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State_Bank_of_India_-_Letter_of_Offer

State_Bank_of_India_-_Letter_of_Offer

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Sections

  • ABBREVIATIONS AND TECHNICAL TERMS
  • RISK FACTORS
  • THE ISSUE
  • SELECTED FINANCIAL AND OPERATING DATA
  • GENERAL INFORMATION
  • OVERSEAS SHAREHOLDERS
  • CAPITAL STRUCTURE
  • OBJECTS OF THE ISSUE
  • BASIS FOR ISSUE PRICE
  • INDUSTRY OVERVIEW
  • BUSINESS
  • REGULATIONS AND POLICIES
  • DIVIDENDS
  • MANAGEMENT
  • RELATED PARTY TRANSACTIONS
  • DESCRIPTION OF CERTAIN DIFFERENCES BETWEEN INDIAN GAAP AND U.S. GAAP
  • AUDITOR’S REPORT (UNCONSOLIDATED)
  • AUDITOR’S REPORT (CONSOLIDATED)
  • FINANCIAL STATEMENTS
  • STOCK MARKET DATA FOR EQUITY SHARES OF THE BANK
  • MATERIAL DEVELOPMENTS
  • DESCRIPTION OF CERTAIN INDEBTEDNESS
  • OUTSTANDING LITIGATION AND DEFAULTS
  • GOVERNMENT APPROVALS
  • STATUTORY AND OTHER INFORMATION
  • TERMS OF THE PRESENT ISSUE
  • MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION
  • DECLARATION

LETTER OF OFFER Dated February 1, 2008 For Equity Shareholders of the Bank only

STATE BANK OF INDIA
(Constituted under State Bank of India Act, 1955)
Central Office: State Bank Bhavan, Madame Cama Road, Mumbai 400 021, Maharashtra, India Tel. no. (91 22) 2202 2426 Fax no. (91 22) 2285 5348 Contact Person: Mr. Subrata Maiti, General Manager (Shares & Bonds) E-mail: gm.snb@sbi.co.in; Website: www.statebankofindia.com FOR PRIVATE CIRCULATION TO THE EQUITY SHAREHOLDERS OF THE BANK ONLY LETTER OF OFFER
ISSUE OF 105,259,776 EQUITY SHARES OF FACE VALUE RS. 10 EACH AT A PREMIUM OF RS. 1,580 PER EQUITY SHARE AGGREGATING TO AN AMOUNT EQUIVALENT TO RS. 167,363.04 MILLION TO THE EQUITY SHAREHOLDERS ON A RIGHTS BASIS IN THE RATIO OF ONE EQUITY SHARE FOR EVERY FIVE EQUITY SHARES HELD ON THE RECORD DATE i.e. FEBRUARY 4, 2008 (THE "ISSUE"). THE ISSUE PRICE FOR EQUITY SHARES IS 159 TIMES OF THE FACE VALUE OF THE EQUITY SHARE. THIS BEING A FAST TRACK ISSUE, THE BANK HAS FILED A LETTER OF OFFER WITH THE DESIGNATED STOCK EXCHANGE AND THE SECURITIES AND EXCHANGE BOARD OF INDIA. GENERAL RISKS

Investments in equity and equity related securities involve a high degree of risk and Investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors carefully before taking an investment decision in relation to this Issue. For taking an investment decision, Investors must rely on their own examination of the Issuer and the Issue including the risks involved. The securities have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy of this document. Investors are advised to refer to “Risk Factors” on page [●] of this Letter of Offer before making an investment in this Issue.
ISSUER’S ABSOLUTE RESPONSIBILITY

The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer contains all information with regard to the Issuer and the Issue, which is material in the context of this Issue, that the information contained in this Letter of Offer is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other material facts, the omission of which makes this Letter of Offer as a whole or any such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The existing Equity Shares of the Bank are listed on the Bombay Stock Exchange Limited (“BSE”), the National Stock Exchange of India Limited (“NSE”), the Calcutta Stock Exchange Association Limited (“CSE”), the Madras Stock Exchange Limited (“MSE”), the Delhi Stock Exchange Association Limited (“DSE”) and the Stock Exchange, Ahmedabad (“ASE”). The Bank has received “in-principle” approvals from the BSE and NSE for listing the Equity Shares arising from this Issue vide letters dated January 31, 2008 and January 30, 2008, respectively. For the purposes of the Issue, the Designated Stock Exchange shall be the NSE. Global Depositary Receipts which represent the underlying Equity Shares of the Bank are listed on the London Stock Exchange. REGISTRAR TO THE LEAD MANAGERS TO THE ISSUE ISSUE

Citigroup Global Markets India Private Limited 12th Floor, Bakhtawar, Nariman Point, Mumbai 400 021 Tel.: (91 22) 6631 9999 Fax.: (91 22) 6631 9803 Email: investors.cgmib@citi.com Website: www.citibank.co.in Contact Person: Mr. Amulya Goyal SEBI Regn No: INM000010718

CLSA India Limited 8/F Dalamal House Nariman Point Mumbai 400 021 Tel.: (91 22) 6650 5050 Fax.: (91 22) 2285 6524 Email: sbi.rights@clsa.com Website: www.india.clsa.com Contact Person: Mr. Sumit Jalan SEBI Regn No: INM000010619

Deutsche Equities India Private Limited DB House, Hazarimal Somani Marg, Fort, Mumbai 400001 Tel.: (91 22) 6658 4600 Fax.: (91 22) 2200 6765 Email: sbi.rights@list.db.com Website: www.db.com/India Contact Person: Mr. Vikram Gupta SEBI Regn No: INM000010833

DSP Merrill Lynch Limited Mafatlal Center, 10th Floor, Nariman Point, Mumbai 400 021 Tel.: (91 22) 6632 8000 Fax.: (91 22) 2204 8518 Email: sbi_rights@ml.com Website: www.dspml.com Contact Person: Mr. Pranav Mehta SEBI Regn No: INM000002236

Kotak Mahindra Capital Company Limited 3rd Floor, Bakhtawar, 229, Nariman Point, Mumbai 400 021 Tel.: (91 22) 6634 1100 Fax.: (91 22) 2283 7517 Email: sbi.rights@kotak.com Website: www.kotak.com Contact Person: Mr. Chandrakant Bhole SEBI Regn No: INM000008704

Datamatics Financial Services Ltd. A 16 & 17, MIDC Part B Crosslane, Andheri (East), Mumbai 400 093 Tel.: (91 22) 6671 2151 2156 Fax.: (91 22) 6671 2192 Email: sbirights@dfssl.com Website: www.dfssl.com Contact Person: Mr. Dnyanesh Gharote SEBI Regn No: INR000000874

ISSUE PROGRAMME ISSUE OPENS ON February 18, 2008 LAST DATE FOR REQUEST FOR SPLIT APPLICATION FORMS March 3, 2008 ISSUE CLOSES ON March 18, 2008

TABLE OF CONTENTS ABBREVIATIONS AND TECHNICAL TERMS............................................................................................. 1 RISK FACTORS .................................................................................................................................................. 7 THE ISSUE ......................................................................................................................................................... 26 SELECTED FINANCIAL AND OPERATING DATA .................................................................................. 27 GENERAL INFORMATION............................................................................................................................ 32 OVERSEAS SHAREHOLDERS ...................................................................................................................... 39 CAPITAL STRUCTURE................................................................................................................................... 42 OBJECTS OF THE ISSUE................................................................................................................................ 51 BASIS FOR ISSUE PRICE ............................................................................................................................... 53 INDUSTRY OVERVIEW.................................................................................................................................. 55 BUSINESS........................................................................................................................................................... 68 DESCRIPTION OF ASSETS AND LIABILITY MANAGEMENT AND RISK MANAGEMENT OF THE BANK .................................................................................................................................... 95 REGULATIONS AND POLICIES ................................................................................................................. 107 DIVIDENDS...................................................................................................................................................... 132 MANAGEMENT .............................................................................................................................................. 133 RELATED PARTY TRANSACTIONS.......................................................................................................... 154 DESCRIPTION OF CERTAIN DIFFERENCES BETWEEN INDIAN GAAP AND U.S. GAAP........... 155 AUDITORS’S REPORT (UNCONSOLIDATED) ........................................................................................ 160 AUDITOR’S REPORT (CONSOLIDATED) ................................................................................................ 164 FINANCIAL STATEMENTS ......................................................................................................................... 167 STOCK MARKET DATA FOR EQUITY SHARES OF THE BANK........................................................ 238 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................................................................................................... 240 MATERIAL DEVELOPMENTS.................................................................................................................... 270 DESCRIPTION OF CERTAIN INDEBTEDNESS....................................................................................... 273 OUTSTANDING LITIGATION AND DEFAULTS ..................................................................................... 274 GOVERNMENT APPROVALS ..................................................................................................................... 280

STATUTORY AND OTHER INFORMATION............................................................................................ 283 TERMS OF THE PRESENT ISSUE .............................................................................................................. 295 MAIN PROVISIONS OF THE STATE BANK OF INDIA ACT AND STATE BANK OF INDIA REGULATIONS ................................................................................................................................ 313 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION..................................................... 327 DECLARATION .............................................................................................................................................. 328

ii

OVERSEAS SHAREHOLDERS The distribution of this Letter of Offer and the issue of Equity Shares on a rights basis to persons in certain jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. Persons into whose possession this Letter of Offer may come are required to inform themselves about and observe such restrictions. The Bank is making this issue of Equity Shares on a rights basis to the shareholders of the Bank and the Letter of Offer/Abridged Letter of Offer and CAF will be dispatched to those shareholders who have an Indian address. No action has been or will be taken to permit this Issue in any jurisdiction where action would be required for that purpose, except that this Letter of Offer has been filed with the Stock Exchanges and with SEBI. Accordingly, the Equity Shares delivered upon exercise of the Rights Entitlements may not be offered or sold, directly or indirectly, and this Letter of Offer may not be distributed, in any jurisdiction outside of India. Receipt of this Letter of Offer will not constitute an offer in those jurisdictions in which it would be illegal to make such an offer and, in those circumstances, this Letter of Offer must be treated as sent for information only and should not be copied or redistributed. No person receiving a copy of this Letter of Offer in any territory other than in India may treat this Letter of Offer as constituting an invitation or offer to him, nor should he in any event use the CAF. The Bank will not accept any CAF where the address as indicated by the applicant is not an Indian address. Accordingly, persons receiving a copy of this Letter of Offer should not, in connection with the issue of Equity Shares or the Rights Entitlements, distribute or send the same in or into the United States or any other jurisdiction where to do so would or might contravene local securities laws or regulations. If this Letter of Offer is received by any person in any such territory, or by their agent or nominee, they must not seek to subscribe to the Equity Shares or to exercise the Rights Entitlements referred to in this Letter of Offer. Neither the delivery of this Letter of Offer nor any sale hereunder shall under any circumstances create any implication that there has been no change in the Bank’s affairs from the date hereof or that the information contained herein is correct as at any time subsequent to this date. European Economic Area Restrictions In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive at any relevant time (each, a “Relevant Member State”) an offer of the Equity Shares to the public may not be made in that Relevant Member State prior to the publication of a prospectus in relation to the Equity Shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that an offer to the public in that Relevant Member State of any Equity Shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State: (a) (b) 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; 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; or in any other circumstances falling within Article 3(2) of the Prospectus Directive.

(c)

provided that no such offer of Equity Shares shall result in a requirement for the publication by the Bank or any Manager of a prospectus pursuant to Article 3 of the Prospectus Directive. For the purpose of this provision, the expression an “offer of Equity Shares to the public” in relation to any Equity Shares 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 the Equity Shares to be offered so as to enable an investor to decide to purchase or subscribe for the Equity Shares, 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. This European Economic Area selling restriction is in addition to any other selling restriction set out below.

i

United Kingdom Restrictions This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to 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, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). The Equity Shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Equity Shares will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents. Republic of Italy Restrictions The Issue of the Equity Shares has not been registered pursuant to Italian securities legislation and, accordingly, no Equity Shares may be offered, sold or delivered, nor may copies of this document or of any other document relating to the Equity Shares be distributed in the Republic of Italy, except: (i) to qualified investors (investitori qualificati), as defined pursuant to Article 100 of Legislative Decree No. 58 of 24 February 1998, as amended (the Financial Services Act) and the relevant implementing CONSOB regulations, as amended from time to time, and in Article 2 of Directive No. 2003/71/EC of 4 November 2003; or in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Financial Services Act and Article 33, first paragraph, of CONSOB Regulation No. 11971 of 14 May 1999, as amended (Regulation No. 11971).

(ii)

Any offer, sale or delivery of the Equity Shares or distribution of copies of this document or any other document relating to the Equity Shares in the Republic of Italy under (i) or (ii) above must be: (a) made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act, CONSOB Regulation No. 16190 of 29 October 2007 (as amended from time to time) and Legislative Decree No. 385 of 1 September 1993, as amended (the Banking Act); and in compliance with any other applicable laws and regulations or requirement imposed by CONSOB or other Italian authority. NO OFFER IN THE UNITED STATES The Rights Entitlements and the Equity Shares of the Bank have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), or any U.S. state securities laws and may not be offered, sold, resold or otherwise transferred within the United States of America or the territories or possessions thereof (the “United States” or “U.S.”) or to, or for the account or benefit of, “U.S. Persons” (as defined in Regulation S under the Securities Act (“Regulation S”)), except in a transaction exempt from the registration requirements of the Securities Act. The rights referred to in this Letter of Offer are being offered in India, but not in the United States. The Issue to which this Letter of Offer relates is not, and under no circumstances is to be construed as, an offering of any shares or rights for sale in the United States or as a solicitation therein of an offer to buy any of the said shares or rights. Accordingly, this Letter of Offer and the enclosed CAF should not be forwarded to or transmitted in or into the United States at any time. Neither the Bank nor any person acting on behalf of the Bank will accept a subscription or renunciation from any person, or the agent of any person, who appears to be, or who the Bank or any person acting on behalf of the Bank has reason to believe is, in the United States and to whom an offer, if made, would result in requiring registration of this Letter of Offer with the United States Securities and Exchange Commission. Envelopes containing a CAF should not be postmarked in the United States or otherwise dispatched from the United States, and all persons subscribing for Equity Shares and wishing to hold such shares in registered form must provide an address for registration of the Equity Shares in India. The Bank is making this issue of Equity Shares on a rights basis to the shareholders of the Bank and the Letter of Offer/Abridged Letter of Offer and CAF shall be dispatched to those Shareholders who have an Indian address. Any person who acquires Rights Entitlements or Equity Shares will be deemed to have declared, warranted and agreed, by accepting the delivery

(b)

ii

of this Letter of Offer, that it is not and that at the time of subscribing for the Equity Shares or the Rights Entitlements, it will not be, in the United States. The Bank reserves the right to treat as invalid any CAF which: (i) appears to the Bank or its agents to have been executed in or dispatched from the United States; (ii) does not include the relevant certification set out in the CAF headed “Overseas Shareholders” to the effect that the person accepting and/or renouncing the CAF does not have a registered address (and is not otherwise located) in the United States; or (iii) where the Bank believes acceptance of such CAF may infringe applicable legal or regulatory requirements; and the Bank shall not be bound to allot or issue any Equity Shares or Rights Entitlement in respect of any such CAF. Rights may not be transferred or sold to any U.S. Person.

iii

” Industry and market share data in this Letter of Offer are derived from data of the RBI or the DGCIS and calculated by the Bank where applicable.S. 2005. 2007 prepared in accordance with Indian GAAP and applicable regulations. For a discussion of the principal differences between Indian GAAP and U. it has not been independently verified. see “Description of Certain Differences Between Indian GAAP and U. Certain financial and statistical figures have been rounded to the nearest tenth of a decimal place. In this Letter of Offer. 2006. Indian economic data in this Letter of Offer is derived from data of the RBI and the economic surveys of the Government. GAAP as they relate to the Bank. iv . Industry publications generally state that the information contained in those publications has been obtained from sources believed to be reliable and that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Market and industry data used in this Letter of Offer. any discrepancies in any table between the total and the sum of the amounts listed may be due to rounding off. Although the Bank believes that market data used in this Letter of Offer is reliable. GAAP”).S. the financial information used in this Letter of Offer is derived from the Bank’s consolidated audited financial statements as of March 31 for the years ended 2007. Unless stated otherwise. GAAP.S. has been obtained from industry publications and governmental sources.PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA The Bank maintains its financial books and records and prepares its financial statement in Rupees in accordance with generally accepted accounting principles in the Republic of India (“Indian GAAP”) which differ in certain important respects from generally accepted accounting principles in the United States (“U. included in this Letter of Offer. 2004 and 2003 and consolidated limited reviewed financial statements for the six-months ended on September 30.

90 40.........................S...........87 42.....27 40............EXCHANGE RATES The following table sets forth...... September 2007 ...........................68 39.......... No representation is made that the rupee amounts actually represent such American dollar amounts or could have been or could be converted into American dollars at the rates indicated................. February 2007.............. for the periods indicated............02 43.36 40...........26 39......05 41...........53 43..58 40......57 40..52 39...15 40.....................55 44.............08 43........07 47...................12 40.15 39....40 43..17 45...........................41 = U..79 42......... 2007 ......................45 46............ March 2007................................... October 2007 .....................................................07 44.......................42 41....................12 Average 49.............40 43...............................................07 43......................................... April 2007.........................................21 44...............................................................63 39....... 2007 was Rs.......04 40...49 44............. November 2007 .....................14 40........................68 40....... Month 47...................83 High 47....................29 v ............ information concerning the exchange rates between Indian rupees and U.48 43...... Period End Average High Low 2003 .........33 39.................... June 2007.......... The noon buying rate as on December 31...................................... July 2007 ..................... Rupee and American Dollars Exchange Rates Year ended March 31.................78 Low January 2007....43 45.............................26 46...........10 Period End 48......................11 39.......21 44...........................75 39.50 38.... 2005 ...........36 39....53 43.....48 39. dollars based on the closing 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.................S......18 40..............25 39.................04 40..46 46.......................05 42...........38 44.....................................................72 39.................................81 39......................................... May 2007................ August 2007.78 40................41 44........27 40.02 40...... December 2007..$ 1........................ Source: Bloomberg 44............. any other rate or at all... 39.........56 40...............................................................86 44................59 40. 2004 ............... 2006 .......................................................................43 43.....10 41....................................00.27 43...................................96 44...62 44.

“plan”. “aim”. In addition. tax or regulatory proceedings in India and in other jurisdictions the Bank is or will become a party to. The Bank does not intend to publicly update or revise these forward-looking statements to reflect events or circumstances after the date of this Letter of Offer. “will continue”. “are likely”. “aimed”. tensions between India and Pakistan related to the Kashmir region. Actual results may differ materially from those suggested by the forwardlooking statements due to certain risks or uncertainties associated with the Bank’s expectations with respect to. “estimating”. The forward-looking statements made in this Letter of Offer speak only as of the date of this Letter of Offer. “estimate”. “may”. and the Bank does not assume any responsibility to do so. equity prices or other market rates or prices. “believe”.. a former financial institution not subject to Indian banking regulations. military armament or social unrest in any part of India. but not limited to. deflation. the future impact of new accounting standards. financial or political conditions. anti-terrorist or other attacks by the United States. certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future. “should”. For a further discussion on the factors that could cause actual results to differ. its ability to implement its dividend policy. “propose to”. that are “forward-looking statements”. its ability to market new products. its ability to successfully implement its strategy. including on the assets and liabilities of SBI. “project”.FORWARD-LOOKING STATEMENTS The Bank has included statements in this Letter of Offer which contain words or phrases such as “will”. future levels of impaired loans. “is likely”. actual future gains. including its use of the Internet and other technology and its rural expansion. market and liquidity risks. “target”. the adequacy of its allowance for credit and investment losses. changes in domestic and foreign laws. technological changes. As a result. “expect”. general economic. the impact of changes in banking regulations and other regulatory changes in India and other jurisdictions on the Bank. “will achieve”. the outcome of any legal. inflation. “expected to”. “would”. the actual growth in demand for banking and other financial products and services. its growth and expansion in domestic and overseas markets. losses or impact on net interest income and net income could materially differ from those that have been estimated. see the discussion under “Risk Factors” included elsewhere in this Letter of Offer.S. “will likely result”. a United States-led coalition or any other country. “trying to”. “contemplate”. the monetary and interest rate policies of India and the other markets in which the Bank operates. cash flow projections. or any other country which have a direct or indirect impact on its business activities or investments. “anticipate”. “seeking to”. unanticipated turbulence in interest rates. the United States or elsewhere. natural calamities. “our judgment” and similar expressions or variations of such expressions. its ability to roll over its short-term funding sources and its exposure to credit. “will pursue”. “seek to”. “objective”. instability in the sub prime credit market and liquidity levels in the U. instability or uncertainty in India. “goal”. changes or volatility in the value of the rupee. regulations and taxes. “can”. its ability to manage the increased complexity of the risks the Bank faces following its rapid international growth. but are not limited to. and general or regional changes in asset valuations. changes in the competitive and pricing environment in India. vi . the performance of the financial markets in general. southeast Asia. “future”. “intend”. foreign exchange rates. other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this Letter of Offer include. “could”. caused by any factor including terrorist attacks in India. investment income. its ability to integrate recent or future mergers or acquisitions into its operations. By their nature.

G....ABBREVIATIONS AND TECHNICAL TERMS All references in this document to “U... 6. Dr. Allahabad 2110 01 (UP) D. Chartered Accountants.000 10.. 1 100.. Simpson Buildings.. One hundred crores ...... No representation is made that the Indian rupee amounts have been. 12-B Baldota Bhawan..000. 81. to U.....” refer to Indian Rupees.41 per $1. Annie Besant Road Worli.. One crore. 2nd Floor...... Any discrepancies in any table between totals and sums of the amounts listed are due to rounding. Chartered Accountants....... 2007.. dollars are based on the noon buying rate in the City of New York on December 31. Ashutosh Chowdhury Avenue... Mount Road. for cable transfers in Indian Rs. Bank Related Terms Act Auditors The State Bank of India Act. dollars”.... Barodawala Mansion. Chartered Accountants 22.. In addition... Price & Co......M.... Chandra Shekar Azad Market Complex. 4. 861. 5th Floor...... 1955 The Joint Statutory Auditors of the Bank namely: 1.......... Flat No... Vinay Kumar & Co.. .. 3.S.. all translations from Indian Rs.. Ten crores ......... Nissim & Co...000 1.. M.P. could have been or could be converted into U.. All references in this document to the “Government” and “Central Government” refer to the Government of India. K.. Sen & Co..000 (one hundred thousand) (ten million) (one hundred million) (one thousand million or one billion) 2... 22... Mittal House...N... Chartered Accountants..... B-Wing...... E-29. Maharshi Karve Road.000.. Mumbai 400 018. Churchgate Mumbai 400 020 R..S.. Mittal & Co. References to “crores” and “lakhs” are to the following: One lakh .. “U.000..000.. as amended........ references to “euro” and “€” refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community..S.00. 39.... South Extension Part II..000 100... dollars at such a rate or any other rate. Chartered Accountants.. 5. as certified for customs purposes by the Federal Reserve Bank of New York which was Rs......... Except as otherwise stated in this Letter of Offer. Opp...S.. Civil Lines. New Delhi 110 049.... 5 Sardar Patel Marg. Chennai 600 002 S...... 3rd Floor.. Khandelwal Jain & Co Chartered Accountants...$” and “$” refer to United States dollars and to “Rupees” and “Rs... 117.

T. Chartered Accountants. 2. Central Board Capital or Share Capital Equity Share(s) or Share(s) Equity Shareholder the Group General Terms and Abbreviations Term AGM AS AY BSE CDSL Companies Act Description Annual General Meeting Indian Accounting Standard Assessment Year The Bombay Stock Exchange Limited Central Depository Services (India) Limited Companies Act. SCO-2935-36(1st floor). 60. Oakland Apartments 7 Malony Road. 5-4-726. Tamarind Lane. Central Board of Directors of the Bank Issued share capital of the Bank The equity share of the Bank having a face value of Rs. G. Laxminiwas & Jain Chartered Accountants. Vardhaman & Co. 10 unless otherwise specified in the context thereof. Chartered Accountants. Maharashtra. Choudhury & Co. Kolkata – 700 069 Jain Kapila Associates 3000. Madame Cama Road. Bentinck Street. Nampally. Paharganj. India. Associate Banks and other jointly controlled entities. Flat 1C Rear Block. 10. M. Chartered Accountants. Hyderabad 500 001 Chaturvedi & Co. Chartered Accountants. A holder of the Equity Shares on the Record Date The State Bank of India and its consolidated Subsidiaries. Bentinck Street. Associate Banks or other jointly controlled entities are made by reference to the name of that particular entity. Chartered Accountants. New Delhi 110 055 8. 9. 1955. Kapadia & Co. 36B Tamarind House. Datta Singla & Co. references to “the Bank” are to State Bank of India on an unconsolidated basis. M. constituted under the State Bank of India Act. Sector 22 C. having its registered office at State Bank Bhavan. Chennai 600 017 the Bank The State Bank of India. 1956 2 . Station Road. Chandigarh 160 022 11. References to specific data applicable to particular subsidiaries. Kolkata – 700 069 12. Fort. Unless otherwise specified. 60. Mumbai 400 021. Mumbai 400 001 13. Nagar. Bhagat Singh Street No.Kolkata 700 019 7.

2000. 1992 and amendments thereto The SEBI (Disclosure and Investor Protection) Guidelines. as the case may be Foreign Venture Capital Investors. as amended A body corporate registered under the SEBI (Depositories and Participant) Regulations. Government of India Non-Banking Finance Company Non-Convertible Debenture National Industry Classification Non-Resident Non-Resident External Account A Person resident outside India. as defined in and registered with SEBI under the SEBI (Foreign Venture Capital Investor) Regulations. as amended. as amended Depository Participant Extraordinary General Meeting Earnings per share Employees Share Purchase Scheme. 1996. 1992 SEBI Guidelines SIA Securities Act Takeover Code US GAAP 3 . 1996 Financial Year ending March 31 or December 31. 2008 Foreign Exchange Management Act. A company. 2000 read with amendments issued subsequent to that date Secretariat of Industrial Assistance The United States Securities Act of 1933. as amended Government of India Gross Domestic Product Global Depository Receipt Hindu Undivided Family The Income Tax Act. and who is a citizen of India or a Person of Indian Origin and such term as defined under the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations. OCBs are not permitted to invest in this Issue Profit After Tax Reserve Bank of India The Reserve Bank of India Act. 1996. 2000 issued by SEBI on January 19.Term Collecting Branches Depositories Act Depository DP EGM EPS ESPS FEMA FCNR Account FDI FI FII(s) fy / fiscal FVCI GOI/ Government/ Central Government GDP GDR HUF IT Act ITAT MAT Mn MoU MoF NBFC NCD NIC NR NRE Account NRI/Non-Resident Indian NRO Account NSDL NSE OCB Description Designated branches of State Bank of India for collection of CAF and Application Money The Depositories Act. 1997. 1961 and amendments thereto Income Tax Appellate Tribunal Minimum Alternate Tax Million Memorandum of Understanding Ministry of Finance. as amended Non-Resident Ordinary Account National Securities Depository Limited National Stock Exchange of India Limited Overseas Corporate Bodies. as amended Generally accepted accounting principles in the United States PAT RBI RBI Act SEBI SEBI Act. as defined under FEMA. 1934 Securities and Exchange Board of India The Securities and Exchange Board of India Act. 1999 Foreign Currency Non Resident Account Foreign Direct Investment Financial Institutions Foreign Institutional Investors as defined in and registered with SEBI under the SEBI (Foreign Institutional Investors) Guidelines. including overseas trusts in which not less than 60% of beneficial interest is irrevocably held by NRIs directly or indirectly as defined under Foreign Exchange Management (Deposit) Regulations. 2000. society or other corporate body owned directly or indirectly to the extent of at least 60% by NRIs. as amended The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations. 2000. partnership.

State Bank of Mysore 5. BSE. State Bank of Hyderabad 3. State Bank of Bikaner & Jaipur 2. 3. MSE and ASE where the Equity Shares of the Bank are presently listed a) DOMESTIC BANKING SUBSIDIARIES 1. 2008 Rs. DSE. 6. State Bank of Indore 4.04 million State Bank of India March 18.Issue Related Terms and Abbreviations Term Banker to the Issue CAF Designated Stock Exchange Fractional Entitlement Investor(s) Issue Description State Bank of India Composite Application Form NSE Entitlement of less than one Equity Share. FOREIGN BANKING SUBSIDIARIES SBI International (Mauritius) Ltd. 167. Issuer Issue Closing Date Issue Opening Date Issue Price Lead Managers Letter of Offer Record Date Registrar to the Issue or Registrar Renouncees Rights Entitlement Stock Exchange(s) Subsidiaries 4 . 2. State Bank of Patiala 6. DSP Merrill Lynch Limited and Kotak Mahindra Capital Company Limited Letter of Offer dated February 1. Commercial Bank of India LLC. 2.580 per share on rights basis to existing Equity Shareholders of the Bank in the ratio of one fully paid up Equity Share for every five fully paid Equity Shares held on the Record Date being February 4. 2008 as filed with the Stock Exchanges February 4. SBI Capital Markets Limited SBI DFHI Limited SBI Mutual Funds Trustee Company Pvt. Deutsche Equities India Private Limited. 2008. 5. 1. State Bank of Saurashtra 7. CSE. Ltd.590 per Equity Share Citibank Global Capital Markets India Private Limited. c) 1. 5. 4. b) 1. 2008 and Renouncees Issue of 105. 3. 4. 10 each for cash at a premium of Rs.776 Equity Shares of Rs. for an amount aggregating Rs. State Bank of India (Canada) State Bank of India (California) Indian Ocean International Bank Ltd. SBI Commercial and International Bank Ltd. State Bank of Travancore 8.259. CLSA India Limited. 2008 February 18. Moscow (##) PT Bank Indo Monex DOMESTIC NON-BANKING SUBSIDIARIES SBI Factors & Commercial Services Pvt. 1. arising as a result of shares held on the Record Date not being a multiple of five Holder(s) of Equity Shares of the Bank as on the Record Date of February 4. Ltd SBI CAP Securities Ltd. 2008 Datamatics Financial Services Limited Persons who have acquired Rights Entitlements from Equity Shareholders as on the Record Date The number of Equity Shares that a shareholder is entitled to in proportion to his/her shareholding in the Bank as on the Record Date excluding Fractional Entitlement The NSE.363.

Nagaland Rural Bank 15. 4. Ministry of Finance. Chhattisgarh Gramin Bank 5. C-Edge Technologies Ltd. 3. 2. Department of Economic Affairs (Banking Division) 5 . Vananchal Gramin Bank 22. SBI CAP Trustees Co. Utkal Gramya Bank 20. 2. as amended Government of India. SBI Funds Management Pvt. Marwar Ganganagar Bikaner Gramin Bank 13. a) Regional Rural Banks 1. SBI Life Insurance Company Ltd. (##) ## These entities are jointly controlled. SBI Funds Management (International) Ltd. Ltd 2. Purvanchal Kshetriya Gramin Bank 17. Parvatiya Gramin Bank 16.6. Others SBI Home Finance Limited Clearing Corporation of India Ltd. Cauvery Kalpatharu Grameena Bank 4. Saurashtra Gramin Bank 19. SBI CAPS Ventures Ltd. (##) 10. Madhya Bharat Gramin Bank 11. (##) 9. Andhra Pradesh Grameena Vikas Bank 2. Deccan Grameena Bank 6. Vidisha Bhopal Kshetriya Gramin Bank b) 1. Samastipur Kshetriya Gramin Bank 18. Arunachal Pradesh Rural Bank 3. Mizoram Rural Bank 14. Ltd. 8. Ltd. Krishna Grameena Bank 9. GE Capital Business Process Management Services Pvt. 1. Ltd. Malwa Gramin Bank 12. SBICAP (UK) Ltd. Ltd. 5. Nepal SBI Bank Ltd. 1970. Bank of Bhutan UTI Asset Management Company Pvt. Uttaranchal Gramin Bank 21. Ka Bank Nongkyndong Ri Khasi Jaintia 8. (##) d) FOREIGN NON-BANKING SUBSIDIARIES 1. SBI Cards & Payment Services Pvt. Jointly Controlled Entities Associates Technical and Industry Terms and Abbreviations Term AIBEA AIBOA ALCO ALM ARC ATMs AY Bank Acquisition Act Banking Division Description All India Bank Employees’ Association All India Bank Officers’ Association Asset and Liability Management Committee Asset Liability Management Asset Reconstruction Company Automated Teller Machines Assessment Year Banking Companies (Acquisition and Transfer of Undertakings) Act. 7. Langpi Dehangi Rural Bank 10. Ellaquai Dehati Bank 7.

as amended Scheduled Commercial Banks The Securities Contract (Regulation) Act. intangible assets. as amended Statutory Liquidity Ratio Small and Medium Enterprises The difference between the yield on the fortnightly average of interest earning assets and the cost of the fortnightly average of interest bearing liabilities Small Scale Industries The core capital of a bank. 1957. as amended The Sick Industrial Companies (Special Provisions) Act. hybrid debt capital instruments (which combine certain features of both equity and debt securities). general provisions and loss reserves (allowed up to a maximum of 1. 2002. 1956.Term BEFI BIFR BPLR BR Act CAGR CARE CBS CDR CISA CPs CRAR CRR CSO DIN DRT ECS EPS FIPB GIR Number IBA IRDA IT KYC Norms LC LFAR MICR NAV NDS-OM NEFT NPAs OTS PAN PAT PBT RTGS SARFAESI SCB SCRA SCRR SICA SLR SME Spread SSI Tier I capital Tier II capital Description Bank Employees Federation of India Board for Industrial and Financial Reconstruction Benchmark Prime Lending Rate The Banking Regulation Act. 1949. and losses in the current period and those brought forward from the previous periods The undisclosed reserves and cumulative perpetual preference shares. which provides the most permanent and readily available support against unexpected losses. 1995. revaluation reserves (at a discount of 55.0%). as amended The Securities Contract (Regulation) Rules. as amended Compounded Annual Growth Rate Credit Analysis & Research Limited Core Banking Solution Corporate Debt Restructuring Certified Information Systems Auditor Commercial Papers Capital to Risk Weighted Assets Ratio Cash Reserve Ratio Central Statistical Organisation Director Identification Number Debt Recovery Tribunal(s) Electronic Clearing Services Earnings Per Share Foreign Investment Promotion Board General Index Registry Number Indian Banks Association Insurance Regulatory and Development Authority Information Technology Know Your Customer norms stipulated by the RBI Letters of Credit Long Form Audit Report Magnetic Ink Character Recognition Net Asset Value Negotiated Dealing System-Order Matching National Electronic Funds Transfer Non-Performing Assets One Time Settlement Permanent Account Number Profit after Tax Profit before Tax Real Time Gross Settlement Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.25% of risk weighted assets). free reserves and capital reserves as reduced by equity investments in subsidiaries. It comprises paid-up capital and reserves consisting of any statutory reserves. investment fluctuation reserves and subordinated debts 6 .

the price of the Bank’s Equity Shares could decline. References to specific data applicable to particular subsidiaries. the Bank’s business. wherever quantifiable. having made all reasonable inquiries.” These reserve requirements require the Bank to maintain a relatively large portfolio of fixed income Government securities. the omission of which make this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. the Bank’s net interest margin could be adversely affected because the interest paid by the Bank could increase at a higher rate than the interest received by the Bank. or other risks that are not currently known or are now deemed immaterial. However there are a few risk factors where the impact is not quantifiable and hence the same has not been disclosed in such risk factors. which is material in the context of the Issue. the Bank may be more exposed to interest rate risk than banks in many other countries. including the risks and uncertainties described below. results of operations and financial condition could suffer. Risks Relating to the Bank’s Business The Bank’s business is particularly vulnerable to interest rate risk. investors must rely on their own examination of the issuer and the offer including the risks involved. The securities have not been recommended or approved by SEBI nor does SEBI guarantee the accuracy or adequacy of this document. Associate Banks or other consolidated entities are made by reference to the name of that particular entity. the Indian markets experienced volatility and sharp increases in interest rates and the Bank experienced an increase in its funding costs. These requirements also have a negative impact on its net interest income and net interest margin because the Bank earns interest on a portion of its assets at rates that are generally less favourable than those typically received on its other interest-earning assets. For taking an investment decision. References to the “Group” are to the State Bank of India and its consolidated subsidiaries. that the information contained in the offer document is true and correct in all material aspects and is not misleading in any material respect. Unless otherwise stated. and volatility in interest rates could adversely affect its net interest margin. References to “fiscal year” are to the year ended March 31. Investors are advised to read the risk factors carefully before taking an investment decision in this offering. net interest margin and financial performance during the first quarter of fiscal year 2008. accepts responsibility for and confirms that this Letter of Offer contains all information with regard to the Issuer and the Issue. Associate Banks (as defined herein) and other consolidated entities. the value of its fixed income portfolio. that the opinions and intentions expressed herein are honestly held and that there are no other material facts. SBI DFHI Limited. A rise in interest rates or greater interest rate volatility could adversely affect the Bank’s income from treasury operations or the value of its fixed income securities trading portfolio. The Bank. its income from treasury operations and its financial performance. which adversely impacted its net interest income. Unless the context otherwise requires. references to the “Bank” are to State Bank of India on an unconsolidated basis. which is a primary dealer in Government securities. See “Regulations and Policies — Legal Reserve Requirements. have been disclosed in the risk factors mentioned below. before making an investment in the Bank’s Equity Shares. actually occur. or if its cost of funds does not decline at the same time or to the same extent as the yield on its interest-earning assets. If such a rise in interest rates were to occur. As a result of certain reserve requirements imposed by the RBI. the financial information of the Bank used in this section is derived from the Bank’s unconsolidated and consolidated financial statements under Indian GAAP. as regrouped. The Bank is also exposed to interest rate risk through its treasury operations and one of its subsidiaries. If any of the following risks. If the yield on its interest-earning assets does not increase at the same time or to the same extent as its cost of funds. You should carefully consider all the information in this Letter of Offer. its net interest income and net interest margin would be adversely impacted. The ordering of the risk factors has been done to facilitate ease of reading and reference and does not in any manner indicate the importance of one risk factor over other. and the Bank could be materially adversely impacted by a rise in interest rates. especially if the rise were sudden or sharp. During the last quarter of fiscal year 2007. The financial and other implications of material impact of risks concerned. Sharp and sustained increases in the rates of interest charged on floating rate home 7 . Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this offer unless they can afford to take the risk of losing their investment. and you may lose all or part of your investment.RISK FACTORS An investment in Equity Shares involves a high degree of risk.

the Bank’s business will be adversely affected. For the six-months ended September 30. these SLR securities comprise 28. While the SLR portfolio of the Bank has decreased in size during the fiscal year 2007 against a backdrop of robust growth of credit portfolio and redemption of securities. of a bank’s demand and time liabilities be invested in approved securities for the purpose of compliance with SLR requirements. the Bank acts as the sole agent for certain Government transactions. The Government is not obligated to choose the Bank to conduct any of its transactions. If the Government does choose another bank to perform such tasks.3% of the Bank’s Other Income. the Bank is more structurally exposed to interest rate risk than banks in many other countries.” Such securities represented 83. the Bank’s liabilities are subject to the statutory liquidity ratio (“SLR”) requirement which requires that a minimum specified percentage.5 billion and commission earned from Government transactions was Rs. Although the Bank believes that its total provisions made in accordance with RBI guidelines will be adequate to cover all known losses in its asset portfolio. financial difficulties could increase the Bank’s level of NPAs and adversely affect its business. Further deterioration of the Bank’s NPA portfolio and an inability to improve its provisioning coverage as a percentage of gross NPA could adversely affect the price of the Equity Shares.6% of the Bank’s investment portfolio consists of SLR securities. allocation of funds and costs of funding. A substantial portion of the Bank’s income is derived from its Government operations. there can be no assurance that there will not be a further deterioration in the provisioning coverage as a percentage of gross NPAs or otherwise or that the percentage of NPAs that the Bank will be able to recover will be similar to its past experience of recoveries of NPAs. If the Bank is not able to control or reduce the level of NPAs in its portfolio.4% of state governments’ payments and receipts.6% of the Bank’s investment portfolio as on September 30. the high level of debt in the financing of projects and capital structures of companies in India. shareholders’ funds and the price of the Equity Shares. See “Management’s Discussion and Analysis — Factors Affecting the Bank’s Results of Operations and Financial Condition — Interest rates. which are a material proportion of its loan portfolio. which could result in higher rates of default in this portfolio. Although the Bank’s loan portfolio contains loans to a wide variety of businesses. The Bank’s NPAs can be attributed to several factors. 2007.6% of its net advances. variable industrial growth. would result in extension of loan maturities and higher monthly instalments due from borrowers. See “Regulations and Policies — RBI Regulations — Legal Reserve Requirements. future financial performance. the Bank handled approximately 52.loans. 2007. There is no assurance that there will not be a deterioration in provisions for loan losses as a percentage of NPAs or otherwise. which reduced profitability for certain of the Bank’s borrowers. 2007. shareholders’ funds and the price of the Equity Shares. While the Bank has enjoyed a strong working relationship with the Government in the past. Under the regulation of the RBI.” The Bank has a large portfolio of Government securities and its business is particularly vulnerable to volatility in interest rates caused by deregulation of the financial sector in India. a slowdown in which could adversely affect the Bank’s business. Although 83. future financial performance. or that the percentage of NPAs that the Bank will be able to recover will be similar to the Bank’s past experience in recovery of NPAs. currently 25. For the year ended March 31. were Rs. The Bank earns interest on such Government securities at rates which are less favourable than those which it typically receives in respect of its retail and corporate loan portfolio.9 billion.3% of the Government’s aggregate receipts and payments as well as 62. The Bank’s net NPAs as on September 30. its future financial performance and the trading price of the Equity Shares. total Government business turnover was Rs. 2007. 5.9% of the Bank’s demand and term liabilities as on September 30.913. As a result of Indian reserve requirements. there is no assurance that this relationship will continue in the future. a sharp decline in commodity prices. or 15.0%. Any further deterioration in its non-performing asset portfolio could adversely affect its business. 2007. its business will be adversely affected. 8 . and the high interest rates in the Indian economy during the period in which a large number of projects contracted their borrowings. 58. it continues to be in excess of the regulatory requirements. including increased competition arising from economic liberalisation in India.3 billion or 1. In many instances. 4. Any deterioration in the Bank’s asset portfolio could have an adverse impact on its business.

Due to competitive pressures. which will make this segment more competitive. corporate guarantees and personal guarantees. receivables and other current assets. In India. an economic downturn could result in a fall in relevant collateral values for the Bank.4 billion. the Bank may have taken further security of a first or second lien on fixed assets and a pledge of financial assets like marketable securities. amounting to Rs. The Government is also actively encouraging banks and other financial institutions to significantly increase their lending to the agricultural sector. Any unexpected losses could adversely affect the Bank’s business. such as the Maldives. and the trading price of the Equity Shares. resulting in fewer banks and financial institutions. foreclosure on collateral generally requires a written petition to an Indian court or tribunal. defects in the perfection of collateral and fraudulent transfers by borrowers.0% in Indian private sector banks. Over the last several years. including Indian and foreign banks and non-banking entities. The Government has also announced measures that would permit foreign banks to establish wholly-owned subsidiaries in India and invest up to 74.” Further. There can be no assurance that it will be able to realize the full value on its collateral. The Government’s proposed agricultural lending plans may contemplate state-owned banks. RBI guidelines stipulate that the Bank’s agricultural advances be 18. delays in bankruptcy and foreclosure proceedings. The Indian banking industry is very competitive and the Bank’s growth strategy depends on its ability to compete effectively. In addition. including the Bank. or be accompanied by. the Indian financial sector may experience further consolidation. 9 . when made. several Indian banks have increased their focus on retail loans. future financial performance and the trading price of the Equity Shares. plant and equipment. the market may perceive the exposure of state-owned banks to the agricultural sector to involve higher risks.0% of adjusted net bank credit. The Bank’s loan portfolio contains significant advances to the agricultural sector. With the exception of certain countries. Additionally. the Bank may be unable to successfully execute its growth strategy and offer products and services at reasonable returns and this may adversely impact its business. as a result of. exposing it to a potential loss. lending at below market rates in the agricultural sector. A substantial portion of the Bank’s loans to corporate customers are secured by real assets. a decrease in the value of the collateral. Although in general the Bank’s loans are over-collateralized. it will face increasing competition for such funds. since the Bank raises funds from market sources and individual depositors. the Bank remains a small to mid-size operator in the international markets and many of its competitors have much greater resources. The Bank may experience delays in enforcing its collateral when borrowers default on their obligations to the Bank. In some cases. A failure to recover the expected value of collateral security could expose the Bank to a potential loss. future financial performance and the trading price of the Equity Shares. the Bank faces intense competition in its international operations from the full range of competitors in the financial services industry. There can be no assurance that the legislation will have a favourable impact on the Bank’s efforts to resolve NPAs. The Bank will face competition from Indian and foreign commercial banks and non-bank finance companies in its retail products and services. The Bank’s loans to corporate customers also include working capital credit facilities that are typically secured by a first lien on inventory. its future financial performance. whether or not the Government mandates lending.9 %. 2007. See “Business — Competition. including property. 2002 (the “SARFAESI Act”).The Bank’s loan portfolio contains significant advances to the agricultural sector. or 15. predominantly property and vehicles. In addition. foreclosure and enforceability of collateral is stayed. of net bank credit as on September 30. An application. The Bank faces competition from Indian and foreign commercial banks in all its products and services. 381. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. among other factors. In the event a corporate borrower makes a reference to a specialised quasi-judicial authority called the Board for Industrial and Financial Reconstruction (“BIFR”). which may result in failure to recover the expected value of collateral security. A substantial portion of the Bank’s loans to retail customers is also secured by the assets financed. This may negatively affect the riskadjusted returns of state-owned banks and may adversely affect the Bank’s business. has strengthened the ability of lenders to resolve NPAs by granting them greater rights as to enforcement of security and recovery of dues from corporate borrowers. may be subject to delays and administrative requirements that may result.

5. The Bank has extended loans to several industrial sectors in India. The largest borrower group as on September 30. could reduce its liquidity and negatively impact its operating results and financial condition. The largest borrower as on September 30.3% of its total exposure. market and operational risk is an important consideration in managing its liquidity risk because it affects the evaluation of its credit ratings by rating agencies. The successful management of credit. shareholders’ funds and the price of the Equity Shares. and mark to market. See also “— Any downgrading of India’s debt rating by an international rating agency could adversely affect its business and the price of its Equity Shares.1% of the Bank’s total capital funds. The Bank’s earnings are dependent upon the effectiveness of its management of migrations in credit quality and risk concentrations. in millions) 532. 10 .74% of the Bank’s total exposure and 16. financial difficulties in these industrial sectors could increase the level of non-performing assets (“NPAs”) and restructured assets.0% of the nominal amount of non-fund based outstanding. Rating agencies may reduce or indicate their intention to reduce the ratings at any time. 2007. The table below sets out the Bank’s five largest industry exposures (fund-based.560 146. including guarantees) was Rs. excluding retail) as on September 30.1 billion. sell. constituted 32. 2007.027. limit its access to capital markets and adversely affect its ability to sell or market its products. Rank 1 2 3 4 5 Industry Services sector Iron and Steel Infrastructure Cotton Textile Engineering Total Fund based (Rs. The Bank’s balance sheet growth will be dependent upon economic conditions.307 143. excluding derivative products). To the extent its assessments. or retain their customers.2 % of its total advances. totalling Rs. engage in business transactions.467 102. its future financial performance. market and liquidity risk which may have an adverse effect on its credit ratings and its cost of funds.The Bank is subject to credit. To the extent any of the instruments and strategies the Bank uses to hedge or otherwise manage its exposure to market or credit risk are not effective. The Bank has high concentrations of loans to certain customers and to certain sectors and if a substantial portion of these loans were to become non-performing. 2007. which may have the same effect as a reduction in its ratings. This. Although the Bank’s portfolio contains loans to a wide variety of businesses.5 billion (including principal outstanding.737 1.3% of the Bank’s total exposure and for 50.027. 2007 accounted for approximately 1. The global and domestic trends in these industrial sectors may have a bearing on the Bank’s financial position.055 These exposures.3% of the Bank’s total capital funds.984 101. Any reduction in the Bank’s ratings (or withdrawal of ratings) may increase its borrowing costs. the Bank could suffer higher than anticipated losses. The Bank’s trading revenues and interest rate risk exposure are dependent upon its ability to properly identify.1% of the Bank’s total exposure and its ten largest borrower groups in aggregate accounted for approximately 18. Credit losses on these large single borrower and group exposures could adversely affect the Bank’s financial performance and the trading price of the Equity Shares. The ten largest individual borrowers in aggregate accounted for approximately 11. the Bank’s total exposure to borrowers (fund-based and non-fund based. as well as upon its determination to securitize. As on September 30. assumptions or estimates prove inaccurate or not predictive of actual results. the quality of its loan portfolio could be adversely affected.8% of the Bank’s domestic advances and 28. 1. in turn. purchase or syndicate particular loans or loan portfolios. and adversely affect the Bank’s business. the accuracy of its valuation models and its critical accounting estimates and the adequacy of its allowances for loan losses. particularly longer-term and derivatives transactions. interest and 100.003. the Bank may not be able to mitigate effectively its risk exposures in particular to market environments or against particular types of risk. changes in the value of financial instruments caused by changes in market prices or rates.” The rating agencies can also decide to withdraw their ratings altogether. accounted for approximately 5.

with approximately 24.” Increased competition arising from economic liberalisation in India. The Bank’s customer deposits are both demand deposits and time deposits. loans with a contractual tenure exceeding one year constituted 44. economic and industrial environment as well as difficulties that many of the Bank’s borrowers face in adapting to instability in world markets and technological advances taking place across the world. future financial performance and the trading price of the Equity Shares. The Bank’s funding is primarily short-term and if depositors do not roll over deposited funds upon maturity the Bank’s business could be adversely affected. failure of borrowers to execute projects on time. 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. all of which may adversely impact the projected cash flows. creating a potential for funding mismatches. adversely impact the Bank’s future financial performance and the trading price of the Equity Shares. especially individuals and small businesses. This may affect the quality of information available to the Bank about the credit history of its borrowers. primarily in the form of deposits. India does not have a fully operational nationwide credit information bureau. its liquidity position could be adversely affected. which may in turn impact the quality of its exposure to these borrowers. However. Most of the Bank’s incremental funding requirements are met through short-term funding sources. See “Description of Assets and Liability Management and Risk Management of the Bank — Risk Management Structure — Credit Risk Management. The Bank is also exposed to infrastructure projects which are still under development and are open to risks arising out of delay in execution. However. Adverse movements in foreign exchange rates may also impact the Bank’s borrowers adversely. exposing the Bank to risks associated with economic cycles. Volatility in foreign exchange rates could adversely affect the Bank’s business. In addition.2% of the Bank’s domestic advances. may have reduced the profitability of some of the Bank’s borrowers. The negative gap has arisen mainly because the Bank’s deposits and other liabilities are of shorter average maturity than its loans and investments. 2007) having maturities of less than one year. As on September 28. The Bank’s loans to middle market companies can be expected to be more severely affected by adverse developments in the Indian economy than loans to large corporations. A substantial portion of the Bank’s loans have a tenure exceeding one year. 2007 (the last reporting Friday in September). Unlike developed countries. The Bank complies with regulatory limits upon its unhedged foreign currency exposure by making foreign currency loans on terms that are generally similar to its foreign currency borrowings and thereby transferring the foreign exchange risk to the borrower or through active use of cross-currency swaps and forwards to generally match the currencies of its assets and liabilities. The failure to obtain rollover of customer deposits upon maturity or to replace them with fresh deposits could have a material adverse effect on the Bank’s business. a large portion of the Bank’s assets have medium or long-term maturities. The Bank is exposed to fluctuations in foreign exchange rates. future financial performance and the price of the Equity Shares. The Bank’s principal business is providing financing to its clients. The credit risk of all its borrowers is higher than in more developed countries due to the higher uncertainty in the Indian regulatory. There can be no assurance that these projects will perform as anticipated. If a substantial number of the Bank’s depositors do not roll over deposited funds upon maturity. a sharp decline in commodity prices. The Bank is subject to the credit risk that its borrowers may not pay in a timely fashion or may not pay at all. 11 . As a financial organisation with operations in various countries. The maturity profile of the Bank’s assets and liabilities shows a negative gap in the short term. political. and breach of contractual obligations by counterparties. the Bank is exposed to fluctuations in foreign currency rates for its unhedged exposure. some of these loans are project finance loans. the Bank is exposed to exchange rate risk. most of which are based in India. and the high interest rates in the Indian economy during the period in which a large number of the projects were entered into. Risks arising out of a recession in the economy and a delay in project implementation or commissioning could lead to rise in delinquency rates and in turn. delay in getting approvals from necessary authorities.The Bank faces greater credit risks than banks in developed countries. variable industrial growth.8% (as on September 28. The long tenure of these loans may expose the Bank to risks arising out of economic cycles. the high level of debt in the financing of projects and capital structures of companies in India.

or are circumvented. damage and failures. the Bank has suffered losses from operational risk and there can be no assurance that the Bank will not suffer losses from operational risks in the future that may be material in amount. clients or other matters. including risks that are unidentified or unanticipated. or operational errors. Although the Bank takes adequate measures to safeguard against system related and other fraud. when realized. may have an adverse impact on its business. This information may not in all cases be accurate. Computer break-ins and power disruptions could affect the security of information stored in and transmitted through these computer systems and network infrastructure. among other things. see “Description of Assets and Liability Management of the Bank — Operational Risk. There are areas in the system that have not been properly protected from security breaches and other attacks. System failures could adversely impact the Bank. Given the increasing share of retail products and services and transaction banking services in the Bank’s overall business. The Bank may also be subject to disruptions of its operating systems. Management of operational. the importance of systems technology to the Bank’s business has increased 12 . unauthorised transactions by employees and third parties (including violation of regulations for prevention of corrupt practices. its dependence upon automated systems to record and process transactions may further increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. like all banks. computer viruses or electrical or telecommunication outages). customers or third parties. In addition. and its reputation could be adversely affected by the occurrence of any such events involving its employees. including firewalls and password encryption.The Bank’s risk management policies and procedures may leave the Bank exposed to unidentified or unanticipated risks. The Bank employs security systems. thereby causing delays in detection or errors in information. they may not be fully effective. For a discussion of how operational risk is managed. The Bank’s hedging strategies and other risk management techniques may not be fully effective in mitigating its risk exposure in all market environments or against all types of risk. and other regulations governing its business activities). Although the Bank intends to continue to implement security technology and establish operational procedures to prevent break-ins.” Significant security breaches could adversely impact the Bank’s business. and to the risk that its (or its vendors’) business continuity and data security systems prove not to be sufficiently adequate. there can be no assurance that it would be able to prevent fraud. these methods may not predict future risk exposures. The Bank’s reputation could be adversely affected by significant fraud committed by employees. including clerical or record keeping errors or errors resulting from faulty computer or telecommunications systems. Failed security measures could have a material adverse effect on the Bank’s business. designed to minimise the risk of security breaches. Given its high volume of transactions. legal or regulatory risk requires. which could negatively affect its business or result in losses. The Bank also faces the risk that the design of its controls and procedures prove inadequate. for example. The Bank’s business operations are based on a high volume of transactions. The Bank outsources some functions to other agencies. The Bank seeks to protect its computer systems and network infrastructure from physical break-ins as well as security breaches and other disruptive problems caused by the Bank’s increased use of the internet. The Bank is further exposed to the risk that external vendors may be unable to fulfil their contractual obligations to the Bank (or will be subject to the same risk of fraud or operational errors by their respective employees as the Bank is). Although the Bank has established these policies and procedures. Some methods of managing risk are based upon observed historical market behaviour. up to date or properly evaluated. customers or outsiders. Although the Bank maintains a system of controls designed to keep operational risk at appropriate levels. policies and procedures to properly record and verify a large number of transactions and events. which could be greater than the historical measures indicated.” There is operational risk associated with the Bank’s industry which. its future financial performance and the trading price of the Equity Shares. like all financial institutions. which may give rise to a deterioration in customer service and to loss or liability to the Bank. complete. As a result. including the risk of fraud or other misconduct by employees or outsiders. See also “Description of Assets and Liability Management and Risk Management of the Bank — Risk Management Structure. Other risk management methods depend upon an evaluation of information regarding markets. certain errors may be repeated or compounded before they are discovered and successfully rectified. there can be no assurance that these security measures will be adequate or successful. The Bank. arising from events that are wholly or partially beyond its control (including. is exposed to many types of operational risk.

Similar changes in the future could have an adverse impact on its capital adequacy and profitability. Subsequently.25%.0%.0%. the RBI issued its final guidelines on securitisation of standard assets under which the Bank is. 2 million (which are categorised as “priority sectors”). the value of its assets or its business in general. As with some other commercial banks in India. the repo rate was raised further to 7. the Bank’s lending to priority sectors accounted for 39. As on September 30. The laws and regulations or the regulatory or enforcement environment in any of those jurisdictions in which the Bank operates may change at any time and may have an adverse effect on the products or services the Bank offers. 2006.40% except direct advances to agriculture and small and medium enterprise sectors. banks are generally subject to changes in Indian law.5% of net bank credit. Banking is a heavily regulated industry and material changes in the regulations which govern the Bank could cause its business to suffer and the price of the Equity Shares to decline. with 15.00% and also increased the risk weight on exposures to commercial real estate from 125. such as agriculture. the RBI increased the requirement of general provisioning for standard advances from 0.0%) of net credit going to the agriculture sector. See “Industry Overview — RBI. AS-15 Revised requires actuarial liability on account of pensions to be calculated on a projected unit method. particularly for retail products and services and transaction banking. The Bank’s principal delivery channels include automated teller machines (“ATMs”). the RBI increased the risk weight for the computation of capital adequacy from 50% to 75% in the case of housing loans and from 100% to 125% in the case of consumer credit (including personal loans and credit cards) as a temporary counter-cyclical measure. In April 2006. In February 2006. such as those related to the Accounting Standard 15 ("AS-15") relating to employee benefits.5% and again on March 31. As most of the Bank’s employees 13 . For example. In March 2007. In its mid-term review of the annual policy statement for fiscal year 2005. on which interest was hitherto paid by the RBI. In July 2005.75%. as well as to changes in regulations. However.” Regulatory changes in India or other jurisdictions in which the Bank operates could adversely affect its business. for example. Banks in India are subject to detailed supervision and regulation by the RBI. Pursuant to the recent amendment to the Reserve Bank of India Act. in its mid-term review of the annual policy statement for fiscal year 2005. no interest is payable on cash reserve ratio balances.” The lending norms of the RBI require that every scheduled commercial bank should extend 40. In addition. a disaster recovery and business continuity plan is in place to cater for system failures in all channels.0% to 7. The CRR was again increased to 7.0% to 125.5% in November 2007. 2007. 2007. See “Regulations and Policies. in respect of transactions after February 1.0% to 150. the RBI increased the requirement of general provisioning for certain categories of advances from 0. See “Business — Delivery Channels. Any change by the RBI in the directed lending norms may result in its inability to meet the priority sector lending requirements as well as require the Bank to increase its lending to relatively riskier segments and may result in an increase in NPAs in the directed lending portfolio.” New accounting directives. In its mid-term review of the monetary policy statement announced in October 2006.significantly.5%. the RBI increased the repo rate by 25 basis points from 7. New accounting directives or new interpretations of current directives may impose additional requirements on the Bank. Economic difficulties are likely to affect those borrowers in priority sectors more severely. could significantly affect the Bank’s operations and the quality of its customer service and could result in business and financial losses and adversely affect the trading price of the Equity Shares. requiring a restructuring of the Bank’s activities or increasing its operating costs. the RBI increased the risk weight for capital market exposure and exposure to commercial real estate from 100. may adversely affect the Bank’s financial position. Any such changes may adversely affect the Bank’s business. In October 2005. See “Industry Overview — RBI.9% (lower than the requirement of 18. the RBI increased the CRR by 50 basis points to 6. a decision by the RBI and the Institute of Chartered Accountants of India to implement AS-15 Revised is expected to negatively impact the Bank. future financial performance and the price of the Equity Shares by. The laws and regulations governing the banking sector could change in the future. small-scale industries and individual housing finance up to Rs. call centres and the internet. government policies and accounting principles.” Any failure in the Bank’s systems.25% to 0. the Bank has generally not met these guidelines. required to maintain higher capital for credit enhancement and also to amortise the profit on securitisation over the life of the related loans.40% to 1. 2007 to 7. in the quarterly review of the monetary policy statement on January 31.0% of its net bank credit to certain eligible sectors.

its financial results would likely have been different from what is shown in this Letter of Offer. Further. 2007 was 7. 14 .85%. In April 2007. 1955. which are effective in fiscal year 2008 for the Bank and require maintenance of higher capital and an increase in minimum Tier I ratio from 4. any incremental capital requirement may adversely impact the Bank’s ability to grow its business and may even require the Bank to withdraw from or to curtail some of its current business operations. the Government controls the Bank and may cause the Bank to take actions which are not in the interests of the Bank or of the holders of the Equity Shares. whether through organic growth or (more likely) capital market financing schemes.78% and 12. in consultation with the RBI. the Government. the Government. two Managing Directors and a majority of the directors of the Central Board. the RBI issued final guidelines on implementation of the new capital adequacy framework pursuant to Basel II. among others. As the Bank’s majority shareholder. 2007. which may arise in the future. respectively. more businesses and individuals will require capital financing. The Bank is required to maintain its capital adequacy ratio at the minimum level required by the RBI for domestic banks. However. despite a lack of substantive change in the underlying financial position of the Bank. had the Bank applied AS-15. in terms of the Act no provision of law relating winding-up shall apply to the Bank and it may be placed in liquidation only by an order of the Government and in such manner it may direct. the Bank is required to obtain approval from the Government for any increase in its authorised share capital. Further. The Bank’s Tier I and total capital adequacy ratio as of September 30. See “Industry Overview — New Initiatives in the Banking Sector — Risk Management and Basel-II. There can be no assurance that the Bank will be able to access capital as and when it needs it for growth. could have a material adverse effect on the financial position of the Bank. financial prospects and profitability may be materially and adversely affected. There can be no assurance that the Act will not be repealed or significantly amended in the future. may issue directives on matters of policy involving public interest which may affect the conduct of the business affairs of the Bank. its business. If the Bank is unable to grow its capital base in step with demand. The Bank is exposed to the risk of the RBI increasing the applicable risk weight for different asset classes from time to time. including payment of dividends. depending on market conditions. 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. 2007 and nine-months ended December 31.0%. after consultation with the RBI and the Chairman of the Bank.5% to 6.0% and seek funding from the capital markets. Such changes in accounting policies. Further proposed amendments to the Act may also enable the Bank to issue preference shares.0%. unless the Bank is able to access the necessary amount of additional capital when required. See "Financial Statements – Note on the likely impact of Accounting Standard 15 (Revised 2005)". such a requirement could significantly impact the calculation of the Bank’s net worth. its unaudited unconsolidated and consolidated financial results for the six-months ended September 30. As the Indian economy grows. under the Act.0%. there can be no assurance that the RBI or the Government will not take action or implement policies that are adverse to investors in the Equity Shares. The Bank is currently evaluating the most appropriate means of implementation. which determines the outcome of the actions relating to the general direction of the affairs of the Bank.” Furthermore. The RBI requires Indian banks to maintain a minimum Tier I capital adequacy ratio of 4. See “Regulations and Policies — The State Bank of India Act. In addition. the Bank will need to accrete its capital base. (“the Act”). under the Act. but has not yet made any increase in provisions for fiscal year 2008.” Although the Bank’s current capitalisation levels are in line with these requirements. has the power to appoint and/or nominate the Chairman. the Bank may choose to raise additional capital from time to time.5% and a minimum risk weighted capital adequacy ratio of 9.” The legal requirement that the Government maintain a majority shareholding interest in the Bank of at least 55% may limit the ability of the Bank to raise appropriate levels of capital financing. This requirement could result in restrictions in the equity capital raising efforts of the Bank as the Government may not be able to fund any further investments that would allow it simultaneously to maintain its stake at a minimum of 55.are covered under the defined benefit scheme. In order to meet and sustain increasing levels of growth in capital demand. See “Business — Relationship with the Government and the Reserve Bank of India. In addition. The Act restricts the Government’s shareholding interests in the Bank from falling below 55. In accordance with the State Bank of India Act.

or develop the skills required for new businesses and markets. As of December 31. joint ventures and associates. the State Sector Bank Employees Association (“SSBEA”). The Bank may seek opportunities for growth through acquisitions or be required to undertake mergers mandated by RBI. Any future acquisitions or mergers may involve a number of risks. called for a strike to oppose the proposed merger. If the Bank’s international expansion is unsuccessful. Further. Because the Bank has such a large number of foreign subsidiaries. The expansion in international business is expected to require substantial capital in the initial period and is expected to include acquisitions of foreign businesses. diversion of its management’s attention required to integrate the acquired business and failure to retain key acquired personnel and clients. Although neither strike materially impacted the Bank’s or the Associate Banks’ operations. If the Bank is unable to adapt to rapid technological changes. the UFBU has threatened to impose an ongoing strike for an indefinite length of time. 2007 results. including deterioration of asset quality. some or all of which could have an adverse effect on its business. Further. investors will have less information than they generally would for a typical rights issue in India. 2007 are unaudited. In addition. If the Bank does not effectively manage its foreign operations. Pursuant to SEBI Guidelines. the audited statements contained in an offer document for a rights issue shall not be older than six months from the Issue Opening Date. If the Bank is not able to integrate any future acquisitions. On January 25. it may lose money in these countries. but were less detailed than the disclosures pertaining to the September 30. Acquisitions involve various risks that are difficult for the Bank to control and the Bank cannot be certain that any acquired or new businesses will perform as anticipated. but has faced and may continue to face opposition by the employees of the Associate Banks to such consolidation. While issuers must generally comply with this requirement. To the extent these reviewed financial statements are not audited. 2008. In September 2007. The Bank is considering the consolidation of its Associate Banks with its business. union and popular opposition to any merger of the Associate Banks into the Bank may harm the Bank’s reputation and disrupt business operations and the delivery of banking services to customers. as well as integrating employees that the Bank hires in different countries into its existing corporate culture. 2007. The Bank’s inability to grow or succeed in new business areas may adversely affect its business. such as labour strikes. 2007. The proposed merger of the Associate Banks with the Bank may engender opposition against the Bank and lead to business disruptions. the United Forum of Bank Unions (“UFBU”) called for a strike opposing the proposed merger which led to a total closure of all branches of the Bank and the Associate Banks. or unknown and known liabilities. future financial performance and the price of the Equity Shares. If the Bank does not effectively manage its foreign operations. its business could suffer. it may not be able to meet its projected earnings and growth targets. The Bank is seeking to expand its operations internationally by leveraging on its domestic relationships and technology competencies in financial services. an umbrella organisation of six of the Associate Banks. rationalise operations. the Bank’s business could be disrupted. these operations may incur losses or otherwise adversely affect the Bank’s business and results of operations. restrictions on the import and export of certain intermediates. which could adversely affect the Bank’s business and results of operations. the financial disclosures pertaining to the period ended December 31. the Bank has only provided financial statements with limited review carried out by its auditors for the six months ended September 30. strikes in December 2007 and January 2008 have caused branch closures at all seven Associates Bank’s. The Bank may also face difficulties integrating new facilities in different countries into its existing operations. the Bank had a network of 84 overseas offices in 32 countries. 15 . leverage synergies.The Bank's financial results for the six months ended September 30. In addition. it is subject to additional risks related to complying with a wide variety of national and local laws. the Bank may face competition from banks in other countries that may have more experience in operations in those countries or in international operations generally. and adversely affect the Bank’s operations. 2007 were in compliance with RBI requirements. technologies and multiple and possibly overlapping tax structures.

The Bank has begun implementing new information technology systems to facilitate and complement its growth. in all material respects. In deciding whether to extend credit or to enter into other transactions with customers and counterparties. which would negatively impact its business. There can be no assurance that the Bank will successfully implement new technologies effectively or adapt its transaction processing systems to meet customer requirements or emerging industry standards. The Bank is also implementing a Business Process Reengineering (“BPR”) initiative to replace its existing systems.The Bank’s future success will depend in part on its ability to respond to technological advances and to emerging banking industry standards and practices on a cost-effective and timely basis. and bank workers represented by their respective associations.250 as of September 30. The salaries offered are market competitive.000 normal retirements in the next three years. These disruptions may affect customer services. Any inability to attract and retain talented professionals may negatively affect the Bank.188 employees from 192. internal operations and data management. so will staff costs. The development and implementation of such technology entails significant technical and business risks. respectively. however. The Bank employs some officers on a contract basis for various purposes. the number of officers on market competitive salaries is minimal. However. the Bank may rely on information furnished to the Bank by or on behalf of customers and counterparties. it is expected. The Bank’s financial condition and results of operations could be negatively affected by relying on financial statements that do not comply with generally accepted accounting principles or with other information that is materially misleading. its business. future financial performance and trading price of the Equity Shares. The Bank has implemented exit option schemes for officers and clerical cadres. for technical. 2006. the Bank may experience temporary setbacks and delays in its streamlining processes. to adapt in a timely manner to changing market conditions. 2006 and April 1. the financial condition. customer requirements or technological changes. with respect to financial statements. the future financial performance of the Bank and the trading price of the Equity Shares could be materially affected. The Bank’s remuneration scheme may not be as attractive as other banks with which it competes and may hurt the Bank’s ability to attract and maintain a skilled and committed workforce. 2007. The Bank may also rely on certain representations as to the accuracy and completeness of that information and. financial or other reasons. The Bank depends on the accuracy and completeness of information about customers and counterparties. that the Bank will be able to continue the implementation of its plan to reduce its number of employees successfully in the future to the targeted levels. unforeseen technical difficulties may cause disruption in the Bank’s operations. There can be no assurances. including financial statements and other financial information. As the Bank’s risk management systems evolve and as its operations become more reliant upon technology to manage and monitor its risk. legal. the total number of the Bank’s employees reduced to 179.” Taking into consideration approximately 25. The Bank may not be able to properly manage its number of employees. Until the BPR system is adequately tested in compliance with RBI norms and fully introduced into the Bank’s operations. the Bank may assume that a customer’s audited financial statements conform to generally accepted accounting principles and present fairly. See “Business — Employees. results of operations and cash flows of the customer. which limits the Bank’s 16 . 2007. The Bank’s employee remuneration scheme is guided by industry level negotiations between bank management represented by the Indian Banks’ Association. any failure or disruption could materially and adversely affect its operations and financial position. which ended on November 1. the Bank’s staff strength will be further reduced and. All negotiations are subject to final approval by the Government. For example. As additional IT platforms are introduced and become integral to the Bank’s product offering. on reports of independent auditors. If the Bank is unable. An inability to attract and retain such talented professionals or the resignation or loss of key management personnel may have an adverse impact on the Bank’s business. As of September 30. If the Bank is not successful in reducing its staffing costs this may have a material adverse effect on the future financial performance of the Bank. The Bank is moving towards more innovative information technology systems as it expands and may experience early implementation technical difficulties. in deciding whether to extend credit.

Added employment pressures may result in diminished profitability.731. which could adversely impact its financial results. 10. Hyderabad for an amount aggregating approximately Rs. There is outstanding litigation against the Bank and its subsidiaries which may adversely affect the Bank’s shareholders. There is one civil recovery case against the State Bank of Hyderabad before the Debt Recovery Tribunal.3 million. There is one criminal case against the State Bank of Patiala before the Judicial Magistrate.5 million. such as a change in Indian law or rulings against the Bank by appellate courts or tribunals. 2007. Litigation by the Subsidiaries • • The State Bank of Hyderabad has filed two tax appeals before the Commissioner of Income Tax (Appeals) for an amount aggregating to Rs.472. provide an ESOP (or other benefits and compensation) to its employees which may increase the operational costs of the Bank. the Group had contingent liabilities of approximately Rs.668 million. These legal proceedings are pending at different levels of adjudication before various courts and tribunals. If such a work stoppage was to occur.flexibility in implementing performance linked pay. There are two consumer cases against the Bank before the National Consumer Disputes Redressal Commission for an amount aggregating to Rs. Patna. If the employees’ union was to call for a work stoppage or other similar action. The State Bank of Patiala has filed seven civil recovery cases before various courts and authorities for an amount aggregating to approximately Rs. The Bank’s employees are highly unionised and any union action may adversely affect the Bank’s business. 3. There are three tax appeals against the State Bank of Hyderabad before the Income Tax Appellate Tribunal.207 million on a consolidated basis. In the year ended March 31. 4. 2007. 3. the Bank may need to make provisions in its financial statements. 689. 20. Kolkata for an amount of approximately Rs. Litigation against the Subsidiaries • • • Litigation by the Bank • The Bank has filed twenty civil recovery cases before various courts and authorities for an amount aggregating to approximately Rs.726. In addition.731.6 million. especially if rates of return do not experience a commensurate rise.536 million. 274 million. If the general banking industry increasingly moves toward incentive-based pay schemes. the Bank’s business would be adversely affected. As on September 30. if significant claims are determined against the Bank and it is required to pay all or a portion of the disputed amounts.3 million. there can be no assurance that the Bank will continue to have such a relationship in the future. Furthermore.s. there could be a material adverse effect on the Bank’s business and profitability. or choose to. There is outstanding litigation against the Bank and its subsidiaries. The details of litigation which have been disclosed in this Letter of Offer are set out below: Litigation against the Bank • • There are five civil cases against the Bank before various courts and authorities for an amount aggregating to Rs. While the Bank believes it has a strong working relationship with that union. Should any new developments arise.679.207 million on a consolidated basis. The Group has contingent liabilities aggregating to R. the Bank may at some point be required to. It is a defendant in legal proceedings incidental to its business and operations. the Bank may be forced to suspend all or part of its operations until the dispute is resolved. Approximately 98% of the Bank’s employees belong to a single union. This may increase the possibility that the Bank’s skilled personnel may go elsewhere for more attractive employment packages. 10. the Bank may not be as competitive as other banks. the Group saw a significant rise in its contingent liabilities on account of an increase in the number of derivative transactions for both customers as 17 . 1.

950 10.780 771. If the Group’s contingent liabilities crystallise.123 2. See “Management’s Discussion and Analysis — Factors Affecting the Bank’s Results of Operations and Financial Condition — Interest rates. 2007 are set out below: Contingent Liability Claims against the bank not acknowledged asdebts Liability for partly paid investments Liability on account of outstanding forward exchange contracts Guarantees given on behalf of constituents (a) In India (b) Outside India Acceptances. Risks Relating to India A slowdown in economic growth. For example. and other obligations Other items for which the bank is contingently liable Total (Rs.0% of its requirements of crude oil. Because of the importance of its commercial banking operations for retail customers and the importance of its agricultural loan portfolio to its business. India imports approximately 70. automobile and agricultural sectors could adversely impact the Bank’s business.777 558. its business prospects. in particular oil and steel prices. leading to intervention by the RBI. If the Bank is unable to manage this growth process properly. due to higher interest rates. Since 2004. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Off Balance Sheet Items. in million) Amount 7. Integrating the operations. endorsements. but also throughout the international offices.898 1. which comprised approximately 29. will increase the need for high level management.824. allocation of funds and costs of funding. not only domestically throughout India.well as its proprietary account. if not managed properly. a significant increase in the price of crude oil could adversely affect the Indian economy. the sharp increase in global crude oil prices during fiscal year 2001 adversely affected the Indian economy in terms of increased volatility in interest and exchange rates. The new businesses will need to be set up and run profitably and the formation of new strategic business units will need to be streamlined into the Bank’s existing operations. any slowdown in the growth of the housing.565. could adversely affect the Bank’s borrowers and contractual counterparties.449 1.” Slowdown in the demand for loans from corporate customers. increased volatility of commodity prices or a rise in interest rates in India could adversely affect the Bank’s business. retail customers and customers in the agricultural sector. interest rates in the Indian economy have increased significantly.207 The Bank’s business growth. A significant increase in the price of crude oil could adversely affect the Indian economy and the Bank’s business. as well as the overall state of liquidity in the banking system. accordingly. These new businesses and business units will be formed across India.9% of total imports in fiscal year 2007. Since 2004. both in terms of its new businesses and financial services. financial position and profitability may be materially adversely affected.731. Any slowdown in the Indian economy or increased volatility of global commodity prices.230 6. the Bank’s other operations may suffer and the Bank’s performance as a whole may also decline. as well as internationally. not only are the financial prospects of the new businesses uncertain. 18 . In such a case. but they may also shift the financial and managerial resources away from other areas of its operations. In addition. The Bank’s expansion into new businesses and financial services product offerings will require proper oversight and management. may result in operational volatility whether within or across its branches and business units. this may have an adverse effect on the Group’s future financial performance and the trading price of the Equity Shares. may add complexities to its current operations.” Details of the Group’s contingent liabilities as on September 30. could adversely impact its business. which.

0%. If regional hostilities. directly or indirectly.there has been a sharp increase in global crude oil prices due to both increased demand and pressure on production and refinery capacity. Although there has been no significant change in the Government’s policies since May 2004. future financial performance and the trading price of the Equity Shares. particularly emerging market countries in Asia. The Bank has also established operations in several other countries. India had also experienced terrorist attacks in some parts of the country. A coalition government led by the Congress Party has been formed with Dr. These hostilities and tensions could lead to political or economic instability in India and a possible adverse effect on the Bank’s business. While global crude prices have risen again. A loss of investor confidence in the financial systems of other emerging markets and countries where the Bank has established operations or any worldwide financial instability may cause increased volatility in the Indian financial markets and. and to political and military tensions in key oil-producing regions. armament and Kashmir. could adversely affect the Bank’s business and the price of the Equity Shares. any significant change in the Government’s economic liberalisation and deregulation policies could adversely affect business and economic conditions in India and could also adversely affect the Bank’s business.7% in fiscal year 2007.0% in fiscal year 2004 to negligible growth in fiscal year 2005. The Bank’s assets and customers are predominantly located in India. including the Bank.0% in fiscal year 2006 and by 2. The Indian economy is influenced by economic and market conditions in other countries. The full burden of the oil price increase has not been passed to Indian consumers and has been substantially absorbed by the Government and Government-owned oil marketing companies. Natural calamities could adversely affect the Indian economy. floods and drought in recent years. India has experienced natural calamities such as earthquakes. many parts of India received significantly less than normal rainfall. the erratic progress of the monsoon season in fiscal year 2005 adversely affected sowing operations for certain crops and resulted in a decline in the growth rate of the agricultural sector from 10. The extent and severity of these natural disasters determine their impact on the Indian economy. terrorist attacks or social unrest in some parts of the country increase. The Government’s economic policies have had and could continue to have a significant effect on public sector entities. the agricultural sector recorded a negative growth of 7. Further prolonged spells of below or above normal rainfall or other natural calamities could adversely 19 . The Government has traditionally exercised and continues to exercise a dominant influence over many aspects of the economy. India has also experienced social unrest in some parts of the country. its future financial performance and the trading price of the Equity Shares. and been sustained at high levels. Further. the Bank’s business and the price of the Equity Shares. a further increase or volatility of oil prices and the pass-through of an increase to Indian consumers could have a material adverse impact on the Indian economy and on the Indian banking and financial system in particular. particularly emerging market countries and countries where the Bank has established operations. in fiscal year 2003. its future financial performance and the trading price of the Equity Shares. it may adversely affect the Bank’s business. Manmohan Singh as the Prime Minister of India. Also. Financial instability in other countries. adversely affect the Indian economy and financial sector and its business. India has from time to time experienced social and civil unrest and hostilities both internally and with neighbouring countries. including through a rise in inflation and market interest rates and a higher trade deficit.” The most recent parliamentary elections were completed in May 2004. Present relations between India and Pakistan continue to be fragile on the issues of terrorism. the Bank’s business and the price of the Equity Shares could be adversely affected. The agricultural sector grew by 6. including securities issued by the Bank. As a result of the drought conditions during fiscal year 2003. and on market conditions and prices of Indian securities. If such tensions spread and lead to overall political and economic instability in India. For example. See “Business — Relationship with the Government and the Reserve Bank of India. A significant change in the Government’s economic liberalisation and deregulation policies could adversely affect the Bank’s business and the price of the Equity Shares.

which is sometimes referred to as “systemic risk. The Bank was constituted under the Act. Moreover. For example. Financial difficulties and other problems in certain financial institutions in India could adversely affect the Bank’s business and the price of the Equity Shares. any adverse revision to India’s credit rating for international debt will have a corresponding effect on the Bank’s ratings. as well as countries in other parts of the world. or such persons outside India. Future outbreaks of avian influenza or a similar contagious disease could adversely affect the Indian economy and economic activity in the region. especially in view of the Bank’s strategy of increasing its exposure to rural India. Certain countries in Southeast Asia have reported cases of bird to human transmission of avian influenza resulting in numerous human deaths. may adversely affect the Bank’s loan and investment portfolios. banks.S. the Bank faces risks of a nature and extent not typically faced in more developed economies. The Bank is exposed to the risks inherent with the Indian financial system. As a result. If credit market conditions continue to deteriorate. including the risk of deposit runs notwithstanding the existence of a national deposit insurance scheme.affect the Indian economy and the Bank’s business.” The price of the Equity Shares may be adversely affected by the recent financial instability in the United States resulting from sub prime mortgages. This risk. Since late 2003. any present or future outbreak of avian influenza or other contagious diseases could have a material adverse effect on the Bank’s business. The recent credit market instability in the United States resulting from concerns with increased defaults of higher risk mortgages to lower income households. Any such difficulties or instability of the Indian financial system in general could create an adverse market perception about Indian financial institutions and banks and adversely affect the Bank’s business and the trading price of the Equity Shares.” may adversely affect financial intermediaries. Any adverse change in the Bank’s ratings may limit its access to capital markets and decrease its liquidity. sub prime loans. whose commercial soundness may be closely interrelated as a result of credit. Investors in the Equity Shares may not be able to enforce a judgment of a foreign court against the Bank. The World Health Organisation and other agencies have issued warnings on a potential avian influenza pandemic if there is sustained human to human transmission. the Bank’s capital funding structure may need to be adjusted. some of the Bank’s investment securities may need to be marked to market at a significantly lower price because a market for those securities is not sufficiently liquid or prices are not properly quoted. See “Industry Overview. have had confirmed cases of the highly pathogenic H5N1 strain of avian influenza in birds. and its funding costs may increase. as amended from time to time. 20 . a number of countries in Asia. or to enforce judgments obtained against such parties outside India. An outbreak of avian influenza or other contagious diseases may adversely affect the Indian economy and the Bank’s business. clearing or other relationships amongst them. although the Bank has no direct exposure to U. Some of the Bank’s borrowers may be exposed to companies which are adversely affected by the instability stemming from the collapse of sub prime mortgages. As a result. trading. such as clearing agencies. These risks are driven by the financial difficulties faced by certain Indian financial institutions. Any downgrading of India’s debt rating by an international rating agency could adversely affect the Bank’s business and its liquidity. credit markets may cause significant fluctuations in stock markets globally and foreign currency exchange rates which in turn may affect the Bank’s financial results. including India. the negative developments in U.S. increasing the risk that some of the Bank’s counterparties may default. it may not be possible for investors to affect service of process upon the Bank. or the so-called sub prime mortgages. its directors or executive officers. As the Indian financial system operates within an emerging market. securities firms and exchanges with whom the Bank interacts on a daily basis. The availability of credit may become limited due to an overall deterioration of the credit markets. Because the Bank’s foreign currency ratings are pegged to India’s sovereign ceiling. Substantially all of the Bank’s Directors and executive officers and some of the experts named herein are residents of India and a substantial portion of the assets of the Bank and such persons are located in India.

however.S. As on March 31.$ 247. As stated in the report of the Bank’s independent auditors included in this Letter of Offer. SEBI has issued regulations and guidelines on disclosure requirements.2%) in fiscal year 2005. A sharp decline in these reserves could result in reduced liquidity and higher interest rates in the Indian 21 . it may be enforced in India by proceedings in execution as if the judgment had been rendered by the relevant court in India.” There may be less company information available in the Indian securities markets than securities markets in developed countries.$ 199. Indian accounting principles and audit standards differ from those which prospective investors may be familiar with in other countries. 1908 of India (the “Civil Code”).S.1 billion (7. There may.4%) in fiscal year 2007. section 44A of the Civil Code is applicable only to monetary decrees not being in the same nature of amounts payable in respect of taxes. be less publicly available information about Indian companies than is regularly made available by public companies in developed countries. There may be differences between the level of regulation and monitoring of the Indian securities markets and the activities of investors. See “Description of Certain Differences between Indian GAAP and U. the Bank’s financial statements are prepared in conformity with Indian GAAP. other charges of a like nature or in respect of a fine or other penalties. Section 13 provides that foreign judgments shall be conclusive regarding any matter directly adjudicated upon except: (i) where the judgment has not been pronounced by a court of competent jurisdiction.S. The Securities and Exchange Board of India (“SEBI”) is responsible for approving and improving disclosure and other regulatory standards for the Indian securities markets.2 billion and U. brokers and other participants and that of the markets in the United States and other developed countries. consistently applied during the periods stated. Execution of a judgment or repatriation outside of India of any amounts received is subject to the approval of the RBI. (iv) where the proceedings in which the judgment was obtained were opposed to natural justice.S. Indian GAAP differs from standards in the United States. presume that the judgment was pronounced by a court of competent jurisdiction. Furthermore. (ii) where the judgment has not been given on the merits of the case.6 billion (31.Recognition and enforcement of foreign judgments are provided for by section 13 of the Code of Civil Procedure. (v) where the judgment has been obtained by fraud. and is uncertain whether an Indian court would enforce foreign judgments that would contravene or violate Indian law.1%) in fiscal year 2006 and by U. (iii) where it appears on the face of the proceedings that the judgment is founded on an incorrect view of international law or a refusal to recognise the law of India in cases to which such law is applicable. However. A judgment of a court of a country which is not a reciprocating territory may be enforced only by a fresh suit upon the judgment and not by proceedings in execution. a court in India shall. upon the production of any document purporting to be a certified copy of a foreign judgment. within the meaning of that section. insider trading and other matters. 2007. India’s foreign exchange reserves increased by U.S. 2007. in any country or territory outside India which the Government has by notification declared to be in a reciprocating territory.5 billion (25. it is unlikely that an Indian court would enforce foreign judgments if that court was of the view that the amount of damages awarded was excessive or inconsistent with public policy. 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. Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a superior court. India’s foreign exchange reserves stood at U. except as provided in such report. Such a suit has to be filed 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.$ 10. unless the contrary appears on the record India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments. and no attempt has been made to reconcile any of the information given in this Letter of Offer to any other accounting principles or to base it on any other auditing standards. The United States has not been declared by the Government to be a “reciprocating territory” for the purposes of section 44A of the Civil Code. by U.$ 47.$ 28.8 billion as on September 28. and (vi) where the judgment sustains a claim founded on a breach of any law then in force in India.S. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action were to be brought in India. Under the Civil Code. GAAP.

2. an increase of 42. investors in the Equity Shares may experience a decrease in the value of the Equity Shares regardless of the Bank’s operating performance or prospects. The Equity Shares you purchase in this Issue will not be credited to your demat account with depository participants until approximately 42 days from the Issue Closing Date. As a result. its future financial performance and the trading price of the Equity Shares. India’s trade relationships with other countries can influence Indian economic conditions. and significant developments in India’s economic liberalisation and deregulation policies. the Bank’s business and the sectors and industries in which it competes. the Indian stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices for the securities of Indian companies. the Indian economy. There may not be an active or liquid market for the Equity Shares. The Indian securities markets are more volatile than certain other securities markets. shares at a particular point in time. India experienced a trade deficit of Rs. Future issues or sales of the Bank’s shares may significantly affect the trading price of the Equity Shares. Trade deficits could adversely affect the Bank’s business and the price of the Equity Shares.906. which in turn. the history of.039.6 billion from Rs. including: • • • • the Bank’s financial results and the financial results of the joint ventures and subsidiaries the Bank operates. You can start trading on such Equity Shares only after receipt of listing and trading approvals in respect of these shares. In addition. which may adversely affect a shareholder’s ability to sell. If India’s trade deficit increases and becomes unmanageable. there can be no assurance that the Equity Shares allocated to you will be credited to your demat account. 22 .9 billion in fiscal year 2006.economy. and the prospects for. which may cause the price of the Equity Shares to fall and may limit your ability to sell the Equity Shares. may significantly affect the trading price of the Equity Shares. 2. There are restrictions on daily movements in the price of the shares. Since the Equity Shares are already listed on stock exchanges. which will subject you to market risk. could adversely affect the Bank’s business. or the price at which such shareholder can sell. In fiscal year 2007. or that trading in the Equity Shares will commence within the time periods specified above. Other than the obtaining of consent from shareholders. Risks Relating to the Equity Shares You may not receive the Equity Shares and other instruments that you subscribe for in this Issue until 42 days after the date on which this Issue closes.5%. you will be subject to market risk from the date you pay for the Equity Shares to the date they are listed. the valuation of publicly traded companies that are engaged in business activities similar to the Bank’s. The price at which the Equity Shares will trade after this Issue will be determined by the marketplace and may be influenced by many factors. some of the Bank’s lenders prior to altering its capital structure and any regulatory consent that may be required under applicable law. and therefore the Bank’s business. and there can be no assurance that it will not issue shares. A future issue of the Bank’s shares or the disposal of shares by any of the Bank’s major shareholders. there are no restrictions on the Bank’s ability to issue shares. or the perception that such issues or sales may occur. future financial performance and the trading price of the Equity Shares could be adversely affected. Further.

including the Equity Shares.617. capital gains arising from the sale of shares in an Indian company are generally taxable in India. These restrictions may adversely affect the liquidity and market price of the Bank’s Equity Shares to the extent international investors are not permitted to purchase shares in normal secondary transactions. eligible non-resident shareholders may not be allowed to participate in the additional subscription of Equity Shares if their participation would cause the Bank’s foreign investment to go beyond the 20% limit prescribed by the RBI. limitations on price movements and margin requirements. Foreign investment in the Bank is subject to limits specified by the Government.500 Equity Shares to certain employees of the Bank under its planned employee share purchase scheme (“ESPS”). These problems have included temporary exchange closures.8%). Once the aggregate foreign investment in the Bank reaches 20% of the Bank’s total paid up capital. However. experienced substantial fluctuations in the prices of listed securities. other than the Government.” Shareholder voting rights may be restricted. Existing eligible non-resident shareholders may apply for additional Equity Shares over and above the shares they are entitled to under the Issue. Shareholders will experience additional dilution as a result of the Bank’s planned Employee Share Purchase Scheme. The Indian stock exchanges have experienced problems which. To the extent that Shareholders are unable to exercise all their voting rights with respect to the shares they own. 2008. A closure of. In addition. if such or similar problems were to continue or recur. see “Terms of the Present Issue – Subscription by Eligible Non-Residents. their proportional voting power would be reduced. to exercise voting rights in excess of ten percent of the Bank’s issued capital. The Central Board approved the ESPS at its meeting held on February 1. approved the allotment of up to 8. Accordingly. You may be subject to Indian taxes arising out of capital gains. or trading stoppage on. settlement delays and strikes by brokers. in the past. could affect the market price and liquidity of the securities of Indian companies. unless the current foreign investment limit applicable to the Bank is changed. either of the BSE and the NSE could adversely affect the trading price of the Equity Shares. 2008 for the grant Equity Shares as per the approval by the Central Government as described above. The Central Government has by its letter F. the RBI limits the amount of foreign investment in the Bank of up to 20% of the total paid up capital (presently at 19. and stock exchanges and other regulatory bodies. Any gain realised on the sale of listed equity shares on a stock exchange held for more than twelve (12) months will not be subject to capital gains tax in India if Securities Transaction 23 . therefore.The Indian securities markets are more volatile than the securities markets in certain countries which are members of the OECD.11/7/2007-BOA dated January 25. which in some cases may have had a negative effect on market sentiment. The issue of Equity Shares pursuant to the Scheme will result in an immediate dilution of your shareholding and may have a negative effect on the trading price of the Equity Shares. The Bank plans to offer certain of its employees the right to purchase additional shares of the Bank. broker defaults. the Bank’s total foreign holdings are 19. The Indian stock exchanges have. Under current Indian tax laws and regulations. investment by FIIs and NRIs) as prescribed by the RBI is 20% of the Bank’s total paid up capital. Furthermore.8%.No. the amount of additional foreign investment in the Bank is limited. from time to time disputes have occurred between listed companies. the RBI instructs non-resident investors and authorised dealers not to further transact in the Equity Shares of the Bank without prior approval of the RBI. Non-resident shareholders may not be allowed to apply for additional shares. As a result. Section 11 of the Act does not allow any individual shareholder. For further information on eligible non-resident participation. Historical trading prices. The permissible foreign investment (including GDRs. may not be indicative of the prices at which the Equity Shares will trade in the future. the governing bodies of the Indian stock exchanges have from time to time imposed restrictions on trading in certain securities. Currently.

2007 was Rs. There could be a failure or a delay in listing the Equity Shares on the BSE and the NSE.04 million.” Prospective investors should consult their own professional advisors for an understanding of the differences between Indian GAAP and US GAAP and how they might affect the financial information contained in this Letter of Offer. In accordance with Indian law and practice. The regulation and monitoring of Indian securities markets and the activities of investors. including the Equity Shares. 313 billion. The Bank has prepared its financial statements and the financial information contained in this Letter of Offer in accordance with Indian GAAP. Approval will require all other relevant documents authorizing the issuing of Equity Shares to be submitted. Indian GAAP requirements differ in certain respects from those of US GAAP. which may be material to investors’ assessments of the Bank’s financial condition. Historical trading prices. may not be indicative of the prices at which the Equity Shares will trade in the future. settlements delays and strikes by brokerage firm employees. such as US GAAP. Any failure or delay in obtaining the approval would restrict your ability to dispose of your Equity Shares. will be subject to long term capital gains tax in India. As there are differences between Indian GAAP and US GAAP. and any trading closures at the BSE and the NSE may adversely affect the trading price of the Equity Shares. 4. See “Summary of Significant Differences Between Indian GAAP and US GAAP. 24 . Significant differences exist between Indian GAAP and other accounting principles.867. the Bank has not quantified or identified the impact of the differences between Indian GAAP and US GAAP as applied to its financial statements. The reports of the RBI are strictly confidential.840 Equity Shares) at a premium of Rs. The book value per Equity Share of the Bank as on March 31. The RBI does not permit disclosure of its inspection report. The BSE and the NSE have in the past experienced problems. Notes to Risk Factors: 1. The Bank has not presented a reconciliation of its financial statements to US GAAP in this Letter of Offer. Furthermore. A closure of. from those in Europe and the U. Net worth of the Bank on a stand alone basis as on March 31.363. therefore.259. Any gain realised on the sale of equity shares held for more than twelve (12) months to an Indian resident. or trading stoppage on. 167. permission for listing of the Equity Shares will not be granted until after those Equity Shares have been issued and allotted. 3. if continuing or recurring. Further. brokers and other participants differ. the NSE and the other stock exchanges in a timely manner or at all. any gain realised on the sale of listed equity shares held for a period of twelve (12) months or less will be subject to short term capital gains tax in India.776 Equity Shares for cash (excepting the Government’s portion representing 62. which. 5. There is no guarantee that the Equity Shares will be listed on the BSE. in some cases significantly. 1. broker defaults. The Bank has entered into certain related party transactions as disclosed in the section titled “Related Party Transactions” on page [ ]. STT will be levied on and collected by a domestic stock exchange on which the equity shares are sold.S. which are sold other than on a recognised stock exchange and on which no STT has been paid. 595 per Equity Share. including temporary exchange closures. either of the BSE and the NSE could adversely affect the trading price of the Equity Shares. 2007 is Rs. there may be substantial differences in the Bank’s results of operations.580 per Equity Share on rights basis to the existing Equity Shareholders of the Bank in the ratio of 1 fully paid up Equity Share for every 5 fully paid up Equity Shares held on the Record Date of February 4. could affect the market price and liquidity of the securities of Indian companies. The Issue is of an amount aggregating Rs. This Issue is of 105. in both domestic and international markets. cash flows and financial position if it were to prepare financial statements in accordance with US GAAP instead of Indian GAAP. The RBI conducts regular inspections of banking companies under the provisions of the Banking Regulation Act. 2.Tax (“STT”) has been paid on the transaction. 2008 in terms of this Letter of Offer.

The average cost of acquisition of Equity Shares by the Promoter is Rs.11/7/2007-BOA dated January 25. 2008. 1. The Bank and the Lead Managers are obliged to keep this Letter of Offer updated and inform the public of any material change/development. 1999 and all the issuances of shares will be done in compliance with the guidelines/regulations/circulars at that time.500 Equity Shares to its Eligible Employees (as defined therein). F. The Bank may issue a maximum of 8. The Bank is proposing an employee share purchase scheme (the “ESPS”). 2008. The Lead Managers and the Bank shall make any clarification or any information relating to the Issue available to the investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever. 13. 25 .No. for all investors shall be in dematerialised form only. you are advised to refer to the section entitled “Basis for Issue Price” on page [ ]. approved the ESPS.6. The issue price will be Rs. 12. 7. the Directors/Key Management personnel have no interest other than reimbursement of expenses incurred or normal remuneration or benefits. The Central Government has. Before making an investment decision in respect of this Issue.617.130. through the stock exchanges. For transactions in Equity Shares by Directors of the Bank in the last six months. The terms and conditions of the ESPS. authorised the issue of the ESPS. 2008. please refer to the section entitled “Capital Structure” on page [ ]. 8.590 per Equity Share. Other than as stated in this Letter of Offer. The ESPS shall remain open for a period commencing from March 28. 9. 10. 1. The Lead Managers and the Bank shall update this Letter of Offer and keep the shareholders/public informed of any material changes till the listing and trading commencement and the Bank shall continue to make all material disclosures as per the terms of the listing agreement.35 per Equity Share. The Promoter of the Bank is the Government of India. Pursuant to Government authorisation. will be in accordance with the provisions of the SEBI (Employee Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines. 11. Trading in the Equity Shares. 14. by its letter no. the Central Board has. 2008 to April 15. at its meeting held on February 1.

298. 1. Ensure compliance with regulatory requirements.154 For more information. February 4. 1. an amount of Rs.e.176. 2008. see “Terms of the Present Issue” on page [●] Terms of Payment The Issue price of the full number of Equity Shares being applied for. refer to “Objects of the Issue” on page [●]. Rs. Objects of the Issue: • • • To improve the Bank’s capital adequacy ratio by augmenting Tier I capital.580 per Equity Share being applied for. and Other general corporate purposes including meeting expenses related to the Issue.590 per share including the share premium of Rs.776 shares One Equity Share for every five Equity Shares held as on the Record Date.580 per Equity Share) 526.590 per Equity Share (including a premium of Rs. 26 .THE ISSUE Equity Shares proposed to be issued by the Bank Rights Entitlement Record Date Issue Price per Equity Share Equity Shares outstanding prior to the Issue Equity Shares outstanding after the Issue and the ESPS Terms of the Issue 105. For details on the Objects of the Issue. 1.878 640. is to be paid at the time of application.259. i. 1.

617 1..217 21. Profit on sale of land..728) (7...282 19 10..... See “Note on Reformatting and Regrouping” in the Financial Statements at the conclusion of the Letter of Offer for further discussion....840 27. guidelines issued by the RBI from time to time and practices generally prevailing in the banking industry in India...... 2007...... Other income Commission..... As there has been a change in accounting policies during fiscal year 2007........678 16..963 139.....536 54.970 3. Income earned from dividends from subsidiaries/companies and/or joint 3.....045 5........ certain line items relating to fiscal year 2006 as extracted from the 2007 annual financial statements in respect of figures relating to the previous year have been regrouped to reflect the change.............870 15.277 176........734 2. Profit on exchange transactions (Net).447 17......... 2006 and 2005..... The data relating to the year 2005 has been extracted from the 2006 annual financial statements in respect of figures relating to the previous year and therefore certain line items relating to fiscal year 2005 are not strictly comparable with those relating to fiscal year 2007 or the regrouped data for fiscal year 2006 as appearing herein... 2006 and 2007 included in this Letter of Offer have been derived from its consolidated and unconsolidated financial statements prepared in accordance with generally accepted accounting principles in India....930 113.932 3..... Interest on balances with RBI and other interbank funds . exchange and brokerage ................................172 5. buildings and other assets including leased assets (Net) ...125 17.......613 2006 2007 (Rs. Unconsolidated Data Selected Income Statement Data Six month period ended Year ended March 31...212 20.962 5..196 4...723 (8) 5. 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” and the financial statements and related notes included elsewhere in this Letter of Offer...435 160........775) (6........ The financial statements of the Bank for the years ended March 31..403) 35...887 32 130................ Profit/(loss) on revaluation of investments (Net) .392 114............ The financial statements are prepared in accordance with Indian GAAP according to which the financial statements contain figures for two years (current year and previous year) for the purpose of comparison.............407 (16.............872 48..........525 7..............063 2.......301 37 8.......... The following data is qualified in its entirety by reference to all of that information.. as presented hereunder have been reformatted to contain the figures for these years...775 248..... in millions) September 30. 2005 INCOME Interest earned Interest/discount on advance/bills. These financial statements do not include the results of operations of its subsidiaries and other consolidating entities. Profit/(loss) on sale of investments (Net) .107 1. Others ..392 8.............698 21. or Indian GAAP.691 50........ 2006 2007 27 .SELECTED FINANCIAL AND OPERATING DATA The Bank’s financial and other data for fiscal year 2005 through fiscal year 2007 and the six-months ended September 30. Income on investments ...753 163...013 121 3.753 39....

. 1...327 7....368 1.......048 6.......... Transfer from general reserve.............................338 33.291 12 636 495 1... Operating expenses Payments to and provisions for employees .326 8... 10.................408 11..............117 90.048 44........543 30...........................113 5 595 266 812 995 2... Total income..081 79...522 10 543 498 744 1... Printing and stationery ..............................375 30.........756 66..413 3 29 45..415 22.295 198............241 7...865 4.........790 4..858 352...148 836 10.............. Depreciation .................. 2006 2007 EXPENDITURE Interest expended Interest on deposits.....045 3 43.......215 9......811 5.....708 6..........231 1..........734 68.............079 916 3..... Transfer to capital reserve.......................628 6 347 266 422 928 1.........072 7...368 1..........210 40............... Tax on dividend .......... Rent........... Repairs and maintenance ..............375 - 30.........087 8........168 20...... Other expenditures ........... etc........ Total appropriations ..................625 7....322 13..... in millions) September 30...022 1.252 3 45.......190 38..120 258...581 43.....703 3....434 81..603 693 7..470 14. Directors’ fees..........182 1..................834 19. taxes and lighting....... Auditors’ fees and expenses.....474 1.................067 3 44......................756 7.070 45.......................367 190........445 19... Miscellaneous income.400 9.....084 452.......... telegrams............... Insurance .230 7.................. Interest on RBI/inter-bank borrowings......834 24....................836 21...073 7......................... Investment Fluctuation Reserves & Revenue and other reserves Dividend ........412 7................479 1....892 3...392 7..............................216 4...............501 171.433 4.........445 19..375 228..831 3 19...............033 3...... telephones..........579 937 3 43...964 1.............. Income from financial leases .....739 6.............. Postage...607 19.........070 3.926 390..........................348 54......137 434..............965 1......................................351 178........553 14....873 2006 2007 (Rs..... Total profit APPROPRIATIONS Transfer to statutory reserves........178 14........ Provisions and contingencies Total expenditure PROFIT Net profit for the year...340 2...........024 7.... Balance carried over to balance sheet.. Others ..... Profit brought forward ..............................554 125.. 2005 ventures in India and abroad........................882 181........................ Law charges ....375 28 ....821 29.......................834 30... allowances and expenses...401 395.586 407.........................024 11 623 573 1.................034 3 44....041 308 8.....372 3 69.....Six month period ended Year ended March 31................

