Private and Confidential Information Memorandum

STATE BANK OF MYSORE
(Associate of the State Bank of India) Head Office: K. G. Road, Bangalore – 560 009, Karnataka. Tel No: 080 2235 3901 3909 Fax: 080 2228 3684 Contact Person: Mr. S. Shiva Kumar Email: cmshares@sbm.co.in Website: www.mysorebank.com PRIVATE PLACEMENT OF UNSECURED, REDEEMABLE, NON-CONVERTIBLE, SUBORDINATED BONDS AGGREGATING TO Rs. 250 CRORES GENERAL RISKS Investors are advised to read the Risk factors carefully before taking an investment decision in this offering. For taking an investment decision the investor must rely on their examination of the offeror and the offer including the risks involved. The securities have not been recommended or approved by Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this document. Specific attention of investors is invited to the Risk Factors on page 9 of the Information Memorandum of Private Placement. OFFEROR’S ABSOLUTE RESPONSIBILITY The Offeror, having made all reasonable inquiries, accepts responsibility for, and confirms that this Information Memorandum contains all information with regard to the Offeror and the Offer, which is material in the context of the Offer, that the information contained in this Information Memorandum is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. The Arranger is not required to file this document with SEBI/ROC as it is on private placement and not an Offer to the general Public. CREDIT RATING ICRA Ltd. has assigned a LAAA (pronounced L Triple A) rating to the captioned debt programme of the Bank. This rating indicates highest credit quality rating assigned by ICRA. The rated instrument carries the lowest credit risk. Also, CRISIL Limited has assigned a ‘AAA/Stable’ (Pronounced ‘Triple A with stable outlook’) rating to the captioned Bond issue. This rating indicates highest degree of safety with regard to timely payment of interest and principal on the instrument. The ratings are not recommendations to buy, sell or hold Securities and investors should take their own decision. The ratings may be subject to revision or withdrawal at any time by the assigning rating agencies and each rating should be evaluated independently of any other rating. The ratings obtained are subject to revision at any point of time in the future. The rating agencies have a right to suspend, withdraw the rating at any time on the basis of new information, etc. LISTING The Unsecured Redeemable Non-Convertible Subordinated Bonds are proposed for listing on the Debt Market Segment of The Stock Exchange, Mumbai. (‘BSE’)
Lead Arrangers to the Private Placement Registrars to the Placement

IDBI Capital Market Services Limited 8th Floor, Bakhtawar, 229, Nariman Point, Mumbai – 400 021. Tel: (022) – 56371212 Fax: (022) – 22885848 www.idbicapital.com Email: info@idbicapital.net

SBI Capital Markets Limited 202, Maker Tower ‘E’, Cuffe Parade, Mumbai – 400 005. Tel: 022 2218 9166 Fax: 022 2218 8332 www.sbicaps.com

Canbank Computer Services Limited R&T Centre, Naveen Complex, 4th Floor, # 14, M. G. Road, Bangalore – 560 001 Tel: 080 2532 0541/42/43. Fax: 080 2532 0544 Email: ccsirnt@vsnl.com

Offer Opens on: 22nd November, 2005

Offer Closes on: 28th November, 2005

TABLE OF CONTENTS Definitions and Abbreviations Disclaimer Risk Factors and Management Perception Part I I. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII. XIII. XIV. XV. Part II Declaration 103 Introduction General Information Capital Structure of the Bank Object of the Offering Terms of the Present Placement Tax Benefits Bank and Management Promoters, Group Companies, Joint Ventures and Associates Financial Statements Management Discussion and Analysis Outstanding Litigation, Defaults and Material Developments Other Regulatory and Statutory Disclosures Investor Grievances and Redressal System Main Provisions of the SBI (SB) Act Material Contracts and Documents for Inspection 18 18 21 23 24 36 40 58 65 80 82 84 89 90 100 3 7 9

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DEFINITIONS AND ABBREVIATIONS
DEFINITIONS Term(s) Description

Board/Board of Directors Book Closure/ Record Date Bonds SBM/Offeror/Bank Depository Depositories Act

The Board of Directors of State Bank of Mysore or a committee thereof The date of closure of register of Bond for payment of interest. Unsecured Redeemable Non-Convertible Subordinate Bonds State Bank of Mysore constituted under the State Bank of India (Subsidiary Banks) Act, 1959 A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time The Depositories Act, 1996, as amended from time to time

Depository Participant A depository participant as defined under the Depositories Act Director(s) Financial Year/Fiscal/FY FIPB Head Office of the Bank ITSL/Trustee Issue/Offer/ Private Placement Issuer/Offeror Information Memorandum/ Memorandum/ Offer Document I.T. Act Offer Size Director(s) of State Bank of Mysore unless otherwise specified Period of twelve months ended March 31 of that particular year Foreign Investment Promotion Board K. G. Road, Bangalore – 560 009, Karnataka. IDBI Trusteeship Services Ltd. Private Placement of the Bonds State Bank of Mysore The Offer Document for the Private Placement of Bonds

The Income-Tax Act, 1961, as amended from time to time 2500 Unsecured Redeemable Non-Convertible Subordinate Bonds of Face Value Rs. 10,00,000/- Each Aggregating Rs. 250 Crores.

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RBI Registrar SEBI SEBI Act SEBI Guidelines

The Reserve Bank of India Registrar to the Offer, in this case being Canbank Computer Services Limited. The Securities and Exchange Board of India constituted under the SEBI Act, 1992 Securities and Exchange Board of India Act, 1992, as amended from time to time SEBI (Guidelines for Disclosure and Investor Protection) 2000 issued by SEBI on January 27, 2000, as amended, including instructions and clarifications issued by SEBI from time to time

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ABBREVIATIONS

ALCO ALM AGL ARC AS BSE CAR CDR CDSL CRISIL CRAR CRR DICGC DP ECGC FDI FEDAI GoI GDP ICAI ICRA IGL MoF NDTL NPA NRI NSDL RBI RRBs SARFAESI Act SBI SBI (SB) Act SBM SEBI SLR The Bank The Board The Companies Act VRS

Asset-Liability Management Committee Asset Liability Management Aggregate Gap Limits Asset Reconstruction Companies Accounting Standard The Stock Exchange, Mumbai Capital Adequacy Ratio Corporate Debt Restructured Central Depository Services (India) Ltd. CRISIL Ltd. Capital to Risk-weighted Assets Ratio Cash Reserve Ratio Deposit Insurance and Credit Guarantee Corporation of India Ltd. Depository Participant Export Credit Guarantee Corporation of India Ltd. Foreign Direct Investment Foreign Exchange Dealers Association of India Government of India/Central Government Gross Domestic Product Institute of Chartered Accountants of India ICRA Ltd. Individual Gap Limits Ministry of Finance Net Demand and Time Liabilities Non-Performing Assets Non Resident Indians National Securities Depository Ltd. Reserve Bank of India Regional Rural Banks Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act State Bank of India State Bank of India (Subsidiary Banks) Act, 1959 State Bank of Mysore Securities and Exchange Board of India Statutory Liquidity Ratio State Bank of Mysore The Board of Directors of the Bank The Companies Act, 1956 Voluntary Retirement Scheme

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PRIVATE PLACEMENT OF BONDS ISSUED BY STATE BANK OF MYSORE Dear Sir/ Madam, State Bank of Mysore (“the Bank”) is proposing to issue Bonds on a private placement basis as described in this Memorandum. Investors are required to make payment through demand draft(s) / cheque(s) payable in favour of “State Bank of Mysore A/c-Bonds Issue” and crossed “Account Payee only”. The full face value of the Bonds has to be paid up on application. The Bank reserves the right to reject in full or part any or all of the offers received by them to invest in these Bonds without assigning any reason for such rejections. You are requested to confirm your acceptance to the terms and conditions outlined in this Memorandum of Private Placement by sending the Application Form along with the cheque(s) / demand draft(s) to the Sole Arrangers/Bank’s branches. Your acceptance of the terms and conditions outlined in this Memorandum will constitute an offer to invest in the above – referred Private placement and will be subject to acceptance by the Bank. Please note that this Private Placement Memorandum is restricted for circulation only to the investors to whom the above has been addressed personally and this Memorandum cannot be transferred/circulated to others. The information contained herein is to be retained in strict confidence. Should you require any further clarifications regarding the above-mentioned Private placement, we request you to contact the undersigned. Yours Faithfully, For State Bank of Mysore Sd/Authorised Signatory Place: Mumbai Date: 22nd November 2005

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DISCLAIMER This Memorandum of Private Placement (“Memorandum”) is neither a prospectus nor a statement in lieu of prospectus and does not constitute an offer to the public to subscribe for or otherwise acquire the Bonds issued by State Bank of Mysore (the Bank/the Offeror). The document is for the exclusive use of the Person(s)/Institution(s) to whom it is delivered and it should not be circulated or distributed to third party (ies). Apart from this Information Memorandum, no Offer Document or Prospectus has been prepared in connection with this Bond Offer and that no Prospectus in relation to the Issuer or the Bonds relating to this Offer has been delivered for registration nor such a document is required to be registered under the applicable laws. The Arranger is not required to file this document with SEBI/ROC/RBI as it is on private placement and not an Offer to the general Public. This Memorandum is issued by the Bank. The views contained in this Memorandum do not necessarily reflect the views of its directors, employees, affiliates, subsidiaries or representatives and should not be taken as such. The Memorandum has been prepared by the Bank to provide general information on the Bank and does not purport to contain all the information a potential investor may require. Where this Memorandum summarizes the provisions of any other document, that summary should not be relied upon and the relevant document should be referred to for the full effect of the provisions. The information relating to the Bank contained in the Memorandum is believed by the Bank to be accurate in all respects as of the date hereof. The Memorandum shall not be considered as a recommendation to purchase the bonds and recipients are urged to determine, investigate and evaluate for themselves, the authenticity, origin, validity, accuracy, completeness, adequacy or otherwise the relevance of information contained in this Memorandum. The recipients are required to make their own independent valuation and judgment of the Bank and the Bonds. It is the responsibility of potential investors to also ensure that they will sell these bonds in strict accordance with this Information Memorandum and other applicable laws, so that the sale does not constitute an offer to the public, within the meaning of the Companies Act 1956.The potential investors should also consult their own tax advisors on the tax implications relating to acquisition, ownership, sale or redemption of Bonds and in respect of income arising thereon. Investors are also required to make their own assessment regarding their eligibility for making investment(s) in the Bonds of the Bank. The Bank or any of its Directors, employees, advisors, affiliates, subsidiaries or representatives do not accept any responsibility and/ or liability for any loss or damage however arising and of whatever nature and extent in connection with the said information. Neither the Arranger nor any of their respective affiliates or subsidiaries have independently verified the information set out in this Memorandum or any other information (written or oral) transmitted or made to any prospective lender in the course of its evaluation of the Offeror. The Arranger make no representation or warranty, express or implied, as to the accuracy or completeness of the Information Memorandum, and the Arranger do not accept any responsibility for the legality, validity, effectiveness, adequacy or enforceability of any documentation executed or which may be executed in relation to this Offer. The recipients of this Memorandum agree that unless and until the definitive written agreements between the Bank and any such recipient with respect to a possible transaction have been executed and delivered and have become legally effective, and then only to the extent of the specified terms and provision of such definitive agreements, neither the Bank nor any of its Directors, employees, advisors, affiliates, subsidiaries or representatives shall be under any legal obligation of any kind what so ever with respect to any such transaction by virtue of the delivery of this Memorandum or its content or of any other written or oral expression by any of the Directors, employees, advisors, affiliates, subsidiaries or representatives of the Bank. Force Majeure The Bank reserves the right to withdraw the Offer prior to the earliest closing date in the event of any unforeseen development adversely affecting the economic and regulatory environment or otherwise. In such an event, the Bank will refund the application money, if any, along with interest payable on such application money, if any, without assigning any reason. This Information Memorandum is issued by the Bank and signed by its authorized signatory. Date:22nd November 2005 Sd/Authorised Signatory

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FORWARD-LOOKING STATEMENTS This Information Memorandum may contain certain “forward-looking statements”. These forward-looking statements generally can be identified by words or phrases such as we “believe”, “expect”, “estimate”, “anticipate”, “intend”, “plan” or other words or phrases of similar import. Similarly, statements that describe our objectives, plans or goals are also forward-looking statements. All forward-looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from our expectations include, among others: a) General economic and business conditions in India; b) Our ability to successfully implement our strategy, our growth and expansion plans and technological changes; c) Changes in the value of the Indian rupee and other currency changes; d) Changes in the Indian and international interest rates; e) Changes in laws and regulations that apply to the Indian Banking Industry; f) Increasing competition in, and the conditions of, the Indian Banking Industry; g) Changes in political conditions in India; and h) Changes in the foreign exchange control regulations in India. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. In accordance with SEBI requirements, our bank will ensure that investors in India are informed of material developments until such time as the grant of listing and trading permission by the Stock Exchanges.

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RISK FACTORS AND MANAGEMENT PERCEPTION THEREOF The Investors should carefully consider the following risk factors as well as the other details and information contained in this Information Memorandum in evaluating the Bank and its business before investing the Bonds offered by this Information Memorandum. INTERNAL RISK FACTORS 1. Contingent Liabilities As on March 31, 2005 the contingent liabilities of the Bank were at Rs.4776.85 crores comprising claims against the Bank not acknowledged as debts (Rs.16.02 crores), liability on account of outstanding forward exchange contracts (Rs. 3367.30 crores), guarantees on behalf of constituents (Rs.486.74crores), acceptances, endorsements and other obligations (Rs. 748.80 crores) and others (Rs. 1.06 crores). Management Perception The contingent liabilities have arisen in the normal course of business of the Bank and are according to the prudential norms prescribed by RBI. 2. Income Tax Proceedings Various proceedings against the Bank relating to Income Tax amounting to Rs. 13.91 crores are pending in appeal with the Income Tax authorities as on 30/09/2005. The Bank has not made any provision in this regard and adverse ruling, if any, shall affect the financials of the Bank, to the extent of the impact of the ruling. Management Perception Appeals have been referred to concerned Tax authorities in respect of the above. 3. Profits of the Bank The growth in net profits of the Bank from Rs. 176.38 crores in FY 2003-04 to Rs. 206.26 crores in FY 2004-05 (growth of 16.94%) can be mainly attributed to treasury profits. The net profit for the half-year ended 30th September 2005 stood at Rs 98.24 crores. The Bank made a profit of Rs. 151.02 crores from sale of investments (treasury income) during FY05 (Rs 98.24 crores for the HY 30th September 2005) Management Perception The operating profit of the Bank has come from diversified income comprising of net interest income, profit on Sale of Securities and other income, which account for 120.61%, 33.48% and 85.47% of the total operating profit respectively for the FY2004-2005. For the half year 30th September 2005 also, the above percentages were 136.36 %, 28.81% and 84.12% respectively of the total operating profit. 4. Non-Performing Assets (NPAs) As on 31.03.2004, 31.03.2005 and 30.09.2005, the net NPAs of the Bank stood at Rs 186.38 crores, Rs 80.99 crores and Rs 102.51crores i.e. 2.96% ,0.92% and 1.03% of its net advances amounting to Rs 6304.08 crores, Rs 8777.34 crores and Rs 9999.52 crores respectively in

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absolute terms. In the event of non-recovery of these assets, the Bank may have to provide for these NPAs, which might affect the profitability of the Bank in future. Management Perception The Net NPAs of the Bank have consistently been declining in percentage terms, from 2.96% as on 31.03.2004 to 0.92% as on 31.03.2005 and the Bank has provided for its NPAs in conformity with RBI guidelines. The Bank is taking steps to reduce the proportion of nonperforming assets through aggressive recovery drives combined with improved risk management practices. Further, there have been substantial changes in the legislative and operating environment enabling FIs and Banks to pursue recovery of overdues. Besides Debt Recovery Tribunal (DRT) set up for faster settlement of recovery litigation, GoI has enacted ‘The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’ enabling FIs and Banks to securitise and reconstruct financial assets and enforce security more effectively. Reserve Bank of India has formulated detailed guidelines for operation of the scheme. The Bank is invoking the provisions of the Securitization Act to enhance recovery. Thus, the Bank has been taking recourse to all the available methods to recover its over dues from the borrowers.The Bank has also taken steps for the implementation of the RBI guidelines for speedy recovery of NPAs under SME. 5. Regional Concentration of the Bank State Bank of Mysore has a regional concentration in Karnataka accounting for approximately 82% of all branches in terms of numbers. The regional presence of the Bank may compromise its competitive position vis-à-vis its national level competitors. Management Perception The total Deposits of the Bank have grown by 104.92% to reach a level of Rs.13584.98 crores and Advances have grownup by 130.46% to a level of Rs.9124.51 crores during the past 5 years. The Bank has 637 branches and 21 extension counters as on 30.09.2005. 6. Decline in Return Ratios The Average Yield on Advances of the Bank has decreased from 9.52% in FY04 to 8.64% in FY05 (8.46% as on 30th September 2005. during the same period. Management Perception Interest rates on advances to the corporate sector and personal segment have been under extreme pressure due to severe competition. A demand for level playing field from the Agricultural and Small Industries and Businesses is exerting greater downward pressure on Yield on Advances. However, with the recent hike in repo and reverse repo rates announced by RBI, the downward pressure on yields will abate and yields on advances are expected to improve. 7. Depreciation charge to P& L account due to Transfer of Securities from AFS to HTM The Bank has considered and provided depreciation on investments upto 30.09.2005 as per RBI guidelines. However consequent upon transfer of certain Government Securities on 02.04.2005 from Available for Sale (AFS) category to Held to Maturity (HTM) as permissible, depreciation amounting to Rs 41.13 crores has risen

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Management Perception The above-referred securities were transferred from AFS to HTM to insulate the Bank from further decline in prices. While improvement in prices, will enable selling the securities with the permission of the top management of the Bank, in case of price fall, no further provisioning is necessary as HTM category is exempted from mark to market. .As on the date of .transfer 10 year 10-year G-Sec yield of 6.68% and as on 30.09.05 10 year yield was 7.11% thus the Bank’s position was comfortable on valuing the investments as on 30.09.05.. 8. Adverse affect of the revised RBI policy on the Capital Adequacy of the Bank The upward revision of the risk weight on exposures to sensitive sector to 125% will adversely affect the Capital Adequacy Ratio of the Bank for the Quarter ended December 2005 Management Perception The Bank has already initiated steps to improve the capital funds and has decided to raise the current issue of Tier II capital of Rs. 250 crores to shore up the Capital Adequacy Ratio. Further, the bank exposure to sensitive sector is marginal, compared to total advances portfolio. 9. Asset Liability Position As per the statement of structural liquidity as on the last reporting Friday in March 2005, the negative mismatches in the first two time buckets are well within the tolerance levels stipulated by RBI and ALM policy of our Bank. Further all the negative gaps in the other time buckets are also within the tolerance limits fixed by the bank. Further, as on the last reporting Friday of September 2005, the mismatches in all the time horizons are well within the tolerance levels stipulated by RBI and ALM policy. A large portion of the funding of the Bank is in the form of short and medium term deposits. The asset liability position of the Bank could be affected if the depositors do not roll over the deposits. A comprehensive contingency plan is put in place to address fully any problems relating to liquidity. Management Perception As per the normal behavioral pattern and past experience, a large portion of the deposits gets rolled over. The Bank feels that in the event of these deposits not being rolled over, the fresh accretion of deposits would take care of the Asset Liability mismatches. In addition, as on 31.03.2005, the Bank had excess SLR securities to the tune of Rs.1481.51 crores, while the investments of Rs.3158.30 crores are in the long-term (over 5 years) category, which can be utilized to correct any medium term mismatches. As on the last reporting Friday of September 2005, the amounts were Rs 963.45 crores and Rs.3506.99 crores respectively. Moreover, the Bank has an Asset Liability Management system in place to actively monitor and manage liquidity mismatches. 10. Credit Risk The Bank’s main business of lending carries an inherent credit risk, which involves inability or unwillingness of a customer or counterparty to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions. Management Perception

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The Bank has a rigorous and well-defined credit appraisal system. Prudential exposure norms and various internal exposure norms are followed to avoid credit concentration and to minimize and mitigate credit risk. Credit risk assessment is in place for capturing the risk profiles of the accounts. The Bank ensures that Risk Management Department is independent of the operational department. Bank has a comprehensive loan policy document covering areas of credit and credit risk. 11. Asset Concentration Top five industries amount for 29.70% and 29.90% of non-food credit of the bank as on 31.3.2004 and 31.3.2005 respectively. Top five borrowers account for 11.65% and 7.88% of non-food credit as on 31.3.2004 and as on 31.3.2005 respectively. Management Perception Exposure norms are in place to avoid asset concentration. Portfolio reviews and reviews of implementation of exposure management norms are undertaken at regular intervals to check asset concentration. Except for infrastructure and Textiles, exposure limits for individual industry is capped at 10 percent to avoid concentration of assets in a few industries. 12. Outstanding Litigations against the Bank There are outstanding litigations (563 cases) as on 31.03.2005 the financial implication of which cannot be estimated. For details, please refer to the para on Litigation on page 82 of the Information Memorandum. Management Perception These claims are not likely to affect the operations and finances of the Bank. 13. Litigation against the Bank sponsored RRB’s There are 18 cases of claims/suits filed against Kalpatharu Grameena Bank and Cauvery Grameena Bank respectively. These Grameena Banks are sponsored by State Bank of Mysore. For details, please refer to the para on Litigation on page 55 of the Information Memorandum. Management Perception These claims against Kalpatharu Grameena Bank and Cauvery Grameena Bank are not likely to affect the operations and finances of State Bank of Mysore. 14. RBI’s Annual Financial Inspection Report The Annual Inspection Report of RBI on the financial position of the Bank as on 31.03.2005 has identified certain weaknesses in the system, operational and other deficiencies. Management Perception The bank has taken the necessary action to rectify the various deficiencies pointed out in the Annual Financial Inspection which is a regular supervisory exercise carried out by RBI in respect of all banks and financial institutions. A comprehensive compliance report has already been submitted to the regulatory authorities furnishing details of corrective action initiated by the bank.

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15. Utilization of Funds The utilization of the funds proposed to be raised through this private placement is entirely at the discretion of the Bank and no monitoring agency has been appointed to monitor the deployment of funds. Management Perception The funds raised through this private placement are not meant for any specific project and hence a monitoring agency may not be required. The Bank is managed by professionals under the supervision of its Board of Directors. Further, the Bank is subject to a number of regulatory checks and balances as stipulated in its regulatory environment. Therefore, the management believes that the funds raised via this private placement would be utilised only towards satisfactory fulfillment of the Objects of the Offer. 16. Credit Decisions The credit decisions of the Bank are subjected to various risk parameters. Management Perception In a dynamic environment, all the credit decisions are subjected to various risk parameters. As such the Bank is following a prudent policy marked by in built checks and balances, where identification and mitigation of risk are the key objectives. Prudential limits are fixed on various financial parameters to implement risk management guidelines. Bank has implemented various Credit Risk Management guidelines given by the Reserve Bank of India. Bank has fixed internal exposure ceilings based on credit rating of the borrowal account to mitigate concentration risk. Portfolio/Industry wise exposure limit is fixed as a risk mitigation tool. As part of the credit risk management system, the Bank has also confined, by and large, the high value credit exposures of Rs.1 crore and above to specially designated branches which are equipped to handle such exposures. Bank has also stipulated criteria for taking exposures in a particular industry. Maximum industry wise stipulated exposure is 10 per cent of total advances except infrastructure in the aggregate. The Due Diligence in respect of the retail assets has been strengthened to protect the quality of this portfolio. 17. Credit Policy of the Bank The credit policy followed by the Bank may materially influence its credit portfolio. Management Perception The Bank has a comprehensive loan policy document. The loan policy is regularly updated in the light of market changes and revision in RBI guidelines. Loan policy aims at continued growth of assets while endeavoring to ensure that they remain performing and standard EXTERNAL RISK FACTOTRS 1. Regulatory restrictions on the Bank and limitations of the powers of bondholders of the Bank There are a number of restrictions as per the State Bank of India (Subsidiary Banks) Act, 1959, which impede the flexibility of the Bank's operations and affect/restrict investor's right.

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i. The Banks can carry on business/activities as specified in the Act. There is no flexibility to pursue profitable avenues if they arise, in contrast with companies under the Companies act, where shareholders can amend the Object clause by a Special Resolution Act. ii. There are restrictions in the Banking regulation Act regarding: a) Setting up of subsidiaries by a bank b) Management of the Bank including appointment of directors c) Borrowings and creation of floating charge thereby hampering leverage. d) Expansion of business as the branches need to be licensed e) Opening of new place of business and transfer of existing place of business f) Disclosures in the profit & loss account and Balance sheet g) Production of documents and availability of records for inspection by shareholders h) Reconstruction of banks through amalgamation etc i) Further issues of capital including issue of rights share for which prior SBI/RBI approval is needed j) The Bank is prohibited from trading activity. This may act as operational constraint. iii. Every Banking Company is required to create a Reserve fund by transfer of a sum equivalent to not less than twenty percent of profit as disclosed in the Profit & Loss account before any dividend is declared. iv. Every Bank has to maintain assets in India, which would be not less than 75% of the Bank's demand and time liabilities in India, which in turn may prohibit the Bank from creating overseas assets and exploiting overseas business opportunities. v. The financial disclosures in the Information Memorandum may not be available to investors after listing, on a continuous basis. vi. Various rights/powers of shareholders available under the Companies Act in this behalf are not available to shareholders of Banks as the provisions of the Companies Act are not applicable to the Bank. Rights like calling for general meetings, inspection of minutes and other material records, application by members for investigation of affairs of a company, application for a relief in case of oppression and mismanagement, voluntary winding up are not available to shareholders of a Bank. vii. As per section 19(2) of State Bank of India (Subsidiary Bank's) Act, 1959, no person other than the State Bank, shall be entitled to exercise voting rights in respect of any shares held by such person in excess of one percent of the issued capital of the subsidiary bank concerned. viii. No banking company shall pay dividend on its shares until all its capitalised expenses (including preliminary, organisational expenses, share selling commission, brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have been completely written off. The Bank has received an exemption from GOI vide letter ref. from this provision relating to the payment of dividend, up to 31.03.04. ix. As per Section 9 (1) of the State Bank of India Act,1959 no person shall be registered as a shareholder in respect of any shares in a subsidiary bank held by him, whether in his own name or jointly with any other person, in excess of two hundred shares, or be entitled to payment of any dividend on the excess shares held by him, or to exercise any of the rights of a shareholder in respect of such excess shares otherwise than for the purpose of selling them: Provided that nothing contained in this sub-section shall apply toa) the State Bank; b) a State Government; c) a Corporation; d) an insurer as defined in the Insurance Act, 1938;

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e) a local authority; f) a Co-operative society; g) a trustee of a public or private religious or charitable trust; Increase in regional hostilities, terrorist attacks and other acts of violence and war could adversely affect the country's economic growth and development thereby the financial markets including the Bank's business and its future financial performance. The performance, quality, and growth of the Bank are dependent on the health of the overall Indian economy. Slowdown in economic growth in India could affect the business of the Bank. Management Perception The bank has been functioning well with all these constraints and is expected to continue to grow as hitherto. The Bank is expanding its product and services offered to diversify its income streams. The Bank's thrust on retail products is envisaged to provide growth. Risk management systems, credit supervision, special emphasis on recovery of NPAs and close monitoring will enable the Bank to closely monitor the health of its credit portfolio. The slowdown witnessed in the Indian and global economy in the past few years has not materially affected the Bank's profitability. 2. Sensitivity to the Economy and Extraneous Factors The Bank’s performance is highly correlated to the performance of the economy and the financial markets. The health of the economy and the financial markets in turn depends on the domestic economic growth, state of the global economy and business and consumer confidence, among other factors. Any event disturbing the dynamic balance of these diverse factors would directly or indirectly affect the performance of the Bank including the quality and growth of its assets. 3. Competition from Existing and New Commercial Banks Competition in the financial sector has increased with the entry of new players and is likely to increase further as a result of further deregulation in the financial sector. The Bank may face competition both in raising resources and in deploying them. Management Perception The Bank has an established broad-based presence and has been taking steps to enhance customer satisfaction by upgrading skills, systems and technology to meet such challenges. The Bank is attempting to add quality assets on competitive terms. The Bank is also taking steps to broad base its product bouquet with a special emphasis on enhancement in the non-fund based income. On the resource-raising front, the Bank is actively endeavouring to broaden its reach and raise resources through its wide distribution network of 629 branches, 20 extension counters. 4. Changes in Regulatory Policies The operations of the Banking Industry are subject to regulations by the Government/RBI. Major changes in Government/ RBI policies relating to banking sector may have an impact on the operations of the Bank.

