Axis Limited (incorporated in the Republic of with limited liability under the Indian Companies Act, 1956 with Registration No. 04-20769) 5,055,500 Global Depositary Receipts each representing one Equity Share Offer Price: U.S.$18.90 per Global Depositary Receipt These listing particulars (the “Listing Particulars”) relate to an offering (the “Offering”) of 5,055,500 equity shares of par value Rs. 10 per equity share of Limited (the “Bank”) in the form of Global Depositary Receipts each representing one equity share (the “GDRs”, which term includes the Rule 144A GDRs and the Regulation S GDRs, each as defined below). The Offering comprises an offering of GDRs in the (the “Rule l44A GDRs”) only to qualified institutional buyers (“QIBs”) in reliance on Rule 144A (“Rule l44A”) under the U.S. Securities Act of 1933, as amended (the “Securities Act”) and an offering of GDRs outside the United States (the “Regulation S GDRs”) in reliance on Regulation S (“Regulation S”) under the Securities Act. The Bank may withdraw the Offering at any time, and the Bank and the Lead Managers (as defined below) reserve the right to reject any offer to purchase the GDRs, in whole or in part, and to sell to any prospective investor less than the full amount of the GDRs sought by such investor. The GDRs will be issued in global form. The Rule 144A GDRs will be evidenced by a Temporary Master Rule 144A GDR (the “Temporary Master Rule 144A GDR”), in registered form, which will be deposited on or about the Closing Date (as defined below) with a custodian for, and registered in the name of Cede & Co. as a nominee of, The Depository Trust Company of New York (“DTC”) and the Regulation S GDRs will be evidenced by a Temporary Master Regulation S GDR (the “Temporary Master Regulation S GDR”, and together with the Temporary Master Rule 144A GDR, the “Temporary Master GDRs”), in registered form, which will be deposited on or about the Closing Date with, and registered in the name of a common depositary for Euroclear Bank S.A./N.V. (“Euroclear”) and Clearstream Banking, societe anonyme (“Clearstream, Luxembourg”). Interests in the Temporary Master Regulation S GDR will be exchanged on the day which is the later of (i) the expiration of the 40 day period beginning on the latest of the commencement of the GDRs offering, the original issue date of the GDRs and the latest issue date with respect to additional GDRs (if any) issued pursuant to over allotments (the “Distribution Compliance Period”), and (ii) the date on which the underlying equity shares are listed on the BSE and the NSE (each as defined below), for interests in the existing Master Regulation S GDR issued on or about 21 March 2005. The Temporary Master Rule 144A GDR, the existing Master Rule 144A GDR issued on or about 21 March 2005 (together with the existing Master Regulation S GDR issued on or about 31 March 2005, the “Existing GDRs”), the Temporary Master Regulation S GDR and the Master Regulation S GDR are referred to collectively herein as the “Master GDRs”. Interests in the Master GDRs will be exchangeable for GDRs in definitive form in accordance with the provisions set out in “Summary of Provisions Relating to GDRs in Master Form”. Payment for the GDRs will be required on the Closing Date, which is expected to be 24 September 2009 (the “Closing Date”). The Rule 144A GDRs and the Regulation S GDRs will be issued pursuant to an amended and restated deposit agreement to be dated on or about 24 September 2009 (the “Deposit Agreement”) by and between the Bank and The Bank of New York Mellon, as depositary (the “Depositary”). Simultaneously with the Offering, the Bank is conducting (i) an offering of 33,044,500 equity shares to be issued to “qualified institutional buyers” (as defined in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulation, 2009 (the “SEBI Regulations”)), pursuant to Chapter VIII of the SEBI Regulations, (the “QIP Offering”), and (ii) a preferential allotment of up to 4,902,257 equity shares to the Bank’s Promoters (as such term is defined herein) (the “Preferential Allotment”). Application has been made to the Authority (“FSA”) in its capacity as competent authority (the “UK Listing Authority”) under the Financial Services and Markets Act 2000 (the “FSMA”) for the GDRs to be admitted to the Official list of the UK Listing Authority (the “Official List”) and application has been made to the London plc (the “London Stock Exchange”) to admit the Regulation S GDRs and Rule 144A GDRs to trading under the symbols “AXBD” and “AXBE” respectively on its Professional Securities Market (“PSM”) through its International Order Book (the “IOB”). The PSM is an unregulated market for the purposes of Directive 2004/39/EC, the Markets in Financial Instruments Directives. It is expected that admission to listing and to trading on the PSM will become effective and that unconditional dealings in the GDRs through the IOB will commence on 28 September 2009. However, there can be no assurance that the applications to the UK Listing Authority and to the London Stock Exchange will be approved. The Bank has undertaken to apply to have the equity shares approved for listing on the Limited (the “BSE”) and the National Stock Exchange of India Limited (the “NSE”). The closing price of the Bank’s equity shares on the NSE and the BSE on 16 September 2009 was Rs. 907.65 and Rs. 907.35 respectively. While the beneficial interests in the GDRs are represented by the Temporary Master GDRs, such GDRs will be listed on the Official List as separate securities from the Existing GDRs, and will not be fungible with such Existing GDRs. When such beneficial interests are converted to beneficial interests in the Master GDRs as described herein, such GDRs will be listed as the same as the Existing GDRs on the Official List and will be fungible with the Existing GDRs. Investment in the GDRs involves risks. See “Risk Factors” beginning on page 9. The GDRs are of a specialist nature and should normally only be bought and traded by investors who are knowledgeable in investment matters. A copy of this document will be delivered to the Registrar of Companies at Ahmedabad, the Reserve (the “RBI”), the BSE, the NSE and the Securities and Exchange Board of India (“SEBI”) for record purposes only. The Bank has not registered the GDRs under the Securities Act. The Lead Managers are offering the GDRs only to QIBs under Rule 144A and to persons outside the United States under Regulation S. See “Transfer Restrictions” and “Subscription and Sale” for information about transfer restrictions and eligible offerees. Offerees are also subject to restrictions imposed by the RBI. See “Supervision and Regulation” for information about restrictions imposed by the RBI.

Lead Managers and Joint Bookrunners

JP Morgan Goldman Sachs International The date of these Listing Particulars is 22 September 2009 These Listing Particulars are issued in compliance with the listing rules of the FSA (the “Listing Rules”) made under section 73A of the FSMA by the UK Listing Authority. This document comprises Listing Particulars for the purposes of section 79(2) of the FSMA. The Bank accepts responsibility for the information contained in this document. The Bank declares that, having taken all reasonable care to ensure that such is the case, the information contained in these Listing Particulars is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import. Without limiting in any way the Bank’s responsibility as outlined in the previous paragraph, the Bank, having made all reasonable enquiries, confirms that these Listing Particulars contain all information with respect to the Bank and the GDRs, which is material in the context of the issue and Offering of the GDRs, the statements contained in these Listing Particulars relating to the Bank are in every material particular true and accurate and not misleading, the opinions, expectations and intentions expressed in these Listing Particulars with regard to the Bank are honestly held, have been reached after considering all relevant circumstances and are based on reasonable assumptions. There are no other facts in relation to the Bank or the GDRs, the omission of which would, in the context of the issue and Offering of the GDRs, make any statement in these Listing Particulars misleading in any material respect and all reasonable enquiries have been made by the Bank to ascertain such facts and to verify the accuracy of all such information and statements and that these Listing Particulars do not contain an untrue statement of a material fact or omit to state a material fact required to be stated or necessary in order to make the statements, in the light of the circumstances under which they are made, not misleading. No person is authorised to give any information or to make any representation in connection with the Offering or sale of the GDRs other than as contained in these Listing Particulars and, if given or made, such information or representation must not be relied upon as having been authorised by the Bank or any of the Lead Managers. Interested investors should therefore rely only upon the information contained and the statements made herein. The delivery of these Listing Particulars does not imply that the information herein is correct at any time subsequent to its date. Each prospective purchaser, by accepting delivery of these Listing Particulars, agrees to the foregoing. When making an investment decision, investors must rely on their own examination of the Bank and the terms of the Offering, including the merits and risks involved. The Bank is not making any representation to any purchaser of the GDRs regarding the legality of an investment in the GDRs by such purchaser under any legal investment or similar laws or regulations. Neither these Listing Particulars nor any information supplied in connection with the issue of the GDRs should be considered as a recommendation or constituting an invitation or offer by the Bank that any recipient of these Listing Particulars should purchase any GDRs. The contents of these Listing Particulars should not be construed as providing legal, business, accounting or tax advice. The information contained herein is correct only on the date of these Listing Particulars, notwithstanding the date of delivery of these Listing Particulars and of the sale of the GDRs. The publication of these Listing Particulars, the Offering and the sale and delivery of the GDRs do not imply under any circumstances that there has been no adverse change or no event likely to give rise to any adverse change with respect to the condition (financial or other) of the Bank or that the information contained herein is still correct after the date of these Listing Particulars. No representation or warranty, express or implied, is made by the Lead Managers or any of their affiliates as to the accuracy or completeness of the information set out herein, and nothing contained in these Listing Particulars may be relied upon as a promise or representation by the Lead Managers or their affiliates as to past or future events. Notwithstanding any investigation that the Lead Managers may have conducted with respect to the information contained herein, the Lead Managers do not accept any liability in relation to the information contained in these Listing Particulars or its distribution or with regard to any other information supplied by or on behalf of the Bank, and assume no responsibility or liability for the accuracy or completeness of any such information or any other information provided by the Bank in connection with the issue of the GDRs or their distribution. Each person receiving these Listing Particulars acknowledges that such person has not relied on the Lead Managers or any person affiliated with the Lead Managers in connection with investigation of the accuracy of such information or its investment decisions. The GDRs have not been recommended by a securities commission or regulatory authority in the Republic of India or otherwise. If there is any doubt as to the contents or meaning of the information contained in these Listing Particulars, investors should consult an authorised or professional adviser who may provide specialised advice on the acquisition of financial instruments. These Listing Particulars do not constitute an offer to sell, or a solicitation by or on behalf of the Bank, any Lead Manager or any person to subscribe for or purchase any of the GDRs in any jurisdiction where it is unlawful for such person to make such an offer or solicitation. The distribution of these Listing Particulars and the Offering or sale of the GDRs in certain jurisdictions is restricted by law. Persons into whose possession these Listing Particulars may come are required by the Lead Managers and the Bank to inform themselves about and to

i observe such restrictions. These Listing Particulars may not be used for, or in connection with, any offer to, or solicitation by, anyone in any jurisdiction or under any circumstances in which such offer or solicitation is not authorised or is unlawful. Further information with regard to restrictions on offers and sales of the GDRs and the distribution of these Listing Particulars is set forth under “Subscription and Sale”. Each purchaser of the GDRs is deemed to have acknowledged, represented and agreed that following the designated allocation of GDRs to such purchaser, its total interest in the paid-up share capital of the Bank, whether direct or indirect, beneficial or otherwise (“Holding”), when aggregated together with its existing Holding and/or the Holding of any “associated enterprise” (as defined under Section 92A of the Indian Income Tax Act, 1961 (the “Income Tax Act”)), will not exceed 5% of the total paid-up share capital of the Bank. As per certain amendments issued by the Ministry of Finance, erstwhile overseas corporate bodies (“OCBs”), as defined under applicable regulations in India, are not eligible to invest in India, and entities prohibited from buying, selling or dealing in securities by SEBI, shall not be eligible to participate in an offering of GDRs. Each purchaser of the GDRs is deemed to have acknowledged, represented and agreed that it is eligible to invest in India under applicable law, including under the Issue of Foreign Currency Convertible Bonds and Ordinary shares (Through Depository Receipt Mechanism) Scheme, 1993, as amended from time to time (the “Depository Receipt Scheme”) and has not been prohibited by SEBI from buying, selling or dealing in securities. Certain of the Lead Managers whose names appear on the cover page of these Listing Particulars will sell Rule 144A GDRs through registered broker-dealers in the United States affiliated with such Lead Managers. The equity shares represented by the GDRs will be registered in the name of the Depositary and the Depositary will issue the GDRs pursuant to the terms of the Deposit Agreement. Except as described herein, beneficial interests in the Master GDRs will be shown on, and transfers thereof will be effected through, records maintained by DTC, Euroclear and Clearstream, Luxembourg and their direct and indirect participants. Beneficial interests in the Regulation S GDRs may only be held through Euroclear and Clearstream, Luxembourg. Beneficial interests in the Rule 144A GDRs may only be held through DTC. Delivery of the Temporary Master GDRs will be made on the Closing Date. The GDRs have not been and will not be marketed or made available in whole or in part to the public in conjunction with the application for the GDRs to be admitted to the Official List and to trading through the IOB on the PSM. In connection with the Offering, the Lead Managers or any agent of them may, outside India and to the extent permitted by applicable laws and regulations, over-allot or effect transactions with a view to supporting the market price of the GDRs at a level higher than that which might otherwise prevail. However, there is no obligation on the Lead Managers or any agent of them to do this. Such transactions, if commenced, may begin on the date of adequate public disclosure of the Offer Price, may be effected in the over-the-counter market or otherwise and may be discontinued at any time, but in no event later than 30 days after the date of such adequate public disclosure of the Offer Price. Neither the Lead Managers nor any of their agents intends to disclose the extent of any such stabilisation transactions otherwise than in accordance with any legal or regulatory obligation to do so. None of the Lead Managers nor any of their respective agents will effect any stabilisation activity with respect to the equity shares.

CERTAIN U.S. MATTERS

THE GDRs OFFERED HEREBY AND THE SHARES UNDERLYING THE GDRs HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. ACCORDINGLY, THE GDRs ARE BEING SOLD IN THE UNITED STATES ONLY TO QIBs IN RELIANCE ON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY RULE 144A AND TO NON-U.S. PERSONS OUTSIDE THE UNITED STATES IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S. PROSPECTIVE PURCHASERS ARE HEREBY NOTIFIED THAT SELLERS OF THE GDRs MAY BE RELYING ON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A. FOR A DESCRIPTION OF CERTAIN RESTRICTIONS ON TRANSFER OF THE GDRs, SEE “TRANSFER RESTRICTIONS”.

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH, OR APPROVED OR DISAPPROVED BY, THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE “SEC”)

ii OR ANY STATE SECURITIES COMMISSION IN THE UNITED STATES OR ANY OTHER UNITED STATES REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT PASSED ON OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THESE LISTING PARTICULARS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES.

FOR NEW HAMPSHIRE RESIDENTS ONLY

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENCE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES (“RSA 421-B”) WITH THE STATE OF NEW HAMPSHIRE, NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE, CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT, NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION, MEANS THAT THE SECRETARY OF STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT, ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

NOTICE TO EUROPEAN ECONOMIC AREA INVESTORS

These Listing Particulars have been prepared on the basis that all offers of GDRs other than the Offering contemplated in these Listing Particulars in the United Kingdom once these Listing Particulars have been approved by the competent authority in the United Kingdom and published in accordance with the Prospectus Directive as implemented in the United Kingdom, will be made pursuant to an exemption under the Prospectus Directive, as implemented in Member States of the European Economic Area (the “EEA”), from the requirement to produce a prospectus for offers of the GDRs. Accordingly, any person making or intending to make any offer within the EEA of the GDRs should only do so in circumstances in which no obligation arises for the Bank or any of the Lead Managers to produce a prospectus for such offer. Neither the Bank nor any of the Lead Managers has authorised, nor do they authorise, the making of any offer of the GDRs through any financial intermediary, other than offers made by the Lead Managers which constitute the final placement of the GDRs contemplated in these Listing Particulars. Each person in a Member State of the EEA which has implemented the Prospectus Directive (each, a “Relevant Member State”) who receives any communication in respect of, or who acquires any GDRs, to whom any offer is made under the Offering will be deemed to have represented, acknowledged and agreed that it is a “qualified investor” within the meaning of Article 2(1)(e) of the Prospectus Directive; and in the case of any GDRs acquired by it as a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, such financial intermediary will also be deemed to have represented, acknowledged and agreed that the GDRs acquired by it in the Offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than qualified investors, as that term is defined in the Prospectus Directive, or in circumstances in which the prior consent of the Joint Bookrunners has been given to the offer or resale; or where the GDRs have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors, the offer of those GDRs to it is not treated under the Prospective Directive as having been made to such persons. The Bank, the Lead Managers and their affiliates, and others will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements. Notwithstanding the above, a person who is not a qualified investor and who has notified the Joint Bookrunners of such fact in writing may, with the consent of the Joint Bookrunners, be permitted to subscribe for or purchase the GDRs. The Lead Managers may rely on the truth and accuracy of the foregoing representations, acknowledgements and agreements and will not be responsible for any loss occasioned by such reliance. For the purposes of this representation, the expression an “offer of GDRs to the public” in relation to any GDRs in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any GDRs to be offered so as to enable an investor to decide to purchase or subscribe for the GDRs, as the same may be varied in that Relevant Member State by any measure

iii implementing the Prospectus Directive in that Relevant Member State, and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

NOTICE TO UNITED KINGDOM INVESTORS

These Listing Particulars are only being distributed to and is only directed at (i) persons who are outside the United Kingdom; (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”); or (iii) high net worth entities falling within Article 49(2)(a) to (d) of the Order and other persons to whom it may lawfully be communicated (such persons collectively being referred to as “relevant persons”). The GDRs are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such GDRs will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on these Listing Particulars or any of their contents.

NOTICE TO INVESTORS IN CERTAIN OTHER COUNTRIES

For information to investors in certain other countries, see “Subscription and Sale”.

AVAILABLE INFORMATION

For so long as any of the GDRs are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, and the Bank is neither subject to Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, the Bank will furnish to any holder or beneficial owner of GDRs, or to any prospective purchaser designated by any such registered holder, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act upon request of any such person. The Bank has agreed to furnish the Depositary with such notices of meetings of the holders of equity shares and other reports and communications that are generally made available to holders of equity shares as the Depositary may reasonably request. Such information will include the annual audited financial statements of the Bank, prepared in conformity with Indian generally accepted accounting principles (“Indian GAAP”) as applicable to and as published by the Bank after the date of these Listing Particulars. Such documents will be available for inspection while any of the GDRs are outstanding at the specified office of the Depositary which, as of the date of these Listing Particulars, is at 101 Barclay Street, 22nd Floor West, New York, NY 10286, United States of America. Upon receipt thereof, the Depositary will make available such reports, notices and communications to all recorded holders of the GDRs. GDR holders can address any queries they may have in relation to their holding of GDRs to their broker or other advisor from whom they purchased the GDRs. The Bank’s corporate headquarters is located at 131, Maker Tower-F, 13th Floor, Cuffe Parade, Colaba, Mumbai 400 005, India (Telephone: +91-22-6707-4407).

ENFORCEMENT OF CIVIL LIABILITIES

The Bank is a limited liability company incorporated under the laws of India. Substantially all directors and executive officers of the Bank and some of the experts named herein are residents of India and a substantial portion of the assets of such persons are located in India. As a result, it may be difficult for investors to effect service of process upon the Bank or such persons outside India or to enforce judgments obtained against such parties outside India. Recognition and enforcement of foreign judgments is provided for under Section 13 of the Code of Civil procedure, 1908 (the “Code”) on a statutory basis. Section 13 and Section 44A of the Code provide that a foreign judgement shall be conclusive regarding any matter directly adjudicated upon except: (i) where the judgement has not been pronounced by a court of competent jurisdiction, (ii) where the judgement has not been given on the merits of the case, (iii) where it appears on the face of the proceedings that the judgement is founded on an incorrect view of international law or a refusal to recognise the law of India in cases in which such law is applicable, (iv) where the proceedings in which the judgement was obtained were opposed to natural justice, (v) where the judgement has been obtained by fraud, and (vi) where the judgment sustains a claim founded on a breach of any law in force in India.

iv India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgements. However, Section 44A of the Code provides that where a foreign judgement has been rendered by a superior court within the meaning of that section in any country or territory outside India which the Government has by notification declared to be a reciprocating territory, it may be enforced in India by proceedings in execution as if the judgement had been rendered by the relevant court in India. However, Section 44A of the Code is applicable only to monetary decrees not being in the nature of any amounts payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty. The United Kingdom has been declared by the Government of India to be a reciprocating territory but the United States has not been so declared. A judgment of a court in a jurisdiction which is not a reciprocating territory may be enforced only by a fresh suit upon the judgment and not by proceedings in execution. The suit must be brought in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of damages awarded as excessive or inconsistent with public policy. A party seeking to enforce a foreign judgment in India is required to obtain approval from RBI to execute such a judgment or to repatriate outside India any amount recovered and any such amount may be subject to income tax in accordance with applicable laws.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

The Bank publishes its financial statements in Indian rupees. For the convenience of the reader, these Listing Particulars present translations into U.S. dollars of certain Indian rupee amounts. The audited non-consolidated financial statements of the Bank as of and for the years ended 31 March 2007, 2008 and 2009 and the audited consolidated financial statements for the years ended 31 March 2007, 2008 and 2009 included in these Listing Particulars have been prepared in accordance with Indian GAAP as applicable to banks and are referred to herein as the “Financial Statements”. The Financial Statements have been presented in Indian rupees. Indian GAAP differs in certain significant respects from U.S. GAAP. For a description of the significant differences between Indian GAAP and U.S. GAAP relevant to the Bank, see “Summary of Significant Differences between Indian GAAP and U.S. GAAP”. References to a particular “fiscal” or “fiscal year” are to the Bank’s fiscal year ended 31 March of such year. In this document, all references to “India” are to the Republic of India and all references to the “Government” are to the Government of India. All references to “Indian rupees” or “Rs.” are to the currency of India. All references to “U.S. dollars”, “dollars”, “$” and “U.S.$” are to the currency of the United States of America. On 11 September 2009, the exchange rate between Indian rupees and U.S. dollars was Rs. 48.39 = U.S.$1.00. Unless otherwise stated, the U.S. dollar equivalent information presented herein has been calculated on the basis of the Rs./U.S.$ exchange rate as of 31 March 2009 of Rs. 50.87 = U.S.$1.00 and is provided solely for the convenience of the readers of these Listing Particulars and should not be construed as a representation that the Indian rupee amounts represent, or could have been or could be converted into, U.S. dollars at such rate of exchange. See “Exchange Rate Information and Regulations”. As a result of rounding adjustments, the figures or percentages in a column may not add up to the total for such column.

INDUSTRY AND MARKET DATA

Information regarding market position, growth rates and other industry data pertaining to the Bank’s business contained in these Listing Particulars consists of estimates based on data reports compiled by professional organisations and analysts, on data from other external sources and on the Bank’s knowledge of its markets. This data is subject to change and cannot be verified with complete certainty due to limits on the availability and reliability of the raw data and other limitations and uncertainties inherent in any statistical survey. In many cases, there is no readily available external information (whether from trade associations, government bodies or other organisations) to validate market-related analyses and estimates, so the Bank relies on internally developed estimates. While the Bank has compiled, extracted and reproduced market or other industry data from external sources, including third parties or industry or general publications, neither the Bank nor the Lead Managers have independently verified that data and neither the Bank nor the Lead Managers makes any representation regarding the accuracy of such data. Similarly, while the Bank believes its internal estimates

v to be reasonable, such estimates have not been verified by any independent sources and neither the Bank nor the Lead Managers can assure potential investors as to their accuracy.

Where information in these Listing Particulars has been sourced from third parties, this information has been accurately reproduced and as far as the Bank is aware and is able to ascertain from information published by these third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading. Third party information has been set out below in the sections entitled “Overview of the Indian Financial Sector” and “Indian Securities Market”.

FORWARD-LOOKING STATEMENTS

These Listing Particulars include statements which contain words or phrases such as “will”, “would”, “aim”, “aimed”, “will likely result”, “is likely”, “are likely”, “believe”, “expect”, “expected to”, “will continue”, “will achieve”, “anticipate”, “estimate”, “estimating”, “intend”, “plan”, “contemplate”, “seek to”, “seeking to”, “trying to”, “target”, “propose to”, “future”, “objective”, “goal”, “project”, “should”, “can”, “could”, “may”, “will pursue”, “in management’s judgment” and similar expressions or variations of such expressions, that are “forward-looking statements”. Actual results may differ materially from those suggested by the forward-looking statements due to certain risks or uncertainties associated with management’s expectations with respect to, but not limited to, the actual growth in demand for banking and other financial products and services, the management’s ability to successfully implement its strategy, future levels of impaired loans, the Bank’s growth and expansion, the adequacy of the Bank’s allowance for credit and investment losses, technological changes, investment income, the Bank’s ability to market new products, cash flow projections, the outcome of any legal or regulatory proceedings the Bank is or may become a party to, the future impact of new accounting standards, management’s ability to implement its dividend policy, the impact of Indian banking regulations on it, the Bank’s ability to roll over its short-term funding sources, the Bank’s exposure to market risks and the market acceptance of and demand for internet banking services. By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains, losses or impact on net interest income and net income could materially differ from those that have been estimated. In addition, other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this document include, but are not limited to: general economic and political conditions in India and the other countries which have an impact on the Bank’s business activities or investments; the monetary and interest rate policies of the Government; inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices; the performance of the financial markets in India and globally; changes in Indian and foreign laws and regulations, including tax, accounting and banking regulations; changes in competition and the pricing environment in India; and regional or general changes in asset valuations. For a further discussion of the factors that could cause actual results to differ, see “Risk Factors”.

vi TABLE OF CONTENTS Page SUMMARY ...... 1 SUMMARY OF THE TERMS OF THE OFFERING ...... 4 SUMMARY SELECTED FINANCIAL AND OPERATING DATA ...... 7 RISK FACTORS ...... 9 MARKET PRICE INFORMATION CONCERNING THE EQUITY SHARES ...... 20 EXCHANGE RATE INFORMATION AND REGULATIONS ...... 21 USE OF PROCEEDS ...... 22 DIVIDEND POLICY ...... 23 CAPITALISATION AND INDEBTEDNESS ...... 24 DILUTION ...... 25 SELECTED FINANCIAL AND OPERATING DATA ...... 26 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ...... 28 BUSINESS ...... 49 SELECTED STATISTICAL INFORMATION ...... 83 MANAGEMENT AND BOARD OF DIRECTORS ...... 99 PRINCIPAL SHAREHOLDERS AND CHANGES IN SHARE CAPITAL ...... 112 OVERVIEW OF THE INDIAN FINANCIAL SECTOR ...... 113 SUPERVISION AND REGULATION ...... 122 INDIAN SECURITIES MARKET ...... 138 TERMS AND CONDITIONS OF THE GDRs ...... 142 SUMMARY OF PROVISIONS RELATING TO GDRs IN MASTER FORM ...... 158 INFORMATION RELATING TO THE DEPOSITARY ...... 160 LEGAL MATTERS ...... 161 INDEPENDENT AUDITORS ...... 162 DESCRIPTION OF SHARE CAPITAL ...... 163 EXCHANGE CONTROLS ...... 169 RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES ...... 170 GOVERNMENT OF INDIA APPROVALS ...... 172 TRANSFER RESTRICTIONS ...... 173 CLEARANCE AND SETTLEMENT ...... 178 TAXATION ...... 181 SUBSCRIPTION AND SALE ...... 188 MATERIAL CONTRACTS ...... 193 GENERAL INFORMATION ...... 194 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND U.S. GAAP ...... 196 GLOSSARY OF CERTAIN TERMS ...... 199 INDEX TO FINANCIAL STATEMENTS ...... F-1

vii SUMMARY

The following summary highlights information contained elsewhere in these Listing Particulars. This summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information and the Financial Statements, including the notes thereto, appearing elsewhere in these Listing Particulars. For a discussion of certain matters that should be considered by prospective investors in the GDRs, see “Risk Factors”.

Overview The Bank is a leading private sector bank and financial services company in India offering a wide range of products and services to corporate and retail customers through a variety of delivery channels. The Bank commenced operations in April 1994 and over the last 15 years, the Bank has grown both in terms of the size of its asset base and its physical network of branches, extension counters and ATMs. The Bank has experienced significant growth while maintaining stable asset quality and enhancing its low-cost funding structure. As of 31 March 2009, the Bank was the third largest private sector bank in India in terms of total assets. The Bank’s total assets as of 31 March 2009 were Rs. 1,477.2 billion. The Bank’s net profit has grown from Rs. 6.59 billion as of 31 March 2007 to Rs. 18.15 billion as of 31 March 2009. As of 30 June 2009, the Bank had 13.07 million retail customer accounts in 534 centres, 861 branches and extension counters, as well as 3,723 ATMs with a ratio of 4.36 ATMs for every branch. In addition to the Bank’s growing branch and ATM networks, the Bank also offers telephone banking in various cities, as well as internet banking and mobile telephone banking. These and other resources give the Bank the capability to deliver a broad range of banking products through multiple delivery channels that enhance convenience for customers. As of 30 June 2009, the Bank also had five overseas offices with branches in , Hong Kong, the Dubai International Financial Centre (“DIFC”), and representative offices in Shanghai and Dubai. The Bank’s foreign branches primarily offer corporate banking, trade finance and treasury and risk management services. The Bank’s principal business activities are divided into two segments, Banking Operations and Treasury.

Banking Operations Corporate Banking: The corporate banking business offers various loan and fee-based products and services to large and mid-size corporates that include credit, trade finance for domestic, as well as international transactions, structured finance, project finance and syndication services through separate strategic business units (“SBUs”). These SBUs include large and mid-corporate credit, lending to micro small and medium enterprises (“MSMEs”), treasury, business banking (including transacting Government business) and capital markets. Liability products that the Bank offers to corporate clients include current accounts, certificates of deposit and time deposits. The Bank also offers various capital market services such as loan syndication and placement, advisory services, clearing and settlement services to stock and commodity exchanges and debenture trusteeship services. Loans under the corporate banking segment amounted to Rs. 655.05 billion as of 31 March 2009 and constituted 80.32% of the Bank’s total loan portfolio as of 31 March 2009. Retail Banking: The Bank offers a variety of liability and asset products and services to retail customers. Retail liability products include savings accounts, time deposits and customised products for certain target groups such as high net worth individuals, senior citizens, defense personnel, women, students and salaried employees. Retail asset products include home loans, personal loans, automobile loans, consumer loans, education loans, as well as security-backed loans of various types. The Bank also offers other products and services such as debit and travel currency cards, credit cards, prepaid cards, financial advisory services, bill payment and wealth management services. In addition, the Bank also markets third party products such as mutual funds, bancassurance (general and life) and Government savings bonds. A wide range of products and services are also offered to NRIs. Retail loans amounted to Rs. 160.52 billion as of 31 March 2009 and constituted 19.68% of the Bank’s total loan portfolio as of 31 March 2009.

Treasury The Treasury Department manages the funding position of the Bank and manages and maintains its regulatory reserve requirements. The Treasury Department invests in sovereign and corporate debt instruments and undertakes trading in equity, fixed income securities, foreign exchange, currency futures and options. The primary components of the Bank’s investment portfolio are government securities and corporate debt securities. The Treasury Department also invests in commercial paper, mutual funds, certificates of deposits and floating

1 rate instruments as part of the management of short-term surplus liquidity. In addition to proprietary trading and liquidity management, the Treasury department offers a wide range of treasury products and services to corporate customers in the form of derivative instruments such as forward contracts, interest rate swaps, currency swaps, foreign currency options, forward rate agreements and structured foreign exchange products.

For financial reporting, effective 1 April 2007, the Bank has adopted revised guidelines of the RBI on segment reporting issued in April 2007, in terms of which the business of the Bank is divided into four segments: Treasury, Corporate/Wholesale Banking, Retail Banking and Other Banking Business. See “Segment Reporting under Financial Statements”.

The core income stream of the Bank comprises interest income earned on its corporate and retail loan portfolio, money-market operations and its investment portfolio. The Bank also earns fee and commission income from the processing of loans, documentary credits, bank guarantees, placements and syndication, cash management services, Government business, advisory services, depository services, capital market services, ATM interchange and cards business, remittance business, wealth management, sale of third party products and other banking service charges. The Bank earns trading profit from trading in investments, foreign exchange and derivatives. The Bank’s expenses consist of interest and non-interest expenses. The Bank’s major non-interest expenses include staff cost, occupancy cost (including rent for office premises, repair and maintenance), depreciation and other administrative costs.

Market Opportunity

India has experienced an average real gross domestic product (“GDP”) growth of 7.13% per annum over the last decade and has liberalised many sectors of its economy. India is also witnessing a favourable shift in its demographic profile, with the upper and middle class constituting an expanding share of the population. The Bank’s management believes that banking in India remains an under-penetrated market with substantial growth opportunities, particularly for a private sector bank in a market traditionally dominated by large public sector banks.

Strengths

The key features of the Bank’s growth and success have been:

• Sustainable profitable growth and return on capital delivered by focusing on increasing core earnings while maintaining asset quality;

• Low-cost deposit base achieved through targeted branch network expansion and customised product offerings;

• Ability to cross sell lending, fee-based and liability products to enhance profitability;

• Disciplined credit risk management and robust controls, policies and procedures;

• Advanced use of technology for efficient and cost-effective delivery of quality products and services; and

• An experienced management team with extensive experience in the Indian banking industry and a track record of executing the Bank’s business strategies and achieving positive results.

Strategy

The Bank’s business strategy will continue to revolve around maintaining its competitive edge in the fast- changing banking and financial services industry. The key elements of its business strategy going forward are to:

• Improve profitability through an emphasis on growing its core income streams such as net interest income and fee-based income. The Bank plans to continue expanding its distribution network and alternate delivery channels such as internet banking aimed at the acquisition of low and/or non-interest bearing savings bank and current account deposits across business segments.

• Position itself to benefit from the economic growth of the Indian economy. The Bank plans to proactively identify and pursue opportunities in sectors that are likely to lead the growth of the Indian economy, especially in those sectors in which the Bank has requisite expertise.

2 • Sustain focus on improvements in loan and investment portfolio quality. The Bank plans to continue to maintain stable asset quality through rigorous credit and risk appraisal, diligent risk monitoring, sound treasury management, product diversification and strong internal controls and compliance procedures. • Increase the Bank’s market-share in India’s expanding financial services industry through a continued focus on the retail financial services sector. The Bank aims to achieve this by providing banking convenience to customers and by offering differentiated products to meet the specific needs of disparate customer segments. The Bank is sensitive to such product differentiation and the Bank’s management believes that such customer-specific orientation will strengthen its future profitability.

• Increase the Bank’s presence in new initiatives such as private equity, asset management and wealth management. The Bank has set up a subsidiary to carry on the activities of managing equity investments and provide venture capital support to businesses primarily focused on infrastructure. The Bank has also set up a subsidiary for asset management to participate in the domestic asset management business in India. The Bank plans to leverage its distribution franchise and customer relationships to offer wealth management services to its customers. • Expand the Bank’s international presence to cater to the needs of India-centric clients. With the global integration of the Indian economy and the consequent international flow of funds and services, the Bank has identified international banking as a key opportunity to leverage the skills and strengths built in its domestic operations by establishing its presence in various strategic international financial hubs in Asia, namely Singapore, Hong Kong, the United Arab Emirates (“UAE”) and Shanghai. In addition, the Bank’s presence in the UAE has facilitated strategic alliances with banks and exchange houses in the Gulf Co-operation Council (“GCC”) region which are expected to strengthen the Bank’s international remittance business. • Continuously upgrade the Bank’s information technology systems. The Bank aims to maintain a scalable computing infrastructure backed by a robust network architecture which delivers service across multiple channels for customer convenience and enhances operational and cost efficiency. To retain a competitive edge, the Bank’s Information Technology Department strives to ensure that the Bank’s technology is consistently the best available.

3 SUMMARY OF THE TERMS OF THE OFFERING

The following is a general summary of the terms of the GDRs. This summary is derived from and should be read in conjunction with, the full text of the Terms and Conditions of the GDRs (the “Conditions”) and the Deposit Agreement made between the Bank and the Depositary relating to the GDRs, which shall prevail to the extent of any inconsistency with the terms set out in this section. Capitalised terms used herein and not otherwise defined have the respective meanings given to such terms in the Conditions. Issuer ...... Axis Bank Limited, a company incorporated in the Republic of India with limited liability. Offering ...... The Offering involves an offering of 5,055,500 GDRs within the United States in reliance on Rule 144A and outside the United States in reliance on Regulation S. QIP Offering and Preferential Allotment ...... The Bank is also conducting (i) an offering of 33,044,500 equity shares to “qualified institutional buyers” (as defined in the SEBI Regulations), pursuant to Chapter VIII of the SEBI Regulations (the “QIP Offering”) and (ii) a preferential allotment of up to 4,902,257 equity shares to the Bank’s Promoters (the “Preferential Allotment”). Use of Proceeds ...... Thenetproceeds to the Bank from the issue of the GDRs, which are expected to be approximately U.S.$ 93.83 million after deduction of the Lead Managers’ commissions and other expenses of the Offering, are intended to be used to enhance its capital adequacy ratio and for general corporate purposes in accordance with applicable laws. See “Use of Proceeds”. The GDRs ...... Each GDR will be issued in respect of one equity share. Subject to the restrictions set out in “Transfer Restrictions” and “Terms and Conditions of the GDRs”, the deposited equity shares in respect of which the GDRs are issued (the “Deposited Shares”) may be withdrawn from the depositary facility at any time after the Closing Date. The Bank will deliver one or more share certificates in respect of the Deposited Shares to the Depositary, which will in turn deliver the GDRs. For more information, see “Terms and Conditions of the GDRs”, “Transfer Restrictions” and “Description of Share Capital”. Offer Price ...... TheGDRs are being offered at a price of U.S.$ 18.90 per GDR (the “Offer Price”) based on an exchange rate of Rs. 47.97 = U.S. $1.00 and a ratio of one equity share per GDR. Indian Taxation ...... TheGDRs and the equity shares represented by such GDRs will have the benefit of the tax concessions available under the provisions of Section 115AC of Income Tax Act and the Depository Receipt Scheme. These tax concessions will be available on capital gains resulting from long-term investments (investments held in excess of 12 months) arising on the sale of the equity shares in India. Under current Indian laws, no tax is payable by the recipients of dividends on equity shares of an Indian company, including the equity shares represented by GDRs. However, the Bank will be liable to pay distribution tax on dividends paid on the equity shares represented by GDRs at a rate of approximately 17% (inclusive of applicable surcharge and education cess). See “Taxation”. Dividends ...... Holders of GDRs will be entitled, subject to the provisions of the Deposit Agreement, to receive dividends paid, if any, in respect of the year ending 31 March 2010 and subsequent years. The owner of each GDR will receive from the Depositary an amount equal to the net after tax amount of the dividend per equity share which the Depositary receives from the Bank less any fees and expenses

4 payable under the Deposit Agreement. The Deposited Shares will rank pari passu with the other equity shares of the Bank in respect of dividends where the record date for such dividends falls after the date of issue of the relevant GDR or issue of the relevant share pursuant to the Offering. See “Terms and Conditions of the GDRs”.

Voting Rights ...... Holders of GDRs will have no voting rights or other direct rights of a shareholder with respect to the equity shares underlying such GDRs. The Depositary will not vote unless required by the board of directors of the Bank (the “Board of Directors”) to either vote as directed by the Board of Directors or give proxy or a power of attorney to the Board of Directors to vote in respect of the equity shares underlying the GDRs. A proxy may not vote the equity shares except on a poll. Registered holders of equity shares withdrawn from the depositary facility under the Deposit Agreement will be entitled to vote and exercise other direct shareholder rights in accordance with applicable Indian law.

Listing and Market for GDRs ...... Application has been made to the UK Listing Authority for the Regulation S GDRs and Rule 144A GDRs to be admitted to the Official List and application has been made to the London Stock Exchange for such GDRs to be admitted to trading initially under the temporary symbols “AXBD” and “AXBE” respectively, on its PSM through its IOB. The Existing GDRs are listed on the Official List and are traded under the symbols “AXB” and “AXBA” respectively, on the London Stock Exchange’s PSM through its IOB. After interests in the Temporary Master Rule 144A GDR and Temporary Master Regulation S GDR are exchanged for interests in the existing Master Rule 144A GDR and existing Master Regulation S GDR, respectively, the current issue of GDRs will be fungible with and form one series with the Master GDRs. Trading in the GDRs is expected to commence on 28 September 2009, conditional trading in the GDRs having commenced on 23 September 2009.

Depositary for the GDRs ...... TheBank of New York Mellon.

Identification Numbers ...... Temporary Regulation S GDRs

ISIN: US05462W6049

SEDOL: B4L2YT9

Common Code: 045233910

CUSIP: 05462W604

Existing Regulation S GDRs

ISIN: US05462W1099

SEDOL: B06CDW2

Common Code: 031677645

CUSIP: 05462W109

Temporary Rule 144A GDRs

ISIN: US05462W5058

SEDOL: B4L2XB4

CUSIP: 05462W505

5 Existing Rule 144A GDRs ISIN: US05462W3079 SEDOL: B06CDY4 CUSIP: 05462W307 Equity Shares Outstanding after this Offering (prior to the QIP Offering and the Preferential Allotment of Shares to the Promoters) ...... 364,926,170 Delivery of the GDRs ...... Itisexpected that delivery of the GDRs will be made on or about the Closing Date. See “Terms and Conditions of the GDRs”, “Subscription and Sale” and “Clearance and Settlement”. Government Approvals ...... Forthepurposes of the Offering, Indian regulations do not require a company issuing GDRs to obtain any approval or permission from regulatory authorities in India. Accordingly, no separate approvals are required for the issue of the GDRs. Governing Law ...... The Deposit Agreement, the Deed Poll executed by the Bank in favour of holders of the GDRs, the GDRs and any non-contractual obligations arising out of or in connection with each of the Deposit Agreement, the Deed Poll and the GDRs are governed by, and shall be construed in accordance with, English law except that the certifications set forth in Schedules 3 and 4 to the Deposit Agreement and any provisions relating thereto shall be governed by and construed in accordance with the laws of the State of New York and any United States Federal Court sitting in the Borough of Manhattan, New York City. The rights and obligations attaching to the Deposited Shares will be governed by Indian law.

6 SUMMARY SELECTED FINANCIAL AND OPERATING DATA

The following information has been extracted from, and is only a summary of, the audited non-consolidated Financial Statements beginning on page F-1. Potential investors are encouraged to read the entire Listing Particulars, including “Selected Financial and Operating Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the Financial Statements and other financial information included in these Listing Particulars, before making any investment decision. See “Presentation of Financial and Other Information”. The Financial Statements as of and for the years ended 31 March 2007, 2008 and 2009 have been audited by S.R. Batliboi & Co., Chartered Accountants. The Financial Statements have been prepared in accordance with Indian GAAP as applicable to banks. Indian GAAP differs in certain significant respects from U.S. GAAP. For a narrative description of the significant differences between Indian GAAP and U.S. GAAP relevant to the Bank, see “Summary of Significant Differences between Indian GAAP and U.S. GAAP”. The Financial Statements reflect applicable statutory requirements, regulatory guidelines and accounting practices in India; these requirements, guidelines and practices change from time to time. In accordance with Indian GAAP, adjustments to reflect such changes are made on a prospective basis, and financial statements for earlier periods are not restated. For the convenience of the reader, the selected financial and operating data as of and for the year ended 31 March 2009 have been translated into U.S. dollars at the noon buying rate in New York City for cable transfers in Indian rupees at U.S.$ 1.00 = Rs. 50.87 on 31 March 2009. Year Ended 31 March 2007 2008 2009 2009 Rs. Rs. Rs. U.S.$ (in millions) Selected Income Statement Data Interest Income(1) ...... 44,616 70,053 108,355 2,130 Interest Expense ...... 29,933 44,200 71,493 1,405 Net Interest Income ...... 14,683 25,853 36,862 725 Non-Interest Income ...... 10,101 17,955 28,969 569 Operating Income ...... 24,784 43,808 65,831 1,294 Non-Interest Expense ...... 12,146 21,549 28,582 562 Operating Profit ...... 12,638 22,259 37,249 732 Provisions and Contingencies ...... 6,048 11,549 19,095 375 Net Profit ...... 6,590 10,710 18,154 357

As of 31 March 2007 2008 2009 2009 Rs. Rs. Rs. U.S.$ (in millions) Selected Balance Sheet Data Cash and cash equivalents ...... 69,183 125,043 150,169 2,952 Investments ...... 268,972 337,051 463,303 9,108 Net loans ...... 368,765 596,611 815,568 16,032 Fixed assets ...... 6,732 9,228 10,729 211 Other assets ...... 18,920 27,845 37,451 736 Total assets ...... 732,572 1,095,778 1,477,220 29,039 Shareholders’ funds ...... 33,932 87,685 102,136 2,008 Employees’ stock options outstanding (net) ...... 90 22 12 — Deposits ...... 587,856 876,262 1,173,741 23,073 Borrowings ...... 51,956 56,240 101,855 2,002 Other liabilities ...... 58,738 75,569 99,476 1,956 Total liabilities and Shareholders’ funds ...... 732,572 1,095,778 1,477,220 29,039

7 Year Ended 31 March 2007 2008 2009 2009 Rs. Rs. Rs. U.S.$ Per Equity Share Data Earnings per equity share, basic ...... 23.50 32.15 50.61 0.99 Earnings per equity share, diluted ...... 22.79 31.31 50.27 0.99 Dividends per equity share(2) ...... 4.50 6.00 10.00 0.20 Book value per equity share(3) ...... 120.50 245.14 284.50 5.59 Basic weighted average number of equity shares (in millions) ...... 280.46 333.10 358.71 — Diluted weighted average number of equity shares (in millions) ...... 289.11 342.09 361.10 —

As of or for the year Ended 31 March 2007 2008 2009 (in percentages) Profitability Ratios Return on average total assets(4) ...... 1.10 1.24 1.44 Return on average net worth(5) ...... 21.84 16.09 19.93 Dividend payout ratio(6) ...... 19.30 20.08 19.80 Net interest margin(7) ...... 2.74 3.47 3.33 Cost income ratio(8) ...... 49.01 49.19 43.42 Capital Adequacy(9) Total capital adequacy ratio ...... 11.57 13.73 13.69 Tier I capital adequacy ratio ...... 6.42 10.17 9.26 Tier II capital adequacy ratio ...... 5.15 3.56 4.43 Asset Quality Gross non-performing assets as a percentage of gross loans ...... 1.11 0.83 1.09 Gross non-performing assets as a percentage of gross customer assets(10) ...... 0.95 0.72 0.96 Net non-performing assets as a percentage of net loans ...... 0.72 0.42 0.40 Net non-performing assets as a percentage of net customer assets(11) ...... 0.61 0.36 0.35

(1) Interest income includes dividends earned on equity and preference shares and units of mutual funds. (2) Represents the rate of dividend paid divided by the face value of each share. (3) Represents the shareholders’ funds divided by the number of total equity shares outstanding at the end of each reporting period. (4) Net profit divided by average month-end assets for the fiscal year. (5) Net profit divided by the daily weighted average of share capital, share premium and year-end average of other reserves and surplus. (6) Represents the ratio of total dividends payable on equity shares relating to each fiscal year, excluding the dividend distribution tax, as a percentage of net profit of that year. Dividends of each fiscal year are typically paid in the following fiscal year. (7) Represents the ratio of net interest income to daily average interest earning assets. (8) Represents the ratio of non-interest expense to the sum of net interest income and non-interest income. (9) Capital adequacy ratios are computed in accordance with RBI guidelines. (10) Gross customer assets include advances, credit substitutes and net written down value of assets leased out before provisions. (11) Net customer assets include advances, credit substitutes and net written down value of assets leased out after deductions of provisions.

8 RISK FACTORS

These Listing Particulars contain forward-looking statements that involve risks and uncertainties. Prospective investors should carefully consider the following risk factors as well as other information included in these Listing Particulars prior to making any decision as to whether or not to invest in the GDRs. The risks described below, which constitute all known material risks concerning the Bank and this Offering, and any additional risks and uncertainties not presently known to the Bank or that currently are deemed immaterial could adversely affect the Bank’s business, financial condition, liquidity or results of operations. As a result, the trading price of the GDRs could decline and investors may lose part or all of their investment.

Risks Relating to the Business of the Bank The Bank is exposed to liquidity risks as a consequence of the adverse conditions in the global financial markets. Since the second half of 2007 the global credit and equity markets have experienced substantial dislocations, liquidity disruptions and market corrections. In particular, sub-prime mortgage loans in the United States have experienced increased rates of delinquency, foreclosure and loss. In September and October 2008, liquidity and credit concerns and volatility in the global credit and financial markets increased significantly with the bankruptcy or acquisition of, and government assistance extended to, several major U.S. and European financial institutions. These and other related events have had a significant impact on the global credit and financial markets as a whole, including reduced liquidity, greater volatility, widening of credit spreads and a lack of price transparency in the United States and global credit and financial markets. In particular, liquidity in India was adversely affect in the third quarter of fiscal 2009, leading to a significant increase in the cost of funds for the banking sector during this period. Further deterioration in the financial markets may cause recessionary conditions to prevail in many economies, which may lead to significant declines in employment, household wealth, consumer demand and lending and as a result, may adversely affect economic growth in India and elsewhere. In response to such developments, legislators and financial regulators in the United States and other jurisdictions, including India, have implemented a number of policy measures designed to add stability to the financial markets. See “Supervision and Regulation”. However, the overall impact of these and other legislative and regulatory efforts on the global financial markets is uncertain, and they may not have the intended stabilising effects. Furthermore, pre-emptive actions taken by the RBI in response to the market conditions in the second half of fiscal 2009, especially the provision of liquidity support and a reduction in policy rates, may not continue in the future and there can be no assurance that the Bank will be able to access the financial markets for fundraising if needed. In the event that the current difficult conditions in the global credit markets continue or if there is any significant financial disruption, such conditions could have an adverse effect on the Bank’s cost of funds, loan portfolio, business, future financial performance and the trading price of the Bank’s equity shares and GDRs.

The Bank’s business is vulnerable to interest rate risk. Net interest income constituted 56.00% of the Bank’s operating income for the financial year ended 31 March 2009. An increase in interest rates applicable to the Bank’s liabilities, without a corresponding increase in interest rates applicable to its assets, will result in a decline in net interest income. Furthermore, in the event of rising interest rates, the Bank’s borrowers may not be willing to pay correspondingly higher interest rates on their borrowings and may choose to repay their loans with the Bank if they are able to switch to more competitively priced loans offered by other banks. In the event of falling interest rates, the Bank may face more challenges in retaining its customers if it is unable to offer competitive rates as compared to other banks in the market. Any inability of the Bank to retain customers as a result of changing interest rates may adversely impact the Bank’s earnings in future periods. Under RBI regulations, the Bank’s liabilities are subject to a statutory liquidity ratio (“SLR”) requirement which requires that a minimum specified percentage, currently 24.00%, of a bank’s net demand and time liabilities, be invested in Government securities and other approved securities. These securities generally carry fixed coupons and, in an environment of rising interest rates, the value of Government securities and other fixed income securities may depreciate. Fixed rate bonds formed 94.71% of the Bank’s Government securities as of 31 March 2009. The volatility in interest rates is reflected in the movement of the annual yield on the ten-year Government bond, which was 7.93% on 31 March 2008 and 7.01% on 31 March 2009. A decline in the valuation of the Bank’s trading book as a result of changing interest rates may adversely impact the Bank’s future financial performance and the market price of the Bank’s equity shares and GDRs.

9 The Bank’s debenture and bond portfolio is exposed to risks relating to mark-to-market valuation. The Bank had a debenture and bond portfolio (including pass-through certificates) of Rs. 150.21 billion as of 31 March 2009, of which 91.24% of the bonds in the portfolio were fixed rate bonds. In the event of a rise in interest rates, the portfolio will be exposed to the adverse impact of the mark-to-market valuation of such bonds. Any rise in interest rates leading to a fall in the market value of such debentures or of such bonds may adversely affect the Bank’s future performance and the market price of the Bank’s equity shares and GDRs.

The Bank faces income volatility from its treasury operations. For fiscal 2008 and 2009, the Bank recorded a profit of Rs. 2.20 billion and Rs. 2.88 billion respectively from treasury operations. The Bank’s income from treasury operations is subject to volatility due to, among other things, changes in interest rates and foreign currency exchange rates as well as other market fluctuations. For example, an increase in interest rates may have an impact on the value of certain of the Bank’s investments. Any significant or sustained decline in income generated from treasury operations resulting from market volatility may adversely impact the Bank’s financial performance and the market price of the Bank’s equity shares and GDRs.

The Bank is exposed to fluctuation in foreign exchange rates. As a financial intermediary, the Bank is exposed to exchange rate risk. The Bank complies with regulatory limits on its unhedged foreign currency exposure. However, the Bank is exposed to fluctuation in foreign currency rates for its unhedged exposure. Adverse movements in foreign exchange rates may also impact the Bank’s borrowers negatively which may in turn impact the quality of the Bank’s exposure to these borrowers. Volatility in foreign exchange rates could adversely affect the Bank’s future financial performance and the market price of the Bank’s equity shares and GDRs.

The Bank’s failure to manage growth effectively may adversely impact its business. In the past, the Bank has witnessed rapid growth in both its infrastructure and its business. The number of branches and extension counters of the Bank has grown from 564 as of 31 March 2007 to 861 as of 30 June 2009. Over the same period, the Bank’s retail relationships have grown to 13.07 million, the number of employees has grown from 9,980 to 21,156 and the Bank’s total assets have grown from Rs. 732.57 billion to Rs. 1,411.42 billion. Such growth puts pressure on the Bank’s ability to effectively manage and control historical and newly emerging risks. The Bank’s ability to sustain growth depends primarily upon its ability to manage key issues such as selecting and retaining skilled manpower, maintaining an effective technology platform that can be continually upgraded, developing a knowledge base to face emerging challenges, and ensuring a high standard of customer service. Beginning in fiscal 2006, the Bank began to expand internationally, opening branches in Singapore, Hong Kong, DIFC-Dubai and representative offices in Shanghai and Dubai. The Bank delivers primarily corporate banking, trade finance and treasury and risk management services through its international branches. This recent international expansion into banking in multiple jurisdictions exposes the Bank to a new variety of regulatory and business challenges and risks related to its inexperience in various aspects of the economic and legal framework in overseas markets. In addition, the skills required for the Bank’s international businesses could be different from those required for the Bank’s Indian business and the Bank may not be able to attract the required professionals. The inability of the Bank to effectively manage any of these issues may adversely affect the Bank’s business growth and as a result, impact future financial performance and the market price of the Bank’s equity shares and GDRs.

The Bank’s retail loan portfolio has experienced significant growth in recent years. If the Bank is unable to address credit risk in its retail loan portfolio or if its channel partners, whose services are also used by the Bank in asset acquisitions, engage in fraud or adopt incorrect selection criteria, the Bank’s financial performance may be adversely affected. The Bank’s retail loan portfolio has grown from Rs. 89.28 billion as of 31 March 2007 to Rs. 160.52 billion as of 31 March 2009. As part of the Bank’s business and growth strategy, it will continue to focus on further growth in its retail banking business. At present, availability of comprehensive credit history reports for the majority of retail borrowers is limited in India. As a result, the Bank is exposed to higher credit risk in the retail business compared to banks in more developed markets. If the Bank’s screening process proves to be inadequate, it may experience an increase in impaired loans and it may be required to increase its provision for defaulted loans. The Bank is a relatively recent entrant into the retail loan market and it is likely that there will be an increase in the Bank’s NPAs as it continues to expand its retail loan operations. This may impact the Bank’s future financial performance and the market price of the Bank’s equity shares and GDRs.

10 In the course of its retail banking business, the Bank also acquires assets through its channel partners. There can be no assurance that the Bank’s future financial performance will not be adversely affected should the Bank’s channel partners fail to perform their obligations due to their own failures, omissions or fraud.

To grow its business, the Bank is required to maintain its capital adequacy ratio (“CAR”) at the minimum level required by the RBI for domestic banks. There is no guarantee that the Bank will be able to access capital as and when it needs it for growth. The RBI requires Indian banks to maintain a minimum risk weighted capital adequacy ratio of 9%. The Bank’s CAR in terms of the Revised Framework of the International Convergence of Capital Measurement and Capital Standards (“Basel II”) as of 31 March 2009 was 13.69%, with Tier I capital adequacy ratio of 9.26%. The Bank is exposed to the risk of the RBI increasing the applicable risk weight for different asset classes from time to time. Unless the Bank is able to access the necessary amount of additional capital, any incremental may adversely impact the Bank’s ability to grow its business and may even require the Bank to withdraw from or curtail some of its current business operations. There can also be no assurance that the Bank will be able to raise adequate additional capital in the future at all or on terms favourable to it.

Any increase in the Bank’s portfolio of NPAs and restructured assets may adversely affect its business. As of 31 March 2009, the Bank’s gross NPAs represented 0.96% of gross customer assets and the Bank’s NPAs, net of provisions, represented 0.35% of net customer assets. As of 31 March 2009, the Bank provided for 63.56% of its total NPAs pursuant to applicable regulatory guidelines and the quality of security available to the Bank. If there is any deterioration in the quality of the Bank’s security or further aging of the assets after being classified as non-performing, an increase in provisions will be required. This increase in provisions may adversely impact the Bank’s financial performance and the market price of the Bank’s equity shares and GDRs. The Bank’s gross restructured assets as a proportion of gross customer assets as of 30 June 2009 was 2.77%. The Bank restructures assets based upon a borrower’s potential to restore its financial health. However, certain assets classified as restructured may subsequently be classified as delinquent or non-performing in the event a borrower fails to restore its financial viability and honour its loan servicing commitments to the Bank. There can be no assurance that the debt restructuring criteria approved by the Bank will be adequate or successful and that borrowers will be able to meet their obligations under restructured loans. Any resulting increase in delinquency levels may adversely impact the Bank’s financial performance and the market price of the Bank’s equity shares and GDRs.

The Bank’s inability to foreclose on collateral or decreases in the value of collateral in the event of a default may result in failure to recover the expected value of the collateral. The Bank’s loans to corporate customers for working capital credit facilities are typically secured by charges on inventories, receivables and other current assets. In certain cases, the Bank obtains security by way of a first or second charge on fixed assets, a pledge of marketable securities, corporate guarantees and personal guarantees. In addition, project loans or long-term loans to corporate customers are secured by a charge on fixed assets and other collateral security. Loans to retail customers are either unsecured or secured by the assets financed, largely property and vehicles. Any decrease in the value of collateral at the time of recovery will have an adverse impact on the quantum of recovery. In India, foreclosure on collateral generally requires a written petition to a court or tribunal. An application may be subject to delays and administrative requirements that may result, or be accompanied by, a decrease in the value of the collateral. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the “SARFAESI Act”), has strengthened the ability of lenders to recover NPAs by granting them greater rights to enforce security and recover amounts owed from secured borrowers. However, there can be no assurance that this legislation will have a favourable impact on the Bank’s efforts to recover NPAs as the full effect of such legislation has yet to be determined in practice. Any failure to recover the expected value of the collateral would expose the Bank to potential loss. In addition, pursuant to RBI corporate debt restructuring guidelines, the Bank may not be allowed to initiate recovery proceedings against a corporate borrower where the borrower’s aggregate total debt is Rs. 100 million or more and 60% of the lenders by number and holding at least 75% or more of the borrower’s debt by value decide to restructure their loans. In such a situation, the Bank is restricted to a restructuring process only as approved by the majority lenders.

11 The Bank is exposed to large loan concentrations with a few borrowers and default by any one of them would adversely affect the Bank’s business. As of 31 March 2009, the Bank’s aggregate exposure to its ten largest borrowers (fund-based) amounted to Rs. 126.17 billion, representing 83.96% of the Bank’s total capital, which comprises Rs. 101.63 billion Tier I and Rs. 48.65 billion Tier II capital. The Bank’s single largest borrower (fund-based) on such date had an exposure of balance of Rs. 20.80 billion, representing 13.84% of the Bank’s capital. Any deterioration in the credit quality of these assets could have a significant adverse effect on the Bank’s future financial performance and the market price of the Bank’s equity shares and GDRs.

The Bank is exposed to various industry sectors. A deterioration in the performance of any of these industry sectors where the Bank has significant exposure may adversely impact the Bank’s business. The Bank’s credit exposure to corporate borrowers is dispersed throughout various industry sectors, the most significant of which are infrastructure, NBFCs and trading, gems and jewellery and construction which represented 11.61%, 8.28%, 3.69%, and 2.98%, respectively, of the Bank’s outstanding fund and non-fund based balances as of 31 March 2009. Any significant deterioration in the performance of a particular sector, driven by events not within the Bank’s control, such as regulatory action or policy announcements by Government or State government authorities, would adversely impact the ability of borrowers in that industry to service their debt obligations to the Bank. As a result, the Bank would experience increased delinquency risk which may adversely impact the Bank’s financial performance and the market price of the Bank’s equity shares and GDRs.

A substantial portion of the Bank’s loans have a tenor exceeding one year exposing the Bank to risks associated with economic cycles. As of 31 March 2009, loans with a tenor exceeding one year (based on the RBI’s asset-liability management guidelines) constituted 75.10% of the Bank’s total loans. The long tenor of these loans may expose the Bank to risks arising out of economic cycles. In addition, some of these loans are project finance loans. There can be no assurance that these projects will perform as anticipated or that such projects will be able to generate cash flows to service commitments under the loans. The Bank is also exposed to infrastructure projects which are still under development and are open to risks arising out of delay in execution, failure of borrowers to execute projects on time, delay in getting approvals from necessary authorities and breach of contractual obligations by counterparties, all of which may adversely impact the projected cash flows. There can be no assurance that these projects will perform as anticipated. Risks arising out of a recession in the economy, a delay in project implementation or commissioning could lead to rise in delinquency rates and in turn, adversely impact the Bank’s future financial performance and the market price of the Bank’s equity shares and GDRs.

It is uncertain whether certain significant shareholders of the Bank will continue to maintain their current shareholdings. As of 31 August 2009, the Government, through the Administrator of the Specified Undertaking of Unit Trust of India (“SUUTI”), held 27.02% of the Bank’s outstanding equity shares. Other Government-controlled entities such as Life Insurance Corporation of India (“LIC”), General Insurance Corporation of India (“GIC”) and the Government owned four public sector general insurance companies collectively hold 15.41% of the Bank’s equity shares. Under the Bank’s Memorandum and Articles of Association (the “Articles”), SUUTI has the right to nominate the Chairman and three Directors, whereas LIC has no such right. Since the inception of the Bank, SUUTI has nominated the Chairman and two Directors and LIC has nominated one Director. The Government is reported to be evaluating proposals for the sale of investments held by SUUTI. Such divestment may be required by RBI guidelines. Any such disposal of the Bank’s equity held by SUUTI could have a material impact on the Bank’s ownership and management which could adversely affect the market price of the Bank’s equity shares and GDRs. See “— RBI guidelines relating to ownership of private sector banks could require the Bank’s significant shareholders to sell their equity shares, which may have an adverse impact on the Bank’s business”.

Regulations in India requiring the Bank to extend a minimum level of loans to the agricultural sector in India may subject the Bank to higher delinquency rates. As of the last reporting Friday of March 2009, lending to the agriculture sector constituted 14.83% of the Bank’s adjusted net bank credit. In accordance with regulatory requirements in India, at least 18% of the Bank’s adjusted net bank credit must be extended to the agricultural sector. There is little scope for expanding the Bank’s agricultural loan portfolio through corporate borrowers due to the limited involvement of corporate entities in agricultural activities in India. As a result, the Bank targets individual farmers. There is inadequate

12 historical data of delinquent loans to farmers which increases the risk of such exposures. Furthermore, as the Bank has fewer branches in rural areas, the Bank also relies on several third-party providers, such as sugar refiners and tractor dealers, for the purpose of sourcing, monitoring and collecting agricultural loans and payments. Any failure by these third parties to perform their obligations may adversely impact the Bank’s agricultural asset portfolio and lead to an increase in delinquency rates that may adversely impact the Bank’s financial performance and the market price of the Bank’s equity shares and GDRs.

The Bank faces greater credit risks than banks in more developed countries. Unlike several more developed economies, a nationwide credit bureau has become operational in India only recently, and therefore, adequate information regarding loan servicing histories, particularly in respect of individuals and small businesses, is limited. As a result, the Bank’s credit risk exposure is higher compared to banks operating in more developed markets. Because the Bank’s lending operations are primarily limited to India, the Bank may be exposed to a greater potential for loss compared to banks with lending operations in more developed countries. The Bank is subject to credit risk that the borrowers may not pay the Bank in a timely fashion or at all.

The Bank faces maturity mismatches between assets and liabilities. If the Bank fails to attract deposits, the Bank’s business may be adversely affected. The Bank meets its funding requirements through short and long-term deposits from retail and large corporate depositors. However, a significant portion of the Bank’s assets have long term maturities resulting in maturity mismatches in liabilities and assets. If depositors do not renew deposits or the Bank is unable to raise new deposits, the Bank may face a liquidity problem and may be required to pay higher rates to attract deposits, which may have an adverse impact on the Bank’s business and operations.

Any material change in Indian banking regulatory guidelines may adversely impact the Bank’s business. The Indian banking industry is highly regulated by the RBI and operates within a framework that provides guidelines on cash reserve ratio (“CRR”), SLR, priority sector lending, export credit, agricultural loans, loans to sectors deemed to be weak by the RBI, market risk, capital adequacy ratio and branch licensing, among others. The RBI can alter any of these and can introduce new regulations to control any particular line of business. There can be no assurance that the guidelines issued by the RBI or any other regulatory authorities will not adversely impact the Bank’s business, its future financial performance and the market price of the Bank’s equity shares and GDRs.

Consolidation in the banking sector in India may adversely affect the Bank. The Government has expressed a preference for consolidation in the banking sector in India. Mergers among public sector banks may result in enhanced competitive strengths in pricing and delivery channels for merged entities. If there is liberalisation of the rules for foreign investment in private sector banks, this could result in consolidation in the banking sector. The Bank may face greater competition from larger banks as a result of such consolidation, which may adversely affect the Bank’s future financial performance and the market price of the Bank’s equity shares and GDRs.

The Bank operates in a very competitive environment and the Bank’s ability to grow depends on its ability to compete effectively. The Indian banking industry is very competitive. The Bank competes directly with public sector banks, private sector banks and foreign banks with branches in India. The public sector banks which generally have much larger customer and deposit bases, larger branch networks and Government support for capital augmentation, pose strong competition to the Bank. Some of the private sector banks in India have larger customer bases and greater financial resources than the Bank. The foreign banks that have established branches in India have aggressively pursued market share. Increased competitive pressure may have an adverse impact on the Bank’s earnings, its future financial performance and the market price of the Bank’s equity shares and GDRs.

The Bank’s business depends on the continuation of its management team, skilled personnel and the Bank’s ability to retain and attract talented personnel. The Bank is highly dependent on the services of its management team, including its Managing Director and CEO and other key personnel. The Bank’s ability to meet future business challenges depends, among other things, on their continued employment and the Bank’s ability to attract and recruit talented and skilled personnel. There can be no assurance that the Bank will be able to retain such key personnel. Competition for skilled and

13 professional personnel in the banking industry is intense. The loss of key personnel or an inability to manage attrition levels across the Bank may have a material adverse impact on the Bank’s business, its ability to grow and its control over various business functions.

The Bank has acquired portfolios through the securitisation of assets by different originators. Some of these pools are not externally rated. If a pool’s performance deteriorates, the Bank’s business may be adversely affected. The Bank has purchased pools of retail loans from different originators with varying levels of duration. Only a few of these pools have been rated by external rating agencies. There can be no assurance that the Bank will not experience deterioration in the performance of the asset pool. Any such deterioration would impact the Bank’s earnings realised from the asset pool and may adversely impact the Bank’s future financial performance, the market price of the Bank’s equity shares and GDRs.

The Bank has securitised pools of retail and corporate assets and provided cash collateral for these pools. Any deterioration of a pool’s performance may adversely impact the Bank’s business. The Bank has securitised retail and corporate assets and provided credit enhancements through cash collateral to the holders of certain of the Bank’s senior securitised assets. These pools have been rated by external rating agencies which have used pre-selection criteria for selecting the pools. Any deterioration in the Bank’s ability to recover from a pool of securitised assets could result in holders of senior securitised assets drawing from the Bank’s pledged cash collateral and could also trigger an increase in the Bank’s provisioning requirements. Any such deterioration could adversely affect the Bank’s future financial performance, including the market price of the Bank’s equity shares and GDRs.

Actions of the Government, as the Bank’s controlling shareholder through SUUTI and other Government- related entities, could conflict with the interests of other shareholders. Through its direct and indirect holdings, the Government holds a major portion of the Bank’s issued equity shares. As of 31 March 2009, the Government directly or indirectly held approximately 44.99% (SUUTI — 27.02%, LIC — 10.62%, GIC, four public sector insurance companies — 4.79%, other Government-controlled institutions, corporations and banks — 2.56%) of the Bank’s equity shares. Following the completion of this Offering (including the effect of the QIP offering), it is expected that the Government will hold up to 40.68% of the Bank’s issued equity shares. For as long as the Government continues to hold a majority of the Bank’s voting shares, the Government may influence the policies of the Bank in a manner that could conflict with the interests of other shareholders.

RBI guidelines relating to ownership of private sector banks require the Bank’s significant shareholders to sell their equity shares, which may have an adverse impact on the Bank’s business and the market price of the Bank’s equity shares and GDRs. RBI guidelines prescribe a policy framework for the ownership and governance of private sector banks. The objective of the RBI is to ensure that no single entity or group of entities has a shareholding or control, directly or indirectly, in any bank in excess of 10%, with acquisitions of over 5% requiring prior RBI acknowledgment. The recent RBI guidelines also provide that any existing shareholding of any individual entity/group of related entities in excess of 10% be reduced to 10% in a phased manner in consultation with the RBI. Each of the Bank’s two major shareholders, SUUTI and LIC, has a shareholding in excess of 10% and any directive by the RBI to SUUTI and LIC to comply with RBI guidelines will materially alter the ownership of the Bank. Any future sale of shares by SUUTI and LIC could adversely affect the market price of the Bank’s equity shares and GDRs.

If ownership restrictions on private sector banks are relaxed, a single investor may acquire a controlling stake in the Bank. If the current restrictions are further liberalised to allow not only increased investment by Indian entities but also greater foreign ownership, a single entity or group of investors acting in unison may acquire equity shares of the Bank to the extent that would allow it to control or strongly influence the Bank. Such an entity would, subject to restrictions in the Bank’s Articles, be able to determine, or would have a disproportionate influence compared to other shareholders in, the election of the Board of Directors, management policies and the outcome of corporate transactions submitted to shareholders for approval. There can be no assurance that any future controlling shareholder will have the same interests as any minority shareholder or will pursue the same strategies as the current management.

14 Major fraud, lapses of control, system failures or calamities could adversely impact the Bank’s business. The Bank is vulnerable to risk arising from the failure of employees to adhere to approved procedures, system controls, fraud, system failures, information system disruptions, communication systems failure and data interception during transmission through external communication channels and networks. There can be no assurance that the Bank’s use of encrypted password-based protections and firewalls are adequate to prevent fraud or the invasion or breach of the network by an intruder. Failure to protect against fraud or breaches in security may adversely affect the Bank’s operations and future financial performance. The Bank’s reputation could be adversely affected by significant fraud committed by its employees, agents, customers or third parties. The Bank maintains a disaster recovery centre at Bangalore in the event that the Bank’s main computer centre at Mumbai shuts down for any reason. The system in Bangalore is configured to come into operation if the Mumbai system is no longer operational. However, if for any reason the switch over to the backup system does not take place or if a calamity occurs in both Mumbai and Bangalore such that the Bank’s business is compromised in both centres, the Bank’s operations would be adversely affected.

The Bank has not registered its brand name or logo as trademarks. The Bank has not registered its brand name or the “Axis Bank Limited” logo as trademarks. There can be no assurance that such registration will be effective. Use of the Bank’s brand name or logo by third parties could adversely affect the Bank’s reputation which could in turn adversely affect the Bank’s financial performance and the market price of the Bank’s equity shares and GDRs.

Risks Relating to Investments in Indian Companies A slowdown in economic growth in India could cause the Bank’s business to suffer. Any slowdown in economic growth in India could adversely affect the Bank’s borrowers and contractual counterparties. Further, in light of the increasing linkage of the Indian economy to other developed and emerging economies, the Indian economy is increasingly influenced by economic and market conditions in other countries and, as a result, a slowdown in the economic growth of the United States and other countries in the developed and emerging global economy could have an adverse impact on economic growth in India. The growth rate of India’s GDP, which was 9.0% or higher in each of fiscal years 2006, 2007 and 2008, moderated to 7.8% in the first quarter of fiscal 2009. The current uncertain economic situation, in India and globally, could result in a further slowdown in economic growth, investment and consumption. A further slowdown in the rate of growth in the Indian economy could result in lower demand for credit and other financial products and services and higher defaults among corporate, retail and rural borrowers. With the importance of retail loans to the Bank’s business, any slowdown in the growth or negative growth of sectors such as housing and automobiles could adversely impact the Bank’s performance. Any such slowdown could adversely affect the Bank’s business, including its ability to grow, the quality of its assets, its financial performance and the trading price of the Bank’s equity shares and GDRs.

A significant change in the Government’s economic liberalisation and deregulation policies could disrupt the Bank’s business. The Bank’s assets and customers are predominantly located in India. The Government has traditionally exercised and continues to exercise a dominant influence over many aspects of the economy. Its economic policies have had and could continue to have a significant effect on public sector entities, including the Bank, and on market conditions and prices of Indian securities, including securities issued by the Bank. The most recent parliamentary elections were completed in May 2009. Although the Indian National Congress Party had a decisive win at the elections current macroeconomic situations and global conditions might lead to certain policy and administrative steps which could result in a wider fiscal deficit and, consequently, a downgrade in sovereign ratings, which would affect exchange rates and interest rates. Such events could also adversely affect the Bank’s business, its future financial performance and the trading price of the Bank’s equity shares and GDRs.

Financial instability in other countries could disrupt the Bank’s business and cause the trading price of the Bank’s equity shares and GDRs to decrease. The Indian market and the Indian economy are influenced by economic and market conditions in other countries. Although economic conditions are different in each country, investors’ reactions to developments in one country can have adverse effects on the securities of companies in other countries, including India. A loss of investor confidence in the financial systems of other emerging markets may cause volatility in Indian financial

15 markets and indirectly, in the Indian economy in general. Any worldwide financial instability could also have a negative impact on the Indian economy, including the movement of exchange rates and interest rates in India. In the event that the current difficult conditions in the global credit markets continue or if there any significant financial disruption, this could have an adverse effect on the Bank’s cost of funding, loan portfolio, business, future financial performance and the trading price of the Bank’s equity shares and GDRs. See “Risks Relating to the Business of the Bank — The Bank is exposed to liquidity risks as a consequence of the adverse conditions in the global financial markets”.

If regional hostilities, terrorist attacks or social unrest in India increases, the Bank’s business could be adversely affected and the trading price of the Bank’s equity shares and GDRs could decrease. India has from time to time experienced social and civil unrest and hostilities with neighbouring countries. Present relations between India and Pakistan continue to be fragile on the issues of terrorism, armament and Kashmir. India has also experienced terrorist attacks in some parts of the country. In November 2008, several coordinated shooting and bombing attacks occurred across Mumbai, India’s financial capital, which resulted in the loss of life, property and business. These hostilities and tensions and/or the occurrence of similar terrorist attacks have the potential to cause political or economic instability in India and possibly adversely affecting the Bank’s business, its future financial performance and the trading price of the Bank’s equity shares and GDRs. For example, the terrorist attacks in the United States on 11 September 2001 and subsequent military action in Afghanistan and Iraq affected markets worldwide. The United States’ continuing battle against terrorism could lengthen these regional hostilities and tensions. Further, India has also experienced social unrest in some parts of the country. If such tensions occur in other parts of the country, leading to overall political and economic instability, it could have an adverse effect on the Bank’s business, future financial performance and the trading price of the Bank’s equity shares and GDRs.

Trade deficits could have a negative affect on the Bank’s business and the trading price of the Bank’s equity shares and GDRs. India’s trade relationships with other countries can influence Indian economic conditions. In fiscal 2009, the merchandise trade deficit was U.S. $119.1 billion compared to U.S. $88.5 billion in fiscal 2008. This large merchandise trade deficit neutralises the surpluses in India’s invisibles in India’s current account. If India’s trade deficits increase or become unmanageable, the Indian economy, and therefore the Bank’s business, future financial performance and the trading price of the Bank’s equity shares and GDR’s could be adversely affected.

Natural calamities could have a negative impact on the Indian economy and could cause the Bank’s business to suffer and the trading price of the Bank’s equity shares and GDRs to decrease. India has experienced natural calamities such as earthquakes, floods and drought in the recent past. The extent and severity of these natural disasters determine their impact on the Indian economy. In previous years, many parts of India received significantly less than normal rainfall. As a result, the agricultural sector recorded minimal growth. Prolonged spells of below normal rainfall in the country or other natural calamities could have a negative impact on the Indian economy, affecting the Bank’s business and potentially causing the trading price of the Bank’s equity shares and GDRs to decrease.

Indian accounting principles differ from those which prospective investors may be familiar with in other countries. The Bank’s financial statements for the periods stated are in conformity with Indian GAAP as applicable to banks consistently applied during the years ended 31 March 2007, 31 March 2008 and 31 March 2009, and no attempt has been made to reconcile any of the information given in these Listing Particulars to any other principles or to base it on any other standards. Indian GAAP differs from accounting principles and auditing standards with which prospective investors may be familiar in other countries. See “Summary of Significant Differences between Indian GAAP and US GAAP”.

The market value of the Bank’s equity shares and GDRs may fluctuate due to the volatility of the Indian securities markets. Indian securities markets are more volatile than and not comparable to the securities markets in certain countries with more developed economies and capital markets than India. Indian stock exchanges have, in the past, experienced substantial fluctuations in the prices of listed securities. Indian stock exchanges have experienced problems which, if such or similar problems were to continue or recur, could affect the market price and liquidity of the securities of Indian companies, including the Bank’s

16 equity shares and GDRs. These problems have included temporary exchange closures, broker defaults, settlement delays and strikes by brokers. In addition, the governing bodies of Indian stock exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Any volatility in the Indian securities markets could have an adverse effect on the price of the Bank’s equity shares and GDRs.

There may be less company information available in the Indian securities markets than securities markets in developed countries. There may be differences between the level of regulation and monitoring of the Indian securities markets and the activities of investors, brokers and other participants and that of the markets in the United States and other developed countries. The Securities and Exchange Board of India (“SEBI”) is responsible for approving and improving disclosure and other regulatory standards for the Indian securities markets. SEBI has issued regulations and guidelines on disclosure requirements, insider trading and other matters. There may, however, be less publicly available information about Indian companies than is regularly made available by public companies in developed countries.

Financial difficulty and other problems in certain long-term lending institutions and investment institutions in India could have a negative impact on the Bank’s business and the trading price of the Bank’s equity shares and GDRs could decrease. The Bank is exposed to the risks of the Indian financial system which in turn may be affected by financial difficulties and other problems faced by certain Indian financial institutions. See “The Indian Financial Sector”. As an emerging market economy, the Indian financial system faces risks of a nature and to an extent not typically faced in developing countries, including the risk of deposit runs notwithstanding the existence of a national deposit insurance scheme. Certain Indian financial institutions have experienced difficulties during recent years. Some cooperative banks have also faced serious financial and liquidity crises. The problems faced by individual Indian financial institutions and any instability in or difficulties faced by the Indian financial system generally could create adverse market perception about Indian financial institutions and banks. This in turn could adversely affect the Bank’s business, future financial performance and the price of the Bank’s equity shares and GDRs.

A decline in India’s foreign exchange reserves may affect liquidity and interest rates in the Indian economy, which could have an adverse impact on the Bank. A rapid decrease in reserves would also create a risk of higher interest rates and a consequent slowdown in growth. India’s foreign exchange reserves increased by U.S.$ 36.9 billion (48.4%) in fiscal 2004, by U.S.$ 28.5 billion (25.2%) in fiscal 2005, by U.S.$ 10.1 billion (7.1%) during fiscal 2006, by U.S.$ 47.6 billion during fiscal 2007 to U.S.$ 199.2 billion and by U.S.$ 110.0 billion during fiscal 2008 to U.S.$ 309.2 billion. During fiscal 2009, foreign exchange reserves decreased sharply by U.S. $56.8 billion. A further decline in these reserves could result in reduced liquidity and higher interest rates in the Indian economy. On the other hand, high levels of foreign funds inflows could add excess liquidity into the system, leading to policy interventions, which will also slow economic growth. Either way, an increase in interest rates in the economy following a decline in foreign exchange reserves could adversely affect the Bank’s business, its future financial performance and the trading price of the Bank’s equity shares and GDRs.

Any downgrading of India’s debt rating by an international rating agency could have a negative impact on the Bank’s business and the trading price of the Bank’s equity shares and GDRs. Any adverse revisions to India’s credit ratings for domestic and international debt by international rating agencies may adversely affect the Bank’s business, future financial performance and the trading price of the Bank’s equity shares and GDRs.

Risks Relating to the GDRs An active market for the GDRs may not develop, which may cause the price of the GDRs to fall. There can be no assurance regarding the future development of a market for the GDRs, the ability of GDR holders to sell their GDRs or the price at which GDR holders may be able to sell their GDRs. Application has been made to list the GDRs on the Official List to admit the GDRs to trading on the London Stock Exchange. There can be no assurance that the GDRs will be accepted for listing on the Official List, to trading on the London Stock Exchange prior to closing of this Offering or thereafter. In addition, the GDRs may

17 be accepted for listing and trading at prices that may be lower than their initial market value depending on various factors, such as prevailing market interest rates, the Bank’s operating results and the market for similar securities. The Lead Managers have no obligation to make a market in the GDRs. In addition, the market for debt and equity securities in emerging markets has been subject to disruptions that have caused volatility in the prices of securities similar to GDRs. There can be no assurance that the market for the GDRs, if any, will not be subject to similar disruption. Any disruption in these markets may have an adverse effect on the market price of GDRs.

GDR holders will bear the risk of fluctuations in the price of the equity shares. The market price of the GDRs is expected to be affected by the fluctuations in the market price of the equity shares. It is not possible to predict whether the price of the equity shares will rise or fall. Trading prices of the GDRs will be influenced by, among others factors, the financial condition of the Bank, its results of operations and political, economic and financial factors. Any decline in the price of the equity shares may have an adverse effect on the market price of the GDRs. Sales of a substantial number of equity shares in the public market could adversely affect the prevailing market price of equity shares.

Investors will not be able to vote their GDRs. Investors in GDRs will have no voting rights, unlike holders of the equity shares. Under the Deposit Agreement, the Depositary will vote in accordance with the instructions of the Board of Directors. Investors may withdraw the equity shares underlying the GDRs and seek to vote (subject to Indian restrictions on foreign ownership) the equity shares obtained upon withdrawal. However, this withdrawal process may be subject to delays and investors may not be able to redeposit the equity shares. For a discussion of the legal restrictions triggered by a withdrawal of the equity shares from the depositary facility upon surrender of GDRs, see “Restrictions on Foreign Ownership of Indian Securities”.

The ability of investors to withdraw equity shares from the GDR depositary facility is uncertain and may be subject to delays. Restrictions on foreign ownership of Indian companies limit the number of equity shares that may be owned by foreign investors. Investors who withdraw their equity shares from the GDR depositary facility for the purpose of selling such equity shares will be subject to Indian regulatory restrictions on foreign ownership upon withdrawal. Prior permission of the RBI is required for holding GDRs which represent 5% or more of the paid-up capital of the Bank or the withdrawal of equity shares from the GDR depositary facility that would result in a single investor holding 5% or more of the paid-up capital of the Bank. It is possible that this withdrawal process may be subject to delays. For a discussion of the legal restrictions triggered by a withdrawal of equity shares from the GDR depositary facility upon surrender of GDRs, see “Restrictions on Foreign Ownership of Indian Securities”. In addition, under Indian law there are limitations on re-deposits of equity shares that have been withdrawn from the GDR depositary facility and on deposits in the GDR deposit facility of equity shares acquired in the open market.

Conditions in the Indian securities market may affect the price or liquidity of the Bank’s equity shares and GDRs. Securities markets in India are smaller and more volatile than securities markets in more developed economies. The Indian stock exchanges have in the past experienced substantial fluctuations in the prices of listed securities. In addition, the governing bodies of the Indian stock exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Although the price of the Bank’s stock has been as volatile as the markets generally, future fluctuations could have a material adverse effect on the price of the Bank’s equity shares and GDRs.

Settlement of trades of equity shares on Indian stock exchanges may be subject to delays. Settlement of the Bank’s equity shares listed on the NSE and the BSE may be subject to delays and an investor who withdraws equity shares from the depositary facility upon surrender of GDRs may not be able to settle trades on these stock exchanges in a timely manner.

Investors may not be able to enforce a judgment of a foreign court against the Bank. The Bank is a limited liability company incorporated under the laws of India. It may not be possible for investors in the GDRs to effect service of process outside of India on the Bank or the Bank’s directors and executive officers and experts named in the Listing Particulars who are residents of India, or to enforce

18 judgments obtained against the Bank or these persons in foreign courts predicated upon the liability provisions of foreign countries. Moreover, it is unlikely that a court in India would award damages on the same basis as a foreign court if an action were brought in India or that an Indian court would enforce foreign judgments if it viewed the amount of damages as excessive or inconsistent with Indian practice. See “Enforcement of Civil Liabilities”.

Holders of GDRs may be restricted in their ability to exercise pre-emptive rights under Indian law and thereby may suffer future dilution of their ownership position. Under the Indian Companies Act, 1956 (as amended) (the “Companies Act”), a company incorporated in India must offer its holders of equity shares pre-emptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to the issuance of any new equity shares, unless the pre-emptive rights have been waived by adopting a special resolution passed by 75% of the shareholders present and voting at a general meeting. Holders of GDRs may be unable to exercise preemptive rights for underlying equity shares of the GDRs. In the case of future issuances, the new securities may be issued to the Depositary, which may sell the securities for the benefit of the holders of the GDRs. The value the Depositary would receive from the sale of such securities cannot be predicted. To the extent that holders of GDRs are unable to exercise pre-emptive rights granted in respect of the equity shares represented by their GDRs, their proportional interest in the Bank would be diluted.

Because the equity shares underlying the GDRs are quoted in Indian rupees, investors may be subject to potential losses arising out of exchange rate risk on the Indian rupee and risks associated with the conversion of Indian rupee proceeds into foreign currency. Investors that purchase GDRs are required to pay for the GDRs in U.S. dollars. Investors are subject to currency fluctuation risk and convertibility risk since the equity shares are quoted in Indian rupees on the Indian stock exchanges on which they are listed. Dividends on the equity shares will also be paid in Indian rupees, and then converted into U.S. dollars for distribution to GDR investors. Investors that seek to convert the Indian rupee proceeds of a sale of equity shares withdrawn upon surrender of GDRs into foreign currency and export the foreign currency will need to obtain the approval of the RBI for each such transaction. In addition, investors that seek to sell equity shares withdrawn from the GDR depositary facility will have to obtain approval from the RBI, unless the sale is made on a stock exchange or in connection with an offer made under regulations regarding takeovers. Holders of Indian rupees in India may also generally not purchase foreign currency without general or special approval from the RBI. However, dividends received by the Depositary in Indian rupees and, subject to approval from the RBI, Indian rupee proceeds arising from the sale on an Indian stock exchange of equity shares, which have been withdrawn from the depositary facility, may be converted into U.S. dollars at the market rate.

There are foreign investment restrictions under Indian law that limit the Bank’s ability to attract foreign investors, which may adversely impact the market price of the Bank’s equity shares and GDRs. Under current Indian regulations and practice, the approval of the RBI is required for the sale of equity shares (including equity shares withdrawn from the Bank’s GDR facilities) by a NRI to a resident of India and for repatriation of the proceeds thereof, unless the sale is made through a stock exchange in India. Under currency exchange controls that are in effect in India, any approval granted by RBI for a transfer of shares by a NRI to a resident of India will require the equity shares to be transferred at a price based on a specified formula, and a higher price per share may not be permitted. Further, prior to the repatriation of sale proceeds, a no objection/tax clearance certificate from the income tax authority or the provision of an undertaking in the prescribed format along with a certificate from an accountant would be required. There can be no assurance that any required approval from the RBI or any other Government agency can be obtained on any particular terms or at all. See “Exchange Controls”.

The Bank may be classified as a passive foreign investment company, which could result in adverse United States federal income tax consequences to United States investors. Based in part on certain proposed Treasury regulations with respect to banks, which are not yet finalised, although not free from doubt, the Bank does not expect to be treated as a passive foreign investment company (“PFIC”) for its current taxable year ending 31 March 2010 for United States federal income tax purposes. However, the application of the PFIC rules is subject to ambiguity in several respects and the determination of whether the Bank is a PFIC is a factual determination made annually after the end of each taxable year, thus it is possible that the Bank may be treated as a PFIC in any taxable year. If the Bank is treated as a PFIC for any taxable year during which a United States investor holds an equity share or GDR, certain adverse United States federal income tax consequences could apply to the United States investor. See “Taxation — U.S. Federal Income Tax Considerations”.

19 MARKET PRICE INFORMATION CONCERNING THE EQUITY SHARES

The Bank’s equity shares are listed on the NSE and BSE. The Bank’s equity shares were first listed on the NSE, the BSE and the ASE in November 1998. Recently, the Bank voluntarily delisted its shares from the ASE. As of 31 August 2009, 359,870,670 equity shares of the Bank were outstanding. The table below sets forth, for the period indicated, the high and low prices and the average volume of trading activity for equity shares on the NSE which the Bank obtained from the NSE: Average Daily Equity High Low High Low Share Trading Volume Rs. Rs. U.S.$ U.S.$ (number of shares) Fiscal 2002 ...... 47.00 21.00 0.96 0.43 69,481 2003 ...... 50.00 32.25 1.05 0.68 85,151 2004 ...... 179.30 39.50 4.13 0.91 402,516 2005 ...... 269.75 105.05 6.18 2.41 1,035,636 2006 ...... 425.50 216.00 9.57 4.86 1,742,527 2007 First Quarter ...... 380.00 220.15 8.28 4.80 421,999 Second Quarter ...... 399.00 249.50 8.68 5.43 387,552 Third Quarter ...... 514.80 372.10 11.67 8.44 488,456 Fourth Quarter ...... 615.00 396.25 14.27 9.19 866,794 2008 First Quarter ...... 620.50 451.45 15.29 11.12 970,006 Second Quarter ...... 768.70 557.85 19.34 14.03 742,882 Third Quarter ...... 996.40 715.65 25.28 18.16 613,638 Fourth Quarter ...... 1,268.15 724.95 31.69 18.11 827,313 2009 First Quarter ...... 948.10 605.05 22.08 14.09 1,536,282 Second Quarter ...... 763.65 580.20 16.44 12.49 3,387,860 Third Quarter ...... 734.60 376.55 15.12 7.75 3,676,876 Fourth Quarter ...... 569.75 281.40 11.20 5.53 3,491,452 October 2008 ...... 734.60 526.85 14.87 10.66 3,884,305 November ...... 640.45 376.55 12.93 7.60 3,744,275 December ...... 546.00 413.05 11.24 8.50 3,421,554 January 2009 ...... 569.75 384.30 11.67 7.87 2,581,507 February ...... 440.40 346.30 8.66 6.81 2,296,737 March ...... 431.05 281.40 8.47 5.53 5,536,377 2010 April ...... 557.50 418.15 11.22 8.41 6,300,537 May...... 797.75 605.25 16.93 12.85 4,176,372 June ...... 867.55 698.20 18.17 14.63 3,671,669 July ...... 956.60 738.25 19.97 15.41 3,444,352 August ...... 933.20 814.65 19.11 16.68 2,913,765 On 16 September 2009 the closing price of equity shares on the NSE was Rs. 907.65, which at the Indian rupee/U.S. dollar noon buying rate in New York City on 11 September 2009 for cable transfers in Indian rupees as reported by the Federal Reserve Bank of New York of Rs. 48.39 = U.S.$1.00, was equivalent to U.S.$18.76.

20 EXCHANGE RATE INFORMATION AND REGULATIONS

Fluctuations in the exchange rate between the Indian rupee and the U.S. dollar will affect the U.S. dollar equivalent of the Indian rupee price of the Bank’s equity shares on the Indian stock exchanges and, as a result, will affect the market price of the GDRs. These fluctuations will also affect the conversion into U.S. dollars by the Depositary of any cash dividends paid in Indian rupees on the equity shares represented by GDRs. From fiscal 1980 until fiscal 2002, the Indian rupee consistently depreciated against the U.S. dollar. However, the Indian rupee appreciated in fiscal 2004 until fiscal 2006 but marginally declined in fiscal 2007. In fiscal 2008, on an average basis the Indian rupee appreciated by 11% as compared to fiscal 2007 and in fiscal 2009, it depreciated by 14% over fiscal 2008. The Indian rupee’s appreciation has been due to remittances from exporters and NRIs, foreign direct investment and foreign institutional investor inflows, along with the weakening of the U.S. dollar against major currencies. The following table sets forth, for the periods indicated, information concerning the exchange rates between Indian rupees and U.S. dollars based on the noon buying rate in New York City for cable transfers of Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York: Fiscal Year Period End Average(1)(2) High Low 2003 ...... 47.53 48.43 49.07 47.53 2004 ...... 43.40 45.96 47.46 43.40 2005 ...... 43.62 44.86 46.45 43.27 2006 ...... 44.48 44.17 46.26 43.05 2007 ...... 43.10 45.12 46.83 42.78 2008 ...... 40.02 40.13 43.05 38.48 2009 ...... 50.87 45.84 51.96 39.73

(1) The noon buying rate at each period end and the average rate for each period may have differed from the exchange rates used in the preparation of the Bank’s financial statements. (2) Represents the average of the noon buying rate for all days during the period. The following table sets forth the high and low noon buying rate for the Indian rupee for each of the previous six months. Month Period End Average High Low January 2009 ...... 48.83 48.70 49.07 48.25 February 2009 ...... 50.88 49.25 50.88 48.37 March 2009 ...... 50.87 51.13 51.96 50.21 April 2009 ...... 49.70 49.97 50.48 49.55 May 2009 ...... 47.11 48.51 49.75 46.95 June 2009 ...... 47.74 47.67 48.50 46.78 July 2009 ...... 47.91 48.36 49.16 47.75 August 2009 ...... 48.83 48.24 48.90 47.27 Although the Bank has translated selected Indian rupee amounts in these Listing Particulars into U.S. dollars for convenience, this does not mean that the Indian rupee amounts referred to could have been, or could be, converted to U.S. dollars at any particular rate, the rates stated above, or at all. There are certain restrictions on the conversion of Indian rupees into U.S. dollars. See “Exchange Controls”. All translations from Indian rupees to U.S. dollars are based on the noon buying rate in New York City for cable transfers in Indian rupees at U.S.$1.00 = Rs. 50.87 on 31 March 2009. The noon buying rate on 11 September 2009 was Rs. 48.39 per U.S.$1.00.

21 USE OF PROCEEDS

The net proceeds from the issue of the GDRs by the Bank are estimated to be approximately U.S.$ 93.83 million after deducting the Lead Managers’ commissions and the estimated expenses of the Offering. See “Subscription and Sale”. The Bank will apply the net proceeds to enhance its capital adequacy ratio and for general corporate purposes, in accordance with applicable law.

22 DIVIDEND POLICY

The Bank generally declares and pays dividends in the fiscal year following the year to which they relate. The following table sets out, for the periods indicated, the dividends paid by the Bank. Total Amount Dividend Per of Dividend Fiscal Year Equity Share Paid(1)(2) Rs. U.S.$ Rs. U.S.$ (In millions) 2007 ...... 4.50 0.10 1,267 29.40 2008 ...... 6.00 0.15 2,146 53.62 2009 ...... 10.00 0.20 3,590 70.57

(1) Dividends paid exclude dividend distribution tax. (2) Dividends paid exclude dividends paid on employee stock options exercised subsequent to year-end but before the record date for declaration of dividend. For a summary of certain Indian, United Kingdom and United States federal tax consequences of dividend distributions to holders and beneficial owners of the GDRs, see “Taxation”. Future dividends will depend on the Bank’s revenues, cash flows, financial condition (including capital position) and other factors. For a description of regulation of dividends, see “Supervision and Regulation — Regulations relating to Investments and Capital Market Exposure Limits — Restrictions on Payment of Dividends”. The holders and beneficial owners of GDRs will be entitled to receive through the Depositary any amounts paid by the Bank as dividends on the equity shares underlying their GDRs, subject to deduction of certain fees and expenses as provided in the Deposit Agreement. Cash dividends, if any, will be paid on the relevant record date as determined by the Board of Directors (see “Terms and Conditions of the GDRs”) and will be forwarded to the Depositary for distribution to the holders and beneficial owners of the GDRs in U.S. dollars in accordance with the terms of the Deposit Agreement.

23 CAPITALISATION AND INDEBTEDNESS

The following table sets forth the Bank’s capitalisation and indebtedness as of 31 March 2009 which has been extracted from the Bank’s audited non-consolidated financial statements which were prepared in accordance with Indian GAAP as applicable to banks and shows the effect of adjusting for the Offering. This capitalisation table should be read together with “Selected Financial and Operating Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Selected Statistical Information” and the Financial Statements and related notes included elsewhere in these Listing Particulars. As of 31 March 2009 As Adjusted(7) Rs. U.S.$(1) Rs. U.S.$(1) (In millions) (In millions) Indebtedness(2) — Deposits(3) ...... 1,173,741 23,073 1,173,741 23,073 — Borrowings ...... 101,855 2,002 101,855 2,002 — Subordinated debt ...... 35,163 691 35,163 691 — Perpetual debt and Upper Tier II instruments ...... 18,181 357 18,181 357 Total Indebtedness ...... 1,328,940 26,123 1,328,940 26,123 Shareholders’ Funds — Share Capital(4) ...... 3,590 71 3,641 72 — Reserves and Surplus ...... 98,546 1,937 103,078 2,026 Total Shareholders’ Funds ...... 102,136 2,008 106,719 2,098 Total Capitalisation ...... 1,431,076 28,131 1,435,659 28,221

(1) U.S. dollar translations have been made using the exchange rate of U.S. $1.00 = Rs. 50.87 as at 31 March 2009, based on the U.S. Federal Reserve’s noon buying rate at that date. (2) Includes short-term and long-term. (3) Deposits include both demand and time deposits. (4) As of 31 March 2009, there were 359,005,118 equity shares at Rs. 10 par value outstanding. (5) Pursuant to various employee stock option schemes of the Bank, the Committee of Directors of the Bank has allotted an aggregate of 865,552 equity shares to the eligible employees of the Bank since 31 March 2009. (6) Contingent liabilities as of 31 March 2009 amounted to Rs. 2,092,603 million. (7) As adjusted to show the number of GDRs. This does not include the effects of any take-up by the Promoters of any of the equity shares in the Bank offered in the Preferential Allotment or the effects of the QIP Offering. (8) Simultaneously with the Offering, the Bank is conducting an offering of 33,044,500 equity shares to be issued to “qualified institutional buyers” (as defined in the SEBI Regulations) pursuant to Chapter VIII of the SEBI Regulations. As of the date of these Listing Particulars, the Bank is also proposing to make a Preferential Allotment of up to 49,02,257 equity shares to LIC and Company Ltd. at a price which is equivalent to the price at which the GDRs are offered. (9) There has been no material change in the capitalisation and indebtedness or contingent liabilities of the Bank since 31 March 2009.

24 DILUTION

The net tangible book value of the Bank under Indian GAAP as of 31 March 2009 was Rs. 97.58 billion (U.S.$ 1,918 million), or Rs. 271.79 (U.S.$ 5.34) per GDR. Net tangible book value per GDR is equal to the amount of the Bank’s total tangible assets (total assets less intangible assets) less total liabilities as of 31 March 2009 divided by the total number of GDRs that would have been outstanding if all the Bank’s outstanding equity shares as of such date were represented by GDRs. After giving effect to the sale by the Bank of GDRs offered by these Listing Particulars at an assumed offering price of U.S.$ 18.90 per GDR and after deducting underwriting discounts and the estimated Offering expenses payable by the Bank but without taking into account any other such changes in such tangible book value after 31 March 2009 the Bank’s net tangible book value as of 31 March 2009 would have been Rs. 102.08 billion (U.S$ 2,007 million), or U.S.$ 5.51 per GDR. This represents an immediate increase in net tangible book value of U.S.$ 0.17 per equity share to existing shareholders and an immediate dilution in net tangible book value of U.S.$ 13.39 per GDR to new investors. The following table illustrates this per share dilution: U.S.$ Assumed offering price per GDR ...... 18.90 Net tangible book value per GDR as of 31 March 2009 ...... 5.34 Increase in net tangible book value per GDR attributable to the Offering ...... 0.17 As adjusted net tangible book value per GDR after the Offering ...... 5.51 Dilution in net tangible book value per GDR to new investors ...... 13.39 The following table summarises, on an as adjusted basis as of 31 March 2009, the difference between existing shareholders and new investors with respect to the number of GDRs purchased, the total consideration paid and the average price per GDR paid.

GDRs Purchased Total Consideration Average Price Number % Amount % Per GDR (In U.S.$ thousands, except per GDR data) Existing shareholders ...... 359,005,118 99% 1,246,029 93% U.S.$ 3.47 New investors ...... 5,055,500 1% 95,556 7% U.S.$18.90 Total ...... 364,060,618 100% 1,341,585 100% U.S.$ 3.69 The above tables and calculations does not include the effects of any take-up by the Promoters of any of the equity shares in the Bank offered in the preferential allotment or the effects of the QIP Offering. For the above tables, equity shares and the average price paid per equity share have been converted into GDR equivalents for comparison purposes.

25 SELECTED FINANCIAL AND OPERATING DATA

The following table sets forth the Bank’s selected financial and operating data. The financial data has been derived from the Bank’s audited non-consolidated Financial Statements prepared in accordance with Indian GAAP as applicable to banks. The summary income statement data for the fiscal years ended 31 March 2007, 2008 and 2009 and the summary balance sheet data as of 31 March 2007, 2008 and 2009 are derived from the Bank’s audited non-consolidated Financial Statements as of and for the years ended 31 March 2007, 2008 and 2009 and included elsewhere in these Listing Particulars. The Financial Statements reflect applicable statutory requirements, regulatory guidelines and accounting practices in India; these requirements, guidelines and practices change from time to time. In accordance with Indian GAAP, adjustments to reflect such changes are made on a prospective basis, and financial statements for earlier periods are not restated. For the convenience of the reader, the selected financial and operating data as of and for the year ended 31 March 2009 have been translated into U.S. dollars at the noon buying rate in New York City for cable transfers in Indian rupees at U.S. $1.00 = Rs. 50.87 on 31 March 2009. Potential investors should read the following data together with the more detailed information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Selected Statistical Information” and the non-consolidated financial statements and related notes included elsewhere in these Listing Particulars. The following data is qualified in its entirety by reference to all of that information. Year Ended 31 March 2007 2008 2009 2009 Rs. Rs. Rs. U.S.$ (in millions) Selected Income Statement Data Interest Income(1) ...... 44,616 70,053 108,355 2,130 Interest Expense ...... 29,933 44,200 71,493 1,405 Net Interest Income ...... 14,683 25,853 36,862 725 Non-Interest Income ...... 10,101 17,955 28,969 569 Operating Income ...... 24,784 43,808 65,831 1,294 Non-Interest Expense ...... 12,146 21,549 28,582 562 Operating Profit ...... 12,638 22,259 37,249 732 Provisions and Contingencies ...... 6,048 11,549 19,095 375 Net Profit ...... 6,590 10,710 18,154 357

As of 31 March 2007 2008 2009 2009 Rs. Rs. Rs. U.S.$ (in millions) Selected Balance Sheet Data Cash and cash equivalents ...... 69,183 125,043 150,169 2,952 Investments ...... 268,972 337,051 463,303 9,108 Net loans ...... 368,765 596,611 815,568 16,032 Fixed assets ...... 6,732 9,228 10,729 211 Other assets ...... 18,920 27,845 37,451 736 Total assets ...... 732,572 1,095,778 1,477,220 29,039 Shareholders’ funds ...... 33,932 87,685 102,136 2,008 Employees’ stock options outstanding (net) ...... 90 22 12 — Deposits ...... 587,856 876,262 1,173,741 23,073 Borrowings ...... 51,956 56,240 101,855 2,002 Other liabilities ...... 58,738 75,569 99,476 1,956 Total liabilities and Shareholders’ funds ...... 732,572 1,095,778 1,477,220 29,039

26 Year Ended 31 March 2007 2008 2009 2009 Rs. Rs. Rs. U.S.$ Per Equity Share Data Earnings per equity share, basic ...... 23.50 32.15 50.61 0.99 Earnings per equity share, diluted ...... 22.79 31.31 50.27 0.99 Dividends per equity share(2) ...... 4.50 6.00 10.00 0.20 Book value per equity share(3) ...... 120.50 245.14 284.50 5.59 Basic weighted average number of equity shares (in millions) ...... 280.46 333.10 358.71 — Diluted weighted average number of equity shares (in millions) ...... 289.11 342.09 361.10 — As of or for the year Ended 31 March 2007 2008 2009 (in percentages) Profitability Ratios Return on average total assets(4) ...... 1.10 1.24 1.44 Return on average net worth(5) ...... 21.84 16.09 19.93 Dividend payout ratio(6) ...... 19.30 20.08 19.80 Net interest margin(7) ...... 2.74 3.47 3.33 Cost income ratio(8) ...... 49.01 49.19 43.42 Capital Adequacy(9) Total capital adequacy ratio ...... 11.57 13.73 13.69 Tier I capital adequacy ratio ...... 6.42 10.17 9.26 Tier II capital adequacy ratio ...... 5.15 3.56 4.43 Asset Quality Gross non-performing assets as a percentage of gross loans ...... 1.11 0.83 1.09 Gross non-performing assets as a percentage of gross customer assets(10) ...... 0.95 0.72 0.96 Net non-performing assets as a percentage of net loans ...... 0.72 0.42 0.40 Net non-performing assets as a percentage of net customer assets(11) ...... 0.61 0.36 0.35

(1) Interest income includes dividends earned on equity and preference shares and units of mutual funds. (2) Represents the rate of dividend paid divided by face value of share. (3) Represents the shareholders’ funds divided by the number of total equity shares outstanding at the end of each reporting period. (4) Net profit divided by average month-end assets for the fiscal year. (5) Net profit divided by the daily weighted average of share capital, share premium and year-end average of other reserves and surplus. (6) Represents the ratio of total dividends payable on equity shares relating to each fiscal year, excluding the dividend distribution tax, as a percentage of net profit of that year. Dividends of each fiscal year are typically paid in the following fiscal year. (7) Represents the ratio of net interest income to daily average interest earning assets. (8) Represents the ratio of non-interest expense to the sum of net interest income and non-interest income. (9) Capital adequacy ratios are computed in accordance with RBI guidelines. (10) Gross customer assets include advances, credit substitutes and net written down value of assets leased out before provisions. (11) Net customer assets include advances, credit substitutes and net written down value of assets leased out after deductions of provisions.

27 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Bank’s financial condition is based on the Bank’s audited non- consolidated financial statements as of and for the years ended 31 March 2007, 31 March 2008 and 31 March 2009 referred to in these Listing Particulars as the “Financial Statements”. This discussion should be read together with “Selected Financial and Operating Data”, “Selected Statistical Information” and the Financial Statements and related notes included elsewhere in these Listing Particulars. The Bank prepares its non-consolidated Financial Statements in accordance with Indian GAAP as applicable to banks, which differs in some respects from U.S. GAAP. See “Summary of Significant Differences between Indian GAAP and U.S. GAAP”. The Financial Statements reflect applicable statutory requirements, regulatory guidelines and accounting practices in India; these requirements, guidelines and practices change from time to time. In accordance with Indian GAAP, adjustments to reflect such changes are made on a prospective basis, and financial statements for earlier periods are not restated. All information regarding cost, yield and average balances are based on daily average balances outstanding during the relevant period. This discussion contains forward-looking statements and reflects the current views of the Bank with respect to future events and financial performance. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors such as those set forth under “Risk Factors” and elsewhere in these Listing Particulars.

Overview The Bank is a leading private sector bank and financial services company in India offering a wide range of products and services to corporate and retail customers through a variety of delivery channels. The Bank commenced operations in April 1994 and over the last 15 years, the Bank has grown both in terms of the size of its asset base and its physical network of branches, extension counters and ATMs. The Bank has experienced significant growth while maintaining stable asset quality and enhancing its low-cost funding structure. As of 31 March 2009, the Bank was the third largest private sector bank in India in terms of total assets. The Bank’s total assets as of 31 March 2009 were Rs. 1,477.2 billion. The Bank’s net profit has grown from Rs. 6.59 billion as of 31 March 2007 to Rs. 18.15 billion as of 31 March 2009. As of 30 June 2009, the Bank had 13.07 million retail customer accounts in 534 centres, 861 branches and extension counters, as well as 3,723 ATMs with a ratio of 4.36 ATMs for every branch. In addition to the Bank’s growing branch and ATM networks, the Bank also offers telephone banking in various cities, as well as internet banking and mobile telephone banking. These and other resources give the Bank the capability to deliver a broad range of banking products through multiple delivery channels that enhance convenience for customers. As of 30 June 2009, the Bank also had five overseas offices with branches in Singapore, Hong Kong, the DIFC, and representative offices in Shanghai and Dubai. The Bank’s foreign branches primarily offer corporate banking, trade finance and treasury and risk management services. The Bank’s principal business activities are divided into two segments, Banking Operations and Treasury.

Banking Operations Corporate Banking: The corporate banking business offers various loan and fee-based products and services to large and mid-size corporates that include credit, trade finance for domestic, as well as international transactions, structured finance, project finance and syndication services through separate SBUs. These SBUs include large and mid-corporate credit, lending to MSMEs, treasury, business banking (including transacting Government business) and capital markets. Liability products that the Bank offers to corporate clients include current accounts, certificates of deposit and time deposits. The Bank also offers various capital market services such as loan syndication and placement, advisory services, clearing and settlement services to stock and commodity exchanges and debenture trusteeship services. Loans under the corporate banking segment amounted to Rs. 655.05 billion as of 31 March 2009 and constituted 80.32% of the Bank’s total loan portfolio as of 31 March 2009. Retail Banking: The Bank offers a variety of liability and asset products and services to retail customers. Retail liability products include savings accounts, time deposits and customised products for certain target groups such as high net worth individuals, senior citizens, defense personnel, women, students and salaried employees. Retail asset products include home loans, personal loans, automobile loans, consumer loans, education loans, as well as security-backed loans of various types. The Bank also offers other products and services such as debit and travel currency cards, credit cards, prepaid cards, financial advisory services, bill payment and wealth

28 management services. In addition, the Bank also markets third party products such as mutual funds, bancassurance (general and life) and Government savings bonds. A wide range of products and services are also offered to NRIs. Retail loans amounted to Rs. 160.52 billion as of 31 March 2009 and constituted 19.68% of the Bank’s total loan portfolio as of 31 March 2009.

Treasury The Treasury Department manages the funding position of the Bank and manages and maintains its regulatory reserve requirements. The Treasury Department invests in sovereign and corporate debt instruments and undertakes trading in equity, fixed income securities, foreign exchange, currency futures and options. The primary components of the Bank’s investment portfolio are government securities and corporate debt securities. The Treasury Department also invests in commercial paper, mutual funds, certificates of deposits and floating rate instruments as part of the management of short-term surplus liquidity. In addition to proprietary trading and liquidity management, the Treasury department offers a wide range of treasury products and services to corporate customers in the form of derivative instruments such as forward contracts, interest rate swaps, currency swaps, foreign currency options, forward rate agreements and structured foreign exchange products. For financial reporting, effective 1 April 2007, the Bank has adopted revised guidelines of the RBI on segment reporting issued in April 2007, in terms of which the business of the Bank is divided into four segments: Treasury, Corporate/Wholesale Banking, Retail Banking and Other Banking Business. See “Segment Reporting under Financial Statements”. The core income stream of the Bank comprises interest income earned on its corporate and retail loan portfolio, money-market operations and its investment portfolio. The Bank also earns fee and commission income from the processing of loans, documentary credits, bank guarantees, placements and syndication, cash management services, Government business, advisory services, depository services, capital market services, ATM interchange and cards business, remittance business, wealth management, sale of third party products and other banking service charges. The Bank earns trading profit from proprietary trading in investments, foreign exchange and derivatives. The Bank’s expenses consist of interest and non-interest expenses. The Bank’s major non-interest expenses include staff cost, occupancy cost (including rent for office premises, repair and maintenance), depreciation and other administrative costs.

Factors Affecting Results of Operations and Financial Condition The Bank’s results of operations and financial condition are affected by numerous factors. The following factors are of particular importance.

Macroeconomic Environment Since the second half of 2007 the global credit and equity markets have experienced substantial dislocations, liquidity disruptions and market corrections. In particular, sub-prime mortgage loans in the United States have experienced increased rates of delinquency, foreclosure and loss. In September and October 2008, liquidity and credit concerns and volatility in the global credit and financial markets increased significantly with the bankruptcy or acquisition of, and government assistance extended to, several major U.S. and European financial institutions. These and other related events have had a significant impact on the global credit and financial markets as a whole, including reduced liquidity, greater volatility, widening of credit spreads and a lack of price transparency in the United States and global credit and financial markets. Unlike developed economies, the slowdown in India has not been led by the financial sector but affected by mainly the following: • The sharp slowdown in global import demand resulted in an export slowdown; • A contraction in the availability of global finance, particularly export finance, and an increase in the costs of foreign currency funds; and • Slowdown in investment plans of many corporations in anticipation of a demand slowdown. Over the past few years, India has become increasingly integrated with the global economy, both through trade and through exposure to financial markets. The loss of export markets has consequently affected domestic demand quite significantly, particularly as many export segments are also employment intensive. The demand slowdown led to inventory buildups, constricted cash flows and cutbacks in corporate capital expenditure plans. The cash squeeze led to concerns about potential defaults on bank loans as well as a sharp increase in interest rates in the third quarter of fiscal 2009. The consequent risk-aversion and tightening of credit standards in bank lending also reduced consumer durables financing, adding weak consumption demand to slowing investments, and earlier fears of high inflation changed to deflation and concerns of rapid and sustained deceleration of growth. Although the Indian economy performed relatively well in fiscal 2009 compared to other countries in its

29 emerging markets peer group, the slowdown in fiscal 2009 was deeper than anticipated. Accordingly, the revised estimate of GDP growth for fiscal 2009 of 6.70% is lower than the average growth rate of 8.90% of the previous four years.

Fiscal Stimulus in India Both the government and the RBI have taken fiscal and monetary policy measures to address the global slowdown. Central and state governments are spending an additional 3% to 4% of GDP on various stimulus measures, tax cuts and spending programmes. In addition, other spending programmes, such as the Sixth Pay Commission payouts, have been implemented that are also likely to have a positive effect on demand expansion. This fiscal push has been complemented by a fairly active monetary policy. The RBI has reduced its policy rates (LAF Repo rates) by 425 basis points since September 2008 and injected significant liquidity into the markets.

Impact on the Banking Sector Despite a difficult funding and credit environment, the extension of credit by banks in India has been reasonably satisfactory and accelerating its delivery will be a key factor in sustaining the positive effects of the fiscal and monetary stimulus measures. In particular, bank credit will play a large role as other avenues for raising funds are likely to remain limited. While concerns about credit quality have impeded a larger increase in credit flows, the financial sector in India remains sound and should, in the Bank’s view, be able to absorb the anticipated increase in non-performing assets without harmful capital erosion. Given the fact that cost of funds for banks is steadily diminishing and will translate into lower lending rates, the demand for bank credit should pick up over time. However, foreign currency funds are expected to remain relatively scarce.

First Quarter of 2010 The Index of Industrial Production (the “IIP”) for the first quarter of fiscal 2010 increased by 3.7% as compared to the first quarter of fiscal 2009. Twelve of the 17 industries making up the index showed growth in June 2009 as compared to June 2008. User based industry classifications also grew, led by capital goods, which increased 11.8% in June 2009 as compared to June 2008. The increase in the IIP in the first quarter of fiscal 2010 resulted primarily due to domestic-focused sectors, aided by stimulus measures, better availability of funds, and improved consumer and business confidence. Management anticipates that general risk perception levels will gradually decline over the remainder of fiscal 2010 resulting in increased capital flows to sectors with growth opportunities.

Interest rates, allocation of funds and costs of funding Net interest income has historically been the most significant component of the Bank’s revenue. In fiscal 2009, net interest income represented 56.00% of the Bank’s operating income. Net interest income is determined by the amount of interest-earning assets, the difference between the rate of interest earned on interest-earning assets and the rate of interest paid on interest-bearing liabilities and the proportion of interest-earning assets financed by non-interest bearing liabilities and equity. The Bank’s net interest income is affected by a number of factors including the general level of interest rates, its ability to allocate its funds to assets that provide high interest rates and its cost of funding.

Interest rates The majority of the Bank’s corporate and commercial loans are priced at a floating rate based on the Bank’s prime lending rate. This rate is primarily determined by the RBI’s lending rate. The RBI lending rate has risen steadily since 2004, partly to reduce the money supply and partly to reduce liquidity at Indian banks. The table below shows the average monthly RBI bid (reverse repo rates) and ask (repo rates) as on the dates indicated: The following table sets forth the bank rate, the reverse repo rate and the repo rate as of the end of each of the last six fiscal years. Reverse Bank Rate Repo Rate Repo Rate (percentages) As of year 31 March 2004 ...... 6.00% 4.50% 6.00% 2005 ...... 6.00% 4.75% 6.00% 2006 ...... 6.00% 5.50% 6.50% 2007 ...... 6.00% 6.00% 7.75% 2008 ...... 6.00% 6.00% 7.75% 2009 ...... 6.00% 3.50% 5.00% 2010 (with effect from 21 April 2009) ...... 6.00% 3.25% 4.75%

Source: Annual Report 2008-2009.

30 Increases in the RBI lending rate allow the Bank to receive higher rates of return on its loans. Any subsequent reductions in the RBI lending rate would reduce the Bank’s prime lending rate and could reduce net interest income despite supporting loan growth and NPA reduction. Conversely, increases in the RBI lending rate could affect the ability of potential borrowers to take out loans despite partly mitigating higher deposit costs. See “Risk Factors — Risks Relating to the Business of the Bank — The Bank’s business is vulnerable to interest rate risk.”

Allocation of funds The Bank’s ability to take advantage of increases in RBI lending rates depends largely on its loan volume. Recent growth in the Indian economy has led to increased demand for funding across many sectors of the economy. This growth has contributed to the Bank’s ability to reallocate its funds from Government securities to loans, which offer the Bank higher returns. However, asset mix also has an effect on profitability as the Bank’s loans bear different interest rates reflecting different credit ratings. For example, net interest income increases to the extent that the Bank increases the proportion of consumer loans, which generally bear a higher interest rate than other loans, but decreases to the extent that the Bank increases the proportion of international loans, which generally bear a lower interest rate than domestic loans. If the volume of the Bank’s loans decreases due to a general slowdown in the economy, increased competition or other factors, the Bank’s net interest income will decrease as well. In addition, the Bank may not be able to reallocate its funds to more profitable assets in the event that interest rates decrease.

Cost of funding The Bank is able to increase its net interest income to the extent that it does not increase the cost of its interest-bearing liabilities to the same extent, or at the same time, as its interest-bearing assets. The Bank’s primary interest-bearing liability is its deposit base. The Bank’s ability to offer low interest rates for customers’ deposit accounts depends significantly on its ability to provide customers with convenient banking services that compensate for the lower returns on deposits. Depositors with low balances tend to choose their banks based upon proximity and convenience rather than deposit rates. To continue to source low-cost funding through deposits, the Bank must, among other things, continue to develop its information technology systems to offer modern banking services and develop products and services to distinguish itself in an increasingly competitive industry. However, increasing sophistication of customers, competition for funding, increasing interest rates and changes to the RBI’s liquidity and reserve requirements may increase the rates the Bank pays on its deposits. In addition to a higher proportion of higher cost deposits forming part of the Bank’s funding, in order to meet the growing needs of its Retail and Corporate Banking groups and to further enhance its capital adequacy ratios, the Bank has and may continue to issue subordinated debt, which increases the Bank’s cost of funding.

Provisioning policies The Bank’s profit is adversely affected by the amount of provisions against loans. Total provisions have increased due to increases in NPAs, volumes of loans and changes in regulatory and internal provisioning policies made in accordance with RBI norms. See “Risk Factors — Any increase in the Bank’s portfolio of NPAs and restructured assets may adversely affect its business.”

Corporate tax rates applicable to the Bank Corporate tax rates applicable to the Bank impact the Bank’s profitability. The corporate tax rate applicable to the Bank has increased from 33.66% in fiscal 2007 to 33.99% in fiscal 2009. Any further increase in tax rates could have a material adverse effect on the Bank’s financial results.

Government policies and regulations in relation to the Indian banking system The Indian banking industry is regulated by the RBI and operates within a framework that provides guidelines on capital adequacy, corporate governance, management, anti-money laundering and provisioning for NPAs. The RBI can alter any of these policies at any time and can introduce new regulations to control any particular line of business. See “Overview of the Indian Financial Sector — Annual Policy Statement for Fiscal 2010”. This will cause an increase in capital requirements, which will in turn have an impact on the Bank’s results of operations. In addition to more stringent capital adequacy requirements, the RBI has increased the CRR for Indian banks. Despite these increases, the RBI has decided to suspend interest payments on CRR balances. Any further increases in the CRR could have a negative impact on the Bank’s results from operations. Any other changes in the regulatory environment as pertaining to the Indian banking industry could have a material impact on the Bank’s operations and financial condition. See “Risk Factors — Risks Relating to the Business of the Bank — Any material change in Indian banking regulatory guidelines may adversely impact the Bank’s business.”

31 Results for the Fiscal Year Ended 31 March 2008 compared to the Fiscal Year Ended 31 March 2009 Summary of Performance

Year Ended 31 March 2008 2009 % change (Rupees in millions, except percentages) Net Interest Income ...... 25,853 36,862 42.58% Non-interest Income ...... 17,955 28,969 61.34% Non-interest Expense ...... 21,549 28,582 32.64% Provisions and Contingencies ...... 11,549 19,095 65.34% Net Profit ...... 10,710 18,154 69.51% Net interest income increased by 42.58% from Rs. 25.85 billion in fiscal 2008 to Rs. 36.86 billion in fiscal 2009 primarily due to an increase in average interest earning assets on a daily average basis by 48.37%, from Rs. 745.89 billion in fiscal 2008 to Rs. 1,106.64 billion in fiscal 2009. Non-interest income increased by 61.34% from Rs. 17.96 billion in fiscal 2008 to Rs. 28.97 billion in fiscal 2009 primarily due to an increase in fee, commission and brokerage income by 64.56% from Rs. 13.21 billion in fiscal 2008 to Rs. 21.73 billion in fiscal 2009. Non-interest expense increased by 32.64% from Rs. 21.55 billion in fiscal 2008 to Rs. 28.58 billion in fiscal 2009 primarily due to an increase in employee expense and administrative and other expenses. Provisions and contingencies increased by 65.34% from Rs. 11.55 billion in fiscal 2008 to Rs. 19.10 billion in fiscal 2009 primarily due to an increase in provision for income tax and provision for loan losses. As a result of above, the Bank’s net profit increased by 69.51% from Rs. 10.71 billion in fiscal 2008 to Rs. 18.15 billion in fiscal 2009.

Net Interest Income The Bank’s net interest income increased by 42.58% from Rs. 25.85 billion in fiscal 2008 to Rs. 36.86 billion in fiscal 2009. The following table sets forth the components of net interest income.

Year Ended 31 March 2008 2009 % change (Rupees in millions, except percentages) Interest on loans ...... 47,457 74,659 57.32% Interest on investments ...... 21,023 30,515 45.15% Other interest income ...... 1,573 3,181 102.23% Interest Income ...... 70,053 108,355 54.68% Interest on deposits ...... 37,425 62,089 65.90% Other interest expense ...... 6,775 9,404 38.80% Interest Expense ...... 44,200 71,493 61.75% Net Interest Income ...... 25,853 36,862 42.58%

The increase in net interest income was due primarily to an increase in average interest earning assets on a daily average basis by 48.37%, from Rs. 745.89 billion in fiscal 2008 to Rs. 1,106.64 billion in fiscal 2009. The average yield on interest earning assets increased by 37 basis points, from 9.36% in fiscal 2008 to 9.73% in fiscal 2009. However this increase was more than offset by an increase in the average cost of funds by 48 basis points from 6.02% in fiscal 2008 to 6.50% in fiscal 2009 which resulted in a decrease in the net interest margin from 3.47% in fiscal 2008 to 3.33% in fiscal 2009.

Interest Income Interest income on loans increased by 57.32%, from Rs. 47.46 billion in fiscal 2008 to Rs. 74.66 billion in fiscal 2009. The increase in interest income on loans was due to the following: • an increase in the average loans by 52.41% from Rs. 443.49 billion in fiscal 2008 to Rs. 675.93 billion in fiscal 2009; and • an increase in the yield on the loans from 10.66% in fiscal 2008 to 11.01% in fiscal 2009.

32 Interest income on investments increased by 45.15%, from Rs. 21.02 billion in fiscal 2008 to Rs. 30.52 billion in fiscal 2009. This increase in interest income on investments during fiscal 2009 was primarily due to an increase in the value of securities held to meet SLR requirements and an increase in investment in corporate debt securities. Average investments increased by 39.83%, from Rs. 281.54 billion in fiscal 2008 to Rs. 393.67 billion in fiscal 2009. Yield on investments also increased from 7.50% in fiscal 2008 to 7.74% in fiscal 2009. Other interest income increased primarily due to increase in term lending. Average term lending increased by 107.13%, from Rs. 15.15 billion in fiscal 2008 to Rs. 31.38 billion in fiscal 2009.

Interest Expense Total interest expense increased by 61.75% from Rs. 44.20 billion in fiscal 2008 to Rs. 71.49 billion in fiscal 2009. The increase in interest expense was primarily due to the following: • an increase in average deposits by 49.32% from Rs. 633.41 billion in fiscal 2008 to Rs. 945.81 billion in fiscal 2009 resulting from the expansion of the Bank’s distribution network; and • an increase in the average cost of deposits from 5.91% in fiscal 2008 to 6.56% in fiscal 2009, primarily due to a steep rise in interest rates on term deposits in the third quarter of 2009 when liquidity concerns were at their peak. Other interest expense increased in fiscal 2009 due to the following: • the Bank raised debt eligible for capital, totaling Rs. 17.00 billion in the form of subordinated debt at an average rate of 11.54% and maturing in 2019; and • an increase in the amount and cost of call and term borrowings. The average Rupee call borrowings increased from Rs. 10.32 billion in fiscal 2008 to Rs. 17.85 billion in fiscal 2009 and the average term borrowings increased from Rs. 1.31 billion in fiscal 2008 to Rs. 9.27 billion in fiscal 2009. The cost of call borrowings also increased from 4.93% in fiscal 2008 to 7.10% in fiscal 2009.

Non-interest Income Non-interest income increased by 61.34% from Rs. 17.96 billion in fiscal 2008 to Rs. 28.97 billion in fiscal 2009. The following table sets forth the components of non-interest income. Year Ended 31 March 2008 2009 % change (Rupees in millions, except percentages) Fee, commission and brokerage ...... 13,207 21,733 64.56% Profit on sale of investments/derivative transactions ...... 2,202 2,884 30.97% Profit on foreign exchange transactions ...... 2,075 3,595 73.25% Others ...... 471 757 60.72% Total Non-interest Income ...... 17,955 28,969 61.34%

Fee, commission and brokerage income increased by 64.56% from Rs. 13.21 billion in fiscal 2008 to Rs. 21.73 billion in fiscal 2009. The increase was primarily due to the following: • robust growth in fee income arising from capital market services such as placement and syndication and advisory services; • an increase in processing fees and service charges from credit activities; and • an increase in fee income from various retail banking activities and business banking activities such as service charges relating to various types of customer accounts, sale of insurance products and debit card transactions, among others. Profit on sale of investments and derivative transactions increased by 30.97% from Rs. 2.20 billion in fiscal 2008 to Rs. 2.88 billion in fiscal 2009 primarily due to favourable market conditions, both in the government securities and debt markets. Profit on foreign exchange transactions increased by 73.25% from Rs. 2.08 billion in fiscal 2008 to Rs. 3.60 billion in fiscal 2009 due to an increase in the volume of foreign exchange transactions as a result of the Bank’s growth.

33 Non-interest Expense The following table sets forth the principal components of non-interest expense. Year Ended 31 March 2008 2009 % change (Rupees in millions, except percentages) Employee expense ...... 6,702 9,977 48.87% Occupancy cost ...... 4,425 5,938 34.19% Depreciation ...... 1,581 1,887 19.35% Administrative and other expenses ...... 8,841 10,780 21.93% Total Non-interest Expense ...... 21,549 28,582 32.64%

Non-interest expense increased by 32.64% from Rs. 21.55 billion in fiscal 2008 to Rs. 28.58 billion in fiscal 2009. The increase in non-interest expense was primarily due to the growth of the Bank’s network and distribution channels and the accompanying increase in business volumes. Employee expense includes salaries, allowances and other staff benefits. Employee expense increased by 48.87% from Rs. 6.70 billion in fiscal 2008 to Rs. 9.98 billion in fiscal 2009. The increase was primarily due to an increase in employee headcount from 14,739 as of 31 March 2008 to 20,624 as of 31 March 2009 to support the Bank’s growth and also as a result of an increase in average salary levels over the period. Occupancy cost, including expenses for office premises and repairs/maintenance, increased by 34.19% from Rs. 4.43 billion in fiscal 2008 to Rs. 5.94 billion in fiscal 2009. The increase was primarily due to the growth in the Bank’s distribution network by 24.44% from 671 branches and extension counters as of 31 March 2008 to 835 branches and extension counters as of 31 March 2009 and by a 30.07% growth in the number of ATMs from 2,764 to 3,595 during the same period. Depreciation increased by 19.35% from Rs. 1.58 billion in fiscal 2008 to Rs. 1.89 billion in fiscal 2009. This increase was primarily due to network expansion and an increase in general business volumes. Administrative and other expenses primarily include printing & stationery, advertisement & publicity, postage, telegram & telephone expenses, audit fees and other professional fees, among others. These expenses increased by 21.93% from Rs. 8.84 billion in fiscal 2008 to Rs. 10.78 billion in fiscal 2009 primarily due to network expansion and an increase in general business volumes.

Provisions and Contingencies The following table sets forth certain information regarding provisions and contingencies. Year Ended 31 March 2008 2009 % change (Rupees in millions, except percentages) Provision for income tax ...... 5,753 9,698 68.57% Provision for loan losses ...... 4,975 9,032 81.55% Provision for depreciation on investments ...... 65 1,078 1558.46% Others ...... 756 (713) (194.31%) Total Provisions and Contingencies ...... 11,549 19,095 65.34%

Provision for Income Tax The Bank’s provision for income tax increased by 68.57% from Rs. 5.75 billion in fiscal 2008 to Rs. 9.70 billion in fiscal 2009 primarily due to increase in profit before tax by 69.20% from Rs. 16.46 billion in fiscal 2008 to Rs. 27.85 billion in fiscal 2009.

Provision for Loan Losses The Bank’s provision for loan losses, including general provisions, increased from Rs. 4.98 billion in fiscal 2008 to Rs. 9.03 billion in fiscal 2009. This was primarily due to the following: • an increase in provision for restructured assets by 207.51% from Rs. 213 million in fiscal 2008 to Rs. 655 million in fiscal 2009; • an increase of 81.41% increase in Gross NPAs from Rs. 4.95 billion in fiscal 2008 to Rs. 8.98 billion in fiscal 2009.

34 During fiscal 2009, the Bank restructured loans totaling Rs. 9.96 billion compared to Rs. 3.22 billion of loans restructured during fiscal 2008. NPAs as a percentage of net customer assets decreased from 0.36% as of 31 March 2008 to 0.35% as of 31 March 2009. Provision for NPAs as a proportion of gross NPAs increased from 49.80% as of 31 March 2008 to 63.56% as of 31 March 2009.

Provision for Depreciation on Investments The Bank’s provision for depreciation on investments increased to Rs. 1,078 million in fiscal 2009 compared to Rs. 65 million in fiscal 2008 primarily due to adverse market conditions in the debt market.

Other provisions Other provisions decreased by 194.31% primarily due to the write-back of contingent provision against derivatives of Rs. 720 million.

Net Profit As a result of the foregoing factors, the Bank’s net profit increased by 69.51% from Rs. 10.71 billion in fiscal 2008 to Rs. 18.15 billion in fiscal 2009.

Financial Condition Assets The following table sets forth the principal components of the Bank’s assets as of 31 March 2008 and 31 March 2009. As of 31 March 2008 2009 % change (Rupees in millions, except percentages) Cash and balances with RBI ...... 73,057 94,192 28.93% Balance with banks and money at call and short notice ...... 51,986 55,977 7.68% Total cash and cash equivalents ...... 125,043 150,169 20.09% Government securities (net) ...... 201,788 277,229 37.39% Other securities (net) ...... 135,263 186,074 37.56% Total investments (net) ...... 337,051 463,303 37.46% Corporate loans (net) ...... 460,694 655,050 42.19% Retail loans (net) ...... 135,917 160,518 18.10% Total loans (net) ...... 596,611 815,568 36.70% Fixed assets ...... 9,228 10,729 16.27% Other assets ...... 27,845 37,451 34.50% Total assets ...... 1,095,778 1,477,220 34.81%

The Bank’s total assets increased by 34.81% from Rs. 1,095.78 billion as of 31 March 2008 to Rs. 1,477.22 billion as of 31 March 2009 primarily due to an increase in the size of the Bank’s loan portfolio and investment portfolio. Cash and balances with the RBI increased by 28.93% from Rs. 73.06 billion as of 31 March 2008 to Rs. 94.19 billion as of 31 March 2009. The increase was primarily due to maintenance of balances in compliance with reserve requirements arising on account of an increase in total deposits. Balances with the RBI increased by 36.18% from Rs. 57.85 billion as of 31 March 2008 to Rs. 78.78 billion as of 31 March 2009. The Bank’s total investments increased by 37.46% from Rs. 337.05 billion as of 31 March 2008 to Rs. 463.30 billion as of 31 March 2009. The Bank’s investments in Government securities (including investments held to meet SLR requirements) increased by 37.39% from Rs. 201.79 billion as of 31 March 2008 to Rs. 277.23 billion as of 31 March 2009. The Bank’s other investments increased by 37.56%, from Rs. 135.26 billion as of 31 March 2008 to Rs. 186.07 billion as of 31 March 2009, primarily due to an increase in investments in corporate debt securities. The Bank’s total loans increased by 36.70% from Rs. 596.61 billion as of 31 March 2008 to Rs. 815.57 billion as of 31 March 2009, primarily due to the growth in corporate loans by 42.19% from Rs. 460.69 billion as of 31 March 2008 to Rs. 655.05 billion as of 31 March 2009. The growth in loans was led by the Bank’s strategy of fully exploiting the business potential of the SME and Mid-Corporate segments and growing the retail

35 agricultural lending business. As a result, during fiscal 2009, while lending to SMEs grew by 39.35% to Rs. 160.77 billion, the total agricultural advances grew by 49.24% to Rs. 82.17 billion. The Bank’s retail loans also increased by 18.10% from Rs. 135.92 billion as of 31 March 2008 to Rs. 160.52 billion as of 31 March 2009 primarily due to home loans which increased by 32.97% from Rs. 78.70 billion as of 31 March 2008 to Rs. 104.65 billion as of 31 March 2009. The Bank’s net fixed assets increased by 16.27% from Rs. 9.23 billion as of 31 March 2008 to Rs. 10.73 billion as of 31 March 2009. The increase was primarily due to an increase in the Bank’s distribution network of branches and extension counters by 24.44% from 671 branches and extension counters as of 31 March 2008 to 835 branches and extension counters as of 31 March 2009. ATMs increased by 30.07% from 2,764 as of 31 March 2008 to 3,595 as of 31 March 2009. Other assets increased by 34.50% from Rs. 27.85 billion as of 31 March 2008 to Rs. 37.45 billion as of 31 March 2009 primarily due an increase in interest accrued, application money paid for investments, security and other deposits, deferred tax assets, accrued income and prepaid expenses and an increase in general business volume.

Liabilities and Shareholders’ Funds The following table sets forth the principal components of the Bank’s liabilities and shareholders’ funds as of 31 March 2008 and 31 March 2009. As of 31 March 2008 2009 % change (Rupees in millions, except percentages) Capital ...... 3,577 3,590 0.36% Reserves and surplus ...... 84,108 98,546 17.17% Total shareholders’ funds ...... 87,685 102,136 16.48% Employees’ stock options outstanding (net) ...... 22 12 (45.45)% Deposits ...... 876,262 1,173,741 33.95% Borrowings ...... 56,240 101,855 81.11% Subordinated Debt, Perpetual Debt and Upper Tier II instruments ...... 34,293 53,344 55.55% Other liabilities and provisions ...... 41,276 46,132 11.76% Total liabilities and shareholders’ funds ...... 1,095,778 1,477,220 34.81%

The Bank’s total liabilities and shareholders’ funds increased by 34.81% from Rs. 1,095.78 billion as of 31 March 2008 to Rs. 1,477.22 billion as of 31 March 2009. Deposits increased by 33.95% from Rs. 876.26 billion as of 31 March 2008 to Rs. 1,173.74 billion as of 31 March 2009. This growth in deposits was the result of an increased focus on retail and corporate customers and the Bank’s success in leveraging on its growing network of branches, extension counters and ATMs. Term deposits increased by 40.19% from Rs. 475.99 billion as of 31 March 2008 to Rs. 667.30 billion as of 31 March 2009. Low cost and non-interest bearing deposits (savings and current account deposits) increased by 26.52%, from Rs. 400.27 billion as of 31 March 2008 to Rs. 506.44 billion as of 31 March 2009. Low cost deposits as a percentage of total deposits decreased from 45.68% as of 31 March 2008 to 43.15% as of 31 March 2009. Borrowings increased by 81.11% from Rs. 56.24 billion as of 31 March 2008 to Rs. 101.86 billion as of 31 March 2009. The increase in borrowings was mainly due to an increase in refinanced borrowings of 450.64% from Rs. 5.47 billion as of 31 March 2008 to Rs. 30.12 billion as of 31 March 2009. Subordinated Debt, Perpetual Debt and Upper Tier II instruments increased by 55.55% from Rs. 34.29 billion as of 31 March 2008 to Rs. 53.34 billion as of 31 March 2009 primarily due to the raising of fresh subordinated debt eligible for capital, totaling Rs. 17.00 billion in fiscal 2009. Other liabilities and provisions increased by 11.76% from Rs. 41.28 billion as of 31 March 2008 to Rs. 46.13 billion as of 31 March 2009. Shareholders’ funds increased by 16.48% from Rs. 87.69 billion as of 31 March 2008 to Rs. 102.14 billion as of 31 March 2009, primarily due to retention of current year earnings.

