STATE BANK of HYDERABAD (Associate of the State Bank of India) Head Office: Gunfoundry, Hyderabad 500 001 (AP)

Home , State Bank of Hyderabad

Private & Confidential – Not for Circulation (This is a Disclosure Document prepared in conformity with Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 issued vide circular No. LAD-NRO/GN/2008/13/127878 dated June 06, 2008)

STATE BANK OF HYDERABAD (Associate of the State Bank of India) Head Office: Gunfoundry, Hyderabad 500 001 (AP). Tel No: (040) 23387201, 23387301 Fax: (040) 23387562 Website: www.sbhyd.com E-mail: [email protected]

DISCLOSURE DOCUMENT FOR PRIVATE PLACEMENT OF UNSECURED, REDEEMABLE, NON-CONVERTIBLE SUBORDINATED UPPER TIER II BONDS IN THE NATURE OF PROMISSORY NOTES FOR CASH AT PAR AGGREGATING RS. 475 CRORE

GENERAL RISKS For taking an investment decision the investor must rely on their examination of the Offeror and the Offer including the risks involved. The securities have not been recommended or approved by Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this document

OFFEROR’S ABSOLUTE RESPONSIBILITY The Offeror, having made all reasonable inquiries, accepts responsibility for, and confirms that this Information Memorandum contains all information with regard to the Offeror and the Offer, which is material in the context of the Offer, that the information contained in this Information Memorandum is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. The Arranger is not required to file this document with SEBI/ROC as it is on private placement and not an Offer to the general Public.

CREDIT RATING

CRISIL Ltd. has assigned a ‘AAA/stable’ (pronounced Triple A with stable outlook) rating to the captioned debt programme of the Bank. This rating indicates the highest degree of safety with regard to timely payment of interest and principal on the instrument. The rate instrument carries the lowest credit risk.

CARE has assigned a ‘CARE AAA’ (pronounced Triple A) rating to the captioned debt programme of the Bank. This is the best credit quality rating assigned by CARE.

1 Instruments with this rating are considered to be of the best credit quality, offering highest safety for timely servicing of debt obligations. Such instruments carry minimal credit risk.

The rating is not a recommendation to buy, sell or hold Securities and investors should take their own decision. The rating may be subject to revision or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating. The rating obtained is subject to revision at any point of time in the future. The rating agencies have a right to suspend, withdraw the rating at any time on the basis of new information, etc.

LISTING The Instruments are proposed to be listed on the BSE.

TRUSTEES FOR THE BOND HOLDERS: IDBI Trusteeship Services Ltd., have given their consent to the Bank vide their letter No 2846/ITSL/OPR/CL-2009-10 Dated 28.08.2009, for being appointed as Bond Trustee for the present private placement.

Lead Arranger to Co-Arranger to the Co-Arranger to REGISTRARS TO Trustee For the Private Private Placement the Private THE ISSUE The Placement Placement Bondholders

Darashaw & Co. Pvt The Hongkong and Standard Chartered KARVY Computer IDBI Ltd. Shanghai Banking Bank Share Private Ltd Trusteeship 1205-06 Corporation Ltd. 90, M.G.Road, 17-24, Vittal Rao Services Ltd. Mumbai – 400 001. Regent Chambers, Nagar, Madhapur, Registered 52/60, Mahatma Gandhi Tel : 022 22617151 208 Nariman Point, Hyderabad -500 081 Office Road, Fax : 022 22651255 Mumbai 400 021 Andhra Pradesh Asian Building, Tel no: Mumbai – 400 001. Tel: 040 23420815-28Ground Floor 022 6630 6612 Tel: (022) 2267 6111 Fax 23420814 17, R Kamani Fax no: Marg, Ballard 022 2204 0031/40 Fax: 91-22-22623339 Estate Mumbai – 400 001 Tel: (022) 66311771-3 Fax: 91-22- 66311776 E-mail: itsl@idbitrustee. co.in Offer Opens Offer Closes on: 02.09.2009 08.09.2009

2 PRIVATE PLACEMENT OF BONDS ISSUED BY STATE BANK OF HYDERABAD

3 DISCLAIMER

This Memorandum of Private Placement (“Memorandum”) is neither a prospectus nor a statement in lieu of prospectus and does not constitute an offer to the public to subscribe for or otherwise acquire the Bonds issued by State Bank of Hyderabad (the Bank/the Offeror). The document is for the exclusive use of the Person(s)/Institution(s) to whom it is delivered and it should not be circulated or distributed to third party (ies). Apart from this Information Memorandum, no Offer Document or Prospectus has been prepared in connection with this Bond Offer and that no Prospectus in relation to the Issuer or the Bonds relating to this Offer has been delivered for registration nor such a document is required to be registered under the applicable laws. The Arrangers are not required to file this document with SEBI/ROC/RBI as it is on private placement and not an Offer to the general Public.

This Memorandum is issued by the Bank. The views contained herein do not necessarily reflect the views of its directors, employees, affiliates, subsidiaries or representatives and should not be taken as such. The Memorandum has been prepared by the Bank to provide general information on the Bank and does not purport to contain all information a potential investor may require. Where this Memorandum summarizes the provisions of any other document, that summary should not be relied upon and the relevant document should be referred to for the full effect of the provisions. The information relating to the Bank contained in the Memorandum is believed by the Bank to be accurate in all respects as of the date hereof.

The Memorandum shall not be considered as a recommendation to purchase the bonds and recipients are urged to determine, investigate and evaluate for themselves, the authenticity, origin, validity, accuracy, completeness, adequacy or otherwise the relevance of information contained in this Memorandum. The recipients are required to make their own independent valuation and judgment of the Bank and the Bonds. It is the responsibility of potential investors to also ensure that they will sell these bonds in strict accordance with this Information Memorandum and other applicable laws, so that the sale does not constitute an offer to the public, within the meaning of the Companies Act 1956. The potential investors should also consult their own tax advisors on the tax implications relating to acquisition, ownership, sale or redemption of Bonds and in respect of income arising thereon. Investors are also required to make their own assessment regarding their eligibility for making investment(s) in the Bonds of the Bank. The Bank or any of its Directors, employees, advisors, affiliates, subsidiaries or representatives do not accept any responsibility and/ or liability for any loss or damage however arising and of whatever nature and extent in connection with the said information.

Neither the Arrangers nor any of their respective affiliates or subsidiaries have independently verified the information set out in this Memorandum or any

5 CONTENTS

1. Name and address of the registered office of the bank ...... 7 2. Name and Address of the Directors of the Bank as on 30.06.2009...... 7 3. Brief summary of the business/ activities of the issuer and its line of business...... 8 4. A brief history of the issuer since its incorporation giving details of its activities including any reorganization, reconstruction or amalgamation, changes in its capital structure, (authorized, issued and subscribed) and borrowings, if any...... 27 5. Details of debt securities issued and sought to be listed including face value, nature of debt securities, mode of issue i.e. public issue or private placement...... 29 6. Issue size...... 31 7. Details of utilization of the issue proceeds ...... 31 8. A statement containing particulars of the dates of, and parties to all material contracts, agreements involving financial obligations of the issuer . 31 9.Details of other borrowings including any other issue of debt securities in past...... 32 10. Any material event/ development or change at the time of issue or subsequent to the issue, which may affect the issue or the investor’s decision to invest / continue to invest in the debt securities ...... 39 11. Particulars of the debt securities issued (i) for consideration other than cash, whether in whole or part, (ii) at a premium or discount, or (iii) in pursuance of an option...... 39 12. List of Top ten holders of Equity holders of the issuer :...... 39 13.Undertaking to use a common form of transfer...... 39 14.Redemption amount, period of maturity, yield...... 39 15. Information relating to Terms of Offer ...... 40 16. Discount at which the offer is being made and effective price for the investor...... 47 17. Debt Equity Ratio (before & after the proposed issue)...... 47 18.Debt Servicing Track Record ...... 48 19. Permission and Consent from the creditors...... 48 20.Trustees to the Bondholders ...... 48 21.Credit Rating...... 49 22.Listing with Stock Exchanges ...... 49 23. Summary Statement ...... 50 24.Declaration...... 52

6 1. Name and address of the registered office of the bank

STATE BANK OF HYDERABAD Head Office: Gunfoundry, Hyderabad 500 001 (AP). Tel No: (040) 23387201, 23387301 Fax: (040) 23387562 Website: www.sbhyd.com E-mail: [email protected]

2. Name and Address of the Directors of the Bank as on 30.06.2009

The composition of the Board of Directors of the Bank as on 30.06.2009 is as under:

Name of the Director Date of Occupation Address appointment and Title Shri O.P.Bhatt 01.07.2006 Chairman, SBI,Corporate Centre, SBI Mumbai - 400 021 Smt Renu Challu 16.06.2008 Managing State Bank of Hyderabad Director, SBH Head Office,Hyderabad – 1 Shri C.S. Murthy 20.06.2008 Director 25-61-8/1, Cross Road No.1, A.N.Rao Nagar, Malkajgiri, Hyderabad Shri Jiban Goswami 17.04.2006 CGM, SBI, SBI, Associate Banks Mumbai Dept., Corporate Centre, Mumbai Shri S.A.Thimmiah 08.07.2006 DGM, SBI, SBI, Associate Banks Dept., Mumbai Corporate Centre, Mumbai Sri V.Murali 01.06.2008 Chartered Victor Grace & Co. Accountant Chartered Accountants, “Spencer Plaza”,0-704, 7th Floor, Phase-I,769, Anna Salai, Chennai – 600 002 Shri M. Harshavardhan 13.03.2006 Officer-SBH State Bank of Hyderabad Head Office, Hyderabad-1 Shri Ramesh Datla 01.06.2007 Director Managing Director, Elico Ltd., Plot No. B 90, APIE, Sanathnagar, Hyderabad Dr.C.L.Laxmipathi Gowda 10.10.2007 Director 601/23, ICRISAT,Patancheru - 502324 Prof. V.Venkata Ramana Flat No.204, 6-3-1198, 01.05.2008 Director East Face Homes, Vaman Naik Lane, Kundanbagh,Hyderabad– 7 16 Sri S.Gopal Krishna 09.06.2008 Director Under Secretary, Ministry of Finance, Dept. of Economic Affairs, (Banking Division), Parliament Street, New Delhi – 110 001

3. Brief summary of the business/ activities of the issuer and its line of business

HIGHLIGHTS OF THE BANK

1. Bank with more than 67 years of existence.

2. Member of the State Bank Group, the largest banking Group in India. The Group has the biggest network of branches and the highest market share of deposits and advances in the country.

3. Professionally managed Bank with an uninterrupted record of profitability since inception.

4. Large Network of 1034 branches and 28 extension counters as on June, 30 2009.

5. Low net NPA ratio of 0.64% as on 30th June 2009.

6. Capital Adequacy Ratio of the Bank stood at 12.54% as on June 30, 2009 Under Basel-I and 13.96% under Basel-II, which is well above the stipulated minimum of 9% prescribed by the Reserve Bank of India.

7. Return on Average Assets stood at 0.59% and Return on Average Net Worth stood at 15% as on June 30, 2009.

8. 100% Business brought under Core Banking Solutions.