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Management Perception The policy changes may provide both opportunities and challenges for the Bank. The Bank has a long presence in the banking sector, for more than 90 years and does not perceive policy changes to be a major threat. 5. Disintermediation in the Financial Markets As the financial markets mature and with growing developments in the capital markets, the trend towards disintermediation may be increasingly in evidence. In such a scenario, many companies including the current and potential borrowers of the Bank may access capital markets directly for their financing needs and reduce their dependence on the banking system. This may have an adverse impact on the level of deposits and also on the level and mix of advances portfolio and the profitability of the Banks. Management Perception The Bank has, in recent years, launched several retail lending schemes and value added products so as to broaden its borrower base. Further, disintermediation brings with it the opportunity for the Bank to expand its fee-based activities. The Bank has been endeavouring to develop a presence in several financial services to earn fee based income by focusing on businesses such as foreign exchange, treasury, investments, cash management, insurance, depository, debenture trustee etc., thus taking advantage of the disintermediation phenomenon. 6. Forex Risk Exchange Rate fluctuations may have an impact on the Bank’s financial performance. Management Perception As per RBI guidelines, banks are not allowed to keep open position on their foreign exchange transactions beyond prescribed limits on a daily basis. Foreign exchange transactions beyond such limits, if any, must be squared off at the end of each day. Hence, the risk from exchange rate fluctuations is minimised. The Board of Directors of the Bank has also prescribed limits for gaps or mismatches in maturities of Bank’s foreign currency assets and liabilities and forward transactions in foreign exchange. The Bank operates within the limits fixed for gaps or mismatches in maturities of Bank’s foreign currency assets and liabilities and forward transactions in foreign exchange, thus minimising the risks of mismatches in maturities and interest rates. 7. Interest Rate Risk Present interest rates on deposits and advances are based on many micro and macro economic factors including the directives of the Reserve Bank of India which are likely to be market driven due to deregulation and thereby may result in increasing pressure on spreads and affect profitability. Interest rate volatility exposes the Bank to an interest rate risk or market risk. Such interest rate risk has a potential impact on net interest income or net interest margin as well as on the market value of the fixed income securities held by the Bank in its investment portfolio. Management Perception These risks are inherent in the banking business. However, the Bank has put in place a system of regular review of lending and deposit rates in order to minimise the interest rate risk. The

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Asset Liability Management Committees of the Bank reviews the risk on a regular basis. Continuous Risk Management measures are initiated depending upon the movement in the market interest rates. The movement in the interest rates is closely monitored for appropriate action. 8. Operational Risk Operational risk is a result of failure of operating system in a bank due to certain reasons like computer break-ins, power disruptions, fraudulent activities, natural disaster, human error or omission or sabotage. Management Perception For managing operational risk, the Bank has laid down well-defined systems and procedures. The Bank has set up a separate department to improve the systems and procedures to suit the changing environment. The Bank has also in place a strong internal inspection and audit system. For managing IT related risks, the Information Systems Security Policy is in place. The Bank has an effective OPD department, which formulates and monitors delegation of duties and responsibilities at different level. Note to Risk Factors 1. Net worth (excluding revaluation reserves) of the Bank as on 31.03.2004 and 31.03.2005 and was Rs. 581.97 crores, and Rs. 750.79 crores respectively. 2. The Private Placement size is Rs. 250 crores. 3. The Book Value of the share as on March 31, 2004 and March 31, 2005 was at Rs. 1616.58 and Rs.2085.53 respectively (face value of Rs. 100/-). 4. State Bank of Mysore would like to clarify that inspection by RBI is a regular exercise and is carried out periodically by RBI for all banks and financial institutions. The reports of RBI are strictly confidential. The Bank has informed the RBI the actions already taken and measures that are under implementation in respect of observations made by RBI. 5. As per the provisions of Section 15(1) of the Banking Regulation Act, 1949 no banking company shall pay any dividend on its shares until all its capitalised expenses (including preliminary expenses, organisational expenses, share selling commission, brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have been completely written off. 6. No person holding shares in the Bank in respect of any shares held by him/her can exercise voting rights on a poll in excess of 1% of the total voting rights of all the shareholders of the Bank. 7. Transactions between State Bank of Mysore and its Associates w.r.t. related party transactions are given under the head Financial Information.

17

STATE BANK OF MYSORE
(Associate of the State Bank of India) Head Office: K. G. Road, Bangalore – 560 009, Karnataka. Tel No: 080 2235 3901 3909 Fax: 080 2228 3684 Contact Person: Mr. S. Shiva Kumar Email: cmshares@sbm.co.in Website: www.mysorebank.com

PART I I. INTRODUCTION

State Bank of Mysore (herein after referred to as “the Bank”) has been constituted under the State Bank of India (Subsidiary Banks) Act, 1959 herein after referred to as the SBI (SB) Act. The Bank is privately placing to Qualified Institutional Buyers and High Net Worth Individuals and other eligible applicants as mentioned else where in this Information Memorandum, 2500 Unsecured, Redeemable, Non-Convertible Subordinated Bonds of Rs.10 lakh each, at par and aggregating to Rs. 250 crores. HIGHLIGHTS OF THE BANK • • • • • • • Bank with 92 years of existence. The Bank is professionally managed with a track record of profitability The Bank has a large network of branches spread throughout the country that may enable it to raise funds competitively. The Bank 637 branches and 21 extension counters as on 30.09.2005. The Bank has also opened 17 specialised branches to cater to the needs of industrial finance, trade finance, personal banking, international banking and small-scale industries. Capital Adequacy Ratio of 11.26%, as at the HY SEP 2005 respectively, which is above minimum of 9% prescribed by RBI. Product portfolio includes Trade finance, Consumer Loans, Agri-Business Services, Insurance Marketing Services, Kisan Cards etc. Consistent Deposits growth: Consistent Advances growth: As on 31.3.05 deposits have grown by Rs.6955.70 crs (104.93% over the last 5 years and advances have grown by Rs.5165.21 crs (130.46%). Core Banking Solution is being implemented in all branches of the Bank by 31.12.2005. II. GENERAL INFORMATION

State Bank of Mysore (herein after referred to as “the Bank”) has been constituted under the State Bank of India (Subsidiary Banks) Act, 1959 herein after referred to as the SBI (SB) Act. The Head Office of the Bank is situated at K. G. Road, Bangalore – 560 009, Karnataka, India. Authority for the Placement This private placement of Bonds is being made pursuant to the resolution passed by the Executive Committee of the Board of Directors of the Bank at its meeting held on November

18

19, 2005 permitting to raise Subordinated Debts of Rs. 250 crores. Further, State Bank of India, Central Office, has approved the issue of subordinated bonds vide their letter SBD/BNJ/002332 dated November 21, 2005. The Bank can carry on its existing activities and future activities planned by it in view of the existing approvals, and no further approvals from any Government authority are required by the Bank to carry on its said activities. BOARD OF DIRECTORS OF THE BANK The composition of the Board of Directors of the Bank as on September 30, 2005 is as under:
Name & Address of Director Appointed/ Coopted to the Board Since Qualifications/ Specialisations
No. of other BOD/Board Committees he is a member/director

A.K. Purwar Chairman, SBI Corporate Office, Mumbai – 400 031 S.K.Hariharan Dy. Managing Director & Group Executive (CB&AS), SBI Corporate Centre, Mumbai – 400 021 Y. Vijayanand Managing Director, SBM, Head Office, Bangalore - 560 009 Vanitha Venugopal DGM, RBI, Bangalore-560001. M.N. Rao General Manager (A&S), SBI Associate Banks’ Deptt, Corporate Centre, Mumbai – 400 021 Yashovardana Sinha Dy. GM, Associate Banks’ Deptt., SBI, Corporate Centre, Mumbai – 400 021 N. Venugopal, No. 52, 10th A Main, 1st Block, Jayanagar, Bangalore 560 011. T.S. Nagaraja, Secretary ABOA, Mysore Unit, SBM, Bangalore - 560 009. R. Umachander, 28 K R Road, Basavangudi, Bangalore – 560 004. K. Sundaram, 35, IInd Main Road, Gandhi Nagar, Chennai – 600 020. G.B. Singh, Under Secretary, GoI, Ministry of Finance, Jeevan Deep,

13.11.2002

Representing SBI, M. Com., CAIIB

32

16.05.05

Representing SBI, 25(i) © B.Sc., CAIIB Managing Director, SBM, MA (Economics), B.L., CAIIB Representing RBI, 25 (i) (b) M. A.(Economics) Representing SBI, M. A.

15

01.03.2004 18.03.2005

01.01.2001

7

01.01.2004

Representing SBI, M. Sc. Representing Workmen Employees, B. Com. Representing NonWorkmen Employees, B. Sc., CAIIB Representing Shareholders, P. U. C. Representing Shareholders, B. A. Representing GoI. Diploma in Mech. Engg.

6

21.10.2002 16.06.2003 15.02.2004 15.02.2004 25.03.2004

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Parliament Street, New Delhi 110 001. Nanu R Mallya, 28, Sirur Park Road, Malleswaram, Bangalore – 560 003. M Mahadeva, Associate Professor, Institute of Social & Economic Change, Bangalore – 560 072

20.06.2003 20.06.2003

Representing Chartered Accountants, B. Com., FCA. Representing SC/ST, M. A. PhD.

Chairman and Managing Director Shri A.K.Purwar, Chaiman, State Bank of India is the Chairman of the Bank. Shri Y. Vijayanand is the Managing Director. Private Placement Management Team
Lead Arranger IDBI Capital Markets Services Limited 8th Floor, Bakhtawar, 229, Nariman Point Mumbai – 400 021 Tel: 022 5637 1212 Fax: 022 2288 5848/50 www.idbicapital.com Legal Advisor to the Offer Mr. K. R. Keerthi Asst. Geneneral Manager (Law) State Bank of Mysore Head Office K.G. Road, Bangalore – 560 009 Trustees IDBI Trusteeship Services Ltd. 10th Floor, Nariman Bhavan, 227 Vinay K Shah Marg Nariman Point, Mumbai – 400 023. Tel: 022 5631 1771 / 2 / 3; Fax: 022 5631 1776 Email: itsl@idbitrustee.co.in www.idbitrustee.com Auditors to the Offer Sonde, Srinivas & Co. Chartered Accountants 105, II Floor, J. C. Road, Shahzad Buildings, Bangalore – 560 002 Tel: 080 2223 2717 E-mail: sondesrinivas@vsnl.net Lead Arranger SBI Capital Markets Limited 202, Maker Tower ‘E’, Cuffe Parade, Mumbai – 400 005. Tel: 022 2218 9166 Fax: 022 2218 8332 www.sbicaps.com Registrar to the Offer Canbank Computer Services Limited R&T Centre, Naveen Complex, 4th Floor, # 14, M. G. Road, Bangalore – 560 001 Tel: 080 2532 0541/ 42 / 43. Fax: 080 2532 0544 Email: ccsirnt@vsnl.com Bankers to the Bank State Bank of Mysore

Compliance Officer Shri S. Shivanna Asstt. General Manager (Compliance) State Bank of Mysore Head Office K.G. Road, Bangalore – 560 009

The investors can contact the Compliance Officer for Bonds in case of any pre-issue/post-issue related problems such as non-credit of letter(s) of allotment/bond certificate(s) in the demat account, non-receipt of refund order(s), interest warrant(s)/cheque(s) etc. Credit Rating ICRA Ltd. has assigned a ‘LAAA’ (pronounced L Triple A) rating to the captioned debt programme of the Bank. This rating indicates highest credit quality rating assigned by ICRA. The rated instrument carries the lowest credit risk. Also, CRISIL Limited has assigned a ‘AAA/Stable’ (Pronounced ‘Triple A with stable outlook’) rating to the captioned Bond issue. This rating indicates highest degree of safety with regard to timely payment of interest and

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principal on the instrument. There may be circumstances adversely affecting the degree of safety but such circumstances, as may be visualised, are not likely to affect the timely payment of principal and interest as per terms. The rating is not recommended to buy, sell or hold Securities and investors should take their own decision. The rating may be subject to revision or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating. The rating obtained is subject to revision at any point of time in the future. The rating agencies have a right to suspend, withdraw the rating at any time on the basis of new information etc. Credit Rating (Previous Three Years) The bonds issued by the bank in the past three years were assigned “LAAA” rating by ICRA. Underwriting The Bonds offer is not underwritten. III. CAPITAL STRUCTURE OF THE BANK (As On September 30, 2005) No. of Shares A. Authorised Capital 5,000,000 Equity Shares of Rs. 100/- each B. Issued, Subscribed and Paid-up Capital 3,600,000 Equity Shares of Rs. 100/- each C. Paid Up Capital after the Present Offer 3,600,000 Equity Shares of Rs. 100/- each D. Share Premium Account Before the Offer After the Offer Notes to Capital Structure: 1) Following is the capital history since 1985: (No. of Shares)
Year ended March 31 Increase (Decrease) in capital Mode Cumulative Paidup capital

Face Value (Rs.) 500,000,000 360,000,000 360,000,000

Issue Value (Rs.) 500,000,000 360,000,000 360,000,000 600,004,000 600,004,000

Pre 1985 16/06/1986 24/09/1988 18/03/1996

195,579 900,000 2,400,000

Opening Balance Issue of Shares at Face Value Issue of Shares at Face Value Issue of Shares at premium of Rs. 250/- per share

104,421 300,000 1,200,000 3,600,000

2) The list of top 10 shareholders of the bank and the number of equity shares held by them: a) Top ten shareholders as on date of filing the Information Memorandum with Stock Exchange is as follows:
Sr. No. Name of the Shareholders Number of Equity Shares

1. 2. 21

State Bank of India Life Insurance Corporation of India

3,324,016 53,991

3. 4. 5. 6. 7. 8. 9. 10.

Lalitha Kalyan Trustees United India Insurance Company Limited Gowri Shankar Kalyan Trustee Pavan & Co.Pvt.Ltd., Ajaykumar Kayan Trustees Deep Fin.Consultants Pvt.Ltd Wall Fort Fin.Services Ltd. Indian Bank

4,850 4,485 3,705 3,550 3,000 2,590 2,125 1,919

b) Top ten shareholders ten days prior to the date filing the Information Memorandum with Stock Exchange is as follows:
Sr. No. Name of the Shareholders Number of Equity Shares

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

State Bank of India Life Insurance Corporation of India Lalitha Kalyan Trustees United India Insurance Company Limited Gowri Shankar Kalyan Trustee Pavan & Co.Pvt.Ltd., Ajaykumar Kayan Trustees Deep Fin.Consultants Pvt.Ltd Wall Fort Fin.Services Ltd. Indian Bank

3,324,016 53,991 4,850 4,485 3,705 3,550 3,000 2,590 2,125 1,919

c) Top ten shareholders two years prior to the filing the Information Memorandum with Stock Exchange is as follows:
Sr. No. Name of the Shareholders Number of Equity Shares

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

State Bank of India Life Insurance Corporation of India Unit Trust of India New India Assurance United India Insurance Company Limited Lalita Kayan Pavan & Co. Gauri Shankar Indian Bank Gauri Shankar Kayan Trust

3,324,006 41,496 14,911 10,800 4,485 4,450 3,350 2,580 2,064 1,125

3) Shareholding Pattern (as on September 30, 2005):
Sr. No. Category A. Promoter's Holding 1. Promoters* - Indian Directors/Relatives - Foreign Promoters 2. Persons acting in Concert Sub Total B. 3. a. Non-Promoters Holding Institutional Investors Mutual Funds & UTI Number of Shares Held 3,324,006 Nil 3,324,006 256 % Shareholding 92.33 Nil 92.93 0.01

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b. c. 4. a. b. c. d.

Banks, Financial Institutions, Insurance Companies (Central/ State Govt. Institutions/ Non Government Institutions) Foreign Institutional Investors Sub Total Others Private Corporate Bodies Indian Public NRIs/ OCBs Trade Union/ Trusts/Clearing Members Sub Total Grand Total

60,462 215 60,933 17,857 197,150 54 2,15,061 3,600,000

1.68 0.01 1.70 0.48 5.49 5.97 100.00

*The Promoter Group of the company comprises of the State Bank of India. 4) The Bank has not raised any bridge loan against the proceeds of this Private Placement. 5) The Bank has not issued any Equity Shares out of revaluation reserves or for consideration other than cash other than that stated in point 1 above. IV. OBJECT OF THE OFFERING

The present Issue of Bonds is being made to − • Augment the long-term resources of the Bank • Augment the capital base of the Bank to meet its future capital adequacy requirements Capital Adequacy Position of the Bank The Capital Adequacy Ratio (‘CAR’) of the Bank was 11.53% as on 31st March 2004, 12.08% as on 31st March 2005 and 11.26% as on 30th September 2005 as against the RBI stipulation of 9.00%. Details of capital vis-à-vis risk weighted assets are as under: (Rs crores)
Year ended March 31 Eligible Tier I Capital Eligible Tier II Capital Total Capital Total Risk-Adjusted Assets Capital Adequacy Ratio (%) 2001 284.96 185.54 470.50 4217.57 11.16% 2002 312.81 238.04 550.85 4665.82 11.81% 2003 350.93 212.93 563.86 4853.50 11.62% 2004 420.90 255.13 676.03 5864.18 11.53% 2005 585.69 407.73 993.42 8222.42 12.08 Sep 05 678.99 386.53 1065.52 9465.75 11.26

Requirement of Capital Enhancement The Bank expects substantial growth in its business activities and operations in the coming years. The risk-weighted assets of the Bank are also expected to increase. The main areas of focus for the Bank in this regard are retail advances, housing loans, loans to traders and self employed businessmen, SSI/Priority sector lending. Increase in Tier I capital through plough back of profits alone may not be enough to enable the Bank to maintain sufficient capital adequacy ratio. In view of the likely expansion of risk-weighted assets, the Bank proposes to augment its Net worth in order to sustain a healthy CAR. Use of Offer Proceeds

23

The proceeds of this offer will be utilised for the regular business activities of the Bank. The Bank has to increase the Capital to match the growth in Assets and maintain level of CAR higher than the minimum prescribed level. The requirement of Capital has increased on account of increase risk weight on housing loans and personal loans and growth in credit. V. TERMS OF THE PRESENT PLACEMENT

The Bank is intending to raise an aggregate amount of Rs 250 crores (through the issue of Unsecured Redeemable Non-Convertible Subordinated Bonds of face value of Rs.10 lakhs each for cash at par (hereinafter referred to as ‘the Bonds’) by way of private placement. Instrument at a Glance:
Issue Size Instrument Credit Rating Face Value/ Issue Price Minimum Application Size Tenor Redemption Coupon Rate Interest Payment Interest on Application Money Rs. 250 crores. Unsecured, Redeemable Non-Convertible, Subordinated Bonds in the nature of Promissory Notes. LAAA by ICRA & AAA/stable by CRISIL Rs. 10,00,000/- per Bond 1 Bonds and multiples of 1 bond thereafter 113 months from the Deemed Date of Allotment Bulleted Redemption at par at the end of 113 months from the Deemed Date of Allotment 7.45% p.a. subject to TDS as applicable Annual Interest on application money will be paid to Investors at the Coupon Rate (subject to deduction of tax at source, as applicable) from the date of realisation of cheque(s)/demand draft(s), upto but not including the Deemed Date of Allotment None Proposed listing at BSE Debt Segment NSDL and CDSL Demat mode

Put & Call option Listing Depository Issuance & Trading

Private Placement Programme Opening date 22nd November, 2005 Closing Date 28th November, 2005 Deemed Date of Allotment 1st December, 2005 Note: The Bank reserves the right to vary (pre-pone/postpone) any of the above date(s) at its sole and absolute discretion without giving any reasons or prior notice. In such a case, investors will be intimated about the revised time schedule by the Bank. The Bank also reserves the right to announce closure of the issue before the scheduled closing date in the event of receipt of subscriptions to the extent of the issue size. Unsecured Redeemable Non-Convertible Subordinated Bonds:

24

The bonds will constitute direct, unsecured and subordinated obligations of the Bank, subordinate to the claims of all other creditors and depositors of the Bank as regards repayment of principal and interest by the Bank out of its own funds. The Bonds will be negotiable instruments in the nature of Promissory Notes, transferable by endorsement and delivery. Key Terms: Tenor The Bonds will mature on the expiry of 113 months from the Deemed Date of Allotment. Coupon The investors will receive interest at 7.45% p.a. subject to TDS as applicable. Face Value Per Bond Each Bond has a face value of Rs.10,00,000/- and is issued at par at Rs.10,00,000/-. Minimum Application Size The minimum investment shall be 1(one) bond i.e. Rs.10,00,000/- and in multiples of 1(one) Bonds i.e. Rs.10,00,000 thereafter. Credit Rating ICRA Ltd. has assigned a ‘LAAA’ (pronounced L Triple A) rating to the captioned debt programme of the Bank. This rating indicates highest credit quality rating assigned by ICRA. The rated instrument carries lowest credit risk. Also, CRISIL Limited has assigned a ‘AAA/Stable’ (Pronounced ‘Triple A with stable outlook’) rating to the captioned Bond issue. This rating indicates highest degree of safety with regard to timely payment of interest and principal on the instrument There may be circumstances adversely affecting the degree of safety but such circumstances, as may be visualised, are not likely to affect the timely payment of principal and interest as per terms. The rating is not recommended to buy, sell or hold Securities and investors should take their own decision. The rating may be subject to revision or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating. The rating obtained is subject to revision at any point of time in the future. The rating agencies have a right to suspend, withdraw the rating at any time on the basis of new information etc. Listing Application shall be made to The Stock Exchange, Mumbai to list the bonds of the Bank now being offered through this Information Memorandum and for permission to deal in such Bonds. If the permissions to deal in and for an official quotation of the Bonds is not granted by BSE the Bank shall forthwith repay, without interest all such moneys received from the applicants in pursuance of this Information Memorandum. If such monies are not repaid within eight days after the Bank becomes liable to repay them (i.e. from the date of refusal or within 70 days from the date of the closing of the subscription list, whichever is earlier), then the Bank will be

25

liable to repay the monies, with interest, as prescribed under Section 73 of the Companies Act, 1956. Book Closure Date The Bank’s Register of Bondholders will be closed for the purposes of payment of interest or redemption of Bonds, as the case may be, 30 days prior to the respective due date. Interest on Application Money Interest at the coupon rate (subject to deduction of tax at source) will be paid in respect of all valid applications including the refunds. Such interest shall be paid from the date of realisation of the Cheques/demand drafts upto the date immediately preceding the Deemed Date of Allotment. Refund cheques/Warrants/Demand Drafts will be mailed within seven days of Deemed Date of Allotment. Interest on the Bonds The Bonds will carry interest at the rate of 7.45% p.a. for a tenure of 113 months from the deemed date of allotment. The first interest will be paid on April 1, 2006 from the Deemed Date of Allotment (subject to deduction of tax at source at the rates prevailing from time to time under the Income Tax Act, 1961 or any other statutory modification or re-enactment thereof) upto 31st March, 2006. Thereafter it is payable annually on 1st April during the tenure of the Bonds except for the last interest payment which will be paid along with the redemption dues on the date of redemption of the bonds. If any interest payment date falls on a day, which is not a business day in Bangalore, Karnataka ("Business Day" being a day on which Commercial Bank are open for business in the city of Bangalore , Karnataka), then payment of interest will be made on the next business day but without liability for making payment of interest for the delayed period. The interest payable shall be calculated by multiplying the coupon rate by the principal amount, multiplying such product by actual number of days in the interest period concerned dividing by 365 (a leap year would be considered as 366 days for the purpose of interest calculation). Interest Period The first interest period is defined as the actual number of days falling between the Deemed Date of Allotment to 31st March, 2006 including both the first date and the last date. The first interest payment would be made on 1st April, 2006 The second and subsequent interest period (except the last interest period) is defined as the actual number of days, taking the number of days in a year as 365 days (366 days in case of a leap year) between April 1 and March 31 including both the dates and so on. The last interest period is defined as the actual number of days falling between 1st April, 2014 and redemption date including both the first date and the last date. The last interest payment would be made on the redemption date along with the redemption of principal amount. Payment of Interest The interest payment would be made by Electronic Clearing System or by means of cheques/demand drafts/(Interest warrants payable at par at specified branches of the Bank) and will be mailed to the Bondholders. Payment of interest will be made to the holders of the Bonds

26

whose names appear in the list of beneficiaries given by NSDL/CDSL to the Bank on Record Date. Tax Deduction at Source Tax as applicable under the Income Tax Act, 1961, or any other statutory modification or reenactment thereof will be deducted at source. The investor(s) desirous of claiming exemption from deduction of income tax at source on the interest on application money are required to submit the necessary certificate(s), in duplicate, along with the application form in terms of Income Tax rules. Interest payable subsequent to the Deemed Date of Allotment of Bonds will be treated as “Interest on Securities” as per Income Tax Rules. Bondholders desirous of claiming exemption from deduction of income tax at source on the interest payable on Bonds should submit tax exemption certificate/ document, under Section 193 of the Income Tax Act, 1961, if any, at the office of the Bank, at least 45 days before the payment becoming due. Redemption The face value of the Bond will be redeemed at par, on expiry of 113 months from the deemed date of allotment. The Bond will not carry any obligation, for interest or otherwise, after the date of redemption. The Bonds held in the Dematerialised Form shall be taken as discharged on payment of the redemption amount by the Bank on maturity to the registered Bondholders whose name appear in the Register of Bondholders on the record date. Such payment will be a legal discharge of the liability of the Bank towards the Bondholders. On such payment being made, the Bank will inform NSDL/CDSL and accordingly the account of the Bondholders with NSDL/CDSL will be adjusted. No Put/Call option is available on the bonds. However, the consent of Reserve Bank of India will be taken before redemption of bonds on due date as required in terms of their guidelines addressed to all commercial banks vide their communication DBOD.BP.BC 5/21.01.002/98.99 dated 08.02.99. Issue of Bonds in dematerialized form The Bank will be issuing the Bonds in dematerialized form. The Bank will be opening the accounts with NSDL and CDSL for issuing these Bonds. Applicant should mention their Depository Participant’s name, DP-ID and Beneficiary Account Number in the appropriate place in the Application Form. The Bank will take necessary steps to credit the Depository Account of the allottee(s) with the number of bonds allotted. Responsibility for correctness of applicant's demographic details given in the application form vis-a-vis his/her depository participant would rest with the applicant and the bank would not be liable with regard to the above in any manner whatsoever. Transfer of Bonds The transfer of bonds in dematerialized form would be in accordance with the rules/procedures as prescribed by Depository/Depository Participant. Terms of Payment Applications should be for a minimum of 1 Bond. All cheques/drafts should be in favour of

27

“State Bank of Mysore A/c-Bonds Issue “ and crossed Account Payee only. The entire amount of Rs. 10 lakhs (Rs. Ten Lakhs only) per bond is payable on application. Applicants can alternatively, remit the application amount through RTGS. State Bank of Mysore’s RTGS details are as under:
IFSC : SBMY 0 TREA 00 A/C SBM F & A Tier II Bonds

Procedure for Application and Mode of Payment This being a Private Placement Offer, Investors who are established/Resident in India and who have been addressed through this Communication directly, only are eligible to apply. Applications for the Bonds must be in the prescribed form (enclosed) and completed in BLOCK LETTERS in English and as per the instructions contained therein. Applications complete in all respects (along with all necessary documents as detailed in the memorandum of information) must be submitted before the last date indicated in the issue time table or such extended time as decided by the Bank, at any of the designated collection centres, accompanied by the subscription amount by way of cheque(s)/draft(s) drawn on any bank including a co-operative bank which is situated at and is a member of the Bankers’ clearing house located at a place where the application form is submitted. Outstation cheque(s)/Bank draft(s) drawn on Bank(s) not participating in the clearing process at the designated clearing centres will not be accepted. Money orders/postal orders will also not be accepted. The Bank assumes no responsibility for any applications/cheques/ DDs lost in mail. All cheques /drafts should be in favour of “State Bank of Mysore– Bonds Issue “ and crossed Account Payee only. The entire amount of Rs. 10 lakhs (Rs. Ten Lakhs only) per bond is payable on application. No separate receipt will be issued for the Application money. However, the Bank’s designated collection branches or arrangers receiving the duly completed Application Form will acknowledge receipt of the application by stamping and returning to the applicant the Acknowledgment Slip at the bottom of the each Application Form. As a matter of precaution against possible fraudulent encashment of Interest Warrants/Cheques due to loss/misplacement, the applicant should furnish the full particulars of his or her bank account (i.e. Account Number, name of the bank and branch) at the appropriate place in the Application Form. Interest warrants will then be made out in favour of the bank for credit to his/her account so specified and despatched to the investors, who may deposit the same in the said bank. Applications may be made by: i) Provident/Superannuation/Gratuity/Pension Funds. ii)Commercial Banks, Financial Institutions and Insurance Companies, societies registered under the applicable laws in India and authorised to invest in bonds. iii)State/Central Co-operative Banks, Development Co-operative Banks, Land Development Banks, RRBs, Primary Co-operative Banks.

