indusind secretarial 2007 · of the companies act, 1956, consent of members of the bank be and is...

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Contents Page

Board of Directors ....................................... 2

Directors’ Report ......................................... 8

Management Discussion & Analysis .......... 11

Corporate Governance ............................... 18

Auditors’ Report .......................................... 29

Balance Sheet ............................................. 30

Profit & Loss Account ................................. 31

Schedules .................................................... 32

Principal Accounting Policies ..................... 38

Notes on Accounts ...................................... 41

Cash Flow Statement .................................. 55

Balance Sheet in US Dollars ..................... 56

Subsidiary – Directors’ Report,

Auditors’ Report and Accounts ................... 57

Branch Network ........................................... 60

Registered Office Corporate Office Retail Banking Division (Chennai)

2401, Gen. Thimmayya Road 701 Solitaire Corporate Park Sudarshan Building

(Cantonment) 167 Guru Hargovindji Marg Old No. 86, New No. 92

Pune - 411001 Chakala, Andheri (East) Chamiers Road

Mumbai - 400093 Chennai - 600018

Board of Directors

Mr. R. Seshasayee, Chairman

Dr. Ram Buxani

Mr. R. Sundararaman

Mrs. Kanchan Chitale

Mr. T. Anantha Narayanan

Dr. T. T. Ram Mohan

Mrs. Pallavi Shroff

Mr. Premchand Godha

Mr. Ajay Hinduja

Mr. S. C. Tripathi

Mr. Bhaskar Ghose, Managing Director

Mr. S. Nagarajan, Joint Managing Director

Company Secretary

Mr. Haresh Gajwani

Top Management

Mr. S. V. Zaregaonkar - Exec. Vice President - Finance Support Services & CFO

Mr. J. Moses Harding - Exec. Vice President & Head – Wholesale Banking

Mr. N. Suresh Pai - Exec. Vice President – Non-Finance Support Services

Mr. S. V. Parthasarathy - Exec. Vice President – Retail Banking

Auditors

M/s. S. R. Batliboi & Co.

Express Towers, 6th

Floor

Nariman Point, Mumbai - 400021

Solicitors

M/s. Crawford Bayley & Co.

Solicitors & Advocates

State Bank Building

NGN Vaidya Marg

Mumbai - 400023

Registrar & Share Transfer Agent

Intime Spectrum Registry Ltd.

C-13, Pannalal Silk Mills Compound

L.B.S. Marg, Bhandup (West)

Mumbai – 400078

Tel: 022 25963838

Fax: 022 25946969

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NOTICE OF 13TH ANNUAL GENERAL MEETING

NOTICE is hereby given that the Thirteenth Annual General Meeting of the Members of IndusInd Bank Limited will be held at Hotel Taj Blue Diamond, 11

Koregaon Road, Pune – 411001, India, on Tuesday, September 18, 2007, at 12.00 noon to transact the following business:

Ordinary Business:

1. To consider and adopt the Profit and Loss Account for the year ended March 31, 2007 and the Balance Sheet as at March 31, 2007 together with the

Reports of the Directors and Auditors thereon.

2. To declare Dividend for the year.

3. To appoint a Director in place of Dr. Ram Buxani, who retires by rotation and, being eligible, offers himself for re-appointment.

4. To appoint a Director in place of Mr. T. Anantha Narayanan, who retires by rotation and, being eligible, offers himself for re-appointment.

5. To appoint a Director in place of Mr. S. Nagarajan, who retires by rotation and, being eligible, offers himself for re-appointment.

6. To appoint M/s. M. P. Chitale & Co., Chartered Accountants, as Statutory Central Auditors for the Bank to hold office from the conclusion of this Annual

General Meeting until the conclusion of the next Annual General Meeting, and to authorise the Board of Directors to fix the remuneration of the Statutory

Auditors, and to appoint branch auditors in consultation with the Statutory Auditors and to fix their remuneration.

Special Business:

7. Appointment of Mr. Premchand Godha as Director.

To consider and, if thought fit, to pass with or without modification(s) the following resolution as an ordinary resolution:

“RESOLVED THAT Mr. Premchand Godha who was appointed Additional Director of the Bank on October 31, 2006 under Section 260 of the Companies

Act, 1956 and who holds office till the date of the 13th

Annual General Meeting, and in respect of whom the Bank has received a notice in writing proposing

his candidature for the office of the Director, in accordance with the provisions of Section 257 and all other applicable provisions, if any, of the Companies

Act, 1956, be and is hereby appointed as Director of the Bank liable to retire by rotation;

RESOLVED FURTHER THAT the Company Secretary be and is hereby authorised to file the required forms with the Registrar of Companies and to take

all necessary steps for giving effect to this resolution.”

8. Appointment of Mr. Ajay Hinduja as Director.


“RESOLVED THAT Mr. Ajay Hinduja who was appointed Additional Director of the Bank on October 31, 2006 under Section 260 of the Companies Act,

1956 and who holds office till the date of the 13

th

Annual General Meeting, and in respect of whom the Bank has received a notice in writing proposing his

candidature for the office of the Director, in accordance with the provisions of Section 257 and all other applicable provisions, if any, of the Companies Act,

1956, be and is hereby appointed as Director of the Bank liable to retire by rotation;



9. Appointment of Mr. S. C. Tripathi as Director.


“RESOLVED THAT Mr. S. C. Tripathi who was appointed Additional Director of the Bank on February 14, 2007 under Section 260 of the Companies Act,

1956 and who holds office till the date of the 13

th

Annual General Meeting, and in respect of whom the Bank has received a notice in writing proposing his

candidature for the office of the Director, in accordance with the provisions of Section 257 and all other applicable provisions, if any, of the Companies Act,

1956, be and is hereby appointed as Director of the Bank liable to retire by rotation;



10. Appointment of Mr. R. Seshasayee as Part-time Non-executive Chairman.


“RESOLVED THAT Mr. R. Seshasayee, who was appointed Additional Director on May 3, 2007 under Section 260 of the Companies Act, 1956 and subject

to the provisions of Sections 10A, 16 and 20 of the Banking Regulation Act, 1949, and who holds office till the date of the 13th

Annual General Meeting, and

in respect of whom the Bank has received a notice in writing proposing his candidature for the office of Director in accordance with the provisions of Section

257 and all other applicable provisions, if any, of the Companies Act, 1956, be and is hereby appointed as Director of the Bank, not liable to retire by

rotation;

RESOLVED FURTHER THAT pursuant to the approval of Reserve Bank of India (RBI) under the applicable provisions of the Banking Regulation Act, 1949,

the applicable provisions of the Companies Act, 1956, and as per the approval of the Board, consent of the members of the Bank be and is hereby

accorded for the appointment of Mr. R. Seshasayee as Part-time Non- executive Chairman of the Bank for a period of two years with effect from July 24,

2007 on the terms and conditions approved by RBI;

RESOLVED FURTHER THAT the Company Secretary be and is hereby authoriszed to file required forms with the Registrar of Companies and to take all

necessary steps for giving effect to this resolution.”

11. Appointment of Mr. Bhaskar Ghose as Managing Director.


“RESOLVED THAT subject to the approval of Reserve Bank of India under Section 35B of the Banking Regulation Act, 1949 and the applicable provisions

of the Companies Act, 1956, consent of members of the Bank be and is hereby accorded for the re-appointment of Mr. Bhaskar Ghose as Managing

Director of the Bank, not subject to retirement by rotation, for a period of two years with effect from June 16, 2007 on such terms and conditions as may be

approved by the Board of Directors and the Reserve Bank of India;

RESOLVED FURTHER THAT the Company Secretary be and is hereby authorised to file required forms with the Registrar of Companies and to take all


12. Appointment of Mr. S. Nagarajan as Joint Managing Director.


“RESOLVED THAT subject to the approval of Reserve Bank of India under Section 35B of the Banking Regulation Act, 1949 and the applicable provisions

of the Companies Act, 1956, consent of members of the Bank be and is hereby accorded for the re-appointment of Mr. S. Nagarajan as whole-time director

(designated as Joint Managing Director) of the Bank, for a period of two years with effect from October 28, 2007 on such terms and conditions as may be

approved by the Board of Directors and the Reserve Bank of India;

RESOLVED FURTHER THAT the Company Secretary be and is hereby authorised to file required forms with the Registrar of Companies and to take all


13. Alteration to Articles of Association (Part-time Non-executive Chairman).

To consider and, if thought fit, to pass with or without modification(s) the following resolution as a special resolution:

“RESOLVED THAT pursuant to the provisions of Sections 31 and other applicable provisions, if any, of the Companies Act, 1956 the existing Articles

102(1), 121(a)(1), 121(a)(3)(i), 121(a)(3)(ii), 121(a)(4), 121(b), 123A, 124 and 125 of the Articles of Association of the Bank be and are hereby altered by

deleting the same and substituting in place thereof, the following as new articles;

Quote

Article 102(1)

Subject to the provisions of the Act, a Managing Director or Managing Directors, who is / are in the whole-time employment of the Bank may be paid

remuneration either by way of a monthly payment and / or as per terms approved by Reserve Bank of India.

Article 121(a)(1)

The Directors may, from time to time, appoint or re-appoint one of their member to be the Part-time Non-executive Chairman for such period not exceeding

five years at any one time and may remove him and appoint another in his place.

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Article 121(a)(3)(i)

Deleted

Article 121(a)(3)(ii)

The Directors, subject to provisions of the Banking Regulation Act, 1949, may, from time to time, entrust to and confer upon the Chairman for the time being

such of the powers exercisable by law or under these presents by the Director, as they think fit except such as or by any law required to be exercised by

the Board of Directors and may confer such powers for such objects and purposes and upon such terms and conditions and with such restriction as they

think expedient and they may confer such powers either collaterally with or to the exclusion of or in substitution of all or any of the powers of the Directors

in that behalf and may from time to time revoke, withdraw, alter or vary all or any such powers.

Article 121(a)(4)

Deleted

Article 121(b)

The eligibility and appointment of the Chairman of the Bank will be governed by provisions of the Banking Regulation Act, 1949.

Chairman of the Bank may, by writing under his hand addressed to the Bank, resign his office.

Article 123A Whole-time Director

In addition to the Part-time Non-executive Chairman or Managing Director, the Bank may also appoint one or more Whole-time Directors by whatever

designation / name it may think fit. The management of whole of the affairs of the Bank shall be entrusted to the Managing Director and the Whole-time

Director(s) so appointed shall function under the supervision and control of the Managing Director.

Article 124

The bank shall not appoint or employ, or continue the appointment or employment of a person as its Part-time Non-Executive Chairman, Managing Director

or Whole-time Director who:-

(a) is an undischarged insolvent, or has at any time been adjudged as insolvent;

(b) suspends, or has, at any time suspended payment to his creditors, or makes or has at any time made a compromise with them; or

(c) is, or has, at any time been convicted by a Court of an offence involving moral turpitude.

Article 125

A Part-time Non-executive Chairman or Managing Director shall not, while he continues to hold that office, be subject to retirement by rotation, in

accordance with Article 112. If he ceases to hold the office of Director, he shall ipso facto and immediately cease to be Chairman / Managing Director, as

the case may be.

Unquote

14. Authority for further issue / placement of securities including ADRs GDRs, and Qualified Institutions Placement.


“RESOLVED THAT pursuant to the provisions of Section 81 and other applicable provisions, if any, of the Companies Act, 1956 (including any amendment

thereto or modification(s) or re-enactment(s) thereof) and in accordance with the provisions of the Memorandum and Articles of Association of the Bank, the

Listing Agreements entered into by the Bank with the respective Stock Exchanges where the equity shares of the Bank are listed, and subject to the

Regulations / Guidelines, if any, prescribed by Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), financial institutions and all

other concerned and relevant authorities from time to time, to the extent applicable and subject to such approvals, consents, permissions and sanctions of

the Government of India, SEBI, RBI and all other appropriate authorities, institutions or bodies and subject to such conditions and modifications as may be

prescribed by any of them while granting such approvals, consents, permissions and sanctions, and agreed to by the Board of Directors of the Bank

(hereinafter referred to as ‘the Board’, which term shall be deemed to include any Committee(s) constituted / to be constituted by the Board to exercise its

powers including the powers conferred by this Resolution) which the Board be and is hereby authorised to accept, if it thinks fit in the interest of the Bank,

the Board be and is hereby authorised, on behalf of the Bank, to create, issue, offer and / or allot, in the course of one or more public or private offerings

by way of public issue, rights issue, preferential allotment including Qualified Institutional Placement pursuant to Chapter XIII-A of the SEBI (Disclosure and

Investor Protection) Guidelines, 2000 as amended from time to time, or otherwise, in the domestic or one or more international markets, equity shares and

/ or equity shares through depository receipts and / or convertible bonds and / or securities convertible into equity shares at the option of the Bank and / or

the holder(s) of such securities, American Depository Receipts (ADRs) / Global Depository Receipts (GDRs) representing equity shares or convertible

securities and / or securities with or without detachable / non-detachable warrants with a right exercisable by the warrant-holder to subscribe for the equity

shares and / or warrants with an option exercisable by the warrant-holder to subscribe for equity shares, and / or any instrument or securities representing

either equity shares and / or convertible securities linked to equity shares (all of which are hereinafter collectively referred to as ‘securities’) subscribed in

Indian / foreign currency(ies) to investors (whether resident and / or non-resident and / or strategic investors and / or institutions or banks and / or

incorporated bodies and / or trustees or otherwise, and whether or not such investors are Members of the Bank) / Foreign Institutional Investors (FIIs) /

Mutual Funds / Pension Funds / Venture Capital Funds / Banks and such other persons or entities excluding promoters in case of preferential allotment,

whether or not such investors are members of the Bank, to all or any of them jointly or severally, through prospectus(es) and / or placement documents(s)

or offer letter(s) or circular(s) and / or on private placement basis for, (or which upon conversion of all securities so created, issued, offered and / or allotted

could give rise to the issue of) an aggregate face value of equity shares not exceeding 25 per cent of the Authorised Equity Share Capital of the Bank at

such time or times with or without voting rights in general meetings / class meetings, at such price or prices, at such interest or additional interest, at a

discount or at the premium to market price or prices and in such form and manner and on such terms and conditions or such modifications thereto,

including the number of Securities to be issued, face value, rate of interest, redemption period, manner of redemption, amount of premium on redemption

/ prepayment, number of equity shares, to be allotted on conversion / redemption / extinguishments of debt(s), exercise of rights attached to the warrants

and / or any other financial instrument, period of conversion, fixing of record date or book closure and all other related or incidental matters as the Board

may in its absolute discretion think fit and decide in according to the directives / guidelines issued by the appropriate authority(ies) and in consultation with

the Merchant Banker(s) and / or Lead Manager(s) and / or Underwriter(s) and / or Advisor(s) and / or such other person(s), but without requiring any further

approval or consent from the shareholders and also subject to the applicable guidelines for the time being in force;

RESOLVED FURTHER THAT, without prejudice to the generality of the above, the aforesaid issue of the securities may have all or any terms or

combinations of terms in accordance with prevalent market practice including but not limited to terms and conditions relating to payment of interest,

dividend, premium on redemption at the option of the Bank and / or holders of any securities, including terms for issue of additional equity shares or

variations of the price or period of conversion of securities into equity shares or issue of equity shares during the period of the securities or terms pertaining

to voting rights or option(s) for early redemption of securities;

RESOLVED FURTHER THAT, without prejudice to the generality of the above, the preferential allotment of such securities, the relevant date on the basis

of which the price of the resultant shares shall be determined, shall be thirty days prior to the date of the General Meeting in which this resolution is passed,

and that the allotment of such securities shall be made in the form of Qualified Institutional Placement to Qualified Institutional Buyers, in accordance with

the provisions of Chapter XIII-A of the SEBI (Disclosure and Investor Protection) Guidelines, 2000 as amended from time to time;

RESOLVED FURTHER THAT the Board be and is hereby authorised to enter into and execute all such agreements and arrangements with any Lead

Manager(s), Co-Lead Manager(s), Manager(s), Advisor(s), Underwriter(s), Guarantor(s), Depository(ies), Custodian(s) and all such agencies as may be

involved or concerned in such offerings of Securities and to remunerate all such agencies by way of commission, brokerage, fees or the like, and also to

seek the listing of such Securities in one or more Indian / International Stock Exchanges;

RESOLVED FURTHER THAT the Bank and / or any agencies or bodies authorised by the Board may issue depository receipts or certificates representing

the underlying equity shares in the capital of the Bank or such other securities in bearer, negotiable, or registered form with such features and attributes as

may be required and are prevalent in the Indian and / or International Capital Markets for the instruments of this nature and to provide for the tradability and

free transferability thereof as per market practices and regulations (including listing on one or more stock exchanges(s) in or outside India);

RESOLVED FURTHER THAT the Board be and is hereby authorised to create, issue, offer and allot such number of equity shares as may be required to

be issued and allotted upon conversion of any securities referred to above or as may be necessary in accordance with the terms of the offer, all such

shares ranking in all respects pari passu inter se and with the then existing equity shares of the Bank in all respects, save and except that such equity

shares or securities or instruments representing the same may be without voting rights, if permitted by law and / or, shall carry the right to receive pro rata

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dividend from the date of allotment, as may be decided by the Board, declared for the financial year in which the allotment of shares shall become effective;

RESOLVED FURTHER THAT the Board be and is hereby authorised to create such mortgage and / or charge on the immovable and movable assets of the

Company or on the whole or any part of the undertaking/s of the Company under Section 293(1)(a) of the Companies Act, 1956, in respect of any

Security(ies) issued by the Bank pursuant to this Resolution and in the event such Security(ies) is / are required to be secured and for that purpose to

accept such terms and conditions and to execute such documents and writings as the Board may consider necessary or proper;

RESOLVED FURTHER THAT, for the purpose of giving effect to any creation, issue, offer or allotment of equity shares or securities or instruments

representing the same, as described above, the Board be and is hereby authorised, on behalf of the Bank, to do all such acts, deeds, matters and things

as it may, in its absolute discretion, deem necessary or desirable for such purpose, including without limitation, entering into arrangements for managing,

underwriting, marketing, listing, trading, acting as depository, custodian, registrar, paying and conversion agent, trustee and to issue any offer document(s)

and sign all applications, filings, deeds, documents and writings and to pay any fees, commissions, remuneration, expenses relating thereto and with power

on behalf of the Bank to settle all questions, difficulties or doubts, that may arise in regard to such issue(s) or allotment(s) as it may, in its absolute

discretion deem fit;

RESOLVED FURTHER THAT the Board be and is hereby authorised to delegate all or any of the powers herein conferred to any Committee or any one or

more whole-time directors of the Bank;

RESOLVED FURTHER THAT this resolution shall be in vogue for a period of 12 months from the date passing by the members or till the next Annual

General Meeting whichever is less.”

15. Authority for Employee Stock Options Scheme (ESOS)


“RESOLVED THAT pursuant to the provisions of Section 81 and other applicable provisions, if any, of the Companies Act, 1956 (including any amendment

thereto or modification(s) or re-enactment(s) thereof) and in accordance with the provisions of the Memorandum and Articles of Association of the Bank, the

Listing Agreements entered into by the Bank with the respective Stock Exchanges where the equity shares of the Bank are listed and subject to the

Regulations / Guidelines, if any, prescribed by the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), financial institutions and all

other concerned and relevant authorities from time to time, to the extent applicable and subject to such approvals, consents, permissions and sanctions of

the Government of India, SEBI, RBI and all other appropriate authorities, institutions or bodies and subject to such conditions and modifications as may be

prescribed by any of them while granting such approvals, consents, permissions and sanctions, and agreed to by the Board of Directors of the Bank

(hereinafter referred to as ‘the Board’, which term shall be deemed to include any Committee(s) constituted / to be constituted by the Board to exercise its

powers including the powers conferred by this Resolution) which the Board be and is hereby authorised to accept, if it thinks fit in the interest of the Bank,

the Board be and is hereby authorised, on behalf of the Bank, to create, issue, offer and / or allot, to or for the benefit of such person or persons as are in

the employment of the Bank in such grade as may be decided by the Board, at any time, equity shares of the Bank, against exercise of options vested from

time to time, and / or warrants (whether attached to any security or not) with an option exercisable by the warrant holder to subscribe for equity shares /

equity linked securities, and / or bonds, debentures, preference shares or such other securities convertible into equity shares, at such price, in such

manner, during such period, in one or more tranches and on such terms and conditions as the Board of Directors may decide prior to the issue and offer

thereof, for, or which upon exercise or conversion could give rise to the issue of a number of equity shares not exceeding in the aggregate, 7% of the

issued equity capital of the Bank from time to time, on the date of the date(s) of the grant of options(s) under the IndusInd Bank Employees Stock Option

Scheme – 2007, hereinafter referred to as ‘ESOS-2007’;

RESOLVED FURTHER THAT the Board be and is hereby authorised to create, issue, offer and allot such number of equity shares as may be required to

be issued and allotted upon conversion of any securities referred to above or as may be necessary in accordance with the terms of the Scheme, all such

shares ranking in all respects pari passu inter se and with the then existing equity shares of the Bank in all respects, save and except that such equity

shares or securities or instruments representing the same may be without voting rights, if permitted by law and / or, shall carry the right to receive dividend,

as may be decided by the Board, declared for the financial year in which the allotment of shares shall become effective;

RESOLVED FURTHER THAT, for the purpose of giving effect to any creation, issue, offer or allotment of equity shares or securities or instruments

representing the same, as described above, the Board be and is hereby authorised, on behalf of the Bank, to do all such acts, deeds, matters and things

as it may, in its absolute discretion, deem necessary or desirable for such purpose, including without limitation, the entering into arrangements for

managing, underwriting, marketing, listing, trading, acting as depository, custodian, registrar, paying and conversion agent, trustee and to issue any offer

document(s) and sign all applications, filings, deeds, documents and writings and to pay any fees, commissions, remuneration, expenses relating thereto

and with power on behalf of the Bank to settle all questions, difficulties or doubts, that may arise in regard to such issue(s) or allotment(s) as it may, in its

absolute discretion deem fit, without being required to seek any further consent or approval of the Members of the Bank;

RESOLVED FURTHER THAT the Board be and is hereby authorised to vary or modify the terms of the Scheme, pursuant to and in accordance with any

rules, regulations, guidelines or directives that may be issued, from time to time, by any appropriate authority;

RESOLVED FURTHER THAT the Board be and is hereby authorised to delegate all or any of the powers herein conferred to any Committee of Directors

of the Bank.”

Notes:

1. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF / HERSELF AND

THE PROXY NEED NOT BE A MEMBER OF THE BANK. The proxy form should be lodged with the Bank at its Registered Office at least 48 hours before

the time of the meeting.

2. The relative Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956, in respect of the Special Businesses is annexed hereto.

3. All documents referred to in the Notice and Explanatory Statement are open for inspection at the Registered Office of the Bank during office hours on all

working days except public holidays between 11.00 a.m. and 1.00 p.m. upto the date of the Annual General Meeting (AGM).

4. The Register of Members and Share Transfer Books of the Bank will remain closed from September 4, 2007 to September 18, 2007 (both days inclusive)

in terms of the provisions of Section 154 of the Companies Act, 1956.

5. Members / proxies should bring the attendance slip duly filled in for attending the AGM.

6. A brief profile of the Directors retiring by rotation and eligible for re-appointment is furnished in the Report on Corporate Governance.

7. Members are requested to kindly bring their copies of the Annual Report to the AGM.

EXPLANATORY STATEMENT UNDER SECTION 173(2) OF THE COMPANIES ACT, 1956

Item No. 6

Although not required, the Explanatory Statement is being given in respect of Item No. 6 of the Notice.

M/s. S. R. Batliboi & Co., Chartered Accountants, who had been re-appointed as Auditors for the year 2006-07 by the members at the Twelfth Annual General

Meeting would be retiring at the conclusion of the forthcoming Annual General Meeting. They have been Statutory Auditors of the Bank for three consecutive

years.

The Board of Directors, on the recommendations of the Audit Committee of the Board, proposes to appoint M/s. M. P. Chitale & Co., Chartered Accountants, as

Statutory Auditors for the year 2007-08. The Bank has since received necessary approval from the Reserve Bank of India under Section 30(1A) of the Banking

Regulation Act, 1949 for the said appointment of M/s M. P. Chitale & Co., Chartered Accountants, as Statutory Auditors for the year 2007-08.

As required, M/s. M. P. Chitale & Co. have forwarded a certificate to the Bank stating that the appointment, if made, will be within the limit specified in sub-section

(1-B) of Section 224 of the Companies Act, 1956. Further, they have confirmed that they are not disqualified to be appointed as auditors under Section 226 of the

Companies Act, 1956 and are not holding any securities of the Company.

Members are requested to pass the resolution under Item No. 6 as an ordinary resolution.

None of the Directors of the Bank is in any way concerned or interested in the passing of the Resolution.

Item No. 7

Mr. Premchand Godha is a Chartered Accountant. Under his leadership, Ipca Laboratories Ltd. has made rapid progress as a leading public listed Indian

pharmaceutical company with a global presence. Mr. Godha is presently Managing Director of Ipca Laboratories Limited.

6

Mr. Premchand Godha was appointed Additional Director of the Bank under Section 260 of the Companies Act, 1956 on October 31, 2006 and he holds office

upto the date of the Annual General Meeting. He is eligible for appointment as Director of the Bank and the Bank has received a notice in writing under Section

257 of the Companies Act, 1956 from a member proposing his candidature for the office of Director.


None of the Directors of the Bank, other than Mr. Premchand Godha, is in any way concerned or interested in the passing of the Resolution.

Item No. 8

Mr. Ajay Hinduja holds a degree in Economics from the University of Geneva with specialisation in Finance. He has had varied experience in the international

banking arena, including as Director and Member of the Management Committee of Amas Bank (Switzerland) Ltd. since 1996. Mr. Ajay Hinduja has been on the

Board of Amas Bank (Switzerland) Ltd. since 2004.

Mr. Ajay Hinduja was appointed Additional Director of the Bank under Section 260 of the Companies Act, 1956 on October 31, 2006 and he holds office upto the

date of the Annual General Meeting. He is eligible for appointment as Director of the Bank and the Bank has received a notice in writing under Section 257 of the

Companies Act, 1956 from a member proposing his candidature for the office of Director.


None of the Directors of the Bank, other than Mr. Ajay Hinduja, is in any way concerned or interested in the passing of the Resolution.

Item No. 9

Mr. S. C. Tripathi, I.A.S. (Retd.) specializes in rural economy and cooperation. He has held important positions, including in the Finance and Industry sectors at

Chief Executive / Secretary level at the Central Government / State Government and in representative capacity at International levels. Mr. Tripathi retired as

Secretary, Ministry of Petroleum and Natural Gas, Government of India in December 2005.

