Private & Confidential – For Private Circulation Only (This Information Memorandum is neither a prospectus nor a Statement In Lieu Of Prospectus)

Memorandum of

Private Placement This is not an invitation for the public to subscribe to any of the securities of

The Bank of Rajasthan Limited, and hence not a Prospectus

(Incorporated on May 7, 1943 under the Mewar Companies Act)

Registered Office Clock Tower , Udaipur- 313 001

Tel: 0294 - 2521257 / 2422116 Fax no : 0294 - 2525709

Email: roudaipur@rajbank.com Website: www.bankofrajasthan.com

Corporate Office Raghuvanshi Mills Compound,

11/12, Senapati Bapat Marg, Lower Parel (West), Mumbai – 400 013.

Phone : 91-22-30400006 Fax : 91-22-30400019

Email : sect_board@rajbank.com

Private Placement of 700 Unsecured, Non-Convertible, Redeemable, Subordinated Bonds in the nature of Promissory Notes Series IV of face value Rs. 10 Lakhs each for cash at par aggregating Rs. 7,000 Lakhs including green-shoe option

for retaining Rs. 2,000 Lakhs

GENERAL RISK

Investment in debt and debt related securities involve a degree of risk and investors should not invest any funds in the debt instrument privately placed unless they can afford to take the risks attached to such investments. Investors are advised to read the risk factors carefully before taking an investment decision in this private placement. For taking an investment decision, investors must rely on their own examination of The Company and The Placement including the risks involved. The securities have not been recommended or approved by Securities and Exchange Board of India nor does Securities and Exchange Board of India guarantee the accuracy or adequacy of this document. The attention of Investors is drawn to the statement of Risk Factors on Page 6 the Information Memorandum.

ABSOLUTE RESPONSIBILITY OF THE BANK OF RAJASTHAN

The Bank of Rajasthan Limited, having made all reasonable inquiries, accepts responsibility for, and confirms that this contains all information with regard to The Bank and The Placement, which is material in the context of The Placement, that the information contained in this Information Memorandum is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect.

LISTING

The Bank proposes to get the privately placed Unsecured, Non-Convertible, Redeemable, Subordinated Bonds Series IV listed in the Wholesale Debt Segment (WDM) of The Stock Exchange, Mumbai

LEAD ARRANGER TO THE ISSUE

SPA Merchant Bankers Limited

10-A, Chandermukhi Building Nariman Point, Mumbai – 400 021.

SEBI Registration No.: INM000010825 Tel: +91-22-2280 1240-49

Fax: +91-22-2287 1192, 2284 6318 e-mail: ajay.manglunia@spasecurities.com, praveen.daga@spacapital.com

PLACEMENT OPENS ON : 26th December 2005 PLACEMENT CLOSES ON : 27th December 2005

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TABLE OF CONTENTS Chapter Title Page No Definitions / Abbreviations 3 Risk Factors and Management Proposal to address the Risks thereof 5 Highlights 10 PART I I. General Information 11 II. Capital Structure 16 III. Terms of the Present Placement 19 IV. Particulars of The Placement 25 V. Bank, Management, Project and Industry 31 VI. Financial Performance for the past Five Financial Years and for the half year ended

September 30, 2005 52

VII. Management Discussion and Analysis of the Financial Conditions and Results of the Operations as reflected in the Financial Statement

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VIII. Basis for Placement Price 62 IX. Outstanding Litigation or Defaults 62 X. Risk factors and Management Proposal to address the Risks thereof 64 XI. Disclosure on Investor Protection and Grievances Redressal System 69 PART II A. General Information 70 B. Financial Information 72 C. Statutory and Other Information 111 D. Material Contracts and Documents for Inspection 113 PART III Declaration 113

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DEFINITIONS / ABBREVIATIONS

AC Assistant Commissioner ALC Assistant Labour Commissioner AMC Asset Management Company Articles Articles of Association of The Bank of Rajasthan Limited AS Accounting Standard AY Assessment Year Board of Directors Board of Directors of The Bank BSE The Stock Exchange, Mumbai CAF Composite Application Form CAGR Compound Annual Growth Rate CC Criminal Complaint CDSL Central Depository Services Limited CGS Central Government Securities CSE Calcutta Stock Exchange CIT Commissioner of Income Tax CMP Current Market Price CRAR Capital Risk Weighted Adequacy Ratio CRR Cash Reserve Ratio Demat Dematerialised (Electronic/Depository - as the context may be) DICGC Deposit Insurance and Credit Guarantee Corporation DLC District Labour Commissioner DRT Debt Recovery Tribunal DSE Delhi Stock Exchange Association Limited ECGC Export Credit Guarantee Corporation Employees Employees of The Bank of Rajasthan Limited EPS Earning Per Share EXIM Bank Export and Import Bank of India FCNR Foreign Currency (Non-Resident) Account FE Foreign Exchange FEDAI Foreign Exchange Dealers Association of India FEMA Foreign Exchange Management Act, 1999 FII Foreign Institutional Investor FIMMDA Fixed Income & Money Market Derivatives Association FY Financial Year GDP Gross domestic product GIR General Index Register GOI Government of India ICAI Institute of Chartered Accountants of India ID Act Industrial Disputes Act 1947 IDBI Industrial Development Bank of India IM Information Memorandum

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IT Act Income Tax Act, 1961

ITAT Income Tax Appellate Tribunal JSE Jaipur Stock Exchange Limited LIC Life Insurance Corporation of India IM / Information Memorandum This Information Memorandum for privately placed 700 Unsecured, Non-

Convertible, Redeemable, Subordinated Bonds of The Bank of Rajasthan Limited, Series IV of face value Rs. 10 Lakh each for cash at par aggregating Rs. 7,000 Lakh including green shoe option of Rs. 2,000 Lakh

MD & CEO MD and Chief Executive Officer Memorandum Memorandum & Articles of Association of The Bank MOU Memorandum of Understanding MPSE Madhya Pradesh Stock Exchange, Indore NABARD National Bank for Agriculture and Rural Development NAV Net Asset Value NI Act The Negotiable Instruments Act, 1881 NPA(s) Non Performing Asset(s) NRE A/c Non-Resident (External) Rupee Account NRI Non-Resident Indians NRO Non-Resident Ordinary Rupee Account NSDL National Securities Depository Limited OCBs Overseas Corporate Bodies The Placement Placement of Unsecured, Non-Convertible, Redeemable, Subordinated

Bonds of The Bank of Rajasthan Limited, Series IV) of face value Rs. 10 Lakhs each through this Information Memorandum.

OP Original Petition OTS One Time Settlement PAN Permanent Account Number PAT Profit After Tax PDAI Primary Dealers Association of India PBIT Profit Before Interest and Tax RBI Reserve Bank of India RR Revenue Recovery RIB Resurgent India Bond ROC Registrar of Companies, Jaipur RON Return on Net Worth SEBI/ The Board Securities and Exchange Board of India Securities The Unsecured, Non-Convertible, Redeemable, Subordinated Bonds of The

Bank of Rajasthan Limited, Series IV of face value Rs. 10 Lakhs each being placed through this IM

SLR Statutory Liquidity Ratio The Bank/The Bank Of Rajasthan The Bank of Rajasthan Limited The BR Act The Banking Regulations Act, 1949 The Department The Income Tax Department VaR Value at Risk WDV Written Down Value YTM Yield to Maturity

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RISK FACTORS ENVISAGED BY THE MANAGEMENT AND PROPOSALS TO ADDRESS SUCH RISKS

INTERNAL RISK FACTORS

1. There are litigations in which The Bank is involved. A brief description of the same is in the table below. For details please refer to page no of this Information Memorandum.

S. No.

Brief Description No. of cases

Amount involved (Rs. In lac)

1 Suits filed by The Bank against defaulting borrowers (including decreed a/cs)

3553 63130.32

2. Appeals filed by The Bank on disputed income tax 18 4977 (approx.) 3 Suits against The Bank which are not treated as

debts 162 7901.80

4 Suits filed by the shareholders 30 - 5 Criminal case against the bank & the directors 1

2. Suit has been filed by HRB Floriculture Limited (as a shareholder of the bank) against The Bank of Rajasthan Limited and some of the Directors u/s 482 of CRPC.

3. As on 31.03.2005, Rs. 15918.18 Lakhs classified as impaired loans out of which Rs. 881.20 Lakhs is sub-standard (A substandard asset is one which has been classified as NPA for a period not exceeding 18 months) and Rs. 13059.22 Lakhs is doubtful (A doubtful asset is one which has remained NPA for a period exceeding 18 months) and Rs. 1977.76 Lakhs is loss assets (A loss asset is one where loss has been identified by The Bank or its internal auditors or external auditors or RBI inspection). The net NPA positions as on 31.03.2002, 31.03.2003, 31.03.2004 and 31.03.2005 are 8.86%, 6.80%, 2.99% and 2.50% respectively of the net advances. A decreasing trend in the NPA has been exhibited over the recent years.

Management Proposal to address the Risk The bank has given thrust for the recovery of Non Performing Assets and arresting the growth of fresh Non Performing Assets. The strategies for reducing the NPA levels are given in detail on page no. of the Information Memorandum.

4. The lending risk involves inability or unwillingness of a customer or counterparty to meet the commitments in relation to lending and other financial transactions.

Management Proposal to address the Risk The Bank has a structured credit appraisal system and lending norms. The Bank takes adequate care to minimise the risk by having a diversified portfolio and fixing lending limits to sensitive sectors.

5. In terms of RBI guidelines, the Bank is required to create an Investment Fluctuation Reserve equivalent to 5% of its investment portfolio of its investments in the categories “held for trading “ and “ available for sale” over five years period beginning from financial year 2001-02. The Bank has so far created a reserve of Rs. 56.80 crores (including Rs. 47.90 crores upto the previous year) which is 4% of the investment portfolio (excluding securities under Held to Maturity category) as on March 31, 2005.

6. Market Risks

Increased interest rate volatility exposes BoR to market rate risk arising out of maturity/ rate mismatches.

Management proposal to address the Risk: Risks arising from interest rate volatility are inherent to the business of financial intermediation and lending. However, the Bank has put in place a system of regular review of lending and deposit rates in order to �inimize the interest rate risk. The Asset Liability Management Committees of the Bank reviews the risk on a regular basis. Continuous Risk Management measures are initiated depending upon the movement in the market interest rates. The movement in the interest rates is closely monitored for appropriate action. For more

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details on the Risk Management procedures, investors are advised to refer to para ‘Risk Management’ mentioned elsewhere in this Information Memorandum.

7 Credit Rating

Bank has obtained credit rating of ‘CARE A-’ (Single A minus) from Credit Analysis & Research Limited AND “LA-“ from ICRA for an amount of Rs. 70 crores for its issue of Tier-II Bonds. Instruments with this rating are considered upper medium grade instruments and have many favourable investment attributes. Safety for principal and interest are considered adequate. Assumptions that do not materialize may have a greater impact as compared to the instruments rated higher.

Management proposal to address the Risk: Investors may please note that, the rating is not a recommendation to buy, sell or hold securities and investors should take their own decision. The rating may be subject to revision; suspension or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating. The ratings obtained are subject to revision at any point of time in the future. The Rating agency has the right to suspend, withdraw or revise the rating at any time on the basis of new information etc.

8 Contingent Liabilities

As on March 31, 2005 the contingent liabilities of the Bank were at Rs 90,402.80 Lakhs (comprising claims against the Bank not acknowledged as debts Rs. 8,499.96 Lakhs, liability on account of outstanding forward exchange contracts Rs. 43,040.38 Lakhs, guarantees on behalf of constituents in India Rs. 21,860.62 Lakhs, acceptances, endorsements and other obligations Rs. 15,540.20 Lakhs and others Rs. 1,461.64 Lakhs).

Management proposal to address the Risk: The contingent liabilities have arisen in the normal course of business of the Bank and are according to the prudential norms prescribed by RBI. 9 Non Performing Assets (NPAs)

As on 31.03.2005, the net NPAs of the Bank stood at Rs. 7,225 lakhs or 2.50% of its net advances. In the event of non-recovery of these assets, the Bank may have to provide for these NPAs, which might affect the profitability of the Bank in future.

Management proposal to address the Risk: The Net NPAs of the Bank have reduced from 2.99% in 2004 to 2.50% in 2005. The Bank has provided for its NPAs in conformity with RBI guidelines and is taking steps to reduce the proportion of non-performing assets through aggressive recovery drives combined with improved risk management practices. Further, there have been substantial changes in the legislative and operating environment enabling FIs and Banks to pursue recovery of over-dues. Besides Debt Recovery Tribunal (DRT) set up for faster settlement of recovery litigation, GoI has enacted ‘The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’ enabling FIs and Banks to securities and reconstruct financial assets and enforce security more effectively. Reserve Bank of India has formulated detailed guidelines for operation of the scheme. The Bank has made provisions for its NPAs over and above the minimum prescribed by the RBI with a view to enhance the financial strength of the Bank.

10 Utilization of Funds The utilization of the funds proposed to be raised through this private placement is entirely at the discretion of the Bank and no monitoring agency has been appointed to monitor the deployment of funds.

Management proposal to address the Risk: The funds raised through this private placement are not meant for any specific project and hence a monitoring agency may not be required. The Bank is managed by professionals under the supervision of its Board of Directors. Further, the Bank is subject to a number of regulatory checks and balances as stipulated in its regulatory environment. Therefore, the management believes that the funds raised via this private placement would be utilised only towards satisfactory fulfillment of the ‘Objects of the Issue’ mentioned elsewhere in this Information Memorandum.

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External Risk Factors 1. Regulatory restrictions on The Bank and limitations of the powers of bondholders of The Bank

There are a number of restrictions as per The BR Act, which impede flexibility of The Bank’s operations and affect / restrict investors’ right. These are as under:

I. In terms of Section 8 of The BR Act, The Bank is prohibited from doing trading activity, which may act as an

operational constraint.

II. In terms of Section 17(1) of The BR Act, every banking company shall create a Reserve Fund and shall, out of the balance of profit of each year as disclosed in the Profit & Loss a/c prepared under Section and before any dividend is declared, transfer to the Reserve Fund a sum equivalent to not less than twenty percent of such profit.

III. In terms of Section 19 of The BR Act, there are some restrictions on The Banking companies regarding opening

of subsidiaries which may deny The Bank from exploiting emerging business opportunities.

IV. In terms of Section 23 of The BR Act, there are certain restrictions on The Banking companies regarding opening of new place of business and transfer of existing place of business, which may hamper the operational flexibility of The Bank.

V. In terms of Section 25 of The BR Act, each banking company has to maintain assets in India which is not less

than 75% of its demand and time liabilities in India which in turn may prohibit The Bank from creating overseas assets and exploiting overseas business opportunities.

VI. There are restrictions in The BR Act regarding,

a) Management of a bank including appointment of directors. b) Borrowings and creation of floating charge. c) Expansion of business, as the branches need to be licensed. d) Disclosures in the profit & loss account and balance sheet. e) Production of documents and availability of records for inspection by shareholders. f) Reconstruction of banks through amalgamation. g) Maintenance of a percentage of Assets in Unencumbered approved Securities

VII. No banking company shall pay any dividend on its shares until all its capitalised expenses (including

preliminary, organisational expenses, share selling commission, brokerage, amounts of losses and any other item represented by tangible assets) have been completely written off.

2. Sensitivity to the economy and extraneous factors The Bank’s performance is highly correlated to the performance of the economy and the financial markets. The health

of the economy and the financial markets in turn depends on the domestic economic growth, state of the global economy and business and consumer confidence, among other factors. Any event disturbing the dynamic balance of these diverse factors would directly or indirectly affect the performance of The Bank including the quality and growth of its assets.

Management Proposal to Address the Risk The Bank’s performance is highly correlated to the performance of the

economy and the financial markets. The health of the economy and the financial markets in turn depends on the domestic economic growth, state of the global economy and business and consumer confidence, among other factors. Any event disturbing the dynamic balance of these diverse factors would directly or indirectly affect the performance of the Bank including the quality and growth of its assets.

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3. Competition from existing and new commercial banks Competition in the financial sector has increased with the entry of new players and is likely to increase further as a

result of further deregulation in the financial sector. The Bank may face competition both in raising resources and in deploying them.

Management Proposal to Address the Risk The Bank has an established broad based presence and has been taking

steps to enhance customer satisfaction by upgrading skills, systems and technology to meet such challenges. The Bank is attempting to add quality assets on competitive terms. The Bank is also taking steps to broad base its product bouquet with a special emphasis on enhancement in the non-fund based income. On the resource mobilisation front, The Bank is actively endeavouring to broaden its reach and raise resources through its network of 428 outlets in India.

4. Changes in Regulatory Policies Major changes in Government/RBI policies relating to banking sector may have an impact on the operations of The

Bank. Management Proposal to Address the Risk The policy changes may provide both opportunities and challenges for

The Bank. The Bank has a long presence in The Banking sector, for more than 60 years and does not perceive policy changes to be a major threat.

5. Disintermediation in the Financial Markets: Development of capital markets may result in disintermediation by current and potential borrowers whereby many

companies may access the markets directly, thereby reducing their dependence on the banking system.

Management Proposal to Address the Risk Disintermediation brings with it the opportunity for the Bank to expand its fee-based activities The Bank has been proactive and has increased its thrust on businesses such as Treasury, Investment, Cash Management and Foreign Exchange. Also, The Bank has, in recent years, launched several retail lending schemes and value added products so as to broaden its borrower base Due to its diversified services, The Bank is confident of facing any disintermediation effectively

6. Forex Risk Exchange Rate fluctuations may have an impact on The Bank’s financial performance. Management Proposal to Address the Risk As per RBI guidelines, banks are required to frame guidelines covering

all the risks related to foreign exchange operations, duly approved by their Board of Directors. This includes limits on net open exchange position which is also approved by the Reserve bank of India.

The Bank, has prescribed internal control guidelines for foreign exchange operations and net open positions and kept

well below the prescribed limits. As such the risk from exchange rate fluctuations is minimised and kept under control.

7. Interest Rate Risk Interest rate volatility exposes The Bank to an interest rate risk or market risk. Such interest rate risk has a potential

impact on net interest income or net interest margin as well as on the market value of the fixed income securities held by The Bank in its investment portfolio.

Management Proposal to Address the Risk These risks are inherent in The Banking business. However, The Bank

has put in place a system of regular review of lending and deposit rates in order to minimise the interest rate risk. The Asset Liability Management Committees of The Bank reviews the risk on a regular basis. Continuous Risk Management measures are initiated depending upon the movement in the market interest rates. The movement in the interest rates is closely monitored for appropriate action.

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8. Operational Risk Operational risk is a result of failure of operating system in a bank due to certain reasons like computer break-ins,

power disruptions, fraudulent activities, natural disaster, human error or omission or sabotage. Management Proposal to Address the Risk For managing operational risk, The Bank has laid down well-defined

systems and procedures. The Bank has also in place a strong internal inspection and audit system. The Bank has an effective human resources department, which formulates and monitors delegation of duties and responsibilities at different levels.

9. Financial Statements in the Information Memorandum The financial statements and derived ratios there from contained in the Information Memorandum are prepared /

computed as per the permissible accounting practices. While due care has been taken to reflect the true economic reality regarding the financials of The Bank as far as possible, the investors may want to make their own adjustments to the same before arriving at an investment decision in The Placement.

Management Proposal to Address the Risk The financial statements and the derived ratios have been prepared in conformity to the extant guidelines and the same have been certified by the statutory auditors of The Bank. The Bank is also governed by the prudential norms of RBI for income recognition, NPA provisioning etc.

NOTES • Net worth of The Bank as on 31.03.2005 is Rs. 32869.00 Lakh (excluding revaluation reserves) and the size of The

Placement is Rs. 7,000 Lakhs (Rs. 2,000 Lakhs including greenshoe option)

• Book Value per share as on 31.03.2005 is Rs 30.56

• The present Private Placement of Bonds by The Bank consists of Coupon being 8.70% p.a for a tenor of 112 months and 8.50% for tenor of 88 months.

• As per Section 12(2) of BR Act, “no person holding shares in a banking company shall, in respect of any shares held by him, exercise voting rights on poll in excess of ten percent of the total voting rights of all shareholders of the banking company “.

• The Bank has no subsidiary/group company.

• The financial information as contained in PART II including the notes to accounts, significant accounting policies as well as auditors’ qualifications has been duly certified by the statutory auditors of The Bank. As far as possible, these audited numbers have been used for computation or derivation of other financial information contained in the Information Memorandum. However, such other financial information contained in the Information Memorandum except as contained in PART II has been certified by the management of The Bank.

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HIGHLIGHTS • One of the oldest private sector bank, established in 1943 and having a network of 428 outlets across 15 states and 2

union territories

• An existing profit making, dividend paying listed banking company.

• Professionally managed bank

• Fully computerized operations

• Online connectivity across 167 outlets covering 84 cities, all other branches will be online by 31st March 2006.

• First Bank approved by Government Maharashtra for franking of adhesive stamps, the same has also started in Gujarat and Rajasthan by the bank

• The bank has signed an MOU with LIC of India for marketing of it’s Life Insurance Products. The Bank has also signed an MOU with United India Insurance Company to market General Insurance Products as corporate agent.

• The bank is aggressively concentrating on retail products like Housing, car, consumer loans.

• The bank has established 12 hubs and appointed Direct selling Agents (DSA’S) to mobilise the business of retail loans.

• The bank has entered into an MOU with NABARD to collect funds under Capital Gains bonds issue

• The Bank has started internet banking wef 30/11/2005The bank is in advance stage for launch of it’s own credit card products and will be launched on 26/12/2005

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PART I I. GENERAL INFORMATION

THE BANK OF RAJASTHAN LIMITED

(Incorporated on May 7, 1943 under the Mewar Companies Act)

Registered Office: Clock Tower , Udaipur- 313 001

Tel: 0294 - 2521257 / 2422116 Fax no : 0294 - 2525709 Email: roudaipur@rajbank.com

Corporate Office : Raghuvanshi Mills Compound, 11/12, Senapati Bapat Marg, Lower Parel (W), Mumbai – 400 013.

Phone : 91-22-30400016 Fax : 91-22- 30400019; Email : sect_board@rajbank.com Website: www.bankofrajasthan.com

Private Placement of 700 Unsecured, Non-Convertible, Redeemable, Subordinated Bonds in the nature of Promissary Notes Series IV of face value Rs. 10 Lakh each for cash at par aggregating Rs. 7,000 Lakhs including

green-shoe option for retaining Rs. 2,000 Lakhs Authority for The Placement

The Placement is being made pursuant to the Resolution of the Board of Directors of The Bank passed at its meeting held on November 7, 2005 Government Approvals No specific Government approval is required for The Bank for raising the Tier II capital. However The Bank is raising the Tier II Capital through this Placement by following the provisions of the Master Circular DBOD No. BP.BC.20/20.01.02/2003-2004 dated September 2, 2003, issued by RBI prescribing the norms for banking companies to raise Tier II Capital. The Bank can undertake the existing activities in view of the present approvals, and no further approvals from any Government authority are required by The Bank to continue the existing business activities save and except those approvals, which may be required to be taken in the normal course of business from time to time. It is to be distinctly understood that the sanction/permission of the Government of India should not in any way, be deemed or construed that the Information Memorandum has been cleared or approved by them nor do they take any responsibility either for the financial soundness of The Bank or the correctness of the statements made or opinions expressed in this Information Memorandum. Disclaimer Clause It is to be distinctly understood that the submission of the Information Memorandum to The Stock Exchange, Mumbai or the National Stock Exchange, Mumbai should not, in any way, be deemed or construed that the same has been cleared or approved by the Stock Exchange(s). Stock Exchange(s) do not take any responsibility either for the financial soundness of any scheme or the project for which The Placement is proposed to be made or for the correctness of the statements made or opinions expressed in the Information Memorandum. The Bank certifies that the disclosures made in the information memorandum are generally adequate and are in conformity with SEBI (Disclosure and Investor Protection) Guidelines, 2000 in force for the time being. This requirement is to facilitate investors to take an informed decision for making investment in the proposed Placement.

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Disclaimer in Respect of Jurisdiction The placement made through this IM is made in India to those corporate bodies, financial institutions and mutual funds, trusts and individuals resident in India not being minors only, who are specifically addressed through a communication directly to, and who are eligible to apply for The Bonds. No other person shall apply for subscription in The Bonds. This IM does not, however, constitute an offer to sell or an invitation to subscribe to The Bonds in any other jurisdiction to any person to whom it is unlawful to make a private placement in such jurisdiction. Any person into whose possession this IM comes is required to inform himself about and to observe any such restrictions. Disputes arising out of this Placement shall be subject to the jurisdiction of court(s) in Mumbai only. The Bank of Rajasthan reserves the right to withdraw The Placement prior to the closing date in the event of any unforeseen development adversely affecting the economic and regulatory environment. In such event, The Bank will refund the subscription money, along with the interest payable on such subscription money, if any. General Disclaimer The Bank accepts no responsibility for statements made otherwise than in the IM or in the advertisements or any other material issued by or at the instance of The Bank and that anyone placing reliance on any other source of information would be doing so at his/her own risk. Disclaimer statement from the arranger In light of SEBI circular no. SEBI/MRD/SE/AT/36/2003/30/09 dated September 30, 2003 and SEBI circular no. SEBI/MRD/SE/AT/46/2003 dated December 22, 2003; it is advised that the issuer company has exercised self due-diligence to ensure complete compliance of prescribed disclosure norms etc. in this Memorandum. The role of arranger in the assignment is confined to marketing and placement of bonds on the basis of this Memorandum as prepared by the issuer company. The arranger has neither scrutinised nor vetted nor has it done any due-diligence for verification of the contents of this Memorandum. The arranger shall use this Memorandum for the purpose of soliciting subscription(s) from qualified institutional investor(s) in the bonds to be issued by the issuer company on private placement basis. It is to be distinctly understood that the aforesaid use of this Memorandum by the arranger should not in any way be deemed or construed that the Memorandum has been prepared, cleared approved or vetted by the arranger, nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Memorandum: nor does it take responsibility for the financial or other soundness of this issuer, its promoters, its management or any scheme or project of this issuer. The arranger or any of its director, employees, affiliates or representatives do not accept any responsibility and/or liability for any loss or damage arising of whatever nature and extent in connection with the use of any of the information contained in this Memorandum. Filing of Information Memorandum with The Stock Exchange, Mumbai The Information Memorandum is filed with The Stock Exchange, Mumbai (BSE) for uploading in their website in terms of SEBI Circulars No.SEBI/MRD/SE/AT/36/2003/30/09 dated September 30, 2003 and No. SEBI/MRD/SE/AT/46/2003 dated December 22, 2003 The Bank is obliged to update the Information Memorandum and keep the investors informed of any material changes till the listing and commencement of trading.

Listing Applications have been submitted to The Stock Exchange, Mumbai (BSE) to list The Bonds now being privately placed through this IM and to seek a permission to deal in such Bonds and has got in principal approval for the same. The Bank hereby undertakes to comply with the requirements of the listing agreement to the extent applicable to it on a continuous basis. The equity shares of the Bank are listed on The Stock Exchange, Mumbai, National Stock Exchange, Mumbai Jaipur Stock Exchange.

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Eligibility of The Bank to Privately Place The Bonds The Bank is raising the Tier II Capital through this Placement by following the provisions of the Master Circular DBOD No. BP No. BP.BC.20/20.01.02/2003-2004 dated September 2, 2003, issued by RBI prescribing the norms for banking companies to raise Tier II Capital.

Prohibition by SEBI The Bank and companies with which the directors of The Bank are associated as directors or promoters are presently not prohibited from accessing the capital market / Money Market under any order or directions passed by SEBI / RBI.

Minimum Subscription Provisions of Section 69 of The Companies Act are not applicable for The Bonds Letters of Allotment / Refund Orders The Bank shall make allotment to investors in due course after verification of the Application Forms, the accompanying documents and on realisation of the subscription money. Dematerialised Form The Depository Account of the investor(s) with NSDL/ CDSL/ Depository Participant will be credited within Thirty (30) days from the Deemed Date of Allotment. The initial credit in the account will be akin to the Letter of Allotment. After completion of the necessary statutory formalities, the initial credit akin to a Letter of Allotment in the Demat Account of the investor would be replaced with the number of Bonds allotted. The Bonds issued in electronic (dematerialised) form, will be governed as per the provisions of The Depository Act, 1996. Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996, rules notified by NSDL/ CDSL/ Depository Participant from time to time and applicable laws and rules notified in respect thereof. Denomination of Bonds The denomination of each Bond will be of the face value of Rs. 10 Lakh. The Bank will issue instructions for a corporate action to give demat credit in the DP beneficiary account of the allottee for the number of bonds allotted. Placement Programme The Placement programme will open at the commencement of banking hours on December 26, 2005 and will close at the close of banking hours on December 27, 2005 unless extended by The Bank Credit Rating Credit Analysis and Research Limited (CARE) & ICRA Ltd. has assigned “A-”(A minus) and “LA_” (Pronounced “ L A minus”) rating respectively to The Bonds being issued under the current private placement. Instruments of this rating are considered to be of investment grade. The rating indicates sufficient safety for payment of interest and principal, at the time of rating. Underwriting The Placement of Bonds is not underwritten. Declaration by The Bank

The Bank accepts full responsibility for the accuracy of the information given in this Information Memorandum and

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confirms that to the best of their knowledge and belief, there are no other facts, the omission of which makes any statement in this Information Memorandum misleading and further confirms that they have made all reasonable inquiries to ascertain such facts. THE BANK OF RAJASTHAN LIMITED further declares that the Stock Exchange to which an application for listing would be made do not take any responsibility for the financial soundness of this Placement or for the coupon at which The Bonds are placed, or for the correctness of the statements made or opinions expressed in this Information Memorandum.

In the opinion of the The Bank, there are no circumstances that have arisen since the date of the last financial statement disclosed in the Information Memorandum, that materially or adversely affect or are likely to affect the performance or profitability of The Bank or value of its assets or its ability to pay its liabilities within the next twelve months.

All information shall be made available by the Lead Arrangers and The Bank to the Members at large and no selective or additional information would be available for a section of the Members in any manner whatsoever.

The promoters / directors declare and confirm that no information / material likely to have a bearing on the decision of Members in respect of Securities placed in terms of this Information Memorandum has been suppressed / withheld and / or incorporated in the manner that would amount to misstatement / misrepresentation and in the event of it transpiring at any point of time till allotment / refund, as the case may be that any information / material has been suppressed / withheld and / or incorporated in the manner that would amount to misstatement / misrepresentation, The Bank shall refund the entire application monies to all the subscribers within 8 days thereafter without prejudice to the provisions of section 63 of the Companies Act, 1956.

The Bank, its directors and companies with which the directors of The Bank are associated as directors or promoters are presently not prohibitedfrom accessing the capital market under any order or direction passed by SEBI.

