(A Government of India Undertaking) [constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970]

Head Office: 11, Hemanta Basu Sarani, Kolkata – 700 001, West Bengal. Tel.: (033) Tel.: (033) 2248 3857, 2210 6803 Fax.: 91-33-2242-0897, 2213-0989

Website : www.unitedbankofindia.com E-mail :agmifm@unitedbank.co.in,gmtm@unitedbank.co.in

TABLE OF CONTENTS

INDEX TITLE

DEFINITIONS/ ABBREVIATIONS

RISK FACTORS AND MANAGEMENT PROPOSALS THEREOF

HIGHLIGHTS OF THE BANK

PART I

I. GENERAL INFORMATION

II. CAPITAL STRUCTURE

III. TERMS OF THE PRESENT ISSUE

IV. PARTICULARS OF THE ISSUE

V. BANK & MANAGEMENT

VI. ORGNAISATION STRUCTURE & MANAGEMENT

VII. SIGNIFICANT REGULATORY MATTERS RELATED TO THE BANK

VIII. STOCK MARKET DATA OF THE EQUITY SHARES OF THE BANK

IX. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL PERFORMANCE

X. BASIS FOR ISSUE PRICE

XI. OUTSTANDING LITIGATIONS, DEFAULTS AND MATERIAL DEVELOPMENTS

XII. INVESTOR GRIEVANCES & REDRESSAL SYSTEM

PART II

I. GENERAL INFORMATION

II. FINANCIAL INFORMATION

III. STATUTORY AND OTHER INFORMATION

IV. MAIN PROVISIONS OF THE BANK NATIONALISATION ACT

V. MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION

PART III

DECLARATION

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DEFINITIONS/ ABBREVATIONS Term Meaning/ Definition/ Complete Term ALM Asset Liability Management ALCO Asset Liability Committee Act The Companies Act, 1956 as amended from time to time till date Application Form The form in terms of which, the investors shall apply for the Unsecured

Redeemable Subordinated Bonds in the nature of Promissory Notes/ Debentures of the Bank

ARC/ A.R.C. Asset Reconstruction Corporation Arrangers IDBI Capital Market Services Limited

Standard Chartered Bank SPA Merchant Bankers Ltd United Bank of India UTI Bank Ltd

The Bank/ The Issuer Company/ the Issuer/ UBI

United Bank of India, constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970, and having its Head Office at 11, Hemanta Basu Sarani, 16, Old Court House Street, Kolkata – 700 001, West Bengal

Board/ BoD/ BOD Board of Directors of the Bank or a Committee thereof Bond(s) Unsecured Redeemable Subordinated (Tier-II) Bonds in the nature of

Promissory Notes/ Debentures of Rs. 10,00,000/- each offered through private placement route under the terms of this Information Memorandum

Bondholder(s) The Holder(s) of the Bond(s) in dematerialised form Beneficial Owner(s) Bondholder(s) holding Bond(s) in dematerialized form (Beneficial Owner of

the Bond(s) as defined in clause (a) of sub-section of Section 2 of the Depositories Act, 1996)

bps basis points Concerned Stock Exchange

National Stock Exchange of India Limited (NSE)

CARE Credit Analysis & Research Limited CDSL Central Depository Services (India) Limited CAR Capital Adequacy Ratio CRAR Capital to Risk weighted Assets Ratio CAGR Compounded Annual Growth Rate CDs Certificate(s) of Deposit(s) CDR Corporate Debt Restructuring CPs Commercial Papers DPGs Deferred Payment Guarantees DICGC Deferred Insurance Credit Guarantee DDA Deemed Date of Allotment for the Bonds DRR Debenture/ Bond Redemption Reserve DRT Debt Recovery Tribunals ECGC Export Credit Guarantee Corporation FY/ F.Y. Financial Year FIs Financial Institutions FIIs Foreign Institutional Investors FB Fund Based FIMMDA Fixed Income Money Market & Derivatives Association of India GOI/ GoI Government of India HRD Human Resource Development HTM Held Till Maturity

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ICRA ICRA Limited Issue/ Offer/ Offering Private Placement of Unsecured Redeemable Subordinated (Tier-II) Bonds

in the nature of Promissory Notes/ Debentures of Rs. 10,00,000/- each for cash at par aggregating to Rs. 200 crores including a green shoe option of Rs. 50 crores offered under the terms of this Information Memorandum

Information Memorandum/ Offer Document

Memorandum of Information dated August 3rd., 2006 for Private Placement of Unsecured Redeemable Subordinated (Tier-II) Bonds in the nature of Promissory Notes/ Debentures of Rs. 10,00,000/- each for cash at par aggregating to Rs. 200 crores including a green shoe option of Rs. 50 crores to be issued by United Bank of India

IT Income Tax IS Information Systems Arrangers IDBI Capital Market Services Limited

Standard Chartered Bank UTI Bank Ltd SPA Merchant Bankers Ltd United Bank of India

LIC Life Insurance Corporation of India LCs Letters of Credit MF/ Mfs MP

Mutual Fund(s) Management Perception

NSDL National Securities Depository Limited NRIs Non Resident Indians NPA/ NPAs Non Performing Asset(s) NSE National Stock Exchange of India Limited NBFCs Non-Banking Finance Companies NFB Non-Fund Based OCBs Overseas Corporate Bodies OTS One Time Settlement OCS Out-of-court Settlement PLR Prime Lending Rate PAN Permanent Account Number PSC Priority Sector Credit Registrars to the Issue/ Registrars/ Registrar & Transfer Agents

Intime Spectrum Registry Limited

RBI Reserve Bank of India RNBCs Residuary Non-Banking Companies Rating Agencies ICRA Limited and Credit Analysis & Research Limited SEBI Securities and Exchange Board of India SARFAESI The Securitisation and Reconstruction of Financial Assets and Enforcement

of Security Interest Act, 2002 SSIs Small Scale Industries SLR Statutory Liquidity Ratio Trustees/ Trustees to the Bondholder(s)

IDBI Trusteeship Services Limited

TDS Tax Deducted at Source VRS Voluntary Retirement Scheme W/O Written Off

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RISK ENVISAGED BY MANAGEMENT AND MANAGEMENT PROPOSALS (MP) TO ADDRESS THE RISKS Following are certain issues for the investors to consider before taking an investment decision in the offer. In some of the risk factors and management proposals thereof, reference has been invited for detailed para mentioned elsewhere in this Information Memorandum, which can be used to obtain more details about the said risk. INTERNAL RISKS 1.Debenture/ Bond Redemption Reserve & Unsecured Bonds Creation of Debenture/ Bond Redemption Reserve is not envisaged for the proposed issue of bonds and the Bonds proposed to be issued are unsecured i.e. they are not proposed to be secured against any asset of the Bank. MP: United Bank of India is a banking company within the meaning of the Banking Regulation Act, 1949. The resources through current issue of bonds are being raised by the Bank for augmenting the Tier-II Capital for strengthening the Capital Adequacy and enhancing its long term resources. Department of Company Affairs, Ministry of Law Justice and Company Affairs, Government of India has vide general clarification no.6/3/2001-CL.V dated 18/04/2002 clarified that banks need not create Debenture Redemption Reserve as specified under section 117C of the Companies Act, 1956. Also as per extant RBI guidelines in respect of issue of Tier-II bonds issued vide its master circular no. DBOD No. BP.BC.13/21.01.002 /2005-06 dated July 04, 2005, the Tier-II bonds are to be issued as unsecured and subordinated bonds for being eligible for inclusion in Tier II capital of the Issuing Bank. Moreover since the resources raised by the Bank are being utilised for the purpose of its business i.e. providing credit and other facilities to the industry, the assets of the Bank are mostly in form of loans and advances. Hence it is proposed that the bonds shall be unsecured in nature and that they shall not be secured against any asset of the Bank. However, the Bank has appointed a Trustee to protect the interest of the investors. 2.Credit Risk The business of lending carries the risk of default by the borrowers. MP: Any lending activity is exposed to credit risk arising from the risk of default by the borrowers. The Bank takes adequate care to minimise such risks by having a well-diversified loan portfolio and industry-wise, promoter group-wise and specific client-wise exposure limits are set to avoid concentration of lending to any specific industry segment/ promoter group/ company and to help minimise credit risk. The Bank also follows a comprehensive project/credit appraisal system and lending norms, which govern industry/client exposure. The Bank has put in place a credit rating system under which the borrowal accounts of Rs 2.00 lacs and above are rated on several parameters and the risk is priced with a suitable mark-up over PLR based on the credit rating. The Bank has also implemented an active Risk Management Policy aimed at mitigating various credit related risks. For other details on the credit risk management process in the Bank, the investors may refer to the para ‘Risk Management’ mentioned elsewhere in this Information Memorandum. 3.Market Risks Increased interest rate volatility exposes United Bank of India to market rate risk arising out of maturity/ rate mismatches. MP: 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. 4.Asset Liability Mismatch A large portion of the funding of the Bank is in the form of short and medium term deposits. The asset liability position of the Bank could be affected if the depositors do not roll over the deposits. MP: As per the normal behavioral pattern and past experience, a large portion of the deposits gets rolled over. The Bank feels that in the event of these deposits not being rolled over, the fresh accretion of deposits would take care of the Asset Liability mismatches. In addition, the Bank has the cushion of investments of Rs. 9503 crores in the long-term (over 5 years) category, which can be utilized to correct any medium term mismatches. Moreover, the Bank has an Asset Liability Management system in place to actively monitor and manage the

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duration and liquidity mismatches. For more details on the Asset Liability position refer to the para ‘Asset Liability Management’ mentioned elsewhere in this Information Memorandum. 5.Credit Rating United Bank of India has obtained credit rating of ‘LAA’ [L Double A] from ICRA for an amount of Rs. 200 crores including a green shoe option of Rs. 50 crores for its current issue of Tier-II Bonds. Instruments carrying this rating indicates that the Risk factors are modest and may vary slightly. The protective factors are strong and the prospect of timely payment of principal and interest as per terms under adverse circumstances, as may be visualised, differs from “LAAA" only marginally. The Bank has also obtained a credit rating of ‘CARE AA’ [Double A] from CARE for an amount of Rs. 200 crores including a green shoe option of Rs. 50 crores for its current issue of Tier-II Bonds. Instruments carrying this rating are judged to be of ‘High Quality’ by all standards. They are also classified as ‘High Investment Grade’. MP: Investors may please note that the above ratings are not recommendation to buy, sell or hold securities and investors should take their own decision. The ratings may be subject to revision or withdrawal at any time by the assigning rating agencies and each rating should be evaluated independently of any other rating. The ratings obtained are subject to revision at any point of time in the future. The rating agencies have the right to suspend, withdraw the rating at any time on the basis of new information etc. Credit Rating of all listed and unlisted taxable bonds/ debentures/ commercial paper issued by the Bank for the last 3 years have been disclosed under the head ‘Credit Rating’ mentioned elsewhere in this Information Memorandum. 6.Contingent Liabilities As on March 31, 2006, the contingent liabilities of the Bank were at Rs. 2,770.12 crores comprising claims against the Bank not acknowledged as debts (Rs. 3.19 crores), liability on account of outstanding forward exchange contracts (Rs. 963.14 crores), guarantees on behalf of constituents (Rs. 1,248.13 crores), acceptances, endorsements and other obligations (Rs. 554.13crores) and others (Rs. 1.53 crores). MP: The contingent liabilities have arisen in the normal course of business of the Bank and are according to the prudential norms prescribed by RBI. 7.Non Performing Assets (NPAs) As on March 31, 2006, the net NPAs of the Bank stood at 1.95% of its net advances amounting to Rs. 303.09 crores in absolute terms. In the event of non-recovery of these assets, the Bank may have to provide for these NPAs, which might affect the profitability of the Bank in future. For details, investors are advised to refer to para ‘Asset Classification, Income Recognition & Provisioning’ mentioned elsewhere in this Information Memorandum. MP: The Net NPAs of the Bank have consistently been declining in percentage terms, from 7.90% as on March 31, 2003 to 3.75% as on March 31, 2004 and to 2.43% as on March 31, 2005 and to 1.95% as on March 31, 2006. The Bank has provided for its NPAs in conformity with RBI guidelines. The Bank 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 overdues. Besides Debt Recovery Tribunal (DRT) set up for faster settlement of recovery litigation, GoI has enacted ‘The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’ enabling FIs and Banks to securitise and reconstruct financial assets and enforce security more effectively. Reserve Bank of India has formulated detailed guidelines for operation of the scheme. The Bank has issued notices under the Act to 742 parties/borrowers and recovered Rs. 90.20 crores from those borrowers. Thus, the Bank has been taking recourse to all the available methods to recover its over dues from the borrowers. 8.Asset Concentration The top 5 industries (non-food) account for 24.87 % of the gross credit exposure of the Bank as on March 31, 2006. Also, the top ten borrowers of the Bank account for about 12.15 % of the gross total advances of the Bank as on March 31, 2006. The borrower specific and industry specific behavior may potentially affect the overall asset quality of the Bank. MP: The Bank has put in place a credit monitoring mechanism to monitor the performance of its borrowers, regularly perform appraisal and do the requisite follow up. The top ten borrowers of the Bank as mentioned above are Standard Assets as on March 31, 2006.As regards the industry concentration, it has been the policy of the Bank to diversify the assistance over different industry/promoter groups with a prudential cap of 10% to a single industry. Investors are advised to refer to para ‘Industry-wise Classification’ mentioned elsewhere in this Information Memorandum.

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9.Profits of the Bank The net profits of the Bank declined from Rs. 315.08 crores in FY 2004 to Rs. 300.18 crores in FY 2005 and to Rs. 204.56 crores in FY 2006. The Bank made a profit of Rs. 191.80 crores from sale of investments (treasury income) during FY 2006 which may not be of sustainable in nature. MP: It may be noted that operating profit of the Bank for FY 2006 has come from diversified income streams comprising net interest income, profit on sale of securities and other income which account for 36.23%,6.81%,16.22% of the total income respectively. Hence, a substantial part of the growth in operating profits is accounted for by net interest income. 10.Regional Concentration of the Bank United Bank of India has a regional concentration in eastern parts of the country accounting for approximately 87.10% of all branches in terms of numbers. The regional presence of the Bank may compromise its competitive position vis-à-vis its national level competitors. MP: The regional presence of the Bank may not be a hindrance to its growth prospects. The global deposits of the Bank have grown at a CAGR of 8.33% to Rs. 29,250 crores and the global net advances have grown at a CAGR of 16.24% to Rs. 15,963 during the past 5 years. During the year, the Bank has opened 10 new branches taking its branches network to 1318 and 65 extension counters as on March 31, 2006 with presence in all the States. The Bank is endeavoring to increase its presence in other parts of the country. Also, the Bank proposes to effectively utilise technology to increase its reach and presence. For details of geographical distribution of branches, investors are advised to refer to para ‘Distribution of Branches’ mentioned elsewhere in this Information Memorandum. 11.Decline in Return Ratios Yield on Investment of the Bank (excluding profit on sale of investments) has shown a declining trend from 11.87 % in FY 2000 to 9.34 % in FY 2006. The Yield on Advances of the Bank has decreased from 9.30% to 8.60 % during the same period. MP: Yield on investments and average rate of interest earned has come down because of the interest rate in general coming down. The continuous downward trend in the interest rates over last one year has been the major reason for decline in Yield on Investment of the Bank. For example, the yield on 10 year GoI security, which was 10.85% as on March 31, 2000 has fallen to 7.55 % on March 31, 2006. As compared to this decline of 330 bps (or 3.30%), the yield on investment (domestic) for the Bank has fallen by 130 bps (or 1.30 %). 12.Outstanding Litigations against the Bank There are outstanding litigations amounting to Rs. 3.19 crores (a total of 9 cases) as on March 31, 2006 for “Claims not acknowledged as debts”. For details, please refer to the para on Litigation mentioned elsewhere in this Information Memorandum. MP: These claims are not likely to affect the operations and finances of the Bank. 13.RBI’s Annual Financial Inspection Report The Annual Inspection Report of RBI on the financial position of the Bank as on March 31, 2006 has identified certain weaknesses in the system, operational irregularities and other deficiencies in the internal controls. MP: The Bank would like to clarify that the inspection of the Bank by RBI is a regular exercise and is carried out periodically for all the banks and financial institutions. The reports of RBI are strictly confidential and the Bank is in dialogue with RBI in respect of observations made by RBI in their report for previous years. RBI does not allow disclosure of its inspection reports and that all the disclosures in this Information Memorandum are on the basis of management and audit reports of the Bank. 14.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. MP: 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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15.Export Credit Target The Bank has not met export credit target (12% of net credit) for the last five years. For more details, refer to para ‘Export Credit’ mentioned elsewhere in this Information Memorandum. MP:The non-achievement of this target has no negative impact on the working results of the Bank. RBI has not taken any punitive action against the Bank for non-achievement of the targets. EXTERNAL RISKS 1.Regulatory restrictions on the Bank and limitations of the powers of shareholders of the Bank There are a number of restrictions as per the Bank Nationalisation Act and Banking Regulations Act, which impede flexibility of the Bank’s operations and affect/restrict investors’ right. These are as under: (i) The Banks can carry on business/activities as specified in the Act. There is no flexibility to pursue

profitable avenues if they arise, in contrast with companies under the Companies Act, where shareholders can amend the Objects Clause by a special resolution.

(ii) In terms of Section 8 of The Banking Regulation Act, 1949, the Bank is prohibited from doing trading activity, which may act as an operational constraint.

(iii) In terms of Section 17(1) of The Banking Regulation Act, 1949, 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 29 and before any dividend is declared transfer to the Reserve Fund a sum equivalent to not less than twenty five percent of such profit.

(iv) In terms of Section 19 of The Banking Regulation Act, 1949 there are some restrictions on the banking companies regarding opening of subsidiaries which may deny the Bank from exploiting emerging business opportunities.

(v) In terms of Section 23 of The Banking Regulation Act, 1949 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.

(vi) In terms of Section 25 of The Banking Regulation Act, 1949 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.

(vii) There are restrictions in the Banking Regulation Act regarding, a. Management of a bank including appointment of directors b. Borrowings and creation of floating charge thereby hampering leverage 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. Further issues of capital including issue of bonus shares/rights shares for which prior MoF approval

is required (viii)The financial disclosures in this Information Memorandum may not be available to the investors after

listing on a continuous basis. (ix) Various rights/powers of shareholders available under the Companies Act in this behalf are not available

to the shareholders of the banks. These rights include rights such as calling for general meetings, inspection of minutes and other material records, application for relief in cases of oppression and mismanagement, voluntary winding up etc.

(x) As per Section 3 (2E) of the Bank Nationalisation Act, “no shareholder other than Central Government shall be entitled to exercise voting rights in respect of any equity shares held by him/her in

excess of one per cent of the total voting rights of all the shareholders of the Bank”. (xi) No banking company shall pay dividend on its shares until all its capitalised expenses (including

preliminary, organisational expenses, share selling commission, brokerage, amounts of losses and any other item not represented by tangible assets) have been completely written off. The Bank has

received an exemption from GoI, Ministry of Finance, Department of Economic Affairs (Banking Division) vide gazette notification F. No. 11/6/2003-BOA dated July 18th, 2003 from the provisions of the said Section 15(1) relating to the payment of dividend, for a period of five years from the date of the notification.

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.

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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. MP: The Bank has an established broad-based presence and has been taking steps to enhance customer satisfaction by upgrading skills, systems and technology to meet such challenges. The Bank is attempting to add quality assets on competitive terms. The Bank is also taking steps to broad base its product bouquet with a special emphasis on enhancement in the non-fund based income. On the resource-raising front, the Bank is actively endeavoring to broaden its reach and raise resources through its wide distribution network of 1318 branches and 65 extension counters. 4.Changes in Regulatory Policies The operations of the Banking Industry are subject to regulations by the Government/ RBI. Major changes in Government/ RBI policies relating to banking sector may have an impact on the operations of the Bank. MP: 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 55 years and does not perceive policy changes to be a major threat. 5.Disintermediation in the Financial Markets As the financial markets mature and with growing developments in the capital markets, the trend towards disintermediation may be increasingly in evidence. In such a scenario, may companies including the current and potential borrowers of the Bank may access capital markets directly for their financing needs and reduce their dependence on the banking system. This may have an adverse impact on the level of deposits and also on the level and mix of advances portfolio and the profitability of the Banks. MP: The Bank has, in recent years, launched several retail lending schemes and value added products so as to broaden its borrower base. Further, disintermediation brings with it the opportunity for the Bank to expand its fee-based activities. The Bank has been endeavoring to develop a presence in several financial services to earn fee based income by focussing on businesses such as foreign exchange, treasury, investments, cash management, insurance, depository, debenture trustee etc., thus taking advantage of the disintermediation phenomenon. 6.Forex Risk Exchange Rate fluctuations may have an impact on the Bank’s financial performance. MP: As per RBI guidelines, banks are not allowed to keep open position on their foreign exchange transactions beyond prescribed limits on a daily basis. Foreign exchange transactions beyond such limits, if any, must be squared off at the end of each day. Hence, the risk from exchange rate fluctuations is minimised. The Board of Directors of the Bank has also prescribed limits for gaps or mismatches in maturities of Bank’s foreign currency assets and liabilities and forward transactions in foreign exchange. The Bank operates within the limits fixed for gaps or mismatches in maturities of Bank’s foreign currency assets and liabilities and forward transactions in foreign exchange, thus minimising the risks of mismatches in maturities and interest rates. 7. Interest Rate Risk Present interest rates on deposits and advances are based on so may micro and macro economic factors including the directives of the Reserve Bank of India which are likely to be market driven due to deregulation and thereby may result in increasing pressure on spreads and affect profitability. Interest rate volatility exposes the Bank to an interest rate risk or market risk. Such interest rate risk has a potential impact on net interest income or net interest margin as well as on the market value of the fixed income securities held by the Bank in its investment portfolio. MP: 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. For more details on the Risk Management procedures, investors are advised to refer to para ‘Risk Management’ mentioned elsewhere in this Information Memorandum.

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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. MP: For mitigating and controlling the operational risk, the Bank has established a strong internal control system. Apart from that, the Bank also has a separate administrative structure to formulate, implement and monitor systems and procedures. 9. Financial Statements in the Information Memorandum The financial statements and derived ratios therefrom contained in this 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 offer. MP: 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 TO RISK FACTORS • Net worth (excluding revaluation reserves) of the Bank as on March 31, 2006 was Rs. 1676.15 crores. • The present private placement of the Bank aggregates Rs.200 crores including a green shoe option of Rs. 50 Crores. • The Book Value of the share as on March 31, 2006 was Rs. 11.33/- (face value of Rs. 10/-). • 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 this Information Memorandum. However, such other Financial Information contained in this Information Memorandum except as contained in PART II has been certified by the management of the Bank. HIGHLIGHTS OF THE BANK • Bank with 55 years of existence. • The Bank is professionally managed with a track record of profitability. • The Bank has a large network of branches spread throughout the country that enables it to raise funds competitively. As on March 31, 2006, the domestic network of the Bank stood at 1383 offices which includes 1318 branches and 65 extension counters. • Capital Adequacy Ratio of 13.12% as on March 31, 2006, which is above minimum of 9% prescribed by RBI. • Consistent Deposits growth: Deposits have grown by a CAGR of 8.33% during the last 5 years. • Consistent Advances growth: Gross Advances have grown by a CAGR of 16.24% during the last 5 years.

