STATE BANK OF MYSORE · 2013-05-16 · E-mail: [email protected] Website: Issue of 12,13,630 equity shares of face value of ` 10 each of State Bank of Mysore (the “Bank”), at

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PRELIMINARY OFFER DOCUMENT May 15, 2013

STATE BANK OF MYSORE(a subsidiary of the State Bank of India)

Our Bank was incorporated on May 13, 1913 as a public limited company pursuant to the Mysore Companies Regulation No.III of 1895 as The Bank of Mysore Limited. Thereafter, pursuant to the notification of the State Bank of India (Subsidiary Banks) Act, 1959, the Bank of Mysore Limited was constituted as a subsidiary of the State Bank of India under the name State Bank of Mysore.

Head Office: Mysore Bank Circle, Kempegowda Road, Bangalore 560 254; Tel: + 91 80 2225 8087; Fax: +91 80 2237 5308; Contact Person: Mr. Giridhara Kathavate, Chief Manager, Shares and Bonds and Compliance Officer;

E-mail: [email protected] Website: www.statebankofmysore.co.inIssue of 12,13,630 equity shares of face value of ` 10 each of State Bank of Mysore (the “Bank”), at a price determined according to the Allotment Criteria (as defined hereinafter) aggregating to ` [●] crores (the “Issue”). The Issue Price (as defined hereinafter) is ` [●] per Equity Share.THIS ISSUE AND THE DISTRIBUTION OF THIS PRELIMINARY OFFER DOCUMENT (THE “PRELIMINARY OFFER DOCUMENT”) IS BEING MADE IN RELIANCE ON CHAPTER VIII-A OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, AS AMENDED (THE “ICDR REGULATIONS”). THIS PRELIMINARY OFFER DOCUMENT DOES NOT CONSTITUTE AN OFFER OR INVITATION OR SOLICITATION OF AN OFFER TO ANY PERSON OR CLASS OF INVESTORS OTHER THAN QUALIFIED INSTITUTIONAL BUYERS (“QIBS”) (AS DEFINED IN “DEFINITIONS AND ABBREVIATIONS”) WITHIN OR OUTSIDE INDIA.

ISSUE ONLY TO QUALIFIED INSTITUTIONAL BUYERS The Issue is being made through the Institutional Placement Programme, wherein at least 25% of the aggregate number of Equity Shares to be Allotted in the Issue shall be Allocated and Allotted to Mutual Funds (as defined hereinafter) and Insurance Companies (as defined hereinafter), subject to valid ASBA Applications (as defined hereinafter) being received at or above the Issue Price, provided that if this portion or any part thereof to be Allotted to Mutual Funds and Insurance Companies remains unsubscribed, such minimum portion or part thereof may be Allotted to other QIBs. QIBs may participate in this Issue only through an application supported by blocked amount (“ASBA”) providing details about the ASBA Account (as defined hereinafter) which will be blocked by the Self Certified Syndicate Bank. For details, see “Issue Procedure” on page 104. This Preliminary Offer Document has not been reviewed or approved by the Securities and Exchange Board of India (“SEBI”), the Reserve Bank of India (“RBI”), the BSE Limited (the “BSE”), the National Stock Exchange of India Limited (the “NSE”), the Madras Stock Exchange Limited (the “MSE”) and Bangalore Stock Exchange Limited (the “BgSE”) (the “Stock Exchanges”) and is intended only for use by QIBs. A copy of this Preliminary Offer Document has been delivered to SEBI and the Stock Exchanges. Copy of the Offer Document will be filed with the SEBI and the Stock Exchanges. This Preliminary Offer Document will only be circulated or distributed to QIBs, and will not constitute an offer to any other class of investors in India or any other jurisdiction. The Equity Shares offered in the Issue have not been recommended or approved by SEBI, nor does SEBI guarantee the accuracy or adequacy of this Preliminary Offer Document. The Equity Shares of our Bank are listed on the BSE, NSE, MSE and BgSE and currently traded on BSE and NSE. The Equity Shares offered in the Issue are securities of our Bank of the same class and in all respects uniform as the Equity Shares listed and traded on the Stock Exchanges. In-principle approvals under Clause 24(a) of the Equity Listing Agreement (as defined hereinafter) for listing of the Equity Shares offered in the Issue have been received from the Stock Exchanges. Applications will be made to the Stock Exchanges for obtaining listing and trading approvals for the Equity Shares offered through this Preliminary Offer Document. The Stock Exchanges assume no responsibility for the correctness of any statements made, opinions expressed or reports contained herein. Admission of the Equity Shares offered in the Issue to trading on the Stock Exchanges should not be taken as an indication of the merits of the business of our Bank or of our Equity Shares. INVESTMENTS IN EQUITY SHARES INVOLVE A DEGREE OF RISK AND PROSPECTIVE INVESTORS SHOULD NOT INVEST IN THIS ISSUE UNLESS THEY ARE PREPARED TO TAKE THE RISK OF LOSING ALL OR PART OF THEIR INVESTMENT. PROSPECTIVE INVESTORS ARE ADVISED TO CAREFULLY READ “RISK FACTORS” ON PAGE 28 OF THIS PRELIMINARY OFFER DOCUMENT BEFORE MAKING AN INVESTMENT DECISION IN THIS ISSUE. EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT ITS OWN ADVISORS ABOUT THE PARTICULAR CONSEQUENCES OF AN INVESTMENT IN THE EQUITY SHARES BEING ISSUED PURSUANT TO THIS PRELIMINARY OFFER DOCUMENT. Invitations, offers and issuances of Equity Shares offered in the Issue shall only be made pursuant to this Preliminary Offer Document together with the ASBA Applications and Confirmation of Allocation Notes. Please see “Issue Procedure” on page 104. The distribution of this Preliminary Offer Document or the disclosure of its contents without the prior consent of our Bank to any person, other than QIBs and persons retained by QIBs to advise them with respect to their subscription of the Equity Shares offered in the Issue is unauthorised and prohibited. Each prospective investor, by accepting delivery of this Preliminary Offer Document, agrees to observe the foregoing restrictions and make no copies of this Preliminary Offer Document or any documents referred to in this Preliminary Offer Document. The information on the website of our Bank or any website directly or indirectly linked to the website of our Bank, other than this Preliminary Offer Document, does not form part of this Preliminary Offer Document and prospective investors should not rely on such information contained in, or available through, any such website. The Equity Shares have not been, and will not be, registered under the U.S. Securities Act 1933, as amended (the “Securities Act”) or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares will be offered and sold outside the United States in compliance with Regulation S of the Securities Act and the applicable laws of the jurisdiction where those offers and sales occur.The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any such jurisdiction, except in compliance with the applicable laws of such jurisdiction.

BOOK RUNNING LEAD MANAGERS TO THE ISSUE REGISTRAR TO THE ISSUE

BOB Capital Markets Limited3rd Floor, South Wing, UTI Tower, Gn Block, Bandra Kurla Complex, Bandra East, Mumbai 400 051 Tel: +91 22 6138 9300Fax: +91 22 6671 8535E-mail: [email protected]: www.bobcaps.inContact person: Mr. Amit PorwalSEBI Registration No.: INM000009926

SBI Capital Markets Limited*202, Maker Tower 'E',Cuffe ParadeMumbai 400 005Tel: + 91 22 22178300Fax: + 91 22 22188332Email: [email protected]: www.sbicaps.comContact Person: Ms. Rajalakshmi V/ Mr. Nithin KanugantiSEBI Registration No.: INM000003531

Integrated Enterprises (India) Limited2nd Floor, Kences Tower, No.1Ramakrishna Street , North Usman Road, T. Nagar, Chennai 600 017, Tel: + 91 44 2814 0801-03Fax: +91 44 2814 3378E-mail:; [email protected]; [email protected] Website: www.integratedindia.inContact Person: Mr. K. Balasubramanian SEBI Registration No.: INR000000544

ISSUE PROGRAMME#

ISSUE OPENS ON [●] 2013 ISSUE CLOSES ON [●] 2013* SBI Capital Markets Limited is a subsidiary of State Bank of India, which is the promoter of the Issuer. SBI Capital Markets Limited has signed the due diligence certificate and accordingly has been disclosed as a Book Running Lead Manager. Further, in compliance with the proviso to Regulation 21A (1) of SEBI (Merchant Bankers) Regula-tions, 1992, and proviso to Regulation 5(3) of the ICDR Regulations, SBI Capital Markets Limited is the Marketing Book Running Lead Manager and would be involved only in the marketing of the Issue. # Details of the Issue programme shall be disclosed in the Floor Price Announcement (as defined hereinafter) to be issued at least one day prior to the Issue Opening Date. Investors should refer to the pre-Issue advertisement and the Floor Price Announcement for further details. Investors are advised to read the above mentioned announcements together with this Preliminary Offer Document.

TABLE OF CONTENTS

NOTICE TO INVESTORS ------------------------------------------------------------------------------------------------------ 1

REPRESENTATIONS BY INVESTORS ------------------------------------------------------------------------------------- 3

OFFSHORE DERIVATIVE INSTRUMENTS ------------------------------------------------------------------------------ 7

DISCLAIMER CLAUSE --------------------------------------------------------------------------------------------------------- 8

PRESENTATION OF FINANCIAL AND OTHER INFORMATION-------------------------------------------------- 9

INDUSTRY AND MARKET DATA ----------------------------------------------------------------------------------------- 10

FORWARD-LOOKING STATEMENTS ----------------------------------------------------------------------------------- 11

EXCHANGE RATES ----------------------------------------------------------------------------------------------------------- 12

ENFORCEMENT OF CIVIL LIABILITIES ------------------------------------------------------------------------------ 13

DEFINITIONS AND ABBREVIATIONS ---------------------------------------------------------------------------------- 14

SUMMARY OF OUR BUSINESS -------------------------------------------------------------------------------------------- 20

SUMMARY OF THE ISSUE -------------------------------------------------------------------------------------------------- 24

SELECTED FINANCIAL INFORMATION ------------------------------------------------------------------------------- 25

RISK FACTORS ----------------------------------------------------------------------------------------------------------------- 28

MARKET PRICE INFORMATION ----------------------------------------------------------------------------------------- 44

CAPITALISATION STATEMENT ------------------------------------------------------------------------------------------ 46

USE OF PROCEEDS ----------------------------------------------------------------------------------------------------------- 47

DIVIDEND POLICY ------------------------------------------------------------------------------------------------------------ 48

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF

OPERATIONS ------------------------------------------------------------------------------------------------------------------- 49

INDUSTRY OVERVIEW ------------------------------------------------------------------------------------------------------ 66

BUSINESS OVERVIEW ------------------------------------------------------------------------------------------------------- 79

BOARD OF DIRECTORS AND SENIOR MANAGEMENT ---------------------------------------------------------- 95

PRINCIPAL SHAREHOLDERS -------------------------------------------------------------------------------------------- 102

ISSUE PROCEDURE ---------------------------------------------------------------------------------------------------------- 104

PLACEMENT ------------------------------------------------------------------------------------------------------------------- 121

TRANSFER RESTRICTIONS ----------------------------------------------------------------------------------------------- 123

THE SECURITIES MARKET OF INDIA--------------------------------------------------------------------------------- 124

DESCRIPTION OF THE EQUITY SHARES ---------------------------------------------------------------------------- 127

STATEMENT OF TAX BENEFIT ------------------------------------------------------------------------------------------ 129

LEGAL PROCEEDINGS ----------------------------------------------------------------------------------------------------- 140

STATUTORY AUDITORS -------------------------------------------------------------------------------------------------- 143

GENERAL INFORMATION ------------------------------------------------------------------------------------------------ 144

FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------ 149

DECLARATION ---------------------------------------------------------------------------------------------------------------- 196

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NOTICE TO INVESTORS

Our Bank has furnished and accepts full responsibility for all of the information contained in this Preliminary Offer Document, having made all reasonable enquiries confirms that, this Preliminary Offer Document contains all information with respect to our Bank and the Equity Shares offered in the Issue that is material in the context of the Issue. The statements contained in this Preliminary Offer Document relating to our Bank and the Equity Shares are, in every material respect, true, accurate and not misleading. The opinions and intentions expressed in this Preliminary Offer Document with regard to our Bank and the Equity Shares are honestly held, have been reached after considering all relevant circumstances, are based on information presently available to our Bank and are based on reasonable assumptions. There are no other facts in relation to our Bank and the Equity Shares, the omission of which would, in the context of the Issue, make any statement in this Preliminary Offer Document misleading in any material respect. Further, all reasonable enquiries have been made by our Bank to ascertain such facts and to verify the accuracy of all such information and statements. No person is authorised to give any information or to make any representation not contained in this Preliminary Offer Document and any information or representation not so contained must not be relied upon as having been authorised by or on behalf of our Bank or BOB Capital Markets Limited or SBI Capital Markets Limited (the “Book Running Lead Managers/BRLMs”) or SBICAP Securities Limited (the “Syndicate Member”). The delivery of this Preliminary Offer Document at any time does not imply that the information contained in it is correct as of any time subsequent to its date.

The Equity Shares offered in the Issue have not been approved, disapproved or recommended by the U.S.

Securities and Exchange Commission, any state securities commission in the United States or the securities

commission of any non-U.S. jurisdiction or any other U.S. or non-U.S. regulatory authority. No authority has

passed on or endorsed the merits of this Issue or the accuracy or adequacy of this Preliminary Offer

Document. Any representation to the contrary is a criminal offence in the United States and may be a criminal offence in other jurisdictions. The Equity Shares offered in the Issue have not been and will not be registered under the U.S. Securities Act or under any state securities laws of the U.S., and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. The Equity Shares offered in the Issue are being offered and sold outside the United States in offshore transactions in reliance on Regulation S. Prospective purchasers are hereby notified that our Bank is relying on the exemption from the registration requirements of the Securities Act. The Equity Shares offered in the Issue are transferable only in accordance with the restrictions described in “Transfer Restrictions” on page 123. All purchasers will be required to make the applicable representations set forth in “Transfer Restrictions” on page 123. The distribution of this Preliminary Offer Document and the Issue may be restricted by law in certain countries or jurisdictions. As such, this Preliminary Offer Document does not constitute, and may not be used for or in connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorised, or to any person to whom it is unlawful to make such offer or solicitation. In particular, no action has been taken by our Bank, the BRLMs or the Syndicate Member which would permit an offering of the Equity Shares offered in the Issue or distribution of this Preliminary Offer Document in any country or jurisdiction, other than India, where action for that purpose is required. Accordingly, the Equity Shares to be issued pursuant to the Issue may not be offered or sold, directly or indirectly, and neither this Preliminary Offer Document nor any Issue materials in connection with the Equity Shares offered in the Issue may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction. This Preliminary Offer Document has been filed with SEBI and the Stock Exchanges, and has been displayed on the websites of BSE, NSE and our Bank stating that it is in connection with the Institutional Placement Programme and that the Issue is being made only to QIBs.

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In making an investment decision, investors must rely on their own examination of our Bank and the terms of the Issue, including the merits and risks involved. Investors should not construe the contents of this Preliminary Offer Document as business, legal, tax, accounting or investment advice. Investors should consult their own counsel and advisors as to business, legal, tax, accounting, investment and related matters concerning the Issue. In addition, neither our Bank, nor the Book Running Lead Managers or the Syndicate Member is making any representation to any offeree or subscriber of the Equity Shares offered in the Issue regarding the legality of an investment in such Equity Shares by such subscriber or purchaser under applicable laws or regulations. Each QIB subscribing to the Equity Shares offered in the Issue is deemed to have acknowledged, represented

and agreed that it is eligible to invest in India and in our Bank under Indian law, including Chapter VIII-A of

the ICDR Regulations, and is not prohibited by SEBI or any other statutory authority from buying,

subscribing to, selling or dealing in securities. The information on our Bank’s website, except this Preliminary Offer Document, or the website of the Book Running Lead Managers does not constitute nor form part of this Preliminary Offer Document. Prospective investors should not rely on the information contained in, or available through such websites, except this Preliminary Offer Document. This Preliminary Offer Document contains summaries of terms of certain documents, which are qualified in their entirety by the terms and conditions of such documents.

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REPRESENTATIONS BY INVESTORS By subscribing to any Equity Shares offered in the Issue, you are deemed to have represented, warranted, acknowledged and agreed to our Bank, the Book Running Lead Managers and the Syndicate Member, as follows: � You are a “QIB”, having a valid and existing registration under applicable laws and regulations of India,

and undertake to acquire, hold, manage or dispose of any Equity Shares offered in the Issue that are Allotted to you in accordance with Chapter VIII-A of the ICDR Regulations;

� You are eligible to invest in India under applicable law, including the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, and any notifications, circulars or clarifications issued thereunder, and have not been prohibited by SEBI or any other regulatory authority, from buying, selling or dealing in securities;

� You have made the representations and warranties set forth in “Transfer Restrictions” on page 123; � You are aware that this Preliminary Offer Document has not been reviewed, verified or affirmed by SEBI,

RBI, the Stock Exchanges or any other regulatory or listing authority, and is intended only for use by QIBs;

� If you are Allotted the Equity Shares in the Issue, you shall not, for a period of one year from the date of Allocation/Allotment, sell such Equity Shares so acquired except on the Stock Exchanges;

� You are entitled to subscribe for the Equity Shares offered in the Issue under the laws of all relevant jurisdictions that apply to you and you have necessary capacity, have obtained all necessary consents, governmental or otherwise, and authorisations and complied with all necessary formalities, to enable you to commit to participation in the Issue and to perform your obligations in relation thereto (including, without limitation, in the case of any person on whose behalf you are acting, all necessary consents and authorisations to agree to the terms set out or referred to in this Preliminary Offer Document), and will honour such obligations;

� You confirm that, either: (i) you have not participated in or attended any investor meetings or presentations by our Bank or its agents (the “Bank Presentations”) with regard to our Bank or the Issue; or (ii) if you have participated in or attended any Bank Presentations: (a) you understand and acknowledge that the Book Running Lead Managers and the Syndicate Member may not have knowledge of the statements that our Bank or its agents may have made at such Bank Presentations and are therefore unable to determine whether the information provided to you at such Bank Presentations may have included any material misstatements or omissions and accordingly you acknowledge that the Book Running Lead Managers and the Syndicate Member have advised you not to rely in any way on any information that was provided to you at any such Bank Presentations and (b) you confirm that, to the best of your knowledge, you have not been provided any material or price sensitive information relating to our Bank and the Issue that was not made publicly available by our Bank;

� Neither our Bank nor the Book Running Lead Managers nor the Syndicate Member nor any of their respective shareholders, directors, officers, employees, counsel, representatives, agents or affiliates are making any recommendations to you or advising you regarding the suitability of any transactions you may enter into in connection with the Issue. Neither the Book Running Lead Managers nor the Syndicate Member nor any of their shareholders, directors, officers, employees, counsel, representatives, agents or affiliates have any duties or responsibilities to you for providing the protection afforded to its or their clients or customers or for providing advice in relation to the Issue and are not in any way acting in any fiduciary capacity;

� All statements other than statements of historical facts included in this Preliminary Offer Document, including those regarding our Bank’s financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to our Bank’s business), are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to be materially different from future results, performance or achievements expressed or implied by such forward-looking

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statements. Such forward-looking statements are based on numerous assumptions regarding our Bank’s present and future business strategies and environment in which our Bank will operate in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Preliminary Offer Document;

� You are aware of and understand that the Equity Shares to be issued pursuant to the Issue are being offered only to QIBs and are not being offered to the general public and the Allocation and Allotment shall be in accordance with the Basis of Allocation (as defined hereinafter), Allotment Criteria and the CAN (as defined hereinafter). See “Issue Procedure” on page 104;

� You shall apply in this Issue only through ASBA mechanism;

� You, together with other QIBs that belong to the same group as you or are under common control as you, shall not be Allotted Equity Shares in excess of 25% of the offer size in terms of Regulation 91H of the ICDR Regulations. For the purposes of this representation: The expression ‘belong to the same group’ shall have the same meaning as ‘companies under the same

group’ as provided in sub-section (11) of Section 372 of the Companies Act; and The expression ‘control’

shall have the same meaning as is assigned to it under Regulation 2(1)(e) of the SEBI(SAST) Regulations, 2011;

For meaning of the terms ‘companies under the same group’ under sub-section (11) of Section 372 of the

Companies Act and ‘control’ under Regulation 2(1)(e) of the SEBI(SAST) Regulations, 2011, see “Issue

Procedure” on page 104. However, in accordance with Section 372(14) of the Companies Act, the

provisions of Section 372 are not applicable to banking and insurance companies. However, this is subject to change in case our Bank, in consultation with the Book Running Lead Managers, chooses to exercise the option to allot Equity Shares in the Issue to less than 10 investors in accordance with the SEBI Letter. In such an event, you together with other QIBs that belong to the same group as you or are under common control as you shall not be Allotted Equity Shares in excess of 50% of the offer size. For further details, see “Issue Procedure – Number of Allottees” on page 106;

� You have read this Preliminary Offer Document in its entirety, including in particular, “Risk Factors” on page 28;

� In making your investment decision, you have (i) relied on your own examination of our Bank and the

terms of the Issue, including the merits and risks involved, (ii) made your own assessment of our Bank and our business, the Equity Shares offered in the Issue and the terms of the Issue based solely on the information contained in this Preliminary Offer Document and publicly available information about our Bank and no other disclosure or representation by us or any other party, (iii) consulted your own independent counsel and advisors or otherwise have satisfied yourself concerning, the effects of local laws, (iv) received all information that you believe is necessary or appropriate in order to make an investment decision in respect of our Bank and the Equity Shares offered in the Issue, and (v) relied upon your own investigation and resources in deciding to invest in the Issue;

� Neither the Book Running Lead Managers nor the Syndicate Member nor any of their shareholders, directors, officers, employees, counsel, representatives, agents or affiliates, have provided you with any tax advice or otherwise made any representations regarding the tax consequences of purchase, ownership and disposal of the Equity Shares offered in the Issue (including the Issue and the use of proceeds from such Equity Shares). You will obtain your own independent tax advice and will not rely on the Book Running Lead Managers, the Syndicate Member or any of their shareholders, directors, officers, employees, counsel, representatives, agents or affiliates, when evaluating the tax consequences in relation to the Equity Shares offered in the Issue (including, in relation to the Issue and the use of proceeds from the Equity Shares offered in the Issue). You waive, and agree not to assert any claim against, any of our Bank, the Book Running Lead Managers, the Syndicate Member or any of their respective shareholders, directors, officers, employees, counsel, representatives, agents or affiliates, with respect to the tax aspects of the Equity Shares offered in the Issue or as a result of any tax audits by tax authorities, wherever situated;

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� You are a sophisticated investor who is seeking to subscribe to the Equity Shares offered in the Issue for

your own investment and not with intent to distribute such Equity Shares and have such knowledge and experience in financial, business and investments as to be capable of evaluating the merits and risks of the investment in the Equity Shares offered in the Issue. You and any accounts for which you are subscribing to the Equity Shares offered in the Issue (i) are each able to bear the economic risk of the investment in the Equity Shares to be issued pursuant to the Issue, (ii) are able to sustain a complete loss on the investment in the Equity Shares to be issued pursuant to the Issue, (iii) have no need for liquidity with respect to the investment in the Equity Shares offered in the Issue, (iv) have sufficient knowledge, sophistication and experience in financial and business matters so as to be capable of evaluating the merits and risk of subscribing to the Equity Shares offered in the Issue, and (v) have no reason to anticipate any change in your or their circumstances, financial or otherwise, which may cause or require any sale or distribution by you or them of all or any part of the Equity Shares offered in the Issue. You acknowledge that an investment in the Equity Shares offered in the Issue involves a high degree of risk and that such Equity Shares are, therefore, a speculative investment. You are seeking to subscribe to the Equity Shares offered in this Issue for your own investment and not with a view to resale or distribution;

� If you are acquiring the Equity Shares offered in the Issue, for one or more managed accounts, you represent and warrant that you are authorised in writing, by each such managed account to acquire such Equity Shares for each managed account and make the representations, warranties, acknowledgements and agreements herein for and on behalf of each such account, reading the reference to ‘you’ to include such accounts;

� You are neither a Promoter nor a person related to the Promoter, either directly or indirectly, and your ASBA Application does not directly or indirectly represent the Promoter or the promoter group ( as defined under the ICDR Regulations) or persons related to the Promoter;

� You have no right to withdraw your ASBA Application or revise downwards the price per Equity Share or the number of Equity Shares mentioned in your ASBA Application;

� You are eligible to apply for and hold the Equity Shares offered in the Issue, which are Allotted to you

together with any Equity Shares held by you prior to the Issue. You confirm that your aggregate holding after the Allotment of the Equity Shares offered in the Issue shall not exceed the level permissible as per any applicable regulations;

� The ASBA Application submitted by you would not result in triggering an open offer under the SEBI (SAST) Regulations, 2011;

� You shall not undertake any trade in the Equity Shares issued pursuant to the Issue and credited to your depository participant account until such time that the final listing and trading approvals for such Equity Shares are issued by the Stock Exchanges;

� You are aware that (i) applications for in-principle approval, in terms of Clause 24(a) of the Equity Listing Agreement, for listing and admission of the Equity Shares offered in the Issue and for trading on the Stock Exchanges, were made and approval has been received from each of the Stock Exchanges, and (ii) the application for the final listing and trading approval will be made after Allotment. There can be no assurance that the final approvals for listing of the Equity Shares issued pursuant to the Issue will be obtained in time, or at all. Our Bank shall not be responsible for any delay or non-receipt of such final approvals or any loss arising from such delay or non-receipt;

� By participating in the Issue, you confirm that you have neither received nor relied on any other information, representation, warranty or statement made by, or on behalf of, the Book Running Lead Managers, the Syndicate Member or our Bank or any of their respective affiliates or any other person acting on their behalf and neither the Book Running Lead Managers, our Bank, the Syndicate Member nor any of their respective affiliates or other person acting on their behalf will be liable for your decision to participate in the Issue based on any other information, representation, warranty or statement that you may have obtained or received;

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� You confirm that the only information you are entitled to rely on, and on which you have relied in

committing yourself to acquire the Equity Shares offered in the Issue is contained in this Preliminary Offer Document, such information being all that you deem necessary to make an investment decision in respect of the Equity Shares offered in the Issue and neither the Book Running Lead Managers nor our Bank nor the Syndicate Member will be liable for your decision to accept an invitation to participate in the Issue based on any other information, representation, warranty or statement that you may have obtained or received;

� The Book Running Lead Managers and the Syndicate Member do not have any obligation to purchase or acquire all or any part of the Equity Shares subscribed for by you or to support any losses directly or indirectly sustained or incurred by you for any reason whatsoever in connection with the Issue, including non-performance by our Bank of any of its obligations or any breach of any representations and warranties by our Bank, whether to you or otherwise;

� You agree that any dispute arising in connection with the Issue will be governed by and construed in accordance with the laws of Republic of India, and the courts in Bangalore, India shall have exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Issue, this Preliminary Offer Document;

� Each of the representations, warranties, acknowledgements and agreements set out above shall continue to be true and accurate at all times up to and including the Allotment, listing and trading of the Equity Shares issued pursuant to the Issue on the Stock Exchanges;

� You agree to indemnify and hold our Bank, the Book Running Lead Managers, the Syndicate Member and their respective affiliates harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach or alleged breach of the foregoing representations, warranties, acknowledgements and undertakings made by you in this Preliminary Offer Document. You agree that the indemnity set forth in this paragraph shall survive the resale of the Equity Shares issued pursuant to the Issue by, or on behalf of, the managed accounts;

� You agree to abide by the Basis of Allocation provided in this Preliminary Offer Document, and the Allocation done in accordance with Basis of Allocation as overseen by BSE and NSE;

� You agree to provide additional documents as may be required by our Bank and the Syndicate for finalisation of the Basis of Allocation along with BSE and NSE. Our Bank, the Book Running Lead Managers, the Syndicate Member and their affiliates may rely on the accuracy of such documents provided by you; and

� Our Bank, the Book Running Lead Managers, the Syndicate Member, their respective affiliates and others will rely on the truth and accuracy of the foregoing representations, warranties, acknowledgements and undertakings, which are given to the Book Running Lead Managers and the Syndicate Member on their own behalf and on behalf of our Bank, and are irrevocable.

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OFFSHORE DERIVATIVE INSTRUMENTS

Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of Regulation 15A(1) of the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995 (the “FII Regulations”), an FII may issue or otherwise deal in offshore derivative instruments such as participatory notes, equity-linked notes or any other similar instruments issued overseas against underlying securities, listed or proposed to be listed on any recognized stock exchange in India, such as the Equity Shares offered in the Issue (all such offshore derivative instruments are referred to herein as “P-Notes”), for which they may receive compensation from the purchasers of such instruments. P-Notes may be issued only in favour of those entities which are regulated by any appropriate foreign regulatory authorities subject to compliance with applicable ‘know your client’ requirements. An FII shall also ensure that no further issue or transfer of any instrument referred to above is made by or on behalf of it to any person other than such entities regulated by an appropriate foreign regulatory authority. No sub-account of an FII is permitted to directly or indirectly issue P-Notes. P-Notes have not been and are not being offered, issued or sold pursuant to this Preliminary Offer Document. This Preliminary Offer Document does not contain any information concerning P-Notes or the issuer(s) of any P-notes, including any information regarding any risk factors relating thereto. Any P-Notes that may be issued are not securities of our Bank and do not constitute any obligation of, claims on or interests in our Bank, the Book Running Lead Managers or the Syndicate Member. Our Bank has not participated in any offer of any P-Notes, or in the establishment of the terms of any P-Notes, or in the preparation of any disclosure related to the P-Notes. Any P-Notes that may be offered are issued by, and are the sole obligations of, third parties that are unrelated to our Bank, the Book Running Lead Managers or the Syndicate Member. Our Bank, the Book Running Lead Managers and the Syndicate Member do not make any recommendation as to any investment in P-Notes and do not accept any responsibility whatsoever in connection with the P-Notes. Any P-Notes that may be issued are not securities of the Book Running Lead Managers or the Syndicate Member and do not constitute any obligations of or claims on the Book Running Lead Managers or the Syndicate Member. Affiliates of the Book Running Lead Managers that are registered as FIIs may purchase, to the extent permissible under law, the Equity Shares offered in the Issue, and may issue P-Notes in respect thereof. Prospective investors interested in purchasing any P-Notes have the responsibility to obtain adequate

disclosures as to the issuer(s) of such P-Notes and the terms and conditions of any such P-Notes from the issuer(s) of such P-Notes. Neither SEBI nor any other regulatory authority has reviewed or approved any P-

Notes or any disclosure related thereto. Prospective investors are urged to consult their own financial, legal,

accounting and tax advisors regarding any contemplated investment in P-Notes, including whether P-Notes

are issued in compliance with applicable laws and regulations.

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DISCLAIMER CLAUSE As required, a copy of this Preliminary Offer Document has been delivered to SEBI and the Stock Exchanges. The SEBI and the Stock Exchanges do not in any manner: (1) warrant, certify or endorse the correctness or completeness of the contents of this Preliminary Offer

Document; (2) warrant that the Equity Shares issued pursuant to the Issue will be listed or the Equity Shares will continue

to be listed on the Stock Exchanges; or (3) take any responsibility for the financial or other soundness of our Bank, our Promoter, our management or

any scheme or project of our Bank. It should not for any reason be deemed or construed to mean that this Preliminary Offer Document has been reviewed or approved by SEBI or the Stock Exchanges. Every person who desires to apply for or otherwise acquire any Equity Shares offered in the Issue may do so pursuant to an independent inquiry, investigation and analysis and shall not have any claim against SEBI and the Stock Exchanges whatsoever, by reason of any loss which may be suffered by such person consequent to or in connection with, such subscription/acquisition, whether by reason of anything stated or omitted to be stated herein, or for any other reason whatsoever.

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

In this Preliminary Offer Document, unless the context otherwise indicates or implies, references to ‘you’, ‘your’, ‘offeree’, ‘purchaser’, ‘subscriber’, ‘recipient’, ‘investors’, ‘prospective investors’ and ‘potential investor’ are to the prospective investors in the Issue, references to ‘the Bank’ or ‘our Bank’ are to State Bank of Mysore, and references to ‘we’, ‘us’ or ‘our’ are to State Bank of Mysore, unless otherwise specified. In this Preliminary Offer Document, all references to “Indian Rupees” and “`” are to Indian Rupees and all references to “U.S. dollars”, “USD” and “U.S.$” are to United States dollars. All references herein to the “U.S.” or the “United States” are to the United States of America and its territories and possessions and all references to “India” are to the Republic of India and its territories and possessions. The financial year of our Bank commences on April 1 of each calendar year and ends on March 31 of the succeeding calendar year, so, unless otherwise specified or if the context requires otherwise, all references to a particular ‘financial year’, ‘fiscal year’, ‘fiscal’ or ‘FY’ are to the twelve month period ended on March 31 of that year. Our Bank publishes our financial statements in Indian Rupees. The financial statements have been prepared at historical cost, convention unless otherwise stated. Our Bank’s audited financial statements included herein have been prepared in accordance with Indian GAAP, Subsidiary Banks Act, and guidelines issued by Reserve bank of India and guidance notes issued by Institute of Chartered Accountants of India and the practices prevalent in the banking industry in India. Unless otherwise indicated, all financial data in this Preliminary Offer Document are derived from our Bank’s audited financial statements prepared in accordance with Indian GAAP. Indian GAAP differs in certain significant respects from International Financial Reporting Standards (“IFRS”) and U.S. GAAP and accordingly, the degree to which the financial statements prepared in accordance with Indian GAAP included in this Preliminary Offer Document will provide meaningful information is entirely dependent on the reader’s familiarity with the respective accounting policies. Our Bank does not provide a reconciliation of its financial statements to IFRS or U.S. GAAP financial statements. The audited financial statements of our Bank for the FY ended March 31, 2013, 2012 and 2011 prepared in accordance with Indian GAAP, are included in this Preliminary Offer Document and are referred to herein as the “Financial Statements”. In this Preliminary Offer Document, certain monetary thresholds have been subjected to rounding off adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

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INDUSTRY AND MARKET DATA Information regarding market position, growth rates and other industry data pertaining to the business of our Bank contained in this Preliminary Offer Document consists of estimates based on data reports compiled by government bodies, data from other external sources and knowledge of the markets in which our Bank functions. Unless stated otherwise, the statistical information included in this Preliminary Offer Document relating to the industry in which our Bank operates has been reproduced from various trade, industry and government publications and websites. This data is subject to change and cannot be verified with certainty due to limits on the availability and reliability of the raw data and other limitations and uncertainties inherent in any statistical survey. Neither our Bank nor the Book Running Lead Managers nor the Syndicate Member have independently verified this data and do not make any representation regarding the accuracy of such data. Our Bank takes responsibility for accurately reproducing such information but accepts no further responsibility in respect of such information and data. In many cases, there is no readily available external information (whether from trade or industry associations, government bodies or other organizations) to validate market-related analysis and estimates, so our Bank has relied on internally developed estimates. Similarly, while our Bank believes our internal estimates to be reasonable, such estimates have not been verified by any independent sources and neither our Bank nor the Book Running Lead Managers nor the Syndicate Member can assure potential investors as to their accuracy.

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FORWARD-LOOKING STATEMENTS

Certain statements contained in this Preliminary Offer Document that are not statements of historical fact constitute ‘forward-looking statements’. Investors can generally identify forward-looking statements by terminology such as ‘aim’, ‘anticipate’, ‘believe’, ‘continue’, ‘can’, ‘could’, ‘estimate’, ‘expect’, ‘intend’, ‘may’, ‘objective’, ‘plan’, ‘potential’, ‘project’, ‘pursue’, ‘shall’, ‘should’, ‘will’, ‘would’, or other words or phrases of similar import. Similarly, statements that describe the strategies, objectives, plans or goals of our Bank are also forward-looking statements. However, these are not the exclusive means of identifying forward-looking statements. All statements regarding our Bank’s expected financial conditions, results of operations, business plans and prospects are forward-looking statements. These forward-looking statements include statements as to our Bank’s business strategy, income and profitability (including, without limitation, any financial or operating projections or forecasts), new business and other matters discussed in this Preliminary Offer Document that are not historical facts. Actual results may differ materially from those suggested by the forward-looking statements due to certain known or unknown risks or uncertainties associated with management’s expectations with respect to, but not limited to, the actual growth in demand for banking and other financial products and services, the management’s ability to successfully implement our strategy, future levels of impaired loans, our Bank’s growth and expansion, the adequacy of our Bank’s allowance for credit and investment losses, technological changes, investment income, our Bank’s ability to market new products, cash flow projections, the outcome of any legal or regulatory proceedings our Bank is or may become a party to, the future impact of new accounting standards, management’s ability to implement our dividend policy, the impact of Indian banking regulations on it, our Bank’s ability to roll over our short-term funding sources, our Bank’s exposure to market risks and the market acceptance of and demand for internet banking services. By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains, losses or impact on net interest income and net income could materially differ from those that have been estimated. Factors that could cause actual results, performance or achievements of our Bank to differ materially include, but are not limited to, those discussed under the sections titled “Risk Factors”, “Industry Overview”, “Business

Overview” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

The forward-looking statements contained in this Preliminary Offer Document are based on the beliefs of management, as well as the assumptions made by, and information currently available to, management of our Bank. Although our Bank believes that the expectations reflected in such forward-looking statements are reasonable at this time, it cannot assure investors that such expectations will prove to be correct. Given these uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements. In any event, these statements speak only as of the date of this Preliminary Offer Document or the respective dates indicated in this Preliminary Offer Document, and our Bank undertakes no obligation to update or revise any of them, whether as a result of new information, future events or otherwise. If any of these risks and uncertainties materialize, or if any of our Bank’s underlying assumptions prove to be incorrect, the actual results of operations or financial condition of our Bank could differ materially from that described herein as anticipated, believed, estimated or expected. All subsequent forward-looking statements attributable to our Bank are expressly qualified in their entirety by reference to these cautionary statements.

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EXCHANGE RATES Fluctuations in the exchange rate between the Rupee and foreign currencies will affect the foreign currency equivalent of the Rupee price of the Equity Shares on the Stock Exchanges. These fluctuations will also affect the conversion into foreign currencies of any cash dividends paid in Rupees on the Equity Shares. The following table sets forth information concerning exchange rates between the Rupee and the U.S. dollar for the periods indicated. Exchange rates are based on the reference rates released by RBI, which are available on the website of RBI. No representation is made that any Rupee amounts could have been, or could be, converted into U.S. dollars at any particular rate, the rates stated below, or at all. On May 10, 2013, the exchange rate (RBI reference rate) was ` 54.54 to U.S. $ 1.00 (Source: http://www.rbi.org.in).

Period End Average #* High * Low *

Financial Year

2013 March 31, 2013 54.45 57.22 50.56

2012 March 31, 2012 47.95 54.24 43.95

2011 March 31, 2011 45.58 47.57 44.03

# Average official rate for each working day of the relevant period. * Note: High, low and average are based on the RBI reference rate

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ENFORCEMENT OF CIVIL LIABILITIES

All directors and executive officers of our Bank named herein are residents of India and a substantial portion of the assets of such persons are located in India. As a result, it may be difficult for investors to effect service of process upon our Bank or such persons outside India or to enforce judgments obtained against such parties in courts outside of India. Recognition and enforcement of foreign judgments is provided for under Section 13 and Section 44A of the Code of Civil Procedure, 1908 (the “Civil Code”) on a statutory basis. Section 13 of the Civil Code provides that a foreign judgment shall be conclusive regarding any matter directly adjudicated upon except: (i) where the judgment has not been pronounced by a court of competent jurisdiction, (ii) where the judgment has not been given on the merits of the case, (iii) where it appears on the face of the proceedings that the judgment is founded on an incorrect view of international law or a refusal to recognize the law of India in cases in which such law is applicable, (iv) where the proceedings in which the judgment was obtained were opposed to natural justice, (v) where the judgment has been obtained by fraud, and (vi) where the judgment sustains a claim founded on a breach of any law in force in India. India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments. However, Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a superior court within the meaning of that section in any country or territory outside India which the Government has by notification declared to be a reciprocating territory, it may be enforced in India by proceedings in execution as if the judgment had been rendered by the relevant court in India. However, Section 44A of the Civil Code is applicable only to monetary decrees not being in the nature of any amounts payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty and does not include arbitration awards. The United Kingdom, Singapore and Hong Kong have been declared by the Government to be a reciprocating territory but the United States has not been so declared. A judgment of a court in a jurisdiction which is not a reciprocating territory may be enforced only by a fresh suit upon the judgment and not by proceedings in execution. The suit must be brought in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of damages awarded as excessive or inconsistent with Indian practice or public policy. A party seeking to enforce a foreign judgment in India is required to obtain approval from RBI to repatriate outside India any amount recovered pursuant to the execution of such judgment and any such amount may be subject to income tax in accordance with applicable laws.

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DEFINITIONS AND ABBREVIATIONS

This Preliminary Offer Document uses the definitions and abbreviations set forth below which you should consider when reading the information contained herein. References to any legislation, act or regulation shall be to such term as amended from time to time.

CONVENTIONAL/ GENERAL TERMS

Term Description

Associate Banks State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore.

Auditors The Central Statutory Auditors of our Bank, being: 1. Bhasin Raghavan & Co., Chartered Accountants; 2. K.P. Rao & Co, Chartered Accountants; 3. B.L. Ajmera & Co., Chartered Accountants; 4. M.K.P.S & Associates, Chartered Accountants; 5. Maharaj N.R. Suresh and Co., Chartered Accountants and 6. Bubber Jindal & Co., Chartered Accountants

Board The Board of Directors of our Bank or any committee authorized to act on its behalf.

Chairman The Chairman of our Bank

Companies Act The Companies Act, 1956, as amended from time to time.

Depository A depository registered with SEBI under the SEBI (Depository and Participant) Regulations, 1996, as amended from time to time.

ISIN International Securities Identification Number allotted by a depository.

ICDR Regulations/ SEBI Regulations

SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 and subsequent amendments thereto.

Insurance Companies Insurance companies registered with the Insurance Regulatory and Development Authority in India

Mutual Funds Mutual funds registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996, as amended

Promoter The Promoter of our Bank, being State Bank of India.

Promoter Group The promoter group of our Bank as determined in terms of Regulation 2 (1) (zb) of ICDR Regulations.

RRB Regional Rural Bank.

Subsidiary Banks Act The State Bank of India (Subsidiary Banks) Act, 1959 as amended.

“We”, “us”, “our”, “the Issuer”, “the Bank”, “our Bank”, “State Bank of Mysore” or “SBM”

Unless the context otherwise indicates or implies, refers to State Bank of Mysore, a bank constituted under the State Bank of India (Subsidiary Banks) Act, 1959.

ISSUE RELATED TERMS

Term Description

Allocation or Allocated Allocation of the Equity Shares offered in the Issue following the determination of the Issue Price to Applicants on the basis of the ASBA Applications submitted by them and in accordance with the Allotment Criteria.

Allotment or Allotted or Allot

Unless the context otherwise requires, the issue and allotment of the Equity Shares.

Allottees QIBs to whom the Equity Shares are Allotted.

Allotment Criteria The method as finalised by our Bank based on which the Equity Shares offered in the Issue will be Allocated and Allotted to successful Applicants, in this case being the proportionate method.

Applicant

A QIB that submits an ASBA Application in accordance with the provisions of this Preliminary Offer Document.

Application Amount

The highest value indicated by the Applicant in the ASBA Application to subscribe for the Equity Shares applied for in the ASBA Application.

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Term Description

ASBA Application supported by blocked amount

ASBA Application

A bid- cum- application by an Applicant, whether physical or electronic, offering to subscribe for the Equity Shares in the Issue at any price at or above the Floor Price, including any revisions thereof, pursuant to the terms of this Preliminary Offer Document and which shall also be an authorisation to an SCSB to block the Application Amount in the ASBA Account maintained with such SCSB. The ASBA Application will also be considered as the application for Allotment for the purposes of this Preliminary Offer Document and the Offer Document. The price per Equity Share and the number of Equity Shares applied for under an ASBA Application may only be revised upwards and any downward revision in price per Equity Shares and/or the number of Equity Shares applied for under an ASBA Application or withdrawal of the ASBA Application is not permitted.

ASBA Account An account maintained with the SCSB by the Applicant and specified in the ASBA Application for blocking the Application Amount.

Basis of Allocation

The basis on which Equity Shares offered in the Issue will be Allocated to successful Applicants in the Issue and the CAN will be dispatched, as described in “Issue Procedure” on page 104.

Book Running Lead Managers (BRLMs)

The Book Running Lead Managers to the Issue, in this case being BOB Capital Markets Limited and SBI Capital Markets Limited.

SBI Capital Markets Limited is the Marketing Book Running Lead Manager and would be involved only in the marketing of the Issue.

CAN or Confirmation of Allocation Note

Note, advice or intimation sent to the Applicants who have been Allocated Equity Shares offered in the Issue, confirming the Allocation of Equity Shares to such Applicants after the determination of the Issue Price in terms of the Basis of Allocation approved by the Stock Exchanges, and shall constitute a valid, binding and irrevocable agreement on part of the Applicant to subscribe to the Equity Shares Allocated to such Applicant at the Issue Price.

Demographic Details The demographic details of an Applicant, including the address of the Applicant, the Applicants’ ASBA Account details, and PAN (as defined hereinafter) as registered with the relevant Depository.

Designated Branches Such branches of the SCSBs which shall collect the ASBA Applications and a list of which is available at http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/RecognisedIntermediaries.

Designated Date The date on which funds blocked by the SCSB are transferred from the ASBA Accounts of the successful Applicants to the Public Issue Account or unblocked, as the case may be, after the Offer Document is filed with the Stock Exchanges.

Equity Shares Equity Shares of face value of ` 10 each of our Bank.

Equity Listing Agreement The equity listing agreement entered into by our Bank with each of the Stock Exchanges.

Floor Price

The price below which the Issue Price will not be finalised and the Equity Shares offered in the Issue shall not be Allotted. The Floor Price will be decided by our Bank in consultation with BOBCAPs in accordance with the SEBI letter, if applicable, and shall be announced at least one day prior to the Issue Opening Date. Any ASBA Application made at a price per Equity Share below the Floor Price will be rejected. For further details, please refer to “Issue Procedure-

SEBI Letter” on page 104.

Floor Price Announcement The announcement of the Floor Price, made by our Bank at least one day prior to the Issue Opening Date.

Institutional Placement Programme or IPP

Institutional placement programme in which offer, allocation and allotment of Equity Shares is made in accordance with under Chapter VIII-A of the ICDR Regulations and in accordance with SEBI Letter, if applicable.

Issue Issue of 12,13,630 Equity Shares at a price of ` [●] per Equity Share.

Issue and Placement Agreement The issue and placement agreement dated May 14, 2013, among our Bank and the Book Running Lead Managers in relation to the Issue.

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Term Description

Issue Closing Date The last date up to which the ASBA Applications shall be accepted, which date shall be announced along with the Floor Price Announcement.

Issue Opening Date The date on which the Designated Branches and the members of the Syndicate will start accepting the ASBA Applications, which date shall be announced along with the Floor Price Announcement.

Issue Period The period between the Issue Opening Date and Issue Closing Date, inclusive of both dates during which QIBs can submit their ASBA Applications to the SCSBs and the members of the Syndicate (in the Specified Cities).

Issue Price

The price at which the Equity Shares offered in the Issue will be Allotted to the successful Applicants, and indicated in the CAN, which shall be equal to or greater than the Floor Price, decided in accordance with the SEBI Letter, if applicable.

Issue Size The aggregate size of the Issue, comprising of 12,13,630 Equity Shares

Offer Document The offer document to be filed with SEBI and the Stock Exchanges in accordance with the provisions of the ICDR Regulations, containing, inter alia, the Issue Size, the Issue Price and certain other information.

Preliminary Offer Document

This preliminary offer document issued in accordance with the provisions of the ICDR Regulations, which does not have complete particulars of the price at which the Equity Shares are offered in the Issue and the size of the Issue filed with SEBI and the Stock Exchanges.

Pricing Date

The date on which our Bank in consultation with BOBCAPS finalises the Issue Price.

Public Issue Account

The account opened with the Public Issue Account Bank in terms of ICDR Regulations to receive monies from the ASBA Accounts on the Designated Date.

Public Issue Account Bank

The bank which is clearing member and registered with SEBI as a bankers to the Issue with whom the Public Issue Account will be opened and in this case being State Bank of Mysore.

Public Issue Account Agreement

Public Issue Account agreement dated May 14, 2013 among our Bank, BRLMs, Syndicate Member, the Registrar to the Issue and Public Issue Account Bank.

QIB or Qualified Institutional Buyer

A qualified institutional buyer, as defined under Regulation 2(1)(zd) of the ICDR Regulations.

Registrar to the Issue Integrated Enterprises (India) Limited

Revision Form The form used by the Applicants, to modify the number of Equity Shares applied for or the price per Equity Share in any of their ASBA Applications or any previous Revision Form(s). Applicants are not allowed to revise downwards the price per Equity Share or the number of Equity Shares applied for.

SEBI Letter The SEBI letter dated March 13, 2013 in relation to, inter-alia: (i) minimum

number of investors required; (ii) filing of Offer Document with Registrar of

Companies etc; Please see “Issue Procedure – SEBI Letter” on page 104 Self Certified Syndicate Bank(s) or SCSB(s)

A banker to the issue registered with SEBI, which offers the facility of ASBA and a list of which is available at http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/RecognisedIntermediaries.

Specified Cities

Cities as specified by the SEBI namely, Mumbai, Chennai, Kolkata, Delhi, Ahmedabad, Rajkot, Jaipur, Bangalore, Hyderabad, Pune, Baroda and Surat.

Stock Exchanges The BSE Limited (BSE), The National Stock Exchange of India Limited (NSE), Madras Stock Exchange Limited (MSE), and Bangalore Stock Exchange Limited (BgSE).

Syndicate ASBA Bidding Centre

Centre(s) in the Specified Cities where the Applicants can submit their ASBA Applications with the Syndicate.

Syndicate or members of the Syndicate

The Book Running Lead Managers and the Syndicate Member.

Syndicate Agreement

The agreement dated May 14, 2013 among the Syndicate and our Bank in relation to the Issue.

Syndicate Member SBICAP Securities Limited

TRS or Transaction Registration The slip or document issued by a member of the Syndicate or the SCSB (only on

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Term Description

Slip

demand), as the case may be, to the Applicant as proof of registration of the ASBA Application.

Working Day

Any day, other than Saturdays and Sundays, on which commercial banks in Mumbai are open for business, provided however, for the purpose of the time period between the Issue Closing Date and listing of the Equity Shares offered pursuant to the Issue on the Stock Exchanges, “Working Days”, shall mean all days excluding Sundays and bank holidays in Mumbai in accordance with the SEBI Circular no. CIR/CFD/DIL/3/2010 dated April 22, 2010.

ABBREVIATIONS

Term Description

AY Assessment Year

AGM Annual General Meeting

AS Accounting Standards as issued by The Institute of Chartered Accountants of India

BG Bank Guarantee

BOBCAPS BOB Capital Markets Limited

BgSE The Bangalore Stock Exchange Limited

BSE BSE Limited

CDSL Central Depository Services (India) Limited

DEMAT Dematerialized (Electronic/Depository as the context may be)

DP Depository Participant

EGM Extra-Ordinary General Meeting

FDI Foreign Direct Investment

FEMA Foreign Exchange Management Act, 1999 and the subsequent amendments thereto

FII Foreign Institutional Investor [as defined under FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000] registered with SEBI

FIPB Foreign Investment Promotion Board

FY Financial Year

GOI / Government Government of India

HUF Hindu Undivided Family

IT Income-Tax Act, 1961

ITAT Income Tax Appellate Tribunal

MIS Management Information System

MSE Madras Stock Exchange Limited

NABARD National Bank for Agriculture and Rural Development

NR Non Resident

NRI Non Resident Indian

NSDL National Securities Depository Limited

NSE National Stock Exchange of India Limited

PAN/GIR No. Income Tax Permanent Account Number/General Index Reference Number

RBI Reserve Bank of India

SBI State Bank of India

SBICAP SBI Capital Markets Limited

SEBI Securities and Exchange Board of India

SEBI (SAST) Regulations, 2011 SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and subsequent amendments thereto

SIDBI Small Industries Development Bank of India

ST Service Tax

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TECHNICAL AND INDUSTRY TERMS AND ABBREVIATIONS

Term Description

Act Income Tax Act, 1961.

AFS Available for sale

ANBC Adjusted Net Bank Credit

ATMs Automated Teller Machines

Basel II Revised framework on “International Convergence of Capital Measurement and Capital Standards” by Bank for International Settlements

Basel III A global regulatory framework for more resilient banks and banking systems (December 2010 (rev. June 2011)) published by Bank for International Settlements

BCBS Basel Committee on Banking Supervision

BHC Bank Holding Company

BIFR Board for Industrial and Financial Reconstruction

CAIIB Certified Associate of Indian Institute of Bankers

CAR Capital Adequacy Ratio

CARE Credit Analysis and Research Limited

CASA Current and Savings Account

CBS Core Banking Solutions

CCB Capital Conversion Buffer

CDR Corporate Debt Restructuring

CGTMSE Credit Guarantee Fund Trust for Micro And Small Enterprises

CRA / CRAR Capital to Risk Weighted Assets Ratio

CRISIL Credit Rating Information Services of India Limited

CRR Cash Reserve Ratio

CTS Cheque Truncation System

DBOD Department of Banking Operations and Development

DICGC Deposit Insurance and Credit Guarantee Corporation

DRT Debts Recovery Tribunal

ECGC Export Credit and Guarantee Corporation of India Ltd

EPS Earnings Per Share

FCNR (Account) Foreign Currency Non Resident (Account)

FCNR (Banks) Foreign Currency Non Resident (Banks)

FHC Financial Holding Company

FITL Funded Interest Term Loan

FSLRC Financial Sector Legislative Reforms Commission

GAAP Generally Accepted Accounting Principles

GBP Great Britain Pound

GDP Gross Domestic Product

HFT Held for trading

HTM Held to Maturity

ICRA ICRA Limited

IRDA Insurance Regulatory and Development Authority

KYC Know Your Customer Norms as stipulated by the Reserve Bank of India

KSBCL Karnataka State Beverages Corporation Limited

LAF Liquidity Adjustment Facility

LIC Life Insurance Corporation of India

LIBOR London Interbank Offered Rate

MICR Magnetic Ink Character Recognisation

MOU Memorandum of Understanding

MSF Marginal Standing Facility

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Term Description

MSME Micro Small and Medium Enterprises.

NBFCs Non-Banking Finance Companies

NDTL Net Demand and Time Liabilities

NPA Non-Performing Asset

NEFT National Electronic Fund Transfer

PCFC Pre-shipment Credit in Foreign Currency

R&D Research & Development

RBI Reserve Bank of India

Repatriation “Investment on repatriation basis” means an investment the sale proceeds of which are, net of taxes, eligible to be repatriated out of India, and the expression ‘Investment on non-repatriation basis’, shall be construed accordingly.

RIDF Rural Infrastructure Development Fund

RTGS Real Time Gross Settlement

RWAs Risk Weighted Assets

SARFAESI Act 2002 /Securitisation Act

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002, as amended

SLM Straight Line Method

SLR Statutory Liquidity Ratio

SMEs Small & Medium Enterprises

SSI Small Scale Industries

SWIFT Society for Worldwide Interbank Financial Telecommunication

The Banking Regulation Act The Banking Regulation Act, 1949 and subsequent amendments thereto.

Tier I Capital The core capital of a bank, which provides the most permanent and readily available support against unexpected losses. It comprises paid-up capital and reserves consisting of any statutory reserves, free reserves and capital reserves as reduced by 50% of equity investments in subsidiaries, deferred tax assets, and losses in the current period and those brought forward from the previous period

Tier II Capital The undisclosed reserves and cumulative perpetual preference shares, revaluation reserves, general provisions and loss reserves, hybrid debt capital instruments, investment fluctuation reserves and subordinated debt, as reduced by 50% of equity investments in subsidiaries.

Tier 1 centres Centres with population of 1,00,000 and above as per 2001 Census

Tier 2 to Tier 6 centres Centres with population upto 99,999 as per 2001 Census

USD US Dollar

WDV Written down value

WPI Wholesale Price Index

WTO World Trade Organisation

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SUMMARY OF OUR BUSINESS

Our Bank is one of the leading Public Sector scheduled commercial banks in Karnataka and offers a wide range of products and services to Retail and Corporate customers through a variety of delivery channels. In 100 years of our operations, we have significantly grown our branch network with a presence predominantly in South India especially Karnataka. We are a subsidiary of State Bank of India, India’s largest commercial bank who holds 92.33% of our equity capital. As on March 31, 2013, our network comprised of 780 branches and 853 ATMs across India. We are also the sponsors of Kaveri Grameena Bank, a RRB having presence in 10 districts of Karnataka with a network of 334 branches as on March 31, 2013. As on March 31, 2013, we had a total of 10,784 employees, serving over 62.89 lakh customers. We have three main business lines:

• Corporate/Wholesale Banking

• Retail Banking

• Treasury Operations We offer various corporate/wholesale banking products and services to our trade and corporate customers, including project finance, term loans, short term loans, cash credit, working capital finance, export credit, bill discounting, line of credit, letters of credit and guarantees. Our retail banking portfolio consists of Savings Bank, Current Account and Term Deposit services, retail lending for Housing, Gold Loan, Vehicle, Education, MSME lending, Agriculture and other personal loans, and other personal banking products. We offer our customers a suite of technological products, including global debit cards, “anywhere banking” facilities, mobile banking, RTGS, NEFT and Internet banking. We distribute third-party products such as life and non-life insurance policies through corporate agency agreements with SBI Life Insurance Company Limited and SBI General Insurance Company Limited, respectively, and mutual funds with SBI Funds Management Private Limited through a distribution agreement. We have entered into agreement for sourcing the applications for SBI Credit Cards. We also act as an agent for various State Governments and the Central Government on numerous matters including the collection of taxes and payment of salary and pension including pensions under New Pension Scheme. Our treasury operations comprise liquidity management by seeking to maintain an optimum level of liquidity, while complying with the CRR and the SLR, monitoring and implementation of non-SLR investments of our Bank. We maintain the SLR through a portfolio of Central Government, State Government and Government-guaranteed securities that we actively manage to optimize yield and benefit from price movements. We are also involved in the trading of debt securities, equity securities and foreign exchange within permissible limits. Our total advances aggregated to ` 44,932.57 crores, ` 39,835.31 crores and ` 34,029.81 crores, and our total assets were ` 67,232.76 crores, ` 60,403.57crores and ` 52,032.46 crores as of March 31, 2013, March 31, 2012 and March 31, 2011 respectively. Our total deposits aggregated ` 56,969.05 crores, ` 50,186.30 crores and ` 43,225.47 crores and our total borrowings were ` 3,854.20 crores, ` 4,425.59 crores and ` 3,307.95 crores as of March 31, 2013, March 31, 2012 and March 31, 2011 respectively. Our total income grew to ` 6,561.07 crores in FY 2013 from ` 5,594.83 crores in FY 2012, representing an increase of 17.27%. Our net profit (after tax) increased to ` 416.10 crores in FY 2013 from ` 369.15 crores in FY 2012, representing an increase of 12.72%.

21

COMPETITIVE STRENGTHS We believe that our success can be attributed to a combination of the following competitive strengths:

100 years of banking experience and established relationships with customers With 100 years of banking experience, we believe to have built strong relationships with customers including Central and State Governments as well as public sector enterprises, which has been one of the drivers of our growth. For instance, we act as an agent for various State Governments and Central Government on numerous matters including the collection of taxes and payment of salary and pension including New Pension Scheme. We are the lead bank in three districts of Karnataka i.e., Mysore, Tumkur and Chamarajanagar. In addition, we handle a significant volume of the banking requirements for India’s public sector enterprises. As on March 31, 2013, 7.01% of our loan portfolio consisted of loans to public sector undertakings. We have earned a commission of ` 67.95 crores during FY 2013 from government business. During the FY 2013, we handled about 77% of Government of Karnataka’s transactions.

Strong presence in Karnataka and Other South Indian States We have a presence predominantly in South India with 715 branch offices in South India out of which 641 branches are in the state of Karnataka. We believe that Karnataka and other South Indian states are rich in resources and provide higher opportunity for resource mobilization. Specifically, Karnataka houses rich mining belts and also has a strong manufacturing and agricultural background which we believe can enable us to enhance our return from our advances. Additionally, we have a wide distribution of 242 branches in the rural areas of South Indian states which provide us an edge in our priority sector banking due to its rich agricultural resources and a large catchment area for low cost deposits. We are also known as “Mysore Bank” and “My Bank” in Karnataka. Favourable financial position Our total income grew to ` 6,561.07 crores in FY 2013 from ` 5,594.83 crores in FY 2012, representing an increase of 17.27%, and our net profit (after tax) grew to ` 416.10 crores in FY 2013 from ` 369.15 crores in FY 2012, representing an increase of 12.72%. Further, for the FY 2013, we reported an expense-to-income ratio of 46.27% and a net interest margin of 3.22% as compared to expense-to-income ratio of 49.55% and a net interest margin of 3.16% for FY 2012. The credit-deposit ratio of our Bank decreased to 80.71% as at March 31, 2013 from 81.87% as at March 31, 2012. As of March 31, 2013, our CRAR was 11.79% as per Basel II, well above the 9.00% minimum required by RBI. Our capital position, as measured by our overall and Tier I capital adequacy ratios, allows us to take advantage of significant growth opportunities in the market. Technology driven approach

Over the past several years, we have devoted substantial resources to achieve seamless integration of our people, processes, data and applications. We have increased our delivery channels through a network of 780 branches, internet banking, mobile banking and 853 ATMs as of March 31, 2013. We have networked all our branches and offices to facilitate Core Banking Solution (“CBS”). We use CBS to centralize the processing of transactions. It allows our customers to operate their accounts from remote locations and use banking services from any of our service outlets, regardless of where our customers maintain their accounts. With the CBS platform, we have been able to implement a variety of IT-enabled services, such as “anywhere banking”, M-Commerce, Interbank Mobile Payment System, RTGS and NEFT. All of our branches are RTGS and NEFT enabled. All the branches of our Bank and RRB sponsored by us are on CBS platform. Additionally, we have established a data centre in Belapur in Navi Mumbai, Maharashtra and a disaster recovery centre in Chennai, Tamil Nadu as part of a business continuity plan in the event of technological problems or disasters. We also make effective use of IT platform to monitor NPAs/ standard assets and take action in a timely manner to avoid slippage of asset quality.

22

Strong Parentage of State Bank of India We are a subsidiary of State Bank of India, India’s largest commercial bank. State Bank of India currently holds 92.33% of our equity share capital. SBI as parent helps in achieving various operational and managerial synergies. We share the SBI logo, which gives us visibility because of strong presence of SBI. Further, we have entered into MOUs for sharing of various technologies for the functioning of our various banking activities. We also draw our various critical policies in line with our parent bank’s policies.

OUR BUSINESS STRATEGIES The key elements for our business strategies going forward are:

To increase CASA deposits and expand our retail banking operations:

We seek to increase our CASA deposits in order to reduce cost of funds and improve our core capital. In order to attract retail customers and increase our CASA deposits, we intend to promote our Bank through marketing campaigns and the introduction of new products. We believe that the implementation of CBS, internet and mobile banking systems and ongoing installation of new ATMs will enable us to increase our customer base, thereby increasing CASA deposits. We aim to focus on increasing the share of retail loans in total advances by leveraging our branch network for sourcing retail loans, expanding the distribution network for retail assets and diversifying our retail loan product portfolio. As a part of our strategy to attract more deposits, we have introduced savings bank accounts with accident insurance policy for ` 4.00 lakhs at a nominal annual premium of ` 100. Our Bank continues to invest in building risk management and analytical capabilities to mitigate risks and drive cross-selling opportunities and profitability of our retail loan products.

Increase number of branches and market share

We seek to leverage our strong brand recall, especially in Southern India, and to expand our presence across other geographies in India. We intend to increase our branch network and infrastructure across India and gain a larger pan-India market share in terms of advances and deposits. Working toward this goal, we plan, and have received approval from our Board of Directors, to open 187 new branches which will increase our branch network from 780 branches as on March 31, 2013 to 967 branches. Of these 187 branches, we plan to open 98 branches in Tier 1 centers (to open branches in Tier 1 centers, require the approval of RBI, which we have applied for), and the remaining 89 branches are planned for Tier 2 to Tier 6 centers (for these branches, the approval of RBI is not required). We will continue to focus on improving our technology to support our network of branches. We also plan to increase our total number of ATMs by installing an additional 115 ATMs by March 31, 2014, to provide easy accessibility to our customers. In addition, we seek to increase our market share in the rural and semi-urban areas by appointing business correspondents and through other financial inclusion initiatives. Our Bank is in the process of setting up two new zones at Mangalore and Belgaum.

To accelerate growth in the MSME Segment

Although we have achieved significant growth in advances to the corporate sector over the last three fiscals, we seek to continue to increase our market share, credit portfolio and NIM in the corporate banking segment, by expanding and improving our distribution network and infrastructure, expanding and strengthening our relationships, especially with MSMEs and by further developing our existing product offerings, processes and distribution channels. As part of this strategy, we also intend to maintain and enhance our franchise in the MSME Segment. For instance, we have formulated a code of commitment to MSMEs, under which we have constituted centres for redressal of grievances of MSMEs. We have also launched a debt restructuring mechanism for MSMEs for improving flow of credit to MSMEs. Our Bank also continues to extend collateral free financial assistance to Micro and Small Enterprises by participating in Credit Guarantee Scheme of CGTMSE.

