TABLE OF CONTENTS

SECTION I - GENERAL 1 DEFINITIONS AND ABBREVIATIONS ...... 1 OVERSEAS SHAREHOLDERS ...... 6 CURRENCY OF PRESENTATION AND FINANCIAL DATA ...... 7 FORWARD-LOOKING STATEMENTS ...... 8 SECTION II - RISK FACTORS 9 SECTION III - INTRODUCTION 29 THE ISSUE ...... 29 SELECTED FINANCIAL INFORMATION ...... 30 GENERAL INFORMATION ...... 33 CAPITAL STRUCTURE ...... 36 OBJECTS OF THE ISSUE ...... 41 STATEMENT OF TAX BENEFITS ...... 43 SECTION IV – ABOUT THE ISSUER 50 OUR MANAGEMENT ...... 50 SECTION V – FINANCIAL INFORMATION 55 FINANCIAL STATEMENTS ...... 55 STOCK MARKET DATA FOR THE EQUITY SHARES OF THE BANK ...... 82 FINANCIAL INDEBTEDNESS ...... 84 SECTION VI – LEGAL AND OTHER INFORMATION 86 OUTSTANDING LITIGATIONS AND DEFAULTS ...... 86 GOVERNMENT AND OTHER APPROVALS ...... 91 MATERIAL DEVELOPMENTS ...... 92 OTHER REGULATORY AND STATUTORY DISCLOSURES ...... 93 SECTION VII - OFFERING INFORMATION 100 TERMS OF THE ISSUE ...... 100 SECTION VIII – STATUTORY AND OTHER INFORMATION 130 DECLARATION ...... 132

SECTION I - GENERAL

DEFINITIONS AND ABBREVIATIONS

Unless the context otherwise indicates or requires, the following terms shall have the meanings given below in this Draft Letter of Offer.

Issuer and Industry Related Terms

Term Description Articles/ Articles of Association/ The articles of association of our Bank, as amended from time to time. AoA Auditors The statutory auditors of our Bank, being M/s Jagannathan & Sarabeswaran, Chartered Accountants. Board/ Board of Directors/ our Board of directors of our Bank or a duly constituted committee thereof, as the context Board may refer to. “CUB” or “our Bank” or “Bank” City Union Bank Limited. or “we” or “us” or “our” Directors/ our Directors Directors of our Bank. Equity Shares The equity shares of our Bank of face value ` 1 each. Eligible Equity Shareholders The holders of Equity Shares, as on the Record Date i.e. [●]. CUB ESOS Scheme Employee stock option scheme of our Bank as approved by our shareholders at the extraordinary general meeting dated April 26, 2008. Memorandum/ Memorandum of The memorandum of association of our Bank, as amended from time to time. Association Registered and Corporate Office The registered and corporate office of our Bank situated at No.149, TSR Big Street, Kumbakonam 612 001, Tamil Nadu.

Issue Related Terms and Abbreviations

Term Description Abridged Letter of Offer The abridged letter of offer to be sent to the Eligible Equity Shareholders and made available to Eligible Employees, in accordance with the SEBI Regulations. “Allot” or “Allotment” The allotment of Equity Shares pursuant to the Issue. “Allotted” Allotment Date The date on which Allotment is made. Application Application made during the Issue Opening Date and the Issue Closing Date, whether submitted by way of CAF or in the form of a plain-paper, in case of Eligible Equity Shareholders, or an EAF, in case of Eligible Employees, to subscribe to the Equity Shares issued pursuant to the Issue at the Issue Price including applications by way of the ASBA process. Application Form The CAF and EAF. Application Money The amount payable in respect of the Equity Shares applied for in this Issue at the time of Application pursuant to the Payment Method, being ` [●] per Equity Share, i.e. [●]% of the Issue Price. “ASBA” or “Application Application supported by blocked amount i.e., an Application (whether physical or Supported by Blocked electronic) for Equity Shares in the Issue, together with an authorization to an SCSB to Amount” block the Application Money in the ASBA Account. ASBA Account Account maintained by an ASBA Investor with an SCSB which will be blocked by such SCSB to the extent of the Application Money, as specified in the CAF or the plain paper application, in case of Eligible Equity Shareholders, or the EAF, in case of Eligible Employees. ASBA Investor (i) An Eligible Employee who intends to apply in the Employee Reservation Portion through ASBA; and

(ii) an Eligible Equity Shareholder who intends to apply in the Issue through ASBA and: (a) holds the Equity Shares in dematerialized form as on the Record Date and has applied for his Rights Entitlement and/ or additional Equity Shares in dematerialized form; (b) has not renounced his/ her Rights Entitlement in full or in part; (c) is not a Renouncee; and (d) is applying through the ASBA Account. Bankers to the Issue [●].

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Term Description “CAF” or “Composite The application form used by Investors (excluding Eligible Employees) to make an Application Form” application for Allotment under the Net Issue portion. Call Call notice sent by our Bank to each of the holders of the partly paid-up Equity Shares as on the Call Record Date, for making a payment of Call Money. Call Money Aggregate amount payable in respect of the Equity Shares applied for in this Issue at the time of the Call pursuant to the Payment Method, being ` [●], i.e. [●]% of the Issue Price. Call Record Date The date fixed by our Bank for the purpose of determining the names of the holders of partly paid-up Equity Shares for the purpose of issuing of the Call. Controlling Branches The branches of the SCSBs which coordinate with the Registrar to the Issue and the Stock Exchanges and a list of which is available at http://www.sebi.gov.in. Designated Branches Such branches of the SCSBs which shall collect the CAF or the plain paper application, in case of Eligible Equity Shareholders, or the EAF, in case of Eligible Employees, from the ASBA Investors and a list of which is available on http://www.sebi.gov.in. Depository A depository registered with the SEBI under the Depository Regulations. Designated Stock Exchange [●]. Draft Letter of Offer This draft letter of offer dated July 17, 2012 filed with SEBI and issued by our Bank in accordance with the SEBI Regulations. “Employee Application Form” The application form used by Eligible Employees to make an application for Allotment or “EAF” under the Employee Reservation Portion. Eligible Employee A permanent and full-time employee of our Bank including a Director of our Bank, whether whole-time or part-time, as on the Record Date, who is an Indian national and is based, working and present in India as on the date of submission of the EAF and who continues to be in such employment till the finalisation of the basis of Allotment in consultation with the Designated Stock Exchange, but excludes persons not eligible under applicable laws, rules, regulations and guidelines. Employee Reservation Portion Reservation of up to [●] Equity Shares (not exceeding 5% of the post-Issue capital of the Bank) for the Eligible Employees aggregating up to ` 50 crores. Investor(s) Eligible Equity Shareholders, Renouncee(s) and Eligible Employees applying in the Issue. Issue Issue of [●] Equity Shares at Issue Price aggregating up to ` 250 crores to the Eligible Equity Shareholders and Eligible Employees.

The Issue comprises of issue of [●] Equity Shares to the Eligible Equity Shareholders in accordance with the Rights Entitlement aggregating up to ` 200 crores and a reservation of up to [●] Equity Shares (not exceeding 5% of the post-Issue capital of the Bank) for the Eligible Employees aggregating up to ` 50 crores. Issue Closing Date [●]. Issue Opening Date [●]. Issue Price ` [●] per Equity Share. Issue Proceeds The proceeds raised through the Issue estimated to be ` 250 crores. Lead Manager Edelweiss Financial Services Limited. Letter of Offer The letter of offer to be filed with the Stock Exchanges after incorporating the observations received from SEBI on the Draft Letter of Offer. Listing Agreement The agreement entered into between us and the Stock Exchanges. Net Issue The Issue less the Employee Reservation Portion. Non-Institutional Investors All Investors including sub-accounts of FIIs registered with SEBI, which are foreign corporate or foreign individuals, that are not QIBs or Retail Individual Investors and who have applied for Equity Shares for an amount of more than ` 2,00,000. Payment Method Payment method in respect of the Equity Shares issued pursuant to the Issue, under which the amount payable on Application is ` [●] per Equity Share, and the balance amount of the Issue Price is payable on Call. QIBs/ Qualified Institutional Public financial institutions as defined in Section 4A of the Companies Act, FIIs and Buyers Sub-Accounts (other than Sub-Accounts which are foreign corporates or foreign individuals), VCFs, AIFs, FVCIs, Mutual Funds, multilateral and bilateral financial institutions, scheduled commercial banks, state industrial development corporations, insurance companies registered with the IRDA, provident funds and pension funds with a minimum corpus of ` 25 crores, the National Investment Fund and insurance funds set up and managed by army, navy or air force of the Union of India and insurance funds set up and managed by Department of Posts, India. QFIs/ Qualified Foreign Non-resident Investors, other than SEBI registered FIIs or sub-accounts or SEBI Investors registered FVCIs, who meet the KYC requirements prescribed by SEBI and are from such jurisdictions outside India (i) which are compliant with Financial Action Task Force (“FATF”) standards and are signatories to the International Organisation of

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Term Description Securities Commission’s (“IOSCOs”) Multilateral Memorandum of Understanding; (ii) who have opened demat accounts with SEBI registered qualified depositary participants and (iii) where it is not unlawful to make an offer or invitation under the Issue.

For further details on QFIs, please refer to SEBI circular number CIR/ IMD/ FII&C/ 13/ 2012 dated June 7, 2012. Record Date [●]. Refund Banker(s) [●]. Registrar/ Registrar to the Issue Karvy Computershare Private Limited. Renouncees Persons, other than ASBA Investors, who have acquired Rights Entitlements from Eligible Equity Shareholders. Retail Individual Investors Investors who have applied for Equity Shares for an amount less than or equal to ` 200,000. Rights Entitlement [●] Equity Shares that an Eligible Equity Shareholder is entitled to under the Issue for every [●] fully paid up Equity Share(s) held as on the Record Date. Self Certified Syndicate Bank The banks which are registered with SEBI under the Securities and Exchange Board of or SCSB India (Bankers to an Issue) Regulations, 1994, as amended, and offers services of ASBA, including blocking of bank account and a list of which is available on http://www.sebi.gov.in. Split Application Form(s) The application form(s) used in case of, (a) renunciation in part by an Eligible Equity Shareholder in favour of one or more Renouncees; or (b) renunciation by an Eligible Equity Shareholder in favour of two or more Renouncees. Stock Exchanges BSE, NSE and MSE where the Equity Shares are presently listed.

Conventional/ General Terms and References to other Entities

Term Description AIF Any fund established or incorporated in India registered with SEBI under the AIF Regulations. AIF Regulations Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012. Act/ Companies Act The Companies Act, 1956, as amended from time to time. ATM Automated teller machine. Banking Regulation Act The Banking Regulation Act, 1949, as amended CERA Central Excise Revenue Audit Depositories Act The Depositories Act, 1996, as amended from time to time. Depository Regulations The Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996, as amended from time to time. Edelweiss Edelweiss Financial Services Limited. FEMA Regulations The Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 and amendments thereto. FII Foreign institutional investors registered under the FII Regulations. FII Regulations Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995. Financial Year/ Fiscal/ FY Period of twelve months ended March 31 of that particular year. FIPB Foreign Investment Promotion Board. FVCI Foreign venture capital investors registered under the FVCI Regulations FVCI Regulations Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000 IT Act The Income Tax Act, 1961, as amended from time to time. IT Department Income Tax Department. Indian GAAP Generally Accepted Accounting Principles in India. Insider Trading Regulations The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, as amended from time to time. ISIN International Securities Identification Number. Merchant Banking Regulations Securities and Exchange Board of India (Merchant Banking) Regulations, 1992. Merchant Banking Rules Securities and Exchange Board of India (Merchant Banking) Rules, 1992. Mutual Fund Mutual fund registered with SEBI under the Mutual Fund Regulations. Mutual Fund Regulations The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended from time to time. NRE Account Non Resident External Account. NRO Account Non Resident Ordinary Account. “Non Resident” or “NR” Non-resident or person(s) resident outside India, as defined under the FEMA, including FIIs and FVCIs.

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Term Description “Non Resident Indian” or “NRI” Non Resident Indian, is a person resident outside India, as defined under FEMA and the FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000. “Overseas Corporate Body” or A company, partnership, society or other corporate body owned directly or indirectly to “OCB” the extent of at least 60% by NRIs including overseas trusts, in which not less than 60% of beneficial interest is irrevocably held by NRIs directly or indirectly as defined under the FEMA Regulations and which was in existence on October 3, 2003 and immediately before such date had taken benefits under the general permission granted to OCBs under the FEMA. P/E Ratio Price/ Earnings Ratio. RBI Act The Reserve Bank of India Act, 1934, as amended from time to time. “Re.” or “Rs.” or “INR” or Indian Rupees, the lawful currency of India. “Rupees” or “`” SARFAESI Act The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, as amended. SEBI Act The Securities and Exchange Board of India Act 1992, as amended from time to time. SEBI ESOP Guidelines The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as amended. SEBI Regulations The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended. Securities Act The United States Securities Act of 1933, as amended. Takeover Code The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended from time to time. U.S./ USA/ United States United States of America, including the territories or possessions thereof. Venture Capital Funds/ VCF Venture capital funds registered with SEBI under the VCF Regulations. VCF Regulations The Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996, as amended from time to time.

Abbreviations

Term Description AFI Annual Financial Inspection. AFS Available for sale. AGM Annual general meeting. AIF Alternative Investment Fund registered under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, as amended. ALCO Asset Liability Management Committee. AS Accounting Standards. AY Assessment Year. Basel I Recommendations of the Basel Committee on Banking Supervision dated July 1988 Basel II Recommendations of the Basel Committee on Banking Supervision dated June 2004 Basel III Recommendations of the Basel Committee on Banking Supervision dated September 2010 BSE BSE Limited. CAIIB Certified Association of Indian Institute of Bankers. CAGR Compounded Annual Growth Rate. CDSL Central Depository Services (India) Limited. CEO Chief Executive Officer. CRAR Capital-to-Risk Asset Ratio. CRR Cash Reserve Ratio. DEA Department of Economic Affairs, Ministry of Finance, GoI. DIPP Department of Industrial Policy and Promotion, Ministry of Commerce, GoI. DP Depository Participant. DP ID Depository Participant’s Identity. DRI Differential rate of interest. ECS Electronic Clearing Service. EGM Extraordinary general meeting. FDI Foreign Direct Investment. FDI Policy Foreign Direct Investment policy, as laid down in the Consolidated FDI Policy, effective from April 10, 2012, issued by DIPP, Ministry of Commerce, GoI. FEMA The Foreign Exchange Management Act, 1999 read with rules and regulations promulgated thereunder and any amendments thereto. GAAP Generally Accepted Accounting Principles.

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Term Description GDP Gross Domestic Product. GoI/ Government Government of India. HFT Held for trading. HTM Held to maturity. HUF Hindu Undivided Family. IPC The Indian Penal Code, 1860, as amended from time to time. IRDA Insurance Regulatory and Development Authority. KYC Know Your Customer. LIBOR London Interbank Offered Rate. MSE Madras Stock Exchange Limited. NECS National Electronic Clearing Services. NEFT National Electronic Fund Transfer. NPA Non Performing Assets. NSDL National Securities Depositories Limited. NSE National Stock Exchange of India Limited. p.a. Per Annum. PAN Permanent Account Number allotted under the IT Act. PBDIT Profit before depreciation, interest and taxes. RBI The Reserve Bank of India. RoC Registrar of Companies RoC Chennai The Registrar of Companies, Tamil Nadu having its office at 5th Floor, Shastri Bhawan, 26 Haddows Road, Chennai 600 006, Tamil Nadu. RONW Return on Net Worth. RTGS Real Time Gross Settlement. SCRA The Securities Contracts (Regulation) Act, 1956, as amended from time to time. SCRR The Securities Contracts (Regulation) Rules, 1957, as amended from time to time. SEBI The Securities and Exchange Board of India, constituted under the SEBI Act. SLR Statutory Liquidity Ratio. VAT Value Added Tax. VCF Venture Capital Fund.

Notwithstanding the foregoing, terms in sections titled “Statement of Tax Benefits” and “Financial Statements” on pages 43 and 55, respectively, have the meanings assigned to such terms in the respective sections.

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OVERSEAS SHAREHOLDERS

The distribution of this Draft Letter of Offer and the Issue to persons in certain jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. Persons into whose possession this Draft Letter of Offer may come are required to inform themselves about and observe such restrictions. The Bank is making the Issue to the Eligible Equity Shareholders and Eligible Employees and will dispatch the Abridged Letter of Offer and Composite Application Form to the shareholders who have an Indian address.

No action has been or will be taken to permit the Issue in any jurisdiction where action would be required for that purpose, except that this Draft Letter of Offer has been filed with SEBI for observations. Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and this Draft Letter of Offer or any offering materials or advertisements in connection with the Issue may not be distributed, in any jurisdiction, except in accordance with legal requirements applicable in such jurisdiction. Receipt of this Draft Letter of Offer will not constitute an offer in those jurisdictions in which it would be illegal to make such an offer and, in those circumstances, this Draft Letter of Offer must be treated as sent for information only and should not be copied or redistributed. Accordingly, persons receiving a copy of this Draft Letter of Offer should not, in connection with the Issue or the Rights Entitlements, distribute or send this Draft Letter of Offer in or into jurisdictions where to do so would or might contravene local securities laws or regulations. If this Draft Letter of Offer is received by any person in any such territory, or by their agent or nominee, they must not seek to subscribe to the Equity Shares or the Rights Entitlements referred to in this Draft Letter of Offer. Neither the delivery of this Draft Letter of Offer nor any sale hereunder, shall under any circumstances create any implication that there has been no change in our Bank’s affairs from the date hereof or that the information contained herein is correct as at any time subsequent to this date.

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CURRENCY OF PRESENTATION AND FINANCIAL DATA

Currency of Presentation

All references to “Re.” or “Rs.” or “INR” or “Rupees” or “`” refer to Indian Rupees, the lawful currency of India. Any reference to “USD” or “US$” or “$” refers to the United States Dollar, the lawful currency of the United States of America. The words “lakh” or “lac” mean “100 thousand” and the word “million” means “10 lakh” and the word “crore” means “10 million” or “100 lakhs” and the word “billion” means “1,000 million” or “100 crores”.

Financial Data

Unless stated otherwise, the financial information used in this Draft Letter of Offer, is derived from our Bank’s audited financial statements for the fiscal year ended March 31, 2012.

Unless stated otherwise, throughout this Draft Letter of Offer, all figures have been expressed in crores.

Our fiscal year commences on April 1 and ends on March 31 of the next year. Unless stated otherwise, reference herein to a particular “financial year” or “fiscal year” or “Fiscal” are to the 12-month period ended March 31 of that year. The revenue of our Bank is referred to herein and in the financial statements as income.

In this Draft Letter of Offer, any discrepancies in any table between the total and the sum of the amounts listed may be due to rounding off.

References to the singular also refers to the plural and one gender also refers to any other gender, wherever applicable.

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FORWARD-LOOKING STATEMENTS

We have included statements in this Draft Letter of Offer which contain words or phrases such as “will”, “aim”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue” and similar expressions or variations of such expressions, that are “forward looking statements”. Similarly, statements that describe our objectives, strategies, plans or goals are also forward-looking statements.

All forward looking statements are based on our current plans and expectations and are subject to a number of uncertainties, assumptions and risks that could significantly affect our current plans and expectations, and our future financial condition and results of operations and may differ materially from those contemplated by the relevant forward-looking statement. These factors include, but are not limited to:

• volatility in interest rates and other market conditions; • failure to sustain or achieve growth of our deposit base, including our current and savings account deposit base; • non-availability of funding and increase in funding costs; • inability to expand operations to other part of India; • any adverse performance by ‘priority sectors’; • our inability to compete effectively; • our inability to sustain growth of our retail banking business; • our inability to grow at a similar rate that we have experienced in the past, or at all; • failure to maintain capital adequacy requirements; • any increase in the CRR and the SLR; • changes in the regulatory environment, under which we operate, or our inability to comply with the regulations; and • our inability to obtain approvals for opening of branches.

For a further discussion of factors that could cause our actual results to differ, see the section titled “Risk Factors” on page 9. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated.

Neither our Bank nor the Lead Manager nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with the SEBI and Stock Exchange requirements, our Bank will ensure that investors in India are informed of material developments until the time of the grant of listing and trading permission by the Stock Exchanges.

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SECTION II - RISK FACTORS

An investment in Equity Shares involves a high degree of risk. You should carefully consider all the information contained in this Draft Letter of Offer, including the risks and uncertainties described below, before making an investment decision. If any of the following risks or any of the other risks and uncertainties discussed in this Draft Letter of Offer actually occur, our business, financial condition and results of operations could suffer, the price of our Equity Shares could decline, and you may lose all or part of your investment. These risks and uncertainties are not the only issues that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also have an adverse effect on our business, results of operations and financial condition.

The financial and other related implications of risks concerned, wherever quantifiable, have been disclosed in the risk factors below. However, there are risk factors the potential effect of which are not quantifiable and therefore no quantification has been provided with respect to such risk factors. In making an investment decision, prospective investors must rely on their own examination of our Bank and the terms of the Issue, including the merits and risks involved.

Unless otherwise stated, our financial information used in this section is derived from our audited financial statements.

Internal Risk Factors

1. Our results of operations largely depend on our net interest income. Volatility in interest rates and other market conditions could adversely impact our business and results of operations.

Our results of operations largely depend on our net interest income. Net interest income constituted 72.74% and 70.70% of our total income for Fiscal 2011 and Fiscal 2012, respectively.

As of March 31, 2011 and March 31, 2012, of our interest-earning assets, 67.74% and 68.71% have floating interest rates, while all of our interest-bearing liabilities have fixed interest rates. Any decrease in the interest rates applicable to our assets, without a corresponding decrease in the interest rates applicable to our liabilities, will result in a decline in our net interest income and may consequently reduce our net interest margin (“NIM”).

In the event of rising interest rates, our borrowers may not be willing to pay correspondingly higher interest rates on their borrowings and may choose to repay their loans if they are able to switch to more competitively priced loans offered by other banks. Although we have been successful in passing on the increase in the interest rates linked to our interest bearing-liabilities to our borrowers, we cannot assure you that we will continue to pass such increase in our costs to our borrowers. Further, an increase in interest rates may also adversely affect the rate of growth of important sectors of the Indian economy such as the corporate, retail and agricultural sectors, which may adversely impact our business.

In the event of falling interest rates, we may face more challenges in retaining our customers if we are unable to offer competitive rates as compared to other banks in the market. Any inability to retain customers as a result of changing interest rates may adversely impact our earnings in future periods.

2. We face maturity mismatches between our assets and liabilities. If we fail to sustain or achieve growth of our deposit base, including our current and savings account deposit base, our business may be adversely affected.

We meet our funding requirements through short-term (i.e. maturity up to one year) and long-term (i.e., maturity for more than one year) deposits from retail depositors and mid-to-large corporate depositors. Banks usually face an asset-liability mismatch where, typically, the deposits are short-term and advances are long-term.

For Fiscal 2012, we have an asset liability mismatch. The bucket-wise negative mismatches are as:

Maturity period Mismatch to outflow (in %)(a)(b) 29 days to three months 12 Above six months to one year 2 One year to three years 18 (a) percentages are represented in negative.

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(b) mismatch to outflow has been arrived at based on the formula: (assets – liabilities) x 100 liabilities

Further, such asset liability mismatch results in liquidity risk, i.e. risk originating due to the potential inability of a bank to generate cash. The liquidity risk in a bank arises on account of unanticipated withdrawals of deposits, non-renewal of deposits and delay in anticipated repayment of advances.

We have implemented an asset liability management committee (“ALCO”) to address the abovementioned risks. The ALCO regularly reviews the asset liability mismatch and takes appropriate steps to ensure that we are not exposed to liquidity risk either, in the short or long-term.

However, if the abovementioned risks materialise, we may face liquidity problem, resulting in an asset liability mismatch. As a result, we may be required to pay higher rates to attract deposits, which may have an adverse impact on our business and results of operations.

Any failure on our part to minimize the asset liability mismatch resulting in higher liquidity risk may adversely affect our business, financial condition and results of operations.

3. Non-availability of funding and increase in funding costs could adversely affect our business and our financial condition. In case our depositors do not roll over term deposits or if we fail to increase our term deposits, our liquidity position may be adversely affected and we may be required to pay higher cost to attract and/or retain further deposits.

Currently our primary source of funding is deposits which include demand deposits, savings deposits and term deposits, long-term Tier II debt and inter-bank borrowings. As of March 31, 2011 and March 31, 2012, 91.54% and 91.12%, respectively, of our primary funding consisted of deposits.

The cost of funds is sensitive to interest rate fluctuations. The pricing on our issuances of debt will also be negatively impacted by any downgrade or potential downgrade in our credit ratings. In addition, attracting customer deposits in the Indian market is competitive. The rates that we must pay to attract deposits are determined by numerous factors such as the prevailing interest rate structure, competitive landscape, Indian monetary policy and inflation.

Our depositors may not roll over term deposits on maturity, which may force us to pay higher interest rates in order to attract and/or retain further deposits. If we fail to sustain or achieve the growth rate of our deposit base, including our current and savings account deposit base, our business, liquidity position and financial condition may be adversely affected.

4. We have regional concentration in southern India, especially Tamil Nadu. Any adverse change in the economic condition of Tamil Nadu and other states in southern India can impact our results of operations. Additionally, we may not be successful in expanding our operations to other parts of India.

As of June 30, 2012, out of our 303 branches, 266 branches were located in southern India (including 200 branches which were located in Tamil Nadu) constituting 87.79% of our total branch network. Our branches located in southern India received deposits of ` 14,323.96 crore as of March 31, 2012, including ` 11,718.99 crore received by branches located in Tamil Nadu, constituting 87.73% and 71.78%, respectively, of our total deposits as of March 31, 2012.

Our concentration in the southern India, and specifically in Tamil Nadu, exposes us to any adverse economic or political circumstances in that region as compared to other public and private sector banks that have more diversified national presence. Any disruption, disturbance or sustained downturn in the economy of Tamil Nadu and other states in southern India could adversely affect our business, financial condition and results of operations.

Additionally, while we continue to expand our operations outside of our traditional areas such as Tamil Nadu and other states in southern India, we face risks with our operations in geographic areas in which we do not possess the same level of familiarity with the economic condition, consumer base and commercial operations. In addition, our competitors may already have established operations in areas outside southern India and we may find it difficult to attract customers in such new areas. We may not be able to successfully manage the risks of such an expansion, which could have a material adverse effect on our business, financial condition and results of operations.

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5. We have received notices from the SEBI in the past. Any regulatory action resulting from such notices can adversely affect our business, financial condition and results of operation.

We have received notices from SEBI in the past alleging violations of Merchant Banking Regulations and the erstwhile Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 dated March 24, 1998 and March 12, 2004, respectively. Though we have filed our replies dated April 16, 1998 and April 15, 2004 in respect of these notices to SEBI, we have not received any further communication from SEBI in this regard. For further details, see section titled “Outstanding Litigations and Defaults” on page 86.

We cannot assure you that SEBI will not take any action under these notices. In the event of any regulatory action by SEBI, including imposition of penalty, our business, financial condition and results of operation may be adversely affected.

6. We are required to lend a minimum percentage of our adjusted net bank credit to certain ‘priority sectors’. A substantial portion of our NPAs are attributable to such ‘priority sectors’. Any adverse performance by such ‘priority sectors’ or any change in the RBI’s regulations relating to priority sector lending could have a material adverse impact on our financial condition and results of operations.

In accordance with current RBI guidelines, all banks in India, including us, are subject to directed lending regulations. We are required to lend a minimum of 40% of our adjusted net bank credit to ‘priority sectors’. Our priority sectors advances include loans to agricultural, micro and small enterprises, education and housing sectors. Out of the advances we are required to lend under the ‘priority sector’, at least 18% of our adjusted net bank credit must be lent to the agricultural sector and at least 10% of adjusted net bank credit to weaker sections. Further 1 % of previous year’s adjusted net bank credit is required to be lent under the ‘Differential Rate of Interest Scheme’.

As of March 31, 2011 and March 31, 2012, our lending to ‘priority sectors’ constituted 49.49% and 47.09%, respectively, of our adjusted net bank credit, including 17.33% and 17.35%, respectively to the agricultural sector. As of March 31, 2011 and March 31, 2012, of our total NPAs 23.46% and 25.16%, respectively was towards agricultural sector which constituted 2.20% and 1.92%, of our total advances to the agricultural sector, for the said period.

Any adverse performance by the priority sectors could significantly increase our NPAs, which may materially and adversely affect our business, results of operations and financial condition. Further, any change in the RBI’s guidelines may require us to increase our lending to the priority sector, which may result in an increase in NPAs. Further, as per the budget for Fiscal 2013, the guidelines for priority sector lending shall be revised after consultation with stakeholders.

Further, we have experienced instances of shortfalls in our directed lending to priority sectors in the past. Any shortfall in the amount required to be provided to the relevant sectors must be deposited with Government- sponsored Indian development banks such as the National Bank for Agriculture and Rural Development (“NABARD”). These deposits typically carry interest rates lower than market rates. We cannot assure you that we will be able to meet the lending targets towards priority sectors. In case we are unable to meet such targets, we may have to deposit the shortfall with any one of such agencies, resulting in reduced interest income on such advances.

7. The Indian banking industry is very competitive and our success will depend on our ability to compete effectively.

We face competition from public and private sector Indian commercial banks and foreign commercial banks in all our products and services. Some of such banks are large institutions and may have much larger customer and deposit bases, larger branch networks and wider capital base. Further, a few banks have recently experienced higher growth, achieved better profitability and increased their market shares relative to us. Further, we also face competition in some or all of our products and services from NBFCs, mutual funds and other entities operating in the financial sector.

Liberalisation of the Indian financial sector could also lead to a greater presence or new entries of Indian and foreign banks offering a wider range of products and services, which could adversely affect our competitive

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environment. The Union budget for the financial year 2010 stated that the RBI is considering giving some additional banking licences to private sector companies, including to industrial houses and non-bank finance companies, if they meet the RBI’s eligibility criteria. Further, the Union budget for the financial year 2011 stated that amendments would be proposed to the Banking Regulation Act, for the purpose of creating additional licenses to private sector entities.

In order to respond to the competitive environment in our industry, we constantly look for opportunities to venture into areas ancillary to banking business. Currently, we provide services such as money transfer services, cross-selling of insurance products and sale of point of sale terminals pursuant to tie-ups with various independent third parties. While providing such services, we are required to enter into contractual arrangement with such third parties. Salient terms and conditions of such contractual arrangement, inter-alia, include providing indemnity to the other party, which can be invoked in cases such as breach of any condition, representation or warranty given by either party. Typically such indemnity clause operates in favour of us and the other party, however, in certain cases the obligation to indemnify is solely on us. In case we are required to indemnify the other party or are unable to collect under the indemnity we are owed, our business and financial condition may be adversely affected.

Our future success will depend in large part on our ability to respond in an effective and timely manner and our ability to compete effectively. Increased competitive pressure may have an adverse impact on our business, financial condition and results of operations.

8. We may be unable to sustain the growth rate of our retail banking business, which could adversely impact our financial results.

As a part of our retail growth strategy, we have been expanding our presence through increase in our branch network to increase our current accounts and saving accounts deposits. Further, we have achieved significant growth in our retail advances and retail deposits in recent years. Our advances under retail banking business as of March 31, 2010, March 31, 2011 and March 31, 2012 were ` 4,998.13 crore, ` 5,775.10 crore and ` 7,534.60 crore, respectively with a CAGR of 34.02%. Further, our deposits under retail banking business as of March 31, 2010, March 31, 2011 and March 31, 2012 were ` 4,982.23 crore, ` 5,667.77 crore and ` 7,179.84 crore, respectively with a CAGR of 31.71%. The number of our branches has grown from 222 as of March 31, 2010 to 300 as of March 31, 2012.

We intend to continue our focus on further growth in retail banking business by offering new products and services and by cross-selling to our customers through marketing. While we anticipate continued demand in the retail banking business, growth of our retail portfolio is subject to various factors including geographic location of our proposed branches, availability of funding in such locations, competitiveness at such locations and approvals from RBI for opening certain branches. We cannot assure you that we will be able to grow at the rates we have experienced in the past, which could materially and adversely affect our business, financial condition and results of operations.

9. There is no assurance that our growth will continue at a similar rate that we have experienced in the recent past, or at all. Our failure to successfully execute our business and growth strategies and to manage such growth effectively may adversely affect our business growth and financial condition.

In the recent past, we have witnessed rapid growth in both our business and our branch network. For example, our deposits have increased from ` 10,285 crores as of March 31, 2010 to ` 12,914 crores as of March 31, 2011 to ` 16,341 crores as of March 31, 2012 and our advances have increased from ` 6,833 crores as of March 31, 2010 to ` 9,255 crores as of March 31, 2011 to ` 12,137 crores as of March 31, 2012. As of March 31, 2012 our deposits and advances were ` 16,341 crores and ` 12,137 crores, respectively. The number of our branches has grown from 222 as of March 31, 2010 to 300 as of March 31, 2012.

While we continue to develop and implement a number of growth initiatives, such as expansion of our branch network, to become more competitive, there can be no assurance that we will be able to successfully implement our business strategies in a timely manner or at all.

Our ability to sustain growth depends primarily upon our ability to manage key issues such as selecting and retaining skilled manpower, establishing additional branches, achieving cost efficiencies, maintaining a technology platform that can be continually upgraded, developing profitable products and services to cater to the needs of our existing and potential customers, improving our risk management systems to monitor our newer

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business, developing a knowledge base to face emerging challenges and ensuring a high standard of customer service.

While we have experienced significant growth in the past which has contributed to our financial performance, there can be no assurance that we will continue to grow at similar rate or at all. Our ability to sustain and manage growth is also affected by macroeconomic factors affecting India, such as GDP growth, changes in implementation of macroeconomic policies, changes in demand for loans and changes in interest rates. We may not be able to successfully maintain growth rates due to unfavourable changes in any one or more of the aforementioned factors. Our inability to effectively manage any of these issues may adversely affect our business growth and, as a result, adversely impact our businesses, prospects, financial condition and results of operations.

10. If we are unable to obtain, renew or maintain our statutory and regulatory permits and approvals required to operate our business, it may have a material and adverse effect on our business, financial condition and results of operations.

We require certain statutory and regulatory permits and approvals to operate our business.

As a part of our growth strategy, we plan opening new branches on a yearly basis. However, in the event we fail to obtain requisite approvals from the RBI for branches to be located in Tier I centres in a timely manner or at all, our growth may be adversely affected.

We have not obtained licenses under the relevant state legislations governing the registration of shops and establishments for our branches where specific exemption has not been granted to the scheduled commercial banks. In this regard, we have filed an application dated October 9, 2002, to the Labour Department, Government of Tamil Nadu, for exemption from the applicability of the Shops & Establishments Act, 1947 in Tamil Nadu. Further, we have also submitted a letter dated June 18, 2012 to the RBI for taking up this matter with the Government of Tamil Nadu.

We cannot assure you that we will be able to obtain the exemption from the relevant state legislations governing the registration of shops and establishments in a timely manner or at all. In the event the authority does not grant an exemption to us, we will be required to obtain registration for our branches where such registration is required. Applying for such registration and complying with the necessary filing requirements will add further administrative cost on us, which may adversely affect our financial condition and results of operation.

Further, the competent authority under the relevant state legislations governing the registration of shops and establishments, may find us in violation of the such legislation and impose statutory penalty for not obtaining the registration, which may adversely affect our results of operations.

For details in relation to outstanding approvals, see the section titled “Government and Other Approvals” on page 91.

Further, under certain of our contractual arrangements we are required to hold all necessary and applicable approvals and licenses from authorities such as RBI and IRDA. In the event that such approvals and licenses lapse or are revoked by the granting authorities, we may not be able to provide such services which could have an adverse effect on our business and financial condition.

Failure by us to renew, maintain or obtain the required permits or approvals, including those set forth above, may result in the interruption of our operations or delay or prevent our expansion plans and may have a material and adverse effect on our business, financial condition and results of operations.

11. Investment in partly paid-up Equity Shares in the Issue is exposed to certain risks.

The Issue Price is ` [●] per Equity Share. The Investors are required to pay [●]% of the Issue Price on Application and [●]% of the Issue Price on the Call. The partly paid-up Equity Shares offered under the Issue will be traded under separate ISIN for the period as may be applicable prior to the Call Record Date. An active trading may not develop for the partly paid-up Equity Shares and, therefore, the trading price of the partly paid- up Equity Shares may be subject to greater volatility than our fully-paid Equity Shares.

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Further, with effect from the Call Record Date, trading in the partly paid-up Equity Shares for which the Call has been made will be suspended for such period as may be applicable under the applicable rules and regulations. The holders of the partly paid-up Equity Shares will not be able to trade in these shares from the Call Record Date till they are credited to the holders’ account as fully paid-up Equity Shares. Investors will be required to pay the money due on the Call, regardless of the market price of the Equity Shares. If the Investor fails to pay the balance amount, the Equity Shares in respect of which such Call has been given shall be forfeited, along with the Application Money already paid.

Additionally, pending conversion of partly paid-up Equity Shares into fully paid-up Equity Shares, Investors are only entitled to dividend and the voting rights in proportion to such Investors’ share of our paid-up equity capital.

Further, we have made an application dated July 16, 2012 to FIPB seeking its approval to Allot partly paid-up Equity Shares to Non-Resident Eligible Equity Shareholders and Renouncees (including FIIs and NRIs). Pursuant to the consolidated FDI policy (circular 1 of 2012) issued by Department of Industrial Policy & Promotion, partly paid-up shares can be allotted to residents outside India only upon receipt of approval of the FIPB. In the event we fail to receive such approval from FIPB, we may not be able to allot Equity Shares to Non-Resident Eligible Equity Shareholders and Renouncees.

12. We may fail to maintain the minimum capital adequacy requirements stipulated by the RBI which could materially and adversely affect our results of operations and financial condition.

We are subject to regulations relating to capital adequacy of banks, which determines the minimum amount of capital we must hold as a percentage of the risk-weighted assets on our portfolio, or capital-to-risk asset ratio (“CRAR”). Due to the capital charge for operational risk, there is an impact on the CRAR under the Basel II standards. Although we have been maintaining a CRAR under the Basel II standards, which was 12.57% as of March 31, 2012 as compared to the regulatory minimum requirement of 9.00%, there can be no assurance that we will be able to maintain our CRAR within the regulatory requirements. Further, any adverse developments could affect our ability to continue to satisfy the capital adequacy requirements, including deterioration in our asset quality, decline in the values of our investments or applicable risk weight for different asset classes.

The RBI has issued the guidelines on Basel III capital regulations on May 2, 2012, pursuant to the Monetary Policy Statement 2012-13. These guidelines would become effective from January 1, 2013 in a phased manner. The Basel III capital ratios will be fully implemented as on March 31, 2018. With the implementation of the Basel III guidelines, we may be required to improve the quality, quantity and transparency of Tier I capital, which will now have to be predominantly equity shares. We may be required to apply regulatory deductions against core capital as opposed to Tier I and Tier II capital and a minimum capital ratio may be set, among other suggested changes. In addition, these changes may result in the incurrence of substantial compliance and monitoring costs. Furthermore, with the implementation of Basel III guidelines, our ability to support and grow our business could be limited by a declining capital adequacy ratio, if we are unable to access or face difficulty in accessing the capital or have difficulty in obtaining capital in any other manner.

If we fail to meet capital adequacy requirements, the RBI may take certain actions, including restricting our lending and investment activities and the payment of dividends by us. These actions could materially and adversely affect our reputation, results of operations and financial condition.

13. We are required to maintain cash reserve ratio (“CRR”) and statutory liquidity ratio (“SLR”) and any increase in these requirements could materially and adversely affect our business, financial condition and results of operations.

As a result of the statutory reserve requirements stipulated by the RBI, we may be more exposed structurally to interest rate risk than banks in other countries. Under the RBI’s regulations, we are subject to a CRR requirement under which we are currently required to keep 4.75% of our net demand and time liabilities in current account with the RBI. We do not earn interest on cash reserves maintained with the RBI. The RBI may further increase the CRR requirement as a monetary policy measure and has done so on numerous occasions. Increases in the CRR requirement could materially and adversely affect our business, results of operations and financial condition.

In addition, under the RBI’s regulations, our liabilities are subject to a SLR requirement, according to which 24% of our net demand and time liabilities need to be invested in Government securities, state government

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securities and other securities approved by the RBI from time to time. In our experience, these securities generally carry fixed coupons. When the interest rate rises, the value of these fixed coupon securities depreciates. We cannot assure you that investment in such securities will provide returns better than other market instruments. Further, any increase in the CRR and the SLR requirements, would reduce the amount of cash available for lending, which may materially and adversely affect our business, financial condition and results of operations.

14. Foreign investment in the Equity Shares, and acquisitions or transfers of our Equity Shares resulting in an aggregate holding of 5% or more are subject to limits specified by the RBI. Further, in relation to our foreign investment, we are required to comply with the various provisions of the Foreign Exchange management Act, 1999 (“FEMA”).