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iv)Mutual Funds, Companies, Bodies Corporate, Trusts and Association of Persons and Individuals. v) Port Trusts. vi)Scientific and/or Industrial Research Organisations, authorised to invest in bonds. viii)Other Government and Non-government agencies authorised to invest in these bonds as per present and relevant government guidelines. Please note that only those to whom this memorandum is addressed by name can apply. Application by Provident Funds, Superannuation Funds and Gratuity Funds The Government of India has, vide its Gazette notification dated 06.03.2003, in partial modification of notification no. F.11 (3-PD/98) dated March 31, 1999 has permitted Provident, Superannuation and Gratuity Funds to invest up to 30% of incremental accretions in the bonds/securities of “public sector companies” as defined under Section 2 (36-A) of the Income Tax Act, 1961. Also, an additional amount of 30% of the incremental accretions, can be invested at the discretion of the Board of Trustees in any of the remaining three prescribed categories of investments. The Bank is a “public sector bank” within the meaning of the said section, and hence Provident Funds, Superannuation Funds and Gratuity Funds can invest in the Bonds. The applications must be accompanied by certified true copies of (i) Trust Deed/Bye Laws/Resolutions, (ii) Resolution authorising investment and (iii) specimen signatures of the authorised signatories. Those desirous of claiming tax exemptions on interest on application money are compulsorily required to submit a certificate issued by the Income Tax Officer along with the Application Form. For subsequent interest payments, such certificates have to be submitted periodically. Applications by Commercial Banks Investment by commercial banks in subordinated debt issues of other banks would attract 100% risk weights for the investing bank. The applications must be in conformity with extant RBI guidelines and accompanied by certified true copies of i) Board Resolution authorising investment, ii) Power of Attorney and iii) specimen signatures of authorised signatories. Application by Regional Rural Banks Reserve Bank of India, vide circular No.RPCDNB.BC.98/03.05.34/94/95 dated January 2, 1995 and amended vide Circular No. RPCD.RRB.BC.882/03.05.34/96-97 dated December 13, 1996 has permitted RRBs to invest their surplus non-SLR funds in Bonds of public sector undertakings. However, the investments are subject to the prudential and single exposure norms of RBI. The applications must be accompanied by certified true copies of (i) Government Notification/Certificate of Incorporation/Articles and Memorandum of Association/Other deed governing the constitution, (ii) resolution authorising investment, (iii) Power of Attorney (iv) specimen signatures of authorised signatories and (v) income tax recognition certificate/Form 15 AA.

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Application by Primary/District/State/Central Co-Operative Banks/Land Development Banks Any State Co-operative Bank (SCB)/District Central Co-operative Bank (DCCB)/Primary Cooperative Bank (PCB)/Land Development Banks (LDBs) in any State would be eligible to invest in these Bonds with necessary approval. Reserve Bank of India vide notification NO. BR.CIR.72/16.20.00/93-94 dated 16th May 1994 have clarified that the primary co-operative banks can invest their surplus funds upto 10% of their deposits in Bonds of public sector undertakings, provided inter-alia that a provision exists for such investments in the respective state Co-operative Societies Act/Multi State Co-operative Societies Act and the Banks should take permission from the Registrar of Co-operative Societies of the State, for such investments. Further, Reserve Bank of India vide notification no. BR.12/16.20.00/95-96 dated Jan 6, 1996 has requested the Registrar of Co-operative Societies of all States to grant general permission to the primary co-operative banks for such investments, subject to their complying with other conditions and safety measures laid down by Reserve Bank of India from time to time. As per RBI circular no. PPF.ROC.9/07.02.03/98-99 dated June 23, 1999; Central/State Cooperative Banks can invest in PSU bonds an amount not exceeding 10% of their deposits and 5% of their average non-SLR surplus funds after obtaining requisite permission. The applications must be accompanied by certified true copies of i) Resolution authorising investment/Power of Attorney and ii) specimen signatures of authorised signatories. Application by Trusts Trusts, whose Trust Deeds provide for investment in Bonds may apply to this issue of bonds, subject to the approval of the Charity Commissioner or other appropriate authority as the case may be. The application must be accompanied by certified true copies of i) Trust Deed/Bye Laws, ii) Certificate of Registration, iii) Resolution authorising investment and containing operating instructions, iv) Specimen signatures of authorised signatories and v) Income exemption certificate (including interest on application money) / Form 15 AA (if applicable). Applications by Corporate Bodies/Companies/FIs/Statutory Corporations The applications must be accompanied by certified true copies of (i) Memorandum and Articles of Association/Constitution/Bye-laws, (ii) resolution authorising investment and containing operating instructions, (iii) specimen signatures of authorised signatories and (iv) Form 15 AA for claiming exemption from deduction of tax on the interest income (including interest on application money), if applicable. Applications under Power of Attorney In case of applications under Power of Attorney by limited companies or other bodies corporates or commercial banks or regional rural banks/primary/district/central co-operative banks or, individuals, a certified copy of Power of Attorney with a copy of the relevant authority/resolution (other than individuals) must be deposited along with the Application Form. Individuals Individuals are also entitled to apply to the bond issue subject to the application qualifying for

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the minimum application amount and is valid in all other respects. Those desirous of claiming tax exemptions on interest on application money are compulsorily required to submit relevant declaration Form (as per I.T. Act 1961) along with the Application Form. For subsequent interest payments, such Forms have to be submitted periodically. In the case of joint applications, the number of such applicants should not be more than three. All communications and cheques for interest/redemption will be addressed to the applicant whose name appears first, at the address stated in the application form/register of Bondholders PAN/GIR Number All Applicants should mention their Permanent Account Number or the GIR Number allotted under Income Tax Act, 1961 and the Income Tax Circle / Ward / District. In case where neither the PAN nor the GIR Number has been allotted, the fact of such a non-allotment should be mentioned in the Application Form in the space provided. Signatures Signatures should be made in English or in any of the Indian Languages. Thumb impressions must be attested by an authorized official of a Bank or by a Magistrate/Notary Public under his/her official seal. Nomination Facility As per Section 109 A of the Companies Act, 1956, only individuals applying as sole applicant/Joint Applicant can nominate, in the prescribed manner, a person to whom his Bonds shall vest in the event of his death. Non-individuals including holders of Power of Attorney cannot nominate. Disposal of Applications and Application Money The Bank reserves, in its own, absolute and uncontrolled discretion and without assigning any reason, the right to accept in whole or in part or reject any application. If an application is rejected in full, the entire application money received will be refunded to the applicant. If the application is rejected in part, excess of the application money received will be refunded to the applicant within one week from the date of allotment of the bonds. No interest will be payable on the application money so refunded. Refund will be made by cheques or demand drafts drawn in favour of the sole/first applicant (including the details of his savings/ current account number and the name of the bank with whom the account is held) and will be dispatched by registered post/courier. Such refund orders Demand Drafts/Cheques will be payable at par at specified centres. The Bank has undertaken to make adequate funds available to the Registrar to the Offer for complying with the requirements of dispatch of Allotment Letters/Refund Orders by registered post/courier. Disputes & Governing Law

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The Bonds are governed by and shall be construed in accordance with the Indian Laws. The High Court of Karnataka, Bangalore alone shall have the jurisdiction in connection with any matter arising under these precincts. Trading of Bonds The trading of privately placed Debt securities would be permitted in standard denomination of Rs. 10 lakhs in the anonymous, order driven system of the Stock Exchange in a separate trading segment. The marketable lot would be Rs. 10 lakhs. All class of investors would be permitted to trade subject to the standard denomination/marketable lot. The trades executed on spot basis shall be required to be reported to the Stock Exchange. Succession In the event of the demise of the sole/first holder of the Bond(s) or the last survivor, in case of joint holders for the time being, the Bank will recognise the executor or administrator of the deceased Bondholder, or the holder of succession certificate or other legal representative as having title to the Bond(s). The Bank shall not be bound to recognise such executor or administrator, unless such executor or administrator obtains probate, wherever it is necessary, or letter of administration or such holder is the holder of succession certificate or other legal representation, as the case may be, from a Court in India having jurisdiction over the matter. The Bank may, in its absolute discretion, where it thinks fit, dispense with production of probate or letter of administration or succession certificate or other legal representation, in order to recognise such holder as being entitled to the Bond(s) standing in the name of the deceased Bondholder on production of sufficient documentary proof or indemnity or on such other terms and conditions as acceptable to the Bank. Notices Notice required to be given by the Bank to the Bondholders shall be Deemed to have been given if sent by ordinary post/courier to the First Bondholder or if published in one All India English daily newspaper and one regional language Kannada newspaper. Any notice required to be given by the Bondholders shall be sent by registered post/courier/by hand delivery to the Bank or to such persons at such address as may be notified by the Bank from time to time. Future Borrowings The Bank will be entitled to borrow/raise loans or avail finance in whatever form as also issue bonds / other securities in any manner having such ranking in priority, pari passu or otherwise and change the capital structure, including issue of shares of any class, on such terms and conditions as the Bank may think appropriate, without the consent of or intimation to the Bondholder(s) in this connection. Miscellaneous A Register of Bondholders shall be maintained at the Head Office of the Bank. Such Register shall be closed thirty (30) business days prior to each interest payment date. In case of dissolution/bankruptcy/insolvency/winding up of Bondholders, the Bond certificates shall be transmittable to the Legal Representative(s)/Successor(s) or the Liquidator, in

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accordance with the law on such terms as may be deemed appropriate by the Bank. Registrars Canbank Computer Services Limited, R&T Centre, Naveen Complex, 4th Floor, # 14, M. G. Road, Bangalore - 560 001 are acting as Registrar and Transfer agents for the Bank. Trustees The Bank has appointed IDBI Trusteeship Services Limited, 10th Floor, Nariman Bhavan, 227, Vinay K Shah Marg, Nariman Point, Mumbai – 400 021 as Bond Trustees registered with SEBI, for the holders of the Bonds (hereinafter referred to as ‘Trustees’). The Bank will enter into a Trustee Agreement/Trust Deed, inter-alia, specifying the powers, authorities and obligations of the Bank and the Trustees in respect of the Bonds. The Bondholders shall, without any further act or deed, be deemed to have irrevocably given their consent to and authorised the Trustees or any of their Agents or authorised officials to do, all incidental acts, deeds and things necessary in terms of this Memorandum of Private Placement. All rights and remedies under the Trust Deed/Trust Agreement and/or other security documents shall rest in and be exercised by the Trustees without having it referred to the Bondholders. Any payment made by the Bank to the Trustees on behalf of the Bondholder(s) shall discharge the Bank pro tanto to the Bondholder(s). The Trustees will protect the interest of the Bondholders in the event of default by the Bank in regard to timely payment of interest and repayment of principal and they will take necessary action at the cost of the Bank. The Trustees may appoint a nominee director on the Board of the Bank in consultation with other institutional Bondholders in the event of default. The major events of default which happen and continue without being remedied for a period of 30 days after the dates on which the monies specified in (i) and (ii) below become due and will necessitate repayment before stated maturity are as follows: (i) Default in payment of monies due in respect of interest/principal owing upon the Bonds; (ii) Default in payment of any other monies including costs, charges and expenses incurred by the Trustees. Other events of default are: i. Default is committed in the performance or observance of any covenant, condition or provision contained in these presents and/or the financial Covenants and Conditions (other than the obligation to pay principal and interest) and, except where the Trustees certify that such default is in their opinion incapable of remedy (in which case no notice shall be required), such default continues for 30 days after written notice has been given thereof by the Trustees to the Bank requiring the same to be remedied. ii. Any information given by the Bank in its applications to the Bondholders, in the reports and other information furnished by the Bank and the warranties given/deemed to have been given by it to the Bondholders/trustees is misleading or incorrect in any material respect. iii. The Bank is unable to or has admitted in writing its inability to pay its debt as they mature. iv. A Receiver or a Liquidator has been appointed or allowed to be appointed of all or any part of the undertaking of the Bank and such appointment is not dismissed within 60 days of appointment. v. The Bank ceases to carry on its business.

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Rights, Powers and Discretion of the Trustees General Rights, Powers and Discretions - In addition to the other powers conferred on the Trustees and provisions for their protection and not by way of limitation or derogation of anything contained in this Agreement nor of any statute limiting the liability of the Trustees, it is expressly stated as follows: a) The Trustees shall not be bound to give notice to any person of the execution hereof or to see to the performance or observance of any of the obligations hereby imposed on the Bank or in any way to interfere with the conduct of the Bank’s business unless and until the rights under the Bonds shall have become enforceable and the Trustees shall have determined to enforce the same; b) Save as herein otherwise expressly provided the Trustees shall, as regards all trusts, powers, authorities and discretions, have absolute and uncontrolled discretion as to the exercise thereof and to the mode and time of exercise thereof and in the absence of fraud shall not be responsible for any loss, costs, charges, expenses or inconvenience that may result from the exercise or non- exercise thereof and in particular they shall not be bound to act at the request or direction of the Bondholders under any provisions of these presents unless sufficient monies shall have been provided or provision to the satisfaction of the Trustees made for providing the same and the Trustees are indemnified to their satisfaction against all further costs, charges, expenses and liability which may be incurred in complying with such request or direction; c) With a view to facilitate any dealing under any provision of these presents the Trustees shall have full power to consent (where such consent is required) to a specified transaction or class of transactions conditionally; d) The Trustees shall not be responsible for the monies paid by applicants for the Bonds; e) The Trustees shall not be responsible for acting upon any resolution purporting to have been passed at any meeting of the Bondholders in respect whereof minutes have been made and signed even though it may subsequently be found that there was some defect in the constitution of the meeting or the passing of the resolution or that for any reason the resolution was not valid or binding upon the Bondholders; f) The Trustees shall have full power to determine all questions and doubts arising in relation to any of the provisions hereof and every such determination bonafide made (whether or not the same shall relate wholly or partially to the acts or proceedings of the Trustees) shall be conclusive and binding upon all persons interested hereunder; g) The Trustees shall not be liable for anything whatsoever except a breach of trust knowingly and intentionally committed by the Trustees; h) The Trustees shall not be liable for any default, omission or delay in performing or exercising any of the powers or trusts herein expressed or contained or any of them or in enforcing the covenants herein contained or any of them or in giving notice to any person or persons of the execution hereof or in taking any other steps which may be necessary, expedient or desirable for any loss or injury which may be occasioned by reason thereof unless the Trustees shall have been previously requested by notice in writing to perform, exercise or do any of such steps as aforesaid by the holders representing not less than three-fourths of the nominal amount of the Bonds for the time being outstanding or by a Special Resolution duly passed at a meeting of the Bondholders and the Trustees shall not be bound to perform, exercise or do any such acts, powers or things or to take any such steps unless and until sufficient monies shall have been provided or provision to the satisfaction of the Trustees made for providing the same by or on behalf of the Bondholders or some of them in order to provide for any costs, charges and expenses which the Trustees may incur or may have to pay in connection with the same and the Trustees are indemnified to their satisfaction against all

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further costs, charges, expenses and liabilities which may be incurred in complying with such request. Provided Nevertheless that nothing contained in this clause shall exempt the Trustees from or indemnify them against any liability for breach of trust nor any liability which by virtue of any rule or law would otherwise attach to them in respect of any negligence, default or breach of trust which they may be guilty of in relation to their duties hereunder. Bondholder not a Shareholder The Bondholders will not be entitled to any of the rights and privileges available to the Shareholders. Rights of Bondholders 1. The Bonds shall not, except as provided in the Act, confer upon the holders thereof any rights or privileges available to the members of the Bank including the right to receive Notices or Annual Reports of, or to attend and/or vote, at the General Meeting of the Bank . However, if any resolution affecting the rights attached to the Bonds is to be placed before the shareholders, the said resolution will first be placed before the concerned registered Bondholders for their consideration. In terms of Section 219(2) of the Act, holders of Bonds shall be entitled to a copy of the Balance Sheet on a specific request made to the Bank . 2. The rights, privileges and conditions attached to the Bonds may be varied, modified and/or abrogated with the consent in writing of the holders of at least three-fourths of the outstanding amount of the Bonds or with the sanction of Special Resolution passed at a meeting of the concerned Bondholders, provided that nothing in such consent or resolution shall be operative against the Bank, where such consent or resolution modifies or varies the terms and conditions governing the Bonds, if the same are not acceptable to the Bank. 3. The registered Bondholder or in case of joint-holders, the one whose name stands first in the Register of Bondholders shall be entitled to vote in respect of such Bonds, either in person or by proxy, at any meeting of the concerned Bondholders and every such holder shall be entitled to one vote on a show of hands and on a poll, his/her voting rights shall be in proportion to the outstanding nominal value of Bonds held by him/her on every resolution placed before such meeting of the Bondholders. The quorum for such meetings shall be at least five Bondholders present in person. 4. The Bonds are subject to the provisions of the Companies Act, 1956, the Memorandum and Articles, the terms of this Information Memorandum and Application Form. Over and above such terms and conditions, the Bonds shall also be subject to other terms and conditions as may be incorporated in the Trustee Agreement/ Letters of Allotment/ Bond Certificates, guidelines, notifications and regulations relating to the issue of capital and listing of securities issued from time to time by the Government of India and/or other authorities and other documents that may be executed in respect of the Bonds. 5. Save as otherwise provided in this Prospectus, the provisions contained in Annexure C and/or Annexure D to the Companies (Central Government’s) General Rules and Forms, 1956 as prevailing and to the extent applicable, will apply to any meeting of the Bondholders, in relation to matters not otherwise provided for in terms of the Issue of the Bonds. 6. A register of Bondholders will be maintained in accordance with Section 152 of the Act and all interest and principal sums becoming due and payable in respect of the Bonds will be paid to the registered holder thereof for the time being or in the case of joint-holders, to the person whose name stands first in the Register of Bondholders.

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7. The Bondholders will be entitled to their Bonds free from equities and/or cross claims by the Bank against the original or any intermediate holders thereof. 8. Bonds can be rolled over only with the positive consent of the Bondholders. Modification of Rights The rights, privileges, terms and conditions attached to the Bond may be varied, modified or abrogated with the consent, in writing, of those holders of the Bond who hold at least three fourth of the outstanding amount of the Bond or with the sanction accorded pursuant to a resolution passed at a meeting of the Bondholders, provided that nothing in such consent or resolution shall be operative against the Bank where such consent or resolution modifies or varies the terms and conditions of the Bond, if the same are not acceptable to the Bank. Bond Redemption Reserve (BRR) Ministry of Company Affairs has vide General Circular No. 9/2002 No. 6/3/2001-CL.V dated 18th April 2002 clarified that banks need not create Debenture Redemption Reserve as specified under section 117C of the Companies Act, 1956. VI. TAX BENEFITS

M/s Fraser & Ross, Chartered Accountants, vide their letter dated 07th January 2004 have advised the following tax benefits under the Current Tax Laws: A. TO THE BANK 1. Under Section 10(23G) of the Income Tax Act, 1961 any income by way of dividends, interest or long term capital gains of the Bank arising from Investments made on or after the first day of June 1998, by way of Bonds/securities or long term finance in any enterprise wholly engaged in the business of: i. ii. iii. developing or maintaining and operating or developing, maintaining and operating

any infrastructure facility which has been approved by the Central Government and which satisfied the prescribed conditions as per rule 2E of the Income Tax Rules, 1962, is exempt from tax. 2. Under Section 36(1)(viia) of the Income Tax Act in respect of any provision made for bad and doubtful debts, the Bank is entitled to a deduction not exceeding: i. 7.5% of the total income (computed before making any deductions under this clause and Chapter VIA) and ii. 10% of the aggregate average advances made by the rural branches of the Bank computed in the prescribed manner.

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However, the Bank, at its option, instead of deduction referred to in para 2(i) and 2(ii) above, can claim in the assessment of any of the five consecutive years, commencing on or after 01.04.2003 and ending before 01.04.2005, a deduction in respect of any provision made by it for any assets classified as doubtful assets or loss assets in accordance with the guidelines issued by Reserve Bank of India in this behalf, of an amount not exceeding 10% of the amount of such assets shown in the books of the Bank on the last day of previous year. Also the Bank shall, at its option, be allowed a further deduction in excess of the limit specified above, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government provided such income has been disclosed in its return of income under the head “Profits and gains of business or profession”. 3. In addition to the deduction available under Section 36(1)(viia) of the Income Tax Act, the Bank is entitled to claim a deduction under Section 36(1)(vii) of the Income Tax Act for the amount of bad debts written off as irrecoverable in the accounts. The deduction shall be limited to the amount by which such debt or part thereof, which exceeds the credit balance in the provision for bad and doubtful debts account made under Section 36(1)(viia) and subject to the compliance of provisions of Section 36(2)(v). 4. Under the provisions of Section 43D of the Income Tax Act interest income on certain categories of bad or doubtful debts as specified in Rule 6EA of the Income Tax Rules having regard to the guidelines issued by Reserve Bank of India in relation to such debts shall be chargeable to tax, only in the year in which it is actually received or the year in which it is credited to the Profit and Loss Account by the Bank, whichever is earlier. 5. Under Second Proviso to Section 48 of the Income Tax Act, the long term capital gains of the Bank arising on transfer of capital assets other than bonds and debentures (not being capital indexed bonds) will be computed after indexing the cost of acquisition, improvement and would be charged at a concessional rate of 20% as per Section 112 of the Income Tax Act plus applicable surcharge and education cess. Alternatively, at the option of the bank, where the tax payable in respect of any such long term capital gains exceeds 10% of the amount of capital gains arrived at without indexing the cost, the capital gains is charged at 10% plus applicable surcharge and education cess. 6. Under the provisions of 54EC of the Income Tax Act and subject to conditions specified therein, the Bank is eligible to claim exemption from the tax arising on long-term capital gains, on investment of capital gains in certain notified bonds, within six months from the date of transfer of capital asset. If only a portion of the capital gains is invested, then the exemption is proportionately available. If the specified asset is transferred or converted into money at any time within a period of three years from the date of acquisition, the amount of capital gains on which tax was not charged earlier shall be deemed to be income chargeable under the head “Capital Gains” of the year in which the specified asset is transferred.

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7. Under Section 54ED of the Income Tax Act, capital gains arising from the transfer of investment held as long term capital asset, being listed securities or unit is exempt fully from tax if the Bank invests within a period six months from the date of such transfer, the whole of the capital gains in acquiring equity Bonds/securities forming part of an eligible issue of capital as defined in clause (i) to explanation in the above section. Where only a part of the capital gains is so invested then the exemption is proportionately available. The exemption is available subject to other conditions specified in that Section. If the specified equity shares are sold or otherwise transferred within a period of three years from the date of acquisition, the amount of capital gains on which tax was not charged earlier shall be deemed to be income chargeable under the head “Capital Gains” of the year in which the specified equity shares are transferred. 8. In accordance with Section 10(34) of the Income Tax Act, dividend income as referred to in Section 115-O of the Act which is declared, distributed or paid on or after April 1, 2003 is exempt from tax in the hands of the Bank. 9. In accordance with Section 10(35) of the Income Tax Act, the following income shall be exempt in the hands of the Bank: a) Income received in respect of the units of a Mutual Fund specified under clause (23D); or b) Income received in respect of units from the Administrator of the specified undertaking; or c) Income received in respect of units from the specified company; Provided that this exemption does not apply to any income arising from transfer of units of the Administrator of the specified undertaking or of the specified company or of a mutual fund, as the case may be. II. TO THE RESIDENT BONDHOLDERS OF THE BANK: 1. Under Section 54EC of the Income Tax Act, exemption from capital gain tax is available in respect of long term capital gains arising on transfer of the Bonds/securities of the Bank if the assessee at any time within a period of six months from the date of such transfer, invests the whole of the capital gains in certain notified bonds. If only a portion of capital gains is so invested, then the exemption is proportionately available. If the specified asset is transferred or converted into money at any time within a period of three years from the date of acquisition, the amount of capital gains on which tax was not charged earlier shall be deemed to be income chargeable under the head “Capital Gains” of the year in which the specified asset is transferred. 2. As per Section 54ED of the Income Tax Act, long term capital gains arising from transfer of Bonds/securities of the Bank on its Bonds/securities being listed, is fully exempt from tax if the assessee invests within a period of six months from the date of transfer, the whole of the capital gains in acquiring equity Bonds/securities forming part of an eligible issue of capital as defined in clause (i) to explanation in the above section. Where only a part of the capital

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gains is so invested, then the exemption is proportionately available. The exemption is available subject to conditions specified in that Section. If the specified equity shares are sold or otherwise transferred within a period of three years from the date of acquisition, the amount of capital gains on which tax was not charged earlier shall be deemed to be income chargeable under the head “Capital Gains” of the year in which the specified equity shares are transferred. 3. As per the provisions of Section 54F of the Income Tax Act, 1961, long term capital gains arising in the hands of an individual or HUF on transfer of Bonds/securities of the Bank shall be exempt if the net consideration is invested in purchase of residential house within a period of one year before or two years from the date of transfer or constructs a residential house within a period of three years from the date of transfer. The exemption is available proportionately if only a portion of the net consideration is invested as above. The exemption is subject to other conditions specified in that Section. If the new residential house is transferred within a period of three years from the date of purchase or construction, the amount of capital gains on which tax was not charged earlier, shall be deemed to be income chargeable under the head “Capital Gains” of the year in which the residential house is transferred. 4. Under Section 112 of the Income Tax Act, where the Total Income of any assessee includes any long term capital gains on transfer of Bonds/securities of the Bank, same is subject to concessional rate of tax at 20% plus applicable surcharge and education cess, after indexing the cost as per the second proviso to Section 48 of the Income Tax Act. Alternatively, at the option of the assessee, where the tax payable in respect of any such long term capital gains exceeds 10% of the amount of capital gains arrived at without indexing the cost, the capital gains is charged at 10% plus applicable surcharge. 5. No Wealth Tax is payable in respect of investments in Bonds/securities of the Bank. III. BENEFITS AVAILABLE TO MUTUAL FUNDS As per the provisions of Section 10(23D) of the Act, dividend income from Investments in Bonds/securities of the Bank or income by way of short term or long term capital gains arising from transfer of such Bonds/securities earned by Mutual Funds registered under the Securities and Exchange Board of India Act, 1992 or Regulations made there under, mutual funds set up by the Public Sector Banks or Public Financial Institutions and Mutual Funds authorized by the Reserve Bank of India would be exempt from Income tax subject to the conditions as the Central Government may by notification in the Official Gazette specify in this behalf. For Fraser & Ross Chartered Accountants Sd/(K. R. Sekar) Partner Date: 19.11.2005, Bangalore

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VII.

BANK AND MANAGEMENT

Business and Industry overview For details, investor may refer Management Discussion and Analysis on page no.80 of this Offer document. History & Background Of The Bank Established in October 1913 under the aegis of the Government of Mysore on the recommendation of the Banking Committee headed by Sir M. Visvesvaraya, the great engineering statesman. It became the subsidiary of State Bank of India in March 1960 under the SBI (Subsidiary Banks) Act, 1959. State Bank of India holds 92.33% of shares and the rest is held by private shareholders/other institutions. The bank’s shares are listed in Bangalore, Chennai and Mumbai Stock Exchanges. The bank is playing a very proactive and dynamic role in the economic development of Karnataka state. It has pioneered in financing of coffee and silk industries and has taken early lead in financing agriculture and small scale industries in the state even before nationalisation of banks. It enjoys an excellent brand equity in the state and is well known for the excellent quality of its customer service. The bank has followed prudent banking policies and has the enviable record of earning uninterrupted profits and declaring dividends since inception without any break. The bank has stood up to the challenges of financial sector reforms in this decade. Our bank has been awarded with the first prize in state level for best performance under SHG – bank linkage programme for the year 2002-2003. Mission Statement of the Bank A premier commercial bank in Karnataka, with all India presence, committed to provide consistently superior and personalised customer service backed by employee pride and will to excel, earn progressively high returns for its shareholders and be a responsible corporate citizen contributing to the well being of the society. Organisational Set-up
HEAD OFFICE AT BANGALORE ZONAL OFFICE BANGALORE ZONE Controls 6 Regions ZONAL OFFICE CENTRAL ZONE Controls 5 Regions ZONAL OFFICE MYSORE ZONE Controls 4 Regions ZONAL OFFICE HUBLI ZONE Controls 4 Regions

The Managing Director at the top is assisted by the Chief General Manager and 6 General Managers in the areas of operations, commercial and international banking, planning and development, finance and services, inspection and vigilance and information and technology.