...790 4.427 1..........140 34........ There are no diluted potential Equity Shares outstanding during the year......067 83.652 734.460 3 3 19.. 2006 2007 ASSETS 29 ............829 507.. Balance of profit and loss account...030 170.......878 45..........351.........976 6...290 456.........116 144..106 58...79 10.... in millions) September 30.....Per Equity Share Data The following table sets forth the basic and diluted earnings per share of the Bank in accordance with Indian GAAP...181 35...866 627.73 10.......878 30. Investment fluctuation reserve.209 4.............29 10.. Foreign currency translation reserve ... 2005 CAPITAL AND LIABILITIES Capital ...314 460.........831 75............155.. Basic and diluted earnings per share..106 61. 2006 2007 (Rs. Borrowings outside of India...878 43.....170 281.......127.674 62..413 86......... Other liabilities and provisions Other Liabilities and Provisions Subordinate Debts Total capital and liabilities .....00 526.....868 566.......093 711............00 526... 2005 2006 2007 September 30.372 115.......00 526.....648 4...263 5...790 4..072 2.....42* 10...298........ Six month period ended Year ended March 31......281 679..298..........181 35.408 1..980 1.244..... Savings bank deposits ... except per share data) Basic and diluted Weighted average no..263 5.878 19... Share premium .00 526....181 35.... of Equity Shares outstanding ..........365 229........ Basic earnings per share is computed by dividing net profit after tax by the weighted average number of Equity Shares outstanding during the year.......745 203.....243. in millions......744 203..............858 4.375 2........993.791 105..............365 2...00 * Annualised Balance Sheet Data As on As on March 31.....834 30.... Term deposits ......123 949.298...............465...391 12......291. Revenue and other reserves ......836 41.....956 5..511 386..665. Reserves and Surplus Statutory reserves .133..263 2006 2007 (Rs......263 5.......589 2............989 58.......956 170..197 338. 526......106 58......265 819..656 2...307 5....944 457 140................029 35.. 3 Deposits Demand deposits .........045 81.....106 61...........423 66.....298.....598...308 5..686 3.....181 35......934 2......................940. Capital reserves ....106 52..... 461.......118 49.392.871 3...956 1.......766..................... Nominal value per share.263 5..36* 10.. Net profit ...539 1..424 239....... Borrowings Borrowings in India ...421 179....239 1..878 44..880 2..209 4.298..........

...............................211 61.....013 97.................250 34....068 2006 2007 (Rs........598..762 1.... in millions) September 30.... 2006 and 2007 are presented in the table below..357 498........725 25..... Operating expenses .786 444......328 333....... Outside India ........366 545...400 31........977 183.701 593..... Investments In India .667 361..069...760 438...............628 28.......029 176..258 2006 2007 (Rs.........362 153......815 341.. PROFIT Net profit for the year.063 N/A N/A 2........930 287......158 40.841 6...........023 489..391 214...........871 262....991 100......................415 1...... Other income... 2005 INCOME Interest earned .......759 14....307.....768 251.254......... 2006.652 968.............189 252.661 572.......299 66...740 610....489 55........885 26.290 1.......363 58.....924......... 29....282 1.............465......893 328........................485 403......................152 1... Six month period ended Year ended March 31. Total profit .. Balance with RBI ..........As on As on March 31.152 296.........615 1....................922 5............126 1..046 339............018 77.572....830 59...........351.....190 N/A 41.046 222.....702 5....923 90. foreign currency and gold).......829 958............975 41... Transfer from general reserve .405..........377 281..........251 268...124 248..............391 683....973 26. Total expenditure .732 28.....................810 4.....904 27.... Fixed assets Other assets Total assets ......918 144..... and 2007 and the six-months ended September 30......862 52.. Total income EXPENDITURE Interest expended ...000 153......314 55.316 55........463 28...314 1...568 1.... APPROPRIATIONS Transfer to statutory reserves...301 265.. 739....529 223. Cash credits..................827 200.........306 108...............562 66.........583 69........... Group profit....564 46....433....836 142..............810......282 1...........341 54..... Provisions and contingencies.......537 307....980 134 3.664 1.....742 20........ Outside India .......... 2006 2007 Consolidated Data The consolidated operating results data for the fiscal years 2005....307 26............802 195............... Balances with banks & money at call & short notice In India ...725 617......665..864 29 67....490 23........ 2005 Cash and balances with the RBI Cash in hand (incl.537 40..............167 89........ Add: Brought forward profit attributable to the group ..436 96.. Advances Bills purchased and discounted....950....................480 1.....940..639 56.176 45...598. 2006 2007 55.....864 N/A N/A 1.708 248.................. Less: Minority Interest ...394 69...495 1........065 1.723 86..237 75......980 1...............341 56.198 2.............536 3... overdrafts and loans repayable on demand...................377 111.555 63...921 111..004 554..570 150..109 155..504 142.....643 28.907 4.......410..... Term loans.813 30....254 1.746..433 30 . in millions) September 30.

Six month period ended Year ended March 31, 2005 Transfer to other reserves.................................. Dividend............................................................ Corporate tax on dividend................................. Balance carried over to balance sheet............... Total appropriations ............................................. 20,080 6,579 937 134 56,980 2006 8,631 7,368 1,033 3,864 55,433 2007 (Rs. in millions) 17,663 7,368 1,252 1,190 67,536 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A September 30, 2006 2007

Balance Sheet Data
As on March 31, 2005 CAPITAL AND LIABILITIES Capital ............................................................ Reserves & surplus......................................... Minority interest............................................. Deposits.......................................................... Borrowings..................................................... Other liabilities & provisions......................... Total capital and liabilities ................................. ASSETS Cash & balances with the RBI ....................... Balances with banks & money at call & short notice ................................................. Investments .................................................... Advances ........................................................ Fixed assets .................................................... Other assets .................................................... Total assets ........................................................... 253,412 2,619,620 2,869,866 35,736 250,984 6,285,776 262,077 2,279,311 3,744,762 39,563 332,917 6,969,918 274,108 2,165,210 4,872,860 39,994 348,911 8,151,744 265,490 2,119,268 4,101,620 39,917 671,595 7,613,211 161,715 2,554,373 5,197,454 44,826 453,595 9,068,479 256,158 311,288 450,661 415,321 656,516 5,263 320,255 13,041 5,061,053 229,295 656,869 6,285,776 5,263 366,804 14,303 5,440,243 369,749 773,556 6,969,918 5,263 420,094 16,899 6,362,729 486,618 860,141 8,151,744 5,263 394,389 15,517 5,784,943 399,951 1,013,148 7,613,211 5,263 457,724 18,418 7,024,773 568,595 993,706 9,068,479 2006 2007 (Rs. in millions,) As on September 30, 2006 2007

31

GENERAL INFORMATION Dear Equity Shareholder(s), The Government has, by its letter (no. F.No.11/16/2005-BOA) dated January 2, 2008, authorised the increase in the issued capital of the Bank and pursuant to the resolutions passed by the Central Board of Directors of the Bank at its meeting held on January 14, 2008, the following offer will be made to the Equity Shareholders of the Bank, with a right to renounce: ISSUE OF 105,259,776 EQUITY SHARES OF FACE VALUE RS. 10 EACH AT A PREMIUM OF RS. 1,580 PER EQUITY SHARE AGGREGATING TO AN AMOUNT EQUIVALENT TO RS. 167,363.04 MILLION TO THE EQUITY SHAREHOLDERS ON A RIGHTS BASIS IN THE RATIO OF ONE EQUITY SHARE FOR EVERY FIVE EQUITY SHARES HELD ON THE RECORD DATE i.e. FEBRUARY 4, 2008 ("ISSUE"). THE ISSUE PRICE FOR EQUITY SHARES IS 159 TIMES OF THE FACE VALUE OF THE EQUITY SHARE. Corporate Office of the Bank State Bank of India State Bank Bhavan, Madame Cama Road Mumbai 400 021 Maharashtra, India The Equity Shares of the Bank are listed on the BSE and NSE. The Bank’s Equity Shares are also listed at Ahmedabad, Calcutta, Chennai and New Delhi. The GDRs issued by the Bank of New York in respect of the Equity Shares are listed on the London Stock Exchange. Central Board of Directors as of December 31, 2007. Name Mr. O.P. Bhatt Mr. T.S. Bhattacharya Mr. S. K. Bhattacharyya Mr. Suman Kumar Bery Dr. Ashok Jhunjhunwala Mr. Ananta C. Kalita Mr. Amar Pal Mr. Piyush Goyal Dr. Deva Nand Balodhi Prof. Mohd. Salahuddin Ansari Mr. Vinod Rai Ms. Shyamala Gopinath Chairman Managing Director Managing Director Director appointed under section 19(c) of the Act Director appointed under section 19(c) of the Act Director appointed under section 19(ca) of the Act Director appointed under section 19(cb) of the Act Director appointed under section 19(d) of the Act Director appointed under section 19(d) of the Act Director appointed under section 19(d) of the Act Director appointed under section 19(e) of the Act Director appointed under section 19(f) of the Act Designation

32

For further details on the Bank’s Directors, see “Management” on page [●] of this Letter of Offer. Compliance Officer Mr. Subrata Maiti General Manager (Shares & Bonds) State Bank of India State Bank Bhavan, Madame Cama Road Mumbai 400 021 Maharashtra, India Tel.: (91 22) 2288 3888 Fax: (91 22) 2285 5348 Email: gm.snb@sbi.co.in Investors may contact the General Manager (Shares & Bonds) for any pre-Issue / post-Issue related matters. Bankers of the Bank State Bank of India Issue Management Team Lead Managers to the Issue Citigroup Global Markets India Private Limited Bakhtawar, 12th Floor 229, Nariman Point, Mumbai 400 021 Tel : (91 22) 6631 9999 Fax : (91 22) 6631 9803 Email: investors.cgmib@citi.com Website: www.citibank.co.in Contact Person: Amulya Goyal CLSA India Limited 8th Floor, Dalamal House Nariman Point Mumbai 400 021 Tel: (91 22) 6650 5050 Fax: (91 22) 2285 6524 Email: sbi.rights@clsa.com Website: www.india.clsa.com Contact Person: Mr. Sumit Jalan

DSP Merrill Lynch Limited Mafatlal Center, 10th Floor, Nariman Point, Mumbai 400 021 Tel: (91 22) 6632 8000 Fax: (91 22) 2204 8518 Email: sbi_rights@ml.com Website: www.dspml.com Contact Person: Mr. Pranav Mehta

33

Deutsche Equities India Private Limited DB House, Hazarimal Somani Marg Fort, Mumbai 400 001 Tel: (91 22) 6658 4600 Fax: (91 22) 2200 6765 Email: sbi.rights@list.db.com Website: www.db.com/India Contact Person: Mr. Vikram Gupta Kotak Mahindra Capital Company Limited 3rd Floor, Bakhtawar 229 Nariman Point Mumbai 400 021 Tel: (91 22) 6634 1100 Fax: (91 22) 2283 7517 Email: sbi.rights@kotak.com Investor Grievance Email: kmccredressal@kotak.com Website: www.kotak.com Contact Person: Mr. Chandrakant Bhole SBI Capital Markets Limited 202, Maker Tower 'E' Cuffe Parade Mumbai 400 005 Tel: (91 22 ) 2218 9166 Fax: ( 91 22) 2218 8332 Email: sbi.rightsissue@sbicaps.com Website: www.sbicaps.com Contact Person: Mr. Ajay Srivastava

34

The statement of inter se allocation of responsibilities for this Issue between is as follows: No 1. Activities Capital structuring with the relative components and formalities such as type of instrument, number of instruments to be issued, etc. Finalising ESPS Scheme alongwith the Bank and other intermediaries and related activities. Drafting, design and distribution of the Letter of Offer (LOF), Abridged LOF, CAF etc. and memorandum containing salient features of the Letter of Offer. The Lead Managers shall ensure compliance with the Guidelines for Disclosure and Investor Protection, Listing Agreement and other stipulated requirements and completion of prescribed formalities with Stock Exchanges and SEBI. Drafting and approval of all publicity material including statutory advertisement, corporate advertisement, brochure, corporate films, etc. Selection of various agencies connected with the issue, namely - Registrars to the Issue; - Printers; - Advertisement agencies; and - Banker to Issue Institutional marketing strategy Offer to GDR Holders as applicable Retail/Non-institutional marketing strategy which will cover, inter alia, preparation of investor presentation, publicity budget, arrangements for selection of (i) ad-media, (ii) centres of holding conferences of brokers, investors etc. Follow-up with Banker to the Issue to get quick estimates of collection and advising the Bank about closure of the issue, based on the correct figures. The post-issue activities will involve essential follow-up steps, which include finalisation of basis of allotment / weeding out of multiple applications, listing of instruments and dispatch of certificates and refunds, with the various agencies connected with the work such as Registrars to the Issue, Bankers to the Issue, and bank handling refund business. The Lead Managers shall be responsible for ensuring that Registrars to the Issue and Bankers to the Issue fulfill their functions and enable it to discharge responsibility through suitable agreements with the Bank. Responsibility Citi, DSPML, DB, CLSA, Kotak Citi, DSPML, DB, CLSA, Kotak Coordinator DSPML

2.

DSPML

3.

Citi, DSPML, DB, CLSA, Kotak

Citi

4. 5.

Citi, DSPML, DB, CLSA, Kotak Citi, DSPML, DB, CLSA, Kotak

CLSA

6. 7. 8.

Citi, DSPML, DB, CLSA, Kotak, SBI CAPS Citi, DSPML, DB, CLSA, Kotak Citi, DSPML, DB, CLSA, Kotak, SBI CAPS

Kotak Citi CLSA DB CLSA DB CLSA

9.

Citi, DSPML, DB, CLSA, Kotak

Kotak

35

Indian Legal Advisors to the Bank Amarchand & Mangaldas & Suresh A. Shroff & Co. Peninsula Chambers Peninsula Corporate Park Ganpatrao Kadam Marg Lower Parel Mumbai 400 013 Tel: (91 22) 6660 4455 Fax: (91 22) 2496 3666 International Legal Advisors to the Bank Allen & Overy 9th Floor, Three Exchange Square Central Hong Kong Tel No: (852) 2974 7000 Fax No: (852) 2974 6999 Indian Legal Advisors to the Lead Managers J. Sagar Associates Vakils House, 1st Floor 18 Sprott Road, Ballard Estate Mumbai 400 001 Tel No: (91 22) 6656 1533 Fax No: (91 22) 6656 1515 International Legal Advisors to the Lead Managers Clifford Chance 29th Floor, Jardine House One Connaught Place Hong Kong Tel No: (852) 2825 8888 Fax No: (852) 2825 8800 Auditors of the Bank 1. M.M. Nissim & Co. Chartered Accountants, Barodawala Mansion, B-Wing, 3rd Floor, 81, Dr. Annie Besant Road Worli, Mumbai 400 018. Khandelwal Jain & Co Chartered Accountants, 12-B Baldota Bhawan, 5th Floor, 117, Maharshi Karve Road, Opp. Churchgate Mumbai 400 020 R.G.N. Price & Co. Chartered Accountants, Simpson Buildings, 861, Mount Road, Chennai 600 002 S.K. Mittal & Co. Chartered Accountants, Mittal House, E-29, South Extension Part II, New Delhi 110 049.

2.

3.

4.

36

5.

Vinay Kumar & Co. Chartered Accountants, Chandra Shekar Azad Market Complex, 5 Sardar Patel Marg, Civil Lines, Allahabad 2110 01 (UP) D.P. Sen & Co. Chartered Accountants 22, Ashutosh Chowdhury Avenue, 2nd Floor, Flat No. 22, Kolkata 700 019 Laxminiwas & Jain Chartered Accountants, 5-4-726, Station Road, Nampally, Hyderabad 500 001 Chaturvedi & Co. Chartered Accountants, 60, Bentinck Street, Kolkata – 700 069 Jain Kapila Associates 3000, Bhagat Singh Street No. 2, Paharganj, New Delhi 110 055

6.

7.

8.

9.

10. Datta Singla & Co. Chartered Accountants, SCO-2935-36 (1st floor), Sector 22 C, Chandigarh 160 022 11. M. Choudhury & Co. Chartered Accountants, 60, Bentinck Street, Kolkata – 700 069 12. G. M. Kapadia & Co. Chartered Accountants, 36B Tamarind House, Tamarind Lane, Fort, Mumbai 400 001 13. Vardhaman & Co. Chartered Accountants, Flat 1C Rear Block, Oakland Apartments, 7 Malony Road, T. Nagar, Chennai 600 017 Registrar to the Issue Datamatics Financial Services Limited Plot No. A-16 & A-17, MIDC Area, Part B, Cross Lane, Andheri (East) Mumbai 400 093 Tel.: (91 22) 6671 2151- 2156 Fax: (91 22) 6671 2192 Contact Person: Mr. Dnyanesh Gharote Note: Investors are advised to contact the Registrar to the Issue/Compliance Officer in case of any preissue/post issue related problems such as non-receipt of Letter of Offer/abridged letter of offer/composite application form/allotment advice/share certificate(s)/ refund orders. Credit Rating This being an issue of Equity Shares, no credit rating is required.

37

ISSUE OPENS ON . 2008 38 .March 18. Minimum Subscription If the Bank does not receive a minimum subscription of 90% of the Issue. the Bank shall pay interest calculated at the rate of 15%. If there is a delay beyond eight days after the date from which the Bank becomes liable to pay the amount (i. Underwriting Arrangements The Issue is not underwritten.Monitoring Agency No monitoring agency has been appointed for this Issue.e. the Bank shall refund the entire subscription amount received within 42 days from the date of closure of the Issue. 2008 ISSUE CLOSES ON . 42 days after closure of the Issue).February 18.

whose corporate purpose is solely to invest in securities. directly or indirectly. Persons into whose possession this Letter of Offer may come are required to inform themselves about and observe such restrictions. the Equity Shares represented thereby may not be offered or sold. 39 . a “Relevant Member State”) an offer of the Equity Shares to the public may not be made in that Relevant Member State prior to the publication of a prospectus in relation to the Equity Shares which has been approved by the competent authority in that Relevant Member State or. approved in another Relevant Member State and notified to the competent authority in that Relevant Member State.000.000. the expression an “offer of Equity Shares to the public” in relation to any Equity Shares 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 the Equity Shares to be offered so as to enable an investor to decide to purchase or subscribe for the Equity Shares. European Economic Area Restrictions In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive at any relevant time (each. as shown in its last annual or consolidated accounts. in those circumstances. Accordingly.OVERSEAS SHAREHOLDERS The distribution of this Letter of Offer and the issue of Equity Shares on a rights basis to persons in certain jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year. if not so authorised or regulated. Neither the delivery of this Letter of Offer nor any sale hereunder shall under any circumstances create any implication that there has been no change in the Bank’s affairs from the date hereof or that the information contained herein is correct as at any time subsequent to this date. The Bank will not accept any CAF where the address as indicated by the applicant is not an Indian address. (c) provided that no such offer of Equity Shares shall result in a requirement for the publication by the Bank or any Manager of a prospectus pursuant to Article 3 of the Prospectus Directive. For the purpose of this provision. in connection with the issue of Equity Shares or the Rights Entitlements. and this Letter of Offer may not be distributed in any jurisdiction outside of India. Receipt of this Letter of Offer will not constitute an offer in those jurisdictions in which it would be illegal to make such an offer and. they must not seek to subscribe to the Equity Shares or the Rights Entitlements referred to in this Letter of Offer. If this Letter of Offer is received by any person in any such territory. or in any other circumstances falling within Article 3(2) of the Prospectus Directive. This European Economic Area selling restriction is in addition to any other selling restriction set out below. nor should he in any event use the CAF.000 and (3) an annual net turnover of more than €50. (2) a total balance sheet of more than €43. if they have been implemented in that Relevant Member State: (a) (b) to legal entities which are authorised or regulated to operate in the financial markets or.000. or by their agent or nominee. all in accordance with the Prospectus Directive. The Bank is making this issue of Equity Shares on a rights basis to the shareholders of the Bank and the Letter of Offer/Abridged Letter of Offer and CAF will be dispatched to those shareholders who have an Indian address. No person receiving a copy of this Letter of Offer in any territory other than in India may treat the same as constituting an invitation or offer to him. persons receiving a copy of this Letter of Offer should not. Accordingly. where appropriate. 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. distribute or send the same in or into the United States or any other jurisdiction where to do so would or might contravene local securities laws or regulations. except that an offer to the public in that Relevant Member State of any Equity Shares may be made at any time under the following exemptions under the Prospectus Directive. this Letter of Offer must be treated as having been sent for information only and should not be copied or redistributed. No action has been or will be taken to permit this Issue in any jurisdiction where action would be required for that purpose.

Neither the Bank nor any person acting on behalf of the Bank will accept a subscription or renunciation from any person. accordingly. Republic of Italy Restrictions The Issue of the Equity Shares has not been registered pursuant to Italian securities legislation and. Any person who is not a relevant person should not act or rely on this document or any of its contents. and any invitation. as amended (the Financial Services Act) and the relevant implementing CONSOB regulations. Any person who acquires Rights Entitlements or Equity Shares will be deemed to have declared. or for the account or benefit of. Envelopes containing a CAF should not be postmarked in the United States or otherwise dispatched from the United States. of CONSOB Regulation No. except: (i) to qualified investors (investitori qualificati). sale or delivery of the Equity Shares or distribution of copies of this document or any other document relating to the Equity Shares in the Republic of Italy under (i) or (ii) above must be: (a) made by an investment firm. by accepting the delivery 40 . but not in the United States. “U. The Bank is making this issue of Equity Shares on a rights basis to the shareholders of the Bank and the Letter of Offer/Abridged Letter of Offer and CAF shall be dispatched to those Shareholders who have an Indian address. offer or agreement to subscribe. no Equity Shares may be offered. or the agent of any person. purchase or otherwise acquire such Equity Shares will be engaged in only with. as amended (Regulation No. nor may copies of this document or of any other document relating to the Equity Shares be distributed in the Republic of Italy. relevant persons. 2003/71/EC of 4 November 2003.S. and (b) in compliance with any other applicable laws and regulations or requirement imposed by CONSOB or other Italian authority. and in Article 2 of Directive No. sold or delivered. or who the Bank or any person acting on behalf of the Bank has reason to believe is. 16190 of 29 October 2007 (as amended from time to time) and Legislative Decree No. 11971 of 14 May 1999. or (ii) in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Financial Services Act and Article 33.”) or to. resold or otherwise transferred within the United States of America or the territories or possessions thereof (the “United States” or “U. as amended (the “Banking Act”). as amended from time to time. an offering of any shares or rights for sale in the United States or as a solicitation therein of an offer to buy any of the said shares or rights. Any offer. bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act. as amended (the “Securities Act”). The rights referred to in this Letter of Offer are being offered in India.S. warranted and agreed. 58 of 24 February 1998. 11971). The Issue to which this Letter of Offer relates is not. NO OFFER IN THE UNITED STATES The Rights Entitlements and the Equity Shares of the Bank have not been and will not be registered under the United States Securities Act of 1933. sold. falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). if made.United Kingdom Restrictions This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to 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. would result in requiring registration of this Letter of Offer with the United States Securities and Exchange Commission. 385 of 1 September 1993. The Equity Shares are only available to. except in a transaction exempt from the registration requirements of the Securities Act. and under no circumstances is to be construed as. in the United States and to whom an offer. or any U.S. this Letter of Offer and the enclosed CAF should not be forwarded to or transmitted in or into the United States at any time. and all persons subscribing for Equity Shares and wishing to hold such shares in registered form must provide an address for registration of the Equity Shares in India. CONSOB Regulation No. and other persons to whom it may lawfully be communicated. as defined pursuant to Article 100 of Legislative Decree No. first paragraph. Accordingly. who appears to be. state securities laws and may not be offered. Persons” (as defined in Regulation S under the Securities Act (“Regulation S”)).

S.of this Letter of Offer. The Bank reserves the right to treat as invalid any CAF which: (i) appears to the Bank or its agents to have been executed in or dispatched from the United States. 41 . or (iii) where the Bank believes acceptance of such CAF may infringe applicable legal or regulatory requirements. (ii) does not include the relevant certification set out in the CAF headed “Overseas Shareholders” to the effect that the person accepting and/or renouncing the CAF does not have a registered address (and is not otherwise located) in the United States. that it is not and that at the time of subscribing for the Equity Shares or the Rights Entitlements. Person. in the United States. and the Bank shall not be bound to allot or issue any Equity Shares or Rights Entitlement in respect of any such CAF. it will not be. Rights may not be transferred or sold to any U.

. As required by Section 5(3) of the Act......259. million) Face value (in Rs...83 1....30 crores to Rs.... million) Authorised share capital Equity Shares of Rs............. the Government has intimated to the Bank that the cabinet has granted its approval for investing approximately Rs..... 10...... 10 each. 2008......... 10 each..878 Equity Shares of Rs. 10 each..776 Equity Shares of Rs....... the Bank has 38.878 Equity Shares of Rs.. Issued capital*# 526.. 86.00 N.. by its letter (no..830. This Letter of Offer has been approved by the Central Board at its meeting held on February 1. 10 each at a premium of Rs.............83 N. N.No..052.. Detailed below Detailed below Present Issue being offered to the Equity Shareholders through the Letter of Offer** 105....590 each Paid up capital after the Issue and the ESPS** After allotment of Equity Shares under the Issue and ESPS Equity Shares of Rs. Share premium account after the Issue .04 Share Premium Account Existing share premium account .590 each Present Issue being offered to the employees of the Bank under the ESPS 8... 10 each.... in terms of Section 5(2) of the Act.. 1........401............ authorised the increase in the issued capital of the Bank from Rs. 2008.CAPITAL STRUCTURE Value at Issue Price (in Rs...18 13...........BOA) dated December 3... 10 each which are evidenced by 19...... F/ 11/ 7/ 2007.............363. 2007.... 5...500 Equity Shares of Rs.000........ 1.A... 2008....... Prior to the present Issue being offered to the Equity Shareholders... 6.....262...11/16/2005BOA) dated January 2.......580 per Equity Share at a price of Rs..580 per Equity Share at a price of Rs.. Accordingly....... the Central Government has..........298.. * 35........ 526.. Further.415.. 1.298.........319 GDRs.... Subscribed capital 526......000 crores in the Issue by issuing SLR marketable securities towards the Government’s Rights Entitlement.A..... with a right to renounce....99 10...........638 Equity Shares of Rs...105...............701.................. 42 # ....... 2008.99 5............ 1......60 167...617....... in terms of the Government’s Letter (Letter No......A.. F....... has been authorised by the Central Board pursuant to the resolution passed at its meetings held on January 14..............031............73 215......262. as on January 25.....76 N.. 650 crores................ this Issue. 10 each at a premium of Rs........A.................

000 1.726 4. of Equity Shares Face value Issue price (Rs.00 200.091 43 .30 474.25 500.189 4.** These figures assume a full subscription of the Issue and the ESPS.000.000.00 3.000 Rs.726 10 60 Cash 1995 180.000. Increase in Cumulative Subscribed capital (Rs in million) 56.000.500.850.418.5 473.009.000.00 15.500 5. 10. 1955 1985 1990 Notes to the Capital Structure 1. The build up of the Bank’s Equity Share Capital as of December 31.828.463 10 100 Cash Incorporation of the Bank Increase in the Issued Capital of the Bank – public issue Increase in the Issued Capital of the Bank – public issue Increase in the Issued Capital of the Bank –public issue Stock Split Public Issue of Equity Shares of Rs 10 each for cash at a premium of Rs 90 per Equity Share Rights Issue of Equity Shares of Rs 10 each for cash at a premium of Rs 50 per equity share in the ratio of three new Equity Shares for every five shares held and also to employees at the Rights Issue price.000.000 100 160 Cash 1994 1994 180.000. Changes in the Bank’s Authorised Share Capital Year July 1.000 2.000 1955 1985 562.000 341. 2007 is set out below: Date of Allotment No.000.850.00 20.000.500 4.978.000.437.000 2.000 141.) Nature of Consideration Reasons for Allotment Authorized Share Capital Rs.500 100 100 100 160 Cash Cash 1987 10.740.000.000. 2.000 Cumulative Number of shares 562. 200.000 10 10 100 Cash 1994 131.000 100 160 Cash 1991 5.000.738.000.000 Rs.

73 0.878 5.339.S. (Rectification of 994 shares (net) relating to public equity issue in 1994 resulted in reduction of share capital by Rs 9.00 0.299.S.00 44 .339. 55.098 5.872 4.200 0 0 0 314.740.00 0.200 314. 2008 Category code Category of Shareholder Number of Shareholders Total number of shares Number of shares held in dematerialised form Total pre-issue shareholding as a percentage of total number of shares As a As a percentage percentage of(A+B)1 of (A+B+C) (A) 1 (a) (b) Shareholding of Promoter and Promoter Group2 Indian Individuals/ Hindu Undivided Family Central Government/ State Government(s) Bodies Corporate Financial Institutions/ Banks Any Others(Specify) Sub Total(A)(1) Foreign Individuals (NonResidents Individuals/ Foreign Individuals) 0 0 0 0.940 and share premium by Rs.15 Cash Cash 1996 (994) 10 - Rectification the Issued Capital public Increase in the Issued Capital Issue of GDR representing two Equity Shares @ U.262.15 per GDR.1996 1996 683 52.00 0.700) 474.000 10 10 100 U.00 0.00 64.262.298.999 526.00 0.872 526.$ 14.989 2. Shareholding pattern of the Bank as of January 28.$ 14.200 0 0 0 314.00 1 0 0 0 1 314.339.48 0.73 (c) (d) (e) 2 A 0 0 0 0.290.339.009.48 59.00 59.200 64.00 0.

B C D d-i d-ii Bodies Corporate Institutions Any Others(Specify) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.00 0.69 1 0 13 289 0 0 0 0 101.200 314.00 0.358.00 0.565.02 0.383 0 0 25.96 (d) (e) (f) (g) (h) (h-i) (h-ii) Sub-Total (B)(1) B2 (a) (b) Non-institutions Bodies Corporate Individuals Individuals -i.00 0.00 0.192 65.00 0.390 2.578 0 0 0 0 126.333 2.36 0.73 I II 544715 28.00 0.843.004. Individual shareholders holding nominal share capital in excess of Rs.48 59.82 12.903.00 0.00 0.794. Individual shareholders holding nominal share capital up to Rs 1 lakh ii.00 (B) 1 (a) (b) (c) Sub Total(A)(2) Total Shareholding of Promoter and Promoter Group (A)= (A)(1)+(A)(2) Public shareholding Institutions Mutual Funds/ UTI Financial Institutions / Banks Central Government/ State Government(s) Venture Capital Funds Insurance Companies Foreign Institutional Investors Foreign Venture Capital Investors Any Other (specify) 1 314.320 8.00 0.00 23.00 0.594.00 0.53 45 .57 0.985 14.73 233 103 26.442 65.632 0 25.02 0.94 2.05 1.210 14.222.005 0.20 13.339.357.093.00 5.411 26.130 5.339.030.780.90 5.46 1. 639 3.290 8.00 4.00 25.46 55 2.602 0 0 0 0 125.200 64.135.889.344.646 0.38 0.87 0.00 0.744.00 0. 1 lakh.00 0.00 0.00 0.552 16.83 5.921 5.

05 0.172 7.170 34.830.170 47.62 (C) 1 552.00 0.638 513.00 3.06 0.00 1 0 0 0 1 377.978 268.13 9.207.05 0.878 38.534 35.638 526.00 0.040 487.97 7.594 1.12 8.00 0.00 0.00 58.617 552.134.977.638 257.639 257.618 173.040 0 0 0 377.468.329 0.035.129.207.040 0 0 0 377.207.05 0.00 0.90 92. Post-issue Shareholding pattern of the Bank (assuming full subscription of Rights Issue and ESPS) Category of Shareholder Number of Shareholders Total number of shares Number of shares held in dematerialised form Total post-issue shareholding as a percentage of total number of shares As a As a percentage percentage of(A+B)1 of (A+B+C) Category code (A) 1 (a) (b) Shareholding of Promoter and Promoter Group2 Indian Individuals/ Hindu Undivided Family Central Government/ State Government(s) Bodies Corporate Financial Institutions/ Banks Any Others(Specify) Sub Total(A)(1) Foreign 0 0 0 0.298.52 32.00 0.00 63.(c) (c-i) (c-ii) (c-iii) (c-iv) (c-v) (c-vi) Any Other (specify) Non-Residents Trust OCB Foreign National Foreign Body Corporates Clearing Member.147.00 0.657 243.207.38 100.040 63.55 58.040 377.619 38.316.94 (B) 552.362 154 4 2 0 701 551.00 0. Sub-Total (B)(2) Total Public Shareholding (B)= (B)(1)+(B)(2) TOTAL (A)+(B) Shares held by Custodians and against which Depository Receipts have been issued GRAND TOTAL (A)+(B)+(C) 2.00 0.00 0.92 (c) (d) (e) 2 46 .594 610 150 0 625.240 159.00 0.65 0.92 0.010 150 0 625.830.55 0.334 474.

00 0.00 25.162.011.12 13.00 0.00 0.49 0.878.67 1 0 12 276 0 0 0 0 121.722 0 0 0 0 151.868 0 2.826 17.02 0.185 10.905 5.00 0.349 10.207.A B C D d-i d-ii Individuals (NonResidents Individuals/ Foreign Individuals) Bodies Corporate Institutions Any Others (Specify) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.694 0 0 0 0 151.00 0.00 0.00 0.00 0.00 0.00 0.606 0.64 (d) (e) (f) (g) (h) (h-i) (h-ii) Sub-Total (B)(1) B2 (a) (b) Non-institutions Bodies Corporate Individuals 634 3.430.00 0.00 Sub Total(A)(2) Total Shareholding of Promoter and Promoter Group (A)= (A)(1)+(A)(2) Public shareholding Institutions Mutual Funds/ UTI Financial Institutions / Banks Central Government/ State Government(s) Venture Capital Funds Insurance Companies Foreign Institutional Investors Foreign Venture Capital Investors Any Other (specify) 0 0 0 0.99 1.00 0.040 63.55 58.684.38 1.428.21 0.00 23.958 0 30.036.130 78.02 0.00 0.00 0.630 78.060 0 0 30.92 (B) 1 (a) (b) (c) 252 93 31.093 31.00 0.066.00 1 377.913.80 4.00 0.667.052 0 17.00 0.75 12.040 377.17 0.312.00 0.213.00 4.207.90 2.69 47 .00 5.

616 7.596.460 19.00 0.775 0 292. 6.05 0.80 92.00 33.700 0 3.972.579.415 216.00 0. A 1 PARTICULARS President of India Pre-Issue 314.765 7.801 569.416 640.481 38. Individual shareholders holding nominal share capital in excess of Rs.11 10.03 65.212 180 0 750.23 2. Top ten Shareholders of the Bank 48 .05 0.368 309.72 (C) Shares held by Custodians and against which Depository Receipts have been issued GRAND TOTAL (A)+(B)+(C) 1 46.596.204 40.326 152 3 2 0 374 725.207.I II (c) (c-i) (c-ii) (c-iii) (c-iv) (c-v) (c-vi) Individuals -i.890.200 % 59.339.50 6. Details of the shareholding of the Promoter subsequent to the ESPS SR.389 191.92 5.040 % 58.16 (B) 726.113 732 180 0 750.176.73 Post-Issue 377.573.179.00 0.204.00 0.765 46.45 100. Individual shareholders holding nominal share capital up to Rs 1 lakh ii. Any Other (specify) Non-Residents Trust OCB Foreign National Foreign Body Corporates Clearing Member Sub-Total (B)(2) Total Public Shareholding (B)= (B)(1)+(B)(2) TOTAL (A)+(B) 653.00 0.776.33 1.367 309.372.060.154 615.414 726.289 0.05 0.204 65.13 10.00 0.96 0.00 4.780 322.961.841 36.05 0. 1 lakh.606 100.956 6.195 1.85 7.NO.28 726. Details of the transactions in Equity Shares by the directors during the last six months There have been no transactions in the Equity Shares by the Directors of the Bank in the last six months.113 1.336.349 593.

8.962 0.872.726 7.932 0.851 0.848 3.362.638 19. 1 2 3 4 5 6 7 8 9 10 7.479.312.339.309 4.810 SR.000 3.665 4.979 0.869.NO.634 414.240 6.INVESTMENT A/C CITIGROUP GLOBAL MARKETS MAURITIUS PRIVATE FIDELITY MGNT AND RESEARCH CO A/C FIDELITY GOLDMAN SACHS INVESTMENTS (MAURITIUS) I LTD LIC OF INDIA MONEY PLUS TOTAL Total Shares 314. 1 2 3 4 5 6 7 8 9 10 c) Top ten Shareholders of the Bank as on January 28. 1 2 3 4 5 6 7 8 9 10 b) Top ten Shareholders of the Bank as on January18.879 4.752 1.BANK BEES .879.368 0. 2006 PARTICULARS RESERVE BANK OF INDIA THE BANK OF NEW YORK AS DEPOSITORY TO GDRs LIFE INSURANCE CORPORATION OF INDIA FIDELITY MGNT AND RESEARCH CO A/C FIDELITY BMF .300.339.068 SR.599.717 % 59.746 3.200 38.635 1.648 78.412.395 4.200.674 3.NO.000.397 3.639 78.998 0.INVESTMENT A/C FIDELITY MANAGEMENT AND RESEARCH COMPANY A/C FIDELITY INVESTMENT TRUST . The total number of shareholders of the Bank as on January 28.666 0.209 6.633 1.760 0.000 5.211 13.629 0.837 % of pre-issue capital 59.BANK BEES .830.700 41. 2008 was 552.930.378 3.855.352 410.185.780 2.214 4.152.760 0.INVESTMENT A/C EUROPACIFIC GROWTH FUND GOLDMAN SACHS INVESTMENTS (MAURITIUS) I LTD MERRILL LYNCH CAPITAL MARKETS ESPANA S A S V GOVERNMENT OF SINGAPORE FIDELITY INVESTMENT FUNDS .010.879.894.985 0.018 25.903.338.139 5.774.726 7.977.746 3. 2008 PARTICULARS PRESIDENT OF INDIA THE BANK OF NEW YORK AS DEPOSITORY TO GDRs LIFE INSURANCE CORPORATION OF INDIA CLSA (MAURITIUS) LIMITED EUROPACIFIC GROWTH FUND BMF .139 5.501.697 5.000.020 13.638 19.619.a) Top ten Shareholders of the Bank as on January 28.726 7.468.253.662 3.FIDELITY SPECIAL SITUATIONS FUND TOTAL Shares 314. The Bank has not made any public offering of its Equity Shares in the two years immediately preceding the date of filing of this Letter of Offer.670 0.634 414.BANK BEES .756 0.282 7.507.062.494 78.000 3.200 38.758 SR.528 % of pre-issue capital 59.307 0. 49 .663 2.872 2.627 0.307 0.527. 2008 PARTICULARS PRESIDENT OF INDIA THE BANK OF NEW YORK AS DEPOSITORY TO GDRs LIFE INSURANCE CORPORATION OF INDIA CLSA (MAURITIUS) LIMITED EUROPACIFIC GROWTH FUND CITIGROUP GLOBAL MARKETS MAURITIUS PRIVATE LIMITED BMF .NO.FIDELITY DIVERSIFIED INTERNATIONAL FUND GOLDMAN SACHS INVESTMENTS (MAURITIUS) I LTD LIC OF INDIA MONEY PLUS TOTAL Total Shares 314.277.

4. Pursuant to a letter dated December 3. At any given time. standby or similar arrangements for any of the securities being issued through Letter of Offer. 14. The Equity Shareholders of the Bank do not hold any warrant. However. the Bank is proposing an employee share purchase scheme (the “ESPS”).617. The terms and conditions of the Scheme. 2008. other than as disclosed in this Letter of Offer.11/7/2007-BOA dated January 25. no further issue of capital by way of issue of bonus shares. has agreed to subscribe to Equity Shares aggregating to approximately Rs. option or convertible loan or debenture which would entitle them to acquire further shares in the Bank. the Bank’s Promoter. authorised the issue of the ESPS. the Central Board will have the right to extend the Issue period as it may determine from time to time but not exceeding 60 days from the Issue Opening Date. rights issue or public issue or in any other manner which will affect the equity capital of the Bank. will be in accordance with the provisions of the SEBI (Employee Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines. Pursuant to the Government authorisation. The Bank has not issued any Equity Shares or granted any options under any scheme of employee’s stock option or employee’s stock purchase. 16. by its letter no. Except as disclosed in this Letter of Offer. 1. presently the Bank does not have any intention to alter the equity capital structure by way of split/consolidation of the denomination of the shares on a preferential basis or issue of bonus or rights or public issue of shares or any other securities within a period of six months from the date of opening of the Issue. The Issue will remain open for 30 days. preferential allotment. 2008.500 Equity Shares to its Eligible Employees (as defined therein). 2008 approved the ESPS. the Government. at its meeting held on February 1. 10. the Bank’s Central Board has. 2007. The Bank may issue a maximum of 8.590 per Equity Share. 11.000 crores in the Issue. The terms of issue to Equity Shareholders/Applicants have been presented under the section “Terms of the Present Issue” on page [●] of this Letter of Offer.9. the Bank is exempted from the eligibility norms as stated in the Guidelines. 10. 50 .No. 15. 1999 and all the issuances of shares will be done in compliance with the guidelines/regulations/circulars at that time. The Government has. The ESPS shall remain open for a period commencing from March 28. The issue price is Rs. 2008 to April 15. 13.1 (iv) of the SEBI DIP Guidelines. F. However. there shall be only one denomination of the Equity Shares of the Bank. The Directors of the Bank or Lead Managers of the Issue have not entered into any buy-back. In accordance with clause 2. Further. shall be made during the period commencing from the filing of this Letter of Offer with the Stock Exchanges and the date on which the Equity Shares under the Letter of Offer are listed or application moneys are refunded on account of the failure of the Issue. 12.

41%) (2. The details of the proceeds of the Issue are summarised below: Particulars Gross proceeds of the Issue Issue related expenses* Net Proceeds of the Issue *Approximated Estimated Amount (In Rs. compliance with regulatory requirements and for other general corporate purposes including meeting expenses related to the Issue.10 (4.80 163.78%) 222.01%) 164.70 12. 2008.383.40 89.52%) 225.797.33%) 469.407.34% The Issue is expected to achieve the objective of augmenting the Tier I capital of Bank and further strengthening its capital adequacy ratio. The issue of 105.913.363. primarily the loan and investment portfolio due to the growth of the Indian economy.19%) (4. 51 .34% at March 31. For further details please see “Regulations and Policies – Capital Adequacy Requirements.800. million) 167.491.40 251.259.34%) (8. is expected to be well above the Central Board mandate of a capital adequacy ratio of 11% as well as RBI’s stipulated capital adequacy ratio of 9%.10 (8.10 (5. at least half of which must be Tier I capital.363.27% of the total Issue size) following are the estimated Issue expenses.088.04%) (9.896.144.570.772.579.36%) 86. if fully subscribed. in millions. The provisions of the Act enable the Bank to undertake existing activities and permit the utilisation of funds proposed herein.363. the issue proceeds equivalent to the Government's subscription will be deployed in an investment of Government bonds.04 million.04 450.90 12.028.789. including a Tier I capital adequacy ratio of 8. 2007 340.00 1.00 166.913.682.69%) 207. 167.20 252.85% Eligible Tier I Capital Eligible Tier II Capital Total Capital Total Risk-Adjusted Assets Capital Adequacy Ratio (%) 135. based on the guidelines of the Basel Committee on Banking Regulations and Supervisory Practices.04 million.0%.264.01% and Tier II capital of 4. 167. Basel II standards prescribed by the RBI will be effective from March 31. Since the Government proposes to subscribe to its Rights Entitlement through an issue of Government bonds.396. currently require the Bank to maintain a minimum ratio of capital to risk adjusted assets and off-balance sheet items of 9.580 per Equity Share for an aggregate amount of Rs.04 Utilisation of the Issue Proceeds The Bank is subject to the capital adequacy requirements of the RBI.10 (5.” The Bank’s total capital adequacy ratio was 12. after providing for the funds out of the gross proceeds of the present Issue aggregating to Rs.06 1. Additional capital is required for future asset growth and compliance with regulatory requirements. 166.90 (8.00 4.237.53% 2.81%) 71.33% of risk-weighted assets.20 67.OBJECTS OF THE ISSUE The Bank intends to deploy the net proceeds from the Issue of Rs.45% 2.67 13. will augment the Tier I capital of the Bank and result in its CAR increasing to more than 12%.666.022.90 (7.510.30 3.690.10 13.654.534.804.40 11. The Bank’s capital adequacy ratio.10 12.88% 304. 450 million to augment its capital base in line with its growth strategy.96 (4.04 million after meeting Issue expenses of approximately Rs. 1998.931.20 (8.336.776 Equity Shares each at a premium of Rs.972. 450 million (or approximately 0. 1.469. A portion of the Issue proceeds will be used to meet Issue expenses estimated at Rs. which.968.08%) 563.492.50% (Rs. The details of capital vis-à-vis risk weighted assets for the previous five financial years is as follows: Financial Year ended March 31 2003 2004 2005 2006 2007 Six months ended on September 30. 2007.60 319. The objects of the Issue are to augment the Bank’s capital base to meet the capital requirements arising out of growth in its assets. except percentages) 139.

in millions % of net proceeds of the Issue % of total expenses of the Issue Fees to Intermediaries Fees paid to the Lead Managers.04 0.5 193.0 51. 52 . no appraisal of the same is required and therefore no monitoring agency has been appointed. and auditors Fees paid to the Registrar to the Issue Statutory Fee Advertising and marketing fees Printing.0 13. During this period.49 12.5 60.67 43.11 0. in accordance with the policies established by the Central Board. legal advisors.04 0. the management.27 14.76 1. Such investments would be in accordance with the investment policies approved by the Central Board from time to time.7 55.33 11.Particulars (Approximate Expenditure) Rs. No part of the Issue proceeds will be paid by the Bank as consideration to the Directors or the Bank’s key management personnel except in the usual course of business.4 7.24 100. will have flexibility in deploying the proceeds received from the present Issue.03 0.1 450.03 0.00 Pending utilisation of Issue proceeds. to augment the long-term resources for increasing the business.01 0. Stationery and Despatch Listing Fees Others Total Interim Use of Proceeds 66. Monitoring of Utilisation of Funds As the Issue is being made with an objective to improve the capital adequacy ratio.51 3.8 15. the Bank intends to temporarily invest the funds in interest or dividend bearing liquid instruments including money market mutual funds and deposits with banks for the necessary duration.01 0.0 0.

...........................) 103... 2008.... factoring and commercial services.....93.. credit cards. • • Quantitative Factors 1... 120.................... XXII/24 dated January 28........ The Bank is present......07 120... Fiscal 2006 ....2 billion as on September 30..... 2.82 105... Price/Earning Ratio (P/E) in relation to the issue price of Rs...... 2007....... 2007............ 112......590 a) Basic EPS as per the consolidated financial statements for year ended March 31..........79 The EPS has been computed on the basis of Net Profit after Taxes and Provisions divided by the number of shares outstanding.... b) Peer Group P/E Industry P/E Highest Lowest 22.79 ...93 Weight 1 2 3 Weighted Average .. Sector: Banks – Public Sector............. 2008 to February 10. of times) 13. 2007 Basic EPS of Rs.........93 .... P/E at the Issue Price (no.... Qualitative factors • The Bank is India’s largest bank............ 120.... through its subsidiaries......... Investors should also refer to the sections “Risk Factors” and “Auditor’s Report” to get a more informed view before making any investment decision....... Fiscal 2007 . Basic EPS (Rs.. in diverse segments of the Indian financial sector......7 Source: Capital Markets Vol...... 53 ................. 10 Year Fiscal 2005 ........15 14.. 120.321.. 3....... The Bank reported a Basic EPS of Rs... Based on weighted average Basic EPS of Rs...... payment services and life insurance....................... with 10.10 Particulars Based on year ended March 31.....1 (Allahabad Bank) Industry Average 13....... including asset management....93 for the period ended March 31. 1......... Basic earning per equity share (EPS) of face value of Rs.072 domestic offices and 84 international offices in 32 countries with more than 100 million accounts as of December 31....... The Bank is also India’s largest retail bank in terms of both assets and liabilities.......................... treasury operations..... 2007.................... 112.........3 (State Bank of India) 6.. totalling Rs..BASIS FOR ISSUE PRICE (Based on consolidated Group data) The Issue Price for the Equity Shares has been determined by the Central Board of Directors. 2007 is Rs.

...........590 per share) ....... 54 .... 1... 10 and the Issue Price is 159 times the face value. 2008.3...............0 18.......8 13...... on the basis of assessment of market demand for the Equity Shares and the same is considered justified by the Lead Managers on the basis of the above factors.3 8. Fiscal 2007 .7 321.1 Union Bank (I) 505......6 13.. Return on Equity (%) is calculated as Profit after tax (as regrouped) divided by Average Equity. 1....5 22............... Fiscal 2006 ...2 33......30 315.) 594.3 26....... 1....00 487.8 21..96 Weight 1 2 3 16..7 Name of the Bank State Bank of India Peer Group Punjab National Bank Canara Bank Bank of India Bank of Baroda P/E 22.............85 15.. Source: Capital Markets Vol. RoE (%) 18....3 12............30 410.......................5 BV (Rs....... The Issue Price of Rs..89%..590 per Equity Share has been determined by the Central Board of Directors........................00 Face Value per share (Rs..............8 117........2 10.... Sector: Banks – Public Sector The face value of the Equity Shares is Rs.................... XXII/23 dated January 24...... 2007.) 526..... 2008 to February 10... Peer Group Comparisons (Industry Peers) Equity Capital (Rs...9 235..........8 47..........590 per share) required to maintain pre-Issue EPS is 12.. in Crs........................ 6......................7 Note: Peer set has been determined on the basis of financial data of the Bank......3 12....8 RoNW (%) 15........2 93......... Book Value Book Value (Rs........ 5..... per share) As on March 31..30 Weighted Average ...................... 808 After the Issue of Equity Shares (at Rs.... 939 Book Value is calculated as Net worth at the end of the period divided by the number of Equity Shares outstanding at the end of the period.....22 15.. Minimum Return on Increased Net Worth Required to Maintain Pre-Issue EPS The minimum return on increased net worth after issue of Equity Shares (at Rs.. 4.. per share) 83......................................40 367....6 197....12 10 16................... Return on Equity (RoE) as per regrouped Indian GAAP financials Year Fiscal 2005 .....................) 10 10 10 10 10 EPS (Rs..4 16......4 19.........

and no representation is made as to the accuracy of this information. In addition to these traditional central banking roles. The RBI issues guidelines on exposure limits. 28. the RBI undertakes certain developmental and promotional roles. 1934. asset classification. trade and agriculture. with approximately 65% of bank branches located in rural or semi-urban areas of the country.3 billion in deposits and Rs. Until the early 1990s. including housing finance companies. longterm lending institutions and non-bank finance companies. The Government’s economic reform program. encompassed the financial sector.INDUSTRY OVERVIEW The information in this section is derived from a combination of various official and unofficial publicly available materials and sources of information. insurance companies. is the central banking and monetary authority in India. see “Regulations and Policies. the Lead Managers or their respective legal or financial advisors. Scheduled commercial banks have a presence throughout India. there were 179 commercial banks (175 scheduled commercial banks and 4 non-scheduled commercial banks) in India with a network of 72. which began in 1991. investment valuation and capital adequacy for commercial banks. 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. 55 . The RBI requires these institutions to furnish information relating to their businesses to it on a regular basis. 20. and mutual funds. A large number of these branches belong to public sector banks.117 branches holding approximately Rs. 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. 2007. other specialised financial institutions and state-level financial institutions. the Indian financial system was strictly controlled.1 billion in loans . Interest rates were administered. A variety of financial intermediaries in the public and private sectors participate in India’s financial sector. See “— Banking Sector Reform — Committee on Banking Sector Reform (Narasimham Committee II). income recognition. It has not been independently verified by the Bank.538. is the central regulatory and supervisory authority for the Indian financial system. the Narasimham Committee I.” Commercial Banks Commercial banks in India have traditionally focused only on meeting the short-term financial needs of industry. formal and informal parameters governed asset allocation and strict controls limited entry into and expansion within the Indian financial sector.409. The first phase of the reform process began with the implementation of the recommendations of the Committee on the Financial System. Scheduled commercial banks are banks listed in the schedule to the Reserve Bank of India Act.” RBI The RBI. including the following: • • • • • • commercial banks. and are further categorised as public sector banks. the central banking and monetary authority of India. Introduction The RBI. provisioning for non-performing and restructured assets. which may be inconsistent with information available or compiled from other sources. established in 1935. As of September 30. private sector banks and foreign banks. non-bank finance companies. long-term lending institutions. The second phase of the reform process began in 1999.

0% of the outstanding gross bank credit and 70. the number of regional rural banks was reduced from 96 to 95 through the amalgamation of two regional rural banks. 2007. as part of the banking reform process and as a measure to induce competition in the banking sector. In 1986. The Bank is the largest public sector bank in India.8% of the outstanding gross bank credit of scheduled commercial banks at of September 30.0% of the aggregate deposits and 2.0% of the total branch network of scheduled commercial banks in the country. 2005. 2004. though certain foreign banks also have wholly-owned non-bank finance company subsidiaries or joint ventures for both corporate and retail lending.3% of aggregate deposits and 20. accounting for 6. As on September 30. In July 1993. See “ — Impact of Liberalisation on the Indian Financial Sector. 2007. the Bank and its associate banks had 14. artisans. Since 1976. regional rural banks have been jointly established by the Government. the Kelkar Committee made comprehensive recommendations covering both the organisational and operational aspects of regional rural banks. Their network of 7. As of September 30. of which eight were “new” private sector banks and 16 were private sector banks existing prior to July 1993. The RBI issued a notification (the “Roadmap for presence of foreign banks in India”) on February 28.150 branches. there were 95 regional rural banks with 14. the RBI has permitted foreign banks to operate more freely. home loans. the RBI stipulated that banks should not acquire any fresh stake in a bank’s equity shares. credit cards and household consumer finance.455 branches.1% of the aggregate deposits and 6. They accounted for 22.6% of the aggregate deposits and 22. public sector banks made up the largest portion of Indian banking. As part of the liberalisation process.6% of outstanding gross bank credit of the scheduled commercial banks.228 branches. existing private sector banks which showed signs of an eventual default were merged with state-owned banks. In a circular dated July 6. Excluding the regional rural banks. This resulted in the introduction of nine private sector banks. 2007. 2007. small entrepreneurs and agricultural labourers.9% of the outstanding gross bank credit of all scheduled commercial banks. offering an array of products such as automobile finance. the remaining public sector banks have 50. Furthermore. As of September 30.6% of the aggregate deposits of the scheduled commercial banks of September 30. there were 29 foreign banks with 257 branches operating in India. 2007. During the six-month period ended September 30. 2007. The focus on public sector banks was maintained throughout the 1970s and 1980s. 2007. the RBI permitted entry of the private sector into the banking system.6% of the outstanding gross bank credit of scheduled commercial banks. some of the larger foreign banks have increasingly made consumer financing a larger part of their portfolios. The National Bank for Agriculture and Rural Development (“NABARD”) is responsible for regulating and supervising the functions of the regional rural banks. there were 24 private sector banks. if by such acquisition the investing bank’s holding would exceed 5% of the investee bank’s equity capital. Private Sector Banks After the first phase of bank nationalisation was completed in 1969.Public Sector Banks Public sector banks make up the largest category in the Indian banking system. announcing the following measures with respect to the presence of foreign banks: 56 . This also applies to holdings in Indian banks of foreign banks with a presence in India. subject to requirements largely similar to those imposed on domestic banks. Regional rural banks provide credit to small farmers. They include the SBI and its seven associate banks. While the primary activity of most foreign banks in India has traditionally been in the corporate sector. As of September 30. private sector banks accounted for approximately 20. 19 nationalised banks (plus IDBI Bank) and 95 regional rural banks.177 branches accounted for 10. accounting for 3. and accounted for 70. 2007.” Foreign banks operate in India through branches of the parent bank. Foreign Banks As of September 30. These banks are collectively known as the “new” private sector banks. The public sector banks’ large network of branches enables them to fund themselves out of low cost deposits. state governments and sponsoring commercial banks with a view to developing the rural economy.

The current aggregate limit for all investments in a private sector bank by foreign institutional investors is restricted to 24. borrowings in the call market and term deposits placed with other urban cooperative banks. However. 2004 provides for the regulation of all cooperative banks by the RBI. small-scale industry and self employed businessmen in urban and semi-urban areas of India. A task force appointed by the Government to examine the reforms required in the cooperative banking system submitted its report in December 2004. and the limit on holdings by individual foreign institutional investors is 10. foreign banks will be allowed to acquire up to 74. 57 . the Finance Minister accepted the recommendations of the task force in principle and proposed to call state governments for consultation and begin to implement the recommendations in the States willing to do so.0%. A more liberal policy will be followed for under-served areas. including measures related to lending against shares. including the year of the merger. the RBI undertook several interim measures. foreign banks will be allowed to establish a presence by setting up wholly-owned subsidiaries or by converting existing branches into wholly-owned subsidiaries. The Banking Regulation (Amendment) and Miscellaneous Provisions Act. regulatory and operational reforms for cooperative banks. including the provision of financial assistance by the Government in order to revitalise this sector. The RBI may consider proposals for mergers or amalgamations in the following circumstances: (i) (ii) (iii) the net worth of the acquired bank is positive and the acquirer bank commits to protect the deposits of all the depositors of the acquired bank. In the light of liquidity and insolvency problems experienced by some cooperative banks in fiscal year 2001. subject to the approval of the bank’s board and shareholders. During the second phase (from April 2009 onwards). the limit is 5. This can be increased to 24. in respect of individual NRIs. The realisable value of assets should be assessed through a process of due diligence.0%. the RBI issued guidelines on mergers and amalgamations in the urban cooperative bank sector with a view to facilitating the emergence of strong entities resulting from the merger between two banking entities and to providing an avenue for the non-disruptive exit of unviable banking entities. which can be raised to 49. during the first phase. Relaxations in this regard were announced in the Mid-term Review of October 2005. In February 2005. In all mergers or amalgamations. and the net worth of the acquired bank is negative and the acquirer bank assures protection of the deposits of all depositors of the acquired bank with financial support from the relevant state government extended upfront as part of the merger process.• During the first phase (up to March 2009).0%. foreign banks will be allowed to acquire a controlling stake in a phased manner only in private sector banks that are identified by the RBI for restructuring. pending formal legislative changes. It recommended several structural. • • • Cooperative Banks Cooperative banks cater to the financing needs of agriculture. For new and existing foreign banks.0%. The state land development banks and the primary land development banks provide long-term credit for agriculture.0%. and the NABARD is responsible for state cooperative banks and district central cooperative banks. it has been proposed to go beyond the existing World Trade Organisation commitment of allowing increases of 12 branches per year. Presently the RBI is responsible for the supervision and regulation of urban co-operative societies.0% in private sector banks in India.0%. the financial parameters of the acquirer bank post merger should conform to the prescribed minimum prudential and regulatory requirement for urban co-operative banks. subject to a special resolution passed by the bank’s shareholders to that effect. The current aggregate limit for all investments by non-resident Indians (“NRIs”) is 10. after a review of the first phase. pursuant to which the acquirer bank was permitted to amortise any loss taken over from the acquired bank over a period of five years. In the Union Budget for fiscal year 2006. In addition. the net worth of the acquired bank is negative and the acquirer bank commits to protect the deposits of all the depositors of the acquired bank.

Kotak Mahindra Finance Limited. See also “Regulations and Policies — RBI Regulations — Capital Adequacy Requirements” and “Regulations and Policies — RBI Regulations — Regulations relating to 58 . The Industrial Development Bank (Transfer of Undertaking and Repeal) Act. IFCI Limited. and fee-based services such as investment banking and underwriting. Although the initial role of these institutions was largely limited to providing a channel for government funding to industry. in recent years. foreclosure of mortgages and establishment of the Mortgage Credit Guarantee Scheme. direct subscription to shares. The primary activities of the non-bank finance companies are consumer credit. several other players. In April 2001. as well as wholesale finance products such as bill discounting for small and medium-sized companies.968 non-bank finance companies in India. a working group created in 1999 to harmonise the role and operations of long-term lending institutions and banks. home finance and consumer durable products finance. IDBI Bank Limited. In recent years. The companies which accept public deposits are subject to the strict supervision and capital adequacy requirements of the RBI. mostly in the private sector. underwriting. was merged with IDBI in April 2005. As a result of various incentives given by the Government for investing in the housing sector in recent years. 2003 converted IDBI into a banking company to be incorporated under the Companies Act. Their new activities include: • • fee-based activities such as investment banking and advisory services. certain non-bank finance companies have defaulted on their obligations to investors and depositors.” In April 2002. Over the past few years. The National Housing Bank and the Housing and Urban Development Corporation Limited are the two government-controlled financial institutions created to improve the availability of housing finance in India. with exemptions from certain statutory and regulatory norms otherwise applicable to banks. a new private sector bank that was a subsidiary of the Industrial Development Bank of India. ICICI Limited merged with ICICI Bank Limited. These institutions provide fund-based and non-fund-based assistance to industry in the form of loans. including banks. Non-Bank Finance Companies There are over 12. See “— Banking Sector Reforms — Universal Banking Guidelines. including an exemption for a period of five years from the SLR. Pursuant to the recommendations of the Narasimham Committee II and the Khan Working Group. See also “— Reforms of the Non-Bank Finance Companies. the RBI. the RBI issued operational and regulatory guidelines required to transform long-term lending institutions into universal banks. have entered the housing finance industry. However. The scope and activities of nonbank finance companies have grown significantly over the years. All non-bank finance companies are required to register with the RBI. the scope of this business has grown substantially. Such longterm lending institutions were expected to play a critical role in Indian industrial growth and accordingly had access to concessional government funding. was granted a banking license by the RBI and converted itself into Kotak Mahindra Bank Ltd. Housing Development Finance Corporation Limited was the premier institution providing housing finance in India. announced that long-term lending institutions would have the option of transforming themselves into banks subject to compliance with the prudential norms applicable to banks. Housing loans up to certain limits prescribed by the RBI and mortgage-backed securities qualify as priority sector lending under the RBI’s directed lending rules. the operating environment of the longterm lending institutions has changed substantially.” Housing Finance Companies Housing finance companies form a distinct subgroup of non-bank finance companies. the reform process required them to expand the scope of their business activities. including corporate finance and issuing working capital loans. many of which are currently pending. including automobile finance. and consequently actions (including bankruptcy proceedings) have been initiated against them. The National Housing Bank Act provides for the securitisation of housing loans. In 2003. ICICI Limited (prior to amalgamation) and the Industrial Investment Bank of India were established to provide medium-term and longterm financial assistance to various industries for setting up new projects and for the expansion and modernisation of existing facilities. a large non-bank finance company. Until recently. The non-bank finance companies may be categorised into entities which take public deposits and those which do not.Long-Term Lending Institutions Long-term lending institutions such as IDFC Limited. debentures and guarantees. in its mid-term review of monetary and credit policy for fiscal year 2000. and short-term lending activities.

Power Finance Corporation Limited. the Indian Parliament passed the Insurance Regulatory and Development Authority Act (the “Act”). 250. nine are in the private sector and six are in the public sector (four government-owned general insurance companies. proposed an increase in the limit on foreign equity participation in private sector insurance companies from 26.1 billion in fiscal year 2007 compared to a 40. the RBI issued guidelines governing the entry of banks and financial institutions into the insurance business. 754. which opened the Indian insurance sector to foreign and private investors. The sole reinsurance company. capital adequacy ratio.0%. provided that they meet certain criteria relating to their net worth. GIC and public sector general insurance companies also provide long-term financial assistance to the industrial sector. Tourism Finance Corporation of India Limited. this would require an amendment to the Insurance Regulatory and Development Authority Act.0 billion. The Government. 3. 1999 and has not yet been implemented. which provide finance primarily to medium-sized and large enterprises. there are 32 insurance companies in India. GIC. It was set up in 1963 at the initiative of the Government and the RBI. Of the 15 general insurance companies. Insurance Companies Currently. From 1987 onwards. The Act allows foreign equity participation in new insurance companies of up to 26. The insurance sector in India is regulated by the Insurance Regulatory and Development Authority. State financial corporations were set up to finance and promote small and medium-sized enterprises. profitability track record.6% to reach Rs.6% growth in fiscal year 2006. level of impaired loans and the performance of their existing subsidiary companies.5% in fiscal year 2006. Risk Capital and Technology Finance Corporation Limited. Export Credit Guarantee Corporation of India Limited and the Agriculture Insurance Company of India). and India Infrastructure Financing Company Ltd. In its monetary and credit policy for fiscal year 2001.” Other Financial Institutions Specialised Financial Institutions In addition to the long-term leading institutions.0 billion. several other public sector mutual funds entered this sector and participation was finally opened up to 59 .the Making of Loans” and “Regulations and Policies —RBI Regulations — Directed Lending — Priority Sector Lending.0 billion to carry out the business of life insurance or general insurance or Rs. compared to an increase of 16. the Unit Trust of India was the only mutual fund operating in the country. From 1963 to 1987. LIC. At the state level.0% to 49. State Financial Institutions State financial corporations operate at the state level and form an integral part of the institutional financing system. Mutual Funds At the end of fiscal year 2007. of which 16 are life insurance companies. First year premiums underwritten in the life insurance sector recorded a growth of 100.263. 1.4% in fiscal year 2007 to Rs. the Small Industries Development Bank of India. while presenting its budget for fiscal year 2005. Of the 16 life insurance companies. The state financial institutions are expected to achieve balanced regional socio-economic growth by generating employment opportunities and widening the ownership base of industry. National Housing Bank. However.0%.0 billion to carry out exclusively the business of reinsurance. 15 are general insurance companies and one is a re-insurance company. Gross premiums underwritten of all general insurance companies increased by 22. is in the public sector. there are various specialised financial institutions which cater to the specific needs of different sectors. 2. there are also state industrial development corporations. there were 755 mutual fund schemes in India with total assets under management of Rs. 15 are in the private sector and one is in the public sector (Life Insurance Corporation of India). The new company should have a minimum paid-up equity capital of Rs. the Export-Import Bank of India. In December 1999. They include the National Bank for Agricultural and Rural Development. the Infrastructure Development Finance Corporation Ltd. The guidelines permit banks and financial institutions to enter the business of insurance underwriting through joint ventures.

0%. The industry is regulated by the Securities and Exchange Board of India (Mutual Fund) Regulations. The major recommendations that were implemented included the following: • with fiscal stabilisation and the Government increasingly resorting to market borrowing to raise resources.5%. which addressed organisational issues. Pursuant to the mid-term review of the Annual Monetary Policy. including guaranteeing redemptions and assured return obligations to the unit holders. one comprising assured return schemes and the other comprising net asset value based schemes. the Government implemented a package of reform measures for the Unit Trust of India. especially in areas requiring development. Impact of Liberalisation on the Indian Financial Sector Until 1991. bank profitability was low. As a result. accounting practices and operating procedures. Many of the recommendations made by the committee. Committee on the Financial System (Narasimham Committee I) The Committee on the Financial System (the Narasimham Committee I) was set up in August 1991 to recommend measures for reforming the financial sector. since 1991. the SLR i. was reduced from 15% in the pre-reform period to 4. 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. the proportion of a banks’ demand and time liabilities that was required to be invested in government securities. the financial sector in India was heavily controlled.the private sector in 1993. the proportion of a bank’s net demand and time liabilities that was required to be deposited with the RBI. similarly. the two dominant financial intermediaries. there were 18 private sector mutual funds with a 79. The focus of the commercial banks was primarily on mobilizing household savings through demand and time deposits and to use these deposits to meet the short-term financial needs of borrowers in industry. had mutually exclusive roles and objectives and operated in a largely stable environment. In particular. As part of the reforms. including balanced industrial growth and employment creation. subject to restrictions on the maximum permissible redemption amount. subject to compliance with the prudential norms applicable to banks. Banks were required to fund the public sector through the mandatory acquisition of low interest-bearing government securities or SLR bonds to fulfil statutory liquidity requirements. However. the Unit Trust of India was divided into two mutual funds structured in accordance with the regulations of SEBI. with little or no competition. emergence of a liberalised domestic capital market.5%. regulations also channelled lending into priority sectors. impaired assets were comparatively high. was reduced from 38.e. effective as of November 10. the Unit Trust of India. In response. 2007. In addition to controlling interest rates and entry into the banking sector. The RBI has permitted the transformation of long-term lending institutions into banks. The CRR was increased to 7. there have been comprehensive changes in the Indian financial system. entry of new private sector banks and broadening of long-term lending institutions’ product portfolios have progressively intensified competition between banks and long-term lending institutions.0% in October 1997.e. 1996. Long-term lending institutions were given access to long-term funds at subsidised rates through loans and equity from the Government and from funds guaranteed by the Government and originating from commercial banks in India and foreign currency resources originating from multilateral and bilateral agencies. 2007. capital adequacy was diminished and operational flexibility was hindered. trade and agriculture. with a high level of investment in equity securities. Various financial sector reforms have transformed the operating environment of the banks and long-term lending institutions. In 2001. the CRR has been increased by 50 basis points to 7.5% in the pre-reform period to 25. were implemented by the Government. the commercial banks provided a range of banking services to individuals and business entities. the deregulation of interest rates. started to face difficulties in meeting redemptions and assured return obligations due to a significant decline in the market value of its securities portfolio.18% market share in terms of total assets under management. Commercial banks and long term lending institutions. In addition. i. the CRR. Long-term lending institutions were focused on achieving the Government’s various socio-economic objectives. • 60 . As of September 30.

The major recommendations of the committee were in respect of capital adequacy requirements. By the end of fiscal year 2002. aggregate recapitalisation amounted to Rs. The amendments also empower the RBI to prescribe ‘fit and proper’ criteria for directors of these banks.0% of a banking company’s paid-up capital or voting rights by any individual. removing the minimum cash reserve ratio requirement of 3. and banks were granted the freedom to open or close branches. • • In order to provide greater operational flexibility to the RBI. The Ordinance facilitated the removal of the then existing SLR floor of 25. 2007. Recent Structural Reforms Amendments to the Reserve Bank of India Act In May 2006. and remove the limit of 10. and commercial banks were allowed to set their own level of interest rates for all deposits except savings bank deposits. permitting these banks to issue preference shares and make preferential allotments or private placements of equity. the Indian Parliament approved amendments to the Reserve Bank of India Act. and permit supercession of their boards and appointment of administrators in certain circumstances. the amendments also created a legal and regulatory framework for derivative instruments.0% on the maximum voting power exercisable by a shareholder in a banking company.0%. joint ventures. most of the restrictions on interest rates for deposits were removed. firm or group. Further. and giving the RBI discretion to reduce the CRR to less than 3.0%. Proposed Amendments to the Banking Regulation Act Legislation seeking to amend the Banking Regulation Act has been introduced in the Indian Parliament. enabling the RBI to specify the SLR without any floor rate.0%. as the regulator and the authority vested with the powers to conduct monetary policy through the requirement for banks to hold liquid instruments. remove the minimum SLR requirement of 25. risk management and merger policies. while leaving the 61 . 217. make prior approval of the RBI mandatory for the acquisition of more than 5. associates or the holding company of the banking company. prohibit lending to relatives of directors and to non-subsidiary companies that are under the same management as the banking company.• • • special tribunals were created to resolve bad debt problems.5 billion. the Government promulgated an ordinance on January 23. See also “Regulations and Policies — RBI Regulations — Legal Reserve Requirements — Statutory Liquidity Ratio”. substantial capital injection to several state-owned banks was approved in order to bring their capital adequacy closer to internationally accepted standards. The RBI accepted and began implementing many of these recommendations in October 1998. asset classification and provisioning. As presently drafted. the main amendments propose to: • • • permit all banking companies to issue preference shares that will not carry any voting rights.0%. • Committee on Banking Sector Reform (Narasimham Committee II) The Committee on Banking Sector Reform (the Narasimham Committee II) submitted its report in April 1998.0%. and the stronger public sector banks were given permission to issue equity to further increase capital. Recent Amendments to Laws Governing Public Sector Banks The Indian Parliament recently amended the laws governing India’s public sector banks. giving the RBI discretion to reduce the SLR to less than 25.

the said legislation has not come into effect and the Sick Industrial Companies Act. if a scheme of reconstruction is pending before the Board for Industrial and Financial Reconstruction. which provide that a borrower may make an objection or representation to a secured creditor after a notice is issued by the secured creditor to the borrower under the Act demanding payment of dues. Following recommendations of the Narasimham Committee. banks or branches located in Special Economic Zones (“SEZs”). IDBI. 2004 was introduced with a view to repealing the Sick Industrial Companies Act. give notice in writing to the borrower. 2002 (“SARFAESI”). In particular. no proceeding for recovery can be initiated or continued before the tribunal. 1949 to enable the RBI to specify the SLR without any floor rate. has received registration from the RBI. seeking to replace the Ordinance and to amend Section 24 of the Banking Regulation Act. In April 2004. To date. Several petitions challenging the constitutional validity of SARFAESI were filed before the Indian Supreme Court. however. which received the assent of the President on March 26.0% intact. 2007 the Banking Regulation (Amendment) Bill. 1985. Legislative Framework for Recovery of Debts due to Banks In fiscal year 2003. requiring it to discharge its liabilities within 60 days. the RBI has devised a corporate debt restructuring system. The Act also introduces a deposit requirement for borrowers if they wish to appeal the decision of the debt recovery tribunal. 1985. set up by the Bank. Subsequently. The secured creditor has to give reasons to the borrower for not accepting the objection or representation.ceiling of 40. Changes were also proposed in Section 53 of the Act to make it mandatory to present draft notification before both Houses of Parliament in cases of exemptions being granted to institutions. On March 9. the Indian Parliament passed the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. the Recovery of Debts due to Banks and Financial Institutions Act. the Supreme Court upheld the constitutionality of the Act. The Ordinance has subsequently been repealed and replaced by the Banking Regulation (Amendment) Act. 62 . The objective of this framework is to ensure a timely and transparent mechanism for restructuring the corporate debts of potentially viable entities facing problems. Further. this framework aims to preserve viable corporations that are affected by certain internal and external factors and minimize any losses to the creditors and other stakeholders through an orderly and coordinated restructuring program. 2007. SARFAESI also provides for the setting up of asset reconstruction companies regulated by the RBI to acquire assets from banks and financial institutions. Corporate Debt Restructuring Forum To establish an institutional mechanism for the restructuring of corporate debt. debt recovery tribunals and other legal proceedings. failing which the secured creditor may take possession of the assets constituting the security for the loan. under the Sick Industrial Companies (Special Provision) Act. This protection from creditor action ceases if the secured creditor takes action under SARFAESI. including the right to sell or otherwise dispose of the assets. SARFAESI provides that a secured creditor may. 2007 was submitted in Parliament. the Sick Industrial Companies (Special Provisions) Repeal Act. 2007. SBT and certain other banks and institutions. 1993 was enacted. 2007. Asset Reconstruction Company (India) Limited. The Government has subsequently made amendments to the Act. The RBI has issued guidelines for asset reconstruction companies in respect of their establishment. other than the requirement that the borrower deposit 75% of the dues with the debt recovery tribunal as a precondition for appeal by against the enforcement measures. in respect of loans classified as non-performing in accordance with RBI guidelines. registration and licensing by the RBI. and is deemed to have come into force on January 23. However. and their operations. the Government announced measures for the setting up more debt recovery tribunals and the eventual repeal of the Sick Industrial Companies (Special Provision) Act. The corporate debt restructuring system is a non-statutory mechanism and a voluntary system based on debtor-creditor and inter-creditor agreements. This legislation provides for the establishment of a tribunal for speedy resolution of litigation and recovery of debts owed to banks or financial institutions. ICICI Bank Limited. has not been repealed. and exercise management rights in relation thereto. While presenting its budget for fiscal year 2002. outside the purview of the Board of Industrial and Financial Rehabilitation. 1985. 1985. the Act permits a lender to take over the business of a borrower under certain circumstances (unlike the earlier provisions under which only assets could be taken over).

Further. Such voluntary contributions are often driven by tax benefits offered under the schemes. It is a contributory program that provides for periodic contributions of 10% to 12% of the basic salary by both the employer and the employees. In the case of pension schemes for government employees. The report suggested that pension fund managers should constitute a separate legal entity to conduct their pension business. the RBI issued operational and regulatory guidelines required to transform long-term leading institutions into universal banks. In March 2005. Pursuant to the recommendations of the Narasimham Committee II and the Khan Working Group. If a long-term lending institution chose to exercise the option available to it and formally decided to convert itself into a universal bank. Subsequently. 2003. Credit Policy Measures The RBI issues an annual policy statement setting out its monetary policy stance and announcing various regulatory measures. In December 2003. The committee submitted its report in January 2000. the Government tabled the Pension Fund and Development Authority Bill in Parliament. there are three categories of pension scheme in India: pension schemes for government employees. the Government commissioned the Old Age Social and Income Security (“OASIS”) project and nominated an expert committee to suggest changes to the existing policy framework. In August 2003. is a mandatory program for employees of certain establishments. The Government also requested the Insurance Regulatory and Development Authority to draw up a roadmap for implementing the OASIS report. The Government also set up the Pension Fund Development and Regulatory Authority to regulate the pension industry. the Government pays its employees a defined periodic benefit upon their retirement. in its mid-term review of monetary and credit policy for fiscal year 2000. In 1998. it could formulate a plan for conversion into a universal bank over a specified time frame. announced that long-term lending institutions would have the option of transforming themselves into banks. In addition. the RBI. It also recommended the establishment of a separate pension regulatory authority to regulate the pension system. established in 1952. 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. The Union Budget for fiscal year 2006 recognised the opportunities for foreign direct investment in the pension sector and it also announced that the Government would issue guidelines for such investment. The contribution towards the pension scheme is funded solely by the Government and not matched by a contribution from employees. the Government announced that the new pension scheme would be applicable to all new recruits to the public sector (excluding defence personnel) from January 1. recommending a system for private sector management of pension funds to provide market-linked returns. the Government announced that it would be mandatory for its new employees (excluding defence personnel) to join a new defined contribution pension scheme where both the Government and the employee would make monthly contributions of 10% of the employee’s salary. 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. the Government promulgated an ordinance establishing a statutory regulatory body. The Bank is one of only three Indian entities (UTI AMC and LIC of India being the other two) selected by the Pension Fund Regulatory and Development Authority (“PFRDA”) to sponsor pension fund managers. 2004.Universal Banking Guidelines Universal banking in the Indian context means the transformation of long-term lending institutions into banks. 63 . 2004. pension schemes for employees in the organised sector and voluntary pension schemes.000 per annum) or offered by insurance companies. The Insurance Regulatory and Development Authority submitted its report in October 2001. developmental and regulatory functions with respect to the pension sector. subject to compliance with certain prudential norms applicable to banks. The Bank intends to become involved in the pension fund business through a subsidiary fund manager. the Pension Fund Regulatory and Development Authority (“PFRDA”) to undertake promotional. The Employees Provident Fund. the Government announced that a high level committee would be formulated to design a contribution-based pension scheme for new Government recruits. where the contribution may be made on a voluntary basis. In April 2001. in the budget for fiscal year 2001. It issues a review of the annual policy statement on a quarterly basis. The Government also formed the interim Pension Fund Development and Regulatory Authority on October 11. Pension Reforms Currently. on December 30.

and it enhanced the overseas investment limit for domestic companies to 300% of their net worth and listed companies’ limit for portfolio investment abroad to 35% of their net worth. 2007.75% and 6. 2. it reduced the interest rate ceiling on non-resident Rupee deposits by 50 basis points to LIBOR/SWAP rates and reduced interest rate ceiling on non-resident dollar deposits by 50 basis points to LIBOR minus 75 basis points. stability.S. the reverse repo rate was retained at 6. effective as of August 6. 64 . the risk weight on residential housing loans to individuals of up to Rs. the RBI eased overseas investment and loan repayment norms for companies.$ 500 million. 2007. The monetary policy focused on credit quality and financial market conditions for maintaining macro-economic. it reduced.S.0 million to 50%. however. and in particular financial.S.$ 4 billion from U. as evident from the higher growth of GDP and IIP. Therefore. the projection of real GDP growth in fiscal year 2008 of around 8. • • • • Mid-term Review of Annual Monetary Policy in October 2007 The salient features of the mid-term review of the monetary policy are as set out below: • the repo and reverse repo rates were kept unchanged at 7.$ 300 million. healthy foreign exchange reserves and stable exchange rates.S. 2007. effective as of August 4.75%: repo is an instrument for the RBI’s lending of funds by purchasing government securities. the ceiling of Rs. The salient features of the policy are as follows: • • it raised the aggregate ceiling on overseas investment by mutual funds to U. the CRR was increased by 50 basis points to 7. reasonable liquidity. • • • • In September 2007. the reverse repo rate is the rate at which the RBI borrows from the banks.0%. by authorised dealer banks without prior approval of the Reserve Bank. subject to re-imposition of such ceiling as deemed appropriate by the RBI. this limit has subsequently been increased to U. it allowed prepayment of external commercial borrowings (“ECBs”) of up to U. mutual funds and individuals seeking to stem the Rupee’s gains by encouraging capital outflows and signalling another step toward fuller capital account convertibility.0%: the reverse repo rate is an instrument for the RBI’s borrowing of funds by selling government securities.Annual Policy Statement of the RBI for Fiscal Year 2008 RBI announced its Annual Policy Statement for the year 2007-2008 on April 24. it permitted banks and primary dealers to begin transactions in single-entity credit default swaps.5% effective as of November 10. First Quarter Review of Annual Monetary Policy in July 2007 The salient features of the first quarter review of the annual monetary policy are as set out below: • the repo rate was retained at 7. as a temporary measure. with an agreement to repurchase the said securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed. 30 billion on daily reverse repo under the liquidity adjustment facility (“LAF”) was withdrawn.$ 400 million.5%.0% respectively. as set out in the Annual Policy Statement of April 2007. as against the existing limit of U. with an additional increase to 7. with an agreement to resell securities on a mutually agreed future date at an agreed price which includes interest for the funds lent.$ 3 billion.S. was retained. 2007 against a backdrop of strong economic fundamentals.

The maximum rate of interest that non-bank finance companies could pay on their public deposits was reduced from 12. On December 12. 205 million is mandatory before existing non-bank finance companies may accept public deposits. effective as of November 10. with different capital to risk assets ratio for non-bank finance companies with different ratings being specified. Other measures introduced include a requirement that non-bank finance companies maintain a certain percentage of liquid assets and create a reserve fund. procedural changes in nomination facilities. and non-bank finance companies are advised to restrict their investments in real estate to 10% of their net owned funds. even if they have the . 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. The first phase of integration covered registration and standards. The registered non-bank finance companies were required to achieve a minimum capital adequacy of 6% by fiscal year 1995 and 8% by fiscal year 1996 and to obtain a minimum credit rating. the RBI announced certain liberalisation measures under which registered non-bank finance companies. and the CRR was increased by 50 basis points to 7. Reforms of the Non-Bank Finance Companies The standards relating to income recognition.5%. and the projection of real GDP growth of 8. 2003. 2006 the RBI issued guidelines on the financial regulation of systematically important non-banking financial companies and bank’s relationships with them with a view to removing the possibility for regulatory arbitrage leading to an uneven playing field and potential systematic risk. the RBI issued new guidelines for non-bank finance companies as follows: • • • a minimum net owned fund of Rs. in July 1996. in compliance with the prudential norms and credit rating requirements. a minimum investment grade rating is compulsory for loan and investment companies accepting public deposits. issuance of a Know Your Customer policy and allowing a non-bank finance companies to take up insurance agency business. non-bank finance companies must maintain 15% of public deposits. prudential norms and liquid assets.• • the bank rate was kept unchanged at 6. the procedures for foreign direct investment in non-bank finance companies were substantially liberalised. Accepting these recommendations. 65 . the RBI introduced a number of measures to enhance the regulatory and supervisory standards of non-bank finance companies in order to bring them in line with those pf commercial banks in select operations over a period of time.” Efforts have been made to integrate non-bank finance companies into the mainstream financial sector.5% per annum to 11% per annum effective as of March 4. To encourage companies to comply with the regulatory framework.minimum net owned funds. 20 million for all new non-bank finance companies.0%. • In its monetary and credit policy for fiscal year 2000. The percentage of liquid assets to be maintained by non-bank finance companies has been uniformly revised upwards. During fiscal year 2003. were granted freedom from the ceiling on interest rates on deposits and deposit amounts. See “— Impact of Liberalisation on the Indian Financial Sector. 2007. In the Government’s budget for fiscal year 2002. provisioning and capital adequacy were prescribed for non-bank finance companies in June 1994. A task force of non-bank finance companies set up by the Government submitted its report on October 1998 and recommended several steps to rationalize the regulation of non-bank finance companies. 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. permission to accept public deposits must be linked to the level of capital to ratio assets ratio.5% was reiterated. Since April 1999. tightening prudential norms and harmonising supervisory directions with the requirements of the Companies Act. the RBI stipulated a minimum capital of Rs.

all other scheduled commercial banks are encouraged to migrate to these approaches under Basel II. India crossed a major milestone in the development of systemically important payment systems and complied with the core principles framed by the Bank for International Settlements.500 billion. under which the risk profile of the banks will decide their supervisory cycles. In view of the dynamic nature of the financial market. including for operational risks and bring about more transparency in financial reporting as part of market discipline. The RBI has also moved towards adoption of the Risk Based Supervision of banks. and guide the smooth implementation of Basel II. 2008. Foreign banks operating in India and Indian banks having presence outside India are now required to migrate to the Standardised Approach for credit risks and the Basic Indicator Approach for operational risks under Basel II with effect from March 31. banks face various market risks such as interest rare risks. The RBI had earlier stipulated its commitment to the adoption of Basel II by the banks and had indicated March 31. RTGS handles about 14.000 transactions a day with an approximate value of Rs. 2005 and the credit risk and operational risk systems with effect from March 31. RTGS Implementation in India With the commencement of operations of the Real Time Gross Settlement (“RTGS”) system from March 26. In preparation for the adoption of the Basel-II accord.000 bank branches spread across more than 3.New Initiatives in the Banking Sector Risk Management and Basel-II With gradual deregulation. in its Mid-term Review of Annual Policy for the Year 2006-07. liquidity risks. On a typical day. As of the end of January 2007. banks are now exposed to different types of risk. 66 . 2007.000 places in the country. but in any case by no later than March 31. the settlement is done on a real-time basis and the funds settled can be further used immediately. 2004. It was proposed to complete implementation of market risk systems within two years from the year ended March 31. The salient features of the RTGS are as follows: • • • • • • payments are settled transaction-by-transaction for high-value and retail payments. In respect of lending. 1. and exchange risks. there were 110 direct participants in the RTGS system and RTGS connectivity was available in more than 26. banks have already required by the RBI to take active measures in terms of risk management systems. there is a provision for intra-day collateralised liquidity support for member banks to smooth the temporary mismatch of fund flows. In order to be in alignment with these banks. evaluate capital charges. it is a fully secure system which uses digital signatures and Public Key Infrastructure based inscription for safe and secure message transmission. which include default risks and portfolio risks. 2009. 2007 as the intended date for adoption by all. the RBI. Taking into account the state of preparedness of the banking system. Banks also face risks such as operational risks. The Steering Committee of banks will continue to interact with banks and the Reserve Bank. they face credit risks. A Bank with a higher risk rating will undergo more frequent supervisory reviews than those with a lower risk rating. and RTGS provides for the transfer of funds relating to inter-bank settlements and also for customerrelated fund transfers. The RBI has also indicated that it will adopt a phased approach to the implementation of the Basel-II accord. the settlement of funds is final and irrevocable. decided to provide banks some more time to put in place appropriate systems so as to ensure full compliance with Basel II.

which is aimed at enhancing efficiency in the retail check clearing sector. is expected to be implemented on a pilot basis in the National Capital Region in six different branches of selected banks by December 2007. Kolkata and Chennai) in a phased manner by including more banks under the CTS.Check Truncation The pilot project for the Check Truncation System (“CTS”). the encoded instruments will continue to exist alongside this service until the CTS is fully implemented. However. 67 . The RBI proposes to extend this service to additional metropolitan centres (Mumbai.

2 billion. as on September 30.4 billion.617.45% and the Bank estimated market share of domestic advances was 15. 2007.590 68 . operating both within India and internationally.072 domestic offices and 84 international offices in 32 countries with over 100 million accounts. which operate in India. 4. the Bank had an estimated 31. as on September 30.8 %. The issue price will be Rs. 2007 and 75. The National Banking Group and the Rural Business Groups service the Bank’s remaining corporate customers. The Group includes the Bank.8 billion.909 branches. from the six-month period ended September 30. deposits and foreign exchange and derivatives products.0% of consolidated Group assets as on September 30. 2008. Rs. its Associate Banks. 2007. or 48. Nepal and Bhutan. with 10.5 billion. The range of products offered by the Bank includes fund-based products. The National Banking Group also provides financial services to the Government and the state governments. 13. fee and commission-based products and services. respectively.1 billion and Rs. Pursuant to Government authorisation.586. and approximately 71 million accounts. 30. including in Europe. The Bank also has subsidiaries and joint ventures outside India. as well as alternative payment products. 40. factoring and commercial services. Associate Banks have a domestic network of approximately 4. an increase of Rs. 3. 2007 (being the last reporting Friday of December 2007) based on RBI data.5 billion. the Central Board has. 2008. by its letter no. the Bank’s estimated market share of aggregate deposits of all scheduled commercial banks in India was 15. Recent Developments Employee Share Purchase Scheme The Bank is proposing an employee share purchase scheme (the “ESPS”). the Group’s consolidated net profit amounted to Rs. treasury operations.500 Equity Shares to eligible employees of the Bank. at its meeting held on February 1. respectively. totalling Rs. 2007. the Bank’s products and services include retail lending and deposits. 9. 7. an increase of Rs. the United States. 2006. with strong regional ties. The Bank is present. through business groups and strategic business units.321. 2007. As on September 30. non-fund-based products. As on December 21. advances and total assets were Rs. 6. Mauritius. See “Business — Non-Bank Subsidiaries and Joint Ventures” and “Insurance Activities. in diverse segments of the Indian financial sector. agriculture and personal banking customers. 1. 2007. the Group’s consolidated deposits.351.11/7/2007-BOA dated January 25. For the six-month period ended September 30.024.197. The Bank may issue a maximum of 8. 2007. Canada. and its subsidiaries and joint ventures.1 billion. including tax collection and payment services.” The Bank is the largest constituent part of the Group by assets and net income.4 billion.7% of consolidated net profit for the six-month period ended September 30.53%. including other state owned enterprises. approved the ESPS. The ESPS will remain open for a period commencing from March 28. As on September 30.5 billion and Rs. 2008. The Bank organises its client relationships. fee and commission-based products and services.1 billion. F.870. The Central Government has. In addition . credit cards. including asset management. authorised the issue of the ESPS. throughout India. 2008 to April 15. payment services and life insurance. the Bank’s unconsolidated deposits. including state-owned enterprises. from the six-month period ended September 30. For the six-month period ended September 30.BUSINESS Overview The Bank is India’s largest bank.068. The Bank is also India’s largest retail bank in terms of both assets and liabilities. 10. marketing and product development. representing 70. or 53. The Corporate Banking Group provides corporate banking services to many of India’s most significant corporations and institutions. advances and total assets were Rs. the Bank’s unconsolidated net profit amounted to Rs. small scale industries. as well as noncustomer facing activities. 2007 based on trade data from the Directorate General of Commercial Intelligence and Statistics (“DGCIS”) . Rs.2 %. through its subsidiaries. The Bank’s primary strategic business groups are the Corporate Banking Group. the National Banking Group and the Rural Business Group. In the retail market. 3.9% market share of Indian merchandise foreign exchange transactions for foreign trade. 2006.No.5 billion. 5.

$ 100 million venture capital fund focusing on knowledge based sectors within India. state governments and state-owned enterprises.. The India Knowledge Fund will target specific Indian sectors including IT. In addition. risk management and other systems. environmental technology and alternative energy. Knowledge Process Outsourcing. Ltd will initially manage pension funds for the Government as well as the pension funds of those state governments which have opted to join the Scheme. Extensive branch network and portfolio of products and services. Venture Capital Fund The Bank's capital markets subsidiary. The Bank has set up the SBI Pension Funds Pvt Ltd. resulting in a large. See. including salary and pension payments and expenditure payments of various ministries. and Experienced management team. the sector is expected to open up for individuals to join the New Pension Scheme by voluntary contribution.PFRDA had advised that 55% of the corpus will be allocated to the Bank in the first year. The terms and conditions of the ESPS. diverse and growing customer base. nanotechnology.S. the Bank handles a significant portion of the banking requirements for India’s public sector enterprises (“PSEs”). The Bank also handles payment functions of the Government through its branches. Inc.. state governments and state-owned enterprises The Bank believes its strong relationships with both the Government and state governments is a key factor driving its growth in terms of total assets and provides the Bank with a stable source of business. The fund will be co-managed by both SBI Capital Markets Ltd. Relationship with the Government . Strong financial position. SBI Pension Funds Pvt. The Bank acts as the RBI’s agent for certain banking businesses of the Government and state governments. The prospective joint venture partner is expected to bring non-life insurance experience from both mature and emerging markets.S. will be in accordance with the provisions of the SEBI (Employee Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines. and SBI Holdings. The fund will invest primarily in unlisted. underwriting best practices. SBI Capital Markets Ltd. This relationship with the Government is instrumental in attracting new customers. Strengths and Strategy The Bank’s key strengths are its: • • • • • Relationship with the Government.” Government Pension Fund The Bank is one of the only three entities (the other two being UTI AMC and Life Insurance Corporation of India) selected by the Pension Fund Regulatory and Development Authority (“PFRDA”) for sponsoring Pension Fund Managers (“PFM”) under the New Pension Scheme. Clinical Research Outsourcing. 1999 and all the issuances of shares will be done in compliance with the guidelines/regulations/circulars at that time. has entered into a 50% joint venture partnership with Japan's SBI Holdings. Inc. “Risk Factors -. Once the PFRDA Bill is passed.$ 3 million to U.per Equity Share. a wholly owned subsidiary to undertake activities relating to Points of Presence (“POP”) and PFM. to launch a U. online and mobile businesses. including administering payments and loans to employees and offering life insurance and 69 .S. high growth companies through initial investments ranging from U. General Insurance The Bank recently invited expressions of interest for its proposed entry into the non-life insurance segment. Market standing.Shareholders will experience additional dilution as a result of the Bank’s planned Employee Share Purchase Scheme.$ 10 million. relevant knowledge of product development.

loan funding (education loans. 3. The Bank believes that. as on September 30. as on September 30. the Bank has a leading market position in several of its business segments. As on March 31. The Bank is continuing to enhance its brand by making significant investments in the products and services it offers to its customers in and outside of India. The Bank is the only bank in India with a mandate from the Pension Fund Regulatory and Development Authority (“PFRDA”) to hold the pension funds for the benefit of Government employees.2 billion.5 billion and Rs. the demand for the Bank’s services from the Government. agricultural. resulting in a large. 2007. such as retail. The Bank had issued 24. The assets of the Bank are diversified across business segments. 2007. 2007. while remaining focused on its profitability.072 offices in India as of 31 December. diverse and growing customer base The Bank is India’s largest bank.321. merchant banking. including deposits and advances. as the Indian economy and financial markets continue to grow. 2007. In addition.870. industries. industrial and retail customers throughout India. the first bank to be set up in British India to meet the needs of the mercantile community. as well as commercial. As a result of its historic position in India. strengthen low cost alternative channels to improve customer service and redesign all key processes in important areas. The Bank has commenced several initiatives to achieve this strategy: 70 . 4. It is also India’s largest retail bank in terms of both assets and liabilities. The Bank’s strategy is to enhance its position as the largest provider of banking and other financial services in India. 2007. internet banking. credit cards and payment services.351. the Bank expects its pension assets to increase as the Government and additional employers in India offer new or larger defined contribution retirement plans.1% of the Bank’s loan portfolio consisted of loans to PSEs. building stronger relationships with existing customers and providing all customers with high quality service across multiple delivery channels in the shortest time possible. which amounted to Rs. totalling Rs. 31. foreign exchange trading. life insurance. institutions and state-owned enterprises.5% of the Bank’s loan portfolio consisted of food credit (including loans to agencies of the Government and State governments for procurement and sale of food grain) and 8. and number of accounts (approximately 71 million). which gives the Bank stability. corporate and international banking. the Bank is increasing its emphasis on a relationship management model in order to provide more tailored products and services. 2007. 3. the Bank has instituted a Business Process Re-engineering Project (“BPR”) in order to transform itself into a world class financial institution by proactively reaching out to acquire new customers. See “Industry Overview — Pension Reforms” for a description of pension schemes in India. As the Government is moving from defined contribution plans to self contribution. For example. state governments and PSEs will also increase.pension plans. The Bank’s extensive branch network allows it to provide banking services to a wide variety of customers. and groups. the Bank has launched a payment gateway system to increase the speed and decrease the costs of fund transfers between customers.17 million debit cards as of December 31. The Bank believes it is India’s largest provider of education loans. home loans and auto-loans). As a result of its extensive network and product offerings. The Bank also has the largest automatic teller machine (“ATM”) network in India with 5. Market standing The origins of the State Bank of India date back to the establishment of the Bank of Calcutta (later renamed the Bank of Bengal) in 1806. In addition. 6. agricultural and micro-finance banking products and project finance loans. including large corporations. the Bank’s comprehensive product and service offerings provide the Bank with numerous opportunities for cross-selling. Some BPR initiatives include the creation of product/customer-focused sales forces to aggressively promote the Bank’s products so as to increase market penetration.4 billion respectively. with 10. Moreover. credit cards. Extensive branch network and portfolio of products and services. the Bank is able to meet its customers’ diverse banking needs throughout India. third largest provider of automobile loans and third largest provider of home loans. especially for its key corporate and mid-corporate customers. The Bank also has the largest deposit and total assets base in India. secured and unsecured loans. the Bank offers a full range of banking products and services including short-term and long-term deposits.577 ATMs as of December. Finally.

roads. See “– Information Technology Systems and Infrastructure — IT-based products and development.P. petroleum. The Bank intends to grow its business through further overseas expansion. This low level of NPAs is due to the Bank’s rigorous risk management policies and procedures. primarily to meet the growing needs of Indian corporates operating overseas as well as non-resident Indians living abroad. The Bank is committed to its ongoing effort of leveraging new technology to maximize efficiency in its operations and expanding the modes of delivery of its services. These opportunities include new developments in India. respectively. 2007. the provision of non-banking products and services. In addition.5% for the six-months ended September 30. the Bank is seeking strategic relationships with vehicle manufacturers and dealers to increase its car. telecom. allows the Bank to take advantage of significant growth opportunities in the market. 2007 of its gross and net advances. The Rural and Agri Business Group (subsequently renamed as Rural Business Group) was created in November 2006 to further coordinate the Bank’s business in this sector. foreign exchange. • • • • • Strong financial position and effective risk management The Bank has a strong cost-to-income ratio. The management team’s extensive and diverse expertise provides the Bank with a broad perspective from which it can make strategic management and operational decisions. The Bank continues to be heavily involved in the agriculture sector through its extensive rural and semi-urban branch network. To achieve this. Rural Business and Corporate Strategy and New Businesses have been created. thereby improving customer service and enhancing its product offerings.6%. Bhatt. gas. the Bank is continuing to invest in payment systems to make them more robust and efficient. merchant acquiring business. the Bank plans to expand its existing ATM and internet banking network as well as migrate all of its branches to the Core Banking Solution platform.• The Bank intends to increase its retail banking business by expanding its distribution network and through the growth of its product and customer base. credit structures and bond trading. custodial services and private equity and venture capital. For example. is considering equity investments in core sectors such as power. In addition. corporate and international banking. the Bank has recently undertaken or is planning to undertake the following initiatives within the next two fiscal years: mobile banking. who has over 30 years’ experience in banking. as measured by its capital adequacy ratio (which is higher than mandatory levels). The Bank’s executive committee members have on average more than 25 years’ banking and financial experience. the Bank’s capital position. under its proposed Private Equity and Venture Capital initiatives. the Bank expects that its central treasury hubs in Hong Kong and London will expand their foreign exchange and money-market activities to cover interest rate. respectively. Business Process Re-engineering 71 .9% and 1. including retail. specialised branches for agriculture and small-scale industries and new innovative products. two-wheeler and tractor loans. In addition. which was 54. and with reputable builders and construction agencies to increase its home loans base. oil. airports and hotels. Such services are increasingly sought after in India as a result of the lack of a national retirement savings plan. The balance of the senior management team has strengths in key areas. Lastly. during the past 12 months.” The Bank. The Bank is pursuing strategic relationships with corporate entities and government departments to provide financing products to their employees and customers. ports. as of September 30. including the management of pension funds. Chairman of the Bank. The Bank also plans to offer mobile banking services to individuals in rural and semi-urban areas of India. several new positions in departments such as Global Markets. Under the guidance of the New Businesses department. Experienced management team The Bank has an experienced management team led by Mr. enabling it to increase its penetration of existing customer segments. O. The Bank’s gross and net NPA were 2. The Bank has recently created a Corporate Strategy and New Business Group to focus on emerging opportunities. the provision of general and nonlife insurance products and financial advisory and wealth management services.

of approximately 456 relationship managers for personal banking and 105 relationship managers for medium enterprises. Relationship mangers have been a feature of corporate banking for significant clients since May 2003. building stronger relationships with existing customers and providing all customers with the highest quality of service across multiple delivery channels in the shortest time possible. The Bank believes that the Core Banking Solution (which provides the capability of online real time transaction processing across the Bank’s branches) and BPR will create a new sales and service platform across its urban branch network. namely ATMs. In addition. and improve the Bank’s key business performance indicators. decreasing back office work at branches. providing improved service. 2007 approximately 60 home loan sales teams have been created to engage in door-to-door sales of home loans to targeted customers. Small and Medium Enterprises City Credit Center. internet banking. such as increases in the return-on-asset ratio. and CPCs including Currency Administration Cell. personalised services to mass affluent and medium enterprise customers are being promoted through the appointment. Small and Medium Enterprises. Relationship managers have been introduced for certain of the Bank’s customer segments. Finally. cost-to-income ratio and decrease in non-performing assets (“NPAs”). The Bank believes that BPR will redefine the Bank’s operating architecture with an aim to enhance the sales and service at its branches. drop-boxes. Home Loans Sales Team and Multi-Product Sales Team. in order to transform itself into a world class financial institution by proactively reaching out to acquire new customers. Centralised Clearing Processing Center and Centralised Pension Processing Cell. The BPR initiatives include the establishment of: • • • • Grahak Mitras (customer greeting personnel) to help customers at the branch entry by providing basic information. Retail Assets CPCs. Relationship managers for Personal Banking. BPR. reducing operating costs. Liability CPC. The Bank’s branches will also be redesigned to provide better service for customers. In addition. boosting sales efforts and leveraging the strength of the existing branch network. all non-customer facing back office activities will be transferred from branches to Central Processing Centres (“CPCs”). as of December 31. 2007. The Bank expects that these initiatives will assist it in transforming its operating structure. and have now been introduced for mid-corporate banking customers. The Bank plans to transfer the majority of the transactions from branches to alternative service channels. mobile banking and call centres. As of December 31. Organisation of the Bank’s Business Groups 72 . Stressed Assets Resolution Center. approximately 214 multi-product sales teams have been created to sell product to small business enterprises and ‘personal’ segment loans (other than housing loans).The Bank has instituted a Business Process Re-engineering Project. Trade Finance CPC.