BUSINESS OF THE BANK & ITS PRODUCTS AND SERVICES :

DEPOSITS

Bank’s total Deposits (Global) during the past five years are as follows:

(Rs. in crores) 31-Mar- 31-Mar- 31.Mar- 31-Mar- 31-Mar- 30 –Jun- Particulars 05 06 07 08 09 09 Deposits 62448.9 28929.51 34024.60 41502.67 50108.30 64079.41 (Global) 1 Annual 12340.6 Growth – 4671.66 5095.09 7478.07 8605.63 1630.50 1 Amount Annual Growth – 19.25 17.61 21.98 20.74 24.63 2.61 Percent Cost of Deposits 5.2 4.89 5.43 6.75 6.97 6.78 (Global) (%)

The category-wise break-up of total deposits during past five years is presented below: (Rs. in crores) Particulars March March March March March, June, 31, 2005 31, 2006 31,2007 31,2008 31, 2009 30, 2009

Current 3490.99 4054.23 4391.38 5189.89 6865.15 5149.00 Deposits Savings Bank 11704.64 5435.22 6855.28 7939.87 9409.43 11466.04 Deposits Term Deposits 19242.13 22136.41 28370.84 34652.50 43130.59 46331.96 Inter-Bank 761.17 978.68 800.58 856.48 987.13 893.81 Deposits Total 28929.51 34024.60 41502.67 50108.30 62448.91 64079.41

9 The population group-wise break-up of total domestic deposits for the past five years is as given in the table below: (Rs. in crores)

As on March March March March March, 31, June, 30 31, 2005 31, 2006 31 2007 31,2008 2009 2009 2178.39 2599.98 2622.13 3118.87 3921.79 3925.74 Rural Semi-Urban 6072.30 6848.18 6974.87 8272.00 10372.76 10963.19 Urban 5103.17 5988.37 8786.43 10318.35 11590.52 12263.92 15575.65 18588.07 23119.24 28399.08 36563.84 36926.56 Metropolita n Total 28929.51 34024.60 41502.67 50108.30 62448.91 64079.41

ADVANCES Bank’s Net Advances during the past five years, both in India and Overseas is as follows: (Rs. in crores) Particulars March March March March March, June 31, 2005 31, 2006 31, 2007 31, 2008 31, 2009 30, 2009 15599.74 20863.02 28109.25 35848.75 43679.17 42796.57 Advances 3786.06 5263.28 7246.23 7739.50 7830.42 -882.60 Annual growth amount 32.05 33.74 34.73 27.53 21.84 -2.02 Annual growth (%) Yield on 8.32 8.21 9.16 10.21 10.86 10.83 advances

The population group-wise classification of the Bank’s advances is as under:

(Rs. in crores) Particulars March March March March March, 31, June, 30 31, 31, 2006 31, 2007 31, 2008 2009 2009 2005

Rural 1350.94 1680.04 2548.67 3339.65 4079.63 4467.50 Semi- 2932.75 3800.92 6687.28 6934.81 Urban 4318.60 5585.24 Urban 2358.68 3100.24 4183.35 5028.29 6106.35 6111.55 Metropoli 8957.37 12281.82 26805.91 25282.71 tan 17058.73 21895.57 Total 15599.74 20863.02 28109.25 35848.75 43679.17 42796.57 10 (Domesti c) Total 15599.74 20863.02 28109.25 35848.75 43679.17 42796.57

Loan Policy: State Bank of Hyderabad’s Loan Policy (hereinafter referred to as “The Loan Policy” or “The Policy”) is aimed at accomplishing its mission of all-round growth with maximum profits, achievement of pre-eminence in banking with commitment to excellence, in rendering customer, shareholder and employee satisfaction, while continuing to emphasis on its development banking role to be fulfilled through a skilled and committed workforce and technological up gradation.

The Loan Policy of the Bank has successfully withstood the test of time and with inbuilt flexibilities, has been able to meet the challenges in the market place. The policy is well documented and implemented through circular instructions and periodic guidelines. The procedural aspects are highlighted in the Bank’s Book of Instructions. The policy, at the holistic level is an embodiment of the Bank’s approach to sanctioning, managing and monitoring credit risk and aims at making the systems and controls effective.

The basic tenets of State Bank of Hyderabad’s Loan Policy are as follows:

(i)The policy establishes a commonality of approach regarding credit basics, appraisal skills, documentation standards and awareness of institutional concerns and strategies, while leaving enough room for flexibility and innovation.

(ii) Exposure levels are set out in the policy in order to ensure growth of assets in an orderly manner.

(iii) The policy sets out minimum scores/hurdle rates (in terms of Credit Risk Assessment parameters) for new/additional exposures.

(iv) Bank’s general approach to Export Credit and Priority Sector Advances is set out in the policy.

(v) The policy lays down norms for take over of advances from other banks/FIs.

(vi) Bank’s stand on granting credit facilities to companies whose directors are in the defaulter’s list of RBI is covered in the policy.

(vii) The policy aims at continued growth of assets while endeavoring to ensure that these remain performing and standard. To this end, as a matter of policy the Bank does not take over Non-Performing Assets (NPA) from other banks.

The Board of Director the Bank is the apex authority in formulating all matters of policy in the bank. The Credit Risk Management Committee (CRMC) deals with issues relating to credit policy and procedures on a Bank-wide basis. The CRMC sets broad policies for managing credit risks, sets parameters for growth of credit portfolio within the boundaries of exposure limits, and reviews credit appraisal systems.

ASSET CLASSIFICATION, INCOME RECOGNITION & PROVISIONING:

ASSET CLASSIFICATION:

The Bank classifies its assets in compliance with RBI guidelines. Under these guidelines, an asset is classified as non-performing if any amount of interest / principal remains overdue for more than 90 days in respect of term loans. In respect of overdraft / cash credit, an asset is classified as non-performing if the account remains out of order for a period of more than 90 days and in respect of bills, if they remain overdue for more than 90 days. In case of retail assets, the Bank classifies an asset as non-performing where any amount of interest / principal remains overdue for more than 90 days in respect of all loans.

NPAs are further categorized into three groups i.e. Substandard, Doubtful and Loss Asset depending upon the period of delinquency and availability of tangible security. The table below gives the criteria for asset classification viz. Standard, Substandard, Doubtful and Loss asset-

Category Classification 1. Performing Standard Assets An asset which has not posed any problem and which does not carry more than the normal business risk. 2. Non- Performing a)Sub-standard An asset which has been non-performing for a period Assets less than or equal to twelve months. b)Doubtful Assets An asset which has been non-performing for a period of over 12 months. c)Loss Assets Asset where loss has been identified by the Bank or auditors / RBI and any non-performing asset where the value of security is less than 10% of the dues to the Bank.

For this purpose, all advances are segregated into performing assets (standard assets) and non-performing assets. A borrowal account is classified as Non Performing Asset (NPA) when interest and / or installment are over due for more than 90 days. Borrowal accounts treated as NPA for a period of 12 12 months are classified as sub-standard and borrowal accounts treated as NPA for more than 12 months are treated as doubtful assets. NPAs where securities are less than 10% of the dues to the bank and which are considered as irrecoverable are treated as loss assets.

When an account is classified as NPA, interest already debited to the account but not realized, is de-recognized and further interest accrued is recognized on cash basis. Provisioning

As per RBI guidelines, provisions are arrived on all outstanding NPAs, as under: Sub- A general provision of 10 percent on total outstanding is Standard made without making any allowance for ECGC guarantee Assets cover and securities available. The unsecured exposures which are identified as substandard attracts additional provision of 10%, i.e., a total of 20% on the outstanding balance. Doubtful 20%, 30%, 100% for secured portion of Doubtful assets upto Assets one year (DA 1), one to three years (DA 2), more than three years (DA 3) respectively and at 100% for the unsecured portion of the outstanding after netting retainable or realizable amount of the guarantee claims already received / lodged with DICGC / ECGC, if any. Loss Assets 100% of the outstanding after netting retainable amount of the guarantee claims already received / lodged with DICGC /ECGC, if any. Standard a) A general provision of 0.25% on direct advances to Assets agriculture and SME sectors. b) All other advances at 0.40%.

Asset Classification of Performing and Non-Performing Assets for the last 5 years is given below: (Rs in crores) Classification MARCH MARCH MARCH MARCH MARCH JUNE of assets as on 31, 2005 31,2006 31,2007 31,2008 31,2009 30,2009 Standard 15449.03 20806.33 28097.08 35703.07 43466.83 42266.22 Assets Sub-Standard 119.20 162.84 167.57 116.58 204.33 220.98 Assets Doubtful 362.03 230.00 138.04 135.90 202.10 229.89 Assets Loss Assets 72.09 60.22 45.22 59.46 79.61 79.48 Gross NPAs 553.32 453.06 350.83 311.94 486.04 530.35 Gross 16002.35 21259.39 28447.91 36015.01 43952.87 42796.57 Advances

Advances given above are Gross Advances while the Balance Sheet indicates Net Advances after setting off provisions, interest suspense etc. 13 Gross Advances – (Provisions, Interest Suspense and DICGC & ECGC claims) = Net Advances.

Asset Classification of Performing and Non-Performing assets for the last 5 years is given below:

(in % terms) Classification of March March March March March June assets (%) as on 31,2005 31,2006 31,2007 31,2008 31,2009 30,2009 Standard Assets 96.54 97.87 98.77 99.13 98.90 98.76 Sub-standard 0.74 0.77 0.59 0.32 0.46 0.52 Assets Doubtful Assets 2.26 1.08 0.48 0.38 0.46 0.54 Loss Assets 0.45 0.28 0.16 0.17 0.18 0.18 Total NPA 3.46 2.13 1.23 0.87 1.10 1.24 Total Advances 100.00 100.00 100.00 100.00 100.00 100.00

NPA Management Strategy

Despite several proactive measures, initiated by the Bank, the Gross NPA level has increased. In percentage terms, the Gross NPA ratio declined from 2.13% in March 2006 to 1.10% in March 2009, while Net NPA ratio has remained the same at 0.38%.