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The bank has 4 Zonal offices headed by Deputy General Managers. While two zonal offices are situated in Bangalore, other two zonal offices are situated at Mysore and Hubli. Top executives of the bank at head office
Shri Y Vijayananad Managing Director

Shri R Gopalan Chief General Manager

Shri S K Mishra General Manager (O)

Sri B N Ramaiah General Manager (P&D)

Shri Dinesh Bhatia
General Manager (C&IB)

Shri C K Mishra GeneralManager (F&S)

Shri R D Naidu General Manager (V&I)

Shri Ashok Bhattacharya General Manager (Tech)

Business Profile The aggregate deposits of the bank as at the end of October, 2005 was Rs. 14,218.00 crores and the total advances stood at Rs. 10,688.00 crores. The bank's advances to priority sector stood at Rs. 3,860.00 crores and constituted 39.47% of the net bank credit. While advances to agriculture stood at Rs. 1,365.00 crores, advances to export credit stood at Rs. 709.00 crores. Advances to SSI sector stood at Rs. 733.00 crores. The gross NPA ratio is 4.26% and net NPA ratio is 0.98%. The bank’s aggregate deposits and total advances in Karnataka State was Rs. 9,574.00 crores and Rs. 5,886.00 crores respectively and constitute 62.07% of the bank’s total business. The bank has made a Gross Profit of Rs. 248.59 crores as at the end of October 2005, registering a growth of Rs. 10.94 crores.. New Products launched by the Bank The following new products were launched by the bank to cater to the needs of the present day demands in the market: Deposits Schemes: a. MyBank Akshaya (linked to deposit scheme; revolving recurring deposit type) b. MOD (multi optional deposit) for public. c. MOD (multi optional deposit) for corporates. Developments in Retail Banking Bank has actively introduced the following new products covering various segments: Personal Segment a. Site purchase loan - housing loan for purchase of residential site / plot b. Housing loan to agriculturists

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c. d. e. f. g. h. i. j. k. l. m.

Housing loan against charge MyBank Adhyapak – finance to non-teaching & teaching staff MyBank Arakshak exclusively designed for helping the policemen MyBank Utsav MyBank Sanchari Suvidha for financing renovation and alteration of hotels, restaurants at tourist places MyBank Samachar – to cater to the needs of journalists Varshavahini – scheme for rainwater harvest Sanjeevini – scheme for high cost medical treatment Annapurna scheme for financing women beneficiaries for establishing food-catering units Tie-up arrangements with Maruti Udyog Ltd., for promoting car finance Tie-up arrangements with Bajaj Auto for promoting two wheeler products.

Agriculture Segment a. Grameena Bhandaran Yojana b. Development of Vanilla crop c. Produce marketing loan scheme d. Advances to bio-fertilizer units e. Financing for combine harvestors f. Financing farmers for purchase of agricultural lands g. Financing for setting-up of agricultural clinics h. My Krishigen Scheme – financing diesel generator sets to agricultural borrowers i. Financing cultivation of gherkins under contract farming j. Swarnamitra Scheme – financing against gold ornaments k. Tie-up arrangements with major tractor dealers for promoting tractor finance Small Industries and Business Segment a. b. c. d. e. f. g. h. MyBank doctor MyBank professional plus SME credit plus Swarojgar credit cards (scc) Artisan credit card (acc) scheme Flexi (SSI) term loan Green Auto – financing auto rickshaw owners for purchase of LPG/CNG kits Surya Deep – for solar power

Cross Selling All branches are authorised to do SBI Life and General Insurance Business. Accredition is obtained from IRDA to impart bancassurance (life) training. Referral arrangements with National Insurance Company Ltd., has been entered for non-life insurance activities. Future plans: The bank has set itself an ambitious target of increasing the market share in deposit and advances. Accordingly, a target of Rs. 2,700 crores under deposits, Rs. 2500 crores under advances, an Operating Profit of Rs. 554 crores and a net profit of Rs. 256 crores has been budgetted for the year 2005-2006.

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Main Objects of the Bank The SBI (SB) Act was enacted, providing for formation of seven subsidaries to SBI inculding SET and for the constitution, management and control of the subsidiary banks so formed and for matters connected there with or incidental thereto. Chapter II Section 4(3) of the SBI(SB) Act provides that the Bank shall carry on the business of banking and other business in accordance with the provisions of the ACT and shall have the power to acquire and hold property whether moveable or immoveable for the purpose of its business and to dispose off the same. Business of the Bank Sections 36, 36(A), 37 and 38 of Chapter VI of the SBI (SB) Act provide that: Subsidiary Bank to Act as Agent of State Bank: 36 (1) A Subsidiary Bank shall, if so required by the State Bank, act as Agent of the State Bank at any place in India for a) Paying, receiving, collecting and remitting money, bullion and securities on behalf of any government in India; and b) Undertaking and transacting any other business which the Reserve Bank may, from time to time, entrust to State Bank. Subsidiary Bank to Act as Agent of Reserve Bank: Section 36(A) A Subsidiary Bank shall, if so required by the Reserve Bank, act as Agent of the Reserve bank at all places in India where it has a branch for: a) Paying, receiving, collecting and remitting money, bullion and securities on behalf of any government in India; and b) Undertaking and transacting any other business which the Reserve Bank may, from time to time, entrust to it. Section 36A(4) A subsidiary bank may transact any business or perform any functions entrusted to it under sub-section (1) by itself or through any agency approved by the Reserve Bank. Other business, which the Bank may undertake Section 37(1): Subject to the other provisions contained in this Act, a subsidiary bank may carry on and transact the business of banking as defined in clause (b) of section 5 of the Banking Regulation Act, 1949, and may engage in one or more of the other forms of business specified in sub-section (1) of section 6 of that Act. Clause (b) of Section 5 of the Banking Regulation Act, 1949, states-"Banking" means the accepting for the purpose of lending or investment, deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft or otherwise.

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Section 37(2): The Central Government may, after consultation with Reserve Bank and the State Bank, by order in Writing: (a) Authorise a subsidiary bank to do such other forms of business as the Central Government may consider necessary or expedient; (b) Direct as any form of business as is mentioned in the order, shall be carried on subject to such restrictions, conditions and safeguards as may be specified therein; or (c) Prohibit a subsidiary bank from carrying on or transacting any form of business which, but for this clause, it is lawful for the subsidiary bank to engage in. Business, which the Bank may not transact: Section 37 (3) Save as otherwise provided under sub-section (2) of section 37 of the SBI (SB) Act a subsidiary bank shall not engage in any form of business other than referred to in sub-section (1) of Section 37 of the said Act. Bank may acquire the Business of Other Banks: Section 38 (1) A subsidiary bank may, with the approval of the State bank, and shall, if the Reserve Bank, in consultation with State Bank, so direct, enter into negotiations for acquiring the business, including the assets and liabilities of any other banking institutions. BRANCH NETWORK OF THE BANK The Bank has 20 Regional Offices, controlling 637 branches and 21 extension counters as on September 30, 2005, including 17 specialized branches. Distribution of Branch Network The population groups’ wise break up of branches in India is as follows:
Population Group Number of Branches % share to Total

Rural Semi-Urban Urban Metropolitan /Port Town Total

212 150 124 151 637

33.28% 23.55% 19.47% 23.70% 100.00%

Geographical Distribution of Branches is as under:
State/ Union Territory Number of Branches % Share of Total

Andhra Pradesh Delhi Goa Gujarat Karnataka Kerala Madhya Pradesh Maharashtra Orissa Rajasthan Tamilnadu Uttar Pradesh West Bengal 44

19 11 3 3 522 10 2 19 1 1 34 2 8

3.05% 1.77% 0.48% 0.48% 82.02% 1.61% 0.32% 2.89% 0.16% 0.16% 5.46% 0.32% 1.12%

Pondicherry Total Specialised Branches

1 637

0.16% 100.00%

For customer satisfaction and to increase the business, the Bank has given thrust to single window service by opening the specialized branches. The Bank has 17 specialized branches (excluding currency chest branches numbering to 110) as on September 30, 2005 that are engaged in financing our corporate borrowers, small-scale industries, specialized trading etc. The details are as given below:
Specialized Branches Number of Branches

Asset Recovery Branch Spl. Banking Branches Industrial Finance SSI Branch Treasury Total

1 4 4 5 3 17

BUSINESS OF THE BANK & ITS PRODUCTS AND SERVICES DEPOSITS
(Rs. in crores)
As on 31-Mar-01 31-Mar-02 31-Mar-03 31-Mar-04 31-Mar-05 30-Sep-05

Deposits (Global) 7335.00 8207.00 8793.00 10860.0013342.98 14280.92 Annual Growth – Amount 940 872 586 2067 2483 938 Annual Growth – Percent 14.69 11.89 7.14 23.51 22.86 14.06 Cost of Deposits (Global) (%) 8.00 7.71 6.89 5.71 4.96 4.74 Total global deposits of the Bank as on September 2005, touched a level of Rs. 14281 crores. The same was Rs. 13343 crore on March 2005 adding Rs. 938 crores. The category-wise break-up of total Global deposits during last 5 years is presented below:
(Rs. in crores)
As on March 31, 2001 March 31, 2002 March 31, 2003 March 31, 2004 Mar 31, 2005 Sept 30, 2005

Current Deposits Savings Bank Deposits Term Deposits Bank Deposits Total Distribution of Deposits

702.37 1795.36 4836.96 268.40 7603.09

815.91 1986.01 5405.32 307.86 8515.10

759.09 1028.02 2289.76 2821.31 5743.86 7011.13 195.54 204.23 8988.25 11064.69

1163.76 3494.53 8684.69 242.00 13584.98

1147.93 3812.32 9320.67 248.29 14529.21

The population group-wise break-up of aggregate Domestic deposits (excl. Bank) for the last five years is as given in the table below: (in %)
As on March 31, 2001 March 31, 2002 March 31, 2003 March 31, 2004 March 31,2005 Sep 30, 2005

Rural Semi-Urban

1081.33 1300.87

859.43 1763.90

952.89 1944.37

1075.78 2171.08

1330.71 2564.16

1365.79 2588.76

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Urban Metropolitan Total ADVANCES

1521.30 3699.59 7603.09

1904.68 3987.09 8515.10

1903.57 2167.96 4187.42 5649.87 8988.25 11064.69

2459.74 7230.37 13584.98

2623.41 7951.25 14529.21

Population group wise classification of Gross Advances The population group-wise classification of the Bank’s Gross Advances is as under:
As on March 31, 2001 March 31, 2002 March 31, 2003 March 31, 2004 (Rs. in crores) March 31 2005 Sept 30, 2005

Rural Semi-Urban Urban Metropolitan Total Growth of Advances

750.62 619.64 871.49 2287.29 4529.04

735.02 925.30 877.36 2636.29 5173.97

854.44 1062.82 895.03 2740.35 5552.64

982.24 1223.80 1040.34 3385.96 6632.34

1187.42 1294.39 1491.19 1592.44 1374.68 1470.30 5071.22 6010.28 9124.51 10367.41

The growth of the Bank’s Gross advances during the past five years, both in India and Overseas is as follows:
Year ended March 31, 2001 March 31, 2002 March 31, 2003 March 31, 2004 (Rs. in crores) March 31 2005 Sept 30 2005

Gross Credit Annual Increase (%)
Loan Policy

4529.04 14.39

5173.97 14.24

5552.64 7.32

6632.34 19.44

9124.51 37.57

10367.41 27.24

State Bank of Mysore (SBM) Loan Policy (hereinafter referred to as “The Loan Policy” or “The Policy”) is aimed at accomplishing its mission of all-round growth with maximum profits, a position of pre-eminence in banking, committed to excellence in customer, shareholder and employee satisfaction, with continuing emphasis on its Development Banking role, achieved through a skilled and committed workforce and technological upgradation. The Loan Policy of the bank has successfully withstood the test of time and with in-built flexibilities, has been able to meet the challenges in the market place. The policy exists and operates at both formal and informal levels. The formal policy is well documented in the form of circular instructions, periodic guidelines and codified instructions, apart from the Book of Instructions, where procedural aspects are highlighted. The policy, at the holistic level is an embodiment of the bank's approach to sanctioning, managing and monitoring credit risk and aims at making the systems and controls effective. The Loan Policy also aims at striking a balance between underwriting assets of high quality, and customer oriented selling. The basic tenets of SBM's Loan Policy are as follows: a. The Policy applies to all domestic lendings, subject to the general or special directives of RBI/Government of India, as also the prudential guidelines applicable to all corporate credit exposures of the Bank. 46

b. It aims at spotting and seizing opportunities and revamping our products and delivery mechanism as well as innovating new products ahead of competition. c. The Policy establishes a commonality of approach regarding credit basics, appraisal skills, documentation standards and awareness of institutional concerns and strategies, while leaving enough room for flexibility and innovation. d. It envisages an effective training system in all areas of "Credit Management" which reflects SBM's commitment to upgrade skills of all members of staff on a continuous basis. e. Computerisation, management information system based on a reliable database and development of faster communication as tools for better overall credit risk management are accorded due priority in the policy. f. Optimum exposure levels are set out in the Policy to different sectors in order to ensure growth of assets in an orderly manner. g. The Policy sets out minimum scores / hurdle rates (in terms of Credit Risk Assessment parameters) for new/ additional exposures. h. Bank's general approach to Export Credit and Priority Sector Advances is set out in the Policy. i. The Policy lays down norms for take over of advances from other banks/FIs. j. Bank's stand on granting credit facilities to companies whose directors is in the defaulter's list of RBI is covered in the Policy. k. The Policy aims of continued growth of assets while endeavoring to ensure that these remain performing and standard. To this end, as a matter of policy the bank does not take over any Non-Performing Asset (NPA) from other banks. The Board of the bank is the apex authority in formulating all matters of policy in the bank. A Credit Policy Committee (CPC) has been set up, duly approved by Executive Committee of the Board, of which the Top Management are members, to deal with issues relating to credit policy and procedures on a bank-wide basis. The CPC and/or the Management Committee (MC) sets broad policies for managing credit risk including industrial rehabilitation, sets parameters for credit portfolio in terms of exposure limits, reviews credit appraisal systems, approves policies for compromises, write offs, etc. and general management of NPAs besides dealing with the issues relating to Delegation of Powers. ASSET CLASSIFICATION, INCOME RECOGNITION & PROVISIONING Asset Classification The Bank classifies its assets in compliance with RBI guidelines. Under these guidelines, an asset is classified as non-performing if any amount of interest/ principal remains overdue for more than 90 days in respect of term loans. In respect of overdraft/ cash credit, an asset is classified as non-performing if the account remains out of order for a period of more than 90 days and in respect of bills, if the account remains overdue for more than 90 days. In case of retail assets, the Bank classifies an asset as non-performing where any amount of interest/ principal remains overdue for more than 90 days, in respect of all loans. NPAs are further categorized into three groups i.e. Substandard, Doubtful and Loss Asset depending upon the period of delinquency and availability of tangible security. The table below gives the criteria for asset classification viz. Standard, sub-standard, doubtful and loss assetCategory
1. Performing

Classification

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Standard Assets 2. Non-Performing a)Sub-Standard Assets b) Doubtful Assets c) Loss Assets

An Asset which has not posed any problem and which does not carry more than the normal business risk An asset which has been non-performing for a period less than or equal to eighteen months An asset, which has been non-performing for a period exceeding eighteen months Asset where loss has been identified by the Bank or auditors/ RBI. The value of security is less than 10%

For this purpose, all advances are segregated into performing assets (standard assets) and nonperforming assets. A borrowal account is classified as Non Performing Asset (NPA) when interest and/or instalment is overdue for more than 90 days. Borrowal accounts treated as NPA for not exceeding 18 months are classified as sub standard assets and borrowal accounts treated as NPA for more than 18 months are treated as doubtful assets. NPAs where securities are less than 10% and which are considered as irrecoverable are treated as loss assets. When an account is classified as NPA, interest already debited to the account but not realised, is de-recognised and further interest accrued is recognised on cash basis. Provisioning and Write-Offs As per RBI guidelines, provisions are arrived on all outstanding NPAs, as under: Sub-Standard Assets Doubtful Assets A general provision of 10 percent on total outstanding without making any allowance for DICGC/ECGC guarantee cover and securities available. Additional provision of 10 per cent, i.e., a total of 20 per cent on the outstanding balance for ‘unsecured exposures’, which are identified as ‘substandard’. 20%, 30%, 50% or 100% for secured portion of Doubtful assets upto one year (DA 1), one to three years (DA 2), more than three years (DA 3) slipped to DA 3 on or before 31.3.2004 and more than three years (DA 3) slipped to DA 3 after 31.03.2004 respectively and at 100% for the unsecured portion of the outstanding after netting retainable or realisable amount of the guarantee claims already received/ lodged with DICGC/ECGC, if any. 100% of the outstanding after netting retainable amount of the guarantee claims already received/lodged with DICGC/ECGC, if any A general provision of 0.25%

Loss Assets Standard Assets

Asset Classification of Performing and Non-Performing Assets for the last 5 years is given below: (Rs. in crore)
Classification of assets as on March 31, 2001 March 31, 2002 March 31, 2003 March 31, 2004 March 31, 2005

Standard Assets Sub Standard Assets Doubtful Assets Loss Assets Gross NPAs Gross Advances

3948.12 167.17 352.85 60.99 581.01 4529.13

4549.36 179.61 377.89 67.11 624.61 5173.97

4987.82 146.97 382.39 32.75 562.01 5549.83

6117.70 147.35 341.17 26.01 514.53 6632.23

8696.35 73.73 316.10 25.54 415.37 9111.72

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Advances given above are Gross Advances while the Balance Sheet indicates Net Advances after setting off provisions, interest suspense etc: Gross Advances – (Provisions, Interest Suspense and DICGC & ECGC claims) = Net Advances. Asset Classification of Performing and Non-Performing Assets for the last 5 years is given below: (As a % of Gross Advances)
Classification of assets (%) as on March 31, 2001 March 31, 2002 March 31, 2003 March 31, 2004 March 31, 2005

Standard Assets Sub Standard Assets Doubtful Assets Loss Assets NPA Total

87.17 3.69 7.79 1.35 12.83 100.00

87.92 3.47 7.30 1.29 12.08 100.00

89.87 2.65 6.89 0.60 10.13 100.00

92.24 2.22 5.14 0.40 7.76 100.00

95.44 0.81 3.47 0.28 4.56 100

NPA Management Strategy Several proactive measures, initiated by the Bank, have resulted in reduction of Gross NPA level from Rs. Rs. 514.53 crores to Rs.415.37crores as of March, 2005 thus registering a net reduction of Rs. 59.16 crores during the year. The Gross NPA ratio declined from 7.76% March 2004 to 4.56% in March 2005. With the aim of improving asset quality, the following measures have been initiated: * Constant review of large borrowal accounts to ensure proper end use of funds * Measurement of risk through credit rating / scoring * Benchmarking of financial and performance ratios * Effective loan review mechanism and portfolio management * Fixing prudential exposure limits in consonance with RBI guidelines * Constant review of economic scenario to identify systemic sector-wise risks * System of timely detection of sickness * Extending the ambit of Credit Audit for covering advances of Rs.2 crores and above * Adherence to various terms and conditions stipulated in the sanction letter * Monitoring of advances by constant on-site and off-site inspection * Review of Special Mention Accounts above Rs. 10 lacs on a monthly basis by the Top Management * Intensive training of officers for improvement of credit assessment skills * Utilization of Securitization Act for recovery of impaired assets * Restructuring / Rehabilitation through CDR / normal route * Some proposals have been sent to ARCIL and have been approved by them but the relative formalities have to be completed TREASURY & INTERNATIONAL OPERATIONS: Investments The total investments of the Bank in Government, approved and other securities increased from Rs. 5490.70 crores as at the end of March, 2004 to Rs. 5,800.87 crores as at the end of March, 2005 recording a growth rate of 5.65%(Rs.310.17 crores).

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Trading Profit on Investments 2003-04 - Rs.155.03 Crores 2004-05 - Rs.151.20 Cores Interest Income on Investments 2003-04 2004-05 Rs.480.11 Crs Rs.477.12 Crs

Yield on Investments 2003-2004 - 9.69% 2004-2005 - 8.46% The modified duration of the investments improved from 4.64 to 3.79. International Banking The merchant turnover increased from Rs.8924.87 Crores during 2003-2004 to Rs.10111.64 Crores during 2004-2005 registering a growth of Rs.1186.77 crores (13.30%). The profit increased from Rs.18.18 Crores to Rs.21.46 Crores registering a growth of Rs.3.28 crores (18.04%). The purchase transaction constituted 57.70% of the turnover while sales transaction accounted for 42.30%. Risk Management The Bank has achieved substantial progress in the implementation of risk management systems, envisaged in RBI guidelines. An integrated Risk Management approach is followed, with a well-designed organizational structure, and comprehensive policies and procedures laid down to manage credit, market & operational risks. The Bank has constituted: i) Risk Management Committee (RMC), which monitors the overall risks assumed by the Bank, ii) Asset Liability Management Committee (ALCO), which monitors the liquidity and interest rate risks, iii) Credit Policy Committee (CPC), which deals with issues relating to credit policy and procedures on a bank-wide basis, iv) Investment Committee, which deals with investment decisions, and v) Operational Risk Management Committee (ORMC) that monitors and manages the Operational Risks. These committees meet at periodic intervals. The Bank has a well-established credit approval process, including comprehensive credit appraisal and established procedures for application forms, documents, etc. A comprehensive system of risk assessment is in place whereby credit rating is assigned to every borrower. An independent review group is also established to vet the risk-assessed credit rating of individual borrower accounts. A comprehensive Loan Policy document that encompasses the various facets of credit risk management is in place. This is reviewed at regular intervals, and modifications to suit the bank’s needs are carried out. The Bank has a loan review mechanism,

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which undertakes review of the pre and post sanction process of all borrowal accounts with sanctioned limits of Rs. 200 lakh and above. The Bank carries out portfolio analysis of all borrowal accounts with sanctioned limits of Rs. 50 lakh and above at half-yearly intervals, which enables it to assess the distribution of standard assets and non-performing assets industry/sector-wise, distribution of standard assets risk rating-wise, extent of non-performing assets in every industry as a percentage of total exposure within the industry and overall credit, and also undertake a constant review of economic scenario to recognize sector-wise risks. The analysis enables the Bank to carry out redressal measures and initiate suitable steps to address the identified credit risks. The process of review/renewal of borrowal accounts is carried out in a systematic manner to assist in assessing the health of the borrowal account and timely detection of sickness. The Bank has laid down counter-party bank exposure limits for various operating departments, which is integrated and monitored on a monthly basis. Country Risk Management Policy has been drawn up, duly approved by the Board. These are reviewed at periodic intervals. In respect of Market Risk Management, including Liquidity and Interest Rate Risk Management, the Bank has introduced a scientific system of Asset-Liability Management. The market risk management policy is adequately spelt out in the ALM policy of the Bank, and is managed within the overall risk framework laid down by the Asset Liability Management Committee. The ALCO monitors market risk on an ongoing basis. Tolerance limits in accordance with RBI guidelines are fixed, and the Bank has always ensured adequate liquidity at all times. The investment policy has been laid down, which embraces the preferred mix of securities, sector-wise ceilings, limits for purchase and buyback transactions, etc., which is monitored by the Investment Committee. Operational Risk covers the whole gamut of residual risks not covered under either Credit or Market Risk. In order to mitigate operational risks, the Bank ensures a comprehensive internal control system, effective systems & procedures, recovery mechanisms and contingency plans, and regular and comprehensive audit of all its business units and administrative offices at regular intervals. The Bank has also introduced Risk Focused Internal Audit, as part of its attempt at introducing improved system of internal audit. Asset Liability Management (ALM) The ALM system was implemented in the Bank in 1999. An integrated Asset Liability Management Policy has been put in place for the purpose of identifying and measuring of Liquidity and Interest Rate Risks and for the formulation of appropriate strategies to manage such risks. The data collection from Branches has since stabilized consequent upon computerization of all the Branches. This has helped in timely decision- making by Asset Liability Management Committee (ALCO). The ALCO is the top operational unit for managing Balance Sheet within the risk parameters laid down by the Board. The ALCO met 14 times during the year to monitor and review risks and returns, raising and deployment of resources, setting Bank’s lending and deposit rates and directing the investment activities of the Bank. Oracle Financial Services Application (OFSA) is the common ALM solution provider for the entire State Bank Group. The Credit Information System (CIS), which is a single source of data

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relating to most information requirements on advances, is being implemented in the Bankmaster branches. This information is being used by IT-ALM Project and Core Banking Project. Technological Upgradation ATMs: As at the end of September 2005, the bank has installed 215 ATMs at 99 centres located in major cities like Bangalore, Mumbai, Chennai, New Delhi, Kolkata and Hyderabad and at important centers in Karnataka like Mysore Chickmagalur, Bellary, Shimoga Mangalore, Hubli, Davangere, Bhadravati, Chitradurga,Belgaum, Hassan etc. Value-added services: The following value-added services are provided to the customers:
Sr. No. Particulars No. of branches

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

CBDT Module Clearing Module Customer Signature DD/Banker’s Cheque Printing E-mail Customer Enquiry Terminal Steps (data transmission) Forex Module Govt. module Internet Banking Officers’ Signature scanning-own Bank OLTAS PPF Remote Customer Terminal SFMS (SWIFT) Single Window Services TDR/RID Printing

230 272 493 629 375 360 262 13 256 336 637 230 273 24 41 493 514

Core Banking Solution (CBS): Core Banking Solution has been implemented at 153 Branches as on Sep.2005. Link Office has also been brought under CBS thus bringing the total number to 154 branches/offices in CBS. Video conferencing: Video conferencing facility is functional at 9 locations. The foreign department and Specialised Treasury Branch, Mumbai are using the facility for conferencing with SBI for treasury operations. Automated stamp duty collection machine: The bank has commissioned ‘stamp duty collecting machine’ for collection of stamp duty at our Bangalore branch, which is the first of its kind in the country. The machine facilitates stamp paper vending without human interference. We propose to install 4 more machine during the year. Internet banking: The facility has been enabled at 336 branches . The transaction based Internet Banking facility is available at all Core Banking Branches.

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Steps (State Bank electronic payment systems): Steps is a messaging software for electronic funds transfer, e-realisation, message transmission, etc. Transmission of non-financial messages is launched in the first phase. 95 branches are using steps for transmission of nonfinancial messages. The bank will start financial messaging on steps on receipt of steps office software from SBI. Realtime Gross Settlement System (RTGS): Real time gross settlement (RTGS) wherein payment instructions to RBI are processed online on gross basis through the operating day in contrast to the existing net settlement system has been commissioned and in operation. Oltas (Online tax accounting system): Oltas was implemented based on recommendations of tax reforms committee. Oltas has been implemented at 213 designated branches of the bank Human Resource Development Human Resource Manpower Profile The total strength of the Bank as at the end of March 2005. stood at 9,564 as against 9,693 as at the end of March 2004. The staff strength comprised of 2,796 Officers, 4865 Clerks / Cashiers and 1,903 Subordinate Staff. Of these 861 are ex-defence Personnel, 110 belong to Physically Handicapped category and 509employees belong to minority communities. Women’s Representation As at the end of March 2005, there were 2,021 women employees in the Bank compared to 2,061 as at the end of March 2004. The Bank continued to provide equal opportunity to women in their career progression. Scheduled Castes / Scheduled Tribes - Representation As at the end of March 2005, there were 1,605 Scheduled Caste employees comprising of 444 Officers, 684 Clerks/Cashiers and 477 Sub-ordinate Staff. There were 464 Scheduled Tribe employees comprising of 185 Officers, 200 Clerks/Cashiers and 79 Subordinate Staff as at the end of March 2005. All guidelines of the Government of India for safeguarding the interests of SC/ST employees have been complied with. Training During the year 2004-05, 204 training programmes were organized at the Bank’s Staff Training Centres at Bangalore and Mysore, imparting training to 4091 employees of all cadres (2208 Officers, 1,520 Clerks and 363 Sub-staff). With a view to equip our officials in specialized areas, the Bank conducted several programmes in credit management, international banking, information technology, marketing and customer service, managing change, personal/retail segment advances, agricultural finance, speedy disposal of loan applications, recovery, profitability, NPA management, risk based supervision, cross-selling of products, preventive vigilance, planning & budgeting, training for internal auditors of Inspection Department, functional/orientation programmes and organizational development programmes. Besides, pre-promotional training programmes for SC/ST officers / employees were also conducted during the year.