PART I

(A Government of India Undertaking) (constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970)

Head Office, 11, Hemanta Basu Sarani, 16, Old Court House Street, Kolkata – 700 001, West Bengal. Tel.: (033) Tel.: (033) 2248 3857, 2210 6803 Fax.: 91-33-2242-0897, 2213-0989

Website : www.unitedbankofindia.com E-mail : E-mail :agmifm@unitedbank.co.in,gmtm@unitedbank.co.in Private Placement of Unsecured Redeemable Subordinated (Tier-II) Bonds in the nature of Promissory Notes/ Debentures of Rs. 10,00,000/- each for cash at par aggregating to Rs. 200 crores including a green shoe option of Rs. 50 crores. I. GENERAL INFORMATION OFFER OF BONDS United Bank of India is seeking offer for subscription of Unsecured Redeemable Non-Convertible Subordinated (Tier-II) Bonds in the nature of Promissory Notes/ Debentures of Rs. 10,00,000/- each for cash at par aggregating to Rs. 200 crores including a green shoe option of Rs. 50 crores. AUTHORITY FOR THE PRESENT ISSUE

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This present issue of Bonds is being made pursuant to the resolution of the Board of Directors of the Bank, passed at its meeting held on 19th July, 2006. REGISTRATION AND GOVERNMENT APPROVALS This present issue of Bonds is being made in accordance with extant RBI guidelines vide its master circular no. DBOD No. BP.BC.13/21.01.002 /2005-06 dated July 04, 2005 on Prudential Norms for Capital Adequacy covering norms for issue of unsecured bonds as subordinated debt by Banks for raising Tier II capital. The Bank can undertake the activities proposed by it in view of the present approvals and no further approval from any government authority(ies)/ Reserve Bank of India (RBI) is required by the Bank to undertake the proposed activities save and except those approvals which may be required to be taken in the normal course of business from time to time. DISCLAIMER CLAUSE This Information Memorandum for issue of Bonds on private placement basis has been prepared in conformity with the extant 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. Therefore as per the applicable provisions, copy of this Information Memorandum has not been filed or submitted to SEBI. It is to be distinctly understood that the Information Memorandum should not, in any way, be deemed or construed that the same has been cleared or vetted by SEBI. SEBI does not take any responsibility either for the financial soundness of any scheme or the project for which the Issue is proposed to be made, or for the correctness of the statements made or opinions expressed in this Information Memorandum. The Issuer Company certifies that the disclosures made in this Information Memorandum are generally adequate and are in conformity with the captioned SEBI circular. This requirement is to facilitate investors to take an informed decision for making investment in the proposed Issue. It should also be clearly understood that while the Issuer Company is primarily responsible for the correctness, adequacy and disclosure of all relevant information in this Information Memorandum. The Issuer Company herein also certifies that it has disclosed various material information including those relating to litigation like commercial disputes etc in this Information Memorandum. Further the Issuer Company confirms that: a. this Information Memorandum is in conformity with the documents, materials and papers relevant to the Issue; b. all the legal requirements connected with the said Issue as also the guidelines, instructions, etc., issued by SEBI, the government and any other competent authority in this behalf have been duly complied with; and c. the disclosures made in this Information Memorandum are true, fair and adequate to enable the investors to make a well informed decision as to the investment in the proposed Issue. d. all the intermediaries named in this Information Memorandum are registered with SEBI and that till date such registration is valid. The Issue of Bonds being made on private placement basis, filing of this Information Memorandum is not required, however the same does not absolve the Issuer Company from any liabilities under Section 63 or Section 68 of the Companies Act, 1956 or from the requirement of obtaining such statutory and other clearances as may be required for the purpose of the proposed Issue. SEBI further reserves the right to take up at any point of time, with the Issuer Company, any irregularities or lapses in this Information Memorandum. DISCLAIMER STATEMENT FROM THE LEAD ARRANGERS 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 Information Memorandum. The role of the Lead Arrangers in the assignment is confined to marketing and placement of the bonds on the basis of this Memorandum as prepared by the Issuer Company. The Lead Arrangers have neither scrutinized or vetted nor have they done any due-diligence for verification of the contents of this Memorandum. The Lead Arrangers shall use this Information 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 Information Memorandum by the Lead Arrangers should not in any way be deemed or construed that the Information Memorandum has been prepared, cleared, approved or vetted by the Lead Arrangers; nor do they in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Information Memorandum; nor do they take responsibility for the financial or other soundness of this Issuer, its promoters, its management or any scheme or project of the Issuer Company. The Lead Arrangers or any

11

of their directors, 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 Information Memorandum. DISCLAIMER STATEMENT FROM THE ISSUER The Issuer Company accepts no responsibility for statements made otherwise than in the Information Memorandum or any other material issued by or at the instance of the Issuer Company and anyone placing reliance on any other source of information would be doing so at his/her/their own risk. FILING OF INFORMATION MEMORANDUM As per extant SEBI guidelines/ regulations, filing of this Information Memorandum is not required either with SEBI, RoC or any other regulatory authority(ies). The present issue of bonds being made on private placement basis, copy of this Information Memorandum along with the documents as specified under the head “Material Contracts and Documents for Inspection” required to be filed with Registrar of Companies (RoC) under Section 60 of the Companies Act, 1956 shall not be applicable and hence the same has not been delivered to RoC for registration nor has the same been filed with SEBI for vetting/ comments/ registration. DISCLAIMER CLAUSE OF THE STOCK EXCHANGE As required, a copy of this Information Memorandum has been submitted to the National Stock Exchange of India Limited (hereinafter referred to as NSE) for hosting the same on its website. It is to be distinctly understood that such submission of the Information Memorandum to NSE or hosting the same on its website should not in any way be deemed or construed that the Information Memorandum has been cleared or approved by NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Information Memorandum; nor does it warrant that this Issuer’s securities will be listed or continue to be listed on the Exchange; 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. Every person who desires to apply for or otherwise acquire any securities of this Issuer may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/ acquisition whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever. DISCLAIMER IN RESPECT OF JURISDICTION This offer of Bonds is made in India to Companies, Corporate Bodies, Trusts registered under the Indian Trusts Act, 1882, Societies registered under the Societies Registration Act, 1860 or any other applicable laws, provided that such Trust/ Society is authorised under constitution/ rules/ bye-laws to hold debentures in a Company, Indian Mutual Funds registered with SEBI, Indian Financial Institutions, Insurance Companies, Provident/ Pension/ Gratuity/ Superannuation Fund Trusts, Commercial Banks including Regional Rural Banks and Co-operative Banks as defined under Indian laws. The Information Memorandum does not, however, constitute an offer to sell or an invitation to subscribe to securities offered hereby in any other jurisdiction to any person to whom it is unlawful to make an offer or invitation in such jurisdiction. Any person into whose possession this Information Memorandum comes is required to inform himself about and to observe any such restrictions. Any disputes arising out of this issue will be subject to the exclusive jurisdiction of the courts at Kolkata (West Bengal). All information considered adequate and relevant about the Issue and the Issuer Company has been made available in this Information Memorandum for the use and perusal of the potential investors and no selective or additional information would be available for a section of investors in any manner whatsoever. LISTING The Issuer Company is an unlisted Bank and therefore its equity shares are not listed on any recognised Stock Exchange(s). The Bank has made an application to the National Stock Exchange of India Limited (hereinafter referred to as NSE) to list the Bonds to be issued and allotted under this Information Memorandum. The Bank shall complete all the formalities relating to listing of the Bonds within 70 days from the Date of Closure of the Issue. If such permission is not granted within 70 days from the Date of Closure of the Issue or where such permission is refused before the expiry of the 70 days from the Date of Closure of the Issue, the Bank shall forthwith repay without interest, all monies received from the applicants in pursuance of this Information Memorandum, and if such money is not repaid within 8 days after the Bank becomes liable to repay it (i.e. from the date of refusal or 70 days from the Date of Closing of the subscription list, whichever is earlier), then the Bank and every director of the Bank who is an officer in default shall, on and from expiry of 8 days, will be jointly and severally liable to repay the money, with interest at the rate of 15 per cent per annum on

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application money, as prescribed under Section 73 of the Companies Act, 1956. MINIMUM SUBSCRIPTION As stated in the SEBI circular no. SEBI/MRD/SE/AT/46/2003 dated December 22, 2003, the requirement of minimum subscription shall not be applicable for the issue of Bonds on private placement basis and therefore the Bank shall not be liable to refund the issue subscription(s)/ proceed(s) in the event of the total issue collection falling short of issue size or certain percentage of issue size. CAUTIONARY NOTE Though not applicable to the issue of bonds, as a matter of abundant caution, attention of applicants is specially drawn to the provisions of sub-section (1) of Section 68A of the Act, which is reproduced below: “Any person who: a) makes, in a fictitious name, an application to a company for acquiring, or subscribing for, any shares therein, or b) otherwise induces a company to allot, or register any transfer of, shares therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years.” MINIMUM-MAXIMUM TARGET The Bank proposes to make Issue of Unsecured Redeemable Non-Convertible Subordinated (Tier-II) Bonds in the nature of Promissory Notes/ Debentures aggregating to Rs. 200 crores including a green shoe option of Rs. 50 crores. ISSUE SCHEDULE The Issue will open for subscription at the commencement of banking hours and close at the close of banking hours on the dates indicated below or earlier or on such extended date as may be decided by the Bank at its sole and absolute discretion without giving any reasons or prior notice. In such a case, investors will be intimated about the revised time schedule by the Bank. The Bank also reserves the right to keep multiple Deemed Date(s) of Allotment at its sole and absolute discretion without any notice. Issue Opening Date August 7 th, 2006 Issue Closing Date August 18th, 2006 Deemed Date of Allotment August 21st, 2006

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STATUTORY AUDITORS (FY 2005-2006) M/s. Bhattacharya Das & Co. Chartered Accountants 3A, Garstin Place, 4th Floor, Kolkata – 700 001. Tel No. (033) 22483020. Fax 91-33-22137668. M/s. Gopal Gupta & Co. Chartered Accountants 588, Mutthiganj, 1st Floor, Allahabad – 211 003.. Tel No. (0532) 2415062. Fax No. 91-532-2415062. M/s. D K Chhajer & Co. Chartered Accountants 5,Old Court House Street, 2nd Floor, Kolkata – 700 001. Tel No. (033-) 22306106,22302598. Fax No. 91-33-22206106. M/s. George Read & Co. Chartered Accountants 1, Chowringhee Square, Kolkata – 700 069. Tel No. (033) 2248-2919,22439094. Fax No. 91-33--------------------------. M/s. Singhvi, Dev & Unni Chartered Accountants 12, Red Course Road, Madhavnagar, Bangalore. Tel No. (080) 22261371. Fax No. 91-80-22205469. REGISTRAR TO THE ISSUE Intime Spectrum Registry Limited C-13, Pannalal Silk Mills Compound, LBS Marg Bhandup (W), Mumbai – 400 078. Tel: (022) 55555491. Fax: +91-22-55555499. Web site www.intimespectrum .com E-mail:solar@intimespectrum.com TRUSTEES FOR THE BONDHOLDERS IDBI Trusteeship Services Limited Registered Office, Asian Building, Ground Floor, 17, R, Kamani Marg, Mumbai – 400 001. Tel No. (022) 56311771-3. Fax No. 91-22-56311776. E-mail: itsl@idbitrustee.co.in

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BANKERS TO THE ISSUE United Bank of India Centre Address STD

Code Telephone Number(s)

Fax Number(s)

Old Court House Street

11, Hemanta Basu Sarani, Kolkata – 700 001

033 22487536 2248-6570

Chennai 117, Post Box No. 8270, Armanian Street, Chennai – 600 001

044 25341097 25340580

Bangalore 40 Kempegowda Road, Bangalore – 560 009

080 22252910 22250412

Hyderabad 4-3-331 Bank Street, Hyderabad – 500 195

040 24756811, 24755486

24755486, 24756994

Ahmedabad Lal Darwaja, Post Box No. 170, United Bank of India Building, Ahmedabad – 380 001

079 25506957, 25506274

25506272

New Delhi J C Das Building, 90/8 Connaught Circus, (Near Madras Hotel), New Delhi – 110 001

011 2336 0661

23347012

Mumbai Post Box No. 298, United Bank of India Building, 25, Sir Pheroz Shah Mehta Road, Fort, Mumbai – 400 001

022 22873656, 22871261/62

22886909

Guwahati Hem Barua Road, Panbazar, Guwahati – 781 001

0361 254 0281, 2540043

254 0042/43

COMPLIANCE OFFICER

Mr. A. K. Ray General Manager (Treasury Management, International Banking & Accounts) United Bank of India Head Office, 11, Hemanta Basu Sarani, 16, Old Court House Street, Kolkata – 700 001, West Bengal. Tel.: (033) 22106803. Fax.: 91-33-22420897. E-mail : gmtm@unitedbank.co.in Website: www.unitedbankofindia.com The investors can contact the Compliance Officer in case of any pre-issue/ post-issue related problems such as non-credit of letter(s) of allotment/ bond certificate(s) in the demat account, non-receipt of refund order(s), interest warrant(s)/ cheque(s) etc. BROKERS TO THE ISSUE Apart from the Lead Arrangers to the Issue appointed by the Issuer Company, there is/are no other broker(s) appointed by the Issuer Company for the purpose of marketing the Issue. Therefore no person/ firm/ company other the Lead Arrangers to the Issue, whether member of recognised stock exchange(s) or otherwise, can act as Brokers to the Issue. CREDIT RATING ICRA Limited (hereinafter referred to as ‘ICRA’) has assigned a ‘LAA’ (pronounced as L Double A) rating to the present Rs. 300 crores Tier-II Subordinated Bond Issue of the Bank vide its letter no. ICRA/KOL/RA/2005-06/050 dated 3.03.2006 which was furhter re-validated vide letter No. ICRA/KOL/RA/2006-07/018 Dt. 27.07.2006. Instruments carrying this rating indicates that the Risk factors are modest and may vary slightly. The protective factors are strong and the prospect of timely payment of principal and interest as per terms under adverse circumstances, as may be visualised, differs from "LAAA" only marginally. A copy of the rating letter from ICRA is reproduced elsewhere in this Information Memorandum. Credit Analysis & Research Limited (hereinafter referred to as ‘CARE’) has assigned a ‘CARE AA’ [pronounced as Double A] rating to the present Rs. 200 crores including a green shoe option of Rs. 50 crores Tier-II Subordinated Bond Issue of the Bank vide its letter dated 24.02.2006 which was furhter revalidated vide letter dt. 26.07.2006. Instruments carrying this rating are judged to be of ‘High Quality’ by all standards. They are also classified as ‘High Investment Grade’. A copy of the rating letter from CARE is reproduced

15

elsewhere in this Information Memorandum. Please note that, the above ratings are not recommendation to buy, sell or hold securities and investors should take their own decision. The ratings may be subject to revision or withdrawal at any time by the assigning rating agencies and each rating should be evaluated independently of any other rating. The ratings obtained are subject to revision at any point of time in the future. The rating agencies have the right to suspend, withdraw the rating at any time on the basis of new information etc. Other Credit Rating Rating as on Security Type Amount Rating Code Notes 28.05.2004 Unsecured

Subordinated Bonds

Rs. 140 crores LAA by ICRA High Safety regarding timely payment of interest and repayment of principal amounts

28.01.2005 Unsecured Subordinated Bonds

Rs. 300 crores LAA by ICRA High Safety regarding timely payment of interest and repayment of principal amounts

03.02.2005 Unsecured Subordinated Bonds

Rs. 300 crores AA by CARE High quality and high investment grade

03.03.2006 Unsecured Subordinated Bonds

Rs. 300 crores LAA by ICRA High Safety regarding timely payment of interest and repayment of principal amounts

24.02.2006 Unsecured Subordinated Bonds

Rs. 300 crores AA by CARE High quality and high investment grade

04.02.2006 Certificate of Deposit ( Proposed )

Rs. 1,000 crores A1+ by ICRA Highest credit quality & lowest credit risk short term

Other than the above credit ratings for its Bonds, Deposits and Commercial Paper, the Bank has not sought any credit rating from any rating agency for any of its listed or unlisted debt securities in the past 3 years. UNDERWRITING The present Issue of Bonds on private placement basis has not been underwritten.

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II. CAPITAL STRUCTURE (Rs. in crores) As on March 31, 2006 Nominal Value Issue Amount 1.

SHARE CAPITAL

a Authorised Share Capital 1532430800 Equity Shares of Rs. 10/- each 1532.43 b Issued Share Capital 1532430800 Equity Shares of Rs. 10/- each 1532.43 Subscribed & Paid-up Share Capital 1532430800 Equity Shares of Rs. 10/- each 1532.43 2.

PRESENT ISSUE OF BONDS THROUGH THIS INFORMATION MEMORANDUM

a.

Issue of 2,000 Unsecured Redeemable Non-Convertible Subordinated (Tier-II) Bonds of Rs. 10,00,000/- each

200.00

b.

Now Offered in terms of this Information Memorandum Issue of 2,000 Unsecured Redeemable Non-Convertible Subordinated (Tier-II) Bonds of Rs. 10,00,000/- each

200.00

Of which, Reservations are Nil c.

Net Offer in terms of this Information Memorandum Issue of 2,000 Unsecured Redeemable Non-Convertible Subordinated (Tier-II) Bonds of Rs. 10,00,000/- each

200.00

3.

PAID-UP SHARE CAPITAL AFTER THE PRESENT ISSUE

1532430800 Equity Shares of Rs. 10/- each 1532.43 4.

SHARE PREMIUM ACCOUNT

a.

Before the Issue Nil

b.

After the Issue Nil

NOTES ON CAPITAL STRUCTURE (1) PROMOTER’S CONTRIBUTION AND LOCK-IN Sr. No.

Date of Allotment

Date when made fully paid-up

Consideration (Cash, bonus, kind, etc.)

No. of shares

Face Value

Issue Price

% of Post- Issue paid-up capital

Lock- In Period

* * * * * * * * * * Not applicable as there is no contribution from the promoters in the Bond Issue. (2)PROMOTERS CONTRIBUTION AND LOCK-IN IN RESPECT OF PROMOTERS WHOSE NAME FIGURE IN THE

INFORMATION MEMORANDUN AS PROMOTERS IN THE PARAGRAPH ON “PROMOTERS AND THEIR BACKGROUND”

Sr. No.

Name of the Promoter

Date of Allotment

Date when made fully paid-up

Consideration (Cash, bonus, kind, etc.)

No. of shares

Face Value

Issue Price

% of Post- Issue paid-up capital

Lock- In Period

* * * * * * * * * * * Not applicable as there is no contribution from the promoters in the Bond Issue. (3)LIST OF TOP 10 SHAREHOLDERS AND THE NUMBER OF SHARES HELD BY THEM (as on March 31, 2006): Sr. No.

Name of Shareholder Number of Shares Held

% Shareholding

1. Government of India 1532430800 100.00

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(4) SHAREHOLDING PATTERN (as on March 31, 2006): Sr. No. Category Number of Shares

Held % Shareholding

1. Promoter's Holding (Government of India) 1532430800 100.00 2. Others Nil Nil

Total 1532430800 100.00 *as defined in Regulation 2[h] of SEBI (Substantial Acquisition of Shares and Takeover) Regulations 1997. The Promoters’ holding shall include all entries in the Promoters’ Group – Individual or Body Corporates. (5) At present, the promoter group and their nominees as defined in SEBI (Disclosure & Investor Protection) Guidelines 2000 (i.e. Government of India), hold 1532430800 equity shares. Save and except, that no equity shares in the promoter group have been transferred between the promoter and their nominees. There has been no trading in the equity shares held by the promoter group and their nominees during the last six months. (6) Promoter holding and lock-in provisions: the promoter holding after this issue would remain intact at 100%. Further, the present issue is a debt issue and therefore the provisions if lock-in do not apply. (7) None of the directors have, either directly or indirectly, undertaken transactions in the shares of the Bank in the last 6 months. (8) The Issuer Company has not issued any shares or debentures or agreed to issue any shares or debentures for consideration other than cash other than that mentioned elsewhere in this Information Memorandum, within the two years preceding the date of this Information Memorandum. (9) The number of shareholders of the Issuer Company as on March 31, 2006 was 1 (one) i.e. the Government of India. (10) At any given time there shall be only one denomination for the shares/ bonds of the Bank and the Bank shall comply with such disclosure and accounting norms as specified by SEBI from time to time. (11) Reservation for small investors in allotment : The present Issue of bonds being made on private placement basis, there shall be no reservation for small/ individual investors and the allotment for bonds shall be finalized by the Bank at its sole and absolute discretion. (13) The Issuer Company has not raised any bridge loan or any other similar financial arrangement against the proceeds of the Issue. (14) The promoters, Directors and the Lead Arranger/ Arrangers of the Bank have not entered into any standby, buy-back or similar arrangements for purchase of securities offered through this Information Memorandum. (15) Details of revaluation reserves: As on March 31 2006, the Bank had a balance of Rs. 133.36 crores outstanding as revaluation reserves, details of which are given as under:

Sr. No. Financial Year/ Date Details of Fixed Assets Revalued

Revaluation Amount(Rs. in crores)

1. 2005-06 Bank’s own premises 133.36

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III. TERMS OF THE PRESENT ISSUE United Bank of India is seeking offer for subscription of Unsecured Redeemable Non-Convertible Subordinated (Tier-II) Bonds in the nature of Promissory Notes/ Debentures of Rs. 10,00,000/- each for cash at par aggregating to Rs. 200 crores including a green shoe option of Rs. 50 crores. The Bonds offered are subject to provisions of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970, the Companies Act, 1956, Securities Contract Regulation Act, 1956, terms of this Information Memorandum, Instructions contained in the Application Form and other terms and conditions as may be incorporated in the Trustee Agreement and Bond Trust Deed. Over and above such terms and conditions, the Bonds shall also be subject to the applicable provisions of the Depositories Act, 1996 and the laws as applicable, guidelines, notifications and regulations relating to the allotment & issue of capital and listing of securities issued from time to time by the Government of India (GoI), Reserve Bank of India (RBI), Securities & Exchange Board of India (SEBI), concerned Stock Exchange(s) or any other authorities and other documents that may be executed in respect of the Bonds. NATURE & STATUS OF THE BONDS The Bonds are to be issued in the form of Unsecured Redeemable Non-Convertible Subordinated (Tier-II) Bonds in the nature of Promissory Notes/ Debentures. The Bonds will constitute direct, unsecured and subordinated obligations of the Bank, ranking pari passu with the existing/ future 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. Depending upon the category of the investor(s), the Bank will have the option to issue Bonds in the nature of Promissory Notes and/or Debentures. 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 (RBI). INSTRUMENT & ISSUE DETAILS AT A GLANCE Issue Size Rs. 200 crores includign a green shoe option of Rs.50 Crores. Issue Objects Augmenting the Tier-II Capital for strengthening the Capital Adequacy

and enhancing long term resources of the Bank Instrument Unsecured Redeemable Non-Convertible Subordinated (Tier-II) Bonds

in the nature of Promissory Notes/ Debentures Instrument Form In Dematerialised Form Credit Rating ‘LAA’ by ICRA and ‘CARE AA’ by CARE Face Value Rs. 10,00,000/- per Bond Issue Price At par (i.e. Rs. 10,00,000/- per Bond) Minimum Application 1 Bond and in multiples of 1 Bond thereafter Tenure 10 Years Put & Call Option None Redemption/ Maturity At par at the end of 10 Years from the Deemed Date of Allotment Coupon Rate * 9.25% p.a. Interest Payment Semi-Annually Annualized Yield 9.46% Listing Proposed on the Wholesale Debt Market (WDM) segment of the

National Stock Exchange of India Ltd. (NSE) Trustee IDBI Trusteeship Services Limited has been appointed by the Bank to

act as Trustees for and on behalf of the holder(s) of the Bonds Interest on Application Money *

At the coupon rate (i.e. @ 9.25% p.a.) from the date of realisation of cheque(s)/ demand draft(s) upto one day prior to the Deemed Date of Allotment

* subject to deduction of tax at source, as applicable.

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KEY TERMS Face Value & Issue Price Each Bond has a face value of Rs. 10,00,000/- and is issued at par i.e. for Rs. 10,00,000/-. Minimum Application The application should be for a minimum of 1 Bond (Rs. 10,00,000/-) and in multiples of 1 Bond (Rs. 10,00,000/-) thereafter. Interest on Application Money Interest at the coupon rate (i.e. @ 9.25 per cent per annum) (subject to deduction of income tax under the provisions of the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof, as applicable) will be paid to all the applicants on the application money for the Bonds. Such interest shall be paid from the date of realisation of cheque(s)/ demand draft(s) upto one day prior to the Deemed Date of Allotment. The interest on application money will be computed on an Actual/ 365 day basis. Such interest would be paid on all the valid applications, including the refunds. Where the entire subscription amount has been refunded, the interest on application money will be paid alongwith the Refund Orders. Where an applicant is allotted lesser number of bonds than applied for, the excess amount paid on application will be refunded to the applicant alongwith the interest on application money. The interest cheque(s)/ demand draft(s) for interest on application money (alongwith Refund Orders, in case of refund of application money, if any) shall be dispatched by the Bank within 15 days from the Deemed Date of Allotment and the relative interest warrant(s) alongwith the Refund Order(s), as the case may be, will be dispatched by registered post/ speed post to the sole/ first applicant, at the sole risk of the applicant. Interest on the Bonds The Bonds shall carry interest at the coupon rate (i.e. @ 9.25per cent per annum) (subject to deduction of tax at source at the rates prevailing from time to time under the provisions of the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof for which a certificate will be issued by the Bank) on the outstanding amount of the principal till final redemption. Interest will be paid semi-annually on August 21st, and February21st each year throughout the tenure of the Bonds till final redemption. The first interest payment shall be made on February 21st, 2007 and the last interest payment will be made at the time of final redemption of the Bonds. Interest on Bonds will cease on the date of final redemption in all events. In case the Deemed Date of Allotment is revised (pre-poned/ postponed) then the given interest payment date may also be revised (pre-poned/ postponed) accordingly by the Bank at its sole & absolute discretion. If any interest payment date falls on a day which is not a Business Day (‘Business Day’ being a day on which Commercial Banks are open for Business in the city of Kolkata, West Bengal, then payment of interest will be made on the next day that is a business day but without liability for making payment of interest for the intervening period. Computation of Interest Interest for each of the interest periods shall be calculated, on 'actual/ 365 (366 in case of a leap year) days' basis, on the face value of principal outstanding on the Bonds at the coupon rate rounded off to the nearest Rupee. Deemed Date of Allotment Interest on the Bonds shall accrue to the Bondholder(s) from August 21st, 2006, which shall be the Deemed Date of Allotment. All benefits relating to the Bonds will be available to the investors from the Deemed Date of Allotment. The actual allotment of Bonds may take place on a date other than the Deemed Date of Allotment. The Bank reserves the right to keep multiple allotment date(s)/ deemed date(s) of allotment at its sole and absolute discretion without any notice. In case if the issue closing date is revised (pre-poned/ postponed), the Deemed Date of Allotment may also be revised (pre-poned/ postponed) by the Bank at its sole and absolute discretion. Depository Arrangements The Bank has appointed “Intime Spectrum Registry Limited” as Registrars & Transfer Agent for the present Bond Issue. The Bank has made necessary depository arrangements with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) for issue and holding of Bonds in dematerialised form. In this context the Bank has signed two tripartite agreements as under: • Tripartite Agreement between United Bank of India, Intime Spectrum Registry Limited and National Securities Depository Limited for offering depository option to the investors. • Tripartite Agreement between United Bank of India, Intime Spectrum Registry Limited and Central Depository Services (India) Limited for offering depository option to the investors.

20

Investors can hold the bonds only in dematerialised form and deal with the same as per the provisions of Depositories Act, 1996 as amended from time to time. Procedure for applying for Demat Facility 1. The applicant must have at least one beneficiary account with any of the Depository Participants (DPs) of NSDL or CDSL prior to making the application. 2. The applicant must necessarily fill in the details (including the beneficiary account number and Depository Participant’s ID) appearing in the Application Form under the heading ‘Details for Issue of Bonds in Electronic/ Dematerialised Form’. 3. Bonds allotted to an applicant will be credited directly to the applicant’s respective Beneficiary Account(s) with the DP. 4. For subscribing the bonds, names in the 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. 5. Non-transferable allotment advice/refund orders will be directly sent to the applicant by the Registrars to the Issue. 6. If incomplete/incorrect details are given under the heading ‘Details for Issue of Bonds in Electronic/ Dematerialised Form’ in the application form, it will be deemed to be an incomplete application and the same may be held liable for rejection at the sole discretion of the Bank. 7. For allotment of Bonds, the address, nomination details and other details of the applicant as registered with his/her DP shall be used for all correspondence with the applicant. The Applicant is therefore responsible for the correctness of his/her demographic details given in the application form vis-à-vis those with his/her DP. In case the information is incorrect or insufficient, the Issuer would not be liable for losses, if any. 8. It may be noted that Bonds being issued in electronic form, the same can be traded only on the Stock Exchanges having electronic connectivity with NSDL or CDSL. National Stock Exchange of India Limited where the Bonds of the Bank are proposed to be listed has connectivity with NSDL and CDSL. 9. Interest or other benefits would be paid to those Bondholders whose names appear on the list of beneficial owners given by the Depositories to the Bank as on Record Date/ Book Closure Date. In case of those Bonds for which the beneficial owner is not identified by the Depository as on the Record Date/ Book Closure Date, the Bank would keep in abeyance the payment of interest or other benefits, till such time that the beneficial owner is identified by the Depository and conveyed to the Bank, whereupon the interest or benefits will be paid to the beneficiaries, as identified, within a period of 30 days. Investors may note that pursuant to circular no. SEBI/MRD/SE/AT/36/2003/30/09 dated September 30, 2003 issued by SEBI, the Bonds of the Bank would be issued and traded only in dematerialised form. Market Lot The market lot will be one Bond (“Market Lot”). Since the bonds are being issued only in dematerialised form, the odd lots will not arise either at the time of issuance or at the time of transfer of bonds. Letter(s) of Allotment/ Bond Certificate(s)/ Refund Order(s) Issue of Letter(s) of Allotment The beneficiary account of the investor(s) with National Securities Depository Limited (NSDL)/ Central Depository Services (India) Limited (CDSL)/ Depository Participant will be given initial credit within 15 days from the Deemed Date of Allotment. The initial credit in the account will be akin to the Letter of Allotment. On completion of the all statutory formalities, such credit in the account will be akin to a Bond Certificate. Issue of Bond Certificate(s) Subject to the completion of all legal formalities within 3 months from the Deemed Date of Allotment, or such extended period as may be approved by the Appropriate Authority(ies), the initial credit akin to a Letter of Allotment in the Beneficiary Account of the investor would be replaced with the number of Bonds allotted. The Bonds since issued in electronic (dematerialized) 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 other applicable laws and rules notified in respect thereof. Despatch of Refund Orders The Bank shall ensure dispatch of Refund Order(s) by registered post/speed post. Terms of Payment

21

The full face value of the Bonds applied for is to be paid alongwith the Application Form. Investor(s) need to send in the Application Form and the cheque(s)/ demand draft(s) for the full face value of the Bonds applied for. Face Value per Bond Minimum Application for Amount Payable on Application per Bond Rs. 10,00,000/- 1 Bond Rs. 10,00,000/-

Payment of Interest The interest will be payable semi-annually to the Bondholder(s) whose names appear in the List of Beneficial Owners given by the Depository to the Bank on the Record Date/ Book Closure Date. Payment of interest will be made by way of cheque(s)/ interest warrant(s)/ demand draft(s), which will be dispatched to the sole/ first applicant, 7 days before the due date(s) by registered post /speed post at the sole risk of the applicant. Tax Deduction at Source (TDS) Tax as applicable under the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof will be deducted at source. For seeking TDS exemption/ lower rate of TDS, relevant certificate(s)/ document(s) must be lodged at least 15 days before the payment of interest becoming due with the Compliance Officer, United Bank of India, Head Office, 11, Hemanta Basu Sarani, Kolkata – 700 001, West Bengal, or to such other person(s) at such other address(es) as the Bank may specify from time to time through suitable communication. Tax exemption certificate/ declaration of non-deduction of tax at source on interest on application money, should be submitted along with the Application Form. Where any deduction of Income Tax is made at source, the Bank shall send to the Bondholder(s) a Certificate of Tax Deduction at Source. Tax Benefits Under the existing provisions of the Income Tax Act, 1961 for the time being in force, the following tax benefits and deductions will be available to the Bondholders of the Bank subject to the fulfillment of the requirements of the relevant provisions. The tax benefits are given as per the prevailing tax laws and may vary from time to time in accordance with the amendments or enactment thereto. As alternate views are also possible, the Bondholder(s) are advised to consult their own tax advisers on the tax implications of the acquisition, ownership and sale of Bonds, and income arising thereon. I. To Resident Bondholders No Income Tax will be deducted at source from interest payable on Bonds in the following cases: a. In case of payment of interest to a Bondholder, who is an individual and resident in India, where the

interest payment in the aggregate during the financial year does not exceeds Rs. 2,500/-; b. Tax will be deducted at a lower rate where the Assessing Officer, on an application of any Bondholder,

issues a certificate for deduction of tax at such lower rate as per provisions of the Section 197(1) of the Income Tax Act.