23

Focus on NRI customer base:

We intend to increase our NRI deposit base. We have established a NRI cell within our Bank to provide dedicated services to our NRI customers. Our Bank is having foreign currency remittance arrangement with 21 major banks around the globe which enables NRIs to easily make remittances to their accounts in India. We have initiated process for collecting the data pertaining to NRIs to enable us to contact them and understand their banking requirements. The NRI cell extends support to our branches in NRI related matters and closely monitors the growth of our NRI business. We intend to conduct NRI customers meet and NRI deposit campaigns at NRI intensive centres or any potential centres. We plan to open NRI specialized branches at Bangalore, Chennai, Mumbai and Kerala. Focus on cross-selling and expand fee income through diverse sources

Over the years, we have developed a large number of corporate relationships as well as retail.We now plan to leverage these relationships by selling to the corporate segment, products offered to other business segments such as the savings bank account and investment products. We intend to diversify revenue sources and increase overall revenue by expanding our product and service offerings; particularly fee based and commission based offerings, which will enable our Bank to advise and cross-sell third-party products, such as insurance and mutual funds, to high-net worth customers.

Continuously update our information technology systems and increase efficiency We strongly believe that technology has driven products and services in the banking industry, and we have devoted substantial resources to achieve seamless integration of our people, processes, data and applications. Information technology is a strategic tool for our business operations to gain a competitive advantage. All of our technology initiatives are aimed at enhancing value, offering customer convenience and improving service levels, while optimizing costs. We believe that our initiatives to implement new technology and automation have resulted in improved productivity and efficiency in our organization with particular reference to our employees. Our business (deposits plus advances) per employee has increased to ` 9.55 crores for FY 2013 from ` 8.81 crores for the FY 2012. We believe these improvements are due, in part, to our technology initiatives. We intend to continue to implement new technology as it becomes available and continuously upgrade the skills of our employees through training. We expect to continue our policy of making investments in technology and as such enhance our productivity per employee, while providing customer-centric solutions.

Enhancing our Alternate Delivery Channels:

We strongly believe that customer satisfaction is the key to growth. We have to continuously update our systems and procedures to meet the ever evolving customer need for seamless banking experience. Apart from being user friendly, these channels have a huge growth potential. We have seen a growth in number of users for our ATMs, internet banking and mobile banking services. We intend to increase the user base for our alternate delivery channels. Further, we have also introduced four cash deposit machines, 40 self service kiosk and 300 green channel counters at selected branches. We plan to increase the reach of these alternate channels by installing 30 more cash deposit machines, 10 more self service kiosk and 200 more green channel counters in FY 2014. We have also started merchant acquiring business for facilitation of payment through debit or credit card at retail outlets. The current account of the merchant is maintained with our Bank and sale proceeds are routed through the current account. We also earn commission from the merchant. We plan to install 2000 such machines in FY 2014.

24

SUMMARY OF THE ISSUE

This summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information appearing elsewhere in this Preliminary Offer Document, including in “Risk Factors”, “Use of Proceeds”, “Placement” and “Issue Procedure” on pages 28, 47, 121 and 104 respectively. The following is a general summary of the terms of the Issue:

Issuer State Bank of Mysore

Issue Size 12,13,630 Equity Shares.

Issue Price The price at which the Equity Shares offered in the Issue will be Allotted to the successful Applicants in terms of SEBI Letter, if applicable, the Basis of Allocation, Allotment Criteria and the CAN. Please see “Issue Procedure” on page 104.

Eligible Investors QIBs

Class of Equity Shares

The Equity Shares offered in the Issue are securities of our Bank of the same class and in all respects uniform with the Equity Shares listed and traded on the Stock Exchanges.

Equity Shares issued and

outstanding immediately

prior to the Issue

4,67,99,790 Equity Shares of ` 10 each.

Equity Shares issued and

outstanding immediately after the Issue

4,80,13,420 Equity Shares of ` 10 each.

Floor Price*

The price below which the Issue Price will not be finalised and the Equity Shares offered in the Issue shall not be Allotted. The Floor Price will be decided by our Bank in consultation with BOBCAPs in accordance with the SEBI letter, if applicable, and shall be announced at least one day prior to the Issue Opening Date. Any ASBA Application made at a price per Equity Share below the Floor Price will be rejected.

Listing

(i) Applications for in-principle approval, in terms of clause 24(a) of the Equity Listing Agreement, for listing and admission of the Equity Shares offered in the Issue and for trading on the Stock Exchanges, were made and approval has been received from each of the Stock Exchanges vide their letter dated May 14, 2013 respectively; and (ii) the application for the final listing and trading approval will be made after Allotment.

Lock- up Our Bank has agreed, subject to certain exceptions, not to issue or offer, sell, contract to sell or otherwise dispose of any Equity Shares or any securities convertible, exchangeable or exercisable for Equity Shares (including any warrants), for a period of 30 days following the date of the Issue and Placement Agreement, without the prior written consent of the Book Running Lead Managers (such consent not to be unreasonably withheld).

Transferability

Restrictions

The Equity Shares Allotted shall not be sold for a period of one year from the date of Allotment, except on the Stock Exchanges. Please see “Transfer Restrictions” on page 123.

Closing The Allotment of the Equity Shares offered pursuant to this Issue is expected to be made on or about [●], 2013.

Use of Proceeds

Net Proceeds of the Issue are expected to total approximately to ` [●] crores. Please see “Use of Proceeds” on page 47.

Risk Factors

Please see “Risk Factors” on page 28 for a discussion of factors you should consider before deciding whether to subscribe for the Equity Shares offered in the Issue.

Ranking The Equity Shares being issued pursuant to the Issue shall rank pari passu in all respects with the existing Equity Shares, including rights in respect of voting and dividends.

Security Codes for the Equity Shares

ISIN: INE651A01020 BSE Code: 532200 NSE Code: MYSOREBANK

* In terms of Regulation 91H of ICDR Regulations, the minimum number of allottees shall not be less than 10

investors. However, this is subject to changes, in case our Bank in consultation with BRLMs, chooses to exercise the

option to allot to less than 10 investors in accordance with SEBI Letter.

25

SELECTED FINANCIAL INFORMATION

The following selected financial information is extracted from and should be read in conjunction with, our financial statements and notes thereto as of and for the FYs ended March 31, 2013, 2012 and 2011 which are extracted from audited financial statements of our Bank for the respective years; each included in this Preliminary Offer Document. You should refer to the section titled “Management's Discussion and Analysis of Financial Condition and Results

of Operation” on page 49 and section titled “Financial Statements” on page 149.

BALANCE SHEET OF STATE BANK OF MYSORE (`̀̀̀ in Crores)

HEAD AS ON 31-03-

2013 (AUDITED)

AS ON 31-03-

2012 (AUDITED)

AS ON 31-03-

2011 (AUDITED)

CAPITAL & LIABILITIES

Capital 46.80 46.80 46.80

Reserves & Surplus 4,285.73 3,941.73 3,636.52

Deposits 56,969.05 50,186.30 43,225.47

Borrowings 3,854.20 4,425.59 3,307.95

Other Liabilities and Provisions 2,076.98 1,803.15 1,815.72

TOTAL 67,232.76 60,403.57 52,032.46

ASSETS

Cash and Balances with Reserve Bank of India 2,404.67 3,025.85 2,705.68

Balances with Banks and Money at call and short notice 1,100.09 336.86 234.60

Investments 16,774.58 14,732.70 12,927.14

Advances 44,932.57 39,835.31 34,029.81

Fixed Assets 824.28 749.41 725

Other Assets 1,196.57 1,723.44 1,410.23

TOTAL 67,232.76 60,403.57 52,032.46

Contingent Liabilities 17,069.91 17,969.81 16,966.51

Bills for Collection 711.17 1,193.03 466.43

26

STATE BANK OF MYSORE

PROFIT AND LOSS ACCOUNT

(`̀̀̀ in Crores)

Period ended

31.03.2013

(Audited)

Year ended

31.03.2012

(Audited)

Year ended

31.03.2011

(Audited)

INCOME

Interest Earned 5,965.48 5,078.43 4,079.08

Other Income 595.59 516.40 455.18

TOTAL 6,561.07 5,594.83 4,534.26

EXPENDITURE

Interest Expended 4,125.28 3,494.14 2,443.08

Operating Expenses 1,104.76 1,041.07 917.43

Provisions and Contingencies 914.93 690.47 673.13

TOTAL 6,144.97 5,225.68 4,033.64

Net Profit for the year 416.10 369.15 500.62

Profit brought forward - - -

TOTAL 416.10 369.15 500.62

27

STATE BANK OF MYSORE - CASH FLOW STATEMENT

(`̀̀̀ in Crores)

Particulars

YEAR

ENDED31-03-2013

YEAR ENDED 31-03-2012

YEAR ENDED 31-03-2011

A CASH FLOW FROM OPERATING ACTIVITIES Net profit after Taxes 416.10 369.15 500.62 Provision for Taxes 278.98 89.01 241.51

Net profit before Taxes 695.08 458.16 742.13 ADJUSTMENT FOR Depreciation charges 47.04 50.04 49.52 Depreciation Write Back (47.32) - - Profit/Loss on sale of fixed assets 1.03 (0.05) (0.21)

0.75 49.99 49.31 Net Profit Before Depreciation,(Profit) Loss on sale of fixed assets 695.83 508.15 791.44 Provisions for NPAs 412.77 503.75 455.78 Provision for/(Written back of) Investment Depreciation (Net) 36.03 31.81 (8.89) Provision for Standard Assets 63.40 46.14 29.16 Interest paid on State Bank of MysoreBonds 113.55 113.55 113.55 Provision for Frauds - - 5.39 Provision for interest sacrifice on restructured accounts 92.74 5.23 (2.50) Provision for / (written back of) wage revision 31.00 - (51.27) Provision for / (written back of) Gratuity - - (16.83) Miscellaneous Provision 0.01 3.11 2.53

TOTAL 1,445.33 1,211.74 1,318.36

- - - LESS DIRECTTAXES (267.62) (219.32) (140.02) ADJUSTMENT FOR Increase / (Decrease) in Deposits 6,782.74 6,960.83 4,345.46 Increase / (Decrease) inBorrowings (571.38) 1,117.63 1,033.95 (Increase) / Decrease in Investments (2,041.87) (1,837.38) (1,423.84) (Increase) / Decrease in Advances (5,510.03) (6,309.24) (4,949.73) Increase / (Decrease) inOther Liabilities & Provisions 40.98 (151.64) 254.58 (Increase) / Decrease in Other Assets 515.50 (93.88) (845.52)

NET CASH PROVIDED BY THE OPERATING ACTIVITIES 393.65 678.74 (406.76)

B CASH FLOW FROM INVESTING ACTIVITIES Fixed Assets (83.66) (88.37) (58.24)

NET CASH USED IN INVESTING ACTIVITIES (83.66) (88.37) (58.24)

C CASH FLOW FROM FINANCING ACTIVITIES Share Capital - - 10.80 Share Premium - - 570.54 Interest paid on Bonds (113.55) (113.55) (113.55) Dividends Paid (54.39) (54.39) (41.98)

NET CASH PROVIDED BY FINANCING ACTIVITIES (167.94) (167.94) 425.81

D CASH AND CASH EQUIVALENTS AT THE BEGINNING OF

THE YEAR Cash in hand (including foreign currency notes and gold) 253.96 277.22 238.41 Balance with Reserve Bank of India 2,771.89 2,428.46 2,527.21 Balance with Banks and Money at Call and Short Notice 336.86 234.60 213.85

NET BALANCE 3,362.71 2,940.28 2,979.47

E

CASH AND CASH EQUIVALENTS AT THE END OF THE

YEAR Cash in hand (including foreign currency notes and gold) 245.06 253.96 277.22 Balance with Reserve Bank of India 2,159.61 2,771.89 2,428.46 Balance with Banks and Money at Call and Short Notice 1,100.09 336.86 234.60

NET BALANCE 3,504.76 3,362.71 2,940.28

28

RISK FACTORS

An investment in Equity Shares involves a high degree of risk. Prospective investors should carefully consider the

following risk factors as well as other information included in this Preliminary Offer Document prior to making any

decision as to whether or not to invest in the Equity Shares. The risks described below, which constitute all known

material risks concerning our Bank and this Issue, and any additional risks and uncertainties not presently known to

our Bank or that currently are deemed immaterial could adversely affect our Bank’s business, financial condition,

liquidity or results of operations. As a result, the trading price of the Equity Shares could decline and investors may

lose part or all of their investment.

A. Risks Relating to the Business of our Bank / Internal Risks

1. Our business could suffer if we are unable to manage our risks and control the level of our NPAs

Our net NPAs has increased to ` 1,208.75 crores in FY 2013 from ` 768.42 crores in FY 2012, which represents 2.69% and 1.93% of our net advances as of March 31, 2013 and March 31, 2012 respectively. Various factors, like a rise in unemployment levels, inflation, economic slowdown in India and other parts of the world, a sharp and sustained rise in the interest rates, developments in the Indian economy, movements in global commodity markets and exchange rates may cause an increase in the level of our NPAs and have a material adverse impact on the quality of our loan portfolio. The inability of the borrowers to repay loans due to the factors mentioned above or any other reasons may lead to increase in NPAs. As on March 31, 2013 and March 31, 2012, our gross NPAs were ` 2,080.63 crores and ` 1,502.62 crores respectively. The gross NPAs from agricultural sector accounted for 28.30% as on March 31, 2013 and 41.68% as on March 31, 2012. Although, our Bank is increasing its efforts to improve collections and to foreclose on existing impaired loans, there cannot be any assurance that we will be successful in our efforts or that the overall quality of our Bank’s loan portfolio will not deteriorate in the future. If our Bank is unsuccessful in controlling or reducing its impaired loans, or if there is a significant increase in its impaired loans, or there is deterioration in the quality of our Bank’s security, our Bank’s future financial performance could be adversely affected. This increase in provisions would adversely impact our Bank’s financial performance and the market price of our Bank’s Equity Shares.

2. Our Bank has a regional concentration in the State of Karnataka and is dependent on the economy of

Karnataka.

Our Bank has a regional concentration in Karnataka. As of March 31, 2013, approximately 82.18% of our Bank’s branches were located in the State of Karnataka. As of March 31, 2013, 58.36%, 48.84% and 66.34% of our Bank’s total business, loans and advances and deposits respectively, were derived from our operations in Karnataka. Out of the total business of our Bank in the State of Karnataka, 9.78% is derived from the agricultural sector. Our concentration in Karnataka exposes our Bank more acutely to any adverse economic and/or political circumstances in the State as compared to other public and private sector banks that have a more diversified national presence. If there is a sustained downturn in the economy of Karnataka, our Bank’s financial performance may be adversely impacted.

3. Our Bank’s business is vulnerable to interest rate risk and volatility in interest rates could adversely

affect our Bank’s net interest margin, the value of our fixed income portfolio, our income from treasury

operations, the quality of our loan portfolio and our financial performance.

The net interest margin of our Bank for FY 2013 and FY 2012 was 3.22% and 3.16% respectively. Interest rates are sensitive to many factors beyond our Bank’s control, including the RBI’s monetary policy, deregulation of the financial sector in India, domestic and international economic and political conditions and other factors. Furthermore, in the event of rising interest rates, our Bank’s borrowers may not be willing to pay correspondingly higher interest rates on their borrowings and may choose to repay/pre-pay their loans with our Bank, particularly if they are able to switch to more competitively priced loans offered by other banks. Any inability of our Bank to retain customers as a result of rising interest rates may adversely impact our Bank’s earnings in

29

future periods. Similarly, in the event of falling interest rates, our Bank may face more challenges in retaining our customers if it is unable to offer competitive rates as compared to other banks in the market. As on March 31, 2013, 86.23% of our total investments, were in government and other approved securities for SLR. Returns on these investments are dependent to a large extent on interest rates. In a rising interest rate environment, especially if the increase is sudden or sharp, we could be materially and adversely affected by the decline in the market value of our government securities portfolio and other fixed income securities and may be required to provide for depreciation in the “Available for Sale” and “Held for Trading” categories. As on March 31, 2013, 85.42% of our gross investments were in the “Held to Maturity” category and14.58 % in the “Available for Sale” category. We are required to mark to market securities in the “Available for Sale” and “Held for Trading” categories which are subject to market risk. In respect of securities under the Held to Maturity category, we are not required to mark the same to market but are required to amortise the difference between acquisition cost and face value of the security over the residual maturity period of the security wherever the acquisition cost is greater than the face value. Volatility and changes in interest rates could affect the interest we earn on our assets differently from the interest we pay on our liabilities. The difference could result in an increase in interest expense relative to interest income leading to a reduction in our net interest income. Accordingly, volatility in interest rates could materially and adversely affect our business and financial performance. An increase in interest rates may also adversely affect the rate of growth of important sectors of the Indian economy, such as the corporate, retail and agricultural sectors, which may adversely impact our business. Further, any significant or sustained decline in income generated from treasury operations resulting from market volatility may adversely impact our Bank’s financial performance and the market price of the Equity Shares. 4. Our Bank’s failure to implement growth strategies or in penetrating new markets may adversely impact

our Bank’s business.

In the past, our Bank has witnessed growth in both office infrastructure and our business. The number of branches of our Bank, excluding the head office, and service branch, has grown from 707 branches as of March 31, 2011 to 780 as on March 31, 2013. Over the same period, our Bank’s total assets have grown to ` 67,232.76 crores from ` 52,032.46 crores. One of our Bank’s principal business strategies is to expand branch network and our product offerings. In the past, our Bank has witnessed growth in both infrastructure and business. This strategy exposes our Bank to a number of risks and challenges, including, the possible failure to identify appropriate opportunities and offer attractive new products, failure to comply with new market and regulatory standards, and the need for hiring and retaining skilled personnel, among others, each of which would have a potential adverse impact on our Bank’s profitability. In addition, given the increasing share of retail products and services and transaction banking services in our Bank’s overall business, the importance of systems technology to our Bank’s business has increased significantly. Any failure in our Bank’s systems, particularly for retail products and services and transaction banking, could significantly affect our Bank’s operations and the quality of our customer service, reputation and could result in business and financial losses. 5. There are operational risks associated with our Bank which, when realised, may have an adverse impact

on the results of our Bank.

Our Bank is exposed to many types of operational risks, including the risk of fraud or other misconduct by employees or outsiders, unauthorised transactions by employees or operational errors, including clerical or recordkeeping errors or errors resulting from faulty computer or telecommunications systems. Given the high volume of transactions of our Bank, certain errors may be repeated or compounded before they are discovered and successfully rectified. We cannot guarantee that such events will not occur in the future. Any such event could disrupt our reputation, operations, or otherwise will have a material adverse effect on our business, financial condition or results of operation. Our Bank also faces the risk that the design of controls of our Bank and procedures prove inadequate, or may be circumvented, thereby causing delays in detection or errors in information. Although our Bank maintains a system of controls designed to keep operational risk at appropriate levels, there can be no assurance that our Bank will not suffer losses from operational risks in the future.

30

6. Our Bank is exposed to various industry sectors. Deterioration in the performance of any of the industry

sectors where our Bank has significant exposure may adversely impact our business. Our Bank has credit exposure to various sectors. As on March 31, 2013, the most significant exposure was to the infrastructure, iron and steel, NBFC & Trading, Textiles and chemicals sectors, which represented 46.61% of our Bank’s outstanding loans, advances and investments. The top 5 sectors to which our Bank had exposure (Fund Based + Non Fund Based) to as on March 31, 2013 is as under:

Industry Loans &

Advances (` in crore)

% of

Loans & Advances

to total

loans &

advances

Investmen

t (` in

crore)

% of

investment to total

investmen

t

Loans &

Advances + Investments (`

in crore )

% of Loans &

Advances + Investments

to the total

Loans &

Advances +

Investments

Infrastructure 8,713.83 16.63 8.94 0.05 8,722.77 12.59

NBFC & Trading 7,670.70 14.64 23.15 0.14 7,693.85 11.11

Iron and Steel 3,714.97 7.09 2.54 0.02 3,717.51 5.37

Textiles 2,301.37 4.39 40.42 0.24 2,341.79 3.38

Chemicals 2,023.03 3.86 0.00 0.00 2,023.03 2.92

Any significant deterioration in the performance of a particular sector, including due to regulatory action or policy announcements by Central or State government authorities, would adversely impact the ability of borrowers in that industry to service their debt obligations to our Bank. As a result, our Bank would experience increased delinquency risk which may adversely impact our Bank’s financial performance and the market price of our Bank’s Equity Shares. 7. Our Bank may be subject to volatility in income from our treasury operations that could materially and

adversely impact our financial results.

We derived 17.77%, 17.88% and 19.06% (excluding interest on inter bank funds) of our total income in FY 2013, FY 2012 and FY 2011 respectively, from our treasury operations. Though our income from our treasury operations have been stable over the last three years, there is no guarantee that in the future, our Bank will not experience volatility in our income from treasury operations. Any significant or sustained decline in income generated from treasury operations would adversely impact our Bank’s financial performance.

8. We derive a portion of our other income from our Government operations, a slowdown in which could

affect our Bank's business

For FY 2013 and FY 2012, total Government business turnover was ` 65,211 crores and ` 70,469 crore respectively and commissions earned from the Government transactions for corresponding periods were ` 67.95 crores and ` 68.05 crore. While our Bank has enjoyed a strong working relationship with the Government in the past, there is no assurance that this relationship will continue in the future. The Government is not obligated to choose our Bank to conduct any of its transactions. If the Government does choose another bank to perform such tasks, our Bank's business will be adversely affected.

9. Our Bank is subject to capital adequacy requirements as stipulated by RBI for domestic banks. Our

Bank’s inability to maintain adequate capital due to changes in regulations, a lack of access to capital

markets, or otherwise may impact our ability to grow and support our business.

The RBI requires Indian banks to maintain a minimum risk weighted capital adequacy ratio of 9%, subject to a minimum Tier I capital adequacy ratio of 6% and Tier II capital adequacy ratio of 3 %. Our Bank’s capital adequacy ratio was 11.19% as on March 31, 2013 and 11.22% as on March 31, 2012 under Basel I and 11.79% as on March 31, 2013 and 12.55% as on March 31, 2012 under Basel II. Our Bank is exposed to the risk of RBI increasing the applicable risk weight for different asset classes from time to time. Although, our Bank has not, at any time, during the preceding 3 financial years, fallen below the minimum level of CAR as required by the RBI, certain adverse

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developments could affect our ability to continue to comply the capital adequacy requirements, including deterioration in our asset quality, declines in the values of our investments and changes in the minimum capital adequacy requirements. Furthermore, our ability to support and grow our business could be limited by a declining capital adequacy ratio if we are unable to access or have difficulty accessing the capital markets or have difficulty obtaining capital in any other manner. If we fail to meet capital adequacy requirements or any other norms as prescribed by the RBI, the RBI may take certain actions, including restricting our lending and investment activities. These actions could materially and adversely affect our business growth, results of operations and financial condition. On May 2, 2012, the RBI published its final guidelines on Basel III capital regulations, which were proposed to be implemented from January 2013 in a phased manner wherein banks are required to improve the quality, consistency and transparency of their capital base, enhance risk coverage and supplement the risk-based capital requirement with a leverage ratio. The RBI, through a press release dated December 28, 2012, has rescheduled the start date for the implementation of Basel III from January 1, 2013 to April 1, 2013. The implementation of Basel III or other capital adequacy requirements imposed by the RBI, may result in our Bank requiring to raise additional capital on the terms which may not be favourable to us and may require incurrence of additional compliance and monitoring costs. Any breach of applicable laws and regulations may adversely affect the reputation of our Bank or our business, operations and financial conditions. 10. Our Bank’s retail assets portfolio has experienced significant growth in recent years. If our Bank is

unable to address credit risk in our retail asset portfolio our Bank’s financial performance may be

adversely affected.

Our Bank’s retail assets portfolio has grown 13.20 % to ` 16,955 crores as on March 31, 2013 from ` 14,978 crores as on March 31, 2012. As part of our Bank’s business and growth strategy, we will continue to focus on further growth in retail banking business. The competition in the retail banking segment is intense and our Bank’s ability to effectively compete in this segment will depend on our ability to offer a diverse product mix and expand our distribution capabilities. At present, availability of comprehensive credit history reports for new first-time borrowers is limited in India. If our Bank’s screening process proves to be inadequate, it may experience an increase in impaired loans and it may be required to increase our provision for defaulted loans.This may impact our Bank’s future financial performance.

11. Our Bank’s inability to foreclose on collateral in the event of a default or a decrease in the value of the

collateral may result in failure to recover the expected value of the collateral.

Our Bank’s loans to corporate customers for working capital credit facilities are typically secured by charges on inventories, receivables and other current assets. In certain cases, our Bank obtains security by way of a first or second charge on fixed assets, a pledge of marketable securities, bank guarantees, government guarantees, corporate guarantees and personal guarantees. In addition, project loans or long-term loans to corporate customers are secured by a charge on fixed assets and other collateral security. Loans to retail customers are either unsecured or secured by the assets financed, largely property and vehicles. As on March 31, 2013, our Bank’s unsecured advances represented 10.48% of our total advances. In India, foreclosure on collateral generally requires a written petition to a court or tribunal. Such application may be subject to delays and administrative requirements that may result, or be accompanied by, a decrease in the value of the collateral. The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the “SARFAESI Act”), the Debt-Recovery Tribunal Act, 1993 and the RBI’s corporate debt restructuring have strengthened the ability of lenders to recover NPAs by granting them greater rights to enforce security and recover amounts owed from secured borrowers. However, there can be no assurance that these legislations will have a favourable impact on our Bank’s efforts to recover NPAs as the full effect of such legislation has yet to be determined in practice. Any failure to recover the expected value of the collateral would expose our Bank to potential loss. In addition, pursuant to RBI prudential guidelines on restructuring of advances by banks, our Bank may not be allowed to initiate recovery proceedings against a corporate borrower where the borrower’s aggregate total debt is ` 10 crore or more and 60% of the lenders by number and holding at least 75% or more of the borrower’s debt by value decide to restructure their loans. In such a situation, our Bank is restricted to a restructuring process only as approved by the majority lenders. Our Bank may not be able to realize the full value of collateral as a result of, among other factors:

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• delays in bankruptcy and foreclosure proceedings;

• defects or deficiencies in the perfection of collateral (including due to inability to obtain approvals that may be required from third parties);

• fraud by borrowers;

• depreciation in value of the collateral, illiquid market for disposal of and volatility in the market prices for the collateral; and

• current legislative provisions or changes thereto and past or future judicial pronouncements. 12. Our Bank is exposed to high concentrations of loans to a few borrowers and default by any one of them

would adversely affect our Bank’s business

As on March 31, 2013, aggregate loans to our Bank’s twenty largest borrowers amounted to ` 8,761.52 crores, representing 16.71% of our Bank’s total advances as compared to ` 8,305.73 crores, representing 20.42% of our Bank’s total advances as on March 31, 2012. Any deterioration in the credit quality of these assets would have adverse effect on our Bank’s financial condition and results of operations, as well as on the market price of our Bank’s Equity Shares. 13. Our Bank’s funding is primarily through short-term and medium-term deposits, whereas significant

portion of Bank’s loan assets are Cash credits and Overdrafts renewed periodically. If depositors do not

roll over deposited funds on maturity or if our Bank is unable to continue to increase our deposits, our

Bank’s liquidity could be adversely affected.

Most of our Bank’s funding requirements are met through short-term and medium-term funding sources, primarily in the form of term deposits. As on March 31, 2013, 93.66 % of our Bank’s total funding consisted of deposits and 31.55% of such total funding consisted of demand deposits and savings deposits. A significant portion of our Bank’s loan assets are cash credits and overdrafts which are to be renewed periodically creating a potential for funding mismatches. In the event that a substantial number of our depositors do not roll over deposited funds upon maturity, our Bank’s liquidity position, business and results of operations would be adversely affected. As on March 31, 2013, our Bank’s total deposits increased to ` 56,969.05 crores registering an increase of 13.52 % vis-à-vis our Bank’s total deposits on March 31, 2012, ` 50,186.30 crores. Further, as on March 31, 2013, the top twenty depositors constitute 8.50 % of our total deposits

14. Non-compliance with RBI inspection/observations may have a material adverse effect on our business,

financial condition or results of operation if we are unable to meet the requirements suggested by RBI.

Our Banks is subject to an annual financial inspection by RBI as per Section 35 of the Banking Regulation Act. Inspection by the RBI is a regular exercise and is carried out periodically by the RBI for all banks and financial institutions. The reports of the RBI are strictly confidential and RBI does not allow disclosure of its inspection reports. In case we are unable to meet the requirements suggested by RBI in its inspection reports, we may be subject to penalties and censure by the RBI which may have an adverse effect on our business, financial condition or results of operation.

15. Our Bank’s employee cost will increase pursuant to the proposed X Bipartite Wage settlement to be

entered into. It is very difficult to assess the actual impact of such wage revisions and consequential

impact on the employee cost for our Bank.

The IX bipartite wage settlement had expired on October 31, 2012 and the negotiation for the X bipartite wage settlement are being taken up. Our Bank has made a provision of ` 31.00 crores during the FY 2013. However, it is difficult to assess the actual impact of such wage revisions at this stage and consequential impact on the employee cost for our Bank.

16. There can be no assurance that the restructuring of our Bank’s loans based on the criteria approved by

our Bank would be sufficient for the borrowers to meet their obligations. Our Bank’s gross restructured loans, as a proportion of gross loans and advances outstanding was 8.61% and 6.57% as on March 31, 2013 and March 31, 2012 respectively. Our Bank has restructured loans and advances based upon a

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borrower’s potential to restore its financial health. There can be no assurance that, the debt restructuring criteria approved by our Bank will be sufficient, and that the borrowers will be able to meet their obligations under the restructured loans. If a significant number of our Bank’s customers are unable to repay the loans as per the restructured terms, these assets may become non-performing, thereby requiring additional provisions, additional capital and having a material adverse effect on our Bank’s financial condition, liquidity and results of operations. 17. Regulations in India require our Bank to extend a minimum level of loans to certain specified sectors in

India which may subject our Bank to lend to vulnerable economic sectors thus affecting our financial

performance. The priority sector lending norms of the RBI require all banks in India to extend at least 40% of their ANBC to specified sectors, including agriculture and small scale industries, which are known as ‘‘priority sectors’’. In accordance with regulatory requirements in India, at least 18 % of our Bank’s ANBC, must be extended to the agricultural sector. In addition, the criteria for classifying agricultural loans as non-performing differ from the criteria applicable for non-agricultural loans. For example, loans to agricultural borrowers can only be classified as non-performing if the loan remains overdue for more than two harvest seasons. As on March 31, 2013, total credit extended to priority sectors constituted 33.82% of our Bank’s ANBC, and credit extended to the agriculture sector constituted 15.86%, of our ANBC. Like other Indian commercial banks, if our Bank fails to achieve the prescribed lending target to the priority sectors and/or the agricultural sector, we are required to contribute to the Rural Infrastructure Development Fund (‘‘RIDF’’) of NABARD or other financial institutions as specified by the RBI, being investments which may offer lower rates of return and our contribution to the same as on March 31, 2013 is ` 1,846.29 crores. Although such priority sector loans are extended to borrowers who have met our Bank’s internal guidelines and against what our Bank believes to be adequate security, adverse economic circumstances, including those resulting from changes in government policies, adverse weather conditions and natural calamities, may adversely impact these priority sectors resulting in an increase in impaired loans in these sectors. 18. The mismatch between Assets and Liabilities could affect our net profit Our Bank had an asset liability mismatch for the position as on March 31, 2013 in certain time buckets. The material negative mismatches within the time bands are observed in certain time buckets as also cumulative mis-matches in the time bands of 3 months to 6 months and 6 months to 1 year of the total outflow respectively. The cumulative mismatches are however within the tolerance level prescribed in our Asset-Liability Management Policy. Positions of mismatch create liquidity surplus or liquidity crunch situations and depending upon the interest rate movement, such situations may affect our net interest income.

19. Most of our business premises are on lease basis. Some of the lease agreements with respect to the

business premises have expired. Further we may not be able to renew the lease agreements for all of our

branches upon favourable terms or at all which could have a material adverse affect on our business

and results of operations

As on March 31, 2013, our Bank has 840 offices (including 780 branches), out of which 55 are located on owned premises. In addition, our Bank has 853 ATMs out of which 94 ATMs are located on the freehold properties of our Bank and the remaining 759 ATMs are on leased premises. Some of the lease agreements with respect to the business premises have expired. However, we continue to be in the possession of the premises whose term has expired. Any failure to renew lease agreements for these premises on terms and conditions favourable to us or at all may require us to shift the concerned branch offices, regional offices or the ATMs to new premises, due to which we may suffer a disruption in our operations or increased costs, or both, which may adversely affect our business and results of operations.

20. There were delays in filing of periodic report with SEBI as Bankers to the Issue in accordance with the

circulars bearing reference MIRSD/DPS-2/BTI/Cir-15/2008 dated May 06, 2008 and CIR/MIRSD/

4/2012 dated March 29, 2012.

Our Bank is required to file periodic report with SEBI in accordance with circulars bearing reference MIRSD/DPS-2/BTI/Cir-15/2008 dated May 06, 2008 and CIR/MIRSD/ 4/2012 dated March 29, 2012 issued by SEBI as Bankers to the Issue. There have been delays in filing such periodic reports with SEBI. SEBI may initiate action / levy

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penalty against our Bank for non compliance of the provisions of the aforesaid circulars which may affect the reputation of our Bank. 21. RBI may levy penalty on our Bank in the event of non compliance of Know Your Customer (KYC)

guidelines issued by RBI from time to time.

Our Bank is required to comply with the provisions of KYC guidelines issued by RBI from time to time at the time of opening of bank account of a customer. In the event of any non compliance with the said guidelines, RBI may levy penalty on our Bank which may affect the reputation and also the market value of our Bank. Further, in deciding whether to extend credit or enter into other banking transactions with customers and counterparties, we may rely on information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial information. We may also rely on certain representations as to the accuracy and completeness of that information. Our financial condition and results of operations could be negatively affected by relying on financial statements that do not comply with generally accepted accounting principles or other information that is materially misleading.

22. Our Bank's risk management policies and procedures may not be fully effective in mitigating

unidentified or unanticipated risks, which could negatively affect our business and financial condition.

Our Bank's hedging strategies and other risk management techniques may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated. Some methods of managing risk are based upon observed historical market behaviour. As a result, these methods may not predict future risk exposures, which could be greater than the historical measures indicated. Other risk management methods depend upon an evaluation of information regarding markets, clients or other matters. This information may not in all cases be accurate, complete, up to date or properly evaluated. Management of operational, legal or regulatory risk requires, among other things, policies and procedures to properly record and verify a large number of transactions and events. Although our Bank has established these policies and procedures, they may not be fully effective. 23. The risks to financial stability of the country have worsened and could adversely affect our Bank’s

business.

As reported by the RBI, in its financial stability report dated December 28, 2012, global risks remain elevated due to delay's in resolution of issues like the European sovereign debt crisis and the imminent US fiscal cliff. The risks to domestic growth has arisen from structural impediments such as fall in domestic savings, persistently high inflation, regulatory and environmental issues. External sector imbalances and rising gold imports have worsened the current account deficit. Moreover, domestic savings have been falling and a lower proportion of household savings is channelled towards financial products. Though, financial markets remained largely stable, but exchange rate volatility was high relative to that of some peers and advanced economies. In addition, the corporate sector’s ability to service debt has been falling since 2009-10. Some industrial groups with greater exposure to key infrastructure sectors like power have witnessed high growth in leverage in recent years. Our Bank has little or no control over any of these risks or trends and may be unable to anticipate changes in economic conditions. Adverse effects on the Indian banking system could impact our Bank’s funding and adversely affect our Bank’s business, operations, financial condition and the market price of the Equity Shares. 24. If our Bank is unable to adapt to rapid technological changes, our business could suffer.

Our Bank's future success will depend in part on our ability to respond to technological advances and to emerging banking industry standards and practices on a cost-effective and timely basis. The development and implementation of such technology entails significant technical and business risks. There can be no assurance that our Bank will successfully implement new technologies effectively or adapt our transaction processing systems to meet customer requirements or emerging industry standards. If our Bank is unable, to adapt itself in a timely manner to changing market conditions, customer requirements or technological changes, our business, and operations could be materially affected. With the implementation of CBS and other technology initiatives, the importance of systems technology to our business has increased significantly. However, the maintenance of the CBS by the technology provider is under an

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agreement between the provider and our promoter, State Bank of India on behalf of our Bank. Consequently, in the event of a breach or termination of such agreement for any reason whatsoever, our Bank’s operations would be adversely affected. Further, any technical failures associated with our Bank’s information technology systems or network infrastructure, including those caused by power failures and breaches in security caused by computer viruses and other unauthorized tampering, may cause interruptions or delays in our Bank’s ability to provide services to our customers on a timely basis or at all, and may also result in costs for information retrieval and verification. 25. Shareholder voting rights are subject to restrictions under Section 19 of the Subsidiary Banks Act.

Section 19 of the Subsidiary Banks Act does not allow any individual shareholder, other than the State Bank of India, to exercise voting rights in excess of ten percent of our Bank's issued capital. To the extent that shareholders are unable to exercise all their voting rights with respect to the shares they own, their proportional voting power would be reduced. 26. Our Bank’s business is highly dependent on the continuation of our management team, skilled

personnel and our Bank’s ability to attract and retain talented personnel. Failure to retain key personnel

or inability to manage attrition levels may have a material adverse impact on our Bank’s business, our

ability to grow and our control over various business functions.

Our Bank is highly dependent on the services of our key management personnel. Our Bank’s ability to meet future business challenges depends, among other things, on their continued employment and our Bank’s ability to attract and recruit talented and skilled personnel. There can be no assurance that our Bank will be able to retain such key personnel. Competition for skilled and professional personnel in the Banking industry is intense. Our Bank’s remuneration scheme may not be as attractive as other banks including private sector banks which may affect our Bank’s ability to attract / retain skilled personnel. The loss of key personnel or an inability to manage attrition levels across our Bank may have a material adverse impact on our Bank’s business, our ability to grow and our control over various business functions. As on March 31, 2013, our Bank had 10,784 employees. Further, our Bank’s employees are represented by officers’ associations and employees’ unions and any employee unrest could adversely affect our operations and profitability. 27. We are exposed to risks related to lending, trading, hedging, settlement and other financial transactions.

Some or all of our Bank’s customers or counterparties may be unable or unwilling to meet their respective contractual commitments in relation to lending, trading, hedging, settlement and other financial transactions. This may materially and adversely affect our Bank’s operations and may require our Bank to engage in protracted litigation and recovery proceedings which may not adequately compensate our Bank for losses suffered by it. As on March 31, 2013, total advances amounted to ` 44,932.57 crores, the available for sale and Held for trading investments amounted to ` 2,415.91 crores and bills for collection yet to be settled amounted to ` 711.17 crores. 28. Our Bank is exposed to fluctuations in foreign exchange rates

As a financial intermediary, our Bank is exposed to exchange rate risk. As on March 31, 2013, contingent liabilities on account of outstanding forward exchange contracts were ` 10,205.33 crores. Our Bank complies with regulatory limits on our unhedged foreign currency exposure, and is exposed to fluctuations in foreign currency rates for our unhedged exposure to that extent. Adverse movements in foreign exchange rates may also impact our Bank’s borrowers negatively which may in turn impact the quality of our Bank’s exposure to these borrowers. Volatility in foreign exchange rates could adversely affect our Bank’s future financial performance and the market price of the Equity Shares. 29. If our Bank fails to maintain desired levels of credit deposit ratio, our business operations may be

materially and adversely affected.

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Our Bank has witnessed decrease in credit deposit ratio. For FY 2013 and for FY 2012, our Bank has a credit deposit ratio of 80.70% and 81.86% respectively. Customer deposits are our Bank’s primary source of funding. Credit to deposit ratio indicates our Bank’s core funds used for lending activities. Any increase in ratio will put pressure on resources and the capital adequacy requirements. Moreover, a higher ratio may also lead to asset – liability mismatches. However, many factors affect the growth of deposits, some of which are beyond our Bank’s control, such as economic and political conditions, availability of investment alternatives and retail customers’ changing perceptions toward savings. Any significant increase in credit deposit ratio may put strain on our existing resources and will have a material adverse effect on Bank’s financial condition, liquidity and results of operations. 30. We are involved in various legal proceedings and any adverse order or judgment, levying penalty or

awarding material damages against us, could have an adverse impact on our financial condition, cash

flows and results of operations

Our Bank is involved in various civil, criminal and regulatory proceedings. Most of these proceedings are incidental to our banking operations and have generally arisen in relation to recovery of dues from our borrowers, claims and consumer complaints from our customers and in relation to certain claims from dismissed employees. There are also certain tax proceedings pending before various forums relating to disallowance of deduction from our income in relation to our previous assessments years. Please see “Legal Proceedings” on page 140 for details of material civil, criminal, regulatory and tax proceedings against our Bank. We cannot assure you that the judgments in any of the proceedings in which we are involved will be in our favour. If an adverse order is passed against us, such as imposing a penalty, awarding damages against us, or disallowing some of the tax deductions claimed by us, our financial condition, cash flows and results of operations could be adversely affected. 31. We have written off loans amounting to ` 274.87 crores during FY 2013. Having to write off bad debts

and to engage in litigation for recovery may impact our business and results of operations.

As per the audited financial statements for FY 2013, our Bank has written off (including technical write off) 2,561 accounts falling under the categories of Agriculture, SSI, Other Priority and Non Priority sectors, amounting to ` 274.87 crores. Our Bank initiates legal proceedings for recovery of amounts outstanding. Further, our Bank conducts recovery drives in each of our branches, through bank adalat, compromise settlements and lok adalats. Having to write off bad debts and to engage in litigation for recovery may impact our business and results of operations.

32. Our Bank may not be able to detect money-laundering and other illegal or improper activities fully or on

a timely basis, which could expose it to additional liability and harm our business or reputation.

Our Bank is required to comply with applicable anti-money-laundering and anti-terrorism laws and other regulations. These laws and regulations require our Bank, among other things, to adopt and enforce “Know Your Customer” (“KYC”) policies and procedures and to report suspicious and large transactions to the applicable regulatory authorities in different jurisdictions. While our Bank has adopted policies and procedures aimed at detecting and preventing the use of our banking networks for money-laundering activities and by terrorists and terrorist-related organizations and individuals generally, such policies and procedures may not completely eliminate instances where our Bank may be used by other parties to engage in money-laundering and other illegal or improper activities due to, in part, the short history of these policies and procedures. To the extent our Bank fails to fully comply with applicable laws and regulations, the relevant government agencies to whom our Bank reports have the power and authority to impose fines and other penalties. In addition, our Bank’s business and reputation could suffer if customers use our Bank for money-laundering or illegal or improper purposes. Although our Bank does not believe that it is in violation of any applicable sanctions, there can be no assurance that our Bank will be able to fully monitor all of our transactions for any potential violation.

33. The proposed new taxation system could adversely affect our Bank’s business and the trading price of

the Equity Shares The Government has proposed three major reforms in Indian tax laws, namely the Goods and Services Tax (“GST”), the Direct Taxes Code and provisions relating to General Anti-Avoidance Rules (“GAAR”). While GST

37

is in relation to indirect taxes on goods and services, the Direct Taxes Code (which proposes to replace certain direct tax laws) and GAAR pertain to direct taxes. As the taxation system in India is intended to undergo a significant overhaul, the consequential effects on our Bank cannot be determined as of the date of this Preliminary Offer Document and there can be no assurance that such effects would not adversely affect our Bank’s business, future financial performance and the trading price of the Equity Shares. 34. Any consolidation of the Associate Banks with the State Bank of India may result in resistance and may

adversely affect our Bank's operations

Any consolidation of the business of the Associate Banks with State Bank of India may result in resistance from our employees and customers. Such kind of opposition in future may disrupt business operations and the delivery of banking services to customers.

35. A significant reduction in our credit rating could adversely affect our business, financial condition, cash

flows and results of operations.

Our Perpetual Debt Instruments and Tier II subordinated bonds are rated by rating agencies as under:

Sr. No. ISIN Issued on Date of Maturity Ratings

1. INE651A09072 November 25, 2009 Perpetual CARE- AAA (Triple A) CRISIL – AAA (Stable)

2. INE651A09064 January 16, 2008 January 16, 2023 CARE- AAA (Triple A) CRISIL – AAA (Stable)

3. INE651A09056 November 30, 2007 Perpetual CARE- AAA (Triple A) CRISIL – AAA (Stable)

4. INE651A09049 November 15, 2006 October 15, 2021 CARE- AAA (Triple A) CRISIL – AAA (Stable)

5. INE651A09031 December 1, 2005 May 1, 2015 ICRA- AAA CRISIL – AAA (Stable)

6. INE651A09023 February 1, 2005 May 1, 2014 ICRA – AAA

Any downgrade in our credit ratings in future may affect our ability to raise capital, mobilize deposits and cost of raising capital which may adversely affect our business, financial condition and results of operations. 36. We are member of the RBI Corporate Debt Restructuring (CDR) mechanism, pursuant to which we may

be mandated to restructure or write-off certain outstanding debts that may impact our results of

operations. Our Bank is a member of the RBI CDR mechanism. RBI’s guidelines on CDR mechanism specify that for debt amounts of ` 10.00 crore and above, 60% of the creditors by number and 75% of creditors by value can decide to restructure the debt and that such a decision would be binding on the remaining creditors. In situations where we have exposure of 25% or less, we could be forced to agree to a restructuring of debt which may not be in our interests or which may be time consuming or require us to reduce interest rates or write-off portions of outstanding amounts, in preference to foreclosure of security or a One Time Settlement (OTS). During FY 2013, our Bank has restructured 92 accounts under CDR. As on March 31, 2013, the total outstanding amount of loans assets under CDR was ` 1,501.20 crore which constituted 3.26% of our total loan assets. 37. We have revalued certain premises belonging to our Bank consisting of land and building as on March

31, 2008 which has resulted in increase in our Reserves and Surplus. These reserves are not free

reserves and may not utilize these for distribution as dividends or bonus shares to our shareholders.

Certain premises belonging to our Bank were revalued in the FY 2008. Such revaluation resulted in appreciation in the value of the said premises by ` 607.97 crore with corresponding credit to Revaluation Reserve and depreciation over and above the normal depreciation attributable to revalued premises which is set off against the Revaluation

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Reserve. The balance lying in Revaluation Reserve as on March 31, 2013 was ` 567.76 crores. However, as per the Accounting Standards issued by the ICAI, we cannot use these reserves to distribute either dividends or bonus shares to our shareholders.

38. The legal requirement that the State Bank of India maintains a majority shareholding interest in our

Bank of at least 51% may limit the ability of our Bank to raise appropriate levels of capital financing.

State Bank of India currently holds 92.33% of our shareholding. The Subsidiary Banks Act prohibits State Bank of India's shareholding interests in our Bank from falling below 51%. This requirement could result in restrictions in the equity capital raising efforts of our Bank as the State Bank of India may not be able to fund any further investments that would allow it simultaneously to maintain its stake at a minimum of 51% and seek funding from the capital markets. As the Indian economy grows, more businesses and individuals will require capital financing. In order to meet and sustain increasing levels of growth in capital demand, our Bank will need to augment our capital base, whether through organic growth or (more likely) capital market financing schemes. If our Bank is unable to grow our capital base in step with demand, our business, financial prospects and profitability may be materially and adversely affected. 39. We require certain statutory and regulatory permits and approvals for expansion i.e. for opening up of

new branches in Tier 1 cities. Failure by us to procure the required permits and approvals may delay or

prevent our expansion plans and may impact our future business.

We require certain statutory and regulatory permits and approvals for expansion i.e. for opening up of new branches in Tier 1 cities. The permissions for opening up of new branches are subject to the branch licensing policy of RBI. Failure by us to procure the required permits and approvals and /or change in the branch licensing policy of RBI, may delay or prevent our expansion plans and may impact our future business.

40. We do not own the intellectual property rights attached to the logo used by our Bank and our ability to

use the logo may be restricted, which may materially and adversely affect our goodwill and business.

We do not own the intellectual property rights attached to the logo of our Bank. The logo used by our Bank is owned by our Promoter, the State Bank of India. We have not entered into any agreement of license with the State Bank of India to use the said logo. However, there can be no assurance that the State Bank of India would not in future, restrain our Bank from using the said logo or call upon our Bank to pay royalty in consideration of usage of the logo. Any such eventuality may require us to incur additional costs and may impact our brand recognition among customers.

41. We may not maintain historical dividends in the future as the same depends upon, among other factors,

our earnings, financial position, cash requirements and availability of profits, as well as the provisions

of relevant laws in India from time to time.

While we have paid dividends in the past, there can be no assurance as to whether we will pay dividends in the future and, if so, the level of such future dividends. The declaration, payment and amount of any future dividends is subject to the discretion of the Board and will depend upon, among other factors, our earnings, financial position, cash requirements and availability of profits, as well as the provisions of relevant laws in India from time to time. 42. Any future equity offerings by our Bank could lead to dilution of your shareholding or adversely affect

the market price of the Equity Shares. As a shareholder of our Bank’s Equity Shares, you could experience dilution to your shareholding in the event that we conduct future equity offerings. Such dilution can adversely affect the market price of the Equity Shares and could impact our ability to raise capital through an offering of our equity securities. In addition, any perception by investors that such issuance or sales will occur could also affect the trading price of the Equity Shares.

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B. External Risks 43. There are certain restrictions as per Subsidiaries Banks Act and Banking Regulation Act which has a

bearing on the flexibility of our Bank’s operations and affect/restrict investor’s right. Further, any

material changes in the regulations that govern our Bank could adversely affect our Bank’s business

and financial performance.

Our Bank can carry on business/activities as specified in the Subsidiary Banks Act and the Banking Regulation Act. There are certain restrictions on our ability to pursue profitable avenues if they arise, in contrast with other companies. There are restrictions 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. Banks may have to resort to

unsecured debt instruments for borrowings d) Expansion of business as branches need to be licensed e) Production of documents and availability of records for inspection by shareholders f) Reconstruction of banks through amalgamation etc. g) Voluntary winding up. h) Ownership restrictions.

44. Changes to interest rates, CRR and SLR may affect our business operations and profitability

The RBI’s policies pertaining to interest rates, CRR and SLR are sensitive to many factors beyond our control, including the RBI's monetary policy, deregulation of the financial sector in India and domestic and international economic and political conditions. Presently, the CRR prescribed by the RBI stands at 4% and the repo/ reverse repo rate at which banks borrow/ lend money from / to the RBI under liquidity adjustment facility is at 7.25% / 6.25%. Under the RBI regulations, we are required to maintain a minimum specified Statutory Liquidity Ratio of 23% of our net demand and time liabilities in cash and government or other approved securities.

45. Changes to the prudential norms by the RBI requiring banks to maintain higher provisioning norms

would adversely affect our profitability

In the event of the RBI effecting any changes to the prudential norms requiring banks to maintain higher provisioning norms for non performing assets, such increase in provisioning requirement would adversely impact our profitability, business, financial condition or results of operations. 46. Natural calamities could have a negative impact on the Indian economy and harm our Bank’s business

India has experienced natural calamities such as earthquakes, floods, drought and a tsunami in recent years. The extent and severity of these natural disasters determines their impact on the Indian economy. Prolonged spells of abnormal rainfall and other natural calamities could have an adverse impact on the Indian economy which could adversely affect our Bank’s business and the price of our Bank’s Equity Shares. 47. Hostilities, terrorist attacks, civil unrest and other acts of violence could adversely affect the financial

markets and our Bank’s business

Terrorist attacks and other acts of violence or war may adversely affect the Indian markets and the worldwide financial markets. These acts may result in a loss of business confidence, make travel and other services more difficult and could generally have an adverse effect on our Bank’s business. In addition, any deterioration in international relations may result in investor concern regarding regional stability which could adversely affect the price of our Bank’s Equity Shares. In addition, India has witnessed localised civil disturbances in recent years and it is possible that future civil unrest as well as other adverse social, economic or political events in India could have an adverse impact on our Bank’s business. Such incidents could also create a greater perception that investment in Indian market involves a higher

40

degree of risk and could have an adverse impact on our Bank’s business and the market price of our Bank’s Equity Shares. 48. Restrictions on foreign direct investment in public sector bank may limit our ability to raise additional

capital. Foreign direct investment including portfolio investment, in public sector bank is limited to 20% of the bank’s share capital. Further, such foreign investment in public sector bank is subject to the prior approval of the Central Government. Thus, our ability to raise additional capital from foreign investors is impaired as a result of these and other restrictions, which may adversely affect our business operations and growth. 49. Banking is a heavily regulated industry and material changes in the regulations which govern our Bank,

may adversely affect our business. Banks in India are subject to detailed supervision and regulation by the RBI. The RBI also sets guidelines on the CRR, SLR, priority sector lending, export credit, agricultural loans, loans to sectors deemed to be weak by the RBI, market risk, CAR and branch licensing, among others. Our Bank is also subject to regular financial inspection by the RBI. In the event, our Bank is unable to meet or adhere to the guidelines or requirements of the RBI, the RBI may impose strict enforcement of its observations on the Bank, which may have an adverse effect on our business, financial condition, cash flows or results of operations. The laws and regulations governing the banking sector, including those governing the products and services that our Bank provides or proposes to provide, such as our life insurance or asset management business, or derivatives and hedging products and services, could change in the future. In addition, the financial condition and results of operations of banks are susceptible to material change pursuant to changes in law, as well as to changes in regulations, government policies and accounting principles. Any such changes may adversely affect our Bank's business, future financial performance and the price of the Equity Shares. 50. Political instability and significant changes in the Government’s policy on liberalisation of the Indian

economy could impact our Bank’s financial results and prospects.

India has been charting a course of economic liberalisation and our Bank’s business could be significantly influenced by the economic policies of the Government. However, there can be no assurance that these liberalisation policies will continue in the future. The rate of economic liberalisation could change, and laws and policies affecting banking and finance companies, foreign investment, currency exchange and other matters affecting investment in our Bank’s securities could change as well. Any significant change in liberalization and deregulation policies could adversely affect business and economic conditions in India generally and our Bank’s business in particular. If the Government introduces significant changes, the competitive position of our Bank’s borrowers may be adversely affected and this may impact the quality of our Bank’s loan portfolio. 51. A slowdown in economic growth in India could cause our Bank’s business to suffer.

Any slowdown in economic growth in India could adversely affect our Bank’s borrowers and contractual parties. The current uncertain economic situation, in India and globally, could result in a further slowdown in economic growth, investment and consumption. A further slowdown in the rate of growth in the Indian economy could result in lower demand for credit and other financial products and services and higher defaults among corporate, retail and rural borrowers. With the importance of retail loans to our Bank’s business, any slowdown in the growth or negative growth of sectors such as housing and automobiles could adversely impact our Bank’s performance. Any such slowdown could adversely affect our Bank’s business, including our ability to grow, the quality of our assets, our financial performance and the trading price of the Equity Shares. Further, Indian economy has witnessed inflationary pressures in the past and this has a major say on the domestic interest rates. Any changes in the CRR and the repo rates will necessitate banks to adjust their Base Rate/BPLR. Call

41

money rates would also move up mainly on account of higher pre-emption and credit off-take. Our Bank’s business may be affected on account of the above factors. 52. The Indian banking industry is very competitive and our Bank’s ability to grow depends on its ability to

compete effectively.

The Indian banking industry is very competitive. Our Bank competes directly with large public sector banks, which have larger customer and deposit bases, larger branch networks and more capital. The large public sector banks are also expected to improve their customer service networks and technology platforms, which will allow them to enhance their competitive position against banks such as our Bank. Our Bank also competes with other private sector banks in India, some of which also have larger customer bases and greater financial resources than our Bank. In particular, other private sector banks may have operational advantages in implementing new technologies, rationalizing branches and recruiting employees through incentive-based compensation. Mergers and consolidation among public sector banks as well and private sector banks may result in enhanced competitive strengths in pricing and delivery channels for the merged entities. Our Bank may face greater competition from larger banks as a result of such consolidation, which may adversely affect our Bank’s future financial performance. 53. Any downgrading of India’s rating by an international rating agency could have a negative impact on

our economy.

Any adverse revision to India’s credit rating for domestic and international debt by international rating agencies may adversely impact the Indian securities markets. Any such disruption could have an adverse effect on the price of our Bank’s Equity Shares. 54. Financial instability in other countries, could disrupt our Bank’s business.

Although economic conditions are different in each country, investors’ reactions to developments in one country may have an adverse effect on the securities of companies in other countries, including India. A loss of investor confidence in the financial systems of other emerging markets may cause increased volatility in Indian financial markets and the Indian economy in general. Any worldwide financial instability could also have a negative impact on the Indian economy, including the movement of exchange rates and interest rates in India, which could adversely affect the Indian financial sector in particular. Any such disruption could have an adverse effect on our Bank’s business, future financial performance, financial condition and results of operations, and affect the price of our Bank’s Equity Shares. 55. Seasonal trends in the Indian economy affect our Bank’s business

Our Bank’s business is affected by seasonal trends in the Indian economy that affect the overall banking industry. The period from October to March is the busy period in India for economic activity and, accordingly, we generally experience higher volumes of business during this period. From April to September, when economic activity typically decreases, our business volumes experience a corresponding decrease. As a result of this, the quarter to quarter comparison of historical results may not be accurate or a meaningful indicator of our future performance.

56. Significant differences exist between Indian GAAP and other accounting principles, such as U.S. GAAP

and IFRS, which may be material to investors’ assessments of our financial condition. Our failure to

successfully adopt IFRS could have a material adverse effect on our stock price. Our financial statements, including the financial statements provided in this Preliminary Offer Document, are prepared in accordance with Indian GAAP. There is lack of clarity on the adoption of and convergence with IFRS and there is not yet a significant body of established practice on which to draw in forming judgments regarding its implementation and application, we have not determined with any degree of certainty the impact that such adoption will have on our financial reporting. There can be no assurance that our financial condition, results of operations, cash flows or changes in shareholders' equity will not appear materially worse under converged accounting standards than under Indian GAAP. There can be no assurance that our adoption of converged accounting standards

42

will not adversely affect our reported results of operations or financial condition and any failure to successfully adopt converged accounting standards could have a material adverse effect on our stock price. 57. There are restrictions on daily movements in the price of the Equity Shares, which may adversely affect

a shareholder’s ability to sell, or the price at which it can sell Equity Shares at a particular point in time. Our Bank’s shares are subject to a daily “circuit breaker” imposed by all stock exchanges in India, which does not allow transactions beyond specified increases or decreases in the price of the Equity Shares. This circuit breaker operates independently of the index-based market-wide circuit breakers generally imposed by SEBI on Indian stock exchanges. The percentage limit on our circuit breakers is set by the stock exchanges based on the historical volatility in the price and trading volume of the Equity Shares. A closure of, or trading stoppage on, either BSE or NSE could adversely affect the trading price of the Equity Shares. The circuit breaker limits the upward and downward movements in the price of the Equity Shares. As a result of this circuit breaker, no assurance may be given regarding your ability to sell your Equity Shares or the price at which you may be able to sell your Equity Shares at any particular time.

58. Market price of the Equity Shares of our Bank may fall below the historical price levels.

The share price data of our Bank incorporated herein pertains to Equity Shares prior to this Institutional Placement Programme. The price of Equity Shares of our Bank may potentially vary significantly following the Issue and may potentially fall to levels which are below the historical price levels of the Equity Shares. 59. After this Issue, the price of our Equity Shares may be highly volatile. The prices of our Bank’s Equity Shares on the Indian stock exchanges may fluctuate after this Issue as a result of several factors, including:

� our profitability and performance; � performance of our competitors in the Indian banking industry and the perception in the market; � significant developments in India’s fiscal, and other regulations; � an assessment of our management, our past and present operations, and the prospects for, and timing of, our

future revenues and cost structures; � the present state of our development, etc

There can be no assurance that an active trading market for our Equity Shares will be sustained after this Issue, or that the prices at which our Equity Shares have historically traded will correspond to the price at which the Equity Shares are offered in this Issue or the prices at which our Equity Shares will trade in the market subsequent to this Issue. The Indian stock markets have witnessed significant volatility in the past and our Equity Share price may be volatile and may decline post listing. 60. The market value of an investment in our Equity Shares may fluctuate due to the volatility of the Indian

securities markets.

The Indian Stock Exchanges have, in the past, experienced substantial fluctuations in the prices of listed securities. Such fluctuations and volatility could affect the market price and liquidity of the securities of Indian companies, including our Equity Shares. Moreover, there have been occasions when secondary market operations have been interrupted and/or affected due to temporary exchange closures, broker defaults and settlement delays. In addition, the governing bodies of the Indian Stock Exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. 61. Investors may be subject to Indian taxes arising out of capital gains Under current Indian tax laws and regulations, capital gains arising from the sale of shares in an Indian company are generally taxable in India. Any gain realised on the sale of listed equity shares on a stock exchange held for more than twelve (12) months will not be subject to capital gains tax in India if Securities Transaction Tax ("STT") has been paid on the transaction. STT will be levied on and collected by a domestic stock exchange on which the equity shares are sold. Any gain realised on the sale of equity shares held for more than twelve (12) months to an Indian resident, which are sold other than on a recognised stock exchange and on which no STT has been paid, will be

43

subject to long term capital gains tax in India. Further, any gain realised on the sale of listed equity shares held for a period of twelve (12) months or less will be subject to short term capital gains tax in India. 62. There is no guarantee that the Equity Shares will be listed on the Stock Exchanges in a timely manner

and any trading closures at the Stock Exchanges may adversely affect the trading price of the Equity

Shares In accordance with Indian law and practice, permission for listing of the equity shares will not be granted until after the equity shares have been issued and allotted. Approval will require all other relevant documents authorizing the issuing of equity shares to be submitted. There could be a failure or a delay in listing the Equity Shares offered in this Issue on BSE, NSE, MSE and BgSE. The exchanges have in the past experienced problems, including temporary exchange closures, broker defaults, settlements delays and strikes by brokerage firm employees, which, if continuing or recurring, could affect the market price and liquidity of the securities of Indian companies. A closure of, or trading stoppage on, either of the exchanges could adversely affect the trading price of the Equity Shares. Further, the Equity Shares offered in this Issue will be listed on BSE, NSE, MSE and BgSE. The Equity Shares allotted in this Issue shall be listed on the Stock Exchanges within stipulated time period as per ICDR Regulations.

44

MARKET PRICE INFORMATION

As of the date of this Preliminary Offer Document, 4,67,99,790 Equity Shares have been issued and are fully paid up. The Equity Shares are listed on the BSE, NSE, MSE and BgSE. The Equity Shares of our Bank have not been traded during the last 3 (three) years on BgSE and MSE. As the Equity Shares have only been traded on the BSE and NSE in the last 3 years, the stock market data has been given separately of these Stock Exchanges. The table set forth below indicates the high and low prices of the Equity Shares and the volume of trading activity for the specified periods. The closing price of the Equity Shares on BSE and NSE on May 14, 2013 was ` 566.60 and ` 571.10 respectively per equity share. The high, low and average market prices of the Equity Shares for the periods indicated are as below:

BSE

Year endin

g March 31,

Date of High High (`)

Volume on date of

High (No. of Equity Shares)

Turnover on

date of High (`̀̀̀ In

crores )

Date of Low Low (`)

Volume on Date

of Low (No. of Equity Shares)

Turnover on Date of Low (`̀̀̀ In

crores)

Average (`)

2011* August 24, 2010 1,327.10 1,91,743 24.52 February 09, 2011

560.35 3,258 0.18 734.93

2012 April 26, 2011 710.65 8,971 0.65 December 30, 2011

416.40 422 0.02 567.22

2013 January 03, 2013

754.00 42,606 3.20 June 04, 2012

446.50 301 0.01 540.69

(Source: www.bseindia.com)

NSE

Year ending March

31,

Date of High High (`)

Volume on date of

High (No. of Equity

Shares)

Turnover on

date of High ( `̀̀̀ In

crores)

Date of Low

Low (`) Volume on Date of Low (No. of Equity

Shares)

Turnover on Date of Low (`̀̀̀ In

crores)

Average (`)

2011* August 24, 2010 1,331.60 3,29,728 42.26 February 09, 2011

562.90 6,809 0.39 735.23

2012 April 26, 2011 706.95 25,387 1.83 December 20, 2011

416. 05 1,087 0.05

566.98

2013 January 03, 2013

752.80 1,21,458 9.12 June 04, 2012

447.20 1,073 0.05 540.55

(Source: www.nseindia.com)

* The rights issue shares of our Bank started trading with effect from Thursday, October 14, 2010.

Notes:

(1) High, low and average prices are of the daily closing prices. (2) In case of two days with the same closing price, the date with the higher volume has been considered. (3) Average price represents the average of the daily closing prices of each day for each year presented.