36 Results for the Fiscal Year Ended 31 March 2007 compared to the Fiscal Year Ended 31 March 2008 Summary of Performance

Year Ended 31 March 2007 2008 % change (Rupees in millions, except percentages) Net Interest Income ...... 14,683 25,853 76.07% Non-interest Income ...... 10,101 17,955 77.75% Non-interest Expense ...... 12,146 21,549 77.42% Provisions and Contingencies ...... 6,048 11,549 90.96% Net Profit ...... 6,590 10,710 62.52% Net interest income increased by 76.07% from Rs. 14.68 billion in fiscal 2007 to Rs. 25.85 billion in fiscal 2008 primarily due to an increase in average interest earning assets on a daily average basis by 39.18%, from Rs. 535.91 billion in fiscal 2007 to Rs. 745.89 billion in fiscal 2008 Non-interest income increased by 77.75% from Rs. 10.10 billion in fiscal 2007 to Rs. 17.96 billion in fiscal 2008 primarily due to an increase in fee, commission and brokerage income by 69.54% from Rs. 7.79 billion in fiscal 2007 to Rs. 13.21 billion in fiscal 2008. Non-interest expense increased by 77.42% from Rs. 12.15 billion in fiscal 2007 to Rs. 21.55 billion in fiscal 2008 primarily due to an increase in employee expense and administrative and other expenses. Provisions and contingencies increased by 90.96% from Rs. 6.05 billion in fiscal 2007 to Rs. 11.55 billion in fiscal 2008 primarily due to an increase in provision for income tax and provision for loan losses. As a result of above, the Bank’s net profit increased by 62.52% from Rs. 6.59 billion in fiscal 2007 to Rs. 10.71 billion in fiscal 2009.

Net Interest Income The Bank’s net interest income increased by 76.07% from Rs. 14.68 billion in fiscal 2007 to Rs. 25.85 billion in fiscal 2008. The following table sets forth the components of net interest income. Year Ended 31 March 2007 2008 % change (Rupees in millions, except percentages) Interest on loans ...... 27,028 47,457 75.58% Interest on investments ...... 16,327 21,023 28.76% Other interest income ...... 1,261 1,573 24.74% Interest Income ...... 44,616 70,053 57.01% Interest on deposits ...... 24,809 37,425 50.85% Other interest expense ...... 5,124 6,775 32.22% Interest Expense ...... 29,933 44,200 47.66% Net Interest Income ...... 14,683 25,853 76.07%

The increase in net interest income was due to the following: • an increase in average interest earning assets on a daily average basis by 39.18%, from Rs. 535.91 billion in fiscal 2007 to Rs. 745.89 billion in fiscal 2008; and • an increase in the net interest margin from 2.74% in fiscal 2007 to 3.47% in fiscal 2008.

Interest Income Interest income on loans increased by 75.58% from Rs. 27.03 billion in fiscal 2007 to Rs. 47.46 billion in fiscal 2008. The increase in interest income on loans was due to the following: • an increase in the average loans by 56.15% from Rs. 284.02 billion in fiscal 2007 to Rs. 443.49 billion in fiscal 2008; and • an increase in yield on loans from 9.48% in fiscal 2007 to 10.66% in fiscal 2008. The increase in yields on the loan portfolio was in line with the general rise in interest rates on advances following a tightening of the money supply position during fiscal 2008.

37 Interest income on investments increased by 28.76%, from Rs. 16.33 billion in fiscal 2007 to Rs. 21.02 billion in fiscal 2008. The increase in investments during fiscal 2008 was primarily due to an increase in the value of securities held to meet SLR requirements and investment in corporate debt securities. The Bank’s average investments increased by 21.57%, from Rs. 231.59 billion in fiscal 2007 to Rs. 281.54 billion in fiscal 2008. Yield on investments also increased from 7.06% in fiscal 2007 to 7.50% in fiscal 2008. Other interest income increased by 24.84%, from Rs. 1.26 billion in fiscal 2007 to Rs. 1.57 billion in fiscal 2008, primarily due to an increase in term lending. Average term lending increased by 108.10% from Rs. 7.28 billion in fiscal 2007 to Rs. 15.15 billion in fiscal 2008.

Interest Expense Total interest expense increased by 47.66% from Rs. 29.93 billion in fiscal 2007 to Rs. 44.20 billion in fiscal 2008. The increase in interest expense was primarily due the following: • an increase in average deposits by 37.35% from Rs. 461.15 billion in fiscal 2007 to Rs. 633.41 billion in fiscal 2008 to meet the funding requirement of the growth in assets; and • an increase in the average cost of deposits increased from 5.38% in fiscal 2007 to 5.91% in fiscal 2008, primarily due to the increase in average term deposits by 26.66% from Rs. 298.64 billion in fiscal 2007 to Rs. 378.27 billion in fiscal 2008. The average cost of term deposits increased from 7.50% in fiscal 2007 to 8.96% in fiscal 2008. Other interest expense increased in fiscal 2008 by 32.22%, from Rs. 5.12 billion in fiscal 2007 to Rs. 6.78 billion in fiscal 2008, primarily due to the increase in forex and overseas borrowings. Average forex borrowings increased by 58.36% from Rs. 6.70 billion in fiscal 2007 to Rs. 10.61 billion in fiscal 2008. Average overseas borrowings increased by 475.89% from Rs. 5.31 billion in fiscal 2007 to Rs. 30.58 billion in fiscal 2008.

Non-interest Income Non-interest income increased by 77.75% from Rs. 10.10 billion in fiscal 2007 to Rs. 17.96 billion in fiscal 2008. The following table sets forth the components of non-interest income.

Year Ended 31 March 2007 2008 % change (Rupees in millions, except percentages) Fee, commission and brokerage ...... 7,790 13,207 69.54% Profit on sale of investments/derivative transactions ...... 609 2,202 261.58% Profit on foreign exchange transactions ...... 1,248 2,075 66.27% Others ...... 454 471 3.74% Total Non-interest Income ...... 10,101 17,955 77.75%

Fee, commission and brokerage income increased by 69.54% from Rs. 7.79 billion in fiscal 2007 to Rs. 13.21 billion in fiscal 2008. The increase was primarily due to the following: • growth in processing fees and service charges from credit activities; • increase in fee income from various retail banking activities and business banking activities such as service charges relating to various types of customer accounts, sale of insurance products, debit and credit card transactions, among others. Profit on sale of investments and derivative transactions increased from Rs. 609 million in fiscal 2007 to Rs. 2,202 million in fiscal 2008 primarily due to favourable market conditions, both in the government securities and debt markets. Profit on foreign exchange transactions increased by 66.27% from Rs. 1.25 billion in fiscal 2007 to Rs. 2.08 billion in fiscal 2008 due to an increase in the volume of foreign exchange transactions as a result of the Bank’s growth.

38 Non-interest Expense The following table sets forth the principal components of non-interest expense.

Year Ended 31 March 2007 2008 % change (Rupees in millions, except percentages) Employee expense ...... 3,813 6,702 75.77% Occupancy cost ...... 2,880 4,425 53.65% Depreciation ...... 1,119 1,581 41.29% Administrative and other expenses ...... 4,334 8,841 103.99% Total non-interest expense ...... 12,146 21,549 77.42%

Non-interest expense increased by 77.42% from Rs. 12.15 billion in fiscal 2007 to Rs. 21.55 billion in fiscal 2008. The increase in non-interest expense was primarily due to the growth of the Bank’s network and distribution channels and the accompanying increase in business volumes. Employee expense includes salaries, allowances and other staff benefits. Employee expense increased by 75.77% from Rs. 3.81 billion in fiscal 2007 to Rs. 6.70 billion in fiscal 2008. The increase was primarily due to the Bank’s increase in employee headcount from 9,980 as of 31 March 2007 to 14,739 as of 31 March 2008 to support the Bank’s growth and also as a result of an increase in average salary levels over the period. Occupancy cost, including expenses for office premises and repairs/maintenance, increased by 53.65% from Rs. 2.88 billion in fiscal 2007 to Rs. 4.43 billion in fiscal 2008. The increase was primarily due to the growth in the Bank’s distribution network by 19.61% from 561 branches and extension counters as of 31 March 2007 to 671 branches and extension counters as of 31 March 2008 and by 18.07% growth in the number of ATMs from 2,341 to 2,764 during the same period and also due to general escalation in lease rentals. Depreciation increased by 41.29% from Rs. 1.12 billion in fiscal 2007 to Rs. 1.58 billion in fiscal 2008 primarily due to network expansion and an increase in general business volumes. Administrative and other expenses increased by 103.99% from Rs. 4.33 billion in fiscal 2007 to Rs. 8.84 billion in fiscal 2009 primarily due to an increase in DSA payments, sales commission, professional fees and travel and conveyance expenses and also due to network expansion and an increase in general business volumes.

Provisions and Contingencies The following table sets forth certain information regarding provisions and contingencies.

Year Ended 31 March % 2007 2008 change (Rupees in millions, except percentages) Provision for income tax ...... 3,372 5,753 70.61% Provision for loan losses ...... 1,961 4,975 153.70% Provision for depreciation on investments ...... 670 65 (90.30)% Others ...... 45 756 1580.00% Total provisions and contingencies ...... 6,048 11,549 90.96%

Provision for Income Tax The Bank’s provision for income tax increased by 70.61%, from Rs. 3.37 billion in fiscal 2007 to Rs. 5.75 billion in fiscal 2008. The Bank’s effective tax rate increased from 33.85% in fiscal 2007 to 34.94% in fiscal 2008, due to a decrease in tax exempt income due to a change in tax regulations and an increase in the statutory tax rate by 33 basis points.

Provision for Loan Losses The Bank’s provision for loan losses, including general provisions, increased from Rs. 1.96 billion in fiscal 2007 to Rs. 4.98 billion in fiscal 2008 due to higher provisioning requirements established by the Bank. Net NPAs decreased from Rs. 2.66 billion as of 31 March 2007 to Rs. 2.48 billion as of 31 March 2008, which resulted in a decrease in net NPAs as a percentage of net customer assets from 0.61% as of 31 March 2007 to

39 0.36% as of 31 March 2008. Provision for NPAs as a proportion of Gross NPAs increased from 36.39% as of 31 March 2007 to 49.80% as of 31 March 2008.

Provision for Depreciation on Investments The Bank’s provision for depreciation on investments decreased to Rs. 65 million in fiscal 2008 compared to the provision of Rs. 670 million in fiscal 2007 primarily due to favourable market conditions.

Other provisions Other provisions increased from Rs. 45 million in fiscal 2007 to Rs. 756 million in fiscal 2008, mainly due to contingent provision against derivatives of Rs. 720 million created in 2008.

Net Profit As a result of the foregoing factors, the Bank’s net profit increased by 62.52% from Rs. 6.59 billion in fiscal 2007 to Rs. 10.71 billion in fiscal 2008.

Financial Condition Assets The following table sets forth the principal components of the Bank’s assets as of 31 March 2007 and 31 March 2008. As of 31 March 2007 2008 % change (Rupees in millions, except percentages) Cash and balances with RBI ...... 46,610 73,057 56.74% Balance with banks and money at call and short notice ...... 22,573 51,986 130.30% Total cash and cash equivalents ...... 69,183 1,25,043 80.74% Government securities (net) ...... 164,297 201,788 22.82% Other securities (net) ...... 104,675 135,263 29.22% Total investments (net) ...... 268,972 337,051 25.31% Corporate loans (net) ...... 279,490 460,694 64.83% Retail loans (net) ...... 89,275 135,917 52.25% Total loans (net) ...... 368,765 596,611 61.79% Fixed assets ...... 6,732 9,228 37.08% Other assets ...... 18,920 27,845 47.17% Total assets ...... 732,572 1,095,778 49.58%

The Bank’s total assets increased by 49.58% from Rs. 732.57 billion as of 31 March 2007 to Rs. 1,095.78 billion as of 31 March 2008, primarily due to an increase in the size of the Bank’s loan and investments portfolio. Cash and balances with the RBI increased by 56.74% from Rs. 46.61 billion as of 31 March 2007 to Rs. 73.06 billion as of 31 March 2008. The increase was primarily due to maintenance of balances in compliance with reserve requirements arising on account of an increase in total deposits. Balances with the RBI increased by 51.28% from Rs. 38.24 billion as of 31 March 2007 to Rs. 57.85 billion as of 31 March 2008. The Bank’s total investments increased by 25.31% from Rs. 268.97 billion as of 31 March 2007 to Rs. 337.05 billion as of 31 March 2008. The Bank’s investments in Government securities (including investments held to meet SLR requirements) increased by 22.82% from Rs. 164.30 billion as of 31 March 2007 to Rs. 201.79 billion as of 31 March 2008. The Bank’s investments in other securities increased by 29.22% from Rs. 104.68 billion as of 31 March 2007 to Rs. 135.26 billion as of 31 March 2008 due to the Bank investing significantly in credit substitutes such as debenture and bonds in order to earn higher interest income. The Bank’s total loans increased by 61.79% from Rs. 368.77 billion as of 31 March 2007 to Rs. 596.61 billion as of 31 March 2008, primarily due to the growth in corporate loans by 64.83% from Rs. 279.49 billion as of 31 March 2007 to Rs. 460.69 billion as on 31 March 2008 and growth in retail loans by 52.25% from Rs. 89.28 billion as of 31 March 2007 to Rs. 135.92 billion as of 31 March 2008, primarily due to home loans which increased by 62.77% from Rs. 48.35 billion as of 31 March 2007 to Rs. 78.70 billion as of 31 March 2008. During fiscal 2008, the corporate credit strategy of the Bank focused on highly rated companies that were competitive globally

40 with good corporate governance and management practices. As a result, the Bank reduced net NPAs from 0.61% as of 31 March 2007 to 0.36% as of 31 March 2008. The Bank’s net fixed assets increased by 37.08% from Rs. 6.73 billion as of 31 March 2007 to Rs. 9.23 billion as of 31 March 2008. The increase was primarily due to an increase in the Bank’s distribution network of branches and extension counters by 19.61% from 561 branches and extension counters as of 31 March 2007 to 671 branches and extension counters as of 31 March 2008. ATMs increased by 18.07% from 2,341 as of 31 March 2007 to 2,764 as of 31 March 2008. Other assets increased by 47.17% from Rs. 18.92 billion as of 31 March 2007 to Rs. 27.85 billion as of 31 March 2008 primarily due to an increase in interest accrued, application money paid for investments, security and other deposits, deferred tax assets and increase in general business volume.

Liabilities and Shareholders’ Funds The following table sets forth the principal components of the Bank’s liabilities and shareholders’ funds as of 31 March 2007 and 31 March 2008. As of 31 March 2007 2008 % change (Rupees in millions, except percentages) Capital ...... 2,816 3,577 27.02% Reserves and surplus ...... 31,116 84,108 170.30% Total shareholders’ funds ...... 33,932 87,685 158.41% Employees’ stock options outstanding (net) ...... 90 22 (75.56)% Deposits ...... 587,856 876,262 49.06% Borrowings ...... 51,956 56,240 8.25% Subordinated Debt, Perpetual Debt and Upper Tier II instruments ...... 35,014 34,293 (2.06)% Other liabilities and provisions ...... 23,724 41,276 73.98% Total liabilities and shareholders’ funds ...... 732,572 1,095,778 49.58%

The Bank’s total liabilities and shareholders’ funds increased by 49.58% from Rs. 732.57 billion as of 31 March 2007 to Rs. 1,095.78 billion as of 31 March 2008.

Deposits increased by 49.06% from Rs. 587.86 billion as of 31 March 2007 to Rs. 876.26 billion as of 31 March 2008. This growth in deposits was the result of an increased focus on retail and corporate customers and by leveraging on the Bank’s network of branches, extension counters and ATMs. Term deposits increased by 34.63% from Rs. 353.55 billion as of 31 March 2007 to Rs. 475.99 billion as of 31 March 2008. Low cost and non-interest bearing deposits (savings and current account deposits) increased by 70.84%, from Rs. 234.30 billion as of 31 March 2007 to Rs. 400.27 billion as of 31 March 2008. Low cost deposits as percentage of total deposits increased from 39.86% as of 31 March 2007 to 45.68% as of 31 March 2008. Borrowings increased by 8.25% from Rs. 51.96 billion as of 31 March 2007 to Rs. 56.24 billion as of 31 March 2008. Subordinated Debt, Perpetual Debt and Upper Tier II instruments decreased by 2.06% from Rs. 35.01 billion as of 31 March 2007 to Rs. 34.29 billion as of 31 March 2008 mainly due to the redemption of subordinated debt of Rs. 2.46 billion in fiscal 2008. Other liabilities and provisions increased by 73.98% from Rs. 23.72 billion as of 31 March 2007 to Rs. 41.28 billion as of 31 March 2008. Shareholders’ funds increased by 158.41% from Rs. 33.93 billion as of 31 March 2007 to Rs. 87.69 billion as of 31 March 2008, primarily due to capital raised through allotment of Global Depository Receipts of Rs. 8.79 billion, offering by way of Qualified Institutional Placement of Rs. 17.52 billion and a preferential allotment of equity shares to the promoters of the Bank of Rs. 19.03 billion. Shareholders’ funds also increased due to retention of current year earnings.

41 Liquidity and Capital Resources The Bank’s growth over the years has been financed by a combination of cash generated from operations, increases in customer deposits, borrowings and new issuances of equity capital. The following table sets forth the Bank’s cash flows from operating activities, investing activities and financing activities. Year Ended 31 March 2007 2008 2009 (Rupees in millions, except percentages) Cash flow from operating activities Net profit before taxes ...... 9,962 16,463 27,852 Adjustments for: Depreciation & impairment provision on fixed assets ...... 1,119 1,581 1,887 Depreciation on investments ...... 670 65 1,078 Amortisation of premium on Held to Maturity investments ...... 987 977 928 Provision for Non Performing Advances/Investments (including bad debts) . . . 734 3,227 7,322 General provision for securitised assets ...... 25 (1) (7) Provision on standard assets (including retail assets) ...... 1,242 1,535 1,055 Provision for loss in present value for agricultural assets ...... — — 7 Provision for wealth tax ...... 323 Loss on sale of fixed assets ...... 29 152 82 Provision for country risk ...... — 35 4 Contingent provision against derivatives ...... — 720 (720) Provision for restructured assets ...... 3 213 655 Amortisation of deferred employee compensation ...... 27 2 (3) 14,801 24,971 40,143 Adjustments for: (Increase)/Decrease in investments ...... (21,043) (26,351) (35,356) (Increase)/Decrease in advances ...... (146,307) (231,262) (225,885) Increase/(Decrease) in borrowings ...... 25,147 4,284 45,614 Increase/(Decrease) in deposits ...... 186,721 288,406 297,479 (Increase)/Decrease in other assets ...... (1,319) (7,918) (8,263) Increase/(Decrease) in other liabilities & provisions ...... (915) 14,235 2,829 Direct taxes paid ...... (4,129) (6,761) (11,045) Net cash flow from operating activities ...... 52,956 59,604 105,516 Cash flow from investing activities Purchase of fixed assets ...... (2,226) (4,356) (3,867) (Increase)/Decrease in Held to Maturity Investments ...... (34,365) (42,795) (93,951) Proceeds from sale of fixed assets ...... 35 126 398 Net cash used in investing activities ...... (36,556) (47,025) (97,420) Cash flow from financing activities Proceeds from issue of Subordinated debt, Perpetual debt & Upper Tier II instruments (net of repayment) ...... 17,128 (721) 19,051 Proceeds from issue of Share capital ...... 29 761 13 Proceeds from Share Premium (net of share issue expenses) ...... 330 44,706 376 Payment of Dividend ...... (1,117) (1,488) (2,516) Net cash generated from financing activities ...... 16,370 43,258 16,924 Effect of exchange fluctuation on translation reserve ...... (5) 22 107 Net increase in cash and cash equivalents ...... 32,765 55,859 25,127 Cash and cash equivalents as at the beginning of the year ...... 36,418 69,183 125,042 Cash and cash equivalents as at the end of the year ...... 69,183 125,042 150,169

Cash Flows from Operating Activities The Bank’s operations generated cash flows of Rs. 105.52 billion, Rs. 59.60 billion and Rs. 52.96 billion in fiscal 2009, 2008 and 2007, respectively. Net cash from operations in fiscal 2009 resulted primarily from net profit before taxes of Rs. 27.85 billion, a net increase in deposits of Rs. 297.48 billion, a net increase in borrowings of Rs. 45.61 billion, depreciation on

42 fixed assets, amortisation of premium on securities under the HTM category and depreciation on investments totalling Rs. 3.89 billion and provision for loan losses, including general provisions, of Rs. 9.03 billion. These items were partly offset by an increase in advances of Rs. 225.89 billion, a net increase in the investment portfolio by Rs. 35.36 billion and direct taxes paid by the Bank of Rs. 11.05 billion. Net cash from operations in fiscal 2008 resulted primarily from net profit before taxes of Rs. 16.46 billion, a net increase in deposits of Rs. 288.41 billion, a net increase in borrowings of Rs. 4.28 billion, depreciation on fixed assets, amortisation of premium on securities under the HTM category and depreciation on investments totalling Rs. 2.62 billion and provision for loan losses, including general provisions, of Rs. 4.97 billion. This was partly offset by an increase in advances of Rs. 231.26 billion, a net increase in the investment portfolio by Rs. 26.35 billion, an increase in other assets of Rs. 7.92 billion and direct taxes of Rs. 6.76 billion. Net cash from operations in fiscal 2007 resulted primarily from net income before taxes of Rs. 9.96 billion, a net increase in deposits of Rs. 186.72 billion, a net increase in borrowings by Rs. 25.15 billion, depreciation on fixed assets and amortisation of premium on securities under the HTM category and depreciation on investments totalling Rs. 2.78 billion and provision for loan losses including general provision by Rs. 2.00 billion. These items were partly offset by an increase in advances and investments by Rs. 146.31 billion and Rs. 21.04 billion, respectively, and direct taxes paid of Rs. 4.13 billion.

Cash Flows used in Investing Activities Net cash used in investing activities was Rs. 97.42 billion, Rs. 47.03 billion and Rs. 36.56 billion in fiscal 2009, 2008 and 2007, respectively. The Bank’s investing activities principally consist of making investments for its own account and for capital expenditures for the Bank’s branch network, technology and infrastructure. Of the Rs. 97.42 billion used in investing activities in fiscal 2009, primarily Rs. 3.87 billion was used for net capital expenditure and Rs. 93.95 billion was used to increase the net investment portfolio under the HTM category. Of the net cash of Rs. 47.03 billion used in investing activities in fiscal 2008, primarily Rs. 4.36 billion was used for net capital expenditure and Rs. 42.80 billion was used to increase the net investment portfolio under the HTM category. Of the net cash of Rs. 36.56 billion used in investing activities in fiscal 2007, primarily Rs. 2.23 billion was used for net capital expenditure and Rs. 34.37 billion was used to increase the net investment portfolio under the HTM category.

Cash Flows from Financing Activities Net cash generated from financing activities was Rs. 16.92 billion, Rs. 43.26 billion and Rs. 16.37 billion in fiscal 2009, 2008 and 2007, respectively. The Bank’s financing sources primarily comprised proceeds from the Bank’s issue of subordinated debt, its issuances of perpetual and upper Tier II instruments and its issuance of share capital, which were partly offset by payment of dividends. Net cash generated from financing activities in fiscal 2009 of Rs. 16.92 billion resulted primarily from the Bank’s raising capital by issue of subordinated debt of Rs. 17.00 billion, which was partly offset by a dividend payment of Rs. 2.52 billion. Net cash generated from financing activities in fiscal 2008 of Rs. 43.26 billion resulted primarily from the Bank’s issuance of equity shares (including premium) of Rs. 45.47 billion from its GDR programme, QIP placement and preferential allotment to promoters, which items were partly offset by a dividend payment of Rs. 1.49 billion. Net cash generated from financing activities in fiscal 2007 of Rs. 16.37 billion resulted primarily from issue of subordinated debt of Rs. 3.89 billion and perpetual debt Rs. 4.14 billion, which items were partly offset by a dividend payment of Rs. 1.12 billion.

Capital Resources The Bank is subject to the capital adequacy guidelines stipulated by RBI, which are based on the framework of the Basel Committee on Banking Supervision. In June 2008, RBI issued the Master Circular — Prudential Guidelines on Capital Adequacy and Market Discipline under Basel II. As per Basel II guidelines, the Bank is required to maintain a minimum CRAR of 9.0%, with minimum Tier I Capital ratio of 6.0%. In terms of RBI guidelines for implementation of Basel II, capital charge for credit and market risk for the financial year ended 31 March 2009 will be required to be maintained at the higher levels implied by Basel II or 90% of the minimum capital requirement computed as per the Basel I framework. For fiscal 2009, the minimum capital required to be maintained by the Bank as per Basel II guidelines was higher than that under Basel I guidelines. Tier I capital consists of equity capital, statutory reserves, other disclosed free reserves, capital reserves and innovative perpetual debt instruments eligible for inclusion in Tier I capital. The Tier II capital consists of general provision and loss reserves, upper Tier II instruments and subordinate debt instruments eligible for inclusion in Tier II capital. For a description of the RBI’s capital adequacy guidelines, see “Supervision and Regulation — Capital Adequacy Requirements”.

43 The following table sets forth the risk-based capital, risk-weighted assets and risk-based capital adequacy ratios computed in accordance with the applicable RBI guidelines. As of 31 March 2007 2008 2009 (Rupees in millions, except percentages) Tier I Capital ...... 36,362 88,225 101,630 Of which — Innovative Perpetual debt instruments ...... 4,140 3,986 4,473 Tier II Capital ...... 29,183 30,828 48,646 Of which — Subordinated debt ...... 17,485 15,729 30,548 — Upper Tier II instruments ...... 9,596 11,484 13,708 Total Capital ...... 65,545 119,053 150,276 Total risk weighted assets and contingents ...... 566,434 867,197 1,097,875 Capital adequacy ratios: Tier I capital adequacy ratio ...... 6.42% 10.17% 9.26% Tier II capital adequacy ratio ...... 5.15% 3.56% 4.43% Total capital adequacy ratio ...... 11.57% 13.73% 13.69% Minimum capital adequacy ratios required by the RBI: Tier I capital adequacy ratio ...... 4.50% 6.00% 6.00% Total capital adequacy ratio ...... 9.00% 9.00% 9.00% As shown above, the Bank’s Tier I capital adequacy ratio decreased to 9.26%, Tier II capital adequacy ratio increased to 4.43% and the total capital adequacy ratio decreased marginally to 13.69% as of 31 March 2009 as compared to 31 March 2008. Capital Expenditures The Bank’s capital expenditures consist principally of branch network expansion as well as investments in technology and communication infrastructure. The Bank incurred aggregate capital expenditures (on additions to fixed assets including capital work in progress) of Rs. 2.23 billion, Rs. 4.36 billion, Rs. 3.87 billion during fiscal 2007, 2008 and 2009, respectively. During fiscal 2010, the Bank plans to incur capital expenditures of approximately Rs. 4.31 billion, which is expected to be funded internally. Of this amount, Rs. 1.35 billion will be related to technology infrastructure. The Bank has not made any commitments to incur the remaining funds allocated to capital expenditure and the amount and purpose of these expenditures may change in accordance with its business requirements. The following table sets forth, as of the dates indicated, the written down value of various fixed assets: As of 31 March 2007 2008 2009 (Rupees in millions) Premises ...... 265 414 774 Other fixed assets (including furniture and fixtures) ...... 5,696 7,165 9,380 Assets on lease ...... 523 365 — Capital work in progress ...... 248 1,284 575 Total written down value of fixed assets ...... 6,732 9,228 10,729

The Bank’s written down value of fixed assets increased by 16.25% to Rs. 10.73 billion as of 31 March 2009 from Rs. 9.23 billion as of 31 March 2008, primarily due to growth in the Bank’s distribution network of branches, extension counters and ATMs. Financial Instruments and Off-Balance Sheet Arrangements Foreign Exchange and Derivative Contracts The Bank enters into foreign exchange and derivative transactions for customers and for its own account. Foreign exchange products offered include forward exchange contracts, currency swaps and currency options. The derivative products offered by the Bank include interest rate swaps, forward rate agreements, interest rate futures and cross currency derivatives primarily for corporate customers. The Bank also trades in interest rate swaps for its own account and enters into foreign exchange contracts to cover its exposure. The Bank earns profit on customer transactions by way of margin as a mark-up over the inter-bank exchange rate. The Bank earns profit on interbank transactions based on the spread between the purchase rate and the sale rate. These profits are booked as income from foreign exchange and derivative transactions.

44 The following table sets forth the notional principal amounts of the Bank’s outstanding foreign and derivative contracts as of the dates indicated: As of 31 March 2007 2008 2009 (Rupees in millions) Forward contracts ...... 507,359 643,205 829,419 Interest rate swaps, currency swaps, forward rate agreement and interest rate futures ...... 1,174,109 1,565,203 804,211 Foreign currency options ...... 52,836 161,001 84,621 Total foreign exchange derivative products ...... 1,734,304 2,369,409 1,718,251

As part of its corporate banking activities, the Bank issues guarantees and documentary credits. Guarantees are generally issued to enhance the credit standing of the Bank’s customers and represent irrevocable assurances that the Bank will make the payments in the event that the customer fails to fulfil its financial or performance obligations. Documentary credits are provided to customers to meet their working capital requirements as well as for capital equipment purchases. The following table sets forth, as of dates indicated, the values of outstanding guarantees and documentary credits: As of 31 March 2007 2008 2009 (Rupees in millions) Guarantees ...... 43,864 119,719 200,810 Documentary credits ...... 54,772 82,466 159,487 Total ...... 98,636 202,185 360,297

Guarantees and documentary credits outstanding increased by 78.20% to Rs. 360.30 billion as of 31 March 2009 from Rs. 202.19 billion as of 31 March 2008, primarily due to growth in the corporate banking business.

Contractual Obligations The following table sets forth the Bank’s contractual obligations as of 31 March 2009:

Payments due by period, as of 31 March 2009 Less than After Total 1 year 1-3 years 3-5 years 5 years (Rupees in millions) Subordinated debt ...... 35,163 300 1,600 9,005 24,258 Perpetual debt ...... 4,473 — — — 4,473 Upper Tier II instruments ...... 13,708 — — — 13,708 Due under operating leases(i) ...... 18,562 3,192 5,557 3,973 5,840 Total ...... 71,906 3,492 7,157 12,978 48,279

(i) Operating leases comprise leases of office premises, staff quarters, IT Equipment and point-of-sale terminals.

First Quarter of Fiscal 2010 Performance Highlights • Net Interest Income The Bank registered a 29% year on year growth in net interest income in the first quarter of fiscal 2010 of Rs. 10.46 billion as compared to Rs. 8.10 billion in the first quarter of fiscal 2009. A strong growth in the levels of advances and investments, together with a higher share of demand deposits, contributed to the rise in net interest income. The advances of the Bank grew to Rs. 781.05 billion as of 30 June 2009 from Rs. 611.60 billion as of 30 June 2008, a growth of 28% year on year. • Net Interest Margin The net interest margin for the first quarter of fiscal 2010 decreased marginally to 3.34%, from 3.35% in the first quarter of fiscal 2009 and from 3.37% in the fourth quarter of fiscal 2009. The decrease in net interest margin was primarily due to reductions in PLR by 50 basis points on 1 April 2009 and another 50 basis points on 15 May 2009.

45 The daily average cost of funds decreased marginally by 2 basis points to 6.09% in the first quarter of fiscal 2010 as compared 6.11% in the first quarter of fiscal 2009. On a daily average basis, the share of low cost deposits — Savings Bank and Current Account — declined to 37% as of 30 June 2009 as compared to 38% as of 30 June 2008. Savings Bank deposits registered a growth of 32% year on year, from Rs. 190.26 billion as of 30 June 2008 to Rs. 251.99 billion as of 30 June 2009. Current Account deposits grew 16% year on year, from Rs. 164.23 billion as at end June 2008 to Rs. 189.77 billion as of 30 June 2009. • Non-Interest Income Non-interest Income registered a growth of 53% year on year, increasing to Rs. 9.59 billion for the first quarter of fiscal 2010 compared to Rs. 6.25 billion for the first quarter of fiscal 2009. • NPA Management Net NPAs as a proportion of net customer assets decreased to 0.41% as of 30 June 2009 compared to 0.47% as of 30 June 2008, however the same were marginally higher from 0.35% as of 31 March 2009. Gross NPAs as a proportion of gross customer assets were at 1.01% as of 30 June 2009, marginally up from 0.96% as of 31 March 2009 and 0.92% as of 30 June 2008. The Bank had a provision coverage of 85.88% as of end June 2009 (as a proportion of Gross NPAs together with accumulated write-offs). If the accumulated write-offs were excluded, provisions held as a proportion of Gross NPAs would constitute 59.89% as of 30 June 2009. The Bank restructured loans totaling Rs. 9.96 billion during the quarter ended June 2009 and provided an amount of Rs. 0.34 billion against diminution in the fair value of such restructured loans. The cumulative value of assets restructured as of 30 June 2009 was Rs. 25.20 billion, constituting 2.77% of gross customer assets. • Network Expansion As of 30 June 2009, the Bank’s ATM network of 3,723 ATMs was the third largest in the country, up from 2,904 ATMs as of 30 June 2008. The Bank has a wide presence through its 861 branches and extension counters across 534 cities and towns. The Bank has added 148 branches and extension counters across an additional 101 cities and towns in the last year. • Capital and Net Worth The net worth of the Bank was Rs. 102.82 billion as of 30 June 2009 as compared to Rs. 87.42 billion as of 30 June 2008, a growth of 18%. The capital adequacy ratio for the Bank was at 15.28%, as of 30 June 2009, as compared to 13.25% as of 30 June 2008. The Tier I capital amounted to 9.39% as of 30 June 2009 compared to 9.93% as of 30 June 2008. During the first quarter of fiscal 2010, the Bank raised subordinated debt of Rs. 20.00 billion raising the Tier II ratio from 3.32% as of 30 June 2008 to 5.89% as of 30 June 2009.

Balance Sheet as of 30 June 2009 The Bank has prepared an unaudited unconsolidated balance sheet as of 30 June 2009 which is condensed in nature and therefore has not been included in the Listing Particulars. The Bank has, however, set out below a qualitative discussion of its principal balance sheet items as of 30 June 2009. The financial information derived from the management accounts on which such discussion is based may be subject to material adjustments or revisions and therefore investors are cautioned not to place undue reliance on the information below. The Bank’s total assets as of 30 June 2009 were marginally lower as compared to 31 March 2009, primarily on account of a decrease in advances due to the macroeconomic environment. The Bank’s total investments remained stable as compared to 31 March 2009, with a slight increase in investments in non-SLR securities which were offset by an equivalent decrease in investments in Government Securities. Deposits decreased marginally as of 30 June 2009 as compared to 31 March 2009 commensurate with the decrease in advances. Shareholders’ funds increased as of 30 June 2009 as compared to 31 March 2009, mainly due to an increase in reserves and surplus on account of retained earnings.

Critical Accounting Policies The Financial Statements are prepared in accordance with Indian GAAP as applicable to banks. The preparation of the Financial Statements requires the Bank to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent liabilities. The notes to the Bank’s Financial Statements contain a summary of its significant accounting policies. Certain of these policies are critical to the portrayal of the Bank’s financial condition, since they require management to make subjective judgments, some of which may relate to matters that are inherently uncertain. Below is a discussion of these critical accounting policies. The Bank bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. As a result of changes in applicable statutory

46 requirements and accounting practices in India, the accounting policies of the Bank have undergone changes during the periods covered by this discussion. Accordingly, this discussion should be read in conjunction with the Financial Statements and notes as applicable during the respective fiscal year. Set forth below are the Bank’s critical accounting policies under Indian GAAP for fiscal 2009.

Investment Classification In accordance with RBI guidelines, investments are classified at the date of purchase as: • Held for Trading (“HFT”); • Available for Sale (“AFS”); and • Held to Maturity (“HTM”). Investments that are held principally for resale within a short period are classified as HFT securities. As per RBI guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date. Investments that the Bank intends to hold till maturity are classified under HTM category. Investments not exceeding 25% of total investments, which the Bank intends to hold till maturity, are classified as HTM securities. As permitted by the RBI, the Bank may exceed the limit of 25% of total investments provided the excess comprises only of those securities which are eligible for complying with the Statutory Liquidity Ratio (“SLR”) i.e. SLR securities and the total SLR securities held in HTM category are not more than 25% of its demand and time liabilities as on the effective date. The effective date means the last Friday of the second preceding fortnight for computation of the aforesaid limit. In computing the investment ceiling for HTM portfolio for the aforesaid purpose, debentures and bonds, which are in the nature of advances are excluded. All other investments are classified as AFS securities. However, for disclosure in the balance sheet, investments in India are classified under six categories — Government securities, Other approved securities, Shares, Debentures and Bonds, Investment in Subsidiaries/ Joint Ventures and Others. Investments made outside India are classified under three categories — Government Securities, Subsidiaries and/or Joint Ventures abroad and Others.

Transfer of security between categories Transfer of security between categories of investments is accounted as per RBI guidelines.

Valuation Investments classified under the HTM category are carried at acquisition cost. Any premium on acquisition over face value is amortised on a constant yield to maturity over the remaining period to maturity. Investments classified under the AFS and HFT category are marked to market. The market/fair value for the purpose of periodical valuation of quoted investments included in the “Available for Sale’ and “Held for Trading’ categories is the market price of the scrip as available from the trades/quotes on the stock exchanges, SGL account transactions, price list of the RBI or prices declared by Primary Dealers Association of India jointly with Fixed Income Money Market and Derivatives Association, periodically. Net depreciation, if any, within each category of investments is recognised in the profit and loss account. The net appreciation if any, under each category is ignored, except to the extent of depreciation previously provided. The book value of individual securities is not changed consequent to the periodic valuation of investments. Treasury Bills, Commercial Paper and Certificate of Deposits, being discounted instruments, are valued at carrying cost. Units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund. Market value of investments where current quotations are not available, is determined as per the norms prescribed by RBI as under: • market value of unquoted Government securities is derived based on the Prices/Yield to Maturity (“YTM”) rate for Government securities of equivalent maturity as notified by Fixed Income Money Market and Derivatives Association of India (“FIMMDA”) jointly with the Primary Dealers Association of India (“PDAI”) at periodic intervals;

47 • in case of Central Government Securities, which do not qualify for SLR requirement, the market price is derived by adding appropriate mark up to the Base Yield Curve of Central Government Securities as notified by FIMMDA; • market value of unquoted State Government securities is derived by applying the YTM method by adding appropriate mark up above the yields of the Central Government Securities of equivalent maturity notified by the FIMMDA/PDAI at periodic intervals; • in case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly, the market price is derived based on the YTM for Government securities as notified by FIMMDA/PDAI and suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for various credit ratings along with residual maturity issued by FIMMDA is adopted for this purpose; • in case of preference shares where dividend is not received regularly, the price derived on the basis of YTM is discounted in accordance with RBI guidelines; • in case of bonds and debentures where interest is not received regularly, the valuation is in accordance with prudential norms for provisioning as prescribed by the RBI; and • equity shares, for which current quotations are not available or where the shares are not quoted on the stock exchanges, are valued at break-up value (without considering revaluation reserves, if any) which is ascertained from the company’s latest balance sheet (which is not more than one year prior to the date of valuation). In case the latest balance sheet is not available, the shares are valued at Re. 1 per company. Investments in subsidiaries/joint ventures are categorised as HTM in accordance with RBI guidelines.

Repurchase and reverse repurchase transactions Repurchase and reverse repurchase transactions are accounted as outright sale and outright purchase respectively. The difference between the clean price of the first leg and clean price of the second leg is recognised as interest income/expense over the period of the transaction. However, depreciation in their value, if any, compared to their original cost, is recognised in the profit and loss account.

Advances Advances are classified into performing and non-performing advances (NPAs) as per RBI guidelines and are stated net of specific provisions made towards NPAs. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. Provisions for NPAs are made for sub-standard and doubtful assets at rates as prescribed by RBI with the exception for schematic retail advances, for which provisions are made in terms of a bucket-wise policy upon reaching specified stages of delinquency (90 days or more of delinquency) under each type of loan, which satisfies RBI prudential norms on provisioning. Loss assets and unsecured portion of doubtful assets are provided/written off as per the extant RBI guidelines. NPAs are identified by periodic appraisals of the loan portfolio by management. For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by the RBI, which requires the diminution in the fair value of the assets be provided at the time of restructuring. A general provision of 0.25% in case of direct advances to agricultural and SME sectors and 0.40% for all other advances is made as prescribed by the RBI through its circular no. DBOD.BP.BC83/21.01.002/2008-09 effective from 15 November 2008, against provision ranging between 0.25% to 2.00% as prescribed hitherto. However, the excess provision held as of 14 November 2008, is not reversed in terms of RBI guidelines.

Revenue recognition Interest income is recognised on an accrual basis except interest income on non-performing assets, which is recognised on receipt. Commission income on deferred payment guarantees, is recognised pro-rata over the period of the guarantee. All other fee income is recognised upfront on its becoming due. Dividend is accounted on an accrual basis when the right to receive the dividend is established. Gain/loss on sell down of loans and advances through direct assignment is recognised at the time of sale. Realised gains on investments under HTM category are recognised in the profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines. Losses are recognised in the profit and loss account.

48 BUSINESS

Overview The Bank is a leading private sector bank and financial services company in India offering a wide range of products and services to corporate and retail customers through a variety of delivery channels. The Bank commenced operations in April 1994 and over the last 15 years, the Bank has grown both in terms of the size of its asset base and its physical network of branches, extension counters and ATMs. The Bank has experienced significant growth while maintaining stable asset quality and enhancing its low-cost funding structure. As of 31 March 2009, the Bank was the third largest private sector bank in India in terms of total assets. The Bank’s total assets as of 31 March 2009 were Rs. 1,477.2 billion. The Bank’s net profit has grown from Rs. 6.59 billion as of 31 March 2007 to Rs. 18.15 billion as of 31 March 2009. As of 30 June 2009, the Bank had 13.07 million retail customer accounts in 534 centres, 861 branches and extension counters, as well as 3,723 ATMs with a ratio of 4.36 ATMs for every branch. In addition to the Bank’s growing branch and ATM networks, the Bank also offers telephone banking in various cities, as well as internet banking and mobile telephone banking. These and other resources give the Bank the capability to deliver a broad range of banking products through multiple delivery channels that enhance convenience for customers. As of 30 June 2009, the Bank also had five overseas offices with branches in Singapore, Hong Kong, the DIFC, and representative offices in Shanghai and Dubai. The Bank’s foreign branches primarily offer corporate banking, trade finance and treasury and risk management services. The Bank’s principal business activities are divided into two segments, Banking Operations and Treasury.

Banking Operations Corporate Banking: The corporate banking business offers various loan and fee-based products and services to large and mid-size corporates that include credit, trade finance for domestic, as well as international transactions, structured finance, project finance and syndication services through separate SBUs. These SBUs include large and mid-corporate credit, lending to MSMEs, treasury, business banking (including transacting Government business) and capital markets. Liability products that the Bank offers to corporate clients include current accounts, certificates of deposit and time deposits. The Bank also offers various capital market services such as loan syndication and placement, advisory services, clearing and settlement services to stock and commodity exchanges and debenture trusteeship services. Loans under the corporate banking segment amounted to Rs. 655.05 billion as of 31 March 2009 and constituted 80.32% of the Bank’s total loan portfolio as of 31 March 2009. Retail Banking: The Bank offers a variety of liability and asset products and services to retail customers. Retail liability products include savings accounts, time deposits and customised products for certain target groups such as high net worth individuals, senior citizens, defense personnel, women, students and salaried employees. Retail asset products include home loans, personal loans, automobile loans, consumer loans, education loans, as well as security-backed loans of various types. The Bank also offers other products and services such as debit and travel currency cards, credit cards, prepaid cards, financial advisory services, bill payment and wealth management services. In addition, the Bank also markets third party products such as mutual funds, bancassurance (general and life) and Government savings bonds. A wide range of products and services are also offered to NRIs. Retail loans amounted to Rs. 160.52 billion as of 31 March 2009 and constituted 19.68% of the Bank’s total loan portfolio as of 31 March 2009.

Treasury The Treasury Department manages the funding position of the Bank and manages and maintains its regulatory reserve requirements. The Treasury Department invests in sovereign and corporate debt instruments and undertakes trading in equity, fixed income securities, foreign exchange, currency futures and options. The primary components of the Bank’s investment portfolio are government securities and corporate debt securities. The Treasury Department also invests in commercial paper, mutual funds, certificates of deposits and floating rate instruments as part of the management of short-term surplus liquidity. In addition to proprietary trading and liquidity management, the Treasury department offers a wide range of treasury products and services to corporate customers in the form of derivative instruments such as forward contracts, interest rate swaps, currency swaps, foreign currency options, forward rate agreements and structured foreign exchange products. For financial reporting, effective 1 April 2007, the Bank has adopted revised guidelines of the RBI on segment reporting issued in April 2007, in terms of which the business of the Bank is divided into four segments: Treasury, Corporate/Wholesale Banking, Retail Banking and Other Banking Business. See “Segment Reporting under Financial Statements”.

49 The core income stream of the Bank comprises interest income earned on its corporate and retail loan portfolio, money-market operations and its investment portfolio. The Bank also earns fee and commission income from the processing of loans, documentary credits, bank guarantees, placements and syndication, cash management services, Government business, advisory services, depository services, capital market services, ATM interchange and cards business, remittance business, wealth management, sale of third party products and other banking service charges. The Bank earns trading profit from proprietary trading in investments, foreign exchange and derivatives. The Bank’s expenses consist of interest and non-interest expenses. The Bank’s major non-interest expenses include staff cost, occupancy cost (including rent for office premises, repair and maintenance), depreciation and other administrative costs. History The Bank obtained its certificate of incorporation on 3 December 1993 and its certificate of commencement of business on 14 December 1993. Its first branch was opened at Ahmedabad in April 1994. The Bank began its operations on 2 April 1994 as one of the first private sector banks established under guidelines issued in 1993 by RBI in line with the Government’s policy to reform India’s financial sector. The Bank’s entire initial equity capital of Rs. 1 billion was contributed by SUUTI (previously Unit Trust of India). Subsequently, LIC contributed Rs. 75 million and GIC, together with four Government-owned general insurance companies, contributed Rs. 75 million. The Bank’s paid up equity capital was subsequently increased from Rs. 1.15 billion to Rs. 1.32 billion through an initial public offering in September 1998. The Bank issued 15 million equity shares and SUUTI made a simultaneous offer for sale of 20 million equity shares. The Bank’s equity shares are listed on the NSE and the BSE. Recently, the Bank voluntarily delisted its shares from the ASE. In March/April 2005, the Bank issued 43.49 million GDRs to overseas investors and raised Rs. 11.22 billion (including its Greenshoe option). Each GDR represents one equity share of the Bank and was issued at a price of U.S.$ 5.91. Further, in July 2007, the Bank raised additional equity in the form of 14,132,466 GDRs (each GDR representing 1 underlying equity share of Rs. 10/- each), at a price of U.S.$ 15.43 per GDR, thereby raising Rs. 8.79 billion. The GDRs are listed on the London Stock Exchange’s Professional Securities Market. Simultaneously, the Bank also raised Rs. 17.52 billion through the issuance of 28.26 million equity shares under a qualified institutional placement, as well as Rs. 19.03 billion by issuing 30.70 million equity shares through a preferential allotment of equity shares to promoter entities. In addition, the Bank raised Hybrid Tier I capital in the form of Innovative Perpetual Debt instruments amounting to U.S.$ 46 million in foreign currency and Rs. 2,140 million in domestic currency in fiscal 2007. The Bank also raised capital in the form of Upper Tier II instruments amounting to U.S.$ 150 million in foreign currency and Rs. 3,075 million in domestic currency in fiscal 2007. The Bank raised Rs. 20 billion through a Lower Tier II offering in the first quarter of fiscal 2010. With effect from 30 July 2007, the Bank changed its name from ‘UTI Bank Limited’ to ‘Axis Bank Limited’. Strengths The key features of the Bank’s growth and success have been: • Sustainable profitable growth and return on capital delivered by focusing on increasing core earnings while maintaining asset quality; • Low-cost deposit base achieved through targeted branch network expansion and customised product offerings; • Ability to cross sell lending, fee-based and liability products to enhance profitability; • Disciplined credit risk management and robust controls, policies and procedures; • Advanced use of technology for efficient and cost-effective delivery of quality products and services; and • An experienced management team with extensive experience in the Indian banking industry and a track record of executing the Bank’s business strategies and achieving positive results. Strategy The Bank’s business strategy will continue to revolve around maintaining its competitive edge in the fast- changing banking and financial services industry. The key elements of its business strategy going forward are to: • Improve profitability through an emphasis on growing its core income streams such as net interest income and fee-based income. The Bank plans to continue expanding its distribution network and alternate delivery channels such as internet banking aimed at the acquisition of low and/or non-interest bearing savings bank and current account deposits across business segments.

50 • Position itself to benefit from the economic growth of the Indian economy. The Bank plans to proactively identify and pursue opportunities in sectors that are likely to lead the growth of the Indian economy, especially in those sectors in which the Bank has requisite expertise.

• Sustain focus on improvements in loan and investment portfolio quality. The Bank plans to continue to maintain stable asset quality through rigorous credit and risk appraisal, diligent risk monitoring, sound treasury management, product diversification and strong internal controls and compliance procedures.

• Increase the Bank’s market-share in India’s expanding financial services industry through a continued focus on the retail financial services sector. The Bank aims to achieve this by providing banking convenience to customers and by offering differentiated products to meet the specific needs of disparate customer segments. The Bank is sensitive to such product differentiation and the Bank’s management believes that such customer-specific orientation will strengthen its future profitability.

• Increase the Bank’s presence in new initiatives such as private equity, asset management and wealth management. The Bank has set up a subsidiary to carry on the activities of managing equity investments and provide venture capital support to businesses primarily focused on infrastructure. The Bank has also set up a subsidiary for asset management to participate in the domestic asset management business in India. The Bank plans to leverage its distribution franchise and customer relationships to offer wealth management services to its customers.

• Expand the Bank’s international presence to cater to the needs of India-centric clients. With the global integration of the Indian economy and the consequent international flow of funds and services, the Bank has identified international banking as a key opportunity to leverage the skills and strengths built in its domestic operations by establishing its presence in various strategic international financial hubs in Asia, namely Singapore, Hong Kong, the UAE and Shanghai. In addition, the Bank’s presence in the UAE has facilitated strategic alliances with banks and exchange houses in the GCC region which are expected to strengthen the Bank’s international remittance business.

• Continuously upgrade the Bank’s information technology systems. The Bank aims to maintain a scalable computing infrastructure backed by a robust network architecture which delivers service across multiple channels for customer convenience and enhances operational and cost efficiency. To retain a competitive edge, the Bank’s Information Technology Department strives to ensure that the Bank’s technology is consistently the best available.

Corporate Banking

Products and Services

The Bank offers a wide spectrum of financial services to the corporate sector. The Bank serves large corporations, mid-corporates, MSMEs and the agriculture sector. The following is a broad classification of products and services offered by the Bank:

• Fund-based products. Loans and advances for working capital, and project finance.

• Non-fund-based products. Non-funded advances such as documentary credits, stand-by letters of credit and guarantees.

• Fee-based services. Including fund transfers, cash management services, collection of Government taxes, trade services and loan syndication.

Other products and services offered include time deposits and current accounts (checking accounts). These products and services are delivered to customers through a network of branches, correspondent banking networks, telephone banking and the internet.

Fund-Based Products

Fund-based limits are generally granted by way of overdrafts, cash credit, demand loans, term loans and bills discounted. Generally, the purpose, the security offered, size of advance, repayment terms and requirements of the customer determine the type of facility to be granted.

51 The following table sets forth a breakdown of the Bank’s corporate loans as of the dates indicated. As of 31 March 2007 2008 2009 (Rupees in millions) Type of Corporate Loans Working Capital Loans ...... 106,112 173,463 226,596 Project and Corporate Loans ...... 173,378 287,231 428,454 Total ...... 279,490 460,694 655,050

Working Capital Loans Cash credit, working capital demand loans and overdraft facilities, which are the most common forms of working capital financing, are funded facilities usually secured by current assets such as inventories and receivables. These facilities are generally extended for a period of one year. In almost all cases, facilities are subject to an annual review and are generally repayable on demand. Interest is collected on a monthly basis, based on daily outstanding amounts. Bill discounting involves discounting negotiable instruments, which are generally issued for trade receivables. These can also be re-discounted with other banks if required. As of 31 March 2009, the Bank’s outstanding net working capital loans amounted to Rs. 226.60 billion, constituting 27.78% of its net loan portfolio and as of 31 March 2008 these amounted to Rs. 173.46 billion, constituting 29.07% of the Bank’s net loan portfolio.

Project and Corporate Loans The Bank provides project finance to companies in the manufacturing, service and infrastructure sectors typically by way of medium and long-term loans. Corporate finance is offered to customers based on the Bank’s appraisal of the quality of management, industry, prospects, business model and financial strength of the firm. This financing is generally provided by way of term loans of various tenures in Indian rupees, and in foreign currencies to a limited extent. The Bank offers asset-based lending such as receivable financing and also offers customised corporate finance products to meet specific customer needs. As of 31 March 2009, the Bank’s outstanding net loans for project and corporate finance amounted to Rs. 428.45 billion, constituting 52.53% of its net loan portfolio and as of 31 March 2008 these amounted to Rs. 287.23 billion, constituting 48.14% of the Bank’s net loan portfolio. The Bank earned interest income on its corporate credit portfolio of Rs. 57.11 billion in fiscal 2009 and Rs. 35.62 billion in fiscal 2008.

Lending to Micro, Small and Medium Enterprises The MSME segment is an area of particular focus for the Bank, as MSME advances generate higher yields and help to disperse risk. MSMEs offer good business potential both for fund and non-fund based credit and cross selling of products. The segment offers schematic and non-schematic products including term loans and working capital finance, depending upon the specific requirements of clients. Under schematic lending, specific loan-based products have been devised to target the requirements of specific customers and loans are made available based on predetermined features, parameters and levels. Loans not falling under any of the product- based schematic lending schemes are treated as non-schematic lending. The Bank continued its focus on the MSME segment during fiscal 2009 by providing timely and adequate credit to customers with quick turnaround time. During fiscal 2009, the segment also launched and implemented two new products: Commercial Vehicles and Construction Equipment Finance, which is intended to tap the growing infrastructure industry, and Channel Finance, which caters to small vendors. The Bank’s SME business segment achieved growth by implementing strategies that focus on specific industry segments and customer preferences. Advances to SMEs increased by 43.51% to Rs. 160.77 billion as of 31 March 2009 from Rs. 115.37 billion as of 31 March 2008. The SME segment continued its focus on increasing fee income through non-fund based advances. For fiscal 2009, the SME segment recorded fee income of Rs. 1.46 billion, which represented a growth of 58.70% from fiscal 2008. The Bank continues to pursue a two-pronged strategy of deepening existing relationships and widening its customer base. To increase the level of SME advances across the country, 25 SME centres have been set-up at key locations.

52 Non-fund-Based Products Documentary Credits The Bank provides documentary credits to customers to meet their working capital requirements as well as for capital equipment purchases. Documentary credits are approved together with a working capital assessment or a project finance assessment. Typically, a working capital line can be drawn down on a revolving basis over the term of the facility. Customers pay fees for draw downs of the documentary credit and the Bank may require additional collateral by way of a cash margin which may be as much as 100% of the value of the documentary credit. As of 31 March 2009, the Bank’s documentary credit portfolio amounted to Rs. 159.49 billion and as of 31 March 2008, it amounted to Rs. 82.47 billion.

Guarantees Guarantees, which also include “Stand-by Letters of Credit”, can be drawn down in a revolving manner over the life of the facility. Guarantees are also assessed during the course of working capital requirements. Guarantees are issued for various purposes such as bid bonds, performance guarantees on behalf of borrowers for execution of contracts, deferral or exemption from payment of statutory duties against performance obligations, advance payments, release of retention monies and other purposes. The term of guarantees is generally 36 months or less, although certain guarantees with a longer term may be approved. As with documentary credits, the Bank sometimes obtains additional collateral by way of cash margin which, in the case of certain types of guarantees, may be as much as 100%. As of 31 March 2009, the Bank’s outstanding guarantees amounted to Rs. 200.81 billion and, as of 31 March 2008, these amounted to Rs. 119.72 billion.

Fee-Based Services Fee income from corporate banking services (which includes fees from Large and Mid-Corporates, SME and Agriculture, Business Banking and Capital Markets) constitutes one of the significant revenue streams of the Bank, accounting for 20.17% of total operating revenue (which represents the aggregate of net interest income and other income for the relevant period) for the year ended 31 March 2009. The Bank offers a variety of fee-based services, including cash management services, collection of commercial taxes, trade services, remittances, collections and loan syndication. In addition to these traditional fee-generating products and services, the Bank also offers tailor-made products on fee-basis to address specific corporate customer needs through a Structured Products group.

Credit Selection Strategy The Bank’s criteria for acceptability of corporate credit include: • acceptable internal credit rating and external credit rating; • appropriate pricing; • opportunities for boosting return on capital from ancillary businesses; • significant probability of credit rating enhancement in the medium term; • strong cash flows; • satisfactory quality of management in terms of track record of performance, competence, integrity and corporate governance practices; • sustainability of business model in the long term; • likely market share; • likely leadership in the emerging businesses; • acceptable underlying security and credit enhancement measures; • professionalism of management; and • export dependency.

Pricing Policy The Bank prices its loans with reference to a benchmark prime lending rate (the “BPLR”). The BPLR is based on cost of funds, business operations costs, provisions and yield curve expectations. The BPLR of the Bank is currently 14.75% per annum.

53 The Bank prices its credit products based on its assessment of risk of borrowers, largely based on: • internal credit rating of customers; • tenure of the loan; • the specific structure of the product (such as embedded options); • available collateral; and • market conditions.

Business Banking Business Current Accounts The Bank offers a range of current account products based on value as well as industry sectors in order to meet the needs of various customer segments such as SMEs, traders, exporters, large corporations and other institutions. These products offer flexibility to customers to choose from different options with varying minimum average quarterly balance commitments and charge structures. In addition to conventional banking facilities, these accounts offer a multi-city, “AT PAR” chequebook facility and an “Anywhere Banking” facility across all of the Bank’s branches. In addition to the Bank’s branches and ATMs, customers can access and conduct transactions in their accounts online through Corporate “i-Connect”, the Bank’s internet banking platform, or can access account information through a tele-banking facility and mobile banking facility. In fiscal 2009, the Bank introduced a new Zero Balance current account product for traders with local business requirements, aimed specifically at generating upfront fee income, as well as a new current account product tailored specifically for professional chartered accountants. Customers are subject to transaction charges including charges for non-maintenance of minimum balances. The Bank had 497,733 business current account relationships as of 31 March 2009. The average balance of the Bank’s business current accounts during fiscal 2009 was Rs. 146.58 billion with an outstanding balance of Rs. 248.22 billion as of 31 March 2009.

Cash Management Services Through the Bank’s cash management services, the Bank’s corporate and institutional clients are offered customised solutions such as collection, payment and remittance services allowing them to minimise the time gap between collections and remittances, thereby improving their cash flows. Cash management products include local and remote collections with the pooling of funds in a central account along with a customised management information system (“MIS”) including online viewing of transactions through the Bank’s internet interface. In addition to collections, the Bank also offers local and remote payments through customer cheques and bulk demand drafts with centralised or remote printing, electronic clearing services, disbursement of dividend and interest, remittance services and internet-based payment products. Electronic payment facilities are offered to government, corporate and institutional customers for payments to their vendors or suppliers through various modes, including electronic clearing and funds transfer facilities, such as Real Time Gross Settlement (“RTGS”) and National Electronic Funds Transfer (“NEFT”) and direct credit facilities for common customers. These services offer a high level of convenience because no physical instruments are required and all transactions are effected electronically. To respond to increasing customer demand, the Bank has established correspondent relationships with smaller local banks in India to offer a broader distribution network for its cash management services. As a result of these correspondent banking relationships, cash management services are provided at over 3,000 locations in India, with a capability of extending the network to other remote locations depending on need. The Bank also offers its services and network of 467 cash management service locations as of 30 June 2009 to other private and foreign banks as a correspondent bank. Customers are charged a fee for these services based on the number and size of transactions, the location for cheque collection and the expected date of credit to the customer accounts. Apart from fees, the Bank also benefits from holding the funds for a period of time before they are required to be deposited in the customers’ current accounts. In fiscal 2009, the Bank introduced the facility of Application Supported By Blocked Amount (“ASBA”). This facility allows the Bank’s saving accounts customers to subscribe and pay for securities offered in initial public offerings without the hassle of having to transfer the subscription funds upfront. The relevant amount of funds will remain in their account and continue to accrue interest but will be blocked from usage until such time when the securities subscribed for are allotted, upon which the relevant amount of funds will then be withdrawn from the account. If the subscription application is subsequently rejected, the funds will be unblocked.

54 The total volume of cash management services processed by the Bank was Rs. 10,830.04 billion for the year ended 31 March 2009. As of 31 March 2009, the Bank had 4,852 cash management service customers. Government Business and Tax Collections In July 2001, the Bank became the first Indian private sector bank to be authorised by the Government and RBI to collect taxes on behalf of the State of Andhra Pradesh on a pilot basis. In October 2003, the Bank’s authorisation was extended, permitting it to offer banking services to various Central Government ministries and departments and other State governments and union territories, including collection of direct and indirect taxes on behalf of the Government and State governments. Currently, the Bank accepts income and other direct taxes and central excise and service taxes through its authorised branches. The Bank also handles disbursement of civil service and defence pensions through its authorised branches. Additionally, the Bank is providing collection and payment services to four Central Government Ministries/Departments and seven State governments/Union Territories. The Bank also handles the business of stamp duty collection through franking on behalf of three State governments, Maharashtra, Gujarat and Rajasthan. The Bank is currently authorised to handle payments under the National Rural Employment Guarantee Scheme (“NREGS”) in three states in the country. In fiscal 2009, the Bank successfully undertook the “Electronic Benefit Transfer Projects”, which is a new line of business handling disbursements relating to certain Government benefit schemes through Smart Cards under the “IT Enabled Financial Inclusion Model” in the two districts of Krishna and Rangareddy in the State of Andhra Pradesh. The total Government business turnover handled by the Bank for the year ended 31 March 2009 was Rs. 608.69 billion. RBI pays a fee for all government businesses (collections and payments) handled as its agent and the Bank has earned fee income of Rs. 294.51 million for the year ended 31 March 2009 under Government business. e-Governance Initiatives Central and State governments have undertaken e-Governance initiatives aimed at providing better citizen services by setting up integrated citizen facilitation centres. The Bank is aggressively seeking to participate in e-Governance initiatives. The Bank is presently associated with the e-Governance initiatives of six State and Union Territories, namely Andhra Pradesh (e-Seva), Karnataka (Bangalore One), Chandigarh (Sampark), Chhattisgarh (CHOiCE), Uttar Pradesh (e-Suvidha) and Rajasthan (e-Mitra). The Bank receives fee income on all State government revenues collected at these citizen facilitation centres and also earns income on non-interest bearing deposits made into user department accounts opened by the Bank in connection with these services. Additionally, the Bank also provides e-Payment facilities for payment of direct and indirect taxes through the Internet for its customers, as part of the e-Governance initiatives of Central Board of Direct Taxes and Central Board of Excise & Customs, respectively. The Bank has strengthened its association with e-Governance initiatives of State governments by extending its banking services for the G2B space with e-Procurement Projects of the government of Karnataka and Gujarat. The Bank also seeks to participate in the e-Governance initiatives of various government departments (such as Railways and Defence establishments) with offerings of single window payment system at which the Bank undertakes payments to suppliers, contractors and other vendors through multiple electronic channels like Direct Credit (Transfer), NEFT/RTGS. Capital Markets Debt Syndication The major activities carried out in this area are: • assessing client debt profiles and funding requirements; • advising on suitable instruments and structure, including pricing and timing of taking the instrument to market; and • placement and syndication in the form of bonds and debentures or loans by way of distribution among various investors and lenders. The Bank has developed a strong relationship with other banks, financial institutions, mutual funds and provident funds, among others. The Bank is active in the domestic debt market and has syndicated an amount approximately Rs. 678 billion by way of debentures, term loans and bank guarantees during fiscal 2009. The Bank acted as arranger for issues of bonds and non-convertible debentures aggregating Rs. 441.03 billion and Rs. 598.69 billion during fiscal 2008 and fiscal 2009, respectively. “Prime Database” ranked the Bank as the number one arranger for private placement of bonds and debentures for fiscal 2009. The Bank also received the “Best Domestic Debt House in India” award from Asiamoney for fiscal 2009.

55 The Bank also received the following awards during 2008; “Best Bond House in India” by Finance Asia, “Best Domestic Debt House in India” by Asiamoney, “Best Debt House — India” by Euromoney Awards for excellence and “India Bond House 2008” in the IFR Asia Awards 2008.

Equities Issue Management The Bank is a Category I Merchant Banker registered with SEBI to carry out Merchant Banking activities for raising funds through equity issuance including initial public offerings (“IPOs”), follow-on-public offerings (“FPOs”), rights issues, qualified and institutional placements (“QIPs”).

Private Equity The Bank offers advisory services to corporates to raise funds through private equity with a focus on industries in fast-growing sectors of the economy.

Corporate and Financial Advisory The Bank’s advisory services have been developed with a focus on infrastructure and other core sector projects. The advisory assignments handled by the Bank cover various sub-sectors such as roads, railways, power, seaports, airports and other green-field and brown-field projects through consultancy for preparation and vetting of business plans, advising on capital structuring, funding options and assisting in financial closure of the projects. The range of advisory services also includes financial restructuring and diagnostic studies for various public and private sector corporations involving re-evaluation of their capital structures to maintain financial competitiveness and enhance operating efficiencies. The Bank also assists clients in executing financial restructuring plans as well as in fund-raising to refinance high-cost capital. The Bank also advises the State governments and their agencies on financing and restructuring arrangements.

Trusteeship and Securitisation The Bank, as a debenture trustee, is registered with SEBI to provide trusteeship services to the holders of debentures issued by various corporations. As part of its trusteeship services, the Bank, among other things, holds the security for the debentures, monitors compliance with the various terms of the issue or indenture and keeps investors apprised. The Bank acts as a trustee for debenture holders and held assets under trust totaling Rs. 2,484.04 billion as of 31 March 2009. In September 2008, the Bank formed a wholly-owned subsidiary company, Axis Trustee Services Limited, to carry out certain trustee services in order to maintain an arms length relationship between the trustee business and other businesses of the Bank in accordance with regulatory requirements. The Bank also acts as trustee for various securitisation issues and as monitoring agency for IPOs as required by the stock exchanges in India.

Capital Markets Services The Capital Markets Division of the Bank handles clearing and settlement activities for the following exchanges: • BSE; • NSE; • National Commodity & Derivative Exchange Ltd. (“NCDEX”); and • (“MCX”). The Bank is a professional clearing member in the futures and options segment of the NSE and provides the NSE and BSE stockbrokers and NCDEX and MCX commodity exchange members fund-based and non-fund- based facilities for carrying out their operations.

Depositary Participant Services The Bank acts as a depositary participant for the National Securities Depository Limited (“NSDL”) and Central Depository Services (India) Limited (“CDSL”). The Bank is registered with SEBI to act as a Custodian of Securities and offers clearing and settlement services for equity and debt securities transactions undertaken by clients such as mutual funds, insurance companies, corporates and banks.

Fee Income — Capital Markets The Bank earned fee income of Rs. 3,678.86 million and Rs. 1,412.55 million, respectively during fiscal 2009 and 2008 from debt syndication, issue management, corporate advisory and other capital markets services.

56 Retail Banking The Indian retail banking and financial services market is growing due to higher household incomes and increasing consumer credit demand. In order to take advantage of increasing demand, the Bank has developed a wide network of fully inter-connected retail branches, extension counters, ATMs, retail asset centres, an internet banking channel, a call centre and mobile banking. The Bank’s retail strategy is based on network expansion, building product differentiators, customer segmentation, sales effectiveness and providing quality customer service. Branches distribute liability accounts, debit cards, travel cards and remittance cards, have point-of-sale terminal machines and depository services and sell third party products such as mutual funds and savings bonds issued by the Government. Retail asset centres distribute retail credit products such as home loans, personal loans, vehicle loans and educational loans. The Bank is focused on shifting customer transactions to low cost alternative channels and cross selling between liability, asset, cards and third party products to maximise income.

Retail Deposits The Bank’s retail deposit products include the following: • Term Deposits. Tenure-based deposits of a fixed amount over a fixed term that accrue interest at a fixed rate and may be withdrawn before maturity in accordance with applicable rates. • Recurring Deposits. Tenure-based periodic deposits of a fixed amount over a fixed term that accrue interest at a fixed rate and may be withdrawn before maturity in accordance with applicable rates by paying penalties. • Savings Bank Accounts. Demand deposits for retail customers that accrue interest at a fixed rate set by RBI (currently 3.5% per annum) and offer a withdrawal facility through chequebooks and debit cards. In addition to the Bank’s conventional deposit products, it offers a variety of special value-added products and services thereby increasing product offerings and providing greater convenience for customers. Adopting a customer-centric segmentation strategy, the Bank offers differentiated liability products to various categories of customers depending on one or more factors such as age group, gender, income and occupation. While the Priority Banking services group caters to high net worth individuals, the Savings Bank Easy Account provides a low frills product. The Bank has also launched savings bank products for senior citizens, women, trusts and non-government organisations (“NGOs”). The Bank’s payroll account scheme, or “Salary Power”, offers customised products for the employees of defence services, corporations, Government and other public sector entities.

Easy Access Savings Bank Account The product aims at offering prompt banking services with accessibility to the account through the Bank’s network of branches and extension counters, ATMs, the internet, the Bank’s call centre, mobile banking and its “AT PAR” Chequebook product. As of 31 March 2009, deposits under this segment accounted for Rs. 68.50 billion, constituting 26.53% of the Bank’s total savings bank deposits, which is an increase from Rs. 64.33 billion as of 31 March 2008.

Smart Privilege The Bank has launched the Smart Privilege Account to serve the banking needs of working women. The account offers facilities which include a dedicated relationship manager, jewellery insurance on debit card, zero balance minor account, exclusive insurance for women, along with a host of other banking and lifestyle privileges, which make it easy and convenient for working women to manage their finances. As of 31 March 2009, deposits under this segment accounted for Rs. 8.40 billion, constituting 3.25% of the total savings bank deposits of the Bank, which is an increase from Rs. 6.36 billion as of 31 March 2008.

Senior Privilege Account In order to serve the emerging population of wealthy senior citizens in India, the Bank has launched the Senior Privilege Account. The account offers convenient banking, personalised service and other privileges such as utility bill payments, tax filing and tax advisory, thus catering to the financial and non-financial needs of senior citizens. The Bank has also introduced the concept of a senior citizen card issued together with the account, which provides various details of the account holder. As of 31 March 2009, deposits under this segment accounted for Rs. 7.08 billion, constituting 2.74% of the total savings bank deposits of the Bank, which is an increase from Rs. 6.26 billion as of 31 March 2008.

57 Savings Bank Account for Trusts and NGOs The Bank has also launched a Savings Bank product for the Trusts, Societies, and NGO segment. The product provides banking solutions by leveraging the “Anywhere Banking” platform of the Bank, the “AT PAR” Chequebook facility (which has no upper limit) and other value-added services. As of 31 March 2009, this segment accounted for Rs. 56.14 billion in deposits, constituting 21.74% of the total savings bank deposits of the Bank, which is an increase from Rs. 35.04 billion as of 31 March 2008.

Payroll Account Scheme To offer complete banking solutions to salaried employees, the Bank has introduced a comprehensive payroll product called “Salary Power” which provides centralised payroll solutions to corporations and institutions. Salary Power provides employees with a complete range of banking services on a preferred basis and allows the employer to manage salaries across various centres, with the employee benefiting from a range of value added services including retail loans, overdrafts, and concessional average balance requirements. Salary Power has been further segmented into four categories, namely Corporate, Public Sector Undertakings, Government and Defence. As of 31 March 2009, the Salary Power portfolio had a total of Rs. 58.95 billion in deposits and more than 4.11 million accounts, which represented an overall growth of Rs. 17.57 billion from the 31 March 2008 month end balance of Rs. 41.38 billion. The share of business as against the overall savings portfolio was 53.94% in terms of number of accounts and 22.83% in terms of year end balances as of 31 March 2009. As of 31 March 2009, Government/Public Sector Undertakings and Defence relationships contributed 31.26% of the portfolio in terms of value while the balance was from large and mid sized corporates.

Encash 24 Account The Bank’s Encash 24 account is a savings account linked to a time deposit product that offers the customer the liquidity of a savings account as well as higher returns of a time deposit. This product provides weekly automatic transfer of idle balances above a certain minimum amount from savings accounts to time deposits, resulting in higher yields for the customer. Whenever there is a shortfall in the customer’s savings account, deposits are automatically transferred from the time deposit account to meet the shortfall.

Priority Banking The Bank’s Priority Banking initiative targets the high net worth customer segment and caters primarily to their banking and investment needs. The Priority Banking service offers customers competitive pricing on asset products and preferred rates for select services, along with personalized service. The Bank offers facilities such as doorstep banking, an exclusive debit card with higher ATM withdrawal as well as Merchant Establishment usage limits and a complimentary gold credit card to Priority Banking customers. In addition, the Bank’s Priority Banking service provides customers with financial planning and investment advisory services. The services include investment advice across products such as savings bank, fixed deposits, bonds and mutual funds based on the customer’s risk appetite. Customers also benefit from lifestyle privileges such as invitations to art exhibitions, musical evenings, shows and concierge services. As of 31 March 2009, this segment accounted for Rs. 30.07 billion in deposits, constituting 11.64% of the total savings bank deposits of the Bank, which is an increase from Rs. 28.69 billion as of 31 March 2008.

Non-Resident Products and Services The Bank offers a wide range of banking, investment and advisory services to the NRI community. Major products offered to NRIs are described below.

Foreign Currency Non-Resident Deposits These are foreign currency deposits offered in six major currencies: the U.S. Dollar, the Pound Sterling, the Euro, the Japanese Yen, the Australian Dollar and the Canadian Dollar. The principal as well as the interest on these deposits are fully repatriable outside of India. The terms of these deposits range from a minimum of one year to a maximum of five years. Interest rates on these deposits are fixed as per the guidelines of the RBI. The present ceiling rate in respect of FCNR(B) deposits of all maturities is the LIBOR/SWAP rate 100 basis points for the respective currency and corresponding maturities.

Non-Resident External Fixed Deposits These deposits are established in India and are maintained for periods from a minimum of one year to a maximum of ten years. The principal and interest from these accounts are fully repatriable outside of India. Interest rates on these deposits are fixed as per the guidelines of the RBI.

58 The present ceiling rate in respect of NRE deposits of all maturities is the LIBOR/SWAP rate plus 175 basis points for corresponding maturities.

Non-Resident Ordinary Deposits These products are offered primarily to NRIs who also have income derived in India. These products are offered as savings bank deposits as well as fixed deposits. The interest rates and terms are structured along the same lines as domestic deposits. While the principal is not repatriable, except in certain cases, the interest paid is repatriable, net of payment of applicable taxes in India.

Non-Resident External Savings Account Non-Resident External Savings Accounts are maintained in Indian rupees. An international debit card, which provides access to Visa ATMs across the world, is issued with such accounts. Interest rates on these deposits are currently 3.50% per annum. An internet banking facility is also available on these accounts to facilitate account management from overseas. The balances in these accounts are fully repatriable outside of India.

NRI Savings Variants NRI Services offers the following three products under NRI Savings (for non-resident external and non- resident ordinary NRIs): NRI Normal (base product); NRI Prime (mid segment, anywhere banking product); and the NRI Priority (high end, lifestyle and investment privilege product). The Bank’s aggregate NRI deposit portfolio totalled Rs. 39.26 billion and Rs. 27.09 billion as of 31 March 2009 and 31 March 2008 respectively.

Retail Lending Activities The growth of retail and consumer lending in India is a consequence of growing affluence and changing consumer behaviour. This growth is evidenced by the utilisation of credit for consumer asset acquisition. The Bank has identified this activity as one of its core growth areas. The Bank’s focused marketing approach, product innovation, risk management systems and competent back-office processes contribute to the strength of the Bank’s retail lending strategy. The target market identified for retail loans is salaried, self-employed professionals and other self-employed individuals. The Bank offers a variety of retail credit products such as home mortgage loans, automobile loans, commercial vehicle loans, two wheeler loans, personal loans, consumer loans, education loans, loans against time deposits and loans against shares. The major components of the Bank’s retail loan portfolio are home and mortgage finance, personal loans and automobile finance. The Bank’s net retail loan portfolio as of 31 March 2009 and 31 March 2008 was Rs. 160.52 billion and Rs. 135.92 billion, respectively. This constituted 19.68% and 22.78% of the Bank’s net loan portfolio as of 31 March 2009 and 31 March 2008, respectively. As of 31 March 2009, 83% of the Bank’s net retail loans are secured and 17% are unsecured. These loans are provided by the Bank directly through retail asset centres in metropolitan areas and major cities of India and through branches in cities where the Bank does not have a retail asset centre. The retail asset centres serve as the focal point for marketing, distribution and servicing of retail loan products.

Retail Loan Portfolio by Category The Bank’s retail loan portfolio consists of schematic (representing specific loan based products devised for specific customer needs) and non-schematic loans (other than schematic loans). As of 31 March 2009, the portfolio mainly consists of automobile loans (13.90%), residential mortgage loans (65.20%), personal loans (11.49%), other schematic loans (consumer and education loans) (0.18%) and non-schematic loans (credit cards, loans against deposits and loans against shares) (9.23%). The Bank’s retail loan portfolio by product is set out below. As of 31 March 2007 2008 2009 (Rupees in millions) Home Loans ...... 48,346 78,704 104,653 Automobile Loans ...... 24,284 21,865 22,307 Personal Loans ...... 9,411 21,092 18,442 Educational Loans ...... 150 174 198 Consumer Durable Loans ...... 136 674 99 Card Power ...... 404 532 — Total Schematic ...... 82,731 123,041 145,699 Non-schematic ...... 6,544 12,876 14,819 Total ...... 89,275 135,917 160,518

59 Home loans, automobile finance and personal loans have been major contributors to the increase in the Bank’s retail loan portfolio. The Bank’s retail loan portfolio also includes loans acquired through portfolio buy- outs.

Home Loans The Bank’s home and mortgage finance business involves extending long-term secured housing and commercial property loans to individuals, both for acquisition purposes as well as for liquidity. Currently, these loans are being offered to individuals for the purchase, construction and extension of residential and commercial premises. As of 31 March 2009, the Bank’s total home and mortgage finance portfolio totalled Rs. 104.65 billion, which predominantly comprised floating rate loans, representing 65.20% of the Bank’s total retail loan portfolio.

Automobile Finance Automobile finance, which includes financing two wheelers, four wheelers and commercial vehicles, involves providing consumer credit for an average period of three to five years to acquire a new vehicle. Automobile loans are secured by a lien on the purchased asset. As of 31 March 2009, the Bank’s total automobile finance portfolio of Rs. 22.31 billion represented 13.90% of its total retail loan portfolio.

Personal Loans Personal loans are unsecured loans provided to customers for various purposes such as medical expenses, social and lifestyle obligations, and are generally repayable over four years. As of 31 March 2009, the Bank’s personal loan portfolio totaled Rs. 18.44 billion, which represented 11.49% of its total retail loan portfolio.

Card Power Card Power is a credit product for financing credit/debit card receivables of merchant establishments (“ME”) who subscribe to EDC machines of the Bank. Card Power funds the regular working capital and operating requirements of the ME, as well as seasonal purchases and capital expenditure for equipment, new premises and refurbishment. Effective April 2008 this product has been reclassified under Corporate banking segment .

Credit Evaluation For retail loans to individuals for the purchase of automobiles, two wheelers and commercial vehicles, personal loans and margin loans against securities, all prospective borrowers are granted loans only if they pass the credit evaluation process. The Bank has devised a credit-scoring sheet for all types of loans. For a loan to be approved, a minimum cut-off score has to be achieved by a borrower. This credit rating mechanism is periodically updated and reviewed.

Retail Financial Services Mutual Fund Sales The Bank is a leading distributor of mutual funds in India. The Bank distributes mutual fund products of all major asset management companies in India to its clients, basing its advice on its own in-house research conducted on various mutual funds. These products are sold through the Bank’s branch distribution network based on client requirements. The Bank earns fee income in the form of up-front and/or retention fees. Mutual funds are also distributed through alternate channels such as ATMs. The Bank has seen an increase in its number of mutual funds customers during fiscal 2009, despite the slowdown in the overall market due to general economic conditions. In particular, the Bank had focused on the sales of mutual funds through Systematic Investment Plans (“SIP”). SIP is an option whereby investors instead of making a lump-sum investment can spread their investment over a period of time. During fiscal 2009, the Bank registered over 100,000 new SIPs. For fiscal 2009, the Bank earned fee income of Rs. 215.53 million through the distribution of mutual fund products, which is a decrease of 52.73% from Rs. 456.00 million for fiscal 2008.

General Insurance The Bank offers general insurance solutions through the Bank’s branch distribution network to its customers. The Bank is a corporate agent of Bajaj Allianz General Insurance Company (“Bajaj Allianz”) and distributes products underwritten by Bajaj Allianz. Apart from standard products, such as motor or fire insurance

60 products, the Bank also sells products such as health, personal accident, jewellery and home insurance products. The Bank also sells exclusive co-branded products and other corporate products. All of these products are sold through the Bank’s branch network. Fee income generated from the Bank’s general insurance business increased from Rs. 139.97 million from fiscal 2008 to Rs. 238.18 million in fiscal 2009, which represented a growth of 70.16%. Total premiums sourced amounted to Rs. 1,033.25 million for fiscal 2009.

Life Insurance The Bank also markets select types of life insurance products such as unit linked, money back and pension plans under “Bancassurance” business for which bank has a tie-up with MetLife India Insurance Company Ltd. (hereinafter referred to “MetLife”). The Bank also markets group insurance schemes of MetLife to corporate clients. The Bank has a referral model arrangement with MetLife for distributing life insurance products in India through its network of branches. The Bank has seen successful growth in the sale of life insurance products through this referral arrangement. For fiscal 2009, the Bank earned fee income of Rs. 1,901.03 million from the sale of life insurance products, which represented a growth of 69.70% from Rs. 1,120.22 million in fiscal 2008. The number of new policies sourced in fiscal 2009 grew to 103,144 from 67,530 in fiscal 2008, which represented an increase of 52.74%.

Online Trading The Bank offers online trading services in association with Geojit BNP Paribas Financial Services Limited (“Geojit BNP”); these agreements with Geojit BNP enable the Bank’s customers to open integrated 3-in-1 accounts to seamlessly trade via a sophisticated online trading platform. Since its launch, the Bank has sourced 26,374 online trading accounts, of which 14,963 accounts were sourced during fiscal 2009. The total trading volume during fiscal 2009 increased by 89.60% from Rs. 12,535.70 million in fiscal 2008 to Rs. 23,731.90 million in fiscal 2009. The Bank earned fee income of Rs. 28.32 million from online trading in fiscal 2009, which represented an increase of 34.35% from Rs. 21.08 million in fiscal 2008. Average revenue per trading account is Rs. 940 per month.

Demateralised Accounts (“Demat Accounts”) “Demat Accounts”, or specialised accounts which allow simplified trading in shares, are offered to retail customers and are managed by the Retail Financial Services department. The facility is available at 655 branches across the country. As of 31 March 2009, the Bank held 195,049 Demat Accounts as compared to 202,625 as of 31 March 2008. The Bank earned fee income of Rs. 121.06 million from Demat Accounts in fiscal 2009, which represented a growth of 75.02% from Rs. 69.17 million in fiscal 2008.

Gold Coins The Bank sells gold coins through its branches, which carry the assurance of a certified assayer. In fiscal 2009, the Bank sold approximately 400 kilograms of gold coins. The Bank earned revenue of Rs. 36.82 million from sales of gold coins in fiscal 2009, which represented a growth of 165.85% from Rs. 13.85 million in fiscal 2008.

Axis Wealth and Private Banking The Axis Wealth and Private Banking group specifically caters to the investment needs of the mass affluent and high net worth individuals segments. The Bank follows a customer centric segmentation strategy for its investment product offering to clients. The various levels of differentiation include the relationship value of the client, access to various investment products etc. The group offers an end-to-end solution for all financial requirements of the clients, including banking, investment and asset requirements. Customers have access to a comprehensive product suite, ranging from fixed deposits, banking accounts, mutual funds, bancassurance products, equity advisory services, structured products, private equity funds, gold coins and bars and online trading to car loans, home loans, loans against property, foreign exchange and remittance services. The group possesses a structured advisory process and strong research capabilities and leverages on the Bank’s branch network to distribute their products to customers. The group has also started building its capabilities to extend the Bank’s private banking services to the overseas markets through the Bank’s branches in Singapore, DIFC and Hong Kong.

61 Other Products and Services Debit Cards The Bank is the third largest issuer of debit cards in India and offers international debit cards to its customers in association with VISA and MasterCard. These debit cards provide customers with 24-hour access to their funds through the Bank’s ATMs as well as any VISA or MasterCard enabled ATMs and merchant establishments across the world. The debit card base of the Bank comprised 11.81 million cards as of 31 March 2009. The Bank has 13 debit card variants catering to different customer segments: Gold Debit Card, Business Gold Debit Card, Priority Debit Card, VISA International Debit Card, MasterCard Debit Card, NRI Domestic Debit Card, NRI International Debit Card, Smart Privilege Debit Card, Power Salute Debit Card, Renewal Debit Card, Gold Plus Debit Card, SB Prime Debit Card and Platinum Debit Card. The debit card products have innovative features such as unlimited “off-us” ATM transactions, personal accidental insurance cover of up to Rs. 0.5 million, reward points, global helpdesk, higher Points of Sale/ATM limits. Recently, the RBI began permitting cash withdrawals up to Rs. 1,000/- per day through debit cards from Point of Sale (“POS”) terminals.

Travel Currency Cards The Bank offers nine currency variants on the Travel Currency Card Product: U.S. Dollar, Euro, Pound Sterling, Australian Dollar, Canadian Dollar, Swedish Kroner, Swiss Francs, Singapore Dollars and Japanese Yen. The U.S. Dollar Travel Currency Card is also available on the MasterCard platform. The card can be offered at any VISA ATM and at merchant establishments globally. The card offers a safe and cost effective alternative to carrying cash and travellers cheques.

Remittance Cards The Bank launched the Remittance Card in association with Times of Money in November 2004. The Remittance Card is a superior replacement to demand drafts that are issued to beneficiaries in India to receive their remittances. The Bank had a total of 1,507 accounts as of 31 March 2009.

Rewards Card The Rewards Card product was launched in July 2005. The Bank has issued 1,099,093 Rewards Cards to more than 300 corporate clients as of 31 March 2009, which represented an increase of 53.98% from fiscal 2008.

Annuity Card — Co-branded programme with Life Insurance Corporation of India The Bank has launched this co-branded pre-paid annuity card in association with LIC of India for disbursing annuity payments/pension payments to the annuitants of the LIC of India. The Bank had a total of 1,975 Annuity Cards in issue as of 31 March 2009.

Gift Card The Bank launched the Gift Card product in January 2007. This is the first free form Gift Card in the market and is sold to both retail and corporate clients. The Bank has sold over 84,000 cards with a load value of Rs. 515.3 million as of 31 March 2009.

Meal Card The Bank is the pioneer in issuing Meal Cards for disbursement of meal allowances to employees. The product was launched in January 2007 and as of 31 March 2009 the Bank had issued 105,228 cards to corporate clients.

Credit Card The Bank launched its credit card business in September 2006 and as of 31 March 2009, had a portfolio of 533,116 credit cards. Corporate credit (and charge) cards were introduced in March 2007. The corporate card offering of the Bank is backed by an extensive expense management solution and reporting tool from VISA. Corporate cards are issued in Gold, Silver and Platinum variants. In addition, the Bank has launched co-branded store and credit cards with the following partners: • Shriram Transport Finance Company Ltd • Magnet Hypermarkets • Subhiksha • Trust Chemists and Druggists

62 The Bank has also launched products such as the virtual credit card — “eShop card” and the Secured Card (a type of credit card issued against collateral of a term deposit with the Bank) in Silver and Gold variants. The latest product launch for the Bank is the Platinum Chip credit card, which is the first fully EMV (Europay MasterCard VISA) — compliant credit card in India. The Platinum Chip credit card comes with a variety of gifts and offers. For the year ended 31 March 2009, fee income earned from the credit card business totalled Rs. 494.64 million.

Card Acceptance Business The Bank offers card acceptance services to merchant establishments in India and had an installed base of 115,266 point-of-sale terminals as of 31 March 2009. Both Visa and MasterCard are accepted at these terminals. The Bank earns a negotiated merchant service fee from the volumes transacted at these point-of-sale terminals and also benefits from the float in the merchant current accounts.

Portfolio Investment Scheme The Bank is authorised by the RBI to maintain accounts under the Portfolio Investment Scheme with 49 of its branches and to issue approvals to NRIs requiring delivery based trading in shares and convertible debentures on Indian stock exchanges. The Bank provides these services, which include facilitating payment and receipt of funds for investment transactions, monitoring regulatory ceilings and computation and payment of taxes on capital gains.

Remittance Services To facilitate remittances into India, the Bank has established alliances with exchange houses and commercial banks. The remittances are made in a seamless manner through technology-enabled channels that are secure, fast and cost effective for the remitters. The Bank has also established a remittance channel to serve NRIs in countries such as the United Kingdom, the United States and through an alliance with TimesofMoney.com using their product, Remit2India, to send NRI remittances to India. This service is available to beneficiaries maintaining accounts with the Bank or with other banks in India. The Bank also launched an online remittance channel, AxisRemit, in November 2008. AxisRemit has a transparent pricing policy and aims to provide superior customer service and a fast turn-around-time. This service represents a significant entry of the Bank into the fast growing online remittance business. Under this service, NRI customers in the United States, United Kingdom, Europe, Canada, Australia, Singapore, Hong Kong and UAE are able to use AxisRemit to transfer money online from their local bank account to the receiver’s account anywhere in India.

Tax Advisory Services The Bank has retained the services of a firm of chartered accountants with expertise in NRI taxation to provide tax advisory services to the Bank’s NRI customers through the Bank’s dedicated NRI Help Desk.

Retail Banking — Fee Income Fee income from Retail Banking activities constituted 11.72% of operating revenue in fiscal 2009.

Delivery Channels The Bank distributes its products and services through various access points ranging from traditional bank branches to ATMs, call centres, telephone and the internet. Investment in alternative distribution channels is part of the Bank’s effort to migrate customers to lower cost electronic delivery channels. The Bank’s channel migration effort is aimed at reducing costs while enhancing customer satisfaction levels by providing customers access to their accounts at all times.

Branch Network As of 31 March 2009, the Bank had a network of 827 branches, 8 extension counters and 3,595 ATMs covering 515 centres. An extension counter is a service outlet, linked to a branch. It is ordinarily situated within the precincts of institutions such as schools, colleges and hospitals, offering banking services. Before setting up a branch, the Bank undertakes a detailed study of the demographic factors of an area to assess its business potential. Branch premises are generally leased. Back-office operations are carried out at national processing centres in Mumbai and Hyderabad, allowing the Bank’s branch network to focus on business acquisition and expanding customer relationships.

63 As part of its branch licensing conditions, RBI has stipulated that at least 25% of the Bank’s branches must be located in semi-urban or rural areas. A semi-urban area is defined as a centre with a population of more than 10,000 but less than 100,000. A rural area is defined as a centre with a population of less than 10,000. The following table sets forth the number of the Bank’s branches, classified by category, as of 31 March 2009. Region Number of Branches % of Total Metropolitan ...... 273 33.01% Urban ...... 324 39.18% Semi-urban ...... 186 22.49% Rural ...... 44 5.32% Total(1) ...... 827 100.00%

(1) This includes 43 service branches/central processing centres which conduct non-customer/limited customer interface support activities and which are excluded from RBI requirement of maintaining at least 25% of branches in semi-urban or rural category. In addition, as of 31 March 2009, the Bank also had three overseas branches and two representative offices.

ATMs As of 31 March 2009, the Bank had installed 3,595 ATMs. These ATMs are located at large residential and commercial developments, railway stations, airports, petrol pumps, offices of certain corporate clients and along major roads in cities. Apart from offering services to its own cardholders, the Bank’s ATMs also process Visa, , Master Card, Cirrus and card transactions. The Bank has entered into ATM sharing arrangements with other banks. Under RBI directive, beginning 1 April 2009 customers can access their accounts with the Bank through the ATM network of any other bank free of cost in addition to the Bank’s own network. Similarly, customers of any other bank can also access their bank accounts using the Bank’s ATM network free of cost. In view of the diversity of regional languages used in various parts of India, the Bank’s ATMs offer multilingual screens. Value added services offered through ATMs include bill payments, mobile recharge, LIC premium payments and sale and redemption of UTI Mutual Fund schemes. The Bank is technologically capable of issuing season tickets through ATMs and kiosks.

Internet Banking Services The Bank offers Internet banking services to its customers through its website, “www.axisbank.com”. The provision of Internet banking has been a cost effective tool in increasing the Bank’s market share in retail banking. Services offered to the Bank’s internet banking customers include online access to account information, placement of requests for demand drafts, cheque book, secure mail box facility for communicating with the Bank, payments of utility bills and credit card bills, transfer of funds to a customer’s account or to a third party account within the Bank. As of 31 March 2009, over 7.24 million of the Bank’s accounts were registered for Internet banking facilities.

Online Bill Payment The Bank has also entered into arrangements with several telecommunication companies, utility providers, an insurance company and internet shopping portals for online payment of bills by its internet banking customers. The Bank generates revenue from these services either by a fee per transaction or a variable fee based on the ticket size of the transaction.

Mobile Phone Banking The mobile banking channel has fast emerged as an extremely convenient option for the Bank’s customers to keep themselves updated on their account activity. This has provided an additional level of security to the Bank’s customers as they are alerted about any activity above a threshold limit through the Bank’s SMS alert service. In addition, customers can request balance or details of the last three transactions through their registered mobile phones. The Bank is also working to enable customers to conduct other banking transactions through their registered mobile phones. This has become the second most used alternative delivery channel of the Bank. The total number of subscribers as of 31 March 2009 was approximately 2.09 million.

64 Sales Channel The Bank employs a frontline sales force to source its liability products. The sales force, which sources a basket of liability products, currently contributes approximately 85% of new business acquisitions and is a critical resource in the Bank’s aggressive customer acquisition strategy. This sales force included 4,163 employees as of 31 March 2009, which operates on a remuneration package which is largely performance based. Members of the sales channel are based at all branches and extension counters and their performance is monitored at both the regional as well as the Bank’s corporate office levels. The Bank has also set up a wholly-owned subsidiary for the marketing of retail assets and credit cards. The advantages of such an entity stems from its ability to attract better quality sales personnel, optimise production, minimise costs and provide greater control and monitoring of the sales efforts as compared to the current direct selling agent model.

Treasury The Treasury Department manages the funding position of the Bank and also manages and maintains its regulatory reserve requirements. As part of liquidity management, the department invests in sovereign and corporate debt instruments, commercial paper, mutual funds and floating rate instruments. The department also undertakes proprietary trading in equity, fixed income securities, foreign exchange, currency futures and Rupee options. In addition to proprietary trading, the department also offers a wide range of treasury products and services to corporate customers, including derivative instruments such as forward contracts, interest rate swaps, currency swaps and foreign currency options.

Funding and Balance Sheet Management Deposits The Treasury department raises term deposits according to the Bank’s requirements in view of prevailing interest rates and liquidity. Wholesale deposits are raised from corporate and institutional customers, mutual funds and banks through term deposits, certificates of deposits (“CDs”) and borrowings. The Bank seeks to maintain an appropriate mix between deposits and borrowings. The Treasury Department manages short-term liquidity through short-term borrowings such as overnight inter-bank borrowings, collateralised borrowing and lending obligations (“CBLO”), Repo, re-discounting bills and through other money market operations. The Bank raises foreign currency borrowings from local banks and foreign counterparties. The Bank also raises retail foreign currency deposits from NRIs at rates regulated by the RBI. The table below describes the deposits position of the Bank as of the specified dates. As of 31 March 2007 2008 2009 (Rupees in millions) Savings Bank ...... 121,259 199,824 258,221 Current Account ...... 113,043 200,466 248,216 Term Deposits ...... 353,554 475,992 667,304 Total Deposits ...... 587,856 876,262 1,173,741

In the Treasury department, the fund management desk conducts market operations by borrowing and lending in the domestic call money market, CBLO and through repurchase transactions with the RBI and other approved banks and institutions. The Treasury department ensures day-to-day funding for branch operations and asset build-up. Since these CRR balances earn nominal interest from the RBI, the funding desk also ensures that only optimal CRR balances are maintained and that additional surpluses are deployed in the form of short-term investments in commercial paper (“CP”), CDs or debt schemes of mutual funds. The Treasury department measures and monitors the spreads of the Bank. Yields on assets and cost of funds are monitored on an ongoing basis. Maturity profiles of new deposits are adjusted to ensure that the Bank reaches its targeted spreads and that its liquidity profile remains comfortable. The funding desk considers suitable hedging options for items on the balance sheet at appropriate times to protect or increase the Bank’s spreads.

65 The table below provides details of the net interest income and net interest margin for the specified dates. For the year ended 31 March 2007 2008 2009 Net interest income (Rupees in million) ...... 14,683 25,853 36,862 Net interest margin (percent)(1) ...... 2.74 3.47 3.33

(1) Based on daily average balances.

Trading Operations The Treasury department manages integrated trading operations in foreign exchange and domestic money markets. It is responsible for maintaining regulatory reserves and using the trading portfolio to earn profits through exchange income and capital gains.

Domestic Money Markets The investment policy is designed to address the following: • Compliance with regulatory requirements; • Guidelines for taking exposure in various debt instruments; and • Risk mitigation. The Treasury department maintains the SLR in the form of investments in Government bonds and treasury bills. This portfolio is actively managed and churned and, depending on an internal view of interest rates, surpluses are maintained in the trading book. The Treasury department uses these surpluses to take advantage of favourable movements in interest rates to book capital gains on the investment book. In accordance with RBI guidelines, investments are categorised as HFT, AFS and HTM (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Investment classification”). The Bank also maintains an investment and trading portfolio in corporate bonds and equities. Investments focus on trading and interest and dividend income. The Bank’s investment in corporate shares is undertaken based on the fundamental strengths of the subject corporations. Similarly, the investment in equity-oriented mutual funds is also made on the basis of the investment objectives of the schemes. Investments in equity shares are made largely for trading, in accordance within investment policies approved by the Board of Directors. The size of the Bank’s equity portfolio is restricted by a ceiling imposed by the RBI on the capital market exposure of banks of 40% of their net worth as on 31 March of the previous year. The Bank’s aggregate limit for exposure to the capital markets for fiscal 2009 is Rs. 33.80 billion (40% of its net worth as of 31 March 2008 as adjusted for subsequent capital injection) The Bank’s exposure to the capital markets as of 31 March 2009 was Rs. 23.31 billion. In general, the Bank pursues a strategy of active management of its equity portfolio to maximise its return on investments. To ensure compliance with SEBI’s insider trading regulations, all dealings in equity investments in listed companies are undertaken by the equity-trading desk, which is securely segregated from the Bank’s other business groups. The Treasury department also offers investment options to retail and institutional investors and servicing support through all branches of the Bank. In this connection, the Bank facilitates the holding of government securities. Commission and trading profits are earned through these transactions. The table below describes the investment portfolio as of the specified dates. As of 31 March 2007 2008 2009 (Rupees in millions) Investment in government securities ...... 164,308 201,788 277,272 Investment in shares ...... 4,628 5,856 5,851 Investment in bonds and debentures (incl. PTCs) ...... 83,893 113,518 150,210 Investment in commercial paper (CP) ...... — — 294 Investment in certificates of deposit (CD) ...... — — 954 Investment in wholly-owned subsidiary/joint venture ...... 100 380 976 Investment in mutual fund/venture capital ...... 2,678 375 1,450 Others ...... 8,669 10,007 19,798 Gross Investments in India ...... 264,276 331,924 456,805 Investments outside India ...... 5,619 6,138 8,572 Gross Investments ...... 269,895 338,062 465,377

66 The table below details figures relating to income earned from market transactions during specified periods. For the year ended 31 March 2007 2008 2009 (Rupees in millions) Interest earned on government securities ...... 9,282 12,051 18,391 Interest earned on debt securities ...... 7,378 8,268 11,532 Interest earned from investments in CP/CD ...... 20 1 17 Dividends from investments in units of mutual funds/venture capital . . . 47 127 4 Dividends from investments in equities ...... 193 186 153 Net gain from sale of government securities ...... 176 306 2,174 Net gain from sale of debt securities ...... (99) 221 895 Net gain from sale of equities ...... 424 1,379 (305) Net gain from sale of CP/CD ...... 4—— Net gain from sale of units of mutual funds ...... 44 79 98 The table below gives the maturity profile of the government securities investment book as of the specified dates. As of 31 March Government Securities 2007 2008 2009 (Rupees in millions, except percentage) 1 year ...... 21,653 13.18% 18,370 9.10% 23,246 8.38% 1-3 years ...... 8,657 5.27% 18,807 9.32% 26,947 9.72% 3-5 years ...... 30,852 18.77% 40,798 20.22% 52,057 18.77% 5 years ...... 103,146 62.78% 123,813 61.36% 175,022 63.13% Total ...... 164,308 100.00% 201,788 100.00% 277,272 100.00%

Set out below are breakdowns of the Bank’s corporate bond portfolio by maturity profile and ratings distribution. As of 31 March Bonds and Debentures 2007 2008 2009 (Rupees in millions, except percentage) 1 year ...... 14,175 16.90% 15,902 14.01% 18,646 12.41% 1-3 years ...... 31,767 37.87% 35,907 31.63% 38,952 25.93% 3-5 years ...... 8,626 10.28% 19,209 16.92% 35,353 23.54% 5 years ...... 29,325 34.95% 42,500 37.44% 57,259 38.12% Total ...... 83,893 100.00% 113,518 100.00% 150,210 100.00%

As of 31 March Bonds and Debentures 2007 2008 2009 (Rupees in millions, except percentage) AAA ...... 43,064 51.33% 66,093 58.22% 73,616 49.01% AA+...... 12,955 15.44% 11,523 10.15% 21,067 14.03% AA...... 4,888 5.83% 11,409 10.05% 15,034 10.01% AA-...... 8,742 10.42% 4,780 4.21% 12,160 8.10% A+...... 1,314 1.57% 3,930 3.46% 2,029 1.35% A ...... 6,237 7.43% 9,483 8.35% 9,160 6.10% A- ...... 5,090 6.07% 3,283 2.89% 2,228 1.48% B ...... — — — — — — BB...... — — 215 0.19% 215 0.14% BB- ...... — — — — 250 0.17% BBB+ ...... 1,069 1.27% 1,307 1.15% 6,100 4.06% BBB...... 380 0.45% — — 7,300 4.86% BBB- ...... — — — — — — C ...... 15 0.02% — — — — D ...... — — 385 0.35% 645 0.43% Unrated ...... 139 0.17% 1,110 0.98% 406 0.27% Total ...... 83,893 100.00% 113,518 100.00% 150,210 100.00%

67 Foreign Exchange and Derivatives The trading desk deals in several major currencies and manages the Bank’s exposure through foreign exchange and money market instruments within the guidelines and limits stipulated by RBI and management. Appropriate internal limits for counterparty and currency exposure are in place. The Bank is a market maker in the spot and forward exchange markets. Foreign exchange trading income has grown significantly. Profits increased from Rs. 2,074.82 million in fiscal 2008 to Rs. 3,595.04 million in fiscal 2009. The Bank recorded an income of Rs. 7.67 million from currency futures trading. The Bank offers both off-the-shelf and specifically structured products to its customers to meet funding and risk management requirements in foreign currencies. The Bank offers forward contracts to customers to hedge against exchange risk on foreign currency receivables and payables, usually up to one year. The Bank also offers interest rate and currency swaps to certain customers to hedge their medium and long-term risk, up to ten years. Commission and exchange income is earned from such transactions. As of 31 March 2009, the Bank had Rs. 829.42 billion (notional value) in outstanding forward contracts and Rs. 888.83 billion (notional value) in outstanding derivatives contracts.

International Correspondent Banking and Trade Facilitation The Treasury department manages the Bank’s correspondent banking relationships. At present, the Bank has 45 Nostro accounts in 14 different currencies. In addition to these, the Bank has active trade relationships with a number of major banks in different locations globally. Through these relationships, the Bank has been instrumental in facilitating the trade flows of customers. The Bank arranges international guarantees and confirmation of letters of credit at competitive prices. Buyers’ credit, suppliers’ credit and letter of credit (“LC”) financing has also been arranged to satisfy clients’ funding requirements. 192 branches of the Bank are authorised to offer foreign exchange services to customers. The Treasury department serves as a one-point contact on foreign exchange matters for these branches with RBI and other regulatory agencies. The Bank raises foreign currency resources through credit lines from its correspondent banks at competitive rates to enable the Bank to fulfil foreign currency requirements for its exporter customers. The Bank’s foreign exchange operations seek to increase reciprocal revenue generation from the Bank’s correspondents by way of rebate and miscellaneous fee income such as export LC advice, confirmations and issuing domestic guarantees against counter guarantees of foreign banks. The Bank’s rebate income increased from Rs. 65.14 million in fiscal 2008 to Rs. 86.48 million in fiscal 2009. The table below indicates the growth of merchant foreign exchange business during the specified periods. For the year ended 31 March 2007 2008 2009 (Rupees in millions) Turnover ...... 1,279,702 1,680,062 2,987,719 Profits ...... 1,096 1,742 2,741

Directed Lending Priority Sector Lending Commercial banks in India are required by the RBI to lend 40% of their adjusted net bank credit of the previous year to specified sectors known as “priority sectors”, subject to certain exemptions permitted by the RBI from time to time. Priority sector advances include loans to agriculture, MSMEs, loans to sectors deemed “weaker” by the RBI, housing and education finance up to certain ceilings, lending for specific infrastructure projects and investments in instruments issued by specified institutions. The Bank is required to comply with the priority sector lending requirements as of the last reporting Friday of March of every fiscal year. Any shortfall in the amount required to be lent to the priority sectors may be required to be deposited with Government-sponsored Indian developmental banks, such as the National Bank for Agriculture and Rural Development (“NABARD”) and Small Industries Development Bank of India (“SIDBI”). See “Supervision and Regulation — Regulations Relating to Making Loans — Directed Lending — Priority Sector Lending.”

68 A summary of the Bank’s priority sector lending position as of the last reporting Friday in March over the last three years is as follows: As of last reporting Friday of March 2007 2008 2009 (Rupees in millions) Agricultural advances/RIDF deposits(1) ...... 47,353 49,638 80,825 Small scale industry and services(2) ...... 21,343 51,664 65,485 Other priority sector lending(3) ...... 74,380 66,954 83,936 Total ...... 143,076 168,256 230,246

(1) Pertains to the MSME business of the Bank. (2) Deposits with the Rural Infrastructure Development Fund (3) Includes indirect finance to agriculture sector in excess of 4.50% of net bank credit.

Agricultural Financing The RBI requires the Bank to lend 18% of net bank credit to the agricultural sector. The Bank looks at agri- business as a profitable business proposition. In light of future business prospects in the Indian agricultural and related sectors, the Bank has identified agricultural lending as an area of potential growth. The Bank has a diverse range of products, including the Kisan Credit Card (credit facilities to farmers for various requirements), advances to commission agents and a comprehensive scheme for warehouse receipt financing. The agriculture business of the Bank is driven through its 243 branches that facilitate the Bank’s growth in agricultural lending. In order to provide a strategic focus to agricultural lending, the Bank has adopted a cluster-centric approach for agricultural lending in areas which exhibited potential for such activities. As a result of such initiatives, 49 agricultural clusters had been formed as of 30 June 2009. To strengthen the agricultural lending of the Bank, 9 agri-business centres have been formed. The Bank’s strategy in agricultural lending is based on a comprehensive view of the agricultural value chain, a focus on diversification and partnerships with other corporates in the agricultural sector, micro finance and other rural institutions and non-governmental organisations that have close links to the agricultural sector. The Bank has also devised a separate risk evaluation model for agricultural loans with an objective to measure and mitigate the risk involved in financing this sector. There has been considerable improvement in the rural infrastructure in select geographies in India in recent years. The Bank’s agricultural financing initiatives are largely focused on regions where the need for credit has consequently increased. The Bank intends to develop its agricultural finance business by: • offering a comprehensive range of products to individual farmers in select geographies covered by an adequate number of rural branches; • offering suitable credit and other banking products to farmers supplying inputs to large corporations in agri-business (contract farming); • offering suitable products to various members in the supply chain in the agriculture business (such as warehouses and cold storage units); and • leveraging upon the Bank’s technology platform to distribute the Bank’s offerings in rural areas in a convenient and cost effective manner. As of the last reporting Friday of fiscal 2009, the Bank’s outstanding portfolio in the agricultural sector amounted to Rs. 80.83 billion compared to Rs. 49.64 billion on the last reporting Friday of fiscal 2008.

Housing Finance The RBI requires banks in India to lend at least 3% of their incremental deposits in the previous fiscal year for housing finance. This can be in the form of home loans to individuals (up to a certain ceiling) or investments in debentures and bonds of the and housing development institutions recognised by the Government. A portion of housing finance lending qualifies as priority sector lending. As of 31 March 2009, the Bank’s home loan portfolio amounted to Rs. 104.65 billion and as of 31 March 2008 it amounted to Rs. 78.70 billion.

69 Export Credit As part of its directed lending requirements the RBI requires banks to lend to exporters at concessional rates of interest. Pre-shipment and post-shipment export credit requirements applicable to exporter borrowers are provided both in Indian rupees and foreign currencies. The RBI requires banks to lend, in the form of export credit, 12% of their net bank credit for each fiscal year-end. This is in addition to the priority sector lending requirement. However, credits extended to exporters that are small-scale industries or small businesses may also meet part of the priority sector lending requirement. The RBI provides export refinancing for an eligible portion of total outstanding export loans at the bank rate prevailing from time to time. Banks also earn fees and commissions from these exporter customers, in addition to the interest income earned on export credits, from fee- based products and services provided to them. As of the last reporting Friday of fiscal 2009, the Bank’s outstanding export credit amounted to Rs. 18.53 billion, constituting 2.27% of the Bank’s net bank credit, and as of the last reporting Friday of fiscal 2008 the Bank’s outstanding export credit amounted to Rs. 12.59 billion, constituting 2.11% of net bank credit.

Overseas Operations India’s growing integration with the global economy has given rise to opportunities to leverage the Bank’s strengths in overseas markets. In order to participate in the growing trade and investment flows between India and other major financial centres of Asia, the Bank has established branches in Singapore, Hong Kong, DIFC (Dubai) and representative offices in Shanghai and Dubai. As of 31 March 2009, the total assets at the Bank’s overseas branches amounted to Rs. 117.44 billion, which constituted 7.95% of the Bank’s total assets.

Support Services To provide a high standard of customer service and achieve a level of operational efficiency, the Bank has integrated its various back-office facilities such as the Central Processing Unit (“CPU”) and facilities for phone banking, cash management, channel and trade finance and the centralised collection and payment hub under one umbrella, named the Support Services.

Phone Banking Centre The Bank has a phone banking centre in Mumbai offering telephone banking services to customers in all zones across India which is open 24 hours, seven days a week. This facility has been extended to 543 branches as at 31 March 2009. The Bank intends to extend these services gradually to all branches. The phone banking centre offers a self-service option for automated phone banking. In addition, carefully chosen and trained phone banking officers offer personalised services for customers of the retail and SME segments, providing account related information and answering queries about the Bank’s products and services.

Centralised Collection and Payment Hub Centralised Collection and Payment Hub (“CCPH”) was set up established to primarily act as a back-office processing unit supporting cash management businesses derived from corporate and institutional relationships. The objective of the CCPH is to achieve minimal turnaround time in cash management transaction processing in a cost efficient manner on par with the best in the industry, rendering quality services to customers. On average, per month, approximately 4 million instruments were processed on behalf of corporates across the country which amounted to Rs. 167.82 billion of collections and payments. Further, improvements in the Bank’s collection system, an exclusive customer service desk and a team to follow up cashing of cheques were set up to achieve increased operational efficiency, reduced costs and to improve customer service.

Central Processing Unit As part of the Bank’s initiative to leverage technology, redefine business processes and deliver quality products to its customers with efficiency and cost effectiveness, the Bank set up a central processing unit in Mumbai in December 2001. The central processing unit opens all liability accounts, retail advance accounts, loan accounts and trade finance accounts for all of the branches. It also produces welcome kits, delivers cheque books, debit cards, term deposit receipts and statements of account. External concurrent auditors (other than the statutory auditors) verify whether the accounts are being opened after compliance with the Bank’s “Know Your Customer” procedures and turn around time is strictly monitored.

Trade Finance Centre The Trade Finance Centre has been established with the aim of providing a state of the art processing centre for smooth, error free, efficient processing and ensuring compliance with existing rules and regulations, setting a benchmark in the processing of forex transactions. The Trade Finance Centre commenced operations in

70 November 2005 and has centralised many of the Bank’s trade related activities including exports, imports, remittances (both current and capital accounts) as well as certain trade operations at the Bank’s Hong Kong branch. Centralisation of the Bank’s trade finance activities is aimed at improving customer orientation, growth acceleration and extended reach of foreign exchange services to remote centres. It is designed to help the branches improve their focus on generating additional business and has enabled the Bank to make its foreign exchange business available across an increasing number of its branches. The Bank’s Trade Finance Centre has handled more than 0.5 million transactions during fiscal 2009 and is processing more than 2,500 transactions per day in addition to handling other related activities. For fiscal 2010, the Bank’s Trade Finance Centre will be responsible for centralising more trade related activities and managing trade operations of the Bank’s overseas offices in Singapore, Hong Kong and Dubai.

Operations and Compliance Operational processes for delivery of products and services are constantly refined, from the perspective of implementation of best practices, risk identification and containment. Operational instructions are revisited on a continuing basis and efforts made to introduce risk free working at branches. Emphasis is on structured visits of branches by functionaries of zonal offices and analysis of various MIS concerning their functioning. Other policy initiatives taken to enable branches to improve their performance are an Imaging Solution, Record Management facility and Outsourcing Policy on Financial Services. As a further step in the direction of improvement of customer service and transparency in dealing with customers and compliance, the Bank has become a member of the Banking Codes and Standards Board of India (“BCSBI”) and has adopted the Code of Bank’s Commitment to Customers formulated by the BCSBI. The Bank has launched measures to become compliant with the Code. Regular meetings by the Customer Service Committee of the Board were held and the standing Committee on Customer Service. Customer-centric recommendations from these Committees are taken up for implementation so as to bring about further improvement in the level of customer service rendered by the Bank. A web-based Complaint Monitoring Software has been put to use to assist in tracking the status of complaints, generating MIS reports for analysis and initiating remedial measures. Compliance functionaries have also been appointed in all the four zones of the Bank for carrying out compliance related activities with the help of off-site and on-site surveillance tools. In addition, the Chief Compliance Officer is the Nodal Officer of the Bank and oversees the Bank’s compliance in terms of customer service and grievance redressal mechanism in accordance with regulatory guidelines. Corporate Banking Operations (CBO) Department within the Bank is involved in monitoring the accounts of Large/Mid-Corporates and SME customers while ensuring compliance with the regulatory guidelines and systems and procedures of the Bank in the conduct of credit operations. CBO Division is created at branches where advances exceeds Rs. 500 million, ensure that the operational risks in monitoring the advances and other related issues are well mitigated. In case of other branches, trained and experienced manpower is posted when the number of borrowal units and advances level exceeds a minimum threshold level. As part of business process re-engineering, eight city-specific centralised CBO Hubs called Credit Management Centres (CMCs) have been opened for standardising the skill pool of efficient monitoring and control of advances. Facilitation Centres have been set up at selected branches covered by CMC Centres for providing prompt customer service in coordination with CMC. Other branches located at these cities have been mapped to the closest facilitation centre for all their credit domestic trade finance and related operations. CBO Divisions and CMCs handled 86% of the Bank’s total domestic non-retail credit portfolio, ensuring that trained and experienced manpower is monitoring a substantial percentage of advances.

Operational Controls and Procedures in Branches An operational framework has been established to ensure that these transactions are handled with precision, regularity and efficiency in a risk mitigating manner. Operational instruction manuals at the branches detail procedures for processing various banking transactions. Amendments to these manuals are implemented through circulars sent to all branches. These internal operative guidelines are made accessible to all the branches on the Bank’s intranet through the online circular management system. The Bank places importance on computer security and has adopted an information security policy. Most of the Bank’s information technology assets, including critical servers are hosted in a centralised data centre, which are subject to appropriate physical and logical access controls. The core banking software used by the Bank is based on the “maker and checker” concept, whereby no transaction can be initiated and authorised by a single

71 individual. The powers to authorise transactions are exercised by officials in accordance with a scheme of delegation of powers and the monetary limits are incorporated as authorisation levels in the software, which validates each payment.

Operational Controls and Procedures for Internet Banking Internet banking services are provided only in respect of existing customer accounts for which the necessary identity documentation has been obtained prior to providing the customer with a user identity and password to access his account online. The latest initiative is “NetSecure”, which is a two factor authentication system to provide added security to online banking transactions. “NetSecure” is a secured system, wherein two different parameters (one that customer already knows, such as login ID and password and second, a single usage password that customer receives while conducting the transaction) are used together to verify customer identity on the Internet. Using two factors instead of one factor (just the login ID and password) ensures heightened security for customer online transactions.

Operational Controls and Procedures in Regional and Central Processing Centres The Bank has centralised transaction processing on a nationwide basis for transactions such as the issue of ATM cum Debit cards and personal identification number mailers, mailing of passwords to internet banking customers, depositing post-dated cheques received from retail loan customers and processing of credit/debit card transactions routed through the Bank’s channels. Centralised processing has also been extended for opening new bank accounts, issuing personalised cheque books and generating customer statements. At select centres, the handling of clearing operations and the management of ATMs have also been centralised for better control.

Anti-Money Laundering Controls Pursuant to the Prevention of Money Laundering Act of 2002, the Bank has implemented a policy on anti- money laundering controls. The policy has been approved by the Board of Directors and is being followed by each of the Bank’s branches. The Bank’s “Know Your Customer” policy, which consists of customer identification procedures and customer acceptance policies, forms the basis of the Bank’s anti-money laundering controls. Transaction scrutiny in accordance with regulatory guidelines issued by RBI is being carried out by the Bank. In its effort to mitigate risk, the Bank is undertaking all possible initiatives to ensure transaction scrutiny and identification of suspicious transactions. The Bank also scans lists of existing customers, prospective customers and foreign remittances against the negative lists stipulated by RBI. A senior Bank official oversees the anti-money laundering activities and ensures compliance with the Bank’s policy.

Risk Mitigation in Products and Processes The guidelines issued by regulatory/semi-regulatory agencies are tracked closely and internal guidelines for implementation of these instructions are issued for guidance and implementation in the Bank. The Chief Compliance Officer (CCO) is a permanent member of the Product Management Committee (PMC) and the Change Management Committee (CMC) of the Bank. Each new product/process and changes to an existing product/process proposed by the any department of the Bank is approved by the PMC/CMC. The Compliance Department identifies the compliance risks involved in the products/processes and suitable risk mitigants are suggested. The Compliance Department monitors the circulars issued by various business/functional units of the Bank to ensure that they are in consonance with the internal/regulatory guidelines and that deviations, if any, are brought to the attention of the concerned unit.

Internal Audit The Bank’s Internal Audit function performs independent and objective evaluations of the adequacy and effectiveness of the Bank’s internal controls to ensure that the operating and business units adhere to systems and procedures as well as regulatory and legal requirements. The Internal Audit function aims to continuously benchmark their standards for internal control systems against international best practices and procedures. It is also responsible for recommending quality enhancement measures in operational processes based on audit findings. The Internal Audit Department has conformed to “Quality Management System” and its internal processes have been certified to be ISO 9001:2008 compliant by International certifying agency Det Norske Veritas AS, Netherlands. The Internal Audit department conducts Internal Cum Management Audit of the Central Office departments, subsidiaries, clusters and Zonal Offices annually or once every two years based on risk profiling of auditee unit from current financial year onwards in accordance with policy approved by the ACB.

72 The Bank’s Internal Audit function undertakes a comprehensive risk based audit of all branches, retail asset centres and service branches as per audit frequency in which the audit entity falls. An annual audit plan is drawn up on the basis of the risk profile of the units audited. The scope of a risk-based internal audit encompasses the examination of adequacy and effectiveness of internal control system as well as external compliance and evaluation of the risk residing at the audited units. The Central Office departments of the Bank are also subjected to internal audit cum Management Audit. Approximately 56% of the Bank’s total business and approximately 71% of total advances are subjected to concurrent audit. The Internal Audit Department has also developed an effective off-site surveillance system. During fiscal 2009, the operations of the Internal Audit function were decentralised by the establishment of Zonal Internal Audit offices at four metros, namely Delhi, Chennai, Kolkata and Mumbai, for better operational efficiency and quicker turnaround time. Information System Audit policies are approved by the ACB and have been introduced covering physical, environmental and administrative controls, logical controls in application software, system administration, network security and protection from external threats and special projects. Audits on all Information Systems, the Bank’s Data Centre, and Business Continuity Centre are also conducted. To ensure independence, the Internal Audit Department reports to the Audit Committee of the Board, which oversees its performance and reviews the effectiveness of controls laid down by the Bank and compliance with regulatory guidelines. Synopses of audit reports are put up to Audit Committee of the Board (ACB) / Audit Committee of Executives (ACE) / Audit Sub Committee of Executives (ASCE) depending upon risk profile of the audit entities as per policy approved by ACB.

Credit Audit The Bank examines compliance with approval terms at disbursement and adherence to post-approval processes and procedures set forth by the Bank in respect of corporate assets having aggregate exposures in fund and non-fund-based facilities of Rs. 30 million and above. Presently this audit is limited to 18 branches (having not less than ten such accounts) and eight Credit Management Centres of the Bank, which have higher concentrations of such assets. However, in case of CMCs, audit of entire credit portfolio is undertaken irrespective of exposure. With respect to exposures of Rs. 30 million and above that are not disbursed through these units, the audit is undertaken by the Internal Audit department. The credit audit is undertaken as per audit frequency in which the audit entity fall and with the following key objectives: • review compliance status of exposures of Rs. 30 million and above at selected branches; • provide feedback on regulatory compliance; • assess conduct and adequacy of cash flows; • recommend corrective actions to improve credit quality and/or security, credit administration and other items; and • rate the functional unit based on the outcome of the audit. The synopses of credit audit reports of branches are submitted to the ACB. This credit rating mechanism is periodically updated and reviewed.

73 Risk Management The Bank’s risk management processes are guided by well-defined policies appropriate for various risk categories, independent risk oversight and periodic monitoring through the sub-committees of the Board of Directors. The Board sets the overall risk appetite and philosophy for the Bank. The Committee of Directors, the Risk Management Committee and the Audit Committee of the Board, which are sub-committees of the Board, review various aspects of risk arising from the businesses of the Bank. Various senior management committees, Asset-Liability Management Committee (ALCO), Credit Risk Management Committee and Operational Risk Management Committee (ORMC) operate within the broad policy framework as illustrated below.

Board of Directors

Risk Management Board level Committee of Committee of the Audit Committee Directors committees Board

Credit Committees Operational Risk Committee of & Investment ALCO Management Committee Executives Committees

The Bank has dedicated teams to cover the following three key areas of risk: credit, market and operational risk, and these teams manage their respective risk areas by: • Ensuring that the business conducted within each division is consistent with the risk appetite of the Bank, • Formulating and implementing risk management policies, procedures and methodologies that are appropriate to the businesses within each division, and • Conducting periodic reviews to ensure that the risks on the portfolios are within the acceptable parameters.

Credit Risk Credit risk covers the inability of a borrower or counter-party to honour commitments under an agreement and any such failure has an adverse impact on the financial performance of the Bank. The Bank is exposed to credit risk through lending and capital market activities. The goal of credit risk management is to maintain a healthy credit portfolio by managing risk at the portfolio level as well as at the individual transaction level. The Board of Directors establishes the parameters for risk appetite, which is defined quantitatively and qualitatively in accordance with the laid-down strategic business plan. This is dovetailed in the process through a combination of governance structures and credit risk policies, control processes and credit systems embedded in a Credit Risk Management Framework (“CRMF”). The foundation of CRMF rests on the credit rating assessment, which is integral to credit sanction and administration process.

Credit Rating System The Bank has developed rating tools specific to market segment such as large corporates, mid-corporates, SME, financial companies and microfinance companies to objectively assess underlying risk associated with exposures on such segments. For retail and schematic SME exposures, scorecards and borrower-scoring templates are used for application screening. The credit rating tool uses a combination of quantitative inputs and qualitative inputs to arrive at a ‘point-in-time’ view of the rating of counterparty. The monitoring tool developed by the Bank helps in objectively assessing the credit quality of the borrower taking into cognizance the actual behaviour post- disbursement. The output of the rating model is primarily to assess the chances of delinquency over a one-year time horizon. Each internal rating grade corresponds to a distinct probability of default. Model validation is carried out periodically by objectively assessing its calibration accuracy and stability of ratings.

74 Corporate Credit The Bank has the following committee structure for credit sanction and review: • Zonal Office Credit Committee (ZOCC) • Central Office Credit Committee (COCC) • Committee of Executives (COE) • Senior Management Committee (SMC) • Committee of Directors (COD) The acceptability of credit exposure is primarily based on the sustainability and adequacy of borrower’s normal business operations supported by adequacy of cash flows and not based solely on the availability of security. Credit rating is an integral part of risk-assessment and the Bank has adopted rating linked exposure norms. Credit risk in respect of exposures on corporates and MSMEs is measured and managed at individual transaction level as well as portfolio level. In the case of schematic SME exposures, the credit risk is measured and managed at the portfolio level, as the products are scorecard driven. To ensure adequate diversification of risk, concentration limits have been set up in terms of: a) Borrower/business group: Exposure to a borrower/business group is subject to the general ceilings established by RBI from time to time, or specific approval by RBI. The exposure-ceiling limit for a single borrower is 15% of the capital funds. This limit may be exceeded by an additional 5% (i.e. up to 20%) provided the additional credit exposure is on account of infrastructure. The exposure-ceiling limit in the case of a borrower group is 40% of the capital funds. This limit may be exceeded by an additional 10% (i.e. up to 50%) provided the additional credit exposure is on account of extensions of credit for infrastructure projects. In addition to the above exposure limit, the Bank may, in exceptional circumstances, with the approval of the Board, consider increasing its exposure to a borrower up to an additional 5% of the capital funds. b) Industry: Exposure to any one industry cannot exceed 12% of aggregate exposures. For this purpose advances, investments (including underwriting and similar commitments) and exposure of any other nature would be aggregated together.

Retail Credit The Bank’s continuing foray into retail banking over the years has resulted in a sizable growth in the retail loan portfolio. The key challenge for a healthy retail asset portfolio is to ensure stable risk adjusted earnings stream by maintaining customer defaults within acceptable levels. The Bank periodically carries out a comprehensive portfolio level analysis of retail loan portfolio with a risk-return perspective. Risk measurement for the retail exposures is done on basis of credit scoring models. The other guiding principles behind Credit Risk Management Framework are stated below. • ‘Know your Customer’ is a leading principle for all activities; • Sound credit approval process with well laid credit-granting criteria; • Portfolio level risk analytics and reporting to ensure optimal spread of risk across various rating classes, prevent undue risk concentration across any particular industry segments and monitor credit risk quality migration; • Sector specific studies are periodically undertaken to highlight risk and opportunities in those sectors; • Industry-wise exposure ceilings are based on the industry performance, prospects and the competitiveness of the sector; • Separate risk limits are set up for credit portfolios like advances to NBFC and unsecured loans that require special monitoring; • With heightened activity in the real estate sector, the Bank has strengthened its risk management systems to ensure that its advances are to borrowers having a good track record and satisfying the criterion of minimum acceptable credit rating; and • Appropriate covenants are stipulated for risk containment and monitoring.

75 Market Risk Market risk is the risk to the Bank’s earnings and capital due to changes in the market level of interest rates, prices of securities, foreign exchange and equities, as well as the volatilities of those changes. The Bank is exposed to market risk through its trading activities, which are carried out both for customers and on a proprietary basis. The Bank adopts a comprehensive approach to market risk management for its trading, investment and asset/liability portfolios. For market risk management, the Bank uses: • Non-statistical measures like position, gaps and sensitivities (duration, PVBP, option greeks), • Statistical measures like Value at risk (“VaR”), supplemented by Stress Tests and Scenario Analysis Risk limits such as position, gaps and sensitivities are set up according to a number of criteria including relevant market analysis, business strategy, management experience and the Bank’s risk appetite. These limits are monitored on a daily basis and the exceptions are put up to ALCO. Risk limits are reviewed, at least, annually or more frequently, if deemed necessary, to maintain consistency with trading strategies and material developments in market conditions. The Bank uses Historical Simulation and variants for computing VaR for its trading portfolio. VaR is calculated at a 99% confidence level for a one-day holding period. The model assumes that the risk factor changes observed in the past are a good estimate of those likely to occur in the future and is, therefore, limited by the relevance of the historical data used. The Bank typically uses 500 days of historical data or two years of relative changes in historical rates and prices. The method, however, does not make any assumption about the nature or type of the loss distribution. The VaR models for different portfolios are back-tested at regular intervals and the results are used to maintain and improve the efficacy of the model. The VaR is computed on a daily basis for the trading portfolio and reported to the senior management of the Bank. The VaR measure is supplemented by a series of stress tests and sensitivity analysis that estimates likely behaviour of a portfolio under extreme but plausible conditions and its impact on earnings and capital. Expected Tail Loss (“ETL”) or Conditional Value at Risk (“CVaR”) is one of the concepts used to devise stress scenarios. The Bank undertakes stress tests for market risks for its trading book, IRS, forex open position and forex gaps at the end of each quarter.

Asset liability management The Bank’s Asset Liability Management policy covers the functions involved in managing the balance sheet within the risk parameters set by the Board. The Asset Liability Management Committee (“ALCO”) meets on a monthly basis and reviews the following: • interest rate and liquidity gap positions; • adherence to the internal control mechanisms; • cost of funds, yield on assets, net interest income and net interest margin; • pricing of liabilities; • maturity profile of incremental assets and liabilities; and • sensitivity of the investment portfolio.

Liquidity Risk Liquidity Risk arises from fluctuation in cash flows. It is defined as the current and prospective risk to earnings or capital arising from a bank’s inability to meet its current or future obligations on the due date. Liquidity risk is two-dimensional viz., risk of being unable to fund portfolio of assets at appropriate maturity and rates (liability dimension) and the risk of being unable to liquidate an asset in a timely manner at a reasonable price (asset dimension). The Bank’s ALM policy defines the gap limits for the structural liquidity. The liquidity profile of the Bank is analysed on a static basis as well as on a dynamic basis by tracking all cash inflows and outflows in the maturity ladder based on the expected occurrence of cash flows. The liquidity profile of the Bank is also estimated on a dynamic basis by considering the growth in deposits and loans, investment obligations, etc. for a short-term period of three months. The Bank undertakes behavioural analysis of the non-maturity products viz. savings and current deposits and cash credit/overdraft accounts on a periodic basis, to ascertain the volatility of residual balances in those accounts. The renewal pattern and premature withdrawals of term deposits and drawdown of unavailed credit limits are also captured through behavioural studies. The concentration of large deposits is monitored on a periodic basis.

76 The Bank’s ability to meet its obligations and fund itself in a crisis scenario is critical and accordingly, stress tests are conducted under different scenarios at periodical intervals to assess the impact on liquidity to withstand stressed conditions. The liquidity positions of overseas branches are managed in line with the Bank’s internal policies and host country regulations. Such positions are also reviewed centrally by the Bank’s ALCO along with domestic positions. See “Selected Statistical Information” for information on our asset-liability gap and the sensitivity of our assets and liabilities to change in interest rates.

Equity Price Risk The Bank manages equity price risk relating to changes in prices of securities (both equities and instruments exhibiting features of equity), which may adversely affect the financial position of the Bank. The Bank undertakes exposure in equities both in the primary and secondary market, as part of its trading activity within limits stipulated by regulators and internal policies. The Bank’s investment policy provides for prudent limits on the secondary market exposure as well as individual security within the overall limit. The securities are marked-to-market daily and the Risk Department monitors the stop loss limits and VaR limits on a daily basis.

Exchange Rate Risk The Bank’s trading room undertakes foreign exchange transactions on behalf of its customers as well as for its proprietary trading book. These activities include trade related transactions of corporate clients, placing and accepting deposits, and borrowing and lending in foreign currencies. The Bank uses currency swaps, currency futures, foreign exchange options and forward contracts for hedging as well as for trading purposes. The exchange rate risk arising out of the above transactions is managed by establishing various limits (daylight limit, overnight limit, individual and aggregate gap limit, stop loss limit and VaR limit). In addition, the Bank has placed prudential internal limits on its options portfolio, which is monitored on a daily basis. The exposure to counterparties arising from exchange transactions is monitored through counter-party limit on a daily basis. The net open position and gap position of the Bank are marked to market and monitored daily by the Risk department. The Bank conducts various scenario analyses on the exchange exposure and the results are submitted to ALCO for review.

Concentration Risk The Bank has allocated the internal risk limits in order to avoid concentrations, wherever relevant. For example, the Aggregate Gap Limit is allocated to various currencies and maturities as Individual Gap Limits to monitor concentrations. Similarly, the change in price for one basis point upward shifts in par value, or “PV01”, for interest rate swaps have been allocated to various benchmarks. Where such allocations have not been undertaken, the Bank continues to monitor the position closely for any possible concentrations.

Counterparty Risk The Bank has put in place appropriate guidelines to monitor counterparty risk covering all counterparty exposures on banks, primary dealers and financial institutions arising out of movement in market variables. Credit exposures to issuer of bonds, advances, etc. are monitored separately under the prudential norms for exposure to a single borrower as per the Bank’s Corporate Credit Risk Policy or Investment Policy as applicable. Rating of counterparty banks, primary dealers and NBFCs and sanctioning of limits are done as per suitable rating Model laid down by the Bank. The Bank has also put in place the “Suitability and Appropriateness Policy” and Loan Equivalent Risk (“LER”) Policy to evaluate counterparty risk arising out of all customer derivatives contracts. The Bank uses the current exposure method for setting up the LER limits.

Country Risk The Bank has put in place a risk monitoring system for the management of country risk. The Bank uses the seven-category classification i.e. insignificant, low, moderate, high, very high, restricted and off-credit followed by the Export Credit Guarantee Corporation Ltd. (“ECGC”) and ratings of international rating agency Dun & Bradstreet for monitoring the country exposures. The categorisation of countries are undertaken at monthly intervals or at more frequent intervals if the situation so warrants. Exposure to a country includes all credit- related lending, trading and investment activities, whether cross border or locally funded. The Bank has set up exposure limits for each risk category as also per country exposure limits and are monitored at weekly intervals. In addition exposures to high risk, very high risk, restricted and off-credit countries are approved on a case to case basis.

77 Risk Management Framework for Overseas Operations The Bank has put in place a comprehensive Risk Management Policy for its global operations, which presently includes branches in Singapore, Hong Kong and Dubai. It has also formulated country-specific risk policy based on the host country regulators’ guidelines. The Asset Liability Management and all the risk exposures for the overseas operations are monitored centrally at the Central Office.

Interest rate risk in the banking book The Bank assesses its exposure to interest rate risk in the banking book at the end of each quarter considering a drop in market value of investments with a 50 basis point change in interest rates. Calculation of interest rate risk in the banking book (“IRRBB”) is based on a present value perspective with cash flows discounted at zero coupon yields published by the NSE for domestic balance sheet and USD LIBOR for overseas balance sheet. Other currencies are taken in equivalent base currencies (INR for domestic books and USD for overseas branches) as the Bank does not have material exposures to other currencies as a percentage of the balance sheet. Cash flows are assumed to occur at the middle of the regulatory buckets for the interest rate sensitive gap statements. Non-interest sensitive products like cash, current account, capital, volatile portion of savings bank deposits, etc. are excluded from the computation. The Bank does not run a position on interest rate options that might result in non-linear pay-off. Future interest cash flows from outstanding balances are included in the analysis. See “Selected Statistical Information — Maturity and Interest Rate Sensitivity of Loans and Credit Substitutes” for information on interest rate risk.

Operational Risk Bank has put in place Operational Risk Management Framework to manage the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. The Bank attempts to mitigate operational Risk by maintaining a comprehensive system of internal controls, establishing systems and procedures to monitor transactions, maintaining key backups and undertaking regular contingency planning. Towards assessment and monitoring of Operational Risk, the Bank uses tools such as Key Risk Indicators and Risk and Control Self-Assessment and Loss Data Module. The Bank has in place various committees to manage and mitigate operational risk in new and existing products, processes, outsourcing arrangements and IT security matters, among other risks. The bank has segregated its activities into seven business lines so that it can calculate capital charge for Operational Risk, as set out under the Standardised/Advanced approaches of the Basel II accord.

Competition The Bank faces strong competition in all of its principal lines of business. The Bank’s primary competitors are large public sector banks, other private sector banks, foreign banks and, in some product areas, development financial institutions.

Corporate Banking The Bank’s corporate banking products and services face competition from a number of banks and financial institutions. Public sector banks, which pose major competition to the Bank, have a significant history of operations. This competition has, over time, built extensive branch networks, providing them with the advantage of a low cost deposit base, and enables them to lend at competitive rates. In addition, the extensive geographic reach of many of these institutions enables product delivery in remote parts of the country. The Bank seeks to compete with these banks through faster response to customer requirements, quality of service, a fast growing inter-connected branch network, and technology enabled delivery capabilities. Other private sector banks also compete in the corporate banking market on the basis of efficiency, service delivery and technology. However, the Bank’s management believes that its product portfolio, credit selection strategy, response time, service quality, and the strength of established relations, provide it with a competitive edge over these other private sector banks. The Bank also faces competition from foreign banks, with foreign banks traditionally having been active in providing trade finance, fee-based services and other short-term financing products to top-tier Indian corporations. The Bank has established strong ties in trade finance, strong fee-based cash management services and competes with foreign banks using its broader branch network in the country, innovative products and competitive pricing.

78 Capital Markets The Bank faces competition in its merchant banking business from large public sector banks, other private sector banks, foreign banks and investment banks.

Retail Banking In retail banking, the Bank’s principal competitors are the large public sector banks, which have much larger deposit bases and branch networks, as well as aggressive new private sector banks and foreign banks. The retail deposit share of foreign banks in India is quite small in comparison to the public sector banks, and has also declined in the last five years, which management attributes principally to competition from new private sector banks. However, some foreign banks have a significant presence among NRIs and also compete for non-branch- based products such as auto loans. The Bank faces significant competition primarily from foreign banks in the debit card segment. In mutual fund sales and other investment related products, the Bank’s principal competitors are brokers, foreign banks and new private sector banks.

Treasury In its treasury advisory services for corporate clients, the Bank competes principally with foreign banks in foreign exchange and derivatives, as well as public sector banks in the foreign exchange and money markets business.