With the aim of improving asset quality, the following measures have been initiated:

• Constant review of large borrowal accounts to ensure proper end use of funds • Measurement of risk through credit rating / scoring • Benchmarking of financial and performance ratios • Effective loan review mechanism and portfolio management • Fixing prudential exposure limits in consonance with RBI guidelines • Constant review of economic scenario to identify systemic sector-wise risks • System of timely detection of sickness • Extending the ambit of Credit Audit for covering advances of Rs.2.00 Crore and above • Adherence to various terms and conditions stipulated in the sanction letter • Monitoring of advances by constant on-site and off-site inspection • Review of Special Mention Accounts above Rs.10.00 Lac on a monthly basis by the Top Management • Intensive training of officers for improvement of credit assessment skills • Utilization of Securitisation Act for recovery of impaired assets • Restructuring / Rehabilitation through CDR / normal route 14 • Review of NPAs with outstanding of Rs.25.00 Lac and above at monthly intervals by the Top Management • Review of PER NPAs of Rs.5.00 Lac and above at monthly intervals by the Top Management • Sale of assets to ARCIL / Financial Institutions

TREASURY & INTERNATIONAL OPERATIONS:

Investments

Item 2007-08 2008-09 As on 30.06.2009

Profit on Investments (Rs Cr) 169.25 176.86 57.02

Interest Income on 1124.53 1370.56 365.33 Investments (Rs. Cr)

Yield on Investments (%) 7.69% 7.70% 7.30%

International Banking The Foreign Exchange Merchant Turnover of the Bank for the Quarter ended 30th June, 2009 stood at Rs.8788/- Crores and achieved 25.11% of the budget for the financial year 2009-10. The total profit (merchant & trading) generated from Foreign Exchange (buying & selling) during the quarter stood at Rs. 13.92 Crores as against Rs. 12.45 Crores during the corresponding quarter last year. FINANCIAL HIGHLIGHTS OF THE BANK:

BALANCE SHEET FOR PAST FIVE YEARS (Rs.in crores)

31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- 05 06 07 08 09 A. ASSETS 1. Cash in hand 73 85 95 97 239 2. Balances with RBI 1318 2193 2777 5450 5189 3. Balances with Banks in India 1231 352 685 735 1360 4. Balances with Banks outside India 255 45 507 32 168 5. Money at Call and Short Notice 200 350 499 0 0 6. Investments in India 14559 14256 13919 16027 20982

15 7. Investments Outside India 0 0 0 0 0 8. Advances in India 15600 20863 28109 35849 43679 9. Advances outside India 0 0 0 0 0 10.Fixed Assets (Net of Rev. Reserve) 172 223 242 253 269 11.Other Assets 1514 2263 2219 3177 4836 A. TOTAL OF (A) 34922 40630 49052 61620 76722 B. LIABILITIES 1. Demand Deposits From Banks 513 774 692 735 825 From Others 3491 4054 4391 5190 6865 2. Savings Deposits 5435 6855 7940 9409 11466 3. Term Deposits From Banks 248 204 109 121 163 From Others 19242 22137 28371 34653 43130 4. Borrowings In India 73 34 2 126 1913 Outside India 744 602 391 823 451 5. Other Liabilities and Provisions 3136 3081 3415 5659 6428 6. Subordinated Debts 275 775 1200 2210 2210 B. TOTAL OF (B) 33157 38516 46511 58926 73451 C. NET ASSETS (C=A-B) 1765 2114 2541 2694 3271 Represented by: D. SHARE CAPITAL 17 17 17 17 17

E. RESERVES AND SURPLUS 1. Statutory Reserve 548 676 828 995 1180 2. Capital Reserve 0 2 4 4 61 3. Share Premium 0 0 0 0 0 4. Investment Fluctuation Reserve 468 0 0 0 0 5. Revenue and Other Reserve 732 1419 1692 1678 1950 6. Balance of Profit and Loss Account 0 0 0 0 0 TOTAL (E) 1748 2097 2524 2677 3191 F. TOTAL (D+E) 1765 2114 2541 2694 3208

PROFIT AND LOSS STATEMENT : (Rs.in crores) Year Year Year Year Year Quarter ended ended ended ended ended ended 31.03.05 31.03.06 31.03.07 31.03.08 31.03.09 30.06.09 INCOME

Interest Earned 2325 2749 3489 4403 5710 1537 Other Income 422 459 457 677 769 187 TOTAL 2747 3208 3946 5080 6479 1724 EXPENDITURE Interest Expended 1363 1655 2135 3290 4243 1156 Operating Expenses 671 816 808 799 933 253 Provisions and Contingencies 462 310 498 434 687 205 TOTAL 2496 2781 3441 4523 5863 1614 PROFIT / LOSS C/f profit/(loss) 0 0 0 0 0 0 Net Profit for the year 251 427 505 557 616 110

Capital Reserve (Investment appreciation) 0 0 0 0 0 0 TOTAL 251 427 505 557 616 110 APPROPRIATIONS Transfer to Statutory Reserves 75 128 152 167 185 0 Investment Fluctuation Reserve (excess / short provision towards depn. on Investments net of taxes and Statutory Reserves) 0 0 0 0 0 0

Transfer to Capital Reserves (Profit on sale of Inv. under "HTM" Category 0 2 2 0 57 0 Redemption Reserve for Bonds 0 0 0 0 0 0 Dividend (inclusive of Dividend Tax where applicable) 59 79 78 97 97 0 Other Reserve 117 218 273 293 277 0

17 Balance carried over to Balance Sheet 0 TOTAL 251 427 505 557 616 110 Earnings per share Basic/Diluted) (in Rs.) 1454 2475 2930 3229 3570 639.09

Organizational Set-up:

Managing Director

MD’s Sectt

C.G.M

CGM’s Sectt

GM (C&IB) GM (Ops) G.M (PB,Tech GM GM (AGRI & GM & CVO &Fin ) (MSME,Treasury CRO) &

The organizational set-up is represented by the Managing Director at the top assisted by the Chief General Manager and 6 General Managers looking after the functions of Operations, Commercial and International Banking, Business Development and Marketing, Treasury, Inspection & Vigilance; and Information & Technology. The Bank has Eight decentralized units i.e., Zonal Offices at Hyderabad, Secunderabad, Warangal, Visakhapatnam, Gulbarga, Nizamabad, Tirupathi and Aurangabad – and three independent Regional Offices at New Delhi, Chennai and Mumbai headed by Deputy General Managers. The Bank also has a Commercial Module comprising of branches dealing with high-value corporate business. Business Profile

The total deposits of the Bank as at the end of June 2009 was Rs.64079.41 crores and the total advances stood at Rs.42796.57 crores. The Bank’s advances to priority sector stood at Rs.16349.00 crores and constituted 38.42% of its net bank credit, while advances to agriculture stood at Rs.7347.07 crores and export credit stood at Rs.1634.00 crores. The gross NPA ratio was stood at 1.24% and net NPA ratio was stood at 0.64% as on 30-06- 2009. The Bank has provided the requisite provisions on NPA as per IRAC norms. The Bank is maintaining floating provision of Rs.79.85 crores to meet contingencies if any, as per the RBI guidelines. The Bank has recorded Net Profit of Rs.110.24 crores (after limited review) as on 30-06-2009 18

Products of our Bank

The Bank is offering the various tailor-made deposits and advances products to suit the requirement of its customers.

Personal Segment : • SBH Varun Mitra • Educational Loan Scheme • SBH Vanita Gold • Educational Loans Plus Scheme • SBH Paryatan Scheme • Educational Loan under • Rakshak Suvidha Scheme coaching Plus scheme • Kanya Vivah Suvidha Scheme • Housing loan Scheme • Valmiki Ambedkar awas • Rajiv Gruhakalpa Scheme yojana • Loans to Pensioners • Adhyapak Suvidha Scheme • Loans to Family Pensioners • Credit to Credit Card holders Scheme • SBH Fast Credit • Two wheeler Loan Scheme • SBH Rail Plus • Computer Loan Scheme • SBH Sanchar Plus • Udyog Bandhu Scheme • Tax Suvidha Scheme • Car Loan Scheme • Mahila Shakthi and Career • Siri sampada sheme Planner Loan. • Cash Key Scheme • SBH Saral Scheme • Loans against term deposit • Recurring Deposit Plus • Clean overdraft scheme • Personal Loans To Trainees for • Loans against kisan vikas patras/ Pilot training and Air Hostess • Loans aginst Indira vikas patras Courses • Loans against National savings • Protested Housing Loan certificate • Loans for Earnest money • Loans against Gold ornaments deposit for allotment of Plot/ • Loans against RBI relief bonds- House/Flat 9%.8.5%10% • SBH reverse Mortgage Loan • Loans against for employees to • Loans against Mortgage Of buy shares of their own Immoveable Properties company • SBH Maxgain –Housing Loan • Loans against Public Sector • Special Scheme for housing Bonds Loan • Loans against Life Insurance • Rajiv Swagruha Housing Policies Scheme • Loans against SBI Magnums • Jawaharlal Nehru National • Loans against security Of Gold Urban Renewable Mission Bonds housing Loan (JNNURAM) • Advances against shares and • SBH 1000 Term Deposit Debentures/Mutual Funds/ Units Scheme Of UTI • Door Step Banking • Software Plus Scheme • SBH Smart Salary • Happy Housing Loan Scheme

New Products launched during the FY- 2009

1. SBHNBF Demand loan for Booking of “TATA NANO CARS” State Bank of Hyderabad Nano Booking Finance.

2. SBH NANO CAR Loan scheme.

3. Educational Loans scheme-concessional rate of interest to the students studying in RGU-IIITs

4. Account opening campaign for (personal segment) from 01.06.2009 to 31.08.2009.

Small Industries and Business Segment • SME Credit Plus • SME Smart Score • Laghu Udyami Credit Card Scheme • Doctor Plus Scheme • Mortgage Loan for SMEs • General Purpose Term Loan • Swarojgar Credit Card • Artisans Credit Card • Tourism Finance • Construction Equipment Loan • Stree Shakti Package • SME CARE • SME HELP • Scheme for financing Commission Agents • Rice Mill Plus Scheme • Scheme for Road Transport Operators.

Commercial & Institutional Segment • Rent Plus Scheme • Mortgage Loan Scheme • Short Term Corporate Loan to non-corporate borrowers Scheme under C&I • (Mfg) and SSI • School Plus Scheme • Flexi Term Loan • Financing of Private Builders for construction of residential/commercial complexes • Financing acquisition of equity in overseas companies • Dealer Finance for dealers ITL tractors • Standby line of credit

20 • Discounting of bills drawn under letter of credit of first class banks • Infrastructure financing • Financing Contractors • Total package for financing traders

Agriculture Segment • Medicinal and Aromatic Plants Scheme • Gram Nivas Scheme • Sahayog Nivas Scheme • Kisan Credit Card Scheme • Agri-clinic Schemes • Kisan Star Card Scheme • General Purpose Credit Card Scheme • Tractor Finance • Financing Co-operatives through PACS/FSCS • Financing Self Help Groups • Mortgage Loans to Agriculturists • Scheme for financing private cold storages for on lending to farmers • Loans against private warehouse receipts • Scheme for Debt Swapping of Borrowers (for Farmers)

The Bank completed implementation of Core Banking Solutions at all its branches in December 2005. A countrywide network of branches is now available, offering customers the benefits of Anywhere Banking, Anytime Banking, Core Power, SMS Alerts, Multi City Cheque facility, Internet Banking for Corporate & Retail customers, Internet Kiosks, CRIS freight payment facility, Direct debit facility, Express clearing & Speed collection, 3 in 1 account facility comprising Deposit, Demat & Trading Accounts, Applications supported by Blocked Amount (ASBA) functionality, Centralised National Electronic Clearing facility, SMS alerts, Centralised outward clearing with drop box facility, Bilingual software for CBS operations etc.

Bank is a member of all Payment Settlement Systems and provides facilities for Inter-bank Remittances to customers through RTGS, NEFT & ECS at all its branches. Additionally Bank also provides State Bank Group Payment facility (SBGRPT) for remittances to branches belonging to State Bank Group, covering over 14000 branches. Further, Foreign Inward Remittance facility through SWIFT, Speed Remittance, MoneyGram & XpressMoney are also made available to the NRI customers. Bank is also in the advanced stage of launching the Mobile Banking services.

21 Cross selling:

The Bank started Cross Selling activities by marketing the insurance policies of SBI Life Insurance Company by obtaining a corporate agency during 2002. During the year 2008-09 we had entered into tie-up arrangements with M/s Tata Asset Management Co. & M/s Sundaram BNP to market mutual fund products besides the existing arrangements with M/s. SBI MF & M/s. UTI MF.

I. OUR TIE-UP PARTNERS FOR CROSS SELLING BUSINESS: Sl. No. Business Activity Tie-up partner 1 Life Insurance M/s SBI Life Insurance Co. Ltd.