45

Monthly high and low prices and trading volumes on the Stock Exchanges for the six months preceding the date of filing of Preliminary this Offer Document:

BSE

Month Date of High

High (`̀̀̀)

Volume on date of

High (No. of Equity Shares)

Turnover on date of High (`̀̀̀ In

crores)

Date of Low

Low (`)

Volume on Date

of Low (No. of Equity Shares)

Turnover on

Date of Low (` ` ` `

In

crores)

Average

(`)

Apr-13 03-Apr-13 584.15 3,007 0.18 12-Apr-13 539.70 214 0.01 565.20

Mar-13 15-Mar-13 596.75 301 0.02 25-Mar-13 527.70 962 0.05 573.38

Feb-13 1-Feb-13 670.40 4,613 0.31 28-Feb-13 570.60 1,809 0.11 622.14

Jan-13 3-Jan-13 754.40 42,606 3.20 24-Jan-13 647.20 2,269 0.15 696.02

Dec-12 10-Dec-12 698.55 74,211 5.14 5-Dec-12 582.15 1,175 0.07 649.17

Nov-12 30-Nov-12 587.30 6,458 0.38 20-Nov-12 499.90 279 0.11 517.23

(Source: www.bseindia.com)

NSE

Month Date of High

High (`̀̀̀)

Volume on date of High

Turnover on date of High (`̀̀̀ In

crores)

Date of Low

Low (`)

Volume on Date of Low

(No. of Equity Shares)

Turnover on

Date of Low (` ` ` `

In crores)

Average

(`)

(No. of Equity Shares)

Apr-13 02-Apr-13 586.95 2,270 13.17 12-Apr-13 541.15 993 5.36 565.56

Mar-13 4-Mar-13 596.30 2,675 0.16 25-Mar-13 535.85 3,950 0.21 574.56

Feb-13 1-Feb-13 673.70 6,893 0.47 28-Feb-13 583.85 5,988 0.35 621.90

Jan-13 3-Jan-13 752.80 121,458 9.12 24-Jan-13 652.65 4,423 0.29 696.50

Dec-12 10-Dec-12 699.90 236,218 16.47 5-Dec-12 584.30 2,347 0.14 649.83

Nov-12 30-Nov-12 584.30 12,581 0.73 21-Nov-12 499.75 668 0.03 517.02

(Source: www.nseindia.com)

Notes:

(1) High, low and average prices are of the daily closing prices. (2) In case of two days with the same closing price, the date with the higher volume has been considered. (3) Average price represents the average of the daily closing prices of each day for each month presented.

Market price on February 6, 2013, the first working day following the Board Meeting approving the Issue was:

Date

BSE NSE

Open High Low Close Open High Low Close

February 6, 2013 663.35 664.90 641.25 643.10 659.60 663.45 638.20 641.75

(Source: www.bseindia.com, www.nseindia.com,)

Details of volume of business transacted during the last six(6) months on the BSE and NSE

Period BSE (No. of Equity Shares) NSE (No. of Equity Shares)

Apr-13 18,689 44,883

Mar-13 13,924 82,017

Feb-13 26,673 136,484

Jan-13 263,030 673,637

Dec-12 284,181 778,467

Nov-12 35,889 93,233

(Source: www.bseindia.com, www.nseindia.com,)

46

CAPITALISATION STATEMENT

The following table sets forth our Bank’s capitalization and total debt, as of March 31, 2013 and as adjusted to give effect to the Issue. This table should be read in conjunction with “Management’s Discussion and Analysis of

Financial Condition and Results of Operations” and our financial information contained in “Financial

Statements” on pages 49 and 149 respectively. (In ` crores)

Particulars As of March 31,

2013

As Adjusted for

the Issue

Loan Funds Long Term (Refer Note 1) 3,248.49 3,248.49

Short Term (Refer Note 2) 605.71 605.71

Total Debt 3,854.20 3,854.20

Shareholders Funds Share Capital 46.80 [●]* Reserves & Surplus (Net of Revaluation Reserve and Deferred Tax Assets)

3,602.21 [●]*

Total Equity 3,649.01 [●]*

Long Term Debt / Equity Ratio 0.89 [●]

* To be included in the Offer Document after determination of the Issue Price.

Notes: 1. Long Term Debts represents Sub-ordinate Debt, Perpetual Debt and Debts payable after one year. 2. Short Term Debts represents Debts maturing with in one year from the date of above statement and interest

accrued on debts.

There will be no further issue of Equity Shares whether by way of public issue, issue of bonus shares, rights issue, qualified institutions placement or in any other manner during the period commencing from the date of filing this Preliminary Offer Document with SEBI and the Stock Exchanges until the Equity Shares offered in the Issue have been listed on the Stock Exchanges or the Application Amounts are unblocked, on account of inter alia, refusal of the listing of such Equity Shares by the Stock Exchanges.

47

USE OF PROCEEDS The gross proceeds of the Issue will be ` [●] crores. After deducting the estimated Issue expenses of approximately ` [●] crores, the net proceeds of the Issue will be approximately ` [●] crores Purpose of the Issue Subject to compliance with applicable laws and regulations, our Bank intends to use the net proceeds received from the Issue to augment our capital base to meet our capital requirements, arising out of growth in our assets, primarily our loan and investment portfolio.

48

DIVIDEND POLICY Our Bank does not have a formal dividend policy. The declaration of dividends by our Bank is governed by the guidelines/circulars issued by RBI from time to time in this regard. The dividend paid by our Bank in the last three FYs is as provided below:

FY 2013 FY 2012 FY 2011

Face value per equity share (`) 10.00 10.00 10.00

Dividend (` in crores)* 53.82 46.80 46.80

Dividend per equity share (`) 11.50 10.00 10.00

Dividend rate (% to paid up capital) 115% 100% 100%

* Excluding corporate dividend tax The amounts paid as dividends in the past are not necessarily indicative of our Bank’s dividend policy or dividend amounts, if any, in the future. Investors are cautioned not to rely on past dividends as an indication of the future performance of our Bank or for an investment in the Equity Shares offered in the Issue.

49

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND

RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations is based on our audited

financial statements as of and for the years ended March 31, 2013, March 31, 2012 and March 31, 2011. You

should read this discussion of our financial condition and results of operations together with the financial

statements included elsewhere in this Preliminary Offer Document. Our actual results and the timing of selected

events could differ materially from those anticipated in forward-looking statements contained in this discussion as a

result of various factors, including those set forth under “Risk Factors” on page 28 and elsewhere in this

Preliminary Offer Document. See the section “Forward-Looking Statements” on page 11.

Our FY ends on March 31 of each year, so all references to a particular “FY” are to the 12-month period ended

March 31 of that year. For a description of our business, see the section “Business Overview” on page 79. The

following discussion is based on our financial statements, which have been prepared by us in accordance with

Indian GAAP, which change from time to time. Certain information included in this section has been derived from

the periodic returns filed with the RBI which are based on our books of account and underlying records. We do not

provide a reconciliation of our financial statements to IFRS or U.S. GAAP and we have not otherwise quantified or

identified the impact of the differences between Indian GAAP and IFRS and U.S. GAAP as applied to our financial

statements. As there are significant differences between Indian GAAP and IFRS and U.S. GAAP, there may be

substantial differences in our results of operations, cash flows and financial condition if we were to prepare our

financial statements in accordance with IFRS or U.S. GAAP instead of Indian GAAP.

Business Overview

Our Bank is one of the leading Public Sector scheduled commercial banks in Karnataka and offers a wide range of products and services to Retail and Corporate customers through a variety of delivery channels. In 100 years of our operations, we have significantly grown our branch network with a presence predominantly in South India especially Karnataka. We are a subsidiary of State Bank of India, India’s largest commercial bank who holds 92.33% of our equity capital. As on March 31, 2013, our network comprised of 780 branches and 853 ATMs across India. We are also the sponsors of Kaveri Grameena Bank, a RRB having presence in 10 districts of Karnataka with a network of 334 branches as on March 31, 2013. As on March 31, 2013, we had a total of 10,784 employees, serving over 62.89 lakh customers. We have three main business lines:

• Corporate/Wholesale Banking

• Retail Banking

• Treasury Operations We offer various corporate/wholesale banking products and services to our trade and corporate customers, including project finance, term loans, short term loans, cash credit, working capital finance, export credit, bill discounting, line of credit, letters of credit and guarantees. Our retail banking portfolio consists of Savings Bank, Current Account and Term Deposit services, retail lending for Housing, Gold Loan, Vehicle, Education, MSME lending, Agriculture and other personal loans, and other personal banking products. We offer our customers a suite of technological products, including global debit cards, “anywhere banking” facilities, mobile banking, RTGS, NEFT and Internet banking. We distribute third-party products such as life and non-life insurance policies through corporate agency agreements with SBI Life Insurance Company Limited and SBI General Insurance Company Limited, respectively, and mutual funds with SBI Funds Management Private Limited through a distribution agreement. We have entered into agreement for sourcing the applications for SBI Credit Cards. We also act as an agent for various State Governments and the Central Government on numerous matters including the collection of taxes and payment of salary and pension including pensions under New Pension Scheme. Our treasury operations comprise liquidity management by seeking to maintain an optimum level of liquidity, while complying with the CRR and the SLR, monitoring and implementation of non-SLR investments of our Bank. We

50

maintain the SLR through a portfolio of Central Government, State Government and Government-guaranteed securities that we actively manage to optimize yield and benefit from price movements. We are also involved in the trading of debt securities, equity securities and foreign exchange within permissible limits. Our total advances aggregated to ` 44,932.57 crores, ` 39,835.31 crores and ` 34,029.81 crores, and our total assets were ` 67,232.76 crores, ` 60,403.57crores and ` 52,032.46 crores as of March 31, 2013, March 31, 2012 and March 31, 2011 respectively. Our total deposits aggregated ` 56,969.05 crores, ` 50,186.30 crores and ` 43,225.47 crores and our total borrowings were ` 3,854.20 crores, ` 4,425.59 crores and ` 3,307.95 crores as of March 31, 2013, March 31, 2012 and March 31, 2011 respectively. Our total income grew to ` 6,561.07 crores in FY 2013 from ` 5,594.83 crores in FY 2012, representing an increase of 17.27%. Our net profit (after tax) increased to ` 416.10 crores in FY 2013 from ` 369.15 crores in FY 2012, representing an increase of 12.72%. Financial Performance Indicators Besides the financial statements, we use a variety of indicators to measure our financial performance. We calculate, among others, (i) the yield on the average of advances, (ii) the yield on the average of investments, (iii) the cost of the average of deposits and (iv) the cost of the average of borrowings. Our cost of funds is our interest expended divided by our average total liabilities, expressed as a percentage. Interest expense includes the interest cost of the unsecured subordinated bonds that we issued for Tier II capital adequacy purposes. In our financial statements, these bonds are accounted for as subordinated debt and form part of our borrowings. The following table sets out certain key metrics in our performance over the last three audited FYs:

FY 2013 FY 2012 FY 2011

Net Interest Income (` crores) 1,840.20 1,584.29 1,636.00

Net Interest Margin (%) 3.22 3.16 3.71

Expense to Income (%) 46.29 49.55 43.87

Net NPAs (%) 2.69 1.93 1.38

Return on Assets (%) 0.66 0.67 1.03

Return on Equity (%) 11.05 10.82 16.17

Profit per employee (` crores) 0.04 0.04 0.05

Cost of Deposits (%) 7.32 7.09 5.56

Yield on Advances (%) 11.62 11.44 10.33

1. Net interest margin is the ratio of net interest income to average total earning assets, expressed as a

percentage. Net interest income equals the difference in amount of interest income from interest-earning assets

and the amount of interest expense for interest-bearing liabilities. The average total earning assets is the simple

average of the fortnightly balances of total earning assets.

2. Expense to income is the ratio of operating expenses (which does not include provisions and contingencies) to

the sum of net interest income and other income, expressed as a percentage.

3. Net NPAs is the ratio of net NPAs to net advances, expressed as a percentage.

4. Return on assets is the ratio of net profit to average total assets, expressed as a percentage. The average total

assets is the simple average of the monthly balances of total assets, extracted from the monthly returns in Form

X filed with the RBI.

5. Return on equity is the ratio of net profit to equity, expressed as a percentage. Equity includes share capital

plus reserves and surplus, minus revaluation reserves.

6. Profit per employee is the ratio of the net profit during the period divided by the number of employees as of the

end of such period.

7. Cost of Deposits is the ratio of interest paid on deposits during the period divided by average deposits

8. Yield on Advances is the ratio of interest earned on advances divided by average advances

51

We intend to continue to increase and diversify our customer base and delivery channels. We had 780, 737 and 707 branches as of March 31, 2013, March 31, 2012 and March 31, 2011, respectively. In the FY 2013, FY 2012 and FY 2011, our total income was ` 6,561.07 crores, ` 5,594.83 crores and ` 4,534.26 crores respectively, representing a CAGR of 20.29% for the three-year period ended on March 31, 2013. In the FY 2013, FY 2012 and FY 2011, our net profit was ` 416.10 crores, ` 369.15 crores and ` 500.62, respectively. Our total assets increased to ` 67,232.76 crores as of March 31, 2013 from ` 52,032.46 crores as of March 31, 2011, representing a CAGR of 13.67% from FY 2011 to FY 2013. Total Income Our total income consists of interest earned and other income. Interest earned includes interest on advances, income on investments and interest on balances with the RBI and other inter-bank funds. Income on investments consists of interest from securities and our other investments. We also earn interest income from deposits that we maintain with other banks. Our investment portfolio consists primarily of Government and State Government securities. Our Bank meets SLR requirements through investments in these and other approved securities. Our Bank also holds Equity Shares, preference shares, debentures and bonds issued by public sector undertakings, public limited companies and government-controlled companies, commercial paper, mutual fund units and security receipts issued by asset reconstruction companies. Our deposits under the Rural Infrastructure Development Fund scheme are also included under our investments. Our interest income is affected by fluctuations in interest rates as well as the volume of the activity. Interest rates are highly sensitive to many external factors beyond our control, including growth rates in the economy, inflation, money supply, the RBI’s monetary policies, competition, deregulation of the financial sector in India, domestic and international economic and political conditions and other factors. Our other income consists principally of fee-based income, such as trade fees, commissions, foreign exchange and brokerage income, including from the sale of foreign exchange and interest rate derivatives and other structured products, net profit on the sale of investments and derivatives, profits or losses on the sale of land, buildings and other assets, net profit on exchange transactions, income earned from dividends from companies in India and miscellaneous income, which includes recovery from written-off accounts and incidental charges such as account keeping fees and sundry charges. Fee-based income includes fees and charges for services in our transactional banking business unit, such as cash management services, remittance services, documentary credits, letters of credit and issuance of guarantees and general banking charges, service charges and processing fees on customer accounts. It also includes income from our global markets activities, commissions on sales of third-party products, such as insurance, third party mortgage products and mutual funds, commissions on the sale of gold bullion and gold coins, and transaction fees on the use of debit and credit cards at our ATMs.

Expenditure Our expenditure consists of interest expended, operating expenses and provisions and contingencies. Interest expended consists of the interest paid on deposits and borrowings, including on the RBI and other inter-bank borrowings and on subordinate debt and Upper Tier II bonds. Our interest expended is affected by fluctuations in interest rates, our deposit mix and business volumes. Non-interest expenditure consists principally of operating expenses, which includes expenses for wages and employee benefits, lease rentals and related expenses such as electricity charges paid on premises, depreciation on fixed assets, fees paid to outsourcing service providers, insurance, repairs and maintenance, printing and stationery, advertising and publicity, auditors’ and directors’ professional fees and expenses, legal charges, postage and telecommunications and other expenses. Provisioning towards standard assets, non performing assets, depreciation and provisions on investments and towards operation losses including frauds and income tax and other taxes are included in provisions and contingencies.

Factors affecting our Financial Results The majority of our income comprises interest earned on credit facilities to clients, interest earned on investments and fee income. Our major expenses comprise interest expense on deposits and short-term borrowings and loans from banks and financial institutions, operating expenses and provisions and contingencies.

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Our financial results will be influenced by macroeconomic factors, including growth and inflation in the Indian economy. We are also vulnerable to interest rate volatility and changes in banking regulation and fiscal policy. Our results will also depend on our ability to attract new customers and additional business volumes from existing and new customers. Our business is subject to various other risks and uncertainties, including those discussed in the section “Risk Factors” on page 28. The following is a discussion of certain factors that have had, and we expect will continue to have, a significant effect on our financial results.

Availability of cost-effective funding sources

Our current and savings account deposits as of March 31, 2013, March 31, 2012 and March 31, 2011 were ` 17,972.32 crores, ` 16,163.54 crores and ` 14,789.88 crores, respectively, resulting in CASA percentages as of March 31, 2013, March 31, 2012 and March 31, 2011 of 31.55%, 32.21% and 34.21% respectively. Our Bank continues to be relatively dependent on retail term deposit, corporate term deposits and inter-bank funding compared to other banks in India. Our ability to meet demand for new loans and lower our cost of funding will depend on our ability to continue to broadbase our deposit profile, including by using our branch expansion strategy, our ability to attract and retain new customers to existing and new branches, and our continued access to term deposits from the retail, corporate and interbank market. Our debt service costs and cost of funds depend on many external factors, including developments in the Indian credit markets and, in particular, interest rate movements and the existence of adequate liquidity in the inter-bank markets. Internal factors that will impact our cost of funds include changes in our credit ratings, available credit limits and our ability to mobilize low-cost deposits, particularly through our retail banking branches.

Ability to build scale and scope in our business while maintaining or increasing profitability Our ability to grow our business and increase profitability, including by increasing our net interest income and fee income, will depend on a variety of factors. These include our ability to effectively manage our branch network expansion while scaling up our offerings across customer segments, our ability to identify and harness new areas of growth and to anticipate and respond to the needs of our customers and successfully cross-sell our products and services to them; our ability to maintain and improve the quality of our customer service and brand effectively; our ability to control costs and operating expenses with the growth of our business and the expansion of our branch network; the efficacy of our risk management methods to accurately assess the risks related to our growth, and to address risk on a larger scale and with respect to a more varied group of customers; our ability to monitor the quality of our balance sheet through our centralized processing methods for corporate and consumer lending and deposit activities and our ability to manage NPAs.

Impact of interest rate volatility Our result of operations depends to a great extent on our net interest income. Net interest income represents the excess of interest earned from interest-bearing assets (performing assets and investments) over the interest paid on customer deposits and borrowings. Volatility in interest rates affect the interest rates we charge on our interest-earning assets and that we pay on our interest-bearing liabilities. Our loans are largely on a floating rate basis. Interest rates are highly sensitive to many external factors beyond our control, including growth rates in the economy, inflation, money supply, the RBI’s monetary policies, competition, deregulation of the financial sector in India, domestic and international economic and political conditions and other factors. Our ability to withstand interest rate volatility will depend on our success in maintaining our asset mix of fixed rate and floating rate loans and in managing our asset-liability maturity gap while also right pricing of our assets.

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Ability to achieve operating efficiencies We use several methods to achieve operating efficiencies, such as centralizing our processing (including with respect to account opening for current and savings accounts and fixed deposits, as well as for trade finance related activities and expense related processing, as well as customer maintenance transactions, including the issue of cheque books and updating customer records), rationalizing and upgrading infrastructure and technology, tracking and improving cost efficiency, streamlining documentation and business process management through technology, enhancing the skill of our workforce through optimal recruitment and training, particularly in customer-facing businesses, and by outsourcing certain activities related to consumer finance business sourcing, collection and operations, off-site ATM operations, transaction processing in respect of credit cards and microfinance sourcing, monitoring and collection activities. On the other hand, our operating costs continue to rise owing to our growth strategy as we significantly widen our branch network and hire more employees. Our ability to sustain our growth strategy and increase the yield on our investments will depend on our continued success at optimising these costs and achieving operating efficiencies.

Ability to monitor asset quality and manage risk

Our net NPAs were ` 1,208.75 crores, ` 768.42 crores and ` 467.88 crores for FY 2013, FY 2012 and FY 2011, respectively, while our gross NPAs were ` 2,080.63 crores, ` 1,502.62 crores and ` 863.74 crores, respectively, as of the same dates. Our net NPA ratio was 2.69%, 1.93% and 1.38% for FY 2013, FY 2012 and FY 2011, respectively, while our gross NPA ratio was 4.53%, 3.70% and 2.51% as of the same dates. We have enterprise-wide risk management systems to manage credit risk, market risk and operational risk. We monitor credit risk at the transaction level as well as the portfolio level. As the average size of corporate loans in our loan portfolio is substantially larger than the average size of our retail loans, any major defaults in our corporate loans can significantly impact our overall portfolio of assets. Accordingly, our ability to manage NPAs is directly related to our ability to effectively manage the composition of our advances and monitor our asset quality. Our ability to continue to reduce or contain the level of our gross and net NPA ratios may also be impacted by a number of factors beyond our control, such as depressed economic conditions, including with respect to specific industries to which we are exposed, decreases in agricultural production, increases or decreases in commodity prices, adverse fluctuations in interest and exchange rates or adverse changes in Indian policies, laws or regulations, increased competition, etc. and also on our ability to manage risk.

Ability to grow our fee income Our ability to increase profitability will depend, among other factors, on our success in increasing our fee income from existing products as well as new products, while properly assessing related risks. Non-fund based offerings such as trade letters of credit, financial and performance bank guarantees, forward exchange contracts and currency and interest rate derivative products are significant activities from which we earn fee income. Our ability to increase profitability will depend on our ability to sustain and grow non-fund based offerings, while assessing and managing the credit, business and other risks. However, the increasing sophistication of our customers, offerings of similar products and services by our competitors and changes in the regulatory environment impacting our operations or marketability of certain third-party products may impact our ability to grow our fee income. In addition, changes in regulation may adversely affect our ability to earn commissions and other income from the sales of third-party products. For example, by its guidelines dated June 28, 2010, the IRDA stipulated limits on fees and charges associated with certain insurance products, commonly known as unit-linked insurance plans (ULIPs), in which the policy value at any time varies with the value of the underlying assets. Because of regulatory changes, as well as any regulation in the future that could reduce or impose a cap on fees and charges on third party products, or otherwise impact the marketability of, the third-party products, including insurance and mutual funds, our fee income from the sales of such products may be affected to that extent.

Economic growth and its impact on our business Our financial condition and results of operations are influenced by the general economic conditions prevailing in India. Real GDP growth in India was 8.4%, 8.4% and 6.5% for the years ended March 31, 2010, March 31, 2011 and March 31, 2012, respectively, according to the RBI’s Annual Report 2011-12 dated August 23, 2012. In addition, the economic growth of India is also affected by the global economy, and we may be impacted to the

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extent we service businesses that depend largely on cross-border economic activity and on the global economy generally. In its Annual Monetary Policy Statement announced on May 03 2013, the RBI noted that the advanced economies (AEs), near-term risks have receded, aided by improving financial conditions and supportive macroeconomic policies. But this improvement is yet to fully transmit to economic activity which remains sluggish. Policy implementation risks and uncertainty about outcomes continue to threaten the prospects of a sustained recovery. Emerging and developing economies (EDEs) are in the process of a multi-speed recovery. However, weak external demand and domestic bottlenecks continue to restrain investment in some of the major emerging economies. Inflation risks appear contained, reflecting negative output gaps and the recent softening of international crude and food prices. Domestically, growth slowed much more than anticipated, with both manufacturing and services activity hamstrung by supply bottlenecks and sluggish external demand. Most lead indicators suggest a slow recovery through 2013-14. Inflation eased significantly in Q4 of 2012-13 although upside pressures remain, both at wholesale and retail levels, stemming from elevated food inflation and ongoing administered fuel price revisions. During 2013-14, economic activity is expected to show only a modest improvement over last year, with a pick-up likely only in the second half of the year. Conditional upon a normal monsoon, agricultural growth could return to trend levels. The outlook for industrial activity remains subdued, with the pipeline of new investment drying up and existing projects stalled by bottlenecks and implementation gaps. With global growth unlikely to improve significantly from 2012, growth in services and exports may remain sluggish. Accordingly, the baseline GDP growth for 2013-14 is projected at 5.7 per cent. Regulations and policies for Indian banks

Our operations are regulated by the RBI. The Government, through the RBI, is actively involved in the management of the Indian economy and in implementing their social policies. Accordingly, we are subject to changes in regulations relating to reserve requirements (designed to maintain the strength of the Indian banking sector but also to reduce liquidity and therefore the availability of credit) and requirements to lend to certain priority sectors and requirements discouraging lending in certain specified sectors, such as real estate, commodities and capital markets, etc. We are also subject to periodic inspection by the RBI.

RBI cash and liquidity requirements

Commercial banks in India are subject to two kinds of statutory reserve requirements: Cash Reserve Ratio (“CRR”) and Statutory Liquidity Ratio (“SLR”). Currently, the RBI requires a CRR of 4.00% of our NDTL. The RBI is vested with the power to prescribe CRR without any ceiling limits and is not obliged to pay interest on CRR. The CRR was 5.00% in April 2009 which was increased to 5.75% in February 2010 and 6.00% in April 2010. Subsequently, the CRR was reduced to 5.50% in January 2012, 4.75% in March 2012, 4.50% in September 2012, 4.25% in November 2012 and to the current level of 4% in January 2013. The RBI is empowered to increase the SLR up to 40% of a bank’s NDTL, and has the discretion to fix the floor and ceiling levels of the SLR. Currently, the RBI requires an SLR of 23%. Although the SLR is intended as a measure to maintain the liquidity of banks, it has adverse implications for our Banks’ ability to expand credit. Changes in interest rates also impact the valuation of our SLR portfolio and thereby affect our profitability.

RBI norms relating to general provisioning and provisioning against NPAs:

The RBI sets prudential norms in respect of income recognition, asset classification and provisioning. In October 2009, the RBI directed banks to augment their provisioning cushions consisting of specific provisions against NPAs, as well as floating provisions, and ensure that their total provisioning coverage ratio, or PCR, including floating provisions, is not less than 70% by not later than September 30, 2010. In April 2011, the RBI relaxed this requirement and stated that banks should maintain a minimum PCR of 70% with reference to the gross NPA position as of September 30, 2010 and that the surplus of the provision under the applicable prudential norms should be segregated into an account called the “countercyclical buffer”, which can be used by the banks for making specific provisions for NPAs during any system-wide downturn with the prior approval of the RBI. As of March 31,

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2013, our provisioning coverage ratio was 60.10%. Any changes in the regulatory framework regarding provisioning for NPAs could adversely affect our profitability and consequently our net worth.

RBI norms on CRAR and Basel III compliance:

We are currently required to maintain a CRAR of 9% in relation to our total risk-weighted assets. With effect from January 1, 2013, the capital ratios prescribed by Basel III will be implemented in a phased manner. Under the Basel III capital requirements, banks are required to improve the quantity, quality and transparency of Tier I capital and meet heightened liquidity requirements. As of March 31, 2013, our CRAR was 11.79% as per Basel II. By March 2018, when the Basel III norms are fully implemented, the capital with capital conservation buffer (CCB) is required to be 11.5% of risk weighted assets. On November 7, 2012, the RBI also issued detailed guidelines on liquidity risk management in accordance with the BCBS (Basel Committee on Banking Supervision) document on Principles for Sound Liquidity Risk Management and Supervision, which are immediately effective. These guidelines include enhanced guidance on liquidity risk governance, measurement, monitoring and reporting requirements with respect to structural liquidity positions by banks. Revised guidelines on securitization:

The RBI issued revised guidelines on securitization transactions in May 2012 which introduced norms on minimum holding period, minimum retention requirement, prohibition of securitization of single loans, loan origination standards, standards of due diligence with regard to securitization transactions. The RBI has also issued a set of detailed guidelines on transactions involving transfer of assets through direct assignment of cash flows and the underlying securities to remove possible regulatory arbitrage that existed between the securitization route and the direct assignment route. Grant of new bank licenses after the amendment of the Banking Regulation Act:

The Union Budget announced on February 26, 2010 stated that the RBI was considering grant of additional banking licenses to private sector players. The RBI released a discussion paper in this regard in August 2010. After examining the comments and suggestions, some of the suggestions were accepted. After the enabling amendments to the Banking Regulation Act, 1949 were made and after consultation with the Government of India, RBI issued Guidelines for “Licensing of New Bank in the Private Sector” on February 22, 2013. The guidelines stipulate conditions relating to eligible promoters who can set up a bank through a wholly owned Non-Operative Financial Holding Company, fit and proper criteria of promoters, corporate structure, minimum voting equity capital, regulatory framework, foreign shareholding, corporate governance, prudential and exposure norms business plan and other conditions of financial inclusion & priority sector lending. In terms of these guidelines, applications can be submitted on or before July 01, 2013. Grant of new bank licenses is likely to increase the competition among banks.

Critical Accounting Policies

For critical accounting policies, please see “Financial Statements” on page 149.

SUMMARY OF OUR FINANCIAL RESULTS The following sets forth a summary of our financial results containing significant items of our income and expenditure based on our audited financial results annexed to the auditors’ report as of and for the FYs ended March 31, 2013, March 31, 2012 and March 31, 2011 as set out in “Financial Statements” on page 149:

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Statement of Profits and Losses

`̀̀̀ in crores

Year ended

31.03.2013

(Audited)

Year ended

31.03.2012

(Audited)

Year ended

31.03.2011

(Audited)

INCOME

Interest Earned 5,965.48 5,078.43 4,079.08

Other Income 595.59 516.40 455.18

TOTAL 6,561.07 5,594.83 4,534.26

EXPENDITURE

Interest Expended 4,125.28 3,494.14 2,443.08

Operating Expenses 1,104.76 1,041.07 917.43

Provisions and Contingencies 914.93 690.47 673.13

TOTAL 6,144.97 5,225.68 4,033.64

Net Profit for the year 416.10 369.15 500.62

FY 2013 compared to FY 2012

Income Our total income increased by 17.27% from ` 5,594.83 crores in FY 2012 to ` 6,561.07 crores in FY 2013 mainly due to an increase in interest income and profit on the sale of certain investments. Interest earned

`̀̀̀ in crores

FY 2013 FY 2012

Interest / discounts on advances / bills 4,787.77 4,063.27

Income on Investments 1,157.57 1,000.23

Interest on balances with RBI and other interbank funds 17.52 14.62

Others 2.62 0.31

Total 5,965.48 5,078.43

Interest earned on advances and discount charges on bills discounted increased by 17.83% from ` 4,063.27 crores in FY 2012 to ` 4,787.77 crores in FY 2013, due to an increase in average loan assets from ` 36,932.56 crores to ` 42,383.94 crores, representing a growth of 14.76%, and an increase in yields on advances from 11.44% to 11.62% over the same period. The average loan assets increased on account of increase in corporate advances. Income on investments increased by 15.73% from ` 1,000.23 crores in FY 2012 to ` 1,157.57 crores in FY 2013. Our investments are predominantly to meet the SLR requirements and in line with the increase in the business. The average investments increased by 13.80% from ` 13,829.92 crores in FY 2012 to ` 15,738.64 crores in FY 2013; the interest yield on investments increased from 7.22% to 7.30% due to the increasing interest rate environment that prevailed over the same period. Interest on balances with the RBI and other inter-bank funds increased by 19.83% from ` 14.62 crores in FY 2012 to ` 17.52 crores in FY 2013. Over the same period, our other interest earnings, which primarily consisted of interest on income-tax refunds, increased from ` 0.31 crores to ` 2.62 crores.

Other income Our other income increased by 15.34% from ` 516.40 crores in FY 2012 to ` 595.59 crores in FY 2013, mainly because of an increase in profit on sale of investments and profit on foreign exchange transactions.

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Commissions, exchange and brokerage

Income from commissions and exchange and brokerage fees decreased by 2.06% from ` 399.58 crores in FY 2012 to ` 391.35 crores in FY 2013. The decline is attributed mainly to loss of revenue by way of exchange income and collection income consequent upon popularizing of electronic remittances routes and use of multicity cheques. Commission income also includes income from distribution of third-party products including insurance and mutual fund products amounting to ` 8.77 crores in FY 2012 and ` 8.95 crores in FY 2013.

Profit on sales of investments

Profit on sales of investments (net) increased by 72.37% from ` 38.60 crores in FY 2012 to ` 66.53 crores in FY 2013 due to churning in liquid mutual funds and softening of G-Sec yields. Profit on foreign exchange transactions

Profit on foreign exchange transactions (net) increased by 79.66% from ` 32.56 crores in FY 2012 to ` 58.50 crores in FY 2013 primarily due to increase in trading turnover and profit from merchant transactions.

Miscellaneous income

Miscellaneous income increased by 75.95% from ` 45.61 crores in FY 2012 to ` 80.23 crores in FY 2013. Miscellaneous income includes recoveries in written off amounts of ` 43.75 crores in FY 2012 as compared to ` 31.79 crores in FY 2013. Miscellaneous income also includes write back of depreciation amounting to ` 47.33 crores on account of change in method of depreciation from SLM to WDV method during the year. As a result of change in method of depreciation, there was a consequent increase in Deferred Tax expense amounting to ` 43.56, thereby impacting the Net Profit by ` 3.77 crores. Expenditure

Interest Expenses

Our interest expense increased by 18.06% from ` 3,494.14 crores in FY 2012 to ` 4,125.28 crores in FY 2013 as the average of interest bearing liabilities consisting of deposits and borrowings increased from ` 50,572.65 crores to ` 57,717.57 crores during the same period.

`̀̀̀ in crores

FY 2013 FY 2012

Interest on deposits 3,779.90 3,220.92

Interest on RBI/Inter Bank borrowings and others 345.38 273.22

Total 4,125.28 3,494.14

Interest on deposits

Interest paid on deposits increased by 17.35% from ` 3,220.92 crores in FY 2012 to ` 3,779.90 crores in FY 2013. Over the same period, average deposits increased by 14.71% from ` 46,705.88 crores to ` 53,577.67 crores due to increases in new deposits and the average cost of deposits increased from 7.09% to 7.32% owing to reduction in CASA share from 32.03% to 31.55%. Other interest, including interest on Reserve Bank of India/inter-bank borrowings/Tier II bonds

Other interest, including interest on borrowings from the RBI, inter-bank borrowings, refinance from institutions, including SIDBI and NABARD (under which CRR and SLR requirements are not applicable to funds raised from such institutions, thereby releasing additional funds that can be deployed in our lending business), and Tier II bonds increased by 26.41% from ` 273.22 crores in FY 2012 to ` 345.38 crores in FY 2013, due to higher repo/call rates.

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Operating expenses (excluding depreciation) Our operating expenses (excluding depreciation) increased by 6.73% from ` 991.04 crores in FY 2012 to ` 1,057.72 crores in FY 2013 mainly due to an increase in payments to and provisions for employees from ` 620.58 crores to ` 640.24, representing an increase of 3.17%, as a result of an increase in the headcount from 10,249 as of March 31, 2012 to 10,784 as of March 31, 2013 primarily to staff the 43 new branches that opened during the FY 2013. Our operating expenses also increased due to an increase in other administrative expenses, excluding depreciation, by 12.69% from ` 370.45 crores in FY 2012 to ` 417.47 crores in FY 2013 mainly due to an increase in business volumes and expenditure incurred in connection with our branch network expansion. Depreciation on fixed assets Depreciation on fixed assets decreased by 5.98% from ` 50.04 crores in FY 2012 to ` 47.04 crores in FY 2013. The lower charge of depreciation is mainly on account of change in method of depreciation from Straight line method to Written down value method during the year resulting in lower charging of depreciation by ` 12.28 crores during the year.

Provisions and Contingencies

`̀̀̀ in crores

FY 2013 FY 2012

Provision for Income Tax / Wealth Tax / Fringe Benefit Tax 278.98 89.02

Provision for Non performing Assets 412.77 503.75

Provision for Standard Assets 63.40 46.13

Depreciation on Investments 36.03 43.23

Provisions towards diminution in fair value of Restructured Standard Assets 92.74 5.23

Other Provisions 31.01 3.11

Total 914.93 690.47

Provisions and contingencies increased by 32.51% from ` 690.47 crores in FY 2012 to ` 914.93 crores in FY 2013. Provisions for taxes increased from ` 89.02 crores in FY 2012 to ` 278.98 crores in FY 2013 because of increase in our operating profits. During FY 2012, there was a write back of Deferred Tax Liability provision in respect of Special Reserve to the extent of ` 60.04 crores. Our provisions against NPAs decreased by 18.06% from ` 503.75 crores in FY 2012 to ` 412.77 crores in FY 2013. Our Gross NPAs level increased from ` 1,502.62 crores to ` 2,080.63 crores over the same period. Provision for standard assets increased from ` 46.13 crores in FY 2012 to ` 63.40 crores in FY 2013 because of increase in Standard Assets and additional provision requirement for Restructured Standard Assets at 2.75% as per revised guidelines issued by RBI. Depreciation on Investments decreased from ` 43.23 crores in FY 2012 to ` 36.03 crores in FY 2013. Profit after Tax As a result of the foregoing factors, our net profit increased by 12.72% from ` 369.15 crores in FY 2012 to ` 416.10 crores in FY 2013. Over the same period, return on assets (RoA), which is computed as the ratio of our net profit to average total assets, expressed as a percentage, declined marginally from 0.67% to 0.66%. FY 2012 compared to FY 2011

Income Our total income increased by 23.39% from ` 4,534.26 crores in FY 2011 to ` 5,594.83 crores in FY 2012 mainly due to an increase in interest income and profit on the sale of certain investments.

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Interest earned

`̀̀̀ in crores

FY 2012 FY 2011

Interest / discounts on advances / bills 4,063.27 3,200.68

Income on Investments 1,000.23 864.57

Interest on balances with RBI and other interbank funds 14.62 8.65

Others 0.31 5.18

Total 5,078.43 4,079.08

Interest earned on advances and discount charges on bills discounted increased by 26.95% from ` 3,200.68 crores in FY 2011 to ` 4,063.27 crores in FY2012, due to an increase in average loan assets from ` 31,782.84 crores to ` 36,932.56 crores, representing a growth of 16.20%, and an increase in yields on advances from 10.33% to 11.44% over the same period. The average loan assets increased on account of increase in corporate advances. Income on investments increased by 15.69% from ` 864.57 crores in FY 2011 to ` 1,000.23 crores in FY 2012. Our investments are predominantly to meet the SLR requirements and in line with the increase in the business. The average investments increased by 13.26% from ` 12,210.77 crores in FY 2011 to ` 13,829.92 crores in FY 2012; the interest yield on investments increased from 6.95% to 7.22% due to the increasing interest rate environment that prevailed over the same period. Interest on balances with the RBI and other inter-bank funds increased by 69.02% from ` 8.65 crores in FY 2011 to ` 14.62 crores in FY 2012. Over the same period, our other interest earnings, which primarily consisted of interest on income-tax refunds, decreased from ` 5.18 crores to ` 0.31 crores.

Other income Our other income increased by 13.45% from ` 455.18 crores in FY 2011 to ` 516. 40 crores in FY 2012, mainly because of an increase in fee income, including commissions and foreign exchange and brokerage fees and fees accounted for as miscellaneous income. Commissions, exchange and brokerage

Income from commissions, exchange and brokerage fees increased by 8.53% from ` 368.16 crores in FY 2011 to ` 399.58 crores in FY 2012. The low growth is attributed mainly to loss of revenue by way of exchange income and collection income consequent upon popularizing of electronic remittances routes and use of multicity cheques. Commission income also includes income from distribution of third-party products including insurance and mutual fund products amounting to ` 8.77 crores in FY 2012 and ` 11.85 crores in FY 2011.

Profit on sales of investments

Profit on sales of investments (net) increased by 183.46% from ` 13.62 crores in FY 2011 to ` 38.60 crores in FY 2012 due to churning in liquid mutual funds and softening of G-Sec yields in the second half of the year. Profit on foreign exchange transactions

Profit on foreign exchange transactions (net) decreased by 29.78% from ` 46.37 crores in FY 2011 to ` 32.56 crores in FY 2012 primarily due decrease in turnover.

Miscellaneous income

Miscellaneous income increased by 70.07% from ` 26.82 crores in FY 2011 to ` 45.61 crores in FY 2012. Miscellaneous income includes recoveries in written off amounts of ` 43.75 crores in FY 2012 as compared to ` 23.64 crores in FY 2011.

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Expenditure

Interest Expenses Our interest expense increased by 43.02% from ` 2,443.08 crores in FY 2011 to ` 3,494.14 crores in FY 2012 as the average of interest bearing liabilities consisting of deposits and borrowings increased from ` 43,843.72 crores to ` 50,572.65 crores during the same period.

`̀̀̀ in crores

FY 2012 FY 2011

Interest on deposits 3,220.92 2,222.21

Interest on RBI/Inter Bank borrowings and others 273.22 220.87

Total 3,494.14 2,443.08

Interest on deposits

Interest paid on deposits increased by 44.94% from ` 2,222.21 crores in FY 2011 to ` 3,220.92 crores in FY 2012. Over the same period, average deposits increased by 13.77% from ` 41,052.74 crores to ` 46,705.88 crores due to increases in new deposits and the average cost of deposits increased from 5.56% to 7.09% owing to reduction in CASA share from 33.97% to 32.03%. Other interest, including interest on Reserve Bank of India/inter-bank borrowings/Tier II bonds

Other interest, including interest on borrowings from the RBI, inter-bank borrowings, refinance from institutions, including SIDBI and NABARD (under which CRR and SLR requirements are not applicable to funds raised from such institutions, thereby releasing additional funds that can be deployed in our lending business), and Tier II bonds increased by 23.70% from ` 220.87 crores in FY 2011 to ` 273.22 crores in FY 2012, due to an increase in the average borrowings by 38.55% from ` 2,790.98 crores to ` 3,866.77 crores as well as higher repo/call rates.

Operating expenses (excluding depreciation) Our operating expenses (excluding depreciation) increased by 14.19% from ` 867.92 crores in FY 2011 to ` 991.04 crores in FY 2012 mainly due to an increase in payments to and provisions for employees from ` 548.37 crores to ` 620.58, representing an increase of 13.17%, as a result of an increase in the headcount from 9,926 as of March 31, 2011 to 10,249 as of March 31, 2012 primarily to staff the 30 new branches that opened during the FY 2012. Our operating expenses also increased due to an increase in other administrative expenses, excluding depreciation, by 15.93% from ` 319.55 crores in FY 2011 to ` 370.45 crores in FY 2012 mainly due to an increase in business volumes and expenditure incurred in connection with our branch network expansion. Depreciation on fixed assets Depreciation on fixed assets increased by 1.05% from ` 49.52 crores in FY 2011 to ` 50.04 crores in FY 2012 reflecting an increase in capital spending on our branches and other infrastructure facilities. Provisions and Contingencies

`̀̀̀ in crores

FY2012 FY, 2011

Provision for Income Tax / Wealth Tax / Fringe Benefit Tax 89.02 241.51

Provision for Non performing Assets 503.75 455.78

Provision for Standard Assets 46.13 29.16

Depreciation on Investments 43.23 9.35

Provisions towards diminution in fair value of Restructured Standard Assets 5.23 (2.50)

Other Provisions 3.11 (60.17)

Total 690.47 673.13

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Provisions and contingencies increased by 2.58% from ` 673.13 crores in FY 2011 to ` 690.47 crores in FY 2012. Provisions for taxes decreased by 63.14% from ` 241.51 crores in FY 2011 to ` 89.02 crores in FY 2012 because of decline in our profits by 26.26%. During FY 2012, there was a write back of Deferred Tax Liability provision in respect of Special Reserve to the extent of ` 60.04 crores. Our provisions against NPAs increased by 10.52% from ` 455.78 crores in FY 2011 to ` 503.75 crores in FY 2012, due to increase in level of Gross NPAs from ` 863.74 crores to ` 1,502.62 crores over the same period. Provision for standard assets increased from ` 29.16 crores in FY 2011 to ` 46.13 crores in FY 2012 because of additional provision requirement for Restructured Standard Assets at 2% as per revised guidelines issue by RBI. Depreciation on Investments increased from ` 9.35 crores in FY 2011 to ` 43.23 crores in FY 2012 mainly on account of depreciation on shares acquired in lieu of debt in respect of restructured advances. Profit after Tax As a result of the foregoing factors, our net profit decreased by 26.26% from ` 500.62 crores in FY 2011 to ` 369.15 crores in FY 2012. Over the same period, return on assets (RoA), which is computed as the ratio of our net profit to average total assets, expressed as a percentage, declined from 1.03% to 0.67%.

Related Party Transactions We enter into transactions with related parties in the normal course of business. The principal related parties are our key management personnel. All significant transactions in relation to our business are conducted on an arm’s-length basis. For further information, see Note 4.6 in the Notes on Accounts in our audited financial statements as of and for the FY ended March 31, 2013 in the section “Financial Statements” on page 149. Liquidity and Capital Resources

Cash Flows

`̀̀̀ in crores

FY 2013 FY 2012 FY 2011

Cash Flow generated from / (used in) Operating Activities 393.65 678.74 (406.76)

Cash Flow generated from / (used in) Investing Activities (83.66) (88.37) (58.24)

Cash Flow generated from / (used in) Financing Activities (167.94) (167.94) 425.81

Cash and Cash equivalents at the end of the year 3,504.76 3,362.71 2,940.28

Our Bank needs cash primarily to finance lending to new borrowers and meet working capital requirements. We fund these requirements through a variety of sources, including deposits, cash from interest income, short-term borrowings and long term borrowings such as bonds, refinancing from financial institutions and banks and securitization transactions as well as equity issuances. Greater deployment of funds to provide loans generally results in decreasing our cash flow. Operating Activities We generated net cash from operating activities of ` 393.65 crores in FY 2013 and ` 678.74 crores in FY 2012. We used net cash from operating activities of ` (406.76) crores in FY 2011.The increase in net cash inflow from operating activities was due to higher volumes of business. The decrease in cash flow during the FY 2011 was primarily on account of more than 100% incremental CD Ratio and increase in investments. Our Bank derives cash inflow from operating activities, principally from the receipt of interest income and other income, including fee income, as well as net proceeds from deposits and short-term borrowings. Our cash outflow from operating activities principally comprises the disbursement of loans to customers, the funding of investments made by us, deposits with the Reserve Bank of India, the payment of interest on deposits and borrowings and general operating expenses.

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Investing Activities We used net cash in investing activities of ` 83.66 crores in FY 2013, ` 88.37 crores in FY 2012 and ` 58.24 crores in FY 2011. Our Bank increased the investment in fixed assets in the FYs 2013, 2012 and 2011 in the ordinary course of our business and in connection with our branch expansion strategy.

Financing Activities We used net cash from financing activities of ` 167.94 crores in FY 2013, ` 167.94 crores in FY 2012 and generated net cash in financing activities of ` 425.81 crores in FY 2011. During the FY 2011 our financing activities consisted mainly of raising share capital at a premium amounting to ` 583.20 crores through Rights Issue under the SEBI regulations. During the FY 2013, FY 2012 and FY 2011 our Bank used cash to pay dividends, interest on the Tier II bonds and to repay the Tier II bonds upon maturity. Our Bank did not raise any capital through share issuances or debt in the FY 2013. Liquidity We regularly monitor our funding levels to ensure we are able to satisfy the requirements of our loan disbursements and those that would arise upon maturity of our liabilities. We maintain diverse sources of funding and liquid assets to facilitate flexibility in meeting our liquidity requirements. Liquidity is provided principally by deposits and borrowings from banks and financial institutions, deposits from customers and retained earnings. Surplus funds, if any, are invested in accordance with our investment policy. As of March 31, 2013, our total investment portfolio was ` 16,774.58 crores. In addition, we monitor and manage our asset-liability gap with respect to our maturing assets and liabilities. As of March 31, 2013, our assets maturing between two days and seven days exceeded our liabilities maturing during the same period by ` 1,290.66 crores. As of the same date, our assets maturing between eight and fourteen days

exceeded liabilities maturing within the same period by ` 70.73 crores, liabilities maturing between fifteen and

twenty-eight days exceeded assets maturing within the same period by ` 937.27 crores, liabilities maturing between twenty-nine days and three months exceeded assets maturing within the same period by ` 67.57 crores, liabilities

maturing between three and six months exceeded assets maturing within the same period by ` 917.36 crores, and liabilities maturing between six months and one year exceeded assets maturing within the same period by `

5,125.85 crores.

Interest Rate Risk Since we have a substantial portion of fixed rate Rupee liabilities and a mix of floating and fixed-rate assets, movements in domestic interest rates constitute the main source of interest rate risk. We assess and manages the interest rate risk on our balance sheet through the process of asset-liability management. An asset liability management policy, which has been approved by our Board of Directors and adopted by our asset and liability committee, sets forth the broad guidelines for asset liability management activities. The asset liability management function categorizes all rate sensitive assets and liabilities into various time period categories according to interest rate sensitivity. We follow RBI guidelines for managing our asset and liability position. Our cost of deposits and cost of borrowings have been and will be negatively impacted by an increase in interest rates. Exposure to fluctuations in interest rates is measured primarily by way of gap analysis, providing a static view of the maturity profile of our assets and liabilities. An interest rate sensitivity report is prepared by classifying all assets and liabilities into various categories according to interest rate sensitivity for reporting on a monthly basis to the asset liability committee, our Board of Directors and the RBI. The difference between the amounts of assets and liabilities maturing in any maturity category provides a measure of the extent to which we are exposed to the risk of potential changes in the margins on new assets and liabilities. Our asset and liability committee meets on a monthly basis and reviews the interest rate and liquidity gap positions on the book, formulates a view on interest rates, reviews the business profile and its impact on asset liability management and determines the asset liability management strategy, in light of the then-current and expected business environment.

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Liquidity Risk

Liquidity risk arises from the absence of liquid resources, when funding loans, and repaying deposits and borrowings. This could be due to a decline in the expected collection, or our inability to raise adequate resources at an appropriate price. This risk is minimized through a mix of strategies, including increasing current account and savings deposits and following a forward-looking deposit mobilization and borrowing programme based on projected loans and maturing obligations. We monitor liquidity risk through our asset liability management function aided by liquidity gap reports. This involves the categorization of all assets and liabilities in different maturity profiles, and evaluating them for any mismatches in any particular maturities, especially in the short term. The asset liability management policy is based on RBI guidelines and our asset liability management committee’s guidelines and establishes the maximum allowed mismatches in the various maturities. On November 7, 2012, the RBI also issued detailed guidelines on liquidity risk management in accordance with the BCBS document on Principles for Sound Liquidity Risk Management and Supervision and the same is also being adhered to.

Exchange Rate Risk A significant portion of our assets are in Rupees and, therefore, we have minimal exchange rate risk on our asset portfolio. However, we have some non-resident deposits in foreign currency and some borrowings in foreign currency, mainly in U.S. Dollars. Since the quantum and tenor of our foreign currency assets are different from that of our foreign currency liabilities, we hedge the open position with other banks. As a financial intermediary, we are exposed to exchange rate risk on our merchant and proprietary transactions, which we manage through methods such as maintaining limits on uncovered positions specified by our board of directors. Credit Ratings

Our debts/bonds are rated by CRISIL (a subsidiary of S&P), ICRA, and CARE. The ratings are as follows:

Sr. No. ISIN Issued on Date of Maturity Ratings

1. INE651A09072 November 25, 2009 Perpetual CARE- AAA (Triple A) CRISIL – AAA (Stable)

2. INE651A09064 January 16, 2008 January 16, 2023 CARE- AAA (Triple A) CRISIL – AAA (Stable)

3. INE651A09056 November 30, 2007 Perpetual CARE- AAA (Triple A) CRISIL – AAA (Stable)

4. INE651A09049 November 15, 2006 October 15, 2021 CARE- AAA (Triple A) CRISIL – AAA (Stable)

5. INE651A09031 December 1, 2005 May 1, 2015 ICRA- AAA CRISIL – AAA (Stable)

6. INE651A09023 February 1, 2005 May 1, 2014 ICRA – AAA

Financial Condition Our net worth (consisting of share capital, and reserves and surplus (excluding revaluation reserves), increased by 10.32% from ` 3,412.72 crores as of March 31, 2012 to ` 3,764.77 crores as of March 31, 2013.

Assets

The following table sets forth the principal components of our assets:

`̀̀̀ in crores

As at

March 31, 2013 As at

March 31, 2012 As at

March 31, 2011

Cash and Balances with Reserve Bank of India 2,404.67 3,025.85 2,705.68

Balances with banks and money at call & short notice 1,100.09 336.86 234.60

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As at

March 31, 2013

As at

March 31, 2012

As at

March 31, 2011

Investments 16,744.58 14,732.70 12,927.14

Advances 44,932.57 39,835.31 34,029.81

Fixed Assets 824.28 749.41 725.00

Other Assets 1,196.57 1,723.44 1,410.23

Total Assets 67,232.76 60,403.57 52,032.46

Our total assets increased by 16.09% from ` 52,032.46 crores as at March 31, 2011 to ` 60,403.57 crores as at March 31, 2012 and further increased by 11.31% to ` 67,232.76 crores as at March 31, 2013. The most significant element of this change was the increase in advances as a result of an increase in our business activities described above. Our investments primarily include investments in Government securities as required by the RBI and surplus funds held in short-term liquid investments. Our net investments stood at ` 16,774.58 crores as at March 31, 2013. Our net advances increased by 17.06% from ` 34,029.81 crores as at March 31, 2011 to ` 39,835.31 crores as at March 31, 2012 and further increased by 12.80% to ` 44,932.57 crores as at March 31, 2013. Other assets, which include Inter-office Adjustments (net), Interest Accrued, Tax Paid in Advance/Tax Deducted at Source, Stationery and Stamps and others, increased by 22.21% from ` 1,410.23 crores as at March 31, 2011 to ` 1,723.44 crores as of March 31, 2012 and decreased by 30.57% to ` 1,196.57 crores as of March 31, 2013. These increases were principally due to a higher volume of business. The decrease in FY 2013 is mainly on account of decrease in Inter office adjustments.

Capital and Liabilities The following table sets forth the principal components of our capital and liabilities:

`̀̀̀ in crores

As at

March 31, 2013

As at

March 31, 2012

As at

March 31, 2011

Capital 46.80 46.80 46.80

Reserves & Surplus 4,285.73 3,941.73 3,636.52

Deposits 56,969.04 50,186.30 43,225.47

Borrowings 3,854.20 4,425.59 3,307.95

Other liabilities & Provisions 2,076.98 1,803.15 1,815.72

Total Liabilities 67,232.76 60,403.57 52,032.46

Our total liabilities increased by 16.09% from ` 52,032.46 crores as at March 31, 2011 to ` 60,403.57 crores as at March 31, 2012 and further increased by 11.31% to ` 67,232.76 crores as at March 31, 2013. These increases were due to the increase in our deposit base as a result of the growth of our business. Other liabilities and provisions include Bills payable, Interest accrued and provisions for expenses. The increases in other liabilities were mainly on account of an increase in provisions on standard assets and outstanding expenses payable due to an increase in business volumes. Off-Balance Sheet Items

Contingent liabilities

The following table sets forth the principal components of our contingent liabilities: `̀̀̀ in crores

As at

March 31,

2013

As at

March 31,

2012

As at

March 31,

2011

Claims against our Bank not acknowledged as debt 297.91 240.08 220.39

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As at

March 31,

2013

As at

March 31,

2012

As at

March 31,

2011

Liability on account of outstanding forward exchange contracts 10,205.33 11,263.72 11,294.26

Guarantees issued on behalf of constituents 2,387.35 2,131.19 1,816.72

Acceptances, endorsements and other obligations 4,043.77 4,309.86 3,632.75

Other items, for which bank is contingently liable 135.55 24.96 2.39

Total Contingent Liabilities 17,069.91 17,969.81 16,966.51

Total contingent liabilities increased by 5.91% from ` 16,966.51 crores as of March 31, 2011 to ` 17,969.81 crores as of March 31, 2012. Our contingent liabilities decreased by 5.01% to ` 17,069.91 crores as of March 31, 2013 as compared to March 31, 2012. Claims against us not acknowledged as debts include liabilities in respect of disputed tax liabilities increased to ` 297.91 crores as at March 31, 2013 as compared to ` 240.08 crores as at March 31, 2012 and ` 220.39 crores as at March 31, 2011. These disputed liabilities pertain to income tax claims. Contingent liabilities on account of outstanding derivative contracts were ` 10,205.33 crores as at March 31, 2013 as compared to ` 11,263.72 crores as at March 31, 2012 and ` 11,294.26 crores as at March 31, 2011. These contracts consist of merchant as well as proprietary trading in interest rate swaps and other derivative contracts, which are marked-to-market for accounting purposes.

Capital Adequacy We are subject to the capital adequacy requirements of the RBI. We are required to maintain a minimum capital adequacy ratio of 9% prescribed by RBI guidelines based on total capital to risk weighted assets. Our capital adequacy ratios are as follows:

As at March

31, 2013

As at March 31,

2012

As at March 31,

2011

Basel

II

Basel

I

Basel

II Basel I Basel II Basel I

Capital to Risk Weighted Assets Ratio (CRAR) (%) 11.79 11.19 12.55 11.22 13.76 12.78

Tier I Capital to Risk Weighted Asset Ratio (%) 8.87 8.41 9.18 8.17 9.78 9.08

Tier II Capital to Risk Weighted Asset Ratio (%) 2.92 2.78 3.37 3.05 3.98 3.70

Under RBI guidelines for the implementation of the new capital adequacy framework issued on April 27, 2007, banks that do not have an operational presence outside India are required to migrate to the revised framework for capital computation under Basel II norms with effect from March 31, 2009, from which date the said norms are applicable to us. However, our Bank has migrated to the revised framework from March 31, 2008. During the FY 2011, we issued 1.08 crore Equity Shares on Rights basis to the existing equity shareholders under the SEBI regulations raising proceeds of approximately `583.20 crores. As a result, our net worth increased due to such capital issuances. Consequently, our capital adequacy ratio computed under Basel II norms stood at 11.79%, 12.55% and 13.76% as of March 31, 2013, March 31, 2012 and March 31, 2011, respectively. Capital Expenditure Our fixed assets mainly comprise owned assets such as land and building, furniture, office equipment, computers and vehicles. Based on cash flow, our capital expenditure in FY 2013 was ` 83.66 crores.

Material Developments In the opinion of our board of directors, other than as described in this Preliminary Offer Document, there has not arisen, post March 31, 2013, any circumstances that materially and adversely affect the profitability or the value of our assets or our ability to pay our liabilities within the next 12 months.

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INDUSTRY OVERVIEW

The information in this section has been extracted from publicly available documents including officially prepared

materials from the Government and its various ministries and the RBI and its publications, the IRDA, Association of

Mutual Funds in India, trade, industry or general publications and other third party sources as cited in this section

below. Industry websites and publications generally state that the information contained therein has been obtained

from sources believed to be reliable but their accuracy and completeness are not guaranteed and their reliability

cannot be assured. The industry, market and other data used in this document has not been independently verified

by our Bank, the Book Running Lead Managers or any of their affiliates or advisers.

Indian Economy

The Indian economy is one of the largest economies in the world with a GDP at current prices of ` 82.80 trillion for the fiscal year ended March 31, 2012 (Source: Annual Report 2011-12, Ministry of Statistics and Programme

Implementation). It is one of the fastest growing major economies in the world, with a real GDP growth rate of 6.5% for the fiscal year ended March 31, 2012 (Source: Reserve Bank of India). In recent years, India has become a popular destination for FDI, owing to its well-developed private corporate sector, large consumer market potential, large pool of well-educated and English speaking work force, and well established legal systems. Overall, India attracted FDI of approximately US$ 33.0 billion in Fiscal 2012 as compared to an average of US$ 16.79 billion from Fiscal 2001 through Fiscal 2010 (Source: Reserve Bank of India). Barring financial year 2009, the economy has registered a growth of 8% and above during the period from financial year 2006 to financial year 2011. Growth slowed down to 6.5% in the financial year 2012 (at constant 2004-05 prices). (Sources: RBI Annual Report, 2011-2012; RBI,) Per capita GDP at factor cost (at constant prices) in India has grown from around ` 17,502 for the year 1991 at the time of liberalization to ` 46,221 for the year 2011 (Source: International Monetary Fund, World Economic Outlook

Database). This increase in per capita income has created increasing wealth and positively affected disposable incomes. This has had a significant investment multiplier effect on the economy leading to increasing consumerism and wealth creation and thus, positively impacting savings. Indian Banking Industry

The RBI, the central banking and monetary authority of India, is the central regulatory and supervisory authority for the Indian financial system. A variety of financial intermediaries in the public and private sectors participate in India’s financial sector, including the following:

• commercial banks; • long-term lending institutions; • regional rural banks, co-operative banks; • NBFCs, including housing finance companies; • other specialized financial institutions, and state-level financial institutions; • insurance companies; and • mutual funds.

In 1969, 14 private banks were nationalized followed by six private banks in 1980. (Source:

http://www.rbi.org.in/scripts/chro_1968.aspx.) Since 1991, many financial reforms have been introduced, substantially transforming the banking industry in India. Until the early 1990s, the Indian financial system was strictly controlled. Interest rates were administered, formal and informal parameters governed asset allocation, and strict controls limited entry into and expansion within the financial sector. The Government’s economic reform program, which began in 1991, focused on the financial sector. The first phase of the reform process began with the implementation of the recommendations of the Committee on the Financial System (the “Narasimham Committee

I”). The second phase of the reform process began in 1999.

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Constituents of the Indian Banking Industry

The Reserve Bank of India The RBI was established in 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934 (the “RBI Act”), is the central banking and monetary authority in India. The RBI is the central regulatory and supervisory authority for the Indian banking sector. Besides regulating and supervising the banking system, RBI performs the following important functions:

• formulates, implements and monitors the monetary policy; • issues and exchanges or destroys currency and coins not fit for circulation. • debt manager for the central and state governments; • regulator and supervisor for NBFCs; • manages the country’s foreign exchange reserves; • manages the capital account of the balance of payments; • designs and operates payment systems; • operates grievance redressal scheme for bank customers through the Banking Ombudsmen and formulates

policies for fair treatment of banking customers; and • development initiatives like financial inclusion and the strengthening of the credit delivery mechanisms for

agriculture, and small and micro-enterprises, especially in rural areas. The RBI issues guidelines on various issues relating to the financial reporting of entities under its supervision. These guidelines regulate income recognition practices, asset classification, provisioning for non-performing and restructured assets, investment valuation and capital adequacy. All the institutions under the purview of the RBI are required to furnish information relating to their businesses on a regular basis.

Commercial Banks Commercial banks in India earlier traditionally focused only on meeting the short-term financial needs of industry, trade and agriculture. However, since 1991 there have been comprehensive changes on account of deepening of the financial sector. Besides, short term, commercial banks are also meeting medium and long term needs of agriculture, industrial and infrastructure sector. As at June 2012, there were 169 scheduled commercial banks in India having 36,758 banked centers. (Source: RBI, Quarterly Statistics on Credits and Deposits, June 2012) Scheduled commercial banks are banks that are listed in the second schedule to the RBI Act, 1934, and are further categorized as public sector banks, private sector banks and foreign banks. As at June 2012, the aggregate deposit of all the scheduled commercial banks in India was ` 62.21 trillion and the gross bank credit of all the scheduled commercial banks in India was ` 47.74 trillion. (Source: RBI Quarterly Statistics on Credits & Deposits, June 2012.)

Public Sector Banks Public sector banks are scheduled commercial banks with significant Government of India shareholding and constitute the largest category in the Indian banking system. These include 26 banks (not including the RRBs) and the State Bank of India (“SBI”) and its five associate banks. These 26 banks had 70,314 offices across India and SBI and its associates had 19,787 offices as of March 31, 2012. Public sector banks make up the largest category in the Indian banking system. As at March 31, 2012, public sector banks had 67,466 branches. (Source: RBI Statistical

Tables Relating to Banks in India 2011-2012.) As at June 2012, public sector banks had ` 46.34 trillion of aggregate deposits and the gross bank credit of all the public sector banks in India was ` 35.09 trillion. (Source: RBI Quarterly

Statistics on Credits & Deposits, June 2012) As of June 2012, SBI and its associates accounted for approximately 22.8% and approximately 22.2% and nationalized banks accounted for approximately 52.3% and approximately 51.3% of the deposits and credit of the scheduled commercial banks, respectively, and the public sector banks in total accounted for approximately 75.1% of the deposits and approximately 73.5% of the advances of the scheduled commercial banks. (Source: RBI

Quarterly Statistics on Credits & Deposits, June 2012) These figures do not include RRBs. Regional rural banks were established from 1976 to 1987 by the Central Government, State Governments and sponsoring commercial banks jointly with a view to develop the rural economy. RRBs provide credit to small farmers, artisans, small entrepreneurs and agricultural laborers. The NABARD is responsible for regulating and supervising the functions of the RRBs.