Mr. S. C. Tripathi was appointed Additional Director of the Bank under Section 260 of the Companies Act, 1956 on February 14, 2007 and he holds office upto

the date of the Annual General Meeting. He is eligible for appointment as Director of the Bank and the Bank has received a notice in writing under Section 257

of the Companies Act, 1956 from a member proposing his candidature for the office of Director.


None of the Directors of the Bank, other than Mr. S. C. Tripathi, is in any way concerned or interested in the passing of the Resolution.

Item No. 10

Mr. R. Seshasayee, a Chartered Accountant, has been Managing Director of Ashok Leyland Ltd. since 1998. He had held Directorship of ICICI Ltd/ICICI Bank

Ltd. from May 1997 to October 2003. He also held the position of Chairman of the Audit Committee of the Board of ICICI Bank Ltd. during that tenure. Mr. R.

Seshasayee was also President of the Confederation of Indian Industry (CII) during 2006-2007.

Mr. R. Seshasayee was appointed Additional Director and Part-time Non-executive Chairman of the Bank under Section 260 of the Companies Act, 1956 and

subject to the provisions of Sections 10A, 16, and 20 of the Banking Regulation Act, 1949, and assumed charge on July 24, 2007 for a period of two years. He

holds office of Director upto the date of the Annual General Meeting. He is eligible for appointment as Director of the Bank and the Bank has received a notice

in writing under Section 257 of the Companies Act, 1956 from a member proposing his candidature for the office of Director.


None of the Directors of the Bank, other than Mr. R. Seshasayee, is in any way concerned or interested in the passing of the Resolution.

Item No. 11

Mr. Bhaskar Ghose was appointed as Managing Director of the Bank on June 16, 2001. The said appointment was approved by the shareholders in the Annual

General Meeting held on August 25, 2001.

Mr. Bhaskar Ghose was re-appointed on June 16, 2004 and approval for the same was granted by Reserve Bank of India vide letter DBOD No. 403/08.87.001/

2004-05 dated November 11, 2004. The shareholders of the Bank also approved the said appointment in the Annual General Meeting held on August 13, 2004.

It is now proposed to consider the re-appointment of Managing Director for a period of two years with effect from June 16, 2007 and make an application to

Reserve Bank of India for necessary approval as required under section 35B of the Banking Regulation Act, 1949.

Mr. Bhaskar Ghose, born in 1954, holds a Bachelors degree in Economics and has Masters degree in Business Management from Indian Institute of

Management, Calcutta. Before joining your Bank, Mr. Ghose served Bank of America for twelve years in various capacities, the last being as Vice President and

Head – Financial Institutions (1986-89). After leaving Bank of America, he moved to Banque Nationale de Paris for a brief period from April 1989 to May 1990.

Thereafter, he shifted to The Bank of New York as its Vice President & Chief Representative for India, Sri Lanka and Bangladesh. He joined your Bank on

October 3, 2000 as Executive Director and was subsequently promoted to Deputy Managing Director of the Bank in January 2001. He was inducted on the Board

of the Bank of April 3, 2001.

Mr. Ghose was elected, on November 10, 2006, as a member of the Governing Council of Indian Institute of Banking & Finance, a non-profit organisation

registered under Section 25 of the Companies Act, 1956.

Mr. Ghose is a professional banker with more than 30 years of rich experience. It will be advantageous for the Bank to avail of his stewardship in the field of

banking.

The aforesaid information is also being furnished as required under Clause 49 of the Listing Agreement.


None of the Directors of the Bank, other than Mr. Bhaskar Ghose, is in any way concerned or interested in the passing of the Resolution.

Item No. 12

Consequent upon merger of Ashok Leyland Finance Limited with the Bank, Mr. S. Nagarajan assumed charge as whole-time Director (designated as Joint

Managing Director) with effect from October 28, 2004. The said appointment was approved by Reserve Bank of India for a period of three years with effect from

the date of assuming charge.

As the approval granted by Reserve Bank of India for the appointment of Mr. S. Nagarajan as whole-time Director (designated as Joint Managing Director) is due

for expiry on October 27, 2007, it is now proposed to consider his re-appointment as whole-time Director (designated as Joint Managing Director) for a further

period of two years and to make an application to Reserve Bank of India for necessary approval as required under section 35B of the Banking Regulation Act,

1949.

Mr. S. Nagarajan, born in 1948, is a Commerce graduate, Chartered Accountant and Company Secretary. He joined Ashok Leyland Ltd. in 1973 as Junior

Executive and was with Ashok Leyland Ltd. till the year 1988. He had held managerial positions in Projects, Manufacturing, Audit, Finance and Marketing. He

joined Ashok Leyland Finance Ltd (then called Ashok Leasing and Hire Purchase) as Controller and Secretary, and assumed charge in 1990 of Ashok Leyland

Finance Ltd. as Managing Director.

The aforesaid information is also being furnished as required under Clause 49 of the Listing Agreement.


None of the Directors of the Bank, other than Mr. S. Nagarajan, is in any way concerned or interested in the passing of the Resolution.

Item No. 13

As per Article 121(a)(1) of the Articles of Association of your Bank, the Directors could, from time to time, appoint one of their member to be the Whole-time

Chairman and Chief Executive Officer.

Reserve Bank of India have directed that banks in private sector have a Part-time Chairman of the Board of Directors and a separate Chief Executive Officer /

Managing Director who would be responsible for the day-to-day management.

Alteration of the existing Articles 102(1), 121(a)(1), 121(a)(3)(i), 121(a)(3)(ii), 121(a)(4), 121(b), 123A, 124 and 125 of the Articles of Association of the Bank is

recommended to ensure compliance with the RBI directive.

Members are requested to pass the resolution under Item No. 13 as a special resolution.


7

Item No. 14

Resolution set out in Item No. 14 is an enabling Resolution conferring authority on the Board to cover all corporate requirements and contingencies to issue

securities of appropriate nature at opportune time, including the size, structure, price and timing of the issue(s) at the appropriate time(s). The Board will fix the

detailed terms of the final size of the offering, exact timing, and other related aspects after careful analysis and discussions with lead managers, prevailing

market conditions and in line with the extant guidelines issued by SEBI, RBI or any other statutory and / or other regulatory authorities either in India or overseas,

in this regard. The Resolution also enables the Bank to place equity capital with Qualified Institutional Buyers in accordance with ‘Guidelines for Qualified

Institutions Placement’ forming part of SEBI (Disclosure and Investor Protection) Guidelines 2000 as amended from time to time.

Section 81 of the Companies Act, 1956 provides, inter alia, that whenever it is proposed to increase the subscribed capital of a company by a further issue and

allotment of shares, such shares shall be offered to the existing shareholders of the company in the manner laid down in the said Section, unless the

shareholders decide otherwise in a general meeting. The listing agreement/s with the stock exchanges provide, inter alia, that a listed company in the first

instance should offer all the shares and debentures to be further issued for subscription pro rata to the equity shareholders unless the shareholders decide

otherwise in a general meeting.



Item No. 15

It is proposed that the Bank formulate an Employee Stock Option Scheme to allow employees to become owners of your Bank’s stock thereby becoming critically

involved in determining your Bank’s performance. It is proposed that Stock Options be issued which upon exercise or conversion could give rise to the issue of

a number of equity shares not exceeding in the aggregate, 7% of the issued equity capital of the Bank from time to time, on the date of the date(s) of the grant

of options(s) under the Scheme.

Section 81 of the Companies Act, 1956 provides, inter alia, that whenever it is proposed to increase the subscribed capital of a company by a further issue and

allotment of shares, such shares shall be offered to the existing shareholders of the company in the manner laid down in the said Section, unless the

shareholders decide otherwise in a general meeting. The listing agreements with the stock exchanges provide, inter alia, that a listed company in the first

instance should offer all the shares and debentures to be further issued for subscription pro rata to the equity shareholders unless the shareholders decide

otherwise in a general meeting.

The Compensation Committee (hereinafter referred to as “the Committee”) will administer the ESOS-2007 and formulate its detailed terms and conditions.

The salient features of the Employee Stock Option Scheme 2007 (ESOS-2007) as proposed by the Board are as under:

(a) Total number of options to be granted:

The maximum number of Options granted to any Eligible Employee in a financial year shall not, except with the approval of the Board of Directors of the

Bank, exceed 0.20% of the paid up equity shares of the Bank at the time of grant of Options and the aggregate of all such Options granted to the Eligible

Employees shall not exceed seven per cent (7%) of the aggregate of the number of paid up equity shares of the Bank, from time to time, on the date(s) of

grant of Option(s).

(b) Identification of classes of employees entitled to participate in the ESOS-2007:

All employees of the Bank as may be decided by the Committee, from time to time, would be entitled to participate in the ESOS-2007.

Employees may be granted stock options based on performance and such other criteria as the Committee may, in its absolute discretion decide.

The options granted to an employee will not be transferable to any person and shall not be pledged, hypothecated, mortgaged or otherwise alienated in any

manner.

(c) Requirements of vesting and period of vesting:

The stock options granted under ESOS-2007 shall vest within a maximum period of five years from the date of grant of options. Vesting of options would

be contingent upon the employee remaining in the services of the Bank for the vesting period. However, in special cases, the Committee shall have the

discretion to vest in an accelerated manner, all unvested options that have completed a vesting period of one year from the date of grant.

(d) Exercise Price:

The exercise price shall be as the Committee may, in its absolute discretion decide from time to time. Normally, this would be based on the latest available

closing price (on the stock exchange on which the shares of the Bank are listed), prior to the date of the meeting of the Committee in which the stock

options are granted. As the shares are listed on more than one stock exchange, the latest available closing price on the stock exchange where there is

highest trading volume on the said date shall be considered.

(e) Exercise Period and the process of exercise:

The exercise period would commence from the date of vesting and will expire on completion of five years from the date of vesting of options.

The options will be exercisable by the employees by a written application to the Bank to exercise the options in such manner, and on execution of such

documents, as may be prescribed by the Committee from time to time.

The options will lapse if not exercised within the specified exercise period. If the stock options expire or become unexercisable without having been

exercised in full and/or lapse on account of employee separation (for any reason) before vesting, such options, which were subject thereto, shall become

available for future Grants or sale under the ESOS-2007 unless the said plan stands terminated.

(f) Appraisal Process for determining the eligibility of the employees under ESOS-2007:

The appraisal process for determining the eligibility of the employee will be specified by the Committee and will be based on criteria such as profile,

seniority and length of service, performance record, merit of the employee, future potential contribution by the employee and / or such other criteria that

may be determined by the Committee at its sole discretion.

(g) Maximum number of options to be issued per employee and in aggregate:

The number of options that may be granted to employees in different Grades and Levels under the ESOS-2007 shall be determined by the Committee from

time to time within the aggregate limit.

(h) Disclosure and Accounting Policies:

The Bank shall comply with the disclosure and the accounting policies prescribed by concerned authorities.

(i) Method of option valuation:

To calculate the stock-based remuneration, the Bank shall use the Intrinsic Value method for valuation of the options granted. The difference between the

employee remuneration cost that shall have been recognized if it had used the fair value of the options, shall be disclosed in the Directors’ Report and also

the impact of this difference on profits and on EPS of the Bank shall also be disclosed in the Directors’ Report.

(j) Deduction of Tax:

The Bank shall have the right to recover from the employee any of the employee’s or employer’s tax obligations arising in connection with the stock options

or the shares acquired upon the exercise thereof. The Bank shall have no obligation to deliver shares or to release shares from an escrow established in

pursuance of an Agreement until the Bank’s tax deduction obligations, if any, have been satisfied by the Option Grantee.

As the ESOS-2007 provides for issue of shares to be offered to persons other than existing shareholders of the Bank, consent of the members is sought

pursuant to Section 81(1A) and all other applicable provisions, if any, of the Companies Act, 1956 and as per Clause 6 of the SEBI Guidelines.


None of the Directors of the Bank other than the Whole-time Directors is in any way concerned or interested in the passing of the Resolution.

By Order of the Board

Company Secretary

Pune, August 21, 2007

8

DIRECTORS’ REPORT

To all Members,

Your Directors have pleasure in presenting the Thirteenth Annual Report covering business and operations of your Bank,

together with the audited accounts for the year ended March 31, 2007.

Financial Performance

The financial performance for the year ended March 31, 2007 is summarised as under:

(Rs. in crores)

As on As on

March 31, 2007 March 31, 2006

Deposits 17644.80 15006.30

Advances 11084.20 9310.46

Operating Profit (before depreciation and provisions and contingencies) 205.67 223.29*

Net Profit 68.22 36.82

(* In terms of RBI guidelines, the Bank has reclassified amortization of premium in respect of HTM securities of Rs.40.12 crore and reported

this as a deduction from “Other Income” in the current year which was earlier reported under “Other Provisions and Contingencies”. Further,

Rs.37.27 crore has been reclassified in “Other Income” of corresponding prior period to conform to current period classification. Consequent

upon this, Operating Profit shown above stands reduced to the extent of such reclassification).

The business of your Bank grew during the year both in deposits and advances. During this year the focus of your Bank was

on improving the fee-based income for which various initiatives have been taken by your Bank.

The operating profit was, however, lower at Rs. 205.67 crores during the year under review as against Rs.223.29 crores in the

previous year mainly due to hardening of interest rates, the Bank’s decision not to undertake securitisation business (in the

previous year Bank booked a profit of Rs.41.84 crores on account of securitisation), and higher operating expenses on

expanded branch network which rose to 170 branches with the opening of 33 new branches.

Your Bank’s Net Profit after considering necessary provisions and contingencies and all expenses was higher at Rs.68.22

crores as against Rs. 36.82 crores previous year (an increase of 85.28%) on account of lower provisions and contingencies

in the current year as against previous year. The Return on Assets (ROA) for the year was 0.34% as compared to 0.22% in

the previous year.

Appropriations

Your Directors recommend appropriation of profit as under:

Rs. in crores

Operating Profit before Depreciation 205.67

Less: Depreciation on Fixed Assets 34.09

Less: Provisions and Contingencies 103.36

Net Profit 68.22

Less: Tax Adjustment for previous year 1.00

Amount available for Appropriation 67.22

Transfer to Statutory Reserve 17.05

Transfer to Capital Reserve 2.22

Proposed Dividend 19.19

Tax on Dividend 3.26

Balance carried over to Balance Sheet 25.50

Total Appropriations 67.22

Dividend

Your Directors recommend a dividend of 6% for the year ended March 31, 2007, i.e., Re. 0.60 per equity share of Rs.10/-

each. (Dividend for the year 2005-06 was Nil).

The Bank will be liable to pay tax on the amount of dividend paid, while it will be tax-free in the hands of the shareholders.

9

Future Outlook

During the year 2006-07 the Bank continued its endeavours for strengthening its network and infrastructure. There are

already indications of benefits arising from the improved infrastructure. In the ensuing year, while your Bank will endeavour to

retain its leadership position in vehicle finance (wherein higher yield loans are replacing lower yield ones), the thrust will be on

higher growth in other business segments like retail liabilities, other retail assets and SME sector.

The organizational efforts will be directed towards achieving high growth in current accounts and savings accounts for

meeting the objective of increasing the share of and broad basing the retail deposit franchise and thus reducing the overall

cost of deposits. This task will be accomplished by leveraging on the expanded branch network, the pan-India marketing set-

up, and through alternate channels like ATMs, Internet Banking, etc. This strengthened infrastructure will help in tapping the

opportunities for cross-selling and up-selling available with the expanded customer base. For optimal realization of this

potential, the Bank has introduced and has in pipeline various new products and services.

Your Bank’s focus on fee-based income has paid dividends. Moving ahead, the Bank plans to upscale non-interest income

through lucrative revenue streams like foreign exchange business, investment banking, high-end treasury products, distribution

of third-party products like mutual funds and insurance, international remittances, depository business, commodity business,

bullion operations, etc. For this purpose the Bank is looking at several avenues like alliances and tie-ups with other service

providers, setting up of subsidiaries, etc.

Share Capital

On March 30, 2007 your Bank issued 2,94,90,300 equity shares of Rs.10/- each in the form of Global Depository Receipts

(GDR), each representing one equity share, at a price of US$ 1.147 per GDR. Accordingly, as at March 31, 2007, the paid up

share capital and share premium account under reserves of the Bank stand increased by Rs. 29.49 crores and Rs. 116.47

crores respectively.

As at March 31, 2007, the equity capital of your Bank consisted of 31,98,07,936 shares of Rs.10 each.

Tier II Capital

Your Bank mobilised an amount of Rs.208.90 crores by issuance of 2089 unsecured, non-convertible, redeemable, non-

cumulative subordinated instruments of Rupees Ten lakhs each with maturity of 15 years on private placement basis. These

bonds qualify for classification as Upper - Tier II Capital.

Your Bank also mobilised an amount of Rs. 50 crores by issuance of 500 unsecured, redeemable, non-convertible subordinated

bonds of Rupees Ten lakhs each with maturity of 63 months on private placement basis. These bonds qualify for classification

as Tier II Capital.

Capital Adequacy

The Capital to Risk-weighted Assets Ratio (CRAR) of your Bank as at March 31, 2007 was comfortable at 12.54%, well above

the regulatory minimum of 9%. Of this, Tier I CRAR was 7.34%.

Rating

During the financial year 2006-07, your Bank received highest rating of “P1+” from CRISIL Ltd. for its short-term fixed deposit

programme (with a contracted maturity of upto 1 year) and highest rating of “A1+” from ICRA Ltd. for its certificate of deposits

programme of Rs.2000 crores.

Directors

Mr. R. J. Shahaney’s term of office as Non-executive Part-time Chairman of the Bank came to an end at the conclusion of the

12th

Annual General Meeting held on September 28, 2006 in accordance with the terms of approval granted by Reserve Bank

of India for his appointment. Your Directors wish to place on record their gratitude for the invaluable contribution made by Mr.

Shahaney during his tenure in the Bank, especially the vital role played by him in integrating the business of Ashok Leyland

Finance Ltd. with that of the Bank.

Mr. Premchand Godha was appointed as an Additional Director by the Board at its meeting held on October 31, 2006, and will

hold office as Additional Director upto the ensuing Annual General Meeting.

Mr. Ajay Hinduja was appointed as an Additional Director by the Board at its meeting held on October 31, 2006, and will hold

office as Additional Director upto the ensuing Annual General Meeting.

Mr. S. C. Tripathi was appointed as an Additional Director by the Board on February 14, 2007, and will hold office as

Additional Director upto the ensuing Annual General Meeting.

Mr. R. Seshasayee was appointed as an Additional Director by the Board of Directors on May 3, 2007 and, on receipt of the

requisite approval from Reserve Bank of India, has taken charge as Part-time Non-executive Chairman on July 24, 2007 for

a period of two years.

Your Bank has received notices from members pursuant to Section 257 of the Companies Act, 1956 signifying their intention

to propose the candidature of Mr. Premchand Godha, Mr. Ajay Hinduja, Mr. S. C. Tripathi and Mr. R. Seshasayee for the office

of Director. Brief resumes of Mr. Premchand Godha, Mr. Ajay Hinduja, Mr. S. C. Tripathi, and Mr. R. Seshasayee are furnished

in the report on Corporate Governance.

10

Auditors

M/s. S. R. Batliboi & Co., Chartered Accountants, the Statutory Central Auditors of the Bank, who have audited the accounts

of the Bank for the year 2006-07, will retire at the ensuing Annual General Meeting and are eligible for re-appointment.

Members are requested to approve their re-appointment and authorise the Board to fix their remuneration. The appointment

of the Statutory Auditors will however be subject to the approval of Reserve Bank of India. The members are further requested

to authorise the Board to appoint branch auditors of the Bank in consultation with the Statutory Auditors and to fix their

remuneration.

Auditors’ Report

M/s. S.R. Batliboi and Co., Chartered Accountants, the Statutory Central Auditors of the Bank, have audited the accounts of

the Bank for the year 2006-07 and their Report is annexed. There are no qualifications in the Auditors’ Report.

Statutory Disclosures

Information, wherever required under the Banking Regulation Act, 1949, or the Companies Act, 1956 as applicable to a

banking company, has been laid out in the schedules attached and forms part of the Balance Sheet and Profit and Loss

Account.

There are no material changes and commitments affecting the financial position of your Bank, which have occurred between

the end of the financial year 2006-07 to which the Balance Sheet relates and the date of this Report.

Considering the nature of activities as an entity in the financial services sector, the provisions of Section 217(1)(e) of the

Companies Act, 1956 relating to conservation of energy and technology absorption do not apply to your Bank. The Bank has

however, made optimum use of information technology in its operations.

The Bank had 2613 employees as on March 31, 2007. The information required under Section 217(2A) of the Companies Act,

1956 and the rules made thereunder, are given in the annexure appended hereto and forms part of this report. In terms of

section 219(1)(b)(iv) of the Companies Act, this Report and the Accounts are being sent to the shareholders excluding the

aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary

at the Registered Office of the Bank.

Corporate Governance

Your Bank continues to adopt best practices in corporate governance. A separate report on the status of implementation of

Corporate Governance, as required under Clause 49 (as applicable from January 1, 2006) of the Listing Agreements with the

relevant Stock Exchanges, is included in the section on ‘Corporate Governance’ which forms part of this report. M/s. Bhandari

& Associates, Company Secretaries, have certified that the conditions of Corporate Governance as stipulated in Clause 49 of

the Listing Agreements with the Stock Exchanges have been complied with by the Bank. A copy of their Certificate is also

attached to the Section on ‘Corporate Governance’.

Directors’ Responsibility Statement

Pursuant to the provisions of section 217(2AA) of the Companies Act, 1956, your Directors hereby certify and confirm that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper

explanation relating to material departures;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates

that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as at March 31, 2007

and of the profit of the Bank for the year ended on that date.

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance

with the provisions of the Companies Act, 1956 and Banking Regulation Act, 1949 for safeguarding the assets of the

Bank and for preventing and detecting fraud and other irregularities; and

(iv) the annual accounts have been prepared on a going concern basis.

Acknowledgement

Your Directors place on record their appreciation for the commendable contribution made by the employees during the year,

towards the growth of your Bank.

The Directors are grateful to the shareholders of the Bank for their continued trust and confidence reposed in the Bank. The

Directors are also grateful to the Reserve Bank of India, Stock Exchanges, the Department of Company Affairs, and Securities

and Exchange Board of India for their guidance and support extended to the Bank.

The Board gratefully thanks the valued customers of the Bank for their support and confidence in the organization and looks

forward to the continuance of this mutually supportive relationship in future.

For and on behalf of the Board of Directors

R. Seshasayee

Mumbai, July 25, 2007 Chairman

11

Macro Economic Scenario – National

The Indian economy maintained its strong performance for the fourth successive year, recording a real GDP growth rate of

9.2% in 2006-07, the second highest growth rate achieved since independence. This growth was largely driven by buoyancy

in the industry and services sectors, which grew by 10% and 11% respectively. The services sector continued to contribute

almost three-fourths of the overall GDP growth during the year. The growth in agricultural sector was, however, lower at 2.7%.

The exports sector that grew by 20.9% also had a significant contribution in the growth momentum. The broad based nature

of the growth points towards the sustainability of the growth rate. The increase in the savings and investment rate also

reinforces the sustainability of this growth level.

The Indian economy swelled to one trillion US dollars, only the twelfth nation to reach the milestone.

Inflation, with its roots in supply-side factors, especially in respect of primary articles and manufactured goods, was accompanied

by buoyant growth of money and credit in the last two years. Liquidity conditions were largely comfortable upto November

2006. Inflation raised concerns, with the Wholesale Price Index (WPI) breaching the 6.5% level. However, RBI measures to

quell inflationary expectations and to contain credit growth succeeded in reining in inflation at 5.74% by the end of the year.

Bank deposit rates increased by 100-300 basis points during the year across different maturities in tandem with rising interest

rates following several measures taken by RBI to check inflation and regulate credit flow to sensitive sectors without

disrupting credit support for investment.

Capital markets remained buoyant during the year, with benchmark stock indices touching their all-time highs and the market

capitalization rising to 91% of GDP.

Macro Economic Scenario – Global

The world economy expanded strongly for the fourth year, and in a broad based manner. While the US economy showed

signs of slowing down, the momentum of growth in Europe and Japan continued unabated. Robust growth in China and India

led the strong macroeconomic performance of Asia and other emerging and developing countries.

Availability of financial resources, generally benign crude oil prices, strong commodity prices and abundant global liquidity

were the major factors that pushed growth in the emerging market economies.

Monetary policy authorities the world over are, by and large, inclined to regard inflation as a major global risk, and remain

watchful about the emergence of excessive volatility in asset prices, underpricing of risks (including geopolitical risks) and

disturbed conditions in currency markets.

The structure of Indian Banking Industry and recent developments

Banks in India are dependent, for their resource requirements, largely on domestic deposits that are predominantly at fixed

rates. Credit expansion continued to be broad based during the year. While the industrial sector fuelled the credit demand,

agriculture also received a higher share in credit growth reflecting various policy initiatives to enhance the flow of credit to this

sector.

Year-on-year growth in bank credit was robust at 28% on top of 31.8% in the previous year, while year-on-year deposit growth

of scheduled commercial banks rose to 23% as against 18.1% in the previous year.

Commercial banks’ investments in bonds / debentures of public sector undertakings and the private sector and in commercial

paper (CP) registered an increase of Rs. 4,002 crores during 2006-07 in contrast to a decline of Rs. 13,237 crores in the

previous year.

Commercial banks invested Rs. 74,706 crores in Government paper in contrast to a decline of Rs. 22,809 crores in 2005-06.

Banking Industry Outlook

Banks have been able to finance the credit boom by managing their capital requirements, and have a CRAR of 12% that is

considerably higher than the 9% level stipulated by RBI. The rapid growth prevailing in bank credit would necessitate further

capitalization of banks.

The high degree of business optimism and continuing investment demand are pointers to prospects of substantial growth in

bank credit. The buoyant performance of businesses has led to significant increase in incomes of individuals and more

employment avenues. Thus, the growth prospects in retail segment are also expected to be high.

As per the schedule for implementation of Basel II provisions, foreign banks operating in India and Indian banks having

presence outside India are required to migrate to the standardised approach for credit risk and the basic indicator approach

for operational risk under Basel II with effect from March 31, 2008. All other scheduled commercial banks are encouraged to

migrate to these approaches under Basel II in alignment with them, but in any case not later than March 31, 2009.