2 General M/s United India Insurance Co. Ltd. Insurance

3 Mutual Funds M/s SBI Mutual Funds M/s UTI Mutual funds M/s TATA Mutual Funds M/s SUNDARAM BNP Mutual Funds

4 Credit Cards M/s SBI Cards Ltd

II. CORPORATE GOALS: (2009-10) ( Rs. in Crs) Sl. Business Activity Premium / Fund Target Commission Target No. (Rs.) (Rs.) 1. Life Insurance 250.00 30.00

2. General Insurance 35.50 5.20

3. Mutual Funds 275.00 3.70

4. Credit Cards (Nos) 4000 0.10

22 III. Business Performance: ( Rs. in Crs) Sl. Business Premium Commission Premium Commission No. Activity 31.03.2009 31.03.2009 30.06.2009 30.06.2009 1. Life 63.09 10.15 8.54 1.36 Insurance

2. General 16.11 1.75 3.60 0.34 Insurance

3. Mutual Funds 5938.31 1.43 755.49 0.13 (Gross mobilization) 4. Credit Cards 1936 0.06 173 0.01 (No.)

Business Process Re-Engineering : Business Process re-engineering is rolled out in our Bank with the objectives of (a) enhanced “Customer Delight”. (b) Standardisation of processes and creation of specialist teams at centres of excellence (c) To create tangible impact on bottom-line of the Bank through increased revenues and reduced costs. BPR initiatives in our Bank are now at an advanced stage with many of the large sized branches being linked to Asset and Liability Processing Centres. The back office functions like pension payments, clearing activities have also being shifted to processing centres to enable branches to function as vibrant marketing outfits. Special Cells for Cash Management and Currency Administration have also been started in our Bank at 11 centres linking 171 branches. Merchant Banking Activities :

The Bank had started Merchant Banking operations in year 1991 and extending services like Debenture trusteeship, Bankers to issue, De-mat and eZ-trade (on line trading), e-Invest (ASBA), Project appraisal and debt syndication services. The department had booked an income of Rs.0.73 crores during 2008-09.

Main Objects of the Bank

The State Bank of India (Subsidiary Banks) Act, 1959 was enacted, providing for formation of certain Government or Government Associated Banks as subsidiaries of the State Bank of India and for the constitution, management and control of the subsidiary banks so formed and for matters connected 23 there with or incidental thereto. Chapter II Section 3 (2A) of SBH Act 1956 provides that the Bank shall carry on the business of banking and other business in accordance with the provisions of the ACT and shall have the power to acquire and hold property whether moveable or immoveable for the purpose of its business and to dispose off the same.

Business of the Bank

Sections 36, 36(A), 37 and 38 of Chapter VI of the SBI (SB) Act provide that:

Subsidiary Bank to Act as Agent of State Bank: 36 (1)

A Subsidiary Bank shall, if so required by the State Bank, act as Agent of the State Bank at any place in India for a. Paying, receiving, collecting and remitting money, bullion and securities on behalf of any government in India; and b. Undertaking and transacting any other business, which the Reserve Bank may, from time to time, entrust to State Bank.

Subsidiary Bank to Act as Agent of Reserve Bank: Section 36(A)(1)

A Subsidiary Bank shall, if so required by the Reserve Bank, act as Agent of the Reserve Bank at all places in India where it has a branch for: a. Paying, receiving, collecting and remitting money, bullion and securities on behalf of any government in India; and b. Undertaking and transacting any other business which the Reserve Bank may, from time to time, entrust to it.

Section 36A(4) A subsidiary bank may transact any business or perform any functions entrusted to it under sub-section (1) by itself or through any agency approved by the Reserve Bank.

Other business, which the Bank may undertake

Section 37(1): Subject to the other provisions contained in this Act, a subsidiary bank may carry on and transact the business of banking as defined in clause (b) of Section 5 of the Banking Regulation Act, 1949, and may engage in one or more of the other forms of business specified in sub- section (1) of section 6 of that Act.

Clause (b) of Section 5 of the Banking Regulation Act, 1949, defines “Banking" as the accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque , draft or otherwise.

24 Section 37(2): The Central Government may, after consultation with the Reserve Bank and the State Bank, by order in Writing: a. authorise a subsidiary bank to do such other forms of business as the Central Government may consider necessary or expedient; b. direct that any form of business as is mentioned in the order, shall be carried on subject to such restrictions, conditions and safeguards as may be specified therein; or c. prohibit a subsidiary bank from carrying on or transacting any form of business which, but for this clause, it is lawful for the subsidiary bank to engage in.

Business, which the Bank may not transact: Section 37 (3) Save as otherwise provided under Sub-section (2) of Section 37 of the SBI (SB) Act a subsidiary bank shall not engage in any form of business other than that referred to in sub-section (1) of Section 37 of the said Act.

Bank may acquire the Business of Other Banks: Section 38 (1) A subsidiary bank may, with the approval of the State bank, and shall, if the Reserve Bank, in consultation with State Bank, so direct, enter into negotiations for acquiring the business, including the assets and liabilities of any other banking institution.

BRANCH NETWORK OF THE BANK

The Bank has 8 Zonal Offices, a Commercial module and 29 Regional Offices. The 1034 branches and 28 extension counters as on March 31, 2009. Distribution of Branch Network The population group-wise break up of branches as on June 30,2009 in India is as follows:

Population Number of % Share to Number of % Share to Number of Group Branches as total 31-03- Branches total Branches on 31-03-2008 08 31-03-2009 31-03-2009 30-06-009 Rural 284 28.37 287 27.83 287 Semi Urban 308 30.77 312 30.26 314 Urban 224 22.37 237 22.98 238 Metropolitan / 185 18.49 195 18.93 195 Port town Total 1001 100 1031 100 1034

25 Geographical Distribution of Branches:

State / Union Territory No. of branches % Share to Total

ANDHRA PRADESH 648 62.66 DELHI 13 1.27 GUJARAT 6 0.58 HARYANA 6 0.58 KARNATAKA 122 11.79 KERALA 6 0.58 MADHYA PRADESH 4 0.39 MAHARASHTRA 182 17.61 ORISSA 6 0.58 PONDICHERRY 1 0.09 PUNJAB 2 0.19 RAJASTHAN 2 0.19 TAMIL NADU 24 2.34 CHANDIGARH - ( UT) 1 0.09 UTTAR PRADESH 5 0.48 WEST BENGAL 6 0.58 TOTAL 1034 100

The following is the break-up of specialized branches of the Bank

Specialised Branches No. of branches Agricultural Development Branches 24 Industrial Finance Branches 3 NRI Branch 1 Overseas Branches 2 Personal & Commercial Branches 2 P&SB Branches 8 SIB Branches 8 SSI Branches 3 Treasury Branches 3 Commercial Branches 2 Service branches 14 Asset Recovery Branch 1

26 ISB Branch 1 Total 72 Bank has 214 Currency chest branches and 289 branches conducting Govt. business

4. A brief history of the issuer since its incorporation giving details of its activities including any reorganization, reconstruction or amalgamation, changes in its capital structure, (authorized, issued and subscribed) and borrowings, if any

HISTORY & BACKGROUND OF THE BANK State Bank of Hyderabad was constituted as ‘Hyderabad State Bank’ on August 8th 1941 under the Hyderabad State Bank Act, 1941. The Bank started as the central bank to the erstwhile princely State of Hyderabad for managing its currency - Osmania Sikka - and public debt, besides functioning as a commercial bank. The first branch of the Bank was opened at Gunfoundry, Hyderabad on 5th April 1942. In 1953 the Bank took over the assets and liabilities of the Hyderabad Mercantile Bank Ltd., and in the same year, the Bank started conducting Government and Treasury business as an agent of Reserve Bank of India. In 1956, the Bank was taken over by Reserve Bank of India as its first subsidiary and its name was changed from Hyderabad State Bank to ‘State Bank of Hyderabad’ The Bank became a subsidiary of the State Bank of India on 1st October, 1959 and is now the largest Associate Bank of State Bank of India. The Bank’s core geographical area of operation continues to be the erstwhile State of the Nizam of Hyderabad comprising of Telangana region in Andhra Pradesh, Hyderabad-Karnataka region of Karnataka and Marathwada region in Maharashtra. With 709 of its branches located in these areas, the Bank has been playing a catalytic role in the economic development of these regions through financing of commerce, industry and agriculture. The Bank has, over the years, also broad-based its operations in other parts of the country and now has a network of 1675 outlets (1034branches and 28Extension Counters, 5 satellite offices and 610 ATMs) spread over 14 States and 2 Union Territories. 289 branches conduct government business (State/Central) and 214 branches maintain currency chests.

The Bank has established 34 specialized branches that focus on identified specific segments of business like Personal & Services Banking, Agricultural Development Banking, and Small Scale Industries. Treasury Branches for Government business, etc.

All branches of the Bank are fully computerized and have extended working hours. All ATMs of the Bank are linked to the network of more than 10,000 ATMs of the State Bank Group enabling customers to draw cash anywhere in 27 the country at any time. The Single Window Services facility at branches provides convenience to customers to conduct all their banking transactions at a single point in the branch.

The Bank has been adjudged as the Second Best Public Sector Bank by Business Today-KPMG and Financial Express-Ernst & Young for the year 2006- 07 and ranked as the Second Best bank among nationalized banks by Financial Express for the year 2007-2008. Our Bank’s Savings Bank product has been adjudged as # 1 in customer satisfaction, conducted by Gallup, Inc. and Indian Banks Association, in their 2008 national survey of public, private and foreign Banks (23 banks).

Capital Structure Of The Bank : No. of Shares Face Value Issue Value (Rs.) (Rs.) A. Authorised Capital 500,00,00,000 - 50,00,000 Equity Shares of Rs. 100 each B. Issued, Subscribed and Paid-up 17,25,00,000 17,25,00,000 Capital 17,25,000 Equity Shares of Rs. 100 each C. Paid Up Capital after the Present Offer 17,25,00,000 17,25,00,000 17,25,000 Equity Shares of Rs. 100 each

Notes to Capital Structure: 1) Following is the capital history since 1959: (No. and Amount of Shares) Year Increase Mode Cumulative Paid-up ended (Decrease) capital March 31 in capital Opening Balance/ Issue 50,000 shares 50,000 shares of Shares at Face Value 1959 of RS.100/- of Rs.100/ Issue of Shares each at premium of Rs.Nil per Rs.0.50 crore share etc 3,75,000 shares Rights shares at face 4,25,000 shares 1985 of RS.100/- value of Rs.100 each RS.4.25 crore 13,00,000 Rights shares at face 17,25,000 shares 1987 shares of value of Rs.100 Rs.17.25 crore Rs.100/- each • State Bank of India holds the entire paid up share capital of the Bank.

28 Shareholding Pattern (as on March 31, 2009):

Sr. Category Number of Shares % No. Held Shareholding A. Promoter's Holding 1. Promoters* 1725000 100.00% - Indian Directors/Relatives - Foreign Promoters NIL NIL 2. Persons acting in Concert - - Total 1725000 100.00

*The Promoter Group of the company comprises of the State Bank of India.

The bank has not raised any bridge loan against the proceeds of this private placement. The bank has not issued any equity shares out of the revaluation reserves or for consideration other than cash. The shareholders of the bank do not hold any warrant, option or any debentures, which would entitle them to acquire further shares in the Bank. The number of issued shares of the Bank as on date of the issue is 17,25,000. The bank as part of its ongoing capital augmentation programme may issue bonds/securities/loans etc. as deemed necessary

5. Details of debt securities issued and sought to be listed including face value, nature of debt securities, mode of issue i.e. public issue or private placement.