Under Indian laws, the aggregate permissible foreign investment, including FDI and investment by FIIs and NRIs in a private sector bank is limited to an aggregate of 49% of the paid up capital under the automatic route. Further, the aggregate FII’s and NRIs’ holding, cannot exceed 24% and 10%, respectively, of the paid up capital. However, with the approval of the board of directors and the shareholders by way of a special resolution, the aggregate FII and NRI holding in a bank can be increased up to 49% and 24%, respectively.

Pursuant to the guidelines issued by the RBI, any acquisition or transfer of shares in a private bank which will take the aggregate holding of an individual or a group to five per cent or more of the paid-up capital of a bank, requires the prior “acknowledgement” of the RBI. Further as advised by RBI, we had amended our Articles of Association to the effect that acquisition of shares by a person/group which would take his/its holding to five per cent or more of our total issued capital (or such other percentage as may be prescribed by the RBI from time to time) should be with the prior approval of the RBI.

Our foreign shareholding is restricted to 40% of our paid up capital, with the aggregate shareholding of NRIs not exceeding 24% and individual shareholding not exceeding 5%, of our paid up capital, pursuant to Board’s resolution dated April 28, 2012 and resolution passed by our shareholders through postal ballot declared on June 11, 2012. As of June 30, 2012, our aggregate foreign shareholding (including FII and NRI shareholding) was 30.75% of our paid up capital. Further, as of June 30, 2012, the aggregate shareholding of NRIs was 2.88% of our paid up capital.

In order to ensure that our foreign shareholding adheres to the abovementioned limits, Allotment to Non- Resident Investors (excluding Eligible Employees), up to their Rights Entitlement and for any additional Equity Shares shall be subject to such limits.

The aforementioned regulatory framework and restriction contained in our Articles of Association could adversely affect the liquidity, free transferability of the Equity Shares and in turn have an adverse affect on the price of the Equity Shares.

15. We are involved in certain material legal proceedings which if determined against us, could affect our business and financial condition.

We are party to several legal proceedings. These legal proceedings are in the nature of civil cases, debt recovery cases and tax cases pending at different levels of adjudication before various courts and tribunals.

Further, we have received a show cause notice dated August 4, 2011 from the Service Tax Commissioner, Trichy, raising a demand of `63.60 crores. Our Bank is in the process of compiling data to file the reply to the show cause notice. For further details regarding material legal proceedings, please see section titled “Outstanding Litigations and Defaults” on page 86.

No assurances can be given as to whether these proceedings will be settled in our favour or against us. If a claim is determined against us and we are required to pay all or a portion of the disputed amount, it could have an adverse effect on our results of operations and cash flows.

16. Banking is a heavily regulated industry and material changes in the regulations which govern us could cause our business to suffer and may adversely impact the price of the Equity Shares.

Banks in India are subject to detailed supervision and regulation by the RBI. In addition, banks are generally subject to changes in Indian law, as well as to changes in regulation and government policies and accounting

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principles. Since 2005, the RBI has made several changes in regulations applicable to banking companies, including:

• risk-weights on certain categories of loans for computation of capital adequacy; • general provisioning requirements for various categories of assets; • capital requirements and accounting norms for securitisation; • policy interest rates, cash reserve ratio, cessation of payment of interest on cash reserve balances; • limits on investments in financial sector enterprises and venture capital funds; and • directed lending requirements.

The Banking Regulation Act imposes a number of restrictions, which affect our operating flexibility and investors’ rights, including:

• restrictions on payment of dividend; • No shareholder of our Bank can exercise voting rights on poll in excess of 10% of the total voting rights of all of our shareholders. • We are subject to restrictions relating to incorporation of subsidiaries, which may prevent us from exploiting emerging business opportunities in areas other than banking. We may not open new places of business and transfer our existing places of business, which may hamper our operational flexibility. Further, RBI has issued detailed guidelines on investment in subsidiaries and other companies, including:

- equity investment by a bank in a non-financial service company would be subject to a limit of 10% of the company’s paid-up capital or 10% of the bank’s paid-up capital and reserves, whichever is less; - equity investments in any non-financial services company held by a bank; its subsidiaries, associates or joint ventures or entities directly or indirectly controlled by the bank; and bank managed mutual funds should in aggregate, not exceed 20% of the investee company’s paid-up capital. - a bank’s equity investments in subsidiaries and other entities that are engaged in financial service activities together with equity investments in entities engaged in non financial service activities shall not exceed 20% of the bank’s paid-up share capital and reserves.

• Our ability to build overseas asset portfolios and exploit business opportunities overseas is limited by the requirement to maintain assets in India of at least 75% of our demand and time liabilities in India. • Our ability to produce documents and records for inspection is regulated. • The RBI is empowered to direct and generally advise us and may prohibit us from entering into certain transactions and agreements. • We are required to obtain prior approval of RBI before we appoint our Chairman, Managing Director and CEO and any other full-time Directors and fix their remuneration. The RBI has powers to remove managerial and other persons from office, and to appoint additional directors. We are also required to obtain approval of the RBI for the creation of floating charges for our borrowings, thereby hampering leverage.

Any changes in the regulatory environment, under which we operate, or our inability to comply with the regulations, could adversely affect our business, results of operations and financial condition.

17. Any increase in our portfolio of Non-Performing Assets (“NPAs”) will have a material adverse effect on our financial condition and results of operations.

As of March 31, 2011 and March 31, 2012, our gross NPAs were ` 112.48 crores and ` 123.54 crores, representing 1.21% and 1.01% of our gross advances, respectively.

For borrowings exceeding ` 0.25 crore, we categorise our borrowers into three categories, namely, high risk borrowers, moderate risk borrowers and low risk borrowers. As of March 31, 2012, 49.50% of our gross advances were to borrowers whom we did not rate as the loans availed by them are less than ` 0.25 crore. For the remaining 50.50% of our gross advances, 27.73% were towards low risk category, 21.09% were towards moderate risk category and 1.68% were towards high risk category.

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Borrowers in the high risk category could be especially vulnerable if economic conditions worsen or economic growth is slow, which could adversely affect our business, results of operations and financial conditions. Although our loan portfolio contains loans to a wide variety of businesses, adverse market conditions in these sectors could increase our level of NPAs. As of March 31, 2012, concentration of NPAs, as a percentage of our gross NPAs, was mostly in agricultural sector (25.16%), trading sector (15.54%) and services sector (12.42%).

Our ability to continue to reduce or contain the level of our NPAs may be affected by a number of factors that are beyond our control including, a sharp and sustained rise in interest rates, unemployment, slowdown in the Indian economy, movements in global commodity markets and exchange rates, global competition, adverse changes in government policies, laws or regulations and performance of various industry sectors including the ‘priority sectors’. In addition, the expansion of our business may also cause the level of our NPAs to increase. Although we constantly endeavour to improve our collections, we cannot assure you that we will be successful in our efforts or that the overall quality of our loan portfolio may not deteriorate in the future. If we are not able to control and reduce our NPAs, it could adversely affect our business, financial condition and results of operations.

18. Our logo is not registered and we may be unable to effectively prohibit other persons from using our logo, which may adversely affect our goodwill and business. Further, any breach by us of third party intellectual property rights could divert management attention and require us to pay financial compensation to such third parties.

The trademarks used by us including our logo , are not registered. Unauthorized parties may attempt to use our logo and our other trademarks and applicable laws may not adequately protect our proprietary rights. Monitoring unauthorized use of our trademarks is difficult and costly, and we cannot be certain that the steps will be effective to prevent passing off and other unauthorized use of our trademark resulting in dilution of our goodwill. We may have to resort to litigation to enforce our proprietary rights, which could result in substantial costs and diversion of management attention and resources.

Further, we may become subject to claims by third parties if we use slogans, names, designs, software or other such subjects in breach of any intellectual property rights registered by such third parties. Any legal proceedings pursuant to such claims, or settlements thereunder, may divert management attention and require us to pay financial compensation to such third parties, as well as compel us to change our marketing strategies or brand names of our products and services.

Any failure to enforce our proprietary rights could require us to make changes to our trademarks and our logo, which could have an adverse effect on our business, goodwill, financial condition and results of operations. Further, any legal proceedings pursuant to claims, or settlements thereunder, may require us to pay financial compensation thereby adversely affecting our goodwill and business.

19. If our risk management policies and procedures do not adequately address unidentified or unanticipated risks, our business could be adversely affected.

We have devoted significant resources to develop our risk management policies and procedures and aim to continue to do so in the future. We have set up a credit risk management committee (CRMC) for credit risk, operations risk management committee (ORCO) for operations risk and ALCO for market risk. These committees meet at regular intervals to discuss the various risks and identify and implement risk mitigation. These committees have senior management executives as members, with experience relevant to the respective functional areas. The Board has constituted a risk management committee (RMC) consisting of executive and non-executive Directors who oversee and guide the various risk management committees referred above. We have implemented the “International Convergence of Capital Measurement and Capital Standards” or the Basel II, as applicable to banks in India.

Despite this, our policies and procedures to identify, monitor and manage risks may not be fully effective. Some of our risk management systems are not automated and are subject to human error. Some of our methods of managing risk are based upon the use of observed historical market behavior. As a result, these methods may not accurately predict future risk exposures which could be significantly greater than indicated by historical measures.

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Management of operations, legal and regulatory risk requires, among other things, policies and procedures to properly record and verify a large number of transactions and events, and these policies and procedures may not be fully effective. As we seek to expand the scope of our operations, we also face the risk of being unable to develop risk management policies and procedures that are properly designed for new business areas or to manage the risks associated with the growth of our existing businesses. Implementation and monitoring may prove particularly challenging with respect to businesses that we plan on developing. Inability to develop and implement effective risk management policies may adversely affect our business, prospects, financial condition and results of operations.

20. We are exposed to possible losses arising out of derivative transactions which could have a material adverse effect on our business, financial condition and results of operations.

We undertake foreign exchange forward contracts for our customers and hedge them with other banks. We are also engaged in dealing with other banks on account of proprietary trading. As of March 31, 2011 and March 31, 2012, we had outstanding foreign exchange forward contacts aggregating to ` 3,356.24 crores and ` 8,283.19 crores, respectively. As of March 31, 2011, our outstanding foreign exchange forward contracts, on behalf of our clients and in our proprietary capacity, aggregated to ` 61.63 crores and ` 3,294.61 crores, respectively. As of March 31, 2012, our outstanding foreign exchange forward contracts, on behalf of our clients and in our proprietary capacity, aggregated to ` 278.04 crores and ` 8,005.15 crores, respectively.

Our derivative transactions are subject to regular monitoring by our risk assessment committee and to ensure compliance with limits prescribed by RBI. However, we cannot assure you that we will be able to anticipate the movement in foreign exchange or at all. Failure to anticipate the foreign exchange movement could cause us to incur losses in such derivatives or forward contracts, thereby adversely affecting our business and financial condition.

21. Our success depends, in large part, upon our management team and skilled personnel and our ability to attract and retain such persons. In the event we are not be able to attract talented employees, or are unable to motivate and retain our existing employees, the future of our business and operations may be affected.

As of June 30, 2012, we had 3,435 employees.

Since banking business is service oriented, our performance and success depends largely on our ability to nurture and retain the continued service of our management team and skilled personnel. We also face a continuing challenge to recruit a sufficient number of suitably skilled personnel, particularly as we continue to grow. There is significant competition for management and other skilled personnel in the banking industry.

In the event we are not be able to attract talented employees, or are unable to motivate and retain our existing employees, the future of our business and operations may be affected. Further, any employee unrest in the future could adversely affect our business and operations.

22. We are subject to annual financial inspection (“AFI”) by RBI. Non-compliance with RBI observations could adversely affect our business, financial condition or results of operations.

We are subject to an AFI by RBI under the Banking Regulation Act. In the past certain observations were made by RBI during the AFI regarding our business and operations in its AFI reports. Inspection by the RBI is a regular exercise and is carried out periodically by the RBI for all banks and financial institutions.

While we attempt to be in compliance with all regulatory provisions applicable to us, in the event we are not able to comply with the observations made by the RBI, we may be subject to penalties by the RBI. Imposition of any penalty by RBI may have a material adverse effect on our reputation, financial condition and results of operations.

23. We are subject to various operational and other risks associated with the financial industry which, if materialised, may have an adverse impact on our business.

The proper functioning of our financial control, risk management, accounting or other data collection and processing systems, together with the communication networks connecting our various branches and offices is

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critical to our operations and ability to compete effectively. We are exposed to many types of operational risk, including:

• fraud or other misconduct by employees or outsiders; • unauthorised transactions by employees and third parties (including violation of regulations for prevention of corrupt practices, and other regulations governing our business activities); • unauthorised use of debit cards at ATMs; • misreporting or non-reporting with respect to statutory, legal or regulatory reporting and disclosure obligations; • any breach of network security; and • operational errors, including clerical or record keeping errors or errors resulting from faulty computer or telecommunications systems.

In the past we have experienced fraud committed by our employees ranging from misuse of discretionary powers to misappropriation of funds. Though we have been able to recover the amounts involved in a majority of such cases, we cannot assure you that such cases will not happen or we will be able to recover such amount in the future. Further, we cannot assure you that any such incident will not have an adverse effect on our reputation.

In addition, we may also be exposed to other different types of risk during our operations, including but not limited to credit risk, counterparty risk, market risk, liquidity risk and operational risk.

Further, we outsource certain functions such as, money transfer, counter payments collection and tax collection, to other agencies and are exposed to the risk that external vendors or service providers may be unable to fulfill their contractual obligations to us (or will be subject to the same risk of fraud or operational errors by their respective employees) and to the risk that its (or its vendors’) business continuity and data security systems prove to be inadequate. Although we maintain a system of controls designed to keep operational risk at appropriate levels, there can be no assurance that we will not suffer losses from operational risks in the future which can have an adverse affect on our business, results of operations, financial condition and the price of the Equity Shares.

24. Due to the limited information regarding loan servicing histories of customers in India, we may be at a higher risk compared to banks with lending operations in more developed countries. We depend on the accuracy and completeness of information furnished by the customers and counterparties and any misrepresentation, errors or incompleteness of such information could cause our business to suffer.

Unlike several more developed economies, a nationwide credit bureau has become operational in India only recently, and therefore, adequate information regarding loan servicing histories, particularly in respect of individuals and small businesses, is limited. As a result, our credit risk exposure is higher compared to banks operating in more developed markets. Because our lending operations are primarily limited to India, we may be exposed to a greater potential for loss compared to banks with lending operations in more developed countries. For example, inadequate loan servicing histories are available for traders and farmers. We have extended 21.12% and 20.27% of our total advances to traders and 5.09% and 4.29% of our total advances to farmers as of March 31, 2011 and March 31, 2012, respectively. Inadequate loan servicing histories for traders and farmers increase the risk of exposure and may lead to an increase in our NPAs which may adversely affect our business, results of operations and financial condition.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished to us by or on behalf of our customers and counterparties, including financial statements and other financial information. We may also rely on certain representations as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit, we may assume that a customer’s audited financial statements conform to generally accepted accounting principles and present fairly, in all material respects, the financial condition, results of operation and cash flows of the customer.

The difficulties associated with the inability to accurately assess the value of collateral and to enforce rights in respect of collateral, along with the absence of such accurate statistical, corporate and financial information, may decrease the accuracy of our assessments of credit risk, thereby increasing the likelihood of borrower default on our loan and decreasing the likelihood that we would be able to enforce any security in respect of such a loan or that the relevant collateral will have a value commensurate to such a loan. Moreover, the

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availability of accurate and comprehensive credit information on retail customers and small businesses in India is more limited than for larger corporate customers, which reduces our ability to accurately assess the credit risk associated with such lending.

Difficulties in assessing credit risks associated with our day-to-day lending operations may lead to an increase in the level of our non-performing and restructured assets, which could materially and adversely affect our business, financial condition and results of operations.

25. We may be unable to foreclose on collateral or there may be decreases in the value of collateral which, if a borrower defaults, may result in failure to recover the expected value of the collateral, exposing us to a potential loss.

As of March 31, 2011 and March 31, 2012, 96.89% and 96.81%, respectively, of our total advances were secured by charges on tangible assets, mortgages on immovable property and stocks. In certain cases, we obtain security by way of pledge of shares, assignment of life insurance policies and ‘kisan vikas patras’. Any decrease in the value of collateral at the time of recovery will have an adverse impact on the quantum of recovery.

In India, foreclosure on collateral generally requires a written petition to a court or tribunal. Although special tribunals have been set up for expeditious recovery of debts due to banks, any proceedings brought may be subject to delays and administrative requirements that may result, or be accompanied by, a decrease in the value of the collateral. The SARFAESI Act and the Debt Recovery Tribunal Act, 1993 have strengthened the ability of lenders to recover NPAs by granting them greater rights to enforce security and recover amounts owed from secured borrowers. However, there can be no assurance that this legislation will have a favourable impact on our efforts to recover NPAs as the full effect of such legislation is yet to be determined in practice. Any failure to recover the expected value of the collateral would expose us to a potential loss.

In addition, the RBI’s guidelines on corporate debt restructuring specify that for debt amounts of ` 10 crores and above, 60% of the creditors by number and 75% of creditors by value can decide to restructure the debt and that such a decision would be binding on the remaining creditors. If we own 25% or less of the debt of a borrower, we could be forced to agree to an extended restructuring of debt which may not act in our interests.

As a result of the foregoing factors, realisation of the full value of collateral may become difficult, which could have an adverse effect on our business and financial condition.

26. A portion of our advances are unsecured. In case we are unable to recover such advances in a timely manner or at all, it may adversely affect our business, financial condition and results of operations.

As of March 31, 2011 and March 31, 2012, 3.11% and 3.19%, respectively, of our total advances were unsecured.

While we have been selective in our lending policies and strive to satisfy ourselves with the credit worthiness and repayment capacities of our customers, there can be no assurance that we will be able to recover the interest and the principal advanced by us in a timely manner or at all. Any failure to recover the unsecured advances given to our customers would expose us to a potential loss which could adversely affect our business, financial condition and results of operations.

27. Certain of our branches are located on premises that have been taken on lease. Further, some of the agreements we enter into for the said leases are inadequately stamped and not registered. The termination of any of these leases or our inability to exercise our rights under the lease agreements may cause disruption in our operations.

As of June 30, 2012, out of a total of our 303 branches, 291 branches are located at premises taken on a lease basis. Such leases are typically for a period of five to ten years. Although we have renewed majority of our leases in the past, our business, financial condition, and operating results could be adversely affected if we are unable to negotiate favorable lease and renewal terms for our existing branches. For example, as of June 30, 2012, the leases for five of our branches have expired and are pending renewal. In case of non-renewal of leases for our existing branches, we will be forced to procure alternative space for our existing branches. Although we procure space that satisfy the safety, operational and financial criteria for our branches, we cannot assure you that we will be able to identify such space at commercially reasonable terms or at all. Failure to identify such space can adversely affect our financial condition and results of operation.

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Further, any breach of the terms and conditions of these lease agreements, could result in the termination of the lease agreements and force us to establish operations at another location, which may disrupt our operations temporarily.

Additionally, some of our lease agreements may not be adequately stamped and some of our immoveable properties for our offices, which are taken on lease, may have one or more irregularities of title such as inadequate stamping and/ or non registration of lease agreements and non execution of such lease agreements. Any such irregularity may result in our inability to enforce our rights under such lease agreements which may disrupt our operations and adversely affect our business, financial condition and result of operations.

28. As of March 31, 2012, our contingent liabilities amounted to ` 9,701.70 crores. If any of our contingent liabilities materialise our liquidity, business, prospects, financial conditions and results of operations could be adversely affected.

The contingent liabilities as of March 31, 2012 are as follows:

Contingent Liabilities Amount (in ` Crores.)

Claims against us not acknowledged as debts 1.36 Liability on account of outstanding Forward Exchange Contracts 8,283.19 Guarantees given on behalf of constituents -in India 797.72 -outside India 9.43 Acceptances, endorsements and other obligations 610.00 Total 9,701.70

The contingent liabilities have arisen in the normal course of our business and are subject to the prudential norms as prescribed by RBI. If any of the contingent liabilities specified above materialises, our liquidity, business prospects, financial conditions and results of operations could be adversely affected.

29. Our ability to pay dividends in the future will depend upon our future earnings, financial condition, cash flows, working capital requirements, capital expenditures and restrictive covenants in our financing arrangements. Further, there are regulatory restrictions on payment of dividend under the RBI guidelines.

Our future ability to pay dividends will depend on our earnings, financial condition and capital requirements. Dividends distributed by us will attract dividend distribution tax at rates applicable from time to time. We cannot assure you that we will generate sufficient income to cover our operating expenses and pay dividends to our shareholders. Our ability to pay dividends could also be restricted under certain financing arrangements that we may enter into in the future.

Further, we cannot pay any dividend on the Equity Shares until all our capitalised expenses have been completely written off. Payment of dividend is further governed by the RBI guidelines, which imposes certain additional requirements.

If we were to raise Tier II capital in the future, the payment of any dividends would be after payment of interest on such capital. In addition, dividends that we have paid in the past may not be reflective of the dividends that we may pay in a future period. The amount of our future dividend payments, if any, will depend upon our future earnings, financial condition, cash flows, working capital requirements, terms and conditions of our indebtedness, capital expenditures and regulation. There can be no assurance that we will be able to pay dividends.

30. Our insurance coverage could prove inadequate to satisfy potential claims. If we were to incur a serious uninsured loss or a loss that significantly exceeds the limits of our insurance policies, it could have a material adverse effect on our business, results of operations and financial condition.

We have taken out insurance within a range of coverage consistent with industry practice in India to cover certain risks associated with our business, including money and securities in safe or transit, goods held in trust/ commission, coins/ currency and buildings. We cannot assure you that our current insurance policies will insure us fully against all risks and losses that may arise in the future. In addition, even if such losses are insured, we

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may be required to pay a significant deductible on any claim for recovery of such a loss, or the amount of the loss may exceed our coverage for the loss. In addition, our insurance policies are subject to annual review, and we cannot assure you that we will be able to renew these policies on similar or otherwise acceptable terms, if at all. If we were to incur a serious uninsured loss or a loss that significantly exceed the limits of our insurance policies, it could have a material adverse effect on our business and financial condition.

31. We require approval from the RBI for opening new branches in Tier I centres. In case we do not obtain such approvals, we may be unable to grow our deposit base which may in turn adversely affect our business prospects.

The opening of new branches and shifting of existing branches of banks is governed by the provisions of the Banking Regulation Act. Domestic scheduled commercial banks are permitted to open branches in Tier 2 to Tier 6 centres, without permission from Reserve Bank of India, subject to reporting requirements to RBI. However, opening of branches by domestic scheduled commercial banks in Tier 1 centres (centres with population of 1,00,000 and above as per Census 2001) require prior permission of the RBI, except in certain cases.

As of June 30, 2012, we have 151 branches in Tier I centres and 81 branches in Tier II and Tier III centres. Deposits maintained at Tier I centres constitute 79.67% of our total deposits.

Our ability to raise fresh deposits and grow our deposit base from Tier 1 centres depends in part on our ability to expand our network of branches. There can be no assurance that we will be able to obtain the RBI’s authorisations to meet our requirements for branch expansion to achieve the desired growth in our deposit base as a result of which our business prospects.

32. Part of our investment portfolio is exposed to risks relating to mark-to-market valuation.

As of March 31, 2012 our investment portfolio comprising of securities under the available for sale category and held for trading category constitutes ` 609.17 crores. In the event of a rise in interest rates or adverse market conditions, our investment portfolio comprising of securities under the aforesaid categories will be exposed to the adverse impact of the mark-to-market valuation. Any rise in interest rates or adverse market condition leading to a fall in the market value of such investments may adversely affect our profitability and financial condition.

33. We have concentrations of loans to and deposits from certain customers, which exposes us to risk of credit losses and premature withdrawal of deposits from these customers that could materially and adversely affect our business, results of operations and financial condition.

Our advances to the twenty largest borrowers, accounted for approximately 8.86% and 8.04% of our total advances as of March 31, 2011 and March 31, 2012, respectively. We cannot assure you that there will not be any credit losses or delay in payments of interest and/or principal from these borrowers.

Further, our deposits from the twenty largest depositors, accounted for approximately 16.68% and 12.96% of our total deposits as of March 31, 2011 and March 31, 2012, respectively. We cannot assure you that there will not be any premature withdrawal or non-renewal of deposits from these depositors.

In the event any of the above risk materialises, our business, results of operations and financial conditions may be adversely affected.

34. Deterioration in the performance of any of the industry sectors where we have significant exposure may adversely impact our business, results of operations and financial condition.

Our credit exposure to corporate borrowers is dispersed across various industry sectors, the most significant of which are cotton textile, iron and steel and construction (commercial real estate) which represented 6.18%, 7.14% and 4.67%, respectively, of our outstanding fund and non-fund based balances as of March 31, 2012. Further, it has been our policy to diversify the exposure over different industry sectors. We have fixed exposure norms (sectoral cap) for major industry sectors. For example, our internal policies set out limit of our credit exposure to any particular industry depending upon the nature of that industry.

Any significant deterioration in the performance of the industry sector we lend to (including ‘priority sectors’), driven by events not within our control, such as regulatory action or policy announcements by Government or

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State government authorities, would adversely impact the ability of borrowers in that industry sector to service their debt obligations.

We cannot assure you that we will be able to diversify our exposure over different industry sectors in the future. Failure to maintain diverse exposure resulting in industry sector concentration may adversely impact our business, financial condition and results of operation, in case of any significant deterioration in performance of such industry sector.

35. Weaknesses, disruption or failures in IT systems could adversely impact our business.

Our principal delivery channels include our branches and ATMs, particularly those utilized for our retail products and services and transaction banking. The increasing size of our operations, which use automated control and recording systems for record keeping, exposes us to the risk of errors in control and record keeping. Given our high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. Our dependence upon automated IT systems to record and process transactions may further increase the risk that technical system flaws will result in losses that are difficult to detect. As a result, we face the risk that the design of our controls and procedures may prove inadequate thereby causing delays in detection or errors in information.

We may also be subject to disruptions of our IT systems, arising from events that are wholly or partially beyond our control (including, for example, computer viruses or electrical or telecommunication outages), which may give rise to deterioration in customer service and to loss or liability to us. A partial or complete failure of any of our primary systems or communication networks could still materially and adversely affect our decision-making process, risk management or internal controls as well as timely response to market conditions.

36. We may seek growth opportunities through acquisitions or be required to undertake mergers on the recommendation of the RBI, which exposes us to integration and other acquisition risks.

We may seek growth opportunities through acquisitions or be required to undertake mergers recommended by the RBI. In the past, RBI has ordered mergers of weak banks with other banks primarily in the interest of depositors of the weak banks.

Any future acquisition or merger is subject to risks and uncertainties, some of which are beyond our control, including:

• difficulties in operating the integrated information technology system, electronic banking system, risk management and other systems; • challenges in harmonising the two or more corporate cultures; • difficulties in maintaining asset quality; • difficulties in leveraging synergies and rationalising operations; • difficulties in retaining and attracting customers and employees; • difficulties in developing new skills required for new business and markets; and • diversion of management’s attention required to integrate the two businesses following the acquisition or merger, one or more of which could have an adverse effect on our business.

In addition to the above risks, we cannot assure you that such merger will be in our interest or will positively impact our growth and performance. Any negative impact of a merger can adversely affect our business, results of operation, financial condition and the price our Equity Shares.

We cannot assure you that RBI will not recommend to us to undertake mergers in the future, which may have an adverse affect on our business and financial condition.

37. We have issued Equity Shares during the last one year at a price that may be below the Issue Price.

In the last one year, we have issued the following Equity Shares at a price that may be lower than the Issue Price:

S. No. Date of allotment Number of Equity Issue Price Reasons for allotment Shares (`) 1. June 24, 2011 16,83,646 11.60 Pursuant to exercise of

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2. November 5, 2011 6,40,746 11.60 options granted under CUB 3. March 21, 2012 8,51,254 11.60 ESOS Scheme 6,000 32.00 Total 31,81,646

The price at which the Equity Shares have been issued in the last one year is not indicative of the price at which Equity Shares may be offered in the Issue or at the price at which they will trade upon listing.

38. Renunciation among Non Resident and resident Investors is subject to obtaining the necessary approvals, including approval from RBI. Further, Eligible Employees are not entitled to renounce their right to participate in the Issue in favour of third parties.

Any renunciation (i) from a resident Eligible Equity Shareholder to a Non Resident, or (ii) from a Non Resident Eligible Equity Shareholder to a resident, or (iii) from a Non Resident Eligible Equity Shareholder to a Non Resident is subject to obtaining the necessary approvals, including from RBI under the FEMA and such permissions should be attached to the CAF. For further details, see the section titled “Terms of the Issue – Renunciation” on page 107. In the event such Eligible Equity Shareholders fail to obtain the requisite permission and such is not attached to the CAF, their Application will be rejected.

Further, participation by Eligible Employees under the Employee Reservation Portion is subject to certain procedural restrictions. For instance, Eligible Employees can neither renounce their right to participate in the Issue in favour of third parties nor apply in the Issue through plain paper application. For further details, see the section titled “Terms of the Issue” on page 100. In the event an Eligible Employee renounces his right to participate in the Issue or applies in the Issue through plain paper application, applications by such Eligible Employees and person in whose favour such Eligible Employee has renounced his right to participate in the Issue are liable to be rejected.

39. The Equity Shares Allotted pursuant to the Issue will be listed on the NSE, the BSE and the MSE and you will not be able to sell immediately on the NSE, the BSE and the MSE any of the Equity Shares Allotted.

Our Equity Shares are currently listed and traded on the NSE, the BSE and the MSE and the Equity Shares offered pursuant to the Issue will be listed and traded on NSE, the BSE and the MSE. Listing and trading of Equity Shares to be Allotted are subject to the receipt of final approval from the Stock Exchanges. We cannot assure that the Equity Shares will be credited to investors’ demat accounts, or that trading in the Equity Shares will commence, within the time periods specified in this Draft Letter of Offer. Any failure or delay in listing the Equity Shares on NSE, the BSE and the MSE would restrict investors’ ability to dispose of their Equity Shares.

40. Future issuances or sale of the Equity Shares could significantly affect the price of the Equity Shares.

The future issuance of Equity Shares by us, including through a preferential allotment to certain investors or pursuant to the CUB ESOS Scheme, or the disposal of Equity Shares by any of our major shareholders, or the perception that such issuance or sales may occur may significantly affect the price of the Equity Shares. In the event of issue of additional Equity Shares in any of the modes stated above or otherwise, existing shareholders, including investors participating in the Issue, may experience dilution and the price of the Equity Shares may decline. Further, any sale of a significant number of the Equity Shares can adversely impact the price of the Equity Shares and as a result, the value of your investment may decline.

There can be no assurance that we will not issue Equity Shares or that our shareholders will not dispose of the Equity Shares.

For further information with respect to our shareholders and their shareholding, including the CUB ESOS Scheme, see the section “Capital Structure” on page 36.

External Risk Factors

41. The market value of an investor’s investment may fluctuate due to the volatility of the Indian securities markets.

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The Indian securities markets are smaller and may be more volatile than the securities markets in other more developed jurisdictions. The Stock Exchanges have, in the past, experienced substantial fluctuations in the prices of listed securities. The stock exchanges in India, in line with global developments, have witnessed substantial volatility in the recent past. In addition, the governing bodies of the Stock Exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Furthermore, from time to time, disputes have occurred between listed companies, the Stock Exchanges and other regulatory bodies, which in some cases may have had a negative effect on market sentiment.

42. We are exposed to fluctuation in foreign exchange rates.

As a bank, we are exposed to exchange rate risk. We comply with regulatory limits on our unhedged foreign currency exposure. However, we are exposed to fluctuation in foreign currency rates for our unhedged exposure. Adverse movements in foreign exchange rates may also impact our borrowers negatively which may in turn impact the quality of our exposure towards these borrowers. Volatility in foreign exchange rates could adversely affect our business, financial conditions and results of operation.

43. Any trading closures at the Stock Exchanges may adversely affect the price of the Equity Shares.

The Stock Exchanges have in the past experienced problems, including temporary exchange closures, broker defaults, settlements delays and strikes by brokerage firm employees, which, if continuing or recurring, could affect the market price and liquidity of the securities of Indian companies, including the Equity Shares. A closure of, or trading stoppage on the Stock Exchanges could adversely affect the price of the Equity Shares.

44. There are restrictions on daily movements in the price of the Equity Shares, which may adversely affect a shareholder's ability to sell, or the price at which it can sell Equity Shares at a particular point in time.

We are subject to a daily “circuit breaker” imposed by Stock Exchanges, which does not allow transactions beyond specified increases or decreases in the price of the Equity Shares. This circuit breaker operates independently of the index-based market-wide circuit breakers generally imposed by the SEBI on Indian stock exchanges. The maximum movement allowed in the price of the Equity Shares before the circuit breaker is triggered is determined by the Stock Exchanges based on the historical volatility in the price and trading volume of the Equity Shares. The Stock Exchanges will not inform us of the triggering point of the circuit breaker in effect from time to time, and may change it without our knowledge. This circuit breaker will limit the upward and downward movements in the price of the Equity Shares. As a result of this circuit breaker, no assurance may be given regarding your ability to sell your Equity Shares or the price at which you may be able to sell your Equity Shares at any particular time.

45. The growth of the Indian banking industry may not be sustainable.

The Indian banking industry has experienced substantial growth, consistent with the economic development of India. We expect the banking industry in India to expand as a result of continued growth in the Indian economy and increase in household income, among other factors. However, since the second half of 2008, global markets have experienced tremendous volatility as a result of the turmoil originating from the United States sub-prime mortgage crisis, which has brought about a global economic downturn, and concerns over sovereign debt, particularly in Europe, which have impeded a global recovery. Following the global financial crisis, the Indian economy witnessed growth of 6.5% for the financial year 2012. The baseline projection of GDP growth for the financial year 2013 has been projected at 7.3%. (Source: RBI Monetary Policy Statement 2012-13). Although India’s economic growth has moderated and there are downside risks globally and, in India, weak industrial growth, slowdown in investment activity and deceleration in the resource flow to the commercial sector, the RBI anticipates a modest recovery in Fiscal 2013. (Sources: RBI, Third Quarter Review of Monetary Policy 2011-12). It is uncertain whether the Indian economy and the banking industry can return to previous levels of growth. Consequently, we cannot assure you that the growth and development of the Indian banking industry will be sustainable. If the rate of growth of the Indian banking industry slows down, our business, financial condition and results of operations may be materially and adversely affected.

46. Our business is substantially affected by prevailing economic conditions in India.

We are incorporated in India, and the majority of our assets and employees are located in India. As a result, we are highly dependent on prevailing economic conditions in India and our results of operations are significantly

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affected by factors influencing the Indian economy. Factors that may adversely affect the Indian economy, and hence our results of operations, may include:

• any increase in Indian interest rates or inflation; • any scarcity of credit or other financing in India, resulting in an adverse impact on economic conditions in India; • prevailing income conditions among Indian consumers and Indian corporations; • volatility in, and actual or perceived trends in trading activity on the Stock Exchanges; • changes in India’s tax, trade, fiscal or monetary policies; • political instability, terrorism or military conflict in India or in countries in the region or globally, including in India’s various neighbouring countries; • prevailing regional or global economic conditions, including in India’s principal export markets; and • other significant regulatory or economic developments in or affecting India or its entertainment industry.

Any slowdown or perceived slowdown in the Indian economy, or in specific sectors of the Indian economy, could adversely impact our business and financial condition and the price of the Equity Shares.

47. Inflation in India could have an adverse impact on our business.

The Indian economy has recently experienced high levels of inflation. According to the Monthly Economic Report for May 2012 prepared by the Department of Economic Affairs, Ministry of Finance, GoI, (“DEA”) the year-on-year inflation in terms of the Wholesale Price Index (“WPI”) was 7.55% for the month of January 2012 as compared to 9.56% in the corresponding month last year. The RBI’s Monetary Policy Statement 2011-12 stated that headline and core inflation had exceeded recent expectations and predicted that high inflation would persist and may get worse. Over the long run, high inflation is inimical to sustained growth as it harms investment by creating uncertainty, according to the RBI.

In its Third Quarter Review of Monetary Policy 2011-12 dated January 24, 2012, the RBI decided against reducing the repo rate in order to avoid an imminent risk of resurgent inflation, and observed that headline WPI had moderated owing largely to a sharp deceleration in prices of seasonal food items. As per the RBI’s Mid- Quarter Monetary Policy Review: June 2012, the RBI recognized headline WPI inflation rate moderated from a peak of 10.00% in September 2011 to 7.70% in March 2012. In the event of a sustained high rate of inflation, our costs, such as operating expenses, may increase, which could have an adverse effect on our results of operations.

48. Natural disasters and other disruptions could adversely affect the Indian economy and could cause our business and operations to suffer and the price of our Equity Shares to decrease.

Our operations, including our branch network, may be damaged or disrupted as a result of natural disasters such as earthquakes, floods, heavy rainfall, epidemics, tsunamis and cyclones and other events such as protests, riots and labour unrest. Such events may lead to the disruption of information systems and telecommunication services for sustained periods. They also may make it difficult or impossible for employees to reach our business locations. Damage or destruction that interrupts our provision of services could adversely affect our reputation, our relationships with our customers, our senior management’s ability to administer and supervise our business or it may cause us to incur substantial additional expenditure to repair or replace damaged equipment or rebuild parts of our branch network. We may also be liable to our customers for disruption in services resulting from such damage or destruction. Our insurance coverage for such liability may not be sufficient. Any of the above factors may adversely affect our business and financial results, the quality of our customer service and the price of our Equity Shares.

49. Continuing high prices of crude oil could adversely affect the Indian economy, which could adversely affect our business.

India imports a substantial portion of its crude oil requirement. While oil prices have declined sharply from their peak levels, any sharp increases or volatility in oil prices and the pass-through of such increases to Indian consumers could have a material negative impact on the Indian economy and the Indian banking and financial system in particular, including through a rise in inflation and market interest rates and a higher trade deficit. Continued high oil prices or further increases in oil prices could affect the Indian economy and the Indian banking and financial system. This could adversely affect our liquidity and business, including our ability to

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grow, the quality of our assets, our financial condition and the price of the Equity Shares.

50. A significant change in the Government’s economic liberalization and deregulation policies could disrupt our business.

We are incorporated in India and derive our revenues in India with substantially all of our assets located in India. Most of our customers are also located in India. The Government has traditionally exercised and continues to exercise a dominant influence over many aspects of the economy. Its economic policies have had and could continue to have a significant effect on public sector entities, including us. Our business and the market price and liquidity of our Equity Shares may be affected by interest rates, changes in Government policy, taxation, social and civil unrest and political, economic or other developments in or affecting India. Since 1991, successive governments have pursued policies of economic and financial sector liberalisation and deregulation. The current Government, which came to power in May 2009, has announced policies and taken initiatives that support the economic liberalisation program pursued by previous governments. The policies of the new Government may change the rate of economic liberalisation, specific laws and policies affecting banks and financial institutions, foreign investment and other matters affecting investment in the Equity Shares. While the Government is expected to continue the liberalisation of India’s economic and financial sectors and deregulation policies, we cannot assure you that such policies will be continued. A significant change in the Government’s policies in the future, in particular, those relating to the financial services industry in India, could affect business and economic conditions in India, and could also adversely affect our financial condition and results of operation.

51. Financial instability in other countries could disrupt our business and cause the price of our Equity Shares to decrease.

The Indian market and the Indian economy are, to a certain extent, influenced by economic and market conditions in other countries, particularly market conditions in the United States and Europe. Although, financial turmoil elsewhere in the world in past years has had limited impact on the Indian economy, investors should be aware that there is a recent history of financial crises and boom-bust cycles in multiple markets in both the emerging and developed economies which leads to risks for all financial institutions, including us. Although economic conditions are different in each country, investors’ reactions to developments in one country can have adverse effects on the securities of companies in other countries, including India. A loss of investor confidence in the financial systems of India or other markets may cause volatility in the Indian financial markets and indirectly, in the Indian economy in general. This could negatively impact the Indian economy, including the movement of exchange rates, interest rates and flow of funds in India. Any significant financial disruption could have an adverse effect on our business, future financial condition and the price of our Equity Shares. Although the recent financial crisis has had a limited direct impact on us, we remain subject to the risks posed by the indirect impact of the global credit crisis on the economy, some of which cannot be anticipated and the vast majority of which are not in our control. We also remain subject to counterparty risk to financial institutions that fail or are otherwise unable to meet their obligations to us.

52. Companies operating in India are subject to a variety of central and state government taxes and surcharges.

Tax and other levies imposed by the central and state governments in India that affect our tax liability include central and state taxes and other levies, income tax, value added tax, turnover tax, service tax, stamp duty, tax on dividends and other special taxes and surcharges which are introduced on a temporary or permanent basis from time to time. Moreover, the central and state tax scheme in India is extensive and subject to change from time to time. The statutory corporate income tax in India, which includes a surcharge on the tax and an education cess on the tax and the surcharge, is currently 32.45%. The central or state government may in the future increase the corporate income tax it imposes. Any such future increases or amendments may affect the overall tax efficiency of companies operating in India and may result in significant additional taxes becoming payable. Additional tax exposure could adversely affect our business and results of operation.