MANAGEMENT DISCUSSION & ANALYSIS

12

Bank’s Performance during 2006-2007

Business Performance

The salient features of your Bank’s operating performance during the year 2006-07 are summarised in the table below:

(Rs. in crores)

2006-07 2005-06 YOY growth

Interest earned 1500.25 1188.29 26.25%

Interest expended 1228.85 873.19 40.73%

Net Interest Income 271.40 315.10 (13.87%)

Other Income :

Profit on sale of investments 18.66 13.26 40.72%

Commission & others incl. bad debts recovery 225.48 175.57 28.43%

Total Operating income 515.54 503.93 2.30%

Operating Expenses excluding depreciation 309.86 280.64 10.41%

Operating Profit before depreciation and provisions 205.67 223.29 (7.89%)

Less : Provision & Contingency 103.36 150.48 (31.31%)

Net Profit 68.22 36.82 85.28%

The performance during the year reflected a significant improvement of over 85% in the net profit of the Bank at Rs.68.22

crores as compared to Rs. 36.82 crores last year. The operating profit however was lower at Rs. 205.67 crores as compared

to Rs.223.29 crores last year, even though there has been significant improvement in the fee-based income of the Bank. This

was mainly due to absence of profit on securitisation business during the year (profit booked last year on account of

securitisation was Rs.41.84 crores). Besides, operating expenses increased during the year to Rs. 309.86 crores from Rs.

280.64 crores, mainly due to expanded branch network. In line with the overall increase in interest rate, there was higher

outgo on account of interest expenses. The interest expenditure at Rs.1,228.85 crores as against Rs.873.19 crores in the

previous year showed an increase of 41%. Interest spreads were under pressure as interest income did not pick up in

tandem, due to the lag effect.

Deposits and Advances

The total deposits of your Bank as on March 31, 2007 aggregated Rs.17,644.80 crores, registering a growth of 17.58% over

the level of deposits as on March 31, 2006.

The current and savings account deposits of your Bank grew by 42.44% and 26.35% respectively while term deposits grew by

14.81% during the year. Although term deposits continue to constitute the major portion of total deposits, the share of CASA

is continuously increasing. In tune with its retail orientation, your Bank is endeavouring to increase the share of current and

savings account deposits by broadening the deposit base through its wider network.

The net advances of your Bank stood at Rs. 11,084.20 crores as on March 31, 2007 as compared to Rs. 9,310.46 crores as

on March 31, 2006, recording a growth of 19.05%.

Operational / Product Performance

Retail Banking

Retail Banking Segment has shown substantial growth during the current financial year. This has been achieved by adopting

customer segmentation and mapping the products and services to appropriate segments, to ensure delivery of value-added

services.

Retail liability customer base of your Bank has expanded by 31% during the year to 6.05 lakh from 4.80 lakh customers.

Retail deposits have moved to Rs.6,006 crores from Rs.4,045 crores, a growth rate of 48.47%. Retail Advances also grew by

43.3% to Rs.1,584 crores from Rs.1,105 crores. In respect of fee-based income, the retail segment recorded an excellent

performance, with growth rate of 300%. This was mainly from initiatives like its Wealth Management activities, distribution of

Mutual Fund and Insurance products and retail sale of 999.9 purity certified Gold Coins (Suvarna Mudra).

On-line General Insurance policies and On-line Investment options in mutual funds are some of the facilities now provided to

the customers. Your Bank has tied up with a large financial services company so as to extend Portfolio Management Services

to customers. Fee income from Retail Banking alone has gone up by 174.7% to Rs.61.12 crores from Rs. 22.25 crores.

Under the cards segment, the Bank has introduced Indus Remit Card aiming at the NRIs and for their dependents for quick

remittance. Indus Gift Card, our Bank’s first Prepaid Card has well been accepted in the market. Indus Tax Saver Deposit,

Indus Premium Deposit and 100-Day deposit scheme have received good response from the customers.

With a view to enhancing the convenience of retail customers, several steps were taken to strengthen the channels. Mobile

Banking with Request Alerts and Automatic Alerts added one more channel to our customers. Delivery through ATMs was

made wider with additional services including Mobile Top-ups and VISA Money Transfer facility.

Vehicle Finance

Vehicle Finance Division (VFD) of your Bank extends asset-backed financing for a wide range of vehicles spanning across

heavy commercial Vehicles, three wheelers, cars, two wheelers, etc. Besides, specialty construction equipments like tippers,

cranes, excavators, and loaders are also financed. The thrust product during the year was three-wheelers, as this product line

yielded high returns.

13

The total disbursements made during the year 2006-07 were Rs. 5141 crores to incremental loan accounts numbering

3,36,000. The focus during the year was to optimize the product mix to maximize yields and at the same time maintain

portfolio quality.

Disbursement for commercial vehicles was of the order of Rs.3,243 crores as against Rs.2,772 crores in 2005-06, an

increase of 17% over the previous year. Construction equipment loans disbursement increased by 33% to Rs.717 crores from

Rs.539 crores in the previous year. Two wheeler loans disbursements showed an increase of about 6% to Rs.710.5 crores as

against Rs.673 crores in 2005-06. Disbursements for cars were strategically kept lower in 2006-07 at Rs.471 crores as

against Rs.659 crores in the previous year, due to lower yield from it.

VFD also earned fee-based income of about Rs.20 crores, primarily through distribution of third-party insurance products.

VFD operations are efficiently supported by state-of-the-art document storage and retrieval facility at Karapakkam unit that

handles loan document processing and record maintenance.

VFD’s data centre, also located at Karappakam, has state-of-the-art facilities in terms of data / equipment protection mechanisms

and access rights with sensors to monitor movement within the data centre.

Priority Sector Lending

Your Bank has attained the RBI-prescribed target for total priority sector advances. Priority Sector advances aggregated

Rs.4,458.32 crores at the end of March 2007 and represented 41.52% of your Bank’s Net Bank Credit (NBC) as compared to

35.13% at the end of March 2006. During the year, your Bank financed over 63000 agriculturists, and direct agricultural

advances represented 9.36% of your Bank’s NBC at the end of March 2007 compared to 7.34% at the end of March 2006.

Other priority sector advances such as finance to Small Road Transport Operators and Individual Housing Loans represented

19.77% of your Bank’s NBC at the end of March 2007 as compared to 16.28% at the end of March 2006.

Wholesale Banking

With the twin objectives of meeting growing market competition as well as improving customer profitability, your Bank has

structured its wholesale banking operations into four vertical business lines, consisting of four Strategic Business Units

(SBUs), viz., Corporate Banking Division, Capital & Commodities Market Division, Treasury & Investments Division and

International Division.

Corporate Banking Division (CBD)

This division caters to the banking and financial needs of Corporates and Institutions, Small and Medium Enterprises, Co-

operative Banks and Financial Institutions. The objective of the division is to service the full value chain of customer

requirements. The division offers a wide range of banking and finance solutions to derive the maximum value and earnings

from each customer. The aim is to build a holistic, long-term and mutually beneficial relationship with its customers through

cost-effective and efficient services, utilising technology solutions where possible.

The structural changes brought into the division by placing a dedicated manpower structure of Relationship Managers and

Product Specialists has brought in a conspicuous shift in methods of customer acquisition. This has enabled a significant

increase in corporate customer base. The customer base of the division grew by 26% during the year.

The Liabilities and Transaction Banking Desk focused on granulation and garnering low cost deposits. Due to persistent

efforts, the low cost deposits of the division grew from Rs.568 crores to Rs.708 crores on YOY basis, registering a growth of

25%. The core deposits of the division grew by 31%, increasing to Rs.9,311 crores from Rs.7,121 crores. On the transaction

banking front, the customer base increased by 129% with total throughput from these customers registering a growth of 56%

over the previous year’s throughput.

The Asset Desk focussed on continuous churning of advances portfolio so as to exit low yielding relationships and enter into

high yielding relationships. While the full impact of this churning will be witnessed in the next financial year, the process has

improved the yield on advances of the division. The Asset Desk also focused on building off-balance sheet non-funded

business. The efforts yielded encouraging results and the non-interest income of the division grew by 75%.

Treasury & Investment Division (TID)

Treasury continued with its significant market presence during the year under review. Your Bank has a fully integrated Dealing

Room that redefined its focus from market segment-based to function-based. This measure has started yielding results as

functional expertise across various markets has been put to optimal use.

The TID has three distinct functional segments viz. (a) Corporate Desk, catering to the needs of customers and branches (b)

Trading Desk, engaged in trading in Foreign Exchange, Fixed Income, Derivatives and Capital Markets (c) Balance Sheet

Desk, managing the liquidity, ALM functions and resources to meet statutory requirements of maintaining of CRR / SLR.

The Corporate Desk provides advisory services to Bank’s customers having multi-currency balance sheet exposure by way of

risk products such as Interest and Currency swaps and options. Besides, International Trade Finance, Letters of Credit,

Export Finance and Bullion Consignment business continued to be the mainstay of the corporate business of Treasury. Your

Bank also continued with Investment Advisory Services for Government and Corporate Debt through Constituent SGL

accounts. The foreign exchange turnover witnessed substantial growth of 84% to Rs.41,550 crores from Rs.22,605 crores.

Your Bank continued to be among the lead players in Bullion Consignment segment, registering a turnover of around

Rs.2,815 crores.

The hardening interest scenario limited the scope for trading in fixed income securities; however, opportunities in Interest

Rate Swaps (IRS) were effectively utilised. The volumes and the profit under IRS registered significant growth in this year.

The Trading Desk clocked good results in currency trading and corporate cover operations.

14

The Balance Sheet Desk ably and efficiently managed the liquidity and ALM positions even during phases of tight liquidity in

the market. The Desk managed market borrowings at average cost of 6.85% through a slew of money market instruments,

thereby reducing the average cost of funds.

The Investment portfolio of the Bank is de-risked from the hardening of interest rates. While dated securities are parked in

HTM category, the AFS category comprises Treasury Bills, which bear minimal risks. The overall yield on investments was

maintained at around 7.10% during the year.

Capital and Commodities Market Division (CCMD)

Your Bank’s Fort (Mumbai) Branch focuses on serving Capital and Commodities market players, and is the nodal branch for

this business line. Your Bank has the Clearing and Settlement Bank status with five principal stock and commodity exchanges

of the country viz. NSE, BSE, NCDEX, MCX and NMCE. Besides, your Bank is an empanelled Depository Participant for

NSDL and CDSL and is also empanelled with NCDEX and MCX, thereby offering DP services to both securities and

commodities segments, a distinction shared by only a few select banks in the country. Your Bank has a comprehensive array

of products covering fund-based credit, non-fund based credit and end-to-end collection / payment solution to members and

participants of the exchanges, thus meeting their total business needs.

Your Bank is offering e-broking through Payment Gateway technology with select brokers to facilitate provision of three-in-one

account facility to the retail investors and to enable them to undertake on-line trading in equity market.

Your Bank has also concluded arrangement with ten leading mutual funds offering direct credit facility for redemption and

income distribution. This arrangement, besides enhancing Bank’s ability to cross-sell mutual fund schemes, greatly adds to

customer convenience.

Your Bank is also registered as a Debenture Trustee for providing this service to corporate customers.

International Division (ID)

The International Division of your Bank covers all cross-border business flows of the Bank. Your Bank has correspondent

relationships with 332 banks spread across the globe.

Your Bank continued to maintain its growth momentum in international trade business with a rise of 21% in turnover and 57%

in revenues. The Bank continued to be an active player in inward remittance business. There are tie-up arrangements with 16

Exchange Houses under Rupee Drawing Arrangement and with two Money Transfer companies as principal agents under

Money Transfer Service Scheme. The Bank is in the process of appointing sub-agents to increase the volumes through

partnership with other domestic banks and financial institutions.

To enhance overseas business and leverage NRI relationships, the Bank has adopted the “Regional Alliance” model of

partnering with strong regional overseas banks that do not have branch presence in India. During the year, alliances were

established with two banks having coverage in United Arab Emirates and Qatar. Your Bank proposes to establish similar

alliances in other geographical regions like South East Asia, United Kingdom, the United States, etc.

Investment Banking

During the year, the Investment Banking Division worked on a number of assignments in the areas of financial and corporate

advisory services, equity placements, cross border transactions, debt restructuring, equity syndication, etc. The assignments

cover a range of industries such as telecom, media, ITES/ BPO, real estate, hospitality, manufacturing etc. Among the various

assignments completed by this Division was the advising of Hinduja TMT Ltd. on divesting its stake in Hutchison Essar Ltd.,

a transaction worth USD 450 million.

In the years to come, the Investment Banking Division would leverage on its alliances with European and US-based

investment banks in the execution of cross border deals. The growing level of capital market activity, mergers and acquisitions

and the entry of private equity funds is expected to provide impetus to corporate advisory services, debt and equity

syndication services as well as equity and debt placement services.

Asset Management

Your Bank has continued its past trend of recoveries. During the year, recoveries / upgrading of written off / non-performing

assets (NPA) amounted to Rs.158.89 crores. Besides, NPAs worth Rs.49.17 crores (Net Book Value) were sold off during the

year to an Asset Reconstruction Company.

Due to these efforts, Net NPAs were restricted to 2.47% of Net Bank Credit as compared to 2.09% in the previous year. But

for classification as NPA of one major account, which is not an NPA with other Banks, the percentage of net NPAs would have

been still lower at 1.46%.

Branch Network

During the current year, 33 branches were opened and 41 off-site ATMs were set up by the Bank.

As at March 31, 2007, your Bank had a total of 170 branches spread across 141 geographical locations and 99 off-site ATMs.

The Bank now has presence in 27 States and Union Territories. In addition, your Bank has Representative Offices in London

and Dubai.

Banking Operations

Your Bank has strengthened the policy framework on “Know Your Customer” (KYC) norms and “Anti Money Laundering”

(AML) measures from time to time, in line with the policies of Reserve Bank of India. Your Bank has implemented a simplified

procedure of “Know Your Customer” which will benefit lower income group persons to open accounts with minimal documentation.

15

Your Bank has also become a member of Banking Codes and Standards Board of India (BCSBI), which was set up to ensure

that banks in India adhere to a voluntary code, which sets minimum standards for fair treatment of customers availing bank

services. Your Bank has made a commitment to adhere to all the provisions of the Code prescribed by BCSBI. Your Bank has

implemented almost all provisions of the Code and the rest are in the final stages of implementation. The Code is displayed

at all the branches of your Bank and the same is also posted on your Bank’s website in thirteen languages.

The clearing process at New Delhi and Mumbai has been centralized for quicker and efficient operations. Your Bank has

commenced image-based processing of clearing at these locations so as to be ready with participation in RBI’s Cheque

Truncation System (CTS), which would help faster and error- free processing of cheques.

Your Bank has revised and adopted a comprehensive policy, in pursuance of RBI advices, on settlement of claims in respect

of deceased depositors. The policy covers all types of deposits, and has simplified the procedure for settlement.

Your Bank has adopted the “Best Practice Code”, relating to transaction processing, with the objective of documenting the

procedures in line with national and international best practices.

Your Bank has also put in place a “Deposit Policy” and a “Fair Practice Code”. While the former outlines the guiding principles

in respect of various deposit products of the Bank, terms and conditions governing the operations of these accounts and the

rights of depositors, the Fair Practice Code is a voluntary code establishing standards to be followed by all our branches in

their dealings with the customers.

Your Bank has also framed a “Citizen’s Charter” to promote fair banking practices and to provide information in respect of

various activities relating to customer service.

Integrated Risk Management

A strong enterprise-wide risk management framework is a cornerstone of prudent banking. It facilitates management of

various risks while supporting rapid business growth, helps reduce volatility in earnings and enhances shareholder value.

Your Bank, with the assistance of KPMG, a leading international consultant, has established an integrated Risk Management

Department responsible for Bank-wide risk management covering credit risk, market risk and operational risk, independent of

the business segments. Your Bank has been progressively adopting the best international practices so as to continually

reinforce its risk management functions.

Basel II – Reinforcement of Risk Management

Pursuant to Basel II accord, Reserve Bank of India has issued guidelines for the new capital adequacy framework. Your Bank

had initiated steps in this regard well in advance, and is already equipped to adopt the new capital adequacy framework under

Basel II as per RBI guidelines. The New Capital Adequacy framework will help the bank in moving towards allocating capital

based on risk sensitivity.

Your Bank has acquired a highly sophisticated system which supports adoption of advanced approaches under New Capital

Adequacy framework for computation of capital charge towards credit risk, market risk and operational risk. The system is

under implementation. Your Bank has also been computing capital charge as per the New Capital Adequacy framework under

parallel run since June 2006. The Bank’s CRAR under the new framework would reflect improvement over the existing norms

due to the large retail assets portfolio.

Credit Risk:

Your Bank manages credit risk comprehensively, both at Transaction and at Portfolio levels. Your Bank uses a robust risk

rating framework for evaluating credit risk of the borrowers. Your Bank uses segment-specific rating models which are

equipped with transition matrix capabilities. Risks on various counter-parties such as corporates and banks are monitored

through counter-party exposure limits, governed by country risk exposure limits also in case of international trades. Your Bank

manages risk at the portfolio level too, with prudential exposure limits to mitigate concentration risk.

Your Bank has a well-diversified portfolio across various industries and segments, as illustrated by the following data:

� Retail exposures (which provide wider diversification benefits) account for as much as 58% of the total advances.

� The Bank’s corporate exposure is fully diversified across over 85 industries, thus insulating your Bank from industry

cycles.

The above initiatives support qualitative business growth while managing inherent risks within the risk appetite.

Market Risk:

The key sources of Market Risk are Liquidity Risk, Interest Rate Risk, Price Risk and Foreign Exchange Risk. Your Bank has

implemented a state-of-the-art Treasury system ‘OPICS’ acquired from Misys, London, which supports robust risk management

capabilities and facilitates Straight Through Processing. OPICS supports tailoring of products to customers’ needs.

Market Risk is effectively managed through comprehensive policy framework which provides various tools such as Mark-to-

Market, Duration Analysis, Value-at-Risk, besides through operational limits such as stop-loss limits, exposure limits, deal-size

limits, maturity ladder, etc. Investment portfolio is constantly re-jigged, in line with market movements and expectations, so as

to ensure minimum risk in the portfolio.

Operational Risk:

Operational risk is managed by addressing people risk, process risk, systems risk as well as risks arising out of external

environment. Your Bank is the only Indian commercial bank to receive ISO–9001:2000 certification for all branches.

Your Bank has an efficient audit mechanism, involving periodical on-site audit, concurrent audits on the spot and off-site

surveillance enabled by the Bank’s advanced technology and core banking system.

16

The Bank has initiated the process of putting in place Operational Risk Management Framework using sophisticated tools,

such as:

� Key Risks Indicators

� Score Cards

� Risk Events

� Loss Data

� Near Miss Events

The framework would help in mitigation of operational risks and optimization of capital requirement towards operational risks

under Basel II norms.

Systems Risk:

As part of Systems-related Operational Risk Management initiatives, your Bank has formulated and implemented a

comprehensive Business Continuity Plan (BCP) to ensure continuity of its critical business functions and extension of banking

services to its customers. Your Bank has established an effective Disaster Recovery site at a geographically distant location,

with online real-time replication of data. Comprehensive IT security framework has been put in place to ensure complete data

security and integrity. Your Bank has housed its data center in a professionally managed environment, with sophisticated and

fool-proof security features and assured supply of utilities.

Internal Control Systems and their adequacy

Operational Controls

Your Bank has laid down the policy framework on “Know Your Customer” (KYC) norms and “Anti Money Laundering

Measures” (AML). The policy has been framed on the basis of recommendations of the Financial Action Task Force and the

paper issued on Customer Due Diligence for Banks by the Basel Committee on Banking Supervision. The AML software that

has been implemented has effectively brought the operations risk under control.

In accordance with RBI’s recommendations, a Committee on Procedures and Performance Audit on Public Service in Banks

(CPPAPS), comprising senior functional heads of the Bank and a few customers, has been established. Your Bank has also

constituted a Customer Service Committee of the Board of Directors (CSCB) to review the performance of the CPPAPS.

Complaint redressal mechanism

Your Bank has designed an escalation process for all customer complaints received at Branches and Corporate office. A

quarterly report is placed to the Board of Directors on the complaints handled.

Your Bank maintains a dedicated page for lodging of complaints and complaint redressal mechanism on its website

www.indusind.com where information on the escalation process and the details of the nodal officer to receive complaints has

been furnished. These details are also displayed at the Bank’s Branches. Details of the Banking Ombudsman Scheme 2002

are also displayed at Branches and provided in the website.

Your Bank has also created a link on the website for a “Complaint Form”, which gives opportunity to all customers to air their

grievances in a simplified way and get their complaints redressed without delay.

Asset Liability Management

Your Bank’s ALM system supports effective management of liquidity risk and interest rate risk, covering 100% of its assets

and liabilities. Liquidity Risk is monitored through Structural Liquidity Gaps, Dynamic Liquidity position, Liquidity Ratios

Analysis and Behavioral Analysis, with prudential limits for negative gaps in various time buckets.

Interest Rate Sensitivity is monitored through prudential limits for Rate Sensitive Gaps and other risk parameters. Interest

Rate Risk on the Investment portfolio is monitored through Modified Duration on a daily basis. Optimum risk is assumed

through duration, to balance between risk containment and profit generation from market movements.

Meetings of the Asset Liability Committee (ALCO) were convened frequently during the year, wherein analytical presentations

were made providing detailed analysis of liquidity position, interest rate risks, product mix, business growth v/s budgets,

interest rate outlook, which helped to review the business strategies regularly and undertake new initiatives. The interest rate

outlook projected in meetings of ALCO during the last two years has largely been in line with the actual interest rate trend

taking place. In order to adopt more advanced and sophisticated techniques of assets-liabilities management, Bank has

acquired state-of-the-art ALM system which is under implementation.

Your Bank is also in the process of implementing an advanced system for Funds Transfer Pricing (FTP), which shall reinforce

the pricing mechanism and enhance performance management framework.

Inspection and Audit

Your Bank has taken appropriate measures to assess and monitor its level of operational efficiency vis-à-vis internal control

processes on an ongoing basis. Towards this end, comprehensive processes have been established for its Internal &

Concurrent Auditors to ensure that all facets of its business operations are subject to thorough scrutiny. The levels of

adherence to established guidelines in all aspects of banking operations are constantly monitored and maintenance of

regulatory standards for the Inspection and Audit of business units is ensured at all times.

In consonance with regulatory guidelines, your Bank has shifted the focus of its audits from the transaction-based approach

to a ‘risk-based’ approach. The latter essentially is systems-based, and entails the allocation of supervisory resources and

management attention calibrated in accordance with the auditee unit’s risk profile. By following a risk-based approach, your

Bank undertakes Internal Inspection of its respective branches, at a frequency synchronized to the risk profile of each branch.

17

Concurrent Audits continuously evaluate the health of more than 50% of the Bank’s business emanating from 15 of the largest

Branches, Depository Operations, Integrated Treasury & the Vehicle Finance Division. Your Bank’s on-line surveillance

capability using its fully networked system, well-defined & strong internal controls, need-based access to computer systems

and clear audit trails have helped to mitigate operational risks. To facilitate ownership of the quality control mindset, most

exception reports are now available on the system, for viewing and use by business units. Your Bank follows best practices

within the legal / regulatory framework.

The Audit Committee of the Board keeps the effectiveness of controls as well as compliance with regulatory guidelines under

constant review, and renders effective guidance to ensure conformity with best practices in the area of Inspection & Audit.

Human Resources / Industrial Relations

The Human Resources (HR) function’s focus was on ensuring employee satisfaction and retention by creating a performance

enabling work culture within the organization. With this goal in mind, your Bank has made substantial progress in all facets of

HR.

Manpower strength increased during the year from 2365 to 2613. Manpower was added in an efficient and time-bound

manner with a keen eye on candidate quality. Your Bank broad-based its recruitment sources with a view to reducing hiring

costs and bringing down turnaround time. A judicious mix of placement consultants, job portals, employee referrals and

campus recruitments ensured hiring costs were kept to a minimum. The employee referral scheme IndusParichay in

particular deserves mention. Not only has this scheme given us quality employees who fit in perfectly with the work ethos but

it has also contributed in substantially bringing down recruitment costs. The year gone by also saw a greater proportion of

professionals from competitor banks and other reputed corporates joining your Bank. Detailed manpower plans, comprehensive

job descriptions and objective productivity norms formed the backbone of the entire recruitment process.

Your Bank has increased emphasis on bringing contemporary skills to the organization through its training and development

activities. Your Bank is continuously assessing the learning gaps amongst its employees and is trying to bridge the learning

gaps by organizing training programs to develop the technical and behavioral competencies of its employees. During the year,

204 training programs were conducted for more than 2500 participants drawn from over 110 Bank locations and 17 clusters

countrywide. There were in excess of 35,000 man-hours of training delivery in areas of (i) employee induction (ii) product

training (iii) process training (iv) soft skill training and (v) specialized domain based programs. Your Bank is now providing

high quality and cost-effective training solutions in all the regions / clusters and is constantly trying to innovate in a bid to offer

high quality learning to the employees.

While your Bank has always recognized and promoted sporting talent, this year proved to be extra special. Not only was your

Bank’s team runner up in popular corporate cricket and football tournaments, but also won the prestigious Barclays Corporate

Soccer 5’s. The year ahead will see a greater emphasis on activities that would transform the workplace into an environment

optimally suited for quality and productive work.

Information Technology

The Bank’s technology infrastructure has been among the best in the Indian Banking Industry. This recognition has been

endorsed by the industry peers with IndusInd Bank being conferred with the Runner-Up Award for Best Implementation of

Straight Through Processing, an Award sponsored by Indian Banks Association (IBA) jointly with Trade Fair Conferences

International (TFCI) and “Finacle” (Infosys). This is the second consecutive year that your Bank has won the IBA Award.

The Bank’s successful Mock Disaster Drills to test the DR preparedness of core banking application exhibits the robustness

of the systems and services provided to its customers. A notable achievement during these mock drills was that the branches

with MPLS and VSAT links were switched to DR site without routing through Mumbai. This is significant in a centralized

environment, as even in a scenario of site disaster at Mumbai, branches can operate without any disruption. The DR

infrastructure for Base24 Switch has been commissioned and the Production ATM Switch was upgraded during the year.

Several other IT initiatives for facilitating customer convenience have been undertaken during the year. For example, Mobile

Banking initiatives help a customer track balances and transactions in his accounts by configuring push and pull based alerts

online in to his mobile instrument. The Bank is now ready to offer a new convenient channel for its customer contact center

with Computer Telephony Interface (CTI) with Operational CRM Application (Talisma) which is interfaced with the bank’s core

systems. During the year, the Bank implemented STP Mechanism for handling NEFT Transactions with core banking allowing

seamless and quick money transfers not only within the country but also from abroad. During the year, the bank has

implemented centralized image-based clearing operations at Mumbai and Delhi. This enables efficient handling of customer

clearing instruments based on images. The infrastructure required for participating in Cheque Truncation System proposed to

be introduced by RBI in the National Capital Region (NCR) at Delhi is completely ready. With the help of technology, the Bank

has enabled online remittances from correspondent banks abroad, which facilitates online movement of funds across banks.