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Private Sector Banks After bank nationalization was completed in 1969 and 1980, the majority of Indian banks were public sector banks. Some of the existing private sector banks, which showed signs of an eventual default, were merged with state-owned banks. In July 1993, as part of the banking reform process and as a measure to induce competition in the banking sector, the RBI permitted entry by the private sector into the banking system. This resulted in the emergence of nine private sector banks. These banks are collectively known as the “New Private Sector Banks”. There were seven New Private Sector Banks operating as of March 31, 2012. In addition, 13 private sector banks existing prior to July 1993 were operating as of March 31, 2012. These are collectively known as the “Old Private Sector Banks”. As of June 2012, private sector banks accounted for approximately 18.4% of the deposits and approximately 18.9% of the gross bank credit of the scheduled commercial banks (Source: RBI Quarterly Statistics on Credits & Deposits, June

2012).These figures do not include RRBs. Foreign Banks As of March 31, 2012, there were 41 foreign banks with 323 branches operating in India. Foreign banks accounted for approximately 4.4% of deposits and approximately 4.8% of gross bank credit of scheduled commercial banks (not including RRBs) as of March 31, 2012. As part of the liberalization process, the RBI has permitted foreign banks to operate more freely, subject to requirements largely similar to those imposed on domestic banks. Foreign banks operate in India through branches of the parent bank. The primary activity of most foreign banks in India has been in the corporate segment. However, in recent years, some of the larger foreign banks have started to put a greater emphasis on consumer financing based on the growth opportunities in India

Regional Rural Banks RRBs in India have been set up with the idea of combining the local feel of and familiarity with local problems characteristic of co-operatives with the professionalism and large resource base of commercial banks. As on March 31, 2012, RRBs had a network of 16,914 branches. As per the advice of the Government of India, RRBs were to open 2,000 branches in two years, i.e., 2010-11 and 2011-12. Against this, RRBs have opened 521 branches during 2010-11 and 913 branches during 2011-12 and have fallen short of the target. The Government of India has advised all sponsor banks of RRBs that 10 per cent of the existing RRB branch network will be the target for the year 2012-13. Accordingly, RRBs will be required to open 1,700 branches during the year 2012-13. (Source:

RBI, Report on Trend and Progress of Banking in India 2011-12)

Cooperative Banks Cooperative banks cater to the financing needs of agriculture, small industry and self-employed businessmen in urban and semi-urban areas of India. The state land development banks and the primary land development banks provide long-term credit for agriculture. Presently, the RBI is responsible for supervision and regulation of urban cooperative societies, and the NABARD for State Co-operative Banks and District Central Co-operative Banks. The Banking Regulation (Amendment) and Miscellaneous Provisions Act, 2004 has replaced the Banking Regulation (Amendment) and Miscellaneous Provisions Ordinance, 2004, promulgated on September 24, 2004 to enable RBI to issue licenses to multi-state cooperative societies to carry on banking business.

Long-Term Lending Institutions The long-term lending institutions were established to provide medium-term and long-term financial assistance to various industries for setting up new projects and for the expansion and modernization of existing facilities. These institutions provide fund-based and non-fund-based assistance to industry in the form of loans, underwriting, direct subscription to shares, debentures and guarantees. The primary long-term lending institutions include Industrial Development Bank of India, Industrial Finance Corporation of India Limited and Industrial Investment Bank of India. The long-term lending institutions were expected to play a critical role in Indian industrial growth and, accordingly, had access to concessional Government funding. However, in recent years, the operating environment of the long-term lending institutions has changed substantially. Although the initial role of these institutions was

69

largely limited to providing a channel for Government funding to industry, the reform process required them to expand the scope of their business activities. Their new activities included:

• fee-based activities such as investment banking and advisory services; and • short-term lending activity including issuing corporate finance and working capital loans.

Non-Banking Financial Companies (“NBFCs”) There were approximately 12,385 NBFCs in India registered with the RBI as at June 30, 2012. (Source: RBI Report

on Trend and Progress of Banking in India 2011-12.) All NBFCs are required to register with the RBI. The NBFCs may be categorized into entities which take public deposits and those which do not. The primary activities of the NBFCs are consumer credit, including automobile finance, home finance and consumer durable products finance, wholesale finance products such as bill discounting for SMEs, and fee-based services such as investment banking and underwriting. The RBI has implemented a set of directions to regulate the activities of the NBFCs under its jurisdiction. (Source: http://www.rbi.org.in/scripts/BS_ViewNBFCNotification.aspx) The directions are aimed at controlling the deposit acceptance activities of the NBFCs. The NBFCs that accept public deposits are subject to strict supervision and the capital adequacy requirements of the RBI. (Source: Notification as amended upto June 30,

2012 — “Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998”

http://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=7403)

Housing Finance Companies Housing finance companies form a distinct sub-group of the NBFCs. As a result of the various incentives given by the Government for investing in the housing sector in recent years, the scope of this business has grown substantially. Until recently, Housing Development Finance Corporation Limited was the premier institution providing housing finance in India. In recent years, several other types of entities including banks have entered the housing finance industry. The National Housing Bank and the Housing and Urban Development Corporation Limited are the two Government-controlled financial institutions created to improve the availability of housing finance in India. The National Housing Bank Act, 1987 provides for refinancing and securitization of housing loans, foreclosure of mortgages and setting up of the Mortgage Credit Guarantee Scheme. Subject to certain limits prescribed by the RBI, housing loans qualify as priority sector lending under the RBI’s directed lending rules.

Other Financial Institutions

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

State-Level Financial Institutions State-level financial institutions broadly consist of state financial corporations and state industrial development corporations. State financial corporations operate at the state level and form an integral part of the institutional financing system. State financial corporations were set up to finance and promote SMEs. The state financial corporations are expected to achieve balanced regional socio-economic growth by generating employment opportunities and widening the ownership base of industry. At the state level, there are also state industrial development corporations, which provide finance primarily to medium and large-sized industrial projects.

Insurance Companies As at December 31, 2012, there were 52 insurance companies in India, of which 24 were life insurance companies, 27 were non-life insurers and one was a reinsurance company. As at December 31, 2012, of the 24 life insurance companies, 23 were in the private sector and one was in the public sector. As at December 32, 2012, among the general insurance companies, 21 were in the private sector and six were in the public sector. For the financial year

70

2012, the first-year premiums underwritten by life insurance companies and the total premiums underwritten by life insurance companies were ` 1,139.42 billion and ` 2,870.72 billion, respectively. For the financial year 2012, total premiums underwritten by general insurance companies were `.528.76 billion. (Source: Insurance Regulatory and

Development Authority, Annual Report 2011-2012)

Mutual Funds There were 44 mutual funds in India with total average assets under management of Rs.7,473.33 billion for the quarter ending September 30, 2012. (Source: Association of Mutual Funds in India, Quarterly Update September

2012) From 1963 to 1987, Unit Trust of India was the only mutual fund operating in the country. It was set up in 1963 at the initiative of the Government and the RBI. From 1987 onwards, several other public sector mutual funds entered this sector. These mutual funds were established by public sector banks, LIC and GIC. The mutual funds industry was opened up to the private sector in 1993. The industry is regulated by the SEBI (Mutual Funds) Regulations, 1996, as amended. (Source: http://www.amfiindia.com/ showhtml.aspx?page=mfindustry)

Monetary and Credit Policy Measures As part of its effort to continue bank reform, the RBI has announced a series of measures in its monetary and credit policy statements aimed at deregulating and strengthening the financial system. The RBI issues an annual policy statement setting out its monetary policy stance and announcing various regulatory measures. It issues a review of monetary policy on a quarterly basis. Key Banking Industry Trends in India Headwinds from international and domestic economic developments posed challenges to the banking sector during the year 2011-12. While banks maintained their profitability, their asset quality was impaired. As things stand, several initiatives are under way to strengthen the regulatory and accounting frameworks aimed at increasing the resilience of the institutions. However, higher capital standards, stricter liquidity and leverage ratios and a more cautious approach to risk is likely to raise the funding costs of banks. Compliance with Basel III stipulations along with the credit needs of a growing economy will require banks to tap various avenues to raise capital. Broad estimates suggest that for public sector banks, the incremental equity requirement due to implementation of Basel III norms by March 2018 is expected to be approximately ` 750-800 billion. Meeting these capital requirements will entail the use of innovative and attractive market based funding channels by the banks. (Source: RBI, Report on

Trend and Progress of Banking in India 2011-12)

Retail Banking During 2011-12, banks’ retail loan portfolio witnessed expansion at a higher rate as compared with the previous year, mainly led by growth in credit card receivables and other personal loans. Housing loans continued to constitute almost half of total retail portfolio of banks.(Source: RBI, Report on Trend and Progress of Banking in India 11-12)

Retail Portfolio of Banks

(Source: RBI, Report on Trend and Progress of Banking in India 2011-12)

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Commercial Banking

Credit The growth in aggregate non-food bank credit decelerated in 2011-12. This trend was in consonance with the overall slowdown observed in the growth of loans and advances in banks’ consolidated balance sheet. Sluggish growth performance of the domestic economy due to cyclical and structural factors partly explains the slowdown in credit offtake. The overall slowdown in non-food bank credit during 2011-12 mainly emanated from slower growth in credit to industry, services and personal loans. (Source: RBI Annual Report 2011-12) Given that a majority of the personal loans are long-term in nature, growth in personal loans assumes special significance, especially against the backdrop of the increase in NPAs during 2011-12. On a year-on-year basis, the growth in personal loans decelerated during 2011-12 compared with the previous year. Within the personal loans segment, housing credit decreased. (Source: RBI Annual Report 2011-12)

Sectoral Deployment of Gross Bank Credit

Rs.billion

Note: 1. Data are provisional and relate to select banks which cover 95 per cent of total non-food credit extended by all scheduled

commercial banks. 2. Gross bank credit data include bills rediscounted with Reserve Bank, Exim Bank, other financial institutions and inter-bank

participations. (Source: RBI Annual Report 2011-12)

Following the overall deceleration in credit growth, credit to infrastructure also slowed down. As at the end of March 2012, the power sector accounted for more than half of total infrastructure credit. Further, the growth of credit to the power sector was higher than the overall growth of credit to infrastructure. Going forward, there is a need to monitor the impact of lending to the power sector on banks’ asset quality, especially given the recent slowdown observed in this sector. During 2011-12, public and private sector banks’ aggregate advances to priority sectors were less than 40% of aggregate ANBC or credit equivalent off-balance sheet exposure, whichever is higher. In addition, advances to

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agriculture and weaker sectors by both public and private sector banks were less than 18% and 10%, respectively, at the aggregate level. (Source: RBI Annual Report 2011-12)

Interest Rates and Inflation

The repo rate was increased to 8.50%, its highest in the period on October 25, 2011. The increase was a response to the prevailing inflationary pressures and anticipated inflation trajectory during April-November 2011. While the inflation trajectory indicated some softening of inflationary pressure by December 2011, there were signs of a marked deceleration of domestic growth brought about by the combined impact of a worsening global environment, the cumulative impact of past monetary policy tightening and domestic policy uncertainties. In the light of these developments, the mid-quarter review of December 2011 signalled a pause. The CRR has been decreased by 175 basis points of net demand and time liabilities (NDTL) of banks since May 2011. The Base Rate system, which replaced the benchmark prime lending rate system introduced in 2003, and became effective from July 2010, has contributed to improvement in the pricing of loans, enhanced transparency in lending rates and improvement of the assessment of the transmission of monetary policy. The headline Wholesale Price Index (WPI), a measure of inflation, eased significantly from 7.18% in December 2012 to 5.96% in March 2013. As proposed in the Second Quarter Review of Monetary Policy 2010-11, a discussion paper on deregulation of savings bank deposit rates was prepared and placed on the RBI website on April 28, 2011 for suggestions or feedback from the general public. Based on the feedback received and after examining the pros and cons of such deregulation, on balance, the RBI decided to deregulate the savings bank deposit interest rate, effective October 25, 2011, subject to the following two conditions:

• First, each bank will have to offer a uniform interest rate on savings bank balances up to Rs. 100,000, irrespective of the amount in the account within this limit.

• Second, for savings bank balances over Rs. 100,000, a bank may provide differential rates of interest, if it so chooses. However, there should not be any discrimination from customer to customer on interest rates between similar deposits accepted on same date.

Since the deregulation of the savings deposit interest rate, as of the day of the publishing of the RBI Annual Report for the year 2011-12, five private sector banks, ten foreign banks and one co-operative bank had increased their savings deposit interest rate in the range of 100-500 basis points during the period. As of the date of publication of the RBI Annual Report for the year 2011-12, none of the public sector banks had increased its savings deposit interest rate.

Asset Quality

During 2011-12, the deteriorating asset quality of the banking sector emerged as a major concern, with gross NPAs of banks registering a sharp increase. The spurt in NPAs could be attributed to the slowdown prevailing in the domestic economy as well as inadequate appraisal and monitoring of credit proposals. The deterioration in asset quality was more pronounced in the case of public sector banks. During 2011-12, the gross NPAs of public sector banks increased at a higher rate as compared with the growth rate of NPAs at a system-wide level. In recent years, restructuring of advances has been one of the important channels used by banks to contain the deterioration in asset quality caused by burgeoning NPAs. Consequent to the slowdown in domestic economy, banks, especially public sector banks, actively resorted to restructuring their advances under the special dispensation scheme of the RBI announced during 2008. The scheme enabled banks to retain the status of standard accounts even after restructuring. The steep increase in gross NPAs during 2011-12 was accompanied by a considerable increase in the growth of restructured advances. This was mainly due to the steep increase in restructured advances by public sector banks. (Source: RBI Annual Report 2011-12) In line with the acceleration in growth of gross NPAs as well as a lower provisioning coverage, net NPAs registered higher growth. Net NPA ratios were on the higher side for public sector banks, as compared with private sector and foreign banks. (Source: RBI Annual Report 2011-12)

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Bank Group-wise NPA ratios

(Source: RBI Annual Report 2011-12)

Profitability Despite accelerated growth in total income, the consolidated net profit of the banking sector increased at a slower rate compared with the previous year, mainly due to the steep increase in interest expended. Interest expended on deposits accounted for more than three-fourths of the total interest expenditure of banks. This, along with an increase in the proportion of relatively high-cost term deposits, led to acceleration in the interest cost of banks. In addition, retail deposits became more costly in the backdrop of a high interest rate environment. (Source: RBI,

Report on Trend and Progress of Banking in India 2011-12)

During 2011-12, both cost as well as return on funds increased for the banks. However, the spreads narrowed due to the higher increase in cost of funds. At the bank group level, cost of funds was lower in the case of foreign banks, partly because low cost CASA deposits formed a higher proportion of total deposits for foreign banks. (Source: RBI,

Report on Trend and Progress of Banking in India 2011-12).

The table below sets out the cost of funds and returns on funds, grouped and presented according to the different categories of banks:

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(Source: RBI, Report on Trend and Progress of Banking in India 2011-12)

Capital Adequacy The capital to risk-weighted assets ratio (CRAR) under both Basel I and II remained well above the stipulated 9% for the system as a whole as well as for all bank groups during 2011-12, indicating that Indian banks remained well-capitalized. Also, the CRAR (Basel II) at the system-level improved marginally compared with the previous year. The component-wise break up of capital funds indicated that Tier I capital accounted for more than 70% of the total capital of Indian banks both under Basel I and II, reflecting the sound capital position of banks. As at end-March 2012, the core CRAR stood well above the stipulated minimum of 6 per cent.

Capital to Risk-Weighted Assets Ratio under Basel I and II – Bank Group-wise:

(Source: RBI, Report on Trend and Progress of Banking in India 2011-12)

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Certain Recent Developments after March 31, 2013

May 2013

• The RBI reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.50 per cent to 7.25 per cent. Consequent to this, the reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, gets calibrated to 6.25 per cent. Similarly, the marginal standing facility (MSF) rate, determined with a spread of 100 basis points above the repo rate, and also the Bank Rate stand adjusted to 8.25 per cent with immediate effect.

Other Initiatives in the Banking Sector

WTO Compliant Roadmap for Foreign Banks in India

In February 2005, the RBI released a roadmap for foreign banks in India articulating a liberalized policy consistent with the World Trade Organization (“WTO”) commitments undertaken by India. The roadmap is divided into two phases. During the first phase (March 2005 to March 2009) foreign banks intending to establish a presence in India for the first time could either choose to operate through branches or set up wholly-owned subsidiaries, following the one-mode presence criteria. In addition, foreign banks would be allowed to acquire a controlling stake in a phased manner in private sector banks identified by the RBI for restructuring. Under the existing WTO commitments undertaken by India, 12 new branch licenses shall be given to foreign banks every year, including new and existing foreign banks. The RBI has been going beyond such WTO commitment by allowing foreign banks to open more branches. The second phase was scheduled to commence in April 2009 after a review of the implementation of the first phase and after due consultation with all the stakeholders in the banking sector. In this phase, three interconnected issues are to be considered. First, rules for the removal of limitations on the operations of the wholly-owned subsidiaries of foreign banks operating in India and treating them on an equal basis with domestic banks, to the extent appropriate, would be designed and implemented. Second, such wholly-owned subsidiaries may be allowed to list and dilute their stake on the stock exchanges in India on completion of a minimum prescribed period of operation. This would be consistent with paragraph 1(b) of Press Note 2 (2004 Series), which requires that at least 26.00% of the paid-up capital of such subsidiaries be held by resident Indians at all times. Dilution may take the form of an initial public offer or an offer for sale. Third, foreign banks may be permitted to enter into merger and acquisition transactions with any private sector bank in India during this phase, subject to the overall investment limit of 74.00%. (Source: RBI Roadmap for presence of foreign banks in India dated February 28, 2005

http://www.rbi.org.in/upload/content/images/RoadMap.html.)

Implementation of the RTGS system in India

With the commencement of operations of the Real Time Gross Settlement system (“RTGS system”) on March 26, 2004, India reached a major milestone in the development of payment systems and complied with the core principles set out by the Bank for International Settlements. As at September 29, 2011, RTGS connectivity was available in more than 78,000 bank branches. (Source: RBI website, http://www.rbi.org.in/scripts/ FAQView.aspx?Id=65) The main features of the RTGS system are as follows:

• payments are settled transaction-by-transaction for high-value and retail payments; • settlement of funds is final and irrevocable; • settlement is done on a real time basis and the funds settled can be used immediately; • it is a fully secured system which uses digital signatures and public key infrastructure based inscription • for safe and secured message transmission; • there is provision for intra-day collateralized liquidity support for member banks to smoothen the

temporary mismatch of fund flows; and • it provides for transfer of funds relating to inter-bank settlements as well as customer related fund transfers.

The RBI has been promoting the initiative to migrate from paper-based payment to electronic payment systems by creating appropriate technological infrastructure, while attempting to adopt international best practices. The RBI has played an instrumental role in the implementation of the RTGS system. All new innovations, whether, RTGS or CTS (as defined below), may only proceed with the approval and often, the support of the RBI. In most cases, it is the RBI that formulates the plan for implementation of new plans and new technologies.

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Cheque Truncation

The Cheque Truncation System (“CTS”), which aims at enhancing efficiency in the retail cheque clearing sector, was implemented on a pilot basis in the National Capital Region and Chennai with effect from February 1, 2008 and September 24, 2011, respectively. After migration of the entire cheque volume from the Magnetic Ink Character Recognition (the “MICR”) system to CTS, the traditional MICR-based cheque processing has been discontinued in these two locations. (Source: RBI website, http://www.rbi.org.in/scripts/ FAQView.aspx?Id=63)

Technology

Technology is emerging as a key-driver of business in the banking and financial services industry. Banks are developing alternative channels of delivery such as ATMs, telebanking, remote access and internet banking. Indian banks have been making significant investments in technology. In addition to computerization of front-office operations, Indian banks have moved towards back-office centralization. They are also implementing “Core Banking” or “Centralized Banking”, which provides connectivity between branches and allows the offering of a variety of value-added products, benefiting a larger number of customers. The use of ATMs has been growing rapidly and this has helped to optimize the investments made by Indian banks in infrastructure. The payment and settlement system is also being modernized. The RBI is actively pursuing the objective of establishing a RTGS system of comparable standard with that of other developed economies.

Corporate Governance

Implementation of good corporate governance practices is becoming an area of focus for banks and regulators in India. It is becoming increasingly common that the board of directors of Indian banks comprises an audit committee entrusted with the task of overseeing the organization, operations and quality control of the internal audit function, reviewing financial accounts and following-up with the external auditors of the bank as well as examinations by regulators. Disclosure levels in banks’ balance sheets have been enhanced and measures have been initiated to strengthen corporate governance in banks. Consolidation

With the increased recognition by Indian banks of the importance of size, the Government has expressed its views of favoring consolidation in the Indian banking sector. Mergers and acquisitions are considered by Indian banks as a means of achieving inorganic growth in size and attaining economies of scale and scope. Notwithstanding its stakeholding in public sector banks, the Government has indicated that it would not impede the mergers of public sector banks, provided the board of directors of the banks comes up with a proposal of merger based on synergies and potential for improved operational efficiency. The Government has also provided favorable tax treatments aimed at promoting mergers and acquisitions. For example, Section 72(A) of the Income Tax Act makes the benefit of “carry forward and set-off of accumulated losses and unabsorbed depreciation” available to the acquiring entity (which could be a company, a corresponding new bank, a banking company or a specified bank), if the Government, on the recommendation of the relevant authority, is satisfied that the specified conditions are being fulfilled and makes a declaration to such effect allowing such benefits to the acquiring entity as provided thereunder. Further, under the Finance Act, 2005 a new Section 72AA has been incorporated into the Income Tax Act pursuant to which, during the amalgamation of a banking company with any other banking institution under a scheme sanctioned and brought into force by the Government under Section 45 (7) of the Banking Regulation Act, the accumulated loss and the unabsorbed depreciation of such banking company shall be deemed to be the loss or, as the case may be, allowance for depreciation of such banking institution for the previous year in which the scheme of amalgamation was brought into force and other provisions of the Income Tax Act relating to setoff and the carry forward of loss, and allowance, for depreciation shall apply accordingly.

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Expected Future Events and Changes

Implementation of the Basel III Capital Regulations

In December 2010, the Basel Committee on Banking Supervision (BCBS) issued the Basel III capital regulations as a response to the lessons learned from the financial crisis. Accordingly, the RBI issued final guidelines on capital regulations to all scheduled commercial banks on May 2, 2012 after due consideration of the comments and suggestions received from various stakeholders on the draft guidelines. The minimum capital requirement including capital conservation buffers will be introduced in a phased manner and will be fully implemented by March 31, 2018. Under the Basel III capital regulations, total capital of a bank in India must be at least 9% of risk weighted assets (RWAs) (the Basel II requirement is a minimum 8% of RWAs). Tier I capital must be at least 7% of RWAs (6% as specified by the BCBS); and Common Equity Tier I capital must be at least 5.5% of RWAs (4.5% as specified by BCBS). In addition to the minimum requirements as indicated above, a capital conservation buffer (CCB) in the form of common equity of 2.5% of RWAs is required to be maintained by banks. Under the Basel III capital regulations, total capital with CCB has been fixed at 10.5% (8% CRAR + 2.5% CCB). Under the Basel III capital regulations, a simple, transparent, non-risk based leverage ratio has been introduced. The BCBS will test a minimum Tier I leverage ratio of 3% during the parallel run period from January 1, 2013 to January 1, 2017. The RBI has prescribed that during this parallel run period, banks should strive to maintain their existing leverage ratios but in no case should a bank’s leverage ratio fall below 4.5%. Banks whose leverage is below 4.5% have been advised to achieve this target as early as possible. This leverage ratio requirement will be finalized taking into account the final proposals of the BCBS.

Dynamic Provisioning Guidelines

At present, banks generally make two types of provisions; general provisions on standard assets and specific provisions on NPAs. Since the level of NPAs varies through the economic cycle, the resultant level of specific provisions also behaves cyclically. Consequently, lower provisioning during upturns and higher provisions during downturns have a procyclical effect on the real economy. To address the pro-cyclicality of capital and provisioning, efforts at an international level are being made to introduce countercyclical capital and provisioning buffers. The RBI has prepared a discussion paper on countercyclical (dynamic) provisioning framework. The dynamic provisioning framework is based on the concept of expected loss. The average level of losses a bank can reasonably expect to experience is referred to as expected loss, and is considered the cost of doing business. It is generally covered by provisioning and pricing. The objective of dynamic provisioning is to smoothen the impact of incurred losses on the results of operations through the cycle, and not to provide general provisioning cushion for expected losses. More specifically, the dynamic provisioning created during a year will be the difference between long run average expected loss of the portfolio for one year and the incremental specific provisions made during the year. The parameters of the model suggested in the discussion paper are calibrated based on data of Indian banks. Banks that have the capability to calibrate their own parameters may, with the prior approval of the RBI, introduce a dynamic provisioning framework using the theoretical model indicated by the RBI. Other banks would have to use the standardized calibration provided by the RBI. Financial Sector Legislative Reforms Commission (FSLRC)

The FSLRC was constituted in March 2011 to redraft and harmonize different legislations related to the financial sector. In its approach paper released on October 1, 2012, the FSLRC has proposed a two-agency model with the RBI as the monetary authority, banking regulator and payment systems regulator, and a single regulator for the rest of the financial sector. This is currently in draft form.

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Bank Holding Company (BHC) or Financial Holding Company (FHC)

In June 2010, the RBI constituted a working group to, inter alia, examine the different holding company structures prevalent internationally in the financial sector and to examine the feasibility of introducing an FHC structure in the Indian context. FHCs are companies that own or control one or more banks or non-bank financial companies. Currently, banks in India are organized under a bank-subsidiary model (BSM) in which the bank is the parent of all the subsidiaries of the group. In May 2011, the RBI released the working group’s recommendation that stated, among others, that the FHC model should be pursued as a preferred model for the financial sector in India and that the RBI should be designated as the regulator for FHCs. The recommendations have currently not been implemented.

Grant of new bank licenses after the amendment of the Banking Regulation Act

The Union Budget announced on February 26, 2010 stated that the RBI was considering grant of additional banking licenses to private sector players. Pursuant to the budget announcement, RBI has released a discussion paper in this regard in August 2010. After examining the comments and suggestions, some of the suggestions were accepted. After the enabling amendments to the Banking Regulation Act, 1949 were made and after consultation with the Government of India, RBI issued Guidelines for “Licensing of New Bank in the Private Sector” on February 22, 2013. The guidelines stipulate conditions relating to eligible promoters who can set up a bank through a wholly owned Non-Operative Financial Holding Company, fit and proper criteria of promoters, corporate structure, minimum voting equity capital, regulatory frame work, foreign shareholding, corporate governance, prudential and exposure norms business plan and other conditions of financial inclusion & priority sector lending. In terms of these guidelines, applications can be submitted on or before 1st July, 2013.

Debt Recovery Regulations in India

Legislative Framework for Recovery of Debts due to Banks

Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act 2002 The Securitization & Reconstruction of Financial Assets and Enforcement of Securities Interest Act 2002 (the “SARFAESI Act”) was enacted by the Government of India on December 17, 2002. It provides that a secured creditor may, in respect of loans classified as non-performing in accordance with RBI guidelines, give notice in writing to the borrower requiring it to discharge its liabilities within 60 days, failing which the secured creditor may take possession of the assets constituting the security for the loan, and exercise management rights in relation thereto, including the right to sell or otherwise dispose of the assets. The Recovery of Debts due to Banks and Financial Institution Act, 1993 Earlier, following the recommendations of the Narasimham Committee, the Recovery of Debts due to Banks and Financial Institutions Act, 1993 was enacted. This legislation provides for the establishment of a tribunal for speedy resolution of litigation and recovery of debts owed to banks or financial institutions. The Act creates tribunals before which the banks or the financial institutions can file a suit for recovery of the amounts due to them. However, if a scheme of reconstruction is pending before the Board for Industrial and Financial Reconstruction, under the Sick Industrial Companies (Special Provision) Act, 1985, no proceeding for recovery can be initiated or continued before the tribunals. This protection from creditor action ceases if the secured creditor takes action under the SARFAESI Act.

Corporate Debt Restructuring Forum To put in place an institutional mechanism for the restructuring of corporate debt, the RBI has devised a corporate debt restructuring system, on which RBI issued detailed guidelines through its circular dated August 23, 2001. The objective of this framework is to ensure a timely and transparent mechanism for the restructuring of corporate debts of viable entities facing problems, outside the purview of the BIFR, debt recovery tribunals and other legal proceedings. In particular, this framework aims to preserve viable corporates that are affected by certain internal and external factors and minimize the losses to the creditors and other stakeholders through an orderly and coordinated restructuring programme. The corporate debt restructuring system is a non-statutory mechanism and a voluntary system based on debtor-creditor and inter-creditor agreements.

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BUSINESS OVERVIEW

Our Bank is one of the leading Public Sector scheduled commercial banks in Karnataka and offers a wide range of products and services to Retail and Corporate customers through a variety of delivery channels. In 100 years of our operations, we have significantly grown our branch network with a presence predominantly in South India especially Karnataka. We are a subsidiary of State Bank of India, India’s largest commercial bank who holds 92.33% of our equity capital. As on March 31, 2013, our network comprised of 780 branches and 853 ATMs across India. We are also the sponsors of Kaveri Grameena Bank, a RRB having presence in 10 districts of Karnataka with a network of 334 branches as on March 31, 2013. As on March 31, 2013, we had a total of 10,784 employees, serving over 62.89 lakh customers. We have three main business lines:

• Corporate/Wholesale Banking

• Retail Banking

• Treasury Operations We offer various corporate/wholesale banking products and services to our trade and corporate customers, including project finance, term loans, short term loans, cash credit, working capital finance, export credit, bill discounting, line of credit, letters of credit and guarantees. Our retail banking portfolio consists of Savings Bank, Current Account and Term Deposit services, retail lending for Housing, Gold Loan, Vehicle, Education, MSME lending, Agriculture and other personal loans, and other personal banking products. We offer our customers a suite of technological products, including global debit cards, “anywhere banking” facilities, mobile banking, RTGS, NEFT and Internet banking. We distribute third-party products such as life and non-life insurance policies through corporate agency agreements with SBI Life Insurance Company Limited and SBI General Insurance Company Limited, respectively, and mutual funds with SBI Funds Management Private Limited through a distribution agreement. We have entered into agreement for sourcing the applications for SBI Credit Cards. We also act as an agent for various State Governments and the Central Government on numerous matters including the collection of taxes and payment of salary and pension including pensions under New Pension Scheme. Our treasury operations comprise liquidity management by seeking to maintain an optimum level of liquidity, while complying with the CRR and the SLR, monitoring and implementation of non-SLR investments of our Bank. We maintain the SLR through a portfolio of Central Government, State Government and Government-guaranteed securities that we actively manage to optimize yield and benefit from price movements. We are also involved in the trading of debt securities, equity securities and foreign exchange within permissible limits. Our total advances aggregated to ` 44,932.57 crores, ` 39,835.31 crores and ` 34,029.81 crores, and our total assets were ` 67,232.76 crores, ` 60,403.57crores and ` 52,032.46 crores as of March 31, 2013, March 31, 2012 and March 31, 2011 respectively. Our total deposits aggregated ` 56,969.05 crores, ` 50,186.30 crores and ` 43,225.47 crores and our total borrowings were ` 3,854.20 crores, ` 4,425.59 crores and ` 3,307.95 crores as of March 31, 2013, March 31, 2012 and March 31, 2011 respectively. Our total income grew to ` 6,561.07 crores in FY 2013 from ` 5,594.83 crores in FY 2012, representing an increase of 17.27%. Our net profit (after tax) increased to ` 416.10 crores in FY 2013 from ` 369.15 crores in FY 2012, representing an increase of 12.72%.

Our History Our Bank was incorporated on May 13, 1913 as a public limited company pursuant to the Mysore Companies Regulation No.III of 1895 as “The Bank of Mysore Limited”. In 1953, The Bank of Mysore Limited was appointed as an agent of the Reserve Bank of India to undertake government business and treasury operations. Thereafter, pursuant to the notification of State Bank of India (Subsidiary Banks) Act, 1959, The Bank of Mysore Limited was constituted as a subsidiary of State Bank of India under the name State Bank of Mysore. We are listed on BSE, NSE,

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MSE and BgSE. In October 2010, we issued 1.08 crore Equity Shares on rights basis to the existing Equity shareholders at a price of ` 540 per equity share aggregating to ` 583.20 crores. Awards and Achievements In the recent past, we have been felicitated with the following awards:

• Special Award (2008-09) for excellence in Lending to Micro & Small Enterprises by Ministry of Micro, Small and Medium Enterprises, Government of India

• Special Award (2010-11) for excellence in Lending to Micro & Small Enterprises by Ministry of Micro, Small and Medium Enterprises, Government of India

• Best Performance Award (2009-10) for Best Overall performance among Commercial Banks under Self Help Group – Bank Linkage Programme – Karnataka by NABARD

• Best Performance Award (2010-11) for Best Overall performance among Commercial Banks under Self Help Group – Bank Linkage Programme – Karnataka by NABARD

COMPETITIVE STRENGTHS We believe that our success can be attributed to a combination of the following competitive strengths:

100 years of banking experience and established relationships with customers With 100 years of banking experience, we believe to have built strong relationships with customers including Central and State Governments as well as public sector enterprises, which has been one of the drivers of our growth. For instance, we act as an agent for various State Governments and Central Government on numerous matters including the collection of taxes and payment of salary and pension including New Pension Scheme. We are the lead bank in three districts of Karnataka i.e., Mysore, Tumkur and Chamarajanagar. In addition, we handle a significant volume of the banking requirements for India’s public sector enterprises. As on March 31, 2013, 7.01% of our loan portfolio consisted of loans to public sector undertakings. We have earned a commission of ` 67.95 crores during FY 2013 from government business. During the FY 2013, we handled about 77% of Government of Karnataka’s transactions.

Strong presence in Karnataka and Other South Indian States We have a presence predominantly in South India with 715 branch offices in South India out of which 641 branches are in the state of Karnataka. We believe that Karnataka and other South Indian states are rich in resources and provide higher opportunity for resource mobilization. Specifically, Karnataka houses rich mining belts and also has a strong manufacturing and agricultural background which we believe can enable us to enhance our return from our advances. Additionally, we have a wide distribution of 242 branches in the rural areas of South Indian states which provide us an edge in our priority sector banking due to its rich agricultural resources and a large catchment area for low cost deposits. We are also known as “Mysore Bank” and “My Bank” in Karnataka. Favourable financial position Our total income grew to ` 6,561.07 crores in FY 2013 from ` 5,594.83 crores in FY 2012, representing an increase of 17.27%, and our net profit (after tax) grew to ` 416.10 crores in FY 2013 from ` 369.15 crores in FY 2012, representing an increase of 12.72%. Further, for the FY 2013, we reported an expense-to-income ratio of 46.27% and a net interest margin of 3.22% as compared to expense-to-income ratio of 49.55% and a net interest margin of 3.16% for FY 2012. The credit-deposit ratio of our Bank decreased to 80.71% as at March 31, 2013 from 81.87% as at March 31, 2012. As of March 31, 2013, our CRAR was 11.79% as per Basel II, well above the 9.00% minimum required by RBI. Our capital position, as measured by our overall and Tier I capital adequacy ratios, allows us to take advantage of significant growth opportunities in the market.

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Technology driven approach

Over the past several years, we have devoted substantial resources to achieve seamless integration of our people, processes, data and applications. We have increased our delivery channels through a network of 780 branches, internet banking, mobile banking and 853 ATMs as of March 31, 2013. We have networked all our branches and offices to facilitate Core Banking Solution (“CBS”). We use CBS to centralize the processing of transactions. It allows our customers to operate their accounts from remote locations and use banking services from any of our service outlets, regardless of where our customers maintain their accounts. With the CBS platform, we have been able to implement a variety of IT-enabled services, such as “anywhere banking”, M-Commerce, Interbank Mobile Payment System, RTGS and NEFT. All of our branches are RTGS and NEFT enabled. All the branches of our Bank and RRB sponsored by us are on CBS platform. Additionally, we have established a data centre in Belapur in Navi Mumbai, Maharashtra and a disaster recovery centre in Chennai, Tamil Nadu as part of a business continuity plan in the event of technological problems or disasters. We also make effective use of IT platform to monitor NPAs/ standard assets and take action in a timely manner to avoid slippage of asset quality. Strong Parentage of State Bank of India We are a subsidiary of State Bank of India, India’s largest commercial bank. State Bank of India currently holds 92.33% of our equity share capital. SBI as parent helps in achieving various operational and managerial synergies. We share the SBI logo, which gives us visibility because of strong presence of SBI. Further, we have entered into MOUs for sharing of various technologies for the functioning of our various banking activities. We also draw our various critical policies in line with our parent bank’s policies.

OUR BUSINESS STRATEGIES The key elements for our business strategies going forward are:

To increase CASA deposits and expand our retail banking operations:

We seek to increase our CASA deposits in order to reduce cost of funds and improve our core capital. In order to attract retail customers and increase our CASA deposits, we intend to promote our Bank through marketing campaigns and the introduction of new products. We believe that the implementation of CBS, internet and mobile banking systems and ongoing installation of new ATMs will enable us to increase our customer base, thereby increasing CASA deposits. We aim to focus on increasing the share of retail loans in total advances by leveraging our branch network for sourcing retail loans, expanding the distribution network for retail assets and diversifying our retail loan product portfolio. As a part of our strategy to attract more deposits, we have introduced savings bank accounts with accident insurance policy for ` 4.00 lakhs at a nominal annual premium of ` 100. Our Bank continues to invest in building risk management and analytical capabilities to mitigate risks and drive cross-selling opportunities and profitability of our retail loan products.

Increase number of branches and market share

We seek to leverage our strong brand recall, especially in Southern India, and to expand our presence across other geographies in India. We intend to increase our branch network and infrastructure across India and gain a larger pan-India market share in terms of advances and deposits. Working toward this goal, we plan, and have received approval from our Board of Directors, to open 187 new branches which will increase our branch network from 780 branches as on March 31, 2013 to 967 branches. Of these 187 branches, we plan to open 98 branches in Tier 1 centers (to open branches in Tier 1 centers, require the approval of RBI, which we have applied for), and the remaining 89 branches are planned for Tier 2 to Tier 6 centers (for these branches, the approval of RBI is not required). We will continue to focus on improving our technology to support our network of branches. We also plan to increase our total number of ATMs by installing an additional 115 ATMs by March 31, 2014, to provide easy accessibility to our customers. In addition, we seek to increase our

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market share in the rural and semi-urban areas by appointing business correspondents and through other financial inclusion initiatives. Our Bank is in the process of setting up two new zones at Mangalore and Belgaum.

To accelerate growth in the MSME Segment

Although we have achieved significant growth in advances to the corporate sector over the last three fiscals, we seek to continue to increase our market share, credit portfolio and NIM in the corporate banking segment, by expanding and improving our distribution network and infrastructure, expanding and strengthening our relationships, especially with MSMEs and by further developing our existing product offerings, processes and distribution channels. As part of this strategy, we also intend to maintain and enhance our franchise in the MSME Segment. For instance, we have formulated a code of commitment to MSMEs, under which we have constituted centres for redressal of grievances of MSMEs. We have also launched a debt restructuring mechanism for MSMEs for improving flow of credit to MSMEs. Our Bank also continues to extend collateral free financial assistance to Micro and Small Enterprises by participating in Credit Guarantee Scheme of CGTMSE.

Focus on NRI customer base:

We intend to increase our NRI deposit base. We have established a NRI cell within our Bank to provide dedicated services to our NRI customers. Our Bank is having foreign currency remittance arrangement with 21 major banks around the globe which enables NRIs to easily make remittances to their accounts in India. We have initiated process for collecting the data pertaining to NRIs to enable us to contact them and understand their banking requirements. The NRI cell extends support to our branches in NRI related matters and closely monitors the growth of our NRI business. We intend to conduct NRI customers meet and NRI deposit campaigns at NRI intensive centres or any potential centres. We plan to open NRI specialized branches at Bangalore, Chennai, Mumbai and Kerala. Focus on cross-selling and expand fee income through diverse sources

Over the years, we have developed a large number of corporate relationships as well as retail.We now plan to leverage these relationships by selling to the corporate segment, products offered to other business segments such as the savings bank account and investment products. We intend to diversify revenue sources and increase overall revenue by expanding our product and service offerings; particularly fee based and commission based offerings, which will enable our Bank to advise and cross-sell third-party products, such as insurance and mutual funds, to high-net worth customers.

Continuously update our information technology systems and increase efficiency We strongly believe that technology has driven products and services in the banking industry, and we have devoted substantial resources to achieve seamless integration of our people, processes, data and applications. Information technology is a strategic tool for our business operations to gain a competitive advantage. All of our technology initiatives are aimed at enhancing value, offering customer convenience and improving service levels, while optimizing costs. We believe that our initiatives to implement new technology and automation have resulted in improved productivity and efficiency in our organization with particular reference to our employees. Our business (deposits plus advances) per employee has increased to ` 9.55 crores for FY 2013 from ` 8.81 crores for the FY 2012. We believe these improvements are due, in part, to our technology initiatives. We intend to continue to implement new technology as it becomes available and continuously upgrade the skills of our employees through training. We expect to continue our policy of making investments in technology and as such enhance our productivity per employee, while providing customer-centric solutions.

Enhancing our Alternate Delivery Channels:

We strongly believe that customer satisfaction is the key to growth. We have to continuously update our systems and procedures to meet the ever evolving customer need for seamless banking experience. Apart from being user friendly, these channels have a huge growth potential. We have seen a growth in number of users for our ATMs, internet banking and mobile banking services. We intend to increase the user base for our alternate delivery channels. Further, we have also introduced four cash deposit machines, 40 self service kiosk and 300 green channel counters at selected branches. We plan to increase the reach of these alternate channels by installing 30 more cash deposit machines, 10 more self service kiosk and 200 more green channel counters in FY 2014.

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We have also started merchant acquiring business for facilitation of payment through debit or credit card at retail outlets. The current account of the merchant is maintained with our Bank and sale proceeds are routed through the current account. We also earn commission from the merchant. We plan to install 2000 such machines in FY 2014. BUSINESS UNITS

CORPORATE/WHOLESALE BANKING

We provide commercial banking products and services to commercial and Institutional customers, including midsized and small business and Government entities. Our loan products include project financing, term loans for acquisition, construction or improvement of assets, as well as short-term loans, cash credit, export and other working capital financing and bill discounting.

Corporate and Commercial Sector Lending Activities

Term Loans

Our term loans consist primarily of financing for acquisition, construction or improvement of assets, including project finance. We also provide foreign currency loans to customers, subject to certain conditions. These loans are generally secured by tangible assets, movable assets or immovable property, as well as by other assets of the borrower, depending on the situation. Repayments in suitable installments are fixed, with or without holiday, so as to recover the amount within a reasonable time within the economic life of the asset. We also provide short-term loans with a maturity of three to 12 months for temporary cash flow needs and other purposes, which are repayable with a bullet payment on maturity. These can be denominated in Indian Rupees or other currencies, subject to availability and are issued at fixed or floating rates. These loans are generally provided to high-rated corporate customers. Cash Credit Cash credit facilities are the most common form of working capital financing in India. We offer revolving credit facilities secured by chargeable current assets, such as inventory and receivables. We also offer stand by line of credit equivalent to 15% of fund based and non-fund based working capital limits. Additional security in the form of lien on fixed assets, including mortgage of immovable property, pledge of marketable securities and personal guarantees are also obtained depending on situation. Facilities are typically provided for a one year period, usually at floating rates linked to base rates with monthly rests. We also provide overdrafts, working capital demand loans, working capital term loans and short-term loan facilities to our corporate and commercial borrowers.

Working Capital Demand Loan (WCDL)

WCDL is the carved out portion of working capital account. We provide WCDL within the sanctioned cash credit limit for specific working capital needs. The minimum period of WCDL keeps on changing. WCDL is granted for a fixed term on maturity of which it has to be liquidated, renewed or rolled over.

Overdrafts

The borrower is allowed to withdraw funds in excess of the actual credit balance in his current account up to a certain specified limit during a stipulated period against a security. Within the stipulated limits any number of withdrawals is permitted by our Bank. Overdraft facility is generally available against the securities of life insurance policies, fixed deposits receipts, Government securities, shares and debentures, etc. of the corporate sector. Interest is charged on the amount actually withdrawn by the borrower, subject to some minimum (commitment) charges.

Bills Purchase / Discount We provide this facility against bills for meeting post sales finance requirements of our borrowers. Bank negotiates purchases or discounts the bills of exchange and promissory notes of the borrower and credits the amount in his

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account after deducting exchange / discount. Before purchasing or discounting the bills, our Bank satisfies itself about the creditworthiness of the drawer as well as drawee and genuineness of the bill. Foreign Currency Loans We provide foreign currency denominated loans to corporate customers in USD, GBD and Euro with LIBOR linked interest rates for working capital and other requirements.

Export Credits We provide export finance to customers in the form of Indian Rupee loans and foreign currency loans for both pre-shipment and post-shipment requirements of exporters. The RBI provides export credit refinancing for an eligible portion of total outstanding export finance at our Bank rate prevailing from time to time. We also earn fees and commissions from other fee-based products and services offered to our export and import customers. We extend Pre shipment credit (Packing Credit) to exporters for purchasing, processing, manufacturing and packing of goods prior to shipment. It is extended on the basis of:

• Letters of Credit opened in favour of the exporter by importer's bank

• a confirmed and irrevocable order for the export of goods from India

• any other evidence of an order for export from India having been placed on the exporter unless lodgement of export orders or letters of credit have been waived by our Bank

We extend pre-shipment credit in foreign currency (PCFC) in addition to Indian Rupee, which helps exporters to avail of export credit at internationally competitive rates. Import Financing We provide non-funded facilities, such as letters of credit, buyers credit for import of goods from abroad. These are fee-based facilities. These facilities are partially or fully secured by assets, including cash deposits, documents of credit, stocks and receivables. These facilities are generally given for periods not exceeding six months, often as part of a package of working capital financing or term loans, or sanctioning of forward contracts. Guarantees We issue guarantees on behalf of our customers. There is a separate policy formulated for non-fund based products, and guarantees are to be issued conforming to the policy parameters. Appropriate margins are to be maintained by the borrower, and a counter-guarantee is obtained. Other securities, depending on the situation, are also obtained.

MICRO, SMALL AND MEDIUM ENTERPRISES We provide financing to Micro, Small and Medium enterprises (“MSMEs”) in the manufacturing and services sectors. In the manufacturing sector, enterprises engaged in the manufacture, production, processing or preservation of goods and whose investment in plant and machinery does not exceed ` 0.25 crores, ` 5.00 crores and ` 10.00 crores are classified as Micro, Small and Medium enterprises respectively irrespective of the location of the unit. In the services sector, enterprises engaged in providing or rendering of services and whose investment in equipment does not exceed ` 0.10 crores, ` 2.00 crores and ` 5.00 crores are classified as Micro, Small and Medium enterprises respectively. As of March 31, 2013, 2012 and 2011 loans to MSMEs constituted 13.16%, 11.00% and 12.70%, respectively, of our ANBC. Important Scheme / Products of our Bank for Micro & Small Enterprises:

• MyBank Medium & Small Enterprise Welcome: Term Loan for Plant and Machinery/Equipments/Tools/Gen Sets and construction of factory building and working capital. This facility is available for the existing Medium and Small Enterprises customers having satisfactory records; existing term loan borrower, who have not availed working capital limit facility during the last one year and new customers falling under Medium and Small Enterprises.

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• SME Credit plus for SSI: This scheme is designed to meet the contingencies like repairs to machineries, labour payment, tax payment and other unforeseen expenditure of the Micro and Small Enterprise borrowers classified as standard assets for last 2 years.

• Flexi (SSI) Term Loan: This scheme is designed to meet requirement for commercial purposes including augmentation up of net working capital, capital expenditure, substitution of high cost debt, R&D expenditure etc. Loan in this scheme is available to existing Micro and Small Enterprises borrowers with a track record of cash profit for at least 3 years and whose accounts are classified as standard assets.

• Laghu Udyami Credit Card Scheme: This scheme is designed to provide a hassle free credit to existing customers who possess satisfactory track record up to a limit of ` 10.00 lakhs or 20% of annual sales turnover declared in Income Tax/Sales tax Returns, whichever is less.

• Stand-by line of credit: Term Loan facility for Micro and Small Enterprises Borrowers rated SB-7 and above for meeting requirements relating to acquisition of machinery and other capital expenditure. Loan available to the extent of 2 times the cash accruals during previous year with a maximum limit of ` 50.00 lakhs for Medium and Small Enterprises.

• Reimbursement facility under Term Loan: Existing borrowers with satisfactory track record are eligible for reimbursement of cost of new machineries purchased and self fabricated machines/acquisition of building within a period of one year on providing (a) original bills and receipts issued by the manufacturer/dealer and (b) Chartered Accounts certificate regarding capital expenditure.

• SME Four Wheeler Loan: Loan to the promoters\partners of the SME units for purchase of cars, jeep, MUVs having net annual income of ` 2.50 lakhs and above individually as per latest IT returns.

• MyBank Shoppe: Term Loans for Purchase of new/old shops/establishments/offices and construction for their own use and modernisation/Expansion/Renovation/face lifting of shops.

• Rice Mill Plus and Dall Mill Plus: Loans towards working capital needs /acquisition of machinery/factory building/modernization for existing profit making units with CRA rating and also new units and take over cases on merits.

• CGTMSE: Collateral Free loans upto ` 100.00 lakhs will be covered under Credit Guarantee scheme of the Credit Guarantee Fund Trust for Micro and Small Enterprises excluding Retail Traders/Educational Institutions/Training Institutes. Bank bears the Guarantee fee and annual service fees.

• Liberalised Trade finance: Facility for providing hassle free finance to Small business enterprises, Retail traders/wholesale traders and professional and Self employed in trade and services sector who are willing to provide mortgage of properties of adequate value for acquiring fixed assets for business purposes and for buying inventory/current assets and also for setting up of new business units.

• Beverages Corporation Scheme for financing retailers of KSB Ltd: Loan facility to registered Liquor dealers/ Retailers of Karnataka State Beverages Corporation Limited (KSBCL) across the state who are Holders of valid license issued by State Excise Dept/KSBCL.

• MyBank Doctor Plus: Loan Facility to Medical practioners, promoters of hospitals and Nursing Homes, Pathological Clinics, poly clinics, X-Ray Labs etc. for setting for purchase of equipments, setting up clinics, nursing homes, Pathology labs, drug stores, ambulance, computers, vehicles etc. and for expansion/renovation/modernization of existing premises.

• MyBank Homestay: Loan Facility for holders of Home Stay registration certificates/license for additional construction such as bed rooms, renovation, modernization of the existing building, furnishing etc. to help development of tourism in the State of Karnataka.

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• Contractor Plus: Overdraft facility for contractors registered with BBMP, City Municipal Corporation, Zila Panchyat in Karnataka against the work bills of those organisations on entering into a Tripartite agreement (or) power of attorney duly registered with the concerned department.

• MyBank Surya Kiran Scheme: To extend finance for purchase of Solar Photo Voltaic home lighting system at a concessional rate of interest.

RETAIL BANKING

Our retail banking portfolio consists of savings, current and term deposit services, retail lending for housing, gold, vehicle, education, agriculture and other personal loans, and other personal banking products. We offer our customers a suite of technological products, including debit cards, “anywhere banking” facilities, mobile banking, a RTGS, NEFT and Internet banking.

Products and Services for Retail Customers

We provide a full range of financial products and services to our retail customers. We provide housing, retail trade, automobile, consumer, education, loan against pledge of gold ornaments, mercantile credit for small and medium traders and other personal loans and deposit services, such as demand, savings and fixed deposits. We also provide products such as debit cards, mobile banking and internet banking services. We also distribute third party products such as life and non-life insurance policies and mutual funds. We deliver our retail products and services through our network of branches. The following is a description of our principal retail loan products:

Housing Finance: This scheme provides loans to individuals including person engaged in agriculture & allied activities for the purchase/construction of homes and renovation of homes and apartments. We offer flexible repayment options ranging up to 30 years. The rate of interest on housing loans depends on the repayment period at floating rate of interest exercised by the borrower. SBM Realty: This scheme provides housing loan to individuals including persons engaged in agriculture & allied activities for the purchase of plot of land for construction of house in 2 years. The maximum loan is ` 50.00 lakhs in Metros and ` 25.00 lakhs in Non Metro centers. The repayment of loan is for maximum period of 180 months. Education Loans: This loan scheme enables financial assistance to students pursuing higher education in India and abroad with maximum limit ` 10.00 lakhs and ` 20.00 lakhs respectively. The same is also available to management quota students and nursing courses. The scheme provides for concessional rate of 0.50% to girl students and 1.1% interest concession for servicing interest during moratorium period. Third party guarantee is required for loan above ` 4.00 lakhs for studies in India and loans above ` 7.50 lakhs for studies abroad. Mybank Scholar: In this scheme, Loans will be granted to deserving/meritorious students for pursuing full time courses in India at selected premier and reputed institutions identified by our Bank. The loan would be sanctioned depending upon the category of institution up to a maximum limit of ` 20.00 lakhs. The amount of scholarship would also depend on tangible collateral and if parent/guardian stands as co-borrower which would be up to a maximum of ` 30.00 lakhs. IBA Model Loan Scheme for Vocational Education and Training: This scheme provides for loan for Vocational/Skill development courses of duration from 2 months to 3 months to 3 years run or supported by a Ministry/Dept/organization of the Govt. or a company/society/organization supported by National Skill Development Corporation or State Skill Missions/State Skill Corporations, preferably leading to a certificate/diploma/degree, etc issued by a government organization or an organization recognized/authorized by the government. Vehicle Finance: We provide financing for the purchase of automobiles for personal, agricultural and commercial purposes. The vehicle purchased is the primary security. These loans are extended for a period up to seven years.

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Gold Loan: We extend loans against pledge of gold ornaments and specially minted gold coins sold by Banks which is kept in the original form. These loans are extended for a period up to 30 months. Personal Loans: We have special scheme for sanctioning loans to State/Central government employees/reputed profit making public limited companies, MNCs for meeting personal and family finance requirements. These loans are extended for a period up to 5 years. Personal Loan against Mortgage of Immovable Property: Under the scheme, loan is granted to permanent employees, professional, self employed professionals and agriculturists against mortgage of Immovable Property. The loan amount sanctioned is 50% of market value of the property and the net income of the individual. These loans are extended for a period up to 5 years. Help age Scheme for Pensioners: We extend loans to retired Central/State government/Bank Pensioners whose pension accounts are maintained by our branches and to family pensioners. The loan amount to pensioner and family pensioner would depend be related to number of months of pension subject to a maximum limit. These loans are extended for a period up to 4 years. Mybank Arakshak: Under this scheme, loans are extended to all permanent employees of Police Department up to a maximum of ` 1.50 lakhs and repayable in 36 months. Mybank Adhyapak: Under this scheme, loans are extended to permanent teachers, Lecturers of Central/State Govt educational institutions and recognized schools up to a maximum of ` 1.00 lakhs and repayable in 36 months. MyBank Suraksha Loan: Under this scheme, loans are extended to housing loan borrowers towards the premium of SBI Life. Deposits

Our retail deposit products include a diverse range of savings and current accounts to suit our various customer segments. The following describes the types of retail products that we offer:

• Savings Accounts: Demand deposits for retail customers that accrue interest at a fixed rate and offer withdrawal facilities through check books and debit cards. The saving bank account holders are eligible for ATM cards, Mobile Banking, Internet Banking. Additional the account holders may avail Accident Insurance Policy of ` 4.00 lakhs by paying annual premium of ` 100.00.

• Current Accounts: Non-interest bearing demand deposits.

• Recurring Deposits: Deposits accepted in monthly instalment up to a period of 120 months. Additionally, we have Harsha Deposit scheme which provides for flexible monthly instalment up to 10 times of the initial deposit.

• Term Deposits: Tenure based deposits of a fixed amount over a fixed term that accrue interest at a fixed rate and may be withdrawn before maturity in accordance with applicable terms and conditions. Tenures range from 7 days to 120 months. Additionally, we have a Time Deposit Scheme with the MyBank Suraksha Time Deposit Account which targets Individuals excluding NRIs with a minimum amount of ` 1.00 lakhs and maximum of ` 99.99 lakhs. Additional benefit in this deposit is an accidental death insurance cover of ` 5.00 lakhs.

• Reinvestment Deposits: Tenure based deposits of a fixed amount over a fixed term that accrue interest at a fixed rate and paid at the end of the tenure. Tenures range from 6 months up to 10 years.

• Mybank Suraksha Savings Account: Besides the normal Saving Deposit features this saving account will accept saving deposits from individuals excluding NRIs with maintenance of minimum quarterly average balance ` 10,000 and facilities like no fee on cheque book and an accidental death insurance cover for ` 2.00 lakhs. Mybank Suraksha Savings Plus Account has a higher maintenance of minimum quarterly average balance and an accidental death insurance cover for ` 5.00 lakhs

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• Centenary Liquid Deposit: This deposit scheme is specially designed for the centenary year for all segments for the period of 7 to 179 days with a minimum deposit amount of ` 15.00 lakhs and maximum of ` 50.00 crore with an interest rate of 7.50% p.a. with no prepayment penalty levied for the amount withdrawn after 7 days. Senior citizens will get 0.50% extra and staff/retired staff will get 1% extra with a cap at 8.50%.

• SBM Tax Saver Scheme: This term deposit scheme is for tax purpose wherein no premature payment of deposit and no loan facility against the deposit is available.

We also take corporate deposits from large public sector corporations, Government Organisations, other banks and private sector companies. Our corporate accounts include current accounts, overdraft accounts, case credits and mercantile credit accounts. The following table sets forth the balances outstanding by type of deposit, as of the dates indicated:

(`̀̀̀ in crores)

As of March 31,

2013 2012 2011

Particulars Balance O/s % of Total Balance O/s % of Total Balance O/s % of Total

Demand Deposits

- From Banks 190.40 0.34 256.53 0.51 258.42 0.60

- From Others 2,666.51 4.68 2,873.51 5.73 2,807.43 6.50

Saving Deposits 15,115.42 26.53 13,033.50 25.97 11,724.03 27.12

Term Deposits

- From Banks 70.25 0.12 266.89 0.53 188.00 0.43

-From Others 38,926.47 68.33 33,755.87 67.26 28,247.59 65.35

Total Deposits 56,969.05 100.00 50,186.30 100.00 43,225.47 100.00

PRIORITY SECTOR LENDING:

We have played a proactive role in extending financial support and financing the sectors identified as “Priority Sectors” by the Government and RBI to promote the development of the Indian economy. Our Priority Sector advances include loans to agriculture, small enterprises, retailers, loans to certain sectors targeted as requiring special assistance, such as education, food and agriculture-based processing sectors, and loans to the housing sector. The Government and the RBI have identified the Priority Sectors and provided lending guidelines. The table below sets out our gross outstanding Priority Sector advances (as defined by the Government and the RBI) as of the dates indicated.

(`̀̀̀ in Crores, except percentages)

31-Mar-13 31-Mar-12 31-Mar-11

Balance O/s Balance O/s Balance O/s

Agriculture 6,324.62 5,247.21 5,377.75

Micro and Small Enterprises 3,756.41 3,353.68 3,657.71

Other Priority Sectors 3,402.11 3,030.21 2,932.56

Total Priority Sector Advances 13,483.14 11,631.10 11,968.02

Total Priority Sector Advances (net) as a percentage of ANBC (%)

33.82 34.16 40.05

If we fail to meet any of the following targets as of the last reporting Friday of March:

• our total priority sector advances, net, are equal to or higher than, the higher of 40% of our ANBC or credit equivalent amount of off-balance sheet exposure;

• our total agriculture loans are equal to or higher than, the higher of 18% of our ANBC or credit equivalent amount of off-balance sheet exposure; or

• our total weaker sections loans are equal to or higher than, the higher of 10% of our ANBC or credit equivalent amount of off-balance sheet exposure;

then during the succeeding FY, the RBI shall allocate an amount for us to deposit with either the Rural Infrastructure Development Fund established with National Bank for Agriculture and Rural Development or any other fund as specified by the RBI. The interest rate on our deposit and the period of deposit shall be determined by the RBI. If we fail to achieve the priority sector lending targets, we will be required to deposit funds, which could adversely affect

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our result of operations. As at March 31, 2013, our Bank has invested ` 1,846.29 crores with NABARD and other Funds on account of shortfall in priority sector lending.

Agriculture

We meet the agricultural investment needs of farmers through our agri-financial schemes for crop production, land development, plantation development, horticulture, minor irrigation, hi-tech agriculture, watershed development and allied activities such as animal husbandry, dairy and fisheries. We offer direct finance to farmers for production and investment in equipment, as well as for indirect finance, among others.

Agricultural Lending Programmes

Our agricultural credit grew by 20.53% in FY 2013, declined by 2.54% in FY 2012 and grew by 30.42% in FY 2011. Our gross non-performing agricultural loan assets constituted 10.22% and 11.85% of gross agricultural credit as of March 31, 2013 and 2012 respectively. The following table illustrates the position of our agricultural portfolio, further classified on the basis of type of financing.

Particulars

31-Mar-13 31-Mar-12 31-Mar-11

No. of A/c

Amount O/s (`̀̀̀ in

cr)

% of Total

O/s Agri. Loans

No. of A/c

Amount O/s (`̀̀̀ in

cr)

% of Total

O/s Agri. Loans

No. of A/c

Amount O/s (`̀̀̀ in

cr)

% of Total

O/s Agri. Loans

Direct Financing 4,09,231 5,754.14 90.98 301,485 4,403.68 83.92 273,337 3,767.94 70.06

Production Financing 1,21,028 1,491.52 23.58 125,487 1,213.55 23.12 118,736 1,333.21 24.79

Investment Financing 2,61,446 4,010.54 63.41 143,945 2,732.43 52.07 137,640 2,407.93 44.77

Allied Investment 26,757 252.08 3.99 32,053 457.70 8.73 16,961 26.80 0.50

Indirect Financing 2,427 570.49 9.02 2,642 843.53 16.08 2,536 1,609.81 29.94

Total Agriculture

Portfolio 4,11,658 6,324.63 100.0 304,127 5,247.21 100.00 275,873 5,377.75 100.00

Some of our popular agricultural lending programs are as follows:

• Kisan Credit Card: This scheme is primarily intended as a credit delivery mechanism for farmers to meet the expenditure connected with the cultivation of various crops, maintenance of livestock, non-farm activity and consumption.

• Investment Cards: This scheme is primarily intended for longer duration loans for meeting credit requirements of horticulture, land development, minor irrigation, farm mechanisation, allied activities etc.

• Kisan gold card scheme: This scheme is primarily intended to meet credit requirement of various developmental activities and schemes and also to meet the consumption requirement of farmers to a certain extent.

• Kisan Chakra: This scheme is primarily intended financing the purchase of vehicles (Two/three/four wheeler) by farmers.

• Produce Market Loans: This scheme is primarily intended to provide loans to farmers with lower rate of interest prescribing for farm produce thus avoiding distress sale.

• Agri Gold Loan – This scheme is primarily intended to provide loans to farmers at lower interest for production purposes.

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Indirect Financing to Agriculture: Indirect finance to agriculture includes among others, loans to food and agro-based processing units with investments in plant and machinery up to specified limits, credit for purchase and distribution of fertilisers, pesticides and seeds, loans up to specified limits granted for the purchase and distribution of inputs, such as cattle feed, poultry feed for allied activities, and finance for setting up of agri-clinics and agribusiness centers. Financial Inclusion

Our Bank has a comprehensive Financial Inclusion Plan for the years 2013 to 2016 for covering 3,232 villages in Karnataka with population below 2,000 as per census 2001 based on Gram Panchayar wise allocation of villages by SLBC. We have earlier covered all 254 allocated villages with population above 2000 (as per 2001 census) by appointing the Business Correspondents before March 31, 2012 and another 143 villages with population of 1600 to 2000 by March 31, 2013. We are also participating in the Direct Benefit Transfer scheme of Government of India for direct credit of benefits under Central Sponsored schemes in 43 pilot districts. Further, we have established 3 Financial Literacy and Credit Counselling Centres in 3 Lead Districts of our Bank to impart knowledge of banking and to inculcate saving habits and the repayment responsibility of loans availed among rural populace. Lead Bank Scheme We have been discharging Lead Bank responsibilities in three district viz. Mysore, Tumkur and Chamarajanagar. The combined annual credit plan for 2013-14 for all the Banks in three districts is ` 8,186.87 crores. In order to impart entrepreneurial skill and guidance to Unemployed Youth, in general and rural youth in particular to enable them to become gainfully self employed, we have established Training centres viz. Mybank Institute for Promotion of Self Employment and Development at Hirehally Industrial Estate, Tumkur and JSS RUDSET at Mariyala, Chamarajanagar Taluk. Regional Rural Banks

Central Government vide notification dated November 01, 2012, provided for amalgamation of Chikmagalur Kodagu Grameena Bank (RRB sponsored by Corporation Bank) and Visveshvaraya Grameena Bank (RRB sponsored by Vijaya Bank) with Cauvery Kalpatharu Grameena Bank (RRB sponsored by State Bank of Mysore). The resultant RRB was named as Kaveri Grameena Bank with its head office at Mysore under the sponsorship of State Bank of Mysore with effect from November 01, 2012. As on March 31, 2013, KGB has network of 334 branches spread over 10 districts of Karnataka, all of which are functioning under CBS. The total deposits and advances of KGB as on March 31, 2013 stood at ` 3,845 crores and ` 3,013 crores respectively.

TREASURY OPERATIONS Our treasury operations comprise liquidity management by seeking to maintain an optimum level of liquidity, while complying with the CRR and the SLR, monitoring and implementation of non-SLR investments of our Bank. We maintain the SLR through a portfolio of central Government, state Government and Government-guaranteed securities that we actively manage to optimize yield and benefit from price movements. We are also involved in the trading of debt securities, equity securities and foreign exchange within permissible limits.