In all other situations, tax would be deducted at source on each payment as per prevailing provisions of the Income Tax Act. Details on deduction of tax at source are given under para ‘Tax Deduction at Source (TDS)’ mentioned elsewhere in this Information Memorandum. No Wealth Tax is payable in respect of investments in Bonds of the Bank. II. To the other Eligible Institutions a. Mutual Funds registered under the SEBI Act or regulations made thereunder or such other mutual fund

sets up by public sector bank or public financial institution or authorised by Reserve Bank of India and notified by the Central Government will, subject to the provisions of Chapter XII-E, be exempted from income tax on all their income, including from investment in Bonds under the provisions of Section 10(23D) of Income Tax Act.

b. No Wealth Tax is payable in respect of investments in Bonds of the Bank. Notes: 1. All the above benefits are as per the current tax law as amended by the Finance Act, 2006. 2. The stated benefits will be available only to the sole/ first named holder in case the bonds are held by joint holders. Put & Call Option Neither Put Option shall be available to the Bondholder(s), nor Call Option would be available to the Bank to redeem the Bonds prior to maturity. The Bonds are free from restrictive clauses and are not redeemable at the instance of the holder or without the consent of the Reserve Bank of India (RBI). Redemption The face value of the Bonds will be redeemed at par, at the end of 10 Years (120 months) from the Deemed

22

Date of Allotment. However, the bonds shall not be redeemable at the initiative of the holder or without the consent of the RBI in terms of extant RBI guidelines vide its master circular no. DBOD No. BP.BC.13/21.01.002 /2005-06 dated July 04, 2005 on Prudential Norms for Capital Adequacy, as amended from time to time. In case if the principal redemption date falls on a day which is not a Business Day (‘Business Day’ being a day on which Commercial Banks are open for Business in the city of Kolkata, West Bengal, then the payment due shall be made on the next Business Day together with additional interest for the intervening period. Payment on Redemption Payment on redemption will be made by cheque(s)/ warrants(s) in the name of the Bondholder whose name appears on the List of Beneficial owners given by Depository to the Bank as on the Record Date/ Book Closure Date. On the Bank dispatching the redemption warrants to such Beneficiary(ies) by registered post, the liability of the Bank shall stand extinguished. The Bonds 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/ Depository Participant. 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/ Depository Participant and accordingly the account of the Bondholders with NSDL/ CDSL/ Depository Participant will be adjusted. The Bank’s liability to the Bondholders towards all their rights including for payment 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 any interest or compensation from the date of redemption. On the Bank dispatching the amount as specified above in respect of the Bonds, the liability of the Bank shall stand extinguished. Record Date/ Book Closure Date The ‘Record Date/ Book Closure Date’ for the Bonds shall be 15 days prior to each interest payment and/ or principal repayment date. Effect of Holidays Should any of dates defined above or elsewhere in this Information Memorandum, excepting the Deemed Date of Allotment, fall on a Saturday, Sunday or a Public Holiday, the next working day shall be considered as the effective date(s). Mode of Transfer of Bonds Bonds shall be transferred subject to and in accordance with the rules/ procedures as prescribed by the NSDL/ CDSL/ Depository Participant of the transferor/ transferee and any other applicable laws and rules notified in respect thereof. The normal procedure followed for transfer of securities held in dematerialized form shall be followed for transfer of these bonds held in electronic form. The seller should give delivery instructions containing details of the buyer’s DP account to his depository participant. List of Beneficial Owners The Bank shall request the Depository to provide a list of Beneficial Owners as at the end of the Record Date/ Book Closure Date. This shall be the list, which shall be considered for payment of interest or repayment of principal amount, as the case may be. Trustees for the Bondholders The Bank has appointed IDBI Trusteeship Services Limited to act as Trustees for the Bondholders (“Trustees”). A copy of letter from IDBI Trusteeship Services Limited conveying their consent to act as Trustees for the bondholders is enclosed elsewhere in this Information Memorandum. The Bank and the Trustees will enter into a Trustee Agreement, inter alia, specifying the powers, authorities and obligations of the Trustees and the Bank. The Bondholder(s) shall, without further act or deed, be deemed to have irrevocably given their consent to the Trustees or any of their agents or authorized officials to do all such acts, deeds, matters and things in respect of or relating to the Bonds as the Trustees may in their absolute discretion deem necessary or require to be done in the interest of the Bondholder(s). Any payment made by the Bank to the Trustees on behalf of the Bondholder(s) shall discharge the Bank pro tanto to the Bondholder(s). The Trustees will protect the interest of the Bondholders in the event of default by the Bank in regard to timely payment of interest and repayment of principal and they will take necessary action at the cost of the Bank. No Bondholder shall be entitled to proceed directly against the Bank unless the Trustees, having become so bound to proceed, fail to do so. Right to Accept or Reject Applications The Board of Directors/ Committee of Directors reserves its full, unqualified and absolute right to accept or

23

reject any application, in part or in full, without assigning any reason thereof. The rejected applicants will be intimated along with the refund warrant, if applicable, to be sent. Interest on application money will be paid from the date of realisation of the cheque(s)/ demand drafts(s) till one day prior to the date of refund. The Application Forms that are not complete in all respects are liable to be rejected and would not be paid any interest on the application money. Application would be liable to be rejected on one or more technical grounds, including but not restricted to: a. Number of bonds applied for is less than the minimum application size; b. Applications exceeding the issue size; c. Bank account details not given; d. Details for issue of bonds in electronic/ dematerialised form not given; e. PAN/GIR and IT Circle/Ward/District not given; f. In case of applications under Power of Attorney by limited companies, corporate bodies, trusts, etc. relevant documents not submitted; In the event, if any Bond(s) applied for is/ are not allotted in full, the excess application monies of such Bonds will be refunded, as may be permitted. How to Apply This Information Memorandum is neither a prospectus nor a statement in lieu of prospectus and does not constitute an offer to the public generally to subscribe for or otherwise acquire the Bonds issued by the Bank. The document is for the exclusive use of the Institution(s) to whom it is delivered and it should not be circulated or distributed to third parties. The document would be sent specifically addressed to the institution(s) by the Issuer Bank and/ or its Lead Arrangers. Only eligible investors as given hereunder may apply for bonds by completing the Application Form in the prescribed format in BLOCK LETTERS in English as per the instructions contained therein. Applications should be for a minimum of 1 Bond and in multiples of 1 Bond thereafter. Applications not completed in the said manner are liable to be rejected. Application Form duly completed in all respects must be submitted with any of the designated branches of the Bank. The name of the applicant’s bank, type of account and account number must be filled in the Application Form. This is required for the applicant’s own safety and these details will be printed on the refund orders and interest/ redemption warrants. The applicant or in the case of an application in joint names, each of the applicant, should mention his/her Permanent Account Number (PAN) allotted under the Income-tax Act, 1961 or where the same has not been allotted, the GIR No. and the Income tax Circle/Ward/District. As per the provision of Section 139A(5A) of the Income Tax Act, PAN/GIR No. needs to be mentioned on the TDS certificates. Hence, the investor should mention his PAN/GIR No. if the investor does not submit Form 15G/15AA/other evidence, as the case may be for non-deduction of tax at source. In case neither the PAN nor the GIR Number has been allotted, the applicant shall mention “Applied for” and in case the applicant is not assessed to income tax, the applicant shall mention ‘Not Applicable’ (stating reasons for non applicability) in the appropriate box provided for the purpose. Application Forms without this information will be considered incomplete and are liable to be rejected. Applications may be made in single or joint names (not exceeding three). In the case of joint applications, all payments will be made out in favour of the first applicant. All communications will be addressed to the first named applicant whose name appears in the Application Form at the address mentioned therein. Unless the Issuer Company specifically agrees in writing with or without such terms or conditions it deems fit, a separate single cheque/ demand draft must accompany each Application Form. Applicants are requested to write their names and application serial number on the reverse of the instruments by which the payments are made. All applicants are requested to tick the relevant column “Category of Investor” in the Application Form. Application Form must be accompanied by either demand draft(s) or cheque(s) drawn or made payable in favour of “United Bank of India” and crossed “Account Payee Only”. Cheque(s)/ demand draft(s) may be drawn on any bank including a co-operative bank, which is a member or a sub-member of the Bankers Clearing House located at Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, New Delhi or Mumbai. Investors in centres which do not have any bank, including a co-operative bank, which is a member or sub-member of the Banker’s Clearing House located at any of the centres mentioned above, will be required to make payments only through demand drafts payable at any one of the above centres. Cash, outstation cheques, money orders, postal orders and stockinvest shall not be accepted. The Bank assumes no responsibility for any applications/ cheques/ demand drafts lost in mail. Detailed instructions for filling up the application form and list of collection centres are provided elsewhere in this Information Memorandum.

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No separate receipts shall be issued for the application money. However, the Bank at their Designated Branch(es) receiving the duly completed Application Forms will acknowledge the receipt of the applications by stamping and returning the acknowledgment slip to the applicant. Applications shall be deemed to have been received by the Bank only when submitted to the Bank at its designated branches or on receipt by the Registrar as detailed above and not otherwise. For further instructions, please read Application Form carefully. Who Can Apply The following categories of investors may apply for the bonds, subject to fulfilling their respective investment norms/ rules by submitting all the relevant documents alongwith the application form. 1. Scheduled Commercial Banks; 2. Financial Institutions; 3. Insurance Companies; 4. Primary/ State/ District/ Central Co-operative Banks (subject to permission from RBI); 5. Regional Rural Banks; 6. Mutual Funds; 7. Provident, Gratuity and Superannuation Funds; 8. Companies, Bodies Corporate authorised to invest in bonds; 9. Trusts, Individuals, Association of Persons, Societies registered under the applicable laws in India which are duly authorised to invest in bonds. Applicants not to be made by 1. Individuals (Non-Residents of India); 2. Hindu Undivided Family (neither by the name of the Karta); 3. Partnership Firms or their nominees; 4. Overseas Corporate Bodies (OCBs); 5. 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 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. Future Borrowings The Bank shall be entitled to borrow/ raise loans or avail of financial assistance in whatever form as also issue Bonds/ Debentures/ Notes/ other securities in any manner with ranking as pari-passu basis or otherwise and to change its capital structure, including issue of shares 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 Bondholder(s) or the Trustees in this connection. Bondholder not a Shareholder The Bondholders will not be entitled to any of the rights and privileges available to the shareholders. Rights of Bondholders 1. The Bonds shall not, except as provided in the Companies Act, 1956 confer upon the holders thereof any rights or privileges available to the members of the Bank including the right to receive Notices or Annual Reports of, or to attend and/or vote, at the General Meeting of the Bank. However, if any resolution affecting the rights attached to the Bonds is to be placed before the shareholders, the said resolution will first be placed before the concerned registered Bondholders for their consideration. In terms of Section 219(2) of the Act, holders of Bonds shall be entitled to a copy of the Balance Sheet on a specific request made to the Bank. 2. The rights, privileges and conditions attached to the Bonds may be varied, modified and/or abrogated with the consent in writing of the holders of at least three-fourths of the outstanding amount of the Bonds or with the sanction of Special Resolution passed at a meeting of the concerned Bondholders, provided that

25

nothing in such consent or resolution shall be operative against the Bank, where such consent or resolution modifies or varies the terms and conditions governing the Bonds, if the same are not acceptable to the Bank. 3. The registered Bondholder or in case of joint-holders, the one whose name stands first in the Register of Bondholders shall be entitled to vote in respect of such Bonds, either in person or by proxy, at any meeting of the concerned Bondholders and every such holder shall be entitled to one vote on a show of hands and on a poll, his/her voting rights shall be in proportion to the outstanding nominal value of Bonds held by him/her on every resolution placed before such meeting of the Bondholders. 4. The Bonds are subject to the provisions of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970, the Companies Act, 1956, Securities Contract Regulation Act, 1956, terms of this Information Memorandum, Instructions contained in the Application Form and other terms and conditions as may be incorporated in the Trustee Agreement and Bond Trust Deed. Over and above such terms and conditions, the Bonds shall also be subject to the applicable provisions of the Depositories Act, 1996 and the laws as applicable, guidelines, notifications and regulations relating to the allotment & issue of capital and listing of securities issued from time to time by the Government of India (GoI), Reserve Bank of India (RBI), Securities & Exchange Board of India (SEBI), concerned Stock Exchange(s) or any other authorities and other documents that may be executed in respect of the Bonds. 5. Save as otherwise provided in this Information Memorandum, the provisions contained in Annexure C and/ or Annexure D to the Companies (Central Government’s) General Rules and Forms, 1956 as prevailing and to the extent applicable, will apply to any meeting of the Bondholders, in relation to matters not otherwise provided for in terms of the Issue of the Bonds. 6. A register of Bondholders will be maintained in accordance with Section 152 of the Act and all interest and principal sums becoming due and payable in respect of the Bonds will be paid to the registered holder thereof for the time being or in the case of joint-holders, to the person whose name stands first in the Register of Bondholders. 7. The Bondholders will be entitled to their Bonds free from equities and/or cross claims by the Bank against the original or any intermediate holders thereof. Succession In the event of winding-up of the holder of the Bond(s), the Bank will recognize the executor or administrator of the concerned Bondholder(s), or the other legal representative as having title to the Bond(s). The Bank shall not be bound to recognize such executor or administrator or other legal representative as having title to the Bond(s), unless such executor or administrator obtains probate or letter of administration or other legal representation, as the case may be, from a Court in India having jurisdiction over the matter. The Bank may, in their absolute discretion, where they think fit, dispense with production of probate or letter of administration or other legal representation, in order to recognize such holder as being entitled to the Bond(s) standing in the name of the concerned Bondholder on production of sufficient documentary proof or indemnity. Notices All notices to the Bondholder(s) required to be given by the Bank or the Trustees shall be published in one English and one regional language daily newspaper in Kolkata, Mumbai, New Delhi and Chennai and/ or will be sent by post/ courier to the sole/ first allottee or sole/ first Beneficial Owner of the Bonds, as the case may be from time to time. All notice(s) to be given by the Bondholder(s) shall be sent by registered post or by hand delivery to the Bank or to such persons at such address as may be notified by the Bank from time to time through suitable communication. Joint-Holders Where two or more persons are holders of any Bond(s), they shall be deemed to hold the same as joint tenants with benefits of survivorship subject to other provisions contained in the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970. Sharing of Information The Bank may, at its option, use on its own, as well as exchange, share or part with any financial or other information about the Bondholders available with the Bank, and other banks, financial institutions, credit bureaus, agencies, statutory bodies, as may be required and neither the Bank nor their agents shall be liable for use of the aforesaid information. Debenture/ Bond Redemption Reserve The Government of India, Ministry of Company Affairs has vide General Circular No. 9/2002 No.6/3/2001-CL.V dated April 18, 2002 clarified that banks need not create Debenture Redemption Reserve as specified

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under section 117C of the Companies Act, 1956. Undertaking by the Issuer The Issuer company undertakes that: a) the complaints received in respect of the Issue shall be attended to by the issuer company expeditiously and satisfactorily; b) it shall take all steps for completion of formalities for listing and commencement of trading at all the concerned stock exchange(s) where securities are to be listed and taken within 70 days from the date of closure of the Issue. c) no further issue of securities shall be made till the securities offered through this Information Memorandum are listed or till the application moneys are refunded on account of non-listing, under-subscription, etc; d) necessary co-operation to the credit rating agencies shall be extended in providing true and adequate information till the debt obligations in respect of the instrument are outstanding. IV. PARTICULARS OF THE ISSUE OBJECTS OF THE ISSUE The present issue of bonds is being made for augmenting the Tier-II Capital of the Bank for strengthening its Capital Adequacy and for enhancing the long-term resources of the Bank. The expenses of the present issue would be met by the Bank. The proceeds of this Issue would be used by the Bank for its regular business activities. Capital Adequacy Position of the Bank The Capital Adequacy Ratio (“CAR”) of the Bank as on March 31, 2006 was 13.12% as against the RBI stipulation of 9.00%. Details of capital vis-à-vis risk weighted assets are as under:

(Rs. in crores) As on March 31,

2002 March 31,

2003 March 31,

2004 March 31,

2005 March 31,

2006 Capital Funds Tier I Capital Paid up Equity Capital 1810.87 1810.87 1810.87 1810.87 1532.43 Less Accumulated Loss &

DTA 1240.21 908.31 595.26 297.18 19.27

Reserves & Surplus 10.87 10.87 10.87 10.87 162.99 Total Tier I Capital 581.53 913.43 1226.48 1524.56 1676.15 Tier II Capital Revaluation Reserve

(discounted) 64.10 63.00 61.95 60.96 60.01

General Provisions 22.93 26.45 35.65 33.34 60.88 Subordinated Debt 112.00 84.00 56.00 328.00 400.00 Investment Fluctuation

Reserve Nil Nil Nil Nil Nil

Undisclosed reserve 9.76 9.76 9.76 9.76 Nil Total Tier II Capital 208.79 183.21 163.36 432.06 520.89 Total Capital Fund 790.32 1096.64 1389.84 1956.62 2197.04 Risk Weighted Assets 6574.11 7230.22 8157.15 10775.12 16745.73 Capital Adequacy Ratio (%) 12.02 15.17 17.04 18.16 13.12

Requirement of Enhancement of Capital The Bank expects to post a growth in business in the years to come. As a result, Risk weighted assets of the Bank are also expected to increase over the years. Increase in Tier I capital through retained earnings alone may not be sufficient to enable the Bank to maintain an adequate capital adequacy ratio. In view of the likely expansion of loan assets, the Bank proposes to augment its capital base in order to sustain a healthy CAR. The Bank has also raised Tier II capital by way of private placement of Unsecured Redeemable Subordinated Bonds to augment capital adequacy as under: Issue Series

Year of Placement

Deemed Date of

Allotment

Issue Amount (Rs. in

Crores)

Tenure (in months)

Credit Rating Coupon Rate

(% p.a.)

Redemption Date

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Series I 2001 31.03.2001 140.00 63 LAA by ICRA 11.00 (annual)

30.06.2006 (Redeemed)

Series II 2005 15.02.2005 300.00 123 LAA by ICRA & AA by CARE

7.40 (annual)

15.05.2015

Series-III 2006 29.03.2006 100.00 121 LAA by ICRA & AA by CARE

8.00 (semi-

annual)

29.04.2016

V.BANK & MANAGEMENT HISTORY & BACKGROUND OF THE BANK United Bank of India (UBI) is one of the 14 major banks which were nationalised on July 19, 1969. Its predecessor the United Bank of India Limited, was formed in 1950 with the amalgamation of four banks viz. Comilla Banking Corporation Ltd. (1914), Bengal Central Bank Ltd. (1918), Comilla Union Bank Ltd. (1922) and Hooghly Bank Ltd. (1932) (which were established in the years indicated in brackets after the names). The origin of the Bank thus goes back as far as 1914. As against 174 branches, Rs. 147 crores of deposits and Rs. 112 crores of advances at the time of nationalisation in July, 1969, the Bank has 1318 branches, over Rs.29250 crores of deposits and Rs. 15963 crores of advances as on March 31, 2006. Presently the Bank has a three-tier organisational set-up consisting of the Head Office, 28 Regional Offices and 1318 branches. In addition there is a Zonal Office at Guwahati which controls six Regional Offices covering the branches in the North-eastern States. After nationalisation, the Bank expanded its branch network in a big way and actively participated in the developmental activities, particularly in the rural and semi-urban areas in conformity with the objectives of nationalisation. In recognition of the role played by the Bank, it was designated as Lead Bank in several districts and at present it is the Lead Bank in 30 districts in the States of West Bengal, Assam, Tripura and Manipur. The Bank is also the Convener of the State Level Bankers' Committees (SLBC) for the States of West Bengal and Tripura. The Bank also played a significant role in the spread of banking services in different parts of the country, more particularly in Eastern and North-eastern India. The Bank has sponsored 8 Regional Rural Banks (RRB) five of which are in West Bengal, one in Assam and one each in Manipur and Tripura. These 8 RRBs together have over 1000 branches. In its efforts to provide banking services to the people living in the not easily accessible areas of the Sunderbans in West Bengal, the Bank had established two floating mobile branches on motor launches which moved from island to island on different days of the week. The floating mobile branches were discontinued with the opening of full-fledged branches at the centres which were bring served by the floating mobile branches. The Bank is also known as the ‘Tea Bank' because of its age-old association with the financing of tea gardens. It has been the largest lender to the tea industry. The Bank has three full fledged Overseas Branches one each at Kolkata, New Delhi and Mumbai with fully equipped dealing room and SWIFT terminal . The operations of 1311 branches have been computerised either fully or partially and Electronic Fund Transfer System came to be implemented in the Bank's branches at Kolkata, New Delhi, Mumbai and Chennai. The Bank has ATMs at Kolkata, New Delhi and at Mumbai. The coverage of ATMs is being expanded to other cities. MAIN OBJECTS OF THE BANK The main object and business of the Bank, as laid down in the Bank Nationalisation Act is as under: The main object of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 under which the undertaking of the Bank was taken over by the Central Government is as under: “An Act to provide for the acquisition and transfer of the undertakings of certain Banking Companies, having regard to their size, resources, coverage and organisation, in order to control the heights of the economy and to meet progressively, and serve better, the needs of the development of the economy, in conformity with national policy and objectives and for matters connected therewith or incidental thereto”. The Main Object of the Bank enables it to undertake the activities for which the funds are being raised and the activities, which it has been carrying on till date. Business Sphere of the Bank The Bank shall carry on and transact the business of Banking as defined in Clause (b) of Section 5 of the

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Banking Regulation Act, 1949, and may engage in one or more of the other forms of business specified in Sub-Section (1) of Section 6 of that Act. Clause (b) of Section 5 of the Banking Regulation Act, 1949 defines Banking as "the accepting for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise." Other Business that the Bank may undertake (Section 3 (7)) Sections 3 (7) of Chapter II of the Banking Companies (Acquisition) Act 1970 provides for the Bank to act as Agent of Reserve Bank. 1. The Bank shall, if so required by the Reserve Bank of India, act as agent of the Reserve Bank at all

places in India where it has a branch for: a. Paying, receiving, collecting and remitting money, bullion and securities on behalf of the Government of India b. Undertaking and transacting any other business which the Reserve Bank may from time to time entrust to it

2. The terms and conditions on which any such agency business shall be carried on by the corresponding new Bank on behalf of the Reserve Bank shall be such as may be agreed upon

3. If no agreement can be reached on any matter referred to in Clause (ii) above, or if a dispute arises between the corresponding new Bank and the Reserve Bank as to the interpretation of any agreement between them, the matter shall be referred to the Central Government and the decision of the Central Government, thereon, shall be final.

4. The corresponding new Bank may transact any business or perform any function entrusted to it under Clause (i) by itself or through any agent approved by the Reserve Bank.

BUSINESS OF THE BANK & ITS PRODUCTS AND SERVICES The Bank have a wide range of choice of deposits & loans through many different schemes. Some of the main features of its various deposits & loans schemes are detailed as follows: DEPOSITS 1. United Bonanza Savings Scheme

This scheme combines the liquidity of Savings Bank Account and Interest of Fixed Deposit Account to allow greater flexibility to the account holder. Under this scheme, a depositor opens a Savings Bank Deposit Account with an in-built arrangement of transferring balance over a specified limit to Fixed Deposit Account automatically for a specified period to be stipulated by the account holder and earn interest at Term Deposit rate.

2. Fixed Deposits In this account the amount remains fixed for a predetermined period of time and the interest is payable monthly, quarterly, half yearly, yearly or on maturity as per the desire of the account holder. Period options available are from 15 days to 120 months.

3. Re-Investment Plans Formalities are the same as in the case of Fixed deposits but interest, which is compounded at quarterly intervals is payable on maturity alongwith the principal. Such certificates can be purchased for Rs. 1000/- and above in multiples of Rs 500/- for 6,9,12,18,24,27,30,36,42, 48,54,60,72,78,84,96,108 and 120 months

4. Multi Unit Flexi Deposit Under this scheme the amount of deposit is broken up into units of Rs. 5,000/-. The minimum amount of deposit is Rs. 10,000/-. The unit concept enables the Bank’s customers to withdraw prematurely or pledge against availment of loan required number of units without having to affect the entire quantum of deposit. The scheme is operative in the state of West Bengal, and in the metropolis of Mumbai, Delhi and Chennai.

5. Recurring Deposit This scheme enables a depositor to open term deposit account with fixed monthly installments for periods extending from 6 months to 120 months. The interest depending on the period is payable on maturity

6. Sadhyanusar Jama Yojna This is a recurring deposit scheme where the amount of monthly deposit is flexible. The person can deposit amount according to his/her ability subject to a minimum of core monthly installment being Rs. 50/- or multiple thereof, subject to a maximum of 10 times of the initial deposit.