Several products and services like Mobile Banking, Visa Gold Debit card, Gift Card, On-line issuance of insurance policies,

Sunday Banking, 8-to-8 banking, etc. have all been deployed with the help of technology.

Corporate Communications

During the year 2006-07, your Bank carried out product-specific campaigns to disseminate information about the new

products, services and changing interest rates. Pan-India campaigns were conducted using outdoor and print media through

vernacular and local dailies to gain effective coverage in the command area of the branches. One-off advertisements were

also released to mark special occasions and events.

Your Bank also sponsored major events in a unique manner thereby adding more visibility to the brand viz., Khaleej Times-

NRI Show (Dubai), Power Breakfast Series, International Film Festival of India (IFFI) in Goa, 34th

National Convention of ICSI

(Kolkata), and Pravasi Bharatiya Divas 2007 (New Delhi).

18

CORPORATE GOVERNANCE

Certificate on Compliance with the Conditions of Corporate Governance under Clause 49 of the Listing Agreement(s)

To the members of IndusInd Bank Limited:

We have examined the compliance of conditions of Corporate Governance by INDUSIND BANK LIMITED (“the Bank”) for the

year ended on 31st March 2007 as stipulated in Clause 49 of the Listing Agreement of the said Bank with the stock

exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited

to procedures and implementation thereof adopted by the Bank for ensuring compliance with the conditions of Corporate

Governance. It is neither an audit nor an expression of opinion on the financials statements of the Bank.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Bank has

complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

We further state that such compliance is neither an assurance as to the future viability of the Bank nor the efficiency or

effectiveness with which the Management has conducted the affairs of the Bank.

For Bhandari & Associates

Company Secretaries

S. N. Bhandari

Proprietor

C. P. 366

Mumbai, July 23, 2007.

Certification by the Chief Financial Officer and the Managing Director

In terms of the revised Clause 49 of the Listing Agreement, the Certification by the Managing Director (CEO) and the Chief

Financial Officer of the Bank, on the financial statements and the internal controls relating to financial reporting has been

obtained and submitted to the Board.

The Bank’s Philosophy on the Code of Corporate Governance

• Your Bank believes that consistent implementation of good Corporate Governance contributes towards developing and

sustaining the best operating systems and procedures.

• The systems, which have been evolved, allow sufficient freedom to the Board and the management to make decisions

and take actions towards the growth of the Bank, whilst remaining within the framework of effective accountability. To

maintain high standards of Corporate Governance, your Directors have formed various committees of the Board. The

Committees meet regularly to achieve their specific objectives.

• Your Bank is committed to operate on commercial principles, ensuring at the same time, the need to remain accountable,

transparent and responsive to its stakeholders.

• Your Bank acknowledges the need to uphold the integrity of every transaction it enters into and believes that honesty and

integrity in its internal conduct would be judged by its external behaviour. In this context, your Directors have adopted a

‘Code of Conduct for Directors and Senior Management’. This code attempts to set forth the guiding principles on which

the Bank shall operate and conduct its daily business with its stakeholders, government and regulatory agencies, media,

and anyone else with whom it is connected.

Code of Conduct for Directors and Senior Management

The Board of Directors has laid down a code of conduct for all Board members and Senior Management1 of the Bank. The

said code of conduct has been uploaded on the website of the Bank (www.indusind.com) under the ‘Investor Relations’

section. The same is available for reference in the following URL: http://www.indusind.com/downloads/CodeOfConduct06.pdf

Declaration by the Managing Director: All members of the Board and Senior Management have affirmed to the Board, of

having complied with the ‘Code of Conduct’ during the year ended March 31, 2007 and no violation of the ‘Code of Conduct’

has been reported during the year.

1 For this purpose, the term ‘senior management’ means personnel of the Bank who are members of its core management team excluding Board of Directors.

This comprises members of management who are all functional heads.

THE MISSION

“To emerge as an international bank, acquiring global capabilities, providing world class services and

maintaining the highest standards of professionalism and integrity.”

QUALITY POLICY

“IndusInd Bank is committed to meet and strive to exceed customer requirements through timely, error

free and courteous service. We shall continually improve the effectiveness of our work process through

training, customer feedback and review of systems.”

19

Board of Directors

i. Composition

The Board comprises Directors who have specialised knowledge and professional experience in diverse fields. Information

in respect of each Director is given below:

Name of Director Nature of Directorship Special Knowledge / Occupation

practical experience

Mr. R. J. Shahaney1

Independent General Management Chairman of Ashok

Non-executive Chairman (4 decades of experience Leyland Ltd.

in top management)

Mr. R. Seshasayee2

Independent Part-time Accountancy Managing Director of

Non-executive Chairman Ashok Leyland Ltd.

Dr. Ram Buxani Non-executive International Business NRI Businessman

Mr. R. Sundararaman Independent Banking Former Dy. Managing

Non-executive Director of SBI

Mrs. Kanchan Chitale Independent Accountancy Practising Chartered

Non-executive Accountant

Mr. T. Anantha Narayanan Independent Agriculture & Rural Retired Executive

Non-executive Economy (Practical Director

experience), Finance (Finance) of Ashok

(Special Knowledge) Leyland Ltd.

Dr. T.T. Ram Mohan Independent Banking & Finance Professor - Finance &

Non-executive Accounting,

IIM Ahmedabad

Mrs. Pallavi Shroff Independent Law Practicing Advocate

Non-executive

Mr. Premchand Godha3

Independent Finance & SSI Industrialist

Non-executive (practical experience)

Mr. Ajay Hinduja4

Non-executive Banking & Finance Businessman

Mr. S. C. Tripathi5

Independent Rural Economy & Self-employed

Non-executive Cooperation (Advocate)

Mr. Bhaskar Ghose Whole-time Banking Managing Director

Mr. S. Nagarajan Whole-time Banking & Finance Jt. Managing Director

ii. Meetings

During the year ended March 31, 2007, 7 meetings of the Board were held on, May 2, 2006, June 13 2006, July 29, 2006,

September 27, 2006, October 31, 2006, January 29, 2007 and March 9, 2007. Details of attendance at the Board

Meetings and the previous Annual General Meeting, other Directorships, Membership and Chairmanship of Committees

pertaining to each Director are as follows:

Name of the Director No. of Board No. of other Public No. of Committees Whether attended

Meetings Limited Companies of the Bank in last A.G.M.

attended in which Director6

which member

Mr. R. J. Shahaney 4 5 4 Yes

Dr. Ram Buxani 5 - 2 No

Mr. R. Sundararaman 7 1 5 Yes

Mrs. Kanchan Chitale 7 - 4 Yes

Mr. T. Anantha Narayanan 6 6 4 Yes

Dr. T. T. Ram Mohan 6 3 4 Yes

Mrs. Pallavi Shroff 1 5 2 No

Mr. Premchand Godha 2 3 - No

Mr. Ajay Hinduja 1 1 - No

Mr. S. C. Tripathi 1 3 - No

Mr. R. Seshasayee - 7 - No

Mr. Bhaskar Ghose 7 1 8 Yes

Mr. S. Nagarajan 7 1 6 Yes

1 Ceased to be Chairman from September 28, 2006.

2 Inducted on the Board as Additional Director with effect from May 3, 2007. Approval of RBI received for his appointment as Part-time

Non-executive Chairman on June 7, 2007.

3 Inducted on the Board as Additional Director with effect from October 31, 2006.

4 Inducted on the Board as Additional Director with effect from October 31, 2006.

5 Inducted on the Board as Additional Director with effect from February 14, 2007.

6 Excludes Foreign Companies, Private Limited Companies, Trusts, etc.

20

iii. Remuneration

Non-executive Directors’ compensation: The members of the Bank, at the 11th

Annual General Meeting held on

September 3, 2005, passed a resolution authorising the Board of Directors of the Bank to fix the sitting fee payable to

non-executive directors in accordance with Rule 10B of the Companies (Central Government’s) General Rules & Forms,

1956 as amended from time to time read with section 310 of the Companies Act, 1956, or any other rule, regulation,

notification issued by any competent authority from time to time as may be applicable.

Subsequently, SEBI, vide circular No SEBI/CFD/DIL/CG/1/2006/13 dated January 13, 2006 has clarified that the requirement

of obtaining prior approval of shareholders at a general meeting shall not apply to the payment of sitting fees to non-

executive directors, if made within the limits prescribed under the Companies Act, 1956.

The Bank has not granted stock options to any of the Directors. The details of sitting fees paid to the non-executive

Directors for attending the Board and Committee meetings held during the year 2006-07 are as under:

Name of Director Salary *(including Sitting Fee (Rs.) Total (Rs.)

perquisites &

allowances)

Mr. R. J. Shahaney* - 1,60,000 1,60,000

Mr. Vijay Vaid - 20,000 20,000

Mr. Anil Harish - 40,000 40,000

Dr. Ram Buxani - 1,10,000 1,10,000

Mr. R. Sundararaman - 4,40,000 4,40,000

Mrs. Kanchan Chitale - 4,10,000 4,10,000

Mr. T. Anantha Narayanan - 3,30,000 3,30,000

Dr. T. T. Ram Mohan - 1,80,000 1,80,000

Mrs. Pallavi Shroff - 70,000 70,000

Mr. Premchand Godha - 40,000 40,000

Mr. Ajay Hinduja - 20,000 20,000

Mr. S. C. Tripathi - 20,000 20,000

The criteria for making payment of remuneration to the non-executive Directors are as follows:

a. An amount of Rs.20,000/- per meeting is being paid towards sitting fee for attending meetings of the Board,

Committee of Directors and the Audit Committee, to the non-executive Directors in accordance with Rule 10B of the

Companies (Central Government’s) General Rules & Forms, 1956.

b. With effect from May 2, 2006, the Board has decided that an amount of Rs.10,000/- per meeting be paid as Sitting

Fee to the Non-executive Directors for attending meetings of Committees other than those mentioned above.

Whole-time Directors’ compensation: The appointment of Whole-time Directors is made with the approval of the

Reserve Bank of India. The details of the terms of appointment as approved by the Reserve Bank of India in respect of

Mr. Bhaskar Ghose, Managing Director and Mr. S. Nagarajan, Joint Managing Director, the two whole-time Directors of

the Bank, are given below:

Mr. Bhaskar Ghose, Managing Director: The remuneration paid, excluding contribution to provident fund and gratuity,

comprises the following: salary of Rs.25.00 lakhs p.a., other allowances of Rs.18.99 lakh p.a. (which does not include

perquisite value of Rs.14.40 lakh for the facility of company leased and furnished accommodation), and official car with

driver. No stock options have been offered as part of the remuneration package or otherwise.

Mr. S. Nagarajan, Joint Managing Director: The remuneration paid, excluding contribution to provident fund, gratuity

and pension, comprises salary of Rs.24.00 lakh p.a., other allowances of Rs.24.00 lakh p.a., free accommodation, and

official car with driver. The appointment is for a period of 3 years commencing from October 28, 2004. No stock options

have been offered as part of the remuneration package or otherwise.

iv. Shareholding

The Equity shares held by Directors as on March 31, 2007 are (i) Dr. Ram Buxani – 1,71,902 (0.0538%); (ii) Mr. T.

Anantha Narayanan – 580 (0.0002%); (iii) Mr. Premchand Godha – 100 (0.0000%); (iv) Mr. Ajay Hinduja – 83,900

(0.0262%) and (v) Mr. S. Nagarajan – 28,138 (0.0088%). No Director of the Bank holds shares in your Bank for other

person/s on a beneficial basis. No Director holds any other security issued by the Bank.

Details of Directors to be appointed / reappointed at the AGM

Mr. Premchand Godha and Mr. Ajay Hinduja were appointed Additional Directors (Non-executive) of your Bank by the Board

of Directors at its meeting held on October 31, 2006. Mr. S. C. Tripathi was appointed Additional Director (Non-executive) of

your Bank by the Board of Directors by circulation on February 14, 2007. They would all hold office as Additional Directors

upto the ensuing Annual General Meeting.

21

Mr. R. Seshasayee was appointed Additional Director of your Bank on May 3, 2007 and, on receipt of the requisite approval

from Reserve Bank of India, has taken charge as Part-time Non-executive Chairman on July 24, 2007 for a period of two

years from that date. Mr. Seshasayee will hold office as Additional Director upto the date of the ensuing Annual General

Meeting.

Your Directors welcome Mr. R. Seshasayee, Mr. Premchand Godha, Mr. Ajay Hinduja and Mr. S. C. Tripathi on the Board and

look forward to valuable contributions from them. Your Bank has received valid notices from members for their appointment as

Directors under Section 257 of the Companies Act, 1956.

Dr. Ram Buxani, Mr. T. Anantha Narayanan and Mr. S. Nagarajan, Directors, retire by rotation at the forthcoming Annual

General Meeting, in accordance with Article 112 of the Articles of Association of your Bank and the applicable provisions of

the Companies Act, 1956, and being eligible, have offered themselves for re-appointment.

A brief profile of the Directors seeking re-appointment/appointment is given below:

Director Qualification and Expertise in specific Date of Name of Number of Shareholding

Experience functional areas Appointment companies in Committees (No. of shares)

which Director (of other

companies in

which member)

Dr. Ram Buxani Ph. D International January 14, • Cosmos- Nil 1,71,902

Business 2000 Sanjay Weaving Mills Private Limited

• Sanjay-Gulf Industries Private Limited

Mr. S. Nagarajan B.Com, ACA, ACS Accountancy & August 28, • IndusInd Information Technology Limited Nil 28,138

Finance 2004

Mr. Premchand Godha B. Com., A.C. A. Finance, and SSI October 31, • Ipca Laboratories Ltd. Member in 100

(practical experience) 2006 • Vasant Investments Corporation Ltd. 3 Committees

• Brescon Corporate Advisors Ltd.

• Kaygee Investments Pvt. Ltd.

• Gudakesh Investments & Traders Pvt. Ltd.

• Paranthapa Investments & Traders Pvt. Ltd.

• Kaygee – Loparex India Pvt. Ltd.

Mr. Ajay Hinduja Degree in Banking & Finance October 31, • Hinduja Group (India) Ltd. Nil 83,900

Economics 2006

(with specialization

in Finance).

Mr. S. C. Tripathi M. Sc., LLB, Rural Economy & February 14, • IL & FS Infrastructure Development Corporation

P. G. Diploma in Cooperation 2007 • Reliance Capital Asset Management Co. Ltd.

Development • Modi Rubber Ltd. (BIFR Special Nominee Director)

(Cantab), Nil Nil

AIMA Diploma

in Management

Mr. R. Seshasayee B. Com., A.C.A. Accountancy & May 3, 2007 • Ashok Leyland Ltd. , Managing Director Member in Nil

Finance • Ashley Holdings Ltd. 2 Committees

• Ashley Investments Ltd.

• Ashley Transport Services Ltd., Chairman

• Ennore Foundries Ltd.

• Irizar TVS Ltd.

• Hinduja Group (India) Ltd.

• Ashley Airways Ltd., Chairman

Committees of Board

The Board has constituted the following Board - Level Committees to take decisions and monitor the activities falling within

their terms of reference. The Board’s Committees are as follows:

Committee of Directors

Terms of Reference The Committee of Directors exercises powers delegated to it by the Board, for managing the affairs of

your Bank; for efficient control over operational areas; and for ensuring speedy disposal of matters

requiring immediate approval.

Composition The Committee comprises seven members viz., Mr. R. Sundararaman, Mrs. Kanchan Chitale, Mr. T.

Anantha Narayanan, Mrs. Pallavi Shroff (inducted w.e.f. July 29, 2006), Dr. T. T. Ram Mohan (inducted

w.e.f January 29, 2007), Mr. Bhaskar Ghose and Mr. S. Nagarajan.

Meetings The Committee met six times during the financial year 2006-07, viz., on April 13, 2006, July 14, 2006

(Mr. T. Anantha Narayanan was unable to attend); August 22, 2006, November 24, 2006 (Mrs.

Kanchan Chitale and Mrs. Pallavi Shroff were unable to attend), December 19, 2006 (Mr. R.

Sundararaman and Mr. T. Anantha Narayanan were unable to attend) and January 23, 2007 (Mr. T.

Anantha Narayanan and Mrs. Pallavi Shroff were unable to attend). Except as indicated within the

brackets, all the members had attended these meetings.

22

Audit Committee of the Board

Terms of reference The role of the Audit Committee includes, inter alia, (1) Oversight of the Bank’s financial reporting

process and the disclosure of its financial information to ensure that the financial statement is correct,

sufficient and credible, (2) Recommending to the Board, the appointment / re-appointment of auditors

and fixation of audit fees, (3) Reviewing with the management, the quarterly and annual financial

statements before submission to the Board for approval, with particular reference to:-

(i) Changes, if any, in accounting policies and practices and reasons for the same; (ii) Major accounting

entries involving estimates based on the exercise of judgment by the management; (iii) Significant

adjustments made in the financial statements arising out of audit findings; (iv) Disclosure of related

party transactions, if any; (v) Qualifications in the draft Audit Report; and (vi) Management discussion

and analysis of financial condition and results of operations.

The specialised functions of the Audit Committee include (1) Reviewing with the management, the

performance of statutory and internal auditors, adequacy of the internal control systems, (2) Reviewing

the findings of any internal investigations by the internal auditors into matters where there is suspected

fraud or irregularity or a failure of internal control systems of a material nature.

Composition The Committee comprises four members viz., Mrs. Kanchan Chitale (Chairperson), Mr. R.

Sundararaman, Mr. T. Anantha Narayanan and Mr. S. Nagarajan.

Meetings The Committee met six times during the financial year 2006-07, viz., on April 13, 2006, June 12, 2006,

July 28, 2006, October 30, 2006 (Mr. T. Anantha Narayanan was unable to attend), January 29, 2007

and March 8, 2007. Except as indicated within the brackets, all the members had attended these

meetings.

Credit Committee of Directors

(The Board of Directors in their meeting held on June 13, 2006 dissolved the Credit Committee of

Directors)

Terms of reference The Credit Committee approves credit exposures that are beyond the powers delegated to the

Executives of the Bank. This facilitates speedy sanction of larger credit proposals while permitting

greater control on such proposals.

Composition The Committee comprised six members viz., Mr. R. J. Shahaney (Chairman), Mr. R. Sundararaman,

Mrs. Kanchan Chitale, Mr. T. Anantha Narayanan, Mr. Bhaskar Ghose and Mr. S. Nagarajan.

Meetings During the financial year 2006-07, the Committee met once, on May 24, 2006 (Mr. R. J. Shahaney

and Mrs. Kanchan Chitale were unable to attend). Except as indicated within the brackets, all the

members had attended the meeting.

Nomination Committee

Terms of reference The Committee conducts due diligence as to the credentials of any Director before his / her appointment,

and makes appropriate recommendations to the Board, in consonance with the Ganguly Committee

recommendations and the requirements of RBI. The Committee also discharges the functions of the

Remuneration Committee envisaged in Clause 49 of the Listing Agreement.

Composition The Committee comprises three members viz., Mr. R. J. Shahaney (Chairman), Mr. R. Sundararaman

and Mr. Bhaskar Ghose.

Meetings The Committee met thrice during the financial year 2006-07 on June 13, 2006, September 27, 2006

and March 9, 2007 (Mr. R. J. Shahaney, Chairman, demitted office on September 28, 2006). Except

as indicated within the brackets, all the members had attended these meetings.

Stakeholders Relation Committee

Terms of Reference The objective of the Stakeholders Relation Committee is the redressal of stakeholders’ complaints.

The Company Secretary discharges the responsibilities of a compliance officer.

Composition The Committee comprises three members viz., Mr. Vijay Vaid (retired w.e.f. June 10, 2006), Dr. Ram

Buxani, Mr. T. Anantha Narayanan and Mr. Bhaskar Ghose. A non-executive Director is elected the

Chairman by the members present at the meeting.

Meetings The Committee met once during the financial year, viz., on September 27, 2006, which was attended

by all the members, except Mr. Vijay Vaid who retired w.e.f. June 10, 2006.

Special Committee for monitoring large value frauds

Terms of Reference In accordance with the directives of Reserve Bank of India, a Special Committee has been set up for

monitoring and follow-up of cases of frauds involving amounts of Rs.1 crore and above.

Composition The Committee comprises five members viz., Mr. Vijay Vaid (retired w.e.f. June 10, 2006), Mr. Anil

Harish (retired w.e.f. July 21, 2006), Mr. R. Sundararaman, Mrs. Kanchan Chitale, Dr. T. T. Ram

Mohan (inducted w.e.f. July 29, 2006), Mrs. Pallavi Shroff (inducted w.e.f. July 29, 2006) and Mr.

Bhaskar Ghose. A non-executive Director is elected the Chairman by the members present at the

meeting.

23

Meetings The Committee met twice during the financial year, viz., on December 19, 2006 (Mr. R. Sundararaman

was unable to attend) and March 9, 2007 (Mrs. Pallavi Shroff was unable to attend).

Customer Service Committee

Terms of reference The Committee’s function is to monitor the customer service extended by your Bank and to attend to

the needs of customers.

Composition The Committee comprises four members viz., Mr. Vijay Vaid (retired w.e.f. June 10, 2006), Mrs.

Kanchan Chitale, Dr. T T Ram Mohan (inducted w.e.f. July 29, 2006), Mr. Bhaskar Ghose and Mr. S.

Nagarajan. A non-executive Director is elected Chairman by the members present at the meeting.

Meetings The Committee met thrice during the financial year, viz., on June 13, 2006, December 19, 2006 and

March 9, 2007 during the financial year under review. All the members of the Committee were present

at these meetings.

Risk Management Committee

Terms of reference The Committee’s role is to examine risk policies and procedures developed by your Bank and to

monitor adherence to various risk parameters and prudential limits by the various operating departments.

Composition The Committee comprises five members viz., Mr. R. Sundararaman, Mr. T. Anantha Narayanan, Dr. T.

T. Ram Mohan, Mr. Bhaskar Ghose and Mr. S. Nagarajan. A non-executive Director is elected Chairman

by the members present at the meeting.

Meetings The Committee met twice on June 12, 2006 (Mr. Bhaskar Ghose was unable to attend) and November

24, 2006 during the financial year under review. Except as indicated within the brackets, all the

members had attended these meetings.

Details of the three previous Annual General Meetings

AGM Day and Date Time Venue Whether Special

Resolution Passed

10th

Friday, August 13, 2004 2.30 p.m. Hotel Taj Blue Diamond

11 Koregaon Road, Pune - 400 001 Yes

11th

Saturday, September 3, 2005 2.30 p.m. Hotel Taj Blue Diamond

11 Koregaon Road, Pune - 400 001 Yes

12th

Thursday, September 28, 2006 10.30 a.m. Hotel Sun-n-Sand

262 Bund Garden Road,

Pune - 400 001 Yes

Special Resolution

The details of Special Resolutions passed at the General Body Meetings of shareholders in the last three years is given

below:

General Body Meeting Date Resolution

Tenth Annual General Meeting August 13, 2004 • Insertion of Article 123A for appointment of whole-time

Director.

Eleventh Annual General Meeting September 3, 2005 • Rectification of errors of punctuation, spelling, formatting

and grammar in the Articles of Association.

• Opening of currency chest(s).

• Alteration to Article of Association to amend nomenclature

of the chapter relating to capital - ‘CAPITAL AND

INCREASE AND REDUCTION IN CAPITAL’ changed to

‘CAPITAL’.

• Approval for increase in Authorised Capital.

• Increase in foreign investments under the automatic route

in Bank’s capital to seventy-four per cent of the paid-up

equity capital.

• Authority to issue ADRs / GDRs.

Twelfth Annual General Meeting September 28, 2006 • Authority to create, issue, offer and / or allot equity shares

and /or equity shares through depository receipts/ ADRs

/ GDRs, etc. of aggregate face value of equity shares

not exceeding 25% of the Authorised Share Capital of

the Bank.

Postal Ballot

No Resolutions were passed through postal ballot during the last financial year.

24

Material Disclosures

Related Party Transactions: During the year, there were no materially significant related party transactions that could have

had any potential for conflict with the interests of your Bank at large. Details are available in para 12 of Schedule XVIII (Notes

on Accounts) forming part of the Audited Financial Statements for the year.

Penalties, etc.: In the matter of irregularities observed in the opening of a demat account in October 2000, Securities and

Exchange Board of India (SEBI) vide its Order dated August 10, 2006, suspended the Bank’s registration as Depository

Participant of NSDL for a period of fifteen days. The Bank complied with the Order, and accordingly no new depository

accounts were opened from August 31, 2006 to September 14, 2006.

Disqualification of Directors: As on March 31, 2007, none of the Directors of your Bank was disqualified under section

274(1) (g) of the Companies Act, 1956.

Mandatory requirements of Clause 49: Your Bank has complied with all the mandatory requirements of Corporate Governance

stipulated under Clause 49 of the Listing Agreement. A certificate to this effect has been issued by M/s. Bhandari &

Associates, Company Secretaries, and the same has been incorporated elsewhere in this document.

Accounting Standards: In the preparation of financial statements for the year 2006-2007, the treatment prescribed in the

Accounting Standards issued by the Institute of Chartered Accountants of India from time to time, has been followed by your Bank.

Non-Mandatory requirements of Clause 49 of the Listing Agreement

The status of compliance with the non-mandatory requirements of Clause 49 of the Listing Agreement is given below.

The Chairman’s Office: The Chairman (Non-executive) has been provided with an office at the Corporate Office of the Bank.

Tenure of Independent Directors: While Clause 49 puts forth a non-mandatory requirement that the tenure of a Director

may be restricted to nine years, according to Section 10A (2A) of the Banking Regulation Act, 1949 “no director of a banking

company, other than its chairman or whole-time director, by whatever name called, shall hold office continuously for a period

exceeding eight years”.

Remuneration Committee: In accordance with the requirements stipulated by RBI, pursuant to the Ganguly Committee

Report, your Board of Directors has constituted a Nomination Committee comprising two non-executive independent Directors

and one whole-time Director. The Committee conducts due diligence as to the credentials of any Director before his

appointment and makes appropriate recommendations to the Board. The Committee discharges the functions of the

Remuneration Committee envisaged in Clause 49 of the Listing Agreement.

Shareholder Rights: All information pertaining to business and developmental activities are intimated to the stock exchanges

on a continuous basis. The stock exchanges in turn announce the corporate information on their respective websites. The

quarterly financial results are published in the newspapers, apart from being reported on EDIFAR and the websites of the

stock exchanges. Therefore your Bank does not find it expedient to send individual communications to the shareholders

regarding significant events and financial performance every half-year.

Audit qualifications: Your Bank endeavours to move towards a regime of unqualified financial statements.

Training of Board Members: Your Directors are being provided with opportunities to attend seminars and workshops in order

to equip them with relevant inputs for effective discharge of their responsibilities as Directors.

Mechanism for evaluating non-executive Board Members: Your Bank does not have a mechanism for evaluating the

performance of non-executive Directors.