Prominent Notes

• Our net worth was ` 1,006.62 crores and ` 1,243.10 crores as at Fiscal 2011 and as at Fiscal 2012, respectively, as per our audited financial statements. The Issue comprises of issue of [●] Equity Shares to the Eligible Equity Shareholders in accordance with the Rights Entitlement aggregating up to ` 200 crores and a reservation of up to [●] Equity Shares for the Eligible Employees aggregating up to ` 50 crores.

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• During the period of six months immediately preceding the date of filing of this Draft Letter of Offer, no financing arrangements existed whereby our Directors and their relatives may have financed the purchase of Equity Shares by any other person, other than in the normal course of the business of such financing entity.

• We have no identifiable promoters and subsidiaries. Hence no disclosure of nature and cumulative value of transactions entered into by us with our group companies or subsidiaries have been given.

For details pertaining to our related party transactions, see section titled “Financial Statements” on page 55.

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SECTION III - INTRODUCTION

THE ISSUE

Following is a summary of the Issue. This summary should be read in conjunction with and is qualified in its entirety by, more detailed information in the section titled “Terms of the Issue” beginning on page 100 of this Draft Letter of Offer.

Equity Shares offered in the Issue [●] Equity Shares aggregating up to ` 250 crores. Of which Employee Reservation Portion [●] Equity Shares aggregating up to ` 50 crores.

Rights Entitlement [●] Equity Shares for every [●] fully paid up Equity Shares held as on the Record Date. Record Date [●]. Face Value per Equity Share ` 1. Issue Price per Equity Share ` [●]. Equity Shares subscribed and paid up prior to the Issue 40,82,12,649 Equity Shares. Equity Shares subscribed and paid up after the Issue [●] Equity Shares. Use of Issue Proceeds See the section titled “Objects of the Issue” on page 41. Terms of the Issue See the section titled “Terms of The Issue” on page 100.

Terms of Payment

The Payment Method available to the Investors is as set forth below:

Payment Method* Amount payable per Equity Share (in `) Face value Premium Total On Application [●] [●] [●] On Call [●] [●] [●] Total 1 [●] [●] * See risk factor 11 on page 13 for risks associated with the Payment Method. For further information, see section titled “Terms of Issue” on page 100. Note: Our Bank has filed an application dated July 16, 2012 to the FIPB seeking approval to Allot partly paid-up Equity Shares to Non- Resident Eligible Equity Shareholders and Renouncees.

The Issue Price is ` [●] per Equity Share. Investors are required to pay ` [●] per Equity Share equivalent to [●]% of the Issue Price on Application, and the balance of ` [●] per Equity Share equivalent to [●]% of the Issue Price on Call, respectively.

While making the Application, the Investor shall make a payment, or in case the Investor is applying under the ASBA process, instruct the relevant SCSB to block funds in the ASBA Account, equivalent to the Application Money, calculated on the basis of the Issue Price of ` [●] per Equity Share. Out of the amount of ` [●] paid on Application per Equity Share, ` [●] per Equity Share shall be adjusted towards the face value of the Equity Shares per Equity Share and ` [●] shall be adjusted towards the share premium account per Equity Share. Accordingly, out of the amount of ` [●] paid on Call, ` [●] per Equity Share shall be adjusted towards the face value of the Equity Shares per Equity Share and ` [●] shall be adjusted towards the share premium account per Equity Share.

Call shall be sent by our Bank to the holders of the partly paid-up Equity Shares on the Call Record Date, provided that such notice is given in writing at least 14 days prior to the date of the Call.

In terms of Regulation 17 of the SEBI Regulations, our Bank shall ensure that the Call Money is collected within 12 months from the date of the Allotment. In case an Investor fails to pay the amount of the Call Money within the said 12 months from the date of the Allotment, the Equity Shares in respect of which any amount of the Call Money remains outstanding shall be forfeited, along with the Application Money already paid.

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SELECTED FINANCIAL INFORMATION

The following tables set forth the summary financial information derived from the audited financial statements of our Bank for the fiscal year ended March 31, 2012 including the notes thereto, prepared in accordance with Indian GAAP and the Companies Act, as described in the Auditor’s reports and should be read in conjunction with the respective financial statements and the notes to the audited financial statements for the fiscal year ended March 31, 2012 included in section titled “Financial Statements” on page 55 and the section titled “Accounting Ratios and Capitalization Statement” on pages 80 and 81, respectively.

BALANCE SHEET AS ON MARCH 31, 2012 (` in crores) Sch. No As on As on 31.03.2012 31.03.2011

CAPITAL AND LIABILITIES

Share Capital 1 40.82 40.50 Reserves and Surplus 2 1,202.28 966.12 Deposits 3 16,340.76 12,914.29 Borrowings 4 348.70 186.15 Other Liabilities & Provisions 5 418.10 484.46 Total 18,350.66 14,591.52

ASSETS

Cash and Balances with Reserve Bank of India 6 814.67 1,052.24 Balances with Banks & Money at Call and Short Notice 7 321.44 234.08 Investments 8 4,586.19 3,616.23 Advances 9 12,137.46 9,255.46 Fixed Assets 10 97.74 68.53 Other Assets 11 393.16 364.98 Total 18,350.66 14,591.52

Contingent Liabilities 12 9,701.70 4,162.22 Bills for Collection 368.85 289.68

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PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2012

(` in crores) Sch. No Year ended Year ended 31.03.2012 31.03.2011

INCOME Interest Earned 13 1,696.77 1,218.41 Other Income 14 207.13 157.40 Total 1,903.90 1,375.81

EXPENDITURE Interest Expended 15 1,197.02 798.38 Operating Expenses 16 279.83 216.40 Provisions and Contingencies 146.80 145.98 Total 1,623.65 1,160.76 PROFIT / LOSS Net Profit 280.25 215.05 Profit brought forward 5.56 5.56 Total 285.81 220.61

APPROPRIATIONS - Statutory Reserves 71.00 56.00 - Capital Reserve 0.00 0.00 - General Reserve 140.00 98.40 - Investment Reserve Account 0.73 0.00 - Special Reserve under IT Act, 1961 20.00 20.50 - Proposed / Dividend 40.82 34.43 - Dividend Tax thereon 6.66 5.72 - Balance carried over to Balance Sheet 6.60 5.56

Total 285.81 220.61

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CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2012 (` in crores) As at March 31 2012 2011

Cash flow from Operating activities: Net Profit as per P&L account 280.25 215.05

Adjustments for Depreciation 13.56 16.83 Provisions & Contingencies - Tax 63.00 67.00 Provisions & Contingencies - Others 83.80 78.98 Profit on sale of Investments (7.77) (6.61) Profit on sale of Assets (0.15) (0.23) Foreign exchange .fluctuations (15.22) (10.55) Operating Profit before working capital changes 417.47 360.47 Adjustments for Funds advanced to Customers (2,944.23) (2,489.20) Other Operating Assets (85.85) 1.99 Deposit from Customers 3,426.47 2,629.70 Borrowing from Banks 162.55 146.09 Other operating liabilities (151.71) (2.88) Purchase and sale of investments (Net) (969.61) (406.78) Cash Generated from Operations (144.91) 239.39 Taxation - Income Tax and FBT 73.53 (2.67) Net cash flow from Operating activities - A (71.38) 236.72

Cash flow from Investing activities Purchase of Fixed Assets (44.38) (23.53) Sale of Fixed Assets 1.77 1.44 Net cash used in Investing Activities - B (42.61) (22.09)

Cash flow from Financing activities: Proceeds from issue of Share Capital 0.32 0.54 Proceeds from share premium 3.38 5.53 Dividend Paid (34.07) (29.60) Tax on distributed profits (5.86) (4.98) Net cash flow from Financing Activities - C (36.23) (28.51)

Net increase in Cash and Cash equivalents A+B+C (150.22) 186.12

Cash & Cash equivalents as at March 31 of the Previous Fiscal 1,286.32 1,100.20

Cash & Cash equivalents as at March 31 of the Reporting Fiscal 1,136.10 1,286.32

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GENERAL INFORMATION

Brief History of our Bank

Our Bank was incorporated on October 31, 1904 as a public limited company with the name of ‘The Kumbakonam Bank Limited’ under the provisions of the Companies Act, 1882. Pursuant to a resolution passed by the shareholders of our Bank at the extraordinary general meeting dated January 27, 1965, the name of our Bank was changed to ‘The Kumbakonam City Union Bank Limited’. Subsequently, the name of our Bank was changed to ‘City Union Bank Limited’ pursuant to a resolution passed by the shareholders of our Bank at the extraordinary general meeting dated June 24, 1987 and we received a fresh certificate of incorporation consequent upon change of name dated November 2, 1987 from the RoC Chennai.

Registered and Corporate Office

City Union Bank Limited No.149, TSR Big Street, Kumbakonam Tamil Nadu – 612 001 Telephone: +91 435 2402322/ 2401622 Facsimile: +91 435 2431746 Website: www.cityunionbank.com

Registration No.: 18-001287

Corporate Identification Number: L65110TN1904PLC001287

Address of the RoC Chennai

Registrar of Companies, Tamil Nadu and Andaman and Nicobar Islands 5th Floor, Shastri Bhawan 26 Haddows Road Chennai – 600 034

The Equity Shares are listed on the BSE, NSE and MSE.

Company Secretary and Compliance Officer

Our Company Secretary and Compliance Officer is Mr. V Ramesh. His contact details are as follows:

City Union Bank Limited No.149, TSR Big Street, Kumbakonam – 612 001 Tamil Nadu Telephone: +91 435 240 2322 / 240 1622 Facsimile: + 91 435 243 1746 Email: [email protected]

Note: Investors are advised to contact the Registrar to the Issue or the Compliance Officer in case of any pre- Issue or post-Issue related problems such as non-receipt of letter of Allotment, Split Application Forms, share certificate(s) or Refund Orders, etc. All grievances relating to the ASBA process may be addressed to the Registrar to the Issue, with a copy to the SCSBs, giving full details such as name, address of the applicant, ASBA Account number and the Designated Branch of the SCSBs, number of Equity Shares applied for, amount blocked, where the CAF or the plain paper application, in case of Eligible Equity Shareholder, or the EAF, in case of Eligible Employee, as the case may be, was submitted by the ASBA Investor.

Lead Manager to the Issue

Edelweiss Financial Services Limited Edelweiss House, 14th Floor

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Off C.S.T. Road, Kalina Mumbai – 400 098 Maharashtra, India Telephone: +91 22 4086 3535 Facsimile: +91 22 4086 3610 E-mail: [email protected] Investor Grievance I.D.: [email protected] Website: www.edelweissfin.com Contact Person: Ms. Dipti Samant / Mr. Piyush Arora SEBI Registration No. INM0000010650

Edelweiss Financial Services Limited shall be responsible for and shall coordinate the following activities in relation to the Issue:

No. Activities

1. Capital structuring with the relative components and formalities such as composition of debt and equity, type of instruments, etc. 2. Drafting and design of the offer document. To ensure compliance with stipulated requirements and completion of prescribed formalities (including finalization of Letter of Offer) with Stock Exchanges and SEBI. 3. Selection of various agencies connected with the issue, namely Registrar to the Issue, printers, and advertisement agencies. 4. The post-Issue activities will involve essential follow-up steps, which must include finalization of basis of allotment / weeding out of multiple applications, listing of instruments and dispatch of certificates and refunds, with the various agencies connected with the work such as the Registrar to the Issue, Bankers to the Issue and the bank handling refund business. Lead Manager shall be responsible for ensuring that these agencies fulfill their functions and enable them to discharge this responsibility through suitable agreements with the Bank.

Legal counsel to the Issue

Luthra & Luthra Law Offices Indiabulls Finance Center 20th Floor, Tower 2, Unit A2 Elphinstone Road, Senapati Bapat Marg Lower Parel Mumbai – 400 013 Telephone: +91 22 6630 3600 Facsimile: +91 22 6630 3700

Auditor of our Bank

M/s Jagannathan & Sarabeswaran Chartered Accountants New No.7 (Old No.35) Luz Avenue, First Floor Mylapore Chennai 600 004 Telephone: +91 44 2499 0630/ 2499 3845 Fax No: +91 44 2467 1150 Email address: [email protected] Contact Person: Mr. P.S. Narasimhan Firm Number: 001204 S

Registrar to the Issue

Karvy Computershare Private Limited Plot Nos. 17-24, Vittal Rao Nagar Madhapur Hyderabad – 500 081 Andhra Pradesh, India Telephone: +91 40 4465 5000 / 1800 345 4001

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Facsimile: +91 40 2343 1551 Email: [email protected] Website: http://karisma.karvy.com SEBI Registration No.: INR000000221 Contact Person: M. Murali Krishna

Monitoring Agency

Since the Issue size does not exceed ` 500 crores the appointment of a monitoring agency, as per Regulation 16 of the SEBI Regulations is not required. The Board of Directors of our Bank will monitor the use of proceeds of the Issue as per clause 49 of the Listing Agreement.

Bankers to the Issue

[●]

Self Certified Syndicate Banks

The list of banks who have been notified by SEBI to act as SCSBs are provided at http://www.sebi.gov.in. For details on designated branches of SCSBs collecting the ASBA Form, refer the aforesaid SEBI link.

Credit rating

This being a rights issue of Equity Shares, no credit rating is required.

Trustee

As the Issue is of Equity Shares, the appointment of trustee is not required.

Underwriting

The Issue is not underwritten.

Principal Terms of Loans and Assets charged as Security

For the principal terms of loans and assets charged as security, see the section titled “Financial Indebtedness” on page 84.

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CAPITAL STRUCTURE

The share capital of our Bank as of the date of this Draft Letter of Offer is set forth below:

(In ` crores, except share data) Aggregate value at face Aggregate value at value Issue Price A) AUTHORISED SHARE CAPITAL 100,00,00,000 Equity Shares 100.00 -- B) ISSUED, SUBSCRIBED AND PAID UP SHARE CAPITAL BEFORE THE ISSUE 40,82,12,649 fully paid up Equity Shares 40.82 -- C) PRESENT ISSUE BEING OFFERED THROUGH LETTER OF OFFER* [●] Equity Shares [●][●] D) PAID-UP EQUITY CAPITAL AFTER THE ISSUE [●] Equity Shares [●] [●] E) SECURITIES PREMIUM ACCOUNT Before the Issue 203.36 After the Issue [●] * The Issue has been authorised pursuant to our Board resolutions dated January 31, 2012 and April 28, 2012 and resolution passed by our shareholders through postal ballot declared on June 11, 2012.

Notes to the Capital Structure

1. Our Bank has no identifiable promoters. Therefore, the disclosures in relation to shareholding, lock-in, pledge of and encumbrance on shares held, acquisition of shares by the promoter and promoter group in the last one year, intention and extent of participation by promoters and promoter group in the Issue and lock- in, are not applicable.

2. Shareholding pattern of our Bank

(a) The table below presents the shareholding pattern of our Bank as on June 30, 2012:

Description Pre Issue Post-Issue

Category of Numb Total No of shares Total Total Shares pledge or Total Total Shares Shareholder er of number of held in share sharehold otherwise numbe Shareh pledge or share Equity demateriali holdin ing as a encumbered r of olding otherwise holder Shares zed form g as a % of total equity as encumbered s % of no of Number As a shares A % of Num As total equity of % of total ber a % no of shares shares total Numbe of equity (a+b+c) numb r of shar shares er of Equity es (A+B) shares shares Promoter and promoter group (A) Indian (A1) ------Foreign (A2) ------Total ------A=A(1)+A(2) Public Shareholding Institutions B(1) Mutual funds 23 76,08,882 76,08,882 1.86 1.86 - - [●] [●] [●] [●] /UTI Financial 5 19,95,706 19,90,706 0.49 0.49 - - [●] [●] [●] [●] Institutions /Banks

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Description Pre Issue Post-Issue

Category of Numb Total No of shares Total Total Shares pledge or Total Total Shares Shareholder er of number of held in share sharehold otherwise numbe Shareh pledge or share Equity demateriali holdin ing as a encumbered r of olding otherwise holder Shares zed form g as a % of total equity as encumbered s % of no of Number As a shares A % of Num As total equity of % of total ber a % no of shares shares total Numbe of equity (a+b+c) numb r of shar shares er of Equity es (A+B) shares shares Central ------[●] [●] [●] [●] Government / State Government(s ) Venture ------[●] [●] [●] [●] Capital Funds Insurance 3 2,03,03,556 2,03,03,556 4.97 4.97 - - [●] [●] [●] [●] Companies Foreign 51 8,90,66,346 8,90,66,346 21.82 21.82 - - [●] [●] [●] [●] Institutional Investors Foreign ------[●] [●] [●] [●] Venture Capital Investors Others ------[●] [●] [●] [●] Sub-total 82 11,89,74,490 11,89,69,490 29.15 29.15 - - [●] [●] [●] [●] B(1) Non- institutions Bodies 937 4,20,27,110 3,86,25,569 10.30 10.30 - - [●] [●] [●] [●] Corporate Individuals (i) Individuals 80,549 13,33,13,996 9,44,29,758 32.66 32.66 - - [●] [●] [●] [●] holding nominal share capital upto ` 1 lakh (ii) 219 7,43,96,366 6,70,34,732 18.22 18.22 - - [●] [●] [●] [●] Individuals holding nominal share capital in excess of ` 1 lakh Others Trusts 7 65,530 14,500 0.02 0.02 - - [●] [●] [●] [●] Non Resident 871 1,17,51,446 1,17,51,446 2.88 2.88 - - [●] [●] [●] [●] Indians Foreign 2 2,46,90,569 2,46,90,569 6.05 6.05 - - [●] [●] [●] [●] Bodies Clearing 216 29,93,142 29,93,142 0.73 0.73 - - [●] [●] [●] [●] Members Sub-total 82,801 28,92,38,159 23,95,39,716 70.85 70.85 - - [●] [●] [●] [●] B(2) Total 82,883 40,82,12,649 35,85,09,206 100.00 100.00 - - [●] [●] [●] [●] B=B(1)+B(2) Total (A+B) 82,883 40,82,12,649 35,85,09,206 100.00 100.00 - - [●] [●] [●] [●]

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Description Pre Issue Post-Issue

Category of Numb Total No of shares Total Total Shares pledge or Total Total Shares Shareholder er of number of held in share sharehold otherwise numbe Shareh pledge or share Equity demateriali holdin ing as a encumbered r of olding otherwise holder Shares zed form g as a % of total equity as encumbered s % of no of Number As a shares A % of Num As total equity of % of total ber a % no of shares shares total Numbe of equity (a+b+c) numb r of shar shares er of Equity es (A+B) shares shares Shares held by custodians, against which depository receipts have been issued (C) Promoter and ------[●] [●] [●] [●] Promoter Group Public ------[●] [●] [●] [●] Grand total 82,883 40,82,12,649 35,85,09,206 100.00 100.00 - - [●] [●] [●] [●] (A+B+C)

(b) The table below represents the holding of partly paid-up shares, convertible securities and warrants in our Bank as on June 30, 2012:

Partly paid-up Equity No. of partly paid-up As a % of total no. of As a % of total no. of Shares:- Equity Shares partly paid-up Equity Equity Shares Shares Held by promoter/ Nil - - promoters group Held by public Nil - - Total Nil - - Outstanding convertible No. of outstanding As a % of total no. of As a % of total no. of securities:- securities outstanding convertible Equity Shares, assuming securities full conversion of the convertible securities Held by promoter/ promoter Nil - - group Held by public Nil - - Total Nil - - Warrants:- No. of warrants As a % of total no. of As a % of total no. of warrants Equity Shares, assuming full conversion of warrants Held by promoter/ Nil - - promoter group Held by public Nil - - Total Nil - - Total paid-up capital assuming full conversion of ` 40.82 crores warrants and convertible securities

(c) The table below represents the shareholding of persons belonging to the category “public” and holding more than 1% of the total paid up share capital of our Bank as on June 30, 2012.

S. No. Name Number of Equity Percentage of Grand Shares Held Total (%) 1. L & T Capital Holdings Limited 1,91,95,012 4.70 2. Nederlandse Finnancierings Maatschappij Voor Ontwik 1,87,50,000 4.59 3. Argonaut Ventures 1,82,32,474 4.47

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S. No. Name Number of Equity Percentage of Grand Shares Held Total (%) 4. Life Insurance Corporation of India 1,73,31,268 4.25 5. Acacia Partners, LP 1,21,71,162 2.98 6. Vilasini Vaidyanathan 1,00,00,000 2.45 7. Wasatch Core Growth Fund 79,41,426 1.95 8. Emblem FII 69,50,000 1.70 9. Meenakshi V 65,00,000 1.59 10. Ares Investments 59,40,569 1.46 11. Sriram V 50,00,000 1.22 12. Rising India Focus Fund Ltd 43,36,109 1.06 13. Wasatch Micro Cap Fund 41,54,569 1.02 14. Shriram Chits Pvt Ltd 41,16,728 1.01 Total 14,06,19,317 34.45

(d) As on June 30, 2012, there are no persons belonging to the category ‘public’ and holding more than 5% of the total paid up share capital of our Bank.

(e) As on June 30, 2012, there are no Equity Shares which are subject to lock-in, pledge or encumbrance.

(f) As on June 30, 2012, there are no Equity Shares against which depository receipts have been issued.

3. The details of outstanding options, including employee stock option scheme or employee stock purchase scheme is as follows:

CUB ESOS Scheme

The shareholders of our Bank have approved the employee stock option scheme at the extra ordinary general meeting held on April 26, 2008 for grant to eligible employees, including Directors, up to 5,00,00,000 equity stock options in aggregate at such price as may be determined by the Board. Accordingly, stock options have been granted to eligible employees under three tranches, CUB ESOS Scheme – 2008 Series I, CUB ESOS – 2008 Series II and CUB ESOS Scheme – 2008 Series III, at an exercise price to be decided by the Board of Directors on the date of grant of options. These stock options would vest as per the following vesting schedule:

Vesting period % of options At the end of one year from the date of grant 15% At the end of two years from the date of grant 15% At the end of three years from the date of grant 15% At the end of four years from the date of grant 25% At the end of five years from the date of grant 30%

The options vested, subject to other conditions, are exercisable within a period of three years from the respective dates of vesting.

Summary of options granted as on the date of this Draft Letter of Offer:

CUB ESOS Scheme – CUB ESOS Scheme – CUB ESOS Scheme – 2008 Series I 2008 Series II 2008 Series III Options granted 2,27,81,250* 3,46,000 28,00,000 Date of grant December 6, 2008 May 26, 2010 October 5, 2010 Options cancelled Nil Nil Nil Net options granted 2,27,81,250 3,46,000 28,00,000 Options vested 1,17,95,048 51,900 4,20,000 Options exercised 82,06,649 6,000 Nil Equity Shares issued on exercise of options 82,06,649 6,000 Nil Options lapsed 10,40,702 32,000 Nil Exercise price (in `) 11.60** 32.00 47.00 Money realized by exercise of options (` in 9.52 0.02 Nil crores) Total number of options outstanding 1,35,33,899 3,08,000 28,00,000 Total options outstanding 1,66,41,899

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* includes 25,31,250 additional options granted on May 26, 2010 pursuant to issue of 8,00,00,000 Equity Shares of ` 6 on a rights basis in 2009 (“2009 Rights Issue”). ** the exercise price of the options was revised from ` 13 to ` 11.60 pursuant to 2009 Rights Issue.

Except as stated below, none of the Directors or key managerial persons of our Bank have been granted stock options as on the date of the filing of this Draft Letter of Offer under the CUB ESOS Scheme:

S. No. Name of key managerial person Number of options granted Number of options exercised 1. Dr. N Kamakodi 5,62,500 2,53,125 2. Mr. R Mohan 2,25,000 1,01,250 3. Mr. S Sekar 2,25,000 1,01,250 4. Mr. S Sundar 2,25,000 1,01,250 5. Mr. S Balasubramanian 8,43,750 4,78,126

4. The ex-rights price of the Equity Shares as per Regulation 10 (4) (b) of the Takeover Code is ` [●] per Equity Share.

5. There shall be only one denomination of the Equity Shares, unless otherwise permitted by law.

6. Our Bank shall comply with such disclosure and accounting norms as may be specified by SEBI from time to time.

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OBJECTS OF THE ISSUE

We are a banking company regulated by RBI. The RBI guidelines require us to maintain a minimum capital adequacy ratio of 9.00% subject to a minimum Tier I capital adequacy ratio of 6.00%. As of March 31, 2012, our total capital adequacy ratio was 12.57% including Tier-I capital adequacy ratio of 11.69 % and Tier-II capital adequacy ratio of 0.88 %.

The object of the Issue is to augment our capital base to meet the capital adequacy requirements arising out of growth in our business.

Since we are engaged in the business of banking, we are seeking to strengthen our capital base to support the future growth in our assets and comply with the capital adequacy requirements applicable to us.

The main objects clause and the objects incidental or ancillary to the main objects clause of our Memorandum of Association enable us to undertake our existing activities. Further, the main objects clause of our Bank enables us to carry on the activities for which the funds are being raised by us in the Issue.

Requirement and sources of funds

Particulars Amount * (` in crores) Augment our capital base to meet our capital adequacy requirements arising out of growth in our [●] business Estimated Issue expenses [●] Issue Proceeds 250 * to be updated on finalization of Issue Price

Means of finance

The stated objects of the Issue are proposed to be financed entirely from the proceeds of the Issue and hence, no amount is proposed to be raised through any other means of finance. Accordingly, sub-clause D of clause VII of Part E of Schedule VIII of the SEBI Regulations (which requires firm arrangements of finance through verifiable means for 75% of the stated means of finance, excluding the amount to be raised through the proposed issue) does not apply.

Monitoring of utilisation of funds

As the size of the Issue will not exceed ` 500 crores, the appointment of monitoring agency would not be required as per Regulation 16 of the SEBI Regulations. Our Board and Audit Committee will monitor the use of proceeds of this Issue as per clause 49 of the Listing Agreement.

Estimated Issue expenses

The total expenses of the Issue are estimated to be approximately ` [●] crores. The expenses of the Issue include, among others, fees of the Lead Manager, Registrar to the Issue and other advisors, commission payable to SCSBs’, printing, stationery and postage expenses, advertising and publicity expenses and other expenses.

The estimated Issue expenses are as under:

Particulars Estimated % of Estimated % of Estimated Expenses Issue size Issue expenses (` in crores) * Fees of the Lead Manager [●] [●] [●] Fees to advisors (Legal, Auditors, etc) [●] [●] [●] Fees of the Registrar to the Issue [●][●][●] Commission payable to SCSBs [●] [●] [●] Advertising and publicity expenses [●] [●] [●] Printing, stationery and postage expenses [●] [●] [●] Other expenses [●] [●] [●] Total [●] [●] [●] * to be updated upon finalization of Issue Price

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Interest of Directors or Key Management Personnel in the Objects of the Issue

No part of the proceeds of the Issue will be paid by us as consideration to our Directors or key management personnel.

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STATEMENT OF TAX BENEFITS

To,

The Board of Directors, The City Union Bank Limited Regd & Corp.Office - T.S.R. Big Street Kumbakonam 612 001 Tamil Nadu

Dear Sir,

We hereby report that the attached Annexure states the possible tax benefits available to City Union Bank Limited (“the Bank”) and to the shareholders of the Bank under the Income Tax Act, 1961, Wealth Tax Act, 1957 presently in force in India, subject to the fact that several of these benefits are dependent on the Bank or its shareholders fulfilling the conditions prescribed under the relevant tax laws. Hence the ability of the Bank or its shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which based on the business imperatives, the Bank may or may not choose to fulfill.

The benefits discussed in the Annexure are not exhaustive. This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for the professional tax advice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their participation in the issue.

We do not express any opinion or provide any assurance as to whether: • The Bank or its shareholders will continue to obtain these benefits in future; or • The conditions prescribed for availing of these benefits have been / would be met with.

The contents of this Annexure are based on the information, explanations and representations obtained from the Bank and on the basis of our understanding of the business activities and operations of the Bank and interpretations of the current tax laws.

PLACE: CHENNAI Name: P S NARASIMHAN DATE : 11.07.2012 M.NO- 020936 Partner

JAGANNATHAN & SARABESWARAN Firm Number: 001204 S Chartered Accountants Address: New No 7 old No.35 Luz Avenue Mylapore – Chennai. 600 004

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The following key tax benefits are available to the Bank and the prospective shareholders under the current direct tax laws in India.

This statement is only intended to provide the tax benefits to the Bank and its shareholders in a general and summary manner and does not purport to be a complete analysis or listing of all the provisions or possible tax consequences of the subscription, purchase, ownership or disposal etc. of shares. In view of the individual nature of tax consequence and the changing tax laws, each investor is advised to consult his/her own tax adviser with respect to specific tax implications arising out of their participation in the issue.

The information on Tax benefit set out below as available to the bank and its shareholders are mainly dependent upon fulfilling conditions prescribed under the relevant Act. The benefits discussed are not exhaustive but is intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. Some or all of the tax consequences of described herein may be amended or modified by future amendments to the Income-tax Act.

I. SPECIAL TAX BENEFITS

SPECIAL TAX BENEFITS AVAILABLE TO THE BANK

1. INCOME TAX

1. In terms of Section 36(1)(viia) of the Income-tax Act, and subject to the conditions specified therein, deduction in respect of any provision for bad and doubtful debts made by the bank is allowed at 7.5% of the total income (computed before making any deduction under this Section and Chapter VIA of the Income-tax Act) and 10% of the aggregate average advances made by rural branches.

2. In terms of Section 36(1)(viii) of the Income-tax Act, bank is allowed deduction at 20% of the profits derived from the business of providing long-term finance for industrial or agricultural development or development of infrastructure facility in India or construction or purchase of houses in India for residential purposes computed in the manner specified under the Section and carried to a Special Reserve account from time to time not exceeding twice the paid-up share capital and general reserves. The amount withdrawn from such a Special Reserve Account would be chargeable to income tax in the year of withdrawal, in accordance with the provisions of Section 41(4A) of the Income-tax Act.

3. In terms of section 43D of the Act, interest on certain categories of bad and doubtful debts as specified in Rule 6EA of the Income-tax Rules, 1962, shall be chargeable to tax only in the year of receipt or credit to Profit and Loss Account, whichever is earlier.

II. GENERAL TAX BENEFITS

A. INCOME-TAX

I. To the Bank

1. As per provisions of Section 10(15)(i) of the Income Tax Act, 1961 (hereinafter called “the Act”), income by way of interest, premium on redemption or other payment on securities, bonds, deposits etc. notified by the Central Government is exempt from tax, subject to such conditions and limits as may be specified by Central Government in this behalf.

2. In terms of sec 10 (34) read with Section 115-O and section 10(35) of the Act, dividend income from shares of Companies and units of Mutual Funds specified under section 10(23D) of the Income-tax Act are exempt in the hands of the bank. As per the provisions of Section 14A of the Income-tax Act, no deduction is allowed in respect of any expenditure incurred in relation to such dividend income to be computed in accordance with the method as may be prescribed under rule 8D subject to and in accordance with the provisions contained therein.

3. In terms of Section 94(7) of the Income-tax Act provides that losses arising from the sale/transfer of shares or units purchased within a period of three months prior to the record date and sold/transferred within three months or nine months respectively after such date, will be disallowed to the extent dividend income on such shares or units are claimed as tax exempt.

44

4. In terms of Section 35DD of the Income-tax Act, any expenditure incurred wholly and exclusively for the purposes of amalgamation, the bank is eligible for deduction of an amount equal to one-fifth of such expenditure for each of the five successive years beginning with the year in which amalgamation takes place.

5. In terms of Section 36(1)(vii) of the Income-tax Act, any bad debts or part thereof written off as irrecoverable in accounts, would be allowed as a deduction from total income in accordance with and subject to the provisions contained therein. The amount subsequently recovered would be chargeable to income-tax in the year of recovery in accordance with the provisions of section 41(4) of the Income-tax Act.

6. In terms of section 10 (38) of the Act Capital gains arising on transfer of long-term capital assets, being equity shares in a company or units of equity oriented mutual fund on sale on which securities transaction tax is paid, is exempt. In respect of short-term capital gains is subject to a concessional rate of tax under Section 111A of the Income-tax Act at the rate of 15% (plus applicable surcharge, and cess). If the shares or units on which securities transaction tax has been paid are treated as stock-in trade liable to tax as business profits, any security transaction tax so paid can be claimed as deduction under section 36(1) of the Act

7. The benefit of exemption from tax under Section 10(38) of the Income-tax Act on long-term capital gains, or, concessional rate of tax under Section 111A of the Income-tax Act on short term capital gains will not be available where no securities transaction tax is applicable. In such cases, under the provisions of Section 112 of the Income-tax Act, taxable long-term capital gains, if any, on sale or transfer of listed securities or units or zero coupon bonds issued in accordance with the specified scheme would be charged to tax at the concessional rate of 20% (plus applicable surcharge and cess) after considering indexation benefits or at 10% (plus applicable surcharge and cess) without indexation benefits in accordance with and subject to the provision of Section 48 of the Income-tax Act. Under Section 48 of the Income- tax Act, the long-term capital gains arising on sale or transfer of capital assets excluding bonds and debentures (except capital indexed bonds issued by the Government) will be computed after indexing the cost of acquisition/improvement.

8. In terms of Section 54EC of the Income-tax Act, subject to the conditions specified therein, tax on capital gains arising from the transfer of a long-term capital asset is exempt from tax, provided that at any time within a period of six months after the date of the transfer, the bank invested the whole of the capital gains in any long-term specified asset for the purposes of Section 54EC of the Income-tax Act. However, if the long-term specified asset are transferred or converted into money within a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the long-term specified asset are transferred or converted into money. However a ceiling on investments in such long term specified asset of upto fifty lakh rupees in a financial year with effect from April 1, 2007 has been imposed in the Act. If only a portion of capital gains is so invested, then the exemption is available proportionately.

II. To Resident Shareholders

1. Dividend income of shareholders is exempt from income tax under Section 10(34) read with Section 115-O of the Income-tax Act. As per the provisions of Section 14A of the Income-tax Act, no deduction is allowed in respect of any expenditure incurred in relation to such dividend income to be computed in accordance with the method as may be prescribed under rule 8D subject to and in accordance with the provisions contained therein. Also, Section 94(7) of the Income-tax Act provides that losses arising from the sale/transfer of shares purchased up to three months prior to the record date and sold or transferred within three months after such date, will be disallowed to the extent dividend income on such shares are claimed as tax exempt by the shareholder.

2. Capital gains arising on transfer of long-term capital assets, being equity shares of the bank on sale of which securities transaction tax is paid, is exempt under Section 10(38) of the Income- tax Act whereas short-term capital gains is subject to tax under Section 111A of the Income-

45

tax Act at the rate of 15% (plus applicable surcharge, and cess ). If the shares or units on which securities transaction tax has been paid are treated as stock-in trade liable to tax as business profits, any security transaction tax so paid can be claimed as deduction under section 36(1) of the Act.

3. The benefit of exemption from tax under Section 10(38) of the Income-tax Act on long-term capital gains, or, concessional rate of tax under Section 111A of the Income-tax Act on short term capital gains will not be available where no securities transaction tax is applicable. In such cases, under the provisions of Section 112 of the Income-tax Act, taxable long-term capital gains, if any, on sale or transfer of listed securities or units or zero coupon bonds issued in accordance with the specified scheme would be charged to tax at the concessional rate of 20% (plus applicable surcharge, and cess after considering indexation benefits or at 10% (plus applicable surcharge and cess without indexation benefits in accordance with and subject to the provision of Section 48 of the Income-tax Act. Under Section 48 of the Income- tax Act, the long-term capital gains arising on sale or transfer of capital assets excluding bonds and debentures (except capital indexed bonds issued by the Government) will be computed after indexing the cost of acquisition/improvement.

4. As per Section 54EC of the Income-tax Act, subject to the conditions specified therein, tax on capital gains arising from the transfer of a long-term capital asset (including bank’s equity shares) is exempt from tax, provided that the shareholder has at any time within a period of six months after the date of the transfer, invested the whole of the capital gains in any specified long-term asset for the purposes of Section 54EC of the Income-tax Act. However, if the long- term specified asset are transferred or converted into money within a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the long-term specified asset are transferred or converted into money. However a ceiling on investments in such long term specified asset of upto fifty lakh rupees in a financial year with effect from April 1, 2007 has been imposed in the Act. If only a portion of capital gains is so invested, then the exemption is available proportionately.

5. As per the provisions of Section 54F of the Income-tax Act, subject to the conditions specified therein, long-term capital gains arising to an individual or a Hindu undivided family on transfer of long-term capital asset (including bank’s equity shares) shall be exempt from tax, provided that the net consideration is utilised in the purchase of a residential house within a period of one year before or two years after the date of transfer, or in the construction of a residential house within a period of three years after the date of transfer of the long-term capital asset. If only a portion of the net consideration is so invested, then the exemption is available proportionately. However, if the residential house in which investment has been made is transferred within a period of three years from the date of its purchase or construction, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which such residential house is transferred.

III. To non-resident shareholders including NRIs, OCBs and FIIs

1. Dividend income of shareholders is exempt from income tax under Section 10(34) of the Income-tax Act read with Section 115-O of the Income-tax Act. As per the provisions of Section 14A of the Income-tax Act, no deduction is allowed in respect of any expenditure incurred in relation to such dividend income to be computed in accordance with such method as may be prescribed subject to and in accordance with the provisions contained therein. Also, Section 94(7) of the Income-tax Act provides that losses arising from the sale/transfer of shares purchased up to three months prior to the record date and sold or transferred within three months after such date, will be disallowed to the extent dividend income on such shares are claimed as tax exempt by the shareholder.

2. Long-term capital gains would arise to non-resident shareholders where the equity shares are held for a period of more than 12 months prior to the date of transfer of the shares. In accordance with and subject to the provisions of Section 48 of the Income-tax Act, in order to compute capital gains, the following amounts would be deductible from the full value of consideration:

46

(i) Cost of acquisition/improvement of the shares as adjusted by the Cost Inflation Index notified by the Central Government and

(ii) Expenditure incurred wholly and exclusively in connection with the transfer of the shares As per the provisions of the first proviso to Section 48 of the Income-tax Act, capital gains arising from the transfer of equity shares acquired by non-residents in foreign currency are to be computed by converting the cost of acquisition/improvement, expenditure incurred wholly and exclusively in connection with such transfer and the full value of the consideration received or accruing into the same foreign currency as was initially utilised in the purchase of equity shares and the capital gains so computed in such foreign currency shall then be reconverted into Indian currency. Cost indexation benefits will not be available in such case.

Further, the aforesaid manner of computation of capital gains shall be applicable in respect of every reinvestment thereafter in and sale of, shares in, or debentures of an Indian company.

3. Capital gains arising on transfer of long-term capital assets, being equity shares in a company on sale of which securities transaction tax is paid, is exempt under Section 10(38) of the Income-tax Act whereas short-term capital gains is subject to tax under Section 111A of the Income-tax Act at the rate of 15% (plus applicable surcharge and cess;

If the shares or units on which securities transaction tax has been paid are treated as stock-in trade liable to tax as business profits, any security transaction tax so paid can be claimed as deduction under section 36(1) of the Act

4. The benefit of exemption from tax under Section 10(38) of the Income-tax Act on long term capital gains, or, concessional rate of tax under Section 111A of the Income-tax Act on short- term capital gains will not be available where no securities transaction tax is applicable. In such cases, under the provisions of Section 112 of the Income-tax Act, taxable long-term capital gains, if any, on sale or transfer of listed securities would be charged to tax at the concessional rate of 20% (plus applicable cess after considering indexation benefits or at the rate of 10% (plus applicable surcharge, and cess) without indexation benefits in accordance with and subject to the provisions of Section 48 of the Income-tax Act.

5. As per Section 54EC of the Income-tax Act, subject to the conditions specified therein, tax on capital gains arising from the transfer of a long-term capital asset (including the bank’s equity shares) is exempt from tax, provided that the shareholder has at any time within a period of six months after the date of the transfer, invested the whole of the capital gains in any specified long-term asset for the purposes of Section 54EC of the Income-tax Act. However, if the long- term specified asset are transferred or converted into money within a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the long-term specified asset are transferred or converted into money. However a ceiling on investments in such long term specified asset of upto fifty lakh rupees in a financial year with effect from April 1, 2007 has been imposed in the Act. If only a portion of capital gains is so invested, then the exemption is available proportionately.

6. As per the provisions of Section 54F of the Income-tax Act, subject to the conditions specified therein, long-term capital gains arising to an individual or a Hindu undivided family on transfer of long-term capital asset (including the bank’s equity shares) shall be exempt from tax, provided that the net consideration is utilised in the purchase of a residential house within a period of one year before or two years after the date of transfer, or in the construction of a residential house within a period of three years after the date of transfer of the long-term capital asset. If only a portion of the net consideration is so invested, then the exemption is available proportionately. However, if the residential house in which investment has been made is transferred within a period of three years from the date of its purchase or construction, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which such residential house is transferred.