The Bank undertakes that it shall take the necessary steps to comply with all the requirements of the guidelines on Corporate Governance as would be applicable to it.

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Intermediaries

LEAD ARRANGER TO THE ISSUE Trustee to the Bond Holders

SPA Merchant Bankers Limited 10-A, Chandermukhi Building Nariman Point Mumbai – 400 021. SEBI Registration No.: Tel: +91-22-2280 1240 Fax: +91-22-2287 1192 e-mail: ajay.manglunia@spasecurities.com praveen.daga@spacapital.com

The Western India Trustee and Executor Company Limited 161/ C, 16th Floor, Mittal Court, Nariman Point, 400021 Tel. no. 022-2281 2883 Fax no.: 022-2281 6477 Email :witco@vsnl.net

Rating Agency :- Credit Analysis & Research Limited Kalpataru Point, 2nd Floor, Kamanii Marg, Sion (East), Mumbai – 400 022 Tel no.: 022-56602871-75/24024541-43 Fax no. :022- 5660 2876 Email: care@careratings.com ICRA Limited Electric Mansion, 3rd Floor Appasaheb Marathe Marg Prabhadevi, Mumbai – 400 025. Tel no.: 022-2433 1046 Fax no. :022- 2433 1390 Email: mumbai@icraindia.com

Company Secretary & Compliance Officer

Mr. D K Jain Company Secretary The Bank of Rajasthan Limited Corporate Office Raghuvanshi Mills Compound, Senapati Bapat Marg, Lower Parel (west), Mumbai – 400 013 Tel. No. -91-22 - 30400006 Fax no. - : 91-22-30400019 Email – sect_board@rajbank.com

Auditors to The Bank ,of Rajasthan Limited

M/s. Chokshi & Chokshi Chartered Accountants 101/102, Kshamalaya, 1st Floor, 37, Sir V. Thackersey Marg, Mumbai – 400020 Tel no.: +91-22-5633 3912 Fax no.: +91-22-2200 3227

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II CAPITAL STRUCTURE

as on September 30, 2005

Description No. of shares Aggregate NOMINAL Value (Rs.)

Aggregate value (Rs.)

AUTHORISED CAPITAL A) Equity Shares of Rs. 10/- each 25,00,00,000 2,50,00,00,000 — ISSUED, SUBSCRIBED AND PAID-UP CAPITAL Equity Shares of Rs.10/-. each Issued 10,75,98,294 1,07,59,82,940 — Equity Shares of Rs.10/- each Subscribed. 10,75,66,729 1,07,56,67,290 — Equity Shares of Rs.10/- each Called up 0 0

B)

Equity Shares of Rs.10/- each Fully paid up. 10,75,66,729 1,07,56,67,290 — C) SHARE PREMIUM — — 37,84,93,000

Notes to Capital Structure 1. History of the Capital

The details of increase in authorised capital (upto September 30, 2005) are given below

Sr. No

Date No. Shares Face Value (Rs.) Authorised Capital

(Rs. Lakhs)

1. As on 31.12.83 40,000 Rs. 100/- 40.00 2. As on 20.06.84 1,00,000 Rs. 100/- 100.00 3. As on 09.06.86 2,00,000 Rs. 100/- 200.00 4. As on 12.09.89 5,00,000 Rs. 100/- 500.00 5. As on 30.09.93 10,00,000 Rs. 100/- 1000.00 6. As on 05.02.94 25,00,000 Rs. 100/- 2500.00 Subdivision of equity shares from face value of Rs. 100/- each to face value of Rs. 10/- each on

June 16, 1994 7. As on 22.09.94 5,00,00,000 Rs. 10/- 5000.00 8. As on 30.09.96 5,10,00,000 Rs. 10/- 5100.00 9. As on 05.01.99 15,00,00,000 Rs. 10/- 15,000.00 10. As on 17.06.05 25,00,00,000 Rs. 10/- 25,000.00

2. Details of allotments made from 21.07.94

Date of Allotment

No of Shares

Face Value

Per Share (Rs.)

Issue Price

Per Share(Rs.)

Cumulative Paid-up

Capital (Rs.)

Considera tion

Description

As on 21.07.94

25,00,000 10/- - 2,50,00,000 - As on 21.07.94

8.10.94 to 31.03.95

54,43,640 10/- - 7,94,36,400 Cash Rights Issue and Preferential allotment to employees

12.05.95 to 09.12.95

99,91,712 10/- - 17,93,53,520 Cash Conversion of warrants

8.7.99 420 10/- - 17,93,57,720 Cash 16.12.99 4,48,26,055 10/- 15/- 6,27,61,8270 Cash Rights Issue 29.03.2001 4,48,04,902 10/- 10/- 1,07,56,67,290 Cash Rights Issue TOTAL 1,07,56,67,290

• The Bank had subdivided equity shares of Rs. 100/- each to equity shares of Rs. 10/- each on June 16, 1994

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3. The Bank came out with a rights issue & warrants issue in 1999 & 2001 and shares pursuant to the said issue were

allotted on 16/12/1999 & 29/03/2001. 4. Directors Shareholding as on 30.09.2005

Sl.No Director No. of shares held

1. Shri. Pravin Kumar Tayal 300

5. No “buy-back” and “stand by” and similar arrangements for purchase of Securities by promoters, directors and lead arrangers have been proposed.

6. The Bonds placed through this Private Placement shall be fully paid-up.

7. Details Regarding Shareholders a) Top 10 shareholders as on date of filing the Information Memorandum with Stock Exchange is as follows (As on December 23, 2005)

S. No. Name of the Shareholder Number of Equity Shares 1 21st Century Entertainment Pvt Ltd 5,085,810 2 Sovotex Textiles Pvt Ltd 5,000,000 3 Cyber Infosystems and Tech. Ltd 4,991,458 4 Global Softech Pvt Ltd 4,981,440 5 EDC Securities Pvt Ltd 4,867,842 6 Cyber Info Zeeboomba.com Ltd 4,330,329 7 Cumballa Hill Property Dev. Pvt Ltd 4,200,000 8 Sumander Property Development Pvt Ltd 4,000,000 9 Ginger Clothing Pvt Ltd 4,000,000 10 Ahmednagar Investments Pvt Ltd 3,190,300

b) Top 10 shareholders ten days prior to the date of filing the Information Memorandum with Stock Exchange is as follows (As on December 13, 2005)

S. No. Name of the Shareholder Number of Equity Shares 1 21st Century Entertainment Pvt Ltd 5,085,810 2 Sovotex Textiles Pvt Ltd 5,000,000 3 Cyber Infosystems and Tech. Ltd 4,991,458 4 Global Softech Pvt Ltd 4,981,440 5 EDC Securities Pvt Ltd 4,867,842 6 Cyber Info Zeeboomba.com Ltd 4,330,329 7 Cumballa Hill Property Dev. Pvt Ltd 4,200,000 8 Sumander Property Development Pvt Ltd 4,000,000 9 Ginger Clothing Pvt Ltd 4,000,000 10 Ahmednagar Investments Pvt Ltd 3,190,300

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c) Top 10 shareholders two years prior to the date of filing the Information Memorandum with Stock Exchange is as follows (As on 31.12.2003)

S. No. Name of the Shareholder Number of Equity Shares 1 21st Century Entertainment Pvt Ltd 5,085,810 2 Sovotex Textiles Pvt Ltd 5,000,000 3 Cyber Infosystems and Tech. Ltd 4,991,458 4 Global Softech Pvt Ltd 4,981,440 5 EDC Securities Pvt Ltd 4,867,842 6 Sahara India Financial Corporation Limited 4,651,808 7 Solid Vision 4,421,386 8 Cumballa Hill Property Dev. Pvt Ltd 4,200,000 9 Sumander Property Development Pvt Ltd 4,000,000 10 Ginger Clothing Pvt Ltd 4,000,000

d) Shareholding Pattern (as on 30.09.2005)

Sl.No. Shareholder No. of shares held % of holding 1. Promoters Holding 4,75,06,129 44.16

2. Mutual Funds, Banks, Financial Institutions, FIIs, NRIs & OCBs 19,04,477 1.77

3. Domestic Companies 1,41,07,179 13.12 4. Resident Individuals 4,30,77,271 40.05 5. Clearing Member & Clearing House 9,71,673 0.90 Total 10,75,66,729 100.00

8. Bonds issued in Series I, II and III are outstanding and redemption is due in year 30th June 2006, 2nd September 2007

and 15th November 2011and 15th July 2014. No other warrants or instruments other than those issued under Series I and II, III are outstanding as on date.

9. Transactions during the previous six months in the Holdings of Directors and related group from September 30, 2005

NIL

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III. TERMS OF THE PRESENT PLACEMENT Terms Of The Bonds

Instrument Unsecured, Redeemable, Non-Convertible Subordinated Bonds Series IV in the nature of Promissory notes

Denomination (Face value) Rs. 10,00,000/- (Rs. Ten Lakh only) per one bond

Rating “CARE A-“ & “ICRA “LA-“

Options Option-I Option-II

Tenure 112 months 88 months

Fixed Coupon 8.70% 8.50%

Coupon Frequency Semi Annual Semi Annual

Put & Call Option None None

Redemption/ Maturity At par at the end of 112 months from the deemed date of allotment

At par at the end of 88 months from the deemed date of allotment

Interest on Application Money Interest shall be payable at the coupon rate from the date of realization of cheques/ draft till one day prior to the deemed date of allotment.*

Form of issuance Dematerialised (electronic credit)

Listing Proposed Listing on BSE

Object of the Bond Placement Tier II Capital for capital adequacy requirements and enhancing long-term resources of the Bank.

Deemed Date of Allotment December 28, 2005 (The Bank reserves the right to extend the deemed date of allotment at its sole discretion)

Minimum subscription per investor

5 Bonds. Thereafter in multiples of one bond

Placement size Rs. 70 crores including green shoe option of Rs. 20 crores

Placement opening date December 26, 2005

Placement closing date December 27, 2005 (The Bank reserves the right to extend the closing date at its sole discretion)

* Subject to TDS as applicable. Investors are advised to read the Information Memorandum for more details.

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Credit Rating Credit Rating & Research Limited (CARE) has assigned “A-” (Pronounced “Single A minus”) & ICRA Ltd, has assigned “LA-“ (pronounced LA minus) rating to its issue of Tier II Bonds being issued under the current private placement of an amount of Rs. 70 crores. Instruments with this rating are considered upper medium grade instruments and have many favourable investment attributes. Safety for principal and interest are considered adequate. Assumptions that do not materialize may have a greater impact as compared to the instruments rated higher. As instruments characteristics or debt management capability could cover a wide range of possible attributes whereas rating is expressed only in limited number of symbols, CARE & ICRA assigns '+' or '-' signs to be shown after the assigned rating (wherever necessary) to indicate the relative position within the band covered by the rating symbol. The Rating Letter and Rating Rationale are reproduced at the end of this IM. Trustees The Bank Of Rajasthan Limited has appointed The Western India Trustee and Executer Company Limited as the trustees to the bondholders (hereinafter referred to as "Trustees"). Under the terms of this appointment the Trustees would monitor timely payment of interest and principal to the Bondholders and take appropriate steps to protect the interest of the Bondholders. The Bank Of Rajasthan Limited And the Trustees will enter into Trustee Agreement, inter alia, specifying the powers, authorities and obligations to the trustees and The Bank of Rajasthan Limited. The bondholder(s) shall, without further act or deed be deemed to have given their consent to the Trustees or any of their agents or authorised officials to do all such acts, deeds, matter and things in respect of or relating to The Bonds as the Trustees may, in their absolute discretion, deemed necessary or required to be done in the interest of the bondholder(s). Underwriting The Placement of Bonds is not underwritten. Deemed Date Of Allotment The deemed date of allotment shall be December28th, 2005. The interest on The Bonds would accrue from the deemed date of allotment. The actual allotment may occur on a date other than the deemed date of allotment. Allotment The Bank of Rajasthan Limited will make allotment to the investors in due course after verification of the application form, the accompanying documents and on realisation of the application money, The Bank of Rajasthan Limited reserves the right to accept or reject any application (in part or full) without assigning any reason thereof. The application forms which are not complete in all respects are liable to be rejected. The full amount of the face value of The Bonds has to be paid along with the application form. After completion of the necessary statutory formalities, the initial credit akin to a Letter of Allotment in the Depository Beneficiary Account of the investor would be replaced with the number of Bonds allotted. Interest on Application Money Interest at the coupon rate applicable to The Bonds placed through this IM (subject to deduction of tax at source at the rate prevailing from time to time under the provisions of Income Tax Act, 1961, or any other statutory modification or re-enactment thereof) will be paid from the date of realisation of the proceeds one day before the deemed date of allotment. The interest warrant would be dispatched by Registered post along with the Letters of Allotment/Refund orders, at the sole risk of the applicant. The interest on application money shall be paid along with Letter of Allotment.

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Interest Payment Interest at 8.70% / 8.50% as the case may be (subject to deduction of tax at source at the rate prevailing from time to time under the provisions of Income Tax Act, 1961, or any other statutory modification or re-enactment thereof) will become payable on 28th June and 28th December every year till redemption. The interest instrument will be mailed to the bondholder(s) by Registered Post, at the sole risk of the applicant, to the first / sole applicant. The last interest payment, if any, will be proportionately made on the redemption date. Payment will be made by way of cheque(s) / interest warrant(s) at par / Demand Draft. In order to avoid any fraudulent misuse of interest warrants, the investors are requested to give their Bank Account details / RTGC details in the application form so that Account Payee Interest Instruments can be issued / directly credited via ECS or RTGS. The record date for payment of interest shall be fixed in accordance with the provisions of the listing agreement from time to time. Interest instruments would be sent to the Bondholders whose names appear in the List of Beneficial owners given by the Depository/ies to The Bank of Rajasthan Limited. Interest for each of the interest periods shall be computed on 365 days a year basis, on the face value of each Debenture at the coupon rate applicable to The Bonds. However, where the interest period (start date to end date) includes 29th February, interest shall be computed on 365 days a year basis, on the face value of each Bond at the coupon rate applicable to he instrument. Tax Deduction At Source Tax as applicable under the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof will be deducted at source while making interest payments for bonds. Tax exemption certificate/document, under Section 193 of the Income Tax Act, 1961, if any, must be lodged to Company Secretary (Compliance Officer) at The Bank of Rajasthan Limited, Raghuvanshi Mills Compound, 11/12, Senapati Bapat Marg, Lower Parel (west), Mumbai – 400 013. Letter(s) of Allotment / Allotment Intimation Bonds will be allotted in Electronic (Dematerialised) form only and allotment intimation will be sent to the allottee(s). This Allotment intimation should neither be construed as a Letter(s) of Allotment nor as a credit advice, and hence it is non-transferable / non-transmittable and not tradable. The Bank will despatch the Allotment intimation to allottee(s) and credit the investor’s beneficiary account with the DP within 30 days from the Deemed Date of Allotment. This initial credit in the beneficiary account of the investor would akin to a Letter of Allotment. After completion of the necessary statutory formalities, the initial credit akin to a Letter of Allotment in the Depository Beneficiary Account of the investor would be replaced with the number of Bonds allotted. The Bonds issued in electronic (dematerialised) form, will be governed as per the provisions of The Depository Act, 1996. Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996, rules notified by NSDL/ CDSL/ Depository Participant from time to time and applicable laws and rules notified in respect thereof. Redemption The face value of The Bonds allotted will be redeemed as indicated below:

• The payment will be made in the name of the bondholder whose name appears on the Register of Bondholders / List of Beneficial owners given by depository to The Bank as on the record date. The record date for payment of interest shall be fixed in accordance with the provisions of the listing agreement from time to time.

• The Bank’s liability to Bondholder(s) towards all their rights including payment of interest or otherwise shall

cease and stand extinguished from the due date of redemption in all events. Further, The Bank will not be liable to pay interest, income or compensation of any kind after the date of such redemption of The Bonds.

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• In case, bonds are lodged (after rematerialisation) for transfer, wherever the signature(s) of transferor(s) in the intimation sent to The Bank is/are not in accordance with the specimen signature(s) of the such transferor(s) available on records of The Bank, all payments on such bonds will be kept in abeyance by The Bank till such time as The Bank is satisfied in this regard.

• On The Bank discharging the payment due upon redemption in the manner specified above in respect of The

Bonds, the liability of The Bank shall stand extinguished.

• The Bonds held in the Dematerialised Form shall be taken as discharged on payment of the redemption amount by The Bank on maturity to the list of Beneficial Owners as provided by NSDL / CDSL. Such payment will be a legal discharge of the liability of The Bank towards the Bondholders. On such payment being made, The Bank will inform NSDL / CDSL and accordingly the account of the Bondholders with NSDL / CDSL will be adjusted.

Put / Call Option There is no put / call option available to the investors / The Bank on The Bonds placed under this IM. Dematerialisation Applications are being made by The Bank to CDSL and NSDL for admitting The Bonds for dematerialisation. The required documentation will be done by The Bank in this regard. The applicants are requested to note the following points while submitting the applications for subscription to The Bonds: 1. An applicant has the only option of seeking allotment of Bonds in electronic mode. 2. The applicants must necessarily fill in the details pertaining to the beneficiary account no. and Depository

Participant’s ID number at the appropriate column in the application form 3. An applicant must have at least one beneficiary account with any of the Depository Participants (DPs) of NSDL or of

CDSL, registered with SEBI, prior to making the application 4. Bonds allotted to an applicant in the electronic account will be credited directly to the respective beneficiary

accounts (with the DP) 5. For allotment in electronic form, names in the Bond application form should be identical to those appearing in the

account details in the depository. In case of joint holders, the names should necessarily be in the same sequence as they appear in the account details in the depository

6. Non-transferable allotment intimations / refund orders will be directly sent to the applicant by the Bank. 7. The applicant is responsible for the correctness of the applicant’s demographic details given in the application form

vis-à-vis those with his / her DP. 8. As per the directives issued by RBI fresh investments by Bonds and Financial institutions are to be held only in

Dematerialised form. 9. Other investors will have the option to hold The Bonds in dematerialised form and deal with the same as per the

provisions of Depositories Act, 1996 and the rules, regulations thereunder and the byelaws (operational instructions) of NSDL / CDSL from time to time (which includes rematerialisation).

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Succession Since The Bonds are issued in the electronic form, the provisions of the Depositories Act, 1996, and the rules there-under read with the relevant Regulation issued by SEBI and the Byelaws of the respective Depositories shall apply for transmission of The Bonds in the case of death of individual Bondholder(s) Future Fund Raising The Bank of Rajasthan Limited will be entitled to raise funds in future in appropriate form, subject to the permissions required, if any, from RBI or any other competent authority, including issue of debentures / bonds / other securities in any manner having such ranking in priority, pari passu or otherwise. The Bank of Rajasthan Limited will also be entitled to change its capital structure including issue of shares of any class, on such terms and conditions as The Bank of Rajasthan Limited may think appropriate, without the consent of intimation to the bondholder(s) in this connection. Rights of Bondholder(S) The Bondholder(s) will not be entitled to any other rights and privileges of shareholders other than those available to them under relevant statutes. The Bonds shall not confer upon the holders the right to receive notice or to attend or vote at the general meetings of The Bank of Rajasthan Limited. The principal amount and interest, if any, on The Bonds will be paid to the holder only, or in the case of joint holders, to the one whose name stands first. The Bonds shall be subjected to other usual terms and conditions applicable to the terms of the placement and also to the covenants of the Trust Agreement. Modification of Rights The rights, privileges terms and conditions attached to The Bonds may be varied, modified or abrogated with the consent, in writing, of those holders of The Bonds who hold at least three fourth of the outstanding amount of The Bonds or with the sanction accorded pursuant to a resolution passed at a meeting of the Bondholders, provided that nothing in such consent or resolution shall be operative against The Bank where such consent or resolution modifies or varies the terms and conditions of The Bonds, if the same are not acceptable to The Bank. Notices The notices to the Bondholder(s) required to be sent by The Bank shall be deemed to have been given if sent by ordinary post to the original holder or first allottee or registered holders of The Bonds as the case may be. All notices to be given by the Bondholders shall be sent by Registered post or by hand delivery to the Compliance Officer (Company Secretary) at the Corporate Office of The Bank at Mumbai. Who Can Apply Investors in the following categories, who are established / resident in India and who have been addressed through the communication directly, only are eligible to apply: 1. Companies and Bodies Corporate 2. Religious and Charitable Trusts 3. Banks, Financial Institutions and Mutual Funds. 4. Regional Rural Banks and Co-operative Banks. 5. Gratuity Funds and Pension Funds 6. Provident Funds and Superannuation Funds 7. Insurance Companies 8. Port Trusts in India. 9. Co-operative Institutions / Societies 10. Individuals who are not minors

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Applications not to be made by 1. Partnership Firms or their nominees; 2. Overseas Corporate Bodies (OCBs); 3. Foreign Institutional Investors (FIIs). Applications under Power of Attorney A certified true copy of the power of attorney or the relevant authority as the case may be alongwith the names and specimen signature(s) of all the authorized signatories and the tax exemption certificate/ document, if any, must be lodged alongwith the submission of the completed Application Form. Further modifications/ additions in the power of attorney or authority should be notified to the Bank or to its Registrars or to such other person(s) at such other address(es) as may be specified by the Bank from time to time through a suitable communication. Application By Companies / Corporate Bodies / Financial Institutions / Statutory Companies. The application must be accompanied by certified true copes of (i) Memorandum and Articles of Association / Constitution / Bye laws (ii) resolution authorising investment and containing operating instructions (iii) specimen signatures of authorised signatories (iv) relevant certificate(s) in the prescribed form(s) under Income Tax Rules, 1961, if exemption is .sought from deduction of tax at source on interest income. Application by Mutual Funds In case of applications by Mutual Funds, a separate application must be made in respect of each scheme of an Indian Mutual Fund registered with SEBI and such applications will not be treated as multiple applications, provided that the applications made by the Asset Management Company/ Trustees/ Custodian clearly indicate their intention as to the scheme for which the application has been made The applications must be accompanied by certified true copies of (i) Power of Attorney (ii) specimen signatures of authorised signatories. Under the SEBI (Mutual Funds) regulations, 1996, Mutual Funds may invest in debt instruments. In case of application by Mutual Funds, certified true copies of (i) SEBI registration certificate, (ii) resolution authorising investments and containing all operating instructions must accompany the applications, and (iii) specimen signatures of authorised signatories. Application by Provident Funds, Superannuation Funds, Pension and Gratuity Funds The Government of India has permitted Provident, Superannuation, Pension and Gratuity Funds, subject to their assessment of the risk-return prospects, to invest up to 10 per cent in the Bonds and securities issued by private sector organisation including banks provided that the bonds or securities have an investment grade rating from atleast two credit rating agencies. Accordingly, provident, superannuation, pension and gratuity funds can invest up to 10 per cent of their corpus in these bonds. The applications must be accompanied by certified true copies of (I) Trust Deed/Bye laws (ii) resolution authorising investment and containing operating instructions (iii) specimen signatures of authorised signatories (iv) Recognition Certificate from Income Tax Department. Documents to be provided by Investors Investors need to submit the following documentation, along with the application form, as applicable.

1. Memorandum and Articles of Association / Documents Governing Constitution 2. Resolution authorizing investment 3. Certified True Copy of the Power of Attorney 4. Specimen signatures of the authorised signatories duly certified by an appropriate authority.

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IV PARTICULARS OF THE PLACEMENT Object of The Placement

The proceeds of this offer will be utilised for the regular business activities of the bank after meeting all expenses of the issue.

Size of The Placement The Bank is privately placing 700 Unsecured, Redeemable, Non-convertible, non-cumulative, Taxable bonds in the nature of promissory notes of face value Rs.10 Lakh each for cash at par aggregating Rs. 7000 Lakh including green-shoe option of Rs. 2000 Lakh, through this IM.

Subscription Money The entire amount of Rs.10,00,000/- (Rupees Ten Lakh only) per bond is payable on application. Where an applicant is allotted a lesser number of bonds than applied for, the excess amount paid on application will be refunded to the applicant. Deemed Date of Allotment The deemed date of allotment shall be December 28, 2005. The interest on The Bonds would accrue from the deemed date of allotment. The actual allotment may occur on a date other than the deemed date of allotment. Listing The Bank proposes to get The Bonds listed on the Wholesale Debt Market (WDM) Segment of The Stock Exchange, Mumbai (BSE) Payment of Interest Interest payable in respect of The Bonds shall be payable semi annually every year from the deemed date of allotment. If any interest payment date falls on a day, which is not a business day in Mumbai (hereinafter called “business day”, being a day on which Commercial Banks are open for business), then payment of interest will be made on the next business day but without liability for making payment of interest for the delayed period. Payment of interest will be made to the sole holder or in the case of joint holders to the one whose name stands first in the Register of Bondholders, on the Semi Annual Interest Payment Date. Interest cheques will be payable at par at all the designated branches of The Bank. For this purpose, record date will be announced as per the applicable rules. All interests on The Bonds will cease from the date of redemption in all events. Interest on Subscription Money Interest at the coupon rate (subject to deduction of tax at source at the rate prevailing from time to time under the provisions of the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof), would be payable on the entire application money to all allottees. Such interest shall be paid for the period commencing from the date of realisation of cheque(s)/ demand draft(s) upto one day prior to the Deemed Date of Allotment. In the case of allottees to whom partial allotment is made, such interest shall not be payable on the subscription money to the extent refunded. The interest warrants will be credited via ECS/RTGS or dispatched by registered post at the sole risk of the applicant, to the sole/ first applicant. No interest on subscription money will be payable in cases of invalid applications. Interest on The Bonds The Bonds shall carry interest of 8.70% / 8.50% per annum payable semi annually on 28th June and 28th December every year till the redemption of The Bonds.

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Tax Deduction at Source Tax as applicable under the Income Tax Act, 1961 or any other statutory modification or re-enactment thereof will be deducted at source. Those desirous of claiming exemption from deduction of income tax at source on the interest on subscription money, are required to submit the necessary certificate (s), in duplicate, along with the application form in terms of Income Tax Rules. Interest payable subsequent to the Deemed Date of Allotment of Bonds will be treated as “Interest on Securities” as per Income Tax Rules and Bondholders desirous of claiming exemption from deduction of income tax at source on the interest payable on Bonds will have to submit a certificate on Form 15-F (in case of individuals) or Certificate issued by the Assessing Officer / Income Tax Officer on Form 15 AA (in the case of others) under Income Tax Rules, 1962, in duplicate, periodically so as to reach the Registers at least 15 days before the Interest Payment Date. Basis of Allotment The allotment will be finalised based on the applications received from the investors. In the event of over-subscription, The Bank reserves the right to decide the basis of allotment in consultation with the Lead Arrangers to The Placement. The Bank reserves the right to reject in full or part any or all of the offers received by it to invest in The Bonds without assigning any reason for such rejection acceptance of the offer shall be subject to completion of subscription formalities as detailed in the application form. Issue of Letter of Allotment Allotment to investors shall be made after due verification of the application forms, the accompanying documents and or realisation of the application money. Appropriate letters intimating the allotment will be mailed to the investors. The demat credit for The Bonds will be made into the respective depository participant beneficiary account of the investor by way of corporate action after completing the legal formalities relating to stamp duty, documentation etc. Refunds For applicants whose applications have been rejected or allotted in part, refund orders will be dispatched within 15 days from the Deemed Date of Allotment. Refund of applicants will be dispatched through post/courier. Denomination of The Bonds The Bonds are issued in denominations of Rs. 10 Lakh. Appropriate credit in electronic form will be given in the respective beneficiary accounts following a corporate action after completing all statutory formalities.

Splitting and Consolidation This concept is not applicable in the demat form since the saleable lot is one bond. Redemption The face value of The Bonds issued will be redeemed at par, at the end of 112 / 88 months from the Deemed Date of Allotment. Payment on Redemption Payment of redemption proceeds of The Bonds will be made to the Bondholder(s) whose name(s) appear(s) as registered Bondholder(s) on the records of The Bank on the Date of Redemption. All interests on The Bonds (s) will cease from the Date of Redemption in all events. In the case of joint holders, payment will be made to the person whose name stands first in the register of bonds.

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Transfer and Transmission of The Bonds Transfer and Transmission of The Bonds shall be subject to the Depositories Act, 1996, the rules made thereunder, the byelaws, rules and regulations of the depositories as amended from time to time. Notices Notices to the Bondholder (s) required to be given by The Bank shall be deemed to have been given if sent by ordinary post to the original sole / first allottee (s) / beneficiary holder of The Bonds. All notice to be given by the Bondholder (s) shall be sent by registered post or by hand delivery to the Head Office of The Bank or to the Registrars or to such persons at such address as may be notified by The Bank from time to time. Effect of Holidays Should any of the date(s) defined above or elsewhere in this Information Memorandum, excepting the Date of Allotment, fall on a Sunday or a Public Holiday or a holiday under the NI Act, the next working day shall be considered as the effective date. Ranking of Bonds The Bonds are Unsecured Redeemable Non-Convertible Non-Cumulative Subordinated debt and are in the nature of promissory notes. The Bonds will constitute direct, unsecured and subordinated obligations of The Bank, ranking pari passu with the existing subordinated debt of The Bank and subordinated to the claims of all other creditors and depositors of The Bank as regards repayment of principal and interest by The Bank. The Bonds shall be free of any restrictive clauses and shall not be redeemable at the initiative of the holder or without the consent of the Reserve Bank of India. Bondholder Not a Shareholder The Bondholder(s) shall not be entitled to any rights and privileges of shareholders other than those available to them under statute. The Bond(s) shall not confer upon the holders the right to receive notice(s), or to attend and vote at General Meetings of shareholders of The Bank. Future Borrowings The Bank shall be entitled to borrow / raise loans or avail of financial assistance in whatever form as also issue any securities debt, equity or hybrid by whatever name called in any manner ranking pari passu or otherwise with the existing classes of such securities and to change its capital structure, including issue of share of any class or redemption or reduction of any class of paid up capital, on such terms and conditions as The Bank may think appropriate, without the consent of, or intimation to, the holders of The Bonds, in this connection. Miscellaneous A Register of Bondholders shall be maintained at the Corporate Office of the Bank. Such Register shall be closed as per applicable rules prior to the date of redemption. In case of dissolution/bankruptcy/insolvency/winding up of Bondholders, the Bond certificates shall be transmittable to the Legal Representative(s) / Successor(s) or the Liquidator as the case may be in accordance with the applicable provisions of law on such terms as may be deemed appropriate by The Bank. Governing Law The Bonds are governed by and shall be construed to be in accordance with the existing laws of India. Any dispute arising thereof will be subject to the jurisdiction of courts at Mumbai only.