Whistleblower Policy: Your Bank has not instituted a formal whistleblower mechanism.

Means of Communication

• Besides communicating to the stock exchanges on which the Bank’s shares are listed, your Bank’s financial results are

also published on a quarterly basis in leading newspapers (Financial Express and Loksatta) and displayed on the Bank’s

website (www.indusind.com).

• In accordance with the requirements of publishing financial and other data in the Electronic Data Information Filing and

Retrieval (EDIFAR) database, your Bank loads the required information on the specified website (www.sebiedifar.nic.in)

maintained for Securities and Exchange Board of India.

• All information relevant to the investors is published on the Bank’s website, and it is updated on a regular basis.

• Press releases on the performance of your Bank on various fronts are issued at appropriate times.

• Presentations made to financial analysts are displayed on your Bank‘s website (www.indusind.com) from time to time.

Subsidiary Company – ALF Insurance Services Private Limited

Your Bank does not have a “material non-listed Indian subsidiary” as defined in Clause 49 of the Listing Agreement. However,

ALF Insurance Services Private Limited is a wholly-owned subsidiary of your Bank. The company has been incorporated with

the objective of pursuing insurance broking. It has applied for a licence to Insurance Regulatory and Development Authority

and the same is awaited. It has a paid-up share capital of Rs.50 lakhs. During the year under review, the company has not

done any business.

The Audit Committee of your Bank has reviewed the financial statements and investments of the subsidiary, ALF Insurance

Services Private Limited. The minutes of the Board meetings of this subsidiary company have been placed before the Board

of your Bank.

25

Corporate Social Responsibility

Corporate Social Responsibility is an intrinsic part of your Bank’s business strategy and the Bank participated, organized and

supported various community activities and events throughout the year with focus being on Public Health and Education.

Your Bank participated, inter alia, in the following activities:

• Release of social messages as scrollers on major news channels during “World No Tobacco Day”.

• Associated with one of the largest medical camps namely DEK 2007 (Diabetes, Eyes and Kidney checkup) along with

Rotary District 3140.

• Sponsored health-related camps in association with service clubs and Hinduja Hospital, Mumbai.

• To generate awareness about saving habit in the minds of young children, your Bank conducted “Young Saver Talent

Hunt 2006-07” across 120 locations. Over 45,000 students appeared in the examination and there was overwhelming

response from the student community.

General Information for Shareholders

• Financial Year : 2006-07

• Board meeting for adoption of audited financial accounts : May 25, 2007

• Posting of Annual Report 2006-07 : August 21, 2007

• Day, Date and Time of 13th Annual General Meeting : Tuesday, September 18, 2007 at 12.00 noon

• Venue : Hotel Taj Blue Diamond, 11 Koregaon Road, Pune - 411001

• Financial Calendar : April 1 to March 31

• Book Closure : September 4, 2007 to September 18, 2007

• Dividend Payment date : September 21, 2007

• Bank’s Website : www.indusind.com

• Board meeting for consideration of unaudited results

for first quarter of FY 2007 - 08 : July 25, 2007

Distribution of shareholding of IndusInd Bank as on March 31, 2007

Range- Shares No. of Folios % No. of shares %

Upto 1,000 116042 91.17 30622818 9.58

1,001 - 5,000 9480 7.45 19967079 6.24

5,001 - 10,000 947 0.74 7097158 2.22

10,001 - 50,000 652 0.51 13486127 4.22

50,001 & above 161 0.13 248634754 77.74

TOTAL 127282 100.00 319807936 100.00

Outstanding GDRs / ADSs / Warrants or any Convertible Debenture, conversion date and likely impact on equity

IndusInd Bank has 29,490,300 GDRs (equivalent to 29,490,300 equity shares) outstanding, which constituted 9.22% of

IndusInd Bank’s total equity capital at March 31, 2007.

Shareholding as on March 31, 2007

i. Distribution

Category No. of shares held % of shareholding

A. Promoters’ holding 90999984 28.45

B. Non-Promoters’ Holding 228807952 71.55

1 Institutional Investors

a Mutual Funds and UTI 5815874 1.82

b Banks, Financial Institutions, Insurance Companies

(Central/State Gov. Institutions/Non-government Institutions) 4252115 1.33

c FIIs 51504348 16.10

Sub Total 61572337 19.25

2 Global Depository Receipts 29490300 9.22

3 Others

a Private Corporate Bodies 51836685 16.21

b Indian Public* 68056578 21.29

c NRIs / OCBs* 17568808 5.49

d Clearing Members 283244 0.09

Sub Total 137745315 43.08

GRAND TOTAL 319807936 100.00

* ‘Indian Public’ includes 28818 shares held by Resident Independent Directors, and Category ‘NRIs / OCBs’ includes

255802 shares held by NRI Directors.

26

ii. Major Shareholders (with more than 1 percent shareholding)

S. No. Name of Shareholder No. of shares held % of shareholding

1 IndusInd International Holdings Ltd. 68499984 21.42

2 The Bank Of New York (GDR-Depository). 29490300 9.22

3 Ashok Leyland Ltd. 29031764 9.08

4 IndusInd Limited 15500000 4.85

5 Amam Limited a/c Invest-India (Mauritius) Ltd. 14377828 4.50

6 KII Limited 8306663 2.60

7 Amam Limited 7939868 2.48

8 De Five (Mauritius) Holdings Ltd. 7000000 2.19

9 Sital K Motwani 5652120 1.77

10 ABN AMRO Bank N V London Br 4483620 1.40

11 IDL Industries Limited 4314323 1.35

12 Macquarie Bank Limited 3727528 1.17

13 Lotus Global Investments Ltd. 3648350 1.14

iii. Total foreign shareholding

No. of shares held % of shareholding

Total foreign shareholding 189563440 59.27

Of which GDR/ADR 29490300 9.22

Details of complaints received and resolved from April 1, 2006 to March 31, 2007

Complaints Received Attended to Pending

Non-Receipt of Share Certificate 126 126 0

Non-Receipt of Dividend Warrants 380 380 0

Non-Receipt of Endorsement Stickers 1 1 0

Non-Receipt of Annual Report 38 38 0

Non-Receipt of Demat Credit/ Remat Certificate 30 30 0

Non-Receipt of Rejected DRF 26 26 0

Non-Receipt of Exchanged Certificate 49 49 0

Non-Receipt of Split / Duplicate/ Replacement Certificate 8 8 0

Others 17 17 0

Total 675 675 0

Listing details of the Bank’s Equity Shares

Name of the Stock Exchange Address of the Stock Code No. Annual Listing Fee

Stock Exchange for 2006-2007

Bombay Stock Phiroz Jeejeebhoy Towers 532187 Rs.2,57,333/-paid on

Exchange Limited Dalal Street, Mumbai 400 001 20th

April 2007

National Stock Exchange Plaza, 5th Floor INDUSINDBK Normal – Rs.1,47,000/-paid on

Exchange of India Limited Bandra-Kurla Complex EQ (physical)Depository – 13th

April 2007

Plot No. C/1, G Block, AE (manual lots)

Bandra (E), Depository –

Mumbai - 400 051 BE (odd lots)

Luxembourg Stock Société de la Bourse de 111202 Euro 1875

Exchange (Global Depository Luxembourg, Societe Anonyme paid on April 18, 2007

Receipts) RC Luxembourg B 6222.

27

0

2000

4000

6000

8000

10000

12000

14000

16000

BANKEXSENSEX

Mar-07Mar-07Feb-07Jan-07Dec-06Nov-06Oct-06Sep-06Aug-06Jul-06Jun-06May-06Apr-06

Price

(Actual values of the indices have been retained in the graph whereas the price has

been factored for the purpose of comparison. The price has been multiplied by 50.)

Market Price Data of the Bank’s shares

i. National Stock Exchange of India Limited

Date Price of Shares Turnover in

Open (Rs.) High (Rs.) Low (Rs.) Close (Rs.) Rs. Lakhs Nifty Bank Nifty

3-Apr-06 47.45 48.45 47.20 47.85 411.50 3,473.30 4,724.05

2-May-06 56.15 60.60 56.15 59.65 1459.94 3,605.45 4,729.30

1-Jun-06 46.95 47.60 43.80 44.20 288.94 2,962.25 4,075.50

3-Jul-06 34.10 35.50 33.60 34.10 243.66 3,150.95 3,719.25

1-Aug-06 32.85 33.10 32.00 32.45 167.42 3,147.80 4,050.75

1-Sep-06 43.05 44.00 43.05 43.60 131.33 3,435.45 4,650.85

3-Oct-06 50.90 51.10 49.50 49.80 811.83 3,569.60 5,264.90

1-Nov-06 44.15 44.25 43.40 43.65 206.27 3,767.05 5,623.65

1-Dec-06 44.90 47.00 44.90 45.20 202.70 3,997.60 6,330.75

2-Jan-07 46.20 49.25 46.20 48.65 743.10 4,007.40 6,039.55

1-Feb-07 53.50 54.60 52.55 54.10 327.76 4,137.20 6,115.20

1-Mar-07 44.00 45.50 42.90 45.10 327.01 3,811.20 5,388.95

30-Mar-07 40.20 43.50 39.70 42.00 1066.20 3,821.55 5,308.50

0

1000

2000

3000

4000

5000

6000

7000

Bank NiftyNifty


Price

(Actual values of the indices have been retained in the graph whereas the price has


(Actual volumes of trades have been retained in the graph whereas the price has


ii. Bombay Stock Exchange Limited

Date Price of Shares Turnover in

Open (Rs.) High (Rs.) Low (Rs.) Close (Rs.) Rs. Lakhs Sensex Bankex

3 Apr -06 47.50 48.40 47.20 47.95 185.98 11,564.36 5,341.97

2 May -06 57.45 60.50 56.05 59.60 635.41 12,218.78 5,459.79

1 Jun -06 47.90 47.90 43.90 44.20 146.79 10,071.42 4,729.81

3 Jul -06 34.90 35.50 33.60 34.20 96.33 10,695.26 4,359.28

1 Aug -06 33.30 33.35 32.15 32.50 53.82 10,751.66 4,741.22

1 Sep -06 43.50 43.80 43.10 43.45 50.36 11,778.02 5,383.86

3-Oct-06 50.00 51.15 49.50 49.75 359.47 12,366.39 6,014.43

1 Nov -06 45.00 45.00 43.40 43.65 49.80 13,033.04 6,498.47

1 Dec -06 44.90 46.15 44.90 45.20 70.32 13,844.78 7,289.88

2 Jan -07 47.75 49.50 47.50 48.50 184.90 13,942.24 7,120.43

1 Feb -07 52.50 54.60 52.15 53.90 111.91 14,267.18 7,413.15

1 Mar -07 45.05 45.80 43.00 45.10 161.86 13,159.55 6,584.50

30-Mar-07 40.20 43.80 39.90 41.95 313.30 13,072.10 6,542.01

0

200

400

600

800

1000

1200

1400

1600


Turnover Price

0

100

200

300

400

500

600

700


Turnover Price

28

Dematerialisation of shares and liquidity

Your Bank’s shares are tradable (in electronic form only) at the Bombay Stock Exchange Limited and the National Stock

Exchange of India Limited. 84.49% of the Bank’s shares are dematerialised and the rest remain in physical form. The volume

of trades and share price information is provided elsewhere in this document.

In view of the numerous advantages offered by the depository system, members holding the shares of the Bank in physical

form are requested to get the same dematerialised and converted to the electronic form.

Share Transfer System

A Share Transfer Committee comprising the Bank’s executives has been formed to deal with matters relating to transfer of

shares, issue of duplicate share certificates in lieu of mutilated share certificates or those which are misplaced / lost, and

other related matters. The approvals granted by the Share Transfer Committee are confirmed at subsequent Board meetings.

With a view to expediting the process of physical share transfers, the Share Transfer Committee meets on the first and third

Friday of every month.

Trading in the Bank’s shares now takes place compulsorily in dematerialised form. However, members holding share certificates

in physical form are entitled to transfer their shareholding by forwarding the share certificates along with valid, duly executed

and stamped transfer deed signed by the member (or on his/her behalf) and the transferee to the Bank or to the Bank’s

Registrar & Share Transfer Agent, Intime Spectrum Registry Ltd.

Registrar & Share Transfer Agent

Intime Spectrum Registry Limited

C-13, Pannalal Silk Mills Compound

L.B.S. Marg, Bhandup (West)

Mumbai – 400078

Contact Person: Mr. KirtiKumar

Tel. No.: 25963838 Fax: 25946969

Email: [email protected]

Redressal of Investors’ Grievances

In order to service the investors in an efficient manner and to attend to their grievances, your Bank has constituted an

‘Investor Services Cell’ at its Corporate Office at Mumbai. Members are welcome to contact:

Mr. Lalit Dalvi

Investor Services Cell

IndusInd Bank Ltd.

Solitaire Corporate Park

167, Guru Hargovindji Marg

Andheri (East), Mumbai - 400093

Tel: 022 66412487 Fax: 022 66412347


Unclaimed Dividends

In accordance with the provisions of Section 205A of the Companies Act, 1956, read with Investor Education and Protection

Fund (Awareness and Protection of Investors), Rules 2001, the dividends that remain unclaimed for a period of seven years

from the date of transfer of the dividend to ‘unpaid dividend account’, shall be transferred to the ‘Investor Education and

Protection Fund’ (IEPF). The table below gives the due dates for such transfers that are required to be effected during the

period October 2007 – October 2008. Members are requested to take note of the due dates for such transfers.

Year Name of Company Type of Date of Payment Due date for

dividend of dividend transfer to IEPF

1999-00 Ashok Leyland Finance Ltd. Final 31.08.2000 11.10.2007

2000-01 Ashok Leyland Finance Ltd. Final 25.07.2001 23.08.2008

2000-01 IndusInd Bank Ltd. Final 25.08.2001 26.09.2008

2000-01 (18 months) IndusInd Enterprises & Finance Ltd. Final 31.08.2001 02.10.2008

Pursuant to Section 205C of the Companies Act, 1956, it is clarified that no claims shall lie against IEPF or the Bank in

respect of individual amounts which have remained unclaimed or unpaid for a period of seven years from the dates that they

first became due for payment, and no payment shall be made in respect of any such amounts.

29

To the Members of IndusInd Bank Limited

1. We have audited the attached balance sheet of IndusInd Bank Limited (the ‘Bank’) as at March 31, 2007 and also the

profit and loss account and cash flow statement for the year ended on that date annexed thereto. These financial

statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial

statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that

we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the

financial statements. An audit also includes assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a

reasonable basis for our opinion.

3. The balance sheet and profit and loss account are drawn up in conformity with Forms A and B (revised) of the Third

Schedule to the Banking Regulation Act, 1949, read with Section 211 of the Companies Act, 1956 (the ‘Companies Act’).

4. The reports on accounts of 34 branches audited by branch auditors and the accounts of overseas representative offices

at Dubai and London, as submitted by the management of the Bank, have been dealt with in preparing our report in the

manner considered appropriate by us.

5. We report that:

a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary

for the purposes of our audit and have found them to be satisfactory;

b) In our opinion, the transactions of the Bank which have come to our notice have been within its powers;

c) In our opinion, proper books of account as required by law have been kept by the Bank so far as appears from our

examination of those books and proper returns adequate for the purposes of our audit have been received from

branches not visited by us. The Branch Auditors’ Reports have been forwarded to us and have been appropriately

dealt with;

d) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with

the books of account and with the audited returns received from the branches;

e) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply

with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, read with the

guidelines issued by Reserve Bank of India insofar as they apply to the Bank;

f) On the basis of written representations received from the directors, as on March 31, 2007, and taken on record by

the Board of Directors, we report that none of the directors are disqualified from being appointed as a director in

terms of clause (g) of sub-section (1) of Section 274 of the Companies Act;

g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts

give the information required by the Companies Act in the manner so required for banking companies, and give a

true and fair view in conformity with the accounting principles generally accepted in India;

i. in case of the balance sheet, of the state of the affairs of the Bank as at March 31, 2007;

ii. in case of the profit and loss account, of the profit for the year ended on that date; and

iii. in case of cash flow statement, of the cash flows for the year ended on that date.

For S. R. Batliboi & Co.

Chartered Accountants

per Viren H. Mehta

a Partner

Membership No. 048749

Mumbai

May 25, 2007

AUDITORS’ REPORT

30

BALANCE SHEET AS AT MARCH 31, 2007

This is the Balance Sheet referred For INDUSIND BANK LTD.

to in our report of even date.

For and on behalf of Dr. Ram Buxani Kanchan Chitale

S.R. Batliboi & Co. Director Director


per Viren H. Mehta Bhaskar Ghose S. Nagarajan

a Partner Managing Director Joint Managing Director

Membership Number: 048749

S. V. Zaregaonkar Haresh Gajwani

Executive Vice President & CFO Company Secretary

Place : Mumbai

Date : May 25, 2007

Rupees in 000s

SCHEDULE As at 31.3.07 As at 31.3.06

CAPITAL AND LIABILITIES

Capital I 320,00,00 290,50,97

Reserves and Surplus II 736,78,81 575,54,92

Deposits III 17644,80,48 15006,30,14

Borrowings IV 592,50,76 534,94,98

Other Liabilities and Provisions V 1633,04,01 1215,20,96

TOTAL 20927,14,06 17622,51,97

ASSETS

Cash and Balances with Reserve Bank of India VI 1021,16,90 604,08,93

Balances with Banks and Money at Call and Short Notice VII 1574,22,80 876,41,50

Investments VIII 5891,65,50 5409,90,43

Advances IX 11084,19,97 9310,46,22

Fixed Assets X 369,56,99 339,58,79

Other Assets XI 986,31,90 1082,06,10

TOTAL 20927,14,06 17622,51,97

Contingent Liabilities XII 20761,73,65 16836,46,12

Bills for Collection 1461,36,34 1758,71,47

Principal Accounting Policies XVII

Notes on Accounts XVIII

The schedules referred to above form an integral part of Balance Sheet.

The Balance Sheet has been prepared in conformity with Form “A” of the Third Schedule to the Banking Regulation Act, 1949.

31

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

Rupees in 000s

SCHEDULE Year ended Year ended

31.3.07 31.3.06

I. INCOME

Interest Earned XIII 1500,25,07 1188,28,33

Other Income XIV 244,13,24 188,83,39

TOTAL 1744,38,31 1377,11,72

II. EXPENDITURE

Interest Expended XV 1228,84,69 873,19,13

Operating Expenses XVI 343,95,62 316,62,62

Provisions and Contingencies 103,36,33 150,48,20

TOTAL 1676,16,64 1340,29,95

III. PROFIT 68,21,67 36,81,77

Add : Transfer from Investment Fluctuation Reserve - 78,89,65

Less : Tax Adjustments of Previous years 99,45 -

AMOUNT AVAILABLE FOR APPROPRIATION TOTAL 67,22,22 115,71,42

IV. APPROPRIATIONS

Transfer to

a) Statutory Reserve 17,05,42 9,20,44

b) Capital Reserve 2,21,99 1,42,36

c) Dividend (Proposed) 19,18,85 -

d) Corporate Dividend Tax 3,26,10 -

41,72,36 10,62,80

Balance transferred to Balance Sheet 25,49,86 105,08,62

TOTAL 67,22,22 115,71,42

Earnings per share (basic and diluted)(Rupees) XVIII(12) 2.31 1.27

Principal Accounting Policies XVII

Notes on Accounts XVIII

The schedules referred to above form an integral part of Profit & Loss Account.

The Profit & Loss Account has been prepared in conformity with Form “B” of the Third Schedule to the Banking Regulation Act, 1949.

This is the Profit and Loss Account For INDUSIND BANK LTD.

referred to in our report of even date.









Place : Mumbai

Date : May 25, 2007

32

SCHEDULES

Rupees in 000s

As at 31.3.07 As at 31.3.06

SCHEDULE - I CAPITAL

Authorised Capital

40,00,00,000 (Previous year 40,00,00,000) equity shares of Rs.10/- each 400,00,00 400,00,00

Issued, Subscribed and Called Up Capital


Paid up Capital


Add : Forfeited 3,84,200 (Previous year 3,84,200) equity shares of Rs. 10/- each 19,21 19,21

On March 29, 2007,Bank issued 2,94,90,300 equity shares of Rs. 10/- in the form

of Global Depository Receipts each representing one share at a price of US $

1.147 per GDR. Accordingly as at March 31, 2007, the paid-up share capital and

share premium account under reserves of the Bank stand increased by Rs. 29,49,03

and Rs. 116,46,62 respectively.

320,00,00 290,50,97

SCHEDULE - II RESERVES AND SURPLUS

1 Statutory Reserve

Opening balance 62,99,07 53,78,63

Additions during the year 17,05,42 9,20,44

80,04,49 62,99,07

2 Capital Reserve



30,03,24 27,81,25

3 Share Premium Account


Additions during the year 116,46,62 -

412,96,39 296,49,77

4 General Reserve


1,35,57 1,35,57

5 Investment Allowance Reserve


1,00,00 1,00,00

33

SCHEDULES (Contd.)

6 Revenue and Other Reserves

(a) Investment Fluctuation Reserve

Opening balance - 78,89,65

Additions during the year - -

Transfer to Profit and loss account - 78,89,65

- -

(b) Profit and Loss account



211,39,12 185,89,26

TOTAL (a)+(b) 211,39,12 185,89,26

TOTAL(1-6) 736,78,81 575,54,92

Rupees in 000s

As at 31.3.07 As at 31.3.06

SCHEDULE - III DEPOSITS

A 1 Demand Deposits

i) From Banks 43,15,92 68,24,90

ii) From Others 1668,13,70 1133,13,36

2 Savings Bank Deposits 921,40,67 729,23,81

3 Term Deposits

i) From Banks 1585,74,12 3506,08,25

ii) From Others 13426,36,07 9569,59,82

TOTAL (1,2 & 3) 17644,80,48 15006,30,14

B Deposits of Branches

1 In India 17644,80,48 15006,30,14

2 Outside India - -

TOTAL 17644,80,48 15006,30,14

34

SCHEDULES (Contd.)

SCHEDULE - IV BORROWINGS

1 Borrowings in India

i) Reserve Bank of India 18,00,00 -

ii) Other Banks 49,30,70 72,07,81

iii) Other Institutions and Agencies 336,34,92 150,00,00

2 Borrowings outside India 188,85,14 312,87,17

TOTAL (1 & 2) 592,50,76 534,94,98

Secured borrowings included in 1 & 2 above - 55,00,00

SCHEDULE - V OTHER LIABILITIES AND PROVISIONS

1 Bills Payable 255,98,14 157,91,30

2 Interest Accrued 181,08,20 80,20,69

3 Unsecured Non-Convertible Redeemable Debentures/Bonds 537,10,00 539,10,00

(Subordinated for Tier-II Capital)

4 Unsecured Non-Convertible Redeemable Non-Cumulative Subordinated

Upper Tier II Bonds 308,90,00 100,00,00

5 Others (including Provisions and proposed dividend) 349,97,67 337,98,97

TOTAL 1633,04,01 1215,20,96

SCHEDULE - VI CASH AND BALANCES WITH RESERVE BANK OF INDIA

1 Cash in hand (including foreign currency notes) 96,85,22 83,14,05

2 Balances with Reserve Bank of India

i) In Current Accounts 924,31,68 520,94,88

ii) In Other Accounts - -

TOTAL (1 & 2) 1021,16,90 604,08,93

SCHEDULE - VII BALANCES WITH BANKS AND

MONEY AT CALL AND SHORT NOTICE

1 In India

i) Balances with Banks

a) In Current Accounts 364,39,11 310,91,71

b) In Other Deposit Accounts 385,31,51 459,80,74

ii) Money at Call and Short Notice with banks 100,00,00 -

TOTAL (i & ii) 849,70,62 770,72,45

2 Outside India

i) In Current Accounts 25,74,16 105,69,05

ii) In Other Deposit Accounts 698,78,02 -

iii) Money at Call and Short Notice - -

TOTAL (i, ii & iii) 724,52,18 105,69,05

GRAND TOTAL (1 & 2) 1574,22,80 876,41,50

Rupees in 000s

As at 31.3.07 As at 31.3.06

35

SCHEDULES (Contd.)

SCHEDULE - VIII INVESTMENTS

1 Investments in India

Gross Value 5904,43,70 5425,85,00

Less : Provision for Depreciation 12,78,20 15,94,57

Net value of Investments in India 5891,65,50 5409,90,43

Comprising :

i) Government securities 4849,32,06 4583,13,77

ii) Other approved securities 1,55,00 2,55,00

iii) Shares 21,39,82 13,23,48

iv) Debentures and bonds 121,81,85 145,68,80

v) Subsidiaries and/or Joint Ventures 50,00 50,00

vi) Others - Deposits under RIDF scheme with NABARD 897,06,77 664,79,38

2 Investments Outside India - -

TOTAL (1 & 2) 5891,65,50 5409,90,43

SCHEDULE - IX ADVANCES

A i) Bills Purchased and Discounted 404,25,86 420,75,56

ii) Cash Credits, Overdrafts and Loans Repayable on Demand 2952,00,45 1947,51,15

iii) Term Loans 7727,93,66 6942,19,51

TOTAL 11084,19,97 9310,46,22

B i) Secured by Tangible Assets (includes advances against book debts) 10022,74,48 7742,84,43

ii) Covered by Bank /Government Guarantees (includes advances against

L/Cs issued by Banks) 137,04,85 376,63,79

iii) Unsecured 924,40,64 1190,98,00

TOTAL 11084,19,97 9310,46,22

C i) Advances in India

a) Priority Sector 3522,05,30 2493,35,17

b) Public Sector 253,16,69 264,96,54

c) Banks 18,97,56 35,38,56

d) Others 7290,00,42 6516,75,95

TOTAL 11084,19,97 9310,46,22

ii) Advances Outside India - -

TOTAL ( i & ii) 11084,19,97 9310,46,22

Rupees in 000s

As at 31.3.07 As at 31.3.06

36

SCHEDULES (Contd.)