Employees The Bank has built up a team of professionals comprising experts in risk management, credit analysis, treasury, capital markets, relationship management, retail products, marketing and information technology as well as general banking professionals. As of 31 March 2009, the Bank had 20,624 employees, compared to 14,739 at 31 March 2008 and 9,980 at 31 March 2007. Of these, 20,624 employees at 31 March 2009, 9,541 were professionally qualified in management, accountancy, economics, banking, engineering, information technology or law. As of 31 March 2009, 21.83% of the workforce was female. Set forth below is a breakdown of the number of employees of the Bank between corporate headquarters, zonal offices and branches. As of 31 March 2007 2008 2009 Corporate headquarters ...... 1,635 2,399 3,305 Zonal offices ...... 600 1,589 2,348 Branches ...... 7,745 10,751 14,971 Total ...... 9,980 14,739 20,624

Learning and development is an area of continuing focus for the Bank to ensure that its professionals are equipped to render quality customer service and be up-to-date with the latest developments in their respective fields. The depth and breadth of training is refined on an ongoing basis in consultation with the business functions. While induction training and banking programmes are conducted in-house, sales-focused training, behavioural training and specialised domain skills training are provided by inviting outside experts or by sending the Bank’s professionals to premier external training institutes both within and outside the country. Exposure to multiple training programmes, the opportunity to work on challenging tasks and job rotation are part of the Bank’s strategy to retain talent and groom employees with the requisite leadership skills. The Bank’s performance management system is aligned to employees’ individual performance with the Bank’s corporate objectives. Employee compensation is structured in terms of fixed pay, variable pay and stock options — the last two are strongly contingent on performance and are designed to encourage team effort. The Bank has an employee stock option scheme under which 35,770,000 options can be granted to employees and Directors. The employee stock option scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (the “Scheme”). The eligibility and number of options to be granted to an employee is determined on the basis of the employee’s work performance and is approved by the Board of Directors. As of 31 March 2009, the Remuneration and Nomination Committee granted options under this scheme on eight occasions since February 2001. The options granted, which are non-transferable, vest at the rate of 30%, 30% and 40% on each of three successive anniversaries following the granting, subject to standard vesting

79 conditions and must be exercised within three years of the date of vesting. The option price is set at the latest available closing price, prior to the date of the Board of Directors meeting in which options are granted on the stock exchange which has had the highest trading volume on the said date. As of 31 March 2009, 12,245,885 options had been exercised and 13,852,974 options were in force. Apart from the various components of compensation mentioned above, employees are eligible for staff loans at subsidised rates. The Bank’s officers are also entitled to various retirement and insurance benefits. Retirement benefits by way of provident fund and gratuity payment are in line with statutory requirements. The Bank as well as its employees contributes a defined amount to the provident fund which is a retirement fund under which the Bank by law is required to pay a minimum of annual return equivalent to the return declared by the Central Government. If such return is not generated internally by this fund, the Bank is liable to pay the difference. The Bank’s provident fund has generated sufficient funds internally to meet the minimum annual return requirement since inception of the fund. The Bank also contributes specified amounts to a gratuity fund and also has a superannuation fund to which defined amounts are contributed. As of 31 March 2009, the Bank’s liability for retirement benefits (gratuity and leave encashment benefits) amounted to Rs.1,180.80 million. Additionally, the Bank provides personal accident and health insurance coverage to its employees. The Bank considers its relations with its employees to be cordial. All compensation and benefits proposals are first referred to the Remuneration and Nomination Committee of the Board which recommends them to the Board of Directors for approval. The Bank’s employees do not belong to any trade union.

Information Technology The IT infrastructure of the Bank is built on a robust architecture providing a stable connectivity to the network of branches in India and overseas. The core banking application operates on a centralised database located at the Bank’s data centre in Mumbai. The overseas branch database and application systems are segregated to comply with regulatory requirements. The core banking application software supports multi currency and multi general ledger accounting standards. The treasury operations are integrated with the core banking applications. The transaction processing systems are built on a scalable hardware platform which has emerged as an industry standard. Customer services are offered through multi-channel delivery systems comprising ATM, Internet, phone banking and mobile banking. The ATMs are connected to Visa and MasterCard networks worldwide. The Banks has leveraged its in-house IT capabilities for offering sale and purchase of mutual funds and payment of insurance premiums through ATMs. For business continuity, the database is replicated at a secondary location in Bangalore which can be accessed by service delivery locations through a primary as well as secondary network path. Periodically, applications are moved to this secondary site to test the business continuity processes. The IT strategy of the Bank has supported business initiatives by a process of continuous upgrade in technology and process transformation. The IT capabilities of the Bank have provided a competitive edge for business.

Insurance The Bank maintains its own insurance policies and coverage that it deems to be appropriate. The Bank’s insurance policies include a financial institution’s blanket bond covering losses from computer, personnel and external crimes, depository insurance for securities, insurance for cash, securities and precious metals in transit, insurance of ATMs, cash dispensers and bank card fraud insurance. In addition, the Bank also obtains an insurance policy to cover the liability of the directors, officers and other key management members of the Bank and its subsidiaries. The Bank carries insurance coverage at levels comparable to those customary for a bank of its size and nature.

Properties The Bank’s registered office is located at “TRISHUL”, Third Floor, Opposite Samartheshwar Temple, Nr. Law Garden, Ellisbridge, Ahmedabad 380 006, India. The Bank’s corporate headquarters is located at 131, Maker Tower ‘F’, 13th Floor, Cuffe Parade, Colaba, Mumbai 400 005, India. The Bank owns one floor of its corporate headquarters building, part of a branch located in Pune, the space occupied by its Data Centre located in Corporate Park II, (Chembur, Mumbai), the space occupied by its National Processing Centre II located at Mind Space, near Sanskriti Township, Hyderabad and 17 residential apartments. Apart from these properties, all branches and other properties used by the Bank are leased. As of 30 June 2009, the Bank had a network consisting of 861 branches and extension counters, and 3,723 ATMs spread over 534 cities and towns. These facilities are located throughout India. A portion of the premises

80 of one of these branches is located on a property owned by the Bank, with the remaining facilities being leased. The net book value of all the properties owned by the Bank, including administrative offices and residential premises as of 31 March 2009 was Rs. 773.93 million. In addition, the Bank has three overseas branches (in Singapore, Hong Kong and DIFC, Dubai) and two overseas representative offices (in Shanghai and Dubai).

Legal Proceedings The Bank is not a party to any proceedings which, if adversely determined, might have a material adverse effect on its financial condition or results of operations. However, the Bank is involved in legal proceedings before various courts and other forums in the ordinary course of business and its usual course of banking, including three cases filed against the Bank by three customers in respect of derivatives contracts.

Subsidiaries The Bank has set up five wholly-owned subsidiaries, namely Axis Sales Limited (“ASL”), Axis Private Equity Limited (“Axis PE”), Axis Trustee Services Limited (“Axis TS”), Axis Asset Management Company Limited (“Axis AMC”) and Trustee Limited.

Axis Sales Ltd. ASL was incorporated in India, as a wholly-owned subsidiary of the Bank, on 6 December 2005 and received its certificate of commencement of business on 2 May 2006. The paid up capital of ASL was Rs. 300 million. The primary objective of ASL is to market financial products with optimisation of sales productivity, the minimisation of costs along with bringing greater focus on process adherence, quality of acquisition and reducing risk. ASL commenced its business operations in August 2006 with the marketing of credit cards and retail loan products of the Bank. During fiscal 2007, ASL also began marketing Electronic Data Capturing (“EDC”) machines of the Bank to merchants and motor vehicle loans. During fiscal 2009, ASL sourced retail loans worth Rs. 35.26 billion and generated revenue of Rs. 369.12 million from retail loans and Rs. 304.41 million from credit cards. During fiscal 2009, ASL reported a loss of Rs. 56.28 million. ASL has set up 58 branch offices for sales across India. It has 3,823 staff involved in marketing the Bank’s credit cards, retail loans and EDC machines.

Axis Private Equity Ltd. Axis PE was incorporated in India as a wholly-owned subsidiary of the Bank on 3 October 2006 and received its certificate of commencement of business on 4 December 2006. The paid up capital of Axis PE was Rs. 150 million. Axis PE has been formed primarily to manage equity investments and provide venture capital support to businesses. Axis PE launched its first infrastructure fund and raised a total commitment of Rs. 6,000 million during fiscal 2009. For fiscal 2009, Axis PE reported a profit of Rs. 32.55 million.

Axis Trustee Services Ltd. Axis TS was incorporated in India as a wholly-owned subsidiary of the Bank on 16 May 2008 and received its certificate of commencement of business on 30 September 2008. During fiscal 2009 it reported a net profit of Rs. 3.83 million. The main objective of Axis TS is to carry on trusteeship activities such as debenture trustee and trustee to various securitisation trusts and other trusteeship business.

Axis Asset Management Company Ltd. Axis AMC was incorporated on 13 January 2009 as a wholly-owned subsidiary of the Bank and received its certificate of commencement of business on 4 March 2009. The main objective of Axis AMC is to manage mutual fund businesses.

Axis Mutual Fund Trustee Ltd. Axis Mutual Fund Trustee Ltd. was incorporated on 2 January 2009 and received its certificate of commencement of business on 4 March 2009. The main objective of Axis Mutual Fund Trustee Ltd. is to act as the trustee for mutual fund businesses. SEBI has, by way of its letter dated 4 September 2009, granted registration to Axis Mutual Fund. SEBI also by way of the same letter granted approval to Axis AMC to act as the asset management company for Axis Mutual Fund.

81 Summary of the Financial Results of the Axis Bank Group Summary of the Financial Results of the Axis Bank Group (consolidated) and its subsidiaries for fiscal 2009 is given below: Axis Asset Axis Mutual Axis Bank Axis Sales Axis Private Axis Trustee Management Fund Trustee Group Ltd. Equity Ltd. Services Ltd. Company Ltd. Ltd.(1) (consolidated) (Rupees in millions) Total Assets ...... 1,476,972 310 126 32 116 — Total Income ...... 137,450 703 115 11 — — Operating Profit/ (Loss) ...... 37,223 (54) 26 5 (6) — Profit/(Loss) after Tax...... 18,129 (56) 33 4 (6) —

(1) Figures less than Rs. 1 million.

82 SELECTED STATISTICAL INFORMATION

The following information should be read together with the Bank’s financial statements included in these Listing Particulars as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Footnotes appear at the end of each related section of tables.

Average Balance Sheet The table below presents the average balances for interest-earning assets and interest-bearing liabilities together with the related interest revenue and expense amounts, resulting in the presentation of the average yields and cost for each period. The average balance is the average of quarterly balances outstanding. The average yield on average interest-earning assets is the ratio of interest revenue to average interest-earning assets. The average cost on average interest-bearing liabilities is the ratio of interest expense to average interest-bearing liabilities. The average balances of loans include NPAs and are net of allowance for credit losses. The Bank has not recalculated tax exempt income on a tax equivalent basis. As the yield and cost in the table below has been computed on the basis of quarterly average balances, these will not match with the ratios contained in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Selected Financial and Operating Data” and “Business” sections which have been calculated on the basis of daily average balances, except as otherwise stated. Year Ended 31 March 2007 2008 2009 Interest Interest Interest Average Income/ Avg. Yield/ Average Income/ Avg. Yield/ Average Income/ Avg. Yield/ Balance Expense Cost (%) Balance Expense Cost (%) Balance Expense Cost (%) (Rupees in millions, except percentages) Interest-earning assets: Advances ...... 292,968 27,028 9.23 462,312 47,457 10.27 693,116 74,659 10.77 Investments ...... 234,640 16,327 6.96 287,139 21,023 7.32 391,723 30,515 7.79 Others ...... 41,182 1,261 3.06 33,720 1,573 4.67 43,684 3,181 7.28 Total interest-earning assets ...... 568,790 44,616 7.84 783,171 70,053 8.94 1,128,523 108,355 9.60 Non-interest earning assets: Fixed assets ...... 6,039 — — 7,585 — — 9,618 — — Other assets ...... 26,625 — — 81,393 — — 134,295 — — Total assets ...... 601,454 44,616 — 872,149 70,053 — 1,272,436 108,355 — Interest-bearing liabilities: Deposits ...... 481,798 24,809 5.15 680,333 37,425 5.50 1,005,147 62,089 6.18 Saving deposits ...... 97,145 2,425 2.50 149,167 3,545 2.38 216,369 5,243 2.42 Other demand deposits .... 88,587 — — 144,105 — — 199,034 — — Term deposits ...... 296,066 22,384 7.56 387,061 33,880 8.75 589,744 56,846 9.64 Borrowings ...... 67,131 5,124 7.63 96,955 6,775 6.99 125,136 9,404 7.51 Total interest-bearing liabilities ...... 548,929 29,933 5.45 777,288 44,200 5.69 1,130,283 71,493 6.33 Non-interest bearing liabilities: Capital and reserves ...... 31,418 — — 65,446 — — 95,384 — — Other liabilities ...... 21,107 — — 29,415 — — 46,769 — — Total non-interest bearing liabilities: ...... 52,525 — — 94,861 — — 142,153 — — Total liabilities ...... 601,454 29,933 — 872,149 44,200 — 1,272,436 71,943 —

83 Analysis of Changes in Interest Revenue and Interest Expense By Volume and Rate The following tables set forth, for the periods indicated, the allocation of the changes in the Bank’s interest revenue and interest expense between average volume and changes in average rates. Fiscal 2008 vs. Fiscal 2007 Fiscal 2009 vs. Fiscal 2008 Increase (Decrease)(1) Due to Increase (Decrease)(1) Due to Change in Change in Change in Change in Net Average Average Net Average Average Change Volume Rate Change Volume Rate (Rupees in millions) Interest revenue Advances ...... 20,429 15,623 4,806 27,202 23,692 3,510 Investments ...... 4,696 3,653 1,043 9,492 7,657 1,835 Others ...... 312 (228) 540 1,608 465 1,143 Total interest-earning assets ...... 25,437 19,048 6,389 38,302 31,814 6,488 Interest expenses Saving deposits ...... 1,120 1,299 (179) 1,698 1,597 101 Demand deposits ...... — — — — — — Term deposits ...... 11,496 6,879 4,617 22,966 17,741 5,225 Borrowings ...... 1,651 2,277 (626) 2,629 1,969 660 Total interest-bearing liabilities ...... 14,267 10,455 3,812 27,293 21,307 5,986 Net interest revenue ...... 11,170 8,593 2,577 11,009 10,507 502

(1) The changes in net interest revenue between periods have been reflected as attributed either to volume or rate changes.

Yields, Spreads and Margins The following table sets forth, for the periods indicated, the yields, spreads and interest margins on the Bank’s interest-earning assets. Year Ended 31 March 2007 2008 2009 (Rupees in millions except percentages) Interest income ...... 44,616 70,053 108,355 Average interest-earning assets ...... 568,790 783,171 1,128,523 Average interest-bearing liabilities ...... 548,929 777,288 1,130,283 Average total assets ...... 601,454 872,149 1,272,436 Average interest-earning assets as a % of average total assets .... 94.57 89.80 88.69 Average interest-bearing liabilities as a % of average total assets ...... 91.27 89.12 88.83 Average interest-earning assets as a % of average interest- bearing liabilities ...... 103.62 100.76 99.84 Yield (%) ...... 7.84 8.94 9.60 Cost of Funds (%) ...... 5.45 5.69 6.33 Spread (%)(1) ...... 2.39 3.25 3.27 Net interest margin (%)(2) ...... 2.58 3.30 3.27

(1) Spread is the difference between yield on average interest-earning assets and cost of average interest bearing liabilities. Yield on average interest-earning assets is the ratio of interest income to average interest-earning assets. Cost of average interest-bearing liabilities is the ratio of interest expense to average interest-bearing liabilities. (2) Net interest margin is the ratio of net interest income to average interest-earning assets. The difference in net interest margin and spread arises due to the difference in amount of average interest-earning assets and average interest-bearing liabilities. If average interest-earning assets exceed average interest-bearing liabilities, net interest margin is greater than spread and if average interest-bearing liabilities exceed average interest-earning assets, net interest margin is less than spread.

84 Return on Equity and Assets The following table presents selected financial ratios for the periods indicated. Year Ended 31 March 2007 2008 2009 (Rupees in millions except percentages) Net profit ...... 6,590 10,710 18,153 Average total assets(1) ...... 601,276 866,738 1,261,263 Average shareholders’ equity ...... 30,171 66,551 91,077 Net profit as a percentage of average total assets(2) ...... 1.10% 1.24% 1.44% Net profit as a percentage of average shareholders’ equity(3) ..... 21.84% 16.09% 19.93% Average shareholders’ equity as a percentage of average total assets ...... 5.02% 7.68% 7.22%

(1) Average total assets represent monthly average balances. (2) Net profit divided by average month-end assets for the fiscal year. (3) Net profit divided by the daily weighted average of share capital, share premium and year end average of other reserves and surplus.

Investment Portfolio (Gross) Available for Sale Investments The following tables set forth, as of the dates indicated, information related to the Bank’s investments available for sale. As of 31 March 2007 As of 31 March 2008 As of 31 March 2009 Book Market Unrealised Unrealised Book Market Unrealised Unrealised Book Market Unrealised Unrealised Value Value Gain Loss Value Value Gain Loss Value Value Gain Loss (Rupees in millions) Government securities ..... 47,693 47,683 256 (266) 43,605 43,618 311 (298) 37,067 37,024 438 (481) Other debt securities ..... 83,465 82,710 756 (1,511) 115,676 114,636 839 (1,879) 154,131 157,859 5,934 (2,206) Total debt securities ..... 131,158 130,393 1,012 (1,777) 159,281 158,254 1,150 (2,177) 191,198 194,883 6,372 (2,687) Non-debt securities ..... 7,307 7,482 678 (503) 5,901 5,872 1,030 (1,059) 5,867 4,266 545 (2,146) Total ...... 138,465 137,875 1,690 (2,280) 165,182 164,126 2,180 (3,236) 197,065 199,149 6,917 (4,833)

Held to Maturity Investments The following tables set forth, as of the dates indicated, information related to the Bank’s investments held to maturity. As of 31 March 2007 As of 31 March 2008 As of 31 March 2009 Book Market Unrealised Unrealised Book Market Unrealised Unrealised Book Market Unrealised Unrealised Value Value Gain Loss Value Value Gain Loss Value Value Gain Loss (Rupees in millions) Government securities ..... 116,269 111,477 35 (4,827) 158,183 154,799 67 (3,451) 240,105 245,398 6,192 (899) Other debt securities ..... 13,627 13,411 5 (221) 13,251 13,079 25 (197) 22,417 22,284 22 (155) Total debt securities ..... 129,896 124,888 40 (5,048) 171,434 167,878 92 (3,648) 262,522 267,682 6,214 (1,054) Non-debt securities ..... 100 100 — — 380 380 — — 2,316 2,316 — — Total ...... 129,996 124,988 40 (5,048) 171,814 168,258 92 (3,648) 264,838 269,998 6,214 (1,054)

85 Held for Trading Investments The following tables set forth, as of the dates indicated, information related to the Bank’s investments held for trading.

As of 31 March 2007 As of 31 March 2008 As of 31 March 2009 Book Market Unrealised Unrealised Book Market Unrealised Unrealised Book Market Unrealised Unrealised Value Value Gain Loss Value Value Gain Loss Value Value Gain Loss (Rupees in millions) Government securities ...... 345 343 — (2) — — — — 101 101 — — Other debt securities ...... 1,089 1,096 12 (5) 737 732 1 (6) 3,279 3,291 13 (1) Total debt securities ...... 1,434 1,439 12 (7) 737 732 1 (6) 3,380 3,392 13 (1) Non-debt securities ...... — — — — 329 329 — — 94 91 1 (4) Total ...... 1,434 1,439 12 (7) 1,066 1,061 1 (6) 3,474 3,483 14 (5)

Residual Maturity Profile The following table sets forth, as of the date indicated, an analysis of the residual maturity profile of the Bank’s investments in government and corporate debt securities classified as available for sale securities and their weighted average market yields.

As of 31 March 2009 Up to One to Five to More than One Year Five Year Ten Years Ten Years Amount Yield Amount Yield Amount Yield Amount Yield (Rupees in millions, except percentages) Government securities .... 14,847 6.25% 4,706 6.96% 14,214 7.56% 3,256 7.78% Other debt securities ..... 19,895 8.78% 83,607 8.46% 38,175 8.99% 16,182 8.83% Total debt securities market value ...... 34,742 7.70% 88,313 8.38% 52,389 8.60% 19,438 8.65% Gross book value ...... 34,276 84,776 52,465 19,681

The following table sets forth, as of the date indicated, an analysis of the residual maturity profile of the Bank’s investments in government and corporate debt securities classified as held to maturity securities and their weighted average market yields.

As of 31 March 2009 Up to One to Five to More than One Year Five Year Ten Years Ten Years Amount Yield Amount Yield Amount Yield Amount Yield (Rupees in millions, except percentages) Government securities . . . 8,434 6.13% 75,567 7.97% 109,376 7.39% 52,021 7.83% Other debt securities .... 781 6.45% 9,779 6.16% 11,724 5.66% — — Total debt securities market value ...... 9,215 6.16% 85,346 7.76% 121,100 7.22% 52,021 7.83% Gross book value ...... 9,124 84,165 118,235 50,998

The following table sets forth, as of the date indicated, an analysis of the residual maturity profile of the Bank’s investments in government and corporate debt securities classified as held for trading securities and their weighted average market yields. As of 31 March 2009 Up to One to Five to More than One Year Five Year Ten Years Ten Years Amount Yield Amount Yield Amount Yield Amount Yield (Rupees in millions, except percentages) Government securities .... 101 5.84% — — — — — — Other debt securities ..... — — 753 6.97% 2,538 8.86% — — Total debt securities market value ...... 101 5.84% 753 6.97% 2,538 8.86% — — Gross book value ...... 101 751 2,528 —

86 Funding The Bank’s funding operations are designed to ensure stability, low cost of funding and effective liquidity management. The primary source of funding is deposits raised from wholesale banking customers, which were 64.13% and 63.79% of total deposits as of 31 March 2008 and 31 March 2009, respectively. Retail banking deposits represented 35.87% and 36.21% of total deposits as of 31 March 2008 and 31 March 2009, respectively.

Total Deposits The following table sets forth, for the periods indicated, the Bank’s average outstanding deposits on a quarterly average basis and the percentage composition by each category of deposits. The average cost (interest expense divided by the average of daily balance for the relevant period) of savings deposits was 2.68% in fiscal 2007, 2.59% in fiscal 2008 and 2.69% in fiscal 2009. The average cost of time deposits was 7.50% in fiscal 2007, 8.96% in fiscal 2008 and 9.41% in fiscal 2009. The average deposits on a quarterly average basis for the periods set forth are as follows: Year Ended 31 March 2007 2008 2009 %of %of %of Amount Total Amount Total Amount Total (Rupees in millions, except percentages) Current deposits(1) ...... 88,587 18.39 144,105 21.18 199,034 19.80 Savings deposits ...... 97,145 20.16 149,167 21.93 216,369 21.53 Time deposits ...... 296,066 61.45 387,061 56.89 589,744 58.67 Total ...... 481,798 100 680,333 100 1,005,147 100

(1) Includes current accounts and cash floats from transactional services. As of 31 March 2009, individual term deposits with the Bank in excess of Rs. 5.09 million (approximately U.S.$ 100,000) had balance to maturity profiles as set out below. As of 31 March 2009 Up to 3 3to6 6to9 9to12 More Than Months Months Months Months 1 Year (Rupees in million) Balance to maturity for deposits exceeding Rs. 5.09 million each ...... 210,802 156,624 93,907 49,057 11,589

Short-term Borrowings The following table sets forth, for the periods indicated, information related to the Bank’s short-term rupee borrowings, which are comprised primarily of money-market borrowings (call borrowing and CBLO borrowing). Short-term rupee borrowings exclude deposits and securities sold under repurchase agreements. Years Ended 31 March 2007 2008 2009 (Rupees in millions) Year end balance ...... — — 3,000 Average balance during the year(1) ...... 16,784 12,441 25,913 Maximum outstanding ...... 35,331 43,184 65,799 Average interest rate during the year(2) ...... 6.83 6.08 6.70 Average interest at year end(3) ...... — — 4.89

(1) Average of daily balances outstanding. (2) Represents the ratio of interest expense on short-term borrowings to the average of daily balances of short- term borrowings. (3) Represents the weighted average rate of short-term borrowings outstanding as of 31 March 2007, 2008 and 2009.

Subordinated Debt The Bank obtains funds from the issuance of unsecured non-convertible subordinated debt securities, which qualify as Tier II risk-based capital under RBI’s guidelines for assessing capital adequacy. The Bank issued eleven tranches of subordinated debt securities during the fiscals 2003, 2004, 2005, 2006, 2007, 2008 and 2009 at coupon rates of 9.30% to 8.95%, 7.0% to 6.5%, 4.85%, 8.75% to 5.31%, 10.10% to 8.95%, 11.75% to 9.95%.

87 The 2002 tranche is repayable in fiscal 2010 and 2012. The 2003 tranche is repayable in fiscal 2009, 2011 and 2013. The 2004 tranche is repayable in fiscal 2010, 2012 and 2014. The 2005 tranche is repayable in fiscal 2011. The 2006 tranche is repayable in fiscal 2013, 2014 and 2016. The 2007 tranche is repayable in fiscal 2014 and 2017. As of 31 March 2009, the Bank had Rs. 35.16 billion aggregate principal amount of subordinated debt outstanding, of which Rs. 30.55 billion qualified as Tier II capital. The following table sets forth, as of 31 March 2009, the details of unsecured non-convertible subordinated debt securities issued by the Bank. As of 31 March 2009 Number of Date of Allotment Debentures Rate of Interest Date of Redemption Amount (Rupees in millions) 20 September 2002 100 9.05% 20 June 2010 50 20 September 2002 1,240 9.30% 20 June 2012 620 21 December 2002 1,200 8.95% 21 September 2012 600 26 July 2003 600 6.50% 26 April 2009 300 26 July 2003 100 6.70% 26 April 2011 50 26 July 2003 1,300 7.00% 26 April 2013 650 15 January 2004 500 6.50% 15 October 2013 500 4 June 2004 1,500 One year Government securities semi-annual 4 June 2010 1,500 yield plus a margin of 85 basis points to be reset at semi-annual intervals 25 July 2005 5,000 Simple average of Mid of Bid and offer yield 25 July 2012 5,000 of the 1 year GOI benchmark (i.e. INBMK) plus a margin of 65 basis points to be reset at semi annual intervals 22 March 2006 1,250 8.50% 22 June 2013 1,250 22 March 2006 50 8.32% 22 June 2013 50 22 March 2006 3,600 8.75% 22 March 2016 3,600 22 March 2006 100 8.56% 22 March 2016 100 28 June 2006 335 8.95% 28 September 2013 335 28 June 2006 1,049 9.10% 28 June 2016 1,049 30 March 2007 2,509 10.10% 30 March 2017 2,509 7 November 2008 15,000 11.75% 7 November 2018 15,000 28 March 2009 2,000 9.95% 28 March 2019 2,000 35,163

Perpetual Debt and Upper Tier II Instruments The Bank has issued Perpetual Debt and Upper Tier II instruments qualifying for Tier I and Tier II capital respectively in fiscal 2007 to increase its capital adequacy ratio and fund its growing overseas and Indian operations. The Bank has issued two tranches of Perpetual Debt instruments at coupon rates of 10.05% and 7.17% and four tranches of Upper Tier II instruments at coupon rates of 7.25%, 9.35%, 9.50% and 7.125%. First three tranches of Upper Tier II will mature in fiscal 2022 and last tranche will mature in fiscal 2023. As of 31 March 2009, the Bank had Rs. 18.18 billion aggregate principal amounts of Perpetual Debt and Upper Tier II instruments outstanding, of which Rs. 4.47 billion qualified as Tier I capital and Rs. 13.71 billion qualified as Tier II capital.

88 The following table sets forth, as of 31 March 2009, the details of Perpetual Debt and Upper Tier II instruments issued by the Bank. As of 31 March 2009 Number of Date of Allotment Debentures Rate of Interest Date of Redemption Amount (Rupees in millions) Perpetual Debt Instrument 30 September 2006 2,140 10.05% — 2,140 15 November 2006 460 7.167% — 2,333 4,473 Upper Tier II Instrument 11 August 2006 1,500 7.25% 11 August 2021 7,599 24 November 2006 2,000 9.35% 24 November 2021 2,000 06 February 2007 1,075 9.50% 06 February 2022 1,075 28 June 2007 600 7.125% 28 June 2022 3,034 13,708

Asset Liability Gap and Interest Sensitivity Data The following table sets forth, for the periods indicated, the Bank’s asset-liability gap position: As of 31 March 2009(1)(2)(3) 1-28 29 - 90 3-6 6-12 1-3 3-5 Over 5 Days Days Months Months Years Years Years Total (Rupees in millions, except percentages) Cash and bank balances ...... 73,538 33,661 7,157 6,874 18,491 274 10,174 150,169 Advances ...... 49,980 43,867 31,051 78,193 147,482 112,150 352,845 815,568 Investments ...... 96,632 79,846 45,645 54,533 67,457 39,906 79,284 463,303 Fixed assets ...... — — — — — — 10,729 10,729 Other assets ...... 13,460 — — — — — 23,991 37,451 Total assets ...... 233,610 157,374 83,853 139,600 233,430 152,330 477,023 1,477,220 Capital and Reserves ...... — — — — — — 102,148 102,148 Deposits ...... 141,793 161,672 178,850 197,164 190,680 4,149 299,433 1,173,741 Borrowings ...... 9,449 19,549 9,753 33,972 28,914 218 — 101,855 Other liabilities ...... 20,855 5,326 15,016 44 6,453 9,260 42,522 99,476 Total liabilities ...... 172,097 186,547 203,619 231,180 226,047 13,627 444,103 1,477,220 Liquidity gap ...... 61,513 (29,173) (119,766) (91,580) 7,383 138,703 32,920 Cumulative liquidity gap ...... 61,513 32,340 (87,426) (179,006) (171,623) (32,920) — Cumulative liabilities ...... 172,097 358,644 562,263 793,443 1,019,490 1,033,117 1,477,220 Cumulative liquidity gap as a % of cumulative liabilities ...... 35.74 9.02 (15.55) (22.56) (16.83) (3.19)

(1) Classification methodologies are based on the Asset Liability Management Guidelines issued by the RBI. (2) Assets and liabilities are classified into categories as per residual maturity. (3) Assets and liabilities that do not mature or have ambiguous maturities are classified as per historical behavioural analysis or management judgment.

Loan Portfolio and Credit Substitutes As of 31 March 2009, the Bank’s gross loan portfolio was Rs. 821.20 billion. As of that date, the Bank’s gross credit substitutes (representing investments in bonds and debentures through primary market and investments in PTCs) outstanding were Rs. 112.55 billion. Primarily, all of the Bank’s gross loans and credit substitutes are to borrowers in India and over 90% are denominated in Indian rupees. For a description of the Bank’s corporate and retail loan products, see “Business — Corporate Banking” and “Business — Retail Banking”.

89 The following table sets forth, for the periods indicated, the Bank’s gross loan portfolio classified by product groups. As of 31 March 2007 2008 2009 (Rupees in millions) Retail loans ...... 89,835 137,348 163,326 Corporate loans ...... 280,386 461,637 657,875 Gross loans ...... 370,221 598,985 821,201 Credit substitutes ...... 61,149 83,424 112,545 Gross loans plus credit substitutes ...... 431,370 682,409 933,746

Maturity and Interest Rate Sensitivity of Loans and Credit Substitutes The following tables set forth, for the periods indicated, the interest rate sensitivity of the Bank’s loans and credit substitutes: As of 31 March 2009 Due In One One Year to Due After Five Year or Less Five Years Years Total (Rupees in millions) Interest rate classification of loans by maturity: Variable rates ...... 689,028 9,347 210 698,585 Fixed rates ...... 54,098 34,044 34,474 122,616 Gross loans ...... 743,126 43,391 34,684 821,201 Interest rate classification of credit substitutes by maturity: Variable rates ...... — — — — Fixed rates ...... 16,317 64,618 31,610 112,545 Gross credit substitutes ...... 16,317 64,618 31,610 112,545 Interest rate classification of loans and credit substitutes by maturity: Variable rates ...... 689,028 9,347 210 698,585 Fixed rates ...... 70,414 98,663 66,084 235,161 Gross loans and credit substitutes ...... 759,443 108,009 66,294 933,746

Concentration of Loans and Credit Substitutes The Bank follows a policy of portfolio diversification and evaluates its total financing exposure in a particular industry in the light of the Bank’s growth and profitability forecasts for that industry. The Bank’s Risk department monitors all major sectors of the economy and specifically follows industries in which the Bank has credit exposure. The Bank actively manages its loan portfolio by responding to economic weaknesses in an industry segment by restricting new credits to that industry segment and by increasing new credits to growing industry segments. In order to avoid concentration, the Bank has set internal ceilings on portfolio exposures to different industry sectors, with the maximum being 12% of the total fund-based and non-fund-based exposures, subject to prudential exposure norms stipulated by the RBI.

90 The following table sets forth, at the dates indicated, the Bank’s gross fund-based loans outstanding and credit substitutes categorised by borrower industry or economic activity. As of 31 March 2007 2008 2009 (Rupees in millions, except percentages) Telecommunication services ...... 4,782 1.11% 20,868 3.06% 21,426 2.29% Chemical and chemical products ...... 11,139 2.58% 13,373 1.96% 21,191 2.27% Drugs and pharmaceuticals ...... 6,301 1.46% 8,871 1.30% 14,569 1.56% Agriculture ...... 40,740 9.44% 55,070 8.07% 82,170 8.80% Textiles ...... 18,729 4.34% 29,494 4.32% 34,612 3.71% Real estate ...... 24,970 5.79% 34,919 5.12% 46,435 4.97% Transportation & logistics ...... 6,214 1.44% 7,623 1.12% 41,715 4.47% Cement ...... 7,361 1.71% 12,721 1.86% 16,411 1.76% Trading ...... 13,123 3.04% 24,145 3.54% 32,760 3.51% Engineering ...... 8,363 1.94% 10,330 1.51% 18,208 1.95% Food Processing ...... 10,482 2.43% 17,931 2.63% 24,946 2.67% Power ...... 3,583 0.83% 19,559 2.87% 29,295 3.14% Petrochemicals & petroleum products ...... 3,166 0.73% 7,243 1.06% 15,895 1.70% Financial intermediaries — Housing Fin. Companies ...... 14,439 3.35% 13,392 1.96% 39,053 4.18% Entertainment & Media ...... 8,127 1.88% 7,194 1.05% 10,186 1.09% Metal & metal products ...... 15,335 3.56% 21,031 3.08% 45,437 4.87% Infrastructure ...... 41,329 9.58% 27,299 4.00% 60,439 6.47% Paper and paper products ...... 2,688 0.62% 3,727 0.55% 6,770 0.73% Financial intermediaries — others...... 46,498 10.78% 74,458 10.91% 79,718 8.54% Gems and jewellery ...... 4,749 1.10% 8,162 1.20% 15,180 1.63% Sugar ...... 6,143 1.42% 7,046 1.03% 6,719 0.72% IT & ITES ...... 7,550 1.75% 7,574 1.11% 12,689 1.36% Auto ancillaries ...... 9,815 2.28% 13,168 1.93% 21,728 2.33% Retail loans ...... 89,835 20.83% 137,348 20.13% 163,326 17.49% Others ...... 25,909 6.01% 99,860 14.63% 72,867 7.80% Gross loans and credit substitutes ...... 431,370 100.00% 682,409 100.00% 933,746 100.00%

As of 31 March 2009, the aggregate exposure of the Bank’s ten largest borrowers (fund-based) amounted to Rs. 126.17 billion representing 83.96% of the Bank’s total capital, which comprises Rs. 101.63 billion Tier I capital and Rs. 48.65 billion Tier II capital. The Bank’s single largest borrower (fund-based) on such date had an outstanding balance of Rs. 20.80 billion representing 13.84% of the Bank’s capital.

Directed Lending In April 2007, the RBI issued revised guidelines on lending to the priority sector. The RBI has linked the priority sector lending targets to adjusted net bank credit (net bank credit plus investments made by banks in non-statutory liquidity bonds included in the held to maturity category and excluding recapitalisation bonds floated by the Government) or credit equivalent amount of off-balance sheet exposure, whichever is higher. Commercial banks required to lend a certain percentage of their adjusted net bank credit to specific sectors (the priority sectors), such as agriculture, micro and small enterprises, retail trade and housing finance. Total priority sector advances should be 40% of adjusted net bank credit with agricultural advances required to be 18% of adjusted net bank credit and advances to weaker sections required to be 10% of adjusted net bank credit, and 1 percent of the previous year’s net bank credit required to be lent under the Differential Rate of Interest scheme. Under the revised guidelines loans up to Rs. 2 million per borrower under housing finance to be treated as priority sector. The guidelines have capped eligible direct agriculture finance to non-individuals (i.e. partnership firms, corporates and institutions) at Rs. 10 million per borrower. One third of loans in excess of Rs. 10 million per borrower would also be considered as direct finance while the remaining two third would constitute indirect finance.

91 In addition, fresh investments made by banks with NABARD in lieu of non-achievement of priority sector lending targets will no longer be considered as indirect finance subsequent to the end of fiscal 2007. However, the existing investments in such bonds would continue to be classified as indirect agriculture finance until fiscal 2010 or till the date of maturity; whichever is earlier. Any shortfall in the amount required to be lent to the priority sectors may be required to be deposited with government sponsored Indian development banks like NABARD and SIDBI. These deposits have a maturity of up to seven years and carry interest rates lower than market rates. A break-up of the Bank’s priority sector lending position as of the last reporting Friday over the last three years is as follows: As of last reporting Friday of March 2007 2008 2009 (Rupees in millions) Agricultural advances/RIDF deposits# ...... 47,353 49,638 80,825 Small scale industry and services* ...... 21,343 51,664 65,485 Other priority sector lending** ...... 74,380 66,954 83,936 Total ...... 143,076 168,256 230,246

* Pertains to MSME business of the Bank. # Deposits with the Rural Infrastructure Development Fund. ** Include indirect finance to agriculture sector in excess of 4.50% of net bank credit.

Non-Performing Assets The Bank has absorbed the losses arising on account of impairment of loans as some borrowers were impacted by negative trends in the global market place, recessionary conditions in the domestic economy, increased competition arising out of economic liberalisation in India and volatility in industrial growth and commodity prices. Several measures have since been adopted by the Bank to refine its credit selection processes and appraisal capabilities. These include creation of an independent Risk department which scrutinises all credit proposals of Rs. 50 million and above, introduction of a rigorous Credit Rating model, rolling out a Credit Monitoring tool to evaluate the performance of accounts at certain intervals and putting in place a Credit Audit mechanism. As a result of these actions, the incidence of slippage into the impaired category has been substantially reduced. As of 31 March 2009, the gross NPAs as a proportion of gross customer assets were 0.96% and net NPAs as a proportion of net customer assets were 0.35%. The Bank had, on 31 March 2009, effected a provision cover of 63.57% on the Bank’s gross NPAs. This provision cover may be viewed against the Bank’s policy of writing off all loss assets and doubtful assets to the extent of security shortfall, against which full provisions are made. If the Bank were not to effect such write-offs and instead retain these amounts as provisions, it would have had a provision cover of 85.31% as of 31 March 2009. The following table sets forth, for the periods indicated, information about the Bank’s NPA portfolio. As of 31 March 2007 2008 2009 (Rupees in millions, except percentages) Non-Performing Assets Corporate credit ...... 3,025 2,151 3,963 Retail ...... 1,081 2,705 4,941 Capital Markets ...... 81 90 73 Gross NPAs ...... 4,187 4,946 8,977 Specific provisions ...... 1,505 2,417 5,674 Floating provisions ...... 18 46 33 NPA net of provisions ...... 2,664 2,483 3,271 Gross customer assets ...... 438,894 682,774 933,746 Net customer assets ...... 437,370 680,310 928,040 Gross NPAs/gross customer assets (%) ...... 0.95 0.72 0.96 Net NPAs/net customer assets (%) ...... 0.61 0.36 0.35 Specific provision as a percentage of gross NPAs ...... 35.94 48.87 63.20 Total provisions as a percentage of gross NPAs ...... 36.39 49.80 63.57

92 Recognition of Non-Performing Assets As a commercial bank operating in India, the Bank recognises NPAs strictly on the basis of the RBI’s current guidelines. The current guidelines require banks in India to classify their NPAs into the following three categories based on the period for which the loan has remained non-performing and the estimated realisation of dues. • Substandard assets • Doubtful assets • Loss assets

Substandard Assets An account becomes non performing if the interest and/or instalment of principal remains overdue for more than 90 days (an exception to this rule is advances to agricultural borrowers which will be classified as non-performing only if the advance/loan remains overdue for more than two harvest season in the case of short duration crops and one harvest season for long duration crops). A substandard asset is one, which has remained non-performing for a period of up to 12 months.

Doubtful Assets A doubtful asset is one which has remained NPA for a period greater than 12 months. Doubtful assets are classified into Doubtful-I, Doubtful-II and Doubtful-III depending on the age of the NPAs as under: a) If the asset has remained in the doubtful category for a period of up to one year it is classified as a Doubtful-I asset. b) If the asset has remained in the doubtful category for a period of more than one year but less than three years it is classified as a Doubtful-II asset. c) If the asset has remained in the doubtful category for a period of more than three years it is classified as a Doubtful-III asset.

Loss Assets A loss asset is one considered irrecoverable with little or no salvage value. An NPA need not go through the various stages of classification in cases of serious credit impairment and such assets should be immediately classified as doubtful or as a loss asset, as appropriate. Erosion in the value of security can be reckoned as significant when the realisable value of the security is less than 50% of the value assessed by the Bank or accepted by RBI at the time of last inspection, as the case may be. Such NPAs may be immediately classified as a Doubtful Asset. If the realisable value of the security, as assessed by the Bank, approved appraisers or the RBI is less than 10% of the borrower’s outstanding accounts, the existence of security is ignored and the asset is immediately classified as a loss that may be either written-off or fully provided for by the Bank.

Non Accrual Policy When an asset is classified as non-performing, interest accrual is stopped and the unrealised interest is reversed by debit to the profit and loss account. In accordance with RBI guidelines, interest realised on NPAs may be added to the income account provided the credits in the accounts towards interest are not out of additional credit facilities sanctioned to the borrower. The RBI has also stipulated that in the absence of a clear agreement between the Bank and the borrower for the purpose of appropriating recoveries in NPAs (i.e. towards principal or interest due), banks should adopt an accounting principle and exercise the right of appropriation of recoveries in a uniform and consistent manner. In the case of NPAs where recoveries are effected as a result of a settlement or otherwise, the Bank’s policy is to first appropriate the same against principal amount due from the borrower as application of interest would have ceased in such accounts. In NPA accounts where transactions have virtually ceased, recoveries will be appropriated towards the principal amount. Only in cases where the nature of continuing transactions allows the Bank to conclude that recovery of the principal is not in jeopardy, are recoveries appropriated against interest.

93 Policy for making Non-Performing Assets Provisions Corporate Credit The Bank’s policy for making provisions for NPAs in Corporate Credit is in accordance with RBI regulations as set forth below. Substandard assets ...... 10%ofthefund-based outstandings Doubtful assets ...... Doubtful-I — 100% of the unsecured portion and 20% of the secured portion. Doubtful-II — 100% of the unsecured portion and 30% of the secured portion. Doubtful-III — 100% of the outstanding. Loss assets ...... 100% to be provided or written-off.

Retail In the case of retail advances, the Bank makes provisions when the retail advances reach specified stages of delinquency (90 days or more of delinquency), which is a more conservative approach than RBI prudential norms. The provisions for different stages of delinquency range from 10% to 100% of the value of delinquent loans depending on the duration of delinquency.

Floating Provisions In June 2006, the RBI issued prudential norms on creation and utilisation of floating provisions (i.e., provisions which are not made in respect of specific non-performing assets or are made in excess of regulatory requirements for provisions for standard assets). The norms state that floating provisions can be used only for contingencies under extraordinary circumstances for making specific provisions in impaired accounts after obtaining approval from the Board of Directors and with the prior permission of the RBI. Floating provisions for advances and investments would be held separately and cannot be reversed by credit to the profit and loss account. Until utilisation of such provisions, they can be netted out from gross non-performing assets to arrive at disclosure of net non-performing assets. Alternatively, floating provisions can be treated as part of Tier II capital within the overall ceiling of 1.25% of total risk-weighted assets. Floating provisions do not include specific voluntary provisions made by banks for advances which are higher than the minimum provision stipulated by RBI guidelines.

94 Analysis of Non-Performing Loans by Industry Sector The following table sets forth, for the periods indicated, the Bank’s non-performing loans, by borrowers’ industry or economic activity and as a percentage of the Bank’s loans in the respective industry or economic activities sector. These figures do not include credit substitutes. As of 31 March 2007 As of 31 March 2008 As of 31 March 2009 % of NPA % of NPA %of Sr. Name of the Gross in Gross in Gross NPA in No. Industry Assets NPA Industry Assets NPA Industry Assets NPA Industry (Rupees in millions, except percentages) 1 Telecommunication services ...... 3,736 0 0.00% 19,868 0 0.00% 21,426 132 0.62% 2 Chemical and chemical products ...... 11,139 268 2.40% 13,373 103 0.77% 20,191 82 0.41% 3 Drugs and pharmaceuticals ...... 5,901 58 0.99% 8,462 6 0.08% 10,278 2 0.02% 4 Agriculture ...... 40,740 830 2.04% 55,070 1,091 1.98% 82,170 1,229 1.50% 5 Textiles ...... 17,518 261 1.49% 27,841 126 0.45% 33,439 308 0.92% 6 Real estate ...... 24,970 0 0.00% 34,919 0 0.00% 46,435 4 0.01% 7 Transportation & logistics ...... 6,214 3 0.05% 6,836 0 0.00% 41,018 1 0.00% 8 Cement ...... 3,180 0 0.00% 8,819 1 0.01% 12,108 0 0.00% 9 Trading ...... 13,123 60 0.46% 24,415 284 1.17% 32,760 517 1.58% 10 Engineering ...... 8,363 73 0.87% 10,330 25 0.24% 18,208 0 0.00% 11 Food Processing ...... 10,482 60 0.58% 17,931 60 0.33% 24,946 215 0.86% 12 Power ...... 3,583 0 0.00% 9,359 0 0.00% 16,448 0 0.00% 13 Petrochemicals & petroleum products ..... 3,166 488 15.40% 6,243 0 0.00% 6,745 31 0.45% 14 Financial intermediaries — Housing Fin. Companies ...... 14,439 0 0.00% 13,392 0 0.00% 19,565 0 0.00% 15 Entertainment & Media ...... 8,127 3 0.03% 7,194 0 0.00% 9,686 0 0.00% 16 Metal & metal products ...... 9,149 49 0.53% 16,583 71 0.43% 40.465 153 0.38% 17 Infrastructure ...... 16,082 109 0.68% 19,265 111 0.58% 47,280 447 0.94% 18 Paper and paper products ...... 2,688 0 0.00% 3,727 0 0.00% 6,120 0 0.00% 19 Financial intermediaries — others...... 28,197 0 0.00% 26,419 0 0.00% 51,364 0 0.00% 20 Gems and jewellery ...... 4,749 15 0.31% 8,162 15 0.18% 15,180 365 2.40% 21 Sugar ...... 6,143 0 0.00% 7,046 0 0.00% 6,719 0 0.00% 22 IT & ITES ...... 7,550 12 0.16% 7,574 54 0.72% 12,689 3 0.02% 23 Auto ancillaries ...... 9.575 4 0.04% 12,171 29 0.24% 18,765 45 0.24% 24 Retail loans ...... 89,835 1,011 1.13% 137,348 2,705 1.97% 163,326 4,941 3.03% 25 Others ...... 21,572 803 3.72% 96,905 175 0.18% 63,870 430 0.67% Total ...... 370,221 4,106 1.11% 598,985 4,856 0.81% 821,201 8,905 1.08%

Top 10 Non-Performing Corporate Loans As of 31 March 2009 the top ten corporate NPAs represented 36.30 % of the Bank’s gross non-performing corporate loans, 22.48% of the Bank’s net non-performing corporate loans and 0.22% of the Bank’s gross corporate loan portfolio. The following table sets forth, for the period indicated information regarding the Bank’s ten largest NPAs as well as the value of the collateral securing the loan (the collateral valuations are based on the audited financial statements of the borrower or independently arrived at by outside agencies) However, the net realisable value of such collateral may be substantially less, if anything. As of 31 March 2009 Principal Currently Outstanding Net of Servicing All Type of Banking Gross Principal Provisions for Credit Interest Borrowers Industry Arrangement Outstanding Provisions Losses Security Payments (Rupees in million) 1 Infrastructure Multiple 319 319 — — No 2 Gems & Jewellery Sole 250 250 — — No 3 Textile Multiple 150 150 — — No 4 Telecommunication Multiple 132 13 119 101 No 5 Food processing Multiple 111 111 — — No 6 Infrastructure Sole 109 109 — — No 7 Gems & Jewellery Sole 105 105 — — No 8 Textile Sole 104 10 94 72 No 9 Textile Sole 84 33 50 50 No 10 Others Multiple 75 75 — — No Total 1,439 1,175 263 223

95 Interest foregone Interest foregone is the interest due on non-performing loans that has not been accrued in the Bank’s books of accounts. The following table sets forth the outstanding amount of interest foregone on existing nonperforming loans as of the respective dates. Year Interest Foregone (Rupees in millions) 31 March 2007 ...... 396.11 31 March 2008 ...... 796.99 31 March 2009 ...... 1,583.64

Restructured Assets The RBI has issued separate set of prudential guidelines on restructuring of advances by banks. The guidelines essentially deal with the norms/conditions — the fulfillment of which are required to maintain the category of the restructured account as ‘standard asset’. The following categories of advances are not eligible for being classified as a standard asset, upon restructuring: (a) consumer and personal advances; (b) advances classified as capital market exposure and (c) advances classified as commercial real estate exposures. As a one time measure/relaxation, the RBI had in December 2008 permitted restructuring of commercial real estate exposures to be classified as ‘standard asset’ The said relaxation was available up to 30 June 2009. The criteria to be fulfilled for the restructured advance to be treated as a ‘standard asset’ includes viability of the business, infusion of promoters’ contribution, full security coverage, cap on maximum tenor of repayment etc. The economic loss, if any, arising as a result of restructuring needs to be provided for in the books of the Bank. The provision is computed as the difference between the fair value of the account before and after restructuring. If there is a failure to meet the payment terms of a restructured standard asset for more than 90 days, it is no longer classified as a restructured loan and is reclassified as an NPA.

Corporate Debt Restructuring (CDR) mechanism The institutional mechanism for restructuring has been set up through establishment of the Corporate Debt Restructuring (CDR) system in 2002. CDR system is a joint forum of all Banks and Financial Institutions and operates as a non-judicial body. The CDR system operates on the principle of super-majority amongst the participating Banks/FIs for a particular advance. Bank has signed the Inter-se Agreement (amongst the Banks and FIs) and is accordingly a member of the CDR system. The prudential guidelines as mentioned above equally apply to the accounts restructured under CDR forum. The Bank restructures debts where the borrower is genuinely unable to effect repayments vis-à-vis its contractual obligations and the Bank is satisfied about the viability of the unit and that a restructuring is the best means of maximising realisation of the loan. The Bank’s gross restructured loans as a proportion of gross customer assets (the aggregate of gross advances, credit substitutes including leased assets), for the years ended 31 March 2007, 31 March 2008 and 31 March 2009 were 1.26%, 0.92% and 1.74% respectively. Restructured accounts that were fully liquidated in subsequent years were not considered in computing the gross restructured loans.

NPA Strategy The Bank’s Special Assets Cell is entrusted with the task of initiating proactive steps for arresting the incidence of incremental impairment as well as for recovery from existing impaired accounts. A watch list (called Special Mention Assets) is prepared using early warning signals in weak accounts which if left unattended might result in the accounts migrating to NPA status. An illustrative list of such warning signals are: • delay in submission of stock statement/other control statements/financial statements; • frequent return of cheques issued by borrowers;

96 • devolvement of deferred payment guarantee instalments and payment not being made within reasonable period; • frequent devolvement of letter of credit and payment not being made within a reasonable period; • frequent invocation of bank guarantees and repayment not being made within a reasonable period; • return of bills/cheques discounted; • non-payment of bills discounted or under collection; • poor financial performance in terms of declining sale and profits, cash losses, net losses, erosion of net worth, etc.; and • incomplete documentation in terms of creation, registration of charge/mortgage etc. These accounts are closely followed in coordination with the officials of the business departments to reduce incidences of slippage. Timely identification of weaknesses in assets provides an opportunity for the Bank to exit from such exposure or at least reduce its exposure level. The Bank identifies exit accounts at half-yearly intervals based on, among other things, early warning signals emanating from the accounts, downgrades in credit rating to BB and below, persistent and serious irregularities being reported in Credit Audit Reports, perceived deterioration in the quality of management, market developments or regulatory pronouncements which may severely affect the viability of the Bank’s exposure. The Special Assets Cell works closely with other banks and financial institutions and uses outside experts and agencies for due diligence, valuation, enforcement of securities etc. and liaises with the Legal Department to ensure quick resolution of legal cases. The Special Assets Cell focuses on recovery and settlement of impaired loans by employing the following broad strategies: • rescheduling and restructuring of accounts strictly on merits and as per RBI guidelines; • encouraging compromise settlements rather than going through a drawn out legal process; and • initiating legal action (including enforcement of securities through the SARFAESI Act) and effective follow up.

Provisions for NPAs The following table sets forth, for the periods indicated, movements in the Bank’s provisions against NPAs. For the year ended 31 March Particulars 2007 2008 2009 (Rupees in millions) Specific provisions at the beginning of the period: Corporate Credit ...... 962 879 896 Retail ...... 355 559 1,431 Capital Markets ...... 14 67 90 Total specific provisions at the beginning of the period ...... 1,331 1,505 2,417 Additions during the period ...... 1,000 2,455 6,903 Reductions during the period on account of recovery and write-offs ..... (826) (1,545) (3,646) Specific provisions at the end of the period ...... 1,505 2,417 5,674 Floating provisions: Floating provisions at the beginning of the period ...... 250 18 46 Additions during the period ...... — 28 — Utilisations during the period ...... (232) (—) (13) Floating provisions at the end of the period ...... 18 46 33 Total specific and floating provisions at the end of the period ...... 1,523 2,463 5,707

97 The following table sets forth, for the periods indicated, the allocation of the total provisions held by the Bank. As of 31 March Particulars 2007 2008 2009 (Rupees in millions) Corporate credit ...... 879 896 2,793 Retail ...... 559 1,431 2,808 Capital Markets ...... 67 90 73 Total ...... 1,505 2,417 5,674 Floating provisions ...... 18 46 33 Total provisions including floating provisions ...... 1,523 2,463 5,707

98 MANAGEMENT AND BOARD OF DIRECTORS

Directors and Senior Management Team The Bank’s Articles provide that unless otherwise agreed by the Company, the number of Directors shall not be more than 12. The Board has decided on 4 August 2009, to increase its strength to 15 members, subject to approval of the Central Government. This increase will require alteration to the Articles of Association, for which approval of the shareholders is being sought through postal ballot. The Bank’s Board of Directors currently consists of 9 members and is responsible for the management of the Bank’s business. Under the terms of the Articles, SUUTI has the right to nominate the Chairman and three Directors. SUUTI has presently nominated one Director to the Bank’s Board. In addition, LIC has also appointed one representative to the Board although the Articles do not confer any specific rights to appoint Directors on LIC. The Banking Regulation Act, 1949 (the “Banking Regulation Act”) requires that at least 51% of Directors shall have specialised knowledge or practical experience in one or more of the following areas: accounting, Finance, agriculture and rural economy, banking, cooperation, economics, law, small scale industry and any other matter RBI may specify. In addition not less than two Directors are required to have specialised knowledge and practical experience in agriculture and rural economy, cooperation and small scale industry. All of the Bank’s Directors are professionals with specialised knowledge of one or more of the above areas. The Managing Director and CEO of the bank is employed on a full-time basis. The appointment of full-time Director requires the approval of the RBI and the shareholders. The RBI has also prescribed “fit and proper” criteria to be considered when appointing directors of banks, with the Bank’s Directors being required to make declarations confirming their ongoing compliance with such criteria. The Bank’s Board of Directors has reviewed the declarations received from the Directors and determined that all of the Bank’s Directors satisfy the fit and proper criteria. Pursuant to the provisions of the Companies Act, at least two-thirds of the total number of Directors are required to retire by rotation, with one-third of the total number of Directors retiring at each Annual General Meeting. A retiring Director is eligible for re-election. Pursuant to the provisions of the Banking Regulation Act, none of the Directors other than full-time Directors may hold office continuously for a period of eight years. None of the Bank’s Directors or employees of the rank of President and above hold 1% or more of the Bank’s equity shares. As of the date of these Listing Particulars, the Bank’s Board of Directors comprised:

Name Position Age Ms. Shikha Sharma ...... Managing Director and CEO 50 Mr. M M. Agrawal ...... Deputy Managing Director 59 Mr. N. C. Singhal ...... Director 73 Prof. J. R. Varma...... Director 49 Dr. R. H. Patil...... Director 72 Ms. Rama Bijapurkar ...... Director 52 Mr. R. B. L. Vaish ...... Director 63 Mr. M. V. Subbiah ...... Director 70 Mr. K.N. Prithviraj ...... Director 62 The business address for the Bank’s Directors is 131, Maker Tower-F, 13th Floor, Cuffe Parade, Colaba, Mumbai — 400 005.

99 The following are brief biographies of the Bank’s Directors as of the date of these Listing Particulars.

Directors Ms. Shikha Sharma Ms. Shikha Sharma has a Bachelor of Arts (Hons) degree in Economics and completed her Masters of Business Administration from the Indian Institute of Management, Ahmedabad in 1980. She has a Post Graduate Diploma in Software Technology from the National Centre for Software Technology, Mumbai. In a career spanning 29 years, Ms. Shikha Sharma has had wide exposure to financial services and has held several leadership positions across various market leading businesses. She started her career in 1980 at ICICI Ltd. in project finance. She later headed the Securities Trading and Research business and also worked at J.P. Morgan Singapore on derivatives servicing South East Asia. She set up the Structured Finance business and pioneered ICICI’s retail entry into Personal Financial Services between 1997 to 2000. In 2000, she became the managing director and founder CEO of ICICI Prudential Life Insurance Company and the company has consistently retained the number one position in the highly competitive insurance landscape. She was recognised as the Businesswoman of the Year at the Economic Times Awards 2008, Entrepreneur of the Year — Manager at the Ernst and Young Entrepreneur Awards 2007 and the Outstanding Businesswoman of the Year at CNBC TV 18’s Business Leader Awards 2007. She was the Chairperson of the FICCI’s Insurance Committee and a member of the Advisory Panel on Financial Sector Assessment set up by RBI. She has also served on the boards of Firstsource Solutions Limited and ACC Limited. Ms. Shikha Sharma joined the Bank on 1 June 2009. Ms. Sharma has served on the board of the Bank since 1 June 2009 and her term expires on 31 May 2012. Mr. M.M. Agrawal Mr. M. M. Agrawal is an Engineering graduate who has been in the banking industry for 35 years, including 22 years with the State Bank group. He joined the Bank in 1994. His specialist areas are merchant banking, equity markets and credit supervision. He is currently Chairman of Axis TS and a Director of Axis PE. Mr. Agrawal has served on the board of the Bank since 4 August 2009 and his term expires on 31 August 2010. Mr. N. C. Singhal Mr. N. C. Singhal has a masters degree in Economics, a masters degree in Science and a post graduate diploma in Public Administration from Lucknow University. He was appointed as a Director of the Bank with effect from 2 May 2002. He was the founder and Chief Executive Officer, Vice-Chairman and Managing Director of SCICI Ltd. (formerly known as the Shipping Credit and Investment Corporation of India Ltd.). He has also worked for ICICI Ltd. for a number of years. Mr. Singhal is presently Chairman of SCI Forbes Limited and Forbes Bumi Armada Limited and is also a director of Deepak Fertilisers & Petrochemicals Corporation Limited, Max India Limited, Birla Sun Life Asset Management Company Limited, Tolani Shipping Limited, Mahagujarat Chamunda Cements Company Pvt. Ltd., Binani Industries Limited, Samalpatti Power Company Pvt. Ltd., Ambit Holdings Pvt. Limited, and XL Telecom & Energy Limited. Mr. Singhal has served on the board of the Bank since 2 May 2002 and his present term expires on 1 May 2010. Prof. J. R. Varma Prof. J. R. Varma is a Cost Accountant and has a post graduate diploma in Management from the Indian Institute of Management, Ahmedabad. He was appointed as a Director of the Bank with effect from 25 June 2003. He is currently a professor in the Finance and Accounting Department at Indian Institute of Management,

100 Ahmedabad where he teaches courses in capital markets, international financial management and corporate finance. Prof. Varma was a full time member of SEBI for a year. Before that, he was a part-time member of SEBI for three years. Prof. Varma has carried out extensive research in the field of Indian and finance theory and published extensively in Indian and international journals. He is a Director of BPO Limited and OnMobile Global Limited. Prof. Varma has served on the board of the Bank since 25 June 2003 and his present term expires on 24 June 2011. Dr. R. H. Patil Dr. Patil has a masters degree in Economics and Ph.D. in International Economics from University of Mumbai. He was appointed as a Director of the Bank with effect from 17 January 2005. He is presently Chairman of Clearing Corporation of India Limited, Clear Corp Dealing Systems (India) Ltd., NSDL, NSDL Database Management Ltd., Axis PE, and is also a director of NSE, National Securities Clearing Corporation India Ltd., NSE.IT Ltd., SBI Capital Markets Ltd., CorpBank Securities Ltd., L&T Infrastructure Finance Company Ltd., IDFC Asset Management Co. Pvt. Ltd. and The Tata Power Company Ltd. He was the founder Managing Director and Chief Executive Officer of the NSE. He has also worked for seven years at the RBI and over 18 years at Industrial Development Bank of India Limited. He is currently Chairman of The Clearing Corporation of India Ltd., Clear Corp Dealing Systems (India) Limited, NSDL and a director of National Securities Clearing Corporation India Limited, NSE, NSE IT Limited, Capital Markets Limited, Corp Bank Securities Limited and NSDL Database Management Limited. Dr. Patil has served on the board of the Bank since 17 January 2005 and his present term expires on 16 January 2013. Ms. Rama Bijapurkar Smt. Rama Bijapurkar has an honours degree in Science and a Post Graduate Diploma in Management from Indian Institute of Management, Ahmedabad. She was appointed as a Director of the Bank with effect from 17 January 2005 Smt. Rama Bijapurkar is an Independent Management Consultant, specialising in market strategy and is a visiting faculty member at the Indian Institute of Management, Ahmedabad. She has more than 30 years of experience in market research and market strategy. She is currently a Director of Infosys Technologies Ltd., Godrej Consumer Products Ltd., CRISIL Limited, CRISIL Risk & Infra Structure Solutions Limited, Mahindra Holidays & Resorts India Ltd., Mahindra & Mahindra Financial Services Ltd., ICICI Prudential Life Insurance Company Ltd., and Bharat Petroleum Corporation Ltd., Ambit Holdings Pvt. Ltd. and Give Foundation. Ms. Bijapurkar has served on the board of the Bank since 17 January 2005 and her present term expires on 16 January 2013. Mr. R. B. L. Vaish Mr. R. B. L. Vaish is a graduate in Commerce and is a Chartered Accountant. He was appointed as a Director of the Bank with effect from 17 January 2005. He has worked in various capacities with LIC for his entire career. He is currently a director of OTCEI Securities Limited. Mr. Vaish has served on the board of the Bank since 17 January 2005 and his present term expires on 16 January 2013. Mr. M. V. Subbiah Mr. Subbiah has a Diploma in Industrial Administration. He is the former Chairman and present Advisor of the Murugappa Group. He was appointed as a Director of the Bank with effect from 14 October 2005. Mr. Subbiah received the JRD Tata Business Leadership award in 2002 and the National HRD award in 1988. The Murugappa family received the ‘Distinguished Family Business’ award 2001, from IMD Lausanne. Having served as the member of EID Parry (I) Ltd., one of the oldest sugar companies in India, he has gained a great deal of

101 exposure to the farming community as well as the agricultural and rural economy. He has been a member of the “Committee on the Financial System” constituted on 25 December 1997 under the Chairmanship of Shri M.Narasimham. He is currently a Chairman of National Skills Development Corporation and a Director of Lakshmi Machine Works Limited, SRF Limited, Parry Enterprises India Limited, Chennai Willingdon Corporate Foundation, Chennai Heritage. Mr. Subbiah has served on the board of the Bank since 14 October 2005 and his present term expires on 13 October 2013. Mr. K. N. Prithviraj Shri K. N. Prithviraj has a masters degree in Economics. He was appointed as a Director of the Bank with effect from 9 January 2008 He has worked with for more than 30 years. Shri K. N. Prithviraj was also an Executive Director of United Bank for two years. He was also Chairman and Managing Director of Oriental Bank of Commerce for two years until March 2007. In December 2007, Shri Prithviraj was appointed as the Administrator of the Specified Undertaking of the Unit Trust of India. He is currently the Administrator of the Specified Undertaking of the Unit Trust of India, a Chairman of Shinsei Trustee Company (India) Pvt. Ltd. and a Director of Surana Industries Ltd., Falcon Tyres Ltd. and Brickwork Ratings India Pvt. Ltd. He is also currently a member of Advisory Board on Bank Commercial and Financial Frauds appointed by Chief Vigilance Commission. Mr. Prithviraj has served on the board of the Bank since 9 January 2008 and his term expires on 8 January 2016.

Directors’ Interests The total of the interests of the Directors of the Bank in the equity shares as of 21 September 2009, and assuming the completion of the Offering, as well as the number of employee stock options held by the Directors as of 21 September 2009, are set out in the table below.

Number of Number of Number of Equity Equity Shares Employee Stock Shares to be held Options held as of Held as of After the 21 September Name 21 September 2009 Offering 2009 Ms. Shikha Sharma ...... — — 100,000* Mr. M. M. Agrawal ...... 16,813 16,813 86,231 Mr. N. C. Singhal ...... — — — Prof. J. R. Varma ...... — — — Dr. R. H. Patil ...... — — — Ms. Rama Bijapurkar ...... — — — Mr. R. B. L. Vaish ...... 225 225 — Mr. M. V. Subbiah ...... — — — Mr. K. N. Prithviraj ...... — — — * Subject to receipt of RBI approval.

102 Senior Management Team The Bank’s senior management team comprised the following members as of the date of these Listing Particulars: Age Name Position (in completed years) Ms. Shikha Sharma ...... Managing Director and CEO 50 Mr. M. M. Agrawal ...... Deputy Managing Director 59 Mr. V. K. Ramani ...... Executive Director (Technology and 59 Business Processes) Mr. S. K. Chakrabarti ...... Executive Director (Mid-Corporate 58 Banking) Mr. Hemant Kaul ...... Executive Director (Retail Banking) 53 Mr. V. Srinivasan ...... Executive Director (Corporate 44 Banking) Mr. Somnath Sengupta ...... President (Finance and Accounts) 54 Mr. S. Bhattacharya ...... President (Human Resources) 57 Mr. P. Mukherjee ...... President (Credit) 49 Mr. Vinod George ...... President (International Banking) 56 Mr. Rajagopal Srivatsa ...... President (Business Banking) 51 Mr. S. S. Bajaj ...... President & Chief Compliance 55 Officer Mr. M. V. Subramanian ...... CEO&Executive Trustee (Axis 52 Bank Foundation) Mr. Suhas Supekar ...... President & Chief Audit Executive 59 Ms. Manju Srivatsa ...... President (Retail Banking) 51 Mr. C. Babu Joseph ...... President (Advances) 54 Mr. Bapi Munshi ...... President (Treasury) 53 Mr. B. Gopalakrishnan ...... President (Law) 56 Ms. Sonu Bhasin ...... President (Retail Financial Services) 45 Mr. S. K. Nandi ...... President (West Zone) 56 Mr. C. P. Rangarajan ...... President (South Zone) 59 Mr. R. K. Bammi ...... President (North Zone) 55 Mr. S. K. Mitra ...... President (East Zone) 56 The following are brief biographies of the Bank’s senior management team. Mr. V. K. Ramani — Executive Mr. V. K. Ramani is an Electronics Engineer with a post graduate Director (Technology & Business diploma in Business Management from the University of Rajasthan. Processes) He has vast experience in banking operations and technology. He joined the Bank in 1995. An expert in the IT sector, he has spearheaded the transition of the Bank’s core IT platform from ISBS to Finacle. Mr. S. K. Chakrabarti — Executive Mr. S. K. Chakrabarti has an Arts degree from the University of Director (Mid-Corporate Banking) Calcutta and is a member of the Indian Institute of Bankers. He joined the Bank in 1994. He has over 33 years of experience in various aspects of banking with overseas training and has also served as a faculty member with the State Bank Staff College in Hyderabad in the areas of international banking and human resources management. Mr. Hemant Kaul — Executive Mr. Hemant Kaul is a Science graduate with an MBA in marketing Director (Retail Banking) from the University of Rajasthan. He has 30 years of banking experience including 17 years with the State Bank Group and during which time he was also posted in New York as an India-based trainee officer for two years. He has extensive experience in operations, branch management and foreign exchange. He joined the Bank in 1994 and heads the Bank’s retail initiatives.

103 Mr. V. Srinivasan — Executive Mr. V. Srinivasan is an engineer from the College of Engineering, Director (Corporate Banking) Anna University, Chennai and completed his Masters of Business Administration from the Indian Institute of Management, Calcutta. He began his career with ICICI Ltd., in its Merchant Banking Division, in 1990 and has vast experience in the financial services industry. Since 1999, Mr. V Srinivasan was working with J.P. Morgan, India and in his latest assignment was their Managing Director and Head of Markets, wherein he had the dual responsibility of CEO, J.P. Morgan Chase Bank, Mumbai Branch as well as Chairman, J.P. Morgan Securities (I) Pvt. Ltd. He has also served as Chairman of FIMMDA and was also member of various RBI Committees. He joined the Bank in September 2009. Mr. Somnath Sengupta — President Mr. Somnath Sengupta has an Arts degree in Economics from the (Finance and Accounts) University of Delhi. He has 31 years of banking experience including 20 years with the State Bank group. He joined the Bank in 1996. He has extensive experience in dealing in foreign exchange and treasury operations. Mr. S. Bhattacharya — President A science graduate and a qualified Cost Accountant, he has over (Human Resources) 31 years of banking experience, of which 18 years were in State Bank Group. He joined the Bank in 1994. His experience spans the areas of branch operations and management, international banking, corporate planning and human resources management. Mr. P. Mukherjee — President He is a Science graduate and brings with him extensive forex and (Credit) treasury management skills acquired by him during his 26 years in the industry, out of which 12 years have been with State Bank of India. He joined the Bank in 1994. While at State Bank of India, he was posted at their New York branch as a dealer. Mr. Vinod George — President A graduate in Science coupled with a Management degree, he is a (International Banking) specialist in merchant banking and corporate banking. He was with State Bank of India group for 15 years before joining the Bank in 1995. He currently heads the Bank’s international banking department. Mr. Rajagopal Srivatsa — President A postgraduate in Arts and graduate in Science, he worked with the (Business Banking) State Bank group from December 1979 to June 1993 in various capacities. He joined the Bank in December 1994 and has worked in the operations and business banking departments of the Bank. Mr. S. S. Bajaj — President & Chief A graduate in Arts, he worked with the State Bank group from Compliance Officer December 1976 to December 1994 and has worked in the capacity of Branch Manager, Chief Manger, Senior Manager in various departments before joining the Bank. He has worked as Branch Head in various branches of the Bank and has also handled credit, foreign exchange and audit desks. His current role is Chief Compliance Officer. Mr. M. V. Subramanian — CEO & A graduate in Physics coupled with CAIIB, he worked with Bank of Executive Trustee (Axis Bank Baroda from January 1978 to January 1987 in commercial banking. Foundation) Thereafter he joined Bank and worked in various positions from 1987 to 2001. Before joining the Bank, he worked in Transmerica Finance as Vice President — Credit and Operations from March 2001 to November 2002. He has handled Credit and Risk Management areas in the Bank and heads the Axis Bank Foundation. Mr. Suhas Supekar — President & Mr. Suhas Supekar has a Masters in Science with JAIIB. He worked Chief Audit Executive in different capacities in branch banking and credit with State Bank of Bikaner and Jaipur till 1995. He joined the Bank in 1995 and worked in credit in the Mumbai Branch and the Western Zonal Office till 2002 when he joined the Inspection and Audit Department.

104 Ms. Manju Srivatsa — President With a Masters in Arts degree, she joined the State Bank of Bikaner (Retail Banking) and Jaipur as a probationary officer in 1979. She worked in different capacities in branch banking till 1994 when she joined the Bank. She worked in operations and was branch head of the Andheri branch till 2004 when she took charge of the Retail Liabilities department. She was promoted as a Senior Vice President in 2004 and was promoted to the grade of President in 2008. Mr. C. Babu Joseph — President Mr. C. Babu Joseph has a Masters degree with CAIIB. He joined the (Advances) as a probationary officer in 1979 where he was branch manager of their Pune branch from 1992 to 1995. He joined Axis Bank in 1995 and served at different branches before moving to the Central Office in 2005 to head the Advances Department. He was promoted to the grade of President in 2008. Mr. Bapi Munshi — President A post graduate in science from the Indian Institute of Technology, (Treasury) Kharagpur, with a JAIIB, Mr. Bapi Munshi started his banking career with State Bank of Bikaner and Jaipur in 1979. He worked in credit and foreign exchange and headed the Bank’s Vadodara Branch before becoming Head of the Risk Department. He was promoted to the grade of President in 2008 and has since been heading the Treasury Department. Mr. B. Gopalakrishnan — President Mr. B. Gopalakrishnan has a Bachelor of Arts degree, Masters in (Law) Business Administration and post graduate qualifications in law. He started his career in private practice in 1976 after enrolling with the Kerala Bar Council. He joined the Unit Trust of India in 1989 and was their Deputy General Manager (Legal) before joining the Bank in March 2000. He was promoted to the grade of President in 2008. Ms. Sonu Bhasin — President (Retail Ms. Sonu Bhasin has a Bachelor of Science degree and Masters in Financial Services) Business Administration. She joined the Tata Administrative Services in 1987 and worked in different companies in the group till April 2000. She joined ING Vysya Bank as Marketing Head for Investment and TPA in 2000 and worked with them till 2005 when she joined the Bank to head the Wealth Management Department. She was promoted to the grade of President in 2008 and currently heads the Retail Financial Services Department. Mr. S. K. Nandi — President (West Mr. S. K. Nandi is a graduate with Honours in English After joining Zone) State Bank of Bikaner & Jaipur as a Probationary Officer and working there for almost 20 years, he joined Axis Bank in 1994. He has worked as DGM/VP in Bangalore and New Delhi branches. Thereafter, he was Zonal Head (North Zone) for about 2 1⁄2 years. He was the OSD for opening the Bank’s Phone Banking Centre at Chembur till April 2005. He has worked in Inspection & Audit Department from April 2005 to February 2007. He is the head of the Western Zone since May 2007. Mr. C. P. Rangarajan — President A post Graduate in Arts and a member of the Indian Institute of (South Zone) Bankers, Joined Axis Bank in 1997. He has more than 27 years of experience in banking. He has served the State Bank of India in various capacities. Mr. R. K. Bammi — President (North A Post Graduate in Economics from the Delhi University and a Zone) Certified Associate of Indian Institute of Bankers, is a versatile banker with more than 25 years in banking. He joined Axis Bank in 1994 before which he was with SBI. He was also a faculty at the Delhi University. Mr. S. K. Mitra — President (East A graduate in Science, he is also a member of the Indian Institute of Zone) Bankers. He joined the State Bank of India as a Probationary Officer and later served the Bank in various capacities including as an Assistant General Manager. He joined Axis Bank in 1995.

105 Compensation of Directors and the Bank’s Senior Management Team The appointment of Ms. Shikha Sharma as the Managing Director & Chief Executive Officer of the Bank is for a period of three years from 1 June 2009 to 31 May 2012 and the compensation package of Ms. Shikha Sharma was approved by the RBI and by the shareholders of the Bank. The approval of the shareholders was received through postal ballot on 9 September 2009. The appointment of Mr. M. M. Agrawal as the Deputy Managing Director of the Bank is for the period from 4 August 2009 to 31 August 2010, the last date of the month in which Mr. Agrawal reaches the age of superannuation. The appointment of and the compensation package of Mr. Agrawal is subject to approval of the RBI, for which we have made an application and its approval is awaited. The approval of the shareholders was received through postal ballot on 9 September 2009. Each Director, except the MD & CEO and Deputy Managing Director is entitled to a sitting fee of Rs. 20,000 for attending each meeting of the Board of Directors or a committee of the board. This fee is set by the Board from time to time in accordance with applicable law. The Bank reimburses Directors for travel and related expenses in connection with Board and Committee meetings and related matters. The appointment of the Bank’s MD & CEO and Deputy Managing Director is subject to a service contract with the Bank. No other Director has a service contract with the Bank.

Other Compensation All employees, including the Bank’s MD & CEO and Deputy Managing Director and the senior management team, participate in the Bank’s Gratuity and Provident Fund. The Bank’s Gratuity Fund scheme is a defined benefit plan that, subject to the completion of five years of employment, upon retirement, death during the tenure of employment or termination of employment, pays a lump sum equivalent to fifteen days of salary for each completed year of service or 30 days for the MD & CEO. Under the Provident Fund scheme, also required by Indian Law, both the Bank and the employee contribute monthly at a determined rate (currently 12% of the employee’s basic salary) to a fund set up by the Bank, which is administered by a Board of Trustees. All employees (excepting sales executives, sales officers, junior executives and junior agriculture executives and employees recruited after 1 April 2006), are eligible to receive benefits under the Bank’s superannuation retirement scheme. The Superannuation Fund is a retirement plan under which the Bank annually contributes 10% of the eligible employee’s annual basic salary to LIC, the administrator of the fund. The Bank also has an employee stock option scheme under which 35,770,000 options can be granted to employees and Directors. See “Business — Employees”.

Staff Loans to Senior Management Team Amount Outstanding as of Amount of 31 March 2009 Annual Rate Loan (Principal of Interest Name Designation Sanctioned plus Interest) (%) Nature of Loan (Rs. in millions) (Rs. in millions) Mr. M. M. Agrawal .... Deputy Managing 2.20 0.82 6 Housing Loan Director Mr. V. K. Ramani ..... Executive Director 1.77 0.53 6 Housing Loan (Technology and Business Processes) Mr. S. K. Chakrabarti . . . Executive Director ———— (Mid-Corporate Banking) Mr. Hemant Kaul ...... Executive Director 1.50 1.26 6 Housing Loan (Retail Banking) Mr. Somnath President (Finance and 2.60 2.01 6 Housing Loan Sengupta ...... Accounts) 0.20 0.11 12 Personal Loan Mr. S. Bhattacharya .... President (Human 1.79 1.10 6 Housing Loan Resources) 0.05 0.02 8 Furniture Loan Mr. P. Mukherjee ...... President (Credit) 1.15 0.88 6 Housing Loan Mr. Vinod George ..... President 2.10 1.32 6 Housing Loan (International Banking)

106 Amount Outstanding as of Amount of 31 March 2009 Annual Rate Loan (Principal of Interest Name Designation Sanctioned plus Interest) (%) Nature of Loan (Rs. in millions) (Rs. in millions) Mr. Rajagopal President (Business 3.20 2.78 6 Housing Loan Srivatsa ...... Banking) Mr. S. S. Bajaj ...... President & Chief 0.02 — 8 Consumer Loan Compliance Officer Mr. M. V. CEO & Executive ———— Subramanian ...... Trustee (Axis Bank Foundation) Mr. Suhas Supekar .... President & Chief 0.27 0.08 6 Housing Loan Audit Executive Ms. Manju Srivatsa .... President (Retail 1.35 1.00 6 Housing Loan Banking) Mr. C. Babu Joseph .... President (Advances) 2.00 1.52 6 Housing Loan Mr. Bapi Munshi ...... President (Treasury) 0.23 0.13 6 Housing Loan Mr. B. 3.20 2.39 6 Housing Loan Gopalakrishnan ..... President (Law) Ms. Sonu Bhasin ...... President (Retail ———— Financial Services) Mr. C. P. Rangarajan . . . President (South 3.20 1.23 6 Housing Loan Zonal Office) Mr. R. K. Bammi ..... President (North 0.19 0.07 8 Consumer Loan Zonal Office) 0.20 0.11 12 Personal Loan Mr. S. K. Mitra ...... President (Eastern 1.01 0.46 6 Housing Loan Zonal Office) Mr. S. K. Nandi ...... President (Western 0.59 0.13 6 Housing Loan Zonal Office) 0.30 0.21 8 Consumer Loan

Corporate Governance The Bank’s equity shares have been listed on the BSE and the NSE since 1998 and, as a result, the Bank is required to comply with the corporate governance requirements applicable to Indian public companies listed on these stock exchanges. Such requirements include, inter alia: (i) the obligation to have independent directors on the Board of Directors; (ii) the formation of an audit committee; (iii) the adoption of a bylaw/code on insider trading, and (iv) the implementation of internal control procedures. The Bank is and has always been in full compliance with these requirements, as amended from time to time by the regulatory authorities. The Bank’s corporate governance policies recognise the accountability of the Board and the importance of transparency to all its constituents, including employees, customers, investors and the regulatory authorities and of demonstrating that the shareholders are the ultimate beneficiaries of the Bank’s economic activities. The Bank’s corporate governance philosophy encompasses not only regulatory and legal requirements but also other practices aimed at a high level of business ethics, effective supervision and enhancement of value for all shareholders. The Board’s role, functions, responsibility and accountability are clearly defined. In addition to its primary role of monitoring corporate performance, the functions of the Board include approving a business plan, reviewing and approving annual budgets and borrowing limits, fixing exposure limits and ensuring that the Bank’s shareholders are kept informed about the Bank’s plans, strategies and performance. To enable the Board of Directors to discharge these responsibilities effectively, management gives detailed reports on the Bank’s performance to the Board on a quarterly basis. The Board of Directors functions either as a full Board or through various committees such as the Committee of Directors, the Audit Committee, the Remuneration and Nomination Committee, the Risk Management Committee, the Shareholders/Investors Grievance Committee, the Customer Service Committee and the Special Committee for monitoring large value frauds. These Board committees meet regularly. There are no potential conflicts of interests between any duties to the Bank owed by any of the Directors or Senior Management specified earlier, acting as Directors or Senior Management, as the case may be, or through

107 the various committees to which they are appointed (as set out below), and their respective private interests and/ or other duties. The constitution and main functions of the various committees are given below.

Committee of Directors The Committee of Directors is comprised of five Directors: Ms. Shikha Sharma, Mr. N. C. Singhal, Dr. R. H. Patil, Mr. M. V. Subbiah and Mr. M. M. Agrawal. The Committee is chaired by Mr. N. C. Singhal. The powers of the Committee of Directors include review of the Bank’s performance against targets for various business segments, credit and investment approvals, approvals in respect of borrowing and treasury operations, the allotment of equity shares and the opening of additional branches and ATM sites and other administrative matters.

Audit Committee The Audit Committee is comprised of four Directors: Mr. N. C. Singhal, Dr. R. H. Patil, Mr. R. B. L. Vaish and Mr. M.V. Subbiah. The Committee is chaired by Mr. N. C. Singhal. The function of the Audit Committee is to review internal and external audit reports and compliance matters. The responsibilities of the Audit Committee include overseeing the financial reporting process to ensure fairness, sufficiency and credibility of financial statements, review of annual financial statements before submission to the Board of Directors, review of the adequacy of internal control systems and the internal audit function, review of compliance with the inspection and audit reports of RBI and reports of statutory auditors, review of the findings of internal investigations, discussion on the scope of audit with external auditors and examination of reasons for substantial defaults, if any. All audit services provided by the Bank’s statutory auditors are pre-approved by the Audit Committee.

Remuneration and Nomination Committee The Remuneration and Nomination Committee is comprised of four Directors: Dr. R. H. Patil, Mr. N. C. Singhal, Smt. Rama Bijapurkar and Mr. K.N. Prithviraj. The Committee is chaired by Dr. R.H. Patil. The functions of the Remuneration and Nomination Committee include determining the suitability of persons for appointments to the Board of Directors, evaluation of the performance of the Managing Director & CEO and other Directors, recommendation to the Board of Directors of the remuneration (including performance bonus and perquisites) of all employees and Directors, establishing guidelines for the employee stock option scheme and recommending stock option grants to employees and full-time directors.

Risk Management Committee The Risk Management Committee is comprised of two Directors: Ms. Shikha Sharma and Prof. J. R. Varma. The Committee is chaired by Prof. J. R. Varma. The objective of the Risk Management Committee is to review the Bank’s risk management policies against guidelines issued by RBI and the Board of Directors. The Committee reviews the Bank’s risk management policies in relation to various risks (credit, market and operational risks), investment policies, strategy and regulatory and compliance issues.

Shareholders/Investors Grievance Committee The Shareholders/Investors Grievance Committee is comprised of two Directors: Mr. R. B. L. Vaish and Mr. K.N. Prithviraj. The Committee is chaired by Mr. K.N. Prithviraj. The functions of the Shareholders/ Investors Grievance Committee include reviewing and redressing shareholders and investors complaints, including any shareholders or investors complaints filed with SEBI or the stock exchanges on which the equity shares are listed.

Customer Service Committee The Customer Service Committee is comprised of two Directors: Prof. J. R. Varma and Mr. R. B. L. Vaish. The Committee is chaired by Mr. R. B. L. Vaish. The functions of the Customer Service Committee include implementing ongoing improvements in customer service initiatives and strengthening the Bank’s corporate governance structure.

Special Committee for monitoring large value frauds The Special Committee for monitoring large value frauds is comprised of three Directors: Ms. Shikha Sharma, Mr. N. C. Singhal and Dr. R. H. Patil. The Committee is chaired by Mr. N. C. Singhal. The Special Committee for monitoring large value frauds was constituted in response to a RBI circular in relation to

108 fraudulent activity involving Rs. 10 million and above. The Committee reviews any suspected fraudulent activity over this amount, including misappropriation of funds by employees of the Bank and reviews and prescribes where appropriate any additional measures to prevent fraudulent activity. The Committee also reviews the Bank’s efficiency in detecting fraudulent activity and implements measures to shorten discovery time.

Litigation Statement about Management At the date of these Listing Particulars, for at least the previous five years, none of the members of the Board of Directors, the Audit Committee, the senior management team or any of the other committees listed above: • has had any convictions in relation to fraudulent offences; • has held an executive function in the form of a senior executive officer or a member of the administrative, management or supervisory bodies, of any company at the time of or preceding any bankruptcy, receivership or liquidation; or • has been subject to any official public incrimination and/or sanction by any statutory or regulatory authority (including any designated professional body) or has ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of a company or from acting in the management or conduct of the affairs of any company.

Memorandum and Articles of Association The Bank’s main objectives are to carry on banking activity and other related activities. The Bank’s main objectives and the objectives incidental or ancillary to the attainment of the main objectives are found in Clause III (A) and (B) of the Memorandum of Association. The Board of Directors may not hold meetings in the absence of a quorum. Pursuant to the Companies Act, the Directors have the power to borrow money for business purposes only with the consent of the shareholders (with certain limited exceptions). Articles 125 to 137 set forth certain rights and restrictions relating to dividend distribution. One of the restrictions is that dividends may be declared only at general meetings of the shareholders, but in no event shall an amount greater than the amount recommended by the Board of Directors be approved. Under the Articles, no Director shall be required to hold any equity shares as qualification shares. Under Section 300 of the Companies Act, no director of a company shall, as a director, take part in the discussion of, or vote on, any contract or arrangement entered into, or to be entered into, by or on behalf of the company, if he is in any way, whether directly or indirectly, concerned or interested in the contract or arrangement. The Annual General Meeting is held during business hours at the Bank’s registered office or at such other place in Ahmedabad as the Board of Directors may determine. The Board may also call an Extraordinary General Meeting. The Board of Directors is required to call an Extraordinary General Meeting upon the request of a set number of shareholders, as set forth in the Companies Act. Under the Articles, every member present in person, on a show of hands, shall have one vote and upon a poll every member present in person or by proxy shall have the right to vote (in proportion to his share of the paid equity capital of the Company) in accordance with the provisions of applicable law. However, according to section 12(2) of the Banking Regulation Act, no person holding shares in a banking company shall, in respect of any shares held by such person, exercise voting rights on poll in excess of 10% of the total voting rights of all the shareholders of the banking company. Under the Articles, the acquisition of equity shares by a person or group which would take its holding to a level of 5% or more of the total paid-up capital of the Company (or such other percentage as may be prescribed by the RBI from time to time) requires the prior approval of the RBI. Under Section 106 of the Companies Act, where the share capital of a company is divided into different classes of shares, the rights attached to the shares of any class may be varied with the written consent of the holders of not less than three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the issued shares of that class, if provision with respect to such variation is contained in the Memorandum or Articles of Association of the company, or in the absence of any such provision in the Memorandum or Articles of Association, if such variation is not prohibited by the terms of issue of the shares of that class. Under the Companies Act, any business to be transacted by an ordinary resolution requires simple majority, with votes cast in favour of the resolution should be more than the votes cast against the resolution. Further, any business to be transacted by way of a special resolution requires the approval of 75% of the shareholders present at the meeting. The votes cast in favour of the resolution should be at least three-fourth of the total votes cast with respect to the resolution.

109 The entire amount of the issue price of the equity shares in the form of GDRs will be treated as subscribed and paid-up share capital of the Bank. The subscribed capital of the Bank shall not, at any time, be less than one-half of the authorised share capital of the Bank, and the paid-up share capital of the Bank shall not be less than one-half of the subscribed share capital of the Bank. The RBI may, however, extend the period of time within which the Bank must achieve these proportions, not to exceed two years from the date of the increase. The Directors have the authority to issue, allot or otherwise dispose of equity shares of the Bank to such persons and on such terms and conditions as they see fit. In addition, the Bank may determine in a General Meeting of shareholders to issue further shares out of the authorised but unissued capital of the Bank and may determine that any shares shall be offered to such persons in such proportions and on such terms and conditions as determined by the shareholders in such a General Meeting. The Bank may reduce its share capital in accordance with the provisions of the Companies Act and the Articles.

Related Party Transactions As of 31 March 2009, the related parties of the Bank are broadly classified as:

a) Promoter As of 31 March 2009, the Bank had identified the following entities as its Promoters. • Administrator of the Specified Undertaking of the Unit Trust of India • Life Insurance Corporation of India • General Insurance Corporation and four Government-owned general insurance companies The New India Assurance Co. Ltd, National Insurance Co. Ltd., United India Insurance Co. Ltd. and The Oriental Insurance Co. Ltd

b) Key Management Personnel • Dr. P. J. Nayak (Chairman & CEO) Based on RBI guidelines, details of transactions with Key Management Personnel are not disclosed since there is only one entity/party in this category.

c) Subsidiary Companies • Axis Sales Limited • Axis Private Equity Limited • Axis Trustee Services Limited • Axis Asset Management Company Limited • Axis Mutual Fund Trustee Limited

d) Joint Venture • Bussan Auto Finance India Private Limited Based on RBI guidelines, details of transactions with Joint Venture Companies are not disclosed since there is only one entity/party in this category.

110 The details of transactions of the Bank with its related parties during fiscal 2009 are given below. Items/Related Party Promoter Subsidiaries Total (Rupees in millions) Dividend Paid ...... 912 — 912 Interest Paid ...... 698 3 701 Interest Received ...... 1 65 66 Investment of the Bank ...... — 336 336 Investment of Related Parties in the Bank ...... — — — Investment in Subordinated Debt/Hybrid Capital of the Bank .... 15,000 — 15,000 Redemption of Subordinated Debt ...... 200 — 200 Sale of Investments ...... 4,499 — 4,499 Management Contracts and Other reimbursements ...... — 50 50 Purchase of Fixed Assets ...... — 2 2 Advances granted ...... — — — Sale of fixed assets ...... — 1 1 Receiving of Services ...... 249 697 946 Rendering of Services ...... 17 3 20 Other Reimbursements to Related parties ...... 50 12 62 The balances payable to/receivable from the related parties of the Bank as of 31 March 2009 are given below.

Items/Related Party Promoter Subsidiaries Total (Rupees in millions) Deposits with the Bank ...... 33,663 164 33,827 Placement of Deposits ...... 2 — 2 Advances ...... — — — Investment of the Bank ...... — 586 586 Investment of Related Parties in the Bank ...... 1,522 — 1,522 Guarantees ...... 390 — 390 Investment in Subordinated Debt/Hybrid Capital of the Bank .... 17,400 — 17,400 Advance for Rendering of Services ...... — 87 87 Other Receivables ...... — 2 2 The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2009 are given below: Items/Related Party Promoter Subsidiaries Total (Rupees in millions) Deposits with the Bank ...... 33,663 263 33,926 Placement of Deposits ...... 2 — 2 Advances ...... 1 1,923 1,924 Investment of the Bank ...... — 586 586 Investment of Related Parties in the Bank ...... 1,522 — 1,522 Repo Borrowing ...... 442 — 442 Guarantees ...... 390 — 390 Investment in Subordinated Debt/Hybrid Capital of the Bank .... 17,400 — 17,400

111 PRINCIPAL SHAREHOLDERS AND CHANGES IN SHARE CAPITAL

The following table presents information regarding the ownership of the Bank’s equity shares as of 31 August 2009. Each person or entity known to the Bank to beneficially own more than 3% of the Bank’s outstanding equity shares is listed below. Each shareholder identified below is both the holder of record and the beneficial owner with sole power to vote and invest the equity shares listed next to its name below. None of these principal shareholders have different voting rights than other shareholders of the Bank.

Percentage of Total Equity Number of Percentage Shares Equity as Shareholder Outstanding Shares Adjusted(1) Government-controlled shareholders SUUTI ...... 27.02 97,224,373 26.64 LIC ...... 10.62 38,216,489 10.47 GIC, New India Assurance Company Ltd., National Insurance Company Ltd., Oriental Insurance Company Ltd. and United India Insurance Company Ltd...... 4.79 17,265,006 4.73 Other Government-controlled institutions, corporations and banks ..... 2.56 9,199,509 2.52 Total Government-controlled or owned Shareholders ...... 44.99 161,905,377 44.36 Other Indian investors ...... ICICI Prudential Life Insurance Co. Limited...... 4.61 16,576,383 4.54 Individual domestic investors ...... 4.72 16,972,262 4.65 Indian Corporations ...... 3.49 12,550,414 3.44 Mutual funds and Banks (other than Government-controlled banks) . . . 5.24 18,868,074 5.18 Other Indian Investors (Clearing members, HUF, Trusts) ...... 0.13 485,660 0.13 Total other Indian investors ...... 18.19 65,452,793 17.94 Total Indian investors ...... 63.18 227,358,170 62.30 Foreign Investors ...... The Bank of New York as a depository custodian of GDR Holders .... 7.32 26,330,374 8.60 Orient Global Cinnamon Capital Limited ...... 4.99 17,956,785 4.92 HSBC Financial Services (Middle East) Limited A/c HSBC IRIS Investments (Mauritius) Limited ...... 4.92 17,709,210 4.85 Other Foreign Institutional Investors /OCBs/NRIs (excluding above three investors) ...... 19.59 70,516,131 19.33 Total Foreign investors ...... 36.82 132,512,500 37.70 Total shareholding ...... 100.00 359,870,670 100.00

(1) As adjusted pursuant to the Offering. This does not include the effects of any take-up by the Promoters of any of the equity shares in the Bank offered in the Preferential Allotment or the effects of the QIP Offering.

In order to meet its funding requirements, the Bank raised equity during the last three years. In July 2007, the Bank raised Tier I Capital in the form of equity capital through simultaneous offerings in the form of a follow-on global depositary receipts issue, a qualified institutional placement (QIP) and a preferential allotment of equity shares to the Promoters of the Bank. The Bank raised Rs. 8.79 billion through the allotment of 14.13 million global depositary receipts, each representing one equity share of the Bank at a price of U.S.$15.43 per share. The Bank also raised Rs. 17.52 billion by issuing 28.26 million equity shares under QIP and Rs. 19.03 billion by issuing 30.70 million equity shares under preferential allotment of equity shares to promoter entities.

Government-controlled shareholders held 44.99% of the Bank’s total outstanding equity shares as of 31 August 2009. In particular, SUUTI held 27.02% of the Bank’s total outstanding shares; LIC held 10.62% of the Bank’s total outstanding equity shares; GIC and four Government-owned general insurance companies together held 4.79% of the Bank’s total outstanding equity shares and other Government-controlled institutions, corporations and banks held 2.56% of the Bank’s total outstanding equity shares. The Bank has in place measures to ensure that the control of the principal shareholders is not abused. See “Management and Board of Directors — Corporate Governance”. In conjunction with the Offering, the Bank is also proposing to make a Preferential Allotment of up to 49,02,257 equity shares to LIC and New India Assurance Company Ltd. at a price which is equivalent to the price at which the GDRs are offered.

The Bank is managed by an independent Board of Directors. There are no agreements with Government controlled shareholders regarding management control, voting rights, non-dilution or any other matters. Under the terms of the Articles, SUUTI has the right to nominate the Chairman and three Directors. SUUTI has

112 presently nominated one Director to the Bank’s Board. In addition, LIC has also appointed one representative to the Board although the Articles do not confer any specific rights to appoint Directors on LIC.

Mr. K.N. Prithviraj represents SUUTI and Mr. R.B.L. Vaish represents LIC. Ms. Shikha Sharma has been appointed as MD & CEO for a period of three years beginning 1 June 2009 to 31 May 2012.

112.1 OVERVIEW OF THE INDIAN FINANCIAL SECTOR

The information in this section has been extracted from publicly available documents from officially prepared materials from the Government and its various ministries, the RBI, the Insurance Regulatory and Development Authority (“IRDA”), the Indian Banks Association, and The Association of Mutual Funds in India (“AMFI”) and has not been prepared or independently verified by the Bank, the Lead Managers or any of their affiliates or advisers.

Introduction The RBI, the central banking and monetary authority of India, is the central regulatory and supervisory authority for the Indian financial system. A variety of financial intermediaries in the public and private sectors participate in India’s financial sector, including the following: • commercial banks; • non-bank finance companies, including housing finance companies; • long-term lending institutions; • other specialised financial institutions and state-level financial institutions; • insurance companies; and • mutual funds. Until the early 1990s, the Indian financial system was strictly controlled. Interest rates were administered, formal and informal parameters governed asset allocation and strict controls limited entry into and expansion within the Indian financial sector. The Government’s economic reform programme, which began in 1991, encompassed the financial sector. The first phase of the reform process began with the implementation of the recommendations of the Committee on the Financial System, the Narasimham Committee I. The second phase of the reform process began in 1999. This discussion presents a brief overview of the role and activities of the RBI and of each of the major participants in the Indian financial system, with a focus on the commercial banks and the long-term lending institutions. This is followed by a brief summary of the banking reform process and the recommendations of various committees that have played a key role in the reform process and the recent credit measures as introduced by the RBI.

Reserve Bank of India The RBI, established in 1935, is the central banking and monetary authority in India. The RBI manages the country’s money supply and foreign exchange and also serves as a bank for the Government and for the country’s commercial banks. The RBI issues guidelines on exposure limits, income recognition, asset classification, provisioning for non-performing and restructured assets, investment valuation and capital adequacy for commercial banks, long- term lending institutions and non-bank finance companies. The RBI requires these institutions to furnish information relating to their businesses to it on a regular basis. For further information regarding the RBI’s role as the regulatory and supervisory authority of India’s financial system and its impact on the Bank, see “Supervision and Regulation”.

Commercial Banks As of 31 March 2009, there were 171 scheduled commercial banks in the country, with a network of 79,056 branches serving approximately Rs. 39.37 trillion (U.S.$774 billion) in deposit accounts and Rs. 28.58 trillion in loan accounts (U.S.$ 562 billion) (Source: RBI). Scheduled commercial banks are banks listed in the schedule to the Reserve Bank of India Act, 1934, (“RBI Act”) and are further categorised as public sector banks, private sector banks and foreign banks. Scheduled commercial banks have a presence throughout India, with approximately 64% of bank branches located in rural or semi-urban areas of the country. A large number of these branches belong to the public sector banks.

Public Sector Banks Public sector banks make up the largest category in the Indian banking system. They include the SBI and its six associate banks, 20 nationalised banks and 86 regional rural banks (Source: RBI). Excluding the regional rural banks, the remaining public sector banks have 55,009 branches, and account for 75.9% of the outstanding gross bank credit and 76.6% of the aggregate deposits of the scheduled commercial banks as of 31 March 2009 (Source: RBI). The public sector banks’ large network of branches enables them to fund themselves out of low cost deposits.

113 The SBI is the largest public sector bank in India. As of 31 March 2009, the SBI and its associate banks had 15,912 branches. They accounted for 24.1% of aggregate deposits and 23.1% of outstanding gross bank credit of all scheduled commercial banks (Source: RBI). As of 31 March 2009 there were 86 regional rural banks with 15,010 branches, accounting for 3.0% of aggregate deposits and 2.3% of outstanding gross bank credit of scheduled commercial banks (Source: RBI).

Private Sector Banks In July 1993, as part of the banking reform process and as a measure to induce competition in the banking sector, the RBI permitted entry of the private sector into the banking system. This resulted in the introduction of nine private sector banks, including the Bank. These banks are collectively known as the “new” private sector banks. As of 31 March 2009, there were 24 private sector banks, of which seven were “new” private sector banks and 17 were private sector banks existing prior to July 1993 (Source: RBI). New private sector banks have seen significant growth in both the assets and infrastructure during the last decade. The entry of new private sector banks has increased the industry competitiveness, enhanced customer service orientation, product innovation and technological advancement. As of 31 March 2009, private sector banks accounted for approximately 18.2% of aggregate deposits and 18.2% of outstanding gross bank credit of the scheduled commercial banks (Source: RBI). Private sector banks had a network of 8,761 branches, accounting for 11.1% of the total branch network of scheduled commercial banks in the country. A large part of this branch network is attributable to new private sector banks (Source: RBI).

Foreign Banks As of 31 March 2009, there were 28 foreign banks with 276 branches operating in India, accounting for 5.2% of aggregate deposits and 59% of outstanding gross bank credit of scheduled commercial banks (Source: RBI). While the primary activity of most foreign banks in India has traditionally been in the corporate segment, some of the larger foreign banks have increasingly made consumer financing a larger part of their portfolios offering an array of products such as automobile finance, home loans, credit cards and household consumer finance. Foreign banks operate in India through branches of the parent bank though certain foreign banks also have wholly-owned non-bank finance company subsidiaries or joint ventures for both corporate and retail lending. By a circular dated 6 July 2004, the RBI stipulated that banks should not acquire any fresh stake in a bank’s equity shares, if by such acquisition, the investing bank’s holding exceeded 5% of the investee bank’s equity capital. This also applies to holdings of foreign banks in Indian banks.

Cooperative Banks Cooperative banks cater to the financing needs of agriculture, small industry and self-employed businessmen in urban and semi-urban areas of India. Presently RBI is responsible for supervision and regulation of urban co-operative societies, and the NABARD for State Cooperative Banks and District Central Cooperative Banks.

Long-Term Lending Institutions The long-term lending institutions were established to provide medium-term and long-term financial assistance to various industries for setting up new projects and for the expansion and modernisation of existing facilities. These institutions provide fund-based and non-fund-based assistance to industry in the form of loans, underwriting, direct subscription to shares, debentures and guarantees. The primary long-term lending institutions include IFCI Limited, Industrial Investment Bank of India and included ICICI Limited prior to its merger with ICICI Bank Limited, and IDBI Limited prior to its merger with IDBI Bank Limited. In addition to providing credit, long-term lending institutions also offer: • fee-based activities such as investment banking and advisory services; and • short-term lending activity including corporate finance and issuing working capital loans.

Non-Bank Finance Companies As of 31 March 2008 there were 12,834 non-bank finance companies in India and out of these 376 were permitted to accept/hold public deposit, mostly in the private sector. All non-bank finance companies are required to register with the RBI. The non-bank finance companies may be categorised into entities which take public deposits and those which do not. The companies which accept public deposits are subject to the strict supervision and capital adequacy requirements of the RBI. The scope and activities of non-bank finance

114 companies have grown significantly over the years. The primary activities of the non-bank finance companies are consumer credit, including automobile finance, home finance and consumer durable products finance, wholesale finance products such as bill discounting for small and medium-sized companies, and fee-based services such as investment banking and underwriting.

Housing Finance Companies Housing finance companies form a distinct subgroup of the non-bank finance companies. As a result of various incentives given by the Government for investing in the housing sector in recent years, the scope of this business has grown substantially. The National Housing Bank Act provides for the securitisation of housing loans, foreclosure of mortgages and establishment of the Mortgage Credit Guarantee Scheme. Housing loans up to certain limits prescribed by the RBI as well as mortgage-backed securities qualify as priority sector lending under the RBI’s directed lending rules.

Other Financial Institutions Specialised Financial Institutions In addition to the long-term lending institutions, there are various specialised financial institutions which cater to the specific needs of different sectors. They include the National Bank for Agricultural and Rural Development, Export-Import Bank of India, Small Industries Development Bank of India, Risk Capital and Technology Finance Corporation Limited, Tourism Finance Corporation of India Limited, National Housing Bank, Power Finance Corporation Limited, the Infrastructure Development Finance Corporation Ltd. and India Infrastructure Financing Company Ltd.

State Level Financial Institutions State financial corporations operate at the state level and form an integral part of the institutional financing system. State financial corporations were set up to finance and promote small and medium-sized enterprises. At the state level, there are also state industrial development corporations, which provide finance primarily to medium-sized and large sized enterprises.

Insurance Companies As of 31 March 2009, there are 44 insurance companies in India, of which 22 are life insurance companies, 21 are general insurance companies and one is a re-insurance company (Source: IRDA). Of the 22 life insurance companies, 21 are in the private sector and one is in the public sector (Life Insurance Corporation of India). Of the 21 general insurance companies, 15 are in the private sector and six are in the public sector (four Government-owned general insurance companies, Export Credit Guarantee Corporation of India Limited and the Agriculture Insurance Company of India). The sole company, GIC, is in the public sector. First year premiums underwritten in the life insurance sector recorded a decline of 6.3% to reach Rs. 871.1 billion (U.S.$ 17.1 million) in fiscal 2009 (Source: IRDA). Gross premiums underwritten of all general insurance companies increased by 10.1% in fiscal 2009 to Rs. 327.1 billion (U.S.$ 6.4 million) (Source: IRDA). The insurance sector in India is regulated by the IRDA. In December 1999, the parliament passed the Insurance Regulatory and Development Authority Act, 1999 which opened the Indian insurance sector to foreign and private investors. The Act allows foreign equity participation in new insurance companies of up to 26%. The Government, while presenting its budget for fiscal 2005, proposed an increase in the limit on foreign equity participation in private sector insurance companies from 26% to 49%. However, this would require an amendment to the Insurance Regulatory and Development Authority Act, 1999 and has not been implemented as yet. In its monetary and credit policy for fiscal 2001, the RBI issued guidelines governing the entry of banks and financial institutions into the insurance business. The guidelines permit banks and financial institutions to enter the business of insurance underwriting through joint ventures provided they meet certain criteria relating to their net worth, capital adequacy ratio, profitability track record, level of impaired loans and the performance of their existing subsidiary companies. Subsequently, the RBI capped the ownership of banks in insurance companies to 26%, while banks owning more than 26% of insurance companies at that time were grandfathered. New companies should have a minimum paid-up equity capital of Rs. 1.0 billion (U.S. $19.7 million) to carry out the business of life insurance or general insurance, or Rs. 2.0 billion (U.S. $39.3 million) to carry out exclusively the business of reinsurance.

115 Mutual Funds The participation in the sector was opened up to the private sector in 1993. The industry is regulated by the Securities and Exchange Board of India (Mutual Fund) Regulation, 1996. As of 31 March 2009, there were 38 private sector mutual funds with total assets under management (“AUM”) of Rs. 4,931.9 billion (U.S.$97.0 billion) (Source: AMFI).

Impact of Liberalisation on the Indian Financial Sector Since 1991, there have been comprehensive changes in the Indian financial system. Various financial sector reforms have transformed the operating environment of the banks and long-term lending institutions. In particular, the deregulation of interest rates, emergence of a liberalised domestic capital market, and the entry of new private sector banks and the broadening of long-term lending institutions’ product portfolios have progressively intensified competition between banks and long-term lending institutions. The RBI has permitted the transformation of long-term lending institutions into banks subject to compliance with the prudential norms applicable to banks.

Banking Sector Reform Most large banks in India were nationalised in 1969 and were thereafter subject to a high degree of control until reform began in 1991. Due to restrictive regulations, the banks’ profitability was low, and operational flexibility was hindered. The last decade has seen many positive developments in the Indian banking sector. The policy makers, which comprise the RBI, the Ministry of Finance and related government and financial sector regulatory entities, have made several notable efforts to improve regulation in the sector.

Recent Amendments to Laws Governing Public Sector Banks The Indian Parliament recently amended the laws governing India’s public sector banks permitting these banks to issue preference shares and make preferential allotments or private placements of equity. The amendments also empower RBI to prescribe ‘fit and proper’ criteria for directors of these banks, and permit supercession of their boards and appointment of administrators in certain circumstances.

Legislative Framework for Recovery of Debts due to Banks In fiscal 2003, the Indian Parliament passed the SARFAESI Act. The SARFAESI Act provides that a secured creditor may, in respect of loans classified as non-performing in accordance with RBI guidelines, give notice in writing to the borrower requiring it to discharge its liabilities within 60 days, failing which the secured creditor may take possession of the assets constituting the security for the loan, and exercise management rights in relation thereto, including the right to sell or otherwise dispose of the assets. The SARFAESI Act also provides for the setting up of asset reconstruction companies regulated by the RBI to acquire assets from banks and financial institutions. The RBI issued guidelines for asset reconstruction companies in respect of their establishment, registration and their licensing by the RBI, and operations.

Corporate Debt Restructuring Forum To establish an institutional mechanism for the restructuring of corporate debt, the RBI has devised a corporate debt restructuring system. The objective of this framework is to ensure a timely and transparent mechanism for restructuring the corporate debts of potentially viable entities facing problems, outside the purview of the Board of Industrial and Financial Rehabilitation, debt recovery tribunals and other legal proceedings. In particular, this framework aims to preserve viable corporations that are affected by certain internal and external factors and minimise any losses to the creditors and other stakeholders through an orderly and coordinated restructuring programme. The corporate debt restructuring system is a non-statutory mechanism and a voluntary system based on debtor-creditor and inter-creditor agreements.

Pension Reforms Currently, there are three categories of pension schemes in India: pension schemes for Government employees, pension schemes for employees in the organised sector and voluntary pension schemes. In the case of pension schemes administered to Government employees, the Government pays its employees a defined periodic benefit upon their retirement. The contribution towards the pension scheme is funded solely by the Government and not matched by a contribution from employees. The Employees Provident Fund, established in 1952, is a mandatory programme for employees of certain establishments. It is a contributory programme that provides for

116 periodic contributions of 10% to 12% of the basic salary by both the employer and the employees. The contribution is invested in prescribed securities and the accumulated balance in the fund (including the accretion thereto) is paid to the employee as a lump sum on retirement. In addition, there are voluntary pension schemes administered by the Government (such as the Public Provident Fund to which contribution may be made up to a maximum of Rs. 70,000 or U.S. $1,625 per annum) or offered by insurance companies, where the contribution may be made on a voluntary basis. Such voluntary contributions are often driven by tax benefits offered under the schemes. On 30 December 2004, the Government promulgated an ordinance establishing the statutory regulatory body, Pension Fund Regulatory and Development Authority (“PFRDA”) to undertake promotional, developmental and regulatory functions with respect to the pension sector. In March 2005, the Government tabled the Pension Fund and Development Authority Bill in Parliament.

Credit Policy Measures The RBI undertook various measures to combat rising inflationary pressures. However, the protracted global slowdown and its effects, combined with a tight monetary policy, resulted in a severe contraction of liquidity in domestic markets in October 2008. Since September 2008, the RBI adopted various measures to improve the liquidity position of the monetary system and ensure credit availability to revive the economy. Since October 2008, interest rates have declined across the term structure in the money and government securities markets. Call money rates have remained near or below the lower bound of the LAF corridor since November 2008, and primary yields on treasury bills have also moderated. On the back of the large market borrowing programme of the Government, the secondary market yield on the 10-year Government security rose from 5.82% in January 2009 to 7.00% in July 2009. Lower yields on Treasury bills and higher yields on longer tenor government securities steepened the yield curve. The remained stable in the first half of fiscal 2010. The rupee appreciated by 5.3% against the U.S. dollar and 1.6% against the Japanese yen in the first three months of fiscal 2010, while depreciating by 8.9% against the pound sterling and 1.7% against the euro. Domestic equity markets have also picked up in the first months of 2009-2010, reflecting the general global trend and increased investor optimism with regard to the Indian economy. Foreign institutional investors made aggregate net investments of U.S. $7.8 billion as at 22 July 2009, while net divestments in the same period were U.S. $4.0 billion. The BSE Sensex also increased from 9,709 as of 31 March 2009 to 14,809 as of 4 August 2009. In response to the global financial crisis, the RBI has instituted policy measures since September 2008 with the broad goals of providing ample rupee liquidity, ensuring comfortable dollar liquidity and maintaining a market environment which would allow for the continued flow of credit to productive sectors. Important measures initiated included: • Reduction of the repo and reverse repo rates; • Reduction of the cash reserve ratio (“CRR”) and the statutory liquidity ratio (“SLR”); • Institution of several sector-specific liquidity facilities; • Establishment of a foreign exchange swap facility; • Relaxation of guidelines for raising external commercial borrowings; and • Allowing the restructuring of stressed assets by banks. The RBI issues an annual policy statement setting out its monetary policy stance and announcing various regulatory measures. It issues a review of the annual policy statement on a quarterly basis.

Mid-term Review of the Annual Policy Statement for Fiscal 2009 and other intermittent measures In the wake of the global financial crisis, the RBI announced the following measures: • The RBI assured financial market participants that it would continue to sell foreign exchange to augment supply in the domestic foreign exchange market or even intervene directly to meet any demand-supply gaps at the prevailing market rates and as per market practice; • A second Liquidity Adjustment Facility (“LAF”) was also re-introduced on a daily basis as an assurance to market participants of liquidity in the event of market stress; • The interest rate ceilings on foreign currency non-resident (bank) (FCNR (B)) deposits of all maturities and on deposits under the non-resident (external) rupee account (NR(E)RA) for one to three years maturity were increased by 50 basis points; and

117 • As an ad hoc and temporary measure, banks were allowed to avail of additional liquidity support under the LAF to the extent of up to 1% of their net demand and time liabilities and seek waiver of penal interest; In view of the persisting uncertainty in the global financial situation and its impact on India, and continuing demand for domestic market liquidity, the following measures were taken in October 2008: • A cumulative reduction of 250 basis points in the CRR effective from the fortnight beginning 11 October 2008; • A special 14-day repo facility for a notified amount of Rs. 20,000 crore was instituted to alleviate liquidity stress faced by mutual funds and banks were allowed temporary access to SLR-eligible securities by an additional 0.5% of net demand and time liabilities (“NDTL”) exclusively for this purpose; • Commercial banks and all term lending and refinancing institutions in India were allowed to lend against and buy back certificates of deposits held by mutual funds for a period of 15 days; • At the request of the Government, the RBI agreed to provide the sum of Rs. 25,000 crore as the first installment under the Agricultural Debt Waiver and Debt Relief Scheme to commercial banks, RRBs and co-operative credit institutions immediately; • The interest rate ceilings on FCNR (B) deposits of all maturities and on deposits under the NR(E)RA for one to three years maturity were further increased by 50 basis points each; • Banks were permitted to borrow funds from their overseas branches and correspondent banks to the extent of 50% of their unimpaired Tier I capital or U.S. $10 million, whichever is higher; and • The RBI also announced that it would institute special market operations to meet the foreign exchange requirements of public sector oil market companies against oil bonds when they become available. On 20 October 2008, in order to alleviate the pressures on domestic credit markets brought on by the indirect impact of the global liquidity constraint and, in particular, to maintain financial stability, the RBI decided to reduce the repo rate under the LAF by 100 basis points to 8% with immediate effect. On 22 October 2008, ECB norms were liberalised. • In the mid term credit policy review, no changes were made in the CRR, SLR, bank rate, repo and reverse repo rates; • Domestic oil and shipping companies have been offered extended hedging facilities with overseas exchanges/OTC markets against volatility in freight rates; and • All-in-cost ceilings on trade credit for less than three years have been enhanced to 6 months LIBOR plus 200 basis points.

Annual Policy Statement for Fiscal 2010 On 29 October 2008, taking into consideration the need for enhanced funds for increasing business and meeting regulatory requirements, the RBI decided that systemically important non-deposit taking non-banking financial companies (“NBFCs-ND-SI”) may augment their capital funds by issue of Perpetual Debt Instruments (“PDIs”) in accordance with the guidelines. Such PDIs shall be eligible for inclusion as Tier I Capital to the extent of 15% of total Tier I capital as on March 31 of the previous accounting year. The RBI then decided as a temporary measure, to permit NBFCs-ND-SI to raise short-term foreign currency borrowings, under the approval route, On 1 November 2008, the RBI announced further measures for monetary and liquidity management: • The repo rate was reduced under the LAF by 50 basis points to 7.5% with effect from 3 November 2008; • The CRR of scheduled banks was reduced by 100 basis points from 6.5% to 5.5% of NDTL effected in two stages: by 50 basis points from the fortnight beginning 25 October 2008, and by a further 50 basis points with effect from the fortnight beginning 8 November 2008. This measure released around Rs. 40,000 crore into the system; • On 16 September 2008, the RBI announced, as a temporary and ad hoc measure, that scheduled banks could avail additional liquidity support under the LAF to the extent of up to 1% of their NDTL and seek waiver of penal interest. It made this reduction permanent. Accordingly, the SLR was reduced to 24% of NDTL with effect from the fortnight beginning 8 November 2008; • In order to provide further comfort on liquidity and to impart flexibility in liquidity management to banks, the RBI introduced a special refinance facility under Section 17(3B) of the RBI Act. Under this facility,

118 all scheduled commercial banks (excluding RRBs) were provided refinance from the RBI equivalent to up to 1% of each bank’s NDTL as of 24 October 2008 at the LAF repo rate up to a maximum period of 90 days. During this period, refinance could be flexibly drawn and repaid; • On 15 October 2008, the RBI announced, purely as a temporary measure, that banks may avail of additional liquidity support exclusively for the purpose of meeting the liquidity requirements of mutual funds (“MFs”) to the extent of up to 0.5% of their NDTL. A similar facility of liquidity support for NBFCs was introduced to enable them to manage their funding requirements. Accordingly, the facility was extended and the banks were allowed to avail liquidity support under the LAF through relaxation in the maintenance of SLR to the extent of up to 1.5% of their NDTL. This relaxation in SLR was to be used exclusively for the purpose of meeting the funding requirements of NBFCs and MFs. Banks can apportion the total accommodation allowed above between MFs and NBFCs flexibly as per their business needs; • The RBI reiterated that it would continue to sell U.S. dollar foreign exchange through agent banks to augment supply in the domestic foreign exchange market or intervene directly to meet any demand- supply gaps; • As a temporary measure, NBFCs-ND-SI were permitted to raise short- term foreign currency borrowings under the approval route, subject to compliance with the prudential norms on capital adequacy and exposure norms; and • In the context of foreign exchange outflows, the RBI announced the buy-back of MSS dated securities so as to provide another avenue for injecting liquidity of a more durable nature into the system. These were calibrated with the market borrowing programme of the Government of India. On 28 November 2008, the special refinance facility introduced on 24 October 2008 was rolled over up to 30 June 2009. The liquidity support to banks through relaxation in maintenance of SLR up to 1.5% of their NDTL for lending to NBFCs and MFs was expanded to enable banks to meet funding requirements of HFCs as well. Indian banks with foreign branches were provided with foreign exchange liquidity by RBI through foreign exchange swaps of tenors up to three months and this facility was extended up to 30 June 2009. Period of entitlement of the first slab of post-shipment rupee export credit, currently available at a concessional interest rate ceiling of the BPLR minus 2.5 percentage points, was extended from 90 days to 180 days with effect from 1 December 2008. On 6 December 2008, the RBI took the following measures: • The repo rate was cut by 100 basis points from 7.5% to 6.5% and the reverse repo rate by 100 basis points from 6% to 5%, with effect from effective 8 December 2008; • Refinance of an amount of Rs. 7,000 crore to the SIDBI; • Refinance facility for the NHB of an amount of Rs. 4,000 crore; • Loans granted by banks to HFCs for on-lending to individuals for purchase/construction of dwelling units could be classified under priority sector, provided that the housing loans granted by HFCs did not exceed Rs. 20 lakh per dwelling unit per family. However, the eligibility under this measure was restricted to five per cent. of the individual bank’s total priority sector lending. This dispensation was applicable to loans granted by banks to HFCs up to 31 March 2010; • Extension of exceptional or concessional treatment to the commercial real estate exposures which were restructured up to 30 June 2009; • Second restructuring done by banks of exposures (other than exposures to commercial real estate, capital market exposures and personal/consumer loans) up to 30 June 2009 were also be eligible for exceptional regulatory treatment; and • In respect of overdue bills, banks had been permitted to charge the rates fixed for Export Credit Not Otherwise Specified for the period beyond the due date. Prescribed interest rate as applicable to post shipment rupee export credit (not exceeding BPLR minus 2.5 percentage points) could be extended to overdue bills up to 180 days from the date of advance. On 11 December 2008, the RBI provided a refinance facility of Rs. 5,000 crore to EXIM Bank. On 2 January 2009, the RBI cut the repo rate by 100 basis points to 5.5% with immediate effect. The reverse repo rate was cut by 100 basis points to 4%. CRR was cut by 50 basis points to 5% with effect from the fortnight beginning 17 January 2009. On 5 February 2009, the foreign exchange swap facility for the Indian public and private sector banks was extended till 31 March 2010. The ceiling rate on export credit in foreign currency was raised to LIBOR plus 350 basis points with immediate effect subject to the condition that banks will not levy any other charges.

119 On 4 March 2009, the RBI cut the repo rate by 50 basis points to 5% with immediate effect and the reverse repo rate was cut by 50 basis points to 4% with immediate effect. In its annual policy statement for the Fiscal Year 2009-10 announced on 21 April 2009, the RBI cut the repo and reverse repo rate by 25 basis points each to 4.75% and 3.25%. respectively. It kept other key policy rates unchanged (bank rate at 6%, CRR at 5% and SLR at 24%). A summary of select key measures has been provided below: • It is proposed to constitute a Working Group to review the present BPLR system and suggest changes to make credit pricing more transparent; • Payment of interest on savings bank accounts by scheduled commercial banks (“SCBs”) would be calculated on a daily product basis with effect from 1 April 2010; • The special refinancing facility introduced on 1 November 2008 to provide funding to SCBs (excluding RRBs) up to one per cent of their NDTL is proposed to be extended up to 31 March 2010; • The 14-day term repo facility up to 1.5% of the NDTL introduced in September 2008 in order to enable NBFCs and HFCs to meet liquidity requirement is proposed to be extended up to 31 March 2010. The 14-days repo auctions will be conducted on a weekly basis; • Export credit refinance limit, which had been extended to 50%. of eligible outstanding rupee export credit in November 2008 will be reviewed in March 2010; • In order to accelerate the credit flow to SMEs, it is proposed to ask the Standing Advisory Committee on SMEs to review the Credit Guarantee Scheme to make it more effective; and • It is proposed to introduce CRAR for RRBs in a phased manner.

Prudential Measures • SCBs have been allowed to set up off shore ATMs without prior approval subject to reporting. • It is proposed to constitute a group to review the existing framework of branch authorisation policy with a view to providing greater flexibility, enhanced penetration and competitive efficiency consistent with financial stability. • It is proposed to issue detailed guidelines on mitigating procyclicality after the Financial Stability Board, the Base Committee on Banking Supervision and the Committee on finalise their recommendations. • The RBI will liaise with SEBI on the issue of rating agencies’ adherence to Code of Conduct Fundamentals of the International Organisation Securities Commission. • It is proposed to upgrade the stress testing guidelines once the Base Committee on Banking Supervision finalises the paper “Principles for Sound Stress Testing Practices and Supervision”.

Reforms of the Non-Bank Finance Companies The standards relating to income recognition, provisioning and capital adequacy were prescribed for non bank finance companies in June 1994. The registered non-bank finance companies were required to achieve a minimum capital adequacy of 6% by fiscal 1995 and 8% by fiscal 1996 and to obtain a minimum credit rating. To encourage companies to comply with the regulatory framework, in July 1996, the RBI announced certain liberalisation measures under which registered non-bank finance companies in compliance with the prudential norms and credit rating requirements were granted freedom from the ceiling on interest rates on deposits and amount of deposits. Other measures introduced include a requirement that non-bank finance companies maintain a certain percentage of liquid assets and create a reserve fund. The percentage of liquid assets to be maintained by non-bank finance companies has been uniformly revised upwards. Since April 1999, non-bank finance companies must maintain 15% of public deposits. The maximum rate of interest that non-bank finance companies could pay on their public deposits was reduced from 12.5% per annum to 11% per annum effective 4 March 2003. Efforts have been made to integrate non-bank finance companies into the mainstream financial sector. The first phase of integration covered registration and standards. The focus of supervision has now shifted to non-bank finance companies accepting public deposits because companies accepting public deposits are required to comply with directions relating to public deposits, prudential norms and liquid assets. A task force on non-bank finance companies set up by the Government submitted its report in October 1998 and recommended

120 several steps to rationalise the regulation of non-bank finance companies. Accepting these recommendations, RBI issued new guidelines for non-bank finance companies as follows: • a minimum net owned fund of Rs. 2.5 million is mandatory before existing non-bank finance companies may accept public deposits; • a minimum investment grade rating is compulsory for loan and investment companies accepting public deposits, even if they have the minimum net owned funds; • permission to accept public deposits was linked to the level of capital to risk assets ratio and different capital to risk assets ratio levels for non-bank finance companies with different ratings were specified; and • non-bank finance companies were advised to restrict their investments in real estate to 10% of their net owned funds. In its monetary and credit policy for fiscal 2000, the RBI stipulated a minimum capital base of Rs. 20 million for all new non-bank finance companies. In the Government’s budget for fiscal 2002, the procedures for foreign direct investment in non-bank finance companies were substantially liberalised. During fiscal 2003, RBI introduced a number of measures to enhance the regulatory and supervisory standards of nonbank finance companies in order to bring them at par with commercial banks in select operations over a period of time. Other regulatory measures adopted and subsequently revised in November 2004 included aligning interest rates in this sector with the rates prevalent in the rest of the economy, tightening prudential norms and harmonising supervisory directions with the requirements of the Companies Act, procedural changes in nomination facilities, issuance of a Know Your Customer policy and allowing non-bank finance companies to take up insurance agency business. In 2005, the RBI has introduced stricter regulatory measures for non-bank finance companies, including stringent reporting requirements and revised Know Your Customer guidelines. On 12 December 2006, the RBI issued guidelines on the of NBFCs-ND-SI and banks’ relationships with them with a view to remove the possibility of regulatory arbitrage leading to an uneven playing field and potential systemic risk.

121 SUPERVISION AND REGULATION

The main legislation governing commercial banks in India is the Banking Regulation Act. The provisions of the Banking Regulation Act are in addition to and not, save as expressly provided in the Banking Regulation Act, in derogation of the Companies Act and any other law for the time being in force. Other important laws include the RBI Act, the Negotiable Instruments Act, 1881, the SARFAESI Act, 2000 and Banker’s Books Evidence Act, 1891. Additionally, the RBI, from time to time, issues guidelines to be followed by the Bank, under the various provisions of the Banking Regulation Act.

RBI Regulations Commercial banks in India are required under the Banking Regulation Act to obtain a license from the RBI to carry on banking business in India. Before granting the license, the RBI must be satisfied that certain conditions are complied with, including (i) the bank has the ability to pay its present and future depositors in full as their claims accrue; (ii) the affairs of the bank will not be or are not likely to be conducted in a manner detrimental to the interests of present or future depositors; (iii) the bank has adequate capital and earnings prospects; and (iv) the public interest will be served if such license is granted to the bank. The RBI can cancel the license if the bank fails to meet the above conditions or if the bank ceases to carry on banking operations in India. The Bank, being licensed by the RBI, is regulated and supervised by RBI. RBI requires the Bank to furnish statements, information and certain details relating to its business. It has issued guidelines for commercial banks on recognition of income, classification of assets, valuation of investments, maintenance of capital adequacy and provisioning for non-performing and restructured assets. The RBI has set up a Board for Financial Supervision, under the chairmanship of the Governor of the RBI. This Board is assisted by the Department of Financial Supervision of the RBI in supervising commercial banks and financial institutions. The appointment of the auditors of the banks is subject to the approval of the RBI. The RBI can direct a special audit in the interest of the depositors or in the public interest.

Regulations relating to the Opening of Branches Banks are required to obtain licenses from the RBI to open new branches. Permission is granted based on factors such as the financial condition and history of the bank, its management, adequacy of capital structure and earning prospects and the public interest. The RBI may cancel the license for violations of the conditions under which it was granted. Under the banking license granted to the Bank by the RBI, the Bank is required to have at least 25% of the Bank’s branches (excluding extension counters) located in rural and semi urban areas (which is a requirement typical for new private banks). A rural area is defined as having a population of less than 10,000. A semi-urban area is defined as having a population of greater than 10,000 but less than 100,000. These population figures relate to the latest census conducted by the Government at the time the branch is opened. In September 2005, the RBI issued a new branch authorization policy, pursuant to which the process by which the RBI authorised the opening of individual branches on a case by case basis was replaced by a system of aggregated approvals on an annual basis. The RBI discusses with individual banks their branch expansion strategies and plans for the medium term. The term “branch” for this purpose has been defined to also include extension counters, offsite ATMs, and administrative offices and back offices. While processing authorisation requests, the RBI gives importance to the nature and scope of banking services particularly in areas that have under-developed banking facilities, actual credit flow to priority sector clients and efforts to promote financial inclusion, the need to increase competition in the banking sector, the bank’s regulatory compliance, quality of governance, risk management and relationships with subsidiaries and affiliates.

Capital Adequacy Requirements The RBI has introduced minimum capital adequacy standards for banks based on the guidelines of the Basel Committee on Banking Regulations and Supervisory Practices. Under these guidelines, with effect from 31 March 2008, the Bank is required to maintain a minimum ratio of capital to risk adjusted assets and off-balance sheet items of 9%, at least 6% of which must be Tier I capital. The capital funds of a bank are classified into Tier I and Tier II capital. Tier I capital, the core capital, provides the most permanent and readily available support against unexpected losses. It comprises paid-up capital and reserves consisting of any statutory reserves, free reserves and capital reserve, innovative perpetual debt instruments, as reduced by equity investments in subsidiaries, intangible assets, deferred tax assets and losses in the current period and those brought forward from the previous period.

122 Tier II capital consists of undisclosed reserves, revaluation reserves (at a discount of 55%), general provisions and loss reserves (allowed up to a maximum of 1.25% of weighted risk assets), hybrid debt capital instruments (which combine features of both equity and debt securities), cumulative perpetual preference shares (which should be fully paid up and should not contain clauses that permit redemption by the holder) and subordinated debt with an initial maturity of not less than five years. Any subordinated debt is subject to progressive discounts each year for inclusion in Tier II capital and total subordinated debt considered Tier II capital cannot exceed 50% of Tier I capital. The Banking Regulation Act does not allow banks established on or after 15 January 1937 to issue preferred equity. In January 2006, the RBI issued guidelines permitting banks to issue perpetual debt with a call option after not less than 10 years, to be exercised with its prior approval, for inclusion in Tier I capital up to a maximum of 15% of total Tier I capital as on 31 March of the previous financial year. The RBI also permitted banks to issue debt instruments with a minimum maturity of 15 years and a call option after not less than 10 years, to be exercised with its prior approval, for inclusion in Tier II capital. In July 2006, the RBI issued guidelines permitting the issuance of Tier I and Tier II debt instruments denominated in foreign currencies. Risk adjusted assets and off-balance sheet items considered for determining the capital adequacy ratio are the risk weighted total of certain funded and non-funded exposures. Degrees of credit risk expressed as percentage weighting have been assigned to various balance sheet asset items and conversion factors to off-balance sheet items. The value of each item is multiplied by the relevant weight and/or conversion factor to produce risk-adjusted values of assets and off-balance sheet items. These risk weights are applied to various balance sheet items based on the rating distribution, assigned by various credit rating agencies. Standby letters of credit and general guarantees are treated as similar to funded exposure and are subject to 100% credit conversion factor. The credit conversion factor for certain off-balance sheet items such as performance bonds, bid bonds and standby letters of credit related to particular transactions is 50% while that for short-term self liquidating trade- related contingencies such as documentary credits collateralised by the underlying shipments is 20%. The credit conversion factor for undrawn commitments is either 20% or 50%, as based on the original maturity of the facility. Since fiscal 2004, the RBI has increased risk weights on various categories of loans. Currently, residential mortgages are risk weighted at 100% (risk weights for residential mortgage loans of less than Rs. 3 million with loan-to-value ratio of up to 75% would be 50% and for loans of value more than Rs. 3 million with loan-to-value ratio up to 75%, risk weight would be 75%). Claims on non-deposit taking systematically important NBFCs are risk weighted at 100% consumer credit and advances included in capital market exposure at 125%, exposure to venture capital funds at 150% Other loans/credit exposures are risk weighted based on their ratings or turnover. The RBI issued guidelines on securitisation of standard assets on 1 February 2006. The guidelines define true sale, criteria to be met by special purpose vehicles set up for securitisation, policy on provision of credit enhancement facilities, liquidity facilities, underwriting facilities and provision of services. The guidelines also cover capital requirements on securitisation, prudential norms for investment in securities issued by special purpose vehicles, accounting treatment of the securitisation transactions and disclosure requirements. All claims on corporate, whether rated or unrated and irrespective of the amount, would be risk weighted at 100% uniformly. To further ensure compliance with the guidelines of Basel II, the RBI has set out compliance periods for banks to transition into the Internal Ratings Based (“IRB”) and Advanced Measurement Approach (“AMA”) methods of risk assessment. Under the RBI’s guidelines, banks can submit their revised methodologies by 1 April 2012, with the RBI set to approve these no later than 31 March 2014.

Loan Loss Provisions and Non-Performing Assets In April 1992, the RBI issued formal guidelines on income recognition, asset classification, provisioning standards and valuation of investments applicable to banks, which are revised from time to time. These guidelines are applied for the calculation of impaired assets under Indian GAAP. The principal features of these RBI guidelines, which have been implemented with respect to the Bank’s loans, debentures, lease assets, hire purchases and bills are set forth below.

Non-Performing Assets An asset, including a leased asset, becomes non-performing when it ceases to generate income for the Bank. A non-performing asset (NPA) is a loan or an advance where: (i) interest and/or instalment of principal remains overdue for a period of more than 90 days in respect of a term loan;

123 (ii) the account remains “out-of-order” (as defined below) in respect of an Overdraft or Cash Credit (OD/CC); (iii) the bill remains overdue for a period of more than 90 days in case of bills purchased and discounted; (iv) a loan granted for short duration crops will be treated as an NPA if the instalments of principal or interest thereon remains overdue for two crop seasons; and (v) a loan granted for long duration crops will be treated as an NPA if the instalments of principal or interest thereon remains overdue for one crop season. Banks should classify an account as a NPA only if the interest imposed during any quarter is not fully repaid within 90 days from the end of the relevant quarter.

“Out-of-Order” Status An account should be treated as “out-of-order” if the outstanding balance remains continuously in excess of the sanctioned drawing limit. In circumstances where the outstanding balance in the principal operating account is less than the sanctioned drawing limit, but (i) there are no credits continuously for a period of 90 days as of the date the balance sheet of the Bank or (ii) the credits are not sufficient to cover the interest debited during the same period, these accounts should be treated as “out-of-order”.

Asset Classification In line with RBI master circular on income recognition, asset classification and provisioning pertaining to advances portfolio of banks, issued in July 2009 for banks, assets are classified as described below:- • Standard Assets. Assets that do not disclose any problems or which do not carry more than the normal risk attached to the business are classified as standard assets. • Sub-Standard Assets. Assets that are non-performing assets for a period not exceeding 12 months. In such cases, the current net worth of the borrower/guarantor or the current market value of the security charged is not enough to ensure recovery of dues to the banks in full. Such an asset has well-defined credit weaknesses that jeopardise the liquidation of the debt and are characterised by the distinct possibility that the bank will sustain some loss, if deficiencies are not corrected. • Doubtful Assets. Assets that are non-performing assets for more than 12 months and have not been written off, either wholly or partially. A loan classified as doubtful has all the weaknesses inherent in assets that are classified as sub-standard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. • Loss Assets. Assets on which losses have been identified by the bank or internal or external auditors or RBI inspection but the amount has not been written off fully. If the realisable value of the security, as assessed by the Bank, approved appraisers or the RBI is less than 10% of the borrower’s outstanding accounts, the existence of security is ignored and the asset is immediately classified as a loss that may be either written-off or fully provided for by the Bank.

Provisioning and Write-Offs Provisions are based on guidelines specific to the classification of the assets. The following guidelines apply to the various asset classifications: • Standard Assets. A general provision in the range of 0.25% to 0.40% is required. • Sub-Standard Assets. A general provision of 10% on total outstanding without making any allowance for ECGC guarantee cover and securities available and 20% on the “unsecured exposure”, of sub-standard asset. “Unsecured exposure” is defined as an exposure where the realisable value of the security, as assessed by the bank/approved valuers/Reserve Bank’s inspecting officers, is not more than 10%, ab-initio, of the outstanding exposure. ‘Exposure’ shall include all funded and non-funded exposures (including underwriting and similar commitments). ‘Security’ will mean tangible security properly charged to the bank and will not include intangible securities like guarantees (including State government guarantees), comfort letters etc. • Doubtful Assets. A 100% provision is made against the unsecured portion of the doubtful asset and charged against income. The value assigned to the collateral securing a loan is the amount reflected on the

124 borrower’s books or the realisable value determined by third party appraisers. In cases where there is a secured portion of the asset, depending upon the period for which the asset remains doubtful, a 20% to 100% provision is required to be taken against the secured asset.

Restructured Assets The RBI has issued separate set of prudential guidelines on restructuring of advances by Banks. The guidelines essentially deal with the norms/conditions — the fulfillment of which are required to maintain the category of the restructured account as ‘standard asset’. The following categories of advances are not eligible for being classified as a standard asset, upon restructuring : (a) consumer and personal advances ; (b) advances classified as capital market exposure and (c) advances classified as commercial real estate exposures. As a one time measure/relaxation, the RBI had in December 2008 permitted restructuring of commercial real estate exposures to be classified as ‘standard asset’ The said relaxation was available up to 30 June 2009. The criteria to be fulfilled for the restructured advance to be treated as a ‘standard asset’ includes viability of the business, infusion of promoters’ contribution, full security coverage, cap on maximum tenor of repayment etc. The economic loss, if any, arising as a result of restructuring needs to be provided for in the books of the Bank. The provision is computed as the difference between the fair value of the account before and after restructuring. If there is a failure to meet the payment terms of a restructured standard asset for more than 90 days, it is no longer classified as a restructured loan and is reclassified as NPA.

Corporate Debt Restructuring mechanism The institutional mechanism for restructuring has been set up through establishment of the CDR system in 2002. CDR system is a joint forum of all Banks and Financial Institutions and operates as a non-judicial body. The CDR system operates on the principle of super-majority amongst the participating Banks/FIs for a particular advance. Bank has signed the Inter-se Agreement (amongst the Banks and FIs) and is accordingly a member of the CDR system. The prudential guidelines as mentioned above equally apply to the accounts restructured under CDR forum.