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During the year, 641 officials were deputed to outside training institutions such as State Bank Staff College, Hyderabad, State Bank Academy, Gurgaon, State Bank Institute for Rural Development, Hyderabad, State Bank Institute for Information and Communication Management, Hyderabad, NIBM Pune, BTC, Mumbai, etc. Besides, officials of the Bank were deputed to various seminars/workshops/conferences. Management Of The Bank The Bank is managed by a Board of Directors comprising of 13 directors. The details of the Directors on the Board of the Bank are provided on page no. 19 of this Offer Document. Authority for the Placement This private placement of Bonds is being made pursuant to the resolution passed by the Executive Committee of the Board of Directors of the Bank at its meeting held on November 19, 2005 permitting to raise Subordinated Debts of Rs. 250 crores. Further, State Bank of India, Central Office, has approved the issue of subordinated bonds vide their letter SBD/BNJ/002332 dated November 21, 2005. The Bank can carry on its existing activities and future activities planned by it in view of the existing approvals, and no further approvals from any Government authority are required by the Bank to carry on its said activities. Terms of Appointment of Managing Director In terms of Section 29 (1) of State Bank of India (Subsidiary Banks) Act, 1959, the State Bank of India, after consulting the Board of Directors of State Bank of Mysore and with the approval of Reserve Bank of India, appointed Shri Y. Vijayanand as Managing Director of State Bank of Mysore for a period of two years from the date of his assuming charge of the position, vide notification no. SBD NO. 18/2003-04 dated February 26, 2004. The details of the terms/ contract of the appointment of Managing Director are available for verification at the Head Office of the bank. Directors’ Shareholding The share holding by the directors in the share capital of the bank is not material and is insignificant as compared to the overall paid up share capital of the bank. Payment or Benefit to Promoters or Officers of the Company Except as stated otherwise in this Information Memorandum, no amount or benefit has been paid or given since the inception of the Bank. Payment or Benefit to the Directors and Officers of the Bank No amount or benefit has been paid or given or is intended to be paid or given to any Director or Officer of the Bank except their normal remuneration and/or reimbursement for the services rendered to the Bank to which they are entitled to or may become entitled to under the provisions of the Bank Nationalisation Act or otherwise in accordance with the Law. Nature and Interest of Directors

54

No Director of the Bank is interested in the appointment of any of the Managers, Registrars and Bankers to the Issue. No Director of the Bank is interested in any property acquired by the Bank within two years of the date of the Offer Document or proposed to be acquired by it. The Bank has not purchased any property in which any of its Directors had or have any direct or indirect interest or in respect of any payment thereof. The Bank has no plans, at present, to acquire any running business out of the proceeds of the Issue. The Directors have no interest in any loan or advance given by the Bank to any person(s)/ Company (ies) nor is any beneficiary of such loan or advance related to any of the Directors. Changes in Directors during the last three years The changes that took place in the Board of Directors since September 1st, 2002 are as follows:
Sr. No. Name Date of change Date of Appointment Ceased from Reason for change

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Shri Janaki Ballabh Shri A. R. Samajdar Shri K. S. V. Krishnamachari Shri C. Bhattacharya Shri B. D. Berwal Shri A. S. Shetty Dr. K. P. Ramaprasanna Shri H. S. Nanjundaswamy Shri B. P. Rao Shri M. Sitarama Murty Shri A.G.Kalmankar Shri V.S.Paliwal

01.11.2000 23.02.2000 12.06.2002 08.10.2003 05.01.2001 26.04.2001 16.09.1996 02.05.1997 24.03.1997 06.10.2000 31.05.2004 04.02.2004

31.10.2002 30.09.2003 31.07.2003 31.05.2004 24.03.2004 31.01.2004 15.09.2002 20.10.2002 23.03.2003 31.12.2003 15.05.2005 17.03.2005

Retired Retired Retired Promoted GoI Nominee Term completed RBI Nominee – Retired Term Completed Term Completed Term Completed Retired

Key Managerial Personnel
Name & Designation Date of Joining Qualifications Experience (with Issuer Bank) Functional responsibility

Sri Y Vijayanand, Managing Director Sri. R.Gopalan Chief General Manager Sri B N Ramaiah, General Manager Sri S.K.Misra, General Manager Sri C K Mishra, General Manager Sri R D Naidu, General Manager Sri Ashok Bhattacharya, General Manager

01.03.2004 28.01.05 10.08.1967 15.09.05 06.01.2004 04.08.2003 31.07.2004

MA (Economics) BL, CAIIB M.Sc. BA, CAIIB B.Tech MA (Economics), LLB B.Sc., LLB, CAIIB, PGDBM ME (Mech), MBA (USA), CAIIB 1 year 1 year 37 years P&D Operations F&S V&I Technology

55

Sri Dinesh Batia, General Manager

08.12.2004

B. Tech. (Hons), Diploma in Management, CAIIB

C&I

The key managerial personnel are permanent employees and on the rolls of the Bank. Changes in Key Managerial Personnel during the last one year (otherwise than by way of retirement): Shri. Niranjan Bardalai CGM, was transferred to State Bank of Indore Shri. Ashok Nayar was appointed as CVO, Bank of India Shareholding by Bank’s Key Managerial Personnel The share holding by the key managerial personnel in the share capital of the bank is not material and is insignificant as compared to the overall paid up share capital of the bank. Corporate Governance State Bank of Mysore is an organization driven by values is committed to enhancing the long term shareholder value and simultaneously protecting the interests of all stake holders, viz customers, employees, investors, partners, RBI, the Government and the society at large, in consonance with best practices. The Bank believes that Corporate Governance facilitates effective management and control of operations. The primary objectives of Corporate Governance are: i) To ensure maximization of long term shareholder value in a legal and ethical manner. ii) To act in the best interest of all stakeholders like customers, employees, government and the society. iii) To ensure transparency and fairness in all transactions within and outside the Bank which form the hallmark of good governance. iv) To ensure accountability for performance and to achieve excellence/benchmarks at all levels and in key operational areas. v) Focus on core competence areas, planned expansions and sustained growth. The Bank is committed to: i) Ensure that the Bank’s Board of Directors meet regularly, provide effective leadership, exercise control over the management and monitor executive performance with their blend of expertise and professionalism. ii) Establish a frame work of strategic control and continuously review its efficacy to promote integrity, openness and accountability. Better disclosures and transparency will bolster investor/share/stakeholder confidence. iii) Establish clearly documented and transparent management processes for policy planning and development, coherent business strategies, implementation and review, decision-making, monitoring control and reporting. iv) Ensure adherence to good business ethics and principles while carrying out banking transactions and be responsive to the needs and interests of wide range of constituencies.

56

v) Practice sound financial and accounting procedures to ensure statutory and regulatory compliances and constantly review organisational structure and control systems to respond to new challenges. Sub-Committees of the Board, Composition, Role and Functions In line with the Corporate Governance Policy of the Bank and for effective functioning, the following Sub-Committees of the Board have been formed with delegated powers and responsibilities: 1. Executive Committee of the Board In terms of Section 35(1) of the State Bank of India (Subsidiary Banks) Act, 1959, the Executive Committee of the Board of Directors has been constituted to consider various business matters namely sanctioning of credit proposals, approval of capital and revenue expenditure, investments, administrative matters and all other issues, falling beyond the powers of the executives of the Bank. The Committee comprises of the Managing Director, two Directors nominated by State Bank of India and one elected Director. One other Director (Non Executive) nominated by State Bank of India shall constitute the fifth member of the Executive Committee. The committee meets at least once in an month and has met fourteen times between 1st April, 2003 to 31st March, 2004. 2. Committee of Directors to oversee the implementation of Asset Liability Management System As per the ALM guidelines issued by Reserve Bank of India, a Committee of Directors of the Board has been constituted. The Committee comprises four Directors, the Managing Director as Chairman of the Committee and three other nominee Directors. The Committee, besides providing directions and overseeing the implementation of the ALM system, also reviews the position of the Ban with regard to measurement and management of liquidity and interest rate risks. The Committee met 3 times during the year. 3. Audit Committee of the Board In terms of the directives from RBI, the audit committee of the Board has been constituted. The Committee comprises of two non-official Directors, nominee director of the RBI and the nominee director from the SBI. One of the non-officials directors who is a Chartered Accountant chairs the meetings of the ACB. The quorum for the ACB meeting is 3 directors. The Audit Committee of the Board provides directions and also oversees the operations of the total audit function in the bank with special focus and follows up on a. b. c. d. e. Reconciliation of Inter-Branch account (SBM General Account) Reconciliation of Inter-Bank NOSTRO accounts Balancing of books at various branches Frauds Review of internal audit / concurrent audit of branches

57

f. Review of inspection reports of specialized and large branches and branches rated as “unsatisfactory” in the internal audit. g. Review/compliance of Long Form Audit Reports h. Review/compliance of Annual Financial Inspection by RBI i. All other major areas of housekeeping The committee interacts with external auditors before finalisation of the annual auditors before finalisation of the annual/half yearly financial accounts and reports. The committee meets atleast once in a quarter and not less than six times in a year. During the current financial year the Committee met eight times. Shareholders’/Investors’ Grievance Committee (SIGC) Investor grievances are given utmost importance and grievances received are dealt expeditiously. Pursuant Clause 49 para VIC of the Listing Agreement a shareholder/investor grievance committee has been formed under the chairmanship of a non-executive director. The Committee specifically looks into redressing of shareholder/investor complaints in matters like transfer of shares, non-receipt of annual reports, non-receipt of dividends etc. This Committee is designated ‘Shareholder/Investor Grievance Committee’ and meets every quarter. VIII. PROMOTERS, GROUP COMPANIES, JOINT VENTURES AND ASSOCIATES Promoters and their Background State Bank of India The State Bank of India was constituted on 1st July 1955, pursuant to the State Bank of India Act, 1955 (the "SBI Act") for the purpose of creating a state-partnered and state-sponsored bank integrating the former Imperial Bank of India. In 1959, the State Bank of India (Subsidiary Banks) Act was passed, enabling the Bank to take over eight former stateassociated banks as its subsidiaries. The Bank is India's largest bank, with approximately 9,000 branches in India and 54 international offices. Its Associate Banks have a domestic network of around 4,600 branches, with strong regional ties. The Bank also has subsidiaries and joint ventures outside India, including Europe, the United States, Canada, Mauritius, Nigeria, Nepal, and Bhutan. The Bank has the largest retail banking customer base in India. The Bank is engaged in corporate banking for many of India's most significant corporates and institutions, including State-owned enterprises, as well as providing banking services to commercial, agricultural, industrial and retail customers throughout India. The Bank services its most important corporate customers, including certain state-owned enterprises, through its Corporate Banking Group, and its other customers, including other large corporations and State-owned enterprises, small scale industries, agriculture and personal banking customers through its National Banking Group. The National Banking Group also provides financial services to the Government and the state governments, including tax collection and payment

58

services. The Bank is engaged in international banking and has foreign operations in 28 countries with a global network of 54 branches. The Bank has a presence in diverse segments of the Indian financial sector, including asset management, factoring and commercial services, insurance, credit cards and payment services. As at 31st March, 2004, calculated based on RBI data, the Bank's estimated market share in aggregate deposits of all scheduled commercial banks in India equalled 18.75 percent including India Millennium Deposits, a deposit scheme denominated in foreign currencies launched by the Bank for non-resident Indians. The Bank's estimated market share in domestic advances was 16.87 percent as on the last reporting Friday of March 2004, calculated based on RBI data for "All Scheduled Commercial Banks" ("ASCB") in India. As at 31st March 2004, the Bank had an estimated 35.63 percent share of the Indian foreign exchange market, calculated based on the trade data of DGCIS. The assets of the Bank are diversified across business segments, industries, and groups. The Bank's corporate headquarters ("Corporate Centre") is located at State Bank Bhavan, Madame Cama Road, Mumbai - 400 021. The bank is committed to using its effort to adopt technology to achieve efficiency in its business operations. The bank is moving towards centralised database using enhanced technology to credit it "CBS". The CBS will enable on time, real time transaction processing and provide live interface to a multitude of technology delivery channels.
SBI FINANCIAL HIGHLIGHTS: PAST 5 YEARS TABLE I STATE BANK OF INDIA -FINANCIAL HIGHLIGHTS-2001-2005 Rs. in Billion Deposits Advances Investments Total Assets Interest Income Interest Expenses Net Interest Income Non-Interest Income Total Operating Income Staff Expenses Overhead Expenses Total Operating Expenses Operating Profit Total Provisions Net Profit FY2001 2428.28 1135.90 1228.76 3156.44 261.38 177.56 83.82 38.83 122.65 60.12 22.87 82.99 39.66 23.63 216.03 FY2002 2705.6 1208.06 1451.42 3482.28 298.10 207.29 90.81 41.74 132.55 51.53 20.58 72.11 60.44 36.14 24.30 FY2003 2961.24 1377.58 1723.48 3758.76 310.87 211.09 99.78 57.40 157.18 56.89 22.53 79.42 77.76 46.70 31.06 FY2004 3186.19 1579.34 1856.76 4078.15 304.60 192.74 111.86 76.12 187.98 64.48 27.97 92.45 95.53 58.72 36.81 FY2005 3670.48 2023.74 1970.98 4598.83 324.28 184.83 139.45 71.20 210.65 69.07 31.67 100.74 109.91 66.86 43.05

TABLE II STATE BANK OF INDIA -FINANCIAL HIGHLIGHTS-2000-2004 (IN US $) In US$ Billion Deposits Advances FY2001 52.09 24.37 FY2002 55.44 24.76 FY2003 62.35 29.01 FY2004 72.88 36.13 FY2005 83.91 46.26

59

Investments Total Assets Interest Income Interest Expenses Net Interest Income Non-Interest Income Total Operating Income Staff Expenses Overhead Expenses Total Operating Expenses Operating Profit Total Provisions Net Profit

26.36 67.71 5.58 3.81 1.77 0.86 2.63 1.29 0.49 1.78 0.85 0.51 0.34

29.74 71.36 6.11 4.25 1.86 0.86 2.72 1.06 0.42 1.48 1.24 0.74 0.50

36.29 79.15 6.55 4.45 2.10 1.21 3.31 1.20 0.47 1.67 1.64 0.98 0.66

42.47 93.28 6.97 4.41 2.56 1.74 4.30 1.47 0.64 2.11 2.19 1.34 0.85

45.06 105.13 7.41 4.23 3.18 1.63 4.81 1.58 0.72 2.30 2.51 1.53 0.98

TABLE III STATE BANK OF INDIA KEY FINANCIAL INDICATORS(%) ROA ROE EPS(Rs.) BVS(Rs.) Dividend Pay out Ratio Cost/Income Ratio Capital Adequacy Ratio Cost of Deposits Yield on Advances Yield on Resources Deployed Net Interest Margin Gross NPA Ratio Net NPA Ratio Provision Coverage FY2001 0.57 11.92 30.48 256 16.40 67.66 12.79 7.80 10.17 10.12 3.23 12.93 6.03 57 FY2002 0.73 15.97 46.20 289 12.98 54.40 13.35 7.60 9.66 10.06 2.91 11.95 5.63 56 FY2003 0.86 18.05 59.00 327 14.40 50.53 13.50 7.11 8.97 9.53 2.95 9.33 4.50 54 FY2004 0.94 18.19 69.94 384 15.73 49.18 13.53 6.02 8.17 8.62 3.04 7.75 3.48 57 FY2005 0.99 18.10 81.79 450 15.29 47.83 12.45 5.11 7.68 7.94 3.39 5.96 2.65 57

TABLE IV SUMMARY OF STATE BANK OF INDIA’S BALANCE SHEET (Rs. in billion) MARCH 2003 CAPITAL & LIABILITIES Capital 5.26 Reserves & Surplus 166.77 Deposits 2961.23 Borrowings 93.04 Other Liabilities & Provisions 532.46 Total 3758.76 ASSETS Cash & balances with 127.38 Reserve Bank of India Balances with banks and 324.43 money at call & short notice Investments 1723.48 MARCH 2004 5.26 197.05 3186.19 134.31 555.34 4078.15 190.41 245.25 1856.76 MARCH 2005 5.26 235.46 3670.48 191.84 495.79 4598.83 168.10 225.12 1970.98

60

Advances Fixed Assets Other Assets Total Contingent Liabilities Bills for Collection

1377.58 23.89 182.01 3758.77 1061.06 75.71

1579.34 26.45 179.94 4078.15 1118.92 101.94

2023.74 26.98 183.91 4598.83 1593.97 167.77

TABLE V SUMMARY OF STATE BANK OF INDIA’S BALANCE SHEET (In US $ billion) MARCH 2003 CAPITAL & LIABILITIES Capital 0.11 Reserves & Surplus 3.51 Deposits 62.35 Borrowings 1.96 Other Liabilities & Provisions 11.21 Total 79.14 ASSETS Cash & balances with 2.68 Reserve Bank of India Balances with banks and 6.83 money at call & short notice Investments 36.29 Advances 29.01 Fixed Assets 0.50 Other Assets 3.83 Total 79.14 Contingent Liabilities 22.34 Bills for Collection 1.59 MARCH 2004 0.12 4.51 72.88 3.07 12.70 93.28 4.35 5.61 42.47 36.13 0.61 4.11 93.28 25.59 2.33 MARCH 2005 0.12 5.38 83.91 4.39 11.33 105.13 3.84 5.15 45.06 46.26 0.62 4.20 105.13 36.44 3.83

ASSOCIATES FINANCIALS OF GROUP COMPANIES
Name of the Company Nature of activity Date of incorporation Year Equity Capital Reserves Sales PAT EPS (in Rs.)

SBI DFHI Ltd

Primary Dealer

08.03.1998

SBI Capital Markets Ltd

SBI Factors & Commercial Services Pvt. Ltd SBI Funds Management Pvt Ltd

Offers invest-ment banking services Factoring Company

02.02.1988

26.02.1991

Mutual Fund Company

07.02.1992

2002 2003 2004 2005 2002 2003 2004 2005 2002 2003 2004 2005 2002 2003 2004 2005

200 200 290.91 290.91 58.03 58.03 58.03 58.03 25 25 25 25 50 50 50 50

414.76 502.77 761.45 667.17 223.98 232.02 245.93 284.42 11.57 13.79 13.97 17.80 7.27 10.38 14.83 20.75

557.94 300.13 379.08 42.80 103.07 120.62 142.75 175.06 13.04 14.1 14.44 23.83 27.22 29.49 36.10 49.75

184.48 129.89 177.57 94.80 18.81 28.35 63.23 88.12 0.46 2.22 1.59 6.12 0.55 6.2 10.09 15.05

92.24 64.94 61.04 -3.24 4.89 10.9 15.18 1.85 8.88 6.32 24.48 1.11 12.23 20.18 30.10

61

CIBIL

Credit Information Bureau Credit card company

21.08.2000

SBI Card

2002 2003 2004 2005 2002 2003 2004 2002 2003 2004 2002 2003 2004 2005 2004 2004

8.75 18.75 25.00 25.00 100 100 100 27 27 27 125.00 125.00 175.00 175.00 0.10 10

NIL NIL NIL NIL NIL NIL 24.98 NIL NIL 15.33 NIL NIL NIL NIL 0.0029 124.94

0.02 1.82 2.31 0.63 165.79 250.48 313.11 45.8 56.25 78.95 27.49 112.36 275.11 652.07 0.0057 380.14

-0.47 -0.52 -3.71 -6.59 1.56 16.57 59.92 2.95 8.68 19.6 -0.29 -7.49 -16.41 11.50 0.0029 124.94

N.A N.A N.A N.A N.A 1.66 3.8 1.09 3.21 7.26 NIL NIL NIL NIL 0.29 124.93

GE Capital Business Process & Management Services Pvt. Ltd. SBI Life 11.10.2000 UTI Trustee Co. Pvt. Ltd UTI Asset Mgt. Co. Pvt. Ltd. Trustee of UTI MF Investment Mgt. Services

14.11.2002 14.11.2002

Name of the Nature of Date of company activity Incorpor ation SBBJ Banking SBI (Subsidiary Banks) Act, 1959 SBH Banking

Year

Equity Reserves Capital 2002 50.00 702.11 2003 50.00 853.45 2004 50.00 1098.57 2005 50.00 1247.68 2002 17.25 981.16 2003 2004 2005 17.25 17.25 17.25 17.50 17.50 17.50 17.50 24.75 24.75 24.75 24.75 314.00 314.00 314.00 314.00 50.00 50.00 50.00 50.00 1233.69 1556.52 1748.40 395.1 566.16 772.67 886.06 1117.25 1387.43 1706.1 2019.63 253.6 311.44 453.41 480.25 560.14 672.8 875.26 1079.98

Sales

EPS (inRs.) 164.5 329 203.28 406.55 301.52 603.04 205.65 411.30 226.49 1312.99 301.4 381.2 250.90 125.1 200.32 226.26 133.18 232.94 322.02 430.36 287.07 82.01 92.55 177.39 41.16 120.93 171.04 244.6 247.13 1747.22 2209.86 1454.49 714.86 1144.69 1292.91 761.03 941.17 1301.09 1738.83 1159.88 26.12 29.47 56.49 13.11 241.86 342.08 489.2 494.26

PAT

SBIR

Banking

2002 2003 2004 2005

SBP

Banking

2002 2003 2004 2005 2002 2003 2004 2005 2002 2003 2004 2005

SBS

Banking

SBT

Banking

62

The following table sets out details of the SBI's International Subsidiaries, Joint Ventures and Associates outside India as at 31st March, 2004. Subsidiaries, Joint Ventures and Associates Outside India (As at 31st March 2004)
Name Date of Establishment Total Assets Owned Funds Bank's Shareholding (%) (Rs millions) Net Profit

SBI (Canada) SBI (California) SBI International (Mauritius) Ltd. INMB Bank Ltd., Lagos Nepal SBI Bank Limited Bank of Bhutan 2 Commercial Bank of India LLC, Moscow
1

5th May, 1982 6,739.4 3rd September, 1982 6,617.0 12th October, 1989 3 7,679.1 27th March, 1994 4 th 26 November, 1981 1,378.3 7 My, 1993 4,531.3 28th May, 1968 12,351.4 5th December, 2003 868.7
th

976.5 697.5 834.7 496.4 341.3 917.3 868.7

100 100 98 51 50 20 60

(22.2) 33.7 49.7 47.9 29 2 164.2 (40.8)

1. Data as on 16th July 2003. 2. Data as on 31st December 2003. 3. As a joint venture. 4. As a subsidiary.
The following tables set out certain performance highlights of the Associate Banks as at 31st March 2004.
Operating Name of the Bank Ownership (per cent) State Bank of Bikaner and Jaipur (SBBJ) State Bank of Hyderabad (SBH) State Bank of Indore (SBIR) State Bank of Mysore (SBM) State Bank of Patiala (SBP) State Bank of Saurashtra (SBS) State Bank of Travancore (SET) Total 75.07 100.00 98.05 92.33 100.00 100.00 75.01 Deposits Advances (Rs .in Millions) 156420 242,580 104,190 110,840 224,730 106,750 197,210 (Rs .in Millions) 85,970 118.14 64,060 63,070 130,860 52,400 111.320 Profit (Rs .in Millions) 6,813.5 10,142.1 5,322.4 4,249.2 10,037.5 4,527.6 7,008.3 48, 100.6 Return on Equity (per cent) 26.25 24.22 28.63 30.31 24.86 23.12 26.44 25.77

1,142,720 625,820

Non-Banking Subsidiaries and Joint Ventures of the Promoter: In addition to the Associate Banks, SBI also has a network of non-banking subsidiaries and joint ventures in India engaged in business other than commercial banking. At 31st March, 2004, total assets. In SBI's financial statements, investments in subsidiaries and joint ventures (both in India and abroad) are valued at historical cost after provisions, if any.
SBI's Ownership Investment (per cent) (Rs. in millions)

Non-Banking Subsidiaries

Assets (Rs. in millions)

Net profit (Rs. in millions)

63

SBI Funds Management Pvt. Ltd SBI Factors and Commercial Services P. Ltd SBIDFHI Ltd SBI Capital Market Ltd. Non- Banking Joint Ventures SBI Life Insurance Company Ltd SBI Cards and Payment Services Pvt. Ltd Credit Information Bureau of India GE Capital Business Process Management Services Pvt Ltd

100.00 69.88 66.00 86.16 7400 60.00 40.00 4000

500.0 135.0 1657. 1 108.0 12950 600.0 100.0 1080

738. 1 1878.6 28599.5 4815.4 48665 8297.6 2546 7207

100.9 15.9 1740.9 632.3 1641 599.2 37. 1 3097

Regional Rural Banks promoted by State Bank of India SBI, along with the Government, including respective state governments, has promoted 30 Regional Rural Banks ("RRBs") spread over 102 districts in 16 States with a network of approximately 2,350 branches. The aggregate deposits and advances of the sponsored RRBs stood at Rs.78,137.8 million and Rs.34,019.0 million respectively at 31st March, 2004. The net profit of the combined RRBs in fiscal year 2004 was Rs. 184.4 million. SBI had, as of March 2004, contributed Rs.1,349.7 million for the recapitalisation of 29 RRBs, which were in the process of financial restructuring Contingent Liabilities/Legal Proceedings/Disputes SBI and its Banking Subsidiaries have contingent liabilities, which pertain to their normal banking activities. A major portion of these contingent liabilities are a source of income for them. Most of these contingent liabilities are adequately covered through individual security mechanisms as also duly counted for maintaining Capital Adequacy in line with RBI guidelines. SBI and its Associates, Subsidiaries and Affiliates are also party to various legal proceedings / disputes in the ordinary course of business of banking / other business. However, none of such proceedings / disputes, even if determined adversely to SBI and its Associates, Subsidiaries and Affiliates would have, by law, any material adverse effect on the business or financial condition of SET since each subsidiary bank is a separate statutory corporation, constituted and governed by the SBI (SB) Act. Sponsored RRBs The bank has sponsored two regional rural banks, viz., Cauvery Grameena Bank covering Mysore, Hassan and Chamarajanagar districts and Kalpatharu Grameena Bank covering Bangalore urban, Bangalore rural and Tumkur districts. As on September 2005, these two RRBs Collectively have a net work of 203 Branches and total deposits and advances of Rs.660.78 and Rs.564.35 crores respectively. Both the RRB’s are profit making. Related Party transactions as per the financial statements For details, investors may refer to page no.74of this offer document. Currency 64

Amounts expressed in this offer document may be construed in INR (Indian Rupee) unless mentioned otherwise.
DIVIDENDS DECLARED IN RESPECT OF LAST FIVE FINANCIAL YEARS ENDED 31ST MARCH Rs.cr 31/3/01 31/3/02 31/3/03 31/3/04 31/03/2005 Dividend (Excl. Tax) Tax Dividend Rate (%) 9.00 0.92 25% 25% 9.00 14.40 1.85 40% 21.60 2.77 60% 27.00 3.79 75%

IX.

FINANCIAL STATEMENTS Financial Summary The Financial Summary has been taken from the Audited results provided by the auditors.
Year ended March 31st Total Income Interest Income Other Income Expenditure Interest Expenditure Operating Expenditure Profit before Provisions & Contingencies Provisions & Contingencies Net Profit 2003 1,330.99 1,037.13 293.86 650.52 327.72 352.75 236.83 115.92 2004 1,397.47 1,057.05 340.42 602.65 369.90 424.92 248.54 176.38 2005 % of change from % of change from 2003 to 2004 2004 to 2005 1553.79 4.99 11.81 1167.77 1.92 10.47 386.01 15.84 13.39 623.02 479.10 451.65 245.40 206.26 (7.36) 12.87 20.46 4.94 52.16 3.38 29.52 6.29 -1.28 16.94

FINANCIAL INFORMATION AUDITORS’ REPORT The Board of Directors State Bank of Mysore, Corporate Office Bangalore: 560 009. Dear Sirs, In terms of our appointment for the purpose of certification of the statement of accounts, to be incorporated in the offer document to be issued by the Bank, in connection with the Private Placement of Sub-ordinated Tier II Debts, we state as follows: 1. We have examined the Audited Accounts of the Bank for the five consecutive financial years ended on 31st March, 2005 and unaudited (reviewed) financial results for the half year ended as on 30.09.2005, being the last date upto which the accounts of the Bank have been made up and audited by the Auditors of the Bank of those respective years.

65

2.