28

How To Apply

• Application forms duly completed in all respects must be submitted with the Main Branches of The Bank of Rajasthan Limited at Mumbai, Kolkata, New Delhi, Chennai, Bangalore, Jaipur, Chandigarh, Bhilwara, Jodhpur, Kota, Indore and Udaipur

• Cheque(s)/Demand Draft(s) should be drawn in favour of “BOR– Tier II Bond Issue (Series IV)” and crossed "Account Payee Only". Cheque(s)/Demand draft(s) may be drawn on a Scheduled Commercial Bank, which is a member or a sub-member of the Banker’s Clearing House located at Mumbai, Kolkata, New Delhi, Chennai, Bangalore, Jaipur, Chandigarh, Bhilwara, Jodhpur, Kota, Indore and Udaipur.

• Code for Electronic transfer of funds

IFSC Code: BRAJ 0003350

Current Account No. 3390 302 112413

Narration: Subscription towards Tier II Series IV Bonds

• Outstation cheques, cash, money orders and postal orders shall not be accepted.

• As a matter of precaution against possible fraudulent encashment of interest warrants due to loss/misplacement, applicants are requested to mention the full particulars to their bank account/RTGS details, as specified in the Application Form. Interest warrants will then be made out in favour of the bank for credit to the applicant’s account. In case the full particulars are not given, cheques will be issued in the name of the applicant at his/ her risk.

• Receipt of applications will be acknowledged by the respective Collecting Banker in the “Acknowledgment Slip”, appearing below the Application Form. No separate receipt will be issued.

• All applicants should mention their Permanent Account Number or the GIR number allotted under Income Tax Act, 1961 and the Income Tax Circle/Ward/District. In case where neither the PAN nor GIR number has been allotted, the fact of non-allotment should be mentioned in the application form in the space provided.

• The application would be accepted as per the terms of the Scheme outlined in the Memorandum of Private Placement.

These details are available in the application form also. Applications under Power of Attorney In case of application under powers of Attorney by limited companies or other bodies corporate, a certified true copy of Power of Attorney or a copy of the approval of the relevant authority / resolution as the case may be must be deposited along with the Application Form. Right to Accept or Reject Application The Bank is entitled at its sole and absolute discretion, to accept or reject any application, in part or in full, without assigning any reason. Application Forms which are not complete in all respects are liable to be rejected. Interest on subscription money will be paid from the date of realisation of cheque (s) / demand draft (s) till the date of refund. Joint Applications Applications may be made in single or joint names (not more than three). In case of Joint Applications, refund, pay orders, interest warrants etc. if any, will be drawn in favour of the first applicant and all communications will be addressed to the first applicant at her/his address as stated in the application form.

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Multiple Applications An applicant should submit only one application form (and not more than one) for the total number of Bonds applied for. Two or more applications in single or joint names will be deemed to be multiple applications if the sole and/or first applicant is one and the same. The Bank reserves the right to accept or reject, in its absolute discretion, any or all multiple applications. Application by Mutual Funds In case of applications by Mutual Funds, a separate application must be made in respect of each scheme of an Indian Mutual Fund registered with SEBI and such applications will not be treated as multiple applications, provided that the application made by the Asset Management Company / Trustees / Custodian clearly indicate their intention as to the scheme for which the application has been made. Applications under Power of Attorney or by Limited Companies In case of applications under Power of Attorney or by Companies, Bodies Corporate, Societies registered under the applicable laws, trustees of Trusts, Provident Funds, Superannuation Funds, Gratuity Funds and Scientific and/or Industrial Research Organisations, a certified copy of the Power of Attorney or the relevant authority, as the case may be, must be lodged separately at the office of the Registrars to The Placement simultaneously with the submission of the application form, indicating the serial number of the application form and the name of The Bank and the branch office where the application has been submitted and The Bank and the branch on which the cheque/draft has been drawn. The Bank in its absolute discretion reserves the right to relax the above condition of simultaneous lodging of the power of attorney along with application form subject to such terms and conditions as it may deem fit. PAN/GIR Number Applicant, or, in case of applications in joint names, each of the applicants should mention his/her/their Permanent Account number (PAN) allotted under Income Tax Act, 1961 or where the same has not been allotted, the GIR Number and the IT Circle/Ward/District. In case where neither the PAN nor the GIR number has been allotted, or the applicant is not assessed to Income tax, the appropriate box provided for the purpose in the Application Form must be ticked. Applications without this will be considered incomplete and are liable to be rejected. Signatures, thumb impressions and signatures other than in English/Hindi or any other language specified in the 8th Schedule to the Constitution of India, must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under his/her official seal. Nomination Facility The Bonds being issued in electronic form shall be governed by the provisions of the Depositories Act, 1996 and the Rules made there under. Rejection of Applications

The Bank reserves in its absolute discretion the right to accept or reject any application in full or in part. The various reasons for rejections could be, but not limited to following: incomplete or illegible applications, number of bonds applied for less than minimum required number, no information about PAN/GIR Disposal of Applications and Subscription Money The Bank reserves, in its own, absolute and uncontrolled discretion and without assigning any reason, the right to accept in whole or in part or reject any application. If an application is rejected in full, the entire subscription money received will be refunded to the applicant. If the application is rejected in part, excess of the subscription money received will be refunded to the applicant within 15 (fifteen) days from the date of closure of The Placement. No interest will be payable on the subscription money so refunded. Refund will be made by cheques or demand drafts drawn in favour of the sole/first applicant (including the details of his/her savings/current account number and the name of The Bank with whom the account is held) and will be despatched by Registered Post.

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The subscription received in respect of Private Placement will be kept in a separate bank account and The Bank shall have access to such funds after allotment of The Bonds. Disputes Any disputes arising out of this Placement will be subject to the jurisdiction of court(s) in Mumbai only UNDERTAKING BY THE BANK The Issuer bank undertakes that: a) The complaints received in respect of the Issue shall be attended to by the Issuer Bank expeditiously and satisfactorily; b) It shall take all steps for completion of formalities for listing and commencement of trading at the concerned stock

exchange(s), where securities are to be listed, within 7 working days of the date of allotment. c) The funds required for despatch of refund orders / allotment letters by registered post shall be made available by the

Issuer Bank; d) No further issue of securities shall be made till the securities offered through this offer document are listed or till the

application moneys are refunded on account of non-listing, under-subscription, etc; e) Necessary co-operation to the credit rating agency (ies) shall be extended in providing true and adequate information

till the debt obligations in respect of the instrument are outstanding. The Issuer bank also undertakes: a) That it shall forward the details of utilization of the funds raised through the bonds duly certified by its statutory

auditors, to the Trustees at the end of each half-year. b) That it shall disclose the complete name and address of the Trustees in its annual report. c) That it shall provide a compliance certificate to the bondholders (on yearly basis) in respect of compliance with the

terms and conditions of issue of bonds as contained in the Information Memorandum, duly certified by the Trustees.

Section 269 SS of the Income Tax Act, 1961

Having regard to the provisions of Section 269 SS of the Income Tax Act, 1961, payment against application should not be made in cash if the amount payable is Rs. 50,000/- or more. In case the payment is made in contravention of this, the application is liable to be rejected without interest.

Tax Benefits for The Bank and Its Shareholders

There is no specific Tax relief with respect to The Bonds

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V. THE BANK, MANAGEMENT, PROJECT AND INDUSTRY

Brief History

The Bank was incorporated as a Joint Stock Bank under the Mewar Companies Act on 7th May, 1943 with its registered office at Udaipur. In 1952 the Bank took over the assets and liabilities of four State owned banks in Rajasthan, namely The Bundi State Bank, Bundi, The Ram Laxman Bank, Dungarpur, The Jhalawar Bank, Jhalawar and The Shahpura Bank, Shahpura. In 1955 the Reserve Bank of India accorded a license to the Bank u/s 22 of the Banking Regulation Act, 1949 and the Bank was included in the 2nd schedule of Reserve Bank of India in 1948. The Bank was appointed as sole banker and treasurer to the State Government of Rajasthan in 1948 and continued in this capacity till 1961.

MilestonesIn the year 1948, the Bank was included in the second schedule by the Reserve Bank of India.

• In 1955, the Bank was given license under Section 22 of Banking Regulation Act,1949 by the Reserve Bank Of India (RBI).

• The Bank was among the first banks to take banking at the door step of customers by introducing the concept of mobile branches, when it opened its first mobile branch in Jaipur on 5th August, 1960.

• The Bank received license to deal in foreign exchange in 1973 from the RBI.

• The Bank was among the first banks in the private sector to have been assigned Lead Bank responsibility which it shared with an associate of State Bank of Bikaner & Jaipur in Udaipur District.

• The Bank became one of the earliest banks in private sector sponsoring any rural (Gramin) bank, when it established the Mewar Anchlik Gramin Bank in Udaipur District in Rajasthan on 26th January, 1983.

• The currency chest of the Bank was also started in the year 1993 .

• Bank's 1st, 100th, 200th and 300th branches were opened in the year 1943, 1973, 1980 and 1997 at Bhilwara, Barmer, Jodhpur (Sardarpura) and Cochin respectively.

• The Bank achieved a unique distinction when its C-scheme, Jaipur branch qualified for ISO-9002:94 certification (quality system certified) by DET NORSKE VERITAS (DNV) LONDON U.K in 1997.

• The Bank started its first ATM services and secured ISO 9002 certification thereby providing Quality services to its customers at C-Scheme Jaipur branch from 1st July 1998.

Main Objects of the Bank The main objects the Bank as set out in its Memorandum and Articles of Association are as follows: “To carry on the business of banking and particularly the following forms of business:

1. The accepting of deposits of money on current account or otherwise, subject to withdrawal by cheque, draft or order.

2. The borrowing, raising or taking up of money; the lending or advancing of money either upon or without security; the drawing, making, accepting discounting, buying, selling, collecting and dealing in bills of exchange, hundies, promissory notes, coupons, drafts, bills of lading, railway receipts, warrants, debentures, certificates, scrips and other instruments, and securites wether transferable or negotiable or not; the granting and issuing of letters of credit, traveller’s cheques and circular notes; the buying seeling and dealing in bullion and specie; the buying and selling of foreign exchange including foreign bank notes; the acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debenture stock, bonds, obligations, securities and investments of all kinds; the purchasing and selling of bonds, scrips or other forms of securities on behalf of constituents or others; the negotiating of loans and advances; the receiving of all kinds bonds, scrips or valuables on deposit, or for safe custody or otherwise; the collecting and transmitting of money and securities.”

The main Objects Clause of the Bank enables the bank to carry on the activities undertaken by the Bank.

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Organization Chart

Dy. Managing Director

Managing Director

Chairman & Board of Directors

Vigilance Company Secretary

GM (LAW) GM (IT)ExecutiveDirector

Public Relations

GM/DGM (Busin. Dev)

GM (Ping)CGM

Credit Risk Mgmt. Deptt.

Disci[plinary Action Deptt.

Inspection &Audit Deptt.

LAW (Rajasthan Only)

Priority Sector& Retail Banking Deptt.

P & HRD

Branch Exp.& Premises

Planning & Dev. & BPRD

Org. Plng., Busin. Dev., Insurance,

Credit Cards etc.

GM/DGM(CAD)

Intl. Banking

GM (Treasury)

DGM (Accts)

Accounts & Audit

Admn.

RO Control

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BUSINESS OF THE BANK & ITS PRODUCTS AND SERVICES:

Retail Banking Business Account / Business Plus Account / Business Premium Account

• Demand Drafts and Demand Drafts through our Correspondent Banking Arrangement • Network at convenient and strategic locations • Anywhere Banking • Multi-City Cheques • Options on statement frequency, personalized cheque books, flexible loans against Customer’s fixed deposits.

Fixed Deposits • Flexible range of tenures to suit the Customer’s investment plans • Choice of various Fixed Deposit schemes • Interest payable monthly, quarterly, half yearly, annually or at maturity as per Customer’s convenience • Interest is payable by cheque or by credit to Customer’s Savings / Current account • Competitive interest rates • Nomination facility available • Partial withdrawals permitted • Auto Renewal facility • Advances available against Customer’s deposits up to 90% of the deposit value • Special rates for Senior Citizens

Recurring Deposit: A deposit ranging from 12 months and above. A pre-determined amount may be deposited by the customer either by himself or through standing instructions to debit every month from his Savings / Current account and accumulated in the deposit. The entire amount together with interest is payable at maturity. Flexible Term Deposit: A deposit, which allows the Customer to partially, withdraw his funds in units of predetermined amount and whenever he requires funds. The balance retained in the deposit continues at the same contracted interest rate. Hence, he earns the high interest rate of a fixed deposit and still has the flexibility of a Savings account. On the retail asset side the bank offers the following products:

• Personal Loans • Auto Loans • Housing Loans • Educational Loans • Loan against Shares

BRANCH NETWORK OF THE BANK

Region wise position of Branches as on December 20, 2005

Regional Office Branches Extension Counter Jaipur 55 13 Jodhpur 45 7 Bhilwara 39 0 Udaipur 49 3 Kota 37 4 Bikaner 36 5 Indore 20 3 Mumbai 33 3 Delhi 29 3 Chandigarh 21 1 Bangalore 9 1 Kolkata 12 0

TOTAL 385 43 * Including treasury branch under the control of T & I Department, Corporate Office, Mumbai.

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Risk Management

Banks in the process of financial intermediation are confronted with various kinds of financial and non financial risks. With liberalization in Indian financial markets over the last few years and growing integration of domestic markets with international markets, the risks associated with banks' operations have become complex and large, requiring strategic management. Banks are now operating in a fairly deregulated environment and are required to determine their own interest rates on deposits and advances in both domestic and foreign currencies on a dynamic basis. The interest rates on banks' investment in government and other securities are now market related. Intense competition for business involving both assets and liabilities, together with increasing volatility in the domestic interest rates as well as foreign rates, has brought pressure on banks to maintain a good balance among spreads, profitability and long-term viability.

The Reserve Bank of India has issued detailed guidelines for risk management systems in banks encompassing credit, market and operational risks. In terms of these guidelines banks are required to put in place risk management policies, systems and procedures approved by their boards of directors, covering the methodologies for measurement, monitoring and control of different types of risks. The guidelines also require banks to evaluate their portfolios on an on-going basis. Banks are also asked to fix a definite time- frame for moving over to the Value-at-Risk (VaR) and duration approaches for measurement of interest rate risk and to evolve detailed policy and operative framework for operational risk management. In compliance with the RBI guidelines, a Risk Management Framework has been put in place in the Bank.

In line with the changing banking environment, the Bank has prepared itself to meet the emerging challenges and has devised and adopted appropriate risk management policies and practices covering the areas of Credit, Market, and Operational risks. The Bank recognizes that management of risk is fundamental to the business of banking and its approach to risk management is proactive. The primary goal of risk management in the Bank is to steer the risks inherent in its business consciously and actively and the basic objective is to strike balance between risk and rewards.

Risk Management System

The risk management system and techniques adopted by the Bank are in conformity with the guidelines issued by the RBI. The Bank’s experience in meeting the requirements of capital adequacy as per BASEL I has been satisfactory. The present level of capital adequacy places the Bank in a comfortable position to meet minimum capital requirement as per the new BASEL Capital Accord (BASEL II). To meet the requirements, the Bank has taken several initiatives to adopt suitable Risk Management System and Techniques. The Bank has identified the following elements for setting up an effective Risk Management System in the Bank.

• Top Management Commitment

• Setting up appropriate policies, systems in the organisation.

• Identification of various types of risks.

• Integrating the Risk Processes System

• measurement and monitoring

• communication to Stakeholders

Top Management Commitment

The Bank has put in place sound corporate governance procedures and MIS to keep the Board of Directors well informed about the risk assessment and minimisation procedures. These procedures are periodically reviewed by the Board to ensure that executive management controls risk through means of the properly defined framework.

A quarterly progress report is placed before the Board of Directors documenting the progress achieved by the Bank towards implementation of guidelines issued by the RBI, identifying the gaps in implementation, steps being taken to bridge the gaps etc. Besides the quarterly progress reports, various other reports are also placed before the Board or sub-committees of the board periodically which keep the Board informed about different types of risks and the actions taken by the Bank to manage the same.

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Risk Profile designed by the Reserve Bank of India for the purpose of Risk Based Supervision is also placed before the Board classifying the operations of the Bank in various risk categories as given below, which enables the Board to take a view about the level of risks and their directions.

Business Risk Control Risk

Credit Risk Internal Control Risk

Market Risk Organisational Risk Earning Risk Management Risk Liquidity Risk Compliance Risk Business Strategy & Environment Risk

Group Risk

Operational Risk

Capital Risk

Based on these reports the Board takes appropriate view about the risk management in the Bank and issues necessary directions to the executive management. The process adopted in the bank ensures commitment of the top management of the Bank towards the risk management.

Risk Management Organization

The Bank has put in place suitable risk management organization structure to identify, measure, monitor and control risks in various risk areas and has set up various departments and high level committees with participation of Top Management Team of the Bank, which helps in managing risks in an integrated manner. The Bank has adopted institutional mechanism in the organizational structure to exclusively deal with risk management functions by following the principle of segregating risk management functions from line functions and the institutional mechanism set up to attend the requirements of RBS has been kept separate and distinct from the institutional mechanism attending to risk management functions.

Risk Management Policies

The Bank has adopted risk management policies to manage risk in different risk categories as given below:

Risk Category Name of the Policy

Credit Risk • Credit Risk Management Policy

• Loan Review Policy

• Credit Policy (Corporate Plan)

• Policy for real Estate exposure

• Policy for unsecured exposure

• Country Risk Policy

Market Risk • Market Risk Management Policy, covering Liquidity Risk, Interest Rate Risk, Foreign Exchange Risk & Equity Price Risk.

• Investment Policy

• Funds Management Policy

Operational Risk • Operational Risk Management Policy

• IT Security Policy

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Risk based Internal Audit • Policy for RBIA

The policies are reviewed keeping in view the developments taking place from time to time and experience gained by the bank during the operations of the policy.

Internal Control Systems, Technology Support and Management Information System

The Bank has sound internal control systems and procedures, which are adequately supported by policies for internal inspections, concurrent audit, regulatory compliance and information system security for computerized operational environment. Disaster Recovery I Business Continuity Plans have been put in place to take care of situations leading to any disruption in service. An independent Disaster Recovery Centre equipped with a configuration of hardware and software facilitating near real time data replication with the main data centre has also been set up. Policies for classification, ownership, preservation and maintenance of confidentiality of data in electronic form have been framed. The Bank has an on-going system of review and re-engineering of business processes to suit the changing requirements of banking in the emerging scenario. Realizing the need of historical database and in-depth analysis thereof for capturing past trends and to identify, measure, monitor and control various risks the Bank has provided necessary technical support and put in place a sound Management Information System. The Bank has computerized all its branches /offices through (i) Anywhere Online Banking Module of Infosys at 255 branches, and (ii) bancmate banking software at the remaining branches. Bank's controlling and administrative offices are also equipped with in-house and / or outsourced software to meet various information requirements for control and decision making. The Bank has acquired suitable softwares and has also developed / adopted Management Information System for risk management in respect of different risk categories

1. Financial Highlights Of The Bank (Rs in Lakhs)

Year Ended

31.03.2001 31.03.2002 31.03.2003 31.03.2004

31.03.2005

6 Months ended

30.09.2005 Interest earned 44,243.18 45,259.58 47,266.97 50,285.82 52,235.66 25,845.26 Other income 5,647.94 9,721.76 12,642.47 17,701.46 6,375.93 1,372.59 Interest Expended 30,929.97 32,332.59 29,182.86 31,302.02 30,891.44 15,395.74 Operating expenses 13,189.76 14,507.03 15,868.43 18,155.19 19,474.50 10,455.23 Provisions & Contingencies 2,549.03 4,110.35 8,015.81 11,626.17 4,744.29 320.00 Net Profit 3,222.36 4,031.37 6,842.34 6,903.90 3,501.36 1,046.88 Deposits 3,53,321.82 3,95,998.31 5,29,923.90 7,63,892.75 8,12,030.97 7,06,509.11 Advances 1,86,703.54 1,95,596.20 2,22,124.48 2,33,258.45 2,89,617.17 2,67,296.23 Share Capital 10,036.67 10,036.67 10,596.67 10,756.67 10,756.67 10,756.67 Reserves 7,810.58 13,332.99 17,924.64 22,190.69 24,316.08 24,316.08 EPS (Rs.) 5.11 4.02 6.82 6.42 3.26 0.97* % of Net NPA 7.65 8.86 6.80 2.99 2.50 2.39

* Not annualised

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2 Assets Liabilities Management System

The Reserve Bank advised banks in February 1999 to put in place an ALM system, effective April 1, 1999 and set up internal asset liability management committee (ALCO) at the top management level to oversee its implementation.. The Reserve Bank also released ALM system guidelines in January 2000 for all India term lending and refinancing institutions, effective April 1, 2000. As per the guidelines, banks and such institutions were required to prepare statements on liquidity gaps and interest rate sensitivity at specified periodic intervals.

Accordingly, the Bank has set up an Asset-liability Committee (ALCO) headed by the Managing Director and Chief Executive Officer and consisting of top management personnel. The Bank is covering 100% business data for preparing position of Structural Liquidity and position of Interest Rat Sensitivity periodically. The Bank is complying with all the guidelines issued by Reserve Bank of India in this regard from time to time. The Bank has put in place an Asset Liability Management (ALM) software acquired from ICICI Infotech for processing of data and preparing the desired reports which are being placed before the ALCO and risk management committee, the Committee of Directors (COD), periodically. The Software has been upgraded to facilitate use of more sophisticated analytical tools for Market Risk Management. Bank has covered 100% data under ALM.

Maturity Pattern of Assets and Liabilities as on March 31, 2005 (Rs. in crores)

Residual Maturity

1-14 days 15-28 days

29 days to 3 months

Over 3 months upto 6 months

Over 6 months upto 1 year

Over 1 year upto 3 years

Over 3 years upto 5 years

Over 5 years Total

Domestic performingloans and advances 206.36 86.17 216.89 360.33 852.15 503.25 257.35 341.41 2823.91

Domestic Investment &Securities 814.50 - 21.69 43.61 12.82 232.94 231.76 2157.35 3514.67

Domestic Deposits 945.59 547.67 1297.14 911.60 824.41 1877.09 253.68 1463.13 8120.31

Domestic Borrowings,Subordinate Debts &Redeemable Bonds

141.92 - 0.01 2.95 2.63 25.54 1.99 72.05 247.09

Foreign currencyliabilities 8.61 0.17 50.50 2.19 4.90 8.35 - - 74.72

Foreign currency assets 14.72 10.82 25.03 11.31 - - - - 61.88

3. Borrowings by The Bank

There are no borrowings for The Bank except export refinance from RBI and SIDBI. These are moving accounts and are subject fluctuations on a daily basis.

4. Regulatory Authority and supervision by RBI

The Bank is subjected to inspection by RBI under section 35 of the BR Act .The entire operations of The Bank come under the ambit of RBI inspection.

Where a person / group acquires shares which would take his/its holding to a level of 5% or more of the total paid up capital of The Bank (or such other percentage as may be prescribed by RBI from time to time) should be with the prior approval of RBI.

All financial ratios/ capital adequacy ratios disclosures regarding NPAs appearing in this Information Memorandum conform to RBI norms.

5. Lending Business of The Bank

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1. Lending Procedures a. Credit Risk Assessment Procedures:

The Bank has set up various prudential limits as a part of its strategy to manage risks. For Credit Risk, the Bank has set up various risk limits such as individual/group exposure limits, prudential / substantial exposure limits, sector-wise exposure limits, country risk exposure limits, daylight / overnight exposure limits, inter-bank exposure limits etc. various benchmark are also prescribed. The Bank has adopted multi-tiered credit approving system for sanction of loan proposals. The Bank has also adopted credit risk score module for SME/SBS borrowal accounts enjoying limit of Rs. 100 Lakhs and above. The setting up of prudential limits, risk rating system and Loan Review Mechanism have helped the Bank in improving the portfolio quality and capturing of early warning signals to take suitable preventive actions and reducing the level of credit risk. The Bank is gradually building up historical database so as to be able to compute Default Probability (PO), Loss Given Default (LGD), and adopt Risk Based Pricing and Risk Adjusted Return on Capital (RAROC) methodologies in due course.

b. Retail Loan Procedure:

In this segment, the bank has formulated parameterised specific products like SUVIDHA LOAN for Retail

Traders, Raj Bank Swarojgar Credit Card (RBSCC) Scheme for providing adequate and timely credit to small artisans, handloom weavers, service sector, fishermen, self employed persons, rikshaw owners and other micro entrepreneurs. The Bank’s “Apna Ghar Scheme”, a home loan product and Raj Bank Kisan credit card scheme, a crop loan product, are premier products of financing of priority sector, prove to be major contributor in enhancing the exposure under the sectors

c. Market Risk Management Procedures:

In the case of bigger exposures, the bank is also considering the ratings awarded by external rating agencies and following it up with subsequent updates made by them has fixed maximum exposure limits for different industries/ sectors so as not to have any unhealthy concentration in certain sectors.

d. Credit Approval Authority

The Credit approval authority of The Bank is as follows: Level 1 - Branch Manager Level 2 – Regional Head Level 3 – General Manager / Deputy General Manager Level 4 – MD & CEO Level 5 – Committee of Directors Level 6 - Board of Directors

Each level has got delegatory powers for approving / sanctioning loan proposals. These powers are revised periodically.

2. The total advances on the years ended on March 31, are as under

(Rs. In Lakhs) 2001 2002 2003 2004 2005

1,85,917 1,95,596 2,22,124 2,33,258 2,89,617

Year end advance are net of fresh disbursement and recovery / written off

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3. Top Ten Borrowers of The Bank As at March 31st, 2005 (rs.in lacs) S.no

Name of borrower Industry / sector Funded exposure

Non funded exposure

Total credit exposure

Adj tce Adj tce as % of capital funds

1. Jaipur development authority

Financial & develop institution

7033.00 0.00 7033.00 7033.00 17.71

2. Hdfc ltd Housing finance co 6799.00 0 6799.00 6799.00 17.12 3. Power finance corporation

ltd Others 5503.50 0.00 5503.50 5503.50 13.85

4. Lic housing finance ltd Financial & develop institution

5018.22 0.00 5018.22 5018.22 12.63

5. Rajasthan rajya vidhut utpadan nigam ltd

Electricity generation 5000.00 0.00 5000.00 5000.00 12.59

6. Rsrdcc ltd Building, bridge, road construction

3000.00 2000.00 5000.00 5000.00 12.59

7. Icici banking ltd Financial & develop institution

4300.00 0.00 4300.00 4300.00 10.82

8. Saw pipes ltd Mfg basic metal & metal products

4035.00 0.00 4035.00 4035.00 10.16

9. Sahara india airlines Transport & commnication 2000.00 2000.00 4000.00 4000.00 10.07 10. Gujrat electricity board Others 3888.00 0.00 3888.00 3888.00 9.79 4. Loans/Advances to the Directors of the Bank, their relatives and companies in normal course of Business

As at March 31st, 2005 NIL,* * Advances granted are by way of Secured OD or LG against 100% Margin which are under exempted category. 5. Key Financial Ratios pertaining to Lendable Funds (for the year)

Ratios 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Interest Income/ Average Working Funds(AWF) 10.44 9.80 9.18 7.63 7.25 Interest Expenses/ AWF 7.30 7.00 5.67 4.75 4.29 Interest Spread / AWF 3.14 2.80 3.51 2.88 2.96 Credit- Deposit Ratio 54.41 57.47 47.21 41.54 44.50 Credit- Deposit Ratio Credit+Non-Slr invts. (excl. invt in subsidiary)-deposit ratio 59.00 63.44 69.18 61.36 55.06

6 NPA Management NPA Scenario in the Banking Industry. Over the years, NPAs have been a cause of concern for the entire banking industry in the country. Due to

inappropriate credit appraisals and poor recovery mechanisms, most of banks were reeling under high levels of bad

40

debts. Once the banking industry was exposed to competition in the post liberalization era in 1990s, this problem started hurting the profitability of most of the banks.

Most of the Asian Banks are facing the problems related to NPA management. With the purpose of building a healthy banking industry, many different measures have been experimented in various countries. Restructuring, writing off of NPAs, closing down of weak branches, mergers are some of the measures adopted to tackle the problem.

A comparative position of NPA level of The Bank is appended below: (Rs. in crores)

31.03.01

31.03.02

31.03.03

31.03.04

31.03.05

Total Advances 2073.62 2115.49 2336.32 2596.32 2983.10 Interest suspense on NPA - - - - - Interest suspense on standard asset (Govt dues) - - - - - Gross advances (excluding interest suspense) 2073.62 2115.49 2336.32 2596.32 2983.10 DICGC/ECGC Claim held 7.86 9.87 13.09 13.75 13.79 Provision held 206.59 149.65 101.99 150.94 73.14 Net advance 1859.17 1955.97 2221.24 2332.58 2896.17 Performing(Standard) Assets 1716.99 1782.65 2070.24 2359.00 2823.92 Impaired Loans 356.63 332.84 266.08 237.32 159.18 Substandard Assets 46.00 82.86 54.68 27.26 8.81 Doubtful assets 202.19 209.42 186.14 179.63 130.59 Loss Assets 108.44 40.56 25.26 30.43 19.78 Gross NPA 356.63 332.84 266.08 237.32 159.18 Net NPA 142.18 173.32 151.00 72.63 72.25 % of Gross NPA 17.20 15.73 11.39 9.14 5.34 % of Net NPA 7.65 8.86 6.80 2.99 2.50

* Figures reported are excluding interest suspense amount.

(Gross NPA= NPA less Interest in suspense and Net NPA = Gross NPA less Provision) Amount wise break up of Non-performing assets (excluding interest suspense) (Rs. In lac)

No. of accounts Balance 31.03.05

Balance of less than Rs.1 lac 13526 2164.41 Balance of Rs.1 lac and above but less than Rs.5 lac

551 1201.82

Balance of Rs.5 lac and above but less than Rs.50 lac

131 1893.18

Balance of Rs.50 lac and above 42 10658.77 Total 14250 15918.18 List of Top Ten NPAs as of March 31, 2005 (Rs. in Lakhs)

S. No. Name of the Borrower Branch Gross

Outstanding Provisions

Held 1. Pennar Industries Limited Hyderabad 884.67 265.40 2. Rupangi Impex Ltd Ahmedabad A R 763.76 402.25

41

3. Alcobax metals Limited Jodhpur Sojati Gate 740.41 444.24 4. Rajasthan Breweries Ltd Delhi South Extension 735.64 441.38 5. Indore Steel and Iron Mills Litd Indore New Palasia 653.86 196.16 6. Sri Sarabati Steel Tubes Ltd Chennai 544.49 166.97 7. Remi Metals Gujarat Ltd Mumbai Fort 501.26 300.75 8. Mesco Exports ltd Delhi South Extension 500.00 125.00 9. Jhaveri Polymers Limited Ahmedabad A R 396.97 39.70

10. Uniworth Ltd Kolkata Chowringhee Road 347.75 90.77 Total 6068.80 2472.63

Sector wise NPA Position as on 31.03.2005 (Rs. in Lakhs)

Sl. No

Sector Number of Accounts

Outstanding

1 Agriculture 7117 1198.14 2 Agriculture allied activities 345 52.50 3 Small Scale Industries 628 10814.61 4 Small Business 732 178.34 5 Retail Trade 3053 2545.42 6 Professional & Self-employed 933 205.97 7 Small Road & Water Transport

Operators 184 117.44

8 Education 1 0.15 9 Housing 187 317.13 10 Non-Priority Sector 1070 488.48 Total 14250 15918.18

42

DETAILS OF SUIT FILED ACCOUNTS INVOLVING RS. 1.00 CRORE AND ABOVE AS ON 31.03.2005.