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7. Capital gains arising to Non Resident Indians (NRIs) on sale of shares on which securities transaction tax is not paid, is governed by Chapter XII-A of the Income-tax Act, subject to fulfilling the conditions stipulated therein.

(i) In accordance with and subject to the provisions of Section 115D read with Section 115E of the Income-tax Act, long-term capital gains arising on transfer of specified capital assets (including bank’s Equity Shares) acquired out of convertible foreign exchange, are taxable at the rate of 10% (plus applicable surcharge and cess). Cost indexation benefits will not be available in such case.

(ii) In accordance with and subject to the provisions of Section 115F of the Income-tax Act, long-term capital gains arising on sale of shares acquired by a NRI shareholder out of convertible foreign exchange shall be exempt from income tax entirely/proportionately, if the entire/part of the net consideration is invested for a period of three years in any savings certificates specified under Section 10(4B) or specified assets as defined in Section 115C(f) of the Income-tax Act, within six months from the date of transferring the shares. The amount so exempted will be chargeable to tax under the head ‘Capital Gains’ if these new assets are transferred or converted (otherwise than by way of transfer) into money within three years from the date of its acquisition in accordance with the provisions of Section 115F(2) of the Income-tax Act.

(iii) As per Section 115G of the Income-tax Act, a NRI would not be required to file a return of income under Section 139(1) of the Income-tax Act, where the total income consists only of investment income and/or long-term capital gains and tax deductible at source has been deducted from such income as per provisions of Chapter XVIIB of the Income-tax Act.

(iv) As per the provision of Section 115I of Income-tax Act, a NRI may elect not to be governed by the provisions of Chapter XII-A for any assessment year by furnishing his return of income for that assessment year under Section 139 of the Income-tax Act, declaring therein that the provisions of Chapter XII-A shall not apply to him for that assessment year and accordingly his total income for that assessment year will be computed in accordance with the provisions of the Income-tax Act.

8. Capital gains arising to FIIs on sale of shares on which securities transaction tax is not paid is governed by Section 115AD of the Income-tax Act. As per Section 115AD of the Income-tax Act, long-term capital gains arising on transfer of shares purchased by FIIs, are taxable at the rate of 10% (plus applicable surcharge, education cess and proposed secondary and higher education cess). Short-term capital gains are however, taxable at the rate of 30% (plus applicable surcharge, education cess and proposed secondary and higher education cess). Cost indexation benefits will not be available. Further, the provisions of the first proviso of Section 48 of the Income-tax Act as stated above will not apply.

9. In accordance with and subject to the provisions of Section 115AD read with Section 196D(2) of the Income-tax Act, no deduction of tax at source is applicable in respect of capital gains arising from the transfer of the equity shares payable to FIIs.

10. In the case of all non-resident shareholders, the above tax rates are subject to the benefits, if any, available under the double taxation avoidance agreements signed by India with the country of which the non-resident shareholder may be a tax resident, subject to fulfillment of conditions prescribed there under.

IV. To Mutual Funds

As per the provisions of Section 10(23D) of the Income-tax Act, tax exemption is available on income of a mutual fund registered under the Securities and Exchange Board of India Act, 1992 and Regulations made there under, or, mutual funds set up by the public sector banks or public financial institutions / authorised by RBI and subject to the conditions as the Central Government may specify by notification in the Official Gazette.

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B. WEALTH TAX

Shares are not treated as assets within the meaning of Section 2(ea) of the Wealth Tax Act, 1957 and accordingly, the bank’s equity are not liable to Wealth-tax in the hands of the shareholders.

C. GIFT TAX

The Gift-tax Act, 1958, has ceased to apply to gifts made on or after October 1, 1998. Gift of the bank’s equity would therefore, be exempt from gift-tax. However, Gift of shares to non-relatives, attracts tax under certain circumstances there may be income tax liability.

Notes: All the above benefits are as per the current tax law and will be available only to the sole/first names holder in case the shares are held by joint holders.

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SECTION IV – ABOUT THE ISSUER

OUR MANAGEMENT

Board of Directors

Under our Articles of Association, our Bank is required to have not less than nine directors and not more than 15 directors. Our Bank currently has ten directors on the Board.

The following table sets forth details regarding our Board as on the date of this Draft Letter of Offer:

Name, Designation, Nationality Director’s Age (years) Other Directorships Occupation, Address and Identification Term Number S Balasubramanian Indian 01719374 66 Nil

Non independent part time non executive Chairman

Occupation: Banker

Address: No.28 Pachayappa Street, Kumbakonam 612 001

Term: Till May 5, 2014 Dr. N Kamakodi Indian 02039618 37 Nil

Managing Director

Occupation: Banker

Address: Plot No.20, Gandhi Nagar, Sri Nagar Colony, Kumbakonam 612 001

Term: Till April 30, 2014 K S Raman Indian 00215005 70 Nil

Independent non executive Director

Occupation: Agriculturist

Address: North Street, Konerirajapuram 612 201

Term: Liable to retire by rotation S Bernard Indian 01719441 61 Nil

Independent non executive Director

Occupation: Chartered Accountant

Address: 64, Gandhiji Road, Koranad, Mayiladuthurai 609 002

Term: Liable to retire by rotation N Kantha Kumar Indian 00890532 66 Nil

Independent non executive

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Name, Designation, Nationality Director’s Age (years) Other Directorships Occupation, Address and Identification Term Number Director

Occupation: Banker

Address: Ashadeep, Cherupilly Road, Off Azad Road, Kaloor, Kochi 682 017

Term: Liable to retire by rotation R G Chandramogan Indian 00012389 63 1. Hatsun Agro Products Limited;

Independent non executive 2. Tonokya Food Private Limited; Director and

Occupation: Industrialist 3. Angel Equity Management Private Limited. Address: 14, Sunrise Avenue, Akkarai, Sholinganallur, Chennai 600 096

Term: Liable to retire by rotation T K Ramkumar Indian 02688194 56 Nil

Non independent non executive Director

Occupation: Advocate

Address: 12B, Vedantha Desikar Swamy Street, (Pelathope) Mylapore, Chennai 600 004

Term: Liable to retire by rotation C R Muralidharan Indian 02443277 64 1. PTC India Financial Services Limited; and Independent non executive Director 2. ICICI Prudential Asset Management Company Occupation: Banker Limited.

Address: 29A, Kamala Street, Nehru Nagar, Chrompet, Chennai 600 044

Term: Liable to retire by rotation (Retired) Justice S R Indian 03022233 64 Nil Singharavelu

Independent non executive Director

Occupation: Agriculturalist

Address: 55, Banadurai North Street, Kumbakonam 612 001

Term: Liable to retire by rotation

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Name, Designation, Nationality Director’s Age (years) Other Directorships Occupation, Address and Identification Term Number Dr. V Kamakoti Indian 03537382 43 Nil

Independent non executive Director

Occupation: Service

Address: Old No. 19, New No.8, “SRIVATSA” First Cross Street, CIT Colony, Mylapore, Chennai 600 004

Term: Liable to retire by rotation

Brief Biographies of our Directors

Mr. S Balasubramanian, aged 66 years, is the non executive part time Chairman. Mr. Balasubramanian has a master of science degree in mathematics from University of Madras, a post graduate diploma in financial management from Annamalai University and is also a certified associate of the Indian Institute of Bankers. Mr. Balasubramanian has 40 years of experience in the banking industry. Prior to becoming the non executive part time Chairman of our Bank, Mr. Balasubramanian has overseen various departments during the course of his association with our Bank including, inspection, planning and development, human resources and accounts and risk management. Mr. Balasubramanian has been associated with our Bank since 1971. Mr. Balasubramanian has been appointed to our Board under the majority sector of banking.

Dr. N Kamakodi, aged 37 years, is the Managing Director and Chief Executive Officer. Dr. Kamakodi has a bachelor of science degree in chemical engineering from Bharathidasan University, a master of business administration degree from the Chinese University of Hong Kong, a doctorate of philosophy in e-banking from Sastra University and is also a certified associate of the Indian Institute of Bankers. Dr. Kamakodi has been associated with our Bank since 2003. He is currently in charge of the overall operations of the Bank.

Mr. K S Raman, aged 70 years, is an independent non executive Director. Mr. Raman holds a master of science degree in statistics from Annamalai University. Mr. Raman has been associated with our Bank since 1984. Mr. Raman has been appointed to our Board under the majority sector of agriculture and rural economy.

Mr. S Bernard, aged 61 years, is an independent non executive Director. Mr. Bernard has a bachelor of commerce degree from University of Madras and is also a Fellow Member of the Institute of Chartered Accountants of India. He is a practicing chartered accountant with 31 years of experience in the field of accountancy and taxation. Mr. Bernard has been associated with our Bank since 2006. Mr. Bernard has been appointed to our Board under the majority sector of accountancy.

Mr. N Kantha Kumar, aged 66 years, is an independent non executive Director. Mr. Kantha Kumar has a bachelor of commerce degree and a bachelor of laws degree from the University of Kerala and is also a certified associate of the Indian Institute of Bankers. Mr. Kantha Kumar has around 38 years of experience in the banking industry and has held various positions in the banking sector including executive director, Canara Bank and chairman and managing director, Syndicate Bank. He has been associated with our Bank since 2006. Mr. Kantha Kumar has been appointed to our Board under the majority sector of banking.

Mr. R G Chandramogan, aged 63 years, is an independent non executive Director. Mr. Chandramogan is the chairman and managing director of Hatsun Agro Product Limited and is also a member in the Screening Cum Implementation Group – Secondary Agriculture and the Working Group on Animal Husbandry & Dairying, both constituted by Planning Commission, GoI. Further, Mr. Chandramogan currently serves the National Council on Agriculture as a member appointed by the Confederation of Indian Industry. Mr. Chandramogan has been associated with our Bank since 1998. Mr. Chandramogan has been appointed to our Board under the minority sector of agriculture and rural economy.

Mr. T K Ramkumar, aged 56 years, is a non independent non executive Director. Mr. Ramkumar has bachelor of commerce degree and bachelor of laws degree from the University of Madras. Mr. Ramkumar is a practicing

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advocate registered with the Bar Council of Tamil Nadu and has about 32 years of experience in the practice of banking, company and intellectual property rights laws. He has been associated with our Bank since 2009. Mr. Ramkumar has been appointed to our Board under the majority sector of law.

Mr. C R Muralidharan, aged 64 years, is a non executive Director. Prior to joining our Bank, Mr. Muralidharan has worked for the RBI, retiring as the Chief General Manager and was also a whole time member of the IRDA. Mr. Muralidharan has over 20 years of experience in the field of banking regulation and supervision and five years in the development and regulation of insurance sector. He has been associated with our Bank since 2010. Mr. Muralidharan has been appointed to our Board under the majority sector of banking.

(Retired) Justice S R Singharavelu, aged 64 years, is an independent non executive Director. (Retired) Justice Singharavelu has a bachelor of science degree in mathematics and a bachelor of laws degree from the University of Madras and is also registered with the Bar Council of Tamil Nadu. Prior to joining our Bank, (Retired) Justice Singharavelu has served as a member of the judiciary at the High Court of Madras and the High Court of Odisha. (Retired) Justice Singharavelu has been associated with our Bank since 2010. (Retired) Justice Singharavelu has been appointed to our Board under the majority sector of agriculture and rural economy.

Dr. V Kamakoti, aged 43 years, is an independent non executive Director. Dr. Kamakoti holds a master of science degree and a doctorate of philosophy in computer science and engineering from the Indian Institute of Technology, Madras. Dr. Kamakoti currently holds the post of professor in the Department of Computer Science and Engineering, Indian Institute of Technology, Madras. He has more than 15 years of experience in computer systems development and specializes in the area of secure systems engineering. Dr. Kamakoti has been associated with our Bank since 2011. Dr. Kamakoti has been appointed to our Board under the majority sector of technology.

Relationships between Directors

None of our Directors are related to each other.

Details of Service Contracts

There are no service contracts entered into with any of the Directors for provision of benefits or payments of any amount upon termination of employment.

Details of the remuneration payable to our Directors are as follows:

Chairman

Pursuant to the resolution passed by the shareholders of our Bank at the annual general meeting dated August 27, 2011 and the RBI approval dated April 26, 2011, the Chairman is entitled to the following remuneration:

- Basic Salary: ` 12 lacs per annum; - Perquisites: • Office car with driver; and • Residential and mobile phone; - Travelling allowance as available to the Managing Director and Chief Executive Officer; and - Insurance cover of ` 10 lacs for travel on official purposes.

The Chairman is not entitled to claim any sitting fees for attending the meetings of the Board.

Managing Director and Chief Executive Officer

Pursuant to the resolution of the shareholders of our Bank at the annual general meeting dated August 27, 2011 and the RBI approval dated April 26, 2011, the Managing Director and Chief Executive Officer is entitled to the following remuneration:

- Basic Salary: ` 24 lacs per annum; - Perquisites: • Housing rent allowance of ` 90,000 per annum or free furnished residential accommodation; • Entertainment allowance;

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• 10% of basic pay as contribution to provident fund; and • Medical benefits: a. Reimbursement of medical expense of Managing Director and dependent family members; b. Reimbursement of actual hospitalisation charge of Managing Director and dependent family members; c. After retirement, bank to reimbursement hospitalisation and other medical expenses or pay full premium under suitable medical insurance scheme; - Leave fare concession once in a year anywhere in India or outside India by eligible class, for self and immediate family; - Reimbursement of travelling and halting allowances; - Free use of office car for official purposes; - Insurance cover of ` 10 lacs for travel on official purposes; and - Free telephone at residence and mobile phone.

Non executive Directors

Pursuant to the approval of the Board at a meeting dated June 24, 2011, with effect from July 1, 2011 each non executive Director is entitled to ` 20,000 as sitting fees for attending meetings of the Board and to ` 10,000 for attending meetings of the committees of the Board.

Details of current and past directorship(s) in listed companies whose shares have been/ were suspended from being traded on the BSE/ NSE and reasons for suspension.

None of our Directors are currently or have been, in the past five years, on the board of directors of a listed company whose shares have been or were suspended from being traded on the BSE or NSE.

Details of current and past directorship(s) in listed companies which have been/ were delisted from the stock exchange(s) and reasons for delisting.

None of our Directors are currently or have been on the board of directors of a public listed company whose shares have been or were delisted from any stock exchange.

Arrangements and understanding with major shareholders, customers, suppliers or others.

None of our Directors or members of our senior management have been appointed pursuant to any arrangement or understanding with our major shareholders, customers, suppliers or others.

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SECTION V – FINANCIAL INFORMATION

FINANCIAL STATEMENTS

AUDITORS REPORT

Report dated July 11, 2012 of our Auditor, on the audited financial statements of our Bank for Fiscal 2012

The Board of Directors City Union Bank Ltd TSR Big Street Kumbakonam – 612001 Tamil Nadu

Dear Sirs,

1. We are engaged to report on the financial statements (‘Financial Statements’) of City Union Bank Limited (‘the Bank’) for the year ended March 31, 2012 annexed to this report in Annexure I to IV for the purpose of inclusion in the Draft Letter of Offer and Letter of Offer (the ‘Offering Documents’) prepared by the Bank in connection with the Rights Issue (‘Rights Issue’) of its equity shares, in accordance with the provisions of the Securities and Exchange Board of India (Issue of Capital & Disclosure Requirements) Regulations 2009 (‘the Regulations”) as amended to date. Our responsibility is to report on such statements based on our procedures.

2. We have examined such statements taking into consideration: (i) the terms of reference dated March 5, 2012 received from the Bank, requesting to carry out the assignment, in connection with the Offering Documents being issued by the Bank for its proposed Rights Issue of equity shares having a face value of Re.1/- each, under the Regulations (‘Issue’); and

(ii) The Guidance Note on Reports in Company Prospectuses (Revised) issued by the Institute of Chartered Accountants of India.

3. We report that the figures disclosed in the ‘Financial Statements’ have been extracted by the management from the audited financial statements for the year ended March 31, 2012. The financial statements for the year ended March 31, 2012 have been audited by us and in respect of which we have issued unqualified audit opinion dated May 18, 2012.

4. For the purpose of this report we have not performed any additional audit procedures on the above referred audited financial statements of the Bank for the year ended March 31, 2012, including evaluating the possible impact, if any, of subsequent events on the earlier audited financial statements of the Bank.

5. The ‘Financial Statements’ annexed to this report are extracted from the audited financial statements for the year ended March 31, 2012. These ‘Financial Statements’ have been prepared using the same set of accounting policies used for preparing the audited financial statements as at March 31, 2012. The accounting policies and notes to accounts have been reproduced as they were disclosed in the relevant year.

6. At the Bank’s request, we have also examined the following information proposed to be included in the Offering Documents prepared by the management and annexed to this report;

(i) Accounting Ratios enclosed as Annexure VII (ii) Capitalization Statement enclosed as Annexure VIII

7. In our opinion, the financial information contained in Annexure I to IV of this report read along with the Notes on Accounts & Significant Accounting Policies (Refer Annexure V & VI) as considered appropriate have been prepared in accordance with the provisions of Section 29 of the BR Act, 1949 read with Section 211 of the Companies Act 1956 and requirements of the Securities and Exchange Board of India (Issue of Capital & Disclosures Requirement) Regulations 2009 as amended till date.

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8. This report should not be in any way construed as a re-dating of any of the previous audit report issued by us nor should this report be construed as a new opinion on any of the financial statements referred to herein.

9. This report is intended solely for your information and for inclusion in the offering documents in connection with the proposed issue by the bank and is not to be used, referred to or distributed for any other purpose without our prior written consent.

for M/s. Jagannathan & Sarabeswaran, Chartered Accountants, (Firm No.001204 S)

(P.S. Narasimhan) Partner M.No.020936

Place : Chennai Date : 11.07.2012

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ANNEXURE - I

BALANCE SHEET AS ON MARCH 31, 2012

(` in crores) Sch. No As on As on 31.03.2012 31.03.2011

CAPITAL AND LIABILITIES

Share Capital 1 40.82 40.50 Reserves and Surplus 2 1,202.28 966.12 Deposits 3 16,340.76 12,914.29 Borrowings 4 348.70 186.15 Other Liabilities & Provisions 5 418.10 484.46 Total 18,350.66 14,591.52

ASSETS

Cash and Balances with Reserve Bank of India 6 814.67 1,052.24 Balances with Banks & Money at Call and Short Notice 7 321.44 234.08 Investments 8 4,586.19 3,616.23 Advances 9 12,137.46 9,255.46 Fixed Assets 10 97.74 68.53 Other Assets 11 393.16 364.98 Total 18,350.66 14,591.52

Contingent Liabilities 12 9,701.70 4,162.22 Bills for Collection 368.85 289.68

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ANNEXURE – II

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2012

(` in crores) Sch. No Year ended Year ended 31.03.2012 31.03.2011

INCOME Interest Earned 13 1,696.77 1,218.41 Other Income 14 207.13 157.40 Total 1,903.90 1,375.81

EXPENDITURE Interest Expended 15 1,197.02 798.38 Operating Expenses 16 279.83 216.40 Provisions and Contingencies 146.80 145.98 Total 1,623.65 1,160.76 PROFIT / LOSS Net Profit 280.25 215.05 Profit brought forward 5.56 5.56 Total 285.81 220.61

APPROPRIATIONS - Statutory Reserves 71.00 56.00 - Capital Reserve 0.00 0.00 - General Reserve 140.00 98.40 - Investment Reserve Account 0.73 0.00 - Special Reserve under IT Act, 1961 20.00 20.50 - Proposed / Dividend 40.82 34.43 - Dividend Tax thereon 6.66 5.72 - Balance carried over to Balance Sheet 6.60 5.56

Total 285.81 220.61

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ANNEXURE - III

SCHEDULES FORMING PART OF ACCOUNTS – YEAR ENDED MARCH 31, 2012

SCHEDULE - 1 CAPITAL (` in crores) As at 31st March 2012 2011 Authorised Capital (100,00,00,000 Equity Shares of Re.1/- each) 100.00 100.00

Issued Capital (40,82,12,649/40,50,31,003 equity shares Re.1/- each) 40.82 40.50

Subscribed and Paid-up Capital 40.82 40.50 (40,82,12,649/40,50,31,003 equity shares Re.1/- each) Less : Calls unpaid 0.00 0.00 TOTAL 40.82 40.50

SCHEDULE - 2 RESERVES AND SURPLUS (` in Crores) As at 31st March 2012 2011

I Statutory Reserves Opening Balance 347.00 291.00 Additions during the year 71.00 56.00 418.00 347.00 II Capital Reserves Opening Balance 43.88 43.88 Additions during the year 0.00 0.00 43.88 43.88 III Share Premium Opening Balance 199.97 194.44 Additions during the year 3.39 5.53 203.36 199.97 IV Revenue and Other Reserves i) General Reserve Opening Balance 339.40 241.00 Additions during the year 140.00 98.40 479.40 339.40 ii) Investment Reserve Account Opening Balance 1.31 1.31 Additions during the year 0.73 0.00 2.04 1.31 iii) Special Reserve u/s 36(1)(viii) of Income Tax Act, 1961 Opening Balance 29.00 8.50 Additions during the year 20.00 20.50 49.00 29.00

V Balance in Profit and Loss Account 6.60 5.56 TOTAL 1,202.28 966.12

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SCHEDULE - 3 DEPOSITS (` in crores) As at 31st March 2012 2011

A I. Demand Deposits i) From Banks 4.50 9.32 ii) From Others 1,198.64 1,078.30 1,203.14 1,087.62

II. Savings Deposits 1,768.46 1,440.73

III. Term Deposits i) From banks 212.81 72.87 ii) From Others 13,156.35 10,313.07 13,369.16 10,385.94

TOTAL 16,340.76 12,914.29

B i) Deposits of Branches in India 16,340.76 12,914.29 ii) Deposits of Branches outside India Nil Nil

TOTAL 16,340.76 12,914.29

SCHEDULE - 4 BORROWINGS (` in crores) As at 31st March 2012 2011 I. Borrowings in India i) Reserve Bank of India 30.00 40.00 ii) Other Banks 0.04 0.04 iii) Other institutions and agencies 278.66 106.11 iv) Subordinated debt 40.00 40.00 II Borrowings from outside India Nil Nil

TOTAL 348.70 186.15 III Secured borrowings included in I Nil Nil

SCHEDULE - 5 OTHER LIABILITIES & PROVISIONS (` in crores) As at 31st March 2012 2011 I. Bills Payable 110.74 111.94 II. Inter-Office Adjustments (net) Nil Nil III. Interest Accrued 62.39 53.80 IV. Others ( including Provisions) 244.97 318.72

TOTAL 418.10 484.46

SCHEDULE - 6 CASH AND BALANCES WITH RESERVE BANK OF INDIA (` in crores) As at 31st March 2012 2011 I Cash in Hand 174.56 211.61 (including foreign currency notes) II Balances with Reserve Bank of India i) In Current Accounts 640.11 840.63 ii) In Other Accounts Nil Nil TOTAL 814.67 1,052.24

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SCHEDULE - 7 BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE (` in crores) As at 31st March 2012 2011

I In India i) Balances with Banks a) In Current Accounts 233.60 170.83 b) In Other Deposit Accounts 40.61 37.35

ii) Money at Call and Short notice a) With Banks 0.00 0.00 b) With Other Institutions 24.97 0.00 TOTAL 299.18 208.18

II Outside India In Current Accounts 22.26 25.90 In Deposit Accounts 0.00 0.00 TOTAL 22.26 25.90 GRAND TOTAL 321.44 234.08

SCHEDULE - 8 INVESTMENTS (` in crores) As at 31st March 2012 2011 I In India i) Government Securities 3,847.17 2,884.75 ii) Other Approved Securities 0.25 0.50 iii) Shares 33.34 30.56 iv) Debentures and Bonds 30.30 35.58 v) Subsidiaries / Joint Ventures 0.00 0.00 vi) Others 675.13 664.84 TOTAL 4,586.19 3,616.23

Gross Investments in India 4,593.64 3,625.12 LESS : Provision for Investment Depreciation 7.45 8.89 Net Investments in India 4,586.19 3,616.23

II Outside India 0.00 0.00 GRAND TOTAL 4,586.19 3,616.23

SCHEDULE - 9 ADVANCES (` in crores) As at 31st March 2012 2011 A i) Bills Purchased and Discounted 321.54 184.55 ii) Cash Credits, Overdrafts and Loans repayable on Demand 7,527.17 5,315.57 iii) Term Loans 4,288.75 3,755.34

TOTAL 12,137.46 9,255.46

B i) Secured by tangible assets (includes advances against book debts) 11,550.31 8,906.54 ii) Covered by Bank/Govt. Guarantees 199.88 61.04 iii) Unsecured 387.27 287.88 TOTAL 12,137.46 9,255.46

C I) Advances in India i) Priority Sector 4,397.79 3,420.77 ii) Public Sector 199.88 60.00 iii) Others 7,539.79 5,774.69 TOTAL 12,137.46 9,255.46

II) Advances outside India 0.00 0.00

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As at 31st March 2012 2011 GRAND TOTAL 12,137.46 9,255.46

SCHEDULE - 10 FIXED ASSETS (` in crores) As at 31st March 2012 2011 I Premises i) At Cost as at 31st March of the preceding year 35.18 33.93 ii) Additions during the year 1.04 1.25 iii) Sales/adjustments during the year 0.00 0.00 TOTAL 36.22 35.18 iv) Depreciation to date 7.83 7.32

TOTAL 28.39 27.86

II Other Fixed Assets ( including Furniture and Fixtures) i) At Cost as at 31st March of the Preceding year 133.90 112.84 ii) Additions during the year 43.34 22.28 TOTAL 177.24 135.12 iii) Deductions/adjustments during the year 1.62 1.22 TOTAL 175.62 133.90 iv) Depreciation to date 106.27 93.23 TOTAL 69.35 40.67 GRAND TOTAL 97.74 68.53

SCHEDULE - 11 OTHER ASSETS (` in crores) As at 31st March 2012 2011 I Inter office Adjustments 42.23 0.69 II Interest accrued 94.05 69.78 III Tax paid in Advance / Tax deducted at Source 171.57 245.10 IV Stationery and stamps 0.46 0.36 V Others 84.85 49.05 TOTAL 393.16 364.98

SCHEDULE - 12 CONTINGENT LIABILITIES (` in crores) As at 31st March 2012 2011 I Claims against Bank not acknowledged as debts 1.36 1.18 II Liability for partly paid Investments 0.00 1.99 III Liability on account of outstanding Forward Exchange Contracts 8,283.19 3,356.24 IV Guarantees given on behalf of constituents - In India 797.72 492.76 - Outside India 9.43 0.00 V Acceptances, endorsements and other obligations 610.00 310.05 VI Other items for which the Bank is contingently liable 0.00 0.00 TOTAL 9,701.70 4,162.22

SCHEDULE - 13 INTEREST EARNED (` in crores) As at 31st March 2012 2011 I Interest / discount on Advances / Bills 1,388.57 965.43 II Income on Investments 303.56 245.11 III Interest on balances with Reserve Bank of India and other Inter-Bank funds 4.64 7.79 IV Others 0.00 0.08 TOTAL 1,696.77 1,218.41

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SCHEDULE - 14 OTHER INCOME (` in crores) As at 31st March 2012 2011 I Commission, Exchange and Brokerage 34.49 30.32 II Profit/Loss on sale of Investments (net) 7.77 6.61 III Profit/loss on revaluation (Amortization) 0.00 0.00 IV Profit on sale of Land,Bldgs and other assets 0.15 0.23 V Profit on Exchange transactions (net) 15.22 10.55 VI Miscellaneous Income 149.50 109.69 TOTAL 207.13 157.40

SCHDULE - 15 INTEREST EXPENDED (` in crores) As at 31st March 2012 2011 I Interest on Deposits 1,166.46 780.19 II Interest on RBI/Inter-Bank Borrowings 17.67 9.48 III Others 12.89 8.71 TOTAL 1,197.02 798.38

SCHDULE - 16 OPERATING EXPENSES (` in crores) As at 31st March 2012 2011 I Payments to and provision for employees 122.31 101.62 II Rent, taxes and lighting 39.36 25.33 III Printing and Stationery 7.36 4.60 IV Advertisement and publicity 19.59 11.44 V Depreciation on Banks property 13.56 16.83 VI Directors' fees, allowances and expenses 0.35 0.30 VII Auditors' fees and expenses 1.12 0.81 VIII Law charges 0.17 0.13 IX Postage, Telegrams, telephone etc 6.02 5.60 X Repairs and maintenance 14.93 12.15 XI Insurance 14.61 11.49 XII Other expenditure 40.45 26.10 TOTAL 279.83 216.40

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ANNEXURE - IV

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2012 (` in crores) As at March 31 2012 2011

Cash flow from Operating activities: Net Profit as per P&L account 280.25 215.05

Adjustments for Depreciation 13.56 16.83 Provisions & Contingencies - Tax 63.00 67.00 Provisions & Contingencies - Others 83.80 78.98 Profit on sale of Investments (7.77) (6.61) Profit on sale of Assets (0.15) (0.23) Foreign exchange .fluctuations (15.22) (10.55) Operating Profit before working capital changes 417.47 360.47 Adjustments for Funds advanced to Customers (2,944.23) (2,489.20) Other Operating Assets (85.85) 1.99 Deposit from Customers 3,426.47 2,629.70 Borrowing from Banks 162.55 146.09 Other operating liabilities (151.71) (2.88) Purchase and sale of investments (Net) (969.61) (406.78) Cash Generated from Operations (144.91) 239.39 Taxation - Income Tax and FBT 73.53 (2.67) Net cash flow from Operating activities - A (71.38) 236.72

Cash flow from Investing activities Purchase of Fixed Assets (44.38) (23.53) Sale of Fixed Assets 1.77 1.44 Net cash used in Investing Activities - B (42.61) (22.09)

Cash flow from Financing activities: Proceeds from issue of Share Capital 0.32 0.54 Proceeds from share premium 3.38 5.53 Dividend Paid (34.07) (29.60) Tax on distributed profits (5.86) (4.98) Net cash flow from Financing Activities - C (36.23) (28.51)

Net increase in Cash and Cash equivalents A+B+C (150.22) 186.12

Cash & Cash equivalents as at March 31 of the Previous Fiscal 1,286.32 1,100.20

Cash & Cash equivalents as at March 31 of the Reporting Fiscal 1,136.10 1,286.32

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ANNEXURE - V

NOTES ON ACCOUNTS

1. CAPITAL ADEQUACY RATIO

March 31, 2012 March 31, 2011 Basel I Basel II Basel I Basel II i) CRAR (%) 10.81% 12.57% 11.09% 12.75% ii) CRAR – Tier I Capital (%) 10.06% 11.69% 10.30% 11.84% iii) CRAR – Tier II Capital (%) 0.75% 0.88% 0.79% 0.91% iv) Percentage of shareholding of the Govt of India in Nationalised Banks Nil Nil Nil Nil v) Amount of subordinated debt raised during the year as Tier-II capital Nil Nil Nil Nil vi) Amount raised by issue of IPDI Nil Nil Nil Nil vii) Amount raised by issue of Upper Tier II instruments Nil Nil Nil Nil

2. INVESTMENTS (` in crores) Particulars March 31, 2012 March 31, 2011 (1) Value of Investments

(i) Gross value of investments (a) in India 4,593.64 3,625.12 (b) Outside India Nil Nil (ii) Provisions for Depreciation (a) in India 7.45 8.89 (b) Outside India Nil Nil (iii) Net Value of Investments (a) in India 4,586.19 3,616.23 (b) Outside India Nil Nil (2) Movement of provisions held towards depreciation on Investments (i) Opening Balance 8.89 8.03 (ii) Add: Provisions made during the year Nil 0.86 (iii) Less: Write-off/write-back of excess provisions during the year 1.44 Nil (iv) Closing Balance 7.45 8.89

2.1 Repo Transactions including LAF (in face value terms)

(` in crores) Minimum Maximum Daily Average As at outstanding outstanding outstanding March 31, 2012 during the year during the during the year year Securities sold under Repos

i) Government Securities 10.50 551.25 170.40 420.00 ii) Corporate debt securities Nil Nil Nil Nil Securities purchased under reverse repo

i) Government Securities 183.75 252.00 3.58 Nil ii) Corporate debt securities Nil Nil Nil Nil

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2.2 Non SLR Investment Portfolio

i) Issuer-wise composition of Non-SLR Investments (` in crores) No. Issuer Amount Extent of Extent of below Extent of Extent of Private “investment grade” “unrated “unlisted Placement securities securities” securities” (1) (2) (3) (4) (5) (6) (7) 1 PSUs 13.96 Nil Nil Nil 0.10 2 Financial Institutions 9.11 Nil Nil Nil 2.00 3 Banks 23.96 10.50 Nil Nil Nil 4 Private Corporates 16.64 4.70 Nil Nil 4.70 5 Subsidiaries / Joint Ventures Nil Nil Nil Nil Nil 6 Others * 676.75 2.75 Nil Nil 2.75 Total (1 - 6) 740.42 17.95 0.00 0.00 9.55 7 Provision held towards depreciation 1.65 TOTAL 738.77 * includes deposits with NABARD (RIDF), SIDBI, NHB of ` 669.48 crores.

ii) Non Performing non SLR Investments (` in crores) Particulars Opening Balance Nil Additions during the year since 1st April Nil Reductions during the above period Nil Closing Balance Nil Total provisions held Nil

3. DERIVATIVES

3.1 Forward Rate Agreement / Interest Rate Swap: (` in crores) Particulars March 31, 2012 March 31, 2011 i) The notional principal of swap agreements Nil Nil

ii) Losses which would be incurred if counterparties failed to fulfil their obligations under the agreements Nil Nil

iii) Collateral required by the bank upon entering into swaps Nil Nil

iv) Concentration of credit risk arising from the swaps Nil Nil

v) The fair value of the swap book Nil Nil

3.2 Exchange Traded Interest Rate Derivatives (` in crores) S. Particulars No. (i) Notional principal amount of exchange traded interest rate derivatives undertaken during the year (instrument-wise) Nil (ii) Notional principal amount of exchange traded interest rate derivatives outstanding as on 31st March 2012 (instrument-wise) Nil (iii) Notional principal amount of exchange traded interest rate derivatives outstanding and not "highly effective" (instrument-wise) Nil (iv) Mark-to-market value of exchange traded interest rate derivatives outstanding and not "highly effective" (instrument-wise) Nil

3.3 Disclosures on risk exposure in derivatives:

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3.3.1 – Qualitative Disclosure:

The Bank undertakes foreign exchange forward contracts for its customers and hedges them with other banks. The credit exposure on account of forward contracts are also considered while arriving at the total exposure of each customer/borrower. The bank also deals with other banks in proprietary trading duly adhering to risk limits permitted by RBI, set in the policy and is monitored by mid office. The Marked to Market values are monitored on monthly basis for foreign exchange forward contracts. The credit equivalent is computed under current exposure method. The Bank’s treasury department operates under three functional areas namely Front Office, Mid Office and Back Office. The operations are conducted in terms of the policy guidelines issued by Reserve Bank of India from time to time and as approved by the Board of the Bank.

3.3.2 – Quantitative Disclosure: (` in crores) Sl Particulars Currency Interest Rate No. Derivatives Derivatives (i) Derivatives (Notional Principal Amount) a) for hedging 278.04 Nil b) for trading 8,005.15 Nil (ii) Marked to Market Positions (1) a) Assets (+) 190.11 Nil b) Liability (-) 179.51 Nil (iii) Credit Exposure (2) @ 355.77 Nil (iv) Likely impact of one percentage change in interest rate (100 * PV01) a) on hedging derivatives b) on trading derivatives Nil Nil Nil Nil (v) Maximum and Minimum of (100 * PV01) observed during the year a) on hedging b) on trading Nil Nil Nil Nil @ Out of the total credit exposure of ` 355.77 crores, exposure to the tune of ` 307.21 crores is out of Inter Bank deals accepted for guaranteed settlement by Clearing Corporation of India Limited (CCIL) ` 39.06 crores is out of direct Inter-Bank deals and the balance of ` 9.50 crores represents exposure to customers.

4. ASSET QUALITY

4.1. Non-Performing Assets (` in crores) Particulars March 31, 2012 March 31, 2011 (i) Net NPAs to Net Advances (%) 0.44% 0.52% (ii) Movement of Gross NPAs Opening balance 112.48 88.23 Additions during the year 144.41 120.66 Reductions during the year 133.35 96.41 Closing balance 123.54 112.48 (iii) Movement of Net NPAs Opening balance 48.42 39.67 Additions during the year 77.42 90.78 Reductions during the year 71.80 82.03 Closing balance 54.04 48.42 iv) Movement of provisions for NPAs (excluding provisions on Standard assets) Opening balance 63.35 48.60 Provisions made during the year 57.00 67.25 Write-off of provisions 51.94 52.50 Closing balance 68.41 63.35

4.2 Particulars of Accounts Restructured (` in crores) Particulars CDR SME Debt Others Mechanism Restructuring Standard Advances Restructured No. of Borrowers 1 2 3

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Particulars CDR SME Debt Others Mechanism Restructuring Amount Outstanding 14.04 7.34 29.01 Sacrifice (diminution in the fair value) 3.49 0.02 0.55 Substandard Advances Restructured No. of Borrowers Nil Nil Nil Amount Outstanding Nil Nil Nil Sacrifice (diminution in the fair value) Nil Nil Nil Doubtful Advances Restructured No. of Borrowers Nil Nil Nil Amount Outstanding Nil Nil Nil Sacrifice (diminution in the fair value) Nil Nil Nil Total No. of Borrowers 1 2 3 Amount Outstanding 14.04 7.34 29.01 Sacrifice (diminution in the fair value) 3.49 0.02 0.55

4.3 Details of financial assets sold to Securitisation / Reconstruction company for Asset Reconstruction:

The bank has not sold any financial assets to Securitisation / Reconstruction Company for Asset Reconstruction. (Previous year – Nil).

4.4 Details of Non-performing financial assets purchased / sold:

The bank has not purchased/sold any financial assets from/to any Banks (Previous Year – NIL).

4.5 Provisions on Standard Assets

(` in crores) Particulars March 31, 2012 March 31, 2011 Provisions towards Standard Assets 46.60 34.04

5. BUSINESS RATIOS

Particulars March 31, 2012 March 31, 2011 Interest Income as percentage to Working Funds 10.34% 9.43% Non-Interest Income as percentage to Working Funds 1.26% 1.22% Operating Profit as percentage to Working Funds 2.60% 2.80% Return on Assets 1.71% 1.67% Business per employee (` in crores) 8.47 7.81 Profit per employee (` in crores) 0.08 0.08

6. ASSET LIABILITY MANAGEMENT

Maturity Pattern of certain items of assets and liabilities

(` in crores) Period Deposits Advances Investments Borrowings Foreign Foreign Currency Currency Assets Liabilities 1 Day 25.14 37.81 4.51 0.04 67.89 1.42 2 to 7 days 132.94 193.33 122.24 0.00 488.38 476.70 8 to 14 days 625.37 1,446.65 0.00 0.00 60.66 21.78 15 to 28 Days 130.31 125.35 257.05 0.00 25.04 16.91 29 days to 3 months 956.42 286.04 767.41 0.00 1,162.00 1,327.30 Over 3 months & upto 6 months 790.39 171.19 715.26 31.22 1,115.53 1,123.74 Over 6 months & upto 1 year 1,636.92 374.06 1,147.15 276.22 1,366.84 1,319.18 Over 1 year & upto 3 years 11,355.89 7,471.58 1,104.01 1.22 0.53 4.72 Over 3 years & upto 5 years 611.27 955.11 71.00 30.00 0.00 0.39 Over 5 years 76.11 1,076.34 397.56 10.00 0.00 0.00

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Period Deposits Advances Investments Borrowings Foreign Foreign Currency Currency Assets Liabilities Total 16,340.76 12,137.46 4,586.19 348.70 4,286.87 4,292.14 The above classification has been made on the basis of the guidelines of RBI and certain assumptions made by management and have been relied upon by auditors.

7. EXPOSURES

7.1 Exposure to Real Estate Sector (` in crores) Category March 31, 2012 March 31, 2011 a) Direct exposure

(i) Residential Mortgages – a) Lending fully secured by mortgages on residential property that is or will be occupied by the borrower or that is rented; * 508.54 315.54

(ii) Commercial Real Estate – Lending secured by mortgages on commercial real estates (office buildings, retail space, multi-purpose commercial premises, multi-family residential buildings, 717.89 543.70 multi-tenanted commercial premises, industrial or warehouse space, hotels, land acquisition, development and construction, etc.). Exposure also includes non-fund based (NFB) limits

(iii) Investments in Mortgage Backed Securities (MBS) and other securitised exposures – a. Residential Nil Nil b. Commercial Real Estate Nil Nil

b) Indirect Exposure Nil Nil

Fund based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs) 7.72 9.99 Total Exposure to Real Estate Sector 1,234.15 869.23 * includes Individual housing loans eligible for inclusion in priority sector advances amounting to ` 333.85 crores for the year ended 31.03.2012 and ` 214.53 crores for the previous year 31.03.2011.