Issue Size Rs. 475 crore Instrument Unsecured, Redeemable, Non-Convertible, Subordinated Upper Tier II Bonds in the nature of Promissory Notes. Credit Rating i) ‘AAA’/Stable by CRISIL ii) ‘CARE AAA’ by CARE Face Value/ Issue Price Rs. 10,00,000/- per Bond Minimum Application Size 10 bonds

29 Tenor 15 Years from the Deemed Date of Allotment Coupon Rate 8.60% p.a.

Interest Payment Annually , subject to RBI guidelines Interest on Application Interest on application money will be paid to Money Investors at the Coupon Rate of 8.60 % per annum (subject to deduction of tax at source, as applicable) and the same will be reckoned from the date of realisation of cheque(s)/demand draft(s), upto the date preceding to the Deemed Date of allotment. Interest Payment Date 31st March every year Call option The Bank may exercise call option at par only with the prior approval of Reserve Bank of India and only if the instrument has run for at least Ten years from the deemed date of allotment. Step-up option The Bank may have a step-up option which may be exercised only once during the whole life of the instrument, in conjunction with the call option, after the lapse of ten years from the deemed date of allotment. If the step up option is exercised, Step-up of 50 bps over and above the coupon will be paid for all subsequent years. Lock-in clause a) Upper Tier II instruments shall be subjected to a lock-in clause in terms of which the issuing bank shall not be liable to pay either interest or principal, even at maturity, if (i) the bank’s CRAR is below the minimum regulatory requirement prescribed by RBI, (ii) or the impact of such payment results in bank’s CRAR falling below or remaining below the minimum regulatory requirement prescribed by RBI. b) The interest amount due and remaining unpaid may be allowed to be paid in the latter years in cash/ Cheque subject to the bank complying with the above regulatory requirement. While paying such unpaid interest and principle, Banks are allowed to pay compound interest at a rate not exceeding the coupon rate of the relative Upper Tier II Bonds, on the outstanding principle and interest.

30 Redemption With the prior approval of RBI, bulleted redemption at par at the end of the 15th year from the deemed date of allotment, if the call option is not exercised earlier. Upper Tier II instruments shall not be redeemable at the initiative of the holder

Seniority of Claim The claims of the investors in these Bonds shall be (a) superior to the claims of investors in instruments eligible for inclusion in Tier I capital; and (b) subordinate to the claims of all other creditors Listing Proposed to be listed at Wholesale Debt Segment (WDM) of the BSE Depository NSDL and CDSL Issuance & Trading Demat mode

*Subject to TDS as applicable. Investors are advised to read the Information Memorandum para 15 for more details.

6. Issue size

Aggregate amount of Rs.475 crores - Unsecured Redeemable Non- Convertible Subordinated Upper Tier II Bonds for Cash at Par.

7. Details of utilization of the issue proceeds

The funds raised through this private placement are not meant for any specific project as such and therefore the proceeds of this issue shall be utilized for the regular business activities of the Bank. The utilization of the funds proposed to be raised is entirely at the discretion of the Bank and no monitoring agency has been appointed to monitor the deployment of funds.

8. A statement containing particulars of the dates of, and parties to all material contracts, agreements involving financial obligations of the issuer

By very nature of its business, the Bank is involved in a large number of transactions involving financial obligations and therefore it may not be possible to furnish details of all material contracts and agreements involving financial obligations of the Bank. However, the contracts and documents referred to in Para A below (not being contracts entered into in the ordinary course of the business carried on by the Bank) which are or may be deemed to be material have been entered into by the Bank. Copies of these contracts and documents may be inspected at the Head Office of the Bank between 10.00 a.m. and 2.00 p.m. on any working day until the issue closing date. 31

A. MATERIAL CONTRACTS AND DOCUMENTS: a. The Bank has been Constituted under State Bank of India(Subsidiary Banks)Act,1959and hence the provision of for submitting certified true copies of Memorandum and Articles of Association shall not be applicable. b. Copy of letter appointing Karvy Computer share Private Ltd. as Registrar and Transfer Agents and copy of MoU entered into between the Bank and the Registrar c. Copy of letter appointing IDBI Trusteeship Services Ltd. as Trustees to the Bondholders d. Board Resolution dated 21st May, 2009 authorizing the issue of Bonds offered under terms of this Disclosure Document. e. Consent from the Trustees to the Bondholders and Registrars to the Issue referred to in this Disclosure Document to act in their respective capacities. f. Copy of application made to the BSE for grant of in-principle approval for listing of Bonds. g. Letter from CRISIL conveying the credit rating for the Bonds of the Bank and the rating rationale pertaining thereto. h. Letter from CARE conveying the credit rating for the Bonds of the Bank and the rating rationale pertaining thereto.

9.Details of other borrowings including any other issue of debt securities in past (Rs. In crore) Borrowings 31.03-2009 1.Borrowings in India i. RBI --- ii..Other Banks 100 iii. GOI Borrowings -- iv. Tier I Bond Issue -- v. Bonds Guaranteed by GOI -- vi. Perpetual Debt Instruments 350 vii. Others 1813 2. Borrowings outside India 451 3. Subordinated Tier II Bonds – Lower Tier II 160 4. Subordinated Tier II Bonds – Upper Tier II 1700 5. Deposits 62449 Total 67023

Previous issues by the Bank- Outstanding Bonds issued by the Bank outstanding as on the date of Offer Document and terms of issue (Rs.in lakhs) Series Year of Size (Rs Credit Credit Rating Coupon Redemption Serial Placeme in Rating Received (% p.a) Date No nt lakhs) Agency IV 2005-06 50000 ICRA Ltd LAAA 7.45 28.04.2015 ICRA Ltd LAAA V 2006-07 55000 CARE Ltd CARE AAA 8.80 29.04.2016 ICRA Ltd LAAA VI 2007-08 16000 CARE Ltd. CARE AAA 9.15 23.09.2017 CARE Ltd CARE AAA VII(UT) 2007-08 50000 CRISIL AAA/STABLE 9.35 19.03.2023 CARE Ltd CARE AAA VIII(IPDI) 2007-08 35000 CRISIL AAA/STABLE 9.95 NA CARE Ltd. CARE AAA IX(UT) 2009-10 32500 CRISIL AAA/STABLE 8.39 05.06.2024 CARE Ltd. CARE AAA X(UT) 2009-10 45000 CRISIL AAA/STABLE 8.50 21.08.2024

SERIES - IV

No. of Sl.No. Name of the Bond Holder Address Bonds % of holding held HDFC Bank lt Custody Services, Trade Word A Wing, Gr. Floor, Kamala 1 CBT EPF A/C HSBC AMC LTD 2095 42 Mills Compound, SB Marg, Lower Parel, Mumbai – 400013 HDFC Bank lt Custody Services, Trade Word A CBT EPF A/C ICICI PRUDENCITAL Wing, Gr. Floor, Kamala 2 1775 36 AMC LTD Mills Compound, SB Marg, Lower Parel, Mumbai - 400013 HDFC Bank lt Custody Services, Trade Word A Wing, Gr. Floor, Kamala 3 CBT EPF EDLI A/C HSBC AMC LTD 435 9 Mills Compound, SB Marg, Lower Parel, Mumbai - 400013

33 HDFC Bank lt Custody Services, Trade Word A CBT EPF A/C ICICI PRUDENCITAL Wing, Gr. Floor, Kamala 4 145 3 AMC LTD Mills Compound, SB Marg, Lower Parel, Mumbai - 400013 Allahabad Bank, Treasury Branch Allahabad Bank 5 ALLAHABAD BANK Building, 3rd Floor 100 2 37 Mumabi Samachar Marg Fort, Mumbai - 400023 Khadya sadan 13th FOOD CORPORATION OF INDIA Floor 16 6 98 2 CPF TRUST 20 Barakamba Lane New Delhi - 110001 6th Floor, South wing, NUCLEAR POWER CORPORATION Vikram Sarabai Bhavan 7 OF INDIA LTD EMPLOYEES 50 1 Anushakthi Nagar PROVIDENT FUND Mumbai-400094 HDFC Bank lt Custody Services, Trade Word A CBT EPF A/C ICICI PRUDENCITAL Wing, Gr. Floor, Kamala 8 50 1 AMC LTD Mills Compound, SB Marg, Lower Parel, Mumbai - 400013 ALLAHABAD BANK (EMPLOYEES) 2, Netaji Subhas Road 9 50 1 PENSION FUND Kolkata-700001 ALLAHABAD BANK STAFF 2, Netaji Subhas Road 10 50 1 PROVIDENT FUND Kolkata-700001

SERIES – V

No. of Sl.No. Name of the Bond Holder Address Bonds % of holding held 6th Floor, West Wing, Central Office, LIFE INSURANCE CORPORATION OF 1 Yogakshema, 2500 45 INDIA INVESTMENT DEPARTMENT Jeevan Bima Marg, Mumbai-400021 25 28 Atlanta, Nariman SAHARA INDIA FINANCIAL 2 Point 1250 23 CORPORATION LTD Mumbai-400021 C/o ICICI Securities Primary Dealership Limited, ICICI Centre, 3 COAL MINES PROVIDENT FUND 800 15 H.T.parekh Marg, Church Gate Mumabi-400020 State bank of STATE BANK OF HYDERABAD Hyderabad, PPG Dept, 4 EMPLOYEES PENSION FUND TRUST 150 3 head Office, 1975 Gunfoundry,

34 Hyderabad - 500001

Duliajan, P.O.Diliajan OIL INDIA LIMITED EMPLOYEES 5 Dist Dibrugarh Assam 102 2 PROVIDENT FUND 786602 9th Floor, Nirmal TATA CONSULTANCY SERVICES Building 6 100 2 EMPLOYEES PROVIDENT FUND Nariman Point, Mumbai-400021 State bank of STATE BANK OF HYDERABAD Hyderabad, PPG Dept, 7 (PAYMENT OF GRATUITY TO head Office, 100 2 EMPLOYEE'S) TRUST Gunfoundry, Hyderabad - 500001 HDFC Bank Ltd., Custody services, Trade World ‘A’ Wing, Gr 8 CBT EPF EPS A/C HSBC AMC LTD Floor, Kamal Mills 81 1 compound, SB Marg, Lower Parel, Mumbai - 400013 Deutsche bank AG, DB House Hazarimal Somani BIRLA SUN LIFE INSURANCE Marg, 9 79 1 COMPANY LIMITED Next to Sterling Theatre, Fort P.O.box.No.1142, Mumbai-400001 South Building, Akurli MAHINDRA & MAHINDRA LTD STAFF Road 10 50 1 PROVIDENT FUND Kandivali East, Mumbai-400101

SERIES - VI No. of Sl.No. Name of the Bond Holder Address Bonds % of holding held 6th Floor, West Wing, Central Office, LIFE INSURANCE CORPORATION OF 1 Yogakshema, 1600 100 INDIA INVESTMENT DEPARTMENT Jeevan Bima Marg, Mumbai-400021

SERIES - VII (UT) No. of Sl.No. Name of the Bond Holder Address Bonds % of holding held HDFC Bank lt Custody Services, Trade Word A 1 CBT EPF EPS A/C HSBC AMC LTD Wing, Gr. Floor, Kamala 1787 36 Mills Compound, SB Marg, Lower Parel, 35 Mumbai - 400013