Corporate Accounts Group. Rural Business Group. human resources. these common services are organized on the basis of administrative units. inspection and audit.0 billion to the largest corporations in India. International Banking Group and Global Markets Group (previously the Treasury and Markets Group). The Bank is currently in the process of creating a Wholesale Banking Group. and SME Groups of the National Banking Group. Each zone covers approximately 150 branches. Government. Within the National Banking Group and Rural Business Group. The Bank expects this group to provide a wide range of banking services required by large organisations and institutions. National Banking Group. Corporate Banking The Corporate Banking Group provides corporate banking services to many of India’s most significant corporations and institutions. 5. fee and commission-based products and services. deposits and foreign exchange and derivatives.Chairman Global Markets Rural Business Corporate Banking National Banking International Banking Associates and Subsidiaries Rural Non-Farm Corporate Accounts Group Personal Banking Agriculture Project Finance & Leasing Government Foreign Offices and Subsidiaries Mid-Corporates Group Marketing and Cross-Selling Associates Banks and Subsidiaries SME SAMG Global and Domestic Treasury The Bank organizes its client relationships. the Personal Banking. The Associates and Subsidiaries Group manages the Bank’s investment in its Associate Banks and its other subsidiaries. which are referred to within the Bank as “circles.” Each circle serves as the geographic centre of approximately 600 to 800 branches and is sub-divided into four to five zones per circle. through business groups and strategic business units. marketing and product development.5 billion and Rs. Each customer is assigned a relationship manager. which together have the largest number of the Bank’s branches. The risk management department has risk officers and risk raters located at each circle headquarters as well as within the Mid-Corporate Group. The Corporate Banking Group’s customers span the range from mid-corporate clients with annual turnover of between Rs. from loan 73 . as well as internal. The Marketing and Cross Selling Group assists the business groups in cross-selling the products and services of the Bank’s subsidiaries and joint ventures. Its business groups are the Corporate Banking Group. and offers fund-based and non-fund-based products. and industrial relations. including state-owned enterprises. International Banking Group. A Deputy General Manager position (IT-Coordination) has been created at Corporate Center to prioritise and coordinate IT related issues among the various business groups with the IT department. and the Rural Business Group. who serves as a single point of contact for all of the customer’s banking needs. non-customer facing activities. The principal customer facing strategic business units and groups are the Corporate Accounts and Mid-Corporates Groups of the Corporate Banking Group. 0. IT. legal and human resources functions. The Bank’s administrative services and management.” “zones” and “branches. in each case reporting to Chief General Manager (Risk Management). including risk management. are common to all its business groups. The IT department provides support to all business groups.

The Bank provides a corporate internet banking facility. The relationship manager may also serve as the bridge to the Bank’s other product groups.” The Corporate Accounts Group’s corporate loan portfolio primarily consists of working capital finance and term loans for project and corporate finance. Interest rates on these facilities are linked to the State Bank Advance Rate (the benchmark rate at which the Bank may lend to its prime borrowers) or to other market related rates. offering centralised payment solutions. the Corporate Accounts Group aims to leverage its strong corporate relationships and increase the Bank’s market share in fund-based. which are developed and provided by the International Banking and Treasury Services Groups. while the Project Finance and Leasing Group appraises and provides specialist support to all high value projects (with project cost exceeding Rs. and electronic payments platforms. including RBI-permitted derivatives. bank guarantees. insurance companies. 10 million and above). other institutions and government departments. respectively. online tax payment. The Stressed Assets Management Group provides specialised internal support in managing and recovering the Bank’s high value NPAs (Rs. as well 74 . the Institutional Accounts Unit focuses exclusively on institutional accounts such as mutual funds. deferred payment guarantees. cash management services. Mid-Corporate Group. remittance and collection services. such as Personal Banking for the corporate’s management or employees or International Banking for export finance services. The Corporate Accounts Group offers its customers both fund based and non-fund-based facilities. Stressed Assets Management Group and Project Finance and Leasing Group. leveraging such relationships to maximize fee and commission income. corporate loans and export credit. deposits. with multi-level access and authorisation controls required by corporate customers. The Bank believes that banking services in the form of payment and collection solutions and liquidity management have become critical requirements of such customers. Through its customer relationship management approach. The most commonly used facilities are cash credits. who will continue to be a significant driver of both interest and fee and commission-based income. Within the Corporate Accounts Group. The Corporate Banking Group comprises four strategic business units — the Corporate Accounts Group. 2 billion) in which the Bank is involved. exploring new growth areas like cash management. fee and commission-based products and services. Corporate Accounts Group The Corporate Accounts Group focuses on the Bank’s prime corporate customers across India. working capital demand loans. bill discounting. term loans. The focus of the Corporate Banking Group is to go beyond traditional lending products by: • • • • emphasising relationship managers to deepen customer relationships and promote cross selling of the Group’s extensive range of products and services. The Corporate Account Group’s other delivery channels include the Bank’s extensive branch network. Non fund based products such as letters of credit. The Corporate Accounts and Mid-Corporate Groups service large Indian corporations and midcorporates. See”— Delivery Channels. Mumbai. Products offered to Corporate Account Group customers include loan products. headed by a relationship manager to coordinate its banking relationship with the Bank. and a broad range of foreign exchange and treasury services. where each client is assigned a dedicated accounts management team. and marketing derivatives products by taking advantage of the volatility in the currency markets and the consequent need by corporates to hedge their balance sheet risks.products and deposit accounts to international funding for cross-border transactions and interest rate and foreign exchange hedging products. credit cards. The Bank also believes that separate marketing and customer service departments are necessary in order to adequately meet the demands of this customer base. respectively. non-fund-based and fee based products. Chennai and Kolkata. Services are delivered through four branches dedicated exclusively to Corporate Accounts Group customers in Delhi.

the confirmation of export letters of credit. reduce costs and provide profit opportunities for the Bank’s customers by allowing for better liquidity management. Currently. the issuance of guarantees on behalf of domestic customers in favour of domestic and foreign beneficiaries.243 Bank branches connected through the Core Banking Solution. 75 . structuring and arranging the syndication of large financial transactions. which stands for “Funds Available in Shortest Time. total outstanding loans of the Corporate Accounts Group was Rs.7 billion in respect of fund-based products and Rs.303 branches as of December 31. Additionally.” Customers can use approximately 359 collecting centres throughout India. Corporate Cash Management The Bank provides cash management services to corporate customers under the brand name SBI FAST. The Bank handles bulk business for all Corporate Accounts Group customers across India by way of dividend warrant payments for companies. Principal products and services that the Bank offers specifically. Full reconciliation support. 2007. time-sensitive bulk payments to any beneficiary in India on behalf of the Bank’s corporate customers. with pooling facilities at various branches. SBI FAST also offers disbursement and payment services through a separate platform to facilitate payments and collections across the country at customers’ payment centres and plant locations. PSUs. As on September 30. 2007). Through SBI FAST. and on behalf of foreign correspondent banks to beneficiaries in India. more than 620 District Headquarters in India and an additional 40 business locations use this centralised cash management system. this strategic relationship has made a significant contribution to the Bank’s ability to cross-sell the products and services of its various business groups and subsidiaries. which are connected to the Bank’s central clearing centre in Mumbai. By leveraging the experience of SBI Capital Markets and the extensive customer relationships of the Bank. The Bank customizes the management information system reports to customers’ needs. enabling quick. funds are transferred directly to the customer’s main account at any branch that has implemented the Core Banking Solution (numbering 7. 381. These activities are all processed through the Bank’s own computerised network and also through the electronic payment gateways of the RBI. Monthly reports are also sent to customers through automatically generated email. and government departments. Detailed management information system reports covering a variety of banking information are made available on a daily basis to customers’ corporate head offices as well as to their local offices and representatives at the centres through automatically generated email.as end to end payment solutions are some of the sources of fee-based income. is provided centrally from the Bank’s hub in Mumbai by a dedicated team.. domestic and foreign bill discounting against letter of credit as well as non-letter of credit bills and similar services. from various collection centres on the same day that they are cleared at the collecting centres. 441. as well as bulk electronic salary payments of large corporates. This service aims to enhance liquidity. to Corporate Account Group customers are: Loan Syndication Through its subsidiary SBI Capital Markets Ltd. electronic payments may be made by the Bank on behalf of its customers to other banks’ branches across India. The Bank seeks to leverage these syndication capabilities to arrange project and corporate finance for its corporate customers and earn fee income. meaning the automatic reconciliation of payments and receipts effected by the customer. The payment solutions offered by the Bank as a part of corporate cash management make it possible for corporate customers to outsource their accounts payable to the Bank and have payments processed using electronically-based as well as paper products. although not exclusively. The Bank also acts as a refund bank for the Government tax authorities and is the exclusive refund bank in respect of income taxes. In addition to effecting payments to the 6. Trade Finance Trade finance services include the issuance and advising of domestic and foreign letters of credit. These activities all contribute to the Bank’s fee-based income. the Bank has developed significant syndication capabilities.5 billion in respect of non-fund-based products. the Bank handles bulk draft issuances for customers across the country.

Provide customized solutions to meet the financial requirements of mid-corporate clients. 0. The Bank expects that supply chain financing will enable it to leverage its links with existing Corporate Accounts Group customers. A typical relationship manager handles approximately 30 mid-corporate accounts depending on the manager’s location and is a customer’s central contact at the Bank. whether or not the vendors are already customers of the Bank. customers of the Mid-Corporate Group can be either the Industry Majors or the vendors or dealers.Trade finance services include a new IT-driven supply chain financing product being developed by the National Banking Group. in the form of wholesale and metal loans. although generally with less customisation. many of whom are listed on a domestic stock exchange.0 billion. Similar to the Corporate Accounts Group. A recent initiative is the formation in 2007 of the precious metals business unit within the MidCorporate Group. foreign exchange. Improve turn around time for credit delivery. Relationship managers provide a single point of contact for all mid-corporate customers. The Bank has established 28 branches that are dedicated exclusively to Mid-Corporate Group customers. The objectives of the Mid-Corporate Group are to: • • • • Focus the Bank’s attention on the banking requirements of mid-corporate clients. Supply chain financing is being marketed to corporates for use by their vendors. derivatives and trade finance. An example would be the cross-selling of retail banking services to the customer’s management or employees. mid-corporate and SME customer segments served by the Bank. and Develop teams well versed in credit. which are defined by the Bank as entities with annual turnover between Rs. The Bank believes that this market segment encompasses more than 10. Mid-sized corporate customers have been and continue to be an integral part of India’s economic development. the Mid-Corporate Group offers supply chain financing to leverage the Bank’s customer base by offering vendor and dealer financing to link the large corporate. This unit also serves the retail sector’s demand for portfolio diversification by offering precious metal products to that market through the Personal Banking Group.” Mid-Corporate Group The Mid-Corporate Group focuses on mid-corporate customers. Unlike customers of the Corporate Accounts Group. A relationship manager may also be approached by the specialised business units within the Bank for the purposes of cross-selling banking products or services to the relationship manager’s customers. referred to by the Bank as “Industry Majors. These relationship managers are expected to attract more banking business from high-end mid-corporate customers by building close relationships with existing customers. as well as a range of trade finance products. In addition to the branch network. The target vendors would typically be part of the SME or SSI customer base. See “— Small and Medium Sized Enterprises. 5. and familiarising customers with the various banking products and services offered by the Bank’s specialised business units. It is anticipated that this activity will bring into the Bank a number of new vendors who serve the Mid-Corporate and SME segments. as well as reaching out to potential customers. Relationship managers are assigned to all mid-corporate customers. the Bank services customers in these metropolitan centres by establishing sales hubs and centralised credit processing facilities. The focus of this business unit is to meet the demand for precious metals financing by midcorporate customers. has traditionally come from the Bank’s mid-sized customers such as jewellery firms and traders. High concentrations of these customers are located in 14 metropolitan centres.000 entities. as those products are used by Mid-Corporate customers.5 billion and Rs. Midcorporate customers located outside the Mid-Corporate Group’s geographic coverage area are served through the Bank’s branch network. or of interest rate and currency hedging products that are offered by the Global Markets Group. The Mid-Corporate Group offers the same banking services and products as the Corporate Accounts Group.” to offer financing services to the small and medium size vendors and dealers to such Industry Majors. and are served by the Bank’s extensive branch network. Demand for gold. Stressed Assets Management Group 76 .

control of the project reverts to the originating Group. The Bank has the largest branch and ATM network in India. metro. Project Finance and Leasing The Project Finance and Leasing Group provide specialist project evaluation services to the Bank’s customers. while customers in rural and semi-urban areas are serviced by the Rural Business Group (discussed below). approximately 71 million retail accounts. The National Banking Group services customers located in urban and metro areas.278 in rural and semi-urban areas. corporate banking products to the Bank’s corporate. 2007. and personal loans. or the Mid Corporate Group and banking services to the Government and state governments.0% of the project cost.299 of those in urban and metro areas. Corporate banking products and services offered by the National Banking Group are largely the same as those offered by the Corporate Banking Group. The Bank’s ATM network totalled 5.The Stressed Assets Management Group (“SAMG”) focuses on the resolution of NPAs of Rs. the National Banking Group and the Mid-Corporate Group interface with the customer in proposing project finance services. the Corporate Accounts Group. The SAMG operates from 10 branches throughout India where dedicated teams of specialists evaluate NPAs referred from other business units within the Bank (for example. The Corporate Accounts Group. of which 3. thereby giving the Bank’s customers access to over 16. the Bank goes beyond traditional banking services to provide access to fee and commission-based products such as life insurance and mutual funds as well as providing services tailored to non-resident Indians (“NRIs”). financial institutions or other entities. Leasing activities. the Bank offers a broad range of products and services to its retail customers. 20. are progressively being wound up and the Bank does not expect leasing to comprise a significant part of its activities in the future. mid-corporate and small enterprise customers that are not serviced by the Corporate Banking Group. The Bank also has bilateral sharing arrangements with 13 other banks for the sharing of ATM networks. deposit products. it had a total of 10. such as demand and time deposits and savings accounts. with debt exposure in excess of 25. which were started by the Bank in 1995. Personal Banking The Bank is the largest retail bank in India having. This unit has a particular focus on core infrastructure sectors of the Indian economy such as telecommunications. sanctioning and documentation of a project will generally be carried out by the Project Finance and Leasing business units. The project finance team examines projects whose total cost is at least Rs. with 3. the SAMG takes steps to recover the amounts due to the Bank either by compromising the claim or enforcing any security interests the Bank may have or selling the NPA to other banks. ports and urban infrastructure.0% of which were located in metro and urban areas.072 offices.577 ATMs across India as of December 31.” In addition. with 7. subsidiaries and joint ventures. roads.415 were in urban and metro areas (and therefore under the umbrella of the National Banking Group) and 6. In addition. 2007. bridges. If the NPAs are found ineligible for restructuring. and 2. spread out over 14 administrative circles with a network of 3. including lending products such as home finance loans. while the SAMG handles the NPAs in accordance with such policies. 10 million and above incurred in the Bank’s customer-facing business units. SMEs and Government Banking Unit. Geographic areas are classified as urban.2 billion.303 of those branches integrated through the Core Banking Solution. The National Banking Group comprises three customer-facing business units — Personal Banking. 2007. which will have booked the assets that may become NPAs). in both the banking and nonbanking sectors. although it has also expanded to corporate sectors such as steel and concrete.500 ATMs across India. Once the project risk has passed. oil and gas. and credit cards. 3. The Bank’s Credit Policy and Procedures Committee formulates NPA policy. as of September 30. 77 . automobile finance loans. and retail banking assets and liabilities of Rs. Together with its Associate Banks. As of December 31. See “Description of Assets and Liability Management and Risk Management of the Bank — Credit Management Policies and Procedure.415 offices as of December 31. 2007. for small value NPAs. 2 billion. while appraisals. rural or semi-urban by the RBI based on population.321.657 of which were in rural and semi-urban areas (servicing customers of the Rural Business Group). National Banking The National Banking Group provides a range of retail banking products to individuals through the Personal Banking unit. the SAMG may use outsourced recovery agents and resolution agents to assist its efforts to resolve NPAs.

Personal Loans Personal loans are general purpose loans for individuals.Specific customer segments include the high net worth and mass affluent. the Bank is also introducing more sophisticated products such as reverse mortgages and home equity loans. Recent initiatives include “SBI Tribal Plus” (special housing financing product for persons residing in the hill or tribal areas. Nearly 650.5% share of the home loan market. Other personal loan products are the “Xpress Credit” (pre-approved personal loans for employees of the Government (including State governments) and leading private sector enterprises). which are loans for the purchase of new and used cars. In addition to traditional lending and deposit products.000 customers across India as of September 30.0% of the personal banking loan portfolio of the Bank by total amounts outstanding. Products The Bank’s retail lending products include home. a priority banking service offered in select branches throughout India. home loans constituted more than 52. sterling and euro currencies. loans against financial securities (financing provided by way of overdrafts or demand loans. This category includes auto loans. the Bank is the largest provider of educational loans according to Indian Banks’ Association. Educational loans include such targeted products as “Nursing Plus” (loans to individuals for undertaking graduate and post-graduate courses in nursing from recognised institutes). which comprised 5. as of March 31. The card is available in U. 2007. “SBIVishesh” scheme. Home Loans The Bank is one of the top three providers of home loans within India (CRISIL Research Retail Finance — Housing Finance Update: May 2007). The Bank offers a wide range of personal loan products targeting specific customer segments or funding purposes. the Bank offers technology based payment products. with another 1. where land records are not available). with over two million salary accounts. In addition. In India.000 expected to be hired by March 2008. and salaried employees.000 customers qualify as high net worth or mass affluent on the basis of the value of their domestic deposits with the Bank. For domestic use. 78 . debentures and mutual funds) and the “Rent Plus Scheme” (securitisations of future rent receivables). in each case measured by amounts outstanding. “SBI Loans to Pensioners” (personal loans to pensioners of the Government (including State governments) and PSUs). Periodic payments such as salary may be loaded onto the card at any Bank branch connected to the Core Banking Solution. According to RBI data. The Bank believes home loans will continue to be a significant driver in the growth of its retail banking business. shares. 2007. auto and educational loans). As of December 31. approximately 170. term deposits and hybrid accounts that combine features of savings and term deposit accounts. 2007 were eligible for the Bank’s recently initiated high net worth and mass affluent banking offering. due to the expected housing shortage in India coupled with the rising affluence of the Indian population. dollars. the Bank had a 16. checking. jeeps and utility vehicles. Rupee prepaid cards are issued in association with VISA International. against the security of term deposits. In addition to home loans for the purpose of construction. and a 16. the Bank has a strong customer base of salaried employees. Deposit products offered to Personal Banking customers include savings. without a mortgage of the property) and “SBI Flexi” (housing loan with a portion at fixed rate and the remaining at floating rate). auto and personal loans. motorcycles and mopeds.03% of the personal banking loan portfolio of the Bank as of December 31. Of that number. Approximately 1. 2007. Nepal and Bhutan.S. as well as for two-wheel vehicles such as scooters. purchase and repair of personal residences. “SBI Freedom” (housing loan secured by liquid securities. with the funds available to cardholders immediately.400 customer relationship executives handle distribution and servicing for high net worth individuals and mass affluent customers.8% share of the personal loans market (which includes personal. the proceeds of which can be used at the borrower’s discretion. Funds can be withdrawn at VISAenabled ATMs and at VISA points of sale in India. The SBI Vishwa Yatra Foreign Travel Card is a prepaid card issued in association with VISA International that can be used to withdraw cash from VISA-enabled ATMs and to purchase goods and services from merchants and points of sales displaying the VISA logo. The Bank is also focusing on increasing the number of retail relationship managers to strengthen its franchise.

Accordingly. the Bank has begun to centralise credit processing for SMEs. and suppliers or vendors of various sizes that comprise the customer base of the SME Group. Although credit cards are marketed primarily by the Personal Banking unit. business to business payment solutions. Relationship managers are provided to high-end SMEs. letters of credit. For example. including the financing of selected vendors and dealers of the Bank’s corporate clients. linking customers of the Corporate Accounts Group. the Bank extends loans to 79 . This scheme is based on a scoring model system to simplify the approval process for loans up to Rs. they are operated by a subsidiary. current accounts. The Bank has simplified the credit appraisal process and reduced credit delivery time through its “SME Smart Score” scheme. In addition to traditional lending products. See “Distribution Channels — Credit Cards. SSI and SBF customers located in rural or semi-urban areas have access to the same products and services through the Rural Business Group. multi-city checks. As part of its BPR initiative. Further. detailing schemes and standards for lending to this sector. the Bank has dedicated specific resources to this customer segment. and cluster specific scoring models. business enterprises. the Bank seeks to extend its reach to the supply chain partners of large corporations through supply chain financing. and financing on advantageous terms of the implementation of energy conservation measures. professionals and self-employed persons and small road transport operators. as these customers generally require more specialised attention. Small Business Finance The Bank finances small business activities for a large number of its SME customers. quicker processing and better risk management. industries relating to auto components. processing or preservation of goods and whose investment in plant and machinery does not exceed Rs. As part of its involvement in this sector.5 million for trade and services. These branches provide focused attention for SSIs through specially trained personnel whose sole responsibility is to look after SSI customers. rice mills and other industries. The Energy Efficiency Program offers a subsidised energy study to energy-intensive SMEs. activity. the Bank has increased penetration in. bank guarantees. the Bank has taken initiatives. SBF is undertaken under four broad categories: retail traders. This IT-based product provides an important cross-selling opportunity. the Bank has prepared a charter for Small Scale Industries. carried out by energy consultants employed by the Bank. The Bank believes that small and medium sized enterprises are a major driving force behind India’s recent economic success. among others. 5 million for manufacturing units and Rs. stand-by lines of credit. defined by the Bank as entities with an annual turnover of up to Rs. time and other deposits. in implementing an Energy Efficiency Program for its SME clients. Since its inception. highly customized products are not necessary to serve these customers. including advisory services and concessionary finance. Products and services offered specifically to SME include dedicated branch tellers. 50 million. with respect to retail trade. Through this project. 2.” Small and Medium Sized Enterprises The SME Group focuses on servicing the specific credit needs of small and medium enterprises (“SMEs”).The Personal Banking unit is the largest user of the ATM distribution channel and credit cards. enabling the Bank to offer greater uniformity in appraisals. 500 million. Because SMEs are large in number but generally share similar needs. The Bank also offers management consultancy services to SSIs who plan to upgrade their technology capabilities. Small Scale Industries SSI customers are businesses engaged in the manufacture. The Bank currently has 44 specialised SSI branches located in areas where there is a greater potential for SSI activity. as the Industry Majors.” Small Scale Industries and Small Business Finance SMEs are further subdivided into Small Scale Industries (“SSI”) and Small Business Finance (“SBF”) units. See “— Corporate Accounts Group — Trade Finance. specially tailored internet banking as well as working capital and term loans. the Bank has played and continues to play an important role in the development of SSIs and small businesses. The Bank has also developed industry.

0% of state government payments and receipts. SME. the Bank remits funds deposited by departments such as post & telecommunications. which are persons appointed by the Bank. to a much smaller extent. SSI and SBF products and services as those of the National Banking Group. Further. 2007. including through other entities. renovation and repair of equipment. The Bank collects government revenues by way of taxes such as central excise and service taxes through its branches. approximately 66. irrespective of the transaction amount. For the year ended March 31. The Bank is currently pilot testing a business correspondent relationship with India Post. 2007. as defined by the RBI. The Bank acts as agent for the receipt and payment of government transactions. The Bank is developing alternative delivery channels for banking services and products through business facilitators and business correspondents. the Bank has set up branches focusing on products important to rural customers such as savings and term deposits. to a population with significant illiteracy rates. The Rural Business Group was formed in November 2006 and focuses on developing innovative and effective modes of delivering banking services to all customers located in the rural and semiurban areas of India. have been regrouped under the Rural Banking (Non-farm) business unit. previously handled at the national level. The Bank also handles government payment functions through its branches. the Bank handled approximately 52. in addition to the other corporate and retail products and services offered by the National Banking Group. other than pension payments.657 offices located in rural and semi-urban areas as of December 31. The Rural Business Group is subdivided into two business units — Rural Banking (Non-farm) and Agriculture. railways. made by the Bank are calculated as a fixed percentage of the payment amount. Receipts and pension payments made by the Bank are subject to a fixed fee per transaction. The Bank also offers working capital products as well as loans for the purchase. The Bank is also in the process of rolling out services through business facilitators.0% of Government aggregate payments and receipts. and approximately 62. Rural Business The Bank services customers located in rural and semi-urban areas through the largest branch and ATM network in India. The Bank earns commission income on the payment services it provides. fees for payments.0% of the Bank’s branch network was in semi-urban and rural areas. The Bank serves its rural clients through an extensive network of 6. Rural housing and micro finance.retail traders who act as a link between the manufacturers of goods or commodities and the consumer. will have their credit needs assessed by the Mid-Corporate Group). These branches service all customer segments that are present in their geographic coverage area. Banking products and services provided to customers of the Rural Business Group generally include all corporate and retail products and services that are provided by the National Banking Group. 80 . and are provided to the same demographic customer groups as are served by the National Banking Group. and therefore views rural banking as one of the key drivers of future growth. As of December 31. To cater to customer needs. from personal banking clients to mid-corporate clients (who. Rural banking requires an innovative approach in respect of delivery of services in remote areas. defence and other government departments. In addition. and a large number of small-value transactions. including pension payments and expenditures payments of various ministries. Rural Banking (Non-farm) The Bank believes that the rural areas of India are greatly underserved by the financial sector. Government Banking The Bank handles government transactions as an agent for the Government (including RBI) and various state governments. 2007. although serviced at a rural branch. life insurance and remittance services. such as non-governmental organisations and micro finance institutions located in areas where the Bank does not yet have a physical presence. whereby India Post will be able to take deposits and permit cash withdrawals through smart cards. small business financing. Branches located in rural and semi-urban areas distribute the same personal banking. the Rural Business Group provides sophisticated corporate products and services to mid-corporate customers that are located outside the geographic areas served by the Mid-Corporate Group of Corporate Banking. The Bank is testing these operations in seven states with an intention to expand into additional states in the near future.

generally by enforcing on the underlying collateral securing the loans. however. a kiosk project that will allow for access to more remote areas as well as a Smart Card program that allows rural customers to access basic banking services through business correspondents without meeting the minimum deposit requirements for accounts with the Bank.” Agriculture Since its inception. and. As in its other lending operations. depositing the collective savings with the Bank. trading and processing. Global Markets 81 . encompassing 40 to 45 branches. The Bank has moved beyond traditional banking to support grass-roots initiatives to encourage access to finance for the poorest of the rural population. fisheries. serve as the basis for establishing group dynamics and a culture of savings within the community. comprising approximately 15 to 20 families. The Bank has provided advances of Rs. as well as activities linked to agriculture such as storage.such as insurance agents or non-governmental organisations.56 billion to approximately 936.000 SHGs in India as of December 31. These initiatives include a user-friendly ATM network that now spans more than 485 rural locations. farm equipment financing. The Bank believes that these groups. The Bank seeks to overcome this challenge through IT-based initiatives targeted specifically at the rural customer. Micro finance loans extended by the Bank form part of the Bank’s directed lending obligations. tube wells and irrigation projects. Traditional micro finance in India has been done through the use of intermediary organisations. By eliminating intermediaries. thereby allowing them to offer more customized products to their clients. given the Bank’s own extensive branch network and its initiatives to broaden delivery channels for banking services. The SHG forms a savings unit. 2007. plantation crops. digging of wells. recovery agents are increasingly being used by the Bank to address debt collection. adopts a village in order to build banking relationships there as well as to support integrated development of the village. In addition. The Bank is a market leader in SHG lending in India. The Bank in turn lends to the SHG an amount of up to four times the SHG’s savings. has significantly contributed to the credit growth in rural areas and the improvement in the standard of living of the rural poor. floriculture. farm mechanisation. which the SHG lends out to its members at its sole discretion. became the first commercial bank in India to be assigned the status of “Self Help Promoting” institution by the National Bank for Agriculture and Rural Development. including financing to Self Help Groups (“SHGs”). to market asset and liability products to customers on a commission basis. Initiatives aimed at strengthening ties with the farming community include attending farmers’ meetings and Farmer’s Club events as well as a village adoption program whereby each region. livestock management and silk worm farming. The Bank had 424 agricultural development branches as of September 30. The Bank’s agricultural development branches offer products such as crop financing. These are specialised branches located throughout India used exclusively for the development of the agriculture sector and its related industries. Lending by individual branches under certain loan programs is linked to NPA levels. so that NPA levels exceeding certain benchmarks will lead to a tightening of certain credit lines. the Bank has played and continues to play an important role in the development of Indian agriculture. See “Regulations and Policies — RBI Regulations —Directed Lending. The Bank also finances activities such as dairy production. The Bank believes. the Bank expects to be able to cultivate relationships with the SHGs and ultimately assist in the development of micro finance projects into micro enterprises. 46. The Bank’s micro finance initiatives are accomplished primarily through the use of SHGs. land development and reclamation. 2007. that these organisations are unnecessary. Rural banking offers a particular challenge due to the low margin transactions that typically occur at rural branches. in 2006. such as the strategic alliance with India Post discussed above. The Bank believes that micro finance. and agricultural value chain financing and serve customers involved in a wide range of agricultural activities such as crop production. The Bank believes that the clients it assists through micro finance initiatives will become loyal customers in the future. the Bank uses a scoring model for credit assessment of borrowers under several of its programs. The Bank’s focus has been on cultivating direct relationships with the farmers. each of which is represented by one family member (who is generally a woman). horticulture.

project export finance. loan syndications. The Bank offers all RBI permitted derivative structures to its clients including: foreign exchange forward contracts. 2007. The Bank also seeks to optimise profits from its trading portfolio by taking advantage of market opportunities. To a lesser extent. valuation and portfolio risk management. The International Banking Group’s core activity is to provide these services to Indian corporates doing business outside of India. short-term financing. options. As on September 30.0% of the Bank’s total trading and available for sale securities portfolio.117 billion in its foreign exchange business for foreign trade. The Bank also sells RBI permitted hedging products to the Bank’s large and medium sized corporate customers through seven Regional Treasury Marketing Units which work in close coordination with the relationship managers in the Mid-Corporate and Corporate Accounts Groups. letters of credit and guarantees. occasionally running a position backed by merchant transactions. and currency and interest rate swaps. engages in proprietary trading of currencies and offers foreign exchange and risk hedging derivative products to its customers. as well as the raising of funds and other borrowings outside India. The rate of CRR to be maintained by banks on their total demand and time liabilities is 7. the RBI does not pay any interest on the CRR balances.” Due to these regulatory reserve requirements. 2006 which came into force on April 1. Through its treasury operations. The Bank’s trading and securities portfolio includes its regulatory portfolio.0% market share calculated based on DGCIS trade data. and foreign companies with operations inside of India. as there is no restriction on active management of the regulatory portfolio. The Bank’s investment and market risk policies are approved by the Central Board. the Bank also maintains proprietary trading portfolios in domestic debt and equity securities and in foreign currency assets. cash and Government securities are netted by the RBI through the Clearing Corporation of India Ltd. 1. Government securities (excluding securities purchased under agreements to resell) constituted 67. As part of its treasury activities. The Bank undertakes foreign exchange sales and purchases on behalf of its customers through cover operations. the International Banking Group also seeks to service corporate and individual customers outside India through the Bank’s branches and subsidiaries. See “Industry Overview — RTGS Implementation in India. See “Regulations and Policies — Legal Reserve Requirement. the Bank recorded a total turnover of Rs. The treasury also handles equity trading for the Bank’s trading and banking books. and collection of documentary credits and remittances. accounting. under the delivery versus payment mechanism. The Bank maintains its statutory liquidity requirement through a portfolio of Government securities that it actively manages to optimise yield and benefit from price movements. 2007. the Bank is required to maintain 25. However. the Bank manages its required regulatory reserves and investment portfolio with a view to maximising efficiency and return on capital. 2007. The RBI may prescribe the Cash Reserve Ratio (“CRR”) for scheduled commercial banks without any floor or ceiling rate. representing an estimated 27.6 billion in its trading portfolio as on September 30.0% of its net demand and time liabilities by way of approved securities. as well as NRIs conducting business in foreign markets. The Bank has implemented treasury solutions software that facilitates online trading. 2007. The International Banking Group’s customers span the range from India’s largest corporates to individuals. 82 . The Bank had outstanding Government securities worth Rs. The Treasury Group engages in domestic and foreign exchange operations from its main office in Mumbai. In view of section 3 of the Reserve Bank of India (Amendment) Act. Under the RBI’s statutory liquidity ratio requirement for Indian banks. A real time gross settlement system (“RTGS”) for inter-bank transfers has also been implemented under the direction of the RBI.” International Banking The Bank’s international banking products and services include corporate lending. a substantial portion of the Bank’s trading and securities portfolio consists of Government securities.The Bank’s Global Markets Group (previously known as the Treasury and Markets Group) manages its domestic liquidity and foreign currency exposure. During the fiscal year 2007.5% as of November 10. such as Government securities (including state government securities).0% as from August 4. 2007. while the remainder included corporate debt securities and equity securities. which has since been raised to 7. 5.

S. 83 .463 checks in sterling. During the current fiscal year. Once projects are approved.5 billion. Of these. and the proceeds of 277.0 million. Project Export Finance The Bank is an active participant in the financing of project export activities by Indian corporates involving the bidding for and execution of turnkey and civil construction contracts and export of engineering goods on a deferred payment basis as well as service exports. This product allows customers to transmit remittances online. the Bank provides performance guarantees and other non-fund based products as well as construction funding if required by the customer. the Bank provides management and technological expertise to two exchange companies. worth a total of U. four subsidiaries and two joint ventures providing data transfer and limited transaction processing connectivity with the Bank’s domestic IT network. The Bank periodically revises its investment policy for foreign offices in line with international market practice and available products.S. GLS collected proceeds of 148. dollars and euros. the Bank supported 21 large projects and service export proposals aggregating Rs. 67. Besides meeting the foreign exchange and money market needs of their linked branches and undertaking proprietary trading in currencies. which need to be approved by a number of Indian government departments. In NRI services. the Bank participated in syndicated corporate loan transactions amounting to U. there were 76.S.1 billion were concluded and the remaining are in various stages of progress. and acts as a sponsor for its customers in respect of projects exceeding U. 2007. In addition. euro.$ 100 million (Rs. it is expected that the central treasury hubs will expand their activities to cover interest rate. Global Link Services (“GLS”). it is present in New York. the Bank handled 41 syndications representing a total of U. Hong Kong and the Maldives.$ 218. 4. In the six-month period ended September 30.$ 5. foreign exchange.9 billion and extended several bilateral corporate loans amounting to U. the Bank had a network of 84 overseas offices in 32 countries covering all major time zones. emphasising investments in the fixed income products of sovereign. The Bank has recently launched a web-based remittance initiative targeted at the sizeable NRI population in the United States and the United Kingdom. and have also been active in providing loans to Indian joint ventures or the wholly owned subsidiaries of Indian corporates which have acquired companies or set up new projects outside India.$ 552.S.As of December 31. and has also entered into arrangements with eight other exchange companies in the Gulf region to facilitate NRI and other customer remittances to India.000 export bills in U.S. The Bank provides bond guarantees for projects during the bidding stage. or entities providing customer to customer money transfer services. credit structures and bond trading. even where the remitting party is not an SBI customer. Singapore. 2007. The Bank has a significant global presence and is participating in syndicated loans to large international corporations both in the primary and secondary markets. Among its other locations. During the fiscal year 2007.0 billion). The Bank’s electronic export payment collection facility. and U.$ 22. It maintains correspondent relationships with 530 leading banks in 124 countries. The Bank’s foreign offices have had success in managing documentary credits. These hubs are intended to aggregate market risks and achieve economies of scale.633 export bill transactions and foreign currency checks worth U. 2007.3 billion in value terms.4 million. specific to the Bank’s international branches and subsidiaries. 4.6 billion.$ 13. In fiscal year 2007. has been installed at 33 foreign branches. London.S.S. The Bank’s emphasis on technology is a critical part of the international banking platform.$ 100 million (Rs. The Bank continues to be a leading arranger for syndicated corporate loans in foreign currencies for corporate customers in India. Frankfurt. generally clients of the Corporate Account Group and the Mid-Corporate Group.S. banking and corporate issuers. As of December 31.1 billion involving 9 countries. 30 syndications worth a total of U. The Bank can approve projects of up to U. on behalf of domestic branches of the Bank. A core banking software. the Bank syndicated loans for both project finance as well as overseas acquisitions by Indian corporates. for external commercial borrowings by Indian corporates were concluded. other overseas collections and inward remittances. Internet banking is provided to customers at all foreign offices and “Instant Transfers” are available from 18 countries. in Qatar and Oman.$ 8.S. As part of the centralisation of treasury activities of foreign offices. 13 bilateral deals. The Bank’s foreign offices have also achieved significant growth in the area of trade finance as the import and export trade of India has increased.0 billion).S. dollars totalling U. the Bank has set up central treasury hubs in Hong Kong and London. facilitates export payments.$ 20. 2007. For the period ended September 30.S.

BTN = Rs.. 2007.. 12 exchange bureaus.. 2007..924 2.. in millions.004350 as on September 30..... catering to the diversified banking needs of its customers.928 17..6206 as on September 30.. and loans against deposits.00 60.$ = Rs. IDR = Rs.... Of the total branches. the Corporate Banking Group had a network of 42 branches catering to high value corporate customers (which are customers other than customers of the Rural Business Group. 2007 IDR = Rs.00 50.. 2007 the Bank had an established network of 10. 131 satellite offices (Bank offices in rural areas offering all standard services but operating only a limited number of days per week). Bank Ltd..004350 as on September 30. 0....154 8.. 2007. four sub-offices (Bank offices in non-rural areas offering all standard services but operating only a limited number of days or hours per week). 2007 NPR = Rs. The National Banking Group along with the Rural Business Group had 14 administrative circles encompassing a network of 10.. 0.. 555 new domestic offices were opened.. 2007.. 2007. Nepal SBI Bank Ltd.....260 610 974 81 89 64 35 5 199 73 33 PT Bank Indo Monex(5) (8) Joint Ventures Bank of Bhutan(6) .Foreign Subsidiaries and Joint Ventures The following table sets out details of the Bank’s international subsidiaries and joint ventures outside India as of September 30.. Of this..030 offices. figures as of December 31...141 8.. figures as of July 16. operating during all working days) to service customers as of December 31. There are 103 personal banking branches located in metropolitan and urban areas.. 2007...00 100.162 17. except percentages) Foreign Subsidiaries SBI (Canada)(1) ... Up to December 31.. 2006.. In accordance with this goal....000 as on September 30. 2007.233 16. 1982 SBI (California)(2) ..00 61.8750 as on September 30. 2005.. 2007. and 341 extension counters (offering deposit and liability products.S.00 98.. 39. as well as branches handling exclusively home loans.. Moscow(9) _______________________ Notes: (1) (2) (3) (4) (5) (6) (7) (8) (9) 1970 1968 1993 2003 CAD = Rs..... MUR = Rs. ATM Services 84 . Stake acquired by the Bank on December 14.. 39. – 1999 1978 Indian Ocean Intl... Commercial Bank of India LLC.704 1..... Year of Establishment Bank’s Shareholding (%) Total Assets Owned Funds Net Profit Name (Rs. 0. Stake acquired by the Bank on April 19.(7) . U.090 1.. (4) 100. Delivery Channels The Bank is committed to bringing convenience and technology to its customers.00 20..00 20... the Bank’s delivery channels for its banking products and services include: Branch Network As of December 31.93 76. 110 were specialised branches catering to high net worth customers and the mass affluent customer segment. 1982 SBI Intl. 2007....419 991 760 678 1... (Mauritius) Ltd(3) As JV — 1989 As a Sub. which offered a wide range of services to high net worth and mass affluent individuals....8450 as on September 30.3175 as on September 30.159 2.072 offices (excluding administrative offices) across India. 2007 of fiscal year 2008. 1. 1..... SMEs and retail accounts).

issue standing instructions. The Bank’s internet banking solution is a comprehensive product for both retail and corporate use.000 customers in the corporate segment. providing its cardholders with access to the largest network in India. for a total of 8. Customers can make inter-branch transfer of funds to their other accounts and also to third party accounts. The Bank’s customers can conduct the following transactions free of charge at any one of the Bank’s ATMs across the country: cash withdrawal. payment of fees for selected schools and colleges.079 ATMs across the Group. mini-statement.500 ATMs in service as of December 31. The Bank’s ATM expansion drive was strengthened through a change in strategy. farmers. Internet banking has given the Bank a real-time transaction processing capability and has allowed the implementation of the Bank’s business initiatives in many areas such as railway and air ticket booking. fee payments and fund transfer. (“SBICPSL”).3 billion worth of cash withdrawals during the month of December 2007. The Bank also has dedicated internet banking for the corporate customers. pay credit card balances and set up SMS alerts for transaction information. and transfer of funds to multiple vendors at different locations. The Bank had issued 24. temple donations. trade stocks.onlinesbi. average transactions were 2. with a total of 33. including SMEs. 2007. 2007 in terms of number of credit cards issued in India. mobile recharge. approximately 6. All the Bank’s ATM cards also function as debit cards. which included improved marketing and customer education including: • • • segment specific cards for customer groups such as high net worth individuals. invest in mutual funds. 3. request check books. For the Group. Ltd. that include features specifically tailored to these clients. and SMEs. The Bank’s customers can check account balances.35 million ATM cards issued by the Group. balance enquiry. Value-added facilities such as payment of premiums on SBI Life Insurance Policies. including control and authorisation features. Internet banking for corporate customers includes online payment of customs tax and corporate income tax. On average. SBICPSL believes its estimated market share to be 16.4 billion per day during the month of December 2007. shopping malls and residential complexes. enhanced visibility of ATM machines. transfer of funds. Customers can also book rail tickets. bill payments and temple donation are available through the Bank’s ATMs. with over 18. such as in railway stations. invest and renew term deposits. SBI Credit Card account payments. and strategic positioning of ATMs. bank drafts and banker’s cheques.3% at March 31. the Bank’s ATMs transact 1. 2007. The Bank believes that ATMs are its most dynamic retail delivery channel today. as of December 31. railway freight payment and utility bill payment. pay utility bills and insurance premiums. vendor finance.868 branches provided internet banking service and were used by approximately 1. open new accounts. 85 . utility payments.577 Bank ATMs in India. The Bank has created a single ATM network across all of its subsidiaries and associates. and was the largest ATM network in the country. Credit cards are marketed primarily by the National Banking and Rural Business Groups. with cash withdrawals of Rs 4.5 million customers in the retail segment and approximately 77.67 million transactions daily involving approximately Rs. 2007. The Bank has bilateral arrangements with 13 other banks.com.17 million ATM cards as of December 31.25 million transactions per day. 2007. online tax payment. Credit Cards The Bank operates its credit card business through its subsidiary. Internet Banking As of December 31. An internet banking service is available at the Bank’s website: www. online payment of central railway freight. donate to religious organisations and pay income taxes online.The Bank is rapidly expanding its ATM network which included 5. SBI Cards and Payment Services Pvt. issuance of online bulk draft. mobile phone.

mobile phone. the State Bank of Saurashtra. Auto payment is also available for customers to set up payments such that the bill amount is withdrawn from the customer’s account each month without any action taken by the customer. though they are allowed the freedom to initiate their own product lines where they deem it necessary to meet the specific demands of their clients. SBI Life had 27. fund management. insurance and credit card bills.589. A scheme of merger has been submitted to the Government and the RBI and is subject to their approval. 2007.8 billion for the six-months ended September 30. Collectively.8 billion in total assets as of September 30. If this merger occurs. The Bank agrees to a budget and a business plan with each Associate Bank annually. investment in subsidiaries and joint ventures (both in India and abroad) are valued at historical cost after netting of provisions. if any. leasing and factoring services. 2007. the State Bank of Saurashtra will cease to exist as an entity. which holds a 26. 2.33% in deposits and 7. allows its customers to pay their telephone.0% stake as of the date of this Letter of Offer. 42. which comprised 5. SBI Life has been rated ‘AAA’ by CRISIL (affiliate of Standard and Poor’s) for financial strength. 2007. The Bank also provides financial services through its non-bank subsidiaries.3 billion for the year ended March 31. Insurance Activities SBI Life Insurance Company (“SBI Life”) was established in 2001 as a joint venture with Cardif SA (“Cardif”) of France.867 branches located in various regions in India as of September 30.68% in advances of all scheduled banks as of September 28. The Associate Banks generally offer the same products and services as the Bank offers. This allows SBI Life to leverage the combined strengths of the Group’s extensive branch network and Cardif’s expertise in bancassurance distribution. they were independent regional banks. For the half year ended September 30.2% of SBI Life’s premiums As of September 30. As a secondary distribution channel. The Bank exercises strategic control over each Associate Bank through the respective boards of directors. the Associate Banks accounted for Rs.6% of the Group’s total consolidated assets. 2007 and Rs. SBICI. electricity. 2007. The Bank has recently announced its intent to merge with one of its Associate Banks.6% of SBI Life’s premiums were sourced through bancassurance. 2007. and the SBI brand name is planned to replace existing State Bank of Saurashtra branding. 13. Cardif SA is a wholly owned subsidiary of BNP Paribas. SBI Life has written more than 6. 29. representing 28.2% of SBI Life’s premiums were sourced through these advisors. The Associate Banks operate on the same IT system as the Bank.Bill payment through the Bank’s e-payment systems. Prior to the Bank’s investment. SBI Life also sells to corporate customers. The Bank’s Associate Banks use the same platform to make internet banking services available to their customers. 2007. The Bank’s seven Associate Banks together had an estimated market share of 7. 2007. In the Bank’s financial statements. The Associate Banks have a total of 4. 86 . who sell life insurance through SBI Life branches. 2007.758 licensed advisors as of September 30. For the half year ended September 30. SBI Life distributes life insurance products through bank branches as its primary distribution channel. SBI Life had premium income of Rs. including merchant banking. Associate Banks and Subsidiaries in India The Bank has three wholly-owned and four majority-owned Associate Banks and a banking subsidiary. 52. apply the same accounting policies and are administered by senior level management appointed by the Bank. a part of internet banking. calculated based on RBI data. See “Regulations and Policies — Regulations Governing Insurance Companies” for a discussion of regulations applicable to insurance operations in India. The Associate Banks Department of the Bank coordinates the Bank’s management of the Associate Banks and subsidiaries. Associate Banks The Associate Banks were created by an Act of Parliament in 1959. donations to charitable institutions and college tuition electronically.84 million life insurance policies and has become one of the top private insurers in India in terms of number of lives covered.

9% from the period ended September 30...34% 0.606 3084 825 3........ respectively....93% 1. 10.33% 100....854 1....... 2006... 1993.....08% 0.. Total.... State Bank of Mysore ..124 312....297 242..........18% 12.. 2007: Name of the Bank Bank’s Ownership Deposits (%) Advances Operating Profit (Rs..10% 12.30% 0.356 433......703 115.......054 180. State Bank of Mysore . State Bank of Indore ............................ Although the Bank has participated in capital increases of certain of the Associate Banks in the past...........61% 0........Although there are no inter-company loans.. The Associate Banks recorded a growth in business during the period ended September 30..........44% Note: (1) Capital to risk asset ratio.. 2007...... over the previous year........... State Bank of Patiala. State Bank of Travancore ...............9% as of the end of the period ended September 30..........766 438.....76% 11..... _______________________ 0........30% 1.... The Bank acquired SBICI in January 1994.. As on September 30.. in millions) Net Profit State Bank of Bikaner and Jaipur ... State Bank of Indore ..... purchasing all of BCCI’s Indian operations following BCCI’s insolvency in England.....1% and 27...........527 213........360 2....9% as of September 30. it made no additional investments in any of the Associate Banks during fiscal year 2007 or the six-month period ended September 30....98% 0............30% 12............... which indicates the ratio of capital employed to the risk weighted assets of the bank and is computed in accordance with RBI guidelines......644 1317 2356 1159 1640 1720 289 1.060 1....480 2737 3.. SBICI SBI Commercial & International Bank Ltd...396 162......12% 12......... State Bank of Hyderabad . State Bank of Hyderabad ...541 10.. Average..07% 100................. The Associate Banks together reported net profit of Rs..18% 0.......00% 75. State Bank of Saurashtra................ State Bank of Travancore ...... 2007.76% 0.. (“SBICI”) is a wholly-owned banking subsidiary of the Bank established in Mumbai on October 7.938 2... Net NPA is defined as gross NPA (which is the aggregate of all NPAs) less provisions..8% as of the period ended September 30............557. 2007.. SBICI is engaged in standard retail and corporate banking operations with retail and corporate customer bases.......4% as of September 30..............79% 0.05% 92..... there are customary inter-bank drawing and deposit arrangements and short-term inter-bank lending transactions between the Bank and the Associate Banks.......................... 75......00% 98. The following tables set out the Bank’s shareholding and certain performance highlights of the Associate Banks as of September 30.......87% 12.......... 2007 with deposits and advances growing by 20..........0 billion during the period ended September 30......... 2007.......49% 12..................91% 0...... Net NPAs as a percentage of net advances decreased from 0... State Bank of Saurashtra................82% 1........... which was an increase of 16.....313 215.....00% 100.022 Name of the Bank Return on Average Assets Net NPA CRAR1 State Bank of Bikaner and Jaipur ........600 18...17% 0...00% 294........279 164.... the aggregate 87 .. Gross NPAs as a percentage of gross advances decreased from 2...... State Bank of Patiala...156 330..22% 0...... 2007...82% 13................3%........... 2006 to 1..........64% 1.............956 263.187 310.......... 2006 to 0....................118...

.. SBI Funds Management (International) Ltd......440 1.95% 427 3406 11........ . the Bank also has a network of non-bank subsidiaries and joint ventures engaged in businesses other than commercial banking.. 43.. 69........... At September 30.01 3.. 2007........... SBI CAP Trustee Co. 136.............. 3...........1) 0............ such non-bank subsidiaries and joint ventures accounted for Rs...................16% 500 1 .......... in millions) SBI Factors and Commercial Services Pvt.16% 86..... SBI CAP Ventures Ltd .278 31....0 0.............. if any............. securitisation) (Stock brokering) (Venture capital) (Financial services and advisory) SBI Mutual Fund Trustee Co Pvt Ltd......409 134 489 SBI Capital Markets Ltd... Group’s Investment Non-Banking Subsidiaries Group’s Ownership (%) Assets Net Profit Business Line (Rs................ Ltd.....88% 65.................00% 1... SBI DFHI Ltd .. debt and equity capital markets... in millions) SBI Life Insurance Company Ltd (Life insurance) ....00% 63......... investments in subsidiaries and joint ventures (both in India and abroad) are valued at historical cost net of provisions.....490 141 (640) 88 . during the period ended September 30.......16% 86.... 33...065................ Bank’s Ownership (%) Non-Banking Joint Ventures Investment Assets Net Profit (Rs....9 billion and Rs.... mergers and acquisitions......04%. _____________ Note: 100.5 16 818 28 0..9 billion in total assets............ 2007...3 2 (1) Shareholding amounts are the aggregate of the Bank’s direct and indirect shareholdings......16% 86... SBICAP (UK) Ltd .. Ltd (Credit cards) .....046 18....00% 60...... respectively.....7 829 SBI CAP Securities Ltd..........deposits and total advances of SBICI stood at Rs. 86.... trustee services) (Finance syndication.....................0 5. 86... Return on assets stood at 1... Ltd ........6 million and Rs........ In the Bank’s financial statements........4 28 6 7............... SBICI recorded an operating and net profit of Rs.. whereas net NPA and CRAR were 0.........00% 4....... infrastructure project advisory..28%..........6 50 48 (0.7 (Factoring services) (Primary dealer trading in securities...... Non-Bank Subsidiaries and Joint Ventures In addition to the Associate Banks..500 69........16% and 19..... 74.......8 million. SBI Cards and Payment Services Pvt.16% 500... ...... respectively..... advisory...4 billion respectively.. 4.......

The Bank’s shareholding in each Regional Rural Bank is limited to 35.. 2007.... 2007) to its Core Banking Solution.0% and each relevant state government holds 15. C-Edge Technologies Ltd ... small business and retail.... SBI Connect SBI Connect... 16 Regional Rural Banks covering over 104 districts in 16 states with a network of approximately 2..303 branches of the Bank and 5. The objective of the Bank’s IT policy is to achieve and maintain efficiency in internal operations and to meet customer and market expectations.. Since the first pilot branch went live in August 2003.GE Capital Business Process Management Services Pvt... planning and budgeting..... while disaster recovery sites are located some distance from the near recovery centres....0%. These responsibilities include approving annual business plans and quarterly monitoring of performance. Pvt.0% of the shares of each Regional Rural Bank........ The Bank believes that the Core Banking Solution will allow for efficient transaction handling through centralised processing.... prevention of frauds.. This back-up is accomplished through a three way disaster recovery: primary data centre....014 140 1.. is the foundation for the technology infrastructure within the Group.. SBI Fund Mgmt.... IT Infrastructure Core Banking Solution The Bank is moving towards a fully centralised database with its Core Banking Solution.... Information Technology Systems and Infrastructure The Bank’s IT infrastructure provides connectivity among the domestic and international network of branches.......... Regional Rural Banks The Bank has sponsored.00% 63.... in accordance with applicable legislation. the Government holds 50..... these banks have been transformed into commercial banks... near recovery centre and disaster recovery site.. inspection and audit. ______________ Note: 40..... lending and financing..00% 49.. training and development.... The Core Banking Solution is being implemented by Tata Consultancy Services.. Further..493 149 6 253 (1) Shareholding amounts are the aggregate of the Bank’s direct and indirect shareholdings. which have been reduced to a total of 22 following consolidation. the number of Bank sponsored Regional Rural Banks decreased from 25 to 16 during the fiscal year 2007.. facilitate uniform product offerings and assist in the introduction of innovative banking products.. The Bank and the 89 .... Ltd . The disaster recovery sites can host critical banking applications in the event of a disaster at the primary site.. a platform for the Bank’s connectivity which makes real-time transactions between branches possible.311 branches as of December 31........... Near recovery centres are located in proximity to primary data centres.. Regional Rural Banks cater to the banking needs of customers in rural and semi-urban areas and their operations are concentrated in one district or a cluster of districts in each state.... Following changes to the regulatory framework governing Regional Rural Banks.... it believes that the Core Banking Solution will enable the Bank to deliver multi-channel value-added services to customers... Ltd (Asset management) ...00% 108 49 189 2. the Bank has added more than 12..... each of them has retained separate databases. managerial assistance through secondment of high-level staff..... and guidance and support through the Bank’s Global Markets Group. to whom the Regional Rural Banks provide services such as deposit and time accounts... All of the Bank’s branches are expected to have completed the implementation of the Core Banking Solution by March 2008.. The Bank retains certain sponsor responsibilities. which provides the capability of online real-time transaction processing across the Bank’s branches that are included within this platform.... The Group had sponsored an aggregate of 44 Regional Rural Banks........ Although the Bank and the Associate Banks use the same Core Banking Solution application..012 branches of Associate Banks as of December 31. The Core Banking Solution includes a centralised processing centre and a disaster recovery site which provides back-up information for the entire project. Their target customer group is agricultural.000 branches (7..... Following Government consolidation of the sector...

g. both as to software and hardware. calculation of commissions and foreign exchange to accounting. 2007. attracts foreign and private banks to this sector. which might expose Indian banks to more intense competition from foreign banks. investing in technology and building on relationships with the Bank’s key customers. were connected by SBI Connect. • The Bank’s IT initiatives have played a significant role in transforming the Bank into a more responsive organisation in a constantly evolving competitive landscape. salary payments) through the Cash Management Module (also provided in bulk via the usual manual mode). and report on the entire transaction.W. See “Risk Factors — Risks Relating to the Bank’s Business — The Indian banking industry is very competitive and the Bank’s growth strategy depends on its ability to compete effectively. foreign banks and other public sector banks are the Bank’s main competitors. in particular in rural and semi-urban areas. The Bank believes that there is strong potential to increase this service among the Bank’s Mid-Corporate Group and SME customer base. followed closely by finance companies. Vendor financing for those vendors who serve the Bank’s corporate clients.Associate Banks. The regulations governing the Indian banking sector are expected to be liberalized in 2009. As of September 30. Centralised collection of bulk equated monthly instalments for the benefit of the Bank’s corporate customers (through the e-debit facility of the cash management product). coupled with a network of more than 6. depend on SBI Connect to support all their business critical applications such as Core Banking Solution. ATMs. trade finance services and cash management services. and 12. messages and report management. including the Bank’s foreign branches. CS Exim Bills is a trade finance system designed to address the data processing requirements of the Bank’s trade finance department. cash management software. 2007. more than 7. CSExim Bills automates the full range of trade finance activities from document preparation. the Bank has introduced the following technology based products: • • • Centralised payment services (e. the generation of S.F. These alternate delivery channels. Competition The Bank faces competition in all its principal areas of business.988 offices of the Group. mutual funds and investment banks. corporate email and intranet portals. The platform.822 branches and offices of the Bank. Trade Finance Project The Bank has purchased integrated trade finance solution software called “CS Exim Bills. this software had been installed in 453 branches. dividend warrant payments. rupee loans. each with distinct internet protocol addresses. IT based solutions for corporates including on-line payment of taxes and direct payment of freight to railways at the point of loading.800 branches. IT-based products and developments In an effort to remain technologically competitive with its peers.” Corporate Banking Corporate banking faces competition from foreign and private banks in such areas as pricing.I. was designed by Tata Consultancy Services. foreign currency loans. The lower risk rating of corporate clients as well as the higher income generating capacity due to the volume and diversity of their business.T. Private sector banks. The Bank seeks to gain a competitive advantage by offering innovative products and services. payment systems. The software also has a facility for customer access over the internet. The Bank also offers Internet Banking to customers of more than 5.” which has been customized for the Bank’s operations. record. Foreign banks also have the advantage of their home 90 . As of December 31.200 branches connected through the Core Banking Solution have increased the transaction processing capacity and efficiency of the Bank and is expected to continue to contribute substantially to the Bank’s growth. maximising the functions of its extensive branch network. Single entry input captures all the necessary data to process. trade finance software.

In addition. while centralizing their cash management in Mumbai. the Bank is able to process bulk direct debits. In recent years.303 branches connected through the Core Banking Solution covering more than 94. the Bank faces competition primarily from foreign and Indian commercial banks and housing finance companies. and geographic locations due to limitations of their smaller branch networks relative to Indian commercial banks. the Bank intends to focus on developing new fee-based services. call centres and the internet to reach customers. 2007.68% of the Bank’s business as of December 31. Treasury Operations The Bank is the market leader in India in treasury operations measured by the size of investment book. such as foreign exchange. direct credits and other centralised solutions. 91 . it intends to continue to pursue a multichannel distribution strategy using physical branches. this extensive network of branches connected to the Core Banking Solution has increased the Bank’s transaction processing capacity and efficiency. enabling customers to carry out their payments and collections across all of India. the volume of foreign exchange transactions handled. relying on its extensive branch network. the Bank believes it can build on the strength of its extensive geographic presence and reputation to continue to expand in these areas. Indian commercial banks generally have wider distribution networks than foreign banks. including letters of credit. The Bank has sought to capitalise on its extensive and diverse corporate relationships to gain individual customer accounts through payroll management products. as well as foreign banks with products and services targeted at non-resident Indians and Indian businesses and other service providers like remittance services. as well as through efficient and focused delivery of products and services. The Bank also intends to expand its banking operations to serve nonresident Indians as well as local clients in its host countries. but relatively weaker technology and marketing capability. traditional corporate banking faces competition from the disintermediation of financial products. The Bank intends to leverage its strong relationships with Indian corporates in its international business. such as high net worth individuals and mass affluent. since they offer tax advantages and have the capacity to earn competitive returns. and product innovation. there is intense competition in relation to simple treasury products. Retail Banking In the retail banking sector. without having to utilise the services of any intermediate banks in the payment chain. ATMs. This has been most noticeable in the area of trade finance services. However. With over 7. The Bank seeks to compete in this sector by offering a wide product portfolio through its extensive branch network and by leveraging its client relationships in diverse market and geographic segments. long-standing customer relationships. To further counter the downward pressure on margins. investment in mutual funds has become an increasingly viable alternative to traditional banking products. However. as well as wholesale banking services such as payment and collections services. In its international operations. with much larger resource raising abilities. such as vendor financing. the Bank believes its extensive lowcost deposit base provides it with a competitive advantage in meeting customers’ borrowing expectations. Furthermore. and the size of money market operations. The Corporate Accounts Group has been able to counter this competition through strong customer relationships. spot and forward sales and purchases. ensuring a high level of data privacy for corporate clients. in rural banking and micro finance. International Banking The Bank’s international strategy is focused on India-linked opportunities in the initial stages. In addition. Customers increasingly have multiple financing sources available to them beyond those generally provided by traditional banks.country connections. the Bank faces competition from other Indian banks with overseas operations. The Bank has sought to address the competitive pressure by offering a wider range of mutual fund products to its customers in addition to traditional deposits. The Bank believes that. it has been able to maintain its strong position within India. The Bank believes it benefits from economies of scale in developing and offering foreign exchange and money market products. Foreign banks typically focus on limited customer segments. This has resulted in competition for the deposit base of the Bank’s retail customers. In addition. strong sales teams. which in turn is putting pressure on margins.

Other public sector banks are the Bank’s principal competitor in handling Government and state government payments and receipts.Government Banking The RBI. ATMs and vehicles.0% were subordinate staff. there was minimal impact on both the Bank’s operation and reputation. computer hardware. 2007. In addition. engineering. and adversely affect the Bank’s operations. Legal and Regulatory Proceedings The Bank is involved in certain legal proceedings in the ordinary course of its business. business processes tailored over the course of long relationships to the unique demands of the various Government departments that the Bank deals with. 2006 to April 8. The Bank’s officers include professionals in business management. Employees As of September 30. the Bank had 179. such as labour strikes. computer science and economics. the Bank and other public sector banks conduct Government business in India.” As a result. The strike ended after a settlement was reached on the issues raised by the respective federations. These relate to matters such as promotion policies. law. currently. its perception as a Government Bank due to its historical association with handling Government business and staff that is trained and experienced in handling Government business. securities and precious metals and other valuables are covered against theft.0% of SBI’s employees. if adversely determined. which enables it to set aside sufficient funds to meet the remittance requirements of the Government on a recurring basis.The proposed merger of the Associate banks with the Bank’s may engender opposition against the Bank and lead to business disruptions. The Bank’s standard insurance policies cover for losses of or damage to property including furniture. Insurance The Bank maintains its own insurance policies and coverage that it deems to be appropriate. cash. fixtures. The Bank believes it has a competitive advantage in this activity due to its specially trained staff. Four new-generation private sector banks including AXIS Bank (formerly UTI Bank). However. Clerical employees from the Associates Bank’s as well as officers from the State Bank of Mysore. which. of these strikes.188 employees.0% were officers. and the depth of its funding base. Computerisation of branches and other IT initiatives have reduced employee workloads and allowed the Bank to reduce its overall workforce during the past five to six years despite growing its business. ICICI Bank and HDFC Bank have been authorised by the RBI for the revenue collection of Central Board of Excise and Customs (CBEC) and Central Board of Direct Taxes (CBDT) of Department of Revenue. Ministry of Finance. and the Government. IDBI Bank. The Bank aims to develop a collaborative culture and ongoing consultative process at various levels of administration within the Bank. Cash-in-transit. The All-India State Bank Officers’ Federation and the All-India SBI Staff Federation jointly went on strike from April 3. providing easy access for customers. See “Risk Factors.” which represents 98.0% were clerical and the remaining 26. However. 2006 demanding a review of the Bank’s pension scheme to bring it in line with industry standards. and is not aware of any current. its historical links with the Government. the Bank is not a party to any proceedings. During this period banking services were provided through various alternate delivery channels. accountancy. The Bank carries insurance coverage commensurate with its level of operations and risk perception. staff empowerment and training. pending or anticipated proceedings by governmental authorities or third parties. 92 . would have a material adverse effect on the Bank’s financial condition or results of operations. redeployment of staff and career progression. the Bank has also obtained a fidelity policy for employees and directors’ and officers’ liability insurance to cover the Bank’s directors and other key management members. Emergency services were also extended through the Associate Banks’ network. jointly went on strike in December 2007 to protest the Bank’s proposed merger of two Associate bank’s with the Bank. The Bank’s management believes that it has a good relationship with its staff. The Bank has entered into numerous settlements and memoranda of understanding with the “All India SBI Staff Federation. The Bank expects to address this growing competition by emphasising its extensive branch network. of whom approximately 30. approximately 44.

These facilities are located throughout India. 2007. and from September 1. to provide online training and assessment. adjustments to this scheme are undertaken on a regular basis to align with market conditions. the Bank believes the value of its properties. which is expected in 2008. In order to deal with this issue. Gurgaon. The Bank has also formulated an incentive scheme for operational employees in an effort to retain talented employees. 12 exchange bureaus and 131 satellite offices.577 ATMs. However. The Bank’s corporate office is located in Mumbai.0% of the Bank’s outstanding shares. On February 28.” The Act and its related rules and regulations provide the Government and the RBI with certain additional rights which may be used to influence the affairs of the Bank. the Government has been given rights and powers typically given to shareholders under typical corporate structures. The Government purchased RBI’s entire shareholding in the Bank on June 29. 2005 to October 31. are being carried on its balance sheet at values significantly below their current fair value. under the Act. State Bank Academy. Incentive schemes based on performance measurement have also been introduced. extension counters and ATMs. 341 extension counters and 5. The Act provides that the Government shall not hold less than 55. In addition to the branches. in consultation with the RBI and the Chairman of the Bank. The State Bank Staff College. As such. the Government has effective control over the affairs of the Bank. For example. See “Regulations and Policies — The State Bank of India Act. In addition. 2006. The Bank has implemented e-learning at the State Bank Academy.7%. approximately 800 are owned by the Bank. are located across India and are focused on creation and skills development relevant to the future of banking. Statutory Powers of the Government over SBI Because the Bank was created by statute. The Bank believes that its employees are its most valuable asset.0% of the Bank’s issued share capital. provide. Various initiatives such as retraining operational staff are under way. Properties The Bank’s principal network consists of 10. In addition. State Bank Institute of Rural Development and 45 Staff Training Centres. State Bank Institute of Information and Communication Management. the Bank has commercial premises housing 14 administrative circles. The Act expressly provides that the Bank shall be guided in matters of policy involving public interest by such direction as the Government may. Poaching of qualified employees has been a concern for the Bank in the past and will likely continue to be in the future. The Bank introduced an exit option scheme for officers which ran from April 29. Further. many of which have been in the Bank’s possession for a long period. the Government has the power to increase or reduce the authorised number of shares of the Bank. the Bank is recruiting staff for specialised functions. The Bank has also appointed a consultant to formulate a stock-option scheme. Relationship with the Government and the Reserve Bank of India The Bank has relationships with the Government and the RBI in several contexts as described below. it does not have articles of association. although the Bank’s affairs are managed by the Central Board. The Act also provides that no shareholder other than the Government shall be entitled to exercise voting rights in respect of any shares held in excess of 10. 2007 for non-officer staff.the introduction of BPR initiatives and focused efforts for marketing has resulted in an increased demand for new staff. The RBI also nominates a 93 . the Central Board consists of members directly appointed by the Government in consultation with the RBI as well as nominees from the Government and the RBI. Of the Bank’s properties. 2007. The performance management system in the Bank has been upgraded to focus on competency based assessments and career progression implications. all owned and operated by the Bank.072 offices. the finance minister of India announced that the entire shareholding of the RBI would be transferred to the Government. the Bank recruits staff at universities across India. The Bank’s premises and other fixed assets are accounted for on a historical cost basis in accordance with Indian GAAP. Government as Majority Shareholder The RBI was the Bank’s majority shareholder with a shareholding of approximately 59. The Bank faces intense competition for the recruitment and retention of its employees. 2006 to March 31. As the Bank’s controlling shareholder. The Bank has a human resources plan in place which will be reviewed once the Core Banking Solution and BPR initiative roll out is complete.

1% of the Bank’s loan portfolio was to PSEs. Pursuant to such instructions and notifications. The Government has the power to terminate any director’s service. under section 19(f) of the Act. In particular. See “Regulations and Policies — RBI Regulations. operations and financial condition. and approximately 8. It also has the power to license new banks which may compete with the Bank. the RBI defines the scope of the Bank’s activities and otherwise controls many factors affecting the Bank’s competitive position. PSEs and the various state governments transact business with the Bank on a regular basis. See “Regulations and Policies — RBI Regulations. It is the policy of the Bank not to enter into any transaction with PSEs unless the terms are no less favourable than those which would have been obtained by the Bank in the normal course of business. including the Bank. thereby giving the RBI considerable latitude over banks in general.” Government and the RBI as Regulator The Government and the RBI regulate the banking sector.director of the Central Board. which are typically broad in scope.5% of the Bank’s loan portfolio consisted of food credit (in the form of loans to agencies of the Government and state governments for procurement and sale of food grains). the Chairman and the two Managing Directors are directly appointed by the Government in consultation with the RBI. As on March 31. The Bank also transacts a significant portion of the banking needs of public sector enterprises (“PSEs”). 2007. 94 . the RBI has authority to issue instructions and notifications.” Government as Customer The Act specifically provides that the Bank shall act as the agent of the RBI for certain banking businesses of the Government and state governments. The Government. approximately 3.

As a financial institution engaged in lending. Market Risk Management Committee (“MRM”) and Operational Risk Management Committee (“ORMC”) are in place to address credit. the Bank is exposed to various kinds of risk. various independent Risk Committees. Board of Directors Risk Management Committee Credit Policy and Procedures Committee Credit Risk Management Risk Management Structure Asset Liability Management Market Risk Management Operational Risk Management The Bank operates an integrated. interest rate. namely the Credit Risk Management Committee (the “CRMC”). MRM and ORMC in place to monitor the credit. market risk (the possibility that changes in interest rates. The Bank has various policies and procedures in place to measure. In addition. In addition. 95 . Risk Based Supervision and a Risk Based Internal Audit at quarterly intervals. market. prices of debt securities and other financial contracts may have an adverse effect on the Bank’s financial condition) and operation risk (including risk arising from inadequate or failed operational processes. which the management believes is in line with international best practices. interest rate and operational risk matters.DESCRIPTION OF ASSETS AND LIABILITY MANAGEMENT AND RISK MANAGEMENT OF THE BANK The Bank is exposed to various risks that are an inherent part of any banking business. credit risk (the potential for loss due to the failure of a counterparty or borrower to meet its financial obligations). independent risk management system. The Central Board of Directors also reviews the progress in the implementation of Risk Management Systems. market risk. with the major risks being credit risk. market liquidity and operational risks. a Risk Management Committee of the Board (“RMCB”) oversees the policy and strategy for integrated risk management relating to various risk exposures of the Bank including credit. foreign exchange rates. interest rate risk (the risk associated with movements in interest rates). people and systems). in particular. manage and monitor these risks systematically across all its portfolios. The Risk Management Committee of the Central Board is in place to oversee the Bank’s policy and strategy for integrated risk management of the various risks faced by the Bank. interest rate and operational risk matters. These policies are reviewed by the Central Board from time to time. credit and operational risks. there are independent Risk Committees including the CRMC. liquidity risk (the possibility of not having the necessary funds to meet operational and debt servicing requirements). ALCO. liquidity. The risk philosophy of the Bank is guided by the twin objectives of enhancement of shareholder value and optimum allocation of capital. liquidity risk and operational risk. to address the risks faced in its banking activities including liquidity. Asset Liability Management Committee (“ALCO”). Critical issues and developments in their respective areas are referred to the Risk Management Committee. Asset Liability Management. liquidity. Further.

principally the failure to make required payments on loans or other obligations due to the Bank. The Bank’s policy is to restrict fund-based exposure to a particular industry to a maximum of 15.......... the Bank could consider increasing exposure to a borrower up to a maximum of a further 5.. It involves activities such as risk identification.... As per these norms.... These three departments act independently but coordinate with the business units to implement risk management policies... real estate. The Bank also has a Chief Credit and Risk Officer (“CCRO”) who is entrusted with further integrating risk management across the Bank........ Credit risk management aims at building up sound asset quality and the long-term profitability of the institution....0% of the Bank’s total domestic advances..... Maximum aggregate credit facilities in accordance with prudential norms of the RBI on exposures................. The following exposure levels are currently prescribed by the Bank: Individuals as borrowers . risk measurement.. 800 million (other than against specified securities for which there is no restriction).0% in case of infrastructure projects) of the Bank’s capital funds (Tier I and Tier II capital) although in exceptional circumstances and with the consent of the Central Board... The Credit Risk Management Department... Associations... the Market Risk Department and the Operational Risk Management Department all report directly to the CCRO through the Chief General Manager (Risk Management). Exposure to any single business group may not exceed 40.. etc..0% in case of infrastructure projects) of the Bank’s capital funds. This is an integral part of the Bank’s risk management system and helps identify early warning signals of potential problems.. the Bank restricts term loan exposure to infrastructure projects to 10.0% (extendable to 20.) .... The primary responsibility for the management of risk rests with the Central Board which has approved the policies and organisational structure for various risk management measures... Non-corporates (Partnerships........ 96 . The above ceiling will also be applicable to the aggregate of all facilities sanctioned to partnership firms which have identical partners.. The Bank believes it has the policies and procedures in place to manage its risks and anticipate future risk based on RBI guidelines and what management believes are international best practices.. subject to such borrower’s consent to appropriate disclosure in the Bank’s annual report. The Bank’s current credit policy prescribes that the Bank’s aggregate term loans with residual maturity of over three years should not in the aggregate exceed 35... Maximum aggregate credit facilities (fund based and nonfund based) of Rs. 200 million (other than against specified securities for which there is no restriction)..” including capital markets..The Bank’s exposure norms are in line with the norms laid down by the RBI for commercial banks and financial institutions.. In addition..0% (extendable to 50. Credit Risk Management The Bank is exposed to credit risk due to the possibility that a borrower or counter-party may fail to meet its obligations in accordance with agreed terms. The Bank’s exposure to certain “sensitive sectors.0% of the Bank’s total fund-based exposure.... maturity and large exposure aggregates by providing a centralised focus to its credit portfolio and instituting a suitable mechanism for its management Credit risk management uses credit audit and inspection systems to determine and manage risk exposure levels across the Bank........0% of the Bank’s total domestic advances. The Bank manages its portfolio of loan assets with a view to limiting concentrations in terms of risk quality.... exposure by way of direct assistance to any single borrower may not exceed 15.... and sensitive commodities (as prescribed by the RBI) are as follows: • Real estate: the Bank’s exposure shall not exceed 20.0% of the Bank’s capital funds... Corporates .. risk mitigation and risk-based pricing. geography industry. Maximum aggregate credit facilities (fund based and nonfund based) of Rs...0% of the total domestic advances of the Bank....

The Bank also maintains a reasonable level of investment in liquid securities which can be liquidated at short notice. Although not currently required by the RBI. balances with other banks and short-term securities help to meet the liquidity requirements of the Bank. The difference in the amount of assets and liabilities maturing or being repriced in any given time period gives the Bank an indication of the extent of exposure to potential impact on 97 . the Bank’s risk assessment model for manufacturing entities complies with the AIRB approach. The Asset Liability Management Committee(‘ALCO”) The Bank has an asset liability management policy which prescribes various prudential limits for liquidity risk and interest rate risk management.0% of its net worth as of the end of its previous fiscal year. ALCO manages and controls the structure of assets. These studies are also meant to provide information to help the Bank determine the merits in taking on additional exposure to various industries. To this end. An interest rate gap report is prepared by classifying all assets and liabilities into various time period categories according to contracted maturities or anticipated repricing dates. banks and primary dealers. certain liquidity ratios are examined as prescribed by the asset liability management policy to track the Bank’s liquidity position as of a particular date. These efforts have included the implementation of the risk management module of the Oracle financial services application. The Bank’s major exposures to individual borrowers and borrower groups are consolidated and disclosed to the Central Board at their regular meetings. Liquidity Risk Management Liquidity risk comprises the risk of not being able to raise necessary funds from the market to meet operational and debt servicing requirements. an asset liability management software solution. The Risk Management Department conducts studies on various industries to examine the quantitative and qualitative measures that should be considered in regard to the handling of the Bank’s current exposure to various industries. liquid assets in the form of cash. The Bank ensures that pro-active steps are taken to meet all impending liquidity requirements. The Bank has credit risk assessment models in place based on the activity of the borrower including manufacturing. These deposits provide a stable resource base. The Bank’s portfolio of traded and other debt securities and its loan portfolio is impacted by movements in interest rates. for strengthening the risk management process. Finally. The Bank monitors its liquidity position through a structural liquidity gap analysis carried out fortnightly in accordance with RBI guidelines on asset liability management. Borrowing is also timed in consideration of overall market liquidity and not just requirements of funds. It also ensures capital adequacy and sufficient liquidity. The liquidity position is also monitored every two weeks through a short-term dynamic liquidity analysis for the following three months based on business projections and a review of the contingency funding plan at the end of each quarter. An important objective of the Bank’s liquidity management is to maintain an optimal asset to liability maturity portfolio that minimizes liquidity risk while maximizing profit. providing a static view of the maturity and repricing characteristics of the Bank’s balance sheet positions.• • Sensitive commodities: the Bank’s exposure shall not exceed 5. trade. Exposure to fluctuations in interest rates is measured primarily by way of a gap analysis. The Bank has made significant efforts to improve its market risk management capabilities and fine-tune its management information systems. movements in domestic interest rates constitute the main source of interest rate risk. In addition. ALCO has the job of managing liquidity and interest rate risk. The Bank has an extensive branch network and therefore holds deposits from a large number of retail customers. Capital markets: the Bank’s exposure shall not exceed 40. Interest Rate Risk Management Since the Bank’s balance sheet consists predominantly of assets and liabilities denominated in Rupees. non-banking financial corporations. as applied to both fund-based and non-fund-based exposure to all forms of capital market products.0% of the Bank’s net worth as of the end of the Bank’s previous fiscal year. liabilities and interest rate sensitivity with a view to maximising profits.

measured. measure. create awareness of operational risk throughout the Bank. Operational Risk Management Operational risk is the risk of loss resulting from inadequate or failed internal processes. among others. The Value at Risk (“VAR”) framework is applied on an asset class basis as well as on a diversified portfolio level. people and systems or from external events. Derivatives are also used by the Bank both for trading as well as for hedging balance sheet items. exposure to interest rates is measured through a sensitivity analysis which examines the impact of interest rate movements on the Bank’s financial condition. see “Risk Factors — Risks Relating to the Bank’s Business — There is operational risk associated with the banking industry which. for entering into derivative transactions. procedures and guidelines. The Bank’s Operational Risk Management Policy is supplemented by operational systems. improve the quality of products and services as well as mitigate the impact and probability of loss. equity instruments and derivative instruments. Systems and External factors. Rupee dollar options and cross-currency options. The interest rate gap report is prepared monthly as of the last reporting Friday of each month. improve capital management. equity prices and commodity prices.repriced assets and liabilities. control and report on their significant operational risks in a manner that is consistent across the Bank. This policy applies to all business and functional areas within the Bank. when realised. Process. Operational risk includes legal risk but excludes strategic and reputational risk and it seeks to identify the cause of a loss. which are periodically updated by the Bank. may have an adverse impact on the Bank’s business. assess. Operational risk has four principal causes: People. VAR is monitored daily and limits are revised quarterly. including securities. For a discussion on the Bank’s vulnerability to operational risk. The VAR is defined as the predicted worst-case loss at a specified confidence level over a certain period of time. Risk measurement and monitoring entails the valuation and marking-to-market of market risk exposures. updating rates and models used for valuations and preparing simulations showing effects of possible changes in market conditions. foreign currency interest rate swaps and forward rate agreements. comply with regulations. The Bank currently deals in over-the counter (“OTC”) interest rate and currency derivatives. Currency derivatives offered by the Bank include currency swaps. Finally. in accordance with RBI requirements. Credit risk is controlled by entering into derivative transactions only with counterparties satisfying the criteria prescribed in the Policy. monitor. Market risks related to treasury operations are regularly and independently identified. assign risk ownership. 98 . The objective of the Bank’s Operational Risk Management Policy is to improve controls and mitigate risks. This policy requires that all functional areas. mitigate. Market risk arises with respect to many types of financial instruments. the monitoring function extends to the examination and approval of the Bank’s treasury group’s new products. Derivative transactions carry market risk. such as the probable loss the Bank may incur as a result of adverse movements in interest rates/exchange rates and credit risk or the probable loss the Bank may incur if the counterparties fail to meet their obligations. The objective of market risk management is to avoid excessive exposure of the Bank’s earnings and equity to loss and to reduce the Bank’s exposure to the volatility inherent in financial instruments. The model is validated monthly by back testing. In addition.” The Operational Risk Management Policy of the Bank establishes a risk framework that guides the Bank in the management of operational risk and allocation of capital for potential losses. foreign exchange contracts. and monitored by the Market Risk Management Department. The Bank’s policy for derivatives is approved by the Central Board and prescribes market risk parameters such as cut-loss triggers and open position limits as well as customer eligibility criteria including credit rating and tenure of relationship. as well as balance sheet gaps. departments and business units of the Bank identify. Interest rate derivatives offered by the Bank are Rupee interest rate swaps. Market Risk Management Market risk refers to potential losses arising from volatility in interest rates. foreign exchange rates.

Guidelines and instructions are also disseminated through Job Cards. the bank conducts central transaction processing. The Bank has also issued necessary instructions throughout the Bank regarding the delegation of financial powers. 99 . While the front office and the independent back offices report to the Head of Treasury. each Circle is assigned an internal audit team and concurrent auditors are assigned to all large branches. merchant and proprietary transactions. the foreign exchange desk operations consists of inter-bank. foreign exchange desk and the derivatives desk. The Bank’s front office Treasury operations are integrated and comprise the Rupee desk.” which contain detailed procedural guidelines for processing various banking transactions. which details sanctioning powers of various levels of officials for different types of financial transactions. a dealing manual and regulatory guidelines. and Training Programs. The front office is supported by Treasury Marketing Units located in seven centres across the country. settlement and accounting. options and structured products. back office and mid-office (Market Risk Management Department) are fully segregated. Dealers enter into trades with counterparties after analyzing market conditions and taking views on price movements. liquidity conditions and publicly available information. The derivatives operations include swaps. Inspection officials periodically monitor adherence to controls and procedure and report derivations to facilitate corrective action. ECirculars. Approximately two-thirds of the Bank’s branches have been brought under the Core banking System (“CBS”). Operational Controls and Procedures in Centralised Processing Cells (“CPCs”) In an effort to improve customer service at all centres. Amendments and modifications to these guidelines are implemented through circulars sent to all offices. The CPCs process clearing checks.The following measures are being used by the bank to control and mitigate operational risks: • • • • • • • Internal Controls and Systems Training Rewarded System Placement and Rotations of Staff Monitoring of Frauds Disciplinary Proceedings System Insurance Operational Controls and Procedures in the Bank The Bank has issued a “Book of Instructions. non-resident Indian services and automatic renewal of deposits. make inter-city check collections and engage in back office support for account opening. Trading is conducted in strict accordance with trading policies. The front office regularly discusses strategies on the basis of market forecasts. After completion of a deal. the deal then flows to the back office for validation. The Bank’s Inspection and Management Audit (“I&MA”) Department has Zonal Inspection Offices located throughout the country. A statutory audit is conducted by external auditors after the annual closing. Operational Systems and Controls in Treasury Treasury’s front office. the Market Risk Management Department functions independently from Treasury and is under the control of the Chief Risk Officer. standing instructions. While the Rupee desk operations consists of fixed income securities. The remaining branches are expected to be brought under the CBS in the near future. equities and inter-bank money markets. Besides I&MA officials.

KYC guidelines are covered as part of regular training program for various staff categories by the Bank Training Institutes. Procedures followed by the back offices to minimize operational risks in Treasury include: validation of deals entered into by the front office. 100 . A list of terrorist organisations. incorporating the following four key elements of the Policy: • • • • Customer Acceptance Policy Customer Identification Procedures Monitoring of Transactions Risk Management The Bank has acquired an AML software solution that is currently in the process of being implemented. The Bank is closely monitoring the implementation of the KYC guidelines and AML procedures through a system of education and monitoring by utilizing various training forums as well as an inspection and audit process. mitigants designed and measures of performance specified to ensure adherence. Risk and control self assessment exercises are conducted at branch level for the purpose of identifying and assessing operational risks. deal confirmations with counterparties. Besides the respective controllers. The Bank’s rural asset operations are spread across India. are promptly reported. accounting. Operational Controls and Procedures in Retail Asset Operations The Bank’s retail asset operations are spread out geographically across India and the Bank has Retail Assets CPCs in most cities across India. Operational risks pertaining to rural and agricultural branches are identified. is circulated to all branches of the Bank. These centres carry out disbursement of approved credit facilities. receipt and checking of broker contract notes. assist branch officers with the identification of customers and classification of customers by risk profile as well as monitoring and reporting of suspicious transactions. Kolkata and New Delhi. broker transaction limits. The Market Risk Management Department (“MRMD”) uses various tools for monitoring market risk. counterparty limits. Operational Controls and Procedures for Corporate Banking The Bank’s Corporate Accounts Group (“CAG”) operates a central functioning office at Mumbai as well as CAG branches at Chennai. Internal auditors monitor adherence to controls and procedures and report deviations to facilitate corrective action. This solution will enable automatic generation of various reports.The Treasury back office undertakes settlement of securities and funds based on guidelines stipulated by the Manual of Operations. The MRMD marks to market various positions and breaches. position limits. periodically updated by the United Nations. monitored. duration and VAR limits. monitoring of receipt and payments on due dates. A statutory audit is also conducted at branch level after the annual closing. Anti-Money Laundering Measures adopted by the Bank The Bank has established a policy implementing know your customer (“KYC”) standards and antimoney laundering (“AML”) Measures. assessed. gap limits. cash management and other general banking operations Operational Controls and Procedures for Rural Banking All rural branches are fully computerised. controlled and mitigated by the respective controlling offices. Mumbai. officials from the Bank’s Inspection & Audit Department and Circle Audit Departments also visit all rural branches periodically to conduct a detailed audit for monitoring the adherence to controls and procedures as well as report irregularities within the branches. Detailed procedural guidelines on KYC and AML Measures have been issued to all branches and offices of the Bank. if any. monitoring of transfer and receipt of securities into accounts where dematerialised securities are held (“demat accounts”) and reconciliation of accounts. These offices are jointly responsible for operations relating to trade finance. reconciliation and repayment management activities of retail assets. All operational and other risks are identified. These tools include: exposure limits.

It is guided by the best practices of commercial prudence. manage and control credit risk on a Bank-wide basis. delegations of credit approving powers. prudential limits on large credit exposures. covering 82 countries. for setting up country exposure limits. foreign exchange and money market activities are in place. Substantial counterparty bank limits for handling letters of credit. Credit Management Policies and Procedures Credit Policy and Procedures Committee The Credit Policy and Procedures Committee (“CPPC”) is headed by the Chairman of the Bank and tasked with handling issues relating to credit policy and procedures and to analyze. sectors and credit facilities Credit appraisal standards Documentation standards Pricing policy Review. loan review mechanisms. portfolio management.Country Risk and Bank Exposure Prudent exposure risk management is ensured by setting up appropriate bank exposure limits in accordance with the Bank’s approved model on a large number of foreign commercial banks. • • • • • • • • • • Board. Further. group of borrowers or specific industries or sectors. It also aims at striking a measured balance between underwriting assets of high quality and customer oriented selling. risk monitoring and evaluation. the credit policy sets out guidelines on the following aspects. Accordingly. risk concentrations. high standards of ethical norms and the requirement of national priorities. The credit policy recognises the need for measures aimed at better risk management and avoidance of concentration of credit risks. Exposure levels for industries. The Executive Committee of the Central Board (“ECCB”) has approved a country risk management policy. Different types of prudential exposure limits are set up for 569 banks worldwide. provisioning and regulatory and legal compliance. in line with RBI guidelines. limits have been prescribed for the Bank’s exposure to any single borrower. standards for loan collateral. financial covenants. bank guarantees. rating standards and benchmarks. which is approved by the Central Board. managing and monitoring credit risk and aims at making the systems and controls effective. All revisions in policies and procedures are carried out with the approval of the CPPC and the Central 101 . With this objective. pricing of loans. renewal and takeover of advances Credit monitoring and supervision Credit risk assessment NPA management Export credit Approach to lending to priority sectors and the services sector. the overall global risk for the Bank as a whole is monitored on a regular basis. in accordance with RBI and Government directives. The Bank’s credit risk management process is articulated in its credit policy. The CPPC formulates clear policies on standards for presentation of credit proposals. The credit policy embodies the Bank’s approach to sanctioning. asset concentrations.

The Bank’s retail credit product operations are sub-divided into various product lines. and 102 . loan applications are reviewed on the basis of the feasibility of the project from a technical. Approved facilities will lapse within three months of approval unless used within that time. Each product line is further sub-divided into separate sales. The Bank’s dedicated credit team has a deep understanding of the intricacies of various industries and is experienced in evaluating the business potential of companies. The Bank believes that this framework allows for risk identification. political risk and currency risk. financial and economic point of view. in addition to being evaluated according to the probability of recovery. The repayment mode is generally linked to the cash flow of the company. The Bank’s corporate term loans are generally available for periods of three to eight years. The credit team assesses the customer’s specific credit requirements and customizes financial solutions to suit the customer’s risk profile and its working capital cycle. The Bank has internal guidelines that limit the amounts of loans that can be authorised. Examples of the types of procedures in place for various finance divisions include: Corporate Finance Procedures As part of the corporate loan approval procedures. allocation and mitigation. Working Capital Finance Procedures The Bank carries out a detailed analysis of its borrowers’ working capital requirements. Project Finance and Leasing Procedures The Bank has a strong framework for the appraisal and execution of project finance and leasing proposals. industrial group and/or industry in light of prudential exposure norms. depending on the loan amount and other factors such as the nature of the credit. salaried or self employed individuals. as befit the exact requirements of the client and the risk context. working capital requirement and status of liquidity. rating of borrower or type of facilities. if any. such as type of borrower. At each level of authority. the Bank carries out a detailed analysis of funding requirements including normal capital expenditure. Retail Loan Procedures The Bank’s retail loan customers are typically middle or high-income. industry outlook and financial projections for the borrower company and/or project. In the case of overseas financing. The Bank has an established process for giving and collecting retail credits.Credit Approval and Monitoring The Bank’s credit approval process involves multiple levels of loan approval authority. the conditions of the transaction and whether or not the loan is secured. marketing and credit groups. The Bank disburses funds to a borrower in strict compliance with the terms of the sanction. an assessment of the relevant international market. after all necessary documentation has been executed. The Bank may also conduct a sensitivity analysis which includes variables such as debt servicing ratios and internal rates of return. The Bank’s corporate term loans may carry fixed or floating rates. an analysis of the benefits from the overseas venture likely to accrue to the Indian promoter. the Bank’s exposure to the company. the Bank requires a contribution from the borrower and the loans are secured by the asset financed. management structure. In most cases. appraisals also include an assessment of an overseas venture in terms of commercial risk. and compliance with regulatory guidelines. Specific approval must be sought from the original sanctioning authority. factoring in the cash flows generated by it. past financial performance and credit ratings. In conducting such a review the following factors are considered: the borrower’s profile. Loan amounts differ depending on the type of loan and certain other factors. Working capital finance limits are normally valid for one year and repayable on demand. The Bank’s credit analysts gauge the applicant’s particular funding requirements and evaluate the company’s creditworthiness. or as delegated in accordance with the policy approved by the Executive Committee of the Central Board (“ECCB”) or the Credit Policy and Procedures Committee (“CPPC”) before deviating from the terms of the sanction.

which is headed by a General Manager who reports to the Chief General Manager. advances and other risk exposures. The responsibility of conducting audit of branches under Group II and Group III rests with the General Managers of nine Zonal Inspection Offices spread over the entire country. on-site credit audits were conducted at 80 branches while off-site credit audits covered 303 branches. examines the probability of default. and a management audit. 50 million. The Project Finance and Leasing SBU is dedicated to lease financing for procuring equipment for projects or plants. 103 . which has been aligned with the risk focused internal audit. The audit. management audit has been reoriented to focus on the effectiveness of risk management in the processes and the procedures followed by the Bank. Management Audit With the introduction of risk focused internal audits. 216 BPR entities were audited. In addition. The Bank uses the credit audit to analyze risk and to initiate early remedial actions to improve the quality of the credit portfolio. The Bank. factoring in a timeframe for the venture to generate a stable revenue stream. The Bank typically undertakes leasing contracts with a minimum ticket size of Rs. Credit Audit Credit audit aims to achieve continuous improvement in the quality of the commercial credit portfolio of the Bank by critically examining individual commercial loans with exposures of Rs. All domestic branches have been divided into three groups on the basis of business profile and risk exposure. 2007. The Bank has 534 employees who perform its audit function.457 domestic branches have been inspected. 2007. The Bank enters into lease agreements as stand-alone contracts or as part of a structured package. The management audit policy document is also being revised in the light of the Bank’s focus on risk management as part of its transition to BASEL II norms.helps minimize residual risk. Inspection & Audit The inspection system plays an important and critical role in introducing international best practices in the internal audit function which is regarded as a critical component of corporate governance. an adjunct to risk based supervision in accordance with RBI directives. has been introduced in the Bank’s audit system. The inspection of branches is conducted periodically under guidance from the Audit Committee of the Board (“ACB”) which is well within RBI norms. a credit audit is conducted for units with large credit limits and a concurrent audit is carried out at branches with large deposit. During the period from April 1. 50 million and above.0% of the total net worth of the lessee. 2. The information systems audit of branches is handled by incorporating the necessary checklists and value statements in the audit report formats of the branches. Internal Controls The Bank has built-in internal control systems with well-defined responsibilities at each level. 2007 to September 30. generally restricted to 50. with repayment periods generally from five to ten years. Inspection and audit undertake a critical review of the entire working of audited units. An information systems audit is conducted at the centralised IT establishments. has stopped encouraging new leases due to a change in tax law resulting in unfavourable tax treatment with respect to such lease contracts. 2007. identifies risks and suggests risk mitigation measures. Project finance is typically structured as long-term loans. During the six-month period ended September 30. project term loans for medium sized projects and smaller clients are delivered through the Corporate Business Group and the NBG. The Bank carries out various audit streams covering different facets of internal audit requirement including an inspection and audit. As of September 30. The loans are approved on the basis of in-house appraisal of the cost and viability of the venture as well as the credit standing of promoters. Lease contracts are usually structured for tenure of five to seven years. Apart from this. The Bank has formed a dedicated Project Finance and Leasing SBU to assess credit proposals and extend term loans for large industrial and infrastructure projects. Maturity periods and repayment modes are structured in line with the specific aspects of each project and industry. Audit of 314 branches under Group I is conducted by Central Audit Unit at the Inspection Audit Department. Risk focused internal audit. however.

2 billion. An information systems audit of centralised IT has also been carried out.420 borrowers with an aggregate principal outstanding of Rs. Enforcement of Security Interests under the SARFAESI Act To assist banks and financial institutions in recovering their unpaid advances and to ensure financial discipline among borrowers.RBI Regulations. concurrent audit takes place in larger individual branches where daily activity at the branch is monitored.Concurrent Audit System Branches covered by the concurrent audit system are reviewed on a day-to-day basis in accordance with RBI directives. Information System Audit Since April 2006. an audit process for ten BPR entities has been developed and introduced. the Bank issued notices under the SARFAESI Act to 45. The Bank has also initiated aggressive one-time settlement measures to recover unpaid loans. (ii) the foreclosure of assets through a SC or RC. 7. 104 . The Bank has been applying all available methods for the recovery of unpaid advances. technology capabilities. 2008.420 borrowers on whom the Bank had served notice. 30-40% of the deposits and 60-70% of the advances are subjected to a concurrent audit. The Bank has conducted a self-assessment and has created a roadmap for migration to Basel II. A “Handbook on Self Audit of Information Systems” was introduced to facilitate the efficiency level of the Bank’s IT systems. foreign banks operating in India and Indian banks having operational presence outside India should adopt the Standardised Approach for credit risk and the Basic Indicator Approach for operational risk when computing their capital requirements under the revised framework. a committee of senior officers of the Bank has been formed to finalise the design. 70. The Bank implemented the Standardised Duration Method for Market Risk on March 31.6 billion has been recovered. In addition. all branches are subject to an Information Systems audit to assess IT related risks. including reporting the name of wilful defaulters to the RBI together with commencing the necessary steps for recovery. 2008. exclusive audit report formats. 2007. development and implementation of a loss database. were introduced. A review of the coverage of the branches made on September 30. Taking into account the processes involved in each of the ten entities. which will come into effect on March 31. the Government enacted the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (the “SARFAESI Act”) in December 2002. with appropriate audit queries. This Committee is in the process of deciding on various measures relating to the loss database. Basel II Framework In accordance with the guidelines issued by the RBI. The SARFAESI Act provides the legal framework for (i) the securitisation of financial assets by setting up a Securitisation Company (“SC”) or Reconstruction Company (“RC”). such as data to be collected by the business units. 2007 revealed that 363 branches in Group I & Group II categories and 109 “End State” model credit oriented BPR entities are identified for coverage under the concurrent audit system. As per RBI directives. and levels at which the procedures will initially be implemented.” As of September 30. Rs. See “Regulations and Policies. which is to be completed by March 31. 2006. risk assessment and risk governance structure to meet the requirements of the Advance Approaches as per Basel II. Of the 45. In addition. 2008. and (iii) the foreclosure of NPA accounts. as a prerequisite to the adoption of the advanced measurement approach required by Basel II. In accordance with RBI guidelines. Simultaneously. Audit of BPR Entities Following implementation of various BPR initiatives and as certain branches attain full BPR implementation. the Bank intends to migrate to Basel II standards with the Standardised Approach for credit risk and Basic Indicator approach for operational risk in accordance with Basel II by March 31. the Bank is updating and fine-tuning its systems and procedures. materiality thresholds.Enforcement of Security Interests Under the SARFAESI Act.