7.2 Exposure to Capital Market

(` in crores) PARTICULARS March 31, 2012 March 31, 2011 1. Direct Investment in equity shares, convertible bonds, convertible debentures and units of equity-oriented mutual funds the corpus of which is not exclusively invested in corporate debt 35.89 34.26 2. Advances against shares / bonds / debentures or other securities or on clean basis to individuals for investments in shares (including IPOs/ESOPs), convertible bonds, convertible debentures and units of equity-oriented mutual funds 1.05 Nil 3. Advances for any other purposes where shares or convertible bonds or convertible debentures or units of equity oriented mutual funds are taken as primary security. 3.03 9.56 4. Advances for any other purposes to the extent secured by the collateral security of the shares or convertible bonds or convertible debentures or units of equity oriented mutual funds i.e. where the primary security other than shares/convertible 100.55 Nil bonds/convertible debentures/units of equity oriented mutual funds `does not fully cover the advances; 5. Secured and Unsecured Advances to stock brokers and guarantees issued on behalf of stock brokers and market makers 85.48 90.43 6. Loans sanctioned to corporates against security of shares / bonds / debentures or other securities or on clean basis for meeting promoter’s contribution to the equity of new companies in anticipation of raising resources Nil Nil 7. Bridge loans to companies against expected equity flows / issues. Nil Nil

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PARTICULARS March 31, 2012 March 31, 2011 8. Underwriting commitments taken up by the banks in respect of primary issue of shares or convertible bonds or convertible debentures or units of equity oriented Nil Nil mutual funds 9. Financing to stock brokers for margin trading Nil Nil 10. All exposures to venture capital funds (both registered and unregistered) Nil Nil Total Exposure to Capital Market 226.00 134.25

7.3 Risk Category wise Country Exposure (` in crores) Risk Category Exposure (net) as at * Provision held as Exposure (net) as at Provision held as at March 31, 2012 at March 31, 2012 March 31, 2011 March 31, 2011 Insignificant 83.19 Nil 79.48 Nil Low 141.83 Nil 64.09 Nil Moderate 0.11 Nil 4.01 Nil High 0.10 Nil 0.00 Nil Very High 0.32 Nil 0.17 Nil Restricted 0.00 Nil 0.00 Nil Off-credit 0.00 Nil 0.00 Nil Total 225.55 Nil 147.75 Nil * The net funded exposure of the bank in respect of foreign exchange transactions with any country is within 1% of the total assets of the Bank and hence no provision is required in terms of RBI guidelines.

7.4 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank

Single Borrower Limit / Group Borrower Limit has not been exceeded during the year.

7.5 Unsecured Advances – Advances secured by intangible securities such as Rights, licences, authorisations, etc. – NIL

8. MISCELLANEOUS

8.1 Provision made for Income-Tax during the year (` in crores) March 31, 2012 March 31, 2011 Provision for Income Tax 63.00 67.00

8.2 Penalties imposed by RBI

No penalty was imposed on the bank by the Reserve Bank of India during the year.

9. DISCLOSURES AS PER ACCOUNTING STANDARDS

The bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI’s guidelines.

i) Prior Period Items – AS 5

There are no material prior period items of income / expenditure during the year requiring disclosure.

ii) Revenue Recognition – AS 9

Income / Expenditure of certain items recognised on cash basis (AS 9) are not considered to be material.

iii) Employee benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

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The Bank and its employees contribute a defined sum every month to City Union Bank Employees Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employees.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

a) The summarized position of the employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard-15 (Revised) is as under:

i) Changes in the present value of the obligations: (` in crores) Particulars Leave Encashment Present value of Obligation as at the beginning of the year 13.64 Interest cost 0.98 Current service cost 1.50 Past service cost – (non vested benefits) 0.00 Past service cost – (vested benefits) 0.00 Benefits paid (2.68) Actuarial (gain)/loss on obligation 4.19 Present value of obligation at year end 17.63

ii) Amount recognized in Balance Sheet: (` in crores) Particulars Leave Encashment Closing Present Value Obligation 17.63 Fair value of Plan Assets 0.00 Difference 17.63 Unrecognised transitional liability 0.00 Unrecognised past service cost – non vested benefits 0.00 Liability recognized in the Balance Sheet 17.63

iii) Expenses recognized in Profit & Loss account: (` in crores) Particulars Leave Encashment Current Service cost 1.50 Interest cost 0.98 Expected return on plan assets 0.00 Net Actuarial (gain)/loss recognised in the year 4.19 Total expenses recognized in the Profit & Loss Account 6.67

iv) Principal actuarial assumption at the Balance Sheet Date:

Particulars Leave Encashment Discount factor 8.60% Salary escalation rate 6.00% Attrition rate 6.00% Expected rate of return on plan assets 0.00%

iv) Segmental reporting - AS 17

Summary of the operating segments of the bank as follows: (` in crores) Business Segments TREASURY CORPORATE / RETAIL OTHER TOTAL WHOLESALE BANKING BANKING BANKING OPERATIONS Particulars Current Previous Current Previous Current Previous Current Previous Current Previous year year year year year year year year year year Revenue 331.19 270.06 596.54 399.69 955.68 693.18 20.50 12.88 1,903.91 1,375.81

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Business Segments TREASURY CORPORATE / RETAIL OTHER TOTAL WHOLESALE BANKING BANKING BANKING OPERATIONS Particulars Current Previous Current Previous Current Previous Current Previous Current Previous year year year year year year year year year year Result 86.06 79.90 170.79 113.25 151.33 156.28 18.87 11.60 427.05 361.03 Unallocated Expenses 0.00 0.00 Operating Profit 427.05 361.03 Other Prov & Contingencies 83.80 78.98 Income Taxes 63.00 67.00 Extraordinary profit / loss 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Net Profit 280.25 215.05

Other Information: Segment Assets 5,255.51 4,223.60 4,827.73 3,765.87 7,902.69 6,248.85 0.00 0.00 17,985.93 14,238.32 Unallocated Assets 364.73 353.20 Total Assets 18,350.66 14,591.52

Segment Liabilities 5,123.49 4,016.99 4,451.79 3,478.00 7,287.32 5,771.19 0.00 0.00 16,862.60 13,266.18 Unallocated Liabilities 244.97 318.72 Total Liabilities 17,107.57 13,584.90

Segment Capital 132.02 206.61 375.94 287.87 615.37 477.66 0.00 0.00 1,123.33 972.14 Unallocated Capital 119.76 34.48 Capital Employed 1,243.09 1,006.62

Part B – Geographic Segment:

The bank operates only in India

v) Related Party disclosures – AS 18

(i) Related Parties:

Parent / Subsidiaries / Associates / JV – NIL

Key Management Personnel – Shri S. Balasubramanian (upto 30.04.2011) – Dr. N. Kamakodi (from 01.05.2011)

(ii) Related Party Transactions:

a) as Remuneration – ` 24,87,500/- b) as Loan availed – outstanding as on 31.03.2012 – ` 42,31,424/-

vi) Earning Per share – AS 20

The details of EPS computation is set out below:

Particulars March 31, 2012 March 31, 2011 Earnings for the year (` thousands) 280,25,16 215,05,42 Basic weighted average number of shares (Nos) 40,65,94,050 40,19,19,038 Basic EPS (`) 6.89 5.35 Dilutive effect of stock options (Nos) 41,58,100 41,58,100 Diluted weighted average number of shares (Nos) 41,07,52,150 40,60,77,138 Diluted EPS (`) 6.82 5.30 Nominal value of shares (`) 1 1

vii) Consolidated Financial Statements (CFS) – AS 21

The bank has no subsidiaries.

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viii) Accounting for Taxes on Income – AS 22

The major components of the Deferred Tax Asset and Liabilities as at 31 March 2012 are as follows:

(` in crores) Components March 31, 2012 March 31, 2011 Deferred Tax Liability: Depreciation on Fixed Assets 2.30 0.00 Accrued Interest on Investments 16.15 7.97 Total Deferred Tax Liability (A) 18.45 7.97 Deferred Tax Asset: Provision for Advances 10.75 10.75 Leave encashment 6.81 5.29 Depreciation on Fixed Assets 0.00 0.87 Total Deferred Tax Asset (B) 17.56 16.91 Net Deferred Tax Liability / (Asset) - (A-B) 0.89 (8.94)

ix) Accounting for Investments in Associates in CFS – AS 23

The bank has no Associates.

x) Discontinuing Operations – AS 24

The bank has not discontinued any operations.

xi) Intangible Assets – AS 26

The Bank has followed AS 26 – “Intangible Asset” issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xii) Impairment of Assets – AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 – “Impairment of Assets” applies.

xiii) Provisions & Contingencies – AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA’s and on depreciation investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

10. OTHER DISCLOSURES

10.1 Break up of Provisions and Contingencies (` in crores) Particulars March 31, 2012 March 31, 2011 Provision for Depreciation on Investments (net) 7.41 7.60 Provision towards NPA 57.00 67.25 Provision towards Standard Assets 12.56 7.50 Provision made towards Income Tax 63.00 67.00 Income Tax excess provision written back -9.00 0.00 Floating Provision for Advances 9.00 0.00 Provision for Restructured Accounts 6.73 -0.19 Provision for Debt Relief -0.30 0.13 Other Provisions 0.40 -3.31 Total 146.80 145.98

10.2.1 Movement in Countercyclical Provisioning Buffer for NPA

(` in crores)

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Sl Particulars March 31, 2012 March 31, 2011 No. a) Opening Balance 19.30 Nil b) Additions during the year Nil 19.30 c) Deductions during the year Nil Nil d) Closing Balance 19.30 19.30

10.2.2 Movement in Floating Provisions (` in crores) Sl Particulars March 31, 2012 March 31, 2011 No. a) Opening Balance Nil 19.30 b) Additions during the year 9.00 Nil c) Deductions during the year Nil 19.30 d) Closing Balance 9.00 Nil

10.3 Drawdown from Reserves

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

10.4 Customer Complaints:

Sl No. Particulars a) No. of complaints pending at the beginning of the year 1 b) No. of complaints received during the year 92 c) No. of complaints redressed during the year 93 d) No. of complaints pending at the end of the year -

10.5 Awards passed by the Banking Ombudsman

Sl No. Particulars a) No. of unimplemented Awards at the beginning of the year Nil b) No. of Awards passed by Banking Ombudsman during the Year Nil c) No. of Awards implemented during the year Nil d) No. of unimplemented Awards pending at the end of the year Nil

10.6 Letters of Comfort issued in respect of Subsidiaries during financial year 2011-12 – NIL

10.7 Provision Coverage Ratio (PCR)

The Provision Coverage Ratio (PCR) of the bank as on 31.03.2012 is 76.81%.

10.8 Bancassurance Business

Income from Bancassurance Business for the financial year 2011-12 – ` 3.25 crores.

10.9 Concentration of Deposits, Advances, Exposures and NPAs

10.9.1 Concentration of Deposits

Total Deposits of twenty largest depositors (` in crores) 2118.52 Percentage of Deposits of twenty largest depositors to Total Deposits of the bank 12.96%

10.9.2 Concentration of Advances

Total Advances to twenty largest borrowers (` in crores) 1851.29 Percentage of Advances to twenty largest borrowers to Total Advances of the bank 12.10%

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10.9.3 Concentration of Exposures

Total Exposure to twenty largest borrowers/customers (` in crores) 1851.29 Percentage of Exposures to twenty largest borrowers/customers to Total Exposure of the bank on borrowers/customers 12.09%

10.9.4 Concentration of NPAs (` in crores) Total Exposure to top four NPA accounts 21.83

10.10 Sector-wise NPAs

Sl. Sector Percentage of NPAs No. to Total Advances in that sector 1 Agriculture & allied activities 1.92% 2 Industry (Micro & small, Medium and Large) 0.49% 3 Services 0.83% 4 Personal Loans 1.08%

10.11 Movement of NPAs (` in crores) Particulars Gross NPAs as on 1st April 2011 112.48 Additions (Fresh NPAs) during the year 144.41 Sub-total (A) 256.89 Less:- (i) Upgradations 16.47 (ii) Recoveries (excluding recoveries made from upgraded accounts) 64.94 (iii) Write-offs 51.94 Sub-total (B) 133.35 Gross NPAs as on 31st March 2012 (A-B) 123.54

10.12 Overseas Assets, NPAs and Revenue

Particulars (` in crores) Total Assets Nil Total NPAs Nil Total Revenue Nil

10.13 Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs.

10.14 Unamortized Pension and Gratuity Liabilities – NIL

10.15 Income Tax

Provision for income tax in the current year has been arrived at consistent with earlier years after considering various judicial decisions on certain disputed issues.

No provision is considered for disputed taxes based on the orders received by the bank and similar decisions at various stages of the Tribunal and Higher judicial Forums.

10.16 Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31.03.2012. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

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10.17 Employees Stock Option

The bank has allotted 31,81,646 shares during the year to its eligible employees who have exercised their options granted under ESOS of the Bank.

10.18 In the absence of notification under Sec 441 A of the Companies Act, 1956 on the cess leviable for the purpose of rehabilitation / revival / protection of assets of Sick Industrial Company, no provision has been made for the same during the year.

10.19 There are no dues to Micro and Small Enterprises calling for disclosure as at 31st March 2012 as per the records available.

10.20 Previous year’s figures have been regrouped wherever necessary to conform to the current year classification.

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ANNEXURE - VI

STATEMENT OF ACCOUNTING POLICIES – YEAR ENDED 31.03.2012

1. General

The financial statements have been prepared on historical cost convention and on accrual basis of accounting, except where stated otherwise and conform to the statutory provisions and practices prevailing within the banking industry in India.

2. Foreign Exchange Transactions

2.1 Assets and Liabilities denominated in Foreign Currencies are translated at the rates notified by FEDAI at the close of the year. Profit or Loss accruing from such transactions is recognised in the Profit and Loss Account.

2.2 Income and Expenditure items have been translated at the exchange rates ruling on the date of the transactions.

2.3 The Bank does not have a branch in any Foreign Country.

2.4 Outstanding Forward Exchange contracts are revalued at the exchange rates notified by FEDAI and the resultant net gain or loss is recognised in the Profit and Loss Account.

2.5 Foreign Currency Guarantees, Acceptances, Endorsements and other obligations are reported at the exchange rates prevailing on the date of the Balance Sheet.

3. Investments

3.1 As per RBI guidelines, the investments of the bank are classified into the following categories at the time of acquisition

¾ Held to Maturity ¾ Available for Sale ¾ Held for Trading

They are further sub classified and shown in Balance Sheet under the following six categories:

i) Government Securities ii) Other Approved Securities iii) Shares iv) Debentures and Bonds v) Subsidiaries /Joint Ventures and vi) Others

a) Securities classified under "Held to Maturity" category are valued at acquisition cost. Where the acquisition cost is higher than the face value, such excess of acquisition cost over the face value is amortised over the remaining period to maturity.

b) Securities held in "Available for Sale" Category are valued scrip wise as under:

i) Government of India Securities are valued at market price as per quotation put out by Primary Dealers’ Association of India/ Fixed Income Money Market and Derivatives Association of India & Bloomberg.

ii) State Government loans, Trustee Securities, Securities guaranteed by Central/State Governments and PSU Bonds are valued on appropriate Yield to Maturity (YTM) basis as per Primary Dealers’ Association of India/ Fixed Income Money Market and Derivatives Association of India guidelines.

iii) Treasury Bills/ Certificate of Deposits/ Commercial Papers are valued at carrying cost.

iv) Equity Shares are valued at market rate if quoted, otherwise at Break up Value as per the latest Balance Sheet, if available, or Re.1/- per Company.

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v) Preference shares are valued at market price if quoted or at appropriate YTM basis as per Primary Dealers’ Association of India/ Fixed Income Money Market and Derivatives Association of India guidelines.

vi) Debentures / Bonds are valued at market price, if quoted, otherwise on an appropriate YTM basis.

vii) Mutual Funds are valued at market price, if quoted, or at NAV or Market Price/ Repurchase Price.

viii) Security Receipts are valued at NAV as declared by Securitisation companies.

c) Individual scrips under “Held for Trading” category are valued at Market Price.

3.2 Individual scrips in Available for Sale / Held for Trading are valued scrip wise aggregated category wise and net depreciation, if any, for each category is charged to Profit & Loss Account, while net appreciation, if any, is ignored.

3.3 Shifting of securities from one category to another category is carried out lower of acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any on such transfer is fully provided for.

3.4 Profit/Loss on sale of Investments in any category is taken to the Profit & Loss Account. However, in case of sale of investment in “Held to Maturity” category, the profit is first credited to Profit and Loss Account and thereafter an amount equivalent to profit, net of statutory reserve and taxes, is appropriated to the Capital Reserve Account.

3.5 Commission, brokerage, broken period interest etc. on securities incurred on acquisition is debited to Profit and Loss account. Commission, incentives, brokerage received on subscription is deducted from the Cost of the securities.

3.6 The Investments shown in the Balance Sheet are net of Depreciation, if any.

3.7 The Non Performing Investments are identified and provided for as per RBI guidelines.

4. Advances

4.1 Advances have been classified as per the Asset Classification norms laid down by the Reserve Bank of India. The required provisioning for Standard Assets and for Non Performing Assets have been made as per the Regulatory Norms.

4.2 Advances shown in the Balance Sheet are net of provisions and interest reserve on NPA accounts, technical write – offs, ECGC/DICGC claims received and provisions for Restructured accounts.

5. Fixed Assets

5.1 Premises and other Fixed Assets are accounted at acquisition cost less depreciation.

5.2 Depreciation has been provided on the composite value for premises acquired with land and building, where cost of the land is not separately identifiable.

5.3 Depreciation in respect of fixed assets is charged on the written down value of the assets from the date of purchase on pro-rata basis at the rates specified under Schedule XIV of the Companies Act, 1956, except in the case of computers and operating software which are depreciated @ 33.33 % on straight line method as per RBI guidelines.

6. Staff Benefits

6.1 Provision towards leave encashment is accounted on actuarial basis in accordance with the guidelines contained in Accounting Standard 15 (revised 2005) issued by ICAI.

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6.2 Liability for Gratuity to staff is contributed to the Group Gratuity Life Assurance Scheme of the Life Insurance Corporation of India.

6.3 Payments to defined contribution schemes such as Provident Fund and Employees Pension Fund Superannuation Scheme of Life Insurance Corporation of India are charged as expenses as they fall due.

7. Employees Stock Option Scheme

The Employee Stock Option Scheme provides for grant of equity stock options to employees that vest in a graded manner. The Bank follows the intrinsic value method to account for its employee compensation costs arising from grant of such options. The excess of fair market price over the exercise price shall be accounted as employee compensation cost in the year of vesting. The fair market price is the latest closing price of the shares on the stock exchanges in which shares of the Bank are largely traded immediately prior to the date of meeting of the compensation committee in which the options are granted.

8. Earning Per share

Basic earning per share is calculated by dividing the net profit of the year by the weighted average number of equity shares.

Diluted earning per share is computed using the weighted average number of equity shares and dilutive potential equity shares.

9. Income Recognition

Interest Income on all advances / performing assets is recognised on accrual basis. In respect of Non- Performing Assets / Non-Performing Investments, interest income is recognised on receipt basis. Commission earned, Locker rent, Dividends on equity shares & Mutual Funds are recognised on receipt basis.

10. Income Tax

Income Tax comprises current tax and deferred tax for the year. The deferred tax assets/liability is recognised in accordance with Accounting Standard-22 issued by the Institute of Chartered Accountants of India.

11. Net Profit

The Net Profit disclosed in the Profit and Loss Account is after considering:

11.1 Provision for taxes on income in accordance with statutory requirements.

11.2 Provision for bad and doubtful advances and investments.

11.3 Contingent Provision for Standard Assets.

11.4 Other usual and necessary provisions.

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ANNEXURE - VII

ACCOUNTING RATIOS – YEAR ENDED MARCH 31, 2012

Year ended 31st March 2012 a. Basic Earnings per share (in `) 6.89 b. Diluted Earnings per share (in `) 6.82 c. Return on Networth (in %) 24.91% d. Net Asset Value per equity share (in `) 30.45

Definition of Key Terms:

Earnings per share - Net Profit divided by weighted average number of equity shares outstanding at the end of the period

Return on Net worth - Net Profit / Average Net worth

Net Asset Value - Net worth (excluding revaluation reserves) divided by number of equity shares outstanding at the end of the period

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ANNEXURE - VIII

CAPITALIZATION STATEMENT AS ON MARCH 31, 2012

Capitalization Statement * (` in crores) Pre-issue as at Post-issue # March 31, 2012 Loan Funds Long Tem @ 40.00 Short Term @@ 308.70 Total Debt 348.70

Share Holders Funds Share Capital 40.82 Reserves & Surplus (Net of Revaluation Reserve) 1,202.28 Total Equity 1,243.10

Long Term Debt / Equity Ratio 0.03 : 1

* The above has been computed on the basis of the audited financial statements. @ Long term debt represents subordinate debt @@ Short term debts are debts maturing within next one year from the date of above statement and interest accrued thereon # Information pertaining to Share Capital and Reserves post issue can be ascertained only after finalization of size and price of rights issue

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STOCK MARKET DATA FOR THE EQUITY SHARES OF THE BANK

The Equity Shares are currently listed on the BSE, NSE and MSE. As our Bank’s Equity Shares are actively traded on the BSE and NSE, stock market data has been given separately for BSE and NSE only. Stated below is the stock market data for the Equity Shares for the periods indicated:

1. The high and low of the closing prices recorded on the BSE and NSE for Fiscal 2011, 2010 and 2009 and the number of Equity Shares traded on the days the high and low prices were recorded are stated below:

Fiscal Year High Date of Volume on Low Date of Volume on Average (`) High date of (`) Low date of Price for High Low the Year (Number (Number (`) of Equity of Equity Shares) Shares) BSE 2012 50.00 July 14, 3,44,810 39.75 December 44,389 44.99 2011 19, 2011 July 22, 2,77,239 2011 2011 51.55 December 8,01,180 28.70 April 12, 1,09,158 42.05 2, 2010 2010 2010 31.55 January 18, 55,00,083 12.46 April 1, 34,277 24.88 2010 2009 NSE 2012 50.00 July 22, 8,08,496 39.75 December 4,65,475 45.02 2011 19, 2011 December 1,83,012 20, 2011 2011 51.60 December 19,92,716 28.75 April 12, 4,01,051 42.04 2, 2010 2010 2010 31.25 January 19, 1,69,83,979 12.55 April 1, 1,60,775 24.87 2010 2009 January 18, 1,26,75,240 2010

2. The high and low of the closing prices and volume of Equity Shares traded on the respective dates on the BSE and NSE during the last six months is as follows:

Month, Year High Date of Volume on Low Date of Volume on Average (`) High date of (`) Low date of Price for High High the (Number (Number Month (`) of Equity of Equity Shares) Shares) BSE June 2012 52.15 June 26, 7,76,097 45.90 June 1, 25440 49.01 2012 2012 May 2012 49.20 May 3, 93,927 45.40 May 16, 25,586 47.79 2012 2012 April 2012 49.45 April 2, 34,572 47.90 April 11, 38,060 48.35 2012 2012 March 2012 49.10 March 21, 1,38,701 46.30 March 1, 22,896 47.86 2012 2012 February 2012 49.65 February 64,912 42.35 February 3, 42,645 46.39 16, 2012 2012 January 2012 43.85 January 27, 165,954 41.00 January 23, 74,980 42.19 2012 2012 NSE June 2012 52.20 June 26, 15,24,839 46.10 June 1, 97,038 49.02 2012 2012 May 2012 49.30 May 3, 2,41,967 45.35 May 16, 1,85,044 47.82 2012 2012

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Month, Year High Date of Volume on Low Date of Volume on Average (`) High date of (`) Low date of Price for High High the (Number (Number Month (`) of Equity of Equity Shares) Shares) April 2012 49.60 April 3, 5,24,919 47.80 April 19, 95,172 48.32 2012 2012 March 2012 49.10 March 21, 10,96,992 46.50 March 1, 1,08,591 47.93 2012 2012 February 2012 49.65 February 890,490 42.45 February 3, 331,811 46.40 15, 2012 2012 January 2012 43.70 January 27, 813,288 41.05 January 23, 399,424 42.20 2012 2012

In the event the high, or low of closing price of the Equity Shares are the same on more than one day, the day on which there has been higher volume of trading has been considered for the purposes of this section.

3. The week end closing prices of the Equity Shares for last four weeks on the BSE and NSE is provided in the table below:

BSE NSE Week Ended On Closing Price (In `) Closing Price (In `) July 13, 2012 52.60 52.75 July 6, 2012 53.50 53.50 June 29, 2012 52.05 52.10 June 22, 2012 49.50 49.40

4. The highest and lowest of the closing prices of the Equity Shares on the BSE and NSE for last four weeks is provided in the table below:

Highest (In `) Date Lowest Date BSE 54.40 July 3, 2012 47.75 June 18, 2012 NSE 54.45 July 3, 2012 48.10 June 18, 2012

5. Market price of the Equity Shares on the BSE and NSE as on July 16, 2012 was ` 51.75 and ` 51.70 respectively.

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FINANCIAL INDEBTEDNESS

Set forth below, is a brief summary of our Bank’s outstanding borrowings (excluding call money, collateralized borrowing and lending obligation and current account balances) of ` 358.66 crores as of June 30, 2012:

Name of the lender/Nature Sanctioned Amount Interest rate Repayment of loan Amount outstanding as on (p.a.) schedule/tenor (` in crores) June 30, 2012 (` in crores) Unsecured redeemable non- 30.00* 30.00 8.90% 10 years (with date of convertible subordinated redemption being April 30, bonds (Series I) 2016) Unsecured redeemable non- 10.00* 10.00 10.00% 10 Years (with date of convertible subordinated redemption being April 30, bonds (Series II) 2017) Small Industries Development 100.00 100.00 10.55% One year from December Bank of India – Refinance 28, 2011 scheme 175.00 175.00 10.95% One year from March 5, 2012 National Bank for Agriculture 7.33 3.66 8.00% Six equal installments of ` and Rural Development – 1,22,12,100 ending on July Refinance scheme 31, 2013 The Reserve Bank of India 150.00 40.00 8.00% Up to 180 days * Represents the total issue size.

Further, set forth below is a brief description of certain significant terms of such financing arrangements:

Unsecured redeemable non-convertible subordinated bonds (Series I)

Listing:

The BSE, vide their letter dated June 29, 2006, granted permission for listing/ trading of the Series I Bonds on its wholesale debt market.

Credit Rating:

Our Bank has obtained credit rating of ‘A (ind)’ from FITCH and ‘CARE A+ [Single A Plus]’ from the Credit Analysis and Research Limited for Series I Bonds indicating adequate degree of safety regarding timely servicing of financial obligations and low credit risk.

Unsecured redeemable non-convertible subordinated bonds (Series II)

Listing:

The BSE, vide their letter dated June 6, 2007, granted permission for listing/ trading of the Series II Bonds on its wholesale debt market.

Credit Rating:

Our Bank has obtained credit rating of ‘A (ind)’ from FITCH and ‘CARE A+ [Single A Plus]’ from the Credit Analysis and Research Limited for Series II Bonds indicating low credit risk.

Small Industries Development Bank of India - Refinance scheme

Pursuant to letters dated December 28, 2011, March 2, 2012 and loan agreement dated February 2, 2012 the Small Industries Development Bank of India (the “SIDBI”) has provided our Bank a refinance facility for the loans advanced by our Bank to micro and small enterprises (“Refinance Facility”).

Security:

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Under the terms of the Refinance Facility, our Bank will hold in trust all the securities including fixed assets, proceeds thereof, bills of exchange obtained/ to be obtained as security in respect of financial assistance made available to micro and small enterprises by our Bank, as security for the Refinancing Facility extended by SIDBI.

National Bank for Agriculture and Rural Development – Refinance scheme

Pursuant to letter dated August 3, 2010, the National Bank for Agriculture and Rural Development (“NABARD”) has provided our Bank a refinance facility for the loans advanced by our Bank.

The Reserve Bank of India – Export Credit Refinance

Pursuant to an agreement dated May 11, 2011 and our letter dated June 21, 2012, the Reserve Bank of India has provided our Bank a refinance facility for loan or advance granted by our Bank to exporters.

Material Covenants:

Under the above mentioned facilities our Bank is subject to certain restrictive covenants, including: a. prior written approval from the trustee for declaring dividends to its shareholder during any financial year unless all dues to the bondholders/ trustees up to the date on which the dividend is proposed to be declared has been paid, or satisfactory provisions have been made therefor; b. requirement of giving notice to the trustee on the happening of certain events, including, notice of any application for winding up, any suit or other legal proceeding intended to be filed or initiated against our Bank and adverse change in profits; c. lender may at any time during the currency of the loan, call upon our Bank to pay the interest on the balance outstanding amount in respect of the loan at such higher rate as may be fixed by the lender; and d. restrictions on pre-payment of the loan amount before the due date.

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SECTION VI – LEGAL AND OTHER INFORMATION

OUTSTANDING LITIGATIONS AND DEFAULTS

Except as stated below there are no outstanding litigations, suits, criminal or civil prosecutions, statutory or legal proceedings including those for economic offences, tax liabilities, show cause notices or legal notices pending against our Bank, which, in case of an adverse outcome, would materially and adversely affect the operations or financial position of our Bank.

Further, except as disclosed below, we are not aware of any litigation involving moral turpitude, criminal liability on the part of our Bank, material violations of statutory regulations and or proceedings relating to economic offences initiated against our Bank which have arisen in the last ten years.

In view of our Bank, all outstanding civil, labour, consumer and tax related litigation and disputes of value of ` 5 crores and above are material to our Bank. Given below is the description of all material litigation.

Criminal cases

There are no criminal cases pending against our Bank.

Civil cases

1. Our Bank has filed a civil suit being O.A. No. 302/2004 before the Debt Recovery Tribunal at Chennai – I against Arunachalam Sugar Mills Limited (“Arunachalam”) and certain others, claiming, inter alia, for recovery, from all the defendants, of a sum of ` 7.34 crores together with interest of 14% and 2% penal interest from the date of application till the date of realization. Our Bank had advanced a sum of ` 8.05 crores towards certain credit facilities availed by Arunachalam, which Arunachalam failed to repay. Our Bank has also filed an interim application being I.A. No. 12/2011 for attachment of certain immovable properties of Arunachalam as security for the claimed amount. The tribunal has issued an order dated October 11, 2011 to attach the property of Arunachalam pending disposal of the dispute. Certain other creditors of Arunachalam, filed a petition, being C.P. 229/2004 before the High Court of Judicature at Madras (“Madras High Court”) for liquidation of the assets of Arunachalam, including land, buildings and plant and machinery. Our Bank has also been impleaded in this matter as a secured creditor of Arunachalam. The Madras High Court, through an order dated July 22, 2005 appointed an official liquidator to manage the assets of Arunachalam till disposal of the petition. By a further order dated August 9, 2011, the Madras High Court directed the official liquidator to bring the assets of Arunachalam for sale. The proceedings before the Debt Recovery Tribunal at Chennai and the Madras High Court are currently pending.

2. Our Bank has filed a civil suit being O.A. No. 101/2011 before the Debt Recovery Tribunal, Ernakulum against Medical Mission Trust and the trustees of Medical Mission Trust for recovery of ` 7.69 crores as dues outstanding from the defendants. Our Bank had advanced a sum of ` 7.53 crores towards certain credit facilities availed by the defendants, which the defendants failed to repay. Our Bank has also filed an interim applications being I.A. No. 637/2011, 638/2011 and 639/2011 for, inter alia, attachment of certain immovable property of the defendants as security for the claimed amount. The suit and applications filed by our Bank are currently pending before the Debt Recovery Tribunal, Ernakulum.

Notices received from SEBI

1. Our Bank had received a notice (No. PMD/MBD/AK/1462/98) dated March 24, 1998 from SEBI to show cause as to why the merchant banking license of our Bank should not be suspended for the remaining period of registration for violation of the Merchant Banking Rules and Merchant Banking Regulations in respect of alleged non fulfillment of underwriting or devolvement obligations in the public issue by BSM Knit Fab India Limited. The notice was issued pursuant to an order of SEBI dated May 21, 1997 directing that an enquiry be conducted on our Bank and the subsequent report of the enquiry officer dated March 18, 1998 recommending suspension of our Bank’s registration to act as a merchant banker for a period of six months. Our Bank by a letter dated April 16, 1998 replied to the show cause notice and also sought a personal hearing to make submissions. Our Bank has not received any further communication from SEBI in this regard.

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2. Our Bank has received a letter dated March 12, 2004 from SEBI seeking information in relation to compliance with the provisions of the erstwhile Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. Our Bank sent a reply dated April 15, 2004 providing the information. Thereafter, our Bank received a notice (CFD/DCR/RC/TO/2304/04) dated November 16, 2004 from SEBI alleging violation of Regulations 6 and 8(3) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The notice provided for an option to our Bank to settle the charges through consent upon payment of ` 1,00,000. Our Bank by a letter dated December 15, 2004 agreed to pay ` 1,00,000 as payment towards consent for the alleged violations. However, our Bank has not received any further communication from SEBI in this regard.

Income tax matters

Assessment year 1998-1999

1. Our Bank received an assessment order dated February 26, 2001 whereby the assessing officer disallowed certain deductions claimed by our Bank aggregating to ` 3.92 crores in relation to, inter alia, interest paid on purchase of securities, provisioning for bad debt, proportionate expenses on interest earned on tax free bonds, proportionate expenses on dividends, payment to SEBI, expenses of public issue and excess depreciation. The assessing officer has further issued a notice of demand dated February 26, 2001 for ` 1.64 crores as tax payable. Our Bank filed an appeal (being appeal number ITA 44/01-02) before the Commissioner of Income Tax (Appeals), Trichy (“CIT (A), Trichy”) challenging the order dated February 26, 2001. The appeal filed by our Bank is currently pending before the CIT (A), Trichy.

2. The assessment of the return of income filed by our Bank for the assessment year 1998-1999 was reopened through a notice dated February 27, 2002. Thereafter the assessing officer issued a notice of demand dated February 27, 2002 for ` 2.48 crores as tax payable. The assessing officer through an order dated March 26, 2003 disallowed certain deductions claimed by our Bank in relation to, inter alia, writing off non rural debts, amortization charges and interest on securities. Our Bank filed an appeal (being appeal number 158/2003-04) before the CIT (A), Trichy, which through an order dated March 31, 2011 allowed the appeal in relation to, inter alia, deletion of additions of broken period interest, amount of bad debts and loss on the sale of securities and confirmed the appeal in relation to certain other grounds. Thereafter, our Bank and the income tax department filed separate appeals (being appeal number ITA 158/03-04 and 1115/Mds/2011) before the Income Tax Appellate Tribunal, B Bench, Chennai (“ITAT Chennai”), which was disposed off through a common order dated November 22, 2011 with a direction to the CIT (A), Trichy to deal with each issue afresh. The appeal filed by our Bank is currently pending before the CIT (A), Trichy.

Assessment year 1999-2000

Our Bank received an assessment order dated March 26, 2002 whereby the assessing officer disallowed certain deductions claimed by our Bank aggregating to ` 14.67 crores in relation to, inter alia, writing off non rural bad debts, depreciation on investments, deductions of provisioning made for bad and doubtful debts in computing taxable income under section 36(1)(viia) of IT Act and broken period interest. Thereafter, the assessing officer issued a notice of demand dated March 26, 2002 for ` 7.18 crores as tax payable. Our Bank has filed an appeal, being appeal number ITA 109/02-03, before the CIT (A), Trichy on April 19, 2002. The appeal filed by our Bank is currently pending before the CIT (A), Trichy.

Assessment year 2000-2001

1. Our Bank filed return of income for the assessment year 2000-2001 on November 30, 2000. The assessing officer through an order dated March 26, 2003 disallowed certain deductions claimed by our Bank aggregating to ` 5.54 crores, inter alia, relating to deductions for non rural bad debts written off and provision for bad debts and salaries. The assessing officer issued a notice dated March 26, 2003 raising a demand for a sum of ` 3 crores as tax payable. Our Bank filed an appeal, being appeal number 159/03-04 to CIT (A), Trichy. The appeal filed by our Bank is currently pending before the CIT (A), Trichy.

2. During pendency of above proceedings as mentioned in point 1 above, the assessing officer through a notice dated March 9, 2006 reopened the assessment of the return of income in relation to assessment year 2000-2001 on account of non furnishing of particulars of advances leading to excess deduction. The assessing officer passed an order dated December 29, 2006 disallowing certain deductions claimed by our

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Bank aggregating to ` 11.78 crores in relation to, inter alia, excess depreciation allowed in original assessment, broken period interest, deduction of provisioning made for bad and doubtful debts in computing taxable income under section 36(1)(viia) of IT Act and profit on recoupment of loss allowed as deduction under computation of taxable income under section 36(1)(viia) of the IT Act for earlier years. Thereafter, the assessing officer issued a notice of demand dated December 29, 2006 for ` 7.07 crores as tax payable. Our Bank filed an appeal, being appeal number 558/2006-07, on January 24, 2007 before the CIT (A), Trichy challenging the order of the assessing officer dated December 29, 2006, which was allowed through an order dated March 31, 2011 in relation to, inter alia, deletion of additions of broken period interest, amount of bad debts and loss on the sale of securities and disallowed the appeal in relation to certain other grounds. Our Bank filed a further appeal to ITAT Chennai dated June 6, 2011, being appeal number 1088/Mds/2011. The ITAT Chennai through an order dated November 22, 2011, has sent the matter back to the CIT (A), Trichy for consideration of all issues afresh. The appeal filed by our Bank is currently pending before the CIT (A), Trichy.

Assessment year 2001-2002

1. Our Bank received an assessment order dated November 20, 2003 for the assessment year 2001-2002, disputing deductions aggregating to ` 8.64 crores. Our Bank filed an appeal, being appeal number ITA 323/03-04 before the CIT (A), Trichy, disputing the liability of ` 3.56 crores imposed on our Bank in relation to writing off of non rural bad debts, provision for depreciation on investments, rural deductions, interest accrued on securities, amortization charges and depreciation on building. The appeal filed by our Bank is currently pending before the CIT (A), Trichy.

2. Our Bank has also filed an appeal for the assessment year 2001-2002, being appeal number 559/06-07 to the CIT (A), Trichy challenging the reopening of already completed assessment order under section 148 of the IT Act. The CIT (A), Trichy, through an order dated March 24, 2009 dismissed the appeal filed by our Bank, against which a further appeal, being appeal number 377/Mds/2010 was filed before the ITAT Chennai. The ITAT Chennai through an order dated June 6, 2011, remanded the matter back to the CIT(A), Trichy for deciding the appeal afresh. The appeal filed by our Bank is currently pending before the CIT (A), Trichy.

Assessment year 2003-2004

1. Our Bank received an assessment order dated March 31, 2006 for the assessment year 2003-2004, disputing deductions aggregating to ` 22.08 crores. Our Bank filed an appeal, being appeal number 116/2006-07, before the CIT (A), Trichy, which through an order dated March 23, 2007, remanded the matter to the assessing officer for reworking of the claim. Thereafter, the assessing officer passed an order dated February 1, 2008 disallowing certain deductions claimed by our Bank for an aggregate amount of ` 3.93 crores, inter alia, in respect of provisioning of rural debts and write off of non rural debts. Subsequently, the assessing officer issued a notice of demand dated February 1, 2008 reducing the refund payable to our Bank to ` 4.70 crores. Our Bank has filed an appeal, being appeal number ITA 427/07-08, before the CIT (A), Trichy disputing additional tax liability of ` 1.39 crores. The appeal filed by our Bank is currently pending before the CIT (A), Trichy.

2. Pursuant to the order passed by the CIT (A), Trichy dated March 23, 2007 and mentioned at point 1 above, the income tax department filed an appeal, being appeal number 1485/2007, before the ITAT Chennai challenging the order of the CIT (A), Trichy. The ITAT Chennai through an order dated October 30, 2009 dismissed the appeal. Thereafter, the income tax department has filed another appeal, being appeal number T.C. (A) No.1100/2010, before the Madras High Court disputing reduction of tax liability of ` 7.78 crores of our Bank. The appeal filed by the income tax department is currently pending before the CIT (A), Trichy.

Assessment year 2008-2009

Our Bank received an assessment order dated December 31, 2010 for the assessment year 2008-2009, whereby the assessing officer disallowed certain deductions claimed by our Bank for an aggregate amount of ` 75.09 crores, inter alia, in respect of interest on the securities, bad debts and provisioning for bad debts, broken period interest, amortization expenses, loss on shifting of securities and interest on NPAs. Thereafter, the assessing officer issued a notice of demand dated December 31, 2010 for ` 30.76 crores as tax payable. Our Bank has

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filed an appeal, being appeal number ITA NO.322/2010-11, before the CIT (A), Trichy. The appeal filed by our Bank is currently pending before the CIT (A), Trichy.