Act Relating to Recovery of NPAs As a part of the financial sector reforms, the Government introduced the SARFAESI Act. The SARFAESI Act provides banks and other lenders increased powers in the recovery of the collateral underlying NPAs.

Regulations relating to Making Loans The provisions of the Banking Regulation Act govern the making of loans by banks in India. The RBI issues directions covering the loan activities of banks. Some of the major guidelines of the RBI, which are now in effect, are as follows: • The RBI has prescribed regulatory limits on bank’s exposure to individual and group borrowers. The ceilings are 15% and 40% respectively of banks capital funds for a borrower and group under normal circumstances. Relaxations are permitted for exceptional circumstances and infrastructure sector. • The RBI has also advised the banks to fix limits on the exposure to a specific industry/sector. • The RBI has not prescribed any guidelines regarding security, margin etc. and these are left to the Banks. • For loans up to Rs. 2 lakhs, rate of interest cannot exceed the BPLR of the Bank. For other loans the banks are free to formulate their own scheme for fixing of rate of interest. However, for export credit, rate of interest for the first 180 days, cannot be more than BPLR -2.5%. • The RBI has prescribed norms for lending to NBFCs. The total exposure to NBFCs and NBFC (Asset financed Companies) cannot exceed 10%/15% of capital funds of the Bank.

125 • In June 2005, the RBI issued guidelines requiring banks to put in place a policy to deal with exposure to real estate with the approval of their boards. The policy is required to include exposure limits, collaterals to be considered, collateral cover and margins and credit authorisation. • The RBI has also permitted banks to extend financial assistance to Indian companies for the acquisition of equity in overseas joint ventures or wholly-owned subsidiaries or in other overseas companies, new or existing, as strategic investment. Banks are not permitted to finance acquisitions by companies in India. However, the RBI may, subject to conditions as it may deem fit to impose, exempt any bank from the restriction on lending to the subsidiary, holding company or any other company in which any of the directors of the bank is a director, managing agent, manager, employee, guarantor or in which such person holds substantial interest. There are guidelines on loans against equity shares in respect of amount, margin requirement and purpose.

Regulations relating to Sale of Assets to Asset Reconstruction Companies The SARFAESI Act provides for the sale of financial assets by banks and financial institutions to Asset Reconstruction Companies (“ARCs”). The RBI has issued guidelines to banks on the process to be followed for sales of financial assets to asset reconstruction companies. These guidelines provide that a bank may sell financial assets to an ARC provided the asset is a non-performing asset in the books of the Bank. These assets are to be sold on a “without recourse” basis only. The banks selling financial assets should ensure that there is no known liability devolving on them and that they do not assume any operational, legal or any other type of risks relating to the financial assets sold. Further, banks may not sell financial assets at a contingent price with an agreement to bear a part of the shortfall on ultimate realisation. However, banks may sell specific financial assets with an agreement to share in any surplus realised by the ARC in the future. Consideration for the sale may be in the form of cash, bonds or debentures or security receipts or pass through certificates issued by the ARC or Trusts set up by it to acquire the financial assets.

Guidelines on Sale and Purchase of NPAs amongst Banks/FIs/NBFCs In July 2005, the RBI issued guidelines on the sales and purchases of NPAs between banks, financial institutions and non-bank finance companies. These guidelines require that the Board of Directors of banks must establish a policy for purchases and sales of NPAs. Purchases and sales of NPAs must be without recourse to the seller and on a cash basis, with the entire consideration being paid up-front. An asset must have been classified as non-performing for at least two years by the seller to be eligible for sale. The purchasing bank must hold the NPA on its books for at least 15 months before it can sell the asset to another bank. The asset cannot be sold back to the original seller.

Directed Lending Priority Sector Lending In April 2007, the RBI issued revised guidelines on lending to the priority sector. The RBI has linked the priority sector lending targets to adjusted net bank credit (net bank credit plus investments made by banks in non-statutory liquidity bonds included in the held to maturity category and excluding recapitalisation bonds floated by the Government) or credit equivalent amount of off-balance sheet exposure, whichever is higher. Commercial banks required to lend a certain percentage of their adjusted net bank credit to specific sectors (the priority sectors), such as agriculture, micro and small enterprises, retail trade and housing finance. Total priority sector advances should be 40% of adjusted net bank credit with agricultural advances required to be 18% of adjusted net bank credit and advances to weaker sections required to be 10% of adjusted net bank credit, and 1% of the previous year’s net bank credit required to be lent under the Differential Rate of Interest scheme. Under the revised guidelines loans up to Rs. 2 million per borrower under housing finance to be treated as priority sector. The guidelines have capped eligible direct agriculture finance to non-individuals (i.e. partnership firms, corporates and institutions) at Rs. 10 million per borrower. One third of loans in excess of Rs. 10 million per borrower would also be considered as direct finance while the remaining two third would constitute indirect finance. In addition, fresh investments made by banks with NABARD in lieu of non-achievement of priority sector lending targets will no longer be considered as indirect finance subsequent to the end of fiscal year 2007. However, the existing investments in such bonds would continue to be classified as indirect agriculture finance until fiscal 2010 or till the date of maturity; whichever is earlier.

Export Credit The RBI also requires commercial banks to make loans to exporters at concessional rates of interest. This enables exporters to have access to an internationally competitive financing option. Pursuant to existing

126 guidelines, 12% of a bank’s net bank credit is required to be in the form of export credit. The Bank provides export credit for pre-shipment and post-shipment requirements of exporter borrowers in Rupees and foreign currencies.

Credit Exposure Limits As a prudent measure aimed at better risk management and avoidance of concentration of credit risk, RBI has prescribed credit exposure limits for banks and long-term lending institutions in respect of their lending to individual borrowers and to all companies in a single group (or sponsor group). The limits set by the RBI are as follows: • Exposure ceiling for a single borrower is 15% of capital funds and group exposure limit is 40% of capital funds. In case of financing for infrastructure projects, the single borrower exposure limit is extendable by another 5%, i.e., up to 20% of capital funds and the group exposure limit is extendable by another 10% i.e. up to 50% of capital funds. Banks may, in exceptional circumstances, with the approval of their board of directors, consider enhancement of the exposure to a borrower up to a maximum of further 5% of capital funds, subject to the borrower (single or group) consenting to the banks making appropriate disclosures in their annual reports. • Capital funds is the total capital as defined under capital adequacy standards (Tier I and Tier II capital). The infusion of capital under Tier I and Tier II, either through domestic or overseas issue, after the published balance sheet date will also be taken into account for determining the exposure ceiling. Other accretion to capital funds by way of quarterly profits would not be eligible to be taken into account for determining the exposure ceiling. • Exposure shall include credit exposure (funded and non-funded credit limits) and investment exposure (including underwriting and similar commitments). Non-fund based exposures are calculated at 100% and in addition, banks include forward contracts in foreign exchange and other derivative products, like currency swaps and options, at their replacement cost value in determining individual or group borrower exposure ceilings, effective from 1 April 2003. For the purpose of exposure norms, banks shall compute their credit exposures arising on account of the interest rate and foreign exchange derivative transactions and gold by using the “Current Exposure Method”. In computing credit exposure, banks may exclude “sold options”, provided that the entire premium or fee or any other form of income is received or realised in accordance with the Prudential Norms for Off-Balance Sheet Exposures of Banks published on 8 August 2008. To ensure that exposures are evenly spread, the RBI requires banks to fix internal limits of exposure to specific sectors. These limits are subject to periodical review by the banks.

Regulation Relating to Country Risk Management The RBI has issued detailed guidelines on country risk management that cover banks’ exposure to those countries to which they have a net funded exposure of 1% of the funded assets and no provision is maintained on such country exposure. The countries are categorised into seven risk categories, namely insignificant, low, moderate, high, very high, restricted and off-credit and provisioning made on exposures exceeding 180 days on a graded scale ranging from 0.25% To 100%. Banks may make a lower level of provisioning of 25% of the requirement in respect of exposures with contractual maturity of less than 180 days.

Regulations relating to Investments and Capital Market Exposure Limits Pursuant to RBI guidelines, the exposure of banks to capital markets by way of investments in shares, convertible debentures, units of equity oriented mutual funds and loans to brokers, should not exceed 40% of net worth on a standalone and consolidated basis. Within this limit direct investments in shares, convertible bond/ debentures and units of equity oriented mutual funds should not exceed 20% of the bank’s net worth. In November 2003, the RBI issued guidelines on investments by banks in non-SLR securities issued by companies, banks, financial institutions, central and state Government sponsored institutions and special purpose vehicles. These guidelines apply to primary market subscriptions and secondary market purchases. Pursuant to these guidelines, banks are prohibited from investing in non-SLR securities with an original maturity of less than one year, other than commercial paper and certificates of deposits. Banks are also prohibited from investing in unrated securities except unrated rated bonds of companies engaged in infrastructure activities in which Banks are permitted to invest on a case to case basis within the overall ceiling limit prescribed for unlisted non-SLR securities. A bank’s investment in unlisted non-SLR securities may not exceed 10% of its total investment in

127 non-SLR securities as of the end of the preceding fiscal year, with a sub-ceiling of 5%. For investments in bonds of public sector undertakings. These guidelines do not apply to investments in security receipts issued by securitisation or reconstruction companies registered with the RBI and asset backed securities and mortgage backed securities with a minimum investment grade credit rating. These guidelines were effective 1 April 2004, with provision for compliance in a phased manner by 1 January 2005. The RBI requires that the investment by a bank in subordinated debt instruments, representing Tier II capital, issued by other banks and financial institutions should not exceed 10% of the investing bank’s capital including Tier II capital and free reserves. In July 2004, the RBI imposed a ceiling of 10% of capital funds (Tier I plus Tier II capital) on investments by banks and financial institutions in equity shares, preference shares eligible for capital status, subordinated debt instruments, hybrid debt capital instruments and any other instrument approved as being in the nature of capital, issued by other banks and financial institutions. Investments in the instruments, which are not deducted from Tier I capital of the investing bank or financial institution, are subject to a 100% risk weight for credit risk for capital adequacy purposes. The risk weight for credit risk exposure in capital markets has been increased to 125% from 100% in July 2005. Further, banks and financial institutions cannot acquire any fresh stake in a bank’s equity shares, if by such acquisition, the investing bank’s or financial institution’s holding exceeds 5% of the investee bank’s equity capital. Banks with investments in excess of the prescribed limits were required to apply to RBI with a roadmap for reduction of the exposure.

Consolidated Supervision Guidelines In fiscal 2003, the RBI issued guidelines for consolidated accounting and consolidated supervision for banks. These guidelines became effective 1 April 2003. The principal features of these guidelines are: Consolidated Financial Statements. Banks are required to prepare consolidated financial statements intended for public disclosure. Consolidated Prudential Returns. Banks are required to submit to the RBI, consolidated prudential returns reporting their compliance with various prudential norms on a consolidated basis, excluding insurance subsidiaries. Compliance on a consolidated basis is required in respect of the following main prudential norms: • Single borrower exposure limit of 15% of capital funds (20% of capital funds provided the additional exposure of up to 5% is for the purpose of financing infrastructure projects); • Borrower group exposure limit of 40% of capital funds (50% of capital funds provided the additional exposure of up to 10% is for the purpose of financing infrastructure projects); and • Deduction from Tier I capital of the bank, of any shortfall in capital adequacy of a subsidiary for which capital adequacy norms are specified.

Banks’ Investment Classification and Valuation Norms Based on the comments to the Report of the Informal Group on Banks’ Investment Portfolio, the RBI finalised its guidelines on categorisation and valuation of banks’ investment portfolio. These guidelines were effective from 30 September 2000. The salient features of the guidelines are given below: • The entire investment portfolio is required to be classified under three categories: (a) held to maturity, (b) held for trading and (c) available for sale. Banks should decide the category of investment at the time of acquisition. • HTMs compulsorily include (a) recapitalisation bonds received from the Government, (b) investments in subsidiaries and joint ventures and (c) investments in bonds, debentures deemed as advance. HTMs also include any other investment identified for inclusion in this category subject to the condition that such investments cannot exceed 25% of the total investment excluding recapitalisation bonds and debentures. In September 2004, the RBI announced that it would set up an internal group to review the investment classification guidelines to align them with international practices and the current state of risk management practices in India, taking into account the unique requirement applicable to banks in India of maintenance of a statutory liquidity ratio equal to 25% of their demand and time liabilities. In the meanwhile, the RBI has permitted banks to exceed the limit of 25% of investments for the held to maturity category provided the excess comprises investment only in those securities eligible for inclusion for statutory liquidity ratio calculation, and the aggregate of such investments in the held to maturity category do not exceed 25% of the demand and time liabilities. • Profit on the sale of investments in the held to maturity category is appropriated to the capital reserve account after being taken in the income statement. Loss on any sale is recognised in the income statement.

128 • The market price of the security available from the trades/quotes on the stock exchange, the price of securities in subsidiary general ledger transactions, the RBI price list or prices declared by Primary Dealers Association of India jointly with the Fixed Income Money Market and Derivatives Association of India serves as the “market value” for investments in available for sale and held for trading securities. • Investments under the held for trading category should be sold within 90 days; in the event of inability to sell due to adverse factors including tight liquidity, extreme volatility or a unidirectional movement in the market, the unsold securities should be shifted to the available for sale category, at acquisition cost/book value/market value on the date of transfer whichever is the least. Such transfer is permitted only with the approval of the Board of Directors, asset liability management committee or the investment Committee. • Profit or loss on the sale of investments in both held for trading and available for sale categories is taken in the income statement. • Shifting of investments from or to held to maturity may be done with the approval of the board of directors once a year, normally at the beginning of the accounting year; shifting of investments from available for sale to held for trading may be done with the approval of the board of directors, the asset liability management committee or the investment committee. Held to maturity securities are not marked to market and are carried at acquisition cost or at an amortised cost if acquired at a premium over the face value. Available for sale and held for trading securities are valued at market or fair value as of the balance sheet date. Depreciation or appreciation for each basket within the available for sale and held for trading categories is aggregated. Net appreciation in each basket, if any, that is not realised is ignored, whilst net depreciation is provided for. Investments in security receipts or pass through certificates issued by asset reconstruction companies or trusts set up by asset reconstruction companies should be valued in accordance with the guidelines applicable to such instruments, prescribed by the RBI from time to time. Accordingly, in cases where the cash flows from security receipts issued by the asset reconstruction company are limited to the actual realisation of the financial assets assigned to the instruments in the concerned scheme, the Bank reckons the net asset value obtained from the asset reconstruction company from time to time, for valuation of such investments at each reporting year/ period end.

Restrictions on Investments in a Single Company No bank may hold shares in any company exceeding 30% of the paid up share capital of that company or 30% of its own paid up share capital and reserves, whichever is less. However, a bank may hold shares in a subsidiary company in accordance with the provisions of the Banking Regulation Act.

Limit on Transactions through Individual Brokers Guidelines issued by the RBI require banks to empanel brokers for transactions in securities. These guidelines also require that a disproportionate part of the bank’s business should not be transacted only through one broker or a few brokers. The RBI specifies that not more than 5% of the total transactions through empanelled brokers can be transacted through one broker. If for any reason this limit is breached, the RBI has stipulated that the board of directors of the bank concerned should be informed on a half-year basis of such occurrences.

Prohibition on Short-Selling The RBI does not permit short selling of securities by banks excluding intra-day short selling in central Government securities. The RBI has permitted banks to sell Government securities already contracted for purchase provided the purchase contract is confirmed and the contract is guaranteed by Clearing Corporation of India Limited or the security is contracted for purchase from the RBI. Each security is deliverable or receivable on a net basis for a particular settlement cycle. In February 2006, the RBI introduced intra-day short selling in Central Government securities as a measure to develop the central Government securities market. In its Annual Policy Statement for fiscal 2007, the RBI proposed to introduce a ‘when issued’ market in government securities in order to further strengthen the debt management framework. In January 2007 the RBI permitted Scheduled Commercial Banks and Primary Dealers to undertake short sales of Central Government dated securities, subject to the short position being covered within a maximum period of five trading days, including the day of trade. The short positions shall have to be covered only by outright purchase of an equivalent amount of the same security.

129 Regulations relating to Deposits The RBI has permitted banks to independently determine rates of interest offered on term deposits. However, banks are not permitted to pay interest on current account deposits. Further, banks may only pay interest of up to 3.5% per annum on savings deposits. In respect of savings and time deposits accepted from employees, the Bank is permitted by the RBI to pay an additional interest of 1% over the interest payable on deposits from the public. Domestic time deposits in Indian rupees have a minimum maturity of seven days (the minimum tenor of domestic term deposits below Rs. 1.5 million had been reduced from 15 days to seven days with effect from 19 April 2001 from 1 November 2004) and a maximum maturity of 10 years. Time deposits from non-resident Indians (resident foreign currency and FCNR-B accounts) denominated in foreign currency have a minimum maturity of one year and a maximum maturity of five years. Starting April 1998, the RBI has permitted banks the flexibility to offer varying rates of interests on domestic deposits of the same maturity subject to the following conditions: • Time deposits are of Rs. 1.5 million and above; and • Interest on deposits is paid in accordance with the schedule of interest rates disclosed in advance by the bank and not pursuant to negotiation between the depositor and the bank. With effect from the close of business in India on 24 April 2007, interest rates on NRE deposits for one to three years should not exceed the LIBOR/SWAP rates, as of the last working day of the previous month, for U.S. dollar denominated deposits of corresponding maturity (as against LIBOR/SWAP rates plus 50 basis points effective from close of business on 31 January 2007). The LIBOR/SWAP rates as on the last working day of the preceding month would form the base for fixing ceiling rates for the interest rates that would be offered effective from the following month.

Deposit Insurance Demand and time deposits of up to Rs. 100,000 accepted by Indian banks have to be mandatorily insured with the Deposit Insurance and Credit Guarantee Corporation, a wholly-owned subsidiary of the RBI. Banks are required to pay the insurance premium for the eligible amount to the Deposit Insurance and Credit Guarantee Corporation on a semi-annual basis. The cost of the insurance premium cannot be passed on to the customer.

Regulations relating to Know Your Customer and Anti-Money Laundering The RBI issued a notification dated 29 November 2004 prescribing guidelines for Know Your Customer (“KYC”) and anti-money laundering procedures. Banks are required to have a customer acceptance policy laying down explicit criteria for acceptance of customers and defining risk parameters. A profile of the customers should be prepared based on risk categorisation. Banks have been advised to apply enhanced due diligence for high-risk customers. Accordingly, the branches and centralised processing units of the Bank have been enabled with access to the database of the customers’ risk sensitivity. The guidelines provide that banks should undertake customer identification procedures while establishing a banking relationship or carrying out a financial transaction or when the bank has a doubt about the authenticity or the adequacy of the previously obtained customer identification data. Banks need to obtain sufficient information necessary to establish the identity of each new customer and the purpose of the intended banking relationship. The guidelines also provide that banks should monitor transactions depending on the account’s risk sensitivity. In line with the RBI’s extant Master Circular on KYC/AML measures, the procedures on customer identification have been revised and branches have been advised of the different documents for different types of customers to be obtained, thereby imposing enhanced due diligence norms on specific categories of customers. Field investigation has also been made mandatory in the account opening procedure. In August 2005, the RBI simplified the KYC procedure for opening accounts for those persons who intend to keep balances not exceeding Rs. 50,000 in all their accounts taken together where the total credit is not expected to exceed Rs. 100,000 in a year, in order to ensure that the implementation of the KYC guidelines do not result in the denial of the banking services to those who are financially or socially disadvantaged. The Bank is offering no frills account for this purpose and has put in place procedures to ensure that banking services are not denied to such individuals. In a bid to prevent money laundering activities, the Government enacted the Prevention of Money Laundering Act, 2002 (the “PML Act”). The PML Act seeks to prevent money laundering and to provide for confiscation of property derived from, or involved in, money laundering and for incidental matters or matters connected therewith.

130 In February 2006, the RBI issued guidelines on the obligations of banks under the PML Act. The RBI also issued anti money laundering guidelines to other entities such as non-bank finance companies and authorised money changers. The PML Act stipulates that banks, financial institutions and intermediaries (together, the “Institutions”) shall maintain a comprehensive record of all their transactions, including the nature and value of such transaction. Further, it mandates verification of the identity of all their clients and also requires the Institutions to maintain records of their respective clients. These details are to be provided to the authority established by the PML Act, which is empowered to order confiscation of property where the authority is of the opinion that a crime as recognised under the PML Act has been committed.

Legal Reserve Requirements Cash Reserve Ratio A bank is required to maintain a specified percentage of its net demand and time liabilities, excluding inter- bank deposits, by way of a balance in a current account with the RBI. Following the enactment of the RBI (Amendment) Bill 2006, the floor and ceiling rates (earlier 3% and 20% respectively) on the cash reserve ratio were removed. The following liabilities are excluded from the calculation of the demand and time liabilities to determine the cash reserve ratio: • inter-bank liabilities; • liabilities to primary dealers; • refinancing from the RBI and other institutions permitted to offer refinancing to banks; and • perpetual debt qualifying for Tier I capital treatment. The cash reserve ratio is 5.0% effective 17 January 2009. The RBI does not pay any interest on cash reserve ratio balances. The CRR has to be maintained on an average basis for a fortnightly period and should not be below 70% of the required cash reserve ratio on any day of the fortnight.

Statutory Liquidity Ratio In addition to the CRR, a bank is required to maintain a specified percentage of its net demand and time liabilities by way of liquid assets like cash, gold or approved unencumbered securities. The percentage of this liquidity ratio is fixed by the RBI from time to time, pursuant to section 24 of the Banking Regulation Act. At present, the RBI requires banks to maintain a liquidity ratio of 24%, with effect from 8 November 2008. The Banking Regulation (Amendment) Bill, 2005 introduced in the Indian Parliament proposes to amend section 24 of the Banking Regulation Act to remove the minimum Statutory Liquidity Ratio stipulation, thereby giving the RBI the freedom to fix the SLR below this level.

Regulations on Asset Liability Management At present, the RBI’s regulations for asset liability management require banks to draw up asset-liability gap statements separately for Rupee and for four major foreign currencies. These gap statements are prepared by scheduling all assets and liabilities according to the stated and anticipated re-pricing date, or maturity date. These statements for the domestic assets and liabilities have to be submitted to the RBI on a monthly basis. The RBI has advised banks to actively monitor the difference in the amount of assets and liabilities maturing or being re-priced in a particular period and place internal prudential limits on the gaps in each time period, as a risk control mechanism. Additionally, the RBI has asked banks to manage their asset-liability structure such that the negative liquidity gap in the 1-14 day and 15-28 day time periods does not exceed 20% of cash outflows in these time periods. This 20% limit on negative gaps was made mandatory with effect from 1 April 2000. In respect of other time periods, up to one year, the RBI has directed banks to lay down internal norms in respect of negative liquidity gaps. It is not mandatory for banks to lay down internal norms in respect of negative liquidity gaps for time periods greater than one year. With effect from 1 January 2008, banks are required to maintain cumulative mismatch for next day, 2-7 days, 8-14 days and 15-28 days within 5%, 10%, 15% and 20% of the cumulative cash outflows in the respective time buckets in order to recognise the cumulative impact on liquidity. While banks may undertake dynamic liquidity management and should prepare the statement of structural liquidity on a daily basis, such statements should, however, be reported to the RBI, as on the first and third Wednesday of every month with effect from 1 April 2008.

131 Foreign Currency Dealership The RBI has granted the Bank a full-fledged authorised dealers’ license to deal in foreign exchange through its designated branches. Under this license, the Bank has been granted permission to: • engage in foreign exchange transactions in all currencies; • open and maintain foreign currency accounts abroad; • raise foreign currency and Rupee denominated deposits from non resident Indians; • grant foreign currency loans to on-shore and off-shore corporations; • open documentary credits; • grant import and export loans; • handle collection of bills, funds transfer services; • issue guarantees; and • enter into derivative transactions and risk management activities that are incidental to its normal functions authorised under its organisational documents. The Bank’s foreign exchange operations are subject to the guidelines specified by the RBI in the exchange control manual. As an authorised dealer, the Bank is required to enroll as a member of the Foreign Exchange Dealers Association of India, which prescribes the rules relating to foreign exchange business in India. Authorised dealers, like the Bank, are required to determine their foreign exchange limits into open positions and maturity gaps in accordance with the RBI’s guidelines and these limits are subject to approval by the RBI. Further, the Bank is permitted to hedge foreign currency loan exposures of Indian corporations in the form of interest rate swaps, currency swaps and forward rate agreements, subject to certain conditions.

Statutes Governing Foreign Exchange and Cross-Border Business Transactions The foreign exchange and cross border transactions undertaken by banks are subject to the provisions of the Foreign Exchange Management Act. All branches should monitor all non-resident accounts to prevent money laundering. The RBI Master Circular on External Commercial Borrowings and Trade Credit, dated 1 July 2009, states that no financial intermediary, including banks, will be permitted to raise external commercial borrowings or provide guarantees in favour of overseas lenders for external commercial borrowings. The Singapore Branch is not affected by these guidelines since Regulation 4(2)(iii) of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 provides that foreign branches of authorised dealers who are banks incorporated or constituted in India (including the Bank) are permitted to borrow in foreign currency in the normal course of their banking business outside India. In March 2006, in view of enhanced stability in India’s external and financial sectors and increased integration of the financial sector in the global economy, the RBI constituted a Committee to set out a roadmap towards fuller capital account convertibility. The Committee has submitted its report in July 2006. The RBI Master Circular on Risk Management & Interbank Dealings, dated 1 July 2009, states that all categories of overseas foreign currency borrowings of Banks, including existing External Commercial Borrowings and loans/overdrafts from their Head Office, overseas branches and correspondents and overdrafts in nostro accounts (not adjusted within five days), shall not exceed 50% of their unimpaired Tier I capital or U.S.$10 million (or its equivalent), whichever is higher. Overseas borrowings for the purpose of financing export credit, capital funds raised/augmented by the issue of Innovative Perpetual Debt Instruments and Debt Capital Instruments, in foreign currency and other overseas borrowings with the specific approval of the Reserve Bank would continue to be outside the limit of 50%.

Prohibited Business The Banking Regulation Act specifies the business activities in which a bank may engage. Banks are prohibited from engaging in business activities other than the specified activities.

Reserve Fund Any bank incorporated in India is required to create a reserve fund to which it must transfer not less than 25% of the profits of each year before dividends. If there is an appropriation from this account, the bank is

132 required to report the same to the RBI within 21 days, explaining the circumstances leading to such appropriation. The government of India may, on the recommendation of the RBI, exempt a bank from requirements relating to its reserve fund.

Restrictions on Payment of Dividends The guidelines on payment of dividends by banks issued by the RBI in 2004 shifted focus from the “quantum of dividend” to “dividend payout ratio”. These guidelines have since been revised in 2005 and the banks have been given general permission to declare dividends subject to compliance with the following norms: • The bank should have: • Capital to Risk Asset Ratio (“CRAR”) of at least 9% for the preceding two completed years and the accounting year for which it proposes to declare a dividend. • Net NPA of less than 7% In the event a bank does not meet the above CRAR norm, but has a CRAR of at least 9% for the accounting year for which it proposes to declare a dividend, it would be eligible to declare a dividend provided its Net NPA ratio is less than 5% • The bank should comply with the provisions of Sections 15 and 17 of the Banking Regulation Act. • The bank should comply with the prevailing regulations/guidelines issued by the RBI, including creating adequate provisions for impairment of assets and staff retirement benefits, transfer of profits to Statutory Reserves etc. • The proposed dividend should be payable out of the current year’s profit. • The RBI should not have placed any explicit restrictions on the bank for declaration of dividends. However, unlike the previous norms, where a bank does not meet the above eligibility criteria no special dispensation shall be available from the RBI.

Restriction on Share Capital and Voting Rights Banks can issue only ordinary shares. The Banking Regulation Act specifies that no shareholder in a bank can exercise voting rights on poll in excess of 10% of total voting rights of all the shareholders of the bank.

Regulatory Reporting and Examination Procedures The RBI is empowered under the Banking Regulation Act to inspect a bank. The RBI monitors prudential parameters at quarterly intervals. To this end and to enable off-site monitoring and surveillance by the RBI, banks are required to report to the RBI on aspects such as: • assets, liabilities and off-balance sheet exposures; • the risk weighting of these exposures, the capital base and the capital adequacy ratio; • the unaudited operating results for each quarter; • asset quality; • concentration of exposures; • connected and related lending and the profile of ownership, control and management; and • other prudential parameters. The RBI also conducts periodical on-site inspections on matters relating to the bank’s portfolio, risk management systems, internal controls, credit allocation and regulatory compliance, at intervals ranging from one to three years. The Bank has been, and at present also is, subject to the on-site inspection by the RBI at yearly intervals. The inspection report, along with the report on actions taken by the Bank, has to be placed before the Board of Directors. On approval by the board of directors, the Bank is required to submit the report on actions taken by it to the RBI. The RBI also discusses the report with the management team including the Chairman, the Managing Director and CEO. The RBI also conducts on-site supervision of selected branches of the Bank with respect to their general operations and foreign exchange related transactions.

133 Appointment and Remuneration of the Managing Director & CEO, Deputy Managing Director (Designate) and Other Directors The Bank requires the prior approval of the RBI to appoint the Whole time Directors and to fix their remuneration. The RBI is empowered to remove the appointee on the grounds of public interest or the interest of depositors or to ensure the proper management of the Bank. Further, the RBI may order meetings of the Bank’s Board of Directors to discuss any matter in relation to the Bank, appoint observers to these meetings and in general may make changes to the management as it may deem necessary and can also order the convening of a general meeting of the company to elect new directors. The RBI has issued guidelines relating to salary and other remuneration payable to the chairman, managing director and full-time directors of new private sector banks. Pursuant to the guidelines, the RBI has permitted banks to fix the performance bonus payable to the managing director/full-time directors on either of two criteria: (a) up to a maximum of 25% of the salary; or (b) the average bonus paid to officers and employees calculated by dividing the total salary bill by the total bonus paid to them. In July 2004, the RBI issued guidelines on “fit and proper” criteria for directors of banks.

Penalties The RBI may impose penalties on banks and its employees in case of infringement of regulations under the Banking Regulation Act. The penalty may be a fixed amount or may be related to the amount involved in any contravention of the regulations. The penalty may also include imprisonment. The banks are also required to disclose the penalty in their annual report.

Assets to be Maintained in India Every bank is required to ensure that its assets in India (including import-export bills drawn in India and RBI approved securities, even if the bills and the securities are held outside India) are not less than 75% of its demand and time liabilities in India.

Subsidiaries and other investments The Bank has set up five wholly-owned subsidiaries. The Bank is required to maintain an “arms’ length” relationship in respect of its subsidiaries and in respect of mutual funds sponsored by it in regard to business parameters such as taking undue advantage in borrowing/lending funds, transferring/selling/buying of securities at rates other than market rates, giving special consideration for securities transactions, in supporting/financing the subsidiary and financing its clients through them when it itself is not able or are not permitted to do so. The Bank must observe the prudential norms stipulated by the RBI, from time to time, in respect of its underwriting commitments. Pursuant to such prudential norms, the Bank’s underwriting commitment under any single obligation shall not exceed 15% of an issue. The Bank also require the prior specific approval of the RBI to participate in the equity of financial services ventures including stock exchanges and depositories notwithstanding the fact that such investments may be within the ceiling prescribed under Section 19(2) of the Banking Regulation Act (See “Supervision and Regulation — RBI Regulations — Restrictions on investments in a Single Company”). Further investment by the Bank in a subsidiary, financial services company, financial institution cannot exceed 10% of its paid-up capital and reserves and its aggregate investments in all such companies and financial institutions put together cannot exceed 20% of its paid-up capital and reserves.

Restriction on Creation of Floating Charge Prior approval of the RBI is required for creating a floating charge on the Bank’s undertaking or its property. Currently, all the Bank’s borrowings including bonds are unsecured, except for collateralised borrowing and lending obligations, which are secured.

Maintenance of Records The Bank is required to maintain books, records and registers. The Banking Regulation Act specifically requires banks to maintain books and records in a particular manner and file the same with the Registrar of Companies on a periodic basis. The provisions for production of documents and availability of records for inspection by shareholders would apply to the Bank as in the case of any company.

134 Secrecy Obligations

The Bank’s obligations relating to maintaining secrecy arise out of Section 13 of the Bank Nationalisation Act and common law principles governing its relationship with its customers. The Bank cannot disclose any information to third parties except under clearly defined circumstances. The following are the exceptions to this general rule:

• where disclosure is required to be made under any law;

• where there is an obligation to disclose to the public;

• where the Bank needs to disclose information in its interest; and

• where disclosure is made with the express or implied consent of the customer.

The Bank is required to comply with the above in furnishing any information to any parties. The Bank is also required to disclose information if ordered to do so by a court. The RBI may, in the public interest, publish the information obtained from the bank. Under the provisions of the Banker’s Books Evidence Act, a copy of any entry in a bankers’ book, such as ledgers, day books, cash books and account books certified by an officer of the bank may be treated as prima facie evidence of the transaction in any legal proceedings.

RBI Restriction on Offshore Payments

Any offshore payments to be made under the GDRs by the Head Office of the Bank would require prior approval of the RBI.

Regulations and Guidelines of the Securities and Exchange Board of India

The SEBI was established to protect the interests of public investors in securities and to promote the development of, and to regulate, the Indian securities market. The Bank is subject to regulations issued by SEBI for its capital issuances, as well as its underwriting, custodial, depositary participant, investment banking, registrar and transfer agents, brokering and debenture trusteeship activities. These regulations provide for its registration with the SEBI for each of these activities, functions and responsibilities. The Bank has been adhering to the regulations and guidelines issued by SEBI for various activities.

Foreign Ownership Restriction

The Government of India regulates foreign ownership in private sector banks. The total foreign ownership in a private sector bank cannot exceed 74% of the paid-up capital. Shares held by foreign institutional investors under portfolio investment schemes through stock exchanges cannot exceed 49% of the paid-up capital.

The RBI on 28 February 2005 released a “Roadmap for Presence of Foreign Banks in India and Guidelines on Ownership and Governance in Private Sector Banks” (the “Roadmap”).

The Roadmap envisages two phases. During the first phase, between March 2005 and March 2009, foreign banks were permitted to establish their presence in India by way of setting up a wholly-owned banking subsidiary (“WOS”) or converting their existing branches into a WOS. The WOS should have a minimum capital requirements of Rs. 300 crore (i.e. Rs. 3 billion) and have to ensure sound corporate governance.

Initially, equity participation by foreign banks would be permitted only in the private sector banks that are identified by the RBI for restructuring. On an application made by a foreign bank for acquisition of 5% or more in any private bank, the RBI would consider the standing and reputation of the foreign bank and shall permit such acquisition only if it is satisfied that the investment by such foreign bank is in the long term interest of all the stake holders of the investee bank.

It was proposed that after review of first phase; beginning April 2009 foreign banks will be allowed to acquire up to 74% of equity capital in private sector banks in India. Taking a view of the current global financial turmoil and concerns regarding the financial strength of banks around the world, the RBI has decided to put on hold the second phase of the Roadmap and leave unchanged its policy on presence of foreign banks in the country. While announcing its annual policy for the year 2009-10 the RBI said that it would continue with the current policy and procedures governing the presence of foreign banks in India. A review will happen once there is greater clarity regarding stability, recovery of the global financial system, and a shared understanding on the regulatory and supervisory architecture around the world.

135 The RBI’s acknowledgement is required for the acquisition or transfer of a bank’s shares, which will take the aggregate holding (both direct and indirect, beneficial or otherwise) of an individual or a group to equivalent of 5% or more of its total paid up capital. The RBI, while granting acknowledgement, may take into account all matters that it considers relevant to the application, including ensuring that shareholders whose aggregate holdings are above specified thresholds meet fitness and propriety tests. In determining whether the acquirer or transferee is fit and proper to be a shareholder, the RBI may take into account various factors including, but not limited to the acquirer or transferee’s integrity, reputation and track record in financial matters and compliance with tax laws, proceedings of a serious disciplinary or criminal nature against the acquirer or transferee and the source of funds for the investment. While granting acknowledgement for acquisition or transfer of shares that takes the acquirer’s shareholding to 10% or more and up to 30% of a private sector bank’s paid-up capital, the RBI may consider additional factors, including but not limited to: • the source and stability of funds for the acquisition and ability to access financial markets as a source of continuing financial support for the bank, • the business record and experience of the applicant including any experience of acquisition of companies, • the extent to which the acquirer’s corporate structure is in consonance with effective supervision and regulation of its operations; and • in case the applicant is a financial entity, whether the applicant is a widely held entity, publicly listed and a well established regulated financial entity in good standing in the financial community. While granting acknowledgement for acquisition or transfer of shares that takes the acquirer’s shareholding to 30% or more of a private sector bank’s paid-up capital, the RBI may consider additional factors, including but not limited to whether or not the acquisition is in the public interest and shareholder agreements and their impact on the control and management of the bank’s operations. Investments in Indian companies can be made both by non-resident as well as resident Indian entities. Any investment by a non-resident entity in an Indian company is considered direct foreign investment. Investment by resident Indian entities could comprise both of resident and non-resident investment. An Indian company would be considered to have indirect foreign investment if the Indian investing company has foreign investment in it. Indirect cascading investment through multi-layered structure will also be taken into account. The Ministry of Commerce & Industry, Department of Industrial Policy & Promotion has vide Press Note No. 2 (2009 Series) dated 13 February 2009, issued guidelines for calculation of total direct and indirect foreign investment in Indian companies.

Guidelines for Merger and Amalgamation of Private Sector Banks The RBI issued guidelines in May 2005 on mergers and amalgamation of private sector banks. The guidelines relate to: (i) an amalgamation of two banks and (ii) an amalgamation of a NBFC with a bank. In the case of an amalgamation of two banks, Section 44A of the Banking Regulation Act requires that a draft scheme of amalgamation be approved by the shareholders of each bank by passing a resolution which requires a two-thirds majority. Additionally, the draft scheme must also be submitted to the RBI for sanction. Where a NBFC is proposed to be amalgamated into a bank, the bank should obtain the approval of the RBI before it is submitted to the relevant high court for approval. Similar provisions apply in the rare case where a bank is amalgamated into a NBFC. In February 2005, the RBI has issued a policy on ownership and governance in private sector banks. The key provisions of the policy on ownership of banks are: • No single entity or group of related entities would be permitted to directly or indirectly hold more than 10% of the equity capital of a private sector bank and any higher level of acquisition would require the RBI’s prior approval; • Banks with shareholders with holdings in excess of the prescribed limit would have to indicate a plan for compliance; • In respect of corporate shareholders, the objective would be to ensure that no entity or group of related entities has a shareholding in excess of 10% in the corporate shareholder. In case of shareholders that are financial entities, the objective will be to ensure that it is widely held, publicly listed and well regulated; and • Banks would be responsible for the “fit and proper” criteria for shareholders on an ongoing basis.

136 Credit Information Bureaus The Parliament of India has enacted the Credit Information Companies (Regulation) Act, 2005, pursuant to which every credit institution, including banks, has to become a member of a credit information bureau and furnish to it such credit information as may be required by the credit information bureau about persons who enjoy a credit relationship with the credit institution. Other credit institutions, credit information bureaus and such other persons as the RBI specifies may access such disclosed credit information.

Special Status of Banks in India The special status of banks is recognised under various statutes including the Sick Industrial Companies Act, 1985, Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and the SARFAESI Act. As a bank, the Bank is entitled to certain benefits under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 which provides for establishment of Debt Recovery Tribunals for expeditious adjudication and recovery of debts due to any bank or Public Financial Institution or to a consortium of banks and Public Financial Institutions. Under this Act, the procedures for recoveries of debt have been simplified and time frames been fixed for speedy disposal of cases. Upon establishment of the Debt Recovery Tribunal, no court or other authority can exercise jurisdiction in relation to matters covered by this Act, except the higher courts in India in certain circumstances.

Income Tax Benefits The Bank is entitled to certain tax benefits under the Indian Income-tax Act including the following: • The Bank’s dividend income earned from domestic is exempt from income tax. • The Bank is entitled to a tax deduction on the provisioning towards bad and doubtful debts equal to 7.5% of the Bank’s total business income, computed before making any deductions prescribed under section 36(1)(viia) of the Income Tax Act and to the extent of 10% of the aggregate average advances made by its rural branches computed in the manner prescribed.

Regulations governing International Operations The Bank’s international operations are governed by regulations in the countries in which the Bank has a presence. In Singapore, the Bank has a merchant banking branch with Asian Currency Unit (“ACU”) capabilities, regulated by the Monetary Authority of Singapore. The Singapore branch is currently engaged in corporate & institutional banking, merchant banking, treasury related activities and private banking. The Bank’s branch in Hong Kong is regulated by the Hong Kong Monetary Authority (“HKMA”) and is permitted to undertake all type of banking business within the purview of HKMA. The Bank has a branch in DIFC which is regulated by the Dubai Financial Services Authority (“DFSA”) and is licensed to engage in the activities of accepting deposits, providing credit, dealing in investments as principal and agent, arranging credit or deals in investments, managing assets, advising on financial products or credit and providing custody in respect of credit, shares, debentures, options, warrants, units and futures.

Representative Offices The Bank has two representative offices, one in Shanghai, and the other in Dubai, UAE. The Bank’s representative office in Shanghai, China is regulated by the China Banking Regulatory Commission. The representative office is only permitted to engage in representational activities, such as investigating and collecting market information for the Bank and advising on trade related opportunities to the customers of the Bank. The Bank’s representative office in Dubai, UAE is regulated by Central Bank of the UAE. The representative office at Dubai is permitted to carry out marketing of permitted products, providing banking, financial and investment consultation services along with other representational activities.

137 INDIAN SECURITIES MARKET The information in this section has been extracted from publicly available documents from officially prepared materials from SEBI, the BSE and the NSE and has not been prepared or independently verified by the Bank, the Lead Managers or any of their respective affiliates or advisers.

The Indian Securities Market India has a long history of organised securities trading. In 1875, the first stock exchange was established in Mumbai. The Securities and Exchange Board of India Act, 1992 granted powers to SEBI to regulate the Indian securities markets, including stock exchanges and other intermediaries in the capital markets, to promote and monitor self-regulatory organisations, to prohibit fraudulent and unfair trade practices and insider trading and to regulate substantial acquisitions of shares and takeovers of companies. SEBI has also issued guidelines and regulations concerning minimum disclosure requirements by public companies, rules and regulations concerning investor protection, insider trading, substantial acquisitions of shares and takeovers of companies, buy-backs of securities, delisting of securities, employee stock option schemes, stockbrokers, merchant bankers, underwriters, mutual funds, foreign institutional investors, credit rating agencies and other capital markets participants.

Stock Exchange Regulation India’s stock exchanges are regulated primarily by SEBI, as well as by the Government acting through the Ministry of Finance, Stock Exchange Division under the Securities Contracts (Regulation) Act, 1956 (the “SCRA”) and the Securities Contracts (Regulation) Rules, 1957 (“SCRR”), which along with the rules, by-laws and regulations of the respective stock exchanges, regulate the recognition of stock exchanges, the qualifications for membership thereof and the manner in which contracts are entered into and enforced between members.

Listing The listing of securities on recognised Indian stock exchanges is regulated by the SCRA, the SCRR and the listing agreement of the respective stock exchanges. Further, under the listing agreement, the governing body of each stock exchange is empowered to suspend trading of or dealing in a listed security for breach of the Bank’s obligations under such agreement, subject to the Bank receiving prior notice of the intent of the stock exchange. In order to restrict abnormal price volatility in any particular stock, SEBI has instructed stock exchanges to apply daily circuit breakers. This does not allow transactions beyond a certain level of price volatility. An index- based marketwide equity and equity derivatives circuit breaker system has been implemented and, additionally, there are currently in place varying individual scrip-wise bands. Circuit breakers are not applicable to certain stocks listed in the “A” category of the BSE, on which stocks, futures and options are traded. The Indian stock exchanges can also exercise the power to suspend trading during periods of market volatility. Trading on Indian stock exchanges is subject to margin requirements imposed by stock exchanges that are required to be paid by stockbrokers. At the discretion of stock exchanges and under instructions from SEBI, stock exchanges can also impose ad hoc margins for specific stocks in the event of extreme volatility in price movements. A listed company can be delisted under the provisions of the SEBI (Delisting of Equity Shares) Regulations, 2009, (the “Delisting Regulations”), which govern voluntary and compulsory delisting of shares of Indian companies from the stock exchanges. SEBI has the power to amend listing agreements and by-laws of stock exchanges in India. Any amendment of the by-laws by the stock exchanges on their own requires the prior approval of SEBI.

Public Issuances of Securities and Disclosures under the Companies Act and Securities Regulations Under the Companies Act, a public offering of securities in India must be made by means of a prospectus, which must contain information specified in the Companies Act and SEBI Regulations, as amended. The prospectus must be filed with the Registrar of Companies having jurisdiction over the place where a company’s registered office is situated, which in the case of the Bank is the Registrar of Companies located at Ahmedabad. A company’s directors and promoters are subject to civil and criminal liability for misstatements/ misrepresentations in a prospectus. The Companies Act also sets forth procedures for the acceptance of subscriptions and the allotment of securities among subscribers and establishes maximum commission rates for the sale of securities. SEBI has issued detailed guidelines through the SEBI Regulations concerning disclosures by public companies and investor protection. Public limited companies are required under the Companies Act and securities regulations to prepare, file with the Registrar of Companies and circulate to their shareholders audited annual accounts which comply with the Companies Act’s disclosure requirements and regulations governing their manner of presentation and which include sections pertaining to corporate governance, related party transactions and the management’s discussion

138 and analysis as required under the listing agreement. In addition, a listed company is subject to continuing disclosure requirements pursuant to the terms of its listing agreement with the relevant stock exchange. Accordingly, listed companies are now required to publish unaudited financial statements (subject to a limited review by auditors) on a quarterly basis. They are also required to inform stock exchanges immediately regarding any stock price-sensitive information.

Indian Stock Exchanges There are now 23 stock exchanges in India, most of which have their own governing board for self regulation. A number of these exchanges have been directed by SEBI to file schemes for demutualisation as a measure of moving towards greater investor protection. The BSE and NSE are premier stock exchanges of India and together hold a dominant position in terms of number of listed companies, market capitalisation and trading activity.

BSE Established in 1875, the BSE is the oldest stock exchange in India. In 1956 it became the first stock exchange in India to obtain permanent recognition from the Indian Government under the SCRA. Recently, pursuant to the SEBI’s BSE (Corporatisation and Demutualisation) Scheme, 2005, with effect from 20 August 2005 the BSE has been corporatised and demutualised and is now a company under the Companies Act. The BSE switched over from an open outcry trading system to an online trading network in May 1995 and has today expanded this network to over 359 towns and cities in India. As of 31 July 2009, the BSE had 1,002 members, comprising 174 individual members, 805 Indian companies and 23 FIIs (Source: BSE). Only a member of the BSE has the right to trade in the stocks listed on the BSE. As of 31 July 2009, there were 4,937 listed companies trading on the BSE and the estimated market capitalisation of stocks trading on the BSE was Rs. 51,399 billion. In July 2009, the average daily turnover on the BSE was Rs. 60,429 million. As of 31 July 2009, the BSE had 15,410 trader work stations spread over 338 cities (Source: BSE).

NSE The NSE was established by financial institutions and banks to provide nationwide, online, satellite-linked, screen-based trading facilities for market-makers and electronic clearing and settlement for securities including government securities, debentures, public sector bonds and units. The NSE was recognised as a stock exchange under the SCRA in April 1993 and commenced operations in the wholesale debt market segment in June 1994. The capital market (equities) segment commenced operations in November 1994 and operations in the derivatives segment commenced in June 2000. As of 31 July 2009, there were 1,426 listed companies on the NSE and the estimated market capitalisation of stocks on the NSE was Rs. 48,164 billion (Source: NSE). In July 2009, the average daily traded value of the capital market segment was Rs. 185,280 million. As of 31 March 2009, the NSE had 1,227 trading members and over 31,798 registered sub-brokers on the capital market segment and the wholesale debt market segment. (Source: NSE) The NSE launched the NSE 50 index, now known as S&P CNX NIFTY, on 22 April 1996 and the Mid-cap Index on 1 January 1996. The NSE has a wide network in major metropolitan cities and its screen based trading and central monitoring system ensure greater transparency.

Internet-based Securities Trading and Services SEBI approved internet trading in January 2000. Internet trading takes place through order routing systems, which route client orders to exchange trading systems for execution. Stockbrokers interested in providing this service are required to apply for permission to the relevant stock exchange and also have to comply with certain minimum conditions stipulated by the SEBI. The NSE became the first exchange to grant approval to its members for providing internet-based trading services. Internet trading is possible on both the “equities” as well as the “derivatives” segments of the NSE.

Trading Hours Trading on both NSE and BSE occurs from Monday through Friday, between 9.55 a.m. and 3.30 p.m. The BSE and NSE are closed on public holidays.

Trading Procedure Electronic trading was introduced in India by NSE, which developed its technology in-house. NSE introduced for the first time in India, fully automated screen based trading, which uses a modern, fully computerised trading system designed to offer investors across the length and breadth of the country a safe and easy way to invest. The NSE trading system called ‘National Exchange for Automated Trading’ (NEAT) is a

139 fully automated screen based trading system, which adopts the principle of an order driven market. In order to facilitate smooth transactions, in 1995, BSE replaced its open outcry system with BSE On-line Trading (BOLT) facility in 1995. This totally automated screen based trading in securities was put into practice nation-wide. This has enhanced transparency in dealings and has assisted considerably in smoothening settlement cycles and improving efficiency in back-office work.

Takeover Code Disclosure and mandatory bid obligations for listed Indian companies under Indian law are governed by the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, of India (as amended from time to time) (the “Takeover Code”) which prescribes certain thresholds or trigger points that give rise to these obligations, as applicable. The Takeover Code is under constant review by SEBI and was last amended on 13 February 2009. Since the Bank is an Indian listed company, the provisions of the Takeover Code will apply to acquisition of its equity shares. The Takeover Code sets forth the contents of the required public announcements as well as the minimum offer price. The minimum offer price depends on whether the shares of the company are “frequently” or “infrequently” traded (as defined in the Takeover Code). If the shares are frequently traded, the offer price shall be the higher of: • the negotiated price under the agreement for the acquisition of shares in the company; • the highest price paid by the acquirer or persons acting in concert with him for any acquisitions, including through an allotment in a public, preferential or rights issue, during the 26-week period prior to the date of public announcement; • the average of the weekly high and low of the closing prices of the shares of the company quoted on the stock exchange where the shares of the company are most frequently traded during the 26 weeks period prior to the date of public announcement, or the average of the daily high and low of the closing issue of the shares as quoted on the stock exchange where the shares of the company are most frequently traded during the two weeks preceding the date of public announcement, whichever is higher. The public open offer provisions of the Takeover Code do not apply to, among other things, certain specified acquisitions, including the acquisition of shares: (i) by allotment in a public and rights issue subject to the fulfillment of certain conditions, (ii) pursuant to an underwriting agreement, (iii) by registered stockbrokers in the ordinary course of business on behalf of clients, (iv) in unlisted companies (unless such acquisition results in an indirect acquisition of shares in excess of 15% in a listed company), (v) pursuant to a scheme of reconstruction or arrangement including amalgamation or merger or demerger under any law or regulation, Indian or foreign; (vi) pursuant to an inter se transfer between promoters or group companies, subject to certain conditions, or (vii) pursuant to a scheme under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985. The Takeover Code does not apply to acquisitions in the ordinary course of business by public financial institutions either on their own account or as a pledgee. An application may also be filled with the Takeover Panel seeking exemption from the requirements of the Takeover Code. The obligation to make an open offer also does not arise in case of acquisition of depositary receipts so long as they are not converted into shares carrying voting rights.

Minimum Level of Public Shareholding In order to ensure availability of floating stock of listed companies, SEBI has recently notified amendments to the Listing Agreement. All listed companies are required to ensure that their minimum level of public shareholding remains at or above 25%. This requirement does not apply to those companies who at the time of their initial listing had offered at least 10% of the issue size to the public pursuant to Rule 19(2)(b) of the SCRR, nor to companies that have reached a size of 20,000,000 or more in terms of the number of listed shares and Rs. 10,000 million or more in terms of market capitalisation. However such listed companies are required to maintain the minimum level of public shareholding at 10% of the total number of issued ordinary shares of a class or kind for the purposes of listing. Failure to comply with this clause in the Listing Agreement enables stock exchanges to delist its shares pursuant to the terms of the SEBI Delisting Regulations (which, inter alia, provide for the payment of a fair price to shareholders) and may result in penal action being taken against the listed company pursuant to the Securities and Exchange Board of India Act, 1992.

Insider Trading Regulations The SEBI (Prohibition of Insider Trading) Regulations, 1992 (“Insider Trading Regulations”) have been notified by SEBI to prevent insider trading in India by prohibiting and penalising insider trading in India. The

140 Insider Trader Regulations prohibit an “insider” from dealing, either on his own behalf or on behalf of any other person, in the securities of a company listed on any stock exchange when in possession of unpublished price sensitive information. The terms “unpublished” and “price-sensitive information” are defined in the Insider Trading Regulations. The insider is also prohibited from communicating, counselling or procuring, directly or indirectly, any unpublished price sensitive information to any other person while in possession of such information. The prohibition under Regulation 3A of the Insider Trading Regulations also extends to a company dealing, while in the possession of unpublished price sensitive information, in securities of another company or its associate listed on any stock exchange and is not restricted to insiders alone. SEBI amended the Insider Trading Regulations to provide for certain defences to the prohibition on companies in possession of unpublished price sensitive information dealing in securities. On a continuing basis, under the Insider Trading Regulations, any person who holds more than 5% of the shares or of the voting rights in any listed company is required to disclose to the company the number of shares or voting rights held by him and any change in shareholding or voting rights (even if such change results in the shareholding falling below 5%) if there has been change in such holdings from the last disclosure made, provided such change exceeds 2% of the total shareholding or voting rights in the company. Such disclosure is required to be made within four working days of: (i) the receipt of intimation of allotment of the shares; or (ii) the acquisition or the sale of the shares or voting rights.

Depositaries Trading of securities in book-entry form commenced in December 1996. In January 1998, SEBI notified of various companies for compulsory dematerialised trading by certain categories of investors such as foreign institutional investors (“FIIs”) and other institutional investors and also notified compulsory dematerialised trading in specified scrips for all retail investors. Subsequently, SEBI has significantly increased the number of scrips in which dematerialised trading is compulsory for all investors. Under the Depositories Act and guidelines issued by SEBI, the Bank shall give the option to subscribers/shareholders to receive the security certificates and hold securities in dematerialised form with a depositary. Transfers of shares in book-entry form require both the seller and the purchaser of the equity shares to establish accounts with depositary participants registered with the depositaries established under the Depositories Act, 1996. See “Description of Share Capital — Transfer of shares”.

141 TERMS AND CONDITIONS OF THE GDRS

The following terms and conditions (subject to completion and amendment and excepting sentences in italics) will apply to the GDRs, and will be endorsed on each GDR certificate: The Global Depositary Receipts (“GDRs”) represented by this certificate are each issued in respect of equity shares of par value Rs. 10 each (the “Shares”) in Axis Bank Limited (the “Bank”) pursuant to and subject to an Amended and Restated Deposit Agreement to be dated on or about 24 September 2009 made between the Bank and The Bank of New York Mellon in its capacity as depositary (the “Depositary”) for the “Regulation S Facility” and for the “Rule 144A Facility” (such agreement, as amended from time to time, being hereinafter referred to as the “Deposit Agreement”). Pursuant to the provisions of the Deposit Agreement, the Depositary has appointed ICICI Bank Limited as custodian (the “Custodian”) to receive and hold on its behalf any relevant documentation in respect of certain Shares (the “Deposited Shares”) and all rights, interests and other securities, property and cash deposited with the Custodian which are attributable to the Deposited Shares (together with the Deposited Shares, the “Deposited Property”). The Depositary shall hold Deposited Property for the benefit of the Holders (as defined below) as bare trustee in proportion to their holdings of GDRs. In these terms and conditions (the “Conditions”), references to the “Depositary” are to The Bank of New York Mellon and/or any other depositary which may from time to time be appointed under the Deposit Agreement, references to the “Custodian” are to ICICI Bank Limited or any other custodian from time to time appointed under the Deposit Agreement and references to the “Main Office” mean, in relation to the relevant Custodian, its head office in the city of Mumbai or such other location of the head office of the Custodian in India as may be designated by the Custodian with the approval of the Depositary (if outside the city of Mumbai) or the head office of any other custodian from time to time appointed under the Deposit Agreement. The GDRs will upon issue be represented by interests in a Temporary Master Regulation S GDR, evidencing Regulation S GDRs, and by interests in a Temporary Master Rule 144A GDR, evidencing Rule 144A GDRs. Interests in the Temporary Master Regulation S GDRs are exchangeable on the day which is the later of (a) the expiration of the 40 day period beginning on the latest of the commencement of the GDRs offering, the original issue date of the GDRs and the latest issue date with respect to additional GDRs (if any) issued pursuant to over allotments, and (b) the date on which the shares are admitted to listing on the BSE and the NSE, for interests in the existing Master Regulation S GDR issued on 21 March 2005. The Master Regulation S GDR and the Master Rule 144A GDR (together the “Master GDRs”) will only be exchanged for certificates in definitive registered form in respect of GDRs representing all or part of the interest of the Holder in the respective Master GDR on the day which is the later of (a) the date on which the GDRs are admitted to listing on the Official List and (b) the date on which the equity shares are admitted to listing on the BSE and the NSE, in the circumstances set out in “Summary of Provisions Relating to the GDRs in Master Form”. References in these Conditions to the “Holder” of any GDR shall mean the person or persons registered on the books of the Depositary maintained for such purpose (the “Register”) as holder. These Conditions include summaries of, and are subject to, the detailed provisions of the Deposit Agreement, which includes the forms of the certificates in respect of the GDRs. Copies of the Deposit Agreement are available for inspection at the specified office of the Depositary and each Agent (as defined in Condition 17) and at the Main Office of the Custodian. Terms used in these Conditions and not defined herein but which are defined in the Deposit Agreement have the meanings ascribed to them in the Deposit Agreement. Holders of GDRs are not party to the Deposit Agreement and thus, pursuant to the provisions of the Deposit Agreement, have no contractual rights against, or obligations to, the Bank or Depositary. However, the Deed Poll executed by the Bank in favour of the Holders provides that, if the Bank fails to perform the obligations imposed on it by certain specified provisions of the Deposit Agreement, any Holder may enforce the relevant provisions of the Deposit Agreement as if it were a party to the Deposit Agreement and was the “Depositary” in respect of that number of Deposited Shares to which the GDRs of which he is the Holder relate. The Depositary is under no duty to enforce any of the provisions of the Deposit Agreement on behalf of any Holder of a GDR or any other person. Holders are deemed to have notice of and be bound by all the provisions of the Deposit Agreement applicable to them.

1. Withdrawal of Deposited Property and Further Issues of GDRs 1.1 Any Holder may request withdrawal of, and the Depositary shall thereupon relinquish, the Deposited Property attributable to any GDR upon production of such evidence of the entitlement of the Holder to the relevant GDR as the Depositary may reasonably require, at the specified office of the Depositary or any Agent accompanied by: (i) a duly executed order (in a form approved by the Depositary) requesting the Depositary to cause the Deposited Property being withdrawn to be delivered at the Main Office of the Custodian, or (at the request,

142 risk and expense of the Holder, and only if permitted by applicable law from time to time) at the specified office located in New York, London or India of the Depositary or any Agent, or to the order in writing of, the person or persons designated in such order; (ii) the payment of such fees, taxes, duties, charges and expenses as may be required under these Conditions or the Deposit Agreement; (iii) the surrender (if appropriate) of GDR certificates in definitive registered form properly endorsed in blank or accompanied by proper instruments of transfer satisfactory to the Depositary to which the Deposited Property being withdrawn is attributable; and (iv) the delivery to the Depositary of a duly executed and completed certificate substantially in the form set out in either (a) Schedule 3, Part B, to the Deposit Agreement, if Deposited Property is to be withdrawn or delivered during the Distribution Compliance Period (such term being defined as the 40-day period beginning on the latest of (i) the commencement of the offering of GDRs, (ii) the original issue date of the GDRs, and (iii) the issue date with respect to the additional GDRs, (if any, issued to cover over- allotments) in respect of surrendered Regulation S GDRs, or (b) in Schedule 4, Part B to the Deposit Agreement, if the Deposited Property is to be withdrawn or delivered in respect of Rule 144A GDRs. 1.2 Certificates representing withdrawn Deposited Shares will contain such legends (including, if applicable, the legend required in respect of the Securities Act), and withdrawals of Deposited Shares may be subject to such transfer restrictions or certificates, as the Bank and the Depositary may from time to time determine to be necessary for compliance with applicable laws and regulations. 1.3 Upon production of such documentation and the making of such payment as aforesaid for withdrawal of the Deposited Property in accordance with Condition 1.1, the Depositary will direct the Custodian by tested telex, facsimile or SWIFT message within a reasonable time after receiving such direction from such Holder, to deliver at its Main Office to, or to the order in writing of, the person or persons designated in the accompanying order: (i) a certificate (if any) for, or other appropriate instrument of title (if any) to or evidence of a book- entry transfer in respect of the relevant Deposited Shares, registered in the name of the Depositary or its nominee and accompanied by such instruments of transfer in blank or to the person or persons specified in the order for withdrawal and such other documents, if any, as are required by law for the transfer thereof; and (ii) all other property forming part of the Deposited Property attributable to such GDR, accompanied, if required by law, by one or more duly executed endorsements or instruments of transfer in respect thereof as aforesaid; provided however that the Depositary may make delivery at its specified office in New York of any Deposited Property which is in the form of cash; PROVIDED FURTHER THAT the Depositary (at the request, risk and expense of any Holder so surrendering a GDR): (a) will direct the Custodian to deliver the certificates for, or other instruments of title to, or book-entry transfer in respect of, the relevant Deposited Shares and any document relative thereto and any other documents referred to in sub-paragraphs 1.3(i) and (ii) of this Condition 1 (together with any other property forming part of the Deposited Property which may be held by the Custodian or its agent and is attributable to such Deposited Shares); and/or (b) will deliver any other property forming part of the Deposited Property which may be held by the Depositary and is attributable to such GDR (accompanied, if required by law, by one or more duly executed endorsements or instruments of transfer in respect thereof); in each case to the specified office located in New York or London of the Depositary (if permitted by applicable law from time to time) or at the specified office in India of any Agent as designated by the surrendering Holder in the order accompanying such GDR. GDR Holders wishing to convert GDRs into underlying shares will be required to open an account with a depositary participant of the National Securities Depository Limited or Central Depository Services (India) Ltd. to hold and sell the shares. See “Indian Securities Market — Depositaries”. 1.4 Delivery by the Depositary, any Agent and the Custodian of all certificates, instruments, dividends or other property forming part of the Deposited Property as specified in this Condition 1 will be made subject to any laws or regulations applicable thereto. No Shares may be deposited by persons located in India, residents of India or for, or on the account of, such persons. Under current Indian laws and regulations, the Depositary cannot accept deposits of outstanding

143 Shares and issue GDRs representing such Shares without prior approval of the Government of India. However, an investor who surrenders a GDR and withdraws Shares may be permitted to redeposit those Shares in the relevant Facility in exchange for GDRs and the Depositary may accept deposits of outstanding Shares purchased by a non-resident of India on the local stock exchange and issue GDRs representing those Shares. However, in each case, the number of Shares redeposited or deposited cannot exceed the number represented by GDRs converted into underlying Shares. 1.5 After the initial deposit of Shares in connection with the issuance of GDRs pursuant to the Listing Particulars of the Bank dated 22 September 2009, unless otherwise agreed by the Depositary and the Bank and permitted by applicable law, only the following may be deposited under the Deposit Agreement: (a) Shares issued as a dividend or free distribution in respect of Deposited Shares pursuant to Condition 5; (b) Shares subscribed or acquired by Holders from the Bank through the exercise of rights distributed by the Bank to such persons in respect of Deposited Shares pursuant to Condition 7; (c) in connection with transfers between the depositary facility for the Rule 144A GDRs and the depositary facility for the Regulation S GDRs; (d) Shares issued upon the conversion of any convertible bonds issued by the Bank after the date of this Deposit Agreement; and (e) Shares to be represented by the same number of GDRs as have previously been cancelled and not already been replaced by further newly issued GDRs. The Depositary may, subject to the restrictions set forth above and in accordance with the terms of the Deposit Agreement and these Conditions upon delivery of a duly executed order (in a form reasonably approved by the Depositary) and a duly executed certificate substantially in the form of (a) Schedule 3, Part A of the Deposit Agreement by or on behalf of any investor who is to become the beneficial owner of the Regulation S GDRs, or (b) Schedule 4, Part A of the Deposit Agreement by or on behalf of any investor who is to become the beneficial owner of the Rule 144A GDRs, from time to time execute and deliver further GDRs having the same terms and conditions as the GDRs which are then outstanding in all respects (or the same in all respects except for the first dividend payment on the equity shares corresponding to such further GDRs) and, subject to the terms of the Deposit Agreement and these Conditions, the Depositary may accept for deposit any further equity shares in connection therewith, so that such further GDRs shall form a single series with the already outstanding GDRs. References in these Conditions to the GDRs include (unless the context requires otherwise) any further GDRs issued pursuant to this Condition and forming a single series with the already outstanding GDRs. The certificate to be provided in the form of Schedule 3, Part A of the Deposit Agreement certifies, among other things, that (i) the person providing such certificate is not a U.S. person (as defined in Regulation S under the United States Securities Act of 1933, as amended (the “Securities Act”), is located outside the United States and will comply with the restrictions on transfer set forth under “Transfer Restrictions”. The certificate to be provided in the form of Schedule 4, Part A of the Deposit Agreement certifies, among other things, that the person providing such certificate is a qualified institutional buyer (as defined in Rule 144A under the Securities Act (“QIB”)) or is acting for the account of another person and such person is a QIB and, in either case, will comply with the restrictions on transfer set forth under “Transfer Restrictions”. 1.6 Any further GDRs issued pursuant to Condition 1.5 which correspond to equity shares which have different dividend rights from the equity shares corresponding to the outstanding GDRs will correspond to a separate temporary Master GDR. Upon becoming fungible with outstanding GDRs, such further GDRs shall be evidenced by a Master GDR (by increasing the total number of GDRs evidenced by the relevant Master GDR by the number of such further GDRs, as applicable). 1.7 The Depositary may issue GDRs against rights to receive equity shares from the Bank (or any agent of the Bank recording equity share ownership). No such issue of GDRs will be deemed a “Pre-Release” as defined in Condition 1.8. 1.8 Unless requested in writing by the Bank to cease doing so, and notwithstanding the provisions of Condition 1.4, the Depositary may execute and deliver GDRs or issue interests in the Master GDR, prior to the receipt of Shares (a “Pre-Release”). The Depositary may, pursuant to Condition 1.1, deliver Shares upon the receipt and cancellation of GDRs, which have been Pre-Released, whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that such GDR has been Pre-Released. The Depositary may receive GDRs in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release will be (a) preceded or accompanied by a written representation from the person to whom GDRs or Deposited Property is to be delivered

144 (the “Pre-Releasee”) that such person, or its customer, (i) owns or represents the owner of the corresponding Deposited Property or GDRs to be remitted (as the case may be), (ii) assigns all beneficial right, title and interest in such Deposited Property or GDRs (as the case may be) to the Depositary in its capacity as such and for the benefit of the Holders, (iii) will not take any action with respect to such GDRs or Deposited Property (as the case may be) that is inconsistent with the transfer of beneficial ownership (including without the consent of the Depositary, disposing of such Deposited Property or GDRs, as the case may be), other than in satisfaction of such Pre-Release, (b) at all times fully collateralised with cash or such other collateral as the Depositary determines in good faith will provide substantially similar liquidity and security, (c) terminable by the Depositary on not more than five (5) business days’ notice, and (d) subject to such further indemnities and credit regulations as the Depositary deems appropriate. The number of GDRs which are outstanding at any time as a result of Pre-Release will not normally represent more than 30% of the total number of GDRs then outstanding; provided, however, that the Depositary reserves the right to change or disregard such limit from time to time as it deems appropriate and may, with the prior written consent of the Bank, change such limits for the purpose of general application. The Depositary will also set dollar limits with respect to such transactions hereunder with any particular Pre-Releasee hereunder on a case by case basis as the Depositary deems appropriate. The collateral referred to in sub-paragraph (b) above shall be held by the Depositary as security for the performance of the Pre-Releasee’s obligations in connection herewith, including the Pre-Releasee’s obligation to deliver Shares and/or other securities or GDRs upon termination of a transaction anticipated hereunder (and shall not, for the avoidance of doubt, constitute Deposited Property hereunder). The Depositary may retain for its own account any compensation received by it in connection with the foregoing including, without limitation, earnings on the collateral. The person to whom any Pre-Release of Regulation S GDRs or Regulation S Shares is to be made pursuant to this paragraph shall be required to deliver to the Depositary a duly executed and completed certificate substantially in the form set out in Schedule 3 Part A of the Deposit Agreement. The person to whom any Pre-Release of Rule 144A GDRs or Rule 144A Shares is to be made pursuant to this paragraph shall be required to deliver to the Depositary a duly executed and completed certificate substantially in the form set out in Schedule 4 Part A of the Deposit Agreement.

2. Suspension of Issue of GDRs and of Withdrawal of Deposited Property The Depositary shall be entitled, at its reasonable discretion, at such times as it shall determine, to suspend the issue or transfer of GDRs (and the deposit of Shares) generally or in respect of particular Shares. In particular, to the extent that it is in its opinion practicable for it to do so, the Depositary will refuse to accept Shares for deposit, to execute and deliver GDRs or to register transfers of GDRs if it has been notified by the Bank in writing that the Deposited Shares or GDRs or any depositary shares corresponding to Shares are listed on a U.S. Securities Exchange or quoted on a U.S. automated inter dealer quotation system. Further, the Depositary may suspend the withdrawal of Deposited Property during any period when the Register, or the register of shareholders of the Bank is closed or, generally or in one or more localities, suspend the withdrawal of Deposited Property or deposit of Shares if deemed necessary or desirable or advisable by the Depositary in good faith at any time or from time to time, in order to comply with any applicable law or governmental or stock exchange regulations or any provision of the Deposit Agreement or for any other reason. The Depositary shall (unless otherwise notified by the Bank) restrict the withdrawal of Deposited Shares where the Bank notifies the Depositary in writing that such withdrawal would result in ownership of Shares exceeding any limit under any applicable law, government resolution or the Bank’s constitutive documents or would otherwise violate any applicable laws.

3. Transfer and Ownership The GDRs are in registered form, each corresponding to one Share. Title to the GDRs passes by registration in the Register and accordingly, transfer of title to a GDR is effective only upon such registration. The Depositary will refuse to accept for transfer any GDRs if it reasonably believes that such transfer would result in violation of any applicable laws. The Holder of any GDR will (except as otherwise required by law) be treated by the Depositary and the Bank as its beneficial owner for all purposes (whether or not any payment or other distribution in respect of such GDR is overdue and regardless of any notice of ownership, trust or any interest in it or any writing on, or theft or loss of any certificate issued in respect of it) and no person will be liable for so treating the Holder. Interests in Rule 144A GDRs corresponding to the Master Rule 144A GDR may be transferred to a person whose interest in such Rule 144A GDRs is subsequently represented by the Master Regulation S GDR only, if applicable, upon receipt by the Depositary of written certifications (in the forms provided in the Deposit

145 Agreement) from the transferor and the transferee to the effect that such transfer is being made in accordance with Rule 903 or Rule 904 of Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”). Prior to expiration of the Distribution Compliance Period, no owner of Regulation S GDRs may transfer Regulation S GDRs or Shares represented thereby except in accordance with Rule 903 or Rule 904 of Regulation S under the U.S. Securities Act or to, or for the account of, a qualified institutional buyer as defined in Rule 144A under the U.S. Securities Act (each a “QIB”) in a transaction meeting the requirements of such Rule 144A. There shall be no transfer of Regulation S GDRs by an owner thereof to a QIB except as aforesaid and unless such owner (i) withdraws Regulation S Shares from the Regulation S Facility in accordance with Clause 3.5 of the Deposit Agreement and (ii) instructs the Depositary to deliver the Shares so withdrawn to the account of the Custodian to be deposited into the Rule 144A Facility for issuance thereunder of Rule 144A GDRs to, or for the account of, such QIB. Issuance of such Rule 144A GDRs shall be subject to the terms and conditions of the Deposit Agreement, including, with respect to the deposit of Shares and the issuance of Rule 144A GDRs, delivery of the duly executed and completed written certificate and agreement required under the Deposit Agreement by or on behalf of each person who will be the beneficial owner of such Rule 144A GDRs certifying that such person is a QIB and agreeing that it will comply with the restrictions on transfer set forth therein and to payment of the fees, charges and taxes provided therein.

4. Cash Distributions Whenever the Depositary shall receive from the Bank any cash dividend or other cash distribution on or in respect of the Deposited Shares (including any amounts received in the liquidation of the Bank) or otherwise in connection with the Deposited Property, the Depositary shall, as soon as practicable, convert the same into United States dollars in accordance with Condition 8. The Depositary shall, if practicable in the opinion of the Depositary, give notice to the Holders of its receipt of such payment in accordance with Condition 23, specifying the amount per Deposited Share payable in respect of such dividend or distribution and the earliest date, determined by the Depositary, for transmission of such payment to Holders and shall as soon as practicable distribute any such amounts to the Holders in proportion to the number of Deposited Shares corresponding to the GDRs so held by them respectively, subject to and in accordance with the provisions of Conditions 9 and 11; PROVIDED THAT: (a) in the event that the Depositary is aware that any Deposited Shares are not entitled, by reason of the date of issue or transfer or otherwise, to such full proportionate amount, the amount so distributed to the relative Holders shall be adjusted accordingly; and (b) the Depositary will distribute only such amounts of cash dividends and other distributions as may be distributed without attributing to any GDR a fraction of the lowest integral unit of currency in which the distribution is made by the Depositary, and any balance remaining shall be retained by the Depositary beneficially as an additional fee under Condition 16.1(iv).

5. Distributions of Shares Whenever the Depositary shall receive from the Bank any distribution in respect of Deposited Shares which consists of a dividend or free distribution of Shares, the Depositary shall cause to be distributed to the Holders entitled thereto, in proportion to the number of Deposited Shares corresponding to the GDRs held by them respectively, additional GDRs corresponding to an aggregate number of Shares received pursuant to such dividend or distribution. Such additional GDRs shall be distributed by an increase in the number of GDRs corresponding to the Master GDRs or by an issue of certificates in definitive registered form in respect of GDRs, according to the manner in which the Holders hold their GDRs; PROVIDED THAT, if and in so far as the Depositary deems any such distribution to all or any Holders not to be reasonably practicable (including, without limitation, due to the fractions which would otherwise result or to any requirement that the Bank, the Custodian or the Depositary withhold an amount on account of taxes or other governmental charges) or to be unlawful, the Depositary shall (either by public or private sale and otherwise at its discretion, subject to all applicable laws and regulations) sell such Shares so received and distribute the net proceeds of such sale as a cash distribution pursuant to Condition 4 to the Holders entitled thereto.

6. Distributions other than in Cash or Shares Whenever the Depositary shall receive from the Bank any dividend or distribution in securities (other than Shares) or in other property (other than cash) on or in respect of the Deposited Property, the Depositary shall distribute or cause to be distributed such securities or other property to the Holders entitled thereto, in proportion to the number of Deposited Shares corresponding to the GDRs held by them respectively, in any manner that the Depositary may deem equitable and practicable for effecting such distribution; PROVIDED THAT, if and in so

146 far as the Depositary deems any such distribution to all or any Holders not to be reasonably practicable (including, without limitation, due to the fractions which would otherwise result or to any requirement that the Bank, the Custodian or the Depositary withhold an amount on account of taxes or other governmental charges) or to be unlawful, the Depositary shall deal with the securities or property so received, or any part thereof, in such way as the Depositary may determine to be equitable and practicable, including, without limitation, by way of sale (either by public or private sale and otherwise at its discretion, subject to all applicable laws and regulations) and shall (in the case of a sale) distribute the resulting net proceeds as a cash distribution pursuant to Condition 4 to the Holders entitled thereto.

7. Rights Issues If and whenever the Bank announces its intention to make any offer or invitation to the holders of Shares to subscribe for or to acquire Shares, securities or other assets by way of rights, the Depositary shall as soon as practicable give notice to the Holders, in accordance with Condition 23, of such offer or invitation, specifying, if applicable, the earliest date established for acceptance thereof, the last date established for acceptance thereof and the manner by which and time during which Holders may request the Depositary to exercise such rights as provided below or, if such be the case, specifying details of how the Depositary proposes to distribute the rights or the proceeds of any sale thereof. The Depositary will deal with such rights in the manner described below: (i) if and to the extent that the Depositary shall, at its discretion, deem it to be lawful and reasonably practicable, the Depositary shall make arrangements whereby the Holders may, upon payment of the subscription price in Indian rupees or other relevant currency together with such fees, taxes, duties, charges, costs and expenses as may be required under the Deposit Agreement and completion of such undertakings, declarations, certifications and other documents as the Depositary may reasonably require, request the Depositary to exercise such rights on their behalf with respect to the Deposited Shares and to distribute the Shares, securities or other assets so subscribed or acquired to the Holders entitled thereto by an increase in the numbers of GDRs corresponding to the Master GDRs or an issue of certificates in definitive registered form in respect of GDRs, according to the manner in which the Holders hold their GDRs; or (ii) if and to the extent that the Depositary shall at its discretion, deem it to be lawful and reasonably practicable, the Depositary will distribute such rights to the Holders entitled thereto in such manner as the Depositary may at its discretion determine; or (iii) if and to the extent that the Depositary deems any such arrangement and distribution as is referred to in paragraphs (i) and (ii) above to all or any Holders not to be lawful and reasonably practicable (including, without limitation, due to the fractions which would otherwise result or to any requirement that the Bank, the Custodian or the Depositary withhold an amount on account of taxes or other governmental charges) or to be unlawful, the Depositary (a) will, PROVIDED THAT Holders have not taken up rights through the Depositary as provided in (i) above, sell such rights (either by public or private sale and otherwise at its discretion subject to all applicable laws and regulations) or (b) may, if such rights are not transferable, in its discretion, arrange for such rights to be exercised and the resulting Shares or securities sold and, in each case, distribute the net proceeds of such sale as a cash distribution pursuant to Condition 4 to the Holders entitled thereto; or (iv) (a) Notwithstanding the foregoing, in the event that the Depositary offers rights pursuant to Condition 7(i) (the “Primary GDR Rights Offering”), if authorised by the Bank to do so, the Depositary may, in its discretion, make arrangements whereby in addition to instructions given by a Holder to the Depositary to exercise rights on its behalf pursuant to Condition 7(i), such Holder is permitted to instruct the Depositary to subscribe on its behalf for additional rights which are not attributable to the Deposited Shares represented by such Holder’s GDRs (“Additional GDR Rights”) if at the date and time specified by the Depositary for the conclusion of the Primary GDR Rights Offering (the “Instruction Date”) instructions to exercise rights have not been received by the Depositary from the Holders in respect of all their initial entitlements. Any Holder’s instructions to subscribe for such Additional GDR Rights (“Additional GDR Rights Requests”) shall specify the maximum number of Additional GDR Rights that such Holder is prepared to accept (the “Maximum Additional Subscription”) and must be received by the Depositary by the Instruction Date. If by the Instruction Date any rights offered in the Primary GDR Rights Offering have not been subscribed by the Holders initially entitled thereto (“Unsubscribed Rights”), subject to Condition 7(iv)(c) and receipt of the relevant subscription price in Indian rupees or other relevant currency, together with such fees, taxes, duties, charges, costs and expenses as it may deem necessary, the Depositary shall make arrangements for the allocation and distribution of Additional GDR Rights in accordance with Condition 7(iv)(b).

147 (b) Holders submitting Additional GDR Rights Requests shall be bound to accept the Maximum Additional Subscription specified in such Additional GDR Request but the Depositary shall not be bound to arrange for a Holder to receive the Maximum Additional Subscription so specified but may make arrangements whereby the Unsubscribed Rights are allocated pro rata on the basis of the extent of the Maximum Additional Subscription specified in each Holder’s Additional GDR Rights Request. (c) In order to proceed in the manner contemplated in this Condition 7(iv), the Depositary shall be entitled to receive such opinions from Indian counsel and U.S. counsel as in its discretion it deems necessary which opinions shall be in a form and provided by counsel satisfactory to the Depositary and at the expense of the Bank and may be requested in addition to any other opinions and/or certifications which the Depositary shall be entitled to receive under the Deposit Agreement and these Conditions. For the avoidance of doubt, save as provided in these Conditions and the Deposit Agreement, the Depositary shall have no liability to the Bank or any Holder in respect of its actions or omissions to act under this Condition 7(iv) and, in particular, the Depositary will not be regarded as being negligent, acting in bad faith, or in wilful default if it elects not to make the arrangements referred to in Condition 7(iv)(a). The Bank has agreed in the Deposit Agreement that it will, unless prohibited by applicable law or regulation, give its consent to, and if requested use all reasonable endeavours (subject to the next paragraph) to facilitate, any such distribution, sale or subscription by the Depositary or the Holders, as the case may be, pursuant to Conditions 4, 5, 6, 7 or 10 (including the obtaining of legal opinions from counsel reasonably satisfactory to the Depositary concerning such matters as the Depositary may reasonably specify). If the Bank notifies the Depositary that registration is required in any jurisdiction under any applicable law of the rights, securities or other property to be distributed under Condition 4, 5, 6, 7 or 10 or the securities to which such rights relate in order for the Bank to offer such rights or distribute such securities or other property to the Holders or owners of GDRs and to sell the securities corresponding to such rights, the Depositary will not offer such rights or distribute such securities or other property to the Holders or sell such securities unless and until the Bank procures the receipt by the Depositary of an opinion from counsel reasonably satisfactory to the Depositary and the Bank that a registration statement is in effect or that the offering and sale of such rights or securities to such Holders or owners of GDRs are exempt from registration under the provisions of such law. Neither the Bank nor the Depositary shall be liable to register such rights, securities or other property or the securities to which such rights relate and they shall not be liable for any losses, damages or expenses resulting from any failure to do so. If at the time of the offering of any rights, at its discretion, the Depositary shall be satisfied that it is not lawful or practicable (for reasons outside its control) to dispose of the rights in any manner provided in paragraphs (i), (ii), (iii) and (iv) above, the Depositary shall permit the rights to lapse. The Depositary will not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Holders or owners of GDRs in general or to any Holder or owner of a GDR or Holders or owners of GDRs in particular.

8. Conversion of Foreign Currency Whenever the Depositary shall receive any currency other than United States dollars by way of dividend or other distribution or as the net proceeds from the sale of securities, other property or rights, and if at the time of the receipt thereof the currency so received can in the judgment of the Depositary be converted on a reasonable basis into United States dollars and distributed to the Holders entitled thereto, the Depositary shall as soon as practicable itself convert or cause to be converted by another bank or other financial institution, by sale or in any other manner that it may reasonably determine, the currency so received into United States dollars. If such conversion or distribution can be effected only with the approval or licence of any government or agency thereof, the Depositary shall make reasonable efforts to apply, or procure that an application be made, for such approval or licence, if any, as it may deem desirable. If at any time the Depositary shall determine that in its judgment any currency other than United States dollars is not convertible on a reasonable basis into United States dollars and distributable to the Holders entitled thereto, or if any approval or licence of any government or agency thereof which is required for such conversion is denied or, in the opinion of the Depositary, is not obtainable, or if any such approval or licence is not obtained within a reasonable period as determined by the Depositary, the Depositary may distribute such other currency received by it (or an appropriate document evidencing the right to receive such other currency) to the Holders entitled thereto to the extent permitted under applicable law, or the Depositary may in its discretion hold such other currency for the benefit of the Holders entitled thereto. If any conversion of any such currency can be effected in whole or in part for distribution to some (but not all) Holders entitled thereto, the Depositary may at its discretion make such conversion and distribution in United States dollars to the extent possible to the Holders entitled thereto and may distribute the balance of such other currency received by the Depositary to, or hold such balance for the account of, the Holders entitled thereto, and notify the Holders accordingly.

148 9. Distribution of any Payments 9.1 Any distribution of cash under Condition 4, 5, 6, 7 or 10 will be made by the Depositary to Holders on the record date established by the Depositary for that purpose (which should be the same date as the corresponding record date set by the Bank or as close to the record date set by the Bank as is reasonably practicable) and, if practicable in the opinion of the Depositary, notice shall be given promptly to Holders in accordance with Condition 23, in each case subject to any laws or regulations applicable thereto and (subject to the provisions of Condition 8) distributions will be made in United States dollars by cheque drawn upon a bank in New York City or, in the case of the Master GDRs, according to usual practice between the Depositary and Clearstream, Euroclear or DTC, as the case may be. The Depositary or the Agent, as the case may be, may deduct and retain from all moneys due in respect of such GDR in accordance with the Deposit Agreement all fees, taxes, duties, charges, costs and expenses which may become or have become payable under the Deposit Agreement or under applicable law or regulation in respect of such GDR or the relative Deposited Property. 9.2 Delivery of any securities or other property or rights other than cash shall be made as soon as practicable to the Holders on the record date established by the Depositary for that purpose (such date to be as close to the record date set by the Bank as is reasonably practicable), subject to any laws or regulations applicable thereto. If any distribution made by the Bank with respect to the Deposited Property and received by the Depositary shall remain unclaimed at the end of three years from the first date upon which such distribution is made available to Holders in accordance with the Deposit Agreement, all rights of the Holders to such distribution or the proceeds of the sale thereof shall be extinguished and the Depositary shall (except for any distribution upon the liquidation of the Bank when the Depositary shall retain the same) return the same to the Bank for its own use and benefit subject, in all cases, to the provisions of applicable law or regulation.

10. Capital Reorganisation Upon any change in the nominal or par value, sub-division, consolidation or other reclassification of Deposited Shares or any other part of the Deposited Property or upon any reduction of capital, or upon any reorganisation, merger or consolidation of the Bank or to which it is a party (except where the Bank is the continuing corporation), the Depositary shall as soon as practicable give notice of such event to the Holders and at its discretion may treat such event as a distribution and comply with the relevant provisions of Conditions 4, 5, 6 and 10 with respect thereto, or may execute and deliver additional GDRs in respect of Shares or may require the exchange of existing GDRs for new GDRs which reflect the effect of such change.

11. Withholding Taxes and Applicable Laws 11.1 Payments to Holders of dividends or other distributions on or in respect of the Deposited Shares will be subject to deduction of Indian and other withholding taxes, if any, at the applicable rates. 11.2 If any governmental or administrative authorisation, consent, registration or permit or any report to any governmental or administrative authority is required under any applicable law in India in order for the Depositary to receive from the Bank Shares or other securities to be deposited under these Conditions, or in order for Shares, other securities or other property to be distributed under Condition 4, 5, 6 and 10 or to be subscribed under Condition 7 or to offer any rights or sell any securities represented by such rights relevant to any Deposited Shares, the Bank has agreed to apply for such authorisation, consent, registration or permit or file such report on behalf of the Holders within the time required under such laws. In this connection, the Bank has undertaken in the Deposit Agreement to the extent reasonably practicable to take such action as may be required in obtaining or filing the same. The Depositary shall not be obliged to distribute GDRs representing such Shares, other securities or other property deposited under these Conditions or make any offer of any such rights or sell any securities corresponding to any such rights with respect to which such authorisation, consent, registration or permit or such report has not been obtained or filed, as the case may be, and shall have no duties to obtain any such authorisation, consent, registration or permit, or to file any such report except in circumstances where the same may only be obtained or filed by the Depositary without unreasonable burden or expense.

12. Voting Rights Holders of GDRs will have no voting rights with respect to the Deposited Shares and cannot instruct the Depositary to exercise voting rights in respect of the Deposited Shares. The Depositary will not vote or give a proxy or power of attorney to vote the Deposited Shares in favour of any Holder. The Depositary will not exercise any voting rights in respect of the Deposited Shares unless required by the Bank’s Board of Directors to either vote as directed by the Bank’s Board of Directors or to give a proxy or power of attorney to a nominee of the Bank’s Board of Directors to vote in accordance with the instructions of the Bank’s Board of Directors.

149 Deposited Shares which have been withdrawn pursuant to the provisions of the Deposit Agreement and transferred on the Bank’s register of shareholders to a person other than the Depositary or its nominee may be voted by such person registered as the holder of such equity shares in accordance with the applicable law. However, Holders of GDRs may not receive sufficient advance notice of the shareholder meetings to enable them to withdraw the Deposited Shares and vote at such meetings. The Bank’s Board of Directors may decline to register the transfer of Deposited Shares on certain grounds. A valid corporate decision of the Bank will bind the Depositary and the Holders of GDRs with respect to the matters affected thereby. There are limitations on redeposits of withdrawn Deposited Shares under the Deposit Agreement. Recently, RBI examined the matter relating to the exercise of voting rights by the depositary, and issued a circular dated 5 February 2007 pursuant to which the Bank is now required to furnish to RBI, a copy of the Deposit Agreement. The Bank is also required to provide RBI with an undertaking to the effect that the Bank will not recognise voting by the Depositary if the vote given by the Depositary is in contravention of the Deposit Agreement and that neither the Bank nor the Depositary will bring about any change in the Deposit Agreement without the prior approval of RBI.

13. Documents to be Furnished, Recovery of Taxes, Duties and Other Charges The Depositary shall not be liable for any taxes, duties, charges, costs or expenses which may become payable in respect of the Deposited Shares or other Deposited Property or the GDRs, whether under any present or future fiscal or other laws or regulations, and such part thereof as is proportionate or referable to a GDR shall be payable by the Holder thereof to the Depositary at any time on request or may be deducted from any amount due or becoming due on such GDR in respect of any dividend or other distribution. In default thereof, the Depositary may for the account of the Holder discharge the same out of the proceeds of sale on any Stock Exchange on which the Shares may from time to time be listed or otherwise on any over-the-counter market in India, and subject to all applicable laws and regulations, of any appropriate number of Deposited Shares or other Deposited Property and subsequently pay any surplus to the Holder. Any such request shall be made by giving notice pursuant to Condition 23.

14. Liability 14.1 In acting hereunder the Depositary shall have only those duties, obligations and responsibilities expressly specified in the Deposit Agreement and these Conditions and, other than holding the Deposited Property for the benefit of Holders as bare trustee, does not assume any relationship of trust for or with the Holders or owners of GDRs or any other person. 14.2 Neither the Depositary, the Custodian, the Bank, any Agent, nor any of their agents, officers, directors or employees shall incur any liability to any other of them or to any Holder or owner of a GDR or any other person with an interest in any GDRs if, by reason of any provision of any present or future law or regulation of India or any other country or of any relevant governmental authority, or by reason of the interpretation or application of any such present or future law or regulation or any change therein, or by reason of any other circumstances beyond their control, or in the case of the Depositary, the Custodian, the Agent or any of their agents, officers, directors or employees, by reason of any provision, present or future, of the constitutive documents of the Bank, any of them shall be prevented, delayed or forbidden from doing or performing any act or thing which the terms of the Deposit Agreement or these Conditions provide shall or may be done or performed; nor shall any of them incur any liability to any Holder or owner of GDRs or any other person with an interest in any GDRs by reason of any exercise of, or failure to exercise, any voting rights attached to the Deposited Shares or any of them or any other discretion or power provided for in the Deposit Agreement. Each of the Depositary, the Custodian, the Bank, any Agent or any of their agents, officers, directors or employees may rely on, and shall be protected in acting upon, any written notice, request, direction or other document believed by it to be genuine and to have been duly signed or presented (including a translation which is made by a translator believed by it to be competent or which appears to be authentic). 14.3 Neither the Depositary nor any Agent shall be liable (except for its own wilful default, negligence or bad faith or that of its agents, officers, directors or employees) to the Bank or any Holder or owner of GDRs or any other person, by reason of having accepted as valid or not having rejected any certificate for Shares or GDRs or any signature on any transfer or instruction purporting to be such and subsequently found to be forged or not authentic or for its failure to perform any obligations under the Deposit Agreement or these Conditions. 14.4 The Depositary and its Agents may engage or be interested in any financial or other business transactions with the Bank or any of its subsidiaries or affiliates, or in relation to the Deposited Property (including without prejudice to the generality of the foregoing, the conversion of any part of the Deposited Property from one currency to another), may at any time hold or be interested in GDRs for its own account, and

150 shall be entitled to charge and be paid all usual fees, commissions and other charges for business transacted and acts done by it as a bank, and not in the capacity of Depositary, in relation to matters arising under the Deposit Agreement (including, without prejudice to the generality of the foregoing, charges on the conversion of any part of the Deposited Property from one currency to another and on any sales of property) without accounting to Holders or any other person for any profit arising therefrom. 14.5 The Depositary shall endeavour to effect any such sale as is referred to or contemplated in Conditions 5, 6, 7, 10, 13 or 21 or any such conversion as is referred to in Condition 9 in accordance with the Depositary’s normal practices and procedures but shall have no liability (in the absence of its own wilful default, negligence or bad faith or that of its agents, officers, directors or employees) with respect to the terms of such sale or conversion or if such sale or conversion shall not be reasonably practicable. 14.6 The Depositary shall not be required or obliged to monitor, supervise or enforce the observance and performance by the Bank of its obligations under or in connection with the Deposit Agreement or these Conditions. 14.7 The Depositary shall have no responsibility whatsoever to the Bank, any Holders or any owner of GDRs or any other person as regards any deficiency which might arise because the Depositary is subject to any tax in respect of the Deposited Property or any part thereof or any income therefrom or any proceeds thereof. 14.8 In connection with any proposed modification, waiver, authorisation or determination permitted by the terms of the Deposit Agreement, the Depositary shall not, except as otherwise expressly provided in Condition 22, be obliged to have regard to the consequence thereof for the Holders or the owners of GDRs or any other person. 14.9 Notwithstanding anything else contained in the Deposit Agreement or these Conditions, the Depositary may refrain from doing anything which could or might, in its opinion, be contrary to any law of any jurisdiction or any directive or regulation of any agency or state or which would or might otherwise render it liable to any person and the Depositary may do anything which is, in its opinion, necessary to comply with any such law, directive or regulation. 14.10 The Depositary may, in relation to the Deposit Agreement and these Conditions, act or take no action on the advice or opinion of, or any certificate or information obtained from, any lawyer, valuer, accountant, banker, broker, securities company or other expert whether obtained by the Bank, the Depositary or otherwise, and shall not be responsible or liable for any loss or liability occasioned by so acting or refraining from acting or relying on information from persons presenting Shares for deposit or GDRs for surrender or requesting transfers thereof. 14.11 Any such advice, opinion, certificate or information (as discussed in Condition 14.10 above) may be sent or obtained by letter, telex, facsimile transmission, telegram or cable and the Depositary shall not be liable for acting on any advice, opinion, certificate or information purported to be conveyed by any such letter, telex or facsimile transmission although (without the Depositary’s knowledge) the same shall contain some error or shall not be authentic. 14.12 The Depositary may call for and shall be at liberty to accept as sufficient evidence of any fact or matter or the expediency of any transaction or thing, a certificate, letter or other communication, whether oral or written, signed or otherwise communicated on behalf of the Bank by a Director of the Bank or by a person duly authorised by a Director of the Bank or such other certificate from persons specified in Condition 14.10 above which the Depositary considers appropriate and the Depositary shall not be bound in any such case to call for further evidence or be responsible for any loss or liability that may be occasioned by the Depositary acting on such certificate. 14.13 The Depositary shall have no obligation under the Deposit Agreement except to perform its obligations as are specifically set out therein without wilful default, negligence or bad faith. 14.14 The Depositary may delegate by power of attorney or otherwise to any person or persons or fluctuating body of persons, whether being a joint Depositary of the Deposit Agreement or not and not being a person to whom the Bank may reasonably object, all or any of the powers, authorities and discretions vested in the Depositary by the Deposit Agreement and such delegation may be made upon such terms and subject to such conditions, including power to sub-delegate and subject to such regulations as the Depositary may in the interests of the Holders think fit, provided that no objection from the Bank to any such delegation as aforesaid may be made to a person whose financial statements are consolidated with those of the Depositary’s ultimate holding company. Any delegation by the Depositary shall be on the basis that the Depositary is acting on behalf of the Holders and the Bank in making such delegation. The Bank shall not in any circumstances and the Depositary shall not (provided that it shall have exercised reasonable care in the selection of such delegate) be bound to

151 supervise the proceedings or be in any way responsible for any loss, liability, cost, claim, action, demand or expense incurred by reason of any misconduct or default on the part of any such delegate or sub-delegate. However, the Depositary shall, if practicable and if so requested by the Bank, pursue (at the Bank’s expense and subject to receipt by the Depositary of such indemnity and security for costs as the Depositary may reasonably require) any legal action it may have against such delegate or sub-delegate arising out of any such loss caused by reason of any such misconduct or default. The Depositary shall, within a reasonable time of any such delegation or any renewal, extension or termination thereof, give notice thereof to the Bank. Any delegation under this Condition which includes the power to sub-delegate shall provide that the delegate shall, within a specified time of any sub-delegation or amendment, extension or termination thereof, give notice thereof to the Bank and the Depositary. 14.15 The Depositary may, in the performance of its obligations hereunder, instead of acting personally, employ and pay an agent, whether a solicitor or other person, to transact or concur in transacting any business and do or concur in doing all acts required to be done by such party, including the receipt and payment of money. 14.16 The Depositary shall be at liberty to hold or to deposit the Deposit Agreement and any deed or document relating thereto in any part of the world with any banking company or companies (including itself) whose business includes undertaking the safe custody of deeds or documents or with any lawyer or firm of lawyers of good repute, and the Depositary shall not (in the case of deposit with itself, in the absence of its own negligence, wilful default, or bad faith or that of its agents, directors, officers or employees) be responsible for any losses, liability or expenses incurred in connection with any such deposit. 14.17 Notwithstanding anything to the contrary contained in the Deposit Agreement or these Conditions, the Depositary shall not be liable in respect of any loss or damage which arises out of or in connection with its performance or non-performance or the exercise or attempted exercise of, or the failure to exercise any of, its powers or discretions under the Deposit Agreement except to the extent that such loss or damage arises from the wilful default, negligence or bad faith of the Depositary or that of its agents, officers, directors or employees. 14.18 No provision of the Deposit Agreement or these Conditions shall require the Depositary to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity and security against such risk of liability is not assured to it. 14.19 For the avoidance of doubt, the Depositary shall be under no obligation to check, monitor or enforce compliance with any ownership restrictions in respect of GDRs or Shares under any applicable Indian law as the same may be amended from time to time. Notwithstanding the generality of Condition 3, the Depositary shall refuse to register any transfer of GDRs or any deposit of Shares against issuance of GDRs if notified by the Bank, or the Depositary becomes aware of the fact, that such transfer or issuance would result in a violation of the limitations set forth above. 14.20 No disclaimer of liability under the Securities Act is intended by any provision of the Deposit Agreement or these Conditions.

15. Issue and Delivery of Replacement GDRs and Exchange of GDRs Subject to the payment of the relevant fees, taxes, duties, charges, costs and expenses and such terms as to evidence and indemnity as the Depositary may require, replacement GDRs will be issued by the Depositary and will be delivered in exchange for or replacement of outstanding lost, stolen, mutilated, defaced or destroyed GDRs upon surrender thereof (except in the case of the destruction, loss or theft) at the specified office of the Depositary or (at the request, risk and expense of the Holder) at the specified office of any Agent.

16. Depositary’s Fees, Costs and Expenses 16.1 The Depositary shall be entitled to charge the following remuneration and receive the following remuneration and reimbursement (such remuneration and reimbursement being payable on demand) from the Holders in respect of its services under the Deposit Agreement: (i) for the issue of GDRs (other than the GDRs issued in connection with the Offering) or the cancellation of GDRs upon the withdrawal of Deposited Property: U.S.$0.05 or less per GDR issued or cancelled; (ii) for issuing GDR certificates in definitive registered form in replacement for mutilated, defaced, lost, stolen or destroyed GDR certificates: a sum per GDR certificate which is determined by the Depositary to be a reasonable charge to reflect the work, costs and expenses involved;

152 (iii) for issuing GDR certificates in definitive registered form (other than pursuant to (ii) above): the greater of U.S.$1.50 per GDR certificate (plus printing costs) or such other sum per GDR certificate which is determined by the Depositary to be a reasonable charge to reflect the work plus costs (including but not limited to printing costs) and expenses involved; (iv) for receiving and paying any cash dividend or other cash distribution on or in respect of the Deposited Shares: a fee of U.S.$0.02 or less per GDR for each such dividend or distribution; (v) in respect of any issue of rights or distribution of Shares (whether or not evidenced by GDRs) or other securities or other property (other than cash) upon exercise of any rights, any free distribution, stock dividend or other distribution (except where converted to cash): U.S.$ 0.05 or less per outstanding GDR for each such issue of rights, dividend or distribution; (vi) for transferring interests from and between the Master Regulation S GDR and the Master Rule 144A GDR: a fee of U.S.$ 0.05 or less per GDR; (vii) a fee of U.S.$ 0.02 or less per GDR (or portion thereof) per calendar year for depositary services, which shall be payable as provided in paragraph (viii) below; and (viii) any other charge payable by the Depositary, any of the Depositary’s agents, including the Custodian, or the agents of the Depositary’s agents, in connection with the servicing of Deposited Shares or other Deposited Property (which charge shall be assessed against Holders as of the date or dates set by the Depositary and shall be payable at the sole discretion of the Depositary by billing such Holders for such charge or deducting such charge from one or more cash dividends or other cash distributions), together with all expenses (including currency conversion expenses), transfer and registration fees, taxes, duties and charges payable by the Depositary, any Agent or the Custodian, or any of their agent, in connection with any of the above. 16.2 The Depositary is entitled to receive from the Bank the fees, taxes, duties, charges, costs and expenses as specified in a separate agreement between the Bank and the Depositary.

17. Agents 17.1 The Depositary shall be entitled to appoint one or more agents (the “Agents”) for the purpose, inter alia, of making distributions to the Holders. 17.2 Notice of appointment or removal of any Agent or of any change in the specified office of the Depositary or any Agent will be duly given by the Depositary to the Holders.

18. Listing The Bank has undertaken in the Deposit Agreement to use its reasonable endeavours to obtain and maintain, so long as any GDRs remain outstanding, a listing of the GDRs on the Official List of the UK Listing Authority and admission to trading on the Professional Securities Market of the London Stock Exchange. If, however, it is unable to do so having used such endeavours, or if the maintenance of such listing is agreed by the Depositary to be unduly onerous and the Depositary is satisfied that the interests of the Holders would not be thereby materially prejudiced, instead use all reasonable endeavours to obtain and maintain a listing of the GDRs on any other internationally recognised investment exchange in Europe; provided that the maintenance of the listing of the GDRs on the Official List of the UK Listing Authority and admission to trading on the Professional Securities Market of the London Stock Exchange shall be deemed to be unduly burdensome if the Bank is required to publish financial statements under the International Financial Reporting Standards or any generally accepted accounting principles other than the Indian Generally Accepted Accounting Principles following the implementation of the European Union Transparency Obligations Directive. For that purpose, the Bank will pay all fees and sign and deliver all undertakings required by the relevant internationally recognised stock exchange in Europe in connection with such listing.

19. The Custodian The Depositary has agreed with the Custodian that the Custodian will receive and hold (or appoint agents approved by the Depositary to receive and hold) all Deposited Property for the account and to the order of the Depositary in accordance with the applicable terms of the Deposit Agreement which include a requirement to segregate the Deposited Property from the other property of, or held by, the Custodian PROVIDED THAT the

153 Custodian shall not be obliged to segregate cash comprised in the Deposited Property from cash otherwise held by the Custodian. The Custodian shall be responsible solely to the Depositary PROVIDED THAT, if and so long as the Depositary and the Custodian are the same legal entity, references to them separately in these Conditions and the Deposit Agreement are for convenience only and that legal entity shall be responsible for discharging both functions directly to the Holders and the Bank. The Custodian may resign or be removed by the Depositary by giving 120 days’ prior notice, except that if a replacement Custodian is appointed which is a branch or affiliate of the Depositary, the Custodian’s resignation or discharge may take effect immediately on the appointment of such replacement Custodian. Upon the removal of or receiving notice of the resignation of the Custodian, the Depositary shall promptly appoint a successor Custodian (approved (i) by the Bank, such approval not to be unreasonably withheld or delayed, and (ii) by the relevant authority in India, if any), which shall, upon acceptance of such appointment, and the expiry of any applicable notice period, become the Custodian. Whenever the Depositary in its discretion determines that it is in the best interests of the Holders to do so, it may, after prior consultation with the Bank, terminate the appointment of the Custodian and, in the event of any such termination, the Depositary shall promptly appoint a successor Custodian (approved (i) by the Bank, such approval not to be unreasonably withheld or delayed, and (ii) by the relevant authority in India, if any), which shall, upon acceptance of such appointment, become the Custodian under the Deposit Agreement on the effective date of such termination. The Depositary shall notify Holders of such change immediately upon such change taking effect in accordance with Condition 23. Notwithstanding the foregoing, the Depositary may temporarily deposit the Deposited Property in a manner or a place other than as therein specified; PROVIDED THAT, in the case of such temporary deposit in another place, the Bank shall have consented to such deposit, and such consent of the Bank shall have been delivered to the Custodian. In case of transportation of the Deposited Property under this Condition, the Depositary shall obtain appropriate insurance at the expense of the Bank if and to the extent that the obtaining of such insurance is reasonably practicable and the premiums payable are of a reasonable amount.

20. Resignation and Termination of Appointment of the Depositary 20.1 The Bank may terminate the appointment of the Depositary under the Deposit Agreement by giving at least 120 days’ prior notice in writing to the Depositary and the Custodian, and the Depositary may resign as Depositary by giving at least 120 days’ prior notice in writing to the Bank and the Custodian. Within 30 days after the giving of either such notice, notice thereof shall be duly given by the Depositary to the Holders and to the UK Listing Authority and the London Stock Exchange. 20.2 The termination of the appointment or the resignation of the Depositary shall take effect on the date specified in such notice; PROVIDED THAT no such termination of appointment or resignation shall take effect until the appointment by the Bank of a successor depositary under the Deposit Agreement and the acceptance of such appointment to act in accordance with the terms thereof and of these Conditions, by the successor depositary. The Bank has undertaken in the Deposit Agreement to use its reasonable endeavours to procure the appointment of a successor depositary with effect from the date of termination specified in such notice as soon as reasonably possible following notice of such termination or resignation. Upon any such appointment and acceptance, notice thereof shall be duly given by the Depositary to the Holders in accordance with Condition 23 and to the UK Listing Authority and the London Stock Exchange. 20.3 Upon the termination of appointment or resignation of the Depositary and against payment of all fees and expenses due to the Depositary from the Bank under the Deposit Agreement, the Depositary shall deliver to its successor as depositary sufficient information and records to enable such successor efficiently to perform its obligations under the Deposit Agreement and shall deliver and pay to such successor depositary all property and cash held by it under the Deposit Agreement. The Deposit Agreement provides that, upon the date when such termination of appointment or resignation takes effect, the Custodian shall be deemed to be the Custodian thereunder for such successor depositary and shall hold the Deposited Property for such successor depositary, and the Depositary shall thereafter have no obligation under the Deposit Agreement or the Conditions (other than liabilities accrued prior to the date of termination of appointment or resignation or any liabilities stipulated in relevant laws or regulations).

21. Termination of Deposit Agreement 21.1 Either the Bank or the Depositary but, in the case of the Depositary, only if the Bank has failed to appoint a replacement Depositary within 120 days of the date on which the Depositary has given notice pursuant to Condition 20 that it wishes to resign, may terminate the Deposit Agreement by giving 120 days’ prior notice to the other and to the Custodian. Within 30 days after the giving of such notice, notice of such termination shall be duly given by the Depositary to Holders of all GDRs then outstanding in accordance with Condition 23 and by the Bank to the UK Listing Authority and the London Stock Exchange.

154 21.2 During the period beginning on the date of the giving of such notice by the Depositary to the Holders and ending on the date on which such termination takes effect, each Holder shall be entitled to obtain delivery of the Deposited Property relative to each GDR held by it, subject to the provisions of Condition 1.1 and upon compliance with Condition 1, payment by the Holder of the charge specified in Condition 16.1(i) and Clause 10.1.1(a) for such delivery and surrender, and payment by the Holder of any sums payable by the Depositary is obliged to pay to the Custodian) in connection with such delivery and surrender, and otherwise in accordance with the Deposit Agreement. 21.3 If any GDRs remain outstanding after the date of termination, the Depositary shall as soon as reasonably practicable sell the Deposited Property then held by it under the Deposit Agreement and shall not register transfers, shall not pass on dividends or distributions or take any other action, except that it will deliver the net proceeds of any such sale, together with any other cash then held by it under the Deposit Agreement, pro rata to Holders of GDRs which have not previously been so surrendered by reference to that proportion of the Deposited Property which is represented by the GDRs of which they are the Holders. After making such sale, the Depositary shall be discharged from all obligations under the Deposit Agreement and these Conditions, except its obligation to account to Holders for such net proceeds of sale and other cash comprising the Deposited Property without interest.

22. Amendment of Deposit Agreement and Conditions All and any of the provisions of the Deposit Agreement and these Conditions (other than this Condition 22) may at any time and from time to time be amended by agreement between the Bank and the Depositary in any respect which they may deem necessary or desirable. Notice of any amendment of these Conditions (except to correct a manifest error) shall be duly given to the Holders by the Depositary, and any amendment (except as aforesaid) which shall increase or impose fees payable by Holders or which shall otherwise, in the opinion of the Depositary, be materially prejudicial to the interests of the Holders (as a class) shall not become effective so as to impose any obligation on the Holders until the expiration of three months after such notice shall have been given. During such period of three months, each Holder shall be entitled to obtain, subject to and upon compliance with Condition 2, delivery of the Deposited Property relative to each GDR held by it upon surrender thereof, free of the charge specified in Condition 16.1(i) for such delivery and surrender but otherwise in accordance with the Deposit Agreement and these Conditions. Each Holder at the time when such amendment so becomes effective shall be deemed, by continuing to hold a GDR, to approve such amendment and to be bound by the terms thereof in so far as they affect the rights of the Holders. In no event shall any amendment impair the right of any Holder to receive, subject to and upon compliance with Condition 2, the Deposited Property attributable to the relevant GDR. For the purposes of this Condition 22, an amendment shall not be regarded as being materially prejudicial to the interests of Holders if its principal effect is to permit the creation of GDRs in respect of additional Shares to be held by the Depositary which are or will become fully consolidated as a single series with the other Deposited Shares PROVIDED THAT temporary GDRs will represent such Shares until they are so consolidated or to increase the number of Shares represented by each GDR.

23. Notices 23.1 Any and all notices to be given to any Holder shall be duly given if personally delivered, or sent by mail (if domestic, first class, if overseas, first class airmail) or air courier, or by telex or facsimile transmission confirmed by letter sent by mail or air courier, addressed to such Holder at the address of such Holder as it appears on the transfer books for GDRs of the Depositary, or, if such Holder shall have filed with the Depositary a written request that notices intended for such Holder be mailed to some other address, at the address specified in such request. 23.2 Delivery of a notice sent by mail or air courier shall be effective three days (in the case of domestic mail or air courier) or seven days (in the case of overseas mail) after despatch, and any notice sent by telex transmission, as provided in this Condition, shall be effective when the sender receives the answerback from the addressee at the end of the telex and any notice sent by facsimile transmission, as provided in this Condition, shall be effective when the intended recipient has confirmed by telephone to the transmitter thereof that the recipient has received such facsimile in complete and legible form. The Depositary or the Bank may, however, act upon any telex or facsimile transmission received by it from the other or from any Holder, notwithstanding that such telex or facsimile transmission shall not subsequently be confirmed as aforesaid.

155 24. Reports and Information on the Bank 24.1 The Bank has undertaken in the Deposit Agreement (so long as any GDR is outstanding) to furnish the Depositary with six copies in the English language (and to make available to the Depositary, the Custodian and each Agent as many further copies as they may reasonably require to satisfy requests from Holders) of: (i) in respect of the financial year ending on 31 March 2010 and in respect of each financial year thereafter the non-consolidated (and, if published for holders of equity shares, consolidated) balance sheets as of the end of such financial year and the non-consolidated (and, if published for holders of equity shares, consolidated) statements of income for such financial year in respect of the Bank, prepared in conformity with generally accepted accounting principles in India and reported upon by independent public accountants selected by the Bank, as soon as practicable (and in any event within 180 days) after the end of such year; (ii) if the Bank publishes semi-annual unaudited financial statements for holders of equity shares, such semi-annual financial statements, as soon as practicable, after the same are published and in any event no later than three months after the end of the period to which they relate; and (iii) if the Bank publishes quarterly unaudited financial statements for holders of Shares, such quarterly financial statements as soon as practicable after the same are published and in any event no later than three months after the end of the period to which they relate. 24.2 The Depositary shall upon receipt thereof give due notice to the Holders that such copies are available upon request at its specified office and the specified office of any Agent. 24.3 For so long as any of the GDRs remain outstanding and are “restricted securities” within the meaning of Rule 144(a)(3) under the United States Securities Act of 1993, as amended, if at any time the Bank is neither subject to nor in compliance with the reporting requirements of Section 13 or 15(d) of the United States Securities Exchange Act of 1934, as amended, nor exempt from such reporting requirements by complying with the information furnishing requirements of Rule 12g3-2(b) thereunder, the Bank has agreed in the Deposit Agreement to supply to the Depositary such information, in the English language and in such quantities as the Depositary may from time to time reasonably request, as is required to be delivered to any Holder or beneficial owner of GDRs or to any holder of Shares or a prospective purchaser designated by such Holder, beneficial owner or holder pursuant to a Deed Poll executed by the Bank in favour of such persons and the information delivery requirements of Rule 144A(d)(4) under the U.S. Securities Act of 1933, as amended, to permit compliance with Rule 144A thereunder in connection with resales of GDRs or Shares or interests therein in reliance on Rule 144A under the Securities Act and otherwise to comply with the requirements of Rule 144A(d)(4) under the Securities Act. Subject to receipt, the Depositary will deliver such information, during any period in which the Bank informs the Depositary it is subject to the information delivery requirements of Rule 144(A)(d)(4), to any such holder, beneficial owner or prospective purchaser but in no event shall the Depositary have any liability for the contents of any such information.

25. Copies of Bank Notices The Bank has undertaken in the Deposit Agreement to transmit to the Custodian and the Depositary on or before the day when the Bank first gives notice, by mail, publication or otherwise, to holders of any Shares or other Deposited Property, whether in relation to the taking of any action in respect thereof or in respect of any dividend or other distribution thereon or of any meeting or adjourned meeting of such holders or otherwise, such number of copies of such notice and any other material (which contains information having a material bearing on the interests of the Holders) furnished to such holders by the Bank (or such number of English translations of the originals if the originals were prepared in a language other than English) in connection therewith as the Depositary may reasonably request. If such notice is not furnished to the Depositary in English, either by the Bank or the Custodian, the Depositary shall, at the Bank’s expense, arrange for an English translation thereof (which may be in such summarised form as the Depositary may deem adequate to provide sufficient information) to be prepared. Except as provided below, the Depositary shall, as soon as practicable after receiving notice of such transmission or (where appropriate) upon completion of translation thereof, give due notice to the Holders which notice may be given together with a notice pursuant to Condition 9.1, and shall make the same available to Holders in such manner as it may determine.

26. Moneys held by the Depositary The Depositary shall be entitled to deal with moneys paid to it by the Bank for the purposes of the Deposit Agreement in the same manner as other moneys paid to it as a banker by its customers and shall not be liable to account to the Bank or any Holder or any other person for any interest thereon, except as otherwise agreed and shall not be obliged to segregate such moneys from other moneys belonging to the Depositary.

156 27. Severability If any one or more of the provisions contained in the Deposit Agreement or in these Conditions shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained therein or herein shall in no way be affected, prejudiced or otherwise disturbed thereby.

28. Governing Law 28.1 The Deposit Agreement, the Deed Poll, the GDRs and any non-contractual obligations arising out of or in connection with each of the Deposit Agreement, the Deed Poll and the GDRs are governed by, and shall be construed in accordance with, English law except that the certifications and agreements set forth in Schedules 3 and 4 to the Deposit Agreement and any provisions relating thereto shall be governed by and construed in accordance with the laws of the State of New York and any United States Federal Court sitting in the Borough of Manhattan, New York City. The rights and obligations attaching to the Deposited Shares will be governed by Indian law. The Bank has submitted in respect of the Deposit Agreement and the Deed Poll to the jurisdiction of the English courts and the courts of the State of New York and any United States Federal Court sitting in the Borough of Manhattan, New York City and has appointed an agent for service of process in London and the Borough of Manhattan, New York City. The Bank has also agreed in the Deposit Agreement, and the Deed Poll to allow, respectively, the Depositary and the Holders to elect that Disputes are resolved by arbitration. 28.2 The Bank has irrevocably appointed Law Debenture Corporate Services Limited, at Fifth Floor, 100 Wood Street, London EC2V 7ZX United Kingdom, as its agent in England to receive service of process in any Proceedings in England based on the Deposit Agreement and the Deed Poll and appointed Law Debenture Corporate Services Inc. as its agent in New York to receive service of process in any Proceedings in New York. If for any reason the Bank does not have such an agent in England or New York as the case may be, it will promptly appoint a substitute process agent and notify the Holders and the Depositary of such appointment. Nothing herein shall affect the right to serve process in any other manner permitted by law. 28.3 The courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with the GDRs, including any dispute relating to any non-contractual obligations arising out of or in connection with the GDRs (each a “Dispute”) and accordingly any legal action or proceedings arising out of or in connection with the GDRs, including any proceedings relating to any non-contractual obligations arising out of or in connection with the GDRs (“Proceedings”) may be brought in such courts. Without prejudice to the foregoing, the Depositary further irrevocably agrees that any Proceedings may be brought in any New York State or United States Federal Court sitting in the Borough of Manhattan, New York City. The Depositary irrevocably submits to the non-exclusive jurisdiction of such courts and waives any objection to Proceedings in such courts whether on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum. 28.4 These submissions are made for the benefit of each of the Holders and shall not limit the right of any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdictions (whether concurrently or not). 28.5 In the event that the Depositary is made a party to, or is otherwise required to participate in, any litigation, arbitration, or Proceeding (whether judicial or administrative) which arises from or is related to or is based upon any act or failure to act by the Bank, or which contains allegations to such effect, upon notice from the Depositary, the Bank has agreed to fully cooperate with the Depositary in connection with such litigation, arbitration or Proceeding. 28.6 The Depositary irrevocably appoints The Bank of New York Mellon, London Branch (Attention: The Manager) of 48th Floor, One Canada Square, London E14 5AL as its agent in England to receive service of process in any Proceedings in England based on any of the GDRs. If for any reason the Depositary does not have such an agent in England, it will promptly appoint a substitute process agent and notify the Holders of such appointment. Nothing herein shall affect the right to serve process in any other manner permitted by law.

157 SUMMARY OF PROVISIONS RELATING TO GDRS IN MASTER FORM

The GDRs will initially be evidenced by (i) a single Temporary Master Regulation S GDR in registered form and (ii) a single Temporary Master Rule 144A GDR in registered form. The Temporary Master Regulation S GDR will be registered in the name of The Bank of New York Depository (Nominees) Limited as common depositary for the respective accounts of Euroclear and Clearstream, Luxembourg on the date the GDRs are issued. The Temporary Master Rule 144A GDR will be registered in the name of Cede & Co. and held by a custodian for DTC on the date the GDRs are issued. Interests in the Temporary Master Regulation S GDR will be exchanged, on the day which is the later of (a) the expiration of the Distribution Compliance Period and (b) the date on which the underlying shares are admitted to listing on the BSE and the NSE, for interests in the existing Master Regulation S GDR issued on or about 21 March 2005 in accordance with the provisions set out in “Terms and Conditions of the GDRs” and “Transfer Restrictions.” The Master Regulation S GDR and the Master Rule 144A GDR contain provisions which apply to the GDRs while they are in master form, some of which modify the effect of the Terms and Conditions of the GDRs. The following is a summary of certain of those provisions. Unless otherwise defined herein, the terms defined in the Conditions shall have the same meaning herein and the numbering of the Conditions shall refer to the numbering as set out in the Deposit Agreement.

Exchange The Master Regulation S GDR and the Master Rule 144A GDR will only be exchanged for certificates in definitive registered form representing GDRs in the circumstances described in (i), (ii), (iii) or (iv) below, in whole but not in part. The Depositary will undertake, subject to and in accordance with the Deposit Agreement, to make available certificates evidencing GDRs in definitive registered form in exchange for either the Master Regulation S GDR or the Master Rule 144A GDR to Holders within 60 days in the event that: (i) either DTC (in the case of the Master Rule 144A GDR) or Euroclear or Clearstream, Luxembourg (in the case of the Master Regulation S GDR) or any successor advises the Bank in writing that it is unwilling or unable to continue as depositary and a successor depositary is not appointed within 90 calendar days; or (ii) DTC or any successor ceases to be a “clearing agency” registered under the Exchange Act; or (iii) either DTC (in the case of the Master Rule 144A GDR) or, Euroclear or Clearstream, Luxembourg (in the case of the Master Regulation S GDR) is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces an intention permanently to cease business, or does in fact do so, and no alternative clearing system satisfactory to the Depositary is available within 45 days; or (iv) the Depositary has determined that, on the occasion of the next payment in respect of the GDRs, the Depositary or its agent would be required to make any deduction or withholding from any payment in respect of the Master GDRs, which would not be required were the GDRs represented by certificates in definitive registered form (provided that the Depositary shall have no obligation to so determine or attempt to so determine). Any exchange shall be at the expense (including printing costs) of the Bank. A GDR evidenced by an individual definitive certificate will not be eligible for clearing and settlement through DTC, Euroclear or Clearstream, Luxembourg. The GDRs in definitive certificated form will be required to bear a legend with respect to restrictions on transfers as set out in “Transfer Restrictions”. Upon any exchange of the Master Regulation S GDR or the Master Rule 144A GDR for certificates in definitive registered form evidencing GDRs or any distribution of GDRs pursuant to Conditions 5, 7, or 10 or any reduction in the number of GDRs represented by the Master Regulation S GDR or the Master Rule 144A GDR following any withdrawal of Deposited Property pursuant to Condition 1, the relevant details will be entered by the Depositary on the Register provided always that if the number of GDRs represented by the Master Regulation S GDR or the Master Rule 144A GDR is reduced to zero the Master Regulation S GDR or the Master Rule 144A GDR (as the case may be) shall continue in existence until the obligations of the Bank under the Deposit Agreement and the obligations of the Depositary under the Deposit Agreement and the Conditions have terminated.

Payment, Distributions and Voting Rights Payments of cash dividends and other amounts (including cash distributions) will be made by the Depositary through DTC (in the case of GDRs represented by the Master Rule 144A GDR) or Euroclear or Clearstream,

158 Luxembourg (in the case of GDRs represented by the Master Regulation S GDR), in each case on behalf of persons entitled thereto upon receipt of funds therefor from the Bank. Any free distribution or rights issue of Shares to the Depositary on behalf of the Holders of GDRs may result in the record maintained by the Depositary being adjusted to reflect the enlarged number of GDRs represented by the Master Regulation S GDR and/or Master Rule 144A GDR. Payments of dividends and other cash distributions payable in respect of the GDRs represented by the Master Regulation S GDR and the Master Rule 144A GDR will be made by the Depositary in U.S. dollars. Holders of GDRs will have no voting rights with respect to the Deposited Shares and cannot instruct the Depositary to exercise voting rights in respect of the Deposited Shares. The Depositary will not vote or give a proxy or power of attorney to vote the Deposited Shares in favour of any Holder. The Depositary will not exercise any voting rights in respect of the Deposited Shares unless required by the Bank’s Board of Directors to either vote as directed by the Bank’s Board of Directors or to give a proxy or power of attorney to a nominee of the Bank’s Board of Directors to vote in accordance with the instructions of the Bank’s Board of Directors.

Surrender of GDRs Any requirement in the Conditions relating to the surrender of a GDR to the Depositary shall be satisfied by the production by DTC (in the case of GDRs represented by the Master Rule 144A GDR) or Euroclear or Clearstream, Luxembourg (in the case of GDRs represented by the Master Regulation S GDR), in each case on behalf of a Holder of GDRs, of such evidence of entitlement of such Holder as the Depositary may reasonably require, which is expected to be a certificate or other documents issued by DTC, Euroclear or Clearstream, Luxembourg (as the case may be) or if relevant an alternative clearing system. The delivery or production of any such evidence shall be sufficient evidence, in favour of the Depositary, any Agent and the Custodian of the title of such person to receive (or to issue instructions for the receipt of) all money or other property payable or distributable in respect of the Deposited Property represented by such GDRs.

Notices For as long as a Master GDR is registered in the name of DTC or its nominee or a common depositary for Euroclear and Clearstream, Luxembourg, as appropriate, notices to Holders may be given by the Depositary by delivery of the relevant notice to DTC, Euroclear or Clearstream, Luxembourg (as the case may be) for communication to persons entitled thereto in substitution for delivery of notices in accordance with Condition 23, except that so long as the GDRs are listed on the Official List and the UK Listing Authority so requires, notices will also be published in a leading newspaper having general circulation in London (which is expected to be the Financial Times). The Master GDRs shall be governed by and construed in accordance with English law.

159 INFORMATION RELATING TO THE DEPOSITARY

The Depositary is a state-chartered New York banking corporation and a member of the United States Federal Reserve System, subject to regulation and supervision principally by the United States Federal Reserve Board and the New York State Banking Department. The Depositary was constituted in 1784 in the State of New York. It is a wholly owned subsidiary of The Bank of New York Mellon Corporation, a New York bank holding company. The principal office of the Depositary is located at One Wall Street, New York, New York 10286. Its principal administrative offices are located at 101 Barclay Street, New York, New York 10286. A copy of the Depositary’s Articles, as amended, together with copies of The Bank of New York Mellon Corporation’s most recent financial statements and annual report are available for inspection at the principal office of the Depositary located at One Wall Street, New York, NY 10286 and at The Bank of New York Mellon, One Canada Square, London E14 5AL.

160 LEGAL MATTERS

Allen & Overy, Hong Kong, will pass upon certain legal matters in connection with the Offering for the Lead Managers with respect to U.S. and English Law. Talwar, Thakore & Associates, India will pass upon certain legal matters in connection with the Offering for the Bank with respect to Indian law and Amarchand Mangaldas, India, will pass upon certain legal matters in connection with the Offering for the Lead Managers with respect to Indian law.

161 INDEPENDENT AUDITORS

The financial statements (consolidated and non-consolidated) of the Bank as of and for the year ended 31 March 2009, 31 March 2008 and 31 March 2007 included in these Listing Particulars have been audited by S.R. Batliboi & Co., Chartered Accountants located at 6th Floor, Express Towers, Nariman Point, Mumbai — 400 021, India. The audited financial statements for these years are prepared in accordance with Generally Accepted Accounting Standards in India as applicable to banks. The independent auditors have issued standard audit opinions on these financial statements.

162 DESCRIPTION OF SHARE CAPITAL

Set forth below is certain information relating the Bank’s share capital, including a brief summary of some of the provisions of the Bank’s Articles, the SCRA, the Companies Act and certain related legislation of India, all as currently in effect.

General As at the date of these Listing Particulars, there exists a general permission granted by the Ministry of Finance, Department of Economic affairs and the RBI for issues of global depositary receipts to be made, provided the same are in compliance with the respective notifications and schemes issued by such entities. The Offering is being issued in full compliance with the aforementioned requirements and no further legislation in India exists governing such issue. The Bank’s authorised share capital consists of 500 million equity shares of Rs. 10 per equity share. The equity shares represented by the GDRs will be fully paid-up on issuance. As of 31 August 2009, the Bank’s issued and paid up capital is Rs. 3,599 million, which consists of 359,870,670 equity shares of Rs. 10 each, all of which are fully paid. As of 31 March 2009, the Bank’s issued and paid-up capital was Rs. 3,590 million, consisting of 359,005,118 equity shares of Rs. 10 each, all of which were fully paid. The equity shares are listed on the BSE and the NSE.

Changes in Share Capital The following table sets forth, for the periods indicated, the changes in the issued capital of the Bank. Issue Price per Equity Number of Equity Share(1) Amount of Increase Period Means of Issue Shares Issued (Rs.) (Rupees in million) Fiscal 2007 ...... Exercise of 2,940,060 10.00 29.40 Employee Stock Options Fiscal 2008 ...... Offering of Shares 14,132,466 10.00 141.32 in the form of Global Depository Receipts (GDR) Offering of Shares 28,264,934 10.00 282.65 through a Qualified Institutional Placement Preferential 30,695,129 10.00 306.95 Allotment to Promoters Exercise of 2,986,353 10.00 29.86 Employee Stock Options Fiscal 2009 ...... Exercise of 1,295,449 10.00 12.95 Employee Stock Options

(1) Issue price per equity share equals the par value of Rs. 10 (excluding premium)

Dividends Under Indian law, a company pays dividends upon a recommendation by its board of directors and approval by a majority of the shareholders at the Annual General Meeting of shareholders held within six months of the end of each fiscal year. If so authorised by the Articles of Association, the shareholders have the right to decrease but not increase the dividend amount recommended by the board of directors. Dividends are generally declared as a percentage of par value and distributed and paid to shareholders in proportion to the paid up value of their equity shares. The Companies Act provides that shares of a company of the same class must receive equal dividend treatment. These distributions and payments are required to be deposited into a separate bank account and paid to shareholders within 30 days of the Annual General Meeting where the resolution for declaration of dividend is approved.

163 The Companies Act states that any dividends that remain unpaid or unclaimed after that period are to be transferred to a special unpaid dividend bank account held with a scheduled bank within seven days of the expiry of 30 days from the date of the declaration of such dividend. Any money that remains unclaimed for seven years from the date of the transfer is to be transferred by the Bank to the Investor Education and Protection Fund created by the Government. No claims for the payment of dividends unpaid or unclaimed for a period of seven years shall lie against the Investor Education and Protection Fund or against the Bank. The Articles of the Bank authorise the Board of Directors to declare interim dividends, the amount of which must be deposited in a separate bank account within five days and paid to the shareholders within 30 days of the declaration. Under the Companies Act, final dividends payable can be paid only in cash to the registered shareholder at the record date fixed prior to the relevant Annual General Meeting, to his order or to the order of his banker. Before paying any dividend on the Bank’s equity shares, the Bank is required under the Banking Regulation Act to write off all capitalised expenses (including preliminary expenses, organisation expenses, share-selling commission, brokerage, amounts of losses incurred or any other item of expenditure not represented by tangible assets). The Bank is permitted to declare dividend up to 40% of current year’s profit without prior RBI approval subject to compliance with certain prescribed requirements. Further, upon compliance with the prescribed requirements, the Bank is also permitted to declare interim dividends subject to the above mentioned cap computed for the relevant accounting period. Dividends may only be paid out of the Bank’s profits for the relevant year and in certain contingencies out of the reserves of the company. Before declaring dividends, the Bank is required, under the Banking Regulation Act to transfer 25% of the balance of profits of each year to a reserve fund. The Government may, however, upon the recommendation of RBI, exempt the Bank from this requirement in which event, under the Companies Act, the Bank is required to transfer 10% of the balance of profits to a reserve fund.

Bonus Shares The Bank’s Articles of Association permit the Bank by a resolution of the shareholders in a general meeting to resolve in certain circumstances that certain amounts standing to the credit of certain reserves or securities premium can be capitalised by the issue of fully paid bonus shares or by crediting shares not fully paid-up with the whole or part of any sum outstanding. Bonus shares must be issued pro rata to the amount of capital paid-up on existing shareholdings. Any issue of bonus shares would be subject to the guidelines issued by SEBI in this regard.

Preemptive Rights and Issue of Additional Shares The Companies Act gives shareholders the right to subscribe for new shares in proportion to their existing shareholdings unless otherwise determined by a resolution passed by three-fourths of the shareholders present and voting at a general meeting. Under the Companies Act and the Bank’s Articles, in the event of an issuance of securities, subject to the limitations set forth above, the Bank must first offer the new equity shares to the holders of equity shares on a fixed record date. The offer, required to be made by notice, must include: • the right, exercisable by the shareholders of record, to renounce the equity shares offered in favour of any other person; • the number of equity shares offered; and • the period of the offer, which may not be less than 15 days from the date of the offer. If the offer is not accepted, it is deemed to have been declined. The Board of Directors is permitted to distribute equity shares not accepted by existing shareholders in the manner it deems beneficial for the Bank in accordance with its Articles. Under the provisions of the Companies Act, new shares may be offered to any persons whether or not those persons include existing shareholders, if a special resolution to that effect is passed by the shareholders of a company in a general meeting. The issuance of the Shares represented by the GDRs has been duly approved by a special resolution of the Bank’s shareholders and such shareholders have waived their preemptive rights with respect to such Shares. The Articles also provide that if at any time the Bank’s share capital is divided into different classes of shares, the rights attached to any one class (unless otherwise provided by the terms of issue of the shares of that class) may be varied with the consent in writing of the holders of three-fourths of the issued shares of that class, or with the sanction of a special resolution, passed at a separate meeting of the holders of the shares of that class.

164 General Meetings of Shareholders There are two types of general meetings of shareholders: Annual General Meetings and Extraordinary General Meetings. The Bank is required to convene its Annual General Meeting within 15 months of the previous Annual General Meeting and in any event not later than six months after the end of each fiscal year. The Bank may convene an Extraordinary General Meeting when necessary or at the request of a shareholder or shareholders holding on the date of the request at least 10% of the Bank’s paid-up capital. A general meeting is generally convened by the Bank’s company secretary in accordance with a resolution of the Board of Directors. Written notice stating the agenda of the meeting must be given at least 21 days prior to the date set for the general meeting to the shareholders whose names are in the register at the record date. The Annual General Meeting is held in Ahmedabad, the city in which the Bank’s registered office is located. General meetings other than the Annual General Meeting may be held at any location if so determined by a resolution of the Board of Directors.

Voting Rights A shareholder has one vote for each equity share and voting may be by a show of hands or on a poll. However, under the Banking Regulation Act, on poll, a shareholder cannot exercise voting rights in excess of 10% of the total voting rights of all shareholders. Voting is by show of hands, unless a poll is ordered by the chairman of the meeting or demanded by a shareholder or shareholders holding at least 10% of the voting rights in respect of the resolution or by those holding paid-up capital of at least Rs. 50,000 (that is, 5,000 shares of Rs. 10 each). The chairman of the meeting has a casting vote. The quorum for a general meeting is five members personally present. Generally, resolutions may be passed by simple majority of the shareholders present and voting at any general meeting. However, resolutions such as an amendment to the organisational documents, commencement of a new line of the Bank’s business, an issue of additional equity shares without preemptive rights and reductions of share capital, require that the votes cast in favour of the resolution (whether by show of hands or on a poll) are not less than three times the number of votes, if any, cast against the resolution. As provided in the Bank’s Articles, a shareholder may exercise its voting rights by proxy to be given in the form prescribed by the Bank. This proxy, however, is required to be lodged with the Bank at least 48 hours before the time of the relevant meeting. A shareholder may, by a single power of attorney, grant general power of representation covering several general meetings. A proxy may not vote except on a poll and does not have a right to speak at meetings. A corporate shareholder is also entitled to nominate a representative to attend and vote on its behalf at all general meetings. The Companies Act has been amended to provide for passing of resolutions in relation to specified matters, which have been notified by the Government, by means of a postal ballot. A notice to all the shareholders shall be sent along with a draft resolution explaining the reasons therefore and requesting them to send their assent or dissent in writing on a postal ballot within a period of 30 days from the date of posting the letter. Postal ballot includes voting by electronic mode. GDR holders have no voting rights with respect to the deposited shares. See “Terms and Conditions of the GDRs — Voting Rights”.

Annual Report At least 21 days before an Annual General Meeting, the Bank must circulate either a detailed or abridged version of the Bank’s audited financial accounts, together with the Directors’ Report and the Auditor’s Report, to the shareholders along with a notice convening the Annual General Meeting and make available the same for inspection at the Bank’s registered office during normal working hours for, 21 days prior to the Annual General Meeting. Under the Indian Companies Act, the Bank must file the Annual Report with the Registrar of Companies within seven months from the close of the accounting year or within 30 days from the date of the Annual General Meeting, whichever is earlier. As required under the listing agreement, copies are required to be simultaneously sent to the Indian Stock Exchanges. The Bank is also required to publish the Bank’s financial results in at least one English language daily newspaper circulating in the whole or substantially the whole of India and also in a newspaper published in the language of the region where the Bank’s registered office is situated. Under the Companies Act, the Bank must file with the Registrar of Companies the Bank’s balance sheet and profit and loss account within 30 days of the conclusion of the Annual General Meeting and the Bank’s annual return within 60 days of the conclusion of that meeting.

165 Register of Shareholders and Record Dates The equity shares are in registered form. The Bank maintains a register of the Bank’s shareholders at its registered office in Ahmedabad. The register and index of beneficial owners maintained by a depositary under the Depositories Act, 1996 is deemed to be an index of members. The Bank recognise as shareholders only those persons who appear on its register of shareholders and the Bank cannot recognise any person holding any share or part of it upon any trust, express, implied or constructive, except as permitted by law. For the purpose of determining entitlement to annual dividends, the register of shareholders is closed for a notified period prior to the Annual General Meeting. The Companies Act and the Bank’s listing agreements with the stock exchanges permit the Bank, pursuant to a resolution of the Board of Directors and upon at least 30 days’ advance notice to the stock exchanges, to set the record date and close the register of shareholders after seven days’ public notice for not more than 30 days at a time, and for not more than 45 days in a year, in order for the Bank to determine which shareholders are entitled to certain rights pertaining to the equity shares. Trading of equity shares and delivery of certificates in respect of the equity shares may, however, continue after the register of shareholders is closed.

Transfer of Shares SEBI requires that the Bank’s equity shares for trading and settlement purposes be in book-entry form for all investors, except for transactions that are not made on a stock exchange and transactions that are not required to be reported to the stock exchange. Transfers of equity shares in book-entry form require both the seller and the purchaser of the equity shares to establish accounts with depositary participants appointed by depositories established under the Depositories Act. Charges for opening an account with a depositary participant, transaction charges for each trade and custodian charges for securities held in each account vary depending upon the practice of each depositary participant. Upon delivery, the equity shares shall be registered in the name of the relevant depositary on the Bank’s books and this depositary shall enter the name of the investor in its records as the beneficial owner. The transfer of beneficial ownership shall be effected through the records of the depositary. The beneficial owner shall be entitled to all rights and benefits and subject to all liabilities in respect of his securities held by a depositary. Transfer of beneficial ownership through a depository is exempt from any stamp duty but each may have its own depository charges. A transfer of shares by way of share transfer form attracts stamp duty at the rate of 0.25% of the transfer price. The requirement to hold the equity shares in book-entry form will apply to the GDR holders when the equity shares are withdrawn from the depositary facility upon surrender of the GDRs. In order to trade the equity shares in the Indian market, the withdrawing GDR holder will be required to comply with the procedures described above. Following the introduction of the Depositaries Act and the repeal of Section 22A of the SCRA, the equity shares of a public company became freely transferable, subject only to the provisions of Section 111A of the Companies Act. Since the Bank is a public company, the provisions of Section 111A will apply to the Bank. In accordance with the provisions of the Companies Act, the Board may refuse to register a transfer of equity shares if they have sufficient cause to do so. If the Board refuses to register a transfer of equity shares, the shareholder wishing to transfer his, her or its equity shares may file a civil suit or an appeal and the Indian Company Law Board can direct the Company to register the transfer. Under the Companies Act if a transfer of equity shares contravenes the Securities and Exchange Board of India Act, 1992, or any other similar law, the Indian Company Law Board may, on application made by the Bank, a depositary incorporated in India, an investor, SEBI or certain other parties, direct a rectification of the register of records. It is a condition of the Bank’s listing that the Bank transfer equity shares and deliver share certificates duly endorsed for the transfer within one month of the date of lodgement of transfer. If a company without sufficient cause refuses to register a transfer of equity shares within two months from the date on which the instrument of transfer is delivered to the company, the transferee may appeal to the Indian Company Law Board seeking to register the transfer of equity shares. The Indian Company Law Board may, in its discretion, issue an interim order suspending the voting rights attached to the relevant equity shares before completing its investigation of the alleged contravention. By the Companies (Second Amendment) Act, 2002, which is expected to come into force shortly, the Board of Industrial and Financial Reconstruction and the India Company Law Board are proposed to be replaced by the National Company Law Tribunal, which is expected to be set up soon. Further, RBI requires the Bank to obtain its approval before registering a transfer of equity shares in favour of a person which together with equity shares already held by him represent more than 5% of the Bank’s share capital.