The aforesaid financial statements have been prepared in accordance with the guidelines issued by the Reserve Bank of India from time to time and subject to the limitation of disclosures required under the Banking Companies (Acquisitions and Transfer of Undertakings) Act 1980. In accordance with the requirements of clause B of Part II to schedule II of the Companies Act 1956 and SEBI (Disclosures and Investor Protection) Guidelines 2000, we report as under: a. The Statement of Profit & Loss of Bank for the five consecutive financial years ended on 31st March .2005 along with the half yearly unaudited (reviewed) accounts as on 30.09.2005, the statement of assets and liabilities of Bank , the Significant Accounting Policies , Notes and Accounts , Auditors Report , Significant changes in Accounting Policies and subject to Auditor's Qualifications in respect of which no adjustments could be carried out as consequential effects could not be ascertained, are prepared from the aforesaid accounts after making such adjustments and regroupings as were feasible and in our opinion, considered appropriate. b. We further report that the dividends declared by Bank in respect of five consecutive financial years ended on 31st March 2005 are set out in annexure enclosed. c. We have also examined the accompanying statements of Key Accounting Ratios for the five consecutive years ended on 31st March 2005 and also for the half year ended 30.09.2005, details of unsecured loans, details of other income, details of investments, statement of capitalisation, Tax shelter statements, contingent liabilities statement and report that in our opinion these have been correctly computed subject to the consequential effects for non adjustment of qualifications as detailed in the annexure.

3.

For and on behalf of Sonde, Srinivas & Co. Chartered Accountants Sd/Partner Date: November 19, 2005 Place: Bangalore

66

STATEMENT OF PROFIT AND LOSS FOR FIVE YEARS
Rs. in crores Year ended Year ended Year ended Year ended Year ended Half-year 31.03.2001 31.03.2002 31.03.2003 31.03.2004 31.03.2005 Sept. 2005 I INCOME Interest Earned Other Income TOTAL II EXPENDITURE Interest Expended Operating Expenses Provisions and Contingencies TOTAL III PROFIT/LOSS C/f loss Net Profit for the year Capital Reserve (Investment appreciation) TOTAL IV APPROPRIATIONS Transfer to - Statutory Reserves Investment Fluctuation Reserve (excess / short - provision towards depn. on Investments net of taxes and Statutory Reserves) Transfer to Capital Reserves - (Profit on sale of Inv. under "HTM" Category Redemption Reserve for - Bonds - Dividend (inclusive of Dividend Tax where applicable) Balance carried over to Balance Sheet TOTAL Earnings per share (Basic/Diluted)

915.35 171.07 1086.42 601.74 346.75 112.22 1060.71 25.72

971.12 233.26 1204.38 655.88 313.72 168.89 1138.49 65.90

1037.13 293.86 1330.99 650.52 327.72 236.82 1215.06 115.92

1057.05 340.42 1397.47 602.65 369.90 248.54 1221.09 176.38

1167.77 386.01 1553.78 623.03 479.10 245.40 1347.53 206.26

638.83 176.02 814.86 353.45 240.94 122.23 716.62

98.24

25.72

65.90

115.92

176.38

206.26

98.24

8.37 -

23.40 32.00

49.51 41.24

59.21

97.35

-

76.00 3.93 1.50 3.50 9.92 9.00 16.24 8.43 24.37 15.81 -

9.10 68.02

-

30.79

-

25.72 71.44

65.90 183.05

0.50 115.92 322.00

1.00 176.39 489.94

1.00 206.26 573.00

273.00

67

2000-01 INTEREST INCOME Interest/Discount on Advances/Bills Income on investments Interest on balances with Reserve Bank of India and other inter bank funds Others TOTAL OTHER INCOME Commission, Exchange and Brokerage Profit/Loss on sale of investments (Net) Profit (-loss) on Revaluation of Investments (Net) Profit on sale of land, buildings and other assets (Net) Profit on exchange transactions (Net) Miscellaneous Income TOTAL INTEREST EXPENDED Interest on Deposits Interest on Reserve Bank of India/Inter Bank borrowings Others TOTAL OPERATING EXPENSES Payments to and provisions for Employees Rent, Taxes and Lighting Printing and Stationery Advertisement and Publicity Depreciation on Bank's Property Directors' Fees, Allowances and Expenses Auditors' Fees and Expenses (including Branch Auditors) Law Charges Postage, Telegrams, Telephones etc. Repairs and Maintenance Insurance Other Expenditure TOTAL 478.53 400.53 16.88 19.41 915.35

2001-02 496.99 436.80 23.02 14.31 971.32

2002-03 528.01 477.91 15.88 15.32 1037.12

(Rupees in crores) 2003-04 2004-05 Sept. 2005 557.92 480.11 10.58 8.44 1057.05 656.26 477.12 12.06 22.33 1167.77 404.74 217.49 9.80 6.80 638.83

104.37 28.06 0.14 12.52 25.98 171.07

111.45 75.78 0.58 20.80 24.65 233.26

118.41 102.30 3.03 0.13 22.68 53.37 293.86

131.66 155.02 0.10 18.19 35.45 340.42

162.71 151.20 -0.03 21.60 50.53 386.01

82.38 60.30 13.33 20.02 176.03

566.03 9.92 25.79 601.74

618.68 5.25 31.95 655.88

616.75 1.23 32.54 650.52

566.30 2.47 33.87 602.64

588.91 6.78 27.34 623.03

331.16 0.30 21.99 353.45

280.77 19.95 3.30 0.25 9.67 0.07 1.78 0.22 1.21 2.10 0.95 26.48 346.75

241.53 20.92 3.48 0.32 10.88 0.07 2.43 0.62 0.63 1.57 0.47 30.79 313.71

248.25 23.59 3.88 0.42 11.73 0.09 1.91 1.47 0.36 1.79 0.35 33.87 327.71

265.14 24.69 4.80 0.47 20.72 0.07 2.67 2.10 0.42 2.54 0.29 46.29 369.90

330.67 32.18 5.80 1.12 31.87 0.17 3.09 2.11 0.72 3.04 1.11 67.23 479.10

139.89 18.96 3.48 0.52 21.54 0.07 1.50 0.87 1.99 1.90 1.56 48.66 240.94

68

STATEMENT OF ASSETS AND LIABILITIES Financial Year Ended as on March 2001 A. ASSETS 1. Cash in hand 2. Balances with RBI 3. Balances with Banks in India 4. Balances with Banks outside India 5. Money at Call and Short Notice 6. Investments in India 7. Investments Outside India 8. Advances in India 9. Advances outside India 10.Fixed Assets (Net of Rev. Reserve) 11.Other Assets A. TOTAL OF (A) B. LIABILITIES 1. Demand Deposits From Banks From Others 2. Savings Deposits 3. Term Deposits From Banks From Others 4. Borrowings In India Outside India 5. Other Liabilities and Provisions 6. Subordinated Debts B. TOTAL OF (B) C. NET ASSETS (C=A-B) Represented by: D. SHARE CAPITAL E. RESERVES AND SURPLUS 1. Statutory Reserve 2. Capital Reserve 3. Investment Fluctuation Reserve 4. Revenue and Other Reserve 5. Balance of Profit and Loss Account TOTAL (E) F. TOTAL (D+E) 35.94 631.07 67.52 1309.22 75.00 3550.32 4286.71 33.50 424.21 9413.49 2002 40.34 533.11 90.43 255.30 4158.83 4914.50 36.18 324.97 10353.66 2003 40.58 424.66 289.60 201.02 4760.57 5260.67 38.29 320.36 11335.75 2004 75.42 635.54 27.39 86.06 551.00 5486.69 6306.72 75.48 513.75 13758.05 2005 Sept. 2005 58.53 883.00 55.14 94.00 475.00 5796.19 8781.26 92.24 317.25 16552.61 69.28 953.56 62.95 85.95 165.00 5528.48 10017.66 152.81 281.93 17317.62

132.05 712.62 1793.67 141.55 4828.40 112.06 67.02 1129.40 205.00 9121.77 291.72 36.00 255.72 77.70 11.75 6.76 159.51 255.72 291.72

177.69 833.93 1987.72 139.92 5385.59 65.29 14.22 1132.73 265.00 10002.09 351.57 36.00 315.57 101.10 13.25 38.76 162.46 315.57 351.57

172.83 820.55 2292.28 47.57 5679.88 170.22 165.19 1366.27 190.00 10904.79 430.96 36.00 394.96 150.61 21.68 80.00 142.67 394.96 430.96

166.76 1028.03 2821.31 56.47 7011.12 2.68 214.66 1695.05 190.00 13176.08 581.97 36.00 545.97 209.82 37.49 156.00 142.66 545.97 581.97

189.62 1163.76 3494.53 52.57 8684.69 60.84 258.73 1526.43 365.00 15796.17 756.44 36.00 720.44 307.17 105.51 165.10 142.66 720.44 756.44

175.04 1214.21 3810.56 40.77 9361.51 1.33 426.73 1137.79 295.00 16462.94 854.68 36.00 818.68 307.17 105.51 165.10 142.66 98.24 818.68 854.68

69

CONTINGENT LIABILITIES

Rs. in crores
FINANCIAL YEAR Claims against the Bank not acknowledged as debts Liability for partly paid Investment Liability on account of outstanding forward exchange contracts Guarantees given on behalf of constituents (Net of Margin) Acceptances, endorsements and other obligations (Net of Margin) Other Items for which the Bank is contingently liable TOTAL BILLS FOR COLLECTION 2000-01 2001-02 2002-03 2003-04 2004-05 Sept. 2005

45.03 1.62 2411.09 351.61 514.37 4.97 3328.69 125.07

64.45 0.12 2219.06 399.24 632.74 3.63 3319.24 180.20

85.10 0.12 3743.57 392.04 695.72 4.69 4921.24 275.16

1.75 0.12 3903.19 376.68 748.80 1.04 5031.58 64.01

16.02 0.12 3367.30 486.74 905.60 1.06 4776.84 67.55

16.02 0.12 3278.43 368.93 860.57

4524.07 NA

BREAK UP OF UNSECURED LOANS AS ON 31.03.2005 AND 30.09.05 I. Borrowings in India 31.03.2005 i) Reserve Bank of India ii) Other Banks 60.00 iii) Other Institutions and Agencies 0.84 II. Borrowings outside India III. Tier II Bonds (a) Subordinated Debt (12 yr maturity) (b) 7 Yr Unsecured Redeemable Bonds TOTAL (I+II+III) 258.73 365.00 684.57

(Rs. in crores) 30.09.2005 1.33 426.73 295.00 723.06

DETAILS REGARDING LOANS AND ADVANCES TO PERSONS/COMPANIES IN WHICH DIRECTORS ARE INTERESTED Name of The Director Nil Type of Bank's Exposure Nil Amount in Lakhs as on 31.03.05 Nil Asset Classification Nil

70

STATEMENT OF FACE VALUE, BOOK VALUE AND MARKET VALUE OF INVESTMENTS AS ON 30th SEPTEMBER 2005 (Rs. in crores) Sr. No. Investments Face Value Book Value Market Value A Govt. Securities Held to Maturity 2835.10 2939.90 2939.90 1913.60 1988.29 2015.40 Available for sale Held for trading 10.00 10.25 10.21 Total of A 4758.70 4938.44 4965.51 B Other App Securities Available for Sale HTM Total of B Shares Available for sale NPA HFT/HTM Total of C Bonds/Debentures Held to maturity Available for sale--performing NPA Total of D Others Mutual Funds Asset Security Receipts Total of E GRAND TOTAL

74.58 90.14 164.72

74.26 90.17 164.43

87.47 90.17 177.64

C

5.56 1.05 2.71 9.32

13.83 1.09 3.23 18.15

30.34 3.24 33.58

D

48.42 233.45 3.58 285.45

48.35 233.07 3.58 285.00

51.92 235.99 287.91

E

110.59 12.41 123.00 5341.19

114.92 12.41 127.33 5533.35

124.70 12.41 137.11 5601.75

AGEING SCHEDULE OF SUNDRY DEBTORS/LOANS AND ADVANCES AS ON 31.03.2005 Residual Maturity Maturity Pattern of Loans and Advances 1-14 days 429.72 15-28 days 69.26 29 days 3 mths 562.50 Over 3 mths upto 6 mths 582.23 Over 6 mths upto 1 year 650.31 Over 1 year upto 3 years 4268.51 Over 3 years upto 5 years 1035.38 (Rs. in crore) Over 5 Total years 1183.35 8781.26

71

SIGNIFICANT ACCOUNTING POLICIES 2004-2005
1. RECONCILIATION a. b. c. The initial matching of entries for the purpose of reconciliation under various Inter-Branch, InterBank accounts have been completed upto March 31,2005. The final reconciliation is in progress. Uploading differences noticed in a few branches between subsidiary and general ledger balances at the time of computerisation are in the process of reconciliation. Reconciliation of balances with other banks/institutions is in progress.

The impact of the above, if any, on the Profit and Loss Account and Balance Sheet, though not quantifiable, in the opinion of the Management, will not be material. 2. RETIREMENT BENEFITS/VOLUNTARY RETIREMENT SCHEME

i. During the year, the following amounts have been provided to meet the liabilities for various
retirement benefits as per actuarial valuation: Item Amount (Rs. In lacs) Current year Previous year

Pension 3138 3224 Leave Encashment 310 * Gratuity 1614 2151 * (Including Gratuity for Janata Deposit Collectors Rs.165 lacs) ii. Rs.2985.15 lakhs written off during the year unamartoised balance on account of VRS- NIL 3. PROVISIONS FOR NON-PERFORMING ASSETS

-

a. Provision has been made for standard assets at the rate of 0.25% in accordance with guidelines issued by the Reserve Bank of India and an amount of Rs lacs (Previous year Rs.1548.34 lacs) has been shown under “Other liabilities and Provisions-Others” in the Balance Sheet. b. The Bank has made an accelerated provision of Rs.14665 lacs (Previous Year Rs13007 lacs) towards non-performing assets, as per RBI guidelines/directives, which has been deducted from Loans and Advances. c. In terms of RBI IRAC norms /guidelines the delinquency norm for Non Performing Assets has been reduced to 90 days from the previous norm of 180 days. The bank has identified and made provision on NPAs accordingly. d. The provision for Non-performing assets for the year is net off Rs.1267 lacs earned by participating in the Govt. of India buy-back of securities scheme. 4. INCOME TAX PROVISION Provision for income tax is arrived at after due consideration of past assessments, decisions of the appellate authorities and advice of counsels. 5. INVESTMENTS i. The Bank holds 36.77%(Previous year 18.76%) of its total investments under the “Held to maturity” category as against the ceiling of 25% specified by the Reserve Bank of India. ii. The Bank has appropriated Rs910 lacs towards the Investment Fluctuation Reserve .The amount in Investment Fluctuation Reserve of Rs. 16510 Lacs as on 31st March, 2005 is 4.50 % of the book value of Investments other than investments held under the “Held to Maturity” category.

72

iii. In respect of assets held under “Held to maturity “ category as stated in Principal Accounting Policies (No.4 (iii)) the excess of acquisition cost over face value of the securities amortised during the year amounted to Rs.472 lacs (Previous Year Rs. 82.35 lacs). iv. As per RBI guidelines an amount of Rs.6802 lacs (Previous year Rs.1581 lacs) being the balance amount of Profit on Sale of securities [net of taxes and transfer to Statutory Reserve] in “Held to Maturity” category is transferred to Capital Reserve. 6. CHANGE IN ACCOUNTING POLICY There is no change in the accounting policy during the year. 7. CAPITAL ADEQUACY RATIO A B C Particulars Capital to Risk Weighted Assets Ratio [CRAR] Tier I Capital to Risk Weighted Assets Ratio Tier II Capital to Risk Weighted Assets Ratio 2004 11.53% 7.18% 4.35% 2005 12.08% 7.12% 4.96%

VRS dues deferred have not been considered in computation of [A] and [B] above as per RBI directives 8. ADDITIONAL DISCLOSURES In terms of the Reserve Bank of India guidelines, the following additional disclosures have been made and the data as computed by the management is relied upon by the auditors: [Rs. in lacs] Particulars 2004-05 2003-04 A Percentage of share holding of the Government of India. --B Percentage of Net NPA to Net Advances 0.92 2.96 C Details of “Provisions and Contingencies” debited to the Profit and Loss Account of the year: 12783.37 16618.58 Provisions made towards NPAs (710.54) Provision for depreciation in the value of investments 2966.06 8644.98 iii. Provision for income tax(including deferred tax) 1.00 1.00 iv. Provision for Wealth Tax 650.00 300.00 v. Provision for Standard Assets Total 16394.43 24854.02 D Subordinate debt raised as Tier II Capital 7000 7000 i. During the year 1999-00 6000 6000 ii. During the year 2000-01 6000 6000 iii. During the year 2001-02 17500 iv. Duri ng the year 2004-05 Total 36500 19000 Particulars Business Ratios: i. Interest income as a percentage to average working funds ii. Non-interest income as a percentage to average working funds iii. Operating profit as a percentage to average working funds iv. Return on assets (net profit as a percentage to total assets at the end of the year) v. Business (Deposits plus Advances) per employee (Rs. in lacs) vi. Profit per employee (Rs. In lacs) 2003-04 7.94% 2.56% 3.19% 1.28% 162.81 1.82 2004-05 8.15% 2.69% 3.15% 1.25% 203.54 2.16

E

73

9. COUNTRY RISK EXPOSURE AND PROVISIONS THERE AGAINST In terms of RBI guidelines on Country Risk Management, there is no exposure to any country where the banks’ net funded exposure is 2% or more of its total assets. Accordingly no provision has been made as required by Reserve Bank of India circular DBOD.BP.BC.71/21.04.103/2002-03 dated 19/2/2003. 10. COMPLIANCE WITH ACCOUNTING STANDARDS The following disclosures are being made in accordance with the provisions of the applicable mandatory Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI): (a) Prior period items (AS 5) The amount of prior period items not being material have not ben separately disclosed. (b) Foreign Exchange Translation (AS 11) During the quarter ended 30.9.05, the Bank has changed its accounting policy by implementing A S 11 (revised 2003) (The Effects of Changes in Foreign Exchange Rates) issued by the ICAI, as per guidelines of RBI on compliance with AS 11 (revised 2003) in place of FEDAI guidelines regarding translation/conversion of foreign exchange transactions. As a result of the change , the profit for the quarter/half year ended 30th September,2005 has increased by Rs.224.81 lacs. (c) Related party transactions (AS 18) In accordance with AS 18 issued by the ICAI and the RBI guidelines, details relating to Related Party transactions are disclosed hereunder: Key Management Personnel
Sr. No 1. Name Mr. Y. Vijayanand Designation Managing Director Particulars Salary and Allowances Period 1-4-04 to 31-3-05 Amount (Rs.) 4,90,074.75

The credit exposure to the above key managerial personnel and their relatives during the year is NIL. All the other related parties are State Controlled enterprises as defined in AS 18 issued by the Institute of Chartered Accountants of India. Transactions with them are not required to be disclosed. (d) Leases (AS 19) i. The Bank has taken premises only on rental basis and has no long-term operating leases taken/given and hence reporting under AS 19 is not considered necessary. ii. No financial lease has been executed after April 1.2001. (e) Accounting for deferred taxes assets/liabilities (AS 22) In compliance with AS 22 “Accounting for taxes on income” issued by the Institute of Chartered Accountants of India the Bank has recognised deferred tax assets and liabilities. Deferred tax asset (net) of Rs.565.13 lacs has been recognised till March 31,2005 ,the major components of which are as under: Current year Leave Encashment Depreciation on assets Amortisation premium on investment Provision for Gratuity for JD Collectors TOTAL 371.13 72.68 110.99 10.33 565.13 (Amount in Rs. lacs) Previous year 220.26 225.20 61.59 507.05

74

(f) Segmental Reporting (AS 17) (i) Primary Segment (Business segment): Treasury Operations Other Banking Operations (ii)Geographic Segment: There is only one Geographic segment i.e., Domestic Segment. (Rs. in Crores)
Business Segment Particulars Treasury Other Banking Operations Total Year ended Year ended Year ended Year ended Year ended Year ended 31.03.2005 31.03.2004 31.03.2005 31.03.2004 31.03.2005 31.03.2004

Total Revenue Inter Segment Revenue Net Revenue Result Unallocated Expenses Operating Profit Provision and Contingencies Income Taxes Net Profit Segment Assets Unallocated Assets Total Assets Segment Liabilities Unallocated Liabilities Total Liabilities Capital Employed

659.16 659.16 232.64 7419.05 7419.05 813.88 166.99

672.11 672.11 253.43 6786.68 6786.68 368.88 156.00

1307.82 413.19 894.63 241.57 9059.04 9059.04 15071.59 589.45

1137.81 412.45 725.36 202.99 6940.47 6940.47 13379.42 401.19

1966.98 413.19 1553.79 474.21 22.55 451.66 215.73 29.67 206.26 16478.09 74.53 16552.62 15885.47 667.15 16552.62 756.44

1809.91 412.45 1397.47 456.42 31.49 424.92 162.08 86.46 176.38 13727.15 30.91 13758.06 13748.30 9.76 13758.06 557.19

12. ADDITIONAL DISCLOSURES: In terms of the guidelines issued by the RBI, the following additional disclosures are made: 31.03.2005 31.03.2004 i) Shareholding Percentage of shareholding of Govt. of India ii) Non-Performing Assets The Percentage of Net NPAs to Net Advances 0.92% 2.96% iii) Tier II Capital Amount of subordinated debts Unsecured Redeemable Bonds 365.00 190.00 (iv) Issuer composition of Non SLR investments (Amounts reported under Columns 4, 5, 6 & 7 are not mutually exclusive)
(Rs. in Crores)
No. Issuer Amount (Rs. In crores) Extent of private placement Extent of below “investment grade” securities Extent of unrated securities Extent of unlisted securities

1 1 2 3 4 5

2 PSUs FIs Banks Private Corporates Subsidiaries/Jo

3 176.08 74.23 23.50 13.90 -

4 176.08 74.23 23.50 13.90

5 27.00 10.65 -

6 5.00 -

7 71.50 20.65 3.00 1.40

75

6 7

int ventures Others Provision held towards depreciation Total

148.82 4.67 441.20

35.82 323.53

-

136.82 141.82

7.00

37.65

103.55

v) Non-performing non-SLR investments:
Particulars Opening balance as on 01.04.2004 Additions during the year Reduction during the year Closing balance as on 31.03.2005 Total provisions held Amount (Rs. crores) 4.57 0.37 0.27 4.67 4.67

vi) Securities sold under repos and purchased under reverse repos, under Liquidity Adjustment Facility of RBI (Rs. in Crores)
Outstanding during 2004 -05 Securities sold under Repos Securities purchased under reverse repos Minimum Nil Nil Maximum 500.00 750.00 Daily average 9.40 276.55 Closing as on 31.03.2005 Nil 400.00

(vii) Capital Adequacy Ratio The capital to weighted risks assets ratio (CRAR) assessed by the Bank on the basis of the guidelines issued by RBI, is as under:
Capital Adequacy Ratio Tier I Capital Tier II Capital 31.03.2005 12.08% 7.12% 4.96% 31.03.2004 11.53% 7.18% 4.35%

(viii) Business Ratios
Interest income as percentage to average working funds Non-interest income as percentage to Average working funds Operating Profit as percentage to average working funds Return on Assets (at the end of the year) 8.15% 2.69% 3.15% 1.25% 7.94% 2.56% 3.19% 1.28%

ix) Movement of NPAs for the year 2004-2005
31.03.2005 1. NPAs at the beginning of the year 2. Less: Reduction in NPAs a) By recoveries b) By write off c) Up gradation d) Exchange fluctuation Add: a) Fresh NPAs during the year b) Increase in the existing NPAs due to operations c) Exchange Difference d) Interest Suspense Gross NPA at the end of the year 514.53 227.39

(Rs. In Crores)
31.03.2004 562.01 226.59

128.23

179.03

415.37

514.53

76

x) (a) Movement of Provisions held towards NPAs
(Rs. in Crores) 2004-05 Opening balance Add: Provisions made during the year Total Less: Amount transferred to interest sacrifice in restructured account, write back of excess provisions and exchange difference Closing balance 325.51 127.83 453.34 122.88 330.46 2003-04 282.51 163.29 445.80 120.29 325.51

(b) Movement of Provisions for NPI/Depreciation on investments
(Rs in Cr.) a) b) c) d) Opening balance (as on 01.04.2004) Add: Provisions made during the year Less: Write back of excess provisions during the year Closing balance (as on March 31,2005) 2.97 1.97 0.27 4.67

xi) Maturity patterns as on 31.03.2005
The Maturity Pattern of Loans & Advances, Investments & Securities, Deposits and Borrowings (under various Maturity Buckets prescribed by the Reserve Bank of India) are as follows: (Rs. in crores) Residual 1-14 days 15-28 29 days 3 to 6 6 mths 1 year to 3 year to Over 5 Total Maturity days 3 mths mths to 1 year 3 years 5 years years Maturity 429.72 69.26 562.50 582.23 650.31 4268.51 1035.38 1183.35 8781.26 Pattern of Loans & Advances Maturity 188.94 119.26 752.52 200.56 342.15 1616.81 784.05 1791.90 5796.19 Pattern of Investment & Securities Maturity 373.73 71.28 679.60 210.90 1065.43 5731.29 2842.33 2610.58 13585.17 Pattern of Deposits Maturity 116.23 90.00 103.56 9.19 0.17 0.16 0.17 0.10 319.58 Pattern of Borrowings Foreign 287.81 189.93 166.54 109.80 4.62 10.22 1.50 3.96 774.38 Currency Asset Foreign 78.81 122.26 127.80 60.26 62.47 28.26 480.26 Currency Liabilities

The above maturity pattern has been compiled based on information received from branches, rates prescribed by RBI for determining core and volatile portion and adjustment/ apportionment made at Head Office on the basis of behavioural maturity, and has been relied upon by the auditors. xii) Lending to Sensitive Sectors
A B C Advances to Capital Market Sector Advances to Real Estate Sector Advances to Commodity Sector

(Rs. in Crores)
31.03.2004 0.39 45.41 280.50 31.03.2005 0.09 79.44 165.04

77

D

E

Exposure to Capital Market i) Investment in a) Shares b) Convertible Debentures /Bonds c) Equity Oriented Mutual Funds ii) Aggregate advances against security/collateral of shares Finance extended to Margin Trading

20.09

58.96

5.25

xiii) Corporate Debt Restructuring
Sr. No. Particulars 31.03.2004

(Rs. in Crores)
31.03.2005

a) b) c) d)

Total amount of loan assets The amount of standard assets The amount of sub-standard assets The amount of doubtful assets

126.98 114.94 12.04

45.23 45.23 -

xiv) Restructured Advances (Industrial advances excluding those under CDR)
Particulars Total amount of loan assets Amount of Standard assets Amount of Sub-standard assets Amount of Doubtful assets Total 31.03.2005 113.18 91.73 14.49 6.96 (Rs. in Crores) Total 31.03.2004 40.36 21.46 17.64 1.26

Statement of Dividend for the last five years
31/3/01 Dividend (Excl. Tax) Tax Dividend Rate (%) 9.00 0.92 25% 25% 31/3/02 9.00 31/3/03 14.40 1.85 40% 31/3/04 21.60 2.77 60% 31/03/2005 27.00 3.79 75%

KEY ACCOUNTING RATIOS FOR LAST 5 YAERS For the Year March 31, March 31, March 31, 2001 2002 2003 3arnings per Share (EPS) 71.44 183.05 322.00 (Rs.) Book Value per Share / 810.33 976.58 1197.11 (Tangible Net Worth/No. of shares.) Return on Net worth (%) 7.42% 21.01% 35.37% (Net Profit/Tangible Net Worth) CAPITALISATION STATEMENT AS ON

March 31, 2004 489.94 1616.58 47.68%

March 31 2005 573.00 2086.00 27.47%

March 31, 2005 Amount

March 31, 2004 Amount Rs. in Crores 190.00

Rs. in Crores
Borrowings Short -Term Debts Long - Term Debts (incl. Sub-ordinated Debt) Total 365.00

78

Shareholders Funds Equity Reserves & Surplus (excluding Revaluation Reserve) Total Long Term Debt/Equity Ratio NETWORTH STATEMENT For the Year March 31, 2001 36.00 March 31, 2002 36.00

36.00 720.44 756.44 0.48:1

36.00 439.31 475.31 0.40:1

March 31, 2003 36.00

Rs. in crores March 31, March 31, 2004 2005 36.00 36.00

Share Capital Reserve & Surplus Statutory Reserve Capital Reserve Investment Fluctuation Reserve Revenue & Other Reserves Revaluation Reserve Balance of Profit and Loss Account (Adjusted) Total Reserves Total (Capital & Reserves) NETWORTH Networth Excluding Revaluation Reserve Net Profit Income Tax Return Average Net Worth Return on Average Net Worth (PAT Basis) Return on Average Net Worth (PBT Basis) TAX SHELTER STATEMENT Details Tax Rate Provision For Tax In Books Net Profit (As Per Book) Adjustments