State bank of India, EPFO Securities Service Branch, Iind Floor CENTRAL BOARD OF TRUSTIES 2 Mumabi main Branch, 1409 28 EMPLOYEES PROVIDENT FUND Mumbai Samachar Marg Mumbai- 400023 HDFC Bank lt Custody Services, Trade Word A CBT EPF A/C ICICI PRUDENCITAL Wing, Gr. Floor, Kamala 3 185 4 AMC LTD Mills Compound, SB Marg, Lower Parel, Mumbai - 400013 Deutsche bank AG, DB House Hazarimal Somani BIRLA SUN LIFE INSURANCE Marg, 4 150 3 COMPANY LIMITED Next to Sterling Theatre, Fort P.O.box.No.1142, Mumbai-400001 C/o Andhra Bank Head Office ANDHRA BANK EMPLOYEES 5 Dr.Pattabhi Bhavan, 150 3 PENSION FUND Saifabad Hyderabad-500004 11 th Floor, Maker Tower F 6 AXIS BANK LIMITED 130 3 Cuffe Parade, Colaba, Mumbai-400005 HDFC Bank lt Custody Services, Trade Word A Wing, Gr. Floor, Kamala 7 CBT EPF EDLI A/C HSBC AMC LTD 119 2 Mills Compound, SB Marg, Lower Parel, Mumbai - 400013 C/o SBI Pension Funds Ltd, No.32, NPS TRUSTEES - SBI PENSION FUND 8 Maker Chambers-III, 100 2 SCHEME1 Nariman Point, Mumbai-400021 25 28 Atlanta, Nariman SAHARA INDIA FINANCIAL 9 Point 100 2 CORPORATION LTD Mumbai-400021 82 83 makers Towers, 8 ANDHRA BANK FUNDS FOREX F Block, 10 100 2 DEPARTMENT Cuffe Parade, Mumbai-400005

36 SERIES – VIII (IPDI) No. of Sl.No. Name of the Bond Holder Address Bonds % of holding held OIL AND NATURAL GAS Tel Bhavan, Dehradun 1 CORPORATION OF INDIA LIMITED 550 16 248003 EMPLOYEES PROVIDENT FUND TRUST PRSB Section, ONGC SELF CONTRIBUTORY POST Basement 2 RETIREMENT AND DEATH IN SERVICE Old Secretariat Blog, 478 14 SUPER ANNUATION BENEFIT TRUST ONGC Tel Bhavan Dehradun-248003 INDIAN OVERSEAS BANK STAFF 762, Anna Salai, 3 250 7 GRATUITY FUND Chennai-600002 Deutsche bank AG, DB House Hazarimal Somani BIRLA SUN LIFE INSURANCE Marg, 4 150 4 COMPANY LIMITED Next to Sterling Theatre, Fort P.O.box.No.1142, Mumbai-400001 NATIONAL MINERAL DEVELOPMENT 10-3-311/, Khanij 5 CORPORATION LTD EMPLOYEES PF Bhavan, Masab tank 118 3 TRUST Hyderabad-500028 I & FM Department, HO, 4th Floor United Bank of India, 6 UNITED BANK OF INDIA H.O. 11 100 3 Hemanth Basu Sarani Kolkata, West Bengal 700001 Citi Bank NA, Custody Services, ING VYSYA LIFE INSURANCE 7 77,Ramnord 100 3 COMPANY LIMITED House,Dr.A B Road, Worli, Mumbai – 400018 H/O PF Dept, 3rd floor, PUNJAB NATIONAL BANK Rajendra Bhavan, 8 100 3 EMPLOYEES PROVIDENT FUND Rajendra Place, New Delhi 110008 Core 2 Scope INDIAN OIL CORPORATION LTD Complex, 9 (REFINERIES DIVISION) EMPLOYEES 7 Institutional Area, 100 3 PROVIDENT FUND Lodhi Road New Delhi- 110003 Sahara India Bhavan, 1 Sahara India Employees , Kapoor Thala 10 75 2 Contributory Provident Fund Trust Complex, Lucknow - 226024

SERIES - IX Name of the No. of Bonds Sl.No. Address % of holding Bond Holder held 6th Floor, West LIFE INSURANCE Wing, CORPORATION Central Office, 1 OF INDIA Yogakshema, 3250 100 INVESTMENT Jeevan Bima DEPARTMENT Marg, Mumbai- 400021

SERIES - X Name of the No. of Bonds Sl.No. Address % of holding Bond Holder held 6th Floor, West LIFE INSURANCE Wing, CORPORATION Central Office, 1 OF INDIA Yogakshema, 4500 100 INVESTMENT Jeevan Bima DEPARTMENT Marg, Mumbai- 400021

List of outstanding FC (foreign currency) Investment/Borrowing by the Bank as on 30.06.2009

Issue Date of Lender Amount Outstandin Last Date Cou- Placemen Drawn in g Amount* of pon t USD* repayment (% p.a) FC Investment as on - - - - - 30.06.2009 FC Borrowings 30.06.09 Bank of 15 15 30.09.09 1.70 Baroda, Dubai 12.05.09 Bank of 10 10 12.11.09 2.95 Baroda, London 29.05.09 SBI Bahrain 10 10 31.08.09 1.67 18.06.09 Syndicate 10 10 18.09.09 1.83 Bank London Total 45 45 *Figures in Millions

10. Any material event/ development or change at the time of issue or subsequent to the issue, which may affect the issue or the investor’s decision to invest / continue to invest in the debt securities

The Bank hereby declares that there has been no material event, development or change at the time of issue which may affect the issue or the investor’s decision to invest/ continue to invest in the debt securities of the Bank.

11. Particulars of the debt securities issued (i) for consideration other than cash, whether in whole or part, (ii) at a premium or discount, or (iii) in pursuance of an option.

The Bank hereby confirms that it has not issued any shares or debt securities or agreed to issue any shares or debt securities for consideration other than cash, whether in whole or in part, at a premium or discount or in pursuance of an option since inception.

12. List of Top ten holders of Equity holders of the issuer :

A. TOP 10 EQUITY SHARE HOLDERS:

Sr. No. Name of the Category Number of Percentage Shareholders Equity Shares 1 Promoter: FI 17,25,000 100% State Bank of India

13.Undertaking to use a common form of transfer

The transfer of bonds in dematerialized form would be in accordance with the rules/procedures as prescribed by Depository/Depository Participant.

14.Redemption amount, period of maturity, yield

The face value of the Bond will be redeemed at par, on expiry of 180 months from the deemed date of Allotment or after 120 months (10 years) from the Deemed Date of Allotment if the Bank exercises Call Option. The Bond will not carry any obligation, for interest or otherwise, after the Date of Redemption. The Bonds held in the Dematerialised Form shall be taken as discharged on payment of the redemption amount by the Bank on maturity to the registered. Bondholders whose name appear in the Register of Bondholders on the record date. Such payment will be a legal discharge of the liability of the Bank towards the Bondholders. On such payment being

39 made, the Bank will inform NSDL/CDSL and accordingly the account of the Bondholders with NSDL/CDSL will be adjusted. The Bonds are negotiable instruments transferable by endorsement and delivery in the denomination of Rs.10,00,000/- each. The bonds will not be redeemable at the initiative of the holder or without the prior approval of Reserve Bank of India. Hence, the prior approval of Reserve Bank of India will be taken before redemption of bonds on due date or on Call Option exercised by the Bank, as required in terms of their guidelines addressed to all commercial banks vide their communication Circular No RBI/2009-2010/37, DBOD.No.BP.BC.6 /21.01.002/2009-10 dated 1st July, 2009.

15. Information relating to Terms of Offer

Key Terms:

Tenor : 15 Years

Coupon : The bonds will carry a coupon rate of 8.60%

Face Value Per Bond

Each Bond will carry a face value of Rs.10, 00,000/- and is issued at par at cash of Rs.10, 00,000/-.

Minimum Application Size The minimum investment shall be 10 (ten) bonds i.e. Rs.1,00,00,000/- and in multiples of 1(one) Bonds i.e. Rs.10, 00,000 thereafter.

Date of Allotment Date: 08.09.2009, shall be the Date of Allotment of the Bonds. All the benefits under the bonds will accrue to the investor from this date even though the actual allotment may take place on a date other than the specified Date of Allotment.

Credit Rating

CRISIL has assigned a ‘AAA’/Stable (pronounced as Triple A Stable) rating to the captioned debt programme of the Bank. This is the highest credit quality rating assigned by CRISIL. The rated instrument carries the lowest credit risk.

CARE has assigned a ‘CARE AAA’ [pronounced as Triple A] rating to the captioned debt programme of the Bank. This is considered to be the best credit quality offering highest safety for timely servicing of debt obligations. Such instruments carry minimal credit risk.

40 The rating is not a recommendation to buy, sell or hold Securities and investors should take their own decision. The rating may be subject to revision or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating. The rating obtained is subject to revision at any point of time in the future. The rating agencies have a right to suspend, withdraw the rating at any time on the basis of new information etc.

Listing Application shall be made to the Bombay Stock Exchange of India Ltd. to list the bonds of the Bank now being offered through this Information Memorandum and for permission to deal in such Bonds.

If the permissions to deal in and for an official quotation of the Bonds is not granted by the BSE, the Bank shall forthwith repay, without interest all such moneys received from the applicants in pursuance of this Information Memorandum. If such monies are not repaid within eight days after the Bank becomes liable to repay them (i.e. from the date of refusal or within 70 days from the date of the closing of the subscription list, whichever is earlier), then the Bank will be liable to repay the monies, with interest, as prescribed under Section 73 of the Companies Act, 1956.

Underwriting The Bonds offer is not underwritten.

RECORD DATE The Record Date will be 30 days prior to each Interest Payment Date or the Date of Redemption as the case may be.

Interest on Application Money Interest at the coupon rate (subject to deduction of tax at source) will be paid in respect of all valid applications including the refunds. Such interest shall be paid from the date of realization of the cheques/demand drafts up to the date immediately preceding the Deemed Date of Allotment. Refund cheques/Warrants/Demand Drafts will be mailed within seven days of Deemed Date of Allotment. The Interest Cheque(s)/ Demand Draft(s) for Interest on Application Money shall be dispatched by the Bank along with allotment advise/ Rejection letter, as the case may be, and will be dispatched by registered post to the sole/ first applicant, at the sole risk of the applicant.

Interest on the Bonds

The Bonds will carry interest at the rate of 8.60 % p.a. for a tenure of 15 Years from the deemed date of allotment. The interest will be paid from the deemed Date of Allotment (subject to deduction of tax at source at the rates prevailing from time to time under the Income Tax Act,

41 1961 or any other statutory modification or re-enactment thereof) and is payable annually on March 31st each year during the tenure of the Bonds except for the last interest payment. In case the call option is not exercised by the Bank, the step-up coupon rate of 50 bps will be paid for the remaining tenor.

If any interest payment date falls on a day, which is not a business day in Hyderabad, Andhra Pradesh ("Business Day" being a day on which Commercial Banks are open for business in Hyderabad, Andhra Pradesh), then payment of interest will be made on the next business day but without liability for making payment of interest for the delayed period. The interest payable shall be calculated by multiplying the coupon rate by the principal amount, multiplying such product by actual number of days in the interest period concerned dividing by 365 (a leap year would be considered as 366 days for the purpose of interest calculation).