7. Future Income Plan A fixed amount of money can be deposited every month for a fixed period for 24,27,30,36,48,60,84,108,120 months, to enjoy an attractive income every month for a period identical to the period for which the installments have been deposited.

8. Bumper Cash Certificate

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An investment of small amount or its multiples will fetch a sizeable amount after 10 years. 9. Flexible Term Deposit

Money can be withdrawn any time against Term Deposit. The depositor may open this account in his/her name singly or jointly. Any sole proprietary, partnership concern/association or company are also eligible to open this Term Deposit. A term Deposit account with a current account will enable its holder to get an overdraft facility in times of need without difficulty.

10. Stock Invest Instruments (SMUT Deposit) Deposits accepted in selected branches with a minimum amount of Rs. 500/-. Interest is allowed on quarterly basis calculated on daily balance at the prevailing rates as per rules as applicable to deposits (for 15 to 179 days).

11. Capital Gains Accounts Scheme The scheme is operative in all non-rural branches and deposits can be placed under this scheme for availment of tax-exemptions under Capital Gains.

12. Savings Bank Account The customer may deposit and withdraw amounts from this account according to their own requirements. Savings Bank Account may be opened singly or jointly with other persons on proper introduction of the account. Minors over the age of 13 years can also open and operate accounts independently. Minor´s account can also be opened by the parents as natural guardian or in joint names. Interest as applicable from time to time is payable twice a year.

13. United Suvidha Current Deposit Scheme The Bank provides value addition to the current deposit accounts. Account may be of an Individual, a Company, Proprietorship or Partnership firm, Corporation, Institution, Trader, Hospital, Nursing Home or Trust. The accounts are categorised under United Suvidha-I and United Suvidha-II on the basis of credit balance stipulation.

LOANS In order to make the Loan scheme more attractive to the people in the present competitive banking scenario, the same has been thoroughly revised by introducing liberal approach in eligibility, quantum of loan, interest and repayment etc. In order to encourage participation of women in availment of loan, the revised scheme provided higher quantum, lower interest and longer repayment period on joining of wife as co-borrower in the loan. 1. United Tax Savers Personal Loan Scheme The Scheme would be operative at all Branches of the Bank. Any individual having investment in the

form of LIP(Surrender Value)/ NSC/ KVP to cover the loan amount in his/her name and be introduced to the bank can avail of this facility. The employees of the Bank are also eligible to avail loan under the Scheme. This type of Loan is available for meeting all types of personal expenses.

2. United Housing Loan Any individual aged 21 years or above having regular income can avail of this facility. This loan can be

availed for Purchase of land, purchase or construction of house/flat or purchase of old house/flat, furnishing of house/flat Renovation/extension/repair/, Taking over of existing Housing Loan form other Bank/Financial Institution & The loan is now extended to those cases also where flats are being constructed by promoters/developers where immediate mortgage of the property may not be possible. Maximum amount of loan that can be availed is Rs. 100 lac depending on the cost of house/flat, application’s age, income, repayment capacity etc. Loans of higher amount may be considered on the basis of merit of the case.

3. United Consumer Loan Scheme Any borrower who is maintaining a Savings/ Current Deposit/ Term Deposit A/c with the Bank and who

fulfil certain criteria can avail this loan. The minimum amount of loan is Rs 0.10 lac. & the maximum amount is Rs 4.00 lacs.

4. United Car Loan Scheme Any borrower who is maintaining a Savings/ Current Deposit/ Term Deposit A/c with the Bank and who

fulfil certain criteria can avail this loan. Maximum amount of loan that can be availed is 12.00 lacs in case of new car Rs. 6.00 lacs in case of old car. The loan is to be repaid on the basis of Equated Monthly Installment (EMI) fixed in accordance with following norms taking into consideration the quantum of loan sanctioned.

5. Education Loan Scheme Borrower can avail loan upto Rs. 7.5 lacs for study in India and upto Rs. 15.00 lacs for studying abroad if

they have secured an admission to some specified academic/professional/technical courses through Entrance Test/ Selection process in an Board/Institution/University. Further 2% interest subsidy is being provided on loan upto Rs. 4 lacs for higher studies to bright and needy students for a maximum period of

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duration of course + 5 years. The loan is to be repaid in 5 to 7 years after commencement of repayment. The repayment will commence after a moratorium/ repayment holiday which is Course period plus 1 year or 6 months after getting job whichever is earlier.

6. United Personal Loan Any salaried person, with permanent service for at least 3 years, may apply for this loan. The loan is to

be repaid within a period not exceeding 36 months & the Rate of Interest charged is highly attractive depending on the nature of the repayment, joining of wife as co borrower, etc.

7. United Professional Loan Any person who is a professional or a businessperson for at least 2 years with a minimum annual income

of Rs 2,00,000/- and an account holder of any of the Bank branches may apply for the loan. The quantum of loan may be upto Rs.2.00 lakhs or 50% of gross annual income whichever is lower subject to the condition that the loan amount shall be secured by surrender value of LIP or NSC/KVP or Relief Bond or any other government securities or bank's term deposits or adequate face value after applying 25% margin or mortgage of immovable property of adequate value after applying 50% margin.

8. United Trade Credit Scheme All types of traders - retailers/ wholesalers engaged in trading of commodities including readymade

garments, medicines and other merchandise or acting as distributors/ dealers of consumer goods, automobiles, etc are eligible for this credit line. There are no hassles of submitting regular statements or day to day calculation of Drawing Power. This type of Loan is availed to finance Working capital & is available in the form of overdraft or Term Loan.

9. United Pensioners Loan The objective of this Loan is to extend term loan to the pensioners to meet their family and personal

expenses. All pensioners of Central and State Governments, Central and State Governments' Undertakings, Defence Services, reputed Companies, Educational Institutions (Universities, Institutes, Schools and Colleges) including pensioners of the Bank drawing pension from the Branches of the Bank are eligible for loan under the Scheme from the Branch, where the pension is paid. Further the age of the Pensioner at the time of availment of loan should be such that the entire loan is repaid before attaining seventy five years of age & a maximum of twelve months' net pension disbursed by the branch subject to a maximum of Rs.1.00 (one) lac shall be provided as loan.

10. United Udyogshree Yojna All existing term loanees/ cash credit account holders under tiny industries and SSI Sector having good

track record for last three years excluding moratorium/gestation period for the existing loan can avail this Loan. Further existing depositors with good track record maintaining an average balance of Rs.5000/- or above for the last three years running a tiny unit or willing to start such units and an average balance of Rs.25000/- or above for the last three years running an SSI unit or willing to set up such unit such depositors should not be defaulter to any bank / financial institution can also eligible to apply for this loan. Maximum amount of loan that may be availed is upto Rs.25 lakhs depending upon the purpose and nature of the applicant.

11. United Cash Rental Loan An individual, firm, company owning house, flat or godown and letting or leasing it out to bank,

insurance company, multinational company, company of good market standing, reputation and sound financial position, financial institution, financial sound PSU of Govt. of India (not individual) may apply for the loan against future rentals. The quantum of loan may be upto 75% of the total rent receivable for the unexpired period of lease/ rental upto 36 months subject to the minimum loan amount of Rs 2,00,000/- and maximum of Rs 1,00,00,000/- and the same is to be repaid within the unexpired period of lease/ tenancy or 36 months whichever is lower.

12. United Gramyashree Yojana The Bank has introduced this scheme as a measure of recognition to rural clientele both depositors as

well as borrower farmers with good track record through multiple schemes of assistance to self and family members.

13. United Krishi Sahayak Yojana The Bank has come out with a farmer friendly scheme entitled United Krishi Sahayak Yojana to provide

tractor/power tiller loans to farmers possessing smaller land holdings at lower margin and lower rate of interest under a tie-up arrangement with a few tractor manufacturing companies.

Utility Services Having rich experience in professional banking service over many decades, the Bank offers to Non Resident Indians, a variety of banking services for investment in India. These investments in Bank by Non Resident Indians, attract a package of incentives declared by Government of India in addition to the return that they earn from deposits. Eligibility

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Any Non Resident Indian who is: 1. an Indian citizen staying abroad for employment, business or vocation, in circumstances indicating an indefinite period of stay outside India. 2. an Indian citizen working with International organisations like United Nations, International Monetary Fund, World Health Organisation etc. 3. an official of Central or State Government or a Public Sector undertaking deputed/posted to his own office abroad. 4. A person of Indian origin i.e. if you are a foreign citizen having held at any time (i) an Indian passport or (ii) if you or either of your parents or any of your grand parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955). 5. A spouse of an Indian citizen or of a person of Indian origin though you may actually be of Non-Indian origin. Types of Accounts 1. Accounts with Repatriation Benefits: These include Non-Resident External A/c, Foreign currency Non-

Resident A/c. 2. Accounts without Repatriation Benefits: These include Ordinary Non-Resident A/c, Non-Resident Non- Repatriable Rupee Deposit (NRNR) A/c.

BRANCH NETWORK OF THE BANK The Bank has 28 regional offices, controlling 1318 branches and 65 extension counters as on March 31, 2006 including 89 specialized branches. Geographical distribution of Branches of the Bank as on March 31, 2006 is as under: State/ Union Territory Number of Branches % share of Total (%) West Bengal 694 52.66 Assam 173 13.14 Orissa 95 7.22 Bihar 65 4.93 Jharkand 45 3.41 Tripura 41 3.12 Uttar Pradesh 41 3.12 Maharashtra 28 2.12 Manipur 15 1.15 Andhra Pradesh 12 0.92 Gujarat 12 0.92 Meghalaya 12 0.92 Tamilnadu 13 1.00 Karnataka 7 0.55 Rajasthan 6 0.46 Haryana 4 0.31 Madhya Pradesh 4 0.31 Punjab 4 0.31 Chattisgarh 2 0.15 Goa 2 0.15 Nagaland 2 0.15 Kerala 3 0.15 Arunachal Pradesh 3 0.15 Himachal Pradesh 1 0.08 Jammu& Kashmir 1 0.08 Uttranchal 2 0.15 Andaman & Nicobar 1 0.08 Chandigarh 1 0.08 Pondicherry 1 0.08 Sikkim 2 0.15 TOTAL 1318 100.00

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For customer satisfaction and to increase the business, the Bank has given thrust to single window service by opening the specialized branches. The Bank has 89 specialized branches as on March 31, 2006 that are engaged in financing its corporate borrowers, small-scale industries, specialized trading etc. The details are as given below:

Specialized Branches Number of Branches Asset Recovery Branch 1 Central Clearing Offices 4 Currency Chests 76 International Business 4 Treasury 1 Others 3 Total 89

DETAILS OF SOURCES OF FUNDS DEPOSITS (Rs. in crores) As on March 31,

2002 March 31,

2003 March 31,

2004 March 31,

2005 March 31,

2006 Deposits (Global) 19610.66 21031.29 22758.21 25348.38 29250.00 Annual Growth – Amount 1133.31 1420.63 1726.92 2590.17 3901.62 Annual Growth – Percent 6.13 7.24 8.21 11.38 15.39 Cost of Deposits (Global) (%) 7.5 6.86 5.89 5.11 4.89

The category-wise break-up of total global deposits during last 5 years is presented below:

33

(Rs. in crores) As on March 31,

2002 March 31,

2003 March 31,

2004 March 31,

2005 March 31,

2006 Current Deposits 1793.38 1981.08 2173.78 2684.78 3132.88 Savings Bank Deposits 6073.16 7002.84 8029.24 9122.23 10433.89 Term Deposits 11744.12 12047.37 12555.19 13541.38 15682.97 Total 19610.66 21031.29 22758.21 25348.39 29249.77

BORROWINGS As on March 31, 2006 the borrowings of Bank are as follows: (Rs. in crores) Particulars of Borrowings from Amount Institutions & Agencies 247.29 Unsecured Redeemable Bonds 540.00 Borrowings Outside India 47.00

The unsecured redeemable bonds (Tier II bonds) of Rs. 540 crores are included under Other Liabilities and Provisions in the Balance Sheet as per the guidelines of the Reserve Bank of India. The details are as under: Issue Series

Year of Placement

Deemed Date of

Allotment

Issue Amount (Rs. in

Crores)

Tenure (in months)

Credit Rating Coupon Rate (% p.a.)

Redemption Date

Series I 2001 31.03.2001 140.00 63 LAA by ICRA 11.00 (annual)

30.06.2006 (Redeemed

) Series II 2005 15.02.2005 300.00 123 LAA by ICRA

& AA by CARE 7.40

(annual) 15.05.2015

Series-III 2006 29.03.2006 100.00 121 LAA by ICRA & AA by CARE

8.00 (semi-

annual)

29.04.2016

All the above borrowings are unsecured. No directors have given any personal guarantee for collaterally securing the borrowings. None of the lenders is an affiliate/associate of the Bank. The Bank has not defaulted in repayment/ redemption of any of the borrowings or rolled over any of its borrowings. The Bank has been servicing all its principal and interest liabilities on time and there have been no defaults since inception. No consents are required from the lenders/trustees for issue of capital, creation of further charge and/or making additional borrowings. The lenders/ trustees have not nominated any directors in the Board of Directors of the Bank. RBI’s nominee director is on the Board of the Bank, the details of which are shown under the section “Board of Directors”. DETAILS OF DEPLOYMENT OF FUNDS ADVANCES The growth of the Bank’s gross advances during the past five years is as follows: (Rs. in crores) Year ended March 31,

2002 March 31,

2003 March 31,

2004 March 2005

March 31, 2006

Gross Credit 7522 7892 8421 11838 15963 Annual Increase (%) 14.7 4.92 6.70 40.60 34.84

The region wise credit exposure of the Bank’s Gross Credit portfolio as on March 31, 2006 is given below. (Rs. in crores) Region Amount % of gross credit East 7618 47.72 North East 1322 8.28 West 1983 12.42 North 3114 19.51 South 1713 10.73 Central 213 1.34 Total 15963 100

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The sector-wise credit portfolio of the Bank (In India) as on last reporting Friday of March 2006 is as under: (Rs. in crores) Sr. No.

Industry Amount Exposure as a % of gross credit

1 Gross Bank Credit 15963 100.00 2 Food Credit 931 5.83 3 Non Food Credit: 15032 94.17 3 a Medium & Large Scale

Industry 5593 35.04

3 b Wholesale Trade 823 5.16 3 c Priority Sector 6303 39.48 3 d Other Sectors incl. Export

Credit 2313 14.49

The top 10 borrowers of the Bank have the following industry-wise classification in respect of advances of the Bank as on March 31, 2006: (Rs. in crores) Account Name

Industry Outstanding Amount to

the Borrower (Rs. in crores)

Outstanding Amount to

the Industry (Rs. in crores)

Outstanding to the

Borrower as a % of Gross

Advances

Outstanding to the

Borrower as a % of

Outstanding Amount to

the Industry

Asset Quality

Borrower A Housing- Indirect

287.01 647.02 1.79 44.36 Standard

Borrower B Transport 281.81 315.00 1.76 89.50 Standard Borrower C Housing-Indirect 250.00 647.02 1.57 38.64 Standard Borrower D Housing-Indirect 200.00 647.02 1.25 30..91 Standard Borrower E Power 200.00 726.00 1.25 27.55 Standard Borrower F Hotel 194.34 416.00 1.22 46.72 Standard Borrower G Wholesale Trade 158.85 823.00 1.00 19.30 Standard Borrower H Steel 131.69 908.00 0.83 14.50 Standard Borrower I Electronics 100.00 292.00 0.63 34.25 Standard Borrower J Real Estate 100.00 320.00 0.63 31.25 Standard

Export Credit The export credit as at the end of March 31, 2006 was Rs. 392 crores. Year ended March 31,

2002 March 31,

2003 March 31,

2004 March 31,

2005 March 31,

2006 Achieved 192 169 186 263 392 % of Export Credit to Net Credit 2.55 2.14 2.20 2.22 2.46

Foreign Currency Loans Details of the Foreign Currency Loans portfolio for the last 5 years is as follows: Year ended March 31,

2002 March 31,

2003 March 31,

2004 March 31,

2005 March 31,

2006 Foreign Currency Loans (USD mln.) 4.00 6.93 2.84 Nil 23.28 Foreign Currency Loans (Total in Rs Crores)

18.80 32.57 60.05 Nil 103.85

Priority Sector Lending As per RBI norms, the Private Sector Banks’ credit to the Priority Sector should be 40% of the Net Bank Credit and that for agriculture should be 18% of the Net Bank Credit. The policy of the Bank with regard to financing to the Priority Sector is based upon the norms stipulated by Reserve Bank of India. As on March 31, 2006 the Priority Sector credit stood at 44.82% of the Net Bank Credit and Agricultural credit stood at 10.78% of the Net Bank Credit. Details of Sector-wise distribution of Gross Priority Sector Advances for the last five years is given below

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(Rs. in crores) Year ended March 31,

2002 March 31,

2003 March 31,

2004 March 31,

2005 March 31,

2006 Agriculture 1030 1208 1222 1477 2327 Small Scale Industry 535 524 511 818 1303 Other Priority Sector Advances 1150 1122 1801 2214 3479 Gross Priority Sector Advances 2715 2854 3534 4509 7109 % to Net Bank Credit 39.80 36.20 36.30 39.14 44.82 Targets (%) 40.00 40.00 40.00 40.00 40.00

Lead Districts As required by the GoI/ RBI, the Bank has been assigned the role of lead bank in 30 districts in 3 states, which are West Bengal, Assam , Manipur and Tripura . The assigned lead bank responsibilities are discharged by maintaining Inter-institutional coordination in the preparation and implementation of various development programmes in each district. The role functions of a Lead Bank are as under: • Development of banking facilities particularly in Rural and Backward areas. • Removal of unemployment and under employment through channelising banks’ advances for Regional Development. • Ensuring appreciable rise in the standard of living of the poorest sections of the population by providing credit for taking up self-employment ventures by them and also for some of their basic needs. • Bringing about greater understanding and cooperation between banks and government departments/ agencies in implementing various programmes/ schemes. • Identifying major constraints impeding the development of the districts’ economy and inducing the appropriate agencies to take remedial measure. • Formulation of Annual District Credit Plan and its implementation. • Monitoring and review of the progress made by Banks in credit deployment in general and in Priority Sector advances in particular and under Government sponsored Credit programmes. Details of branch network, resources mobilised and advances made in the lead districts are as under: (Rs. in crores) State No. of Lead

Districts No. of

Branches Total

Deposits Total

Advances (A) Advances to

Priority Sector (B)

Percentage to Total Advances

(B/A) West Bengal 10 348 4692.69 1498.16 1227.23 82 Assam 12 108 1866.57 585.58 313.39 54 Tripura 4 41 634.78 184.15 139.65 76 Manipur 4 6 38.71 19.33 15.25 79 Total 30 503 7232.75 2287.22 1695.52 74

Credit Approval Authority and Procedures The Bank adopts stringent standards of appraisal for its advances. The various levels of authorities are vested with discretionary powers to sanction credit limits. Detailed guidelines have been formulated to appraise, sanction and monitor the credit proposals. The officers of the Bank are well trained to appraise the credit proposals in an efficient and skilful manner. The Bank is continuously toning up the skills of the officers in credit appraisals by giving training both in house and outside agencies. The credit limits sanctioned by one layer of authority is being reviewed by the next higher layer authority and any comments/ observations of higher authority are taken up for rectification.

36

INVESTMENTS (Rs. in crores) As on March 31,

2002 March 31,

2003 March 31,

2004 March 31,

2005 March 31,

2006 Gross investments 11728.16 12728.31 13982.90 14572.57 14530.66 SLR Investments 7513.99 8604.01 9992.63 10681.39 10862.00 Permanent Investments 0 0 0 0 0 Current Investments 0 0 0 0 0 Current Investments to SLR Investments (%)

0 0 0 0 0

Overseas 0 0 0 0 0 Held Till Maturity (HTM) 3079.10 3158.87 3110.99 4933.45 7689.93 Available For Sale 8087.68 9093.15 10355.84 9639.11 6765.43 Held For Trading 117.28 476.28 516.06 0 75.30 % of HTM(including exempted category) to entire portfolio

26.25 24.82 22.25 21.45 52.92

During the year 2005-06, the gross investments of the Bank increased from Rs. 14,572.55 crores as on March 31, 2005 to Rs. 14530.66 crores as on March 31, 2006. Risk management from treasury operations was well monitored through well defined investment policy. The switch over to Negotiated dealing settlement was also carried out successfully during the year 2003-04. The break up of investments for the last five financial years is given as under:

(Rs. in crores) Security Details March 31,

2002 March 31,

2003 March 31,

2004 March

31,2005 March 31,

2006 Government Securities 8880.27 10093.06 11561.58 12181.74 12411.74 Other Approved Securities 439.70 415.15 372.54 308.08 255.76 Shares 8.18 21.91 26.97 69.41 60.62 Debentures & Bonds 2256.56 2042.21 1840.13 1433.89 1173.51 Subsidiaries & Joint Ventures 23.05 23.05 30.59 3.85 3.85 Others 48.66 43.98 84.32 406.35 625.18 Total 11656.42 12639.36 13916.14 14403.32 14530.66

The yield on investments (%) for the last five financial years is given as under: As on March 31,

2002 March 31,

2003 March 31,

2004 March 31,

2005 March 31,

2006 Yield including profit on sale of investments (%)

13.57 12.47 12.01 10.74 9.34

Yield excluding profit on sale of investments (%)

11.19 10.30 9.51 9.02 8.70

Investment Strategy The main objectives of the Investment strategy of the Bank are as follows: 1. To raise funds from the money market and deploy resources allocated/available for treasury for

optimisation of income having due regard to the risk profile of assets and capital adequacy requirements. 2. To comply with all regulatory requirements including Statutory Liquidity Ratio (SLR) and Cash Reserve

Ratio (CRR) in the country and abroad as per local regulations. 3. To manage liquidity risk, interest rate risk, credit risk and counter party risk so far as investment

portfolio is concerned. 4. To take advantage of market conditions for profitable trading activities in securities. ASSET CLASSIFICATION, INCOME RECOGNITION & PROVISIONING Asset Classification The Bank classifies its assets in compliance with RBI guidelines. Under these guidelines, an asset is classified as non-performing if any amount of interest/principal remains overdue for more than 90 days in respect of term loans. In respect of overdraft/ cash credit, an asset is classified as non-performing if the account remains out of order for a period of 90 days and in respect of bills, if the account remains overdue for more than 90 days. In case of retail assets, the Bank classifies an asset as non-performing where any amount of interest/ principal remains past due for more than 90 days, in respect of all loans other than home loans.

37

NPAs are further categorized into three groups i.e. Substandard, Doubtful and Loss Asset depending upon the period of delinquency and availability of tangible security. The table below gives the criteria for asset classification viz. Standard, sub-standard, doubtful and loss asset: Category Classification 1. Performing Standard Assets An Asset which has not posed any problem and which does not carry more than the

normal business risk 2. Non-Performing a) Sub-Standard

Assets An asset which has been non-performing for a period less than or equal to eighteen months

b) Doubtful Assets

An asset, which has been non-performing for a period exceeding eighteen months

c) Loss Assets Asset where loss has been identified by the Bank or auditors/ RBI. The value of security is less than 10%

For this purpose, all advances are segregated into performing assets (standard assets) and non-performing assets. A borrowal account is classified as Non Performing Assets (NPA) when interest and/or installment is due for more than 90 days. Borrowal accounts treated as NPA for not exceeding 1½ years are classified as sub standard assets and borrowal accounts treated as NPA for more than 1½ years are treated as doubtful assets. NPAs where securities are less than 10% and which are considered as irrecoverable are treated as loss assets. When an account is classified as NPA, interest already debited to the account but not realised, is de-recognised and further interest accrued is collected on cash basis. Provisioning and Write-Offs As per RBI guidelines, provisions are arrived on all outstanding NPAs, as under: Sub-Standard Assets

10% of the outstanding

Doubtful Assets 20% or 30% or 50% of the secured portion based on the number of years the account remained as "Doubtful Asset" (i.e. up to one year, one to three years and more than three years respectively) and at 100% of the unsecured portion of the outstanding after netting retainable or realisable amount of the guarantee claims already received/lodged with DICGC/ECGC, if any

Loss Assets 100% of the outstanding after netting retainable amount of the guarantee claims already received/lodged with DICGC/ECGC, if any

Standard Assets A general provision of 0.30% Asset Classification of Performing and Non-Performing Assets for the last 5 years is given below: (Rs. in crores) Classification of assets as on March 31,

2002 March 31,

2003 March 31,

2004 March 31,

2005 March 31,

2006 Standard Assets 6283 6932 7657 8553.48 15219.17 Sub Standard Assets 136 83 148 88.39 202.22 Doubtful Assets 915 827 605 600.31 485.01 Loss Assets 188 49 11 37.67 57.07 Gross NPAs 239 959 764 726.37 744.30 Gross Advances 7522 7891 8421 10006.22 15963.47

Advances given above are Gross Advances while the Balance Sheet indicates Net Advances after setting off provisions, interest suspense etc: Gross Advances – (Provisions, Interest Suspense and DICGC & ECGC claims) = Net Advances. General Data on Non-Performing Assets

38

The details of Non-Performing Assets of the Bank are furnished in the tables below: (Rs. in crores) As on March 31,

2002 March 31,

2003 March 31,

2004 March 31,

2005 March 31,

2006 Gross NPA at the beginning of the year

1411 1239 959 764 726

Addition during the year 122 60 156 145 255 Reduction during the year 294 340 351 210 237 Upgradation 10 16 6 3 Cash Recovery 109 101 95 13 92 Compromise 7 10 15 86 20 Write-off 168 213 235 25 122 Gross NPA at the end of the year 1239 959 764 726 744 Provision 674 542 458 459 439 Interest Suspense 3 11 7 0 0 DICGC & ECGC Balance 0 0 0 0 0 Net NPA at the end of the year 542 406 299 277 303 Gross NPAs to Gross Advances (%) 16.17 12.10 9.10 6.10 4.66 Net Advances 6823 7352 7963 11390 15860 Net NPAs 542 406 299 277 303 Net NPA to Net Advances (%) 7.94 5.50 3.75 2.43 1.95

NPA Management Strategy The Bank is utilizing the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act., 2002 as an effective tool. The Bank has also opened Asset recovery management branches to give necessary impetus to closely monitor recovery of suit filed cases at DRT and Civil courts. Senior level executives visit the Regions to take decisions on the spot for One Time Settlement (OTS) / Out-of-court Settlement (OCS). Second Level executives are allotted responsibility for NPA recovery. The Bank has been utilizing the revised guidelines of RBI for OTS / OCS which is now been extended upto Senior Manager. Bank is on the initiative by taking the following steps for improving the NPA recovery and arresting the fresh generation of NPA. With this initiate the Bank has been able to improve the recovery and reduction of NPA upto the net NPA level of 1.95% of net advance as on March 31, 2006. The fresh generation of NPA has also come down at low level. In order to improve the profitability the Bank has given emphasis on recovery for shadow register. Asset Liability Management