166 The Bank’s transfer agent is M/s. Karvy Computershare Pvt. Ltd., located in Hyderabad. Certain foreign exchange control and security regulations apply to the transfer of equity shares by a non-resident or a foreigner. See “Restrictions on Foreign Ownership of Indian Securities”. The Bank has entered into listing agreements with the BSE and the NSE on which the Bank’s outstanding equity shares are listed. It is a condition of the Bank’s listing that if an acquisition of the Bank’s equity shares results in the acquirer holding any securities beyond 5% of the Bank’s voting capital, the Bank and the acquirer shall be subject to the provisions of the Takeover Code. See “Indian Securities Market — Takeover Code” and “Restrictions on Foreign Ownership of Indian Securities”.

Disclosure of Ownership Interest The provisions of the Companies Act generally require beneficial owners of equity shares of Indian companies that are not holders of record to declare to the company details of the holder of record and holders of record to declare details of the beneficial owner. While it is unclear whether these provisions apply to holders of an Indian company’s GDRs, investors who exchange GDRs for equity shares are subject to this provision. Failure to comply with these provisions would not affect the obligation of a company to register a transfer of equity shares or to pay any dividends to the registered holder of any equity shares in respect of which this declaration has not been made, but any person who fails to make the required declaration may be liable for a fine of up to Rs. 1,000 for each day this failure continues. However, under the Banking Regulation Act, a registered holder of any equity shares, except in certain conditions, shall not be liable to any suit or proceeding on the ground that the title to those equity shares vests in another person.

Acquisition by the Bank of Its Own Equity Shares The Bank is prohibited from acquiring its own equity shares unless the consequent reduction of capital is approved by the shareholders of the Bank by a special resolution passed in a general meeting effected and sanctioned by the High Courts of competent jurisdiction or in accordance with the SEBI (Buy-Back of Securities) Regulations, 1998, subject to certain conditions, including: (i) the buy-back should be authorised by the articles of association of the company; (ii) a special resolution has been passed in a general meeting of the company authorising the buy back; (iii) the buy-back is limited to less than 25% of the total paid-up capital and free reserves; (iv) the debt owed by the company is not more than twice the capital and free reserves after such buy-back; and (v) the buy-back is in accordance with the SEBI (Buy-Back of Securities) Regulation, 1998. The condition mentioned in (ii) above would not be applicable if the buy back is for less than 10% of the total paid-up equity capital and free reserves of the company and provided that such buy-back has been authorised by the board of directors of the company. A company buying back its securities is required to extinguish and physically destroy the securities so bought back within seven days of the last date of completion of the buy-back. GDR holders will be eligible to participate in a buy-back in certain cases. A GDR holder may acquire equity shares by withdrawing them from the depositary facility and then selling those equity shares back to the Bank. GDR holders should note that equity shares withdrawn from the depositary facility may only be redeposited into the depositary facility under certain circumstances. See “Terms and Conditions of the GDRs — Voting Rights”. There can be no assurance that the equity shares offered by a GDR investor in any buy-back of equity shares by the Bank will be accepted by the Bank. The position regarding regulatory approvals required for GDR holders to participate in a buy-back is not clear. GDR investors are advised to consult their Indian legal advisers prior to participating in any buy-back by the Bank, including in relation to any regulatory approvals and tax issues relating to the buy-back.

Liquidation Rights Subject to the rights of depositors, creditors, employees, the Government or any State government in the event of the Bank’s winding up, the holders of the equity shares are entitled to be repaid the amounts of capital paid up or credited as paid up on these equity shares. All surplus assets remaining after the above payments are made belong to the holders of the equity shares in proportion to the amount paid up or credited as paid up on these equity shares, respectively, at the commencement of the winding-up.

167 Acquisition of the Undertaking by the Government Under the Banking Regulation Act, the Government may, after consultation with RBI, in the interest of the Bank’s depositors or banking policy or better provision of credit generally or to a particular community or area, acquire the Bank’s banking undertaking. The RBI may acquire the Bank’s business if it is satisfied that the Bank has failed to comply with the directions given to the Bank by the RBI or that the Bank’s business is being managed in a manner detrimental to the interest of the Bank’s depositors. Similarly, the Government may also acquire the Bank’s business based on a report by RBI.

168 EXCHANGE CONTROLS

Restrictions on Conversion of Indian Rupees There are restrictions on the conversion of Indian rupees into U.S. dollars. Effective July 1995, the process of current account convertibility was advanced by relaxing restrictions on foreign exchange for various purposes, such as foreign travel and medical treatment. The Government has also relaxed restrictions on capital account transactions by resident Indians since 1999. For example, by circular dated 18 March 2004 and recently by circular dated 26 September 2007, resident Indians are now permitted to remit up to U.S.$ 200,000 for any permissible current or capital account transaction or a combination of both.

169 RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES

General With effect from 1 June 2000, foreign investment in Indian securities is regulated by the Foreign Exchange Management Act 1999 (as amended from time to time) (“FEMA”) and the rules, regulations and notifications made under the FEMA. A person resident outside India can transfer any security of an Indian company or any other security to an Indian resident only under the terms and conditions specified in the FEMA and the rules and regulations made thereunder or as permitted by the RBI.

Foreign Direct Investment (“FDI”) The Government, pursuant to its liberalisation policy, set up the Foreign Investment Promotion Board, Ministry of Finance, Government of India (the “FIPB”) to regulate all investments by way of subscription and/or purchase of securities of an Indian company by a non-resident investor (Foreign Direct Investment or FDI) into India. FIPB approval is required for investment in sectors such as housing, petroleum (other than refining), defence and strategic industries and for investment in certain other circumstances. A person residing outside India (other than a citizen of Pakistan and ) or any entity incorporated outside India (other than an entity incorporated in Pakistan or Bangladesh) has general permission to purchase shares, convertible debentures or preference shares of an Indian company, subject to certain terms and conditions. Pursuant to a circular dated 19 December 2007, the RBI has allowed citizens of Bangladesh or entities incorporated in Bangladesh to purchase shares and convertible debentures of an Indian company under an FDI scheme with prior approval of the FIPB. Currently, foreign investors may own up to 74% of the equity shares of the Bank subject to conformity with guidelines issued by the RBI from time to time. This limit is under the automatic route and does not require specific approval of the FIPB. This limit includes FDI, american depositary receipts, global depositary receipts and investment under the Portfolio Investment Scheme by FIIs and also NRIs, and also includes shares acquired by subscription to private placements and public offerings and acquisition of shares from existing shareholders. Further, as per the existing policy of the RBI, any allotment or transfer of shares which will take the aggregate shareholding of an individual or a group to an equivalent of 5% or more of the paid-up capital of a bank would require the prior acknowledgement of the RBI before the bank can effect the allotment or transfer of shares. Further, the term “holding” would include both direct and indirect holding, beneficial or otherwise, and would be required to be computed with reference to the holding of the applicant, relatives (where the applicant is a natural person) and “associated enterprises”, as defined under Section 92A of the Income Tax Act.

Pricing The price of shares of a listed Indian company (including shares represented by GDRs) issued to non-residents under the FDI scheme on an automatic basis cannot be less than the price calculated in accordance with the guidelines issued by SEBI. Every Indian company issuing shares or convertible debentures in accordance with the applicable regulations is required to submit a report to the RBI within 30 days of receipt of the consideration and another report within 30 days from the date of issue of the shares to the non-resident purchaser. The above description applies only to an initial issue of shares or convertible debentures by an Indian company.

Transfer of shares and convertible debentures of an Indian company by a person resident outside India Until recently, the sale of shares of an Indian company from a non-resident to a resident required RBI approval, unless the sale was made on a stock exchange at the market price. The Government has granted general permission to persons residing outside India to transfer shares and convertible debentures held by them to an Indian resident, subject to compliance with certain terms and conditions and reporting requirements. A resident who wishes to purchase shares from a non-resident must, pursuant to the relevant notice requirements, file a declaration with an authorised dealer in the prescribed Form FC-TRS, together with the relevant documents and file an acknowledgment thereof with the Indian company to effect transfer of the shares to his name. However, in such cases, the person to whom the shares are being transferred is required to obtain the prior permission of the Central Government of India to acquire the shares if he has an existing venture (with his holding over 3% shares) or tie-up in India through investment in shares or debentures or a technical collaboration or a trade mark agreement or investment by whatever name called, in the same field to that in which the Indian company whose shares are being transferred is engaged. Further, a non-resident may transfer any security to a person resident in India by way of gift.

170 Moreover, the transfer of shares between an Indian resident and a non-resident does not require the prior approval of the FIPB or the RBI, provided that: (i) the activities of the investee company are under the automatic route pursuant to the FDI Policy and the transfer does not involve the attention of the Takeover Code (ii) the non-resident shareholding complies with sector limits under the FDI policy and (iii) the pricing is in accordance with the guidelines prescribed by SEBI and the RBI.

Block Deals SEBI has, by its circular dated 2 September 2005 (“Block Deal Circular”), issued certain guidelines in relation to ‘block deals’. The Block Deal Circular has defined a ‘block deal’ to mean a trade with a minimum quantity of 500,000 shares or a minimum value of Rs. 50 million executed through a single transaction on a separate specified window of the stock exchange. The Block Deal Circular has specified the following conditions for a block deal: (i) the specified trading window may be kept open for a limited period of 35 minutes from the beginning of trading hours i.e. the trading window shall remain open from 9.55 am to 10.30 am; (ii) the orders may be placed in this window at a price not exceeding °/-1% from the ruling market price/previous day closing price, as applicable; (iii) an order may be placed for a minimum quantity of 5,00,000 shares or minimum value of Rs. 50 million; (iv) every trade executed in this window must result in delivery and shall not be squared off or reversed; (v) the stock exchanges shall disseminate the information on block deals such as the name of the scrip, name of the client, quantity of shares bought/sold, traded price, etc. to the general public on the same day, after the market hours; and (vi) with respect to all transactions in a scrip where total quantity of shares bought/sold is more than 0.5% of the number of equity shares of the company listed on the stock exchange, certain disclosure requirements would be applicable.

Issue of American Depositary Receipts/Global Depositary Receipts The Depositary Receipt Scheme permits Indian companies to issue american depositary receipts/global depositary receipts to persons resident outside India generally under an automatic route or subject to the approval of the FIPB and the RBI in certain cases. Any Indian company issuing american depositary receipts/global depositary receipts is required to comply with certain reporting requirements prescribed by the RBI. The pricing for the issue of the shares underlying the global depositary receipts may not be less than the average of the weekly high and low of the closing price of the related shares quoted on the stock exchange during the two weeks preceding the relevant date on which the meeting of the board of the issuer or a committee of directors duly authorised by the board decides to open the proposed issue.

171 GOVERNMENT OF INDIA APPROVALS

This Offering is being made entirely outside India. These Listing Particulars may not be distributed directly or indirectly in India or to residents of India and the GDRs are not being offered or sold and may not be offered or sold directly or indirectly in India or to, or for the account or benefit of, any resident of India. Each purchaser of GDRs will be deemed to represent that it is neither located in India nor a resident of India and that it is not purchasing for, or for the account or benefit of, any such person, and understands that the GDRs will bear a legend to the effect that the securities evidenced thereby may not be offered, sold, pledged or otherwise transferred to any person located in India, to any resident of India or to, or for the account of, such persons, unless the Bank may determine otherwise in compliance with applicable law. The RBI has issued a notification permitting Indian companies to issue equity shares by way of issue of global depository receipts to persons resident outside India under the automatic route subject to the sectoral confirmations specified by the SIA/FIPB. The Bank is undertaking this issue in accordance with the above and the terms of the Depositary Receipt Scheme. The Bank is required to provide RBI, within thirty days of the date of closing of this Offering, details of its capital structure before and after the Offering. The Bank is required to furnish a statement, in the prescribed form, to the Chief General Manager, Exchange Control Department, Foreign Investment Division, RBI, within thirty days from the date of closing of this Offering, providing full particulars of the Offering such as the number of GDRs issued, the number of underlying fresh Shares issued, listing arrangements, total proceeds of the Offering, any proceeds of the Offering retained abroad and other relevant details relating to the launching and initial trading of the GDRs. The Bank is required to inform the RBI of any repatriation of issue proceeds held abroad, immediately upon such repatriation. The Bank is required to furnish to the RBI a quarterly return within 15 days of the close of each calendar quarter. In case of the Bank, foreign investors may own up to 74% of the equity shares subject to conformity with guidelines issued by the RBI from time to time. This limit is under the automatic route and does not require specific approval of the FIPB. This limit includes FDI, ADSs, Global Depositary Receipts and investment under the Portfolio Investment Scheme by FIIs and also NRIs, and also includes shares acquired by subscription to private placements and public offerings and acquisition of shares from existing shareholders. See “Restrictions on Foreign Ownership of Indian Securities — Foreign Direct Investment”.

Approvals Received by the Bank The Bank has received in-principle approvals for the listing of the Shares underlying the GDRs from the following Stock Exchanges: • BSE, pursuant to letter dated 9 September 2009 • NSE, pursuant to letter dated 9 September 2009 The Bank is also required to obtain the final approval for listing of the Shares underlying the GDRs on the completion of the allotment of the Shares.

Other Approvals The Board and the Shareholders of the Bank have approved the Offering, including the issuance of the GDRs and the underlying equity shares of the Bank in relation to such GDRs, by resolutions dated 4 August 2009 and 9 September 2009 respectively. Further, the Management Committee of the Bank passed a resolution on 22 September 2009 confirming the pricing and the allotment of equity shares pursuant to the Offering. To other approval is required under the Companies Act nor are the provisions of the Companies Act relating to the issue of a prospectus applicable to the Offering.

Filing A copy of the Listing Particulars will be filed with RBI, the Register of Companies, Ahmedabad, the BSE, NSE and SEBI for information and record purposes.

172 TRANSFER RESTRICTIONS

As a result of the following restrictions, purchasers are advised to consult legal counsel prior to making any resale, pledge or transfer of the GDRs. The Offering is being made in accordance with Rule 144A and Regulation S. None of the Shares or the GDRs have been or will be registered under the Securities Act or with any securities regulatory authority of any state of the United States and, accordingly, may not be offered or sold within the United States, or to, or for the account or benefit of, U.S. persons, except to in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A and to persons outside the United States in offshore transactions in accordance with Regulation S. Terms used in this section that are defined in Rule 144A or in Regulation S are used herein as so defined.

Rule 144A GDRs Each purchaser of Rule 144A GDRs within the United States will, by accepting delivery of these Listing Particulars and the Shares or GDRs, be deemed to have represented, acknowledged and agreed as follows: 1. The Rule 144A GDRs and the Shares represented thereby have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state of the United States and are subject to significant restrictions on transfer. 2. It is (a) a QIB (within the meaning of Rule 144A), (b) acquiring such Shares or Rule 144A GDRs for its own account or for the account of a QIB and (c) aware, and each beneficial owner of such Shares or Rule 144A GDRs has been advised, that the sale of such Shares or Rule 144A GDRs to it is being made in reliance on Rule 144A. 3. It agrees (or, if it is acting for the account of another persons, such person has confirmed to it that such person agrees) that it (or such person) will not offer, sell, pledge or otherwise transfer such Rule 144A GDRs or Shares represented thereby except (a) to a person whom it and any person acting on its behalf reasonably believe is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A, (b) in an offshore transaction in accordance with Rule 903 or 904 of Regulation S or (c) pursuant to an exemption from registration provided by Rule 144 under the Securities Act (if available), in each case in accordance with any applicable securities laws of any state or other jurisdiction of the United States. The purchaser will, and each subsequent holder is required to, notify any subsequent purchaser from it of such Rule 144A GDRs of the resale restrictions referred to in (a), (b) and (c) above. Notwithstanding anything to the contrary in the foregoing, the equity shares represented by the Rule 144A GDRs may not be deposited into any unrestricted depositary facility established or maintained by a depositary bank (including the Depositary), so long as such Shares are “restricted securities” within the meaning of Rule 144 (a)(3) under the Securities Act. No representation can be made as to the availability of the exemption provided by Rule 144 for resale of the 144A GDRs or the Shares represented thereby. 4. It understands that the Rule 144A GDRs sold in the United States and represented by the Master Rule 144A GDR will bear a legend substantially to the following effect unless the Depositary and the Bank determine otherwise in compliance with applicable law: “THIS MASTER RULE 144A GLOBAL DEPOSITARY RECEIPT, THE RULE 144A DEPOSITARY RECEIPTS EVIDENCED HEREBY AND THE SHARES OF AXIS BANK LIMITED REPRESENTED THEREBY (THE “SHARES”) HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THE HOLDER HEREOF BY PURCHASING, TAKING POSSESSION OF OR TAKING AN INTEREST IN THE GDRS, AGREES FOR THE BENEFIT OF AXIS BANK LIMITED THAT THE GLOBAL DEPOSITARY RECEIPTS AND THE SHARES CORRESPONDING HERETO MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERSON WHOM THE SELLER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER (“QIB”) (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (B) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (C) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THE HOLDER OF THE GLOBAL DEPOSITARY RECEIPTS WILL, AND EACH SUBSEQUENT

173 HOLDER IS REQUIRED TO, NOTIFY ANY SUBSEQUENT PURCHASER OF SUCH GLOBAL DEPOSITARY RECEIPTS OF THE RESALE RESTRICTIONS REFERRED TO ABOVE. THE BENEFICIAL OWNER OF SHARES RECEIVED UPON CANCELLATION OF ANY RULE 144A GLOBAL DEPOSITARY RECEIPT MAY NOT DEPOSIT OR CAUSE TO BE DEPOSITED SUCH SHARES INTO ANY DEPOSITARY RECEIPT FACILITY IN RESPECT OF SHARES ESTABLISHED OR MAINTAINED BY A DEPOSITARY BANK, OTHER THAN A RULE 144A RESTRICTED DEPOSITARY RECEIPT FACILITY, SO LONG AS SUCH SHARES ARE “RESTRICTED SECURITIES” WITHIN THE MEANING OF RULE 144(A)(3) UNDER THE SECURITIES ACT. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT FOR RESALE OF THE SHARES OR ANY RULE 144A GLOBAL DEPOSITARY RECEIPTS. THE HOLDER HEREOF, BY PURCHASING THE GLOBAL DEPOSITARY RECEIPTS REPRESENTED BY THIS CERTIFICATE, AGREES FOR THE BENEFIT OF AXIS BANK LIMITED AND THE DEPOSITARY NAMED BELOW THAT THE GLOBAL DEPOSITARY RECEIPTS MAY NOT AT ANY TIME BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANY PERSON LOCATED IN INDIA, OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, SUCH PERSONS.” 5. The Rule 144A GDRs sold in the United States and represented by a Temporary Master Rule 144A GDR will bear a legend substantially to the following effect, unless the Depositary and the Bank determine otherwise in compliance with applicable law: “THIS TEMPORARY MASTER RULE 144A GLOBAL DEPOSITARY RECEIPT, THE RULE 144A GLOBAL DEPOSITARY RECEIPTS EVIDENCED HEREBY AND THE SHARES OF AXIS BANK LIMITED REPRESENTED THEREBY (THE “SHARES”) HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THE HOLDER HEREOF BY PURCHASING, TAKING POSSESSION OF OR TAKING AN INTEREST IN THE RULE 144A GLOBAL DEPOSITARY RECEIPTS, AGREES FOR THE BENEFIT OF AXIS BANK LIMITED THAT THE RULE 144A GLOBAL DEPOSITARY RECEIPTS AND THE SHARES CORRESPONDING HERETO MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERSON WHOM THE SELLER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER (“QIB”) (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (B) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (C) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THE HOLDER OF THE GDRs WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY SUBSEQUENT PURCHASER OF SUCH RULE 144A GLOBAL DEPOSITARY RECEIPTS OF THE RESALE RESTRICTIONS REFERRED TO ABOVE. THE BENEFICIAL OWNER OF SHARES RECEIVED UPON CANCELLATION OF ANY RULE 144A GLOBAL DEPOSITARY RECEIPT MAY NOT DEPOSIT OR CAUSE TO BE DEPOSITED SUCH SHARES INTO ANY DEPOSITARY RECEIPT FACILITY IN RESPECT OF SHARES ESTABLISHED OR MAINTAINED BY A DEPOSITARY BANK, OTHER THAN A RULE 144A RESTRICTED DEPOSITARY RECEIPT FACILITY, SO LONG AS SUCH SHARES ARE “RESTRICTED SECURITIES” WITHIN THE MEANING OF RULE 144(a)(3) UNDER THE SECURITIES ACT. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT FOR RESALE OF THE SHARES OR ANY RULE 144A GLOBAL DEPOSITARY RECEIPTS. THIS TEMPORARY MASTER RULE 144A GLOBAL DEPOSITARY RECEIPT SHALL BEAR AN ISIN NUMBER THAT IS DIFFERENT FROM THE ISIN NUMBER ASSIGNED TO ANY RULE 144A GLOBAL DEPOSITARY RECEIPTS CURRENTLY OUTSTANDING UNDER THE DEPOSIT AGREEMENT. THE HOLDER HEREOF, BY PURCHASING THE RULE 144A GLOBAL DEPOSITARY RECEIPTS REPRESENTED BY THIS TEMPORARY MASTER RULE 144A GLOBAL DEPOSITARY RECEIPT, AGREES FOR THE BENEFIT OF AXIS BANK LIMITED AND THE DEPOSITARY NAMED BELOW THAT THE RULE 144A GLOBAL DEPOSITARY RECEIPTS MAY NOT AT ANY TIME BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANY PERSON LOCATED IN INDIA, OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, SUCH PERSONS.” 6. It understands that the Rule 144A GDRs will initially be represented by a Temporary Master Rule 144A GDR and, before any beneficial interests in Rule 144A GDRs represented by a Temporary Master

174 Rule 144A GDR may be transferred to a person who takes delivery in the form of a beneficial interest in Regulation S GDRs represented by the Master Regulation S GDR, the transferor will be required to provide certain written certifications (in the form provided in the Deposit Agreement). 7. It acknowledges that the Bank, the Depositary, the Lead Managers and their respective affiliates and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements. If it is acquiring the Rule 144A GDRs for the account of one or more QIBs, it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account. Any sale or other transfer, or attempted sale or other transfer, made other than in compliance with the above-stated restrictions, shall not be recognised by the Bank or the Depositary in respect of the Rule 144A GDRs and the Shares represented thereby.

Regulation S GDRs Each purchaser of Shares or Regulation S GDRs outside of the United States pursuant to Regulation S, and each subsequent purchaser of Shares or Regulation S GDRs in resales until the expiration of the 40 day period beginning on the latest of the commencement of the GDRs offering, the original issue date of the GDRs and the latest issue date with respect to additional GDRs (if any) issued pursuant to over allotments by the Bank (the “Distribution Compliance Period”) will be deemed to have represented, acknowledged and agreed as follows: 1. It is aware that the sale of such Shares or Regulation S GDRs to it is being made pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S and it is, or at the time such Shares or Regulation S GDRs are purchased will be, the beneficial owner of such Shares or GDRs and (a) it is not a U.S. person (as defined in Regulation S) and it is located outside the United States (within the meaning of Regulation S) and (b) it is not an affiliate of the Bank or a person acting on behalf of such affiliate. 2. It understands that the Regulation S GDRs and the Shares represented thereby have not been and will not be registered under the Securities Act and, prior to the expiration of the Distribution Compliance Period, may not be offered, sold, pledged or otherwise transferred except (a) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S or (b) to a person whom the seller and any person acting on its behalf reasonably believe is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A, in each case in accordance with any applicable securities law of any state or other jurisdiction of the United States; provided that in connection with any transfer under clause (b) above, the transferor shall, prior to the settlement of such sale, withdraw such securities from the Regulation S Facility in accordance with the terms and conditions of the Deposit Agreement and instruct that such securities be delivered to the custodian under the Deposit Agreement for deposit thereunder in the Rule 144A Facility and issuance, in accordance with the terms and conditions thereof, of a Rule 144A GDR to or for the account of such QIB. 3. The Regulation S GDRs sold pursuant to Regulation S and represented by the Master Regulation S GDR will bear a legend substantially to the following effect, unless the Depositary and the Bank determine otherwise in compliance with applicable law: “THIS MASTER REGULATION S GLOBAL DEPOSITARY RECEIPT, THE REGULATION S GLOBAL DEPOSITARY RECEIPTS EVIDENCED HEREBY AND THE SHARES OF AXIS BANK LIMITED REPRESENTED THEREBY (THE “SHARES”) HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND, PRIOR TO THE EXPIRATION OF A DISTRIBUTION COMPLIANCE PERIOD (DEFINED AS THE 40 DAY PERIOD BEGINNING ON THE LATEST OF THE COMMENCEMENT OF THE GLOBAL DEPOSITARY RECEIPTS OFFERING, THE ORIGINAL ISSUE DATE OF THE GLOBAL DEPOSITARY RECEIPTS AND THE LATEST ISSUE DATE WITH RESPECT TO ADDITIONAL GLOBAL DEPOSITARY RECEIPTS (IF ANY) ISSUED PURSUANT TO OVER ALLOTMENTS) MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (B) TO A PERSON WHOM THE SELLER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER (“QIB”) (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES; PROVIDED THAT IN CONNECTION WITH ANY TRANSFER

175 UNDER (B) ABOVE, THE TRANSFEROR SHALL PRIOR TO THE SETTLEMENT OF SUCH SALE, WITHDRAW THE SHARES FROM THE REGULATION S FACILITY (AS DEFINED IN THE DEPOSIT AGREEMENT) IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE DEPOSIT AGREEMENT AND INSTRUCT THAT SUCH SHARES BE DELIVERED TO THE CUSTODIAN UNDER THE DEPOSIT AGREEMENT FOR DEPOSIT IN THE RULE 144A FACILITY (AS DEFINED IN THE DEPOSIT AGREEMENT) THEREUNDER AND THAT RULE 144A GLOBAL DEPOSITARY RECEIPTS REPRESENTED BY A MASTER RULE 144A GLOBAL DEPOSITARY RECEIPT BE ISSUED, IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE DEPOSIT AGREEMENT, TO OR FOR THE ACCOUNT OF SUCH QIB. UPON THE EXPIRATION OF THE DISTRIBUTION COMPLIANCE PERIOD REFERRED TO ABOVE, THIS GLOBAL DEPOSITARY RECEIPT AND THE SHARES REPRESENTED HEREBY SHALL NO LONGER BE SUBJECT TO THE RESTRICTIONS PROVIDED IN THIS LEGEND, PROVIDED THAT AT THE TIME OF SUCH EXPIRATION THE OFFER OR SALE OF THE GLOBAL DEPOSITARY RECEIPTS REPRESENTED HEREBY AND THE SHARES REPRESENTED THEREBY BY THE HOLDER HEREOF IN THE UNITED STATES WOULD NOT BE RESTRICTED UNDER THE SECURITIES LAWS OF THE UNITED STATES OR ANY STATE IN THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING THE GLOBAL DEPOSITARY RECEIPTS REPRESENTED BY THIS CERTIFICATE, AGREES FOR THE BENEFIT OF AXIS BANK LIMITED AND THE DEPOSITARY NAMED BELOW THAT THE GLOBAL DEPOSITARY RECEIPTS MAY NOT AT ANY TIME BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANY PERSON LOCATED IN INDIA, OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, SUCH PERSONS.” 4. The Regulation S GDRs sold pursuant to Regulation S and represented by a Temporary Master Regulation S GDR will bear a legend substantially to the following effect, unless the Depositary and the Bank determine otherwise in compliance with applicable law: “THIS TEMPORARY MASTER REGULATION S GLOBAL DEPOSITARY RECEIPT, THE REGULATION S GLOBAL DEPOSITARY RECEIPTS EVIDENCED HEREBY AND THE SHARES OF AXIS BANK LIMITED REPRESENTED THEREBY (THE “SHARES”) HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND, PRIOR TO THE EXPIRATION OF A DISTRIBUTION COMPLIANCE PERIOD (DEFINED AS THE 40 DAY PERIOD BEGINNING ON THE LATEST OF THE COMMENCEMENT OF THE GDR OFFERING, THE ORIGINAL ISSUE DATE OF THE REGULATION S GLOBAL DEPOSITARY RECEIPTS AND THE LATEST ISSUE DATE WITH RESPECT TO ADDITIONAL THE REGULATION S GLOBAL DEPOSITARY RECEIPTS (IF ANY) ISSUED PURSUANT TO OVER ALLOTMENTS) MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (B) TO A PERSON WHOM THE SELLER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER (“QIB”) (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES; PROVIDED THAT IN CONNECTION WITH ANY TRANSFER UNDER (B) ABOVE, THE TRANSFEROR SHALL PRIOR TO THE SETTLEMENT OF SUCH SALE, WITHDRAW THE SHARES FROM THE REGULATION S FACILITY (AS DEFINED IN THE DEPOSIT AGREEMENT) IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE DEPOSIT AGREEMENT AND INSTRUCT THAT SUCH SHARES BE DELIVERED TO THE CUSTODIAN UNDER THE DEPOSIT AGREEMENT FOR DEPOSIT IN THE RULE 144A FACILITY (AS DEFINED IN THE DEPOSIT AGREEMENT) THEREUNDER AND THAT RULE 144A GDRs REPRESENTED BY A MASTER RULE 144A GDR BE ISSUED, IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE DEPOSIT AGREEMENT, TO OR FOR THE ACCOUNT OF SUCH QIB. THIS TEMPORARY MASTER REGULATION S GLOBAL DEPOSITARY RECEIPT SHALL BEAR AN ISIN NUMBER THAT IS DIFFERENT FROM THE ISIN NUMBER ASSIGNED TO ANY REGULATION S GLOBAL DEPOSITARY RECEIPTS CURRENTLY OUTSTANDING UNDER THE DEPOSIT AGREEMENT. UPON THE EXPIRATION OF THE DISTRIBUTION COMPLIANCE PERIOD REFERRED TO ABOVE, THIS TEMPORARY MASTER REGULATION S GLOBAL DEPOSITARY RECEIPT AND THE SHARES REPRESENTED HEREBY SHALL NO LONGER BE SUBJECT TO THE RESTRICTIONS PROVIDED IN

176 THIS LEGEND, PROVIDED THAT AT THE TIME OF SUCH EXPIRATION THE OFFER OR SALE OF THE GLOBAL DEPOSITARY RECEIPTS REPRESENTED HEREBY AND THE SHARES REPRESENTED THEREBY BY THE HOLDER HEREOF IN THE UNITED STATES WOULD NOT BE RESTRICTED UNDER THE SECURITIES LAWS OF THE UNITED STATES OR ANY STATE IN THE UNITED STATES. UPON THE LATER OF THE EXPIRATION OF THE DISTRIBUTION COMPLIANCE PERIOD AND THE DATE ON WHICH THE SHARES REPRESENTED HEREBY ARE LISTED ON THE BOMBAY STOCK EXCHANGE LIMITED (OR SUCH OTHER INDIAN STOCK EXCHANGE UPON WHICH AXIS BANK LIMITED’S SHARES ARE LISTED), BENEFICIAL INTERESTS IN THIS TEMPORARY MASTER REGULATION S GLOBAL DEPOSITARY RECEIPT WILL AUTOMATICALLY BE EXCHANGED FOR BENEFICIAL INTERESTS IN THE MASTER REGULATION S GDR (AS DEFINED IN THE DEPOSIT AGREEMENT) REPRESENTING ALL REGULATION S GLOBAL DEPOSITARY RECEIPTS CURRENTLY ISSUED AND OUTSTANDING WHICH ARE NOT RESTRICTED BY REASON OF DATE OF ISSUANCE OR OTHERWISE. THE HOLDER HEREOF, BY PURCHASING THE GDRs REPRESENTED BY THIS TEMPORARY MASTER REGULATION S GLOBAL DEPOSITARY RECEIPT, AGREES FOR THE BENEFIT OF AXIS BANK LIMITED AND THE DEPOSITARY NAMED BELOW THAT THE GDRs MAY NOT AT ANY TIME BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANY PERSON LOCATED IN INDIA, OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, SUCH PERSONS.” 5. It understands that the Regulation S GDRs will initially be represented by a Temporary Master Regulation S GDR and, prior to the expiration of the Distribution Compliance Period, before any beneficial interest in the Regulation S GDRs represented by a Temporary Master Regulation S GDR may be transferred to a person who takes delivery in the form of a beneficial interest in the Rule 144A GDR represented by the Master Rule 144A GDR, the transferor will be required to provide certain written certifications (in the form provided in the Deposit Agreement). 6. It acknowledges that the Bank, the Depositary, the Lead Managers and their respective affiliates and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements. Any sale or other transfer, or attempted sale or other transfer, made other than in compliance with the above-stated restrictions, shall not be recognised by the Bank or the Depositary in respect of the Regulation S GDRs and the equity shares represented thereby.

Other Provisions Regarding Transfers of the GDRs Interests in the Rule 144A GDRs may be transferred to a person whose interest in such GDRs is subsequently represented by the Master Regulation S GDR only upon receipt by the Depositary of written certifications (in the forms provided in the Deposit Agreement) from the transferor and the transferee to the effect that, among other things, such transfer is being made in accordance with Regulation S and subject to the terms of the Deposit Agreement. Prior to the expiration of the Distribution Compliance Period, interests in Regulation S GDRs may be transferred to a person whose interest in such GDRs is subsequently represented by the Master Rule 144A GDR only upon receipt by the Depositary of written certifications from the transferor (in the forms provided in the Deposit Agreement) to the effect that, among other things, such transfer is being made in accordance with Rule 144A. Any interest in GDRs represented by one of the Master GDRs that is transferred to a person whose interest in such GDRs is subsequently represented by the other Master GDR will, upon transfer, cease to be an interest in the GDRs represented by such first Master GDR and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to interests in GDRs represented by such other Master GDR for so long as it remains such an interest.

177 CLEARANCE AND SETTLEMENT

Clearing and Settlement of GDRs Custodial and depositary links have been established among Euroclear, Clearstream, Luxembourg and DTC to facilitate the initial issue of the GDRs and cross-market transfers of the GDRs associated with secondary market trading.

The Clearing Systems Euroclear and Clearstream, Luxembourg Euroclear and Clearstream, Luxembourg each hold securities for participating organisations and facilitate the clearance and settlement of securities transactions between their respective participants through electronic book-entry changes in accounts of such participants. Euroclear and Clearstream, Luxembourg provide to their respective participants, among other things, services for safekeeping, administration, clearance and settlement of internationally-traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg participants are financial institutions throughout the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations. Indirect access to Euroclear or Clearstream, Luxembourg is also available to others, such as banks, brokers, dealers and trust companies which clear through or maintain a custodial relationship with a Euroclear or Clearstream, Luxembourg participant, either directly or indirectly. Distributions of dividends and other payments with respect to book-entry interests in the GDRs held through Euroclear or Clearstream, Luxembourg will be credited, to the extent received by the Depositary, to the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with the relevant system’s rules and procedures.

DTC DTC is a limited-purpose trust company organised under the laws of the State of New York, a “banking organisation” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities for DTC participants and facilitates the clearance and settlement of securities transactions through electronic computerised book-entry changes in DTC participants’ accounts. DTC participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organisations. Indirect access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly (“Indirect Participants”). Holders of book-entry interests in the GDRs held through DTC will receive, to the extent received by the Depositary, all distributions of dividends or other payments with respect to book-entry interests in the GDRs from the Depositary through DTC and DTC participants. Distributions in the United States will be subject to relevant U.S. tax laws and regulations. See “Taxation — U.S. Federal Income Tax Considerations”. As DTC can act on behalf of DTC participants only, who in turn act on behalf of Indirect Participants, the ability of beneficial owners who are Indirect Participants to pledge book-entry interests in the GDRs to persons or entities that do not participate in DTC, or otherwise take actions with respect to book-entry in the GDRs, may be limited.

Registration and Form Book-entry interests in the GDRs held through Euroclear and Clearstream, Luxembourg, will be evidenced by the Master Regulation S GDR registered in the name of The Bank of New York Depository (Nominees) Limited as common depositary for Euroclear and Clearstream, Luxembourg. Book-entry interests in the GDRs held through DTC will be represented by the Master Rule 144A GDR registered in the name of a nominee for DTC, which will be held by the Depositary as custodian for DTC. As necessary, the Depositary will adjust the amounts of GDRs on the relevant register for the accounts of the common depositary and nominee to reflect the amounts of GDRs held through Euroclear, Clearstream, Luxembourg, and DTC, respectively. Beneficial ownership in GDRs will be held through financial institutions as direct and indirect participants in Euroclear, Clearstream, Luxembourg and DTC. The aggregate holdings of book-entry interests in the GDRs in Euroclear, Clearstream, Luxembourg and DTC will be reflected in the book-entry accounts of each such institution. Euroclear, Clearstream, Luxembourg

178 and DTC, as the case may be, and every other intermediate holder in the chain to the beneficial owner of book- entry interests in the GDRs, will be responsible for establishing and maintaining accounts for their participants and customers having interests in the book-entry interests in the GDRs. The Depositary will be responsible for maintaining a record of the aggregate holdings of GDRs registered in the name of a common depositary for Euroclear and Clearstream, Luxembourg and a nominee for DTC. The Depositary will be responsible for ensuring that payments received by it from the Bank for Holders holding through Euroclear and Clearstream, Luxembourg are credited to Euroclear or Clearstream, Luxembourg, as the case may be, and the Depositary will also be responsible for ensuring that payments received by it from the Bank for Holders holding through DTC are received by the relevant DTC participant or, where no election has been made, by DTC. The Bank will not impose any fees in respect of the GDRs; however, holders of book-entry interests in the GDRs may incur fees normally payable in respect of the maintenance and operation of accounts in Euroclear, Clearstream, Luxembourg or DTC.

Global clearance and settlement procedures Initial Settlement On the initial offering, the GDRs will be in global form evidenced by the two global Master GDRs. The GDRs will be in uncertificated book-entry form. Purchasers electing to hold book-entry interests in the GDRs through Euroclear and Clearstream, Luxembourg accounts will follow the settlement procedures applicable to depositary receipts. Book-entry interests in the GDRs will be credited to Euroclear and Clearstream, Luxembourg and participant securities clearance accounts on the business day following the Closing Date against payment (for value on the Closing Date). DTC participants acting on behalf of purchasers electing to hold book-entry interests in the GDRs through DTC will follow the delivery practices applicable to securities eligible for DTC’s Same-Day Funds Settlement (“SDFS”) system. The securities accounts of DTC participants will be credited with book-entry interests in the GDRs following confirmation of receipt of payment to the Bank on the Closing Date.

Secondary Market Trading Transfer restrictions For a description of the transfer restrictions relating to the GDRs, see “Terms and Conditions of the Global Depositary Receipts” and “Transfer Restrictions”.

Trading between Euroclear and Clearstream, Luxembourg participants Secondary market sales of book-entry interests in the GDRs held through Euroclear or Clearstream, Luxembourg to purchasers of book-entry interests in the GDRs through Euroclear or Clearstream, Luxembourg will be conducted in accordance with the normal rules and operating procedures of Euroclear and Clearstream, Luxembourg and will be settled using the normal procedures applicable to depositary receipts.

Trading between DTC participants Secondary market sales of book-entry interests in the GDRs held through DTC will occur in the ordinary way in accordance with DTC rules and will be settled using the procedures applicable to depositary receipts in DTC’s SDFS System, if payment is effected in U.S. dollars, or free of payment, if payment is not effected in U.S. dollars. Where payment is not effected in U.S. dollars, separate payment arrangements outside DTC are required to be made between the DTC participants.

Trading between DTC seller and Euroclear/Clearstream, Luxembourg purchaser When book-entry interests in the GDRs are to be transferred from the account of a DTC participant to the account of a Euroclear or Clearstream, Luxembourg participant, the DTC participant must send to DTC a free of payment instruction at least two business days prior to the settlement date. DTC will in turn transmit such instruction to Euroclear or Clearstream, Luxembourg, as the case may be, on the settlement date. Separate payment arrangements are required to be made between the DTC participant and the relevant Euroclear or Clearstream, Luxembourg participant. On the settlement date, DTC will debit the account of its DTC participant and will instruct the Depositary to instruct Euroclear or Clearstream, Luxembourg, as the case may be, to credit the relevant account of the Euroclear or Clearstream, Luxembourg participant, as the case may be. In addition, on the settlement date, DTC will instruct the Depositary to (i) decrease the amount of book-entry interests in the GDRs registered in the name of a nominee for DTC and represented by the Master Rule 144A GDR and (ii) increase the amount of book-entry interests in the GDRs registered in the name of the common nominee for Euroclear and Clearstream, Luxembourg and represented by the Master Regulation S GDR.

179 Trading between Clearstream, Luxembourg/Euroclear seller and DTC purchaser When book-entry interests in the GDRs are to be transferred from the account of a Euroclear or Clearstream, Luxembourg participant to the account of a DTC participant, the Euroclear or Clearstream, Luxembourg participant must send to Euroclear or Clearstream, Luxembourg a free of payment instruction at least one business day prior to the settlement date. Separate payment arrangements are required to be made between the DTC participant and the relevant Euroclear or Clearstream, Luxembourg participant, as the case may be. On the settlement date, Euroclear or Clearstream Luxembourg, as the case may be, will debit the account of its participant and will instruct the Depositary to instruct DTC to credit the relevant account of Euroclear or Clearstream, Luxembourg, as the case may be, and will deliver such book-entry interests in the GDRs free of payment to the relevant account of the DTC participant. In addition, Euroclear or Clearstream, Luxembourg, as the case may be, shall on the settlement date instruct the Depositary to (i) decrease the amount of the book-entry interests in the GDRs registered in the name of the common nominee and evidenced by the Master Regulation S GDR and (ii) increase the amount of the book-entry interests in the GDRs registered in the name of a nominee for DTC and represented by the Master Rule 144A GDR.

General Although the foregoing sets forth the procedures of Euroclear, Clearstream, Luxembourg and DTC in order to facilitate the transfers of interests in the GDRs among participants of Euroclear, Clearstream, Luxembourg and DTC, none of Euroclear, Clearstream, Luxembourg or DTC are under any obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Bank, the Lead Managers, the Depositary, the Custodians nor their respective affiliates or agents will have any responsibility for the performance by Euroclear, Clearstream, Luxembourg or DTC or their respective participants of their respective obligations under the rules and procedures governing their operations. The Bank is required to inform RBI of the details of remittances received with respect to issuances of equity shares in the form of GDRs within 30 days from the date of issuance.

180 TAXATION

The following summary of material U.S. federal income, United Kingdom and Indian tax consequences A10.27.11 of ownership of GDRs (and of any equity shares that may be delivered upon surrender of GDRs) is based upon laws, regulations, decrees, rulings, income tax conventions (treaties), administrative practice and judicial decisions in effect at the date of these Listing Particulars. Legislative, judicial or administrative changes or interpretations may, however, be forthcoming that could alter or modify the statements and conclusions set forth herein. Any such changes or interpretations may be retroactive and could affect the tax consequences to holders of the GDRs. This summary does not purport to be a legal opinion or to address all tax aspects that may be relevant to a holder of GDRs.

U.S. Federal Income Tax Considerations TO COMPLY WITH INTERNAL REVENUE SERVICE CIRCULAR 230, PROSPECTIVE INVESTORS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF U.S. FEDERAL TAX ISSUES CONTAINED OR REFERRED TO IN THESE LISTING PARTICULARS IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY PROSPECTIVE INVESTORS, FOR THE PURPOSES OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THEM UNDER THE UNITED STATES INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS BEING USED IN CONNECTION WITH THE PROMOTION OR MARKETING BY THE BANK OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) PROSPECTIVE INVESTORS SHOULD SEEK ADVICE BASED ON THE TAXPAYER’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. The following is a general description of certain material United States federal income tax consequences to U.S. Holders (defined below) under present law of an investment in the GDRs or equity shares. This summary applies only to investors that hold the GDRs or equity shares as capital assets and that have the U.S. dollar as their functional currency. This discussion is based on the tax laws of the United States as in effect on the date of these Listing Particulars and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of these Listing Particulars, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below. The following discussion does not address state, local, non-United States or other tax laws, or the tax consequences to any particular investor or to persons in special tax situations such as: • banks; • certain financial institutions; • insurance companies; • broker dealers; • U.S. expatriates; • traders that elect to mark-to-market; • tax-exempt entities; • persons liable for the alternative minimum tax; • persons holding a GDR or equity share as part of a straddle, hedging, conversion or integrated transaction; • persons that actually or constructively own 10% or more of the Bank’s voting stock; • persons who acquired GDRs or equity shares pursuant to the exercise of any employee share option or otherwise as consideration; or • persons holding GDRs or equity shares through partnerships or other pass-through entities. PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE APPLICATION OF THE UNITED STATES FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE AND LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF GDRs OR EQUITY SHARES.

181 The discussion below of the United States federal income tax consequences to “U.S. Holders” will apply to you if you are a beneficial owner of GDRs or equity shares and you are, for United States federal income tax purposes, • an individual who is a citizen or resident of the United States; • a corporation (or other entity taxable as a corporation) organised under the laws of the United States, any State thereof or the District of Columbia; • an estate whose income is subject to United States federal income taxation regardless of its source; or • a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions of the trust, or (2) has a valid election in effect under the applicable U.S. Treasury regulations to be treated as a U.S. person. If you are a partner in a partnership, or other entity taxable as a partnership for United States federal income tax purposes, that holds GDRs or equity shares, your tax treatment generally will depend on your status and the activities of the partnership. The discussion below assumes that the representations contained in the Deposit Agreement are true and that the obligations in the Deposit Agreement and any related agreement will be complied with in accordance with their terms. If you hold GDRs, although not free from doubt, you generally should be treated as the holder of the underlying equity shares represented by those GDRs for United States federal income tax purposes. The U.S. Treasury has expressed concerns that parties to whom GDRs are pre-released may be taking actions that are inconsistent with the claiming, by U.S. Holders of GDRs, of foreign tax credits for United States federal income tax purposes. Such actions would also be inconsistent with the claiming of the reduced rate of tax applicable to dividends received by certain non-corporate U.S. Holders, as described below. Accordingly, the availability of the reduced tax rate for dividends received by certain non-corporate U.S. Holders could be affected by future actions that may be taken by the U.S. Treasury or parties to whom GDRs are pre-released.

Taxation of Distributions on the GDRs or Equity Shares Subject to the passive foreign investment company rules discussed below, the gross amount of distributions to you with respect to the GDRs or equity shares generally will be included in your gross income in the year received as foreign source ordinary dividend income, but only to the extent that the distribution is paid out of the Bank’s current or accumulated earnings and profits (as determined under United States federal income tax principles). To the extent that the amount of the distribution exceeds the Bank’s current and accumulated earnings and profits, it will be treated first as a tax-free return of your tax basis in your GDRs or equity shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. However, the Bank does not intend to calculate its earnings and profits under United States federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will generally be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above. The dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations. Subject to applicable limitations, with respect to non-corporate U.S. Holders (including individual U.S. Holders) for taxable years beginning before 1 January 2011, dividends may constitute “qualified dividend income” that is taxed at the lower applicable capital gains rate provided that (1) the Bank is not a passive foreign investment company (as discussed below) for either the taxable year in which the dividend is paid or the preceding taxable year, (2) certain holding period requirements are met, and (3) the Bank is eligible for the benefits of the Convention Between the Government of the United States of America and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. Non-corporate U.S. Holders are strongly urged to consult their tax advisors regarding the availability of the lower rate for dividends paid with respect to GDRs or equity shares. The amount of any distribution paid in Indian rupees will be equal to the U.S. dollar value of such Indian rupees on the date such distribution is received by the Depositary, in the case of GDRs, or by the U.S. Holder, in the case of equity shares, regardless of whether the payment is in fact converted into U.S. dollars at that time. Gain or loss, if any, realised on the sale or other disposition of such Indian rupees will generally be U.S. source ordinary income or loss. The amount of any distribution of property other than cash will be the fair market value of such property on the date of distribution. For foreign tax credit purposes, dividends distributed with respect to GDRs or equity shares will generally constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category

182 income” for taxable years beginning after 31 December 2006. A U.S. Holder will not be able to claim a U.S. foreign tax credit for Indian taxes for which the Bank is liable and must pay with respect to distributions on GDRs or equity shares. The rules relating to the determination of the U.S. foreign tax credit are complex and U.S. Holders should consult their tax advisors to determine whether and to what extent a credit would be available in their particular circumstances.

Taxation of a Disposition of GDRs or Equity Shares Subject to the passive foreign investment company rules discussed below, you generally will recognise capital gain or loss on any sale or other taxable disposition of a GDR or equity share equal to the difference between the U.S. dollar value of the amount realised for the GDR or equity share and your tax basis (in U.S. dollars) in the GDR or equity share. If you are a non-corporate U.S. Holder (including an individual U.S. Holder) who has held the GDR or equity share for more than one year, capital gain on a disposition of the GDR or equity share generally will be eligible for reduced federal income tax rates. The deductibility of capital losses is subject to limitations. Any such gain or loss that you recognise generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes. Because gains on a disposition of a GDR or equity share generally will be treated as U.S. source, the use of foreign tax credits relating to any Indian income tax imposed upon gains in respect of GDRs or equity shares may be limited. U.S. Holders should consult their tax advisors regarding the application of Indian taxes to a disposition of a GDR or equity share and their ability to credit an Indian tax against their United States federal income tax liability.

Passive Foreign Investment Company In general, a non-U.S. corporation is considered to be a passive foreign investment company, or a PFIC, for any taxable year if either: • at least 75% of its gross income is passive income, or • at least 50% of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income. The Bank will be treated as owning its proportionate share of the assets and earning its proportionate share of the income of any other corporation in which it owns, directly or indirectly, 25% or more (by value) of the stock. Based in part on certain proposed Treasury regulations with respect to banks, which are not yet finalised, although not free from doubt, the Bank does not expect to be a PFIC for its current taxable year ending 31 March 2008. However, the determination of whether the Bank is a PFIC is a factual determination made annually after the end of each taxable year, and there can be no assurance that the Bank will not be considered a PFIC in the current taxable year or any future taxable year because, among other reasons, (i) the composition of the Bank’s income and assets will vary over time, (ii) there can be no assurance that the proposed Treasury regulations will be finalised in their current form, and (iii) the manner of the application of the proposed Treasury regulations and other relevant rules is uncertain in several respects. Furthermore, the Bank’s PFIC status may depend on the market price of its equity shares and GDRs, which may fluctuate considerably. PROSPECTIVE PURCHASERS ARE URGED TO CONSULT YOUR TAX ADVISORS REGARDING THE BANK’S POSSIBLE STATUS AS A PFIC. If the Bank is a PFIC for any taxable year during which you hold GDRs or equity shares, you will be subject to special tax rules with respect to any “excess distribution” that you receive and any gain you realise from a sale or other disposition (including a pledge) of the GDRs or equity shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the GDRs or equity shares will be treated as an excess distribution. Under these special tax rules: • the excess distribution or gain will be allocated ratably over your holding period for the GDRs or equity shares, • the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which the Bank became a PFIC, will be treated as ordinary income, and • the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

183 The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realised on the sale of the GDRs or equity shares cannot be treated as capital, even if you hold the GDRs or equity shares as capital assets. If the Bank is a PFIC for any year during which you hold GDRs or equity shares, the Bank generally will continue to be treated as a PFIC with respect to you for all succeeding years during which you hold GDRs or equity shares. However, if the Bank ceases to be a PFIC you may avoid some of the adverse effects of the PFIC regime by making a deemed sale election with respect to the GDRs or equity shares, as applicable. The Bank does not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election. In addition, if the Bank is treated as a PFIC, to the extent any of its direct or indirect subsidiaries are also PFICs, you may be deemed to own shares in such subsidiaries and you may be subject to the adverse PFIC tax consequences with respect to the shares of such subsidiaries that you would be deemed to own. A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election with respect to such stock to elect out of the tax treatment discussed above, although it is possible the mark-to-market election may not apply or be available with respect to the shares in the Bank’s subsidiaries to the extent they are PFICs that you may be deemed to own if the Bank is treated as a PFIC, as discussed above. If you make a valid mark-to-market election for the GDRs or equity shares, you will include in income each year an amount equal to the excess, if any, of the fair market value of the GDRs or equity shares as of the close of your taxable year over your adjusted basis in such GDRs or equity shares. You are allowed a deduction for the excess, if any, of the adjusted basis of the GDRs or equity shares over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the GDRs or equity shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the GDRs or equity shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the GDRs or equity shares, as well as to any loss realised on the actual sale or disposition of the GDRs or equity shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such GDRs or equity shares. Your basis in the GDRs or equity shares will be adjusted to reflect any such income or loss amounts. If you make such an election, the tax rules that apply to distributions by corporations that are not PFICs generally would apply to distributions by the Bank, except that the lower applicable capital gains rate with respect to qualified dividend income (discussed above) would not apply. The mark-to-market election is available only for “marketable stock”, which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter on a qualified exchange or other market, as defined in the applicable U.S. Treasury regulations. Under applicable U.S. Treasury regulations, a “qualified exchange” includes a foreign exchange that is regulated by a governmental authority in the jurisdiction in which the exchange is located and in respect of which certain other requirements are met. U.S. Holders of equity shares or GDRs should consult their own tax advisors as to whether the equity shares or GDRs would qualify for the mark-to-market election. If you hold GDRs or equity shares in any year in which the Bank is a PFIC, you will be required to file Internal Revenue Service Form 8621 regarding distributions received on the GDRs or equity shares and any gain realised on the disposition of the GDRs or equity shares. PROSPECTIVE PURCHASERS ARE URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE APPLICATION OF THE PFIC RULES TO YOUR INVESTMENT IN GDRS OR EQUITY SHARES, AND THE AVAILABILITY AND ADVISABILITY OF ANY ELECTIONS.

Information Reporting and Backup Withholding Dividend payments with respect to GDRs or equity shares and proceeds from the sale, exchange or redemption of GDRs or equity shares may be subject to information reporting to the Internal Revenue Service and possible U.S. backup withholding at a current rate of 28%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on Internal Revenue Service Form W-9. U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules. Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your United States federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information.

184 United Kingdom Taxation Considerations General The following statements are intended to apply only as a general guide to current United Kingdom tax law and to the current practice of HM Revenue and Customs in the United Kingdom. These provisions may be repeated, revoked or modified (possibly with retrospective effect) so as to result in United Kingdom tax consequences different to those discussed below. They are intended to apply only to shareholders who are resident, ordinarily resident, and domiciled in the United Kingdom for United Kingdom tax purposes, who hold the GDRs as investments and who are the beneficial owners of the GDRs (“United Kingdom resident shareholders”). The statements may not apply to certain classes of shareholders such as dealers in securities. Prospective subscribers for or purchasers of GDRs who are in any doubt as to their tax position regarding the acquisition, ownership and disposition of the GDRs or who are subject to tax in a jurisdiction other than the United Kingdom should consult their own tax advisers. No representations with respect to the tax consequences to any particular holder of GDRs are made hereby.

Dividends United Kingdom resident shareholders will be liable to income tax or corporation tax (as applicable) on dividends paid by the Bank at the rate applicable to their particular circumstances. Generally, United Kingdom resident shareholders will bring into account the gross amount of such dividends before deduction of any Indian tax withheld (see “Indian Taxation Considerations” below, which provides that currently there is no such withholding). Subject to certain limits, and the individual circumstances of shareholders, the amount of any Indian tax withheld on such dividends should be available as a credit against the liability of United Kingdom resident shareholders to pay income tax or corporation tax as appropriate in respect of the relevant dividend.

Capital Gains A disposal of GDRs by a United Kingdom resident shareholder may, depending on the shareholder’s circumstances and subject to any applicable available exemption or relief, give rise to a chargeable gain or an allowable loss for the purposes of the taxation of capital gains in the United Kingdom.

United Kingdom stamp duty and stamp duty reserve tax No United Kingdom stamp duty reserve tax (“SDRT”) should be payable on an agreement to transfer GDRs, nor should United Kingdom stamp duty be payable on the transfer of GDRs provided that the instrument of transfer (if any) is executed outside the United Kingdom and subsequently remains at all times outside the United Kingdom and provided the transfer does not relate to anything done or to be done in the United Kingdom. No United Kingdom stamp duty or SDRT should be payable on the issue of Shares to the Depositary, on the basis that the Shares will not be registered in the United Kingdom, as no register is kept in the United Kingdom on behalf of the Bank. No United Kingdom stamp duty or SDRT should be payable on the issue of Shares or GDRs to the initial holders thereof.

Indian Taxation Considerations The following is a summary of the principal Indian tax consequences for non-resident investors of the, GDRs and the Shares underlying the GDRs. The summary is based on the provisions of Section 115AC and other applicable provisions the Income Tax Act and the Depositary Receipt Scheme (together the “Section 115AC Regime”) in force at the time of the Listing Particulars and is subject to change. Further, it only addresses the tax consequences for persons who are non-residents as defined in the Income Tax Act 1961, who acquire GDRs or Shares (upon conversion) pursuant to these Listing Particulars and who hold such GDRs or equity shares (upon conversion) as capital assets, and does not address the tax consequences which may be relevant to other classes of non-resident investors, including dealers. The summary proceeds on the basis that the person continues to remain a non-resident when the income by way of interest, dividend and capital gains is earned. THIS SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE SUMMARY. EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT ITS TAX ADVISERS ABOUT THE PARTICULAR TAX CONSEQUENCES TO IT OF AN INVESTMENT IN THE GDRs.

Taxation of Distributions After withdrawal of equity shares from the Depositary Facility under the Deposit Agreement, dividends paid to such non-resident holder are not presently liable to tax. However, the Bank is liable to pay a “dividend

185 distribution tax” currently at the rate of 15% (plus surcharge and education cess on dividend distribution tax at the applicable rates) on the total amount distributed as dividend and dividends are not taxable in India in the hands of the recipient. The effective rate of dividend distribution tax is approximately 17%. Distributions to non-residents of bonus GDRs, bonus shares or rights to subscribe for equity shares (for the purposes of this Section, “Rights”) made with respect to GDRs or equity shares are not subject to Indian tax.

Taxation on Acquisition of GDRs or Shares upon Conversion or in Exchange for GDRs The acquisition of equity shares in exchange for GDRs does not constitute a taxable event for Indian income tax purposes. Such exchange may, however, give rise to stamp duty as described below under “Stamp Duty”.

Taxation of Capital Gains The transfer of GDRs between non-resident investors outside India falling within the purview of Section 115AC is not subject to income tax in India on capital gains therefrom. It is unclear whether capital gains derived from the sale of rights by a non-resident investor to another non-resident investor will be subject to tax liability in India. This would depend on the view taken by Indian tax authorities on the position with respect to the status of the rights being offered under the GDRs. Capital gains arising to the non-resident investor on the transfer of the equity shares received upon conversion of the GDRs in India will be liable for income tax under the provisions of the Income Tax Act. Any gain realised on the sale of listed equity shares on the stock exchange held for more than 12 months will not be subject to Indian capital gains tax if the Securities Transaction Tax (“STT”) has been paid on the transaction. Such transactions are subject to STT of 0.125% to 0.25% depending upon the nature of securities. No surcharge or education cess is payable on STT and STT is collected by the relevant stock exchange and is paid to the Government. Any gain realised on the sale of equity shares held for more than 12 months on which no STT has been paid, will be subject to Indian capital gains tax at the rate of 10% plus applicable surcharge on income tax and education cess at the applicable rates. For the purpose of computing capital gains tax on the sale of the equity shares underlying the GDRs under the Section 115AC Regime, the cost of acquisition of such equity shares will be determined on the basis of the prevailing price of the equity shares on the NSE or BSE as on the date on which the relevant Depository gives notice to its Custodian for the delivery of such equity shares. A non-resident holder’s holding period (for purpose of determining the applicable Indian capital gains tax rate) in respect of equity shares commences on the date of the advice of withdrawal of such equity shares by the relevant Depository to its Custodian. Capital gains realised in respect of equity shares held (calculated in the manner set forth in the prior paragraph) for 12 months or less (short term gain) on which STT is paid in the manner and rates set out above, is subject to tax at the rate of 15% plus applicable surcharge on income tax and an education tax at the rate of 3% of the tax and surcharge. In the event that no STT is paid, short term gain is subject to tax at variable rates with the maximum rate of 40% plus applicable rate of surcharge on income tax and education tax at the rate of 3% of the tax and surcharge. The actual rate of tax on short term gains depends on a number of factors, including the legal status of the non-resident holder and the type of income chargeable in India.

Tax Treaties If any equity shares are held by a non-resident investor following withdrawal thereof from the depositary facility under the Deposit Agreement, the double taxation treaty, if any, entered into by India with the country of residence of such non-resident investor will be applicable to taxation with respect to any capital gain arising from transfer of such equity shares or the GDRs or the dividend income received by such investor. Further, during the period of fiduciary ownership of equity shares in the hands of the Depositary, the provisions of Double Taxation Avoidance Agreement entered into by the Government with the country of residence of the Depositary will be applicable in the matter of taxation of capital gains, if any, on GDRs or the dividend income received by such investor.

Stamp Duty Under Indian Law, issue and transfers of GDRs and delivery of underlying shares on conversion requests of GDRs will be exempt from liability to Indian stamp duty.

186 Other Taxes At present, there are no wealth, gift or inheritance taxes which may apply to the GDRs or the underlying equity shares.

Service Tax Brokerages or commissions paid to stockbrokers in connection with the sale or purchase of shares listed on a recognised stock exchange in India are subject to a service tax of 10% (plus education tax at the rate of 3%) ad valorem. The stockbroker is responsible for collecting the service tax and paying it to the relevant taxation authority. Investors should note that the Draft of the Direct Tax Code has recently been issued for public comments. If the same is passed in present form by both houses of Parliament and approved by the President of India and then notified in the Gazette of India, there could be an impact on some of the rates of tax above.

187 SUBSCRIPTION AND SALE

Purchase Agreement Pursuant to a purchase agreement dated 22 September 2009 (the “Purchase Agreement”), the Lead Managers have severally agreed with the Bank, subject to the satisfaction of certain conditions, to purchase the respective number of GDRs being offered in the Offering set forth opposite the name of each Lead Manager below.

Number of Manager GDRs J.P. Morgan Securities Limited ...... 1,769,425 Deutsche Bank AG, Hong Kong Branch ...... 1,769,425 Goldman Sachs International ...... 1,516,650 TOTAL ...... 5,055,500 The Offer Price is U.S.$ 18.90 per GDR. As compensation to the Lead Managers, the Bank will pay to the Lead Managers, a commission of 1.25% of the gross proceeds of the GDRs sold in the Offering, subject to RBI approval. In connection with the Offering, the Lead Managers may purchase and sell GDRs in the open market. These transactions may include over-allotment, syndicate covering transactions and stabilising transactions. Over- allotment involves sales of GDRs in excess of the principal amount of GDRs to be purchased by the Lead Managers in the Offering, which creates a short position for the Lead Managers. Covering transactions involve purchases of the GDRs in the open market after the distribution has been completed in order to cover short positions. Stabilising transactions consist of certain bids or purchases of GDRs made for the purpose of preventing or retarding a decline in the market price of the GDRs while the Offering is in progress. Any of these activities may have the effect of preventing or retarding a decline in the market price of the GDRs. They may also cause the price of the GDRs to be higher than the price that otherwise would exist in the open market in the absence of these transactions. The Lead Managers may conduct these transactions in the over-the-counter market or otherwise. If the Lead Managers commence any of these transactions, they may discontinue them at any time. The Lead Managers expect to deliver the notes against payment for the GDRs on or about the date specified in the second paragraph of the cover page of these Listing Particulars. The distribution of these Listing Particulars or any offering material and the offering, sale or delivery of the GDRs is restricted by law in certain jurisdictions. Therefore, persons who may come into possession of these Listing Particulars or any offering material are advised to consult with their own legal advisers as to what restrictions maybe applicable to them and may observe such restrictions. These Listing Particulars may not be used for the purpose of an offer or invitation in any circumstances in which such offer or invitation is not authorised. The Lead Managers have the right to terminate the Offering in certain circumstances, such as the suspension or limitation of trading in any securities of the Bank by an Indian Stock Exchange or a material adverse change in the Bank’s financial condition or business, in accordance with the terms of the Purchase Agreement prior to payment being made to the Bank. If the Lead Managers are released and discharged from their obligations under the Purchase Agreement, the Offering will be cancelled and any moneys received in connection with the Offering will be returned to prospective purchasers of GDRs without interest. The Bank has agreed to indemnify the Lead Managers against certain liabilities in connection with the offer and sale of the GDRs or to contribute to payments that the Lead Managers may be required to make in respect thereof. In addition, the Bank has agreed to reimburse the Lead Managers for certain of their expenses. The Lead Managers reserve the right to withdraw, cancel or modify the Offering and to completely or partially reject any orders for any reason and to allocate to any prospective investor less than the full amount of GDRs sought by such investor. The Bank estimates that the expenses of the Offering will be U.S.$ 1,727,332. These expenses consist of the following: • Underwriting commission of U.S.$ 1,194,450 • Estimated legal fees and expenses of U.S.$ 350,000 • Estimated miscellaneous fees and expenses of U.S.$ 80,000 • Estimated printing expenses of U.S.$ 22,250

188 • UK Listing Authority listing fee of U.S.$10,796 • Accounting fees of U.S.$69,836 The net proceeds of the Offering (gross proceeds less expenses, commission and incentive fee, if any) will be paid by the Lead Managers to the Bank in cash by wire transfer. The Bank is also conducting (i) an offering of 33,044,500 equity shares to “qualified institutional buyers” (as defined in the SEBI Regulations), pursuant to Chapter VIII of the SEBI Regulations (the “QIP Offering”) and (ii) a preferential allotment of up to 4,902,257 equity shares to the Bank’s Promoters (the “Preferential Allotment”). From time to time the Lead Managers and certain of their affiliates have provided and continue to provide investment banking services to the Bank for which they have received and will receive customary compensation and commissions. The Lead Managers will also manage and act as placement agents in the QIP Offering. The Bank has agreed that it will not prior to 180 days after the Closing Date, without the prior written consent of the Lead Managers, (i) directly or indirectly issue, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any of the Bank’s equity shares or GDRs or any securities convertible into or exercisable or exchangeable for such equity shares or GDRs or file any registration statement under the Securities Act with respect to any of the foregoing, (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of Bank’s equity shares or GDRs, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of equity shares or GDRs or other such securities, in cash or otherwise, or (iii) deposit the Bank’s equity shares with any other depositary in connection with a depositary receipt facility or enter into any transaction (including a transaction involving derivatives) having an economic effect similar to that of a sale or a deposit of the Bank’s equity shares in any depositary receipt facility. The foregoing sentence shall not apply to (a) the GDRs sold pursuant to the Purchase Agreement, (b) any equity shares issued by the Bank upon the exercise of an option or warrant or the conversion of a security outstanding on the date of these Listing Particulars, (c) any equity shares issued or options to purchase equity shares granted pursuant to existing employee benefit plans of the Bank referred to in these Listing Particulars or (d) any equity shares issued pursuant to the QIP Offering or the preferential allotment approved by shareholders at the Bank’s EGM held on 9 September 2009 and to be issued to the Bank’s Promoters at a price that will be equivalent to the price at which the GDRs are offered.

Selling restrictions General No action has been or will be taken in any jurisdiction that would permit a public offering of the GDRs or the possession, circulation or distribution of these Listing Particulars or any other material relating to the Bank or the GDRs in any jurisdiction where action for such purpose is required. Accordingly, the GDRs may not be offered or sold directly or indirectly, and neither these Listing Particulars nor any other offering material or advertisements in connection with the GDRs may be distributed or published, in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction. The issue and distribution of these Listing Particulars and the offering of the GDRs may be subject to statutory restrictions in other jurisdictions. The Bank and the Lead Managers request persons into whose possession these Listing Particulars may come to inform themselves of and to observe all such restrictions. Neither the Bank nor the Lead Managers accept any legal liability for any violation of any such restriction by any person, whether or not a prospective purchaser of the GDRs.

Canada The GDRs will not be qualified for sale under the securities laws of any province or territory of Canada. Each Lead Manager has represented and agreed that it has not offered, sold or distributed and will not offer, sell or distribute any securities, directly or indirectly, in Canada or to or for the benefit of any resident of Canada, other than in compliance with applicable securities laws. Each Lead Manager has also represented and agreed that it has not distributed or delivered and will not distribute or deliver the Listing Particulars, or any other offering material in connection with any offering of the GDRs, in Canada other than in compliance with applicable securities laws.

189 Hong Kong The contents of these Listing Particulars have not been reviewed by any regulatory authority in Hong Kong. Prospective investors are advised to exercise caution in relation to the Offering. If prospective investors are in any doubt about any of the contents of these Listing Particulars, they should obtain independent professional advice. Please note that (1) GDRs may not be offered or sold in Hong Kong by means of these Listing Particulars or any other document other than to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571) (SFO) and any rules made thereunder, or in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance of Hong Kong (Cap. 32) (CO) or which do not constitute an offer or invitation to the public for the purposes of the CO or the SFO, and (2) no person shall issue, or possess for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to GDRs which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to GDRs which are or are intended to be disposed of only to persons outside Hong Kong or only to such professional investors.

India The Lead Managers have represented and agreed that these Listing Particulars have not and will not be registered as a prospectus with the Registrar of Companies, SEBI or any other statutory or regulatory body of like nature in India, and that the GDRs will not be offered or sold, and have not been offered or sold, in India nor have the Lead Managers circulated or distributed, nor will they circulate or distribute, these Listing Particulars or any other offering document or material relating to the GDRs, directly or indirectly, to any person or the public or any member of the public in India or otherwise generally distributed or circulated in India other than to a maximum of 49 mutual funds registered with SEBI. The GDRs have not been offered or sold, and will not be offered or sold, in India in circumstances which would constitute an offer to the public within the meaning of the Companies Act, 1956 and other laws for the time being in force.

Japan The GDRs have not been and will not be registered under the Financial Instruments and Exchange Law of (Law No. 25 of 1948, as amended; the “FIEL”) The Lead Managers have represented and agreed that they will not offer or sell any GDRs, directly or indirectly, in Japan or to, or for the benefit of, any resident in Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organised under the laws of Japan), or to others for reoffering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEL and any other applicable laws, regulations and ministerial guidelines of Japan.

Singapore These Listing Particulars have not been registered as a prospectus with the Monetary Authority of Singapore under the Securities and Futures Act, Chapter 289 of Singapore (the “Securities and Futures Act”). Accordingly, the GDRs may not be offered or sold or made the subject of an invitation for subscription or purchase nor may these Listing Particulars or any other document or material in connection with the offer or sale or invitation for subscription or purchase of any GDRs be circulated or distributed, whether directly or indirectly, to any person in Singapore other than (a) to an institutional investor pursuant to Section 274 of the Securities and Futures Act, (b) to a relevant person, or any person pursuant to Section 275(1A) of the Securities and Futures Act, and in accordance with the conditions specified in Section 275 of the Securities and Futures Act, or (c) pursuant to, and in accordance with the conditions of, any other applicable provision of the Securities and Futures Act. Each of the following relevant persons specified in Section 275 of the Securities and Futures Act who has subscribed for or purchased shares, namely a person who is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor,

190 should note that shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the shares under Section 275 of the Securities and Futures Act except: (1) to an institutional investor under Section 274 of the Securities and Futures Act or to a relevant person, or any person pursuant to Section 275(1A) of the Securities and Futures Act, and in accordance with the conditions, specified in Section 275 of the Securities and Futures Act; (2) where no consideration is given for the transfer; or (3) by operation of law.

United Arab Emirates The GDRs have not been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates (including the Dubai International Financial Centre) other than in compliance with the laws of the United Arab Emirates (and the Dubai International Financial Centre) governing the issue, offering and sale of securities. Further, these Listing Particulars do not constitute a public offer of securities in the United Arab Emirates (including the Dubai International Financial Centre) and is not intended to be a public offer. These Listing Particulars have not been approved by or filed with the Central Bank of the United Arab Emirates, the Securities and Commodities Authority or the Dubai Financial Services Authority.

United Kingdom Each of the Lead Managers has represented and agreed that: (a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (“FSMA”) in connection with the issue or sale of any GDRs in circumstances in which section 21(1) of FSMA does not apply to the Bank; and (b) it has complied and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the GDRs in, from or otherwise involving the United Kingdom.

European Economic Area In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), an offer to the public of any GDRs which are the subject of the Offering contemplated by these Listing Particulars may not be made in that Relevant Member State except that an offer to the public in that Relevant Member State of any GDRs may be made at any time under the following exemptions under the Prospective Directive, if they have been implemented in that Relevant Member State: (a) to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities, (b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year, (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts, (c) to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the initial purchaser for any such offer; or (d) in any other circumstances failing which Article 3(2) of the Prospectus Directive, provided that no such offer of the GDRs shall result in a requirement for the publication by the Bank or the initial purchaser of a prospectus pursuant to Article 3 of the Prospectus Directive. For the purposes of this provision, the expression an “offer to the public” in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any securities to be offered so as to enable an investor to decide to purchase any securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

United States The GDRs have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in either case, pursuant to an

191 effective registration statement or in accordance with an applicable exemption from the registration requirements of the Securities Act. Accordingly, the GDRs are being offered and sold by the Lead Managers only (1) in the United States to QIBs pursuant to Rule 144A under the Securities Act and (2) outside the United States in reliance upon Regulation S. Each Lead Manager has agreed that, except as permitted by the Purchase Agreement, it will not offer or sell the GDRs (i) as part of their distribution at any time or (ii) otherwise until the expiration of the Distribution Compliance Period, within the United States or to, or for the account or benefit of, U.S. persons, except, in either case, in accordance with Regulation S or to persons who it reasonably believes to be QIBs pursuant to Rule 144A, and it will have sent to each dealer to which it sells GDRs (other than a sale pursuant to Rule 144A) during the Distribution Compliance Period a confirmation or other notice setting forth the restrictions on offers and sales of the GDRs within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S. The GDRs are being offered and sold outside the United States in reliance on Regulation S. The Purchase Agreement provides that each Lead Manager, or any person acting on its behalf, will only offer or sell or solicit offers for, the GDRs as part of their initial distribution only to persons it reasonably believes are QIBs or in offshore transactions within the meaning of Rule 903 under the Securities Act. In addition, until 40 days after the commencement of the offering of the GDRs, an offer or sale of Shares and the GDRs within the United States by a dealer whether or not it is participating in the Offering may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A. As used in this paragraph and the immediately preceding paragraphs, the terms “United States” and “U.S. persons” have the meanings given them by Regulation S under the Securities Act. Each purchaser of GDRs will be deemed to have made acknowledgments and agreements as described under “Transfer Restrictions”.

192 MATERIAL CONTRACTS

The following is a summary of the principal contents of each material contract directly concerning the Offering:

Deposit Agreement Pursuant to the Amended and Restated Deposit Agreement to be dated on or about 24 September 2009 between the Bank and the Depositary, the Depositary will issue the GDRs to investors on confirmation of the deposit with the Custodian of the underlying equity shares. The Depositary will act as above trustee capacity in relation to the GDR Holders, maintaining a register of Holders of the GDRs and the Depositary (or its nominees) will be entered into the Bank’s register of Shareholders. The terms upon which the GDRs are to be held and converted into equity shares are set out in further detail in “Terms and Conditions of the GDRs”.

Purchase Agreement Pursuant to the Purchase Agreement dated 22 September 2009 between the Bank and the Lead Managers, the Lead Managers have agreed with the Bank to subscribe, at the Offering Price, for the number of GDRs as specified in such agreement. The Purchase Agreement provides that the obligations of the Lead Managers are subject to certain conditions precedent. The Bank has agreed to indemnify the Lead Managers against certain liabilities, including securities laws liabilities. Further terms of the Purchase Agreement are described in “Subscription and Sale”.

193 GENERAL INFORMATION

1. The Bank was incorporated on 3 December 1993 for an indefinite period with registration number 04-20769 issued by the Registrar of Companies, Gujarat State, India. The Bank has been allotted Corporate Identity Number L65110GJ1993PLC020769 under the Companies Act, 1956. The Articles of the Bank permit the Bank to engage in a wide variety of activities, including all of the activities in which the Bank currently engages or intends to engage. 2. Under the Bank’s statutes, the principal objects of the Bank are carrying out banking business as set out in Section 6 of the Banking Regulation Act. The objects are set out in the Memorandum of Association. The Bank operates in conformity with its constitutional documents. 3. The registered office of the Bank is “TRISHUL”, Third Floor, Opp. Samartheshwar Temple, Nr. Law Garden, Ellisbridge, Ahmedabad 380 006, India. 4. Application has been made for the GDRs to be admitted to the listing on the Official List on or about 28 September 2009, subject only to the issue of the Temporary Master GDRs. It is expected that conditional dealings in the GDRs will commence on 23 September 2009. Transactions will normally be effected for settlement in U.S. dollars and for delivery on the third working day after the day of the transaction. 5. There has been no significant change in the financial or trading position or prospects of the Bank since 31 March 2009. 6. The Bank is not and has not been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Bank is aware) during the previous 12 months which may have, or have had in the recent past significant effects on the financial position or profitability of the Bank, and no such governmental, legal or arbitration proceedings are pending or threatened of which the Bank is aware. 7. The Bank has appointed S.R. Batliboi & Co., Chartered Accountants, a firm of Chartered Accountants registered with the Institute of Chartered Accountants of India, as its statutory auditors from fiscal 2007 to 2010. The financial statements of the Bank as of and for the year ended 31 March 2007, 31 March 2008 and 31 March 2009 have been audited by S.R. Batliboi & Co., Chartered Accountants, having office at 6th Floor, Express Towers, Nariman Point, Mumbai-400 021, India. The audited financial statements were prepared in accordance with Generally Accepted Accounting Standards in India as applicable to banks. S.R. Batliboi & Co. Chartered Accountants has issued standard audit opinions on these financial statements. 8. Certain legal matters relating to the Offering will be passed upon by Allen & Overy counsel to the Lead Managers. The validity of the equity shares and certain other Indian legal matters relating to the Offering will be passed upon by Talwar, Thakore Associates, Indian counsel to the Bank, and by Amarchand & Mangaldas & Suresh A. Shroff & Company, Indian counsel to the Lead Managers. 9. The issue of this document and the transactions referred to herein were approved by the Board of Directors and the shareholders of the Bank pursuant to resolution adopted on 4 August 2009 and 9 September 2009, respectively. All approvals, authorisations, consents or other orders required under the Articles and the prevailing laws of India have been given or obtained for the issue of GDRs. 10. Copies in English of the following documents may be inspected at the offices of Allen & Overy LLP at One Bishops Square, London E1 6AD, United Kingdom during usual business hours on any weekday (Saturday and public holidays excepted) for 14 days from the date of this document:- (i) the Memorandum and Articles of Association of the Bank; (ii) the Bank’s statutes and an English translation thereof; (iii) the audited financial statements, and the notes thereto, of the Bank for the years ended 31 March 2009, 31 March 2008 and 31 March 2007, together with the independent auditor’s reports contained therein; (iv) of the Deposit Agreement, which includes the form of the Master GDRs; and (v) the Purchase Agreement. 11. Investors will pay for the GDRs in immediately available funds to accounts designated by the Lead Managers or their agents. 12. J.P. Morgan Securities Limited is a member of the London Stock Exchange plc and is authorised and regulated in the United Kingdom by the Financial Services Authority. The address of J.P. Morgan Securities Limited is 125 London Wall, London EC2Y 5AJ, United Kingdom.

194 13. The address of Deutsche Bank AG, Hong Kong Branch is 48/F Cheung Kong Centre, 2 Queens Road Central, Hong Kong. 14. Goldman Sachs International is a member of the London Stock Exchange plc and is authorised and regulated in the United Kingdom by the Financial Services Authority. The address of Goldman Sachs International is Peterborough Court, 133 Fleet Street, London EC4A 2BB, United Kingdom.

195 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND U.S. GAAP

The Financial Statements have been prepared in accordance with the accounting policies followed by the Bank which conform to Generally Accepted Accounting Principles in India and RBI Guidelines as applicable to the Bank. The following are significant differences between Indian GAAP and U.S. GAAP limited to those significant differences that are appropriate to the Bank’s financial statements. However, they should not be construed as being exhaustive, and no attempt has been made to identify possible future differences between Indian GAAP and U.S. GAAP as a result of prescribed changes in accounting standards nor to identify future differences that may affect the Bank’s financial statements as a result of transactions or events that may occur in the future. The Financial Statements reflect applicable statutory requirements, regulatory guidelines and accounting practices in India; these requirements, guidelines and practices change from time to time. In accordance with Indian GAAP, adjustments to reflect such changes are made on a prospective basis, and financial statements for earlier periods are not restated.

Indian GAAP U.S. GAAP

Changes in accounting policies Changes in accounting policies Impact of adjustments resulting from the change to be Retrospective application requiring the entity to shown in the income statement of the period in which adjust each affected component of equity for the the change is made except as specified in certain earliest period presented and comparative income standards where the change resulting from adoption of statement presented, except where impracticable to do such standards has to be shown by an adjustment to so. Transition provisions are generally specified in opening retained earnings. new standards and may be different. Property, plant and equipment Property, plant and equipment Use of historical cost or revalued amounts is permitted. Upward revaluation is not permitted. Downward Revaluation of an entire class of assets or of a selection valuations are required when future undiscounted of assets is required to be carried out on a systematic cashflows are less than the carrying value of the asset. basis. Depreciation Depreciation The Indian Companies Act provides minimum rates of Allocated on a systematic basis to each accounting depreciation. If management’s estimate of useful life of period over the economic useful life of the asset a fixed asset is shorter than depreciation rates as per reflecting the pattern in which the entity consumes the the Companies Act, depreciation is provided at higher asset’s benefits. rate based on management’s estimate of useful life. Depreciation on revaluation portion can be recouped Upward revaluation is not permitted. out of revaluation reserve. Unrealised gains/losses on investments Unrealised gains/losses on investments All investments are categorised into “Held to Investments are categorised into “Held to Maturity”, Maturity”, “Available for Sale” and “Held for “Available for Sale” or “Trading” based on Trading”. “Held to Maturity” securities are carried at management’s intent and ability. While “trading” and their acquisition cost or at amortised cost if acquired at “Available For Sale” securities are valued at fair a premium/discount over the face value. “Available for value, “Held to Maturity” securities are valued at Sale” and “Held for Trading” securities are valued cost, adjusted for amortisation of premiums and periodically as per RBI guidelines. Net depreciation, if accretion of discount. The unrealised gains and loses any, within each category of investments is recognised on “Trading” securities are taken to the income in the profit and loss account. The net appreciation if statement, while those of “Available for Sale” any, under each classification is ignored except to the securities are reported as a separate component of extent of depreciation previously provided. stockholders’ equity, net of applicable taxes, until realised. Amortisation of premium/discount on the purchase of Amortisation of premium/discount on the purchase investments of investments No amortisation of premium/discount is allowed on Premium/discount amortisation is permitted for all investments except for the premium on investments categories of investments. categorised as Held to Maturity.

196 Indian GAAP U.S. GAAP

Allowances for credit losses Allowances for credit losses All credit exposures are classified as per RBI guidelines, Loans are tested for impairment and placed on a non- into performing and non-performing assets (NPAs). accrual basis (i.e., interest income is not accrued) Further, non-performing assets are classified into when based on current information and events, substandard, doubtful and loss assets for provisioning management estimates that the collection of based on the criteria stipulated by the RBI. Provisions outstanding interest and principal amounts are are made in accordance with RBI guidelines. For doubtful. The impairment of a loan is measured based restructured assets, a provision is made in accordance on the present value of the loan’s effective interest with the guidelines issued by the RBI, which require that rate, or at the observable market price of the loan, or a provision equal to the difference between fair value of at the fair value of the collateral if the loan is the loan before and after restructuring. In addition to the collateral dependent. The impairment is recognised if specific provisioning made on NPAs the Bank maintains the measured value is less than the recorded general provisions to cover potential credit losses of investment in the impaired loan. standard assets in accordance with RBI guidelines. Loan origination fees/costs Loan origination fees/costs Loan origination fees are recognised upfront on their Non-refundable loan origination fees (net of direct becoming due. Loan origination costs are taken to the loan origination costs) are deferred and recognised as profit and loss account in the year in which an adjustment to yield over the life of the loan. The accrued/incurred. adjustment is made using the interest method based on the contractual terms of the loan. Derivatives Derivatives Derivatives are disclosed as off balance sheet All derivatives are required to be recognised as assets or exposures. The derivatives are bifurcated as trading or liabilities on the balance sheet and measured at fair value hedge transaction. Trading derivatives are revalued at with changes in fair value being recognised in earnings. the balance sheet date with the resulting unrealised Fair values are based on quoted market prices, or absent gain/loss being recognised in the profit and loss quoted market prices, based on valuation technique, account and is included in other assets or other which may take into account available current market liabilities. Hedged swaps/options are accounted for on and contractual prices of the similar instrument as well a an accrual basis. time value underlying the positions. If a derivative is a hedge, depending on the nature of the hedge, the effective portion of the hedge’s change in fair value is either offset against the change in fair value of the hedged asset, liability or firm commitment through income or held in equity until the hedge item is recognised in income. The ineffective portion of a hedge is immediately recognised in income. Revenue Recognition Revenue Recognition Revenue is recognised on accrual basis when there is Revenue involving the sales of services are no uncertainty of its ultimate collection. recognised when certain criteria’s have been met, including whether persuasive evidence of an Realised gains on investments under HTM category are arrangement exists, delivery has occurred or services recognised in the profit and loss account and have been rendered, the sales price is fixed or subsequently appropriated to capital reserve account in determinable and, collectibility is reasonably assured. accordance with RBI guidelines. Realised gains on investments under HTM category are recognised in the profit and loss account. Employee Benefits Employee Benefits AS 15 (Revised) (mandatory with effect from Obligation for defined benefit plans must be 7 December 2006) requires the use of projected unit measured using projected unit credit method. credit method to determine benefit obligation. Immediate recognition of actuarial gains or losses is All actuarial gains and losses have to be recognised not required. immediately in profit and loss account.

197 Indian GAAP U.S. GAAP

Taxation Taxation Income tax comprises the current tax (i.e., amount of Income taxes are accounted for as per the provisions tax for the period determined in accordance with the of SFAS No. 109, Accounting for Income Taxes. Income Tax Act, 1961 and the rules framed SFAS No. 109 requires recognition of deferred tax thereunder) and the deferred tax charge or credit assets and liabilities for the expected future tax reflecting the tax effects of timing differences between consequences of events that have been included in the accounting income and taxable income for the period. consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities The deferred tax charge or credit and the are determined based on the difference between the corresponding deferred tax liabilities or assets are financial reporting and tax basis of assets and recognised using the tax rates that have been enacted or liabilities, using enacted tax rates expected to apply to substantially enacted by the balance sheet date. taxable income in the years that the temporary Deferred tax assets are recognised only to the extent differences are expected to be recovered or settled. there is reasonable certainty that the assets can be The effect on deferred tax assets and liabilities of a realised in future. However, where there is unabsorbed change in tax rates is recognised in the statement of depreciation or carried forward loss under taxation income in the period of enactment. laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are recognised subject to a valuation allowance based upon management’s Deferred tax assets are reviewed as at each balance judgment as to whether realisation is considered more sheet date and written down or written up to reflect the likely than not that the assets will be realised. amount that is reasonably/virtually certain to be realised. Employee Stock Option Plan Employee Stock Option Plan As per the guidance note on Accounting for Employee As per FASB 123R — Accounting for Share Based Share based payments, effective for all share based Payments, employee stock based compensation plans grants made after 1 April 2005, employee share based have to be accounted for using the fair value method. plans are classified into equity settled, cash settled and employee share based payments plans with alternatives. Any plan falling into the above categories can be accounted for adopting fair value method or intrinsic value method as of the grant date. An enterprise using the intrinsic value method is required to make fair value disclosures. Listed companies are also to observe the specific guidance by market regulator (SEBI). Proposed dividend Proposed dividend Dividend proposed after the Balance Sheet date for the The declaration of a cash dividend is a non-adjusting year/period then ended, is required to be recognised as event. Dividends are recorded when they are declared a liability on the Balance Sheet date. by the shareholders. Accounting for subsidiaries and affiliates Accounting for subsidiaries and affiliates The Bank consolidates subsidiaries where it controls Consolidates of subsidiaries is required in where the the ownership, directly or indirectly of more than Bank, directly or indirectly, holds more than 50% of one-half of the voting power or controls the the voting rights or exercises control. Entities where composition of board of directors with the objective of the Bank holds 20% to 50% of the voting rights obtaining economic benefits from their activities. The and/or has the ability to exercise significant influence Bank accounts for investments in associates under the are accounted for under the equity method, and the equity method of accounting. pro rata share of their income (loss) is included in income. The Bank is also required consolidate Variable Interest Entities (VIEs) where the Bank is determined to be the primary beneficiary under FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46 (R)).

198 GLOSSARY OF CERTAIN TERMS

ACB — The Audit Committee of the Board of Directors. ACU — Asian currency unit. AFS — All securities other than those held for trading and held to maturity are classified as available for sale securities. Agriculture Loans — Loans to the agriculture sector or for agricultural purposes. ALCO — The Asset Liability Management Committee of the Bank. AMA — Advanced measurement approach. AMFI — Association of Mutual Funds in India. ARCs — Asset reconstruction companies. Articles — The Bank’s Memorandum and Articles of Association. ASBA — Application supported by blocked amount. ATMs — Automated Teller Machines. AUM — Assets under management of mutual fund companies. Axis AMC — Axis Asset Management Company Ltd. Axis PE — Axis Private Equity Limited. Axis TS — Axis Trustee Services Limited. Banking Regulation Act — Banking Regulation Act, 1949. Basel-II — Revised framework on “International Convergence of Capital Measurement and Capital Standards” by Bank for International Settlements. BCSBI — Banking Codes and Standards Board of India. Board of Directors — The board of directors of the Bank. BPLR — The benchmark prime lending rate, based on cost of funds, cost of business operations, provisions and yield curve expectations. The BPLR of the Bank is currently 14.75% per annum payable monthly. BSE — Bombay Stock Exchange Ltd. Capital Increase — The increase in issued share capital of the Bank. CAR — Capital adequacy ratio. Cash and Cash equivalents — Cash and cash equivalents include cash in hand, in ATMs, and balances with the Reserve Bank of India, as well as balances with banks and money at call and short notice. CBLO — Collateralised borrowing and lending obligations. CBO — Corporate banking operations. CCPH — Centralised Collection and Payment Hub. CD — Certificates of Deposit. CDR — Corporate debt restructuring. CDSL — Central Depository Services (India) Limited. Closing Date — The date on which payment for the GDRs will be required, which is expected to be 24 September 2009. Clearstream — Clearstream Banking, societe anonyme. Companies Act — The Companies Act, 1956 of India (as amended). Code — Code of Civil Procedure, 1908 of India.

199 Conditions — The terms and conditions of the GDRs. CPs — Commercial papers. CPU — Central processing unit. CRAR — Capital to risk asset ratio. CRR — Cash reserve ratio. CVaR — Conditional value at risk. Deposit Agreement — The deposit agreement dated 21 March 2005 between the Bank and the Depositary. Depositary — The Bank of New York Mellon. Depository Receipt Scheme — The Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depositary Receipt Mechanism) Scheme 1993 promulgated by the Government. DFSA — Dubai Financial Services Authority. DIFC — Dubai International Financial Centre. DSA — Direct selling agent. DTC — The Depository Trust Company of New York. ECBs — External commercial borrowings. ECGC — The Export Credit Guarantee Corporation of India Ltd. EDC — Electronic data capturing. EEA — European Economic Area. ETL — Expected tail loss. Euroclear — Euroclear Bank S.A./N.V. EVE — Economic value of equity. Exchange Act — The U.S. Securities Exchange Act of 1934, as amended. Existing Regulation S GDRs — The Global Depositary Receipts issued on 21 March 2005 and 27 July 2007 outside the United States in reliance on Regulation S of the Securities Act. Existing Rule 144A GDRs — The Global Depositary Receipts issued on 21 March 2005 and 27 July 2007 in the United States to Qualified Institutional Buyers in reliance on Rule 144A of the Securities Act. FCNR — Foreign currency non-resident. FDI — Foreign direct investment. FEDAI — Foreign Exchange Dealers’ Association of India. FEMA — The Foreign Exchange Management Act, 1999 of India. FIIs — Foreign Institutional Investors. FIMMDA — Fixed Income Money Market and Derivatives Association of India. Financial Statements — The audited financial statements of the Bank as of and for the years ended 31 March 2007, 31 March 2008 and 31 March 2009 prepared in accordance with Indian GAAP as applicable to banks. FIPB — The Foreign Investment Promotion Board of Ministry of Finance. Fiscal/Fiscal year — Period of twelve months ended/ending 31 March of that particular year. Foreign Institutional Investor Regulations — SEBI (Foreign Institutional Investors) Regulations, 1995. FPO — Follow-on Public Offerings. FRA/IRS — Forward Rate Agreements/Interest Rate Swaps. FSA — The United Kingdom Financial Services Authority. FSMA — The Financial Services and Markets Act 2000.

200 GCC — Gulf Co-operation Council. GDP — Gross Domestic Product. GDRs — The 5,055,500 equity shares of par value Rs. 10 per equity share of the Bank in the form of global depositary receipts each representing one equity share subject of the Offering. These include the Rule 144A GDRs and the Regulation S GDRs. GIC — General Insurance Corporation of India. Government — Government of India. HFCs — Housing finance companies. HFT — Investments that are held principally for resale within a short period are classified as Held For Trading (HFT) securities. HKMA — Hong Kong Monetary Authority. Home Loans — Mortgage backed loans to individuals. HTM — Investments not exceeding 25% of total investments which the bank intends to Hold to Maturity (HTM). During fiscal 2005, RBI has permitted banks to exceed the limit of 25% of total investments provided the excess comprises only SLR securities and total SLR securities held in the HTM category are not more than 25% of the Bank’s demand and time liabilities. ICAI — Institute of Chartered Accountants of India. IDBI — Industrial Development Bank of India. IFR — Investment Fluctuation Reserve. IIP — Index of Industrial Production. Income Tax Act — The Income Tax Act, 1961 of India. India — The Republic of India. Indian GAAP — Generally accepted accounting principles in India. “Indian Rupees” or “Rs.” or “INR” — Currency of India. “Insider Trading Regulations” — SEBI (Prohibition of Insider Trading) Regulations, 1992. Interest earning assets — Primarily include advances, investments, balances with banks in deposit accounts, money at call and short notice. Interest bearing liabilities — Primarily include deposits, borrowings, subordinated debt and hybrid capital. IOB — International Order Book. IPO — Initial public offering. IRB — Internal rating based. KYC — Know Your Customer guidelines. LAF — Liquidity adjustment facility. LC — Letter of Credit. Lead Managers — lead managers of the Offering, being J.P. Morgan Securities Limited, Deutsche Bank AG, Hong Kong Branch and Goldman Sachs International. LER — Loan equivalent risk. LIBOR — London Interbank Offered Rate. LIC — Life Insurance Corporation of India. Listing Rules — The listing rules of the UK Listing Authority made under Section 74 of the FSMA. Master GDRs — The Master Rule 144A GDR together with the Master Regulation S GDR.

201 Master Regulation S GDR — The Global form of the Existing Regulation S GDRs deposited on 21 March 2005 with, and registered in the name of a nominee of, a common depositary for Euroclear Bank S.A./N.V. and Clearstream Banking, societe anonyme. Master Rule 144A GDR — The Global form of the Existing Rule 144A GDRs deposited on 21 March 2005 with a custodian for, and registered in the name of Cede & Co. as a nominee of, The Depository Trust Company of New York. MCX — Multi-Commodity Exchange. MD & CEO — Managing Director & Chief Executive Officer. ME — Merchant Establishments. MIS — The Bank’s customised management information system. MSME — Micro small and medium enterprises (as defined by the RBI). MSME Loans — Loans to MSMEs engaged in the manufacturing and services sector. NABARD — National Bank for Agriculture and Rural Development. NBFCs — Non-Banking Financial Companies registered with the RBI. Net Tangible Book Value per GDR — The amount of the Bank’s total tangible assets (total assets less intangible assets) less total liabilities as of 31 March 2009, divided by the total number of GDRs that would have been outstanding if all of the Bank’s outstanding equity shares as of such date were represented by GDRs. NCDEX — National Commodity & Derivative Exchange Ltd. NDTL — Net demand and time liabilities. NEFT — National electronic fund transfer. NGO — Non-government organisation. Non-SLR — Non-statutory liquidity ratio. NPA — Non-performing Assets. NRI — Non-Resident Indian. NSDL — National Securities Depository Limited. NSE — The National Stock Exchange of India Limited. OCBs — Overseas corporate bodies. Offering — The offering of equity shares of par value Rs. 10 per equity share by the Bank in the form of Global Depositary Receipts at an offer price of U.S.$18.90 per Global Depositary Receipt. Offer Price — U.S.$18.90. Official List — The official list of the UK Listing Authority. ORMC — Operational risk management committee. OTCEI — Over the Counter Exchange of India. PDAI — Primary Dealers Association of India. PDI — Perpetual debt instrument. PFIC — Passive Foreign Investment Company for U.S. federal income tax purposes. PFRDA — Pension Fund Regulatory and Development Authority. PML Act — Prevention of Money Laundering Act, 2002. Portfolio Investments — Investments made by registered FIIs or NRIs through an Indian stock exchange. POS — Point of sale.

202 Preferential Allotment — The preferential allotment of up to 4,902,257 equity shares to the Bank’s Promoters at a price that will be equivalent to the price at which the GDRs are offered. Promoters — SUUTI, LIC, GIC and four Government-owned insurance companies, namely New India Assurance Company, National Insurance Company Limited, Oriental Insurance Company Limited and United Insurance Company Limited. PSM — Professional Securities Market of the London Stock Exchange plc. PTC — Pass through certificate. Purchase Agreement — The purchase agreement dated 22 September 2009 between the Lead Managers and the Bank. PVBP — Price Variance for Basis Points. QIBs — Qualified institutional buyers of securities under the Securities Act. QIP Offering — The offering of 33,044,500 equity shares of par value Rs. 10 per equity shares by the Bank to the “qualified institutional buyers” (as defined in the SEBI Regulations), pursuant to Chapter VIII of the SEBI Regulations. QIPs — Qualified Institutions Placements. RBI — Reserve Bank of India. Regulation S GDRs — The Global Depositary Receipts offered outside the United States in reliance on Regulation S of the Securities Act. Repo Rate — Re-purchase option rate; a rate at which RBI lends to other banks in India. Retail deposits — Include savings bank deposits, deposits of NRIs and all term deposits in value not exceeding Rs. 10 million. Retail loans — Include home loans, personal loans, auto loans, consumer loans, education loans as well as security-backed loans of various types. Reverse Repo Rate — A rate at which RBI borrows money from banks in India. RRBs — Regional rural banks. RTGS — Real time gross settlement system developed by the RBI. Rule 144A GDRs — The Global Depositary Receipts offered in the United States to Qualified Institutional Buyers in reliance on Rule 144A of the Securities Act. SARFAESI Act — The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. SBI — State Bank of India. SBUs — Strategic business units. SCBs — Scheduled commercial banks. Scheme — SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. SCRA — Securities Contract (Regulation) Act, 1956. SCRR — Securities Contract (Regulation) Rules, 1957. SEBI Regulations — Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, which have, as of 26 August 2009, replaced the SEBI (Disclosure and Investor Protection) Guidelines, 2000. SDFS system — Same-Day Funds Settlement system of DTC. SDRT — United Kingdom stamp duty reserve tax. Securities Act — The U.S. Securities Act of 1933, as amended. SEBI — Securities and Exchange Board of India. SEC — United States Securities And Exchange Commission. SFAS — Statement of Financial Accounting Standards. SIDBI — Small Industries Development Bank of India.

203 SIP — Systematic investment plan of mutual funds. SLR — Statutory Liquidity Ratio requirement imposed on the Bank by the RBI. SLR Securities — Securities held towards satisfying the SLR requirement of the RBI. SME — Small and Medium Enterprises. SPV — Special purpose vehicle. STT — Securities Transaction Tax. SUUTI — Administrator of the Specified Undertaking of the Unit Trust of India. SWIFT — Society for Worldwide Interbank financial telecommunications. Takeover Code — SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, of India (as amended from time to time). Temporary Master Regulation S GDR — The temporary Global form of the Regulation S GDRs which will be deposited on or about the Closing Date with, and registered in the name of a nominee of, a common depositary for Euroclear Bank S.A./N.V. and Clearstream Banking, societe anonyme. Temporary Master Rule 144A GDR — The temporary Global form of the Rule 144A GDRs which will be deposited on or about the Closing Date with a custodian for, and registered in the name of Cede & Co. as a nominee of, The Depository Trust Company of New York. U.A.E. — United Arab Emirates. UK Listing Authority — The Financial Services Authority in its capacity as competent listing authority under the FSMA. U.S. dollar or U.S.$ — Currency of United States of America. U.S. GAAP — Generally accepted accounting principles in the United States. UTI — The Unit Trust of India. VaR — Value at risk. WOS — Wholly-owned banking subsidiary. YTM — Yield to Maturity.

204 INDEX TO FINANCIAL STATEMENTS

Page Financial information of Axis Bank Limited in accordance with Indian GAAP Auditors’ Report as of 31 March 2007 ...... F-2 Balance Sheet as of 31 March 2007 ...... F-3 Profit & Loss Account for the year ended 31 March 2007 ...... F-4 Cash Flow Statement for the year ended 31 March 2007 ...... F-5 Notes to the financial statements for the year ended 31 March 2007 ...... F-15 Auditors’ Report as of 31 March 2008 ...... F-41 Balance Sheet as of 31 March 2008 ...... F-42 Profit & Loss Account for the year ended 31 March 2008 ...... F-43 Cash Flow Statement for the year ended 31 March 2008 ...... F-44 Notes to the financial statements for the year ended 31 March 2008 ...... F-55 Auditors’ Report as of 31 March 2009 ...... F-83 Balance Sheet as of 31 March 2009 ...... F-84 Profit & Loss Account for the year ended 31 March 2009 ...... F-85 Cash Flow Statement for the year ended 31 March 2009 ...... F-86 Notes to the financial statements for the year ended 31 March 2009 ...... F-97 Unaudited non-consolidated financial results for the quarter ended 30 June 2009 Limited Review Report for the quarter ended 30 June 2009 ...... F-130 Unaudited financial results for the quarter ended 30 June 2009 ...... F-131 Consolidated financial statements of Axis Bank Limited and its subsidiaries in accordance with Indian GAAP Auditors’ Report on consolidated financial statements as of 31 March 2007 ...... F-134 Consolidated Balance Sheet as of 31 March 2007 ...... F-135 Consolidated Profit & Loss Account for the year ended 31 March 2007 ...... F-136 Consolidated Cash Flow Statement for the year ended 31 March 2007 ...... F-137 Notes to the consolidated financial statements for the year ended 31 March 2007 ...... F-145 Auditors’ Report on consolidated financial statements as of 31 March 2008 ...... F-161 Consolidated Balance Sheet as of 31 March 2008 ...... F-162 Consolidated Profit & Loss Account for the year ended 31 March 2008 ...... F-163 Consolidated Cash Flow Statement for the year ended 31 March 2008 ...... F-164 Notes to the consolidated financial statements for the year ended 31 March 2008 ...... F-173 Auditors’ Report on consolidated financial statements as of 31 March 2009 ...... F-194 Consolidated Balance Sheet as of 31 March 2009 ...... F-195 Consolidated Profit & Loss Account for the year ended 31 March 2009 ...... F-196 Consolidated Cash Flow Statement for the year ended 31 March 2009 ...... F-197 Notes to the consolidated financial statements for the year ended 31 March 2009 ...... F-206

F-1 Auditors’ Report

To, The members of UTI Bank Limited 1. We have audited the attached balance sheet of UTI Bank Limited (the ‘Bank’) as at 31 March 2007 and also the profit and loss account and cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. The balance sheet and profit and loss account are drawn up in conformity with Forms A and B (revised) of the Third Schedule to the Banking Regulation Act, 1949, read with Section 211 of the Companies Act, 1956. 4. We report that: a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit and have found them to be satisfactory; b) In our opinion, the transactions of the Bank which have come to our notice have been within its powers; c) In our opinion, proper books of account as required by law have been kept by the Bank so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the Bank’s branches; d) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account; e) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, insofar as they apply to banks; f) On the basis of written representations received from the directors, as on 31 March 2007, and taken on record by the Board of Directors, we report that none of the directors is disqualified from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956; g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required for banking companies, and give a true and fair view in conformity with the accounting principles generally accepted in India; i. in case of the balance sheet, of the state of the affairs of the Bank as at 31 March 2007; ii. in case of the profit and loss account, of the profit for the year ended on that date; and iii. in case of cash flow statement, of the cash flows for the year ended on that date.

For S.R. Batliboi & Co. Chartered Accountants

Viren H. Mehta Partner Membership No.: 048749

17 April 2007

F-2 Balance Sheet as of 31 March 2007

Schedule As of As of No. 31-03-2007 31-03-2006 Rs. Rs. Figures in millions CAPITAL AND LIABILITIES Capital ...... 1 2,816 2,787 Reserves & Surplus ...... 2 31,116 25,935 Employees’ Stock Options Outstanding (Net) ...... 17(4.15) 90 134 Deposits ...... 3 587,856 401,135 Borrowings ...... 4 51,956 26,810 Other liabilities and provisions ...... 5 58,738 40,510 TOTAL ...... 732,572 497,311 ASSETS Cash and Balances with Reserve Bank of India ...... 6 46,610 24,294 Balance with banks and money at call and short notice ...... 7 22,573 12,124 Investments ...... 8 268,972 215,274 Advances ...... 9 368,765 223,142 Fixed Assets ...... 10 6,732 5,677 Other Assets ...... 11 18,920 16,800 TOTAL ...... 732,572 497,311 Contingent liabilities ...... 12 1,841,648 985,654 Bills for collection ...... 62,746 43,322 Significant Accounting Policies and Notes to accounts ...... 17

Schedules referred to above form an integral part of the Balance Sheet

F-3 Profit & Loss Account for the year ended 31 March 2007

Schedule Year Ended No. 31-03-2007 31-03-2006 Rs. Rs. Figures in millions except EPS data I INCOME Interest earned ...... 13 45,604 28,888 Other income ...... 14 10,101 7,296 TOTAL ...... 55,705 36,184 II EXPENDITURE Interest expended ...... 15 29,933 18,106 Operating expenses ...... 16 12,146 8,140 Provisions and contingencies ...... 17(5.1.1) 7,036 5,087 TOTAL ...... 49,115 31,333 III NET PROFIT FOR THE YEAR ...... (I—II) 6,590 4,851 Balance in Profit & Loss account brought Forward from previous year ...... 7,311 1,974 Transfer from Investment Fluctuation Reserve ...... — 2,928 Utilisation for Employee Benefits Provision under AS 15 (revised) .... 17(4.10) (318) — IV AMOUNT AVAILABLE FOR APPROPRIATION ...... 13,583 9,753 V APPROPRIATIONS : Transfer to Statutory Reserve ...... 1,648 1,213 Transfer to Capital Reserve ...... 17(5.2.2) 156 104 Proposed dividend (includes tax on dividend) ...... 1,488 1,125 Balance in Profit & Loss account carried forward ...... 10,291 7,311 TOTAL ...... 13,583 9,753 VI EARNINGS PER EQUITY SHARE ...... 17(5.2.4) (Face value Rs 10/- per share) Basic ...... 23.50 17.45 Diluted ...... 22.79 17.08 Significant Accounting Policies and Notes to accounts ...... 17

Schedules referred to above form an integral part of the Profit and Loss Account

F-4 Cash Flow Statement for the year ended 31 March 2007

Year ended 31-03-2007 31-03-2006 Rs. Rs. Figures in millions Cash flow from operating activities Net profit before taxes ...... 9,962 7,313 Adjustments for: Depreciation on fixed assets ...... 1,119 922 Depreciation on investments ...... 670 34 Amortisation of premium on Held to Maturity Securities ...... 987 875 Provision for Non Performing Advances/Investments (net of bad debts) ...... 737 1,270 General Provision on Securitised assets ...... 25 (4) Provision on Standard assets ...... 1,224 447 General Provision on retail assets ...... 18 1 Provision for wealth tax ...... 3 2 Loss on sale of fixed assets ...... 29 17 Amortisation of deferred employee compensation ...... 27 63 14,801 10,940 Adjustments for: (Increase)/Decrease in investments ...... (21,043) (46,298) (Increase)/Decrease in advances ...... (146,307) (68,245) Increase/(Decrease) in borrowings ...... 25,147 8,996 Increase/(Decrease) in deposits ...... 186,721 84,015 (Increase)/Decrease in other assets ...... (1,319) 4,598 Increase/(Decrease) in other liabilities & provisions ...... (915) 11,544 Direct taxes paid ...... (4,129) (3,148) Net cash flow from operating activities ...... 52,956 2,402 Cash flow from investing activities Purchase of fixed assets ...... (2,226) (1,474) (Increase)/Decrease in Held to Maturity Investments ...... (34,365) (19,543) Proceeds from sale of fixed assets ...... 35 42 Net cash used in investing activities ...... (36,556) (20,975) Cash flow from financing activities Proceeds from issue of Subordinated debt (net of repayment) ...... 3,393 10,000 Proceeds from Issue of Perpetual Debt & Upper Tier II instruments ...... 13,735 — Proceeds from issue of Share capital ...... 29 49 Proceeds from share premium (net of share issue expenses) ...... 330 800 Payment of Dividend ...... (1,117) (887) Net cash generated from financing activities ...... 16,370 9,962 Effect of exchange fluctuation translation reserve ...... (5) — Net increase in cash and cash equivalents ...... 32,765 (8,611) Cash and cash equivalents as at 1 April, 2006 ...... 36,418 45,029 Cash and cash equivalents as at 31 March, 2007 ...... 69,183 36,418

Cash and cash equivalents comprise of cash on hand & in ATM, balance with RBI, balances with banks and money at call & short notice (refer schedule 6 and 7 of the Balance Sheet)

F-5 SCHEDULE 1 — CAPITAL As of As of 31-03-2007 31-03-2006 Figures in millions Authorised Capital 30,00,00,000 Equity Shares of Rs. 10/- each...... 3,000 3,000 Issued, Subscribed and Paid-up capital#@ ...... 2,816 2,787

# 281,630,787 and 278,690,727 equity shares of Rs. 10 each fully paid up as of 31 March 2007 and 2006 respectively @ includes 11,994,991 and 18,844,064 GDRs representing 11,994,991 and 18,844,064 equity shares as of 31 March 2007 and 31 March 2006 respectively.

SCHEDULE 2 — RESERVES AND SURPLUS As of As of 31-03-2007 31-03-2006 Figures in millions I. Statutory Reserve Opening Balance ...... 4,199 2,986 Additions during the year ...... 1,648 1,213 5,847 4,199 II. Share Premium Account Opening Balance ...... 13,554 12,689 Additions during the year ...... 402 914 Less: Share issue expenses ...... — (49) 13,956 13,554 III. Investment Fluctuation Reserve Opening Balance ...... — 2,928 Additions during the year ...... — — Less: Transfer to Profit and Loss account ...... — (2,928) —— IV. General Reserve Opening Balance ...... 143 143 Additions during the year ...... — — 143 143 V. Capital Reserve Opening Balance ...... 727 623 Additions during the year ...... 156 104 883 727 VI. Foreign Currency Translation Reserve Opening Balance ...... 1 — Additions during the year (Refer Sch 17 (4.5)) ...... (5) 1 (4) 1 VII. Balance in Profit & Loss Account 10,291 7,311 TOTAL ...... 31,116 25,935

F-6 SCHEDULE 3 — DEPOSITS As of As of 31-03-2007 31-03-2006 Figures in millions A. I. Demand Deposits . (i) From banks ...... 7,490 4,395 (ii) From others ...... 105,553 75,306 II. Savings Bank Deposits ...... 121,259 80,654 III. Term Deposits (i) From banks ...... 60,207 50,536 (ii) From others ...... 293,347 190,244 TOTAL ...... 587,856 401,135 B. I. Deposits of branches in India ...... 585,729 401,135 II. Deposits of branches outside India ...... 2,127 — TOTAL ...... 587,856 401,135

SCHEDULE 4 — BORROWINGS As of As of 31-03-2007 31-03-2006 Figures in millions I. Borrowings in India (i) Reserve Bank of India ...... — — (ii) Other Banks ...... 6,000 8,680 (iii) Other institutions & agencies ...... 12,039 12,238 II. Borrowings outside India ...... 33,917 5,892 TOTAL ...... 51,956 26,810 Secured borrowing included inI&IIabove ...... — 1,299

F-7 SCHEDULE 5 — OTHER LIABILITIES AND PROVISIONS As of As of 31-03-2007 31-03-2006 Figures in millions I. Bills payable ...... 13,095 11,353 II. Inter — office adjustments (net) ...... — — III. Interest accrued ...... 1,773 645 IV. Proposed dividend (includes tax on dividend) ...... 1,483 1,112 V. Subordinated Debt# ...... 21,279 17,886 VI Perpetual Debt and Upper Tier instruments* ...... 13,735 — VI. Others (including provisions) ...... 7,373 9,514 TOTAL ...... 58,738 40,510

# represents Subordinated Debt of 10,772 bonds and 11,772 bonds of Rs. 0.5 million each as of 31 March 2007 and 31 March 2006 respectively and 15,893 bonds and 12,000 bonds of Rs. 1 million each as of 31 March 2007 and 31 March 2006 respectively, in the nature of Non Convertible Debentures. (Also refer 17(5.1.2)) * represents Rs. 4,140 million and Rs. Nil million of Perpetual Debt and Rs. 9,595 million and Rs. Nil million of Upper Tier II instruments as of 31 March 2007 and 31 March 2006, respectively. (Also refer 17(5.1.3))

SCHEDULE 6 — CASH AND BALANCES WITH RESERVE BANK OF INDIA As of As of 31-03-2007 31-03-2006 Figures in millions I. Cash in hand & in ATM (including foreign currency notes) ...... 8,367 4,898 II. Balances with Reserve Bank of India: (i) in Current Account ...... 38,243 19,396 (ii) in Other Accounts ...... — — TOTAL ...... 46,610 24,294

F-8 SCHEDULE 7 — BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE As of As of 31-03-2007 31-03-2006 Figures in millions I. In India (i) Balance with Banks (a) in Current Accounts ...... 6,243 3,108 (b) in Other Deposit Accounts ...... 524 1,200 (ii) Money at Call and Short Notice (a) With banks ...... 12,138 6,998 (b) With other institutions ...... — — TOTAL ...... 18,905 11,306 II. Outside India (i) in Current Accounts ...... 2,903 147 (ii) in Other Deposit Accounts ...... 679 671 (iii) Money at Call & Short Notice ...... 86 — TOTAL ...... 3,668 818 GRAND TOTAL (I+II) ...... 22,573 12,124

F-9 SCHEDULE 8 — INVESTMENTS As of As of 31-03-2007 31-03-2006 Figures in millions I. Investments in India in — (i) Government Securities##**...... 164,308 117,898 (ii) Other approved securities ...... — — (iii) Shares ...... 4,628 4,298 (iv) Debentures and Bonds$ ...... 70,449 69,349 (v) Investments in Subsidiaries ...... 100 — (vi) Others@ ...... 24,791 23,930 (Mutual Fund units, CD / CP, NABARD Deposits, PTC etc.) Gross Investments in India ...... 264,276 215,475 Less: Depreciation in the value of investments* ...... (923) (201) Net investments in India ...... 263,353 215,274 II. Investments outside India (i) Government Securities (including local authorities) ...... 55 — (ii) Subsidiaries and / or joint ventures abroad ...... — — (iii) Others ...... 5,564 — Gross Investments outside India ...... 5,619 — Less: Depreciation in the value of investments ...... — — Net investments outside India ...... 5,619 — GRAND TOTAL (I + II) ...... 268,972 215,274

@ Includes deposits with NABARD Rs. 8,669 million and Rs. 8,363 million as of 31 March 2007 and 31 March 2006 respectively and PTCs Rs. 13,444 million and Rs. 12,706 million as of 31 March 2007 and 31 March 2006 respectively. ## Includes securities costing Rs. 35,815 million and Rs. 22,032 million as of 31 March 2007 and 31 March 2006 respectively pledged for availment of fund transfer facility, clearing facility and margin requirement. ** Includes Repo lending under Liquidity Adjustment Facility of RBI Rs. 13,509 million and Rs. 20,475 million as of 31 March 2007 and 31 March 2006 respectively and net off repo borrowing Rs. 3,046 million and Rs. Nil million under the liquidity adjustment facility of RBI as of 31 March 2007 and 31 March 2006 respectively. $ Includes securities costing Rs. 3,218 million and Rs. 919 million as of 31 March 2007 and 31 March 2006 respectively. * includes provision for Non Performing Investments Rs. 66.7 million and Rs. 14.4 million as of 31 March 2007 and 31 March 2006.

F-10 SCHEDULE 9 — ADVANCES As of As of 31-03-2007 31-03-2006 Figures in millions A. (i) Bills purchased and discounted# ...... 12,737 5,838 (ii) Cash credits, overdrafts and loans repayable on demand ...... 98,866 60,466 (iii) Term loans ...... 257,162 156,838 TOTAL ...... 368,765 223,142 B. (i) Secured by tangible assets@ ...... 305,023 197,889 (ii) Covered by Bank/Government Guarantees&& ...... 14,489 2,665 (iii) Unsecured ...... 49,253 22,588 TOTAL ...... 368,765 223,142 C. I. Advances in India (i) Priority Sectors ...... 131,963 77,299 (ii) Public Sector ...... 215 636 (iii) Banks ...... 277 252 (iv) Others ...... 210,554 144,955 TOTAL ...... 343,009 223,142 II. Advances Outside India (i) Due from banks ...... — — (ii) Due from others — ...... (a) Bills purchased and discounted ...... 2,914 — (b) Syndicate loans ...... 2,442 — (c) Others ...... 20,400 — TOTAL ...... 25,756 — GRAND TOTAL (CI+CII) ...... 368,765 223,142

# Bills purchased and discounted are net of Rs. 7,000 million and Rs. 3,720 million of borrowings under the Bills Rediscounting Scheme as of 31 March 2007 and 31 March 2006 respectively. @ Includes advances against book debts && Includes advances against L/Cs issued by Banks. Advances are net of floating provision, which has been adjusted based on management estimate.

F-11 SCHEDULE 10 — FIXED ASSETS As of As of 31-03-2007 31-03-2006 Figures in millions I. Premises At cost at the beginning of the year ...... 337 337 Additions during the year ...... — — Deductions during the year ...... — — Depreciation to date ...... (72) (55) TOTAL ...... 265 282 II. Other fixed assets (including Furniture & Fixtures) At cost at the beginning of the year ...... 7,884 6,545 Additions during the year ...... 2,122 1,487 Deductions during the year ...... (119) (148) Depreciation to date ...... (4,191) (3,190) TOTAL ...... 5,696 4,694 III. Assets on Lease At cost at the beginning of the year ...... 765 765 Additions during the year ...... — — Deductions during the year ...... — — Depreciation to date ...... (242) (208) TOTAL ...... 523 557 6,484 5,533 IV. CAPITAL WORK-IN-PROGRESS (including Capital Advances) ...... 248 144 GRAND TOTAL (I+II+III+IV) ...... 6,732 5,677

SCHEDULE 11 — OTHER ASSETS As of As of 31-03-2007 31-03-2006 Figures in millions I Inter office adjustments (net) ...... — — II Interest Accrued ...... 6,419 3,971 III Tax paid in advance / tax deducted at source (net of provisions) ...... 1,036 1,095 IV Stationery and stamps ...... 8 8 V Non-Banking assets acquired in satisfaction of claims ...... — — IV Others# ...... 11,457 11,726 TOTAL ...... 18,920 16,800

# Includes deferred tax assets Rs. 1,597 million and Rs. 736 million as of 31 March 2007 and 31 March 2006 respectively.

F-12 SCHEDULE 12 — CONTINGENT LIABILITIES As of As of 31-03-2007 31-03-2006 Figures in millions I. Claims against the bank not acknowledged as debts ...... 1,708 1,796 II. Liability for partly paid investments ...... — — III. Liability on account of outstanding forward exchange and derivative contracts a) Forward Contracts ...... 507,359 326,831 b) Interest Rate Swaps & Currency Swaps ...... 1,174,109 531,686 c) Foreign Currency Options ...... 52,836 46,858 TOTAL: ...... 1,734,304 905,375 IV. Guarantees given on behalf of constituents In India ...... 43,814 29,446 Outside India ...... 50 — V. Acceptances and endorsements ...... 54,772 41,862 VI. Other items for which the bank is contingently liable ...... 7,000 7,175 TOTAL ...... 1,841,648 985,654

SCHEDULE 13 — INTEREST EARNED Year ended 31-03-2007 31-03-2006 Figures in millions I. Interest/discount on advances / bills ...... 27,029 15,280 II. Income on investments ...... 17,315 12,857 III. Interest on balances with Reserve Bank of India and other inter-bank funds ...... 773 417 IV. Others ...... 487 334 TOTAL ...... 45,604 28,888

SCHEDULE 14 — OTHER INCOME Year ended 31-03-2007 31-03-2006 Figures in millions I. Commission, exchange and brokerage ...... 7,790 4,889 II. Profit/(Loss) on sale of Investments/ Derivative transactions (net) ...... 609 1,298 III. Profit on exchange transactions (net) ...... 1,248 869 IV. Profit/(Loss) on sale of fixed assets (net) ...... (29) (17) V. Income earned by way of dividends etc. from Subsidiaries/companies and/or joint venture abroad / in India ...... — — VI. Lease rentals ...... 35 35 VII. Miscellaneous Income# ...... 448 222 TOTAL ...... 10,101 7,296

# including recoveries on account of advances written off in earlier years Rs. 236 million and Rs. 159 million and profit on account of portfolio sell downs/securitisation Rs. 20 million and Rs. 14 million for the year ended 31 March 2007 and 31 March 2006 respectively.

F-13 SCHEDULE 15 — INTEREST EXPENDED Year ended 31-03-2007 31-03-2006 Figures in millions I. Interest on deposits ...... 24,809 15,517 II. Interest on Reserve Bank of India / Inter-bank borrowings ...... 1,688 604 III. Others@ ...... 3,436 1,985 TOTAL ...... 29,933 18,106

@ including interest on repos and subordinated debt

SCHEDULE 16 — OPERATING EXPENSES Year ended 31-03-2007 31-03-2006 Figures in millions I. Payments to and provisions for employees ...... 3,813 2,402 II. Rent, taxes and lighting ...... 1,591 1,137 III. Printing and stationery ...... 376 282 IV. Advertisement and publicity ...... 296 171 V. Depreciation on bank’s property ...... 1,119 922 VI. Directors’ fees, allowance and expenses ...... 6 5 VII. Auditor’s fees and expenses ...... 5 4 VIII. Law Charges ...... 64 60 IX. Postage, Telegrams, Telephones, etc...... 701 426 X. Repairs and maintenance ...... 1,289 950 XI. Insurance ...... 548 346 XII. Other Expenditure ...... 2,338 1,435 TOTAL ...... 12,146 8,140

F-14 Notes to financial statements for the year ended 31 March 2007 Indian Rupees Million

FISCAL 2006 - 2007 1 Background UTI Bank Limited (‘the Bank’) was incorporated in 1993 and provides a complete suite of corporate and retail banking products.

2 Basis of preparation The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting, unless otherwise stated, and comply with generally accepted accounting principles, statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India (‘RBI’) from time to time, the Accounting Standards (‘AS’) issued by the Institute of Chartered Accountants of India (‘ICAI’) to the extent applicable and current practices prevailing within the banking industry in India.

3 Use of estimates The preparation of the financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates is recognised prospectively in the current and future periods.

4 Significant accounting policies 4.1 Investments Classification In accordance with the RBI guidelines, investments are classified at the date of purchase as: • Held for Trading (‘HFT’); • Available for Sale (‘AFS’); and • Held to Maturity (‘HTM’). Investments that are held principally for resale within a short period are classified as HFT securities. As per RBI guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date. Investments not exceeding 25% of total investments, which the Bank intends to hold till maturity, are classified as HTM securities. As permitted by RBI, the Bank may exceed the limit of 25% of total investments provided the excess comprises only of those securities which are eligible for complying with the Statutory Liquidity Ratio (‘SLR’) i.e. SLR securities and the total SLR securities held in HTM category is not more than 25% of its demand and time liabilities as on the effective date. The effective date means the last Friday of the preceding fortnight for computation of the aforesaid limit. In computing the investment ceiling for HTM portfolio for the aforesaid purpose, debentures and bonds, which are in the nature of advances are excluded. All other investments are classified as AFS securities. However, for disclosure in the balance sheet, investments are classified under six categories — Government securities, Other approved securities, Shares, Debentures and Bonds, Investment in Subsidiaries/Joint Ventures and Others. Investments made outside India are classified under three categories — Government Securities, Subsidiaries and/or Joint Ventures abroad and Others.

Transfer of security between categories Transfer of security between categories of investments is accounted for at the acquisition cost/book value/ market value as on the date of transfer, whichever is lower, and the depreciation, if any, on such transfer is recognised in the profit and loss account.

F-15 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

Valuation Investments classified under the HTM category are carried at acquisition cost. Any premium on acquisition over face value is amortised on a straight-line basis over the remaining period to maturity. Investments classified under the AFS and HFT category are marked to market. The market/fair value for the purpose of periodical valuation of quoted investments included in the ‘Available for Sale’ and ‘Held for Trading’ categories is the market price of the scrip as available from the trades/quotes on the stock exchanges, SGL account transactions, price list of RBI or prices declared by Primary Dealers Association of India jointly with Fixed Income Money Market and Derivatives Association (“FIMMDA”), periodically. Net depreciation, if any, within each category of investments is recognised in the profit and loss account. The net appreciation if any, under each classification is ignored, except to the extent of depreciation previously provided. The book value of individual securities is not changed consequent to the periodic valuation of investments. Treasury Bills and Commercial Paper, being discounted instruments, are valued at carrying cost. Units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund. Market value of investments where current quotations are not available, is determined as per the norms prescribed by the RBI as under: • market value of unquoted Government securities is derived based on the Prices/Yield to Maturity (‘YTM’) rate for Government securities of equivalent maturity as notified by Fixed Income Money Market and Derivatives Association of India (‘FIMMDA’) jointly with the Primary Dealers Association of India (‘PDAI’) at periodic intervals; • in case of Central Government Securities, which do not qualify for SLR requirement, the market price is derived by adding 50 basis points to the Base Yield Curve of Central Government Securities; • market value of unquoted State Government securities is derived by applying the YTM method by marking it up by 25 basis points above the yields of the Central Government Securities of equivalent maturity notified by the FIMMDA/PDAI at periodic intervals; • in case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly, the market price is derived based on the YTM for Government securities as notified by FIMMDA/PDAI and suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for various credit ratings along with residual maturity issued by FIMMDA is adopted for this purpose; • in case of preference shares where dividend is not received regularly, the price derived on the basis of YTM is discounted in accordance with the RBI guidelines; • in case of bonds and debentures where interest is not received regularly, the valuation is in accordance with prudential norms for provisioning as prescribed by RBI; and • equity shares, for which current quotations are not available or where the shares are not quoted on the stock exchanges, are valued at break-up value (without considering revaluation reserves, if any) which is ascertained from the company’s latest balance sheet (which is not more than one year prior to the date of valuation). In case the latest balance sheet is not available, the shares are valued at Re 1 per company. Investments in subsidiaries are categorised as ‘Held to Maturity’ in accordance with RBI guidelines.

Repurchase and reverse repurchase transactions Repurchase and reverse repurchase transactions are accounted as outright sale and outright purchase respectively. The difference between the clean price of the first leg and clean price of the second leg is recognised as interest income/expense over the period of the transaction. However, depreciation in their value, if any, compared to their original cost, is recognised in the profit and loss account.

4.2 Advances Advances are classified into performing and non-performing advances (NPAs) as per RBI guidelines and are stated net of specific provisions made towards Non Performing Advances. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. Provisions for NPAs (other than

F-16 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million retail advances) are made for sub-standard and doubtful assets at rates as prescribed by RBI. Loss assets and unsecured portion of doubtful assets are provided/written off as per the extant RBI guidelines. NPAs are identified by periodic appraisals of the loan portfolio by management. In the case of retail advances, provisions are made upon reaching specified stages of delinquency (90 days or more of delinquency) under each type of loan, which satisfies the RBI prudential norms on provisioning. For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI, which requires the present value of the interest sacrifice be provided at the time of restructuring. A general provision @ 0.25% to 2.00% is made on the various classes of standard assets as prescribed by RBI. Pursuant to the change in provisioning requirement for certain classes of standard assets from 0.40% to 2.00% as notified by RBI, the Bank has made an additional provision of Rs. 681 million during the year ended 31 March 2007. In addition, general provision is also made on retail advances based on bucket-wise provisioning for delinquencies less than 90 days.

4.3 Country Risk In addition to the provisions required to be held according to the asset classification status, provisions are held for individual country exposure (other than for home country). The countries are categorised into seven risk categories namely insignificant, low, moderate, high, very high, restricted and off-credit and provisioning made on exposures exceeding 180 days on a graded scale ranging from 0.25% to 100%. For exposures with contractual maturity of less than 180 days, 25% of the normal provision requirement is held. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on such country exposure.

4.4 Securitisation The Bank enters into purchase/sale of corporate and retail loans through direct assignment/Special Purpose Vehicle (SPV). In most cases, post securitisation, the Bank continues to service the loans transferred to the assignee/SPV. The Bank also provides credit enhancement in the form of cash collaterals and/or by subordination of cash flows to Senior Pass Through Certificate (PTC) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies, future servicing etc.) accepted by the Bank, appropriate provision/ disclosure is made at the time of sale in accordance with AS-29-’Provisions, contingent liabilities and contingent assets’. Gain on securitisation transaction is recognised over the period of the underlying securities issued by the SPV. Loss on securitisation is immediately debited to profit and loss account.

4.5 Foreign currency transactions In respect of domestic operations, transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction. Foreign currency assets and liabilities are translated at the balance sheet date at rates notified by Foreign Exchange Dealers Association of India (‘FEDAI’). All profits/losses resulting from year-end revaluations are recognised in the profit and loss account. Financial statements of foreign branches classified as non-integral foreign operations are translated as follows: • Assets and liabilities (both monetary and non-monetary as well as contingent liabilities) are translated at closing rates notified by FEDAI at the year-end. • Income and expenses are translated at the rates prevailing on the date of the transactions. • All resulting exchange differences are accumulated in a separate ‘Foreign Currency Translation Reserve’ till the disposal of the net investments. Outstanding forward exchange contracts (excluding currency swaps undertaken to hedge Foreign Currency Non-Resident (‘FCNR’) deposits which are not revalued) and spot exchange contracts are revalued at year end exchange rates notified by FEDAI. The resulting gains or losses on revaluation are included in the profit and loss account in accordance with RBI/FEDAI guidelines. Premium/discount on currency swaps undertaken to hedge FCNR deposits is recognised as interest income/ expense and is amortised on a straight-line basis over the underlying swap period.

F-17 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

Contingent liabilities on account of foreign exchange contracts/options, guarantees, acceptances, endorsements and other obligations denominated in foreign currencies are disclosed at closing rates of exchange notified by FEDAI.

4.6 Derivative transactions Derivative transactions comprise of swaps and options which are disclosed as contingent liabilities. The swaps/options are segregated as trading or hedge transactions. Trading swaps/options are revalued at the balance sheet date with the resulting unrealised gain or loss being recognised in the profit and loss account and correspondingly in other assets or other liabilities respectively. Hedged swaps/options are accounted for on an accrual basis.

4.7 Revenue recognition Interest income is recognised on an accrual basis except interest income on NPAs, which is recognised on receipt. Commission income on deferred payment guarantees, is recognised pro-rata over the period of the guarantee. All other fee income is recognised upfront on its becoming due. Dividend is accounted on an accrual basis when the right to receive the dividend is established. Gain/loss on sell down of loans and advances through direct assignment is recognised at the time of sale. Realised gains on investments under HTM category are recognised in the profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines. Losses are recognised in the profit and loss account.

4.8 Fixed assets and depreciation Fixed assets are carried at cost of acquisition less accumulated depreciation. Cost includes freight, duties, taxes and incidental expenses related to the acquisition and installation of the asset. Capital work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid to acquire fixed assets. Depreciation (including on assets given on operating lease) is provided on the straight-line method from the date of addition. The rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the management’s estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life on a subsequent review is shorter, then depreciation is provided at a higher rate based on management’s estimate of the useful life/remaining useful life. Pursuant to this policy, depreciation has been provided using the following estimated useful lives: Estimated Asset useful life Owned premises ...... 20years Assets given on operating lease ...... 20years Computer hardware ...... 3years Application software ...... 5years Vehicles ...... 4years EPABX, telephone instruments ...... 8years Mobile phone ...... 2years Locker cabinets/cash safe/strong room door ...... 16years Assets at staff residence ...... 5years All other fixed assets ...... 10years All fixed assets individually costing less than Rs. 5,000 are fully depreciated in the year of installation. Depreciation on assets sold during the year is recognised on a pro-rata basis to the profit and loss account till the date of sale. The carrying amount of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and

F-18 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. As on 31 March 2007, there was no impairment to assets.

4.9 Lease transactions Assets given on operating lease are capitalised at cost. Rentals received by the Bank are recognised in the profit and loss account when due. Lease payments for assets taken on operating lease are recognised as an expense in the profit and loss account on a straight-line basis over the lease term.

4.10 Employee benefits Contributions payable to the recognised provident fund, which is a defined contribution scheme, are recognised in the profit and loss account. The Bank contributes towards gratuity fund (defined benefit retirement plan) administered by the Life Insurance Corporation of India (‘LIC’) for eligible employees. Under this scheme, the settlement obligations remain with the Bank, although LIC administers the scheme and determines the contribution premium required to be paid by the Bank The plan provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee’s salary and the years of employment with the Bank. Liability with regard to gratuity fund is accrued based on actuarial valuation conducted as at 31 March each year. The Bank provides leave encashment benefit (long term), which is a defined benefit scheme based on actuarial valuation as at the balance sheet date conducted by an independent actuary. Employees of the Bank are entitled to receive retirement benefits under the Bank’s Superannuation scheme. Superannuation is a defined contribution plan under which the Bank contributes annually a specified sum of 10% of the employee’s eligible annual basic salary to LIC, which undertakes to pay the lumpsum and annuity benefit payments pursuant to the scheme. Superannuation contributions are recognised in the profit and loss account in the period in which they accrue. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred. Effective 1 April 2006, the Bank has early adopted Accounting Standard 15 (AS) (Revised) on ‘Employee Benefits’ issued by the Institute of Chartered Accountants of India. Accordingly, the Bank has recorded the charge for compensated absences for the year ended 31 March 2007 based on actuarial valuation conducted by an independent entity. Further, in accordance with the transitional provisions of AS-15 (Revised), an amount of Rs. 318 million (net of tax benefit) being the liability for employee benefits (gratuity, leave encashment and sick leave) up to the year ended 31 March 2006 has been adjusted against the balance in profit and loss account.

4.11 Credit Card reward points The Bank estimates the probable redemption of credit card reward points using an actuarial method by employing an independent actuary. Provision for the said reward points is then made based on the actuarial valuation report as furnished by the said independent actuary.

4.12 Taxation Income tax expense is the aggregate amount of current tax, deferred tax and fringe benefit tax charge. Current year taxes and fringe benefit tax are determined in accordance with the Income-tax Act, 1961. Deferred tax adjustments comprise of changes in the deferred tax assets or liabilities during the period. Deferred tax assets and liabilities are recognised on a prudent basis for the future tax consequences of timing differences arising between the carrying values of assets and liabilities and their respective tax basis, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted prior to the balance sheet date. The impact of changes in the deferred tax assets and liabilities is recognised in the profit and loss account. Deferred tax assets are recognised and reassessed at each reporting date, based upon management’s judgement as to whether realisation is considered certain.

F-19 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

4.13 Earnings per share The Bank reports basic and diluted earnings per share in accordance with AS 20 — ’Earnings per Share’. Basic earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding for the year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at year end.

4.14 Cash and Cash Equivalents Cash and cash equivalents include cash on hand and in ATM, balances with Reserve Bank of India, balances with other banks and money at call and short notice.

4.15 Employee stock option scheme The 2001 Employee Stock Option Scheme (‘the Scheme’) provides for grant of stock options on equity shares of the Bank to employees and Directors of the Bank. The Scheme is in accordance with the Securities and Exchange Board of India (SEBI) (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. Options are granted at an exercise price, which is equal to/less than the fair market price of the underlying equity shares. The excess of such fair market price over the exercise price of the options as at the grant date is recognised as a deferred compensation cost and amortised on a straight-line basis over the vesting period of such options. The fair market price is the latest available closing price, prior to the date of the Board of Directors meeting in which options are granted / shares are issued, on the stock exchange on which the shares of the Bank are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date shall be considered.