SCHEDULE - X FIXED ASSETS

1 PREMISES

i) At cost as at the beginning of the year 136,70,88 133,54,08

ii) Additions during the year 19,60,86 10,24,27

156,31,74 143,78,35

iii) Less : Deductions during the year - 7,07,47

iv) Less : Depreciation to date 14,28,89 12,60,71

Total 142,02,85 124,10,17

2 Other Fixed Assets (including furniture & fixtures)

i) At cost as at the beginning of the year 481,18,18 437,94,42

ii) Additions during the year 40,08,76 46,77,37

[includes Assets given on lease Rs.225,71,92521,26,94 484,71,79

(Previous year Rs. 225,71,92)]

iii) Less : Deductions during the year 2,51,29 3,53,61

iv) Less : Depreciation to date 300,00,04 268,79,22

Total 218,75,61 212,38,96

3 Capital Work in Progress 8,78,53 3,09,66

TOTAL (1,2 & 3) 369,56,99 339,58,79

SCHEDULE - XI OTHER ASSETS

1 Inter-office Adjustments (Net) 11,31 2,31,10

2 Interest Accrued 168,43,59 162,02,34

3 Tax Paid in Advance / tax deducted at source (net of provision) 218,59,58 223,81,14

4 Stationery and Stamps 51,06 21,56

5 Non-banking assets acquired in satisfaction of claims 33,38,15 62,68,26

6 Others [includes Deposits with banks Rs. 260,18,85 being credit enhancement 565,28,21 631,01,70

against Securitised Assets (Previous year Rs. 294,76,80)]

TOTAL 986,31,90 1082,06,10

SCHEDULE - XII CONTINGENT LIABILITIES

1 Claims against the Bank not acknowledged as debts 221,74,14 184,64,55

2 Liability on account of outstanding Forward Exchange Contracts 9793,88,58 7194,03,01

3 Liability on account of outstanding Derivative Contracts 7002,55,15 6857,98,39

4 Guarantees given on behalf of constituents

a) In India 1475,18,58 1021,44,65

b) Outside India - -

5 Acceptances, Endorsements and Other Obligations 2268,37,20 1578,35,52

6 Other Items for which the Bank is contingently liable - -

TOTAL 20761,73,65 16836,46,12

Rupees in 000s

As at 31.3.07 As at 31.3.06

37

SCHEDULES (Contd.)

Rupees in 000s

Year ended Year ended

31.3.07 31.3.06

SCHEDULE - XIII INTEREST EARNED

1 Interest/Discount on Advances /Bills 1044,59,97 835,60,29

2 Income on Investments 391,94,86 310,99,94

3 Interest on Balances with RBI and Other Inter-Bank Funds 30,85,52 14,17,93

4 Others 32,84,72 27,50,17

TOTAL 1500,25,07 1188,28,33

SCHEDULE - XIV OTHER INCOME

1 Commission, Exchange and Brokerage 68,72,28 40,51,43

2 Profit on Sale of Investments / Derivatives (Net) 18,65,68 13,26,18

3 Profit/(Loss) on Sale of Land, Buildings and Other Assets (27,65,42) (4,33,89)

4 Profit on exchange transactions (Net) 18,66,96 10,53,76

5 Profit on Revaluation of Investments (40,11,91) (37,26,75)

6 Income earned by way of dividend from companies in India 30,85 42,45

7 Miscellaneous Income 205,54,80 165,70,21

TOTAL 244,13,24 188,83,39

SCHEDULE - XV INTEREST EXPENDED

1 Interest on Deposits 1059,89,40 777,78,03

2 Interest on Reserve Bank of India/ Inter-Bank Borrowings 83,89,69 49,90,04

3 Others including interest on Subordinate Debts and Upper Tier II bonds 85,05,60 45,51,06

TOTAL 1228,84,69 873,19,13

SCHEDULE - XVI OPERATING EXPENSES

1 Payments to and Provisions for Employees 96,28,91 84,79,14

2 Rent, Taxes and Lighting (includes operating lease rentals) 30,32,24 28,53,47

3 Printing and Stationery 10,41,24 9,99,09

4 Advertisement and Publicity 3,32,56 8,15,27

5 Depreciation on Bank’s Property 34,09,22 35,98,83

6 Directors’ Fees, Allowances and Expenses 39,10 42,43

7 Auditors’ Fees and Expenses (includes branch auditors) 80,90 83,78

8 Law Charges 11,41,49 10,71,66

9 Postage, Telegrams, Telephones, etc. 22,14,03 20,61,04

10 Repairs and Maintenance 23,92,82 19,97,28

11 Insurance 14,14,97 12,70,83

12 Service Provider Fees 40,88,40 37,39,73

13 Other Expenditure 55,79,74 46,50,07

TOTAL 343,95,62 316,62,62

38

Schedule No. XVII

PRINCIPAL ACCOUNTING POLICIES

1) General:

The accompanying financial statements have been prepared on the historical cost convention, except where otherwise

stated, and in accordance with the accounting standards referred to in Section 211(3C) of the Companies Act, 1956, read

with guidelines issued by the Reserve Bank of India (‘RBI’) and conform to the statutory provisions and practices

prevailing within the banking industry in India.

2) Transactions involving Foreign Exchange:

2.1 Monetary assets and liabilities denominated in foreign currency are translated at the balance sheet date at the

exchange rates notified by the Foreign Exchange Dealers’ Association of India (‘FEDAI’) and the resulting profits or

losses are recognised in the profit and loss account.

Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported

using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or

other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when

the values were determined.

2.2 All Foreign Exchange contracts outstanding at the balance sheet date are revalued at the rates of exchange notified

by the FEDAI for specified maturities and the resulting profits or losses are recognised in the profit and loss account.

2.3 The Swap cost arising on account of foreign currency swap contracts to convert FCNR (B) deposits into rupee

liability is charged to profit and loss account as ‘Interest - Others’.

2.4 Income and Expenditure items are translated at the rates of exchange prevailing on the date of the transaction.

2.5 Contingent liability at the balance sheet date on account of outstanding forward foreign exchange contracts, guarantees,

acceptances, endorsements and other obligations denominated in foreign currency and foreign exchange derivative

contracts are stated at the closing rates of exchange notified by FEDAI. In the previous year contingent liability on

account of outstanding forward foreign exchange contracts was stated at the contracted rates of exchange.

3) Investments:

The significant accounting policies in accordance with the RBI guidelines and subsequent circulars issued by the RBI are

as follows :

3.1 Categorisation of investments:

In accordance with the guidelines issued by RBI, the Bank classifies its investment portfolio into the following three

categories, at the time of acquisition :

i) ‘Held to Maturity’ - Securities acquired by the Bank with the intention to hold till maturity.

ii) ‘Held for Trading’ – Securities acquired by the Bank with the intention to trade.

iii) ‘Available for Sale’ – Securities which do not fall within the above two categories are classified as ‘available for

sale’.

3.2 Classification of investments :

For the purpose of disclosure in the Balance Sheet, investments have been classified under six groups as required

under RBI guidelines - Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments

in Subsidiaries/ Joint Ventures and Other Investments.

3.3 Valuation of Investments :

(i) ‘Held to Maturity’ – These investments are carried at their acquisition cost. Any premium on acquisition is

amortised over the balance period to maturity. Diminution other than temporary, if any, in the value of such

investments is determined and provided for on each investment individually.

(ii) ‘Held for Trading’ – Each scrip in this category is revalued at the market price or fair value and the resultant

depreciation of each scrip in this category is recognised in the profit and loss account. Appreciation, if any, is

ignored. Market value of government securities is determined on the basis of the price list published by RBI or

the prices periodically declared by Primary Dealers Association of India jointly with Fixed Income Money Market

and Derivatives Association (FIMMDA) for valuation at year-end. In case of unquoted government securities

market price or fair value is determined as per the rates published by FIMMDA.

(iii) ‘Available for Sale’ – Each scrip in this category is revalued at the market price or fair value and the resultant

depreciation of each scrip in this category is recognised in the profit and loss account. Appreciation, if any, is

ignored.

Market value of government securities (excluding treasury bills) is determined on the basis of the price list

published by RBI or the prices periodically declared by Primary Dealers Association of India jointly with FIMMDA

for valuation at year-end. In case of unquoted government securities market price or fair value is determined as

per the rates published by FIMMDA.

Market value of other debt securities is determined based on the yield curve and spreads provided by FIMMDA.

Equity shares are valued at cost or the closing quotes on a recognised stock exchange, whichever is lower.

Treasury bills are valued at carrying cost, which includes discount amortised over the period to maturity.

Units of mutual funds are valued at the lower of cost and net asset value provided by the respective mutual funds.

SCHEDULES (Contd.)

39

(iv) Investments in Equity Shares held as Long-term investments by the erstwhile IndusInd Enterprises & Finance Ltd.

and Ashok Leyland Finance Ltd. (since merged) are valued at cost. Provision towards diminution in the value of

such Long-term investments is made only if the dimunition in value is not temporary in the opinion of management.

(v) Broken period interest on debt instruments is treated as a revenue item. Brokerage, commission, etc. pertaining

to investments paid at the time of acquisition is charged to revenue.

(vi) Repurchase and reverse repurchase transactions are considered as separate sale and purchase contracts.

Commitments under these transactions are recorded at contracted rates and excess of contracted rates over

market value is recorded in the profit and loss account.

(vii) Profit in respect of investments sold from “HTM” category is included in Profit on sale of investments and equal

amount is transferred out of P& L Appropriation account after tax and Statutory Reserve, to Capital Reserve

account.

(viii)Amortised amount on “HTM” category is shown as deduction in the Profit and Loss account under Profit on

revaluation of investments.

4) Derivatives:

Derivative contracts are designated as hedging and trading and accounted for as follows :

(i) The hedging contracts comprise interest rate swaps and currency options undertaken to hedge interest rate risk on

certain assets and liabilities. The net interest receivable/ payable is accounted on an accrual basis over the life of the

swaps. However, where the hedge is designated with an asset or liability that is carried at market value or lower of

cost or market value in the financial statements then the hedging is also marked to market with the resulting gain or

loss recorded as an adjustment to the market value of designated assets or liabilities.

(ii) The trading contracts comprise proprietary trading in interest rate swaps. The gain/ loss arising on unwinding or

termination of the contracts is accounted for in the profit and loss account. Trading contracts outstanding as at the

balance sheet date are revalued at their fair value and resulting gains / losses are recognised in the profit and loss

account.

(iii) Premium paid and received on currency options is accounted up-front in the Profit and Loss account as all options

are undertaken on a back-to-back basis.

(iv) Provisioning of overdue customer receivable on derivative contracts, if any, are made as per RBI guidelines.

5) Advances:

5.1 Advances are classified as per the RBI guidelines into standard, sub-standard, doubtful and loss assets after

considering subsequent recoveries to date.

5.2 Provision for non-performing assets is made in conformity with the RBI guidelines.

5.3 In accordance with RBI guidelines, general provision on standard assets has been made at 0.40% of the outstanding

amount on a portfolio basis except for the following categories where the general provision is made at the rates

mentioned alongside such categories of loans :

� for direct advances to agriculture and Small and Medium Enterprises at 0.25% of the outstanding amount,

� residential housing loans beyond Rs. 20 lacs at 1.00% of the outstanding amount,

� personal loans, loans and advances qualifying as capital market exposures and commercial real estate loans at

2.00% of the outstanding amount.

5.4 Advances are disclosed in the Balance Sheet, net of provisions and interest suspended for non-performing advances.

Provision made against standard assets is included in ‘Other Liabilities and Provisions’.

5.5 Advances include the Bank’s participation in / contributions to Pass Through Certificates (PTCs) and /or to the asset-

backed assignment of loan assets of other banks / financial institutions where the Bank has participated on risk-

sharing basis.

5.6 Advances exclude derecognised securitised advances, inter-bank participation and bills rediscounted (BRDS).

5.7 Amounts recovered against bad debts written off in earlier years and, provisions no longer considered necessary in

context of the current status of the borrower are written back / recognised to the profit and loss account to the extent

such write-offs / provisions were charged to the profit and loss account.

5.8 For re-structured / re-scheduled assets, provision is made in accordance with the guidelines issued by RBI.

6) Securitisation Transactions :

6.1 The Bank transfers commercial and consumer loans through securitisation transactions. The Bank securitises its

loan receivables both through Bilateral Direct Assignment route as well as transfer to Special Purpose Vehicles

(‘SPV’) in securitisation transactions.

6.2 The securitisation transactions are without recourse to the Bank. The transferred loans and such securitised-out

receivables are de-recognised in the balance sheet as and when these are sold (true sale criteria being fully met)

and the consideration has been received by the Bank. Gains / losses are recognised only if the Bank surrenders the

rights to the benefits specified in the loan contracts.

6.3 In respect of certain transactions, the Bank provides credit enhancements in the form of cash collaterals / guarantee

and/or by subordination of cashflows to senior Pass Through Certificates (PTC). Retained interest and subordinated

PTCs are disclosed under “Advances” in the balance sheet.

SCHEDULES (Contd.)

40

6.4 Recognition of gain or loss arising out of Securitisation of Standard Assets :

In terms of RBI guidelines issued on February 1, 2006, profit/premium arising on account of sale of standard assets,

being the difference between the sale consideration and book value, is amortised over the life of the securities

issued by the Special Purpose Vehicles (‘SPV’).

Any loss arising on account of the sale is recognized in the Profit and Loss Account in the period in which the sale

occurs.

Up to January 31, 2006, gains or losses from sale of loan receivables, being the difference between the sale

consideration and book value, were recognized at the time of the sale.

7) Fixed Assets :

7.1 Fixed assets (including assets given on operating lease) have been stated at cost less accumulated depreciation and

impairment. Cost includes incidental expenditure incurred on the assets before it is ready for intended use. The

carrying amount of fixed assets is reviewed at each balance sheet date if there are any indications of impairment

based on internal / external factors.

7.2 Depreciation has been provided for pro rata for the period of use, on Straight Line Method as per the rates

prescribed under Schedule XIV to the Companies Act, 1956, except in respect of computers, which are depreciated

at the rate of 33.33%. These rates are reflective of management’s estimate of the useful life of the related fixed

assets.

8) Revenue Recognition:

8.1 Income by way of interest and discount on performing assets is recognised on accrual basis and on non-performing

assets the same is accounted for on realisation. Further, income not realised on non-performing assets is provided for.

8.2 Interest on Government securities, debentures and other fixed income securities is recognised on accrual basis.

Income on discounted instruments is recognised over the tenure of the instrument on a straight-line basis.

8.3 Dividend income is recognised when the right to receive payment is established.

8.4 Commission (except for commission on Deferred Payment Guarantees and insurance commission which is recognised

on accrual basis), exchange and brokerage is recognised on realisation.

8.5 Lease income and service charges earned by the Vehicle Finance Division are recognised on accrual basis.

8.6 Income from distribution of life insurance products is recognised, proportionately, on basis of the business booked.

9) Operating Leases:

Lease rental obligations in respect of assets taken on operating lease are charged to profit and loss account on straight-

line basis over the lease term. Initial direct costs are charged to profit and loss account.

Assets given under operating leases in respect of which all the risks and benefits of ownership are effectively retained by

the Bank are classified as operating leases. Lease rentals received under operating leases are recognized in the profit

and loss account on accrual basis as per contracts.

10) Retirement and Other Employee Benefits:

10.1 Payments under the Group Gratuity policies of the Bank are made to Life Insurance Corporation of India as per

actuarial contributions for the year as determined by the Corporation.

10.2 Payment under Group Superannuation policy to the eligible employees of the erstwhile Ashok Leyland Finance Ltd.

(ALFL) is made to Life Insurance Corporation of India as per actuarial contribution for the year.

10.3 Provident fund contributions are made under trust separately established for the purpose and the scheme administered

by Regional Provident Fund Commissioner (RPFC), as applicable.

10.4 Provision for leave encashment has been made in the accounts on the basis of actuarial valuation as at the

balance sheet date.

11) Segment Reporting:

The Bank operates in two segments of business: ‘Treasury’ and ‘Other Banking Operations’.

The segments have been identified and reported taking into account the nature, returns and risks involved. The organization

structure and the internal reporting structure are taken into account for the purpose of determining segment results.

The revenues reported under ‘Treasury’ segment include interest income on investment portfolio, profit/ loss on sale of

investments, profit/loss on foreign exchange transactions, equities, income from derivatives and money market operations.

The expenses of this segment consist of interest expenses on funds borrowed from external sources as well as internal

sources and depreciation / amortisation of premium on Held to Maturity category investments.

The revenues of ‘Other Banking Operations’ segment consist of interest earned on loans and advances and other fee

based income. The expenses mainly comprise interest paid on deposits and other infrastructure expenses.

Certain expenses have been classified as unallocated expenses, which comprise common expenses of both the segments,

which are not specifically allocated to the segments.

Segment results include revenue as reduced by interest expenses and operating expenses for that segment. For this

purpose, the fund transfer pricing mechanism followed is based on the cost of funds incurred.

12) Income-tax:

Tax expenses comprise current, deferred and fringe benefit taxes. Current income tax and fringe benefit tax is measured

at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred income

SCHEDULES (Contd.)

41

taxes reflect the impact of current year timing differences between taxable income and accounting income for the year

and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted

or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is

reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be

realized. Unrecognized deferred tax assets of earlier years are re-assessed and recognised to the extent that it has become

reasonably certain that future taxable income will be available against which such deferred tax assets can be realized.

13) Earnings per Share:

Earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after

deducting attributable taxes) by the weighted average number of equity shares outstanding during the period.

14) Provisions:

A provision is recognised when there is an obligation as a result of past event. It is probable that an outflow of resources

will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not

discounted to their present value and are determined based on best estimate required to settle the obligation at the

balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

15) Others:

Cash and cash equivalents in the cash flow statement comprise cash and balances with RBI (Schedule VI) and balances

with banks and money at call and short notice (Schedule VII).

Schedule No. XVIII

NOTES ON ACCOUNTS

1. Fixed Assets:

i) Cost of premises includes Rs.4.02 crores (previous year Rs. 4.02 crores) in respect of properties for which execution

of documents and registration formalities are in progress. Of these properties, the Bank has not obtained full

possession of one property having WDV of Rs. 1.96 crores (previous year Rs. 1.96 crores) and has filed a suit for

the same.

ii) Operating leases:

Transaction – I

(Rs. in crores)

Particulars 2006-07 2005-06

Description of the asset Wind Turbine Generator–37 Nos.

Gross carrying amount 25.68 25.68

Accumulated depreciation 5.43 4.07

Depreciation recognized during the current year 1.36 1.36

Contingent Rent recognized during the year 5.31 4.65

Minimum Lease Payments (MLP) MLP based on the actual consumption of electricity at the

contracted rates by the lessee. Accordingly, future minimum

lease payments are indeterminate.

Transaction – II

(Rs. in crores)

Particulars 2006-07 2005-06

Description of the asset Wind Turbine Generator – 88 Nos.

Gross carrying amount 72.45 72.45

Accumulated depreciation 10.29 6.46

Depreciation recognized during the current year 3.83 3.83

Minimum Lease Payments (MLP)

Not later than one year 11.00 11.50

Later than one year and not later than five years 48.25 47.50

Later than five years - 13.00

SCHEDULES (Contd.)

42

2. Other Assets:

i) ‘Non-banking assets acquired in satisfaction of claims’ include properties acquired in satisfaction of debts of Rs. 5.27

crores (previous year Rs. 5.27 crores) in respect of which the Bank has entered into MOUs / settlement agreements.

The stamp duty, registration charges, etc., will be accounted for on completion of legal formalities.

‘Non-banking assets acquired in satisfaction of claims’ also includes vehicles repossessed by the Bank, which are

readily saleable, aggregating to Rs. 28.10 crores (previous year Rs. 57.40 crores).

ii) Other assets include advances given to dealers against vehicle financing schemes to the extent of Rs. 10.03 crores

(previous year Rs. 18.59 crores), cash collateral (including liquidity facility) of Rs. 260.19 crores (previous year Rs.

294.77 crores) and stock of gold on consignment basis of Rs. 16.05 crores (previous year Rs. 34.33 crores).

3. Other Liabilities and Provisions:

i) During the year, the Bank has issued on private placement basis 500 unsecured, redeemable, non-convertible

subordinated bonds of Rupees Ten lacs each aggregating to Rs. 50 crores (previous year Rs. 117.10 crores). These

bonds qualify for classification as Tier II Capital.

ii) During the year, the Bank has issued on private placement basis 2089 unsecured, non-convertible, redeemable,

non-cumulative subordinated Upper - Tier II instruments of Rupees Ten lacs each aggregating to Rs. 208.90 crores

(previous year Rs. 100.00 crores). These bonds qualify for classification as Upper - Tier II Capital.

iii) Included in ‘Other Liabilities – Others’ are credit balances in nostro accounts aggregating Rs. 50.67 crores (previous

year Rs. 97.60 crores).

4. Contingent Liabilities:

Claims against the Bank not acknowledged as debts comprise tax demands in respect of which the Bank is in appeal of

Rs. 126.56 crores (previous year Rs. 99.20 crores) and the cases sub-judice Rs. 95.18 crores (previous year Rs. 85.45

crores). The above are based on the management’s estimate and no significant liability is expected to arise out of the

same.

5. Miscellaneous income includes recovery from bad debts written off Rs. 96.97 crores (previous year Rs. 86.30 crores),

lease rentals Rs.19.61 crores (previous year Rs. 23.83 crores) and others (processing charges, cheque return charges

and depository services charges, etc.) Rs. 88.97 crores (previous year Rs. 55.57 crores).

6. In the case of one borrower, the Bank is contesting the restructuring package approved by the Corporate Debt Restructuring

(CDR) Cell. As the borrower has not renewed the security documents, the Bank, out of abundant caution, has filed a

recovery suit against the borrower and classified the entire exposure as a sub-standard asset as per the extant income

recognition, asset classification and provisioning guidelines of the RBI. The Bank has been legally advised that it has

good chances of winning this case.

7. Additional disclosures as per Reserve Bank of India guidelines are as under:

i). Capital Adequacy Ratio :

Items March 31, March 31,

2007 2006

i) Capital Adequacy Ratio (CRAR) 12.54% 10.54%

ii) CRAR – Tier I Capital (%) 7.34% 6.84%

iii) CRAR – Tier II Capital (%) 5.20% 3.70%

ii). “Provisions and Contingencies” as charged to Profit and Loss account for the year consist of :

(Rs. in crores)

March 31, March 31,

2007 2006

i) Income Tax / Wealth Tax / Deferred Tax/ Fringe Benefit Tax 39.16 22.37

ii) Depreciation on Investments 2.31 7.62

iii) Provision for non-performing assets including bad debts written off 55.92 90.29

iv) Provision towards Standard Assets 9.80 13.08

v). Other provisions and contingencies towards write off of other assets/

contingent obligations (3.83) 17.12

Total 103.36 150.48

SCHEDULES (Contd.)

43

iii). Investments:

(Rs. in crores)

2006-2007 2005-2006

(1) Value of Investments

(i) Gross Value of Investments 5904.44 5425.85

(a) In India 5904.44 5425.85

(b) Outside India - -

(ii) Provision for Depreciation 12.78 15.95

(a) In India 12.78 15.95


(iii) Net Value of Investments 5891.66 5409.90

(a) In India 5891.66 5409.90


(2) Movements in provision held towards depreciation on Investments:

(i) Opening Balance 15.95 8.33

(ii) Add: Provision made during the year 2.31 7.62

(iii) Less: Write-off/ write-back of excess provision during the year 5.48 -

(iv) Closing Balance 12.78 15.95

iv) Business ratios:

March 31, March 31,

2007 2006

i) Interest income as a percentage of working funds 7.59% 7.21%

ii) Non-interest income as a percentage of working funds 1.23% 1.15%

iii) Operating profit as a percentage of working funds 0.87% 1.14%

iv) Return on assets 0.34% 0.22%

v) Business (deposits plus advances) per employee including

trainees (Rs. in lacs) 1039.77 880.18

vi) Profit per employee including trainees (Rs. in lacs) 2.61 1.56

Working funds are calculated at the average of working funds as per the Bank’s monthly returns filed with the RBI.

v) (a) Maturity Pattern of rupee denominated assets and liabilities as at March 31, 2007:

(Rs. in crores)

Maturity Buckets Loans & Investment Deposits Borrowings

Advances Securities

1-14 Days 663.47 400.97 1485.43 67.79

15-28 Days 468.58 1.31 492.21 8.90

29 days to 3 months 529.31 76.01 2058.44 34.01

Over 3 months to 6 months 707.10 535.90 1434.04 -

Over 6 months to 12 months 1535.07 12.37 1661.33 150.00

Over 1 year to 3 years 5824.01 606.09 5068.37 42.94

Over 3 years to 5 years 802.39 1450.22 2464.18 100.00

Over 5 years 358.81 2808.79 2393.91 -

Total 10888.74 5891.66 17057.91 403.64

SCHEDULES (Contd.)

44

b) Maturity Pattern of rupee denominated assets and liabilities as at March 31, 2006:

(Rs. in crores)

Maturity Buckets Loans & Investment Deposits Borrowings

Advances Securities

1-14 Days 567.85 597.84 1353.86 17.07

15-28 Days 1036.63 43.28 880.58 -

29 days to 3 months 1313.37 29.79 3170.50 100.00



Over 1 year to 3 years 2054.13 267.27 3877.81 50.00

Over 3 years to 5 years 1259.56 747.93 1415.05 -

Over 5 years 858.05 3560.25 1384.62 -

Total 8979.41 5409.90 14556.55 222.07

vi) a) Maturity Pattern of foreign currency denominated assets and liabilities as at March 31, 2007:

(Rs. in crores)

Maturity Buckets Loans & Deposits Borrowings Other Other

Advances assets liabilities

1-14 Days 14.77 81.39 25.43 725.03 64.33

15-28 Days 15.20 5.88 - - -

29 days to 3 months 55.27 16.97 46.07 - 0.15

Over 3 months to 6 months 15.42 26.00 - - -

Over 6 months to 12 months 0.06 70.35 117.37 - 1.17

Over 1 year to 3 years 94.74 247.91 - - -

Over 3 years to 5 years - 73.02 - - -

Over 5 years - 65.37 - 23.87 -

Total 195.46 586.89 188.87 748.90 65.65

b) Maturity Pattern of foreign currency denominated assets and liabilities as at March 31, 2006:

(Rs. in crores)

Maturity Buckets Loans & Deposits Borrowings Other Other

Advances assets liabilities

1-14 Days 205.34 58.72 71.39 1.32 97.48

15-28 Days 70.41 65.64 48.80 - -

29 days to 3 months 37.35 33.60 104.47 - -

Over 3 months to 6 months 17.88 50.33 88.22 - -

Over 6 months to 12 months - 94.55 - - -

Over 1 year to 3 years 0.07 140.51 - - -

Over 3 years to 5 years - 6.27 - - -

Over 5 years - 0.13 - 8.03 -

Total 331.05 449.75 312.88 9.35 97.48

SCHEDULES (Contd.)

45

vii). Lending to sensitive sectors:

A) Exposure to Real Estate Sector:

(Rs. in crores)


2007 2006

a) Direct Exposure

(i) Residential Mortgages 176.14 144.26

[of which individual housing loans upto Rs.15 lacs is

Rs.117.09 crores (previous year Rs. 87.27 crores)]

(ii) Commercial Real Estate * 78.73 145.43

(iii) Investments in Mortgage Backed Securities (MBS) and other

securitised Exposures :

a) Residential, - -

b) Commercial Real Estate - -

b) Indirect Exposure

Fund based and non-fund based exposures on

National Housing Bank (NHB) and Housing Finance

Companies (HFCs) 178.64 415.49

Total Real Estate Exposure 433.51 705.18

* Does not include corporate lending backed by mortgage of land and building.