27 0. As of September 30. 2007: No. ARCIL then uses amounts recovered to redeem the security receipts issued to certain qualified institutional investors.42 0. (“ARCIL”). the RBI issued guidelines on the sale and purchase of NPAs amongst banks.06% Total loan assets which have been restructured Total sub-standard assets which have been restructured Total Doubtful assets which have been restructured Establishment of Asset Reconstruction Company The SARFAESI Act provides the framework for setting up asset reconstruction companies in India. 2007. See “Regulations relating to Sale of Assets to Asset Reconstruction Companies.Corporate Debt Restructuring Mechanism.76 0. Banks. 2007 to September 30. Financial Institutions and NBFCs The Bank has sold NPAs to reconstruction companies.22% 1. (Rs.27% 5.” The objectives of the CDRM are (i) to ensure a timely and transparent mechanism for restructuring corporate debts of viable entities affected by certain internal and external factors and (ii) to minimize losses to creditors and other stakeholders through an orderly and coordinated restructuring program.46 2.95% of the share capital of ARCIL.0 0.27% 5. financial institutions and NBFCs. Year ended March 31.” Pursuant to an amendment of these guidelines on October 4. In July 2005. has jointly promoted the Asset Reconstruction Company (India) Ltd.06 0. in billions. 2006 2007 % Rs. As a result. non-statutory mechanism based on debtor-creditor and inter-creditor agreements and operates outside the authority of the BIFR. No NPAs were sold in the period from March 31.02% 2005 5. 2005. ARCIL seeks to recover outstanding debts through restructuring.9 Consideration Received 1.2 8. the Bank owns 19.56% 9.54 0.40% 14. debt recovery tribunals or legal proceedings. financial institutions and NBFCs.3 Not Applicable 3.9 0. 2007.57 0. The CDRM is a voluntary. % Rs. of NPAs sold 114 131 90 Nil 335 Total Outstanding Principal Amount (Rs. See “Regulations and Policies -.28% 4.94 0. 2006 and 2007 and as a percentage of the Bank’s total loans on those dates. the Bank. Accordingly. the RBI has established the Corporate Debt Restructuring Mechanism ("CDRM"). settlement or enforcement of security interests. % Rs. in billions) 8.Corporate Debt Restructuring Mechanism In addition to the Government passing the SARFAESI Act. The following table shows loan assets subjected to restructuring during the years ended March 31. The following table sets out the sales of NPAs by the Bank to reconstruction companies as of September 30. 2007.8 Fiscal Year 2005 2006 2007 Six-months ended September 30. Sale of Assets to Asset Reconstruction Companies. ARCIL serves as the entity that acquires the NPAs of its parent banks at a mutually acceptable price against the issue of security receipts. the RBI has stipulated that banks should calculate the net present value of the estimated cash flows associated with the realisable value of the available securities net of the cost of realisation. the sale price of a NPA should generally not be lower than the net present value arrived at in the manner described above. except percentages) 48.8 Not Applicable 17.5 2. banks.17% 0.65 0. together with other major Indian banks. 2007 Total 105 .

have implemented Risk Management Policies which are in line with SBI’s policies to identify. of NPAs sold 290 20 Nil 310 Total Outstanding Principal Amount (Rs.1 Not Applicable 2. the banking subsidiaries have put in place risk management committees. all banking subsidiaries are in compliance with the minimum CRAR requirement stipulated by the RBI.The following table sets out the sales of NPAs by the Bank to banks. As of the date of this Letter of Offer. there were no NPAs sold in the fiscal year ended March 31.9 Consideration Received 2. liquidity risk. assess. market risk and operational risk. 2007 Total Risk Management in Banking Subsidiaries The Bank’s banking subsidiaries. monitor.3 0.5 Not Applicable 11. interest rate risk. which include the seven Associate Banks and SBICI Bank Limited. in billions) 11. As is the case with the Bank.4 106 . 2007. financial institutions or NBFCs as of September 30. 2005: Fiscal Year 2006 2007 Six-months ended September 30. A risk governance structure has also been put in place by all the banking subsidiaries with one general manager designated as the chief risk officer at each subsidiary bank. Steps are being taken to modify the risk management framework of the subsidiary banks to conform to Basel II guidelines. No. control and mitigate risks coming under the broad categories of credit risk.4 0.

classification of assets. The Bank is also governed by the provisions of the Act. being licensed by the RBI. the provisions of law relating to the winding up of companies do not apply to the Bank and the Bank shall not be placed in liquidation except by order of the Central Government. In accordance with the Act. banking. 1956 are inapplicable. as well as other nominees put forward by the Central Government from among persons having expert knowledge of cooperative institutions. the Bank acts as an agent of the RBI. The RBI requires the Bank to furnish statements. the State Bank of India (Amendment) Bill. the provisions of the Companies Act. The accounts of the Bank are audited by external statutory auditors appointed by the RBI. The Bank. the RBI periodically issues guidelines to be followed by the bank. it may appoint additional auditors to examine and report on the Bank’s accounts. maintenance of capital adequacy and provisioning for non-performing and restructured assets. The auditors of the Bank are appointed by the RBI. a piece of legislation seeking to amend the Act was introduced in the Indian Parliament. elected Directors of the Shareholders and nominees from the RBI and Government. Additionally. Under the Act. Since the Bank is a statutory corporation. If the Government desires. 1949 and some of these provisions are applicable to the Bank. The RBI can direct a special audit in the interest of depositors or in the public interest. On December 18. in consultation with the Governor of the RBI and the Chairman of the Bank. the Bank shall be guided by such directions in matters of policy involving public interest as the Central Government may. Compliance with all regulatory requirements is evaluated with respect to financial statements under Indian GAAP. including (i) that the bank has the ability to pay its present and future depositors in full as their claims accrue. give it. the Negotiable Instruments Act and the Banker’s Books Evidence Act.” The State Bank of India Act While the main legislation governing commercial banks in India is the Banking Regulation Act. in derogation of the Companies Act. 2006. (ii) that 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. Certain provisions of the Banking Regulation Act apply in addition to the Act. as well as for diverse public purposes. and (iv) that the public interest will be served if such license is granted to the bank. The RBI has set up a Board for Financial Supervision. Under the Act. The State Bank of India (Subsidiary Banks) Act was passed in 1959 to enable the Bank to take over eight former State-associated banks as its subsidiaries. (iii) that the bank has adequate capital and earnings prospects. under the chairmanship of the Governor of the RBI. 1956 and any other law for the time being in force. 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. which has since referred it to the Parliamentary Standing Committee on Finance. The provisions of the Banking Regulation Act are in addition to and not. RBI Regulations Commercial banks in India are required under Section 22 of the Banking Regulation Act to obtain a license from the RBI to carry on banking business in India. information and certain details relating to its business. the Bank is mainly governed by the provisions of the Act. Other important laws include the Reserve Bank of India Act. rural economy and industry. particularly in rural and semi-urban areas. 2006.REGULATIONS AND POLICIES The main legislation governing commercial banks in India is the Banking Regulation Act. the Act was separately amended to incorporate the transfer of the RBI shareholding in the Bank to the Central Government. is regulated and supervised by the RBI. which consists of the Chairman and Managing Directors appointed by the Central Government under the Act. See also “Industry Overview — Commercial Banks. It has issued guidelines for commercial banks on the recognition of income. the RBI must be satisfied that certain conditions are complied with. Before granting the license. The Bank is managed by a Central Board of Directors. 107 . save as expressly provided in the Banking Regulation Act. Furthermore. and finance. valuation of investments. The Bank was constituted in order to extend the availability of banking facilities.

its management. 108 . IPDIs have a call option after not less than ten years from the date of issue. Permission is granted based on factors such as the financial condition and history of the bank. While processing authorisation requests. In fiscal year 2003. authorised the issue of instruments such as (i) Innovative Perpetual Debts Instruments (“IPDIs”) as part of Tier I capital and (ii) Upper Tier II subordinated debt as part of Tier II capital.0% of the bank’s investment portfolio classified in the trading book within a period of five years. hybrid debt capital instruments (which combine certain features of both equity and debt securities) and subordinated debt. Based on the guidelines of the Basel Committee on Banking Regulations and Supervisory Practices. As per these guidelines. they cannot be categorised as branches. Tier II capital consists of undisclosed reserves. 2006. for inclusion as Tier I capital up to a maximum of 15. gaps in provisioning. the RBI advised banks to build up an investment fluctuation reserve of a minimum of 5. The investment fluctuation reserve was considered as Tier II capital. intangible assets. 2006.Regulations relating to the Opening of Branches Section 23 of the Banking Regulation Act provides that a bank must obtain the prior approval of the RBI to open new branches. Capital Adequacy Requirements The Bank is subject to the capital adequacy requirements of the RBI. the RBI will give importance to the nature and scope of banking services.0%.0%). Total Tier II capital cannot exceed Tier I capital. Risk-adjusted assets and off-balance sheet items considered for determining the capital adequacy ratio are the risk-weighted total of specified funded and non-funded exposures. particularly in under-served areas. risk management and relationships with subsidiaries and affiliates. quality of corporate governance.0% of Tier I capital. No banking transactions are undertaken in call centres. to be exercised with the RBI’s prior approval. The RBI issued a new branch authorisation policy in September 2005 under which the existing system of granting authorisation for each time an individual branch is opened will be replaced by a system of aggregated approvals on an annual basis. general provisions and loss reserves (allowed up to a maximum of 1. revaluation reserves (at a discount of 55. provides the most permanent and readily available support against unexpected losses. free reserves and capital reserves. The term “branch” for this purpose has been defined to also include extension counters. The total capital of a bank is classified into Tier I and Tier II capital. Any subordinated debt is subject to progressive discounts each year during the last five years of the tenure for inclusion in Tier II capital and total subordinated debt considered as Tier II capital cannot exceed 50. for inclusion as Tier II capital. therefore. the RBI has since permitted banks to transfer the entire investment fluctuation reserve to the category (also considered as Tier I capital). the need to induce enhanced competition in the banking sector. to be exercised with the RBI’s prior approval. the bank’s regulatory compliance.25% of risk-weighted assets). In fiscal year 2002. pursuant to the Indian Income Tax Act. offsite ATMs.0% of total unimpaired non-innovative Tier I capital. The RBI may cancel a license for violations of the conditions under which it was granted. With the introduction of a capital charge for securities included in the trading book. Upper Tier II instruments have a minimum maturity of 15 years and a call option after not less than ten years from the date of issue. the core capital. This reserve must be computed with respect to investments held for trading and available for sale categories. and losses in the current period and brought forward from the previous period. at least half of which must be Tier I capital. as reduced by equity investments in subsidiaries. actual credit flow to priority sectors and efforts to promote financial inclusion. the RBI also issued guidelines permitting the issuance of Tier I and Tier II debt instruments denominated in foreign currencies to the extent of and subject to the conditions stipulated therein. administrative offices and back offices where banking transactions are undertaken. by a circular dated January 25. Tier I capital. adequacy of capital structure and earning prospects and the public interest. the RBI issued guidelines requiring a bank’s deferred tax asset to be treated as an intangible asset and deducted from its Tier I capital. It comprises paid-up capital and reserves consisting of any statutory reserves. On July 21. With a view to providing banks with additional options to raise capital funds. The RBI will discuss with individual banks their branch expansion strategies and plans over the medium term. with a view to building up adequate reserves to guard against any unfavourable interest rate movement due to unexpected developments. this requires the Bank to maintain a minimum ratio of capital to risk-adjusted assets and off-balance sheet items of 9. Degrees of credit risk expressed as percentage weighting have been assigned to various balance sheet asset items and for off-balance sheet items. the RBI.

as appropriate these approaches. inter alia. unsecured and free of restrictive clauses.0% risk weight for retail credit exposures. through its circular dated October 29.5% on the banking book has been removed across the board. All foreign exchange and gold open position limits of the bank carry a 100. the RBI. These guidelines specify that foreign banks operating in India and Indian banks having an operational presence outside India should migrate to the Basel II framework by adopting the Standardised Approach for credit risk and the Basic Indicator Approach for operational risk with effect from March 31. permitted the issue of preference shares in Indian Rupees. With the introduction of a capital charge for market risk as of March 31. Issuance of Preference Shares as Part of Regulatory Capital With a view to providing banks with a wider choice of instruments to raise Tier I and Tier II capital. in June 2004. the shares shall be perpetual non-cumulative preference shares and shall be fully paid up. and securities included in the available for sale category by March 31. as per the standardised duration method. After adequate expertise has been developed. 2006. In October 2005. decided that educational loans will no longer qualify as consumer credit and carry a risk weight of 100% under the Basel I framework and 75% under the Basel II framework. an additional risk weight of 2. The face 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. a risk weight of 2. some banks may be allowed to migrate to the Internal Ratingsbased approach after obtaining RBI approval. 2008. 109 . and a capital charge for operational risk based on a factor of 15.0% risk weight. the RBI issued guidelines requiring banks to maintain a capital charge for market risk in respect of: • • securities included in the held for trading category (including derivatives) by March 31. Further. that preference shares shall be eligible for inclusion in Tier I or Tier II capital as set out below: Tier I capital: • • the outstanding amount of Tier I preference shares along with innovative Tier I instruments must not exceed 40% of total Tier I capital. Securities classified as available for sale or held for trading are valued at market or fair value as of the balance sheet date. Accordingly. Standby letters of credit or guarantees and documentary credits are treated as similar to funded exposure and are subject to similar risk weight. In respect of banks and financial institutions.The percentage risk-weight age is made with the appropriate credit conversion factor. 2001. after March 31.0% of the sum of a bank’s previous three year average net interest income and non-interest income (excluding extraordinary income).5% to cover market risk must be assigned in respect of the entire investment portfolio over and above the existing risk weights for credit risk in all categories of security. The RBI has. in January 2008. the RBI specified that banks that maintain capital for both credit and market risk for both the held for trading and available for sale categories at the end of fiscal year 2006 would be permitted to treat the entire balance in the investment fluctuation reserve as Tier I capital. Capital requirements have also been prescribed for open foreign currency exposures and open positions in gold. The guidelines also prescribe a 75. 2007. All other commercial banks (except local area banks and regional rural banks) are encouraged to migrate to the Basel II framework no later than March 31. the RBI issued final guidelines for the implementation of the revised capital adequacy framework of the Basel Committee (“Basel II framework”). differential risk weights for other credit exposures linked to their credit rating. The said circular provides. 2006. Currently. 2005. 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. the Bank has provided a capital charge for market risk on the securities included in the trading book. Banks were required to maintain a capital charge for market risk in respect of their trading book exposure (including derivatives) by the end of fiscal year 2005 and in respect of securities included in the available for sale category by the end of fiscal year 2006. The aggregate risk-weighted assets are taken into account for determining the capital adequacy ratio. In April 2007. both at the banks and at the supervisory level. 2009 by adopting one of these approaches.

along with other components of Tier II capital. debentures.• • the shares shall be issued without a put or step-up option. for example a dividend missed in one year will not be paid in future years. Non-Performing Assets An asset. Loan Loss Provisions and Non-Performing Assets In April 1992. • • • • The Redeemable Preference Shares (both cumulative and non-cumulative) shall be subjected to a progressive discount for capital adequacy purposes over the last five years of their tenor. no dividend may be declared if the Bank’s CRAR is below (or is caused by the payment to fall below) the minimum stipulated CRAR or if the half yearly (for a half yearly dividend) or current year’s balance sheet shows accumulated losses. a call option. the shares may be perpetual cumulative preference shares. provisioning standards and the valuation of investments applicable to banks. are set forth below. These guidelines are applied for the calculation of impaired assets under Indian GAAP. which have been implemented with respect to the Bank’s loans. the coupon rate payable should be a fixed or floating rate referenced to a market determined Rupee interest benchmark rate and will not be payable if the Bank’s CRAR is below (or is caused by the payment to fall below) 9% or if the Bank suffers a net loss. shares shall be issued without a put option. even if adequate profit is available and the level of CRAR conforms to the regulatory minimum. An NPA is an asset in respect of which either the principal or interest remains overdue for more than 90 days. on income recognition. must not exceed 100% of Tier 1 capital at any point in time. An NPA is a loan or an advance where: • interest and/or the instalment of principal has remained overdue for a period of more than 90 days in respect of a term loan. which are revised periodically. even at maturity. hire purchases and bills. becomes non-performing when it ceases to generate income for the Bank. however. unsecured and free of any restrictive clauses. 110 . including a leased asset. a call option is permitted provided it is exercisable only after a period of ten years and with the prior approval of the RBI. and redemption shall not be at the initiative of the holder and shall only be made with the prior approval of the RBI. • Tier II capital: • • the outstanding amount of these instruments. and the dividend shall not be cumulative. as they approach maturity. asset classification. lease assets. the period of maturity for redeemable non-cumulative preference shares and redeemable cumulative preference shares shall be at least 15 years. The principal features of these RBI guidelines. redeemable non-cumulative preference shares or redeemable cumulative preference shares and shall be fully paid up. A step-up option may be exercised only once during the term of the instrument and must not exceed 100 basis points. however. the RBI issued formal guidelines. is permitted provided such option is exercisable only after a period of ten years and with the prior approval of the RBI.

111 . whether in respect of the principal instalment or interest amount. if the instalment of principal or interest thereon remains overdue for one crop season. but must be separately disclosed as a restructured asset. A loan classified as doubtful has all the weaknesses inherent in assets that are classified as sub-standard.” Asset Classification NPAs are classified as described below: • Sub-Standard Assets. i. and • an amount to be received remains overdue for a period of 90 days in respect of other accounts. falls due. provided that the amount of sacrifice. A loan granted for short duration crops will be treated as a non-performing asset. conditions and values. and crops. on the basis of currently known facts. A fully secured standard asset can be restructured by rescheduling principal repayments and/or the interest element. “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. A rescheduling of interest shall not result in an asset being downgraded to sub-standard. Such an asset has well-defined credit weaknesses that jeopardize the liquidation of the debt and are characterised by the distinct possibility that the bank will sustain some loss. Once an account has been classified as a non-performing asset. A rescheduling of the instalments of principal amount alone does not result in a standard asset being classified as sub-standard provided the loan/credit facility is fully secured. 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 bank in full. In circumstances where the outstanding balance in the principal operating account is less than the sanctioned drawing limit. Assets that are NPAs for more than 12 months. Assets that are NPAs for a period not exceeding 12 months. Similar guidelines apply to sub-standard assets. the bill has remained overdue for a period of more than 90 days in the case of purchased and discounted bills. A loan granted for long duration crops will be treated as a non-performing asset. • • There are separate guidelines for projects under implementation which are based on the achievement of financial closure and the date of approval of the project financing. The sub-standard accounts which have been subjected to restructuring by whatever modality. but (i) there are no credits for a continuous period of 90 days as of the date of the balance sheet of the Bank or (ii) the credits are not sufficient to cover the interest debited during the same period. with the added characteristic that the weaknesses make collection or liquidation in full. Loss Assets. The RBI also has separate guidelines for restructured loans. whichever is earlier.e. are eligible to be upgraded to the standard category only after the specified period. a period of one year after the date when first payment of interest or of principal. Doubtful Assets. (Crops with harvest seasons longer than one year are long duration crops. if deficiencies are not corrected. subject to satisfactory performance during the period. the interest and/or principal have remained overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes. highly improbable. 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 instalment of principal or interest thereon remains overdue for two crop seasons. measured in present value terms. these accounts should be treated as “out-of-order.. In such cases. is written off or provision is made to the extent of the sacrifice involved.• • • the account has remained “out-of-order” (as defined below) in respect of an overdraft or cash credit for more than 90 days. which are not long duration crops are treated as short duration crops). the unrealised interest and other income already debited to the account is de-recognised and further interest is not recognised or credited to the income account unless collected.

000 is 1.” Provisioning and Write-offs Provisions are based on guidelines specific to the classification of the assets. • • Loss Assets. however.000. a 100.0% total outstanding on the “unsecured exposures” identified as “Substandard” (i. are as follows: • • The RBI has prescribed norms for bank lending to non-bank financial companies. However. loans and advances to systemically important NBFCs.0%. such as personal loans (including credit card receivables).” Regulations relating to the Making of Loans The provisions of the Banking Regulation Act govern the making of loans by banks in India. ab initio.000 to any one entity (other than most retail loans) must not exceed 112 .0% 30. if. for any reason whatsoever.0%. A general provision of 10. of the outstanding exposure. For more information see “Industry Overview — Credit Policy Measures. with a minimum of 20. Each bank should also indicate the maximum spread over the prime lending rate for all credit exposures other than retail loans. the total provisioning on the unsecured exposures shall be 20. the general provisioning requirement is 2. the asset is retained on the books. permitted to phase the additional provisioning. 200.25%. 2005. Whilst the provisions indicated above are mandatory. required due to the reduction in the transition period from “sub-standard” to “doubtful asset. For purposes of this classification. The entire asset shall be written off.” from 18 to 12 months over a four year period commencing from the year ending March 31.0% provision shall be made on the outstanding amount. The rate of provisioning for residential housing loans beyond Rs. Banks are free to determine their own lending rates but each bank must declare its benchmark prime lending rate as approved by its board of directors. provision is to be made as set out below: Period for which advance remained in “Doubtful” category Up to one year One to three years More than three years Provisioning requirement (%) 20.0% 100. Provision at 100.4%. which are now in effect. Restructured Assets. The following guidelines apply to the various asset classifications: RBI guidelines on provisioning and write-offs are as follows: • Standard Assets. 2. a higher provision on a loan could be made if considered necessary. A provision is made in present value terms equal to the level of sacrifice (of interest) made. and non-deposit taking and commercial real estate loans.0% each year. loans and advances qualifying as capital market exposures.0% • • Banks are. an unsecured exposure is one where the realisable value of security is not more than 10.0%). Doubtful Assets. The general provisioning requirement for “Standard Advances” is currently 0.To put in place an institutional mechanism for the restructuring of corporate debt. Some of the major guidelines of the RBI. For specific sectors. See “Industry Overview — Recent Structural Reforms. Also “exposure” shall include both funded and non-funded exposure.0% of the total outstanding and an additional 10. The RBI issues directions covering the loan activities of banks. the RBI has devised a corporate debt restructuring system. The interest charged by banks on advances up to Rs. With regard to the secured portion.0%. with the exception of direct advances to agricultural and SME sectors where the general provisioning required is 0.e. Sub-standard Assets.0% of the extent to which the advance is not covered by the realisable value of security.

which is the general body for all member institutions. employee or guarantor or in which.the benchmark prime lending rate. consisting of 12 financial institutions. a banking company is prohibited from entering into any commitment for granting any loans or advances to or on behalf of any of its directors. a niche body of select institutions that decides policy matters. amended the above guidelines on CDR. The objective of this framework is to ensure a timely and transparent mechanism for the restructuring of corporate debts of viable entities facing problems. new or existing. The corporate debt restructuring system is a nonstatutory mechanism and a voluntary system based on debtor-creditor and inter-creditor agreements. Subsequently. 2005. The RBI has. with a view to making the decision-making more equitable. In particular. any of the directors of the bank is a director. The major amendments include: • • • extending the scheme to entities with an outstanding exposure of Rs. giving discretion to the Core Group in dealing with wilful defaulters in certain cases.0% of creditors by number in addition to the support of 75. he holds substantial interest. or the subsidiary or the holding company in which. Decisions on restructuring are taken by the CDR Empowered Group. or any firm in which any of its directors is interested as partner. as of March 31. Secured creditors having a minimum 20. 113 . out of which is carved out the CDR Core Group. Banks are also given freedom to lend at a rate below the prime lending rate in respect of creditworthy borrowers and exporters. 1956. a bank cannot grant any loans and advances against the security of its own shares. • In terms of section 20(1) of the Banking Regulation Act. Interest rates for certain categories of advance are regulated by the RBI. Banks are also free to stipulate lending rates without reference to their own benchmark prime lending rates in respect of certain specified categories of loan. A CDR Cell has been formed to assist the CDR Forum in administrative matters and for analysis of the restructuring packages. guidelines pertaining to which were issued on August 23.0% of creditors by value. There are guidelines on loans against equity shares in respect of the amount. margin requirement and purpose. by its circular dated November 10. or any company (not being a subsidiary of the banking company or a company registered under section 25 of the Companies Act. subject to the conditions specified). or the subsidiary or the holding company of which. or a Government company) of which. 2003. The total membership of the CDR Forum. manager. employee or guarantor. Corporate Debt Restructuring Mechanism In order to put in place as institutional mechanism for the restructuring of corporate debt. 100 million or more. 2007. as a strategic investment. Banks are not permitted to finance acquisitions by companies in India (except in the case of companies engaged in implementing or operating infrastructure projects.0% exposure in term loans or working capital may make a reference to the CDR Forum. led by the CDR Standing Forum. was 58. debt recovery tribunals and other legal proceedings. one Trust. The system established by the RBI has a three-tier structure. to Indian companies for the acquisition of equity in overseas joint ventures or wholly owned subsidiaries or in other overseas companies. 28 public sector banks and 17 private sector banks. The Bank is in compliance with these requirements. or any individual in respect of whom any of its directors is a partner or guarantor. There are certain exemptions in this regard as the explanation to the section provides that “loans or advances” shall not include any transaction which the RBI may specify by general or special order as not being a loan or advance for the purpose of such section. managing agent. detailed guidelines were issued of February 5. 2001. manager. other than cases involving fraud or the diversion of funds with mala fide intentions. but outside the purview of the Board for Industrial and Financial Reconstruction. requiring the support of 60. the framework aims to preserve viable corporates that are affected by certain internal and external factors and minimize the losses to the creditors and other stakeholders through an orderly and coordinated restructuring program. The RBI permitted banks to extend financial assistance. the RBI devised a Corporate Debt Restructuring (“CDR”) System. which has all the member banks and financial institutions as its members.

failing which. including the right to transfer these assets by way of lease. assignment or sale in order to realise the secured loans. Pursuant to the SARFAESI Act. allowing one-time settlement as a part of the CDR mechanism to make the exit option more flexible. The secured creditors are also entitled to proceed 114 . the Government enacted the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (“SARFAESI Act”) in December 2002. or advising any person who owes money. requiring the pro-rata sharing of additional finance requirements by both term lenders and working capital lenders. (ii) the foreclosure of assets through an SC or RC. minimum sacrifice and injection of funds by promoters. where the package also has to meet norms relating to the turn-around period. Enforcement of Security Interests under the SARFAESI Act To assist banks and financial institutions in recovering their unpaid advances and to ensure financial discipline among borrowers. and in the absence of any satisfactory objections or representations made by the borrower. and (iii) the foreclosure of NPA accounts. limiting RBI’s role to providing broad guidelines for the CDR mechanism. assignment or sale in order to realise the secured assets. a debt restructuring mechanism in line with the CDR mechanism prevailing in the banking sector was introduced for units in the SME sector. give notice in writing to the borrower. a secured creditor may. In case the amounts due are not fully recovered by the sale of secured assets. The remaining amount would be paid to others in accordance with their rights and interests. The SARFAESI Act provides the legal framework for (i) the securitisation of financial assets by setting up a Securitisation Company (“SC”) or Reconstruction Company (“RC”). the secured creditor may take the following measures to recover the amounts due: • • • • taking possession of the secured assets of the borrower including the right to transfer by way of lease. taking over the management of secured assets. • • • • • • Furthermore. converging in the methodology used by banks and financial institutions for the computation of economic sacrifice. in respect of loans classified as NPAs. restricting the regulatory concession in asset classification and provisioning to the first restructuring. enhancing disclosures in the balance sheet to provide greater transparency. appointing any person to manage the secured assets after taking possession. then the secured creditors may file an application to the Debt Recovery Tribunal for the remaining amounts due. and requiring the valuation and regulatory treatment of non-SLR instruments acquired while funding interest or in lieu of outstanding principal. the secured creditors may request the Chief Metropolitan Magistrate or the District Magistrate to take possession of part or whole of the secured assets and other related documents and forward the assets and documents to the secured creditors.• • linking the restoration of asset classification prevailing on the date of reference to the CDR Cell to implementation of the CDR package within four months from the date of approval of the package. 2005. on September 8. If required. The sale proceeds would first be utilized to meet all the expenses incurred in enforcement of the security interest and then for payment of amounts due to secured creditors. due to the acquisition of any of the secured assets from the borrower. requiring it to discharge its liabilities within 60 days. to pay the money directly to the banks and institutions.

the term “substantial part of the business” has not been defined. and a new section 13(4)(b) empowering the secured creditor to take over management of the business of such borrower. • • • On November 29. 1993. • • The Supreme Court discussed various provisions of the DRT Act and the SARFAESI Act and observed that the SARFAESI Act is treated as an additional remedy and is not inconsistent with the DRT Act. 1993 (“DRT Act”) can still invoke the SARFAESI Act in order to realise the secured assets. The following three points were discussed: • whether the banks or financial institutions that have elected to seek a remedy under the Recovery of Debts due to Banks and Financial Institutions Act. whether recourse to take possession of the secured assets of the borrower pursuant to section 13(4) of the SARFAESI Act encompasses the power to take actual possession of the immovable property. assignment or sale in order to realise the secured asset. whereby banks and financial institutions may withdraw the recovery application filed by them at the Debt Recovery Tribunal (“DRT”) in the event that they propose to initiate action under the SARFAESI Act. Where a substantial part of the business of the borrower is held as security for the debt. 2006 the Supreme Court pronounced a judgment on whether withdrawal of an application from the DRT is a condition precedent to having recourse under the SARFAESI Act as defined. However. The Government has since enacted the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act. an appeal can be filed against the order of the DRT before the Debt Recovery Appellate Tribunal (“DRAT”) after the borrower has deposited 50. Further. the secured creditor is also empowered to take over the management. Therefore. The application is required to be decided within 60 days. The Amended Act includes: • a new provision in the Amended Act making it mandatory for the secured creditor to consider any representation or objection raised by the borrower (on whom notice had been served) and communicate reasons for rejection of the representation or objection within one week from the date of receipt of such representation or objection. any pending reference before the BIFR shall be withdrawn if 75. Pursuant to the SARFAESI Act.0% by the DRAT for reasons to be recorded in writing). Similarly. is payable on an application under section 17(1) of the SARFAESI Act in the absence of any rule framed under the said Act. 2004 the Supreme Court pronounced a judgment upholding the constitutional validity of the SARFAESI Act (with the exception of section 17(2)). On April 8. It is for the banks or the financial institutions to exercise their discretion in withdrawing cases from the DRT.0% of the amount of debt (such sum may be reduced to 25. which is related to the security of the debt. and whether an ad valorem court fee prescribed under rule 7 of the DRT (Procedure) Rules. and two new provisions enabling the aggrieved borrower to make an application to the DRT against any action taken under the SARFAESI Act.0% of the secured creditors (in terms of amount outstanding) have taken any action to recover their amounts due under the SARFAESI Act. 115 . the withdrawal of an application pending before the DRT under the DRT Act is not a pre-condition for recourse under the SARFAESI Act.against the guarantors and sell the pledged assets independent of their action for enforcement of the security interest. including the right to transfer by way of lease. an amendment to the Debt Recovery Tribunal Act. 2004 (the “Amended Act”). the borrower cannot make a reference to the BIFR after the transfer of financial assets to an SC or a RC. without withdrawing or abandoning the original application filed before the DRT pursuant to the DRT Act. 1993.

2. in consortium or multiple banking arrangements where more than 75. these guidelines are also applicable to financial institutions and Non-Banking Financial Companies (“NBFCs”). including valuation and pricing aspects and prudential norms in the following areas: (a) asset classification. the sale price should generally not be lower than the net present value. 20. income recognition and provisioning for originators and service providers (such as credit enhancers). to enable the transferred assets to be removed from the balance sheet of the seller in a securitisation structure. underwriters and investors.0 million. Classification of SMEs The Government passed the Micro. Further. arm’s length relationship must be maintained between the originator and seller. (d) capital adequacy. Apart from banks.0 million but less than Rs. Micro-sized entities comprise manufacturing companies with investments in plant and machinery of up to Rs. 116 . small. However. liquidity support providers. A bank may sell a standard asset only if the borrower has a consortium or multiple banking arrangements. the RBI issued guidelines for the securitisation of standard assets. 50. banks may sell specific financial assets with an agreement to share in any surplus realised by the asset reconstruction company in the future.Regulations relating to the Sale of Assets to Asset Reconstruction Companies The RBI has issued guidelines to banks on the process to be followed for sales of financial assets to asset reconstruction companies.0 million and service companies with investments in equipment of over Rs. 2007.0 million. wherein it imposed on banks the consideration that while selling NPAs. banks may not sell financial assets at a contingent price with an agreement to bear a part of the shortfall on ultimate realisation. legal or any other type of risk relating to the financial assets sold. (b) provisioning. RBI issued guidelines on the sale and purchase of NPAs. 2006 in June 2006 to promote lending to SMEs and to create uniformity in the way that banks classify SMEs. and the SPV. the repackaging of the security interests representing claims on incoming cash flows from the pool of assets and their sale to third party investors should be effected. and also relating to the accounting treatment for securitisation transactions and disclosure norms. valuation. a two-stage process must be followed.0% by value of the total loans to the borrower are classified as non-performing and at least 75. debentures or security receipts. 1.0 million but less than Rs.0% by value of the banks and financial institutions in the consortium or multiple banking arrangements agree to the sale. Small-sized entities comprise manufacturing companies with investments in plant and machinery of over Rs. The guidelines provide that for a transaction to be treated as a securitisation.5 million but less than Rs. These guidelines provide that a bank may sell financial assets to an asset reconstruction company provided that the asset is an NPA. 1.0% by value of the banks or financial institutions accept the offer.5 million or service companies with investments in equipment of up to Rs. In addition. 50. Banks may invest in pass-through certificates issued by the asset reconstruction company or trusts set up by it to acquire the financial assets. 20. Small & Medium Enterprises Development Act. The banks selling financial assets should ensure that there is no known liability devolving on them and that they do not assume any operational. 2. 50.0 million but less than Rs. In February 2006.and medium-sized entities. Further. Consideration for the sale may be in the form of cash. Medium-sized entities comprise manufacturing companies with investments in plant and machinery of over Rs. the pooling of assets and their transfer to a bankruptcy remote vehicle (“SPV”) should take place and in the second stage. at least 75. The said principle should be applied to compromise settlements entered into by the banks. 100. (e) exposure and (f) disclosure requirements. These assets are to be sold on a non-recourse basis only. These guidelines set out the procedure for the purchase or sale of non-performing financial assets by banks. bond. the remaining banks or financial institutions are obliged to accept the offer. Further. have been prescribed. In the first stage. On October 4. Whilst each bank is required to make its own assessment of the value offered in the sale before accepting or rejecting an offer for the purchase of financial assets by an asset reconstruction company. Entities are divided into micro-. Certain regulatory norms relating to capital adequacy.0 million and service companies with investments in equipment of over Rs. the isolation of assets or the “true sale” from the seller or originator to the SPV is an essential prerequisite.0 million. (c) accounting of recoveries. banks have to account for the net present value of the estimated cash flows associated with the realisable value of the available securities. net of the cost of realisation. financial institutions and NBFCs (excluding securitisation companies and reconstruction companies). The RBI also issued guidelines in July 2005 in relation to the sale or purchase of NPAs by banks. profit and loss on the sale of assets.

i. and advances to weaker sections required to be 10. banks include forward contracts in foreign exchange and other derivative products. bank loans to finance promoters’ contributions.0% of capital funds.0% of capital funds. Non-fund based exposures are calculated at 100. Credit Exposure Limits As a prudent measure aimed at better risk management and the avoidance of concentration of credit risk. small-scale industry. whichever is higher. Pursuant to existing guidelines.0% of capital funds. Export Credit The RBI also requires commercial banks to make loans to exporters at concessional rates of interest. the 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 RBI are as follows: • exposure ceiling for a single borrower is 15. with agricultural advances required to be 18. and exposure shall include credit exposure (funded and non-funded credit limits) and investment exposure (including underwriting and other similar commitments).0% of capital funds. taking into account the following (except in one case for which the Bank has received permission to be in non-compliance): • • • • all types of funded and non-funded credit limits. whichever is higher. such as agriculture. i. small businesses and housing finance. subject to the borrower consenting to the banks making appropriate disclosures in their annual reports.Directed Lending Priority Sector Lending The RBI requires commercial banks to lend a certain percentage of their net bank credit to specific sectors (the priority sectors). whichever is higher.0% of the previous year’s total advances required to be lent under the Differential Rate of Interest scheme.0% of the adjusted net bank credit or credit-equivalent amount of off-balance sheet exposure. consider enhancement of the exposure to a borrower up to a maximum of a further 5. and the group exposure limit is extendable by another 10.e. The Bank provides export credit for pre-shipment and post-shipment requirements of exporter borrowers in Rupees and foreign currencies. Banks may.e. Total priority sector advances should be 40. bonds and units of mutual funds to stockbrokers and market makers. advances against shares. export credit is not a part of the priority sector of domestic commercial banks. hire purchase finance and factoring services.0% of the adjusted net bank credit or the credit-equivalent amount of off-balance sheet exposure. the single borrower exposure limit is extendable by another 5. In the case of financing for infrastructure projects. such as currency swaps and options. 117 . up to 20. facilities extended by way of equipment leasing. The group exposure limit is 40.0%.0% of the limit or outstandings. as defined under capital adequacy standards (Tier I and Tier II capital). the capital fund is the total capital. debentures. in exceptional circumstances and with the approval of their boards of directors.0% of capital funds. • • As of fiscal year-end 2007. whichever is higher.0%.0% of the adjusted net bank credit or credit-equivalent amount of off-balance sheet exposure. the Bank was in compliance with the credit exposure limits. Any shortfall in the amount required to be lent to the priority sectors may be required to be deposited with the National Bank for Agriculture and the Rural Development. and 1. These deposits can be for a period of one year or five years. at their replacement cost value in determining individual or group borrower exposure. This enables exporters to have access to an internationally competitive financing option. up to 50. In addition.

the aggregate exposure of a consolidated bank to capital markets in any year (both fund-based and non-fund-based) should not exceed 40. keeping in view its overall risk profile and corporate strategy.0% of its net worth as of March 31 in the previous year. The Bank has fixed a ceiling of 15. debentures and units of equity-oriented mutual funds and all exposures to Venture Capital Funds (“VCFs”) (both registered and unregistered) should not exceed 20. and investments in debentures.0% of its consolidated net worth. bridge loans against equity flows/issues. the bank’s direct investment in shares. and the financing of initial public offerings. security receipts. convertible bonds. bonds.0% of its net worth. Credit exposure is the aggregate of: • • • • • • all types of funded and non-funded credit limits. or devolvement arising out of underwriting obligations or purchased from secondary markets. As of fiscal year-end 2007. The above-mentioned ceilings are the maximum permissible and the Bank’s Central Board of Directors is free to adopt a lower ceiling for its bank. the aggregate direct exposure by way of the consolidated bank’s investment in shares. Investment exposure comprises the following elements: • investments in shares and debentures of companies acquired through direct subscription or devolvement arising out of underwriting obligations or purchased from secondary markets or on the conversion of debt into equity. convertible bonds. Within this overall ceiling. the RBI requires banks to fix internal limits of exposure to specific sectors. pass-through certificates issued by securitisation or reconstruction companies (banks are allowed to exceed prudential exposure on account of such investments on a case by case basis). bonds and units of mutual funds.0% of the Bank’s total fund-based exposure to any one industry (other than retail loans) and monitors its exposure accordingly. and the financing of initial public offerings. debentures. advances against shares. debentures and units of equity oriented mutual funds and all exposures to VCFs (both registered and unregistered) should not exceed 20. facilities extended by way of equipment leasing. Further. the Bank is in compliance with the above.• • • bridge loans against equity flows/issues. investments in public sector undertaking bonds through direct subscription. 118 . These limits are subject to periodical review by the banks. Within this overall ceiling. hire purchase finance and factoring services. investments in shares. investments in commercial paper issued by corporate bodies or public sector undertakings. bonds and units of mutual funds to stockbrokers and market makers. debentures.0% of its consolidated net worth as of March 31 in the previous year. bank loans to finance promoters’ contributions. • • • To ensure that exposure is evenly spread. Regulations relating to Investments and Capital Market Exposure Limits The aggregate exposure of a bank to the capital markets in any year (both fund-based and non-fundbased) should not exceed 40.

should not exceed 10. borrower group exposure limit of 40. Quarterly CFSs are subject to a limited review while annual CFSs are audited. banks. 119 . Investments in the instruments issued by other banks/FIs which are not deducted from the Tier I capital of the investing bank or financial institution will attract 100.0% of the investee bank’s equity capital. Further. In April 1999. In December 2007. issued on December 15. Pursuant to these guidelines. Pursuant to the RBI guidelines of July 2004.0% of the investing bank’s capital. financial institutions. 2006. i.0% risk weight for credit risk for capital adequacy purposes. stated that investment by a bank in subordinated debt instruments. with various prudential norms on a consolidated basis. Banks are also prohibited from investing in unrated securities.0% became applicable to the Bank’s investments in all types of instruments. the investing bank’s or financial institution’s holding exceeds 5. In July 2005. including Tier II capital and free reserves. the RBI issued guidelines on consolidated accounting and consolidated supervision in respect of banks. the said ceiling of 10. hybrid debt capital instruments and any other instrument considered to be in the nature of capital.0% is for the purpose of financing infrastructure projects). 2004. Banks are required to prepare consolidated financial statements intended for public disclosure. with provision for compliance in a phased manner by January 1. the RBI issued guidelines on investments by banks in non-Statutory Liquidity Ratio securities issued by companies. Banks are required to submit to the RBI. These guidelines were effective as of April 1. a transition period of 6 months is provided to comply with the above obligations. at half yearly intervals. subject to certain specified conditions. banks and financial institutions cannot acquire any fresh stake in a bank’s equity shares. A bank’s investment in unlisted non-Statutory Liquidity Ratio securities may not exceed 10. 2007. consolidated prudential returns reporting their compliance excluding that of insurance subsidiaries.e. came into effect on April 1.0% of capital funds (20.0% of its total investment in non-Statutory Liquidity Ratio securities as of the end of the preceding fiscal year. the RBI advised banks to be judicious in extending finance to mutual funds and has mandated that any loans extended to equity oriented mutual funds will form part of that bank’s capital market exposure. 2005. banks are prohibited from investing in non-Statutory Liquidity Ratio securities with an original maturity of less than one year. equity shares. subordinated debt instruments. preference shares eligible for capital status. the RBI. 2003.0% of capital funds provided that the additional exposure of up to 10.0% of capital funds provided that the additional exposure of up to 5. Consolidated Supervision Guidelines In fiscal year 2003. The principal features of these guidelines are: Consolidated Financial Statements (“CFSs”). However. CFSs are prepared quarterly and annually. which are issued by other banks/FIs and are eligible for capital status for the invested bank/FI. in its monetary and credit policy. banks are allowed to invest their surplus funds in non-Statutory Liquidity Ratio securities without obtaining prior approval from the RBI on a case-by-case basis.0% with immediate effect. Consolidated Prudential Returns. the RBI increased the risk weight requirement for credit risk on capital market exposures to 125. Compliance on a consolidated basis is required in respect of the following main prudential norms: • • single borrower exposure limit of 15. Pursuant to an RBI circular in August 2005. if by such acquisition. investments in unlisted non-Statutory Liquidity Ratio securities such as security receipts issued by securitisation or reconstruction companies registered with the RBI and asset-backed securities and mortgagebacked securities with a minimum investment grade credit rating shall be permitted up to a limit of 20.These guidelines for the rationalisation of norms relating to exposure to capital markets.0% of capital funds (50. These guidelines apply to primary market subscriptions and secondary market purchases. other than commercial papers and certificates of deposits. These guidelines became effective as of April 1. Banks with investments in excess of the prescribed limits were required to apply to the RBI with a roadmap for reduction of the exposure. In November 2003. representing Tier II capital issued by other banks and financial institutions. central and state-sponsored institutions and special purpose vehicles. However.0% is for the purpose of financing infrastructure projects).0%.

In September 2004.0% of investments for the held to maturity category provided that the excess comprises only SLR investments and that the aggregate of such investments in the held to maturity category does not exceed 25. the RBI has permitted banks to exceed the limit of 25. such as intra-group advisory and service arrangements. The transfer had to be done at the lower of acquisition cost. the Bank is required to report to the regulator on the following risk areas: • • • • • • large intra-group transactions carried out for any purpose. and other significant aspects. the build up of any disproportionate exposure (both fund-based and non-fund-based) of any group entity to other group entities. to maintain an SLR equal to 25. book value and market value on the date of transfer. The Bank is in compliance with these guidelines.• • deduction from the Tier I capital of the bank of any shortfall in capital adequacy of a subsidiary for which capital adequacy norms are specified. the RBI announced that it would set up an internal group to review the investment classification guidelines with a view to aligning them with international practices and the current state of risk management practices in India.e. the RBI permitted banks to transfer additional securities to the held to maturity category as a one-off measure. banking. except with regard to the single borrower exposure limit of 15. in addition to the transfer permitted under the earlier guidelines. Banks should decide the category of investment at the time of acquisition. shared directors and senior executives. (b) investments in subsidiaries and joint ventures and (c) investments in bonds and debentures deemed as advance. Held to maturity investments also include any other investment identified for inclusion in this category.0% of consolidated advances and 10. In the meantime. i. (b) held for trading and (c) available for sale. and consolidated capital market exposure limit of 2. applicable to banks in India. taking into account the unique requirement. The State Bank Group is also in compliance with these guidelines. the Group has been designated as a financial conglomerate as its operations straddle more than one financial market segment and it has a significant presence in one segment.0% of capital funds for which the Bank has received permission from its Central Board as well as from the RBI to be in non-compliance.0% of the demand and time liabilities. The Group has adopted appropriate internal controls and risk management systems to manage the above risks by putting in place appropriate prudential limits and firewalls. Held to maturity investments compulsorily include (a) recapitalisation bonds received from the Government.0% of consolidated net worth. direct indirect cross-holdings. Under the supervisory framework for financial conglomerates. Banks’ Investment Classification and Valuation Norms The salient features of the guidelines on the categorisation and valuation of banks’ investment portfolio are given below: • The entire investment portfolio is required to be classified under three categories: (a) held to maturity. • 120 .0% of a bank’s demand and time liabilities. any group level concentration of exposure to various financial market segments and counterparties outside the group. Conglomerate Reporting and Supervision Since June 2004. During fiscal year 2005.0% of the total investment excluding recapitalisation bonds and debentures. subject to the condition that such investments cannot exceed 25.

Loss on any sale is recognised in the profit and loss account. the unsold securities should be shifted to the available for sale category. that is not realised. Available for sale and held for trading securities are given a market or fair value as of the balance sheet date. 121 .0% of its own paid-up share capital and reserves. extreme volatility and a unidirectional movement in the market. with reasons therefore. Investments in security receipts or pass-through certificates issued by asset reconstruction companies or trusts set up by asset reconstruction companies should be valued at the lower of the redemption value of the security receipts or pass-through certificates and the net book value of the financial asset. a bank may hold shares in a subsidiary company in accordance with the provisions of the Banking Regulation Act. the RBI has stipulated that the board of directors of the bank concerned should be informed of such occurrence. 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. Limit on Transactions through Individual Brokers Guidelines issued by the RBI require banks to empanel brokers for transactions in securities. Net appreciation in each basket. whilst net depreciation is provided for. The RBI specifies that not more than 5. However. normally at the beginning of the accounting year: the shifting of investments from the available for sale to the held for trading category may be done with the approval of the board of directors. except short-selling by the banks to undertake the outright sale of Central Government dated securities that they do not own. The market price of the security available from the stock exchange. Short-Selling The RBI does not permit short-selling of securities by banks. the RBI price list or prices declared by the Primary Dealers Association of India (“PDAI”) jointly with the Fixed Income Money Market and Derivatives Association of India (“FIMMDA”) serves as the “market value” for investments in available for sale and held for trading securities. The shifting of investments from or to the held to maturity category may be done with the approval of the board of directors once a year. whichever is less. If for any reason this limit is breached. • • • • 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. in the event of an inability to sell due to adverse factors. the Asset Liability Management Committee or the Investment Committee.0% of the total transactions through empanelled brokers can be transacted through a single broker. including tight liquidity. is ignored. Investments under the held for trading category should be sold within 90 days.0% of the paid-up share capital of that company or 30. including the day of trade. subject to the short position being covered within a maximum period of five trading days. In other words. Profit or loss on the sale of investments in both held for trading and available for sale categories is entered into the profit and loss account. if any. Restrictions on Investments in a Single Company No bank may hold shares in any company exceeding 30. The Union Budget for fiscal year 2008 has announced delivery-based short-selling by institutions in order to make capital markets transactions more efficient. the price of securities in subsidiary general ledger transactions. Depreciation or appreciation for each basket within the available for sale and held for trading categories is aggregated. the short sale position initiated today (trade date. whichever is the least.• Profit on the sale of investments in the held to maturity category is appropriated to the capital reserve account after being entered into the profit and loss account. T+0) will have to be covered on or before close of T+4 days. at acquisition cost/book value/market value on the date of transfer.

a wholly-owned subsidiary of the RBI. Regulations relating to Know Your Customer and Anti-Money Laundering The RBI has issued several guidelines relating to the identification of depositors and has advised banks to put in place systems and procedures to tackle financial fraud. Since April 1998. customer identification. RBI has simplified the know your customer procedure for opening accounts for persons who intend to keep balances not exceeding Rs. the Bank is permitted by the RBI to pay additional interest of 1. and monitor high value cash transactions. 2007 for one to three years should not exceed LIBOR/ swap rates of the last working day of the previous month for corresponding U. 50. 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. Based on RBI guidelines. Revised guidelines were issued by the RBI in November 2004 following the recommendations made by the Financial Action Task Force (“FATF”) and paper on Customer Due Diligence for banks by the Basel Committee on Banking Supervision.5 million and above. banks are not permitted to pay interest on current account deposits.Regulations relating to Deposits The RBI has permitted banks to independently determine rates of interest offered on term deposits. identify money laundering and suspicious activities. Non-resident external deposit contracts effective as of close of business in India on April 24. The interest rates as determined above shall also be applicable if the maturity period exceeds three years. Apart from addressing this concern. risk categorisation. In respect of savings and time deposits accepted from employees.S. banks must ensure that only information relevant to the perceived risk is collected and the same is not intrusive in nature. the RBI has permitted banks the flexibility to offer varying rates of interest on domestic deposits of the same maturity. monitoring of transactions and risk management.0% over the interest payable on deposits from the public. The concerns remain substantially the same and are directed towards the prevention of financial frauds and money laundering transactions. advising banks to be vigilant whilst opening accounts for new customers so as to prevent misuse of the banking system for the perpetration of fraud. Deposit Insurance Demand and time deposits of up to Rs.5% per annum on savings deposits. The RBI has also issued guidelines periodically.000 that are accepted by Indian banks are required to be insured with the Deposit Insurance and Credit Guarantee Corporation. the RBI Guidelines set out in detail the framework to be adopted by banks as regards their customer dealings. Further. banks may only pay interest of up to 3. The detailed procedural guidelines in this regard have been circulated to all branches of the Bank. 100. 122 . the Bank has put in place a Policy on “know your customer — anti-money laundering measures” with the approval of the Central Board. They include comprehensive instructions on customer acceptance. The cost of the insurance premium cannot be passed on to the customer. However. subject to the following conditions: • • time deposits are of Rs. In addition to keeping customer information confidential. dollar maturities.000 in all their accounts taken together. 200. 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. 1.000 in any year in order to ensure that the implementation of the KYC guidelines do not result in the denial of banking services to those who are financially or socially disadvantaged. Domestic time deposits have a minimum maturity of seven days and a maximum maturity of ten years. where the total credit in all the accounts taken together is not expected to exceed Rs. Time deposits from non-resident Indians denominated in a foreign currency have a minimum maturity of one year and a maximum maturity of three years.

the “Institutions”) must maintain a comprehensive record of all their transactions. banking companies.0% for the SLR to be prescribed by the RBI. Accordingly. 2007. which is empowered to order confiscation of property where it is of the opinion that a crime as recognised under the PML Act. At the date of this Letter of Offer. The RBI may prescribe the CRR for banks without any floor or ceiling. the CRR is 7. has been committed.0%. inter alia. 2006 with effect from April 1. 2007.0%. 2007. via Gazette Notification. 2007. which received the assent of the President on March 26. the RBI will not pay any interest on the CRR balances maintained by banks for each fortnightly period. 2002 (the “PML Act”). the statutory minimum and maximum CRR requirement of 3. The Banking Regulation (Amendment) Act. These details are to be provided to the appropriate authority under the PML Act. The Central Government has made public the rules under the PML Act on July 1. See also “Industry Overview — Recent Structural Reforms — Proposed Amendments to the Banking Regulation Act. 2007 and was deemed to have come into force on January 23.0% of the required CRR on any day of the fortnight. 2007. the amendment to sub-section (i) of section 42 of the Reserve Bank of India Act came into force with effect from April 1. by way of cash reserve with itself and by way of balance in current account with the RBI. The following liabilities are excluded from the calculation of the cash reserve ratio: • • • • inter-bank liabilities.0% of total demand and time liabilities no longer exists from April 1. and liabilities on account of transactions in CBLO with the Clearing Corporation of India Ltd. beginning March 31. In view of section 3 of the Reserve Bank of India (Amendment) Act. The percentage of this liquidity ratio is periodically fixed by the RBI and can be a maximum of 40. financial institutions and intermediaries (together. Legal Reserve Requirements Cash Reserve Ratio A banking company such as the Bank is required to maintain a specified percentage of its demand and time liabilities. the Government enacted the Prevention of Money Laundering Act. 2007 The CRR must be maintained on an average basis for a fortnightly period and should not be below 70. the rules require verification of the identities of all their clients and also require that the Institutions maintain records of their respective clients. liabilities of offshore banking units.S. In addition. Statutory Liquidity Ratio In addition to the cash reserve ratio. has.In a bid to prevent money laundering activities. the RBI requires banking companies to maintain a liquidity ratio of 25. the applicable exchange control regulations prescribe reporting mechanisms for foreign exchange transactions and required authorised dealers to report suspicious transactions that they identify to RBI. including the nature and value of such transactions. Pursuant to section 3 of the Reserve Bank of India (Amendment) Act 2006.” Regulations on Asset Liability Management At the date of this Letter of Offer. dollar) accounts. At the date of this Letter of Offer. The PML Act seeks to prevent money laundering and provides for the confiscation of property derived from. Further. 2005. giving it more flexibility in its monetary management operations.0% and 15. removed the floor rate of 25. It has also empowered the RBI to determine SLR-eligible assets. or involved in.5% of total demand and time liabilities. gold or approved securities. Under these rules. the RBI’s regulations for asset liability management (“ALM”) require banks to draw up asset-liability gap statements separately for Rupees and for four major foreign 123 . excluding inter-bank deposits. credit balances in ACU (U. a banking company such as the Bank is required to maintain a specified percentage of its net demand and time liabilities in liquid assets such as cash. money laundering and for incidental matters connected therewith.

2008. issue guarantees. subject to certain conditions. respectively.e. The net cumulative negative mismatches during the next day. 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. which prescribes the rules relating to foreign exchange activities in India. 2000. grant foreign currency loans to onshore and offshore corporations. The Bank’s foreign exchange operations are subject to the guidelines specified under the Foreign Exchange Management Act. the RBI made certain amendments to the ALM framework. Additionally. Further.0% limit on negative gaps was made mandatory with effect from April 1. 10%. the Bank is permitted to hedge the foreign currency loan exposures of Indian corporations in the form of interest rate swaps. 1999. 2008. the Bank is required to enrol as a member of the Foreign Exchange Dealers Association of India. from April 1. 8-14 days and 15-28 days should not exceed 5%. i. open and maintain foreign currency accounts abroad. 2-7 days and 8-14 days. In respect of other time periods. 124 . As an authorised dealer. Foreign Currency Dealership The RBI has granted the Bank a full authorised dealers’ license to deal in foreign exchange through its designated branches. These gap statements are prepared by scheduling all assets and liabilities according to the stated and anticipated re-pricing date or the maturity date. Under this license.currencies. These statements for the domestic assets and liabilities have to be submitted to the RBI periodically. 15% and 20%. the Statement of Structural Liquidity may be reported to the RBI once a month. 2007. • These norms will have to be complied with from January 1. This 20. Further. Further. the Bank has been granted permission to • • • • • • • • • engage in foreign exchange transactions in all currencies. of the cumulative cash outflows in the same periods. RBI has directed banks to lay down internal norms for negative liquidity gaps. banks may undertake dynamic liquidity management and should prepare the Statement of Structural Liquidity on a daily basis. as a risk control mechanism. the RBI has asked banks to manage their asset-liability structure such that the negative liquidity gap in the periods of 1–14 and 15–28 days does not exceed 20. On October 24. open documentary credits.0% of cash outflows in these same periods. next day. However. These are set out below: • • Banks may split the first time period (referred to above) into three periods. for example on the third Wednesday of every month. raise foreign currency and Rupee denominated deposits from non-resident Indians. handle the collection of bills and funds transfer services. grant import and export loans. currency swaps and forward rate agreements. supervisory reporting of the Structural Liquidity position will take place every fortnight. and enter into derivative transactions and risk management activities that are incidental to its normal functions authorised under its organisational documents. 2-7 days. Authorised dealers such as the Bank are required to determine their limits on open positions and maturity gaps in accordance with the RBI’s guidelines and these limits are approved by the RBI.

Special Provisions of the Banking Regulation Act. the bank is required to report the same to the RBI within 21 days. the RBI is empowered to advise generally and give directions to the Bank and prohibit the Bank from entering into any transactions. Restrictions on External Commercial Borrowings Under the RBI’s Circular on external commercial borrowings (“ECBs”) dated August 7. no person shall have a right. In November 2003.S. explaining the circumstances leading to such appropriation. exempt a bank from requirements relating to its reserve fund.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. 1949 Under sections 35A and 36 of the Banking Regulation Act (which apply to the Bank).$ 400 million to U. companies requiring ECBs can utilise: (i) only up to U. including sections 35A and 36. on the recommendation of the RBI. 2007. 2000 provides that overseas branches of authorised dealers that are banks incorporated or constituted in India (including the Bank) are permitted to borrow in a foreign currency in the normal course of their banking business outside India.$ 500 million per company per financial year. subject to compliance with the applicable minimum average maturity period. The Government cannot transfer any shares of the Bank if the transfer results in the Government’s overall shareholding falling below 55.$ 500 million. Further.S. pursuant to the RBI Circular dated September 26. Restriction on Transfer of Shares The Act lays down restrictions on the transfer of the Bank’s shares. Also. the limit for prepayment of external commercial borrowing (without prior approval of the Reserve Bank) has been increased from U. Prohibited Business The Banking Regulation Act specifies the business activities in which a bank may engage. subject to the funds remaining overseas until they are required to be expended in India or (ii) ECBs for foreign currency expenditure for permitted end-uses without RBI approval.0% of the Bank’s issued capital. 125 .S. 2007. The maximum amount of ECBs that companies are permitted to raise is subject to a limit of U. subject to the funds remaining overseas. All branches should monitor all non-resident accounts to prevent money laundering. The London Branch and Nassau Branch are not affected by these guidelines since Regulation 4(2)(ii) of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations. to any compensation for any loss incurred by reason of operation of certain provisions of the Act. 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 20. If there is an appropriation from this account. The Government may.0% of the issued capital of the Bank (unless permitted by the Government after consultation with the RBI).0% of the profits in each year before dividends. Under section 50 of the Banking Regulation Act (which also applies to the Bank). under the Act.$ 20 million of ECBs per financial year (per company) for Rupee expenditure for permitted end-uses with the prior approval of the RBI.S. whether in contract or otherwise. the RBI issued guidelines which stated that no banks will be permitted to raise external commercial borrowings or provide guarantees in favour of overseas lenders for external commercial borrowings. no shareholder other than the Government can exercise voting rights in excess of 10.

1949. subject to compliance with the following norms: • • Capital to Risk Asset Ratio (“CRAR”) of at least 9. banks have been given general permission to declare dividends. and the RBI should not have placed any explicit restrictions on the bank as regards the declaration of dividends. Banks may declare and pay interim dividends out of the relevant accounting period’s profit without the prior approval of the RBI if they satisfy the minimum criteria above. However. In the event a bank does not meet the above CRAR norms. depreciation in assets. proposes to permit the issuance of preference shares in accordance with the guidelines framed by the RBI.0% for the accounting year for which it proposes to declare a dividend. the equalisation of dividends. it would be eligible to declare a dividend provided its net NPA ratio is less than 5. the financial statements pertaining to the financial year for which the bank is declaring a dividend should be free of any qualifications by the statutory auditors which have an adverse bearing on the profit during that year. In terms of the Act. on a poll of shareholders. the bank should comply with the prevailing regulations/guidelines issued by the RBI in respect of creating adequate provisions for the impairment of assets and staff retirement benefits.0%. it can declare dividends without the consent of the RBI. no exemptions shall be available from the RBI. If a bank does not comply with the conditions stated above but wishes to declare dividends or a higher rate of dividend. Restriction on Share Capital and Voting Rights Banks can issue only ordinary shares. inter alia. the Act (Amendment) Bill. The rate of dividend shall be determined by the Central Board. and the contribution to staff and superannuation funds. The Banking Regulation Act specifies that.Restrictions on Payment of Dividends As regards the guidelines issued by the RBI pertaining to the payment of dividends. no shareholder in a banking company can exercise voting rights in excess of 10. 2006. the transfer of profits to statutory reserves etc. the proposed dividend should be payable out of the current year’s profit. Also. bad and doubtful debts. no shareholder other than the Government can exercise voting rights in excess of 10. the Bank should comply with the requirements of the Act prior to declaring any dividend.0%. The bank should also satisfy the following conditions: • • the bank should comply with the provisions of sections 15 and 17 of the Banking Regulation Act. Regulatory Reporting and Examination Procedures 126 .0%.0%) computed for the relevant accounting period.0% of the issued capital of the Bank (unless permitted by the Government after consultation with the RBI). a dividend can only be declared after making provision for. and the cumulative interim dividend is within the prudential cap on the dividend payout ratio (40. and net NPA ratio of less than 7.0% for the preceding two completed years and the accounting year for which the bank proposes to declare a dividend. Additionally. but has a CRAR of at least 9. • • • • In the event that a bank fulfils the conditions stated above. in accordance with the Act.0% of the total voting rights of all the shareholders of the banking company. The declaration and payment of an interim dividend beyond this limit would require the prior approval of RBI. the dividend payout ratio should not exceed 40.

the nomination committee must meet and decide upon his candidature based inter alia on educational qualification. banks are required to report to the RBI on aspects such as: • • • • • • • assets. at intervals ranging from one to three years. • • Penalties 127 . in consultation with the RBI. and in case there is any significant change in such information. the Bank is required to submit the report on actions taken by it to the RBI. Appointment and Remuneration of the Chairman. along with the report on actions taken by the Bank. and other prudential parameters. The RBI also conducts periodical on-site inspections on matters relating to the bank’s portfolio. risk management systems. The salient features of these guidelines are set out below: • • • the board of directors of the Associate Bank should constitute a nomination committee.The RBI is empowered under the Banking Regulation Act to inspect banks. the nomination committee should re-examine the fit and proper status of such director. and elected directors must be a yearly basis provide a declaration that the information submitted by them has not undergone any change. the unaudited operating results for each quarter. internal controls. control and management. The Directors shall be paid fees and allowances for attending the meetings and for attending to any other work of the Bank. The salary and allowances of the Chairman and the Managing Director(s) shall be determined by the Central Government. experience and field of expertise. Four directors are to be elected by the shareholders and nine other directors are nominated or appointed by the Central Government except one director who shall be nominated by the RBI. including the Chairman. The inspection report. the Managing Director and other senior executives. asset quality. The RBI monitors prudential parameters at quarterly intervals. The RBI also discusses the report with the management team. the capital base and the capital adequacy ratio. before any person is appointed as director. credit allocation and regulatory compliance. the board of directors should ensure that the elected directors sign the deed covenants laid down. must be placed before the board of directors. the risk weighting of these exposures. The RBI also conducts on-site supervision of selected branches of the Bank with respect to their general operations and foreign exchange related transactions. Criteria for elected directors on boards of the Associated Banks In November 2007. On approval by the board of directors. The Bank is subject to the on-site inspection by the RBI at intervals of at least one year. track record and integrity. To this end and to enable off-site monitoring and surveillance by the RBI. the RBI issued guidelines laying down the ‘fit and proper’ criteria for elected directors on the boards of the Associate Banks. connected and related lending and the profile of ownership. the nomination committee should undertake due diligence to determine the fit and proper status of existing elected directors and of persons to be elected as directors. the concentration of exposures. Managing Director and Other Directors The Chairman and Managing Director(s) of the Bank are appointed by the Central Government. liabilities and off-balance sheet exposures.

The Bank is also required to disclose information if ordered to do so by a court. together with rules and regulations framed there under.The RBI may impose penalties on banks and its employees in the case of any infringement of regulations under the Banking Regulation Act. Maintenance of Records The Bank is required to maintain books. The KYC guidelines also provide for certain records to be maintained for a minimum period of five years. the Bank cannot issue bonus shares. the Bank also requires the prior approval of the RBI to participate in the equity of financial services ventures. The Bank and its subsidiaries have to observe the prudential norms stipulated by the RBI from time to time. notwithstanding the fact that such investments may be within the ceiling prescribed under section 19(2) of the Banking Regulation Act. 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. records and registers. and where disclosure is made with the express or implied consent of the customer. Issue of Bonus Shares In the absence of any provision in the Act to re-capitalise the reserves. in the public interest.0% of its paid-up capital and reserves and its aggregate investments in all such companies and financial institutions put together cannot exceed 20. The provisions contained in the Act and SBI General Regulations. the Banking Regulations Act. including bonds. where the Bank needs to disclose information in its interests.0% of its paid-up capital and reserves. Assets to be Maintained in India Each bank is required to ensure that its assets in India (including import-export bills drawn in India and RBI-approved securities. The Bank cannot disclose any information to third parties except under clearly defined circumstances. Further investment by the Bank in a subsidiary. Secrecy Obligations The Bank’s obligations relating to maintaining secrecy arise out of section 44 of the Act and common law principles governing the Bank’s relationship with its customers. The penalty may also include imprisonment. where there is an obligation to disclose to the public. The RBI may. 128 . The following are the exceptions to this general rule: • • • • where disclosure is required to be made under any law.0% of its demand and time liabilities in India. Pursuant to such prudential norms. The Bank is required to maintain an arm’s length relationship with its subsidiaries. and the Banker’s Books Evidence Act govern the production of documents. The Bank is required to comply with the above in furnishing any information to any parties. financial services company or financial institution cannot exceed 10. The Banking Regulation Act specifically requires banks to maintain books and records in a particular manner. all the Bank’s borrowings. Currently. See “— Restrictions on Investments in a Single Company” above. even if the bills and the securities are held outside India) are not less than 75. The penalty may be a fixed amount or may be related to the amount involved in any contravention of the regulations. including stock exchanges and depositories. Subsidiaries and other Investments The Bank requires the prior permission of the RBI to incorporate a subsidiary. preservation of records and inspection by shareholders. are unsecured.

the disclosure of which has no relationship to any public activity or interest. Funds can also be raised from those resident sources to the extent such residents are permitted under the existing exchange control regulations to invest/maintain foreign currency accounts abroad. which are ‘Public Authorities’ within the meaning of the Right to Information Act. certified by an officer of the bank may be treated as prima facie evidence of a corresponding transaction in any legal proceedings. the ECB guidelines apply. similar information which would cause a breach of privilege of Parliament or the state legislature or which would prejudicially affect the sovereignty and integrity of India. Under the provisions of the Banker’s Books Evidence Act. Offshore Banking Units are exempt from cash reserve ratio requirements. • • • • • • • 129 . cash books and account books. Offshore Banking Units may operate and maintain balance sheets only in foreign currencies. Offshore Banking Units are required to adopt liquidity and interest rate risk management policies prescribed by the RBI in respect of overseas branches of Indian banks as well as within the overall risk management and asset and liability management framework of the banks subject to monitoring by the bank’s board of directors at prescribed intervals. 2005 gives citizens the right to secure access to information under the control of public authorities in order to promote transparency and accountability in the working of every public authority. except information pertaining to commercial confidence. the parent bank is required to provide a minimum of U. Offshore Banking Units must follow the Know Your Customer guidelines and must be able to establish the identities and addresses of the participants in a transaction. the following: • • • • No separate assigned capital is required. The deployment of funds is restricted to lending to units located in the SEZ (including other SEZs) and SEZ developers. and. However. duties and tariffs. 1999.S. a copy of any entry in a bankers’ book. unless such a person is eligible to enter into or undertake such transactions under the Foreign Exchange Management Act. The key regulations applicable to Offshore Bank Units include. The Right to Information Act. All prudential norms applicable to overseas branches of Indian banks apply to Offshore Banking Units. The sources for raising foreign currency funds must be external. or which would cause unwarranted invasion of the privacy of the individual. such as the Bank. the disclosure of which would harm the competitive position of a third party. trade secrets or intellectual property. subject to Foreign Exchange Management regulations.$ 10 million to its Offshore Banking Unit. which are specially delineated duty free enclaves deemed to be foreign territory for the purpose of trade operations. Foreign currency requirements of corporates in the Domestic Tariff Area (“DTA”) can also be met by the Offshore Banking Units.publish the information obtained from the Bank. A bank cannot borrow from its Offshore Banking Units. An Offshore Banking Unit may not enter into any foreign exchange transactions with a resident in India. Regulations Governing Offshore Banking Units The Government and the RBI have permitted banks to set up Offshore Banking Units in Special Economic Zones. The RBI may exempt a bank’s Offshore Banking Unit from SLR requirements on specific application by the bank for a specified period. its security or relationship with foreign states or which would lead to an incitement to commit an offence. except for a special Rupee account out of the convertible fund to meet daily expenses. or personal information. but are not limited to. If funds are lent to corporates in the DTA. such as ledgers. on certain other grounds. day books. The loans and advances of Offshore Banking Units are not counted as net bank credit when computing priority sector lending obligations. the legal capacity of the participants and the identity of the beneficial owner of the funds. Banks. 2005 are required to provide any information called for by any citizen.

The Bank’s Offshore Banking Units in India are located in Mumbai and Kochi. Regulations and Guidelines of the Securities and Exchange Board of India The Securities and Exchange Board of India was established to protect the interests of public investors in securities and to promote the development of, and regulate, the Indian securities market. The Bank is subject to the Securities and Exchange Board of India’s regulations as regards its capital issuances, as well as its underwriting, custodial, depositary participant, investment banking, brokering and debenture trusteeship activities. These regulations provide for its registration with the Securities and Exchange Board of India for each of these activities, functions and responsibilities. The Bank has adhered to the regulations and guidelines issued by SEBI for various activities. Foreign Ownership Restriction The existing permissible foreign investment limit in the Bank (for public sector banks) is 20.0%. As of January 28, 2008, the total foreign holding of the Bank is 19.8%. The limit is inclusive of the global depository receipt (“GDR”) holdings which stood at 7.8% as on September 30, 2007. Guidelines for Merger and Amalgamation of Private Sector Banks The RBI has issued guidelines for the merger and amalgamation of private sector banks. The guidelines relate to: (i) an amalgamation of two banking companies and (ii) an amalgamation of an NBFC with a banking company. In the case of an amalgamation of two banking companies, section 44A of the Banking Regulation Act requires that a draft scheme of amalgamation be approved by the shareholders of each banking company by passing a resolution which requires a two-thirds majority. Additionally, the draft scheme must also be submitted to the RBI for approval. Where an NBFC is proposed to be amalgamated into a banking company, the banking company 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 banking company is amalgamated into an NBFC. In July 2004, the RBI issued a draft policy on ownership and governance in private sector banks. The key provisions of the policy on the ownership of banks are: • no single entity or group of related entities is permitted to directly or indirectly hold more than 10.0% 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 have to indicate a plan for compliance; in respect of corporate shareholders, the objective is to ensure that no entity or group of related entities has a shareholding in excess of 10.0%. In the case of shareholders that are financial entities, the objective is to ensure that it is in good standing, publicly listed and well regulated; and banks are responsible in any ongoing basis for the “fit and proper” criteria applicable to shareholders.

• •

Special Status of Banks in India The special status of banks is recognised under various statutes including the Sick Industrial Companies Act, 1985, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and the Securitisation Act. As a bank, under various statutes the Bank is entitled to certain benefits, including the following: • The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 provides for the 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.

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Under this Act, the procedures for recoveries of debt have been simplified and time frames have been fixed for the 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. • The Sick Industrial Companies Act, 1985, provides for the reference of sick industrial companies to the Board for Industrial and Financial Reconstruction. Under the Act, other than the Board of Directors of a company, a scheduled bank (where it has an interest in the sick industrial company owing to any financial assistance or obligation rendered or undertaken by it) may refer the company to the BIFR. The Sick Industrial Companies Act, 1985 has been repealed by the Sick Industrial Companies (Special Provisions) Repeal Act, 2004, subject to which the provisions of Companies Act will apply in relation to sick companies. The Securitisation Act focuses on improving the rights of banks, financial institutions and other specified secured creditors, as well as asset reconstruction companies, by providing that such secured creditors can take over management control of a borrower company upon default and/or sell assets without the intervention of the courts, in accordance with the provisions of the Securitisation Act.

Regulations Governing Insurance Companies Subsidiaries offering life insurance and non-life insurance are subject to the provisions of the Insurance Act, 1938 and the various regulations prescribed by the Insurance Regulatory and Development Authority. These regulations regulate and govern, among other things, registration as an insurance company, investment, the licensing of insurance agents, advertising, the sale and distribution of insurance products and services, and the protection of policyholders’ interests. In May 2002, the Indian Parliament approved the Insurance (Amendment) Act 2002, which facilitates the appointment of corporate agents by insurance companies and prohibits intermediaries and brokers from operating as surrogate insurance agents. Income Tax Benefits As a banking company, the Bank is entitled to certain tax benefits under the Indian Income Tax Act, including the following: • In respect of the provision made by it for bad and doubtful debts, the Bank is entitled to a tax deduction 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, 1961, and of up to 10.0% of the aggregate average advances made by its rural branches computed in the manner prescribed. The Bank has the option of claiming a deduction of up to 5% in respect of the provision made by it for any assets classified pursuant to the RBI’s guidelines as doubtful or loss assets. For income tax purposes, the Bank’s deposits and bonds are prescribed modes of investing and depositing surplus money by charitable and religious trusts. The income of non-resident persons and persons not ordinarily resident in India, acquired as interest on the Bank’s deposits in a foreign currency qualifying under section 10(15)(iv)(fa), is exempt from tax.

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DIVIDENDS The declaration and payment of dividends is recommended by the Bank’s Central Board of Directors and approved by its shareholders. The Bank’s decision to declare a dividend depends on a number of factors including but not limited to its profits, capital requirements and overall financial condition. The Central Board may also pay interim dividends from time to time. All dividend payments are made in cash to the shareholders of the Bank. Past dividends declared by the Bank have been made pursuant to the guidelines issued by RBI from time to time. RBI has issued a revised Dividend Policy through their circular DBOD No. BC.88/21.02.067/2004-05 dated May 4, 2005. The Bank has declared dividends for the years 2006 and 2007 in accordance with RBI’s revised policy. The Bank’s dividend policy is to declare dividends only at the conclusion of the fiscal year. The dividends declared by the Bank during the previous fiscal years ended March 31, 2003, 2004, 2005, 2006 and 2007 are presented in the table below. March 31, 2003 526,298,878 March 31, 2004 526,298,878 March 31, 2005 526,298,878 March 31, 2006 526,298,878 March 31, 2007 526,298,878

Number of Shares (Face value of Rs. 10 each) Dividend Rate (%) Total divided amount (Rs. in million)

85% 4,473.6

110% 5,789.3

125% 6,578.7

140% 7,368.2

140% 7,368.2

The amounts paid as dividends in the past are not necessarily indicative of the Bank’s dividend policy or dividend amounts, if any, in the future.

132

MANAGEMENT The following chart illustrates the management structure of the Bank as of December 31, 2007.
CHAIRMAN CHAIRMAN DMD & Corp.Devpt.Officer DMD & Corp.Devpt.Officer DMD &Chief Fin.Officer DMD &Chief Fin.Officer DMD (Corporate Strategy & DMD (Corporate Strategy & New Businesses) New Businesses) MD & Chief Credit & Risk Officer MD & Chief Credit & Risk Officer DMD (Info. Technology ) DMD (Info. Technology ) DMD (Insp & Mgmt Audit) DMD (Insp & Mgmt Audit) Chief Economic Advisor # Chief Economic Advisor # GM (Corporate GM (Corporate Communication & Change) Communication & Change) Chief Vigilance Officer Chief Vigilance Officer

DMD & GE DMD & GE (Global (Global Markets) Markets)

DMD & GE DMD & GE (Rural (Rural & Agri. Bus) & Agri. Bus)

MD & GE MD & GE (Comm.Bkg) (Comm.Bkg)

DMD & GE DMD & GE (National Bkg) (National Bkg)

DMD & GE DMD & GE (Intl.Bkg) (Intl.Bkg)

DMD & GE DMD & GE (Associates (Associates & Subsidiaries) & Subsidiaries)

DMD & GE (MC) Rural Business Group Corporate Accts..Group Stressed Asset Mgmt. Group Global and Domestic Treasury Modules Reg.Bus.Office Branches

DMD (On special duty) Whole Sale Banking) Project Finance & Leasing Local Head Offices (Circles)
Marketing Cross Selling

Personal Bkg Bus.Unit Govt. Bus. Unit SME Bus. Unit CGM SBSU Banking Operations # Position now vacant.

Foreign Offices and Subsidiaries

Associates Banks and Subsidiaries

Central Board of Directors The Central Board of Directors of the Bank is appointed in accordance with Section 19 of the Act. The Central Board is headed by the Chairman of the Bank. Two Managing Directors are also members of the Central Board. As of January 30, 2008, in addition to the three whole-time Directors, i.e., the Chairman and two Managing Directors, there were nine other Directors, on the Central Board, including eminent members of academia, finance and accounting professions. These included representatives of shareholders and staff of the Bank, nominees of the Government and the RBI, as well as other directors nominated under Section 19 of the Act. Brief particulars of the Bank’s Directors are set out below: Sr. No. 1. Name, Designation, Address, Occupation and Term Mr. O.P. Bhatt Chairman Appointed under Sec 19(a) of the Act Address: No. 5, Dunedin J.M. Mehta Road Mumbai - 400 006 Nationality Indian Age 56 1. 2. 3. 4. 5. Other Directorships SBI Funds Management (Private) Limited SBI Factors & Commercial Services Private Limited State Bank of Indore State Bank of Saurashtra State Bank of Patiala

133

Sr. No.

Name, Designation, Address, Occupation and Term Occupation: Banking Term: July 1, 2006 to March 31, 2011 Date of Birth: March 7, 1951 DIN No. 00548091

Nationality

Age 6. 7. 8. 9.

Other Directorships State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Travancore

10. State Bank of India (California) 11. SBI Life Insurance Company Limited 12. SBI Capital Markets Limited 13. SBICAPS Ventures Limited 14. SBI Discount & Finance House of India Limited (SBIDFHI) 15. SBI Cards & Payment Services Private Limited 16. General Insurance Corporation of India 17. Export-Import Bank of India 18. GE Capital Business Process Management Services Private Limited, Member 19. Member of the Governing Board and Chairman of the Finance Committee & Campus Committee – National Institute of Bank Management 20. Member of the Governing Board & Chairman of the Finance Committee and Committee of Administrators of IBPS Employees Provident Fund – Institute of Banking Personnel Selection 21. Confederation of National Council Indian Industry –

22. Federation of Indian Chamber of Commerce & Industry – Chairman of the Banking & Financial Institutions 23. Khadi & Village Industries Commission 24. National Co-operative Development Corporation - Member 25. High Level Committee on Financial Sector Reforms 26. Governing Board of Indian Council for Research on International Economic Relations 27. Board of Governors of XLRI, Jamshedpur 28. Institute for Development and Research in Banking Technology

134

Sr. No. 2.

Name, Designation, Address, Occupation and Term Mr. T.S. Bhattacharya Managing Director Appointed under Sec 19(b) of the Act Address: M-1, Kinellan Towers 100 A, Napean Sea Road Mumbai 400 006 Occupation: Banking Term: February 28, 2005 to January 31, 2008 Date of Birth: January 24, 1948 DIN No. 00157305

Nationality Indian

Age 59 1. 2. 3. 4.

Other Directorships SBI Capital Markets Limited State Bank of India (Canada) Infrastructure Leasing & Services Limited (IL & FS) Financial

PT Bank Indomonex (PBIM), Indonesia

3.

Mr. S.K. Bhattacharyya Managing Director Appointed under Sec 19(b) of the Act Address: M-2, Kinellan Towers 100 A, Napean Sea Road Mumbai - 400 006 Occupation: Banking Term: October 8, 2007 to October 31, 2010 Date of Birth: October 31, 1950 DIN No. 01924770

Indian

57

Nil

4.

Mr. Suman Kumar Bery Non-Executive Director, elected under Section 19(c) of the Act Address: N-42, Panchshila Park, New Delhi - 110 017 Occupation: Economist Term: with effect from September 15, 2005; three years and eligible for reelection for a further three years, maximum six years continuously Date of Birth: July 18, 1949

Indian

58

Director General, NCAER

135

New Delhi 14. State Bank of India Zonal Office Bhangagarh Guwahati 781 . Telecom & Networks (TeNeT) Group Department of Electrical Engineering IIT Madras Chennai . Tata Teleservices (Maharashtra) Limited 12. 5. 4. appointed under Section 19(ca) of the Act Address: Head Assistant. 1953 DIN No. 7. Member of the Army Information Technology Advisory Board. Name. 2005. Term: with effect from July Indian 59 Nil 136 . Dr. Occupation and Term DIN No. (Sec. Institute for Development & Research in Banking Technology (IDRBT) 10 3i Infotech Limited 11. Ananta C.Sr.600 036 Occupation: Academician Term: with effect from September 15. Chennai 16. I-Tech (International Training and Education Centre on HIV).005 Occupation: SBI Employee. National Internet Exchange of India Limited. three years and eligible for reelection for a further three years. Army Headquarters. Mr. Kalita Employee Representative Director. Member of the Scientific Advisory to the Prime Minister (SAC-PM) 13. Designation. Member of the Governing Council of the Institute of Financial Management and Research. Polaris Software Lab Limited Tejas Networks Private Limited Sasken Communications Technologies Limited Midas Communication Private Limited Bharat Electronics Limited National Research Corporation Limited Vishal Bharath Company) Development (Sec. 2. 3. Chennai 6. Address. Ashok Jhunjhunwala Non-Executive Director. 00417944 Comnet 8. Member of the Executive Council of Jawaharlal Nehru University 15. maximum six years continuously Date of Birth: June 22.25 Company) – Member – Governing Council 9. elected under Section 19(c) of the Act Indian 54 1.25 Technologies Address: Professor. No. Member of the Board. 6. 01943092 Nationality Age Other Directorships 5.

Amar Pal Employee Representative Director. All India State Bank of India Officers’ Federation House No. 1948 DIN No. Mr. 6. Official Languages Department.400 006 Occupation: Chartered Accountant/Industrialist Term: with effect from January 23. Piyush Goyal Non-Executive Director. Sonmarg. Chandigarh. 1948 DIN No. 00609564 Nationality Age Other Directorships 7. 2005 to March 31. 4. maximum tenure six years continuously Date of Birth: June 13. 01944128 Indian 59 Nil 8. 5. Indian Merchants Chamber 137 .V. Shah Construction Services Private Limited Flash Agro Farms Private Limited Intercon Advisers Private Limited Managing Committee. Mr. appointed under Section 19(cb) of the Act Address: Deputy Manager. Name. 1964 Indian 43 1. State Bank of India. Designation. 3. maximum tenure of six years continuously Date of Birth: June 1. nominated under Section 19(d) of the Act Address: 28. Petit Hall Mumbai . Address. 2003. Occupation and Term 15. Thane Belapur Industries Association Infrastructure Development Centre S. Local Head Office. 2004. President.Sr. three years or until a successor is appointed and eligible for re-appointment.B. 14th Floor Napean Sea Road. No.354 Sector 37-A Chandigarh – 160 037 Occupation: SBI Employee Term: August 19. Opposite J. 2008 Date of Birth: April 1. three years or until a successor is nominated and eligible for renomination. Flashnet Infosolutions (I) Limited 2.

110 005 Occupation: Working Journalist Term: with effect from July 9. Prof. 00024431 Nationality Age Other Directorships 9. Deva Nand Balodhi Non-Executive Director. maximum tenure six years continuously Date of Birth: July 14. Military Road. nominated under Section 19(d) of the Act Address: 669. Address. 2007. Occupation and Term DIN No. Anand Parbat New Delhi . No. 1946 DIN No. Salahuddin Ansari Non-Executive Director. Name. 01946041 Indian 61 Nil 10. nominated under Section 19(d) of the Act Address: Principal-in-charge Madhupur College Madhupur (District Deoghar) Jharkhand – 815 353 Occupation: Professor of Commerce Term: with effect from July 9. 1st Floor. Dr. maximum tenure six years Indian 61 Nil 138 . 2007 for three years and eligible for re-nomination . Mohd. three years and eligible for re-nomination.Sr. Designation.

Ministry of Finance. No.Sr. Arun Ramanathan GOI Nominee Director. 1949 DIN No. Shyamala Gopinath RBI Nominee Director. 2004 until further orders Date of Birth: June 20. 1946 DIN No. 12. appointed under Section 19(e) of the Act Address: Secretary (Financial Services) Department of Financial Services. 4. Designation. Address. 1949 DIN No. 2007. Central Office Mint Road Mumbai 400 001 Occupation: Central Banker Term: with effect from September 28. Indian 58 1. Infrastructure Development Bank of India Ltd. Nationality Age Other Directorships 11. RBI Central Board .110 001 Occupation: Member of the Indian Administrative Services Term: with effect from January 18.Director National Housing Bank . India Infrastructure Finance Company Limited (IIFCL) 3. 2008 until further orders Date of Birth: April 25. (to be applied for) Indian 58 1. Life Insurance Corporation of India 5. Brief Biographies of the Directors 139 . Occupation and Term continuously Date of Birth: July 30. Government of India Parliament Street New Delhi . ICICI Bank. with a minimum of six meetings per year. To be applied for. appointed under Section 19(f) of the Act Address: Deputy Governor RBI. Name. Ms. 3. 2.Director Export Import Bank of India . (IDFC) 2. To be applied for. Infrastructure Development Finance Company Ltd. Mr.Director The Central Board meets regularly in accordance with the requirements of the Bank. The Central Board meetings were held nine times during fiscal year 2007 and seven times during the nine-month period ended December 31.

he was the Managing Director of the State Bank of Bikaner and Jaipur. Mr. 2008. representing the non-workmen staff. Piyush Goyal is a Director nominated by the Central Government under section 19(d) of the Act. Bhattacharya joined the Bank as a direct recruit officer in 1969. He has also served as Chief General Manager of the Bank’s Hyderabad Circle and as Managing Director of SBI International (Mauritius) Limited. Mr. Zonal Office. Dr. O. whichever is earlier. Deva Nand Balodhi 140 .Mr. Mr. corporate and international banking. Mr. Suman Kumar Bery Mr. Mr. representing the workmen staff. Mr. for three years and. Piyush Goyal Mr. Ananta C. Prior to his present assignment as Managing Director and Chief Credit and Risk Officer of the Bank.C. Mr. Goyal is also the Chairman & Managing Director of Flashnet Infosolutions (I) Limited. Bhattacharya (Managing Director) Mr. Mr. for a further period of three years. Chief General Manager of the Bank’s North-East Circle and the Bank’s Representative in Washington D. with effect from September 15. he was the Managing Director of State Bank of Indore.P. Bhattacharya has also headed the retail banking. S. Bhatt has held several critical positions in retail. Bhattacharya retires on January 31. Kalita Mr. for a period of three years or until he ceases to be a workman employee of the Bank or until further orders. K. which is the date on which he will attain the age of superannuation. Mr. with effect from July 15. State Bank of India. Bhattacharyya (Managing Director) Mr. Kalita is the Head Assistant. Under his leadership. Suman Kumar Bery is a director elected by the shareholders under section 19(c) of the Act with effect from September 15. having earlier worked with the World Bank and also as Advisor with the RBI. 2005. Bhattacharyya joined the Bank as a direct recruit officer in 1972. 2005 until March 31. Madras that is working closely with the industry in the development of a number of telecom and computer network systems. Bhatt (Chairman) Mr. Kalita shall not hold office continuously for a period exceeding six years. Mr. Mr. Ashok Jhunjhunwala is a Director elected by the shareholders under section 19(c) of the Act. the Bank has undertaken technological upgrades. Mr. 2004. New Delhi. Mr. whichever is later (maximum six years). Ashok Jhunjhunwala Dr. Goyal is a Chartered Accountant and was previously a Director on the Board of the Bank of Baroda. 2005. 2008. with effect from January 23. Jhunjhunwala is a Professor of the Department of Electrical Engineering and leads the Telecommunications and Computer Network Group (TeNeT) at IIT. whichever is earlier. Mr. Bery is a reputed economist and is currently the Director General (CEO) of National Council of Applied Economic Research (NCAER). Dr. 2003. Ananta Chandra Kalita is a Director nominated under section 19(ca) of the Act. marketing and product development and international merchant banking and international correspondent banking departments of the Bank. Mr. for three years or until the appointment of his successor. Mr. Amar Pal is a Director nominated by the Central Government under section 19(cb) of the Act. Mr. Prior to the present assignment as Managing Director and Group Executive (Corporate Banking). including Managing Director of State Bank of Travancore. Bhatt assumed charge as Chairman of the Bank in July 2006. for a further period of three years. Pal is the Deputy Manager at the Chandigarh Local Head Office of the Bank. or until he ceases to be an officer of the Bank. Bhatt joined the Bank as a direct recruit officer in 1972. S. Amar Pal Mr. Guwahati. with effect from August 19. T. for three years and if re-elected. if re-elected.

S. Professor Ansari has also been a member of Parliament. Balodhi is a Director nominated by the Central Government under section 19(d) of the Act. Ramanathan is Secretary (Financial Services) for the Government's Ministry of Finance. 2007. Uttarakhand. Salahuddin Ansari Professor Ansari is a Director nominated by the Central Government under section 19(d) of the Act. Shyamala Gopinath is a Director nominated under section 19(f) of the Act (nominated by the RBI). for three years or until the appointment of his successor.P. It is headed by the Chairman and is the highest nonCentral Board level policy-making body of the Bank. Shyamala Gopinath Ms. Arun Ramanathan is a Director nominated under section 19(e) of the Act (nominated by the Government) with effect from January 18. (1) Executive Committee. Professor Ansari is active in academia and is presently the Principal-in-charge at Madhupur College. Bharati Rao Mr. Bhattacharya Mr. Bhattacharyya Mr.Dr. Balodhi was previously a Media Advisor to the Chief Minister. Person Mr. Designation Chairman Managing Director & Group Executive (Corporate Banking) Managing Director & Chief Credit & Risk Officer Deputy Managing Director & Group Executive (Mid Corporate) Deputy Managing Director & Group Executive (National Banking) Deputy Managing Director & Corporate Development Officer. Deepak Chawla Mr. Bhatt Mr. whichever is later (maximum six years). the Managing Directors and all Deputy Managing Directors of the Bank. G. with effect from September 28.S. Ms. Contractor Corporate Governance The Central Board has established the following committees (a) to ensure compliance with the Act and corporate governance requirements and (b) for operational reasons. Arun Ramanathan Mr. 2007. Gopinath is the Deputy Governor of the RBI. Anup Banerji Mr. Mr.K. Mr. He is a working journalist and his areas of interest include rural economy and agriculture. Deputy Managing Director (Corporate Strategy & New Businesses) Deputy Managing Director & Group Executive (Rural Business) Deputy Managing Director & Chief Financial Officer Deputy Managing Director & Group Executive (Wholesale Banking) 141 . Professor Ansari has previously held the position of Dean of the Faculty of Commerce at S. Abhijit Datta Mr. H. The CENMAC also deliberates and facilitates the day-today affairs of the Bank. 2008. Mohd. 2004. Ashok Mukand Mr. Central Management Committee The Central Management Committee (“CENMAC”) comprises of the Chairman. whichever is later (maximum six years). Ms. The Bank believes the Central Board has established a positive functioning relationship with the senior management of the Bank. T.K.M University.K. Sitaramam Mrs. with effect from July 9. Prof. Mr. O. The Bank has a system in place to delegate powers to the various tiers of management. for three years or until the appointment of his successor. with effect from July 9. Jharkhand.

one of whom is a Chartered Accountant. Ms. Executive Committee of the Central Board The Executive Committee of the Central Board (“ECCB”) constituted in accordance with the requirements of section 30 of the Act. Managing Director and Chief Credit and Risk Officer — Member (Ex officio).(2) Audit Committee. 6. Piyush Goyal — Director. Managing Director and GE (CB) — Member (Ex officio). be present at any place within India where ECCB meetings are held. S. 2. Bhattacharyya. The composition and functions of the ACB are set out below: Composition of the ACB In accordance with RBI guidelines. Further. Mr. It reviews the inspection reports of specialised and extra-large branches and branches with unsatisfactory ratings. T. comprises the Chairman. (6) Customer Service Committee. including the system. Shyamala Gopinath. (3) Shareholders’ and Investors’ Grievance Committee. Ashok Jhunjhunwala — Director — Member 4. 5. (4) Risk Management Committee of the Board. the ACB has six members. Audit Committee The Audit Committee (“ACB”) functions under RBI guidelines and complies with the provisions of Clause 49 of the Listing Agreement to the extent that they do not violate the directives and guidelines issued by RBI. Bhattacharya. It also focuses on the follow-up of: (b) 142 . 7. including two full time Directors. subject to the general or special directions of the Central Board. Regulations 46 and 47 of the State Bank of India General Regulations. Arun Ramanathan — GOI Nominee — Member (Ex officio). The members of the ACB are: 1.S. The ACB was last re-constituted with effect from January 14. 3. and three non-official. two official Directors (nominees of the Government and the RBI). and (8) Committee of the Board on Rural Sector Business. realisation and quality control of the internal audit and inspection within the Bank and follow-up on the statutory and external audit of the Bank and inspection by the RBI.. the Director nominated under section 19(f) of the Act. (5) Special Committee of Directors for Monitoring Large Value Frauds. Meetings of the ACB are chaired by a non-executive Director. and oversees the operation of.e. Mr. K. RBI Nominee — Member (Ex officio). The ACB reviews the internal inspection and audit functions of the Bank. (7) Technology Committee. non-executive Directors. Mr. Functions of the ACB (a) The ACB provides directions to. the organisation. the total audit function of the Bank i. ECCB may deal with any matter within the competence of the Central Board. S.K. its quality and its effectiveness in terms of follow-up. The ECCB meets once every week. and all or any of the other Directors who are normally residents or may. In accordance with the Act. the ECCB exercises powers delegated by the Central Board and its functions are subject to the conditions imposed by the Central Board. 1955. Mr. 2008. provide that. Mr. Chairman (ACB). for the time being. Dr. the Managing Directors. Bery — Director — Member.

Dr. N. 2007. Managing Director and GE (CB). It also interacts with the external auditors before the finalisation of the annual/semi-annual financial accounts and reports. 2007. Mr Suman Kumar Bery. and reviewed complaints received. 3. 4. D. etc. respectively. The ACB follows up on all the issues raised in the long form audit reports of the statutory auditors. 2007. 2001. Risk Management Committee of the Board The Risk Management Committee of the Board (“RMCB”) was constituted with the approval of the Central Board on March 23. the Shareholder’/Investors’ Grievance Committee (“SIGCB”) of the Board was formed on January 30. acts of fraud. and Managing Director and Chief Credit and Risk Officer. The Committee was last reconstituted with effect from September 1. Suman Kumar Bery and Dr.• • • • • (c) (d) inter-branch adjustment accounts. Ashok Jhunjhunwala. 3. Member.699 and 4. to review shareholders’ and investors’ complaints regarding transfer of shares. systems and procedures and other aspects as required in terms of RBI guidelines. were held to review various matters connected with internal control. ten and six meetings of the ACB. non-receipt of balance sheet. 143 . 2. Shareholders’/Investors’ Grievance Committee Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges. 2004. 2007 and three meetings in the ninemonth period ended December 31. respectively. For the year ended March 31. to oversee the policy and strategy for integrated risk management relating to credit risk. and Two non-executive directors — Mr. 2007 and the nine-month period ended December 31. and all other major areas of housekeeping. Member. Composition of the Committee The Committee has four members: Managing Director and Chief Credit and Risk Officer. non-receipt of interest on bonds/declared dividends. Director. Chairman of Committee. arrears in the balancing of books at various branches. 2007. Chairman. market risk and operational risk. Member. The ACB obtains and reviews half-yearly reports of the Compliance Department of the Bank. 2007. Composition of SIGCB 1. Shareholder Director. During the year ended March 31. The Committee was last reconstituted with effect from September 1. were received and resolved within the stipulated period excepting those pending in courts and cases where duplicate shares have to be issued with the approval of the ECCB. 2007 and the nine months ended December 31. unreconciled and long outstanding entries in inter-bank accounts and nostro or vostro accounts. Managing Director and GE (CB). Balodhi. The SIGCB held four meetings during the year ended March 31.802 complaints.

The major functions of the Committee are to monitor and review all cases of fraud of Rs. Piyush Goyal and Mr. the ECCB approved the constitution of the Special Committee of Directors for monitoring of large value frauds (Rs. 2007) 3. with the following members. Composition of the Committee 1. (Both Managing Directors became members of the Committee from November 14. The Committee was last reconstituted with effect from September 1. 10 million and above) At its meeting held on March 29. Managing Director and Chief Credit and Risk Officer. to ensure that any staff accountability exercise is completed quickly. Balodhi and Prof. Chairman of the Committee.Meetings The RMCB meets a minimum of four times per year. Managing Director and Group Executive (CB). Customer Service Committee of the Board The Customer Service Committee of the Board was constituted on August 26. Md. 2. 10 million and above). 2007. Ashok Jhunjhunwala (Non-Executive Director). with a view to identifying systemic lacunae. 2007. 2007. 2007. Managing Director and Chief Credit and Risk Officer. Special Committee of Directors for Monitoring of Large Value Frauds (Rs. Two Directors from the Audit Committee of the Central Board — Mr. 2007) Three meetings of the Committee were held during the year ended March 31. 2007) 3. 2. 2007 and has met three times in the nine months ended December 31. 2004. 2007. 4. the Bank did not detect any fraud which had any significant impact on its operating results. As of December 31. 10 million and above. Salahuddin Ansari. Salahuddin Ansari (Non-Executive Director). Md. recovery position. Composition of the Committee 1. (Both Managing Directors became members of the Committee from November 14. The Committee was last reconstituted with effect from September 1. 4. to review the efficacy of remedial action taken to prevent recurrence of fraud. (Both the present MDs became members of the Committee from November 14. D. Managing Director and Group Executive (CB). Dr. 2007 and twice during the nine months ended December 31. 2007. Suman K. and Two other Directors from the Central Board of the Bank — Dr. once in each quarter. Bery. and to put in place suitable preventive measures. N. The RMCB met four times during the year ended March 31. and Prof. Technology Committee of the Board 144 . The Committee met five times during the year ended March 31. Chairman. 2007 and two meetings were held in the nine months ended December 31. and reasons for delay in detection and reporting. to monitor progress of CBI and police investigation. 2004. to bring about ongoing improvements in the quality of customer service provided by the Bank.

2007) The Committee met nine times during the year ended March 31. D. 2007 and four times during the nine months ended December 31. Amar Pal * Number of Equity Shares (preIssue) 250 53 119 500 500 50 69 Number of Equity Shares (post-Issue)* 300 63 142 600 600 60 82 The number of Equity Shares for the column entitled Number of Equity Shares (post-Issue) has been calculated assuming full subscription to rights in this Issue and any fractional entitlements have been ignored.500 per meeting. Managing Director and Chief Credit and Risk Officer. Bhattacharya Mr. no Director holds any Equity Share of the Bank. Chairman.C. Managing Director and Group Executive (CB).K. and 4. T. 2005. Name Mr. Committee of the Board on Rural Sector Business The Committee of the Board on Rural Sector Business was constituted on October 27. as part of the Bank’s special focus on the agricultural sector and was reconstituted with effect from.N. (Both Managing Directors were also inducted into the Committee from November 14. 2007. fees payable for Central Board meetings are Rs. Chairman. 2007. 2007. Dr. Shareholdings of Directors on the Central Board Except as set out below. 2007. Ashok Jhunjhunwala Mr. Compensation for Executives and the Central Board The salary structure for the Chairman and Managing Directors of the Bank is fixed by the Government. Md. 2. O. Salahuddin Ansari. 5. (Both Managing Directors became members of the Committee from November 14. Suman Kumar Bery Dr. Ashok Jhunjhunwala. and 2. As of December 31. 2007) The Committee met twice during the year ended March 31. The salary and allowances of Deputy Managing Directors are paid according to the Bank’s Officers’ Service Rules.P Bhatt Mr. sitting fees are paid as decided by the Government. 2007. Dearness allowance is to be paid as equivalent to Group A officials of the Government. Bhattacharyya Mr. A. with the following Directors: 1.S. 2007 and twice during the nine-months ended December 31. Bhatt. With respect to compensation for members of the Central Board. Terms of Appointment of the Bank’s Chairman is as follows: Mr. S. September 1.000 per meeting and for other Central Board-level Committees fees are Rs. Prof. 2004. 3. 2007.The Technology Committee of the Board was constituted on August 26. Balodhi. with the following Directors: 1. The following tables set forth all compensation paid by the Bank to the directors for the fiscal year ended March 31. Mr Piyush Goyal (alternate Chairman). Dr. 2. O. It was reconstituted with effect from September 1. Kalita Mr. Chairman 145 .P. to track the progress of the Bank’s IT initiatives.

O. Remuneration: Mr. Managing Director Mr. 2006. 2004 July 21. Bhattacharya. 2005. 0. Changes in the Central Board of Directors during the last three years Name Section under the Act Date of Appointment Date of Cessation Reason 2004-05 Mr. S. B. He was later appointed Chairman with effect from July 1. O. Bhatt was appointed as a whole-time Director of the Bank with effect from April 26. 2005 RBI nominated Ms.S. A. 2004 September 1. 0. Ajay G. I.P. Bhattacharyya was appointed as a whole-time Director of the Bank with effect from October 8. S.Mr. Bhatt is entitled to certain perquisites.S.S. Mr. Kini Mr. 2005 September 28.G. 0. Sardesai 19 (b) 19 (b) 19 (b) 19 (c) 19 (c) 19 (c) 19 (c) 19 (d) 19 (e) 19 (f) April 1. Mr. T.K. 2004 February 1.S.S. 2007. Mr. Perquisites: In addition to the salary. T. Mr. 2001 July 11. T. B. Managing Director Mr. 2003 February 28.V. Ajay G. Bhattacharya retires on January 31. T. 2005 Appointed as whole-time Director by the GOI Resigned Resigned Independent Director elected by shareholders Independent Director elected by shareholders Resigned Superannuated on January 31. Bhattacharyya will receive a salary of Rs. 2004 ----------July 23. Remuneration: Mr. Piramal Mr.P. B. S.K. 2005 September 1. 2003 December 27. Bhattacharyya. Shyamala Gopinath . K. Perquisites: In addition to the salary.S. 2001 September 1. I.G Patel Mr. 2003 146 -----February 1.633 million for the fiscal year 2007-08. Mr. Patel Dr. Bhattacharya was appointed as a whole-time Director of the Bank with effect from February 28.694 million for the fiscal year 2007-08.K. 2004 Appointed as whole-time Director by the GOI Superannuated on January 31. Bhattacharya will receive a salary of Rs.P. N. 2006. 2001 September 1.K. Bhattacharya Mr. Bhattacharyya is entitled to certain perquisites. 2008. 2.S. Remuneration: Mr. A. Terms of appointment of the Bank’s Managing Directors are as follows: 1. 2004 December 17. 2005 -----July 15. Ashok K. Bhatt will receive a gross salary of Rs. Piramal Dr. Perquisites: In addition to the salary. O.659 million for the fiscal year 2007-08. Mr. 2004 July 17. T. S. Chandan Bhattacharya Mr. Bhattacharya is entitled to certain perquisites. A. Sisodia Mr A. Parikh Mr.

2005 ------ Nominated by RBI vice Mr. Ashok Jha 19 (b) 19 (e) October 10. 2002 August 31. 2006 ------October 30. Patel Mr. 2005 Mr. 2006 Mr. vice Mr. Ashok Kini Dr. Ashok Jha 19 (b) 19 (c) 19 (c) 19 (c) January 1. 2006 September 9. Sardesai Laid down office on attaining superannuation on December 31. Patel’s demise Completion of term Independent Director elected by shareholders Independent Director elected by shareholders Completion of his term on May 19. Bhattacharyya 19 (b) 19 (b) October 10. Vinod Rai nominated on the Central Board in his place Secretary (Financial Sector) — GOI nominee.R. 2007 July 1. S. A. 2005 On account of his sad demise Resigned Independent Director elected unopposed due to vacancy caused by Dr. 2006 ------- 2007-08 (until January 20.V.Name Section under the Act Date of Appointment Date of Cessation Reason Ms. 2004 April 1. 1999 Extension. Shantha Raju 19 (f) September 28.May 20. Amar Pal Mr. O. Vinod Rai 19 (e) October 31.K.K. 2006 July 14. K. Appointed as Managing Director (whole-time 147 . 2005 November 13. 2006 April 26. 2002 July 1. Yogesh Agarwal Mr. Ashok Jhunjhunwala Mr. O. 2004 September 10. Khanna Mr. 2005 ------------May 20. 2004 September 1. Suman Kumar Bery Dr.P. M. 2005 Non-Workmen Employee Representative nominated by the GOI GOI nominee Director Laid down office on attaining superannuation on May 31. Suman Kumar Bery Prof. 2002 September 15. 2006 July 17. I. 2002 August 19. 2005 -----------June 1.G. 2005 July 14. 2006 Appointed as Chairman by the GOI Appointed as Managing Director (whole-time Director) by the GOI Appointed as Managing Director (whole-time Director) by the GOI Elevated to post of Finance Secretary and Mr. Purwar Mr. Bhatt Mr. 2008) Mr.G. Swaminathan Mr. A. Yogesh Agarwal Mr.P. 2006 ----* Appointed as Chairman with effect from July 1.S. 2005 Originally. 2006 October 8. 2007 ---- Consequent upon his appointment as Chairman of IDBI Ltd. Bhatt 19 (cb) 19 (e) 19 (a) 19 (a) 19 (b) September 10. Shyamala Gopinath 2005-06 Mr. 2005 August 10.May 20. Ashok Jha 2006-07 Mr. 2005 September 15. 2005 ------- 19 (c) 19 (c) 19 (c) 19 (cb) Mr. P. I.

Bhattacharyya Mr Abhijit Datta Age 56 59 Designation Chairman Managing Director Managing Director Deputy Managing Director & Group Executive (Mid Corporate) Deputy Managing Director & Group Executive Education M. 2003 January 23. Ajay G. April 11. Previous Position Managing Director Managing Director (SB Indore) Managing Director (SBBJ) Deputy Managing Director and Corporate Development Officer Managing Director (SBT) Date of joining the Bank July 1. 2007 July 30.Sc. Salahuddin Ansari Mr. M.A. 2005 Mr.50 148 . Sitaramam 58 M.290. M.K. Md. 2006 Resignation w. Swaminathan 19 (c) August 31.901.75 58 M. Swaminathan resigned from Bank’s Central Board consequent upon his nomination to the Rajya Sabha On completion of his tenure Independent Director nominated by the GOI Independent Director nominated by the GOI Consequent upon nomination of new Director by the GOI Consequent upon nomination of new Director by the GOI Appointed as CAG and resigned wef January 6 2008 Mr.915. 2007 accepted by Central Board on May 12. 2008.) 55. Bhattacharya Mr S. 1969 July 1. 1971 54. Vinod Rai Key Managerial Personnel The details of the Bank’s key managerial personnel as on January 20. 2004 October 31.Prof. 2008 Secretary (Financial Services) — GOI nominee. 2008 --- Director) by the GOI Prof. Arun Ramanathan 19 (e) January 18.038.e.00 53. Piramal Dr.165.45 Mr K. 2007 July 25. accepted by Central Board on January 24.f. Rajiv Pandey Mr.(Eco) 35 Years 55.A. 0972 July 4.P.A. January 06. 2007 ------July 30. 2007 July 9. vice Mr.S. 2008 are as follows: Total Years of Experience (including relevant experience) 35 Years 38 Years Name Mr O.(Hons) 35 Years 51. Bhatt Mr T.25 57 B. 36 Years February 1. 2007 August 31. Arun Singh Mr. 2004 July 9.e. 1972 Gross Salary per month (Rs. 1972 September 8.S.A. Vinod Rai 19(c) 19 (d) 19 (d) 19 (d) 19 (d) 19 (e) September 1.f. Deva Nand Balodhi Prof. 2007 Resignation w.

if any. or that may be subscribed for and allotted to them.438.A. The key managerial personnel of the Bank do not have any interest in the Bank other than to the extent of the remuneration or benefits to which they are entitled as per their terms of appointment and reimbursement 149 . out of the present Issue in terms of the Letter of Offer and also to the extent of any dividend payable to them and other distributions in respect of the said Equity Shares. 1973 54.A.(National Banking) Mrs Bharati Rao 59 Deputy Managing Director & Corporate Development Officer Deputy Managing Director (Corporate Strategy & New Businesses) Deputy Managing Director & Group Executive (Rural Business) Deputy Managing Director &Chief Financial Officer Deputy Managing Director & Group Executive (Wholesale Banking) M. already held by them or their dependants and relatives in the Bank.038.40 All the above-mentioned key managerial personnel are permanent employees of the Bank.838. (Eco) Deputy Managing Director and Chief Credit and Risk Officer Managing Director and CEO. held by or that may be subscribed by and allotted to the companies.572. in which they are interested as directors.G. (History) 34 Years October 31. firms or trusts.60 Mr Anup Banerji 57 M. All the directors may also be deemed to be interested to the extent of Equity Shares.50 Mr Deepak Chawla 59 M.A. (Eco) 35 Years July 1. Interest of Directors and Key Managerial Personnel The Non-Executive Directors of the Bank may be deemed to be interested to the extent of fees. members. The Chairman and Managing Directors may be deemed to be interested to the extent of remuneration paid to them for services rendered by them as whole-time directors appointed by the Government. partners and/or trustees. Chief General Manager 37 Years December 14. The Directors may also be regarded as interested in the Equity Shares.Sc. payable to them for attending meetings of the Central Board or a Committee. 1972 54. SBI Funds Management Pvt Ltd Chief General Manager 35 Years August 7.572. 1974 52.70 Mr Ashok Mukand 58 B. Contractor 53 B. if any.40 Mr H. 1970 52. 1972 54.A. Chief General Manager 33 Years August 14.