4.16 Provisions, contingent liabilities and contingent assets A provision is recognised when the Bank has a present obligation as a result of past event where it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. A disclosure of contingent liability is made when there is: • a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non occurrence of one or more uncertain future events not within the control of the Bank; or • a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

F-20 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

5 Notes to Accounts 5.1 Statutory disclosures as per RBI 5.1.1 ‘Provisions and contingencies’ recognised in the profit and loss account include: For the year ended 31 March 2007 31 March 2006 (Rs. in million) Provision for income tax — Current tax for the year ...... 4,126 2,961 — Deferred tax for the year ...... (814) (557) Provision for fringe benefit tax ...... 60 58 3,372 2,462 Provision for wealth tax ...... 3 1 Provision for non performing advances & investments, (including bad debts written off and write backs) ...... 737 1,271 Provision towards standard assets ...... 1,224 447 General provision for retail loans ...... 18 1 Amortisation of premium on Held to Maturity investments ...... 987 876 Provision for depreciation in value of investments ...... 670 34 Provision for securitised assets ...... 25 (4) Total ...... 7,036 5,088

5.1.2 The capital adequacy ratio of the Bank, calculated as per RBI guidelines is set out below: 31 March 2007 31 March 2006 (Rs. in million) Capital adequacy Tier I ...... 36,362 28,022 Tier II ...... 29,183 14,761 Total capital ...... 65,545 42,783 Total risk weighted assets and contingents ...... 566,434 385,983 Capital ratios Tier I ...... 6.42% 7.26% Tier II ...... 5.15% 3.82% CRAR ...... 11.57% 11.08% Amount of Subordinated Debt raised as Tier-II capital (as per details given below) ...... Rs.3,893 million Rs. 10,000 million During the year ended 31 March 2007, the Bank raised subordinated debt of Rs. 3,893 million, the details of which are set out below: Date of allotment Period Coupon Amount 28 June 2006 ...... 87months 8.95% Rs. 335 million 120 months 9.10% Rs. 1,049 million 30 March 2007 ...... 120months 10.10% Rs. 2,509 million During the year ended 31 March 2007, the Bank redeemed subordinated debt of Rs. 500 million, the details of which are set out below: Date of maturity Period Coupon Amount 28 June 2006 ...... 63months 11.10% Rs. 500 million

F-21 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

During the year ended 31 March 2006, the Bank raised subordinated debt of Rs. 10,000 million, the details of which are set out below: Date of allotment Period Coupon Amount 25 July 2005 ...... 84months Simple average of Mid of Bid and Rs. 5,000 million Offer yield of the 1 year GOI benchmark (i.e. INBMK) + a margin of 65 basis points to be reset at semi annual intervals 22 March 2006 ...... 87months 8.50% Rs. 1,250 million 87 months 8.32% Rs. 50 million 120 months 8.75% Rs. 3,600 million 120 months 8.56% Rs. 100 million 5.1.3 During the year ended 31 March 2007, the Bank also raised hybrid capital in the form of Perpetual Debt of Rs. 4,140 million qualifying as Tier I capital and Rs. 9,596 million qualifying as Tier II capital, the details of which are set out below:

Type of Capital Date of allotment Period Coupon Amount Upper Tier II ...... 11August 2006 180 months 7.25% (U.S.$150 million) Rs. 6,521 million Perpetual Debt ...... 30September 2006 Perpetual 10.05% Rs. 2,140 million Perpetual Debt ...... 15November 2006 Perpetual 7.167% (U.S.$46 million) Rs. 2,000 million Upper Tier II ...... 24November 2006 180 months 9.35% Rs. 2000 million Upper Tier II ...... 6February 2007 180 months 9.50% Rs. 1,075 million 5.1.4 The key business ratios and other information is set out below: As at 31 March 2007 31 March 2006 %% Interest income as a percentage to working funds (working funds represent average total assets) ...... 7.58 7.05 Non-interest income as a percentage to working funds ...... 1.68 1.78 Operating profit as a percentage to working funds ...... 2.27 2.43 Return on assets ...... 1.10 1.18 Business (deposits less inter bank deposits plus advances) per employee** ...... Rs.102million Rs. 102 million Profit per employee** ...... Rs.0.76 million Rs. 0.87 million Net non performing assets as a percentage of net customer assets* ...... 0.61 0.75

* Net Customer assets include advances and credit substitutes. ** Productivity ratios are based on average employee numbers. 5.1.5 Asset Quality i) Net non-performing assets to net advances is set out below: 31 March 2007 31 March 2006 %% Net non performing assets as a percentage of net advances ...... 0.72 0.98 ii) Movement in gross non-performing assets is set out below: 31 March 2007 31 March 2006 (Rs. in million) Gross Gross Opening balance at the beginning of the year ...... 3,780 3,248 Additions during the year ...... 1,693 1,799 Reductions during the year ...... (1,286) (1,267) Closing balance at the end of the year ...... 4,187 3,780

F-22 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

iii) Movement in net non-performing assets is set out below: 31 March 2007 31 March 2006 (Rs. in million) Net Net Opening balance at the beginning of the year ...... 2,198 2,261 Additions during the year ...... 925 903 Reductions during the year ...... (460) (966) Closing balance at the end of the year ...... 2,663 2,198

iv) Movement in provisions for non performing assets (excluding provisions for standard assets) is set out below: 31 March 2007 31 March 2006 (Rs. in million) Opening balance at the beginning of the year ...... 1,581 987 Provisions made during the year ...... 768 895 Write-offs/write back of excess provisions ...... (826) (301) Closing balance at the end of the year ...... 1,523 1,581

5.1.6 Movement in Floating Provision is set out below: For the year ended 31 March 2007 31 March 2006 (Rs. in million) Opening balance at the beginning of the year ...... 250 29 Provisions made during the year ...... — 221 Draw down made during the year ...... (232) — Closing balance at the end of the year ...... 18 250

The Reserve Bank of India identified a shortfall in provisions for non-performing assets amounting to Rs. 245 million during its inspection relating to the previous year ended 31 March 2006. However, in view of the floating provision of Rs. 250 million held as at the end of March 2006, no additional provision was recommended. Accordingly, the Bank has during the current year utilised floating provision to the extent of Rs. 232 million, being the additional provision required for the non performing assets identified by RBI, based on the outstanding balances of these assets as on the date of utilisation. 5.1.7 Provision on Standard Assets 31 March 2007 31 March 2006 (Rs. in million) Provision towards Standard Assets ...... 2,055 831 5.1.8 Details of Investments are set out below: i) Value of Investments: 31 March 2007 31 March 2006 (Rs. in million) 1) Gross value of Investments a) In India ...... 264,276 215,475 b) Outside India ...... 5,619 — 2) Provision for Depreciation/Non Performing Investments a) In India ...... 923 201 b) Outside India ...... — — 3) Net value of Investments a) In India ...... 263,353 215,274 b) Outside India ...... 5,619 —

F-23 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

ii) Movement of provisions held towards depreciation on investments: 31 March 2007 31 March 2006 (Rs. in million) Opening balance ...... 187 153 Add: Provisions made during the year ...... 670 34 Less: Write offs/write back of excess provisions during the year ...... — — Closing balance ...... 857 187

5.1.9 A summary of lending to sensitive sectors is set out below: As at 31 March 2007 31 March 2006 (Rs. in million) A. Exposure to Real Estate Sector 1) Direct Exposure (i) Residential mortgages ...... 47,635 26,086 — of which housing loans upto Rs. 1.50 million ...... 22,873 14,090 (ii) Commercial real estate ...... 38,852 16,608 (iii) Investments in mortgage backed securities (MBS) and other securitised exposures — a. Residential ...... — — b. Commercial real estate ...... — — 2) Indirect Exposure Fund based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs) ...... 25,613 — Total Exposure to Real Estate Sector ...... 112,100 42,694 B. Exposure to Capital Market 1. Investments made in equity shares (includes sanctioned application money of Rs. 2 million, previous year Rs. 502 million) ...... 2,762 2,420 2. Investments in bonds / convertible debentures ...... — — 3. Investments in units of equity-oriented mutual funds (includes application money of Rs. Nil million, previous year Rs. 30 million) ...... — 30 4. Investments in Equity Subscription ...... 50 — 5. Investments in Venture Capital (includes application money of Rs. 1.50 million, previous year Rs. Nil million ...... 2,679 — 6. Advances against shares to individuals for investment in equity shares (including IPOs / ESOPs), bonds and debentures, units of equity oriented mutual funds ...... 620 — 7. Secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market makers (including underwriting commitments) ...... 3,306 2,327 Total exposure to the Capital Market (Total of 1 to 7) ...... 9,417 4,777 8. Of 7. above, the total finance extended to stock brokers for margin trading ...... — —

F-24 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

5.1.10 Details of loan assets subjected to restructuring are given below: 31 March 2007 31 March 2006 (Rs. in million) i) Total amount of loan assets subjected to restructuring, rescheduling, renegotiation ...... 2,170 3,301 — of which under CDR ...... — 377 ii) The amount of Standard assets subjected to restructuring, rescheduling, renegotiation ...... 1,781 3,151 — of which under CDR ...... — 377 iii) The amount of Sub-Standard assets subjected to restructuring, rescheduling, renegotiation ...... 60 39 — of which under CDR ...... — — iv) The amount of Doubtful assets subjected to restructuring, rescheduling, renegotiation ...... 329 111 — of which under CDR ...... — — 5.1.11 Details of restructuring undertaken by the Bank during the year for SME accounts are given below: 31 March 2007 31 March 2006 (Rs. in million) i) Total amount of assets of SMEs subjected to restructuring ...... 625 1,090 ii) The amount of standard assets of SMEs subjected to restructuring ...... 509 1,044 iii) The amount of sub-standard assets of SMEs subjected to restructuring ...... — 39 iv) The amount of doubtful assets of SMEs subjected to restructuring ...... 116 6 5.1.12 Details of Non-SLR investment portfolio are set out below: i) Issuer composition as at 31 March 2007 of non-SLR investments: Extent of “below Extent of investment Extent of Extent of Total private grade” “unrated” “unlisted” No. Issuer Amount placement securities# securities# securities# (1) (2) (3) (4) (5) (6) (7) (Rs. in million) i. Public Sector Units ...... 13,297 6,606 — — — ii. Financial Institutions ...... 24,141 19,958 70 — 70 iii. Banks ...... 11,456 7,529 50 — — iv. Private Corporates ...... 53,861 39,542 6,504 179 4,358 v. Subsidiaries/ Joint Ventures ...... 100 100 — — — vi. Others ...... 2,732 — — — — vii. Provision held towards depreciation/non- performing investments ...... (912) — — — — Total ...... 104,675 73,735 6,624 179 4,428

Amounts reported under columns (4), (5), (6) and (7) above are not mutually exclusive.

# This excludes investments, amounting to Rs. 5,564 million, in Credit Linked Notes (CLN) and Rs. 55 million in Exchange Traded Bills invested by overseas branches

F-25 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

Issuer composition as at 31 March 2006 of non-SLR investments: Extent of “below Extent of investment Extent of Extent of Total private grade” “unrated” “unlisted” No. Issuer Amount placement securities securities securities (1) (2) (3) (4) (5) (6) (7) (Rs. in million) i. Public Sector Units ...... 11,954 7,560 — — — ii. Financial Institutions ...... 12,738 10,015 — — 110 iii. Banks ...... 3,047 1,086 50 — 10 iv. Private Corporates ...... 58,614 45,205 6,306 405 5,602 v. Subsidiaries/Joint Ventures ...... — — — — — vi. Others ...... 11,224 — — — — vii. Provision held towards depreciation/non-performing investments ...... (201) — — — — Total ...... 97,376 63,866 6,356 405 5,722

Amounts reported under columns (4), (5), (6) and (7) above are not mutually exclusive. ii) Non-performing non SLR investments is set out below: 31 March 2007 31 March 2006 (Rs. in million) Opening balance ...... 37 137 Additions during the year since 1st April ...... 44 67 Reductions during the above period ...... — (167) Closing balance ...... 81 37 Total provisions held ...... 67 14 5.1.13 Details of securities sold/ purchased during the year ended 31 March 2007 & 31 March 2006 under repos/ reverse repos (excluding LAF transactions): Minimum Maximum Daily Average outstanding outstanding outstanding As at Year ended 31 March 2007 during the year during the year during the year 31 March 2007 (Rs. in million) Securities sold under repos ...... — 2,438 441 — Securities purchased under reverse repos ...... — 13,509 577 13,509 Minimum Maximum Daily Average outstanding outstanding outstanding As at Year ended 31 March 2006 during the year during the year during the year 31 March 2006 (Rs. in million) Securities sold under repos ...... — 6,070 1,643 — Securities purchased under reverse repos ...... — 7,999 506 — 5.1.14 Details of financial assets sold to Securitisation/Reconstruction companies for Asset Reconstruction: 31 March 2007 31 March 2006 (Rs. in million) Number of accounts ...... — — Book Value of loan asset securitised ...... — Aggregate value (net of provisions) of accounts sold ...... — — Aggregate consideration ...... — — Additional consideration realised in respect of accounts transferred in earlier years ...... — — Aggregate gain/loss over net book value ...... — —

F-26 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

5.1.15 Details of securitisation transactions undertaken by the Bank in the year are as follows: 31 March 2007 31 March 2006 Rs. in million Number of loan accounts securitised ...... 2 — Book value of loan assets securitised ...... 5,472 — Sale consideration received for the securitised assets ...... 5,501 — Net gain / loss over net book value ...... 29 — The information on securitisation activity of the Bank as an originator as on 31 March 2007 and 31 March 2006 is given below: 31 March 2007 31 March 2006 (Rs. in million) Outstanding credit enchancement (cash collateral) ...... 155 191 Outstanding liquidity facility ...... — — Outstanding servicing liability ...... 5 16 Outstanding investment in PTCs ...... 15 62 5.1.16 During the year, the Bank’s credit exposures to single borrower and group borrowers were within the prudential exposure limits prescribed by RBI except in 4 cases where single borrower limit was exceeded upto an additional exposure of 5% with the approval of the Board of Directors. These 4 cases represent credit and investment exposures to financial institutions, multinationals and local corporates. The total exposure outstanding in respect of these 4 cases as at 31 March 2007 was Rs. 21,659 million. Further the total amount of exposure in excess of the prudential limit as at 31 March 2007 was Rs. 3,471 million. 5.1.17 Details of Risk Categorywise Country Exposure: Exposure Provision Exposure Provision (Net) as at Held as at (Net) as at Held as at Risk Category March 2007 March 2007 March 2006 March 2006 (Rs. in million) Insignificant ...... 7,358 — 3,106 — Low ...... 14,918 — 1,772 — Moderate ...... 723 — 407 — High ...... 26 — 100 — Very High ...... 3 — 21 — Restricted ...... — — 2 — Off-Credit ...... — — — — Total ...... 23,028 — 5,408 —

As the Bank has no net funded exposure in a foreign country, which is 1% or more of its total assets as at 31 March 2007, no provision has been made for country risk. 5.1.18 A maturity pattern of certain items of assets and liabilities at 31 March 2007 & 31 March 2006 is set out below: Over Over Over Over 29 days 3 months 6 months 1 year 3 years 1to 15 to and upto and upto and upto and upto and upto Over Year ended 31 March 2007 14 days 28 days 3 months 6 months 1 year 3 years 5 years 5 years Total (Rs. in million) Deposits ...... 53,874 19,105 91,664 80,169 93,820 236,160 9,666 3,398 587,856 Advances ...... 14,285 3,590 13,339 18,705 31,019 117,675 65,546 104,606 368,765 Investments ...... 25,322 21,806 56,086 25,018 24,723 74,050 19,823 22,144 268,972 Borrowings ...... 339 — 7,739 10,231 10,533 15,973 7,077 64 51,956 Foreign Currency Assets ...... 2,278 166 4,251 11,626 1,129 12,571 1,355 12,756 46,132 Foreign Currency Liabilities ...... 1,315 229 7,434 5,235 12,869 12,423 16,253 12,116 67,874

F-27 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

Over Over Over Over 29 days 3 months 6 months 1 year 3 years 1to 15 to and upto and upto and upto and upto and upto Over Year ended 31 March 2006 14 days 28 days 3 months 6 months 1 year 3 years 5 years 5 years Total (Rs. in million) Deposits ...... 49,647 15,394 53,770 33,127 84,075 153,474 8,362 3,286 401,135 Advances ...... 10,359 836 8,526 11,298 16,963 82,681 42,307 50,172 223,142 Investments ...... 41,688 11,780 38,476 13,131 21,179 54,806 15,002 19,212 215,274 Borrowings ...... 3,300 1,000 1,446 7,627 2,013 11,022 2 400 26,810 Foreign Currency Assets . . . 680 214 605 3,226 660 1,051 491 37 6,964 Foreign Currency Liabilities ...... 1,049 89 915 5,084 4,509 1,957 1,003 — 14,606 Classification of assets and liabilities under the different maturity buckets are compiled by management based on the guidelines issued by the RBI and are based on the same estimates and assumptions as used by the Bank for compiling the return submitted to the RBI. Maturity profile of foreign currency assets and liabilities is excluding forward contracts. 5.1.19 Disclosure in respect of Interest Rate Swaps (IRS), Forward Rate Agreement (FRA) and Cross Currency Swaps (CCS) outstanding at 31 March 2007 is set out below: As at As at Sr. No. Items 31 March 2007 31 March 2006 (Rs. in million) i) Notional principal of swap agreements ...... 1,174,109 531,686 ii) Losses which would be incurred if counterparties failed to fulfil their obligations under the agreements ...... 11,534 5,734 iii) Collateral required by the Bank upon entering into swaps ...... — — iv) Concentration of credit risk arising from the swaps Maximum single industry exposure with Banks (previous year with Banks) — Interest Rate Swaps/FRAs ...... 75.11% 76.31% — Cross Currency Swaps ...... 58.49% 60.57% v) Fair value of the swap book — Interest Rate Swaps/FRAs (hedging & trading) ...... (114) 8 — Currency Swaps ...... 300 268 The nature and terms of the IRS are set out below: Notional Nature Nos. Principal Benchmark Terms (Rs. in million) Hedging Swaps ...... 6 2,398 INBMK Fixed receivable v/s floating payable Hedging Swaps ...... 5 5,250 MIBOR Fixed receivable v/s floating payable Hedging Swaps ...... 2 500 MIBOR Fixed payable v/s floating receivable Hedging Swaps ...... 1 1,500 LIBOR Fixed payable v/s fixed receivable Hedging Swaps ...... 4 2,825 LIBOR Fixed receivable v/s floating payable Trading Swaps ...... 65 25,961 INBMK Fixed receivable v/s floating payable Trading Swaps ...... 59 26,550 INBMK Fixed payable v/s floating receivable Trading Swaps ...... 1,237 477,416 MIBOR Fixed receivable v/s floating payable Trading Swaps ...... 1,254 476,766 MIBOR Fixed payable v/s floating receivable Trading Swaps ...... 1 500 LIBOR/MIBOR Floating payable v/s floating receivable Trading Swaps ...... 196 50,250 MIFOR Fixed receivable v/s floating payable Trading Swaps ...... 199 51,000 MIFOR Fixed payable v/s floating receivable Trading Swaps ...... 150 2,806 LIBOR Fixed receivable v/s floating payable Trading Swaps ...... 37 3,692 LIBOR Fixed payable v/s floating receivable Trading Swaps ...... 2 869 LIBOR Floating payable v/s floating receivable Trading Swaps ...... 2 348 LIBOR Fixed receivable v/s floating payable Trading Swaps ...... 2 348 LIBOR Floating receivable v/s fixed payable 3,222 1,128,979

F-28 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

The nature and terms of the FRA’s are set out below: Notional Nature Nos. Principal Benchmark Terms (Rs. in million) Trading Swaps ...... 7 682 LIBOR Fixed receivable v/s floating payable Trading Swaps ...... 7 681 LIBOR Fixed payable v/s floating receivable 14 1,363

The nature and terms of the CCS are set out below: Notional Nature Nos. Principal Benchmark Terms (Rs. in million) Trading Swaps ...... 17 13,640 LIBOR Fixed receivable v/s floating payable Trading Swaps ...... 24 14,773 LIBOR Fixed payable v/s floating receivable Trading Swaps ...... 1 411 LIBOR/INBMK Floating receivable v/s floating payable Trading Swaps ...... 23 4,196 PRINCIPAL ONLY Fixed Receivable Trading Swaps ...... 22 3,791 PRINCIPAL ONLY Fixed payable Hedging Swaps ...... 5 6,955 PRINCIPAL ONLY Fixed Payable 92 43,766

Agreements with Banks/Financial Institutions and corporates are under approved credit lines. The Bank has not undertaken any transactions in exchange traded interest rate derivatives during the year. The Bank has an exclusive derivative trading desk, which takes proprietary trading and hedging positions in derivatives, apart from, providing derivative service to its select customers with acceptable internal credit rating grades. Derivative transactions can expose the Bank to all the three broad categories of risks, viz; counterparty credit risk, market risk and operational risk. The management of the derivative activities are integrated into the Bank’s overall risk management system. The Risk Department of the Bank provides independent risk assessment to the Senior Management, ALCO and Risk Management Committee of the Board in accordance with the various RBI and other regulatory guidelines and also the internal risk policy laid down by the Bank. The Risk Department has set up appropriate risk limits for the derivative trading position and monitors the derivative exposure of the Bank on a daily basis. Risk limits are set according to a number of criteria including relevant analysis of market data on volatility, business strategy and management experience. The Risk Department computes and reports the Value at Risk (VaR), Price Value of a Basis Point (PVBP) and the option greeks to the Senior Management on a daily basis. Simulation of extreme stress scenarios, including testing of a current portfolio against past periods of significant disturbance is carried out on the derivative portfolio. The results of the stress tests are reviewed periodically and the ALCO promptly addresses the situations and risks that give rise to vulnerability. The Bank follows current exposure method for monitoring the credit risk on derivative transactions and suitable action such as margin call, cancellation of contracts etc., are initiated, as deemed necessary for mitigating the credit risk. The Bank further ensures that the gross PV 01 of all non-option rupee derivative contracts are within 0.25% of the net worth of the Bank as on the last balance sheet date. The Bank has framed a hedging policy for using the derivative products in an efficient manner as a tool for mitigating market risk. The Bank undertakes hedge transactions that are permitted by the RBI from time to time to protect against changes in the fair value or variability in the cash flow that is attributable to a particular risk of a recognised asset or liability. The Risk Department assesses the hedge effectiveness of all the hedge deals at periodical intervals and transactions that do not conform to the hedge criteria are re-designated as trading deals with the approval of the competent authority and accordingly accounted like other trading transactions.

F-29 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

5.1.20 Disclosure on risk exposure in Derivatives As at 31 March 2007 Currency Sr. Derivatives Interest rate No. Particulars CCS Options Derivatives (Rs. in million) 1 Derivatives (Notional Principal Amount) a) For hedging ...... 6,955 — 12,473 b) For trading ...... 36,811 52,836 1,117,869 2 Marked to Market Positions# a) Asset (+) ...... 317 — 160 b) Liability (–) ...... — (9) — 3 Credit Exposure ...... 2,644 605 14,299 4 Likely impact of one percentage change in interest rate (100*PV01) (as at 31st March 2007) a) on hedging derivatives ...... 7 — 153 b) on trading derivatives ...... 4 — 47 5 Maximum and Minimum of 100*PV01 observed during the year a) on hedging I) Minimum ...... 7 — 111 II) Maximum ...... 7 — 253 b) on Trading I) Minimum ...... 1 — 7 II) Maximum ...... 22 — 157

# Only on Trading derivatives The notional principal amount of forex contracts classified as hedging outstanding at 31 March 2007 amounted to Rs. 43,564 million (previous year Rs. 20,644 million). The notional principal amount of forex contracts classified as trading outstanding at 31 March 2007 amounted to Rs. 616,138 million (previous year Rs. 527,227 million). The net overnight open position at 31 March 2007 is Rs. 467 million (previous year Rs. 252 million) 5.1.21 No penalty/strictures have been imposed on the Bank during the year by the Reserve Bank of India. 5.1.22 Disclosure of Customer Complaints a. No. of complaints pending at the beginning of the year 63 b. No. of complaints received during the year 881 c. No. of complaints redressed during the year 931 d. No. of complaints pending at the end of the year 13 5.1.23 Disclosure of Awards passed by the Banking Ombudsman a. No. of unimplemented awards at the beginning of the year — b. No. of awards passed by the Banking Ombudsman during the year 3 c. No. of awards implemented during the year 3 d. No. of unimplemented awards at the end of the year —

5.2 Other disclosures 5.2.1 The Bank holds a ‘general provision’ of Rs. 29 million (previous year Rs. 11 million), based on bucket- wise provisioning for delinquencies less than 90 days for retail loans, which is in excess of RBI guidelines. 5.2.2 During the year, the Bank has appropriated Rs. 156 million (previous year Rs. 105 million) to Capital Reserve, being the gain on sale of HTM investments in accordance with RBI guidelines. 5.2.3 During the year ended 31 March 2007, the Bank sold loans with carrying value of Rs. 2,531 million (previous year Rs. 4,058 million), which resulted in gains of Rs. Nil (previous year Rs. 14 million) being the difference between the contracted yield and the net present value of the negotiated yield. Further the Bank has established retained beneficial interest of Rs. Nil (previous year Rs. 15 million) on these transactions.

F-30 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

5.2.4 Earnings Per Share (‘EPS’) The details of EPS computation is set out below: As at 31 March 2007 31 March 2006 Earnings for the year (Rs. in million) ...... 6,590 4,851 Basic weighted average no. of shares (in million) ...... 281 278 Basic EPS (Rs.) ...... 23.50 17.45 Diluted weighted average no. of shares (in million) ...... 289 284 Diluted EPS (Rs.) ...... 22.79 17.08 Nominal value of shares — Basic (Rs. in million) ...... 2,816 2,787 Nominal value of shares — Diluted (Rs. in million) ...... 2,903 2,847 Dilution of equity is on account of 8,653,638 stock options (previous year 5,987,339). 5.2.5 Employee Stock Options Scheme (‘the Scheme’) In February 2001, pursuant to the approval of the shareholders at the Extraordinary General Meeting, the Bank approved an Employee Stock Option Scheme. Under the Scheme, the Bank is authorised to issue upto 13,000,000 equity shares to eligible employees. Eligible employees are granted an option to purchase shares subject to vesting conditions. The options vest in a graded manner over 3 years. The options can be exercised within 3 years from the date of the vesting. Further, in June 2004 and June 2006, pursuant to the approval of the shareholders at Annual General Meeting, the Bank approved an ESOP scheme for additional 10,000,000 and 48,00,000 options respectively. 15,191,145 options have been granted under the Scheme till the previous year ended 31 March 2006. On 17 April 2006, the Bank granted 46,95,860 stock options (each option representing entitlement to one equity share of the Bank) to its employees, the Chairman & Managing Director and the Executive Director. These options can be exercised at a price of Rs. 319.00 per option. The Bank has not recorded any compensation cost on options granted during the year ended 31 March 2001, year ended 31 March 2006 and the current year ended 31 March 2007 as the exercise price was more than or equal to the quoted market price of underlying equity shares on the grant date. The Bank recorded a compensation cost of Rs 14 million on options granted during the year ended 31 March 2002, Rs. 20 million on options granted during the year ended 31 March 2004, Rs. 242 million on options granted during the year ended 31 March 2005, based on the excess of the quoted market price of the underlying equity shares as of the date of the grant over the exercise price. The compensation cost is amortised over the vesting period. Compensation expense for all the grants under the Scheme for the year ended 31 March 2007 is Rs. 27 million. Stock option activity under the Scheme for the year ended 31 March 2007 is set out below: Weighted average Weighted average Range of exercise exercise remaining Options prices price contractual life outstanding (Rs.) (Rs.) (Years) Outstanding at the beginning of the year ...... 8,838,245 29.68 to 232.10 171.39 4.00 Granted during the year ...... 46,95,860 319.00 319.00 — Forfeited during the year ...... (720,744) 29.68 to 319.00 254.96 — Expired during the year ...... (391) 29.68 to 319.00 29.70 — Exercised during the year ...... (2,940,060) 29.68 to 319.00 122.25 — Outstanding at the end of the year ...... 9,872,910 29.68 to 319.00 250.14 3.19 Exercisable at the end of the year ...... 979,768 29.68 to 319.00 200.43 3.90

F-31 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

Stock option activity under the Scheme for the year ended 31 March 2006 is set out below: Weighted average Weighted average Range of exercise exercise remaining Options prices price contractual life outstanding (Rs.) (Rs.) (Years) Outstanding at the beginning of the year ...... 5,694,445 29.68 to 97.62 75.48 4.00 Granted during the year ...... 5,708,240 232.10 232.10 — Forfeited during the year ...... (670,767) 29.68 to 232.10 173.44 — Expired during the year ...... (90) 29.68 to 232.10 29.68 — Exercised during the year ...... (1,893,583) 29.68 to 97.62 65.22 — Outstanding at the end of the year ...... 8,838,245 29.68 to 232.10 171.39 4.00 Exercisable at the end of the year ...... 286,277 29.68 to 97.62 76.49 1.58

Fair Value Methodology Impact of fair value method on net profit and EPS: 31 March 2007 31 March 2006 Net Profit (as reported) (Rs. in million) ...... 6,590 4,851 Add: Stock based employee compensation expense included in net income (Rs. in million) ...... 27 63 Less: Stock based employee compensation expense determined under fair value based method (proforma) (Rs. In million) ...... (459) (306) Net Profit (Proforma) (Rs. in million) ...... 6,158 4,608 Earnings per share: Basic (in Rs. ) As reported ...... 23.50 17.45 Proforma ...... 21.95 16.58 Earnings per share: Diluted (in Rs. ) As reported ...... 22.79 17.08 Proforma ...... 21.30 16.23 The fair value of the options is estimated on the date of the grant using the Black-Scholes options pricing model, with the following assumptions: 31 March 2007 31 March 2006 Dividend yield ...... 1.69% 1.48% Expected life ...... 2-4years 2-4 years Risk free interest rate ...... 6.93% to 7.17% 6.54% to 6.67% Volatility ...... 46.91%-52.03% 48.94%-57.15% 5.2.6 Dividend paid on shares issued on exercise of stock options The Bank may allot shares between the balance sheet date and record date for the declaration of dividend pursuant to the exercise of any employee stock options. These shares will be eligible for full dividend for the year ended 31 March 2007, if approved at the ensuing Annual General Meeting. Dividend relating to these shares has not been recorded in the current year. Appropriation to proposed dividend during the year ended 31 March 2007 includes dividend paid pursuant to exercise of 1,301,308 employee stock options after the previous year end and record date for declaration of dividend for the year ended 31 March 2006. 5.2.7 Segmental reporting The business of the Bank is divided into two segments: Treasury & Other Banking Operations. These segments have been identified and reported based on RBI guidelines on compliance with Accounting Standards by banks vide circular no. DBOD. BP. BC. 89/21.04.018/2002-03 dated 29 March 2003.

F-32 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

The treasury services segment undertakes trading operations on the proprietary account, foreign exchange operations and derivatives trading. Revenues of the treasury services segment primarily consist of fees and gains or losses from trading operations and interest income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses. Other banking operations principally comprise the lending activities (i.e corporate and retail) of the Bank. The corporate lending activity include providing loans and transaction services to corporate and institutional customers. The retail lending activity include raising of deposits from customers and providing loans and advisory services to such customers through branch network and other delivery channels. Revenues from the corporate lending activity consist of interest and fees earned on loans given to corporate customers, interest earned on cash float and fees arising from transaction services and fees from merchant banking activities such as syndication and debenture trusteeship. Revenues from the retail lending activity are derived from interest earned on retail loans, fees for banking and advisory services, ATM interchange fees and interest earned from other segments for surplus funds placed with those segments. Expenses of the lending activity primarily comprise interest expense on deposits, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses. Segment revenue includes earnings from external customers plus earnings from funds transferred to the other segments. Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Inter segment revenue represents the transfer price paid/received by the Central Funding Unit (CFU). For this purpose, the funds transfer pricing mechanism presently followed by the Bank, which is based on cost of funds and spreads, has been used. Operating expenses are allocated to the segments based on an activity-based costing methodology. All activities in the Bank are segregated segment-wise and allocated to the respective segment. Geographical segment disclosure is not required to be made, since the operations from foreign branches are less than the prescribed norms. Segmental results are set out below : 31 March 2007 Other Banking Segment Revenue Treasury Operations Unallocated Total (Rs. in million)

Gross interest income (external customers) ...... 18,601 27,003 — 45,604 Other income ...... 2,395 7,730 (24) 10,101 Total income as per profit and loss account ...... 20,996 34,733 (24) 55,705 Add/(less) inter segment interest income ...... 67,758 18,412 — 86,170 Total segment income ...... 88,754 53,145 (24) 141,875 Less: Interest expense (external customers) ...... 23,146 6,787 — 29,933 Less: Inter segment interest expenses ...... 60,857 25,313 — 86,170 Less: Operating expenses ...... 774 11,372 — 12,146 Operating profit ...... 3,977 9,673 (24) 13,626 Less: Provision for non performing assets/Others ...... 1,712 1,952 — 3,664 Segment result ...... 2,265 7,721 (24) 9,962 Less: Provision for Tax ...... — — — 3,372 Net Profit ...... — — — 6,590 Segment assets ...... 343,392 376,671 12,509 732,572 Segment liabilities ...... 370,740 324,052 3,848 698,640 Net assets ...... (27,348) 52,619 8,661 33,932 Fixed assets additions during the year ...... — — 2,122 2,122 Depreciation on fixed assets during the year ...... — — 1,119 1,119

F-33 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

31 March 2006 Other Banking Segment Revenue Treasury Operations Unallocated Total (Rs. in million) Gross interest income (external customers) ...... 13,601 15,287 — 28,888 Other income ...... 2,064 5,220 12 7,296 Total income as per profit and loss account ...... 15,665 20,507 12 36,184 Add/(less) inter segment interest income ...... 40,616 10,715 — 51,331 Total segment income ...... 56,281 31,222 12 87,515 Less: Interest expense (external customers) ...... 13,172 4,934 — 18,106 Less: Inter segment interest expenses ...... 37,402 13,929 — 51,331 Less: Operating expenses ...... 532 7,608 — 8,140 Operating profit ...... 5,175 4,751 12 9,938 Less: Provision for non performing assets/Others ...... 1,020 1,604 1 2,625 Segment result ...... 4,155 3,147 11 7,313 Less: Provision for Tax ...... — — — 2,462 Net Profit ...... — — — 4,851 Segment assets ...... 257,314 227,524 12,473 497,311 Segment liabilities ...... 234,652 220,026 13,911 468,589 Net assets ...... 22,662 7,498 (1,438) 28,722 Fixed assets additions during the year ...... — — 1,487 1,487 Depreciation on fixed assets during the year ...... — — 922 922 5.2.8 Related party disclosure The related parties of the Bank are broadly classified as: a) Promoter The Bank has identified the following entities as its Promoters. • Administrator of the Specified Undertaking of the Unit Trust of India (UTI-1) • Life Insurance Corporation of India (LIC) • General Insurance Corporation and four PSUs — New India Assurance Co. Ltd, National Insurance Co. Ltd., United India Insurance Co. Ltd. and The Oriental Insurance Co. Ltd b) Key Management Personnel Dr. P. J. Nayak (Chairman & Managing Director) and Shri. S. Chatterjee (Executive Director). c) Subsidiary Companies • UBL Sales Limited • UBL Asset Management Company Limited The details of transactions of the Bank with its related parties during the year ended 31 March 2007 are given below.

Related Party to Key Management Key Management Items/Related Party Promoter Personnel Personnel Subsidiaries Total (Rs. in million) Dividend Paid ...... 426 1 — — 427 Interest Paid ...... 312 1 1 1 315 Interest Received ...... 16 — — — 16 Investments ...... 1,580 — — — 1,580 Management Contracts ...... — 31 — — 31 Receiving of Services ...... 182 — — 109 291 Rendering of Services ...... 3 — — 15 18

F-34 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

The balances payable to/receivable from the related parties of the Bank as on 31 March 2007 are given below. Related Party to Key Management Key Management Items/Related Party Promoter Personnel Personnel Subsidiaries Total (Rs. in million) Deposits with the Bank ...... 7,608 22 6 6 7,642 Placement of Deposits ...... 1 — — — 1 Advances ...... 1 2 — — 3 Investment of the Bank ...... — — — 100 100 Investment of Related Parties in the Bank ...... 1,214 1 — — 1,215 Guarantees ...... 390 — — — 390 Investment in Subordinated Debt of the Bank ...... 3,340 — — — 3,340 The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2007 are given below. Related Party to Key Management Key Management Items/Related Party Promoter Personnel Personnel Subsidiaries Total (Rs. in million) Deposits with the Bank ...... 7,810 24 6 55 7,895 Placement of Deposits ...... 1 — — — 1 Advances ...... 3,999 3 — 27 4,029 Investment of the Bank ...... — — — 100 100 Investment of Related Parties in the Bank ...... 1,218 1 — — 1,219 Repo Borrowing ...... 2,885 — — — 2,885 Guarantees ...... 390 — — — 390 Investment in Subordinated Debt of the Bank ...... 4,310 — — — 4,310 The details of transactions of the Bank with its related parties during the year ended 31 March 2006 are given below. Related Party to Key Management Key Management Items/Related Party Promoter Personnel Personnel Subsidiaries Total (Rs. in million) Dividend Paid ...... 341 — — — 341 Interest Paid ...... 279 1 — — 280 Interest Received ...... 1 — — — 1 Investments ...... 4,556 — — — 4,556 Management Contracts ...... — 18 — — 18 Receiving of Services ...... 163 — — — 163 Rendering of Services ...... 2 — — — 2 The balances payable to/receivable from the related parties of the Bank as on 31 March 2006 are given below. Related Party to Key Management Key Management Items/Related Party Promoter Personnel Personnel Subsidiaries Total (Rs. in million) Deposits with the Bank ...... 3,937 12 5 — 3,954 Placement of Deposits ...... 1 — — — 1 Advances ...... 2 2 — — 4 Investment of Related Parties in the Bank ...... 1,218 1 — — 1,219 Guarantees ...... 360 — — — 360 Investment in Subordinated Debt of the Bank ...... 3,850 — — — 3,850

F-35 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2006 are given below.

Related Party to Key Management Key Management Items/Related Party Promoter Personnel Personnel Subsidiaries Total (Rs. in million) Deposits with the Bank ...... 6,187 12 7 — 6,206 Placement of Deposits ...... 1 — — — 1 Call & Term Borrowing ...... 1,420 — — — 1,420 Advances ...... 118 6 — — 124 Investment of Related Parties in the Bank ...... 1,226 1 — — 1,227 Repo Borrowing ...... 1,000 — — — 1,000 Guarantees ...... 360 — — — 360 Investment in Subordinated Debt of the Bank ...... 3,850 — — — 3,850 5.2.9 Leases Disclosure in respect of assets given on operating lease Operating lease comprises leasing of power generation equipments. 31 March 2007 31 March 2006 (Rs. in million) Gross carrying amount at the beginning of the year ...... 765 765 Accumulated depreciation as at the end of the year ...... 242 208 Accumulated impairment losses as at the end of the year ...... — — Depreciation for the year ...... 34 34 Impairment losses for the year ...... — — Minimum lease payments receivable at the end of the year ...... 10 1 Future lease rentals receivable as at the end of the year: — Not later than one year ...... 35 35 — Later than one year and not later than five years ...... 125 139 — Later than five years ...... 42 62 There are no provisions relating to contingent rent. The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements.

Disclosure in respect of assets taken on operating lease Operating lease comprises leasing of office premises/ATMs, staff quarters, electronic data capturing machines and IT equipment. 31 March 2007 31 March 2006 (Rs. in million) Future lease rentals payable as at the end of the year: — Not later than one year ...... 1,229 615 — Later than one year and not later than five years ...... 3,385 1,915 — Later than five years ...... 1,161 815 Total of minimum lease payments recognised in the profit and loss account for the year ...... 712 427 Total of future minimum sublease payments expected to be received under non-cancellable subleases ...... 22 — Sub-lease payments recognised in the profit and loss account for the year ...... 2 — The Bank has sub-leased certain of its properties taken on lease. There are no provisions relating to contingent rent.

F-36 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements. There are no undue restrictions or onerous clauses in the agreements. 5.2.10 The major components of deferred tax assets and deferred tax liabilities arising out of timing differences are as under: As at 31 March 2007 31 March 2006 (Rs. in million) Deferred tax assets on account of provisions for doubtful debts ...... 1,213 794 Deferred tax assets on account of amortisation of HTM investments ...... 710 387 Deferred tax liabilities on account of depreciation on fixed assets .... (525) (535) Other deferred tax assets ...... 199 90 Net deferred tax asset/(liability) ...... 1,597 736

In computing the amount of permanent difference for reckoning tax provisions, the disallowance of interest expenditure u/s. 14A of the Income Tax Act, 1961 has been arrived at having regard to the statutory restrictions on deployment of resources raised, their cost and their maturity. 5.2.11 Employee Benefits

Provident Fund The contribution to the employee’s provident fund amounted to Rs. 138 million for the year ended 31 March 2007.

Superannuation The Bank contributed Rs. 91 million to the employee’s superannuation plan for the year ended 31 March 2007.

Leave Encashment The Bank charged an amount of Rs.83 million as liability for leave encashment for the year ended 31 March 2007.

Gratuity The following table sets forth the funded status of the gratuity benefit plan, during the year ended 31 March 2007 (refer note 1). 31 March 2007 (Rs. in million) Present Value of Funded Obligations ...... 143 Fair Value of Plan Assets ...... (119) Present Value of Unfunded Obligations ...... — Unrecognised Past Service Cost ...... — Net Liability ...... 24 Amounts in Balance Sheet Liabilities ...... 24 Assets ...... — Net Liability ...... 24

F-37 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

The amount recognised in the statement of profit and loss are as follows (refer note 1) : 31 March 2007 (Rs. in million) Current Service Cost ...... 23 Interest on Defined Benefit Obligation ...... 7 Expected Return on Plan Assets ...... (6) Net Actuarial Losses/(Gains) Recognised in Year ...... 4 Past Service Cost ...... — Losses/(Gains) on “Curtailments & Settlements” ...... — Total included in “Employee Benefit Expense” ...... 28 Actual Return on Plan Assets ...... 8

Changes in the present value of the defined benefit obligation representing reconciliation of opening and closing balances thereof are as follows (refer note 1): 31 March 2007 (Rs. in million) Change in Defined Benefit Obligation Opening Defined Benefit Obligation ...... 116 Current Service Cost ...... 22 Interest Cost ...... 7 Actuarial Losses/(Gains) ...... 6 Liabilities Extinguished on Curtailment ...... — Liabilities Extinguished on Settlements ...... — Liabilities Assumed on Acquisition ...... — Exchange Difference on Foreign Plans ...... — Benefits Paid ...... (8) Closing Defined Benefit Obligation ...... 143

Changes in the fair value of plan assets representing reconciliation of the opening and closing balances thereof are as follows (refer note 1): 31 March 2007 (Rs. in million) Change in the Fair Value of Assets Opening Fair Value of Plan Assets ...... 74 Expected Return on Plan Assets ...... 6 Actuarial Gains/(Losses) ...... 2 Assets Distributed on Settlements ...... — Contributions by Employer ...... 45 Assets Acquired due to Acquisition ...... — Exchange Difference on Foreign Plans ...... — Benefits Paid ...... (8) Closing Fair Value of Plan Assets ...... 119

31 March 2007 The major categories of plan assets as a percentage of fair value of total plan assets — Insurer Managed Funds ...... 100.00% Principal actuarial assumptions at the balance sheet date: Discount Rate ...... 8.50 % p.a. Expected rate of Return on Plan Assets ...... 7.50 % p.a. Salary Escalation Rate ...... 6.00 % p.a. The estimates of future salary increases considered take into account the inflation, seniority, promotion and other relevant factors.

F-38 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

The expected rate of return on plan assets is based on the average long-term rate of return expected on investments of the Fund during the estimated term of the obligations. Note 1: In view of early adoption of AS-15 (Revised), previous period figures are not determinable. Note 2: As the contribution expected to be paid to the plan during the annual period beginning after the balance sheet date is based on various internal/external factors, a best estimate of the contribution is not determinable. 5.2.12 Provisions and contingencies a. Movement in provision for frauds included under other liabilities is set out below: 31 March 2007 31 March 2006 (Rs. in million) Opening balance at the beginning of the year ...... 10 24 Additions during the year ...... 8 6 Reductions on account of payments during the year ...... — (10) Reductions on account of reversals during the year ...... (1) (10) Closing balance at the end of the year ...... 17 10

b. Movement in provision for credit enhancements on securitised assets is set out below: 31 March 2007 31 March 2006 (Rs. in million) Opening balance at the beginning of the year ...... 7 11 Additions during the year ...... 25 — Reductions during the year ...... — (4) Closing balance at the end of the year ...... 32 7

c. Movement in provision for credit card reward points is set out below: 31 March 2007 31 March 2006 (Rs. in million) Opening provision at the beginning of the year ...... — — Provision made during the year ...... 2 — Reductions during the year ...... — — Closing provision at the end of the year ...... 2 —

5.2.13 Description of contingent liabilities: a) Claims against the Bank not acknowledged as debts These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in progress. These also include demands raised by income tax and other statutory authorities and disputed by the Bank. b) Liability on account of forward exchange and derivative contracts The Bank enters into foreign exchange contracts, currency options/swaps and forward rate agreements on its own account and for customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by way of interest/ principal in two currencies, based on ruling spot rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. Forward Rate Agreements are agreements to pay or receive a certain sum based on a differential interest rate on a notional amount for an agreed period. A foreign currency option is an agreement between two parties in which one grants to the other the right to buy or sell a specified amount of currency at a specific price within a specified time period or at a specified future time. c) Guarantees given on behalf of constituents As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfil its financial or performance obligations.

F-39 Notes to financial statements for the year ended 31 March 2007 (Continued) Indian Rupees Million

d) Acceptances, endorsements and other obligations These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank’s customers that are accepted or endorsed by the Bank. e) Other items Other items represent bills rediscounted by the Bank and the value of put option provided by the Bank to certain Pass Through Certificate (PTC) holders under an agreement, where in the Bank acted as an arranger for a securitisation issue originated by a third party. 5.2.14 Previous year figures have been regrouped and reclassified, where necessary to conform to current year’s presentation.

F-40 Auditors’ Report

To, The members of Axis Bank Limited 1. We have audited the attached balance sheet of Axis Bank Limited (the ‘Bank’) (formerly known as UTI Bank Limited) as at 31 March 2008 and also the profit and loss account and cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. The balance sheet and profit and loss account are drawn up in conformity with Forms A and B (revised) of the Third Schedule to the Banking Regulation Act, 1949, read with Section 211 of the Companies Act, 1956. 4. We report that: a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit and have found them to be satisfactory; b) In our opinion, the transactions of the Bank which have come to our notice have been within its powers; c) In our opinion, proper books of account as required by law have been kept by the Bank so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the Bank’s branches; d) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account; e) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, insofar as they apply to banks; f) On the basis of written representations received from the directors, as on 31 March 2008, and taken on record by the Board of Directors, we report that none of the directors is disqualified from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956; g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required for banking companies, and give a true and fair view in conformity with the accounting principles generally accepted in India; i. in case of the balance sheet, of the state of the affairs of the Bank as at 31 March 2008; ii. in case of the profit and loss account, of the profit for the year ended on that date; and iii. in case of cash flow statement, of the cash flows for the year ended on that date.

For S.R. Batliboi & Co. Chartered Accountants

per Viren H. Mehta Partner Membership No.: 048749

21 April 2008

F-41 Balance Sheet as of 31 March 2008

Schedule As of As of No. 31-03-2008 31-03-2007 Rs. Rs. Figures in millions CAPITAL AND LIABILITIES Capital ...... 1 3,577 2,816 Reserves & Surplus ...... 2 84,108 31,116 Employees’ Stock Options Outstanding (Net) ...... 17(4.16) 22 90 Deposits ...... 3 876,262 587,856 Borrowings ...... 4 56,240 51,956 Other liabilities and provisions ...... 5 75,569 58,738 TOTAL ...... 1,095,778 732,572 ASSETS Cash and Balances with Reserve Bank of India ...... 6 73,057 46,610 Balance with banks and money at call and short notice ...... 7 51,986 22,573 Investments ...... 8 337,051 268,972 Advances ...... 9 596,611 368,765 Fixed Assets ...... 10 9,228 6,732 Other Assets ...... 11 27,845 18,920 TOTAL ...... 1,095,778 732,572 Contingent liabilities ...... 12 2,588,956 1,841,648 Bills for collection ...... 83,234 62,746 Significant Accounting Policies and Notes to accounts ...... 17

Schedules referred to above form an integral part of the Balance Sheet

F-42 Profit & Loss Account for the year ended 31 March 2008

Schedule Year ended on No. 31-03-2008 31-03-2007 Rs. Rs. Figures in millions except EPS data I INCOME Interest earned ...... 13 70,053 44,616 Other income ...... 14 17,955 10,101 TOTAL ...... 88,008 54,717 II EXPENDITURE Interest expended ...... 15 44,200 29,933 Operating expenses ...... 16 21,549 12,146 Provisions and contingencies ...... 17(5.2.1) 11,549 6,048 TOTAL ...... 77,298 48,127 III NET PROFIT FOR THE YEAR ...... (I—II) 10,710 6,590 Balance in Profit & Loss account brought Forward from previous year ...... 10,291 7,311 Utilisation for Employee Benefits Provision under AS 15 (revised) ...... 17 — (318) IV AMOUNT AVAILABLE FOR APPROPRIATION 21,001 13,583 V APPROPRIATIONS : Transfer to Statutory Reserve ...... 2,678 1,648 Transfer to Capital Reserve ...... 17(5.3.1) 268 156 Proposed dividend (includes tax on dividend) ...... 17(5.3.4) 2,516 1,488 Balance in Profit & Loss account carried forward ...... 15,539 10,291 TOTAL ...... 21,001 13,583 VI EARNINGS PER EQUITY SHARE ...... 17(5.3.2) (Face value Rs 10/- per share) Basic ...... 32.15 23.50 Diluted ...... 31.31 22.79 Significant Accounting Policies and Notes to accounts ...... 17

Schedules referred to above form an integral part of the Profit and Loss Account

F-43 Cash Flow Statement for the year ended 31 March 2008

Year ended 31-03-2008 31-03-2007 Rs. Rs. Figures in millions Cash flow from operating activities Net profit before taxes ...... 16,463 9,962 Adjustments for: Depreciation & impairment provision on fixed assets ...... 1,581 1,119 Depreciation on investments ...... 65 670 Amortisation of premium on Held to Maturity investments ...... 977 987 Provision for Non Performing Advances/Investments (including bad debts) ...... 3,440 737 General Provision on securitised assets ...... (1) 25 Provision on Standard assets ...... 1,535 1,224 General provision on retail assets ...... — 18 Provision for wealth tax ...... 2 3 Loss on sale of fixed assets ...... 152 29 Provision for country risk ...... 35 — Contingent Provision against derivatives ...... 720 — Amortisation of deferred employee compensation ...... 2 27 24,971 14,801 Adjustments for: (Increase) /Decrease in investments ...... (26,351) (21,043) (Increase) /Decrease in advances ...... (231,262) (146,307) Increase/(Decrease) in borrowings ...... 4,284 25,147 Increase /(Decrease) in deposits ...... 288,406 186,721 (Increase) /Decrease in other assets ...... (7,918) (1,319) Increase /(Decrease) in other liabilities & provisions ...... 14,235 (915) Direct taxes paid ...... (6,761) (4,129) Net cash flow from operating activities ...... 59,604 52,956 Cash flow from investing activities Purchase of fixed assets ...... (4,356) (2,226) (Increase) / Decrease in Held to Maturity Investments ...... (42,795) (34,365) Proceeds from sale of fixed assets ...... 126 35 Net cash used in investing activities ...... (47,025) (36,556) Cash flow from financing activities Proceeds from issue of Subordinated debt (net of repayment) ...... (2,455) 3,393 Proceeds from issue of Perpetual Debt & Upper Tier II instruments ...... 1,734 13,735 Proceeds from issue of Share capital ...... 761 29 Proceeds from share premium (net of share issue expenses) ...... 44,706 330 Payment of Dividend ...... (1,488) (1,117) Net cash generated from financing activities ...... 43,258 16,370 Effect of exchange fluctuation translation reserve ...... 22 (5) Net increase in cash and cash equivalents ...... 55,859 32,765 Cash and cash equivalents as at 1 April 2007 ...... 69,183 36,418 Cash and cash equivalents as at 31 March 2008 ...... 125,042 69,183

Cash and cash equivalents comprise of cash on hand & in ATM, balance with RBI, balances with banks and money at call & short notice (refer schedule 6 and 7 of the Balance Sheet)

F-44 SCHEDULE 1 — CAPITAL As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions Authorised Capital* ...... 5,000 3,000 Issued, Subscribed and Paid-up capital #@ ...... 3,577 2,816

* 500,000,000 and 300,000,000 equity shares of Rs. 10 each as of 31 March 2008 and 31 March 2007, respectively. # 357,709,669 and 281,630,787 equity shares of Rs. 10 each fully paid up as of 31 March 2008 and 31 March 2007 respectively. @ includes 13,033,458 and 11,994,991 GDRs representing 13,033,458 and 11,994,991 equity shares as of 31 March 2008 and 31 March 2007 respectively.

SCHEDULE 2 — RESERVES AND SURPLUS As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Statutory Reserve Opening Balance ...... 5,846 4,199 Additions during the year ...... 2,678 1,648 8,524 5,847 II. Share Premium Account Opening Balance ...... 13,956 13,554 Additions during the year ...... 45,248 402 Less: Share issue expenses [refer 17(5.1)] ...... (472) — 58,732 13,956 III. General Reserve Opening Balance ...... 143 143 Additions during the year ...... — — 143 143 IV. Capital Reserve Opening Balance ...... 884 727 Additions during the year ...... 268 156 1,152 883 V. Foreign Currency Translation Reserve Opening Balance ...... (4) 1 Additions during the year [refer 17(4.5)] ...... 22 (5) 18 (4) VI. Balance in Profit & Loss Account ...... 15,539 10,291 TOTAL ...... 84,108 31,116

F-45 SCHEDULE 3 — DEPOSITS As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions A. I. Demand Deposits (i) From banks ...... 8,957 7,490 (ii) From others ...... 191,489 105,553 II. Savings Bank Deposits ...... 199,824 121,259 III. Term Deposits (i) From banks ...... 36,842 60,207 (ii) From others ...... 439,150 293,347 TOTAL ...... 876,262 587,856 B. I. Deposits of branches in India ...... 863,916 585,729 II. Deposits of branches outside India ...... 12,346 2,127 TOTAL ...... 876,262 587,856

SCHEDULE 4 — BORROWINGS As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Borrowings in India (i) Reserve Bank of India ...... — — (ii) Other Banks ...... — 6,000 (iii) Other institutions & agencies ...... 5,467 12,039 II. Borrowings outside India ...... 50,773 33,917 TOTAL ...... 56,240 51,956 Secured borrowing included inI&IIabove ...... — —

F-46 SCHEDULE 5 — OTHER LIABILITIES AND PROVISIONS As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Bills payable ...... 21,022 13,095 II. Inter — office adjustments (net) ...... — — III. Interest accrued ...... 1,778 1,773 IV. Proposed dividend (includes tax on dividend) ...... 2,511 1,483 V. Subordinated Debt# ...... 18,824 21,279 VI Perpetual Debt and Upper Tier instruments* ...... 15,469 13,735 VII. Contingent Provision against Standard Assets ...... 3,589 2,055 VIII. Others (including provisions)@ ...... 12,376 5,318 TOTAL ...... 75,569 58,738

# represents Subordinated Debt of 5,862 bonds and 10,772 bonds of Rs. 0.5 million each as of 31 March 2008 and 31 March 2007 respectively and 15,893 bonds and 15,893 bonds of Rs. 1 million each as of 31 March 2008 and 31 March 2007 respectively, in the nature of Non Convertible Debentures. (Also refer 17(5.2.2)) * represents Perpetual Debt of Rs.3,985 million and Rs. 4,140 million as of 31 March 2008 and 31 March 2007 respectively and Rs. 11,484 million and Rs. 9,595 million of Upper Tier II instruments as of 31 March 2008 and 31 March 2007 respectively. (Also refer 17(5.2.3)) @ includes contingent provision against derivatives of Rs. 720 million and Rs. Nil million as of 31 March 2008 and 31 March 2007 respectively.

SCHEDULE 6 — CASH AND BALANCES WITH RESERVE BANK OF INDIA As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Cash in hand & in ATM (including foreign currency notes) ...... 15,203 8,367 II. Balances with Reserve Bank of India : (i) in Current Account ...... 57,854 38,243 (ii) in Other Accounts ...... — — TOTAL ...... 73,057 46,610

F-47 SCHEDULE 7 — BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. In India (i) Balance with Banks (a) in Current Accounts ...... 10,461 6,243 (b) in Other Deposit Accounts ...... 719 524 (ii) Money at Call and Short Notice (a) With banks ...... 31,076 12,138 (b) With other institutions ...... — — TOTAL ...... 42,256 18,905 II. Outside India (i) in Current Accounts ...... 3,846 2,903 (ii) in Other Deposit Accounts ...... 1,204 679 (iii) Money at Call & Short Notice ...... 4,680 86 TOTAL ...... 9,730 3,668 GRAND TOTAL (I+II) ...... 51,986 22,573

F-48 SCHEDULE 8 — INVESTMENTS As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Investments in India in — (i) Government Securities##**...... 201,788 164,308 (ii) Other approved securities ...... — — (iii) Shares ...... 5,856 4,628 (iv) Debentures and Bonds$ ...... 108,212 70,449 (v) Investments in Subsidiaries/ Joint ventures ...... 380 100 (vi) Others@ ...... 15,688 24,791 (Mutual Fund units, CD / CP , NABARD Deposits, PTC etc.) Gross Investments in India ...... 331,924 264,276 Less: Depreciation in the value of investments* ...... (959) (923) Net investments in India ...... 330,965 263,353 II. Investments outside India (i) Government Securities (including local authorities) ...... — 55 (ii) Subsidiaries and / or joint ventures abroad ...... — — (iii) Others ...... 6,138 5,564 Gross Investments outside India ...... 6,138 5,619 Less : Depreciation in the value of investments ...... (52) — Net investments outside India ...... 6,086 5,619 GRAND TOTAL(I + II) ...... 337,051 268,972

@ Includes deposits with NABARD Rs. 10,007 million and Rs. 8,669 million as of 31 March 2008 and 31 March 2007 respectively and PTCs Rs. 5,307 million and Rs. 13,444 million as of 31 March 2008 and 31 March 2007 respectively. ## Includes securities costing Rs. 38,718 million and Rs. 35,815 million as of 31 March 2008 and 31 March 2007 respectively pledged for availment of fund transfer facility, clearing facility and margin requirement. ** Includes Repo lending under Liquidity Adjustment Facility of RBI Rs. 5,308 million and Rs. 13,509 million as of 31 March 2008 and 31 March 2007 respectively and net of Repo borrowing of Rs. Nil million and Rs. 3,046 million as of 31 March 2008 and 31 March 2007 respectively in line with RBI requirements $ Includes securities costing Rs. 1,751 million and Rs. 3,218 million as of 31 March 2008 and 31 March 2007 respectively pledged for margin requirement * Includes provision for Non Performing Investments of Rs. 90 million and Rs. 67 million as of 31 March 2008 and 31 March 2007 respectively.

F-49 SCHEDULE 9 — ADVANCES As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions A. (i) Bills purchased and discounted* ...... 20,236 12,737 (ii) Cash credits, overdrafts and loans repayable on demand ...... 164,432 98,866 (iii) Term loans ...... 411,943 257,162 TOTAL ...... 596,611 368,765 B. (i) Secured by tangible assets@ ...... 482,473 305,023 (ii) Covered by Bank/Government Guarantees&& ...... 17,699 14,489 (iii) Unsecured ...... 96,439 49,253 TOTAL ...... 596,611 368,765 C. I. Advances in India (i) Priority Sectors ...... 165,723 131,963 (ii) Public Sector ...... 62 215 (iii) Banks ...... 276 277 (iv) Others ...... 376,741 210,554 TOTAL ...... 542,802 343,009 II. Advances Outside India (i) Due from banks ...... — — - (ii) Due from others — ...... (a) Bills purchased and discounted ...... 2,151 2,914 (b) Syndicate loans ...... 20,477 2,442 (c) Others ...... 31,181 20,400 TOTAL ...... 53,809 25,756 GRAND TOTAL (CI+CII) ...... 596,611 368,765

* Bills purchased and discounted are net of Rs. Nil million and Rs. 7,000 million of borrowings under the Bills Rediscounting Scheme as of 31 March 2008 and 31 March 2007 respectively. @ Includes advances against book debts && Includes advances against L/Cs issued by Banks. Advances are net of floating provision, which has been adjusted based on management estimate.

F-50 SCHEDULE 10 — FIXED ASSETS

As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Premises At cost at the beginning of the year ...... 337 337 Additions during the year ...... 225 — Deductions during the year ...... (62) — Depreciation to date ...... (86) (72) TOTAL ...... 414 265 II. Other fixed assets (including Furniture & Fixtures) At cost at the beginning of the year ...... 9,887 7,884 Additions during the year ...... 3,095 2,122 Deductions during the year ...... (400) (119) Depreciation to date ...... (5,417) (4,191) TOTAL ...... 7,165 5,696 III. Assets on Lease At cost at the beginning of the year ...... 765 765 Additions during the year ...... — — Deductions during the year ...... — — Depreciation to date ...... (276) (242) Provision for Impairment ...... (124) — TOTAL ...... 365 523 7,944 6,484 IV. CAPITAL WORK-IN-PROGRESS (including Capital Advances) 1,284 248 GRAND TOTAL (I+II+III+IV) ...... 9,228 6,732

SCHEDULE 11 — OTHER ASSETS As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I Inter-office adjustments (net) ...... — — II Interest Accrued ...... 9,079 6,419 III Tax paid in advance / tax deducted at source (net of provisions) ...... 448 1,036 IV Stationery and stamps ...... 9 8 V Non-banking assets acquired in satisfaction of claims ...... — — VI Others# ...... 18,309 11,457 TOTAL ...... 27,845 18,920

# Includes deferred tax assets Rs. 3,191 million and Rs. 1,597 million as of 31 March 2008 and 31 March 2007 respectively.

F-51 SCHEDULE 12 — CONTINGENT LIABILITIES

As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Claims against the bank not acknowledged as debts ...... 2,548 1,708 II. Liability for partly paid investments ...... — — III. Liability on account of outstanding forward exchange and derivative contracts a) Forward Contracts ...... 643,205 507,359 b) Interest Rate Swaps, Currency Swaps, Forward Rate Agreement & Interest Rate Futures ...... 1,565,203 1,174,109 c) Foreign Currency Options ...... 161,001 52,836 TOTAL: ...... 2,369,409 1,734,304 IV. Guarantees given on behalf of constituents In India ...... 117,963 43,814 Outside India ...... 1,756 50 V. Acceptances, endorsements and other obligations ...... 82,466 54,772 VI. Other items for which the bank is contingently liable ...... 14,814 7,000 TOTAL ...... 2,588,956 1,841,648

SCHEDULE 13 — INTEREST EARNED

Year ended 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Interest/discount on advances/bills ...... 47,457 27,028 II. Income on investments ...... 21,023 16,327 III. Interest on balances with Reserve Bank of India and other inter-bank funds ...... 1,076 773 IV. Others ...... 497 488 TOTAL ...... 70,053 44,616

F-52 SCHEDULE 14 — OTHER INCOME

Year ended 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Commission, exchange and brokerage ...... 13,207 7,790 II. Profit/(Loss) on sale of Investments/ Derivative transaction (net) ...... 2,202 609 III. Profit on exchange transactions (net) ...... 2,075 1,248 IV. Profit/(Loss) on sale of fixed assets (net) ...... (152) (29) V. Income earned by way of dividends etc. from Subsidiaries/companies and/or joint venture abroad/in India ...... — — VI. Lease rentals ...... 35 35 VII. Miscellaneous Income# ...... 588 448 TOTAL ...... 17,955 10,101

# including recoveries on account of advances/investments written off in earlier years Rs. 449 million and Rs. 236 million for the year ended 31 March 2008 and 31 March 2007 respectively and profit on account of portfolio sell downs/securitisation of Rs. 91 million and Rs. 20 million for the year ended 31 March 2008 & 31 March 2007 respectively.

SCHEDULE 15 — INTEREST EXPENDED Year ended 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Interest on deposits ...... 37,425 24,809 II. Interest on Reserve Bank of India / Inter-bank borrowings ...... 1,763 1,688 III. Others@ ...... 5,012 3,436 TOTAL ...... 44,200 29,933

@ including interest on repos and subordinated debt

F-53 SCHEDULE 16 — OPERATING EXPENSES Year ended 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Payments to and provisions for employees ...... 6,702 3,813 II. Rent, taxes and lighting ...... 2,529 1,591 III. Printing and stationery ...... 540 376 IV. Advertisement and publicity ...... 744 296 V. Depreciation on bank’s property (including impairment provision) ...... 1,581 1,119 VI. Directors’ fees, allowance and expenses ...... 7 6 VII. Auditor’s fees and expenses ...... 7 5 VIII. Law Charges ...... 52 64 IX. Postage, Telegrams, Telephones, etc...... 1,012 701 X. Repairs and maintenance ...... 1,896 1,289 XI. Insurance ...... 767 548 XII. Other Expenditure ...... 5,712 2,338 TOTAL ...... 21,549 12,146

F-54 Notes to financial statements for the year ended 31 March 2008 Indian Rupees Million

FISCAL 2007 - 2008 1 Background Axis Bank Limited (the ‘Bank’) was incorporated in 1993 and provides a complete suite of corporate and retail banking products. Pursuant to the approval received from the Registrar of Companies, Gujarat, the Bank has changed its name from ‘UTI Bank Limited’ to ‘Axis Bank Limited’ with effect from 30 July 2007.

2 Basis of preparation The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting, unless otherwise stated, and comply with generally accepted accounting principles, statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India (‘RBI’) from time to time, the Accounting Standards (‘AS’) issued by the Institute of Chartered Accountants of India (‘ICAI’) and notified by Companies Accounting Standards Rules, 2006 to the extent applicable and current practices prevailing within the banking industry in India.

3 Use of estimates The preparation of the financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates is recognised prospectively in the current and future periods.

4 Significant accounting policies 4.1 Investments Classification In accordance with the RBI guidelines, investments are classified at the date of purchase as: • Held for Trading (‘HFT’); • Available for Sale (‘AFS’); and • Held to Maturity (‘HTM’). Investments that are held principally for resale within a short period are classified as HFT securities. As per RBI guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date. Investments that the Bank intends to hold till maturity are classified under HTM category. Investments not exceeding 25% of total investments, which the Bank intends to hold till maturity, are classified as HTM securities. As permitted by RBI, the Bank may exceed the limit of 25% of total investments provided the excess comprises only of those securities which are eligible for complying with the Statutory Liquidity Ratio (‘SLR’) i.e. SLR securities and the total SLR securities held in HTM category is not more than 25% of its demand and time liabilities as on the effective date. The effective date means the last Friday of the second preceding fortnight for computation of the aforesaid limit. In computing the investment ceiling for HTM portfolio for the aforesaid purpose, debentures and bonds, which are in the nature of advances are excluded. All other investments are classified as AFS securities. However, for disclosure in the balance sheet, investments in India are classified under six categories— Government securities, Other approved securities, Shares, Debentures and Bonds, Investment in Subsidiaries/ Joint Ventures and Others. Investments made outside India are classified under three categories – Government Securities, Subsidiaries and/or Joint Ventures abroad and Others.

Transfer of security between categories Transfer of security between categories of investments is accounted for at the acquisition cost/book value/ market value as on the date of transfer, whichever is lower, and the depreciation, if any, on such transfer is recognised in the profit and loss account.

F-55 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

Valuation Investments classified under the HTM category are carried at acquisition cost. Any premium on acquisition over face value is amortised on a straight-line basis over the remaining period to maturity. Investments classified under the AFS and HFT category are marked to market. The market/fair value for the purpose of periodical valuation of quoted investments included in the ‘Available for Sale’ and ‘Held for Trading’ categories is the market price of the scrip as available from the trades/quotes on the stock exchanges, SGL account transactions, price list of RBI or prices declared by Primary Dealers Association of India jointly with Fixed Income Money Market and Derivatives Association (“FIMMDA”), periodically. Net depreciation, if any, within each category of investments is recognised in the profit and loss account. The net appreciation if any, under each category is ignored, except to the extent of depreciation previously provided. The book value of individual securities is not changed consequent to the periodic valuation of investments. Treasury Bills and Commercial Paper, being discounted instruments, are valued at carrying cost. Units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund. Market value of investments where current quotations are not available, is determined as per the norms prescribed by the RBI as under: • market value of unquoted Government securities is derived based on the Prices/Yield to Maturity (‘YTM’) rate for Government securities of equivalent maturity as notified by Fixed Income Money Market and Derivatives Association of India (‘FIMMDA’) jointly with the Primary Dealers Association of India (‘PDAI’) at periodic intervals; • in case of Central Government Securities, which do not qualify for SLR requirement, the market price is derived by adding 50 basis points to the Base Yield Curve of Central Government Securities; • market value of unquoted State Government securities is derived by applying the YTM method by marking it up by 25 basis points above the yields of the Central Government Securities of equivalent maturity notified by the FIMMDA/PDAI at periodic intervals; • in case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly, the market price is derived based on the YTM for Government securities as notified by FIMMDA/PDAI and suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for various credit ratings along with residual maturity issued by FIMMDA is adopted for this purpose; • in case of preference shares where dividend is not received regularly, the price derived on the basis of YTM is discounted in accordance with the RBI guidelines; • in case of bonds and debentures where interest is not received regularly, the valuation is in accordance with prudential norms for provisioning as prescribed by RBI; and • equity shares, for which current quotations are not available or where the shares are not quoted on the stock exchanges, are valued at break-up value (without considering revaluation reserves, if any) which is ascertained from the company’s latest balance sheet (which is not more than one year prior to the date of valuation). In case the latest balance sheet is not available, the shares are valued at Re 1 per company. Investments in subsidiaries/joint ventures are categorized as ‘Held to Maturity’ in accordance with RBI guidelines.

Repurchase and reverse repurchase transactions Repurchase and reverse repurchase transactions are accounted as outright sale and outright purchase respectively. The difference between the clean price of the first leg and clean price of the second leg is recognised as interest income/expense over the period of the transaction. However, depreciation in their value, if any, compared to their original cost, is recognised in the profit and loss account. 4.2 Advances Advances are classified into performing and non-performing advances (NPAs) as per RBI guidelines and are stated net of specific provisions made towards Non Performing Advances. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. Provisions for NPAs (other than

F-56 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million retail advances) are made for sub-standard and doubtful assets at rates as prescribed by RBI. Loss assets and unsecured portion of doubtful assets are provided/written off as per the extant RBI guidelines. NPAs are identified by periodic appraisals of the loan portfolio by management. In the case of retail advances, provisions are made upon reaching specified stages of delinquency (90 days or more of delinquency) under each type of loan, which satisfies the RBI prudential norms on provisioning. For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI, which requires the present value of the interest sacrifice be provided at the time of restructuring. A general provision @ 0.25% to 2.00% is made on the various classes of standard assets as prescribed by RBI.

4.3 Country Risk In addition to the provisions required to be held according to the asset classification status, provisions are held for individual country exposure (other than for home country). The countries are categorised into seven risk categories namely insignificant, low, moderate, high, very high, restricted and off-credit and provisioning made on exposures exceeding 180 days on a graded scale ranging from 0.25% to 100%. For exposures with contractual maturity of less than 180 days, 25% of the normal provision requirement is held. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on such country exposure.

4.4 Securitisation The Bank enters into purchase/sale of corporate and retail loans through direct assignment/Special Purpose Vehicle (SPV). In most cases, post securitisation, the Bank continues to service the loans transferred to the assignee/SPV. The Bank also provides credit enhancement in the form of cash collaterals and/or by subordination of cash flows to Senior Pass Through Certificate (PTC) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies, future servicing etc.) accepted by the Bank, appropriate provision/ disclosure is made at the time of sale in accordance with AS-29-’Provisions, contingent liabilities and contingent assets’. Gain on securitisation transaction is recognised over the period of the underlying securities issued by the SPV. Loss on securitisation is immediately debited to profit and loss account.

4.5 Foreign currency transactions In respect of domestic operations, transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction. Foreign currency assets and liabilities are translated at the balance sheet date at rates notified by Foreign Exchange Dealers Association of India (‘FEDAI’). All profits/losses resulting from year-end revaluations are recognised in the profit and loss account. Financial statements of foreign branches classified as non-integral foreign operations are translated as follows: • Assets and liabilities (both monetary and non-monetary as well as contingent liabilities) are translated at closing rates notified by FEDAI at the year-end. • Income and expenses are translated at the rates prevailing on the date of the transactions. • All resulting exchange differences are accumulated in a separate ‘Foreign Currency Translation Reserve’ till the disposal of the net investments. Outstanding forward exchange contracts (excluding currency swaps undertaken to hedge Foreign Currency Non-Resident (‘FCNR’) deposits which are not revalued) and spot exchange contracts are revalued at year end exchange rates notified by FEDAI. The resulting gains or losses on revaluation are included in the profit and loss account in accordance with RBI/FEDAI guidelines. Premium/discount on currency swaps undertaken to hedge FCNR deposits is recognised as interest income/ expense and is amortised on a straight-line basis over the underlying swap period. Contingent liabilities on account of foreign exchange contracts/options, guarantees, acceptances, endorsements and other obligations denominated in foreign currencies are disclosed at closing rates of exchange notified by FEDAI.

F-57 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

4.6 Derivative transactions Derivative transactions comprise of swaps and options which are disclosed as contingent liabilities. The swaps/options are segregated as trading or hedge transactions. Trading swaps/options are revalued at the balance sheet date with the resulting unrealized gain or loss being recognised in the profit and loss account and correspondingly in other assets or other liabilities respectively. Hedged swaps/options are accounted for on an accrual basis.

4.7 Revenue recognition Interest income is recognised on an accrual basis except interest income on non-performing assets, which is recognised on receipt. Commission income on deferred payment guarantees, is recognised pro-rata over the period of the guarantee. All other fee income is recognised upfront on its becoming due. Dividend is accounted on an accrual basis when the right to receive the dividend is established. Gain/loss on sell down of loans and advances through direct assignment is recognised at the time of sale. Realized gains on investments under HTM category are recognised in the profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines. Losses are recognised in the profit and loss account.

4.8 Fixed assets and depreciation Fixed assets are carried at cost of acquisition less accumulated depreciation less impairment, if any. Cost includes freight, duties, taxes and incidental expenses related to the acquisition and installation of the asset. Capital work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid to acquire fixed assets. Depreciation (including on assets given on operating lease) is provided on the straight-line method from the date of addition. The rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the management’s estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life on a subsequent review is shorter, then depreciation is provided at a higher rate based on management’s estimate of the useful life/remaining useful life. Pursuant to this policy, depreciation has been provided using the following estimated useful lives:

Asset Estimated useful life Owned premises ...... 20years Assets given on operating lease ...... 20years Computer hardware ...... 3years Application software ...... 5years Vehicles ...... 4years EPABX, telephone instruments ...... 8years Mobile phone ...... 2years Locker cabinets/cash safe/strong room door ...... 16years Assets at staff residence ...... 5years All other fixed assets ...... 10years All fixed assets individually costing less than Rs. 5,000 are fully depreciated in the year of installation. Depreciation on assets sold during the year is recognised on a pro-rata basis to the profit and loss account till the date of sale. The carrying amount of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

F-58 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

4.9 Lease transactions Assets given on operating lease are capitalised at cost. Rentals received by the Bank are recognised in the profit and loss account on accrual basis. Lease payments for assets taken on operating lease are recognised as an expense in the profit and loss account on a straight-line basis over the lease term.

4.10 Retirement and other employee benefits Provident Fund Retirement benefit in the form of provident fund is a defined contribution scheme and the contributions are charged to the profit and loss account of the year when the contributions to the fund are due. There are no other obligations other than the contribution payable to the trust. Gratuity The Bank contributes towards gratuity fund (defined benefit retirement plan) administered jointly by the Life Insurance Corporation of India (‘LIC’) and Metlife Insurance Company Limited (‘Metlife’) for eligible employees. Under this scheme, the settlement obligations remain with the Bank, although LIC/Metlife administer the scheme and determines the contribution premium required to be paid by the Bank The plan provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee’s salary and the years of employment with the Bank. Liability with regard to gratuity fund is accrued based on actuarial valuation conducted by an independent actuary using the projected unit credit method as at 31 March each year. Leave Encashment Short term compensated absences are provided for based on estimates. The Bank provides leave encashment benefit (long term), which is a defined benefit scheme based on actuarial valuation as at the balance sheet date conducted by an independent actuary. The actuarial valuation is carried out as per the Projected Unit Credit Method. Superannuation Employees of the Bank are entitled to receive retirement benefits under the Bank’s Superannuation scheme. Superannuation is a defined contribution plan under which the Bank contributes annually a specified sum of 10% of the employee’s eligible annual basic salary to LIC, which undertakes to pay the lumpsum and annuity benefit payments pursuant to the scheme. Superannuation contributions are recognised in the profit and loss account in the period in which they accrue. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.

4.11 Credit Card reward points The Bank estimates the probable redemption of credit card reward points using an actuarial method at balance sheet date by employing an independent actuary. Provision for the said reward points is then made based on the actuarial valuation report as furnished by the said independent actuary.

4.12 Taxation Income tax expense is the aggregate amount of current tax, deferred tax and fringe benefit tax charge. Current year taxes and fringe benefit tax are determined in accordance with the Income-tax Act, 1961. Deferred tax adjustments comprise of changes in the deferred tax assets or liabilities during the period. Deferred tax assets and liabilities are recognised on a prudent basis for the future tax consequences of timing differences arising between the carrying values of assets and liabilities and their respective tax basis, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted prior to the balance sheet date. The impact of changes in the deferred tax assets and liabilities is recognised in the profit and loss account. Deferred tax assets are recognised and reassessed at each reporting date, based upon management’s judgement as to whether realisation is considered as reasonably certain.

4.13 Share Issue Expenses Share issue expenses are adjusted from share premium account.

F-59 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

4.14 Earnings per share The Bank reports basic and diluted earnings per share in accordance with AS 20 — ’Earnings per Share’ issued by the ICAI. Basic earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding for the year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at year end.

4.15 Cash and Cash Equivalents Cash and cash equivalents include cash on hand and in ATM, balances with Reserve Bank of India, balances with other banks and money at call and short notice.

4.16 Employee stock option scheme The 2001 Employee Stock Option Scheme (‘the Scheme’) provides for grant of stock options on equity shares of the Bank to employees and Directors of the Bank. The Scheme is in accordance with the Securities and Exchange Board of India (SEBI) (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Bank follows the intrinsic value method to account for its stock based employee compensation plans as per the Guidance Note on ‘Accounting for Employee Share-based Payments’ issued by the ICAI. Options are granted at an exercise price, which is equal to/less than the fair market price of the underlying equity shares. The excess of such fair market price over the exercise price of the options as at the grant date is recognised as a deferred compensation cost and amortised on a straight-line basis over the vesting period of such options. The fair market price is the latest available closing price, prior to the date of the Board of Directors meeting in which options are granted / shares are issued, on the stock exchange on which the shares of the Bank are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered.

4.17 Provisions, contingent liabilities and contingent assets A provision is recognised when the Bank has a present obligation as a result of past event where it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. A disclosure of contingent liability is made when there is: • a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non occurrence of one or more uncertain future events not within the control of the Bank; or • a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

5 Notes to Accounts 5.1 Share Capital During the year ended 31 March 2008, the Bank raised additional equity capital in the form of 14,132,466 Global Depository Receipts (GDRs) (each GDR representing 1 underlying equity share of Rs. 10/- each), at a price of U.S.$ 15.43 per GDR. The Bank also undertook a Qualified Institutional Placement (QIP) of 28,264,934

F-60 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million shares and a preferential allotment of 30,695,129 shares at a price of Rs. 620/- per share. As a consequence, the paid-up share capital of the Bank has increased by Rs. 731 million and the reserves of the Bank have increased by Rs. 44,140 million after charging of issue related expenses. The funds mobilised from the equity raising (through GDR, QIP and Preferential issue) were utilised for enhancing the capital adequacy ratio and for general corporate purposes.

5.2 Statutory disclosures as per RBI 5.2.1 ‘Provisions and contingencies’ recognised in the profit and loss account include:

For the year ended 31 March 2008 31 March 2007 (Rs. in million) Provision for income tax — Current tax for the year ...... 7,256 4,126 — Deferred tax for the year ...... (1,594) (814) Provision for fringe benefit tax ...... 91 60 5,753 3,372 Provision for wealth tax ...... 2 3 Provision for non performing advances & investments, (including bad debts written off and write backs) ...... 3,440 737 Provision towards standard assets ...... 1,535 1,223 General provision for retail loans ...... — 18 Provision for depreciation in value of investments ...... 65 670 Provision for securitised assets ...... (1) 25 Contingent provision against derivatives ...... 720 — Provision for country risk ...... 35 — Total ...... 11,549 6,048

5.2.2 In terms of its guidelines for implementation of the new capital adequacy framework issued on 27 April 2007, RBI has directed banks with overseas branches to migrate to the revised framework for capital computation (under Basel II) with effect from 31 March 2008. The migration is proposed in a phased manner over a three-year period during which banks are required to compute their capital requirements in terms of both Basel I and Basel II. The minimum capital to be maintained by banks under the Revised Framework is subject to a prudential floor of 100%, 90% and 80% of the capital requirement under Basel I over the years March 2008, 2009 and 2010 respectively. The capital adequacy ratio of the Bank, calculated as per RBI guidelines (Basel I requirement being higher) is set out below:

31 March 2008 31 March 2007 (Rs. in million) Capital adequacy Tier I ...... 88,225 36,362 Tier II ...... 30,828 29,183 Total capital ...... 119,053 65,545 Total risk weighted assets and contingents ...... 867,197 566,434 Capital ratios Tier I ...... 10.17% 6.42% Tier II ...... 3.56% 5.15% CRAR ...... 13.73% 11.57% Amount of Subordinated Debt raised as Tier-II capital (as per details given below) ...... NIL Rs. 3,893 million The Bank has not raised any subordinated debt during the year ended 31 March 2008.

F-61 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

During the year ended 31 March 2008, the Bank redeemed subordinated debt of Rs. 2,455 million, the details of which are set out below:

Date of maturity Period Coupon Amount 28 April 2007 ...... 85months 11.75% Rs. 1,000 million 4 June 2007 ...... 66months 9.80% Rs. 1,120 million 27 June 2007 ...... 63months 9.30% Rs. 335 million During the year ended 31 March 2007, the Bank raised subordinated debt of Rs. 3,893 million, the details of which are set out below: Date of allotment Period Coupon Amount 28 June 2006 ...... 87months 8.95% Rs. 335 million 120 months 9.10% Rs. 1,049 million 30 March 2007 ...... 120months 10.10% Rs. 2,509 million During the year ended 31 March 2007, the Bank redeemed subordinated debt of Rs. 500 million, the details of which are set out below: Date of maturity Period Coupon Amount 28 June 2006 ...... 63months 11.10% Rs. 500 million 5.2.3 During the year ended 31 March 2008, the Bank raised hybrid capital in the form of Upper Tier II bonds qualifying as Tier II capital, the details of which are set out below: Type of Capital Date of allotment Period Coupon Amount Upper Tier II ...... 28June 2007 180 months 7.125% (U.S.$60 million) Rs. 2,407 million During the year ended 31 March 2007, the Bank raised hybrid capital in the form of Perpetual Debt of Rs. 4,140 million qualifying as Tier I capital and Upper Tier II bonds Rs. 9,596 million qualifying as Tier II capital, the details of which are set out below: Type of Capital Date of allotment Period Coupon Amount Upper Tier II ...... 11August 2006 180 months 7.25% (U.S.$150 million) Rs. 6,521 million Perpetual Debt ...... 30September 2006 Perpetual 10.05% Rs. 2,140 million Perpetual Debt ...... 15November 2006 Perpetual 7.167% (U.S.$46 million) Rs. 2,000 million Upper Tier II ...... 24November 2006 180 months 9.35% Rs. 2,000 million Upper Tier II ...... 6February 2007 180 months 9.50% Rs. 1,075 million 5.2.4 The key business ratios and other information is set out below: As at 31 March 2008 31 March 2007 %% Interest income as a percentage to working funds# ...... 8.08 7.42 Non-interest income as a percentage to working funds ...... 2.07 1.68 Operating profit as a percentage to working funds ...... 2.57 2.10 Return on assets (based on average working funds) ...... 1.24 1.10 Business (deposits less inter bank deposits plus advances) per employee** ...... Rs.112million Rs. 102 million Profit per employee** ...... Rs.0.84 million Rs. 0.76 million Net non performing assets as a percentage of net customer assets* ...... 0.36 0.61

# Working funds represent average of total assets as reported to RBI in From X under Section 27 of the Banking Regulation Act, 1949 * Net Customer assets include advances and credit substitutes ** Productivity ratios are based on average employee numbers

F-62 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

5.2.5 Asset Quality i) Net non-performing assets to net advances is set out below: 31 March 2008 31 March 2007 %% Net non performing assets as a percentage of net advances ...... 0.42 0.72 ii) Movement in gross non-performing assets is set out below: 31 March 2008 31 March 2007 Gross Gross (Rs. in million) Opening balance at the beginning of the year ...... 4,187 3,780 Additions during the year ...... 3,842 1,693 Reductions during the year ...... (3,083) (1,286) Closing balance at the end of the year ...... 4,946 4,187

iii) Movement in net non-performing assets is set out below: 31 March 2008 31 March 2007 Net Net (Rs. in million) Opening balance at the beginning of the year ...... 2,663 2,198 Additions during the year ...... 1,358 925 Reductions during the year ...... (1,538) (460) Closing balance at the end of the year ...... 2,483 2,663

iv) Movement in provisions for non performing assets (excluding provisions for standard assets) is set out below: 31 March 2008 31 March 2007 (Rs. in million) Opening balance at the beginning of the year ...... 1,523 1,581 Provisions made during the year ...... 2,484 768 Write-offs/write back of excess provisions ...... (1,544) (826) Closing balance at the end of the year ...... 2,463 1,523

5.2.6 Movement in Floating Provision is set out below: For the year ended 31 March 2008 31 March 2007 (Rs. in million) Opening balance at the beginning of the year ...... 18 250 Provisions made during the year ...... 28 — Draw down made during the year ...... — (232) Closing balance at the end of the year ...... 46 18

Based on the guidelines contained in Reserve Bank of India circular DBOD.No. BP.BC.89/21.04.048/2005-06 dated 22 June 2006 the general provision of Rs. 29 million held as on 31 March 2007 in respect of retail advances for bucketwise provisioning for delinquencies less than 90 days was categorized as floating provision effective 1 April 2007. Consequently, the Bank no longer creates such provisions in respect of retail advances with effect from 1 April 2007. 5.2.7 Provision on Standard Assets 31 March 2008 31 March 2007 (Rs. in million) Provision towards Standard Assets ...... 3,589 2,055

F-63 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

5.2.8 Details of Investments are set out below: i) Value of Investments: 31 March 2008 31 March 2007 (Rs. in million) 1) Gross value of Investments a) In India ...... 331,924 264,276 b) Outside India ...... 6,139 5,619 2) Provision for Depreciation/Non-Performing Investments a) In India ...... 959 923 b) Outside India ...... 53 — 3) Net value of Investments a) In India ...... 330,965 263,353 b) Outside India ...... 6,086 5,619 ii) Movement of provisions held towards depreciation on investments: 31 March 2008 31 March 2007 (Rs. in million) Opening balance ...... 857 187 Add: Provisions made during the year ...... 65 670 Less: Write offs/write back of excess provisions during the year ...... — — Closing balance ...... 922 857

5.2.9 A summary of lending to sensitive sectors is set out below: As at 31 March 2008 31 March 2007 (Rs. in million) A. Exposure to Real Estate Sector 1) Direct Exposure (i) Residential mortgages ...... 77,796 47,635 — of which housing loans upto Rs. 15 lakhs ...... 28,246 22,873 (ii) Commercial real estate ...... 59,140 38,852 (iii) Investments in mortgage backed securities (MBS) and other securitised exposures — a. Residential ...... — — b. Commercial real estate ...... — — 2) Indirect Exposure Fund based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs) ...... 15,084 25,613 Total Exposure to Real Estate Sector ...... 152,020 112,100

F-64 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

As at 31 March 2008 31 March 2007 (Rs. in million) B. Exposure to Capital Market 1. Direct investments made in equity shares, convertible bonds, convertible debentures and units of equity-oriented mutual funds the corpus of which is not exclusively invested in corporate debt . . 4,987 2,812 2. Advances against shares/bonds/debentures or other securities or on clean basis to individuals for investment in shares (including IPOs/ ESOPs), convertible bonds, convertible debentures, and units of equity-oriented mutual funds ...... 641 620 3. Advances for any other purposes where shares or convertible bonds or convertible debentures or units of equity-oriented mutual funds are taken as primary security ...... 1,955 — 4. Advances for any other purposes to the extent secured by the collateral security of shares or convertible bonds or convertible debentures or units of equity-oriented mutual funds i.e. where primary security other than shares/convertible bonds/convertible debentures/units of equity-oriented mutual funds does not fully cover the advances ...... 1,51 — 5. Secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and marketmakers ...... 8,313 3,306 6. Loans sanctioned to corporates against the security of shares/ bonds/debentures or other securities or on clean basis for meeting promoter’s contribution to the equity of new companies in anticipation of raising resources...... — — 7. Bridge loans to companies against expected equity flows/issues . . . — — 8. Underwriting commitments taken up in respect of primary issue of shares or convertible bonds or convertible debentures or units of equity-oriented mutual funds ...... — — 9. Financing to stock brokers for margin trading ...... — — 10. All exposures to Venture Capital Funds (both registered and unregistered) ...... 2,460 2,680 Total exposure to Capital Market (Total of 1 to 10) ...... 18,507 9,417

5.2.10 Details of loan assets subjected to restructuring are given below: 31 March 2008 31 March 2007 Interest Interest Particulars Number Amount Sacrifice Number Amount Sacrifice (Rs. in million) i) Total amount of loan assets subjected to restructuring, rescheduling, renegotiation ...... 712 6,297 58 722 2,170 17 — of which under CDR ...... 4 2,539 — — — — ii) Total amount of Standard assets subjected to restructuring, rescheduling, renegotiation ...... 711 6,237 58 312 1,781 17 — of which under CDR ...... 4 2,539 — — — — iii) The amount of Sub-Standard loan assets subjected to restructuring, rescheduling, renegotiation ...... — — — 189 60 — — of which under CDR ...... — — — — — — iv) The amount of Doubtful assets subjected to restructuring, rescheduling, renegotiation ...... 1 60 — 221 329 — — of which under CDR ...... — — — — — —

F-65 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

5.2.11 Details of restructuring undertaken by the Bank during the year for SME accounts are given below: Particulars 31 March 2008 31 March 2007 (Rs. in million) i) Total amount of assets of SMEs subjected to restructuring ...... 580 625 ii) The amount of standard assets of SMEs subjected to restructuring ...... 520 510 iii) The amount of sub-standard assets of SMEs subjected to restructuring ...... — — iv) The amount of doubtful assets of SMEs subjected to restructuring ...... 60 116 5.2.12 Details of Non-SLR investment portfolio are set out below: i) Issuer composition as at 31 March 2008 of non-SLR investments: Extent of Extent of “below Extent of Extent of Total private investment grade” “unrated” “unlisted” No. Issuer Amount placement securities securities securities (1) (2) (3) (4) (5) (6) (7) (Rs. in million) i. Public Sector Units ...... 20,696 11,775 216 1,000 1,000 ii. Financial Institutions ...... 37,003 25,325 70 — 70 iii. Banks ...... 17,299 12,499 100 — 4,393 iv. Private Corporates ...... 55,215 45,472 4,915 166 3,337 v. Subsidiaries/Joint Ventures ...... 380 380 — — — vi. Others ...... 5682 3,092 — — — vii. Provision held towards depreciation/ non-performing investments ...... (1,012) — — — — Total ...... 135,263 98,543 5,301 1,166 8,800

Amounts reported under columns (4), (5), (6) and (7) above are not mutually exclusive. Issuer composition as at 31 March 2007 of non-SLR investments: Extent of “below Extent of investment Extent of Extent of Total private grade” “unrated” “unlisted” No. Issuer Amount placement securities securities securities (1) (2) (3) (4) (5) (6) (7) (Rs. in million) i. Public Sector Units ...... 13,297 6,605 — — — ii. Financial Institutions ...... 24,141 19,958 70 — 70 iii. Banks ...... 11,456 7,529 50 — 5,564 iv. Private Corporates ...... 53,860 39,543 6,504 179 4,358 v. Subsidiaries/Joint Ventures ...... 100 100 — — — vi. Others ...... 2,733 — — — 55 vii. Provision held towards depreciation/ non-performing investments ...... (912) — — — — Total ...... 104,675 73,735 6,624 179 10,047

Amounts reported under columns (4), (5), (6) and (7) above are not mutually exclusive. ii) Non-performing non SLR investments is set out below: 31 March 2008 31 March 2007 (Rs. in million) Opening balance ...... 81 37 Additions during the year since 1st April ...... 11 44 Reductions during the above period ...... (2) — Closing balance ...... 90 81 Total provisions held ...... 90 67

F-66 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

5.2.13 Details of securities sold/purchased during the year ended 31 March 2008 & 31 March 2007 under repos/reverse repos (excluding LAF transactions): Minimum Maximum Daily Average outstanding outstanding outstanding As at Year ended 31 March 2008 during the year during the year during the year 31 March 2008 (Rs. in million) Securities sold under repos ...... — 1,119 427 — Securities purchased under reverse repos ...... — 7,739 456 5,038 Minimum Maximum Daily Average outstanding outstanding outstanding As at Year ended 31 March 2007 during the year during the year during the year 31 March 2007 (Rs. in million) Securities sold under repos ...... — 2,438 441 — Securities purchased under reverse repos ...... — 13,509 577 13,509 5.2.14 Details of financial assets sold to Securitisation/Reconstruction companies for Asset Reconstruction: 31 March 2008 31 March 2007 (Rs. in million) Number of accounts ...... — — Book Value of loan asset securitised ...... — — Aggregate value (net of provisions) of accounts sold ...... — — Aggregate consideration ...... — — Additional consideration realized in respect of accounts transferred in earlier years ...... — — Aggregate gain/loss over net book value ...... — — 5.2.15 Details of Non-Performing Financial Assets Purchased/Sold : 31 March 2008 31 March 2007 (Rs. in million) Non — Performing Financial Assets Purchased 1. (a) Number of accounts purchased during the year ...... — — (b) Aggregate outstanding ...... — — 2. (a) Of these, number of accounts restructured during the year . . . — — (b) Aggregate outstanding ...... — — Non — Performing Financial Assets Sold 1. Number of accounts sold during the year ...... — — 2. Aggregate outstanding ...... — — 3. Aggregate consideration received ...... — — 5.2.16 Details of securitisation transactions undertaken by the Bank in the year are as follows: 31 March 2008 31 March 2007 (Rs. in million) Number of loan accounts securitised ...... 19 2 Book value of loan assets securitised ...... 32,020 5,472 Sale consideration received for the securitised assets ...... 32,098 5501 Net gain/loss over net book value ...... 78 29 Net gain/loss recognised in profit and loss account ...... 47 20 The information on securitisation activity of the Bank as an originator as on 31 March 2008 and 31 March 2007 is given below: 31 March 2008 31 March 2007 (Rs. in million) Outstanding credit enchancement (cash collateral) ...... 137 155 Outstanding liquidity facility ...... — — Outstanding servicing liability ...... 5 5 Outstanding investment in PTCs ...... 8 15

F-67 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

5.2.17 During the year, the Bank’s credit exposures to single borrower and group borrowers were within the prudential exposure limits prescribed by RBI except in 2 cases viz., UTI Asset Management Company Ltd. and HDFC Ltd., where single borrower limit was exceeded upto an additional exposure of 5% with the approval of the Board of Directors. The details of such cases are set out below: %of Exposure excess Ceiling as Original limit over on Exposure as Exposure Limit original 31 March on 31 March Name of the Borrower Ceiling Sanctioned ceiling 2008 2008 (Rs. in million) HDFC Ltd ...... 9,832 10,318 4.94 16,908 16,202 UTI Asset Management Company Ltd...... 9,832 10,000 1.71 16,908 10,000 5.2.18 Details of Risk Categorywise Country Exposure:

Exposure Provision Exposure Provision (Net) as at Held as at (Net) as at Held as at Risk Category 31 March 2008 31 March 2008 31 March 2007 31 March 2007 (Rs. in million) Insignificant ...... 17,877 — 7,357 — Low ...... 29,151 36 14,918 — Moderate ...... 316 — 723 — High ...... 117 — 26 — Very High ...... 43 — 3 — Restricted ...... — — — — Off-Credit ...... — — — — Total ...... 47,504 36 23,027 —

5.2.19 A maturity pattern of certain items of assets and liabilities at 31 March 2008 & 31 March 2007 is set out below: Over 3 Over 3 29 days and months and Over 6 Over 1 year years and Year ended 2 days to 7 8 days to 14 15 days to 28 upto 3 upto 6 months and and upto 3 upto 5 Over 5 31 March 2008 1 day days days days months months upto 1 year years years years Total (Rs. in million) Deposits ...... 9,461 31,860 16,304 33,016 92,401 108,096 177,756 162,289 7,901 237,178 876,262 Advances ..... 7,456 15,187 5,508 7,130 29,634 27,095 62,185 76,990 89,444 275,982 596,611 Investments .... 5,644 16,923 12,005 28,218 48,848 31,572 49,133 51,762 22,548 70,399 337,051 Borrowings .... — — 1,003 1,605 4,508 7,273 9,666 31,898 18 269 56,240 Foreign Currency Assets ...... 3,316 193 862 707 3,787 7,123 10,121 15,783 17,088 12,695 71,675 Foreign Currency Liabilities . . . 421 2,645 1,175 4,475 15,974 6,657 10,858 26,091 283 622 69,201 The above disclosure has been made based on the revised maturity buckets as specified by RBI in its guidelines on Asset-Liability Management (ALM) system issued during the current year. Previous year’s disclosure is therefore not comparable with the figures of the current year. Over 3 months Over 6 months Over 1 year Over 3 years Year ended 29 days and and upto 6 and upto 1 and upto 3 and upto 5 31 March 2007 1 to 14 days 15 to 28 days upto 3 months months year years years Over 5 years Total (Rs. in million) Deposits ...... 5,3874 19,105 91,664 80,169 93,820 236,160 9,666 3,398 587,856 Advances ...... 14,285 3,590 13,339 18,705 31,019 117,675 65,546 104,606 368,765 Investments ...... 25,322 21,806 56,086 25,018 24,723 74,050 19,823 22,144 268,972 Borrowings ...... 339 — 7,739 10,231 10,533 15,973 7,077 64 51,956 Foreign Currency Assets ...... 2,278 166 4,251 11,626 1,129 12,571 1,355 12,756 46,132 Foreign Currency Liabilities ...... 1,315 229 7,434 5,235 12,869 12,423 16,253 12,116 67,874 Classification of assets and liabilities under the different maturity buckets is based on the same estimates and assumptions as used by the Bank for compiling the return submitted to the RBI. Maturity profile of foreign currency assets and liabilities is excluding forward contracts.

F-68 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

5.2.20 Disclosure in respect of Interest Rate Swaps (IRS), Forward Rate Agreement (FRA) and Cross Currency Swaps (CCS) outstanding at 31 March 2008 is set out below:

As at As at Sr. No. Items 31 March 2008 31 March 2007 (Rs. in million) i) Notional principal of swap agreements ...... 1,559,185 1,174,109 ii) Losses which would be incurred if counterparties failed to fulfil their obligations under the agreements ...... 13,942 11,534 iii) Collateral required by the Bank upon entering into swaps ...... 769 — iv) Concentration of credit risk arising from the swaps ...... Maximum single industry exposure with Banks (previous year with Banks) — Interest Rate Swaps / FRAs ...... 79.73% 75.11% — Cross Currency Swaps ...... 33.84% 58.49% v) Fair value of the swap book — Interest Rate Swaps / FRAs (hedging & trading) ...... 165 (114) — Currency Swaps ...... (19) 300 The nature and terms of the IRS are set out below:

Notional Nature Nos. Principal Benchmark Terms (Rs. in million) Hedging ...... 3 1,250 MIBOR Fixed receivable v/s floating payable Hedging ...... 2 500 MIBOR Fixed payable v/s floating receivable Hedging ...... 5 2,088 INBMK Fixed receivable v/s floating payable Hedging ...... 3 2,407 LIBOR Receive fixed / Pay floating Trading ...... 1,400 659,900 MIBOR Fixed receivable v/s floating payable Trading ...... 1,409 660,750 MIBOR Fixed payable v/s floating receivable Trading ...... 162 42,900 MIFOR Fixed receivable v/s floating payable Trading ...... 155 41,250 MIFOR Fixed payable v/s floating receivable Trading ...... 78 30,961 INBMK Fixed receivable v/s floating payable Trading ...... 69 30,800 INBMK Fixed payable v/s floating receivable Trading ...... 40 1,216 LIBOR Fixed receivable v/s floating payable Trading ...... 28 7,900 LIBOR Fixed payable v/s floating receivable Trading ...... 3 4,926 LIBOR Fixed payable v/s fixed receivable Trading ...... 5 802 LIBOR Receive fixed / Pay floating Trading ...... 5 963 LIBOR Receive Floating / Pay fixed 3,367 1,488,613

The nature and terms of the FRA’s are set out below: Notional Nature Nos. Principal Benchmark Terms (Rs. in million) Trading ...... 49 12,744 LIBOR Fixed receivable v/s floating payable Trading ...... 39 10,604 LIBOR Fixed payable v/s floating receivable 88 23,348

F-69 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

The nature and terms of the CCS are set out below: Notional Nature Nos. Principal Benchmark Terms (Rs. in million) Trading Swaps ...... 22 13,549 LIBOR Fixed payable v/s floating receivable Trading Swaps ...... 15 12,561 LIBOR Fixed receivable v/s floating payable Trading Swaps ...... 1 361 LIBOR/INBMK Floating receivable v/s floating payable Trading Swaps ...... 33 6,072 PRINCIPAL ONLY Fixed receivable Trading Swaps ...... 32 5,872 PRINCIPAL ONLY Fixed payable Trading Swaps ...... 2 1,186 PRINCIPAL ONLY Fixed receivable & fixed payable Trading Swaps ...... 1 602 PRINCIPAL ONLY Paying floating Trading Swaps ...... 1 602 PRINCIPAL ONLY Receive floating Hedging Swaps ...... 5 6,419 LIBOR Fixed payable 112 47,224

Agreements with Banks/Financial Institutions and corporates are under approved credit lines. Details of Exchange Traded Interest Rate Derivatives are set out below: Sr. As at As at No. Particulars 31 March 2008 31 March 2007 (Rs. in million) i) Notional principal amount of exchange traded interest rate derivatives undertaken during the year a) 90 Day Euro Future — March 09 ...... 602 — b) 90 Day Euro Future — June 08 ...... 883 — c) 90 Day Euro Future — June 09 ...... 401 — d) 90 Day Euro Future — September 08 ...... 2,166 — e) 90 Day Euro Future — September 09 ...... 401 — f) 90 Day Euro Future — December 08 ...... 1,966 — g) 3MO Euro EURIBOR — March 08 ...... 10,150 — h) 3MO Euro EURIBOR — September 08 ...... 10,150 — i) 30 Day InterBank — February 08 ...... 7,707 — j) JPN 10Y Bond (TSE) — March 08 ...... 81 — k) EURO-BUND Future — March 08 ...... 8,221 — l) EURO-BUND Future — June 08 ...... 13,829 — m) US 10 years Note — March 08 ...... 602 — n) US 10 years Note — June 08 ...... 674 — o) AUST 10Y Bond Future — March 08 ...... 220 — 58,053 — ii) Notional principal amount of exchange traded interest derivatives outstanding as on 31 March 2008 a) 90 Day Euro Future — March 09 ...... 201 — b) 90 Day Euro Future — June 08 ...... 883 — c) 90 Day Euro Future — June 09 ...... 401 — d) 90 Day Euro Future — September 08 ...... 2,166 — e) 90 Day Euro Future — September 09 ...... 401 — f) 90 Day Euro Future — December 08 ...... 1,966 — 6,018 — iii) Notional principal amount of exchange traded interest rate derivatives outstanding and “not highly effective” a) 90 Day Euro Future — March 09 ...... 201 — b) 90 Day Euro Future — June 08 ...... 883 — c) 90 Day Euro Future — June 09 ...... 401 — d) 90 Day Euro Future — September 08 ...... 2,166 — e) 90 Day Euro Future — September 09 ...... 401 — f) 90 Day Euro Future — December 08 ...... 1,966 — 6,018 —

F-70 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

As at As at Sr. No. Particulars 31 March 2008 31 March 2007 (Rs. in million) iv) Mark-to-market value of exchange traded interest rate derivatives outstanding and “not highly effective” a) 90 Day Euro Future — March 09 ...... — — b) 90 Day Euro Future — June 08 ...... — — c) 90 Day Euro Future — June 09 ...... — — d) 90 Day Euro Future — September 08 ...... (1) — e) 90 Day Euro Future — September 09 ...... (1) — f) 90 Day Euro Future — December 08 ...... — (2) —

The Bank undertakes derivative transactions for proprietary trading/market making, hedging own balance sheet and for client servicing. These transactions expose the Bank primarily to counter-party credit risk, market risk and operational risk. The Bank has adopted the following mechanism for monitoring the portfolio. The Bank has set up appropriate risk limits for the derivative trading positions and the actual positions are monitored on a daily basis. Risk limits are fixed based on the analysis of market data on volatility, business strategy and management experience. A report on the risk assessment of the portfolio is periodically submitted to ALCO and Risk Management Committee of the Board in accordance with the regulatory guidelines and the internal risk policy laid down by the Bank. Value at Risk (VaR), Price Value of a Basis Point (PVBP) and option Greeks are computed and reported to appropriate internal authorities on a daily basis. Simulation of extreme scenarios, based on the significant disturbances observed in the past is carried out on the derivative portfolio. The Bank ensures that the gross PV01 (price value of a basis point) of all non-option rupee derivative contracts are within 0.25% of the net worth of the Bank as on last date of the balance sheet. The Bank has framed a hedging policy for using the derivative products in an efficient manner as a tool for mitigating market risk. During the year the Bank has put in place a policy on “Suitability and customer appropriateness”, duly approved by the Board for selling derivative products to customers. The Bank undertakes hedge transactions that are permitted by RBI from time to time to protect against changes in the fair value of the underlying or variability in the cash flow that is attributable to a particular risk of a recognised asset or liability. The Bank assesses the hedge effectiveness of all the hedge deals at periodical intervals and transactions that do not conform to the hedge criteria are re-designated as trading deals with the approval of the competent authority and accordingly accounted like other trading transactions. 5.2.21 Disclosure on risk exposure in Derivatives As at 31 March 2008 Currency Interest Derivatives rate Sr. No. Particulars CCS Options Derivatives (Rs. in million) 1 Derivatives (Notional Principal Amount) a) For hedging ...... 6,419 — 6,245 b) For trading ...... 40,805 161,001 1,505,716 2 Marked to Market Positions# a) Asset (+) ...... 212 170 — b) Liability (-) ...... — — (43) 3 Credit Exposure ...... 5,922 4,448 13,504 4 Likely impact of one percentage change in interest rate (100*PV01) (as at 31st March 2008) a) on hedging derivatives ...... 21 — 412 b) on trading derivatives ...... 3 — 35 5 Maximum and Minimum of 100*PV01 observed during the year a) on hedging I) Minimum ...... 1 — 302 II) Maximum ...... 21 — 546 b) on Trading I) Minimum ...... 1 — 18 II) Maximum ...... 35 — 189

# Only on Trading derivatives

F-71 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

The notional principal amount of forex contracts classified as hedging outstanding at 31 March 2008 amounted to Rs. 24,986 million (previous year Rs. 43,564 million). The notional principal amount of forex contracts classified as trading outstanding at 31 March 2008 amounted to Rs. 774,545 million (previous year Rs. 616,138 million). The net overnight open position at 31 March 2008 is Rs. 367 million (previous year Rs. 467 million) 5.2.22 No penalty/ strictures have been imposed on the Bank during the year by the Reserve Bank of India. 5.2.23 Disclosure of Customer Complaints a. No. of complaints pending at the beginning of the year ...... 13 b. No. of complaints received during the year ...... 1,720 c. No. of complaints redressed during the year ...... 1,681 d. No. of complaints pending at the end of the year ...... 52 5.2.24 Disclosure of Awards passed by the Banking Ombudsman a. No. of unimplemented awards at the beginning of the year ...... — b. No. of awards passed by the Banking Ombudsman during the year ...... 9 c. No. of awards implemented during the year ...... 9 d. No. of unimplemented awards at the end of the year ...... — 5.2.25 Draw Down from Reserves The Bank has not undertaken any draw down of reserves during the year except towards issue expenses incurred for the equity raising through the GDR, QIP and Preferential issue, which have been adjusted against the share premium account. 5.2.26 Letter of Comfort During the year, the Bank issued a Letter of Comfort (LoC) on behalf of its Singapore branch to the Monetary Authority of Singapore (MAS) confirming to the overseas regulator that it would ensure that its Singapore branch maintained adequate liquidity and sound financial position at all times and that in the event of an actual or contingent obligation, the Bank would meet all future obligations and liabilities of the aforesaid branch. The Bank thus has one outstanding LoC issued by it at the end of 31 March 2008 without any financial value.

5.3 Other disclosures 5.3.1 During the year, the Bank has appropriated Rs. 268 million (previous year Rs. 156 million) to Capital Reserve, being the gain on sale of HTM investments in accordance with RBI guidelines. 5.3.2 Earnings Per Share (‘EPS’) The details of EPS computation is set out below: As at 31 March 2008 31 March 2007 Basic and Diluted earnings for the year (Net profit after tax) (Rs. in million) ...... 10,710 6,590 Basic weighted average no. of shares (in million) ...... 333 280 Add: Equity shares for no consideration arising on grant of stock options under ESOP ...... 9 9 Diluted weighted average no. of shares (in million) ...... 342 289 Basic EPS (Rs.) ...... 32.15 23.50 Diluted EPS (Rs.) ...... 31.31 22.79 Nominal value of shares (Rs.) ...... 10.00 10.00 Dilution of equity is on account of 8,986,371 stock options (previous year 8,653,638). 5.3.3 Employee Stock Options Scheme (‘the Scheme’) In February 2001, pursuant to the approval of the shareholders at the Extraordinary General Meeting, the Bank approved an Employee Stock Option Scheme. Under the Scheme, the Bank is authorised to issue upto 13,000,000 equity shares to eligible employees. Eligible employees are granted an option to purchase shares

F-72 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million subject to vesting conditions. The options vest in a graded manner over 3 years. The options can be exercised within 3 years from the date of the vesting. Further, in June 2004 and June 2006, pursuant to the approval of the shareholders at Annual General Meeting, the Bank approved an ESOP scheme for additional 10,000,000 and 4,800,000 options respectively. 19,887,005 options have been granted under the Scheme till the previous year ended 31 March 2007. On 17 April 2007, the Bank granted 6,729,340 stock options (each option representing entitlement to one equity share of the Bank) to its employees and the Chairman & CEO. These options can be exercised at a price of Rs. 468.90 per option. The Bank has not recorded any compensation cost on options granted during the year ended 31 March 2001, year ended 31 March 2006, year ended 31 March 2007 and the current year ended 31 March 2008 as the exercise price was more than or equal to the quoted market price of underlying equity shares on the grant date. The Bank recorded a compensation cost of Rs 14 million on options granted during the year ended 31 March 2002, Rs. 20 million on options granted during the year ended 31 March 2004, Rs. 242 million on options granted during the year ended 31 March 2005, based on the excess of the quoted market price of the underlying equity shares as of the date of the grant over the exercise price. The compensation cost is amortised over the vesting period. Compensation expense for all the grants under the Scheme for the year ended 31 March 2008 is Rs. 2 million. Stock option activity under the Scheme for the year ended 31 March 2008 is set out below: Weighted average Weighted average Range of exercise exercise remaining Options prices price contractual life outstanding (Rs.) (Rs.) (Years) Outstanding at the beginning of the year ...... 9,872,910 29.68 to 319.00 250.14 3.19 Granted during the year ...... 6,729,340 468.90 468.90 — Forfeited during the year ...... (820,249) 39.77 to 468.90 398.10 — Expired during the year ...... (1,380) 39.77 39.77 — Exercised during the year ...... (2,986,353) 29.68 to 468.90 199.51 — Outstanding at the end of the year ...... 12,794,268 29.68 to 468.90 367.55 3.57 Exercisable at the end of the year ...... 2,082,034 29.68 to 468.90 250.56 2.12 Stock option activity under the Scheme for the year ended 31 March 2007 is set out below: Weighted average Weighted average Range of exercise exercise remaining Options prices price contractual life outstanding (Rs.) (Rs.) (Years) Outstanding at the beginning of the year ...... 8,838,245 29.68 to 232.10 171.39 4.00 Granted during the year ...... 46,95,860 319.00 319.00 — Forfeited during the year ...... (720,744) 29.68 to 319.00 254.96 — Expired during the year ...... (391) 29.68 to 319.00 29.70 — Exercised during the year ...... (2,940,060) 29.68 to 319.00 122.25 — Outstanding at the end of the year ...... 9,872,910 29.68 to 319.00 250.14 3.19 Exercisable at the end of the year ...... 979,768 29.68 to 319.00 200.43 3.90

F-73 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

Fair Value Methodology Applying the fair value based method in Guidance Note on ‘Accounting for Employee Share-based Payments’ the impact on reported net profit and EPS would be as follows: 31 March 31 March 2008 2007 Net Profit (as reported) (Rs. in million) ...... 10,710 6,590 Add: Stock based employee compensation expense included in net income (Rs. in million) ...... 2 27 Less: Stock based employee compensation expense determined under fair value based method (proforma) (Rs. in million) ...... (718) (459) Net Profit (Proforma) (Rs. in million) ...... 9,994 6,158 Earnings per share: Basic (in Rs.) As reported ...... 32.15 23.50 Proforma ...... 30.00 21.95 Earnings per share: Diluted (in Rs.) As reported ...... 31.31 22.79 Proforma ...... 29.21 21.30 The fair value of the options is estimated on the date of the grant using the Black-Scholes options pricing model, with the following assumptions: 31 March 2008 31 March 2007 Dividend yield ...... 1.37% 1.69% Expected life ...... 2-4years 2-4 years Risk free interest rate ...... 8.21% to 8.33% 6.93% to 7.17% Volatility ...... 44.20% to 51.21% 46.91%-52.03% 5.3.4 Dividend paid on shares issued on exercise of stock options The Bank may allot shares between the balance sheet date and record date for the declaration of dividend pursuant to the exercise of any employee stock options. These shares will be eligible for full dividend for the year ended 31 March 2008, if approved at the ensuing Annual General Meeting. Dividend relating to these shares has not been recorded in the current year. Appropriation to proposed dividend during the year ended 31 March 2008 includes dividend of Rs. 5 million paid pursuant to exercise of 1,018,992 employee stock options after the previous year end and record date for declaration of dividend for the year ended 31 March 2007. 5.3.5 Segmental reporting Effective 1st April 2007, the Bank has adopted RBI’s revised guidelines on Segment Reporting issued on 18th April 2007 vide RBI Circular No. DBOD.No. BP.BC. 81 / 21.04.018/ 2006-07 in terms of which the business of the Bank is divided into four segments: Treasury, Corporate/Wholesale Banking, Retail Banking and Other Banking Business. The principal activities of these segments are as under. Segment Principal Activities Treasury Treasury operations include investments in sovereign and corporate debt, equity and mutual funds, trading operations, derivative trading and foreign exchange operations on the proprietary account and for customers and central funding Corporate/Wholesale Banking Includes corporate relationships not included under Retail Banking, corporate advisory services, placements and syndication, management of public issue, project appraisals, capital market related services and cash management services Retail Banking Constitutes lending to individuals/small businesses subject to the orientation, product and granularity criterion and also includes low value individual exposures not exceeding the threshold limit of Rs. 50 million as defined by RBI. Retail Banking activities also include liability products, card services, internet banking, ATM services, depository, financial advisory services and NRI services Other Banking Business All banking transactions not covered under any of the above three segments

F-74 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

Revenues of the treasury services segment primarily consist of fees and gains or losses from trading operations and interest income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses. Revenues from the corporate/wholesale banking lending activity consist of interest and fees earned on loans given to customers falling under this segment, interest earned on cash float and fees arising from transaction services and fees from merchant banking activities such as syndication and debenture trusteeship. Revenues from the retail lending activity are derived from interest earned on loans classified under this segment, fees for banking and advisory services, ATM interchange fees and interest earned from other segments for surplus funds placed with those segments. Expenses of the Corporate/Wholesale Banking and Retail Banking activity primarily comprise interest expense on deposits, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses. Segment revenue includes earnings from external customers plus earnings from funds transferred to the other segments. Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Inter segment revenue represents the transfer price paid/received by the Central Funding Unit (CFU). For this purpose, the funds transfer pricing mechanism presently followed by the Bank, which is based on cost of funds and spreads, has been used. Operating expenses are allocated to the segments based on an activity-based costing methodology. All activities in the Bank are segregated segment-wise and allocated to the respective segment. Geographical segment disclosure is not required to be made since the operations from foreign branches are less than the prescribed norms. Segmental results are set out below : 31 March 2008 Corporate/ Other Wholesale Retail Banking Segment Revenue Treasury Banking Banking Business Total (Rs. in million)

Gross interest income (external customers) ...... 22,563 31,629 15,841 20 70,053 Other income ...... 4,607 6,617 6,846 (115) 17,955 Total income as per profit and loss account ...... 27,170 38,246 22,687 (95) 88,008 Add / (less) inter segment interest income ...... 97,744 9,534 19,915 — 127,193 Total segment income ...... 124,914 47,780 42,602 (95) 215,201 Less: Interest expense (external customers) ...... 32,485 — 11,715 — 44,200 Less: Inter segment interest expenses ...... 86,644 27,050 13,499 — 127,193 Less: Operating expenses ...... 1,346 6,400 13,679 124 21,549 Operating profit ...... 4,439 14,330 3,709 (219) 22,259 Less: Provision for non performing assets/Others ...... 961 2,430 2,403 2 5,796 Segment result ...... 3,478 11,900 1,306 (221) 16,463 Less: Provision for Tax ...... 5,753 Net Profit ...... 10,710 Segment assets ...... 469,311 411,350 197,791 17,326 1,095,778 Segment liabilities ...... 456,891 226,045 318,564 6,593 1,008,093 Net assets ...... 12,420 185,305 (120,773) 10,733 87,685 Fixed assets additions during the year ...... — — — 3,319 3,319 Depreciation and impairment provision on fixed assets during the year ...... — — — 1,581 1,581

F-75 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

31 March 2007 Other Banking Segment Revenue Treasury Operations Unallocated Total (Rs. in million) Gross interest income (external customers) ...... 17,613 27,003 — 44,616 Other income ...... 2,395 7,730 (24) 10,101 Total income as per profit and loss account ...... 20,008 34,733 (24) 54,717 Add / (less) inter segment interest income ...... 67,758 18,412 — 86,170 Total segment income ...... 87,766 53,145 (24) 140,887 Less: Interest expense (external customers) ...... 23,146 6,787 — 29,933 Less: Inter segment interest expenses ...... 60,856 25,314 — 86,170 Less: Operating expenses ...... 775 11,371 — 12,146 Operating profit ...... 2,989 9,673 (24) 12,438 Less: Provision for non performing assets/Others ...... 724 1,952 — 2,676 Segment result ...... 2,265 7,721 (24) 9,962 Less: Provision for Tax ...... — — — 3,372 Net Profit ...... — — — 6,590 Segment assets ...... 343,392 376,671 12,509 732,572 Segment liabilities ...... 370,740 324,052 3,848 698,640 Net assets ...... (27,348) 52,619 8,661 33,932 Fixed assets additions during the year ...... — — 2,122 2,122 Depreciation on fixed assets during the year ...... — — 1,119 1,119 In terms of RBI guidelines on Segment Reporting, disclosure of previous year figures in the first year of reporting under the revised format is not necessary. Segmental results relating to the previous year ended 31 March 2007 have therefore been disclosed based on the reportable segments then in force and are hence not comparable with results for the current year. 5.3.6 Related party disclosure The related parties of the Bank are broadly classified as: a) Promoter The Bank has identified the following entities as its Promoters. • Administrator of the Specified Undertaking of the Unit Trust of India (UTI-1) • Life Insurance Corporation of India (LIC) • General Insurance Corporation and four PSUs — New India Assurance Co. Ltd, National Insurance Co. Ltd., United India Insurance Co. Ltd. and The Oriental Insurance Co. Ltd b) Key Management Personnel Dr. P. J. Nayak (Chairman & CEO) Based on RBI guidelines, details of transactions with Key Management Personnel are not disclosed since there is only one entity / party in this category. c) Subsidiary Companies • Axis Sales Limited (formerly UBL Sales Limited) • Axis Private Equity Limited (formerly UBL Asset Management Company Limited) d) Joint Venture • Bussan Auto Finance India Limited Based on RBI guidelines, details of transactions with Joint Venture Companies are not disclosed since there is only one entity / party in this category.

F-76 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

The details of transactions of the Bank with its related parties during the year ended 31 March 2008 are given below. Items/Related Party Promoter Subsidiaries Total (Rs. in million) Dividend Paid ...... 546 — 546 Interest Paid ...... 1,061 1 1,062 Interest Received ...... 1 2 3 Investment of the Bank ...... — 150 150 Investment of Related Parties in the Bank ...... 19,031 — 19,031 Purchase / Sale of Investments ...... 1,312 — 1,312 Advances granted ...... — 1,850 1,850 Management Contracts ...... — 12 12 Sale of fixed assets ...... — 1 1 Receiving of Services ...... 131 84 975 Rendering of Services ...... 3 3 6 The balances payable to/receivable from the related parties of the Bank as on 31 March 2008 are given below. Items/Related Party Promoter Subsidiaries Total (Rs. in million) Deposits with the Bank ...... 28,777 69 28,846 Placement of Deposits ...... 1 — 1 Advances ...... — 1,852 1,852 Investment of the Bank ...... — 250 250 Investment of Related Parties in the Bank ...... 1,521 — 1,521 Guarantees ...... 390 — 390 Investment in Subordinated Debt/Hybrid Capital of the Bank ...... 2,600 — 2,600 Advance for Rendering of Services ...... — 197 197 Other Receivables ...... — 3 3 The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2008 are given below. Items/Related Party Promoter Subsidiaries Total (Rs. in million) Deposits with the Bank ...... 28,578 192 28,770 Placement of Deposits ...... 11 — 11 Advances ...... 4,330 1,852 6,182 Investment of the Bank ...... — 250 250 Investment of Related Parties in the Bank ...... 3,890 — 3,890 Repo Borrowing ...... 575 — 575 Guarantees ...... 390 — 390 Investment in Subordinated Debt/Hybrid Capital of the Bank ...... 1,543 — 1,543 The details of transactions of the Bank with its related parties during the year ended 31 March 2007 are given below. Key Related Party to Management Key Management Items/Related Party Promoter Personnel Personnel Subsidiaries Total (Rs. in million) Dividend Paid ...... 426 1 — — 427 Interest Paid ...... 312 1 1 1 315 Interest Received ...... 16 — — — 16 Investment of the Bank ...... — — — 100 100 Investment of Related Parties in the Bank ...... — — — — — Purchase / Sale of Investments ...... 1,580 — — — 1,580 Management Contracts ...... — 31 — — 31 Sale of fixed assets ...... — — — — — Receiving of Services ...... 181 — — 110 291 Rendering of Services ...... 3 — — 15 18

F-77 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

The balances payable to/receivable from the related parties of the Bank as on 31 March 2007 are given below.

Related Party to Key Management Key Management Items/Related Party Promoter Personnel Personnel Subsidiaries Total (Rs. in million) Deposits with the Bank ...... 7,608 22 6 6 7,642 Placement of Deposits ...... 1 — — — 1 Advances ...... 1 2 — — 3 Investment of the Bank ...... — — — 100 100 Investment of Related Parties in the Bank .... 1,214 1 — — 1,215 Guarantees ...... 390 — — — 390 Investment in Subordinated Debt of the Bank ...... 3,340 — — — 3,340 Advance for Rendering of Services ...... — — — 10 10 Other Receivables ...... — — — 2 2 The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2007 are given below.

Related Party to Key Management Key Management Items/Related Party Promoter Personnel Personnel Subsidiaries Total (Rs. in million) Deposits with the Bank ...... 7,810 24 6 55 7,895 Placement of Deposits ...... 1 — — — 1 Advances ...... 3,999 3 — 27 4,029 Investment of the Bank ...... — — — 100 100 Investment of Related Parties in the Bank .... 1218 1 — — 1,219 Repo Borrowing ...... 2885 — — — 2,885 Guarantees ...... 390 — — — 390 Investment in Subordinated Debt of the Bank ...... 4310 — — — 4,310 5.3.7 Leases

Disclosure in respect of assets given on operating lease Operating lease comprises leasing of power generation equipments. 31 March 2008 31 March 2007 (Rs. in million) Gross carrying amount at the beginning of the year ...... 765 765 Accumulated depreciation as at the end of the year ...... 276 242 Accumulated impairment losses as at the end of the year ...... 124 — Depreciation for the year ...... 34 34 Impairment losses for the year ...... 124 — Minimum lease payments receivable at the end of the year ...... — 10 Future lease rentals receivable as at the end of the year: — Not later than one year ...... 35 35 — Later than one year and not later than five years ...... 111 125 — Later than five years ...... 21 42 There are no provisions relating to contingent rent. The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements. Disclosure in respect of assets taken on operating lease.

F-78 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

Operating lease comprises leasing of office premises/ATMs, staff quarters, electronic data capturing machines and IT equipment. 31 March 2008 31 March 2007 (Rs. in million) Future lease rentals payable as at the end of the year: — Not later than one year ...... 2,146 1,229 — Later than one year and not later than five years ...... 6,227 3,385 — Later than five years ...... 3,688 1,161 Total of minimum lease payments recognised in the profit and loss account for the year ...... 1,922 712 Total of future minimum sublease payments expected to be received under non-cancellable subleases ...... 14 22 Sub-lease payments recognised in the profit and loss account for the year ...... 3 2 The Bank has sub-leased certain of its properties taken on lease. There are no provisions relating to contingent rent. The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements. There are no undue restrictions or onerous clauses in the agreements. 5.3.8 The major components of deferred tax assets and deferred tax liabilities arising out of timing differences are as under: As at 31 March 2008 31 March 2007 (Rs. in million) Deferred tax assets on account of provisions for doubtful debts ...... 2,056 1,213 Deferred tax assets on account of amortisation of HTM investments ...... 1,014 710 Deferred tax assets on account of provision for retirement benefits ...... 167 48 Deferred tax assets on account of contingent provision against derivatives ...... 244 — Deferred tax liability on account of depreciation and impairment on fixed assets . . (478) (525) Other deferred tax assets ...... 188 151 Net deferred tax asset/(liability) ...... 3,191 1,597

5.3.9 Employee Benefits

Provident Fund The contribution to the employee’s provident fund amounted to Rs. 210 million for the year ended 31 March 2008 (previous year Rs. 138 million).

Superannuation The Bank contributed Rs. 75 million to the employee’s superannuation plan for the year ended 31 March 2008 (previous year Rs. 91 million).

Leave Encashment The Bank charged an amount of Rs. 281 million as liability for leave encashment for the year ended 31 March 2008 (previous year Rs. 83 million).

F-79 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

Gratuity The following tables summarise the components of net benefit expenses recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the Gratuity benefit plan.

Profit and Loss Account Net employee benefit expenses (recognised in employee cost) 31 March 2008 31 March 2007 (Rs. in million) Current Service Cost ...... 34 23 Interest on Defined Benefit Obligation ...... 12 7 Expected Return on Plan Assets ...... (9) (6) Net Actuarial Losses/(Gains) recognised in the year ...... 55 4 Past Service Cost ...... — — Losses/(Gains) on “Curtailments & Settlements” ...... — — Total included in “Employee Benefit Expense” ...... 92 28 Actual Return on Plan Assets ...... 7 8

Balance Sheet Details of provision for gratuity 31 March 2008 31 March 2007 (Rs. in million) Present Value of Funded Obligations ...... 234 143 Fair Value of Plan Assets ...... (178) (119) Present Value of Unfunded Obligations ...... — — Unrecognised Past Service Cost ...... — — Net Liability ...... 56 24 Amounts in Balance Sheet Liabilities ...... 56 24 Assets ...... — — Net Liability ...... 56 24

Changes in the present value of the defined benefit obligation are as follows: 31 March 2008 31 March 2007 (Rs. in million) Change in Defined Benefit Obligation Opening Defined Benefit Obligation ...... 143 116 Current Service Cost ...... 34 22 Interest Cost ...... 12 7 Actuarial Losses/(Gains) ...... 54 6 Liabilities Extinguished on Curtailment ...... — — Liabilities Extinguished on Settlements ...... — — Liabilities Assumed on Acquisition ...... — — Exchange Difference on Foreign Plans ...... — — Benefits Paid ...... (9) (8) Closing Defined Benefit Obligation ...... 234 143

F-80 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

Changes in the fair value of plan assets are as follows: 31 March 2008 31 March 2007 (Rs. in million) Change in the Fair Value of Assets Opening Fair Value of Plan Assets ...... 119 74 Expected Return on Plan Assets ...... 9 6 Actuarial Gains/(Losses) ...... (2) 2 Assets Distributed on Settlements ...... — — Contributions by Employer ...... 60 45 Assets Acquired due to Acquisition ...... — — Exchange Difference on Foreign Plans ...... — — Benefits Paid ...... (9) (8) Closing Fair Value of Plan Assets ...... 177 119

31 March 2008 31 March 2007 The major categories of plan assets as a percentage of fair value of total plan assets — Insurer Managed Funds ...... 100.00% 100.00% 31 March 2008 31 March 2007 Principal actuarial assumptions at the balance sheet date: Discount Rate ...... 7.55% p.a. 8.50 % p.a. Expected rate of Return on Plan Assets ...... 7.50% p.a. 7.50 % p.a. Salary Escalation Rate ...... 6.00% p.a. 6.00 % p.a. Employee Turnover — 21 to 44 (age in years) ...... 10.00% 10.00% — 44 to 64 (age in years) ...... 1.00% 1.00% The estimates of future salary increases considered in actuarial valuation take account of inflation, seniority, promotion and other relevant factors. The expected rate of return on plan assets is based on the average long-term rate of return expected on investments of the Fund during the estimated term of the obligations. As the contribution expected to be paid to the plan during the annual period beginning after the balance sheet date is based on various internal/external factors, a best estimate of the contribution is not determinable. 5.3.10 Provisions and contingencies a. Movement in provision for frauds included under other liabilities is set out below: 31 March 2008 31 March 2007 (Rs. in million) Opening balance at the beginning of the year ...... 17 10 Additions during the year ...... 35 8 Reductions on account of payments during the year ...... (2) — Reductions on account of reversals during the year ...... — (1) Closing balance at the end of the year ...... 50 17

b. Movement in provision for credit enhancements on securitised assets is set out below: 31 March 2008 31 March 2007 (Rs. in million) Opening balance at the beginning of the year ...... 32 7 Additions during the year ...... — 25 Reductions during the year ...... (1) — Closing balance at the end of the year ...... 31 32

F-81 Notes to financial statements for the year ended 31 March 2008 (Continued) Indian Rupees Million

c. Movement in provision for credit card reward points is set out below: 31 March 2008 31 March 2007 (Rs. in million) Opening provision at the beginning of the year ...... 2 — Provision made during the year ...... 59 2 Reductions during the year ...... (2) — Closing provision at the end of the year ...... 59 2

5.3.11 Description of contingent liabilities: a) Claims against the Bank not acknowledged as debts These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in progress. These also include demands raised by income tax and other statutory authorities and disputed by the Bank. b) Liability on account of forward exchange and derivative contracts The Bank enters into foreign exchange contracts, currency options/swaps, interest rate futures and forward rate agreements on its own account and for customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by way of interest/principal in two currencies, based on ruling spot rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. Interest Rate Futures are standardized, exchange traded contracts that represent a pledge to undertake a certain interest rate transaction at a specified price, on a specified future date. Forward Rate Agreements are agreements to pay or receive a certain sum based on a differential interest rate on a notional amount for an agreed period. A foreign currency option is an agreement between two parties in which one grants to the other the right to buy or sell a specified amount of currency at a specific price within a specified time period or at a specified future time. c) Guarantees given on behalf of constituents As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfil its financial or performance obligations. d) Acceptances, endorsements and other obligations These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank’s customers that are accepted or endorsed by the Bank. e) Other items Other items represent outstanding amount of bills rediscounted by the Bank, estimated amount of contracts remaining to be executed on capital account and commitments towards underwriting and investment in equity through bids under Initial Public Offering (IPO) of corporates as at the year end. 5.3.12 Previous year figures have been regrouped and reclassified, where necessary to conform to current year’s presentation.

F-82 Auditors’ Report

To The members of Axis Bank Limited 1. We have audited the attached balance sheet of Axis Bank Limited (‘the Bank) as at 31 March 2009 and also the profit and loss account and cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. The balance sheet and profit and loss account are drawn up in conformity with Forms A and B (revised) of the Third Schedule to the Banking Regulation Act, 1949, read with Section 211 of the Companies Act, 1956. 4. We report that: a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit and have found them to be satisfactory; b) In our opinion, the transactions of the Bank which have come to our notice have been within its powers; c) In our opinion, proper books of account as required by law have been kept by the Bank so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the Bank’s branches; d) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account; e) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, insofar as they apply to banks; f) On the basis of written representations received from the directors, as on 31 March 2009, and taken on record by the Board of Directors, we report that none of the directors is disqualified from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956; g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required for banking companies, and give a true and fair view in conformity with the accounting principles generally accepted in India; i. in case of the balance sheet, of the state of the affairs of the Bank as at 31 March 2009; ii. in case of the profit and loss account, of the profit for the year ended on that date; and iii. in case of cash flow statement, of the cash flows for the year ended on that date.

For S.R. Batliboi & Co. Chartered Accountants

per Viren H. Mehta Partner Membership No.: 048749

Place: Mumbai Date: 20 April 2009

F-83 Balance Sheet as of 31 March 2009

Schedule As of As of No. 31-03-2009 31-03-2008 Rs. Rs. Figures in millions CAPITAL AND LIABILITIES Capital ...... 1 3,590 3,577 Reserves & Surplus ...... 2 98,546 84,108 Employees’ Stock Options Outstanding (Net) ...... 17(4.16) 12 22 Deposits ...... 3 1,173,741 876,262 Borrowings ...... 4 101,855 56,240 Other liabilities and provisions ...... 5 99,476 75,569 TOTAL ...... 1,477,220 1,095,778 ASSETS Cash and Balances with Reserve Bank of India ...... 6 94,192 73,057 Balance with banks and money at call and short notice ...... 7 55,977 51,986 Investments ...... 8 463,303 337,051 Advances ...... 9 815,568 596,611 Fixed Assets ...... 10 10,729 9,228 Other Assets ...... 11 37,451 27,845 TOTAL ...... 1,477,220 1,095,778 Contingent liabilities ...... 12 2,092,603 2,588,956 Bills for collection ...... 139,573 83,234 Significant Accounting Policies and Notes to accounts ...... 17

Schedules referred to above form an integral part of the Balance Sheet

F-84 Profit & Loss Account for the year ended 31 March 2009

Schedule Year ended on No. 31-03-2009 31-03-2008 Rs. Rs. Figures in millions except EPS data I INCOME Interest earned ...... 13 108,355 70,053 Other income ...... 14 28,969 17,955 TOTAL ...... 137,324 88,008 II EXPENDITURE Interest expended ...... 15 71,493 44,200 Operating expenses ...... 16 28,582 21,549 Provisions and contingencies ...... 17(5.1.1) 19,095 11,549 TOTAL ...... 119,170 77,298 III NET PROFIT FOR THE YEAR ...... (I—II) 18,154 10,710 Balance in Profit & Loss account brought Forward from previous year ...... 15,539 10,291 IV AMOUNT AVAILABLE FOR APPROPRIATION ...... 33,693 21,001 V APPROPRIATIONS : Transfer to Statutory Reserve ...... 4,539 2,678 Transfer to Capital Reserve ...... 17(5.2.1) 1,467 268 Transfer to Investment Reserve ...... 1 — Proposed dividend (includes tax on dividend) ...... 17(5.2.4) 4,205 2,516 Balance in Profit & Loss account carried forward ...... 23,481 15,539 TOTAL ...... 33,693 21,001 VI EARNINGS PER EQUITY SHARE ...... 17(5.2.2) (Face value Rs 10/- per share) Basic ...... 50.61 32.15 Diluted ...... 50.27 31.31 Significant Accounting Policies and Notes to accounts ...... 17

Schedules referred to above form an integral part of the Profit and Loss Account

F-85 Cash Flow Statement for the year ended 31 March 2009

Year ended 31-03-2009 31-03-2008 Rs. Rs. Figures in millions Cash flow from operating activities Net profit before taxes ...... 27,852 16,463 Adjustments for: Depreciation & impairment provision on fixed assets ...... 1,887 1,581 Depreciation on investments ...... 1,078 65 Amortisation of premium on Held to Maturity investments ...... 928 977 Provision for Non Performing Advances/Investments (including bad debts) ...... 7,322 3,227 General Provision on securitised assets ...... (7) (1) Provision on Standard assets ...... 1,055 1,535 Provision for loss in present value for agricultural assets ...... 7 — Provision for wealth tax ...... 3 2 Loss on sale of fixed assets ...... 82 152 Provision for country risk ...... 4 35 Contingent Provision against derivatives ...... (720) 720 Provision for restructured assets ...... 655 213 Amortisation of deferred employee compensation ...... (3) 2 40,143 24,971 Adjustments for: (Increase)/Decrease in investments ...... (35,356) (26,351) (Increase)/Decrease in advances ...... (225,885) (231,262) Increase/(Decrease) in borrowings ...... 45,614 4,284 Increase/(Decrease) in deposits ...... 297,479 288,406 (Increase)/Decrease in other assets ...... (8,263) (7,918) Increase/(Decrease) in other liabilities & provisions ...... 2,829 14,235 Direct taxes paid ...... (11,045) (6,761) Net cash flow from operating activities ...... 105,516 59,604 Cash flow from investing activities Purchase of fixed assets ...... (3,867) (4,356) (Increase)/Decrease in Held to Maturity Investments ...... (93,951) (42,795) Proceeds from sale of fixed assets ...... 398 126 Net cash used in investing activities ...... (97,420) (47,025) Cash flow from financing activities Proceeds from issue of Subordinated debt, Perpetual Debt & Upper Tier II instruments (net of repayment) ...... 19,051 (721) Proceeds from issue of Share capital ...... 13 761 Proceeds from share premium (net of share issue expenses) ...... 376 44,706 Payment of Dividend ...... (2,516) (1,488) Net cash generated from financing activities ...... 16,924 43,258 Effect of exchange fluctuation translation reserve ...... 107 22 Net increase in cash and cash equivalents ...... 25,127 55,859 Cash and cash equivalents as at 1 April 2008 ...... 125,042 69,183 Cash and cash equivalents as at 31 March 2009 ...... 150,169 125,042

Cash and cash equivalents comprise of cash on hand & in ATM, balance with RBI, balances with banks and money at call & short notice (refer schedule 6 and 7 of the Balance Sheet)

F-86 SCHEDULE 1 — CAPITAL As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in millions Authorised Capital* ...... 5,000 5,000 Issued, Subscribed and Paid-up capital#@ ...... 3,590 3,577

* 500,000,000 and 500,000,000 equity shares of Rs. 10 each as of 31 March 2009 and 31 March 2008, respectively. # 359,005,118 and 357,709,669 equity shares of Rs. 10 each fully paid up as of 31 March 2009 and 31 March 2008 respectively. @ includes 27,847,621 and 13,033,458 GDRs representing 27,847,621 and 13,033,458 equity shares as of 31 March 2009 and 31 March 2008 respectively.