B) Exposure to Capital Market:

(Rs. in crores)


2007 2006

(i) Investments made in equity shares, 25.93 18.06

(ii) Investments in bonds/ convertible debentures - -

(iii) Investments in units of equity- oriented mutual funds - -

(iv) Advances against shares to individuals for investment in 34.69 13.27

equity shares (including IPOs/ESOPs), bonds and debentures and

units of equity oriented mutual funds

(v) Secured and unsecured advances to stockbrokers and guarantees 270.07 133.79

issued on behalf of stockbrokers and market makers

Total Exposure to Capital Market 330.69 165.12

(i + ii + iii + iv +v)

(vi) of (v) above, the total finance extended to stockbrokers for

margin trading - -

Exposure to capital market sector represents equity investments, fund and non-fund based facilities, recoverability of

which is sensitive to capital market fluctuations. The above does not include advances to individuals against pledge

of equity shares for personal purposes of Rs. 104.19 crores (previous year Rs. 36.81 crores) in line with the

guidelines issued by RBI vide its circular No. DBOD BP.BC.119/21.04.137/2000-01 dated May 11, 2001.

In terms of guidelines issued by RBI vide circular DBOD No. Dir.BC.33/13.03.00/2006-07 dated 10/10/2006, the

Exposure to Capital Market as of 31.03.2007 is reported based on the criteria of outstanding or sanctioned limit

whichever is higher. The corresponding figures for the previous year however represent the outstanding exposures

and hence not comparable to the current year’s disclosure to that extent.

viii) Single Borrower Limit and Group Borrower Limit :

During the year the Bank has not exceeded the prudential credit exposure limit in respect of Single Borrower and

Group Borrowers.

SCHEDULES (Contd.)

46

ix) Exposure to country risk:

a) In terms of Reserve Bank of India circular No. DBOD BP.BC.72/21.04.018/ 2004-05 dated March 31, 2005 the

exposure of the Bank to country risk is as under:

(Rs. in crores)

Sr. Risk category ECGC classification March 31, 2007 March 31, 2006

1 Insignificant A1 165.98 129.61

2 Low A2 11.02 36.10

3 Moderate B1 28.80 84.35

4 High B2 4.37 12.20

5 Very High C1 3.45 3.85

6 Restricted C2 1.97 2.44

7 Off Credit D 0.00 0.89

Total 215.59 269.44

b) No provision is considered necessary against exposure to country risk.

x) Provision on Standard Assets:

(Rs. in crores)


2007 2006

Cumulative Provision held for Standard Assets 44.81 35.01

xi) Non-Performing Assets:

(Rs. in crores)

Items 2006-2007 2005-2006

(i) Net NPAs to Net Advances (%) 2.47% 2.09%

(ii) Movement in NPAs (Gross)

a) Opening Balance 268.83 320.53

b) Additions during the year 237.59 108.96

c) Reductions during the year 163.69 160.66

d) Closing Balance 342.73 268.83

(iii) Movement in Net NPAs


b) Additions during the year 189.87 67.38

c) Reductions during the year 111.09 116.68


(iv) Movement in provisions for NPAs

(excluding provisions on standard assets)


b) Provisions made during the year 47.72 41.58

c) Write-off/write back of excess provisions 52.60 43.98


SCHEDULES (Contd.)

47

xii) a) Issuer composition of Non-SLR investments as at March 31, 2007:

(Rs. in crores)

No. Issuer Amount Extent of Extent of Extent of Extent of

private ‘below ‘unrated’ ‘unlisted’

placement investment Securities* securities**

grade’

securities

1 PSUs 3.03 - - 0.02 0.02

2 FIs *** 907.07 - - - -

3 Banks 50.63 48.27 - 5.00 5.00

4 Private corporates 20.95 4.35 - - 7.12

5 Subsidiaries/ Joint Ventures 0.50 0.50 - - 0.50

6 Others 147.07 - - - -

7 Provision held towards depreciation (11.69) - - - -

Total 1,117.56 53.12 - 5.02 12.64

b) Issuer composition of Non-SLR investments as at March 31, 2006:

(Rs. in crores)

No. Issuer Amount Extent of Extent of Extent of Extent of

private ‘below ‘unrated’ ‘unlisted’

placement investment Securities* securities**

grade’

securities

1 PSUs 1.34 - - 0.04 0.04

2 FIs*** 674.79 - - - -

3 Banks 58.86 48.75 - 11.00 11.00

4 Private corporates 17.56 12.27 - - 15.05

5 Subsidiaries/ Joint Ventures 0.50 0.50 - - 0.50

6 Others 81.20 - - -

7 Provision held towards depreciation (10.03) - - - -

Total 824.22 61.52 - 11.04 26.59

* Excludes investments in NABARD RIDF, Oil Bonds, equity shares and government securities pledged with the

Clearing Corporation of India.

** Excludes investments in NABARD RIDF, Oil Bonds and government securities pledged with the Clearing

Corporation of India.

*** Includes deposits placed with NABARD RIDF.

Information regarding maturity pattern of assets and liabilities [Ref. items 7(v), 7(vi)], lending to sensitive sectors

[Ref. item 7 (vii)] and Issuer composition of Non-SLR investments [Ref. item 7 (xii)] has been compiled by the

management and relied upon by the Auditors.

xiii) Non-performing Non-SLR investments:

(Rs. in crores)

Particulars 2006-2007 2005-2006

Opening balance 5.65 5.24

Additions during the year since 1st April 0.09 0.50

Reductions during the above period - 0.09

Closing balance 5.74 5.65

Total provisions held 5.74 5.65

SCHEDULES (Contd.)

48

xiv) Details of Repo/Reverse Repo (including liquidity adjustment facility) deals done during the year ended March 31,

2007:

(Rs. in crores)

Minimum Maximum Daily average As on

outstanding outstanding outstanding March 31,

during the year during the year during the year 2007

Securities sold under repos 1.96 610.00 101.97 405.00

(2.98) (356.33) (17.07) (-)

Securities purchased under reverse repo 14.80 1100.00 114.29 -

(10.00) (575.00) (9.65) (575.00)

Note: Amounts in brackets represent previous year figures

xv) Details of Loan Assets subjected to Restructuring:

(Rs. in crores)

Items 2006-2007 2005-2006

(i) Total Amount of loan assets subjected to restructuring,

rescheduling, renegotiation; - 62.07

-of which under CDR - -

(ii) The amount of Standard assets subjected to restructuring,

rescheduling, renegotiation; - 62.07


(iii) The Amount of Sub-Standard assets subjected to restructuring,

rescheduling, renegotiation; - -


(iv) The Amount of Doubtful assets subjected to restructuring,

rescheduling, renegotiation; - -


Note: [ (i) = (ii) + (iii) + (iv)]

xvi) Details of financial assets sold to Securitisation / Reconstruction Company for asset reconstruction :

(Rs. in crores)

Items 2006-2007 2005-2006

1) No. of accounts 7 7

2) Aggregate value (net of provisions) of accounts sold to SC/RC 49.17 28.38

3) Aggregate consideration 48.36 29.80

4) Additional consideration realized in respect of accounts transferred

in earlier years - 0.19

5) Aggregate gain/(loss) over net book value (0.81) 1.42

xvii) Assets Securitised :

Items 2006-2007 2005-2006

1) Number of deals concluded - 6

2) Total number of loans securitised - 95827

3) Book Value of Loans securitised (Rs. crores) - 1425.16

4) Sale consideration received for the securitised assets (Rs. crores) - 1487.50

5) Gain/loss on sale on account of securitisation (Rs. crores)* - 41.84

(Rs. in crores) (Rs. in crores)

Outstanding value of services provided:

Outstanding value of credit enhancement (A) 214.40 327.57

Outstanding value of First Loss Facility 74.74 80.46

Outstanding value of Second Loss Facility (Guarantee) ** 80.46 80.46

Outstanding value of Liquidity facility 10.15 28.36

* Net of securitisation expenses and finance charges for the month in which the assets were securitised.

** Second loss facility has been provided in the form of a Guarantee by a third party (second loss facility provider)

(A) Represents credit enhancement provided for securitisation deals undertaken prior to issue of RBI circular on draft

guidelines on securitisation of standard assets where bifurcation into first loss and second loss facility is not available.

The Bank is the servicing agent for all the securitisation deals undertaken.

SCHEDULES (Contd.)

49

SCHEDULES (Contd.)

xviii) a) Forward Rate Agreement/Interest Rate Swap :

(Rs. in crores)

Items March 31, 2007 March 31, 2006

1) The notional principal of swap agreements 6950.00 6775.00

2) Losses which would be incurred if counter-parties failed to 122.87 45.77

fulfill their obligations under the agreements.

3) Collateral required by the bank upon entering into swaps - -

4) Concentration of credit risk arising from the swaps (with banks) 65% 62%

5) The fair value of the swap book (0.63) (5.25)

b) Exchange Traded Interest Rate Derivatives:

The Bank has not undertaken exchange traded interest rate derivative transactions during the year.

c) Disclosures on risk exposure in Derivatives:

The Bank has entered into interest rate swap contracts to hedge on-balance sheet assets & liabilities and for

trading purposes.

• The Bank’s Market Risk Management Policy, approved by the Board of Directors, covers both on and off-

balance sheet positions including derivatives. The Bank has framed the policy for using derivative products

in an efficient manner as tools for mitigating market risk, which covers dealing guidelines and prescribes

exposure limits for derivative products.

• Risk Management Department independently monitors the derivative position of the Bank, and reports

Marked to Market position to top management on a daily basis.

• Effectiveness of the hedge portfolio is reviewed periodically. The Basis Present Value (BPV) of the entire

portfolio is also computed on a daily basis.

Derivative contracts transacted during the current year were in accordance with the prescribed Market Risk

Policy and the Funds & Investment Policy approved by the Board.

Disclosure on risk exposure in derivatives:

(Rs. in crores)

March 31, 2007 March 31, 2006

SI. No Particulars Currency Interest rate Currency Interest rate

Derivatives Derivatives Derivatives Derivatives

1 Derivatives (Notional Principal Amount) - 6950.00 - 6775.00

a) For hedging - 125.00 - 125.00

b) For trading - 6825.00 - 6650.00

2 Marked to Market Positions

a) Asset (+) - 6.29 - -

b) Liability (-) - - - (-)0.72

3 Credit Exposure - 152.87 - 74.14

4 Likely impact of one percentage change

in interest rate (100*PV01) (Note 1)

a) on hedging derivatives - 2.40 - 0.03

b) on trading derivatives - 4.53 - 0.04

5 Maximum and Minimum of 100*PV01

observed during the year (Note 2)

a) on hedging - Max: 3.48 - Max: 0.05

Min : 2.01 Min : 0.03

b) on trading - Max:13.62 - Max: 0.05

Min : 0.15 Min : 0.26

Note 1: Based on the PV01 of the outstanding derivatives as at March 31, 2007.

Note 2: Based on the absolute value of PV01 of the derivatives outstanding during the year. Derivative contracts

that are “back-to-back” have not been included herein.

Note 3: Mark to Market positions above includes interest accrued on the swaps

Note 4: Forward Exchange Contracts are not included in the Currency derivates above.

Foreign Currency exposure not hedged by derivative instruments Rs. 11.98 crores (Net Open position as on

March 31, 2007).

50

SCHEDULES (Contd.)

8. Disclosure of penalties imposed by RBI

The Reserve Bank of India has not imposed any penalty on the Bank u/s 46(4) of the Banking Regulation Act, 1949.

9. There has been no material change in Accounting Policies adopted during the year ended March 31, 2007 from those

followed for the year ended March 31, 2006, except valuation of money market swaps where the swap cost is amortised

over the maturity period of the swap, which has no significant impact.

10. Segment Reporting (AS-17):

The Bank operates in two business segments, viz. Treasury and Other Banking Operations. There are no significant

residual operations carried by the Bank.

Summary:

(Rs. in crores)

Business Segments Treasury Other Banking Operations Total

Particulars 06-07 05-06 06-07 05-06 06-07 05-06

Revenue 453.17 319.93 1612.40 1293.05 2065.57 1612.98

Less : Inter-segment revenue (321.18) (235.86)

Total Income 1744.39 1377.12

Result (14.19) (29.22) 234.84 261.97 220.65 232.75

Unallocated Expenses 49.07 45.45

Operating Profit 171.58 187.30

Income Taxes and

other provisions 103.36 150.48

Profit 68.22 36.82

Tax Adjustment of

Previous years (1.00) -

Transfer from Investment

Fluctuation Reserve - 78.89

Amount available for

appropriation 67.22 115.71

Other Information

Segment Assets 7756.20 6468.65 12386.56 10298.83 20142.76 16767.48

Unallocated Assets 784.38 855.04

Total Assets 20927.14 17622.52

Segment Liabilities 616.57 1059.74 18937.93 15358.73 19554.50 16418.47

Unallocated liabilities 1372.64 1204.05

Total Liabilities 20927.14 17622.52

Geographic Segments:

The business operations of the Bank are largely concentrated in India. Activities outside India are restricted to resource

mobilization in the international markets. Since the Bank does not have material earnings emanating from foreign

operations, the Bank is considered to operate only in domestic segment.

11. Related party transactions (AS-18):

The following is the information on transactions with related parties:

Key Management Personnel: Mr. Bhaskar Ghose, Managing Director

Mr. S. Nagarajan, Jt. Managing Director

Associates: Ashley Holdings Limited (upto September 30, 2006)

Ashley Investments Limited (upto September 30, 2006)

IndusInd Information Technology Limited

IndusInd Marketing and Financial Services Private Limited (formerly

known as Allfin Services & Solutions Private Limited)

Ashley Transport Services Private Limited (upto March 28, 2007)

Allfin Marketing Services Private Limited

Allfin Insurance Specialities Private Limited

Allfin Distribution Private Limited

IBL Services & Solutions Private Limited

Subsidiaries: ALF Insurance Services Private Limited

51

Summarised transactions with related parties for the year ended March 31, 2007 :(Rs. in crores)

Items/ Related Party Parent Subsidiaries Associates Key Relatives Total

(as per Management of key

ownership Personnel Management

of control) Personnel

Borrowings - - - - - -

Deposits - 0.55 6.12 0.75 - 7.42

Placement of deposits - - - - - -

Advances - - 6.50 0.15 - 6.65

Investments - 0.50 0.60 - - 1.10

Non-funded commitments - - - - - -

Leasing/HP arrangements

availed


provided - - - - - -

Purchase of fixed assets - - - - - -

Sale of fixed assets - - - - - -

Interest paid - 0.04 0.09 - - 0.13

Interest received - - 0.01 0.01 - 0.02

Rendering of services - - 11.40 - - 11.40

Receiving of services - - 35.56 - - 35.56

Receiving of

services-Capitalized 2.25 2.25

Management Contracts - - - 1.04 - 1.04

Sale of Shares 9.50 9.50

Redemption of Preference

Shares 3.40 3.40

Profit on sale of shares - - 8.00 - - 8.00

Dividend on Preference

shares - - 0.03 - - 0.03

The following balances represent the maximum balance payable to / receivable from the related parties during the year

ended March 31, 2007 :

(Rs. in crores)

Items/ Related Party Subsidiaries Associates Key Relatives Total

Management of key

Personnel Management

Personnel

Borrowings - - - - -

Deposits 1.14 20.98 0.97 0.03 23.12

Placement of deposits - - - - -

Advances - 10.75 0.15 - 10.90

Investments 0.50 8.50 - - 9.00

Non-funded commitments - - - - -

Leasing/HP arrangements availed - - - - -

Leasing/HP arrangements provided - - - - -

52

Summarised Transactions with related parties for the year ended March 31, 2006:

(Rs. in crores)

Items/ Related Party Parent Subsidiaries Associates Key Relatives Total

(as per Management of key

ownership Personnel Management

of control) Personnel

Borrowings - - - - - -

Deposits - 0.70 0.08 0.03 0.81

Placement of deposits - - - - - -

Advances - - 3.15 - - 3.15

Investments - 0.50 8.50 - - 9.00

Non-funded commitments - - - - - -


availed


provided - - - - - -

Purchase of fixed assets - - - - - -

Sale of fixed assets - - 7.50 - - 7.50

Interest paid - - 0.15 0.02 0.01 0.18

Interest received - - 0.23 - - 0.23

Rendering of services - - 5.82 - - 5.82

Receiving of services - - 29.48 - - 29.48

Management Contracts - - - 1.05 - 1.05

The following balances represent the maximum balance payable to / receivable from the related parties during the year

ended March 31, 2006 :

(Rs. in crores)

Items/ Related Party Subsidiaries Associates Key Relatives Total

Management of key

Personnel Management

Personnel

Borrowings - - - - -

Deposits - 3.51 0.18 0.06 3.75

Placement of deposits - - - - -

Advances - 4.15 - - 4.15

Investments 0.50 8.50 - - 9.00

Non-funded commitments - - - - -

Leasing/HP arrangements availed - - - - -

Leasing/HP arrangements provided - - - - -

53

12. Earning per share: (AS-20):

The numerators and denominators used to calculate the earning per share as per AS-20 are as under:

Year ended Year ended

March 31, 2007 March 31, 2006

Profit attributable to Equity Share holders (Rs. in crores) 67.22 36.82

Weighted average number of equity shares outstanding during the year 290,479,227 290,317,636

Nominal value of Equity Shares (Rs.) 10 10

Basic / Diluted Earnings per Share (Rs.) 2.31 1.27

13. ALF Insurance Services Pvt. Ltd., subsidiary of the Bank, is yet to commence operations for want of necessary regulatory

approvals. Accordingly, no consolidated financial statements have been drawn up as per AS-21 “Consolidated Financial

Statements”.

14. Taxation:

(a) Provision for tax has been made after considering contingency provision as admissible deduction.

(b) Deferred tax (AS-22): The major components of deferred tax assets/ liabilities as on March 31, 2007 are as

under:

(Rs. in crores)

Timing difference on account of : 31.03.2007 31.03.2006

Deferred Tax Deferred Tax

Assets Liabilities Assets Liabilities

Difference between book depreciation and

depreciation under the Income Tax Act, 1961 - 36.16 - 41.62

Difference between Provisions for doubtful debts

and advances and amount allowable under

Section 36(1)(viia) of the Income Tax Act, 1961 42.57 - 43.31 -

Interest on securities - 19.61 - 14.69

Income Recognition 0.01 - 0.01 -

Others 2.09 2.12 -

Net closing balance carried to Balance Sheet

(included in Sch. V – Others) 11.10 - 10.87

15. A. Customer Complaints

2006-07

(a) No. of complaints pending at the beginning of the year 33

(b) No. of complaints received during the year 173

(c) No. of complaints redressed during the year 167

(d) No. of complaints pending at the end of the year 39

54

B. Awards passed by the Banking Ombudsman

2006-07

(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

16. In the opinion of the Bank there is no impairment of its Fixed Assets to any material extent as at 31st March 2007

requiring recognition in terms of Accounting Standard 28.

17. The Bank does not have any non-cancelable operating leases during the year, where it is the lessee.

18. Previous year’s figures have been regrouped / reclassified wherever necessary.

55

(Rs. in crores)

For the year For the year

ended 31.3.2007 ended 31.3.2006

A. Cash Flow from Operating Activities

Net Profit after taxes 67.22 36.82

Adjustments for non-cash charges :

Depreciation on Fixed Assets 34.09 35.99

Provision on Investments 2.31 7.62

Tax Provisions (Income Tax/ Wealth Tax/ Deferred Tax) 40.15 22.37

Loan loss and Other Provisions 61.90 120.49

(Profit)/Loss on sale of fixed assets. 0.61 (7.53)

Operating Profit before Working Capital changes 206.28 215.76

Adjustments for :

Increase in trade and Other Receivables (Advances and Other Assets) (1734.78) (416.31)

Increase in Inventories (Investments) (484.06) (1348.35)

Increase in Trade Payables (Deposits, Borrowings and Other Liabilities) 2874.22 1855.68

Cash generated from Operations 861.66 306.78

Direct taxes paid (34.94) (45.33)

Net Cash from Operating Activities 826.72 261.45

B. Cash Flow from Investing Activities

Purchase of Fixed Assets (65.40) (58.93)

Sale of Fixed Assets (Proceeds) 0.72 15.38

Net Cash used in Investing Activities (64.68) (43.55)

C. Cash Flow from Financing Activities

Proceeds from GDR issue - Capital 29.49 -

- Premium 116.47

Dividends paid - (59.09)

Proceeds from Issue of Unsecured Non- Convertible

Redeemable subordinated Tier II Bonds 50.00 117.10

Proceeds from Unsecured Non-convertible Redeemable

Non-Cumulative subordinated Upper Tier II Bonds 208.90 100.00

Redemption of subordinated Tier II capital (52.00) (50.00)

Net Cash used in Financing Activities 352.86 108.01

Net increase in Cash and Cash Equivalents 1114.90 325.91

Cash and Cash Equivalents as on the first day of the year 1480.50 1154.59

Cash and Cash Equivalents as on the last day of the year 2595.40 1480.50

Notes :

1. The above Cash Flow Statement has been prepared under the indirect method as set out in Accounting Standard 3 on

Cash Flow Statement issued by the Institute of Chartered Accountants of India (ICAI).

2. Figures in brackets indicate cash outflow.

3. Refer to note 15 under Schedule No. XVII.

4. Previous year’s figures have been regrouped and recast to conform to the current year’s classification.

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

This is the Cash Flow Statement For INDUSIND BANK LTD.

referred to in our report of even date









Place : Mumbai

Date : May 25, 2007

56

US DOLLARS DENOMINATED BALANCE SHEET AS AT MARCH 31, 2007

(Millions of US$)

1 USD = Rs. 43.47 As at 31.03.07 As at 31.03.06

CAPITAL AND LIABILITIES

Capital 73.61 66.83

Reserves and Surplus 169.49 132.40

Deposits 4,059.08 3,452.11

Borrowings 136.30 123.06

Other Liabilities & Provisions 375.67 279.55

TOTAL 4,814.15 4,053.95

ASSETS

Cash and Balances with Reserve Bank of India 234.91 138.97

Balances with Banks & Money at Call and Short Notice 362.14 201.61

Investments 1,355.34 1,244.51

Advances 2,549.85 2,141.81

Fixed Assets 85.02 78.12

Other Assets 226.89 248.93

TOTAL 4,814.15 4,053.95

Contingent Liabilities 4,776.11 3,873.12

Bills for Collection 336.18 404.58

US DOLLARS DENOMINATED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED MARCH 31, 2007

(Millions of US$)

1 USD = Rs. 43.47 Year ended Year ended

31.3.07 31.3.06

I INCOME

Interest earned 345.12 273.36

Other Income 56.16 43.44

TOTAL 401.28 316.80

II EXPENDITURE

Interest expended 282.69 200.87

Operating expenses 79.12 72.84

Provisions & contingencies 23.78 34.62

TOTAL 385.59 308.33

III PROFIT 15.69 8.47

Add: Transfer from Investment Fluctuation Reserve - 18.15

Less: Tax adjustment of the last year 0.22 -

AMOUNT AVAILABLE FOR APPROPRIATION 15.47 26.62

IV. APPROPRIATIONS

Transfer to

a) Statutory Reserves 3.92 2.12

b) Capital Reserves 0.51 0.33

c) Dividend on equity 4.41 -

d) Corporate Dividend Tax 0.75 -

9.59 2.45

Balance carried over to Balance Sheet 5.88 24.17

TOTAL 15.47 26.62

57

ALF Insurance Services Private Limited

DIRECTORS’ REPORT

Your Directors are pleased to present the Fourth Annual Report along with the audited accounts for

the year ended March 31, 2007.

Financial Performance:

(in Rupees)

Particulars Year ended Year ended

March 31, March 31,

2007 2006

Interest Income 3,18,257 3,30,618

Total Income 3,18,257 3,30,618

Administrative and Other Expenses 29,588 31,869

Total Expenditure 29,588 31,869

Net Profit before Tax 2,88,669 2,98,749

Preliminary Expenses written off 3,210 3,210

Provision for Taxation 1,00,695 1,00,271

Profit After Tax 1,84,764 1,95,268

Profit brought forward from previous year 3,22,874 1,27,606

Profit carried to Balance Sheet 5,07,638 3,22,874

Business

Your Company is in the Business of Insurance Corporate Broking.

Outlook for the future:

Upon getting license from IRDA, your company will be doing business with all the public sector

Companies namely, New India Assurance Company Limited, Oriental Insurance Company Limited,

United India Insurance Company Limited and National Insurance company Limited.

Board of Directors:

Mr. C. M. Sambasivam, Director, retires by rotation and he being eligible, offers himself for

reappointment.

Directors’ Responsibility Statement:

a) In the preparation of annual accounts for the period ended March 31, 2007 the applicable

accounting standards have been followed by the Company.

b) The Directors have selected such accounting policies and applied them consistently and made

judgments and estimates that are reasonable and prudent so as to give a true and fair view of

the state of affairs of the Company as at March 31, 2007 and the profit of the Company for the

period ended on that date.

c) The Directors have taken proper and sufficient care for the maintenance of adequate accounting

records in accordance with the provisions of the Companies Act, 1956 for safeguarding the

assets of the company and for preventing and detecting fraud and other irregularities.

d) The accounts of the company have been prepared on a going concern basis.

Auditors:

M/S. Prasad & Srinath, Chartered Accountants, Chennai, retire at the ensuing Annual General

Meeting and are eligible for re-appointment.

Secretarial Compliance Certificate:

Secretarial Compliance Certificate pursuant to Section 383A of the Companies Act issued by Mr.

G.Ramachandran, Company Secretary in practice is attached and the same forms part of this report.

Particulars of employees:

None of the employees are covered under Section 217(2A) of the Companies Act read with Companies

(Particulars of Employees) Rules, 1975.

Conservation of Energy, Technology absorption and Foreign exchange Earning/Outgo:

Your Company has no activities relating to Conservation of Energy or Technology Absorption. Your

Company did not have any foreign earnings or outgo.

Acknowledgement:

Your Directors wish to place on record their deep appreciation for the whole-hearted and sincere co-

operation from its Bankers. Your Directors also wish to place on record their appreciation for the

unstinted co-operation and support extended by all the employees in achieving the performance of

your Company.