39

Maturity Profile of the Asset Liability as on the last reporting 31.03.2006: (Rs. in crores) Maturity 1-14

days 15-28 days

29 days-3 months

3-6 months

6-12 months

1-3 years

3-5 years

Over 5 years

Total

1Outflows Capital 1532 1532 Reserves &

Surplus 296 296

Deposits 1940 260 1029 1088 4640 6665 1771 11856 29248 Borrowings Other Liability &

Provision 292 141 330 212 234 286 235 441 2171

A: Total Outflows 2232 401 1359 1300 4874 6951 2005 14125 33248 B: Cumulative

Outflows 2232 2633 3992 5292 10166 17117 19122 33248

2 Inflows 14225 33248 Cash 149 149 Balance with RBI 97 52 58 222 346 93 417 1285 Balance with

Other Banks 1343 1343

Investments 20 99 218 18 140 1857 2244 9503 14100 Advances

Performing 1598 287 1307 693 1137 6935 1169 1653 14779

NPAs 202 572 774 Fixed Assets 205 205 Other Assets 300 300 C: Total Inflows 3134 507 1684 926 1501 9139 3708 12648 33248 3Mismatches D: Mismatch (C-

A) 902 107 326 -374 -3373 2188 1703 -1477

E: % Mismatch (D as a % of A)

40.41 26.71 23.96 -28.80 -69.21 31.48 84.90 -10.46

F: Cumulative Mismatch

902 1009 1335 960 -2413 -225 1477 0

G: % Cumulative Mismatch F as % of B

40.41 38.32 33.44 18.14 -23.74 -1..32 7..73 0

ALM Policy of the Bank The Bank has put in place a system for collection from all its branches to work out the residual maturities of its assets & liabilities in various time buckets. On the basis of the data collected and applying appropriate statistical methods, the residual maturity pattern of assets & liabilities were computed at periodical interval and it was found that the Bank operated more or less within the tolerance limits fixed for liquidity mismatches. The Bank has also undertaken the interest rate sensitivity analysis to assess the impact of change in the rates of interest from the perspective of net interest income. CAPITAL ADEQUACY RATIO The RBI’s guidelines on Capital Adequacy Ratios (CAR) generally conform to the guidelines adopted by the Committee on Banking Regulations and Supervisory Practices of the Bank of International Settlements (“BIS”). The RBI requires that assets, non-funded items and other off-balance sheet exposures be assigned weights according to prescribed risk weights and that each Bank must maintain capital levels equivalent to a prescribed ratio to such risk weighted assets. All financial ratios and capital adequacy ratios confirm to RBI norms. Capital For the purpose of calculating the CAR, capital of a Bank is divided into two classes i.e. Tier I capital and Tier II capital. Tier I capital, also known as core capital, represents amounts readily available to support the Bank against unexpected losses. Tier-I capital consists of paid up capital, statutory reserves and other disclosed free reserves. Tier-II capital comprises elements that are less permanent in nature and thus less readily available. Tier II capital consists of subordinated debt (with an minimum maturity of five years), undisclosed reserves, cumulative perpetual preference shares, revaluation reserves (to the extent of 45% of the total

40

amount of revaluation reserves on the Bank’s book), general provisions and hybrid capital. The total capital for the calculation of CAR is the sum of Tier I capital and Tier II capital and is taken, with the condition that the Tier II capital should not exceed Tier I capital. RBI vide its circular dated October 31, 1998 prescribed that banks should achieve a minimum CAR of 9% with effect from the year ending March 31, 2000. Risk Weighted Assets Each class of assets of the Bank (including off-balance sheet assets) is assigned a risk weight (following certain norms laid down by RBI). The value of risk weighted assets for each class of assets is obtained by multiplying the amount of each asset class by its risk weight. The total risk weighted assets are obtained by summing up the individual risk weighted assets. An International Committee of Banking Regulations and Supervisory Practices of the BIS released an agreed framework on international convergence of CAR for commercial Banks. The minimum CAR was set at 8%. The capital adequacy norms are to be enforced by the Banking Supervisory Authority of the respective country. RBI being the Central Bank of the country had issued guidelines and prescribed that Indian Banks should achieve CAR of 9%, by March 31, 2000. Risk Management The Bank has constituted an Risk Management Committee which looks after credit risk, market risk and operational risk. The credit risk management department looks after different areas of credit risk including assessment of credit portfolio risk and progress of implementation of risk management system in the Bank. There is also a loan review department for examination of risk level of large credit sanctioned as per guideline issued by RBI for loan review mechanism. The liquidity risk, interest rate risk & market risk are being monitored through asset liability management committee. The Bank had also engaged ICRA Advisory Services for assessment of gaps in the Risk Management System in the Bank and also to set up Risk based supervision including a risk based internal audit. Internal Control System and the Adequacy Strengthening and improving internal supervision and internal control continued to receive thrust by the Bank. During the year 2005-06, 892 branches, 13 regional offices were inspected. Concurrent audit was conducted at two head offices departments (Investment & Fund Management & dealing operations of International Banking Division) and 339 branches covering 57.47% of the aggregate deposits and 81.61% of advances constituting 65.17% of the Bank’s total business against the RBI stipulation of 50% for deposits & advances. Revenue audits were conducted for 1113 branches including 340 branches under Concurrent audit. The Bank carried out System audit of 670 ALPM branches and 222TBM branches. Risk based internal audits were also conducted in 779 branches by CA Firms. The Bank continued to give due attention to improve inter branch reconciliation of entries. The Bank also stepped up its efforts towards preventive vigilance and laid adequate emphasis on speedy disposal of vigilance cases and complaints in line with the Central Vigilance Commission (CVC) guidelines. SUBSIDIARIES OF THE BANK The Bank does not have any subsidiary as on the date of this Information Memorandum. GROUP COMPANIES OF THE BANK Since the Government of India is the promoter of the bank, it is not possible to give details of its group companies because of the large number of such undertakings. JOINT VENTURE/ AFFILIATES/ OF THE BANK/ COMPANY PROMOTED/ CO-PROMOTED BY THE BANK The Bank does not have any affiliates as on the date of this Information Memorandum. VI.SIGNIFICANT REGULATORY MATTERS RELATED TO THE BANK Regulatory Framework United Bank of India is licensed as a Bank and is regulated and supervised by RBI and the laws, rules and regulations provided in relation thereto in the Banking Regulation Act, 1949, the RBI Act, 1934 and other related enactment such as the Banker’s Books of Evidence Act, 1891. Its activities, like all other commercial banks and financial institutions, are supervised by a Board for Financial Supervision set up by RBI, under the Chairmanship of the Governor of RBI. This Board is assisted by the Department of Financial Supervision of RBI.

41

United Bank of India observes the requirements and conditions applicable to a banking company on matters, inter alia, as mentioned herein below: (a) The forms of business in which United Bank of India and its subsidiaries may engage in is specified and regulated by the Banking Regulation Act, 1949. Pursuant to the provisions of Banking Regulation Act, 1949, United Bank of India cannot directly or indirectly deal in the buying, selling, bartering of goods by itself or for others except in connection with the realisation of security given to it or held by it or in connection with bills of exchange received for collection or negotiation or with such of its business entailing undertaking the administration of estates as executor, trustee or otherwise, or any such business as specified under Section 6(1)(o) of the Banking Regulation Act, 1949. Goods for this purpose means every kind of movable property, other than actionable claims, stocks, shares, money, bullion and specie and all instruments referred to in section 6(1)(a) of Banking Regulation Act, 1949. Subject to the provisions of the Banking Regulation Act, 1949, United Bank of India and its subsidiaries will pursue business avenues as permitted under Section 6 of the Banking Regulation Act, 1949 in contrast to companies not being a banking company under the Banking Regulation Act, 1949. (b) Appointment or re-appointment of the Chairman and Managing Director, Executive Director and other Directors of United Bank of India will be subject to the approval of RBI. The Chairman & Managing Director of United Bank of India is required to have certain specified qualifications as per the Banking Regulation Act. RBI is empowered to remove such an appointee on the ground of public interest, interest of depositors or to ensure the proper management of United Bank of India. RBI may order meeting of United Bank of India’s board of directors to discuss any matter in relation to United Bank of India, appoint observers to such meeting and in general may make such changes to the management as it may deem necessary and can also order the convening of the general meeting of United Bank of India to elect new directors. Additionally, United Bank of India may not appoint persons as directors who are already directors on the board of another banking company. (c) United Bank of India will need to obtain the prior approval of RBI to open new branches. (d) United Bank of India cannot, subject to the provisions of the Banking Regulation Act, 1949, hold shares in any company (save and except its existing subsidiary) exceeding 30.0% of the paid-up share capital of such company or 30% of its own paid up share capital and reserves, whichever is less. United Bank of India will require the prior permission of RBI to incorporate a subsidiary. (e) United Bank of India and its subsidiaries will have to observe the prudential norms stipulated by RBI, from time to time, in respect of their underwriting commitments. Pursuant to such prudential norms, the underwriting commitment under any single obligation of United Bank of India or its subsidiaries shall not exceed 15% of an issue. (f) A shareholder of United Bank of India will not be able to exercise voting rights on poll in excess of 10% of the total voting rights of all the shareholders of United Bank of India. (g) RBI in its directive to all Indian private sector commercial banks, including United Bank of India, requires such banks to obtain the acknowledgement of RBI before effecting transfer of shares when the transfer makes the shareholding of the individual/ group equivalent to 5% or more of the total paid up capital of such banks. (h) For creating floating charge on United Bank of India’s undertaking or its property, prior approval of RBI will be required. Currently, all borrowings of United Bank of India, as also the issue of bonds, are unsecured. (i) United Bank of India is required, under the Banking Regulation Act, 1949, to create a reserve fund and out of the balance of profit each year as disclosed in the profit and loss account prepared under Section 29 of the Banking Regulation Act, 1949, and before any dividend is declared, required to transfer to the reserve fund a sum equivalent to twenty percent of such profit. (j) United Bank of India is required under the Banking Regulation Act, 1949, to ensure at periodic intervals that the assets in India shall not be less than 75% of its demand and time liabilities in India, and submit returns to RBI in the prescribed form and manner. (k) United Bank of India will be required to prepare its balance sheet and profit and loss account in the forms set out in the Third Schedule to the Banking Regulation Act, 1949 or as near thereto and subject to and in accordance with the other provisions of the Banking Regulation Act, 1949 read with the Companies Act, 1956. (l) A compromise or arrangement between United Bank of India and its creditors or any class of them or between United Bank of India and its members or any class of them or any modification in any such arrangement or compromise will not be sanctioned by any High Court unless such compromise or arrangement or modification, as the case may be, is certified by RBI in writing as not being incapable of being worked and as not being detrimental to the interest of the depositors of United Bank of India. (m) Amalgamation of United Bank of India with any other banking company in future will require being sanctioned by RBI and shall be in accordance with the provisions of the Banking Regulation Act, 1949. (n) United Bank of India will pay dividend on its shares only after all its capitalized expenses (including

42

preliminary expenses, organisation expenses, share-selling commission, brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have been completely written off. RBI’s prior approval is required for a dividend payment above 25.0% of the par value of United Bank of India’s shares or for an interim dividend payment. (o) United Bank of India is required to maintain books, records and registers. The Banking Regulation Act, 1949 specifically requires such companies to maintain books and records in a particular manner and file the same with the Registrar of Companies on a periodic basis. The provisions for production of documents and availability of records for inspection by shareholders would apply to United Bank of India as in the case of any company.

United Bank of India would have to obtain the prior permission of RBI to issue bonus shares as prescribed under the Banking Regulation Act, 1949.

(p) Subject to and on account of laws governing banking companies, the financial disclosures in the Information Memorandum may not be available to investors after listing on a continuous basis. (q) The special status of banks is recognized under other statutes including the Sick Industrial Companies Act, 1985, Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002. As a bank, United Bank of India is entitled to certain benefits under various statutes including the following:

• The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 provides for establishment of Debt Recovery Tribunals for expeditious adjudication and recovery of debts due to any bank or Public Financial Institution or to a consortium of banks and Public Financial Institutions. Under this Act, the procedures for recoveries of debt have been simplified and time frames been fixed for speedy disposal of cases. Upon establishment of the Debt Recovery Tribunal, no court or other authority can exercise jurisdiction in relation to matters covered by this Act, except the higher courts in India in certain circumstances. • The Sick Industries Companies Act, 1985, provides for reference of sick industrial companies, to the Board for Industrial and Financial Reconstruction (BIFR). Under the Act, other than the Board of Directors of the Bank, a scheduled bank (where it has an interest in the sick industrial company by any financial assistance or obligation, rendered by it or undertaken by it) may refer such company to the BIFR. • The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”) focuses on improving the rights of banks and financial institutions and other specified secured creditors as well as asset reconstruction companies (ARCs) by providing that such secured creditors/ARCs can take over management control of a borrower company upon default and/or sell assets without the intervention of courts, in accordance with the provisions of the SARFAESI Act. Further, the SARFAESI Act also has related features to enable securitisation of corporate debt, the establishment and functioning of ARCs and the establishment of a Central Registry.

Inspection by RBI RBI conducts an annual inspection of the Bank based on the audited accounts. Simultaneously, RBI carries out inspection of branch/ controlling offices on a selective basis. RBI also conducts offsite surveillance of the branches of the Bank on a quarterly basis. Discussions with the management of the Bank also form a part of the inspection and surveillance process. An inspection of United Bank of India under section 35 of the Banking Regulation Act, 1949 was conducted by Reserve Bank of India with reference to its position as on March 31, 2006. The Annual Inspection Report of the Reserve Bank of India has identified certain weaknesses in the system, operational and other deficiencies in their internal controls. The inspection of the Bank by RBI is a regular exercise and is carried out periodically for all the banks and Financial Institutions. The reports of RBI are strictly confidential and the Bank has informed the RBI about the actions already taken and measures that are under implementation in respect of observations made by RBI. The issues raised by RBI in the aforesaid report have been replied to by the Bank. VII. ORGANISATION STRUCTURE & MANAGEMENT PROMOTERS & THEIR BACKGROUND Name Age

(Years) Education & Qualification

Experience in the Business or employment in the proposed line of business

Business & Financial Activities

Photograph Voter-ID No.

Driving License No.

43

Government of India

N.A. N.A. N.A. N.A. N.A. N.A. N.A.

[as the promoter of the Bank is the Government of India, the requirement of furnishing the above details shall not be applicable. Also the requirement of the Issuer Company to confirm that the details of all the promoters pertaining to their Permanent Account Number, Bank Account Number and Passport Number, if any, has been submitted to the concerned Stock Exchange(s), shall also not be applicable]

KEY MANAGERIAL PERSONNEL (as on March 31, 2006) Name Age

(Years) Date of Joining

Designation Qualification Details of previous employment

Work Experience (Years)

Compensation (FY 2006)

Shri P. K.Gupta 57 01.05.2005

Chairman & Managing Director

M.Com, LLB CMD NHB 35 188022.00

Ms. Sunanda Lahiri

58 18.06.2005

Executive Director

BE (Elect. Telecommun.)

GM, UCO Bank

35 379786.00

Shri Prakritish Basu

59 27.04.1971

General Manager

BE( Elec.), ICWAI,CAIIB

Nil 35 724101.00

Shri Mrinal Baishya

58 12.01.1972

General Manager

MA, LLB, Dipl. in Statistics

Nil 34 665369.00

Shri Ashoke Kumar Banerjee

57 08.02.1971

General Manager

MA ( Eco.) Nil 35 780037.00

Shri Santanu Guha

58 12.07.1972

General Manager

BE ( Mech.) CAIIB

Nil 34 716280.00

Shri Ashoke Kumar Roy

56 26.06.1972

General Manager

BE (Mech), CAIIB

Nil 34 690382.00

Shri Anup Sankar Bhattacharya

53 26.05.1971

General Manager

B.Sc (Agri ) Hons.

Nil 35 661946.00

Shri Swapan Kumar Biswas

56 11.05.1971

General Manager

BSc (Agri) Hons, MA (Public Admn.), CAIIB

Nil 35 659305.00

Shri Nirode Gopal Saha

56 07.05.1971

General Manager

BSc (Agri) Hons

Nil 35 652155.76

Shri N. Jeevagan 55 19.09.2005

General Manager

B.Com, MA(Eco), CAIIB

Dy. Gen Mgr. Canara Bank

34 284464.29

Shri Amitava Roy Choudhury

56 10.12.2005

General Manager

B.Sc.,B.Tech, CAIIB

Nil 29 657254.00

Shri Tapan Kumar Mukherjee

56 10.12.2005

General Manager

B.Sc.,CAIIB,LLB, FCA

Nil 28 662999.00

Shri Shankar Lal Ghosal

55 10.12.2005

General Manager

BE,PGDip GM

Nil 28 605135.69

*salary of CMD was paid by NHB prior to Dec 2005. ** salary of Shri Jeevagan is being reimbursed to Canara Bank. CHANGES IN KEY MANAGERIAL PERSONNEL IN LAST 1 YEAR Sr. No.

Name & Qualification Position Held Reason for Change

1. Shri Parkash Singh Chairman & Managing Director Retired 2. Shri P. K. Gupta Chairman & Managing Director New Appointment since

01.05.2005 3. Shri K N Prithviraj Executive Director Transferred to Oriental Bank of

Commerce

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4. Ms. Sunanda Lahiri Executive Director New Appointment since 18.06.2005

5. Shri S. P. Biswas General Manager Retired on completion of tenure 6. Shri N. Jeevagan General Manager New Appointment since

17.09.2005 7. Shri Amitava

Roychowdhury Deputy General Manager Promoted to General Manager on

26.11.05 8. Shri S. L. Ghosal Deputy General Manager Promoted to General Manager on

26.11.05 9. Shri Tapan Mukherjee Deputy General Manager Promoted to General Manager on

26.11.05 BOARD OF DIRECTORS (as on March 31, 2006) Sr. No.

Name & Designation

Age (Years)

Qualification & Experience

Date of Appointment

Date of Expiry of Current Term

Residential Address Particulars of other Directorships

1. Shri P. K. Gupta, Chairman & Managing Director

57 M.Com, LLB 01.05.2005 Until further Order

UBI House,73-E, Purna Das Rd. Kolkata 700029.

Nil

2. Ms. Sunanda Lahiri, Executive Director

58 BE (Electronics & Telecommunications)

18.06.2005 Until further Order

Flat No. 11,Ashoka Apartment,111 Southern Avenue, Kolkata 700029.

Nil

3. Shri Alok Bhatnagar, Director

50 B.Sc.,LLB 14.05.2003 Until further Order

D II-21, Kaka Nagar, New Delhi -110 003

Nil

4. Smt. Suma Varma, Director

48 B.Sc., PGDM

09.01.2004 -Do- A-6, RBI Officer’s Flats, 7, New Road, Alipur, Kolkata-27

Nil

5. Shri Debasish Banerji, Director

55 M.Com. 22.08.2004 21.08.2007 12, Gobinda Pal Lane, Kolkata-2

Nil

6. Shri Biswajit Kakoti, Director

42 B.A. 27.02.2004 26.02.2007 Nahoroni Path, Dispur, Last Gate, Guwahati-6

Nil

7. Shri Abdul Rashid, Director

58 M.A. 10.01.2006 10.01.2009 Bhaiyathan Road, P. O. Surajpur, Distt-Sarguja, Chattisgarh

Nil

8. Shri P. C. Zoram Sangliana, Director

50 B.A. 10.01.2006 10.11.2009 B-71, Dwarpul Vengthar, Aizwal

Nil

There is no shareholding of the directors of the Bank in the Bank as on December 31, 2005 as 100% shareholding in the Bank is owned by the Government of India. CORPORATE GOVERNANCE The SEBI guidelines in respect of corporate governance, shall be applicable to the Bank only after listing of its equity shares on the recognised stock exchange(s). 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 upon listing of its shares as well as any requirements of the stock exchanges with regard to corporate governance before grant of listing permission by the stock exchanges. The Bank also confirms that it shall comply with the requirements of the stock exchanges to their satisfaction. In this regard, the Bank shall take necessary steps to further broad-base it’s Board of Directors and also set up the necessary committees as per the requirements of the guidelines as in force from time to time. HUMAN RESOURCES The total manpower of the Bank as on March 31, 2006 was 17143 comprising 5092 officers, 8158 clerks and 3893 sub-staff. The manpower position of the Bank for the last five years is as under:

45

As on March 31,

2002 March 31,

2003 March 31,

2004 March

31,2005 March 31,

2006 Officer 4571 4480 4755 4636 5092 Clerks 9161 9077 9099 8864 8158 Sub-Staff 4227 4188 4033 4044 3893 Total Number of Employees 17959 17745 17887 17544 17143

The business per employee of the Bank has been on an increasing trend. The employee productivity parameters during the last five years & six months ended September 30, 2004 are depicted in the table given below: As on March 31,

2002 March 31,

2003 March 31,

2004 March 31,

2005 March 31,

2006 Business per Employee (Rs. in crores) 1.44 1.62 1.69 2.08 2.54 Net Profit per Employee (Rs. in lacs) 0.66 1.77 1.76 1.71 1.19

Human Resources (HR) Development As on March 31, 2006, the Bank had 17143 employees, out of these scheduled castes, scheduled tribes and other backward class formed 22.5% of the total employees, while women employees constituted about 7.2% of the total. In September 2001, the Bank had introduced a novel strategy of acknowledging & recognizing the performance of employees, under this scheme six regional heads, one officer, one teller and one daftary were selected for excellence award during 2002-2003. The spouse of each successful individual was also felicitated during the year under the scheme. During the year 2005-06, the Bank through its various training centers conducted 352 training programmes covering 4934 employees of different categories. In house training programmes on computerization, conducted by officials of Computer Deptt., were attended by officers & clerical staff of many Branches including Managers & Deputy Managers of computerized branches . They were given on the spot informal training of formal training at the Staff Training College (STC), Kolkata. Apart from in-house training, 571 participants were sent for higher training on 200 instances in the field of computer applications i.e. information system audit, network management and trouble shooting skills, information security management system etc. to various institutes across the country. Information Technology Presently the Bank has 350 TBM and 967 ALPM branches and 65 Extension Counter covering 95% of business. The Anywhere Anytime Banking is now available in selected branches spread over most of important cities, like Kolkata, Delhi, Mumbai, Chennai, Lucknow, Jaipur, Patna, Bhubaneswar, Guwahati. Bank has also joined the consortium of ATM network along with 10 other leading Public Sector Banks and Private sector Banks under the brand name ‘Cash Tree’. This has enabled our customer to avail bank services at 108 selected branches and 2000 Cash Tree ATM, of which 120 ATMs are owned by the Bank. Installation of another 80 ATMs of our Bank are in the progress. Bank has also introduced Multi City Cheque facility as an at par instrument in selected cities. The tele banking services has been extended to 38 branches and SMS mobile banking services has been extended to 5 branches. In addition it has launched VISA affiliated Debit Cards, Online Collection of Tax (OLTAS ) facility in 344 branches, RTGS facility in 84 Branches etc. MBB facility has also been extended to 140 Branches. The only Bank in Eastern India has achieved 100% branch computerization status within stipulated time of December 2004. The introduction of Core Banking Solution (CBS) in the bank has also been initiated which will introduce more and more delivery channels for better customer services, meeting emerging and dynamic market competition and internal efficiency. CBS would be extended to 300 Branches by March 2008 covering 64% of business of the Bank and 600 Branches by September 2009 covering 600 Branches. VIII.STOCK MARKET DATA OF THE EQUITY SHARES OF THE BANK The entire capital of the Bank is held by the Government of India and therefore the provision of providing the stock market data with respect to its equity shares shall not be applicable. PROMISE V/s. PERFORMANCE As the Bank has not approached the capital markets, with either its equity or debt public issue, the comparison of the Bank’s performance vis-à-vis projections can not be furnished.

46

IX. MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL PERFORMANCE Financial highlights of the Bank for the last three financial years as per the profit & loss account of the Bank are as given in the following table: Year ended March 31,

2004 March 31,

2005 March 31,

2006 % change from

2004 to 2005 % change from

2005 to 2006 Total Income 2578.42 2611.57 2816.99 1.29% 7.87% Interest Income 2072.98 2133.07 2360.03 2.90% 10.64% Other Income 505.44 478.5 456.96 -5.53% -4.50% Total Expenditure 1965.12 1921.93 2612.43 17.62% 13.07% Interest Expenditure 1292.44 1217.73 1339.51 -5.80% 10.00% Operating Expenditure

672.68 704.2 833.63 4.68% 18.38%

Profit Before Provisions & Contingencies

613.3 689.64 643.85 12.45% -6.64%

Provisions & Contingencies

298.22 389.46 439.29 30.63% 12.79%

Net Profit 315.08 300.18 204.56 -4.70% -31.85% Significant items of income and expenditure during 2004-05 (comparison of financials for the year ended March 2005 with March 2004) Net Profit: Net Profit of the Bank increased from Rs. 119.04 crores in 2001-02 to Rs. 305.19 crores in 2002-03 showing a growth of 156.38%. Net profit decreased by 4.70% in 2005 from 2004. Interest Income: Interest income from advances improved from Rs. 647.22 crores in 2001-02 to Rs. 726.87 crores in 2002-03. Gross investments of the Bank increased by 8.53 % from Rs. 11728.14 crores as on 31-03-2002 to Rs. 12728.29 crores as on 31-03-2003. Interest earned on investment also went up to Rs. 1332.60 crores in 2002-03 from Rs. 1323.37 crores in 2001-02. The net interest income of the Bank improved from Rs. 601.71 crores in 2001-02 to Rs. 719.68 crores in 2002-03.It further increased to Rs. 2133 Crores in 2005 and marked an increase by 2.9 over that of 2004. Gross investments of the Bank increased to Rs.14300 Crores in 2004 and Rs. 14403.31 crores in 2005 which marked an increase by 1.9 %. Other Income: Commission and exchange income of the Bank increased from Rs. 66.93 crores in 2001-02 to Rs. 69.90 crores in 2002-03. Due to an active securities market profit on sale of investments increased from Rs. 281.24 crores in 2001-02 to Rs. 305.96 crores in 2002-03. Consequently total other income of the Bank increased from Rs. 428.20 crores in 2001-02 to Rs. 505.44 crores in 2002-03. The income from Commission , Exchange and Brokerage increased to Rs. 90 crores from Rs. 75 crores in financial year 2005 over that of FY 2004 marking an increase by 20%. The Bank is aware of the need to increase non-fund non-interest income in order to improve overall profitability and is exploring various avenues to increase fee-based income. Interest Expenses: Interest paid on deposits decreased from Rs. 1399.26 crores in 2001-02 to Rs. 1376.69 crores in 2002-03 due to low cost of deposits. The ratio further decreased by 5.8 % in 2005 over 2004. Operating Expenses: Operating expenses could be contained because of the VRS scheme implemented by the Bank. Staff cost declined by Rs. 170.85 crores while other expenses declined by Rs. 3.19 crores, the rise due to occupancy and infrastructure costs including depreciation and insurance. Staff costs further decreased by 3.38% in FY 2005 over FY 2004. Total Income: Total income of the Bank went up by Rs. 118.95 crores (i.e. growth of 4.90%) from Rs. 2428.66 crores in 2001-02 to Rs. 2547.61 crores in 2002-03. The total income in FY 2005 increased to Rs. 2611.56 Crores from 2578.43 Crores in 2004 marking an increase by 1.28%. Total Expenditure: While the total income of the Bank went up by Rs. 118.95 crores, the total expenditure of the Bank decreased from Rs. 1965.12crores to Rs. 1991.59 crores. The total expenses of the Bank recorded an increase of 2.12 % in FY 2005 over the previous year mainly because of a rise in Provisions and Contingencies by 30.6%. Significant items of income and expenditure during 2005-06 (comparison of financials for the year ended March 2006 with March 2005) Net Profit: Net Profit of the Bank decreased from Rs. 300.18 crores in 2004-05 to Rs. 204.57 crores in 2005-06 showing a decrease in growth by 31.85%. Interest Income: Interest income improved from Rs. 2133.07 crores in 2004-05 to Rs. 2360.03 crores in 2005-06 showing increase of 10.64% increase on YOY basis. Interest Income on advances increased by 37.42% in 2005-06 over the previous yeras figures.