Interest Period a. The first interest period is defined as the actual number of days falling between the Deemed Date of Allotment and 30th March 2010 including both the first date and the last date. The first interest payment would be made on 31st March, 2010. b. The second interest period is defined as the actual number of days between 31st March 2010 and 30th March 2011 including both the dates and so on. c. The last interest period is defined as the actual number of days falling between 31st March and redemption date including both the first date and the last date. The last interest payment would be made on the redemption date along with the redemption of principal amount

Payment of Interest The interest payment would be made by RTGS / Electronic Clearing System or by means of cheques/demand drafts/ (Interest warrants payable at par at specified branches of the Bank) and will be mailed to the Bondholders. Payment of interest will be made to the holders of the Bonds whose names appear in the list of beneficiaries given by NSDL/CDSL to the Bank on Record Date.

Tax Deduction at Source Tax as applicable under the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof will be deducted at source. The investor(s) desirous of claiming exemption from deduction of income tax at source on the interest on application money are required to submit the necessary certificate(s), in duplicate, along with the application form in terms of Income Tax rules.

Interest payable subsequent to the Deemed Date of Allotment of Bonds will be treated as “Interest on Securities” as per Income Tax Rules. Bondholders 42 desirous of claiming exemption from deduction of income tax at source on the interest payable on Bonds should submit tax exemption certificate/ document, under Section 193 of the Income Tax Act, 1961, if any, at the office of the Bank, at least 45 days before the payment becoming due. Regarding deduction of tax at source and the requisite declaration forms to be submitted, prospective investor is advised to consult his tax consultant.

Put Option No put option is available for the Bonds.

Call Option

In terms of RBI Circular No RBI/2009-2010/37, DBOD.No.BP.BC.6 /21.01.002/2009-10 dated 1st July, 2009, Banks may issue the instruments with a Call Option subject to strict compliance with each of the following conditions:

a) Call option may be exercised only if the instrument has run for at least ten years;

b) Call option shall be exercised only with the prior approval of RBI (Department of Banking Operations & Development). While considering the proposals received from banks for exercising the call option the RBI would, among other things, take into consideration the bank’s CRAR position both at the time of exercise of the call option and after exercise of the call option.

The Bank shall have the option of redeeming the Bonds at par, subject to the prior approval of the RBI and in accordance with applicable laws and regulations in effect at the time relating to, among other things, CRAR, replacement capital and interest rate, in whole but not in part, at the end of 10th year from the Deemed Date of Allotment at a redemption price equal to the principal amount thereof plus accrued interest. For availing of this facility, the Bank shall notify its intention to do so through a public notice at least in one All-India English and one regional language daily newspaper in Mumbai, New Delhi, Kolkata and Chennai and/ or through notice sent by registered post to the sole/ first allottee or sole/ first Beneficial Owner of the Bonds at least 1 (one) month prior to the due date.

Step-Up Option In terms of RBI Circular No RBI/2009-2010/37, DBOD.No.BP.BC.6 /21.01.002/2009-10 dated 1st July, 2009, the issuing bank may have a step-up option which may be exercised only once during the whole life of the instrument, in conjunction with the call option, after the lapse of ten years from the date of issue. The step-up shall not be more than 100 bps. The limits on step-up apply to the all-in cost of the debt to the issuing banks.

If the Step-up Option is exercised, a step up of 50 bps over and above the coupon rate of 8.60% will be paid, for all subsequent years. The Step-up Option shall not in any way alter other characteristics of the instruments, except the coupon rate of the instruments. Lock-in Clause

In terms of RBI Circular No RBI/2009-2010/37, DBOD.No.BP.BC.6 /21.01.002/2009-10 dated 1st July, 2009

1. Upper Tier II instruments shall be subjected to a lock-in clause in terms of which the issuing bank shall not be liable to pay either interest or principal, even at maturity, if • the bank’s CRAR is below the minimum regulatory requirement prescribed by RBI, or • the impact of such payment results in bank’s CRAR falling below or remaining below the minimum regulatory requirement prescribed by RBI.

2. However, banks may pay interest with the prior approval of RBI when the impact of such payment may result in net loss or increase the net loss provided CRAR remains above the regulatory norm. For this purpose 'Net Loss' would mean either (a) the accumulated loss at the end of the previous financial year; or (b) the loss incurred during the current financial year.

3. The interest amount due and remaining unpaid may be allowed to be paid in the later years in cash/ cheque subject to the bank complying with the above regulatory requirement. While paying such unpaid interest and principal, banks are allowed to pay compound interest at a rate not exceeding the coupon rate of the relative Upper Tier II bonds, on the outstanding principal and interest.

REDEMPTION

In terms of RBI Circular No RBI/2009-2010/37, DBOD.No.BP.BC.6 /21.01.002/2009-10 dated 1st July, 2009 Upper Tier 2 instruments shall not be redeemable at the initiative of the holder. All redemptions shall be made only with the prior approval of the Reserve Bank of India (Department of Banking Operations & Development).

The face value of the Bond will be redeemed at par, on expiry of 180 months from the Deemed Date of Allotment or earlier, if the call option is exercised, which, in any case, shall not be before the expiry of atleast ten years from the Deemed Date of Allotment. The Bond will not carry any obligation, for interest or otherwise, after the Date of Redemption. The Bonds held in the Dematerialized Form shall be taken as discharged on payment of the redemption amount by the Bank on maturity to the registered Bondholders whose names appear in the Register of Bondholders on the record date. Such payment will be a legal discharge of the liability of the Bank 44 towards the Bondholders. On such payment being made, the Bank will inform NSDL/CDSL and, accordingly, the account of the Bondholders with NSDL/CDSL will be adjusted. The Bonds are negotiable instruments transferable by endorsement and delivery in the denomination of Rs.10,00,000/- each. The bonds will not be redeemable at the initiative of the holder or without the prior approval of Reserve Bank of India. Hence, the prior approval of Reserve Bank of India will be taken before redemption of bonds on due date or on Call Option exercised by the Bank, as required in terms of their guidelines addressed to all commercial banks vide their communication Circular No RBI/2009-2010/37, DBOD.No.BP.BC.6 /21.01.002/2009- 10 dated 1st July, 2009

EFFECT OF HOLIDAYS Should any of the dates defined above or elsewhere in the Information Memorandum, excepting the Deemed Date of Allotment, fall on a Sunday or a Public Holiday, the next working day shall be considered as the effective date(s). In case any Interest Payment Date(s) and/or the Date of Redemption falls on a holiday, interest/ redemption will be paid on the next working day (i.e. a day on which scheduled commercial banks are open for business). No additional interest will be paid as a result of the interest payment and/or Redemption being made on a day falling after the Interest Payment Date/ Date of Redemption under this condition.

Issue of Bonds in dematerialized form The Bank will be issuing the Bonds in dematerialized form. The Bank will be opening the accounts with NSDL and CDSL for issuing these Bonds. Applicant should mention their Depository Participant’s name, DP-ID and Beneficiary Account Number in the appropriate place in the Application Form. The Bank will take necessary steps to credit the Depository Account of the allottee(s) with the number of bonds allotted. Responsibility for correctness of applicant's demographic details given in the application form vis-a-vis his/her depository participant would rest with the applicant and the bank would not be liable with regard to the above in any manner whatsoever.

Transfer of Bonds

The transfer of bonds in dematerialized form would be in accordance with the rules/procedures as prescribed by Depository/Depository Participant.

TERMS OF PAYMENT Applications should be for a minimum of 10 Bonds. All cheques /drafts should be in favour of “State Bank of Hyderabad A/c-Upper Tier II Bonds Issue- Series-XI" and crossed Account Payee only. The entire amount of Rs. 10 lakh (Rs. Ten Lakh only) per bond is payable on application.

45 The full face value of the Bonds has to be paid up on application. Investors may also remit the application money through RTGS (if remitted from branches of other Banks), with instructions to credit the same to the above account No. 62105466585 maintained at our Nariman Point Branch Mumbai ”, IFSC Code: “SBHY0020001”

PROCEDURE FOR APPLICATION AND MODE OF PAYMENT This being a Private Placement Offer, Investors who are established/Resident in India and who have been addressed through this Communication directly, only are eligible to apply.

Applications for the Bonds must be in the prescribed form (enclosed) and completed in Block Letters in English and as per the instructions contained therein.

Applications complete in all respects (along with all necessary documents as detailed in the memorandum of information) must be submitted before the last date indicated in the issue time table or such extended time as decided by the Bank, at any of the designated collection centers, accompanied by the subscription amount by way of cheque(s)/draft(s) drawn on any bank including a co-operative bank which is situated at and is a member of the Bankers’ clearing house located at a place where the application form is submitted.

Outstation cheque(s)/Bank draft(s) drawn on Bank(s) not participating in the clearing process at the designated clearing centres will not be accepted. Money orders/postal orders will also not be accepted. The Bank assumes no responsibility for any applications/cheques/ DDs lost in mail. All cheques /drafts should be in favour of “State Bank of Hyderabad A/c – Upper Tier II Bonds Issue - Series XI” and crossed Account Payee only. Investors may also remit the application money through RTGS with instructions to credit the same to account maintained with SBH, Nariman Point Branch, Mumbai. The RTGS code number of Nariman Point Branch is SBHY0020001.The entire amount of Rs. 10 lakh (Rs. Ten Lakh only) per bond is payable on application.

No separate receipt will be issued for the Application money. However, the Bank’s designated collection branches or Arrangers receiving the duly completed Application Form will acknowledge receipt of the application by stamping and returning to the applicant the Acknowledgment Slip at the bottom of the each Application Form.

As a matter of precaution against possible fraudulent encashment of Interest Warrants/Cheques due to loss/misplacement, the applicant should furnish the full particulars of his or her bank account (i.e. Account Number, name of the bank and branch) at the appropriate place in the Application Form. Interest warrants will then be made out in favour of the bank for credit to his/her account so specified and dispatched to the investors, who may deposit the same in the said bank. 46

WHO CAN APPLY

The issue of Private Placement Upper Tier-II issue is being offered to various categories of investors as mentioned below:

1.Provident Funds/ Superannuation/Pension Fund, Gratuity Funds.

2.Commercial Banks, Financial Institutions, Insurance Companies

3.State/ Central Co-operative Banks, Development Co-operative Banks, Land Development Banks, Regional Rural Banks and Primary Co Operative Banks subject to their internal and other appropriate approvals.

4.Mutual Funds, Port Trusts

5.Trust and Association of Person which are authorised to invest in Bonds

6.Body Corporates, Companies, and Societies authorised to invest in Bonds

7. Individuals (excluding minors and NRIs) to whom this Information Memorandum is specifically addressed.

8.Scientific and/or Industrial Research Organisations authorised to invest in the Bonds.

9..Other Government / Non Government agencies/Board/Institutions etc

Although above investors are eligible to apply, only those persons, who are individually addressed through direct communication by the Bank, are eligible to apply for the Bonds. No other person may apply. Posting of Information Memorandum on the Designated Stock Exchange website should not be construed as an offer to issue and has been posted only as it is stipulated by SEBI. Investors should check about their eligibility before making any investment.