S. No Name of the Account Branch Date of Suit Amount (Rs. In lacs)

1. M/s Shree Vindhya Paper Mills Ltd., Fort Mumbai 27.08.02 149.87

2. M/s Denholm Steels Ltd., Fort Mumbai 09.02.99 1733.53

3. M/s Labh Constructions & Industries Ltd. A R Ahmedabad 17.05.00 221.18

4. M/s Roopangi Impex Ltd., A R Ahmedabad 16.06.00 980.78

5. M/s Happy Textiles A R Ahmedabad 07.11.01 874.66

6. M/s Jai Bharat Febrics Mills Ltd., A R Ahmedabad 22.10.03 1172.22

7. M/s Divya Fibres Ltd., A R Ahmedabad 24.07.02 158.22

8. M/s Global Boards Ltd., Overseas Mumbai 27.06.00 616.66

9. M/s Rajasthan Braveries Ltd., S Ex Delhi 01.06.00 1186.24

10. M/s V K Constructions Work, P. P. Delhi 24.10.94 352.70

11. M/s Asian Capital services Ltd., K N Delhi 29.06.98 575.58

12. M/s Shiv Shakti Udyog Ltd., V K A Jaipur 06.02.04 342.19

13. M/s Sujana Metal products Ltd., Hyderabad 11.03.04 171.70

14. M/s Hari Om Steels Ltd., Hyderabad 26.03.04 612.36

15. M/s Bharat Metal Box Ltd., Hyderabad 21.05.98 1102.52

16. M/s Nayagra Paper Product Ltd., Hyderabad 28.01.00 428.17

17. M/s Sobhgaya Steels Ltd., Chennai 14.10.03 1068.78

18. M/s Megestic Hotels Ltd., Ludhiana 30.05.01 247.00

19. M/s Mesco Exports Ltd., S Ex Delhi 09.01.98 752.55

20. M/s Uniworth India Ltd., C R Kolkata 27.06.00 604.35

21. M/s Decora Tubes Ltd., N P Indore 09.09.04 576.00

22. M/s Shruti Synthetics Ltd., A M Udaipur 05.03.04 219.91

23. M/s Jaina Jewellery Co. Ltd., Overseas Jaipur 03.02.04 137.61

24. M/s Basera Cement Ltd., J B Jaipur 01.08.02 392.95

25. M/s S K G Solvex Ltd., Baran 16.09.97 229.94

26. M/s Mecrury Mettles Ltd., A R Ahmedabad 18.07.00 126.31

27. M/s Akai Impex Ltd., Overseas Mumbai 27.12.99 329.04

28. M/s Champion Steels Ltd., KDR Mumbai 26.02.04 381.05

29. M/s G S L Products Overseas Mumbai 07.03.00 436.67

30. M/s GTCL Mobile Com.tech. A R Ahmedabad 20.06.00 1088.60

31. M/s Garvare Nylons Ltd., Fort Mumbai 26.02.98 1531.68

32. M/s Merdia Steels Ltd., A R Ahmedabad 24.10.02 5557.19

33. M/s Pfimex Pharmaceuticals Hyderabad 09.09.98 216.71

34. M/s Graphic Printers Chennai 17.10.97 127.77

35. M/s Velvet International Pharma, Chennai 24.05.99 427.52

36. M/s MVR Industries, Chennai 01.10.97 1067.48

37. M/s Mexwell Exim Food Product, Chennai 01.10.97 1382.63

43

38. M/s Scott Engineering, Bangalore 12.07.99 353.24

39. M/s Nandh Product P Ltd., Bangalore 12.11.03 263.84

40. M/s Produntial International Ltd., C R Kolkata 30.12.97 597.14

41. M/s Shanoo Exports C R Kolkata 29.05.98 801.24

42. M/s Love kush Exports Ltd., C R Kolkata 14.09.99 201.74

43. M/s Uxhur Ltd., C R Kolkata 29.04.98 260.77

44. M/s Bagla & Co. C R Kolkata 30.03.98 184.02

45. M/s Gangaur Nirman Nivesh Ltd., C R Kolkata 16.03.98 784.02

46. M/s BCL Financial services C R Kolkata 14.02.02 252.19

47. M/s CFL Capital services P. Ltd., C R Kolkata 26.06.03 869.79

48. M/s Jaina Jewelers, Overseas Jaipur 03.02.04 112.77

49. M/s Pan Asia Global Ltd., T M Jaipur 12.10.98 221.25

50. M/s M T M , Bhilwara, Main 04.07.01 286.04

51. M/s Ganpati Commerce Ltd., J P Delhi 25.02.98 687.61

52. M/s Ganpati Combine Ltd., J P Delhi 25.02.98 656.76

53. M/s Ganpati Export Ltd., J P Delhi 25.02.98 707.52

54. M/s KashiRam Panna Lal, Kanpur 17.04.98 147.47

55. M/s CRB Capital, C R Kolkata 15.12.97 358.43

56. M/s CRB Corporation C R Kolkata 26.12.97 548.23

57. M/s Nucent Finance C R Kolkata 18.01.99 366.66

58. M/s Xitiz Exim P. Ltd., C R Kolkata 26.05.98 785.91

59. M/s Commodity Exchange C R Kolkata 19.05.98 1458.13

60. M/s S M Commercial C R Kolkata 14.05.98 800.45

61. M/s VCK Shares & Stocks Broking Co. C R Kolkata 21.11.97 862.42

62. M/s GRML Exports C R Kolkata 08.06.98 800.75

63. M/s S M Finance Ltd., C R Kolkata 07.09.99 125.16

64. M/s Narhem Mercantile Ltd., Bandra Mumbai 05.10.93 *132.17

65. M/s Mathania Texport, Overseas Mumbai 11.07.97 157.75

66. M/s Sanjeevani Agro Industries Overseas Mumbai 14.08.00 251.02

67. M/s Virgo Steel Western Ltd., Overseas Mumbai 05.10.93 *257.70

68. M/s BPL Ltd., Fort Mumbai 08.11.04 281.00

69. M/s Prime Securities Ltd., Overseas Mumbai 14.02.98 *292.90

70. M/s CRC Cargo ltd., Fort Mumbai 28.08.01 *294.90

71. M/s CRC Carries Ltd., Fort Mumbai 28.08.01 *631.54

72. M/s Karan Fiber & Febrics, A R Ahmedabad 15.04.98 407.33

73. M/s Marudhar Edible Oil Overseas Mumbai 29.06.00 612.80

74. M/s Sunmick Exports Overseas, Mumbai 17.06.96 732.22

75. M/s Lok Housing Co. Ltd., Andheri Mumbai 28.03.98 *1972.11

76. M/s Ram Kashyap Investment Ltd., Bangalore 06.01.00 104.74

77. M/s Govind Pathara, Chennai 21.07.00 153.92

78. M/s Modren Protins Hyderabad 20.07.00 346.07

44

79. M/s Kinetic Leasing Finance Ltd., Pune 16.12.04 400.00

80. M/s Akai Impex Overseas Mumbai 27.12.99 663.22

81. M/s VCK Capital, C R Kolkata 17.03.98 238.97

82. M/s Virgo Steel Western Ltd., Fort Mumbai 05.10.93 *465.32

83. M/s Akai Impex, Overseas Mumbai 27.12.9 556.28

84. M/s Shree Niwas Company Pvt. Ltd, Overseas Mumbai 14.08.2000 114.00

* Since compromised and amount received. Withdrawal of suit is under process.

Strategies Adopted for Reducing The NPA Level of The Bank

During the year 2004-05 the Bank stepped up its recovery drive very aggressively through multipronged strategy including reasonable compromise, legal actions and actions under SARFAESI Act (Securitisation Act) etc. So far as small NPAs are concerned attempts were made to recover maximum dues by organizing Recovery Camps for on-the spot settlements, whereas hard core high value NPAs were followed up by mounting pressure upon the defaulting borrowers, guarantors and judgment debtors through appropriate legal action. Accordingly, the Bank was able to effect handsome recoveries to the tune of Rs. 58.03 Crores in high value NPAs (with outstanding balance of Rs. 50.00 lacs and above) during the year. Similarly, substantial recoveries to the tune of Rs. 30.97 Crores were effected in small NPAs (having outstanding balance up to Rs.50.00 lacs), which amounts to 106.25 % of the target set for the year. Besides, NPAs amounting to Rs. 4.15 crores were upgraded to the category of Performing Assets. Thus, the total recovery / up gradation made during the year 2004-05 works out to Rs.93.15 Crores as against Rs.61.58 Crores in the previous year. The Bank has also exercised its right under the Securitisation Act with vigour and issued 255 notices to the defaulting borrowers/ guarantors compelling them to come forward with reasonable settlement proposals for liquidation of the dues of the Bank. The Bank has accordingly made a good recovery of Rs.7.69 crores in 125 NPA accounts. The Bank has also undertaken an extensive drive to execute decrees for enforcing recovery in hard core accounts by resorting to attachment, taking possession & sale of properties. In this way the Bank could recover Rs.20.74 crores in decreed accounts. The Bank approved compromises in 4401 accounts, effecting aggregate recovery of Rs. 37.64 Crores during the year. To accelerate the pace of recovery in small value accounts as many as 240 recovery camps were organized by the Regional Offices where an aggregate recovery of Rs. 4.69 Crores was effected in 3637 accounts. Besides this, the Bank effected significant recoveries amounting to Rs. 6.04 Crores in 5192 written off accounts, which also added to net profit of the Bank. The financial health of the Bank has been enhanced as a result of the initiatives taken by the Bank in improving asset quality and recoveries effected as also by making provisions in respect of Gross Non Performing Advances in accordance to the guidelines prescribed by Reserve Bank of India. Net NPAs as at the end of 31.03.2005 have been brought down to Rs.72.25 crores from a level of Rs.72.63 crores as of 31.3.2004. Thus, the proportion of Net NPAs to net advances has been reduced from 2.99 % as on 31.3.2004 to 2.50% as on 31.3.2005.

1. Prevention of New NPA

The potential NPA accounts or Borderline accounts of the branches are to be closely monitored to prevent them from turning into NPA. The Bank has acquired software which enables branch-wise/ region-wise/ Bank as whole data of accounts having arrears as at month-end as also dues falling due during next 3 months. On the basis of this data branch / Regional office / Corporate Office. Monitor Besides, Bank has system to monitor borderline cases from Rs. 5 lacs to Rs. 50 lacs at a regional office level and above Rs. 50 lacs at corporate office level, borderline cases of Rs. 50 lacs and above are being placed to committee of directors on quarterly basis.

2. Reduction of Existing NPAs. The Bank proposes a recovery target of Rs.6,800 Lakhs (excluding interest) for the FY 2004-05 for reduction of

the NPA level of The Bank. In order to achieve the above target, The Bank has adopted the following measures.

45

3. Recovery Camps The bank proposes to conduct Recovery Camps in certain identified centres, in order to settle maximum number

of NPA accounts by giving some waiver/remissions. The Camps will be attended by Senior Executives from Central Office in addition to the Regional Head, so as to enable to take spot decisions according to the merit of each account.

In order to settle the NPA accounts under Government Sponsored Schemes, more and more revenue recovery camps will be conducted by Regional Heads at various centres under their Region.

4. Suit filed accounts. Since a major portion of NPA accounts are blocked in suit filed accounts, special focus will be made for the

follow up/out of court settlement of such accounts. The Bank has already started to call the individual borrowers to its Central Office for negotiated settlements. Some of the accounts are already settled and the process of negotiations is continuing in other major suit filed accounts. DRT cases will be closely monitored by these special officers for the speedy court proceedings. Performance of the panel lawyers has to be reviewed by the Regional Head and the non-performers will be removed from the existing panel

5. One-Time Settlements The Bank has formulated policy guidelines in order to arrive at one- time settlements. The guidelines are based

on the security, recovery and cost aspects. The Bank is giving concessional interest for OTS based on the merits of each account.

Background of Directors

The Bank is professionally managed by the Board of Directors, all of whom are professionals and experts in their fields of activity. The policy decision are taken at the meetings of the Board of Directors. Board of Directors of the Bank : (As on December 20, 2005)

Name, Address & Designation, occupation

Age Qualification

Category of directors

Total Experience (Years)

Other Directorship

Shri. P K Tayal Address: 101-102, Happy House, Tata Press Lane, Prabhadevi, Mumbai – 400 025 Designation: Director Occupation: Industrialist

47 B.Com Promoter Non Executive

29 Nil

Shri B R Gupta Address: Flat no.6, Ground Floor, Sheetal Apartment, Apna Ghar, Unit 9, Shree Swami Samarth Nagar , Lokhandwala, Andheri (West), Mumbai – 400 053. Designation: Director Occupation: Retired Executive of LIC

65 M.A LLB

Independent Non-Executive

42 1. M/s OTCEI Sec Ltd. 2. M/s Indian Rayon & Ind. Ltd. 3. M/s IDBI Capital Markets Services Ltd. 4. M/s Prudential ICICI Asset Management Co. Ltd. 5. M/s Sentient Advisors Pvt. Ltd. 6. M/s JBF Industries Ltd.

Shri Sanjay Kumar Tayal Address: 23, NCPA, ‘B’

i i i

42 B.Com Promoter Non Executive

22 M/s Krishna Knitwear Technology Ltd.

46

Wing, Nariman Point, Mumbai – 400 021. Designation : Director Occupation: Industrialist Shri. Som Prakash Arya 1268, Canal Rest House Road, Yamuna Nagar, Haryana Designation : Director Occupation: Agriculture

79 Matriculation

Promoter Non Executive

51 Nil

Shri. P P Kapoor Address: A- 6/3, E-34, The Groves Co-op Society, Jeevan Bima Nagar, Borivali (West), Mumbai – 400 103. Designation : Director Occupation: Retired

66 B.Com FCA & MFM

Independent non executive

41 Nil

Shri A N Chakrabarti Address: Satellite Classic, Flat no. B-2/203-204, Caves Road, Jogeshwari (East), Mumbai – 400 060 Designation: Director Occupation: Retired

65 M.Com CAIIB

Independent non executive

41 Nil

Shri Anil Anand Rao Address: 208/C, Prakash Nagar, Mogul Lane, Mahim, Mumbai – 400 016 Designation : Director Occupation: Advocate

42 B.Sc LLB

Independent non executive

15 Nil

Shri Niraj Tayal Address: H.No.2104, Sector 21 – C Chandigarh –160 022 Designation: Director Occupation: Industrialist

48 B.A L.LB

Independent non executive

26 1. R H Engg. (P) Ltd. 2. Arynit Enterprises (P) Ltd.

Shri B M Sharma Address: 61 Sunita Building, Cuffe Parade, Mumbai – 400 021. Designation: Managing Director & CEO

61 B.A.(special) economics

Managing Director & CEO

40 Nil

47

CORPORATE GOVERNANCE

1. Board of Directors :

a. Composition of the Board of Directors

The present Board of Directors of the Bank consists of 8 non – executive directors and one Managing Director & CEO. Further, the constitution of the board is in compliance with Sec 10 A of the Banking Regulation Act, 1949.

The Composition of the Board of Directors and the Sector pursuant to Sec 10- A (2) of the Banking Regulation Act, 1949 each Director represents are given below :

No. Name of Director / Designation Name of the Sector which the Director represents

1. Mr. P. K. Tayal, Banking 2. Shri B R Gupta Finance 3. Shri Sanjay Kumar Tayal Industrialist 4. Shri Som Prakash Arya Agriculture 5. Shri P P Kapoor Accountancy 6. Shri A N Chakrabarti Banking

7. Shri Anil Anand Rao Law

8. Shri Niraj Tayal SSI

9. Shri B M Sharma, MD & CEO Banking

b. Ceiling on Directorships / Committee Positions :

None of the Directors of The Bank holds committee positions exceeding 10. The following table highlights the position.

Directors and number of committees in which they are Members as on December 20, 2005

Name of the Director Executive / Non-Executive / Independent

Committee Positions

As Chairman As Member

Mr. P K Tayal Promoter Non Executive

Committee for Monitoring Frauds

Committee of Directors

Mr. Sanjay Kumar Tayal Promoter Non Executive

Shareholder / Investor Grievance Committee

(a)Committee of Directors

(b) Audit Committee of Board

( c) Customer Service Committee

Mr. Som Prakash Arya Promoter Non Executive

- -

Mr. B R Gupta Independent non executive

- (a) Audit Committee of Board

(b) Committee for monitoring of Frauds

Mr.P P Kapoor Independent non executive

Audit Committee of the Board

(a)Committee of Directors

(b)Risk management committee

( c) Customer Service Committee

Mr.A N Chakrabarti Independent non executive

Nomination Committee

(a)Committee of Directors

(b)Committee for monitoring of

48

Frauds

(c)Risk management committee

(d) Customer Service Committee

Mr.Anil Anand Rao Independent non executive

- (a)Shareholder/ Investor Grievance Committee

(b)Committee for monitoring of Frauds

(c) Nomination Committee

Mr.Niraj Tayal Independent non executive

- (a) Committee of Directors

(b) Shareholder/ Investor Grievance Committee

Mr. B M Sharma MD & CEO (a) Customer Service Committee

(b) Risk Management Committee

(a) Committee of Directors

(b) Committee of monitoring of frauds

2. Audit Committee :

The role of the audit committee includes the following :

• Providing direction as also to oversee the operations of the total audit function in The Bank. • Review internal inspection / audit function in the Bank including the system, its quality and effectiveness in terms of follow up of inspection reports • Regarding statutory audits, it follows upon all the issues raised in the Long Form Audit Report (LFAR) and to

interact with the external auditors before the finalisation of the annual / semi annual financial accounts and reports.

• ACB also follows up on all the issues/concerns raised in the inspection reports of RBI. • Establishment of an appropriate internal control framework • Monitoring of activities of internal audit departments and liaisoning with external auditors • Recommending the appointment and removal of the external auditors, fixation of audit fees and also approval for

payment for any other service • Approve panel of branch auditors in consultation with the statutory auditors • To investigate any activity within its terms of reference • Reviewing the company’s financial and risk management policies • Surveillance and monitoring of total exposure to the capital market (including investment in share) both fund

based and non-fund based

3 Shareholders / Investors Grievance Committee:

The Shareholders / Investors Grievance is constituted to specifically look into the redressing of all Shareholder and investors complaints like transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends etc.

4. Committee for Monitoring of Frauds In terms of RBI’s directions, a special committee for monitoring of frauds was constituted on March 26, 2004. It has met twice during the current financial year upto September 2005.

49

5. Risk Management Committee

In terms of RBI’s directions, a Risk Management Committee was constituted on 10.12.2004 to effectively co- ordinate between Credit Risk Management Committee, Asset - Liability Management Committee and other risk management committees in the Bank. The Committee is chaired by Shri B.M. Sharma, Managing Director & CEO and two non-executive directors i.e. S/Shri A.N. Chakrabarti & P.P. Kapoor are members of the Committee.

6. Customer Service Committee

In terms of RBI’s directions, a Customer Service Committee was constituted on 10.12.2004 to strengthen the corporate governance structure and also to improve the quality of customer service in the Bank. The Committee is chaired by Shri B.M. Sharma, Managing Director & CEO and three non-executive directors i.e. S/Shri A.N. Chakrabarti, P.P. Kapoor & Sanjay Kumar Tayal are members of the Committee.

7. General Body Meeting (AGMS)

Location and time where last three AGM’s held:

AGM number Date & Time Venue 60th 29th July, 2003, 10.00 AM Hotel India International, Udaipur 61st 26th June, 2004, 10.00 A.M Hotel India International, Udaipur 62nd 17th June, 2005, 10.00 A.M Hotel India International, Udaipur

8. Disclosures :

The Company has complied with the provisions of law and no penalties or strictures have been imposed by the Stock Exchanges or SEBI or any other statutory authority, on any matter related to the capital markets, during the last 3 years. The Directors did not incur any disqualification under Section 274 (1)(g) or under any other law applicable to the Bank. Disclosures on other related party transactions are as given in the Notes to the Accounts. The Bank did not enter into any material related party transactions with its Directors or management or relatives that would potentially conflict with and / or adversely affect the interests of the bank.

The Bank has complied with the directives issued by the Stock Exchanges / SEBI and other statutory authorities on all mattes related to ther capital markets and no penalties have been imposed by them.

9. Compliance Status of Clause 49 of the Listing Agreement :

The Bank has complied with all mandatory recommendations prescribed in clause 49 of the Listing Agreement. A certificate to this effect from the Bank’s Statutory Auditors has been issued.

Human Resource

Bank’s HRD Strategy is centered around optimum utilisation of Human resources in step with the induction of new technology in Banking operations and redeployment of staff at new branches, extension counters and administrative offices. Recruitment and promotion policies are accordingly reviewed to allow the individuals to remain motivated and excel in their job responsibilities. The staff strength of the Bank as on 31.03.2005 stands as under: Officers 1947 Clerical 1346 Subordinate 775 TOTAL 4068

50

Key Management Personnel The day-to-day management of The Bank is looked after by Managing Director and CEO. He is assisted in the management of The Bank by a team of qualified professionals. The profile of the key management personnel is as follows:

Name Date of joining

Designation

Qualification Earlier Company Banking Experience

(Years) Shri B M Sharma 18/11/2004 Managing Director &

CEO B A (Special) Economics,

CAIIB-I

Punjab National Bank

35

Shri. Vinod Juneja 02/04/2002 Deputy Managing Director

B.Com (Hons), M.Com,

CAIIB, Dip. In Int’l Trade &

Mkt.

The Sumitomo Mitsui Banking

Corporation

34

Shri Deepak Saruparia 31/08/2004 Executive Director B. Com. FCA M/s. D. Saruparia & Associates,

Chartered Accounts

6

Shri. Naresh Chand Mehta

12/10/1963 Chief General Manager

B.Com, CAIIB Rajasthan State Productivity

Council

42

Shri. Kailash Chandra Sharma

21/02/1995 General Manager (Planning)

M.Sc., CAIIB RBI 25

Shri. Anand Swaroop Bhatnagar

14/06/1991 General Manager (IT operations)

M.Sc, M Tech, CAIIB, MBA,

CISA, Certification in

Russian Language, Sp.

Diploma in Operation

research, PG Cert. Buis. & Ind. Mgmt.,

CISM

BDPS, HCL Tech. APEDA (under

Min. of Commerce)

14

No Key Managerial personnel is related to any of the Directors of The Bank There is no arrangement or understanding with major Shareholders, customers or others pursuant to which any of the key managerial persons referred to above has been appointed.

51

Change in Key Managerial Personnel During the last 3 years

Name Date of joining

Date of Cessation

Designation

Shri. Vinod Juneja 02/04/2002

- Deputy Managing Director (*) Promoted as Deputy Managing Director from Executive

Director on June 1, 2004

Appointed

Mr. Deepak Sarpuria 31.08.2004

- Appointed as Executive Director Appointed

Mr. B M Sharma 18.11.2004

- Appointed as MD & CEO Appointed

Mr. O P Khetawat - 30.09.2005 Retired Ceased

Change in Auditors in last three years

Sr. No.

Name of the Auditors Reasons for change / Remarks

2. M/s. Chokshi & Chokshi, Chartered Accountants, Mumbai

Appointed for the year 2003-2004 for their first term. Continued for FY 2004-05 and FY 2005-06

3. M/s. T. R. Chadha & Co., Chartered Accountants, New Delhi

M/s. T. R. Chadha & Co., Chartered Accountants, New Delhi had completed 4 years tenure in the year 2002-2003 and in terms of RBI guidelines could not be re-appointed.

4. M/s. Khanna Annandhamam, Chartered Accountants, New Delhi

Appointed as the Bank’s Co-Statutory Central Auditors for the year 2002-2003

Change in Directors in last three years

Changes in the Board of Directors during the last three years & during current year along with the dates of appointment/resignation and reasons thereof.

Name of the Director Date of Appointment

Date of Change

Remark

Sh. H. R. Khan – RBI Nominee

09.04.1999 09.05.2002 Ceased in terms of RBI order

Sh. P. Aravind 09.05.2002 18.07.2003 Ceased in terms of RBI order Sh. Navin Kumar Tayal 24.03.2000 26.03.2002 Resigned Sh. A. K. Pandya 20.04.2000 31.12.2002 Ceased in terms of RBI order Sh. A. K. Pandya 10.02.2003 14.08.2004 Appointed by RBI Sh. Radhe Shyam 18.07.2003 14.08.2004 Appointed by RBI Sh. R. C. Mehta 31.10.2000 29.07.2003 Retired on completion of term Sh. Akshey K. Gupta 29.04.2004 01.12.2005 Expired Sh. K. M. Bhattacharya 15.05.2000 21.05.2004 Ceased on expiry of term Mr. Deepak Saruparia 8.12.1998 30.08.2004 Resigned Mr. P. K. K. Krishnan 14.08.2004 29.11.2005 Ceased in terms of RBI orders Mr. S. K. Mishra 14.08.2004 07.04.2005 Expired Mr. Amarnath 09.06.2005 29.11.2005 Ceased in terms of RBI orders Mr. B M Sharma 18.11.2004 - Appointed

52

VI. FINANCIAL PERFORMANCE FOR THE PAST FIVE FINANCIAL YEARS AND FOR THE HALF YEAR ENDED SEPTEMBER 30, 2005 Statement of Profit And Loss Account for Last Five Years Financial Year ended March 31, (Rs.in crores) Particulars 2001 2002 2003 2004 2005 Half

Year ended 30.09.05

Income Interest Earned 442.43 452.59 472.67 502.86 522.35 258.45 Interest and Discount on Advances/Bills 219.90 219.73 211.78 197.35 228.97 110.19 Income on Investments 177.52 190.11 231.62 281.11 249.39 104.97 Interest on Balances with RBI and other inter-bank Funds 33.42 38.66 22.08 24.26 42.03 40.53 Others 11.60 4.08 7.19 0.15 1.96 2.76 Other Income 56.48 97.22 126.42 177.01 63.76 13.73 Commission, Exchange & Brokerage 23.96 20.00 22.65 22.19 27.75 18.94 Profit on Exchange Transactions (Net) 3.23 4.03 4.69 4.77 6.13 2.61 Profit on Sale of Investments (Net) 10.28 56.60 83.77 128.04 7.82 (20.17) Profit on Sale of Land, Building & Other Assets (Net) -0.38 -0.16 -0.07 -0.05 (0.13) 0.08 Profit/Loss on revaluation of investments 0.00 0.00 0.00 0.00 0.00 0.00 Income Earned by way of Dividends etc. 0.23 0.50 0.00 0.00 0.00 0.00 Miscellaneous Income 19.16 16.25 15.39 22.06 22.19 12.27 Total Income 498.91 549.81 599.09 679.87 586.11 272.18 Expenditure 444.20 468.39 450.51 494.57 503.66 258.51 Interest Expended 309.30 323.32 291.83 313.02 308.91 153.96 Interest On Deposits 306.95 319.83 287.30 308.63 299.83 148.30 Interest On RBI/Inter-Bank Borrowings 0.33 0.31 1.79 0.93 1.69 0.91 On Others 2.03 3.18 2.74 3.46 7.39 4.75 Operating Expenses 134.90 145.07 158.68 181.55 194.75 104.55 Payments to and Provisions for employees 86.60 94.06 103.82 116.23 120.66 66.59 Rent, Taxes & Lighting 10.00 12.07 13.29 14.29 17.35 8.95 Insurance 2.44 1.75 2.69 3.00 5.01 3.60 Printing & Stationery 1.35 1.65 2.42 2.63 2.69 1.19 Advertisement and Publicity 0.82 0.88 0.94 1.05 2.43 1.61 Postage, Telegrams, Telephones etc. 2.14 3.81 4.22 4.84 5.48 2.18 Repairs & Maintenance 0.94 1.60 4.05 4.62 4.96 2.66 Law Charges 2.27 2.96 3.84 4.76 3.10 1.35 Directors' Fees, Allowances and Expenses 0.12 0.12 0.15 0.21 0.19 0.13 Auditors Fees & Expenses (Including Branch Auditors Fees and expenses) 0.40 0.50 0.55 0.43

0.48 0.17

Other Expenditure 12.63 14.20 13.68 17.66 20.03 9.47 Depreciation on Bank's Property ( Netoff depreciation on revaluation reserve ) 15.17 11.46 9.03 11.85 12.37 6.65 Total Expenditure 444.20 468.39 450.51 494.57 503.66 258.51

53

Particulars 2001 2002 2003 2004 2005

Half Year ended

30.09.05 Gross Profit before provision for Tax and Extraordinary items 54.71 81.42 148.58 183.52 82.45 13.67 Less:- Extraordinary Items (-) 1.78 Gross Profit before provision for Tax 54.71 81.42 148.58 185.30 82.45 13.67 Less: Provision and Contingencies ** 25.49 41.10 80.16 116.26 47.44 3.20 Net Profit for the year 29.22 40.31 68.42 69.04 35.01 10.47

Balance of Profit / Loss brought forward -147.43 -128.27 0.47 7.55 1.22 3.16 TOTAL -118.21 -87.96 68.90 76.59 36.23 13.63 Add-Amount transferred from Revenue & Reserve 0.00 119.71 0.00 0.00 0.00 0.00

Less : Tax adjustments of earlier year 0.00 -3.90 0.00 0.00 0.00 0.00

Leave encashment of earlier years 0.00 -14.80 0.00 0.00 0.00 0.00 Profit / Loss Available for Appropriation -118.21 13.05 68.90 76.59 36.23 0.00 APPROPRIATIONS 0.00 Transfer to Statutory Reserve 8.06 10.08 17.11 17.26 8.76 0.00 Transfer to Investment Fluctuation Reserve 2.00 2.50 16.80 26.60 8.90

0.00

Transfer to Revenue & Other Reserve 0.00 0.00 5.20 7.24 1.92 0.00 Proposed Dividend + Tax on Dividend 0.00 0.00 22.24 24.27 13.49 0.00 Balance of Profit / Loss carried forward -128.27 0.47 7.55 1.22 3.16 13.63

TOTAL -118.21 13.05 68.90 76.59 36.23 13.63

Statement of Assets and Liabilities for Last Five Years (Rs. in core) Financial Year ended as on March 31, 2001 2002 2003 2004 2005 Half Year

Ended 30.09.05

Assets Cash in Hand (including foreign currency notes) 50.21 44.02 63.23 89.73 103.33 76.11 Balances with RBI in Current Account 373.05 308.93 315.42 236.20 247.17 257.43 Balances with Banks and Money at Call & Short Notice in India 280.55 356.28 622.31 1005.51 2096.85 2129.66 Balances with Banks and Money at Call & Short Notice outside India 1.02 9.63 6.14 44.33 2.02 10.05 Total Balances with Banks and Money at Call & Short Notice 281.57 365.92 628.45 1049.84 2098.87 2139.71 Investments in India 1568.97 1883.68 2642.55 4457.40 3514.67 2507.06 Investments outside India 0.00 0.00 0.00 0.00 0.00 0.00 Total Investments 1568.97 1883.68 2642.55 4457.40 3514.67 2507.06 Advances in India 1859.17 1955.96 2221.24 2332.58 2896.17 2672.96 Advances outside India 0.00 0.00 0.00 0.00 0.00 0.00

54

Total Advances 1859.17 1955.96 2221.24 2332.58 2896.17 2672.96 Fixed Assets * 48.84 38.82 57.46 78.39 103.41 105.26 Other Assets 128.35 183.21 178.58 187.54 169.03 181.94 Total (A) 4310.16 4780.54 6106.94 8431.68 9,132.65 7940.47 * Net of Revaluation Reserves Liabilities Demand Deposits from Banks 24.12 20.09 16.49 29.48 41.75 19.64 Demand Deposits from Others 656.21 734.84 815.71 901.94 1099.48 986.17 Savings Deposits 793.95 944.32 1079.14 1273.35 1517.22 1698.55

Term Deposits From Banks 77.89 75.13 577.56 1523.02 1570.48 728.11 From Others 1981.04 2185.61 2810.35 3911.14 3891.38 3632.62 Total Deposits 3533.22 3959.98 5299.24 7638.93 8120.31 7065.09 Borrowings in India 17.04 29.34 17.03 132.60 158.56 95.27 Borrowings outside India 0.84 0.63 0.18 43.72 48.59 7.76 Total Borrowings 17.88 29.96 17.21 176.32 207.15 103.03 Other Liabilities & Provisions ( Includes Subordinate Debts) 606.71 579.75 527.86 309.27 476.50 433.19 Total (B) 4157.81 4569.70 5844.31 8124.52 8803.96 7601.31 Net Assets ( C=A-B) 152.35 210.85 262.63 307.16 328.69 339.16 Represented by Particulars 2001 2002 2003 2004 2005 Capital (D) 100.37 100.37 105.97 107.57 107.57 107.57 Reserves & Surplus Statutory Reserve 57.31 67.39 84.50 101.76 110.52 110.52

Capital Reserve 0.26 0.27 0.27 0.28

1.29 1.29

Share Premium 37.85 37.85 37.85 37.85 37.85 37.85 Revenue & Other Reserves 84.83 4.97 34.05 59.71 71.46 81.93 TOTAL 180.25 110.48 156.67 199.60 221.12 231.59

Less: Accumulated Losses 128.27 0.00 0.00 0.00 0.00 0.00 Net Reserve & Surplus(Total E) 51.98 110.48 156.67 199.60 221.12 231.59

Total(D+E) 152.35 210.85 262.63 307.16 328.69 339.16 Note:- For the year 2000-01 the auditors have given qualification for depreciation on computers as per AS-6 for Rs. 3.00 crores, the depreciation was subsequently provided during the year 2001-02, accordingly adjustment has been done in the year 2000-01and 2001-02.Auditors qualification in respect of which adjustments could not be carried out Refer Annexure -VII.