On behalf of the Board of Directors

C. M. Sambasivam

Place : Chennai S. T. Krishnekumaar

Date : May 21, 2007 Directors

SUBSIDIARY COMPANY

AUDITORS’ REPORT

Auditor’s Report to the members of ALF Insurance Services Private Limited

1. We have audited the attached balance sheet of ALF Insurance Services Private Limited as at

31st

March 2007, and the Profit and Loss Account for the year ended on that date annexed

thereto. These financial statements are the responsibility of the company’s management. Our

responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in

India. Those Standards require that we plan and perform the audit to obtain reasonable

assurance about whether the financial statements are free of material misstatement. An audit

includes examining, on a test basis, evidence supporting the amounts and disclosures in the

financial statements, An audit also includes assessing the accounting principles used and

significant estimates made by management, as well as evaluating the overall financial statement

presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 as amended by the Companies

(Auditor’s Report) (Amendment) Order, 2004, issued by the Government of India in terms of

sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a

statement on the matters specified in paragraphs 4 and 5 of the said Order

4. Further to our comments in the Annexure referred to above, we report that:

(i) We have obtained all the information and explanations, which to the best of our

knowledge and belief were necessary for the purposes of our audit;

(ii) In our opinion, proper books of account as required by law have been kept by the

company so far as appears from our examination of those books

(iii) The Balance Sheet and Profit and Loss Account dealt with by this report are in

agreement with the books of account

(iv) In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report

comply with the accounting standards referred to in sub-section (3C) of section 211 of

the Companies Act, 1956;

(v) On the basis of written representations received from the Directors, as on 31st

March

2007 and taken on record by the Board of Directors, we report that none of the

Directors is disqualified as on 31st

March 2007 from being appointed as a Director in

terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

(vi) In our opinion and to the best of our information and according to the explanations

given to us, the said accounts give the information required by the Companies Act,

1956, in the manner so required and give a true and fair view in conformity with the

accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at

31st

March 2007,

(b) in the case of the Profit and Loss Account of the Profit for the year ended on

that date.

For PRASAD & SRINATH


S.PRASAD

Place: Chennai Partner

Date: May 21, 2007 M.No.12847

ANNEXURE

Referred to in paragraph 3 of our report of even date,

1) The Company does not have any Fixed Asset and hence maintenance of register and physical

verification does not arise.

2) The Company does not have any stock of inventory and hence reporting on physical verification

does not arise.

3) a) The Company has neither granted nor taken any loans, secured or unsecured to/from

companies, firms, or other parties covered in the register maintained under section

301 of the companies Act, 1956.

4) In our opinion and according to the information and explanations given to us, there is an

adequate internal control system commensurate with the size of the company and the nature

of its business. During the course of our audit, we have not observed any continuing failure to

correct major weaknesses in internal system.

5) a) According to the information and explanations given to us, we are of the opinion that

the transactions that need to be entered into the register maintained under section 301

of the Companies Act 1956 have been so entered.

b) None of the said transactions have exceeded Rs.5 Lakhs in value in respect of any

party in one financial year.

6) The company has not accepted deposits from the Public during the year.

7) The company does not have separate internal audit system. However in our opinion the

existing internal control procedures are sufficient considering the size and nature of business

of the company.

8) The Central Government has not prescribed maintenance of any cost records under Section

209 (1) (d) of the Companies Act, 1956.

9) a) The Company is regular in depositing applicable undisputed statutory dues

with appropriate statutory authorities.

b) According to the information and explanations given to us, there were no disputed

amounts payable in respect of Income tax, Wealth tax, Sales tax, Customs duty,

Excise duty, Service tax and Cess as at 31.03.2007 for a period of more than six

months from the date they became payable.

10) The company does not have accumulated losses. The company has not incurred cash losses

during the year covered by our audit and the immediately preceding year.

11) The company does not have any dues to a bank or to a financial institutions or to Debenture

holders.

12) The company has not granted any loans and advances on the basis of security by way of

pledge of shares, debentures and other securities.

13) The company is not a chit fund or a nidhi/ mutual benefit fund/ society. Therefore, the

provisions of clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 are not applicable

to the company.

14) The company is not dealing in or trading in shares, securities, debentures and other

investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditor’s Report)

Order, 2003 are not applicable to the company.

15) The company has not given any guarantee for loans taken by others from banks or financial

institutions.

16) The Company does not have any term loan.

17) The company has not raised funds on short-term basis.

18) The company has not made any preferential allotment of shares to parties and companies

covered in the register maintained under section 301 of the Act.

19) The company has not issued any debentures.

20) The company has not raised money by way of public issues.

21) During the course of our examination of the books of account carried out in accordance with

the generally accepted auditing practices in India, we have neither come across any instance

of fraud on or by the company, noticed or reported during the year, nor have we been

informed of such case by the management.

For PRASAD & SRINATH


S. PRASAD

Place: Chennai Partner

Date: May 21, 2007 M.No.12847

58

BALANCE SHEET AS AT MARCH 31, 2007

SOURCE OF FUNDS SCH March 31, March 31,

2007 2006

Rs. Rs. Rs. Rs.

Shareholders’ Funds

Share Capital 1 50,00,000 50,00,000

Reserves and Surplus 2 5,07,638 3,22,874

Total 55,07,638 53,22,874

APPLICATION OF FUNDS

Current Assets Loans and Adances 3 57,12,776 58,48,806

Less: Current Liabilities and Provisions 4 2,08,348 5,32,352

Net Current Assets 55,04,428 53,16,454

Preliminary Expenses 3,210 6,420

Total 55,07,638 53,22,874

Schedules and Notes to the Accounts form part of this Balance Sheet

As per our Report of even date

For and on behalf of For and on behalf of the Board

PRASAD & SRINATH


S. PRASAD C.M.SAMBASIVAM S.T.KRISHNEKUMAAR

Partner Director Director

M.NO.12847

Place : Chennai

Date : May 21, 2007

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED

MARCH 31, 2007

INCOME March 31, March 31,

2007 2006

SCH Rs. Rs.

Interest On Fixed Deposit 3,18,257 3,30,618

(TDS: Rs.86,812; previous year Rs. 69,588)

TOTAL INCOME (A) 3,18,257 3,30,618

EXPENDITURE

Administration 5 29,588 31,869

Preliminary Expenses written -off 3,210 3,210

TOTAL EXPENDITURE (B) 32,798 35,079

Profit Before Tax (A-B) 2,85,459 2,95,539

Less: Provision for Taxation 96,157 99,478

Less: Provision for Taxation (for Prior Period) 4,538 793

Profit after Tax 1,84,764 1,95,268

Profit brought forward from previous Year 3,22,874 1,27,606

Profit carried to Balance Sheet 5,07,638 3,22,874

Schedules and Notes to the Accounts form part of this Balance Sheet

As per our report of even date


PRASAD & SRINATH




M.NO.12847

Place : Chennai

Date : May 21, 2007

SCHEDULES TO ACCOUNTS

March 31, March 31,

2007 2006

Rs. Rs. Rs. Rs.

1. SHARE CAPITAL

Authorised

5,00,000 Equity Shares of

Rs.10/- each 50,00,000 50,00,000

Issued, Subscribed and Paid up

5,00,000 equity shares of

Rs.10/- each 50,00,000 50,00,000

[The entire capital is held by

IndusInd Bank Ltd. and it’s nominees]

2. RESERVES AND SURPLUS

Profit and Loss Account 5,07,638 3,22,874

TOTAL 5,07,638 3,22,874

3. CURRENT ASSETS, LOANS AND

ADVANCES

Interest Receivable 3,00,054 1,60,986

Tax Deducted at source 1,23,611 1,40,323

Bank Balance (with Scheduled Bank)

In current Account 89,772 2,123

In Fixed Deposit Account 51,99,339 55,45,374 55,47,497

57,12,776 58,48,806

4. Current Liabilities & Provisions

a) Current liabilities

Sundry Creditors 12,713 4,04,892

b) Provisions

Provision for Taxation 1,95,635 1,27,460

2,08,348 5,32,352

5. Administrative Expenses

Rates & Taxes 1,528 4,000

Professional Charges 16,836 15,765

Audit Fees(including service tax) 11,224 11,224

Bank Charges - 880

29,588 31,869

ACCOUNTING POLICIES

1. Revenue Recognition

1.1 Interest on Fixed Deposit is accounted on accrual basis.

1.2 Retirement Benefits

Liability towards gratuity has not been accrued to the company. Encashment of leave is at

present at the discretion of the management and hence no provision is considered necessary.

2. The company does not have any deferred tax liability.

3. The figures have been rounded off to nearest rupee.

4. Previous year figure have been regrouped wherever necessary.

ALF Insurance Services Private Limited


PRASAD & SRINATH




M.NO.12847

Place : Chennai

Date : May 21, 2007

59

1 Name of the Subsidiary Company

2 Financial Year ending

3 Holding Company’s Interest

4 Extent of holding

5 Profit (Loss) for the financial year of the subsidiary so far as it concerns

the member of the holding company and not dealt with in the books of

accounts of the holding company.

6 Profit (Loss) for the financial year of the subsidiary so far as it concerns

the member of the holding company and dealt with in the books of

accounts of the holding company.

7 Profit (Loss) for the previous financial year of the subsidiary so far as it

concerns the member of the holding company and dealt with in the

books of accounts of the holding company.

8 Profit (Loss) for the previous financial year of the subsidiary so far as it

concerns the member of the holding company and dealt with in the

books of accounts of the holding company.

: ALF Insurance Services Pvt. Ltd.

: March 31, 2007

: 5,00,000 equity shares of Rs. 10/- face value.

: 100%

: Rs. 1,84,764

: Rs. Nil

: Rs. 1,95,268

: Rs. Nil

STATEMENT PURSUANT TO SEC.212 (1) (E) OF THE COMPANIES ACT, 1956

RELATING TO SUBSIDIARY COMPANY AS ON MARCH 31, 2007.

INDUSIND BANK - LAST 10 YEARS

(Rs. in crores)

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Deposits 4273 5018 6546 7187 8400 8598 11200 13114 15006 17645

Advances 2451 2662 3677 4237 5574 5348 7812 9000 9310 11084

Capital 158 159 159 159 159 219 290 291 291 320

Reserves & Surplus 355 370 374 385 403 383 510 539 576 737

Borrowings 63 41 55 41 87 237 2310 611 535 593

Investments 1696 2095 2731 2494 2485 2535 3972 4069 5410 5892

Interest Income 551 594 637 729 710 743 986 1134 1188 1500

Other Income 155 83 145 116 184 258 345 251 189 244

Interest Expenses 429 479 501 569 547 558 669 719 873 1229

Operating Expenses(Excluding depreciation) 59 66 68 75 74 93 180 220 281 310

Operating Profit(before depreciation) 218 132 213 201 273 350 482 446 223 205

Provisions & Contingencies(including depreciation) 127 95 157 160 222 260 220 236 186 137

Net Profit 91 37 56 41 51 90 262 210 37 68

Number Of Branches 21 26 27 32 40 53 61 115 137 170

Number Of Extension Counters 0 3 4 4 7 10 12 9 8 0

Number Of OSA’s 0 0 0 0 30 64 80 80 83 99

60

Andhra Pradesh

Ananthapur


Tel: (08554) 244955, 651286

Banjara Hills


Tel: (040) 23354567, 23354568

Chittoor


Tel: (08572) 221166, 230044

Gajuwaka


Tel: (0891) 2514125, 2758223

Gudivada


Tel: (0867) 249033, 249044

Guntur


Tel: (08674) 2331001, 2331002

Hyderabad


Tel: (040) 27907660, 27907664

Kadapa


Tel: (08562) 243411

Kodad


Tel: (08683) 256403

Kurnool


Tel: (08518) 223425, 395420

Miryalaguda


Tel: (08689) 243050

Nellore


Tel: (0861) 2306369

Seethummadhara


Tel: (0891) 2707326, 2707329

Vijayawada


Tel: (0866) 2492633, 2492644

Visakhapatnam


Tel: (0891) 2702202, 2702198

Warangal


Tel: (0870) 2433555

Assam

Guwahati


Tel: (0361) 2452864, 2452865

Jorhat


Tezpur


Bihar

Patna


Tel: (0612) 2206140, 2202542

Chandigarh

Chandgarh


Tel: (0172) 2541651, 2541655

Branch Network

Mohali


Tel: (0172) 2222983, 2222985

Chattisgarh

Ambikapur


Tel: (07774) 231802, 323804

Jagdalpur


Raipur


Tel: (0771) 4033402, 4033403

Goa

Madgaon


Tel: (0832) 2712238, 2712242

Panjim


Tel: (0832) 2429044, 2429045

Gujarat

Ahmedabad


Tel: (079) 26426104, 26426108

Amalsad


Bardoli


Tel: (02622) 229230, 229375

Baroda


Tel: (0265) 2332409, 2332416

Bhavnagar


Tel: (0278) 2512055

Dharmaj


Tel: (02697) 245096, 245097

Gandhidham


Tel: (02836) 233541

Jamnagar


Tel: (0288) 2664321

Mehsana


Tel: (02762) 241492, 241493

Morbi


Tel: (02822) 251808, 251760

Rajkot


Tel: (0281) 2461893, 2461894

Silvassa


Surat


Tel: (0261) 2346473, 2366823

Valsad


Tel: (02632) 254665, 254666

Vapi


Tel: (0260) 2425175, 2428129

Warasia


Tel: (0265) 2512595, 2512597

Haryana

Gurgaon


Tel: (0124) 2388882, 2388883, 2388884

Hissar


Tel: (01662) 226342

Karnal


Tel: (0184) 2268956, 2268957

PanchKula


Tel: (0172) 5024380 – 5024388

Rohtak


Tel: (01262) 255940, 255942

Himachal Pradesh

Shimla


Tel: (0177) 2654187, 2652217

Jammu & Kashmir

Srinagar


Jharkhand

Bokaro


Tel: (06542) 233420

Dhanbad


Tel: (0326) 2305700, 2309888

Hazaribagh


Tel: (06546) 224920, 224922

Jamshedpur


Tel: (0657) 3294929, 2756115

Ranchi


Tel: (0651) 2330137, 2330147

Karnataka

Bangalore


Tel: (080) 25323882, 25592327

Basavanagudi


Tel: (080) 26610251-3

Bomasandra


Tel: (08110) 322377

Hubli


Tel: (0836) 2358263, 2358264

Mangalore


Tel: (0824) 6558600

Mysore


Tel: (0821) 4252061, 5262899

Shimoga


Tel: (08182) 227711, 227722

Kerala

Alappuzha


Tel: (0477) 2230888

Kakkanad


Tel: (0484) 2413252

Kannur


Tel: (0497) 3959660, 2705944

Kattappana


Kazhakuttom


Tel: (0471) 2527550, 2527551

Kochi


Tel: (0484) 2360888, 2360889

Kollam


Tel: (0474) 2766985, 2766986

Kottayam


Tel: (0481) 2303614, 2303615

Malapuram


Tel: (0483) 2735810, 2735811

Palakkad


Tel: (0491) 2573900, 2571900

Perinthalmanna


Tel: (04933) 224600, 224601

Thiruvalla


Tel: (0469) 2600241, 2600243

Thiruvananthapuram


Tel: (0471) 2339931, 2339932

Thrissur


Tel: (0487) 2323178, 2323378

Madhya Pradesh

Bhopal


Tel: (0755) 4228090, 4228091

Chhindwara


Tel: (07162) 245204, 247917

Gwalior


Tel: (0751) 2235564, 2235565

Indore


Tel: (0731) 2542696, 2542697

Jabalpur


Tel: (0761) 4006180, 4010100

Maharashtra

Andheri


Tel: (022) 28237636, 28237640

Aurangabad


Tel: (0240) 2353760, 2353756

Bandra


Tel: (022) 26457800, 26458320

Chembur


Tel: (022) 25260881, 25260882

Dadar


Tel: (022) 24167911, 24167917

Fort Branch


Tel: (022) 66366580, 66366583

Kandivali


Tel: (022) 28022079, 28022080

Kolhapur


Tel: (0231) 6512006, 6512007

Lokhandwala


Tel: (022) 66951107, 66951110

Mahim


Tel: (022) 24455301, 24455563

Mulund


Tel: (022) 25927080, 25926808

Nagpur


Tel: (0712) 2547456, 2534188

Nariman Point


Tel: (022) 22022404, 22022407

Opera House


Tel: (022) 23857474, 23859494

Panvel


Tel: (022) 27483156, 27483154

Pune


Tel: (020) 26343201, 26343227

Thane


Tel: (022) 25390387, 25390392

Vashi


Tel: (022) 27830026, 27830027

New Delhi

Barahkhambha


Tel: (011) 23738040, 23738408

Janakpuri


Tel: (011) 41000141, 41000143

Nehru Place


Tel: (011) 26481119, 26236539

Preet Vihar


Tel: (011) 22051623, 22051632

Punjabi Bagh


Tel: (011) 25220037, 25220038

Orissa

Balasore


Tel: (06782) 240274

Barbil


Tel: (06767) 276821, 262448

Bhubaneswar


Tel: (0674) 2536124, 2536125

Cuttack


Tel: (0671) 2321255

61

Punjab

Amritsar


Tel: (0183) 2221055, 5066708

Banga


Tel: (01823) 264513

Bhatinda


Tel: (0164) 2240566, 5004187

Jallandhar


Tel: (0181) 5003480, 5003580

Khanna


Tel: (01628) 237924, 237926

Ludhiana


Tel: (0161) 2771387, 2771385

Mansa


Phagwara


Tel: (01824) 223424, 223425

Urban Estate Focal Point


Tel: (0161) 2678500, 2678600

Rajasthan

Ajmer


Tel: (0145) 2631999, 2428239

Bhilwara


Tel: (01482) 233200, 233201

Bikaner


Tel: (0151) 2201790, 2201792

Jaipur


Tel: (0141) 2387301, 2387302

Jhunjhunu


Tel: (01592) 236319, 236728

Jodhpur


Tel: (0291) 2627491, 2647738

Kota


Tel: (0744) 2366678, 2366680

Nagaur


Nasirabad


Shahpura


Tel: (01422) 225388, 225389

Sumerpura


Udaipur


Tel: (0294) 2417294, 2417295

Sikkim

Gangtok


Tel: (03592) 271157 / 232571

Tamil Nadu

Adyar


Tel: (044) 52607575, 52607576

Annanagar


Tel: (044) 42180926, 42180927

Avinashi


Tel: (04296) 273701, 329702

Chennai


Tel: (044) 28234788, 28235471

Coimbatore


Tel: (0422) 2213551, 2216790

Coonoor


Tel: (0423) 2232010, 2232020

Dharmapuri


Erode


Tel: (0424) 2259073, 2259075

Hosur


Karur


Madurai


Tel: (0452) 5571454, 5571413

Namakkal


Tel: (04286) 231722

R. S. Puram


Tel: (0422) 2541409, 2541429

Salem


Tel: (0427) 2443292, 2449547

Sankari


Sivakasi


Tiruchirapalli


Tel: (0431) 2412237

Tirupur


Tel: (0421) 2242875, 2242885

Vellore


Tel: (0416) 6454647

Tripura

Dharmanagar


Union Territory

Pondicherry


Tel: (0413) 4210600, 4210601

Uttar Pradesh

Agra


Tel: (0562) 2526452, 2526472

Allahabad


Tel: (0532) 2260354, 2260353

Aminabad


Tel: (0522) 2614336, 2622870

Bareilly


Tel: (0581) 2471912

Hapur


Tel: (0122) 2306085, 2306086

Kanpur


Tel: (0512) 2554057, 2554059

Lucknow


Tel: (0522) 2620169, 6566810

Noida


Tel: (0120) 2517417, 2517420

Varanasi


Tel: (0542) 2207982, 2207985

Uttaranchal

Dehradun


Tel: (0135) 274 0411, 274 0522

West Bengal

Asansol


Tel: (0341) 2215665, 2215666

Burra Bazar


Tel: (033) 22594856, 22594819

Durgapur


Tel: (0343) 2543520, 2543521

Gariahat


Tel: (033) 24653731, 24653732

Kharagpur


Tel: (03222) 228328, 228330

Kolkatta


Tel: (033) 30212400, 22896205

Malda


Tel: (03512) 265769, 265762

Siliguri


Tel: (0353) 2777940, 2777941

Stock Exchange


Tel: (033) 22312723, 22312724

Offices Abroad

Dubai


Tel. 009714 3978803

London


Tel. 0044 207 4324503

62

MILESTONES

Year Business Achievements

2006-07 • Net worth crossed a milestone figure of Rs. 1000 crores at Rs. 1056 crores.

• Successful completion of GDR issue of Rs. 145.96 crores.

• Business Turnover touched a figure of Rs 28,700 crores registering a growth of 18.14% over the

previous year.

• Network of Branches increased to 170 along with 99 off-site ATMS, thus having presence in over

141 geographical locations spread over 27 States including Union Territories.

• Highest A1+ rating for its Certificates of Deposits by ICRA and Highest P1+ rating for its FDs by

CRISIL.

• Bestowed with the prestigious IBA Award for technology implementation (STP).

• Added a number of new business and product lines, viz. the launch of Indus GOLD Debit Card

and Indus Gift Card, E-Remittance facility, tie-up with number of Banks for ATM usage, tie-up with

Religare Securities to extend Portfolio Management services and Bancassurance tie-up with

Aviva Life Insurance.

2005-06 • Ranked among the top ten banks in the country in the ET500 list of leading companies in India.

• Rated as “The best among the top 10 private-sector banks” in a survey covering 79 banks

conducted by Business Standard in its November 2005 issue. Ranked sixth in the overall list, the

Bank was also identified the “Most Efficient Bank” among all banks in India.

• Bestowed “India’s Most Productive Bank” status by a Business Today- KPMG Survey.

• Presented “Outstanding Achiever of the Year 2005 - Corporate” (Runner up- Banking Technology

Award) by IBA, Finacle (from Infosys) and TFCI (Trade Fair and Conference International).

• Honoured with the “Award for Corporate Social Responsibility (CSR)” at the India Brand Summit

2005, Mumbai.

2004-05 • Business Turnover crossed Rs. 22000 crores.

• Network grew to 115 branches, 9 extension counters and 195 ATMs, spread over 95 geographical

locations.

• Bestowed with highest ratings for deposits from reputed rating agencies.

• Highest rating “P1+” - on Fixed Deposits from CRISIL.

• Highest rating “P1+” - on Certificate of Deposits from CRISIL.

• Highest rating “F1+” - on Certificate of Deposits from Fitch Ratings India Pvt. Ltd.

• Bank’s second International Representative office opened in London.

• 100th

Branch opened at Dadar, Mumbai.

• Signed an agreement with NCDEX as clearing banker.

• Launched International Mahila Card.

2003-04 • Total business volume touches Rs. 19,000 crores.

• Completes 10 years of banking excellence.

• Ashok Leyland Finance merges with the Bank.

• The first Indian Commercial Bank to achieve certification for its “Entire Network of Branches”

under the ISO 9001:2000 Quality Management System.

• Launch of Debit Card- International Power Card.

• Bank’s first International Representative Office in Dubai.

• One of the first banks to go live on RTGS platform.

2002-03 • One of the first banks to implement the RBI- Electronic Funds Transfer scheme.

2001-02 • Total business volume touches Rs. 14,000 crores. Highest productivity in the Indian banking

sector with Rs. 16 crores of business per employee.

2000-01 • Total business volume crosses Rs. 10,000 crores.

1998-99 • IndusInd again rated as one of the Top Performing Banks in various survey reports, for the

second year in succession.

1997-98 • IndusInd rated as one of the Top Performing Banks in various survey reports.

1996-97 • Pioneer in launching Internet Banking.

1994-95 • IndusInd Bank comes into existence. Completes first profitable year of operations.

I/We ................................................... of ............................................. in the district of .. .......................................... being a member / members of the

above named Bank, hereby appoint .................................... of ..................................... in the district of ............................. or failing him ................................

of ...................................................... in the district of ............................................ as my / our proxy to vote for me / us on my / our behalf at the

Thirteenth Annual General Meeting of the Bank to be held at Hotel Taj Blue Diamond, 11 Koregaon Road, Pune - 411001 on Tuesday,

September 18, 2007 at 12.00 noon and at any adjournment thereof.

Signed this ..................................................... day of ............................................, 2007

Signature __________________

NOTE : This proxy form, in order to be effective and valid, should be duly stamped, completed and signed and must be deposited at the Registered

Office of the Bank not less than 48 hours before the time of the Meeting.

13th

Annual General Meeting, Tuesday, September 18, 2007 at 12.00 noon at Hotel Taj Blue Diamond, 11 Koregaon Road, Pune - 411 001

I hereby record my presence at the 13th Annual General Meeting of the Bank to be held on Tuesday, September 18, 2007 at 12.00 noon at Hotel Taj

Blue Diamond, 11 Koregaon Road, Pune - 411001.

Name of the shareholder / proxy (in block letters) .....................................................................................................................................................................

Signature of the shareholder / proxy ..........................................................................................................................................................................................

NOTE : Shareholders attending the meeting in person or by proxy are requested to complete the attendance slip and hand it over to the Bank

officials at the entrance of the meeting hall.

BANK ACCOUNT PARTICULARS / ECS MANDATE FORM

Folio No. ________________________ No. of shares hled ________________

I/We ......................................................................................... do hereby authorise IndusInd Bank Limited to

* Print the following details on my / our Dividend Warrant

* Credit my dividend account directly to my Bank account by Electronic Clearing Services (ECS).

(* Strike out whichever is not applicable.)

Particulars of Bank Account:

A. Bank Name : ....................................................................................................................................................

B. Branch Name : ....................................................................................................................................................

Address with PIN code

(for ECS Mandate only)

C. 9 Digit Code Number of the Bank and

Branch (as appearing on the MICR Cheque) : .............................................................................................................................................

D. Account Type (Saving/Current/NRE/NRO) : .............................................................................................................................................

E. Account No. (as appearing on the cheque Book) : .............................................................................................................................................

I/We shall not hold the bank responsible if the ECS could not be implemented or the Bank discontinues the ECS, for any reason.

Intime Spectrum Registry Limited

MAIL TO � Unit: IndusInd Bank Ltd., C-13, Pannalal Silk Mills Compound,

L.B.S. Marg, Bhandup (W), Mumbai 400 078 ....................................................................

Signature of the Shareholder

NOTE : Please attach the photocopy of a cheque or a blank cancelled cheque issued by your Bank relating to your above account for veri fying the

accuracy of the 9 digit code number.

In case you are holding shares in demat form, kindly advise your Depository Participant to take note of your Bank account particulars /

ECS Mandate.

� �

��

Revenue

Stamp

Registered Office :

2401, General Thimmayya Road

(Cantonment), Pune 411 001

PROXY FORM Folio No. ________________________

DPID-Client ID No. ________________

No. of shares held ________________

Registered Office :

2401, General Thimmayya Road

(Cantonment), Pune 411 001

ATTENDANCE SLIPFolio No. ________________________

DPID-Client ID No. ________________

No. of shares held _________________

� �

INFO

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indusind secretarial 2007 · of the companies act, 1956, consent of members of the bank be and is...

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