Assessment year 2009-2010

Our Bank received an assessment order dated December 29, 2011 for the assessment year 2009-2010, whereby the assessing officer disallowed certain deductions claimed by our Bank for an aggregate amount of ` 66.58 crores, inter alia, in respect of interest on the securities, bad debts, broken period interest, amortization expenses, ex-gratia amounts, loss on shifting of securities and interest on NPAs. Thereafter, the assessing officer issued a notice of demand dated December 29, 2011 for ` 28.64 crores as tax payable. Our Bank has filed an appeal, being appeal number ITA NO.250/2011-12, before the CIT (A), Trichy, challenging the assessment order dated December 29, 2011. The appeal filed by our Bank is currently pending before the CIT (A), Trichy.

Dispute in relation to deduction of bad debts relating to rural and non-rural advances

The income tax department has filed two special leave petitions before the Supreme Court of India being SLP (Civil) No. 24001/2007 and SLP (Civil) No. 1116/2007 and against the order of the Madras High Court dated February 26, 2007 in relation to assessment years 1991-92 and 1992-93 regarding disallowance of deduction of bad debts relating to rural and non-rural advances, taxability of interest on the securities and the diminution in the value of investments. SLP (Civil) No. 1116/2007 is currently pending admission.

Disputes in relation to reopening of assessments

Our Bank has filed certain appeals currently pending before the CIT (A), Trichy in respect of assessment years 1988-89, 1990-91, 1991-92, 1992-93, 1993-94, 1995-96 and 1996-97 being appeal numbers ITA 42/01-02, ITA 43/2001-02, ITA 111/02-03, ITA 110/02-03, ITA 37/2000-2001, ITA 155/03-04, ITA 156/03-04 respectively. The appeals have been filed in respect of, inter alia, issues of jurisdiction of the assessing officer in issuing notices, and limitation of time for reopening of assessments under section 148 of the IT Act. The CIT (A) through a common order dated March 31, 2011 allowed the appeals in relation to, inter alia, deletion of additions of broken period interest, amount of bad debts and loss on the sale of securities and disallowed the appeal in relation to certain other grounds. Our Bank filed further appeals in respect of assessment years 1988- 89, 1990-91, 1991-92, 1992-93, 1993-94, 1995-96 and 1996-97 being appeal numbers ITA. No. 1079/Mds/2011, 1080/Mds/2011, 1081/Mds/2011, 1082/Mds/2011, 1083/Mds/2011, 1084/Mds/2011, 1085/Mds/2011, 1086/Mds/2011, 1087/Mds/2011, and 1088/Mds/2011 before the ITAT Chennai. The ITAT Chennai through a common order dated November 22, 2011 disposed off the appeals with a direction to the CIT (A), Trichy to consider each issue afresh. The appeals filed by our Bank are currently pending before the CIT (A), Trichy.

Further, the ITAT Chennai, through an order dated June 6, 2011, has remanded four appeals filed by our Bank in relation to assessment years 2001-02, 2002-03, 2003-04 and 2004-05 being appeal numbers 377/Mds/2010, 911/Mds/2010, 912/Mds/2010 & 913/Mds/2010 respectively, to CIT (A), Trichy for consideration of each issue afresh. The appeals in these assessment years also pertain to the issue of reopening of assessment of our Bank’s income tax returns under section 148 of the IT Act. The appeals filed by our Bank are currently pending before the CIT (A), Trichy.

The total disputed tax liability in these appeals is ` 5.29 crores.

Service tax matters

Pursuant to an audit conducted on our Bank by CERA in October 2009, a letter dated November 25, 2009 from the Superintendent of Central Excise, Kumbakonam Range disputing the amount of service tax paid by our Bank for the period from April 2008 till March 2009 and contending short levy of service tax on foreign exchange transactions, non levy of service tax on foreign exchange income through inter-bank transactions and incorrect utilization of CENVAT credit. Our Bank has filed a reply dated April 4, 2010. Pursuant to the audit and our reply dated April 4, 2010, certain show cause notices were issued to our Bank in relation to the allegations raised in the letter dated November 25, 2009 (including notices for periods outside the audited period). The description of the material show cause notices are as follows:

1. Show cause notice dated April 19, 2011 from the Office of Commissioner of Central Excise and Service Tax, Trichy (“Service Tax Commissioner, Trichy”) raising a demand for ` 20.41 crores together with

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interest and penalty thereon for failure to pay service tax on the interest generated on hypothecation loans provided by our Bank from April 2006 till March 2011. Our Bank has filed a reply on June 18, 2011. We have not received any further communication from the Service Tax Commissioner, Trichy in this regard.

2. Show cause notices dated October 14, 2010, December 13, 2010 and October 17, 2011 from the Service Tax Commissioner, Trichy raising a demand of ` 2.87 crores, ` 12.64 crores and ` 7.98 crores respectively on payment of service tax on the amount of foreign exchange purchase and income earned in foreign currency on account of inter-banking transactions classified as profit on exchange transactions from different periods including, April 2005 to July 2009, May 16, 2008 to March 31, 2010 and April 31, 2010 to March 31, 2011. Our Bank has filed replies to the show cause notices on December 20, 2010 and March 21, 2012. We have not received any further communication from the Service Tax Commissioner, Trichy in this regard.

3. Show cause notice dated August 4, 2011 from the Service Tax Commissioner, Trichy raising a demand of ` 63.60 crores on the ground of failure to maintain separate registers for taxable and exempted services leading to incorrect availing of CENVAT credit for the period from April 2008 to March 2011. Our Bank is in the process of compiling data to file the reply to the show cause notice dated August 4, 2011. We have not received any further communication from the Service Tax Commissioner, Trichy in relation to the delay in filing our reply.

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GOVERNMENT AND OTHER APPROVALS

Except as stated below, our Bank has received the necessary consents, licenses, permissions and approvals from government and various regulatory agencies required for us to undertake our current business activities and there are no pending approvals and renewals required for carrying on our present business: a) Our Bank has filed an application dated October 9, 2002 to the Labour Department, Government of Tamil Nadu, for grant of exemption from registration of our branches located in the state of Tamil Nadu from the applicability of the Tamil Nadu Shops and Establishments Act, 1947. The application is currently pending. b) Our Bank is yet to apply for registration and/or exemption from registration under the relevant Shops and Establishments Act for our branches located in the states of Chhattisgarh, Gujarat, Madhya Pradesh, Maharashtra, Odisha, Puducherry, Punjab, Rajasthan, Uttar Pradesh, and West Bengal.

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MATERIAL DEVELOPMENTS

A. In accordance with circular no. F.2/5/SE/76 dated February 5, 1977 issued by the Ministry of Finance, Government of India, as amended by Ministry of Finance, Government of India through its circular dated March 8, 1977 and in accordance with sub-item (B) of item X of Part E of the SEBI Regulations, the information required to be disclosed for the period between the last date of the balance sheet and the profit and loss account provided to the shareholders (i.e. for the year ended March 31, 2012), and up to the end of the last but one month preceding the date of this Draft Letter of Offer (i.e. July 17, 2012), is provided below:

1. Working results of our Bank for the period from April 1, 2012 to May 31, 2012:

The unaudited working results of our Bank for the period from April 1, 2012 to May 31, 2012 are as follows: (In ` crores) S. No. Particulars Amount 1. Net interest income 87.38 2. Other income 38.43 3. Total operating income 125.81 4. Other expenses 59.36 5. Operating profit before provisions and tax 66.45 6. Other provision and contingencies 10.00 7. Provision for tax 12.00 8. Profit after tax 44.45

2. In the opinion of the Directors, except as disclosed in this Draft Letter of Offer, there have not arisen any circumstances since April 1, 2012 which has materially and adversely affected or that are likely to affect our business, the profitability of our Bank or the value of our assets or our ability to pay our liabilities.

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OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority for the Issue

Pursuant to the resolution passed by our Board of Directors at its meeting held on January 31, 2012, it has been decided to propose the Issue to the Eligible Equity Shareholders with a right to renounce. Further, our Board of Directors by resolution dated April 28, 2012 and our shareholders through postal ballot resolution declared on June 11, 2012 have authorized the Employee Reservation Portion for Eligible Employees.

Prohibition by SEBI, RBI or governmental authorities

Our Bank and our Directors have not been prohibited from accessing or operating in the capital markets or restrained from buying, selling or dealing in securities under any order or direction passed by SEBI.

Our Bank, our Directors and the companies with which our Directors are associated as directors or promoters or persons in control have not been prohibited from accessing or operating in the capital markets or restrained from buying selling or dealing in securities under any order or direction passed by SEBI.

Other than Mr. C R Muralidharan, who is a director on the board of directors of ICICI Prudential Asset Management Company Limited, none of our Directors are associated with the securities market in any manner.

Except for seven letters of suggestion, warnings and show cause notices issued by SEBI to ICICI Prudential Asset Management Company Limited, no action has been initiated against any other entity described above.

Our Bank has not been declared as wilful defaulter by the RBI or any other governmental authority and there have been no violations of securities laws committed by our Bank in the past and no such proceedings are currently pending against our Bank.

Compliance with Part E of Schedule VIII of SEBI Regulations

Our Bank is in compliance with the provisions specified in Clause (1) of Part E of Schedule VIII of the SEBI Regulations as explained below:

(a) Our Bank has been filing periodic reports, statements and information in compliance with the Listing Agreements for the last three years immediately preceding the date of filing of this Draft Letter of Offer with SEBI;

(b) The reports, statements and information referred to in sub-clause (a) above are available on the website of recognised stock exchanges with nationwide trading terminals or on a common e-filing platform specified by SEBI; and

(c) Our Bank has an investor grievance-handling mechanism which includes meeting of the Shareholders’ Grievance Committee at frequent intervals, appropriate delegation of power by the Board as regards share transfer and clearly laid down systems and procedures for timely and satisfactory redressal of investor grievances.

Disclaimer Clause of SEBI

AS REQUIRED, A COPY OF THE DRAFT LETTER OF OFFER HAS BEEN SUBMITTED TO SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE DRAFT LETTER OF OFFER TO SEBI SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE DRAFT LETTER OF OFFER. THE LEAD MANAGER, EDELWEISS FINANCIAL SERVICES LIMITED, HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH THE SEBI (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS)

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REGULATIONS, 2009 IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE.

IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE DRAFT LETTER OF OFFER, THE LEAD MANAGER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE ISSUER DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE LEAD MANAGER, EDELWEISS FINANCIAL SERVICES LIMITED HAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED JULY 17, 2012, WHICH READS AS FOLLOWS:

“1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS, ETC., AND OTHER MATERIALS IN CONNECTION WITH THE FINALISATION OF THE DRAFT LETTER OF OFFER PERTAINING TO THE SAID ISSUE;

2. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE ISSUER, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS AND OTHER PAPERS FURNISHED BY THE ISSUER,

WE CONFIRM THAT:

(A) THE DRAFT LETTER OF OFFER FILED WITH SECURITIES AND EXCHANGE BOARD OF INDIA (“BOARD”) IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE;

(B) ALL THE LEGAL REQUIREMENTS RELATING TO THE ISSUE, AS ALSO THE REGULATIONS, GUIDELINES, INSTRUCTIONS, ETC. FRAMED/ ISSUED BY THE BOARD, THE CENTRAL GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND

(C) THE DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE AND SUCH DISCLOSURES ARE IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIES ACT, 1956, THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 AND OTHER APPLICABLE LEGAL REQUIREMENTS.

3. WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT LETTER OF OFFER ARE REGISTERED WITH THE BOARD AND THAT TILL DATE SUCH REGISTRATION IS VALID.

4. WE HAVE SATISFIED OURSELVES ABOUT THE CAPABILITY OF THE UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS. - NOT APPLICABLE

5. WE CERTIFY THAT WRITTEN CONSENT FROM THE PROMOTERS HAS BEEN OBTAINED FOR INCLUSION OF THEIR EQUITY SHARES AS PART OF THE PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK-IN AND THE EQUITY SHARES PROPOSED TO FORM PART OF THE PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK-IN SHALL NOT BE DISPOSED OR SOLD OR TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING FROM THE DATE OF FILING THE DRAFT LETTER OF OFFER WITH SEBI UNTIL THE DATE OF COMMENCEMENT OF THE LOCK-IN PERIOD AS STATED IN THE DRAFT LETTER OF OFFER.- NOT APPLICABLE

6. WE CERTIFY THAT REGULATION 33 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009,

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WHICH RELATES TO SECURITIES INELIGIBLE FOR COMPUTATION OF PROMOTERS' CONTRIBUTION, HAS BEEN DULY COMPLIED WITH AND APPROPRIATE DISCLOSURES AS TO COMPLIANCE WITH THE SAID REGULATION HAVE BEEN MADE IN THE DRAFT LETTER OF OFFER.- NOT APPLICABLE

7. WE UNDERTAKE THAT SUB-REGULATION (4) OF REGULATION 32 AND CLAUSE (C) AND (D) OF SUB-REGULATION (2) OF REGULATION 8 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, SHALL BE COMPLIED WITH. WE CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION SHALL BE RECEIVED AT LEAST ONE DAY BEFORE THE OPENING OF THE ISSUE. WE UNDERTAKE THAT AUDITOR’S CERTIFICATE TO THIS EFFECT SHALL BE DULY SUBMITTED TO THE BOARD. WE FURTHER CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION SHALL BE KEPT IN AN ESCROW ACCOUNT WITH A SCHEDULED COMMERCIAL BANK AND SHALL BE RELEASED TO THE ISSUER ALONG WITH THE PROCEEDS OF THE PUBLIC ISSUE.- NOT APPLICABLE

8. WE CERTIFY THAT THE PROPOSED ACTIVITIES OF THE BANK FOR WHICH THE FUNDS ARE BEING RAISED IN THE PRESENT ISSUE FALL WITHIN THE ‘MAIN OBJECTS’ LISTED IN THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION OR OTHER CHARTER OF THE BANK AND THAT THE ACTIVITIES WHICH HAVE BEEN CARRIED OUT UNTIL NOW ARE VALID IN TERMS OF THE OBJECT CLAUSE OF ITS MEMORANDUM OF ASSOCIATION.

9. WE CONFIRM THAT NECESSARY ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT THE MONEYS RECEIVED PURSUANT TO THE ISSUE ARE KEPT IN A SEPARATE BANK ACCOUNT AS PER THE PROVISIONS OF SECTION 73(3) OF THE COMPANIES ACT, 1956 AND THAT SUCH MONEYS SHALL BE RELEASED BY THE SAID BANK ONLY AFTER PERMISSION IS OBTAINED FROM ALL THE STOCK EXCHANGES MENTIONED IN THE LETTER OF OFFER. WE FURTHER CONFIRM THAT THE AGREEMENT TO BE ENTERED INTO BETWEEN THE BANKERS TO THE ISSUE AND THE ISSUER SPECIFICALLY CONTAINS THIS CONDITION.- NOTED FOR COMPLIANCE

10. WE CERTIFY THAT A DISCLOSURE HAS BEEN MADE IN THE DRAFT LETTER OF OFFER THAT THE INVESTORS SHALL BE GIVEN AN OPTION TO GET THE EQUITY SHARES IN DEMAT OR PHYSICAL MODE.

11. WE CERTIFY THAT ALL APPLICABLE DISCLOSURES MANDATED IN THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 HAVE BEEN MADE IN ADDITION TO DISCLOSURES WHICH, IN OUR VIEW, ARE FAIR AND ADEQUATE TO ENABLE THE INVESTOR TO MAKE A WELL INFORMED DECISION.

12. WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE DRAFT LETTER OF OFFER:

(A) “AN UNDERTAKING FROM THE BANK THAT AT ANY GIVEN TIME THERE SHALL BE ONLY ONE DENOMINATION FOR THE EQUITY SHARES OF THE BANK; AND

(B) AN UNDERTAKING FROM THE BANK THAT IT SHALL COMPLY WITH SUCH DISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY THE BOARD FROM TIME TO TIME.”

13 WE UNDERTAKE TO COMPLY WITH THE REGULATIONS PERTAINING TO ADVERTISEMENT IN TERMS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 WHILE MAKING THE ISSUE.

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14. WE ENCLOSE A NOTE EXPLAINING HOW THE PROCESS OF DUE DILIGENCE HAS BEEN EXCERCISED BY US IN VIEW OF THE NATURE OF CURRENT BUSINESS BACKGROUND OF THE ISSUER, SITUATION AT WHICH THE PROPOSED BUSINESS STANDS, RISK FACTORS, PROMOTERS EXPERIENCE ETC. - REFER TO ANNEXURE A.

15. WE ENCLOSE A CHECKLIST CONFIRMING REGULATION-WISE COMPLIANCE WITH THE APPLICABLE PROVISIONS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, CONTAINING DETAILS SUCH AS THE REGULATION NUMBER, ITS TEXT, THE STATUS OF COMPLIANCE, PAGE NUMBER OF THE DRAFT LETTER OF OFFER WHERE THE REGULATION HAS BEEN COMPLIED WITH AND OUR COMMENTS, IF ANY. – REFER TO ANNEXURE B.

16. WE ENCLOSE STATEMENT ON ‘PRICE INFORMATION OF PAST ISSUES HANDLED BY MERCHANT BANKERS BELOW (WHO ARE RESPONSIBLE FOR PRICING THE ISSUE)’, AS PER FORMAT SPECIFIED BY SEBI THROUGH CIRCULAR. – NOT APPLICABLE

THE FILING OF THIS DRAFT LETTER OF OFFER DOES NOT, HOWEVER, ABSOLVE THE ISSUER FROM ANY LIABILITIES UNDER SECTION 63 OR SECTION 68 OF THE COMPANIES ACT OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY AND OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED ISSUE. SEBI, FURTHER RESERVES THE RIGHT TO TAKE UP, AT ANY POINT OF TIME, WITH THE LEAD MANAGER ANY IRREGULARITIES OR LAPSES IN THE DRAFT LETTER OF OFFER.

Caution

Our Bank and the Lead Manager accept no responsibility for statements made otherwise than in this Draft Letter of Offer or in any advertisement or other material issued by our Bank or by any other persons at the instance of our Bank and anyone placing reliance on any other source of information would be doing so at his own risk.

Investors who invest in the Issue will be deemed to have been represented to our Bank and Lead Manager and their respective directors, officers, agents, affiliates and representatives that they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares, and are relying on independent advice/ evaluation as to their ability and quantum of investment in the Issue.

The Lead Manager and our Bank shall make all information available to the Eligible Equity Shareholders and Eligible Employees and no selective or additional information would be available for a section of the Eligible Equity Shareholders or Eligible Employees in any manner whatsoever including at presentations, in research or sales reports etc. after filing of this Draft Letter of Offer with SEBI.

Disclaimer with respect to jurisdiction

This Draft Letter of Offer has been prepared under the provisions of Indian Laws and the applicable rules and regulations thereunder. Any disputes arising out of the Issue will be subject to the jurisdiction of the appropriate court(s) in Chennai only.

Selling restrictions

The distribution of this Draft Letter of Offer and the issue of Equity Shares on a rights basis to persons in certain jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. Persons into whose possession this Draft Letter of Offer may come are required to inform themselves about and observe such restrictions. Our Bank is making the Issue to the Eligible Equity Shareholders and Eligible Employees and will dispatch the Abridged Letter of Offer and CAF to the Eligible Equity Shareholders and EAF to Eligible Employees, who have an Indian address.

No action has been or will be taken to permit the Issue in any jurisdiction where action would be required for that purpose, except that this Draft Letter of Offer has been filed with SEBI for observations. Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and this Draft Letter of Offer may not be distributed, in any jurisdiction, except in accordance with legal requirements applicable in such jurisdiction. Receipt of this Draft Letter of Offer will not constitute an offer in those jurisdictions in which it would be illegal

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to make such an offer and, in those circumstances, this Draft Letter of Offer must be treated as sent for information only and should not be copied or redistributed. Accordingly, persons receiving a copy of this Draft Letter of Offer should not, in connection with the issue of the Equity Shares or the Rights Entitlements, distribute or send this Draft Letter of Offer in any other jurisdiction where to do so would or might contravene local securities laws or regulations. If this Draft Letter of Offer is received by any person in any such territory, or by their agent or nominee, they must not seek to subscribe to the Equity Shares or the Rights Entitlements referred to in this Draft Letter of Offer. Neither the delivery of this Draft Letter of Offer nor any sale hereunder, shall under any circumstances create any implication that there has been no change in our Bank’s affairs from the date hereof or that the information contained herein is correct as at any time subsequent to this date.

Filing

This Draft Letter of Offer has been filed with SEBI Southern Regional Office, Overseas Towers, 7th Floor, 756 – L, Anna Salai, Chennai – 600 002, for its observations. After SEBI gives its observations, the Letter of Offer shall be filed with the Designated Stock Exchange, as per the provisions of the Companies Act.

Consents

Consents in writing of our Directors, the Auditor, the Lead Manager, the legal counsel, the Registrar to the Issue, to act in their respective capacities have been obtained and such consents have not been withdrawn up to the date of this Draft Letter of Offer. M/s Jagannathan & Sarabeswaran, Chartered Accountants, the Auditor of our Bank, have given their written consent for the inclusion of their report in the form and content appearing in this Draft Letter of Offer and such consent and report have not been withdrawn up to the date of this Draft Letter of Offer.

Expert Opinion

Other than as disclosed in the section titled, “Financial Statements” and “Statement of Tax Benefits” on pages 55 and 43, respectively, no expert opinion has been obtained by our Bank in relation to the Issue.

Designated Stock Exchange

The Designated Stock Exchange for the purposes of the Issue will be the [●].

Disclaimer Clause of the BSE

As required, a copy of this Draft Letter of Offer will be submitted to BSE. The disclaimer clause as intimated by the BSE to us, upon completion of its review of this Draft Letter of Offer, shall be included in the Letter of Offer prior to filing the Letter of Offer with the Stock Exchanges.

Disclaimer Clause of the NSE

As required, a copy of this Draft Letter of Offer will be submitted to NSE. The disclaimer clause as intimated by the NSE to us, upon completion of its review of this Draft Letter of Offer, shall be included in the Letter of Offer prior to filing the Letter of Offer with the Stock Exchanges.

Disclaimer Clause of the MSE

As required, a copy of this Draft Letter of Offer will be submitted to MSE. The disclaimer clause as intimated by the MSE to us, upon completion of its review of this Draft Letter of Offer, shall be included in the Letter of Offer prior to filing the Letter of Offer with the Stock Exchanges.

Disclaimer Clause of the RBI

A license authorising our Bank to carry on banking business has been obtained from the RBI in terms of Section 22 of the Banking Regulation Act. It must be distinctly understood, however, that in issuing the license the RBI does not undertake any responsibility for the financial soundness of our Bank or for the correctness of any of the statements made or opinion expressed in this connection.

Expenses of the Issue

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The total expenses of the Issue are estimated to be approximately ` [●] crores. The expenses of the Issue include, among others, fees of the Lead Manager, fees of the Registrar to the Issue, fees of the other advisors, commission payable to SCSBs’, printing and stationery expenses, advertising, travelling and marketing expenses and other expenses.

The estimated Issue expenses are as under:

Particulars Estimated % of % of Expenses Estimated Estimated (in ` crores) Issue size Issue expenses Fees of the Lead Manager [●] [●] [●] Fees to advisors (Legal, Auditors, etc) [●] [●] [●] Fees of the Registrar to the Issue [●][●] [●] Commission payable to SCSBs [●] [●] [●] Advertising and publicity expenses [●] [●] [●] Printing, stationery and postage expenses [●] [●] [●] Other expenses [●] [●] [●] Total [●] [●] [●]

Investor Grievances and Redressal System

Our Bank has adequate arrangements for redressal of Investor complaints. Our Bank has a Shareholders’ Grievance Committee which meets as and when required, to deal and monitor redressal of complaints from shareholders. Generally, the investor grievances are dealt within seven working days of the receipt of the complaint. Karvy, Registrar to the Issue, is also our registrar and share transfer agent.

Status of Complaints

(a) Total number of complaints received during Fiscal 2012: 1 (b) Number of pending complaints as on June 30, 2012: Nil (c) Status of the pending complaints: As on June 30, 2012, there were no outstanding investor complaints. (d) Time normally taken by it for disposal of various types of Investor grievances: 3-4 working days

Investor Grievances arising out of the Issue

Our Bank’s investor grievances arising out of the Issue will be handled by the Registrar to the Issue and the Compliance Officer. The Registrar to the Issue will have a separate team of personnel handling only our post- Issue correspondence.

The agreement between us and the Registrar to the Issue provides for retention of records with the Registrar for a period of at least one year from the last date of dispatch of letter of Allotment refund order to enable the Registrar to the Issue to redress grievances of Investors.

All grievances relating to the Issue may be addressed to the Registrar to the Issue giving full details such as folio number, name and address, contact telephone/ cell numbers, email id of the first applicant, number and type of shares applied for, CAF serial number, Application Money and the name of the bank and the branch where the application was deposited, along with a photocopy of the acknowledgement slip. In case of renunciation, the same details of the Renouncee should be furnished.

The average time taken by the Registrar to the Issue for attending to routine grievances will be seven working days from the date of receipt. In case of non-routine grievances where verification at other agencies is involved, it would be the endeavour of the Registrar to the Issue to attend to them as expeditiously as possible. We undertake to resolve the investor grievances in a time bound manner.

Investors may contact the Registrar to the Issue at:

Karvy Computershare Private Limited Plot Nos. 17-24, Vittal Rao Nagar Madhapur

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Hyderabad 500 081 Telephone: +91 40 4465 5000 / 1800 345 4001 Facsimile: +91 40 2343 1551 Email: [email protected] Website: http://karisma.karvy.com; Contact Person: M. Murali Krishna SEBI Registration No.: INR000000221

Investors may contact the Compliance Officer at:

Compliance Officer V Ramesh City Union Bank Limited No.149, TSR Big Street, Kumbakonam – 612 001 Tamil Nadu Telephone: +91 435 240 2322 / 240 1622 Facsimile: + 91 435 243 1746 Email: [email protected]

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SECTION VII - OFFERING INFORMATION

TERMS OF THE ISSUE

The Equity Shares, proposed to be issued, are subject to the terms and conditions contained in this Draft Letter of Offer, the Letter of Offer, the Application Form enclosed with the Abridged Letter of Offer, FEMA, the Memorandum and Articles of Association, the provisions of the Companies Act, SEBI Regulations, any other regulations, guidelines, notifications and regulations for issue of capital and for listing of securities issued by SEBI, RBI, GOI and/ or other statutory authorities and bodies from time to time, and the terms and conditions as stipulated in the allotment advice or letters of allotment or share certificate and rules as may be applicable and introduced from time to time.

All rights and obligations of the Eligible Equity Shareholders in relation to Applications and refunds pertaining to the Issue shall apply to Renouncee(s) as well.

Eligible Employees can participate in the Issue under the Employee Reservation Portion pursuant to Regulation 55A of the SEBI Regulations. However, it is clarified that the Eligible Employees participating under the Employee Reservation Portion cannot renounce their right to participate in the Issue.

Each Eligible Equity Shareholder who is a QIB or Non-Institutional Investor to invest in the Issue must mandatorily invest through the ASBA process provided that it:

• holds the Equity Shares in dematerialised form as on the Record Date and has applied towards its Rights Entitlements or additional Equity Shares in the Issue in dematerialised form; • has not renounced its Rights Entitlements in full or in part; • is not a Renouncee; • has applied through a bank account maintained with one of the SCSBs; and • has not split the CAF.

Retail Individual Investors and Eligible Employees may optionally apply through the ASBA process provided that they meet the above conditions.

ASBA Investors should note that the ASBA process involves Application procedures that may be different from the procedure applicable to non-ASBA process. ASBA Investors should carefully read the provisions applicable to such Applications before making their Application through the ASBA process.

Authority for the Issue

Pursuant to the resolution passed by our Board of Directors at its meeting held on January 31, 2012, it has been decided to propose the Issue to the Eligible Equity Shareholders with a right to renounce. Further, our Board of Directors by resolution dated April 28, 2012 and our shareholders through postal ballot resolution declared on June11, 2012 have authorized the Employee Reservation Portion for Eligible Employees.

Our Bank has filed an application dated July 16, 2012 to the FIPB seeking approval to Allot partly paid-up Equity Shares to Non-Resident Eligible Equity Shareholders and Renouncees.

Our Bank has obtained in-principle listing approvals dated [●], [●] and [●] from BSE, NSE and MSE, respectively.

Basis for the Issue

The Equity Shares are being offered for subscription for cash to (i) those existing Equity Shareholders whose names appear, as beneficial owners as per the list to be furnished by the Depositories in respect of the Equity Shares held in the electronic form, and on the register of members of our Bank in respect of Equity Shares held in the physical form at the close of business hours on the Record Date, i.e., [●], fixed in consultation with the Designated Stock Exchange and (ii) those employees who are permanent and full-time employees of our Bank including a Director of our Bank, whether whole-time or part-time, as on the Record Date, who is an Indian national and is based, working and present in India as on the date of submission of the EAF and who continues

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to be in such employment till the finalisation of the basis of Allotment in consultation with the Designated Stock Exchange, but excludes persons not eligible under applicable laws, rules, regulations and guidelines.

Ranking of Equity Shares

The Equity Shares shall be subject to the Memorandum and Articles of Association. The Equity Shares allotted in the Issue shall rank pari passu with the existing Equity Shares in all respects, including dividend, provided that voting rights and dividend payable shall be in proportion to the paid-up value of the Equity Shares held. In terms of Article 8(vi) of the Articles of Association, money paid in advance of calls shall not confer a right to dividend or participate in profits of our Bank.

Mode of Payment of Dividend

We shall pay dividend to our Equity shareholders as per the provisions of the Companies Act.

Principal Terms and Conditions of the Issue

Face Value

Each Equity Share shall have the face value of ` 1.

Issue Price

Each Equity Share is being offered at a price of ` [●] (including a premium of ` [●] per Equity Share). The Issue Price has been decided before determining the Record Date and has been arrived in consultation between our Bank and the Lead Manager.

Terms of payment

The Issue Price is ` [●] per Equity Share. Investors are required to pay Issue Price as below:

Payment Method* Amount payable per Equity Share (in `) Face value Premium Total On Application [●] [●] [●] On Call [●] [●] [●] Total 1 [●] [●] * See risk factor 11 on page 13 for risks associated with the Payment Method.

While making the Application, the Investor shall make a payment, or in case the Investor is applying under the ASBA process, instruct the relevant SCSB to block funds in the ASBA Account, equivalent to the Application Money, calculated on the basis of the Issue Price of ` [●] per Equity Share. Out of the Application Money of ` [●] per Equity Share, ` [●] per Equity Share shall be adjusted towards the face value of the Equity Shares per Equity Share and ` [●] shall be adjusted towards the share premium account per Equity Share. Accordingly, out of the Call Money of ` [●], ` [●] per Equity Share shall be adjusted towards the face value of the Equity Shares per Equity Share and ` [●] shall be adjusted towards the share premium account per Equity Share.

Notices for the payment of the Call Money shall be given by our Bank to the holders of the partly paid-up Equity Shares on the Call Record Date, provided that such notice is given in writing at least 14 days prior to the date of the Call.

In terms of Regulation 17 of the SEBI Regulations, our Bank shall ensure that the Call is completed within 12 months from the date of the Allotment. In case an Investor fails to pay the amount of the Call within the said 12 months from the date of the Allotment, the Equity Shares in respect of which any amount of the Call remains outstanding shall be forfeited, along with the Application Money already paid.

Further, in terms of the Articles of Association, Equity Shares in respect of which the balance amount payable remains unpaid on Call, may be forfeited, along with the Application Money already paid, by our Bank at any time after the due date for payment of such balance amount due, after giving a prior notice of at least 14 days.

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Any amount paid on Application in excess of the Application Money shall be adjusted towards the Call Money, if such amount does not exceed the Call Money payable, subject to the provisions of the Companies Act and the Articles of Association. In the event the amount paid on Application in excess of the Application Money exceeds the Call Money payable, an amount equivalent to the Call Money payable out of such excess amount shall be adjusted towards the Call Money as abovementioned, and the balance amount shall be refunded, as provided for in “Payment of Refund” on page 123.

Rights Entitlement Ratio

The Equity Shares are being offered on a rights basis to the existing Eligible Equity Shareholders of our Bank in the ratio of [●] Equity Shares for every [●] Equity Shares held as on the Record Date.

As your name appears as beneficial owner in respect of Equity Shares held in the electronic form or appears in the register of members as an Eligible Equity Shareholder, you are entitled to the number of Equity Shares as set out in Part A of the CAF enclosed with the Abridged Letter of Offer.

An Eligible Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate CAF may make an Application to subscribe to the Issue on plain paper. For further details, see the section titled ‘Terms of the Issue – Application on plain paper’ on page 110.

Employee Reservation Portion

The Equity Shares are being offered under the Employees Reservation Portion pursuant to SEBI Regulations to the Eligible Employees subject to the total consideration for Equity Shares applied for by Eligible Employee not exceeding ` 200,000.

Since this is a rights issue under regulation 55A of the SEBI Regulations, specific provisions of public issue are not applicable to the Issue.

The Eligible Employee applying under the Employee Reservation Portion should compulsorily apply through the EAF. Please note that Eligible Employees cannot make an application on a plain paper. Any application by an Eligible Employee other than through EAF shall be liable to be rejected.

An Eligible Employee who has not received the EAF may approach the Registrar for the Issue of duplicate EAF.

Eligible Employees who are Eligible Equity Shareholders may also apply under the Net Issue. In such a case, application under the Net Issue and application under the Employee Reservation Portion shall not be considered as multiple applications.

Fractional Entitlements

For Equity Shares being offered on a rights basis under the Issue, if the shareholding of any of the Eligible Equity Shareholders is equal to or less than [●] Equity Shares or is not in multiple of [●], the fractional entitlement of such Eligible Equity Shareholders shall be ignored for computation of the Rights Entitlement. However, Eligible Equity Shareholders whose fractional entitlements are being ignored earlier will be given preference in the allotment of one additional Equity Share each, if such Eligible Equity Shareholders have applied for additional Equity Shares.

Those Eligible Equity Shareholders holding less than [●] Equity Shares and therefore entitled to zero Equity Shares under the Issue shall be dispatched a CAF with zero entitlement. Such Eligible Equity Shareholders are entitled to apply for additional Equity Shares. However, they cannot renounce the same in favour of any third parties. CAF with zero entitlement will be non-negotiable/ non-renounceable.

Notices

All notices to the Investors required to be given by our Bank shall be published in one English national daily newspaper with wide circulation, one Hindi national daily newspaper with wide circulation and one regional language newspaper with wide circulation at the place where our Registered and Corporate Office is situated and/ or will be sent by registered post or speed post to the registered holders of the Equity Shares at their address in India registered with the Registrar to the Issue from time to time.

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Listing and trading of the Equity Shares

Our existing Equity Shares are currently traded on the BSE (scrip code 532210), NSE (scrip code CUB) and MSE (scrip code CUB) under the ISIN INE491A01021. In addition to the ISIN for the existing Equity Shares, our Bank shall obtain separate ISIN for the partly paid-up Equity Shares. The partly paid-up Equity Shares offered pursuant to the Issue shall be listed and traded under a separate ISIN for the period prior to the record dates for the Call. On the record date for the Call, the trading of the partly paid-up Equity Shares shall be terminated. The process of corporate action for crediting the fully paid-up Equity Shares to the Investors demat accounts may take about two weeks from the last date of payment of money under the notice for the Call. On payment of the Call Money, the partly paid-up Equity Shares shall be converted into fully paid-up Equity Shares and will trade under the ISIN for the existing Equity Shares. The Equity Shares, in respect of which the balance amount payable remains unpaid may be forfeited, along with the Application Money already paid, at any time after the due date for payment of the balance amount due, with prior notice of at least 14 days, as provided under the Articles of Association.

All steps for the completion of the necessary formalities for listing and commencement of trading of the Equity Shares allotted pursuant to the Issue shall be taken within seven days from date of finalisation of the basis of Allotment. Our Bank has made applications to the BSE, NSE and MSE seeking “in-principle” approval for the listing of the Equity Shares issued pursuant to the Issue in accordance with Clause 24(a) of the Listing Agreement pursuant to letters dated [●], [●] and [●], respectively. Our Bank will also apply to the Stock Exchanges for final approval for the listing and trading of the Equity Shares. No assurance can be given regarding the active or sustained trading in the Equity Shares or that the price at which the Equity Shares offered under the Issue will trade after listing on the Stock Exchange.

If permissions to list, deal in and for an official quotation of the Equity Shares are not granted by any of the Stock Exchanges, our Bank will forthwith repay, without interest, all moneys received from the applicants in pursuance of the Letter of Offer. If such money is not repaid within eight days after our Bank becomes liable to repay it, i.e., the date of refusal of an application for such a permission from a Stock Exchange, or on expiry of 15 days from the Issue Closing Date in case no permission is granted, whichever is earlier, then our Bank and every Director who is an officer in default shall, on and from such expiry of eight days, be liable to repay the money, with interest as per applicable law.

Rights of the equity shareholders

Subject to applicable laws, the equity shareholders shall have the following rights:

• Right to receive dividend, if declared. The dividend payable on partly paid-up Equity Shares until fully paid-up shall rank for dividend in proportion to the amount paid up; • Right to attend general meetings and exercise voting powers, unless prohibited by law; • Right to vote on a poll either in person or by proxy in proportion to the paid-up value of the Equity Shares held; • Right to receive offers for rights shares and be allotted bonus shares, if announced; • Right to receive surplus on liquidation; • Right of free transferability of shares; and • Such other rights, as may be available to a shareholder of a listed public company under the Companies Act and the Memorandum and Articles of Association.

General Terms and Conditions of the Issue

Market Lot

The Equity Shares are tradable only in dematerialized form. The market lot for the Equity Shares in dematerialised mode is one. In case of physical certificates, our Bank would issue one certificate for the Equity Shares allotted to one folio (“Consolidated Certificate”). In respect of Consolidated Certificates, our Bank will upon receipt of a request from the respective holder of Equity Shares, split such Consolidated Certificates into smaller denominations.

Minimum Subscription

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If our Bank does not receive the minimum subscription of 90% of the Issue (i.e. Net Issue and Employee Reservation Portion on a consolidated basis), or the subscription falls below 90% after the Issue Closing Date on account of cheques being returned unpaid or withdrawal of applications, our Bank shall refund the entire subscription amount received within 15 days from the Issue Closing Date. If there is delay in the refund of subscription by more than eight days after the date from which our Bank becomes liable to pay the amount (i.e. 15 days from the Issue Closing Date), our Bank shall pay interest for the delayed period at rates prescribed under sub-sections (2) and (2A) of Section 73 of the Companies Act. For details see ‘Terms of Issue – Minimum Subscription’ on page 103.

The above is subject to the terms mentioned under the section titled ‘Terms of the Issue - Basis of Allotment’ on page 111.

Joint-Holders

Where two or more persons are registered as the holders of any Equity Shares, they shall be deemed to hold the same as joint-holders with benefits of survivorship subject to provisions contained in the Articles of Association.

Nomination facility

In terms of Section 109A of the Companies Act, nomination facility is available in case of Equity Shares. The applicant can nominate, by filling the relevant details in the Application Form in the space provided for this purpose.

In accordance with section 109A of the Companies Act, a sole applicant or first applicant, along with other joint applicants being individual(s) may nominate any person(s) who, in the event of the death of the sole holder or all the joint-holders, as the case may be, shall become entitled to the Equity Shares. A person, being a nominee, becoming entitled to the Equity Shares by reason of the death of the original equity shareholder(s), shall be entitled to the same advantages to which he would be entitled if he were the registered holder of the Equity Shares. Where the nominee is a minor, the applicant (s) may also make a nomination to appoint, in the prescribed manner, any person to become entitled to the Equity Share(s), in the event of death of the said holder, during the minority of the nominee. A nomination shall stand rescinded upon the sale of the Equity Share by the person nominating. A transferee will be entitled to make a fresh nomination in the manner prescribed. When the Equity Share is held by two or more persons, the nominee shall become entitled to receive the amount only on the demise of all the holders. Fresh nominations can be made only in the prescribed form available on request at our Registered and Corporate Office or such other person at such addresses as may be notified by our Bank. The applicant can make the nomination by filling in the relevant portion of the Application Form.

Only one nomination would be applicable for one folio. Hence, in case the Eligible Equity Shareholder has already registered the nomination with our Bank, no further nomination needs to be made for Equity Shares to be allotted in the Issue under the same folio. However, new nominations, if any, by the Eligible Equity Shareholder(s) shall operate in supersession of the previous nomination, if any.

In case the Allotment of Equity Shares is in dematerialised form, there is no need to make a separate nomination for the Equity Shares to be allotted in the Issue. Nominations registered with respective DP of the applicant would prevail. If the applicant requires changing the nomination, they are requested to inform their respective DP.