55

Contingent Liabilities & Bills for Collection As on March 31st 2001 2002 2003 2004 2005 Claims against the Bank not acknowledged as Debts 78.48 81.64 87.83 85.74 85.00 Liability for partly paid Investment 0.00 0.00 0.00 0.00 0.00 Liability on account of outstanding Forward Exchange Contracts 91.89 265.57 141.17 316.09 430.40 Guarantees given on behalf of constituents 92.25 101.02 170.22 180.72 218.61 Acceptance, endorsements and other obligations 82.03 122.22 138.20 97.69 155.40 Other items for which the Bank is contingently liable 31.25 15.92 6.66 10.23 14.62 Bills for Collection 331.36 358.96 550.51 778.19 409.39 TOTAL 707.26 945.32 1094.59 1468.67 1313.42

56

VII. MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITIONS AND RESULTS OF THE OPERATIONS AS REFLECTED IN THE FINANCIAL STATEMENT Important Ratios KEY ACCOUNTING RATIOS (Rs.in crores) ACCOUNTING RATIOS 2001 2002 2003 2004 2005 Interest Income / Average Working Funds (AWF) 10.44 9.80 9.18 7.63 7.25 Interest Expenses / AWF 7.30 7.00 5.67 4.75 4.29 Interest Spread / AWF 3.14 2.80 3.51 2.88 2.96 Non-Interest Income / AWF 1.33 2.10 2.46 2.69 0.88 Operating Expenses / AWF 3.18 3.14 3.08 2.75 2.70 Cost Income Ratio 71.15 64.05 51.64 49.49 70.25 Gross (Operating) Profit / AWF 1.29 1.76 2.89 2.78 1.14 Net Profit / AWF 0.69 0.87 1.33 1.05 0.49 Return on Net Worth 18.81 19.12 26.05 22.48 10.65 Return on Assets 0.67 0.84 1.12 0.82 0.38 Return on Average Assets 0.69 0.87 1.33 1.05 0.49 Yield on Advances 11.65 10.61 10.57 9.49 9.32 Cost of Deposits 8.36 8.00 6.50 5.46 4.69 Dividend payout Ratio 0.00 0.00 32.50 35.15 38.53 (Including Corporate Dividend Tax) Credit – Deposit Ratio 54.41 57.47 47.21 41.54 44.50 Credit + Non SLR Investment (excluding Investments in Subsidiaries)-Deposit Ratio 59.00 63.44 69.18 61.36 55.06 Capital Adequacy Ratio 10.57 12.07 11.29 11.18 12.75 Tier – I 8.91 10.01 8.92 8.35 7.84 Tier - II 1.66 2.06 2.37 2.83 4.91 Business per branch (Rs in Crore) 17.23 18.84 22.38 27.79 29.53 Gross Profit per branch ( Rs in Crore) 0.17 0.26 0.44 0.52 0.22 Net Profit per branch ( Rs in Crore) 0.09 0.13 0.20 0.20 0.09 Earnings per share (Rupees) 4.02 5.11 6.82 6.42 3.26 Book Value per share (Rupees) 14.44 19.60 24.42 28.56 30.56 Net Asset Value per share (Rs) 1.44 1.96 2.44 2.86 3.06

57

Definitions of Key ratios: Average Working Funds (AWF ): Fortnightly average of total assets Average Deposits : Fortnightly average of total deposits Average Advances : Fortnightly average of total advances Average Business : Total of Average Deposits & Average Advances Average Investments : Fortnightly average of total investments Interest Income/AWF : Total Interest Income Divided by AWF Interest Expenses/AWF : Total Interest Expenses Divided by AWF Operating Expenses : Total Expenses minus Interest Expenses Operating Expenses/AWF : Operating Expenses Divided by AWF Cost Income Ratio : Operating Expenses Divided by (Non Interest Income plus Interest

Spread) Gross (operating) Profit/AWF : Operating profit divided by AWF Net Profit/AWF : Net Profit Divided by AWF Return on Net Worth : Net Profit Divided by Net Worth ( Excluding revaluation reserves) Return on Assets : Net Profit Divided by Total Assets Returns on Average Assets : Net Profit Divided by Average Assets (Average of two years

outstanding figures) Yield on Advances : Interest earned on Advances Divided by Average Advances Cost of Deposits : Interest paid on deposits Divided by Average Deposits Dividend payout Ratio (including Corporate Dividend Tax :

Dividend including corporate Dividend Tax Devided by Net profit

Credit- Deposit Ratio : Total Advances Divided by Customer Deposits ( i.e.Total Deposits minus Inter Bank Deposits)

Credit + Non SLR Investments( Excluding investments in Subsidiaries)- Deposit Ratio :

Total Advances plus Non-SLR Investments minus Investments in subsidiaries ) Divided by Customer Deposits

Business per Branch : Total Deposits plus Total Advances Divided by No.of Branches Gross Profit per Branch : Gross Profit Divided by No.of Branches Net Profit per Branch : Net Profit Divided by No.of Branches Earning per Share : Net Profit Divided by Equity multiplied by ten Book Value per Share : Net Worth ( excluding revaluation reserves)divided by equity

multiplied by ten Net Asset Value per share : Equity net worth arrived at the end of the year divided by no. of

equity shares at the end of each fiscal year

58

A. CAPITAL FUNDS CRAR The Capital Adequacy ratio stood at 12.75 % which is above 9% minimum stipulated by the Reserve Bank of India. B. ASSET QUALITY Net NPA to Net advance Bank has been able to bring down the Net NPA from 2.99 % as on 31.03.2004 to 2.50 % as on 31.03.2005. Net NPAs to Total Assets The ratio of net NPAs to Total assets reveal the degree of impairment of assets in the Balance Sheet. A higher ratio

indicates poor asset quality. This ratio has come down favorably from 0.85% in 2004 to 0.79 % in 2005.

Net NPAs to Total Equity The ratio indicates the equity cover available for NPAs. In the past few years the net NPA of the Bank was in excess

of the equity available leaving an uncovered portion. The ratio of net NPA to total equity was high at 22.04 % as on 31.03.2004.This has been brought down to 20.60% respectively during the year ended 31.03.2005.

Investments in Bonds and Debentures Out of total Bonds and debentures to the tune of Rs. 471.29 crores as on 31.03.2005 unrated Bonds amounts to Rs.

66.57 crores only.

NPAs in Investments to other investments

The ratio of the above is negligible at 1.45%.

Large Exposures to Net Owned Funds The ratio is a pointer to the future asset quality problems. Larger the ratio, higher the concentration risk. The ratio in

respect of above is slightly on the higher side. Delinquency in a few large accounts may have adverse effect on the profitability as well as on the reserves. The ratio (taking large exposure in excess of 15% of NOF has improved and as on 31.3.05 there is no exposure in excess of 15% of NOF.

C. EARNINGS Return on Assets Post Tax ROA is the financial indicator of the efficiency of the Bank. The ratio of our Bank has reduced from 0.82% as on

31.03.2004 to 0.38% as on 31.03.2005. Return on risk weight assets The ratio of ROA basically focuses only Balance Sheet items. The measure of Return on Risk weighted Assets,

which captures the off balance sheet activities of the Bank as well, reveal the relationship between the risk and returns. In case the ratio has consistently been decreasing, it indicates that the Bank has not been adequately compensated for the additional risks assumed. The ratio has further improved to 1.12 % as on March 31st, 2005 from 2.66 % as on March 31st, 2004.

59

Net Interest Income (NII) & Net Interest Margin(NIM) NII and NIM are summary of measures of Bank’s net interest return on income producing assets. The higher amount/

ratio shows the financial strength of the Bank. Net interest income has gone up by Rs 23.60 crores in 2004-05.

Non Interest Margin The ratio indicates the relationship of Non Interest Income to Non Interest Expenditure (Operating Expenses). A

positive ratio indicates that the entire operating expenses are met out of other income. The ratio has gone down from 97.50% to 32.74%

Efficiency Ratio Efficiency Ratio represents operating costs as a percentage of the net total income. The ideal ratio should not exceed

60%. The ratio of our Bank for the year 31.03.2005 was high at 70.25%. D. RISK MEASURES (Liquidity/Interest Rate Risk)

Purchased funds to Total Assets Instead of Purchased funds, it appears that the ratio has been calculated on borrowings to toal assets as on

31.03.2004. On this criterion the ratio of borrowings to total assets as on 31.03.2005 works out to 2.26%. Net Loans to Total Assets

Loans, essentially being illiquid, a higher ratio of loans to total assets indicate the illiquidity of the Bank. The ratio

of our Bank as on 31.03.2005 was 31.64 % compared to 27.59% as on 31.03.2004.

Core deposit to Net Advances The ratio of advances to core deposit (total deposits excluding deposits from banks) as of 31.03.2005 works out to

44.50%.

Interest Rate Sensitivity The Bank has negative gaps in four of the five time-buckets covering the peiod upto 3 years as on 31st March 2005

(Audited Position) while the cumulative gap up to this period is also negative. As the interest rate scenario indicates only nominal hardening of interest rates the impact on net interest margin on account of changes in interest rates is not expected to be significant.

60

Stock market Data High/Low and Average Prices for the preceding three years at BSE

Date High (Rs.) Low (Rs.) Close (Rs.)

Year 2002 9.70 8.60 8.90

Year 2003 18.95 15.10 16.40

Year 2004 45.00 13.75 37.35

Year 2005 75.50 27.10 56.15

Monthly Highest & Lowest closing quotations for the preceding 6months at BSE

Date Open (Rs.) High (Rs.) Low (Rs.) Close (Rs.) No. of Shares

June 2005 53.80 58.45 49.00 51.00 4365777

July 2005 51.00 61.90 50.65 54.30 9515682

August 2005 54.00 59.00 52.50 54.95 5893423

September 2005 55.00 69.65 51.20 54.65 25816268

October 2005 55.10 57.25 43.10 44.40 4933135

November 2005 46.50 52.80 44.50 48.00 3320505

61

Promise Vs Performance The Bank of Rajasthan has not made any public or rights issue in past three years The Bank made Rights Offer in 1994. The object of the offer were to strengthen the Banks capital base in a phased manner. Projections as per Rights issue dated 19 May 1994 and subsequent re-working dated 13 July 1994. th th

Projections (Rs. Lakhs) Actuals (Rs. Lakhs)

Position as at Year ended 31st March 1995 1996 1997 1999 1995 1996 1997 1999

Deposits 2,07,500 2,80,000 3,80,000 2,03,451 2,50,682 2,93,893 2,98,492

% growth 27.62% 34.94% 35.71% 32.80% 23.21% 17.24% 5.60% Advances 1,03,750 1,40,000 1,90,000 1,01,841 1,36,099 1,44,593 148746 % growth 47.87% 34.94% 35.71% 47.97% 33.64% 6.24% 0.48% Total Income 26,018 34,155 45,249 41,177 24,982 31,144 39,773 39,388 Total Expenditure (including provisions) 21,301 27,615 36,025 44,485 19,568 27,600 35,504 46,134 Net Profit after Tax 2,547 3,499 4,981 (3,308) 3,489 2,702 -5392 (6745) Equity Capital 1,750 1,750 1,750 1,794 1,794 1,794 1794 Reserves (excl. revaluation reserves) 7,683 10,995 16,164 8,748 11,860 6,356 Credit Deposit Ratio 50% 50% 50% 50% 54% 49% Book Value 53.9 72.83 102.37 120.12 76.12 45.44 Earnings per share 45.28 19.99 28.46 68.27 16.06 -30.06 A rights issue was made in December 1990, in which no projections were given. The Bank subsequently made one more rights issue in 1999.

Projections (Rs. Lakhs) Actuals (Rs. Lakhs)

Position as at Year ended 31st March 1999 1999

Total Income 41,177 39,388 Total Expenditure 44,485 46,134 Net Profit after Tax (3,308) (6745)

Comparative Table on the Capital Adequacy

2001 2002 2003 2004 2005 Capital Adequacy Ratio 10.57 12.07 11.29 11.18 12.75 Tier – I 8.91 10.01 8.92 8.35 7.84 Tier – II 1.66 2.06 2.37 2.83 4.91

As is evident from the above data, The Bank is currently compliant with the CRAR requirements and the augmentation of the capital base has enabled The Bank of Rajasthan Limited to augment the net worth and to undertake expansion of its business.

62

VIII. BASIS FOR PLACEMENT PRICE Qualitative Factors

• A bank established in 1943 and having a network of 385 branches including 4 service branches and 43 extension counters.

• An existing profit making, dividend paying listed banking company. Please refer to page no.105 of the Information Memorandum for details.

• Professionally managed bank.

• Fully Computerised operations IX. OUTSTANDING LITIGATION OR DEFAULTS

Suits have been filed by HRB Floriculture Limited against some of the directors of The Bank of Rajasthan Limited. The same are not going to materially affect the financial position or the operations of the Bank. There are no other litigation and / or proceedings initiated against the directors and promoters of the Bank involving violation of statutory regulations or criminal offences or economic offences.

There are no outstanding litigations launched against the Bank or any of its Directors or Promoters as on the date of this Information Memorandum, for any of the alleged offence under the enactments specified in Paragraph I of Part I of Schedule XIII to the Companies Act, 1956.

Except compounding fee for compoundable offences under the sections 209(3)(6), 211(3A & 3B) and 217 (3) of Companies Act, 1956, no penalties were imposed by the concerned authorities on the Bank or its Directors or Promoters for violation of laws applicable to its business.

Defaults There has been no default in meeting any of the statutory dues, institutional dues and dues towards holders of debentures, bonds, fixed deposits and equity shares, other than unclaimed liabilities of the Bank.

The litigations in which The Bank is involved

S. No.

Brief Description No. of cases

Amount involved (Rs. In lac)

1 Suits filed by The Bank against defaulting borrowers (including decreed a/cs)

3553 63130.32

2. Appeals filed by The Bank on disputed income tax 18 4977 (approx.) 3 Suits against The Bank which are not treated as

debts 162 7901.80

4 Suits filed by the shareholders 30 - 5 Criminal case against the bank & the directors 1

63

Suits Filed Accounts - Position

Year Number of Accounts Amount (Rs. in lacs)

2002 2843 21929.51

2003 3101 52939.85

2004 3387 50231.87

2005 3553 63130.32

II. Age wise break up of suit filed accounts as on 31/03/2005 (Rs. In Lakhs)

Suit filed Decreed Age No. of a/cs Amount No. of a/cs Amount

Below 1 year 501 2080.67 256 781.90 1 to 5 year 661 18916.76 681 9179.39 5 to 10 year 336 18052.42 592 12673.15 Above 10 year 90 676.92 436 769.11 Total 1588 39726.77 1965 23403.55

III. Disputed Tax Demands (Rs. In Lakhs)

Nature of Dispute Asstt. Year

2001-02 2002-03 2003-04 2004-05 Total Remarks

The main dispute is in regard to : 1. Taxability of interest on security 2.Disallowance of provision for bad and doubtful debt made on the basis of average advances of rural branches by treating them as non rural purpose. 3. Change of accounting policy from cash to mercantile basis on certain incomes. 4. Disallowance u/s 14A

Nil 1460.00 Nil Nil 1460.00 In earlier years the CIT (A) has allowed the entire claim of the Bank in respect of taxability of interest on securities and provision for bad debts. The Bank has preferred appeal before CIT (A) against above order which is pending. It is likely that the above appeal will be decided in favor of the Bank and no demand will be payable.

2. Details of Outstanding Litigations in respect of Income Tax

S. No. Brief Description No. of Cases

Amount Involved (Rs. In Lakhs)

1. Appeals filed by the Bank on disputed

18 It is not practically possible to ascertain the accurate amount involved in above appeals. However the estimated amount of

64

Income Tax income is Rs.4977.00 lakhs approx. The Bank has already paid the tax on above amount (except demand of Rs. 1460 Lakhs for the assessment year 2002-03 on the income of Rs. 3600 Lakhs) and it is likely that the above appeals will be decided in the favour of the Bank and the tax paid should be converted into refund.

3. Statement Of Suit Filed/Complaints Lodged Against The Bank In Various Courts Position As On 31.03.2005 Involving Claim Amount Of Rs. 5.00 Lac & Above (Rs. In Lakhs)

Region Name No. Of Cases Claimed Amount

Margin Security

Amount Of Loss

Provision Held

Bhilwara 1 5.00 0.00 0.00 0.00 Bikaner 0 0.00 0.00 0.00 0.00 Mumbai 4 128.93 5.00 43.17 19.60 Delhi 17 7482.03 0.00 155.65 11.37 Jaipur 4 63.53 0.00 0.26 0.28 Jodhpur 3 166.96 0.00 0.00 0.00 Indore 1 21.48 0.00 0.00 0.00 Udaipur 1 37.34 0.00 0.00 0.00 Kota 0 0.00 0.00 0.00 0.00 Total 31 7905.27 5.00 199.08 31.25

Other Material Information

There are no material changes and commitments, affecting the financial position of The Bank.

X RISK FACTORS ENVISAGED BY THE MANAGEMENT AND PROPOSALS TO ADDRESS SUCH RISKS

INTERNAL RISK FACTORS

1. There are litigations in which The Bank is involved. A brief description of the same is in the table below. For details please refer to page no -------- of this Information Memorandum.

S. No.

Brief Description No. of cases

Amount involved (Rs. In lac)

1 Suits filed by The Bank against defaulting borrowers (including decreed a/cs)

3553 63130.32

2. Appeals filed by The Bank on disputed income tax 18 4977 (approx.) 3 Suits against The Bank which are not treated as

debts 162 7901.80

4 Suits filed by the shareholders 30 - 5 Criminal case against the bank & the directors 1

65

2. As on 31.03.2005, Rs. 15918.18 Lakhs classified as impaired loans out of which Rs. 881.20 Lakhs is sub-standard (A substandard asset is one which has been classified as NPA for a period not exceeding 18 months) and Rs. 13059.22 Lakhs is doubtful (A doubtful asset is one which has remained NPA for a period exceeding 18 months) and Rs. 1977.76 Lakhs is loss assets (A loss asset is one where loss has been identified by The Bank or its internal auditors or external auditors or RBI inspection). The net NPA positions as on 31.03.2002, 31.03.2003, 31.03.2004 and 31.03.2005 are 8.86%, 6.80%, 2.99% and 2.50% respectively of the net advances. A decreasing trend in the NPA has been exhibited over the recent years.

Management Proposal to address the Risk The bank has given thrust for the recovery of Non Performing Assets and arresting the growth of fresh Non Performing Assets. The strategies for reducing the NPA levels are given in detail on page number --------- of the Information Memorandum.

3. The lending risk involves inability or unwillingness of a customer or counter party to meet the commitments in relation to lending and other financial transactions.

Management Proposal to address the Risk The Bank has a structured credit appraisal system and lending norms. The Bank takes adequate care to minimise the risk by having a diversified portfolio and fixing lending limits to sensitive sectors.

4. In terms of RBI guidelines, the Bank is required to create an Investment Fluctuation Reserve equivalent to 5% of its investment portfolio of its investments in the categories “held for trading “ and “ available for sale” over five years period beginning from financial year 2001-02. The Bank has so far created a reserve of Rs. 56.80 crores (including Rs. 47.90 crores upto the previous year) which is 4% of the investment portfolio (excluding securities under Held to Maturity category) as on March 31, 2005.

5. Market Risks

Increased interest rate volatility exposes BoR to market rate risk arising out of maturity/ rate mismatches.

Management proposal to address the Risk: Risks arising from interest rate volatility are inherent to the business of financial intermediation and lending. However, the Bank has put in place a system of regular review of lending and deposit rates in order to minimise the interest rate risk. The Asset Liability Management Committees of the Bank reviews the risk on a regular basis. Continuous Risk Management measures are initiated depending upon the movement in the market interest rates. The movement in the interest rates is closely monitored for appropriate action. For more details on the Risk Management procedures, investors are advised to refer to para ‘Risk Management’ mentioned elsewhere in this Information Memorandum.

6 Credit Rating

Bank has obtained credit rating of ‘CARE A-’ (Single A minus) from Credit Analysis & Research Limited and ‘ICRA Ltd. LA-‘(single A minus) for an amount of Rs. 70 crores for its issue of Tier-II Bonds. Instruments with this rating are considered upper medium grade instruments and have many favourable investment attributes. Safety for principal and interest are considered adequate. Assumptions that do not materialize may have a greater impact as compared to the instruments rated higher.

Management proposal to address the Risk: Investors may please note that, the rating is not a recommendation to buy, sell or hold securities and investors should take their own decision. The rating may be subject to revision, suspension or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating. The ratings obtained are subject to revision at any point of time in the future. The Rating agency has the right to suspend, withdraw or revise the rating at any time on the basis of new information etc.

7 Contingent Liabilities

As on March 31, 2005 the contingent liabilities of the Bank were at Rs 90,402.80 Lakhs (comprising claims against the Bank not acknowledged as debts Rs. 8,499.96 Lakhs, liability on account of outstanding forward exchange contracts

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Rs. 43,040.38 Lakhs, guarantees on behalf of constituents in India Rs. 21,860.62 Lakhs, acceptances, endorsements and other obligations Rs. 15,540.20 Lakhs and others Rs. 1,461.64 Lakhs).

Management proposal to address the Risk: The contingent liabilities have arisen in the normal course of business of the Bank and are according to the prudential norms prescribed by RBI.

8 Non Performing Assets (NPAs)

As on 31.03.2005, the net NPAs of the Bank stood at Rs. 7,225 lakhs or 2.50% of its net advances. In the event of non-recovery of these assets, the Bank may have to provide for these NPAs, which might affect the profitability of the Bank in future.

Management proposal to address the Risk: The Net NPAs of the Bank have reduced from 2.99% in 2004 to 2.50% in 2005. The Bank has provided for its NPAs in conformity with RBI guidelines and is taking steps to reduce the proportion of non-performing assets through aggressive recovery drives combined with improved risk management practices. Further, there have been substantial changes in the legislative and operating environment enabling FIs and Banks to pursue recovery of over-dues. Besides Debt Recovery Tribunal (DRT) set up for faster settlement of recovery litigation, GoI has enacted ‘The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’ enabling FIs and Banks to securities and reconstruct financial assets and enforce security more effectively. Reserve Bank of India has formulated detailed guidelines for operation of the scheme. The Bank has made provisions for its NPAs over and above the minimum prescribed by the RBI with a view to enhance the financial strength of the Bank.

9 Utilization of Funds

The utilization of the funds proposed to be raised through this private placement is entirely at the discretion of the Bank and no monitoring agency has been appointed to monitor the deployment of funds.

Management proposal to address the Risk: The funds raised through this private placement are not meant for any specific project and hence a monitoring agency may not be required. The Bank is managed by professionals under the supervision of its Board of Directors. Further, the Bank is subject to a number of regulatory checks and balances as stipulated in its regulatory environment. Therefore, the management believes that the funds raised via this private placement would be utilised only towards satisfactory fulfillment of the ‘Objects of the Issue’ mentioned elsewhere in this Information Memorandum.

External Risk Factors 10. Regulatory restrictions on The Bank and limitations of the powers of bondholders of The Bank

There are a number of restrictions as per The BR Act, which impede flexibility of The Bank’s operations and affect / restrict investors’ right. These are as under:

I. In terms of Section 8 of The BR Act, The Bank is prohibited from doing trading activity, which may act as an

operational constraint.

II. In terms of Section 17(1) of The BR Act, every banking company shall create a Reserve Fund and shall, out of the balance of profit of each year as disclosed in the Profit & Loss a/c prepared under Section and before any dividend is declared, transfer to the Reserve Fund a sum equivalent to not less than twenty percent of such profit.

III. In terms of Section 19 of The BR Act, there are some restrictions on The Banking companies regarding opening of subsidiaries which may deny The Bank from exploiting emerging business opportunities.

IV. In terms of Section 23 of The BR Act, there are certain restrictions on The Banking companies regarding opening of new place of business and transfer of existing place of business, which may hamper the operational flexibility of The Bank.

V. In terms of Section 25 of The BR Act, each banking company has to maintain assets in India which is not less than

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75% of its demand and time liabilities in India which in turn may prohibit The Bank from creating overseas assets and exploiting overseas business opportunities.

VI. There are restrictions in The BR Act regarding,

a) Management of a bank including appointment of directors. b) Borrowings and creation of floating charge. c) Expansion of business, as the branches need to be licensed. d) Disclosures in the profit & loss account and balance sheet. e) Production of documents and availability of records for inspection by shareholders. f) Reconstruction of banks through amalgamation. h) Maintenance of a percentage of Assets in Unencumbered approved Securities

VII. No banking company shall pay any dividend on its shares until all its capitalised expenses (including preliminary,

organisational expenses, share selling commission, brokerage, amounts of losses and any other item represented by tangible assets) have been completely written off.

11. Sensitivity to the economy and extraneous factors The Bank’s performance is highly correlated to the performance of the economy and the financial markets. The health

of the economy and the financial markets in turn depends on the domestic economic growth, state of the global economy and business and consumer confidence, among other factors. Any event disturbing the dynamic balance of these diverse factors would directly or indirectly affect the performance of The Bank including the quality and growth of its assets.

Management Proposal to Address the Risk The Bank’s performance is highly correlated to the performance of the

economy and the financial markets. The health of the economy and the financial markets in turn depends on the domestic economic growth, state of the global economy and business and consumer confidence, among other factors. Any event disturbing the dynamic balance of these diverse factors would directly or indirectly affect the performance of the Bank including the quality and growth of its assets.

12. Competition from existing and new commercial banks Competition in the financial sector has increased with the entry of new players and is likely to increase further as a

result of further deregulation in the financial sector. The Bank may face competition both in raising resources and in deploying them.

Management Proposal to Address the Risk The Bank has an established broad based presence and has been taking

steps to enhance customer satisfaction by upgrading skills, systems and technology to meet such challenges. The Bank is attempting to add quality assets on competitive terms. The Bank is also taking steps to broad base its product bouquet with a special emphasis on enhancement in the non-fund based income. On the resource mobilisation front, The Bank is actively endeavouring to broaden its reach and raise resources through its network of 398 outlets in India. .

13. Changes in Regulatory Policies Major changes in Government/RBI policies relating to banking sector may have an impact on the operations of The

Bank. Management Proposal to Address the Risk The policy changes may provide both opportunities and challenges for

The Bank. The Bank has a long presence in The Banking sector, for more than 60 years and does not perceive policy changes to be a major threat.

14. Disintermediation in the Financial Markets: Development of capital markets may result in disintermediation by current and potential borrowers whereby many

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companies may access the markets directly, thereby reducing their dependence on the banking system.