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The following table set forth, as of dates indicated, the allocation of our investment portfolio (Net)

Securities

As of March 31,

2013 2012 2011

Amount (`̀̀̀ in

crores %

Amount (`̀̀̀ in

crores %

Amount (`̀̀̀ in

crores %

SLR

Govt. Securities 14,460.16 86.20 12,971.46 88.05 11,420.64 88.35

Approved Securities - - - - 13.50 0.10

Sub. Total 14,460.16 86.20 12,971.46 88.05 11,434.14 88.45

Non-SLR

Shares 77.13 0.46 80.45 0.55 91.81 0.71

Debentures and Bonds 213.94 1.28 171.66 1.16 146.02 1.13

Subsidiaries/Joint Ventures/RRBs

18.89 0.11 10.39 0.07 10.39 0.08

Mutual Fund and Others 2,004.46 11.95 1,498.74 10.17 1,244.78 9.63

Sub. Total 2,314.42 13.80 1,761.24 11.95 1,493.00 11.55

Total (Domestic) 16,774.58 100.00 14,732.70 100.00 12,927.14 100.00

Investment outside India

- - - - - -

Total 16,774.58 100.00 14,732.70 100.00 12,927.14 100.00

The profit on sale of investments and exchange profit generated from Foreign Exchange Business for FY 2013, FY 2012 and FY 2011 was ` 125.03 crores, ` 71.16 crores and ` 59.99 respectively.

GOVERNMENT BUSINESS

We have been handling a major share (about 77% during FY 2013) of Karnataka State Government receipts and payments transactions. About 86% of our Banks Government business (for the FY 2013) emanated from State Government transactions. We handle transactions for various Central Government departments like Postal, Railways, Defence, Central Board of Direct taxes, Central Board of Excise and various Central Schemes like Public Provident Fund, Senior Citizen Saving Scheme etc. Distribution of Third Party Products

Insurance Products Life Insurance We have a tie up with SBI Life Insurance Company Limited for marketing, distribution and selling of life Insurance Products through our branch distribution network. The tie up is in the nature of corporate agency model under which our Bank’s staff is licensed and responsible for selling the life insurance products. During FY 2013, we earned fee income of ` 6.90 crores from our life insurance business, as compared to ` 6.48 crores in FY 2012.

General Insurance We have recently entered into a tie up with SBI General Insurance Company Limited for marketing, distribution and selling of General Insurance Products like motor or fire insurance, health, personal accident, jewellery and home insurance products through our branch distribution network. Prior to SBI General Insurance, we had a corporate agency tie up with National Insurance Company. The tie up is in the nature of corporate agency model under which our Bank’s staff is licensed and responsible for selling the insurance products other than life insurance. During FY 2013, we earned fee income of ` 0.86 crores from our general insurance business, as compared to ` 1.67 crores in FY 2012.

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Mutual Fund Products We have distribution agreement with SBI Fund Management Private Limited to market their mutual fund products through our branches. We recommend suitable scheme to the clients based on the recommendation of our own in-house research team. Mutual fund products are sold through our Bank’s branch distribution network based on client requirements. We earn fee income in the form of up-front retention remuneration on the sale of mutual funds and transaction charges on sale of mutual fund products. We earned fee income of ` 1.04 crores in FY 2013 and ` 0.50 crores in FY 2012 SBI Credit Cards

We have entered into agreement for sourcing the applications for SBI Credit Cards. The service is offered to our customer as value added service. We earned fee income of ` 0.15 crores in FY 2013 and ` 0.12 crores in FY 2012.

Delivery Channels We distribute our products and services through various access points ranging from traditional bank branches to ATMs and the Internet. Investment in alternate distribution channels is part of our effort to migrate customers to lower cost electronic delivery channels. Our channel migration effort is aimed at reducing cost while enhancing customer satisfaction levels by providing customers access to their accounts at all times. Branch Network

We have 780 branches, covering 13 states and 2 union territories, as of March 31, 2013. We maintain currency chests at treasuries and branches at all important centres. As on March 31, 2013, we have 112 currency chests. These currency chests are intended to facilitate the distribution, exchange and remittance of notes, including one rupee notes and rupee coins and small coins. We have six Currency Administrative Cells (CACs) at Bangalore (2), one each at Chennai, Mysore, Delhi and Mumbai. Our Centralized Clearing Processing Centres (CCPCs) at Bangalore, Mysore and Chennai undertake entire clearing work of all the linked branches. We have a Centralized Pension Processing Cell (CPPC) at Mangalore wherein all pension payments are centralized. We also have a Liability Centralized Processing Centre (LCPC) at Mangalore which takes care of opening of new deposit account and issue of CTS -2010 compliance cheque books. During the FYs 2013, 2012 and 2011, we opened 43, 30 and 18 new branches, respectively. Our network of branches is spread across both metropolitan and rural locations. As of March 31, 2013, of our 780 branches, 244 are rural, 179 are semi-urban, 159 are urban and 198 are metropolitan branches. We recognise the importance of ATMs and continue to rapidly add ATMs to our network. During the FYs 2013, 2012 and 2011, we added 51 ATMs, 67 ATMs and 127 ATMs, respectively, to our network. Further, as a part of State Bank of India group, our customers can use State Bank of India ATMs without any charges irrespective of the number of transactions. Internet Banking Services We offer internet banking services to our customers through Internet Banking portal website i.e. www.onlinesbm.com. A complete range of online services are offered to both Corporate and Personal Banking customers, including online, real-time access to their accounts, information on fixed deposits, online fund transfer to accounts of our Bank as well as other banks, bill payments, credit card bill payment and placement of requests for demand drafts and cheque books. In addition, we offer an online direct debit facility to customers for purchase of products and services through a host of online merchants in the e-commerce space. As at March 31, 2013, 2,32,945 customers, of which 25,517 were corporate customers, were registered for internet banking facilities.

SBM Contact Centre As a customer friendly service, our Bank has established a dedicated “SBM Contact Centre” with a toll free number which is accessible from throughout the country. The centre is manned by trained personnel which caters to all customers, providing services in English, Hindi and Kannada for 24 hours on 365 days (24*7*365) basis.

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Customer Grievance Redressal Our Bank has launched a Customer Redressal System called SMS Unhappy which facilitates customers to air their grievance or feedback through the process of a simple SMS message. On receipt of the message, our Bank’s dedicated Happy Room staff, calls back the customer for the purpose of Grievance Redressal.

Mobile Banking

The mobile banking channel has fast emerged as an extremely convenient option for our Bank’s customers for information on their accounts, transferring funds and making payments. In addition, customers can request their balance or details of the last five banking transactions through their mobile phones, use their account with our Bank to make bill payments, transfer funds, recharge their prepaid mobile phones, log requests for cheque books, stop cheques and change PINs via mobile phone. Customers can also make payments to merchants by using their mobile phones. As on March 31, 2013, 9,059 customers have availed mobile banking.

Technology

We believe that in order to sustain corporate success, we must embrace a customer-oriented strategic business model. In line with this model, we have networked all of our branches and offices to facilitate CBS, which centralises the processing of transactions and allows our customers to operate their accounts from remote locations and use banking services from any of our service outlets, regardless of where that customer maintains his or her account. We have established a data centre in Belapur in Navi Mumbai, Maharashtra and a disaster recovery centre in Chennai, Tamil Nadu as part of a business continuity plan in the event of technological problems or disasters. The following facilities and systems are also available in our banking network:

• the RTGS facility is available in all of our branches;

• the NEFT facility is available in all of our branches; and

• the SWIFT facility is available in select branches. We continue to upgrade our technological capabilities to increase efficiency, reduce costs and to expand our service portfolio and increase convenience for our customers The agreement for Core Banking Solution, Internet Banking and Mobile Banking services is entered by our promoter, State Bank of India jointly on behalf of self and other Associate banks. We have entered into MOUs with our promoter, State Bank of India for sharing of technology for our Core Banking Solutions, ATMs, Internet Banking and Mobile Banking services.

Insurance We have obtained insurance policies and coverage that deems to be appropriate. Insurance policies include a banker’s indemnity insurance policy, which is a comprehensive insurance policy that offers coverage for various forms of risk. Some of the items covered under this insurance policy include:

(a) Money and/or Securities on premises; (b) Money and/or Securities in transit; (c) losses from forgery or alteration; (d) losses from dishonesty; (e) losses by reason of fraud and/or dishonesty by the employee in respect to pledged goods; (f) losses by reason of robbery, theft of Registered Post etc.; (g) losses by reason of infidelity or criminal acts on the part of appraisers (h) losses by reasons of infidelity or criminal acts on part of Janta Agents / Choti Bachat Yojana / Pygmie

collectors etc.

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Properties Our Bank’s head office is located at Mysore Bank Circle, Kempegowda Road, Bangalore – 560 254, India. As on March 31, 2013, our Bank has 840 offices, out of which there are 780 Branches including 5 Service Branches, 24 Regional Offices, 6 Administrative Offices and 30 Processing Centres. Of the above, 55 offices are located on owned premises. Our Bank has 28 staff quarters all of which are located on owned premises, 5 Guest Houses out of which 1 is located on owned premises. Our Bank has 2 training centers out of which 1 is located on owned premises. Further, out of the 853 ATMs opened by our Bank, 94 are located on owned premises. The aggregate book value, as at March 31, 2013, of all the properties capitalized by our Bank, was ` 730.52 crores. Corporate Social Responsibility As a committed and responsible corporate citizen, we actively participate / associate with various community service activities, both Banking and non-Banking for the well being of needy. We have undertaken Community Service activities through network of our Branches associating with community development project. Our community services activities are spread across in Karnataka and more so to Bangalore where it has sizeable presence. Our Bank has donated 1,558 units of water purifier to schools from each of our branch/administrative offices on the eve of Teachers Day Celebration and on New Year in the FY 2013. Competition We face competition in all our business areas from other public and private sector banks. A significant portion of our total business is located in the state of Karnataka. Our main competitors in the state of Karnataka are State Bank of India and Canara Bank. In corporate banking, other public sector banks have traditionally been our main competitors. In retail banking, our principal competitors are private sector banks. In the case of agriculture and priority segments, our principal competitors are the other public sector banks and RRBs. This is due to the extensive physical presence of other public sector banks and RRBs throughout India, with focus on agriculture and priority sectors that have traditionally existed among public sector banks. Employees As at March 31, 2013, we had a total of 10,784 employees comprising of 3,661 officers and 7,123 other employees. Our employees include experts as in the areas of Risk management, credit analysis, treasury, relationship management, retail products, IT as well as general banking professionals. We provide regular training programs to our employees at all level for specific service knowledge in order to prepare our workforce to handle emerging challenges in banking industry and contribute towards corporate goals. We provide training to our staff at staff learning centre in Bangalore and Mysore and at the Apex Training Institute of SBI. We also have arrangements with some private training institutes like National Institute of Banking Studies & Corporate Management, Noida (“NIBSCOM”) and National Institute of Bank Management, Pune (“NIBM”). With the expansion of our operations, we plan to open learning centre in Hubli. We also send our staff for training at SBI training centres viz. SBA, Gurgaon; SBSC, Hyderabad; SSBIICM, Hyderabad; SBIRD Hyderabad.

95

BOARD OF DIRECTORS AND SENIOR MANAGEMENT

Board of Directors The Board of Directors of our Bank is constituted in accordance with Section 25 of the Subsidiary Banks Act. Our Board currently comprises of the Chairman, the Managing Director and eight other directors who represent various fields including members of academia, finance, accounting professions, workmen, officer employee etc., (nominated by Government of India, RBI and State Bank of India) and elected by shareholders. The brief particulars of our Bank’s Directors as on the date of this Preliminary Offer Document are set below:

Sr.

No.

Name, Nationality and Term Age

(Completed

Years)

Designation

1. Shri Pratip Chaudhuri

Nationality: Indian

Term: Date of assuming charge till September 30, 2013 i.e. the date of his attaining the age of superannuation or until further orders, whichever is earlier.

59 Chairman

Appointed under Sec.25(1)(a) of the Subsidiary Banks Act

2. Shri Sharad Sharma Nationality: Indian Term: Two (2) years from August 13, 2012.

56 Managing Director

Appointed under Sec. 29 (1) (aa) of the Subsidiary Banks Act

3. Smt. Madhumita Sarkar Deb Nationality: Indian Term: January 03, 2011 until further orders.

52 Director (RBI Nominee) Nominated under Sec. 25 (1) (b) the Subsidiary Banks Act.

4. Shri D. D. Maheshwari Nationality: Indian Term: May 12, 2009 until further orders.

50 Director (G.O.I. Nominee)

Nominated under Sec. 25 (1) (e) of the Subsidiary Banks Act.

5. Shri Rajeev Nandan Mehra

Nationality: Indian Term: From December 01, 2012 until further notice

58 Director (SBI Nominee)

Nominated under Sec. 25 (1) (c) of the Subsidiary Banks Act.

6. Shri. K. Gururaj Acharya Nationality: Indian Term: Three years from April 05, 2013 to April 04, 2016 (both days inclusive)

44 Director (SBI Nominee)

Nominated under Sec. 25 (1) (d) of the Subsidiary Banks Act

7. Shri K.N. Nayak

Nationality: Indian Term: From September 30, 2011 until further notice.

53 Director (SBI Nominee)

Nominated under Sec. 25 (1) (c) of the Subsidiary Banks Act.

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Sr.

No.

Name, Nationality and Term Age

(Completed

Years)

Designation

8. Shri. Ramasubramanian S Nationality: Indian Term: Three (3) years with effect from February 15, 2013 to February 14, 2016.

66 Director (Elected Share

Holders Nominee)

Elected under Sec. 25 (1) (d) (i) of the Subsidiary Banks Act

9. Shri Milind S Katti Nationality: Indian Term: Three years from the date of notification i.e. August 31, 2010 or till he ceases to be workmen employee of our Bank or until further orders, whichever is earlier.

53 Director (Workmen

Employee)

Appointed under Sec. 25 (1) (ca) and Sec. 26 (2A) of the Subsidiary Banks Act.

10. Shri Gururaja Rao Nationality: Indian Term: Three years from the date of notification i.e. September 07, 2010 or till he ceases to be officer employee of our Bank or until further orders, whichever is earlier.

58 Director (Officer

Employee)

Appointed under Sec. 25 (1) (cb) and Sec. 26 (2A) of the Subsidiary Banks Act.

Brief profile of our Directors

Shri. Pratip Chaudhuri, Chairman

Shri. Pratip Chaudhuri, Chairman of the State Bank of India, is the Chairman of our Bank. His appointment as the Chairman of State Bank of India was effected vide notification dated April 07, 2011 issued by the Department of Financial Services, Ministry of Finance, Government of India under the State Bank of India Act, 1955. He holds a post graduate degree in Business Administration (Finance). He has an experience of 38 years in banking sector across the group. Amongst others, he has held positions of Deputy Managing Director- International Banking Group at State Bank of India and Managing Director of erstwhile State Bank of Saurashtra. Shri. Sharad Sharma, Managing Director

Shri. Sharad Sharma is the whole time Managing Director of our Bank appointed vide notification dated July 23, 2012 issued by the State Bank of India, Associates and Subsidiaries Group under section 29(1) of the Subsidiary Banks Act. He holds a Bachelors Degree in Arts and is a Certified Associate of the Indian Institute of Bankers (CAIIB) and certificate programs with respect to management at IIM, Duke University and Booth School of University of Chicago. He has served the State Bank of India in many responsible positions such as Chief General Manager (Chennai Circle), CGM (Risk Management), General Manager (Global Markets), General Manager (Retail & SME), General Manager (Project Finance). He has also served as Overseas Junior India based officer at State Bank of India, Toronto, Canada during the period from 1988 to 1991. He has been appointed as the Managing Director of our Bank on August 13, 2012. Smt. Madhumita Sarkar Deb, Director, RBI Nominee Smt. Madhumita Sarkar Deb is the nominee director appointed by Reserve Bank of India. She was nominated and appointed under Sec. 25 (1) (b) of the Subsidiary Banks Act. She holds a Master Degree in Arts and is a Certified Associate of the Indian Institute of Bankers (CAIIB). She is currently Chief General Manager, Reserve Bank of India, Dept of External Investments and Operations, Mumbai.

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Shri D. D. Maheshwari, Director, G.O.I. Nominee

Shri D. D. Maheshwari is the nominee director appointed by the Government of India, under Sec. 25 (1) (e) of the Subsidiary Banks Act. He holds a Bachelor Degree in Arts. He is working as Under Secretary at the Department of Financial Services, Ministry of Finance, Government of India. He has handled issues concerning agriculture credit, priority sector lending, performance of public sector banks, restructuring of capital as well as IPO, FPO, QIP, Rights issue of public sector banks. He has been appointed as a Director (Government of India Nominee) of our bank on May 12, 2009. Shri Rajeev Nandan Mehra, Director, SBI Nominee

Shri. Rajeev Nandan Mehra is the Nominee Director of State Bank of India, under Sec. 25 (1) (c) the Subsidiary Banks Act. He holds a Masters Degree in Science and also holds a Master Degree in Business Administration. He is currently the Chief General Manager (Associates & Subsidiaries) State Bank of India. He has 35 years of experience in the field of banking. Shri K. Gururaj Acharya, Director, SBI Nominee Shri. K. Gururaj Acharya is the Nominee Director of State Bank of India, under Sec. 25 (1) (d) the Subsidiary Banks Act. He holds a Bachelor’s Degree in Commerce and Graduate in Cost and Works Accountanty and Fellow Chartered Accountant. He has 21 years of experience in the field of Chartered Accountants Practice. Shri K.N. Nayak, Director, SBI Nominee

Shri. K.N. Nayak is the Nominee Director of State Bank of India, under Sec. 25 (1) (c) the Subsidiary Banks Act. He holds a Bachelor’s Degree in Commerce and is a Certified Associate of the Indian Institute of Bankers (CAIIB). He is currently the Deputy General Manager (Associates & Subsidiaries) State Bank of India. He has 31 years of experience in the field of banking. Shri. S. Ramasubramanian, Elected Shareholder Director

Shri. S. Ramasubramanian is the elected shareholder director appointed under Sec. 25 (1) (d) of the Subsidiary Banks Act. He holds a Bachelor’s Degree in Science and also has completed his Bachelor of Law. He also is a Certified Associate of the Indian Institute of Bankers (CAIIB) and holds a post graduation diploma in Alternate Dispute Resolution (ADR) and Marketing. He has 30 years of experience in the field of Banking. He is currently a practicing advocate. Shri Milind S Katti, Workmen Employee Director

Shri Milind S Katti is the Workmen Employee Director of our Bank, appointed under Sec. 25 (1) (ca) read with Sec. 26 (2A) of the Subsidiary Banks Act. He has completed his Bachelor’s in Science from Karnatak University, Dharwad. He has 29 years of experience in the field of Banking. Shri Gururaja Rao, Officer Employee Director

Shri Gururaja Rao is the Officer Employee Director of our Bank appointed by the Government of India under Sec. 25 (1) (cb) of the Subsidiary Banks Act. He holds a Bachelor degree in Commerce and has completed Part 1 of CAIIB. He is serving as Manager, BPR Department with our Bank and has 34 years of experience in Banking. Compensation to the Chairman No remuneration or sitting fees is paid by our Bank to the Chairman.

Compensation paid to Shri. Sharad Sharma, Managing Director for FY 2013

Our Bank has paid salary and perequisites of ` 18.87 lakhs during FY 2013.

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Performance linked Incentive to Managing Director

The Ministry of Finance, Department of Financial Services, has vide a letter dated May 29, 2012 notified the broad parameters for the performance linked incentives payable to whole time directors of public sector banks. The performance linked incentive is given according to scores obtained as per the performance evaluation matrix prescribed in the notification. The performance evaluation matrix consists of qualitative and quantitative parameters. The basis of evaluation of the quantative and qualitative parameters would be Bank’s audited financial data as on March 31st of the relevant year. Further, for qualitative parameters, our Bank would require a Board approved plan covering period up to March 2017 with quantative milestones for each year. The evaluation of performance would be done by a sub-committee of the Board called “Remuneration Committee” consisting of (i) Government nominee director (ii) RBI nominee director and (iii) two other directors. In accordance with the same, our Managing Director is eligible, subject to the achievement of certain quantitative and qualitative parameters, to receive performance linked incentives up to a maximum amount of ` 8.00 lakhs per annum. Except as stated above, there are no other terminal benefits available to our Managing Director. Compensation paid to our Directors The salary structure for our whole time directors is fixed by the Government of India. Dearness allowance is to be paid as equivalent to Group A officials of the Government. With respect to compensation for members of the Board, sitting fees are paid as decided by the Government of India. The sitting fees payable to non – executive directors for attending board meetings, is ` 10,000 per meeting and ` 5,000 per meeting for attending board level committee meetings. The sitting fees paid to the direcors for the FY 2013 is as under:

Sl. No Name of the Director Total amount paid (`)`)`)`)

1. Shri. K. Gururaj Acharya 3,55,000

2. Shri. Ramasubramanian S 30,000

3. Smt. May Rose Steele 2,90,000

4. Shri. Milind S Katti 1,47,500

5. Shri. Gururaja Rao 1,42,500

Relationship between our Directors None of the directors of our Bank are related to each other. Shareholding of Board of Directors in our Bank as of March 31, 2013

Sl. No. Name of the Director No. of Equity Shares held

1. Shri Pratip Chaudhuri Nil

2. Shri Sharad Sharma Nil

3. Smt. Madhumita Sarkar Deb Nil

4. Shri D. D. Maheshwari Nil

5. Shri Rajeev Nandan Mehra Nil

6. Shri. K. Gururaj Acharya Nil

7. Shri K.N. Nayak Nil

8. Shri. S. Ramasubramanian 165

9. Shri Milind S. Katti 20

10. Shri Gururaja Rao Nil

99

Prohibition by SEBI or Other Governmental Authorities None of the directors or the companies with which they are or were associated as promoters, directors or persons in control have been debarred from accessing the capital market under any order or direction passed by SEBI or any other regulatory or governmental authority.

ORGANISATION STRUCTURE

Key Managerial Personnel

The Key managerial personnel of our Bank apart from the Managing Director, are as follows: Shri. Kalyan Mukherjee is the Chief General Manager- Retail Banking of our Bank. He holds a Bachelor’s Degree in Science from Bangalore University. He is currently responsible for handling the retail banking section, information technology, audit and inspection, stressed assets management, human resources, priority sector and financial inclusion. He has 35 years of experience in various areas of Banking. Shri. Saswata Chaudhuri is the Chief General Manager- Commercial Banking of our Bank. He holds a Bachelor Degree in Science (Hons.) from University of Kolkata and is a CAIIB. He is currently responsible for handling the portfolio of credit, treasury, risk management and credit policy and procedures portfolios. He has 33 years of experience in various areas of Banking.

100

Shri. A. Karunanithi is the General Manager- Retail Network- Bangalore of our Bank. He has completed his Bachelor’s Degree in Commerce from Madras University and has completed the intermediary course from Institute of Cost and Works Accountants of India (ICWAI). He is currently responsible for supervising the retail network of Bangalore Urban, Bangalore Rural, Tumkur, Kolar, Chikkaballapura and Ramanagaram. He has 36 years of experience in various areas of Banking. Shri. K. Lakshmisha is the General Manager- Priority Sector, Rural banking and Financial Inclusion of our Bank. He has completed his Master’s Degree in Commerce from Bangalore University, Bachelors of Laws (LL.B) from Bangalore University, PhD in Management. He is also an Associate Member of Institution of Business Management and Diploma in Financial Management. He also holds a Masters Degree in Business Administration. In addition to the aforesaid qualifications, he is a CAIIB. He is currently responsible for handling the portfolio of planning, priority sector, rural banking and financial inclusion of our Bank. He has 38 years of experience in various areas of Banking. Shri. Bibhupada Nanda is the General Manager- Human Resources and General Administration of our Bank. He has completed his Master’s Degree in Arts from Utkal University. He is currently responsible for supervising the human resources policies and other administrative functions of our Bank. He has 34 years of experience in various areas of Banking.

Shri. V. Viswanathan is the General Manager- Treasury and Chief Financial Officer of our Bank. He has completed his Master’s Degree in Science from Madras University and is a CAIIB. He has also completed his diploma in Company Law and Banking Law and holds a Post Graduate diploma degree in Finance Management. He is currently responsible for handling the portfolio of treasury and is also the chief finance officer of our Bank. He has served State Bank of India, Singapore for 4 years from December 2006 to December 2010. He has 28 years of experience in various areas of Banking.

Shri. N. Parthasarathy is the General Manager- Risk Management and Credit Policy and Procedures of our Bank. He has completed his Bachelor’s Degree in Commerce from Madras University and is a CAIIB. He is currently responsible for handling the portfolio of risk management, credit policy and procedures of our Bank. He has 31 years of experience in various areas of Banking. Shri. Subhrabrata Ray is the General Manager- Inspection and Audit of our Bank. He has completed his Bachelor’s Degree in Arts (Economics) from Calcutta University and is a CAIIB. He also holds a certificate in General Management from Indian Institute of Management- Kolkata. He is currently responsible for handling the portfolio of inspection and audit of our Bank. He has 34 years of experience in various areas of Banking. Shri. Rajeev Mathur is the General Manager- Corporate Network - of our Bank. He has completed his Master’s Degree in Science from University of Rajasthan. He is a CAIIB. He is currently responsible for handing the portfolio of corporate network of our Bank. He has 30 years of experience in various areas of Banking. Shri. Ramakrishnan .J is the General Manager- Stressed Asset Management Group of our Bank. He has completed his Bachelor’s Degree in Science from Madras University and is a CAIIB. He is currently responsible for handling the stressed asset management portfolio of our Bank. He has 38 years of experience in various areas of Banking. Shri. Ravinder Kumar Madaan is the General Manager- Network Delhi of our Bank. He has completed his Bachelor’s Degree in Arts from Punjab University, Chandigarh and is a CAIIB. He has 38 years of experience in various areas of Banking. Shri. Bangara Raju S is the General Manager- Retail Network -Mysore of our Bank. He has completed his Master’s degree in Arts from Andhra University, Visakhapatnam and is a CAIIB. He has 33 years of experience in various areas of Banking. Shri. Vijay Dube is the General Manager and Chief Vigilance Officer of our Bank. He has completed his Master’s Degree in Science (Statistics) from Lucknow University and also holds Master’s Degree in Business Administration from Faculty of Management Studies, Delhi. Shri. Dube is also a CAIIB. He is currently responsible for handling the portfolio of vigilance of our Bank. He has 28 years of experience in various areas of Banking.

101

Shareholding of the key managerial personnel as on March 31, 2013

None of the key managerial personnel hold Equity Shares in our Bank, except as stated below:

Sr. No. Name and Desgination No. of Equity Shares held

1. Shri. A. Karunanithi- General Manager- Retail Network, Bangalore

10

2. Shri. K. Lakshmisha General Manager- Priority Sector, rural banking and financial inclusion

260

3. Shri. Ramakrishnan J. General Manager- Streesed Asset Management Group

86

Corporate Governance

The constitution of the Board of our Bank is in accordance with the provisions of Subsidiaries Banks Act, guidelines issued by RBI from time to time. As on the date of this Preliminary Offer Document, amongst other committees, our Bank has constituted the following committees:

Sl. No Name of the Committee Members

1. Executive Committee (i) Shri. Sharad Sharma (ii) Shri. Rajeev N. Mehra (iii) Shri. K.N. Nayak (iv) Shri. S. Ramasubramanian.

2. Audit Committee (i) Shri. K. Gururaj Acharya- Chairman (ii) Smt. Madhumita Sarkar Deb (ii) SBI Nominee Director (iv) Shri. S. Ramasubramanian

3. Shareholders/Investors Grievances Committee (i) Shri. S. Ramasubramanian (ii) Shri. K.N. Nayak (iii) Managing Director- Shri. Sharad Sharma

In addition to the aforesaid committees, the Board has constituted various committees such as Risk Management Committee of the Board, Special Committee of the Board for monitoring high value frauds of ` 1.00 crore and above, Nomination Committee etc. Interest of Directors and Key Managerial Personnel Except as stated in “Financial Statements – Related Party Transactions” on page 187, and to the extent of shareholding held in our Bank and remuneration and benefits to which they are entitled as per their terms of appointment, the Directors do not have any other interest in our Bank or our business. The directors may also be regarded as interested in the Equity Shares, if any, held by or that may be subscribed by and allotted to them, their relatives, dependents, companies, firms, HUF or trusts, in which they are interested as directors, members, partners, karta and/or trustees. All the directors may also be deemed to be interested to the extent of any dividend payable to them and other distributions in respect of the said Equity Shares and any other benefit arising out of such holding and transactions with the companies with which they are associated as directors or members. The Non-Executive directors of our Bank may also be deemed to be interested to the extent of sitting fees payable to them for attending meetings of the Board or a committee. The key managerial personnel of our Bank do not have any interest in our Bank other than to the extent of the remuneration or benefits to which they are entitled to as per their terms of appointment and reimbursement of expenses incurred by them during the ordinary course of business and to the extent of the Equity Shares held by them or their dependants in our Bank, if any.

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PRINCIPAL SHAREHOLDERS

Our Bank is constituted as a subsidiary of the State Bank of India under the Subsidiary Banks Act. The State Bank of India is our Promoter. The shareholding pattern of our Bank as on March 31, 2013 is as under:

Category of shareholder

Number of Shareholders

Total no. of shares

No. of shares held

in demat

Total shareholding as a % of total no.

Of shares

Shares pledged of otherwise encumbered

As a % of A+B

As a % of A+B+C

No. of Shares

% of total no.

of shares

A Shareholding Of Promoter And Promoter Group

(1) Indian

Financial Institutions/Banks 1 4,32,12,078 4,32,12,078 92.33 92.33 - -

SUB TOTAL A(1) 1 4,32,12,078 4,32,12,078 92.33 92.33 - -

(2) Foreign - - - - - - -

SUB TOTAL A(2) - - - - - - -

Total Shareholding of promoter and

Promoter Group(A)=A(1)+A(2)

1 4,32,12,078 4,32,12,078 92.33 92.33 - -

B Public Shareholding

(1) Institutions

Mutual funds/UTI - -

Financial Institutions/Banks 10 75,358 74,798 0.16 0.16 - -

Central Government/State Government

- -

Venture Capital Funds - -

Insurance Companies 3 7,77,808 7,77,758 1.66 1.66 - -

Foreign Institutional Investors 2 488 288 0.001 0.001 - -

Foreign Venture Capital Investors - -

Any other (specify) - -

SUB TOTAL B(1) 15 8,53,654 8,52,844 1.82 1.82 - -

(2) Non-Institutions

Bodies Corporate (Indian/Foreign/Overseas)

303 90471 81131 0.19 0.19 - -

Individuals

(i) Individual shareholders holding Nominal share Capital up to ` 1 Lakh

26780 23,94,351 14,88,263 5.12 5.12 - -

Individual shareholders holding Nominal share Capital in excess of `1 Lakh

8 2,03,810 2,03,810 0.435 0.435 - -

Any other (specify) - -

Non Resident Indians 145 30,549 29,909 0.06 0.06 - -

Clearing Members 94 8,102 8,102 0.02 0.02 - -

Trusts 1 6,760 6,760 0.01 0.01 - -

SUB TOTAL B(2) 27,332 27,34,058 18,17,990 5.84 5.84 - -

Total Public Share Holding (B)=B(1)+B(2)

27,347 35,87,712 26,70,834 7.67 7.67 - -

TOTAL (A)+(B) 27,348 4,67,99,790 4,58,82,912 100 100 - -

C

Shares held by Custodians and against which Depository Receipts have been issued

0 0 0 0 0 - -

(1) Promoter and Promoter Group 0 0 0 0 0 - -

(2) Public 0 0 0 0 0 - -

GRAND TOTAL (A)+(B)+(C) 27,348 4,67,99,790 4,58,82,912 0 100 - -

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The shares held by our Promoter and Promoter Group as on March 31, 2013 is as under:

Category of shareholders No. of Equity Shares Percentage of Shareholding

Promoter

State Bank of India 4,32,12,078 92.33

Promoter Group Nil Nil

Total 4,32,12,078 92.33%

Details of shareholders holding more than one per cent of the share capital of our Bank as on March 31, 2013 is as follows:

Sr. no Name of the Shareholder No. of Shares % of Paid up Share Capital

1 State Bank of India 4,32,12,078 92.33

2 Life Insurance Corporation of India 7,08,058 1.51

TOTAL 4,39,20,136 93.84

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ISSUE PROCEDURE

The following is a summary intended to present a general outline of the procedure relating to the application,

payment, Allocation and Allotment of the Equity Shares offered in the Issue. Our Bank and the members of the

Syndicate do not accept any responsibility for the completeness and accuracy of the information stated in this

section, and are not liable for any amendment, modification or change in applicable laws or regulations, which may

occur after the date of this Preliminary Offer Document. This section applies to all Applicants. The Applicants are

advised to inform themselves of any restrictions or limitations that may be applicable to them. Please see

“Representations by Investors” and “Transfer Restrictions” beginning on pages 3 and 123 respectively. Applicants

are advised to make their independent investigations and ensure that their applications do not exceed the Issue Size

or the investment limits or maximum number of Equity Shares that can be held by them under applicable laws.

Authority for the Issue The Issue was authorised and approved by the Board of Directors through a resolution dated February 04, 2013, and by the shareholders of our Bank through a resolution dated March 11, 2013. The State Bank of India has, vide its letter dated January 24, 2013 accorded its in-principle approval for the Issue. RBI vide its letter bearing reference number DBOD.CO.BP. No./21.01.002/2012-13 dated February 28, 2013 has accorded its approval for the Issue. The Department of Financial Services, Ministry of Finance, Government of India vide its letter bearing reference number F.NO. 11/5/2013-BOA dated March 21, 2013 has accorded its approval for the Issue. Our Bank has applied for and received in-principle approvals from BSE, NSE, MSE and BgSE on May 14, 2013 under Clause 24(a) of the Equity Listing Agreement for listing of the Equity Shares offered in the Issue. Our Bank has also filed a copy of this Preliminary Offer Document with SEBI and the Stock Exchanges. Prohibition by SEBI or Other Governmental Authorities Neither our Bank, our Promoter, Promoter Group nor our directors or banks/companies with which our Bank’s Promoter and directors are associated as promoters or person in control, have been debarred from accessing the capital market under any order or direction passed by SEBI or any other regulatory or governmental authority. The companies with which the Promoter, the directors or the persons in control of our Bank are or were associated as promoter, directors or persons in control have not been debarred from accessing the capital market under any order or direction passed by SEBI or any other regulatory or governmental authority.

Restrictions on Issue Size The aggregate of all tranches of the IPP undertaken by our Bank cannot result in an increase in the public shareholding in our Bank by more than 10% or such lesser percentage as may be required by our Bank to achieve the required minimum public shareholding. Based on the Issue Size of 12,13,630 Equity Shares, the increase in public shareholding of our Bank shall be 2.33%.

SEBI Letter SEBI, by its letter dated March 13, 2013 has permitted the following in relation to, inter-alia: 1. Minimum number of Allottees: SEBI has permitted us to allot Equity Shares in the Issue to less than 10

investors, subject to the minimum number of Allottees being in line with the extant provisions on minimum number of Allottees in qualified institutions placement (“QIP”). However, the proposed Issue would be subject to the pricing provisions as applicable to a QIP.

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In terms of Regulation 87(1) of the ICDR Regulations, the minimum number of allottees as applicable to a QIP shall not be less than: (i) two, where the issue size is less than or equal to two hundred and fifty crore rupees; and (ii) five, where the issue size is greater than two hundred and fifty crore. In such a scenario, in accordance with the terms of the SEBI Letter, we are required to ensure that the Issue price should be in compliance with regulations applicable for a QIP i.e. Chapter VIII of ICDR Regulations. However, it is clarified that the pricing-related provisions of Chapter VIII of the ICDR Regulations will be applicable only in case we Allot Equity Shares in the Issue to less than 10 investors.

2. Relaxing the requirement of filing the Offer Document with the Registrar of Companies, Karnataka, in

terms of ICDR Regulations, as it is not applicable to our Bank in terms of regulatory framework under the Subsidiary Banks Act and the Banking Regulation Act.

Who can Apply This Issue is being made only to QIBs, being the following: � mutual funds, venture capital funds, Alternate Investment Funds (AIFs) and foreign venture capital

investors registered with SEBI; � foreign institutional investors and sub-accounts registered with SEBI, other than a sub-account which is a

foreign corporate or foreign individual; � public financial institutions, as defined in Section 4A of the Companies Act; � scheduled commercial banks; � State Industrial Development Corporations; � insurance companies registered with the Insurance Regulatory and Development Authority; � multilateral and bilateral financial institutions; � provident funds with minimum corpus of ` 250 million; � pension funds with minimum corpus of ` 250 million; � National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of the

GoI published in the Gazette of India; � insurance funds set up and managed by army, navy or air force of the Union of India; and � insurance funds set up and managed by the Department of Posts, India. No single FII can hold more than 10% of the post Issue paid-up capital of our Bank. In respect of an FII investing in the Equity Shares offered in the Issue on behalf of its eligible sub-accounts, the investment on behalf of each eligible sub-account shall not exceed 10% of our Bank’s total issued capital. Note: Each eligible sub-account of an FII, other than a sub-account which is a foreign corporate or foreign individual, will need to submit a separate ASBA Applications, FIIs or sub-accounts of FIIs, are required to indicate the SEBI FII/sub-account registration number in the ASBA Applications. No Allotment shall be made, either directly or indirectly, to any QIB being a promoter or promoter group as per ICDR Regulations or any person related to the promoter(s). QIBs which have all or any of the following rights shall be deemed to be persons related to promoter(s): (a) rights under a shareholders’ agreement or voting agreement entered into with a promoter or persons related

to the promoters; (b) veto rights; or (c) right to appoint any nominee director on the Board. Provided that a QIB which does not hold any equity shares and which has acquired the said rights in the capacity of a lender shall not be deemed to be a person related to the Promoter. Applicants are advised to make their independent investigations and satisfy themselves that they are eligible

to apply. Applicants are advised to ensure that the number of Equity Shares for which they have provided ASBA Applications does not exceed the investment limits or maximum number of Equity Shares that can be

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held by them under applicable law or regulation or as specified in this Preliminary Offer Document. Further,

Applicants are required to satisfy themselves that their ASBA Applications would not result in triggering an

offer under the SEBI (SAST) Regulations, 2011. A minimum of 25% of the aggregate number of Equity Shares to be Allotted in the Issue shall be Allocated

and Allotted to Mutual Funds and Insurance Companies, subject to receipt of valid ASBA Applications at or

above the Issue Price, provided that if this portion or any part thereof to be Allocated and Allotted to Mutual

Funds and Insurance Companies remains unsubscribed, such minimum portion or part thereof may be

Allotted to other QIBs. For further details, please see “Basis of Allocation”. Affiliates or associates of the Book Running Lead Managers who are QIBs may participate in the Issue in compliance with applicable laws. No person connected with the Issue shall offer any incentive, direct or indirect, in any manner, whether in cash, kind, services or otherwise, to any Applicant for making an ASBA Application.

Number of Allottees The Equity Shares offered in the Issue, will not be Allotted to less than 10 Allottees, subject to what is stated below. No single Allottee shall be Allotted more than 25% of the offer size in terms of Regulation 91H of the ICDR Regulations. Provided further that, the QIBs belonging to the same group or who are under same control shall be deemed to be a single allottee for the purpose of the foregoing. (i) The expression ‘belong to the same group’ shall have the same meaning as ‘companies under the same

group’ as provided in sub-section (11) of Section 372 of the Companies Act: Section 372(11) of the Companies Act - “For the purposes of this section, a body corporate shall be deemed to be in

the same group as the investing company-

(a) if the body corporate is the managing agent of the investing company; or

(b) if the body corporate and the investing company should, in virtue of subsection (1B) of section 370, be

deemed to be under the same management.” Under Section 370(1B) of the Companies Act, two bodies corporate are deemed to be under the same management if any of the following conditions are satisfied: (a) The managing agent, secretaries and treasurers, managing director or manager of one body corporate is the

managing agent, secretary or treasurer, managing director or manager of the other body corporate or a partner in a firm acting as the managing agents or secretaries and treasurers of the other body corporate or a director of a private company acting as managing agent or secretaries and treasurers of the other body corporate;

(b) A majority of the directors of the one body corporate constitute or at any time within the immediately preceding six months have constituted a majority of the directors on the board of the other body corporate;

(c) Not less than one-third of the total voting power with respect to any matter relating to each of the

two bodies corporate is exercised or controlled by the same individual or body corporate;

(d) The holding company of one body corporate is under the same management as the other body corporate within the meaning of (a), (b) or (c) above; and

(e) One of more directors of one body corporate hold, either by themselves or together with their relatives, the

majority of the shares in the other body corporate.

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(ii) The expression ‘control’ shall have the same meaning as is assigned to it under Regulation 2(1)(e) of the SEBI(SAST) Regulations, 2011:

In accordance with Regulation 2(1)(e) of the SEBI(SAST) Regulations, 2011, “control” includes the right to

appoint majority of the directors or to control the management or policy decisions exercisable by a person or

persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or

management rights or shareholders agreements or voting agreements or in any other manner:

Provided that a director or officer of a target company shall not be considered to be in control over such target

company, merely by virtue of holding such position.

However, in accordance with Section 372(14) of the Companies Act, the provisions of Section 372 of Companies Act are not applicable to banking and insurance companies. In case our Bank, in consultation with BRLMs, chooses to exercise the option to allot Equity Shares in the Issue to less than 10 investors in accordance with the SEBI Letter, the minimum number of allottees shall not be less than: (a) two, where the issue size is less than or equal to two hundred and fifty crore rupees; and (b) five, where the issue size is greater than two hundred and fifty crore rupees. Provided that no single allottee shall be allotted more than fifty per cent of the issue size.

The qualified institutional buyers belonging to the same group or who are under same control shall be deemed to be a single allottee. Qualified institutional buyers belonging to the same group shall have the same meaning as derived from sub-section (11) of section 372 of the Companies Act.

Minimum Application Size Each ASBA Application is required to be such number of Equity Shares and at such price per Equity Share that the minimum Application Amount exceeds ` 2,00,000. Information for the Applicants (a) Only ASBA mode of payment can be used by QIBs to participate in this Issue. (b) Our Bank, in consultation with BOBCAPS, will decide the Floor Price for the Issue and the same shall be

announced at least one day prior to the Issue Opening Date. (c) Our Bank will publish the Issue Opening Date and the Issue Closing Date in the Floor Price

Announcement. The Issue Period shall be for a minimum of one Working Day and shall not exceed two Working Days.

(d) Our Bank has filed this Preliminary Offer Document with the Stock Exchanges atleast 3(three) days prior to the Issue Opening Date.

(e) Once a duly filled in ASBA Application is submitted by an Applicant, such ASBA Application constitutes an irrevocable offer and cannot be withdrawn. In addition, the price per Equity Share and/or the number of Equity Shares applied for in an ASBA Application cannot be revised downwards.

(f) Our Bank shall open the Public Issue Account with the Public Issue Account Bank in terms of Section 73 of the Companies Act to receive monies on the Designated Date from the ASBA Accounts.

(g) Upon the receipt of the ASBA Applications, our Bank, after the closure of the Issue, shall determine the Issue Price for the Equity Shares offered in the Issue and the number of Equity Shares to be issued at the Issue Price, in consultation with BOBCAPS and in accordance with the Allotment Criteria. Upon finalisation of the Basis of Allocation, our Bank will issue CANs to the successful Applicants. The dispatch of the CANs shall be deemed a valid, binding and irrevocable agreement on the part of the Applicant to subscribe to such number of Equity Shares as mentioned in their respective CANs at the Issue Price indicated in such CAN. The CAN shall contain details such as the number of Equity Shares Allocated to the Applicant and the Issue Price.

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(h) Our Bank shall take all steps to ensure that listing and commencement of trading of the Equity Shares Allotted in the Issue at the Stock Exchanges is within 12 Working Days of the Issue Closing Date.

(i) Our Bank or the BRLMs shall not be responsible for any delay or non-receipt of the communication of the final listing and trading permissions from the Stock Exchanges or any loss arising from such delay or non-receipt. Final listing and trading approvals granted by the Stock Exchanges are also placed on their respective websites. Applicants are advised to apprise themselves of the status of the receipt of the listing and trading approvals from the Stock Exchanges or our Bank.

(j) Our Bank will issue a statutory advertisement after the filing of the Offer Document with SEBI and the Stock Exchanges in terms of Regulation 66 of the ICDR Regulations, in an English national newspaper, a Hindi national newspaper and a Kannada newspaper, each with wide circulation.

(k) In case of a Mutual Fund, a separate ASBA Application can be made in respect of each scheme of the Mutual Fund registered with SEBI and such ASBA Applications in respect of more than one scheme of the Mutual Fund will not be treated as multiple ASBA Applications, provided that the ASBA Applications clearly indicate the scheme concerned for which it has been made. No Mutual Fund scheme can invest more than 10% of its net asset value in equity shares or equity related instruments of any single Bank provided that the limit of 10% shall not be applicable for investments in index funds or sector or industry specific funds. No Mutual Fund under all its schemes should own more than 10% of any company’s paid-up share capital carrying voting rights. Further, no single Mutual Fund shall be Allocated and Allotted more than 25% of the aggregate number of the Equity Shares Allotted in the Issue. However, this is subject to changes in case our Bank, in consultation with the BRLMs, chooses to exercise the option to allot Equity Shares in the Issue to less than 10 investors in accordance with the SEBI Letter. For further details, please see “Issue Procedure – Number of Allottees” on page 106.

Pre-Issue Advertisement Our Bank shall, after filing of the Preliminary Offer Document with the SEBI and Stock Exchanges, publish a pre-Issue advertisement, in the form prescribed by the ICDR Regulations, in an English national newspaper, a Hindi national newspaper and a Kannada newspaper, each with wide circulation. ASBA Application and Revision Form The ASBA Application and the Revision Form shall be in the form prescribed by SEBI pursuant to the circular dated September 27, 2011, to the extent applicable to the Issue. By making an application for the Equity Shares offered in the Issue through an ASBA Application, an Applicant will be deemed to have made the representations, warranties and agreements made under “Representations by Investors” and “Transfer Restrictions” beginning on pages 3 and 123, respectively. SCSBs would be entitled to a processing fee of ` 25 per valid ASBA Application collected by the members of the Syndicate in the Specified Cities and submitted to the SCSBs. No selling commission is payable in respect of ASBA Applications procured in the Issue. Method and Process of Bidding (a) ASBA Applications will be available with the SCSBs, the members of the Syndicate (only in the Specified

Cities) and at the Head Office of our Bank. Electronic ASBA Applications will be available on the website of the Stock Exchanges and the Designated Branches of the SCSBs.

(b) Any eligible Applicant may obtain a copy of this Preliminary Offer Document and the ASBA Applications from the Head Office of our Bank.

(c) Applicants should approach the Designated Branches of the SCSBs or the members of the Syndicate (only in the Specified Cities) to submit their ASBA Applications.

(d) Applicants may submit their ASBA Applications, and / or the Revision Forms, during the Issue Period to (i) the members of the Syndicate in the Specified Cities; (ii) the Designated Branches of the SCSBs where the ASBA Account is maintained; or (iii) in electronic form to the SCSBs with whom the ASBA Account is maintained. For details, the Applicants should contact the SCSBs where the ASBA Account is maintained. The SCSBs may provide the electronic mode of bidding either through an internet enabled bidding and banking facility or through any secured, electronically enabled mechanism for bidding and blocking funds in the ASBA Account.

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(e) ASBA Applications submitted directly to the SCSBs should bear the stamp of the SCSBs and the ASBA Application submitted to the members of the Syndicate in the Specified Cities should bear the stamp of the member of the Syndicate. Applicants also have an option to submit the ASBA Application in electronic form or submit ASBA Applications through the members of the Syndicate in the Specified Cities.

(f) For ASBA Applications submitted to the members of the Syndicate in the Specified Cities, the members of the Syndicate shall upload the details of the ASBA Application onto the electronic bidding system of the Stock Exchanges and deposit a schedule (containing certain information including the ASBA Application number and the Application Amount) along with the ASBA Application with the relevant branch of the SCSB, named by such SCSB to accept such ASBA Applications from the members of the Syndicate in such Specified City (a list of such branches is available at

http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/RecognisedIntermediaries. The relevant branch of the SCSB shall block an amount equal to the Application Amount specified in the ASBA Application in the ASBA Account. For ASBA Applications submitted directly to the SCSBs, the relevant SCSB shall block an amount equal to the Application Amount specified in the ASBA Application in the ASBA Account, before entering the required details of the ASBA Application into the electronic bidding system.

(g) The Applicant should mention its PAN allotted under the Income Tax Act in the ASBA Application. Any ASBA Application without the PAN is liable to be rejected. Applicants should not submit the GIR number instead of the PAN as the ASBA Application is liable to be rejected on this ground.

(h) The Registrar to the Issue shall validate the details of the ASBA Application uploaded on the electronic bidding system of the Stock Exchanges with the Depository records and the complete reconciliation of the final certificates received from the SCSBs with the electronic details of the ASBA Applications.

Applicants should note that in case the DP ID, Client ID and PAN mentioned in the ASBA Application and

entered into the electronic bidding system of the BSE and NSE by the Syndicate/ SCSBs do not match with

the DP ID, Client ID and PAN available in the database of Depositories, the ASBA Application is liable to be

rejected. (i) Each ASBA Application will give the Applicant the option to indicate up to three prices at or above the

Floor Price, as the case may be, and specify the demand (i.e., the number of Equity Shares applied for at each such price). The number of Equity Shares applied for by an Applicant at or above the Floor Price will be considered for Allocation and Allotment in accordance with the Basis of Allocation. The highest value indicated by the Applicant in the ASBA Application to subscribe for the Equity Shares applied for in the ASBA Application shall be blocked in the ASBA Account of such Applicant. After determination of the Issue Price, the maximum number of Equity Shares applied for by an Applicant at or above the Issue Price will be considered for Allocation and the rest of the options will become automatically invalid.

(j) The Applicant cannot submit another ASBA Application after one ASBA Application has been submitted

to the SCSBs or any member of the Syndicate. Submission of a second ASBA Application to either the same or to another SCSB or any member of the Syndicate will be treated as multiple applications and is liable to be rejected either before entering the required details of the ASBA Application into the electronic bidding system, or at any point of time prior to the Allotment of the Equity Shares offered in this Issue. However, the Applicant can revise upwards the price per Equity Share or the number of Equity Shares applied for through the Revision Form, the procedure for which is detailed under the paragraph titled “- Revision of ASBA Applications”.

(k) Upon receipt of an ASBA Application from the Applicant, in physical mode, the Designated Branches of

the SCSBs shall verify if sufficient funds equal to the Application Amount are available in the ASBA Account, as mentioned in the ASBA Application, prior to uploading details of the ASBA Application on the electronic bidding system of the BSE and NSE.

(l) If sufficient funds are not available in the ASBA Account, the Designated Branches of the SCSBs shall

reject such ASBA Application and shall not upload the details of the ASBA Application on the electronic bidding system of the BSE and NSE.

(m) If sufficient funds are available in the ASBA Account, the SCSB shall block an amount equivalent to the

Application Amount mentioned in the ASBA Application and will enter the details of the ASBA

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Application into the electronic bidding system and generate a TRS for each price and demand option. It is the Applicant’s responsibility to obtain the TRS from the members of the Syndicate or the Designated Branches of the SCSBs. Such TRS will be non-negotiable and by itself will not create any obligation of any kind.

(n) The Application Amount shall remain blocked in the ASBA Account until the finalisation of the Basis of

Allocation, the dispatch of the CAN and consequent transfer of the Application Amount for the Allotted Equity Shares to the Public Issue Account from the ASBA Accounts, or alternatively, until the withdrawal of the Issue or the rejection of the ASBA Application, as the case may be. Once the Basis of Allocation is finalised and the CAN is dispatched, the Registrar to the Issue shall send an appropriate request to the SCSBs to unblock the relevant ASBA Accounts and to transfer the amount due on the Equity Shares to be Allotted to the successful Applicants to the Public Issue Account on the Designated Date.

(o) In case our Bank withdraws or cancels the Issue, the Registrar to the Issue shall give instructions to the

SCSBs to unblock the Application Amounts in the relevant ASBA Accounts of the Applicants within one day of receipt of such instruction. Our Bank shall also inform the Stock Exchanges of such cancellation or withdrawal.

Electronic Registration of ASBA Applications

(a) The BSE and NSE will offer an electronic facility for registering details under the ASBA Applications for

the Issue. This facility will be available with the Syndicate and their authorised agents and the SCSBs during the Issue Period. The members of the Syndicate and the Designated Branches of the SCSBs can also set up facilities for off-line electronic registration of details under the ASBA Applications, subject to the condition that they will subsequently upload the off-line data file into the electronic facilities offered by the BSE and NSE. The members of the Syndicate and the SCSBs will register the ASBA Applications received, using the electronic bidding system of the BSE and NSE. On the Issue Closing Date, the members of the Syndicate and the Designated Branches of the SCSBs shall upload the details under the ASBA Applications on the electronic bidding system of the BSE and NSE till such time as may be permitted by the BSE and NSE.

(b) Each ASBA Application will give the Applicant the choice to apply for up to three optional prices at or

above the Floor Price and to specify the demand (i.e., the number of Equity Shares applied for) at each such price.

(c) With respect to details under the ASBA Applications submitted to the members of Syndicate at the

Specified Cities, the members of Syndicate shall enter the following details in the electronic bidding system of the BSE and NSE: � ASBA Application number; � PAN; � DP ID and Client ID number of the beneficiary account of the Applicant; � Application Amount; � ASBA Account number (not compulsory); � Category of the Applicant; � Numbers of Equity Shares applied for; � Price per Equity Share; � Bank code for the SCSB where the ASBA Account is maintained; and � Name of the Specified City.

(d) With respect to details under the ASBA Applications submitted to the SCSBs, the SCSBs shall enter the

following details in the electronic bidding system of the BSE and NSE: � ASBA Application number; � PAN; � DP ID and Client ID number of the beneficiary account of the Applicant; � Application Amount; � ASBA Account number; � Category of the Applicant;

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� Numbers of Equity Shares applied for; and � Price per Equity Share.

(e) TRS will be generated when the ASBA Application is registered for each price and demand option. The registration of the ASBA Application by the member of the Syndicate or the Designated Branches of the SCSBs does not guarantee that the Equity Shares shall be Allocated/Allotted either by the members of the Syndicate or our Bank.

(f) The members of the Syndicate and the SCSBs will register the ASBA Applications received, using the electronic bidding system of the BSE and NSE.

(g) The members of the Syndicate and the SCSBs may undertake modification of selected fields in the details under the ASBA Application already uploaded within one Working Day from the Issue Closing Date.

(h) Neither our Bank nor the Registrar to the Issue shall be responsible for any acts, mistakes or errors or omission and commissions in relation to (i) the ASBA Applications accepted by the members of the Syndicate or the SCSBs, (ii) the details under the ASBA Applications uploaded by the members of the Syndicate or the SCSBs, or (iii) the ASBA Applications accepted but not uploaded by the members of the Syndicate or the SCSBs.

(i) The SCSBs shall be responsible for any acts, mistakes, errors or omissions and commissions in relation to (i) the ASBA Applications accepted by them, (ii) the details under the ASBA Applications uploaded by them, (iii) the ASBA Applications accepted but details not uploaded by them, and (iv) the ASBA Applications accepted and details uploaded without blocking funds in the ASBA Accounts. It shall be presumed that for ASBA Applications uploaded by the SCSBs, the full Application Amount has been blocked in the relevant ASBA Account and can be transferred to the Public Issue Account on the Designated Date.

(j) The permission given by the BSE and NSE to use its network and software of the electronic bidding system should not in any way be deemed or construed to mean that the compliance with various statutory and other requirements by our Bank, the members of the Syndicate or the SCSBs are cleared or approved by the BSE and NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the compliance with the statutory and other requirements nor does it take any responsibility for the financial or other soundness of our Bank or any scheme or project of our Bank; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Preliminary Offer Document; nor does it warrant that the Equity Shares offered in the Issue will be listed or will continue to be listed on the Stock Exchanges.

(k) The aggregate demand in relation to ASBA Applications registered shall be displayed by the BSE and NSE without disclosing the price.

(l) Only those ASBA Applications details of which are uploaded on the electronic bidding system of the BSE and NSE shall be considered for the Allocation and Allotment. Members of the Syndicate and the SCSBs will be given up to one Working Day after the Issue Closing Date to verify the DP ID and Client ID uploaded on the electronic bidding system of the BSE and NSE during the Issue Period, after which the Registrar to the Issue will receive this data from the Stock Exchanges and will reconcile and validate the details of the ASBA Application uploaded on the electronic bidding system of the BSE and NSE with the Depositories records. In case no corresponding record is available with the Depositories, which matches the three parameters, namely, DP ID, Client ID and PAN, then such ASBA Applications are liable to be rejected.

(m) The details of the ASBA Applications uploaded on the electronic bidding system of the BSE and NSE shall be considered as final and Allocation and Allotment will be based on such details.

Revision of ASBA Applications (a) During the Issue Period, any Applicant who has submitted an ASBA Application may revise upwards the

number of Equity Shares applied for and/or the price per Equity Shares at or above the Floor Price, as the case may be, using the printed Revision Form, which is a part of the ASBA Application. An ASBA

Application cannot be withdrawn and the price per Equity Share and/or the number of Equity Shares applied for cannot be revised downwards.

(b) Upward revisions can be made in both the desired number of Equity Shares and the price per Equity Share by using the Revision Form. The Members of the Syndicate and the Designated Branches of the SCSBs will not accept incomplete or inaccurate Revision Forms.

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(c) The Applicant can make this upward revision any number of times during the Issue Period. However, for any revision(s) in the ASBA Application, the Applicants will have to use the services of the same member of the Syndicate or the SCSB through whom such Applicant had placed the original ASBA Application. Applicants are advised to retain copies of the blank Revision Form and any revision in the ASBA Application must be made only in such Revision Form or copies thereof.

(d) Apart from mentioning the revised options in the Revision Form, the Applicant must also mention the details of all the options in his or her ASBA Application or earlier Revision Form. For example, if an Applicant has applied for three options in the ASBA Application and such Applicant is changing only one of the options in the Revision Form, the Applicant must still fill the details of the other two options that are not being revised, in the Revision Form. The Syndicate and the Designated Branches of the SCSBs will not accept incomplete or inaccurate Revision Forms.

(e) In case of revision of the number of Equity Shares and/or the price per Equity Share, the relevant SCSB shall block the additional Application Amount in the ASBA Account of such Applicant. The Registrar to the Issue will reconcile the ASBA Application data and consider the revised ASBA Application data for preparing the Basis of Allocation.

(f) When an Applicant revises its ASBA Application, it should surrender the earlier TRS and request for a revised TRS from the members of the Syndicate or the SCSB as proof of it having revised the previous ASBA Application.

Allocation (a) Allocation to FIIs and FVCIs, applying on repatriation basis will be subject to applicable law, rules,

regulations, guidelines and approvals. (b) A minimum of 25% of the aggregate number of Equity Shares to be Allotted in the Issue shall be Allocated

and Allotted to Mutual Funds and Insurance Companies, subject to valid ASBA Applications being received at or above the Issue Price, provided that if this portion or any part thereof to be Allotted to Mutual Funds and Insurance Companies remains unsubscribed, such minimum portion or part thereof may be Allotted to other QIBs.

(c) No single Allottee shall be allotted less than 25% of the aggregate number of Equity Shares. This is subject to changes in case our Bank, in consultation with the BRLMs, chooses to exercise the option to allot Equity Shares in the Issue to less than 10 investors.

Price Discovery (a) Based on the demand for the Equity Shares offered in the Issue generated at various price levels, our Bank,

in consultation with BOBCAPS, shall finalize the Issue Price. (b) The Issue Price shall be the price at or above the Floor Price. The Equity Shares offered in the Issue shall

be Allocated and Allotted at the Issue Price. For further details, please refer “SEBI Letter” on page 104.

Filing

Our Bank will update and deliver a copy of the updated Preliminary Offer Document to SEBI and the Stock Exchanges in accordance with the applicable law, which then would be termed as the ‘Offer Document’. The Offer Document will contain details of the Issue and will be complete in all material respects. Our Bank will submit a copy of the Offer Document to SEBI and the Stock Exchanges. Allotment Criteria The Equity Shares offered in the Issue will be Allocated and Allotted to successful Applicants as per the proportionate method. Basis of Allocation � ASBA Applications received at or above the Issue Price shall be grouped together to determine the total

demand for the Equity Shares offered in the Issue. Allotment against each ASBA Application for Equity Shares in the Issue shall be restricted to 25% of the offer size in terms of Regulation 91H of the ICDR

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Regulations, by our Bank in consultation with the BRLMs, BSE and NSE. However, this is subject to changes in case our Bank, in consultation with the BRLMs, chooses to exercise the option to allot Equity Shares in the Issue to less than 10 investors in accordance with the SEBI Letter. For further details, please see “Issue Procedure – Number of Allottees” on page 106. The Allocation and Allotment to all successful Applicants will be made at the Issue Price finalized by our Bank, in consultation with BOBCAPS.

� The Allocation shall be undertaken in the following manner:

(a) In the first instance, Allocation to Mutual Funds and Insurance Companies for 25% of the aggregate number of Equity Shares to be Allotted in the Issue shall be determined as follows: � In the event that the aggregate demand from Mutual Funds and Insurance Companies exceeds 25%

of the aggregate number of Equity Shares to be Allotted in the Issue, then subject to valid ASBA Applications received at or above the Issue Price, Allocation to Mutual Funds and Insurance Companies shall be made on a proportionate basis at the Issue Price as per the Allocation criteria mentioned below for 25% of the aggregate number of Equity Shares to be Allotted in the Issue.

� In the event that the aggregate demand from Mutual Funds and Insurance Companies is equal to or less than 25% of the aggregate number of Equity Shares to be Allotted in the Issue, then all Mutual Funds and Insurance Companies shall get full Allocation at the Issue Price to the extent of valid ASBA Applications received at or above the Issue Price.

� In the event that the aggregate demand from Mutual Funds and Insurance Companies exceeds 25% of the aggregate number of Equity Shares to be Allotted in the Issue, then the additional demand from Mutual Funds and Insurance Companies after Allocation of 25% of the aggregate number of Equity Shares to be Allotted in the Issue, shall be aggregated with the portion to be Allocated to other QIBs.

� In the event subscription from Mutual Funds and Insurance Companies is below 25% of the aggregate number of Equity Shares to be Allotted in the Issue, the Equity Shares offered in the Issue that remain unsubscribed shall be available for Allocation to other QIBs as set out in (b) below.

(b) In the second instance, Allocation to all Applicants shall be determined as follows: � All Applicants who have submitted valid ASBA Applications at or above the Issue Price shall be

Allocated Equity Shares offered in the Issue at the Issue Price on a proportionate basis as per the Allocation criteria mentioned below, until the Equity Shares offered in the Issue representing up to 75% of the Issue Size or such number of Equity Shares offered in the Issue as may remain after Allocation to Mutual Funds and Insurance Companies are exhausted.

� Mutual Funds and Insurance Companies, who have received Allocation as per (a) above, for less than the number of Equity Shares applied for by them, are eligible to receive Equity Shares on a proportionate basis as per the Allocation criteria mentioned below along with the other QIBs. For the purpose of Allocation to Mutual Funds and Insurance Companies in this category, quantity of Equity Shares applied for in the Issue less the Equity Shares Allocated as per (a) above shall be considered for Allocation.

� In the event subscription from Mutual Funds and Insurance Companies pursuant to (a) above is below 25% of the aggregate number of Equity Shares to be Allotted in the Issue, such portion which remains unsubscribed would be included for Allocation along with the other QIBs on a proportionate basis.

Proportionate Method The Allocation and Allotment shall be made on a proportionate basis as explained below: (a) The number of Equity Shares applied for in the Issue at or above the Issue Price shall first be aggregated. (b) Number of Equity Shares to be Allocated to the successful Applicants will be calculated on a proportionate

basis, which is total number of Equity Shares applied for by each Applicant multiplied by the inverse of the over-subscription ratio, (subject to the maximum limit of 25% of the offer size in terms of Regulation 91H of the ICDR Regulations) where oversubscription ratio means the ratio of the total number of Equity Shares applied for in the Issue and the remaining number of Equity Shares offered in the Issue that are available

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for Allocation. However, this is subject to change in case our Bank, in consultation with the BRLMs, chooses to exercise the option to allot Equity Shares in the Issue to less than 10 investors in accordance with the SEBI Letter. For further details, please see “Issue Procedure – Number of Allottees” on page 106.

(c) If the determination of proportionate Allocation to an Applicant is not a multiple of one (which is the marketable lot), the decimal would be rounded off to the higher whole number if that decimal is 0.5 or higher. If that number is lower than 0.5 it would be rounded off to the lower whole number. Allocation and Allotment to all Applicants would be arrived at after such rounding off.

Decision of our Bank and the BRLMs in respect of Allocation and Allotment shall be binding on all Applicants.

Issuance of the CAN (a) Upon approval of the Basis of Allocation by the BSE and NSE and the dispatch of the CAN, the Registrar

to the Issue shall send to the BRLMs a list of the Applicants who would be Allotted Equity Shares in the Issue.