77.70 11.75 6.76 159.51 255.72 291.72 291.72

101.10 13.25 38.76 162.46 315.57 351.57 351.57

150.61 21.68 80.00 142.67 394.96 430.96 430.96

209.82 37.49 156.00 142.66 545.97 581.97 581.97

307.17 105.51 165.10 142.66

720.44 756.44 756.44

291.72 25.72 46.05 8.82% 291.72

351.57 65.90 46.06 18.74% 351.57

430.96 115.92 77.00 28.90% 430.96

581.97 176.38 86.48 30.31% 581.97

756.44 206.26 29.67 27.26% 756.44

8.82% 24.60%

18.74% 31.85%

28.90% 44.77%

3031% 45.17%

27.26 31.18

2001 39.55% 21.90 25.72

2002 35.70% 46.05 65.90

2003

(Rs. in crores) 2004 35.875% 86.45 176.38

2005 36.59% 29.66 206.26

36.75% 77.00 115.92

79

Add: Depreciation As Per Books Provisions Provision For Bonus Interest Recd On Investments Donations Made Amortisation On Investments Others Total Less Depreciation As Per It Schedule Payment Of Interest Tax Dividend Income Exempt Interest Eligible For Deduction u/s 23(G) Provision For Standard Assets Bonus Paid Interest On Invst. On Due Basis Profit On Sale Of Permanent Category Deduction U/S 36(1)(Viia) Deduction U/S 80g Provision For Depn On Investments Others Total Business Income After Adjustments Tax On Longterm Capital Gains Total Tax Tax Savings

10.04 112.22 0.16 398.74 0.08 1.96 0.53 549.45 6.24 0 6.04 1.23 1.35 0.15 400.53 5.23 62.65 0.01 0 11.45 494.88 54.57 0.00 21.58 0.32

11.26 168.89 0.15 407.97 0.17 0.16 0.84 655.34 9.6 0 12.98 1.04 1.5 0.15 436.8 2.02 75.74 0.16 5.9 11.6 557.49 97.85 0.20 35.13 10.92

12.11 236.83 0.15 467.49 0.02 0.87 3.4 836.79 12.96 0 2.25 1.48 1.11 0.14 477.91 12.56 100.31 0.01 2.99 49.72 661.44 175.35 1.26 65.70 11.30

20.8 248.54 0.13 474.10 0.53 0.82 10.25 931.55 25 0 19.81 2.11 3 0.1 480.11 23.49 134.46 0.42 0 19.96 708.46 223.09 2.56 82.59 3.86

31.87 245.40 0.17 505.44 0.31 4.72 4.44 998.61 36.75 0 6.10 13.31 6.50 -477.12 100.53 124.36 0.28 128.14 96.25 989.34 9.27 10.05 17.80 11.86

X. MANAGEMENT DISCUSSION AND ANALYSIS Significant items of Income and Expenditure during 2004 –05 (Comparison of Financials for the year ended March 2005 with March 2004) Net Profit: The net profit has increased by 16.94% due to an increase in other income and reduction in interest expenses. Interest Income: The Interest income had increased marginally by 10.47%. Though the average advances have grown by 37.58% during the year, the average yield on advances had declined from 9.52% in 2004 to 8.64% in 2005. Other Income: The other income had increased by 13.39% supported by increase in profit on sale of investments. Interest Expenses: The interest expenses marginally increased by 3.38% in spite of reduction in average cost of deposits from 5.71% in 2003-04 to 4.96% in 2004-05 due to increase in Bond interest. Operating Expenses: The operating expenses increased by 29.52% as bank has factored the revision in wage structure during the year.. Significant items of Income and Expenditure during 2004 -05 (Comparison of Financials for the year ended March 2005 with March 2004)

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Net Profit: The net profit has increased by 16.94% primarily due to an increase in other income. Interest Income: The Interest income had increased by 10.47% aided by increase in advances by 37.58% (i.e. Rs. 2492.27 crores). Other Income: The other income had increased by 14.63% supported by increase in profit on sale of investments. Other matters relating to the Operations of the Bank Unusual or Infrequent events and transactions: No unusual or infrequent events and transactions occurred in the last three years. Significant economic changes that materially affected or are likely to affect income from continuing operations: Changes in the interest rate structure that is any upward movement in interest rate, is going to reduce the value of the investment portfolio. Future relationship between costs and revenue: The freedom to determine interest rates and the keen competition has resulted in narrowing of spreads and reduction in profitability. However the bank has a tradition of mobilising low cost deposits and keeping its cost of deposits low. The bank has also succeeded in increasing its 'Other income', thus improving profitability. Extent of seasonality in the business: Bank’s business is not likely to be affected by seasonality. Non-dependence on a few customers: The operations of the bank are well spread out. The bank has over 20 million customers. The Bank has a diversified credit portfolio to prevent any concentration in exposures both industry-wise and clientwise. This insulates the bank to a large extent from any possible adverse conditions effecting any particular industry segment. The Bank has an adequately designed credit risk policy to ensure the prevention of excess exposure to few customers. Competitive Conditions: The Bank has 644 rural branches where it has monopoly in business. The large network of rural and semi-urban branches (numbering 1062 ) ensures that a huge captive business automatically flows in to the bank. In metro centres, the Bank faces a stiff competition from other Banks, including private sector banks and foreign banks. In spite of this, the bank has succeeded in registering improved performances over the last few years. Servicing Behavior: The Bank has been servicing all its principal and interest liabilities on time and there have been no defaults. Material Developments: In the opinion of the Directors of the Bank, there have been no material developments after the date of the last financial statements as disclosed in the Information Memorandum, which would materially and adversely affect or are likely to affect the trading or profitability of the Bank or the value of its assets, or its ability to pay its liabilities within the next twelve months, other than what has been already set out elsewhere in this Information Memorandum.

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XI.

OUTSTANDING LITIGATION, DEFAULTS & MATERIAL DEVELOPMENTS

Save as stated herein: • There is no outstanding or pending litigation, suit, criminal or civil prosecution, proceeding initiated for offence (irrespective of whether specified in paragraph (I) of Part 1 of Schedule XIII of the companies Act) or litigation for tax liabilities against the Bank, its Promoters, Directors or Promoter Group companies. • There are no defaults, non payments or overdues of statutory dues, institutional or bank dues or dues towards holders of debentures, bonds and fixed deposits and arrears of preference shares, other than unclaimed liabilities of the Bank, its Promoters or Promoter Group companies. • No disciplinary action has been taken by SEBI or any stock exchanges against the Bank, its Promoters or Directors. • There are no outstanding litigations against the directors of the Bank. • There are no other litigations except the following, mentioned below: Cases filed against the Bank The summary of litigations outstanding as on March 31st 2005 is as follows:
Sr. No. Particulars No. of Cases Amount involved (Rs. in crores)

A. B. C. D.

Cases pending in various Civil/High Courts filed by customers and others Suits/Writs filed by employees/ex-employees in various Civil / High Courts and other courts Consumer Cases filed against the Bank Premises Cases Total

19 528 14 2 563

2.21 Financial Implication cannot be estimated as of now 0.75 0.02 Rs. in Crores Disputed Tax amount Amount incl. interest 0.15 0.054 0.80 0.287 12.48 4.477 0.27 1.58 83.40 11.59 8.78 99.24 16.65 129.39 7.87 47.66 8.52 13.50 1.50 443.38 0.097 0.567 7.700 4.158 3.150 8.020 5.973 9.490 2.823 17.098 3.057 4.843 0.538 72.33

Disputed Tax Liabilities
Sr. No. 1 2 3 4 5 6 7 8 9 10 11 A.Y. 1979-80 1987-88 1988-89 1989-90 1993-94 1994-95 1995-96 1999-2000 2000-01 2001-02 2002-03 Major grounds of Appeal Appeal Pending before High Court Interest on Sticky Loan High Court Broken period Interest and Interest on Sticky Loans High Court Accrued Interest on Securities. Broken Period Interest and Interest on Sticky Loans High Court Bad Debts High Court Accrued Interest on Investments Interest on Securities subject to Income Tax High Court Accrued Interest on Investments Bad Debts Interest on Securities subject to Income Tax High Court Bad Debts Interest on Securities subject to Income Tax ITAT Broken Period Interest on purchase of securities ITAT Broken Period Interest on purchase of securities Provision for Standard Assets ITAT Provision for Standard Assets ITAT Provision for Standard Assets Total

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Cases filed against the RRBs sponsored by the Bank as on March 31, 2005 The summary of litigations outstanding as on March 31st 2005 is as follows:
Sr. No. Particulars No. of Cases Amount involved (Rs. in crores)

A. B. C. D.

Cases pending in various Civil/High Courts filed by customers and others Suits/Writs filed by employees/ex-employees in various Civil / High Courts and other courts Consumer Cases filed against the Bank Premises Cases Total

1 22 1 Nil 24

0.0022 Financial Implication cannot be estimated as of now 0.048 Nil -

Against the Directors of the Bank There are no outstanding litigations, disputes or penalities against the Directors of the Bank, including tax liabilities, economic offences, criminal or civil prosecution for any offence, irrespective of whether specified under any enactment in Paragraph 1 of Part 1 of Schedule XIII, of the Companies Act, 1956 or any other liability in their personal capacities or as Director/Partner/Sole Proprietor in the Bank or any other company/firm. There are no litigations against the Directors involving violation of statutory regulations or criminal offences. No discipliniary action has ever been taken by the Securities and Exchange Board of India or Stock Exchanges and no penalty has been imposed by any authority. Other than as stated above, there are no disputes/litigations towards tax liabilities or any criminal or civil prsecutions against the Bank, its subsidiaries and sponsored associations for any offence – economic or otherwise. No criminal proceedings have been launched against the Bank under any of the enactment irrespective of whether specified in paragraph 1 of part 1 of Schedule XIII of the Companies Act, 1956. Defaults Besides the above, the Bank, its subsidiaries and sponsored institutions have not defaulted in meeting any of its statutory or institutional dues and have made all payments/refunds on fixed deposits. Further, no proceedings have been initiated against the Bank, its subsidiaries and sponsored institutions for any of the offences specified in paragraph 1 of Part I of Schedule XIII of the Companies Act, 1956. Further, there are no disputes/litigations towards tax liabilities or criminal prosecutions against the Bank and its Directors for any offence, economic or otherwise. As regards civil litigations against the Bank and its Directors, there are no material disputes/legal actions other than those disclosed above There are no pending proceedings initiated for economic offences against the Bank, its

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subsidiaries and sponsored institutions. Besides the above, no disciplinary action/ investigation has been taken by the SEBI against the Bank, its subsidiaries and sponsored institutions and its respective directors. Material Developments In the opinion of the Directors of the Bank, there have been no material developments after the date of the last financial statements as disclosed in the Information Memorandum, which would materially and adversely affect or are likely to affect the trading or profitability of the Bank or the value of its assets, or its ability to pay its liabilities within the next twelve months, other than what has been already set out elsewhere in this Information Memorandum. Against SBI SBI is party to various legal proceedings / disputes in the ordinary course of business of banking / other business. However, none of such proceedings / disputes, even if determined adversely to SBI will have, by law, any material adverse effect on the business or financial condition of SBI. SBI also has contingent liabilities, which pertain to their normal banking activities. A major portion of these contingent liabilities are a source of income for them. Most of these contingent liabilities are adequately covered through individual security mechanisms as also duly counted for maintaining Capital Adequacy in line with RBI guidelines. XII. OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority for the Placement This private placement of Bonds is being made pursuant to the resolution passed by the Executive Committee of the Board of Directors of the Bank at its meeting held on November 19, 2005 permitting to raise Subordinated Debts of Rs. 250 crores. Further, State Bank of India, Central Office, has approved the issue of subordinated bonds vide their letter SBD/BNJ/002332 dated November 21, 2005. The Bank can carry on its existing activities and future activities planned by it in view of the existing approvals, and no further approvals from any Government authority are required by the Bank to carry on its said activities. Prohibition by SEBI / Issuer Eligibility to enter Capital Market The Bank, its associates and companies with which the directors of the Bank are associated as directors or promoters are not prohibited from accessing the capital market/ Debt Securities Market under any order or directions passed by SEBI. Disclaimer in respect of Jurisdiction This offer of bonds is made in India to persons resident in India. This Information Memorandum does not constitute an offer to sell or an invitation to subscribe to the Bonds herein, in any other jurisdiction to any person to whom it is unlawful to make an offer or invitation in such jurisdiction. Disclaimer Clause of The Stock Exchange, Mumbai.

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A copy of this Information Memorandum has been submitted to The Stock Exchange, Mumbai (hereinafter referred to as ‘BSE’) where Bank’s securities are proposed to be listed in terms of the extant Guidelines. BSE does not in any manner: 1. warrant, certify or endorse the correctness or completeness of any of the contents of this Information Memorandum; or 2. warrant that the Bank’s securities will be listed or will continue to be listed on the Exchange; or 3. take any responsibility for the financial or other soundness of the Bank, its promoters, its management or any scheme or project of the Bank. Every person who desires to apply for or otherwise acquire any securities of the Bank may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against BSE 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. The delivery of this Information Memorandum hereunder shall not under any circumstances create any implication that there has been no change in the affairs of the Bank since the date thereof or that the information contained herein is correct as of any time subsequent to this date. General Disclaimer This Offer Document is neither a Prospectus nor a statement in lieu of Prospectus. It does not constitute an offer or an invitation to the Public at large to subscribe to Unsecured Redeemable Non-Convertible Subordinated Bonds (“Bonds”) issued by the Bank. This Offer Document is not intended for distribution and is for the consideration of the person to whom it is addressed and should not be reproduced by the recipient. It cannot be acted upon by any person other than to whom it has been specifically addressed. Multiple copies hereof given to the same entity shall be deemed to be offered to the same investor. Apart from this Offer Document, no other document has been prepared in connection with this Bond Issue and that no document in relation to the Issuer or this Bond Issue has been delivered for registration to any authority. This Offer Document has been prepared in accordance with Schedule II of the Companies Act 1956, Chapter VI of the SEBI (DIP) Guidelines to give information regarding the Bank to investors proposing to invest in this issue of Bonds and it does not purport to contain all the information that any such party may require. The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Offer Document contains all information with regard to the Issuer which is material in the context of the Issue, that the information contained in this Offer Document is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this document or any of such information or the expression of any such opinions or intentions misleading in any material respect. Potential investors are required to make their own independent evaluation and judgment before making the investment and they are believed to be experienced in investing in debt markets and are able to bear the economic risk of investing in the Bonds. It is the responsibility of potential

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investors to have obtained all consents, approvals or authorizations required by them to make an offer to subscribe for, and purchase of the Bonds. Potential investors have not relied on any advice given by the Lead Manager/ Lead Arranger in connection with their offer to subscribe for and purchase the Bonds and acknowledge that the Lead Manager/ Lead Arranger does not owe them any duty of care in respect of their offer to subscribe for and purchase of the Bonds. It is the responsibility of potential investors to ensure that any transfer of the Bonds is in accordance with this Offer Document and the applicable laws, and ensure that the same does not constitute an offer to the public. Potential investors should also consult their own tax advisors on the tax implications of the acquisition, ownership, sale and redemption of Bonds and income arising thereon. The Lead Manager does not take any responsibility either for the financial soundness of the Bonds offered or for the correctness of the statement made in this Offer Document. The Lead Manager has relied exclusively upon the information provided by the Bank and has neither verified independently, nor assumes responsibility for the accuracy and completeness of this Offer Document, or any other information or documents supplied or approved by the Bank. The Lead Manager holds no responsibility for any misstatement in or omission by the Bank, publicly available information or any other information about the Bank available in the market. Neither the Lead Manager nor any officer or employee of the Lead Manager accept any liability whatsoever for any direct or consequential loss arising from any use of this document or its contents. Listing Application shall be made to The Stock Exchange, Mumbai to list the bonds of the Bank now being offered through this Information Memorandum and for permission to deal in such Bonds. If the permissions to deal in and for an official quotation of the Bonds is not granted by BSE the Bank shall forthwith repay, without interest all such moneys received from the applicants in pursuance of this Information Memorandum. If such monies are not repaid within eight days after the Bank becomes liable to repay them (i.e. from the date of refusal or within 70 days from the date of the closing of the subscription list, whichever is earlier), then the Bank will be liable to repay the monies, with interest, as prescribed under Section 73 of the Companies Act, 1956. Caution Though the provisions of Sub-section (1) of Section 68-A of the Companies Act, 1956 do not apply to an issue of Bonds, attention of the investors is drawn to the provisions as a matter of abundant precaution: “Any person who a) makes in a fictitious name, an application to a company for acquiring, or subscribing for, any shares therein, or otherwise induces a company to allot, or register any transfer of shares therein to him, or any other person in fictitious name, shall be punishable with imprisonment for a term which may extend to five years” Consents

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Consents in writing of the Arrangers to the Issue, Directors, Trustees, Registrars, Legal Advisors and Compliance Officer to act in their respective capacities have been obtained. Expert Opinion Save as stated elsewhere in the Information Memorandum, the Bank has not obtained any other expert opinion. Expenses of the Offer The expenses of the Offer payable by the Bank inclusive of brokerage, fees payable to the Arrangers, fees of Legal Advisors, stamp duty, fees payable to trustees, fees payable to the Registrars to the Offer, listing fees and other miscellaneous expenses is estimated not to exceed 1.00% of the offer size and will be met out of the proceeds of the Offer. Outstanding Debenture or Bond Offers As of September 30, 2005, the Bank has outstanding Bonds of Rs 295 crores. Outstanding Preference Shares As of date, the Bank does not have any outstanding preference shares. Capitalisation of Reserves or Profits The bank has not capitalised any reserves or profits during the last five financial years. Issue Otherwise than for Cash There has not been any issue of equity shares for consideration other than cash, otherwise than as mentioned in point 1 of Capital Structure on Page 21. Previous Commission and Brokerage Commission or brokerage has been paid by the Bank for earlier issues as per guidelines and within the stipulated limit. Previous Placement by the Bank The Bank has raised Tier II Capital by way of Private Placement of unsecured, redeemable bonds in the nature of Promissory Notes to augment capital adequacy as under:
Year of Placement Size (Rs crore) Tenor (Months) Credit Rating Coupon (% p.a) Redemption Date

2000-2001 2001-2002 2004-2005

60.00 60.00 175.00

63 63 111

Unrated LAAA LAAA

11.60 9.70 7.10

22.04.2006 28.04.2007 01.05.2014

Option to Subscribe The Bank has not given any person nor does it propose to give any person any option to subscribe to the bonds of the bank. Undertaking Regarding Purchase of Property

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There is no property which the Bank has purchased or acquired or proposes to purchase or acquire, which is to be paid for wholly or partly out of the proceeds of the present issue or the purchase or acquisition of which has not been completed on the date of this Offer Document, other than property as given hereunder: a) The contracts for the purchase or acquisition whereof were entered into, or may be entered into, in the ordinary course of the Bank’s business, such contracts not being made in contemplation of the offer nor the offer in consequence of the contract or b) In respect of which the amount of the purchase money is not material. The Bank has not purchased any property in which any of its directors had or have any direct or indirect interest or in respect of any payment thereof. Revaluation of Assets The bank has not revalued its assets in the last 5 years Classes of Shares The authorised capital of the Bank is Rs 50 crores divided into 50,00,000 Equity Shares of Rs.100 each. Stock Market Data The Bank’s shares are listed with The Stock Exchange, Mumbai, Bangalore and Chennai Stock Exchanges after the initial public offer. The equity shares of the Bank are actively traded at all the Stock Exchanges where they are listed. (i) The following table shows the high and low of daily closing share prices of the Bank on The Stock Exchange, Mumbai (BSE) for the periods indicated:
Period High (Rs.) BSE Low (Rs.) Average (Rs.)

2001-2002 2002-2003 2003-2004 2004-2005 May 2005 June 2005 July 2005 August 2005 September 2005 October 2005

339.45 560.00 2198.10 2749.00 2450.00 2739.00 2720.00 2780.00 5288.00 5570.00

192.00 245.00 429.95 1199.00 1995.00 2300.00 2364.00 2425.00 2510.00 3407.00

265.73 402.50 1314.03 1857.99 2231.98 2519.50 2542.00 2602.50 3899.00 4488.50

(ii) The following table shows the number of shares traded on the days High and Low prices of the Bank’s shares recorded on The Stock Exchange, Mumbai (BSE) for the last six months:
Period Date BSE High Number of shares traded Low Number of shares traded

Date

May 2005

25/05/05

60

02/05/05

10

88

June, 2005 July, 2005 August 2005 September 2005 October 2005

14/06/05 04/07/05 16/08/05 15/09/05 05/10/05

150 40 220 590 385

03/06/05 27/07/05 08/08/05 01/09/05 25/10/05

90 100 125 100 55

XIII. INVESTOR GRIEVANCE & REDRESSAL SYSTEM Investor grievances are given utmost importance and grievances received are dealt expeditiously. Pursuant Clause 49 para VIC of the Listing Agreement a shareholder/investor grievance committee has been formed under the chairmanship of a non-executive director. The Committee specifically looks into redressing of shareholder/investor complaints in matters like transfer of shares, non-receipt of annual reports, non-receipt of dividends etc. This Committee is designated ‘Shareholder/Investor Grievance Committee’ and meets every quarter. The investors can contact the Compliance Officer in case of any pre-issue/ post-issue related problems such as non-credit of letter(s) of allotment/ bond certificate(s) in the demat account, non-receipt of refund order(s), interest warrant(s)/ cheque(s) etc. Changes in Auditors during the last three years Since the RBI appoints the Auditors each year, the changes have been effected as per RBI’s Approval. The details of the same can be availed from the bank. OFFERING INFORMATION Minimum Subscription Minimum subscription is not applicable for private placement of bonds. Terms of the Issue For details, investors may kindly refer page no.24 of this offer document. Undertaking by the Bank The Bank undertakes: a)to attend to the complaints received in respect of the Issue expeditiously and satisfactorily; b)to take all steps for completion of necessary formalities for listing and commencement of trading at the Stock Exchange where the securities are to be listed are taken within 7 working days of finalisation of basis of allotment c)to apply in advance for the listing of the securities; d)that the funds required for despatch of refund orders/allotment letters by registered post shall be made available. e)that the Allotment Letters/Refund Orders to the applicants shall be despatched within specified time;

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f)that no further issue of securities shall be made till the securities offered through this Offer Document are listed or till the application monies are refunded on account of nonlisting. g)that necessary Cooperation with Credit Rating Agency (ies) shall be extended in providing true and adequate information till the debt obligations in respect of the instrument are outstanding. h)to forward the details of utilisation of the funds raised through the Bonds duly certified by the statutory auditors, to the bond trustees at the end of each half-year. i)to disclose the complete name and address of the bond trustees in the annual report. j)to provide a compliance certificate to the bond holders on a yearly basis in respect of compliance with the terms and conditions of placement of Bonds as contained in the memorandum, duly certified by the bond trustee. UTILISATION OF OFFER PROCEEDS The Bank undertakes that details of all monies utilised/ unutilised out of the Offer shall be disclosed under an appropriate separate head in the Balance Sheet of the Bank. XIV. MAIN PROVISIONS OF THE STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT, 1959 AND THE SUBSIDIARY BANKS GENERAL REGULATIONS, 1959. The General Regulations extracted in this document are as existing now. The relevant provisions of the SBI (Subsidiary Banks) Act 1959 (THE ACT) / Subsidiary Banks General Regulations (G.R.) Framed under the Act inter alia are as under: AUTHORISED CAPITAL Section 6 of Chapter II of the SBI (SB) Act provides that the authorised capital of the Bank shall be Rs. Two crore and shall be divided into shares of one hundred rupees each. The authorised capital of the Bank may be increased or reduced by the State Bank with the approval of the Reserve Bank. Subsequently increased to Rs 50 Crores ISSUED CAPITAL Section 7 (sub sections 4 & 5) of Chapter II of the SBI (SB) Act provides as under: A Subsidiary Bank may, with the approval of SBI and RBI, increase from time to time, its issued capital but no increase in the issued capital shall be made in such a manner that the State Bank holds at any time less than fifty-five per cent of the issued capital of the Bank. DISPOSAL OF PROFITS Sec. 40 (1): After making provision for bad and doubtful debts, depreciation in assets, equalization of dividends, contribution to staff and superannuation funds and for all other matters for which provision is necessary by or under this Act or which are usually provided for by banking companies, a Subsidiary bank may, out of its net profits, declare a dividend. Sec. 40 (2): The rate of dividend shall be determined by the Board of Directors of the Subsidiary bank concerned. VOTING RIGHTS Chapter IV of the Subsidiary Banks General Regulations 1959 provides that :

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G.R. 25 (1): Subject to the provisions contained in section 19 of the Act, each shareholder of a subsidiary Bank who has been registered as a shareholder for a period of not less than three months prior to the date of a general meeting of that subsidiary bank shall be entitled to vote on every resolution placed before the meeting. G.R. 25 (2): Every shareholder entitled to vote as aforesaid who, not being a company, is present in person or by proxy or who being a company is present by a duly authorised representative, or by proxy shall have one vote on a show of hands and in case of a poll shall have one vote for each share held by him. G.R. 26 (1): A shareholder, of a subsidiary bank, being a company, may by a resolution or a power of attorney authorise any of its officials or any other person to act as its representative at any general meeting of the shareholders of the subsidiary bank and the person so authorised (referred to as a “duly authorised representative” in these Regulations) shall be entitled to exercise the same powers on behalf of the company which he represents, as if he were an individual shareholder of the subsidiary bank. The authorisation so given may be in favour of two persons in the alternative and in such a case any one of such persons (but not both) may act as the duly authorised representative of the company. G.R. 29: No person who is an officer or an employee of a subsidiary bank may be appointed a duly authorised representative or a proxy in respect of a general meeting of that bank. MEETING OF SHAREHOLDERS NOTICE CONVENING A GENERAL MEETING G.R. 17(1): A notice convening a General Meeting of the shareholders of a subsidiary bank signed by the Chairman or the Managing Director of that bank shall be published at least twenty-eight days before the date of the meeting in the Gazette of India and also in at least two principal daily newspapers circulating at the place where the head office of the subsidiary bank is situated. G.R.17 (2): Every such notice shall state the time, date and location of such meeting, and also the business that shall be transacted at the meeting. SPECIAL GENERAL MEETING G.R. 18 (1): The Board may, at any time and shall, if a requisition for such a meeting has been received from either the State Bank or other shareholders holding shares carrying, in the aggregate, not less than 20 per cent of the total voting rights of all the shareholders, convene or cause to be convened, a Special General Meeting of shareholders. BUSINESS AT GENERAL MEETINGS G.R. 19(1): No business other than that specified in sub-section (2) of section 44 of the Act shall be transacted or discussed at the Annual General Meeting, except with the consent of the Chairman or other person presiding at the meeting, unless not less than six weeks’ notice of the same has been given to the Chairman or the Managing Director or the subsidiary bank either by the State Bank or by at least ten other shareholders qualified to vote at the meeting. Such notice shall take the form of a definite resolution to be put to the meeting, and shall be included in the notice of the meeting. G.R. 19 (2): Except with the consent of the Chairman or other person presiding at the meeting, no business shall be transacted or discussed at any special general meeting, except the business for which the meeting has been specifically convened. QUORUM AT GENERAL MEETINGS G.R. 20: No business shall be transacted at any meeting of the shareholders whether it is the Annual General meeting or any Special General Meeting, unless a quorum of at least five

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shareholders consisting of the State Bank represented by a proxy or by a duly authorised representative and four other shareholders entitled to vote at such meeting in person or by proxy or by duly authorised representatives is present at the commencement of such business, and if within fifteen minutes from the time appointed for the meeting a quorum is not present the Chairman or the person presiding at the general meeting may dissolve the meeting or adjourn it to the same day in the following week at the same time and location, and if at such adjourned meeting a quorum is not present, the shareholders who are present in person or by proxy or by duly authorised representative shall form a quorum: Provided that no annual general meeting shall be adjourned to a date later than three months after the 31st December # and if adjournment of the meeting to the same day in the following week would have this effect, the annual general meeting shall not be adjourned but the business of the meeting shall be commenced either as soon within one hour from the time appointed for the meetings as a quorum may be present, or immediately after the expiry of one hour from that time and those shareholders who are present in person or by proxy or by duly authorised representative at such time shall form a quorum. # changed to March 31 CHAIRMAN AT GENERAL MEETINGS G.R. 21(1): The Chairman or in his absence such one of the directors as may generally or in relation to any particular meeting be authorised by the Chairman in this behalf shall preside at a general meeting, and in the absence of the Chairman and the person so authorised and also failing any such authorisation the shareholders who are present in person or by proxy or by duly authorised representatives at the meeting may elect any other director to preside at the meeting. G.R. 21 (2): The person presiding at a general meeting shall regulate the procedure at the general meeting, and, in particular, shall have power to decide the order in which shareholders may address the meeting, to fix a time limit for speeches, to apply the closure when, in his opinion, any matter has been sufficiently discussed and to adjourn the meeting. PERSONS ENTITLED TO ATTEND THE GENERAL MEETINGS G.R. 22 (1): All directors, the auditor for the time being and all shareholders of the Subsidiary bank shall, subject to the provisions of sub-regulation (2), be entitled to attend a general meeting. VOTING AT GENERAL MEETINGS G.R. 23 (1): Save as otherwise provided in section 31 of the Act, every matter submitted to a General Meeting of a subsidiary bank shall be decided by a majority of votes. G.R. 23(2): A declaration by the person presiding at a general meeting of a subsidiary bank that a resolution has been carried or rejected thereat upon a show of hands by those shareholders present who are entitled to vote on the resolution shall be conclusive, and an entry to that effect in the book of proceeding of the subsidiary bank shall be sufficient evidence of that fact, without proof of the number or proportion of the votes recorded in favour of, or against, such resolution, unless immediately on such declaration a poll be demanded in writing on behalf of the State Bank of by at least four other shareholders present and entitled to vote at the meeting. G.R. 23 (4): The decision of the person presiding at the meeting as to the qualification of any person to vote, and also in the case of a poll, as to the number of votes any person is competent to exercise shall be final. TRANSFER OF SHARES