Management Proposal to Address the Risk Disintermediation brings with it the opportunity for the Bank to expand its fee-based activities The Bank has been proactive and has increased its thrust on businesses such as Treasury, Investment, Cash Management and Foreign Exchange. Also, The Bank has, in recent years, launched several retail lending schemes and value added products so as to broaden its borrower base Due to its diversified services, The Bank is confident of facing any disintermediation effectively

15. Forex Risk Exchange Rate fluctuations may have an impact on The Bank’s financial performance. Management Proposal to Address the Risk As per RBI guidelines, banks are required to frame guidelines covering

all the risks related to foreign exchange operations, duly approved by their Board of Directors. This includes limits on net open exchange position which is also approved by the Reserve bank of India.

The Bank, has prescribed internal control guidelines for foreign exchange operations and net open positions and kept

well below the prescribed limits. As such the risk from exchange rate fluctuations is minimised and kept under control.

16. Interest Rate Risk Interest rate volatility exposes The Bank to an interest rate risk or market risk. Such interest rate risk has a potential

impact on net interest income or net interest margin as well as on the market value of the fixed income securities held by The Bank in its investment portfolio.

Management Proposal to Address the Risk These risks are inherent in The Banking business. However, The Bank

has put in place a system of regular review of lending and deposit rates in order to minimise the interest rate risk. The Asset Liability Management Committees of The Bank reviews the risk on a regular basis. Continuous Risk Management measures are initiated depending upon the movement in the market interest rates. The movement in the interest rates is closely monitored for appropriate action.

17. Operational Risk Operational risk is a result of failure of operating system in a bank due to certain reasons like computer break-ins,

power disruptions, fraudulent activities, natural disaster, human error or omission or sabotage. Management Proposal to Address the Risk For managing operational risk, The Bank has laid down well-defined

systems and procedures. The Bank has also in place a strong internal inspection and audit system. The Bank has an effective human resources department, which formulates and monitors delegation of duties and responsibilities at different levels.

18. Financial Statements in the Information Memorandum The financial statements and derived ratios there from contained in the Information Memorandum are prepared /

computed as per the permissible accounting practices. While due care has been taken to reflect the true economic reality regarding the financials of The Bank as far as possible, the investors may want to make their own adjustments to the same before arriving at an investment decision in The Placement.

Management Proposal to Address the Risk The financial statements and the derived ratios have been prepared in conformity to the extant guidelines and the same have been certified by the statutory auditors of The Bank. The Bank is also governed by the prudential norms of RBI for income recognition, NPA provisioning etc.

NOTES • Net worth of The Bank as on 31.03.2005 is Rs. 32869.00 Lakh (excluding revaluation reserves) and the size of The

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Placement is Rs. 7,000 Lakhs (Rs. 2,000 Lakhs including greenshoe option)

• Book Value per share as on 31.03.2005 is Rs. 30.56

• The present Private Placement of Bonds by The Bank consists of Coupon being 8.70% p.a for a tenor of 112 months and 8.50% for tenor of 88 months.

• As per Section 12(2) of BR Act, “no person holding shares in a banking company shall, in respect of any shares held by him, exercise voting rights on poll in excess of ten percent of the total voting rights of all shareholders of the banking company “.

• The Bank has no subsidiary/group company.

• The financial information as contained in PART II including the notes to accounts, significant accounting policies as well as auditors’ qualifications has been duly certified by the statutory auditors of The Bank. As far as possible, these audited numbers have been used for computation or derivation of other financial information contained in the Information Memorandum. However, such other financial information contained in the Information Memorandum except as contained in PART II has been certified by the management of The Bank.

XI DISCLOSURE ON INVESTOR PROTECTION AND GRIEVANCE REDRESSAL SYSTEM The Bank has qualified and experienced staff in its secretarial department that closely monitors complaints attends to

and resolve the complaints of its Shareholders. It seeks to ensure that complaints are minimal and that all complaints are resolved satisfactorily. The Bank closely monitors the action taken in disposing the complaints received from investors and ensures that the grievances are redressed within one week of receipt of the complaints.

Complaint letters should be either type written or legibly hand written quoting Folio number, application number, number of equity shares applied for, name and address of the first applicant, name and address of The Bank, Branch where application was submitted with date thereof, and the date of receipt by the Bank in case application was sent by Post.

All Complaints / Grievances should be addressed to the Company Secretary and Compliance Officer of The Bank :

Mr. D K Jain Company Secretary The Bank of Rajasthan Limited Corporate Office Raghuvanshi Mills Compound, 11/12, Senapati Bapat Marg, Lower Parel (west), Mumbai – 400 013 Tel. No. -91-22 – 3040 0006 Fax no. - : 91-22-3040 0019 Email – sect_board@rajbank.com

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PART II

GENERAL INFORMATION

Consents

Consents in writing of the Auditors, Compliance Officer, Trustee and Registrars to the Placement to act in their respective capacities have been obtained and such consents have not been withdrawn up to the time of delivery of the Information Memorandum to the said Stock Exchange. The Auditors of the company have given their written consent to the inclusion of their Report in the form and context in which they appear in the Information Memorandum. Such consents and reports have not been withdrawn up to the time of delivery of the Information Memorandum.

Rights of Bondholders in the present issue

The Bondholders are entitled to receive Interest and Principal repayment on due date.

Changes in Directors of The Bank of Rajasthan Limited during the last three years

Changes in the Board of Directors during the last three years & during current year along with the dates of appointment/resignation and reasons thereof.

Name of the Director Date of Appointment

Date of Change

Remark

Sh. H. R. Khan – RBI Nominee

09.04.1999 09.05.2002 Ceased in terms of RBI order

Sh. P. Aravind 09.05.2002 18.07.2003 Ceased in terms of RBI order Sh. Navin Kumar Tayal 24.03.2000 26.03.2002 Resigned Sh. A. K. Pandya 20.04.2000 31.12.2002 Ceased in terms of RBI order Sh. A. K. Pandya 10.02.2003 14.08.2004 Appointed by RBI Sh. Radhe Shyam 18.07.2003 14.08.2004 Appointed by RBI Sh. R. C. Mehta 31.10.2000 29.07.2003 Retired on completion of term Sh. Akshey K. Gupta 29.04.2004 01.12.2005 Expired Sh. K. M. Bhattacharya 15.05.2000 21.05.2004 Ceased on expiry of term Mr. Deepak Saruparia 8.12.1998 30.08.2004 Resigned Mr. P. K. K. Krishnan 14.08.2004 29.11.2005 Ceased in terms of RBI orders Mr. S. K. Mishra 14.08.2004 07.04.2005 Expired Mr. Amarnath 09.06.2005 29.11.2005 Ceased in terms of RBI orders Mr. B M Sharma 18.11.2004 - Appointed

Change in Management of companies where the promoters hold a controlling stake There is no major change in management of companies where promoters hold a controlling stake

Expert Opinion Save as stated else where in the Information Memorandum, the company has not obtained any other expert opinion.

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Change in Auditors in last three years

Sr. No.

Name of the Auditors Reasons for change / Remarks

2. M/s. Chokshi & Chokshi, Chartered Accountants, Mumbai

Appointed for the year 2003-2004 for their first term. Continued for FY 2004-05 and FY 2005-06

3. M/s. T. R. Chadha & Co., Chartered Accountants, New Delhi

M/s. T. R. Chadha & Co., Chartered Accountants, New Delhi had completed 4 years tenure in the year 2002-2003 and in terms of RBI guidelines could not be re-appointed.

4. M/s. Khanna Annandhamam, Chartered Accountants, New Delhi

Appointed as the Bank’s Co-Statutory Central Auditors for the year 2002-2003

Interest of Directors of the Company

The Directors of the Company are interested to the extent of Sitting Fees they are entitled based on the Board and Committee meetings attended by them and to the extent of their shareholding in the company. None of the Directors / Relatives are holding any shares of the Company or is entitled to any Commission / Remuneration other than those mentioned in Notes to Capital Structure. Procedure and time schedule for allotment of Debentures

Debentures would be allotted by Board of Directors of the company and Letter of Allotment would be credited in Demat form within seven days from date of allotment. Letter of Allotment will be converted into NCD within the time limit prescribed under the Companies Act, 1956.

. INVESTOR GRIEVANCE & REDRESSAL SYSTEM

The Shareholders / Investors Grievance is constituted to specifically look into the redressing of all Shareholder and investors complaints like transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends etc.

The Bank has qualified and experienced staff in its secretarial department that closely monitors complaints attends to and resolve the complaints of its Shareholders. It seeks to ensure that complaints are minimal and that all complaints are resolved satisfactorily. The Bank closely monitors the action taken in disposing the complaints received from investors and ensures that the grievances are redressed within one week of receipt of the complaints.

Complaint letters should be either type written or legibly hand written quoting Folio number, application number, number of equity shares applied for, name and address of the first applicant, name and address of The Bank, Branch where application was submitted with date thereof, and the date of receipt by the Bank in case application was sent by Post.

All Complaints / Grievances should be addressed to the Company Secretary and Compliance Officer of The Bank :

Mr. D K Jain Company Secretary The Bank of Rajasthan Limited Corporate Office Raghuvanshi Mills Compound, 11/12, Senapati Bapat Marg, Lower Parel (west), Mumbai – 400 013 Tel. No. -91-22 – 3040 0006 Fax no. - : 91-22-3040 0019

Email – sect_board@rajbank.com

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XII FINANCIAL INFORMATION – A REPORT BY THE AUDITORS

REPORT ON CERTIFICATION OF INFORMATION/DATA COMPILED

FOR THE PURPOSE OF RAISING TIER-II CAPITAL

The Board of Directors The Bank of Rajasthan Ltd. Clock Tower UDAIPUR Sirs, In terms of the appointment for the purpose of certification of the Statement of Accounts to be incorporated in the Information Memorandum proposed to be issued by the Bank in connection with the Private Placement of 700 Unsecured, Non-Convertible, Redeemable, Subordinated Bonds (Tier II Bonds) of face value of Rs.10 lacs each for cash aggregating Rs. 70 crores, we state as follows :

A. We have relied upon the Audited accounts of the Bank for the five consecutive financial years ended on 31/03/2005, being the last date upto which the accounts of the Bank have been made up and audited by the Auditors of the Bank of those respective years and unaudited financial statements for the half year ended 30th September 2005 subjected to limited review by statutory auditors, the audited financial statements of Rajasthan Bank Financial Services Ltd.(31st March, 1999 to 31st March,2003 ) and all related information/data as furnished by the Bank. Our certification is based on the audited data only and our procedures do not constitute either an audit or a review made in accordance with generally accepted accounting standards in India or a conformity to the origin of the said data or information.

B. The aforesaid financial statements have been prepared in accordance with the guidelines issued by the Reserve Bank of India from time to time and are subject to the disclosures required under the Banking Regulations Act 1949.

In accordance with the requirements of Clause B of Part II to Schedule II of the Companies Act, 1956 and SEBI (Disclosure and Investors Protection) Guidelines, 2000, we have examined the following:

1. The audited Profit & Loss Account of The Bank of Rajasthan Ltd. for the five financial years ended 31st March,

2005 and the unaudited Profit & Loss Account for the half year ended 30th September 2005, subjected to Limited Review by the statutory auditors of the Bank (Annexure I) and the Statements of Assets and Liabilities (Balance Sheets) of The Bank of Rajasthan Ltd. as at the end of the respective years / period and the unaudited Balance Sheet for the half year ended September 30, 2005 subjected to limited review by the statutory auditors of the Bank (Annexure II).

2. The significant accounting policies for the year 2004-05 (Annexure III), Notes Attached to and Forming Part of

The Profit & Loss Account for the Year 2004-05 and Balance Sheet as on 31 March 2005 (Annexure IV),.Auditors report to the members of the Bank of Rajasthan Ltd. for the year 2004-2005 (Annexure V), significant changes in accounting policies during the last five financial years (Annexure VI), auditors’ qualifications in respect of which no adjustment could be carried out as the consequential effects could not be ascertained, for the five financial years ended 31st March, 2005 (Annexure VII), audited profit and loss account and the statement of assets and liabilities (Balance sheet) for the five financial years of the subsidiaries of Bank of Rajasthan Ltd. (Annexure VIII).

We further report that the dividends declared by The Bank of Rajasthan Ltd. in respect of five consecutive financial years ended 31st March, 2005 are set out in (Annexure IX) enclosed.

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We have also examined, i. The accompanying statements of key Accounting Ratios for five consecutive financial years ended 31st March, 2005

(Annexure X), ii. Details of unsecured loans as on 31st March 2005 (Annexure XI),

iii. Details of other income for the last five consecutive financial years ended 31st March, 2005 (Annexure XII) iv. Details of Investments as on 31st March 2005 (Annexure XIII). v. Statement of Capitalisation as on 31/03/2005 (Annexure XIV).

vi. Tax Shelter Statement for five consecutive financial years ended 31st March, 2005 (Annexure XV). vii. Contingent Liabilities statement as on 31st March 2005 (Annexure XVI),

And subject to the consequential effect for non-adjustment of qualifications as detailed in Annexure VII, in our opinion these have been correctly computed.

For CHOKSHI & CHOKSHI Chartered Accountants (Partner) Membership No. Place : Mumbai Date : December 23, 2005

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Annexure I THE BANK OF RAJASTHAN LTD. Audited (adjusted) Profit & Loss Account for Last Five Financial Years & Unaudited Profit & Loss Account for the six months (half year ) ended September 30, 2005

Financial Year ended March 31, (Rs.in crores) Particulars 2001 2002 2003 2004 2005 Half Year

ended 30.09.05

Income Interest Earned 442.43 452.59 472.67 502.86 522.35 258.45 Interest and Discount on Advances/Bills 219.90 219.73 211.78 197.35 228.97 110.19 Income on Investments 177.52 190.11 231.62 281.11 249.39 104.97 Interest on Balances with RBI and other inter-bank Funds 33.42 38.66 22.08 24.26 42.03 40.53 Others 11.60 4.08 7.19 0.15 1.96 2.76 Other Income 56.48 97.22 126.42 177.01 63.76 13.73 Commission, Exchange & Brokerage 23.96 20.00 22.65 22.19 27.75 18.94 Profit on Exchange Transactions (Net) 3.23 4.03 4.69 4.77 6.13 2.61 Profit on Sale of Investments (Net) 10.28 56.60 83.77 128.04 7.82 (20.17) Profit on Sale of Land, Building & Other Assets (Net) -0.38 -0.16 -0.07 -0.05 (0.13) 0.08 Profit/Loss on revaluation of investments 0.00 0.00 0.00 0.00 0.00 0.00 Income Earned by way of Dividends etc. 0.23 0.50 0.00 0.00 0.00 0.00 Miscellaneous Income 19.16 16.25 15.39 22.06 22.19 12.27 Total Income 498.91 549.81 599.09 679.87 586.11 272.18 Expenditure 444.20 468.39 450.51 494.57 503.66 258.51 Interest Expended 309.30 323.32 291.83 313.02 308.91 153.96 Interest On Deposits 306.95 319.83 287.30 308.63 299.83 148.30 Interest On RBI/Inter-Bank Borrowings 0.33 0.31 1.79 0.93 1.69 0.91 On Others 2.03 3.18 2.74 3.46 7.39 4.75 Operating Expenses 134.90 145.07 158.68 181.55 194.75 104.55 Payments to and Provisions for employees 86.60 94.06 103.82 116.23 120.66 66.59 Rent, Taxes & Lighting 10.00 12.07 13.29 14.29 17.35 8.95 Insurance 2.44 1.75 2.69 3.00 5.01 3.60 Printing & Stationery 1.35 1.65 2.42 2.63 2.69 1.19 Advertisement and Publicity 0.82 0.88 0.94 1.05 2.43 1.61 Postage, Telegrams, Telephones etc. 2.14 3.81 4.22 4.84 5.48 2.18 Repairs & Maintenance 0.94 1.60 4.05 4.62 4.96 2.66 Law Charges 2.27 2.96 3.84 4.76 3.10 1.35 Directors' Fees, Allowances and Expenses 0.12 0.12 0.15 0.21 0.19 0.13 Auditors Fees & Expenses (Including Branch Auditors Fees and expenses) 0.40 0.50 0.55 0.43

0.48 0.17

Other Expenditure 12.63 14.20 13.68 17.66 20.03 9.47 Depreciation on Bank's Property ( Netoff depreciation on revaluation reserve ) 15.17 11.46 9.03 11.85 12.37 6.65 Total Expenditure 444.20 468.39 450.51 494.57 503.66 258.51

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Particulars 2001 2002 2003 2004 2005

Half Year ended

30.09.05 Gross Profit before provision for Tax and Extraordinary items 54.71 81.42 148.58 183.52 82.45 13.67 Less:- Extraordinary Items (-) 1.78 Gross Profit before provision for Tax 54.71 81.42 148.58 185.30 82.45 13.67 Less: Provision and Contingencies ** 25.49 41.10 80.16 116.26 47.44 3.20 Net Profit for the year 29.22 40.31 68.42 69.04 35.01 10.47

Balance of Profit / Loss brought forward -147.43 -128.27 0.47 7.55 1.22 3.16 TOTAL -118.21 -87.96 68.90 76.59 36.23 13.63 Add-Amount transferred from Revenue & Reserve 0.00 119.71 0.00 0.00 0.00 0.00

Less : Tax adjustments of earlier year 0.00 -3.90 0.00 0.00 0.00 0.00

Leave encashment of earlier years 0.00 -14.80 0.00 0.00 0.00 0.00 Profit / Loss Available for Appropriation -118.21 13.05 68.90 76.59 36.23 0.00 APPROPRIATIONS 0.00 Transfer to Statutory Reserve 8.06 10.08 17.11 17.26 8.76 0.00 Transfer to Investment Fluctuation Reserve 2.00 2.50 16.80 26.60 8.90 0.00 Transfer to Revenue & Other Reserve 0.00 0.00 5.20 7.24 1.92 0.00 Proposed Dividend + Tax on Dividend 0.00 0.00 22.24 24.27 13.49 0.00 Balance of Profit / Loss carried forward -128.27 0.47 7.55 1.22 3.16 13.63

TOTAL -118.21 13.05 68.90 76.59 36.23 13.63

** Details of provisions and contingencies debited to P & L a/c Financial Year ended 31st March 2001 2002 2003 2004 2005 Half Year

ended 30.09.05

Bad Debts written off/Provision made towards NPA 25.36 24.32 27.87 76.73 -62.73 5.48 Provision for depreciation on investment (Incl. Matured Securities) 0.88 2.74 5.56 11.81 63.93 4.19 Provision for Standard Assets

0.30 0.16 0.72 0.00 1.16 -0.54 Excess Provision for depreciation on Investments 0.00 0.00 0.00 0.00 - - Adhoc General Provision for 90 days delinquency norms 0.00 0.50 2.00 0.00 - - Provision towards sacrifice of interest in restructured standard and substandard A/cs 0.00 0.27 1.20 -0.06 1.07 -0.54 Others -2.49 0.13 0.37 0.22 27.42* 0.43 Total 24.06 28.12 37.72 88.71 30.85 9.02 Provision for taxes (inclusive of deferred tax) 1.43 12.98 42.44 27.55 16.59 -5.82 Total Provision & Contingencies 25.49 41.10 80.16 116.26 47.44 3.20

* Including provision of Rs. 27.00 crore for arrears of wage revision.

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Adjustment resulting from Audit qualification, material amounts relating to adjustments of previous years and changes in Accounting policies : For the year 2000-01 the auditors have given qualification for depreciation on computers as per Accounting Standard (AS)-6 Depreciation Accounting for Rs. 3.00 crores, the depreciation was subsequently provided during the year 2001-02, accordingly adjustment has been done in the year 2000-01and 2001-02.Auditors qualification in respect of which adjustments could not be carried out Refer Annexure -VII.

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THE BANK OF RAJASTHAN LTD. Annexure II Statement of Assets & Liabilities (Balance Sheet) for Last Five Years (adjusted) & Unaudited Assets & Liabilities for the half year ended September 30, 2005 (Rs. in core) Financial Year ended as on March 31, 2001 2002 2003 2004 2005 Half Year

Ended 30.09.05

Assets Cash in Hand (including foreign currency notes) 50.21 44.02 63.23 89.73 103.33 76.11 Balances with RBI in Current Account 373.05 308.93 315.42 236.20 247.17 257.43 Balances with Banks and Money at Call & Short Notice in India 280.55 356.28 622.31 1005.51 2096.85 2129.66 Balances with Banks and Money at Call & Short Notice outside India 1.02 9.63 6.14 44.33 2.02 10.05 Total Balances with Banks and Money at Call & Short Notice 281.57 365.92 628.45 1049.84 2098.87 2139.71 Investments in India 1568.97 1883.68 2642.55 4457.40 3514.67 2507.06 Investments outside India 0.00 0.00 0.00 0.00 0.00 0.00 Total Investments 1568.97 1883.68 2642.55 4457.40 3514.67 2507.06 Advances in India 1859.17 1955.96 2221.24 2332.58 2896.17 2672.96 Advances outside India 0.00 0.00 0.00 0.00 0.00 0.00 Total Advances 1859.17 1955.96 2221.24 2332.58 2896.17 2672.96 Fixed Assets * 48.84 38.82 57.46 78.39 103.41 105.26 Other Assets 128.35 183.21 178.58 187.54 169.03 181.94 Total (A) 4310.16 4780.54 6106.94 8431.68 9,132.65 7940.47 * Net of Revaluation Reserves Liabilities Demand Deposits from Banks 24.12 20.09 16.49 29.48 41.75 19.64 Demand Deposits from Others 656.21 734.84 815.71 901.94 1099.48 986.17 Savings Deposits 793.95 944.32 1079.14 1273.35 1517.22 1698.55

Term Deposits From Banks 77.89 75.13 577.56 1523.02 1570.48 728.11 From Others 1981.04 2185.61 2810.35 3911.14 3891.38 3632.62 Total Deposits 3533.22 3959.98 5299.24 7638.93 8120.31 7065.09 Borrowings in India 17.04 29.34 17.03 132.60 158.56 95.27 Borrowings outside India 0.84 0.63 0.18 43.72 48.59 7.76 Total Borrowings 17.88 29.96 17.21 176.32 207.15 103.03 Other Liabilities & Provisions ( Includes Subordinate Debts) 606.71 579.75 527.86 309.27 476.50 433.19 Total (B) 4157.81 4569.70 5844.31 8124.52 8803.96 7601.31 Net Assets ( C=A-B) 152.35 210.85 262.63 307.16 328.69 339.16 Represented by Particulars 2001 2002 2003 2004 2005 Capital (D) 100.37 100.37 105.97 107.57 107.57 107.57 Reserves & Surplus Statutory Reserve 57.31 67.39 84.50 101.76 110.52 110.52

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Capital Reserve 0.27 0.28 0.26 0.27

1.29 1.29

Share Premium 37.85 37.85 37.85 37.85 37.85 37.85 Revenue & Other Reserves 84.83 4.97 34.05 59.71 71.46 81.93 TOTAL 180.25 110.48 156.67 199.60 221.12 231.59

Less: Accumulated Losses 128.27 0.00 0.00 0.00 0.00 0.00 Net Reserve & Surplus(Total E) 51.98 110.48 156.67 199.60 221.12 231.59

Total(D+E) 152.35 210.85 262.63 307.16 328.69 339.16 Note:- For the year 2000-01 the auditors have given qualification for depreciation on computers as per AS-6 for Rs. 3.00 crores, the depreciation was subsequently provided during the year 2001-02, accordingly adjustment has been done in the year 2000-01and 2001-02.Auditors qualification in respect of which adjustments could not be carried out Refer Annexure -VII. Contingent Liabilities & Bills for Collection As on March 31st 2001 2002 2003 2004 2005 Claims against the Bank not acknowledged as Debts 78.48 81.64 87.83 85.74 85.00 Liability for partly paid Investment 0.00 0.00 0.00 0.00 0.00 Liability on account of outstanding Forward Exchange Contracts 91.89 265.57 141.17 316.09 430.40 Guarantees given on behalf of constituents 92.25 101.02 170.22 180.72 218.61 Acceptance, endorsements and other obligations 82.03 122.22 138.20 97.69 155.40 Other items for which the Bank is contingently liable 31.25 15.92 6.66 10.23 14.62 Bills for Collection 331.36 358.96 550.51 778.19 409.39 TOTAL 707.26 945.32 1468.67 1094.59 1313.42

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Annexure III

SIGNIFICANT ACCOUNTING POLICIES FOR THE YEAR 2004- 2005

Accounting Conventions:

The financial statements have been prepared on the historical cost basis, as modified by the revaluation of premises and conform to statutory provisions & generally accepted accounting practices prevailing within the banking industry in India.

Investments: In accordance with the Reserve Bank of India (RBI) guidelines, investments are classified into “Held for Trading ”, “Available for Sale” and “Held to Maturity” categories. These are further identified into Performing and Nonperforming as per Income Recognition, Asset Classification & Provisioning norms of Reserve Bank of India. However, for disclosure in the balance sheet, these are classified under six groups, as per Schedule 8 of the Balance Sheet. Basis of Classification:

Classification of an Investment is done at the time of purchase into following categories: a) Held to Maturity These comprise of investments which the bank intends to hold till maturity. b) Held for Trading

Securities which are held for resale within 90 days from the date of purchase. c) Available for Sale Investments which cannot be classified in the above two categories. Transfer of Securities between categories:

The transfer / shifting of securities between the three categories of Investments is accounted at the lower of acquisition cost/ book value / market value on the date of transfer and the depreciation, if any, on such transfer is fully provided for. Valuation: The valuation of investments is made in accordance with the Reserve Bank of India guidelines. Held to Maturity The investments classified under this category are valued at acquisition cost. The excess of acquisition cost/ book value over the face value is amortised over the remaining period of maturity. Available for Sale Investments under this category are valued scrip-wise and net depreciation in each classification of securities is provided for while the net appreciation in each classification of securities is ignored.

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Held for Trading Investments under this category are valued scrip-wise on monthly basis and net depreciation under each classification is provided for, without adjusting the book value of the securities. However, unrealized gain on such valuation is ignored. Revenue Recognition a) Dividend on equity and preference shares is recognized as income when the right to receive the dividend is established and income from units of mutual fund is accounted on cash basis in line with the RBI guidelines. b) The profit or loss on sale/redemption of investments is taken to the Profit and Loss Account. However, in case of profit on sale / redemption of investments from “Held to Maturity” category, an equivalent amount is appropriated to the “Capital Reserve”. c) In respect of securities included in any of the three categories of investments where interest/principal is in arrears for

more than 90 days, income is not reckoned and appropriate provision for the depreciation in the value of the investments is made, as per prudential norms applicable to non-performing advances. The depreciation / provision requirement in respect of non-performing investments is not set off against the appreciation in respect of performing investments.

d) Brokerage, incentive, front-end fees, etc. received on purchase of securities are reduced from the cost of investments. e) Expenses such as brokerage, fees, commission or taxes incurred at the time of acquisition of securities is charged to revenue. Determination of Cost Cost of investments is determined on the basis of weighted average cost method. Investment Fluctuation Reserve Pursuant to the RBI Guidelines, profits are appropriated to ‘Investment Fluctuation Reserve’ as per management decision so as to build reserve at least equal to 5% of the investment portfolio (excluding securities under Held to Maturity category) over a period of five years beginning from financial year 2001-2002. Advances: Advances are classified as standard, sub-standard, doubtful or loss assets and provisions for losses are made on sub-standard, doubtful and loss assets as per the prudential norms of RBI as under: a) Sub-standard 10% b) Doubtful 100% of the unsecured portion plus 20% / 30% / 50%/ 60%/ 100% of the secured portion depending on the period for which the advance has remained doubtful. c) Loss Assets 100% Advances are net of unrealized interest on non performing advances, Bills Rediscounted, DICGC/ECGC claims received, provision made for non-performing advances. Provision in respect of standard advances made @ 0.25%, as per the guidelines of RBI, included under the head “Other Liabilities and Provisions” under the sub-head “Others (including provisions)”,.

81

Recognition of Income & Expenditure: Income and expenditure are generally recognized on accrual basis. In view of uncertainty of collection of income including in cases of non-performing advances and investments, consistent with accrual accounting, such income is accounted for only on realization. Interest on matured deposits is accounted for at the time of renewal of deposits. In accordance with the guidelines issued by the RBI prior period disclosures are made in respect of any item which exceeds one percent of the total income/total expenditure as accounted for in the profit and loss account. Fixed Assets/Depreciation:

Premises and other fixed assets are stated at historical cost except those premises, which are revalued. The appreciation on revaluation is credited to Capital Reserve. Depreciation attributable to the enhanced value is met out of Capital Reserve. Leasehold land is amortized over the period of lease.

Depreciation on ATMs is provided @ 33.33% on Straight Line Method basis. Depreciation on Computers (including softwares forming integral part of hardware) is provided @ 33.33% on straight-line method basis in accordance with the guidelines of RBI.

Depreciation on all Other Fixed Assets is provided on pro rata basis, as per straight-line method basis at the rates prescribed in Schedule XIV to the Companies Act, 1956. Non-Banking Assets Non-Banking Assets are shown at cost or market value whichever is lower. Foreign exchange transactions

Foreign currency assets and liabilities including outstanding forward exchange contracts, guarantees, acceptances, endorsements and other obligations are translated on the Balance Sheet date at the exchange rates notified by Foreign Exchange Dealers’ Association of India (FEDAI), as per the guidelines issued by Reserve Bank of India and the resultant gain/ loss is taken to revenue. Income and expenditure items are accounted at the exchange rates ruling on the date of transaction. Retirement Benefits For Employees Annual contribution to Gratuity, Pension Fund and provision for leave encashment are determined on the basis of actuarial valuation. The contributions to pension fund are made under a defined benefit scheme.

In respect of employees who have opted for Provident fund Scheme, a matching contribution is made by the Bank. Taxes on Income

The provision for tax for the year comprises of current tax liability computed in accordance with the applicable tax laws, appellate orders in favour of the Bank though contested by the tax department in some cases and opinion of experts and the deferred tax adjustment on account of timing differences between taxable income and accounting income. Net Profit

The net profit in the Profit & Loss Account is after considering provision for advances, depreciation in the value of investments, provision for taxation and other necessary provisions.