The Applications must be accompanied by certified true copies of (1) Memorandum and Articles of Association/constitution/Bye-laws (2) Resolution authorising investment and containing operating instructions (3) Specimen signatures of authorised signatories and (4) Necessary forms for claiming exemption from deduction of tax at source on the interest income / interest on application money, wherever applicable.

16. Discount at which the offer is being made and effective price for the investor

Not applicable as the issue is being made at par.

47 17. Debt Equity Ratio (before & after the proposed issue)

DEBT EQUITY RATIO (Rs. in crores) Particulars Pre-Issue Post Issue

LOAN FUNDS Subordinated Bonds 2,835.00 3310.00 Other Long Term Borrowings ------TOTAL 2,835.00 3310.00

SHAREHOLDERS’ FUNDS Equity Share Capital 17.25 17.25 Reserves & Surplus (excluding Revaluation 3,301.32 3,301.32 Reserve) TOTAL 3,318.57 3,318.57

DEBT/ EQUITY RATIO Long Term Debt/ Equity Ratio 0.72 1.00

18.Debt Servicing Track Record

State Bank of Hyderabad. has a consistent record of paying principal installments and interest on all loans, bonds and deposits on due dates. No default has been committed by the Bank in servicing of its debt liabilities.

19. Permission and Consent from the creditors The Bank is not required to obtain consent of the creditors for any issue to be made under this document.

20.Trustees to the Bondholders

IDBI Trusteeship Services Ltd., Mumbai, has been appointed as Trustees for the proposed issue of unsecured bonds. The Bank and the Trustees will enter into a Trustee Agreement specifying inter alia, the powers, authorities and obligations of the Trustees and the Bank. By applying for the Bonds, the Bondholders shall without further action or deed, be deemed to have irrevocably given their consent to and authorised the Trustees or any of their agents or authorised officials to do interalia all acts, deeds, matters and things in respect of or relating to the Bonds. All the rights and remedies of the Bondholders shall vest in and shall be exercised by the Trustees without reference to the Bondholders. No Bondholder shall be entitled to proceed directly against the Bank unless the Trustees, having become so bound to proceed, failed to do so. The Trustees will endeavour to protect the interest of the Bondholders in the event of default in regard to timely payment of interest and principal by the Bank.

21.Credit Rating

CRISIL has assigned a ‘AAA/Stable’ (pronounced as Triple A with Stable Outlook) rating to the captioned debt programme of the Bank. This is the highest credit quality rating assigned by CRISIL. The rated instrument carries the lowest credit risk.

CARE has assigned a ‘CARE AAA [Triple A]’ rating to the captioned debt programme of the Bank. This is considered to be the best credit quality offering highest safety for timely servicing of debt obligations. Such instruments carry minimal credit risk.

The rating is not recommended to buy, sell or hold Securities and investors should take their own decision. The rating may be subject to revision or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating. The rating obtained is subject to revision at any point of time in the future. The rating agencies have a right to suspend, withdraw the rating at any time on the basis of new information etc.

22.Listing with Stock Exchanges

Application shall be made to the Bombay Stock Exchange of India Ltd. to list the bonds of the Bank now being offered through this Information Memorandum and for permission to deal in such Bonds.

23. Summary Statement

Issuer State Bank Of Hyderabad Issue Size Rs. 475 crore Instrument Unsecured, Redeemable, Non-Convertible, Subordinated Upper Tier II Bonds in the nature of Promissory Notes. Credit Rating i) ‘AAA/stable’ by CRISIL ii) ‘CARE AAA’ by CARE Security Unsecured Face Value/ Issue Price Rs. 10,00,000/- per Bond Minimum Application 10 bonds Size Tenor 15 Years from the Deemed Date of Allotment Coupon Rate 8.60 % p.a.

Interest Payment Annually , subject to RBI guidelines Interest on Application Interest on application money will be paid to Investors, Money at the Coupon Rate of 8.60% (subject to deduction of tax at source, as applicable) and the same will be reckoned from the date of realisation of cheque(s)/demand draft(s), upto the date preceding to the deemed date of allotment. Interest Payment Date 31st March every year Issue Opens on* 02.09.2009 Issue Closes on* 08.09.2009 Pay-in Date* Deemed Date of 08.09.2009 Allotment* Call option The Bank may exercise call option at par only with the prior approval of Reserve Bank of India and only if the instrument has run for at least Ten years from the deemed date of allotment. Step-up option The Bank may have a step-up option which may be exercised only once during the whole life of the instrument, in conjunction with the call option, after the lapse of ten years from the deemed date of allotment. 50 If the step up option is exercised, Step-up of 50 bps over and above the coupon will be paid for all subsequent years. Lock-in clause a) Upper Tier II instruments shall be subjected to a lock- in clause in terms of which the issuing bank shall not be liable to pay either interest or principal, even at maturity, if (iii) the bank’s CRAR is below the minimum regulatory requirement prescribed by RBI, (iv) or the impact of such payment results in bank’s CRAR falling below or remaining below the minimum regulatory requirement prescribed by RBI. b) The interest amount due and remaining unpaid may be allowed to be paid in the latter years in cash/ Cheque subject to the bank complying with the above regulatory requirement. While paying such unpaid interest and principle, Banks are allowed to pay compound interest at a rate not exceeding the coupon rate of the relative Upper Tier II Bonds, on the outstanding principle and interest. Redemption With the prior approval of RBI, bulleted redemption at par at the end of the 15th year from the deemed date of allotment, if the call option is not exercised earlier. Upper Tier II instruments shall not be redeemable at the initiative of the holder

• The Bank reserves the right to change the issue closing date and in such an event, the Deemed Date of Allotment for the Bonds may also be revised by the Bank at its sole and absolute discretion. In the event of any change in the above issue programme, the investors will be intimated about the revised issue programme by the Bank

52 STATE BANK OF HYDERABAD (Associate of the State Bank of India) Head Office: High Bank Towers, Gunfoundry, Hyderabad 500 001 (AP). Tel No: (040) 23387201, 23387301, Fax: (040) 23387562 Website: www.sbhyd.com

Application Form No: Dear Sirs, Having read and understood the contents of the Memorandum of Private Placement, we apply for allotment to us of the Unsecured, Redeemable Non-Convertible, Subordinated Upper Tier II Bonds The amount payable on application as shown below is remitted herewith On allotment, please place our name on the Register of Bond holders. We bind ourselves to the terms and conditions as contained in the Information Memorandum for Private Placement. We note that the Bank is entitled in its absolute discretion to accept or reject this application whole or in part without assigning any reason whatsoever. (PLEASE READ THE INSTRUCTIONS CAREFULLY BEFORE FILLING THIS FORM) Form in which certificate is to be issued [ ] Demat DP NAME: NSDL [ ] CDSL [ ] DPID: CLIENT ID: We understand that in case of allotment of Bonds to us / our Beneficiary Account as mentioned above would be credited to the extent of Bonds allotted. In case the Bonds allotted to us cannot be credited to our Beneficiary Account for any reason whatsoever, we will accept physical Bonds certificates.

The application shall be for a minimum of 10 (Ten) Bonds and in Multiples of 10 (Ten) Bonds thereafter No. of Bonds applied for (In words) No. of Bonds applied for (In figures) Amount (Rs.) (in words) Date DraftCheque / Demand No.Cheque /Demand Draft drawn on

We are applying as {Tick (9) whichever is applicable} 1 Company Body 2 Commercial Bank 3 Regional Rural Corporate Bank 4 Co-operative Banks 5 Financial Institution 6 Insurance Companies

53 7 Mutual Fund 8 Provident/Superannuatio 9 Port Trusts n /Gratuity Funds 10 NBFC & Residuary 11 Association of Persons 12 Others (Please NBFC specify)

Application Details :

First Applicant’s Name in Full (Block letters)

Second Applicant’s Name in Full

Third Applicant’s Name in Full

Mailing Address in Full (Do not repeat name. Post Box No. alone is not sufficient.)

Pin: Tel: Fax: Tax Details PAN or GIR No. IT Circle / Ward / District Not Allotted

Details of Bank Account Bank Name & Branch______

Account No: ______Nature of Account ______

Tax Deduction Status: (Please tick one) Fully Exempt (Please furnish exemption certificate): ______Tax to be deducted at Source: ______

Specimen Signature Name of the Authorised Signatory Designation Signature 1. 2. Acknowledgement Slip shall be given to the Investors as shown below the Instructions.

STATE BANK OF HYDERABAD 54 (Associate of the State Bank of India) Head Office: High Bank Towers, Gunfoundry, Hyderabad 500 001 (AP). Tel No: (040) 23387201, 23387301, Fax: (040) 23387562 Website: www.sbhyd.com

ACKNOWLEDGEMENT SLIP Sr. No.: Received from ______Address______an application for ______Bonds along with Cheque/Demand Draft No. ______Dated ______Drawn on ______for Rs. ______(Rupees______only) (Note: Cheques and Drafts are subject to realisation)

55 INSTRUCTIONS 1) Application Forms must be completed in BLOCK LETTERS IN ENGLISH. A blank space must be between two or more parts of the name. For Example A B C D E L I M I T E D 2) Application forms duly completed in all respect must be lodged at the collection centers mentioned below, before the closing of the subscription. Cheques/Demand Drafts should be in favour or ‘State Bank of Hyderabad– Upper Tier II Bonds Issue- Series-XI’ and crossed ‘Accounts Payee only’. Cheques / Demand drafts may be drawn on any bank including a co-operative bank, which is situated at and is a member or sub-member of the Banker’s clearing house located at the Designated Collection centers as mentioned elsewhere in the Information Memorandum. Investors may also remit the application money through RTGS (if remitted from branches of other Banks), with instructions to credit the same to the above account No. 62105466585 maintained at our Nariman Point Branch Mumbai ”, IFSC Code: “[SBHY0020001●]” 3) Cash, outstation cheques, money orders, postal orders and stock invest will NOT be accepted. 4) As a matter of precaution against possible fraudulent encashment of interest warrants due to loss / misplacement, applicants are requested to mention the full particulars of their bank account as specified in the Application Form. Interest warrants will then be made in favour of the bank for credit to the applicant’s account. In case the full particulars are not given, cheques will be issued in the name of the applicant at his own risk. 5) Receipt of application will be acknowledged by the Bank in the “Acknowledgement Slip” appearing below the Application Form. No separate receipt will be issued. 6) All applicants should mention their permanent Account No. or the GIR number allotted under the Income Tax Act, 1961 and the Income Tax Circle/Ward district. In case where neither the PAN nor GIR is allotted, the fact of non-allotment should be mentioned in the application form in the space provided. 7) The Application would be accepted as per the terms and conditions of the Bonds outlined in the Memorandum of Private Placement. 8) Signatures should be made in English. Signatures made in any other Indian language must be attested by an authorized official of a Bank or by a Magistrate/Notary Public under his/her official seal. 9) Those desirous of claiming tax exemptions on interest on application money are compulsorily required to submit a certificate issued by the Income Tax Officer / relevant declaration forms as pr Income Tax Act, 1961 along with the application form. In case the above documents are not enclosed with the application forms, TDS will be deducted on interest on application money. For subsequent interest payments such certificates have to be submitted periodically.

56 Application forms can be submitted to the offices of the Arrangers mentioned in the Information Memorandum or at the branches of State Bank of Hyderabad as mentioned in the Information Memorandum and shown below:

Designated Collection Centres State Bank of Hyderabad Nariman Point Branch, Mumbai Telephone No. –022-22844096, Fax 022-22851321