Housing Loan: 0.Bhatt Total Amount Interest Outstanding (Rs.138 Mr Deepak Chawla Nil 0.440 Festival Advance – 0. Except as described below.5% Nil N/A Nil N/A 0. if any.110 – 10% Employee Temporary Advance Amount Outstanding (Rs.K.004 (Festival Advance) Nil Nil N/A 0.P.0% Nil Nil N/A 1.1 lac : 11% Overdraft –0.1 lac: 5% Above 1.160 N/A Individual: 0.1 lac to 5 lac: 10% Nil N/A Nil N/A 0.392 (ii) Addl.1 lac: 11% Nil N/A Nil N/A 0.556 Up to 1.309 0. none of the Bank’s Directors and key management personnel have availed themselves of personal loans.309 Mr S. Bhattacharyya Commercial: 0.392 Up to 1.052 150 .of expenses incurred by them during the ordinary course of business and to the extent of the Equity Shares held by them or their dependants in the Bank. House Building Loan Amount Outstanding (Rs.Sitaramam 0.1 lac : 5% Above 1.160 Interest Rate Up to 0. In million) Nil Name Mr O.138 12% N/A 0. Loans toDirectors and key managerial personnel from the Bank as on December 31.592 Up to 1. In million) Rate 0.110 – 5% Above 0. Nil Interest Rate N/A Soft Furnishing loan Amount Outstanding (Rs.1 lac : 5% Above 1.020 11. 2007.004 Mr Anup Banerji 0.556 Mrs Bharati Rao (i) 0.359 Mr K. In million) 0.359 10% 13.

2004 06.11. the Bank’s Directors and its key managerial personnel have not taken any loan from the Bank.02.10.12.12. No.2004 20.047 Except as disclosed below. P.Sinha Shri S. Relationship with Director Brother Brother Nature of Loan EPC EBP EPC EBP Amount 7.10.50 million 5 million 60 million 55 million Rate of Interest 10% 9.K.2005 Retired . In million) Rate Mr Ashok Mukand 0. Car Loan to an employee of the bank. the Bank has not entered into any contract.12. Except as stated otherwise in this Letter of Offer.e.047 (Int. 1. Mitra Shri Yogesh Agarwal Shri C. Bhattacharya Shri B.02.2004 9.K. Loans to Relatives of Director: 1. 2007 Name of Borrower M/s Ductile Auto Engg.01.2004 27.principal already repaid) Nil N/A Nil N/A 0.2004 Date of Leaving Reasons Appointed as Chief Economic Advisor on contract basis Retired Retired Posted as DMD Posted as DMD Posted as DMD Appointed as MD of State Bank of Patiala Retired Appointed as MD 31. 2007 March 23.75% under Gold Card Changes in the Bank’s Key Managerial Personnel during the last three years 2004-05 Name Ms Ritu Anand Shri R. amount on H/L.2004 31. and loans against specified securities) Sr. agreements or arrangements or are proposed to be made to them. Date of Sanction March 31. Interest Rate Soft Furnishing loan Amount Outstanding (Rs. Housing Loan.Santhanakrishnan Shri Ashwini Kumar Sharma Shri Abhijit Datta Shri P. agreement or arrangement during the preceding two years from the date of this Letter of Offer in which the Directors are interested indirectly and no payments have been made to them in respect of these contracts.D. Sumitra 2005-06 151 Designation DMD &CEA DMD (I&MA) DMD & CDO DMD & CFO DMD &CDO DMD (I&MA) DMD & CFO Managing Director & Group Executive (CB) Managing Director & Group Executive (CB) DMD & GE (IB) Date of joining 01. In million) Name Total Amount Interest Outstanding (Rs.2005 28.S. 2.House Building Loan Amount Outstanding (Rs.2005 28. Ltd M/s Fitex Industries Ltd. In million) Interest Rate Employee Temporary Advance Amount Outstanding (Rs.2004 30.12. Shri Amar Pal (Other than those specifically exempted by RBI i. Bhattacharya Shri T.

2007 Date of leaving 30.2006 31.P.2007 31. Lateef Ms Ritu Anand Shri H.K. Bhatt Shri V.2007 152 .07.2005 28. SBBJ Posted as DMD Retired Retired 31.2006 25. Contractor Shri Arun Shandilya Shri Ashok Mukand Shri Ashwini Kumar Sharma Shri P.2006 Reasons Retired Retired Retired Designation DMD & GE (IB) DMD & CCO DMD (IT) Managing Director & GE (NB) Chairman DMD (IT) Chairman DMD & CCO DMD & GE (A&S) DMD (Corporate Strategy & New Business) DMD & GE (Rural Business) Managing Director & GE (NB) DMD &CFO DMD ( Global Markets) DMD & GE (IB) Date of joining 05. Gupta Shri Y.10.04.09.03.07.04.2007 08.2007 31.10.P.11. Bhattacharyya Shri Y. Bhatt Shri A.K.04.12. Ashok Kini Shri A.11.07.2006 17. Kalmankar Shri R.12.2006 01.G.Sitaramam Shri S.2007 Designation MD &GE(NB) DMD &GE (NB) MD & CC & RO DMD & GE (A&S) DMD (Global Markets) DMD & CEA DMD & GE (Wholesale Banking) DMD & CFO DMD & CFO DMD (IT) DMD (I & MA) Date of joining 02. Pattanayak Shri O. Pattanayak Shri O.G. SBM Appointed as Chairman Deputed as MD.2006 25.09.P.06.K. Posted as DMD & GE (A & S) Posted as DMD Posted as DMD Appointed as MD Posted as DMD & CFO.08.2006 01.01. Purwar Shri P.K.06.2006 Date of leaving Reasons Posted as DMD Posted as DMD Posted as DMD (IT) Appointed as MD Retired Posted as MD.Mitra Designation Managing Director &GE (NB) DMD &GE (IB) DMD (IT) Date of joining Date of Leaving 31.06. Posted as DMD & GE (Global Markets) Retired 30.2007 25.02. Ramanathan 2006-07 Name Ms Bharati Rao Shri V.2008 26.2006 10.02.2006 07.2007 30.N. Vijayanand Shri Deepak Chawla Shri Anup Banerji Shri Yogesh Agarwal Shri Arun Shandilya Shri M. SBIDFHI Ltd. Hariharan 2007-08 Name Shri Yogesh Agarwal Shri K. IDBI Bank Posted as DMD & GE (NB) Appointed as Managing Director Retired Retired Completion of contract Posted as DMD Appointed as MD.08. Lateef Shri S.2007 30.2007 21.2007 Reasons Appointed as CMD.09.2006 01.08.P.04.2006 26.K.M. Gupta Shri P.2006 27.Name Shri K. Vijayanand Shri M.M.11.2006 31.05.10.10.K.2006 27.2006 11.2006 28.

2008. The Government has. c. the Equity Shares to be issued under the ESPS. The ESPS shall be administered by the Administration Committee (as defined therein) which will include the two Deputy Managing Directors. F.590 per Equity Share which is equivalent to the price of the Equity Shares issued through this Issue. 1992. d.500 Equity Shares to its Eligible Employees (as defined therein). 2008 to April 15. The issue price is Rs. 1995. 153 . at its meeting held on February 1. The terms and conditions of the ESPS will be in accordance with the provisions of the SEBI (Employee Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines. to provide an incentive to Eligible Employees. the SEBI (Disclosure and Investor Protection) Guidelines. Pursuant to the Government authorisation. and to encourage equity ownership by Eligible Employees by providing them with the means to acquire a proprietary interest in the Bank. reward and retain talent at the Bank.Note: The date of appointment is the date when the relevant person became a key managerial person Employees Stock Purchase Scheme The Bank is proposing an employee share purchase scheme (“ESPS”). to reward Eligible Employees for their continued support and contribution towards the Bank’s growth. 1999 and the issuances of shares will be done in compliance with the relevant guidelines/regulations/circulars.No. approved the ESPS. The ESPS shall remain open for a period commencing from March 28. to stimulate their efforts towards the continued success of the Bank. The allotment of Equity Shares issued pursuant to the ESPS will occur subsequent to this Issue. by its letter no. The Administration Committee has been authorised to determine inter alia details of the offer of. b. and to contribute to the growth and profitability of the Bank. The primary objectives of the scheme are: a. and the payment for. The Administration Committee will frame suitable policies and systems to ensure that there is no violation of the SEBI (Insider Trading) Regulations. 1. the Bank's Central Board has. to provide a means to attract. 2008. 2000 and the SEBI (Prohibition of Fraudulent and Unfair Trading Practice relating to the Securities Market) Regulations. 2008. as members.11/7/2007-BOA dated January 25. The Bank may issue a maximum of 86. authorised the issue of the ESPS.17.

154 . see “Auditor’s Report” on page [●] of this Letter of Offer.RELATED PARTY TRANSACTIONS For a detailed description of the Bank’s related party transactions.

No revaluations are allowed except for securities and derivatives. 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. An exemption applies when it is impracticable to change comparative information. which are required to be fair valued under specified circumstances. The following are significant differences between Indian GAAP and U. the Financial Statements reflect adjustments made in accordance with applicable statutory requirements and regulatory guidelines and accounting practices in India. However. and no attempt has been made to identify possible future differences between Indian GAAP and U. 155 U. but assets maybe written down to reflect an impairment loss. Preparation of consolidated financial statements Presentation of consolidated financial statements is mandatory for all enterprises for all periods presented. Transition provisions are generally specified in new standards and may be different. GAAP Historical cost convention Uses historical cost. Correction of errors Restatement is not required. No comprehensive guidance available for derivatives. GAAP limited to those sign differences that are appropriate to the Bank’s financial statements. Preparation of consolidated financial statements All listed entities as per listing requirements or entities that are in the process of getting their securities listed are required to present consolidated financial statements in their presentation of annual financial statements. Comparative information is restated. Changes in accounting policies The cumulative effect of the change is recognised and disclosed in the income statement in the period in which the change is made except as specified in certain standards (transitional provisions) where the change during the transition period resulting from adoption of the standard has to be adjusted against opening retained earnings and the impact needs to be disclosed. the purchase method is used.S. but assets maybe written down to reflect an impairment loss. The nature and amount of prior period item should be disclosed separately in the statement of profit and loss in such a manner that its impact on current year profits or losses can be perceived.S. In certain respects.S. Indian GAAP Historical cost convention Uses historical cost. Consolidated financial statements are however not mandatory for interim period financial statements.DESCRIPTION OF CERTAIN DIFFERENCES BETWEEN INDIAN GAAP AND U. Any Change in an accounting policy which has a material effect should be disclosed. As a result. Correction of errors The correction of material errors usually results in the restatement of relevant prior periods. Property. In all other cases. if required. Changes in accounting policies Effective from fiscal years beginning after 15 December 2005. Business Combinations Business combinations are accounted for using the purchase method only (except as discussed below). which change from time to time and may have been applied prospectively. the periods covered by the Financial Statements and the Bank’s results on a period-by-period basis may not be directly comparable. if required. plant and equipment may be re-valued to fair value. changes in accounting policy are accounted for retrospectively.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 effect of correction is included in the current year income statement as a prior period item. Several differences can arise in terms of date of combination. calculation of share value to use for . Business Combinations Restricts the use of pooling of interest method to circumstances which meet the criteria listed for an amalgamation in the nature of a merger. and the amount of the adjustment relating to prior periods is adjusted against the opening balance of retained earnings of the earliest year presented. they should not be construed as being exhaustive.

reflecting the pattern in which the entity consumes the asset’s benefits. Both business and geographical segments are identified and either of the two is classified as primary segment (with the other one being classified as the secondary segment). Segments are identified based on risks and returns and the internal reporting structure.e. the excess of the fair value of net assets acquired over the aggregate purchase consideration) Negative goodwill after reassessment is allocated to reduce proportionately the fair value assigned to non monetary assets. Downward valuations are required when future undiscounted cash flows are less than the carrying value of the asset. at least annually.e. Intangibles that have an indefinite useful life are required to be tested. Negative Goodwill arising on consolidation (i. Any negative goodwill remaining is recognised as an extraordinary gain. Depreciation on revaluation portion can be recouped out of revaluation reserve. ‘Available for Sale’ or ‘Trading’ based on management’s 156 . Segment Information Specific requirements govern the format and content of a reportable segment and the basis of identification of a reportable segment. Segments are identified based on operating segments and the way the chief operating decision maker evaluates financial information for purposes of allocating resources and assessing performance.. generally not exceeding 10 years. Segment Information A Public Company is required to report information about its products and services. Revaluation of an entire class of assets or of a selection of assets is required to be carried out on a systematic basis. “Held to Goodwill Goodwill is computed as the excess of the purchase price over the fair value of the net assets acquired. Property. The recoverable amount of an intangible asset that is not ready for use or is being amortized over a period exceeding 10 years should be reviewed at least at each financial year end even if there is no indication that the asset is impaired. Intangible Assets Intangible assets are capitalized if specific criteria are met and are amortized over their useful life. Unrealised gains/losses on investments Investments are categorised into ‘Held to Maturity’. Upward revaluation is not permitted. the excess of the fair value of net assets acquired over the aggregate purchase consideration) Negative goodwill arising on consolidation is computed based on the book value of assets (not the fair value) of assets taken over or acquired and is credited to the capital reserve account. Intangible assets that have finite useful life are required to be amortized over their estimated useful lives. Unrealised gains/losses on investments All investments are categorised into “Held to Maturity”. While reporting Segmental information. plant and equipment Use of historical cost or revalued amounts is permitted. plant and equipment is allocated on a systematic basis over its useful life.purchase price. especially if the Indian GAAP method is ‘amalgamation’ or pooling. accounting policies used for preparing the financial statements of the enterprise must be used.) Property. Negative Goodwill arising on consolidation (i. based on specific criteria. the accounting is done on historical cost basis in a manner similar to a pooling of interests for all periods presented. Goodwill Goodwill is computed as the excess of the purchase price over the carrying value of the net assets acquired. Reportable segments are required to be identified based on specified criteria. Intangible Assets When allocating purchase price of a business combination. The depreciable amount of an item of property.. For combination of entities under common control. companies need to identify and allocate such purchase price to intangible assets. plant and equipment Upward revaluation is not permitted. “Available for Sale” and “Held for Trading”. Banks provide depreciation over the asset’s useful life subject to rates of depreciation prescribed by the Regulator (RBI) in respect of computers. Internal financial reporting policies apply (even if accounting policies differ from group accounting policy. which is a component of shareholders’ funds. for impairment. the geographical areas in which it operates and its major customers.

net of applicable taxes. Amortisation of premium/discount on the purchase of investments Premium/discount is amortised on all categories of investments. while those of ‘Available for Sale’ securities are reported as a separate component of stockholders equity. under each classification is ignored. or at the observable market price of the loan. within each category of investments is recognised in the profit and loss account. Net depreciation. ‘Held to Maturity’ securities are valued at cost. the effective portion of the hedge’s change in fair value is either offset against the change in fair value of the hedged asset. Fair values are based on quoted market prices.Maturity” securities are carried at their acquisition cost or at amortised cost if acquired at a premium over the face value. or at the fair value of the collateral if the loan is collateral dependent. Derivatives All derivatives are required to be recognised as assets or liabilities on the balance sheet and measured at fair value with changes in fair value being recognised in earnings. adjusted for amortisation of premiums and accretion of discount. based on valuation techniques which may take into account available current market and contractual prices of similar instruments as well a time value underlying the positions. depending on the nature of the hedge. if any. Swaps and options are disclosed as off-balance sheet exposures. Further. Allowances for credit losses Loans are tested for impairment and placed on a nonaccrual basis (i. Trading swaps/options are revalued at the balance sheet date with the resulting unrealised gain/loss being recognised in the profit and loss account and is included in other assets or other liabilities. The impairment of a loan is measured based on the present value of the loan’s effective interest rate. intent and ability. While ‘Trading’ and ‘Available For Sale’ securities are valued at fair value. non-performing assets are classified into substandard. Derivatives Derivative transactions comprise swaps and options. Loan origination costs are taken to the profit and loss account in the year in which accrued/incurred. Amortisation of premium/discount on the purchase of investments No amortisation of premium/discount is allowed on investments except for the premium on investments categorised as Held to Maturity. until realised. a provision is made in accordance with the guidelines issued by the RBI. into performing and non-performing assets (NPAs). The swaps/options are bifurcated as trading or hedge transaction. Loan origination fees/costs Non-refundable loan origination fees (net of direct loan origination costs) are deferred and recognised as an adjustment to yield over the life of the loan. For restructured assets. In addition to the specific provisioning made on NPAs the Bank maintains general provisions to cover potential credit losses of standard assets in accordance with RBI guidelines. If a derivative is a hedge. Loan origination fees/costs Loan origination fees are recognised upfront on their becoming due. 157 . The ineffective portion of a hedge is immediately recognised in income. which require that a provision equal to the present value of the interest sacrifice be made at the time of restructuring. The net appreciation if any. The unrealised gains and loses on ‘Trading’ securities are taken to the income statement.e.. The impairment is recognised if the measured value is less than the recorded investment in the impaired loan. doubtful and loss assets for provisioning based on the criteria stipulated by the RBI. Allowances for credit losses All credit exposures are classified as per RBI guidelines. or absent quoted market prices. The adjustment is made using the interest method based on the contractual terms of the loan. interest income is not accrued) when based on current information and events. management estimates that the collection of outstanding interest and principal amounts are doubtful. liability or firm commitment through income or held in equity until the hedge item is recognised in income. “Available for Sale” and “Held for Trading” securities are valued periodically as per RBI guidelines. Provisions are made in accordance with RBI guidelines. Hedged swaps/options are accounted for on an accrual basis.

Additional liability arising upon the first application of the Standard may be either adjusted against opening reserve or in the alternative (with effect from October 17. However. Revenue Recognition Revenue involving the sales of services is recognised when certain criteria’s have been met. collectability is reasonably assured. 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. The discount rate to be used is determined with reference to market yields of government securities. 109. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantially enacted by the balance sheet date. Taxation Income taxes are accounted for as per the provisions of SFAS No. the sales price is fixed or determinable and. where there is unabsorbed depreciation or carried forward loss under taxation laws. Employee Benefits AS 15 (Revised) (mandatory with effect from accounting period commencing on or after December 7. then such amount is not recognized immediately. To the extent that the benefits are already vested immediately following the introduction of. a defined benefit plan.. an enterprise should recognise past service cost immediately. If at the beginning of the year. or changes to. Deferred tax assets are reviewed as of each The discount rate to be used is determined with reference to market yields of high quality corporate bonds. An enterprise should recognise past service cost as an expense on a straight-line basis over the average period until the benefits become vested. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in the statement of income in the period of enactment. including whether persuasive evidence of an arrangement exists. Accounting for Income Taxes. SFAS No. using enacted tax rates expected to apply to taxable income in the years that the temporary differences are expected to be recovered or settled. the actuarial gains or losses exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets. Under this method.e. 2007). 109 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. 1961 and the rules framed there under) and the deferred tax charge or credit reflecting the tax effects of timing differences between accounting income and taxable income for the period. Employee Benefits Obligation for defined benefit plans must be measured using projected unit credit method.Revenue Recognition Revenue is recognised on accrual basis when there is no uncertainty of its ultimate collection. delivery has occurred or services have been rendered. Taxation Income tax comprises the current tax (i. but amortized over the average remaining service period of active employees expected to receive benefits under the plan. may be charged as an expense over a 5 year period. All actuarial gains and losses have to be recognised immediately in profit and loss account. Past service costs are amortized over the service period or life expectancy of workers. deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax basis of assets and liabilities. 2006) requires the use of projected unit credit method to determine benefit obligation. amount of tax for the period determined in accordance with the Income Tax Act. Deferred tax assets are recognised subject to a valuation allowance based upon management’s judgment as to whether 158 . Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future.

employee share based plans are classified into equity settled. cash settled and employee share based payments plans with alternatives. realisation is considered more likely than not that the asset will be realised. 2005. Employee Stock Option Plan As per the guidance note on Accounting for Employee Share based payments. employee stock based compensation plans have to be accounted for using the fair value method. 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 entities are also to observe the specific guidance by market regulator (SEBI).balance sheet date and written down or written up to reflect the amount that is reasonably/virtually certain to be realised. Employee Stock Option Plan As per FASB 123R -Accounting for Share Based Payments. effective for all share based grants made after April 1. 159 .

K P Rao & Co. G S Mathur & Co. Chaturvedi & Co. K P Rao & Co. Venugopal & Chenoy.. K P Rao & Co.. Khandelwal Jain & Co... Salarpuria Jajodia & Co. and accordingly reliance has been placed on the financial statements audited by them for the said years: Year ended March 31... S P Chopra & Co. S Viswanathan. which were audited by branch auditors who were appointed as per the Guidelines of the Reserve Bank of India (RBI)... Chatrath & Co. K P Rao & Co.. G S Mathur & Co.. M Choudhury & Co.... and the unaudited profit and loss statement of the Bank for the six months’ period ended on September 30. Kanwalia & Co. Phillipos & Co. 2005. 1949 (the Banking Regulation Act). M M Nissim & Co.. Chaturvedi & Co. The audit for the other financial years was conducted by the auditors. 2007 were audited by us.. Venugopal & Chenoy. B D Bansal & Co. Madam Cama Road..AUDITOR’S REPORT (UNCONSOLIDATED) The Board of Directors State Bank of India Central Office. M. Chatrath & Co. M. Vyas & Vyas. Chatrath & Co. 2007 were subjected to limited review and reported upon by 160 .. Chaturvedi & Co. which were prepared in accordance with the provisions of the Banking Regulations Act. 2003. RGN Price & Co... 2007 includes figures of the branches reviewed by concurrent auditors and certified by the branch managers as per the Guidelines of RBI. Mumbai 400 021 Dear Sirs. Vyas & Vyas.. (the “Act”) and the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines. to the extent they are not inconsistent with the Banking Regulation Act. The unaudited Balance Sheet of the Bank as on September 30. We have been engaged to examine and report on the financial information of the State Bank of India (the “Bank”) annexed to this report as approved by the Board of Directors of the Bank.. 2003 Names of the Auditors B. Kanwalia & Co.. The financial information is proposed to be included in the offer document of the Bank in connection with its proposed rights issue of Equity Shares. 2000 as amended to date (“SEBI Guidelines”) issued by Securities and Exchange Board of India Act 1992. B.. 1. 2006 and 2007... Chatrath & Co. S P Chopra & Co. Vinay Kumar & Co.. G S Mathur & Co. The financial information has been prepared by the Bank’s Management from the Bank’s audited financial statements for the years ended March 31. K S Aiyar & Co. M M Nissim & Co. The financial statements of the Bank for the year ended on March 31. Patro & Co. 1956.. M.. O P Totla & Co. The preparation and presentation of this financial information is the responsibility of the Bank’s management.. which has been prepared in terms of the requirements of Paragraph B. Nundi & Associates.. Vardhman & Co. 2007 were subjected to limited review and reported upon by us in accordance with Auditing and Assurance Standard (AAS) 33 “Engagement to Review Financial Statement” issued by the Institute of Chartered Accountants of India (ICAI). 3. O P Totla & Co.. Sarma & Co. as mentioned herein below. G S Mathur & Co. Vinay Kumar & Co. 2004.. Part II of Schedule II to the Companies Act. B. Phillipos & Co. B. O P Totla & Co. Sarma & Co. 2004 2005 2006 The aforesaid audited financial statements include figures of the branches. S Viswanathan. K S Aiyar & Co. Phillipos & Co. State Bank Bhavan. R Devendra Kumar & Associates. Laxminiwas & Jain. S K Mittal & Co. S Viswanathan. B D Bansal & Co... M. Venugopal & Chenoy. Nariman Point.... R Devendra Kumar & Associates. 2... The financial statement for the half year ended September 30. Khandelwal Jain & Co. 2007 and unaudited Cash Flow Statement of the Bank for the six months’ period ended on September 30.

161 . Creation and Utilisation of floating provisions. 2007 set out in the Annexure 10. iii.6. books and records produced to us and such other tests and procedures. 2003. b) Statement of Major Changes in the activities of the Bank during the financial years ended March 31. Statement of Accounting Ratios for the financial years ended March 31. 6. 2006 and 2007 set out in the Annexure 7. 2007 set out in the Annexure 5.M/s Chaturvedi & Co. 2003. 2003. ii. 2006. the impact of which has not been ascertained by the management. These procedures included comparison of the attached financial information of the Bank with the respective audited/reviewed financial statements. 2002 to September 30. 2007 set out in the Annexure 8. 2007 set out in Annexure 11. Effects of material amounts relating to adjustments for the previous years have not been given in the attached financial information to the periods to which they relate. 5. h) Statement of Tax Shelter for the financial years ended March 31. 2006. Treatment of amortisation of premium on investments and amortisation of expenditure incurred on Voluntary Retirement Scheme. The Bank has carried out necessary amendments in its accounting policies in the relevant years to be in conformity with the said RBI guidelines. g) Capitalisation statement as at September 30. Asset Classification. 2004. e) f) Statement of Loans and Borrowings as at September 30 2007 and material terms and conditions including interest rates and repayment terms set out in the Annexure 9. whether the financial information under examination is free of material misstatement. In accordance with the terms of our engagement with the Bank. 2005. for the purpose of audit of financial information in accordance with the AAS issued by the ICAI. 2006. have not been given in the attached financial information for the periods prior to such changes in the accounting policies. d) Statement of Other Income for the financial years ended March 31. 2007 and half year ended on September 30. 2004. 2007 for complying with the Mandatory Accounting Standard. 2005. Provisioning in respect of Standard Assets/Non Performing Advances/Other Assets. 2005. iv. 2004. Attention is drawn to note A. 2007 and half year ended on September 30. 2004. 2007 set out in the Annexure 6. 2006 and 2007 set out in the Annexure 12. 2006. The financial information for the above periods was examined to the extent practicable. We report that: i. 2007 and half year ended on September 30. 2005.. 2005. in accordance with AAS 33 “Engagement to Review Financial Statement” issued by the ICAI and we have relied on such financial statements. we have also examined the following other financial information set out in the following annexures prepared by the management and approved by the Board of Directors for the purpose of inclusion in the Letter of Offer: a) Statement of Cash Flows for the financial years ended March 31. 2003. 4. c) Statement of Dividend paid by the Bank for the financial years ended March 31. 2005. The effects of such changes have not been given in the attached financial information in the period prior to which these changes came into effect. 2004. one of the auditors of the Bank. 2007 and half year ended on September 30. were necessary for our reporting. Treatment of depreciation on investments. Those Standards require that we plan and perform our audit to obtain reasonable assurance. Classification of Investments and valuation thereof. 2004. RBI has issued/amended various guidelines from time to time on Income Recognition. Effects of changes in accounting policies made during the period from April 1. 2003.a of Notes to the summarised financial information set out in Annexure 4 to this report regarding non compliance of Accounting Standard 15 “Employee Benefits” (revised 2005) for the reasons stated therein. which in our opinion. 2003. We have reported on the above statement on the basis of information and explanations provided by the management.

For M. 9. notes to the summarised financial information (Annexure 4) and other financial information as set out in Annexure 5 to Annexure 12 respectively to this report. L. M. P. The impact of the above on the financial information for the period covered by this report is not ascertainable. Sarkar Partner: M. the attached summarised financial information (comprising of Statement of Assets and Liabilities in Annexure 1 and Statement of Profit and Loss Account in Annexure 2) along with the principal accounting policies (Annexure 3). 52066 For D. No. Ramesh Kumar Partner: M. have been prepared in accordance with Para B. No. No. 51043 For Jain Kapila Associates Chartered Accountants D. K. it is not practicable for the management to recast/make adjustments in the financial information to reflect such changes referred to above. No. This report should neither in any way be construed as a re-issuance or redrafting of any of the previous Audit/Review Reports issued by us or by other firms of Chartered Accountants nor construed as a new opinion on any financial statements referred to herein. Kapila Partner: M. 16905 For G. No. 13795 For Chaturvedi & Co. Chartered Accountants Sanjay Khemani Partner: M. Kapadia & Co. No. For S. in our opinion. No. 7. K. Subject to our comments in Para 6 above. 44577 For Khandelwal Jain & Co. Chartered Accountants V.As informed by the management of the Bank. Mittal & Co. Chartered Accountants Pankaj Jain Partner: M. 14907 For Laxminiwas & Jain Chartered Accountants B. This report is intended solely for use of the management and for inclusion in the offer document in connection with the proposed rights’ issue of Equity Shares of the Bank. Chartered Accountants P M VEERAMANI Partner: M. K. Chartered Accountants Rajen Ashar Partner: M. referred to or distributed for any other purpose without our prior written consent. 11546 For Vinay Kumar & Co. Chartered Accountants P. Chartered Accountants Rajiv Datta Partner: M. 48243 162 . 23933 8. No. Choudhury Partner: M. 48850 For R G N Price & Co. No. Chartered Accountants S. No. The summarised financial information has been prepared after making such regroupings as were. As a result of these regroupings. M. in our opinion. Chaturvedi Partner: M. considered appropriate. Nissim & Co. No. Chartered Accountants D. K. the amount reported in the summarised financial information may not necessarily be the same as those appearing in the audited/reviewed financial statements for the relevant years/period. Our report should not be used. No. 200304 For Datta Singla & Co. Agrawal Partner: M. C. Sen & Co. Chartered Accountants S. Chopra Partner: M. 12705 For M Choudhury & Co. Part II of Schedule II of the Act and SEBI Guidelines. we report that.

Chartered Accountants V. No. 12202 163 .For Vardhaman & Co. Baskaran Partner: M.

to the extent they are not inconsistent with the Banking Regulation Act. 2006 and 2007. The financial information has been prepared by the Bank’s Management from the Group’s audited financial statements for the years ended March 31. Part II of Schedule II to the Companies Act. associates and joint ventures audited by their respective statutory auditors for the respective years as per the Provisions of Act/Guidelines of Reserve Bank of India (RBI). 2005. The financial information for the above periods was examined to the extent practicable. which in our opinion. 2007 and unaudited Cash Flow Statement of the Group for the six months’ period ended on September 30. We have reported on the above statement on the basis of information and explanations provided by the management. Madam Cama Road.AUDITOR’S REPORT (CONSOLIDATED) The Board of Directors State Bank of India Central Office. The financial information is proposed to be included in the offer document of the Bank in connection with its proposed rights issue of Equity Shares. 1956. in accordance with AAS 33 “Engagement to Review Financial Statement” issued by the ICAI and we have relied on such financial statements. whether the financial information under examination is free of material misstatement. 7 Joint Ventures. 2007 were audited by us. These procedures included comparison of the attached financial information of the Bank with the respective audited/reviewed financial statements. 2000 as amended to date (“SEBI Guidelines”) issued by Securities and Exchange Board of India Act 1992. and the un-audited profit and loss statement of the Group for the six months’ period ended 30th September 2007 were subjected to limited review and reported upon by us in accordance with Auditing and Assurance Standard (AAS) 33 “Engagement to Review Financial Statement” issued by the Institute of Chartered Accountants of India (ICAI). 3. The financial statements of the Group for the year ended March 31. The financial statements for the other financial years included in this report were audited by M/s B. for the purpose of audit of financial information in accordance with the AAS issued by the ICAI. were necessary for our reporting. associates and joint ventures (the “Group”) annexed to this report as approved by the Board of Directors of the Bank. and accordingly we have relied on the financial statements audited by them for those years. 4. 2003. Chatrath & Co. 24 associates and estimated results of 4 Associates based on their annual results for the year ended March 31. 2. 1. one of the auditors of the Bank. 2007 were subjected to limited review and reported upon by M/s Chaturvedi & Co. The aforesaid reviewed un-audited Profit and Loss statement include reviewed results of the Bank reviewed by Joint Auditors of the Bank including us. which has been prepared in terms of the requirements of Paragraph B. Mumbai 400 021 Dear Sirs. which were prepared in accordance with the provisions of the Banking Regulations Act.. 2007. 164 . The aforesaid audited financial statements include figures of the Bank which have been audited by Joint Auditors of the Bank (including us for the year ended March 31. M. 2005. (the “Act”) and the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines. 7 subsidiaries reviewed by their respective auditors. The unaudited Balance Sheet of the Group as on September 30. The preparation and presentation of this financial information is the responsibility of the Bank’s management. un-reviewed results of 14 subsidiaries. 2004. We have been engaged to examine and report on the financial information of the State Bank of India (the “Bank”) and its subsidiaries. State Bank Bhavan. Those Standards require that we plan and perform our audit to obtain reasonable assurance. 1949 (the Banking Regulation Act). 2006 and 2007) and audited financial statements of Bank’s subsidiaries. Nariman Point. books and records produced to us and such other tests and procedures.

Creation and Utilisation of floating provisions. 2007 for complying with the Mandatory Accounting Standard. iii. We report that: Effects of changes in accounting policies made during the period from April 1. 165 . v. 2007. ii. The summarised financial information has been prepared after making such regroupings as were.6. 2007 and half year ended on September 30. 9. the amount reported in the summarised financial information may not necessarily be the same as those appearing in the audited/reviewed financial statements for the relevant years/period. Asset Classification. M. In accordance with the terms of our engagement with the Bank. referred to or distributed for any other purpose without our prior written consent. 7. The effects of such changes have not been given in the attached financial information in the period prior to which these changes came into effect. 2004. 2003. The Group has. Part II of Schedule II of the Act and SEBI Guidelines. 2004. the impact of which has not been ascertained by the management. we have also examined the following other financial information set out in the following annexures prepared by the management and approved by the Board of Directors for the purpose of inclusion in the Letter of Offer: Statement of Cash Flows for the financial years ended March 31. This report should neither in any way be construed as a re-issuance or redrafting of any of the previous Audit/Review Reports issued by us or by other firms of Chartered Accountants nor construed as a new opinion on any financial statements referred to herein.5. have not been given in the attached financial information for the periods prior to such changes in the accounting policies. Provisioning in respect of Standard Assets/Non Performing Advances/Other Assets. The Group has carried out necessary amendments in its accounting policies in the relevant years to be in conformity with the said RBI guidelines. The effect of the same on the profits of earlier years has not been recomputed to reflect this change in the accounting policy. This report is intended solely for use of the management and for inclusion in the offer document in connection with the proposed rights issue of Equity Shares of the Bank. 2006 and 2007 set out in the Annexure C-5. Nissim & Co. Treatment of depreciation on investments. Treatment of amortisation of premium on investments and amortisation of expenditure incurred on Voluntary Retirement Scheme. Statement of Accounting Ratios for the financial years ended March 31. which hitherto was being recognised by the Group without restricting to its capital contribution. 2007 set out in the Annexure C-6. For M. it is not practicable for the management to recast/make adjustments in the financial information to reflect such changes referred to above. in our opinion. The impact of the above on the financial information for the period covered by this report is not ascertainable. As a result of these regroupings. the attached summarised financial information (comprising of Statement of Assets and Liabilities in Annexure C-1 and Statement of Profit and Loss Account in Annexure C-2) along with the principal accounting policies (Annexure C-3). 2005. considered appropriate. 2002 to September 30. 2005. during the year ended March 31. have been prepared in accordance with Para B. 6. iv. i.a of Notes to the summarised financial information set out in Annexure C-4 to this report regarding non compliance of Accounting Standard 15 “Employee Benefits” (revised 2005) for the reasons stated therein. Classification of Investments and valuation thereof. Attention is drawn to note A. 8. Effects of material amounts relating to adjustments for the previous years have not been given in the attached financial information to the periods to which they relate. we report that. As informed by the management of the Bank. ii. Our report should not be used. 2006. in our opinion. RBI has issued/amended various guidelines from time to time on Income Recognition. Subject to our comments in Para 6 above. notes to the summarised financial information (Annexure C-4) and other financial information as set out in Annexure C-5 and Annexure C-6 respectively to this report. 2003. recognised diminution in the value of investments in Regional Rural Banks to the extent of its capital contribution. i.

No.Chartered Accountants Sanjay Khemani Partner: M. 44577 166 .

Other than for the period ended September 30. 2007. This change in accounting policy does not have any impact on the Bank's net profit. the Bank's profit and loss account has also been regrouped for fiscal year 2006. Therefore. 2006 and 2007 as presented hereunder have been reformatted to contain the figures for these years. 2006. as was the case during fiscal year 2006. the figures from the income statement for the half year ended September 30. The Bank's profit and loss account has been changed so as to correlate with the corresponding items in “Assets” and “Liabilities” in the Balance Sheet for fiscal year 2007. 2007. Accordingly. The Bank had previously followed a policy of amortising premium in respect of securities in the “Held to Maturity” ("HTM") category by making an adjustment to the “provision and contingencies” line item in the Bank's profit and loss account. 2007 to conform with the current guidelines. Based on a clarification issued by RBI on July 11. The Bank's cash flow statement for fiscal year 2006 has been regrouped to correspond with the revised presentation of its balance sheet for the same period. the data relating to fiscal year 2005 and fiscal year 2006 is not strictly comparable with those relating to fiscal year 2007 as appearing herein. 2003. 2006 are extracted from the 2007 half yearly income statements relating to the previous year. The financial statements of the Bank for the years ended March 31. the Bank has regrouped the amortisation of premium in respect of securities held in HTM category for the period ended September 30. as was the case during fiscal year 2006. which led to the regrouping of some fiscal year 2006 financial data. 167 . which led to regrouping of some of the data relating to half year ended September 30. Balance Sheet figures for fiscal year 2006 have also been regrouped. Also claims received from Deposit Insurance and Credit Guarantee Corporation and Export Credit Guarantee Corporation have been netted off against Advances during fiscal year 2007 instead off retaining them as a liability item. 2006. Advances: Provisions for restructured standard assets have been retained as provisions during fiscal year 2007.FINANCIAL STATEMENTS NOTE ON REFORMATTING AND REGROUPING The Bank's financial statements are prepared in accordance with generally accepted accounting principles in India according to which the financial statements contain figures for two years (current year and previous year) for the purpose of comparison. the Bank is now required to reflect the amortization of premium in respect of securities held in HTM category by making an adjustment to the "Interest on Investments" line item in the Bank's profit and loss account. Further. as there has been a change in the accounting policies during the half year ended September 30. Therefore. In accordance with an RBI directive dated April 20. the Bank has not made this change with respect to any other financial periods. 2005. 2007. Accordingly. 2004. Other liabilities and provisions: The figures in “Other Liabilities and Provisions” have undergone changes to correspond with the changes under “Advances”. the figures for fiscal year 2006 as extracted from the 2007 annual financial statements relating to the previous year have been regrouped. Because there were changes in the accounting policies during fiscal year 2007. instead of netting them off against Advances. during fiscal year 2007 the Bank changed the previous policy relating to amortisation of premium in respect of securities held in the HTM category and charged the amortisation amount as well as marked to market losses on transfer of securities from Available for Sale ("AFS") category to the HTM category by adjusting the Profit/(Loss) on revaluation of investments (net) line item.

Under AS-15 Revised. which will be applicable to the Bank beginning in fiscal year 2008. AS-15 Revised has not yet been applied to the Bank's unaudited unconsolidated and consolidated financial results for the sixmonths ended September 30. The Bank expects to complete the actuarial valuation exercise in time to be compliant with the revised standard by March 31. the Bank has made provisions for retirement benefits (gratuity. 2007 and nine-months ended December 31. Had the Bank applied AS-15 Revised. 2007. 168 . it is estimated that the amount of provision that needs to be set aside by Indian banks under the new standard would. AS-15 Revised provides banks with the following two options for making a provision in its books of accounts: 1. 2008. 2007. be higher than such provision determined under the previous standard. and the provisioning for such amount is mandatory. Any increased funding liability in 2008 will likely decrease in future fiscal years. The Bank's compliance with AS-15 Revised must take effect from April 1. Charge off the entire differential of increased liability (as adjusted by any tax related expense) by debit to opening reserve and surplus as on April 1. While the impact of AS-15 Revised has not been quantified. the Bank's financial results for these periods would have differed from what is shown in this Letter of Offer. however. AS-15 has been revised and replaced with Accounting Standard 15 “Employee Benefits” (Revised 2005) ("AS-15 Revised"). 2. the actuarial liability of the employees’ benefits is likely to be increased. As a result of implementation of AS15-Revised.NOTE ON THE LIKELY IMPACT OF ACCOUNTING STANDARD 15 (REVISED 2005) The Bank’s accounting policy on Retirement Benefits complies with the provisions of Accounting Standard 15 “Accounting for Retirement Benefits in the Financial Statements of Employers” ("AS-15"). The Bank has not increased its provision for employee benefits for fiscal year 2008 as a result of the expected increase stemming from implementation of AS-15 Revised. which is a method prescribed under the International Accounting Standard 19. the amount of employee benefits is determined on the "Projected Unit Credit" method. in general. 2007. The Bank is currently undergoing an actuarial valuation exercise to determine which option would be most appropriate. superannuation benefits (pension) and leave encashment benefit) on the basis of an annual acturial valuation done on an aggregate basis. Charge off 20% of the differential increased liability each year for a period of 5 years by way of a debit to the profit and loss account in each of the five years. Under the previous AS-15.

656.10 710.54 25.232.99 1.149.391.410.92 183.462.069.835.99 555.98 562.99 520.766.537.117.94 449.723.81 14.96 1.018.884.720.99 456.58 63.262.ANNEXURE 1 SUMMARISED STATEMENT OF ASSETS & LIABILITIES (UNCONSOLIDATED) (Rs.423.049.89 58.57 69.843.06 55.88 497.68 277.022.152.43 4.83 307.072.464.399.922. overdrafts and loans repayable on demand Term Loans Total FIXED ASSETS OTHER ASSETS TOTAL (A) LIABILITIES 1 I i ii II III i ii 2 i ii 3 i ii DEPOSITS Demand Deposits From Banks From Others Savings Bank Deposits Term Deposits From Banks From Others Total BORROWINGS Borrowings in India Borrowings outside India Total OTHER LIABILITIES & PROVISIONS Other Liabilities & Provisions Subordinate Debts Sub Total TOTAL (B) C D NET ASSETS (C=A-B) Represented By SHARE CAPITAL 11.239.678.35 142.759.563.625.373.010.921.652.352.363.253.935.29 BALANCES WITH BANKS & MONEY AT CALL & SHORT NOTICE 68.140.231.598.985.491.128.06 290.01 1.21 120.843.91 228.92 341.62 397.83 15.28 4.663.301.146.10 556.83 341.04 116.999.907.291.197.764.036.810.59 23.186.08 44.335.64 1.816.64 1.99 169 .412.55 26.543.433.09 328.02 202.45 109.415.254.05 52.83 148.12 225.49 958.88 34.598.37 127.529.10 1.13 134.618.495.510.814.134.262.958.460.648.975.923.53 191.66 80.73 216.802.723.758.827.46 45.94 386.246.79 5.06 5.975.22 58.25 532.04 190.04 86.841.62 39.340.81 61.67 1.801.19 3.36 1.02 438.718.135.280.98 12.563.55 66.98 1.26 12.622.005.15 172.60 2.18 2.836.56 1.50 229.18 737.73 1.384.586.924.49 2.44 1.60 3.856.188.317.167.67 2.800.08 6.480.364.82 63.848.553.731.741.33 4.61 179.462.364.67 245.19 265.49 46.721.11 55.362.699.091.117.821.67 144.91 4.18 1.96 46.313.36 27.306.210.1 214.670.14 2.90 3.838.707.412.843.11 4.285.694.377.451.36 5.351.293.73 338.394.31 195.79 93.33 1.940.61 1.78 739.489.67 20.73 1.529.585.830.53 693.392.31 240.078.37 26.941.746.34 223.63 657.58 690.61 229.579.03 1.83 5.186.475.279.38 23.14 31.86 492.99 460.68 276.623.257.21 1.96 3.312.99 461.86 5.339.849.87 3.420.262.13 3.358.48 182.979.262.64 127.88 3.19 68.06 609.342.724.39 691.125.567.033.731.72 13.39 1.527.364.422.66 1.289.788.04 6.94 1.21 51.81 312.127.631.378. in Millions) 31-Mar-03 Audited 31-Mar-04 Audited 31-Mar-05 Audited 31-Mar-06 Audited 31-Mar-07 Audited 30-Sep-07 Unaudited Reviewed As on A 1 i ii ASSETS CASH AND BALANCES WITH RESERVE BANK OF INDIA Cash in hand (including foreign currency notes and gold) Balances with Reserve Bank of India in Current Account Total 2 I ii 3 i ii 4 i ii iii 5 6 B In India Outside India Total INVESTMENTS Investments in India Investments outside India Total ADVANCES Bills purchased and discounted Cash Credits.307.25 74.071.732.479.99 462.999.107.858.970.152.009.764.988.16 1.463.875.262.666.584.660.14 70.115.653.60 153.73 153.961.81 177.99 507.57 5.856.93 28.867.82 239.97 1.70 168.871.760.46 34.828.800.57 5.023.840.85 165.40 77.62 3.488.30 433.355.922.361.24 379.862.909.210.033.01 795.261.950.006.41 248.764.58 49.103.761.109.262.726.96 62.01 4.15 179.86 2.07 324.197.885.68 4.69 1.425.35 949.744.025.665.748.433.37 5.726.01 66.35 67.87 1.422.07 124.808.97 34.94 46.02 644.870.22 1.30 155.976.572.45 495.970.67 252.63 306.707.824.236.367.152.904.440.253.90 600.34 73.586.262.

68* 335.907.39 271.030.934.538. 170 .57 30-Sep-07 Unaudited Reviewed 203.721.61 211.46 3.807.458.04 61.506.09 17.11 5.955.E As on RESERVES & SURPLUS I II III IV V VI VII Statutory Reserves Capital Reserves Share Premium Investment Fluctuation Reserve Foreign Currency Translation Reserve Revenue and Other Reserves Balance in Profit and Loss Account 31-Mar-03 Audited 106.85 35.05 35.105.83 3.047.83 289.181.089.871.73 2.254.790.44 35.39 307.125.288.73 52.39 235.744.585.00 1.147.050.64 1.810.869.50 462.59 150.181.191.130. revenue and other reserves.51 440.177.502.203.10 158. endorsements and other obligations Other items for which the banks is contingently liable Total Bills for collection 4.96 75.84 172.711.94 2.211.33 3.738.43 208.78 1.105.375.23 551.712.340.09 8.73 43.54 1.61 3.87 268.31 35.78 205.37 TOTAL (E) F TOTAL (D+E) CONTINGENT LIABILITIES I II III IV V VI Claims against the bank not acknowledged as debts Liability for partly paid investments Liability on account of outstanding forward exchange contracts Guaranteed given on behalf of constituents Acceptances.061.73 22.22 280.105.148.722.40 6.973.105.29 101.853.73 2.66 1.440.75 587.73 456.80 370.37 166.83 162.54 1.167.216.865.37 240.755.37 4.36 223.794.790.24 4.11 2.79 31-Mar-05 Audited 140.83 31-Mar-04 Audited 116.71 221.33 3.181.929.92 1.17 28.38 341.33 3.50 1.886.85 7.118.39 197.955.321.105.41 1.50 523.55 61.23 671.209.675.676.312.09 190.770.17 233.195.119.210.128.922.105.00 1.982.028.46 35.02 167.711.88 * Without appropriation to Statutory reserves.48 1.95 150.439.37 4.972.593.637.87 276.98 470.879.13 917.36 31-Mar-06 Audited 170.88 28.49 3.900.86 31-Mar-07 Audited 203.80 202.110.58 312.90 1.44 35.54 38.058.00 58.05 376.065.257.033.938.95 652.030.42 9.87 197.686.048.773.343.049.030.506.61 30.802.985.069.813.

2 2.88) 112.368.398.81 (16.402.85 13.113.724.882.73 6.012.33 79.21 125.1 2.78 40.59 9.1 1.69 1.91 9.50 595.39 (8. Telegrams.5 2.72 3.119.609.71 48.61 380.19 192.280.88 1.74 17.1 0 2.235.723.217.97 8.022.12 1.55 22.453.60 3.83 *7.83 1.71 5.37 32.75 8.73 1.207.96 19.15 24.07 7.840.06 3.30 21.024.399.01 184.736.45 7.89 7.16 5.77 114.124.230.604.367.71) 4.4 2.903.82 29.962.756.83 573.09 304.39 10.15 310.147.407.ANNEXURE 2 SUMMARISED STATEMENT OF PROFIT AND LOSS ACCOUNT (UNCONSOLIDATED) (Rs in millions) 30-Sep-07 For the Financial Year/Half Year Ended A 1 INCOME Interest Earned 1.904.53 394.43 15.69 117.90 6.612.671.805.94 60.325.181.215.392. exchange and brokerage Profit / (Loss) on sale of investments (Net) Profit / (Loss) on revaluation of investments (Net) Profit / (Loss) on sale of land.17 2.74 744.741.833.19 7.391.96 139.36 69.92 27.01 1.266.18 465.521.61 31-Mar-03 Audited 31-Mar-04 Audited 31-Mar-05 Audited 31-Mar-06 Audited 31-Mar-07 Audited Unaudited Reviewed (2.80 21.435.3 1.69 248.965.73 (7.753.80 201.47 497.92 10.09 227.231. allowances and expenses Auditors’ fees and expenses (including branch auditors’ fees and expenses) Law charges Postages.27 1.70 57.402.733.76 171.34 10.3 2 Interest on deposits Interest on Reserve Bank of India/ Inter-bank borrowings Others Total Operating Expenses 2.86 324.04 395.3 2.1 2.8 408.3 2.910.107.602.2 1.177.35 1.352.171.891. Repairs and maintenance Insurance 1.775.155.15 568.647.00 147.00 71.870.93 6.60 815.58 2.407.083.25 163.993.476.424. taxes and lighting Printing & Stationery Depreciation Directors’ fees.49 976.983.02 176.673.50 57.06 1.221.741.864.64 11.321.93 4.870.39 7.348.702.31 266.045.969.124.136.7 2.03 4.44 Other Expenditure Total 7.17 2.4 Commission.20 689.86 14.167.392.094.14) 20.39 56.936.71 (4.39 258.411. Telephones.733.67 1.625.276.8 2.525.00 2.92 152.339.23 1.734.784.692.741.81 8.74 5.961.835.95 2.76 181.067.54 (2.2 2.48 635.56 9.401.37 7.04 203.795.19 1.56 811.15 359.086.116.514.1 1.44 118.66 121.196.4 2 Interest/Discount on Advances Bills Income on Investments Interest on Balances with RBI and other Inter Bank Funds Others Total Other Income 2.75 542.697.729.01 1.94 (50.21 30.47 190.372.535.290.51 1.37 4.932.92 130.38 100.9 2.99 1.19 112.871.073.206.66 *32.953.91 14.775.33 6.023.688. buildings and other assets (Net) including leased assets Profit on exchange transactions (Net) Income by way of dividends from subsidiaries/companies and or joint ventures abroad or in India Income from Financial Leases Miscellaneous income Total Total Income B 1 EXPENDITURE Interest Expended 1.11 171 .85 8.5 2.74 4.53 74.821.07 160.99 5.522.08 76.43 79.21 2.229.963.66 17.11 9.677.58 9.635.030.22 486.97 3.05) 35.446.613.65 31.92 994.60 494.461.272.25 7.773.250.69 92.27 3.03 5.6 1.44 7.94 81.552.89 54.48 452.62 368.873.46 16.77 157.71 2.474.84 211.75 13.291.81 1.945.032.479.53 3.00 39.48 7.90 4.887.6 Payments to and provisions for employees Rent.86 1.576.738.61 181.86 234.28 21.756.42) 5.929.215.35 64.7 2.71 622.417.281.469.02 434.19 307.99 14.60 1.415.68 836.42 1.26) 5.424.2 1.48 1.32 12.543.886.199.64) 31.68 8.701. etc.26 437.

71 44.066.545.580.68 Break up of Non-Recurring Items Included above: Income: Profit on sale of investments Interest on Income tax refund Write back of Depreciation Write back of provisions Write back of provisions towards securities transactions Exchange gain on India Millennium Deposits Miscellaneous Income – Unreconciled net credit on interbranch accounts Sub-total (A) Expenses: Voluntary Retirement Scheme Reduction in Provision for depreciation on investments 3.306.827.20 122.10 3.95 66.518.74 4.29 741.70 4.37 36.903.050.375.937.113.21 (2.20 (29.08 3.39 44.39 44.252.00 5.925.37 15.39 3.18 3.57 (2.50 30.00 7.603.087.48 109.20 6.37 31.74 33.374.14 (198.71 3.6 3.60 95.93 95.045.97 31-Mar-04 Audited 285.00 1.90 14.59 573.90 3.74 58.368.195.22 3.37 31.045.94 4.707.80 3.810.445.40 (868.60 3.783.40 7.18 3.37 21.478.280.534.472.2 3.01 4.375.00 26.40 510.575.746.60 1.00 31.262.070.57 6.340.33) 885.00 36.048.00 8.488.30) 332.37 24.58 109.77 3.166.17 4.445.21 50.40 7.00 4.858.60) 4.898.315.60 36.37 10.578.033.1 3.545.39 28.28 45.00 8.00 30.79 16.066.39 43.31 491.999.70 - 172 .383.413.384.80 1.56 44.80 (3.372.72 38.60 (7.10 3.660.18 1.80 132.916.00 1.40) 722.5 3.821.464.452.94 6.534.978.8 Provision for Income Tax (Current tax) Provision for Income Tax (Deferred tax) Provision for Fringe Benefit Tax Provision for other taxes Provision for NPAs Provision for Standard Assets Provision for Depreciation on investments Provision for Other Assets/ Contingencies Total Net Profit for the year Add/ Less Adjustments Adjusted Net Profit for the year Add: Balance of Profit Brought forward from previous year Add: Transfer from General Reserve Profit Available for Appropriation APPROPRIATIONS Transfer to Statutory Reserves Transfer to Capital Reserves .853.586.891.10 29.050.146.760.053.18 43.07 3.96) 68.984.40 174.18 1.30 151.13 21.4 43.86 45.00 174.150.16) 36.789.256.762.29 30.00 8.545.024.935.578.09 24.924.999.7 3.97 31.39 30.57 16.992.80 12.048.368.85 5.97 77.64 8.992.49 9.63) 46.040.00 29.00 4.753.39 36.327.90 20.58 31-Mar-06 Audited 321.60 31-Mar-05 Audited 285.68 31-Mar-03 Audited 290.27 112.03 5.84 77.00 23.375.022.38 99.32 17.44 112.35 99.703.30-Sep-07 For the Financial Year/Half Year Ended Total Expenditure Profit Before Provisions and taxation & extraordinary items Less: Extraordinary Items Profit Before Provisions and taxation 3 Provision & Contingencies: 3.126.937.39 43.4 3.372.68 30.3 3.155.35 Unaudited Reviewed 208.724.29 3.903.053.194.793.00 3.340.813.746.240.30 2.74 937.60 25.792.999.810.75 3.44 54.07 45.97 (583.80) (454.32 0.20) 4.854.581.40 979.00 3.295.070.046.813.70 - 8.39 45.10 3.337.473.50 3. Investment Fluctuation Reserve and Revenue and Other Reserves Dividend Corporate Tax on Dividend Balance carried to Balance Sheet 9.413.79 50.27 31-Mar-07 Audited 352.80 16.051.20 6.753.

20) (2.545.175.60 (7.647.545.216.10 4.225.75) Unaudited Reviewed - * Interest on Swaps netted off.00 12.15) (5.795.635.391.70 9.10 3.798.10 5.889.90 1.14 31-Mar-07 Audited 2.70) 28.84 2.38 (879.28) 31-Mar-04 Audited 3. 173 .56 19.148.652.60 7.551.255.674.20) 35.430.308.90) (1.06 31-Mar-05 Audited (26.335.704.650.29 31-Mar-06 Audited 3.70 (5.128.30-Sep-07 For the Financial Year/Half Year Ended Payments to and provisions for employees Interest on Income Tax Interest on India Millennium Deposits Sub-total (B) Total (A-B) Tax impact thereon Net impact on profit 31-Mar-03 Audited 3.71 22.

(b) and (c) 0. In respect of foreign offices. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. (c) Doubtful Assets and (d) Loss Assets. b. In the year 2005-06. Direct advances to agricultural and SME Sectors Residential housing loans beyond Rs. accounting standards/ guidance notes issued by the Institute of Chartered Accountants of India (ICAI). 2005 and 2006 and which have changed in subsequent years have been stated in italics at the appropriate places. 2. 2. Future results could differ from these estimates. d. (b) Sub-standard Assets.3. c.3.00% 2.00% 1.2004-05. Commercial real estate loans.Non Deposit Taking All other loans and advances not included in (a). which comprise the statutory provisions.2. 174 .40% except on the advances to small and medium enterprises and direct agriculture which was at 0. 2.25%. Indian Offices 2. the general provision on standard assets on the global portfolio was 0. They conform to Generally Accepted Accounting Principles (GAAP) in India.25%. 1.25% 1. Basis of Preparation The accompanying financial statements have been prepared under the historical cost convention. regulatory/RBI guidelines.2003-04. 2007 The principal accounting policies of the Bank have been described in brief in the following paragraphs. The material accounting policies which were followed in the financial years ended on March 31. statutory provisions and practices prevailing in respective countries are complied with. 2003. 2.1. and the practices prevalent in the banking industry in India. (a) Standard Assets.1. the general provision on standard assets on the global portfolio was 0. and Loans and advances to systemically important NBFCs . The provision rates for the different categories of Standard Assets are summarised below: a. viz.40% Earlier Policy: During the years 2002-03. 1. A general provision is required to be made on Standard Assets on the global portfolio. The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenditure during the reporting period.1.2. All advances are classified under four categories. 20 lakhs Personal Loans Loans and advances qualifying as capital market exposures.ANNEXURE 3 Principal Accounting Policies for the year ended March 31. 0. Advances and Provisions thereon Advances are shown net of provisions and unrealised interest on Non-Performing Assets (NPAs). 2004.

“doubtful” or “loss”. as the case may be. “Financial Assets” sold are recognised as follows: i) ii) In case the sale is at a price lower than the Net Book Value (NBV). the surplus provision is not reversed and is utilised to meet the shortfall on sale of other such nonperforming financial assets. In the years 2003-04 and 2002-03. wherever applicable. the difference is charged to the Profit & Loss Account. b) ii) iii) c) • In the year 2002-03. the percentage of provision on secured portion in the earlier years were 50% in 2002-03 & 2003-04. advances guaranteed by State Governments are classified as ‘sub-standard’ or ‘doubtful’ or ‘loss’. the advances were considered as non-performing if they remain overdue or out of order for more than 180 days as against 90 days at present.2. advances where State Government guarantee remain default for more than two quarters as on March 31. Provisions are made on outstanding non-performing advances (net of interest not realised) as under : • Substandard Assets From the year ended 2004-05 • Doubtful Assets a) Unsecured portion at 100% after netting retainable/realisable amount of guarantee cover provided by Export Credit Guarantee Corporation/ Credit Guarantee Trust for Small Industries. 175 . 60% in 2004-05 and 75% in 2005-06. In the case of advances guaranteed by the state governments the accounting policy for classification of account and making provisions were as under in the earlier years: i) In the year 2005-06. if the amount due to the bank remains overdue for more than 180 days and attracted appropriate provisioning as applicable to other advances. 2000 after it is invoked at provision was made at 30% of the secured portion and 100% of the unsecured portion. Secured portion Period for which the advance has been considered as doubtful Up to one year 20% One to three years 30% More than three years 100% 100% : : 10% 20% (In case of ab initio unsecured exposures (where realisable value of security is not more than 10%) b) • Loss assets Earlier Policy: a) In the case of doubtful assets for more than three years as on March 31. advances guaranteed by State Governments were classified as “sub-standard”. as the case may be. In case the sale is at a price higher than the NBV.3. 2004. if the amount due to the bank remains overdue for more than 90 days and attracts appropriate provisioning as applicable to other advances.2. In the year 2004-05.

1. Investments Investments are classified into three categories.4. The transfer of a security (from one category to another) is accounted for at the lower of acquisition cost/book value/market value on the date of transfer and the (d) (e) 176 . Unrealised Interest recognised in the previous year on advances which have become nonperforming during the current year is provided for.3. In determining the acquisition cost of an investment: (a) (b) (c) Brokerage/commission received on subscriptions is deducted from the cost of securities. Brokenperiod interest received on sale of securities is recognised as interest income. viz. Investments which are not classified in either of the above categories are classified as ‘Available for Sale’.1.1. 3. Government Securities Other Approved Securities Shares Debentures and Bonds Investments in Subsidiaries/Joint Ventures and Other Investments Investments that are acquired by the Bank with the intention to trade by taking advantage of short term price/interest rate movement are classified under “Held for Trading”. 2. Cost is determined on the weighted average cost method.2.3. Valuation 3. whichever is higher. broken-period interest.4. 3. 3. 2.e. Advances are classified under four categories in line with those of Indian Offices.2.3. These investments are held under this category for 90 days from the date of acquisition. Brokerage.1.4. 2. investments are further classified under the following six groups : i) ii) iii) iv) v) vi) 3. Foreign Offices 2.1. ‘Available for Sale’ and ‘Held to Maturity’.1. Under each of these categories.3. Interest accrued unto the date of acquisition of securities i.2.2. 3. is excluded from the acquisition cost and recognised as interest expense. ‘Held for Trading’. 3.2.1. the difference between the present value of the future interest as per the original agreement and the present value of the future interest as per the revised agreement is provided for at the time of restructuring/rescheduling. Investments which are intended to be held up to maturity are classified as ‘Held to Maturity’. commission and stamp duty paid in connection with acquisition of securities are treated as revenue expenses.4. Provisions in respect of non-performing advances are made as per the local law or as per the norms of RBI. In case of restructuring/rescheduling of advances.

Balance in Repo/Reverse Repo Account is adjusted against the balance in the Investment Account. the securities sold/purchased under Repo/Reverse Repo are treated as outright sales/ purchases and accounted for in the Repo/Reverse Repo Accounts and the entries are reversed on the date of maturity.5. The Bank has adopted the Uniform Accounting Procedure prescribed by the RBI for accounting of Repo and Reverse Repo transactions other than transactions under the Liquidity Adjustment facility (LAF) with the RBI. depreciation was recognised scrip-wise and appreciation ignored. Interest expended/earned thereon is accounted for as expenditure/revenue.8. 3.2. Earlier Policy: In the years 2002-03 & 2003-04.2. Securities purchased/sold under LAF with RBI are debited/credited to Investment Account and reversed on maturity of the transaction. the premium on acquisition or on transfer from another category is amortised over the remaining period to maturity of the security using Constant Yield Method (CYM).2. on such transfer is charged to Profit and Loss Account .“Profit on Revaluation of Investments” as a deduction. Securities are valued scrip-wise and depreciation/appreciation is aggregated for each classification. Non-Performing Investments are recognised as per RBI guidelines and provision is made as per RBI norms applicable to Non-Performing Advances. is provided for while net appreciation is ignored. 3. 3. Investments under ‘Available for Sale’ category are valued at cost or market value. Net depreciation in each classification.3. The book value of the scripts continue to remain unchanged. Costs and revenues are accounted as interest expenditure/income.3. as the case may be.4. Individual scripts classified under ‘Held for Trading’ category are valued at lower of book value or market value. 2003-04 and 2004-05 investments in Regional Rural Banks are accounted for after netting off the provisions held on account of losses incurred by RRBs up to the previous accounting period restricted to amount of the Bank’s investment up to that period. market value for this purpose is arrived at on the basis of realisable market price computed as per the guidelines of the Fixed Income Money Market and Derivatives Association of India (FIMMDA) / Primary Dealers Association of India (PDAI) / RBI. Accordingly.2. Amortisation loss is charged to Profit and Loss Account . Treasury Bills and Commercial Papers are valued at cost. 3. if any. 3. whichever is lower. if any. is provided for while net appreciation is ignored.“Profit on Revaluation of Investments” as a deduction.6. the weighted average cost was determined at the end of year after considering transactions during the year: 3. if any. Investments in subsidiaries and joint ventures (both in India and abroad) are valued at historical cost after netting off provisions. Net depreciation in each classification. Securities are valued scrip-wise and depreciation/appreciation is aggregated for each classification. Earlier Policy: In the years 2002-03 & 2003-04.3. 177 . Investments in Regional Rural Banks (“RRBs”) are valued at carrying cost (i. 3.depreciation.3.2. Earlier Policy: In the year 2002-03. book value) Earlier Policy: In the years 2002-03. Where market quotations are not available. The book value of the security is reduced to the extent of the amount amortised. if any. The book value of the scripts continues to remain unchanged.7.2. 3.e. Wherever the book value is higher than the face value/redemption value. Investments under ‘Held to Maturity’ (HTM) category are carried at acquisition cost. the premium amount was amortised equally over the remaining period of maturity.

33% per annum. as the case may be. The Bank also deals in a mix of these generic instruments. 4.000 are charged off to the Profit and Loss Account.1. as per RBI guidelines. 5. which are considered appropriate by the management.3. 5. 5. 1. 7. Derivatives are valued as follows: a) b) Derivatives used for trading are marked to market and net appreciation/ depreciation is recognised in the Profit and Loss Account. 1956. depreciation is provided as per the laws/norms of the respective countries. 2001 are accounted as per Accounting Standard 19 (Leases) issued by the ICAI.4. are recognised in accordance with Accounting Standard-28 issued by the ICAI and charged off to Profit and Loss Account. In respect of computers.2. 6.2.1.2. 5. 7. 5. Assets costing up to Rs. Based on RBI guidelines. and the difference between the annual lease charge (capital recovery) and the depreciation is taken to Lease Equalisation Account as per the guidelines issued by the ICAI. Assets given on Lease In respect of assets given on lease by the Bank on or before March 31.1 Derivatives The Bank presently deals in Interest Rate Derivatives viz.5. Such assets are included under “Other Assets”. Accounted on accrual basis in cases where the underlying Assets/Liabilities are not marked to market. 178 . and Currency Derivatives viz.4. 6. the lease amount is amortised over the period of lease. depreciation is provided on straight line method at 33. The net outstanding marked to market position of each type of derivative is shown either under Asset or Liability. 6. the value of the assets given on lease and the amounts paid as advance for assets to be given on lease are disclosed as “Leased Assets” and “Capital Work-in-progress (Leased Assets)” respectively under fixed assets. In respect of leasehold premises. Depreciation is provided on the written down value method at the rates prescribed under the Income Tax Rules. 2001. Derivatives used for hedging are: i) ii) Marked to market in cases where the underlying Assets/Liabilities are marked to market. In respect of fixed assets held at Foreign Offices. Depreciation is provided on straight line method as per the Companies Act. Computer software not forming an integral part of hardware is depreciated fully in the year of purchase. Cross Currency Interest Rate Swaps and Forward Rate Agreements. The resultant gain/loss is recognised in the Profit and Loss Account. under the portfolio of Structured Products. Impairment of Assets Impairment losses (if any). Options and Currency Forwards. Rupee Interest Rate Swaps. 4.1. 5. Fixed Assets and Depreciation Premises and other fixed assets are accounted on historical cost basis. Assets given on lease by the Bank on or after April 1. 1962.

4.1. Interest received and paid as well as accruals on Balance Sheet date in different currencies on Cross Currency Interest Rate Swaps are converted into Indian Rupees and routed through the interest account. Foreign currency monetary items are reported using the FEDAI closing spot rates. 9. The difference between the revalued amount and the contracted amount is recognised as profit or loss. Non-integral Operations a) b) c) All monetary/non-monetary assets and liabilities as well as contingent liabilities are translated at the closing rate notified by FEDAI. Forward Exchange Contracts In accordance with the guidelines of FEDAI and the provisions of AS -11. In case of Foreign Offices.1. Interest income and expense on IRSs and FRAs are accounted for on accrual basis. The notional principals of these instruments are recorded as off Balance Sheet items. Foreign Branches of the Bank and Offshore Banking Units (“OBUs”) have been classified as Non-integral Operations and Representative Offices classified as Integral Operations. 8. 8. 2. 3.2. Interest Rate Swaps (“IRSs”) and Forward Rate Agreements (“FRAs”) have been used as hedging instruments. b) c) Earlier Policy: In the Year 2002-03 and 2003-04 1. as the case may be. Foreign Currency Transactions In conformity with Accounting Standard 11 (The effects of changes in foreign exchange rates) of the ICAI. Integral Operations a) b) All income and expenditure of integral operations are recorded at the rates prevalent on the date of transaction. Items of income and expenditure in respect of foreign offices and assets and liabilities in foreign currencies are converted at the rate of exchange prevailing at the close of the year as per RBI guidelines. 179 .8. Income and expenditure are translated using the quarterly average rate notified by FEDAI at the end of the respective quarter. 9. Revenue Recognition Income and expenditure are accounted on accrual basis. 8.5. income is recognised as per the local laws of the country in which the respective foreign office is located. net outstanding forward exchange contracts in each currency are revalued at the Balance Sheet date at the corresponding forward rates for the residual maturity of the contracts. 8. a) Foreign currency transactions are recorded on initial recognition in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the date of transaction. All foreign currency monetary items are reported using the FEDAI closing spot rates. All resulting exchange differences are accumulated in a separate “Foreign Currency Translation Reserve” account till the disposal of the net investment. 8.3. Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognised as income or as expense in the period in which they arise.

The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date.2. Liability for gratuity. Interest on application money on investments and overdue interest on investments. Profit on sale of investments in this category is first credited to the Profit and Loss Account and thereafter appropriated to the “Capital Reserve Account”. it is recognised only at the time of sale / redemption. 10.1. Deferred tax assets are not recognised unless there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets will be realised. exchange and brokerage.2. Dividend on investments. Income (other than interest) on investments in “Held to Maturity” (HTM) category acquired at a discount to the face value. owing to significant uncertainty in collection thereof: (a) (b) Income on non-performing advances. fringe benefit tax and deferred tax charge or credit reflecting the tax effects of timing differences between accounting income and taxable income for the period. is recognised as follows : a) b) On Interest bearing securities. Interest on non-performing investments. 180 . 9. it is accounted for over the balance tenor of the security on a constant yield basis.3. in conformity with Accounting Standard 22 (Accounting for taxes on income) of the Institute of Chartered Accountants of India. Provision for Taxation Provision for tax comprises current tax for the period determined in accordance with the relevant laws. pension and leave encashment (which are defined benefits) is determined on the basis of actuarial valuations carried out at the year end and the incremental liability is provided for by charging to the Profit and Loss Account.9. Retirement Benefits Contributions payable to the Bank’s Provident Fund Trust in terms of its Provident Fund Scheme are charged to Profit and Loss account on accrual basis.4. Loss on sale is recognised in the Profit and Loss Account. 10. 9. The following items of income are recognised on realisation basis. Income on Rupee Derivatives designated as “Trading”. The following items of income are recognised on realisation basis: (a) (b) (c) (d) Commission (other than commission on deferred payment guarantees and government transactions). On zero-coupon securities. 11. overdue bills and non-performing leased assets. 10.

d. c. As a result of this change. 1. Year Ended on March 31. In terms of decision of the Government. profit for the year is higher by Rs. 17. Year Ended on March 31. Ltd resulting in a profit of Rs. During the year an amount of Rs. 269.ANNEXURE 4 Material Notes to Summarised Unconsolidated Financial Information and Accounting Standard Disclosures (A) 1. 181 . an amount of Rs. 2004 During the year an amount of Rs. which was treated as deferred revenue expenditure. 3545 million has been charged to revenue on account of Voluntary Retirement Scheme (VRS) implemented during the year 2000-2001. 2003 The expenses on encashment of leave of employees were hitherto accounted for on cash basis.545 million has been charged to revenue on account of Voluntary Retirement Scheme (VRS) implemented during the year 2000-2001. Material Notes to Summarised Financial Information Year Ended on March 31.090 million is to be amortised over a further period of two years in accordance with RBI guidelines. whereas in the previous years. 6. which was treated as deferred revenue expenditure. in order to comply with the Accounting Standard 15 issued by the Institute of Chartered Accountants of India and guidelines issued by the RBI. 3. 2. it was accounted for at the year end. b. Consequent upon the change.340 million has been received during the year on account of certain securities transactions. based on actual sales value and weighted average cost of purchases. a. 3. b. 6.545 million has been charged to revenue on account of Voluntary Retirement Scheme (“VRS”) implemented during the year 2000-01. Accordingly.062 million in the accounts. 2002 has been debited to the Revenue Reserve. Unamortised amount of Rs. 3.214 million was made in the accounts in earlier years towards these transactions. 7. 3. b. net additional provision requirement is lower and profit before tax is higher by Rs. Accordingly.545 million is to be amortised next year in accordance with RBI guidelines. 2005 During the year final instalment of Rs.782 million from ‘Available for Sale’ (AFS) to ‘Held to Maturity’ (HTM) category under specific RBI guidelines and made a provision of Rs. A provision of 8. the provision held towards “other Assets” has been written back and the balance amount has been credited to the respective revenue accounts. 29. was provided script wise while ignoring appreciation. Profit or loss on sale of investments has been accounted for transaction wise on the settlement date. during the current year. the Bank divested 37% of its stake in its fully owned subsidiary SBI Funds Management Pvt. a. computed scrip wise and providing for net depreciation in each classification while ignoring net appreciation. Unamortised amount of Rs. a. c. Ministry of Finance and Court orders. 8. However. an amount of Rs. During the year the Bank shifted SLR securities amounting to Rs.937 million.853 million During the year.464 million. From the current financial year investment in AFS and HFT categories have been valued in conformity with RBI guidelines after netting-off classification-wise depreciation and appreciation. 382 million representing current’s year liability has been charged to Profit and Loss Account and an amount of Rs. which was treated as deferred revenue expenditure. the liability towards encashment of leave is accounted for on the basis of actuarial valuation. based on the weighted average price for the whole year for both purchases and sales.213 million representing the accrued liability to March 31. The Bank’s Investments in ‘Available for Sale’ (“AFS”) and ‘Held For Trading’ (“HFT”) categories were being valued scrip-wise and depreciation if any.

Such interest is credited to profit and loss account on such determination.635 million paid to RBI for maintenance of value (MOV) by debit to Interest Expended Account in the years 2001 and 2002 was received back during the year on redemption of IMDs and credited to Interest Expended account.648 million withdrawn by taxation authorities. there is no impact on the Net Profit for the year.775 million for the current year and Rs.526 million.100 million. c. 2.315 million being Exchange Gain on India Millennium Deposits (“IMDs”) redemption. f. 2. 3129 million. the Accounting Standard 11 – Effects of change in Foreign Exchange Rate (2003Revised) has come into effect. 5. The net profit of the Bank for the year is arrived at in conformity with the provisions of the said Accounting Standard. being arrears of salary paid for the previous financial years.385 million. Interest Earned-Others includes an amount of Rs. 46. during earlier years.738 million. 16. 6. 3. which is in line with the RBI guidelines. Prior Period Items: Items Depreciation written back Operating expenses Interest expended Other income (Rs. in millions) (175) 164 2648 24 4. net exchange difference arising on translation of monetary items of non integral operations amounting to Rs. 869 million.3571 million being the amortisation and marked to market losses on inter-category transfer of Rs. d. under Operating Expenses includes an amount of Rs.796 million for the previous year. However. a. Any subsequent withdrawal of interest is being charged to profit and loss account. b. e. b. a.880 million shown under Other Liabilities & Provisions in earlier years has been transferred to Foreign Currency Translation Reserve. 3. 1999 aggregating to Rs. was debited to the “Tax paid in 182 . Consequently.e. An amount of Rs. The Bank accounts for the interest on income tax refund on determination of interest by taxation authorities. Consequent upon this. profit (net of tax) for the year is higher by Rs. Consequently. Other Income includes an amount of Rs. 5. 2006 Investments in Regional Rural Banks (“RRBs”) were hitherto accounted for after netting off provisions towards losses incurred by RRBs in proportion to and not exceeding the Bank’s investment. profit (net of tax) for the year is higher by Rs. Year Ended on March 31. Interest of Rs. 2007. Year Ended on March 31. During the year. 2. profit (net of tax) for the year is higher by Rs. the profit for the year is higher by Rs. 16. Consequently. From the current financial year. Consequently. As a result of this change in accounting policy. in terms of RBI Guidelines. From the current financial year and in accordance with RBI directive dated April 20. However. these investments have been valued at cost. being interest on refund of Income Tax. 2007 The Bank had hitherto been following a policy of amortisation of premium in respect of securities held in the “Held to Maturity” (HTM) category by an adjustment to the account head “Provision and Contingencies”. Payments to and provisions for employees. the Bank has charged the amortisation amount as well as marked to market losses on transfer of securities from “Available for Sale” (AFS) to HTM category by an adjustment to the account head Other Income: “ Profit on Revaluation of Investments” as a deduction. 5. As a one time measure. the book value of the securities is reduced by Rs. 3166 million has been credited to Profit and Loss account under the head Miscellaneous Income. unreconciled net credit balances in the inter-branch accounts unto March 31.

with a face value of Rs. the entire share holding of RBI in State Bank of India aggregating 314. the Bank has shifted SLR investments having aggregate Face Value of Rs. This change in accounting procedure does not have any impact on the net profit for the period(s) under review. 2007.339. a. During the half-year ended September 30. which has been notified on October 17. 2007. the Bank had accounted for amortisation of premium in respect of securities included in the ‘Held to Maturity’ (HTM) category as an adjustment against ‘Other Income’. Based on the clarification issued by RBI on 11th July 2007. During the quarter ended September 30. the Central Board of State Bank of India (SBI) and the Board of State Bank of Saurashtra (SBS) have accorded approval for merger of SBS with SBI. The Bank is currently examining both the alternatives. Banks are required to reflect the amortisation of premium held in HTM category by an adjustment to the ‘Interest Earned’. 2007. the difference (as adjusted by any related tax expense) between the transitional liability and the liability that would have been recognised at the same date. d. ‘Accounting for Retirement Benefits in the Financial Statements of Employers’. As the merger process has not yet been crystallised.73%). resulting in a net revaluation loss of Rs. In the interregnum. Accounting Standard Disclosures Segment Reporting Segment identification i) Primary Segment ii) Secondary Segment i) ii) b. 2. ‘Accounting for Retirement Benefits in the Financial Statements of Employers’. should be adjusted immediately against opening balance of revenue reserves and surplus.200 Equity Shares (59. The matter has further been referred to RBI and the Government for approval. 4. (B) 1. During the half-year ended September 30.816 million from ‘Available for Sale’ (AFS) category to ‘Held to Maturity’ (HTM) category.977 million. This has been rectified during the year to fall in line with the rationale of opinion expressed by Expert Advisory Committee of the Institute of Chartered Accountants of India in similar instance.783 million has been charged to the Profit & Loss account during the year. Half Year Ended on September 30. e. Accordingly. The impact of the Accounting Standard 15 “Employee Benefits” (revised 2005) has not been ascertained for transitional provision and current period(s). The ex-gratia payments under exit option aggregating to Rs. i) Banking Operations : Other than treasury operations Treasury Operations . 6. the Bank has made adequate provisions as per pre-revised Accounting Standard 15. In terms of RBI circular dated 20th April 2007.Domestic rupee treasury Domestic Operations . Exit Option The Bank had implemented an Exit Option Scheme for its eligible employees. The Institute of Chartered Accountants of India has made a limited revision to this provision. 2006.Branches/Offices having operations in India Foreign Operations . 2007 Accounting Standard 15 “Employee Benefits” (revised 2005) is effective for accounting periods commencing on or after December 12. there is no impact on the Bank’s results. 2007.Branches/Offices having operations outside India and offshore banking units having operations in India ii) Pricing of Inter-segmental transfers 183 . 10 each has been transferred to the Central Government. c.advance”. the Bank has carried out the reclassification of the same for the period ended 30th September 2007. This revision provides the Bank with another option to charge additional liability arising upon the first application of the standard as an expense over a period up to five years. as per pre revised Accounting Standard (AS) 15. As per this Standard. c. 90.

187 59.642 107.640. The financial effect on the segmental result due to change in accounting policy is not reasonably determined. 2006. are allocated accordingly.259 159.570.104. The Treasury Operations segment is a recipient of funds from Banking Operations.259 25.156 0 56.829 2.353 219.965 87.393 * 5.881.566 1.513 (7.368 114.665.153 4.116 18.243 1.289 4.050 313.063.804 0 55.119 2. 2006 March 31.670 4.413 257.150 4.765 3.254 12.032) 48.393 5.372 3.485 0 45.148 3.289.986 39.423 -19. iv) Segment Results (Rs.197.197 (2.037.357 38. 2007 312.718 1.822 54.067 444.819.177 0 88.610 0 64.113 1.393 28.894 154.593 5.036 201.259) 49.259 25.831 4.733 712.913 0 40.652 184 .747 412.661 2.119 2.289.171 0 43.665. 2007 September 30. this change does not have any impact on the financials of the bank.940.697 24.466.061 1.063.630 4.625 0 31. iii) Allocation of Expenses Expenses incurred at Corporate Centre establishments directly attributable either to Banking Operations or to Treasury Operations segment.923.238 (12.469 188.452 1.656 560 65.822.843 4.825 54.131 379.483 40. 2005 March 31.924 0 30.046 10.675 21.216 22.492 3. the bank has changed the segmental pricing methodology for more meaningful presentation of segment results and accordingly market related funds transfer pricing (MRFTP) has been introduced under which a separate unit called Funding Centre has been created.868 366.280 60.078.898 30. in millions) Part A: Primary Segments Year /Half Year ending REVENUE Banking Operations Treasury Operations Elimination Total RESULTS Banking Operations Treasury Operations Elimination Total Unallocated Income/(Expenses) Net Operating Profit Income Taxes Extraordinary Profit/Loss Net Profit OTHER INFORMATION Segment Assets Banking Treasury Elimination Total Unallocated Assets Total Assets Segment Liabilities March 31.659 174.444 0 36.803 4. The Funding Centre notionally buys funds that the business units raise in the form of deposits or borrowings and notionally sell funds to business units engaged in creating assets.327 (8.295 17.296 3.914.713.169.399 451.713.995 9.250 0 56.329 383.582 55.722 114.510 214.531 258.810 324.570 2. However.510 19.365 44.037.522) 52. 2003 March 31.901 26.077 3. From April 1.733 712.270. Expenses not directly attributable are allocated on the basis of the ratio of number of employees in each segment/ratio of directly attributable expenses.340) 75.758. 2004 March 31.873 53.458 25.640.598.593 5.652 4.The Banking Operations segment is the primary resource mobilising unit.118 141.045 352.558.

450 1.478 180.478 180.667 4.849 4.172.875.848 2. 2.010.388 5.310.388 5.672.358.017.731 3.733 867.010.733 867. 2007.840 4.993 3.307 Total 3.617.728 8.655.352.133 2.092 4.560 2.087.358.731 3.133 2.841.029.663.165.107 Unallocated Liabilities 0 0 0 Total Liabilities 3.875.029.963 1.827 1.530.301 Treasury 1.172.586.189 5.893.955 4.152.840 4.189 * 5.621 3.586.107 * Segment Assets and Liabilities are as on March 31.047.Banking 3.113 Elimination 1.667 185 .121 4.352.576.

Clearing Corporation of India Ltd Nepal SBI Bank Ltd. Bank of Bhutan UTI Asset Management Company Pvt.816 306.765 4. Ltd.1.884 412. 2003 March 31.873 5.623 3.142 237. 20. 2007 413. 2006 385.280 4.965 5. 18. 15.122 527. 8. 14.505 13.948 Total 366.289 March 31. 17.Part B: Secondary Segments (Rs in millions) March 31.008 Total 3. 11. 2004 March 31.940. 26.337 4.533. Andhra Pradesh Grameena Vikas Bank Arunachal Pradesh Rural Bank Chhatisgarh Gramin Bank Cauvery Kalpatharu Grameena Bank Deccan Grameena Bank Ellaquai Dehati Bank Ka Bank Nongkyndong Ri Khasi Jaintia Krishna Grameena Bank Langpi Dehangi Rural Bank Madhya Bharat Gramin Bank Malwa Gramin Bank Marwar Ganganagar Bikaner Bank Mizoram Rural Bank Nagaland Rural Bank Parvatiya Gramin Bank Purvanchal Kshetriya Gramin Bank Samastipur Kshetriya Gramin Bank Saurashtra Grameena Bank Utkal Gramya Bank Uttaranchal Gramin Bank Vananchal Gramin Bank Vidisha Bhopal Kshetriya Gramin Bank SBI Home Finance Limited. 2. 13.821 Foreign Operations 225.396 26.1 2.1. 19.826 435.530 5.873 38. 24.292.611 369. 2. 10.122 527.903 18.116 383.138. 21.970 258.652 September 30. 9. 2007. 12. 2.665.598.1 Related Parties: Joint ventures: 1. 2005 March 31.2 C Edge Technologies Ltd GE Capital Business Process Management Services Private Limited. 25. Related Party Disclosures As identified by the management and relied upon by the auditors.843 368.092 451.901 379. 22.829 * Segment Assets and Liabilities are as on March 31.153 4. Associates: 1.058 10.078. 27.652* Year ending Revenue Domestic Operations 354. 4.504. 7. 6. 16.877 Foreign Operations 12.825 Assets Domestic Operations 3. 2007 239. 186 . 2.530 5. 5. 2. 3.138.758. 23.665.840.463 4.

2006 to 30.2002 to 07. SBI Home Finance Ltd.03. transactions in the nature of banker-customer relationship are not required to be disclosed in respect of Key Management Personnel.2005) Shri A. Further.2007) Shri Ashok Kini (from 01.2005) Shri Yogesh Agrawal (from 10.2006 onwards as Chairman) Shri A. 15.2002) Shri Y.2003) Shri P. 9.07. Other particulars are: 1. Bank of Bhutan Nepal SBI Bank Ltd. 4. (from 28. Shri O.2004 to 31.N.1.06. C Edge Technologies Ltd.04. Managing Director (from 10.2004) Shri Janki Ballabh (up to 31. 5.3 Key Management Personnel of the Bank: Shri O.2007) 2. (from 28. Batra (from 28. 10.03. Chairman (upto 31.2006 to 30.2. Bhattacharya. Purwar. 8. Radhakrishnan (up to 30.12.06. Bhatt.P. 2.2006) Shri A.06.01.10. Govindarajan (up to 31.2006 to 30. 11. 16.2002) Credit Information Bureau of India Ltd (up to 31.11. 12.03.07.K.07. 13. S.P. 6.10. 14.1.02.2006) Shri T.06.2003 to 31.2004) 187 . Managing Director from 26.2002 to 31.06 and from 01.2006) Shri T. Bhattacharya (from 17. S.K. 3. 17. 7.2006) GE Capital Business Process Management Services Pvt.10. Bhattacharya.Bhatt (from 26.03.04.02. in terms of paragraph 5 of AS 18.02.04.K.2005) Asset Reconstruction Company (India) Ltd (up to 31.05. Ltd.12.2002) Shri S. 18.05.2005) Shri C.4 Related Parties with whom transactions were entered: No disclosure is required in respect of related parties which are “state controlled enterprises” as per paragraph 9 of Accounting Standard (AS) 18.2002 to 31. Purwar (from 13. Managing Director Shri Yogesh Agrawal. Venkatachalam (from 28.

2004 March 31.457 - 17. Investments i) Associates 5. Management Contracts i) Key management Personnel @ 844 - 1. 2005 March 31. Deposits i) Associates ii) Key management Personnel * 3. Borrowings i) Associates 2. 2003 48 March 31.062 400 334 198 - - - 5. Income from Dividends i) Associates * Transactions which are not in the nature of banker-customer relationship.601 - 22 1 282 72 66 337 26 109 - - 7 5 36 - - 31 162 - - 17 1 1 1 2 7 11. Interest Paid i) Associates 7. Receiving of services of services i) Associates 10. Interest Received i) Associates 8.360 105 265 - - 465 2. 2006 March 31.703 1 5. Rendering of services i) Associates 9.242 - 2. Advances i) Associates 4. - - 5 188 .Transactions/Balances (Rs in millions) March 31. Non funded commitments i) Associates 6. 2007 - Item / Related Party 1.954 - 3.

in millions) Year ending Total gross investment in the leases Present value of minimum lease payments receivable Less than 1 year 1 to 5 years 5 years and above Total Present value of unearned finance income 4. 2007 2. Leases: (Rs. 2006 March 31.023 2.588 1.435 5.045 44.810 43.261 985 2.42** Accounting for taxes on Income: (Rs. 2003 1. 2005 1.00 Rs. 2004 1. 2004 March 31. 2007 September 30. 59.79 Rs. March 31. 86.413 30.648 1. 2005 March 31.878 Rs. in millions) The break-up of deferred tax assets and liabilities into major items is given below: Year ending / half year ending A.647 March 31.3.878 526.372 526.298.434 975 2. 115.647 March 31.495 1.246 189 .647 March 31. in millions) ** Annualised 5.440 4. Deferred Tax Assets (DTA) i) Provision for Non Performing Assets ii) Ex Gratia Paid under Exit Option iii) Provision for wage revision iii) Others Total B .178 2.409 1.122 195 1. 2007 31.878 526.94 Rs 81.647 March 31.756 2.756 3.298.73 Rs.298.067 45. March 31.647 263 619 85 967 219 313 447 40 800 159 313 289 602 103 176 205 381 68 89 151 240 50 The Bank reports basic and diluted earnings per equity share in accordance with Accounting Standard 20 – “Earnings per Share”.878 526.050 36.29 Rs. March 31.298. March 31. Deferred Tax March 31. “Basic earnings” per share is computed by dividing net profit after tax by the weighted average number of Equity Shares outstanding during the year.298. 2007 1. 69. There are no diluted potential Equity Shares outstanding during the year. March 31.878 526.208 6. Earnings per Share: March 31.298. 2003 March 31. 83. September 2003 2004 2005 2006 2007 30. Year ending / half year ending Net Profit * Weighted average number of shares Earnings Per Share (Basic & diluted) * (Rs.878 526. 2006 1.

039 2. Year ending / half year ending GE Capital Country of Business Residence Process Holding Management Investment Services (P) Rs. Net DTA/ (DTL)(A-B) 6. income and expenses related to the Bank’s interests in jointly controlled entities are disclosed below: A: Assets & Liabilities (Rs.837) (4. 2005 4.655 9.294 3.266 1.2 49% 49 49% 49 As required by AS 27 the aggregate amount of the assets. 2004 March 31. 2006 March September 31.237 1. 2006 338 1 136 475 March 31.970 2. 2003 March 31.830 3. 2003 March 31.991) Investments in jointly controlled entities: Investments include the following amount representing Bank’s interest in the following jointly controlled entities.891 1.455 March 31. March 31. (in millions) March 31. 2007 September 31. liabilities.Year ending / half year ending Liabilities (DTL) i) Depreciation on Fixed Assets ii) Interest on Securities iii) VRS expenses iv) Depreciation of Leased Assets v) Others Total C. 2004 March 31.948 March 31. 2003 March 31.572 146 1317 1033 66 6213 958 7. 2007 521 582 2 3 206 287 729 872 March 31.422 71 5.633 6.178 (4. 2007 30.317 6.213 7.814 March 31. 2004 March 31.822 16. 2005 March 31. 2003 1. (in Ltd millions) C-Edge Country of Technologies Residence Ltd Holding Investment Rs. in millions) March 31.511 3. 2007 40% 108 40% 108 40% 108 40% 108 40% 108 INDIA 49% 0.068 209 324 2.757 1.037 5. 2005 March 31.246 (312) 2.745 1.451 4. 2007 September 30. 2007 110 664 2. 2006 INDIA 40% 108 March 31. 2007 September 30. 2007 CAPITAL & LIABILITIES Capital & Reserves Deposits Borrowings Other Liabilities & Provisions Total ASSETS 190 . 2005 March 31. 2006 March 31. 2004 2.

2006 3 481 484 March 31. Contingent Liabilities & Contingent Assets Break up of Provisions (Rs. 2003 a) Provision for Current Income Tax 21.052 38.338 2.295 5. Income and Expenditure March 31. 2003 1. 2007 17. 2006 72 96 307 475 - March September 31.150 23.619 159 925 16.763) (454) 36.114 66. 2005 162 604 8. 2004 1.855 4.047 g) Provision for depreciation on investment 4.413 3.053 806 1. 2007 30.814 43 23 March 31. 2007 28 305 333 Income and Expenditure I.918 7.853 4. in millions) March 31. 2004 110 1.037 2. Income Interest earned Other Income Total II.760) 333 20.478 4. 2005 24.684 March 31.330 277 1.792 122 54.CAPITAL & LIABILITIES Cash & Balances with RBI Balances with Banks & Money at call Investments Advances Fixed Assets Other Assets Total Contingent Liabilities Capital commitments B.935 491 4.546 619 7.661 (2.580 9 1.374 191 .793 (198) 885 5 14.827 3.469 215 223 6.388 180 339 52 391 93 382 101 483 176 235 25 260 73 Provisions.040 1.262 151 510 4.688 112 289 5.306) 5 12.948 3 29 March 31.479 6. 2004 15.000 58.859 March 31.985 (584) 68.725 March 31. 2007 29.909 387 2.859 March 31.472 (2.088) Total 46. a) 197 1. 2007 37 25 197 470 729 25 25 199 623 872 (Rs.586 September 30.924 f) Provision on Standard Assets 2.489 b) Provision for Deferred Tax 133 c) Provision for Income Tax Fringe Benefit Tax d) Provision for other Taxes 4 e) Provision for NPA 25. 2003 40 272 1. Expenditure Interest expended Operating expenses Provisions & contingencies Total III.384 8.804 55 173 1. 2005 1650 5.898 980 (3. 2006 16.568 March 31.195 h) Provision for Other Assets/ Contingencies (7. Profit 7.455 13 13 March 31.704 (Figures in brackets indicate credit) March 31. in millions) Year ending / half year March ending 31.579 4.346 1.911 152 392 9.892 3.926 March 31. 2007 659 659 September 30.

2007 NIL NIL NIL NIL September 30. results of operations or cash flows. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. disposal of appeals.400 NIL 8. Other items for which the Bank is contingently liable 4 d. The Bank is a party to various Bank taxation matters in respect of which appeals are pending. the amount being called up. currency options. forward rate agreements. The Bank enters into forward exchange contracts. Guarantees generally represent irrevocable assurances that the Bank will make payment in the event of the customer failing to fulfil its financial or performance obligations. are typically amounts used as a benchmark for the calculation of the interest component of the contracts. 2006 8. acceptances.400 NIL March 31. The contingent liabilities mentioned above are dependent upon the outcome of court/arbitration/out of court settlements. No. lease accounting and interest in jointly controlled entities have not been compiled for the half year ended on September 30. the Bank has made commitments to subscribe to shares in the normal course of business. The notional amounts that are recorded as contingent liabilities. The disclosure requirements in respect of related party transactions. 1 March 31. These are being contested by the Bank and not provided for. 2007 NIL NIL NIL NIL Description of Contingent Liabilities and Contingent Assets Items Claims against the Bank not acknowledged as debts Liability on account of exchange contracts Brief Description The Bank is a party to various proceedings in the normal course of business. currency swaps and interest rate swaps with inter-bank participants on its own account and for customers. as the case may be. terms of contractual obligations. As a part of its commercial banking activities. the Bank issues documentary credits and guarantees on behalf of its customers. in millions) Year ending / half year ending a) Opening Balance b) Addition during the year c) Draw down during the year d) Closing balance c) Sr. 2 3 Guarantees given on behalf of constituents. Documentary credits enhance the credit standing of the customers of the Bank. 2007. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. Currency swaps are commitments to exchange cash flows by way of interest/principal in one currency against another. devolvement and rising demand by concerned parties. 192 . endorsements and other obligations. based on predetermined rates. Further.b) Floating Provisions: (Rs. 8. The Bank does not expect the outcome of these proceedings to have a material adverse effect on the Bank’s financial conditions.

00 1.478.817.30 (4.01 31-Mar-07 (17.769.397.49) 70.77) (7.371.95 (20.25) (275.90 589.723.20 7.449.941.112.19 193 .76 382.14 (3.421.34) 3.36 484.53 76.70 7.96) (3.52 (84.421.37 0.18) (4.19) 70.695.383.695.027.74 (16.016.13 68.491.17 4.03 5.14) (9.35 (8.39 (203.316.25) 77.956.05 (6.156.48) (583.70) (2.74 (1.09 14.45 6.675.01 519.54) 56.32 (19.100.42) 649.99 445.548.644.06) (3.988.144.053.345.220.705.89 2.29) (8.23 4.333.545.372.98) (2.810.304.387.01) (60.023.07 554.941.956.066.58) (1.936.41 (16.01 4.777.57 (34.01) 52.14 (1.956.00 3.600.23) 3.74 (2.83) 4.82) 1.845.704.898.666.98) (9.516.613.33) (7.32 4.53 (89.21) 3.848.821.92 (121.051.51) (12.762.956.704.251.445.00 (8.29 114.64 (3.506.721.474.288.24 31-Mar-04 2.545.92 10.011.750.983.02) (217.987.066.79 48.56) (1.46 (3.56) 8.34) (2.15) 3.573.89) (130.39) 1.097.301.87) (5.19) 7.82) (5.760.682.06) 224.432.687.38 3.394.985.68) 8.113.81) (3.87) (3.36 (10.372.215.71 25.447.401.379.969.254.022.19) 3.53 (304.55) 42.810.13 (1.72 781.64 8.631.600.00 6.46 979.113.051.77) (2.45) 104.31 362.61) 110.87 (18.02 393.91 74.26) (8.96) 74.301.295.613.08 49.80 (137.69 (42.891.90 6.00 52.807.35) 129.61) (33.474.739.80 425.84) (456.35) 1.956.987.171.723.17) 1.27) 14.05 4.560.301.20) (7.171.261.35) 3.29 519.394.503.345.06) 451.68 (6.79 (769.447.569.686.091.19) (238.32) (27.63) 27.860.969.13 (247.741.ANNEXURE 5 SUMMARY STATEMENT OF CASH FLOW (UNCONSOLIDATED) (Rs.532.561.529.63 (7.01) 255.81) 3.223.046.61) (8.66 451.18 393.760.99 31-Mar-06 56.36 52.48) (8.545.473.503.51 491.08) (854.00 1.040.58) 94.100.55 57.08) (8.357.06 52.19 (6.448.066.07 (7.874.229.247.03) (197.153.29 (42.692.75) 16.75 (3.24 2.37) (17.35) (4.55) 15.12 (9.14 2.956.14 (5.650.90 850.12) 3.712.64) (30.253.287.134.73 (3.150.999.17 1.24 435.36) (7.721.75) 232.522.953.48) 3.85) (6.845.38) (10.752.28) 5.899.03 23.932.87) (4.14) (7.250.807.316.686.34 90.18 31-Mar-05 (27.90 34.672.70) 515.824.21 (4.63 (1.02 31-Mar-03 (185.98) (2.27 37.555.060.932.94) (230.532.134.548.56) (5.89 41.666.620.65) 29.57) 16.72) (185.742.41) 52.53) (10.97) 42.560. in millions) For the Year ended/ Half Year Ended Cash flow from Operating Activities Cash flow from Investing Activities Cash flow from Financing Activities Cash flows on account of exchange fluctuation Net change in cash and cash equivalents Cash and cash equivalents – Opening Cash and cash equivalents – Closing Cash flow from Operating Activities Net Profit before taxes ADJUSTMENTS FOR: Depreciation charge (Profit)/Loss on sale of fixed assets Provision for NPAs Provision for Standard Assets Provision for Leave Encashment Depreciation on Investments: Depreciation/Revaluation of Investments / Loss on revaluation of Investments Provision for Subs/JVs/RRBs Provision on Other Assets and Other Provisions Deferred Revenue Expenditure w/o during the year Dividend from subsidiaries (investing activity) Interest paid on bonds (financing activity) LESS: Direct Taxes Sub-Total Other adjustments: Increase/(Decrease) in Deposits Increase/(Decrease) in Borrowings (Increase)/Decrease in Investments (Increase)/Decrease in Advances Increase/(Decrease) in Other Liabilities & Provisions (Increase)/Decrease in Other Assets Net Cash provided by Operating activities Cash flow from Investing Activities (Increase)/Decrease in Investments in Joint Ventures/Associates Income earned on investments in Joint Ventures/Associates (Increase)/Decrease in Fixed Assets Net Cash provided by Investing Activities Cash flow from Financing Activities Net proceeds/ (repayment) of bonds (including subordinated debts) Interest paid on Bonds Dividend paid Net Cash provided by Financing Activities 46.692.99 69.100.87 (25.90 30-Sep-07 27.18) (71.19) 435.277.93 111.023.77 65.064.14 (135.223.626.93 54.291.195.48 (17.58) 94.87 (18.023.48) (195.220.95 3.620.11 18.086.89 445.37) 83.83 (7.889.011.061.30 12.80) 38.75 (595.924.

362.56 451.69 42.199.73 229.96) (247.73 229.60 153.97 445.220.36 (247.301.64 324.253.18 14.36 54.01 25.18 589.022.83 208.802.117.117.03) 232.70 225.301.253.666.66 11.49) 194 .33 435.99 20.600.06 228.301.741.19 265.741.563.70 225.01 25.99 127.686.525.32 649.81 177.18 14.387.724.362.96) (2.06 228.072.220.600.90 (1.922.387.41 232.97 445.Opening: Cash in hand (including FC notes & gold) Balances with Reserve Bank of India Balances with Banks & MACSN Total Cash and Cash equivalents .Closing: Cash in hand (including FC notes & gold) Balances with Reserve Bank of India Balances with Banks & MACSN Total 11.576.04 245.229.686.463.922.41 42.49) (2.60 153.849.563.81 177.724.04 245.361.666.425.19 265.Cash flows on account of Exchange Fluctuation: Reserves of foreign subsidiaries/foreign offices Net cash flows on account of Exchange Fluctuation Cash and Cash equivalents .463.04 116.072.229.802.65 519.988.24 12.51 430.970.31 195.56 451.65 519.04 116.760.24 12.02 438.257.361.810.64 324.69 393.425.69 393.19 10.99 20.810.33 435.03) (1.31 195.90 23.849.69 54.022.

ANNEXURE 6 Major changes in the business activities of the Bank The Bank is in the business of Corporate and Retail Banking. loss of agencies or markets and similar factors. including discontinuance of lines of business. Treasury Operations and other miscellaneous banking business. 195 . There has not been any change in the business activities of Bank which has had any material effect on the statement of profit/loss for the five years.

789 742 110 March 31.368 1. 2007.98. The bank has not declared any dividend for the half year ended September 30.878 4.368 1.878 6. 2006 52. 2005 52.62.252 140 196 .62.62. 2007 52.878 7.98. in millions) For the year ending Number of Equity Shares Dividend (Rs) Tax on Dividend (Rs) Dividend Rate (%) Note 1. 2004 52.62.579 938 125 March 31.033 140 March 31. 2003 52.878 5.98.98. March 31.878 7.ANNEXURE 7 Statement of Dividends Declared by the Bank (Rs.474 573 85 March 31.98.62.

207 March 31.872 *5. 2007 20.030 *5. 2007 48.282 10. in millions) For the Financial Year /Period Ended March 31 Other Income 1 Commission. they have been disclosed. 2005 35.447 March 31.013 *3.734 *1.ANNEXURE 8 Summary Statement of Other Income (Unconsolidated) (Rs. 2006 39.773 March 31.775) (7.753 *5.735 17.525 16. exchange and brokerage 2 Profit/ Loss on sale of investments (Net) 3 Profit/ Loss on revaluation of investments (Net) 4 Profit on Exchange Transactions (Net) Notes : a) b) March 31.636 *5.045 September 30. 2004 31. however for comparison purposes.946 30. 197 .125 * (51) *(2) - (16.678 7.403) *4. 2003 29.962 March 31.408 All items of “Other Income” are of recurring nature Those items identified with * are less than 20% of the profit before tax .