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Annexure IV

As at 31.03.2005

Notes Attached to and forming part of accounts for the year ended 31st March, 2005 Balancing of Books and Reconciliation :

Reconciliation of transactions in interbranch accounts is completed upto 31.3.2005 and adjustment of outstanding entries is in progress. Sundry and Suspense Accounts contain entries pending adjustment to appropriate head of accounts. The consequential effect of the above is not material. Investments : The book value of Investments held under the three categories, viz. Held to Maturity (HTM), Held For Trading (HFT) and Available for Sale (AFS) are as under :-

As at 31.03.2004 Held to Maturity (excluding under exempted category)

37.67% 13.70%

Held for Trading 0% 0% Available for Sale 62.32% 86.29% Exempted Category 0.01% 0.01%

Investments in Mewar Aanchalik Gramin Bank, a Regional Rural Bank (RRB) amount to Rs.4.73 crores (previous year Rs.4.73 crores). Out of this, Rs.0.35 crores (previous year Rs.0.35 crores) is included in Investments under “Held to Maturity” category and balance of Rs.4.38 crores (previous year Rs.4.38 crores) pending allotment of shares is included under “Other Assets”. As per RBI guidelines, no provision towards diminution in the value of investment in RRB has been made in the accounts. The Bank, as per the practice consistently followed, transfers securities, in respect of which, principal amount is due for redemption to overdue investments and in case where principal / interest is overdue for more than 90 days, investments is treated as NPA and provision for depreciation has been made in line with prudential norms of Reserve Bank of India. In terms of RBI guidelines, the Bank is required to create an Investment Fluctuation Reserve equivalent to 5% of its investment portfolio (excluding securities under Held to Maturity category) over five years period beginning from financial year 2001-02. The Bank has so far created a reserve of Rs.56.80 crores (including Rs.47.90 crores upto the previous year) which is 4% of the investment portfolio (excluding securities under Held to Maturity category). The Bank in the previous year had contributed to a trust as senior contributor for purchase of beneficial interest in secured home loan receivables (mortgage backed receivables) originated by another bank. The above are included in Investments under “Available For Sale” category amounting to Rs.83.84 crores (previous year Rs.99.05 crores) which hitherto were accounted as advances. As per RBI guidelines an amount of Rs.1.02 crores, being profit on sale of securiti es classified under ‘Held to Maturity’ category has been transferred to Capital Reserve. Results include Rs.26.61 crores on account of depreciation on certain Govt. securities transferred from AFS to HTM category in terms of one time measure as per RBI guidelines. The figures of the corresponding period are not comparable to that extent. Advances Advances given to units which have become sick, including those under nursing/ rehabilitation/restructuring program, and other advances classified as doubtful or loss, have been considered secured / recoverable to the extent of the estimated / realizable value of security carrying first/second charge based on assessment of value of properties/assets mortgaged and other data available with the Bank.

83

Prudential floating provision of Rs.1.31 crores (previous year Rs.54.41 crores) is held as at 31st March 2005 in excess of regulatory requirements. Fixed Assets : Fixed Assets possessed by the Bank are treated as “Corporate Assets” and are not “Cash Generating Units” as defined by AS 28 issued by the Institute of Chartered Accountants of India (ICAI). In the opinion of the Management, there is no impairment of Fixed Assets of the Bank.

Contingent Liability of Rs.904.03 crores disclosed in Schedule 12 includes an item of Rs.14.61 crores (previous year Rs.9.12 crores) representing tax liability for the assessment year 2002-03, which on the basis of legal advise is being disputed in appeal at various levels for which no provision has been made.

Bank in line with AS-22 on “Accounting for taxes on Income” issued by ICAI, has accounted for debit of Net Deferred Tax Assets amounting to Rs.15.47 crores (previous year credit of Rs.17.87 crores), which has been charged to Profit & Loss Account. The major components of Deferred Tax Assets and Deferred Tax Liabilities are as under :-

As at

31.3.2005 As at

Registration formalities are pending in respect of properties valued at Rs.5.30 crores (previous year Rs.5.69 crores). In accordance with Accounting Standard (AS) 26 on “Intangible Assets” issued by the Institute of Chartered Accountants of India (ICAI), operating and banking software, integral to banking business having book value of Rs.1.74 crores (previous year Rs.4.66 crores) is capitalized to computers subjected to depreciation and other software of non-integral nature amounting to Rs.0.01 crores (previous year Rs.0.02 crores) is charged off to Profit & Loss A/c. Taxation Matters Provision for income tax has been made after due consideration of decisions of the appellate authorities, advice of the counsel and legal opinions.

Particulars 31.3.2004

Deferred Tax Assets

Provision for bad and doubtful debts

7.05

39.62

Provision for Leave Encashment 6.88 6.09 Provision for Pension 17.40 13.49 Deferred Tax (wage revision) 9.09 -- TOTAL 40.42 59.20 Deferred Tax Liabilities Depreciation on fixed assets 6.00 4.85 Interest accrued but not due on Investment 6.93 11.39 TOTAL 12.93 16.24 Deferred Tax Assets (Net) 27.49 42.96

Income / Expenditure There are no material amounts of expenditure / income required to be disclosed as “Prior Period” items as per AS – 5 on “Prior Period Items” read with RBI guidelines. As per the Indian Banks’ Association an understanding has been reached with Workmen Unions and Officers’ Association on wage revision. However, a memorandum of understanding is yet to be executed in this respect and several matters, which may materially affect the quantification of liability, are yet to be finalised. However, based on estimates of liability by the management, a provision of Rs.27.00 crores (previous year Nil) has been made. Particulars of Remuneration Relating to The Managing Director & Chief Executive Officer :

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Particulars Current Year Previous Year Salaries 6,11,075.26 12,00,000.00 Employer’s contribution to PF 61,107.52 1,20,000.00 Monetary value of any other benefits or perquisites

7,63,333.00 1,23,122.00

14,43,122.00 Total *14,35,515.78 *Salary, allowances and gratuity paid to Ex-Managing Director & Chief Executive Officer amounts to Rs.9,47,849.12 upto 21.05.2004. Segment Reporting The Bank operates in two segments, Banking operations and Treasury operations. The Bank has recognized these business segments as primary segments in compliance with AS 17 – Segment Reporting issued by ICAI. There are no secondary reporting segments.

(Rs. In crores)Particulars Currency Derivatives Interest Rate DerivativesForward Exchange Contracts Derivatives(Notional Principal Amount)a) For hedging 430.4 Nilb) For trading Nil NilMarked to Market Positionsa) Asset 14.04 Nilb) Liability Nil NilCredit Exposure 7.25 Nil

Likely impact of one percentage change in interest rate (100*PV01)a) On hedging derivatives Nil Nilb) On trading derivatives Nil NilMaximum and minimum of 100*PV01 observed during the yeara) On hedging Nil Nilb) On trading Nil Nil

Treasury operations include dealing in Government and other securities and Money Market operations. Banking Operations consists of Corporate Banking, Retail Banking, Personal and Commercial Banking, Cash

85

Management Services, Deposits and Allied Services. Pricing of inter segment transfers Banking Operation (BO) is primary resource mobilizing unit and Treasury Operation compensates the former for funds lent by BO, taking into consideration the average cost of funds incurred by BO. Allocation of Costs (a) Expenses directly attributable to particular segment are allocated to the relative segment. (b) Expenses not directly attributable to specific segment are allocated in proportion to the business managed / asset in use. Related Party Disclosures List of related parties:

1)

(a) Key Managerial Personnel

Dr. K.M.Bhattacharya – Ex-Managing Director & Chief Executive Officer upto 21.05.2004

Shri B. M. Sharma – Managing Director & Chief Executive Officer w.e.f. 18.11.2004 (i) Relatives of the Directors referred to in item (a) above.

NIL (ii) List of enterprises owned by the directors referred to in item (a) above.

NIL (b) Associates Mewar Aanchalik Gramin Bank (Regional Rural Bank sponsored by Bank)

(Rs. in crores) Key Management Personnel :

Current Year Previous Year Managing Director Remuneration 0.14 0.14 (for details refer Note No.7) Housing Loan 0.03 0.03

2) Associates : Deposits with Bank 26.39 37.12 Investments 0.35 0.35 Other Receivables 4.38 4.38

The above disclosures have been made in accordance with RBI guidelines for related party disclosures. Earning Per Share

Particulars Current Year Previous Year Number of shares outstanding as at the beginning of the year 107566729 107566729 Number of shares outstanding as at the close of the year 107566729 107566729 Net Profit after tax available for Equity Share holders (Rs. in crores) 35.01 69.04 Basic earnings per share of Rs. 10 each 3.26 6.42

Additional Disclosures

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In terms of the guidelines issued by the Reserve Bank of India, the following additional disclosures are made: Aggregate of Non-promoters’ shareholding

Current Year Previous Year Number of shares 6,00,60,600 6,00,60,600 Percentage of shareholding 55.84% 55.84%

Provisions and Contingencies debited to the Profit & Loss Account

(Rs. in crores) Particulars Current Year Previous Year Provision for NPAs (64.04) 22.32 General Provision for Standard Advances 1.16 -- Floating Provision 1.31 54.41 Depreciation / Amortisation of premium in case of securities held under HTM 63.93 11.81 Provision for income tax (net of deferred tax provision) 16.59 27.55 Provision for wage revision 27.00 - Others (net) 1.49 0.17 Total 47.44 116.26

Investments in / advance against shares

(i) Investment in equity shares and equity like instruments outstanding is as under: (Rs. in crores)

Description Current Year Previous Year Equity shares including investments in subsidiaries and joint venture 13.90 23.42 Units of UTI 0.01 0.01 Units of equity oriented Mutual Funds 2.00 19.00 Convertible Debentures - - Regional Rural Banks 0.35 0.35 Venture Capital Fund - - Underwriting Commitments - - Total 16.26 42.78

(ii) Advance Against Shares

(Rs. in crores) Current Year Previous Year Advance against shares 3.25 1.13

Subordinate Debts -

(Rs. in crores) Current Year Previous Year Subordinate Debts Tier II Capital 90.72 18.72

- Interest Expended – Others includes interest on Subordinated Debt Rs.4.41 crores (previous year Rs.1.97 crores) - During the year the Bank has raised Subordinated Debt to the tune of Rs.72 crores (previous year Nil) by issue of Unsecured,Redeemable,Non-Convertible Tier II Bonds as on November 15, 2004 and the same is included under “Other Liabilities & Provisions” in Schedule V of the Balance Sheet, the details of which are as follows :-

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(i) 7.50% Unsecured Non-Convertible Redeemable Subordinated Bonds Series III Option I maturing on 15.11.2011 Rs.36 crores. (ii) 7.75% Unsecured Non-Convertible Redeemable Subordinated Bonds Series III Option II maturing on 15.7.2014 Rs.36 crores.

Business Ratios

Current

Year Previous Year

Capital Adequacy Ratio - Tier I Capital - Tier II Capital

7.84 4.91

8.35 2.83

Interest income as percentage to average working funds 7.24 7.63 Non-interest income as percentage to average working funds 0.88 2.69 Operating profit as percentage to average working funds 1.14 2.78 Return on Assets 0.38 0.82 Business per employee (Rs. in Lakhs) 231.18 199.93 Profit per employee (Rs. in Lakhs) 0.86 1.67 Percentage of net NPAs to net advances 2.50 2.99

Movement in Non Performing Assets (NPAs)

(Rs. in crores)

Particulars Current Year

Previous Year

Gross NPAs at the beginning of the year 237.32 266.08

Addition during the year 11.26 *70.24

Reduction in NPAs :

-- By Recoveries 59.09 51.00

-- By Write off:

- Regular 0.60 0.03

- Prudential 13.16 43.09

-- By Upgradation 16.55 4.88

Gross NPAs at the end of the year 159.18 237.32

Less: Provision & other credit balances 86.93 164.69

Net NPAs at the end of the year 72.25 72.63

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Movement in Provision for NPAs (excluding provision for Standard Assets)

(Rs in Crores) Particulars Current

Year Previous Year

Opening balance as at the beginning of the year 150.94 101.99

Add: Provisions made during the year (Net) (64.04) 92.00

Less: Write off, write back of excess provisions 13.76 43.05

Closing balance as at the end of the year 73.14 150.94

Movement in Provision/Depreciation on Investments

(Rs. in crores) Particulars Current Year Previous

Year Opening balance as at the beginning of the year 9.79 6.11 Add: Provision made during the year(including amortisation) 45.62 13.31 Less: Write off/ write back of excess provisions 15.64 9.63 Closing balance as at the end of the year 39.77 9.79

Issuer-wise composition of Non-SLR investments

tent of ‘unlisted’ securities

(Rs. in crores) S. No

Issuer

Amount Extent of Private Placement

Extent of ‘below investment grade’ securities

Extent of ‘unrated’ securities

Ex

(1) (2) (3) (4) (5) (6) (7)

1. PSUs 118.61 75.33 4.99 37.68 24.95 2. FIs 234.74 209.71 0.00 20.00 24.96 3. Banks 22.67 21.97 0.00 14.22 13.52 4. Private Corporates 126.26 68.15 5.00 19.76 15.48 5. Subsidiaries/Joint

ventures 0.35 0.35 0.00 0.35 0.35 6. Others 191.03 165.90 0.00 105.19 191.03 7. Provision held towards

depreciation (6.22) Total 687.44 541.41 9.99 197.20 270.29

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Details of Repo / Reverse Repo transactions done during the year including repos under Liquidity Adjustment Facility (net of margin)

(Rs. in crores) Outstanding during the year Particulars Minimum Maximum Daily Average

Outstanding as on 31.3.05

Securities sold under Repo 60.00 80.00 1.12 Nil Securities purchased under reverse repos

35.00 1325.00 515.70 810.00

Repo / Reverse Repo (with other banks)

Outstanding during the year Particulars Minimum Maximum Daily Average

Outstanding as on 31.3.05

Securities sold under Repo 25.06 315.00 8.38 Nil Securities purchased under reverse repos

29.78 100.05 1.12 Nil

Non-Performing Non-SLR Investments

(Rs. in crores) Particulars Current Year Previous Year Opening Balance as at the beginning of the year 5.00 10.00 Additions during the year 4.99 - Reductions during the year 0.00 5.00 Closing Balance as at the end of the year 9.99 5.00 Total Provisions held 5.89 1.30

Information in respect of restructuring undertaken during the year

(Rs. in crores)

a) Corporate Debt Restructuring (CDR) Outstanding as at 31.3.2005

Outstanding as at 31.3.2004

Total amount of loan assets subjected to restructuring 15.16 26.71 The amount of standard assets subjected to restructuring 15.16 4.52 The amount of sub-standard assets subjected to restructuring - - The amount of doubtful assets subjected to restructuring - 22.19

(Rs. in crores)

b) Other Restructuring / Rescheduling Outstanding as at 31.3.2005

Outstanding as at 31.3.2004

Total amount of loan assets subjected to restructuring 1.95 12.25 The amount of standard assets subjected to restructuring 1.95 12.04 Total amount of sub-standard assets subjected to restructuring - 0.21

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Lending to Sensitive Sectors

(Rs. in Crores)

Particulars Current Year Previous Year

Advances to Capital Market Sector* 42.75 22.98

Advances to Real Estate Sector 87.32 20.47

Advances to Commodity Sector 31.25 3.00

TOTAL 161.32 46.45

* excluding advances against collateral of shares

Maturity Pattern of Assets and Liabilities

(Rs. in crores)

Residual Maturity

1-14 days 15-28 days

29 days to 3 months

Over 3 months upto 6 months

years

years

Over 6 months upto 1 year

Over 1 year upto 3 years

Over 3

upto 5

Over 5 years Total

Domestic performingloans and advances 206.36 86.17 216.89 360.33 852.15 503.25 257.35 341.41 2823.91

Domestic Investment &Securities 814.50 - 21.69 43.61 12.82 232.94 231.76 2157.35 3514.67

Domestic Deposits 945.59 547.67 1297.14 911.60 824.41 1877.09 253.68 1463.13 8120.31

Domestic Borrowings,Subordinate Debts &Redeemable Bonds

141.92 - 0.01 2.95 2.63 25.54 1.99 72.05 247.09

Foreign currencyliabilities 8.61 0.17 50.50 2.19 4.90 8.35 - - 74.72

Foreign currency assets 14.72 10.82 25.03 11.31 - - - - 61.88

The above maturity pattern has been compiled from the information received from the branches, ratios prescribed by the RBI for determining core and volatile portion and apportionment made at Central Office on the basis of behavioral maturity and other adjustments wherever considered necessary. The figures in the case of foreign currency assets and liabilities are after revaluation as at the year end FEDAI rates.

Disclosure on risk exposures in Derivatives Products In compliance with RBI Circular DBOD.No.BP.BC.72/21.04.018/2004-05 dated March 3, 2005 following disclosures are made :- Qualitative Disclosure The Bank follows various internal control guidelines relating to foreign exchange business which covers various risks. Bank offers forward exchange contract to hedge exchange fluctuation risk. All the forward contracts are covered for

91

respective tenors based on market lots and available tenor swaps. Bank follows Gap limits as prescribed by RBI guidelines and forward contracts are revalued at monthly intervals at Foreign Exchange Dealers Association of India (FEDAI) rates and resultant profit or loss taken to profit and loss account. The Bank has not undertaken any other derivative product in Rupee or foreign currency except as stated above. Quantitative Disclosures on Risk Exposure in Derivatives as on 31.03.2005

(Rs. In crores)Particulars Currency Derivatives Interest Rate DerivativesForward Exchange Contracts Derivatives(Notional Principal Amount)a) For hedging 430.4 Nilb) For trading Nil NilMarked to Market Positionsa) Asset 14.04 Nilb) Liability Nil NilCredit Exposure 7.25 Nil

Likely impact of one percentage change in interest rate (100*PV01)a) On hedging derivatives Nil Nilb) On trading derivatives Nil NilMaximum and minimum of 100*PV01 observed during the yeara) On hedging Nil Nilb) On trading Nil Nil

The Bank has not transacted in any exchange traded interest rate derivatives during the year. Accordingly,the

disclosure required vide circular NO. IDMC.NSRD. 4801/06.01.03/2002-03 date June 3, 2003 is NIL. Details of Assets sold to Securitisation Company / Reconstruction company, if any.

(Rs. In crores)Particulars 31.03.2005 31.03.2004Number of Accounts Nil NilAggregate Value (net of provisions) of accounts sold to SC/RC Nil NilAggregate consideration Nil NilAdditional consideration realized in respect of acounts transferred in earlier years Nil NilAggregate gain/ loss over net book value Nil Nil

92

Details of Credit Exposures where the Bank had exceeded the Prudential Exposure during the year

(Rs. In crores)

Name of Party & Branch

Permissible exposure ceiling for individual borrower @15% of capital funds and 20% for infrastructure

Additional 5% as per BOD Approval

Maximum permissible exposure approved by BOD

Actual exposure as on 31.03.05

Rajasthan State Road 43.44 14.48 57.92 50Development ConstructionCorpn. Ltd., B/o TM JaipurPower Finance Corpn. 43.44 14.48 57.92 55Ltd. B/o FaridabadHINDALCO Ind. Ltd. B/o 43.44 14.48 57.92 50Lower Parel, MumbaiJaipur Development Authority 57.92 14.48 72.4 70B/o Bapu Nagar, Jaipur (infrastructure)

The Bank has not made any financing for margin trading during the year and also not securitized any assets. As the Bank’s net funded exposure for the year ended 31st March 2005 in respect of the foreign exchange transactions with each country is below 1% of the total assets of the Bank, no provision and disclosure are required as per RBI circular DBOD.BP.BC. 96/21.04.103/2003-04 dated 17th June 2004. In accordance with Accounting Standard 29 on “Provisions, Contingent Liability and Contingent Assets” issued by the Institute of Chartered Accountants of India, the Bank has carried out financial assessment of the contingent liabilities and determination of provision for probable losses. The amount of losses estimated were Rs.0.25 crores which have been charged to Profit & Loss Account. Disclosures in terms of accounting standard on provisions, contingent liabilities, and contingent assets. (a) Movement of provisions for liabilities*

(Rs. In crores)

ParticularsSalary Arrears under Negotiations

Legal Cases/ Contingencies

Balance as at 1st April 2004 Nil 0.63Provided during the year 27 0.25Amounts used during the year Nil NilReversed during the year Nil NilBalance as at 31st March 2005 27 0.88

Timing of outflow/ uncertaintiesOn finalisation of wage settlement

settlement / crystalisation

*excluding provisions for others (b) Refer schedule – 12 on Contingent Liabilities

Such liabilities at S.No.(I), (II), (III), (IV) and (V) are dependent upon, the outcome of court / arbitration / out of court settlement, disposal of appeals, the amount being called up, the terms of contractual obligations, development and raising of demand by concerned parties, respectively. No reimbursement is expected in such cases.

93

In accordance with Accounting Standard 11 (Revised) on Accounting for the effects of changes in foreign exchange rates issued by the Institute of Chartered Accountants of India, the Bank had translated the year end balances at Balance Sheet date at FEDAI rates. The daily transactions are translated at notional rates. For strict compliance of the Accounting Standard 11, the Bank is in process of modifying the software so as to apply weekly average for translation of daily foreign currency transactions. This, however, has no significant impact for the year. Significant Changes made during the year in the prudential norms for income recognition and assets classification in compliance with RBI directives having a financial impact on identification/ classification of Performing Assets/ Non-Performing Assets.

(i) Investments in securities and advances guaranteed by State Govt. have been classified as Non-Performing Assets where the

principal/ interest is overdue for more than 180 days as on 31.3.05. (ii) NPAs which are in doubtful category are classified based on 12 months delinquency status.

(iii) Unsecured exposures (i.e. funded and non-funded exposures having tangible security not more than 10% ab initio of outstanding) on becoming NPA, have been classified as sub-standard and provision has been made @ 20% of outstanding without making allowance for DICGC / ECGC guarantee cover and security cover available. (iv) Provision on secured portion of doubtful assets existing as such for more than three years have been made @ 60% for outstanding stock of NPAs as on 31st March 2004 and @ 100% where the advances have been classified as doubtful for more than three years on or after April 1, 2004. (v) The above changes have an impact of reduction in the profit of the Bank by Rs.13.64 crores. All the Accounting Standards issued by the Institute of Chartered Accountants of India, to the extent applicable to the Bank and mandatory in nature have been complied with. Corresponding figures of the previous year have been regrouped/rearranged to the extent necessary/practicable.

94

THE BANK OF RAJASTHAN LTD.

2. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these

Annexure V AUDITOR’S REPORT

To the Members of The Bank of Rajasthan Limited 1. We have audited the attached Balance Sheet of The Bank of Rajasthan Limited as at 31st March, 2005, the Profit & Loss Account for

the year ended on that date annexed thereto and the cash flow statement for the year ended on that date. Incorporated in the said financial statements are the returns of 12 branches audited by us and 361 branches audited by other Branch Auditors.

financial statements, based on our audit. 3. We have conducted our audit in accordance with auditing standards generally accepted in India. These Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material mis-statement. An audit includes examining, on a test check 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. 4. We report that :

I. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of the

Banking Regulation Act, 1949 read with Section 211 of the Companies Act, 1956. II. The reports on the accounts of the branches audited by Branch Auditors have been dealt with in preparing our report

in the manner Considered necessary by us. III. Read with significant accounting policies and notes on accounts, we further report that :

(a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the

purpose of our audit and found them to be satisfactory.

(b) The transactions of the Bank which came to our notice have been within the powers of the Bank.

(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 such books. Proper returns generally adequate for the purpose of our audit have been received from the branches of the Bank. (d) The Balance Sheet and the Profit and Loss Account of the Bank dealt with by this report are in agreement with the books of account and the branch returns.

95

(e) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with

Accounting Standards as referred to in Section 211 (3C) of the Companies Act, 1956, in so far as they apply to banks.

(f) On the basis of the written representations from the directors, taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2005 from being appointed as a director under Section 274(1) (g) of the Companies Act, 1956.

(g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the significant accounting policies in Schedule 17 and other notes as given in Schedule 18 give the information required by the Companies Act, 1956, in the manner so required for banking companies and give a true and fair view :

(i) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31st March, 2005; and (ii) in the case of the Profit and Loss Account, of the profit of the Bank for the year ended on that date; and

(iii) in case of the Cash Flow Statement of the cash flows for the year ended on the date.

Annexure VI SIGNIFICANT CHANGES IN ACCOUNTING POLICIES DURING THE LAST FIVE FINANCIAL YEARS 1. During the five consecutive financial years ended 31st March 2005, Reserve Bank of India issued various guidelines in

Income recognition, Asset Classification, Provisioning in respect of Standard Assets, Non Performing Advances, other Assets, Classification of Investments and Valuation thereof, Treatment of Depreciation on investments/fixed/leased assets. Bank in conformity with the reserve Bank of India guidelines carried out necessary amendments in the accounting policies

2. Taxes on Income 2001-02, 2002-03, 2003-04 and 2004-05 : From the year 2001-2002 the Bank accounted for

liability of Income tax with adjustment for deferred tax assets and liabilities as per the Accounting Standard-22 issued by the Institute of Chartered Accountants of India.

Significant changes in Accounting Policies as appearing in Notes to Accounts of respective years

3. Financial Year 2001-2002

Note No.11 (i):- In order to comply with AS 15 on " Accounting for Retirement Benefits in the Financial Statements of Employers" liability for Leave Encashment amounting to Rs.14.80 crores relating to the period upto 31st march, 2001 has been provided during the year ended 31st March, 2002 as per the Actuarial Valuation. These expenses were hitherto accounted for as and when due for payment. Since the above mentioned item pertain to prior periods, the management has decided to use a part of its Revenue Reserve for the meeting the said expenditure.

Note No.11(ii):- Provision has been made for the arrears of depreciation on computers on computers (Rs.3.00 crores) to comply with AS-6 on "Depreciation Accounting". The equivalent amount has been utilised from Revenue Reserve, which had been earmarked in the earlier year(s) to cover the said shortfall. Since the above adjustment have been carried out during the year ended 31st March, 2002 the corresponding Deferred tax Credit of Rs.5.79 crores in respect of the same has been taken into account while determining the provision for tax

96

Note No.11 (iii):- In order to comply with requirements of AS-9 on "Revenue Recognition" issued by the Institute of Chartered Accountants of India, during the current financial year, the income from commission, Exchange and Discont has been accounted for on the basis of actual realisation. M,Had the earlier accounting policy of the revenue recognition been followed by the bank, the net profit for the current financial year would have been higher by Rs.3.46 crores. 4. Financial Year 2002-2003 Note No.7:- In the previous years, the cost of securities at the time of sale was taken on random basis. From the year 2002-03, the cost has been calculated on weighted average basis. The impact of the change in the basis of accounting on the profit for the year is not ascertainable. Note:- All confirmation are based on the relevant applicable statutes as prevailing at the respective time.

97

THE BANK OF RAJASTHAN LTD. Annexure VII AUDITORS' QUALIFICATION IN RESPECT OF WHICH NO ADJUSTMENT COULD BE CARRIED OUT AS THE CONSEQUENTIAL EFFECTS COULD NOT BE ASCERATAINED FOR THE LAST FIVE FINANCIAL YEARS ENDED 31st MARCH 2005 Qualification as appearing in Auditors Report of respective years Financial year 2000-2001: Para No. 3 "We are unable to ascertain the effect of adjustments that may arise upon balancing/reconciliation/matching of entries as mentioned in note no.1 in Schedule-18 to the accounts" Para No. 4 "Certain items of expenditure have not been accounted on accrual basis and amounts have not been ascertained in respect of : (i) interest on matured term deposits (accounting policy no.5.3) and; (ii) leave encashment benefits to staff (accounting policy no. 8.2) which is not in accordance with AS-15 issued by the Institute of Chartered Accountants of India" Para No. 5 "Income has not been recognized in respect of commission, exchange and discount (accounting policy no. 5.2) which is not in accordance with AS-9 on Revenue Recognition issued by the Institute of Chartered Accountants of India; the amount in respect of which has not been ascertained" Financial Year 2001-2002 Para No. 3 "For the reasons stated in note 10 in Schedule -18, the bank has not complied with the disclosures requirements of the Accounting Standard AS-17, Segment Reporting and AS-18, Related Party disclosures and presentation of consolidated financial statement AS-21, issued by the Institute of Chartered Accountants of India" Financial Year 2002-2003 Para No.4 "Reference is invited to note No.10, regarding unpaid calls due from promoters/associates" Note: Pursuant to the scheme of merger of Rajasthan Bank Financial Services Ltd. (RBFSL), a wholly owned subsidiary company of the bank, as per the order of High Court dated 17/09/2003 the profit & Loss account and the assets & Liabilities have been included in the financial statement of the bank for the financial year 2003-04 resulting in the balance sheet of bank as at 31/03/2003 not being comparable with that as at 31/03/2004.The audited Profit & Loss account and the statement of Assets & Liabilities (Balance Sheet) for the five years of the subsidiary of the bank (31st March 1999 to 31st March 2003) have been annexed in Annexure-VIII.