SCHEDULE 2 — RESERVES AND SURPLUS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in millions I. Statutory Reserve Opening Balance ...... 8,524 5,846 Additions during the year ...... 4,539 2,678 13,063 8,524 II. Share Premium Account Opening Balance ...... 58,732 13,956 Additions during the year ...... 383 45,248 Less: Share issue expenses ...... — (472) 59,115 58,732 III. Investment Reserve Account Opening Balance ...... — — Additions during the year ...... 1 — Less: Transfer to Profit and Loss account ...... — — 1— IV. General Reserve Opening Balance ...... 143 143 Additions during the year ...... — — 143 143 V. Capital Reserve Opening Balance ...... 1,152 884 Additions during the year ...... 1,467 268 2,619 1,152 VI. Foreign Currency Translation Reserve Opening Balance ...... 18 (4) Additions during the year [(refer 17(4.5)] ...... 106 22 124 18 VII. Balance in Profit & Loss Account 23,481 15,539 TOTAL ...... 98,546 84,108

F-87 SCHEDULE 3 — DEPOSITS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in millions A. I. Demand Deposits (i) From banks ...... 13,316 8,957 (ii) From others ...... 234,900 191,489 II. Savings Bank Deposits ...... 258,221 199,824 III. Term Deposits (i) From banks ...... 55,642 36,842 (ii) From others ...... 611,662 439,150 TOTAL ...... 1,173,741 876,262 B. I. Deposits of branches in India ...... 1,149,494 863,916 II. Deposits of branches outside India ...... 24,247 12,346 TOTAL ...... 1,173,741 876,262

SCHEDULE 4 — BORROWINGS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in millions I. Borrowings in India (i) Reserve Bank of India ...... 10,795 — (ii) Other Banks ...... 3,000 — (iii) Other institutions & agencies ...... 16,322 5,467 II. Borrowings outside India ...... 71,738 50,773 TOTAL ...... 101,855 56,240 Secured borrowing included inI&IIabove ...... — —

F-88 SCHEDULE 5 — OTHER LIABILITIES AND PROVISIONS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in millions I. Bills payable ...... 19,368 22,749 II. Inter — office adjustments (net) ...... — — III. Interest accrued ...... 2,386 1,778 IV. Proposed dividend (includes tax on dividend) ...... 4,200 2,511 V. Subordinated Debt# ...... 35,163 18,824 VI Perpetual Debt and Upper Tier instruments* ...... 18,181 15,469 VII. Contingent Provision against Standard Assets ...... 4,644 3,589 VIII. Others (including provisions)@ ...... 15,534 10,649 TOTAL ...... 99,476 75,569

# represents Subordinated Debt of 4,540 bonds and 5,862 bonds of Rs. 0.5 million each as of 31 March 2009 and 31 March 2008 respectively and 32,893 bonds and 15,893 bonds of Rs. 1 million each as of 31 March 2009 and 31 March 2008 respectively, in the nature of Non Convertible Debentures. (Also refer 17(5.1.2)) * represents Perpetual Debt of Rs. 4,473 million and Rs.3,985 million as of 31 March 2009 and 31 March 2008 respectively and Rs. 13,708 million and Rs. 11,484 million of Upper Tier II instruments as of 31 March 2009 and 31 March 2008 respectively. (Also refer 17(5.1.3)) @ includes contingent provision against derivatives of Rs. Nil million and Rs.720 million as of 31 March 2009 and 31 March 2008 respectively.

SCHEDULE 6 — CASH AND BALANCES WITH RESERVE BANK OF INDIA As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in millions I. Cash in hand & in ATM (including foreign currency notes) ...... 15,415 15,203 II. Balances with Reserve Bank of India: (i) in Current Account ...... 78,777 57,854 (ii) in Other Accounts ...... — — TOTAL ...... 94,192 73,057

F-89 SCHEDULE 7 — BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in millions I. In India (i) Balance with Banks (a) in Current Accounts ...... 5,406 10,461 (b) in Other Deposit Accounts ...... 38,764 31,795 (ii) Money at Call and Short Notice (a) With banks ...... — — (b) With other institutions ...... — — TOTAL ...... 44,170 42,256 II. Outside India (i) in Current Accounts ...... 8,529 3,846 (ii) in Other Deposit Accounts ...... 1,369 1,204 (iii) Money at Call & Short Notice ...... 1,909 4,680 TOTAL ...... 11,807 9,730 GRAND TOTAL (I+II) ...... 55,977 51,986

F-90 SCHEDULE 8 — INVESTMENTS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in millions I. Investments in India in — (i) Government Securities##**...... 277,272 201,788 (ii) Other approved securities ...... — — (iii) Shares ...... 5,851 5,856 (iv) Debentures and Bonds$ ...... 140,770 108,212 (v) Investments in Subsidairies/ Joint ventures ...... 976 380 (vi) Others@ ...... 31,935 15,688 (Mutual Fund units, CD / CP , NABARD Deposits, PTC etc.) Gross Investments in India ...... 456,804 331,924 Less: Depreciation in the value of investments* ...... (1,387) (959) Net investments in India ...... 455,417 330,965 II. Investments outside India (i) Government Securities (including local authorities) ...... — — (ii) Subsidiaries and / or joint ventures abroad ...... — — (iii) Others ...... 8,572 6,138 Gross Investments outside India ...... 8,572 6,138 Less : Depreciation in the value of investments ...... (686) (52) Net investments outside India ...... 7,886 6,086 GRAND TOTAL (I + II) ...... 463,303 337,051

@ Includes deposits with NABARD Rs. 19,799 and Rs. 10,007 million as of 31 March 2009 and 31 March 2008 respectively and PTCs Rs. 9,440 million and Rs. 5,307 million as of 31 March 2009 and 31 March 2008 respectively. ## Includes securities costing Rs. 68,400 million and Rs. 38,718 million as of 31 March 2009 and 31 March 2008 respectively pledged for availment of fund transfer facility, clearing facility and margin requirement. ** Includes Repo lending under Liquidity Adjustment Facility of RBI Rs. Nil million and Rs. 5,308 million as of 31 March 2009 and 31 March 2008 respectively and net of Repo borrowing of Rs. 8,410 million and Rs. Nil million as of 31 March 2009 and 31 March 2008 respectively in line with RBI requirements. $ Includes securities costing Rs. Nil million and Rs. 1,751 million as of 31 March 2009 and 31 March 2008 respectively pledged for margin requirement. * Includes provision for Non Performing Investments of Rs. 73 million and Rs. 90 million as of 31 March 2009 and 31 March 2008 respectively.

F-91 SCHEDULE 9 — ADVANCES As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in millions A. (i) Bills purchased and discounted ...... 24,653 20,236 (ii) Cash credits, overdrafts and loans repayable on demand ...... 213,671 164,432 (iii) Term loans ...... 577,244 411,943 TOTAL ...... 815,568 596,611 B. (i) Secured by tangible assets@ ...... 696,011 482,473 (ii) Covered by Bank/Government Guarantees&& ...... 9,929 17,699 (iii) Unsecured ...... 109,628 96,439 TOTAL ...... 815,568 596,611 C. I. Advances in India (i) Priority Sectors ...... 229,491 165,723 (ii) Public Sector ...... 1,582 62 (iii) Banks ...... 185 276 (iv) Others ...... 482,648 376,741 TOTAL ...... 713,906 542,802 II. Advances Outside India (i) Due from banks ...... 683 — (ii) Due from others — ...... (a) Bills purchased and discounted ...... 3,802 2,151 (b) Syndicate loans ...... 30,906 20,477 (c) Others ...... 66,271 31,181 TOTAL ...... 101,662 53,809 GRAND TOTAL (CI+CII) ...... 815,568 596,611

@ Includes advances against book debts && Includes advances against L/Cs issued by Banks. Advances are net of floating provision, which has been adjusted based on management estimate.

F-92 SCHEDULE 10 — FIXED ASSETS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in millions I. Premises At cost at the beginning of the year ...... 500 337 Additions during the year ...... 391 225 Deductions during the year ...... — (62) Depreciation to date ...... (117) (86) TOTAL ...... 774 414 II. Other fixed assets (including Furniture & Fixtures) At cost at the beginning of the year ...... 12,582 9,887 Additions during the year ...... 4,186 3,095 Deductions during the year ...... (241) (400) Depreciation to date ...... (7,147) (5,417) TOTAL ...... 9,380 7,165 III. Assets on Lease At cost at the beginning of the year ...... 765 765 Additions during the year ...... — — Deductions during the year ...... (765) — Depreciation to date ...... — (276) Provision for Impairment ...... — (124) TOTAL ...... — 365 10,154 7,944 IV. CAPITAL WORK-IN-PROGRESS (including Capital Advances) ...... 575 1,284 GRAND TOTAL (I+II+III+IV) ...... 10,729 9,228

F-93 SCHEDULE 11 — OTHER ASSETS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in millions I Inter-office adjustments (net) ...... — — II Interest Accrued ...... 13,219 9,079 III Tax paid in advance / tax deducted at source (net of provisions) ...... 420 448 IV Stationery and stamps ...... 9 9 V Non banking assets acquired in satisfaction of claims ...... — — VI Others# ...... 23,803 18,309 TOTAL ...... 37,451 27,845

# Includes deferred tax assets Rs. 4,561 million and Rs. 3,191 million as of 31 March 2009 and 31 March 2008 respectively.

SCHEDULE 12 — CONTINGENT LIABILITIES As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in millions I. Claims against the bank not acknowledged as debts ...... 1,650 2,548 II. Liability for partly paid investments ...... — — III. Liability on account of outstanding forward exchange and derivative contracts a) Forward Contracts ...... 829,419 643,205 b) Interest Rate Swaps, Currency Swaps, Forward Rate Agreement & Interest Rate Futures ...... 804,211 1,565,203 c) Foreign Currency Options ...... 84,621 161,001 TOTAL ...... 1,718,251 2,369,409 IV. Guarantees given on behalf of constituents In India ...... 193,529 117,963 Outside India ...... 7,281 1,756 V. Acceptances, endorsements and other obligations ...... 159,487 82,466 VI. Other items for which the bank is contingently liable ...... 12,405 14,814 TOTAL ...... 2,092,603 2,588,956

F-94 SCHEDULE 13 — INTEREST EARNED Year ended 31-03-2009 31-03-2008 Rs. Rs. Figures in millions I. Interest/discount on advances/bills ...... 74,659 47,457 II. Income on investments ...... 30,515 21,023 III. Interest on balances with Reserve Bank of India and other inter-bank funds ...... 2,102 1,076 IV. Others ...... 1,079 497 TOTAL ...... 108,355 70,053

SCHEDULE 14 — OTHER INCOME Year ended 31-03-2009 31-03-2008 Rs. Rs. Figures in millions I. Commission, exchange and brokerage ...... 21,733 13,207 II. Profit/(Loss) on sale of Investments/Derivative transaction (net) ...... 2,884 2,202 III. Profit on exchange transactions (net) ...... 3,595 2,075 IV. Profit/(Loss) on sale of fixed assets (net) ...... (82) (152) V. Income earned by way of dividends etc. from Subsidiaries/companies and/or joint venture abroad/in India ...... — — VI. Lease rentals ...... 21 35 VII. Miscellaneous Income# ...... 818 588 TOTAL ...... 28,969 17,955

# including recoveries on account of advances written off in earlier years Rs. 630 million and Rs. 449 million for the year ended 31 March 2009 and 31 March 2008 respectively and profit on account of portfolio sell downs/securitisation of Rs. 168 million and Rs. 91 million for the year ended 31 March 2009 & 31 March 2008 respectively.

F-95 SCHEDULE 15 — INTEREST EXPENDED Year ended 31-03-2009 31-03-2008 Rs. Rs. Figures in millions I. Interest on deposits ...... 62,089 37,425 II. Interest on Reserve Bank of India/Inter-bank borrowings ...... 2,853 1,763 III. Others@ ...... 6,551 5,012 TOTAL ...... 71,493 44,200

@ including interest on repos and subordinated debt

SCHEDULE 16 — OPERATING EXPENSES Year ended 31-03-2009 31-03-2008 Rs. Rs. Figures in millions I. Payments to and provisions for employees ...... 9,977 6,702 II. Rent, taxes and lighting ...... 3,703 2,529 III. Printing and stationery ...... 752 540 IV. Advertisement and publicity ...... 463 744 V. Depreciation on bank’s property (including impairment provision) ...... 1,887 1,581 VI. Directors’ fees, allowance and expenses ...... 7 7 VII. Auditor’s fees and expenses ...... 9 7 VIII. Law Charges ...... 107 52 IX. Postage, Telegrams, Telephones, etc...... 1,502 1,012 X. Repairs and maintenance ...... 2,235 1,896 XI. Insurance ...... 1,137 767 XII. Other Expenditure ...... 6,803 5,712 TOTAL ...... 28,582 21,549

F-96 Notes to the financial statements for the year ended 31 March 2009 Indian Rupees Million

FISCAL 2008-09 1 Background Axis Bank Limited (‘the Bank’) was incorporated in 1993 and provides a complete suite of corporate and retail banking products.

2 Basis of preparation The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting, unless otherwise stated, and comply with generally accepted accounting principles, statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India (‘RBI’) from time to time and Notified accounting standard by Companies (Accounting Standards) Rules, 2006 to the extent applicable and current practices prevailing within the banking industry in India.

3 Use of estimates The preparation of the financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates are recognised prospectively in the current and future periods.

4 Significant accounting policies 4.1 Investments Classification In accordance with the RBI guidelines, investments are classified at the date of purchase as: • Held for Trading (‘HFT’); • Available for Sale (‘AFS’); and • Held to Maturity (‘HTM’). Investments that are held principally for resale within a short period are classified as HFT securities. As per RBI guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date. Investments that the Bank intends to hold till maturity are classified under HTM category. Investments not exceeding 25% of total investments, which the Bank intends to hold till maturity, are classified as HTM securities. As permitted by RBI, the Bank may exceed the limit of 25% of total investments provided the excess comprises only of those securities which are eligible for complying with the Statutory Liquidity Ratio (‘SLR’) i.e. SLR securities and the total SLR securities held in HTM category are not more than 25% of its demand and time liabilities as on the effective date. The effective date means the last Friday of the second preceding fortnight for computation of the aforesaid limit. In computing the investment ceiling for HTM portfolio for the aforesaid purpose, debentures and bonds, which are in the nature of advances are excluded. All other investments are classified as AFS securities. However, for disclosure in the balance sheet, investments in India are classified under six categories — Government securities, Other approved securities, Shares, Debentures and Bonds, Investment in Subsidiaries/ Joint Ventures and Others. Investments made outside India are classified under three categories — Government Securities, Subsidiaries and/or Joint Ventures abroad and Others.

Transfer of security between categories Transfer of security between categories of investments is accounted as per RBI guidelines.

F-97 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

Valuation Investments classified under the HTM category are carried at acquisition cost. Any premium on acquisition over face value is amortised on a constant yield to maturity basis over the remaining period to maturity. Investments classified under the AFS and HFT category are marked to market. The market/fair value for the purpose of periodical valuation of quoted investments included in the ‘Available for Sale’ and ‘Held for Trading’ categories is the market price of the scrip as available from the trades/quotes on the stock exchanges, SGL account transactions, price list of RBI or prices declared by Primary Dealers Association of India jointly with Fixed Income Money Market and Derivatives Association, periodically. Net depreciation, if any, within each category of investments is recognised in the profit and loss account. The net appreciation if any, under each category is ignored, except to the extent of depreciation previously provided. The book value of individual securities is not changed consequent to the periodic valuation of investments. Treasury Bills, Commercial Paper and Certificate of Deposits being discounted instruments, are valued at carrying cost. Units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund. Market value of investments where current quotations are not available, is determined as per the norms prescribed by the RBI as under: • market value of unquoted Government securities is derived based on the Prices/Yield to Maturity (‘YTM’) rate for Government securities of equivalent maturity as notified by Fixed Income Money Market and Derivatives Association of India (‘FIMMDA’) jointly with the Primary Dealers Association of India (‘PDAI’) at periodic intervals; • in case of Central Government Securities, which do not qualify for SLR requirement, the market price is derived by adding the appropriate mark up to the Base Yield Curve of Central Government Securities as notified by FIMMDA; • market value of unquoted State Government securities is derived by applying the YTM method by adding the appropriate mark up above the yields of the Central Government Securities of equivalent maturity notified by the FIMMDA/PDAI at periodic intervals; • in case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly, the market price is derived based on the YTM for Government securities as notified by FIMMDA/PDAI and suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for various credit ratings along with residual maturity issued by FIMMDA is adopted for this purpose; • in case of preference shares where dividend is not received regularly, the price derived on the basis of YTM is discounted in accordance with the RBI guidelines; • in case of bonds and debentures where interest is not received regularly, the valuation is in accordance with prudential norms for provisioning as prescribed by RBI; and • equity shares, for which current quotations are not available or where the shares are not quoted on the stock exchanges, are valued at break-up value (without considering revaluation reserves, if any) which is ascertained from the company’s latest balance sheet (which is not more than one year prior to the date of valuation). In case the latest balance sheet is not available, the shares are valued at Re 1 per company. Investments in subsidiaries/joint ventures are categorised as HTM in accordance with RBI guidelines.

Repurchase and reverse repurchase transactions Repurchase and reverse repurchase transactions are accounted as outright sale and outright purchase respectively. The difference between the clean price of the first leg and clean price of the second leg is recognised as interest income/expense over the period of the transaction. However, depreciation in their value, if any, compared to their original cost, is recognised in the profit and loss account.

4.2 Advances Advances are classified into performing and non-performing advances (‘NPAs’) as per RBI guidelines and are stated net of specific provisions made towards NPAs. Further, NPAs are classified into sub-standard, doubtful

F-98 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million and loss assets based on the criteria stipulated by RBI. Provisions for NPAs are made for sub-standard and doubtful assets at rates as prescribed by RBI with the exception for schematic retail advances, for which provisions are made in terms of a bucket-wise policy upon reaching specified stages of delinquency (90 days or more of delinquency) under each type of loan, which satisfies the RBI prudential norms on provisioning. Loss assets and unsecured portion of doubtful assets are provided/written off as per the extant RBI guidelines. NPAs are identified by periodic appraisals of the loan portfolio by management. For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI, which requires the diminution in the fair value of the assets be provided at the time of restructuring. A general provision @ 0.25% in case of direct advances to agricultural and SME sectors and 0.40% for all other advances is made as prescribed by RBI through its circular no. DBOD.BP.BC.83/21.01.002/2008-09 effective from 15 November 2008, against provision ranging between 0.25% to 2.00% as prescribed hitherto. However, the excess provision held as of 14 November 2008, is not reversed in terms of RBI guidelines.

4.3 Country risk In addition to the provisions required to be held according to the asset classification status, provisions are held for individual country exposure (other than for home country). The countries are categorised into seven risk categories namely insignificant, low, moderate, high, very high, restricted and off-credit and provisioning made on exposures exceeding 180 days on a graded scale ranging from 0.25% to 100%. For exposures with contractual maturity of less than 180 days, 25% of the normal provision requirement is held. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on such country exposure.

4.4 Securitisation The Bank enters into purchase/sale of corporate and retail loans through direct assignment/Special Purpose Vehicle (‘SPV’). In most cases, post securitisation, the Bank continues to service the loans transferred to the assignee/SPV. The Bank also provides credit enhancement in the form of cash collaterals and/or by subordination of cash flows to Senior Pass Through Certificate (‘PTC’) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies, future servicing etc.) accepted by the Bank, appropriate provision/ disclosure is made at the time of sale in accordance with AS 29, Provisions, contingent liabilities and contingent assets. Gain on securitisation transaction is recognised over the period of the underlying securities issued by the SPV. Loss on securitisation is immediately debited to profit and loss account.

4.5 Foreign currency transactions In respect of domestic operations, transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction. Monetary foreign currency assets and liabilities are translated at the balance sheet date at rates notified by Foreign Exchange Dealers Association of India (‘FEDAI’). All profits/ losses resulting from year end revaluations are recognised in the profit and loss account. Financial statements of foreign branches classified as non-integral foreign operations are translated as follows: • Assets and liabilities (both monetary and non-monetary as well as contingent liabilities) are translated at closing rates notified by FEDAI at the year end. • Income and expenses are translated at the rates prevailing on the date of the transactions. • All resulting exchange differences are accumulated in a separate ‘Foreign Currency Translation Reserve’ till the disposal of the net investments. Outstanding forward exchange contracts (excluding currency swaps undertaken to hedge Foreign Currency Non-Resident (‘FCNR’) deposits which are not revalued) and spot exchange contracts are revalued at year end exchange rates notified by FEDAI. The resulting gains or losses on revaluation are included in the profit and loss account in accordance with RBI/FEDAI guidelines.

F-99 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

Premium/discount on currency swaps undertaken to hedge FCNR deposits is recognised as interest income/ expense and is amortised on a straight-line basis over the underlying swap period. Contingent liabilities on account of foreign exchange contracts/options, guarantees, acceptances, endorsements and other obligations denominated in foreign currencies are disclosed at closing rates of exchange notified by FEDAI.

4.6 Derivative transactions Derivative transactions comprise of swaps and options which are disclosed as contingent liabilities. The swaps/options are segregated as trading or hedge transactions. Trading swaps/options are revalued at the balance sheet date with the resulting unrealised gain or loss being recognised in the profit and loss account and correspondingly in other assets or other liabilities respectively. Hedged swaps/options are accounted for on an accrual basis.

4.7 Revenue recognition Interest income is recognised on an accrual basis except interest income on non-performing assets, which is recognised on receipt. Commission income on deferred payment guarantees, is recognised pro-rata over the period of the guarantee. All other fee income is recognised upfront on its becoming due. Dividend is accounted on an accrual basis when the right to receive the dividend is established. Gain/loss on sell down of loans and advances through direct assignment is recognised at the time of sale. Realised gains on investments under HTM category are recognised in the profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines. Losses are recognised in the profit and loss account.

4.8 Fixed assets and depreciation Fixed assets are carried at cost of acquisition less accumulated depreciation less impairment, if any. Cost includes freight, duties, taxes and incidental expenses related to the acquisition and installation of the asset. Capital work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid to acquire fixed assets. Depreciation (including on assets given on operating lease) is provided on the straight-line method from the date of addition. The rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the management’s estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life on a subsequent review is shorter, then depreciation is provided at a higher rate based on management’s estimate of the useful life/remaining useful life. Pursuant to this policy, depreciation has been provided using the following estimated useful lives:

Asset Estimated useful life Owned premises ...... 20years Assets given on operating lease ...... 20years Computer hardware ...... 3years Application software ...... 5years Vehicles ...... 4years EPABX, telephone instruments ...... 8years Mobile phone ...... 2years Locker cabinets/cash safe/strong room door ...... 16years Assets at staff residence ...... 5years All other fixed assets ...... 10years All fixed assets individually costing less than Rs. 5,000 are fully depreciated in the year of installation. Depreciation on assets sold during the year is recognised on a pro-rata basis to the profit and loss account till the date of sale.

F-100 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

The carrying amount of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

4.9 Lease transactions Assets given on operating lease are capitalised at cost. Rentals received by the Bank are recognised in the profit and loss account on accrual basis. Lease payments for assets taken on operating lease are recognised as an expense in the profit and loss account on a straight-line basis over the lease term.

4.10 Retirement and other employee benefits Provident Fund Retirement benefit in the form of provident fund is a defined contribution scheme and the contributions are charged to the profit and loss account of the year when the contributions to the fund are due. There are no other obligations other than the contribution payable to the trust.

Gratuity The Bank contributes towards gratuity fund (defined benefit retirement plan) administered jointly by the Life Insurance Corporation of India (‘LIC’) and Metlife Insurance Company Limited (‘Metlife’) for eligible employees. Under this scheme, the settlement obligations remain with the Bank, although LIC/Metlife administer the scheme and determine the contribution premium required to be paid by the Bank. The plan provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee’s salary and the years of employment with the Bank. Liability with regard to gratuity fund is accrued based on actuarial valuation conducted by an independent actuary using the Projected Unit Credit Method as at 31 March each year.

Leave Encashment Short term compensated absences are provided for based on estimates. The Bank provides leave encashment benefit (long term), which is a defined benefit scheme based on actuarial valuation as at the balance sheet date conducted by an independent actuary. The actuarial valuation is carried out as per the Projected Unit Credit Method.

Superannuation Employees of the Bank are entitled to receive retirement benefits under the Bank’s Superannuation scheme either under a cash-out option through salary or under a defined contribution plan. Through the defined contribution plan the Bank contributes annually a specified sum of 10% of the employee’s eligible annual basic salary to LIC, which undertakes to pay the lumpsum and annuity benefit payments pursuant to the scheme. Superannuation contributions are recognised in the profit and loss account in the period in which they accrue. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.

4.11 Debit/Credit card reward points The Bank estimates the probable redemption of debit and credit card reward points using an actuarial method at balance sheet date by employing an independent actuary. Provision for the said reward points is then made based on the actuarial valuation report as furnished by the said independent actuary.

4.12 Taxation Income tax expense is the aggregate amount of current tax, deferred tax and fringe benefit tax charge. Current year taxes and fringe benefit tax are determined in accordance with the Income-tax Act, 1961. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

F-101 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. The impact of changes in the deferred tax assets and liabilities is recognised in the profit and loss account. Deferred tax assets are recognised and reassessed at each reporting date, based upon management’s judgement as to whether realization is considered as reasonably certain.

4.13 Share issue expenses Share issue expenses are adjusted from share premium account.

4.14 Earnings per share The Bank reports basic and diluted earnings per share in accordance with AS 20, Earnings per Share, Notified accounting standard by Companies (Accounting Standards) Rules, 2006. Basic earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding for the year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at year end.

4.15 Cash and cash equivalents Cash and cash equivalents include cash on hand and in ATM, balances with Reserve Bank of India, balances with other banks and money at call and short notice.

4.16 Employee stock option scheme The 2001 Employee Stock Option Scheme (‘the Scheme’) provides for grant of stock options on equity shares of the Bank to employees and Directors of the Bank. The Scheme is in accordance with the Securities and Exchange Board of India (SEBI) (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Bank follows the intrinsic value method to account for its stock based employee compensation plans as per the Guidance Note on ‘Accounting for Employee Share-based Payments’ issued by the ICAI. Options are granted at an exercise price, which is equal to/less than the fair market price of the underlying equity shares. The excess of such fair market price over the exercise price of the options as at the grant date is recognised as a deferred compensation cost and amortised on a straight-line basis over the vesting period of such options. The fair market price is the latest available closing price, prior to the date of the Board of Directors meeting in which options are granted / shares are issued, on the stock exchange on which the shares of the Bank are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered.

4.17 Provisions, contingent liabilities and contingent assets A provision is recognised when the Bank has a present obligation as a result of past event where it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. A disclosure of contingent liability is made when there is: • a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non occurrence of one or more uncertain future events not within the control of the Bank; or

F-102 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

• a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

5 Notes to Accounts 5.1 Statutory disclosures as per RBI 5.1.1 ‘Provisions and contingencies’ recognised in the profit and loss account include: For the year ended 31 March 2009 31 March 2008 (Rs. in million) Provision for income tax — Current tax for the year ...... 10,955 7,256 — Deferred tax for the year ...... (1,371) (1,594) Provision for fringe benefit tax ...... 114 91 9,698 5,753 Provision for wealth tax ...... 3 2 Provision for non performing advances & investments, (including bad debts written off and write backs) ...... 7,322 3,227 Provision for restructured assets ...... 655 213 Provision for loss in present value for agricultural assets ...... 7 — Provision towards standard assets ...... 1,055 1,535 Provision for depreciation in value of investments ...... 1,078 65 Provision for securitised assets ...... (6) (1) Contingent provision against derivatives ...... (720) 720 Provision for country risk ...... 3 35 Total ...... 19,095 11,549

5.1.2 In terms of its guidelines for implementation of the new capital adequacy framework issued on 27 April 2007, RBI has directed banks with overseas branches to migrate to the revised framework for capital computation (under Basel II) with effect from 31 March 2008. The migration is proposed in a phased manner over a three-year period during which banks are required to compute their capital requirements in terms of both Basel I and Basel II. The minimum capital to be maintained by banks under the Revised Framework is subject to a prudential floor of 100%, 90% and 80% of the capital requirement under Basel I over the years March 2008, 2009 and 2010 respectively. The capital adequacy ratio of the Bank, calculated as per RBI guidelines (Basel II requirement being higher for current year, previous year as per Basel I) is set out below: 31 March 2009 31 March 2008 (Rs. in million) Capital adequacy Tier I ...... 101,630 88,225 Tier II ...... 48,646 30,828 Total capital ...... 150,276 119,053 Total risk weighted assets and contingents ...... 1,097,875 867,197 Capital ratios Tier I ...... 9.26% 10.17% Tier II ...... 4.43% 3.56% CRAR ...... 13.69% 13.73% Amount of Subordinated Debt raised as Tier-II capital (as per details given below) ...... Rs.17,000 million NIL

F-103 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

During the year ended 31 March 2009, the Bank raised subordinated debt of Rs. 17,000 million, the details of which are set out below: Date of allotment Period Coupon Amount 7 November 2008 ...... 120months 11.75% Rs. 15,000 million 28 March 2009 ...... 120months 9.95% Rs. 2,000 million The Bank has not raised any subordinated debt during the previous year ended 31 March 2008. During the year ended 31 March 2009, the Bank redeemed subordinated debt of Rs. 661 million, the details of which are set out below: Date of maturity Period Coupon Amount 20 June 2008 ...... 69months 8.80% Rs. 330 million 21 September 2008 ...... 69months 8.40% Rs. 331 million During the year ended 31 March 2008, the Bank redeemed subordinated debt of Rs. 2,455 million, the details of which are set out below:

Date of maturity Period Coupon Amount 28 April 2007 ...... 85months 11.75% Rs. 1,000 million 4 June 2007 ...... 66months 9.80% Rs. 1,120 million 27 June 2007 ...... 63months 9.30% Rs. 335 million

5.1.3 The Bank has not raised any hybrid capital during the year ended 31 March 2009. During the year ended 31 March 2008, the Bank raised hybrid capital in the form of Upper Tier II bonds qualifying as Tier II capital, the details of which are set out below: Date of Type of Capital allotment Period Coupon Amount

Upper Tier II ...... 28June 2007 180 months 7.125% (U.S.$60 million) Rs. 2,407 million

5.1.4 The key business ratios and other information is set out below: As at 31 March 2009 31 March 2008 %% Interest income as a percentage to working funds# ...... 8.59 8.08 Non-interest income as a percentage to working funds ...... 2.30 2.07 Operating profit as a percentage to working funds ...... 2.95 2.57 Return on assets (based on average working funds) ...... 1.44 1.24 Business (deposits less inter bank deposits plus advances) per employee** ...... Rs.106million Rs. 112 million Profit per employee** ...... Rs.1.00 million Rs. 0.84 million Net non performing assets as a percentage of net customer assets* ...... 0.35 0.36

# Working funds represent average of total assets as reported to RBI in Form X under Section 27 of the Banking Regulation Act, 1949 * Net Customer assets include advances and credit substitutes ** Productivity ratios are based on average employee numbers for the year 5.1.5 Asset Quality i) Net non-performing assets to net advances is set out below: 31 March 2009 31 March 2008 %% Net non performing assets as a percentage of net advances ...... 0.40 0.42

F-104 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

ii) Movement in gross non-performing assets (including non-performing investments) is set out below: 31 March 2009 31 March 2008 Gross Gross (Rs. in million) Opening balance at the beginning of the year ...... 4,946 4,187 Additions during the year ...... 8,926 3,842 Reductions during the year ...... (4,895) (3,083) Closing balance at the end of the year ...... 8,977 4,946

iii) Movement in net non-performing assets (including non-performing investments) is set out below: 31 March 2009 31 March 2008 Net Net (Rs. in million) Opening balance at the beginning of the year ...... 2,483 2,663 Additions during the year ...... 2,023 1,358 Reductions during the year ...... (1,235) (1,538) Closing balance at the end of the year ...... 3,271 2,483

iv) Movement in provisions for non performing assets (including non-performing investments but excluding provisions for standard assets) is set out below: 31 March 31 March 2009 2008 (Rs. in million) Opening balance at the beginning of the year ...... 2,463 1,523 Provisions made during the year ...... 6,903 2,484 Write-offs/write back of excess provisions ...... (3,660) (1,544) Closing balance at the end of the year ...... 5,706 2,463

5.1.6 Movement in floating provision is set out below: For the year ended 31 March 2009 31 March 2008 Opening balance at the beginning of the year ...... 46 18 Provisions made during the year ...... — 28 Draw down made during the year ...... (14) — Closing balance at the end of the year ...... 32 46

Based on the guidelines contained in Reserve Bank of India circular DBOD.No. BP.BC.48/21.04.048/2008-09 dated 22 September, 2008, an amount of Rs. 14 million representing unrealised interest and other charges on loans qualifying under the Agricultural Debt Waiver and Debt Relief Scheme, 2008 of the Government of India, has been utilised out of the opening balance of floating provision. 5.1.7 Provision on Standard Assets 31 March 2009 31 March 2008 (Rs. in million) Provision towards Standard Assets (includes Rs. 60 million of standard provision on derivative exposures, previous year Rs. Nil) ...... 4,644 3,589

F-105 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

5.1.8 Details of Investments are set out below: i) Value of Investments: 31 March 2009 31 March 2008 (Rs. in million) 1) Gross value of Investments a) In India ...... 456,804 331,924 b) Outside India ...... 8,572 6,138 2) Provision for Depreciation/Non-Performing Investments a) In India ...... 1,387 959 b) Outside India ...... 686 52 3) Net value of Investments a) In India ...... 455,417 330,965 b) Outside India ...... 7,886 6,086

ii) Movement of provisions held towards depreciation on investments: 31 March 2009 31 March 2008 (Rs. in million) Opening balance ...... 922 857 Add: Provisions made during the year ...... 1,828 172 Less: Write offs/write back of excess provisions during the year ...... (750) (107) Closing balance ...... 2000 922

5.1.9 A summary of lending to sensitive sectors is set out below: As at 31 March 2009 31 March 2008 (Rs. in million) A. Exposure to Real Estate Sector 1) Direct Exposure (i) Residential mortgages ...... 111,005 77,796 — of which housing loans eligible for inclusion in priority sector advances ...... 50,367 40,596 (ii) Commercial real estate ...... 60,904 59,140 (iii) Investments in mortgage backed securities (MBS) and other securitised exposures — a. Residential ...... — — b. Commercial real estate ...... — — 2) Indirect Exposure Fund based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs) ...... 19,998 15,084 Total Exposure to Real Estate Sector ...... 191,907 152,020

F-106 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

As at 31 March 2009 31 March 2008 (Rs. in million) B. Exposure to Capital Market 1. Direct investments made in equity shares, convertible bonds, convertible debentures and units of equity-oriented mutual funds the corpus of which is not exclusively invested in corporate debt ...... 8,230 4,987 2. Advances against shares/bonds/debentures or other securities or on clean basis to individuals for investment in shares (including IPOs/ESOPs), convertible bonds, convertible debentures, and units of equity-oriented mutual funds ...... 641 641 3. Advances for any other purposes where shares or convertible bonds or convertible debentures or units of equity-oriented mutual funds are taken as primary security ...... 1,890 1,955 4. Advances for any other purposes to the extent secured by the collateral security of shares or convertible bonds or convertible debentures or units of equity-oriented mutual funds i.e. where primary security other than shares/ convertible bonds/convertible debentures/units of equity-oriented mutual funds does not fully cover the advances ...... 63 151 5. Secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and marketmakers ...... 9,552 8,313 6. Loans sanctioned to corporates against the security of shares/bonds/ debentures or other securities or on clean basis for meeting promoter’s contribution to the equity of new companies in anticipation of raising resources...... — — 7. Bridge loans to companies against expected equity flows/issues ...... — — 8. Underwriting commitments taken up in respect of primary issue of shares or convertible bonds or convertible debentures or units of equity-oriented mutual funds ...... 450 — 9. Financing to stock brokers for margin trading ...... — — 10. All exposures to Venture Capital Funds (both registered and unregistered) . . 2,485 2,460 Total exposure to Capital Market (Total of 1 to 10) ...... 23,311 18,507

5.1.10 Details of loan assets subjected to restructuring during the year ended 31 March 2009 and 31 March 2008 are given below:

31 March 2009 SME Debt Particulars CDR Mechanism Restructuring Others (Rs. in million) i) Standard advances restructured .... No.ofBorrowers 4 64 407* Amount Outstanding 1,626 3,826 4,510 Sacrifice (diminution in the fair value) 120 106 120 ii) Sub-Standard advances restructured ...... No.ofBorrowers — — — Amount Outstanding — — — Sacrifice (diminution in the fair value) — — — iii) Doubtful advances restructured .... No.ofBorrowers — — — Amount Outstanding — — — Sacrifice (diminution in the fair value) — — — Total ...... No.ofBorrowers 4 64 407* Amount Outstanding 1,626 3,826 4,510 Sacrifice (diminution in the fair value) 120 106 120

* Includes 385 retail agricultural loans aggregating to Rs. 734 million and 13 personal loans aggregating to Rs. 8 million. The 13 standard assets under personal loans, which were restructured, have been downgraded to sub-standard assets upon restructuring.

F-107 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

31 March 2008 SME Debt Particulars CDR Mechanism Restructuring Others (Rs. in million) i) Standard advances restructured ...... No.ofBorrowers 4 16 4 Amount Outstanding 2,539 520 104 Sacrifice (diminution in the fair value) — — — ii) Sub-Standard advances restructured . . . No. of Borrowers — — — Amount Outstanding — — — Sacrifice (diminution in the fair value) — — — iii) Doubtful advances restructured ...... No.ofBorrowers — 1 — Amount Outstanding — 60 — Sacrifice (diminution in the fair value) — — — Total ...... No.ofBorrowers 4 17 4 Amount Outstanding 2,539 580 104 Sacrifice (diminution in the fair value)** — — —

** Though the Bank was not holding any provision for diminution in the fair value of assets restructured as on 31 March 2008, the Bank had made provision aggregating to Rs. 174 million towards interest sacrifice and funded interest for the assets restructured during the year ended 31 March 2008. 5.1.11 As at 31 March 2009, there were 43 applications for restructuring under process aggregating to Rs. 4,519.50 million. Sr. No Particulars Number Amount (Rs. in million) 1. Applications received up to 31 March 2009 for restructuring, in respect of accounts which were standard as on 1 September 2008 ...... 493 13,824 2. Of (1), proposals approved and implemented as on 31 March 2009 and thus became eligible for special regulatory treatment and classified as standard assets as on the date of the balance sheet ...... 450 9,304 3. Of (1), proposals approved and implemented as on 31 March 2009 but could not be upgraded to the standard category ...... — — 4. Of (1), proposals under process / implementation which were standard as on 31 March 2009 ...... 43 4,520 5. Of (1), proposals under process / implementation which turned NPA as on 31 March 2009 but are expected to be classified as standard assets on full implementation of the package ...... — —

5.1.12 Details of Non-SLR investment portfolio are set out below: i) Issuer composition as at 31 March 2009 of non-SLR investments: Extent of “below Extent of investment Extent of Extent of Total private grade” “unrated” “unlisted” No. Issuer Amount placement securities securities securities (1) (2) (3) (4) (5) (6) (7) (Rs. in million) i. Public Sector Units ...... 20,336 9,481 215 — — ii. Financial Institutions ...... 48,258 35,596 35 35 19,834 iii. Banks ...... 31,116 24,416 100 8,572 6,253 iv. Private Corporates ...... 76,529 61,628 17,384 528 5,701 v. Subsidiaries/ Joint Ventures ...... 976 976 — — 976 vi. Others ...... 10,889 9,391 — — 10,889 vii. Provision held towards depreciation/ non- performing investments ...... (2,029) — — — — Total ...... 186,075 141,488 17,734 9,135 43,653

F-108 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

Amounts reported under columns (4), (5), (6) and (7) above are not mutually exclusive. Issuer composition as at 31 March 2008 of non-SLR investments: Extent of “below Extent of investment Extent of Extent of Total private grade” “unrated” “unlisted” No. Issuer Amount placement securities securities securities (1) (2) (3) (4) (5) (6) (7) (Rs. in million) i. Public Sector Units ...... 20,696 11,775 215 100 999 ii. Financial Institutions ...... 37,003 25,326 70 — 10,077 iii. Banks ...... 17,299 12,499 100 6,138 4,393 iv. Private Corporates ...... 55,215 45,472 4,915 166 3,337 v. Subsidiaries/ Joint Ventures ...... 380 380 — — 380 vi. Others ...... 5,682 3,092 — — 5,682 vii. Provision held towards depreciation/ non- performing investments ...... (1,012) — — — — Total ...... 135,263 98,543 5,301 7,305 24,868

Amounts reported under columns (4), (5), (6) and (7) above are not mutually exclusive. ii) Non-performing non SLR investments is set out below: 31 March 31 March 2009 2008 (Rs. in million) Opening balance ...... 90 81 Additions during the year since 1 April ...... 1,000 11 Reductions during the above period ...... (1,017) (2) Closing balance ...... 73 90 Total provisions held ...... 73 90 5.1.13 Details of securities sold/ purchased during the year ended 31 March 2009 & 31 March 2008 under repos/ reverse repos (excluding LAF transactions): Daily Minimum Maximum Average outstanding outstanding outstanding As at during the during the during the 31 March Year ended 31 March 2009 year year year 2009 (Rs. in million) Securities sold under repos ...... — 5,961 1,271 — Securities purchased under reverse repos ...... — 4,088 38 — Daily Minimum Maximum Average outstanding outstanding outstanding As at during the during the during the 31 March Year ended 31 March 2008 year year year 2008 (Rs. in million) Securities sold under repos ...... — 1,119 427 — Securities purchased under reverse repos ...... — 7,739 456 5,038 5.1.14 Details of financial assets sold to Securitisation/Reconstruction companies for Asset Reconstruction: 31 March 2009 31 March 2008 (Rs. in million) Number of accounts ...... — — Book Value of loan asset securitised ...... — — Aggregate value (net of provisions) of accounts sold ...... — — Aggregate consideration ...... — — Additional consideration realised in respect of accounts transferred in earlier years ...... — — Aggregate gain/loss over net book value ...... — —

F-109 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

5.1.15 Details of Non-Performing Financial Assets Purchased/Sold: 31 March 2009 31 March 2008 (Rs. in million) Non — Performing Financial Assets Purchased 1. (a) Number of accounts purchased during the year ...... — — (b) Aggregate outstanding ...... — — 2. (a) Of these, number of accounts restructured during the year . . . — — (b) Aggregate outstanding ...... — — Non — Performing Financial Assets Sold 1. Number of accounts sold during the year ...... — — 2. Aggregate outstanding ...... — — 3. Aggregate consideration received ...... — — 5.1.16 Details of securitisation transactions undertaken by the Bank in the year are as follows: 31 March 2009 31 March 2008 (Rs. in million) Number of loan accounts securitised ...... 16 19 Book value of loan assets securitised ...... 56,271 32,020 Sale consideration received for the securitised assets ...... 56,374 32,098 Net gain / loss over net book value ...... 104 78 Net gain / loss recognised in profit and loss account ...... 77 47 The information on securitisation activity of the Bank as an originator as on 31 March 2009 and 31 March 2008 is given below: 31 March 2009 31 March 2008 (Rs. in million) Outstanding credit enchancement (cash collateral) ...... — 137 Outstanding liquidity facility ...... — — Outstanding servicing liability ...... — 5 Outstanding investment in PTCs ...... — 8 5.1.17 During the year, the Bank’s credit exposure to single borrower was within the prudential exposure limits prescribed by RBI except in 3 cases, where single borrower limit was exceeded upto an additional exposure of 5% with the approval of the Board of Directors. The details of such cases are set out below: % of excess limit Exposure sanctioned Ceiling Original over as on Exposure Limit original 31 March Exposure as on Name of the Borrower Period Ceiling Sanctioned ceiling 2009 31 March 2009 (Rs. in million) Ltd...... May2008 17,858 23,000 28.79% 20,408 12,743 UTI AMC Ltd...... July 2008 to Oct 2008 17,858 23,000 28.79% 20,408 10,000 Nov 2008 to Feb 2009 20,108 23,050 14.63% 20,408 10,000 HDFC Ltd...... Nov2008 20,108 20,934 4.11% 20,408 15,684 During the year, the Bank’s credit exposure to group borrowers was within the prudential exposure limits prescribed by RBI except in 1 case, where group borrower limit was exceeded upto an additional exposure of 5% with the approval of the Board of Directors. The details of the case are set out below: % of excess Original limit sanctioned Exposure Exposure Limit over original Ceiling as on Exposure as on Period Ceiling Sanctioned ceiling 31 March 2009 31 March 2009 (Rs. in million) July 2008 ...... 47,621 49,620 4.20% Aug 2008 ...... 47,621 49,842 4.66%}} 54,421 43,401 Sep 2008 ...... 47,621 47,864 0.51%

F-110 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

During the year ended 31 March 2008, the Bank’s credit exposures to single borrower and group borrowers were within the prudential exposure limits prescribed by RBI except in 2 cases viz., UTI Asset Management Company Ltd. and HDFC Ltd., where single borrower limit was exceeded upto an additional exposure of 5% with the approval of the Board of Directors. The details of such cases are set out below: % of excess Exposure limit Ceiling Exposure Original sanctioned as on as on Exposure Limit over original 31 March 31 March Name of the Borrower Ceiling Sanctioned ceiling 2008 2008 (Rs. in million) HDFC Ltd ...... 9,832 10,318 4.94 16,908 16,202 UTI Asset Management Company Ltd...... 9,832 10,000 1.71 16,908 10,000 5.1.18 Details of Risk Category wise Country Exposure: Exposure (Net) Provision Held Exposure (Net) Provision Held as at as at as at as at Risk Category 31 March 2009 31 March 2009 31 March 2008 31 March 2008 (Rs. in million) Insignificant ...... 2,249 — 17,877 — Low...... 47,555 39 29,151 36 Moderate ...... 5,446 — 316 — High ...... 499 — 117 — Very High ...... 36 — 43 — Restricted ...... 8 — — — Off-Credit ...... — — — — Total ...... 55,793 39 47,504 36

5.1.19 A maturity pattern of certain items of assets and liabilities at 31 March 2009 & 31 March 2008 is set out below: Over Over Over Over 2 days 8 days 15 days 29 days 3 months 6 months 1 year 3 years to to to and upto and upto and upto and upto and upto Over Year ended 31 March 2009 1 day 7 days 14 days 28 days 3 months 6 months 1 year 3 years 5 years 5 years Total (Rs. in million) Deposits ...... 12,891 51,989 32,052 44,861 161,672 178,850 197,164 190,680 4,149 299,433 1,173,741 Advances ...... 4,038 20,889 7,638 17,414 43,867 31,051 78,193 147,482 112,150 352,846 815,568 Investments ...... 8,261 13,763 25,434 49,174 79,846 45,645 54,533 67,457 39,906 79,284 463,303 Borrowings ...... — 4,522 — 4,927 19,549 9,753 33,972 28,914 218 — 101,855 Foreign Currency Assets ...... 3,169 25,624 4,309 11,651 15,880 14,574 6,019 54,145 20,855 31,024 187,250 Foreign Currency Liabilities ...... 282 23,680 1,723 5,445 28,451 13,630 6,014 19,742 122 19,040 118,129

Over Over Over Over 2 days 8 days 15 days 29 days 3 months 6 months 1 year 3 years to to to and upto and upto and upto and upto and upto Over Year ended 31 March 2008 1 day 7 days 14 days 28 days 3 months 6 months 1 year 3 years 5 years 5 years Total (Rs. in million) Deposits ...... 9,461 31,860 16,304 33,017 92,401 108,096 177,756 162,289 7,901 237,178 876,262 Advances ...... 7,456 15,187 5,508 7,130 29,634 27,095 62,185 76,990 89,444 275,982 596,611 Investments ...... 5,644 16,923 12,005 28,218 48,848 31,572 49,133 51,762 22,548 70,399 337,051 Borrowings ...... — — 1,003 1,605 4,508 7,273 9,666 31,898 18 269 56,240 Foreign Currency Assets ...... 3,316 4,038 862 707 5,801 7,123 10,935 15,783 17,089 12,695 78,349 Foreign Currency Liabilities ...... 468 4,378 1,181 4,481 15,984 6,659 10,860 26,174 283 656 71,124 Classification of assets and liabilities under the different maturity buckets is based on the same estimates and assumptions as used by the Bank for compiling the return submitted to the RBI. Maturity profile of foreign currency assets and liabilities is excluding forward contracts.

F-111 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

5.1.20 Disclosure in respect of Interest Rate Swaps (IRS), Forward Rate Agreement (FRA) and Cross Currency Swaps (CCS) outstanding at 31 March 2009 is set out below: Sr. As at As at No. Items 31 March 2009 31 March 2008 (Rs. in million) i) Notional principal of swap agreements ...... 801,777 1,559,185 ii) Losses which would be incurred if counterparties failed to fulfil their obligations under the agreements ...... 22,317 13,942 iii) Collateral required by the Bank upon entering into swaps ** ...... 781 769 iv) Concentration of credit risk arising from the swaps Maximum single industry exposure with Banks (previous year with Banks) — Interest Rate Swaps / FRAs ...... 83.73% 79.73% — Cross Currency Swaps ...... 62.08% 33.84% v) Fair value of the swap book (hedging & trading) — Interest Rate Swaps / FRAs ...... 803 165 — Currency Swaps ...... 106 (19)

** Total collaterals taken from counterparties having outstanding derivative contracts The nature and terms of the IRS as on 31 March 2009 are set out below: Notional Nature Nos. Principal Benchmark Terms (Rs. in million) Hedging ...... 2 500 MIBOR Fixed payable v/s floating receivable Hedging ...... 4 3071 INBMK Fixed receivable v/s floating payable Trading ...... 783 295,200 MIBOR Fixed receivable v/s floating payable Trading ...... 794 293,725 MIBOR Fixed payable v/s floating receivable Trading ...... 115 29,805 MIFOR Fixed receivable v/s floating payable Trading ...... 106 28,305 MIFOR Fixed payable v/s floating receivable Trading ...... 77 30,461 INBMK Fixed receivable v/s floating payable Trading ...... 68 29,800 INBMK Fixed payable v/s floating receivable Trading ...... 18 4,097 LIBOR Fixed receivable v/s floating payable Trading ...... 27 6,582 LIBOR Fixed payable v/s floating receivable Trading ...... 5 7,171 LIBOR Fixed payable v/s fixed receivable 1,999 728,717

The nature and terms of the IRS as on 31 March 2008 are set out below: Notional Nature Nos. Principal Benchmark Terms (Rs. in million) Hedging ...... 3 1,250 MIBOR Fixed receivable v/s floating payable Hedging ...... 2 500 MIBOR Fixed payable v/s floating receivable Hedging ...... 5 2,088 INBMK Fixed receivable v/s floating payable Hedging ...... 3 2,407 LIBOR Receive fixed / Pay floating Trading ...... 1,400 659,900 MIBOR Fixed receivable v/s floating payable Trading ...... 1,409 660,750 MIBOR Fixed payable v/s floating receivable Trading ...... 162 42,900 MIFOR Fixed receivable v/s floating payable Trading ...... 155 41,250 MIFOR Fixed payable v/s floating receivable Trading ...... 78 30,961 INBMK Fixed receivable v/s floating payable Trading ...... 69 30,800 INBMK Fixed payable v/s floating receivable Trading ...... 40 1,216 LIBOR Fixed receivable v/s floating payable Trading ...... 28 7,900 LIBOR Fixed payable v/s floating receivable Trading ...... 3 4,926 LIBOR Fixed payable v/s fixed receivable Trading ...... 5 802 LIBOR Receive fixed / Pay floating Trading ...... 5 963 LIBOR Receive Floating / Pay fixed 3,367 1,488,613

F-112 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

The nature and terms of the FRA’s as on 31 March 2009 are set out below: Notional Nature Nos. Principal Benchmark Terms (Rs. in million) Trading ...... 18 8,848 LIBOR Fixed receivable v/s floating payable Trading ...... 18 8,595 LIBOR Fixed payable v/s floating receivable 36 17,443

The nature and terms of the FRA’s as on 31 March 2008 are set out below: Notional Nature Nos. Principal Benchmark Terms (Rs. in million) Trading ...... 49 12,744 LIBOR Fixed receivable v/s floating payable Trading ...... 39 10,604 LIBOR Fixed payable v/s floating receivable 88 23,348

The nature and terms of the CCS as on 31 March 2009 are set out below: Notional Nature Nos. Principal Benchmark Terms (Rs. in million) Trading Swaps ...... 23 21,480 LIBOR Fixed payable v/s floating receivable Trading Swaps ...... 19 22,015 LIBOR Fixed receivable v/s floating payable Trading Swaps ...... 1 457 LIBOR /INBMK Floating receivable v/s floating payable Trading Swaps ...... 2 1,775 Principal Only Fixed receivable Trading Swaps ...... 2 1,775 Principal Only Fixed payable Hedging Swaps ...... 5 8,115 Principal Only Fixed payable 52 55,617

The nature and terms of the CCS as on 31 March 2008 are set out below: Notional Nature Nos. Principal Benchmark Terms (Rs. in million) Trading Swaps ...... 22 13,549 LIBOR Fixed payable v/s floating receivable Trading Swaps ...... 15 12,561 LIBOR Fixed receivable v/s floating payable Trading Swaps ...... 1 361 LIBOR / INBMK Floating receivable v/s floating payable Trading Swaps ...... 33 6,072 PRINCIPAL ONLY Fixed receivable Trading Swaps ...... 32 5,872 PRINCIPAL ONLY Fixed payable Trading Swaps ...... 2 1,186 PRINCIPAL ONLY Fixed receivable & fixed payable Trading Swaps ...... 1 602 PRINCIPAL ONLY Paying floating Trading Swaps ...... 1 602 PRINCIPAL ONLY Receive floating Hedging Swaps ...... 5 6,419 LIBOR Fixed payable 112 47,224

Agreements with Banks/Financial Institutions and corporates are under approved credit lines.

F-113 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

Details of Exchange Traded Interest Rate Derivatives for the year ended 31 March 2009 are set out below: As at Sr. No. Particulars 31 March 2009 (Rs. in million) i) Notional principal amount of exchange traded interest rate derivatives undertaken during the year 2 Year U.S. Treasury Notes Futures — December 08 ...... 2,232 2 Year U.S. Treasury Notes Futures — June 08 ...... 183 2 Year U.S. Treasury Notes Futures — September 08 ...... 223 30 Day Interbank Cash Rate Futures — December 08 ...... 8,407 30 Day Fed Fund Futures — September 08 ...... 5,072 3 Month Euribor Futures — June 09 ...... 6,744 3 Month Euribor Futures — March 09 ...... 27,650 3 Month Euribor Futures — September 09 ...... 4,046 5 Year U.S. Treasury Note Futures — June 08 ...... 51 5 Year U.S. Treasury Note Futures — September 08 ...... 183 Euro Dollar Futures — December 08 ...... 6,137 Euro Dollar Futures — December 09 ...... 913 Euro Dollar Futures — December 10 ...... 254 Euro Dollar Futures — June 09 ...... 2,840 Euro Dollar Futures — June 10 ...... 558 Euro Dollar Futures — June 11 ...... 51 Euro Dollar Futures — June 08 ...... 4,159 Euro Dollar Futures — March 09 ...... 5,427 Euro Dollar Futures — March 10 ...... 710 Euro Dollar Futures — March 11 ...... 152 Euro Dollar Futures — September 08 ...... 4,565 Euro Dollar Futures — September 09 ...... 5,123 Euro Dollar Futures — September 10 ...... 2,282 10 Year Commonwealth Treasury Bond Futures — December 08 ...... 182 10 Year Commonwealth Treasury Bond Futures — June 08 ...... 147 10 Year Commonwealth Treasury Bond Futures — March 09 ...... 140 10 Year Commonwealth Treasury Bond Futures — September 08 ...... 245 3 Year Commonwealth Treasury Bond Futures — September 08 ...... 385 Euro — BOBL Futures — June 08 ...... 41 Euro — BOBL Futures — September 08 ...... 67 Euro — BOBL Futures — December 08 ...... 68,060 Euro — BOBL Futures — June 08 ...... 42,191 Euro — BOBL Futures — June 09 ...... 4,586 Euro — BOBL Futures — March 09 ...... 27,124 Euro — BOBL Futures — September 08 ...... 42,366 Euro — Schatz Futures — December 08 ...... 1,484 Euro — Schatz Futures — June 09 ...... 472 Euro — Schatz Futures — March 09 ...... 337 10 Year Long Gilt Futures — March 09 ...... 435 10 Year Long Gilt Futures — June 09 ...... 536 10 Year JGB Futures — December 08 ...... 103 10 Year JGB Futures — June 08 ...... 206 10 Year JGB Futures — September 08 ...... 309 10 Year U.S. Treasury Note Futures — December 08 ...... 4,210 10 Year U.S. Treasury Note Futures — June 08 ...... 1,542 10 Year U.S. Treasury Note Futures — June 09 ...... 1,775 10 Year U.S. Treasury Note Futures — March 09 ...... 2,536 10 Year U.S. Treasury Note Futures — September 08 ...... 1,877 289,318

F-114 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

As at Sr. No. Particulars 31 March 2009 (Rs. in million) ii) Notional principal amount of exchange traded interest rate derivatives outstanding as on 31 March 2009 Euro Dollar Futures — March 10 ...... 101 Euro Dollar Futures — March 11 ...... 51 Euro Dollar Futures — June 10 ...... 152 Euro Dollar Futures — June 11 ...... 51 Euro Dollar Futures — June 09 ...... 812 Euro Dollar Futures — September 10 ...... 152 Euro Dollar Futures — September 09 ...... 660 Euro Dollar Futures — December 10 ...... 152 Euro Dollar Futures — December 09 ...... 304 2,435 iii) Notional principal amount of exchange traded interest rate derivatives outstanding as on 31 March 2009 and “not highly effective” Euro Dollar Futures — March 10 ...... 101 Euro Dollar Futures — March 11 ...... 51 Euro Dollar Futures — June 10 ...... 152 Euro Dollar Futures — June 11 ...... 51 Euro Dollar Futures — June 09 ...... 812 Euro Dollar Futures — September 10 ...... 152 Euro Dollar Futures — September 09 ...... 660 Euro Dollar Futures — December 10 ...... 152 Euro Dollar Futures — December 09 ...... 304 2,435 iv) Mark-to-market value of exchange traded interest rate derivatives outstanding as on 31 March 2009 and “not highly effective” Euro Dollar Futures — March 10 ...... — Euro Dollar Futures — March 11 ...... — Euro Dollar Futures — June 10 ...... (1) Euro Dollar Futures — June 11 ...... — Euro Dollar Futures — June 09 ...... (1) Euro Dollar Futures — September 10 ...... 1 Euro Dollar Futures — September 09 ...... (3) Euro Dollar Futures — December 10 ...... 1 Euro Dollar Futures — December 09 ...... (2) (5)

F-115 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

Details of Exchange Traded Interest Rate Derivatives for the year ended 31 March 2008 are set out below: As at Sr. No. Particulars 31 March 2008 (Rs. in million) i) Notional principal amount of exchange traded interest rate derivatives undertaken during the year a) 90 Day Euro Futures — March 09 ...... 602 b) 90 Day Euro Futures — June 08 ...... 883 c) 90 Day Euro Futures — June 09 ...... 401 d) 90 Day Euro Futures — September 08 ...... 2,166 e) 90 Day Euro Futures — September 09 ...... 401 f) 90 Day Euro Futures — December 08 ...... 1,966 g) 3MO Euro EURIBOR — March 08 ...... 10,150 h) 3MO Euro EURIBOR — September 08 ...... 10,150 i) 30 Day InterBank — February 08 ...... 7,707 j) JPN 10Y Bond (TSE) — March 08 ...... 81 k) EURO-BUND Futures — March 08 ...... 8,221 l) EURO-BUND Futures — June 08 ...... 13,829 m) US 10 years Note — March 08 ...... 602 n) US 10 years Note — June 08 ...... 674 o) AUST 10Y Bond Futures — March 08 ...... 220 58,053 ii) Notional principal amount of exchange traded interest derivatives outstanding as on 31 March 2008 a) 90 Day Euro Futures — March 09 ...... 201 b) 90 Day Euro Futures — June 08 ...... 883 c) 90 Day Euro Futures — June 09 ...... 401 d) 90 Day Euro Futures — September 08 ...... 2,166 e) 90 Day Euro Futures — September 09 ...... 401 f) 90 Day Euro Futures — December 08 ...... 1,966 6,018 iii) . . Notional principal amount of exchange traded interest rate derivatives outstanding as on 31 March 2008 and “not highly effective” a) 90 Day Euro Futures — March 09 ...... 201 b) 90 Day Euro Futures — June 08 ...... 883 c) 90 Day Euro Futures — June 09 ...... 401 d) 90 Day Euro Futures — September 08 ...... 2,166 e) 90 Day Euro Futures — September 09 ...... 401 f) 90 Day Euro Futures — December 08 ...... 1,966 6,018 iv) . . Mark-to-market value of exchange traded interest rate derivatives outstanding as on 31 March 2008 and “not highly effective” a) 90 Day Euro Futures — March 09 ...... — b) 90 Day Euro Futures — June 08 ...... — c) 90 Day Euro Futures — June 09 ...... — d) 90 Day Euro Futures — September 08 ...... (1) e) 90 Day Euro Futures — September 09 ...... (1) f) 90 Day Euro Futures — December 08 ...... — (2)

The Bank undertakes derivative transactions for proprietary trading/market making, hedging own balance sheet and for offering to customers, who use them for hedging their risks within the prevalent regulations. Proprietary trading covers Interest Rate Futures and Rupee Interest Rate Swaps under different benchmarks viz.

F-116 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

MIBOR, MIFOR and INBMK and U.S.$/INR options. These transactions expose the Bank to various risks, primarily credit, market and operational risk. The Bank has adopted the following mechanism for managing risk arising out of the derivative transactions. In terms of the structure, the derivative transactions are originated by Treasury Front Office, which ensures compliance with the trade origination requirements as per Bank’s policy and RBI guidelines. Market Risk Group within the Bank’s Risk Department independently identifies, measures and monitors market risk associated with derivative transactions, and appraises the Asset Liability Management Committee (ALCO) and the Risk Management Committee of the Board (RMC) on the compliance with the risk limits. Treasury Operations undertakes activities such as confirmation, settlement, ISDA documentation, accounting and other MIS reporting. The derivative transactions are governed by the Derivative Policy, Hedging Policy and the Suitability and Appropriateness Policy of the Bank as well as by the extant RBI guidelines. The Bank has also put in place a detailed process flow for customer derivative transactions for effective management of operational risk. The credit risk in respect of customer derivative transactions is sought to be mitigated through a laid down policy on sanction of Loan Equivalent Risk (LER) limits, monitoring mechanism for LER limits and trigger events for escalation/margin calls/termination. Various risk limits are set up and actual exposures are monitored vis-à-vis the limits. These limits are set up taking in to account market volatility, business strategy and management experience. Risk limits are in place for risk parameters viz. PV01, VaR, stop loss, Delta, Gamma and Vega. Actual positions are monitored against these limits on a daily basis and breaches, if any, are reported promptly. Risk assessment of the portfolio is undertaken periodically. The Bank ensures that the Gross PV01 (Price value of a basis point) position arising out of all non option rupee derivative contracts are within the 0.25% of net worth of the Bank as on balance sheet date. Hedging transactions are undertaken by the Bank to protect the variability in the fair value or the cash flow of the underlying balance sheet item. These deals are accounted on an accrual basis. These transactions are subjected to hedge effectiveness test and in case any transaction fails such a test, the same is redesignated as a trading deal with the prior approval of the competent authority and appropriate accounting treatment is followed. 5.1.21 Disclosure on risk exposure in Derivatives As at 31 March 2009 Currency Derivatives Interest rate Sr. No. Particulars CCS Options Derivatives (Rs. in million) 1 Derivatives (Notional Principal Amount) a) For hedging ...... 8,115 — 3,571 b) For trading ...... 47,501 84,621 742,589 2 Marked to Market Positions# a) Asset (+) ...... 243 887 86 — — — ...... (מ) b) Liability 3 Credit Exposure* 7,569 5,834 25,215 4 Likely impact of one percentage change in interest rate (100*PV01) (as at 31 March 2009) a) on hedging derivatives ...... 15 — 355 b) on trading derivatives ...... 8 96 5 Maximum and Minimum of 100*PV01 observed during the year a) on hedging I) Minimum ...... 8 — 340 II) Maximum ...... 31 — 496 b) on Trading I) Minimum ...... 2 — 30 II) Maximum ...... 10 — 169

# Only on trading derivatives and represents net position * Includes accrued interest

F-117 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

As at 31 March 2008 Currency Derivatives Interest rate Sr. No. Particulars CCS Options Derivatives (Rs. in million) 1 Derivatives (Notional Principal Amount) a) For hedging ...... 6,419 — 6,245 b) For trading ...... 40,805 161,001 1,505,716 2 Marked to Market Positions# a) Asset (+) ...... 212 170 — (43) — — ...... (מ) b) Liability 3 Credit Exposure* ...... 5,922 4,448 13,504 4 Likely impact of one percentage change in interest rate (100*PV01) (as at 31 March 2008) a) on hedging derivatives ...... 21 — 412 b) on trading derivatives ...... 3 — 35 5 Maximum and Minimum of 100*PV01 observed during the year a) on hedging I) Minimum ...... 1 — 302 II) Maximum ...... 21 — 546 b) on Trading I) Minimum ...... 1 — 18 II) Maximum ...... 35 — 189

# Only on trading derivatives and represents net position * Includes accrued interest The notional principal amount of forex contracts classified as hedging and funding outstanding at 31 March 2009 amounted to Rs. 27,244 million (previous year Rs. 24,986 million) and Rs. 31,099 million (previous year Rs. 15,877 million) respectively. The notional principal amount of forex contracts classified as trading outstanding at 31 March 2009 amounted to Rs. 1,169,079 million (previous year Rs. 774,545 million). The net overnight open position at 31 March 2009 is Rs. 316 million (previous year Rs. 367 million) 5.1.22 No penalty/ strictures have been imposed on the Bank during the year by the Reserve Bank of India. 5.1.23 Disclosure of Customer Complaints 31 March 2009 31 March 2008 a. No. of complaints pending at the beginning of the year ...... 52 13 b. No. of complaints received during the year ...... 3,272 1,720 c. No. of complaints redressed during the year ...... 3,254 1,681 d. No. of complaints pending at the end of the year ...... 70 52 5.1.24 Disclosure of Awards passed by the Banking Ombudsman 31 March 2009 31 March 2008 a. No. of unimplemented awards at the beginning of the year ..... — — b. No. of awards passed by the Banking Ombudsman during the year ...... 2 9 c. No. of awards implemented during the year ...... 2 9 d. No. of unimplemented awards at the end of the year ...... — — 5.1.25 Draw Down from Reserves The Bank has not undertaken any draw down of reserves during the year. 5.1.26 Letter of Comfort The Bank has not issued any Letter of Comfort (LoC) on behalf of its subsidiaries.

F-118 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

5.2 Other disclosures 5.2.1 During the year, the Bank has appropriated Rs. 1,467.20 million (previous year Rs. 268.40 million) to Capital Reserve, being the gain on sale of HTM investments in accordance with RBI guidelines. 5.2.2 Earnings Per Share (‘EPS’) The details of EPS computation is set out below:

As at 31 March 2009 31 March 2008 Basic and Diluted earnings for the year (Net profit after tax) (Rs. in million) ...... 18,154 10,710 Basic weighted average no. of shares (in million) ...... 359 333 Add: Equity shares for no consideration arising on grant of stock options under ESOP (in million) ...... 2 9 Diluted weighted average no. of shares (in million) ...... 361 342 Basic EPS (Rs.) ...... 50.61 32.15 Diluted EPS (Rs.) ...... 50.27 31.31 Nominal value of shares (Rs.) ...... 10.00 10.00 Dilution of equity is on account of 2,388,519 stock options (previous year 8,986,371). 5.2.3 Employee Stock Options Scheme (‘the Scheme’) In February 2001, pursuant to the approval of the shareholders at the Extraordinary General Meeting, the Bank approved an Employee Stock Option Scheme. Under the Scheme, the Bank is authorised to issue upto 13,000,000 equity shares to eligible employees. Eligible employees are granted an option to purchase shares subject to vesting conditions. The options vest in a graded manner over 3 years. The options can be exercised within 3 years from the date of the vesting. Further, in June 2004, June 2006 and June 2008, pursuant to the approval of the shareholders at Annual General Meeting, the Bank approved an ESOP scheme for additional 10,000,000, 4,800,000 and 7,970,000 options respectively. 26,616,345 options have been granted under the Scheme till the previous year ended 31 March 2008. On 21 April 2008, the Bank granted 2,677,355 stock options (each option representing entitlement to one equity share of the Bank) to its employees and the Chairman & CEO. These options can be exercised at a price of Rs. 824.40 per option. The Bank has not recorded any compensation cost on options granted during the current year ended 31 March 2009 and the previous year ended 31 March 2008, as the exercise price was more than or equal to the quoted market price of underlying equity shares on the grant date. The Bank recorded a compensation cost of Rs 14 million on options granted during the year ended 31 March 2002, Rs. 20 million on options granted during the year ended 31 March 2004, Rs. 242 million on options granted during the year ended 31 March 2005, based on the excess of the quoted market price of the underlying equity shares as of the date of the grant over the exercise price. The compensation cost is amortised over the vesting period. Stock option activity under the Scheme for the year ended 31 March 2009 is set out below: Weighted Weighted average average Range of exercise remaining Options exercise prices price contractual outstanding (Rs.) (Rs.) life (Years) Outstanding at the beginning of the year ...... 12,794,268 39.77 to 468.90 367.55 3.57 Granted during the year ...... 2,677,355 824.40 824.40 — Forfeited during the year ...... (322,805) 232.10 to 824.40 466.76 — Expired during the year ...... (395) 97.62 97.62 — Exercised during the year ...... (1,295,449) 39.77 to 468.90 299.95 — Outstanding at the end of the year ...... 13,852,974 39.77 to 824.40 459.87 2.95 Exercisable at the end of the year ...... 5,616,088 39.77 to 824.40 320.20 1.86

F-119 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

The weighted average share price in respect of options exercised during the year was Rs.765.54. Stock option activity under the Scheme for the year ended 31 March 2008 is set out below:

Weighted Weighted average average Range of exercise remaining Options exercise prices price contractual outstanding (Rs.) (Rs.) life (Years) Outstanding at the beginning of the year ...... 9,872,910 29.68 to 319.00 250.14 3.19 Granted during the year ...... 6,729,340 468.90 468.90 — Forfeited during the year ...... (820,249) 39.77 to 468.90 398.10 — Expired during the year ...... (1,380) 39.77 39.77 — Exercised during the year ...... (2,986,353) 29.68 to 468.90 199.51 — Outstanding at the end of the year ...... 12,794,268 39.77 to 468.90 367.55 3.57 Exercisable at the end of the year ...... 2,082,034 39.77 to 468.90 250.56 2.12 The weighted average share price in respect of options exercised during the year was Rs.709.63.

Fair Value Methodology Applying the fair value based method in Guidance Note on ‘Accounting for Employee Share-based Payments’ the impact on reported net profit and EPS would be as follows: 31 March 2009 31 March 2008 Net Profit (as reported) (Rs. in million) ...... 18,154 10,710 Add: Stock based employee compensation expense included in net income (Rs. in million) ...... — 2 Less: Stock based employee compensation expense determined under fair value based method (proforma) (Rs. in million) ...... (863) (718) Net Profit (Proforma) (Rs. in million) ...... 17,291 9,994 Earnings per share: Basic (in Rs. ) As reported ...... 50.61 32.15 Proforma ...... 48.20 30.00 Earnings per share: Diluted (in Rs. ) As reported ...... 50.27 31.31 Proforma ...... 47.88 29.21 The fair value of the options is estimated on the date of the grant using the Black-Scholes options pricing model, with the following assumptions: 31 March 2009 31 March 2008 Dividend yield ...... 1.22% 1.37% Expected life ...... 2-4years 2-4 years Risk free interest rate ...... 7.96% to 8.01% 8.21% to 8.33% Volatility ...... 45.65% to 48.63% 44.20% to 51.21% Volatility is the measure of the amount by which a price has fluctuated or is expected to fluctuate during a period. The measure of volatility used in the Black-Scholes options pricing model is the annualised standard deviation of the continuously compounded rates of return on the stock over a period of time. For calculating volatility, the daily volatility of the stock prices on the National Stock Exchange, over a period prior to the date of grant, corresponding with the expected life of the options has been considered. The weighted average fair value of options granted during the year ended 31 March 2009 is Rs. 310.26. 5.2.4 Dividend paid on shares issued on exercise of stock options The Bank may allot shares between the balance sheet date and record date for the declaration of dividend pursuant to the exercise of any employee stock options. These shares will be eligible for full dividend for the year ended 31 March 2009, if approved at the ensuing Annual General Meeting. Dividend relating to these shares has not been recorded in the current year.

F-120 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

Appropriation to proposed dividend during the year ended 31 March 2009 includes dividend of Rs. 5 million (previous year Rs. 5 million) paid pursuant to exercise of 709,251 employee stock options after the previous year end and record date for declaration of dividend for the year ended 31 March 2008. 5.2.5 Segmental reporting The business of the Bank is divided into four segments: Treasury, Retail Banking, Corporate/Wholesale Banking and Other Banking Business. These segments have been identified and based on RBI’s revised guidelines on Segment Reporting issued on 18 April 2007 vide Circular No. DBOD.No. BP.BC. 81 / 21.04.018/ 2006-07. The principal activities of these segments are as under.

Segment Principal Activities Treasury Treasury operations include investments in sovereign and corporate debt, equity and mutual funds, trading operations, derivative trading and foreign exchange operations on the proprietary account and for customers and central funding. Retail Banking Constitutes lending to individuals/small businesses subject to the orientation, product and granularity criterion and also includes low value individual exposures not exceeding the threshold limit of Rs. 50 million as defined by RBI. Retail Banking activities also include liability products, card services, internet banking, ATM services, depository, financial advisory services and NRI services. Corporate / Wholesale Banking Includes corporate relationships not included under Retail Banking, corporate advisory services, placements and syndication, management of public issue, project appraisals, capital market related services and cash management services. Other Banking Business All banking transactions not covered under any of the above three segments. Revenues of the Treasury segment primarily consist of fees and gains or losses from trading operations and interest income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses. Revenues of the Corporate/Wholesale Banking segment consist of interest and fees earned on loans given to customers falling under this segment and fees arising from transaction services and merchant banking activities such as syndication and debenture trusteeship. Revenues of the Retail Banking segment are derived from interest earned on loans classified under this segment and fees for banking and advisory services, ATM interchange fees and cards products. Expenses of the Corporate/Wholesale Banking and Retail Banking segments primarily comprise interest expense on deposits and funds borrowed from other internal segments, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses. Segment income includes earnings from external customers and from funds transferred to the other segments. Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Inter segment interest income and interest expense represent the transfer price received from and paid to the Central Funding Unit (CFU) respectively. For this purpose, the funds transfer pricing mechanism presently followed by the Bank, which is based on historical matched maturity and market-linked benchmarks, has been used. Operating expenses other than those directly attributable to segments are allocated to the segments based on an activity-based costing methodology. All activities in the Bank are segregated segment-wise and allocated to the respective segment. Geographical segment disclosure is not required to be made since the operations from foreign branches are less than the prescribed norms.

F-121 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

Segmental results are set out below: 31 March 2009 Corporate/ Other Wholesale Retail Banking Segment Revenue Treasury Banking Banking Business Total (Rs. in million) Gross interest income (external customers) ...... 33,697 47,962 26,696 — 108,355 Other income ...... 7,302 12,064 9,657 (54) 28,969 Total income as per profit and loss account ...... 40,999 60,026 36,353 (54) 137,324 Add / (less) inter segment interest income ...... 161,793 12,766 30,400 — 204,959 Total segment income ...... 202,792 72,792 66,753 (54) 342,283 Less: Interest expense (external customers) ...... 53,312 15 18,166 — 71,493 Less: Inter segment interest expense ...... 137,351 44,026 23,582 — 204,959 Less: Operating expenses ...... 2,227 7,360 18,995 — 28,582 Operating profit ...... 9,902 21,391 6,010 (54) 37,249 Less: Provision for non performing assets/Others ...... 1,839 3,570 3,985 3 9,397 Segment result ...... 8,063 17,821 2,025 (57) 27,852 Less: Provision for Tax ...... — — — — 9,698 Net Profit ...... — — — — 18,154 Segment assets ...... 626,449 573,163 256,273 21,336 1,477,221 Segment liabilities ...... 664,737 272,127 429,585 8,637 1,375,085 Net assets ...... (38,288) 301,036 (173,312) 12,699 102,136 Fixed assets additions during the year ...... — — — 4,577 4,577 Depreciation on fixed assets during the year ...... — — — 1,887 1,887 31 March 2008 Corporate/ Other Wholesale Retail Banking Segment Revenue Treasury Banking Banking Business Total (Rs. in million) Gross interest income (external customers) ...... 22,653 31,629 15,841 20 70,053 Other income ...... 4,607 6,617 6,846 (115) 17,955 Total income as per profit and loss account ...... 27,170 38,246 22,687 (95) 88,008 Add / (less) inter segment interest income ...... 97,744 9,534 19,915 — 127,193 Total segment income ...... 12,4914 4,7780 42,602 (95) 215,201 Less: Interest expense (external customers) ...... 32,485 — 11,715 — 44,200 Less: Inter segment interest expenses ...... 86,644 27,050 13,499 — 127,193 Less: Operating expenses ...... 1,346 6,400 13,679 124 21,549 Operating profit ...... 4,439 14,330 3,709 (219) 22,259 Less: Provision for non performing assets/Others ...... 961 2,430 2,403 2 5,796 Segment result ...... 3,478 11,900 1,306 (221) 16,463 Less: Provision for Tax ...... — — — — 5,753 Net Profit ...... — — — — 10,710 Segment assets ...... 469,311 411,350 197,791 1,7,326 1,095,778 Segment liabilities ...... 456,891 226,045 318,564 6,593 1,008,093 Net assets ...... 12,420 185,305 (120,773) 10,733 87,685 Fixed assets additions during the year ...... — — — 3,319 3,319 Depreciation and impairment provision on fixed assets during the year ...... — — — 1,581 1,581

F-122 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

5.2.6 Related party disclosure The related parties of the Bank are broadly classified as: a) Promoters The Bank has identified the following entities as its Promoters. • Administrator of the Specified Undertaking of the Unit Trust of India (UTI-1) • Life Insurance Corporation of India (LIC) • General Insurance Corporation and four PSUs — New India Assurance Co. Ltd., National Insurance Co. Ltd., United India Insurance Co. Ltd. and The Oriental Insurance Co. Ltd.

b) Key Management Personnel • Dr. P. J. Nayak (Chairman & CEO) Based on RBI guidelines, details of transactions with Key Management Personnel are not disclosed since there is only one entity / party in this category.

c) Subsidiary Companies • Axis Sales Limited • Axis Private Equity Limited • Axis Trustee Services Limited • Axis Asset Management Company Limited • Axis Mutual Fund Trustee Limited

d) Joint Venture • Bussan Auto Finance India Private Limited Based on RBI guidelines, details of transactions with Joint Venture Companies are not disclosed since there is only one entity / party in this category. The details of transactions of the Bank with its related parties during the year ended 31 March 2009 are given below: Items/Related Party Promoters Subsidiaries Total (Rs. in million) Dividend Paid ...... 912 — 912 Interest Paid ...... 698 3 701 Interest Received ...... 1 65 66 Investment of the Bank ...... — 336 336 Investment of Related Parties in the Bank ...... — — — Investment in Subordinated Debt / Hybrid Capital of the Bank ...... 15,000 — 15,000 Redemption of Subordinated Debt ...... 200 — 200 Sale of Investments ...... 4,499 — 4,499 Management Contracts and Other reimbursements ...... — 50 50 Purchase of Fixed Assets ...... — 2 2 Advances granted ...... — — — Sale of fixed assets ...... — 1 1 Receiving of Services ...... 249 697 946 Rendering of Services ...... 17 3 20 Other Reimbursements to Related Parties ...... 50 12 62

F-123 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

The balances payable to/receivable from the related parties of the Bank as on 31 March 2009 are given below: Items/Related Party Promoters Subsidiaries Total (Rs. in million) Deposits with the Bank ...... 33,663 164 33,827 Placement of Deposits ...... 2 — 2 Advances ...... — — — Investment of the Bank ...... — 586 586 Investment of Related Parties in the Bank ...... 1,522 — 1,522 Guarantees ...... 390 — 390 Investment in Subordinated Debt/Hybrid Capital of the Bank ...... 17,400 — 17,400 Advance for Rendering of Services ...... — 87 87 Other Receivables ...... — 2 2 The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2009 are given below: Items/Related Party Promoters Subsidiaries Total (Rs. in million) Deposits with the Bank ...... 33,663 263 33,926 Placement of Deposits ...... 2 — 2 Advances ...... 1 1,923 1,924 Investment of the Bank ...... — 586 586 Investment of Related Parties in the Bank ...... 1,522 — 1,522 Repo Borrowing ...... 442 — 442 Guarantees ...... 390 — 390 Investment in Subordinated Debt/Hybrid Capital of the Bank ...... 17,400 — 17,400 The details of transactions of the Bank with its related parties during the year ended 31 March 2008 are given below: Items/Related Party Promoters Subsidiaries Total (Rs. in million) Dividend Paid ...... 546 — 546 Interest Paid ...... 1,061 1 1,062 Interest Received ...... 1 2 3 Investment of the Bank ...... — 150 150 Investment of Related Parties in the Bank ...... 19,031 — 19,031 Purchase / Sale of Investments ...... 1,312 — 1,312 Advances granted ...... — 1,850 1,850 Management Contracts ...... — 12 12 Sale of fixed assets ...... — 1 1 Receiving of Services ...... 131 843 974 Rendering of Services ...... 3 3 6 The balances payable to/receivable from the related parties of the Bank as on 31 March 2008 are given below. Items/Related Party Promoters Subsidiaries Total (Rs. in million) Deposits with the Bank ...... 28,777 69 28,846 Placement of Deposits ...... 1 — 1 Advances ...... — 1,852 1,852 Investment of the Bank ...... — 250 250 Investment of Related Parties in the Bank ...... 1,521 — 1,521 Guarantees ...... 390 — 390 Investment in Subordinated Debt/Hybrid Capital of the Bank ...... 2,600 — 2,600 Advance for Rendering of Services ...... — 197 197 Other Receivables ...... — 3 3

F-124 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2008 are given below: Items/Related Party Promoters Subsidiaries Total (Rs. in million) Deposits with the Bank ...... 28,578 192 28,770 Placement of Deposits ...... 11 — 11 Advances ...... 4,330 1,852 6,182 Investment of the Bank ...... — 250 250 Investment of Related Parties in the Bank ...... 1,543 — 1,543 Repo Borrowing ...... 575 — 575 Guarantees ...... 390 — 390 Investment in Subordinated Debt/Hybrid Capital of the Bank ...... 3,890 — 3,890 5.2.7 Leases Disclosure in respect of assets given on operating lease Operating lease comprises leasing of power generation equipments.

31 March 2009 31 March 2008 (Rs. in million) Gross carrying amount at the beginning of the year ...... 765 765 Accumulated depreciation as at the end of the year ...... — 276 Accumulated impairment losses as at the end of the year ...... — 124 Depreciation for the year ...... 15 34 Impairment losses for the year ...... — 124 Minimum lease payments receivable at the end of the year ...... — — Future lease rentals receivable as at the end of the year: — Not later than one year ...... — 35 — Later than one year and not later than five years ...... — 111 — Later than five years ...... — 21 There are no provisions relating to contingent rent. The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements. Disclosure in respect of assets taken on operating lease Operating lease comprises leasing of office premises/ATMs, staff quarters, electronic data capturing machines and IT equipment.

31 March 2009 31 March 2008 (Rs. in million) Future lease rentals payable as at the end of the year: — Not later than one year ...... 3,192 2,146 — Later than one year and not later than five years ...... 9,530 6,227 — Later than five years ...... 5,840 3,688 Total of minimum lease payments recognised in the profit and loss account for the year ...... 3,038 1,922 Total of future minimum sub-lease payments expected to be received under non-cancellable subleases ...... 25 14 Sub-lease payments recognised in the profit and loss account for the year ...... 3 3 The Bank has sub-leased certain of its properties taken on lease. There are no provisions relating to contingent rent. The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements. There are no undue restrictions or onerous clauses in the agreements.

F-125 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

5.2.8 Other Fixed Assets (including furniture & fixtures) The movement in fixed assets capitalised as application software is given below: Particulars 31 March 2009 31 March 2008 (Rs. in million) At cost at the beginning of the year ...... 1,607 1,198 Additions during the year ...... 550 411 Deductions during the year ...... (2) (2) Accumulated depreciation as at 31 March ...... (1,230) (937) Closing balance as at 31 March ...... 924 669 5.2.9 The major components of deferred tax assets and deferred tax liabilities arising out of timing differences are as under: As at 31 March 2009 31 March 2008 (Rs. in million) Deferred tax assets on account of provisions for doubtful debts ...... 3,077 2,056 Deferred tax assets on account of amortisation of HTM investments ...... 1,281 1,014 Deferred tax assets on account of provision for retirement benefits . . . 350 167 Deferred tax assets on account of contingent provision against derivatives ...... — 244 Deferred tax liability on account of depreciation and impairment on fixed assets ...... (368) (478) Other deferred tax assets ...... 221 188 Net deferred tax asset/(liability) ...... 4,561 3,191

5.2.10 Employee Benefits

Provident Fund The contribution to the employee’s provident fund amounted to Rs. 297 million for the year ended 31 March 2009 (previous year Rs. 210 million).

Superannuation The Bank contributed Rs. 88 million to the employee’s superannuation plan for the year ended 31 March 2009 (previous year Rs. 75 million).

Leave Encashment The Bank charged an amount of Rs. 451 million as liability for leave encashment for the year ended 31 March 2009 (previous year Rs. 281 million).

Gratuity The following tables summarise the components of net benefit expenses recognised in the profit and loss account and funded status and amounts recognised in the balance sheet for the Gratuity benefit plan.

Profit and Loss Account Net employee benefit expenses (recognised in payments to and provisions for employees) 31 March 2009 31 March 2008 (Rs. in million) Current Service Cost ...... 56 34 Interest on Defined Benefit Obligation ...... 21 12 Expected Return on Plan Assets ...... (16) (9) Net Actuarial Losses/ (Gains) recognised in the year ...... 68 55 Past Service Cost ...... — — Losses/ (Gains) on “Curtailments & Settlements” ...... — — Total included in “Employee Benefit Expense” ...... 129 92 Actual Return on Plan Assets ...... 8 7

F-126 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

Balance Sheet Details of provision for gratuity 31 March 2009 31 March 2008 (Rs. in million) Present Value of Funded Obligations ...... 364 234 Fair Value of Plan Assets ...... (298) (178) Present Value of Unfunded Obligations ...... — — Unrecognised Past Service Cost ...... — — Net Liability ...... 66 56 Amounts in Balance Sheet Liabilities ...... 66 56 Assets ...... — — Net Liability ...... 66 56

Changes in the present value of the defined benefit obligation are as follows: 31 March 2009 31 March 2008 (Rs. in million) Change in Defined Benefit Obligation Opening Defined Benefit Obligation ...... 234 143 Current Service Cost ...... 55 34 Interest Cost ...... 21 12 Actuarial Losses / (Gains) ...... 61 54 Liabilities Extinguished on Curtailment ...... — — Liabilities Extinguished on Settlements ...... — — Liabilities Assumed on Acquisition ...... — — Exchange Difference on Foreign Plans ...... — — Benefits Paid ...... (7) (9) Closing Defined Benefit Obligation ...... 364 234

Changes in the fair value of plan assets are as follows: 31 March 2009 31 March 2008 (Rs. in million) Change in the Fair Value of Assets Opening Fair Value of Plan Assets ...... 177 119 Expected Return on Plan Assets ...... 16 9 Actuarial Gains / (Losses) ...... (7) (2) Assets Distributed on Settlements ...... — — Contributions by Employer ...... 119 60 Assets Acquired due to Acquisition ...... — — Exchange Difference on Foreign Plans ...... — — Benefits Paid ...... (7) (9) Closing Fair Value of Plan Assets ...... 298 177

Experience adjustments 31 March 2009 31 March 2008 (Rs. in million) Defined Benefit Obligations ...... 364 234 Plan Assets ...... 298 177 Surplus / (Deficit) ...... (66) (56) Experience Adjustments on Plan Liabilities ...... 34 36 Experience Adjustments on Plan Assets ...... (7) (2) 31 March 2009 31 March 2008 The major categories of plan assets as a percentage of fair value of total plan assets — Insurer Managed Funds ...... 100.00% 100.00%

F-127 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

31 March 2009 31 March 2008 Principal actuarial assumptions at the balance sheet date: Discount Rate ...... 6.70% p.a. 7.55% p.a. Expected rate of Return on Plan Assets ...... 7.50% p.a. 7.50% p.a. Salary Escalation Rate ...... 6.00% p.a. 6.00% p.a. Employee Turnover - 21 to 44 (age in years) ...... 10.00% 10.00% - 44 to 64 (age in years) ...... 1.00% 1.00% The estimates of future salary increases considered in actuarial valuation take account of inflation, seniority, promotion and other relevant factors. The expected rate of return on plan assets is based on the average long-term rate of return expected on investments of the Fund during the estimated term of the obligations. As the contribution expected to be paid to the plan during the annual period beginning after the balance sheet date is based on various internal/external factors, a best estimate of the contribution is not determinable.

5.2.11 Provisions and contingencies a) Movement in provision for frauds included under other liabilities is set out below: 31 March 2009 31 March 2008 (Rs. in million) Opening balance at the beginning of the year ...... 50 17 Additions during the year ...... — 35 Reductions on account of payments during the year ...... (5) (2) Reductions on account of reversals during the year ...... — — Closing balance at the end of the year ...... 45 50

b) Movement in provision for credit enhancements on securtized assets is set out below: 31 March 2009 31 March 2008 (Rs. in million) Opening balance at the beginning of the year ...... 31 32 Additions during the year ...... — — Reductions during the year ...... (31) (1) Closing balance at the end of the year ...... — 31

c) Movement in provision for credit card reward points is set out below: 31 March 2009 31 March 2008 (Rs. in million) Opening provision at the beginning of the year ...... 59 2 Provision made during the year ...... 8 59 Reductions during the year ...... (10) (2) Closing provision at the end of the year ...... 57 59

d) Movement in provision for debit card reward points is set out below: 31 March 2009 31 March 2008 (Rs. in million) Opening provision at the beginning of the year ...... — — Provision made during the year ...... 42 — Reductions during the year ...... — — Closing provision at the end of the year ...... 42 —

F-128 Notes to financial statements for the year ended 31 March 2009 (Continued) Indian Rupees Million

5.2.12 Description of contingent liabilities: a) Claims against the Bank not acknowledged as debts These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in progress. These also include demands raised by income tax and other statutory authorities and disputed by the Bank. b) Liability on account of forward exchange and derivative contracts The Bank enters into foreign exchange contracts, currency options/swaps, interest rate futures and forward rate agreements on its own account and for customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by way of interest/principal in two currencies, based on ruling spot rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. Interest rate futures are standardised, exchange-traded contracts that represent a pledge to undertake a certain interest rate transaction at a specified price, on a specified future date. Forward rate agreements are agreements to pay or receive a certain sum based on a differential interest rate on a notional amount for an agreed period. A foreign currency option is an agreement between two parties in which one grants to the other the right to buy or sell a specified amount of currency at a specific price within a specified time period or at a specified future time. c) Guarantees given on behalf of constituents As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfil its financial or performance obligations. d) Acceptances, endorsements and other obligations These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank’s customers that are accepted or endorsed by the Bank. e) Other items Other items represent outstanding amount of bills rediscounted by the Bank, estimated amount of contracts remaining to be executed on capital account and commitments towards underwriting and investment in equity through bids under Initial Public Offering (IPO) of corporates as at the year end. 5.2.13 Previous year figures have been regrouped and reclassified, where necessary to conform to current year’s presentation.

F-129 Limited Review Report

Review Report to The Board of Directors Axis Bank Limited We have reviewed the accompanying statement of unaudited financial results of Axis Bank Limited (the ‘Bank’) for the quarter ended 30 June 2009. This statement is the responsibility of the Bank’s management and has been approved by the Board of Directors. Our responsibility is to issue a report on these financial statements based on our review. We conducted our review in accordance with the Standard on Review Engagement (SRE) 2400, Engagements to Review Financial Statements issued by the Institute of Chartered Accountants of India. This standard requires that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of Bank personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and accordingly, we do not express an audit opinion. In the conduct of our review, we have relied upon various returns received from the branches of the Bank. Based on our review conducted as above, nothing has come to our attention that causes us to believe that the accompanying statement of unaudited financial results prepared in accordance with recognition and measurement principles laid down in Accounting Standard 25 Interim Financial Reporting, [notified pursuant to the Companies (Accounting Standards) Rules, 2006] and other recognised accounting practices and policies has not disclosed the information required to be disclosed in terms of Clause 41 of the Listing Agreement including the manner in which it is to be disclosed, or that it contains any material misstatement or that it has not been prepared in accordance with the relevant prudential norms issued by the Reserve Bank of India in respect of income recognition, asset classification, provisioning and other related matters.

For S. R. Batliboi & Co. Chartered Accountants per Viren H. Mehta Partner Membership No.: 048749

Place: Mumbai

Date: 13 July 2009

F-130 Axis Bank Regd. Office : ‘Trishul’, 3rd floor, Opp. Samartheshwar Temple, Law Garden, Ellisbridge, Ahmedabad — 380 006.

UNAUDITED FINANCIAL RESULTS FOR THE QUARTER ENDED 30TH JUNE, 2009 FOR THE FOR THE FOR THE QUARTER QUARTER YEAR ENDED ENDED ENDED PARTICULARS 30.06.2009 30.06.2008 31.03.2009 (Unaudited) (Unaudited) (Audited) (Rs. in million) 1. Interest earned (a)+(b)+(c)+(d) ...... 29,056 22,664 108,355 (a) Interest/discount on advances/bills ...... 19,736 15,492 74,659 (b) Income on Investments ...... 8,673 6,528 30,515 (c) Interest on balances with Reserve Bank of India and other inter-bank funds ...... 354 508 2,102 (d) Others ...... 293 136 1,079 2. Other Income ...... 9,586 6,248 28,969 3. TOTAL INCOME (1+2) ...... 38,641 28,912 137,324 4. Interest Expended ...... 18,599 14,560 71,493 5. Operating expenses (i)+(ii) ...... 8,278 6,329 28,582 (i) Employees cost ...... 3,093 2,137 9,977 (ii) Other operating expenses ...... 5,185 4,193 18,606 6. TOTAL EXPENDITURE (4)+(5) (Excluding Provisions and Contingencies) ...... 26,878 20,889 100,075 7. OPERATING PROFIT (3-6) (Profit before Provisions and Contingencies) ...... 11,764 8,023 37,249 8. Provisions (other than tax) and Contingencies (Net) ...... 3,153 2,967 9,397 9. Exceptional Items ...... ——— 10. Profit/(Loss) from Ordinary Activities before Tax (7-8-9) .... 8,611 5,056 27,852 11. Tax expense ...... 2,990 1,755 9,698 12. Net Profit/(Loss) from Ordinary Activities after Tax (10-11) ...... 5,620 3,301 18,154 13. Extraordinary Items (net of tax expense) ...... ——— 14. Net Profit/(Loss) for the period (12-13) ...... 5,620 3,301 18,154 15. Paid-up equity share capital (Face value Rs. 10/- per share) ...... 3,598 3,586 3,590 16. Reserves excluding revaluation reserves ...... 98,546 17. Analytical Ratios (i) Percentage of Shares held by Government of India ...... NIL NIL NIL (ii) Capital Adequacy Ratio ...... 15.28% 13.25% 13.69% (iii) Earnings per Share (EPS) for the period / year (before and after extraordinary items) — Basic ...... 15.64 9.22 50.61 — Diluted ...... 15.50 9.03 50.27 (iv) NPA Ratios (a) Amount of Gross Non Performing assets ...... 9,153 6,383 8,978 (b) Amount of Net Non Performing assets ...... 3,671 3,257 3,271 (c) % of Gross NPAs ...... 1.01 0.92 0.96 (d) % of Net NPAs ...... 0.41 0.47 0.35 (v) Return on Assets (annualised) ...... 1.63 1.19 1.44 18. Public Shareholding — Number of shares ...... 180,867,355 192,755,252 178,930,292 — Percentage of shareholding ...... 50.27% 53.76% 49.84%

F-131 FOR THE FOR THE FOR THE QUARTER QUARTER YEAR ENDED ENDED ENDED PARTICULARS 30.06.2009 30.06.2008 31.03.2009 (Unaudited) (Unaudited) (Audited) (Rs. in million) 19. Promoters and promoter group shareholding Pledged/Encumbered — Number of shares ...... NIL NIL — Percentage of shares (as a % of the total shareholding of promoter and promoter group) ...... — — — Percentage of shares (as a % of the total share capital) ...... — — Non Encumbered — Number of shares ...... 151,877,320 152,227,205 — Percentage of shares (as a % of the total shareholding of promoter and promoter group) ...... 100.00% 100.00% — Percentage of shares (as a % of the total share capital) ...... 42.22% 42.40%

Notes: 1. The results above have been approved by the Board of Directors of the Bank at its meeting held at Mumbai today. 2. ‘Other income’ includes gains from securities’ transactions, commission earned from guarantees/letters of credit, fees earned from providing services to customers, selling of third party products and ATM sharing fees. 3. Disclosure about investor complaints: Complaints at the Received during Disposed off during Unresolved as on beginning of the quarter the quarter the quarter 30.6.2009 1 169 169 1 4. These results for the quarter ended 30th June 2009, have been subjected to a “Limited Review” by the statutory auditors of the Bank. 5. Previous period figures have been regrouped and reclassified, where necessary, to make them comparable with current quarter figures.

Place: Mumbai SHIKHA SHARMA Date : 13.07.2009 MD & CEO www.axisbank.com

F-132 Segmental Results For the For the For the quarter ended quarter ended year ended 30-06-2009 30-06-2008 31-03-2009 (Rs. in million) 1 Segment Revenue a Treasury ...... 53,391 41,722 202,792 b Corporate/Wholesale Banking ...... 18,789 15,555 72,793 c Retail Banking ...... 18,224 14,311 66,752 d Other Banking Business ...... (14) (2) (54) Total ...... 90,390 71,586 342,283 Less Inter segment revenue ...... 51,749 42,674 204,959 Income from Operations ...... 38,641 28,912 137,324 2 Segment Results After Provisions & Before Tax a Treasury ...... 4,400 (309) 8,063 b Corporate/Wholesale Banking ...... 4,716 5,128 17,822 c Retail Banking ...... (490) 239 2,024 d Other Banking Business ...... (15) (2) (57) Total Profit Before Tax ...... 8,611 5,056 27,852 3 Capital Employed a Treasury ...... (41,243) (15,644) (38,288) b Corporate/Wholesale Banking ...... 312,362 202,029 301,036 c Retail Banking ...... (180,767) (108,240) (173,311) d Other Banking Business ...... 17,490 13,080 12,699 Total ...... 107,842 91,225 102,136

Notes: 1. Previous period figures have been regrouped and reclassified, where necessary, to make them comparable with current quarter figures.

F-133 Auditor’s Report on the Consolidated Financial Statements of Axis Bank Limited and its Subsidiaries To The Board of Directors Axis Bank Limited 1. We have audited the attached consolidated balance sheet of Axis Bank Limited and its subsidiaries (the ‘Group’) as at 31 March 2007, and also the consolidated profit and loss account and the consolidated cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of Axis Bank Limited’s management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. We did not audit the financial statements of subsidiaries whose financial statements reflect total assets of Rs. 104.6 million as at 31 March 2007, total revenues of Rs. 110.9 million and cash flows amounting to Rs. 1.2 million for the year then ended. These financial statements and other financial information have been audited by other auditors whose reports have been furnished to us, and our opinion is based solely on the report of other auditors. 4. We report that the consolidated financial statements have been prepared by Axis Bank Limited’s management in accordance with the requirements of Accounting Standard 21 issued by the Institute of Chartered Accountants of India. 5. Based on our audit and on consideration of reports of other auditors on separate financial statements and on the other financial information of the components, and to the best of our information and according to explanations given to us, we are of the opinion that the attached consolidated financial statements gives a true and fair view in conformity with the accounting principles generally accepted in India: i. in the case of the consolidated balance sheet, of the state of affairs of the Group as at 31 March 2007; ii. in the case of the consolidated profit and loss account, of the profit for the year ended on that date; and iii. in the case of the consolidated cash flow statement, the cash flows for the year ended on that date.

For S.R. Batliboi & Co. Chartered Accountants

per Viren H. Mehta Partner Membership No.:048749

17 April 2007

F-134 Consolidated Balance Sheet as of 31 March 2007

Schedule As of No. 31-03-2007 Rs. Figures in millions CAPITAL AND LIABILITIES Capital ...... 1 2,816 Reserves & Surplus ...... 2 31,068 Employees’ Stock Options Outstanding (Net) ...... 17(4.15) 90 Deposits ...... 3 587,850 Borrowings ...... 4 51,956 Other liabilities and provisions ...... 5 58,780 TOTAL ...... 732,560 ASSETS Cash and Balances with Reserve Bank of India ...... 6 46,610 Balance with banks and money at call and short notice ...... 7 22,573 Investments ...... 8 268,872 Advances ...... 9 368,765 Fixed Assets ...... 10 6,778 Other Assets ...... 11 18,962 TOTAL ...... 732,560 Contingent liabilities ...... 12 1,841,654 Bills for collection ...... 62,746 Significant Accounting Policies and Notes to accounts ...... 17

Schedules referred to above form an integral part of the Consolidated Balance Sheet

F-135 Consolidated Profit & Loss account for the year ended 31 March 2007

Schedule No. 31-03-2007 Rs. Figures in millions except EPS data I INCOME Interest earned ...... 13 45,604 Other income ...... 14 10,099 TOTAL ...... 55,703 II EXPENDITURE Interest expended ...... 15 29,932 Operating expenses ...... 16 12,194 Provisions and contingencies ...... 17(5.1.1) 7,035 TOTAL ...... 49,161 III CONSOLIDATED NET PROFIT ATTRIBUTABLE TO THE GROUP ...... (I—II) 6,542 Balance in Profit & Loss account brought Forward from previous year ..... 7,311 Utilisation for Employee Benefits Provision under AS 15 (revised) ...... 17(4.10) (318) IV AMOUNT AVAILABLE FOR APPROPRIATION 13,535 V APPROPRIATIONS : Transfer to Statutory Reserve ...... 1,648 Transfer to Capital Reserve ...... 156 Proposed dividend (includes tax on dividend) ...... 1,488 Balance in Profit & Loss account carried forward ...... 10,243 TOTAL ...... 13,535 VI EARNINGS PER EQUITY SHARE ...... 17(5.1.4) (Face value Rs 10/- per share) Basic ...... 23.33 Diluted ...... 22.63 Significant Accounting Policies and Notes to accounts ...... 17

Schedules referred to above form an integral part of the Consolidated Profit and Loss Account

F-136 Consolidated Cash Flow Statement for the year ended 31 March 2007

Year ended 31-03-2007 Rs. Figures in millions Cash flow from operating activities Net profit before taxes ...... 9,914 Adjustments for: Depreciation on fixed assets ...... 1,120 Depreciation on investments ...... 670 Amortisation of premium on Held to Maturity investments ...... 987 Provision for Non Performing Advances / Investments (net off bad debts) ...... 737 General Provision on retail assets ...... 18 General Provision on Securitised assets ...... 25 Provision on Standard assets ...... 1,224 Provision for wealth tax ...... 3 Loss on sale of fixed assets ...... 29 Amortisation of deferred employee compensation ...... 27 14,754 Adjustments for: (Increase) /Decrease in investments ...... (21,043) (Increase) /Decrease in advances ...... (146,307) Increase/(Decrease) in borrowings ...... 25,147 Increase /(Decrease) in deposits ...... 186,715 (Increase) /Decrease in other assets ...... (1,351) Increase /(Decrease) in other liabilities & provisions ...... (873) Direct taxes paid ...... (4,138) Net cash flow from operating activities ...... 52,904 Cash flow from investing activities Purchase of fixed assets ...... (2,274) (Increase)/Decrease in Held to Maturity Investments ...... (34,265) Proceeds from sale of fixed assets ...... 35 Net cash used in investing activities ...... (36,504) Cash flow from financing activities Proceeds from issue of Subordinated debt (net of repayment) ...... 3,393 Proceeds from Issue of Perpetual Debt & Upper Tier II instruments ...... 13,735 Proceeds from issue of Share capital ...... 29 Proceeds from share premium (net of share issue expenses) ...... 330 Payment of Dividend ...... (1,117) Net cash generated from financing activities ...... 16,370 Effect of exchange fluctuation translation reserve ...... (5) Net increase in cash and cash equivalents ...... 32,765 Cash and cash equivalents as at 1 April 2006 ...... 36,418 Cash and cash equivalents as at 31 March 2007 ...... 69,183

Cash and cash equivalents comprise of cash on hand & in ATM, balance with RBI, balances with banks and money at call & short notice (refer schedule 6 and 7 of the Balance Sheet)

F-137 SCHEDULE 1 — CAPITAL As of 31-03-2007 Rs. Figures in millions Authorised Capital 300,000,000 Equity Shares of Rs. 10/- each...... 3,000 Issued, Subscribed and Paid-up capital ...... 2,816 281,630,787 equity shares (including 11,994,991 GDRs representing 11,994,901 equity shares) of Rs. 10 each fully paid up.

SCHEDULE 2 — RESERVES AND SURPLUS As of 31-03-2007 Rs. Figures in millions I. Statutory Reserve Opening Balance ...... 4,199 Additions during the year ...... 1,648 5,847 II. Share Premium Account Opening Balance ...... 13,554 Additions during the year ...... 402 Less: Share issue expenses ...... — 13,956 III. General Reserve Opening Balance ...... 143 Additions during the year ...... — 143 IV. Capital Reserve Opening Balance ...... 727 Additions during the year ...... 156 883 V. Foreign Currency Translation Reserve Opening Balance ...... 1 Additions during the year [Refer 17(4.5)] ...... (5) (4) VI. Balance in Profit & Loss Account ...... 10,243 TOTAL ...... 31,068

SCHEDULE 3 — DEPOSITS As of 31-03-2007 Rs. Figures in millions A. I. Demand Deposits (i) From banks ...... 7,490 (ii) From others ...... 105,551 II. Savings Bank Deposits ...... 121,259 III. Term Deposits (i) From banks ...... 60,207 (ii) From others ...... 293,343 TOTAL ...... 587,850 B. I. Deposits of branches in India ...... 585,723 II. Deposits of branches outside India ...... 2,127 TOTAL ...... 587,850

F-138 SCHEDULE 4 — BORROWINGS

As of 31-03-2007 Rs. Figures in millions I. Borrowings in India (i) Reserve Bank of India ...... — (ii) Other Banks ...... 6,000 (iii) Other institutions & agencies ...... 12,039 II. Borrowings outside India ...... 33,917 TOTAL ...... 51,956 Secured borrowing included inI&IIabove ...... —

SCHEDULE 5 — OTHER LIABILITIES AND PROVISIONS As of 31-03-2007 Rs. Figures in millions I. Bills payable ...... 13,095 II. Inter — office adjustments (net) ...... — III. Interest accrued ...... 1,773 IV. Proposed dividend (includes tax on dividend) ...... 1,483 V. Subordinated Debt# ...... 21,279 VI Perpetual Debt and Upper Tier instruments* ...... 13,735 VII. Others (including provisions) ...... 7,415 TOTAL ...... 58,780

# represents Subordinated Debt of 10,772 bonds of Rs. 0.5 million each and 15,893 bonds of Rs. 1 million each, in the nature of Non Convertible Debentures. (Also refer 17(5.1.2)) * represents Rs. 4,140 million of Perpetual Debt and Rs. 9,595 million of Upper Tier II instruments. (Also refer 17(5.1.3))

SCHEDULE 6 — CASH AND BALANCES WITH RESERVE BANK OF INDIA As of 31-03-2007 Rs. Figures in millions I. Cash in hand & in ATM (including foreign currency notes) ...... 8,367 II. Balances with Reserve Bank of India : (i) in Current Account ...... 38,243 (ii) in Other Accounts ...... — TOTAL ...... 46,610

F-139 SCHEDULE 7 — BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE As of 31-03-2007 Rs. Figures in millions I. In India (i) Balance with Banks (a) in Current Accounts ...... 6,243 (b) in Other Deposit Accounts ...... 524 (ii) Money at Call and Short Notice (a) With banks ...... 12,138 (b) With other institutions ...... — TOTAL ...... 18,905 II. Outside India i) in Current Accounts ...... 2,903 ii) in Other Deposit Accounts ...... 679 iii) Money at Call & Short Notice ...... 86 TOTAL ...... 3,668 GRAND TOTAL (I+II) ...... 22,573

SCHEDULE 8 — INVESTMENTS As of 31-03-2007 Rs. Figures in millions I. Investments in India in — (i) Government Securities##** ...... 164,308 (ii) Other approved securities ...... — (iii) Shares ...... 4,628 (iv) Debentures and Bonds$ ...... 70,449 (v) Others@ ...... 24,791 (Mutual Fund units, CD / CP, NABARD deposit, PTCs etc.) Gross Investments in India ...... 264,176 Less : Depreciation in the value of investments (includes provision for Non Performing Investment Rs. 67 million) ...... (923) Net investments in India ...... 263,253 II. Investments outside India in — (i) Government Securities (including local authorities) ...... 55 (ii) Subsidiaries and / or joint ventures abroad ...... — (iii) Others ...... 5,564 Gross Investments outside India ...... 5,619 Less : Depreciation in the value of investments ...... — Net investments outside India ...... 5,619 GRAND TOTAL (I+II) ...... 268,872

@ Includes deposits with NABARD Rs. 8,669 million and PTCs Rs. 13,444 million. ## Includes securities costing Rs. 35,815 million pledged for availment of fund transfer facility, clearing facility and margin requirement. ** Includes Repo lending of Rs.13,509 million and net of Repo borrowing of Rs.3,046 million under Liquidity Adjustment Facility of RBI in line with RBI requirements. $ Includes securities costing Rs. 3,218 million pledged for margin requirement.

F-140 SCHEDULE 9 — ADVANCES As of 31-03-2007 Rs. Figures in millions A. (i) Bills purchased and discounted# ...... 12,737 (ii) Cash credits, overdrafts and loans repayable on demand ...... 98,866 (iii) Term loans ...... 257,162 TOTAL ...... 368,765 B. (i) Secured by tangible assets$ ...... 305,023 (ii) Covered by Bank/Government Guarantees&& ...... 14,489 (iii) Unsecured ...... 49,253 TOTAL ...... 368,765 C. I. Advances in India (i) Priority Sectors ...... 131,963 (ii) Public Sector ...... 215 (iii) Banks ...... 277 (iv) Others ...... 210,554 TOTAL ...... 343,009 II. Advances Outside India (i) Due from banks ...... — (ii) Due from others — ...... (a) Bills purchased and discounted ...... 2,914 (b) Syndicate loans ...... 2,442 (c) Others ...... 20,400 TOTAL ...... 25,756 TOTAL l (CI + CII) ...... 368,765

# Bills purchased & discounted are net of Rs.7,000 million of borrowings under the Bills Rediscounting Scheme $ Includes advances against book debts && Includes advances against L/Cs issued by Banks. Advances are net of floating provision, which has been adjusted based on management estimate.

F-141 SCHEDULE 10 — FIXED ASSETS As of 31-03-2007 Rs. Figures in millions I. Premises At cost at the beginning of the year ...... 337 Additions during the year ...... — Deductions during the year ...... — Depreciation to date ...... (72) TOTAL ...... 265 II Other fixed assets (including Furniture & Fixtures) At cost at the beginning of the year ...... 7,884 Additions during the year ...... 2,165 Deductions during the year ...... (119) Depreciation to date ...... (4,192) TOTAL ...... 5,738 III. Assets on Lease At cost at the beginning of the year ...... 765 Additions during the year ...... — Deductions during the year ...... — Depreciation to date ...... (242) TOTAL ...... 523 6,526 IV. CAPITAL WORK-IN-PROGRESS (including Capital Advances) ...... 252 GRAND TOTAL (I+II+III+IV) ...... 6,778

SCHEDULE 11 — OTHER ASSETS As of 31-03-2007 Rs. Figures in millions I Inter-office adjustments (net) ...... — II Interest Accrued ...... 6,419 III Tax paid in advance / tax deducted at source (net of provisions) ...... 1,044 IV Stationery and stamps ...... 8 V Non banking assets acquired in satisfaction of claims ...... — VI Others# ...... 11,491 TOTAL ...... 18,962

# Includes deferred tax assets Rs. 1,598 million.

F-142 SCHEDULE 12 — CONTINGENT LIABILITIES As of 31-03-2007 Rs. Figures in millions I. Claims against the Group not acknowledged as debts ...... 1,708 II. Liability for partly paid investments ...... — III. Liability on account of outstanding forward exchange and derivative contracts a) Forward Contracts ...... 507,359 b) Interest Rate Swaps & Currency Swaps ...... 1,174,109 c) Foreign Currency Options ...... 52,836 TOTAL ...... 1,734,304 IV. Guarantees given on behalf of constituents In India ...... 43,814 Outside India ...... 50 V Acceptances, endorsements and other obligations ...... 54,772 VI Other items for which the Group is contingently liable ...... 7,006 TOTAL ...... 1,841,654

SCHEDULE 13 — INTEREST EARNED Year ended 31-03-2007 Rs. Figures in millions I. Interest/discount on advances/bills ...... 27,028 II. Income on investments ...... 17,315 III. Interest on balances with Reserve Bank of India and other inter-bank funds ...... 773 IV. Others ...... 488 TOTAL ...... 45,604

SCHEDULE 14 — OTHER INCOME Year ended 31-03-2007 Rs. Figures in millions I. Commission, exchange and brokerage ...... 7,790 II. Profit / (Loss) on sale of Investments/ Derivative transaction (net) ...... 609 III. Profit on exchange transactions (net) ...... 1,248 IV. Profit/(Loss) on sale of fixed assets (net) ...... (29) V. Income earned by way of dividends etc. from Subsidiaries/companies and/or joint venture abroad / in India ...... — VI. Lease rentals ...... 35 VII. Miscellaneous Income# ...... 446 TOTAL ...... 10,099

# including recoveries on account of advances written off in earlier years Rs. 236 million and profit on account of portfolio sell downs/ securitisation Rs. 20 million

F-143 SCHEDULE 15 — INTEREST EXPENDED Year ended 31-03-2007 Rs. Figures in millions I. Interest on deposits ...... 24,808 II. Interest on Reserve Bank of India / Inter-bank borrowings ...... 1,688 III. Others@ ...... 3,436 TOTAL ...... 29,932

@ including interest on repos and subordinated debt

SCHEDULE 16 — OPERATING EXPENSES Year ended 31-03-2007 Rs. Figures in millions I. Payments to and provisions for employees ...... 3,912 II. Rent, taxes and lighting ...... 1,599 III. Printing and stationery ...... 377 IV. Advertisement and publicity ...... 296 V. Depreciation on bank’s property ...... 1,120 VI. Directors’ fees, allowance and expenses ...... 6 VII. Auditor’s fees and expenses ...... 5 VIII. Law Charges ...... 64 IX. Postage, Telegrams, Telephones, etc...... 701 X. Repairs and maintenance ...... 1,290 XI. Insurance ...... 548 XII. Other Expenditure ...... 2,276 TOTAL ...... 12,194

F-144 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Currency: In Indian Rupees)

1 Principles of Consolidation The consolidated financial statements comprise the financial statements of UTI Bank Limited (‘the Bank’) and its subsidiaries, which together constitute the ‘Group’. The Bank consolidates its subsidiaries in accordance with AS-21, Consolidated Financial Statements issued by the Institute of Chartered Accountants of India on a line-by-line basis by adding together the like items of assets, liabilities, income and expenditure.

2 Basis of preparation The financial statements of the Group have been prepared and presented under the historical cost convention on the accrual basis of accounting, unless otherwise stated, and comply with generally accepted accounting principles, statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India (‘RBI’) from time to time, the Accounting Standards (‘AS’) issued by the Institute of Chartered Accountants of India (‘ICAI’) to the extent applicable and current practices prevailing within the banking industry in India. The consolidated financial statements present the accounts of UTI Bank Ltd. with its following subsidiaries: Country of Ownership Name Incorporation Interest UBL Sales Ltd...... India 100.00% UBL Asset Management Company Ltd...... India 100.00% The audited financial statements of the subsidiaries have been drawn up to the same reporting date as that of the Bank, i.e. 31 March 2007.

3 Use of estimates The preparation of the financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates is recognised prospectively in the current and future periods.

4 Significant accounting policies 4.1 Investments UTI Bank Ltd. Classification In accordance with the RBI guidelines, investments are classified at the date of purchase as: • Held for Trading (‘HFT’); • Available for Sale (‘AFS’); and • Held to Maturity (‘HTM’). Investments that are held principally for resale within a short period are classified as HFT securities. As per RBI guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date. Investments not exceeding 25% of total investments, which the Bank intends to hold till maturity, are classified as HTM securities. As permitted by RBI, the Bank may exceed the limit of 25% of total investments provided the excess comprises only of those securities which are eligible for complying with the Statutory Liquidity Ratio (‘SLR’) i.e. SLR securities and the total SLR securities held in HTM category is not more than 25% of its demand and time liabilities as on the effective date. The effective date means the last Friday of the

F-145 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees) preceding fortnight for computation of the aforesaid limit. In computing the investment ceiling for HTM portfolio for the aforesaid purpose, debentures and bonds, which are in the nature of advances are excluded. All other investments are classified as AFS securities. However, for disclosure in the balance sheet, investments are classified under six categories — Government securities, Other approved securities, Shares, Debentures and Bonds, Investment in Subsidiaries/Joint Ventures and Others. Investments made outside India are classified under three categories — Government Securities, Subsidiaries and/or Joint Ventures abroad and Others.

Transfer of security between categories Transfer of security between categories of investments is accounted for at the acquisition cost/book value/ market value as on the date of transfer, whichever is lower, and the depreciation, if any, on such transfer is recognised in the profit and loss account.

Valuation Investments classified under the HTM category are carried at acquisition cost. Any premium on acquisition over face value is amortised on a straight-line basis over the remaining period to maturity. Investments classified under the AFS and HFT category are marked to market. The market/fair value for the purpose of periodical valuation of quoted investments included in the ‘Available for Sale’ and ‘Held for Trading’ categories is the market price of the scrip as available from the trades/quotes on the stock exchanges, SGL account transactions, price list of RBI or prices declared by Primary Dealers Association of India jointly with Fixed Income Money Market and Derivatives Association (“FIMMDA”), periodically. Net depreciation, if any, within each category of investments is recognised in the profit and loss account. The net appreciation if any, under each classification is ignored, except to the extent of depreciation previously provided. The book value of individual securities is not changed consequent to the periodic valuation of investments. Treasury Bills and Commercial Paper, being discounted instruments, are valued at carrying cost. Units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund. Market value of investments where current quotations are not available, is determined as per the norms prescribed by the RBI as under: • market value of unquoted Government securities is derived based on the Prices/Yield to Maturity (‘YTM’) rate for Government securities of equivalent maturity as notified by Fixed Income Money Market and Derivatives Association of India (‘FIMMDA’) jointly with the Primary Dealers Association of India (‘PDAI’) at periodic intervals; • in case of Central Government Securities, which do not qualify for SLR requirement, the market price is derived by adding 50 basis points to the Base Yield Curve of Central Government Securities; • market value of unquoted State Government securities is derived by applying the YTM method by marking it up by 25 basis points above the yields of the Central Government Securities of equivalent maturity notified by the FIMMDA/PDAI at periodic intervals; • in case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly, the market price is derived based on the YTM for Government securities as notified by FIMMDA/PDAI and suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for various credit ratings along with residual maturity issued by FIMMDA is adopted for this purpose; • in case of preference shares where dividend is not received regularly, the price derived on the basis of YTM is discounted in accordance with the RBI guidelines; • in case of bonds and debentures where interest is not received regularly, the valuation is in accordance with prudential norms for provisioning as prescribed by RBI; and

F-146 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

• equity shares, for which current quotations are not available or where the shares are not quoted on the stock exchanges, are valued at break-up value (without considering revaluation reserves, if any) which is ascertained from the company’s latest balance sheet (which is not more than one year prior to the date of valuation). In case the latest balance sheet is not available, the shares are valued at Re 1 per company. Investments in subsidiaries are categorised as ‘Held to Maturity’ in accordance with RBI guidelines.

Repurchase and reverse repurchase transactions Repurchase and reverse repurchase transactions are accounted as outright sale and outright purchase respectively. The difference between the clean price of the first leg and clean price of the second leg is recognised as interest income/expense over the period of the transaction. However, depreciation in their value, if any, compared to their original cost, is recognised in the profit and loss account.

4.2 Advances UTI Bank Ltd Advances are classified into performing and non-performing advances (NPAs) as per RBI guidelines and are stated net of specific provisions made towards Non Performing Advances. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. Provisions for NPAs (other than retail advances) are made for sub-standard and doubtful assets at rates as prescribed by RBI. Loss assets and unsecured portion of doubtful assets are provided/written off as per the extant RBI guidelines. NPAs are identified by periodic appraisals of the loan portfolio by management. In the case of retail advances, provisions are made upon reaching specified stages of delinquency (90 days or more of delinquency) under each type of loan, which satisfies the RBI prudential norms on provisioning. For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI, which requires the present value of the interest sacrifice be provided at the time of restructuring. A general provision @ 0.25% to 2.00% is made on the various classes of standard assets as prescribed by RBI. Pursuant to the change in provisioning requirement for certain classes of standard assets from 0.40% to 2.00% as notified by RBI, the Bank has made an additional provision of Rs. 681 million during the year ended 31 March 2007. In addition, general provision is also made on retail advances based on bucket-wise provisioning for delinquencies less than 90 days.

4.3 Country Risk UTI Bank Ltd In addition to the provisions required to be held according to the asset classification status, provisions are held for individual country exposure (other than for home country). The countries are categorised into seven risk categories namely insignificant, low, moderate, high, very high, restricted and off-credit and provisioning made on exposures exceeding 180 days on a graded scale ranging from 0.25% to 100%. For exposures with contractual maturity of less than 180 days, 25% of the normal provision requirement is held. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on such country exposure.

4.4 Securitisation UTI Bank Ltd The Bank enters into purchase/sale of corporate and retail loans through direct assignment/Special Purpose Vehicle (SPV). In most cases, post securitisation, the Bank continues to service the loans transferred to the assignee/SPV. The Bank also provides credit enhancement in the form of cash collaterals and/or by subordination of cash flows to Senior Pass Through Certificate (PTC) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies, future servicing etc.) accepted by the Bank, appropriate provision/ disclosure is made at the time of sale in accordance with AS-29-’Provisions, contingent liabilities and contingent assets’.

F-147 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

Gain on securitisation transaction is recognised over the period of the underlying securities issued by the SPV. Loss on securitisation is immediately debited to profit and loss account.

4.5 Foreign currency transactions UTI Bank Ltd In respect of domestic operations, transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction. Foreign currency assets and liabilities are translated at the balance sheet date at rates notified by Foreign Exchange Dealers Association of India (‘FEDAI’). All profits/losses resulting from year-end revaluations are recognised in the profit and loss account. Financial statements of foreign branches classified as non-integral foreign operations are translated as follows: • Assets and liabilities (both monetary and non-monetary as well as contingent liabilities) are translated at closing rates notified by FEDAI at the year-end. • Income and expenses are translated at the rates prevailing on the date of the transactions. • All resulting exchange differences are accumulated in a separate ‘Foreign Currency Translation Reserve’ till the disposal of the net investments. Outstanding forward exchange contracts (excluding currency swaps undertaken to hedge Foreign Currency Non-Resident (‘FCNR’) deposits which are not revalued) and spot exchange contracts are revalued at year end exchange rates notified by FEDAI. The resulting gains or losses on revaluation are included in the profit and loss account in accordance with RBI/FEDAI guidelines. Premium/discount on currency swaps undertaken to hedge FCNR deposits is recognised as interest income/ expense and is amortised on a straight-line basis over the underlying swap period. Contingent liabilities on account of foreign exchange contracts/options, guarantees, acceptances, endorsements and other obligations denominated in foreign currencies are disclosed at closing rates of exchange notified by FEDAI.

4.6 Derivative transactions UTI Bank Ltd. Derivative transactions comprise of swaps and options, which are disclosed as contingent liabilities. The swaps/options are segregated as trading or hedge transactions. Trading swaps/options are revalued at the balance sheet date with the resulting unrealized gain or loss being recognised in the profit and loss account and correspondingly in other assets or other liabilities respectively. Hedged swaps/options are accounted for on an accrual basis.

4.7 Revenue recognition UTI Bank Ltd. Interest income is recognised on an accrual basis except interest income on NPAs, which is recognised on receipt. Commission income on deferred payment guarantees, is recognised pro-rata over the period of the guarantee. All other fee income is recognised upfront on its becoming due. Dividend is accounted on an accrual basis when the right to receive the dividend is established. Gain/loss on sell down of loans and advances through direct assignment is recognised at the time of sale. Realized gains on investments under HTM category are recognised in the profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines. Losses are recognised in the profit and loss account.

F-148 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

UBL Sales Ltd. Revenue is recognised when there is reasonable certainty of its ultimate realization/collection. Revenue from marketing of credit cards and retail loans (excluding service tax) is recognised at the point of issuance of the credit card or disbursal of loan respectively by UTI Bank Ltd. to the customer.

4.8 Fixed assets and depreciation Group Fixed assets are carried at cost of acquisition less accumulated depreciation. Cost includes freight, duties, taxes and incidental expenses related to the acquisition and installation of the asset. Capital work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid to acquire fixed assets. Depreciation (including on assets given on operating lease) is provided on the straight-line method from the date of addition. The rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the management’s estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life on a subsequent review is shorter, then depreciation is provided at a higher rate based on management’s estimate of the useful life/remaining useful life. Pursuant to this policy, depreciation has been provided using the following estimated useful lives: Estimated Asset useful life Owned premises ...... 20years Assets given on operating lease ...... 20years Computer hardware ...... 3years Application software ...... 5years Vehicles ...... 4years EPABX, telephone instruments ...... 8years Mobile phone ...... 2years Locker cabinets/cash safe/strong room door ...... 16years Assets at staff residence ...... 5years All other fixed assets ...... 10years All fixed assets individually costing less than Rs. 5,000 are fully depreciated in the year of installation. Depreciation on assets sold during the year is recognised on a pro-rata basis to the profit and loss account till the date of sale. The carrying amount of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. As on 31 March 2007, there was no impairment to assets.

4.9 Lease transactions Group Assets given on operating lease are capitalised at cost. Rentals received by the Bank are recognised in the profit and loss account when due. Lease payments for assets taken on operating lease are recognised as an expense in the profit and loss account on a straight-line basis over the lease term.

4.10 Employee benefits Group Contributions payable to the recognised provident fund, which is a defined contribution scheme, are recognised in the profit and loss account.

F-149 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

UTI Bank Ltd. The Bank contributes towards gratuity fund (defined benefit retirement plan) administered by the Life Insurance Corporation of India (‘LIC’) for eligible employees. Under this scheme, the settlement obligations remain with the Bank, although LIC administers the scheme and determines the contribution premium required to be paid by the Bank. The plan provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee’s salary and the years of employment with the Bank. Liability with regard to gratuity fund is accrued based on actuarial valuation conducted as at 31 March each year. The Bank provides leave encashment benefit (long term), which is a defined benefit scheme based on actuarial valuation as at the balance sheet date conducted by an independent actuary. Employees of the Bank are entitled to receive retirement benefits under the Bank’s Superannuation scheme. Superannuation is a defined contribution plan under which the Bank contributes annually a specified sum of 10% of the employee’s eligible annual basic salary to LIC, which undertakes to pay the lumpsum and annuity benefit payments pursuant to the scheme. Superannuation contributions are recognised in the profit and loss account in the period in which they accrue. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred. Effective 1 April 2006, the Bank has early adopted Accounting Standard 15 (AS) (Revised) on ‘Employee Benefits’ issued by the Institute of Chartered Accountants of India. Accordingly, the Bank has recorded charge for compensated absences for the year ended 31 March 2007 based on actuarial valuation conducted by an independent entity. Further, in accordance with the transitional provisions of AS-15 (Revised), an amount of Rs. 318 million (net of tax benefit) being the liability for employee benefits (gratuity, leave encashment and sick leave) up to the year ended 31 March 2006 has been adjusted against the balance in profit and loss account.

UBL Sales Ltd. The Company contributes towards gratuity fund (defined retirement plan) administered by the Life Insurance Corporation of India (‘LIC’) for eligible employees. Liability with regard to gratuity fund is accrued based on actuarial valuation conducted by LIC as on 31 December every year.

UBL Asset Management Company Ltd. The payment of Gratuity Act, 1972 is not yet applicable to the company.

4.11 Credit Card reward points UTI Bank Ltd. The Bank estimates the probable redemption of credit card reward points using an actuarial method by employing an independent actuary. Provision for the said reward points is then made based on the actuarial valuation report as furnished by the said independent actuary.

4.12 Taxation Group Income tax expense is the aggregate amount of current tax, deferred tax and fringe benefit tax charge. Current year taxes and fringe benefit tax are determined in accordance with the Income-tax Act, 1961. Deferred tax adjustments comprise of changes in the deferred tax assets or liabilities during the period. Deferred tax assets and liabilities are recognised on a prudent basis for the future tax consequences of timing differences arising between the carrying values of assets and liabilities and their respective tax basis, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted prior to the balance sheet date. The impact of changes in the deferred tax assets and liabilities is recognised in the profit and loss account. Deferred tax assets are recognised and reassessed at each reporting date, based upon management’s judgement as to whether realisation is considered certain. Deferred tax assets are recognised on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty that such deferred tax asset can be realised against future profits.

F-150 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

4.13 Earnings per share Group The Group reports basic and diluted earnings per share in accordance with AS 20 — ’Earnings per Share’. Basic earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding for the year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at year end.

4.14 Cash and cash equivalents Group Cash and cash equivalents include cash on hand and in ATM, balances with Reserve Bank of India, balances with other banks and money at call and short notice.

4.15 Employee stock option scheme UTI Bank Ltd. The 2001 Employee Stock Option Scheme (‘the Scheme’) provides for grant of stock options on equity shares of the Bank to employees and Directors of the Bank. The Scheme is in accordance with the Securities and Exchange Board of India (SEBI) (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. Options are granted at an exercise price, which is equal to/less than the fair market price of the underlying equity shares. The excess of such fair market price over the exercise price of the options as at the grant date is recognised as a deferred compensation cost and amortised on a straight-line basis over the vesting period of such options. The fair market price is the latest available closing price, prior to the date of the Board of Directors meeting in which options are granted / shares are issued, on the stock exchange on which the shares of the Bank are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date shall be considered.

4.16 Provisions, contingent liabilities and contingent assets Group A provision is recognised when the Group has a present obligation as a result of past event where it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. A disclosure of contingent liability is made when there is: • a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non occurrence of one or more uncertain future events not within the control of the Bank; or • a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

F-151 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

5 Notes to Accounts 5.1.1 ‘Provisions and contingencies’ recognised in the profit and loss account include: For the year ended 31 March 2007 (Rs. in million) Provision for income tax — Current tax for the year ...... 4,126 — Deferred tax for the year ...... (815) Provision for fringe benefit tax ...... 60 3,371 Provision for wealth tax ...... 3 Provision for non performing advances & investments (including bad debts written off and write backs) ...... 737 Provision towards standard assets ...... 1,224 General provision for retail loans ...... 18 Amortisation of premium on Held to Maturity investments ...... 987 Provision for depreciation in value of investments ...... 670 Provision for Securitised Assets ...... 25 Total ...... 7,035

5.1.2 During the year ended 31 March 2007, the Bank raised subordinated debt of Rs. 3,893 million, the details of which are set out below: Date of allotment Period Coupon Amount 28 June 2006 ...... 87months 8.95% Rs. 335 million 120 months 9.10% Rs. 1,049 million 30 March 2007 ...... 120months 10.10% Rs. 2,509 million During the year ended 31 March 2007, the Bank redeemed subordinated debt of Rs. 500 million, the details of which are set out below: Date of maturity Period Coupon Amount 28 June 2006 ...... 63months 11.10% Rs. 500 million 5.1.3 During the year ended 31 March 2007, the Bank also raised hybrid capital in the form of Perpetual Debt of Rs. 4,140 million qualifying as Tier I capital and Rs. 9,596 million qualifying as Tier II capital, the details of which are set out below: Type of Capital Date of allotment Period Coupon Amount Upper Tier II ...... 11August 2006 180 months 7.25% (U.S.$150 million) Rs. 6,521 million Perpetual Debt ...... 30September 2006 Perpetual 10.05% Rs. 2,140 million Perpetual Debt ...... 15November 2006 Perpetual 7.167% (U.S.$46 million) Rs. 2,000 million Upper Tier II ...... 24November 2006 180 months 9.35% Rs. 2,000 million Upper Tier II ...... 6February 2007 180 months 9.50% Rs. 1,075 million 5.1.4 Earnings Per Share (‘EPS’) The details of EPS computation is set out below: As at 31 March 2007 Earnings for the year (Rs. in million) ...... 6,543 Basic weighted average no. of shares (in million) ...... 281 Basic EPS (Rs.) ...... 23.33 Diluted weighted average no. of shares (in million) ...... 289 Diluted EPS (Rs.) ...... 22.63 Nominal value of shares — Basic (Rs. in million) ...... 2,816 Nominal value of shares — Diluted (Rs. in million) ...... 2,903

F-152 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

Dilution of equity is on account of 8,653,638 stock options. 5.1.5 Dividend paid on shares issued on exercise of stock options The Bank may allot shares between the balance sheet date and record date for the declaration of dividend pursuant to the exercise of any employee stock options. These shares will be eligible for full dividend for the year ended 31 March 2007, if approved at the ensuing Annual General Meeting. Dividend relating to these shares has not been recorded in the current year. Appropriation to proposed dividend during the year ended 31 March 2007 includes dividend paid pursuant to exercise of 1,301,308 employee stock options after the previous year end and record date for declaration of dividend for the year ended 31 March 2006. 5.1.6 Employee Stock Options Scheme (‘the Scheme’) In February 2001, pursuant to the approval of the shareholders at the Extraordinary General Meeting, the Bank approved an Employee Stock Option Scheme. Under the Scheme, the Bank is authorised to issue up to 13,000,000 equity shares to eligible employees. Eligible employees are granted an option to purchase shares subject to vesting conditions. The options vest in a graded manner over 3 years. The options can be exercised within 3 years from the date of the vesting. Further, in June 2004 and June 2006, pursuant to the approval of the shareholders at Annual General Meeting, the Bank approved an ESOP scheme for additional 10,000,000 and 4,800,000 options respectively. 15,191,145 options have been granted under the Scheme till the previous year ended 31 March 2006. On 17 April 2006, the Bank granted 4,695,860 stock options (each option representing entitlement to one equity share of the Bank) to its employees, the Chairman & Managing Director and the Executive Director. These options can be exercised at a price of Rs. 319.00 per option. The Bank has not recorded any compensation cost on options granted during the year ended 31 March 2001, year ended 31 March 2006 and the current year ended 31 March 2007 as the exercise price was more than or equal to the quoted market price of underlying equity shares on the grant date. The Bank recorded a compensation cost of Rs 14 million on options granted during the year ended 31 March 2002, Rs. 20 million on options granted during the year ended 31 March 2004, Rs. 242 million on options granted during the year ended 31 March 2005, based on the excess of the quoted market price of the underlying equity shares as of the date of the grant over the exercise price. The compensation cost is amortised over the vesting period. Compensation expense for all the grants under the Scheme for the year ended 31 March 2007 is Rs. 27 million. Stock option activity under the Scheme for the year ended 31 March 2007 is set out below: Weighted average Range of exercise Weighted average remaining prices exercise price contractual life Options outstanding (Rs.) (Rs.) (Years) Outstanding at the beginning of the year ...... 8,838,245 29.68 to 232.10 171.39 4.00 Granted during the year ...... 46,95,860 319.00 319.00 — Forfeited during the year ...... (720,744) 29.68 to 319.00 254.96 — Expired during the year ...... (391) 29.68 to 319.00 29.70 — Exercised during the year ...... (2,940,060) 29.68 to 319.00 122.25 — Outstanding at the end of the year ..... 9,872,910 29.68 to 319.00 250.14 3.19 Exercisable at the end of the year ..... 979,768 29.68 to 319.00 200.43 3.90

F-153 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

Fair Value Methodology Impact of fair value method on net profit and EPS: 31 March 2007 Net Profit (as reported) (Rs. in million) ...... 6,542 Add:Stock based employee compensation expense included in net income (Rs. in million) ...... 27 Less: Stock based employee compensation expense determined under fair value based method (proforma) (Rs. in million) ...... (459) Net Profit (Proforma) (Rs. in million) ...... 6,110 Earnings per share: Basic (in Rs. ) As reported ...... 23.33 Proforma ...... 21.78 Earnings per share: Diluted (in Rs. ) As reported ...... 22.63 Proforma ...... 21.14 The fair value of the options is estimated on the date of the grant using the Black-Scholes options pricing model, with the following assumptions: 31 March 2007 Dividend yield ...... 1.69% Expected life ...... 2-4years Risk free interest rate ...... 6.93% to 7.17% Volatility ...... 46.91%-52.03% 5.1.7 Segmental reporting The business of the Group is divided into two segments: Treasury & Other Banking Operations. These segments have been identified and reported based on RBI guidelines on compliance with Accounting Standards by banks vide circular no. DBOD. BP. BC. 89/21.04.018/2002-03 dated 29 March 2003. The operations of UBL Sales Ltd. and UBL Asset Management Company Ltd. have been classified under the ‘Other Banking Operations’ Segment. The treasury services segment undertakes trading operations on the proprietary account, foreign exchange operations and derivatives trading. Revenues of the treasury services segment primarily consist of fees and gains or losses from trading operations and interest income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses. Other banking operations principally comprise the lending activities (i.e corporate and retail) of the Bank. The corporate lending activity include providing loans and transaction services to corporate and institutional customers. The retail lending activity include raising of deposits from customers and providing loans and advisory services to such customers through branch network and other delivery channels. Revenues from the corporate lending activity consist of interest and fees earned on loans given to corporate customers, interest earned on cash float and fees arising from transaction services and fees from merchant banking activities such as syndication and debenture trusteeship. Revenues from the retail lending activity are derived from interest earned on retail loans, fees for banking and advisory services, ATM interchange fees and interest earned from other segments for surplus funds placed with those segments. Expenses of the lending activity primarily comprise interest expense on deposits, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses. Segment revenue includes earnings from external customers plus earnings from funds transferred to the other segments. Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that segment.