47

Other Income: Commission and exchange income of the Bank increased from Rs. 90.04 crores in 2005-04 to Rs.99.18 crores in 2006-05, an increase of 10.15%.The Profits from sale of Investments decreased due to rising interest rates of G-sec., The Bank is aware of the need to increase non-fund non-interest income in order to improve overall profitability and is exploring various avenues to increase fee-based income. -35- Interest Expenses: Interest paid on deposits increased from Rs. 1196.72 crores in 2005-04 to Rs. 1289.46 crores in 2005-06,an increase by 7.75% although the total quantum of deposits increased by 15.39%. The cost of deposits decreased to 4.89%. Operating Expenses: Operating expenses increased by 18.38% over that of 2005-04. The Operating expenses contained the last instalment of VRS payout of Rs.46.04 Crores. The quantum of operating expenses are expected to decrease significantly from the subsequent year. Total Income: Total income of the Bank went up by Rs. 205.42 crores (i.e. growth of 7.97%) from Rs. 2611.57 crores in 2005-04 to Rs. 2816.99 crores in 2006-05. Total Expenditure: The total expense of the Bank went up to Rs.2612.43 Crores as compared to Rs. 2311.39 Crores during the year 2005-04 marking an increase of 13%. The increased expense was mainly owing to an increase quantum of deposits by 15.39%. The quantum of provisions and contingencies also marked an increase of 12.79% over the previous year which also contributed to the rise in overall quantum of expenses. Other matters relating to the Operations of the Bank Unusual or Infrequent events and transactions: No unusual or infrequent events and transactions occurred in the last three years. Significant economic changes that materially affected or are likely to affect income from continuing operations: Changes in the interest rate structure that is any upward movement in interest rate, is going to reduce the value of the investment portfolio. Future relationship between costs and revenue: While it is expected that costs and revenues as a percentage would come down simultaneously, the margin would be under pressure. The net margin may also be affected by increasing operating cost. Extent of seasonality in the business: Bank’s business is not likely to be affected by seasonality. Non-dependence on a few customers: The Bank has a diversified credit portfolio to prevent any concentration in exposures both industry-wise and client wise. The Bank has an adequately designed credit risk policy to ensure the prevention of excess exposure to few customers. Competitive Conditions: The Bank has 646 rural branches where it has monopoly in business. The large network of rural and semi-urban branches ensure that a huge captive business automatically flows in to the bank. In metro centres, the Bank faces a stiff competition from other Banks. But then, the Bank has been consistently achieving higher growth rates than the industry. Servicing Behaviour: The Bank has been servicing all its principal and interest liabilities on time and there have been no defaults. Material Developments: In the opinion of the Directors of the Bank, there have been no material developments after the date of the last financial statements as disclosed in this Information Memorandum, which would materially and adversely affect or are likely to affect the trading or profitability of the Bank or the value of its assets, or its ability to pay its liabilities within the next twelve months, other than what has been already set out elsewhere in this Information Memorandum. Particulars Regarding Listed Companies There is no other listed company under the same management. X. BASIS FOR ISSUE PRICE As per RBI guidelines vide its master circular no. DBOD No. BP.BC.13/21.01.002 /2005-06 dated July 04, 2005 for issue of Tier-II Bonds as amended from time to time, the rate of interest offered on Tier II Bonds should not exceed 200 basis points above the yield on Government of India securities of equal residual maturity at the time of issuing bonds. This issue being a debt issue, the price/ coupon rate is determined taking market rates into consideration and the same is well within the ceiling rate of 200 basis points over yield on Government of India security of

48

equal residual maturity, specified by RBI. XI. OUTSTANDING LITIGATIONS, DEFAULTS AND MATERIAL DEVELOPMENTS The litigation in which the Bank and or its subsidiaries and sponsored institutions involved are classified into 3 categories: Cases filed against the Bank; Cases filed against the Bank’s subsidiaries, directors, promoters, companies/ firms/ ventures promoted by the promoters of the Bank; Disputed Tax Liabilities. 1. The details of the cases filed against the Bank as on 31.03.2006 and which are outstanding as on date: There are 9 cases against the Bank with monitory relief amounting to Rs. 3.19 crores claimed therein against the Bank. The amount claimed does not exceed Rs. 1.00 crore. 2. Cases filed against the Bank’s subsidiaries, directors, promoters, companies/ firms/ ventures

promoted by the promoters of the Bank and which are outstanding as on 31.03.2006: The Bank has no subsidiary as on March 31, 2006 and moreover as the Government of India is the promoter of the Bank, it is not feasible to give details of pending litigations against the Government or the companies/ firms/ ventures promoted by the Government because of large number of such undertakings. There are no cases pending against the Directors of the Banks. 3. Disputed Tax Liability: As on March 31, 2006, the aggregate amount of tax involved in all cases filed against the Bank by the Income Tax authorities relating to income tax matters is nil. No proceedings have been launched against the Bank for any of the offences under any enactment, irrespective of whether specified in Paragraph I of Part I Schedule XIII of the Companies Act 1956. . No such litigation or disputes are pending as on todat and there are no defaults or outstanding statutory dues. There are no Small-scale undertakings/ creditors to which the Bank owes any sum exceeding one lakh where payment is outstanding for a period of more than 30 days. The Bank has not defaulted in meeting any statutory dues, Institutional dues and has made all payments/ refunds on debentures/ fixed deposits. It has not defaulted on dues to holders of other debt instruments and preference shareholders. The Bank has not defaulted in meeting dues towards payment of interest or principal on due dates to holders of Bonds and Fixed Deposits. Other than the above there are no disputes/ litigations towards tax liabilities or any civil or criminal prosecutions against the Bank, its Directors and its Promoters for any offense, economic or otherwise. There are no pending proceedings initiated for economic offences. No penalties have been imposed on the Bank by RBI or any other regulatory authority. No proceedings is known to be contemplated by Governmental authorities except those relating to income tax disputes as given above. No disciplinary action/ investigation has been taken by the Securities and Exchange Board of India/ Stock Exchange against the Bank and its Directors. Also other than the above the promoters of the Bank as well as the companies/ firms/ ventures promoted by the promoters of the Bank have not defaulted in meeting any of the statutory dues, Institutional dues etc to the financial institutions/ banks and have made all payments towards interest or principal on due dates to the holders of Bonds, Debentures, Fixed Deposits, Cumulative/ Non-Cumulative Preference Shares. Other than the above there are no disputes/ litigations towards tax liabilities or any civil or criminal prosecutions against promoters of the Bank and the companies/ firms/ ventures promoted by the promoters of the Bank for any offense, economic or otherwise. There are no pending proceedings initiated for economic offences. AGAINST THE DIRECTORS OF THE BANK There are no outstanding litigations, disputes or penalties against the Directors of the Bank, including tax liabilities, economic offences, criminal or civil prosecution for any offence, irrespective of whether specified under any enactment in Paragraph 1 of Part I of Schedule XIII, of the Companies Act, 1956 or any other liability in their personal capacities or as Director/Partner/Sole Proprietor in the Company or any other company/firm. There are no litigations against the Directors involving violation of statutory regulations or criminal offences.

49

No disciplinary action has ever been taken by the Securities and Exchange Board of India or Stock Exchanges and no penalty has been imposed by any authority. There is no suit pending against the Directors in capacity as director or partner or sole proprietor in any other company/firm. Other than as stated above, there are no disputes/ litigations towards tax liabilities or any criminal or civil prosecutions against the Bank for any offence – economic or otherwise. No criminal proceedings have been launched against the Bank under any of the enactment irrespective of whether specified in paragraph 1 of part I of Schedule XIII of the Companies Act, 1956. Interest of Directors of the Bank The directors of the Bank are interested to the extent of fees, if any, payable to them for attending meetings of the Board or Committee and reimbursement of travelling and other incidental expenses, if any, for such attendance as per the Articles of Association of the Bank. The Directors of the Bank are not interested in the appointment of or acting as Lead Arrangers, Trustees, Rating Agencies, Registrars and Bankers to the Issue or any such intermediary registered with SEBI. The Directors of the Bank are not interested in any property acquired by the Bank within two years of the date of this Information Memorandum or proposed to be acquired by it. Save as stated above, no amount or benefit has been paid or given to the Bank’s Directors or Officers since its incorporation nor is intended to be paid or given to any Directors or Officers of the Bank except the normal remuneration and/or disbursement for services as Directors, Officers or Employees of the Bank. XII. INVESTOR GRIEVANCE & REDRESSAL SYSTEM As the Bank has not raised any equity through the capital markets earlier, there are no pending grievances from Investors. To ensure that the Investor grievances with respect to current issue of Bonds are handled expeditiously and satisfactorily, the Bank shall set up a Committee headed by the Bank’s Compliance Officer to handle all investor grievances. The Bank has also appointed “Intime Spectrum Registry Limited” as Registrars and Transfer Agent for the present Bond issue. Transfer of Bonds, interest payment and all other investor related activities would be attended to and processed at the office of the Registrar & Transfer Agent, “Intime Spectrum Registry Limited” [Address: C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup (W), Mumbai – 400078, Tele: 022-55555491 Fax -91-22-5555-5499]. The details of the Compliance Officer of the Bank are as follows: Mr. A. K. Ray General Manager (Treasury Management) United Bank of India Head Office, 11, Hemanta Basu Sarani, 16, Old Court House Street, Kolkata – 700 001, West Bengal. Tel.: (033) 22106803. Fax.: 91-33-22420897. E-mail : gmtm@unitedbank.co.in Website: www.unitedbankofindia.com The investors can contact the Compliance Officer in case of any pre-issue/ post-issue related problems such as non-credit of letter(s) of allotment/ bond certificate(s) in the demat account, non-receipt of refund order(s), interest warrant(s)/ cheque(s) etc. The investors can also contact the Registrars to the Issue, “Intime Spectrum Regisrty Limited” [Address: C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup (W), Mumbai – 400078, Tele: 022-55555491 Fax -91-22-5555-5499]. in case of queries/ complaints, if any, regarding this issue. PART II

I. GENERAL INFORMATION Consents Consents in writing from the Directors, Registrars, Trustees to the Issue, Directors, Compliance Officer, Lead Arrangers to the Issue to act in their respective capacities have been obtained by the Issuer Company and such consents have not been withdrawn upto the date of opening of the Issue. The Auditors of the Bank have given their written consent to the inclusion of their Report in the form and context in which they appear in

50

this Information Memorandum Such consents and reports have not been withdrawn upto the date of opening of the Issue. Expert Opinion Save as stated elsewhere in this Information Memorandum, the Bank has not obtained any other expert opinion. Changes in Directors during last three years The changes that took place in the Board of Directors since April 01, 2002 are as follows:

Sr. No.

Name Date of change Reason for change and position held

1. Shri S. S. Gangopadhyay 02.04.2002 Retired 2. Shri N. P. Sinha 02.04.2002 Appointed 3. Shri Kamal Kishore Gupta 24.04.2002 Appointed 4. Shri P. M. Sirajuddin 20.03.2002 Appointed 5. Shri D. Banerji 22.08.2001 Appointed 6. Shri S. S. Gangopadhyay 02.04.2002 Retired 7. Shri P. M. Sirajuddin 16.01.2003 Retired 8. Shri K. N. Prithviraj 20.01.2003 Appointed 9. Shri Alok Bhatnagar 14.05.2003 Appointed 10. Shri Madhukar 29.02.2004 Retired 11. Shri Parkash Singh 01.03.2004 Appointed 12. Shri V. S. Chitre 26.03.2004 Retired 13. Shri Dilip Phukan 26.03.2004 Retired 14. Shri Mukul Roy 26.03.2004 Retired 15. Shri R. K. Gupta 26.03.2004 Retired 16. Shri Supratim Sen 26.03.2004 Retired 17. Shri H. Bhattacharya 26.03.2004 Retired 18. Smt. Suma Verma 09.01.2004 Appointed 19. Shri Biswajit Kakoti 27.02.2004 Appointed 20. Shri P K Gupta 1.05.2005 Appointed 21. Miss Sunanda Lahiri 18.06.2005 Appointed 22. Shri Parkash Singh 29.02.2005 Retired. 23. Shri K N Prithviraj 30.04.2005 Retired 24. Shri Kamal Kishore Gupta 23.04.2005 Retired 25. Shri P K Zoram Sangliana 10.01.2006 Appointed 26. Shri Abdul Rashid 10.01.2006 Appointed

Changes in Auditors during last three years Given below are the changes in the Bank’s Auditors during the past 3 years. Since the RBI appoints the auditors each year these changes have been effected as per RBI’s approval: Sr. No.

Name of the Auditor Year of Change Added/ Retired Reason

1. M/s Bhattacharya Das & Co.

2003-2004 Appointed As per RBI Instruction

2. M/s Gopal Gupta & Co. 2003-2004 Appointed As per RBI Instruction 3. M/s Saha Ganguli &

Associates 2003-2004 Appointed As per RBI Instruction

4. M/s D. K. Chhajer & Co.

2003-2004 Appointed As per RBI Instruction

5. M/s Sanghvi, Dev & Unni

2004-2005 Appointed As per RBI Instruction

6. M/s Kalyansundaram & Co.

2004-2005 Appointed As per RBI Instruction

7. M/s George Read & Co. 2004-2005 Appointed As per RBI Instruction 8. M/s Saha Ganguli &

Associates 2004-2005 Retired As per RBI Instruction

9. M/s Kalyansundaram & Co.

2004-2005 Retired As per RBI Instruction

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Authority for the Present Issue This present issue of Bonds is being made pursuant to the resolution of the Board of Directors of the Bank, passed at its meeting held on 19.07. 2006. The present issue of Bonds is being made in accordance with extant RBI guidelines vide its master circular no. DBOD No. BP.BC.13/21.01.002 /2005-06 dated July 04, 2005 for issue of Tier-II Bonds as amended from time to time. The Bank can undertake the activities proposed by it in view of the present approvals and no further approval from any government authority(ies)/ Reserve Bank of India (RBI) is required by the Bank to undertake the proposed activities save and except those approvals which may be required to be taken in the normal course of business from time to time. Disposal of Applications and Application Money The Board of Directors/ Committee of Directors of the Bank reserves its full unqualified and absolute discretion without giving any reason, the right to accept or reject any application in whole or in part. If any application is rejected in full, the whole of the application money received, and if the application is rejected in part, the excess application money, after adjustment of allotment money if any, will be refunded to the applicants by registered post only. No receipt will be issued by the Bank. However, the nominated branches of the Bank receiving the application will acknowledge the receipt of the application by stamping and returning the detachable acknowledgement slip appended to each application form. Refund (if any) will be made by cheque/ demand draft drawn on the Bank and payable at par at all the places where applications are accepted. Procedure and Time Schedule for Allotment/ Refund The beneficiary account of the investor(s) with National Securities Depository Limited (NSDL)/ Central Depository Services (India) Limited (CDSL)/ Depository Participant will be given initial credit within 15 days from the Deemed Date of Allotment. The initial credit in the account will be akin to the Letter of Allotment. On completion of the all statutory formalities, such credit in the account will be akin to a Bond Certificate. Letter(s) of Regret alongwith Refund Order(s), as the case may be, will be despatched by Registered Post or as per extant postal rules at the sole risk of the applicant to the sole/ first applicant within 15 days of closure of the Issue. Subject to the completion of all legal formalities within 3 months from the Deemed Date of Allotment, or such extended period as may be approved by the Appropriate Authority(ies), the initial credit akin to a Letter of Allotment in the Beneficiary Account of the investor would be replaced with the number of Bonds allotted which will be akin to a Bond Certificate. In case of joint applications, refund/ pay orders, if any, will be made out in the first name and all communications will be addressed to the person whose name appears first in the application form. Oversubscription and Basis of Allotment The Board of Directors/ Committee of Directors reserves its full, unqualified and absolute right to accept or reject any application, in part or in full, without assigning any reason thereof. The rejected applicants will be intimated along with the refund warrant, if applicable, to be sent. Interest on application money will be paid from the date of realisation of the cheque(s)/ demand drafts(s) till one day prior to the date of refund. The application forms that are not complete in all respects are liable to be rejected and would not be paid any interest on the application money. Application would be liable to be rejected on one or more technical grounds, including but not restricted to: a. Number of bonds applied for is less than the minimum application size; b. Applications exceeding the issue size; c. Bank account details not given; d. Details for issue of bonds in electronic/ dematerialised form not given; e. PAN/GIR and IT Circle/Ward/District not given; f. In case of applications under Power of Attorney by limited companies, corporate bodies, trusts, etc. relevant documents not submitted; In the event, if any Bond(s) applied for is/ are not allotted in full, the excess application monies of such Bonds will be refunded, as may be permitted. In the event of issue being oversubscribed, the Bank reserves

52

its full, unqualified and absolute right of allotment/ rejection in full or prorata at its discretion without assigning any reason thereof. Interest on Application Money Interest at the coupon rate (i.e. @ 9.25 per cent per annum) (subject to deduction of income tax under the provisions of the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof, as applicable) will be paid to all the applicants on the application money for the Bonds. Such interest shall be paid from the date of realisation of cheque(s)/ demand draft(s) upto one day prior to the Deemed Date of Allotment. The interest on application money will be computed on an Actual/ 365 day basis. Such interest would be paid on all the valid applications, including the refunds. Where the entire subscription amount has been refunded, the interest on application money will be paid alongwith the Refund Orders. Where an applicant is allotted lesser number of bonds than applied for, the excess amount paid on application will be refunded to the applicant alongwith the interest on application money. The interest cheque(s)/ demand draft(s) for interest on application money (alongwith Refund Orders, in case of refund of application money, if any) shall be dispatched by the Bank within 15 days from the Deemed Date of Allotment and the relative interest warrant(s) alongwith the Refund Order(s), as the case may be, will be dispatched by registered post to the sole/ first applicant, at the sole risk of the applicant. STATUTORY AUDITORS (FY 2005-2006) M/s. Bhattacharya Das & Co. Chartered Accountants 3A, Garstin Place, 4th Floor, Kolkata – 700 001. Tel No. (033) 22106629, 22483020. Fax 91-33-22137668. M/s. Gopal Gupta & Co. Chartered Accountants 588, Mutthiganj, 1st Floor, Allahabad – 211 003.. Tel No. (0532) 2415062. Fax No. 91-532-2415062. M/s. D K Chhajer & Co. Chartered Accountants 5,Old Court House Street, 2nd Floor, Kolkata – 700 001. Tel No. (033-) 22206106,22202598. Fax No. 91-33-22206106. M/s. George Read & Co. Chartered Accountants 1, Chowringhee Square, Kolkata –700 069 Tel No. (033) 2248-2919,2243-9094. M/s. Singhvi, Dev & Unni Chartered Accountants 12, Red Course Road,, Madhavnagar, Bangalore. Tel No. (080) 22261371. Fax No. 91-80-22205469. REGISTRAR TO THE ISSUE Intime Spectrum Registry Limited C-13, Pannalal Silk Mills Compound, LBS Marg Bhandup (W), Mumbai – 400078. Tel: (022) 55555491.

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Fax: +91-22-55555499. Web site www.intimespectrum .com E-mail:solar@intimespectrum.com TRUSTEES FOR THE BONDHOLDERS IDBI Trusteeship Services Limited Registered Office, Asian Building, Ground Floor, 17, R, Kamani Marg, Mumbai – 400 001. Tel No. (022) 56311771-3. Fax No. 91-22-56311776. E-mail: itsl@idbitrustee.co.in BANKERS TO THE ISSUE United Bank of India Centre Address STD Code Telephone

Number(s) Fax

Number(s) Old Court House Street

11, Hemanta Basu Sarani 033 2248-7536 2248-6570

Chennai 117, Post Box No. 8270, Armanian Street, Chennai – 600 001

044 25341097 25340580

Bangalore 40 Kempegowda Road, Bangalore – 560 009

080 22252910 22250412

Hyderabad 4-3-331 Bank Street, Hyderabad – 500 195

040 24756811, 24755486

24755486, 24756994

Ahmedabad Lal Darwaja, Post Box No. 170, United Bank of India Building, Ahmedabad – 380 001

079 25506957, 25506274

25506272

New Delhi J C Das Building, 90/8 Connaught Circus, (Near Madras Hotel), New Delhi – 110 001

011 2336 0661

23347012

Mumbai Post Box No. 298, United Bank of India Building, 25, Sir Pheroz Shah Mehta Road, Fort, Mumbai – 400 001

022 22873656, 22871261/62

22886909

Guwahati Hem Barua Road, Panbazar, Guwahati – 781 001

0361 254 0281, 2540043

254 0042/43

54

LEAD ARRANGERS TO THE ISSUE (in alphabetic order)

Standard Chartered Bank UTI BANK LIMITED 90, Mahatma Gandhi Road, Central Office, Maker Tower 'F', 11th Floor,

Fort, Cuffe Parade, Colaba,Mumbai- 400 005 Mumbai -400 001. Tel: (022) 22160304/(022)22165270

Tel: (022)22652872-4 Fax:(022) 22164721 Fax: 91-22-22677770/22652875.

ARRANGER TO THE ISSUES (in alphabetic order)

IDBI Capital Market Services Ltd. SPA Merchant Banker s Ltd United Bank of India Mafatlal Centre, 10A, Chandra Mukhi, Nariman Point Merchant Banking Division 5th Floor, Mumbai-400 021 Head Office Nariman Point, 4/1, Red Cross Place, 11 Hemanta Basu Sarani Mumbai – 400 021. Kolkata- 700 001 Kolkata-700 001 Tel. : (022) 56371212. Ph: 22100818-9 Tel : (033) 2248-3857 Fax.: 91-22-22885848/50. Fax: 22100819 Fax : (033) 22420897

COMPLIANCE OFFICER Mr. A. K. Ray General Manager (Treasury Management, International Banking & Accounts) United Bank of India Head Office, 11, Hemanta Basu Sarani, 16, Old Court House Street, Kolkata – 700 001, West Bengal. Tel.: (033) 22106803. Fax.: 91-33-22420897. E-mail : gmtm@unitedbank.co.in Website: www.unitedbankofindia.com The investors can contact the Compliance Officer in case of any pre-issue/ post-issue related problems such as non-credit of letter(s) of allotment/ bond certificate(s) in the demat account, non-receipt of refund order(s), interest warrant(s)/ cheque(s) etc. BROKERS TO THE ISSUE Apart from the Lead Arrangers to the Issue appointed by the Issuer Company, there is/are no other broker(s) appointed by the Issuer Company for the purpose of marketing the Issue. Therefore no person/ firm/ company other the Lead Arrangers to the Issue, whether member of recognised stock exchange(s) or otherwise, can act as Brokers to the Issue.

55

CREDIT RATING AGENCIES ICRA Limited A-10 & 11, 3rd Floor, FMC Fortuna, 234/ 3A, A.J.C. Bose Road, Kolkata – 700 020. Tel: (033) 22406617/ 8839, 22800008, 22831411/2. Fax: 91-33-22470728. Website: www.icraindia.com Credit Analysis & Research Limited 901 & 902, 9th Floor, Subham Building, 1, Sarojini Naidu Sarani (Rawdon Street), Park Street Crossing, Kolkata – 700 017. Tel.: (033) 22831800, 22808472. Fax: 91-33-22808472, 22831800. Website: www.careratings.com

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II.FINANCIAL INFORMATION

AUDITOR’S REPORT

57

PART I – STATEMENT OF PROFIT AND LOSS Rs. in Crores

For the year ended March 31, 2002

March 31, 2003

March 31, 2004

March 31, 2005

March 31, 2006

INCOME 1.

Interest Earned

1.1

Interest/ Discount on Advances/ Bills 647.22 726.87 670.34 839.40 1153.46

1.2

Income on Investments 1323.37 1332.60 1321.11 1246.12 1165.05

1.3

Interest on Balances with RBI and other Inter-Bank Funds

51.04 31.10 26.94 23.30 25.25

1.4

Others 13.15 28.84 54.59 24.26 16.27

2.

Other Income

2.1

Commission, Exchange & Brokerage 66.93 69.90 75.03 90.04 99.18

2.2

Profit on Sale of Investments (Net) 281.24 305.96 348.14 263.91 191.80

2.3

Profit on Revaluation of Investments (Net)

- - -0.51 - -

2.4

Profit on Sale of Land, Buildings & Other Assets (Net)

0.05 0.03 - 0.12 -0.005

2.5

Profit on Exchange Transactions (Net) 3.46 3.95 5.73 9.06 6.20

2.6

Income from Dividends 1.17 2.44 6.01 5.49 10.43

2.7

Miscellaneous Income 41.03 45.92 71.04 109.86 149.35

Total Income 2428.66 2547.61 2578.42 2611.57 2816.99 EXPENDITURE 1.