98

Annexure VIII The adjusted P & L of the Company for last five years in terms of Clarification XIII of the SEBI guidelines for Disclosure and Investor Protection. Part – ‘I’ of Annexure VIII Rajasthan Bank Financial Services Limited (RBFSL) RBFSL – Statement of Profit & Loss Account (Adjusted)

(Rs. In lacs) Sr. no

Income 31.03.1999 31.03.2000 31.03.2001 31.03.2002 31.03.2003

1 Interest Income 21.85 8.98 1.06 1.15 0.01 2 Capital; Market Operations 2.59 27.67 0.00 2.67 0.00 3 Lease Rentals 52.67 47.17 37.86 19.86 14.77 4 Other Income 0.56 0.53 0.81 5.39 0.28 5 Principal amount waived / forgiven by

depositors / creditors 0.00 461.02 0.00 0.00 0.00

6 Excess provision written off 0.00 479.10 0.00 61.23 1.48 Total 77.67 1024.47 39.73 90.30 16.54 Expenditure 31.03.1999 31.03.2000 31.03.2001 31.03.2002 31.03.2003 1 Membership fee 0.00 0.00 1.00 0.00 0.00 2 Operating expenses 2.49 8.17 4.31 2.83 3.85 3 Financial Expenses 326.50 711.97 227.62 73.28 72.47 4 Depreciation 11.11 10.62 9.88 9.68 9.68 5 Provision & Contingencies 25.64 19.05 0.00 0.00 3.69 6 Bad Debts written off 0.00 0.00 0.00 94.65 0.00 Total 365.74 749.81 242.81 180.44 89.69 Particulars 31.03.1999 31.03.2000 31.03.2001 31.03.2002 31.03.2003 Profit / (Loss) before Tax (288.07) (274.66) (203.08) (90.14) (73.15) Provision for tax 0.00 0.00 0.00 0.00 0.00 Profit / (Loss) after tax (288.07) (274.66) (203.08) (90.14) (73.15)

99

The adjusted Balance Sheet of the Company for last five years in terms of Clarification XIII of the SEBI guidelines for Disclosure and Investor protection. Part – ‘II’ of Annexure VIII Rajasthan Bank Financial Services Limited (RBFSL) RBFSL – Statement of Assets and Liabilities (Adjusted)

(Rs. In lacs) Sr. no

Sources of Funds 31.03.1999 31.03.2000 31.03.2001 31.03.2002 31.03.2003

1 Share Capital 500.00 500.00 500.00 500.00 500.00 2 Reserves and Surplus 0.00 0.00 0.00 0.00 0.00 3 Loans (Secured) 2.57 0.00 0.00 0.00 0.00 4 Loans (Unsecured) 1876.61 1056.69 1206.01 941.32 1003.48 5 Current Liabilities and Provisions 302.34 87.84 84.73 75.26 70.34 6 Total 2681.52 1644.53 1790.74 1516.58 1573.82 Application of Funds 31.03.1999 31.03.2000 31.03.2001 31.03.2002 31.03.2003 1 Fixed Assets (including Lease Assets) 160.43 112.77 68.89 49.64 35.02 2 Investments 58.94 0.00 0.00 0.00 0.00 3 Current Assets, Loans and Advances 340.98 54.16 72.06 27.81 31.54 4 Misc. Expenditure 2.21 1.81 1.42 1.03 0.00 5 P & L Account 2118.96 1475.79 1648.37 1438.10 1507.26 Total 2681.52 1644.53 1790.74 1516.58 1573.82

100

(Rs. In lacs) Income Audited as

on 31.03.1999

Changes to be effected in terms of SEBI guidelines

Effect of changes on current year’s B/S

Effect of changes on subsequent year’s A.cs

Recasted as on 31.03.1999

Fees & Arrangements, Brokerage & Commission

-

Interest Income 21.85 21.85 Capital; Market Operations 2.59 2.59 Lease Rentals 52.67 52.67 Other Income 0.56 0.56 Total 77.67 77.67 Expenditure Operating expenses 2.49 2.49 Financial Expenses 5.05 321.50 321.50 321.45 326.50 Depreciation 11.11 11.11 Provision & Contingencies 25.64 25.64 Total 44.29 365.74 Particulars Profit / (Loss) before Tax (33.38) 288.07 Provision for tax - - Profit / (Loss) after tax (33.38) 288.07 (Rs. In lacs) Sources of Funds Audited as

on 31.03.1999

Changes to be effected in terms of SEBI guidelines

Effect of changes on current year’s B/S

Effect of changes on subsequent year’s A.cs

Recasted as on 31.03.1999

Share Capital 500.00 500.00 Reserves and Surplus - - Loans (Secured) 2.57 2.57 Loans (Unsecured) 1102.63 321.45 321.45 452.53 1876.61 Current Liabilities and Provisions

299.71 302.34

Total 1904.91 2681.52 Application of Funds Fixed Assets (including Lease Assets)

160.43 160.43

Investments 58.94 58.94 Current Assets, Loans and Advances

340.98 340.98

Misc. Expenditure 2.21 2.21 P & L Account 1342.35 321.45 321.45 455.16 2118.96 Total 1904.91 2681.52

101

(Rs. In lacs) Income Audited as

on 31.03.2000

Changes to be effected in terms of SEBI guidelines

Effect of changes on current year’s B/S

Effect of changes on subsequent year’s A.cs

Recasted as on 31.03.2000

Fees & Arrangements, Brokerage & Commission

-

Interest Income 8.98 8.98 Capital; Market Operations 27.67 27.67 Lease Rentals 47.17 47.17 Other Income 0.53 0.53 Principal amount waived / forgiven by depositors/ creditors

461.02 461.02

Excess provision written back

479.10 479.10

Total 1024.47 1024.47 Expenditure Operating expenses 8.17 8.17 Financial Expenses 534.01 177.96 177.96 711.97 Depreciation 10.62 10.62 Provision & Contingencies 19.05 19.05 19.05 19.05 Total 571.85 749.81 Particulars Profit / (Loss) before Tax 442.62 274.66 Provision for tax - - Profit / (Loss) after tax 442.62 274.66 (Rs. In lacs) Sources of Funds Audited as

on 31.03.2000

Changes to be effected in terms of SEBI guidelines

Effect of changes on current year’s B/S

Effect of changes on subsequent year’s A/Cs

Recasted as on 31.03.2000

Share Capital 500.00 500.00 Reserves and Surplus 0 0 Loans (Secured) 0 0 Loans (Unsecured) 470.63 177.96 177.96 408.10 1056.69 Current Liabilities and Provisions

68.79 19.05 19.05 - 87.84

Total 1039.42 1644.53 Application of Funds Fixed Assets (including Lease Assets)

112.77 112.77

Investments 0 0 Current Assets, Loans and Advances

54.16 54.16

Misc. Expenditure 1.81 1.81 P & L Account 870.68 197.01 197.01 408.10 1475.79 Total 1039.42 1644.53

102

(Rs. In lacs) Income Audited as

on 31.03.2001

Changes to be effected in terms of SEBI guidelines

Effect of changes on current year’s B/S

Effect of changes on subsequent year’s A/cs

Recasted as on 31.03.2001

Fees & Arrangements, Brokerage & Commission

-

Interest Income 1.06 1.06 Capital; Market Operations 0 0 Lease Rentals 37.86 37.86 Other Income 0.81 0.81 Principal amount waived / forgiven by depositors/ creditors

0 0

Excess provision written back

0 0

Total 39.73 39.73 Expenditure Membership Fees 1.00 1.00 Operating expenses 4.31 4.31 Financial Expenses 38.40 189.58 189.58 227.62 Depreciation 9.88 9.88 Provision & Contingencies 0 0 Total 53.59 242.81 Particulars Profit / (Loss) before Tax 13.86 208.62 208.62 203.08 Provision for tax - Profit / (Loss) after tax 1386 208.62 208.62 203.08 (Rs. In lacs) Sources of Funds Audited as

on 31.03.2001

Changes to be effected in terms of SEBI guidelines

Effect of changes on current year’s B/S

Effect of changes on subsequent year’s A/Cs

Recasted as on 31.03.2001

Share Capital 500.00 500.00 Reserves and Surplus 0 0 Loans (Secured) 0 0 Loans (Unsecured) 461.23 189.58 189.58 555.20 1206.01 Current Liabilities and Provisions

65.68 19.05 84.73

Total 1026.91 1790.74 Application of Funds Fixed Assets (including Lease Assets)

68.89 68.89

Investments 0 0 Current Assets, Loans and Advances

72.06 72.06

Misc. Expenditure 1.42 1.42 P & L Account 884.54 189.58 189.58 574.25 1648.37 Total 1026.91 1790.74

103

(Rs. In lacs) Income Audited as

on 31.03.2002

Changes to be effected in terms of SEBI guidelines

Effect of changes on current year’s B/S

Effect of changes on subsequent year’s A/cs

Recasted as on 31.03.2002

Fees & Arrangements, Brokerage & Commission

-

Interest Income 1.15 1.15 Capital; Market Operations 2.67 2.67 Lease Rentals 19.86 19.86 Other Income 5.39 5.39 Excess provision written back

61.23 61.23

Total 90.30 90.30 Expenditure Operating expenses 2.83 2.83 Financial Expenses 10.82 62.47 62.47 73.28 Depreciation 9.68 9.68 Provision & Contingencies 0 0 Bad Debts Written Off 94.65 94.65 Total 117.98 180.44 Particulars Profit / (Loss) before Tax (27.68) (90.14) Provision for tax - - Profit / (Loss) after tax (27.68) (90.14) (Rs. In lacs) Sources of Funds Audited as

on 31.03.2002

Changes to be effected in terms of SEBI guidelines

Effect of changes on current year’s B/S

Effect of changes on subsequent year’s A/Cs

Recasted as on 31.03.2002

Share Capital 500.00 500.00 Reserves and Surplus 0 0 Loans (Secured) 0 0 Loans (Unsecured) 360.00 62.47 62.47 518.85 941.32 Current Liabilities and Provisions

56.21 19.05 75.26

Total 916.21 1516.58 Application of Funds Fixed Assets (including Lease Assets)

49.64 49.64

Investments 0 0 Current Assets, Loans and Advances

27.81 27.81

Misc. Expenditure 1.03 1.03 P & L Account 837.73 62.47 62.47 537.90 1438.10 Total 916.21 1516.58

104

(Rs. In lacs) Audited as on 31.03.2003

Effect of changes on

year’s B/S

Recasted as

31.03.2003

Income Changes to be effected in terms of SEBI guidelines

current

Effect of changes on subsequent year’s A/cs

on

Fees & Arrangements, Brokerage & Commission

-

Interest Income 0.01 0.01 Capital; Market Operations 0 0 Lease Rentals 14.77 14.77 Other Income 0.28 0.28 Excess provision written back

1.48 1.48

Total 16.54 16.54 Expenditure Operating expenses 3.85 3.85 Financial Expenses 6.31 62.47 62.47 72.47 Depreciation 9.68 9.68 Provision & Contingencies 0 3.69 3.69 3.69 Bad Debts Written Off 0 0 Total 19.84 89.69 Particulars Profit / (Loss) before Tax 3.30 (73.15) Provision for tax - - Profit / (Loss) after tax 3.30 (73.15) (Rs. In lacs) Sources of Funds Audited as

on 31.03.2003

Changes to be effected in terms of SEBI guidelines

Effect of changes on current year’s B/S

Effect of changes on subsequent year’s A/Cs

Recasted as on 31.03.2003

Share Capital 500.00 500.00 Reserves and Surplus 0 0 Loans (Secured) 0 0 Loans (Unsecured) 360.00 62.47 62.47 581.01 1003.48 Current Liabilities and Provisions

47.60 3.69 19.05 70.34

Total 907.60 1573.82 Application of Funds Fixed Assets (including Lease Assets)

35.02 35.02

Investments 0 0 Current Assets, Loans and Advances

31.55 31.55

Misc. Expenditure 0 0 P & L Account 841.03 66.16 66.16 600.06 1507.25 Total 907.60 1573.82

105

Details of Interest on FDR/Loan from Bank

Year ended

Opening balance Paid/adjusted Amount of Interest Total

31.03.2000 958.73 80.00 177.96 1056.69 31.03.2001 1056.69 40.26 189.58 1206.01 31.03.2002 1206.01 327.16 62.47 941.01 31.03.2003 941.01 0 62.47 1003.48

*Opening balance taken from last adjusted Balance Sheet *Amount of interest taken from Notes to Accounts of Balance Sheet of the year Annexure IX THE BANK OF RAJASTHAN LTD. DIVIDENDS DECLARED IN RESPECT OF LAST FIVE FINANCIAL YEARS Rs. In crores 2001 2002 2003 2004 2005 EQUITY CAPITAL 100.37 100.37 105.97 107.57 107.57 AMOUNT OF DIVIDEND 0.00 0.00 19.71 21.51 11.83 PERCENTAGE 20.00 20.00 11%

106

Annexure X KEY ACCOUNTING RATIOS (Rs.in crores) ACCOUNTING RATIOS 2001 2002 2003 2004 2005 Interest Income / Average Working Funds (AWF) 10.44 9.80 9.18 7.63 7.25 Interest Expenses / AWF 7.30 7.00 5.67 4.75 4.29 Interest Spread / AWF 3.14 2.80 3.51 2.88 2.96 Non-Interest Income / AWF 1.33 2.10 2.46 2.69 0.88 Operating Expenses / AWF 3.18 3.14 3.08 2.75 2.70 Cost Income Ratio 71.15 64.05 51.64 49.49 70.25 Gross (Operating) Profit / AWF 1.29 1.76 2.89 2.78 1.14 Net Profit / AWF 0.69 0.87 1.33 1.05 0.49 Return on Net Worth 18.81 19.12 26.05 22.48 10.65 Return on Assets 0.67 0.84 1.12 0.82 0.38 Return on Average Assets 0.69 0.87 1.33 1.05 0.49 Yield on Advances 11.65 10.61 10.57 9.49 9.32 Cost of Deposits 8.36 8.00 6.50 5.46 4.69 Dividend payout Ratio 0.00 0.00 32.50 35.15 38.53 (Including Corporate Dividend Tax) Credit – Deposit Ratio 54.41 57.47 47.21 41.54 44.50 Credit + Non SLR Investment (excluding Investments in Subsidiaries)-Deposit Ratio 59.00 63.44 69.18 61.36 55.06 Capital Adequacy Ratio 10.57 12.07 11.29 11.18 12.75 Tier – I 8.91 10.01 8.92 8.35 7.84 Tier - II 1.66 2.06 2.37 2.83 4.91 Business per branch (Rs in Crore) 17.23 18.84 22.38 27.79 29.53 Gross Profit per branch ( Rs in Crore) 0.17 0.26 0.44 0.52 0.22 Net Profit per branch ( Rs in Crore) 0.09 0.13 0.20 0.20 0.09 Earnings per share (Rupees) 4.02 5.11 6.82 6.42 3.26 Book Value per share (Rupees) 14.44 19.60 24.42 28.56 30.56 Net Asset Value per share (Rs) 1.44 1.96 2.44 2.86 3.06

107

Definitions of Key ratios: Average Working Funds (AWF ): Fortnightly average of total assets Average Deposits : Fortnightly average of total deposits Average Advances : Fortnightly average of total advances Average Business : Total of Average Deposits & Average Advances Average Investments : Fortnightly average of total investments Interest Income/AWF : Total Interest Income Divided by AWF Interest Expenses/AWF : Total Interest Expenses Divided by AWF Operating Expenses : Total Expenses minus Interest Expenses Operating Expenses/AWF : Operating Expenses Divided by AWF Cost Income Ratio : Operating Expenses Divided by (Non Interest Income plus

Interest Spread) Gross (operating) Profit/AWF : Operating profit divided by AWF Net Profit/AWF :

Returns on Average Assets :

Net Profit Divided by AWF Return on Net Worth : Net Profit Divided by Net Worth ( Excluding revaluation

reserves) Return on Assets : Net Profit Divided by Total Assets

Net Profit Divided by Average Assets (Average of two years outstanding figures)

Yield on Advances : Interest earned on Advances Divided by Average AdvancesCost of Deposits : Interest paid on deposits Divided by Average Deposits Dividend payout Ratio (including Corporate Dividend Tax :

Dividend including corporate Dividend Tax Devided by Net profit

Credit- Deposit Ratio : Total Advances Divided by Customer Deposits ( i.e.Total Deposits minus Inter Bank Deposits)

Credit + Non SLR Investments( Excluding investments in Subsidiaries)- Deposit Ratio :

Total Advances plus Non-SLR Investments minus Investments in subsidiaries ) Divided by Customer Deposits

Business per Branch : Total Deposits plus Total Advances Divided by No.of Branches

Gross Profit per Branch : Gross Profit Divided by No.of Branches Net Profit per Branch : Net Profit Divided by No.of Branches Earning per Share : Net Profit Divided by Equity multiplied by ten Book Value per Share : Net Worth ( excluding revaluation reserves)divided by

equity multiplied by ten Net Asset Value per share : Equity net worth arrived at the end of the year divided by

no. of equity shares at the end of each fiscal year

108

Annexure XI

THE BANK OF RAJASTHAN LTD.

(Rs. in Crores)

Details of Borrowings as on 31.03.2005 Borrowings in India Banks ( Other than Reserve Bank of India ) 5.12 Other Institutions and Agencies 153.44 Borrowings outside India 48.59 Total 207.15 Secured borrowings included above 144.11 OTHER LIABILITIES AND PROVISIONS 11.75 % Unsecured Non-Convertible Reedemable Bonds 8.72 9.50% Unsecured Non- Convertible Reedemable Bonds 10.00 7.50% Unsecured Non- Convertible Reedemable Bonds 7.75% Unsecured Non- Convertible Reedemable Bonds

36.00

36.00

Annexure XII Details of other income for last five financial years Financial Year ended March 31, 2001 2002 2003 2004 2005 Commission, Exchange and brokerage 23.96 20.00 22.65 22.19 27.75 Profit on sale of investments (net) 10.28 56.60 83.77 128.04 7.82 Profit on sale of Land, buildings & other assets (net) -0.38 -0.16 -0.07 -0.05 -0.13 Profit on exchange transactions (net) 3.23 4.03 4.69 4.77 6.13 Income Earned by way of Dividends 0.23 0.50 0.00 0.00 0.00 etc. from Subsidiaries/Companies & Joint ventures abroad/in India Miscellaneous Income 19.16 16.25 15.39 22.06 22.19 Profit on revaluation of Investment 0.00 0.00 0.00 0.00 0.00 Total 56.48 97.22 126.42 177.01 63.76

109

THE BANK OF RAJASTHAN LTD. Annexure XIII Details of Investments as on 31.03.2005

(Rs. in crores)

Details of the Investments (In India) Book Value as on 31st March 2005

Market Value as on 31st March 2005

Government securities 2672.58 2613.17 Other Approved securities 154.64 188.66 Shares 25.08 44.69 Debentures and Bonds 471.29 493.50 Subsidiaries and /or other ventures 0.35 0 Others 190.70 190.71 Sub Total 3514.67 3530.73 (Out Side India) Government securities - Other Approved securities - Shares - Debentures and Bonds - Subsidiaries and /or other ventures - Others - Sub Total - Total 3514.67 3530.73 Less NPA provision - Demunition -

5.90

Provision c/f from previous year - Net investment as per balance sheet as on 31/03/2005 3514.67 3524.83

110

Annexure XIV Statement of Capitalisation as on 31.03.05

(Rs.in crores) Pre issue as at

31.03.2005 Adjusted for private placement

Borrowings Short-Term Debt 207.15 207.15 Long-Term Debt 90.72 160.72 Total debt 297.87 367.87 Shareholders Funds Share capital Equity 107.57 107.57 Less:- Calls-in arrears 0.00 0.00 Preference Share premium Reserves & Surplus* 221.11 221.11 Less:- Miscellaneous Expenditure written off Total Reserve & Surplus 221.11 221.11 Total Shareholders Funds 328.68 328.68 Long Term Debt/ Equity Ratio 0.28 0.49 * Excluding revaluation Reserve

111

Annexure XV TAX SHELTER STATEMENT FOR FIVE CONSECUTIVE FINANCIAL YEAR ENDED ON 31-03-2005 (Rs. in crores) As at March 31st 2000 2001 2002 2003 2004 2005Tax Rate 38.50% 39.55% 35.70% 36.75% 35.88% 35.88%Tax at Actual Rate on Profit 4.39 13.31 19.22 40.74 34.65 18.51 (excluding tax on book profit)

(5.95)

Adjustments: Permanent Differences: Dividend and interest on tax free securities (0.47) (3.59) (3.37) (3.92) (14.35) (8.50) Misc. Disallowable expenses 0.90 0.06 3.88 0.02 0.03 - Allowable expenses (1.32) 0 - - - 0.02 Adjustment of provisions (0.93) (0.29) (0.13) 1.56 0.16 28.48 Loss on sale of fixed assets 0.02 0.39 0.23 0.15 0.05 0.13

TOTAL (1.80) (3.43) 0.61 (2.19) (14.11) 20.13 Timing Difference: Difference between Tax & Book depreciation 6.77 4.20 0.40 (3.51) (5.16) Difference between Provision for bad debts (13.82) 3.42 14.52 (28.94) 34.49 (89.51) Difference between interest accrued & due - 4.44 - (12.75) 4.14 10.97 Difference between pension provision & payment 0.09 (2.84) 0.61 9.65 15.37 17.56 Loss carried forward from previous year (2.63) (14.87) - - - - TOTAL (9.59) (5.65) 15.53 (35.55) 48.84 (66.93) Net Adjustments (11.39) (9.08) 16.14 (37.74) 34.73 (46.80) Tax Saving thereon 4.39 3.59 (5.76) 13.87 (12.46) 16.79 Total Tax Provision for the year Nil 1.43 13.53 30.10 45.43 1.12 Note: 1. Figures in brackets indicate reduction in tax liability 2. The figures have been computed as per the relevant assessment orders and/or Income Tax return filed with the Income Tax Department.

112

Annexure XVI THE BANK OF RAJASTHAN LTD.

CONTINGENT LIABILITIES STATEMENT AS ON 31/03/2005 The Bank has following contingent liabilities outstanding as per the Audited Accounts for the year ended 31.03.2005

(Rs. in Crores)

PARTICULARS AMOUNT Claims against the Bank not acknowledged as Debts 85.00 Liability on account of outstanding Forward Exchange Contracts

904.03

430.40 Guarantees given on behalf of constituents In India 218.61 Outside India -- Acceptances, Endorsements and Other obligations 155.40 Other items for which the Bank is contingently liable 14.62 TOTAL

STATUTORY AND OTHER INFORMATION

Minimum Subscription

In terms of the clarifications issued by SEBI (Ref. No. SEBI/MRD/SE/AT/46/2003) dated December 22, 2003, the minimum subscription is not applicable to the privately placed debt securities

Management fees The fees payable to the Lead Arranger to the issue shall be mutually agreed upon by the parties

Brokerage and Commission No brokerage and commission would be payable

Fees payable to the Registrars There is no Registrar to the Issue appointed for the issue

Fees payable to the Trustees of the Debenture holders The fees payable to The Western India Trustee and Executor Company Limited, as Trustee to the Debentures would be mutually agreed by the parties.

Other expenses

The other expenses include fees and reimbursement of expenses towards printing and distribution, listing fees, credit rating fees, fees payable to the Auditors and other expenses. The above expenses will be met out the proceeds of the issue

113

Previous Public or rights issue if any during last 5 years In April 1999, the Bank had made a rights issue of 4,48,55,480 equity shares of Rs. 10/- each at a premium of Rs. 5/- per share, with one detachable warrant carrying the right to subscribe to one share within 12-18 months attached to each new share, in the ratio of 5 (five) equity shares of Rs.10/- each for every 2 (two) equity shares of Rs.10/- each aggregating Rs. 6,728.32 lakhs.

Commission and Brokerage on Previous Public/ Rights issues made by the company The company has not borrowed through public or rights issue during the last 5 years

Option to Subscribe The Bank has made arrangements for issue and holding of the Bonds in only de-materialised form.

114

MATERIAL CONTRACTS AND DOCUMENTS Copies of the contracts and documents referred to below, all of which have been attached to a copy of this Information Memorandum, which has been delivered to BSE may be inspected at the Corporate office of The Bank of Rajasthan Limited between 10.00 a.m. to 12.00 noon on any working day between the date of the offer document and the date of closing of the issue.

1. Certified true copy of the Memorandum and Articles of Association of The Bank of Rajasthan Limited as amended from time to time.

2. Certified copy of the resolution of the Board of Directors of The Bank passed at the meeting held on November 7, 2005.

3. Copies of the Balance Sheet, Profit and Loss Account for the five years ended March 31, 2001, 2002, 2003, 2004, 2005 and the report of the Auditors thereon of the Bank of Rajasthan Limited.

4. Consents of (a) Board of Directors, (b) Company Secretary, (c) Trustees to the issue as referred to in their respective capacities.

5.

Copy of the letter dated December 19, 2005 from Credit Analysis of Research Limited and December 23, 2005 from ICRA Ltd. stating the credit rating of the Debentures.

6. Copy of the in-principle approval granted vide letter dated Dec 20th 2005 by The Stock Exchange, Mumbai for listing of the Debentures to be issued in terms of this offer document.

7. Copy of the Bipartite agreement dated May 2, 2003 between The Bank of Rajasthan Limited and National Securities Depository Limited (NSDL).

8. Copy of the Bipartite agreement dated March 10, 2003 between The Bank of Rajasthan Limited and Central Depository Services Limited (CDSL).

PART III

DECLARATION

NO STATEMENT MADE IN THIS INFORMATION MEMORANDUM CONTRAVENES ANY OF THE

PROVISIONS OF THE COMPANIES ACT, 1956 AND THE RULES MADE THEREUNDER. ALL THE LEGAL

REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES, INSTRUCTIONS,

ETC. ISSUED BY SEBI, GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF

HAVE BEEN DULY COMPLIED WITH.

Yours faithfully,

For The Bank of Rajasthan Limited

Dy. Managing Director Date: December 23, 2005

Place: Mumbai

Tier II Subordinated Bonds

Rating: CARE “A-“ and ICRA “LA-“

Application Form Serial No.

(Incorporated on May 7, 1943 under the Mewar Companies Act)

Registered Office Clock Tower , Udaipur- 313 00

Tel: 0294 - 2521257 / 2422116 Fa: 0294 - 2525709

Email: roudaipur@rajbank.comWebsite: www.bankofrajasthan.c

Private Placement of 700 Unsecured, Non-Convertible, Redeemable, Subo

Notes Series IV of face value Rs. 10 Lakh each for cash at par aggregating Rretaining Rs. 2000 Lakh

Dear Sirs,

Having read and understood the contents of the Memorandum of InformaBond(s). The amount payable on application as shown below is remitted name(s) on the Register of Bondholder(s).

(Please read carefully the instructions on the next page before filling minimum of five (5) Bonds and thereafter in multiples of one Bond.

No. (in words) No. (in figures) Amount (Rs.) (in words)

Amount (Rs.) (in figures)

Date Cheque /Demand Draft drawn on (Name of the

Bank and Branch)

Cheque/Demand Dr

SOLE/FIRST APPLICANT’S NAME IN FULL SIGNAT SECOND APPLICANT’S NAME THIRD APPLICANT’S NAME ADDRESS (Do not repeat name) (Post Box No. alone is not sufficient) PH. FAX

Private & Confidential. Not for Circulation

115

1 x no

om

Corporate Office Raghuvanshi Mills Compound,

11/12, Senapati Bapat Marg, Lower Parel (W), Mumbai – 400 013.

Phone : 91-22-30400006 Fax : 91-22-30400019

Email : sect_board@rajbank.com

rdinated Bonds in the nature of Promissory s. 7000 Lakh including a green shoe option for

tion, we apply for allotment to me/us of the herewith. On allotment, please place my/ our

up this form) The application shall be for a

FOR OFFICE USE ONLY Date of receipt of Application

Date of clearance of Cheque

Option I 112 months

Option II 88 months

aft No.

8.70%

8.50%

ORY / AUTHORISED SIGNATORY

PIN CODE

116

WE ARE APPLYING AS (TICK WHEREVER APPLICABLE) DOCUMENTS ENCLOSED Companies & Bodies Corporates

Insurance Companies Memorandum/ Articles/ Trust Deed

Religious and charitable trusts

Port Trusts in India Resolution to invest

Banks, FIs and Mutual Funds

Co-op Institutions / Societies

Signature Verification

RRBs and Co-operative Banks

Superannuation funds TDS Exemption Certificate, if any.

Pf & Gratuity Funds Individuals not bring minors

Other (please specify)

Authorised Contact Person & Phone Number_________________________________________________ DETAILS OF BANK ACCOUNT: Bank Name & Branch___________________________________________________________________ RTGS Number_________________________________________________________________________ Account No. _______________________ Nature of Account_-_____________________________________________________________ Tax Payer’s PAN IT Circle/ Not allotted GIR No. (Ref. Instruction 7) Ward/District Kindly attach photocopy of PAN document

TO BE FILLED IN ONLY IF THE APPLICANT IS AN INSTITUTION Name of the Authorised Signatory/ies

Designation Signature

1.

2.

3.

4.

Details required for issuing The Bonds in Electronic/ Dematerialized Form. Depository Name Specimen Signature/s Depository Participant’s Name

DP-ID

Sole/ First Applicant

Client-ID Beneficiary Account No

Second Applicant

Name of the Applicant We understand that in case of allotment of Bonds to me/us, our Beneficiary Account as mentioned above would be credited to the extent of Bonds allotted. In case The Bonds allotted to me/us cannot be credited to our Beneficiary Account for any reason whatsoever, we will be given physical Bond certificate(s).

117

---------✃ -------------✃ -----------------(Tear Here)------------✃ ---------------✃ ---------------✃ ------------✃ ------------- ACKNOWLEDGEMENT SLIP

(Incorporated on May 7, 1943 under the Mewar Companies Act)

Registered Office Clock Tower , Udaipur- 313 001

Tel: 0294 - 2521257 / 2422116 Fax no : 0294 - 2525709

Email: roudaipur@rajbank.com Website: www.bankofrajasthan.com

Corporate Office Raghuvanshi Mills Compound,

Senapati Bapat Marg, Lower Parel, Mumbai – 400 013.

Phone : 91-22-30400027 Fax : 91-22-56625082

Email : sect_board@rajbank.com

APPLICATION FORM FOR PLACEMENT OF The Bank of Rajasthan Limited BONDS SERIES IV Application Form Serial No. (To be filled in by the Applicant) Received from__________________________________________________________ Address_______________________________________________________________ _____________________________________________________________________ an application for ___________________________________________________Bonds

vide Cheque/ Demand Draft No. _______________Drawn on___________________ Dated_________________ amounting to Rs. ________________________________. Note: Cheque(s) are subject to realisation.

For all further correspondence pleasecontact:

INSTRUCTIONS

1. Application forms must be completed in full in BLOCK LETTERS IN ENGLISH. A blank space must be left between two or more parts of the name.

A B C D E L T D

Signatures should be made in English or in any of the Indian languages. Thumb impressions must be attested by an authorised official of a Bank or by a Magistrate/Notary Public under his/her official seal.

2. Application forms duly completed in all respects must be submitted with the respective Collecting Banker at the following Branches of The Bank of Rajasthan viz. Mumbai (Fort), New Delhi (Janpath), Kolkatta (Chowringi Road), Chennai, Jaipur (M.I. Road), Bangalore, Kota (Aerodrome Circle) , Chandigarh, Bhilwara (main), Jodhpur (sojati gate), Bikaner (kotgate), Indore (New Palasia), Udaipur (Bapu Bazar)

3. Cheque(s)/Demand Draft(s) should be drawn in favour of “The Bank of Rajasthan Limited - BOND ISSUE SERIES IV" and crossed "Account Payee Only". Cheque(s)/Demand draft(s) may be drawn on a Scheduled Commercial Bank, which is a member or a sub-member of the Banker’s Clearing House located at Mumbai (Lower Parel), New Delhi (Janpath), Kolkatta (Chowringi Road), Chennai, Jaipur (M.I. Road), Bangalore, Kota (Aerodrome Circle) , Chandigarh, Bhilwara (main), Jodhpur (sojati gate), Bikaner (kotgate), Indore (New Palasia), Udaipur (Bapu Bazar)

4. Outstation cheques, cash, money orders, postal orders and stockinvest shall not be accepted.

5. As a matter of precaution against possible fraudulent encashment of interest warrants due to loss/misplacement, applicants are requested to mention the full particulars to their bank account, as specified in the Application Form. Interest warrants will then be made out in favour of the bank for credit to the applicant’s account. In case the full particulars are not given, cheques will be issued in the name of the applicant at his/ her/their risk.

6. Receipt of applications will be acknowledged by the respective Collecting Banker in the “Acknowledgment Slip”, appearing below the Application Form. No separate receipt will be issued.

7. All applicants should mention their Permanent Account Number or the GIR number allotted under Income Tax Act, 1961 and the Income-Tax Circle/Ward/District. In case where neither the PAN nor GIR number has been allotted, the fact of non-allotment should be mentioned in the application form in the space provided. Income tax as applicable will be deducted at source at the time of payment of interest.

8. The application would be accepted as per the terms of the Scheme outlined in the Memorandum of Private Placement..