999 Fixed Fixed 8.5% p.535 679.25 years Perpetual non call 10 years 1 Day Feb-07 Perpetual with call option to the Issuer after 10.25 to 14% d Others Total Domestic Borrowings (A) Overseas Borrowings 45 62.04 to 15.217 Floating LIBOR+38bps to LIBOR+73.015 Various rates Term Ranging from 1 day to 1 year Total (Overseas Borrowings) (B) Tier I Capital Overseas 386.282 Coupon 6.6.9.355 Fixed 12.9.25 years Perpetual with call option to the Issuer after 10 years 1 day 9.159 Jun-07 Total Tier I Capital (C) Subordinate Debts 1 Domestic 25.50% 87 months to 180 months 8 Years Various dates from 1.917 Fixed Fixed 6.07 Various dates Bullet 1 Bond Issues (Excluding Hybrid Tier-I Bonds) Floating 2 Foreign Currency Loans 47.50% 0-1% 364 Days 1-3 days 1/9/2007 28/9/2007 Bullet Bullet Outstanding amount Rate of Interest Duration Date of Borrowings Repayment Terms b c Refinance NHB Refinance NABARD 5.636 Fixed 3. interest at half yearly intervals Bullet 3 Money Market Borrowings 277.90% p.5% p. No.439% after swap LIBOR +120 BPS on semi annual basis Coupon 7.000 17. 289 204. 2007 (Rs.12.2001 to 17.5bps LIBOR+1 2bps to LIBOR+3 9bps 364 days to 5 years Bullet principal repayment.04. 6.2000 198 .441 204. in millions) S.a.07. 1 2 3 a Particulars Domestic Borrowings Term Borrowings CBLO* Refinance SIDBI Borrowing from Other Institutions/ Agencies 6.14% after swap LIBOR +137 BPS on semi annual basis Perpetual non call 10.511 62.a Monthly Instalment of Rs 50.500 Fixed 6.75% 5 Years Various dates from 8.05 to 28.00 crores on 1st of Every Month 3 Years 23/12/2005 Bullet Half Yearly due on 31st January and July till 31.2019 Various Terms and Date 50 32.45% to 11.246 Fixed 7.a Various from 4.1.2007 Overseas Total Subordinate Debts (D) Grand Total (A+B+C +D) * Secured Borrowings.02.868 16.50% to 4.ANNEXURE 9 Statement of Borrowings as on September 30.07 Various dates from 2.

56% 12.63% 12.48% 13.62% 7 8 9 10 11 12 0.00 29.69% 2.04% 4.0 0 236.85% 7.50% 8.50 216.68% 1.308.Overall (%) Capital to Risk -weighted Assets Ratio-Tier I (%) Capital to Risk -weighted Assets Ratio-Tier II (%) Operating Expenses / Average Working Funds (%) Business (Deposits plus Advances) per employee (Rs.39% 0.50% 2.50% 13.01% 4.27% 2.94% 3.27% 1.41% 2.43% 0.43% 457.00 19.077.69 30-Sep2007* 115.33% 0.34% 5.99% 2.99% 7.61 207.84% 1.86% 1.76 339.923.48% 1.81 46.41% 594.78% 5.65 14 147. in thousands) Profit per employee (Rs. in thousands) 9.61% 2.67% 384.53% 8.79 19.89% 1.00 35.83 176.ANNEXURE 10 Summary Statement of Accounting Ratios Sr No.69% 1.25 31-Mar07 86.33% 2.97% 1.16 Particulars Basic and Diluted Earning Per Share Return on Avg Net Worth (%) 3 Net Asset Value per Share Other Ratios 4 Interest Income As a percentage to working Funds (%) Non Interest Income as a percentage to working Funds (%) Operating Profit as percentage to working Funds (%) Return on Assets (%) Net NPAs to Net Advances (%) Capital to Risk -weighted Assets Ratio.36% 2.00 * Ratios have been calculated on an annualised basis 199 .19% 7.73 17.02% 6 2.88% 11.10% 7.87 31-Mar04 69.88% 9.25% 5 1. 1 2 31-Mar03 59.36% 0.99% 1.04% 525.81% 4.39 31-Mar06 83.29 15.94% 13 19.57% 648.07% 1.20% 0.700.07% 1.45% 8.563.19% 2.15% 326.00 24.70% 7.056.52% 2.41 31-Mar05 81.65% 12.42 18.34% 8.94 19.34% 7.00 21.86% 4.

355 6. 2007 344.01 Particulars Loan Funds Long Term Short Term Total Debt Shareholders’ Fund Share Capital Share Premium Reserve and Surplus Total Equity Long Term Debt/Equity Ratio 1. in millions) Pre Issue as of September 30.861 334.760 508. Post Issue 344. 2007 (Rs.492 0.760 341.416 300.106 300.263 35.68 Loan Funds include Subordinate Debt and perpetual bonds 200 .494 679.316 201.355 5.129 1.861 334.494 679.ANNEXURE 11 Capitalisation Statement as of September 30.

No.20 21.171.49 4.61 (3.80) (62.78 4.00 914.660.75% 19.94) 872.60 6.40 31-Mar-06 64.70 11.62) (13.61) (2.80 2.747.90 (4.23) (84.59% 23.64 (1.38 (365.00) 1.00 560.16) (2.862.701.862.671.97) 49.90 3.09 450.85 22.500.396.00 (16.35 (11.94) (4.50) (13.21 577.73 33.00 2.335.782.958.88% 17.977.57 902.40 (16.16 1.000.791.794.255.702.500.90 1.000.606.20 (10.00 850.699.80 901.40 6.707.67) (6.40 36.48) (11.30) 16.891.66% 21.784.054.00 5. For the Financial Year Ended Profit Before Tax Tax Rate Tax at actual Rate (A) Permanent Difference 1 2 3 4 Income Exempt from Tax Interest on Income Tax Others Taxes including wealth tax and fringe benefit tax Timing Difference 1 2 3 4 5 6 7 Voluntary Retirement Scheme Provision for employees benefits Provision for doubtful debts Provision for other assets and contingencies Provision for Investments Payment of Wage Arrears Depreciation on Fixed assets 901.577.827.14) (4.845.57 15. in millions) S.05) Tax Saving Thereon (B) Tax liability on current year’s profit Tax Adjustments relating to earlier years Tax liability (4.26 (34.36 (1.163.184.09) 15.60 24.519.96 (454.89 33.90 3.19 36.112.30) 273.192.70 (5.473.886.08 3.48 201 .14) 17.078.098.827.882.52 31-Mar-07 75.14 (1.374.78 7.472.35 656.292.43) (1.324.356.00 (46.146.61 29.588.00) 450.77 35.81) (1.ANNEXURE 12 STATEMENT OF TAX SHELTERS (UNCONSOLIDATED) (Rs.52) (1.93) 27.511.211.80 (5.80) (650.696.172.90 781.43 12.14) 14.05 30.90 1.73) 2.33 889.66 31-Mar-05 65.472.90 (233.74 31-Mar-04 49.19) 4.40) (0.659.447.39) (20.66% 25.70) (1.832.35 31-Mar-03 52.682.660.04) 4.79) 24.20) 181.509.366.488.28 514.329.360.74) 29.

412.085.489.728.634.01 29.62 65.21 5.36 35.372.999.724.663.48 2.077.039.943.61 16.021.60 2.83 407.49 2.619.272.74 3.644.78 328.16 5.72 3 I II INVESTMENTS Investments in India in Investments outside India in Total 2.906.03 2.993.90 191.228.279.210.47 5.194.197.917.195.563.714.307.289.55 2. overdrafts and loans repayable on demand 978.45 866.12 247.42 2.716.744.28 161.485.922.911.260.05 2.97 4.453.45 II Balances with Reserve Bank of India Total 2 I II BALANCES WITH BANKS & MONEY AT CALL & SHORT NOTICE In India Outside India Total 283.404.528.134.50 419.66 246.67 5.31 4.440.539.213.151.860.54 6.563.826.07 262.84 2.984.45 311.900.890.661.717.762.591.694.ANNEXURE C-1 SUMMARISED STATEMENT OF ASSETS AND LIABILITIES (CONSOLIDATED) (Rs.478.64 274.227.869.262.92 58.26 25.40 39.012.47 1.509.14 617.847.24 1.918.777.882.99 2.72 3.146.657.872.516.20 1.775.73 250.539.363.23 1.264.98 175.75 348.86 31.96 2.918.86 2.209.880.39 84.65 66.744.199.006.71 1.285.844.65 39.48 843. in millions) 31-Mar-03 Audited 31-Mar-04 Audited 31-Mar-05 Audited 31-Mar-06 Audited 31-Mar-07 Audited 30-Sep-07 Unaudited Reviewed As on A Assets 1 I CASH AND BALANCES WITH RESERVE BANK OF INDIA Cash in hand (including foreign currency notes and gold) 14.969.035.53 483.71 177.37 2.82 46.64 72.647.649.005.47 2.408.771.093.14 202 .110.305.63 74.41 286.50 41.188.220.977.36 2.49 453.989.64 2.198.201.89 626.56 2.31 392.54 238.448.571.511.592.613.47 749.71 1.256.15 2.919.04 2.870.76 1.554.20 1.213.10 251.475.899.165.082.500.098.34 98.14 332.052.27 141.57 75.292.287.321.226.011.362.332.21 3.504.194.881.77 546.70 44.800.802.62 89.00 6.724.173.735.73 73.996.306.65 53.494.407.977.08 161.749.05 17.57 57.061.59 241.594.768.259.472.88 124.865.757.79 178.83 78.069.178.408.092.77 4 I II ADVANCES Bills purchased and discounted Cash Credits.605.620.285.726.158.838.41 1.803.79 54.79 4.073.36 80.206.068.23 3.77 879.01 6.34 1.242.17 214.53 35.162.740.85 89.58 1.901.11 1.817.310.02 1.56 7.891.016.796.01 4.496.85 72.274.56 656.51 450.944.538.95 178.61 764.772.758.560.956.77 59.66 9.93 263.873.084.22 31.15 120.66 282.56 80.024.107.72 256.76 3.71 341.57 48.859.080.526.52 253.110.490.59 8.876.869.18 III Term Loans Total 5 6 Fixed Assets Other Assets Total (A) B LIABILITIES 1 I i ii II III i ii DEPOSITS Demand Deposits From Banks From Others Savings Bank Deposits Term Deposits From Banks From Others Total 68.

760.547.99 5.69 9.31 18.86 2.835.08 247.73 3.303.86 7.44 146.874.48 262.81 22.90 14.44 2.44 860.851.824.99 35.995.99 123.99 203 .31 13.86 7.51 247.31 140.58 486.50 35.708.262.67 233.99 5.20 2.212.22 1.294.778.556.13 8.40 1.741.83 993.34 481.99 207.808.07 90.105.465.554.779.934.90 3.094.06 3.09 771.677.026.18 7.226.19 1.38 427.75 94.85 18.101.863.57 443.306.22 173.43 125.093.904.73 62.128.105.83 386.41 125.595.28 202.45 284.575.33 386.18 109.277.06 702.129.363.480.577.909.51 233.32 44.355.949.225.97 1.37 9.987.088.574.040.02 3.898.53 1.25 10.94 179.59 194.07 60.29 373.19 35.985.74 202.96 1.16 320.94 10.751.723.72 269.709.25 13.40 657.947.289.695.541.77 139.35 442.949.743.66 7.35 781.492.99 5.217.08 26.695.288.480.56 20.345.839.732.808.85 689.262.555.73 304.765.07 Represented By D E 1 2 I II III IV V VI VII Share Capital Reserve & Surplus Statutory Reserves Capital Reserves # Share Premium Investment Fluctuation Reserve Foreign Currency Translation Reserve Revenue and Other Reserves Balance in Profit and Loss Account Total # includes capital reserve on consolidation G MINORITY INTEREST Total H I CONTINGENT LIABILITIES Claims against the bank not acknowledged as debts II III Liability for partly paid investments Liability on account of outstanding forward exchange contracts IV Guaranteed given on behalf of constituents: (a) India (b) Outside India V Acceptances.141.86 325.869.496.116.516.53 5. endorsements and other obligations VI Other items for which the bank is contingently liable 232.18 90.38 4.774.964.630.262.76 366.105.62 57.105.172.61 558.122.650.813.19 6.34 40.580.71 3.90 16.65 6.304.583.654.072.41 656.64 1.258.418.10 369.777.254.04 233.732.632.705.99 5.647.558.625.86 153.62 134.236.405.777.05 300.61 1.138.24 35.899.18 40.73 5.262.46 321.38* 457.109.42 674.370.155.14 718.84 41.63 352.73 709.024.669.07 128.558.69 32.340.320.255.370.48 231.745.774.98 63.95 38.532.25 3.262.547.902.580.449.69 219.08 1.26 54.753.84 1.342.463.352.12 773.62 31.53 677.971.587.361.488.61 605.91 901.848.566.74 5.949.02 7.57 262.748.565.644.12 50.587.As on 2 I II BORROWINGS Borrowings in India Borrowings outside India Total 3 OTHER LIABILITIES & PROVISIONS I II Other Liabilities & Provisions Subordinate Debts Sub Total Total (B) C NET ASSETS (C=A-B) 31-Mar-03 Audited 31-Mar-04 Audited 31-Mar-05 Audited 31-Mar-06 Audited 31-Mar-07 Audited 30-Sep-07 Unaudited Reviewed 32.804.53 586.459.636.02 560.48 5.73 363.56 8.41 284.093.99 5.72 481.95 568.405.26 442.50 467.042.255.086.73 71.618.64 682.262.246.35 160.229.33 658.708.13 449.027.38 122.898.50 143.66 119.66 338.073.574.67 554.149.190.17 420.649.15 2.178.89 274.439.762.42 208.605.624.26 1.47 229.59 201.07 338.17 172.502.48 176.088.92 6.105.50 35.

009.47 31-Mar-05 Audited 2.914.52 31-Mar-07 Audited 3.206.930.375.686.529.460.01 31-Mar-04 Audited 1.023.895.405.259.26 163.37 31-Mar-06 Audited 2.16 247.731.807. Revenue and other reserves 204 .53 283.407.37 30-Sep-07 Unaudited Reviewed 10.As on Total Bills for collection 31-Mar-03 Audited 1.768.83 316.70 N/A * Without appropriation to Statutory Reserves.017.75 113.

67 10.65 339.53) (1.1 1.94 261.96) 28.94 572.71 683.57 10.280.93 (130.333.09 10.19 2.14 242.8 2.335.719.362.58 24.71 281.484.419.74 2.088.711.181.6 Profit on exchange transactions (Net) Dividends from Associates/Joint ventures in India/ abroad 2.990.918.768.431.390.75 66.08 6.583.47 39.30 215.81 (189.49 258.98 22.402. in millions) A For the Financial Year/Half Year Ended 31-Mar-03 Audited 31-Mar-04 Audited 31-Mar-05 Audited 31-Mar-06 Audited 31-Mar-07 Audited 30-Sep-07 Unaudited Reviewed INCOME 1 INTEREST EARNED 1.60 3.176.212.176.92 410.06 82.77 12.91 (6.377.622.38 4.751.62 23.30 11.189.270.86 29.3 Interest / discount on advances/ bills Income on Investments Interest on balances with Reserve Bank of India and other inter-bank funds 1.66 4.3 Profit/ (Loss) on revaluation of investments (Net) 2.579. exchange and brokerage 2.48 199.21 368.38 1.9 2.57 610.827.730.558.21 27.15 526.61 272.76 22.45 10.98 194.957.83 233.2 1.495.765.888.32 5.36 2.357.133.136.459.992.05 80.516.37 14.397.708.02 250.55 16.163.726.64 5.ANNEXURE C-2 SUMMARISED STATEMENT OF PROFIT & LOSS ACCOUNT (CONSOLIDATED) (Rs.10 10.11 168.76) 27.366.98 403.67 205 .648.75 47.87 350.806.74 12.48 498.313.10 8.72 193.59 24.26 4.222.289.30 49.15@ 333.584.305.90 (23.317.41 5.77 53.477.855.954.720.229.23) 227. buildings and other assets and Leased Assets (Net) 2.97 533.660.629.35 42.38 11.17 31.47 58.85 127.057.2 Profit/ (Loss) on sale of investments (Net) 2.408.82 1.234.49 15.671.341.841.067.24 (9.94 492.328.70 1.43 545.52 211.560.03 10.58 13.66 9.48 253.866.42 1.676.93) 20.662.43@ 222.746.99 579.07 191.12 111.20 254.00 161.44 2.32 717.80 248.014.138.477.11 Income from Financial Leasing Credit Card membership/ service fees Life Insurance Premium Share of earnings from associates Miscellaneous income TOTAL TOTAL INCOME B 1 EXPENDITURE INTEREST EXPENDED 1.82 444.028.261.64 12.931.07 125.36 2.72 164.393.65 20.21 100.992.58 111.39 1.634.193.7 2.938.542.389.39 11.326.574.23) 6.72 9.50 287.471.893.479.62 69.10 2.011.98 (5.371.98 17.09 14.5 2.4 Profit/(Loss) on sale of land.92 29.67) 7.4 Others TOTAL 2 OTHER INCOME 2.674.616.86 34.380.280.2 Interest on deposits Interest on Reserve Bank of India/ Inter-bank borrowings 1.74 67.32 365.62 644.28 221.19 6.1 1.13 419.336.3 Others TOTAL 2.07 364.08 29.97 524.70 1.68 15.61 413.05 111.670.031.235.739.92 240.921.05 491.1 Commission.249.751.177.

86) 727.161.013.195.706.454.76 2.90 944.638.618.92 9.142.75 (741.13 9.43 (775.137.762.07 25.88 1.500.162.01 28.52 393.02 105.65 770.294.27 106.80 0.275.7 2.32 4.435.03 132.95 1.69 8.054.84 32.2 2.67 145.13 153.72 7.00 4.11 Operating Expenses relating to Life Insurance 2.397.29) 5.30 2.13 153.97 71.974.62 206 .007.695.17) (18.19 2.47 4.679.75 30.20 144.398.89 11.67 336.96 12.95 23.170.79 1.77 9.32 6.238.016.714.70 2.665.053.54 2.03 457.60 2.532.2 Provision for Income Tax (Deferred tax) 3.637.808. Telephones.6 Auditors’ fees and expenses (including branch auditors’ fees and expenses) 2.811.32 821.28 5.93 107.700. Telegrams.83 69.92 4.691.83 982.65 1.49 1.90) (386.651.618.50) 36.69 38.61 53.87 (1.16 86. allowances and expenses 2.1 Payments to and provisions for employees 2.27 27.039.45 176.93 27.20 11.707.639.55 1.17 69.70 636.118.254.98 939.7 55.202.5395.8 2.179.330.161.812.893.60 (14.61 12.386.31 4.30 152.67 145.97 71.210.97 11.700.17 996.374.868.031.6 3.112.305.10 Operating Expenses relating to Credit Card Operations 2.305.48 9.A For the Financial Year/Half Year Ended 31-Mar-03 Audited 31-Mar-04 Audited 31-Mar-05 Audited 31-Mar-06 Audited 31-Mar-07 Audited 30-Sep-07 Unaudited Reviewed 2 OPERATING EXPENSES 2.60 (4.15 2.865.30 152.337.941.291.77 19.77 6.42) (38.31 18.999.952.585.84 1.16 124.29 379.12 4.261.94 1.82 860.78 997.361.61 8.64 5.90 6.73 143.922.003.87 83.693.60) 1247.334.922.1 Provision for Income Tax (Current tax) 3.80 9.25) 7.71) 14.914.7 Provision for Fringe Benefit Tax Provision for other taxes Provision for NPAs Provision for Standard Assets Provision for depreciation on investments 6.52 2.08 5.4 2.75 1.14 5.441.4941.74 108.10 864.948.592.05 2.169.353.209.698.51 8.76 41.623.033.143. Repairs and maintenance Insurance Amortisation of deferred revenue expenditure 2.777.86 (3.070.86 179.569.030.281.03 614.64 672.384.62 3.854.05 1.293.50 1. taxes and lighting Printing & Stationery Depreciation Directors’ fees.91 21.23 (1.9 Law charges Postages. etc.434.34 113.679.56 5.54 200.39 10.48 16.7 2.319.34 10.45 9.042.676.003.4 3.140.14 1.08 2.82 539.53) 17.12 Other Expenditure TOTAL TOTAL EXPENDITURE Gross Profit Before Provisions (including for income tax & extraordinary Items) Less: Extraordinary Items Gross Profit Before Provisions (including for income tax) 113.6 2.5 3.25 759.355.19 1.91 379.58 22.845.949.329.3 2.017.74 9.700.29 1.70 331.25 28.07 4.38 40.72 2.039.385.758.12 3 Provisions & Contingencies: 3.3 3.64 467.949.24 15.5 Rent.73 143.

800.023.A For the Financial Year/Half Year Ended 31-Mar-03 Audited 31-Mar-04 Audited 31-Mar-05 Audited 31-Mar-06 Audited 31-Mar-07 Audited 30-Sep-07 Unaudited Reviewed 3.578.10 1.35 24.311.93 56.079.852.98 2.84 41.724.27 56.22 1.86 67.612.189.099.00 1.36 3.25 586.96 (1.97 34.70 5.13 10.433.433.003.40 4.94 1.40 8.269.158.36 40.863.614.882.26 2.053.315.17 41.68 1.90 722.40 41.281.75 3.20 6.340.00 - 207 .667.832.315.331.018.80 1.20 6.8 Provision on other assets/ Contingencies (7.662.085.639.80 28.757.033.84 17.919.30 5.197.72 56.50 134.72 56.76 28.16 56.80 17.452.340.00 5.65 55.937.783.282.94 7.99 66.464.783.43 54.518.536.313.38 41.29 741.99 1.00 4.252.003.081.643.979.00 174.18 1.299.92 14.70 - Expenses: Voluntary Retirement Scheme Reduction in Provision for depreciation on investments (29.502.01 589.28 29.123.421.59 20.18 1.990.54 30.92 Break up of Non-Recurring Items Included above: Income: Profit on sale of investments Interest on Income tax refund Write back of Depreciation Write back of provisions Write back of provisions towards securities transactions Exchange gain on India Millennium Deposits Miscellaneous Income – Unreconciled net credit on interbranch accounts Diminution in the value of Investments written back Sub-total (A) 8.473.937.64 57.289.340.190.40 4.59 723.62 14.340.69 42.94 96.169.340.76 55.54 41.00 7.40 589.19 40.789.853.74 937.60 55.554.318.62 692.98 6.39 3.331.537.00 8.73 29.94) 2.68 43.30) 97.97 134.313.16 55.15 21.582.593.280.863.81 32.003.73 88.190.9 Other Provisions Total Net Profit for the year Less: Minority Interests Group Profit Add: Brought forward Profit attributable to the group Transfer from General Reserve TOTAL APPROPRIATIONS: Transfer to Statutory Reserves Transfer to Other Reserves Dividend Corporate Tax on Dividend Balance carried to Balance Sheet Total 341.20 1.368.22 69.00 8.062.45 55.03 7.20 57.93 179.308.47 42.35 1.60) 5.08 19.90 5.916.28 2.536.71 5.66 2.25 63.16 77.40) (868.631.30 1.249.979.368.17 67.979.75 2.

43 (24.64 21.05) 4.696.60 - @ Interest on Swaps netted off.20) (1.081.263.378.479.A For the Financial Year/Half Year Ended 31-Mar-03 Audited 31-Mar-04 Audited 31-Mar-05 Audited 31-Mar-06 Audited 31-Mar-07 Audited 30-Sep-07 Unaudited Reviewed Payments to and provisions for employees Interest on Income Tax Interest on India Millennium Deposits Sub-total (B) Total (A-B) Tax impact thereon Net impact on profit 5.30 1.837.635.60 (1.799.851.60) (1.716.70 659.647.216.80 10.80 2.673.084.60) 30.018. 208 .42 20.258.60 (5.50) 33.38 7.30 5.27 1.30 12.337.90 3.099.430.66 (5.178.55) (4.109.655.30) 5.

1.1 Advances and Provisions thereon Advances are shown net of provisions and unrealised interest on Non-Performing Assets (NPAs). statutory provisions and practices prevailing in respective countries are complied with. Joint Ventures and Associates) have been prepared on the basis of : a) b) Audited accounts of State Bank of India (Parent). Minority interest in the net assets of the consolidated subsidiaries consists of : a) b) 2. 2003 and March 31. joint ventures were consolidated on proportionate consolidation method as per the then prevailing provisions of Accounting Standard 27. The amount of equity attributable to the minority at the date on which investment in a subsidiary is made. Basis of Consolidation Consolidated financial statements of the Group (comprising subsidiaries. and after eliminating all material intra-group balances / transactions. The material accounting policies which were followed in the financial year ended on March 31. 1. The minority share of movements in revenue reserves/loss (equity) since the date the parent-subsidiary relationship came into existence. Accounting Standards/guidance notes issued by the ICAI. and making necessary adjustments wherever required for non-uniform accounting policies as per AS 21 of The Institute of Chartered Accountants of India (ICAI). Basis of Preparation The accompanying financial statements have been prepared under the historical cost convention. 3. c) d) e) Earlier Policy: During the financial years ended on March 31. Financial Statements of the Subsidiaries / Joint Ventures drawn up to the same reporting date as that of the Parent. 2003. 2005 and 2006 and which has changed in subsequent years have been stated in italics at the appropriate places. They conform to Generally Accepted Accounting Principles (GAAP) in India. In respect of foreign offices. which comprise the statutory provisions. 2004. 3. 2004. 2007 The principal accounting policies of the Group have been described in brief in the following paragraphs. unrealised profit/loss. Line by line aggregation of each item of asset/liability/income/expense of the subsidiaries with the respective item of the Parent. Regulatory/RBI guidelines. The difference between cost to the group of its investment in the subsidiary entities and the group’s portion of the equity of the subsidiaries is recognised in the financial statements as goodwill / capital reserve. 209 . Accounting for investment in ‘Associates’ under the ‘Equity Method’ as per AS 23 of ICAI. Consolidation of Joint Ventures – full consolidation in respect of joint ventures which are also subsidiaries and ‘Proportionate Consolidation’ in respect of other Joint Ventures – as per AS 27 of ICAI.ANNEXURE C-3 Principal Accounting Policies for the Consolidated Financial Information for the year ended March 31. 2.

60% in 2004-05 and 75% in 2005-06.2 A general provision is required to be made on Standard Assets on the global portfolio.1 3.25% 1. (b) & (c) 0. 20 lakhs Personal Loans. The provision rates for the difference categories of Standard Assets are summarised below: a. 0. wherever applicable. (b) Sub-standard Assets.40% Earlier Policy: During the years 2002-03.40% except on the advances to small and medium enterprises and direct agriculture which was at 0.00% 2. 3. (c) Doubtful Assets and (d) Loss Assets.3 Indian Offices 3. c. the percentage of provision on secured portion in the earlier years were 50% in 2002-03 and 2003-04. In the year 2005-06.00% d.3. Direct advances to agricultural and SME Sectors Residential housing loans beyond Rs. 2003-04 and 2004-05.25%. 210 . (a) Standard Assets. Secured portion b) Period for which the advance has been considered as doubtful Up to one year One to three years More than three years • Loss Assets PERCENTAGE 20% 30% 100% 100% Earlier Policy: a) In the case of doubtful assets for more than three years as on March 31. the general provision on standard assets on the global portfolio was 0. 2004.2 All advances are classified under categories.25%. viz. the general provision on standard assets on the global portfolio was 0. Loans and advances qualifying as capital market exposures. b. Commercial real estate loans. and Loans and advances to Systemically important NBFCs – Non Deposit Taking All other loans and advances not included in (a).3.3. Provisions are made on outstanding non-performing advances (net of interest not realised) as below: • Sub Standard Assets From the year ended 2004-05 : : 10% 20% (In case of ab initio unsecured exposures (where realisable value of security is not more than 10 %) • Doubtful Assets a) Unsecured portion at 100 percent after netting retainable/realisable amount of guarantee cover provided by Export Credit Guarantee Corporation / Credit Guarantee Trust for Small Industries.

4.3 3. the difference is charged to the Profit and Loss Account. 2000 after it is invoked at provision was made at 30% of the secured portion and 100% of the unsecured portion. whichever is higher. 2005. Investments in Subsidiaries/Joint Ventures/Associates.3. Debentures and Bonds. In the financial years ended March 31.1 Investments Investments are classified into 3 categories. ii. 3.3.2 Advances are classified under four categories in line with those of India Offices. and Other Investments.4 Foreign Offices 3. 5.1 3. advances where State Government guarantee remain default for more than two quarters as on March 31. Provisions in respect of non-performing advances are made as per the local law or as per the norms of RBI. In the financial year ended March 31. 2003. ‘Available for Sale’ and ‘Held to Maturity’. viz. iii. 4. “doubtful” or “loss”. 2.4. 3. advances where State Government guarantee remained default for more than two quarters ended as of March 31. advances guaranteed by State Governments were classified as “sub-standard”. In case the sale is at a price higher than the NBV. as the case may be. 6. the difference between the present value of the future interest as per the original agreement and the present value of the future interest as per the revised agreement is provided for at the time of restructuring / rescheduling. 2004 and March 31. ‘Held for Trading’. Government Securities. if the amount due to the bank remains overdue for more than 180 days and attracted appropriate provisioning as applicable to other advances. the advances were considered as non-performing if they remain overdue or out of order for more than 180 days as against 90 days at present. In the years 2003-04 and 2002-03.4. In case of restructuring / rescheduling of advances. Under each of these categories.4 Unrealised Interest recognised in the previous year on advances which have become nonperforming during the current year is provided for. 211 . Financial Assets sold are recognised as follows: i) ii) In case the sale is at a price lower than the Net Book Value (NBV). c) • In the year 2002-03. 2000 after it is invoked at provision was made at 30% of the secured portion and 100% of the unsecured portion. the surplus provision is not reversed and is utilised to meet the shortfall on sale of other such nonperforming financial assets. investments are further classified under the following six groups: 1. 3. Shares. 4. Other Approved Securities.b) In the case of advances guaranteed by the state governments the accounting policy for classification of account and making provisions were as below in the earlier years: i.

the weighted average cost was determined at the end of year after considering transactions during the year.2. is provided for while net appreciation is ignored. whichever is lower. market value for this purpose is arrived at on the basis of realisable market price computed as per the guidelines of the Fixed Income Money Market and Derivatives Association of India (FIMMDA) / Primary Dealers Association of India (PDAI) / RBI. the premium on acquisition or on transfer from another category is amortised over the remaining period to maturity of the security using Constant Yield Method (CYM). Investments which are intended to be held up to maturity are classified as ‘Held to Maturity’. Investments under ‘Held to Maturity’ (HTM) category are carried at acquisition cost. The transfer of the security (from one category to another) is accounted for at the least of acquisition cost / book value / market value on the date of transfer and the depreciation. Brokerage. Net depreciation in each classification. These investments are held under this category up to 90 days from the date of acquisition. depreciation was recognised scrip-wise and appreciation ignored. on such transfer is charged to Profit and Loss Account – “Profit on Revaluation of Investments” as a deduction. 4. Securities are valued scrip-wise and depreciation / appreciation is aggregated for each classification.2 4. The book value of the scrips continues to remain unchanged. Cost is determined on the weighted average cost method.2. Brokenperiod interest received on sale of securities is recognised as interest income. Earlier Policy: In the years 2002-03 and 2003-04. Earlier Policy: In the financial years ended March 31.1. 4. 2004. Securities are valued scrip-wise and depreciation/appreciation is aggregated for each classification. Where market quotations are not available.3 4. 4. The book value of the security is reduced to the extent of the amount amortised.2. is provided for while net appreciation is ignored.1. 4. The book value of the scrips continues to remain unchanged. the premium amount was amortised equally over the remaining period of maturity.3 212 .2 Valuation 4.2. Wherever the book value is higher than the face value/redemption value.4 Investments under ‘Available for Sale’ category are valued at cost or market value. Net depreciation in each classification. if any. d) e) Earlier Policy : In the year 2002-03.e. commission and stamp duty paid in connection with acquisition of securities are treated as revenue expenses. broken-period interest. Interest accrued up to the date of acquisition of securities i. Amortisation loss is charged to Profit & Loss Account – “Profit on Revaluation of Investments” as a deduction. 2003 & March 31. is excluded from the acquisition cost and recognised as interest expense. Investments which are not classified in either of the above categories are classified as ‘Available for Sale’.4. if any.1 In determining the acquisition cost of an investment: a) b) c) Brokerage/commission received on subscriptions is deducted from the cost of securities.2 Individual scrips classified under ‘Held for Trading’ category are valued at lower of book value or market value. if any.1.1 Investments that are acquired by the Group with the intention to trade by taking advantage of short term price / interest rate movement are classified under ‘Held for Trading’.

as per RBI guidelines. Assets costing up to Rs. as the case may be. Rupee Interest Rate Swaps.000 are charged off to the Profit and Loss Account.1 6. Non-Performing Investments are recognised as per RBI guidelines and provision is made as per RBI norms applicable to Non-Performing Advances. depreciation is provided on straight line method at 33. In respect of computers. The resultant gain/loss is recognised in the Profit & Loss Account. Investments in Regional Rural Banks (RRBs) are valued at carrying cost (i. the securities sold/purchased under Repo/Reverse Repo are treated as outright sales/purchases and accounted for in the Repo/Reverse Repo Accounts and the entries are reversed on the date of maturity. Costs and revenues are accounted as interest expenditure/income. Based on RBI guidelines. Accordingly. and Currency Derivatives viz. 2007.1 Derivatives The Group presently deals in Interest Rate Derivatives viz. Derivatives are valued as follows: a) b) Derivatives used for trading are marked to market and net appreciation/depreciation is recognised in the Profit and Loss Account. Interest expended/earned thereon is accounted for as expenditure/revenue. Securities purchased/sold under LAF with RBI are debited/credited to Investment Account and reversed on maturity of the transactions. The Group also deals in a mix of these generic instruments. Accounted on accrual basis in cases where the underlying Assets/Liabilities are not marked to market. the group has recognised diminution in the value of investments in RRBs to the extent of its capital contribution which hitherto was being recognised by the group without restricting to its capital contribution. 1.33% per annum.2. In respect of fixed assets held at Foreign Offices. 4. Earlier Policy: During the financial year ended March 31.4.8 The Group has adopted the Uniform Accounting Procedure prescribed by the RBI for accounting of Repo and Reverse Repo transactions other than transactions under the Liquidity Adjustment facility (LAF) with the RBI. Computer software not forming an integral part of hardware is depreciated fully in the year of purchase. Depreciation is provided on the written down value method at the rates prescribed under the Income Tax Rules. 6. 6. depreciation is provided as per the laws/norms of the respective countries.2 The net outstanding marked to market position of each type of derivative is shown either under Asset or Liability.2. Options and Currency Forwards.5 4.3 6. 6.e. under the portfolio of Structured Products. book value).4 213 .2 Fixed Assets and Depreciation Premises and other fixed assets are accounted on historical cost basis. 5.2. which are considered appropriate by the management. Derivatives used for hedging are : i) ii) Marked to market in cases where the underlying Assets/Liabilities are marked to market. 1962. as the case may be.7 Treasury Bills and Commercial Papers are valued at cost. Balance in Repo/Reverse Repo Account is adjusted against the balance in the Investment Account.6 4. 5.2. 5. Cross Currency Interest Rate Swaps and Forward Rate Agreements.

7. a) Foreign currency transactions are recorded on initial recognition in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the date of transaction. 9. 7. Assets given on Lease In respect of assets given on lease by the Group on or before March 31. the value of the assets given on lease and the amounts paid as advance for assets to be given on lease are disclosed as “Leased Assets” and “Capital Work-in-progress (Leased Assets)” respectively under fixed assets. 1956 and the difference between the annual lease charge (capital recovery) and the depreciation is taken to Lease Equalisation Account as per the guidelines issued by the ICAI.1 9.1 In respect of leasehold premises. and assets and liabilities in foreign currencies held in the books of domestic offices were 214 . Such assets are included under “Other Assets”.2 7.4 Integral Operations a) b) All income and expenditure of integral operations are recorded at the rates prevalent on the date of transaction. Income and expenditure are translated using the quarterly average rate notified by FEDAI at the end of the respective quarter. Earlier Policy: In the years 2002-03 and 2003-04. the lease amount is amortised over the period of lease.3 8. Provisions on non-performing leased assets are made on the basis of RBI guidelines applicable to advances. All foreign currency monetary items are reported using the FEDAI closing rates.5 7. All resulting exchange differences are accumulated in a separate “Foreign Currency Translation Reserve” account till the disposal of the net investment. are recognised in accordance with Accounting Standard 28 issued by the ICAI and charged off to Profit and Loss Account. 9. Depreciation is provided on straight line method as per the Companies Act.6.3 Non-integral Operations a) b) c) All monetary/non-monetary assets and liabilities as well as contingent liabilities are translated at the closing rate notified by FEDAI. foreign subsidiaries and foreign Joint Ventures. Foreign Currency Transactions In conformity with Accounting Standard 11 (The effects of changes in foreign exchange rates) of the ICAI. 2001 are accounted as per Accounting Standard 19 (Leases) issued by the ICAI. Foreign currency monetary items are reported using the FEDAI closing spot rates. Foreign Branches of the Group and Offshore Banking Units (“OBUs”) have been classified as Non-integral Operations and Representative Offices classified as Integral Operations.2 b) c) 9. Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognised as income or as expense in the period in which they arise. 8.1 9. Assets given on lease by the Group on or after April 1. items of income and expenditure as well as assets and liabilities in foreign currencies in respect of foreign offices. Impairment of Assets Impairment losses (if any). 2001.

as the case may be.1 10. Items of income and expenditure in foreign currencies at domestic offices were converted at the exchange rate prevailing on the date of transactions. 9. The difference between the revalued amount and the contracted amount is recognised as profit or loss.2 On Interest bearing securities. 10.1 a) b) 10.5 Non-banking entities 10.1 Merchant Banking : a) b) c) Issue management and advisory fees are recognised as per the terms of agreement with the client. Overdue bills and leased assets. Income on Rupee Derivatives designated as “Trading”.5 Forward Exchange Contracts In accordance with the guidelines of the FEDAI and the provisions of AS – 11. Loss on sale is recognised in the Profit and Loss Account. 215 . owing to significant uncertainty in collection thereof: a) b) Income on non-performing advances.4 Income (other than interest) on investments in “Held to Maturity” (HTM) category acquired at a discount to the face value. On zero-coupon securities. net outstanding forward exchange contracts in each currency are revalued at the Balance Sheet date at the corresponding forward rates for the residual maturity of the contracts.4. 10. Fees for private placement are recognised on completion of assignment. exchange and brokerage. In case of foreign offices. income is recognised as per the local laws of the country in which the respective foreign office is located The following items of income are recognised on realisation basis: a) b) c) d) 10.5. Underwriting commission relating to public issues is accounted for on finalisation of allotment of the public issue.3 Commission (other than commission on deferred payment guarantees and government transaction). Brokerage income relating to public issues/mutual fund/other securities is accounted for based on mobilisation and intimation received from clients/intermediaries.converted at the rate of exchange prevailing at the close of the year as per RBI guidelines. it is accounted for over the balance tenor of the security on a constant yield basis. 10. Profit on sale of investments in this category is first credited to the Profit and Loss Account and thereafter appropriated to the “Capital Reserve Account”. Dividend on investments. is recognised as follows: 10. Interest on non-performing investments. 10.4. Interest on application money on investments and overdue interest on investments. it is recognised only at the time of sale.2 Revenue Recognition Income and Expenditure are accounted on accrual basis. The following items of income are recognised on realisation basis.

Claims by maturity are accounted on the policy maturity date. Liability for gratuity. 11. 10.d) 10. Uncollected premium from lapsed policies is not recognised as income until such policies are revived.5.2 Retirement Benefits Contributions payable to Bank’s Provident Fund Trust in terms of its Provident Fund Scheme are charged to Profit and Loss account on accrual basis. Visa interchange income is recognised on accrual basis. b) c) d) 10.3 Credit Card Operations: a) b) c) Joining membership fee and first annual fee has been recognised over a period of one year as this more closely reflects the period to which the fee relates to. All other service fees are recorded at the time of recording the respective transaction. 10. and investments made by the company in the respective scheme). In respect of linked business. Provision for Taxation 12.1 11.4 Factoring: Factoring service charges are accounted on accrual basis except in the case of non-performing assets. Premium ceded on reinsurance is accounted in accordance with the terms of the treaty or in-principle arrangement with the reinsurer. Annuity benefits are accounted when due. 10. The estimation of liability against life policies is determined by the Appointed Actuary pursuant to an annual review of the life insurance business of the company. premium income is recognised when the associated units are allotted. Claims cost consist of the policy benefit amounts and claims settlement costs. pension and leave encashment (which are defined benefits) is determined on the basis of actuarial valuations carried out at the year end and incremental liability is provided for by charging to the Profit and Loss Account. where applicable. Surrenders are accounted as and when notified. Intimations up to the end of the year are considered for accounting of such claims. Life insurance claims by death are accounted when intimated. Asset Management: Management fee is recognised at specific rates agreed with the relevant scheme applied on the average daily net assets of each scheme (including inter-scheme investments.4 Life Insurance: a) Life insurance premium (net of service tax) is recognised as income when due from policyholders.5.6 Foreign Offices/Foreign Subsidiaries Income is recognised as per the local laws of the countries. 11. Amounts recoverable from re-insurers are accounted for in the same period as the related claims and are reduced from claims.5.2 Brokerage income in relation to stock broking activity is recognised on settlement date of the transaction. 216 .5. where applicable. where income is accounted on realisation.

Deferred tax assets are not recognised unless there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets will be realised. 217 .Provision for tax comprises of current tax for the period determined in accordance with the relevant laws. in conformity with Accounting Standard 22 (Accounting for Taxes on Income) of the Institute of Chartered Accountants of India. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. fringe benefit tax and deferred tax charge or credit reflecting the tax effect of timing differences between accounting income and taxable income for the period.

16 65.00 86.00 100. Joint Ventures and Associates (which along with State Bank of India.16 86.00 100.00 100.00 86. 2003 75.00 75.33 100.16 66.00 86.16 58.00 98.00 75.07 100.07 100.16 86.01 75.00 100.83 100.07 100.00 100.00 100.05 92.00 98.00 75.16 86.00 100.95 100.00 100.00 98.00 86.ANNEXURE C-4 Material Notes to Summarised Consolidated Financial Information and Accounting Standard Disclosures (A) 1.33 100.00 100.16 65.00 100.88 69.00 100.00 98.16 86.00 98.07 100.88 69. 2005 31.00 100.16 86.07 100.00 100.00 100.07 100.16 65.33 100.00 100.00 86. 2007 75.16 86. No 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) Name of the Subsidiary State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Indore State Bank of Mysore State Bank of Patiala State Bank of Saurashtra State Bank of Travancore SBI Commercial & International Bank Ltd SBI Capital Markets Ltd SBICAP Securities Ltd SBICAP Trustee Company Ltd SBICAPS Ventures Ltd SBI DFHI Ltd SBI Factors & Commercial Services Pvt Ltd SBI Mutual Fund Trustee Company Pvt Ltd State Bank of India (Canada) State Bank of India (California) India India India India India India 100.05 92.00 100. 2007 75.16 86.00 75.05 92.95 India 69. the parent.01 Year wise Group’s Stake (%) As of As of As of As of March March March March 31.05 92.00 100.16 65. constitute the Group).00 100. considered in the preparation of the consolidated financial statements. 2004 31.00 86.88 69. are: A) Subsidiaries Country of Incorporation India India India India India India India As of March 31.01 S.88 69. 2006 31.00 75.33 100.88 India Canada USA 100.00 100.01 75.95 100.00 100.01 75.05 92.00 100.00 218 . Material Notes to Summarised Consolidated Financial Information List of Subsidiaries/Joint Ventures/Associates considered for preparation of consolidated financial statements: The Subsidiaries.33 100.95 100.01 As of September 30.00 100.88 69.16 86.33 100.00 75.16 86.00 98.05 92.

00 74.84 76. 2007 As of September 30.00 63. 2004 31.00 - - - - B) S. 2006 31.00 40. 2005 31.00 60.00 60.00 86.00 60.00 86. 2007 98.00 40.00 63.00 60.00 49.00 - 74.00 74.00 63.00 63.00 40. No 18) 19) 20) 21) 22) Name of the Subsidiary SBI International (Mauritius) Ltd Indian Ocean International Bank Ltd PT Bank Indomonex SBICAP (UK) Ltd SBI Fund Management Pvt Ltd Joint Ventures Country of Incorporation Mauritius As of March 31.00 100.00 86.00 60. 2006 31. 2007 98.S.00 219 .00 40.K.00 60.00 60.00 49.00 74.No 1) 2) 3) 4) 5) 6) 7) Name of the Joint Venture C Edge Technologies Pvt Ltd GE Capital Business Process Management Services Pvt Ltd SBI Cards and Payment Services Pvt Ltd SBI Fund Management Pvt Ltd SBI Life Insurance Company Ltd Commercial Bank of India LLC SBI Funds Management (International) Private Ltd Country of Incorporation As of March 31. 2003 98.93 76.00 Mauritius Indonesia U.00 60. 2003 Year wise Group’s Stake (%) As of As of As of As of March March March March 31. - - - 51.00 74.00 60.16 56.16 61. 2004 31.00 As of September 30.00 60.00 India - - 63.00 Year wise Group’s Stake (%) As of As of As of As of March March March March 31.00 India Russia 74.16 India 100. 2007 India - - - 49.00 India 40. 2005 31.00 40.00 98.00 98.00 India 60.00 98.00 Mauritius - - - - 63.

27 26.00 35.00 35.No 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) Name of the Associate Andhra Pradesh Grameena Vikas Bank Arunachal Pradesh Rural Bank Chhatisgarh Gramin Bank Ellaquai Dehati Bank Ka Bank Nongkyndong Ri Khasi Jaintia Krishna Grameena Bank Langpi Dehangi Rural Bank Madhya Bharat Gramin Bank Mizoram Rural Bank Nagaland Rural Bank Parvatiya Gramin Bank Purvanchal Kshetriya Gramin Bank Samastipur Kshetriya Gramin Bank Utkal Gramya Bank Uttaranchal Gramin Bank Vananchal Gramin Bank Marwar Ganganagar Bikaner Gramin Bank Vidisha Bhopal Kshetriya Gramin Bank India - - - 35.00 India India India 35. 2007 As of September 30.00 35.00 35. 2006 31.00 35.00 35.00 - 35.00 - 35.00 35.00 35.32 34.00 35.00 35.00 35.00 India India India India India India 35.00 35.00 35.00 35.32 34.00 35.00 35.00 - 35. 2004 31.00 14) 15) 16) 17) India - - - - 26.00 35.32 34.00 35.27 18) India 34.00 35.00 35.00 35.00 35.00 35.00 35.00 35.00 35.00 35.00 35.00 35.00 - 35.00 35.00 35.00 35.00 35.00 35.00 35.32 34.00 35.32 34.00 35.00 35.00 13) India India India India 35.00 35. 2003 Year wise Group’s Stake (%) As of As of As of As of March March March March 31.00 35.00 35.00 35.00 35.00 35.00 35.00 35.00 India - - - 35.00 35.00 35.00 35.32 220 .00 35. 2005 31.00 35.00 35.00 35.00 35. 2007 S.00 35.00 35.C) Associates Country of Incorporation As of March 31.00 35.00 35.00 35.00 India 12) 35.00 35.

00 35.00 50.00 25.00 35.05 India Bhutan Nepal 25.00 35.32 35. 2003 - Year wise Group’s Stake (%) As of As of As of As of March March March March 31. 2005 31.00 25. 2007 35.S.00 20.00 25.00 - 35.00 20. 2006 31.00 50.00 India India 26. 2004 31.00 50.00 32.97 25.00 20.82 25.00 - 35.00 25.00 20.00 50.97 25.No 19) 20) 21) 22) 23) 24) 25) 26) 27) Name of the Associate Deccan Grameena Bank Cauvery Kalpatharu Grameena Bank Malwa Gramin Bank Saurashtra Grameena Bank Clearing Corporation of India Ltd SBI Home Finance Ltd UTI Asset Management Company Pvt Ltd Bank of Bhutan Nepal SBI Bank Ltd Country of Incorporation India As of March 31.97 25.05 28.00 20.00 221 .05 28.05 28.00 As of September 30.05 28.00 50.00 25.00 35. 2007 35.00 - 35.00 32.00 50.05 28.00 India India India 35.32 35.97 25.97 25.00 20.

2002 has been debited to the Revenue Reserve. which was treated as deferred revenue expenditure. commenced operation effective from December 4. 456 million has been fully realised.113 million representing current’s year liability has been charged to Profit and Loss Account and an amount of Rs. SBI Servicos Limitada. a subsidiary incorporated in Brazil. Year Ended on March 31. incorporated in Russia as a joint stock company on November 5. While figures of these Companies were not taken for the purpose of consolidation. The group’s equity investment of Rs. a) b) c) d) e) 3. 5. 5. the liability towards encashment of leave is accounted for on the basis of actuarial valuation. Two of the associates – Bank of Bhutan (December 31) and Nepal SBI Bank Ltd (Hindu Calendar Year) follow accounting years different from that of the parent. 2004. While figures of these Companies have not been taken for the purpose of consolidation. For the purpose of preparing the statement. Ltd. and SBI Life Insurance Co. However. b) c) d) e) f) 2. Ltd. Year Ended on March 31. 5.157 million representing the accrued liability up to March 31. the bank’s investment in this subsidiary have been shown as receivable under the head “Other Investment” in Schedule 8. GE Capital Business Process Management Services Pvt.099 million has been charged to revenue on account of Voluntary Retirement Scheme (VRS) implemented during the year 2000-2001. was in the process of being liquidated. The effective date of merger was April 1.082 million has been charged to revenue on account of Voluntary Retirement Scheme (VRS) implemented during the year 2000-2001. a) Year Ended on March 31. in order to comply with the Accounting Standard 15 issued by the Institute of Chartered Accountants of India and guidelines issued by RBI. SBI Gilts Ltd was merged with Discount & Finance House of India Ltd in terms of the order of the Mumbai High Court dated February 26. 1. 2005 During the year final instalment of Rs. which was treated as deferred revenue expenditure. were consolidated on proportionate basis as per Accounting Standard 27 instead of being consolidated as subsidiaries as was done in 2001-02. During the year an amount of Rs.054 million has been charged to revenue on account of Voluntary Retirement Scheme (VRS) implemented during the year 2000-01. Ltd. a subsidiary which was under voluntary liquidation. 2003 The expenses on encashment of leave of employees were hitherto accounted for on cash basis. Two of the subsidiaries – SBI Cards and Payment Services Pvt. – has also been liquidated during the year. SBI Securities Ltd. Accordingly. Commercial Bank of India LLC. 2003. a) 222 . an amount of Rs. – being joint ventures. the Bank’s investment in these entities was accounted for at cost. 2004 During the year an amount of Rs. Unamortised amount of Rs. a joint venture with Canara Bank. 10. 2003. 2003. 8. Unamortised amount of Rs. Two of the bank’s subsidiaries – SBI Securities Ltd. during the current year. In 2001-02. the figures of the merged entity have been considered.054 million is to be amortised next year in accordance with RBI guidelines. which was treated as deferred revenue expenditure. 5. and SBI Servicos Limitada – are in the process of being liquidated. was liquidated. Another subsidiary – SBI Finance Inc. the Bank’s investment in these subsidiaries have been shown as receivable under the head “Other assets – Others” in Schedule 11.1. and Credit Information Bureau of India Ltd were included for consolidation on proportionate basis as per Accounting Standard 27.085 million is to be amortised over a further period of two years in accordance with RBI guidelines.

income and expenses of IOIB were consolidated from April 20. c) d) e) f) g) 4.f. As Credit Information Bureau of India Ltd ceased to be a joint venture it has not been consolidated for the year 2005-06. March 28.e. SBICAPS Ventures Ltd.e. 63 million was charged off as loss on disposal of subsidiary. Ltd. 2005 were consolidated. A sum of Rs. The investments in ‘ Available for Sale (AFS) and ‘Held For Trading’ (HFT) categories were being valued scrip-wise and depreciation if any. State Bank of India promoted a new company as a joint venture – C Edge Technologies Ltd .f. However.f. However there is no impact on the net profit for financial year 2004-05. As such the assets. The stake of SBI in Asset Reconstruction Company came down to 19. 2006 State Bank of India acquired 51% stake in Indian Ocean International Bank Ltd at a cost of U. A new Subsidiary. A sum of Rs. liabilities.e. computed scrip-wise and providing for net depreciation in each classification while ignoring net appreciation.95% (24. April 20. 2004 and the assets.S. 2006. 3. 2004). in the 2004-05. SBICAP Securities Ltd. as set out in Accounting Standard 21. As per Accounting Standard 21. a) b) c) d) e) 223 .321 million shown under Other Liabilities & Provisions in earlier years has been transferred to Foreign Currency Translation Reserve. The company commenced operations w. 8 million was recognised as goodwill in the consolidated financial statements. 91 million was recognised as profit on disposal of subsidiary/joint venture. liabilities. Income (Rupee equivalent 231 million) / Expenses (Rupee equivalent 278 million) of INMB Bank Ltd up to December 31. SBICAP Trustee Company Ltd and SBICAP (UK) Ltd. SBI Mutual Fund Trustee Company Pvt. loss on redemption of securities in AFS category has been recognised after adjusting the underlying specific provisions held against these securities as against accounting of the same on gross basis in “Income from Investments” in earlier years. promoted four wholly owned subsidiaries viz. Year Ended on March 31. State Bank of India brought down its equity stake in Credit Information Bureau of India Ltd from 40% as of March 31. the interest in the assets. 2005 to 10% in stages starting from May 17. France. promoted by State Bank of India. a sum of Rs. the Accounting Standard 11 – Effects of change in Foreign Exchange Rate (2003Revised) has come into effect.24%. 2006 pursuant to its merger with Sterling Bank Plc in compliance with Nigerian Regulatory requirements. income and expense of the entity were consolidated as per procedure for consolidation of investments in subsidiaries. 322 million) w. SBI Capital Market Ltd. the entity was not treated as an Associate of the State Bank Group. During the year. 2005. took over the trusteeship function of the SBI mutual fund from December 29.$ 7. was provided scrip wise while ignoring appreciation. The consolidated financials of SBI Capital Markets Ltd were used in the preparation of consolidated financial statements of State Bank of India. Consequent upon this.50% up to October 15. From the current financial year investment in ‘Available for Sale’(AFS) and ‘Held For Trading’ (HFT) categories have been valued in conformity with RBI guidelines after netting-off classification-wise depreciation and appreciation. As per the merger scheme.with Tata Consultancy Ltd. During the year. income and expenses of the entity was consolidated as per procedure for consolidation of investments in subsidiaries set out in Accounting Standard 21. 2005. Consequently. January 1. The net profit of the Bank for the year is arrived at in conformity with the provisions of the said Accounting Standard. State Bank of India’s stake in Sterling Bank Plc is 9. a subsidiary of State Bank of India. 2005. liabilities.b) State Bank of India divested 37% of its stake in its fully owned subsidiary SBI Funds Management Pvt Ltd to Société Générale Asset Management. net exchange difference arising on translation of monetary items of non integral operations amounting to Rs. INMB Bank Ltd ceased to be a subsidiary w.35 million (Rs.

f. 223 million) w.06 g) Name of the amalgamated RRB 1.03. Interest Earned-Others includes an amount of Rs. 1999 aggregating to Rs. Nagarjuna Grameena Bank 6.01.e. 5. Payments to and provisions for employees. being interest on refund of Income Tax. 2005. profit (net of tax) for the year is higher by Rs. An amount of Rs.166 million has been credited to Profit and Loss account under the head Miscellaneous Income. Junagarh Amreli Gramin Bank 14. Surendranagar Bhavnagar Gramin Bank h) Deccan Grameena Bank State Bank of Hyderabad 24. i) j) k) l) m) 5. profit (net of tax) for the year is higher by Rs. 3. 2006 came down to 34 due to amalgamation of 14 RRBs details of which are as follows. Jamnagar Rajkot Gramin Bank 13. Gorakhpur Kshetriya Gramin Bank 3. 131 million has been recognised as goodwill in the consolidated financial statements.06 Saurashtra Gramin Bank State Bank of Saurashtra 02.085 million.001/2005-06 dated December 19.f) During the year the Bank has paid Rs. liabilities. Sangameshwara Grameena Bank 7. 8804/22. Sri Saraswathi Grameena Bank 11. As such the assets. Sri Rama Grameena Bank 10. 2005.05 31. Name of the new RRB Purvanchal Kshetriya Gramin Bank Andhra Pradesh Grameena Vikas Bank Name of the sponsor bank State Bank of India State Bank of India Date of merger 12. As of March 31. income and expenses of this bank have been consolidated from December 14. under Operating Expenses includes an amount of Rs.S.018 million. 17. 2006. being its share (25%) of the consideration for purchase of UTI Asset Management Company Pvt. unreconciled net credit balances in the inter-branch accounts up to March 31.03.CO. the unreconciled net credit balances (net value of debit and credit entries) in Inter Branch Account up to March 31.00 million (Rs. 2007 State Bank of India has acquired 76% stake in PT Bank Indomonex. Consequently.06 As a one time measure.No.$ 5.SMC. 1999 aggregating Rs5. Basti Gramin Bank 2. A sum of Rs. 3. Year Ended on March 31. profit (net of tax) for the year is higher by Rs. Consequently. at a cost of U. Ltd.09. 2006. 5. Consequently. 4. Kakathiya Grameena Bank 4.09.170 million has been credited to Profit and Loss Account. As per Accounting Standard 23. 3. a) 224 . Golconda Grameena Bank 9. 2100 million. December 14. the group had 44 RRBs as associates.DBS. this amount has been identified as goodwill and included in the carrying amount of investment.738 million. being arrears of salary paid for the previous financial years.635 million paid to RBI for maintenance of value (MOV) by debit to Interest Expended Account in the years 2001 and 2002 was received back during the year on redemption of IMDs and credited to Interest Expended account. Manjira Grameena Bank 5.315 million being Exchange Gain on India Millennium Deposits (“IMDs”) redemption. a commercial bank incorporated and operating in Indonesia. in terms of RBI Guidelines. Other Income includes an amount of Rs. Sri Sathavahana Grameena Bank 12. which as of March 31. In terms of RBI letter No.092 million to the Government. Sri Vishaka Grameena Bank 8. 3526 million.

incorporated on January 17. 2006. As of March 31. which as of March 31. 23. As per this Standard. Damoh Sagar Panna Kshetriya Gramin Bank 6. 2007 has come down to 22 due to amalgamation of 19 RRBs into seven new RRBs. ‘Accounting for Retirement Benefits in the Financial Statements of Employers’.2006 Marwar Ganganagar Bikaner Bank Cauvery Kalpatharu Grameena Bank State Bank of Bikaner & Jaipur State Bank of Mysore 12. the group had 34 Regional Rural Banks (RRBs) as associates. the Group has charged the amortisation amount as well as mark to market losses on transfer of securities from ‘Available for Sale’ (AFS) to HTM category by an adjustment to the account head Other Income “Profit on revaluation of Investments” as a deduction. Kalahandi Anchalika Gramya Bank 9. This has resulted in the increase in the profit of the group for the year by Rs. there is no goodwill/capital reserve on account of these mergers. 2007 Accounting Standard 15 “Employee Benefits” (revised 2005) is effective for accounting periods commencing on or after 07.2006 Since the assets/liabilities of the merged RRBs have been taken over by the new entities at their respective book values. Half Year Ended on September 30.06.2006 24.2006 31.12. Bundelkhand Kshetriya Gramin Bank 5. has promoted a new wholly owned subsidiary – SBI Funds Management (International) Private Limited. 2006. The new subsidiary. 2006. Santhal Parganas Gramin Bank 12. should be adjusted immediately against opening balance of 225 . the Operating Profit for the year stands reduced by Rs.06.582 million. details of which are as follows.06. 6. as per pre revised Accounting Standard (AS) 15. Koraput Panchbati Gramya Bank 10. From the current financial year and in accordance with RBI directive dated April 20. Alaknanda Gramin Bank 13. Bikaner Kshetriya Gramin Bank 16. The parent and its constituent banks had hitherto been following a policy of amortisation of premium in respect of securities held in the ‘Held to Maturity’ (HTM) category by an adjustment to the account head ‘Provision and Contingencies’. As a result of this change in accounting policy.b) SBI Funds Management (Pvt) Ltd. Cauvery Grameena Bank 19. Raigarh Kshetriya Gramin Bank 4.06. Sriganganagar Kshetriya Gramin Bank 18.05. During the year.2006. Pithoragarh Kshetriya Gramin Bank 15. the group has recognised diminution in the value of investments in RRBs to the extent of its capital contribution which hitherto was being recognised by the group without restricting to its capital contribution. Kalpatharu Grameena Bank 30. a company in which SBI holds 63% stake. the difference (as adjusted by any related tax expense) between the transitional liability and the liability that would have been recognised at the same date.031 million for the current year. Shivpuri Guna Kshetriya Gramin Bank 7. Marwar Gramin Bank 17. Bolangir Anchalika Gramya Bank 8. there is no impact on the Net Profit for the year. 2007. Bastar Kshetriya Gramin Bank 2. has commenced operations on April 1. Ganga Yamuna Gramin Bank 14. Palamau Kshetriya Gramin Bank 11.2006 30. 1.06. However. a. Name of the new RRB Chhatisgarh Gramin Bank Madhya Bharat Gramin Bank Utkal Gramya Bank Vananchal Gramin Bank Uttaranchal Gramin Bank Name of the sponsor bank State Bank of India State Bank of India State Bank of India State Bank of India State Bank of India Date of merger 30. Bilaspur Raipur Kshetriya Gramin Bank 3.2006 30.07.2006 c) d) e) Name of the amalgamated RRB 1.

39. 2007. with a face value of Rs. c. The impact of the Accounting Standard 15 “Employee Benefits” (revised 2005) has not been ascertained for transitional provision and current period(s). 2007. resulting in a net revaluation loss of Rs. which has been notified on October 17. 226 . e. 2.977 million. d.200 Equity Shares (59.43. In terms of RBI circular dated April 20. 2007. 2007. there is no impact on the Bank’s results. As the merger process has not yet been crystallised. During the quarter ended September 30. 2007. the Bank has carried out the reclassification of the same for the period ended September 30. This revision provides the Bank with another option to charge additional liability arising upon the first application of the standard as an expense over a period up to five years. The Institute of Chartered Accountants of India has made a limited revision to this provision. the Central Board of the Bank and the Board of State Bank of Saurashtra (“SBS”) have accorded approval for merger of SBS with SBI. The Bank is currently examining both the alternatives. In the interregnum.816 million from ‘Available for Sale’ (AFS) category to ‘Held to Maturity’ (HTM) category. Based on the clarification issued by RBI on July 11. b. 10 each has been transferred to the Central Government. the Bank has made adequate provisions as per pre-revised Accounting Standard 15. Accordingly. 90. the Bank had accounted for amortisation of premium in respect of securities included in the ‘Held to Maturity’ (HTM) category as an adjustment against ‘Other Income’. the entire share holding of RBI in State Bank of India aggregating 31. the Bank has shifted SLR investments having aggregate Face Value of Rs.73%). During the half-year ended September 30. The matter has further been referred to RBI and the Government for approval. Banks are required to reflect the amortisation of premium held in HTM category by an adjustment to the ‘Interest Earned’. ‘Accounting for Retirement Benefits in the Financial Statements of Employers’.revenue reserves and surplus. 2007. During the half-year ended September 30. This change in accounting procedure does not have any impact on the net profit for the period(s) under review. 2007.

769 41.804 289. Income Taxes 396.835 5.123 432.688 77. v) Segmental Results (Rs.295 11.640 41.648 -18.384 -82. REVENUE i) Banking Operations ii) Treasury Operations iii) Non Banking Operations iv) Elimination v) Total (i+ii+iii-iv) 2. March 31.896 265. the parent and its constituent banks have changed the segmental pricing methodology for presenting more meaningful segmental results. 2003 March 31.514 153. 2005 For the Year Ended 1.963 8.840 30.093 533.647 349 82.571 227 .578 81.090 682. 2006 2007 Part A: Primary Segment March 31. i) Accounting Standard Disclosures Segment Reporting Segment identification PRIMARY (Business Segment) SECONDARY (Geographical Segment) Treasury Operations Banking Operations Non-Banking Operations Domestic Operations Foreign Operations ii) Accounting Policy The accounting policies adopted for segment reporting are in line with the accounting policies adopted in the parent’s financial statements with the following additional features.240 4.411 1.607 -126. Operating Profit(2-3) 5. have been included under “Unallocated Expenses” net of unallocated corporate revenue.229 490. which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis.799 79.962 523. compensation for the use of funds is reckoned based on interest and other costs incurred by the lending segment.671 271.756 177.896 65.660 992 -82.531 408.820 73.747 588. Revenue and expenses.513 107. In respect of transactions between treasury and banking segments.282 18. this change does not have any impact on the financials of the Group. 2004 March 31.717 24.185 23.(B) 1.000 12.318 481.833 119. iv) Allocation of Revenue and Expenses Revenue and expenses have been identified to segments based on their relationship to the operating activities of the segment.159 -93. in millions) March 31. Unallocated Income/(Expenses) Net 4. The financial effect of change on the segment results cannot be reasonably determined.298 26.932 233.660 8.528 -60.546 32.380 183.293 46.747 -18.429 1. However. iii) Pricing of Inter-segmental transfers During the year.116 132.559 72.995 8.296 615.631 21. The Group has hitherto been following the pricing of inter-segment transactions between the Non Banking Operations segment and other segments are market led.264 5. RESULTS i) Banking Operations ii) Treasury Operations iii) Non Banking Operations iv) Elimination v) Total (i+ii+iii-iv) 3.872 148.912 39.635 183.636 1.

926.454.672.632.388 For the Year Ended 1. 2004 511.870 6.559 5.692 200. 2005 -55. Net Profit (4-5+6) OTHER INFORMATION 8.185 5.824 42.980 March 31.1 Joint Ventures:1.480 5.391 4.457.615 March 31.752.797.856.858 56.610 29.165.854 268.610 43.593 8.088 582.493 4.933. Segment Liabilities i) Banking Operations ii) Treasury Operations iii) Non Banking Operations iv) Elimination v) Total (i+ii+iii-iv) 12.582 49.235.272 475.654 2. 6. 2004 -57.492 712.960. Assets i) Domestic Operations ii) Foreign Operations iii) Total (i+ii) 2.646 6.717 5.997. Revenue i) Domestic Operations ii) Foreign Operations iii) Total (i+ii) 2.258 5.309 March 31.509.557.977.151.688 6.544 682. 5.444 56. 2006 9.040 2.255 4.378 4.851 5. Related Party Disclosures March 31.534 2.176 2.For the Year Ended 6.578.307 5.776 5.492 2.586 77.217.198 4. 4. 2.534 7.058 490.417. 3.918 5. Segment Assets i) Banking Operations ii) Treasury Operations iii) Non Banking Operations iv) Elimination v) Total (i+ii+iii-iv) 9.744 5. Unallocated Liabilities 13.752. 2006 2007 559.920 2.301 18.881.308 6.889.632 523.553 11.651 1. Unallocated Assets 10.728.023 55. 2.509. 2005 518.776 (Rs. Associates:1.332 6.713.854 12. in millions) March 31.179 5.159.547 1.992 5.108. 2007 -66.597.348 29.042.882 39.285.962 5.895.949.151.067 6.969.285.418 225.929 2.494.726.709 336.918 641.833 7.863 2.956 2.969 6.496 533.340 588.1.104.063 15.844 March 31.238 39.744 As identified by the management and relied upon by the auditors.2 C Edge Technologies Ltd GE Capital Business Process Management Services Private Limited.920 8.853.150 6.594.122 1. 2003 478.560 March 31.229.713.912 4.650 2.852 52.171.844 4.249.805 87.629 5.965 1.241.1. Total Assets (8+9) 11.289 41.313 54. March 31.234.563 1.868 4.365 56.969. Extraordinary Profit/Loss 7.016. 2003 -43.127 260.569. 2.258 5.433 111.142 4. Andhra Pradesh Grameena Vikas Bank Arunachal Pradesh Rural Bank Chhatisgarh Gramin Bank Cauvery Kalpatharu Grameena Bank Deccan Grameena Bank Ellaquai Dehati Bank 228 . Total Liabilities (11+12) Part B: Secondary Segments- March 31.803 6.136 24.499.776.711 7.362 1.594 March 31.000 27.977.840 869.656 8. 2.058.560 4.709 1.819.841.1 Related Parties: 2.065.456.834 1.744 22.

27.07.03.04. Key Management Personnel of the Bank:1.11. 2.06.10. in terms of paragraph 5 of AS 18.2006) Shri A. 4.1.2005) Shri C.2002 to 07. 10. 26. 22. 3. 9.02.K. 15.2006) Shri T.12.01. Ltd.2003 to 31. 16. Bank of Bhutan Nepal SBI Bank Ltd. Managing Director (from 10. Batra (from 28.2002) Shri S. Other particulars are: 1. 5. 23.2006) GE Capital Business Process Management Services Pvt.3 Ka Bank Nongkyndong Ri Khasi Jaintia Krishna Grameena Bank Langpi Dehangi Rural Bank Madhya Bharat Gramin Bank Malwa Gramin Bank Marwar Ganganagar Bikaner Bank Mizoram Rural Bank Nagaland Rural Bank Parvatiya Gramin Bank Purvanchal Kshetriya Gramin Bank Samastipur Kshetriya Gramin Bank Saurashtra Grameena Bank Utkal Gramya Bank Uttaranchal Gramin Bank Vananchal Gramin Bank Vidisha Bhopal Kshetriya Gramin Bank SBI Home Finance Limited. 10. 18. Bhattacharya (from 17. 11.02. 15. 14. Radhakrishnan (up to 30.2004 to 31.06.N. Shri O. 17. Bhattacharya (from 28. Bhatt (Managing Director from 26. 14.2006 to 30. 24.06. Shri O. 19.2002 to 31.03.2002) Shri Y.12. Chairman (up to 31. 20. C Edge Technologies Ltd.2006 to 30.2006 onwards as Chairman) Shri A. Purwar. 12. 17.07.2007) Shri Ashok Kini (from 01.03. 12.03. Ltd.04.7. Managing Director Shri Yogesh Agrawal. 9. 6. Purwar (from 13.P. Bhattacharya.2005) Shri A.K. Govindarajan (up to 31. 3.05. 8.2005) Shri Yogesh Agrawal (from 10.06. S.P.1. 25.10.02.4 Related Parties with whom transactions were entered : No disclosure is required in respect of related parties which are “state controlled enterprises” as per paragraph 9 of Accounting Standard (AS) 18. 2.2006) Shri T.05.06 and from 01.2003) Shri P.Bhatt (from 26.2007) 2. 11. S. 7. SBI Home Finance Ltd. transactions in the nature of banker-customer relationship are not required to be disclosed in respect of Key Management Personnel. 21. Venkatachalam (from 28. 2. 13.2004) Shri Janki Ballabh (up to 31.2006 to 30.07. (from 28.10. Further.2002 to 31.K. 18.2005) Asset Reconstruction Company (India) Ltd (up to 31.04. 13. Bank of Bhutan UTI Asset Management Company Pvt. 16.2002) Credit Information Bureau of India Ltd (up to 31. Clearing Corporation of India Ltd Nepal SBI Bank Ltd. 4. 8.2004) 229 .

703 5.457 17. 2005 48 - - - - 848 1. Interest Paid Associates 8. March 31. Advances Associates 5. Non funded commitments Associates 7. Interest Received Associates 9. 2006 2007 Item/Related party 1. Placement of Deposit Associates 4.Transactions / Balances: (Rs. 2 7 2 230 . Management Contracts i) Associates ii) Key management Personnel * 1 1 1 Items 1 to 6 are as of March 31 and items 7 to 11 are total for the financial year. Borrowings Associates 2. in millions) March 31.253 2. * Transactions which are not in the nature of banker-customer relationship. 2004 March 31. Investments Associates 6. Receiving of services of services Associates March 31. The above disclosures are as identified by the management and relied upon by the Auditors.954 - - 117 - - 3360 105 266 - - 465 2703 400 345 198 - - - 5601 - 22 1 282 72 66 337 26 112 - 2 7 5 45 - - 481 162 - 856 17 11. 2003 March 31. Rendering of services Associates 10. Deposits Associates 3.

87 8 March 31.285 4.990 526.130 7.298.427 11.298.435 815 9. in million) b. 2004 55.214 5. Earnings per Share: The Bank reports basic and diluted earnings per equity share in accordance with Accounting Standard 20 – “Earnings per Share”.286 195 2. in millions) March 31. 2006 55.298.294 402 464 72 357 1267 2. There are no diluted potential Equity Shares outstanding during the year.298.600 6.87 8 Rs. 79.93 Rs. Earnings Per Share (Basic and diluted Annualised) 5.299 526.48 Accounting for taxes on Income: March 31.231 4742 1.82 Rs. Deferred Tax Liabilities i) Depreciation on Fixed Assets ii) Interest on Securities iii) Depreciation on Investments iv) Interest Accrued on Investments v) VRS expenses vi) Provisions relating to securities transactions vii) Depreciation of Leased Assets 5.09 Rs. 105. 2007 40.78 Rs. 2005 54.311 526. 2001. Weighted average number of shares c. March 31.87 8 September 30.647 Present value of minimum lease payments receivable Less than 1 year 263 313 313 176 89 1 to 5 years 619 447 289 205 150 5 years and above 85 40 Total 967 800 602 381 239 Present value of unearned finance income 219 159 103 68 50 4.124 526.87 8 March 31. March 31.647 1.644 526.07 Rs.350 1.647 1. 2006 2007 For the Year Ended A. 2004 March 31.570 12.647 1. 2005 (Rs. 2003 41.167 6. Net Profit (Group) (Rs.87 8 March 31.3. 152.298. 2007 63. The details of financial leases are given below. 2003 2004 2005 2006 2007 For the Year Ended Total gross investment in the leases 1.263 - 231 .647 1. in millions) March 31.223 907 6. (Rs.039 308 1. March 31. “Basic earnings” per share is computed by dividing net profit after tax by the weighted average number of Equity Shares outstanding during the year. March 31. For the Year/Half Year Ended a.298. Leases: Assets given on Financial Leases on or after April 1. March 31.152 1.745 1459 2093 - 1. 103. 2003 March 31.777 667 1.057 397 685 511 794 704 2.543 4. March 31. Deferred Tax Assets i) Provision for Non Performing Assets ii) Ex Gratia Paid under Exit Option iii) Provision for wage revision iii) Others Total B.478 5.87 8 March 31. 105. 120.804 7.639 526.

2003 38 5.455 March 31. 2007 0 37 24 186 470 717 Nil Nil Capital and Liabilities Capital & Reserves Deposits Borrowings Other Liabilities & Provisions Total Assets Cash & Balances with RBI Balances with Banks & Money at call Investments Advances Fixed Assets Other Assets Total Contingent Liabilities Capital commitments 232 .423 707 March 31.948 3 29 (Rs.455 13 13 March 31.822 16.422 71 5. Net DTA/(DTL)(A-B) 6.619 159 925 16. 2004 2.479 6. 2005 162 604 8.971 2. 2005 4.304 2981 March 31. March 31. 2003 1.438 (2381) Investments in jointly controlled entities: As required by AS 27 the aggregate amount of the assets.948 March 31. 2004 8 4.830 3.853 4.814 43 23 March 31.037 5.498 8045 March 31. March 31. 2003 40 272 1.266 1. in millions) March 31.609 4991 March 31. 2007 794 13.For the Year Ended iv) Others Total C.633 6. income and expenses related to the Bank’s interests in jointly controlled entities are disclosed as under: A: Assets & Liabilities March 31. 2006 0 72 0 96 307 475 Nil Nil 509 2 206 717 March 31.814 March 31. 2006 2007 338 1 136 475 March 31.037 2. 2005 1 4.911 152 392 9.413 3. liabilities. 2006 752 4.511 3.654 9.688 112 289 5. 2004 110 1.

248 (15) 23.854 56.640 (3.665 b) Provision for Income Tax (deferred Tax) (386) c) Fringe Benefit Tax d) Provision for other Taxes (18) e) Amount of provisions made against NPA (including Write back) 36.422 88. 2007 1650 5918 7568 3 481 484 659 659 222 6.385 14. 2006 11652 5076 9198 7530 (Rs. 2006 (Rs. September 2007 30.432 (77) 21 4.698 f) General Provision on Standard Assets in the global loan portfolio 2. in millions) March 31.189 Total 69.017 5.213 105 (923) 587 (1. 2005 March 31.086 (741) 44.866 (4.387 181 339 53 392 92 415 101 516 143 Provisions. 2004 28.291) 8 March 31.853 (Figures in brackets indicate credit) b) Floating provisions: 53.759 9.454 8.B: Income and Expenditure Income and Expenditure I.725 1. a) March 31. in millions) March 31.942 (1. Contingent Liabilities & Contingent Assets Break up of provisions: March 31. in millions) March 31.763 (1. 2003 March 31.040) 728 9 For the Year Ended a) Provision for Income Tax (Current Tax) 30.171 1. Expenditure Interest expended Operating expenses Provisions & contingencies Total III Profit 7.883 96.269) 97.593 g) Provision for investments in India 6.320 4. 2007 41.345 81 515 589 10.670 For the Year Ended a) Opening Balance b) Addition during the year c) Draw down during the year d) Closing balance March 31. Income Interest earned Other income Total II.911) 100 30 180 30. 2005 27.004 9.546 619 7.113 (775) 1.196 12 (Rs.024 5. 2006 21.345 35 (85) 57 589 77.920) k) Others (net of write back) 2.071 6. 2007 7530 631 3000 5161 233 .141 17.032 h) Provision for investments outside India i) Provision for RRBs j) Provision on other assets/ Contingencies (7.585) (39) March 31.034 4.

Guarantees generally represent irrevocable assurances that the Bank will make payment in the event of the customer failing to fulfil its financial or performance obligations. related party disclosures. currency swaps and interest rate swaps with inter-bank participants on its own account and for customers. terms of contractual obligations. Documentary credits enhance the credit standing of the customers of the Group. As a part of its commercial banking activities. based on predetermined rates. 8. These are being contested by the Group and not provided for. It does not expect the outcome of these proceedings to have a material adverse effect on the Group’s financial conditions.c) Sr. The disclosure requirements in respect of segment information. are typically amounts used as a benchmark for the calculation of the interest component of the contracts. the Group issues documentary credits and guarantees on behalf of its customers. The Group is a party to various taxation matters in respect of which appeals are pending. results of operations or cash flows. accounting for taxes on income and interest in jointly controlled entities have not been compiled for the half year ended on September 30. Currency swaps are commitments to exchange cash flows by way of interest/principal in one currency against another. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. as the case may be. 2007. acceptances. 234 . and the amount being called up. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. The Group enters into foreign exchange contracts. lease accounting. disposal of appeals. currency options. The notional amounts that are recorded as contingent liabilities. endorsements and other obligations 4 Other items for which the Group is contingently liable d) The contingent liabilities mentioned above are dependent upon the outcome of court/arbitration/out of court settlements. forward rate agreements. 2 Liability on account of outstanding forward exchange contracts 3 Guarantees given on behalf of constituents. No 1 Description of contingent liabilities and contingent assets: Items Claims against the Group not acknowledged as debts Brief Description The parent and its constituents are parties to various proceedings in the normal course of business. Further the Group has made commitments to subscribe to shares in the normal course of business. devolvement and raising of demand by concerned parties.

365.123.415.12 0.49) 44.73 (13.787.89 (17.02 4.14 11.23) 31-Mar-04 5.407.22) 122.47) 70.695.500.14 (18.806.23 0.73 (13.23 (57.639.91) 0.815.182.768.54) 0.721.189.64 5.653.17 63.957.75 (741.955.463.09 81.256.116.562.04) (5.37 (6.681.990.921.18) (18.328.24 299.99) 586.826.846.815.869.32) 17.11) (13.132.650.067.372.71 4.86 4.256.615.80 12.63 93.61) (5.59) 515.52) 236.79 706.650.43 573.334.366.77 (11.92 9.388.339.298.63 818.28) 0.00 (11.00 120.27) 797.63 (9.29 0.225.96 (1.060.271.00 (2.594.61) 20.53 724.592.377.890.808.979.89 105.70 (125.13 10.76 9.00 140.Total Increase/(Decrease) in Deposits Increase/(Decrease) in Borrowings (Increase)/Decrease in Investments (Increase)/Decrease in Advances Increase/(Decrease) in Other Liabilities & Provisions (Increase)/Decrease in Other Assets Net Cash provided by Operating activities Cash flow from Investing Activities (Increase)/Decrease in Investments in Joint Ventures/Associates Income earned on such investments (Increase)/Decrease in Fixed Assets Net Cash provided by Investing Activities 1.34) (17.858.09 (2.640.22 5.653.610.88) (280.471.36 922.988.00 (6.83 379.Opening Cash and cash equivalents .93) (54.30 (9.49 (1.93) (1.60) 589.454.19) 5.60) 308.87) 3.00 (26.00 509.93) (54.481.53 (239.22 (392.63) (2.033.89 515.66) 50.365.67) 491.79 509.570.486.54) (373.525.366.189.86 4.05 533.79) 30-Sep-07 43.628.29) 0.85 6.174.636.65 1.972.93 589.581.20 151.38 9.658.612.54 0.19) 0.41 573.23 (84.64 (6.20 0.21) (31.33 2.803.185.628.16) 737.656.71 (8.54 4.210.463.74 (130.18) (53.06 31-Mar-06 55.89) 533.365.94 5.371.697.053.432.36) 97.43 (922.12) 76.591.04 87.608.140.680.42) (540.94) 21.432.31) 55.77) (15.Closing Cash flow from Operating Activities Net Profit before taxes ADJUSTMENTS FOR: Depreciation charge (Profit)/Loss on sale of fixed assets Provision for NPAs Provision for Standard Assets Provision for Subs/JVs/RRBs Depreciation/Revaluation of Investments / Loss on revaluation of Investments Provision on Other Assets Other Provisions DRE written off during the year Interest paid on bonds (financing activity) Dividend/Earnings from Associates LESS: Direct Taxes Other adjustments Sub .638.16) 61.03 (174.679.755.55) (99.491.20 724.82 662.941.19 (204.19) (3.011.16) (182.97) 9.768.61 (877.044.682.489.683.269.31 (1.71 (7.00 36.570.20) (657.848.67) 14.37) 0.16) (333.549.977.365.686.399.319.30) (24.78) (3.40 1.854.00) (9.221.011.556.11 80.13 (491.11 4.00 9.26 (387.88) 1.312.373.55) (4.403.787.919.87 (20.760.86) (8.16 132.10 51.688.07) 221.92 (9.758.03 (385.441.37 (295.77 (97.86) 28.46 413.19) (10.32 94.231.462.23 247.979.145.497.284.55 6.567.40 (21.64 10.12 0.88) 26.00 44.08 83.32) 192.166.766.00 60.22 5.14 (3.638.628.75 4.91) (10.41 63.59 (34.976.03 5.19) 53.719.288.629.56 31-Mar-05 6.372.22 4.47 55.94) 2.955.30) 179.697.55) (11.312.00 (13.700.443.30 31-Mar-07 50.ANNEXURE C-5 SUMMARY STATEMENT OF CASH FLOW (CONSOLIDATED) (Rs in millions) For the Year ended/ Half Year Ended Cash flow from Operating Activities Cash flow from Investing Activities Cash flow from Financing Activities Cash flows on account of exchange fluctuation Net change in cash and cash equivalents Cash and cash equivalents .11) 235 .87 140.93 (9.70) 63.43 404.00 9.71 144.841.67) 110.181.913.454.856.346.00 (40.362.92) 43.696.64 (1.882.16 31-Mar-03 (187.40) 6.13) (715.49) (187.670.794.841.20) 4.63 (104.64) (12.172.12 116.

194.23) (715.472.346.71 177.12 737.869.292.23) 797.789.921.809.511.210.305.63 14.For the Year ended/ Half Year Ended Cash flow from Financing Activities Minority Interest Net proceeds/ (repayment) of bonds (including subordinated debts) Interest paid on Bonds Dividend paid Net Cash provided by Financing Activities Cash flows on account of Exchange Fluctuation: Reserves of foreign subsidiaries/foreign offices Net cash flows on account of Exchange Fluctuation Cash and Cash equivalents .15 509.71 818.Closing: Cash in hand (including FC notes & gold) Balances with Reserve Bank of India Balances with Banks & MACSN Total 31-Mar-03 69.12) (6.45 262.Opening: Cash in hand (including FC notes & gold) Balances with Reserve Bank of India Balances with Banks & MACSN Total Cash and Cash equivalents .95 515.41 286.979.56 797.305.221.768.475.41 25.093.00 17.188.435.956.365.292.90 341.201.27) 31-Mar-05 0.886.54 238.57) 110.12 247.29 (4.24) 26.16 236 .15 509.56 161.194.34 573.755.51 274.23) (7.93 251.72 253.472.62 724.51 274.531.89 16.196.407.71 177.570.107.629.12 247.06 3.95 515.45 262.09 (715.41 25.060.377.50 419.70 (5.011.20 31.06 247.05 14.32 (12.00 39.768.516.50 419.41 286.188.65) (4.412.30 (387.50 259.210.511.90 341.401.956.62 724.28 533.714.79) (2.56 3.011.41) 61.49) (8.638.23) (5.72 253.63 (9.570.890.54) (4.11) 13.20 31.89 16.757.620.107.54 238.50 (815.44) (10.194.093.00 17.399.365.89 626.194.19) (4.93 251.407.79) (387.475.00 131.683.225.701.00 7.34 573.11) (2.13) (8.13) 31-Mar-04 0.869.252.758.30 247.00 (345.077.26 30-Sep-07 0.87) 31-Mar-06 0.04) (4.23 31-Mar-07 0.00 79.43 463.372.077.28 533.638.762.231.201.63 29.85) (10.412.163.

84 521.82 18.02% 22.5 31-Mar06 105.07% 879.2 30-Sep07 * 152.31 * Ratios have been calculated on an annualised basis 31-Mar05 103.7 237 .07 15.78 105.93 15.48 18.ANNEXURE C-6 SUMMARY STATEMENT OF ACCOUNTING RATIOS (CONSOLIDATED) For the year Ending/Half Year 31-Mar31-Mar03 04 Sr No.09 2 Return on Average Net Worth (%) 20.95 31-Mar07 120.85% 706.22% 618.14% 3 Net Asset Value per Share 427. ending 1 Basic Earning Per Share 79.96% 808.

.594.567... 2006 4.05 August 23.445.85 690.. 2006 December 1. 2004 April 29...800 1. 1... 2005 June 19.. 2006 4. 2007 473.785.20 The average price has been computed based on the daily closing price of Equity Shares. of shares) Low (Rs..50 987. 2007 1...614 1..90 84.....612..033 953.. the Bank’s stock market data have been given separately for each of these Stock Exchanges.284 1.. 2005 July 19.467 408. 1........80 997.777 570.606 829.50 June 23.699 542.. 2007 August..00 The average price has been computed based on the daily closing price of Equity Shares.415.50 June 23..705...209 408....) 2005 ... The high and low prices and volume of Equity Shares traded on the respective dates during the last six months are as follows: BSE Average price for Volume on the date of low month (no...... 2006 ....70 September 28.744.. 2006 ........ 742. 2007 September..95 August 8.) Date of Low 2005 ..621.898 1....457 1. Year High (Rs... 2006 2...601.80 689.60 811..713.727 1.34 846.496 2.624.45 September 5.571....850 1.STOCK MARKET DATA FOR EQUITY SHARES OF THE BANK As the Bank’s shares are actively traded on the BSE and NSE..58 2007 .578 1.. 2007 748.. 742.31 2007 .. of shares) Average price for the year (Rs. 2006 December 1... 2005 March 27.80 March 10.. 2007 1.... 2007 1.413. of shares) Low (Rs.05 July 27...57 811......) Date of High Volume on date of high (no.81 546..) Date of High Volume on date of high (no.135 542.........67 997. of shares) Average price for the year (Rs.90 Month.10 987.497.70 584. NSE Volume on date of high (no....755.) Date of Low July.. 2007 2007 238 .50 July 31..) Date of Low Volume on date of low (no.....360.504..20 March 10.. 2004 April 29.) Date of High Low (Rs..950.) Year ended March 31 High (Rs. The high and low closing prices recorded on the BSE and NSE for the preceding three years and the number of Equity Shares traded on the days the high and low prices were recorded are stated below: BSE Year ended March 31 High (Rs. 2005 March 27.136 1..178 616....... 2006 8. 1. of shares) (Rs..500.. of shares) Volume on date of low (no.) 955..

15 November 14.......117. 14..945.361 2.188 2.85 July 31. 2008... 2008. Year October. NSE Average price for Volume on the month date of low (no.. 2.368...897. The market price was Rs.070.623.265.075. 2007 2. 2007 247. 239 .787 2... 2.30 December 19. the trading day immediately following the day on which the Central Board meeting was held to finalize the offer price for the Issue. of shares) Low (Rs...673...135 1.706. 2007 1.) Date of High Volume on date of high (no. 2.) 2..70 2. of shares) Low (Rs. 2007. 2007 .85 November 1.414.423..46 2.85 August 8. 2007 2007 December..Month.00 on the BSE and Rs.667. 29... 1...350 1.248.35 on BSE on January 15...896. of shares) (Rs. 2007 October. 2. The closing market price was Rs.. 1..85 December 11.173 1..414.285 1. 2.. 2007 September..571.85 September 2007 .207... of shares) (Rs.58 271.25 September 5.366. 2007 970. Year High (Rs.672.371.. 2007 December...60 October 19.131 1... 2.531 2. 2007 ..371.447..) Date of Low Average price for Volume on the month date of low (no.666 2. 2007 August.197 1. 2...75 December 11.) 637.. 2007 2007 The average price has been computed based on the daily closing price of Equity Shares. 2007 681....347 2.567.699 1.13 Month.234 2. 2007 2.35 November 1.2007 November..55 December 19..70 October 2007 .083 2.150..45 on NSE on January 15..116.143...594..113.. 1. 2..353.713.256. 28..862 1.. 2.) Date of Low July.051.85 October 29..667.2007 The average price has been computed based on the daily closing price of Equity Shares...368.15 on the NSE on December 31.. 2007.346.10 October 19..445.) Date of High Volume on date of high (no.75 August 23.602 1.75 July 27. the trading day immediately following the day on which the Central Board meeting was held to finalise the offer price for the Issue..68 2.85 November 2007 ..774...249. 2007 446.98 647.106. 2007 3. 2007 1..67 1.498.03 1. 2007 High (Rs.66 1.258. 2007 November. The market price was Rs.967 1.

In addition. The National Banking Group and the Rural Business Groups service the Bank’s remaining corporate customers. 2006 and 2007. and approximately 71 million accounts.45% and the Bank’s estimated market share of domestic advances was 15. deposits and foreign exchange and derivatives products. 2007 (being the last reporting Friday of December 2007). GAAP.9% market share of Indian merchandise foreign exchange transactions for foreign trade. representing 70. which differs in some respects from U. In the retail market.S. through business groups and strategic business units. based on trade data from the Directorate General of Commercial Intelligence and Statistics (“DGCIS”) the Bank had an estimated 31. The Bank organizes its client relationships. The Bank is present. There were certain changes in the Bank’s and the Group’s principal accounting policies in 2007 and as a result. 3.S. 2007. which have been prepared in accordance with Indian GAAP. were not regrouped to reflect the changes in accounting policies and investors should therefore understand that certain line items contained in the annual financial statements for 2005 are not strictly comparable to its financial statements for the years ended March 31. The Bank is also India’s largest retail bank in terms of both assets and liabilities. including tax collection and payment services. GAAP. however. with the exception of the Bank’s recognition of employee benefits under Accounting Standard 15. credit cards.2007. including asset management. 2006 have been regrouped to reflect these changes. with 10. As on December 21. the National Banking Group and the Rural Business Group. payment services and life insurance. the Bank’s estimated market share of aggregate deposits of all scheduled commercial banks in India was 15. fee and commission-based products and services.7% of consolidated net profit for the six-month 240 .0% of consolidated Group assets as on September 30. as well as noncustomer facing activities. certain line items relating to the both the Bank’s and the Group’s audited financial statements for the year ended March 31. fee and commission-based products and services. small scale industries. factoring and commercial services. The Bank’s primary strategic business groups are the Corporate Banking Group. non-fund-based products.” This Management’s Discussion and Analysis of Financial Condition and Results of Operations also includes a discussion of the Group’s financial performance which should be read together with the Group’s audited consolidated financial statements and accompanying notes.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of the Bank’s financial condition and results of operations together with the Bank’s audited unconsolidated financial statements.2 billion. the Bank’s products and services include retail lending and deposits. The Bank’s and the Group’s audited financial statements for the year ended March 31. The following discussion is based on the Bank’s unconsolidated financial statements and accompanying notes. through its subsidiaries and joint ventures.072 domestic branches and 84 international offices in 32 countries with over 100 million accounts. For further information regarding changes in the Group’s accounting policies. Overview The Bank is India’s largest bank. 2005.” The Bank is the largest constituent part of the Group by assets and net income. including state-owned enterprises. treasury operations.321. See “Business — Non-Bank Subsidiaries and Joint Ventures” and “Insurance Activities. as on September 30. 2007. based on RBI data. as on September 30.53%. The range of products offered by the Bank include fund-based products. The National Banking Group also provides financial services to the Government and the state governments. 2007 and 75. The Corporate Banking Group provides corporate banking services to many of India’s most significant corporations and institutions. as well as alternative payment products. See “Summary of Certain Differences in Accounting Policies under Indian GAAP and U. throughout India. This discussion should be read together with “Selected Financial and Operating Data” and the financial statements in accordance with prevailing practices within the banking industry in India and Indian GAAP. totalling Rs. agriculture and personal banking customers. marketing and product development. investors should see “Note on Reformatting and Regrouping” in the financial Statements contained in the audited consolidated financial statements for the year ended March 31. in diverse segments of the Indian financial sector. which have been prepared in accordance with Indian GAAP and are also included elsewhere in this Letter of Offer. including other state-owned enterprises.

7%. The industrial sector grew by 8.75 per U. 10. During fiscal year 2007. there was an increase in inflationary trends in India.0% in fiscal year 2006 and 11. 7. which operate in India. respectively. from the six-month period ended September 30.4% during the corresponding period in the previous year. 2007. 39. The Rupee appreciated by 7. financial condition and results of operations have been. which could adversely affect the Bank’s business. euro and against the Japanese yen. lending volume by Indian banks grew by approximately 27% over the last year. 9. Growth of the Indian economy As a bank with the vast majority of its operations in India. advances and total assets were Rs.068. 40. India’s GDP grew by 9.S. 2007.5 billion. the Bank’s financial position and results of operations have been and will continue to be significantly affected by general economic and political conditions in India. Canada. Rs. 2007).870.0% in fiscal year 2007.351.7% growth in fiscal year 2007. During the first half of fiscal year 2008. 2006. agricultural growth was at 3. The Bank also has subsidiaries and joint ventures outside India. the Bank’s unconsolidated deposits.0% growth in fiscal year 2006 and 2.7% against the U. Rs. with strong regional ties. 10. Factors Affecting the Bank’s Results of Operations and Financial Condition The Bank’s loan portfolio. operating both within India and internationally.” The annual average rate of inflation measured by the Wholesale Price Index was 5.4 billion. 9.1%.1 billion.5 billion. Associate Banks have a domestic network of approximately 4. This economic growth has contributed to increased demand for loans. primarily due to the increase in prices of primary articles as well as the increase in oil prices over the last several years. Mauritius.$ 247. As on September 30. while industry and services sectors grew by 9.10 per U. dollar during fiscal year 2008 (through September 30. including in Europe. For the six-month period ended September 30. See “Risk Factors — Risks Relating to India — A slowdown in economic growth.0% in fiscal year 2005.” India had a GDP growth of 7. Due to the increasing demand for loans. 2007.8.1 billion and Rs.1 billion.00 as of the end of fiscal year 2007 to Rs.3% against the U.0% to 4.197. you should consider the introductory discussion of these macroeconomic factors.867 branches. To facilitate the understanding of the discussion of the Bank’s results of operations that follows.4% in fiscal year 2007. the Group’s consolidated deposits. Nepal and Bhutan. 2006. 13. During fiscal year 2007.5% in fiscal year 2005. expected growth in retail credit in India and certain global developments.4% during fiscal year 2007 compared to 4.5% respectively. by Indian corporations and SMEs as well as increased demand for consumer products generally and consumer banking services. the Rupee appreciated by 2. 3.S. Foreign exchange reserves were approximately U. 6. from the six-month period ended September 30. influenced by economic conditions in India.3% during fiscal year 2008 (through September 29. the Bank’s unconsolidated net profit amounted to Rs. The services sector grew by 10.4% during the previous year. 30. or 53.$ 1. dollar.4 billion. the United States.00 on September 30. which did not grow in fiscal year 2005.024. The agricultural sector. 5.5 % and 10. 2007. 43.5 billion.period ended September 30. respectively. advances and total assets were Rs. the Group’s consolidated net profit amounted to Rs. The continued momentum in growth has been primarily due to the resurgence of the industrial sector and sustained growth of the services sector.5 billion and Rs. 241 . 2007.8 billion. 4.2%. and its subsidiaries and joint ventures. increased volatility of commodity prices or rise in interest rates in India could cause the Bank’s business to suffer. an increase of Rs. 2007. moving from Rs.0% in fiscal year 2006 and 9. 2007) from 5. registered 6.586.5% over the medium term. Inflationary pressures eased in the first quarter of fiscal year 2008.8 billion as on September 28. The RBI’s stated policy objective is to contain inflation in the range of 4. or 48. For the six-month period ended September 30. Industrial growth during this period was supported primarily by sustained growth in manufacturing activities.S.4% in fiscal year 2005. See also “Risk Factors — Risks Relating to India — A significant increase in the price of crude oil could adversely affect the Indian economy. an increase of Rs.S. As on September 30. The Group includes the Bank. particularly in commodity prices relating to the business activities of the Bank’s corporate customers.8%. and are expected to be.$ 1. its Associate Banks. The Rupee depreciated against the pound sterling. The average annual rate of inflation reduced to 3. 2007.S. Disruptions in the growth of the Indian economy could have a direct impact on the Bank’s consumer and corporate banking services and could lead to an increase in NPAs.0% in fiscal year 2007.3% in fiscal year 2006 and 11.

In addition.. March 3.......The impact of these and other factors and the overall growth in industry... 2007... April 14..75% 6.. December 23.. the quality of its assets. 2007.. As a result of these increases..25% 5. In response to inflationary pressures in the economy. the performance of the Indian banking sector is a critical factor to the Bank’s financial success.. April 28.. 2007 February 17..9% on a year-on-year basis... The Bank’s large and diverse customer base has allowed it to capitalise on these higher rates resulting in increased interest income....... 2007. each time to the current rate of 7... The increase in credit growth for fiscal year 2007 was driven by the continued growth in both retail credit and credit to industry....00% 5.....75% (see chart below)......... According to RBI data. August 4..00% 6.9% in fiscal year 2005.... As described above. have also raised their deposit and lending rates......... Credit to industry accounted for 35.... 2007. See “Risk Factors — Risks Relating to India — A slowdown in economic growth.. the recent growth in the Indian economy has contributed to a rise in interest rates as the Government has instituted a tighter monetary policy to combat inflation....... 2006.. over time. each time resulting in the reverse repo rate increasing from 4.. including the Bank... total deposits of all scheduled commercial banks increased by 13% in fiscal year 2005...........3% of the total expansion in non-food credit for fiscal year 2007.. there has been a 9.0% between October 2004 and July 2006. Source: RBI Statistics Rate 5..0%....8% in fiscal year 2006 and 28... 2007.25% 6.00% The RBI increased the reverse repo rate (which is the annualised interest earned by the lender in a repurchase transaction between a bank and the RBI) six times by 25 basis points...... these factors are expected to affect the overall growth prospects of the Bank. Bank credit of scheduled commercial banks grew by 30.......... the RBI also increased the repo rate six times by 25 basis points.. the value of its investment portfolio and its ability to implement its strategy..... increased volatility of commodity prices or rise in interest rates in India could cause the Bank’s business to suffer. This movement was principally due to RBI’s policy of assuring adequate liquidity in the banking system and generally lowering the rate at which it would lend to Indian banks to ensure that borrowers had access to funding at competitive rates....... The inflationary trends since fiscal year 2005 resulted in a change in the monetary policy stance..... barring intra-year periods when interest rates were higher temporarily due to extraneous circumstances... Government monetary policy is also heavily influenced by the condition of the Indian economy. which could reduce its margins and thus its net interest income..” 242 ..... During the first half of fiscal year 2008........ deposits of scheduled commercial banks increased by 23. Until fiscal year 2005..............50% 5.... Health of the Indian banking sector As the largest bank in India...... As of September 28.. January 06. agriculture and services during fiscal year 2007 has affected the banking sector and is expected to affect the level of credit disbursed by the Bank. including its ability to expand its deposit base... In addition.......... Changes in this policy could result in lower interest rates on the Bank’s asset products. high rates of inflation in the Indian economy could also impact the Bank’s ability to sustain profitable net interest margins because it could lower the demand for loans.50% 7. the RBI has..7% in fiscal year 2007.5% to 6.. 2007.... Between January 2006 and April 2007.. 2004 .. discourage diversification of the Bank’s loan portfolio or require the Bank to increase the costs of its deposits.... 18..... Banks generally followed the direction of interest rates set by the RBI and adjusted both their deposit rates and lending rates downwards until fiscal year 2005... The positive trends in each of the data points discussed above are reflected in the Bank’s strong financial performance over the past three years..... Changes in monetary policy will affect the interest rates of the Bank’s loans and deposits..8% growth in deposits while bank credit has grown by 5. there was a downward movement in interest rates....9% on a year-on-year basis while bank credit grew by 21. banks...1% in fiscal year 2006 and 23..0% in fiscal year 2007. 30. increased the cash reserve ratio (“CRR”) as follows: Effective Date October 2...