(b) Our Bank will then issue a CAN to the Applicants who have been Allocated Equity Shares in the Issue. (c) The dispatch of the CAN shall be deemed a valid, binding and irrevocable agreement on part of the

Applicant to subscribe to the Equity Shares Allocated to such Applicant at the Issue Price. (d) On the basis of the approved Basis of Allocation, our Bank shall pass necessary corporate action for

Allotment of Equity Shares in the Issue. Advertisement under Regulation 66 of the ICDR Regulations Our Bank will issue a statutory advertisement after the filing of the Offer Document with SEBI and the Stock Exchanges in terms of Regulation 66 of the ICDR Regulations, in an English national newspaper, a Hindi national newspaper and a Kannada newspaper, each with wide circulation. Any material updates between the date of this Preliminary Offer Document and the date of Offer Document will be included in such statutory advertisement.

Designated Date and Allotment of Equity Shares offered in the Issue (a) Our Bank will ensure that (i) the Allotment of Equity Shares offered in the Issue; and (ii) credit to the

successful Applicant’s depositary account will be completed within 12 Working Days of the Issue Closing Date.

(b) In accordance with the ICDR Regulations, Equity Shares offered in the Issue will be issued and Allotment shall be made only in the dematerialised form to the Allottees.

(c) Allottees will have the option to re-materialise the Equity Shares so Allotted in the Issue as per the provisions of applicable laws.

(d) The Equity Shares will be Allotted to at least 10 Allottees under the Issue. As provided in the ICDR Regulations, no single Allottee shall be Allotted more than 25% of the offer size in terms of the ICDR Regulations. However, this is subject to changes in case our Bank, in consultation with the BRLMs, chooses to exercise the option to allot Equity Shares in the Issue to less than 10 investors in accordance with the SEBI Letter. For further details, please see “Issue Procedure – Number of Allottees” on page 106.

Applicants are advised to instruct their Depository Participant to accept the Equity Shares that may be

Allotted to them pursuant to this Issue. GENERAL INSTRUCTIONS (a) Check if you are eligible to apply; (b) Ensure that the price per Equity Share you have included in the ASBA Applications is a price per Equity

Share at or above the Floor Price; (c) Ensure that the details about the Depository Participant and the beneficiary account are correct as

Allotment of Equity Shares in the Issue will be in the dematerialised form only;

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(d) Ensure that the ASBA Applications are submitted either to the members of the Syndicate (only in Specified Cities) or at a Designated Branch of the SCSB where the Applicant or the person whose ASBA Account will be utilised by the Applicant for bidding has an ASBA Account;

(e) Ensure that the ASBA Application is signed by the ASBA account holder(s) or an authorised signatory on

behalf of the ASBA account holder, in case the Applicant is not the ASBA account holder. Ensure that you have mentioned the correct ASBA Account number in the ASBA Application;

(f) Ensure that the ASBA Application is completed in full, in BLOCK LETTERS in ENGLISH and in

accordance with the instructions contained herein, in the ASBA Application or in the Revision Form. Applicants should note that the members of the Syndicate and / or the SCSBs, as appropriate, will not be liable for errors in data entry due to incomplete or illegible ASBA Applications or Revision Forms;

(g) Ensure that you request for and receive a TRS for each of the options applied for in the ASBA Application; (h) If you are an SCSB and are applying for Allotment of the Equity Shares, ensure that you use an ASBA

Account for your ASBA Application which is maintained in your own name with a different SEBI registered SCSB, which ASBA Account is used solely for the purpose of subscribing in public issues, having clear, demarcated funds, else your ASBA Application is liable to be rejected;

(i) Ensure that you have funds equal at least to the Application Amount in your ASBA Account maintained

with the SCSB before submitting the ASBA Application to the respective Designated Branch of the SCSB or the member of the Syndicate in Specified Cities;

(j) Submit revised ASBA Applications to the same member of the Syndicate/SCSB through whom the original

ASBA Application was placed and obtain a revised TRS; (k) Ensure that the Demographic Details (as defined under “Applicant’s PAN, Depository Account and ASBA

Account Details” mentioned herein below) are updated, true and correct in all respects; (l) Ensure that the name given in the ASBA Application is exactly the same as the name in which the

beneficiary account is held with the Depository Participant; (m) Ensure that the DP ID, the Client ID and the PAN mentioned in the ASBA Application and entered into the

electronic bidding system of the BSE and NSE by the members of the Syndicate match with the DP ID, Client ID and PAN available in the Depository database;

(n) Ensure that you use the ASBA Application bearing the stamp of the relevant SCSB and/or the Designated Branch of the SCSB and/or the member of the Syndicate (except in case of electronic forms);

(o) Applicants bidding through Syndicate should ensure that the ASBA Application is submitted to a member

of the Syndicate only in the Specified Cities and that the SCSB where the ASBA Account, as specified in the ASBA Application, is maintained has named at least one branch in the Specified Cities for the members of the Syndicate to deposit the ASBA Applications;

(q) Ensure that in case of ASBA Applications made under power of attorney, relevant documents are

submitted; (r) Ensure that ASBA Applications submitted by QIBs resident outside India should be in compliance with

applicable foreign and Indian laws; (s) Ensure that you have correctly signed the authorisation/undertaking box in the ASBA Application, or have

otherwise provided an authorisation to the SCSB via the electronic mode, for blocking funds in the ASBA Account equivalent to the Application Amount mentioned in the ASBA Application;

(t) ASBA Applications made on a repatriation basis shall be in the name of FIIs or FVCIs;

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(u) Do not fill up the ASBA Application such that the number of Equity Shares applied for exceeds the investment limit or maximum number of Equity Shares that can be held under the applicable laws or regulations or maximum amount permissible under the applicable regulations; and

(v) Information provided by the Applicants will be uploaded on the electronic bidding system of the BSE and

NSE by the members of the Syndicate and the SCSBs, as the case may be, and the electronic data will be used to make Allocation and Allotment. Please ensure that the details are correct and legible.

Applicant’s PAN, Depository Account and ASBA Account Details Applicants should note that on the basis of PAN of the Applicants, DP ID and Client ID entered into the

electronic bidding system of the BSE and NSE by the members of the Syndicate or SCSBs, the Registrar to

the Issue will obtain from the Depository the demographic details including address, Applicants’ ASBA

Account details, and PAN registered with the Depository (the “Demographic Details”). These Demographic

Details would be used for processing, including identifying ASBA Applications to be rejected on technical grounds and unblocking of ASBA Account. Hence, Applicants are advised to immediately update their

Demographic Details as appearing on the records of the Depository Participant. Please note that failure to do

so could result in delays in unblocking of the ASBA Account at the Applicants sole risk and none of the

BRLMs, the Registrar to the Issue, the Syndicate Member, the SCSBs or our Bank shall have any

responsibility and undertake any liability for the same. Hence, Applicants should carefully fill in their

Depository Account details in the ASBA Application. The Demographic Details would be used for all correspondence with the Applicants including mailing of the CANs. The Demographic Details given by Applicants in the ASBA Application would not be used for any other purpose by the Registrar to the Issue. By signing the ASBA Application, the Applicant would be deemed to have authorised the Depositories to provide, upon request, to the Registrar to the Issue, the required Demographic Details as available on its records. The CAN will be mailed at the address of the Applicant as per the Demographic Details received from the

Depositories or the email address provided by the Applicant in the ASBA Application. Applicants may note

that delivery of the CAN may get delayed if the same once sent to the address obtained from the Depositories are returned undelivered. Please note that any such delay shall be at such Applicant’s sole risk and none of

our Bank, BRLMs, Syndicate Member or the Registrar to the Issue shall be liable to compensate the

Applicant for any losses caused to the Applicant due to any such delay or liable to pay any interest for such

delay. In case no corresponding record is available with the Depositories, which matches the parameters, namely, PAN of the Applicant, the DP ID and Client ID, then such ASBA Application is liable to be rejected.

ASBA Applications made under Power of Attorney In case of ASBA Applications made pursuant to a power of attorney or by FIIs, Mutual Funds, VCFs, FVCIs, AIFs, Insurance Companies and provident funds with a minimum corpus of ` 250 million (subject to applicable law) and pension funds with a minimum corpus of ` 250 million, a certified copy of the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of the memorandum of association and articles of association and/or bye laws must be lodged along with the ASBA Application. In addition to the above, certain additional documents are required to be submitted by the following entities: (a) With respect to ASBA Applications by FIIs, Mutual Funds, VCFs, FVCI’s and AIFs a certified copy of

their SEBI registration certificate must be lodged along with the ASBA Application. (b) With respect to ASBA Applications by Insurance Companies, in addition to the above, a certified copy of

the certificate of registration issued by the Insurance Regulatory and Development Authority must be lodged along with the ASBA Application.

(c) With respect to ASBA Applications made by provident funds with a minimum corpus of ` 250 million (subject to applicable law) and pension funds with a minimum corpus of ` 250 million, a certified copy of a

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certificate from a chartered accountant certifying the corpus of the provident fund/pension fund must be lodged along with the ASBA Application.

PAYMENT INSTRUCTIONS Payment mechanism for Applicants The Applicants shall specify the ASBA Account number in the ASBA Application. The SCSB shall block an amount equivalent to the Application Amount in the ASBA Account specified in the ASBA Application and each Applicant or the account holder shall be deemed to have agreed to block such amount. In case of revision of the number of Equity Shares applied for or the price per Equity Share, the SCSB shall block additional Application Amount in the ASBA Account of such Applicant and the Applicants or the account holder shall be deemed to have agreed to block such amount. The Application Amount shall remain blocked in the ASBA Account until finalisation of the Basis of Allocation in the Issue, dispatch of the CAN and consequent transfer of the Application Amount to the Public Issue Account, until rejection of the ASBA Applications or until withdrawal of the Issue, as the case may be. In the event of rejection of the ASBA Application or for unsuccessful or partially successful ASBA Applications, the Registrar to the Issue shall give instructions to the SCSB to unblock the application money in the relevant ASBA Account and the same shall be acted upon by the SCSB concerned within one Working Day of receipt of such instruction. OTHER INSTRUCTIONS

Multiple Applications An Applicant should submit only one (and not more than one) ASBA Application. In case of a Mutual Fund, a separate ASBA Application may be made in respect of each scheme of the Mutual Fund and such ASBA Applications in respect of over one scheme of the Mutual Fund will not be treated as multiple ASBA Applications provided that the ASBA Applications clearly indicate the scheme concerned for which the ASBA Application has been made. After submitting an ASBA Application, an Applicant cannot submit another ASBA Application, to either the same or another Designated Branch of the SCSB or member of the Syndicate. Submission of a second ASBA Applications in such manner will be deemed a multiple ASBA Application and is liable to be rejected. However, the Applicants may revise their ASBA Application through the Revision Form, the procedure for which is described in “Revision of ASBA Applications” above. Copies of ASBA Applications with the same PAN details shall be treated as multiple ASBA Applications and are liable to be rejected. Our Bank, in consultation with BOBCAPS, reserves the right to reject, in its absolute discretion, all or all except one of such multiple ASBA Application(s) in any or all categories. 1. All ASBA Applications will be checked for common PAN as per the records of Depository. For Applicants

other than Mutual Funds and FII sub-accounts, ASBA Applications bearing the same PAN will be treated as multiple ASBA Applications and will be rejected.

2. For ASBA Applications from Mutual Funds and FII sub-accounts which were submitted under the same PAN, the ASBA Applications will be scrutinized for DP ID and Client ID. In case applications bear the same DP ID and Client ID, these will be treated as multiple applications.

The Registrar to the Issue will obtain, from the depositories, details of the Applicant’s address based on the DP ID and Client ID provided in the ASBA Applications.

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REJECTION OF ASBA APPLICATIONS Our Bank has a right to reject the ASBA Applications based on technical grounds. The Designated Branches of the SCSBs shall have the right to reject ASBA Applications if at the time of blocking the Application Amount in the Applicant’s ASBA Account, the respective Designated Branch of the SCSB ascertains that sufficient funds are not available in the Applicant’s ASBA Account maintained with the SCSB. Grounds for Technical Rejections Applicants are advised to note that ASBA Applications are liable to be rejected inter alia on the following technical grounds and for any other reasons after assigning reason for such rejection in writing: (a) ASBA Applications other than by QIBs; (b) In case of SCSBs applying for allotment of Equity Shares, if the ASBA Account is not in the name of such

SCSB or not opened with a different SCSB; (c) Incomplete ASBA Application. For instance, ASBA Application not having details of the ASBA Account

to be blocked or not containing the authorisations for blocking the Application Amount in the ASBA Account specified in the ASBA Application;

(d) The amount mentioned in ASBA Application does not tally with the amount payable for the value of the Equity Shares applied for;

(e) PAN not mentioned in the ASBA Application; (f) ASBA Applications made at a price per Equity Share less than the Floor Price; (g) ASBA Application by Applicants whose demat account have been “suspended for credit” pursuant to the

circular issued by SEBI on July 29, 2010 bearing number CIR/MRD/DP/22/2010; (h) Multiple ASBA Applications as explained in this Preliminary Offer Document. See “- Other Instructions –

Multiple ASBA Applications”; (i) ASBA Applications are not delivered by the Applicants within the time prescribed as per the ASBA

Applications, the Floor Price Announcement and this Preliminary Offer Document and as per the instructions in this Preliminary Offer Document and the ASBA Applications;

(j) In case no matching or corresponding record is available with the Depositories that matches the DP ID and the Client ID;

(k) Inadequate funds in the ASBA Account to block the Application Amount specified in the ASBA Application at the time of blocking such Application Amount in the ASBA Account;

(l) ASBA Application submitted by Applicants to a member of the Syndicate at locations other than the Specified Cities;

(m) ASBA Applications by persons in the United States; (n) ASBA Applications, details of which are not uploaded on the electronic bidding system of the BSE and

NSE; and (o) ASBA Applications by persons prohibited from buying, selling or dealing in the shares directly or

indirectly by SEBI or any other regulatory authority. EQUITY SHARES IN DEMATERIALISED FORM WITH NSDL OR CDSL The Allotment of Equity Shares in this Issue shall be only in a dematerialised form, (i.e., not in the form of physical certificates but be fungible and be represented by the statement issued through the electronic mode). Applicants can seek Allotment only in dematerialised mode. ASBA Applications from any Applicant without relevant details of its depository account are liable to be rejected. (a) An Applicant applying for Equity Shares in the Issue must have at least one beneficiary account with a

Depository Participant of either NSDL or CDSL prior to making the ASBA Application. (b) Allotment to a successful Applicant will be credited in electronic form directly to the beneficiary account

(with the Depository Participant) of the Applicant as provided in the ASBA Application. (c) Names in the ASBA Application or Revision Form should be identical to those appearing in the account

details in the Depository. (d) The Applicant is responsible for the correctness of its Demographic Details given in the ASBA Application

vis-à-vis those with its Depository Participant.

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(e) The trading of the Equity Shares issued pursuant to the Issue of our Bank would be in dematerialised form only for all Applicants in the demat segment of the Stock Exchanges.

(f) Non transferable CAN will be directly sent to the Applicants. Our Bank or the members of the Syndicate will not be responsible or liable for the delay in the credit of the Equity Shares Allotted in the Issue due to errors in the ASBA Application or otherwise on part of the Applicants. Communications All future communications in connection with ASBA Applications made in this Issue should be addressed to the Registrar to the Issue quoting the full name of the Applicant, ASBA Application number, the Applicants’ Depository Account details, number of Equity Shares applied for, date of the ASBA Application, name and address of the member of the Syndicate or the Designated Branch of the SCSBs where the ASBA Application was submitted and ASBA Account number in which the amount equivalent to the Application Amount was blocked. Applicants can contact the Registrar to the Issue in case of any pre-Issue or post- Issue related problems such as non-receipt of the CAN, credit of Allotted Equity Shares in the respective beneficiary accounts etc. In case of ASBA Applications submitted with the Designated Branches of the SCSBs, Applicants can contact the Designated Branches of the SCSBs.

Unblocking the Funds The Registrar to the Issue shall instruct the relevant SCSBs to unblock the funds in the relevant ASBA Accounts to the extent of the Application Amount specified in the ASBA Applications for rejected or unsuccessful or partially successful ASBA Applications within 12 Working Days of the Issue Closing Date and the same shall be acted upon by the SCSBs within one Working Day of receipt of such instruction. DISPOSAL OF ASBA APPLICATIONS AND APPLICATION MONEYS AND INTEREST IN CASE OF

DELAY Our Bank shall take all steps to ensure that listing and commencement of trading of the Equity Shares Allotted in the Issue at the Stock Exchanges is within 12 Working Days of the Issue Closing Date. In accordance with the requirements of the Stock Exchanges and the ICDR Regulations, our Bank further undertakes that: (a) Allotment of Equity Shares in the Issue shall be made only in dematerialised form within 12 Working Days

of the Issue Closing Date; (b) Instructions for unblocking of the Applicant’s ASBA Account shall be made within 12 Working Days from

the Issue Closing Date; and (c) Our Bank shall pay interest at 15% per annum for any delay, if Allotment is not made, funds in the relevant

ASBA Accounts to the extent of the Application Amount specified in the ASBA Applications for rejected or unsuccessful or partially successful ASBA Applications are not unblocked and/or demat credits are not made to investors within the 12 Working Days.

IMPERSONATION “Any person who: (a) makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares

therein, or (b) otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other

person in a fictitious name,

shall be punishable with imprisonment for a term which may extend to five years under applicable laws.”

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Issue Programme

ISSUE OPENS ON [●], 2013.

ISSUE CLOSES ON [●], 2013.

Details of the Issue programme shall be disclosed in the Floor Price Announcement. Investors should refer to the pre-issue advertisement and the Floor Price Announcement for further details. ASBA Applications and any revision in the ASBA Applications shall be accepted and uploaded only between 10.00 a.m. (Indian Standard Time, “IST”) and 5.00 p.m. IST during the Issue Period as mentioned above by the members of the Syndicate at the Syndicate ASBA Bidding Centres and the Designated Branches of SCSBs as mentioned on the ASBA Application. Withdrawal of the Issue Our Bank reserves the right to withdraw the Issue at any stage prior to Allotment. In such an event, our Bank would issue a public notice in the newspapers in which the pre-Issue advertisements were published. The Registrar to the Issue, shall issue instructions to the SCSBs to unblock the ASBA Accounts of the Applicants within one day of receipt of such instructions. Our Bank shall also inform the Stock Exchanges of such withdrawal.

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PLACEMENT

Issue and Placement Agreement The BRLMs have entered into the Issue and Placement Agreement with our Bank, pursuant to which the BRLMs have agreed to manage the Issue and use reasonable efforts to procure subscription for Equity Shares to be placed with the QIBs, pursuant to Chapter VIII-A of the ICDR Regulations. The Issue and Placement Agreement contains customary representations and warranties, as well as indemnities from our Bank and is subject to termination in accordance with the terms contained therein. Our Bank has received in-principle approvals from the Stock Exchanges under Clause 24(a) of the Equity Listing Agreement to list the Equity Shares being offered in the Issue on the Stock Exchanges. After Allotment of the Equity Shares, applications shall be made to list the Equity Shares and admit them to trading on the Stock Exchanges. The Issue is subject to obtaining final listing and trading approvals of the Stock Exchanges, which our Bank shall apply for after the Allotment. In connection with the Issue, the Book Running Lead Managers (or its affiliates) may, for their own accounts, enter into asset swaps, credit derivatives or other derivative transactions relating to the Equity Shares at the same time as the offer and issuance of the Equity Shares, or in secondary market transactions. As a result of such transactions, the Book Running Lead Managers may hold long or short positions in such Equity Shares. These transactions may comprise a substantial portion of the Issue and no specific disclosure will be made of such positions. Affiliates of the Book Running Lead Managers may purchase Equity Shares and be Allotted Equity Shares for proprietary purposes and not with a view to distribution or in connection with the issuance of P-Notes. See “Offshore Derivative

Instruments” on page 7. From time to time, the Book Running Lead Managers and certain of its affiliates have provided and continue to provide commercial and investment banking services, particularly acting as an underwriter or lead managers, to us or our affiliates for which they have received and may in the future receive compensation.

Lock up

Our Bank has agreed, subject to certain exceptions, not to issue or offer, sell, contract to sell or otherwise dispose of any Equity Shares or any securities convertible, exchangeable or exercisable for Equity Shares (including any warrants), for a period of 30 days following the date of the Issue and Placement Agreement, without the prior written consent of the Book Running Lead Managers (such consent not to be unreasonably withheld). Inter-se Allocation of Responsibilities of the Book Running Lead Manager The following table sets forth the inter se allocation of responsibilities for various activities among the BRLMs for the Issue:

Sr. No Activities Responsibilities Co-ordinator

1 Capital structuring with the relative components and formalities

BOBCAPS BOBCAPS

2 Drafting and design of offer documents and other issue related material such as application forms etc. The BRLMs shall ensure compliance with stipulated requirements and completion of prescribed formalities with the SEBI and the Stock Exchanges including finalization of offer documents.

BOBCAPS BOBCAPS

3 Drafting and approval of all statutory advertisements BOBCAPS BOBCAPS

4 Review of other publicity material such as corporate advertisements, press releases, etc.

BOBCAPS BOBCAPS

5 Appointment of intermediaries, including the Public Issue Account Bank, the Registrar to the Issue, the printers, the

BOBCAPS BOBCAPS

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Sr. No Activities Responsibilities Co-ordinator

advertising agency.

6 Institutional marketing strategy, which will cover, inter alia:

• Finalizing the list and division of investors for one to one Meetings

• Finalizing the domestic road show schedule and investor meeting schedules

BOBCAPS, SBICAP*

SBICAPS

7 Pricing, managing the book and allocation BOBCAPS BOBCAPS

8 Co-ordination with the Stock Exchanges for book building software and bidding terminals. Post-bidding activities including management of escrow accounts, follow-up with SCSBs, Registrar to the Issue, co-ordination for allocation, demat delivery of Equity Shares, intimation of Allocation and dispatch of the CANs to Applicants etc. The Book Running Lead Manager shall be responsible for ensuring that these agencies fulfill their functions and enable it to discharge this responsibility through suitable agreements with the Bank. The post Issue activities will involve essential co-ordination and follow up steps with the Stock Exchanges, which include the finalization of listing and trading of Equity Shares.

BOBCAPS BOBCAPS

*SBI Capital Markets Limited is a subsidiary of State Bank of India, which is the promoter of the Issuer. SBI Capital

Markets Limited has signed the due diligence certificate and accordingly has been disclosed as a Book Running

Lead Manager. Further, in compliance with the proviso to Regulation 21A (1) of SEBI (Merchant Bankers)

Regulations, 1992, and proviso to Regulation 5(3) of the ICDR Regulations, SBI Capital Markets Limited is the

Marketing Book Running Lead Manager and would be involved only in the marketing of the Issue.

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TRANSFER RESTRICTIONS

In terms of Chapter VIII-A of ICDR Regulations, purchasers of the Equity Shares in this Issue are not permitted to sell the Equity Shares for a period of one year from the date of allotment except through the Stock Exchanges.

U.S. Offer Transfer Restrictions Each purchaser of the Shares in the United States will be required to make representations substantially as follows: ● It (A) is a “qualified institutional buyer” (as defined in Rule 144A) and (B) is aware that the sale of the

Shares to it is being made in reliance on exemptions under the Securities Act. ● It is acquiring the Shares for its own account or for the account of one or more eligible US investors (i.e.,

qualified institutional buyers), each of which is acquiring beneficial interests in the Shares for its own account.

● It understands that the Shares have not been and will not be registered under the Securities Act and may not be offered, sold, pledged or otherwise transferred except in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S and on a recognized stock exchange, as applicable.

● It acknowledges that our Bank, the BRLMs and their affiliates, and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that, if any of such acknowledgements, representations or agreements deemed to have been made by virtue of its purchase of the Shares are no longer accurate, it will promptly notify our Bank and the BRLMs.

Global Offer Transfer Restrictions Each purchaser of the Equity Shares outside the United States pursuant to Regulation S, will be deemed to have represented and agreed as follows: ● It is authorized to consummate the purchase of the Shares in compliance with all applicable laws and

regulations. ● It acknowledges (or if it is a broker-dealer acting on behalf of a customer, its customer has confirmed to it

that such customer acknowledges) that such Shares have not been and will not be registered under the Securities Act.

● It certifies that either (A) it is, or at the time the Shares are purchased will be, the beneficial owner of the Shares and is located outside the United States (within the meaning of Regulation S) or (B) it is a broker-dealer acting on behalf of its customer and its customer has confirmed to it that (i) such customer is, or at the time the Shares are purchased will be, the beneficial owner of the Shares, and (ii) such customer is located outside the United States (within the meaning of Regulation S).

● It agrees that it will not offer, sell, pledge or otherwise transfer such Shares except in an offshore transaction complying with Rule 903 or Rule 904 of Regulation S or pursuant to any other available exemption from registration under the Securities Act and in accordance with all applicable securities laws of the states of the United States and any other jurisdiction, including India.

● It acknowledges that our Bank, the BRLMs and their affiliates, and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that, if any of such acknowledgements, representations or agreements deemed to have been made by virtue of its purchase of the Shares are no longer accurate, it will promptly notify us. Any resale or other transfer or attempted resale or other transfer, made other than in compliance with the above-stated restrictions will not be recognized by our Bank.

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THE SECURITIES MARKET OF INDIA

The information in this section has been extracted from publicly available documents from various sources,

including officially prepared materials from SEBI, the BSE and the NSE, and has not been prepared or

independently verified by our Bank, the Book Running Lead Managers, the Syndicate Member or any of their

respective affiliates or advisors.

India has a long history of organised securities trading. In 1875, the first stock exchange was established in Mumbai.

Indian Stock Exchanges Indian stock exchanges are regulated primarily by SEBI, as well as by the Government acting through the Ministry of Finance, Stock Exchange Division, under the SCRA and the SCRR. Various rules, bye-laws and regulations of the respective stock exchanges regulate the recognition of stock exchanges, the qualifications for membership thereof and the manner in which contracts are entered into, settled and enforced between members. The SEBI Act empowers SEBI to regulate the Indian securities markets, including stock exchanges and other intermediaries, promote and monitor self-regulatory organisations and prohibit fraudulent and unfair trade practices. Regulations concerning minimum disclosure requirements by public companies, investor protection, insider trading, substantial acquisitions of shares and takeovers of companies, buybacks of securities, employee stock option schemes, stockbrokers, merchant bankers, underwriters, mutual funds, foreign institutional investors, credit rating agencies and other capital market participants have been notified by the relevant regulatory authorities. Most of the stock exchanges have their own governing board for self regulation. The BSE and the NSE together hold a dominant position among the stock exchanges in terms of the number of listed companies, market capitalisation and trading activity.

Listing of Securities The listing of securities on a recognised Indian stock exchange is regulated by applicable Indian laws including the Companies Act, the SCRA, the SCRR, the SEBI Act and various guidelines and regulations issued by SEBI and the equity listing agreements of the respective stock exchanges. The governing body of each recognized stock exchange is empowered to suspend or withdraw admission to dealings in a listed security for breach of or non compliance with any conditions under such equity listing agreement or for any other reason, subject to the issuer receiving prior written notice of the intent of the exchange and upon granting of a hearing in the matter. SEBI also has the power to amend such equity listing agreements and the bye-laws of the stock exchanges in India, to overrule a stock exchange‘s governing body and withdraw recognition of a recognised stock exchange. SEBI has notified the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 in relation to the voluntary and compulsory delisting of equity shares from the stock exchanges. In addition, certain amendments to the SCRR have also been notified in relation to delisting. Pursuant to an amendments to the SCRR in June 2010, all listed companies (except public sector undertakings) are required to maintain a minimum public shareholding of 25% and all public sector undertakings such as our Bank, are required to maintain a minimum public shareholding of 10%. Pursuant to a notification dated January 30, 2012 and circulars dated February 1, 2012 and August 29, 2012, SEBI has introduced new mechanisms for listed Indian companies and their controlling shareholders to meet minimum public shareholding requirements, i.e., (i) the institutional placement programme; (ii) an offer for sale by the promoters and promoter group through the relevant stock exchange; (iii) Rights Issues to public shareholders, with promoters/promoter group shareholders forgoing their rights entitlement; and (iv) bonus issues to public shareholders, with promoters/promoter group shareholders forgoing their bonus entitlement.

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Index-Based Market-Wide Circuit Breaker System In order to restrict abnormal price volatility in any particular stock, the SEBI has instructed stock exchanges to apply daily circuit breakers which do not allow transactions beyond a certain level of price volatility. The index-based market-wide circuit breaker system (equity and equity derivatives) applies at three stages of the index movement, at 10 percent, 15 percent and 20 percent. These circuit breakers, when triggered, bring about a coordinated trading halt in all equity and equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement of either the SENSEX of the BSE or NIFTY of the NSE, whichever is breached earlier. In addition to the market-wide index-based circuit breakers, there are currently in place varying individual scrip-wise price bands. However, no price bands are applicable on scrips on which derivative products are available or scrips included in indices on which derivative products are available. The stock exchanges in India can also exercise the power to suspend trading during periods of market volatility. Margin requirements are imposed by stock exchanges that are required to be paid by the stockbrokers. BSE Established in 1875, the BSE is the oldest stock exchange in India. In 1956, it became the first stock exchange in India to obtain permanent recognition from the Government under the SCRA. It has evolved over the years into its present status as one of the premier stock exchange of India. As of January 31 2013, the BSE had 1,391 members, comprising 209 individual members, 1,152 Indian companies and 30 FIIs. Only a member of the BSE has the right to trade in the stocks listed on the BSE. As of January 31, 2013 there were 5,195 listed companies trading on the BSE (excluding permitted companies). The estimated market capitalisation of stocks trading on the BSE was ` 70,245.77 billion as on January 31, 2013. In January 2013, the average daily equity turnover on the BSE was ` 24.64 billion. As of January 31, 2013, the BSE had 15,738 trader work stations spread over 238 cities. NSE The NSE was established by financial institutions and banks to provide nationwide on-line satellite-linked screen based trading facilities with electronic clearing and settlement for securities including government securities, debentures, public sector bonds and units. It has evolved over the years into its present status as one of the premier stock exchanges of India. The NSE was recognised as a stock exchange in April 1993 and commenced operations in the wholesale debt market segment in June 1994. The average daily turnover for January 2013 was ` 128.44 billion. The NSE launched the NSE 50 index, now known as S&P CNX NIFTY, on April 22, 1996 and the Mid-cap Index on January 1, 1996. As of January 31, 2013 the NSE had 1,644 companies listed and market capitalisation of approximately ` 68,586.53 billion. The NSE has a wide network in major metropolitan cities and has a screen based trading and a central monitoring system.

Internet-based Securities Trading and Services

SEBI approved internet trading in January 2000. Internet trading takes place through order routing systems, which route client orders to exchange trading systems for execution. Stockbrokers interested in providing this service are required to apply for permission to the relevant stock exchange and also have to comply with certain minimum conditions stipulated by the SEBI. The NSE became the first exchange to grant approval to its members for providing internet-based trading services. Internet trading is possible on both the “equities” as well as the “derivatives” segments of the NSE. Trading Hours Trading on both NSE and BSE occurs from Monday through Friday, between 9:15 a.m. and 3:30 p.m IST (excluding the 15 minutes pre-opening session from 9.00 a.m to 9.15 a.m.). The BSE and NSE are closed on public holidays. The recognised stock exchanges have been permitted to set their own trading hours (in cash and

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derivatives segments) subject to the condition that (i) the trading hours are between 9 a.m. and 5 p.m.; and (ii) the stock exchange has in place risk management system and infrastructure commensurate to the trading hours

Trading Procedure

In order to facilitate smooth transactions, in 1995, BSE replaced its open outcry system with BSE On-line Trading (“BOLT”) facility. This totally automated screen based trading in securities was put into practice nation-wide. This has enhanced transparency in dealings and has assisted considerably in smoothening settlement cycles and improving efficiency in back-office work. NSE also provides on-line trading facilities through a fully automated screen based trading system, known as the National Exchange for Automated Trading (NEAT) system. SEBI (SAST) Regulations, 2011

Disclosure and mandatory bid obligations for listed Indian companies under Indian law are governed by the specific regulations in relation to substantial acquisition of shares and takeover being the SEBI (SAST) Regulations, 2011. Since our Bank is an Indian listed entity, the provisions of the SEBI (SAST) Regulations, 2011 apply to our Bank. Insider Trading Regulations The Insider Trading Regulations have been notified by SEBI to prohibit and penalise insider trading in India. An insider is, among other things, prohibited from dealing in the securities of a listed company when in possession of unpublished price sensitive information. The Insider Trading Regulations also provide disclosure obligations for shareholders holding more than a pre-defined percentage, and directors and officers, with respect to their shareholding in the company, and the changes therein. The definition of “insider” includes any person who has received or has had access to unpublished price sensitive information of the company. Depositories The Depositories Act provides a legal framework for the establishment of depositories to record ownership details and effect transfers in book-entry form. Further, SEBI framed the Securities and Exchange Board of India (Depositories and Participant) Regulations, 1996, as amended, which among other things provide regulations in relation to the formation and registration of such depositories, the registration of participants as well as the rights and obligations of the depositories, participants, companies and beneficial owners. The depository system has significantly improved the operation of the Indian securities markets.

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DESCRIPTION OF THE EQUITY SHARES

The following is information relating to the Equity Shares including a brief summary of the Banking Regulation Act,

the Subsidiary Banks Act and guidelines issued by RBI from time to time. Prospective investors are urged to read

the Banking Regulation Act, the Subsidiary Banks Act and guidelines issued by RBI from time to time carefully, and

consult with their advisers, as the Banking Regulation Act and State Bank of India (Subsidiary Bank) Act, and not

this summary, govern the rights attached to the Equity Shares.

General

Our Bank’s authorized share capital consists of 50,00,00,000 Equity Shares of `10 each. As of April 30, 2013 4,67,99,790 Equity Shares of our Bank are issued and outstanding. The Equity Shares are listed on the BSE, NSE, MSE and BgSE. Restriction on Payment of Dividends

As per the Banking Regulation Act, no banking company shall pay any dividend on its shares until all its capitalised expenses (including preliminary expenses, organisation 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. Further, a banking company may pay dividends on its shares without writing off-

(i) the depreciation, if any, in the value of its investments in approved securities in any case where such depreciation has not actually been capitalised or otherwise accounted for as a loss;

(ii) the depreciation, if any, in the value of its investments in shares, debentures or bonds (other than approved securities) in any case where adequate provision for such depreciation has been made to the satisfaction of the auditor of the banking company;

(iii) the bad debts, if any, in any case where adequate provision for such debts has been made to the satisfaction of the auditor of the banking company.

As per the Subsidiary Banks Act, 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. Further, such subsidiary bank may declare a dividend out of its net profits, only after making provision for bad and doubtful debts, depreciation in assets, equalisation of dividends, contribution to staff and superannuation funds and for all other matters for which provision is necessary by or which are usually provided for by banking companies. The rate of such dividend shall be determined by the Board of Directors of the subsidiary bank concerned. However, nothing shall preclude the payment of interim dividends in such manner and to such extent as may be prescribed. Further Issue of Capital

Our Bank may, with the approval of State Bank of India and Central Government and in consultation with the Reserve Bank, increase from time to time by way of issuing bonus shares to existing equity shareholders, its issued capital in such manner as the State Bank of India, in consultation with the Reserve Bank and with the approval of the Central Government, direct. As per the Subsidiary Banks Act, a shareholder of an existing bank who has applied for shares in the capital of the corresponding new bank shall be allotted (a) such number of shares, having such total face value as would bear to forty-five per cent. of the issued capital of

the corresponding new bank the same proportion as the paid-up value of his shares in the capital of the existing bank in respect of which he is paid compensation bears to the total paid-up capital of that bank; and

(b) if the total number of shares allotted under clause (a) to all applicants is less than forty-five per cent of the

issued capital of the corresponding new bank, such number of additional shares as the State Bank of India may

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deem fit having regard to the provisions of this Act, the circumstances of the case and the desirability of securing as wide a distribution of shares among as large a number of shareholders as possible.

General Meetings of Shareholders

The Board of Directors of our Bank may, after consultation with the State Bank of India and the Reserve Bank and with the previous approval of the Central Government, by notification in the Official Gazette, make regulations in a manner in which general meetings shall be convened, the procedure to be followed thereat and the manner in which voting rights may be exercised; As per the Subsidiary Banks Act, an annual general meeting of a subsidiary bank shall be held in each year at the place where the head office of the subsidiary bank is situated and such annual general meeting shall be held before the expiry of six weeks from the date on which the balance sheet together with profit and loss account and auditor’s report were forwarded to the State Bank of India, RBI or the Central Government. Apart from the annual general meeting, any other general meeting may be convened by the Board of Directors at any time. The shareholders present at an annual general meeting shall be entitled to discuss and adopt the balance-sheet and profit and loss account of the bank concerned, made up to the previous 31st day of March or as the case may be, the report of the Board of Directors on the working and activities of that bank for the period covered by the accounts and the auditors' report on the balance-sheet and accounts.

Restriction on Voting Rights The Subsidiary Banks Act, enumerates that no shareholder, other than the State Bank of India, shall be entitled to exercise voting rights in respect of any shares held by him in excess of ten per cent. of the issued capital of the subsidiary bank concerned. Unless the shareholder holding any preference share capital in the subsidiary bank shall, in respect of such capital, have a right to vote only on resolutions placed before such subsidiary bank which directly affect the rights attached to his preference shares. Provided that no preference shareholder shall be entitled to exercise voting rights in respect of preference shares held by him in excess of ten per cent. of the total voting rights of all the shareholders holding preference share capital only. Further as per the Banking Regulation Act, no person holding shares in a banking company shall, in respect of any shares held by him, exercise voting rights on poll in excess of ten per cent of the total voting rights of all the shareholders of the banking company. Transfer of Shares

As per the Subsidiary Banks Act, the shares of a subsidiary bank shall be freely transferable. However, the State Bank of India will not be entitled to transfer its shares held in any subsidiary bank that will result in reducing the shares held by it to less than fifty-one per cent. of the issued capital consisting of equity shares of that subsidiary bank. Every individual registered shareholder of a subsidiary bank may, at any time, nominate an individual to whom all his rights in the shares shall vest in the event of his death. Where the shares are registered in the name of more than one individual jointly, the joint holders may together nominate an individual to whom all their rights in the shares shall vest in the event of the death of all the joint holders. Where a nomination made in the prescribed manner purports to confer on any individual the right to vest the shares, the nominee shall, on the death of the shareholder or, as the case may be, on the death of all the joint holders, become entitled to all the rights of the shareholder or, as the case may be, of all the joint holders, in relation to such shares to the exclusion of all other persons unless the nomination is varied or cancelled in the prescribed manner. In relation to minors, it shall be lawful for the individual registered as the holder of the shares to make nomination to appoint, any person to become entitled to the shares in the event of his death during the minority of the nominee.

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STATEMENT OF TAX BENEFIT

To, The Board of Directors State Bank Of Mysore Bangalore Dear Sirs, We hereby report that the enclosed annexure states the possible direct tax benefits available to State Bank of Mysore (the “Bank”) and proposed Institutional Placement Programme (“IPP”) under the current tax laws presently in force in India. Several of these benefits are dependent on the Bank and proposed IPP fulfilling the conditions prescribed under the relevant tax laws. Hence, the ability of the Bank and proposed IPP to derive the tax benefits is dependent upon fulfilling such conditions, which is based on business imperatives the Bank faces in the future, which the Bank may or may not choose to fulfill. The benefits discussed in the enclosed annexure are not exhaustive. This statement is only intended to provide general information to the investors and is neither designed nor intended to be a professional tax advice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is advised to consult their own tax consultant with respect to the specific tax implications arising out of their participation in the issue. Unless otherwise specified, sections referred to below are sections of the Income-tax Act, 1961 (“the Act”). The income tax rates referred here are the existing tax rates based on the rates prescribed in the Finance Act, 2013 for the Financial Year 2013-14. All the provisions set out below are subject to conditions specified in the respective sections. We do not express any opinion or provide any assurance as to whether: i) the Bank and proposed IPP will continue to obtain these benefits in future; or ii) the conditions prescribed for availing the benefits have been/would be met with. The contents of the enclosed Annexure are based on information, explanations and representations obtained from the Bank and on the basis of our understanding of the business activities and operations of the Bank.

For Bhasin Raghavan & Co. ,

Chartered Accountants

FRN No. 000197N

CA. S.V.Raghavan

(Partner)

M. No.014315

For K.P.Rao & Co.

Chartered Accountants

FRN No. 003135S

CA. K. Surya Prakash

(Partner)

M. No. 018857

For B L Ajmera & Co.

Chartered Accountants

FRN No. 001100C

CA. Sanjeev Mathur

(Partner)

M. No. 075325

For M K P S & Associates

Chartered Accountants

FRN No. 302014E

CA. Ankit Kumar Agarwal

(Partner)

M. No.231099

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For Bubber Jindal & Co.

Chartered Accountants

FRN No.000399N

CA. S. Narayanan

(Partner)

M. No. 086618

For Maharaj N. R. Suresh and Co.

Chartered Accountants

FRN No. 001931S

CA .E. Narayanan

(Partner)

M. No. 025981

Place: Bangalore Date: May 11, 2013

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ANNEXURE TO TAX BENEFIT

STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO THE ISSUER BANK AND PROPOSED

INSTITUTIONAL PLACEMENT PROGRAMME The law stated below is as per the Income tax Act, 1961 as amended by the Finance Bill, 2013.

Indian Taxation Under the Income Tax Act, 1961 (unless otherwise specified, all sections hereinafter referred to shall be meant to have meaning as provided in the Income Tax Act, 1961), “Non-Resident” means a person who is not a resident in India. An individual is considered to be a resident of India during any financial year if he or she is in India in that year for:

a) a period or periods amounting to 182 days or more; or b) a period or periods amounting to 60 days or more if, within the four preceding years, he/she has been in India

for a period or periods amounting to 365 days or more; provided that:

(i) in the case of a citizen of India who leaves India as a member of the crew of an Indian ship or for the purposes of employment outside India, the words “60 days” in paragraph (b) above shall be substituted by words “182 days”; or

(ii) in the case of a citizen of India or a person of Indian origin living abroad who visits India, the words “60 days” in paragraph (b) above shall be substituted by words “182 days”.

A company is resident in India if it is an Indian Company or in case of a company other than the Indian Company the control and management of its affairs is situated wholly in India. An Indian Company as defined in section 2(26) means a company formed and incorporated in accordance with the Companies Act 1956 and its registered or principal office is in India. A firm or other association of persons is resident in India except where the control and management of its affairs is situated wholly outside India.

I. Income-tax Act, 1961

A. Tax Benefits to the Bank:

1. Income by way of interest, premium on redemption or other payment on notified securities, bonds, certificates

issued by the Central Government is exempt from tax under Section 10(15) in accordance with and subject to the conditions and limits as may be specified in Notifications.

2. As per the provisions of section 36(1)(iiia), the Bank is entitled to deduction in respect of pro rata amount of discount on a zero coupon bond, having regard to the period of life of such bond, calculated in the manner as may be prescribed by rules in this behalf. Zero coupon bond is defined under section 2(48) of the Income Tax Act, 1961 (hereinafter called “the Act”) to mean a bond issued by any infrastructure capital company or infrastructure capital fund or public sector company on or after 1.6.2005 in respect of which no payment and benefit is received or receivable before maturity or redemption from infrastructure capital company/fund or public sector company and which is notified by the Central Government in this behalf

3. Dividends from domestic companies earned by the Bank are exempt from tax in accordance with and subject to

the provisions of Section 10 (34) read with Section 115-O. However, as per Section 94(7), losses arising from sale/ transfer of shares, where such shares are purchased within three months prior to the record date and sold within three months from the record date, will be disallowed to the extent such loss does not exceed the amount of dividend claimed exempt.

4. Income earned by the Bank from investment in units of mutual fund specified under Section 10(23D) or income

received in respect of units from the administrator of the specified undertaking or income received in respect of units from a specified company is exempt from tax under Section 10(35). However, as per Section 94(7), losses arising from the sale/ redemption of units purchased within three months prior to the record date (for

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entitlement to receive income) and sold within nine months from the record date, will be disallowed to the extent such loss does not exceed the amount of income claimed exempt. Under Section 94(8), losses arising from sale/transfer of units of mutual funds specified under section 10(23D) or of Unit Trust of India, where such units are purchased within three months prior to the record date, additional units are allotted without payment based on holdings on such date and all or any units initially purchased are sold within nine months from the record date while continuing to hold all or any additional units, will be ignored for computing chargeable income. Such loss ignored will be considered as the cost of acquisition of the additional units held on the date of sale/transfer.

5. Section 14A provides that any expenditure incurred in relation to exempt income is not allowable as deduction

in computing total income. In case the tax officer is not satisfied with the correctness of the claim of the taxpayer or in case the taxpayer contends that no expenditure have been incurred towards earning exempt income, disallowance under section 14A shall be computed as per Rule 8D of the Income-tax Rules, 1962.

6. Any income realized from the sale/ transfer of capital assets (including equity shares in a company or units of

equity oriented mutual funds) held by the Bank as part of its stock-in-trade would be included in the income computed under the head “profits and gains of business or profession” as per the provisions of the Act.

7. Under Section 32, the Bank can claim depreciation allowance at the prescribed rates on tangible assets such as

building, machinery, plant or furniture and intangible assets such as know-how, patents, copyrights, trademarks, licenses, franchises or other business or commercial rights of similar nature, subject to satisfaction of conditions. In terms of sub section (2) of Section 32, the Bank is entitled to carry forward and set off the unabsorbed depreciation arising due to absence/ insufficiency of profits or gains chargeable for the previous year. The amount is allowed to be carried forward and set off in the succeeding previous years against any income (not restricted to business income), without any time limit.

8. Deduction for expenses incurred while computing the Bank’s income under the head “Profits and gains of

business or profession’ is available in terms of provisions of Sections 29 to 43D.

9. Under Sections 35D, 35DD and 35DDA the Bank will be entitled to a deduction equal to one fifth of the expenditure incurred of the nature specified in that section by way of amortization over a period of 5 successive years, subject to the limits specified in the section.

10. Under Section 36(1)(vii), any bad debt or part thereof written off as irrecoverable in the accounts of the Bank is

allowable as a deduction. The deduction of bad debts is limited to the amount, by which such bad debts or part thereof, exceeds the credit balance in the provision for bad and doubtful debts account made under Section36(1)(viia).

11. Under Section 36(1)(viia), a deduction is allowable in respect of any provision made for bad and doubtful debts,

by an amount not exceeding 7.5% of total income (computed before making any deduction under this Clause and Chapter VIA) and an amount not exceeding 10% of the aggregate average advances made by rural branches of the Bank.

12. Under Section 36(1)(xv), securities transaction tax paid by a taxpayer in respect of taxable securities

transactions entered into in the course of its business, would be allowed as a deduction if the income arising from such taxable securities transactions is included in the income computed under the head “Profits and gains of business or profession”.

13. Interest income on certain categories of bad and doubtful debts, as specified in Rule 6EA of the Income tax

Rules, 1962, is chargeable to tax only in the year of receipt or credit to the profit & loss account of the Bank whichever is earlier, in accordance with the provisions of Section 43D.

14. As per provisions of Section 72, the Bank is entitled to carry forward business losses that cannot be set off

against permitted sources of income in the relevant assessment year, for a period of 8 consecutive assessment years immediately succeeding the assessment year when the losses were first computed, and set off such losses against income chargeable under the head “Profits and gains from business or profession” in such assessment

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year. The set off is permissible even if the business in which the loss was sustained is not carried on in the year of set off.

15. Under Section 74, short-term capital loss suffered during the year is allowed to be carried forward and set-off

against short-term as well as long-term capital gains of a subsequent year. Such loss is permitted to be carried forward for eight years immediately succeeding the year in which such loss arises, for claiming set-off against subsequent years’ short-term as well as long term capital gains. Long-term capital loss suffered during the year is allowed to be set-off against long-term capital gains. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years’ long-term capital gains.

Tax Rates

1. The tax rate applicable to the Indian banks for the Assessment Year (AY) 2014-15 relevant to financial year

2013-14 is 30%. A surcharge on income tax of 5% would be levied if the total income exceeds Rs.10 million but does not exceed Rs 100 million. A surcharge at the rate of 10% would be levied if the total income exceeds Rs 100 million. Education cess of 2% and Secondary Higher Education cess of 1% is levied on the amount of tax and surcharge.

2. Under section 115BBD, any dividend received by an Indian company from a specified foreign company in

which Indian company holds 26% or more in nominal value of the equity share capital of such company is taxable at 15% for the assessment year 2014-15, relevant to the financial year 2013-14.

3. As per Section 115JB, Minimum Alternate Tax (“MAT”) is payable by the Bank @18.5% of the Book profits

computed in accordance with the provisions of this section, where income-tax computed under the normal provisions of the Act is less than 18.5% of the Book profits as computed under the said section. A surcharge on income tax of 5% would be levied if the total income exceeds Rs.10 million Rs.10 million but does not exceed Rs 100 million. A surcharge at the rate of 10% would be levied if the total income exceeds Rs 100 million. Education cess of 2% and Secondary Higher Education cess of 1% is levied on the amount of tax and surcharge.

Under Section 115JAA(1A), credit is allowed in respect of any MAT paid under Section 115JB for any assessment year commencing on or after April 1, 2006. Tax credit eligible to be carried forward will be the difference between MAT paid and the tax computed as per the normal provisions of the Act for that assessment year. Such MAT credit is allowed to be carried forward to be set off against the difference between normal tax liability and MAT, for a period of up to ten years succeeding the year in which the MAT credit arises.

4. The tax rate on distributed profits of the Bank/ dividends covered under Section 115-O viz. Dividend

Distribution Tax (DDT) is 15%. A surcharge of 10% would be levied on the amount of DDT. Further, Education cess of 2% and Secondary Higher Education cess of 1% is levied on the amount of tax and surcharge. The amount of dividend shall be reduced by the amount of dividend received from a subsidiary company (i.e. a company in which the domestic company holds more than half of voting power), if the subsidiary has paid tax on such dividends under section 115-O, irrespective of whether the domestic company is a subsidiary of another company or not.

B. Benefits to Qualified Institutional Buyers’(QIBs) shareholders Under SEBI (ICDR) regulations, QIB means a public financial institution, a scheduled commercial bank, a mutual fund registered with SEBI, a foreign institutional investor and sub-account registered with SEBI, other than a sub-account which is a foreign corporate or foreign individual, a multilateral and bilateral development financial institution, a venture capital fund registered with SEBI, a foreign venture capital investor registered with SEBI, a state industrial development corporation, an insurance company registered with the Insurance Regulatory and Development Authority (IRDA), a provident fund with minimum corpus of Rs.25 crores, a pension fund with minimum corpus of Rs.25 crores, National Investment Fund, insurance funds set- up and managed by army, navy or air force of the Union of India. Dividends earned on shares of the Bank are exempt from tax in accordance with and subject to the provisions of Section 10(34) read with Section 115-O. However, as per Section 94(7), losses arising from said transfer of shares, where such shares are purchased within three months prior to the record date and sold within three months from the record date, will be disallowed to the extent such loss does not exceed the amount of dividend claimed exempt.

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B.1. To Resident Qualified Institutional Buyers’(QIBs) shareholders

B.1.1 Scheduled Commercial Banks, public financial institutions, state industrial development corporations, others:

1. The characterization of gains/losses, arising from sale of shares, as Capital Gains or Business Income would

depend on the nature of holding in the hands of the shareholder and various other factors. It may be noted that there are contradicting judicial rulings on characterization of income of a taxpayer regularly trading in shares and securities in India. Taxability of income on regular trading of securities will depend on facts and circumstances of each case.

2. Where the gains on sale/transfer of shares are characterized as business profits, the same would be subject to tax at the normal rates applicable (plus applicable surcharge and education cess). 2.1 If trading in securities other than the eligible transaction of trading in derivatives is carried out without

obtaining delivery of securities, such transactions would be deemed to be speculative transactions and consequentially, gains are taxed as ‘speculative income’ whereas losses are allowed to be set off only against speculative gains. Also a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holding of stock and shares through price fluctuations shall not be treated as speculative transaction as defined under section 43(5).

2.2 Explanation to section 73 of the Act which provides that the purchase and sale of shares are deemed to be carrying on speculative business should not be applicable to the Scheduled Commercial Banks, public financial institutions, state industrial development corporations as its a company the principal business of which is the business of banking or the granting of loans and advances

2.3 Under Section 36(1)(xv), STT paid by a taxpayer in respect of taxable securities transactions entered into in the course of its business, would be allowed as a deduction if the income arising from such taxable securities transactions is included in the income computed under the head “Profits and gains of business or profession”.

2.4 Section 14A provides that any expenditure incurred in relation to exempt income is not allowable as deduction in computing total income. In case the tax officer is not satisfied with the correctness of the claim of the taxpayer or in case the taxpayer contends that no expenditure have been incurred towards earning exempt income, disallowance under section 14A shall be computed as per Rule 8D of the Income tax Rules, 1962.

3. Where the shares acquired of the Bank are treated as investments giving rise to capital gains on its transfer, the taxation of such gains is as under: Equity Shares of a company held for a period of more than 12 months with an intention to hold as “investments” are treated as long-term capital assets. If the Equity Shares are held for a period of 12 months or less than 12 months, the capital gain arising on the sale thereof is to be treated as short-term capital gain. In accordance with and subject to provisions of Section 48, in order to arrive at quantum of capital gains, the following amounts would be deductible from the full value of consideration: (a) Cost of acquisition of the shares (b) Cost of improvement, if any (c) Expenditure incurred wholly and exclusively in connection with the transfer of shares In computing long term capital gain, cost of acquisition and cost of improvement is substituted by indexed cost of acquisition and indexed cost of improvement using the cost inflation index notified by the Government.

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Long-Term Capital Gains

• As per Section 10(38), long-term capital gains on sale of equity shares of company listed on a recognized stock exchange held for a period of more than twelve months, would not be taxable, provided STT has been paid on the same. However, such exempt capital gains cannot be reduced from “book profits” of the Company under Section 115JB and the Company will be required to pay Minimum Alternate Tax, 18.5% (plus applicable surcharge and education cess) on such book profits if 18.5% of “book profits” is higher than tax liability under normal provisions of the Act. Book Profits means the net profit as shown in the profit and loss account of the taxpayer after giving effect to adjustments as provided in section 115JB (2).

• Long-term capital gains on the sale of listed Indian securities not routed through a recognized stock exchange in India and therefore not subject to STT would be taxed at the rate of 20% plus applicable surcharge and education cess. However, in case of listed securities, the amount of such tax could be limited to 10% (plus applicable surcharge and cess), without indexation, at the option of the shareholder in cases where securities transaction tax is not levied.

The aforesaid tax treatment is applicable if the concerned transaction is not in nature of business and/or speculative business.

Short-Term Capital Gains

• Short-term capital gains, being gains on sale of equity shares of a company listed on recognized stock exchange held for a period of twelve months or less, will be taxed at the rate of 15% plus applicable surcharge and education cess, provided STT has been paid on the sale;

• Short Term Capital gains on sale of unlisted equity shares and short term capital gains on sale of listed Indian equity shares otherwise than on a recognized stock exchange and as a result no STT is paid, are chargeable to tax at 30% plus applicable surcharge and education cess in case of resident company and firms.

4. Under Section 54EC and subject to the conditions and to the extent specified therein, long-term capital gains (other than those exempt under Section 10(38)) arising on transfer of Bank’s shares would be exempt from tax if such capital gain is invested within 6 months after the date of such transfer in the bonds (long term specified assets) issued on or after April 1, 2007 by:

(a) National Highways Authority of India constituted under Section 3 of The National Highways Authority of India Act, 1988; or

(b) Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956.

The investment in the long term specified assets is eligible for such deduction to the extent of Rs.5 million during a financial year. If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion as the cost of long term specified assets bears to the whole of the capital gain. However, in case the long term specified asset is transferred or converted into money within three years from the date of its acquisition, the amount so exempted shall be chargeable to tax during the year of such transfer or conversion. However in case of companies, such exempt capital gains cannot be reduced from “book profits” under Section 115JB and the company will be required to pay Minimum Alternate Tax at 18.5% (plus applicable surcharge and education cess) on such book profits if 18.5% of ‘book profits” is higher than tax liability under normal provisions of the Act. 5. Under Section 74, a short-term capital loss can be set off against capital gain, whether short-term or long term.

To the extent that the loss is not absorbed in the year of transfer, it would be carried forward for eight subsequent years. Long-term loss arising from a transfer of a capital asset can only be set off against long-term capital gain. The excess/ balance loss, if any, can be carried forward for eight years for claiming setoff against subsequent years’ long-term capital gains. Long term capital loss on sale of listed equity shares in respect of which STT has been paid is not allowed to be set- off and carried forward since the gains in respect of such shares is exempt under section 10(38).

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B.1.2 To the Resident Mutual Fund QIB shareholders: Under Section 10(23D), exemption is available in respect of all income (including capital gains arising on transfer of shares of the Bank) earned by a Mutual Fund registered under the Securities and Exchange Board of India Act, 1992 or such other mutual fund set up by a public- sector bank or a public financial institution or authorized by the Reserve Bank of India and subject to the conditions as the Central Government may specify by notification.

B.1.3 To the Resident Insurance Company QIB shareholders Taxation of insurance companies is governed by Section 44 of the Act which provides a special regime for taxation of insurance companies. The section states that notwithstanding anything to the contrary contained in the provisions of this Act relating to computation of income chargeable under the head “income from house property”, “capital gains” or “income from other sources” or in section 199 or in sections 28 to 43B, the profits and gains of any business of insurance, including a mutual insurance company or by a co-operative society shall be computed in accordance with the rules contained in the First Schedule. Taxation of life insurance business in India is governed by section 115B, section 44 and the First Schedule of the Income Tax Act, 1961. “Profit and gains of the life insurance business” is taken as “annual average of the surplus or deficit disclosed by the actuarial valuation” excluding “from it any surplus or deficit included therein which was made in any earlier inter-valuation period.” Provisions of computation of Minimum Alternative Tax under section 115JB of the Act are not applicable to Life Insurance Companies. Profits and gains of business of general insurance companies is computed based on the profit and loss account prepared in accordance with the provisions of the Insurance Act, 1938 and the IRDA Act, 1999 subject to the following adjustments:

1. Additions of the amounts which are not admissible under the provisions of sections 30 to 43B 2. Any gains or loss on realization of investments shall be added or deducted, if such gain or loss is not

credited or debited to the profit and loss account 3. Any provision for diminution in the value of investments debited to profit and loss account shall be

added back 4. Amount carried to reserve for unexpired risk shall be allowed as a deduction as prescribed in rule 6E of

the Income Tax Rules, 1962. Tax rate: For Life Insurance Companies: 12.5% on profits from life insurance business and 30% on other than life insurance business income as increased by surcharge and education cess. The tax authorities may contend that income from investments made by life insurance companies is not income from life insurance business but income from other sources and hence should be charged to tax @ 30% (plus surcharge and education cess as applicable). Therefore, the matter is litigative in nature. For general insurance companies: 30% of profits as increased by surcharge and education cess.

B.1.4 Provident Fund and Pension Fund

Under section 10(25) of the Act, any income received by trustees on behalf of a recognized provident fund and a recognized superannuation fund is exempt from tax. B.1.5 Venture Capital Fund or Venture Capital Company (VCC or VCF):

VCF or VCC have been granted a pass-through status in the Indian Income-tax Act, 1961. Income of a VCF or VCC from investments in a Venture Capital Undertaking is exempt under section 10(23FB) of the Act.

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Any income received by a person out of investment in venture capital fund or venture capital company shall be chargeable to income tax in the same manner as if it were income received by such person had he made investment in the venture capital undertaking directly. The income paid by VCF or VCC shall be deemed to be of the same nature and in the same proportion in the hands of the person receiving it as it had been received by or had accrued or arisen to VCF or VCC as the case may be. The income accruing or arising to a VCF of VCC shall be deemed to be accruing or arising to a person during a previous year shall be deemed to have been paid to a person on the last day of the previous year in the same proportion in which such person would have been entitled to receive the income.

B.1.6 Tax Deduction at source No income tax is deductible at source from income by way of capital gains arising to a resident shareholder under the present provisions.

B.2 To non-resident QIB shareholders:

Income Tax Laws and Tax Treaty Benefits The taxation of non-residents in India is governed by the provisions of the Income Tax Act and the tax treaty between India and the jurisdiction of the non-residents (“Tax Treaty”). As per Section 90 (2), the provisions of the Income Tax Act would apply to the extent they are more beneficial than the provisions of the applicable tax treaty. However, in case where the provisions relating to General Anti Avoidance Rule (GAAR) have been invoked, the taxpayer will not be allowed to the beneficial treaty benefits. The non-resident eligible to avail DTAA benefits shall obtain TRC from the Government of the Country of his residence or specified territory containing the prescribed particulars which has been notified by the CBDT through insertion of Rule 21AB in the Income Tax Rules, 1962. B.2.1 Multi-lateral and bilateral development financial institutions

Generally, Multilateral and bilateral development financial institutions may be exempt from taxation in India on the capital gains arising on the sale of shares of the bank depending on the applicable Statute and Acts passed in India. For e.g., world bank, IBRD, IFC, etc. In case they are not specifically exempt from tax then the provisions as applicable for capital gains to a non-resident FII as they should be registered as FII should apply to these institutions.

B.2.2 Foreign Institutional Investors (FIIs) (including multi-lateral and bilateral development financial

institutions excluding foreign corporations and foreign individuals)

1. Dividends earned on shares of the Bank are exempt from tax in accordance with and subject to the provisions

of Section 10(34) read with Section 115-O.

2. As per Section 115AD, FIIs will be taxed at: a) 10% (plus applicable surcharge and Education cess) on long-term capital gains, where STT is not payable

on the transfer of the shares. b) 15% (plus applicable surcharge and Education cess) on short-term capital gains arising on the sale of the

shares of the Indian company which is subject to STT. c) 30% (plus applicable surcharge and Education cess) on short-term capital gains arising on the sale of the

shares of the Indian Company which is not subject to STT.

3. As per Section 10(38), Long-term capital gains on sale of equity share of a company listed on recognized stock exchange which is held for a period of more than twelve months, would not be taxable, provided STT has been paid on the sale transaction. The FII eligible to avail DTAA benefits shall obtain TRC from the Government of the Country of its residence or specified territory containing the prescribed particulars which has been notified by the CBDT through insertion of Rule 21AB in the Income Tax Rules, 1962.

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B.2.2 Foreign Venture Capital Investor:

1. FVCI should be granted a pass-through status in the Indian Income-tax Act, 1961. 2. Income of a FVCI from investments in a Venture Capital Undertaking/ Companies is exempt under section

10(23FB) of the Act. 3. Any income received by a person out of investment in venture capital fund or venture capital company

shall be chargeable to income tax in the same manner as if it were income received by such person had he made investment in the venture capital undertaking directly. The income paid by VCF or VCC shall be deemed to be of the same nature and in the same proportion in the hands of the person receiving it as it had been received by or had accrued or arisen to VCF or VCC as the case may be. The income accruing or arising to a VCF or VCC shall be deemed to be accruing or arising to a person during a previous year in the same proportion in which such person would have been entitled to receive the income. The FVCI eligible to avail DTAA benefits shall obtain TRC from the Government of the Country of its residence or specified territory containing the prescribed particulars which has been notified by the CBDT through insertion of Rule 21AB in the Income Tax Rules, 1962

B.2.3 Tax Deduction at Source Under section 195, dividends as referred to in section 115-O paid by the Bank are not subject to deduction of tax at source. As per the provisions of Section 195, any income by way of capital gains payable to non-residents (other than LTCG exempt under Section 10(38)) may be subject to withholding of tax at the rate under the domestic tax laws or under the DTAA, whichever is beneficial to the taxpayer. The withholding tax rates are subject to the recipients of income obtaining and furnishing a permanent account number (PAN) to the payer, in the absence of which the applicable withholding tax rate would be the higher of the applicable rates or 20%, under section 206AA of the Act. Generally, there should be no requirement to withhold tax on gains arising on sale of shares of the bank by the FVCI as the income of the FVCI should be exempt from tax. As per Section 196D, no deduction of tax at source shall be made in respect of capital gains arising on sale proceeds to FIIs on transfer of shares.

II. Wealth Tax and Gift Tax

No Indian wealth tax will be payable with respect to the Equity Shares. Presently there is no gift tax enactment in India. III. Securities Transaction Tax (STT):

1. For Purchaser: The transaction for purchase of equity shares entered into on a recognized stock exchange and

settled by actual delivery or transfer is liable to STT @ 0.1%.

2. For Seller: The transaction for sale of equity shares entered into on a recognized stock exchange and settled by actual delivery or transfer is liable to STT @ 0.1%. The transaction for sale of equity shares entered into on a recognized stock exchange and not settled by actual delivery or transfer is liable to STT @ 0.025%.

Notes:

1. The above Statement sets out the provisions of law in a summary manner only and is not a complete analysis

or listing of all potential tax consequences of the purchase, ownership and disposal of shares. 2. The above statement covers only certain relevant direct tax law benefits and does not cover any indirect tax

law benefits or benefit under any other law.

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3. The above statement of possible tax benefits are as per the current direct tax laws relevant for the assessment year 2014-15. Several of these benefits are dependent on the Company or its shareholder fulfilling the conditions prescribed under the relevant tax laws.