Offer to Non Resident Eligible Equity Shareholders/ Investors

Applications received from NRs for Equity Shares under the Issue shall be inter alia, subject to the conditions imposed from time to time by the RBI under FEMA, including the regulations relating to QFIs, in the matter of receipt and refund of Application Money, Allotment, issue of letters of Allotment/ allotment advice/ share certificates, payment of interest and dividends. General permission has been granted to any person resident outside India to purchase shares offered on a rights basis by an Indian company in terms of FEMA and Regulation 6 of notification No. FEMA 20/2000-RB dated May 3, 2000. Our Board of Directors may, at its absolute discretion, agree to such terms and conditions as may be stipulated by RBI while approving the Issue. The Equity Shares purchased on a rights basis by non-residents shall be subject to the same conditions including

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restrictions in regard to the repatriability as are applicable to the original equity shares against which equity shares are issued on a right basis.

OCBs desiring to participate in the Issue must obtain prior approval from the RBI. Such approval must be submitted along with the CAF.

The Letter of Offer and CAF shall only be dispatched to Non Resident Eligible Equity Shareholders with registered addresses in India.

Our foreign shareholding is restricted to 40% of our paid up capital, with the aggregate shareholding of NRIs not exceeding 24% and individual shareholding not exceeding 5%, of our paid up capital, pursuant to Board’s resolution dated April 28, 2012 and resolution passed by our shareholdersthrough through postal ballot declared on June 11, 2012. As of June 30, 2012, our aggregate foreign shareholding (including FII and NRI shareholding) was 30.75% of our paid up capital. Further, as of June 30, 2012, the aggregate shareholding of NRIs was 2.88% of our paid up capital.

In order to ensure that our foreign shareholding adheres to the abovementioned limits, Allotment to Non- Resident Investors (excluding Eligible Employees), up to their Rights Entitlement and for any additional Equity Shares shall be subject to such limits.

INVESTORS MAY PLEASE NOTE THAT THE EQUITY SHARES ISSUED PURSUANT TO THE ISSUE CAN BE TRADED ON THE STOCK EXCHANGE ONLY IN DEMATERIALIZED FORM.

How to Apply?

Procedure for Application

The Application Form would be printed in black ink for all Eligible Equity Shareholders and Eligible Employees.

In case the original CAF is not received or is misplaced, the Eligible Equity Shareholder may request the Registrar to the Issue for issue of a duplicate CAF, by furnishing the registered folio number, DP ID Number, Client ID Number and their full name and address. In case the signature of the Eligible Equity Shareholder(s) does not match with the specimen registered with our Bank or the DP, the Application is liable to be rejected.

In case the original EAF is not received or is misplaced, the Eligible Employees may request the Registrar to the Issue, for issue of a duplicate EAF, by furnishing the employee identification number and PAN and their full name and address.

Neither our Bank nor the Registrar to the Issue shall be responsible for delay in the receipt of the Application Form or duplicate Application Form attributable to postal delays or if the Application Form or duplicate Application Form is misplaced in the transit. The request for a duplicate Application Form should reach the Registrar to the Issue within seven days from the Issue Opening Date. Investors should note that those who are making the Application in such duplicate Application Form should not utilize the original Application Form for any purpose, including renunciation in case of Eligible Equity Shareholders, even if the original Application Form is received or found subsequently. If any Investor violates any of these requirements, they shall face the risk of rejection of both applications.

Resident Eligible Equity Shareholders

Applications by Eligible Equity Shareholders should be made only on the CAF enclosed with the Abridged Letter of Offer. The CAF should be completed in all respects, as explained in the instructions indicated in the CAF. An Eligible Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate CAF may make an Application to subscribe to the Issue on plain paper. For further details, see the section titled ‘Terms of the Issue – Application on plain paper’ on page 110. Applications will not be accepted by the Lead Manager or by the Registrar to the Issue or by our Bank at any offices except in the case of postal applications as per instructions given in the Draft Letter of Offer. ASBA Investors shall be required to indicate either in (i) Part A of the CAF, or (ii) a plain paper application, as to whether they desire to avail of the ASBA option.

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Non Resident Eligible Equity Shareholders

Non Resident Indian applicants can obtain the CAF from the Registrar to the Issue. Applications received from Non Resident Eligible Equity Shareholders for the Issue shall, inter alia, be subject to the conditions as may be imposed from time to time by the RBI under FEMA, in the matter of receipt and refund of Application Money, Allotment, issue of letters of allotment/ allotment advice payment of interest, dividends etc.

Eligible Employees

Eligible Employees shall be sent numbered EAFs on the Record Date. Applications should be made only on the EAF enclosed with the Abridged Letter of Offer. The EAF should be completed in all respects, as explained in the instructions indicated in the EAF. Applications will not be accepted by the Lead Manager or by the Registrar to the Issue or by our Bank at any offices except in the case of postal applications as per instructions given in the Letter of Offer.

Eligible Employees can also apply through the ASBA. For details see “Additional Information for ASBA Investors” at page 117. ASBA Investors shall be required to indicate in the EAF as to whether they desire to avail of the ASBA option.

Option available to the Eligible Equity Shareholders

An Eligible Equity Shareholder shall have the following five options:

(a) Apply for his entitlement in part; (b) Apply for his entitlement in part and renounce the other part; (c) Renounce his entire entitlement; (d) Apply for his entitlement in full; or (e) Apply for his entitlement in full and apply for additional Equity Shares.

The CAF consists of four parts:

Part A: Form for accepting the Equity Shares offered and for applying for additional Equity Shares; Part B: Form for renunciation; Part C: Form for application for renouncees; and Part D: Form for request for Split Application Forms.

Option available to the Eligible Employees

Applications by Eligible Employees applying under the Employee Reservation Portion should be made only on the EAF.

The Eligible Employee may apply under the Employee Reservation Portion, subject to the total consideration for Equity Shares applied for by Eligible Employee not exceeding ` 200,000. It is clarified that the Eligible Employees participating under the Employee Reservation Portion cannot renounce their right to participate in the Issue.

Acceptance of the Issue

Eligible Equity Shareholders may accept the Issue and apply for the Equity Shares offered, either in full or in part by filling of Part A of the CAF and submit the same along with the Application Money payable to the Bankers to the Issue at any of the collection branches as mentioned on the reverse of the CAF before the close of the banking hours on or before the Issue Closing Date or such extended time as may be specified by our Board thereof in this regard. Resident applicants at centers not covered by the branches of collecting banks can send their CAF together with the cheque drawn on a local bank at Hyderabad or demand draft/ pay order payable at Hyderabad to the Registrar to the Issue by registered post. Such Applications sent to anyone other than the Registrar to the Issue are liable to be rejected.

An Eligible Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate CAF may make an Application to subscribe to the Issue on plain paper. For further details, see the section titled ‘Terms of the Issue – Application on plain paper’ on page 110.

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Eligible Employees may apply in the Issue by filling of EAF and submit the same along with the Application Money payable to the Bankers to the Issue at any of the collection branches as mentioned on the reverse of the EAF before the close of the banking hours on or before the Issue Closing Date or such extended time as may be specified by our Board thereof in this regard.

ASBA Investors shall indicate in (i) Part A of the CAF or a plain paper application (in case of Eligible Equity Shareholders) or (ii) the EAF (in case of Eligible Employees), as to whether they desire to avail of the ASBA option.

Renunciation

Any renunciation (i) from a resident Indian Eligible Equity Shareholder to a Non Resident, or (ii) from a Non Resident Eligible Equity Shareholder to a resident Indian, or (iii) from a Non Resident Eligible Equity Shareholder to a Non Resident is subject to the renouncer (s)/ Renouncee(s) obtaining the necessary approvals, including from RBI under the FEMA and such permissions should be attached to the CAF. Applications not accompanied by the aforesaid approvals are liable to be rejected.

Eligible Employees participating under the Employee Reservation Portion cannot renounce their right to participate in the Issue. Any application made other than through the EAF by an Eligible Employee is liable to be rejected.

As an Eligible Equity Shareholder, you have the right to renounce your Rights Entitlement for the Equity Shares in full or in part in favour of one or more persons. Your attention is drawn to the fact that our Bank shall not allot and/ or register any Equity Shares in favour of:

• More than three persons including joint holders; • Partnership firm(s) or their nominee(s); • Minors (unless it is through their legal guardian); • Hindu Undivided Family; • Any trust or society (unless the same is registered under the Societies Registration Act, 1860 or any other applicable trust laws and is authorised under its constitutions to hold equity shares of a company); or • Any person situated or subject to jurisdiction where the offering in terms of the Letter of Offer could be illegal or requires compliance with securities laws.

The right of renunciation is subject to the express condition that our Board shall be entitled in its absolute discretion to reject the Application from the Renouncee(s) without assigning any reason thereof.

Renouncee(s) shall not be entitled to further renounce the entitlement in favour of any other person. You cannot renounce the Rights Entitlement, in full or in part, in favour of an ASBA Investor.

Eligible Equity Shareholders may not renounce in favour of persons or entities who would otherwise be prohibited from being offered or subscribing for Equity Shares or Rights Entitlement under applicable securities laws.

The procedure for renunciation is as follows:

To renounce the entire Rights Entitlement in favour of one Renouncee

If you wish to renounce the Rights Entitlement indicated in Part A, in whole, please complete Part B of the CAF. In case of joint holding, all joint holders must sign Part B of the CAF. The person in whose favour renunciation has been made should complete and sign Part C of the CAF. In case of Renouncees, all joint Renouncees must sign this part of the CAF. You cannot renounce the Rights Entitlement, in full or in part, in favour of an ASBA Investor.

To renounce in part/ or renounce the whole to more than one person(s)

If you wish to either accept the Rights Entitlement in part and renounce the balance or renounce the entire Rights Entitlement in favour of two or more Renouncees, the CAF must be first split into requisite number of forms.

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Please indicate your requirement of Split Application Forms in the space provided for this purpose in Part D of the CAF and return the entire CAF to the Registrar to the Issue so as to reach them latest by the close of business hours on the last date of receiving requests for Split Application Forms. On receipt of the required number of Split Application Forms from the Registrar to the Issue, the procedure as mentioned in paragraph above shall have to be followed.

In case the signature of the Eligible Equity Shareholder(s), who has renounced the Equity Shares, does not agree with the specimen registered with our Bank, the Application is liable to be rejected.

Renouncee(s)

The person(s) in whose favour the Equity Shares are renounced by the Eligible Equity Shareholders should fill in and sign Part C of the CAF and submit the entire CAF on or before the Issue Closing Date along with the Application Money.

Renouncees cannot participate in the ASBA process. Eligible Equity Shareholders renouncing their Rights Entitlement in whole or in part will not be eligible to participate through ASBA.

Change and/ or introduction of additional holders

If you wish to apply for Equity Shares jointly with any other person(s), not more than three, who is/ are not already a joint holder with you, it shall amount to renunciation and the procedure as stated above for renunciation shall have to be followed. Even a change in the sequence of the name of joint holders shall amount to renunciation and the procedure, as stated above shall have to be followed.

However, this right of renunciation is subject to the express condition that our Board of Directors shall be entitled in its absolute discretion to reject the Application from the Renouncee(s) without assigning any reason thereof.

Additional Equity Shares

Eligible Equity Shareholders may apply for additional Equity Shares over and above their Rights Entitlement, provided that such Eligible Equity Shareholders have applied for their entire Rights Entitlement without renouncing them in whole or in part in favor of any other person(s). Applications for additional Equity Shares shall be considered and Allotment shall be in the manner prescribed under the section titled ‘Terms of the Issue - Basis of Allotment’ on page 111. If an Eligible Equity Shareholder desires to apply for additional Equity Shares, the same must be indicated in the place provided for additional Equity Shares in Part A of CAF. The Renouncees applying for all the Equity Shares renounced in their favor may also apply for additional Equity Shares.

It is clarified that the Eligible Employees participating under the Employee Reservation Portion cannot apply for additional Equity Shares in the Issue.

Where the number of additional Equity Shares applied for exceeds the number available for allotment, the Allotment would be made on a fair and equitable basis in consultation with the Designated Stock Exchange.

In the event of under-subscription in the Employee Reservation Portion, the unsubscribed portion would be added to the Net Issue. However, in case there is under-subscription in the Net Issue, the unsubscribed portion would not be met with spill over from over-subscription under the Employee Reservation Portion.

Instructions for Options available to Eligible Equity Shareholders

The summary of options available to the Eligible Equity Shareholder is presented below. You may exercise any of the following options with regard to the Equity Shares offered, using the enclosed CAF:

Option Available Action Required Accept whole or part of your Rights Entitlement without Fill in and sign Part A (all joint holders must sign) renouncing the balance Accept your Rights Entitlement in full and apply for Fill in and sign Part A including ‘Block III’ relating to the

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Option Available Action Required additional Equity Shares acceptance of Rights Entitlement and ‘Block IV’ relating to additional Equity Shares (all joint holders must sign) Renounce your Rights Entitlement in full to one person, Fill in and sign Part B (all joint holders must sign) (Joint Renouncees are considered as one) indicating the number of Equity Shares renounced and hand it over to the Renouncee. The Renouncees must fill in and sign Part C (all joint Renouncees must sign) Accept a part of your Rights Entitlement and renounce the Fill in and sign Part D (all joint holders must sign) balance to one or more Renouncee(s) requesting for Split Application Forms. Send the CAF to the Registrar to the Issue so as to reach them on or before OR the last date for receiving requests for Split Application Forms. Splitting will be permitted only once. Renounce your Rights Entitlement of all the Equity On receipt of the Split Application Form take action as Shares offered to you to more than one Renouncee indicated below.

For the Equity Shares you wish to accept, if any, fill in and sign Part A.

For the Equity Shares you wish to renounce, fill in and sign Part B indicating the number of Equity Shares renounced and hand it over to the Renouncees. Each of the Renouncees should fill in and sign Part C for the Equity Shares accepted by them Introduce a joint holder or change the sequence of joint This will be treated as a renunciation. Fill in and sign Part holders B and the Renouncees must fill in and sign Part C

Please note that:

• Part A of the CAF must not be used by any person(s) other than the Eligible Equity Shareholders. If used, this will render the Application invalid. • EAF must not be used by any person(s) other than Eligible Employees. If used this will render the Application invalid. • Request for Split Application Form should be made for a minimum of [●] Equity Shares or in multiples thereof and one Split Application Form for the balance Equity Shares, if any. • Request by the Eligible Equity Shareholder(s) for the Split Application Form should reach the Registrar to the Issue on or before [●]. • Only the Eligible Equity Shareholder, to whom the Letter of Offer and/ or Abridged Letter of Offer has been addressed to and not the Renouncee(s) or Eligible Employees, shall be entitled to renounce and to apply for Split Application Forms. CAF once split cannot be split again. • Split Application Forms(s) will be sent to the applicant(s) by post at the applicant’s risk. • While applying for or renouncing their Rights Entitlement, joint Eligible Equity Shareholders must sign the Application Form or Split Application Form in the same order and as per specimen signatures recorded with our Bank/Depositories. • Eligible Equity Shareholders may not renounce in favour of persons or entities who would otherwise be prohibited from being offered or subscribing for Equity Shares or Rights Entitlement under applicable securities laws.

For applicants residing at places other than designated Bank collecting branches

Resident Investors residing at places other than the cities where the bank collection centres have been opened should send their completed Application Form by registered post/ speed post to the Registrar to the Issue, along with a cheque drawn on a local bank at Hyderabad or demand drafts/pay order, net of bank and postal charges, payable at Hyderabad, crossed account payee only and marked “[●]” so that the same are received on or before Issue Closing Date.

Non Resident applicants applying on a non-repatriation basis should send their completed CAF by registered post/ speed post to the Registrar to the Issue, along with a cheque drawn on a local bank at Hyderabad or demand drafts net of bank and postal charges, payable at Hyderabad, crossed account payee only and marked “[●]” so that the same are received on or before Issue Closing Date.

Non Resident Investors, who are applying on a repatriation basis should send their completed CAF by registered post/ speed post to the Registrar to the Issue, along with demand drafts for the full Application Money (net of

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bank and postal charges), payable at Hyderabad crossed account payee only and marked “[●]” so that the same are received on or before Issue Closing Date.

Investors must write their Application Form number, as the case may be, at the back of the cheque/demand draft.

Our Bank will not be liable for any postal delays and Applications received through mail after the Issue Closing Date are liable to be rejected and returned to the applicants. Applications by mail should not be sent in any other manner except as mentioned above.

Availability of duplicate Application Form

In case the original CAF is not received or is misplaced, the Eligible Equity Shareholder may request the Registrar to the Issue, for issue of a duplicate CAF, by furnishing the registered folio number, DP ID Number, Client ID Number and their full name and address. In case the signature of the Eligible Equity Shareholder(s) does not match with the specimen registered with our Bank or the DP, the Application is liable to be rejected.

In case the original EAF is not received or is misplaced, the Eligible Employees may request the Registrar to the Issue, for issue of a duplicate EAF, by furnishing the employee identification number and PAN and their full name and address.

Please note that those who are making the Application in such duplicate Application Form should not utilize the original Application Form for any purpose, including renunciation in case of Eligible Equity Shareholders, even if the original Application Form is received or found subsequently. If Investor violates any of these requirements, they shall face the risk of rejection of both the applications. Our Bank or Registrar to the Issue will not be responsible for postal delays or loss of duplicate Application Form in transit, if any.

Application on plain paper

A resident Eligible Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate CAF may make an application to subscribe to the Issue on plain paper, along with an account payee cheque drawn on a local bank at Hyderabad or demand draft/ pay order (net of bank and postal charges) payable at Hyderabad, and marked “[●]” and send the same by registered post directly to the Registrar to the Issue.

Non Resident Eligible Equity Shareholders applying on a repatriation basis who have neither received the original CAF nor are in a position to obtain the duplicate CAF may make an application to subscribe to the Issue on plain paper, along with an ‘Account Payee Cheque’ drawn on a local bank at Hyderabad or demand draft/ pay order (net of bank and postal charges) payable at Hyderabad crossed account payee only and marked “[●]” and send the same by registered post directly to the Registrar to the Issue.

The Application on plain paper, duly signed by the applicants including joint holders, in the same order as per specimen recorded with our Bank, must reach the office of the Registrar to the Issue before the Issue Closing Date and should contain the following particulars:

• Name of Bank, being “City Union Bank Limited”; • Name and address of the Eligible Equity Shareholder including joint holders; • Registered Folio Number/ DP and Client ID No.; • Number of Equity Shares held as on Record Date; • Share certificate numbers and distinctive numbers of Equity Shares, if held in physical form; • Allotment option preferred - physical or demat form, if held in physical form; • Application Money payable at the rate of ` [●] per Equity Share; • Number of Equity Shares entitled as per Rights Entitlement; • Number of Equity Shares applied for as per Rights Entitlement; • Number of additional Equity Shares applied for, if any; • Total number of Equity Shares applied for; • Total amount paid at the rate of ` [●] per Equity Share; • Particulars of cheque/ draft;

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• Savings/ current account number and name and address of the bank where the Eligible Equity Shareholder will be depositing the refund order; • Details of PAN, of the applicants and for each applicant in case of joint Application, except in case of Applications on behalf of the Central or State Government and the officials appointed by the courts and by Investors residing in the State of Sikkim; • Signature of Eligible Equity Shareholders to appear in the same sequence and order as they appear in the records of our Bank; and • If the payment is made by a draft purchased from NRE/FCNR/NRO account, as the case may be, an account debit certificate from the bank issuing the draft, confirming that the draft has been issued by debiting the NRE/FCNR/NRO account.

Please note that those who are making the Application otherwise than on original CAF shall not be entitled to renounce their rights and should not utilize the original CAF for any purpose including renunciation even if it is received subsequently. If an applicant violates any of these requirements, he/ she shall face the risk of rejection of both the Applications.

PLEASE NOTE THAT ELIGIBLE EMPLOYEES CANNOT MAKE AN APPLICATION TO SUBSCRIBE UNDER THE EMPLOYEE RESERVATION PORTION ON PLAIN PAPER. ELIGIBLE EMPLOYEES MAY APPLY IN THE ISSUE ONLY BY SUBMITTING THE EAF. ANY APPLICATION MADE OTHER THAN THROUGH THE EAF BY AN ELIGIBLE EMPLOYEE SHALL BE LIABLE TO BE REJECTED.

Last date of Application

The last date for submission of the duly filled in Application Form or the plain paper Application is [●].The Issue will be kept open for 15 days. Our Board or any committee thereof will have the right to extend the said date for such period as it may determine from time to time but not exceeding 30 (thirty) days from the Issue Opening Date.

If the Application Form or the plain paper Application together with the amount payable is not received by the Bankers to the Issue/ Registrar to the Issue, on or before the close of banking hours on the aforesaid last date or such date as may be extended by our Board or any committee of our Board, the offer contained in the Letter of Offer shall be deemed to have been declined and our Board or any committee of our Board shall be at liberty to dispose of the Equity Shares hereby offered, as provided under the section titled “ Terms of the Issue - Basis of Allotment’ on page 111.

Basis of Allotment

For Eligible Equity Shareholders

Subject to the provisions contained in the Draft Letter of Offer, the Letter of Offer, the Articles of Association and the approval of the Designated Stock Exchange, our Board will proceed to allot the Equity Shares in the following order of priority:

(a) Full Allotment to those Eligible Equity Shareholders who have applied for their Rights Entitlement either in full or in part and also to the Renouncee(s), who has/ have applied for Equity Shares renounced in their favour, in full or in part.

(b) If the shareholding of any of the Eligible Equity Shareholders is equal to or less than [●] Equity Shares or is not in multiple of [●] Equity Shares, the fractional entitlement of such holders shall be ignored for the computation of Rights Entitlement. Shareholders whose fractional entitlements are being ignored would be considered for allotment of one additional Equity Share each if they apply for additional Equity Share(s). Allotment under this head shall be considered if there are any un-subscribed Equity Shares after allotment under (a) above. If number of additional Equity Shares required for allotment under this head is more than number of Equity Shares available after Allotment under (a) above, the Allotment would be made on a fair and equitable basis in consultation with the Designated Stock Exchange. (For further details, see the section titled ‘Terms of the Issue – Fractional Entitlements’ on page 102)

(c) Allotment to the Eligible Equity Shareholders who have applied for the Rights Entitlement and have also applied for additional Equity Shares. The Allotment of such additional Equity Shares will be made as far as

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possible on an equitable basis having due regard to the number of Equity Shares held by them on the Record Date, provided there is an under-subscribed portion after making Allotment in (a) and (b) above. The Allotment of such Equity Shares will be at the sole discretion of our Board in consultation with the Designated Stock Exchange, as a part of the Issue and not as a preferential Allotment.

(d) Allotment to the Renouncees, who have applied for the Equity Shares renounced in their favour and have also applied for additional Equity Shares, provided there is an under-subscribed portion after making full Allotment in (a), (b) and (c) above. The Allotment of such additional Equity Shares will be made on a proportionate basis at the sole discretion of our Board or any committee of our Board but in consultation with the Designated Stock Exchange, as a part of the Issue and not as a preferential allotment.

(e) Allotment to any other person as our Board may in its absolute discretion deem fit provided there is surplus available after making Allotment under (a), (b), (c), and (d) above, and the decision of the Board in this regard shall be final and binding.

In the event of oversubscription, Allotment will be made within the overall size of the Issue.

Our foreign shareholding is restricted to 40% of our paid up capital, with the aggregate shareholding of NRIs not exceeding 24% and individual shareholding not exceeding 5%, of our paid up capital, pursuant to Board’s resolution dated April 28, 2012 and resolution passed by our shareholdersthrough through postal ballot declared on June 11, 2012.

In order to ensure that our foreign shareholding adheres to the abovementioned limits, Allotment to Non- Resident Investors (excluding Eligible Employees), up to their Rights Entitlement and for any additional Equity Shares shall be subject to such limits.

Our Bank expects to complete the Allotment within a period of 15 days from the Issue Closing Date in accordance with the Listing Agreement with the Stock Exchanges. Our Bank shall retain no oversubscription.

For Eligible Employees

Eligible Employee must apply for a minimum of [●] Equity Shares and in multiples of [●] Equity Shares, subject to the total consideration for Equity Shares applied for by Eligible Employee not exceeding ` 200,000. In case of over-subscription in the Employee Reservation Portion, Allotment will be on a proportionate basis.

Applications received from the Eligible Employees shall be grouped together to determine the total demand under the Employee Reservation Portion. If the aggregate demand in this category is less than or equal to [●] Equity Shares, full allocation shall be made to the Eligible Employees to the extent of their demand. If the aggregate demand in this category is greater than [●] Equity Shares, the allocation shall be made on a proportionate basis up to a minimum of [●] Equity Shares and in multiple of [●] Equity Share thereafter.

ONLY ELIGIBLE EMPLOYEES ARE ELIGIBLE TO APPLY UNDER THE EMPLOYEE RESERVATION PORTION.

However, Eligible Equity Shareholders who are Eligible Employees may also apply under Employee Reservation Portion. In such a case, application under the Employee Reservation Portion and application under the Net Issue shall not be considered as multiple applications.

In the event of under-subscription in the Employee Reservation Portion, the unsubscribed portion would be added to the Net Issue. However, in case there is under-subscription in the Net Issue, the unsubscribed portion would not be met with spill over from over-subscription under the Employee Reservation Portion.

General instructions for Investors

(a) Please read the instructions printed on the enclosed Application Form carefully.

(b) Application should be made on the printed Application Form, provided by our Bank or a plain paper Application (for Eligible Equity Shareholders only) and should be completed in all respects. ASBA Investors may indicate as to whether they desire to avail of the ASBA option. The Application Form found incomplete with regard to any of the particulars required to be given therein, and/ or which are not

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completed in conformity with the terms of this Draft Letter of Offer are liable to be rejected and the money paid, if any, in respect thereof will be refunded without interest and after deduction of bank commission and other charges, if any. The Application Form must be filled in English and the names of all the applicants, details of occupation, address, father’s/ husband’s name must be filled in block letters.

(c) The Application Form together with cheque/ demand draft (net of bank and postal charges) should be sent to the Bankers to the Issue/ Collecting Bank or to the Registrar to the Issue, and not to our Bank and the Lead Manager to the Issue. Resident applicants residing at places other than cities where the branches of the Bankers to the Issue have been authorised by our Bank for collecting Applications, will have to make payment by Account Payee Cheque drawn on a local bank at Hyderabad or demand draft/ pay order (net of bank and postal charges) payable at Hyderabad, crossed account payee only and marked “[●]” and send their Application Forms to the Registrar to the Issue by registered post. If any portion of the Application Form is/ are detached or separated, such Application is liable to be rejected. Applications where separate cheques/demand drafts are not attached for amounts to be paid for Equity Shares are liable to be rejected.

(d) Each of the applicants should mention his/ her PAN allotted under the IT Act along with the Application. Except in case of Applications on behalf of the Central or State Government and the officials appointed by the courts and by Investors residing in the State of Sikkim, Application Forms without the PAN details will be considered incomplete and are liable to be rejected.

(e) Investors are advised to provide information as to their savings/ current account number, 9 digit MICR number and the name of the Bank, branch with whom such account is held in the Application Forms to enable the Registrar to the Issue to print the said details in the refund orders, if any, after the names of the payees.

(f) All payment should be made by cheque/ demand draft only. Application through the ASBA process as mentioned above is acceptable. Cash payment is not acceptable. In case payment is effected in contravention of this, the Application may be deemed invalid and the Application Money will be refunded and no interest will be paid thereon.

(g) Signatures should be either in English or Hindi or in any other language specified in the Eighth Schedule to the Constitution of India. Signatures other than in English or Hindi and thumb impression must be attested by a Notary Public or a Special Executive Magistrate under his/ her official seal. The Investors must sign the Application Forms or the plain paper (only for Eligible Equity Shareholders) Application as per the specimen signature recorded with our Bank and the Depositories.

(h) In case of an Application under power of attorney or by a body corporate or by a society, a certified true copy of the relevant power of attorney or relevant resolution or authority to the signatory to make the relevant investment under the Issue and to sign the Application and a copy of the memorandum and articles of association and/ or bye-laws of such body corporate or society must be lodged with the Registrar to the Issue giving reference of the serial number of the Application Forms. In case these papers are sent to any other entity besides the Registrar to the Issue or are sent after the Issue Closing Date, then the Application is liable to be rejected.

(i) In case of joint holders, all joint holders must sign the relevant part of the Application Forms in the same order and as per the specimen signature(s) recorded with our Bank/Depositories. Further, in case of joint applicants who are Renouncees, the number of applicants should not exceed three. In case of joint applicants, reference, if any, will be made in the first applicant’s name and all communication will be addressed to the first applicant.

(j) Application(s) received from Non Residents/ NRIs, or persons of Indian origin residing abroad for allotment of Equity Shares shall, inter alia, be subject to conditions, as may be imposed from time to time by the RBI under FEMA in the matter of refund of Application Money, allotment of Equity Shares, subsequent issue and allotment of Equity Shares, interest, export of share certificates, etc. In case a Non Resident Eligible Equity Shareholder has specific approval from the RBI, in connection with his shareholding, he should enclose a copy of such approval with the CAF.

(k) All communication in connection with Application, including any change in address of the Investor should be addressed to the Registrar to the Issue prior to the Allotment Date quoting the name of the first/ sole applicant, folio numbers, if applicable, and Application Forms number. Please note that any intimation for

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change of address of Investor, after the Allotment Date, should be sent to the share registrar of our Bank, Registrar in the case of Equity Shares held in physical form and to the respective DP, in case of Equity Shares held in dematerialised form.

(l) Split Application Forms cannot be re-split.

(m) Only Eligible Equity Shareholders and not Renouncee(s) shall be entitled to obtain split forms.

(n) Applicants must write their Application Forms number at the back of the cheque/ demand draft.

(o) Only one mode of payment per Application should be used. The payment must be either by cheque/ demand draft (net of bank and postal charges) drawn on any of the banks, including a co-operative bank, which is situated at and is a member or a sub member of the bankers clearing house located at the centre indicated on the reverse of the Application Forms where the Application is to be submitted.

(p) A separate cheque/ demand draft must accompany each Application Form. Outstation cheques/ demand drafts or post-dated cheques and postal/ money orders will not be accepted and Applications accompanied by such cheques/ demand drafts/ money orders or postal orders will be rejected. The Registrar to the Issue will not accept payment against Application if made in cash.

(q) No receipt will be issued for Application Money received. The Bankers to the Issue/ Collecting Bank/ Registrar to the Issue will acknowledge receipt of the Application Form by stamping and returning the acknowledgment slip at the bottom of the Application Form.

(r) Our Bank shall not allot and/ or register any Equity Shares in favour of any person situated or subject to jurisdiction where the offering in terms of this Draft Letter of Offer could be illegal or requires compliance with securities laws.

(s) Investors are requested to ensure that the number of Equity Shares applied for by them do not exceed the prescribed limits under applicable laws.

Grounds for Technical Rejections for non-ASBA Investors

Investors are advised to note that Applications are liable to be rejected on technical grounds, including the following:

• Amount paid does not tally with the Application Money; • Bank account details (for refund) are not given or not available with the DP or the Registrar to the Issue, as the case may be; • Age of the first applicant not given; • Except in case of Applications on behalf of the Central or State Government and the officials appointed by the courts and by Investors residing in the State of Sikkim, PAN details not given; • PAN in Application Forms not matching the PAN in the DP ID; • In case of Application Forms under power of attorney or by limited companies, corporate, trust, etc., relevant documents are not submitted; • If the signature of the Eligible Equity Shareholder does not match with the one given on the CAF and for Renouncees and Eligible Employees if the signature does not match with the records available with their depositories; • If the applicant desires to have Equity Shares in electronic form, but the Application Forms does not have the applicant’s depository account details; • The Application Forms are not submitted by the applicants within the time prescribed as per the Application Forms and the Letter of Offer; • Applications where our Bank believes that the Application is incomplete or acceptance of such Application may infringe applicable legal or regulatory requirements; • Application Forms accompanied by outstation cheques/ demand drafts or post-dated cheques and postal/ money orders; • Application Forms not duly signed by the sole/ joint applicants; • Application Forms by OCBs unless accompanied by specific approval from the RBI permitting the OCBs to invest in the Issue;

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• Application Forms accompanied by stockinvest; • In case no corresponding record is available with the Depositories that matches three parameters, namely, names of the applicants (including the order of names of joint holders), the DP ID and the beneficiary’s identity; • CAFs by ineligible Non-residents (including on account of restriction or prohibition under applicable local laws) and where last available address in India has not been provided; • Multiple Applications, including where an applicant submits a CAF and a plain paper Application (in case of Eligible Equity Shareholders); • Duplicate Applications; and • Applications by Eligible Employees, other than under the Employee Reservation Portion. However, Eligible Equity Shareholders who are Eligible Employees may also apply under Employee Reservation Portion. In such a case, application under the Employee Reservation Portion and application under the Net Issue shall not be considered as multiple applications; • Applications by Eligible Employees, other than though the EAF; • Applications by Eligible Employees where the total consideration for Equity Shares applied for exceeds ` 200,000; • In case the GIR number is submitted instead of the PAN; and • Applications by Renouncee(s) or Eligible Employees who are persons not competent to contract under the Indian Contract Act, 1872, including minors.

Please read the Letter of Offer and the instructions contained therein and in the Application Form carefully before filling in the Application Form. The instructions contained in the Application Form are an integral part of the Letter of Offer and must be carefully followed. The Application Form is liable to be rejected for any non- compliance of the provisions contained in the Letter of Offer or the Application Form.

Do’s for non-ASBA Investors:

(a) Check if you are eligible to apply i.e. you are an Eligible Equity Shareholder on the Record Date, a Renouncee or an Eligible Employee; (b) Read all the instructions carefully and ensure that the cheque/ draft option is selected in the Application Form and necessary details are filled in; (c) In the event you hold Equity Shares in dematerialised form or being an Eligible Employee, wish to obtain the Equity Shares in dematerialised form, ensure that the details about your Depository Participant and beneficiary account are correct and the beneficiary account is activated as the Equity Shares will be allotted in the dematerialized form only; (d) In case of Eligible Equity Shareholders, ensure that your Indian address is available to our Bank and the Registrar to the Issue, in case you hold Equity Shares in physical form or the depository participant, in case you hold Equity Shares in dematerialised form; (e) Ensure that the value of the cheque/ draft submitted is correct i.e., equal to the (number of Equity Shares applied for) X ([●]% of Issue Price of Equity Shares, as the case may be) before submission of the Application Form; (f) Ensure that you receive an acknowledgement from the collection centres of the collection bank for your submission of the Application Form in physical form; (g) Ensure that you mention your PAN in the Application Form, except for application on behalf of the Central and State Governments, residents of the state of Sikkim and officials appointed by the courts; (h) Ensure that the name(s) given in the Application Form is exactly the same as the name(s) in which the beneficiary account is held with the Depository Participant. In case the Application Form is submitted in joint names, ensure that the beneficiary account is also held in same joint names and such names are in the same sequence in which they appear in the Application Form; (i) Ensure that the demographic details are updated, true and correct, in all respects.

Don’ts for non-ASBA Investors:

(a) Do not apply on duplicate Application Form after you have submitted a Application Form to a collection centre of the Bankers to the Issue; (b) Do not pay the Application Money in cash, by money order or by postal order; (c) Do not submit the GIR number instead of the PAN as the Application is liable to be rejected on this ground; (d) Do not submit Bid accompanied with Stock invest; and (e) Do not apply if you are not eligible to participate in the Issue under the securities laws applicable to your jurisdiction.

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Mode of payment – Non ASBA

Mode of payment for Resident Applicants

• Applicants who are resident in centers with the bank collection centres shall draw cheques/ demand drafts accompanying the Application Form, crossed account payee only and marked “[●]”. • Resident applicants residing at places other than places where the bank collection centres have been opened by our Bank for collecting Applications, are requested to send their Applications together with demand draft/ pay order for the Application Money (net of bank and postal charges) payable at Hyderabad, crossed account payee only and marked “[●]” directly to the Registrar to the Issue by registered post so as to reach them on or before the Issue Closing Date. Our Bank or the Registrar to the Issue will not be responsible for postal delays or loss of Applications in transit, if any. • Eligible Equity Shareholders who are applying on plain paper, are requested to send their applications on plain paper together with a demand draft of full amount after deducting bank and postal charges favouring “[●]” and marked account payee only payable at Hyderabad directly to the Registrar to the Issue by registered post so as to reach them on or before the Issue Closing Date.

Mode of payment for Non Resident Eligible Equity Shareholders

As regards the Application by Non Resident Eligible Equity Shareholders, the following further conditions shall apply:

Payment by NRs must be made by demand draft (net of bank and postal charges) payable at Hyderabad/ cheque payable drawn on a bank account maintained at Hyderabad or funds remitted from abroad in any of the following ways:

Application with repatriation benefits

• By Indian Rupee drafts purchased from abroad and payable at Hyderabad or funds remitted from abroad (submitted along with Foreign Inward Remittance Certificate); or • By cheque/ draft on a Non Resident External Account (NRE) or FCNR Account maintained in Hyderabad; or • By Rupee draft purchased by debit to NRE/ FCNR Account maintained elsewhere in India and payable in Hyderabad; or FIIs registered with SEBI must remit funds from special Non-Resident Rupee deposit account. • Non Resident investors applying with repatriation benefits should draw cheques/ demand drafts marked “[●]” payable at Hyderabad and must be crossed ‘account payee only’ for the full Application Money. • In the case of NRIs who remit their application money from funds held in FCNR/NRE Accounts, refunds and other disbursements, if any shall be credited to such account, details of which should be furnished in the appropriate columns in the CAF. In the case of NRIs who remit their application money through Indian Rupee Drafts from abroad, refunds and other disbursements, if any will be made in U.S Dollars at the rate of exchange prevailing at such time subject to the permission of RBI. Our Bank will not be liable for any loss on account of exchange rate fluctuation for converting the Rupee amount into U.S. Dollar or for collection charges charged by the applicant’s Bankers.

Application without repatriation benefits

• As far as Non Residents holding shares on non-repatriation basis is concerned, in addition to the modes specified above, payment may also be made by way of cheque drawn on Non Resident (Ordinary) Account maintained in Hyderabad or Rupee draft purchased out of NRO Account maintained elsewhere in India but payable at Hyderabad. In such cases, the Allotment of Equity Shares will be on non-repatriation basis. • All cheques/ demand drafts submitted by non-residents applying on a non-repatriation basis should be marked “[●]” payable at Hyderabad and must be crossed ‘account payee only’ for the full Application Money, net of bank and postal charges. The CAF duly completed together with the amount payable on Application must be deposited with the bank collection centre indicated on the reverse of the CAF before the close of banking hours on or before the Issue Closing Date. • Applicants may note that where payment is made by demand drafts purchased from NRO account, an Account Debit Certificate from the bank issuing the draft confirming that the draft has been issued by

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debiting the NRO account should be enclosed with the CAF. Otherwise the Application shall be considered incomplete and is liable to be rejected. • New demat account shall be opened for holders who have had a change in status from resident Indian to NRI. • For Non Resident Eligible Equity Shareholders applying on a plain paper, the applications are to be directly sent to the Registrar to the Issue by registered post along with demand drafts (net of bank and postal charges) marked “[●]” payable at Hyderabad so as to reach them on or before the Issue Closing Date.

Note:

• In case where repatriation benefit is available, interest, dividend, sales proceeds derived from the investment in Equity Shares can be remitted outside India, subject to tax, as applicable according to IT Act. • In case Equity Shares are allotted on non-repatriation basis, the dividend and sale proceeds of the Equity Shares cannot be remitted outside India. • The CAF duly completed together with the amount payable on Application must be deposited with the Collecting Bank indicated on the reverse of the CAF before the close of banking hours on or before the Issue Closing Date. A separate cheque or bank draft must accompany each CAF. • Non Residents applying through CAF but not residing at places where the collection centre is located, shall send the CAF to the Registrar to the Issue by registered post along with demand drafts of an amount (net of bank and postal charges) marked “[●]” payable at Hyderabad and crossed ‘account payee only’ for the amount payable so as to reach them on or before the Issue Closing Date.

In case of an Application received from Non Residents, Allotment, refunds and other distribution, if any, will be made in accordance with the guidelines/ rules prescribed by RBI under the FEMA, in respect of matters including refund of Application Money, Allotment, subsequent issue and allotment of Equity Shares, share certificates.

Renouncees who are NRIs/FIIs/Non-Residents should submit their respective applications either by hand delivery or by registered post with acknowledgement due to the Registrar to the Issue only along with the cheque/demand draft (net of bank and postal charges) marked “[●]” payable at Hyderabad so that the same are received on or before the Issue Closing Date.

Additional Information for ASBA Investors

Eligible Equity Shareholder who is a QIB or a Non Institutional Investor to invest in the Issue must mandatorily invest through the ASBA process.

This section is for the information of the ASBA Investors proposing to subscribe to the Issue through the ASBA process. Our Bank and the Lead Manager are not liable for any amendments or modifications or changes in applicable laws or regulations, which may occur after the date of the Letter of Offer. Investors who are eligible to apply under the ASBA process are advised to make their independent investigations and to ensure that the Application Form, as the case may be, is correctly completed, specifying the number of the bank account maintained with the Self Certified Syndicate Bank (“SCSB”) in which the Application Money will be blocked by the SCSB.