... The RBI lending rate has risen steadily since 2004.......... Increases in the RBI lending rate allow the Bank to receive higher rates of return on its loans.. Annual Report 2005-2006 and Weekly Statistical Supplements and Annual Policy Statement 2007-08.. During the last quarter of fiscal year 2007. See also “Industry Overview — Credit Policy Measures....50% 4. 2007 and the six-months ended September 30..00% 6. interest earned represented 68. 2008 (through September 30.....5%.. 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 and the reverse repo rate for the last six fiscal years.. which adversely impacted its net interest margin............00% Repo Rate 7. the Indian financial markets experienced volatility and sharp increases in interest rates and the Bank experienced a sharp increase in its funding costs... 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.. 2006................00% 6....... Further. its ability to allocate its funds to assets that provide high interest rates and its cost funding..25% 6. its income from treasury operations and its financial performance.. 6.00% 6.. Conversely.............75% 5.75% Source: RBI: Handbook of Statistics on Indian Economy...50% 6.... 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.. 2007 ......... it cannot be assured that the Bank will be able to pass through increases in funding costs to its customers.. Interest earned is determined by the amount of interest-earning assets.. 2005 ..75% 7. of the Bank’s unconsolidated operating income....................... which are much higher than its loan assets................ 2007) ...........00% 6........ First Quarter review of Policy Statement 2007-08.......8% and 71.” Since interest rates in the banking system have continually increased over the last two years and the Bank’s liabilities..... This rate is primarily determined by the RBI’s lending rate....... Any failure to pass higher funding costs to its customers will adversely impact the Bank’s net interest margin..50% 7...... In the year ended March 31.................... respectively..... 2007.... 2004 .00% 6..” Interest rates.... Recent growth in the Indian economy has led to increased demand for funding across many sectors of 243 .. See “Risk Factors — Risks Relating to the Bank’s Business — The Bank’s business is particularly vulnerable to interest rate risk and volatility in interest rates could adversely affect its net interest margin..00% 4.. increases in the RBI lending rate could affect the ability of potential borrowers to take out loans despite partly mitigating higher deposit costs........ partly to reduce the money supply and partly to reduce liquidity at Indian banks... the Bank’s net interest income has been adversely effected....... The Bank expects that this trend will continue until the yield on its interest earning assets increases to a level which will offset its increase in funding costs.... The Bank’s net interest earned is affected by a number of factors including the general level of interest rates.00% 6... 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 a non-interest bearing liabilities and equity... 2006 ....00% 6. Allocation of funds The Bank’s ability to take advantage of increases in RBI lending rates depends largely on its loan volume.....00% 6.The RBI has also instituted several prudential measures to moderate credit growth including increase in risk weights for capital adequacy computation and general provisioning for various Asset classes..... allocation of funds and costs of funding Interest earned has historically been the most significant component of the Bank’s revenue.. Bank Rate As of year ended March 31.... 2003 ....... have been re-priced.00% Reverse Repo Rate (percentages) 5...... the value of its fixed income portfolio....

as well as acquiring new IT systems. which involves retraining and reallocating staff. increasing interest rates and changes to the RBI’s liquidity and reserve requirements may increase the rates the Bank pays on its deposits. 244 . the Bank must.” Non-interest expenses The level of the Bank’s non-interest expenses impacts its profitability. 50. While the Bank has been able to reduce its portfolio of NPAs. To continue to source low-cost funding through deposits. the Bank is continuing its business process re-engineering. 2007. However. which will in turn have an impact on the Bank’s results of operations. the Bank expects that the business process re-engineering will also increase administrative costs in the short term. 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. The tax rate for the current financial year is 33. See “Industry Overview — New Initiatives in the Banking Sector — Risk Management and Basel-II. 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. See “Risk Factors — Risks Relating to the Bank’s Business — If the Bank is unable to adapt to rapid technological changes.000 per customer. Provisioning policies The Bank’s profit is adversely affected by the amount of provisions against loans. the Bank’s net interest income will decrease as well. If the volume of the Bank’s loans decreases due to a general slowdown in the economy. 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. anti-money laundering and provisioning for NPAs. competition for funding. The effective corporate tax rate to the Bank has come down from 41. but decreases to the extent that the Bank increases the proportion of international loans. the average deposit amount of the Bank’s customers was approximately Rs.25% in the financial year 2006-07.the economy. asset mix also has an effect on profitability as the Bank’s loans bear different interest rates reflecting different credit ratings. Any increase in tax rates could have a material adverse effect on the Bank’s financial results.” As a result. Corporate tax rates applicable to the Bank Corporate tax rates applicable to the Bank impact the Bank’s profitability. which generally bear a higher interest rate than other loans. In addition to a higher proportion of higher cost deposits forming part of the Bank’s funding. the Bank has and may continue to issue subordinated debt which increases the Bank’s cost of funding. which offer the Bank higher returns. The RBI can alter any of these policies at any time and can introduce new regulations to control any particular line of business. 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. increasing sophistication of customers. among other things. its business could suffer.03% in the financial year 1996-97 to 39. In addition. in order to meet the growing needs of its Retail and Corporate Banking groups and to further enhance its capital adequacy ratios. or at the same time.” This will cause an increase in capital requirements. total provisions have continued to increase due to increases in volumes of loans and changes in regulatory and internal provisioning policies. The banking system in India is expected to adopt a capital adequacy framework in line with the Basel II framework in March 2008. Staff costs comprise a significant proportion of the Bank’s administrative costs and wage inflation. This growth has contributed to the Bank’s ability to reallocate its funds from Government securities to loans. management. As on September 30. corporate governance. For example. In addition. Depositors with low balances tend to choose their banks based upon proximity and convenience rather than deposit rates. The Bank’s primary interest-bearing liability is its deposit base. See “Business — Business Process Re-engineering. as its interest-bearing assets. In addition to more stringent capital adequacy requirements. which generally bear a lower interest rate than domestic loans. the Bank may not be able to reallocate its funds to more profitable assets in the event that interest rates decrease.99%. See “Risk Factors — Further deterioration of the Bank’s NPA portfolio and an inability to improve its provisioning coverage as a percentage of gross NPA could adversely affect the price of the Equity Shares. increased competition or other factors. net interest income increases to the extent that the Bank increases the proportion of consumer loans.

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 Bank’s Business — Banking is a heavily regulated industry and material changes in the regulations which govern the Bank could cause its business to suffer and the price of the Equity Shares to decline.” Unconsolidated Results for the Six-Months Ended September 30, 2007 Compared to the Six-Months Ended September 30, 2006 Interest Earned Interest earned increased by 31.4% to Rs. 227.1 billion in the six-months ended September 30, 2007 from Rs. 172.8 billion in the six-months ended September 30, 2006. This increase was primarily the result of a 43.8% increase in the interest earned on advances and bills to Rs. 163.5 billion in the six-months ended September 30, 2007 from Rs. 113.7 billion in the six-months ended September 30, 2006. This increase was primarily caused by an increase in the prime lending rate (“PLR”) of the Bank during the period by 175 basis points as well as increases in the rates charged by the Bank above the PLR on renewal of loans and new loans. The increase in interest earned was also the result of a 26.7% increase in the Bank’s loan volume which was driven by continued growth in the Indian economy as well as increased marketing efforts by the Bank. The increase in interest earned was partially aided by a 7.6% increase in income earned on investments to Rs. 54.6 billion in the six-months ended September 30, 2007 from Rs. 50.8 billion in the six-months ended September 30, 2006. This was due to an increase in the investments held by the Bank during the period Other Income Other income increased by 25.9% to Rs. 31.8 billion in the six-months ended September 30, 2007 from Rs. 25.3 billion in the six-months ended September 30, 2006. The increase was primarily attributable to a 27.8% increase in commission, exchange and brokerage income to Rs. 20.5 billion in the six-months ended Sept 30, 2007 from Rs. 16.1 billion in the six-months ended September 30, 2006 as a result of an increase in the volume of transactions with the Government. The higher income was due to a one time profit of Rs. 2.19 billion on account of divestment of promoters’ stake by the Bank in the NSE. The remaining increase in profit was largely from the Bank’s own account trading. The Bank also saw an increase of 222.7% in the profit on sale of investment to Rs. 7.1 billion in the six-months ended September 30, 2007 from Rs. 2.2 billion in the six-months ended September 30, 2006 mainly due to higher income from equity trading. The increase was partially offset by a decrease of 52.4% in dividends from subsidiaries and joint ventures to Rs. 1.7 billion in the six-months ended September 30, 2007 from Rs. 3.6 billion in the six-months ended September 30, 2006. This decrease was due to several of the Bank’s subsidiaries and joint ventures paying an interim dividend to the Bank in the fourth quarter of the year ended March 31, 2007, a change from the typical first quarter payment. In addition, leasing income decreased by 55.6% to Rs. 308.0 million in the six-months ended September 30, 2007 from Rs. 693.0 million in the six-months ended September 30, 2006 as a result of the Bank’s decision to continue to wind down its leasing portfolio. This was partially offset by an increase of 10% in loss on revaluation of investment to Rs. 7.4 billion in the six-months ended September 30, 2007 from Rs. 6.7 billion in the six-months ended September 30, 2006 . Interest Expended Interest expended increased 44.5% to Rs. 147.4 billion in the six-months ended September 30, 2007 from Rs. 102.1 billion in the six-months ended September 30, 2006. This was primarily due to an increase in interest expended in respect of interest on RBI and inter-bank borrowings of 93.9% to Rs. 14.4 billion in the sixmonths ended September 30, 2007 from Rs. 7.4 billion in the six-months ended September 30, 2006. This increase was the result of the Bank’s greater borrowing needs as well as increased interest rates. This Bank also saw a 65.6% increase in other interest expended to Rs. 7.5 billion in the six-months ended September 30, 2007 from Rs. 4.5 billion in the six-months ended September 30, 2006 caused by an increase in interest paid on the Bank’s Tier II capital bonds issued by the Bank. Interest expended on deposits increased 39.3% to Rs. 125.5 billion in the six-months ended September 30, 2007 from Rs. 90.0 billion in the six-months ended September 30, 2006. This increase in interest expended on deposits was due to a 29.7% increase in fixed deposits, most of which were interest-bearing deposits, as well as increased interest rates over the period. Total deposits increased

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by Rs. 865.5 billion in the six-months ended September 30, 2007, while the cost of deposits (domestic) increased to 5.48% in the six-months ended September 30, 2007 from 4.51% in the six-month period ended September 30, 2006. As a result of the higher cost of funds due to increased interest rates and the additional CRR requirement, the Bank’s net interest margin decreased to 2.84% in the six-months ended September 30, 2007 as compared to 3.02% in the six-months ended September 30, 2006. Investors should note that, for the purpose of public disclosure, the net interest margin figure calculated here is based on weekly averages of interest earning assets as per Indian market convention. Operating Expenses Operating expenses saw a modest increase of 6.9% to Rs. 60.7 billion in the six-months ended September 30, 2007 from Rs. 56.8 billion in the six-months ended September 30, 2006. This increase was primarily attributable to a 13.7% increase in other operating expenditures to Rs. 20.5 billion in the six-months ended September 30, 2007 from Rs. 18.0 billion in the six-months ended September 30, 2006. Other expenditures increased as a result of an increase in mandatory deposit insurance related to an increase in deposits. Rent, taxes and lighting increased by 9.8% to Rs. 4.5 billion in the six-months ended September 30, 2007 from Rs. 4.1 billion in the six-months ended September 30, 2006. This increase reflects the overall growth of the Bank’s branch and office facilities over the period. The Bank also experienced a 3.7% increase in payments and provisions for employees to Rs. 40.2 billion in the six-months ended September 30, 2007 from Rs. 38.8 billion in the six-months ended September 30, 2006. This increase was the result of employees taking advantage of the Bank’s “Exit Option,” which is a voluntary early retirement scheme introduced by the Bank. This increase was the result of employees taking advantages of the Bank’s ‘Exit Option’ which was a voluntary early retirement scheme introduced by the Bank during the fiscal year ended March 31, 2007 and which was extended to all the non-officer bank employees during the period from September 1, 2006 to March 31, 2007. As of March 31, 2007 approximately 8,000 employees had opted for voluntary early retirement scheme. Provisions and Contingencies (excluding provisions for tax) The Bank classifies its loans in accordance with RBI guidelines. Provisions and contingencies (excluding provisions for tax) decreased 57.2% to Rs. 2.5 billion in the six-months ended September 30, 2007 from Rs. 5.7 billion in the six-months ended September 30, 2006. This decrease in provisions and contingencies (excluding provisions for tax) was primarily attributable to moderation of the Government securities yield in the one to five year range, where the bank holds a high concentration. This resulted in a decrease of provisions for depreciation on investments of 375.4% or a write back of Rs. 3.8 billion from provisions for depreciation on investments as against provision of Rs. 1.4 billion in September 2006. The decrease was partially offset by a significant increase in NPA provisions in the six-months ended September 30, 2007 to Rs. 4.9 billion from Rs. 2.8 billion in the six-months ended September 30, 2006. This increase was the result of gross NPAs increasing to Rs. 106.3 billion in the six-months ended September 30, 2007 from Rs. 97.4 billion in September 30, 2006 as a result of an increase in the Bank’s loan portfolio as well as an increasing interest rate environment. In May 2006, the general provisioning requirement for personal loans, loans and advances qualifying as capital market exposure, residential housing loans in an amount exceeding Rs. 2.0 million and commercial real estate loans was increased by the RBI to 1.0% from 0.4%. In January 2007, the general provisioning requirement for personal loans, credit card receivables, loans and advances qualifying as capital market exposure, commercial real estate and advances to non-deposit taking systemically important non-banking financial companies (“NBFCs”) was increased to 2.0%. All additional liability on account of higher general provisioning rates on existing loans was fully provided in the year ended March 31, 2007. The general provision for higher rates is now required to be provided only on incremental loans made in the six-months ended September 30, 2007. As a result, the general provision on standard assets decreased by 37.4% to Rs. 979.8 million in the six-months ended September 30, 2007 from Rs. 1,564.9 million in the six-months ended September 30, 2006. Tax Expense Total taxation expenses increased by 31.5% to Rs. 17.9 billion in the six-months ended September 30, 2007 as compared to Rs. 13.6 billion in the six-months ended September 30, 2006.

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Current income tax expenses increased by 48.41% to Rs. 17.3 billion in the year ended September 30, 2007 as compared to Rs. 11.6 billion in the six-months ended September 30, 2006 primarily because of the Bank’s provisions for expenditure items where income tax levels are uncertain, leading to an effective tax rate of 36.24% which was 225 basis points higher than the statutory tax rate of 33.99%. Net Profit As a result of the above, net profit increased by 53.2% to Rs. 30.4 billion in the six-months ended September 30, 2007 from Rs. 19.8 billion in the six-months ended September 30, 2006. Financial Condition Total assets amounted to Rs. 6,351.4 billion as on September 30, 2007 compared to Rs. 5,465.3 billion as on September 30, 2006, an increase of 16.2%. Cash and balances with RBI increased 46.0% to Rs. 462.0 billion as on September 30, 2007 from Rs. 316.4 billion as on September 30, 2006. The primary reason for this increase was a 2.0% statutory increase in CRR held by RBI to 7.0% as on September 30, 2007 from 5.0% as on September 30, 2006. Balances with banks and money at call and short notice decreased to Rs. 128.0 billion as on September 30, 2007 from Rs. 233.1 billion as on September 30, 2006. Advances for term loans increased 22.0% to Rs. 1,950.4 billion as on September 30, 2007 from Rs. 1,599 billion as on September 30, 2006. This increase was in line with the Bank’s overall increase in business and was supported by continued growth in deposits. The increase in total assets was partially the result of a 22.8% increase in government securities held to Rs. 1,438.6 billion as on September 30, 2007 from Rs. 1,171.4 billion as on September 30, 2006. The table below sets out the principal components of the Bank’s assets as on the dates indicated. As on September 30, 2007 % change 2006 (Rs. in millions, except percentages) 316,420 462,018 46.0% 233,066 127,970 (45.1%) 549,486 1,171,381 293,514 1,464,895 1,598,973 1,231,557 2,830,530 26,701 593,702 5,465,314 589,988 1,438,627 362,971 1,801,598 1,950,400 1,635,749 3,586,149 31,815 341,841 6,351,391 7.4% 22.8% 23.7% 23.0% 22.0% 32.8% 26.7% 19.2% (42.4%) 16.2%

Cash and balances with the RBI Balance with banks and money at call and short notice Total Cash and cash equivalents Government securities Other investments Total investments Term loans Other advances Total advances Fixed assets Other assets Total assets

Total liabilities and shareholders’ funds amounted to Rs. 6,351.4 billion as on September 30, 2007 compared to Rs. 5,465.3 billion as on September 30, 2006, an increase of 16.2%. Capital remained unchanged over the period, while reserves and surplus increased 15.0% to Rs. 335.9 billion as on September 30, 2007 from Rs. 292.0 billion as on September 30, 2006. The increase in reserves was primarily attributable to the retention of Rs. 47.3 billion out of the Rs. 56.0 billion, or 84.6%, of net profit earned in the period. Deposits increased 21.6% to Rs. 4,870.5 billion as on September 30, 2007 from Rs. 4,005.1 billion as on September 30, 2006 as a result of a 13.4% increase in demand deposits over the period caused by the overall growth in the Indian economy, new marketing efforts and new product initiatives. Borrowings increased 39.2% to Rs. 449.4 billion as on September 30, 2007 from Rs. 322.8 billion as on September 30, 2006. The increase in the Bank’s borrowings is primarily attributable to the Bank’s domestic and international capital fundraising activities.

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The table below sets out the principal components of the Bank’s shareholders’ funds and liabilities as on the dates indicated. As on September 30, 2007 % change 2006 (Rs. in millions, except percentages) 5,263 5,263 0.0% 292,018 335,865 14.7% 297,281 341,128 14.7% 4,005,090 4,870,544 21.6% 322,844 449,379 39.2% 840,099 690,340 (17.8%) 5,465,314 6,351,391 16.2%

Capital ................................................................................................. Reserves and surplus ........................................................................... Total shareholders’ funds ................................................................. Deposits ............................................................................................... Borrowings .......................................................................................... Other liabilities and provisions ............................................................ Total liabilities and shareholders’ funds .........................................

Unconsolidated Results for the Year Ended March 31, 2006 Compared to the Year Ended March 31, 2007 Interest Earned Interest earned increased by 9.8% to Rs. 394.9 billion in the year ended March 31, 2007 from Rs. 359.8 billion in the year ended March 31, 2006. This increase was primarily the result of a 28.9% increase in the Bank’s loan volume which was driven by the buoyant economic conditions in India as well as increased marketing efforts. The increase in interest earned was also the result of a 40.4% increase in the interest earned on advances and bills to Rs. 248.4 billion in the year ended March 31, 2007 from Rs. 177 billion in the year ended March 31, 2006. This increase was primarily the result of a 200 basis point increase in the prime lending rate charged by the Bank. The increase in interest earned was partially offset by the 17.8% decrease in income earned on investments to Rs. 114.9 billion in the year ended March 31, 2007 from Rs. 139.8 billion in the year ended March 31, 2006 which was due to (a) higher CRR requirements, (b) replacement of higher coupon bonds by lower coupon bonds (primarily Government securities) to reduce the average duration of the investment portfolio and (c) reduction of the Bank’s investment portfolio held in the assets-held-for-sale category. Also, offsetting the increase in interest earned, there was an 79.9% decrease in other interest earned to Rs. 4.4 billion in the year ended March 31, 2007 from Rs. 21.8 billion in the year ended March 31, 2006. This decrease in other interest earned during the year ended March 31, 2007, reflects a one-off receipt of interest recorded on an income tax refund during the year ended March 31, 2006. Other Income Other income decreased by 22.4% to Rs. 57.7 billion in the year ended March 31, 2007 from Rs. 74.4 billion in the year ended March 31, 2006. This decrease was primarily attributable to the loss on revaluation of investments of Rs. 16.8 billion in the year ended March 31, 2007 compared to no such loss in the year ended March 31, 2006 which was related to an accounting change in the Bank’s amortisation policy for held to maturity investments. In addition, the Bank saw a 62.7% decrease in the profit on exchange transactions to Rs. 3.7 billion in the year ended March 31, 2007 from Rs. 10.0 billion in the year ended March 31, 2006 which was caused by a one-time gain in the year ended March 31, 2006 related to the redemption of Indian Millennium Deposits which was not recorded in 2007. This decrease was partially offset by a 20.2% increase in exchange and brokerage commission to Rs. 48.0 billion in the year ended March 31, 2007 from Rs. 40 billion in the year ended March 31, 2006, as well as a 88.2% increase in income earned from dividends from subsidiaries and joint ventures to Rs. 6.0 billion in the year ended March 31, 2007 from Rs. 3.2 billion in the year ended March 31, 2006. This gain was the result of generally improved performances across all of the Bank’s subsidiaries and joint ventures Interest Expended Interest expended increased 14.9% to Rs. 234.4 billion in the year ended March 31, 2007 from Rs. 203.9 billion in the year ended March 31, 2006. This increase in interest expended was primarily due to a 136.1% increase in other interest expended to Rs. 22.1 billion in the year ended March 31, 2007 from Rs. 9.4 billion in the year ended March 31, 2006 caused by interest paid on Tier I and Tier II capital bonds. Interest

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expended in respect of interest on RBI and inter-bank borrowings also saw a 62.1% increase to Rs. 21.4 billion in the year ended March 31, 2007 from Rs. 13.2 billion in the year ended March 31, 2006. This increase was the result of greater borrowing needs as well as increased interest rates. Interest expended on deposits increased 5.2% to Rs. 190.8 billion in the year ended March 31, 2007 from Rs. 181.3 billion in the year ended March 31, 2006. This increase in interest expended on deposits was due to 14.6% increase in deposits, partially offset by an expansion of lower cost current and savings account deposits, as well as interest rate revisions over the period. Total deposits increased to Rs. 4,355.2 billion in the year ended March 31, 2007 from Rs. 3,800.5 billion in the year ended March 31, 2006. As a result of growth in the lower cost current and savings account deposits, the Bank’s net interest margin decreased to 3.3% in the year ended March 31, 2007, as compared to 3.4% in the year ended March 31,2006. Investors should note that for the purpose of public disclosure, the net interest margin figure calculated here is based on weekly averages of interest earning assets as per Indian market convention. Operating Expenses Operating expenses saw a modest increase of 0.8% to Rs. 118.2 billion in the year ended March 31, 2007 from Rs. 117.3 billion in the year ended March 31, 2006. This increase was primarily attributable to a 22.3% increase in other expenditures to Rs. 14.3 billion in the year ended March 31, 2007 from Rs. 11.7 billion in the year ended March 31, 2006. Other expenditures increased as a result of an increase in mandatory deposit insurance reflecting continued growth in the number of deposits. Rent, taxes and lighting increased 12.6% to Rs. 9.0 billion in the year ended March 31, 2007 from Rs. 8.0 billion in the year ended March 31, 2006. This increase reflects the overall growth of the Bank’s branch and office facilities over the period. These increases were partially offset by a 12.6% decrease in directors’ fees, allowances and expenses to Rs. 11.0 million in the year ended March 31, 2007 from Rs. 12.0 million in the year ended March 31, 2006. The Bank also experienced a 2.3% decrease in payments and provisions for employees to Rs. 79.3 billion in the year ended March 31, 2007 from Rs. 81.2 billion in the year ended March 31, 2006 which was a result of lower contributions made to the pension and gratuity funds for employees based on an actuarial valuation. Provisions and Contingencies (excluding provisions for tax) The Bank classifies its loans in accordance with RBI guidelines. Provisions and contingencies (excluding provisions for tax) decreased 45.1% to Rs. 24.1 billion in the year ended March 31, 2007 from Rs. 43.9 billion in the year ended March 31, 2006. This decrease in provisions and contingencies (excluding provisions for tax) was primarily attributable to a RBI-mandated accounting change whereby amortisation and redemption on held to maturity investments must now be accounted for as an operating expense instead of as an adjustment in the “Provision and Contingencies” account. This change resulted in a decrease in Provisions for Depreciation on Investments of 90.3% or Rs. 35.2 billion. The decrease was partially offset by a significant increase in NPA provisions in the year ended March 31, 2007 to Rs. 14.3 billion from Rs. 1.5 billion in the previous year. The lower provisioning in the year ended March 31, 2006 was the result of the write back of a provision in respect of a significant NPA account that became a standard asset during the period. Under the RBI guidelines issued in September 2005, banks were required to make general provision at 0.4% on standard loans (excluding loans to the agricultural sector and to small and medium enterprises). In May 2006, the general provisioning requirement for personal loans, loans and advances qualifying as capital market exposure, residential housing loans beyond Rs. 2.0 million and commercial real estate was further increased to 1.0% from 0.4%. In January 2007, the general provisioning requirement for personal loans, credit card receivables, loans and advances qualifying as capital market exposure, commercial real estate and advances to non-deposit taking systemically important non-banking financial companies (“NBFCs”) was increased to 2.0%. As a result, a general provision on standard assets increased by 45.4% to Rs. 5.9 billion in the year ended March 31, 2007 from Rs. 4.1 billion in the year ended March 31, 2006. Tax Expense Total taxation expenses increased by 22% to Rs. 30.5 billion in the year ended March 31, 2007 from Rs. 25.0 billion in the year ended March 31, 2006. Current income tax increased by 77.1% to Rs. 29.8 billion in the year ended March 31, 2007 as compared to Rs. 16.8 billion in the year ended March 31, 2006, primarily due to a disallowance of expenditure incurred on ex gratia payments to employees who exercised the Exit Option in the year ended March 31, 2007,

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leading to an effective tax rate of 39.62% which was 596 basis points higher than the statutory tax rate of 33.66%. Net Profit As a result of the above, net profit increased by 3.1% to Rs. 45.4 billion in the year ended March 31, 2007 from Rs. 44.1 billion in the year ended March 31, 2006. Financial Condition Total assets amounted to Rs. 5,665.7 billion as on March 31, 2007 compared to Rs. 4,940.3 billion as on March 31, 2006, an increase of 14.7%. Cash and balances with RBI increased 34.3% to Rs. 290.8 billion as on March 31, 2007 from Rs. 216.5 billion as on March 31, 2006. The primary reason for this increase was a 1.0% RBI-mandated increase in the CRR held by the RBI from 5.0% as on March 31, 2006 to 6.0% as on March 31, 2007. Balances with banks and money at call and short notice saw a slight decrease to Rs. 228.9 billion as on March 31, 2007 from Rs. 229.1 billion as on March 31, 2006. Advances for term loans increased 28.3% to Rs. 1,810.7 billion as on March 31, 2007 from Rs. 1,410.9 billion as on March 31, 2006 which was in line with the Bank’s overall increase in business and was supported by continued growth in deposits. These increases were partially offset by a 12.6 % decrease in government securities held to Rs. 1,182.7 billion as on March 31, 2007 from Rs. 1,352.9 billion as on March 31, 2006. The table below sets out the principal components of the Bank’s assets as on the dates indicated. As on March 31, 2007 % change (Rs. in millions, except percentages) 216,527 290,764 34.3% 229,073 228,922 (0.01%) 519,686 1,182,709 308,780 1,491,489 1,810,732 1,562,633 3,373,365 28,189 252,923 5,665,652 16.6% (12.6%) 13.3% (8.2%) 28.3% 29.5% 28.9% 2.4% 13.0% 14.7%

2006 Cash and balances with the RBI ............................ Balance with banks and money at call and short notice ..................................................................... Total Cash and cash equivalents ........................ Government securities ........................................... Other investments .................................................. Total investments................................................. Term loans ............................................................. Other advances ...................................................... Total advances ..................................................... Fixed assets............................................................ Other assets............................................................ Total assets ...........................................................

445,600 1,352,913 272,429 1,625,342 1,410,904 1,207,105 2,618,009 27,530 223,809 4,940,290

Total liabilities and shareholders’ funds amounted to Rs. 5,665.7 billion as on March 31, 2007 compared to Rs. 4,940.3 billion as on March 31, 2006, an increase of 14.7%. Capital remained unchanged over the period, while reserves and surplus increased 13.5% to Rs. 307.7 billion as on March 31, 2007 from Rs. 271.2 billion as on March 31, 2006. The increase in reserves was primarily as attributable to the retention of Rs. 36.8 billion out of the Rs. 45.4 billion, or 81%, of net income earned in the period. This retention was the result of the Bank’s low dividend payout ratio of 19%. Deposits increased 14.6% to Rs. 4,355.2 billion as on March 31, 2007 from Rs. 3,800.5 billion as on March 31, 2006 as a result of a 20.6% increase in demand deposits over the period caused by the overall growth in the Indian economy, new marketing efforts and new product initiatives. Borrowings increased 29.6% to Rs. 397.0 billion as on March 31, 2007 from Rs. 306.4 billion as on March 31, 2006. The increase in the Bank’s borrowings is primarily attributable to the Bank’s domestic and international capital fundraising activities.

250

....8 billion in the year ended March 31....... 2006 from Rs.211 14.... 6. 2005... 160..7% increase in the interest earned on advances and bills to Rs.. 324.. 16... 17.5 billion recognised in 2005.. For a more detailed discussion of these changes. This increase in interest expended was primarily due to a 5.... the Bank made certain changes to its accounting policies in the year ended March 31.................. Reserves and surplus .. 2005............4 billion in the year ended March 31.. except percentages) 5.. 2006 from Rs. 15..355.. 71........ As on March 31....5% 251 ...263 5.6% 306. 2006 was related to the replacement of high coupon investments with lower coupon investments (primarily Government securities) with the intention to reduce the average duration of the investment portfolio.. The Bank saw an increase in profit on exchange transactions to Rs.......... This increase was primarily the result of a 35.... investors should be aware that the line items relating to Other Income as well as Provisions and Contingencies from the years ended March 31.7 billion to Rs.... Miscellaneous income also saw a substantial increase of Rs. 2006 In accordance with RBI directions. Total liabilities and shareholders’ funds ......2% 3........... 2007. 2006 from Rs.... Total shareholders’ funds ..........8 billion in the year ended March 31....... the Bank saw a 39...263 0..... however.8 billion in the year ended March 31....722 13...8 billion in the year ended March 31. 2005............ 2006 from Rs...1 billion in the year ended March 31........... 2006 from Rs.. Borrowings . 2006 from Rs.3 billion in the year ended March 31....9 billion in the year ended March 31.....9 billion in the year ended March 31. 10......033 29........290 5.. 184. 2005.. loans repayable on demand and term loans reflecting the continued growth of the Bank’s business.4 billion in the year ended March 31............... 2005 Compared to the Year Ended March 31...” Interest Earned Interest earned increased by 11% to Rs... 2007 % change 2006 (Rs......6% 556................ Other liabilities and provisions ....... 2005. 2006 from Rs. 177 billion in the year ended March 31...8% 4............. 1999..1% increase in other interest earned to Rs..3 billion in the year ended March 31.. 2005 which was mainly the result of a one-time gain related to the redemption of Indian Millennium Deposits. as well as recommendations of its statutory auditors.. 5..... have not been regrouped....3 billion in the year ended March 31. The Bank saw a decrease in profits on sale of investments to Rs..665. 2005...... Increasing yields on investments in the year ended March 31.............441 312...178 307..... The decrease in income earned on investments in the year ended March 31. 2006 have been regrouped to reflect these changes...0% 271. 2006 and 2007 are not strictly comparable to those items in the year ended March 31...8 billion in the year ended March 31....... Other Income Other income increased to Rs. 2005. 5.... 2005.. 21..................976 600.. In addition......... 14.... 2006 from Rs...7 billion in the year ended March 31.. 2006 from Rs.........412 397..The table below sets out the principal components of the Bank’s shareholders’ funds and liabilities as on the dates indicated...8% decrease in income earned on investments to Rs.... 130.... Interest Expended Interest expended increased by 10.. Because of this................ Contributing factors to this increase were a higher recovery amount from written-off loan accounts as well as a one-time recognition of non-reconciled net-credit entries held on the Bank’s inter-office accounts up to March 31.........7% Capital ...... 74.....652 14........ The figures relating to the year ended March 31...... 139.....5% 276.985 13.......0 billion in the year ended March 31. 2005 reflecting a one-off interest received on an income tax refund of Rs... These increases were partially offset by the 12...940.....2 billion in the year ended March 31. 7.. 203..... 7....................423 7.. Unconsolidated Results for the Year Ended March 31... Deposits .. The figures contained in this Letter of Offer relating to the year ended March 31..800.. overdrafts...3% to Rs... 2005 which was primarily the result of increased disbursements of cash credits. see “— Changes in Accounting Policies..4 billion recognised in 2006 against Rs..............4 billion in the year ended March 31.........461 4. in millions........... 359........ 2006 contributed to the decrease in the profit on sale of such investments..

2005 as a result of the 3.9 billion in the year ended March 31. for the purpose of public disclosure the net interest margin figure calculated here is based on weekly averages of interest earning assets as per Indian market convention. 2006 from Rs.940. Balances with banks and money at call and short notice saw a modest increase of 1.3 billion in the year ended March 31. 2006 from Rs. 2006 from Rs. primarily due to higher CRR balances as a result of an increase in deposits. Total deposits increased to Rs. 2006 from Rs. 3. 2005.1 billion in the year ended March 31.3 billion in the year ended March 31. 117. The Bank saw higher general provisions for standard assets.7% to Rs. Net interest margin for the year ended March 31.0 billion in the year ended March 31.1 billion as on March 31. 229.9 million in the year ended March 31.5% increase in deposits over the same period. 2005 primarily due to provisions made towards wage in arrears form earlier years.increase in interest on deposits to Rs.7 billion in the year ended March 31. 2006 from Rs. 3. This increase was related to interest paid on domestic borrowings and Medium Term Note Programme used to increase the Bank’s international resources.670. 13.800. 2006 compared to Rs.5 billion in the year ended March 31. Directors’ fees.9% to Rs. 4. Starting in the third quarter of 2005. 2006. provision for fringe benefit tax as well as a lower provision for loan loss. 44. 171. 44.1 billion as on March 31. 43. 1. This increase reflects a payment of wage revision arrears and an increased contribution to superannuation benefits.2% to Rs. 2006.6% increase in payments and provisions for employees to Rs. Current income tax expense decreased 31. 2006 from Rs. while the cost of deposits (domestic) decreased to 4.7% from 5. 216. 2006 from Rs. 168.25% applicable until September 30. 2005.0 billion in the year ended March 31.1 billion in the year ended March 31.4 billion in the year ended March 31.4% as compared to March 31. 2005 as increases in average interest earning assets were offset by an increase in the cost of borrowings and a decrease in the yield on investments. 4. 25. an increase of 7. 2005. Financial Condition Total assets amounted to Rs.9 billion as on March 31. 2005.5% to Rs. 2005.8 billion as on March 31. 2006 as compared to Rs. 2006 from Rs. Cash and balances with the RBI increased 28. 81.4%. 69. Tax Expense Total taxation expense increased by 12. 9. 1. 2005. 225. net profit after tax increased by 2. 2005.1 billion in the year ended March 31.1% over the same period.9 billion in the year ended March 31.2 billion in the year ended March 31. Operating Expenses Operating expenses saw an increase of 16. 2005.9 billion as on March 31. leading to an effective tax rate of 27. 8. 2006 from Rs. higher investment depreciation.1 billion in the year ended March 31.5 billion in the year ended March 31.2 billion in the year ended March 31. 2005. allowances and expenses also increased 24% to Rs. This increase was primarily attributable to a 17. 12. In accordance with these guidelines.63% which was 603 basis points lower than the statutory tax rate of 33.598. 2006 from Rs. Net Profit As a result of the above.8 billion in the year ended March 31. 2006 from Rs.3 million in the year ended March 31. 181. 4. Other interest expended increased 5. 22. 2006 from Rs.4% to Rs.7 billion in the year ended March 31.5 billion in the year ended March 31.8% to Rs. Advances for term loans increased 31. Interest expended in respect of interest on RBI and interbank borrowings also saw a 223. 2005.069.4% to Rs.3% increase to Rs. the RBI increased the requirement of general provisioning on standard loans (excluding loans to the agricultural sector and small and medium enterprises) to 0. 252 . 100.3 billion as on March 31.5 billion as on March 31. 43. 2005 primarily as a result of interest paid on Tier I and Tier II capital bonds.40% compared to 0. Investors should note that. 2006 remains constant at 3. Provisions and Contingencies (excluding provisions for tax) Provisions and contingencies (excluding provisions for tax) increased to Rs. 2005.410. the Bank made general provisions of Rs.9 billion in the year ended March 31. 9. 16.8% to Rs. 2006 from Rs. 24.66%. These provisions were allowed as a deduction from taxable income during the year ended March 31. 2005. 4.1 billion as on March 31.2 billion in the year ended March 31.

.........7% to Rs. 2006 from Rs........5% 29......4% Capital ........3% 4. 3.1% increase in demand deposits partially offset by the repayment of Indian Millennium Deposits during the year ended March 31..263 5.......... Total advances ........... Reserves and surplus ................ Total Cash and cash equivalents .....625......... of net income earned in the period.... 235.....907 4....178 15. Other liabilities and provisions increased 12......4% increase in bills payable as well as a 50..342 1.............. or 80...... 2006 from Rs. 557 billion as on March 31...2% 240..... Other investments ...... 1......9 billion as on March 31......829 445..............3% to Rs......105 2.940.352....................5%) 31...........073 1..290 7.9%..843 306........ The increase in reserves was primarily attributable to the retention of Rs...4%...4 billion as on March 31....618. 3.. As on March 31...........9% 26...410..809 4.....3% decrease in Government securities to Rs.8 billion as on March 31..... 2005......0% 21..... in millions.....940.... 191...... 4.. Capital remained unchanged over the period................. 253 .. 271............. 2005 as a result of the Bank’s strategy during the period to liquidate investments in Government securities to fund loan growth as well as to meet the redemption requirements of Indian Millennium Deposits.8% 3...................................................... Balance with banks and money at call and short notice .........940...2% to Rs..2 billion as on March 31.. 2006 from Rs.....................476 3....0% increase in other liabilities................................ in millions.............8% 393.....829 4.8 billion as on March 31............221 1.......... while reserves and surplus increased 15................ 35...................... 2005 as a result of a 20............118 229..719........ 4.....................................976 12......... 2006 % change 2005 (Rs..... These increases were partially offset by a 21...... 2006 % change 2005 (Rs....... 2005. 2006 from Rs. The table below sets out the principal components of the Bank’s shareholders’ funds and liabilities as on the dates indicated............719.........913 272..352........598....598.........103 216...5% 191..530 223...............860 2....904 1....7% 7.... Other advances .......009 27...........3%) 8..207........ except percentages) 168............. except percentages) 5..... Deposits ........ 2006.. 306.8 billion as on March 31........5 billion as on March 31..............................789 556......670....461 3............745 26..... 495.263 0................885 953.. This increase in term loans was consistent with growth in the Bank’s overall loan portfolio.. Total liabilities and shareholders’ funds amounted to Rs.....600 1.7 billion.441 14.................... As on March 31....... 1...............527 28................069.......670.. Borrowings increased 59.. 2006 compared to Rs... The increase in the Bank’s borrowings is primarily attributable to the Bank’s efforts to increase its capital adequacy through offshore borrowings by way of drawdown from its Medium Term Note Programme as well as borrowings within India................... 2005.........4% 2. The table below sets out the principal components of the Bank’s assets as on the dates indicated.....3% (21........3% (17...........977 183... Total investments.........412 59......721 276......2005...5% to Rs............ Total assets ..544 1................429 1...............979 1.................... Total liabilities and shareholders’ funds .... 2006 from Rs......... Other assets.................. Government securities ......... Deposits increased 3.800.4% Cash and balances with the RBI ......7% 495.........0% 235......5 billion as on March 31........970.................800. an increase of 7.................... Borrowings ...435 251........5 billion as on March 31..........598. The increase was primarily a result of a 152..023.............. Fixed assets.290 13...4 billion as on March 31................. 2005..3 billion as on March 31... Term loans ......................8% 225. Other liabilities and provisions ....458 271........... including provisions........... Total shareholders’ funds .....

.6 billion and a Rs.1 billion decrease in investments.488) 435... Cash from operations was primarily used to fund the Bank’s expanding loan portfolio resulting in an outflow of Rs. 254 .7 billion increase in loans.. 204.1 billion in the six-months ended September 30. 27. 515. 108..893 102.6 billion increase in borrowings. The primary reasons for this increase in cash flow were a Rs. a Rs. The net cash outflow during the period was partially offset by income received from joint ventures and subsidiaries of Rs. 90.0 billion in the year ended March 31. Net cash (used in)/from investing activities . A significant source of cash for the period came from a Rs..8 billion in the year ended March 31.687 59.120 (137) 43. 2006.. 2007.600 2007 (Rs.. 56...5 billion decrease in investments as well as a Rs.. The net cash outflow during the period was also partially offset by an increase in deposits of Rs. Net cash (used in)/from financing activities . The net cash inflow during the period was partially offset by a Rs. 484.. 6..0 billion increase in deposits.. 74.229) 589..394) 3. The Bank recorded a net cash outflow from investing activities of Rs...8 billion as well as Rs.. The primary reasons for the net cash inflow during the period was an increase in deposits of Rs.988 Six-months ended September 30. 217...Liquidity The following table sets forth the Bank’s unconsolidated statement of cash flows for the years ended March 31....876 445.5 billion increase in borrowings and a Rs...3 billion as well as a Rs. 554. 2006 and 2007 and the six-month periods ended September 30.100 (6..023 (7. Net increase (decrease) in cash & equivalents Cash & equivalents.3 billion increase in borrowings. In addition. 27.4 billion increase in borrowing.. 2006 2007 Cash Flows from Operating Activities The Bank recorded a net cash inflow from operating activities of Rs...7 billion decrease in investments as a result of the Bank winding down its investment portfolio.687 (2. 1.3 billion increase in advances...325 393. 215. reflecting the Bank’s strategy of attracting new depositors to fund future advances. Cash Flows from Investing Activities The Bank recorded a net cash outflow from investing activities of Rs.666 43 393. 304.. 1..3 billion increase in deposits..846) 94. causing an increase in advances of Rs.807) (4.. 114. 130..704) 52. 2005 Net cash (used in)/from operating activities . 2.761) (2. 17.941 74. 59.6 billion increase in investments as well as a Rs. The Bank recorded a net cash outflow from operating activities of Rs. The primary reasons for the net cash inflow during the period was an inflow of deposits of Rs.010 549..7 billion worth of fixed assets relating to upgrading the interiors of the Bank’s branches as well as purchases of computers and other IT related equipment and services.. end of period (27. The Bank recorded a net cash inflow from operating activities of Rs... 2006. 52.134 72.8 billion..7 billion that was partially offset by a Rs..1 billion in the six-months ended September 30. The cash was used primarily to purchase Rs. The cash was used primarily to purchase fixed assets of Rs.4 billion...600 (247) 519.334 445. Cash was used during the period primarily to fund new loans. The Bank also recorded an outflow of Rs. 2005..221 2006 56.696 52.7 billion relating to investment in its joint ventures and subsidiaries... 456.. 362... 2007.. The Bank recorded a net cash inflow from operating activities of Rs..7 billion in the six-months ended September 30. the Bank saw a Rs.7 billion for advances..8 billion in the year ended March 31. 2006.. Effect of foreign exchange rate changes Cash & equivalents. 2006 and 2007: Year ended March 31. 595.. The primary reason for the net cash outflow was an increase in advances of Rs.988) (9.. 2005.530 519. The Bank recorded a net cash outflow from operating activities of Rs.1 billion in the six-months ended September 30. 0. 769.221 54 445. beginning of period. 16. in millions) (17.693) (42..7 billion. 6. The net cash inflow during the period was partially offset by a Rs.600 1.486 27. 2007.

Liability on account of outstanding forward exchange contracts. which saw an increase of Rs.. in billions) 38. 94.. 7..5 billion in interest payments on bonds. 68...1 billion increase in fixed assets. 17. 2005 Contingent liabilities Claims against the Bank not acknowledged as debts. 52... 8. Rs.. Net cash outflow on financing activities was Rs.. 5.8 billion of subordinated debt raised domestically.9 376..9 billion for interest paid on bonds. 3.. 2005.2 346.1 1... Guarantees given on behalf of As on March 31.4 billion in dividends paid by the Bank to its shareholders (including related taxes) as well as Rs..343. 9. The Bank recorded a net cash outflow from investing activities of Rs...7 5. 2006... The Bank recorded a net cash outflow from investing activities of Rs. 3. In addition.0 0. Net cash inflow on financing activities was Rs..0... Net cash inflow on financing activities was Rs. 94.. The outflow was primarily attributable to Rs. 2006.8 billion for dividends paid and Rs. The cash was primarily used to fund a Rs. 2... 2007.4 billion in the year ended March 31..972... The cash inflow was primarily attributable to Rs... 8..0 billion in interest paid on bonds as well as Rs..9 billion to fund the Bank’s joint ventures and subsidiaries.. This outflow was primarily attributable to an increase of Rs. 4..886.. the Bank issued Rs.. The cash inflow was primarily attributable to the issuance of domestic bonds equalling Rs... Off Balance Sheet Items The table below sets forth...6 billion in dividend paid by the Bank to its shareholders (including related taxes) as well as Rs...6 billion..8 billion in fixed assets as well as a Rs. 55....6 255 . The inflow was primarily attributable to Rs.03 1...4 billion worth of subordinated debt raised domestically by the Bank during the year. The Bank recorded a net cash outflow from investing activities of Rs. 3. 2006 2007 8. 2005.... This inflow was partially offset by Rs.9 -1 -1 1. The primary source of cash inflow from investing activities was income earned on investments in subsidiaries and joint ventures of Rs.5 billion in dividends paid by the Bank to its shareholders (including related taxes).. The inflow was primarily due to the issue of Rs.....03 1. 6. Cash Flows from Financing Activities Net cash inflow from financing activities was Rs.6 billion as well as investments in joint ventures and subsidiaries. 6 billion.7 billion in the year ended March 31.. 5 billion in the year ended March 31. 2.4 billion in dividends paid by the Bank to its shareholders (including related taxes).2 billion. 7..7 billion increase in investments in subsidiaries and joint ventures....2 As on September 30.3 0.. The cash was used primarily to fund investments in fixed assets of Rs. This inflow was partially offset by Rs. 8.. 7.7 1. the principal components of the Bank’s unconsolidated contingent liabilities..3 billion raised through the issuance of Tier II capital bonds by the Bank.5 billion in interest paid on bonds during the year as well as Rs...4 billion worth of Hybrid Tier I notes through its Medium Term Note Program... 17. 3...5 268. 7.... This inflow was partially offset by Rs.1 billion in interest payments on bonds.0 190. 32. 2006.9 billion in the six-months ended September 30. The net cash outflow during the period was partially offset by Rs. 2... Liability for partly paid investments . Net cash inflow from financing activities was Rs. for the periods indicated. The cash outflow from these activities was partially offset by an increase in income earned by joint ventures and subsidiaries of Rs..1 billion in the six-months ended September 30.....6 billion received from the Bank’s joint ventures and subsidiaries. 2006 2007 (Rs..8 billion in the year ended March 31..6 917.8 17..388.4 billion. 3. 8.3 billion. though this was partially offset by the redemption of subordinated debt in the amount of Rs...5 462. 8.. 2007.......1 0. 43.7 billion in the year ended March 31. 2007.9 billion in the year ended March 31.

.6 221..7 3...2 12.2 6..288... 256 ........ other consumer loans and capital market exposure at a risk weightage of 125... Total risk-weighted assets and contingents .45% 4..6 2. Contingent liabilities increased by 34....0 121..1 billion to Rs... primarily due to a 46.............. 2007 from Rs.... Total .594..............07% 12.......901......34% 4.. 2007 was 12.. Tier II capital adequacy ratio..... 2006.119.00% 8.1 8.............. the aggregate amount of claims against the Bank not acknowledged as debts......... 163..2 197.. liability for partly paid investments and other items for which the Bank is contingently liable are shown as an aggregate amount...7 2...461.1% increase in acceptances.31 2........1 billion as on September 30. endorsements and other obligations.......1 1..810...5 563. 2007 also include the impact of capital requirement for market risk on the held for trading and available for sale portfolio of investments.....8 9.............804.6% increase in contingent liabilities to Rs.4 2.........0% or Rs......50% 9...01% 4....9 As on September 30..... The 43....0 370........9 251...1 652..016.....028....4 4.4 3..5 252.810......886....07%..7 164..... Tier II capital . 2006 2007 (Rs...............1 2. 2... in billions) 470.2 263.... Total market risk-weighted assets .52% 11..... 2006........ 2007 include home loans to individuals at a risk weightage of 50......8 304.. 3. 2007 from Rs.886.8 billion as on March 31.594....9 billion as on March 31.8 273.7 469.... 1. endorsements & other obligations .1 196....00% 8........2 3.8 billion to Rs......00% 7...89% 12....78% and Tier-II capital adequacy of 5... Total qualifying capital ............. in billions. 2007 and September 30..88% 4..9 (1) For September 30.5 208....608..288.63% 4........0 to 75...... the risk-weighted assets as of September 30..... Other items for which the Bank is contingently liable ....74% 3....... 2006 2007 (Rs...383...41% 12. Contingent liabilities increased by Rs.... 2005 2006 2007 As of September 30....... Acceptances..........0%..0%...........85% 4. 6.. 2006.1 3...9 billion as on September 30... The risk-weighted assets as of March 31.00% 9..8 billion as on March 31. 2006 from Rs..122.78% 5.... primarily due to an increase in other items for which the Bank is contingently liable as a result of a significant increase in the number of derivative transactions for customers as well as its proprietary account.... 2005 was primarily due to a 46. 777......8 2. Capital adequacy ratios: Tier I capital adequacy ratio ........ 2...0%..50% 9..3 289...........36% 2....85%....0 229.9 4.50% 9...8 67....8 319. Total credit risk-weighted assets .04% 4... 2............8 519....... risk-weighted assets and risk-based capital adequacy ratios computed in accordance with the applicable RBI guidelines and as reported to the RBI..... Note: As on March 31.50% 9.802............4 394......... Total capital adequacy ratio .....9 222.... except percentages) Tier I capital .. 2006 2007 280.. 9.” Capital Resources The following table sets forth the Bank’s unconsolidated risk-based capital.065................. Commercial real estate exposure and investments in venture capital funds have been considered at a risk weightage of 150...... including Tier-I capital adequacy of 7....924.... As of March 31..00% The Bank’s total capital adequacy as of September 30.2005 customers ........50% 9....6 2..8% increase in liability on account of outstanding forward exchange contracts as well as a 27...0 billion as on March 31....065.......690...33% 12.5% increase liability on account of outstanding forward exchange contracts as well as a 41% increase in guarantees given on behalf of customers..9 631... See “Business — Global Markets.... Minimum Tier I ratio required by RBI Minimum capital adequacy ratios required by RBI ...7 340.1 89..288.... In accordance with RBI guidelines....

ATMs.6 1.6 billion as of September 30.0 1.0 1. are similar to those relating to other types of financial instruments. 2007. This increase was primarily the result of a 45. Other property or security may also be available as collateral to cover losses under guarantees.0 290.9 billion as of September 30.0 2. 2005. six joint ventures and 39 associates. as well as the operating risks. 251. Pursuant to the above. The credit risks associated with these products. the entire balance in investment fluctuation reserve as of the year ended March 31. general reserve or balance of profit and loss account.0 N/A 980. The consolidated financial statements for the year ended March 31. 2006 and 2007 as well as the audited consolidated financial statements for the years ended March 31. 2006. 2006 contain 21 subsidiaries.1 1. 2006. 2007 and Rs. Note: N/A = Not Available Guarantees For the six month For the year ended period ended September 30 March 31 2006 2007 2007 2005 (Rs.0 N/A As a part of the Bank’s project financing and commercial banking activities. purchases of real estate properties for branches and offices and leasehold improvements. in millions) 3. 2005 contain 16 subsidiaries. 2006 and 2007. 2006. Rs. Rs.6 billion in the six-months ended September 30.611.917. 2007 from Rs. Consolidated Results for the Six-Months Ended September 30.The RBI issued guidelines in October 2005 permitting banks that have maintained capital of at least 9. of Rs. and the financial statements for the year ended March 31.0% of the risk-weighted assets for credit risk and market risk for held for trading and available for sale categories of investments to transfer the balance in the investment fluctuation reserve to statutory reserve. Capital Expenditures The Bank’s capital expenditures primarily include expenditures for computer software and hardware. 2006. The Bank has collateral available to reimburse potential losses on the guarantees.5 billion in the six-months ended September 30.465. 36. Performance guarantees are obligations to pay a third party beneficiary where a customer fails to perform a nonfinancial contractual obligation.0 1. This increase was 257 . the financial statements for the year ended March 31. 2007 Interest Earned Interest earned increased by 32. The following table sets forth significant capital expenditures for various fixed assets for the periods indicated: Computer hardware and software Furniture and fixtures Construction projects Site preparation work for full computerisation. Financial guarantees are obligations to pay a third party beneficiary where a customer fails to make payment towards a specified financial obligation. 2007 contain 21 subsidiaries. Because the entities consolidated in the financial statements are not uniform over these three periods. six joint ventures and 49 associates. 52.2% increase in the interest earned on advances and bills to Rs.800.500. 2006. was transferred to revenue and other reserves and considered as part of the Bank’s Tier I capital.1 as of March 31.9 billion as of March 31. Consolidated Financial Statement Discussion The discussion set out below is based on the Group’s unaudited consolidated financial statements for the six-months ended September 30.630.0 340. 52.3 4.5 billion.498. seven joint ventures and 27 associates. 242. 2006 Compared to the Six-Months Ended September 30. The guarantees are generally for a period not exceeding ten years. 167 billion in the six-months ended September 30. 333. 2007 from Rs.2 1. 38.8% to Rs. Cash collateral available to reimburse losses realised under guarantees amounted to Rs.0 N/A 610. etc. the figures appearing against various items for these years are not strictly comparable.860. it has issued financial and performance guarantees to enhance the credit standing of its customers.130. 46.2 billion in the six-months ended September 30.

2007. 7. This decrease in provisions and contingencies (excluding provisions for tax) was primarily due to a moderation of the Government securities yield in the one to five year range.5% increase in other expenditures to Rs.9% to Rs. 2007. 18.6% or Rs. 2007 from Rs.024. 2007 from Rs. where the Bank holds a high concentration.2 billion in the six-months ended September 30. This increase was partially attributable to a growth of 79.99% in the six-months ended September 30.785 billion in the six-months ended September 30. 55. Other expenditures increased as a result of a 148. The Group also experienced a 5.5 billion in the six-months ended September 30.67% in the six-months ended September 30. which was extended to all the non-officer Bank employees during the period from September 1.8 billion in the six-months ended September 30.5 billion in the six-months ended September 30. Operating Expenses Operating expenses saw a modest increase of 21. Provisions and Contingencies (excluding provisions for tax) The Group classifies its loans in accordance with RBI guidelines. Interest Expended Interest expended increased by 48.4 billion in the six-months ended September 30. 150. 2006. 2006.attributable to an increase in the Group’s PLR during the period by 175 basis points as well as increases in the rates charged by the Group above the PLR on renewal of loans and new loans. The increase on interest paid on deposits was caused by a 103 basis point increase on the cost of deposits as well as a 21. 6.3 billion in the six-months ended September 30. 7.0% to Rs. 2006 to March 31. 2006.3 billion in the six-months ended September 30. 194. 8. Provisions and contingencies (excluding provisions for tax) decreased 25. This increase reflects the continued growth of the life insurance business. 2006. 134.6 billion in the six-months ended September 30. This increase was the result of greater borrowing needs as well as increased interest rates. 2006. 53.5 billion in the six-months ended September 30. 37. 7. This change resulted in a decrease in provisions for depreciation on investments of 261. 2007 as compared to 2. and (ii) an increase in the Bank and its associate Banks compensation level based on rising price levels in India.0 billion in the six-months ended September 30. 7.8 billion in the six-months ended September 30.2% to Rs.6 billion in the six-months ended September 30. 222. 2007 from Rs. The decrease was partially offset by a significant increase of 87% in NPA provisions in the six-months ended September 30. the Group’s net interest margin decreased to 2. 2007 as compared to Rs. The increase in interest earned was also aided by a 8.0% in life insurance premiums earned amounting to Rs. As a result of the higher cost of funds due to increased interest rates and additional CRR requirements. 9. The increase in interest earned was also the result of a 26. 2006.4% increase in the volume of deposits (primarily interest-bearing deposits) to Rs. 13. Interest expended in respect of interest on RBI and inter-bank borrowings also saw a 173. 2007 from Rs.9% increase in interest paid on deposits amounting to Rs. 69. 2007 from Rs.0 billion in the six-months ended September 30. 74. Other Income Other income increased by 53. 2006. This increase was primarily attributable to a 44.1% increase in payments and provisions for employees to Rs.6 billion in the six-months ended September 30. 23.2 billion from Rs. 2007 from Rs. 5.4% to Rs. 2007 from Rs. 2006.7 billion in the six-months ended September 30.7% increase in the Group’s loan volume which was driven by continued growth in the Indian economy as well as increased marketing efforts. 2007 from Rs. 108. 9. 2006 which was due to higher level of investments held by the Group during the period. 2007 to Rs. 2006 which was (i) a result of employees taking advantages of the Bank’s Exit Option which was a voluntary early retirement scheme introduced by the Bank during the year ended March 31.1 billion in the six-months ended September 30. 2006. 89. 2007 from Rs.5 billion in the six-months ended September 30. 2007 from Rs.2 billion in the six-months ended September 30. 2007 from Rs.9 billion in the previous year. 2006.8 billion in the six-months ended September 30.2 billion.6% increase in changes in insurance policies liabilities to Rs. 80. 45.4 billion in the six-months ended September 30.6% increase in income earned on investments to Rs. 2006. 4.2 billion in the six-months ended September 30.7 billion in the six-months ended September 30. 52. 258 .3% increase to Rs. This increase in interest expended was primarily due to a 43.6 billion in the six-months ended September 30.

............ Capital remained unchanged over the period...068 4....715 (39.7% 12....258. reflecting an effective tax rate of 36........ 2. 2007 as well as a 200 basis point increase in the CRR to 7....53% which was 254 basis points higher than the statutory tax rate of 33.. Other investments ........... 9. while reserves and surplus increased 16....891.... 265.. 2006.. 2007 from Rs. 7..1% to Rs.........1% to Rs.............. 2006... net profit increased by 48................ 2007 as compared to 17.801 464....3 billion as on September 30....5 billion as on September 30..490 161. Total Cash and cash equivalents ..0 billion in the six-months ended September 30. Other advances .245 5..... 9... Current income tax increased by 39..... or 86..1% 26. 27.9 billion as on September 30.231 2............ 66.. 2006.......613.4 billion as on September 30.3 billion out of the Rs..2 billion as on September 30.516 58........ Balances with banks and money at call and short notice decreased to Rs.............0% in the six-months ended September 30.. 2.................8 billion as on September 30...6 billion as on September 30........ primarily due to the Bank’s provisions for expenditure items where income tax levels are uncertain..119...99%.4% as on September 30....... Government securities .. Total assets .917 671.595 9..197.3% 31... 2006... 394....5 billion as on September 30......843. Net Profit As a result of the above...6 billion in the six-months ended September 30.068......552 1....765..... 7.0 billion as on September 30... The increase in reserves was primarily attributable to the retention of Rs... 40.0% to Rs.....068......595 7....... 161......... 2006..0% 25....211 818....7 billion as on September 30..826 453..089... in millions..... of net income earned in the period............554.. 2006..0% in the six-months ended September 30....... 656... Term loans . 2...........2% to Rs..... 400.... Other assets....... Investment in Government securities also increased 18... Total investments... 2007 from Rs. 2007 from Rs........ 568....4%.....306..258..209 2.454 44....479 20.. As on September 30..7 billion as on September 30.....974 353... Financial Condition Total assets amounted to Rs........ 2006.. 2006......... 415..5 billion in the six-months ended September 30. 2006 which was in line with the Group’s overall increase in business and was supported by continued growth in deposits..... 18........268 2.... 2007 from 5....5% 20.1%. Balance with banks and money at call and short notice . The table below sets out the principal components of the Group’s assets as on the dates indicated.....089.. an increase of 19..2 billion as on September 30...7% to Rs....4 billion as on September 30... 2006. except percentages) 415.....1% 265. The primary reason for this increase was higher CRR balances held by the RBI due to an increase in deposits of 21...2% to Rs..........6 billion as on September 30........1 billion in the six-months ended September 30...........2 billion as on September 30...... 2007 % change 2006 (Rs.1%... 2007 as compared to Rs.....2% 18........321 656.....1 billion in the six-months ended September 30...3% (32.... The increase in the Group’s borrowings was primarily attributable to the Group’s domestic and international capital markets fundraising activities..572 2.. an increase of 19..5% 28......... 2007 from Rs.101......811 1............ 2007 from Rs........... 2007 from Rs..8 billion. Advances for term loans increased 28.613....613........Tax Expense Total taxation expense increased by 26% to Rs. 76.........294 2. Cash and balances with RBI increased 58. 23.....373 2......... Total liabilities and shareholders’ funds amounted to Rs....... 2007 from Rs.. 259 ..620 39.891........... Borrowings increased 42...1% Cash and balances with the RBI ..... Fixed assets. 1765..3% to Rs. 457. 23... Total advances .... 2006............. 2007 as compared to Rs.8 billion in the six-months ended September 30............ 2007 from Rs.5 billion as on September 30... 2006..9%) 680...............068.....5%) 19..

..... Other liabilities and provisions .. 111.. 339.... Also offsetting the increase in interest earned was a 79..7 billion in the year 260 .. 5. 53...6 billion in the year ended March 31...0 billion in the year ended March 31..4 billion in the year ended March 31....8% increase in exchange and brokerage commission to Rs.... 2006 Compared to the Year Ended March 31............ 10...... 2006.. 2006 as a result of the Group’s greater borrowing needs..9 billion in the year ended March 31... except percentages) 5............. 281......7 billion in the year ended March 31... 253. 2007 from Rs.418 18.........2% increase in the interest earned on advances and bills to Rs. 2007 from Rs.... 17 billion realised in 2006........ 498....7 billion in the year ended March 31........ 12..3 billion in the year ended March 31.....517 18.. Other interest expended also increased 139.... 572..389 457. This decrease in other interest earned was primarily caused by interest on income tax refund of Rs.....148 993....0% increase to Rs. 23...724 16........3 billion in the year ended March 31..6% decrease in other interest earned to Rs.4% 399... This slight decrease was primarily attributable to the loss on revaluation of investments of Rs...... 2007 from Rs. the Group saw a 51..0% 394.024.2 billion in the year ended March 31.. 29... Total shareholders’ funds .... 22..... 2006...9 billion in the year ended March 31....4 billion in the year ended March 31..... 0.. The increase in life insurance premiums was principally the result of the Group’s strategy to grow its life insurance business..........211 9...........1 billion in the year ended March 31. 368..9%) 7...613..... 2007 from Rs....... 2007 from Rs.4 billion in the year ended March 31.. 2006 as a result of an increase in the Group’s overall deposits partially offset by an expansion of lower cost current and savings account deposits as well as interest rate reversions over the period....987 15........ 2006..... 2007 from Rs..068.8% 15. Consolidated Results for the Year Ended March 31.... This increase was primarily the result of a 200 basis point increase in the prime lending rate.... The loss on revaluation of investments in the year ended March 31........9% to Rs..... 29.......... 2007 from Rs.....7 billion in the year ended March 31......8 billion in the year ended March 31. 2007 compared to a profit of Rs......2 billion in the year ended March 31..784..1% to Rs....9% decrease in the profit on exchange transactions to Rs...1% 399...........1% Capital . 2007 % change 2006 (Rs... 15 billion in the year ended March 31..... 66... 2006... 2006........943 7.. Borrowings .. 2006..479 19..... This decrease was partially offset by a 24.263 0...3 billion in the year ended March 31....... Total liabilities and shareholders’ funds ..... In addition... 4.. Other Income Other income remained relatively unchanged at Rs. 111........ 2007 was related to an RBI-mandated accounting change in the Group’s amortisation policy for held to maturity investments.. 2006........ This increase was primarily the result of a 42.......... 2007 from Rs..... Reserves and surplus ................. 2007 from Rs...5% increase in interest on deposit to Rs..........6 billion in the year ended March 31..263 5..951 568.013........... 2006. 2007 from Rs..1 billion in the year ended March 31. 2007 Interest Earned Interest earned increased by 14...652 462..The table below sets out the principal components of the Group’s shareholders’ funds and liabilities as on the dates indicated.....773 21.. 2006........... 287... 2006..... Interest Expended Interest expended increased 20.......9% decrease in income earned on investments to Rs..... This increase was partially offset by the 12.....7% 5... 168....595 42..9 billion in the year ended March 31... as well as a 172.........4% increase in life insurance premiums to Rs.......7% to Rs.... Minority interest Deposits . As on September 30. 2007 from Rs.............. Interest expended in respect of interest on RBI and inter-bank borrowings also saw a 49.. 22. This increase in interest expended was primarily due to a 13.. in millions.... 193.........2% 1.... 259 billion in the year ended March 31.. which was the result of a decreasing yield on investments due to higher CRR requirements as well as a portion of the Group’s higher yielding bonds reaching maturity.706 (1....4 billion in the year ended March 31...........0 billion in the year ended March 31.....

1% to Rs. This increase was primarily attributable to a 142. 2006.1 billion in the year ended March 31. primarily due to the Bank’s provisions for expenditure items where income tax levels are uncertain. This accounting change resulted in a decrease in provisions for depreciation on investments of 85. Operating Expenses Operating expenses saw an increase of 13.802. 55. 2006. 1.6 billion in the year ended March 31. This increase reflects the overall growth of the Group’s branch and office facilities over the period. net profit after tax increased by 15. 2006. This increase was the result of expenses related to strong growth in the life insurance business.6 billion in the year ended March 31. 2006 to 6. 2007 from Rs.6 billion in the year ended March 31. 28. 63.8 billion from Rs.7% to Rs.1 billion as on March 31. 107.66%. 20 billion in the year ended March 31.4 billion as on March 31. 12. The increase in other interest expended was primarily due to interest paid on Tier I and Tier II capital bonds.0%. 2006 was on account of the write back or provisions. 2007 from Rs.969. 6. The primary reason for this increase was a 1. 41.2 billion in the year ended March 31. 274. These increases were partially offset by an 8. Other expenditures also increased 37. Cash and balances with the RBI increased 44.1 billion in the year ended March 31. 2007 from Rs. 2007 from Rs.5% statutory increase in CRR held by the RBI from 5. Indian accounting standards require that customer acquisition expenses be recognised in the year the policy was sold. 2007 from Rs. 21. Provisions and Contingencies (excluding provisions for tax) Provisions and contingencies (excluding provisions for tax) decreased 44.0%. 2006. 2006. 2007 from Rs.4 billion in the year ended March 31.663. 1. 262. Financial Condition Total Group assets amounted to Rs. 2006. taxes and lighting saw an increase of 13. 2006 . 2007 compared to Rs. 2.4 billion in the year ended March 31.3 billion in the year ended March 31. 2007. 2. 4. The lower amount of NPA provisions during the year ended March 31.1% to Rs. 106 billion in the year ended March 31. 2006. 2006. 47.8% to Rs.0% in the year ended March 31. Current income tax increased by 95. 2007 from Rs. Balances with banks and money at call and short notice saw a slight increase to Rs. reflecting an effective tax rate of 38.2 billion in the year ended March 31.31% which was 465 basis points higher the statutory tax rate of 33.1% decrease in government securities to Rs.1 billion.9 billion as on March 31. Net Profit As a result of the above.3 billion in the year ended March 31.961. Payments and provisions for employees also decreased 1.4% to Rs.0 billion in the year ended March 31. 11. 2006. This decrease was partially offset by an increase in NPA provisions in the year ended March 31. 12. 17.3 billion as on March 31. 2006.3 billion as on March 31. 2007 to Rs. 2007 as compared to Rs.5% in the year ended March 31. 261 .5% to Rs.151.6 billion in the year ended March 31.6% to Rs.7 billion in the year ended March 31. 2006. 2007 as compared to Rs.7 billion as on March 31. or Rs. This decrease in provisions and contingencies (excluding provisions for tax) was primarily attributable to an RBI-mandated change in accounting policies whereby amortisation and redemption on held to maturity investments must now be accounted for as an operating expense instead of as an adjustment to the Provision and Contingencies account.4 billion as on March 31. 2006.000 employees opting for the voluntary Exit Option introduced by the Bank for its employees. Rent.6% to Rs. 11. 2007 from Rs.0 billion in the year ended March 31. 311. 176. 2007 from Rs. 2007 from Rs.8 billion as on March 31.7 billion in the year ended March 31. 2007 Tax Expense Total taxation expense increased by 28.9% to Rs. an increase of 17. 36. 2006. 64. Advances for term loans increased 32. 2006. 8. 2006. 450.ended March 31.8 billion as on March 31. 200. 27. 2007 from Rs.0 billion in the year ended March 31.7 billion in the year ended March 31.011. which was not available in the year ended March 31. This increase was in line with the Group’s overall increase in business and was supported by a strong growth in deposits. 32.9% increase in expenses relating to the life insurance business to Rs. The principal cause for this decrease was more than 8.5% to Rs. 2007 from Rs. 41.1 billion as on March 31.

.....011... 2005 Compared to the Year Ended March 31...744......... Investments........762 4........6% 773....................077 274.......563 39.............. except percentages) 5.1% increase in demand deposits over the period caused by the Group’s marketing efforts aimed at increasing non-interest bearing accounts.........769 26..969..... The figures relating to the year ended March 31...661 44.891 362.... The minority interest increased 18.. Deposits increased 17.... 2006.....0% to Rs.... As on March 31....... Other assets..311 2......288 450..................... 16....................165.. 2007 compared to Rs............ 860...........8% 6. 63...108 4.... in millions........2 billion as on March 31..8 billion as on March 31....... Minority interest Deposits ..... Borrowings increased 31..362............067 425....8% 262........3 billion as on March 31.......0%... 2007 % change 2006 (Rs...917 348....... however.0% 366.. except percentages) 311.....2% to Rs...804 420........0% 369............. The increase in the Group’s borrowings was primarily attributable to the Group’s domestic and international capital markets fundraising activities...... Other liabilities and provisions increased 11................7 billion as on March 31............. 2006.... The increase in reserves was primarily attributable to the retention of Rs.......... The table below sets out the principal components of the Group’s shareholders’ funds and liabilities as on the dates indicated...The table below sets out the principal components of the Group’s assets as on the dates indicated......797 2. Total investments..................3% 14.994 1.......................362.. Balance with banks and money at call and short notice Total Cash and cash equivalents .......... Other advances ........... Borrowings ....448 (8....6% to Rs.................872............. of net income earned in the period.420 1.................151.......... an increase of 17.279...................440............. 5.............. as well as recommendations of its statutory auditors..... in millions.. 2006 have been regrouped to reflect these changes.................. Other liabilities and provisions ..................663.....0% Cash and balances with the RBI ........ Government securities ...........899 18...440.....5% 372........................................ 8.... 2007 from Rs. 53.. Fixed assets...744 17...............556 860...0%) 2..0% Consolidated Results for the Year Ended March 31.........................918 8. 2006.969........6% 573..263 0.............3%......729 17.....7 billion out of the Rs........... Total advances ..........4% 1....... 2006 as a result of a 17..... investors should be aware that the line items relating to Advances....2% 5.....570 27.........209....... 773............7 billion as on March 31............... 2006 and 2007 are not strictly 262 ...911 4.......1% 39....961.141 11.....7 billion as on March 31.....802.................... have not been regrouped. 486.........860 30.....5% to Rs..........243 6....... Total liabilities and shareholders’ funds ... 2006. 2007 % change 2006 (Rs...........357 14. 6......749 486..................151.......365 724............................ Because of this........ while reserves and surplus increased 14....... Total assets ...........6 billion as on March 31..........094 14.4% 1................9 billion as on March 31. Other investments ..5% 3.1%) 317.....2% to Rs..... 2005.965 2.............1 billion as on March 31.... Other Liabilities and Provisions.. 369.. 366.303 16................1 billion as on March 31....... Total liabilities and shareholders’ funds amounted to Rs...... 2007 from Rs...........151... Capital ......... as a result of an overall increase in the Group’s business...........732.............918 8. The figures contained in this Letter of Offer relating to the year ended March 31.1% 332........... 14...6 billion......................1% 2....762 14..210 (5..... 2006.... 2007 from Rs.. the Group made certain changes to its accounting policies in the year ended March 31..... Total shareholders’ funds ........... or 84.....2% 6..........969........... Term loans ... Capital remained unchanged over the period... 2007 from Rs....... As on March 31.. 2006 In accordance with RBI guidelines..618 31........ 6...9 billion as on March 31.6 billion as on March 31......................744 17....... Other Income as well as Provisions and Contingencies from the years ended March 31....... 2007 from Rs.................................................... 2007......... Reserves and surplus .290 32.................... 420.....263 5.

10. This increase is mainly due to a payment of wage revision arrears and an increased contribution to superannuation benefits. 2005. 12.8% increase in interest on deposits to Rs.6 billion in the year ended March 31. 2006 from Rs.5% to Rs. the Group saw a 20. The increase in life insurance premiums was commensurate with the overall growth of the life insurance business. This increase was primarily the result of a 35.3 billion in the year ended March 31. 2005. 2005. 2006 from Rs. 2006 from Rs.4 billion in the year ended March 31. 2005 caused by a greater amount of interest received on higher CRR balances. taxes and lighting to Rs.4% increase to Rs.7 billion in the year ended March 31. Miscellaneous income also increased to Rs. 10. This increase in interest expended was primarily due to an 8. 2006 from Rs.1 billion in the year ended March 31.7 billion in the year ended March 31. 2005 as a result of the strong growth of the Group’s deposits over the period. 2005 which was a result of the redemption of Indian Millennium Deposits.1999. This increase is in line with the level of these operations. 2006 from Rs. This increase was partially due to an increase in profit on exchange transactions to Rs.4 billion in the year ended March 31. 2005. 233. 7. Contributing factors to this increase were a higher recovery amount from written-off loan accounts as well as a one-time recognition of non-reconciled net-credit entries held on the Bank’s inter-office accounts up to March 31. Operating expenses relating to credit card operations and the life insurance business recorded a sharp increase of 121. 15 billion in the year ended March 31. Other interest expended increased 20.3% decrease in income earned on investments to Rs. income from life insurance premiums increased to Rs. 13. 2006 from Rs. This increase is commensurate with the Group’s overall increase in business during the period. 5. 2006 from Rs. see “— Changes in Accounting Policies.9% to Rs. 10 billion in the year ended March 31. primarily as a result of interest paid on Tier I and Tier II capital bonds.2 billion in the year ended March 31.2 billion in the year ended March 31. 11. 13.2% increase in rent. Interest Expended Interest expended increased 12. 2006 from Rs. In addition. Other Income Other income increased to Rs.7 billion in the year ended March 31. 2005.0 billion in the year ended March 31. 24. 20.3 billion in the year ended March 31. 2006 from Rs.4 billion in the year ended March 31. 6 billion in the year ended March 31.comparable to those items in the year ended March 31. 2006 from Rs. 2005. 2005. 5. 20. 259 billion in the year ended March 31. Increasing yields on investments in the year ended March 31.4 billion in the year ended March 31. 12.9 billion in the year ended March 31.7 billion in the year ended March 31. 2005. 253. 263 .5 billion in the year ended March 31.” Interest Earned Interest earned increased by 12. 191.9% to Rs.3 billion in the year ended March 31.3 billion in the year ended March 31.1 billion in the year ended March 31. 100. 215.1% to Rs. 2006 from Rs. This increase was related to interest paid on domestic and Medium Term Note Programme borrowing used to increase the Group’s capital adequacy. 176.8 billion in the year ended March 31. 86. 24. In addition. Operating Expenses Operating expenses saw an increase of 21. For a more detailed discussion of these changes. Payments and provisions for employees also increased 24.7 billion in the year ended March 31. 2005. 2006 resulted in a decrease in the profit on the sale of such investments.2 billion in the year ended March 31. 2005.2 billion in the year ended March 31. These increases were partially offset by a Rs. 2006 was related to a fall in the Group’s overall investment portfolio as a result of the maturing of higher yielding investments. This increase was primarily attributable to a 12. 11. 10. 111. 2006 from Rs. 2005.1% to Rs.2 billion decrease in profits on the sale of investments to Rs.0 billion in the year ended March 31. 193.0 billion in the year ended March 31. 2005. The decrease in income earned on investments in the year ended March 31. 2006 from Rs. These increases were partially offset by the 10. 2006 from Rs. 498. 2005. Interest expended in respect of interest on RBI and inter-bank borrowings also saw a 180. 248.0% increase in the interest earned on advances and bills to Rs. 2006 from Rs. 107. 2006 from Rs. 2005. 281. 2006 from Rs.7% to Rs.2 billion in the year ended March 31. 445.9 billion in the year ended March 31. 144.9 billion in the year ended March 31. 2005 which was primarily the result of credit growth.7% increase from interest earned on balances with the RBI and other inter-bank funds to Rs.5 billion in the year ended March 31.

..........66%.................330.........776 6.. Total Cash and cash equivalents . 32.... 320.. 2005.732. where they were allowed as a deduction from taxable income during the year ended March 31.9 billion in the year March 31........7 billion in the year ended March 31.... Other investments ..Provisions and Contingencies (excluding provisions for tax) Provisions and contingencies (excluding provisions for tax) decreased to Rs...............3 billion in the year ended March 31...1 billion as on March 31.. primarily due to the provisions made towards wages in arrears in earlier years.117 317....8% to Rs.. 2006 as compared to Rs.... Cash and balances with RBI increased 21.0% 2...... Capital remained unchanged over the period... 2005...... 6.8 billion as on March 31..........5% 2......... 2005...7 billion in the year ended March 31.011..... 2006 from Rs...........8% decrease in government securities to Rs........797 34. an increase of 10... 2005....... Net Profit As a result of the above......6% 6.3 billion in the year ended March 31.. in millions. 2006 as compared to Rs.5% to Rs. 253..... 54.....620 2..........6 billion in the year ended March 31.....375.969.. 366..0%) 1... Balance with banks and money at call and short notice .969............0 billion in the year ended March 31............. Financial Condition Total assets amounted to Rs...285............ 1..... 256.........279. 55....288 21.330.........4% to Rs...... 2005...... an increase of 10. 2005 as a result of the winding-down of the investment book to fund loan growth as well as the redemption of India Millennium Deposits............... 2005............ 2... Total liabilities and shareholders’ funds amounted to Rs. This resulted in an effective tax rate of 27..969... 2006..869...... Advances for term loans increased 34... 311.891 10....011..... This increase in term loans was consistent with the Group’s overall loan growth. 2006 from Rs..07% which was 659 basis points lower than the statutory tax rate of 33. Fixed assets.................762 30.. 6............2 264 .412 262.158 311........ primarily due to higher CRR balances as a result of an increase in deposits...9% Cash and balances with the RBI ... 2005........... This modest decrease in provisions and contingencies was partially attributable to a decrease in provision for NPAs (including writebacks) and non-creation of an ad-hoc provision for wage revision as a settlement regarding wage revision was reached during the year ended March 31....... 1..5% 253........494..........570 573. 2006 % change 2005 (Rs............... Tax Expense Total taxation expense increased by 22... 2006......7 billion as on March 31.........365 12......7% 250.......... while reserves and surplus increased 14. 27.866 3... 2006 from Rs...494....... These increases were partially offset by a 15...077 3...3 billion in the year ended March 31............. Other advances ....... Government securities .................... 26......311 (13... Total advances .....6% to Rs... Other assets.........736 39.285.619.... Balance with banks and money at call and short notice saw a modest increase of 3...... 2006 compared to Rs.... 2006 from Rs...... Term loans ........9 billion as on March 31...... 2... 2006 compared to Rs.961... Current income tax decreased by 24....9%..........0% 2. 69.... The table below sets out the principal components of the Group’s assets as on the dates indicated...9 billion as on March 31................6% 1.....5% to Rs.......563 10............3 billion as on March 31..2 billion as on March 31......5% 35........ 6......420 (15.965 26... 2005.................. 2006 from Rs......................... Total investments... 262.961...744...... Total assets ..4 billion as on March 31. 6.....4% 509.................984 332...... As on March 31........7 billion as on March 31..216 1.650 2... 21....4 billion as on March 31............503 1... 64.8 billion as on March 31................. 2006 from Rs.....8%) 289...5 billion as on March 31......285......9%........918 10.2% to Rs.......... except percentages) 256..... net profit after tax increased 1..917 32.......7% to Rs..6 billion as on March 31................ 2006 from Rs.......... 2005....

.........283 (5. 2006.365 2007 (Rs.......285...570 573....... 333.. 103.698 (11........243 7..263 5. 2007... 2006 from Rs... 5.256) 26.7% 5.... 369....969...650 (8...9 billion of which was on account of the Associate Banks.. 344.811 43........ end of period 6.. except percentages) 5... 2006 % change 2005 (Rs.........816 (9....769 62.......... Other liabilities and provisions .0% 320.......7 billion in the six-months ended September 30....8% 6... 7... Rs. 2006 and 2007 and the six-month periods ended September 30...918 10.......3 billion as on March 31.........7 billion increase in deposits.3% 656. 229....4 billion...... 46...255 366...... 662......................851 1...........3 billion out of the Rs. a Rs.. 2006.060 (2.7 billion increase in advances.... These increases in cash flow were partially offset by a Rs... Borrowings increased 61..231 Six-months ended September 30.629) (4........ primarily as a result of the Group’s domestic and international capital fundraising activities...061........ 157... in millions) 50.2 billion of which was attributable to the Associate Banks. 2005 Net cash (used in)/from operating activities . 62........5 billion as on March 31....9 billion as on March 31.... The table below sets out the principal components of the Group’s shareholders’ funds and liabilities as on the dates indicated................... 2005. The primary reasons for the increase in cash flow for the period was a Rs.........841) 61.. Net cash (used in)/from financing activities .........5 billion increase in investments. 28.... The increase was primarily a result of an 81. The primary reasons for the increase in cash flow for the period was a Rs......5% to Rs.... 2005 as a result of a 20.............053 5.......869 773.. 55.061..............3% to Rs..........347) 3.........804 14.8 billion increase in advances..0 billion increase in deposits..570 2006 55.........2 billion increase in borrowings.......... 2005...2 billion as on March 31.......432 (18.................. 2006 and 2007: Year ended March 31. as well as a Rs..8 billion as on March 31.....210 515..769 818...365 680.3% increase in bills payable..... 361.......2 billion of which was attributable to the Associate Banks.. 5... 82 billion increase in borrowings.. Borrowings ....5% 325.....654) 110...... The increase in reserves was primarily attributable to the retention of Rs... 30.....638 509.. Total shareholders’ funds ... Minority interest Deposits ........440.3% increase in demand deposits over the period partially offset by the repayment of Indian Millennium Deposits during the year ended March 31.... 54...3 billion in the six-months ended September 30... or 83..................9% Capital ........ Other liabilities and provisions increased 17....... Rs............749 61. 656... 2006 from Rs.104 573.....295 369.. of net income earned in the period.......365 724. Rs. 2005.....041 14... Reserves and surplus ....303 9. Rs...792) 49... The Group recorded a net cash inflow from operating activities of Rs.. in millions..... Deposits increased 7.....3 billion... Rs.518 372...... As on March 31. 2006 from Rs.. 139...... Exchange Fluctuation Cash Flow .......372 247 509. 265 ....556 17.7%.. as well as a Rs....... 2005...... Total liabilities and shareholders’ funds ..................... 773......629 (387) 573....... Cash & equivalents...407) 724.. 122.....440........ Rs....8% to Rs..........billion as on March 31..6 billion of which was attributable to the Associate Banks........ Cash & equivalents.067 14. Net cash (used in)/from investing activities .1 billion as on March 31.. as well as a Rs... 140..... 2006 2007) Cash Flows from Operating Activities The Group recorded a net cash inflow from operating activities of Rs......3% 13..5 billion of which was attributable to the Associate Banks. These increases in cash flow were partially offset by a Rs...0 billion of which was attributable to the Associate Banks.......776 6...6 billion cash inflow from the liquidation of investments relating to the sale of Government securities. Rs...5% 229.......... of which was attributable to the Associate Banks. 385........ Liquidity The following table sets forth the Group’s consolidated statement of cash flows for the years ended March 31...263 0.. beginning of period.. 43.

145. 2006. The Group recorded a net cash inflow from operating activities of Rs. 55.The Group recorded a net cash inflow from operating activities of Rs. 2005.4 billion dividend paid by the Group to its shareholders.8 billion in the six-months ended September 30. 11. The primary reasons for the increase in cash flow for the period was an increase in deposits to Rs. 2007. 299. The cash was used primarily to fund an increase of fixed assets by Rs. The Group recorded a net cash outflow from investing activities of Rs. 8. 1. 4.8 billion in interest payments on capital bonds as well as a Rs.8 billion and interest payments on capital bonds in the amount of Rs. 15. The primary reason for the increase in cash outflow for the period was a Rs. 110. 8.8 billion in the year ended March 31. The Group recorded a net cash outflow from investing activities of Rs. These increases in cash flow were partially offset by an increase in advances to Rs. 62. 1. These figures were partially offset by an increase in income earned from the joint ventures and associates of Rs. This was partially offset by repayment of capital bonds up to an amount of Rs.4 billion. 0.4 billion for advances. 9.2 billion in interest payments on capital bonds.7 billion increase in deposits.5 billion as well as a Rs. Cash Flows from Investing Activities The Group recorded a net cash outflow from investing activities of Rs. 9. The Group also saw a Rs. 5.4 billion in the year ended March 31. The Group also increased its investment in joint ventures and associates by Rs. The Group recorded a net cash inflow from operating activities of Rs. 877. 922. Cash was used during the period primarily to fund new loans. The Group recorded a net cash inflow from financing activities of Rs. 706.6 billion in the year ended March 31.7 billion in the year ended March 31.6 billion decrease in investments. 2 billion. The increase in cash outflow was partially offset by income earned on investments in joint ventures and subsidiaries of Rs.6 billion increase in fixed assets. A significant source of cash for the period came from a Rs.1 billion in fixed assets. 9.5 billion. 2.1 billion in the six-months ended September 30. The primary reason for the increase in cash flow for the period was the issuance of domestic capital bonds in the amount of Rs. 8.9 billion in the six-months ended September 30. The primary reason for the cash outflow for the period was an increase in fixed assets of Rs. 79. 2007. The primary reasons for this increase in cash flow were a Rs.3 billion decrease in investments. 12. causing an increase in advances of Rs.8 billion. The Group recorded a net cash outflow from investing activities of Rs. 379.8 billion in the six-months ended September 30. This outflow was primarily attributable to an increase of Rs.9 billion which is commensurate with the Group’s strategy of increasing and diversifying its loan portfolio. 11. 2007.6 billion.7 billion in the year ended March 31. 2007.2 billion. The primary reason for the increase in cash flow for the period was the issuance of domestic capital bonds in the amount of Rs. These increases in cash flow were partially offset by Rs.1 billion worth of capital bonds. The inflow was primarily due to the issuance of Rs. driven by higher interest rates provided by those banks. 6. as well as the Associate Banks.4 billion paid by the Group to its shareholders as well as Rs. Cash Flows from Financing Activities The Group recorded a net cash inflow from financing activities of Rs.2 billion as well as a Rs. 49. The Group recorded a net cash outflow from investing activities of Rs. 2006. 2006. 61. 134. 18.1 billion increase in deposits and a Rs.6 billion dividend paid by the Group to its shareholders. The cash was primarily used to fund a Rs.8 billion. 5. 2005. 50. 94. 266 . 2006. The increase in deposits was a result of an increase in deposits at the Bank.2 billion in the year ended March 31.8 billion increase in fixed assets. 3 billion increase in cash used to invest in joint ventures and associates.6 billion in the year ended March 31. 8. Net cash inflow on financing activities was Rs. These increases in cash flow were partially offset by a dividend of Rs. 2007. 9.4 billion. 657. Cash used in operations was primarily to fund the Group’s expanding loan portfolio resulting in an outflow of Rs.

. 2005 2006 2007 As of September 30.. 2006 2007 10......0 0.879... Contingent liabilities increased by 33.1 172.... the principal components of the Group’s consolidated contingent liabilities...7 113.565..2 billion at September 30....... 2006... 2007 from Rs.. or Rs 983.......... risk-weighted assets and risk-based capital adequacy ratios computed in accordance with the applicable RBI guidelines and as reported to the RBI. This was partially offset by the repayment of existing subordinated debt in the amount of Rs....5 1.5 449... to Rs 3.8 1.8 0....0 267 .... 3.... Acceptances......0% or Rs....6%. 2006..4 467..8 372..565..5 billion for dividends paid by the Group to its shareholders and Rs.. Off Balance Sheet Items The table below sets forth...... except percentages) Tier I capital ................... 2005 was primarily due to a 51...0 489..0 619.1 2.... 10...01 1.1 232. 5.2% increase in guarantees given on behalf of constituents... 2.. 261.....4 1.... Liability for partly paid investments .......8 2..7 7... 7..........914. 4...... The cash inflow for the period was a result of a Rs...3 billion in the year ended March 31.............565.836.....2% increase in other items for which the Group is contingently liable as a result of a significant increase in the number of derivative transactions for customers as well as for its proprietary account............2 Contingent liabilities increased by 201.867. primarily due to a 40.... 2... 26.8 3......930.0 489..930. Liability on account of outstanding forward exchange contracts.149.914....824....5 300. The outflow was primarily attributable to Rs.8 billion at year ended March 31..... 59. 6....212....587...6% increase in guarantees given on behalf of constituents..... Tier II capital . As on March 31....5 586..........0 billion in interest payments on capital bonds..0 117...........017..........5% increase in liability on account of outstanding forward exchange contracts as well as a 39...7 646..9 0... in billions.....1 374.... As of March 31..7 771.....4 418....4 billion as well as a Rs.9 10..476.. Total qualifying capital .....731. The 45.. 2006.....5 299.5 4...5 billion at the year ended March 31........ 19. Net cash outflow on financing activities was Rs.2 billion issuance of domestic subordinated debt........ endorsements & other obligations .165...... Capital Resources The following table sets forth the Group’s consolidated risk-based capital....7 208.3 6........4 billion in the year ended March 31.....4 As on September 30.0 372. 2005 Contingent liabilities Claims against Group not acknowledged as debts...6 667.5 billion dividend paid by the Group to its shareholders. Total ......896..... 2006 2007 (Rs.. 2007 from Rs....930......8 560...............0 3....... Guarantees given on behalf of customers ...017.. primarily due to a 955. 2006 2007 (Rs.....402.8 billion in the year ended March 31.. 2005...... Other items for which Group is contingently liable ....Net cash inflow on financing activities was Rs.......5 billion to Rs..1 233......5 435..731..7 billion at September 30...6 1..9% increase in liability on account of outstanding forward exchange contracts and 43. Total risk-weighted assets and contingents ....8 789........5 2..9 352....5 18.......6 billion..0 325.3% increase in contingent liabilities to Rs........... 2...... 2006 from Rs.1 2........4 billion in the year ended March 31.............1 231..7 5. 7.....4 6...4 544..4 1.2 2. for the periods indicated...8 3............ in billions) 40.

. Total capital adequacy ratio ....... 2006 and 2007..... In accordance with the RBI guidelines.31% 12..85% 12......” In addition. The RBI mandates nearly all accounting policies for Indian banks...... the provision for “advances” has been regrouped for the year ended March 31.... 2006 have been regrouped to reflect these changes. Advances The provision for restructured standard asset has been retained as a provision during the year ended March 31. This is a change from the previous policy of netting the provision off against “advances. Minimum Tier I ratio required by RBI Minimum capital adequacy ratios required by RBI . Other Liabilities and Provisions The figures contained in “Other Liabilities and Provisions” have been altered to reflect the corresponding changes in the way the Group now accounts for its advances.50% 9...... 2007...96% 4. the “Profit and Loss” account has been aligned per the corresponding items in “assets” and “liabilities” in the balance sheet for the 268 . Changes in Accounting Policies In 2007.88% 12... including Tier I capital adequacy of 7.50% 9... The year ended March 31. The risk-weighted assets at March 31.00% 12........ Critical Accounting Policies The Bank and the Group’s Associate Banks operate in a highly regulated industry...... 2007.0%... 9. As a result..... however.50% 9..84%.00% 8.. other consumer loans and capital market exposure at a risk weightage of 125.13% 3... the Group’s annual financial statements for the year ended March 31.05% 4.96% and Tier II capital adequacy of 4... the Group made certain changes to its principal accounting policies as per the direction of the RBI as well as recommendations from its statutory auditors......55% 3.. was not regrouped to reflect the changes in accounting policies and investors should note that the Group’s 2005 annual financial statements are not strictly comparable to the years ended March 31......07% 4.00% 9... As a result of these policy changes..... A discussion of the Bank’s and the Group’s principal accounting policies can be found in Schedule 17 of their respective audited financial statements. 2007 include home loans to individuals at a risk weightage of 50.0%.. there is no impact on net profit for the year.00% 7. Because of this.00% 8.. 2007 also include the impact of capital requirement for market risk on the held for trading and available for sale portfolio. For further information regarding changes in the Group’s accounting policies.. 2007 and September 30.. Investments The Group had previously followed a policy of amortizing the premium for securities deemed “held to maturity” as an adjustment to the “Provision and Contingencies” account. In addition. the riskweighted assets at September 30..16% 4....31% 3..36% 4.84% 4.. investors should see “Note on Reformatting and Regrouping” contained in the audited consolidated financial statements for the year ended March 31. 2006.. This is a change from the previous policy of retaining these items as a liability.0 to 75. 2007..00% The Group’s total capital adequacy at September 30. Tier II capital adequacy ratio.. 2005...55% 4.88%.94% 13.. While this adjustment may cause particular line items to not be strictly comparable.. Commercial real estate exposure and investments in venture capital funds have been considered at a risk weightage of 150. The Group has since changed this policy by charging the amortisation amount as well as marked to market losses on transfer of securities from the “available for sale” to “held to maturity” category as a deduction to the “Profit on Revaluation of Investments” under the “Other Income” account.....0%.50% 9.....Capital adequacy ratios: Tier I capital adequacy ratio ....50% 9.. claims received under the Deposit Insurance and Credit Guarantee Corporation and Export Credit Guarantee Corporation have been netted off against “advances” during the year ended March 31.... management believes that it does not have the scope to materially affect the Bank’s or the Group’s results of operations through estimates or judgments in the application of its policies..... 2007 was 12.

the balance sheet as well as the cash flow statement figures for the year ended March 31. 2006 were regrouped.year ended March 31. 269 . 2007. Because of these changes.

98 64687.42 18310.93 1.12 2700.28% 92. Pension.26 5877.72 0.36 35373.00 4845.62 3399.19 1351. Results and Capital Employed Particulars 1.93 9307.37 (not annualised) 10641.44% 1.16 1775.06 1688. 10 per share) Reserves excluding Revaluation Reserves (as per balance sheet of previous accounting year) Analytical Ratios (i) Percentage of shares held by Government of India (ii) Capital Adequacy Ratio (iii) Earnings Per Share (EPS) (in Rs.96 (not annualised) 28. Investment Depreciation.49 3470.22 5257.81 38849.57 2734.06% 211959678 40.2007 31.42 1049.03.86 nil 121.99 12535.43 698.82 10902.30 30772.95 6216.27 623.12.29 (not annualised) 45.85 4487.94 2409.00 7590.12.92 8399.31 0.45% 0.85 4487.27% Unaudited Segment-wise Revenue.21 146. 15.26 0.26 59.12 3965.00 8410.71 1005.61 41251.01 2.89 0. NPA Ratios (a) Amount of gross non-performing assets (b) Amount of net non-performing assets (c) % of gross NPAs (d) % of net NPAs (v) Return on Assets (Annualised) Public Shareholding .00 7201.04 700.87 27898.94 35260.60 6413.49 27644.11 628.89 -220.94 31298.08 12894.68 1542.34 9999.03.48 16213.51 0.72 4221.38 1762.80 6364.86% 20.2006 (Reviewed) (Reviewed) (Reviewed) (Reviewed) 18434.2007 (Audited) 44536.52 3271.81 24804.83 33982.31 23152.86% 57.26 nil 12.75 775.15 3495.12 0.94 3313.03.30 3048.68 2349.80 0.88 2442.93 120.66 678.53 (not annualised) 121.12 0.86 nil 45.43 444.00 2442.53 1574.00 11464.30 3048.2007 31.57 1524.2007 31. 2007 have been arrived at after considering provisions for NPAs.09 (Rs.10 931.24 8732.86 nil 12.58 3890.12. Leave Encashment.75 20001.60 3115.) (a) Basic and diluted EPS before Extraordinary items (net of tax expense) (b) (iv) Basic and diluted EPS after Extraordinary items 18.28 8706.96 (not annualised) 63.91 92.30 41691.79% 211959678 40.31 526.06 297. 10.18 52567.2006 (Reviewed) (Reviewed) 40103.13 7920.43 19455. 13.57 -1307.20 10739. 2007 with the Stock Exchanges in accordance with Clause 41 of the Listing Agreement: UNAUDITED FINANCIAL RESULTS FOR THE PERIOD ENDED DECEMBER 31.00 2584.79 -504.26 0.54 15364.68 32516.55 5823.03 4648.83 2963.12 526.91 17801.99 4541. 16.00 1688.00 2506.69% 1.07 (not annualised) 10.64 27898.00 4541.00 2855.92 5033.19 2719.46 37858.31 1046.81 9446.56 31082.53 (not annualised) 96.98 1985.02 11268.61 439.04 2697.05 45260.31 6919.00 5033.26 0. 14.62 3399.51 6396.74 -438. 6.87 698.48 5174.17 2798.06 526.92 45260.94 9363.77 1852.87 526.04 4845.04 526.34% 86.31 27898.00 4402.99 4541.60 13818.13 8718.00 1065.81 0.37 526.32 53984.15% 1.85 1233.17 5946.34 7929.610.79 34765.40 7404.64 964.2007 (Audited) 55575. 12.89 23735.86 11268.00 3048.42 17045.28 1458. 8.63 6267.41 nil 28. 5.85 1131.30 41691.26 26141.51 933.73 8824.07 7828.30 30772.41 nil 80.45 4402.71 881.13 1171.27% 74.78% 211959678 40.28 23436.64 1595.00 1808.94 455.27% 35.89 12801.74 981. Income Tax (after 270 .55 117.24 (not annualised) 20.57 0.56 4347.27 154.26 13611.92 (not annualised) 9902.06 0.64 0.88 1922.2007 31.92% 1.64 526.27 3147. The working results for the period ended December 31.92 (not annualised) 57.64 1429.00 6619.09 9-month period ended 31.01 2.87 526.71 51792.61 32.30 30772.87 0.12.49 27644.26 59.27% Year ended 31.50 1100.45% 0.82 11823.2006 (Reviewed) (Reviewed) (Reviewed) (Reviewed) 12666. Segment Revenue (income) (a) Banking Operations (b) Treasury Operations Total Less : Inter Segment Revenue Net Income from Operations Segment Results (Profit before tax) (a) Banking Operations (b) Treasury Operations Total Add / (Less) : Unallocated Profit before Tax Less : Income Tax (including FBT) Net Profit Capital Employed (Segment Assets .29 (Rs.12.00 0.43 0. 9.86 3048. 3.2006 (Reviewed) (Reviewed) 14345.88 31072.51 13731.31 7892.2007 (Audited) 38454.in crores) State Bank of India (Consolidated) Quarter ended 9-month period ended 31.22 (not annualised) Year ended 31.2006 31.35 36832.04 3359.81 15163.48 2855.12.21 39002.60 3115.30 36680.83 1822.52 7932.31 1046.01 9123.2007 31.46 5610.30 27117.20 2911.12 24528.70 661.34 9547.73 41251.in crores) Year ended 31.36% 120.of which provisions for Non-performing assets Exceptional Items Profit from Ordinary Activities before tax (7-8-9) Tax expenses Net Profit from Ordinary Activities after tax (10-11) Extraordinary items (net of tax expense) Net Profit for the period (12-13) Net Profit after Minority Interest Paid-up equity share capital (Face Value of Rs.07 8992.56 2.27 623.31 2383.48 68376.89 8734.66 7684.40 3956.22 (not annualised) 80.71 3122.61 9271.13 11704.6) (before Provisions and Contingencies) Provisions (other than tax) and Contingencies (net of write-back) .Segment Liabilities) (a) Banking Operations (b) Treasury Operations Total Quarter ended 31.62 3399.20 56000.52 5908.30 27117.13 3697.71 2682.50 0.34 6619.31 0.30 41691.14 4925.38 6007.22 13574.15% 1.28 -1233.94 31298.16 3.00 10812. Interest Earned (a) + (b) + (c) + (d) (a) Interest/discount on advances / bills (b) Income on Investments (c) Interest on balances with Reserve Bank of India and other inter bank funds (d) Others Other Income TOTAL INCOME (1+2) Interest Expended Operating Expenses (i) + (ii) (i) Employee cost (ii) Other Operating Expenses TOTAL EXPENDITURE (4) + (5) (excluding Provisions and Contingencies) OPERATING PROFIT (3 .19 15364.84% 211959678 40.56% 0. 7. Gratuity.23 24839.98 1985.44% 1.67 1808.54 2946.54 519. (Segment Assets and Liabilities are as on March 31 of the previous year ) 1.92 4855.15 9445.641.12.73% 12. 2. Bonus.28% 34.45 3293.89 21.00 3794.00 1574.69% 1.21 1065.12.12.35 2121.41 7994.27% 78.94 31298.00 6570.29 86.48 2029.86 3048.65 1709.81 2194.91 2839.11 8591.96 0.2006 31.72 2.25 6806.79 nil 11.24 (not annualised) 9902.05 2329.00 7684.07 (not annualised) 92.58 26724.58 49650.04 4845.66 526. of shares .12 13985.46 9404.16 3.11 8493. 2.2007 31.26 3659.29 (not annualised) 90.00% 211959678 40.56 11285.21 1065. 17.30 3580.78 10597.91 2839. 11.63 46677.18 12699.48 24380.79 nil 11.46 5.30 36680.68 4736.12.18 10456.42 526.77 8918.12. 4.55 25624.86 31072.00 10268.MATERIAL DEVELOPMENTS State Bank of India filed its limited review financial results for the nine months ended December 31.62 6570. 2007 Particulars State Bank of India Quarter ended 9-month period ended 31.67 1808.12.64 17782.98 7590.53 14392.No.73% 12.68 1099.37 (not annualised) 34.14 4192.24 2716.Percentage of Shareholding 9998.74 804.06 24528.86 37554.02 12120.

39. v) Rs. During the period ended December 31. Infused additional Capital of i) Rs. should be adjusted immediately against opening balance of revenue reserves and surplus.77 crores in State Bank of India International (Mauritius) Ltd. the impact of which has not been ascertained: The management’s response is detailed in Note 2 above. the Bank has carried out the reclassification of the same for the period ended December 31. This revision provides the Bank with another option to charge additional liability arising upon the first application of the standard as an expense over a period up to five years. 9400 crores) from ‘Available for Sale’ (AFS) to ‘Held for Maturity (HTM) category. 6.200 Equity Shares (59. the Central Board of the Bank and the Board of State Bank of Saurashtra (SBS) have accorded approval for merger of the SBS with the SBI. The Bank is currently examining both the alternatives. 2007. During the period ended December 31. The matter has further been referred to RBI and the Government for approval. 4. 9081. iv) Rs.00 crores in SBI Cards & Payment Services P. as per-revised Accounting Standard 15.57 crores (corresponding previous period — Rs.28%. (IOIB) Mauritius. Ltd. 2007. ‘ Accounting for Retirement Benefits in the Financial Statements of Employers’.67 crores (corresponding previous period — Rs. 120. Banks are required to reflect the amortisation of premium held in the HTM category by an adjustment to the ‘Interest Earned’. resulting in a net revaluation loss of Rs. 7. the Bank has raised US $ 225 million (Rs. Based on the clarification issued by RBI on July 11. 74. 5. Ltd. the entire share holding of RBI in State Bank of India aggregating 314.84% to 62. 2. 2007.339. 915. 8. Necessary approval is awaited. from 56. 121.73%).73 crores). 2007. 59. 2007. 2007. As per this Standard. the Bank had accounted for amortisation of premium in respect of securities included in the ‘Held to Maturity’ (HTM) category as an adjustment against ‘Other Income’. the Bank has shifted SLR investments having aggregate Face Value of Rs. 225. 2007.86 crores) as Hybrid Tier I Capital in the form of Perpetual Non Call 2017 Bonds. Accounting Standard 15 “Employee Benefits” (revised 2005) is effective for accounting periods commencing on or after December 7. 3. 271 . 297. Wealth Tax. As the merger process has not yet been crystallised. there is no impact on the Bank’s quarterly results as on December 31. iii) Rs. 9. Fringe Benefit Tax (FBT) and other contingencies on an estimated basis. the difference (as adjusted by any related tax expense) between the transitional liability and the liability that would have been recognised at the same date. The impact of the Accounting Standard 15 “Employee Benefits” (revised 2005) has not been ascertained for transitional provision and current period(s). During the period ended December 31.84 crores in State Bank of India (California). which was notified on October 17.. The qualification made by the Statutory Central Auditors in their review report on the financial results of the quarter ended 30th June 2007 and the resolution thereof : Non compliance with AS 15 (revised 2005). During the period ended December 31. 10 each has been transferred to the Central Government. In terms of the RBI circular dated April 20. During the period ended December 31. 2007.00 crores in SBI Life Insurance Co. with a face value of Rs.adjustment for deferred tax). The Institute of Chartered Accountants of India has made a limited revision to this provision. 2007. the Bank has made following investments in its foreign / domestic subsidiaries for the purpose of funding business growth: Increased stake in Indian Ocean International Bank Ltd. ‘Accounting for Retirement Benefits in the Financial Statements of Employers’. the Bank has made adequate provisions as per pre-revised Accounting Standard 15. 2006.90 crores in State Bank of India (Canada).. Accordingly. ii) Rs. This change in accounting procedure does not have any impact on the net profit for the period(s) under review. In the interregnum. 2007.