4. This statement is intended only to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of tax consequences, each investor is advised to consult his/her own tax advisor with respect to specific tax consequences of his/her investment in the shares of the Company.

5. The stated benefits will be available only to the sole/first named holder in case the share is held by joint holders.

6. In respect of non-residents, the tax rates and consequent taxation mentioned above will be further subject to any benefits available under the relevant DTAA, if any, between India and the country in which the non-resident has fiscal domicile.

7. The Bank has no unabsorbed losses or depreciation for carry forward to future years. No assurance is given that the revenue authorities/courts will concur with the views expressed herein. Our views are based on the existing provisions of law and its interpretation, which are subject to changes from time to time. We do not assume responsibility to update the views consequent to such changes. We shall not be liable to any claims, liabilities or expenses relating to this assignment except to the extent of fees relating to this assignment, as finally judicially determined to have resulted primarily from bad faith or intentional misconduct. We will not be liable to any person other than the Investor / Prospective Investor in the shares of The Bank.

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LEGAL PROCEEDINGS Our Bank is involved in various legal proceedings including, among others, income tax cases and criminal proceedings. We believe that any legal proceeding below 1% of our networth may not have any material impact on our financial position. Except as described below, we are not involved in any material legal proceedings and in our opinion, no proceedings are threatened, which may have, or have had during the 12 months preceding the date of this Preliminary Offer Document, a material adverse effect on our business, financial position, profitability or results of operations. Recovery proceedings initiated by our Bank 1. Parties: State Bank of Mysore (Applicant) Vs. Salasar Polyfab Private Limited (Defendant Company) &

Others (together referred as Defendants) Case Number and Court: O.A. No. 295/ 2012, Debt Recovery Tribunal, Ahmedabad

Brief facts: The Defendant Company had availed credit facilities from our Bank amounting to ` 60.00 Crores. On the Defendants failing to make the payment, our Bank filed this application before this Tribunal for recovery of ` 58.81 Crores inclusive of interest. The presiding office DRT II, Ahmedabad vide injunction order dated January 30, 2013 has restrained the Defendant Company and others from disposing or dealing in with any manner the hypothecated and mortgaged properties. Status: The matter is presently pending adjudication. 2. Parties: State Bank of Mysore (Applicant) Vs. Maytas Hill County SEZ Private Limited (Defendant

Company) & Others (together referred as Defendants) Case Number and Court: O.A. No. 386/ 2011, Debt Recovery Tribunal, Hyderabad Brief facts: The Defendant Company had availed certain loan facilities from banks on consortium basis. The Defendants failed to repay the outstanding amount, of which an amount of ` 47.57 Crores is payable to our Bank. Our Bank has accordingly filed a suit of recovery of the said amount. Status: The matter is presently pending adjudication. 3. Parties: State Bank of Mysore (Applicant) Vs. Sterling Biotech Limited (Defendant Company) & Others

(together referred as Defendants) Case Number and Court: O.A. No. 71/2012 and O.A. No. 70/2012, Debt Recovery Tribunal, Mumbai

Brief facts: The Defendant Company had twice availed credit facility of ` 50.00 Crores each from our Bank. However, the Defendants failed to repay the outstanding amount of ` 52.64 Crores and `24.96 Crores with future interest respectively to our Bank. Consequently, our Bank filed two seperate suits before the tribunal for recovering of the outstanding amounts as mentioned above with future interest. In the meantime, the Defendant Company had issued certain cheques to our Bank, which when presented for clearing, was dishonoured due to insufficient funds. Our Bank has also filed criminal complaints against the Defendant Company for recovery of the amounts. The details of said cases have been mentioned under the heading “Criminal Proceedings initiated by the Bank”. Status: The matter is presently pending adjudication.

4. Parties: State Bank of Mysore (Petitioner) Vs. Smt. K Susheela and others (Respondents), Case Number and Court: Special Leave Petition No. 20084 -20089 of 2012, Supreme Court of India Brief facts: Our Bank had introduced State Bank of Mysore Voluntary Retirement Scheme (“Scheme”), a non statutory and contractual scheme which offered attractive benefits to those who accepted the same. The said Scheme did not provide for the benefit of additional qualifying service up to 5 years as set out in Regulation 29(5) of the

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State Bank of Mysore (Employees’) Pension Regulations, 1995. The Respondents herein are ex-employees of our Bank, filed Writ Petitions claiming additional service of five years under the State Bank of Mysore (Employees’) Pension Regulations, 1995 and consequential pensionary benefits. The learned Single Judge of Hon’ble High Court of Karnataka passed a common order holding that the writ petitioners were entitled to additional qualifying service not exceeding five years and for consequential re-fixation of pension. On appeal, the division bench of the Hon’ble High Court of Karnataka confirmed the said order. Aggrieved, the Bank has filed this Special Leave Petition seeking special leave against the final orders passed by the Hon’ble High Court. Subsequently, the Hon’ble Court has admitted the special leave petition on April 08, 2013. Status: The matter is presently pending adjudication.

Criminal Proceedings initiated by the Bank

1. Parties: State Bank of Mysore (Complainant) Vs. M/s. Sterling Biotech Limited and Others (Accused), Case Numbers and Court: CC Nos. 230043/55/2012, 230042/55/2012, 289/55/2012, 1074/2012 and 1675/2012, Hon’ble Chief/Additional Metropolitan Magistrate Court, Mumbai. Brief facts: The Accused had availed certain credit facilities from our Bank. The Accused had issued cheques to our Bank towards repayment of the credit facilities availed by them. However, when the cheques were presented to the bank, they were returned dishonoured with remarks “Funds Insufficient” and failed to pay the balance outstanding amounts of ` 80.90 Crores. Consequently, our Bank filed this complaint before the Hon’ble Court, Mumbai issue of arrest warrant and other necessary process against the Accused. Status: The matter is presently pending adjudication.

Disputed tax claims

Proceedings initiated by our Bank

1. Parties: State Bank of Mysore Vs. Joint Commission of Income Tax, Bangalore. Brief facts: Our Bank has filed an appeal before the Commissioner of Income Tax (Appeals), Bangalore against the order of the Joint Commission of Income Tax dated March 28, 2013 for the Assessment Year 2010-11. The issues pertain to inter alia: (i) disallowance of provision for loss in present value under debts relief scheme; (ii) reduction of deduction under section 36(1) (viia); (iii) recovery of bad debts written off in earlier years; (iv) disallowance of deduction under section 36(1)(viii); (v) disallowance of prior period expenditure; (vi) disallowance of depreciation of certain liabilities by treating them as contigent liabilities; (vii) disallowance of depreciation on ATMs and other computer peripherals; (viii) computation of tax liability on long term capital gains; (ix) disallowance of expenses and expenditure; etc Status: The matter is presently pending adjudication. The disputed tax liability amounts to approximately `37.18 Crores. 2. Parties: State Bank of Mysore Vs. Joint Commission of Income Tax, Large Tax Payers Unit, Bangalore Case Number: ITA No. 25/JCIT-LTU/CIT(A) LTU/09-10 Brief facts: Our Bank had filed an appeal before the Commissioner of Income Tax (Appeals), Bangalore against the order of the Joint Commissioner of Income Tax, Large Tax Payers Unit, Bangalore dated November 30, 2011 for the Assessment Year 2007-08. The issues pertain to inter alia (i) payment made to employees under employee exit option scheme; (ii) Depreciation on computer and computer software; (iii) expenditure in the nature of penalty; (iv) non re-computation of deduction u/s 36(1) etc.

Status: The matter is pending adjudication. The disputed tax liability amounts to approximately ` 8.73 Crores.

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Proceedings initiated against our Bank

1. Parties: The Commissioner of Income Tax and Another (Appellants) Vs. State Bank of Mysore (Respondent)

Case Number: ITA No. 401/2010 Brief facts: The Respondent for the Assessment Year 2005-2006, had made a provision of `127.21Crore on transfer of securities from AFS (available to sale) category to HTM (held to maturity) category. However, the assessing officer (AO) had disallowed the aforesaid amount. Aggrieved by the order dated May 31, 2007, the Respondent preferred an appeal before the Commissioner of Income tax(CIT) (Appeals). The said authority by its order dated March 12, 2008 upheld the order passed by the AO. Subsequently, the Respondent preferred an appeal before the Income Tax Appellate Tribunal against the order passed by the CIT (Appeals). The Income Tax Appellate Tribunal by its order dated May 29, 2009 allowed the appeal with regard to the provision of transfer of securities. Thereafter, the Appellants have preferred an appeal before the Hon’ble High Court of Karnataka on the issue that the Income Tax Appellate Tribunal has incorrectly allowed the depreciation claim of `127.21 Crores on held on maturity investments by treating it as a stock in trade.

Status: The matter is pending adjudication. The disputed tax liability amounts to approximately ` 46.55 Crores. 2. Parties: The Commissioner of Income Tax and Another (Appellants) Vs. State Bank of Mysore

(Respondent) Case Number: ITA No. 494/2009 Brief facts: The Respondent at the time of filing of the return for the Assessment Year 1997-1998, had excluded the item income under the head profits and gains of business and instead offered interest on investments actually received during the previous year. The Assessing Officer(AO) had objected to the said provision and added a sum of ` 70.36 Crores by way of broken period interest. The Respondent had preferred an appeal before Commissioner of Income Tax(CIT) (Appeals) against the order passed by the AO dated March 10, 2000. CIT (Appeals) by its order dated June 07, 2000 allowed the appeal stating that the broken period interest is not taxable in the year in which it falls and hence the addition of `70.36 is deleted. Aggrieved by the order passed by CIT (Appeals), the Appellants preferred an appeal before Income Tax Appellate Tribunal (ITAT), Bangalore. ITAT by its order dated April 17, 2009 dismissed the appeal and the order passed by the CIT(Appeals) not to include the broken period interest in computation of income was upheld. Thereafter, the Appellants preferred an appeal before the Hon’ble High Court of Karnataka against the order passed by ITAT.

Status: The matter is pending adjudication. The disputed tax liability amounts to approximately ` 30.25 Crores.

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STATUTORY AUDITORS

The following are the Central Statutory Auditors of our Bank who have audited our financial statements for the year ended March 31, 2013, included in this Preliminary Offer Document 1. Bhasin Raghavan & Co., Chartered Accountants; 2. K.P. Rao & Co, Chartered Accountants; 3. B.L. Ajmera & Co., Chartered Accountants; 4. M.K.P.S & Associates, Chartered Accountants; 5. Maharaj N.R. Suresh and Co., Chartered Accountants; 6. Bubber Jindal & Co., Chartered Accountants. The following are the Central Statutory Auditors of our Bank who have audited our financial statements for the year ended March 31, 2012, included in this Preliminary Offer Document. 1. Bhasin Raghavan & Co., Chartered Accountants; 2. K.P. Rao & Co, Chartered Accountants; 3. B.L. Ajmera & Co., Chartered Accountants; 4. M.K.P.S & Associates, Chartered Accountants; 5. S K Basu & Co, Chartered Accountants; and 6. Maharaja N.R. Suresh and Co., Chartered Accountants

The following are the Central Statutory Auditors of our Bank who have audited our financial statements for the year ended March 31, 2011, included in this Preliminary Offer Document. 1. Grover, Lalla and Mehta, Chartered Accountants; 2. Gopalaiyer and Subramanian, Chartered Accountants; 3. Ramraj & Co., Chartered Accountants; 4. K.P.Rao & Co. Chartered Accountants; and 5. Bhasin Raghavan & Co, Chartered Accountants;

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GENERAL INFORMATION 1. Our Bank was incorporated on May 13, 1913 as a public limited company pursuant to the Mysore Companies

Regulation No.III of 1895 as “The Bank of Mysore Limited”. In 1953, the Bank of Mysore Limited was appointed as an agent of the Reserve Bank of India to undertake government business and treasury operations. Thereafter, pursuant to the notification of the State Bank of India (Subsidiary Banks) Act, 1959, The Bank of Mysore Limited was constituted as a subsidiary of the State Bank of India under the name State Bank of Mysore. The head office of our Bank is situated at Mysore Bank Circle, Kempegowda Road, Bangalore 560 254.

2. The Issue is being made to QIBs in reliance upon Chapter VIII-A of the ICDR Regulations.

3. The Issue has been authorised and approved by the Board of Directors through resolution dated February 04, 2013 and by our Bank’s shareholders through a shareholders’ general meeting dated March 11, 2013.

4. Our Bank has received in-principle approvals under Clause 24(a) of the Equity Listing Agreement to list the Equity Shares being offered in the Issue on the BSE, the NSE, MSE and BgSE on May 14, 2013.

5. Our Bank has received in-principle approval from the State Bank of India on January 24, 2013.

6. RBI vide its letter bearing reference number DBOD.CO.BP. No./21.01.002/2012-13 dated February 28, 2013

has accorded its approval for the Issue. 7. The Department of Financial Services, Ministry of Finance, Government of India vide its letter bearing

reference number F.NO. 11/5/2013-BOA dated March 21, 2013 has accorded its approval for the Issue. 8. Except as disclosed in this Preliminary Offer Document, there has been no material change in our Bank’s

financial condition since March 31, 2013, the date of its latest financial statements, prepared in accordance with Indian GAAP, included herein.

9. Except as disclosed in this Preliminary Offer Document, there are no legal or arbitration proceedings against or affecting our Bank or its assets or revenues, nor is our Bank aware of any pending or threatened legal or arbitration proceedings, which are, or might be, material in the context of the Issue.

10. The following are our Bank’s Central Statutory Auditors who have audited our Bank’s financial statements as of and for each of the years ended March 31, 2013, 2012 and 2011 and have consented to the inclusion of their audit report in relation thereto, in this Preliminary Offer Document:

As on financial year ended March

31, 2011

As on financial year ended March

31, 2012

As on financial year ended March

31, 2013

Grover, Lalla & Mehta, Chartered Accountants

Bhasin Raghavan & Co., Chartered Accountants

Bhasin Raghavan & Co., Chartered Accountants

Gopalaiyer and Subramanian, Chartered Accountants

K.P. Rao & Co., Chartered Accountants

K.P. Rao & Co., Chartered Accountants

Ramraj & Co., Chartered Accountants

B.L. Ajmera & Co. , Chartered Accountants

B.L. Ajmera & Co., Chartered Accountants

K.P. Rao & Co., Chartered Accountants

M.K.P.S. & Associates, Chartered Accountants

M.K.P.S. & Associates, Chartered Accountants

Bhasin Raghavan & Co., Chartered Accountants

S.K. Basu & Co., Chartered Accountants

Maharaj N.R. Suresh and Co., Chartered Accountants

Maharaj N.R. Suresh and Co., Chartered Accountants

Bubber Jindal & Co., Chartered Accountants

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

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

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12. Consents

Consents in writing of: (a) the Directors and the legal advisors; (b) BOB Capital Markets Limited and SBI Capital Markets Limited as the Book Running Lead Managers to the proposed Issue, the Syndicate Member, the Public Issue Account Bank and the Registrar to the Issue to act in their respective capacities, have been obtained. Bhasin Raghavan & Co., K.P. Rao & Co., B.L. Ajmera & Co., M.K.P.S. & Associates, Maharaj N.R. Suresh and Co., and Bubber Jindal & Co our Bank’s Statutory Central Auditors, have given their written consent to the inclusion of their audit report dated May 11, 2013 in the form and context in which it appears in this Preliminary Offer Document. The Auditors have given their written consent for the inclusion of the report dated May 11, 2013 relating to the possible tax benefits accruing to our Bank and our shareholders in the form and context in which it appears in this Preliminary Offer Document.

13. Experts The Auditors have given their written consent for the inclusion of the report dated May 11, 2013 relating to the possible tax benefits accruing to our Bank and our shareholders in the form and context in which it appears in this Preliminary Offer Document.

14. Compliance Officer of our Bank Mr. Giridhara Kathavate, Chief Manager, Shares and Bonds State Bank of Mysore Mysore Bank Circle, Kempegowda Road, Bangalore - 5600254 Tel: + 91 80 2225 8087 Fax: +91 80 2237 5308 Email: [email protected] Website: www.statebankofmysore.co.in Investors can contact the Compliance Officer or the Registrar to the Issue in case of any pre or post-Issue related problems related to Allotment, credit of Allotted Equity Shares in the respective beneficiary account or unblocking of funds in the ASBA Accounts.

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15. Price Information of Past Issues handled by Book Running Lead Managers

(i) BOB Capital Markets Limited No. Issue

Name

Issue size (` crores)

Issue

price (`)

Listing

date

Opening

price on listing date

Closing

price on listing date

%

Change in Price on listing date

(Closing) vs. Issue Price

Benchmark

index on listing date (Closing)

Closing

price as on 10th calendar day from

listing day

Benchmark

index as on 10th calendar day from

listing day (Closing)

Closing

price as on 20th calendar day from

listing day

Benchmark

index as on 20th calendar day from

listing day (Closing)

Closing

price as on 30th calendar day from

listing day

Benchmark

index as on 30th calendar day from

listing day (Closing)

NIL

(ii) Summary statement of price information of past issues handled by BOB Capital Markets Limited to the Issue: FY Total

No. of IPOs

Total Funds Raised (`

crores)

No. of IPOs trading at discount on listing date

No. of IPOs trading at premium on listing date

No. of IPOs trading at discount as on 30th calendar day from listing day

No. of IPOs trading at premium as on 30th calendar day from listing day

Over 50%

Between 25-50%

Less than

25%

Over 50%

Between 25-50%

Less than

25%

Over 50%

Between 25-50%

Less than

25%

Over 50%

Between 25-50%

Less than

25%

NIL

(b) (i) SBI Capital Markets Limited No. Issue Name Issue size

(` crores) Issue price

(`) Listing

date Opening

price on listing

date

Closing

price on listing

date

%

Change in Price

on listing

date (Closing)

vs. Issue

Price

Benchmark

index on listing date

(Closing)

Closing

price as on 10th

calendar

day from

listing

day

Benchmark

index as on 10th

calendar

day from listing day

(Closing)

Closing

price as on 20th

calendar

day from

listing

day

Benchmark

index as on 20th

calendar

day from listing day

(Closing)

Closing

price as on 30th

calendar

day from

listing

day

Benchmark

index as on 30th

calendar

day from listing day

(Closing)

1. SJVN Limited 10,627.37 26.00(1)

20-May-10 27.10 25.10 -3.46% 4,947.60 24.70 5,086.30 24.10 4,987.10 24.10 5,262.60

2. Jaypee Infratech Limited 22,576.00 102.00(2)

21-May-10 98.00 91.45 -10.34% 4,931.15 83.50 5,086.30 76.20 5,000.30 86.30 5,353.30

3. Microsec Financial Services Limited 1,475.00 118.00

05-Oct-10 135.10 110.90 -6.02% 20,407.71 91.00 20,497.64 88.60 20,303.12 79.40 20,465.74

147

No. Issue Name Issue size

(` crores) Issue price

(`) Listing

date Opening

price on listing

date

Closing

price on listing

date

%

Change in Price

on listing

date (Closing)

vs. Issue

Price

Benchmark

index on listing date

(Closing)

Closing

price as on 10th

calendar

day from

listing

day

Benchmark

index as on 10th

calendar

day from listing day

(Closing)

Closing

price as on 20th

calendar

day from

listing

day

Benchmark

index as on 20th

calendar

day from listing day

(Closing)

Closing

price as on 30th

calendar

day from

listing

day

Benchmark

index as on 30th

calendar

day from listing day

(Closing)

4. Electrosteel Steels Limited 2,852.77 11.00

08-Oct-10 12.35 11.25 2.27% 20,250.26 10.80 20,168.89 10.95 20,005.37 11.12 20,852.38

5. Tecpro Systems Limited 2,679.05 355.00(3)

12-Oct-10 399.40 407.85 14.89% 20,203.34 399.95 20,260.58 425.50 20,355.63 418.20 20,875.71

6. A2Z Maintenance & Engineering services limited 7,762.47 400.00(4)

23-Dec-10 390.00 328.90 -17.78% 19,982.88 327.35 20,561.05 302.85 19,196.34 302.85 19,007.53

7. Punjab & Sind Bank 4,708.20 120.00

30-Dec-10 146.10 127.05 5.88% 20,389.07 118.55 19,224.12 119.85 19,092.05 110.20 18,395.97

8. PTC India Financial Services Limited 4,334.79 28.00(5)

30-Mar-11 26.75 24.90 -11.07% 5,787.65 23.40 5,842.00 22.05 5,729.10 22.20 5,785.45

9. Credit Analysis and Research Limited 5,399.77 750.00

26-Dec-12 949.00 923.95 23.19% 19,417.46 934.45 19,784.08 924.15 19,906.41 916.60 19,923.78

10. PC Jeweller Limited 6,013.08 135.00(1)

27-Dec-12 135.50 149.00 10.37% 19,323.80 181.90 19,691.42 169.00 19,986.82 157.80 20,103.53

11. Repco Home Finance Limited 2,702.32 172.00(2)

01-Apr-13 159.95 161.8 -5.93% 5,704.40 171.65 5,558.70 168.75 5,834.40 170.9 5,930.20

Source:

Note: The 10th, 20th and 30th calendar day computation includes the listing day. If either of the 10th, 20th or 30th calendar days is a trading holiday, the next trading day is considered for the computation.

1. Issue price for employees and retail individual bidders was ` 130 2. Issue price for employees was ` 156 3. Issue price for bidding employee was ` 338.00 4. Issue price for bidding employee was ` 380.00 5. Issue price for retail individual bidders was ` 27.00 6. Issue price for employees and retail individual bidders was ` 130.00

148

(ii) Summary statement of price information of past issues handled by SBI Capital Markets Limited: FY Total

No. of IPOs

Total Funds Raised (`̀̀̀

crores)

No. of IPOs trading at discount on listing date

No. of IPOs trading at premium on listing date

No. of IPOs trading at discount as on 30th calendar day from listing day

No. of IPOs trading at premium as on 30th calendar day from listing day

Over 50%

Between 25-50%

Less than 25%

Over 50%

Between 25-50%

Less than 25%

Over 50%

Between 25-50%

Less than 25%

Over 50%

Between 25-50%

Less than 25%

2011-12 0 0.00 0 0 0 0 0 0 0 0 0 0 0 0

2012-13 2 11,412.85 0 0 0 0 0 2 0 0 0 0 0 2

2013-14 1 2,702.32 0 0 1 0 0 0 0 0 1 0 0 0

Note: The 30th

calendar day computation includes the listing day. If the 30th

calendar day is a trading holiday, the next trading day is considered for the computation. 16. Track record of past issues handled by Book Running Lead Managers

For details regarding the track record of the Book Running Lead Managers to the Issue as specified in Circular reference CIR/MIRSD/1/2012 dated January 10, 2012 issued by SEBI, please refer to the following website of the Book Running Lead Managers: BOB Capital Markets Limited: http://bobcapitalmarkets.com/pdf/Track_Record_Past_issues.pdf SBI Capital Markets Limited: http://www.sbicaps.com/Main/TrackRecordEquity.aspx ; .

149

FINANCIAL STATEMENTS

Report by the Auditors

(On the Financial Information of State Bank of Mysore) To, The Board of Directors, State Bank of Mysore, Head Office Bengaluru Dear Sirs, 1) We have examined the attached Financial Information of State Bank of Mysore (hereinafter called the Bank),

which have been prepared in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 as amended to date (hereinafter called SEBI Regulations) and in terms of engagement letter dated 25th February, 2013 in connection with the proposed Institutional Placement Programme for Issue of Equity Shares by the Bank.

2) These financial information have been extracted by the Management from the audited financial statements for the years ended 31st March 2013, 31st March 2012 and 31st March 2011 audited and reported upon by the respective auditors, the names of whom and the years of their audit are furnished below:

Year Name of Auditors

2010-11 M/s Grover Lalla & Mehta, M/s Gopala Iyer and Subramanian, M/s Ramraj & Co, M/s K P Rao & Co, M/s Bhasin Raghavan & Co

2011-12 M/s Bhasin Raghavan & Co, M/s K P Rao & Co, M/s B.L.Ajmera & Co, M/s M K P S & Associates, M/s S K Basu & Co, M/s Maharaj N R Suresh and Co

2012-13 M/s Bhasin Raghavan & Co, M/s K P Rao & Co, M/s B.L.Ajmera & Co, M/s M K P S & Associates, M/s Bubber Jindal & Co, M/s Maharaj N R Suresh and Co

3) The preparation and presentation of these Financial Information is the responsibility of Bank’s management.

Our responsibility is to express an opinion that these financial information have been extracted from audited financial statements of the bank for the respective years/period as referred in para 2 above.

4) Based on Para 1, 2 and 3 above, we report that in our opinion and according to the information and explanations given to us, we have found the information to be correctly extracted from the audited financial statements

5) The attached financial information, do not reflect the effect of events that occurred subsequent to the date of our

report on those financial statement. 6) This report should neither in any way be construed as a re-issuance or redrafting of any of the previous audit

reports issued by us or by other firms of chartered accountants nor construed as a new opinion on any financial statements referred to herein

150

7) This report is intended solely for use of the management and for inclusion in the Offer Document in connection with the proposed Institutional Placement Programme for Issue of Equity Shares by the Bank and is not to be used, referred to or distributed for any other purpose without our prior written consent

For BHASIN RAGHAVAN & CO. Chartered Accountants FRN : 000197N

(CA S. V. Raghavan) Partner Membership No 014315

For B.L AJMERA & CO. Chartered Accountants FRN : 001100C

(CA Sanjeev Mathur ) Partner Membership No 075325

For BUBBER JINDAL & CO. Chartered Accountants FRN : 000399N

(CA S. Narayanan) Partner Membership No 086618

For K P RAO & CO Chartered Accountants FRN: 003135S

(CA K.Surya Prakash) Partner Membership No 018857

For M.K.P.S & Associates Chartered Accountants FRN: 302014E

(CA Ankit Kumar Agarwal) Partner Membership No 231099

For Maharaj N R Suresh and Co Chartered Accountants FRN: 001931S

(CA E Narayanan) Partner Membership No 025981

DATE 11/05/2013 PLACE: BENGALURU

151

BALANCE SHEET OF STATE BANK OF MYSORE

(`̀̀̀ in Crores)

HEAD SCHEDULE

AS ON

31-03-2013

(AUDITED)

AS ON

31-03-2012

(AUDITED)

AS ON

31-03-2011

(AUDITED)

CAPITAL & LIABILITIES

Capital 1 46.80 46.80 46.80

Reserves & Surplus 2 4,285.73 3,941.73 3,636.52

Deposits 3 56,969.05 50,186.30 43,225.47

Borrowings 4 3,854.20 4,425.59 3,307.95

Other Liabilities and Provisions 5 2,076.98 1,803.15 1,815.72

TOTAL 67,232.76 60,403.57 52,032.46

ASSETS

Cash and Balances with Reserve Bank of India 6 2,404.67 3,025.85 2,705.68

Balances with Banks and Money at call and short notice 7 1,100.09 336.86 234.60

Investments 8 16,774.58 14,732.70 12,927.14

Advances 9 44,932.57 39,835.31 34,029.81

Fixed Assets 10 824.28 749.41 725.00

Other Assets 11 1,196.57 1,723.44 1,410.23

TOTAL 67,232.76 60,403.57 52,032.46

Contingent Liabilities 12 17,069.91 17,969.81 16,966.51

Bills for Collection 711.17 1,193.03 466.43

Significant Accounting Policies 17

Notes Forming part of the Accounts 18

Significant Accounting Policies and Notes on Accounts forms integral part of the Balance sheet

SCHEDULE 1 - CAPITAL

(`̀̀̀ in Crores)

AS ON 31-03-2013

(AUDITED)

AS ON 31-03-2012

(AUDITED)

AS ON 31-03-2011

(AUDITED)

Authorised Capital 50,00,00,000 Equity shares of `10/- each 500.00 500.00 500.00

Issued, Subscribed, Called-up & paid up Capital 4,67,99,790 Equity shares of `10/- each

46.80 46.80

46.80

Out of which 4,32,12,078 equity shares of `10 each are held by State Bank of India

TOTAL 46.80 46.80 46.80

152

SCHEDULE 2 – RESERVES & SURPLUS

(`̀̀̀ in Crores )

AS ON

31-03-2013

(AUDITED)

AS ON

31-03-2012

(AUDITED)

AS ON

31-03-2011

(AUDITED)

I. Statutory Reserves

Opening Balance 1,334.98 1,242.69 1,116.36

Additions during the year 104.02 92.29 126.33

Deductions during the year - - -

1,439.00 1,334.98 1,242.69

II. Capital Reserves

Opening Balance 202.65 202.65 198.19

Additions during the year 19.86 - 4.46

Deductions during the year - - -

222.51 202.65 202.65

III. Revaluation Reserve

Opening Balance 575.80 583.85 591.89

Additions during the year - - -

Deductions during the year 8.04 8.04 8.04

567.76 575.81 583.85

IV Share Premium

Opening Balance 630.54 630.54 60.00

Additions during the year - - 570.54

Deductions during the year - - -

630.54 630.54 630.54

V. Revenue and Other Reserves

Opening Balance 958.15 783.16 507.33

Additions during the year 169.39 174.99 275.83

Deductions during the year - - -

1,127.54 958.15 783.16

VI. Special Reserve under section 36(1)(viii) of The Income Tax Act 1961

Opening Balance 226.05 180.07 134.33

Additions during the year 58.78 45.98 45.75

Deductions during the year - - -

284.83 226.05 180.08

Reserve for deferred tax Account - - -

VII. Investment Reserve

Opening Balance 13.55 13.55 18.23

Additions during the year -- - -

Deductions during the year - - 4.68

13.55 13.55 13.55

VIII. Balance in Profit and Loss Account - -

TOTAL ( I + II + III + IV +V+ VI+ VII+VIII ) 4,285.73 3,941.73 3,636.52

153

SCHEDULE 3 - DEPOSITS

( `̀̀̀ in Crores )

AS ON

31-03-2013

(AUDITED)

AS ON

31-03-2012

(AUDITED)

AS ON

31-03-2011

(AUDITED)

A. I Demand Deposits

i) From Banks 190.39 256.53 258.42

ii) From Others 2,666.52 2,873.51 2,807.43

Total 2,856.91 3,130.04 3,065.85

II Savings Bank Deposits 15,115.42 13,033.50 11,724.03

III Term Deposits

i) From Banks 70.25 266.89 188.00

ii) From Others 38,926.47 33,755.87 28,247.59

Total 38,996.72 34,022.76 28,435.59

TOTAL ( I+II+III ) 56,969.05 50,186.30 43,225.47

B. i) Deposits of Branches in India 56,969.05 50,186.30 43,225.47

ii) Deposits of Branches outside India - - -

TOTAL (i + ii) 56,969.05 50,186.30 43,225.47

SCHEDULE 4 – BORROWINGS

( ` ` ` ` in Crores )

AS ON

31-03-2013

(AUDITED)

AS ON

31-03-2012

(AUDITED)

AS ON

31-03-2011

(AUDITED)

I. Borrowings in India

i) Reserve Bank of India 280.00 560.00 300.00

ii) Other Banks - 700.00 -

iii) Other Institutions and Agencies 1,923.49 1,189.39 1,281.35

iv) Innovative Perpetual Debt Instrument - ( IPDI ) (raised as Tier I Capital) 260.00 260.00 260.00

v) Subordinated Debt Instruments (raised as Tier II Capital) 1,065.00 1,065.00 1,065.00

TOTAL (i +ii +iii+iv +v) 3,528.49 3,774.39 2,906.35

II.Borrowings outside India 325.71 651.20 401.60

TOTAL (I + II) 3,854.20 4,425.59 3,307.95

Secured Borrowings included in I & II above 1,923.49 1,189.39 1,281.35

154

SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS

( `̀̀̀ in Crores )

AS ON

31-03-2013

(AUDITED)

AS ON

31-03-2012

(AUDITED)

AS ON

31-03-2011

(AUDITED)

I. Bills Payable 371.53 333.04 356.58

II. Inter-Office Adjustments (Net) - - -

III. Interest Accrued 709.47 683.94 465.23

IV. Others 995.98 786.17 993.91

TOTAL(I+II+III+IV) 2,076.98 1,803.15 1,815.72

SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA

(`̀̀̀ in Crores)

AS ON

31-03-2013

(AUDITED)

AS ON

31-03-2012

(AUDITED)

AS ON

31-03-2011

(AUDITED)

I. Cash in hand (including Foreign Currency Notes) 245.06 253.96 277.22

II. Balances with Reserve Bank of India

i) in Current Account 2,159.61 2,771.89 2,428.46

ii) in Other Accounts - - -

Total (i+ii) 2,159.61 2,771.89 2,428.46

TOTAL (I+II) 2,404.67 3,025.85 2,705.68

SCHEDULE 7 - BALANCES WITH BANKS & MONEY AT CALL & SHORT NOTICE

(`̀̀̀ in Crores)

AS ON

31-03-2013 (AUDITED)

AS ON

31-03-2012 (AUDITED)

AS ON

31-03-2011 (AUDITED)

I.In India

i)Balance with Banks

a) in Current Accounts 21.84 20.93 49.70

b) in Other Deposit Accounts - - -

TOTAL (a+b) 21.84 20.93 49.70

ii) Money at Call and Short Notice

a) With Banks 950.00 200.00 -

b) With Other Institutions 8.14 - -

TOTAL (a+b) 958.14 200.00 -

TOTAL (i+ii) 979.98 220.93 49.70

II. Outside India

i) in Current Accounts 120.11 115.93 184.90

ii) in other Deposit Accounts - - -

iii) Money at Call and Short Notice - - -

Total (i+ii+iii) 120.11 115.93 184.90

GRAND TOTAL ( I + II) 1,100.09 336.86 234.60

155

SCHEDULE 8 – INVESTMENTS

(`̀̀̀ in Crores)

AS ON

31-03-2013

(AUDITED)

AS ON

31-03-2012

(AUDITED)

AS ON

31-03-2011

(AUDITED)

Investments in India (Gross) 16,864.01 14,786.11 12,948.73

Less : Reserve for Depreciation on Investments , NPI provision & ARCIL SRs 89.43 53.41 21.59

NET INVESTMENTS 16,774.58 14,732.70 12,927.14

I. Investments in India in

i)Government Securities 14,460.16 12,971.46 11,420.64

ii)Other Approved Securites - - 13.5

iii)Shares 77.13 80.45 91.81

iv)Debentures and Bonds 213.94 171.66 146.02

v)Subsidiaries and/or Joint Ventures (including RRBs) 18.89 10.39 10.39

vi)Others 2,004.46 1,498.74 1,244.78

NET TOTAL INVESTMENTS 16,774.58 14,732.70 12,927.14

II.Investments outside India in - - -

i) Government Securities (Including Local Authorities) - - -

-

ii) Subsidiaries and/or Joint Ventures Abroad - - -

-

iii) Other Investments - - -

TOTAL - - -

GRAND TOTAL (I+II) 16,774.58 14,732.70 12,927.14

156

SCHEDULE 9 – ADVANCES

(`̀̀̀ in Crores)

AS ON

31-03-2013

(AUDITED)

AS ON

31-03-2012

(AUDITED)

AS ON

31-03-2011

(AUDITED)

A. i) Bills Purchased and Discounted 1,764.70 1,925.57 1,955.22

ii) Cash Credits, Overdrafts and Loans Repayable on Demand 17,687.46 15,912.34 11,482.08

iii) Term Loans 25,480.41 21,997.40 20,592.51

TOTAL - A (i+ii+iii) 44,932.57 39,835.31 34,029.81

B. i) Secured by Tangible Assets (Includes Advance against Book Debts) 39,519.73 33,486.90 30,052.02

ii) Covered by Bank/Government Guarantees 705.48 973.69 566.01

iii) Unsecured(a + b) 4,707.36 5,374.72 3,411.78

Out of (iii) above a)Advances against collaterals like Rights, Licences, Authorisations etc., charged to the Bank in respect of Projects (Including Infrastructure Projects) - 111.15 247.00

b) Other Unsecured Advances 4,707.36 5,263.57 3,164.78

TotalUnsecured (a+b) 4,707.36 5,374.72 3,411.78

TOTAL - B (i+ii+iii) 44,932.57 39,835.31 34,029.81

C. I. Advances in India

i) Priority Sector 13,415.22 11,258.29 11,747.13

ii) Public Sector 3,148.30 3,312.97 1,903.20

iii) Banks 0 0 -

iv) Others 28,369.05 25,264.05 20,379.48

TOTAL (i+ii+iii+iv) 44,932.57 39,835.31 34,029.81

II. Advances Outside India

i) Due from Banks - - -

ii) Due from Others (a+b+c) - - -

a)Bills Purchased and discounted - - -

b)Syndicated Loans - - -

c)Others - - -

TOTAL (i+ii) - - -

GRAND TOTAL (C I & II) 44,932.57 39,835.31 34,029.81

157

SCHEDULE 10 - FIXED ASSETS

(`̀̀̀ in Crores)

AS ON

31-03-2013

(AUDITED)

AS ON

31-03-2012

(AUDITED)

AS ON

31-03-2011

(AUDITED)

I.A) Premises

At cost/Revalued as on 31st March of the preceding year 700.36 675.08 674.32

Additions during the year 23.82 25.28 0.76

Deductions during the year - -

Premises under Construction 6.34 7.52 -

Depreciation to date includes depreciation on revalued buildings. (73.37) (65.63) (53.23)

TOTAL 657.15 642.25 621.85

II.Other Fixed Assets (including Furniture and Fixtures)

At cost as on 31st March of the preceding year 484.14 452.53 432.77

Additions during the year 64.03 53.00 59.95

Deductions during the year (8.68) (21.39) (40.19)

Depreciation to date* (372.36) (376.98) (349.38)

TOTAL 167.13 107.16 103.15

III. LEASED ASSETS

At Cost as on 31st March of preceeding year - - -

Additions during the year - - -

Deductions during the year - - -

Depreciation to date - - -

TOTAL - - -

GRAND TOTAL (I + II + III) 824.28 749.41 725.00

.

* Depreciation policy modified from SLM method to WDV method

from 01/04/2012 on all assets except Revalued assets & Computers

resulted in reversal of depreciation relating to earlier years, `47.33

Crores

158

SCHEDULE 11 - OTHER ASSETS

(`̀̀̀ in Crores)

AS ON 31-03-2013

(AUDITED)

AS ON 31-03-2012

(AUDITED)

AS ON 31-03-2011

(AUDITED)

I. Inter-Office Adjustments (Net) 78.54 348.57 630.76

II Interest Accrued 445.90 375.46 325.4

III.Tax Paid in Advance / Tax Deducted at Source (Net) 238.03 235.84 130.03

IV.Stationery and Stamps 4.35 4.82 5.07

V. Non-Banking Assets acquired in satisfaction of claims - - -

VIOthers 314.00 629.44 303.17

VII Deferred Tax Assets 115.75 129.31 15.80

TOTAL(I+II+III+IV+V+VI+VII) 1,196.57 1,723.44 1,410.23

SCHEDULE 12 - CONTINGENT LIABILITIES

(`̀̀̀ in Crores)

AS ON

31-03-2013

(AUDITED)

AS ON

31-03-2012

(AUDITED)

AS ON

31-03-2011

(AUDITED)

I. Claims against the Bank not acknowledged as debts 297.91 240.08 220.39

II.Liability for partly paid Investments 0.12 0.12 0.12

IIILiability on account of Venture Capital Funds 11.95 18.08 -

IV. Liability on account of outstanding forward exchange contracts 10,205.33 11,263.72 11,294.26

V.Guarantees given on behalf of constituents (BG) 2,387.35 2,131.19 1,816.72

a) In India 1,882.00 1,875.08 1,673.48

b) Outside India 505.35 256.11 143.24

VI. a) Acceptances, endorsements and other obligations(LC) 3,105.25 3,456.39 3,075.48

b)Letters of Comfort Outstanding 938.51 853.47 557.27

VIIClaims made by Various Government Departments 3.57 6.76 2.02

VIII.Other items for which the Bank is contingently liable 119.92 - 0.25

TOTAL (I+II+III+IV+V+VI+VII+VIII) 17,069.91 17,969.81 16,966.51

159

STATE BANK OF MYSORE

PROFIT AND LOSS ACCOUNT

( `̀̀̀ in Crores )

Schedule

Year ended

31.03.2013

(Audited)

Year ended

31.03.2012

(Audited)

Year ended

31.03.2011

(Audited)

INCOME

Interest Earned 13 5,965.48 5,078.43 4,079.08

Other Income 14 595.59 516.40 455.18

TOTAL 6,561.07 5,594.83 4,534.26

EXPENDITURE

Interest Expended 15 4,125.28 3,494.14 2,443.08

Operating Expenses 16 1,104.76 1,041.07 917.43

Provisions and Contingencies 914.93 690.47 673.13

TOTAL 6,144.97 5,225.68 4,033.64

Net Profit for the year 416.10 369.15 500.62

Profit brought forward - - -

TOTAL 416.10 369.15 500.62

APPROPRIATIONS: ( `̀̀̀ in Crores )

Year ended

31.03.2013

(Audited)

Year ended

31.03.2012

(Audited)

Year ended

31.03.2011

(Audited)

Transfer to Statutory Reserves (25% of Net Profit) 104.02 92.29 126.33

Transfer to Capital Reserve 19.86 - 4.46

Transfer To Other Reserves 169.39 174.99 272.87

Transfer to Special Reserve in terms of Sec 36 (i)(viii) of the Income Tax Act 1961. 58.78 45.98 45.75

Transfer (from) / to Investment Reserve - - (4.68)

Proposed Dividend 53.82 46.80 46.80

Tax on Dividend 8.73 7.59 7.59

Contribution to Retired employees Medical Fund 1.50 1.50 1.50

Balance carried over to Balance Sheet - - -

TOTAL 416.10 369.15 500.62

Earning per Share (Basic and Diluted) (in `) `) `) `) 88.91 78.88 121.66

Significant Accounting Policies 17

NotesForming part of the Accounts 18

* EPS restated an account of right issue during the financial year 2010-11

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SCHEDULE 13 - INTEREST EARNED

( `̀̀̀ in Crores)

Year ended

31.03.2013

(AUDITED)

Year ended

31.03.2012

(AUDITED)

Year ended

31.03.2011

(AUDITED)

Interest/Discount on Advances/Bills 4,787.77 4,063.27 3,200.68

Income on Investments 1,157.57 1,000.23 864.57

Interest on balances with Reserve Bank of India and other interbank funds 17.52 14.62 8.65

Others 2.62 0.31 5.18

TOTAL 5,965.48 5,078.43 4,079.08

SCHEDULE 14 - OTHER INCOME ( `̀̀̀ in Crores)

Year ended

31.03.2013

(AUDITED)

Year ended

31.03.2012

(AUDITED)

Year ended

31.03.2011

(AUDITED)

Commission, Exchange and Brokerage 391.36 399.58 368.16

Profit on Sale of investments - Net 66.53 38.59 13.62

Profit on Revaluation of Investments - - -

Less: loss on revaluation of investments - - -

Profit on Sale of Land, Buildings and Other Assets - Net (1.03) 0.05 0.21

Profit on Exchange Transactions 58.5 32.56 46.37

Less: loss on Exchange transactions - - -

Income earned by way of Dividends etc from subsidiaries/Companies and /or Joint ventures abroad/in India - - -

Miscellaneous Income 80.23 45.62 26.82

TOTAL 595.59 516.40 455.18

SCHEDULE 15 - INTEREST EXPENDED

( `̀̀̀ in Crores)

Year ended

31.03.2013

(AUDITED)

Year ended

31.03.2012

(AUDITED)

Year ended

31.03.2011

(AUDITED)

Interest on Deposits 3,779.90 3,220.92 2,222.21

Interest on Reserve Bank of India/Inter Bank Borrowings 214.6 146.11 95.76

Others 130.78 127.11 125.11

TOTAL 4,125.28 3,494.14 2,443.08

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SCHEDULE 16 - OPERATING EXPENSES

( `̀̀̀ in Crores)

Year ended

31.03.2013

(AUDITED)

Year ended

31.03.2012

(AUDITED)

Year ended

31.03.2011

(AUDITED)

Payments to and provision for employees 640.24 620.58 548.36

Rent, Taxes and Lighting 98.17 92.72 84.82

Printing and Stationery 14.29 13.16 11.70

Advertisement and Publicity 6.40 6.13 6.07

Depreciation on bank's properties 47.04 50.04 49.52

Directors' fees, allowances and expenses 0.21 0.18 0.16

Auditors' fees and expenses (including branch auditors fees and expenses) 9.16 10.59 10.15

Law charges 7.34 7.69 4.69

Postages, Telegrams, Telephones, etc., 6.23 8.15 3.58

Repairs and maintenance 4.61 5.50 4.02

Insurance 46.93 39.70 35.96

Other expenditure 224.14 186.63 158.40

TOTAL 1,104.76 1,041.07 917.43

( `̀̀̀ in Crores)

Year ended

31.03.2013

(AUDITED)

Year ended

31.03.2012

(AUDITED)

Year ended

31.03.2011

(AUDITED)

OPERATING PROFIT 1,331.03 1,059.62 1173.75

Provision for Income Tax 278.58 87.80 240.39

Provision for wealth tax 0.40 0.35 0.15

Fringe Benefit Tax of earlier years - 0.87 0.97

Provision for non performing Advances 412.77 503.75 455.78

Provision for Standard Assets 63.40 46.13 29.16

Provision for Investments 36.03 43.23 9.35

Provision for interest sacrifice on restructured accounts 92.74 5.23 (2.50)

Provision for frauds - - 5.39

Provision for Wage Revision 31.00 - (51.27)

Provision for loss in Present value on Debt Relief - - -

Excess Provision for Gratuity Reversed - - (16.83)

Miscellaneous Provision 0.01 3.11 2.54

TOTAL PROVISIONS AND CONTINGENCIES 914.93 690.47 673.13

NET PROFIT 416.10 369.15 500.62

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STATE BANK OF MYSORE - CASH FLOW STATEMENT

(`̀̀̀ in Crores)

Particulars

YEAR

ENDED31-03-2013

YEAR ENDED 31-03-2012

YEAR ENDED 31-03-2011

A CASH FLOW FROM OPERATING ACTIVITIES Net profit after Taxes 416.10 369.15 500.62 Provision for Taxes 278.98 89.01 241.51

Net profit before Taxes 695.08 458.16 742.13 ADJUSTMENT FOR Depreciation charges 47.04 50.04 49.52 Depreciation Write Back (47.32) - - Profit/Loss on sale of fixed assets 1.03 (0.05) (0.21)

0.75 49.99 49.31 Net Profit Before Depreciation,(Profit) Loss on sale of fixed assets 695.83 508.15 791.44 Provisions for NPAs 412.77 503.75 455.78 Provision for/(Written back of) Investment Depreciation (Net) 36.03 31.81 (8.89) Provision for Standard Assets 63.40 46.14 29.16 Interest paid on State Bank of MysoreBonds 113.55 113.55 113.55 Provision for Frauds - - 5.39 Provision for interest sacrifice on restructured accounts 92.74 5.23 (2.50) Provision for / (written back of) wage revision 31.00 - (51.27) Provision for / (written back of) Gratuity - - (16.83) Miscellaneous Provision 0.01 3.11 2.53

TOTAL 1,445.33 1,211.74 1,318.36

- - - LESS DIRECTTAXES (267.62) (219.32) (140.02) ADJUSTMENT FOR Increase / (Decrease) in Deposits 6,782.74 6,960.83 4,345.46 Increase / (Decrease) inBorrowings (571.38) 1,117.63 1,033.95 (Increase) / Decrease in Investments (2,041.87) (1,837.38) (1,423.84) (Increase) / Decrease in Advances (5,510.03) (6,309.24) (4,949.73) Increase / (Decrease) inOther Liabilities & Provisions 40.98 (151.64) 254.58 (Increase) / Decrease in Other Assets 515.50 (93.88) (845.52)

NET CASH PROVIDED BY THE OPERATING ACTIVITIES 393.65 678.74 (406.76)

B CASH FLOW FROM INVESTING ACTIVITIES Fixed Assets (83.66) (88.37) (58.24)

NET CASH USED IN INVESTING ACTIVITIES (83.66) (88.37) (58.24)

C CASH FLOW FROM FINANCING ACTIVITIES Share Capital - - 10.80 Share Premium - - 570.54 Interest paid on Bonds (113.55) (113.55) (113.55) Dividends Paid (54.39) (54.39) (41.98)

NET CASH PROVIDED BY FINANCING ACTIVITIES (167.94) (167.94) 425.81

D CASH AND CASH EQUIVALENTS AT THE BEGINNING OF

THE YEAR Cash in hand (including foreign currency notes and gold) 253.96 277.22 238.41 Balance with Reserve Bank of India 2,771.89 2,428.46 2,527.21 Balance with Banks and Money at Call and Short Notice 336.86 234.60 213.85

NET BALANCE 3,362.71 2,940.28 2,979.47

E

CASH AND CASH EQUIVALENTS AT THE END OF THE

YEAR Cash in hand (including foreign currency notes and gold) 245.06 253.96 277.22 Balance with Reserve Bank of India 2,159.61 2,771.89 2,428.46 Balance with Banks and Money at Call and Short Notice 1,100.09 336.86 234.60

NET BALANCE 3,504.76 3,362.71 2,940.28

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SCHEDULE 17

SIGNIFICANT ACCOUNTING POLICY FOR THE YEAR 2012-13

A. BASIS OF PREPARATION

The Bank’s financial statements are prepared under the historical cost convention, on the accrual basis of accounting and conform in all material aspects to Generally Accepted Accounting Principles (GAAP) in India, which comprise of applicable statutory provisions, regulatory norms/guidelines prescribed by Reserve Bank of India (RBI), Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI), and the practices prevalent in the banking industry in India, unless otherwise stated.

B. USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

C. SIGNIFICANT ACCOUNTING POLICIES

1. Revenue recognition 1.1 Income and expenditure are accounted on accrual basis, except otherwise stated. 1.2 Interest income is recognised in the Profit and Loss Account as it accrues except the following, (i) Income from nonperforming assets (NPAs), comprising of advances, leases and investments, which is recognised upon realisation, as per the prudential norms prescribed by Reserve Bank of India. (ii) Funded Interest on Standard Restructured Advances and interest on FITL as per the guidelines of Reserve Bank of India

(iii) Interest on application money on investments (iv) Overdue interest on investments and bills discounted, (v) Income on Rupee Derivatives designated as “Trading”. (vi) In respect of compromise/settlement proposals, accounting for income/loss is recognised on complete closure/realisation. 1.3 Profit or loss on sale of investments is recognised in the Profit and Loss Account, however, the profit on sale of investments in the ‘Held to Maturity’ category is appropriated net of applicable taxes and amount required to be transferred to statutory reserve to ‘Capital Reserve Account’. 1.4 Income (other than interest) on investments in “Held to Maturity” (HTM) category acquired at a discount to the face value, is recognised as follows : a. On Interest bearing securities, it is recognized only at the time of sale/ redemption. b. On zero-coupon securities, it is accounted for over the balance tenor of the security on a constant yield basis. 1.5 Dividend is accounted on an accrual basis where the right to receive the dividend is established. 1.6 All other commission and fee incomes are recognized on their realisation except Commission on Government Business, which is recognised as it accrues. 1.7 Expenditure is charged on accrual basis except Electricity, Water, Rent, Property Taxes, Telephone, Insurance , Annual Maintenance Contracts, Law Charges, Advertisement & Publicity and Traveling & Conveyance 1.8 One time Insurance Premium paid under Special Home Loan Scheme (December 2008 to June 2009) is amortised over loan period.

2. INVESTMENTS: Transactions in all Govt. securities are recorded on “Settlement Date”.

2.1 Classification

Investments are classified into three categories, viz. Held to Maturity (HTM), Available for Sale (AFS) and Held for Trading (HFT).

2.2 Basis of classification:

i. Investments that the Bank intends to hold till maturity are classified as Held to Maturity.

ii. Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

iii. Investments, which are not classified in the above two categories, are classified as Available for Sale.

iv. An investment is classified as Held to Maturity, Available for Sale or Held for Trading at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

v. Investments in subsidiaries, joint ventures and associates are classified as Held to Maturity.

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2.3 Valuation:

i. In determining the acquisition cost of an investment:

(a) Brokerage/commission received on subscriptions is reduced from the cost.

(b) Brokerage, commission, securities transaction tax etc. paid in connection with acquisition of investments are expensed upfront and excluded from cost.

(c) Broken period interest paid / received on debt instruments is treated as interest expense/income and is excluded from cost/ sale consideration.

(d) Cost is determined on Weighted Average Cost method for investments under all categories.

ii. The transfer of a security amongst the above three categories is accounted for at the least of Weighted Average Cost or Market Value on the date of transfer, and the depreciation, if any, on such transfer is fully provided for.

iii. Treasury Bills and Commercial Papers are valued at carrying cost.

iv. Held to Maturity category: Investments under Held to Maturity category are carried at acquisition cost unless it is more than the face value, in which case the premium is amortised over the period remaining maturity on constant yield basis. Such amortisation of premium is adjusted against income under the head “interest on investments”. Investments in Regional Rural Banks is valued at carrying cost (i.e book value). A provision is made for diminution, other than temporary, for each investment individually.

v. Available for Sale and Held for Trading categories:

Investments held under AFS and HFT categories are individually revalued at the market price or fair value determined as per regulatory guidelines, and only the net depreciation of each group for each category is provided for and net appreciation, is ignored. On provision for depreciation, the book value of the individual securities remains unchanged after marking to market.

vi. Security receipts issued by an asset reconstruction company (ARC) are valued in accordance with the guidelines applicable to non-SLR instruments. Accordingly, in cases where the security receipts issued by the ARC are limited to the actual realisation of the financial assets assigned to the instruments in the concerned scheme, the Net Asset Value, obtained from the ARC, is reckoned for valuation of such investments.

vii. Investments are classified as performing and non-performing, based on the guidelines issued by the RBI. Investments become non-performing (NPI) where:

(a) Interest/installment (including maturity proceeds) is due and remains unpaid for more than 90 days.

(b)The above would apply mutatis-mutandis to preference shares where the fixed dividend is not paid. However, if only the preference shares are classified as NPI, the investment in any of the other performing securities issued by the same issuer is not classified as NPI and any performing credit facilities granted to that borrower is not treated as NPA.

(c) In the case of equity shares, in the event the investment in the shares of any company is valued at Re. 1 per company on account of the non availability of the latest Balance Sheet, those equity shares would be reckoned as NPI.

(d) If any credit facility availed by the issuer is NPA in the books of the Bank, investment in any of the securities issued by the same issuer would also be treated as NPI and vice versa except in case of Preference Shares as stated in (b) above .

(e) The investments in debentures/bonds, which are deemed to be in the nature of advance, are also subjected to NPI norms as applicable to investments.

viii. Accounting for Repo/ reverse repo transactions (other than transactions under the Liquidity Adjustment Facility (LAF) with the RBI)

(a) The securities sold and purchased under Repo/ Reverse repo are accounted as Collateralized lending and borrowing transactions. However securities are transferred as in case of normal outright sale/ purchase transactions and such movement of securities is reflected using the Repo/Reverse Repo Accounts and Contra entries. The above entries are reversed on the date of maturity. Costs and revenues are accounted as interest expenditure/income, as the case may be. Balance in Repo A/c is classified under Schedule 4 (Borrowings) and balance in Reverse Repo A/c is classified under Schedule 7 (Balance with Banks and Money at Call & Short Notice).

(b) Securities purchased/sold under LAF with RBI are debited/credited to Investment Account and reversed on maturity of the transaction. Interest expended/earned thereon is accounted for as expenditure/revenue.

3. LOANS/ADVANCES AND PROVISIONS THEREON

3.1 Loans and Advances are classified as performing and non-performing, based on the guidelines issued by RBI. Loan assets become non-performing assets (NPAs) where:

i. In respect of term loans, interest and/or installment of principal remains overdue for a period of more than 90 days;

ii. In respect of Overdraft or Cash Credit advances, the account remains “out of order”, i.e. if the outstanding balance exceeds the sanctioned limit/drawing power continuously for a period of 90 days, or if there are no credits continuously for 90 days as on the date of balance-sheet, or if the credits are not adequate to cover the interest due during the same period;

165

iii. In respect of bills purchased/discounted, the bill remains overdue for a period of more than 90 days;

iv. In respect of agricultural advances for short duration crops, where the instalment of principal or interest remains overdue for two crop seasons;

v. In respect of agricultural advances for long duration crops, where the principal or interest remains overdue for one crop season.

3.2 NPAs are classified into sub-standard, doubtful and loss assets, based on the following criteria stipulated by RBI:

i. Sub-standard: A loan asset that has remained non-performing for a period less than or equal to 12 months.

ii. Doubtful: A loan asset that has remained in the sub-standard category for a period of 12 months.

iii. Loss: A loan asset where loss has been identified but the amount has not been fully written off.

3.3 Provisions are made for NPAs as per the extant guidelines prescribed by the regulatory authorities, subject to minimum provisions as prescribed below:

I Substandard Assets: i. A general provision of 15%

ii. Additional provision of 10% (5% incase of Infrastructure Loan accounts) for exposures which are unsecured ab-initio (where realisable value of security is not more than 10 percent ab-initio)

II Doubtful Assets:

- Secured portion: i. Upto one year – 25%

ii. One to three years – 40%

iii. More than three years – 100%

- Unsecured portion 100%

III. Loss Assets: 100%

3.4 The sale of NPAs is accounted as per guidelines prescribed by RBI. If the sale is at a price below net book value, the shortfall is debited to the Profit and Loss Account, and in case of sale for a value higher than net book value, the excess provision is retained and utilized to meet the shortfall / loss on sale of other financial assets. Net book value is outstandings as reduced by specific provisions held and ECGC/CGTMSE claims received.

3.5 Advances are net of specific loan loss provisions including floating provisions, counter cyclical provisions, provision for diminution in fair value and interest sacrifice, unrealised interest, ECGC/CGTMSE claims received and bills rediscounted.

3.6 For restructured/rescheduled assets, provisions are made in accordance with the guidelines issued by RBI, which require that the difference between the fair value of the loan before and after restructuring is provided for, in addition to provision for NPAs. The provision for diminution in fair value and interest sacrifice, arising of the above, is reduced from advances.

3.7 In the case of loan accounts classified as NPAs, an account may be reclassified as a performing asset if it conforms to the guidelines prescribed by RBI.

3.8 Amounts recovered against debts written off in earlier years are recognised as revenue. 3.9 In addition to the specific provision on NPAs, general provisions are also made for standard assets. These provisions are reflected in Schedule 5 of the Balance Sheet under the head “Other Liabilities & Provisions – Others” and are not considered for arriving at Net NPAs.

4. FLOATING & COUNTER CYCLICAL PROVISIONS

A. Floating Provision: The Bank has a policy for creation and utilisation of floating provisions separately for advances, investments and general purpose. The quantum of floating provisions to be created is assessed at the end of each financial year. The floating provisions are utilised only for contingencies under extra ordinary circumstances specified in the policy with prior permission of Reserve Bank of India. B. Counter Cyclical Provision: In order to maintain a Provision Coverage Ratio (PCR) as prescribed by RBI, the Bank provides Counter Cyclical Provision to meet the gap, if any, between specific loan loss provisions, other provisions like floating provisions etc., and the minimum provision as per PCR.

5. PROVISION FOR COUNTRY EXPOSURE

In addition to the specific provisions held according to the asset classification status, provisions are held for individual country exposures (other than the home country). Countries are categorised into seven risk categories, namely, insignificant, low, moderate, high, very high, restricted and off-credit, and provisioning made as per extant RBI guidelines. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on such country exposures. The provision is reflected in Schedule 5 of the Balance Sheet under the “Other liabilities & Provisions – Others”.

6. FIXED ASSETS AND DEPRECIATION

166

6.1 Fixed assets have been accounted for at cost less accumulated depreciation, except certain land and buildings which are stated at revalued amount. 6.2 Premises include freehold as well as leasehold properties. The land and building allotted by Government/ Government agencies are capitalised based on letters of allotment / agreement / physical possession 6.3 Cost includes cost of purchase and all expenditure such as site preparation, installation costs and professional fees incurred on the asset before it is put to use. Subsequent expenditure incurred on assets put to use is capitalised only

when it increases the future benefits from such assets or their functioning capability.

6.4 Depreciation is provided for on Written Down Value Method (except revalued assets & computers which are provided at straight line method)at the rates fixed by the Bank as under:

ATM/computers including system software, UPS, ATM, Accesss locks and ACs 33.33%

Application computer software not forming an integral part of hardware 100%

Software part of hardware 60%

Premises residence and guest house 5%

Premises Office 10%

Furniture & Fixtures 10%

Vehicles 15%

Officer & Electrical Equipments 15 %

6.5 Depreciation on premises is provided on composite cost, where the value of land and building is not separately identifiable. 6.6 Depreciation on additions to fixed assets, excluding premises procured during the second half of the financial year has been provided at 50% of the normal depreciation. In respect of (i) Premises and (ii) application software, depreciation @ 100% of the normal depreciation is charged irrespective of the date of purchase. 6.7 Depreciation on leased assets is charged on Straight Line Method over the primary period of lease.

6.8 The Bank is having a Policy for revaluation of Bank’s Land and Building which includes appropriate frequency of revaluation, in consonance with Accounting Standard 10 issued by the Institute of Chartered Accountants of India

6.9 In the case of Land and Building, which have been revalued, the depreciation is provided on the revalued amount and the incremental depreciation attributable to the revalued amount is adjusted to the ‘Revaluation Reserve’.

6.10 Expenditure on miscellaneous civil works on the rented premises in respect of ATMs is being charged as “Revenue expenditure” to the Profit and Loss Account.

7. IMPAIRMENT OF FIXED ASSETS

7.1 In case of partial impairment of assets, the assets are restored to the normal condition and the expenditure incurred on such restoration is charged to revenue. The asset value and the cumulative depreciation are not altered. 7.2 In case of total impairment of assets, the assets are written off in the books. The scrap value of such assets is auctioned or disposed off as per the E-Waste disposing policy of the Bank.

8. EFFECTS OF CHANGES IN THE FOREIGN EXCHANGE RATE 8.1 All the monetary assets and liabilities in the form of balances with the Banks abroad, deposits in Foreign Currency, overnight deposits/investments, Foreign Currency Loan Accounts etc. and other obligations such as Letters of Credit including Letters of Comfort for Indian Operations, other than Forward Exchange Contracts are translated at the end of the year at the closing rates as per Accounting Standard 11 (Revised 2003) issued by the ICAI. 8.2 Income and Expenditure items are translated at the exchange rates prevailing on the date of transaction as per Accounting Standard 11( Revised 2003) issued by the ICAI.

8.3 Forward Exchange Contracts outstanding as on Balance Sheet date are revalued in accordance with guidelines of FEDAI. The difference between the revalued amount and the contracted amount is recognised as profit or loss, as the case may be.

9. EMPLOYEE BENEFITS

9.1 Short Term Employee Benefits: Short term employee benefits are accounted for at undiscounted amount as and when the liability becomes due. 9.2 Post Employment Benefits 9.2.1Defined Benefit Plan 1. The Bank operates a Provident Fund scheme. All eligible employees who joined the bank on or before 31st March,

167

2010 and not opted for pension benefits are entitled to receive benefits under the Bank’s Provident Fund Scheme. The Bank contributes monthly at a determined rate (currently 10% of employee’s basic pay plus eligible allowance). These contributions are remitted to a trust established for this purpose and are charged to Profit and Loss Account. 2. The Bank operates gratuity and pension schemes which are defined benefit plans. 3. The Bank provides for gratuity to all eligible employees. The benefit is in the form of lump sum payments to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs upon completion of five years of service. The bank makes annual contributions to a fund administered by trustees for the deficit in plan assets based on an independent external actuarial valuation carried out annually. 4. The Bank provides for pension to all eligible employees. The benefit is in the form of monthly payments as per rules and regular payments are made to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs at different stages as per the rules. The pension liability is reckoned based on an independent actuarial valuation carried out annually. 5. The cost of providing defined benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains/ losses are recognized in the statement of Profit and Loss Account. 9.2.2 Defined Contribution Plan The Bank operates a new pension scheme(NPS) for all officers/ employees joining the bank on or after 1st April, 2010, which is a defined contribution plan, such new joinees not being entitled to become members of the existing Pension Scheme. Pending finalization of the detailed scheme, the employees covered under the scheme contribute 10% of their basic pay plus dearness allowance to the scheme together with a matching contribution from the Bank. These contributions are retained as savings deposits in the Bank and earn interest at the same rate as that is applicable to other savings bank accounts. The Bank recognizes such annual contributions and interest as an expense in the year to which they relate. 9.2.3Other Long Term Employee benefits All eligible employees of the Bank are entitled for leave encashment, sick leave, silver jubilee award, leave travel concession, resettlement expenses. The costs of such long term employee benefits are internally funded by the Bank. The cost of providing other long term benefits is determined using the projected unit credit

method with actuarial valuations being carried out at each balance sheet date.

9.3 Consequent on the re-opening of Pension option to employees and enhancement in Gratuity Limit due to amendment in the Payment of Gratuity Act, the Bank has opted to amortize the incremental liability, as per RBI Circular, over a period of five years (subject to a minimum of 1/5th every year) beginning with the financial year ending 31st March 2011.