Interest Expended

1.1

Interest on Deposits 1399.26 1376.69 1273.72 1196.72 1289.45

1.2

Income on Balances with RBI/ Inter-Bank Borrowings

0.75 0.31 0.31 0.10 6.52

1.3

Others 33.06 22.73 18.41 20.91 43.53

2. Operating Expenses 2.1 Payment to and Provisions for Employees 652.26 481.41 515.11 497.75 628.36 2.2 Rent, Taxes & Lighting 23.89 25.29 27.98 32.24 34.58 2.3 Printing & Stationery 7.25 8.79 10.71 10.44 14.02 2.4 Advertisements & Publicity 0.78 1.63 3.10 3.19 5.02 2.5 Depreciation on Bank’s Properties 16.67 18.95 18.64 20.44 24.44 Less Transfer from Revaluation Reserve -2.81 -2.45 -2.33 -2.21 -2.10 2.6 Directors’ Fees, Allowances and Expenses 0.32 0.34 0.58 0.45 0.50 2.7 Auditor’s Fees and Expenses 3.60 2.86 3.64 4.66 4.02 2.8 Law Charges 0.50 0.76 11.77 1.39 1.27 2.9 Postage, Telegrams and Telephones 4.48 4.70 5.74 6.58 7.08 2.1

0 Repairs and Maintenance 3.11 3.27 3.79 5.28 6.74

2.11

Insurance 9.36 10.12 10.89 18.46 25.85

2.12

Other Expenditure 39.00 36.19 63.06 103.34 83.85

Total Expenditure 2191.50 1991.59 1965.12 1921.93 2173.13 Gross Profit Before Provisions & Contingencies 237.16 556.02 613.30 689.64 643.86 Provisions & Contingencies* 118.12 250.83 298.22 389.46 439.29

58

Net Profit/ (Loss) For The Year 119.04 305.19 315.08 300.18 204.57 Add: Balance of Profit/ (Loss) Brought

Forward (net of deferred tax assets) (1359.25

) (1198.88

) (893.69) (578.61) (278.43)

Set off with Capital 278.43 Profit Available for Appropriation (1240.21

) (893.69) (578.61) (278.44) 204.57

APPROPRIATIONS Transfer to Statutory Reserve - - - - 51.14 Transfer to Capital Reserve - - - - 17.62 Dividend Payable to GOI 45.98 Tax on Dividend 6.45 Transfer to Revenue Reserve 83.38 Balance Carried Over to Balance Sheet (1240.21

) (893.69) (578.61) (278.44) 204.57

Adjustments resulting from audit qualifications , material amounts relating to Adjustments for previous years and changes in accounting policies :

Rs. in Crores For the year ended March

31, 2002 March

31, 2003 March

31, 2004 March

31, 2005 March 31,

2006 Provision made towards NPAs a. Advances 58.17 72.48 169.07 106.61 134.15 b. Investments 29.99 22.75 2.82 118.18 227.64 Provision against Standard Assets 10.12 3.52 9.20 10.27 27.54 Provision for Depreciation on Investment 6.27 (5.73) (14.64) (34.07) (9.38) Provision for Income Tax 10.50 72.00 134.01 104.00 68.00 Provision for amortisation on Investment (6.28) - - Others 9.35 85.81 (2.24) 84.47 (8.67) Total 118.12 250.83 298.22 389.46 439.28

PART II – STATEMENTS OF ASSETS AND LIABILITIES

Rs. in Crores As on March 31,

2002 March 31,

2003 March 31,

2004 March 31,

2005 March 31,

2006 A Assets 1. Cash in Hand 136.15 135.38 138.58 132.53 149.36 2. Balance with RBI 1382.22 1564.99 923.09 1455.95 1284.86 3. Balances with Bank in India 262.86 353.94 300.48 349.88 303.00 Balances with Bank outside India 22.58 2.14 - 4. Money at Call & Short Notice - 37.13 757.97 192.47 1040.00 5. Investments Investments in India 11656.43 12639.37 13916.14 14403.31 14129.51 Investments outside India - - - Total Investments 11656.43 12639.37 13916.14 14403.31 14129.51 Advances 6. Advances in India 6822.71 7351.69 7963.34 11389.68 15522.31 Advances outside India - - - - - Total Advances 6822.71 7351.70 7963.34 11389.68 15522.31 7. Fixed Assets 195.77 187.38 189.75 201.28 205.07 8. Other Assets 1057.45 1104.95 1074.61 694.32 613.61 9. Balance of Profit and Loss Account 1240.21 893.70 578.61 278.44 - TOTAL (A) 22776.38 24270.68 25842.57 29097.86 33247.72

B Liabilities 1. Demand Deposits From Banks 110.08 147.80 146.82 110.05 232.33 From Others 1683.30 1833.28 2026.96 2574.73 2900.57 2. Savings Deposits 6073.16 7002.84 8029.24 9122.23 10433.89 3. Term Deposits From Banks 1192.85 858.11 792.14 698.90 932.78

59

From Others 10551.27 11189.26 11763.05 12842.47 14750.20 Total Deposits (1+2+3) 19610.66 21031.29 22758.21 25348.39 29249.77 4. Borrowings In India 84.59 51.68 29.49 26.99 296.62 Outside India 3.64 6.04 - Total Borrowings 88.23 57.72 29.49 26.99 296.62 5. Other Liabilities & Provisions Other Liabilities & Provisions 973.30 1079.93 955.46 1325.29 1332.53 Subordinate Debts 140.00 140.00 140.00 440.00 540.00 Sub-total 1113.30 1219.93 1095.46 1765.29 1872.53 TOTAL (B) 20812.19 22308.94 23883.16 27140.67 31418.92

C NET ASSETS (C = A–B) 1964.19 1961.74 1959.41 1957.15 1828.80 Represented by:

D Share Capital 1810.87 1810.87 1810.87 1810.87 1532.43 E Reserve & Surplus 1. Statutory Reserve 10.87 10.87 10.87 10.87 62.01 2. Revaluation Reserve 142.45 140.00 137.67 135.46 133.35 3. Others 17.62 4. Revenue and Other Reserve 83.38 TOTAL (E) 153.32 150.87 148.54 146.28 296.37

F TOTAL (D+E) 1964.19 1961.74 1959.41 1957.15 1828.80 G Contingent Liabilities Claims against the Bank not

acknowledged as debts 14.22 11.29 3.19 3.17 3.19

Liability for partly paid Investments 0.12 0.12 0.12 0.12 0.12 Liability on account of forward exchange

contracts 118.15 619.57 1213.09 961.93 963.14

Guarantees given on behalf of constituents

321.49 312.43 291.39 839.57 1248.12

Acceptances, endorsements and other obligations

110.63 226.10 317.20 545.44 554.13

Other items for which the Bank is contingently liable

8.42 3.19 2.09 1.60 1.42

Total (G) 573.02 1172.70 1827.08 2351.83 2770.12 BILLS FOR COLLECTION 220.66 367.70 729.60 487.23 373.82 PART III A. SIGNIFICANT ACCOUNTING POLICIES (as appearing in the Annual Report of the Bank for the FY 2005-06) 1. General

The accompanying financial statements are prepared on historical cost basis, except as otherwise stated, following the 'Going Concern' concept and conform to the generally accepted accounting practices, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI) and prevailing practices in banking industry.

2. Recognition of Income and Expenditure 2.1. The Revenues and Expenses are accounted for on accrual basis unless otherwise stated. 2.2. Income on performing assets is recognised on accrual basis and income from non-performing assets is accounted for on realization and the amount realised during the year is appropriated first to current year's income on Sub-standard Assets and those Doubtful Assets which are under specific reconstruction or rehabilitation or nursing programme. Amounts realised/recovered in other Doubtful & Loss Assets and Suit Filed and Decreed Accounts are adjusted against outstanding balances. 2.3. Income accounted for in the previous year in respect of advances classified as NPA in the current year and remaining unrealised, is reversed or provided for. 2.4. Commission (except on Govt. transactions), exchange, brokerage, insurance claim and locker rent are accounted for on cash basis. 2.5. Interest on Matured Term Deposits is provided for on renewal. 2.6. In respect of compromise and settlement proposals, accounting for write-off, if any, is done on realization of settled dues.

60

3. Transactions involving Foreign Exchange

In terms of the AS-11 (Revised) issued by the Institute of Chartered Accountant of India (ICAI) : 3.1. Monetary Assets and Liabilities excluding outstanding Forward Exchange Contracts in each currency are revalued at the Balance Sheet date at closing spot rate announced by FEDAI. Outstanding forward exchange contracts are revalued at the appropriate forward rates announced by FEDAI. The difference between the revalued amount and the contracted amount is recognized as profit or loss, as the case may be. 3.2. Income and expenditure items are recorded at the exchange rates prevailing on the date of transaction. 3.3. Acceptances, endorsements and other obligations including guarantees are carried at the closing spot rate announced by FEDAI. 4. Investments 4.1. The investments in Balance Sheet for disclosure are classified as (i) Government Securities (ii) Other Approved Securities (iii) Shares (iv) Debentures and Bonds (v) Subsidiaries and/or Joint Ventures and (vi) Others. 4.2. In accordance with the Reserve Bank of India (RBI) guidelines, investments are categorised into (i) 'Held to Maturity', (ii) 'Available for Sale' and (iii) 'Held for Trading'. The securities acquired by the Bank with an intention to hold till maturity are classified as “ Held to Maturity”. “Held for Trading” category comprises securities acquired by the Bank with the intention of trading. The securities, which do not fall within the above two categories are classified under “Available for Sale”. The above categorization is done by the Bank at the time of acquisition of the securities. 4.3. In respect of securities included in any of the above three categories where interest/principal is in arrears for more than 90 days, income is not recognised as per prudential norms. 4.4. The valuation of Investments is done in accordance with the guidelines issued by the RBI as under : 4.4.1. Investments under 'Held to Maturity' category are carried at cost and premium is amortised over the remaining period of maturity of the security. Investment in sponsored RRBs classified as Joint Ventures (JV) are valued at carrying cost. 4.4.2. Investments under 'Available for Sale' category are marked to market and are valued at quarterly or more frequent intervals as under:

a) Central Govt. Securities: As per price list declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA).

b) State Govt. Securities, Other Approved Securities, PSU Bonds & Debentures: After appropriate mark up over YTM of Central Govt. Securities declared by FIMMDA & PDAI.

c) Mutual Funds Units: As per market quotation, if available, otherwise on repurchase price. In the absence of market quotation and repurchase price, on Net Asset Value (NAV) basis. If the above is not available, valuation is done at cost.

d) Treasury Bills, Commercial Paper and Zero Coupon Bonds: At carrying cost.

e) Shares: (i) Equity: As per last traded quotation. In cases where last traded quotation is not available, on the basis of book value as per company's latest Balance Sheet. In the absence of both, at Re.1/- per company. (ii) Preference: By appropriate mark up over YTM of Central Govt. Securities. Where dividend is in arrear the valuation is made by discounting as under :

Dividend in arrear for one year - 15% Dividend in arrear for more than one year – 20% In case where latest Balance Sheet is not available the shares are valued at Re.1/- per

company. Based on above valuation, under each sub-category of 'Available for Sale' if net result is appreciation, the same is ignored and if it is depreciation, the same is charged to Profit and Loss Account and individual scrip is carried at book value.

4.4.3. Investments under 'Held for Trading' category are valued on a monthly basis or more frequent intervals at market price declared by FIMMDA and PDAI and in each sub-category if net result is appreciation, the same is ignored while depreciation, if any, is charged to Profit and Loss Account without changing book value of securities. 4.5. Income from Zero Coupon Bonds is recognised on a time proportion basis being the difference between cost and face value. 4.6. Transfer of scrips from one category to another, under all circumstances is done at acquisition cost /book value / market value on the date of transfer whichever is the least and the depreciation, if any, on such transfer is fully provided for, without changing book value of scrips. 4.7. For calculating the surplus / deficit on sale of securities, weighted average method is adopted.

61

4.8. For the purpose of calculating holding period in case of 'Held for Trading' category, FIFO method is applied. 4.9. Brokerage/Commission/Incentives received on subscription to securities are deducted from the cost of securities. Interest received for broken period is credited to Profit & Loss Account. 4.10. Brokerage/Commission/Broken-period interest paid is charged to Profit & Loss Account. 4.11. Provision for Non-Performing Investments (NPI) in the investment portfolio is made as per RBI prudential norms. 5. Advances 5.1. Advances classified as Performing and Non-Performing Assets and provisions therefore are as per the

prudential norms prescribed by RBI. 5.2. Advances other than those classified as performing assets are stated net of provisions and ECGC claims

received. Provisions held for performing assets is shown under the head 'Other Liabilities & Provisions'. 6. Fixed Assets and Depreciation 6.1. Premises, including leasehold and other fixed assets, are stated at historical cost. In case of revaluation, the same are stated at the revalued amounts and the appreciation is credited to Revaluation Reserve. 6.2 Software are capitalized with computers. 6.3 Depreciation on assets other than computers is provided for under written down value method, in the manner and as per the rates prescribed under Schedule XIV to the Companies Act, 1956. The rate is rounded off to next absolute number. Depreciation on the revalued portion of the assets is adjusted from Revaluation Reserve. 6.4 Leasehold assets are amortised over the period of lease. 6.5 Depreciation on computers and software are provided on straight-line method @ 33.33% on pro rata basis from the date of acquisition as per RBI guidelines. 7. Staff Retirement Benefits 7.1. In respect of employees who have opted for Provident Fund Scheme, matching contribution is made. For

others who have opted for Pension Scheme, contribution to Pension Fund is based on actuarial valuation at the year-end.

7.2 Annual contribution to Gratuity Fund and liability towards leave encashment are made on the basis of actuarial valuation at the year-end. 8. Voluntary Retirement Scheme (VRS) The expenditure incurred under VRS is amortised over a period of 5 years as per RBI guidelines. 9. Provision for Taxation Provision for taxation is made on the basis of estimated tax liability and deferred tax liability/asset in

terms of Accounting Standard 22 issued by ICAI. 10. Provisions and Contingencies The Provisions and Contingencies disclosed in the Profit and Loss Account includes:

a) Provision for Income Tax, Fringe Benefit Tax and Wealth Tax; b) Provision for advances, investments and other assets; c) Adjustment effects on valuation of investments; and d) Other usual and necessary provisions.

B. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES BETWEEN 01.04.2000 AND 31.03.2006 1. Financial Year 2000-2001

Depreciation In compliance with the requirement of Reserve Bank of India guidelines, depreciation from financial year 200-2001 onwards was charged as per straight line method of depreciation instead of written down value method used in earlier years. The additional charge on account of the same was Rs. 1.04 crores.

2. Financial Year 2001-2002

Valuation of Investments Upto December 31, 2001, for calculating the surplus/ deficit on sale of securities, last in first out (LIFO) method was followed for determining the cost of investment sold. However w. e. f. January 01, 2005

62

weighted average method is being adopted for determining the cost of the investment sold. 3. Financial Year 2002-2003

Valuation of Leave Encashment Upto financial year 2001-2002, leave encashment was valued as per the basis of ‘pay as you go’.

However from financial year 2002-2003 leave encashment is being valued on actuarial basis. Due to this change accrued liability of Rs. 39.76 crores was provided for during the year.

4. Financial Year 2003-2004

a. Income recognition & asset classification norms for advances & investments Till financial year 2002-2003, any income realised from advances & investment wherein interest was

not realised for more than 180 days, was recognised only on cash basis. However from March 2004 onwards such recognition of income & impairment on advances & investments is being made on more than 90 days norms.

b. Legal Expenses Pursuant to RBI direction, legal expenses incurred by the Bank in suit filled account & recovery

therein are now being debited & credited to profit & loss account respectively against the earlier practice of charging the same in the ‘Law charges & recoverable account’.

5. Financial Year 2004-2005 There are no significant change in the accounting policies in the year 2004-2005. 6. Financial Year 2005-2006 There are no significant change in the accounting policies in the year 2005-2006. PART IV A. MATERIAL NOTES ON ACCOUNTS (as appearing in the Annual Report of the Bank for the FY 2005-06) 1. Inter branch transactions are reconciled and elimination of outstanding entries is in progress. The accounts with other banks/ institutions are also reconciled, excepting in a few cases and matching of outstanding entries of NOSTRO Accounts are in progress. Pending such final adjustment / matching, the net credit is appearing in the Balance Sheet under the

head 'Others' in "Other Liabilities and Provisions". In the opinion of the management, consequential impact of the above on accounts is not material. 2. During the year the RBI has increased provisioning requirement on performing assets from 0.25% to 0.40% on the funded outstanding amount, with the exception of direct advances to agricultural and SME sectors. However, the Bank has made no distinction of performing direct advances to agricultural and SME sectors and provided for such assets at 0.40% also. In the opinion of the management, consequential impact of the above on accounts is not material. 3. a) Bank’s SLR investments under 'Held to Maturity' (HTM) category , excluding exempted category,was

Rs.5319.89 Crore (Previous year :Rs.3032.30 Crore) representing 18.25% (Previous year 11.65%) of Demand and Time Liability (DTL) as against ceiling of 25% (Previous year : 25%) prescribed by RBI.

b) The Bank has shifted Rs.593.87 Crore (Previous year: Rs.1,507.10 Crore) of investments at Face Value (FV) from AFS to HTM category in terms of RBI guidelines and has provided depreciation of Rs. 57.37 Crore (Previous year: Rs.120.16 Crore) during the year.

4. a) The Government of India, vide their letter F.No.11/25/2005-BOA(i), dated April 27,2006, has permitted the Bank to net off the accumulated unabsorbed losses of Rs.278.44 Crore(as on March 31, 2005) against the Equity Capital of Rs.1810.87 Crore with effect from March 31, 2006. Consequently, the Equity Capital of the Bank after set off stands at Rs.1532.43 Crore. b) During the year the Bank has appropriated Rs.51.14 Crore (Previous year: Rs. Nil) representing 25%

(Previous year: Nil) of the net profit to the Statutory General Reserve and Rs.17.63 Crore (Previous year: Nil) to the Capital Reserve being the profit on sale of HTM securities. Out of the balance of Rs.135.80 Crore (Previous year: Nil), Rs. 45.97 Crore (Previous Year: Nil) has been provided towards dividend payable to the Government of India, tax on dividends Rs. 6.45 Crore (Previous Year: Nil) and appropriated the balance of Rs. 83.38 Crore (Previous Year: Nil) to Revenue and other reserves.

c) Provisions and Contingencies include reversal of a sum of Rs.9.76 Crore (Previous Year –NIL) representing a provision made in earlier years no longer required.

63

5. a) Premises include properties of Rs.2.65 Crore (Previous year: Rs. 5.45 Crore) (net of depreciation)

[cost –Rs.2.25 Crore (Previous year: Rs. 3.52 Crore), revalued at Rs.3.66 Crore ( Previous year : Rs. 8.49 Crore)] in respect of which registration formalities are pending.

b) Premises include leased properties amounting to Rs.10.49 crore (net of depreciation) (Previous year: Rs. 10.95 Crore).

6. During the year Rs. 46.04 Crore (Previous year: Rs.63.50 Crore), representing the remaining unamortised expenditure on Voluntary Retirement Scheme (VRS) has been charged to the Profit and Loss account. 7. a) Capital Adequacy

Items 2005-06 2004-05 i) CRAR (%) 13.12 18.16 ii) CRAR-Tier I capital (%) 10.01 14.15 iii) CRAR-Tier II Capital (%) 3.11 4.01 iv) Percentage of the shareholding of the Govt. of India.

100% 100%

v) Amount of subordinated debt raised as Tier-II Capital ( Rs. in Crore)

100 300

b) Investments (Rs. in Crore) Items 2005-06 2004-05

(1) Value of Investments (i) Gross Value of Investments (a) In India (b) Outside India,

(ii) Provisions for Depreciation* (a) In India

(b) Outside India

(iii) Net Value of Investments (a) In India (b) Outside India.

(2) Movement of provisions held towards depreciation on investments.

(i) Opening balance

(ii) Add: Provisions made during the year (iii)Less: Write-off/ write-back of excess

provisions during the year. (iv) Closing balance.

14530.64 0.02

401.14 0.01

14129.50 0.01

120.41

227.52

0.24

347.69

14572.55 0.02

169.24 0.01

14403.31 0.01

2.23

120.40

2.22

120.41

*Provision for Depreciation includes Amortization and NPI provision.

c) Repo/reverse repo transactions The Bank has not undertaken any repo/reverse repo transaction other than with Reserve Bank of India under the Liquidity Adjustment Facility (LAF) during 2005-06.

d) Non-SLR investment portfolio

64

i) Issuer composition of Non-SLR Investments (Rs. in crore)

ii) Non-performing Non-SLR Investments (Rs. in crore) Particulars 2005-06 2004-05 Opening balance 51.86 84.77 Additions during the year since 1st April - 17.00 Reductions during the above period 24.26 49.91 Closing balance 27.60 51.86 Total provisions held 24.01 34.87

e) Derivatives

During the year, the Bank has not dealt with in Derivatives. Consequently, the disclosures relating to Forward Rate Agreement/Interest Rate Swap, Interest Rate Derivatives and risk exposure in derivatives are not applicable. The policy on derivatives is under formulation.

f) Asset Quality i) Non-Performing Assets (Rs. in Crore)

Items 2005-2006 2004-2005 (i) Net NPAs to Net Advances (%) 1.95 2.43 (ii) Movement of NPAs (Gross)

a) Opening Balance b) Additions during the year c) Reductions during the year d) Closing balance

726.37 254.93 237.00 744.30

764.18 172.19 210.00 726.37

iii) Movement of Net NPAs a) Opening Balance b) Additions during the year c) Reductions during the year d) Closing balance

277.09 203.00 177.00 303.09

298.55 94.54

116.00 277.09

iv) Movement of provisions for NPAs (excluding provisions on standard assets)

a) Opening Balance b) Provisions made during the year c) Write Off/Write back during the year d) Closing balance

449.28 134.15 142.28 441.15

458.06 106.61 115.39 449.28

ii) Loan Assets subjected to Restructuring (Rs. in crore)

Items 2005-2006 2004-2005 (i) Total amount of loan assets subjected to

restructuring, rescheduling, renegotiation - of which under CDR

91.02

(25.25)

166.42

(33.94)

No.

Issuer Amount Extent of private placement

Extent of 'below investment grade' securities

Extent of 'unrated' securities

Extent of 'unlisted' securities

(1)

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

1 PSUs 467.58 467.58 - 12.98 22.60 2 FIs 525.29 525.29 - 0.00 125.58 3 Banks 110.15 110.15 - 20.00 10.00 4 Private Corporates 70.48 70.48 - 0.36 25.01 5 Subsidiaries/Joint

ventures 3.86 3.86 - 0.00 3.86

6 Others (Mutual Fund)

685.79 591.59 - 0.00 591.59

7 Provision held towards depreciation / NPI

24.01 - - - -

Total (1 to 6 ) – (7)

1839.14 1768.95 - 33.34 778.64

65

(ii) The amount of Standard assets subjected to restructuring, rescheduling, renegotiation

- of which under CDR

91.02

(25.25)

166.42

(33.94) (iii) The amount of Sub-Standard assets subjected to restructuring, rescheduling, renegotiation

- of which under CDR

Nil

Nil

Nil

Nil (iv) The amount of Doubtful assets subjected to restructuring, rescheduling, renegotiation

- of which under CDR Note: (i)=(ii) +(iii)+(iv)

Nil

Nil

Nil

Nil

iii) Reconstruction of Assets

During the year the Bank has not sold any assets to the Securitization/Asset Reconstruction Company and consequently the disclosures regarding such transactions are not applicable.

iv) Provision on Standard Assets During the year the Bank has provided for Rs.60.88 crore against the last year’s provision for Standard Assets of Rs.33.34 crore.

g) Business Ratios

Item 2005-2006 2004-2005 (i) Interest Income as a percentage to Working Funds 7.66% 7.93% (ii) Non-interest income as a percentage to Working

Funds 1.48% 1.78%

(iii) Operating Profit as a percentage to Working Funds 2.09% 2.56% (iv) Return on Assets 0.62% 1.04%% (v) Business (Deposits plus advances) per employee

(Rs. in crore) 2.54 2.08

(vi) Profit per employee (Rs. in lac) 1.18 1.72

h) Asset Liability Management Maturity pattern of certain items of Assets and Liabilities (Rs. in Crore) Assets/ Liabilities

1 to 14 days

15 to 28 days

29 days to 3

months

Over 3 months & up to

6 months

Over 6 months & up to 1 year

Over 1 year & up to 3

years

Over 3 years & up to 5

years

Over 5 years

Total

Deposits 1750.68 359.14 1282.87 1428.72 4384.96 7543.50 1643.58 10856.32

29249.77

Advances 1895.07 290.14 1333.40 700.96 1148.22 7238.04 1204.72 1711.76 15522.31

Investments 20.32 99.11 217.75 18.21 139.79 1857.49 2273.85 9502.99 14129.51

Borrowings 4.29 0.00 0.00 25.96 25.34 100.17 93.84 0.02 249.62 Foreign Currency Assets

160.75 65.07 329.71 93.34 48.86 - - -

697.73

Foreign Currency Liabilities

204.95 31.03 290.79 99.08 67.15 11.92 0.10 - 705.02

The classification of Assets and Liabilities in different time buckets has been compiled on the basis of information collected from the branches / offices and adjustment/apportionment made at Head Office on the basis of behavioural maturity pattern.

i)Lending to Sensitive Sector

a) Exposure to Real Estate Sector (Rs. in Crore)

66

Category 2005-06 2004-05 a) Direct exposure i) Residential Mortgages – Lending fully secured by mortgages on residential property that is or will be occupied by the borrower or that is rented;

of which individual housing loans up to Rs.15 lakh

ii) Commercial Real Estate – Lending secured by mortgages on commercial real estates (office buildings, retail space, multi-purpose commercial premises, multi-family residential buildings, multi-tenanted commercial premises, industrial or warehouse space, hotels, land acquisition, development and construction, etc., including non-fund based (NFB) limits) iii) Investments in Mortgage Backed Securities (MBS) and other securitized exposures –

a. Residential, b. Commercial Real Estate.

b) Indirect Exposure Fund based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs)

1549.05

(1231.35)

927.50

NIL

740.94

851.81*

117.12

NIL

107.64

* Figure represents only Housing Loan. b) Exposure to Capital Market (Rs. in Crore) Items 2005-06 2004-05

(i) Investments made in equity shares (ii) Investments in bonds/convertible debentures

(iii) Investments in units of equity-oriented mutual funds. (iv)Advances against shares to individuals for investment in equity shares (including IPOs/ESOPS), bonds and debentures, units of equity oriented mutual funds (v) Secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market makers.

64.47 -

62.02

9.85

36.67

74.39 -

28.03

1.06

Total Exposure to Capital Market (i+ii+iii+iv+v)

(vi) of (v) above, the total finance extended to stockbrokers for margin trading.

173.01

(34.73)

103.48

c) Risk Category-wise Country Exposure The risk exposure of the Bank on any country is less than the threshold limit of 1% of the total asset of the Bank and as such no provision has been made in terms of RBI guidelines. The position of risk category of country exposure is given as follows: (Rs. in Crore) Risk Category*

Exposure (net)* as at March’06

(2005-06)

Provision held as at March’06

(2005-06)

Exposure (net) As at March’05

(2004-05)

Provision held as at March’05

(2004-05) Insignificant 83.79 Nil 37.64 Nil Low 77.79 Nil 22.76 Nil Moderate 7.99 Nil 1.02 Nil High 1.56 Nil 1.01 Nil Very High 0.56 Nil Nil Nil Restricted - Nil Nil Nil Off Credit - Nil Nil Nil Total 171.69 Nil 62.43 Nil

* Exposure shown above includes only Funded Exposure.

67

d) Single/Group Borrower limits. During the year ended 31.03.2006 the Bank did not accept any additional exposure beyond the prudential ceiling of 15% of the Capital Fund for single borrower and 40% of the Capital Fund for group borrowers.

j) Miscellaneous

a) Provision for Income Tax Amount of Provisions made for Income Tax during the year: (Rs. in Crore) Year ended March 31, 2006 Year ended March 31, 2005 Provision for Income Tax 68.00 104.00

In the opinion of the management, no provision is required in respect of disputed income tax demands contested in appeals. b) Penalties imposed by RBI The Bank has maintained SLR and CRR in excess of statutory requirement during the year except in one fortnight day ended on 14.10.2005, when there was a shortfall of coverage for daily maintenance of CRR by Rs.2.67 crore per day on an average for which penalty imposed was Rs.2.45 lac. (Previous year: Nil).