55 crores Approval from RBI for the purchase of these shares is awaited.80 2. The above results have been approved by the Central Board of the Bank on January 24. 2008 2.437. 12. wherever necessary. K. As per RBI guidelines. IFC. P.368.40 2.00 2. Japan. a public notice is being issued jointly by Export-Import Bank of India ("EXIM"). ("GTFL"). Number of Investors’ Complaints received and disposed of during the quarter ended December 31. FIM Bank.10. 2008 January 18. State Bank of India has entered into a business co-operation agreement with Mizuho Financial Group. Recent stock market data Week end prices of Equity Shares of the Bank for the last four weeks on the BSE and NSE are as below: Week Ended on Closing Rate BSE (Rs. (iii) Disposed of during the quarter: 1016. BHATTACHARYA Managing Director & Group Executive (Corporate Banking) O. off-shore fund raising. Previous period figures have been regrouped / reclassified. Accordingly. aggregating to 91% of the total shareholding of GTFL. 2008 January 11. The agreement aims to harness the expertise of both SBI and MCB in the areas of loan syndications. at an aggregate price of Rs. to conform to current period classification. IFC. Mizuho is Japan's third-largest bank and has a presence in India with two offices in Mumbai and New Delhi. trade finance. The Bank has decided to issue Equity Shares on a rights basis to the existing shareholders for augmentation of Capital. Malta ("FIM") in Global Trade Finance Ltd. derivative products and infrastructure co-financing. 2008 January 4. BHATTACHARYYA Managing Director and Chief Credit & Risk Officer T. BHATT CHAIRMAN January 25.30 2. 520. 2008 and were subjected to Review by the Auditors. (iv) Unresolved at the end of the quarter: 64. Mumbai Date: 24.390.2008 Recent Transactions State Bank of India has informed the Stock Exchanges that: "State Bank of India intends to purchase shareholding of Export-Import Bank of India ("EXIM"). Washington ("IFC").) S.405.40 2. Malta ("FIM") and SBI regarding the sale/purchase of shares subject to necessary permissions. (ii) Received during the quarter: 1004. consents and/or approval".434.80 2. a prior Public Notice of 30 days is required to be given by the sellers and buyer(s) before effecting the sale or transfer of the ownership of shares or transfer of control.80 272 .30 2. 11.407.) Closing Rate NSE (Rs.01. Washington ("IFC") and FIM Bank. 2007: (i) Pending at the beginning of the quarter: 76.362. S.388.

535 679.355 Fixed 273 .282 Coupon 6.a.75% Various dates from December 8.868 16.DESCRIPTION OF CERTAIN INDEBTEDNESS Statement of Borrowings as on September 30. 2019 Outstanding amount 50 32.000 17.511 Floating 2 Foreign Currency Loans 47.999 Rate of Interest Fixed Fixed 8. 2007 April 12.5bps 364 days to 5 years Various dates from June 2.25 to 14% d 45 62.45% to 11.441 204.917 Fixed Fixed 6.439% after swap LIBOR +120 BPS on semi annual basis Coupon 7.25 years Perpetual with call option to the Issuer after 10 years 1 day Total Tier I Capital ( C) Subordinate Debts 1 Domestic 25.14% after swap LIBOR +137 BPS on semi annual basis 9.159 Perpetual non call 10.246 Fixed 7.50% 0-1% Duration 364 Days 1-3 days Date of Borrowings September 1.90% p.a Monthly Instalment of Rs 50. 6.a Various from 4. 1 2 3 a Refinancing by Small Industries Development Bank of India Refinancing by National Housing Bank Refinancing by National Bank for Agriculture and Rural Development Others Total Domestic Borrowings (A) Overseas Borrowings 1 Bond Issues (Excluding Hybrid Tier-I Bonds) 62.5% p. 2005 to September 28.015 Various rates Term Ranging from 1 day to 1 year Total (Overseas Borrowings) (B) Tier I Capital Overseas 386. 2007 LIBOR+38bps to LIBOR+73.500 Fixed 6.5% p.50% to 4.25 years Perpetual non call 10 years 1 Day February 2007 June 2007 Perpetual with call option to the Issuer after 10.No. in millions) S. 2004 to February 15. 2007 (Rs. 2007 Various dates 5 Years Bullet Particulars Domestic Borrowings Term Borrowings CBLO (secured borrowing) Borrowing from Other Institutions/ Agencies 6.217 Floating LIBOR+12 bps to LIBOR+39 bps Bullet principal repayment. 2007 Repayment Terms Bullet Bullet b c 5. 2007 September 28. 2001 to September 17.00 crores on 1st of Every Month 3 Years December 23. interest at half yearly intervals Bullet 3 Money Market Borrowings 277.50% 87 months to 180 months 8 Years Various dates from January 1. 2000 Overseas Total Subordinate Debts (D) Grand Total (A+B+C +D) 289 204.636 Fixed 3. 2005 Various Terms and Date Bullet Half Yearly due on January 31 and July till July 31.

The Bank issued four bid bond guarantees aggregating Rs. its Subsidiaries and there are no defaults. 1949.9 million. The financial impact is to the extent of Rs.e. The matter is pending. claiming damages from the Bank and alleging that the Bank did not extend the period of the letter of credit. The suit is yet to be listed for hearing. Except as described below. over dues to banks/ financial institutions. suits or criminal or civil prosecutions. erroneous methods of applying interest etc. 350 million. The financial impact on the Bank is to the extent of Rs. 3. The Bank had issued a letter of credit in favour of Birla Ericsson Opticals Limited. criminal or civil prosecutions. there are no outstanding litigation. Vikas Co-operative Bank has filed this civil suit (No. 2886/2005) against the Bank in the Bombay High Court. 274 . pursuant to the RBI’s order under section 35A of the Banking Regulation Act. The present suit has been filed by SECC. 83/2003) against the Bank before the Civil Court. 255. 4. The Bank has contended that the action was taken in pursuance of the Reserve Bank’s directions. Cases filed against the Bank Civil Cases State Bank of India 1. 5. its Directors. defaults in dues payable to holders of any debentures. Criminal litigation. 337. proceedings or tax liabilities against the Bank. The Bank in turn filed an application in the Bombay High Court for stay of the abovementioned suit. which was granted. The suit was filed against the Bank alleging that wrong interest rates. Consequently. The suit is presently pending for framing of issues. 255. i. non payment of statutory dues. Further. though. proceedings initiated for any economic or civil offences and disciplinary action taken by SEBI or stock exchanges. bonds or fixed deposits. The financial impact on the Bank is to the extent of Rs. The Bank had issued a letter of credit in favour of Vindhya Telelinks Limited. below the above mentioned monetary threshold. Shin Etsu Chemical Company (SECC) has filed this civil suit (No. The Bank has contended that it did not extend the letter of credit in accordance with Article 41 of Uniform Customs and Practice for Documentary Credits 500 and therefore the Bank would not be liable to pay any damages. were adopted by the Bank. RFA (OS) 108/1997) against M/s HFCL BEZEQ Limited and the Bank in the Delhi High Court. Shin Etsu Chemical Company (SECC) has filed this civil suit (No. 250 million or more. defaults against banks/ financial institutions. The Telecom Authority has filed this suit (No. The above mentioned monetary threshold has been applied to the material subsidiaries as well. 2007.OUTSTANDING LITIGATION AND DEFAULTS Details of litigation or proceedings.9 million. Surat. disclosed have been restricted to those involving a claim of Rs. which is a beneficiary of the letter of credit. non-payment or past due statutory dues. labour proceedings or tax disputes) against the Bank. The Bank has contended that it did not extend the letter of credit in accordance with Article 41 of Uniform Customs and Practice for Documentary Credits 500 and therefore the Bank would not be liable to pay any damages. pertaining to the Bank and the material subsidiaries have not been subjected to the abovementioned threshold limits. M/s Godhoke & Sons has filed this suit (No 598/1998) against the Bank in the Bombay High Court. The financial impact on the Bank is Rs. its Directors and its Subsidiaries. which have not been disclosed by the Bank. issued by the Bank (including past cases where penalties may or may not have been awarded) which would materially affect the business of the Bank. 273 2. 2887/2005) against the Bank in the Bombay High Court. claiming damages from the Bank and alleging that the Bank did not extend the period of the letter of credit. The present suit has been filed by SECC. which is a beneficiary of the letter of credit. defaults. against or by the Bank or its Subsidiaries. The suit is yet to be listed for hearing. there has not been a consolidation of the litigation or proceedings pending.5 million. the disclosure has been restricted to litigation relating to the Bank's material subsidiaries. The present suit has been filed by Vikas Co-operative Bank claiming damages for its suspension from the clearing house. there is outstanding litigation (in the nature of suits. subsidiaries which contribute in excess of 10% of the Bank’s consolidated net assets or net income as of March 31. against the Bank and by the Bank. Further.

namely M/s HFCL BEZEQ Limited. The suit is pending. The appeal is pending before the Appellate Tribunal. expenditure on exempted income. The cases have been filed for claiming damages from 275 . 237/2001) against the State Bank of Hyderabad before the Debt Recovery Tribunal. Mr. Mukesh Kumar has filed two consumer cases (Nos. State Bank of Hyderabad 1. Kolkata. The appeal has been filed for the assessment year 2004-2005 with regard to income on cash basis.2 million. 2. Hyderabad. The drawee of the bill has been referred to BIFR under the Sick Industrial Companies Act and the proceedings of this suit have been kept in abeyance. Aggrieved by the said order the beneficiary has filed an appeal before the Delhi High Court which stands dismissed. The appeal has been filed for the assessment year 2003-2004 with regard to income on cash basis. Hyderabad. The drawee sought extension of time for making payment by sending instructions through the Bank for payment which also indicated co-acceptance of the bills by the Bank. The claim of the drawee was subsequently rejected by the Bank. Tax Cases State Bank of Hyderabad 1. expenditure on exempted income. The applicant.million in favour of the President of India (the beneficiary) acting through the Telecom Authority at the request of the First International Bank of Israel (FIBI) which had provided the counter guarantee. However. Criminal Cases State Bank of Patiala 1. Patna. The financial impact is to the extent of Rs. Hyderabad.4 million.9 million. The Income Tax Department has filed this appeal (No. DCM Limited has paid the complainant the whole amount along with interest. 12/2005 and 23/2005) against the Bank before the National Consumer Disputes Redressal Commission. Action on the part of the Bank staff was in connivance with the drawee of the bill which is tantamount to fraud for which a complaint has been lodged by the Bank with the CBI. The complainant has made an application to withdraw the complaint but the same has not been permitted by the court. 125/H/06) against the State Bank of Hyderabad before the Income Tax Appellate Tribunal. The appeal is pending before the Appellate Tribunal. the beneficiary has moved an application for condonation of delay and restoration of the appeal. M/s Gloand (Far East) Pte Limited (drawer) has drawn seven bills on Kothari Global Limited (drawee) which were accepted. Consumer Cases 1. The appeal is pending before the Appellate Tribunal.145. The financial impact is to the extent of Rs. etc. 274 million which has been provided for. moved the Delhi High Court for an order against the beneficiary and obtained an order in its favour. 1217. broken period interest. 1000 each in respect of DCM Limited for which the State Bank of Patiala was acting as a debenture trustee. 363. The Income Tax Department has filed this appeal (No. 3.A. Although FIBI acknowledged the claim no payment was made on account of an injunction order issued by the Delhi High Court. broken period interest. The Income Tax Department has filed this appeal (No. 1175/H/05) against the State Bank of Hyderabad before the Income Tax Appellate Tribunal. The Bank of India has filed this civil suit (O. etc. 2008. The appeal has been filed for the assessment year 2002-2003 with regard to broken period interest and loss on revaluation of nostro accounts. The Bank of India has filed the present suit claiming recovery of the bill amount along with interest. The financial impact is to the extent of Rs. The beneficiary invoked the guarantees and the Bank in turn claimed the invocation amount from FIBI. The financial impact is to the extent of Rs. 348/2000) against the Managing Director of the State Bank of Patiala and DCM Limited before the Judicial Magistrate. The complainant filed the present complaint for non-payment of 90 non convertible debentures amounting to Rs. Mr Madan Gopal has filed this criminal complaint (No. which is pending and the next date of hearing is April 4. 2. 39/H/07) against the State Bank of Hyderabad before the Income Tax Appellate Tribunal.

The matter is pending at the evidence stage. The Bank has filed two cases (Nos. 194/2003) against SPIC Petrochemicals Limited before the Debt Recovery Tribunal. 273/2006) against Alpine Industries Limited before the Debt Recovery Tribunal. 170 million was recovered. Mumbai. The present case has been filed by the Bank for recovery of its dues. The case has been filed by the Bank for recovery of its dues. Mumbai. The financial impact is to the extent of Rs.8 million.9 million. 240/2004) against Swati Diamonds Limited before the Debt Recovery Tribunal. The financial impact is to the extent of Rs. 2006 has also been issued. 276 . Delhi. 2.740.8 million. The case has been decreed in favour of the Bank and the same is under execution.the Bank alleging deficiency of service on the Bank’s behalf on payments relating to the FCNR deposits held by the complainant jointly with another person. 689. The case has been filed by the Bank for recovery of its dues. 1. The case has been decreed in favour of the Bank and a Recovery Certificate dated July 2003 has also been issued. 599/2001) against Lloyds Steel Industries Limited before the Debt Recovery Tribunal. The Defendant has made an application before the BIFR under the Sick Industrial Companies Act. The case has been filed by the Bank for recovery of its dues. Kolkata. Mumbai. 350. The Defendant has made an application before the BIFR under the Sick Industrial Companies Act.A. 5. 412/2001) against Tunga Bhadra Industries Limited in the Andhra Pradesh High Court. 152/2000) against Ahmedabad Manufacturing and Calico Printing Company Limited before the Debt Recovery Tribunal. The Bank has filed this case (No. R. 4. 4. The case has been filed by the Bank for recovery of its dues. 2. The matter is pending at the hearing stage. The financial impact is to the extent of Rs. The financial impact is to the extent of Rs. The financial impact is to the extent of Rs. O. The Bank has filed this case (No. The case has been decreed in favour of the Bank. 6.6 million. The Bank has filed this case (No. The matter has been posted for hearing in February 2008. 7. 8. The financial impact is to the extent of Rs. Andhra Pradesh High Court who took possession of the Defendant’s properties of which some portions were auctioned and an amount of Rs. The Bank has filed this case (No. The case has been decreed by the court in favour of the Bank for Rs. 1. The case has been filed by the Bank for recovery of its dues.010 million. Mumbai. The Bank has filed this case (No. The total financial impact of both cases is to the extent of Rs. 1985 and the same is pending. The case has been filed by the Bank for recovery of its dues.6 million.3 million. 23/1995) against Weston Electronics Limited before the Debt Recovery Tribunal. 215/2000 and 451/2000) against Western India Shipyard Limited before the Debt Recovery Tribunal. The Bank has filed this case (No. The financial impact is to the extent of Rs. The case has been filed by the Bank for recovery of its dues. O.P. The Bank has filed this case (No. 352. 10. The case has been decreed in favour of the Bank and a Recovery Certificate dated February 2.9 million. The case has been decreed in favour of the Bank and the same is under execution. 2. Ahmedabad.801. The matter is pending at the hearing stage.837 million. The appeal is pending. Cases filed by the Bank Civil Recovery Cases 1. 1. The case was filed by the Bank for recovery of its dues.080 million. 186/2004) against the Mining & Allied Machinery Corporation Limited before the Debt Recovery Tribunal. 1985 and the same is pending. 3. The Bank has filed this case (No. The case has been filed by the Bank for recovery of its dues. 428.A.516 million. 521. 9. The Defendant has filed an appeal against the decree passed in favour of the Bank. The court appointed the Official Liquidator. The financial impact on the Bank is to the extent of Rs. Chennai. The financial impact is to the extent of Rs. Delhi. The Bank has filed this case (No. 419/1998) against Altos India Limited before the Debt Recovery Tribunal. The Defendant is under liquidation.

296. 18. 15. 17. 209/2001) against M/s Raj Solvex Limited before the Debt Recovery Tribunal. The Defendant’s case is also pending before the BIFR/AAIFR which had allowed the Bank to proceed against the Defendant before the Debt Recovery Tribunal against which the Defendant preferred an appeal to the Delhi High Court. The case has been filed by the Bank for recovery of its dues. The case has been filed by the Bank for recovery of its dues. 341. 12. Sayar Kothari.A for construction of a system of undersea pipelines. The Defendant has made an application before the BIFR under the Sick Industrial Companies Act. Rs. The case has been filed by the Bank for recovery of its dues. The Defendant subsequently has made a request to the Bank for settlement of its dues through a one time settlement which was approved. The case has been decreed in favour of the Bank. The financial impact of the case is to the extent of Rs. 418 million. ONGC invoked the bank guarantee which was honoured by the Bank. Bhopal. The case is yet to come up for hearing. The matter has been decided in favour of all secured lenders including the Bank. The Bank preferred an appeal against the stay granted by the Delhi High Court and the judgment is reserved. The Bank has filed this case (No. 27. Mumbai. The case has been filed by the Bank for recovery of its dues. 19.e. The Bank has filed this case (No. Kothari and Mrs. Limited (GWIPL) and its directors. Pune. 20. N. The matter is pending before the Debt Recovery Tribunal. 99/2004) against Uni Credito Italiano before the Debt Recovery Tribunal. 175/2001) against K. The Bank has filed this case (No. The Defendant is under reference to the BIFR under the Sick Industrial Companies Act.P. Mr. Mumbai. 166/2001) against Petrofils Co-operative Limited before the Debt Recovery Tribunal. 2008. The Bank has filed this case against Uni Credito Italiano as they failed to honour the counter guarantee given in favour of the Bank. The financial impact is to the extent of Rs. 1614. before the Singapore Court. 456.e. The matter is pending at the hearing stage. 617/1999) against Greatwin International Pte. The activity never took place on account of numerous deficiencies and ultimately the account became a non performing asset. The Bank has filed this case (No. 1199/1999) against Shri Kane and Others (Borrowers) in the Civil Court. A bank guarantee in favour of ONGC was given by the Bank against a counter guarantee from Uni Credito Italiano. The case is listed for hearing on January 31. The financial impact is to the extent of Rs. 135/2001) against Shri Ishar Alloys Limited before the Debt Recovery Tribunal. 342. The consortium was required to furnish a bank guarantee in favour of ONGC for any claim of liquidated damages. The financial impact is to the extent of Rs. Subsequently.9 million. The financial impact is to the extent of Rs. 331. The total financial impact of the case is to the extent of Rs. The Bank has filed this case (No. The case has been filed by the Bank for recovery of its dues. Ahmedabad. 335 million./ Snamprogettin S. i. The Bank along with the Bank of India and Indian Bank (Plaintiffs) has filed this case (No. the Defendants shifted their base to Ontario. The case has been filed against the Defendants for failure to honour their liability under the letters of credit issued by the Plaintiffs. 239/2004) against Jewel Tech (I) Limited before the Debt Recovery Tribunal. The Borrowers had been sanctioned a working capital and term loan for construction of a poultry shed and to meet daily expenses of the poultry.2 million.7 million. The matter is pending at the argument stage before the Debt Recovery Tribunal.11.2 million. The Bank has filed this case (No. 16. 14. The final order of the Debt Recovery Tribunal has been received.P.A. The 277 .5 million and has applied for an extension of time to pay the balance amount which is being considered by the Bank. The Bank has filed this suit (No.5 million. The Defendant has paid 50% of the amount i. Choksi before the Debt Recovery Tribunal. The financial impact of the case is to the extent of Rs. The Delhi High Court allowed the appeal. The financial impact is to the extent of Rs. The case has been filed by the Bank for recovery of its dues. The Bank has filed this case (No. 760. 369/2003) against Roofit Industries Limited before the Debt Recovery Tribunal. The Bank has filed this suit against the Borrowers. 1985 and the same is pending.A. The case was decreed in favour of the Plaintiffs by the Singapore Court. Canada. O. 47/2002) against M/s Uptron Limited before the Debt Recovery Tribunal for recovery of its dues. The Bank has filed this case (No. The Defendant subsequently made an application before the BIFR under the Sick Industrial Companies Act and the same is pending. 1985. 13.8 million. The financial impact is to the extent of Rs. Ahmedabad.4 million. Pune. ONGC entered into a contract with a consortium called Saipem S. The Borrowers have filed a counter claim in the Civil Court. Mumbai. Delhi.L.

The State Bank of Hyderabad has filed this appeal (No. 6.9 million. Presently.6 million. The Defendant has made an application to the Delhi High Court for stay of proceedings before the Debt Recovery Tribunal. Lucknow. 258/2002) against M/s Uptron India Limited before the Debt Recovery Tribunal. The State Bank of Patiala has filed this case (No.5 million has been paid. The case has been filed by the State Bank of Patiala for recovery of its dues. 2007 which was approved. The Debt Recovery Tribunal 2. the Defendant has paid only Rs. The matter is pending. Tax Cases State Bank of Hyderabad 1.S. The financial impact is to the extent of Rs. The State Bank of Patiala has filed this case (No. Canada seeking a summary judgment for enforcement of the Singapore Court judgment.4 million. 4. The amount is yet to be paid. 0363/2005-06) against the Income Tax Department before the Commissioner of Income Tax (Appeals). The State Bank of Patiala has filed this case (No. Chandigarh for recovery of Rs 412. OA 256/2003) against ROM Industries Limited before the Debt Recovery Tribunal. 883. The financial impact is to the extent of Rs. The State Bank of Patiala has filed this case (No. The present appeal has been filed by the State Bank of Hyderabad for the assessment year 1994-95 regarding quantification of amount pertaining to interest computed on accrual basis by the Bank.5 million has been approved out of which Rs. 214/1988) against M/s Hamco Mining and Smelting Limited before the Debt Recovery Tribunal.1 million.S.75 million. Mumbai for recovery of its dues. The matters are pending. The financial impact is to the extent of Rs. The financial impact is to the extent of Rs. 432. In the meanwhile a one time settlement of Rs. 3. 278 . The next date of hearing has been fixed for February 1. 2. 72. 15 million. 45 million payable up to June 30. 64/2001) against Deepharma Limited before the Debt Recovery Tribunal. The matter is pending for issuance of the consent decree. 317.$ 2. The Bank’s share is U.Plaintiffs have moved the Ontario Court. The case has been filed by the State Bank of Patiala for recovery of its dues.6 million due to the State Bank of Patiala from the Defendant. The case has been filed by the State Bank of Patiala for recovery of its dues.361. 5. The State Bank of Patiala has filed this case (No. The State Bank of Patiala has filed two cases (Nos. The balance amount is due on February 15. 7.S. Shoes East Limited before the Debt Recovery Tribunal. The Defendants have proposed a one time settlement of U. 1961 against which an appeal was filed by the Bank. 4.077 million. 2008. The financial impact is to the extent of Rs. A compromise has been arrived at subject to certain conditions which are yet to be complied with by the Defendants. Chandigarh. A regular assessment was made by the Income Tax Department under Section 143(3) of the Income Tax Act. The financial impact is to the extent of Rs. The matter is pending before the Commissioner of Income Tax (Appeals). 490. 2008. 36/1999 and 114/1998) against Parasrampuria Synthetics Limited before the Debt Recovery Tribunal. Civil Recovery Cases State Bank of Patiala 1. The case is pending before the Ontario Court. The matter is pending at the evidence stage. 37. 2008. The case has been filed by the State Bank of Patiala for recovery of its dues. These cases have been filed by the State Bank of Patiala for recovery of its dues. The financial impact is to the extent of Rs. OA 346/47/2002) against M/s Thapar Agro Mills Limited before the Debt Recovery Tribunal.7 million. The State Bank of Patiala has filed this case (No. 434. 307 million. The hearing has been completed and a decision in the matter is awaited. The Defendant approached the State Bank of Patiala for a one time settlement of Rs. 305/1997) against M/s M. The next date of hearing for determining the application for stay of the proceedings has been fixed for January 31. The State Bank of Hyderabad has filed this appeal (No. 0020/2007-08) against the Income Tax Department before the Commissioner of Income Tax (Appeals). The present appeal has been filed by the State Bank of Hyderabad for the assessment year 2005-06.$ 4.6 million.

The financial impact is to the extent of Rs. The matter is pending. 279 . 707.4 million.has issued a Recovery Certificate and the Official Liquidator appointed by the Tribunal has taken possession of the properties.

11/16/2005-BOA dated January 2.022/2007-08 dated July 4. 4) London branch Registration No. (188) dated 17. issued to State Bank of India by the Commissioner of Banks and Trust Companies.00 crore. County of Los Angeles. Approval for setting up of Subsidiary 1) Approval No.GOVERNMENT APPROVALS On the basis of the indicative list of approvals provided below. FBP/1572 dated November 20. State of Illinois for setting up Chicago branch. 1975. 7) Licence reference No.1426 (Hijra) approving the application of the Bank to open a branch in the kingdom of Saudi Arabia. from RBI for setting up subsidiary for Managing Pension Funds. 1976. for maintaining the Bank's New York branch. 2007. U. 2008. from Pension Fund Regulatory & Development Authority for appointment of the Bank as Sponsor of Pension Funds for Government employees under the New Pension System. BSD / 17/ 94 /1109 dated September 26. 1981. Wilshire Boulevard.139156 with the Financial Services Authority. FSD / 124 /24. 526.966/76 dated December 29. 280 . 2.07.09. granted to State Bank of India to maintain a depository agency at 707.K. 20 dated May 6. DBOD No. 2) Approval No. 3) Approval letter No.01. In-principle approval from the NSE dated January 30.000 crore. 2) Letter from the Government F No. 2008. issued by the Banking Department. and In-principle approval from the BSE dated January 31. City of Los Angeles.30 crore to Rs. 1978. 1094 dated 21. 1172 dated June 16. 9) Certificate of Authority No. Approvals for the Issue 1) Letter from the Central Government F No. licensing banking business to State Bank of India. 2) Licence No. 2007. In-Principle Approvals 1. 11/7/2007-BOA dated December 3. 10. 1994.2007. State of California. the Bank may undertake this Issue and the Bank's current business activities and no further major approvals from any government authority/RBI are required to continue these activities. 2008. 2007. BLC. State of New York. USA. 8) RBI Licence No. 5) Approval Reference No. conveying its approval for subscription to the rights issue of Bank’s Equity Shares aggregating approximately Rs. II Cb 53-1043 dated November 14. 9/1/2007-PFRDA dated September 21. File No. conveying approval for the increase in the issued capital of the Bank from the existing Rs. 650. Approvals for setting of Foreign Offices 1) Resolution of the Council of Ministers No. the Government and/or the RBI does not take any responsibility for the Bank's financial soundness or for the correctness of any of the statements made or opinions expressed in this behalf. issued by BUNDESAUFSICHTSAMT FUR DAS KREDITWESEN for carrying on banking business through a branch office in Frankfurt branch. 6) Letter from Ministry of Finance No. 1974. 2069 dated August 30. to Bank of Bhutan issued by the Royal Monetary Authority of Bhutan. in granting these licences. 1979. It must be distinctly understood that. authorising the Bank to open an Agency branch at Los Angeles (USA). Tokyo.

2007. 6) Notification No. appointing Shri Tara Shankar Bhattacharya. Head Assistant. 1974 by the Central Govt. or until further orders.e. 2005. All India State Bank of India Officers’ Federation (posted as Deputy Manager. 4) Notification No. Chandigarh) as Officer-employee Director on the Central Board of Directors of the Bank from the date of notification and up to March 31. 4 dated March 29. whichever is earlier. in consultation with the RBI. 1984. 12) Licence No. 8/3/2003-B. nominating Shri Amar Pal. Republic of Singapore for incorporation of SBI. 2005. appointing Shri S. appointing Shri Ananta Chandra Kalita.. under clause (cb) of section 19 read with subsection (3A) and sub-section (4) of Section 20 of the Act (23 of 1955) and Rule 4 of the State Bank of India (appointment of employee Directors) Rules. 2003. or until he ceases to be a workman employee of the Bank or until further orders whichever is earlier provided that he shall not hold the Office continuously for a period exceeding six years. 2003. WB/011 dated January 1. 7) Notification No. 8/4/2004-B. F No. State Bank of India as a Director on the Central Board of the Bank from among the employees of State Bank of India who are workmen for a period of three years commencing from July 15.K. Managing Director (SBBJ) as Managing Director of the Bank up to October 31. 2004. Bhattacharyya. The Bank has obtained all relevant approvals in this regard. 2003. President. or until further orders. 2) Notification No. Local Head Office.Bhatt. issued to SB International Ltd. Hong Kong under the Companies Ordinance. by the Government. Official Languages Department. F No. 1978.I dated July 9. 2008. F No. 8/1/2005/BO-I dated August 19. under clause (b) of section 19 and subsection (1) of Section 20 of the Act (23 of 1955) by the Central Govt.10) Certificate No. 2010. under clause (d) of Section 19 read with subsection 3(A) and sub-section (4) of Section 20 of the Act (23 of 1955) by the Central Govt. 2006. 2007. 2011. under clause (d) of Section 19 of the Act (23 of 1955). 8/01/2007/BO.P. under clause (a) of section 19 and sub-section (1) of Section 20 of the Act (23 of 1955) by the Central Govt. under clause (b) of section 19 and subsection (1) of Section 20 of the Act (23 of 1955) by the Central Govt. for registration of SBI. in consultation with RBI. by Central Bank of Russian Federation for execution of banking operations granted to Commercial Bank of India LLC Moscow.I dated October 8. Bank of Mauritius.I dated February 25. 8/3/2004/BO. 103 dated July 25. Deputy Managing Director as Managing Director of the Bank up to January 31. The Bank requires prior approval from RBI for opening new place of business in India or abroad. 13) Offshore Banking Licence No. whichever is earlier. in consultation with the RBI nominating the following two persons as part time Non- 281 . F No. Singapore 11) Certificate of Registration No F-1935 dated August 31. 1977. under clause (ca) of section 19 read with subsection (3A) of Section 20 of the Act (23 of 1955) and in exercise of powers vested under Rule 3 of State Bank of India (Appointment of employee Directors) Rules. F No. granted by the Governor in Council. appointing Shri O.O. whichever is earlier. 5) Notification No. and Licence No. granted by Central Bank of Bahrain to State Bank of India. 15/10/2001/IR dated July 15. 2008 i. 3446 dated December 29. Managing Director as Chairman of the Bank up to March 31. Bahrain (Wholesale Bank branch). Mauritius by Governor. or until further orders.O. after consultation with the RBI. after consultation with the RBI.I dated June 30. 3) Notification No. 1974 by the Central Govt.I (2) dated January 23. 9/25/2005/BO. Licences and approvals pertaining to appointment and remuneration of Bank’s Directors 1) Notification No. issued by Registrar of Companies. 2670 dated October 11. nominating Shri Piyush Goyal as a Director of the Central Board of the Bank for a period of three years from the date of Notification. whichever is earlier. the date on which he will attain the age of superannuation or until he ceases to be an Officer of the State Bank of India. 1990. 1977. 14) Licence No.

V. 9) RBI Letter No. Certificate of Registration as Participant granted by SEBI dated July 4. Salahuddin Ansari. the Bank obtains separate tax deduction at source numbers and VAT registrations for each of its branches. 1996 (22 of 1996). Ministry of Finance. In addition to approvals indicated above. SYD. Deva Nand Balodhi. with the Registration No.official Directors on the Central Board of Directors of the Bank for a period of three years from the date of Notification or until further order whichever is earlier: (a) Dr. 8) Notification F No. the Government. 9/7/2007-BO. under clause (e) of Section 19 of the Act (23 of 1955). regular applications to various authorities in the ordinary course of our business including for opening new branches in India and abroad and applications for labour related clearances and non-receipt. nominating Shri Arun Ramanathan. Sardesai. 2008. In addition.03. INU000000027. with the Registration No. delay in receipt or rejection of the same will not have material adverse effect on the Bank. Certificate of Registration as Underwriter granted by SEBI dated January 4. 2.492/02. Registrations with SEBI 1. (b) Prof. 2007. 282 . Certificate of Registration as Portfolio Manager granted by SEBI dated March 28. Department of Financial Services.04/2004-05 dated September 28. with the Registration No. Secretary. under the Depositories Act. we have made and will continue to make.I dated January 18. INP000000068. New Delhi as a Director on the Central Board of the Bank with immediate effect and until further orders vice Shri Vinod Rai. by the Central Govt. Deputy Governor on the Central Board of the Bank vice Shri A. 2007. in terms of Section 19 (1) (f) of the Act nominating Smt. IN-DP-CDSL-80-2000. Shyamala Gopinath. 3. Taxation related approvals Permanent Account Number – (PAN) AAACS8577K issued by the Department of Income Tax. 2005. 2004.

THE LEAD MANAGERS ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE BANK DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE LEAD MANAGERS HAVE FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED FEBRUARY 1. CLSA INDIA LIMITED. not later than the Issue opening date.STATUTORY AND OTHER INFORMATION Authority for the Issue As required by Section 5(3) of the Act. 2008. A COPY OF THE LETTER OF OFFER WILL BE SUBMITTED TO SEBI NOT LATER THAN THE ISSUE OPENING DATE. in terms of Section 5(2) of the Act. this Issue. The Bank’s GDRs are listed on the London Stock Exchange.No. 10. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE. IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSION OF THE LETTER OF OFFER TO SEBI SHOULD NOT. Prohibition by SEBI Neither the Bank. DSP MERRILL LYNCH LIMITED. Disclaimer Clause AS REQUIRED. Further. AND OTHER MATERIALS MORE PARTICULARLY REFERRED TO IN THE 283 . by its letter (no. This Letter of Offer has been approved by the Central Board at its meeting held on February 1. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE BANK IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS.4. none of the directors or person(s) in control of the Bank have been prohibited from accessing the capital market under any order or direction passed by SEBI.1(iv) of the SEBI Guidelines. nor the Directors. the Central Government has.BOA) dated December 3. the Bank has satisfied the conditions stipulated in Clause 2. with a right to renounce. the Bank will also file a copy of this Letter of Offer with the SEBI. MSE.2A. In terms of Clause 2. IN ANY WAY BE DEEMED/CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. has been authorised by the Central Board pursuant to the resolution passed at its meeting held on January 14. the Government has intimated to the Bank that the cabinet has granted its approval for investing approximately Rs. authorised the increase in the issued capital of the Bank. OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE LETTER OF OFFER. and its Equity Shares are listed on the BSE and NSE. The Bank’s Equity Shares are also listed on CSE. Further. ASE and DSE. Further neither the Bank. 2007. Further. It is eligible to make this Issue in terms of Clause 2. in terms of the Government’s Letter (Letter No. Accordingly. ETC.2A. 2008. 2008. THE LEAD MANAGERS. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION SUCH AS COMMERCIAL DISPUTES. Associate Banks or the Bank’s subsidiaries have been declared as wilful defaulters by RBI/Government authorities. 2008. or companies/banks with which the Bank’s Directors are associated with as directors or promoters. F/ 11/ 7/ 2007.1. have been prohibited from accessing or operating in the capital markets under any order or direction passed by SEBI.2 of the SEBI Guidelines.11/16/2005BOA) dated January 2. CITIGROUP GLOBAL MARKETS INDIA PRIVATE LIMITED.000 crores in the Issue by issuing SLR marketable securities towards the Government’s Rights Entitlement. DISPUTES WITH COLLABORATORS. ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE LETTER OF OFFER. WHICH READS AS FOLLOWS: 1. DEUTSCHE EQUITIES INDIA PRIVATE LIMITED AND KOTAK MAHINDRA CAPITAL COMPANY LIMITED HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THE LETTER OF OFFER ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES FOR DISCLOSURE AND INVESTOR PROTECTION IN FORCE FOR THE TIME BEING.1. F.1 of the SEBI Guidelines. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE. Eligibility for the Issue The Bank was constituted under the Act.

WE CONFIRM THAT: C) 3. INSTRUCTIONS ETC.3. MATERIALS AND PAPERS RELEVANT TO THE ISSUE. OTHER AGENCIES. WE CONFIRM THAT BESIDES OURSELVES. FURTHER. THE LEAD MANAGERS SHALL HAVE PROVIDED THE FOLLOWING ADDITIONAL CONFIRMATIONS / CERTIFICATIONS: 4. THE GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH. ALL THE INTERMEDIARIES NAMED IN THE LETTER OF OFFER ARE REGISTERED WITH SEBI AND TILL DATE SUCH REGISTRATION IS VALID. BY THE BANK.. IN TERMS OF CLAUSE 5. PROJECTED PROFITABILITY PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE BANK. 2000 AND OTHER APPLICABLE LEGAL REQUIREMENTS. 2. 5. HAS ALSO BEEN DISCLOSED IN THE LETTER OF OFFER. WE CONFIRM THAT ALL THE MATERIAL DISCLOSURES IN RESPECT OF THE BANK HAVE BEEN MADE IN THE LETTER OF OFFER AND CERTIFY THAT ANY MATERIAL DEVELOPMENT IN THE BANK OR RELATING TO THE ISSUE UP TO THE COMMENCEMENT OF LISTING AND TRADING OF THE SHARES OFFERED THROUGH THIS ISSUE SHALL BE INFORMED THROUGH PUBLIC NOTICES / ADVERTISEMENTS IN ALL THOSE NEWSPAPERS IN WHICH PRE-ISSUE ADVERTISEMENT AND ADVERTISEMENT FOR OPENING OR CLOSURE OF THE ISSUE HAVE BEEN GIVEN. A) B) THE LETTER OF OFFER FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS. 2. ISSUED BY SEBI. AND WE CERTIFY THAT WRITTEN CONSENT FROM SHAREHOLDERS HAS BEEN OBTAINED FOR INCLUSION OF THEIR SECURITIES AS PART OF THE BANK’S CONTRIBUTION SUBJECT TO LOCK-IN AND THE SECURITIES PROPOSED TO FORM PART OF THE BANK’S CONTRIBUTION SUBJECT TO LOCK-IN.1A. THE FULFILLMENT OF THE ELIGIBILITY CRITERIA AS SPECIFIED IN THAT CLAUSE. ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES. INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE. 2000.3. — NOT APPLICABLE. WE SHALL SATISFY OURSELVES ABOUT THE WORTH OF THE UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS. WILL NOT BE DISPOSED/ SOLD/ TRANSFERRED BY THE BANK DURING THE PERIOD STARTING FROM THE DATE OF FILING THE LETTER OF OFFER WITH THE CENTRAL BOARD TILL THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE LETTER OF OFFER— NOT APPLICABLE IF UNDERWRITTEN.1. WE CONFIRM THAT THE BANK IS ELIGIBLE TO MAKE FAST TRACK ISSUE IN TERMS OF CLAUSE 2. ITS DIRECTORS AND OTHER OFFICERS. FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL-INFORMED DECISION AS TO INVESTMENT IN THE PROPOSED ISSUE AND SUCH DISCLOSURES ARE IN ACCORDANCE WITH THE REQUIREMENTS OF THE SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES. THE DISCLOSURES MADE IN THE LETTER OF OFFER ARE TRUE. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE BANK.2A OF THE SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES. WE CONFIRM THAT NONE OF THE INTERMEDIARIES NAMED IN THE LETTER OF OFFER HAVE BEEN DEBARRED FROM FUNCTIONING BY ANY REGULATORY AUTHORITY. 284 . 3. 1.ANNEXURE HERETO IN CONNECTION WITH THE FINALISATION OF THE LETTER OF OFFER PERTAINING TO THE SAID ISSUE.

9. the Equity Shares represented thereby may not be offered or sold. except that this Letter of Offer has been filed with SEBI. in such circumstances.) – NOT APPLICABLE. WE CERTIFY THAT AS PER THE REQUIREMENTS OF THE 1ST PROVISO TO CLAUSE 4. WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE LETTER OF OFFER: A) AN UNDERTAKING FROM THE BANK THAT AT ANY GIVEN TIME THERE SHALL BE ONLY ONE DENOMINATION FOR THE SHARES OF THE BANK AND B) AN UNDERTAKING FROM THE BANK THAT IT SHALL COMPLY WITH SUCH DISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY THE CENTRAL BOARD FROM TIME TO TIME. Persons in whose possession this Letter of Offer may come are required to inform themselves about and observe such restrictions. the Letter of Offer must 285 . directly or indirectly. however. with the Lead Managers any irregularities or lapses in the Letter of Offer. WE CERTIFY THAT A DISCLOSURE HAS BEEN MADE IN THE LETTER OF OFFER THAT THE INVESTORS SHALL BE GIVEN AN OPTION TO GET THE SHARES IN DEMAT OR PHYSICAL MODE. in research or sales reports etc. and this Letter of Offer may not be distributed in any jurisdiction outside of India. SEBI further reserves the right to take up. under the relevant statutes. No action has been or will be taken to permit this Issue in any jurisdiction where action would be required for that purpose. Selling Restrictions The distribution of this Letter of Offer and the Issue of Equity Shares on a rights basis to persons in certain jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. WE CONFIRM THAT THE ABRIDGED LETTER OF OFFER CONTAINS ALL THE DISCLOSURES AS SPECIFIED IN THE SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES. CASH FLOW STATEMENT HAS BEEN PREPARED AND DISCLOSED IN THE RED HERRING PROSPECTUS AND / OR PROSPECTUS. The Lead Managers and the Bank shall make all information available to the Equity Shareholders and no selective or additional information would be available for a section of the Equity Shareholders in any manner whatsoever including at presentations. The Bank is making this Issue of Equity Shares on a rights basis only to the shareholders of the Bank and will dispatch the Abridged Letter of Offer and CAF to those shareholders who have an Indian address. after filing of this Letter of Offer with SEBI.1 OF THE SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES. Any disputes arising out of this Issue will be subject to the jurisdiction of the appropriate court(s) in Mumbai. where applicable. at any point of time. 2000. WE CONFIRM THAT AGREEMENTS HAVE BEEN ENTERED INTO WITH BOTH THE DEPOSITORIES FOR DEMATERIALISATION OF THE SECURITIES OF THE BANK . or from the requirement of obtaining such statutory or other clearance as may be required for the purpose of the proposed Issue. 8. absolve the Bank from any liability. Caution The Bank and the Lead Managers accept no responsibility for statements made otherwise than in this Letter of Offer or in any advertisement or other material issued by the Bank or by any other persons at the instance of the Bank and anyone placing reliance on any other source of information would be doing so at his own risk. 5. India only. 6. Accordingly. Disclaimer with respect to jurisdiction This Letter of Offer has been prepared under the provisions of Indian Laws and the applicable rules and regulations there under. 7. Receipt of the Letter of Offer will not constitute an offer in those jurisdictions in which it would be illegal to make an offer and. The filing of the Letter of Offer does not. 2000.4.

S. (2) a total balance sheet of more than €43. ‘G’ Block.C4-A. AND MAY NOT BE OFFERED. The Letter of Offer was filed with the Designated Stock Exchange and a copy thereof was filed / will be filed with SEBI. European Economic Area Restrictions In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive at any relevant time (each. OR ANY U. Bandra (East). SECURITIES LAWS IN CONNECTION WITH THE EXERCISE.000 and (3) an annual net turnover of more than €50. Accordingly. IF MADE. shall under any circumstances create any implication that there has been no change in the Bank’s affairs from the date hereof or that the information contained herein is correct as of any time subsequent to this date. OR THE AGENT OF ANY PERSON.000. SOLD. EXCEPT IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. a “Relevant Member State”) the Bank has not made and will not make an offer of the Equity Shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Equity Shares which has been approved by the competent authority in that Relevant Member State or. where appropriate. OR WHO THE BANK OR ANY PERSON ACTING ON BEHALF OF THE BANK HAS REASON TO BELIEVE IS.S.S.”) OR TO. except that it may. STATE SECURITIES LAWS. OR FOR THE ACCOUNT OR BENEFIT OF. Mumbai 400051. they must not seek to subscribe to the Equity Shares or the Rights Entitlements referred to in the Letter of Offer. WOULD RESULT IN REQUIRING REGISTRATION OF THIS LETTER OF OFFER WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION. THE RIGHTS REFERRED TO IN THIS LETTER OF OFFER ARE BEING OFFERED IN INDIA. if not so authorised or regulated. with effect from and including the Relevant Implementation Date. REGISTERED UNDER THE U. (c) 286 . THE ISSUE TO WHICH THIS LETTER OF OFFER RELATES IS NOT. in connection with the issue of Equity Shares or the Rights Entitlements distribute or send the same in or into the United States or any other jurisdiction where to do so would or might contravene local securities laws or regulations. United States Restrictions NEITHER THE RIGHTS ENTITLEMENTS NOR THE EQUITY SHARES THAT MAY BE PURCHASED PURSUANT HERETO HAVE BEEN. nor should he in any event use the CAF. persons receiving a copy of the Letter of Offer should not. all in accordance with the Prospectus Directive. SECURITIES ACT OF 1933. “US PERSONS” (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT (“REGULATION S”)). If the Letter of Offer is received by any person in any such territory. or by their agent or nominee. Neither the delivery of this Letter of Offer nor any sale hereunder. BUT NOT IN THE UNITED STATES.000. IN THE UNITED STATES AND TO WHOM AN OFFER. OR WILL BE. approved in another Relevant Member State and notified to the competent authority in that Relevant Member State.be treated as sent for information only and should not be copied or redistributed. ANY PERSON SUBSCRIBING TO THE EQUITY SHARES OFFERED HEREBY WILL BE DEEMED TO REPRESENT THAT SUCH PERSON IS NOT IN THE UNITED STATES AND HAS NOT VIOLATED ANY U. or in any other circumstances which do not require the publication by the Bank of a prospectus pursuant to Article 3 of the Prospectus Directive. The Bank will not accept any CAF where the address as indicated by the applicant is not an Indian address. No person receiving a copy of the Letter of Offer in any territory other than in India may treat the same as constituting an invitation or offer to him. THIS LETTER OF OFFER SHOULD NOT BE FORWARDED TO OR TRANSMITTED IN OR INTO THE UNITED STATES AT ANY TIME. WHO APPEARS TO BE.000. prior to the Issue Opening Date. whose corporate purpose is solely to invest in securities. Bandra Kurla Complex.S. AS AMENDED (THE “SECURITIES ACT”). RESOLD OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OF AMERICA OR THE TERRITORIES OR POSSESSIONS THEREOF (THE “UNITED STATES” OR THE “U. NEITHER THE BANK NOR ANY PERSON ACTING ON BEHALF OF THE BANK WILL ACCEPT SUBSCRIPTIONS OR RENUNCIATIONS FROM ANY PERSON. make an offer of Equity Shares to the public in that Relevant Member State at any time: (a) (b) to legal entities which are authorised or regulated to operate in the financial markets or. AND UNDER NO CIRCUMSTANCES IS TO BE CONSTRUED AS. ACCORDINGLY. Plot No. AN OFFERING OF ANY SHARES OR RIGHTS FOR SALE IN THE UNITED STATES OR AS A SOLICITATION THEREIN OF AN OFFER TO BUY ANY OF THE SAID SHARES OR RIGHTS. to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year. as shown in its last annual or consolidated accounts.

the expression an “offer of Equity Shares to the public” in relation to any Equity Shares 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 the Equity Shares to be offered so as to enable an investor to decide to purchase or subscribe for the Equity Shares. 58 of 24 February 1998. sold or delivered. of CONSOB Regulation No. Designated Stock Exchange The Designated Stock Exchange for the purposes of this Issue will be NSE. no Equity Shares may be offered. CONSOB Regulation No. 11971 of 14 May 1999. accordingly.1. as defined pursuant to Article 100 of Legislative Decree No. nor may copies of this document or of any other document relating to the Equity Shares be distributed in the Republic of Italy. (“the Exchange”) has given vide its letter dated January 31. 385 of 1 September 1993. as amended from time to time. 11971). 2008 permission to this Bank to use the Exchange’s name in this Letter of Offer as one of the stock exchanges on which the Bank’s securities are proposed to be listed. and other persons to whom it may lawfully be communicated. first paragraph.For the purpose of this provision. As the proposed Rights Issue by the Bank is in terms of Clause 2. 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. does not in any manner : 287 . Republic of Italy Restrictions The Issue of the Equity Shares has not been registered pursuant to Italian securities legislation and. Further the Exchange’s permission to use the name of the Exchange as stated above. 2000 no draft letter of offer has been filed with the Exchange and hence no scrutiny of the same has been carried out by the Exchange for any purpose. as amended (Regulation No. except: (i) to qualified investors (investitori qualificati). United Kingdom Restrictions This Letter of Offer is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to 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. offer or agreement to subscribe. sale or delivery of the Equity Shares or distribution of copies of this document or any other document relating to the Equity Shares in the Republic of Italy under (i) or (ii) above must be: (a) made by an investment firm. and (b) in compliance with any other applicable laws and regulations or requirement imposed by CONSOB or other Italian authority. relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents. as amended (the Banking Act).2A of the SEBI (Disclosure and Investor Protection) Guidelines. 2003/71/EC of 4 November 2003. 16190 of 29 October 2007 (as amended from time to time) and Legislative Decree No. Any offer. as amended (the Financial Services Act) and the relevant implementing CONSOB regulations. or (ii) in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Financial Services Act and Article 33. falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). purchase or otherwise acquire such Equity Shares will be engaged in only with. and any invitation. and in Article 2 of Directive No. bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act. The Equity Shares are only available to. This European Economic Area selling restriction is in addition to any other selling restriction set out below. Disclaimer Clause of BSE Bombay Stock Exchange Ltd.

its promoters. 2008 and January 30. along with a copy of the Letter of Offer and i) 288 . then the Bank and every Director of the Bank who is an officer in default shall. Legal Advisors and Registrar to the Issue to act in their respective capacities have been obtained and filed with SEBI. Lead Managers. certify or endorse the correctness or completeness of any of the contents of the Letter of Offer. on and from expiry of eight days. investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever. within 42 days from the Issue Closing Date. The Bank’s Equity Shares are also listed on the CSE. If such money is not paid within eight days after the Bank becomes liable to repay it. ASE and DSE. certify or endorse the correctness or completeness of any of the contents of this Letter of Offer. Every person who desires to apply for or otherwise acquires any Equity Shares of the Bank may do so pursuant to an independent inquiry. respectively. investigation and analysis and shall not have any claim against the Stock Exchanges whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever. all moneys received from applicants in pursuance of this Letter of Offer. Disclaimer Clause of Other Stock Exchanges The Stock Exchanges do not in any manner (i) warrant. any shares therein. and it should not for any reason be deemed or construed to mean that the Letter of Offer has been cleared or approved by the Stock Exchanges. be jointly and severally liable to repay the money with interest. or otherwise induces a Company to allot. MSE. or iii) take any responsibility for the financial or other soundness of this Bank. or (iii) take any responsibility for the financial or other soundness of this Bank its management or any scheme or project of the Bank. Consents Consents in writing of the Auditors. The GDRs issued by the Bank are listed on the London Stock Exchange. or subscribing for. or any other person in a fictitious name. and it should not for any reason be deemed or construed to mean that the Letter of Offer has been cleared or approved by the Exchange. its management or any scheme or project of this Bank. 2003 and September 2. Listing The existing Equity Shares are listed on the BSE and NSE. If the permission to deal in and for an official quotation of the securities is not granted by any of the Stock Exchanges mentioned above. and its Equity Shares bear the ISIN No. Dematerialised dealing The Bank has entered into agreements dated September 19.warrant. the Bank shall forthwith repay. shall be punishable with the applicable penalties under the relevant statutes. without interest. (ii) warrant that the Bank’s Equity Shares will be listed or will continue to be listed on the Stock Exchanges. The Bank will apply to the BSE and NSE for listing of the Equity Shares to be issued pursuant to this Issue after allotment. 2003 with National Securities Depository Limited and the Central Depository Services (India) Limited respectively. or register any transfer of shares therein to him. INE062A01012. Impersonation Any person who makes in a fictitious name an application to a Company for acquiring. The Bank has made applications to the BSE and NSE for permission to deal in and for an official quotation in respect of the Equity Shares being offered in terms of this Letter of Offer. The Bank has received in-principle approvals from the BSE and NSE by letters dated January 31. 2008. or ii) warrant that this Bank’s securities issued pursuant to the rights issue will be listed or will continue to be listed on the Exchange. Every person who desires to apply for or otherwise acquires any securities of this Bank may do so pursuant to independent inquiry.

5 60.01 0.0 13.01 0.27% of the total Issue size) and will be met out of the proceeds of the Issue.03 0. Expert Opinion. However.24 100.00 The fees payable to the Lead Managers to the Issue are set out in the engagement letters issued by the Bank to the Lead Managers entered into by the Bank with the Lead Managers. Option to Subscribe Other than the present Issue. publicity.0 0.7 55.04 0. fees and reimbursement to the Lead Managers. Fees Payable to the Registrar to the Issue The fee payable to the Registrar to the Issue is as set out in the relevant documents. Expenses of the Issue The expenses of the Issue payable by the Bank including brokerage.67 43. and auditors Fees paid to the Registrar to the Issue Statutory Fee Advertising and marketing fees Printing. legal advisors. The Auditors of the Bank have given their written consent for the inclusion of their Report in the form and content as appearing in this Letter of Offer and such consents and reports have not been withdrawn up to the time of delivery of this Letter of Offer for registration with the stock exchanges. if any Except in the sections titled “Auditor’s Report” on page [●] of this Letter of Offer. should the need arise. no expert opinion has been obtained by the Bank in relation to this Letter of Offer. 450 million (or approximately 0. the Bank’s stock market data have been given separately for each of these Stock Exchanges.76 1.51 3. Particulars (Approximate Expenditure) Rs. stamp duty and other expenses are estimated at Rs.8 15.0 51. To the best of the Bank’s knowledge there are no other consents required for making this Issue.33 11.such consents have not been withdrawn up to the time of delivery of this Letter of Offer for registration with the stock exchanges. listing fees.11 0.1 450. The high and low closing prices recorded on the BSE and NSE for the preceding three years and the number of Equity Shares traded on the days the high and low prices were recorded are stated below: BSE 289 .03 0. Stationery and Despatch Listing Fees Others Total Fees Payable to the Lead Managers to the Issue 66. in millions % of net proceeds of the Issue % of total expenses of the Issue Fees to Intermediaries Fees paid to the Lead Managers. Registrar to the Issue. the Bank has not given any person any option to subscribe to the Equity Shares of the Bank. Legal Advisors. Auditors.49 12.04 0.5 193. necessary consents shall be obtained by the Bank. copies of which are available for inspection at the Registered Office of the Bank.27 14. printing and distribution expenses.4 7. Stock Market Data for Equity Shares As the Bank’s shares are actively traded on the BSE and NSE.

.57 811..2007 955.774..594...967 2.207.... 2007...666 247.50 June 19.) 2005 ......197 1. 2005 690..284 748.... 2007 3. September...727 970. 2007 December 11.81 546...34 846.497.083 1..80 689..785.... 1.70 October 29.117... 2006 2.. of shares) Average price for the year (Rs..70 1. August.. 2007 1...... 2007. 2007 August 8... 2007 October 19..95 1.353. 2007 August 23.602 1.15 2. 2007 1.896.85 July 31.898 1. 2007 2..413.85 November 14.03 1. 742..... 2006 8.667. 2007 August 8.) Date of High Low (Rs....361 1.135 1.50 1.60 811...258.35 November 1.58 The average price has been computed based on the daily closing price of Equity Shares.00 December 1.673.623.25 September 5.) Date of High Volume on date of high (no.) Date of Low Volume on date of low (no.80 997...131 446..85 2...614 1. 2007 ... 2007 . 2007 . 2004 584..571..672.606 829. NSE Volume on date of high (no..414..58 271.567.467 408.897.) Year ending March 31 High (Rs.80 1..) Date of Low 2005.90 584.173 2...10 October 19. Year High (Rs..116..850 473.755...98 1.621.612....85 April 29...500.. 2007 2.624... 2007..) Date of Low July.. 2006 .67 1.136 1... 2007 November 1.033 953. 2006 December 1.705.350 2.67 997..) Month.60 2.20 March 10..265.31 The average price has been computed based on the daily closing price of Equity Shares.46 The average price has been computed based on the daily closing price of Equity Shares.70 2.10 March 27.. March 10. 2007 November 14... 2007 September 28.713.248.20 1..70 June 23. 2007 October 29... 2007 290 . 2007 . 2006 987.....66 1. of shares) Volume on date of low (no.. November.90 637....504. of shares) Average price for the year (Rs...945.. 2007 1. 2004 April 29... of shares) Volume on date of low (no..601.) Date of High Low (Rs.. September.571.75 1....445. 2007. 2007...578 1. The high and low prices and volume of Equity Shares traded on the respective dates during the last six months is as follows: BSE Volume on date of high (no..85 July 31. 2007 2..30 July 27.777 570...347 2. 2006 4. NSE Volume on date of high (no.496 2.699 542....594... of shares) Volume on date of low (no..706... 2007 September 5. 2007 2..667.567.. 2005 March 27.45 1.05 1. October... October. of shares) Average price for the year (Rs.....) Date of High Low (Rs. 2005 742. August..498...360.. 2007 December 19.713.. 2006 4.. December.. 2005 July 19...68 2.85 1.445.188 1.862 2.) Month..135 542. of shares) Average price for the year (Rs.368..368...285 1.209 408.787 2.85 2.. 2007 .. 2007 August 23. 1. November.50 987.415.150. 2007 ..143....249.05 1..Year ending March 31 High (Rs...699 1.744.. Year High (Rs.) Date of Low July....800 1.075.. 2006.75 July 27. of shares) Low (Rs. 2007.346.106.051. 2007 .113.50 June 23..457 1.178 616.950.070...85 September 28.

...... Important: • This Issue is pursuant to the approval of the Government (F. The market price was Rs... of shares) Average price for the year (Rs. of shares) Low (Rs...... 2007..... • • • • • • • Issue Schedule Issue Opening Date:...........) December. There have not been any transactions in Equity Shares by the Bank and directors of the Bank during the last six months from the date of this Letter of Offer other than those mentioned in the section “Capital Structure” on page [●] of this Letter of Offer.......11/16/2005-BOA) dated January 2......) Date of High Volume on date of high (no. An application is liable to be rejected for any non-compliance of the provisions contained in the Letter of Offer or the CAFs.... quoting the Registered Folio number/ DP and Client ID number and the CAFs numbers as mentioned in the CAFs. Last date for receiving requests for split forms: . after giving effect to the valid share transfers lodged with the Bank up to the Record Date of February 4...... F/ 11/ 7/ 2007...45 on NSE on January 15.. The instructions contained in the CAF are each an integral part of this Letter of Offer and must be carefully followed. the resolution passed by the Central Board at its meetings held on January 14. This Issue is applicable to those Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the shares held in the electronic form and on the Register of Members of the Bank at the close of business hours on the Record Date of February 4.Month..... 2.531 2..423.75 December 11.. The Bank shall update the Letter of Offer and keep the public informed of any material changes till the listing and trading commences............... Please ensure that you have received the Composite Application Forms (“CAF”) with this Letter of Offer/Abridged Letter of Offer....414.....55 December 19. All information shall be made available to the Investors by the Lead Managers and the Bank ..... Issue Closing Date: ..... 2008............ 2008.. All enquiries in connection with the Letter of Offer or CAFs should be addressed to the Registrar to the Issue.... 2.......................366.... the trading day immediately following the day on which the Central Board meeting was held to finalise the offer price for the Issue..... 2008.. 2008 and who have provided an Indian address for communication.BOA) dated December 3...447. Your attention is drawn to the section entitled “Risk Factors” appearing on page [●] of this Letter of Offer/Abridged Letter of Offer......... Please read the Letter of Offer and the instructions contained therein and in the CAF carefully before filling in the CAFs... 2007 681....... 2008 March 18.. 2.... approval of the Government’s (Letter No... 2008 291 ..35 on BSE on January 15........ 2008... This Letter of Offer has been approved by the Central Board at its meeting held on February 1........234 2...13 The average price has been computed based on the daily closing price of Equity Shares.. presentations......... in research or sales reports.. Year High (Rs............256......No.. 2008.. the trading day immediately following the day on which the Central Board meeting was held to finalize the offer price for the Issue........... and no selective or additional information would be available by them for any section of the Investors in any manner whatsoever including at road shows. etc............. 2008 March 3.. 2008....) Date of Low Volume on date of low (no.... The market price was Rs..2007 647.. 2007. February 18...

Shareholders’ / Investors’ Grievance Committee of the Board reviews matters relating to investors’ complaints on various issues. The same would be marked ‘Account Payee only’ and would be drawn in favour of the sole/first Applicant. the Bank shall pay that money with interest as stipulated under the applicable statutes.2156 Fax: (91 22) 6671 2192 Email: sbirights@dfssl. A 16 & 17. MIDC Part B Crosslane. The refund order exceeding Rs. In the case of those Applicants who have opted to receive Equity Shares subscribed in the Issue in physical form and the Bank issues an allotment advice. Further. Investor Grievances and Redressal System The Bank has adequate arrangements for redressal of Investor complaints.dfssl. Such shares will be held in abeyance and retained separately by the Bank. at quarterly intervals. The Bank has a separate department. advice regarding their credit of the Equity Shares shall be given separately.699 292 . in pursuance of clause 49 of the Listing Agreement with the stock exchange. For more information please refer to the section titled ‘Allotment advice/Share Certificates/Demat Credit’ on page [●] of this Letter of Offer.com Contact Person: Mr. Such refund orders would be payable at par at all places where the applications were originally accepted. Dnyanesh Gharote Status of Complaints (a) Total number of shareholder complaints received during last financial year (2006-2007): 3.The Central Board may however decide to extend the issue period as it may determine from time to time but not exceeding 60 days from the Issue Opening Date. the Shares and Bonds department. at Corporate Centre to oversee the functioning of the Registrars in handling investors / shareholders complaints. Mumbai 400 093 Tel. 1. The contact details of the share registrars are: Datamatics Financial Services Ltd. Applicants to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary post informing them of the mode of credit of refund within 42 working days of closure of the Issue. Andheri (East). if any.com Website: www. Refund orders up to the value of Rs.500 would be sent by registered post/speed post to the sole/first Applicant’s registered address.500 would be sent under certificate of posting. If such money is not repaid within eight days from the day the Bank becomes liable to pay it. Well-arranged correspondence system has been developed for letters of routine nature. the corresponding share certificates will be dispatched within one month from the date of allotment. Applicants residing at centres where clearing houses are managed by the RBI will get refunds through ECS only (Electronic Clearing Service) except where Applicants are otherwise disclosed as applicable/eligible to get refunds through direct credit and RTGS. Allotment Advices / Refund Orders The Bank will issue and dispatch allotment advice/share certificates/demat credit and/or letters of regret along with refund order or credit the allotted securities to the respective beneficiary accounts. Disputed Shares Equity Shares which are the subject matter of a dispute or sub-judice will not be allotted pending resolution of the dispute in accordance with the Bank’s policy or receipt of an order from the relevant court or authority removing the restriction thereon.: (91 22) 6671 2151 . 1. In the case of those Applicants who have opted to receive Equity Shares subscribed in the Issue in dematerialised form using electronic credit under the depository system. within a period of 42 days from the date of closure of the Issue. Adequate funds would be made available to the Banker to the Issue for this purpose.

in Datamatics Financial Services Ltd.: (99 22) 2288 3888 Fax: (99 22) 2285 5348 Email: gm. Time normally taken for disposal of various types of Investor grievances: 30 days. The agreement between the Bank and the Registrar will provide for retention of records with the Registrar for a period of at least one year from the last date of dispatch of Allotment Advice/ share certificate / warrant / refund order to enable the Registrar to redress grievances of Investors. Vyas & Vyas 2 M/s. name and address. M/s. the same details of the Renouncee should be furnished. Subrata Maiti General Manager (Shares & Bonds Department) State Bank of India Tel.2006 Fax: (91 22) 6671 2011 Email: sbirights@dfssl.Khandelwal Jain & Co. Investors may contact the Compliance Officer in case of any pre-Issue/ post -Issue related problems such as non-receipt of allotment advice/share certificates/ demat credit/refund orders etc. contact telephone / cell phone numbers. Application Form serial number. In case of renunciation.D. MIDC Part B Crosslane.S. who is the Registrar to the Issue.statebankofindia. 2007): 4.dfssl. The Registrar will have a separate team of personnel handling only postIssue correspondence. 293 . number and type of shares applied for. Devendra Kumar & Associates 4 M/s. K.com Website: www. Patro & Co. email id of the first applicant. M/s. Vinay Kumar & Co. In case of non-routine grievances where verification at other agencies is involved.com. R. B. Nissim & Co. Kanwalia & Co. amount paid on application and the name of the bank and the branch where the application was deposited.co. M/s.802 Status of the complaints: Out of the 3.com Contact Person: Mr Dnyanesh Gharote Changes in Auditors In 2004-05 Sr No Auditors who left during the year 1 M/s. A 16 & 17. the Bank has resolved 3.M. (d) Investor Grievances arising out of this Issue The Bank’s investor grievances arising out of the Issue will be handled by Datamatics Financial Services Ltd.sbi.: (91 22) 6671 2001. 5 M/s. M.699 outstanding complaints in fiscal year 2007. All grievances relating to the Issue may be addressed to the Registrar to the Issue giving full details such as folio number. Bansal & Co. along with a photocopy of the acknowledgement slip. Aiyar & Co. Auditors who joined during the year M/s.co. His address is as follows: Mr. M/s.(b) (c) Total number of complaints received during current financial year (up to December 31.681 complaints and 18 complaints are sub-judice. Andheri (East).snb@sbi. The Bank undertakes to resolve Investor grievances in a timely manner. Mumbai 400 093 Tel. All the complaints received thus far in fiscal year 2008 have been resolved excepting 18 sub-judice cases. The average time taken by the Registrar for attending to routine grievances will be 21 days from the date of receipt.P.. www.in Website: www. Chopra & Co. S. the Registrar will attend to them as expeditiously as possible. 3 M/s.

P. D.Mittal & Co. S.S. S. M/s. G. Rao & Co. R. 294 .G.M. 2007) Auditors who left during the year Sr No Nil Auditors who joined during the year M/s. K. Kapadia & Co. Auditors who joined during the year Nil Capitalisation of Reserves or Profits The Bank has not capitalised any of its reserves or profits for the last five years other than those mentioned in the section “Capital Structure” on page [●] of the Letter of Offer. Sarma & Co. 4 M/s.Totla & Co. Mathur & Co. G. M/s. 5 M/s. Phillipos & Co. 3 M/s. Auditors who joined during the year M/s.K. Kanwalia & Co. Viswanathan 2 M/s. M/s. 2 M/s.Sen & Co. B. 2007 to December 31. Venugopal & Chenoy 3 M/s. Laxminiwas & Jain M/s. M/s. Choudhary & Co. Patro & Co.N. Price & Co. In 2007-08 (From April 1.M.P. M. Revaluation of Fixed Assets There has been no revaluation of the Bank’s fixed assets for the last five years.P. In 2006-07 Auditors who left during the year Sr No 1 M/s. M/s. Chatrath & Co. 6 M/s. Vardhaman & Co. Datta Sangla & Co. O. Jain Kapila Associates M/s.In 2005-06 Sr No Auditors who left during the year 1 M/s. 4 M/s.

e. Rights Entitlement As your name appears as beneficial owner in respect of Equity Shares held in the electronic form or appears in the register of members as an Equity Shareholder of the Bank as on February 4. The Government. Issue Price Each Equity Share shall be offered at an Issue Price of Rs. the enclosed Composite Application Forms (“CAFs”). 10 each at a premium of Rs. 1580 per Equity Share aggregating to an amount equivalent to Rs. 1955. you are entitled to the number of Equity Shares as set out in Part A of the enclosed CAFs. 167.TERMS OF THE PRESENT ISSUE The Bank. This Letter of Offer has been approved by the Central Board at its meeting held on February 1. PRINCIPAL TERMS OF EQUITY SHARES Face Value Each Equity Share shall have the face value of Rs. will subscribe to the Equity Shares through an issue of SLR Marketable Government Securities in lieu of cash. F. 1. 2008. Record Date. State Bank of India General Regulations. in terms of Section 5(2) of the Act. 2008. though. 1. notifications and regulations for issue of capital and for listing of securities issued by the Government. 10 per Equity Share. Abridged Letter of Offer. through this Letter of Offer.363. 2008. with a right to renounce.776 Equity Shares of Rs. the provisions of the Act. authorised the increase in the issued capital of the Bank. Fractional Entitlements For Equity Shares being offered on a rights basis under this Issue. guidelines issued by SEBI. Basis for the Issue The Equity Shares are being offered for subscription for cash to those existing Equity Shareholders of the Bank.580 per Equity Share.11/16/2005BOA) dated January 2.259. has been authorised by the Central Board pursuant to the resolution passed at its meetings held on January 14. fixed in consultation with the Designated Stock Exchange. Further.No. guidelines. is offering on a rights basis 105. Authority for the Issue As required by Section 5(3) of the Act. the RBI and/or other statutory authorities and bodies from time to time. are subject to the terms and conditions contained in this Letter of Offer. Entitlement Ratio The Equity Shares are being offered on a rights basis to the existing Equity Shareholders of the Bank in the ratio of 1 Equity Share for every 5 Equity Shares held as on Record Date. 2008. except the Government whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the Equity Shares held in dematerialised form and on the Register of Members of the Bank in respect of the Equity Shares held in physical form at the close of business hours on the Record Date of February 4. this rights issue. and the Banking Regulation Act. the fractional entitlement of such 295 . 2008 i. The eligible Equity Shareholders are entitled to 1 Equity Share for every 5 Equity Shares held on Record Date.04 million. 1949. if the shareholding of any of the Equity Shareholders is less than 5 Equity Shares or is not a multiple of five. Ranking of Equity Shares The Equity Shares allotted in this Issue shall be pari passu with the existing Equity Shares in all respects including dividend. The Equity Shares proposed to be issued on rights basis. the Central Government has. by its letter (no.590 for cash at a premium of Rs. terms and conditions as stipulated in the allotment advice or security certificate and rules as may be applicable and introduced from time to time.

right to receive surplus on liquidation.S. state securities laws and may not be offered. The Rights Entitlement referred to in this Letter of Offer is being offered in India. and under no circumstances is to be construed as. For example if an Equity Shareholder holds between one and four Equity Shares. but not in the United States. The Government will subscribe to the Equity Shares through an issue of SLR marketable Government bonds in lieu of cash. except in a transaction exempt from the registration requirements of the Securities Act. or for the account or benefit of. right to receive offers for rights shares and be allotted bonus shares. or any U. Terms of Payment Full amount of Rs. "Basis of Allotment" on page [●]. 1949. However.590 per Equity Share is payable on application. if announced. Shareholders whose fractional entitlements are being ignored would be given preference in allotment of one additional Equity Share each if they apply for additional Equity Share(s). resold or otherwise transferred within the United States of America or the territories or possessions thereof or to. 1955 and the Banking Regulation Act. “U. right to vote on a poll in person or by proxy. an offering of any shares or rights for sale in the United States or as a 296 . he will be entitled to 1 Equity Share on a rights basis. The Issue to which this Letter of Offer relates is not. right to attend general meetings and exercise voting powers. 10 per share Towards Share Capital Rs. he will be entitled to Nil Equity Shares on a rights basis. Please see. Note: Only registered equity shareholders (or in case of joint holders. the equity shareholders shall have the following rights: • • • • • • • right to receive dividend. Such equity shareholders are entitled to apply for additional Equity Shares. Rights of the Equity Shareholder Subject to applicable laws. The payment towards the Equity Shares offered will be applied as under: Rs. right to free transferability of shares. they cannot renounce the same in favour of third parties. No Offer in the United States The Rights Entitlement and the Equity Shares of the Bank have not been and will not be registered under the Securities Act.Shareholders shall be ignored for the purpose of entitlement. and such other rights as may be available to a shareholder of the Bank as prescribed by the Act. He will also be given a preference for allotment of one additional Equity Share if he has applied for the same. 1. 1580 per shareTowards Securities Premium Account The Government has issued a letter of commitment towards the amount to be subscribed. Persons” (as defined in Regulation S under the Securities Act). unless prohibited by law. For example if an Equity Shareholder holds between five and ten Equity Shares.S. CAFs with zero entitlement will be non-negotiable/non-renouncable. those whose names appear first on the Register of Members/ list of beneficial owners in the records of the Bank) shall be entitled to these rights. He will be given a preference for allotment of one additional Equity Share if he has applied for additional Equity Share(s). Those Equity Shareholders who have a holding of less than five Equity Shares and are therefore entitled to zero Equity Shares under this Issue shall be despatched a CAF with zero entitlement. sold. if declared. State Bank of India General Regulations.

and any invitation. where appropriate. This European Economic Area selling restriction is in addition to any other selling restriction set out below. if not so authorised or regulated. or in any other circumstances falling within Article 3(2) of the Prospectus Directive. United Kingdom Restrictions This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to 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. no Equity Shares may be offered. as defined pursuant to Article 100 of Legislative Decree No. Neither the Bank nor any person acting on behalf of the Bank will accept subscriptions from any person. if made. falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). approved in another Relevant Member State and notified to the competent authority in that Relevant Member State. 58 of 24 February. who appears to be. accordingly. (2) a total balance sheet of more than €43. nor may copies of this document or of any other document relating to the Equity Shares be distributed in the Republic of Italy. would result in requiring registration of this Letter of Offer with the United States Securities and Exchange Commission. offer or agreement to subscribe. a resident of the United States and to whom an offer. (c) provided that no such offer of Equity Shares shall result in a requirement for the publication by the Bank or any Manager of a prospectus pursuant to Article 3 of the Prospectus Directive.solicitation therein of an offer to buy any of the said shares or rights. as shown in its last annual or consolidated accounts. sold or delivered. Any person who is not a relevant person should not act or rely on this document or any of its contents. a “Relevant Member State”) an offer of the Equity Shares to the public may not be made in that Relevant Member State prior to the publication of a prospectus in relation to the Equity Shares which has been approved by the competent authority in that Relevant Member State or. if they have been implemented in that Relevant Member State: (a) (b) to legal entities which are authorised or regulated to operate in the financial markets or. the expression an “offer of Equity Shares to the public” in relation to any Equity Shares 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 the Equity Shares to be offered so as to enable an investor to decide to purchase or subscribe for the Equity Shares. as amended (the Financial Services Act) and the relevant 297 . to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year.000. or who the Bank or any person acting on behalf of the Bank has reason to believe is. European Economic Area Restrictions In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive at any relevant time (each. 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. 1998.000 and (3) an annual net turnover of more than €50. except: (i) to qualified investors (investitori qualificati). For the purpose of this provision. The Equity Shares are only available to. except that an offer to the public in that Relevant Member State of any Equity Shares may be made at any time under the following exemptions under the Prospectus Directive.000. all in accordance with the Prospectus Directive. this Letter of Offer should not be forwarded to or transmitted in or into the United States at any time. or the agent of any person. and other persons to whom it may lawfully be communicated. purchase or otherwise acquire such Equity Shares will be engaged in only with. Accordingly. Republic of Italy Restrictions The Issue of the Equity Shares has not been registered pursuant to Italian securities legislation and. relevant persons.000. whose corporate purpose is solely to invest in securities.

2008. Notices All notices to the Equity Shareholder(s) required to be given by the Bank shall be published in one English national daily with wide circulation. first paragraph. they shall be deemed to hold the same as joint tenants with the benefit of survivorship. The Bank has agreed in the Deposit Agreement that it will. of CONSOB Regulation No. sale or subscription by the Depositary or the Holders. 2007 (as amended from time to time) and Legislative Decree No. In case of holding of Equity Shares in physical form. However. 2003. 11971 of 14 May. 2003/71/EC of 4 November. unless prohibited by applicable law. nomination facility is not available to Shareholders. The Bank has received in-principle approval from the BSE through its letter no. 385 of 1 September. Joint Holders Where two or more persons are registered as the holders of any Equity Shares. CONSOB Regulation No. Nominations registered with respective Depositary Participant (“DP”) of the applicant would prevail. DCS/PREF/JA/IPRT/3109/07-08 dated January 31. and in Article 2 of Directive No. Listing and trading of Equity Shares The Bank’s existing Equity Shares are currently traded on the Stock Exchanges under the ISIN SBIN. 2008 and from NSE through its letter no. or (ii) in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Financial Services Act and Article 33. 11971). Nomination In terms of the Act. sale or delivery of the Equity Shares or distribution of copies of this document or any other document relating to the Equity Shares in the Republic of Italy under (i) or (ii) above must be: (a) made by an investment firm. and. one Hindi national daily with wide circulation and one regional language daily newspaper with wide circulation and/or will be sent by ordinary post / registered post / speed post to the registered holders of the Equity Share from time to time. use all reasonable endeavours to facilitate any such distribution. as amended from time to time. if the Bank notifies the Depositary that registration is required in any jurisdiction under an applicable law of the rights or securities to be distributed for the Depositary 298 . 1996 (“Deposit Agreement”).implementing CONSOB regulations. In case the allotment of Equity Shares is in dematerialised form. The fully paid up Equity Shares allotted pursuant to this Issue will be listed as soon as practicable but in no case later than 10 days from the date of allotment. The fully paid up Equity Shares proposed to be issued on a rights basis shall be listed and admitted for trading on the BSE and NSE under the existing ISIN for fully paid Equity Shares of the Bank. NSE/LIST/65582-E dated January 30. (b) GENERAL TERMS OF THE PRESENT ISSUE Market lot The Equity Shares of the Bank are tradable only in dematerialised form. as amended (Regulation No. as amended (the Banking Act). 1993. 16190 of 29 October. the Bank would issue to the allottees one certificate for the Equity Shares allotted to each folio (“Consolidated Certificate”). if requested. The GDRs with respect to the Equity Shares of the Bank issued by Bank of New York as depositary (“Depository”) are currently listed on the London Stock Exchange pursuant to the Deposit Agreement dated October 10. Any applicant desirous of changing the existing nomination is requested to inform its respective DP. Any offer. and in compliance with any other applicable laws and regulations or requirement imposed by CONSOB or other Italian authority. give its consent to. The market lot for Equity Shares in dematerialised mode is 1. there is no need to make a separate nomination for the Equity Shares to be allotted in this Issue. bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act. 1999.

either in full or in part. the Bank shall pay interest calculated at the rate of 15%. the Bank has been granted approval under Section 5(3) of the Act approving the increase in the Bank’s issued capital from Rs. The Government will create a separate securities redemption fund to redeem the SLR Securities. the applicant may request the Registrars to the Issue. In line with the Government’s decision. 2008. for issue of a duplicate CAF. the Government will issue the requisite number of SLR Securities worth the aggregate price of the Equity Shares constituting its entitlement in the Issue. Subscription by the Government In terms of the Government’s Letter (No. The Bank is making this issue of Equity Shares on a rights basis only to the shareholders of the Bank who have an Indian address. Neither the Bank nor the depositary shall be liable to register such rights or securities and they shall not be liable for any losses. 11/16/ 2005. F/ 11/ 7/ 2007. against the simultaneous allotment of Equity Shares by the Bank. 526. If there is a delay beyond eight days after the date from which the Bank becomes liable to pay the amount (i. The Government has advised the Bank to complete the entire process by March 31. 42 days after closure of the Issue). The process of subscription by the Government will be as follows: 1. to avail the benefit of the Issue proceeds for the purpose of ensuring capital adequacy for the Financial Year 2008. the Government has agreed to issue a letter of commitment on or before the date of closure of the Issue. 2. 2007. (mentioned above).BOA) dated January 2. In case the original CAF is not received by the applicant or is misplaced by the applicant. F/No. Minimum Subscription If the Bank does not receive a minimum subscription of 90% of the Issue. 2007. Acceptance of the Issue You may accept the Issue and apply for the Equity Shares. by filling Part A of the enclosed CAFs and submitting the same along with the application money payable to State Bank of India or any of the collection branches as mentioned on the reverse of the CAF before the close of the business hours on or before the Issue Closing Date or such extended time as may be specified by the Central Board of Directors of the Bank in this regard. the Bank proposes to treat the aforesaid letter of commitment issued by the Government as part of the minimum subscription portion of the Issue in terms of SEBI (DIP) Guidelines. the Bank shall forthwith refund the entire subscription amount received within 42 days from the date of closure of the Issue. Further. DP ID Number. Accordingly. Subsequent to the issue of the letter of commitment by the Government and after the closure of the Issue. 3.to be able to offer such rights or distribute such securities to the Holders and to sell the securities represented by such rights. in terms of the Government’s Letter (Letter No. the Government has intimated to the Bank that the cabinet has granted its approval for investing approximately Rs. The distribution of this Letter of Offer and the issue of Equity Shares on a rights basis to persons in certain jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. The Government will subscribe to Equity Shares to the extent mentioned in its letter dated December 3. The consideration for the same will be the SLR Securities. 650 crores. 2008. the Depositary will not offer such rights or distribute such securities to the Holders unless and until the Bank notifies the Depositary that the necessary registration has been effected.e.30 crores to Rs. Procedure for Application The CAF for Equity Shares would be printed in black ink for all Equity Shareholders. by furnishing the registered folio number. 10. damages or expenses resulting from any failure to do so. Client ID Number and their full name and address.BOA) dated December 3. Payment by the Government will be made on the date of allotment.000 crores in the Issue by issuing SLR marketable government securities (the “SLR Securities”) towards the Government’s Rights Entitlement. Applicants at centres not covered by the branches of collecting banks can send their CAF together with the cheque drawn at par on a local bank at Mumbai/demand draft payable at Mumbai to the 299 .

2003. this will render the application invalid. Renunciation This Issue includes a right exercisable by you to renounce the Equity Shares offered to you either in full or in part in favour of any other person or persons. minors. apply for his entitlement in full and apply for additional Equity Shares. Option available to the Equity Shareholders The CAF clearly indicates the number of Equity Shares that the Equity Shareholder is entitled to.Registrar to the Issue by registered post. By virtue of Circular No. To renounce in part/or renounce the whole to more than one person(s) If you wish to either accept this offer in part and renounce the balance or renounce the entire offer under this Issue in favour of two or more renouncees. HUF. Applications not accompanied by the aforesaid approvals are liable to be rejected. any society (unless the same is registered under the Societies Registration Act. partnership firm(s) or their nominee(s). Accordingly. The person in whose favour renunciation has been made should complete and sign Part ‘C’ of the CAF. Such applications sent to anyone other than the Registrar to the Issue are liable to be rejected. Procedure for renunciation To renounce all the Equity Shares offered to a shareholder in favour of one renouncee If you wish to renounce the offer indicated in Part ‘A’. the existing Equity Shareholders of the Bank who do not wish to subscribe to the Equity Shares being offered but wish to renounce the same in favour of renouncees shall not renounce the same (whether for consideration or otherwise) in favour of OCB(s). In case of joint renouncees. 2003 issued by the RBI. 14 dated September 16. In case of joint holding. Overseas Corporate Bodies (“OCBs”) have been derecognised as an eligible class of investors and the RBI has subsequently issued the Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)) Regulations. in whole. then he can: • • • • apply for his entitlement of Equity Shares in full. as the case may be). Your attention is drawn to the fact that the Bank shall not allot and/or register any Equity Shares in favour of more than three persons (including joint holders). apply for his entitlement of Equity Shares in part and renounce the other part of the Equity Shares. Part ‘A’ of the CAF must not be used by the renouncee(s) as this will render the application invalid. If the Equity Shareholder applies for an investment in Equity Shares. Any renunciation from Resident Indian Shareholder(s) to eligible Non-resident Indian(s) or from eligible Non-resident Indian Shareholder(s) to Resident Indian(s) or from eligible Non-resident Indian shareholder(s) to other eligible Non-resident Indian(s) is subject to the renouncer(s)/renouncee(s) obtaining the approval of the FIPB and/or necessary permission of the RBI under the FEMA and such permissions should be attached to the CAF. please complete Part ‘B’ of the CAF. Part ‘A’ of the CAF must not be used by any person(s) other than those in whose favour this offer has been made. 1860 or any other applicable law relating to societies and is authorised under its constitution or bye-laws to hold Equity Shares. Submission of the enclosed CAF to the Banker to the Issue at its collecting branches specified on the reverse of the CAF with the form of renunciation (Part ‘B’ of the CAF) duly filled in shall be conclusive evidence for the Bank of the person(s) applying for Equity Shares in Part ‘C’ of the CAF to receive allotment of such Equity Shares. If used. For this purpose you will have to apply to the Registrar to the Issue. the CAF must be first split into requisite number of forms. apply for his entitlement of Equity Shares in part. all joint holders must sign Part ‘B’ of the CAF. The renouncees applying for all the Equity Shares renounced in their favour may also apply for additional Equity Shares. Please indicate your requirement of split forms in the space provided for this purpose in Part ‘D’ of the CAF and return the entire CAF to the Registrar to the Issue so as to reach them at the latest by the close of 300 . all joint renouncees must sign this part of the CAF. Renouncee(s) will have no further right to renounce any Equity Shares in favour of any other person.

Action Required Accept all or part of your entitlement without renouncing Fill in and sign Part A. Requests by the applicant for the split application form should reach the Registrar to the Issue on or before March 3. Even a change in the sequence of the name of joint holders shall amount to renunciation and the procedure. Forms once split cannot be split further. does not agree with the specimen registered with the Bank. as the case may be. Please see paragraph entitled "Foreign Ownership Restrictions" in "Regulations and Policies" on page [●] of this Letter of Offer. who has renounced the Equity Shares. this will render the application invalid. On receipt of the required number of split forms from the Registrar. it shall amount to renunciation and the procedure as stated above for renunciation shall have to be followed. using the enclosed CAFs: Option Available 1. without renouncing them in whole or in part in favour of any other person(s). In case the signature of the Equity Shareholder(s). Where the number of additional Equity Shares applied for exceeds the number available for allotment. Allotment of additional Equity Shares applied to under the Issue will be subject to applicable foreign ownership restrictions. Split form(s) will be sent to the applicant(s) by post at the applicant’s risk. who is/are not already a joint holder with you. However. (All joint holders must the balance.business hours on the last date of receiving requests for split forms. the allotment would be made on a fair and equitable basis in consultation with the Designated Stock Exchange. You may exercise any of the following options with regard to the Equity Shares offered. Change and/or introduction of additional holders If you wish to apply for Equity Shares jointly with any other person(s). this right of renunciation is subject to the express condition that the Bank shall be entitled in its absolute discretion to reject the request for allotment from the renouncee(s) without assigning any reason thereof. Renouncee(s) The person(s) in whose favour the Equity Shares are renounced should fill in and sign Part ‘C’ of the Application Form and submit the entire Application Form to the Bankers to the Issue or to the collection centres to the Issue on or before the Issue Closing Date along with the application money in full. Only the Equity Shareholder to whom this Letter of Offer has been addressed shall be entitled to renounce and to apply for split application forms. Applications for additional Equity Shares shall be considered and allotment shall be in the manner prescribed under the section entitled ‘Basis of Allotment’ on page [●] of this Letter of Offer. The summary of options available to the Equity Shareholder is presented below. the procedure. shall have to be followed. If used. Additional Equity Shares You are eligible to apply for additional Equity Shares over and above the number of Equity Shares you are entitled to. Requests for split forms should be made for a minimum of one Equity Share and will only be accepted from Equity Shareholders whose entitlement is more than ten shares. provided that you have applied for all the Equity Shares offered. as described above. as described above. shall have to be followed. not more than three. the application is liable to be rejected. 2008. Instructions for Options Please note that: • • • • • Part ‘A’ of the CAF must not be used by any person(s) other than the Equity Shareholder to whom this Letter of Offer has been addressed. sign) 301 .

must reach the office of the Registrar to the Issue before the Issue Closing Date and should contain the following particulars: • • Name of Issuer. fill in and sign Part B indicating the number of Equity Shares renounced and hand it over to the renouncees.Option Available 2. if any. 3. Please note that those who are making the application in the duplicate form should not utilise the original CAF for any purpose including renunciation. in the same order as per specimen recorded with the Bank. The envelope should be superscribed “SBI—Rights Issue” and should be postmarked in India. The renouncees must fill in and sign Part C. Action Required Fill in and sign Part A including Block III relating to the acceptance of entitlement and Block IV relating to additional Equity Shares. Please note that the request for a duplicate CAF should reach the Registrar to the Issue within 15 days from the Issue Opening Date. Availability of duplicate CAF In case the original CAF is not received. 4. Name and address of the Equity Shareholder including joint holders. he/she shall face the risk of rejection of both the applications. Renounce your entitlement in full to one person (joint renouncees are considered as one). This will be treated as a renunciation. being State Bank of India. 302 . OR Renounce your entitlement to all the Equity Shares offered to you to more than one renounce. or is misplaced by the applicant. For the Equity Shares you wish to accept. Fill in and sign Part B and the renouncees must fill in and sign Part C. Accept your entitlement in full and apply for additional Equity Shares. 5. For the Equity Shares you wish to renounce. net of bank and postal charges payable at Mumbai which should be drawn ‘SBI Rights Issue’ or ‘SBI Rights IssueNR’ and send the same by registered post directly to the Registrar to the Issue. Splitting will be permitted only once. duly signed by the applicants including joint holders. The application on plain paper. On receipt of the Split Form take action as indicated below. along with Demand Draft. Each of the renouncees should fill in and sign Part C for the Equity Shares accepted by them. Introduce a joint holder or change the sequence of joint holders. (All joint renouncees must sign) Fill in and sign Part D (all joint holders must sign) requesting for Split Application Forms. (All joint holders must sign) Fill in and sign Part B (all joint holders must sign) indicating the number of Equity Shares renounced and hand it over to the renouncee. fill in and sign Part A. the Registrar to the Issue will issue a duplicate CAF on the request of the applicant who should furnish the registered folio number/DP and Client ID number and his/ her full name and address to the Registrar to the Issue. even if it is received/found subsequently. Application on Plain Paper An Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate CAF may make an application to subscribe to the Issue on plain paper. If the applicant violates any of these requirements. Send the CAF to the Registrar to the Issue so as to reach them on or before the last date for receiving requests for Split Forms. Accept a part of your entitlement and renounce the balance to one or more renouncee(s).

However. irrespective of the total value of the Equity Shares applied for pursuant to the Issue. Allotment to renouncee(s) shall be subject to applicable regulations including regulations relating to foreign shareholding limit. Number of Equity Shares held as on Record Date. State Bank of India General Regulations. Particulars of cheque/draft.8%. (b) For Equity Shares being offered on a rights basis under this Issue. PAN of the applicant and for each applicant in case of joint names. the total foreign holding is 19. Last date of Application The last date for submission of the duly filled in CAF is March. The existing permissible foreign investment limit in the Bank as prescribed by the RBI is 20%. 18 2008. and the approval of the Designated Stock Exchange. • • Please note that those who are making the application otherwise than on original CAF shall not be entitled to renounce their rights and should not utilise the original CAF for any purpose including renunciation even if it is received subsequently. Presently. in terms of SEBI letter no. If the CAF/plain paper application together with the amount payable is not received by the Banker to the Issue/Registrar to the Issue on or before the close of banking hours on the aforesaid last date or such date as may be extended by the Central Board/Committee of Directors. the fractional entitlement of such Shareholders shall be ignored. if any. CFD/ DIL/SM/ 113422 dated January 10. 2008. 1955. number of Equity Shares held on Record date divided by five). Total number of Equity Shares applied for. he/she shall face the risk of rejection of both the applications. INVESTORS PLEASE NOTE THAT THE EQUITY SHARES OF THE BANK CAN BE TRADED ON THE STOCK EXCHANGES ONLY IN DEMATERIALISED FORM. The Bank shall refund such application amount to the applicant without any interest thereon. Representation that the Equity Shareholder is not in the United States at the time of making the application. Savings/Current Account Number and name and address of the bank where the Equity Shareholder will be depositing the refund order. The Issue will be kept open for a minimum of 30 (thirty) days and the Central Board or any committee thereof will have the right to extend the said date for such period as it may determine from time to time but not exceeding 60 (sixty) days from the Issue Opening Date. Signature of Equity Shareholders to appear in the same sequence and order as they appear in the records of the Bank. 1590 per Equity Share. Number of additional Equity Shares applied for. Number of Rights Equity Shares applied for.• • • • • • • • • • Registered Folio Number/DP and Client ID no. Number of Rights Equity Shares entitled (i. If the applicant violates any of these requirements.e. the provisions of the Act. in full or in part. Total amount paid at the rate of Rs. the offer contained in this Letter of Offer shall be deemed to have been declined and the Central Board/Committee of Directors shall be at liberty to dispose of the Equity Shares hereby offered. if the shareholding of any of the Equity Shareholders is less than five Equity Shares or is not a multiple of five. as provided under the section “Basis of Allotment”. Basis of Allotment Subject to the provisions contained in this Letter of Offer. the Central Board will proceed to allot the Equity Shares in the following order of priority: (a) Full allotment to those Equity Shareholders who have applied for their Rights Entitlement either in full or in part and also to the renouncee(s) who has/have applied for Equity Shares renounced in their favour. Shareholders whose fractional entitlements are being ignored would be given 303 . shareholders of the Bank holding shares up to / including 100 Equity Shares are exempted from quoting the PAN.

the existing Equity Shareholders of the Bank who do not wish to subscribe to the Equity Shares being offered but wish to renounce the same in favour of renouncees shall not renounce the same (whether for consideration or otherwise) in favour of OCB(s). having applied for all the Equity Shares renounced in their favour. and shall be subject to conditions specified under ‘Additional Subscription by Non Residents’ on page [●]. The allotment of such Equity Shares will be at the sole discretion of the Central Board/Committee of Directors in consultation with the Designated Stock Exchange. 2003. this Issue being a rights issue and not preferential allotment under the SEBI (DIP) Guidelines.a. agree to such terms and conditions as may be stipulated by the RBI while approving the allotment of Equity Shares. (c) Allotment to the Equity Shareholders who. No over subscription shall be retained by the Bank. The Central Board of Directors may. 14 dated September 16. Allotment under this head shall be considered if there are any unsubscribed Equity Shares after allotment under (a) above. (d) Allotment to renouncees who. having applied for all the Equity Shares offered to them as part of the Issue. within a period of 42 days from the date of closure of the Issue. The basis of allotment shall be finalised by the Central Board in consultation with NSE. After taking into account the allotments made under (a). The allotment of such additional Equity Shares will be made as far as possible on an equitable basis having due regard to the number of Equity Shares held by them on the Record Date. Applications not accompanied by the aforesaid approvals are liable to be rejected.preferential allotment of one additional Equity share for each Shareholder if they apply for additional share(s). 304 . Subscription by eligible Non Residents Existing eligible non-resident shareholders or eligible non-resident applicants may apply for Rights Entitlement/issue of additional Equity Shares over and above the Rights Entitlements and the Bank may allot the same subject to the condition that the overall issue of shares to eligible non-residents in the total paid up capital of the Bank does not exceed the foreign investment ceiling prescribed by the RBI. Overseas Corporate Bodies (“OCBs”) have been derecognised as an eligible class of investors and the RBI has subsequently issued the Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)) Regulations. as part of the Issue and not a preferential allotment and shall be subject to conditions specified under ‘Additional Subscription by Non Residents’ on page [●]. Accordingly. subject to the same conditions including restrictions in regard to the repatriability as are applicable to the original shares against which Rights Entitlement shares are issued. By virtue of the Circular No. In case of delay in allotment the Bank shall pay interest on the same at a rate of 15% p. have applied for additional Equity Shares provided there is surplus available after making full allotment under (a). so as to ensure that the issue of shares to eligible non-residents in the total paid-up capital of the Bank does not exceed the foreign investment ceiling prescribed by the RBI. (b) and (c) above. as a part of the Issue and not a preferential allotment. If the number of Equity Shares required for allotment under this head is more than the number of shares available after allotment under (a) above. Any renunciation from Resident Indian Shareholder(s) to eligible Non-resident Indian(s) or from eligible Non-resident Indian Shareholder(s) to Resident Indian(s) or from eligible Non-resident Indian shareholder(s) to other eligible Non-resident Indian(s) is subject to the renouncer(s)/renouncee(s) obtaining the approval of the FIPB and/or necessary permission of the RBI under the FEMA and such permissions should be attached to the CAF. the un-subscribed portion shall be disposed of by the Central Board/Committee of Directors upon such terms and conditions and to such person/persons and in such manner as the Central Board/Committee of Directors may in its absolute discretion deem fit. which is the Designated Stock Exchange. The allotment of such Equity Shares will be at the sole discretion of the Central Board/Committee of Directors in consultation with the Designated Stock Exchange. if there is still any under subscription. 2003 issued by the RBI. provided there is an under-subscribed portion after making full allotment in (a) and (b) above. which stands at 20% of its paid-up capital (inclusive of GDR holders and FIIs). the Bank will have the discretion in accepting/rejecting the applications for renunciation of shares. the allotment would be made on a fair and equitable basis in consultation with the Designated Stock Exchange. (b). at its absolute discretion. (c) and (d) above. The existing permissible foreign investment limit in the Bank as prescribed by the RBI is 20%. Additionally. have also applied for additional Equity Shares.

Mumbai. if any. The same would be marked ‘Account Payee only’ and would be drawn in favour of the sole/first applicant. IFSC Code will be obtained from the website of RBI as on a date immediately prior to the date of payment of a refund. 1. Chandigarh. Depository Participant’s name. duly mapped with MICR numbers. Refund orders up to the value of Rs. Bhubaneshwar. the Bank will issue the corresponding share certificates. except where the applicant. Patna and Thiruvananthapuram. If such money is not repaid within eight days from the day the Bank becomes liable to pay it. being eligible. within a period of six (6) weeks from the Issue Closing Date. In case of those applicants who have opted to receive Equity Shares subscribed in dematerialised form using electronic credit under the depository system. 2. Any refund order exceeding Rs. Applicants to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary post intimating them about the mode of credit of refund within a period of six (6) weeks from the Issue Closing Date. if any. Mode of making refunds The payment of a refund. Hence. The payment of refunds is mandatory for applicants having a bank account at any of the abovementioned fifteen centres. NEFT (National Electronic Fund Transfer) — Payment of a refund shall be undertaken through NEFT wherever the applicants’ bank has been assigned the Indian Financial System Code (IFSC). from the Depositories. Nagpur. New Delhi. 305 . refunds will be made on the basis of the bank account details provided by them in the Composite Application Form. 1. Chennai. In case of applicants applying for physical shares. Payment of Refund Applicants should note that on the basis of the name of the applicants. In case of those Applicants who have opted to receive Equity Shares subscribed in physical form. Applicants residing at those centres where clearing houses are managed by the RBI. Kolkata.500 would be sent by registered post/speed post to the sole/first applicant’s registered address. opts to receive a refund through direct credit or RTGS. would be done through various modes in the following order of preference: 1. Please note that failure to do so could result in delays in credit of refunds to shareholders at the shareholders sole risk and neither the Lead Manager nor the Bank nor the Registrar shall have any responsibility and undertake any liability for the same. Bangalore. This mode of payment of refunds would be subject to availability of complete bank account details including the MICR code as appearing on a cheque leaf.Underwriting The present Issue is not underwritten. Depository Participant. Jaipur.Identification number (DP ID) and Beneficiary Account Number provided by them in the Composite Application Form. Adequate funds would be made available to the Bankers to the Issue for this purpose. applicants are advised to immediately update their bank account details as appearing on the records of the depository participant.500 would be sent under certificate of posting. Kanpur. will get refunds through ECS only (Electronic Clearing Service) except where applicants are otherwise disclosed as applicable/eligible to get refunds through direct credit and RTGS. ECS-Payment of a refund would be done through ECS for applicants having an account at any of the following fifteen centres: Ahmedabad. the Bank shall pay that money with interest at the rate of 15%. Such refund orders would be payable at par at all places where the applications were originally accepted. Guwahati. an advice regarding their credit of the Equity Shares shall be given separately. Hyderabad. Allotment/Refund The Bank will issue and dispatch share certificates/demat credit and/or letters of regret along with refund order or credit the allotted securities to the respective beneficiary accounts. if any. available to that particular bank branch. which can be linked to a Magnetic Ink Character Recognition (MICR). Wherever the applicants have registered their nine digit MICR number and their bank account number while opening and operating the demat account. the Registrar to the Issue will obtain from the Depository the bank account details including the nine digit Magnetic Ink Character Recognition (MICR) code as appearing on a cheque leaf.

The procedure for availing the facility for allotment of Equity Shares in this Issue in electronic form is as follows: • Open a beneficiary account with any depository participant (care should be taken that the beneficiary account should carry the name of the holder in the same manner as is exhibited in the records of the Bank. the refund shall be made through ECS. the particulars of the applicant’s bank account are mandatorily required to be given for printing on the refund orders. The Bank will in no way be responsible if any loss occurs through these instruments falling into improper hands either through forgery or fraud. if any. Charges. The Equity Shares of the Bank will be listed on the BSE. 1. In case the Bank issues allotment advice. Allotment advice/Share Certificates/Demat Credit Allotment advice/share certificates/demat credit will be dispatched to the registered address of the first named applicant or respective beneficiary accounts will be credited within (six) 6 weeks. NSE and Ahmedabad. have the option to receive the refund through RTGS. the relative share certificates will be dispatched within one month from the date of allotment. 5.the same will be duly mapped with the IFSC Code of that particular bank branch and the payment of a refund will be made to the applicants through this method. the refund orders will be despatched under certificate of posting for value up to Rs. Bank account particulars will be printed on the refund orders/refund warrants which can then be deposited only in the account specified. levied by the applicant’s bank receiving the credit would be borne by the applicant. the beneficiary account should be opened carrying the names of the holders in the same order as with the Bank). No separate applications for securities in physical and/or dematerialised form should be made. Printing of Bank Particulars on Refund Orders As a matter of precaution against possible fraudulent encashment of refund orders due to loss or misplacement. 3. The Bank has also signed a tripartite agreement with Central Depository Services (India) Limited (CDSL) and the Registrar which enables the Investors to hold and trade in securities in a dematerialised form. if any. If such applications are made. the application for physical securities will be treated as multiple applications and is liable to be rejected. For all other applicants. 4. The Bank in consultation with Lead Managers may decide to use NEFT as a mode of making refunds. Allottees are requested to preserve such allotment advice (if any) to be exchanged later for share certificates. Charges.500 and through Speed Post/ Registered Post for refund orders of Rs. pay orders or demand drafts drawn in favour of the sole/first applicant and payable at par. In case of Investors having various 306 . will be given the securities in physical form. In this Issue. from the date of closure of the subscription list.500 and above. including those who have not updated their bank particulars with the MICR code. levied by the Refund Bank(s) for the same would be borne by the Bank. if any. 1 million. The Bank signed a tripartite agreement with National Securities Depository Limited (NSDL) and the Registrar which enables the Investors to hold and trade in securities in a dematerialised form. 1. Charges. RTGS — Applicants having a bank account at any of the abovementioned fifteen centres and whose refund amount exceeds Rs. Calcutta. Applications. which do not accurately contain this information. the allottees who have opted for Equity Shares in dematerialised form will receive their Equity Shares in the form of an electronic credit to their beneficiary account with a depository participant. Such refunds will be made by cheques. instead of holding the securities in the form of physical certificates. instead of holding the securities in the form of physical certificates. Delhi and Madras Stock Exchanges. Investor will have to give the relevant particulars for this purpose in the appropriate place in the CAF. levied by the relevant bank(s) for the same would be borne by the Bank. Option to receive Equity Shares in Dematerialised Form Applicants to the Equity Shares of the Bank issued through this Issue shall be allotted the securities in dematerialised (electronic) form at the option of the applicant. Such eligible applicants who indicate their preference to receive the refund through RTGS are required to provide the IFSC code in the CAF. Direct Credit-Applicants having bank accounts with the select banks shall be eligible to receive refunds through direct credit. In the case of joint holding. In the event the same is not provided.

if any. Responsibility for correctness of information (including applicant’s age and other details) filled in the CAF vis-à-vis such information with the applicant’s depository participant. Applicants should ensure that the names of the applicants and the order in which they appear in CAF should be the same as registered with the applicant’s depository participant. the Investors will have to open separate accounts for such holdings. refund orders (if any) would be sent directly to the applicant by the Registrar to the Issue. 2008.folios in the Bank with different joint holders. Those equity shareholders who have already opened such Beneficiary Account(s) need not adhere to this step. would rest with the applicant. details of occupatio