10. TAXES ON INCOME

10.1 Income tax expense is the aggregate amount of current tax and deferred tax. Current taxes are determined in accordance with the provisions of tax laws prevailing in India. Deferred tax adjustments comprise of changes in the deferred tax assets or liabilities during the period and Deferred Tax is determined in terms of Accounting Standard-22 issued by ICAI

10.2 Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted prior to the balance sheet date. Deferred tax assets and liabilities are recognised on a prudent basis for future tax consequences of timing differences by adoption of Profit and Loss approach with their respective tax bases. The impact of changes in the deferred tax assets and liabilities is recognized in the profit and loss account.

10.3 Deferred tax assets are recognised at each reporting date, based upon management’s judgement as to whether realisation is considered reasonably certain. Deferred tax assets are recognized on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty that such deferred tax assets can be realised against future profits.

10.4 No withdrawal is made from the Special Reserve created and maintained under the provisions of section 36(1)(viii) of the Income Tax Act 1961

11. EARNING PER SHARE

11.1 The Bank reports basic and diluted earnings per share in accordance with AS 20 -‘Earnings per Share’ issued by the ICAI. Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of

168

equity shares outstanding for the year.

11.2 Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at year end.

12. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

12.1 In conformity with AS 29, “Provisions, Contingent Liabilities and Contingent Assets”, issued by the ICAI, the Bank recognises provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

12.2 No provision is recognised for i. any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or ii. any present obligation that arises from past events but is not recognised because a. it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or b. a reliable estimate of the amount of obligation cannot be made. Such obligations are recorded as Contingent Liabilities. These are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

12.3 Contingent Assets are not recognised in the financial statements.

13. SHARE ISSUE EXPENSES

Share issue expenses are charged to the Share Premium Account.

14. NET PROFIT:

The net profit disclosed in the Profit and Loss Account is after: (i) Provisions as per RBI guidelines for bad and doubtful Advances and Investments. (ii) Transfer to/from contingency funds. (iii) Provisions for taxes in accordance with the statutory requirements. (iv) Other usual and necessary provisions.

169

SCHEDULE – 18

NOTES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH 2013

1. CAPITAL (Amount in `̀̀̀ Crores)

Particulars 2012-13 2011-12

Basel II Basel I Basel II Basel I

(i) Capital to Risk Weighted Assets Ratio [CRAR] 11.79% 11.19% 12.55% 11.22%

(ii) Tier I Capital to Risk Weighted Assets Ratio 8.87% 8.41% 9.18% 8.17%

(iii) Tier II Capital to Risk Weighted Assets Ratio 2.92% 2.78% 3.37% 3.05%

(iv) Percentage of the share holding of the Govt. of India Nil Nil Nil Nil

(v) (vi) (vii)

AMOUNT RAISED BY ISSUE OF IPDI : TIER I CAPITAL The Bank has issued by way of private placement, Unsecured, Non-Convertible Innovative Perpetual Debt Instruments in the nature of promissory notes forming part of Tier I Capital of the face value of `10,00,000.00 each at par at the rates mentioned against them, interest payable annually; (i) Issued during the year 2007-08 @ 9.80% p.a. (ii) Issued during the year 2009-10 @ 9.10% p.a TOTAL IPDI BONDS

SUB-ORDINATE DEBT - TIER II CAPITAL

(a) Sub-ordinated debt – Lower Tier II Bonds: The Bank has issued by way of private placement, unsecured, sub-ordinate bonds of the face value of `10,00,000.00 each for cash at par at the rates mentioned against them, interest payable annually; (i) Issued during the year 2004-05 @ 7.10% p.a due on 01.05.2014 (ii)Issued during the year 2005-06 @ 7.45% p.a due on 01.05.2015 Total face value of Lower Tier II bonds outstanding (A)

(b) Sub-ordinated debt - Upper Tier-II Bonds: The Bank has issued by way of private placement unsecured, rated, redeemable, non-convertible upper Tier-II sub-ordinate debt bonds in the nature of promissory notes of the face value of `10,00,000.00 each for cash at par at the rates mentioned against them, interest payable annually and redeemable at par on the dates mentioned below; (i) Issued during the year 2006-07 @ 8.95% p.a. due on 15.11.2021 with a call option with prior approval of Reserve Bank of India after 10 years from the date of allotment. If the call option is not exercised by the bank after 10 years from the date of allotment, the Bond will carry a coupon rate of 9.45% p.a from 17-11-2016 for the remaining period of 5 years. (ii) Issued during the year 2007-08 @ 9.08% p.a due on 16-01-2023 with a call option at the end of 120 months with prior approval of Reserve Bank of India. If the call option is not exercised at the end of 120 months from the deemed date of allotment, the Step Up coupon rate will be 0.50% p.a for all subsequent years. Total face value of upper Tier II Bonds outstanding (B)

TOTAL SUBORDINATED DEBT: TIER II(A+B)

REVALUATION RESERVE Revaluation Reserve of Land and Buildings (See Note No 9) Considered at 45 % of `567.76 Crores ( Previous Year – `575.81 Crores) as per RBI Directives

2012-13 (`̀̀̀ in Cr)

160.00 100.00 260.00

175.00 250.00 425.00

300.00

340.00

640.00

1065.00

255.49

2011-12 (`̀̀̀ in Cr)

160.00 100.00 260.00

175.00 250.00 425.00

300.00

340.00

640.00

1065.00

259.11

170

2. INVESTMENTS

The Bank’s holding of total SLR securities in “Held to Maturity” Category (HTM) is 21.68% (previous year 23.62%) of DTL as on the last Friday of the second preceeding fortnight. The total investment in HTM category is equal to 85.42% (Previous year 89.51%) of its total investments and the excess of “Held to maturity” category investments over 25% of total investments comprises of SLR securities. The Bank’s holdings in Held to Maturity Category of investments are within the overall limits stipulated by RBI.

2.1 (Amount in `̀̀̀ Crores)

Particulars 2012-13 2011-12

(1) Value of Investments (i) Gross Value of Investments

(a) In India (b) Outside India

(ii) Provisions for Depreciation, NPIs and ARCIL Security Receipts

(a) In India (b) Outside India

(iii) Net Value of Investments (a) In India (b) Outside India

(2) Movement of Provisions held towards depreciation

on Investments. (i) Opening Balance (ii) Add: Provisions made during the year (iii) Less: Write-off/write-back of excess provisions during the year

(iv) Utilization of provision during the year for write off/Depreciation on securities transferred from AFS to HTM

(v) Closing Balance

16864.01 Nil

89.43 Nil

16774.58

Nil

53.41 36.02

Nil

Nil

89.43

14786.11 Nil

53.41 Nil

14732.70

Nil

21.59 43.23

Nil

11.41

53.41

2.2. Repo Transactions (in face value terms) (Amount in `̀̀̀ Crores)

Sl No

Particulars

Minimum

outstanding during the

year

Maximum

outstanding during the

year

Daily

average outstanding

during the

year

Outstandin

g as on March 31,

2013

1 Securities sold/earmarked under Repos* i) Government securities ii) Corporate debt securities

100.00

Nil

1500.00

Nil

232.69

Nil

Nil Nil

2 Securities purchased/earmarked under Reverse Repos*

i) Government securities ii) Corporate debt securities

180.00 Nil

700.00 Nil

7.64 Nil

700.00 Nil

(*done only with RBI under Liquidity Adjustment Facility)

171

2.3 NON-SLR INVESTMENTS PORTFOLIO

i) Issuer composition of Non-SLR Investments

(Amount in `̀̀̀ Crores)

Sl

No.

Issuer Amount Extent of

private placement

Extent of

below investment

grade

securities

Extent of

unrated securities

Extent of

unlisted securities

(1) (2) (3) (4) (5) (6) (7)

1 PSUs 44.17 44.17 0.00 0.00 0.00

2 FIs 92.63 52.39 29.34 0.00 29.34

3 Banks 174.81 59.21 0.00 0.00 0.00

4 Private Corporates 176.10 122.31 61.86 61.86 0.00

5 Subsidiaries / Joint Ventures / RRBs 18.89 0.00 0.00 0.00 0.00

6 Others 1893.06 1891.44 0.98 0.98 0.98

7 Less: Provision held towards depreciation, NPIs and ARCIL SRs

89.43 xxx xxx xxx Xxx

TOTAL 2310.23 2169.52 92.18 62.84 30.32

ii) Non-Performing Non-SLR Investments

(Amount in `̀̀̀ Crores)

PARTICULARS AMOUNT

Opening Balance 49.43

Additions during the year since 1st April 2012 34.49

Reductions during the above period 0.00

Closing Balance 83.92

Total Provisions held 81.19

2.4. Sale and Transfer to/from HTM Category

2.4.1 The Bank has not undertaken any sale of investments held under Held To Maturity category which needs

disclosure in terms of RBI circular No.DBOP.BP.BC 34/21.04.141/2010-11 dated 6th April 2010 wherein the Bank has to disclose the excess of book value over the market value for which provision is not made, excluding onetime transfer of security to/from HTM and pre-announced OMO auctions.

2.4.2 As per RBI guidelines, an amount of `19.86 crores (Previous year Nil) being the balance amount of Profit on Sale of securities [net of applicable taxes and Statutory Reserve] in “Held to Maturity” category has been transferred to Capital Reserve.

2.4.3 Income on Investments in Schedule 13 of Interest earned para II is net of amortization of premium on HTM

Investments `47.40 Crores (Previous Year `56.22 Crores).

172

3. DERIVATIVES

3.1 Forward Rate Agreement / Interest Rate Swap

(Amount in `̀̀̀ Crores)

Particulars 2012-13 2011-12

i) The notional principal of swap agreements Nil Nil

ii) Losses which would be incurred if counter parties failed to fulfill their obligations under the agreements.

Nil Nil

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

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

v) The fair value of the swap book Nil Nil

3.2 Exchange Traded Interest Rate Derivatives

(Amount in `̀̀̀ Crores)

Sl. No. Particulars Amount

1 Notional principal amount of exchange traded interest rate derivatives undertaken during the year (instrument wise)

Nil

2 Notional principal amount of exchange traded interest rate derivatives outstanding as on 31st March, 2013 (instrument wise)

Nil

3 Notional principal amount of exchange traded interest rate derivatives outstanding and not “highly effective” (instrument wise)

Nil

4 Mark-to Market value of exchange traded interest rate derivatives outstanding and not “highly effective” (instrument wise)

Nil

3.3 Disclosure on risk exposure in derivatives

3.3.1 Qualitative Disclosures Forward Contracts are the only derivatives held in the books of the Bank. The Bank enters into forward contracts with the customers and covers the resultant position in the inter bank market. The Bank also trades in Inter Bank forward contracts on its own with a view to derive profits. The Bank does not have any unhedged foreign exchange exposure other than the open overnight position. The Bank has put in place Board approved policy for monitoring various risks associated with the above mentioned transactions. The risks are managed by prescribing various limits and ensuring that the exposures are within the limits. Such limits are prescribed in the following areas:

a) Overnight Exposure Limits b) Daylight exposure Limits c) Aggregate and currency-wise gap Limits d) Stop Loss Limits e) VaR Limits f) Limit on Proprietary Trading g) Limit on Counter Party Bank

In terms of Board approved policy, the limits are monitored by Mid Office and discretionary power is vested with functionaries at various levels to ratify / approve the breaches, if any.

173

3.3.2 Quantitative Disclosures

(Amount in `̀̀̀ Crores)

SL.No. Particulars Currency Derivatives Interest rate

Derivatives

(i) Derivatives (Notional Principal Amount)

a) For hedging (Gross Forward Contracts) 10205.33 0.00

b) For trading 0.00 0.00

(ii) Marked to Market Positions (1)

a) Asset (+) 76.06 0.00

b) Liability (-) 0.00 0.00

(iii) Credit Exposure (2) 92.68 0.00

(iv) Likely impact of one percentage change in interest rate (100*PV01)

a) On hedging derivatives 0.00 0.00

b) On trading derivatives 0.00 0.00

(v) Maximum and Minimum of 100* PV01 observed during the year

a) On hedging 0.00 0.00

b) On trading 0.00 0.00

3.4. ASSET QUALITY 3.4.1 Non-Performing Assets (Amount in `̀̀̀ Crores)

Particulars 2012-13 2011-12

(i) Net NPAs to Net Advances (%) 2.69% 1.93%

(ii) Movement of NPAs (Gross) (a) Opening Balance (b) Additions during the year (c) Reductions during the year

(d) Closing balance

1502.62 1658.39 1080.38 2080.63

863.74

1310.59 671.71

1502.62

(iii) Movement of Net NPAs (a) Opening Balance (b) Additions during the year (c) Reductions during the year

(d) Closing balance

768.42

440.33* -

1208.75

467.88

300.54* -

768.42

(iv) Movement of provisions for NPAs (excluding provisions on standard assets)

(a) Opening Balance (b) Provisions made during the year (c) Write-off / write-back of excess provisions (d) Closing balance

734.20 412.55

(-) 274.87 871.88

395.88 503.75

(-) 165.43 734.20

* Only net figure of Addition and Reduction given. Notes:

(i) The Provision on NPAs is as per RBI guidelines. (ii) The Bank has a floating provision of Rs. 84.45 Crores as on 31st March,2013 (Previous year Rs. 84.45

Crores) over and above the amount required as per RBI guidelines on Income Recognition, Asset Classification and Provisioning of advances.

The Bank is holding a Counter Cyclical Provisioning Buffer of Rs 65 crores over and above required as per RBI guidelines on Income Recognition, Assets Classification and Provisioning of Advances.

174

3.4.2 PARTICULARS OF ACCOUNTS RESTRUCTURED

DISCLOSURE OF RESTRUCTURED ACCOUNTS

(Rs in Crore)

Sl.

No.

Type of R`estructuring Under CDR Mechanism Under SME Debt Restructuring

Mechanism Others Total

Asset Classification (Details) Standa

rd

Sub-Stand

ard

D

o

ub

tf

ul

Los

s

Total Stand

ard

Sub-

Stan

dard

Doubtfu

l

Loss Total Stand

ard

Sub-Stand

ard

Doub

tful Loss Total

Standar

d

Sub-Stand

ard

Doub

tful Loss

Tota

l

1

Restructured Accounts as on April 1 of the FY (opening figures*)

No. of Borrowers

61 2 - - 63 386 324 196 44 950

15,003

2,065 1,229 259 18,556 15,450 2,391 1,425 303

19,569

Amt. Outstanding

840.05

113.37

- -

953.42

224.9

9 3.38 3.40 0.66 232.43

1,410.92

41.10 31.00 2.29 1,485.31 2,475.96

157.85

34.40 2.95 2,671.16

Provision thereon

68.51 7.27 - - 75.78 0.63 0.08 0.02 - 0.73 14.20 0.10 0.14 - 14.44 83.34 7.45 0.16 -

90.95

2 Fresh restructuring during the year

No. of Borrowers

53 - - - 53 289 38 83 7 417

53,521

1,281 1,434 206 56,442 53,863 1,319 1,517 213

56,912

Amt. Outstanding

992.66 - - -

992.66

148.1

8 0.44 1.02 0.05 149.69

1,078.30

92.20 24.14 0.92 1,195.56 2,219.14 92.64 25.16 0.97 2,337.91

Provision thereon

83.26 - - - 83.26 0.96 - 0.02 - 0.98 19.24 16.80 - - 36.04 103.46 16.80 0.02 -

120.28

3

Upgradations to restructured standard category during the FY

No. of Borrowers

- - - - - - - - - - 278 (166) (112) - - 278 (166) (112) - -

Amt. Outstanding

- - - - - - - - - - 3.27 (2.55) (0.72) - 0.00 3.27 (2.55) (0.72) - 0.00

Provision thereon

- - - - - - - - - - - - - - - - - - - -

4

Restructured standard advances which cease to attract higher provisioning and / or additional risk weight at the end of the FY and hence need not be shown

No. of Borrowers

41 - - - 41 112 - - - 112 5,653 - - - 5,653 5,806 - - -

5,806

Amt. Outstanding

309.00 - - -

309.00

35.00 - - - 35.00

382.00

- - - 382.00 726.00 - - -

726.00

Provision thereon

11.00 - - - 11.00 - - - - - 3.00 - - - 3.00 14.00 - - -

14.00

175

DISCLOSURE OF RESTRUCTURED ACCOUNTS

(Rs in Crore)

Sl.No

.

Type of R`estructuring Under CDR Mechanism Under SME Debt Restructuring

Mechanism Others Total

Asset Classification (Details) Standa

rd

Sub-

Stand

ard

D

ou

b

tfu

l

L

os

s

Total Stand

ard

Sub-

Standar

d

Dou

btfu

l

Loss Total Stand

ard

Sub-

Stand

ard

Doubtful

Loss Total Standar

d

Sub-

Stand

ard

Doubtful

Loss Tota

l

as restructured standard advances at the beginning of the next FY

5 Downgradations of restructred accounts during the FY

No. of Borrowers

- - - - - - - - - - (193) 164 24 5 - (193) 164 24 5 -

Amt. Outstanding

- - - - - - - - - - (36.88

) 36.50 0.34 0.04 (0.00) (36.88) 36.50 0.34 0.04

(0.00)

Provision thereon

- - - - - - - - - - - - - - - - - - - -

6

Write-offs of restructured Accounts during the FY

No. of Borrowers

- - - - - - - - - - - - - 11 11 - - - 11 11

Amt. Outstanding

- - - - - - - - - - - - -

101.65

101.65 - - -

101.65

101.

65

Provision thereon

- - - - - - - - - - - - - - - - - - - -

7

Restructured Accounts as on March 31 of the FY (closing figures*)

No. of Borrowers

45 5 1 - 51 309 69 350 43 771

55,344

1,690 2,386 249 59,669 55,698 1,764 2,737 292

60,491

Amt. Outstanding

1,128.80

63.38 0.01

- 1,192.

20

300.4

5 1.39 3.91 0.21 305.96

1,537.81

154.6

0 44.70 1.88 1,738.98 2,967.06

219.3

7 48.61 2.09

3,237.13

Provision thereon

138.62 10.43 - -

149.05

1.11 0.01 0.01 0.00 1.14 22.35 7.65 0.01 0.00 30.01 162.08 18.09 0.03 0.00

180.20

*Excluding the figures of Standard Restructured Advances which do not attract higher provisioning or risk weight (if applicable)

176

3.4.2.1 Provision on Restructured Loan Assets

During the current year ended 31st March,2013, provision for diminution in fair value of Restructured Accounts irrespective of amounts have been individually calculated at all the branches and provision thereof made at Head Office. 3.4.3 Details of financial assets sold to Securitization/Reconstruction Company for Asset Reconstruction

(Amount in `̀̀̀ Crores) Particulars 2012-13 2011-12

a. No. of accounts 1 NIL

b. Aggregate Value (net of provisions) of accounts sold to SC/RC 15 NIL

c. Aggregate consideration 15 NIL

d. Additional consideration realized in respect of accounts transferred in earlier years

Nil 2.27

e. Aggregate gain/(loss) over net book value Nil 1.24

3.4.4 Details of non-performing financial assets purchased / sold

A. Details of non-performing financial assets purchased: (Amount in `̀̀̀ Crores)

Particulars 2012-13 2011-12

1. (a) No. of accounts purchased during the year Nil Nil

(b) Aggregate outstanding Nil Nil

2. (a) Of these, number of accounts restructured during the year Nil Nil

(b) Aggregate outstanding Nil Nil

C. Details of non-performing financial assets sold:

(Amount in `̀̀̀ Crores) Particulars 2012-13 2011-12

1. No. of Accounts Sold Nil Nil

2. Aggregate Outstanding Nil Nil

3. Aggregate Consideration Received Nil Nil

3.4.5 Provisions on Standard Assets

(Amount in `̀̀̀ Crores) Particulars As on

31.03.2013

As on

31.03.2012

Provisions towards Standard Assets 248.00 184.60

177

3.5. BUSINESS RATIOS:

Particulars 2012-13 2011-12

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 average working

funds* at the end of the year) v. Business (Deposits plus Advances) per employee (Rs. in Crores)

(Excluding Inter Bank deposits) vi. Profit per employee (Rs. in Crores)

9.50% 0.87% 2.05% 0.66%

9.55

0.04

9.23% 0.94% 1.93% 0.67%

8.81

0.04

* Monthly average of Total Assets as reported to RBI in Form X under section 27 of the Banking Regulation Act, 1949 during the 12 months of the financial year 2012-13.

3.6. ASSET LIABILITY MANAGEMENT

Maturity pattern of certain items of Assets and Liabilities: (Amount in `̀̀̀ Crores)

Maturity

Pattern

1

Day

2-7

Days

8-14

Days

15-

28

Days

29 Days and up

to 3

months

Over 3 months

and up

to 6

months

Over 6 months

and up

to 1

year

Over

1 year

and up to

3

years

Over

3

years and

up to

5

years

Over

5

years

Total

Deposits 54 610 1088 1545 4745 4565 9480 13849 8438 12595 56969

Loans and advances

405 736 929 366 3297 1844 3933 20863 5838 6721 44933

Investments 2 56 49 204 910 421 172 3107 3485 8459 16864

Borrowings 28 0 0 391 215 152 1122 1046 161 740 3854

Foreign Currency

Assets

91 48 38 96 177 459 6 18 0 1 935

Foreign Currency Liabilities

111 5 129 326 5 7 9 12 4 0 610

178

3.7. EXPOSURES

3.7.1 Exposure to Real Estate Sector (Amount in `̀̀̀ Crores)

Sl.N

o.

Category 2012-13 2011-12

(a)

(b)

Direct Exposure : (i) Residential Mortgages: (Lending fully secured by mortgages on residential property that is or will be occupied by the borrower or that is rented) Out of above, Individual housing loans upto `20 Lakhs – `2922.05 Crores. (ii) Commercial Real Estate: Lending secured by mortgages on commercial real estates (Office buildings, retail space, multi-purpose commercial premises, multi-family residential buildings, multi-tenanted commercial premises, industrial or warehouse space, hotels, land acquisition, development and construction etc,) including non-fund based limits (iii) Investments in Mortgage Backed Securities (MBS) and other securitised exposure:- a. Residential b. Commercial Real Estate (iv) Any other Direct Exposure

Indirect Exposure Fund based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs) TOTAL EXPOSURE TO REAL ESTATE SECTOR

4967.40

911.69

-- --

20.73

782.22

6682.04

4236.06

516.53

-- --

157.08

615.59

5525.26

179

3.7.2 Exposure to Capital Market

(Amount in `̀̀̀ Crores)

Sl.No. Particulars 2012-13 2011-12

(i) Direct investment in equity shares, convertible bonds, convertible debentures and units of equity-oriented mutual funds, the corpus of which is not exclusively invested in corporate debt;

54.90 57.20

(ii) Advances against shares / bonds / debentures or other securities or on clean basis to individuals for investment in shares (including IPOs / ESOPs), convertible bonds, convertible debentures, and units of equity-oriented mutual funds;

0.00 0.00

(iii) Advances for any other purposes where share or convertible bonds or convertible debentures or units of equity oriented mutual funds are taken as primary security;

0.14 0.00

(iv) Advances for any other purposes to the extent secured by the collateral security of shares or convertible bonds or convertible debentures or units of equity oriented mutual funds i.e. where the primary security other than shares / convertible bonds / convertible debentures / units of equity oriented mutual funds does not fully cover the advances:

0.10 5.81

(v) Secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market makers:

0.00 0.00

(vi) Loans sanctioned to corporates against the security of shares / bonds / debentures or other securities or on clean basis for meeting promoter’s contribution to the equity of new companies in anticipation of raising resources;

0.00 0.00

(vii) Bridge loans to companies against expected equity flows / issues;

0.00 0.00

(viii) Underwriting commitments taken up by the bank in respect of primary issue of shares or convertible bonds or convertible debentures or units of equity oriented mutual funds;

0.00 0.00

(ix) Financing to stockbrokers for margin trading; 0.00 0.00

(x) All exposures to Venture Capital Funds (both registered and unregistered)

52.82 53.60

Total Exposure to Capital Market (i + ii + iii + iv + v + vi + vii + viii + ix + x )

107.96

116.61

3.7. 3 RISK CATEGORY WISE COUNTRY EXPOSURE (Amount in `̀̀̀ Crores)

Risk Category Exposure (net) as

at 31st March’13

Provision held as at

31st March ‘13

Exposure (net) as

at 31st March’12

Provision held as at

31st March’12

Insignificant 3.42 Nil 3.99 Nil

Low 323.95 Nil 248.86 Nil

Moderate 107.37 Nil 36.74 Nil

High 0.44 Nil 3.90 Nil

Very High 0.07 Nil 13.53 Nil

Restricted 0.00 Nil 0.00 Nil

Off-credit 4.61 Nil 1.05 Nil

Total 439.86 Nil 308.07 Nil

180

3.7.4. DETAILS OF SINGLE BORROWER LIMIT (SBL), GROUP BORROWER LIMIT (GBL)

EXCEEDED BY THE BANK DURING THE YEAR 2012 - 13 (Amount in `̀̀̀ Crores)

Sl No

Name of Borrower

Single Borrower

Limit

Group Borrower Limit

Amount in excess of Prudential Norms

Amount in excess of Prudential Norms for

NBFC’s

N I L

• As per Prudential norms; I. 15% of the capital funds as on 31.03.2012, for a single Borrower works out to `725.51 crores and

40% for Group borrowers works out to `1934.69 crores. II. Additional 5% (`241.84 crores) of the capital funds as on 31.03.2012, for single Borrower

provided the additional credit exposure is on account of extension of credit to Infrastructure Projects.

III. Additional 10% (`483.67 crores) of the capital funds as on 31.03.2012, for Group borrowers provided the additional credit exposure is on account of extension of credit to Infrastructure Projects.

IV. Additional 10% (`483.67 crores) of the capital funds as on 31.03.2012, for Oil Companies who have been issued Oil bonds (which do not have SLR Status) by the Govt of India.

Exposure to NBFCs:

• As per Prudential Norms; I. 10% of the capital funds as on 31.03.2012, for single borrower (NBFC) works out to `483.67

crores. II. 15% of the capital funds as on 31.03.2012, for a single borrower (NBFC-AFC (Asset financing

Company)) works out to `725.51 crores. III. 20% of the capital funds as on 31.03.2012, on account of funds lent by NBFC – AFC to

infrastructure sector works out to `967.35 crores. The above statement is exclusive of Food Credit, which is outside the purview of prudential norms.

3.7.5 Unsecured Advances against collaterals like Rights, licences, authorizations etc charged to the Bank in

respect of projects (including infrastructure projects) financed by the Bank.

(Amount in `̀̀̀ Crores)

SL No. Details 2012-13

1 Total amount of advances for which intangible securities taken as collateral Nil

2 Estimated value of such intangible collaterals Nil

3 Estimated value of tangible security Nil

3.8 Penalties imposed by the Reserve Bank of India during the year 2012-13 - NIL

4. DISCLOSURE REQUIREMENTS AS PER ACCOUNTING STANDARDS The Bank has generally complied with all the applicable Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) read with the relevant guidelines of Reserve Bank of India. The following disclosures (not made elsewhere in the financial statements including Significant Accounting Policies and Notes on Accounts) are made hereunder in accordance with the provisions of the applicable mandatory Accounting Standards, issued by the Institute of Chartered Accountants of India. 4.1 Cash Flow Statements (AS 3 Revised)

In terms of Para 45 of the Standard, the amount of significant cash and cash equivalent balances held by the enterprise that are not available for use by it, are Rs Nil. (excluding balances required to be maintained for the purpose of Cash Reserve Ratio). 4.2 Net Profit or Loss for the period, prior period items and changes in Accounting Policies (AS- 5)

181

4.2.1 In terms of Accounting Standard 5 issued by the Institute of Chartered Accountants of India read with RBI guidelines, prior period items are

Other Prior Period Items - Expenditure - NIL Income – NIL. 4.2.2 The Bank during the year has changed its method of depreciation of Fixed Assets except revalued assets and computers, from Straight Line Method to Written Down Value Method w.e.f. 01.04.2012, and surplus amounting to `47.33 crores, arising from retrospective computation is accounted and disclosed under Other Incomes. This change in method of depreciation and consequently increase in tax expense (deferred tax) of `43.56 crores has resulted in increase in Net Profit for the year by `3.77 crores. Further, due to the change in method of depreciation, charge on account of depreciation for the year is lower by `12.28 crores and correspondingly increase in profit (Net of Tax) for the year to the extent of `8.30 crores. 4.3 Revenue Recognition (AS 9)

The revenue has been recognized in terms of AS 9 on Revenue recognition, the guidelines issued by Reserve Bank of India and the Accounting Policy of the Bank.

4.4 Employees’ Benefits – Accounting Standards 15 (Revised) 4.4.1 In terms of AS 15 (revised), Bank has made provision for the following Employee benefits for the year 2012-13 as per Actuarial valuation.

(Amount in `̀̀̀ Crores)

S. No. Benefits 2012-13 2011-12

1 Pension 71.82* 87.11*

2 Gratuity 54.16* 54.09*

3 Leave Encashment 21.10 19.53

4 Sick Leave -18.53 5.57

5 LFC / HTC 5.00 4.78

6 Silver Jubilee Award 1.61 0.82

7 Resettlement Expenses 0.85 1.53

8 TOTAL 136.01 173.43

*Includes 1/5th amortised portion of the incremental liability of `58.49 crores for pension and `74.69 crores for Gratuity for the year 31st March 2013. 4.4.2 Contributions made to the Retired Employee Medical Benefit Scheme, being at the sole discretion of the Management, is not recognized by the Management as a Long Term Employee Benefit and therefore no provision has been considered necessary for this liability on actuarial basis.

4.4.3 Defined Benefit Obligations

Change in the Present value of the Defined Benefit Obligation

(Amount in ` ` ` ` Crores)

2012-13 2012-13

Pension Plan Gratuity Plan

Opening Defined Benefit Obligation as at 1st April 2012 1098.45 425.68

Current Service Cost 83.59 57.26

Interest Cost 84.17 32.78

Actuarial Losses (Gains) -21.28 -0.51

Past Service Cost (Non Vested Benefit) 0.00 0.00

Past Service Cost (Vested Benefit) 0.00 0.00

Benefits Paid -92.69 -31.92

Closing Defined Benefit Obligation as at 31st March 2013 1152.24 483.29

Current Liability (within 12 months) 98.64 41.26

Non Current Liability 1053.60 442.03

182

Change in Plan Assets

(Amount in `̀̀̀ Crores)

Pension Plan Gratuity Plan

Opening Fair Value of Plan Assets as at 1st April 2012 1098.45 425.68

Diff. in opening Balance -41.80 8.90

Expected Return on Plan Assets 88.83 36.63

Contributions by Employer pertaining to previous year 0.00 0.00

Additional contribution made on 31.03.2013* 9.89 0.00

Benefits Paid -92.69 -31.92

Actuarial Gains (Losses) 29.44 4.78

Depreciation in assets 0.00 0.00

Appreciation in assets 0.00 0.00

Closing Fair Value of Plan assets as at 31st March 2013 1092.12 444.07 *Excluding Gratuity for Janata Deposit Collectors 0.14 Crores

taken separately in P&L Account. Reconciliation of present value of obligations and fair value of plan assets

(Amount in ` ` ` ` Crores)

Pension Plan Gratuity Plan

Present value of funded obligations as at 31-03-2013 1152.24 483.29

Fair Value of Plan assets as at 31-03-2013 1092.12 444.07

Deficit/(Surplus) 60.12 39.22

Unrecognized Past Service Cost 0.00 0.00

Amount not recognized as asset because of limit in paragraph 59(b) of AS 15 0.00 0.00

Net Liability (Asset) 60.12 39.22

Experience Adjustment on Plan Assets 29.44 4.78

Experience Adjustment on Plan Liabilities -21.28 -0.51

Net Cost Recognised in the Profit &Loss Account

(Amount in ` ` ` `

Crores)

Pension Plan Gratuity Plan

Current Service Cost 83.59 57.26

Interest Cost 84.17 32.78

Expected Return on Plan Assets -88.83 -36.63

Net Actuarial Losses/(Gains) recognised during the year -50.72 -5.29

Past Service Cost (Amortised) 0.00 0.00

Past Service Cost (Non Vested Benefits) Recognised 0.00 0.00

Past Service Cost (Vested Benefits) Recognised 0.00 0.00

Excess Provision in earlier years reversed 0.00 0.00

Total Costs of Defined Benefits Plans included in Schedule 16 (Payment to and Provisions for Employees) 28.21 48.12

Reconciliation of Expected Return and Actual Return on Plan (Amount in `̀̀̀ Crores)

Pension Plan Gratuity Plan

Expected Return on Plan Assets 8.75% 8.75%

Actuarial Gain/(Loss) on Plan Assets 29.44 4.78

Actual Return on Plan Assets 70.84 19.60

183

Reconciliation of Opening & Closing Net Liability (Asset) recognised in Balance Sheet

Opening Net Liability as on 1st April 2012 0.00 0.00

Expenses as recognized in P&L 28.21 48.12

Past Service cost (Amortised) 0.00 0.00

Employers Contribution 28.21 48.12

Net Liability / Asset recognized in Balance Sheet as at 31st March 2013 60.12 39.22

Principal Actuarial Assumptions

Particulars

Pension Plan Gratuity Plan

2012-13 2011-12 2012-13 2011-12

Discount Rate 8.25% 8.25% 8.25% 8.25%

Expected Rate of Return on Plan Assets 8.25% 8.75% 8.25% 8.75%

Salary Escalation 5.50% 5.00% 5.50% 5.00%

Any other Material assumptions(Attrition Rate) 1.00% - 1.00 % -

Particulars of Investments under Plan Assets of Gratuity and Pension Fund as on 31st March’13

(Amount in `̀̀̀ Crores)

Category of assets

Pension Fund Gratuity Fund Any other plan

Amount

% of Plan

Assets Amount

% of Plan

Assets Amount

% of Plan

Assets

Central Government Securities 191.79 17% 42.35 9% - -

State Government Securities 294.52 25% 52.86 11% - -

PSU Bonds 122.82 11% - - - -

Other Bonds - - - - - -

FDR/TDR of Banks 260.02 22% 128.34 26% - -

Special Deposits - - - - - -

Insurance Scheme 145.06 13% 128.68 26% - -

Bank A/c 134.97 12% 131.06 28% - -

Others (Mutual Fund etc) 3.06 - - - - -

Total 1152.24 100% 483.29 100% - -

Out of above, following Investments are made in State Bank Group (State Bank and its Subsidiaries /

Joint Ventures)

(Amount in `̀̀̀ Crores)

Pension Fund Gratuity Fund Any other plan

Category of assets Amount

% of Plan

Assets Amount

% of Plan

Assets Amount % of Plan Assets

Bonds 43.33 8% - - - -

Bank Deposits 117.30 21% 131.06 34% - -

FDR/TDR of Banks 261.20 46% 128.34 33% - -

Insurance Scheme 145.05 25% 128.68 33% - -

Others (Mutual Funds etc) 3.06 - - - - -

Total 569.94 100% 388.08 100%

184

OTHER LONG TERM BENEFITS

Particulars

Leave

Encashment Sick Leave LFC/HTC

Silver

Jubilee Award

Resettleme

nt Expenses

Opening Defined Benefit Obligation as at

1st April 2012

115.47 29.03 25.14

3.67 5.04

Current Service Cost 30.43 0.43 11.73 2.40 2.74

Interest Cost 8.56 0.51 1.72 0.28 0.39

Actuarial Losses/(Gains) -0.94 -19.47 -1.15 -1.23 -1.73

Past Service Cost (Non Vested Benefit) 0.00 0.00 0.00 0.00 0.00

Past Service Cost (Vested Benefit) 0.00 0.00 0.00 0.00 0.00

Benefits Paid -16.95 0.00 -7.30 -0.60 -0.21

Closing Defined Benefit Obligation as at 31st March 2013

136.57 10.50 30.14

4.52 6.65

Net Cost Recognised in the Profit & Loss Account (Amount in ` ` ` ̀ Crores))))

Reconciliation of Opening & Closing Net Liability/(Asset) recognised in Balance Sheet

Opening Net Liability as on 1st April 2012

115.47 29.03 25.14 3.67 5.04

Expenses as recognized in P&L -16.95 0.00 -7.30 -0.60 0.21

Employers Contribution/Benefit paid 16.95 0.00 7.30 0.60 -0.21

Net Liability/(Asset) recognised in Balance Sheet as at 31st March 2013.

136.57 10.50 30.14 4.52 6.65

Particulars

Leave

Encash

ment

Sick

Leave

LFC/

HTC

Silver

Jubilee

Award

Resettlement

Expenses

Current Service Cost 30.43 0.43 11.73 2.40 2.74

Interest Cost 8.56 0.51 1.72 0.28 0.39

Net Actuarial Losses/(Gains) recognised during the year -0.94 -19.47 -1.15 -1.23 -1.73

Past Service Cost (Non Vested Benefits) Recognised 0.00 0.00 0.00 0.00 0.00

Past Service Cost ( Vested Benefits) Recognised 0.00 0.00 0.00 0.00 0.00

Total Cost of Defined Benefits Plans included in Sch.16 (Payment to and provisions for Employees) 38.05 -18.53 12.30 1.45

1.40

185

Principal Actuarial Assumptions

Particulars Leave encashment

Sick leave

LFC/HTC Silver Jubilee

Award

Resettlement expenses

Discount Rate 8.25% 8.25% 8.25% 8.25% 8.25%

Salary Escalation 5.50% 5.50% 5.50% 5.50% 5.50%

Any other material assumption ( Attrition Rate)

1.00% 1.00% 1.00% 1.00% 1.00%

Other material assumptions Additional establishment cost on account of impending wage settlement from November 2012.

4.5 SEGMENT REPORTING – (AS-17) :

The following segments have been identified: I. Primary Segment (Business Segment) : Treasury Operations Corporate / Wholesale Banking Retail Banking II. The Geographic segment consists of only the Domestic segment as the Bank does not have any foreign branches. 4.5.1 The Bank has got two main business segments namely Treasury Operations and Banking Operations. Banking

Operations are further segmented to Corporate / Wholesale Banking and Retail Banking and there is no ‘Other Banking Operations’

4.5.2 PRICING OF INTER-SEGMENTAL TRANSFERS: Corporate / Wholesale banking and Retail Banking

Operations Segment are the primary resource mobilising units. The Treasury segment is a recipient of funds from these operations apart from resource mobilised by treasury segment from REPO, CBLO, Call Money, IBTM and Export credit refinance. The cost of funds mobilised by treasury from corporate / wholesale banking and retail banking is computed at the cost of deposits of Corporate / Wholesale Banking and Retail banking. Pricing of Inter Segmental transfer in Treasury is reduced from the operating profit of Treasury Segment and added to the Operating Profit of Corporate / Wholesale banking in the ratio of deposits allocated to these segments.

4.5.3 REVENUE: All income relating to Treasury Operations are considered under Treasury operations

segment. All interest as furnished by ITS Department and as certified by the Management for all borrowal accounts with exposures above `5crores are classified as Corporate/Wholesale Banking segment. The balance interest is treated as relating to retail banking segment. The other interest income/other income is allocated under Corporate/Wholesale and Retail Banking segments in the ratio of total income of these segments (excluding other interest income/other income and interest segment revenue).

4.5.4 ALLOCATION OF EXPENSES: Expenses incurred at Corporate Centre establishment directly

attributable to Treasury Operations are allocated accordingly. As regards Corporate/Wholesale and retail banking segment interest paid on deposits is segregated to these segments in the ratio of deposits to these segments (deposits are allocated on the basis of outstanding advances pertaining to these segments). Employees’ expenses are allocated to the Treasury segment in proportion to the number of Employees of that segment to the total employees of the Bank. Other interest paid, provisions relating to employees and other operative expenditure for Corporate/Wholesale and Retail Banking segment are allocated based on the income earned by these segments (excluding inter segmental revenue). Interest paid on Tier I/Tier II/Subordinated bonds are classified as ‘Unallocated’.

186

4.5.5 SEGMENT ASSETS: All assets which are directly attributable to treasury operations are considered for Treasury Operations Segment. All outstandings in advance accounts for borrowers with exposures above `5crores as furnished by ITS Department and as certified by the Management is considered as assets pertaining to Corporate/Wholesale Banking segment. Other outstandings in advances segments is shown as pertaining to Retail Banking Segment. All other assets are segregated and added to the segment advances pertaining to Corporate/Wholesale and Retail Banking segment in the ratio of outstanding balances of advances in these segments.

4.5.6 SEGMENT LIABILITIES: All liabilities which are directly attributable to Treasury Operations segment

are allocated accordingly. Other deposits are allocated and segregated for Corporate/Wholesale segment in the ratio of outstanding balances of advances for the respective segments. With regard to other liabilities, provisions and contingencies, the allocation to Corporate/Wholesale and Retail Banking segments are made on the basis of the outstanding balances of advances under these segments. Tier I/Tier II/Subordinated bonds are classified as ‘Unallocated’.

4.5.7 PART A : BUSINESS SEGMENT (Amount in `̀̀̀ Crores)

BUSINESS SEGMENT

TREASURY CORPORATE/

WHOLESALE BANKING

RETAIL BANKING TOTAL

31.03.13 31.03.12 31.03.13 31.03.12 31.03.13 31.03.12 31.03.13 31.03.12

Revenue 1242 1053 3237 2779 2082 1763 6561 5595

Result -125 -136 824 679 746 630 1445 1173

Unallocated expenses 114 113

Operating profit 1331 1060

Income taxes & Provisions 915 691

Extraordinary profit/loss

Net profit 416 369

Other information

Segment assets 20231 16871 30944 29163 16058 14370 67233 60404

Unallocated assets

Total assets 67233 60404

Segment liabilities * 19832 16501 30337 28523 15739 14055 65908 59079

Unallocated liabilities 1325 1325

Total liabilities * 67233 60404

*Includes Capital Employed

PART B : GEOGRAPHICAL SEGMENTS

(Amount in `̀̀̀ Crores)

Domestic International Total

31.03.2013 31.03.2012 31.03.2013 31.03.2012 31.03.2013 31.03.2012

Revenue 6561 5595 0.00 0.00 6561 5595

Assets 67233 60404 0.00 0.00 67233 60404

187

4.6 RELATED PARTY DISCLOSURES (AS 18) 4.6.1 In accordance with AS 18 issued by the ICAI and the RBI guidelines, details relating to Related Party transactions are disclosed hereunder: (i) Key Management Personnel

Sl.

No

Name Designation Particulars Period Amount(`̀̀̀)

1 Smt Hamsini Menon Managing Director(Offg)

Salary and Perquisites

01.04.2012 to 31.07.2012

7,33,568.00

2 Sri Sharad Sharma Managing Director Salary and Perquisites

01.08.2012 to 31.03.2013

18,87,447.00

ii) Post–employment benefits for key Management personnel

Particulars Amount-`̀̀̀

Gratuity Nil

Leave Encashment Nil

Resettlement Expenses Nil

iii) The Credit exposure to the above key managerial personnel and their relatives during the year is NIL.

4.6.2 All the other related parties are State Controlled enterprises as defined in AS 18 issued by the Institute of Chartered Accountants of India as such transactions with them are not required to be disclosed. 4.7 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. 4.8 EARNINGS PER SHARE (AS 20)

Particulars 2012-13 2011-12

Net Profit for the year attributable to Equity shareholders (`in Crores)

416.10 369.15

Number of Equity shares 46799790 46799790

Weighted average number of Equity shares 46799790 46799790

Basic Earnings per share (in `) 88.91 78.88

Nominal Value per share (in `) 10 10

Diluted Earning per share (in `) 88.91 78.88

188

4.9 ACCOUNTING FOR TAXES ON INCOME (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 on the basis of timing difference by adoption of Profit and Loss Approach . Deferred Tax Asset (net of liabilities) of `115.75 Crores (Previous Year - `129.31 Crores) has been recognised as at March 31, 2013, the major components of which are as under:

(Amount in `̀̀̀ Crores)

DEFERRED TAX ASSETS 2012-13 2011-12

Depreciation on Fixed assets 0.00 31.87

Amortisation of premium on HTM category of Investments 38.43 33.06

Provision for Employee Benefits 43.34 39.91

Provision for Frauds 3.87 3.87

Others 57.12 46.53

Total 142.76 155.24

DEFERRED TAX LIABILITIES 2012-13 2011-12

Depreciation on Fixed Assets 10.11 0.00

Unamortized incremental payment of Gratuity / Pension Fund 16.88 25.93

Others 0.02 0.00

TOTAL 27.01 25.93

NET DEFERRED TAX ASSET 115.75 129.31

4.10 : INTANGIBLE ASSETS AS - 26

There are no intangible asset other than application and operating software, which are depreciated as per Accounting Policy of the Bank (i.e.Application Software at 100% and Operating Software at 33.33%).

4.11 IMPAIRMENT OF ASSETS AS - 28 There is no impairment in any of the assets of the Bank.

4.12 : PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS AS - 29

(a) PROVISIONS* (Amount in `̀̀̀ Crores)

Particulars Provisions as at the beginning of the year

Additions during the year

Amount used during the year

Unused amounts Reversed during the year

Provisions as at the close of the year

Remarks

Other Provisions including adhoc provision A. Provision for Interest sacrifice on restructured accounts B. Provision for Frauds

90.95

16.79

103.25

Nil

Nil Nil

Nil

Nil

194.20

16.79

* Provision for depreciation, impairment of assets and doubtful debts are adjusted to carrying amount of assets and these have not been included above in terms of para 7 of the Accounting Standard (AS 29). Provision against standard assets has already been disclosed in para 3.4.5 above.

189

(b) CONTINGENT LIABILITIES (Amount in `̀̀̀ Crores)

As on

31.03.2012

PARTICULARS As on

31.03.2013

0.01

1.30

238.78

1. Claims not acknowledged as debt a) Counter suits filed by the borrowers against whom the Bank has initiated legal action b) Cases filed in Consumer/Civil Courts for deficiency in services c) Any other claims against the bank not acknowledged as debts

0.01

1.26

296.64

2131.18 2.Guarantees issued on behalf of constituents 2387.35

4309.86 3.Acceptance,endorsements & other obligations* 4043.77

11288.68 4.Other items for which the Bank is contingently liable 10340.88

17969.81 TOTAL 17069.91

* Includes Letters of Comfort amounting to `̀̀̀ 938.51 Crores (Previous Year – Rs 853.47 Crores) (details

furnished in para 5.5 below)

5. ADDITIONAL DISCLOSURES

5.1 PROVISIONS AND CONTINGENCIES 5.1.1 In terms of the Reserve Bank of India guidelines, the following additional disclosures have been made. (Amount in `̀̀̀ Crores)

Particulars 2012-13 2011-12

Break up of “Provisions and Contingencies” shown under the head Expenditure in the Profit and Loss Account:

i. Provisions made towards NPAs 412.77 503.75

ii. Provision for depreciation on investments transferred from AFS to HTM category

0.00 43.23

iii. Provision for depreciation on investments /NPI / ARCIL SRs

36.03 0.00

iv. Provision for income tax (Net of deferred tax and after reversal of excess provision of earlier years)

278.58 87.80

v. Provision for Wealth Tax 0.40 0.35

vi. Provision for Fringe Benefit Tax of earlier years 0.00 0.87

vii. Provision for Standard Assets 63.40 46.13

viii. Provision for frauds 0.00 0.00

ix. Provision for wage revision 31.00 0.00

x. Provision for Interest Sacrifice on Restructured Advances 92.74 5.23

xi Provision for loss in Present Value on Debt Relief 0.00 0.00

xii Write back of floating Provision 0.00 0.00

Xiii Miscellaneous provisions 0.01 3.11

Xv Provision for Gratuity 0.00 0.00

Total 914.93 690.47

Notes: Provision for income tax for the year is arrived at after consideration of past assessments, decisions of the appellate authorities and advice of counsels. In the opinion of the management, no provision is required in respect of the earlier years.

190

5.2 FLOATING PROVISIONS: (Amount in `̀̀̀ Crores)

Particulars 2012-13 2011-12

(a) Opening balance in the floating provisions account 84.45 84.45

(b) The quantum of floating provisions made in the accounting year 0.00 0.00

(c) Amount of draw down made during the accounting year 0.00 0.00

(d) Closing balance in the floating provisions account 84.45 84.45

Note: The above provision has been deducted from ‘Loans and Advances’ as per RBI guidelines.

5.3 DRAW DOWN FROM RESERVES: NIL.

5.4 DISCLOSURE OF COMPLAINTS

A. CUSTOMER COMPLAINTS:

( a ) No. of complaints pending at the beginning of the year 145

( b ) No. of complaints received during the year 19055

( c ) No. of complaints redressed during the year 19082

( d ) No. of complaints pending at the end of the year 118

B. AWARDS PASSED BY THE BANKING OMBUDSMAN:

( a ) No. of unimplemented Awards at the beginning of the year Nil

( b ) No. of Awards passed by the Banking Ombudsmen during the year Nil

( c ) No. of Awards implemented during the year Nil

( d ) No. of unimplemented Awards at the end of the year Nil

5.5 DISCLOSURE OF LETTERS OF COMFORT (LOCs) ISSUED BY THE BANK: The position of Letters of Comfort issued by the Bank during the year and outstanding Letters of Comfort as at the end of the year is given hereunder:

LOCs issued during the year 2012 – 13 LOCs outstanding as on 31.03.2013

Nos Value

(`̀̀̀ in Crores)

Nos Value

(`̀̀̀ in Crores)

1177 2,936.60 515 938.51

Out of the above, Letters of Comfort issued in respect of financing arrangements from Overseas Banks for availment of Trade Credits (Buyers Credit) and their Currency wise outstanding, is as under:

Particulars Currency Wise outstanding as on 31.03.2013

USD EURO GBP YEN Rupee

equivalent in Crores

State Bank of India & Associates

23141676.28 266514.93 17000 15200000 129.49

Other Banks 134738100.54 1260234.35 0 0 740.16

Total Obligation in Foreign currency

157879776.82 1526749.28 17000 15200000 869.65

Conversion at FEDAI Spot rates as on 31.3.2013

54.2850 69.4950 82.2275 0.576800

Rupee Equivalent as on 31.3.2013 (Rs in crores

856.90 11.73 0.14 0.88 869.65

191

5.6 PROVISION COVERAGE RATIO: The Provision to Gross NPA of the Bank as on 31st March 2013 is 60.10% ( Previous Year – 65.22%) 5.7 BANCASSURANCE BUSINESS :

During the financial year 2012 -13, the Bank has earned a sum of `8.95 Crores (Previous Year – `8.77 Crores) as fees and remuneration from Bancassurance business. The details of the fees / remuneration earned are as under: 1. Income from SBI life business `6.90 Crores (Previous Year – `6.48 Crores) 2.Income from General Insurance business `0.86 Crores (Previous Year – `1.67 Crores) 3. Others (SBI Cards, SBI Mutual Funds) `1.19 Crores (Previous Year –`0.62 Crores) 5.8 CONCENTRATION OF DEPOSITS, ADVANCES, EXPOSURES AND NPAS

5.8.1 Concentration of Deposits

(Amount in `̀̀̀ Crores)

Total Deposits of twenty largest depositors 4844.54

Percentage of Deposits of twenty largest depositors to Total Deposits of the bank 8.50%

5.8.2 Concentration of Advances*

(Amount in `̀̀̀ Crores)

Total Advances to twenty largest borrowers 8751.47

Percentage of Advances to twenty largest borrowers to Total Advances of the bank 16.69%

*Advances computed as per definition of Credit Exposure including derivatives furnished in RBI Master Circular on Exposure Norms DBOD.BP.BC No.16/21.04.018./2011-12 dated July 1, 2011 5.8.3 Concentration of Exposures** (Amount in `̀̀̀ Crores)

Total Exposure to twenty largest borrowers / customers

8761.52

Percentage of Exposures to twenty largest borrowers/customers to Total Exposure of the bank on borrowers/customers

16.71%

**Exposures should be computed based on credit and investment exposure as prescribed in RBI Master Circular on Exposure Norms DBOD.No.Dir.BC.07/13.03.00/2011-12 dated July 1, 2011. 5.8.4 Concentration of NPAs

Total Exposure to top four NPA accounts Amount in ` ` ` ` Crores

As on 31.03.2013 As on 31.03.2012

TOTAL 355.47 274.21

5.9 Sector-wise NPAs (Amount in `̀̀̀ Crores) Sl. No. Sector

Percentage of NPAs to Total Advances in that sector

NPA Total

Advance

% to total

Advance

1 Agriculture & allied activities 587.67 5751.62 10.22

2 Industry (Micro & Small, Medium and Large) 1209.02 31346.93 3.86

3 Services 135.96 1431.87 9.50

4 Personal Loans 147.97 7450.12 1.99

Total 2080.62 45980.54 4.53

192

5.10 Movement of NPAs

Particulars (` ` ` ` in Crores)

Gross NPAs* as on 1st April 2012(Opening Balance) 1502.62

Additions (Fresh NPAs) during the year 1658.39

Sub-Total (A) 3161.01

Less:-

(i) Upgradations 564.58

(ii) Recoveries (Excluding recoveries made from upgraded accounts) 240.93

(iii)Write-offs 0.00

(iv) Technical write-offs 274.87

Sub-Total (B) 1080.38

Gross NPAs as on 31st March 2013 (Closing Balance) ( A - B) 2080.63

*Gross NPAs as per item 2 of Annex to DBOD Circular DBOD.BP.BC.No. 46/21.04.048/2009-10 dated

September 24, 2009.

5.11 Overseas Assets, NPAs and Revenues

Particulars (` in Crores)

Total Assets* 153.64

Total NPAs --

Total Revenue ** 0.05

* Represents balances held in Nostro Accounts in Foreign Currency. ** Interest on AIP and Short Term Investments. 5.12. Off-balance Sheet SPVs sponsored (which are required to be consolidated as per accounting norms)

Name of the SPV sponsored

Domestic Overseas

NIL NIL

5.13. Unamortised Pension and Gratuity Liabilities

During the year 2010-11, the Bank reopened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result of exercise of the said option by 2947 employees, the Bank incurred a liability of `58.49 crores in respect of the 2616 continuing employees. Further, during the year 2010-11, the limit of gratuity payable to the employees of the Banks was also enhanced pursuant to the amendment to the Payment of Gratuity Act, 1972, which resulted in increase in Gratuity liability of the Bank by `74.69 crores. In terms of the requirements of the Accounting Standard (AS) 15, Employee Benefits, the entire amount of `133.18 crores was required to be charged to the Profit and Loss Account for the year 2010-11. However, the Reserve Bank of India has issued a circular No.DBOD.BP.BC.80/21.04018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits –Prudential Regulatory Treatment, dated 9th February 2011. In accordance with the guidelines of the Reserve Bank of India, the Bank opted to amortise an amount of `133.18 crores over the period of five years. Accordingly, `26.64 crores (representing one-fifth of `133.18 crores) has been amortised and charged to the Profit & Loss Account for the year and the balance unamortised amount carried forward is `53.27 crores.. Had such circular not been issued by Reserve Bank of India, the profits of the Bank would have been higher by `26.64 crores.

5.14 Disclosures on Remuneration – NOT APPLICABLE

193

5.15 Disclosures relating to Securitisation

Annexure

S. No.

Paticulars Number Amount (In cr)

1. No of SPVs sponsored by the bank for securitisation transactions* Nil Nil

2. Total amount of securitised assets as per books of the SPVs sponsored by the bank

Nil Nil

3. Total amount of exposures retained by the bank to comply with MRR as on the date of balance sheet

a) Off-balance sheet exposures Nil Nil

First loss Nil Nil

Others Nil Nil

b) On-balance sheet exposures Nil Nil

First loss Nil Nil

Others Nil Nil

4. Amount of exposures to securitisation transactions other than MRR

a) Off-balance sheet exposures

i) Exposure to own securitizations Nil Nil

First loss Nil Nil

Loss Nil Nil

ii) Exposure to third party securitisations Nil Nil

First loss Nil Nil

Others Nil Nil

b) On-balance sheet exposures

i) Exposure to own securitizations Nil Nil

First loss Nil Nil

Others Nil Nil

ii) Exposure to third party securitizations Nil Nil

First loss Nil Nil

Others Nil Nil

*Only the SPVs relating to outstanding securitisation transactions may be reported here.

6. TAX LIABILITIES: 6.1 Amount of Provisions towards taxes made during the year:

(Amount in `̀̀̀ Crores)

Particulars 2012-13 2011-12

Provision for Income Tax net of Deferred Tax and after reversal of excess provisions of earlier years.

278.58 87.80

Provision for Fringe Benefit Tax of earlier years 0.00 0.87

Provision for Wealth Tax 0.40 0.35

6.2 The disputed Income tax demands as at 31st March, 2013 amounting to `296.58 crores ( Previous Year – `238.42 crores) out of which `248.96 crores ( Previous Year – `223.03 crores) has been paid / adjusted by the Income Tax Dept against refund orders. The Bank has received favourable decisions for appeal petitions filed before various Appellate Authorities regarding demands raised disclosed in the Contingent Liability amounting to `232.62 Crores. Accordingly claims/demands to the extent of `232.62 crores no longer exist. Since the effect of the appellate orders has not been given by the Income Tax Department till date, the entire amount is shown as Contingent Liability.

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6.3 The Bank has considered the provisions of Section 115JB (MAT) and it is found that MAT is not applicable to the Bank for the current financial year since the TAX Computed under regular provision of Income Tax Act is higher than the Tax Computed under section 115JB.The Bank had created MAT Credit amounting to `61.55 crores during the financial year 2010-11 which is eligible for reversal in subsequent financial years. An amount of `27.70 crores has been reversed till date and the residual balance of MAT Credit is `33.85 crores. 7. RECONCILIATION:

I. Inter Branch:

1. Inter Branch Reconciliation is an ongoing process and is under progress. In terms of RBI guidelines, the Banks are required to close inter-branch reconciliation within six months. The Inter Branch Reconciliation up to 31.12.2012 has been closed after reconciliation of all the debit entries.

2. A sum of `157.15 lacs was transferred to Profit & Loss Account in 2005-06 being the net credit balance in the inter branch accounts upto 31st March 1999 pending reconciliation, in terms of RBI letter No. DBS/CO.SMC.No.8809/22.09.001/2005-06 dated 19.12.2005. Out of this, a claim of `2.98 lacs was preferred and debited during the earlier years, leaving a balance of `154.17 lacs as on 31.03.2012. There was a claim in Inter Branch Drafts A/c for `2500.00 during the year 2012-13, thus reducing the amount of unreconciled entries in Inter Branch account up to 31.03.1999 to `154.14 lacs as on 31.03.2013. 3. The Bank has transferred all outstanding unreconciled credit entries from 01.04.1999 to 31.03.2005 to a blocked account as per RBI guidelines vide letter No BP/.BC/73/21.04.018/98 dated 27.07.1998. The balance in Blocked accounts in respect of both BCG & Drafts as on 31st December, 2012 is `18.87 crores. 4. The Core Inter Branch Account being maintained in CBS is reconciled automatically by the system as per yearly statement of affairs as on 31st March, 2013. II. Inter-Bank: Reconciliation of Accounts under SBI Agency Clearing Scheme and Associate Bank Settlement of Transactions (ABSOT) Scheme is an on-going process and is under progress.

III Others: The reconciliation of various accounts including National & Local Clearing Account, Branch System Suspense Account, FCNR Account, PCFC Account, Currency Transactions Account, ATM Transactions and IBIT Account is an on going process and is under progress. IV Impact of the above, if any, on the Profit & Loss Account and Balance Sheet is not material. 8. Other Fixed assets include assets jointly owned by the Bank, State Bank of India and Other Associate Banks as on 31.03.2013 (Amount in `̀̀̀ Crores)

Original Cost Depreciation to date Net Block

93.14 90.76 2.38

Previous Year – `̀̀̀ 6.42 Crores

9. REVALUATION OF FIXED ASSETS

The Premises (Land & Building) of the Bank consisting of Land & Building were revalued on 01-04-2008 on the basis of reports of approved valuers and upward revision in value amounting to `607.97 crores was credited to Revaluation Reserve Account. The depreciation for the year on incremental value amounting to `8.04 crores is withdrawn from Revaluation Reserve, as such there is no impact on the profits for the year. The Revaluation Reserve as at 31st March 2013 stands at `567.76 crores (Previous Year `575.81 crores).

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10. SHARE HOLDING:

10.1 The shareholding of State Bank of India in the Bank’s Paid up Capital as at 31st March 2013 is 92.33 % (Previous year 92.33%). 10.2 EMPLOYEE STOCK OPTION: Nil

11. Advances shown in the Balance Sheet are net of provision for diminution in fair value, as such advances shown are less to the extent of `194.20 crores (Refer Accounting Policy No3.6 Schedule17). 12. The current Bipartite settlement between IBA & employees/officers union on wage has expired on 31.10.2012. IBA has advised the Bank to make provision towards any wage increase effective from 01.11.2012. Accordingly, the Bank has provided a sum of `31 crores towards wage revision, representing 15% of the current average salary and allowance per annum. 13. Investment includes Equity Shares having book value of `14.89 crores and Compulsory Convertible Debentures(CCD) of `13.50 crores against which allotment is yet to be made. Further the Bank has invested `8.50 crores in Equity shares of Kaveri Grameeena Bank at face value of `10 per share in order to acquire Vishvesharaya Grameeena Bank sponsored by Vijaya Bank and Chikmagalur-Kodagu Grameena Bank sponsored by Corporation Bank, however the relative Equity Shares from Kaveri Grameena Bank are yet to be issued. 14. With regard to disclosures relating to Micro, Small & Medium Enterprises under the Micro, Small & Medium Enterprises Development Act, 2006, there have been no reported cases of delayed payments or of interest payments due to delay in such payments to Micro, Small & Medium Enterprises.

15. The figures of the previous years have been regrouped/re-arranged, wherever considered necessary.

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DECLARATION We hereby declare and certify that relevant provisions of the Subsidiary Banks Act, Banking Regulation Act, Companies Act and the guidelines issued by the Government of India or the regulations or guidelines issued by Securities and Exchange Board of India, as the case may be and as applicable to the Issue, have been complied with and no statement made in this Preliminary Offer Document is contrary to the provisions of the Subsidiary Banks Act, Banking Regulation Act, Companies Act, the SEBI Act or rules or regulations made thereunder or guidelines issued, as the case may be. We certify that this Preliminary Offer Document contains all information specified under the ICDR Regulations and such other information as is material and appropriate to enable the investors to make a well informed decision as to investment in the proposed Issue and further certify that all the statements in this Preliminary Offer Document are true and correct. No. Name of Director Signature

1. Shri Pratip Chaudhuri Chairman

__________________ 2. Shri Sharad Sharma

Managing Director

__________________ 3. Smt. Madhumita Sarkar Deb

Director (RBI Nominee)

__________________ 4. Shri D. D. Maheshwari

Director (G.O.I. Nominee)

__________________ 5. Shri Rajeev Nandan Mehra

Director (SBI Nominee)

__________________ 6. Shri. K. Gururaj Acharya

Director (SBI Nominee)

___________________ 7. Shri K.N. Nayak

Director (SBI Nominee)

__________________ 8. Shri. Ramasubramanian S

Director (Share Holders Nominee)

__________________ 9. Shri Milind S Katti

Director (Workmen Employee)

__________________

10. Shri Gururaja Rao Director (Officer Employee)

__________________

Signed by our General Manager (Treasury) and Chief Financial Officer _________________________ Shri. V. Viswanathan

Signed by our Compliance Officer

________________ Shri. Giridhara Kathavate

Date: May 15, 2013 Place: Bangalore

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Head Office of our Bank

State Bank of Mysore

Mysore Bank Circle K.G. Road

Bangalore 560 254

Book Running Lead Managers

BOB Capital Markets Limited 3rd Floor, South Wing, UTI Tower, Gn Block,

Bandra Kurla Complex, Bandra East, Mumbai 400 051

SBI Capital Markets Limited 202, Maker Tower 'E',

Cuffe Parade Mumbai 400 005

Central Statutory Auditors

M/s. Bhasin Raghavan & Co. Chartered Accountants, FRN-000197N

F-48, Bhagat Singh Market, Near Gole Market New Delhi 110 001

M/s. K. P. Rao & Co. Chartered Accountants, FRN-003135S

"Poornima", 25, State Bank Road, Bangalore 560 001

M/s. B. L. Ajmera & Co. Chartered Accountants, FRN-001100C

Malji Chhogalal Trust Building, M. I. Road JAIPUR 302 001

M/s. M K P S & Associates Chartered Accountants, FRN-302014E

Block 'B', LBS Colony, Monalika Apartment, Old Station Road, Cuttack Road

Bhubaneswar 751 006

M/s. Maharaj N.R. Suresh and Co Chartered Accountants, FRN-001931S

9, II Lane, 11 Main Road, Trustpuram Chennai 600 024

M/s. Bubber Jindal & Co. Chartered Accountants, FRN-000399N

19-20, Gola Market, Darya Ganj, New Delhi 110 002

Syndicate Member

SBICAP Securities Limited Mafatlal Chambers, 2nd Floor

C Wing, N M Joshi Marg Lower Parel

Mumbai 400 013

Registrar to the Issue Public Issue Account Bank

Integrated Enterprises (India) Limited 2nd Floor, Kences Tower,

No.1Ramakrishna Street , North Usman Road, T. Nagar, Chennai 600 017

State Bank of Mysore Mysore Bank Circle

K.G. Road Bangalore 560 254

Legal Counsel to the Issue

ALMT Legal Advocates & Solicitors

#2, Lavelle Road Bangalore 560 001