The Lead Manager, our Bank, its directors, affiliates, associates and their respective directors and officers and the Registrar to the Issue shall not take any responsibility for acts, mistakes, errors, omissions and commissions etc. in relation to Applications accepted by SCSBs, Applications uploaded by SCSBs, Applications accepted but not uploaded by SCSBs or Applications accepted and uploaded without blocking funds in the ASBA Accounts. It shall be presumed that for Applications uploaded by SCSBs, the amount payable on Application has been blocked in the relevant ASBA Account.

The list of banks which have been notified by SEBI to act as SCSBs for the ASBA process is provided on http://www.sebi.gov.in. For details on Designated Branches of SCSBs collecting the Application Form, please refer the above mentioned SEBI link.

Investors who can apply under the ASBA process

All QIBs and Non – Institutional Investors must and all Retail Individual Investors and Eligible Employees may apply through the ASBA process.

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To qualify as ASBA Applicants, Eligible Equity Shareholders:

• are required to hold Equity Shares in dematerialized form as on the Record Date and apply for (i) their Rights Entitlement or (ii) their Rights Entitlement and Equity Shares in addition to their Rights Entitlement in dematerialized form; • should not have renounced their Right Entitlement in full or in part; • should not have split the CAF; and • should not be Renouncees.

CAF

The Registrar to the Issue will dispatch the CAF to all Eligible Equity Shareholders as per their Rights Entitlement on the Record Date.

Those Eligible Equity Shareholders who must apply or who wish to apply through the ASBA payment mechanism will have to select for this mechanism in Part A of the CAF and provide necessary details.

Eligible Equity Shareholders desiring to use the ASBA process are required to submit their Applications by selecting the ASBA option in Part A of the CAF. Application in electronic mode will only be available with such SCSBs who provide such facility. The Investors shall submit the CAF to the SCSB for authorising such SCSB to block an amount equivalent to the Application Money in the said bank account maintained with the same SCSB.

Please note, no more than five ASBA Applications (including CAF and plain paper) can be submitted per bank account in the Issue. Investors applying under the ASBA process are also advised to ensure that the CAF is correctly filled up, stating therein the bank account number maintained with the SCSB in which an amount equivalent to the amount payable on Application as stated in the CAF will be blocked by the SCSB.

EAF

The Registrar to the Issue will dispatch the EAF to all Eligible Employees on the Record Date.

Eligible Employees desiring to use the ASBA process are required to submit their Applications by selecting the ASBA option in the EAF. Application in electronic mode will only be available with such SCSBs who provide such facility. The Eligible Employees shall submit the EAF to the SCSB for authorising such SCSB to block an amount equivalent to the Application Money in the said bank account maintained with the same SCSB.

Please note, no more than five ASBA Applications can be submitted per bank account in the Issue. Eligible Employees applying under the ASBA process are also advised to ensure that the EAF is correctly filled up, stating therein the bank account number maintained with the SCSB in which an amount equivalent to the amount payable on Application as stated in the EAF will be blocked by the SCSB.

Mode of payment - ASBA

The Investors applying under the ASBA process authorize the SCSB to block the entire Application Money in a bank account maintained with SCSB at the time of the submission of the Application Form. The SCSB may reject the Application at the time of acceptance of Application Form if the bank account with the SCSB, details of which have been provided by the Investors in the Application Form, does not have sufficient funds equivalent to the Application Money mentioned in the Application Form. Subsequent to the acceptance of the Application by the SCSB, our Bank would have a right to reject the Application only on technical grounds.

After verifying that sufficient funds are available in the bank account details of which are provided in the Application Form, the SCSB shall block an amount equivalent to the Application Money mentioned in the Application Form until it receives instructions from the Registrar to the Issue. Upon receipt of intimation from the Registrar to the Issue, the SCSBs shall transfer such amount as per the Registrar to the Issue’s instruction from the bank account maintained with the SCSB, as mentioned by in the Application Form. This amount will be transferred in terms of the SEBI Regulations, into a separate bank account maintained by our Bank as per the provisions of section 73(3) of the Companies Act. The balance amount remaining after the finalisation of the

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basis of Allotment shall be unblocked by the SCSBs on the basis of the instructions issued in this regard by the Registrar to the Issue and the Lead Manager to the respective SCSB.

Investors other than Retail Individual Investors having bank account with SCSBs that are providing ASBA in cities/ centers where Investors other than Retail Individual Investors are located, are mandatorily required to make use of ASBA facility. Otherwise, applications of such non-retail investors are liable for rejection.

Options available to the Eligible Equity Shareholders applying under the ASBA process

The summary of options available to the Eligible Equity Shareholders is presented below. You may exercise any of the following options with regard to the Equity Shares, using the respective CAFs received from Registrar to the Issue:

Option Available Action Required Accept whole or part of your Rights Entitlement without Fill in and sign Part A of the CAF (All joint holders renouncing the balance. must sign) Accept your Rights Entitlement in full and apply for Fill in and sign Part A of the CAF including Block III additional Equity Shares relating to the acceptance of entitlement and Block IV relating to additional Equity Shares (All joint holders must sign)

The Eligible Equity Shareholders applying under the ASBA process will need to select the ASBA process option in the CAF and provide required details. However, in cases where this option is not selected, but the CAF is tendered to the SCSBs with the relevant details required under the ASBA process option and the SCSBs block the requisite amount, then that CAF would be treated as if the Eligible Equity Shareholder has selected to apply through the ASBA process option.

Options available to the Eligible Employees applying under the ASBA process

The Eligible Employees applying under the ASBA process will need to select the ASBA process option in the EAF and provide required details. However, in cases where this option is not selected, but the EAF is tendered to the SCSBs with the relevant details required under the ASBA process option and the SCSBs block the requisite amount, then that EAF would be treated as if the Eligible Employee has selected to apply through the ASBA process option.

Renunciation under the ASBA process

Renouncees cannot participate in the ASBA process.

Option to receive Equity Shares in Dematerialized Form

INVESTORS UNDER THE ASBA PROCESS MAY PLEASE NOTE THAT THE EQUITY SHARES OF OUR BANK UNDER THE ASBA PROCESS CAN BE ALLOTTED ONLY IN DEMATERIALIZED FORM AND TO THE SAME DEPOSITORY ACCOUNT IN WHICH THE EQUITY SHARES ARE HELD BY SUCH ASBA APPLICANT ON THE RECORD DATE.

Issuance of Intimation Letters

Upon approval of the Basis of Allotment by the Designated Stock Exchange, the Registrar to the Issue shall send the controlling branches, a list of the ASBA Investors who have been allocated Equity Shares in the Issue, along with:

• The number of Equity Shares to be allotted against each successful ASBA; • The amount to be transferred from the ASBA Account to the separate account opened by the Bank for the Issue, for each successful ASBA Application; • The date by which the funds referred to in above paragraph, shall be transferred to separate account opened by the Bank for Issue; and • The details of rejected ASBAs Applications, if any, along with reasons for rejection to enable SCSBs to unblock the respective ASBA Accounts.

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General instructions for Investors applying under the ASBA process

• Please read the instructions printed on the Application Form carefully. • Application should be made on the printed Application Form or plain paper (in case of Eligible Equity Shareholders) and should be complete in all respects. The Application Form found incomplete with regard to any of the particulars required to be given therein, and/ or which are not completed in conformity with the terms of this Draft Letter of Offer, the Letter of Offer, Abridged Letter of Offer are liable to be rejected. The Application Form must be filled in English. • The Application Form in the ASBA process should be submitted at a Designated Branch of the SCSB and whose bank account details are provided in the Application Form and not to the Bankers to the Issue (assuming that such Banker to the Issue is not a SCSB), to our Bank or Registrar to the Issue or Lead Manager to the Issue. • All applicants, and in the case of Application in joint names, each of the joint applicants, should mention his/ her PAN number allotted under the Income-Tax Act, 1961, irrespective of the amount of the Application. Except for Applications on behalf of the Central or State Government, the residents of Sikkim and the officials appointed by the courts, Application Form without PAN will be considered incomplete and are liable to be rejected. With effect from August 16, 2010, the demat accounts for Investors for which PAN details have not been verified shall be “suspended for credit” and no allotment and credit of Equity Shares shall be made into the accounts of such Investors. • All payments will be made by blocking the amount in the bank account maintained with the SCSB. Cash payment or payment by cheque/ demand draft/ pay order is not acceptable. In case payment is affected in contravention of this, the Application may be deemed invalid and the Application Money will be refunded and no interest will be paid thereon. • Signatures should be either in English or Hindi or in any other language specified in the Eighth Schedule to the Constitution of India. Signatures other than in English or Hindi and thumb impression must be attested by a Notary Public or a Special Executive Magistrate under his/ her official seal. The Investors must sign the Application Form as per the specimen signature recorded with our Bank and/ or Depositories. • In case of joint holders, all joint holders must sign the relevant part of the Application Form in the same order and as per the specimen signature(s) recorded with the Depository/ our Bank. In case of joint applicants, reference, if any, will be made in the first applicant’s name and all communication will be addressed to the first applicant. • All communication in connection with Applications, including any change in address of the Investor should be addressed to the Registrar to the Issue prior to the date of Allotment in the Issue quoting the name of the first/ sole applicant, folio numbers and Application Form number. • Only persons outside restricted jurisdictions and who are eligible to subscribe for Rights Entitlement and Equity Shares under applicable securities laws are eligible to participate. • Only the Eligible Equity Shareholders holding shares in demat and Eligible Employees who have a valid demat account are eligible to participate through ASBA process. • Eligible Equity Shareholders who have renounced their entitlement in part/ full are not entitled to apply using ASBA process. • Please note that pursuant to the applicability of the directions issued by SEBI vide its circular bearing number CIR/CFD/DIL/1/2011 dated April 29, 2011, all applicants who are QIBs, Non Institutional Investors shall mandatorily make use of ASBA facility. All QIBs and Non-Institutional Investors, complying with the eligibility conditions of SEBI circular dated December 30, 2009, must mandatorily invest through the ASBA process. • Non-retail investors having bank account with SCSBs that are providing ASBA in cities/ centers where non-retail investors are located, are mandatorily required to make use of ASBA facility. Otherwise, Applications of such non-retail investors are liable for rejection.

Do’s:

• Ensure that the ASBA process option is selected in the Application Form and necessary details are filled in. In case of non-receipt of the CAF, the Application can be made on plain paper by Eligible Equity Shareholders with all necessary details as required under ‘Terms of Issue - Application on Plain Paper’ on page 110. Please note that Eligible Employees cannot make an application to subscribe to the Issue on plain paper. Eligible Employees may apply in the issue only by submitting the EAF. Any application made other than through the EAF by an Eligible Employee shall be liable to be rejected. • Ensure that the details about the Depository Participant and beneficiary account are correct and the beneficiary account is activated as Equity Shares will be allotted in the dematerialized form only.

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• Ensure that the Application Form are submitted with the Designated Branch of the SCSBs and details of the correct bank account have been provided in the Application Form. • Ensure that there are sufficient funds (equal to Application Money {number of Equity Shares as the case may be applied for} X {[●]% of Issue Price, as the case may be}) available in the bank account maintained with the SCSB mentioned in the Application Form before submitting the Application Form to the respective Designated Branch of the SCSB. • Ensure that you have authorised the SCSB for blocking funds equivalent to the Application Money mentioned in the Application Form, in the bank account maintained with the respective SCSB, of which details are provided in the Application Form and have signed the same. • Ensure that you receive an acknowledgement from the SCSB for your submission of the Application Form in physical form. • Except for Application Form submitted on behalf of the Central or State Government, the residents of Sikkim and the officials appointed by the courts, each applicant should mention their PAN allotted under the I. T. Act. • Ensure that the name(s) given in the Application Form is exactly the same as the name(s) in which the beneficiary account is held with the Depository Participant. In case the Application Form is submitted in joint names, ensure that the beneficiary account is also held in same joint names and such names are in the same sequence in which they appear in the Application Form. • Ensure that the Demographic Details are updated, true and correct, in all respects. • Ensure that the account holder in whose bank account the funds are to be blocked has signed authorizing such funds to be blocked. • Apply under the ASBA process only if you comply with the definition of an ASBA investor.

Don’ts:

• Do not apply if you are not eligible to participate in the Issue under the securities laws applicable to your jurisdiction. • Do not apply on duplicate Application Form after you have submitted a Application Form to a Designated Branch of the SCSB. • Do not pay the Application Money in cash, by money order or by postal order. • Do not send your physical Application Forms to the Lead Manager/ Registrar to the Issue/ Bankers to the Issue (assuming that such Bankers to the Issue is not a SCSB)/ to a branch of the SCSB which is not a Designated Branch of the SCSB/ Bank; instead submit the same to a Designated Branch of the SCSB only. • Do not submit the GIR number instead of the PAN as the Application is liable to be rejected on this ground. • Do not apply if the ASBA account has been used for five applicants. • Do not instruct respective banks to release the funds blocked under the ASBA process.

Grounds for Technical Rejection under ASBA process

In addition to the grounds listed under “Grounds for Technical Rejection for non-ASBA Investors” on page 114, Applications under the ABSA Process are liable to be rejected on the following grounds:

• Application on a Split Application Form. • Application for allotment of Rights Entitlement or additional shares which are in physical form. • DP ID and Client ID mentioned in Application Form not matching with the DP ID and Client ID records available with the Registrar to the Issue. • Sending the Application Form to the Lead Manager/ Registrar to the Issue/ Bankers to the Issue (assuming that such Bankers to the Issue is not a SCSB)/ to a branch of a SCSB which is not a Designated Branch of the SCSB/ Bank. • Insufficient funds are available with the SCSB for blocking the amount equivalent to the Application Money. • Funds in the bank account with the SCSB whose details are mentioned in the Application Form having been frozen pursuant to regulatory orders. • A Renouncee applying under ASBA. • Account holder not signing the Application Form or declaration mentioned therein. • Application Forms that do not include the certification set out in the Application Form to the effect that the subscriber does not have a registered address (and is not otherwise located) in restricted jurisdictions and is authorized to acquire the rights and the securities in compliance with all applicable laws and regulations. • Application Form which have evidence of being executed in/ dispatched from restricted jurisdiction.

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• An Investor, who is not complying with any or all of the conditions for being an ASBA Investor, applies under the ASBA process. • Non-retail investors having bank account with SCSBs that are providing ASBA in cities/ centers where non-retail investors are located, are mandatorily required to make use of ASBA facility. Otherwise, Applications of such non-retail investors are liable for rejection. • Applications where our Bank believes that the Application is incomplete or acceptance of such Application may infringe applicable legal or regulatory requirements. • The total consideration for Equity Shares applied for by Eligible Employee exceeding ` 200,000. • Submitting the GIR instead of the PAN. • Please note that each Eligible Equity Shareholder who is a QIB or Non-Institutional Investor to invest in the Issue must mandatorily invest through the ASBA process.

Depository account and bank details for Investors applying under the ASBA process

IT IS MANDATORY FOR ALL THE INVESTORS APPLYING UNDER THE ASBA PROCESS TO RECEIVE THEIR EQUITY SHARES IN DEMATERIALISED FORM. ALL INVESTORS APPLYING UNDER THE ASBA PROCESS SHOULD MENTION THEIR DEPOSITORY PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM. INVESTORS APPLYING UNDER THE ASBA PROCESS MUST ENSURE THAT THE NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE APPLICATION FORM IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT THE DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN THE SAME SEQUENCE IN WHICH THEY APPEAR IN THE APPLICATION FORM.

Investors applying under the ASBA process should note that on the basis of name of these Investors, Depository Participant’s name and identification number and beneficiary account number provided by them in the Application Form, the Registrar to the Issue will obtain from the Depository demographic details of these Investors such as address, bank account details and occupation (“Demographic Details”). Hence, Investors applying under the ASBA process should carefully fill in their Depository Account details in the Application Form.

These Demographic Details would be used for all correspondence with such Investors including mailing of the letters intimating unblocking of bank account of the respective Investors. The Demographic Details given by the Investors in the Application Forms would not be used for any other purposes by the Registrar to the Issue. Hence, Investors are advised to update their Demographic Details as provided to their Depository Participants.

By signing the Application Forms, the Investors applying under the ASBA process would be deemed to have authorised the Depositories to provide, upon request, to the Registrar to the Issue, the required Demographic Details as available on its records.

Letters intimating Allotment and unblocking the funds would be mailed at the address of the Investors applying under the ASBA process as per the Demographic Details received from the Depositories. The Registrar to the Issue will give instructions to the SCSBs for unblocking funds in the ASBA Account to the extent Equity Shares are not allotted to such shareholders. Investors applying under the ASBA process may note that delivery of letters intimating unblocking of the funds may get delayed if the same once sent to the address obtained from the Depositories are returned undelivered. In such an event, the address and other details given by the Investors in the Application Form would be used only to ensure dispatch of letters intimating unblocking of the funds.

Note that any such delay shall be at the sole risk of the Investors applying under the ASBA process and none of the Bank, the SCSBs or the Lead Manager shall be liable to compensate the Investors applying under the ASBA process for any losses caused due to any such delay or liable to pay any interest for such delay.

In case no corresponding record is available with the Depositories that matches three parameters, (a) names of the Investors (including the order of names of joint holders), (b) the DP ID and (c) the beneficiary account number, then such Applications are liable to be rejected.

Underwriting

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This Issue is not underwritten.

Allotment/ Refund

Our Bank will issue and dispatch letters of Allotment/ Allotment advice/ share certificates/ demat credit and/ or letters of regret along with refund order or credit the allotted Equity Shares to the respective beneficiary accounts, if any, within a period of 15 days from the Issue Closing Date. If such money is not repaid within the stipulated time period, our Bank shall pay that money with interest at the rate of 15% per annum for the delayed period at rates prescribed under sub-sections (2) and (2A) of Section 73 of the Companies Act.

The payment of refunds is mandatory for Investors having a bank account at any centre where NECS facility has been made available by the RBI (subject to availability of all information for crediting the refund through NECS), except where the Investor, being eligible, opts to receive refund through NEFT, direct credit or RTGS provided that the MICR details are recorded with the Depositories or our Bank.

In case of those Investors who have opted to receive Equity Shares in dematerialized form using electronic credit under the depository system, and advise regarding their credit of the Equity Shares shall be given separately. Investors to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary post intimating them about the mode of credit of refund within 15 days of the Issue Closing Date.

In case of those Investors who have opted to receive Equity Shares in physical form and our Bank issues letters of allotment or allotment advice, the corresponding share certificates will be kept ready within three months from the Allotment Date thereof or such extended time as may be approved by the Company Law Board under Section 113 of the Companies Act or other applicable provisions, if any. Allottees are requested to preserve such letters of allotment/ allotment advice, which would be exchanged later for the share certificates. For more information please refer to the section titled ‘Terms of the Issue - Letters of Allotment/ Allotment Advice/ Share Certificates/ Demat Credit’ on page 124.

The letters of allotment/ allotment advice/ refund order would be sent by registered post/ speed post to the sole/ first applicant's registered address. Such refund orders would be payable at par at all places where the Applications were originally accepted. The same would be marked ‘Account Payee only’ and would be drawn in favour of the sole/ first applicant. Adequate funds would be made available to the Registrar to the Issue for this purpose.

Payment of Refund

Mode of making refunds

The payment of refund, if any, would be done through any of the following modes:

1. NECS – Payment of refund would be done through NECS for Investors having an account at any of the 68 centres where such facility has been made available. This mode of payment of refunds would be subject to availability of complete bank account details including the MICR code as appearing on a cheque leaf, from the Depositories/ the records of the Registrar to the Issue. The payment of refunds is mandatory for Investors having a bank account at any centre where NECS facility has been made available by the RBI (subject to availability of all information for crediting the refund through NECS), except where the Investor, being eligible, opts to receive refund through NEFT, direct credit or RTGS.

2. National Electronic Fund Transfer (“NEFT”) – Payment of refund shall be undertaken through NEFT wherever the Investor’s bank has been assigned the Indian Financial System Code (IFSC), which can be linked to a Magnetic Ink Character Recognition (MICR), if any, available to that particular bank branch. IFSC Code will be obtained from the website of RBI as on a date immediately prior to the date of payment of refund, duly mapped with MICR numbers. Wherever the Investors have registered their nine digit MICR number and their bank account number while opening and operating the demat account, the same will be duly mapped with the IFSC Code of that particular bank branch and the payment of refund will be made to the Investors through this method.

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3. Direct Credit – Investors having bank accounts with the Refund Banker(s), in this case being, [●] shall be eligible to receive refunds through direct credit. Charges, if any, levied by the Refund Bank(s) for the same would be borne by our Bank.

4. RTGS – Investors whose refund amount exceeds ` 200,000, have the option to receive refund through RTGS. Such eligible Investors who indicate their preference to receive refund through RTGS are required to provide the IFSC code in the CAF. In the event the same is not provided, refund shall be made through NECS. Charges, if any, levied by the Refund Bank(s) for the same would be borne by our Bank. Charges, if any, levied by the Investors’ bank receiving the credit would be borne by the Investor.

5. For all other Investors, including those who have not updated their bank particulars with the MICR code, the refund orders will be dispatched through speed post/ registered post. Such refunds will be made by cheques, pay orders or demand drafts drawn and will be payable at par.

6. In case of any category of Investors specified by SEBI, crediting of refunds to the Investors in any other electronic manner permissible under the banking laws of India for the time being in force which is permitted by SEBI from time to time.

Printing of Bank Particulars on Refund Orders

As a matter of precaution against possible fraudulent encashment of refund orders due to loss or misplacement, the particulars of the Investors’ bank account are mandatorily required to be given for printing on the refund orders. Bank account particulars will be printed on the refund orders/refund warrants which can then be deposited only in the account specified. Our Bank will in no way be responsible if any loss occurs through these instruments falling into improper hands either through forgery or fraud.

Letters of Allotment/Allotment Advice/ Share Certificates/ Demat Credit

Letters of allotment/ allotment advice/ share certificates/ demat credit or letters of regret will be dispatched to the registered address of the first named applicant or respective beneficiary accounts will be credited within 15 days, from the Issue Closing Date. In case our Bank issues letters of Allotment/ Allotment advice, the relative share certificates will be dispatched within three months from the Allotment Date. Allottees are requested to preserve such letters of allotment/ allotment advice (if any) to be exchanged later for share certificates. Export of letters of allotment/ allotment advice (if any)/ share certificates/ demat credit to Non Resident allottees will be subject to the approval of RBI.

Option to receive Equity Shares in Dematerialized Form

Except for ASBA Investors, Investors to the Issue shall be Allotted Equity Shares in dematerialised (electronic) form at the option of the Investor. Our Bank, along with Karvy Computershare Private Limited, has signed tripartite agreements dated May 13, 2011 with each NSDL and CDSL, which enables the Investors to hold and trade in securities in a dematerialised form, instead of holding the securities in the form of physical certificates.

In the Issue, the allottees who have opted for Equity Shares in dematerialised form will receive their Equity Shares in the form of an electronic credit to their beneficiary account with a DP. Investor will have to give the relevant particulars for this purpose in the appropriate place in the Application Form. Applications, which do not accurately contain this information, will be given the securities in physical form. No separate applications for securities in physical and/ or dematerialized form should be made. If such applications are made, the application for physical securities will be treated as multiple applications and is liable to be rejected. In case of partial allotment, allotment will be done in demat option for the shares sought in demat and balance, if any, may be allotted in physical shares.

INVESTORS MAY PLEASE NOTE THAT THE EQUITY SHARES OF OUR BANK CAN BE TRADED ON THE STOCK EXCHANGES ONLY IN DEMATERIALIZED FORM.

The Equity Shares will be listed on the Stock Exchanges.

Procedure for availing the facility for Allotment in the electronic form is as under:

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1. Open a beneficiary account with any DP (care should be taken that the beneficiary account should carry the name of the holder in the same manner as is exhibited in the records of our Bank. In the case of joint holding, the beneficiary account should be opened carrying the names of the holders in the same order as with our Bank). In case of investors having various folios in our Bank with different joint holders, the investors will have to open separate accounts for such holdings. Those Eligible Equity Shareholders who have already opened such beneficiary account(s) need not adhere to this step.

2. For Eligible Equity Shareholders already holding Equity Shares in dematerialized form as on the Record Date, the beneficial account number shall be printed on the CAF. For Investors who open accounts later or those who change their accounts and wish to receive their Equity Shares pursuant to the Issue by way of credit to such account, the necessary details of their beneficiary account should be filled in the space provided in the Application Form. It may be noted that the Allotment of Equity Shares arising out of the Issue may be made in dematerialized form even if the original Equity Shares are not dematerialized. Nonetheless, it should be ensured that the depository account is in the name(s) of the Eligible Equity Shareholders and the names are in the same order as in the records of our Bank.

Responsibility for correctness of information (including applicant’s age and other details) filled in the Application Form vis-à-vis such information with the applicant’s DP, would rest with the applicant. Applicants should ensure that the names of the applicants and the order in which they appear in Application Form should be the same as registered with the applicant’s DP.

If incomplete/ incorrect details are given under the heading ‘Request for Shares in Electronic Form’ in the Application Form, the applicant will get Equity Shares in physical form.

Allotment to investors opting for dematerialized form would be directly credited to the beneficiary account as given in the Application Form after verification. Allotment advice or letters of allotment, refund order (if any) would be sent directly to the applicant by the Registrar to the Issue but the applicant’s DP will provide to him the confirmation of the credit of such Equity Shares to the applicant’s depository account.

Renouncees will also have to provide the necessary details about their beneficiary account for Allotment in the Issue. In case these details are incomplete or incorrect, the Renouncees will get Equity Shares in physical form.

Utilisation of Issue Proceeds

Our Board declares that:

(a) The funds received against the Issue will be transferred to a separate bank account.

(b) Our Bank shall utilize funds collected in rights issue only after the finalization of the basis of Allotment.

Undertakings by our Bank

Our Bank undertakes as follows:

(a) The complaints received in respect of the Issue shall be attended to by our Bank expeditiously and satisfactorily.

(b) All steps for completion of the necessary formalities for listing and commencement of trading at all Stock Exchange where the securities are to be listed will be taken within seven working days of finalization of basis of Allotment.

(c) The funds required for making refunds to unsuccessful applicants as per the mode(s) disclosed in this Draft Letter of Offer shall be made available to the Registrar to the Issue by our Bank.

(d) Where refunds are made through electronic transfer of funds, a suitable communication shall be sent to the applicants within 15 days of the Issue Closing Date, giving details of the bank where refunds shall be credited along with amount and expected date of electronic credit of refund.

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(e) Adequate arrangements shall be made to collect all ASBA Applications and to consider them similar to non ASBA Applications while finalizing the basis of Allotment.

Impersonation

As a matter of abundant caution, attention of the investors is specifically drawn to the provisions of sub- section (1) of section 68A of the Companies Act which is reproduced below:

“Any person who makes in a fictitious name an application to a Bank for acquiring, or subscribing for, any shares therein, or otherwise induces a Bank to allot, or register any transfer of shares therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years”.

Restriction on foreign ownership of Indian securities

Under Indian laws, the aggregate permissible foreign investment (including FDI) and investment by FIIs and NRIs in a private sector bank is limited to an aggregate of 49% of the paid up capital under the automatic route, which may be increased up to 74% under the government route. Further, the foreign exchange regulations stipulate that the aggregate FII’s holding, including sub-accounts of such FIIs, cannot exceed 24% of the paid up capital. However, with the approval of the Board of Directors and the shareholders by way of a special resolution, the aggregate FII holding in a company can be increased up to 49%. Pursuant to a resolution passed by our Board of Directors on April 28, 2012 and resolution passed by our shareholders through postal ballot declared on June 11, 2012, the total foreign investment (including FDI and investments by FIIs and NRIs), cannot exceed 40% of our paid up capital, within which NRI’s holding cannot exceed 24% and individual foreign investments through FDI or investment by FIIs and NRIs cannot exceed five percent of our paid up capital, respectively.

As of June 30, 2012, our aggregate foreign shareholding (including FII and NRI shareholding) was 30.75% of our paid up capital. Further, as of June 30, 2012, the aggregate shareholding of NRIs was 2.88% of our paid up capital.

In order to ensure that our foreign shareholding adheres to the abovementioned limits, Allotment to Non- Resident Investors (excluding Eligible Employees), up to their Rights Entitlement and for any additional Equity Shares shall be subject to such limits.

Investment by FIIs

In accordance with the current regulations, the following restrictions are applicable for investment by FIIs:

The Issue of Equity Shares under the Issue to a single FII should not exceed 10% of the post-issue paid up capital of our Bank (subject to RBI approval for holding beyond 5%). In respect of an FII investing in the Equity Shares on behalf of its sub-accounts the investment on behalf of each sub-account shall not exceed 5% of the total paid up capital of our Bank.

Investment by NRIs

Investments by NRIs are governed by the Portfolio Investment Scheme under Regulation 5(3)(i) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000. NRI Applicants should note that Applications by NRIs who are ineligible (including on account of restriction or prohibition under applicable local laws) and where a registered address in India has not been provided are liable to be rejected.

Investment by QFIs

QFIs have been permitted to invest in Indian equity issues, including in rights issues. A QFI can invest in the Issue through its depository participant with whom it has opened a demat account. No single QFI can hold more than five percent of paid up equity capital of the company at any point of time. Further, aggregate shareholding of all QFIs shall not exceed ten percent of the paid up equity capital of the Bank at any point of time. Applications will not be accepted from QFIs in restricted jurisdictions. QFI applicants which are QIBs or whose

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total amount paid for the Equity Shares exceeds ` 2,00,000 can participate in the Issue only through the ASBA process.

Procedure for Applications by Mutual Funds

A separate Application can be made in respect of each scheme of an Indian mutual fund registered with the SEBI and such Applications shall not be treated as multiple Applications. The applications made by asset management companies or custodians of a mutual fund should clearly indicate the name of the concerned scheme for which the Application is being made.

As per the current norms prescribed by SEBI, no mutual fund scheme shall invest more than 10% of its net asset value in the equity shares of any company provided that the limit of 10% shall not be applicable for investments in index funds or sector or industry specific funds. Further, no mutual fund under all its schemes can own more than 10% of any company’s paid-up share capital carrying voting rights.

Dematerialized dealing

Our Bank has entered into agreements dated May 13, 2011 with NSDL and CDSL, respectively, and its Equity Shares bear the ISIN INE491A01021. In addition to the ISIN for the existing Equity Shares, our Bank shall obtain separate ISIN for the partly paid-up Equity Shares. The partly paid-up Equity Shares offered pursuant to the Issue shall be listed and traded under a separate ISIN for the period prior to the Call Record Date. On the Call Record Date, the trading of the existing partly paid-up Equity Shares shall be terminated.

Payment by Stockinvest

In terms of RBI Circular DBOD No. FSC BC 42/24.47.00/2003-04 dated November 5, 2003, the stockinvest scheme has been withdrawn with immediate effect. Hence, payment through stockinvest would not be accepted in the Issue.

Disposal of Application and Application Money

No acknowledgment will be issued for the Application Money received by our Bank. However, the Bankers to the Issue/ Registrar to the Issue receiving the Application Form will acknowledge its receipt by stamping and returning the acknowledgment slip at the bottom of each Application Form.

Our Board reserves its full, unqualified and absolute right to accept or reject any Application, in whole or in part, and in either case without assigning any reason thereto.

In case an Application is rejected in full, the whole of the Application Money received will be refunded. Wherever an Application is rejected in part, the balance of Application Money, if any, after adjusting any money due on Equity Shares allotted, will be refunded to the applicant within 15 days from the Issue Closing Date.

For further instruction, please read the Application Form carefully.

Restriction on share capital and voting rights

Pursuant to the Guidelines for ‘Acknowledgement of Shares in Private Banks’ contained in the circular DBOD. NO.PSBS. BC. 64/ 16.13.100/ 2003-04 dated February 3, 2004, or the ‘Acknowledgement Guidelines’, any acquisition or transfer of shares in a private bank which will take the aggregate holding of an individual or a group to five per cent or more of the paid-up capital of a bank, requires the prior “acknowledgement” of the RBI. The term “holding” refers to both direct and indirect holdings, beneficial or otherwise, and is computed with reference to the holding of the applicant, relatives (where the applicant is a natural person) and associated enterprises. In considering whether it will grant its acknowledgement to any application for an acquisition or transfer resulting in a holding of five per cent or more of the paid-up capital of a private bank, the RBI considers, among other matters, whether the applicant or proposed acquirer (including all entities connected with the acquirer) meets certain fitness and propriety tests.

Further as advised by RBI vide its circular DBOD.No.PSBS.BC.182/16.13.100/99-2000 dated May 31, 2000, we had amended our Articles of Association to the effect that acquisition of shares by a person/group which

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would take his/its holding to five per cent or more of our total issued capital (or such other percentage as may be prescribed by the Reserve Bank from time to time) should be with the prior approval of the RBI.

The RBI considers additional criteria when granting its acknowledgement where the acquisition or transfer will take the aggregate shareholding of the applicant or proposed acquirer to 10% or more and certain further criteria when granting its acknowledgement where the acquisition or transfer will take the aggregate shareholding of the applicant or proposed acquirer to 30% or more of the paid-up capital of a private bank. The RBI, in terms of the guidelines on ownership and governance issued on February 28, 2005, may require the applicant or proposed acquirer to seek further approval in relation to subsequent acquisitions at any higher threshold as it may specify.

Relevant RBI Provisions

Rights issues by private sector banks – Acknowledgement of transfer / allotment of shares

In terms of RBI circular DBOD.No.PSBS.BC.79/16.13.100/2001-2002 dated March 20, 2002, listed as well as unlisted private sector banks are not required to obtain approval of the RBI for rights issues.

While reviewing the rights issues by various private sector banks, RBI highlighted the following issues with reference to percentage of holding at the time of rights issues: a) When some shareholders (individuals/ entities/ groups) pick up unsubscribed shares, the result would be the increase in his/ its holding increasing as a percentage of the total paid-up capital of the bank. b) When some shareholders do not pick up their entitlements, the holdings of the other shareholders would go up in percentage terms even if they picked up only their own entitlements.

The matter was examined from the view point of applicability of RBI circulars DBOD.No.PSBS.BC.64/16.13.100/2003-04 dated February 3, 2004 on acknowledgement of transfer/ allotment of shares in private sector banks and DBOD.No.BP.BC.71/21.01.01/2004-05 dated February 28, 2005 on ownership and governance and also the regulatory limits such as the cap for the aggregate FDI/ FII/ NRI holdings and the 5% limit for a bank's investment in the equity of another bank.

In view of the above, RBI has advised banks going for rights issues to make complete disclosure of the regulatory requirements in the offer document, including the following: a) Subscription to rights other than own entitlement will not be permitted if such subscription would result in breach of any statutory/ regulatory ceilings. b) Any acquisition of shares that will take the shareholding of any entity/ group of entities to 5% or more of the paid-up capital of the bank would require acknowledgement of RBI in terms of the criteria laid down in the RBI guidelines contained in the circular DBOD.No.PSBS.BC.64/16.13.100/2003-04 dated February 3, 2004. Further, in terms of the guidelines on ownership and governance issued on February 28, 2005, any acquisition that will take the shareholding of any entity/ group, directly or indirectly, to 10% or more of the paid-up capital of the bank will require the prior approval of RBI. c) If the holding of any shareholder breaches any statutory/ regulatory ceilings as a result of non-subscription of rights by other shareholders, the shareholder concerned will not be able to acquire any further shares till his/ its shareholding is brought within the stipulated ceilings.

In the event of statutory/ regulatory limits getting breached as indicated in paragraph above, the bank will inform the entities/ group of entities concerned suitably.

Important

• Please read the Letter of Offer carefully before taking any action. The instructions contained in the accompanying Application Form are an integral part of the conditions of the Letter of Offer and must be carefully followed; otherwise the Application is liable to be rejected.

It is to be specifically noted that the Issue of Equity Shares is subject to the risk factors mentioned in the section titled “Risk Factors” on page 9.

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• All enquiries in connection with the Draft Letter of Offer, Letter of Offer or accompanying Application Form and requests for Split Application Forms must be addressed (quoting the Registered Folio Number/ DP and Client ID number, employee identification number, PAN, the Application Form number and the name of the first applicant as mentioned on the Application Form, as applicable, and superscribed “City Union Bank Limited – Rights Issue” on the envelope) to the Registrar to the Issue at the following address:

Karvy Computershare Private Limited Plot Nos. 17-24, Vittal Rao Nagar Madhapur Hyderabad 500 081 Telephone: +91 40 4465 5000 / 1800 345 4001 Facsimile: +91 40 2343 1551 Email: [email protected] Website: http://karisma.karvy.com; Contact Person: M. Murali Krishna

The Issue will be kept open for 15 days unless extended, in which case it will be kept open for a maximum of 30 days.

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SECTION VIII – STATUTORY AND OTHER INFORMATION

Option to subscribe

Other than the present Issue and options granted under the CUB ESOS Scheme, our Bank has not given any person any option to subscribe to the Equity Shares of our Bank. The Investors shall have an option either to receive the security certificates or to hold the securities in dematerialised form with a depository.

Material documents for inspection referred to hereunder, may be inspected at the Registered and Corporate Office from 10.00 am to 4.00 pm on working days from the date of this Draft Letter of Offer until the date of closure of the Issue.

A. Material contracts for inspection

1. Issue agreement dated July 14, 2012 between our Bank and Edelweiss Financial Services Limited.

2. Agreement dated January 3, 2011 between our Bank and Karvy Computershare Private Limited.

3. Escrow Agreement dated [●] between our Bank, the Bankers to the Issue and Edelweiss Financial Services Limited.

B. Material documents for inspection

1. Memorandum of Association and Articles of Association of our Bank.

2. Our certificates of incorporation dated October 31, 1904 and certificate of incorporation consequent upon change in name of our Bank dated November 2, 1987.

3. Annual Report of our Bank for the Fiscal 2011, Fiscal 2010, Fiscal 2009, Fiscal 2008 and Fiscal 2007.

4. Copy of our Board Resolutions dated January 31, 2012 and April 28, 2012 and resolution of our shareholders through postal ballot declared on June11, 2012 authorizing the Issue.

5. Consents of the Directors, Auditors, Lead Manager, legal counsel to the Issue and the Registrar to the Issue, to include their names in this Draft Letter of Offer and to act in their respective capacities.

6. The report of M/s Jagannathan & Sarabeswaran, Chartered Accountants, dated July 11, 2012 in relation to the financial statements of our Bank for Fiscal 2012, as set out in this Draft Letter of Offer.

7. Statement of tax benefits dated July 11, 2012, issued by M/s Jagannathan & Sarabeswaran, Chartered Accountants, as set out in this Draft Letter of Offer.

8. Consent of the M/s Jagannathan & Sarabeswaran, Chartered Accountants, dated July 11, 2012 for inclusion of their report on the financial statements of our Bank for Fiscal 2012 and the statement of tax benefit, in the form and context in which they appear in this Draft Letter of Offer.

9. Due Diligence Certificate dated July 17, 2012 from Edelweiss Financial Services Limited.

10. Copy of the letter of offer dated November 20, 2009 filed by our Bank for its rights issue with the Stock Exchanges.

11. Tripartite agreement dated May 13, 2011 between our Bank, Karvy Computershare Private Limited and NSDL.

12. Tripartite Agreement dated May 13, 2011 between our Bank, Karvy Computershare Private Limited and CDSL.

13. Application dated July 16, 2012 to the FIPB seeking approval to Allot partly paid-up Equity Shares to Non-Resident Eligible Equity Shareholders and Renouncees.

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Any of the contracts or documents mentioned in this Draft Letter of Offer may be amended or modified at any time, if so required in the interest of our Bank or if required by the other parties, subject to compliance of the provisions contained in the Companies Act and other relevant statutes.

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DECLARATION

No statement made in this Draft Letter of Offer contravenes any of the provisions of the Companies Act, and the rules made there under. All the legal requirements connected with the Issue as also the regulations, guidelines, instructions, etc., issued by SEBI, Government and any other competent authority in this behalf, have been duly complied with. We further certify that all the statements in this Draft Letter of Offer are true and correct.

SIGNED BY ALL THE DIRECTORS OF THE BANK

Mr. S Balasubramanian ______Non independent part time non executive Chairman

Dr. N Kamakodi ______Managing Director

Mr. K S Raman ______Independent non executive Director

Mr. S Bernard ______Independent non executive Director

Mr. N Kantha Kumar ______Independent non executive Director

Mr. R G Chandramogan ______Independent non executive Director

Mr. T K Ramkumar ______Non independent non executive Director

Mr. C R Muralidharan ______Independent non executive Director

Justice S R Singharavelu (Retired) ______Independent non executive Director

Dr. V Kamakoti ______Independent non executive Director

SIGNED BY THE CHIEF EXECUTIVE OFFICER

Dr. N Kamakodi ______

SIGNED BY THE CHIEF FINANCIAL OFFICER

Mr. S Sundar ______

Place: Kumbakonam, Tamilnadu

Date: July 17, 2012

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