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Chapter IV of the State Bank of India (Subsidiary Banks) Act 1959 provides thatSec. 18 (1) : Save as otherwise provided in sub-section (2) the shares of a subsidiary bank shall be freely transferable. Sec. 18 (2) : Nothing contained in sub-section (1) shall entitle the State Bank to transfer any shares held by it in any subsidiary bank if such transfer will result in reducing the shares held by it to less than fifty five per cent of the issued capital of that subsidiary bank. Sec. 19 (1) : No person shall be registered as a shareholder in respect of any shares in a subsidiary bank held by him, whether in his own name or jointly with any other person, in excess of two hundred shares, or be entitled to payment of any dividend on the excess shares held by him, or to exercise any of the rights of a shareholder in respect of such excess shares otherwise than for the purpose of selling them : Provided that noting contained in this sub-section shall apply to – (a) the State Bank; (b) a State Government; (c) a Corporation; (d) an insurer as defined in the Insurance Act, 1938; (e) a local authority; (f) a co-operative society; (g) a trustee of a public or private religious or charitable trust; (h) a shareholder of an existing bank who is allotted any shares under sub-section (9) of Section 13. Sec. 19 (2) : Notwithstanding anything contained in sub-section (1), No person referred to in the proviso to that sub-section, other than the State Bank, shall be entitled to exercise voting rights in respect of any shares held by such person in excess of one per cent of the issued capital of the subsidiary bank concerned. Sec. 20 : Notwithstanding anything contained in the Acts hereinafter mentioned in this section, the shares of a subsidiary bank shall be deemed to be included among the securities enumerated in section 20 of the Indian Trusts act, 1882, and also to be approved securities for the purposes of the Insurance Act, 1938, and the Banking Companies Act, 1949. Sec.21: Every subsidiary bank shall keep at its head office, a register, in one or more books, of the shareholders, and shall enter therein the following particulars so far as they may be available:a. the names, addresses and occupations, if any, of the shareholders and a statement of the shares held by each shareholder, distinguishing each share by its denoting number; b. the date on which each person is so entered as a shareholder; c. the date on which any person ceases to be a shareholder; and d. such other particulars as may be prescribed. Sec. 22: Notwithstanding anything contained in section 19, no notice of any trust, express, implied or constructive shall be entered on the register of shareholders of a subsidiary bank or be receivable by it in respect of its shares. Chapter II of the Subsidiary Banks General Regulations 1959 provides thatG.R. 13 (1): Every transfer of the shares of a subsidiary bank shall be in writing in the form contained there in or in any usual or common form which the subsidiary bank shall approve. G.R. 13 (2): The instrument of transfer of any share shall be submitted to the Board or its Executive Committee and shall be signed by or on behalf of the transferor and the transferee, and the transferor shall be deemed to remain the holder of such shares until the name of the transferee is entered in the share register. Each signature to such transfer shall be duly attested by the signature of one witness who shall add his address and occupation. G.R. 13 (3) : Upon receipt by the Board or its Executive Committee of an instrument of transfer with the request to register the transfer, the Board or its Executive Committee shall,

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unless it declines the registration under Regulation 14, within two months from the date on which the instrument of transfer was delivered to the subsidiary bank for submission to the Board or its Executive Committee, cause the transfer to be registered. G.R. 14 (1) : The Board or its Executive Committee may decline to register any transfer of shares unless:G.R. 14 (1) (b) : a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and the transferee has been submitted to the Board or its Executive Committee. G.R. 14 (1) (c) : The instrument of transfer is accompanied by the certificate of the shares to which it relates, and such other evidence as the subsidiary bank may reasonably require in evidence of the right of the transferor to make the transfer. G.R. 14 (1) (d) : It is satisfied after such enquiry as it may consider necessary that the transferee is qualified to be registered as a shareholder in respect of the shares covered by the instrument of transfer. G.R. 14 (2) : The Board or its Executive Committee may suspend the registration of transfer during any period in which the register is closed. G.R. 16 (2) : The Board or its Executive Committee may at any time cause such enquiries to be made as it shall deem fit for the purpose of ascertaining whether any person registered as a shareholder of the subsidiary bank whether alone or jointly with another or others, is not or has ceased to be, qualified to be so registered in respect of any share and upon being satisfied that any such person is, contrary to the provision of subsection (1) of section 19 of the Act, registered, by inadvertence or other wise, in respect of any shares held by him whether in his own name or jointly with another person or persons so as to make such total holdings in excess of the total nominal value of twenty thousand rupees, it shall determine which of such shares shall be deemed to constitute such excess and shall inform the shareholder or, where such excess is held jointly, each of the joint shareholders, that in accordance with section 19 of the Act he is, and in the case of joint holders they are, not entitled to the payment of any dividend on any such share not to exercise any of the rights of a shareholder otherwise than for the purpose of the transfer of such share and shall make an entry in the register to that effect. G.R. 17 : Subject to the provisions of sub-section (3) of section 44 of the Act. G.R. 17 (1) : A Notice convening a general meeting of the shareholders of a subsidiary bank signed by the chairman or the [managing director] of that bank shall be published at least twenty-eight days before the date of the meeting in the Gazette of India and also in at least two principal daily newspapers circulating at the place where the head office of the subsidiary bank is situated. G.R. 17 (2) : Every such notice shall state the time, date and location of such meeting, and also the business that shall be transacted at the meeting. G.R. 18 (1) : The Board may, at any time and shall, if a requisition for such a meeting has been received from either the State Bank or other shareholders holding shares carrying, in the aggregate, note less that 20 per cent of the total voting rights of all the shareholders convene or cause to be convened, a special general meeting of shareholders. G.R. 18 (2) : The requisition referred to in sub-regulation (1) shall state the purpose for which the special general meeting is required to be convened, and may consist of several documents in like form each signed by one or more of the requisitionists. G.R. 18 (3) : The time, date and location of a general meeting shall be decided by the Board: Provided that a special general meeting convened on requisition shall be convened not later than three months of the receipt of the requisition. G.R. 19 (1) : No business other than that specified in sub-section (2) of section 44 of the Act shall be transacted or discussed at the annual general meeting, except with the consent of the chairman or other person presiding at the meeting, unless not less than six weeks notice of the same has been given to the chairman or the [Managing Director] of the subsidiary bank either

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by the State Bank or by at least ten other shareholders qualified to vote at the meeting. Such notice shall take the form of a definite resolution to be put to the meeting, and shall be included in the notice of the meeting. G.R. 19 (2) : Except with the consent of the Chairman or other person presiding at the meeting no business shall be transacted or discussed at any special general meeting, except the business for which the meeting has been specifically convened. SHARES AND SHARE REGISTERS Chapter II of the Subsidiary Banks General Regulations 1959 provides that – G.R.3 : The shares of a subsidiary bank shall be moveable property. G.R.4(1) : Subject to the provisions of the Act and these Regulations, the register of shareholders of a subsidiary bank shall be maintained by, and be under the control of, the Board or its Executive Committee and the decision of the Board or its Executive Committee as to whether or not a person is entitled to be registered as a holder in respect of any share shall be final. G.R.4 (2) : In particular, and without prejudice to the foregoing provision, the Board or its Executive Committee shall, as regards the entries in the register of shareholders of that bank, have the power to examine and pass or refuse to pass transfers and transmissions and to approve or refuse to approve transferees of shares and to give certificates of shares. G.R.5(1) : Except as otherwise provided by these regulations, no minor or person who has been found by a Court of competent jurisdiction to be of unsound mind shall be entitled to be registered as a shareholder. G.R.5(2) : In the case of firms, shares shall be registered in the names of the individual partners, and no firm, as such, shall be entitled to be registered as a shareholder. G.R.6(2) : In the case of joint holders of any shares, their names and other particulars required by subregulation (1) shall be grouped under the name of the first of such joint holders. G.R.6(3) : A shareholder resident outside India shall furnish to the subsidiary bank an address in India, and such address shall be entered in the register and be deemed to be his registered address for the purposes of the Act and these regulations. G.R.7 : If any share stands in the name of two or more persons the person first named in the register shall, as regards voting, receipt of dividends, service of notice and all or any other matter connected with the subsidiary bank, except the transfer of the shares, be deemed the sole holder thereof SUCCESSION G.R.15(1) : The executors or administrators of the estate of a deceased sole holder of a share of subsidiary bank, or the holder of a succession certificate issued under Part X of the Indian Succession Act, 1925 in respect of such share or a person in whose favour a valid instrument of transfer of such share was executed by such person or by the deceased sole holder during the latter’s life-time, shall be the only persons who may be recognized by the subsidiary bank as having any title to the share of the deceased shareholder. In the case of a share of a subsidiary bank registered in the names of two or more holders, the survivor or survivors and on the death of the last survivor, the executors or administrators of his estate, or any person who is the holder of a succession certificate in respect of such survivors interest in the share, or a person in whose favour a valid instrument of transfer of the share was executed by such person or such last survivor during the latter’s life-time shall be the only person who may be recognized by the subsidiary bank as having any title to such share. The subsidiary bank shall not be bound to recognize such executors or administrators unless they shall have obtained probate or letters of administration or other legal representation as the case may be from a duly constituted Court in India having effect at the place where the Head Office of the subsidiary bank is situated.

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Provided nevertheless that in any case where the Board or its Executive Committee shall in its absolute direction think fit, it shall be lawful for the Board or its Executive Committee to dispense with the production of a succession certificate, letters of administration or such other legal representation upon such terms as to indemnity or other wise as it may think fit. G.R.15(2) : Subject to the provisions of the Act and these regulations, any such person becoming entitled to a share of a subsidiary bank in consequence of the death of a shareholder and any person becoming entitled to a share in consequence of the insolvency, bankruptcy or liquidation of a shareholder shall upon production of such evidence, as the Board or its Executive Committee may require, be entitled:G.R.15(2) (a) : to be registered as a shareholder in respect of the share upon his satisfying the Board or its Executive Committee in the same manner as if he were the proposed transferee under regulation 14 that he is qualified to be registered as a shareholder; or G.R. 15(2) (b) : to make such transfer of the share as the person from whom he derives his title, could have made. INCORPORATION AND SHARE CAPITAL OF STATE BANK OF MYSORE Chapter II of the SBI (Subsidiary Banks) Act 1959 provides as under: Sec 7 (1) : On the appointed day, the issued capital of a new bank shall consist of such amount divided into fully paid up shares of hundred rupees each, as the State Bank may, with the approval of the Reserve Bank fix. Sec 7 (4) : Without prejudice to the provisions contained in sub-section (3), a new bank may, with the approval of the State Bank and the Reserve Bank, increase from time to time, its issued capital and the capital so increased shall consist of fully paid up shares to be issued in such manner as the State Bank may, with the approval of the Reserve Bank, direct. Sec 7 (5) : No increase or reduction in the issued capital of a new bank shall be made in such a manner that the State Bank holds at any time less than 55 per cent of the issued capital of that bank. CONSTITUTION OF THE BOARD OF DIRECTORS, THEIR POWERS, THEIR REMUNERATIONS Chapter V of the SBI (Subsidiary Banks) Act 1959 provides as under : Sec 24(1) : The State Bank may, from time to time, give directions and instructions to a subsidiary bank in regard to any of its affairs and business, and that bank shall be bound to comply with the directions and instructions so given. Sec 24(2) : Subject to any such directions and instructions, the general superintendence and conduct of the affairs and business of a subsidiary bank shall, as from the appointed day, vest in a Board of Directors who may, with the assistance of the Managing Director, exercise all powers and do all such acts and things as may be exercised or done by that bank. Sec 25(1) : Subject to the provisions of sub-section (2), the Board of Directors of a subsidiary bank shall consist of the following: (a) the chairman for the time being of the State Bank, ex-officio; (aa) the Managing Director appointed under sub- section (1) of section 29, or under section 32; (b) an officer of the Reserve Bank, to be nominated by that bank; (c) not more than five directors to be nominated by the State Bank of whom not more than three shall be officers of that bank; (ca) one director, from among the employees of the subsidiary bank, who are workmen, to be appointed by the Central Government in the manner provided in the rules made under this Act.

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(cb) one director, from among such of the employees of the subsidiary banks as are not workmen, to be appointed by the Central Government in the manner provided in the rules made under this Act; (d) two directors to be elected in the prescribed manner by the shareholders, other than the State Bank; provided that if the total amount of holdings of all such shareholders registered in the books of the subsidiary bank three months before the date fixed for election is below five per cent of the total issued capital, or if there are no shareholders other than the State Bank registered on the books of the subsidiary bank, the directors to be elected by the shareholders shall be nominated by the State Bank and such directors shall, for the purposes of this Act, be deemed to be directors elected under this clause; (e) a director, if any, to be nominated by the Central Government. Sec 26(1) : A director of a subsidiary bank nominated under clause (b) or clause (c) or clause (e) of subsection (1) of Section 25 or appointed under clause (ca) or clause (cb) of that subsection shall hold office during the pleasure of the authority nominating or appointing him. Sec 26 (2) : Subject to the provisions contained in Section 25, a director elected under clause (d) of subsection (1) of that section shall hold office for three years and thereafter until his successor is duly elected, and shall be eligible for re-election. Provided that no such director shall hold office continuously for a period exceeding six years. Sec 26 (2A) : Subject to the provisions contained in Section 25 and in sub-section (1), a director nominated under clause (c) and not being an officer of the State Bank or a director appointed under clause (ca) or clause (cb) or a director, not being an officer of the Central Government, nominated under clause (e) of sub-section (1) of section 25, shall hold office for such term not exceeding three years, as the central government may specify and thereafter until his successor shall have been duly nominated or appointed, and shall be eligible for renomination or re-appointment, as the case may be. Provided that no such Director shall hold office continously for a period exceeding six years. MANAGING DIRECTOR OF A SUBSIDIARY BANK Sec.29(1) : The State Bank shall, after consulting the Board of Directors of a subsidiary bank, and with the approval of the Reserve Bank, appoint a Managing Director for that subsidiary bank; Sec.29(3)(b) : The Managing Director of a subsidiary bank shall hold office for such term not exceeding four years and subject to such conditions as the State Bank may, with the approval of the Reserve Bank, specify at the time of his appointment; Sec.29(4) : The Managing Director vacating his office shall be eligible for re-appointment. Sec.29(5) : The State Bank may, with the approval of the Reserve Bank, for any sufficient reason, remove from office the Managing Director of a subsidiary bank; Provided that no such Managing Director shall be removed from office unless he has been given an opportunity of showing cause against such removal. CASUAL VACANCIES CASUAL VACANCY OF MANAGING DIRECTOR Sec. 32 : If the Managing Director of a subsidiary bank is rendered incapable of discharging his duties by reason of infirmity or otherwise or is absent on leave or otherwise in circumstances not involving the vacation of his office, the State Bank may appoint another person to officiate for the managing director until the date on which the Managing Director resumes duty. CASUAL VACANCIES AMONG DIRECTORS

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Sec.33 (1) : Where any vacancy occurs before the expiry of the term of office of a director of a subsidiary bank (other than the Managing Director or a director appointed under clause (ca) or clause (cb) of subsection (1) of section 25, the vacancy shall be filled a. in the case of a director nominated under clause (c) of sub-section (1) of section 25, not being an officer of the State Bank, by nomination by the State Bank; b. in the case of a director elected under clause (d) of sub-section (1) of section 25, by election or where the proviso to that clause is applicable, by nomination by the State Bank; Provided that where the duration of the vacancy in the office of an elected director is likely to be less than six months, the vacancy may be filled by the remaining directors by co-opting a person from among the shareholders entitled to elect a director under clause (d) of sub-section (1) of section25 who is not disqualified under section 27; c. in the case of a director nominated under clause (e) of sub-section (1) of section 25, not being an officer of the Central Government, by nomination by that Government in consultation with the State Bank. Sec. 33 (2) : A person nominated or elected or co-opted as the case may be, [under sub-section (1) shall hold office for the unexpired portion of the term of his predecessor. Sec. 33 (3) : Where any vacancy occurs before the expiry of the term of office of a director appointed under clause (ca) or clause (cb) of sub-section (1) of section 25, such vacancy shall be filled in accordance with the said clause (ca) or, as the case may be, clause (cb) and the director so appointed shall hold office for the period specified under sub-section (2A) of Section 26. REMUNERATION OF DIRECTORS Sec.30 : A director of a subsidiary bank shall be paid for attending the meetings of the Board of Directors or of any of its committees and for attending to any other business of the subsidiary bank such fees and allowances as may be prescribed. Provided that no fees shall be payable to the chairman of the State Bank (or the Managing Director of the subsidiary bank) or any other director who is a whole time officer of the Central Government or the Reserve Bank or the State Bank. POWER AND REMUNERATION OF MANAGING DIRECTOR Sec. 29 (2) : Subject to the general control of the Board of Directors, the day to day administration and management of the affairs of a subsidiary bank shall vest in the managing director, and the Managing Director shall exercise such other powers and perform such other duties as may be delegated to him by the Board of Directors. Sec.29(3) : The Managing Director of a subsidiary bank shall devote his whole time to the affairs of that bank :Provided that the Managing Director of the subsidiary bank may, with the approval of the State Bank and theReserve Bank be a director of any other institution; shall receive such salary and allowances as may be determined by the State Bank with the approval of the Reserve Bank. EXECUTIVE AND OTHER COMMITTEES OF THE BOARD OF DIRECTORS Sec.35(1) : There shall be an executive committee in respect of a subsidiary bank consisting of such directors as may be prescribed : Provided that if any such director being an officer of the State Bank and nominated by that bank under clause (c) of sub-section (1) of section 25, is for any reason unable to exercise his functions or to discharge his duties in relation to the executive committee, the State Bank may depute any of its officers to exercise all the functions and to discharge all the duties of such director in relation to the executive committee whenever such director is so unable to exercise

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his functions or discharge his duties; and the officer so deputed shall, for all purposes of this Act, in so far as it applies to the executive committee, be deemed to be a director of the subsidiary bank. Sec.35(2) : Subject to any regulations made under this Act, the executive committee may deal with any matter within the competence of the Board of Directors. Sec.35(3) : A copy of the minutes of every meeting of the executive committee of a subsidiary bank shall be forwarded to the State Bank and be laid before the Board of Directors of the subsidiary bank as soon as possible after the meeting. Sec.35(4) : Without prejudice to the powers of the executive committee, and subject to any regulations made under this Act, the Board of Directors of a subsidiary bank may constitute such and so many other committees, whether consisting wholly of the directors or wholly of other persons, or partly of the directors and partly of other persons, as it deems fit, to exercise such powers and perform such duties as may, subject to such conditions, if any, as the Board of Directors may impose, be delegated to them by the Board of Directors. MEETINGS OF THE BOARD OF DIRECTORS Sec.34(1) : The Board of Directors of a subsidiary bank shall meet at such time and place and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed. Sec.34(2) : The chairman of the State Bank shall preside at every meeting of the Board of Directors of a subsidiary bank and, in his absence such one of the directors as may generally or in relation to any particular meeting be authorised by the chairman in this behalf shall preside: and in the absence of the chairman and also failing such authorisation, the directors of the subsidiary bank present at the meeting shall elect one from among themselves to preside at the meeting. Explanation – For the purposes of this sub-section “absence from a meeting” means nonattendance for any reason whatsoever at the meeting or any part of the meeting during which any business is transacted. Sec.34(3) : All questions at a meeting of the Board of Directors of a subsidiary bank shall be decided by a majority of the votes of the directors present, and in case of equality of votes, the person presiding at the meeting shall have a second or casting vote. Sec.34(4) : Where any of the directors specified in clauses (a) and (b) of sub-section (1) of section 25 or any of the directors, being an officer of the State Bank specified in clause (c) of that sub-section is unable to attend any meeting of the Board of Directors of a subsidiary bank, and the State Bank or any other such director as may be present at the meeting considers that the State Bank would not be adequately or effectively represented at such meeting by reason of the absence of any such director, the State Bank or the director present may give notice in writing to that subsidiary bank that the meeting should be adjourned to such date as may be indicated in the notice; or that any matter, action, step or proceeding proposed to be considered, taken or carried out at that meeting, should not be so considered, taken or carried out: or that no decision should be taken at that meeting on any such matter, action step or proceeding; and that subsidiary bank and its Board of Directors shall be bound to comply with such notice and act accordingly.

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XV. MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION Material Contracts and Documents • • • • • • • • • • • • • • State Bank of India (Subsidiary Banks) Act, 1959 Credit Rating Letters for the current and previous Placements. Terms of Appointment of Managing Director. Original Documents of Property purchased and registered in the name of the Bank. Board Resolution approving the proposed Bond placement. Consent letters of the Registrars, the Trustees to the Bondholders, the Legal Advisors, and the Directors of the Bank. Annual Reports of the Bank for the last five years. Letter from the Legal Advisor giving his legal opinion on the IM. Certificates in relation to the Placement. Principal terms of loans and assets charged as security. Agreements and approvals for floating of joint ventures and associates. Auditor’s Certificate in respect of the Financials of the Bank. Tax Benefit Certificate issued by the Auditors. Certificate form Trustees for concurrence with the Trustee Clauses

The above documents are available for the inspection by the investors with the Compliance Officer to the Private Placement at the Head Office of the Bank between 10.00 a.m. to 2.00 p.m. on all working days during which the proposed private placement remains open.

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PART II DECLARATION All the relevant provisions of the State Bank of India (Subsidiary Banks), 1959 as amended from time to time and the legal requirements connected with this placement as also the guidelines, instructions, etc. issued by SEBI, Government and any other competent authority in this behalf have been complied with and no statement made in this Information Memorandum is contrary to the provisions of the said Acts/Regulations/ Guidelines and rules thereunder.

Sd/Authorised Signatory Place: Mumbai Date: 22nd November 2005

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STATE BANK

OF MYSORE

(Associate of the State Bank of India) Head Office: K. G. Road, Bangalore – 560 009, Karnataka. Tel No: 080 2235 3901 3909 Fax: 080 2228 3684 Email: cmshares@sbm.co.in Website: www.mysorebank.com Application Form Sr. No. Dear Sirs, Having read and understood the contents of the Memorandum of Private Placement, we apply for allotment to us of the Unsecured, Redeemable Non-Convertible, Subordinated Bonds The amount payable on application as shown below is remitted herewith On allotment, please place our name on the Register of Bond holders. We bind ourselves to the terms and conditions as contained in the Information Memorandum for Private Placement. We note that the Bank is entitled in its absolute discretion to accept or reject this application whole or in part without assigning any reason whatsoever. (PLEASE READ THE INSTRUCTIONS CAREFULLY BEFORE FILLING THIS FORM) Form in which certificate is to be issued [ ] Demat DP NAME: NSDL [ ] CDSL [ ] DPID: CLIENT ID: We understand that in case of allotment of Bonds to us / our Beneficiary Account as mentioned above would be credited to the extent of Bonds allotted. In case the Bonds allotted to us cannot be credited to our Beneficiary Account for any reason whatsoever, we will accept physical Bonds certificates. The application shall be for a minimum of 1 (One) Bonds and in Multiples of 1 (One) Bonds thereafter No. of Bonds applied for (In words) No. of Bonds applied for (In figures) Amount (Rs.) (in words) Date Cheque / Demand Draft drawn on We are applying as {Tick ( ) whichever is applicable} 1 4 7 10 Company Body Corporate Co-operative Banks Mutual Fund NBFC & Residuary NBFC 2 5 8 11 Commercial Bank Financial Institution Provident/Superannuation/Gratuity Funds Association of Persons 3 6 9 12 Regional Rural Bank Insurance Companies Port Trusts Others (Please specify)

Cheque /Demand Draft No.

Application Details First Applicant’s Name in Full (Block letters)

Second Applicant’s Name in Full Third Applicant’s Name in Full Mailing Address in Full (Do not repeat name. Post Box No. alone is not sufficient.)

Pin: Tax Details Details of Bank Account

Tel: PAN or GIR No.

Fax: IT Circle / Ward / District

Not Allotted

Bank Name & Branch_______________________________________________________________________ Account No: ____________________________ Nature of Account _______________________________________________________ Tax Deduction Status: (Please tick one) Fully Exempt (Please furnish exemption certificate): ____________________________________________________________________ Tax to be deducted at Source: __________________________________________________________________________________ Specimen Signature Name of the Authorised Signatory Designation Signature 1. 2. Acknowledgement Slip shall be given to the Investors as shown below the Instructions.

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INSTRUCTIONS 1) Application Forms must be completed in BLOCK LETTERS IN ENGLISH. A blank space must be between two or more parts of the name. For Example
A

B

C

D

E

L

I

M

I

T

E

D

2) Application forms duly completed in all respect must be lodged at the collection centers mentioned below, before the closing of the subscription. Cheques/Demand Drafts should be in favour or ‘State Bank of Mysore– Bonds Issue’ and crossed ‘Accounts Payee only’. Cheques / Demand drafts may be drawn on any bank including a co-operative bank, which is situated at and is a member or sub-member of the Banker’s clearing house located at the Designated Collection centers as mentioned elsewhere in the Information Memorandum. 3) Cash, outstation cheques, money orders, postal orders and stock invest will NOT be accepted.
4) As a matter of precaution against possible fraudulent encashment of interest warrants due to loss / misplacement, applicants are requested to mention the full particulars of their bank account as specified in the Application Form. Interest warrants will then be made in favour of the bank for credit to the applicant’s account. In case the full particulars are not given, cheques will be issued in the name of the applicant at his own risk.

5) Receipt of application will be acknowledged by the Bank in the “Acknowledgement Slip” appearing below the Application Form. No separate receipt will be issued. 6) All applicants should mention their permanent Account No. or the GIR number allotted under the Income Tax Act, 1961 and the Income Tax Circle/Ward district. In case where neither the PAN nor GIR is allotted, the fact of non-allotment should be mentioned in the application form in the space provided. 7) The Application would be accepted as per the terms and conditions of the Bonds outlined in the Memorandum of Private Placement. 8) Signatures should be made in English. Signatures made in any other Indian language must be attested by an authorized official of a Bank or by a Magistrate/Notary Public under his/her official seal. 9) Those desirous of claiming tax exemptions on interest on application money are compulsorily required to submit a certificate issued by the Income Tax Officer / relevant declaration forms as pr Income Tax Act, 1961 along with the application form. In case the above documents are not enclosed with the application forms, TDS will be deducted on interest on application money. For subsequent interest payments such certificates have to be submitted periodically. Application forms can be submitted to the offices of the Arrangers mentioned in the Information Memorandum or at the branches of State Bank of Mysore as mentioned in the Information Memorandum and shown below:
Designated Collection Centres

State Bank of Mysore
Fort Branch,

Mumbai

IDBI Capital Market Services Ltd. 8th Floor, Bakhtawar, Nariman Point, Mumbai – 400 021.

SBI Capital Markets Limited

202, Maker Tower ‘E’, Cuffe Parade, Mumbai – 400 005

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STATE BANK OF MYSORE
(Associate of the State Bank of India) Head Office: K. G. Road, Bangalore – 560 009, Karnataka. Tel No: 080 2235 3901 3909 Fax: 080 2228 3684 Email: cmshares@sbm.co.in Website: www.mysorebank.com ACKNOWLEDGEMENT SLIP Sr. No.: Received from ____________________________________________ Address _______________________________________________ __________________________________________ an application for _________________ Bonds along with Cheque/Demand Draft No. __________ Dated _________ Drawn on _____________ for Rs. __________ (Rupees________________________________________ ___________________________________________ only) (Note: Cheques and Drafts are subject to realisation)

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