F-154 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

Segment-wise income and expenses include certain allocations. Inter segment revenue represents the transfer price paid/received by the Central Funding Unit (CFU). For this purpose, the funds transfer pricing mechanism presently followed by the Bank, which is based on cost of funds and spreads, has been used. Operating expenses are allocated to the segments based on an activity-based costing methodology. All activities in the Group are segregated segment-wise and allocated to the respective segment. Geographical segment disclosure is not required to be made, since the operations from foreign branches are less than the prescribed norms. Segmental results are set out below: 31 March 2007 Other Banking Treasury Operations Unallocated Total (Rs. in million) Segment Revenue Gross interest income (external customers) ..... 18,601 27,003 — 45,604 Other income ...... 2,395 7,728 (24) 10,099 Total income as per profit and loss account ... 20,996 34,731 (24) 55,703 Add/(less) inter segment interest income ...... 67,758 18,412 — 86,170 Total segment income ...... 88,754 53,143 (24) 141,873 Less: Interest expense (external customers) ..... 23,146 6,786 — 29,932 Less: Inter segment interest expenses ...... 60,856 25,314 — 86,170 Less: Operating expenses ...... 775 11,419 — 12,194 Operating profit ...... 3,977 9,624 (24) 13,577 Less: Provision for non performing assets/Others ...... 1,712 1,952 — 3,664 Segment result ...... 2,265 7,672 (24) 9,913 Less: Provision for Tax ...... — — — 3,371 Net Profit ...... — — — 6,542 Segment assets ...... 343,292 376,671 12,597 732,560 Segment liabilities ...... 370,740 324,046 3,889 698,675 Net assets ...... (27,448) 52,625 8,708 33,885 Fixed assets additions during the year ...... — — 2,165 2,165 Depreciation on fixed assets during the year .... 1,120 1,120 5.1.8 Related party disclosure The related parties of the Bank are broadly classified as: a) Promoter The Bank has identified the following entities as its Promoters. • Administrator of the Specified Undertaking of the Unit Trust of India (UTI-1) • Life Insurance Corporation of India (LIC) • General Insurance Corporation and four PSUs: New India Assurance Co. Ltd, National Insurance Co Ltd., United India Insurance Co. Ltd. and The Oriental Insurance Co. Ltd b) Key Management Personnel Dr. P. J. Nayak (Chairman & Managing Director) and Shri. S. Chatterjee (Executive Director).

F-155 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

The details of transactions of the Bank with its related parties during the year ended 31 March 2007 are given below: Related Party to Key Management Key Management Items/Related Party Promoter Personnel Personnel Total (Rs. in million) Dividend Paid ...... 426 1 — 427 Interest Paid ...... 312 1 1 314 Interest Received ...... 16 — — 16 Investments ...... 1,580 — — 1,580 Management Contracts ...... — 31 — 31 Receiving of Services ...... 182 — — 182 Rendering of Services ...... 3 — — 3 The balances payable to/receivable from the related parties of the Bank as on 31 March 2007 are given below: Related Party to Key Management Key Management Items/Related Party Promoter Personnel Personnel Total (Rs. in million) Deposits with the Bank ...... 7,608 22 6 7,636 Placement of Deposits ...... 1 — — 1 Advances ...... 1 2 — 3 Investment of Related Parties in the Bank . . 1,214 1 — 1,215 Guarantees ...... 390 — — 390 Investment in Subordinated Debt of the Bank ...... 3,340 — — 3,340 The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2007 are given below: Related Party to Key Management Key Management Items/Related Party Promoter Personnel Personnel Total (Rs. in million) Deposits with the Bank ...... 7,810 24 6 7,840 Placement of Deposits ...... 1 — — 1 Advances ...... 3,999 3 — 4,002 Investment of Related Parties in the Bank . . 1,218 1 — 1,219 Repo Borrowing ...... 2,885 — — 2,885 Guarantees ...... 390 — — 390 Investment in Subordinated Debt of the Bank ...... 4,310 — — 4,310

F-156 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

5.1.9 Leases Disclosure in respect of assets given on operating lease Operating lease comprises leasing of power generation equipments. 31 March 2007 (Rs. in million) Gross carrying amount at the beginning of the year ...... 765 Accumulated depreciation as at the end of the year ...... 242 Accumulated impairment losses as at the end of the year ...... — Depreciation for the year ...... 34 Impairment losses for the year ...... — Minimum lease payments receivable at the end of the year ...... 10 Future lease rentals receivable as at the end of the year: — Not later than one year ...... 35 — Later than one year and not later than five years ...... 125 — Later than five years ...... 42 There are no provisions relating to contingent rent. The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements.

Disclosure in respect of assets taken on operating lease Operating lease comprises leasing of office premises/ATMs, staff quarters, electronic data capturing machines and IT equipment. 31 March 2007 (Rs. in million) Future lease rentals payable as at the end of the year: — Not later than one year ...... 1,241 — Later than one year and not later than five years ...... 3,408 — Later than five years ...... 1,161 Total of minimum lease payments recognised in the profit and loss account for the year ...... 712 There are no provisions relating to contingent rent. The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements. There are no undue restrictions or onerous clauses in the agreements. 5.1.10 The major components of deferred tax assets and deferred tax liabilities arising out of timing differences are as under: As at 31 March 2007 (Rs. in million) Deferred tax assets on account of provisions for doubtful debts ...... 1,213 Deferred tax assets on account of amortisation of HTM investments ...... 710 Deferred tax liabilities on account of depreciation on fixed assets ...... (525) Other deferred tax assets ...... 200 Net deferred tax asset/(liability) ...... 1,598

In computing the amount of permanent difference for reckoning tax provisions, the disallowance of interest expenditure u/s. 14A of the Income Tax Act, 1961 has been arrived at having regard to the statutory restrictions on deployment of resources raised, their cost and their maturity.

F-157 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

5.1.11 Employee Benefits

Provident Fund The contribution to the employee’s provident fund of the Group amounted to Rs.140 million for the year ended 31 March 2007.

Superannuation The Bank contributed Rs.91 million to the employee’s superannuation plan for the year ended 31 March 2007.

Leave Encashment The Bank charged an amount of Rs.83 million as liability for leave encashment for the year ended 31 March 2007.

Gratuity The following table sets forth the funded status of the gratuity benefit plan of the Bank, during the year ended 31 March 2007. 31 March 2007 (Rs. in million) Present Value of Funded Obligations ...... 143 Fair Value of Plan Assets ...... (119) Present Value of Unfunded Obligations ...... — Unrecognised Past Service Cost ...... — Net Liability ...... 24 Amounts in Balance Sheet Liabilities ...... 24 Assets ...... — Net Liability ...... 24

The amount recognised in the statement of profit and loss are as follows: 31 March 2007 (Rs. in million) Current Service Cost ...... 23 Interest on Defined Benefit Obligation ...... 7 Expected Return on Plan Assets ...... (6) Net Actuarial Losses/ (Gains) Recognised in Year ...... 4 Past Service Cost ...... — Losses/(Gains) on “Curtailments & Settlements” ...... — Total included in “Employee Benefit Expense” ...... 28 Actual Return on Plan Assets ...... 8

F-158 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

Changes in the present value of the defined benefit obligation representing reconciliation of opening and closing balances thereof are as follows: 31 March 2007 (Rs. in million) Change in Defined Benefit Obligation Opening Defined Benefit Obligation ...... 116 Current Service Cost ...... 22 Interest Cost ...... 7 Actuarial Losses/(Gains) ...... 6 Liabilities Extinguished on Curtailment ...... — Liabilities Extinguished on Settlements ...... — Liabilities Assumed on Acquisition ...... — Exchange Difference on Foreign Plans ...... — Benefits Paid ...... (8) Closing Defined Benefit Obligation ...... 143

Changes in the fair value of plan assets representing reconciliation of the opening and closing balances thereof are as follows: 31 March 2007 (Rs. in million) Change in the Fair Value of Assets Opening Fair Value of Plan Assets ...... 74 Expected Return on Plan Assets ...... 6 Actuarial Gains/(Losses) ...... 2 Assets Distributed on Settlements ...... — Contributions by Employer ...... 45 Assets Acquired due to Acquisition ...... — Exchange Difference on Foreign Plans ...... — Benefits Paid ...... (8) Closing Fair Value of Plan Assets ...... 119

31 March 2007 The major categories of plan assets as a percentage of fair value of total plan assets — Insurer Managed Funds ...... 100.00% Principal actuarial assumptions at the balance sheet date: Discount Rate ...... 8.50 % p.a. Expected rate of Return on Plan Assets ...... 7.50 % p.a. Salary Escalation Rate ...... 6.00 % p.a. The estimates of future salary increases considered take into account the inflation, seniority, promotion and other relevant factors. The expected rate of return on plan assets is based on the average long-term rate of return expected on investments of the Fund during the estimated term of the obligations. As the contribution expected to be paid to the plan during the annual period beginning after the balance sheet date is based on various internal/external factors, a best estimate of the contribution is not determinable 5.1.12 Provisions and contingencies a. Movement in provision for frauds included under other liabilities is set out below: 31 March 2007 (Rs. in million) Opening balance at the beginning of the year ...... 10 Additions during the year ...... 8 Reductions on account of payments during the year ...... — Reductions on account of reversals during the year ...... (1) Closing balance at the end of the year ...... 17

F-159 UTI Bank Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2007 (Continued) (Currency: In Indian Rupees)

b. Movement in provision for credit enhancements on securitized assets is set out below: 31 March 2007 (Rs. in million) Opening balance at the beginning of the year ...... 7 Additions during the year ...... 25 Reductions during the year ...... — Closing balance at the end of the year ...... 32

c. Movement in provision for credit card reward points is set out below: 31 March 2007 (Rs. in million) Opening provision at the beginning of the year ...... — Provision made during the year ...... 2 Reductions during the year ...... — Closing provision at the end of the year ...... 2

5.1.13 Description of contingent liabilities: a) Claims against the Group not acknowledged as debts These represent claims filed against the Group in the normal course of business relating to various legal cases currently in progress. These also include demands raised by income tax and other statutory authorities and disputed by the Group. b) Liability on account of forward exchange and derivative contracts The Bank enters into foreign exchange contracts, currency options/swaps and forward rate agreements on its own account and for customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by way of interest/ principal in two currencies, based on ruling spot rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. Forward Rate Agreements are agreements to pay or receive a certain sum based on a differential interest rate on a notional amount for an agreed period. A foreign currency option is an agreement between two parties in which one grants to the other the right to buy or sell a specified amount of currency at a specific price within a specified time period or at a specified future time. c) Guarantees given on behalf of constituents As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfil its financial or performance obligations. d) Acceptances, endorsements and other obligations These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank’s customers that are accepted or endorsed by the Bank. e) Other items for which the Group is contingently liable Other items represent outstanding amount of bills rediscounted and the estimated amount of contracts remaining to be executed on capital account and not provided for. 5.1.14 Comparative Figures In terms of the transitional provisions under AS-21, Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India, the comparative figures for the previous year have not been presented.

F-160 Auditor’s Report on the Consolidated Financial Statements of Axis Bank Limited and its Subsidiaries To The Board of Directors Axis Bank Limited 1. We have audited the attached consolidated balance sheet of Axis Bank Limited and its subsidiaries (the ‘Group’) as at 31 March 2008, and also the consolidated profit and loss account and the consolidated cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of Axis Bank Limited’s management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. We did not audit the financial statement of subsidiary whose financial statements reflect total assets of Rs. 1,943.78 million as at 31 March 2008, total revenues of Rs. 1.78 million and cash flows amounting to Rs. 23.81 million for the year then ended. These financial statements and other financial information have been audited by other auditors whose reports have been furnished to us, and our opinion is based solely on the report of other auditors. 4. We report that the consolidated financial statements have been prepared by Axis Bank Limited’s management in accordance with the requirements of Accounting Standard 21 issued by the Institute of Chartered Accountants of India. 5. Based on our audit and on consideration of reports of other auditors on separate financial statements and on the other financial information of the components, and to the best of our information and according to explanations given to us, we are of the opinion that the attached consolidated financial statements gives a true and fair view in conformity with the accounting principles generally accepted in India: iv. in the case of the consolidated balance sheet, of the state of affairs of the Group as at 31 March 2008; v. in the case of the consolidated profit and loss account, of the profit for the year ended on that date; and vi. in the case of the consolidated cash flow statement, the cash flows for the year ended on that date.

For S.R. Batliboi & Co. Chartered Accountants

per Viren H. Mehta Partner Membership No.:048749

21 April 2008

F-161 Consolidated Balance Sheet as of 31 March 2008

Schedule As of As of No. 31-03-2008 31-03-2007 Rs. Rs. Figures in millions CAPITAL AND LIABILITIES Capital ...... 1 3,577 2,816 Reserves & Surplus ...... 2 83,941 31,068 Employees’ Stock Options Outstanding (Net) ...... 17(4.16) 22 90 Deposits ...... 3 876,194 587,850 Borrowings ...... 4 56,240 51,956 Other liabilities and provisions ...... 5 75,690 58,780 TOTAL ...... 1,095,664 732,560 ASSETS Cash and Balances with Reserve Bank of India ...... 6 73,057 46,610 Balance with banks and money at call and short notice ...... 7 51,999 22,573 Investments ...... 8 338,651 268,872 Advances ...... 9 594,760 368,765 Fixed Assets ...... 10 9,324 6,778 Other Assets ...... 11 27,873 18,962 TOTAL ...... 1,095,664 732,560 Contingent liabilities ...... 12 2,588,957 1,841,654 Bills for collection ...... 83,234 62,746 Significant Accounting Policies and Notes to accounts ...... 17

Schedules referred to above form an integral part of the Consolidated Balance Sheet

F-162 Consolidated Profit & Loss Account for the year ended 31 March 2008

Schedule Year ended on No. 31-03-2008 31-03-2007 Rs. Rs. Figures in millions except EPS data I INCOME Interest earned ...... 13 70,051 44,616 Other income ...... 14 17,959 10,099 TOTAL ...... 88,010 54,715 II EXPENDITURE Interest expended ...... 15 44,199 29,932 Operating expenses ...... 16 21,667 12,193 Provisions and contingencies ...... 17(5.1.2) 11,553 6,048 TOTAL ...... 77,419 48,173 III CONSOLIDATED NET PROFIT ATTRIBUTABLE TO GROUP ...... (I—II) 10,591 6,542 Balance in Profit & Loss account brought forward from previous year ...... 10,243 7,311 Utilisation for Employee Benefits Provision under AS 15 (revised) ...... — (318) IV AMOUNT AVAILABLE FOR APPROPRIATION ...... 20,834 13,535 V APPROPRIATIONS: Transfer to Statutory Reserve ...... 2,678 1,648 Transfer to Capital Reserve ...... 268 156 Proposed Dividend (includes tax on dividend) ...... 17(5.1.6) 2,516 1,488 Balance in Profit & Loss account carried forward ...... 15,372 10,243 TOTAL ...... 20,834 13,535 VI EARNINGS PER EQUITY SHARE ...... 17(5.1.5) (Face value Rs 10/- per share) Basic ...... 31.80 23.33 Diluted ...... 30.96 22.63 Significant Accounting Policies and Notes to accounts ...... 17

Schedules referred to above form an integral part of the Consolidated Profit and Loss Account

F-163 Consolidated Cash Flow Statement for the year ended 31 March 2008

Year ended 31-03-2008 31-03-2007 Rs. Rs. Figures in millions Cash flow from operating activities Net profit before taxes ...... 16,348 9,914 Adjustments for: Depreciation & impairment provision on fixed assets ...... 1,593 1,120 Depreciation on investments ...... 65 670 Amortisation of premium on Held to Maturity Investments ...... 977 987 Provision for Non Performing Advances/Investments (including bad debts) ...... 3,440 737 General Provision on securitised assets ...... (1) 25 Provision on Standard assets ...... 1,535 1,224 General provision on retail assets ...... — 18 Provision for wealth tax ...... 2 3 Loss on sale of fixed assets ...... 152 29 Provision for country risk ...... 36 — Contingent Provision against derivatives ...... 720 — Amortisation of deferred employee compensation ...... 2 27 24,869 14,754 Adjustments for: (Increase)/Decrease in investments ...... (26,331) (21,043) (Increase)/Decrease in advances ...... (229,410) (146,307) Increase/(Decrease) in borrowings ...... 4,284 25,147 Increase /(Decrease) in deposits ...... 288,343 186,715 (Increase)/Decrease in other assets ...... (7,784) (1,351) Increase /(Decrease) in other liabilities & provisions ...... 14,314 (873) Direct taxes paid ...... (6,886) (4,138) Net cash flow from operating activities ...... 61,399 52,904 Cash flow from investing activities Purchase of fixed assets ...... (4,417) (2,274) (Increase)/Decrease in Held to Maturity Investments ...... (44,516) (34,265) Proceeds from sale of fixed assets ...... 126 35 Net cash used in investing activities ...... (48,807) (36,504) Cash flow from financing activities Proceeds from issue of Subordinated debt (net of repayment) ...... (2,455) 3,393 Proceeds from Issue of Perpetual Debt & Upper Tier II instruments ...... 1,734 13,735 Proceeds from issue of Share capital ...... 761 29 Proceeds from share premium (net of share issue expenses) ...... 44,706 330 Payment of Dividend ...... (1,488) (1,117) Net cash generated from financing activities ...... 43,258 16,370 Effect of exchange fluctuation translation reserve ...... 22 (5) Net increase in cash and cash equivalents ...... 55,872 32,765 Cash and cash equivalents as at 1 April 2007 ...... 69,183 36,418 Cash and cash equivalents as at 31 March 2008 ...... 125,055 69,183

Cash and cash equivalents comprise of cash on hand & in ATM, balances with RBI, balances with banks and money at call & short notice (refer schedule 6 and 7 of the Balance Sheet).

F-164 SCHEDULE 1 — CAPITAL As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions Authorised Capital* ...... 5,000 3,000 Issued, Subscribed and Paid-up capital#@ ...... 3,577 2,816

* 300,000,000 and 500,000,000 equity shares of Rs. 10/- each as of 31 March 2008 and 31 March 2007 respectively. # 357,709,669 and 281,630,787 equity shares of Rs.10/- each fully paid up as of 31 March 2008 and 31 March 2007 respectively. @ includes 13,033,458 and 11,994,991 GDRs representing 13,033,458 and 11,994,991 equity shares as of 31 March 2008 and 31 March 2007 respectively.

SCHEDULE 2 — RESERVES AND SURPLUS As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Statutory Reserve Opening Balance ...... 5,846 4,199 Additions during the year ...... 2,678 1,648 8,524 5,847 II. Share Premium Account Opening Balance ...... 13,956 13,554 Additions during the year ...... 45,249 402 Less: Share issue expenses ...... (473) — 58,732 13,956 III General Reserve Opening Balance ...... 143 143 Additions during the year ...... — — 143 143 IV Capital Reserve Opening Balance ...... 884 727 Additions during the year ...... 268 156 1,152 883 V. Foreign Currency Translation Reserve Opening Balance ...... (4) 1 Additions during the year [Refer 17(4.5)] ...... 22 (5) 18 (4) VI. Balance in Profit & Loss Account ...... 15,372 10,243 TOTAL ...... 83,941 31,068

F-165 SCHEDULE 3 — DEPOSITS As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions A. I. Demand Deposits (i) From banks ...... 8,957 7,490 (ii) From others ...... 191,472 105,551 II. Savings Bank Deposits ...... 199,824 121,259 III. Term Deposits (i) From banks ...... 36,842 60,207 (ii) From others ...... 439,099 293,343 TOTAL ...... 876,194 587,850 B. I. Deposits of branches in India ...... 863,848 585,723 II. Deposits of branches outside India ...... 12,346 2,127 TOTAL ...... 876,194 587,850

SCHEDULE 4 — BORROWINGS As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Borrowings in India (i) Reserve Bank of India ...... — — (ii) Other Banks ...... — 6,000 (iii) Other institutions & agencies ...... 5,467 12,039 II. Borrowings outside India ...... 50,773 33,917 TOTAL ...... 56,240 51,956 Secured borrowing included inI&IIabove ...... — —

SCHEDULE 5 — OTHER LIABILITIES AND PROVISIONS As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Bills payable ...... 21,022 13,095 II. Inter — office adjustments (net) ...... — — III. Interest accrued ...... 1,778 1,773 IV. Proposed dividend (Includes tax on dividend) ...... 2,511 1,483 V. Subordinated Debt# ...... 18,824 21,279 VI Perpetual Debt and Upper Tier II instruments* ...... 15,469 13,735 VI. Contingent Provision against Standard Assets ...... 3,589 2,055 VII. Others (including provisions)@ ...... 12,497 5,360 TOTAL ...... 75,690 58,780

# represents Subordinated Debt of 5,862 bonds and 10,772 bonds of Rs. 0.5 million each as of 31 March 2008 and 31 March 2007 respectively and 15,893 bonds and 15,893 bonds of Rs. 1 million each as of 31 March 2008 and 31 March 2007 respectively, in the nature of Non Convertible Debentures [Also refer 17(5.1.3)]. * represents Rs. 3,985 million and Rs. 4,140 million of Perpetual Debt as of 31 March 2008 and 31 March 2007 respectively and Rs. 11,484 million and Rs. 9,595 million of Upper Tier II instruments as of 31 March 2008 and 31 March 2007 respectively. [Also refer 17(5.1.4)]. @ includes contingent provision against derivatives of Rs. 720 million and Rs. Nil million as of 31 March 2008 and 31 March 2007 respectively.

F-166 SCHEDULE 6 — CASH AND BALANCES WITH RESERVE BANK OF INDIA As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Cash in hand & in ATM (Including foreign currency notes) ...... 15,203 8,367 II. Balances with Reserve Bank of India: (i) in Current Account ...... 57,854 38,243 (ii) in Other Accounts ...... — — TOTAL ...... 73,057 46,610

SCHEDULE 7 — BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. In India (i) Balance with Banks (a) in Current Accounts ...... 10,461 6,243 (b) in Other Deposit Accounts ...... 732 524 (ii) Money at Call and Short Notice (a) With banks ...... 31,076 12,138 (b) With other institutions ...... — — TOTAL ...... 42,269 18,905 II. Outside India i) in Current Accounts ...... 3,846 2,903 ii) in Other Deposit Accounts ...... 1,204 679 iii) Money at Call & Short Notice ...... 4,680 86 TOTAL ...... 9,730 3,668 GRAND TOTAL (I+II) ...... 51,999 22,573

F-167 SCHEDULE 8 — INVESTMENTS As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Investments in India in — (i) Government Securities##**...... 201,788 164,308 (ii) Other approved securities ...... — — (iii) Shares ...... 7,706 4,628 (iv) Debentures and Bonds$ ...... 108,212 70,449 (v) Investments in Joint Ventures ...... 130 — (vi) Others@ ...... 15,688 24,791 (Mutual Fund units, CD / CP, NABARD Deposit, PTCs etc.) Gross Investments in India ...... 333,524 264,176 Less: Depreciation in the value of investments* ...... (959) (923) Net investments in India ...... 332,565 263,253 II. Investments outside India in — (i) Government Securities (including local authorities) ...... — 55 (ii) Subsidiaries and / or joint ventures abroad ...... — — (iii) Others ...... 6,138 5,564 Gross Investments outside India ...... 6,138 5,619 Less: Depreciation in the value of investments ...... (52) — Net investments outside India ...... 6,086 5,619 GRAND TOTAL ...... 338,651 268,872

@ Includes deposits with NABARD Rs. 10,007 million and Rs. 8,669 million as of 31 March 2008 and 31 March 2007 respectively and PTCs Rs. 5,307 million and Rs. 13,444 million as of 31 March 2008 and 31 March 2007 respectively. ## Includes securities costing Rs. 38,718 million and Rs. 35,815 million as of 31 March 2008 and 31 March 2007 respectively pledged for availment of fund transfer facility, clearing facility and margin requirement. ** Includes Repo lending under Liquidity Adjustment Facility of RBI Rs. 5,038 million and Rs. 13,509 million as of 31 March 2008 and 31 March 2007 respectively and net of repo borrowing under the Liquidity Adjustment Facility Rs. Nil million and Rs. 3,046 million as of 31 March 2008 and 31 March 2007 respectively in line with Reserve Bank of India requirements. $ Includes securities costing Rs. 1,751 million and Rs. 3,218 million as of 31 March 2008 and 31 March 2007 respectively pledged for margin requirement. * Includes provision for non-performing investments of Rs. 90 million and Rs. 67 million as of 31 March 2008 and 31 March 2007 respectively.

F-168 SCHEDULE 9 — ADVANCES As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions (i) Bills purchased and discounted# ...... 20,236 12,737 (ii) Cash credits, overdrafts and loans repayable on demand ...... 164,432 98,866 (iii) Term loans ...... 410,092 257,162 TOTAL ...... 594,760 368,765 (i) Secured by tangible assets$ ...... 480,622 305,023 (ii) Covered by Bank/Government Guarantees&& ...... 17,699 14,489 (iii) Unsecured ...... 96,439 49,253 TOTAL ...... 594,760 368,765 I. Advances in India (i) Priority Sectors ...... 165,723 131,963 (ii) Public Sector ...... 62 215 (iii) Banks ...... 276 277 (iv) Others ...... 374,890 210,554 TOTAL ...... 540,951 343,009 II. Advances Outside India (i) Due from banks ...... — — (ii) Due from others — (a) Bills purchased and discounted ...... 2,151 2,914 (b) Syndicate loans ...... 20,477 2,442 (c) Others ...... 31,181 20,400 TOTAL ...... 53,809 25,756 GRAND TOTAL (C I+CII) ...... 594,760 368,765

# Bills purchased & discounted are net of Rs. Nil million and Rs. 7,000 million of borrowings under the Bills Rediscounting Scheme as of 31 March 2008 and 31 March 2007 respectively. $ Includes advances against book debts && Includes advances against L/Cs issued by Banks. Advances are net of floating provision, which has been adjusted based on management estimate.

F-169 SCHEDULE 10 — FIXED ASSETS As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Premises At cost at the beginning of the year ...... 337 337 Additions during the year ...... 225 — Deductions during the year ...... (62) — Depreciation to date ...... (86) (72) TOTAL ...... 414 265 II. Other fixed assets (including Furniture & Fixtures) At cost at the beginning of the year ...... 9,931 7,884 Additions during the year ...... 3,160 2,165 Deductions during the year ...... (400) (119) Depreciation to date ...... (5,430) (4,192) TOTAL ...... 7,261 5,738 III. Assets on Lease At cost at the beginning of the year ...... 765 765 Additions during the year ...... — — Deductions during the year ...... — — Depreciation to date ...... (276) (242) Provision for impairment ...... (124) — TOTAL ...... 365 523 8,040 6,526 IV. CAPITAL WORK-IN-PROGRESS (including Capital Advances) ...... 1,284 252 GRAND TOTAL (I+II+III+IV) ...... 9,324 6,778

SCHEDULE 11 — OTHER ASSETS

As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I Inter-office adjustments (net) ...... — — II Interest Accrued ...... 9,079 6,419 III Tax paid in advance/tax deducted at source (Net of provisions) ...... 578 1,044 IV Stationery and stamps ...... 9 8 V Non banking assets acquired in satisfaction of claims ...... — — VI Others# ...... 18,207 11,491 TOTAL ...... 27,873 18,962

# Includes deferred tax assets Rs.3,191 million and Rs.1,598 million as of 31 March 2008 and 31 March 2007 respectively.

F-170 SCHEDULE 12 — CONTINGENT LIABILITIES As of As of 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Claims against the Group not acknowledged as debts ...... 2,548 1,708 II. Liability for partly paid investments ...... — — III. Liability on account of outstanding forward exchange and derivative contracts a) Forward Contracts ...... 643,205 507,359 b) Interest Rate Swaps, Currency Swaps, Forward Rate Agreement & Interest Rate Futures ...... 1,565,203 1,174,109 c) Foreign Currency Options ...... 161,001 52,836 Total: ...... 2,369,409 1,734,304 IV. Guarantees given on behalf of constituents In India ...... 117,963 43,814 Outside India ...... 1,756 50 V Acceptances, endorsements and other obligations ...... 82,465 54,772 VI Other items for which the Group is contingently liable ...... 14,816 7,006 TOTAL ...... 2,588,957 1,841,654

SCHEDULE 13 — INTEREST EARNED Year ended 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Interest/discount on advances/bills ...... 47,454 27,028 II. Income on investments ...... 21,023 16,327 III. Interest on balances with Reserve Bank of India and other inter-bank funds 1,077 773 IV. Others ...... 497 488 TOTAL ...... 70,051 44,616

SCHEDULE 14 — OTHER INCOME Year ended 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Commission, exchange and brokerage ...... 13,209 7,790 II. Profit/(Loss) on sale of Investments/Derivative transaction (net) ...... 2,202 609 III. Profit on exchange transactions (net) ...... 2,075 1,248 IV. Profit/(Loss) on sale of fixed assets (net) ...... (152) (29) V. Income earned by way of dividends etc. from Subsidiaries/companies and/or joint venture abroad / in India ...... — — VI. Lease rentals ...... 35 35 VII. Miscellaneous Income# ...... 590 446 TOTAL ...... 17,959 10,099

# Including recoveries on account of advances/investments written off in earlier years Rs. 449 million and Rs. 236 million for the year ended 31 March 2008 and 31 March 2007 respectively and profit on account of portfolio sell downs/securitisation Rs. 91 million and Rs. 20 million for the year ended 31 March 2008 and 31 March 2007 respectively.

F-171 SCHEDULE 15 — INTEREST EXPENDED Year ended 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Interest on deposits ...... 37,424 24,808 II. Interest on Reserve Bank of India/Inter-bank borrowings ...... 1,763 1,688 III. Others@ ...... 5,012 3,436 TOTAL ...... 44,199 29,932

@ including interest on repos and subordinated debt

SCHEDULE 16 — OPERATING EXPENSES Year ended 31-03-2008 31-03-2007 Rs. Rs. Figures in millions I. Payments to and provisions for employees ...... 7,521 3,912 II. Rent, taxes and lighting ...... 2,580 1,599 III. Printing and stationery ...... 545 376 IV. Advertisement and publicity ...... 744 296 V. Depreciation on bank’s property (incl. Impairment provision) ...... 1,593 1,120 VI. Directors’ fees, allowance and expenses ...... 7 6 VII. Auditor’s fees and expenses ...... 7 5 VIII. Law Charges ...... 53 64 IX. Postage, Telegrams, Telephones, etc...... 1,051 701 X. Repairs and maintenance ...... 1,907 1,290 XI. Insurance ...... 767 548 XII. Other Expenditure ...... 4,892 2,276 TOTAL ...... 21,667 12,193

F-172 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Currency: In Indian Rupees) 1 Principles of Consolidation The consolidated financial statements comprise the financial statements of Axis Bank Limited (the ‘Bank’) and its subsidiaries, which together constitute the ‘Group’. Pursuant to the approval received from the Registrar of Companies, Gujarat, the Bank has changed its name from ‘UTI Bank Limited’ to ‘Axis Bank Limited’ with effect from 30 July 2007. The Bank consolidates its subsidiaries in accordance with AS-21, Consolidated Financial Statements issued by the Institute of Chartered Accountants of India on a line-by-line basis by adding together the like items of assets, liabilities, income and expenditure.

2 Basis of preparation The financial statements of the Group have been prepared and presented under the historical cost convention on the accrual basis of accounting, unless otherwise stated, and comply with generally accepted accounting principles, statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India (‘RBI’) from time to time, the Accounting Standards (‘AS’) issued by the Institute of Chartered Accountants of India (‘ICAI’) and notified by Companies Accounting Standards Rules, 2006 to the extent applicable and current practices prevailing within the banking industry in India. The consolidated financial statements present the accounts of Axis Bank Ltd. with its following subsidiaries: Country of Ownership Name Incorporation Interest Axis Sales Ltd. (formerly UBL Sales Ltd.) ...... India 100.00% Axis Private Equity Ltd. (formerly UBL Asset Management Company Ltd.) ...... India 100.00% The audited financial statements of the subsidiaries have been drawn up to the same reporting date as that of the Bank, i.e. 31 March 2008. The Bank has made investment in a corporate entity wherein it holds more than 25% of the equity shares of that company. Such investment does not fall within the definition of a joint venture as per (AS) 27, Financial Reporting of Interest in Joint Ventures, issued by the Institute of Chartered Accountants of India, and the said accounting standard is thus not applicable. The Bank indirectly through its subsidiary holds more than 20% of the equity shares of certain companies. These investments are acquired for a temporary period with an intention to transfer in future. Such investments do not fall within the definition of an Associate as per (AS) 23, Accounting for Investments in Associates in Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India, and the said accounting standard is thus not applicable.

3 Use of estimates The preparation of the financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates is recognised prospectively in the current and future periods.

4 Significant accounting policies 4.1 Investments Group Classification In accordance with the RBI guidelines, investments are classified at the date of purchase as: • Held for Trading (‘HFT’);

F-173 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

• Available for Sale (‘AFS’); and • Held to Maturity (‘HTM’). Investments that are held principally for resale within a short period are classified as HFT securities. As per RBI guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date. Investments that the Bank intends to hold till maturity are classified under HTM category. Investments not exceeding 25% of total investments, which the Bank intends to hold till maturity, are classified as HTM securities. As permitted by RBI, the Bank may exceed the limit of 25% of total investments provided the excess comprises only of those securities which are eligible for complying with the Statutory Liquidity Ratio (‘SLR’) i.e. SLR securities and the total SLR securities held in HTM category is not more than 25% of its demand and time liabilities as on the effective date. The effective date means the last Friday of the second preceding fortnight for computation of the aforesaid limit. In computing the investment ceiling for HTM portfolio for the aforesaid purpose, debentures and bonds, which are in the nature of advances are excluded. All other investments are classified as AFS securities. However, for disclosure in the balance sheet, investments in India are classified under six categories— Government securities, Other approved securities, Shares, Debentures and Bonds, Investment in Subsidiaries/ Joint Ventures and Others. Investments made outside India are classified under three categories – Government Securities, Subsidiaries and/or Joint Ventures abroad and Others.

Transfer of security between categories Transfer of security between categories of investments is accounted for at the acquisition cost/book value/ market value as on the date of transfer, whichever is lower, and the depreciation, if any, on such transfer is recognised in the profit and loss account.

Valuation Investments classified under the HTM category are carried at acquisition cost. Any premium on acquisition over face value is amortised on a straight-line basis over the remaining period to maturity. Investments classified under the AFS and HFT category are marked to market. The market/fair value for the purpose of periodical valuation of quoted investments included in the ‘Available for Sale’ and ‘Held for Trading’ categories is the market price of the scrip as available from the trades/quotes on the stock exchanges, SGL account transactions, price list of RBI or prices declared by Primary Dealers Association of India jointly with Fixed Income Money Market and Derivatives Association (“FIMMDA”), periodically. Net depreciation, if any, within each category of investments is recognised in the profit and loss account. The net appreciation if any, under each category is ignored, except to the extent of depreciation previously provided. The book value of individual securities is not changed consequent to the periodic valuation of investments. Treasury Bills and Commercial Paper, being discounted instruments, are valued at carrying cost. Units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund. Market value of investments where current quotations are not available, is determined as per the norms prescribed by the RBI as under: • market value of unquoted Government securities is derived based on the Prices/Yield to Maturity (‘YTM’) rate for Government securities of equivalent maturity as notified by Fixed Income Money Market and Derivatives Association of India (‘FIMMDA’) jointly with the Primary Dealers Association of India (‘PDAI’) at periodic intervals; • in case of Central Government Securities, which do not qualify for SLR requirement, the market price is derived by adding 50 basis points to the Base Yield Curve of Central Government Securities;

F-174 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

• market value of unquoted State Government securities is derived by applying the YTM method by marking it up by 25 basis points above the yields of the Central Government Securities of equivalent maturity notified by the FIMMDA/PDAI at periodic intervals; • in case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly, the market price is derived based on the YTM for Government securities as notified by FIMMDA/PDAI and suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for various credit ratings along with residual maturity issued by FIMMDA is adopted for this purpose; • in case of preference shares where dividend is not received regularly, the price derived on the basis of YTM is discounted in accordance with the RBI guidelines; • in case of bonds and debentures where interest is not received regularly, the valuation is in accordance with prudential norms for provisioning as prescribed by RBI; and • equity shares, for which current quotations are not available or where the shares are not quoted on the stock exchanges, are valued at break-up value (without considering revaluation reserves, if any) which is ascertained from the company’s latest balance sheet (which is not more than one year prior to the date of valuation). In case the latest balance sheet is not available, the shares are valued at Re 1 per company. Investments in subsidiaries/joint ventures are categorised as ‘Held to Maturity’ in accordance with RBI guidelines.

Repurchase and reverse repurchase transactions Repurchase and reverse repurchase transactions are accounted as outright sale and outright purchase respectively. The difference between the clean price of the first leg and clean price of the second leg is recognised as interest income/expense over the period of the transaction. However, depreciation in their value, if any, compared to their original cost, is recognised in the profit and loss account.

4.2 Advances Axis Bank Ltd Advances are classified into performing and non-performing advances (NPAs) as per RBI guidelines and are stated net of specific provisions made towards Non Performing Advances. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. Provisions for NPAs (other than retail advances) are made for sub-standard and doubtful assets at rates as prescribed by RBI. Loss assets and unsecured portion of doubtful assets are provided/written off as per the extant RBI guidelines. NPAs are identified by periodic appraisals of the loan portfolio by management. In the case of retail advances, provisions are made upon reaching specified stages of delinquency (90 days or more of delinquency) under each type of loan, which satisfies the RBI prudential norms on provisioning. For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI, which requires the present value of the interest sacrifice be provided at the time of restructuring. A general provision @ 0.25% to 2.00% is made on the various classes of standard assets as prescribed by RBI.

4.3 Country Risk Axis Bank Ltd In addition to the provisions required to be held according to the asset classification status, provisions are held for individual country exposure (other than for home country). The countries are categorised into seven risk categories namely insignificant, low, moderate, high, very high, restricted and off-credit and provisioning made on exposures exceeding 180 days on a graded scale ranging from 0.25% to 100%. For exposures with contractual maturity of less than 180 days, 25% of the normal provision requirement is held. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on such country exposure.

F-175 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

4.4 Securitisation Axis Bank Ltd The Bank enters into purchase/sale of corporate and retail loans through direct assignment/Special Purpose Vehicle (SPV). In most cases, post securitisation, the Bank continues to service the loans transferred to the assignee/SPV. The Bank also provides credit enhancement in the form of cash collaterals and/or by subordination of cash flows to Senior Pass Through Certificate (PTC) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies, future servicing etc.) accepted by the Bank, appropriate provision/ disclosure is made at the time of sale in accordance with AS-29-’Provisions, contingent liabilities and contingent assets’. Gain on securitisation transaction is recognised over the period of the underlying securities issued by the SPV. Loss on securitisation is immediately debited to profit and loss account.

4.5 Foreign currency transactions Axis Bank Ltd In respect of domestic operations, transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction. Foreign currency assets and liabilities are translated at the balance sheet date at rates notified by Foreign Exchange Dealers Association of India (‘FEDAI’). All profits/losses resulting from year-end revaluations are recognised in the profit and loss account. Financial statements of foreign branches classified as non-integral foreign operations are translated as follows: • Assets and liabilities (both monetary and non-monetary as well as contingent liabilities) are translated at closing rates notified by FEDAI at the year-end. • Income and expenses are translated at the rates prevailing on the date of the transactions. • All resulting exchange differences are accumulated in a separate ‘Foreign Currency Translation Reserve’ till the disposal of the net investments. Outstanding forward exchange contracts (excluding currency swaps undertaken to hedge Foreign Currency Non-Resident (‘FCNR’) deposits which are not revalued) and spot exchange contracts are revalued at year end exchange rates notified by FEDAI. The resulting gains or losses on revaluation are included in the profit and loss account in accordance with RBI/FEDAI guidelines. Premium/discount on currency swaps undertaken to hedge FCNR deposits is recognised as interest income/ expense and is amortised on a straight-line basis over the underlying swap period. Contingent liabilities on account of foreign exchange contracts/options, guarantees, acceptances, endorsements and other obligations denominated in foreign currencies are disclosed at closing rates of exchange notified by FEDAI. Axis Private Equity Ltd Transactions in foreign currency are recorded at the exchange rate prevailing on the dates of transactions. Exchange differences arising on foreign exchange transactions settled during the period are recognised in the profit and loss account of the period.

4.6 Derivative transactions Axis Bank Ltd. Derivative transactions comprise of swaps and options, which are disclosed as contingent liabilities. The swaps/options are segregated as trading or hedge transactions. Trading swaps/options are revalued at the balance sheet date with the resulting unrealised gain or loss being recognised in the profit and loss account and correspondingly in other assets or other liabilities respectively. Hedged swaps/options are accounted for on an accrual basis.

F-176 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

4.7 Revenue recognition Axis Bank Ltd. Interest income is recognised on an accrual basis except interest income on non-performing assets, which is recognised on receipt. Commission income on deferred payment guarantees, is recognised pro-rata over the period of the guarantee. All other fee income is recognised upfront on its becoming due. Dividend is accounted on an accrual basis when the right to receive the dividend is established. Gain/loss on sell down of loans and advances through direct assignment is recognised at the time of sale. Realised gains on investments under HTM category are recognised in the profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines. Losses are recognised in the profit and loss account. Axis Sales Ltd. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. Commission income is recognised on the basis of accrual when all the services are performed.

4.8 Fixed assets and depreciation Group Fixed assets are carried at cost of acquisition less accumulated depreciation less impairment, if any. Cost includes freight, duties, taxes and incidental expenses related to the acquisition and installation of the asset. Capital work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid to acquire fixed assets. Depreciation (including on assets given on operating lease) is provided on the straight-line method from the date of addition. The rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the management’s estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life on a subsequent review is shorter, then depreciation is provided at a higher rate based on management’s estimate of the useful life/remaining useful life. Pursuant to this policy, depreciation has been provided using the following estimated useful lives: Asset Estimated useful life Owned premises ...... 20years Assets given on operating lease ...... 20years Computer hardware ...... 3years Application software ...... 5years Vehicles ...... 4years EPABX, telephone instruments ...... 8years Mobile phone ...... 2years Locker cabinets/cash safe/strong room door ...... 16years Assets at staff residence ...... 5years All other fixed assets ...... 10years All fixed assets individually costing less than Rs. 5,000 are fully depreciated in the year of installation. Depreciation on assets sold during the year is recognised on a pro-rata basis to the profit and loss account till the date of sale. The carrying amount of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

F-177 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

4.9 Lease transactions Axis Bank Ltd. Assets given on operating lease are capitalised at cost. Rentals received by the Bank are recognised in the profit and loss account on accrual basis. Group Lease payments for assets taken on operating lease are recognised as an expense in the profit and loss account on a straight-line basis over the lease term.

4.10 Retirement and other employee benefits Group Provident Fund Retirement benefit in the form of provident fund is a defined contribution scheme and the contributions are charged to the profit and loss account of the year when the contributions to the fund are due. There are no other obligations other than the contribution payable to the trust. Axis Bank Ltd. Gratuity The Bank contributes towards gratuity fund (defined benefit retirement plan) administered jointly by the Life Insurance Corporation of India (‘LIC’) and Metlife Insurance Company Limited (‘Metlife’) for eligible employees. Under this scheme, the settlement obligations remain with the Bank, although LIC/Metlife administer the scheme and determines the contribution premium required to be paid by the Bank The plan provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee’s salary and the years of employment with the Bank. Liability with regard to gratuity fund is accrued based on actuarial valuation conducted by an independent actuary using the Projected Unit Credit Method as at 31 March each year.

Leave Encashment Short term compensated absences are provided for based on estimates. The Bank provides leave encashment benefit (long term), which is a defined benefit scheme based on actuarial valuation as at the balance sheet date conducted by an independent actuary. The actuarial valuation is carried out as per the projected unit credit method.

Superannuation Employees of the Bank are entitled to receive retirement benefits under the Bank’s Superannuation scheme. Superannuation is a defined contribution plan under which the Bank contributes annually a specified sum of 10% of the employee’s eligible annual basic salary to LIC, which undertakes to pay the lumpsum and annuity benefit payments pursuant to the scheme. Superannuation contributions are recognised in the profit and loss account in the period in which they accrue. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred. Axis Sales Ltd.

Gratuity Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation using projected unit credit method made at the end of each financial year. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.

F-178 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

During the year, the Company has adopted Accounting Standard 15 (Revised) on ‘Employee Benefits’, which is mandatory from accounting periods commencing on or after 7 December 2006. Accordingly the company has provided for gratuity based on actuarial valuation done as per projected unit credit method. Since the Company has adequately provided the liability in the previous year there is no adjustment made to the general reserve as per the transitional provision of the revised accounting standard.

Leave Encashment Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done, at the end of each financial year, using the projected unit credit method. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred. Axis Private Equity Ltd.

Gratuity The payment of Gratuity Act, 1972 is not yet applicable to the company.

4.11 Credit Card reward points Axis Bank Ltd. The Bank estimates the probable redemption of credit card reward points using an actuarial method at balance sheet date by employing an independent actuary. Provision for the said reward points is then made based on the actuarial valuation report as furnished by the said independent actuary.

4.12 Taxation Group Income tax expense is the aggregate amount of current tax, deferred tax and fringe benefit tax charge. Current year taxes and fringe benefit tax are determined in accordance with the Income-tax Act, 1961. Deferred tax adjustments comprise of changes in the deferred tax assets or liabilities during the period. Deferred tax assets and liabilities are recognised on a prudent basis for the future tax consequences of timing differences arising between the carrying values of assets and liabilities and their respective tax basis, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted prior to the balance sheet date. The impact of changes in the deferred tax assets and liabilities is recognised in the profit and loss account. Deferred tax assets are recognised and reassessed at each reporting date, based upon management’s judgement as to whether realisation is considered as reasonably certain. Deferred tax assets are recognised on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty that such deferred tax asset can be realised against future profits.

4.13 Share Issue Expenses Axis Bank Ltd Share issue expenses are adjusted from share premium account.

4.14 Earnings per share Group The Group reports basic and diluted earnings per share in accordance with AS 20 — ’Earnings per Share’. Basic earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding for the year.

F-179 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at year end.

4.15 Cash and cash equivalents Group Cash and cash equivalents include cash on hand and in ATM, balances with Reserve Bank of India, balances with other banks and money at call and short notice.

4.16 Employee stock option scheme Axis Bank Ltd. The 2001 Employee Stock Option Scheme (‘the Scheme’) provides for grant of stock options on equity shares of the Bank to employees and Directors of the Bank. The Scheme is in accordance with the Securities and Exchange Board of India (SEBI) (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Bank follows the intrinsic value method to account for its stock based employee compensation plans as per the Guidance Note on ‘Accounting for Employee Share-based Payments’ issued by the ICAI. Options are granted at an exercise price, which is equal to/less than the fair market price of the underlying equity shares. The excess of such fair market price over the exercise price of the options as at the grant date is recognised as a deferred compensation cost and amortised on a straight-line basis over the vesting period of such options. The fair market price is the latest available closing price, prior to the date of the Board of Directors meeting in which options are granted / shares are issued, on the stock exchange on which the shares of the Bank are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered.

4.17 Provisions, contingent liabilities and contingent assets Group A provision is recognised when the Group has a present obligation as a result of past event where it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. A disclosure of contingent liability is made when there is: • a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non occurrence of one or more uncertain future events not within the control of the Group; or • a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

F-180 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

5 Notes to Accounts 5.1.1 Share Capital During the year ended 31 March 2008, the Bank raised additional equity capital in the form of 1,41,32,466 Global Depository Receipts (GDRs) (each GDR representing 1 underlying equity share of Rs. 10/- each), at a price of U.S.$ 15.43 per GDR. The Bank also undertook a Qualified Institutional Placement (QIP) of 2,82,64,934 shares and a preferential allotment of 3,06,95,129 shares at a price of Rs. 620/- per share. As a consequence, the paid-up share capital of the Bank has increased by Rs. 731 million and the reserves of the Bank have increased by Rs. 44,140 million after charging of issue related expenses. The funds mobilised from the equity raising (through GDR, QIP and Preferential issue) were utilised for enhancing the capital adequacy ratio and for general corporate purposes. 5.1.2 ‘Provisions and contingencies’ recognised in the profit and loss account include:

For the year ended 31 March 2008 31 March 2007 (Rs. in million) Provision for income tax — Current tax for the year ...... 7,256 4,126 — Deferred tax for the year ...... (1,593) (815) Provision for fringe benefit tax ...... 93 60 5,756 3,371 Provision for wealth tax ...... 2 3 Provision for non performing advances & investments (including bad debts written off and write backs) ...... 3,440 737 Provision towards standard assets ...... 1,535 1,224 General provision for retail loans ...... — 18 Provision for depreciation in value of investments ...... 65 670 Provision for Securitised Assets ...... (1) 25 Contingent provision against derivatives ...... 720 — Provision for country risk ...... 36 — Total ...... 11,553 6,048

5.1.3 The Bank has not raised any subordinated debt during the year ended 31 March 2008. During the year ended 31 March 2008, the Bank redeemed subordinated debt of Rs. 2,455 million, the details of which are set out below:

Date of maturity Period Coupon Amount 28 April 2007 ...... 85months 11.75% Rs. 1,000 million 4 June 2007 ...... 66months 9.80% Rs. 1,120 million 27 June 2007 ...... 63months 9.30% Rs. 335 million During the year ended 31 March 2007, the Bank raised subordinated debt of Rs. 3893 million, the details of which are set out below:

Date of allotment Period Coupon Amount 28 June 2006 ...... 87months 8.95% Rs. 335 million 120 months 9.10% Rs. 1,049 million 30 March 2007 ...... 120months 10.10% Rs. 2,509 million During the year ended 31 March 2007, the Bank redeemed subordinated debt of Rs. 500 million, the details of which are set out below:

Date of maturity Period Coupon Amount 28 June 2006 ...... 63months 11.10% Rs. 500 million

F-181 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

5.1.4 During the year ended 31 March 2008, the Bank raised hybrid capital in the form of Upper Tier II bonds qualifying as Tier II capital, the details of which are set out below:

Type of Capital Date of allotment Period Coupon Amount Upper Tier II ...... 28June 2007 180 months 7.125% (U.S.$60 million) Rs. 2,407 million During the year ended 31 March 2007, the Bank raised hybrid capital in the form of Perpetual Debt of Rs. 4,140 million qualifying as Tier I capital and Rs. 9,596 million qualifying as Tier II capital, the details of which are set out below:

Type of Capital Date of allotment Period Coupon Amount Upper Tier II ...... 11August 2006 180 months 7.25% (U.S.$150 million) Rs. 6,521 million Perpetual Debt ...... 30September 2006 Perpetual 10.05% Rs. 2,140 million Perpetual Debt ...... 15November 2006 Perpetual 7.167% (U.S.$46 million) Rs. 2,000 million Upper Tier II ...... 24November 2006 180 months 9.35% Rs. 2,000 million Upper Tier II ...... 6February 2007 180 months 9.50% Rs. 1,075 million 5.1.5 Earnings Per Share (‘EPS’) The details of EPS computation is set out below: As at 31 March 2008 31 March 2007 Basic and Diluted earnings for the year (Net profit after tax) (Rs. in million) ..... 10,591 6,542 Basic weighted average no. of shares (in million) ...... 333 280 Add: Equity shares for no consideration arising on grant of stock options under ESOP ...... 9 9 Diluted weighted average no. of shares (in million) ...... 342 289 Basic EPS (Rs.) ...... 31.80 23.33 Diluted EPS (Rs.) ...... 30.96 22.63 Nominal value of shares (Rs.) ...... 10.00 10.00 Dilution of equity is on account of 8,986,371 stock options (previous year 8,653,638). 5.1.6 Dividend paid on shares issued on exercise of stock options The Bank may allot shares between the balance sheet date and record date for the declaration of dividend pursuant to the exercise of any employee stock options. These shares will be eligible for full dividend for the year ended 31 March 2008, if approved at the ensuing Annual General Meeting. Dividend relating to these shares has not been recorded in the current year. Appropriation to proposed dividend during the year ended 31 March 2008 includes dividend of Rs. 5 million paid pursuant to exercise of 1,018,992 employee stock options after the previous year end and record date for declaration of dividend for the year ended 31 March 2007. 5.1.7 Employee Stock Options Scheme (‘the Scheme’) In February 2001, pursuant to the approval of the shareholders at the Extraordinary General Meeting, the Bank approved an Employee Stock Option Scheme. Under the Scheme, the Bank is authorised to issue up to 13,000,000 equity shares to eligible employees. Eligible employees are granted an option to purchase shares subject to vesting conditions. The options vest in a graded manner over 3 years. The options can be exercised within 3 years from the date of the vesting. Further, in June 2004 and June 2006, pursuant to the approval of the shareholders at Annual General Meeting, the Bank approved an ESOP scheme for additional 10,000,000 and 4,800,000 options respectively. 19,887,005 options have been granted under the Scheme till the previous year ended 31 March 2007.

F-182 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

On 17 April 2007, the Bank granted 6,729,340 stock options (each option representing entitlement to one equity share of the Bank) to its employees and the Chairman & CEO. These options can be exercised at a price of Rs. 468.90 per option. The Bank has not recorded any compensation cost on options granted during the year ended 31 March 2001, year ended 31 March 2006, year ended 31 March 2007 and the current year ended 31 March 2008 as the exercise price was more than or equal to the quoted market price of underlying equity shares on the grant date. The Bank recorded a compensation cost of Rs 14 million on options granted during the year ended 31 March 2002, Rs. 20 million on options granted during the year ended 31 March 2004, Rs. 242 million on options granted during the year ended 31 March 2005, based on the excess of the quoted market price of the underlying equity shares as of the date of the grant over the exercise price. The compensation cost is amortised over the vesting period. Compensation expense for all the grants under the Scheme for the year ended 31 March 2008 is Rs. 2 million. Stock option activity under the Scheme for the year ended 31 March 2008 is set out below:

Weighted average Range of exercise Weighted average remaining prices exercise price contractual life Options outstanding (Rs.) (Rs.) (Years) Outstanding at the beginning of the year ...... 9,872,910 29.68 to 319.00 250.14 3.19 Granted during the year ...... 6,729,340 468.90 468.90 — Forfeited during the year ...... (820,249) 39.77 to 468.90 398.10 — Expired during the year ...... (1,380) 39.77 39.77 — Exercised during the year ...... (2,986,353) 29.68 to 468.90 199.51 — Outstanding at the end of the year ..... 12,794,268 29.68 to 468.90 367.55 3.57 Exercisable at the end of the year ..... 2,082,034 29.68 to 468.90 250.56 2.12 Stock option activity under the Scheme for the year ended 31 March 2007 is set out below:

Weighted average Range of exercise Weighted average remaining prices exercise price contractual life Options outstanding (Rs.) (Rs.) (Years) Outstanding at the beginning of the year ...... 8,838,245 29.68 to 232.10 171.39 4.00 Granted during the year ...... 46,95,860 319.00 319.00 — Forfeited during the year ...... (720,744) 29.68 to 319.00 254.96 — Expired during the year ...... (391) 29.68 to 319.00 29.70 — Exercised during the year ...... (2,940,060) 29.68 to 319.00 122.25 — Outstanding at the end of the year ..... 9,872,910 29.68 to 319.00 250.14 3.19 Exercisable at the end of the year ..... 979,768 29.68 to 319.00 200.43 3.90

F-183 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

Fair Value Methodology Applying the fair value based method in Guidance Note on ‘Accounting for Employee Share-based Payments’ the impact on reported net profit and EPS would be as follows:

31 March 2008 31 March 2007 Net Profit (as reported) (Rs. in million) ...... 10,591 6,542 Add: Stock based employee compensation expense included in net income (Rs. in million) ...... 2 27 Less: Stock based employee compensation expense determined under fair value based method (proforma) (Rs. in million) ...... (718) (459) Net Profit (Proforma) (Rs. in million) ...... 9,875 6,110 Earnings per share: Basic (in Rs. ) As reported ...... 31.80 23.33 Proforma ...... 29.64 21.78 Earnings per share: Diluted (in Rs. ) As reported ...... 30.96 22.63 Proforma ...... 28.86 21.14 The fair value of the options is estimated on the date of the grant using the Black-Scholes options pricing model, with the following assumptions:

31 March 2008 31 March 2007 Dividend yield ...... 1.37% 1.69% Expected life ...... 2-4years 2-4 years Risk free interest rate ...... 8.21% to 8.33% 6.93% to 7.17% Volatility ...... 44.20% to 51.21% 46.91%-52.03%

5.1.8 Segmental reporting Effective 1st April 2007, the Group has adopted RBI’s revised guidelines on Segment Reporting issued on 18th April 2007 vide RBI Circular No. DBOD.No. BP.BC. 81 / 21.04.018/ 2006-07 in terms of which the business of the Group is divided into four segments: Treasury, Corporate/Wholesale Banking, Retail Banking and Other Banking Business. The operations of Axis Sales Ltd. and Axis Private Equity Ltd. have been classified under the ‘Retail Banking’ and ‘Treasury’ segment respectively. The principal activities of these segments are as under.

Segment Principal Activities Treasury Treasury operations include investments in sovereign and corporate debt, equity and mutual funds, trading operations, derivative trading and foreign exchange operations on the proprietary account and for customers and central funding Corporate/Wholesale Banking Includes corporate relationships not included under Retail Banking, corporate advisory services, placements and syndication, management of public issue, project appraisals, capital market related services and cash management services Retail Banking Constitutes lending to individuals/small businesses subject to the orientation, product and granularity criterion and also includes low value individual exposures not exceeding the threshold limit of Rs. 50 million as defined by RBI. Retail Banking activities also include liability products, card services, internet banking, ATM services, depository, financial advisory services and NRI services Other Banking Business All banking transactions not covered under any of the above three segments

F-184 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

Revenues of the treasury services segment primarily consist of fees and gains or losses from trading operations and interest income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses. Revenues from the corporate/wholesale banking lending activity consist of interest and fees earned on loans given to customers falling under this segment, interest earned on cash float and fees arising from transaction services and fees from merchant banking activities such as syndication and debenture trusteeship. Revenues from the retail lending activity are derived from interest earned on loans classified under this segment, fees for banking and advisory services, ATM interchange fees and interest earned from other segments for surplus funds placed with those segments. Expenses of the Corporate/Wholesale Banking and Retail Banking activity primarily comprise interest expense on deposits, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses. Segment revenue includes earnings from external customers plus earnings from funds transferred to the other segments. Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Inter segment revenue represents the transfer price paid/received by the Central Funding Unit (CFU). For this purpose, the funds transfer pricing mechanism presently followed by the Bank, which is based on cost of funds and spreads, has been used. Operating expenses are allocated to the segments based on an activity-based costing methodology. All activities in the Group are segregated segment-wise and allocated to the respective segment. Geographical segment disclosure is not required to be made since the operations from foreign branches are less than the prescribed norms. Segmental results are set out below : 31 March 2008 Corporate/ Other Wholesale Retail Banking Treasury Banking Banking Business Total (Rs. in million) Segment Revenue Gross interest income (external customers) ...... 22,561 31,629 15,841 20 70,051 Other income ...... 4,609 6,616 6,849 (115) 17,959 Total income as per profit and loss account ...... 27,170 38,245 22,690 (95) 88,010 Add / (less) inter segment interest income ...... 97,744 9,534 19,915 — 127,193 Total segment income ...... 124,914 47,779 42,605 (95) 215,203 Less: Interest expense (external customers) ...... 32,483 — 11,715 — 44,198 Less: Inter segment interest expenses ...... 86,645 27,050 13,499 — 127,194 Less: Operating expenses ...... 1,395 6,400 13,748 124 21,667 Operating profit ...... 4,391 14,329 3,643 (219) 22,144 Less: Provision for non performing assets/Others ...... 961 2,430 2,403 2 5,796 Segment result ...... 3,430 11,899 1,240 (221) 16,348 Less: Provision for Tax ...... 5,757 Net Profit ...... 10,591 Segment assets ...... 470,993 409,498 197,846 17,326 1,095,663 Segment liabilities ...... 456,828 226,045 318,679 6,593 1,008,145 Net assets ...... 14,165 183,453 (120,833) 10,733 87,518 Fixed assets additions during the year ...... 3,385 3,385 Depreciation and impairment provision on fixed assets during the year ...... 1,593 1,593

F-185 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

31 March 2007 Other Banking Treasury Operations Unallocated Total (Rs. in million) Segment Revenue Gross interest income (external customers) ...... 17,613 27,003 — 44,616 Other income ...... 2,395 7,728 (24) 10,099 Total income as per profit and loss account ...... 20,008 34,731 (24) 54,715 Add/(less) inter segment interest income ...... 67,758 18,412 — 86,170 Total segment income ...... 87,766 53,143 (24) 140,885 Less: Interest expense (external customers) ...... 23,146 6,786 — 29,932 Less: Inter segment interest expenses ...... 60,856 25,314 — 86,170 Less: Operating expenses ...... 775 11,418 — 12,193 Operating profit ...... 2,989 9,625 (24) 12,590 Less: Provision for non performing assets/Others ...... 725 1,952 — 2,676 Segment result ...... 2,264 7,673 (24) 9,914 Less: Provision for Tax ...... — — — 3,372 Net Profit ...... — — — 6,542 Segment assets ...... 343,292 376,671 12,597 732,560 Segment liabilities ...... 370,740 324,046 3,889 698,675 Net assets ...... (27,448) 52,625 8,708 33,885 Fixed assets additions during the year ...... — — 2,165 2,165 Depreciation on fixed assets during the year ...... 1,120 1,120 In terms of RBI guidelines on Segment Reporting, disclosure of previous year figures in the first year of reporting under the revised format is not necessary. Segmental results relating to the previous year ended 31 March 2007 have therefore been disclosed based on the reportable segments then in force and are hence not comparable with results for the current year. 5.1.9 Related party disclosure The related parties of the Bank are broadly classified as: a) Promoter The Bank has identified the following entities as its Promoters. • Administrator of the Specified Undertaking of the Unit Trust of India (UTI-1) • Life Insurance Corporation of India (LIC) • General Insurance Corporation and four PSUs — New India Assurance Co. Ltd, National Insurance Co. Ltd., United India Insurance Co. Ltd. and The Oriental Insurance Co. Ltd b) Key Management Personnel • Dr. P. J. Nayak (Chairman & CEO) Based on RBI guidelines, details of transactions with Key Management Personnel are not disclosed since there is only one entity / party in this category. c) Joint Venture • Bussan Auto Finance India Limited Based on RBI guidelines, details of transactions with Joint Venture Companies are not disclosed since there is only one entity / party in this category.

F-186 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

The details of transactions of the Bank with its related parties during the year ended 31 March 2008 are given below. Items/Related Party Promoter (Rs. in million) Dividend Paid ...... 546 Interest Paid ...... 1,061 Interest Received ...... 1 Investment of Related Parties in the Bank ...... 19,031 Purchase / Sale of Investments ...... 1,312 Receiving of Services ...... 131 Rendering of Services ...... 3 The balances payable to/receivable from the related parties of the Bank as on 31 March 2008 are given below. Items/Related Party Promoter (Rs. in million) Deposits with the Bank ...... 28,777 Placement of Deposits ...... 1 Advances ...... — Investment of Related Parties in the Bank ...... 1,521 Guarantees ...... 390 Investment in Subordinated Debt/Hybrid Capital of the Bank ...... 2,600 The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2008 are given below. Items/Related Party Promoter (Rs. in million) Deposits with the Bank ...... 28,578 Placement of Deposits ...... 11 Advances ...... 4,330 Investment of Related Parties in the Bank ...... 3,890 Repo Borrowing ...... 575 Guarantees ...... 390 Investment in Subordinated Debt/Hybrid Capital of the Bank ...... 1,543 The details of transactions of the Bank with its related parties during the year ended 31 March 2007 are given below. Key Related Party to Management Key Management Items/Related Party Promoter Personnel Personnel Total (Rs. in million) Dividend Paid ...... 426 1 — 427 Interest Paid ...... 312 1 1 314 Interest Received ...... 16 — — 16 Investments ...... 1,580 — — 1,580 Management Contracts ...... — 31 — 31 Receiving of Services ...... 181 — — 181 Rendering of Services ...... 3 — — 3 The balances payable to/receivable from the related parties of the Bank as on 31 March 2007 are given below. Key Related Party to Management Key Management Items/Related Party Promoter Personnel Personnel Total (Rs. in million) Deposits with the Bank ...... 7,608 22 6 7,636 Placement of Deposits ...... 1 — — 1 Advances ...... 1 2 — 3 Investment of Related Parties in the Bank ..... 1,214 1 — 1,215 Guarantees ...... 390 — — 390 Investment in Subordinated Debt of the Bank . . 3,340 — — 3,340

F-187 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2007 are given below. Key Related Party to Management Key Management Items/Related Party Promoter Personnel Personnel Total (Rs. in million) Deposits with the Bank ...... 7,810 24 6 7,840 Placement of Deposits ...... 1 — — 1 Advances ...... 3,999 3 — 4,002 Investment of Related Parties in the Bank ..... 1,218 1 — 1,219 Repo Borrowing ...... 2,885 — — 2,885 Guarantees ...... 390 — — 390 Investment in Subordinated Debt of the Bank . . 4,310 — — 4,310 5.1.10 Leases

Disclosure in respect of assets given on operating lease Operating lease comprises leasing of power generation equipments. 31 March 2008 31 March 2007 (Rs. in million) Gross carrying amount at the beginning of the year ...... 765 765 Accumulated depreciation as at the end of the year ...... 276 242 Accumulated impairment losses as at the end of the year ...... 124 — Depreciation for the year ...... 34 34 Impairment losses for the year ...... 124 — Minimum lease payments receivable at the end of the year ...... — 10 Future lease rentals receivable as at the end of the year: — Not later than one year ...... 35 35 — Later than one year and not later than five years ...... 111 125 — Later than five years ...... 21 42 There are no provisions relating to contingent rent. The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements.

Disclosure in respect of assets taken on operating lease Operating lease comprises leasing of office premises/ATMs, staff quarters, electronic data capturing machines and IT equipment.

31 March 2008 31 March 2007 (Rs. in million) Future lease rentals payable as at the end of the year: — Not later than one year ...... 2,197 1,241 — Later than one year and not later than five years ...... 6,390 3,408 — Later than five years ...... 3,810 1,161 Total of minimum lease payments recognised in the profit and loss account for the year ...... 1,961 712 There are no provisions relating to contingent rent. The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements. There are no undue restrictions or onerous clauses in the agreements.

F-188 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

5.1.11 The major components of deferred tax assets and deferred tax liabilities arising out of timing differences are as under:

As at 31 March 2008 31 March 2007 (Rs. in million) Deferred tax assets on account of provisions for doubtful debts ...... 2,056 1,213 Deferred tax assets on account of amortisation of HTM investments ...... 1,014 710 Deferred tax assets on account of provision for retirement benefits . . . 167 48 Deferred tax assets on account of contingent provision against derivatives ...... 244 — Deferred tax liability on account of depreciation and impairment on fixed assets ...... (478) (525) Other deferred tax assets ...... 188 152 Net deferred tax asset/(liability) ...... 3,191 1,598

5.1.12 Employee Benefits Group

Provident Fund The contribution to the employee’s provident fund of the Group amounted to Rs. 222 million for the year ended 31 March 2008 (previous year Rs. 140 million) Axis Bank Ltd.

Superannuation The Bank contributed Rs. 75 million to the employee’s superannuation plan for the year ended 31 March 2008 (previous year Rs. 91 million).

Leave Encashment The Bank charged an amount of Rs. 281 million as liability for leave encashment for the year ended 31 March 2008 (previous year Rs. 83 million).

Gratuity Axis Bank Ltd. The following tables summarise the components of net benefit expenses recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the Gratuity benefit plan.

Profit and Loss Account Net employee benefit expenses (recognised in employee cost) 31 March 2008 31 March 2007 (Rs. in million) Current Service Cost ...... 34 23 Interest on Defined Benefit Obligation ...... 12 7 Expected Return on Plan Assets ...... (9) (6) Net Actuarial Losses/ (Gains) recognised in the year ...... 55 4 Past Service Cost ...... — — Losses/ (Gains) on “Curtailments & Settlements” ...... — — Total included in “Employee Benefit Expense” ...... 92 28 Actual Return on Plan Assets ...... 7 8

F-189 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

Balance Sheet Details of provision for gratuity 31 March 2008 31 March 2007 (Rs. in million) Present Value of Funded Obligations ...... 234 143 Fair Value of Plan Assets ...... (178) (119) Present Value of Unfunded Obligations ...... — — Unrecognised Past Service Cost ...... — — Net Liability ...... 56 24 Amounts in Balance Sheet Liabilities ...... 56 24 Assets ...... — — Net Liability ...... 56 24

Changes in the present value of the defined benefit obligation are as follows: 31 March 2008 31 March 2007 (Rs. in million) Change in Defined Benefit Obligation Opening Defined Benefit Obligation ...... 143 116 Current Service Cost ...... 34 22 Interest Cost ...... 12 7 Actuarial Losses/(Gains) ...... 54 6 Liabilities Extinguished on Curtailment ...... — — Liabilities Extinguished on Settlements ...... — — Liabilities Assumed on Acquisition ...... — — Exchange Difference on Foreign Plans ...... — — Benefits Paid ...... (9) (8) Closing Defined Benefit Obligation ...... 234 143

Changes in the fair value of plan assets are as follows: 31 March 2008 31 March 2007 (Rs. in million) Change in the Fair Value of Assets Opening Fair Value of Plan Assets ...... 119 74 Expected Return on Plan Assets ...... 9 6 Actuarial Gains / (Losses) ...... (2) 2 Assets Distributed on Settlements ...... — — Contributions by Employer ...... 60 45 Assets Acquired due to Acquisition ...... — — Exchange Difference on Foreign Plans ...... — — Benefits Paid ...... (9) (8) Closing Fair Value of Plan Assets ...... 177 119

31 March 2008 31 March 2007 The major categories of plan assets as a percentage of fair value of total plan assets — Insurer Managed Funds ...... 100.00% 100.00%

F-190 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

31 March 2008 31 March 2007 Principal actuarial assumptions at the balance sheet date: Discount Rate ...... 7.55% p.a. 8.50 % p.a. Expected rate of Return on Plan Assets ...... 7.50% p.a. 7.50 % p.a. Salary Escalation Rate ...... 6.00% p.a. 6.00 % p.a. Employee Turnover — 21 to 44 (age in years) ...... 10.00% 10.00% — 44 to 64 (age in years) ...... 1.00% 1.00% The estimates of future salary increases considered take into account the inflation, seniority, promotion and other relevant factors. The expected rate of return on plan assets is based on the average long-term rate of return expected on investments of the Fund during the estimated term of the obligations. As the contribution expected to be paid to the plan during the annual period beginning after the balance sheet date is based on various internal/external factors, a best estimate of the contribution is not determinable Axis Sales Ltd.

Gratuity 31 March 2008 (Rs. in million) Present Value of Funded Obligations ...... 1 Fair Value of Plan Assets ...... (1) Present Value of Unfunded Obligations ...... — Unrecognised Past Service Cost ...... — Net Liability ...... — Amounts in Balance Sheet Liabilities ...... — Assets ...... — Net Liability ...... —

The amount recognised in the statement of profit and loss are as follows: 31 March 2008 (Rs. in million) Current Service Cost ...... 1 Interest on Defined Benefit Obligation ...... — Expected Return on Plan Assets ...... — Net Actuarial Losses/ (Gains) Recognised in Year ...... — Past Service Cost ...... — Losses/(Gains) on “Curtailments & Settlements” ...... — Total included in “Employee Benefit Expense” ...... 1 Actual Return on Plan Assets ...... —

F-191 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

Changes in the present value of the defined benefit obligation representing reconciliation of opening and closing balances thereof are as follows: 31 March 2008 (Rs. in million) Change in Defined Benefit Obligation Opening Defined Benefit Obligation ...... — Current Service Cost ...... 1 Interest Cost ...... — Actuarial Losses/(Gains) ...... — Liabilities Extinguished on Curtailment ...... — Liabilities Extinguished on Settlements ...... — Liabilities Assumed on Acquisition ...... — Exchange Difference on Foreign Plans ...... — Benefits Paid ...... — Closing Defined Benefit Obligation ...... 1

Changes in the fair value of plan assets representing reconciliation of the opening and closing balances thereof are as follows: 31 March 2008 (Rs. in million) Change in the Fair Value of Assets Opening Fair Value of Plan Assets ...... 1 Expected Return on Plan Assets ...... — Actuarial Gains / (Losses) ...... — Assets Distributed on Settlements ...... — Contributions by Employer ...... — Assets Acquired due to Acquisition ...... — Exchange Difference on Foreign Plans ...... — Benefits Paid ...... — Closing Fair Value of Plan Assets ...... 1

31 March 2008 The major categories of plan assets as a percentage of fair value of total plan assets — Insurer Managed Funds ...... 100.00% 31 March 2008 Principal actuarial assumptions at the balance sheet date: Discount Rate ...... 7.95 % p.a. Expected rate of Return on Plan Assets ...... 7.50 % p.a. Salary Escalation Rate ...... 6.00 % p.a. Employee Turnover ...... 30.00% p.a. The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. There has been significant change in expected rate of return on assets due to the improved stock market scenario. The Company expects to contribute Rs. 300,000 as gratuity in the year 2008-09. 5.1.13 Provisions and contingencies a. Movement in provision for frauds included under other liabilities is set out below: 31 March 2008 31 March 2007 (Rs. in million) Opening balance at the beginning of the year ...... 17 10 Additions during the year ...... 35 8 Reductions on account of payments during the year ...... (2) — Reductions on account of reversals during the year ...... — (1) Closing balance at the end of the year ...... 50 17

F-192 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2008 (Continued) (Currency: In Indian Rupees)

b. Movement in provision for credit enhancements on securitized assets is set out below: 31 March 2008 31 March 2007 (Rs. in million) Opening balance at the beginning of the year ...... 32 7 Additions during the year ...... — 25 Reductions during the year ...... (1) — Closing balance at the end of the year ...... 31 32

c. Movement in provision for credit card reward points is set out below: 31 March 2008 31 March 2007 (Rs. in million) Opening provision at the beginning of the year ...... 2 — Provision made during the year ...... 59 2 Reductions during the year ...... (2) — Closing provision at the end of the year ...... 59 2

5.1.14 Description of contingent liabilities: a) Claims against the Group not acknowledged as debts These represent claims filed against the Group in the normal course of business relating to various legal cases currently in progress. These also include demands raised by income tax and other statutory authorities and disputed by the Group. b) Liability on account of forward exchange and derivative contracts The Bank enters into foreign exchange contracts, currency options/swaps and forward rate agreements on its own account and for customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by way of interest/ principal in two currencies, based on ruling spot rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. Forward Rate Agreements are agreements to pay or receive a certain sum based on a differential interest rate on a notional amount for an agreed period. A foreign currency option is an agreement between two parties in which one grants to the other the right to buy or sell a specified amount of currency at a specific price within a specified time period or at a specified future time. c) Guarantees given on behalf of constituents As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfil its financial or performance obligations. d) Acceptances, endorsements and other obligations These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank’s customers that are accepted or endorsed by the Bank. e) Other items for which the Group is contingently liable Other items represent outstanding amount of bills rediscounted by the Bank, estimated amount of contracts remaining to be executed on capital account and commitments towards underwriting and investment in equity through bids under Initial Public Offering (IPO) of corporates as at the year end. 5.1.15 Comparative Figures Previous year figures have been regrouped and reclassified, where necessary to conform to current years presentation.

F-193 Auditor’s Report on the Consolidated Financial Statements of Axis Bank Limited and its Subsidiaries To The Board of Directors Axis Bank Limited 1. We have audited the attached consolidated balance sheet of Axis Bank Limited and its subsidiaries (the ‘Group’) as at 31 March 2009, and also the consolidated profit and loss account and the consolidated cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of Axis Bank Limited’s management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. We did not audit the financial statement of 1 subsidiary whose financial statement reflects total assets of Rs. 126.5 million as at 31 March 2009, total revenues of Rs. 114.6 million and cash flows amounting to Rs. 11.2 million for the year then ended. The financial statement and other financial information of this subsidiary have been audited by other auditor whose report has been furnished to us, and our opinion is based solely on the report of other auditors. 4. We have also relied on the un-audited financial statements of certain subsidiaries whose financial statements reflect total assets of Rs. 116.4 million as at 31 March 2009, revenue of Rs. Nil and cash flow amounting to Rs. 86.1 million for the year then ended. 5. We report that the consolidated financial statements have been prepared by Axis Bank Limited’s management in accordance with the requirements of Accounting Standard 21 Consolidated Financial Statements notified by Companies (Accounting Standard) Rules, 2006. 6. Based on our audit and on consideration of reports of other auditors on separate financial statements and on the other financial information of the components, and to the best of our information and according to explanations given to us, we are of the opinion that the attached consolidated financial statements gives a true and fair view in conformity with the accounting principles generally accepted in India: vii. in the case of the consolidated balance sheet, of the state of affairs of the Group as at 31 March 2009; viii. in the case of the consolidated profit and loss account, of the profit for the year ended on that date; and ix. in the case of the consolidated cash flow statement, the cash flows for the year ended on that date.

For S.R. Batliboi & Co. Chartered Accountants

per Viren H. Mehta Partner Membership No.:048749

20 April 2009

F-194 Consolidated Balance Sheet as of 31 March 2009

Schedule As of As of No. 31-03-2009 31-03-2008 Rs. Rs. Figures in million CAPITAL AND LIABILITIES Capital ...... 1 3,590 3,577 Reserves & Surplus ...... 2 98,355 83,941 Employees’ Stock Options Outstanding (Net) ...... 17(4.16) 12 22 Deposits ...... 3 1,173,577 876,194 Borrowings ...... 4 101,855 56,240 Other liabilities and provisions ...... 5 99,583 75,690 TOTAL ...... 1,476,972 1,095,664 ASSETS Cash and Balances with Reserve Bank of India ...... 6 94,192 73,057 Balance with banks and money at call and short notice ...... 7 56,002 51,999 Investments ...... 8 462,717 338,651 Advances ...... 9 815,568 594,760 Fixed Assets ...... 10 10,824 9,324 Other Assets ...... 11 37,669 27,873 TOTAL ...... 1,476,972 1,095,664 Contingent liabilities ...... 12 2,092,603 2,588,957 Bills for collection ...... 139,573 83,234 Significant Accounting Policies and Notes to accounts ...... 17

Schedules referred to above form an integral part of the Consolidated Balance Sheet

F-195 Consolidated Profit & Loss Account for the year ended 31 March 2009

Schedule Year ended on No. 31-03-2009 31-03-2008 Rs. Rs. Figures in million except EPS data I INCOME Interest earned ...... 13 108,291 70,051 Other income ...... 14 29,159 17,959 TOTAL ...... 137,450 88,010 II EXPENDITURE Interest expended ...... 15 71,489 44,199 Operating expenses ...... 16 28,738 21,667 Provisions and contingencies ...... 17(5.1.1) 19,094 11,553 TOTAL ...... 119,321 77,419 III CONSOLIDATED NET PROFIT ATTRIBUTABLE TO GROUP ...... (I—II) 18,129 10,591 Balance in Profit & Loss account brought forward from previous year ...... 15,372 10,243 IV AMOUNT AVAILABLE FOR APPROPRIATION ...... 33,501 20,834 V APPROPRIATIONS: Transfer to Statutory Reserve ...... 4,539 2,678 Transfer to Investment Reserve ...... 1 — Transfer to Capital Reserve ...... 1,467 268 Transfer to General Reserve ...... — — Proposed Dividend (includes tax on dividend) ...... 17(5.1.6) 4,205 2,516 Balance in Profit & Loss account carried forward ...... 23,289 15,372 TOTAL ...... 33,501 20,834 VI EARNINGS PER EQUITY SHARE ...... 17(5.1.4) (Face value Rs 10/- per share) Basic ...... 50.54 31.80 Diluted ...... 50.21 30.96 Significant Accounting Policies and Notes to accounts ...... 17

Schedules referred to above form an integral part of the Consolidated Profit and Loss Account

F-196 Consolidated Cash Flow Statement for the year ended 31 March 2009

Year ended 31-03-2009 31-03-2008 Rs. Rs. Figures in million Cash flow from operating activities Net profit before taxes ...... 27,826 16,348 Adjustments for: Depreciation & impairment provision on fixed assets ...... 1,902 1,593 Depreciation on investments ...... 1,078 65 Amortisation of premium on Held to Maturity Investments ...... 928 977 Provision for Non Performing Advances/Investments (including bad debts) ...... 7,322 3,227 General Provision on securitised assets ...... (7) (1) Provision on Standard assets ...... 1,055 1,535 Provision for loss in present value for agricultural assets ...... 7 — Provision for wealth tax ...... 3 2 Loss on sale of fixed assets ...... 82 152 Provision for country risk ...... 4 36 Contingent Provision against derivatives ...... (720) 720 Provision for restructured assets ...... 655 213 Amortisation of deferred employee compensation ...... (3) 2 40,132 24,869 Adjustments for: (Increase)/Decrease in investments ...... (35,356) (26,331) (Increase)/Decrease in advances ...... (227,736) (229,410) Increase/(Decrease) in borrowings ...... 45,614 4,284 Increase/(Decrease) in deposits ...... 297,383 288,343 (Increase)/Decrease in other assets ...... (8,418) (7,784) Increase/(Decrease) in other liabilities & provisions ...... 2,814 14,314 Direct taxes paid ...... (11,077) (6,886) Net cash flow from operating activities 103,356 61,399 Cash flow from investing activities Purchase of fixed assets ...... (3,883) (4,417) (Increase)/Decrease in Held to Maturity Investments ...... (91,765) (44,516) Proceeds from sale of fixed assets ...... 400 126 Net cash used in investing activities ...... (95,248) (48,807) Cash flow from financing activities Proceeds from Issue of Subordinated debt, Perpetual Debt & Upper Tier II instruments (net of repayment) ...... 19,051 (721) Proceeds from issue of Share capital ...... 13 761 Proceeds from share premium (net of share issue expenses) ...... 376 44,706 Payment of Dividend ...... (2,516) (1,488) Net cash generated from financing activities ...... 16,924 43,258 Effect of exchange fluctuation translation reserve ...... 107 22 Net increase in cash and cash equivalents ...... 25,139 55,872 Cash and cash equivalents as at 1 April 2008 ...... 125,055 69,183 Cash and cash equivalents as at 31 March 2009 ...... 150,194 125,055

Cash and cash equivalents comprise of cash on hand & in ATM, balances with RBI, balances with banks and money at call & short notice (refer schedule 6 and 7 of the Balance Sheet).

F-197 SCHEDULE 1 — CAPITAL As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in million Authorised Capital* ...... 5,000 5,000 Issued, Subscribed and Paid-up capital#@ ...... 3,590 3,577

* 500,000,000 Equity Shares of Rs. 10/- each as of 31 March 2009 and 31 March 2008 respectively. # 359,005,118 and 357,709,669 equity shares of Rs.10/- each fully paid up as of 31 March 2009 and 31 March 2008 respectively. @ includes 27,847,621 and 13,033,458 GDRs representing 27,847,621 and 13,033,458 equity shares as of 31 March 2009 and 31 March 2008 respectively.

SCHEDULE 2 — RESERVES AND SURPLUS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in million I. Statutory Reserve Opening Balance ...... 8,524 5,846 Additions during the year ...... 4,539 2,678 13,063 8,524 II. Share Premium Account Opening Balance ...... 58,732 13,956 Additions during the year ...... 383 45,249 Less: Share issue expenses ...... — (473) 59,115 58,732 III Investment reserve Account Opening Balance ...... — — Additions during the year ...... 1 — 1— IV General Reserve Opening Balance ...... 143 143 Additions during the year ...... — — 143 143 V. Capital Reserve Opening Balance ...... 1,152 884 Additions during the year ...... 1,467 268 2,619 1,152 VI. Foreign Currency Translation Reserve Opening Balance ...... 18 (4) Additions during the year [Refer 17(4.5)] ...... 107 22 125 18 VII. Balance in Profit & Loss Account ...... 23,289 15,372 TOTAL ...... 98,355 83,941

F-198 SCHEDULE 3 — DEPOSITS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in million A. I. Demand Deposits (i) From banks ...... 13,316 8,957 (ii) From others ...... 234,771 191,472 II. Savings Bank Deposits ...... 258,221 199,824 III. Term Deposits (i) From banks ...... 55,642 36,842 (ii) From others ...... 611,627 439,099 TOTAL ...... 1,173,577 876,194 B. I. Deposits of branches in India ...... 1,149,330 863,848 II. Deposits of branches outside India ...... 24,247 12,346 TOTAL ...... 1,173,577 876,194

SCHEDULE 4 — BORROWINGS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in million I. Borrowings in India (i) Reserve Bank of India ...... 10,795 — (ii) Other Banks ...... 3,000 — (iii) Other institutions & agencies ...... 16,322 5,467 II. Borrowings outside India ...... 71,738 50,773 TOTAL ...... 101,855 56,240 Secured borrowing included inI&IIabove ...... — —

SCHEDULE 5 — OTHER LIABILITIES AND PROVISIONS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in million I. Bills payable ...... 19,368 22,749 II. Inter — office adjustments (net) ...... — — III. Interest accrued ...... 2,386 1,778 IV. Proposed dividend (includes tax on dividend) ...... 4,200 2,511 V. Subordinated Debt# ...... 35,163 18,824 VI Perpetual Debt and Upper Tier II instruments* ...... 18,181 15,469 VI. Contingent Provision against Standard Assets ...... 4,644 3,589 VII. Others (including provisions)@ ...... 15,641 10,770 TOTAL ...... 99,583 75,690

# represents Subordinated Debt of 4,540 bonds and 5,862 bonds of Rs. 0.5 million each as of 31 March 2009 and 31 March 2008 respectively and 32,893 bonds and 15,893 bonds of Rs. 1 million each as of 31 March 2009 and 31 March 2008 respectively, in the nature of Non Convertible Debentures [Also refer 17(5.1.2)]. * represents Rs. 4,473 million and Rs. 3,985 million of Perpetual Debt as of 31 March 2009 and 31 March 2008 respectively and Rs. 13,708 million and Rs. 11,484 million of Upper Tier II instruments as of 31 March 2009 and 31 March 2008. [Also refer 17(5.1.3)]. @ Includes contingent provision against derivatives of Rs. Nil million and Rs. 720 million as of 31 March 2009 and 31 March 2008 respectively.

F-199 SCHEDULE 6 — CASH AND BALANCES WITH RESERVE BANK OF INDIA

As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in million I. Cash in hand & in ATM (including foreign currency notes) ...... 15,415 15,203 II. Balances with Reserve Bank of India: (i) in Current Account ...... 78,777 57,854 (ii) in Other Accounts ...... — — TOTAL ...... 94,192 73,057

SCHEDULE 7 — BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in million I. In India (i) Balance with Banks (a) in Current Accounts ...... 5,406 10,461 (b) in Other Deposit Accounts ...... 38,789 31,808 (ii) Money at Call and Short Notice (a) With banks ...... — — (b) With other institutions ...... — — TOTAL ...... 44,195 42,269 II. Outside India (i) in Current Accounts ...... 8,529 3,846 (ii) in Other Deposit Accounts ...... 1,369 1,204 (iii) Money at Call & Short Notice ...... 1,909 4,680 TOTAL ...... 11,807 9,730 GRAND TOTAL (I+II) ...... 56,002 51,999

F-200 SCHEDULE 8 — INVESTMENTS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in million I. Investments in India in — (i) Government Securities##**...... 277,272 201,788 (ii) Other approved securities ...... — — (iii) Shares ...... 5,851 7,706 (iv) Debentures and Bonds$ ...... 140,770 108,212 (v) Investments in Joint Ventures ...... 390 130 (vi) Others@ ...... 31,935 15,688 (Mutual Fund units, CD / CP, NABARD Deposit, PTCs etc.) Gross Investments in India ...... 456,218 333,524 Less: Depreciation in the value of investments* ...... (1,387) (959) Net investments in India ...... 454,831 332,565 II. Investments outside India in — (i) Government Securities (including local authorities) ...... — — (ii) Subsidiaries and / or joint ventures abroad ...... — — (iii) Others ...... 8,572 6,138 Gross Investments outside India ...... 8,572 6,138 Less: Depreciation in the value of investments ...... (686) (52) Net investments outside India ...... 7,886 6,086 GRAND TOTAL (I+II) ...... 462,717 338,651

@ Includes deposits with NABARD Rs. 19,799 million and Rs. 10,007 million as of 31 March 2009 and 31 March 2008 respectively and PTCs Rs. 9,440 million and Rs. 5,307 million and as of 31 March 2009 and 31 March 2008 respectively. ## Includes securities costing Rs. 68,400 million and Rs. 38,718 million as of 31 March 2009 and 31 March 2008 respectively pledged for availment of fund transfer facility, clearing facility and margin requirement. ** Includes Repo lending under Liquidity Adjustment Facility of RBI Rs. Nil million and Rs. 5,038 million as of 31 March 2009 and 31 March 2008 respectively and net of repo borrowing under the Liquidity Adjustment Facility Rs. 8,410 million and Rs. Nil million as of 31 March 2009 and 31 March 2008 respectively in line with Reserve Bank of India requirements. $ Includes securities costing Rs. Nil million and Rs. 1,751 million as of 31 March 2009 and 31 March 2008 respectively pledged for margin requirement. * Includes provision for non-performing investments of Rs. 73 million and Rs. 90 million as of 31 March 2009 and 31 March 2008 respectively.

F-201 SCHEDULE 9 — ADVANCES As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in million A. (i) Bills purchased and discounted ...... 24,653 20,236 (ii) Cash credits, overdrafts and loans repayable on demand ...... 213,671 164,432 (iii) Term loans ...... 577,244 410,092 TOTAL ...... 815,568 594,760 B. (i) Secured by tangible assets$ ...... 696,011 480,622 (ii) Covered by Bank/Government Guarantees&& ...... 9,929 17,699 (iii) Unsecured ...... 109,628 96,439 TOTAL ...... 815,568 594,760 C. I. Advances in India (i) Priority Sectors ...... 229,491 165,723 (ii) Public Sector ...... 1,582 62 (iii) Banks ...... 185 276 (iv) Others ...... 482,648 374,890 TOTAL ...... 713,906 540,951 II. Advances Outside India (i) Due from banks ...... 683 — (i) Due from others — (a) Bills purchased and discounted ...... 3,802 2,151 (b) Syndicate loans ...... 30,906 20,477 (c) Others ...... 66,271 31,181 TOTAL ...... 101,662 53,809 GRAND TOTAL (C I + C II) ...... 815,568 594,760

$ Includes advances against book debts && Includes advances against L/Cs issued by Bank. Advances are net of floating provision, which has been adjusted based on management estimate.

F-202 SCHEDULE 10 — FIXED ASSETS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in million I. Premises At cost at the beginning of the year ...... 500 337 Additions during the year ...... 391 225 Deductions during the year ...... — (62) Depreciation to date ...... (117) (86) TOTAL ...... 774 414 II. Other fixed assets (including Furniture & Fixtures) At cost at the beginning of the year ...... 12,691 9,931 Additions during the year ...... 4,202 3,160 Deductions during the year ...... (242) (400) Depreciation to date ...... (7,176) (5,430) TOTAL ...... 9,475 7,261 III. Assets on Lease At cost at the beginning of the year ...... 765 765 Additions during the year ...... — — Deductions during the year ...... (765) — Depreciation to date ...... — (276) Provision for impairment ...... — (124) TOTAL ...... — 365 10,249 8,040 IV. CAPITAL WORK-IN-PROGRESS (including Capital Advances) ...... 575 1,284 GRAND TOTAL (I+II+III+IV) ...... 10,824 9,324

SCHEDULE 11 — OTHER ASSETS As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in million I Inter-office adjustments (net) ...... — — II Interest Accrued ...... 13,219 9,079 III Tax paid in advance / tax deducted at source (Net of provisions) ...... 575 578 IV Stationery and stamps ...... 9 9 V Non banking assets acquired in satisfaction of claims ...... — — VI Others# ...... 23,866 18,207 TOTAL ...... 37,669 27,873

# Includes deferred tax assets of Rs. 4,570 million and Rs. 3,191 million as of 31 March 2009 and 31 March 2008 respectively.

F-203 SCHEDULE 12 — CONTINGENT LIABILITIES As of As of 31-03-2009 31-03-2008 Rs. Rs. Figures in million I. Claims against the Group not acknowledged as debts ...... 1,650 2,548 II. Liability for partly paid investments ...... — — III. Liability on account of outstanding forward exchange and derivative contracts a) Forward Contracts ...... 829,419 643,205 b) Interest Rate Swaps, Currency Swaps, Forward Rate Agreement & Interest Rate Futures ...... 804,211 1,565,203 c) Foreign Currency Options ...... 84,621 161,001 TOTAL ...... 1,718,251 2,369,409 IV. Guarantees given on behalf of constituents In India ...... 193,529 117,963 Outside India ...... 7,281 1,756 V. Acceptances, endorsements and other obligations ...... 159,487 82,465 VI. Other items for which the Group is contingently liable ...... 12,405 14,816 TOTAL ...... 2,092,603 2,588,957

SCHEDULE 13 — INTEREST EARNED Year ended 31-03-2009 31-03-2008 Rs. Rs. Figures in million I. Interest/discount on advances / bills ...... 74,593 47,454 II. Income on investments ...... 30,515 21,023 III. Interest on balances with Reserve Bank of India and other inter-bank funds ...... 2,102 1,077 IV. Others ...... 1,081 497 TOTAL ...... 108,291 70,051

SCHEDULE 14 — OTHER INCOME Year ended 31-03-2009 31-03-2008 Rs. Rs. Figures in million I. Commission, exchange and brokerage ...... 21,858 13,209 II. Profit/(Loss) on sale of Investments/ Derivative transaction (net) ...... 2,951 2,202 III. Profit on exchange transactions (net) ...... 3,595 2,075 IV. Profit/(Loss) on sale of fixed assets (net) ...... (82) (152) V. Income earned by way of dividends etc. from Subsidiaries/companies and/or joint venture abroad / in India ...... — — VI. Lease rentals ...... 21 35 VII. Miscellaneous Income# ...... 816 590 TOTAL ...... 29,159 17,959

# Including recoveries on account of advances/investments written off in earlier years Rs. 630 million and Rs. 449 million for the year ended 31 March 2009 and 31 March 2008 respectively and profit on account of portfolio sell downs/securitization Rs. 168 million and Rs. 91 million for the year ended 31 March 2009 & 31 March 2008 respectively.

F-204 SCHEDULE 15 — INTEREST EXPENDED Year ended 31-03-2009 31-03-2008 Rs. Rs. Figures in million I. Interest on deposits ...... 62,085 37,424 II. Interest on Reserve Bank of India / Inter-bank borrowings ...... 2,853 1,763 III. Others@ ...... 6,551 5,012 TOTAL ...... 71,489 44,199

@ including interest on repos and subordinated debt

SCHEDULE 16 — OPERATING EXPENSES Year ended 31-03-2009 31-03-2008 Rs. Rs. Figures in million I. Payments to and provisions for employees ...... 10,678 7,521 II. Rent, taxes and lighting ...... 3,768 2,580 III. Printing and stationery ...... 756 545 IV. Advertisement and publicity ...... 463 744 V. Depreciation on bank’s property (incl. impairment provision) ...... 1,902 1,593 VI. Directors’ fees, allowance and expenses ...... 7 7 VII. Auditor’s fees and expenses ...... 9 7 VIII. Law Charges ...... 109 53 IX. Postage, Telegrams, Telephones, etc...... 1,528 1,051 X. Repairs and maintenance ...... 2,247 1,907 XI. Insurance ...... 1,138 767 XII. Other Expenditure ...... 6,133 4,892 TOTAL ...... 28,738 21,667

F-205 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Currency: In Indian Rupees)

1 Principles of Consolidation The consolidated financial statements comprise the financial statements of Axis Bank Limited (‘the Bank’) and its subsidiaries, which together constitute ‘the Group’. The Bank consolidates its subsidiaries in accordance with AS 21, Consolidated Financial Statements, Notified accounting standard by Companies (Accounting Standards) Rules, 2006 on a line-by-line basis by adding together the like items of assets, liabilities, income and expenditure. All significant inter-company accounts and transactions are eliminated on consolidation.

2 Basis of preparation The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting, unless otherwise stated, and comply with generally accepted accounting principles, statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India (‘RBI’) from time to time and Notified accounting standard by Companies (Accounting Standards) Rules, 2006 to the extent applicable and current practices prevailing within the banking industry in India. The consolidated financial statements present the accounts of Axis Bank Limited with its following subsidiaries: Country of Ownership Name Incorporation Interest Axis Sales Ltd...... India 100.00% Axis Private Equity Ltd...... India 100.00% Axis Trustee Services Ltd.* ...... India 100.00% Axis Mutual Fund Trustee Ltd.* ...... India 100.00% Axis Asset Management Company Ltd.* ...... India 100.00%

* incorporated during the current year The audited financial statements of Axis Sales Ltd., Axis Private Equity Ltd. and Axis Trustee Services Ltd. and the unaudited financial statements of Axis Mutual Fund Trustee Ltd. and Axis Asset Management Company Ltd. have been drawn up to the same reporting date as that of the Bank, i.e. 31 March 2009. The Bank has made investment in a corporate entity wherein it holds more than 25% of the equity shares of that company. Such investment does not fall within the definition of a joint venture as per AS 27, Financial Reporting of Interest in Joint Ventures, issued by the Institute of Chartered Accountants of India, and the said accounting standard is thus not applicable.

3 Use of estimates The preparation of the financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates are recognised prospectively in the current and future periods.

4 Significant accounting policies 4.1 Investments Group Classification In accordance with the RBI guidelines, investments are classified at the date of purchase as: • Held for Trading (‘HFT’);

F-206 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

• Available for Sale (‘AFS’); and • Held to Maturity (‘HTM’). Investments that are held principally for resale within a short period are classified as HFT securities. As per RBI guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date. Investments that the Bank intends to hold till maturity are classified under HTM category. Investments not exceeding 25% of total investments, which the Bank intends to hold till maturity, are classified as HTM securities. As permitted by RBI, the Bank may exceed the limit of 25% of total investments provided the excess comprises only of those securities which are eligible for complying with the Statutory Liquidity Ratio (‘SLR’) i.e. SLR securities and the total SLR securities held in HTM category are not more than 25% of its demand and time liabilities as on the effective date. The effective date means the last Friday of the second preceding fortnight for computation of the aforesaid limit. In computing the investment ceiling for HTM portfolio for the aforesaid purpose, debentures and bonds, which are in the nature of advances are excluded. All other investments are classified as AFS securities. However, for disclosure in the balance sheet, investments in India are classified under six categories — Government securities, Other approved securities, Shares, Debentures and Bonds, Investment in Joint Ventures and Others. Investments made outside India are classified under three categories — Government Securities, Joint Ventures abroad and Others.

Transfer of security between categories Transfer of security between categories of investments is accounted as per RBI guidelines.

Valuation Investments classified under the HTM category are carried at acquisition cost. Any premium on acquisition over face value is amortised on a constant yield to maturity basis over the remaining period to maturity. Investments classified under the AFS and HFT category are marked to market. The market/fair value for the purpose of periodical valuation of quoted investments included in the ‘Available for Sale’ and ‘Held for Trading’ categories is the market price of the scrip as available from the trades/quotes on the stock exchanges, SGL account transactions, price list of RBI or prices declared by Primary Dealers Association of India jointly with Fixed Income Money Market and Derivatives Association, periodically. Net depreciation, if any, within each category of investments is recognised in the profit and loss account. The net appreciation, if any, under each category is ignored, except to the extent of depreciation previously provided. The book value of individual securities is not changed consequent to the periodic valuation of investments. Treasury Bills, Commercial Paper and Certificate of Deposits being discounted instruments, are valued at carrying cost. Units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund. Market value of investments where current quotations are not available, is determined as per the norms prescribed by the RBI as under: • market value of unquoted Government securities is derived based on the Prices/Yield to Maturity (‘YTM’) rate for Government securities of equivalent maturity as notified by Fixed Income Money Market and Derivatives Association of India (‘FIMMDA’) jointly with the Primary Dealers Association of India (‘PDAI’) at periodic intervals; • in case of Central Government Securities, which do not qualify for SLR requirement, the market price is derived by adding the appropriate mark up to the Base Yield Curve of Central Government Securities as notified by FIMMDA;

F-207 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

• market value of unquoted State Government securities is derived by applying the YTM method by adding the appropriate mark up above the yields of the Central Government Securities of equivalent maturity notified by the FIMMDA/PDAI at periodic intervals; • in case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly, the market price is derived based on the YTM for Government securities as notified by FIMMDA/PDAI and suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for various credit ratings along with residual maturity issued by FIMMDA is adopted for this purpose; • in case of preference shares where dividend is not received regularly, the price derived on the basis of YTM is discounted in accordance with the RBI guidelines; • in case of bonds and debentures where interest is not received regularly, the valuation is in accordance with prudential norms for provisioning as prescribed by RBI; and • equity shares, for which current quotations are not available or where the shares are not quoted on the stock exchanges, are valued at break-up value (without considering revaluation reserves, if any) which is ascertained from the company’s latest balance sheet (which is not more than one year prior to the date of valuation). In case the latest balance sheet is not available, the shares are valued at Re 1 per company. Investments in joint ventures are categorised as HTM in accordance with RBI guidelines.

Repurchase and reverse repurchase transactions Repurchase and reverse repurchase transactions are accounted as outright sale and outright purchase respectively. The difference between the clean price of the first leg and clean price of the second leg is recognised as interest income/expense over the period of the transaction. However, depreciation in their value, if any, compared to their original cost, is recognised in the profit and loss account.

4.2 Advances Axis Bank Ltd. Advances are classified into performing and non-performing advances (‘NPAs’) as per RBI guidelines and are stated net of specific provisions made towards NPAs. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. Provisions for NPAs are made for sub-standard and doubtful assets at rates as prescribed by RBI with the exception for schematic retail advances, for which provisions are made in terms of a bucket-wise policy upon reaching specified stages of delinquency (90 days or more of delinquency) under each type of loan, which satisfies the RBI prudential norms on provisioning. Loss assets and unsecured portion of doubtful assets are provided/written off as per the extant RBI guidelines. NPAs are identified by periodic appraisals of the loan portfolio by management. For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI, which requires the diminution in the fair value of the assets be provided at the time of restructuring. A general provision @ 0.25% in case of direct advances to agricultural and SME sectors and 0.40% for all other advances is made as prescribed by RBI through its circular no. DBOD.BP.BC.83/21.01.002/2008-09 effective from 15 November 2008, against provision ranging between 0.25% to 2.00% as prescribed hitherto. However, the excess provision held as of 14 November 2008, is not reversed in terms of RBI guidelines.

4.3 Country risk Axis Bank Ltd. In addition to the provisions required to be held according to the asset classification status, provisions are held for individual country exposure (other than for home country). The countries are categorised into seven risk categories namely insignificant, low, moderate, high, very high, restricted and off-credit and provisioning made on exposures exceeding 180 days on a graded scale ranging from 0.25% to 100%. For exposures with contractual maturity of less than 180 days, 25% of the normal provision requirement is held. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on such country exposure.

F-208 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

4.4 Securitisation Axis Bank Ltd. The Bank enters into purchase/sale of corporate and retail loans through direct assignment/Special Purpose Vehicle (‘SPV’). In most cases, post securitisation, the Bank continues to service the loans transferred to the assignee/SPV. The Bank also provides credit enhancement in the form of cash collaterals and/or by subordination of cash flows to Senior Pass Through Certificate (‘PTC’) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies, future servicing etc.) accepted by the Bank, appropriate provision/ disclosure is made at the time of sale in accordance with AS 29, Provisions, contingent liabilities and contingent assets. Gain on securitisation transaction is recognised over the period of the underlying securities issued by the SPV. Loss on securitisation is immediately debited to profit and loss account.

4.5 Foreign currency transactions Axis Bank Ltd. In respect of domestic operations, transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction. Monetary foreign currency assets and liabilities are translated at the balance sheet date at rates notified by Foreign Exchange Dealers Association of India (‘FEDAI’). All profits/ losses resulting from year end revaluations are recognised in the profit and loss account. Financial statements of foreign branches classified as non-integral foreign operations are translated as follows: • Assets and liabilities (both monetary and non-monetary as well as contingent liabilities) are translated at closing rates notified by FEDAI at the year end. • Income and expenses are translated at the rates prevailing on the date of the transactions. • All resulting exchange differences are accumulated in a separate ‘Foreign Currency Translation Reserve’ till the disposal of the net investments. Outstanding forward exchange contracts (excluding currency swaps undertaken to hedge Foreign Currency Non-Resident (‘FCNR’) deposits which are not revalued) and spot exchange contracts are revalued at year end exchange rates notified by FEDAI. The resulting gains or losses on revaluation are included in the profit and loss account in accordance with RBI/FEDAI guidelines. Premium/discount on currency swaps undertaken to hedge FCNR deposits is recognised as interest income/ expense and is amortised on a straight-line basis over the underlying swap period. Contingent liabilities on account of foreign exchange contracts/options, guarantees, acceptances, endorsements and other obligations denominated in foreign currencies are disclosed at closing rates of exchange notified by FEDAI. Axis Private Equity Ltd. Transactions in foreign currency are recorded at the exchange rate prevailing on the date of transactions. Exchange differences arising on foreign exchange transactions settled during the period are recognised in the profit and loss account of the period.

4.6 Derivative transactions Axis Bank Ltd. Derivative transactions comprise of swaps and options, which are disclosed as contingent liabilities. The swaps/options are segregated as trading or hedge transactions. Trading swaps/options are revalued at the balance sheet date with the resulting unrealised gain or loss being recognised in the profit and loss account and correspondingly in other assets or other liabilities respectively. Hedged swaps/options are accounted for on an accrual basis.

F-209 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

4.7 Revenue recognition Axis Bank Ltd. Interest income is recognised on an accrual basis except interest income on non-performing assets, which is recognised on receipt. Commission income on deferred payment guarantees, is recognised pro-rata over the period of the guarantee. All other fee income is recognised upfront on its becoming due. Dividend is accounted on an accrual basis when the right to receive the dividend is established. Gain/loss on sell down of loans and advances through direct assignment is recognised at the time of sale. Realised gains on investments under HTM category are recognised in the profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines. Losses are recognised in the profit and loss account. Axis Sales Ltd. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. Commission income is recognised on the basis of accrual when all the services are performed. Axis Trustee Services Ltd. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Trusteeship fees are recognised, on a straight line basis, over the period when services are performed. Initial acceptance fee is recognised as and when the ‘Offer letter’ for the services to be rendered is accepted by the customer.

4.8 Fixed assets and depreciation Group Fixed assets are carried at cost of acquisition less accumulated depreciation less impairment, if any. Cost includes freight, duties, taxes and incidental expenses related to the acquisition and installation of the asset. Capital work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid to acquire fixed assets. Depreciation (including on assets given on operating lease) is provided on the straight-line method from the date of addition. The rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the management’s estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life on a subsequent review is shorter, then depreciation is provided at a higher rate based on management’s estimate of the useful life/remaining useful life. Pursuant to this policy, depreciation has been provided using the following estimated useful lives: Estimated Asset useful life Owned premises ...... 20years Assets given on operating lease ...... 20years Computer hardware ...... 3years Application software ...... 5years Vehicles ...... 4years EPABX, telephone instruments ...... 8years Mobile phone ...... 2years Locker cabinets/cash safe/strong room door ...... 16years Assets at staff residence ...... 5years All other fixed assets ...... 10years

F-210 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

All fixed assets individually costing less than Rs. 5,000 are fully depreciated in the year of installation. Depreciation on assets sold during the year is recognised on a pro-rata basis to the profit and loss account till the date of sale. The carrying amount of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

4.9 Lease transactions Axis Bank Ltd. Assets given on operating lease are capitalised at cost. Rentals received by the Bank are recognised in the profit and loss account on accrual basis. Group Lease payments for assets taken on operating lease are recognised as an expense in the profit and loss account on a straight-line basis over the lease term.

4.10 Retirement and other employee benefits Group Provident Fund Retirement benefit in the form of provident fund is a defined contribution scheme and the contributions are charged to the profit and loss account of the year when the contributions to the fund are due. There are no other obligations other than the contribution payable to the trust. Axis Bank Ltd. Gratuity The Bank contributes towards gratuity fund (defined benefit retirement plan) administered jointly by the Life Insurance Corporation of India (‘LIC’) and Metlife Insurance Company Limited (‘Metlife’) for eligible employees. Under this scheme, the settlement obligations remain with the Bank, although LIC/Metlife administer the scheme and determine the contribution premium required to be paid by the Bank. The plan provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee’s salary and the years of employment with the Bank. Liability with regard to gratuity fund is accrued based on actuarial valuation conducted by an independent actuary using the Projected Unit Credit Method as at 31 March each year. Leave Encashment Short term compensated absences are provided for based on estimates. The Bank provides leave encashment benefit (long term), which is a defined benefit scheme based on actuarial valuation as at the balance sheet date conducted by an independent actuary. The actuarial valuation is carried out as per the Projected Unit Credit Method. Superannuation Employees of the Bank are entitled to receive retirement benefits under the Bank’s Superannuation scheme either under a cash-out option through salary or under a defined contribution plan. Through the defined contribution plan the Bank contributes annually a specified sum of 10% of the employee’s eligible annual basic salary to LIC, which undertakes to pay the lumpsum and annuity benefit payments pursuant to the scheme. Superannuation contributions are recognised in the profit and loss account in the period in which they accrue. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.

F-211 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

Axis Sales Ltd. Gratuity Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation using Projected Unit Credit Method made at the end of each financial year. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred. Leave Encashment Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done, at the end of each financial year, using the Projected Unit Credit Method. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.

4.11 Debit/Credit card reward points Axis Bank Ltd. The Bank estimates the probable redemption of debit and credit card reward points using an actuarial method at balance sheet date by employing an independent actuary. Provision for the said reward points is then made based on the actuarial valuation report as furnished by the said independent actuary.

4.12 Taxation Group Income tax expense is the aggregate amount of current tax, deferred tax and fringe benefit tax charge. Current year taxes and fringe benefit tax are determined in accordance with the Income-tax Act, 1961. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. The impact of changes in the deferred tax assets and liabilities is recognised in the profit and loss account. Deferred tax assets are recognised and reassessed at each reporting date, based upon management’s judgement as to whether realization is considered as reasonably certain. Deferred tax assets are recognised on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty that such deferred tax asset can be realized against future profits.

4.13 Share issue expenses Axis Bank Ltd. Share issue expenses are adjusted from share premium account.

4.14 Earnings per share Group The Group reports basic and diluted earnings per share in accordance with AS 20, Earnings per Share, Notified accounting standard by Companies (Accounting Standards) Rules, 2006. Basic earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding for the year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at year end.

F-212 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

4.15 Cash and cash equivalents Group Cash and cash equivalents include cash on hand and in ATM, balances with Reserve Bank of India, balances with other banks and money at call and short notice.

4.16 Employee stock option scheme Axis Bank Ltd. The 2001 Employee Stock Option Scheme (‘the Scheme’) provides for grant of stock options on equity shares of the Bank to employees and Directors of the Bank. The Scheme is in accordance with the Securities and Exchange Board of India (SEBI) (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Bank follows the intrinsic value method to account for its stock based employee compensation plans as per the Guidance Note on ‘Accounting for Employee Share-based Payments’ issued by the ICAI. Options are granted at an exercise price, which is equal to/less than the fair market price of the underlying equity shares. The excess of such fair market price over the exercise price of the options as at the grant date is recognised as a deferred compensation cost and amortised on a straight-line basis over the vesting period of such options. The fair market price is the latest available closing price, prior to the date of the Board of Directors meeting in which options are granted/shares are issued, on the stock exchange on which the shares of the Bank are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered.

4.17 Provisions, contingent liabilities and contingent assets Group A provision is recognised when the Group has a present obligation as a result of past event where it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. A disclosure of contingent liability is made when there is: • a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non occurrence of one or more uncertain future events not within the control of the Group; or • a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

F-213 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

5 Notes to Accounts 5.1.1 ‘Provisions and contingencies’ recognised in the profit and loss account include: For the year ended 31 March 2009 31 March 2008 (Rs. in million) Provision for income tax — Current tax for the year ...... 10,960 7,256 — Deferred tax for the year ...... (1,380) (1,593) Provision for fringe benefit tax ...... 117 93 9,697 5,756 Provision for wealth tax ...... 3 2 Provision for non performing advances & investments ...... (including bad debts written off and write backs) ...... 7,322 3,227 Provision for restructured assets ...... 655 213 Provision for loss in present value for agricultural assets ...... 7 — Provision towards standard assets ...... 1,055 1,535 Provision for depreciation in value of investments ...... 1,078 65 Provision for securitised assets ...... (6) (1) Contingent provision against derivatives ...... (720) 720 Provision for country risk ...... 3 35 Total ...... 19,094 11,553

5.1.2 During the year ended 31 March 2009, the Bank raised subordinated debt of Rs. 17,000 million, the details of which are set out below: Date of allotment Period Coupon Amount 7 November 2008 ...... 120months 11.75% Rs. 15,000 million 28 March 2009 ...... 120months 9.95% Rs. 2,000 million The Bank has not raised any subordinated debt during the previous year ended 31 March 2008. During the year ended 31 March 2009, the Bank redeemed subordinated debt of Rs. 661 million, the details of which are set out below: Date of maturity Period Coupon Amount 20 June 2008 ...... 69months 8.80% Rs. 330 million 21 September 2008 ...... 69months 8.40% Rs. 331 million During the year ended 31 March 2008, the Bank redeemed subordinated debt of Rs. 2455 million, the details of which are set out below: Date of maturity Period Coupon Amount 28 April 2007 ...... 85months 11.75% Rs. 1,000 million 4 June 2007 ...... 66months 9.80% Rs. 1,120 million 27 June 2007 ...... 63months 9.30% Rs. 335 million

5.1.3 The Bank has not raised any hybrid capital during the year ended 31 March 2009. During the year ended 31 March 2008, the Bank raised hybrid capital in the form of Upper Tier II bonds qualifying as Tier II capital, the details of which are set out below: Type of Capital Date of allotment Period Coupon Amount Upper Tier II ...... 28June 2007 180 months 7.125% (U.S.$60 million) Rs. 2,407 million

F-214 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

5.1.4 Earnings Per Share (‘EPS’) The details of EPS computation is set out below: As at 31 March 2009 31 March 2008 Basic and Diluted earnings for the year (Net profit after tax) (Rs. in million) ...... 18,129 10,591 Basic weighted average no. of shares (in million) ...... 359 333 Add: Equity shares for no consideration arising on grant of stock options under ESOP (in million) ...... 2 9 Diluted weighted average no. of shares (in million) ...... 361 342 Basic EPS (Rs.) ...... 50.54 31.80 Diluted EPS (Rs.) ...... 50.21 30.96 Nominal value of shares (Rs.) ...... 10.00 10.00 Dilution of equity is on account of 2,388,519 stock options (previous year 8,986,371).

5.1.5 Employee Stock Options Scheme (‘the Scheme’) In February 2001, pursuant to the approval of the shareholders at the Extraordinary General Meeting, the Bank approved an Employee Stock Option Scheme. Under the Scheme, the Bank is authorised to issue up to 13,000,000 equity shares to eligible employees. Eligible employees are granted an option to purchase shares subject to vesting conditions. The options vest in a graded manner over 3 years. The options can be exercised within 3 years from the date of the vesting. Further, in June 2004, June 2006 and June 2008, pursuant to the approval of the shareholders at Annual General Meeting, the Bank approved an ESOP scheme for additional 10,000,000, 4,800,000 and 7,970,000 options respectively. 26,616,345 options have been granted under the Scheme till the previous year ended 31 March 2008. On 21 April 2008, the Bank granted 2,677,355 stock options (each option representing entitlement to one equity share of the Bank) to its employees and the Chairman & CEO. These options can be exercised at a price of Rs. 824.40 per option. The Bank has not recorded any compensation cost on options granted during the current year ended 31 March 2009 and the previous year ended 31 March 2008, as the exercise price was more than or equal to the quoted market price of underlying equity shares on the grant date. The Bank recorded a compensation cost of Rs 14 million on options granted during the year ended 31 March 2002, Rs. 20 million on options granted during the year ended 31 March 2004, Rs. 242 million on options granted during the year ended 31 March 2005, based on the excess of the quoted market price of the underlying equity shares as of the date of the grant over the exercise price. The compensation cost is amortised over the vesting period. Stock option activity under the Scheme for the year ended 31 March 2009 is set out below: Weighted Weighted average average remaining Options Range of exercise exercise contractual life outstanding prices (Rs.) price (Rs.) (Years) Outstanding at the beginning of the year ...... 12,794,268 39.77 to 468.90 367.55 3.57 Granted during the year ...... 2,677,355 824.40 824.40 — Forfeited during the year ...... (322,805) 232.10 to 824.40 466.76 — Expired during the year ...... (395) 97.62 97.62 — Exercised during the year ...... (1,295,449) 39.77 to 468.90 299.95 — Outstanding at the end of the year ...... 13,852,974 39.77 to 824.40 459.87 2.95 Exercisable at the end of the year ...... 5,616,088 39.77 to 824.40 320.20 1.86 The weighted average share price in respect of options exercised during the year was Rs. 765.54.

F-215 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

Stock option activity under the Scheme for the year ended 31 March 2008 is set out below: Weighted average Weighted remaining Options Range of exercise average exercise contractual life outstanding prices (Rs.) price (Rs.) (Years) Outstanding at the beginning of the year ..... 9,872,910 29.68 to 319.00 250.14 3.19 Granted during the year ...... 6,729,340 468.90 468.90 — Forfeited during the year ...... (820,249) 39.77 to 468.90 398.10 — Expired during the year ...... (1,380) 39.77 39.77 — Exercised during the year ...... (2,986,353) 29.68 to 468.90 199.51 — Outstanding at the end of the year ...... 12,794,268 39.77 to 468.90 367.55 3.57 Exercisable at the end of the year ...... 2,082,034 39.77 to 468.90 250.56 2.12 The weighted average share price in respect of options exercised during the year was Rs. 709.63.

Fair Value Methodology Applying the fair value based method in Guidance Note on ‘Accounting for Employee Share-based Payments’ the impact on reported net profit and EPS would be as follows: 31 March 2009 31 March 2008 Net Profit (as reported) (Rs. in million) ...... 18,129 10,591 Add: Stock based employee compensation expense included in net income (Rs. in million) ...... — 2 Less: Stock based employee compensation expense determined under fair value based method (proforma) (Rs. in million) ...... (863) (718) Net Profit (Proforma) (Rs. in million) ...... 17,266 9,875 Earnings per share: Basic (in Rs. ) As reported ...... 50.54 31.80 Proforma ...... 48.13 29.64 Earnings per share: Diluted (in Rs. ) As reported ...... 50.21 30.96 Proforma ...... 47.82 28.86 The fair value of the options is estimated on the date of the grant using the Black-Scholes options pricing model, with the following assumptions: 31 March 2009 31 March 2008 Dividend yield ...... 1.22% 1.37% Expected life ...... 2-4years 2-4 years Risk free interest rate ...... 7.96% to 8.01% 8.21% to 8.33% Volatility ...... 45.65% to 48.63% 44.20% to 51.21% Volatility is the measure of the amount by which a price has fluctuated or is expected to fluctuate during a period. The measure of volatility used in the Black-Scholes options pricing model is the annualised standard deviation of the continuously compounded rates of return on the stock over a period of time. For calculating volatility, the daily volatility of the stock prices on the National Stock Exchange, over a period prior to the date of grant, corresponding with the expected life of the options has been considered. The weighted average fair value of options granted during the year ended 31 March 2009 is Rs. 310.26.

5.1.6 Dividend paid on shares issued on exercise of stock options The Bank may allot shares between the balance sheet date and record date for the declaration of dividend pursuant to the exercise of any employee stock options. These shares will be eligible for full dividend for the year ended 31 March 2009, if approved at the ensuing Annual General Meeting. Dividend relating to these shares has not been recorded in the current year.

F-216 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

Appropriation to proposed dividend during the year ended 31 March 2009 includes dividend of Rs. 5 million (previous year Rs. 5 million) paid pursuant to exercise of 709,251 employee stock options after the previous year end and record date for declaration of dividend for the year ended 31 March 2008.

5.1.7 Segmental reporting The business of the Bank is divided into four segments: Treasury, Retail Banking, Corporate/Wholesale Banking, and Other Banking Business. These segments have been identified and based on RBI’s revised guidelines on Segment Reporting issued on 18 April 2007 vide Circular No. DBOD.No. BP.BC. 81 / 21.04.018/ 2006-07. The principal activities of these segments are as under. Segment Principal Activities Treasury Treasury operations include investments in sovereign and corporate debt, equity and mutual funds, trading operations, derivative trading and foreign exchange operations on the proprietary account and for customers and central funding. Retail Banking Constitutes lending to individuals/small businesses subject to the orientation, product and granularity criterion and also includes low value individual exposures not exceeding the threshold limit of Rs. 5 crores as defined by RBI. Retail Banking activities also include liability products, card services, internet banking, ATM services, depository, financial advisory services and NRI services. Corporate/Wholesale Banking Includes corporate relationships not included under Retail Banking, corporate advisory services, placements and syndication, management of public issue, project appraisals, capital market related services and cash management services. Other Banking Business All banking transactions not covered under any of the above three segments. Revenues of the Treasury segment primarily consist of fees and gains or losses from trading operations and interest income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses. Revenues of the Corporate/Wholesale Banking segment consist of interest and fees earned on loans given to customers falling under this segment and fees arising from transaction services and merchant banking activities such as syndication and debenture trusteeship. Revenues of the Retail Banking segment are derived from interest earned on loans classified under this segment and fees for banking and advisory services, ATM interchange fees and cards products. Expenses of the Corporate/Wholesale Banking and Retail Banking segments primarily comprise interest expense on deposits and funds borrowed from other internal segments, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses. Segment income includes earnings from external customers and from funds transferred to the other segments. Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Inter segment interest income and interest expense represent the transfer price received from and paid to the Central Funding Unit (CFU) respectively. For this purpose, the funds transfer pricing mechanism presently followed by the Bank, which is based on historical matched maturity and market-linked benchmarks, has been used. Operating expenses other than those directly attributable to segments are allocated to the segments based on an activity-based costing methodology. All activities in the Bank are segregated segment-wise and allocated to the respective segment. Geographical segment disclosure is not required to be made since the operations from foreign branches are less than the prescribed norms.

F-217 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

Segmental results are set out below: 31 March 2009 Corporate/ Other Wholesale Retail Banking Treasury Banking Banking Business Total (Rs. in crores) Segment Revenue Gross interest income (external customers) ...... 33,632 47,962 26,697 — 108,291 Other income ...... 7,482 12,073 9,658 (54) 29,159 Total income as per profit and loss account ...... 41,114 60,035 36,355 (54) 137,450 Add / (less) inter segment interest income ...... 161,793 12,766 30,400 — 204,959 Total segment income ...... 202,907 72,801 66,755 (54) 342,409 Less: Interest expense (external customers) ...... 53,311 14 18,164 — 71,489 Less: Inter segment interest expenses ...... 137,351 44,026 23,582 — 204,959 Less: Operating expenses ...... 2,321 7,364 19,053 — 28,738 Operating profit ...... 9,924 21,397 5,956 (54) 37,223 Less: Provision for non performing assets/Others ...... 1,839 3,570 3,985 3 9,397 Segment result ...... 8,085 17,827 1,971 (57) 27,826 Less: Provision for Tax ...... — — — — 9,697 Net Profit ...... — — — — 18,129 Segment assets ...... 626,010 573,164 256,461 21,336 1,476,971 Segment liabilities ...... 664,745 272,009 429,635 8,637 1,375,026 Net assets ...... (38,735) 301,155 (173,174) 12,699 101,945 Fixed assets additions during the year ...... — — — 4,593 4,593 Depreciation on fixed assets during the year ...... — — — 1,902 1,902 31 March 2008 Corporate/ Other Wholesale Retail Banking Treasury Banking Banking Business Total (Rs. in million) Segment Revenue Gross interest income (external customers) ...... 22,561 31,629 15,841 20 70,051 Other income ...... 4,609 6,616 6,849 (115) 17,959 Total income as per profit and loss account ...... 27,170 38,245 22,690 (95) 88,010 Add / (less) inter segment interest income ...... 97,744 9,534 19,915 — 127,193 Total segment income ...... 124,914 47,779 42,605 (95) 215,203 Less: Interest expense (external customers) ...... 32,483 — 11,715 — 44,198 Less: Inter segment interest expenses ...... 86,645 27,050 13,499 — 127,194 Less: Operating expenses ...... 1,395 6,400 13,748 124 21,667 Operating profit ...... 4,391 14,329 3,643 (219) 22,144 Less: Provision for non performing assets/Others ...... 961 2,430 2,403 2 5,796 Segment result ...... 3,430 11,899 1,240 (221) 16,348 Less: Provision for Tax ...... — — — — 5,757 Net Profit ...... — — — — 10,591 Segment assets ...... 470,993 409,498 197,846 17,326 1,095,663 Segment liabilities ...... 456,828 226,045 318,679 6,593 1,008,145 Net assets ...... 14,165 183,453 (120,833) 10,733 87,518 Fixed assets additions during the year ...... — — — 3,385 3,385 Depreciation and impairment provision on fixed assets during the year ...... — — — 1,593 1,593

F-218 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

5.1.8 Related party disclosure The related parties of the Bank are broadly classified as: a) Promoters The Bank has identified the following entities as its Promoters. • Administrator of the Specified Undertaking of the Unit Trust of India (UTI-1) • Life Insurance Corporation of India (LIC) • General Insurance Corporation and four PSUs — New India Assurance Co. Ltd., National Insurance Co. Ltd., United India Insurance Co. Ltd. and The Oriental Insurance Co. Ltd. b) Key Management Personnel • Dr. P. J. Nayak (Chairman & CEO) Based on RBI guidelines, details of transactions with Key Management Personnel are not disclosed since there is only one entity / party in this category. c) Joint Venture • Bussan Auto Finance India Private Limited Based on RBI guidelines, details of transactions with Joint Venture Companies are not disclosed since there is only one entity / party in this category. The details of transactions of the Bank with its related parties during the year ended 31 March 2009 are given below: Items/Related Party Promoters (Rs. in million) Dividend Paid ...... 912 Interest Paid ...... 698 Interest Received ...... 1 Investment of Related Parties in the Bank ...... — Investment in Subordinated Debt / Hybrid Capital of the Bank ...... 15,000 Redemption of Subordinated Debt ...... 200 Sale of Investments ...... 4,499 Receiving of Services ...... 249 Rendering of Services ...... 17 Other Reimbursements to Related Parties ...... 50 The balances payable to/receivable from the related parties of the Bank as on 31 March 2009 are given below: Items/Related Party Promoters (Rs. in million) Deposits with the Bank ...... 33,663 Placement of Deposits ...... 2 Advances ...... — Investment of Related Parties in the Bank ...... 1,522 Guarantees ...... 390 Investment in Subordinated Debt/Hybrid Capital of the Bank ...... 17,400

F-219 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2009 are given below: Items/Related Party Promoters (Rs. in million) Deposits with the Bank ...... 33,663 Placement of Deposits ...... 2 Advances ...... 1 Investment of Related Parties in the Bank ...... 1,522 Repo Borrowing ...... 442 Guarantees ...... 390 Investment in Subordinated Debt/Hybrid Capital of the Bank ...... 17,400 The details of transactions of the Bank with its related parties during the year ended 31 March 2008 are given below: Items/Related Party Promoters (Rs. in million) Dividend Paid ...... 546 Interest Paid ...... 1,061 Interest Received ...... 1 Investment of Related Parties in the Bank ...... 19,031 Purchase / Sale of Investments ...... 1,312 Receiving of Services ...... 131 Rendering of Services ...... 3 The balances payable to/receivable from the related parties of the Bank as on 31 March 2008 are given below: Items/Related Party Promoters (Rs. in million) Deposits with the Bank ...... 28,777 Placement of Deposits ...... 1 Advances ...... — Investment of Related Parties in the Bank ...... 1,521 Guarantees ...... 390 Investment in Subordinated Debt/Hybrid Capital of the Bank ...... 2,600 The maximum balances payable to/receivable from the related parties of the Bank as on 31 March 2008 are given below: Items/Related Party Promoters (Rs. in million) Deposits with the Bank ...... 28,578 Placement of Deposits ...... 11 Advances ...... 4,330 Investment of Related Parties in the Bank ...... 1,543 Repo Borrowing ...... 575 Guarantees ...... 390 Investment in Subordinated Debt/Hybrid Capital of the Bank ...... 3,890

F-220 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

5.1.9 Leases Disclosure in respect of assets given on operating lease Operating lease comprises leasing of power generation equipments. 31 March 2009 31 March 2008 (Rs. in million) Gross carrying amount at the beginning of the year ...... 765 765 Accumulated depreciation as at the end of the year ...... — 276 Accumulated impairment losses as at the end of the year ...... — 124 Depreciation for the year ...... 15 34 Impairment losses for the year ...... — 124 Minimum lease payments receivable at the end of the year ...... — — Future lease rentals receivable as at the end of the year: — Not later than one year ...... — 35 — Later than one year and not later than five years ...... — 111 — Later than five years ...... — 21 There are no provisions relating to contingent rent. The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements.

Disclosure in respect of assets taken on operating lease Operating lease comprises leasing of office premises/ATMs, staff quarters, electronic data capturing machines and IT equipment. 31 March 2009 31 March 2008 (Rs. in million) Future lease rentals payable as at the end of the year: — Not later than one year ...... 3,250 2,197 — Later than one year and not later than five years ...... 9,683 6,390 — Later than five years ...... 5,925 3,810 Total of minimum lease payments recognised in the profit and loss account for the year ...... 3,090 1,961 There are no provisions relating to contingent rent. The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements. There are no undue restrictions or onerous clauses in the agreements.

5.1.10 Other Fixed Assets (including furniture & fixtures) The movement in fixed assets capitalised as application software is given below: Particulars 31 March 2009 31 March 2008 (Rs. In million) At cost at the beginning of the year ...... 1,611 1,200 Additions during the year ...... 551 413 Deductions during the year ...... (2) (2) Accumulated depreciation as at 31 March ...... (1,232) (938) Closing balance as at 31 March ...... 928 673

F-221 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

5.1.11 The major components of deferred tax assets and deferred tax liabilities arising out of timing differences are as under: As at 31 March 2009 31 March 2008 (Rs. In million) Deferred tax assets on account of provisions for doubtful debts ...... 3,077 2,056 Deferred tax assets on account of amortisation of HTM investments ...... 1,281 1,014 Deferred tax assets on account of provision for retirement benefits . . . 350 167 Deferred tax assets on account of contingent provision against derivatives ...... — 244 Deferred tax liability on account of depreciation and impairment on fixed assets ...... (368) (478) Other deferred tax assets ...... 230 188 Net deferred tax asset/(liability) ...... 4,570 3,191

5.1.12 Employee Benefits Group

Provident Fund The contribution to the employee’s provident fund of the Group amounted to Rs. 309 million for the year ended 31 March 2009 (previous year Rs. 222 million) Axis Bank Ltd.

Superannuation The Bank contributed Rs. 88 million to the employee’s superannuation plan for the year ended 31 March 2009 (previous year Rs. 75 million).

Leave Encashment The Bank charged an amount of Rs. 451 million as liability for leave encashment for the year ended 31 March 2009 (previous year Rs. 281 million).

Gratuity Group The following tables summarise the components of net benefit expenses recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the Gratuity benefit plan.

Profit and Loss Account Net employee benefit expenses (recognised in payments to and provisions for employees) 31 March 2009 31 March 2008 (Rs. in million) Current Service Cost ...... 56 34 Interest on Defined Benefit Obligation ...... 21 12 Expected Return on Plan Assets ...... (16) (9) Net Actuarial Losses/(Gains) recognised in the year ...... 68 55 Past Service Cost ...... — — Losses/(Gains) on “Curtailments & Settlements” ...... — — Total included in “Employee Benefit Expense” ...... 129 92 Actual Return on Plan Assets ...... 8 7

F-222 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

Balance Sheet Details of provision for gratuity 31 March 2009 31 March 2008 (Rs. in million) Present Value of Funded Obligations ...... 364 234 Fair Value of Plan Assets ...... (298) (178) Present Value of Unfunded Obligations ...... — — Unrecognised Past Service Cost ...... — — Net Liability ...... 66 56 Amounts in Balance Sheet Liabilities ...... 66 56 Assets ...... — — Net Liability ...... 66 56

Changes in the present value of the defined benefit obligation are as follows: 31 March 2009 31 March 2008 (Rs. in million) Change in Defined Benefit Obligation Opening Defined Benefit Obligation ...... 234 143 Current Service Cost ...... 55 34 Interest Cost ...... 21 12 Actuarial Losses/(Gains) ...... 61 54 Liabilities Extinguished on Curtailment ...... — — Liabilities Extinguished on Settlements ...... — — Liabilities Assumed on Acquisition ...... — — Exchange Difference on Foreign Plans ...... — — Benefits Paid ...... (7) (9) Closing Defined Benefit Obligation ...... 364 234

Changes in the fair value of plan assets are as follows: 31 March 2009 31 March 2008 (Rs. in million) Change in the Fair Value of Assets Opening Fair Value of Plan Assets ...... 177 119 Expected Return on Plan Assets ...... 16 9 Actuarial Gains / (Losses) ...... (7) (2) Assets Distributed on Settlements ...... — — Contributions by Employer ...... 119 60 Assets Acquired due to Acquisition ...... — — Exchange Difference on Foreign Plans ...... — — Benefits Paid ...... (7) (9) Closing Fair Value of Plan Assets ...... 298 177

Experience adjustments 31 March 2009 31 March 2008 (Rs. in million) Defined Benefit Obligations ...... 364 234 Plan Assets ...... 298 177 Surplus / (Deficit) ...... (66) (56) Experience Adjustments on Plan Liabilities ...... 34 36 Experience Adjustments on Plan Assets ...... (7) (2)

F-223 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

Axis Bank Ltd. 31 March 2009 31 March 2008 The major categories of plan assets as a percentage of fair value of total plan assets — Insurer Managed Funds ...... 100.00% 100.00% 31 March 2009 31 March 2008 Principal actuarial assumptions at the balance sheet date: Discount Rate ...... 6.70% p.a. 7.55% p.a. Expected rate of Return on Plan Assets ...... 7.50% p.a. 7.50% p.a. Salary Escalation Rate ...... 6.00% p.a. 6.00% p.a. Employee Turnover — 21 to 44 (age in years) ...... 10.00% 10.00% — 44 to 64 (age in years) ...... 1.00% 1.00% The estimates of future salary increases considered take into account the inflation, seniority, promotion and other relevant factors. The expected rate of return on plan assets is based on the average long-term rate of return expected on investments of the Fund during the estimated term of the obligations. As the contribution expected to be paid to the plan during the annual period beginning after the balance sheet date is based on various internal/external factors, a best estimate of the contribution is not determinable Axis Sales Ltd. 31 March 2009 31 March 2008 The major categories of plan assets as a percentage of fair value of total plan assets — Insurer Managed Funds ...... 100.00% 100.00% 31 March 2009 31 March 2008 Principal actuarial assumptions at the balance sheet date: Discount Rate ...... 6.30% p.a. 7.95 % p.a. Expected rate of Return on Plan Assets ...... 7.50% p.a. 7.50 % p.a. Salary Escalation Rate ...... 6.00% p.a. 6.00 % p.a. Employee Turnover ...... 30.00% p.a. 30.00% p.a. The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. The Company expects to contribute Rs. 3,00,000 as gratuity in the year 2009-10.

5.1.13 Provisions and contingencies a) Movement in provision for frauds included under other liabilities is set out below: 31 March 2009 31 March 2008 (Rs. in million) Opening balance at the beginning of the year ...... 50 17 Additions during the year ...... — 35 Reductions on account of payments during the year ...... (5) (2) Reductions on account of reversals during the year ...... — — Closing balance at the end of the year ...... 45 50

b) Movement in provision for credit enhancements on securitised assets is set out below: 31 March 2009 31 March 2008 (Rs. in million) Opening balance at the beginning of the year ...... 31 32 Additions during the year ...... — — Reductions during the year ...... (31) (1) Closing balance at the end of the year ...... — 31

F-224 Axis Bank Limited Group 17 Significant accounting policies and notes forming part of the consolidated financial statements for the year ended 31 March 2009 (Continued) (Currency: In Indian Rupees)

c) Movement in provision for credit card reward points is set out below: 31 March 2009 31 March 2008 (Rs. in million) Opening provision at the beginning of the year ...... 59 2 Provision made during the year ...... 8 59 Reductions during the year ...... (10) (2) Closing provision at the end of the year ...... 57 59

d) Movement in provision for debit card reward points is set out below: 31 March 2009 31 March 2008 (Rs. in million) Opening provision at the beginning of the year ...... — — Provision made during the year ...... 42 — Reductions during the year ...... — — Closing provision at the end of the year ...... 42 —

5.1.14 Description of contingent liabilities: a) Claims against the Group not acknowledged as debts These represent claims filed against the Group in the normal course of business relating to various legal cases currently in progress. These also include demands raised by income tax and other statutory authorities and disputed by the Group. b) Liability on account of forward exchange and derivative contracts The Bank enters into foreign exchange contracts, currency options/swaps, interest rate futures and forward rate agreements on its own account and for customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by way of interest/principal in two currencies, based on ruling spot rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. Interest rate futures are standardised, exchange-traded contracts that represent a pledge to undertake a certain interest rate transaction at a specified price, on a specified future date. Forward rate agreements are agreements to pay or receive a certain sum based on a differential interest rate on a notional amount for an agreed period. A foreign currency option is an agreement between two parties in which one grants to the other the right to buy or sell a specified amount of currency at a specific price within a specified time period or at a specified future time. c) Guarantees given on behalf of constituents As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfil its financial or performance obligations. d) Acceptances, endorsements and other obligations These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank’s customers that are accepted or endorsed by the Bank. e) Other items for which the Group is contingently liable Other items represent outstanding amount of bills rediscounted by the Bank, estimated amount of contracts remaining to be executed on capital account and commitments towards underwriting and investment in equity through bids under Initial Public Offering (IPO) of corporates as at the year end.

5.1.15 Comparative Figures Previous year figures have been regrouped and reclassified, where necessary to conform to current years presentation.

F-225 REGISTERED OFFICE OF THE BANK Axis Bank Limited “TRISHUL”, Third Floor Opposite Samartheshwar Temple Nr. Law Garden Ellisbridge Ahmedabad 380 006 India

CORPORATE HEADQUARTERS OF THE BANK Axis Bank Limited 131, Maker Tower-F, 13th Floor Cuffe Parade Colaba Mumbai — 400 005 India

AUDITORS TO THE BANK S.R. Batliboi & Co. Chartered Accountants 6th Floor Express Towers Nariman Point Mumbai — 400 021 India

DEPOSITARY The Bank of New York Mellon 101 Barclay Street 22nd Floor West New York, NY 10286 United States of America

CUSTODIAN ICICI Bank Limited Securities Markets Services First Floor Empire Complex 414, Senapati Bapat Marg Lower Parel Mumbai — 400 013 India

LEGAL ADVISERS TO THE BANK As to Indian law Talwar, Thakore & Associates Hague Building 9 Sprott Road Ballard Estate Mumbai — 400 001 India

LEGAL ADVISERS TO THE MANAGERS As to English and U.S. law As to Indian law Allen & Overy Amarchand & Mangaldas & 9th Floor Three Exchange Square Suresh A. Shroff & Co. Central Peninsula Chambers Hong Kong Peninsula Corporate Park, Ganpatrao Kadam Marg, Lower Parel Mumbai — 400 013