8. Disclosure as per Accounting Standard (AS) issued by ICAI in terms of RBI guidelines: i) Net Profit or Loss for the period, Prior Period items and changes in Accounting Policies

(AS-5) There are no changes in the accounting policies and material prior period items included in the Profit

and Loss Account required to be disclosed as per Accounting Standards (AS-5). ii) Revenue Recognition (AS-9) The circumstances in which Revenue Recognition has been postponed are noted under the Significant

Accounting Policies, in this regard. iii) Retirement Benefits of the employees (AS-15) The accounting policy followed on VRS expenditure is noted under A-8 of the Significant Accounting

Policies. iv) Segment Reporting (AS-17)

The Bank's operations are classified into two primary business segments viz. "Treasury Operations" and "Banking Operations". The relevant information is given hereunder in the prescribed format: Part A: Business segments (Rs. in Crore)

Business Segments

Treasury Operations

Other banking Operations

Total

Particulars 2005-06

2004-05 2005-06 2004-05 2005-06 2004-05

Revenue 1392 1539 1425 938 2817 2477 Result 450 594 516 239 966 833 Unallocated expenses net of unallocated income

(322) (143)

Operating Profit 644 690 Provisions & Contingencies

(371) (286)

Income-tax (68) (104) Extraordinary profit/loss

- - - - - -

Net Profit 205 300 OTHER INFORMATION

- - - - - -

Segment assets 16907 16534 15522 11390 32429 27924 Unallocated assets 800 831 Total assets 33229 28755 Segment liabilities 15802 15503 15554 11486 31356 26989 Unallocated liabilities 1873 1766 Total liabilities 33229 28755

68

Part B: Geographical Segment – Not Applicable

v) Related Party Disclosures (AS-18) Key Management Personnel Sl. No

Name Designation Item Period Amount (in

Rupees) 1. Sri. Parkash

Singh Chairman & Managing Director

Salary and emoluments

From 01.04.2005 to 31.05.2005

96,092

2. Sri. K. N Prithviraj

Executive Director

Salary and emoluments

From 01.04.2005 to 30.04.2005

39,715

3.

Sri P.K. Gupta

Chairman & Managing Director

Salary and emoluments

From 01.12.2005 to 31.03.2006

1,88,022

4. Ms. S. Lahiri

Executive Director

Salary and emoluments

From 18.06.2005 to 31.03.2006

3,79,786

vi) Consolidated Financial Statement (AS-21 )/ Accounting for Investments in Associates in Consolidated Financial Statements (AS-23)

The Bank does not have any subsidiary and as such no consolidation is required. vii) Accounting for Taxes on Income (AS-22)

Major components of Deferred Tax Assets/Liabilities are as follows: (Rs in crore) 2005-2006 2004-2005 Deferred Tax Assets Leave encashment 19.27 18.74 19,27 18.74 Deferred Tax Liability Depreciation on fixed assets 3.44 2.61 3.44 2.61

viii) Impairment of Assets (AS-28) The Bank has identified that there is no material impairment of fixed assets and as such no provision is required as per the Accounting Standard (AS-28) issued by the ICAI. ix) Provisions, Contingent Liabilities and Contingent Assets (AS-29) Movement in significant Provisions have been disclosed at the appropriate places in the Notes forming part of the accounts.

9. Previous year’s figures have been regrouped / rearranged wherever considered necessary. PART V AUDITORS QUALIFICATIONS FOR WHICH ADJUSTMENTS COULD NOT BE CARRIED OUT NIL PART VI KEY ACCOUNTING RATIOS For the Year ended March 31,

2002 March 31,

2003 March 31,

2004 March

31,2005 March 31,

2006 Earnings per Share (EPS) (Rs.) 0.66 1.69 1.74 1.66 1.33 Cash Earnings per Share (Rs.) 0.73 1.78 1.83 1.76 1.66 Book Value per Share/ Net Asset value per share (Rs.)

4.00 5.90 7.63 8.47 11.06

Return on Assets (%) 0.54 1.31 1.25 1.04 0.62 OTHER RATIOS Net NPA to Net Advances Ratio (%) 7.90 5.52 3.75 2.43 1.95 Interest Income/ Working Funds (%) 9.84 9.23 8.41 7.93 7.66

69

Non-Interest Income/ Working Funds (%)

1.91 1.87 2.05 1.78 1.48

Operating Profit/ Working Funds (%) 1.15 2.42 2.49 2.56 2.09 Net Profit per Employee (Rs. in lacs) 0.66 1.77 1.76 1.72 1.18 Capital Adequacy Ratio (%) 12.02 15.17 17.04 18.16 13.12 Tier I 8.84 12.63 15.04 14.15 10.01 Tier II 3.18 2.54 2.00 4.01 3.11 Credit/ Deposit Ratio (%) (net) 34.79 34.96 34.99 46.7 55.00 Interest Spread/ Average Working Funds (%)

2.91 3.23 3.17 3.39 3.33

Gross Profit/ Average Working Funds (%)

1.15 2.49 2.49 2.55 2.10

Operating Expenses/ Average Working Funds (%)

0.52 0.50 0.64 1.35 2.72

Return on Average Networth (%) 20.45 32.89 25.30 19.45 9.57 Yield on Advances (%) 9.70 9.50 8.70 8.44 8.60 Yield on Investments (%) 11.20 10.42 9.48 8.92 8.70 Cost of Deposits (%) 7.50

6.86 5.89 5.12 4.89

Business per Branch (Rs. in crores) 20.81 22.27 23.95 28.39 34.30 Business per Employee (Rs. in Crore) 1.44 1.62 1.69 2.08 2.54

* annualised Definitions of Key Ratios: Earnings per Share (EPS) (Rs.) Profit After Tax/ No. of Equity Shares Cash Earnings per Share (Rs.) (Profit After Tax + Depreciation)/ No. of Equity Shares Book Value per Share/ Net Asset value per share (Rs.)

Networth at year end/ No. of Equity Shares

Return on Assets (%) Net Profit/ Average Total Assets Net NPA to Net Advances Ratio (%) Net NPAs/ Net Advances Interest Income/ Working Funds (%) Interest Income/ Average Working Funds (Total Average of

monthly total assets as per Form X) Non-Interest Income/ Working Funds (%)

Non-Interest Income/ Average Working Funds (Total Average of monthly total assets as per Form X)

Net Profit/ Working Funds (%) Net Profit/ Average Working Funds (Total Average of monthly total assets as per Form X)

Business per Employee (Rs. in lacs) (Deposit + Advances)/ No. of Employees Net Profit per Employee (Rs. in lacs) Net Profit/ No. of Employees Capital Adequacy Ratio (%) Tier I Tier I Capital/ Risk Weighted Assets Tier II Tier II Capital/ Risk Weighted Assets Credit/ Deposit Ratio (%) (net) Total Advances/ Total Deposits Gross Profit/ Average Working Funds (%)

Gross Profit (Profit prior to Provisions & Contingencies)/ Average Working Funds (Total Average of monthly total assets as per Form X)

Operating Expenses/ Average Working Funds (%)

Operating Expenses (Non-Interest Expenditure)/ Average Working Funds (Total Average of monthly total assets as per Form X)

Yield on Advances (%) Interest Earned on Advances/ Average Advances as per Form X

Yield on Investments (%) Interest Earned on Investments/ Average Investments as per Form X

Cost of Deposits (%) Interest Expended (Interest paid on Deposits)/ Average Deposits as per Form X

Cost of Borrowings (%) Interest on Borrowings/ Average Borrowings as per Form X Gross Profit per Employee (Rs. in lacs) Gross Profit (Profit prior to Provisions & Contingencies)/

No. of Employees Business per Branch (Rs. in lacs) (Total Deposit + Total Advances)/ No. of Branches Gross profit per Branch (Rs. in lacs) Gross Profit (Profit prior to Provisions & Contingencies)/

No. of Branches All the Financial Ratios/ Capital Adequacy Ratios as specified in the Information Memorandum and the disclosures

70

regarding NPA’s conform to the norms as specified by RBI

PART VII

Capitalisation Statement (as at March 31, 2006) (Rs. in crores) Particulars Pre Issue Post Issue as adjusted for the

proposed Issue of Bonds of Rs.200 crores

Loan Funds Long Term 540.00 600.00 Short Term 296.62 296.62 Total Debt 836.62 896.62 Shareholders’ Funds 1828.80 1828.80 Share Capital 1532.43 1532.43 Reserves and Surplus 296.37 296.37 Accumulated loss Nil Nil Total Equity 1532.43 1532.43 Long Term Debt/ Equity Ratio 0.55 0.59

Details of Outstanding Unsecured Liabilities (as on March 31, 2006) (Rs. in crores) Particulars Amount outstanding Interest Rate Repayment Date/

Schedule Demand Deposits from Banks 232.32 0.00 Withdrawal on

demand Demand Deposits from Others 2900.57 0.00 Withdrawal on

demand Saving Bank Deposits 10433.90 3.50 Withdrawal on

demand Term Deposits from Banks 932.79 4.00-10.50 7days – 10 years Term Deposits from Others 14750.20 4.00-14.00 7 days – 10 years Unsecured Subordinated Bonds 400.00 11.00 29.4.2016 &

15.5.2015 Borrowings from Other Banks 2.33 overnight. Borrowings from Other Institutions & Agencies

247.29 6.50-16.50 January and July each year 2013

Borrowings outside India 47.00 Total 29546.39

PART VIII

Tax Shelter (Rs. in crores) For the Year ended March 31,

2002 March 31,

2003 March 31,

2004 March31,

2005 March 31,

2006

71

Tax Rate 7.65 36.75 35.88 36.59 33.66 Tax at actual rate on profit Adjustments Permanent Differences i) Interest on Tax free bonds ii) Dividend (exempt from tax) 1.17 - 6.01 5.49 10.40 iii)

Interest Income from Infrastructure Project

Timing Difference i) Difference between both

Depreciation IT Depreciation on Fixed Assets

3.16 - (0.23) 1.09 0.63

ii) Provision for bad and doubtful debts/ 51.52 72.48 165.60 106.61 134.15 ii) Provision for bad debts written off 175.86 224.13 250.31 111.03 142.27 iv)

Brought forward Losses 1240.21 893.70 578.62 278.43 -

v) Other Adjustments - vi)

VRS Expenditure 40.48 63.50 63.50 63.50 46.04

Total Taxation 104.00 68.00 Adhoc Provisions u/s 14A for F.Y. 2001-02 to 2005-06

Nil Nil Nil Nil Nil

Total Taxation 8.97 68.01 131.52 104.00 68.00 Note The Income Tax liability for the five financial years ended March 31, 2004 has been computed as per the relevant Income Tax returns/ communications sent to the Assessing Officer. The tax liability for 6 months ended 30.09.2004 is calculated on the estimated basis.

PART IX

STATEMENT OF DIVIDEND DECLARED BY THE BANK (Figures in Rs.) Year ended March 31,

2002 March 31,

2003 March 31,

2004 March 31,

2005 March 31,

2006 For the Year 2001-

2002 2002-2003

2003-2004

2004-2005

2005-2006

Number of shares 1810867700

1810867700

1810867700

1810867700

1532430800

Rate of Dividend (%) Nil Nil Nil Nil 3.00 Amount of Dividend (Rs. in crores) Nil Nil Nil Nil 45.97

III.STATUTORY AND OTHER INFORMATION Minimum Subscription As stated in the SEBI circular no. SEBI/MRD/SE/AT/46/2003 dated December 22, 2003, the requirement of minimum subscription shall not be applicable for the issue of Bonds on private placement basis and therefore the Bank shall not be liable to refund the issue subscription(s)/ proceed(s) in the event of the total issue collection falling short of issue size or certain percentage of issue size. Expenses of the Issue The expenses of the Issue payable by the Bank such as lead arrangers’ fee, reimbursement of expenses and payments to the Registrars to the Issue, printing expenses, listing fees, fees of the Trustees for the Bondholders, stamp duty and other expenses will be met by the Bank. Fees Payable to the Intermediaries The fees payable and the terms of appointment of intermediaries such as lead arrangers to the issue,

72

auditors, registrars to the issue, trustees for the bondholders, credit rating agencies etc are set out in the relevant appointment letters, copies of which are kept open for inspection at the Head Office of the Bank. Underwriting and Procurement Commission/ Brokerage The issue is not underwritten and hence no underwriting commission is payable. As the Bank shall not be appointing any Broker other than the Lead Arrangers to the issue, no procurement commission/ brokerage shall be payable to any other broker in addition. Previous Issues by the Bank The Bank has not gone for seeking public subscription for either its equity shares/ bonds/ debentures/ preference shares etc through Prospectus and thus the Bank is a unlisted company within the meaning of SEBI Disclosure & Investor Protection Guidelines 2000. The shares of the Bank are therefore not listed on any Stock Exchange. However the Bank has raised Tier II Capital by way of private placement of unsecured subordinated (Tier-II) bonds to augment capital adequacy as under: Issue Series

Year of Placeme

nt

Deemed Date of

Allotment

Issue Amount (Rs. in

Crores)

Tenure (in

months)

Credit Rating

Coupon Rate

(% p.a.)

Redemption Date

Series I 2001 31.03.2001

140.00 63 LAA by ICRA

11.00 (annual)

30.06.2006

Series II 2005 15.02.2005

300.00 123 LAA by ICRA & AA by CARE

7.40 (annual)

15.05.2015

Series-III 2006 29.03.2006

100.00 121 LAA by ICRA & AA by CARE

8.00 (semi-

annual)

29.04.2016

Except as stated elsewhere in this Information Memorandum, the Bank has not issued any shares/ debentures/ bonds or agreed to issue any shares/ debentures/ bonds for cash or otherwise within the two years preceding the date of this Information Memorandum. Offer Otherwise than for Cash There have not been any issues for consideration other than cash, save as except stated elsewhere in this Information Memorandum. Option to Subscribe Save as otherwise stated in this Information Memorandum, the Bank has not given any person nor does it propose to give any person any option to subscribe to the shares/ debentures/ bonds of the Bank. Undertaking regarding purchase of property There is no property which the Bank has purchased or acquired or proposes to purchase or acquire, which is to be paid for, wholly or partly, out of the proceeds of the present Issue or the purchase or acquisition of which has not been completed on the date of issue of this Information Memorandum, other than the property as given hereunder: a. the contracts for the purchase or acquisition whereof were entered into, or may be entered into, in the ordinary course of the Bank’s business, such contracts not being made in contemplation of the Issue or in consequence of the contract; or b. in respect of which the amount of the purchase consideration is not material. The Bank has not purchased any property in which any of its directors had or have any direct or indirect interest or in respect of any payment thereof. The Bank has no plans, at present, to acquire any running business out of the proceeds of the Issue. Terms of Appointment of Chairman and Managing Director In exercise of the powers conferred by clause (a) of sub-section (3) of section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, read with sub-clause (1) of clause 3, clause 6, clause 7 and sub-clause (1) of clause 8 of the Nationalised Banks (Management and Miscellaneous Provisions) Scheme 1970, the Central Government, after consultation with RBI, has appointed Shri P..K.Gupta as Chairman and Managing Director of the Bank on 1.05.2005. His compensation details are as follows: Salary: Rs. 45130/- per month in the scale of Rs. 24050-650/3-26000/- (plus 50% of the basic pay as dearnss pay.) paid since December 2005. Other benefit:Allowances and Perquisites such as dearness allowance, city compensatory allowance, housing, Leave Travel Allowance, Contribution to Provident Fund, Gratuity, Superannuation, Reimbursement of medical expenses, entertainment expenses and others.

73

Terms of Appointment of Executive Director In exercise of the powers conferred by clause (a) of sub-section (3) of section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, read with sub-clause (1) of clause 3 and sub-clause (1) of clause 8 of the Nationalised Banks (Management and Miscellaneous Provisions) Scheme 1970, the Central Government, after consultation with RBI, has appointed Ms. Sunanda Lahiri as Executive Director of the Bank on 18.06.2005-. Her compensation details are as follows: Salary:Rs. 40320.75/- per month in the scale of Rs.22050-500/4-24050/-(plus 50% of the basic pay as dearness pay) paid since 18.06.2005 . Other benefit:Allowances and Perquisites such as dearness allowance, city compensatory allowance, housing, Leave Travel Allowance, Contribution to Provident Fund, Gratuity, Superannuation, Reimbursement of medical expenses, entertainment expenses and others. Payment or Benefit to the Directors and Officers of the Bank No amount or benefit has been paid or given or is intended to be paid or given to any Director or Officer of the Bank except their normal remuneration and/or reimbursement for the services rendered to the Bank to which they are entitled to or may become entitled to under the provisions of the Bank Nationalisation Act or otherwise in accordance with the Law. Except the benefits as provided under the relevant rules framed by the Government of India from time to time, the Directors of the Bank are not eligible to any additional benefits upon termination of employment. The key managerial personnel are entitled to the compensation & benefits as applicable to all the permanent employees of the Bank. All the key managerial personnel, except the Chairman & MD and Executive Director, are of General Manager and higher grade and hence their compensation falls in the scale of Rs. 29340-680/2-30700-900/1-31600-1000/1-32600/- The other benefit includes the festival loan housing loan reimbursement of certain expenses etc. as per employees’ service rules. Nature and Interest of Directors No Director of the Bank is interested in the appointment of any of the intermediaries to the issue such as Lead Arranger, Arrangers, Registrars, Rating Agency(ies), Trustees etc. No Director of the Bank is interested in any property acquired by the Bank within two years of the date of this Information Memorandum or proposed to be acquired by it. The Directors are not interested in any loan or advance given by the Bank to any person(s)/ Company(ies) nor is any beneficiary of such loan or advance related to any of the Directors of the Bank. Capitalisation of Reserves or Profits The Bank has not capitalised any of its reserves and/or profits since inception. Revaluation of Assets As on March 31 2006, the Bank had a balance of Rs. 133.36 crores outstanding as revaluation reserves, details of which are given as under: Sr. No. Financial Year/ Date Details of Fixed Assets

Revalued Revaluation Amount (Rs. in crores)

1. 2005-06 Bank’s own premises Rs.133.36 IV. MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION Relevant provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 as amended by the Banking Companies (Acquisition and Transfer of Undertakings) Amendment Act, 1994 & Banking Companies (Acquisition and Transfer of Undertakings) Amendment Act, 1995 & 1996 hereinafter collectively referred to as the Bank Nationalisation Act are: Authorised Capital As per the provisions of Section 3 (Sub-Section 2A) of the Banking Companies (Acquisition) Act, 1970 the Authorised Capital of the Bank shall be Rupees 1500 crores to be divided into 150 crore of fully paid-up equity shares of Rs.10/- each. Provided that the Central Government may, after consultation with the Reserve Bank of India and by notification in the Official Gazette, increase or reduce the authorised capital as it thinks fit, so however that after such increase or reduction, the authorised capital shall not exceed Rs. 3000 crore, or be less than Rs. 1500 Crores.

74

Issued Capital Section 3 (Sub-Section 2B) of the Banking Companies (Acquisition) Act, 1970 provides that the paid-up capital may from time to time be increased by a. Such amounts as the Board of Directors of the corresponding new Bank may, after consultation with the

Reserve Bank of India and with the previous sanction of the Central Government transfer from the reserve fund established by such Bank to such paid-up capital;

b. Such amounts as the Central Government may, after consultation with the Reserve Bank, contribute to such paid-up capital;

c. Such amounts as the Board of Directors of the corresponding new Bank may, after consultation with the Reserve Bank and with the previous sanction of the Central Government, raise by Public Issue of shares as may be prescribed, so however, that the Central Government shall at all times hold not less than 51% of the paid-up capital of each corresponding new Bank.

The entire paid-up capital of the corresponding new Bank, except the paid-up capital raised by public Issue under clause (c) of Sub-Section 2B shall stand vested in, and allotted to, the Central Government. Sec 3 (2BB) of Banking Companies (Acquisition) Act, 1970 provides that “notwithstanding anything contained in subsection (2), the paid up capital of a corresponding new Bank constituted under subsection (1) may from time to time and before any paid up capital is raised by Public Issue under clause (c) of sub section (2B) be reduced by a. the Central Government after consultation with the Reserve Bank by cancelling any paid up capital which

is lost, or is unrepresented by available assets; b. the board of directors, after consultation with Reserve Bank and with the previous sanction of the Central

Government, by paying off any paid up capital which is in excess of the wants of the corresponding new Bank.......”

(2BBB) “Notwithstanding anything contained in sub section (2BB) or sub-sub section (2BBA), the paid up capital of a corresponding new Bank shall not be reduced at any time so as to render it below twenty five percent of the paid up capital of that Bank as on date of commencement of the Banking Companies (Acquisition and Transfer of Undertakings) Amendment Act, 1995.” Rights of Equity Shareholders As to Dividend Section 10(7): After making provision for bad and doubtful debts, depreciation in assets, contributions to staff and Superannuation funds and all other matters for which provision is necessary under any law, or which are usually provided for by Banking companies, a corresponding new Bank may, out of its net profits, declare a dividend and retain the surplus, if any. Voting Rights Section 3(2E): No shareholder of the corresponding new Bank, other than the Central Government, shall be entitled to exercise voting rights in respect of any shares held by him in excess of one per cent of the total voting rights of all the shareholders of the corresponding new Bank. Meeting of Shareholders Section 10A: A General Meeting (in this Act referred to as an annual general meeting) of every corresponding new Bank which has issued capital under clause (c) of sub-section (2B) of Section 3 shall be held at the place of the head office of the Bank in each year at such time as shall from time to time be specified by the Board of Directors: Provided that such annual general meeting shall be held before the expiry of six weeks from the date on which the balance sheet together with the profit and loss account and auditors' report is under sub-section (7A) of section 10, forwarded to the Central Government or to the Reserve Bank, whichever date is earlier. The shareholders present at an annual general meeting shall be entitled to discuss the balance sheet and the profit and loss account of the corresponding new Bank made up to the previous 31st day of March, the report of the Board of Directors on the working and activities of the corresponding new Bank for the period covered by the accounts and the auditor's report on the balance sheet and account. Transfer of Shares and Share Registers Section 3 (2D): The shares of every corresponding new Bank not held by the Central Government shall be freely transferable.

75

Section 3 (2F): Every corresponding new Bank shall keep at its head office a register, in one or more books, of the shareholders (in this Act referred to as the Register) and shall enter therein the following particulars: i. the names, addresses and occupations, if any, of the shareholders and a statement of the shares held by

each shareholder, distinguishing each share by its denoting number; ii. the date on which each person is so entered as a shareholder; iii. the date on which any person ceases to be a shareholder and iv. such other particulars as may be prescribed Section 3 (2G): Notwithstanding anything contained in sub-section (2F), it shall be lawful for every, corresponding new Bank to keep the register in computer floppies or diskettes subject to such safeguards as may be prescribed. Section 3 (3): Notwithstanding anything contained in the Indian Evidence Act, 1872, a copy of, or extract from, the Register, certified to be a true copy under the hand of an officer of the corresponding new Bank authorised in this behalf by it, shall in all legal proceedings, be admissible in evidence. Section 3A: Notwithstanding anything contained in sub-section (2F) of Section 3, no notice of any trust, express, implied or constructive, shall be entered on the register, or be receivable, by the corresponding new Bank. Board of Directors and their Powers Constitutions of the Board of Directors: Section 9 (3): Every Board of Directors of a corresponding new Bank, constituted under any scheme made under Section (1), shall include: i. not more than two whole time directors to be appointed by the Central Government after consultation

with the Reserve Bank; ii. one director who is an official of the Central Government to be nominated by the Central Government

provided that no such Director will be a Director of any other corresponding new Bank as in terms of the Banking Companies (Acquisition) Act, 1970;

iii. one director who is an officer of the Reserve Bank to be nominated by the Central Government on the recommendation of the Reserve Bank.

Explanation: For the purpose of this clause "an officer of the Reserve Bank" includes an officer of the Reserve Bank who is deputed by the Bank under Section 54AA of the Reserve Bank of India Act, 1934 to any institution referred to therein.

iv. Not more than 2 directors to be nominated by the Central Government from amongst SEBI established under Section (3) of SEBI Act 1992 (15 of 1992), the National Bank for Agriculture & Rural Development established under section (3) NABARD Act 1981 (61 of 1981), Public financial institutions as specified in subsection (1) or notified from time to time under Sub-Section (2) of Section (4A) of Companies Act 1956 (1 of 1956) and other institutions established or constituted by or under any Central Act or incorporated under the Companies Act 1956 and having not less than 51% of the paid-up share capital held or controlled by the Central Government.

v. one director, from among such of the employees of the corresponding new Bank who are workmen under clause(s) of Section 2 of the Industrial Disputes Act, 1947 to be nominated by the Central Government in such manner as may be specified in a scheme made under this section;

vi. one director, from among the employees of the corresponding new Bank, who are not workmen under clause (S) of Section 2 of the Industrial Disputes Act, 1947, to be nominated by the Central Government after consultation with Reserve Bank;

vii. one director who has been a Chartered Accountant for not less than 15 years to be nominated by the Central Government after consultation with the Reserve Bank;

viii. subject to the provisions of clause (i), not more than six directors, to be nominated by the Central Government;

ix. where the capital issued under clause (c) of sub-section (2B) of Section 3 is _ - not more than twenty per cent, of the total paid up capital, not more than two directors. - more than twenty per cent but not more than forty per cent, of the total paid-up capital, not more

than four directors. - more than forty per cent, of the total paid-up capital, not more than six directors to be elected by the

shareholders other than the Central Government, from amongst themselves. Provided that on the assumption of charge after election of any such directors under this clause, equal number of directors nominated under clause (h) shall retire in such manner as may be specified in the scheme.

76

(3A): The directors to be nominated under clause (h) or to be elected under clause (i) of Sub-Section 3 shall - A. have special knowledge or practical experience in respect of one or more of the following matters, namely:

i. agricultural and rural economy ii. Banking iii. Co-operation iv. economics v. finance vi. law vii. small scale industry viii. any other matter the special knowledge of, and practical experience in which would in the opinion

of the Reserve Bank, be useful to the corresponding new Bank; B. represent the interest of depositors; or C. represent the interests of farmers, workers and artisans. Removal of Directors Section 9 (3B): Where the Reserve Bank is of the opinion that any director of a corresponding new Bank elected under clause (i) of Sub-section (3) does not fulfil the requirements of the Sub- Section (3A), it may, after giving to such director and the Bank a reasonable opportunity of being heard, by an order remove such director and on such removal, the Board of Directors shall co-opt any other person fulfilling the requirements of sub-section 3(A) in place of the person so removed till a Director is duly elected by the shareholders of the corresponding new Bank in the next Annual General Meeting and the person so co-opted shall be deemed to have been duly elected by the shareholders of the corresponding new Bank as a director. Powers of Board of Directors Section 19: 1. The Board of Directors of a corresponding new Bank may, after consultation with the Reserve Bank and

with the previous sanction of the Central Government by notification in the Official Gazette make the regulations, not inconsistent with the provisions of this Act or any scheme made thereunder, to provide for all matters for which provision is expedient for the purpose of giving effect to the provisions of this Act.

2. In particular, and without prejudice to the generality of the foregoing power, the regulations may provide for all or any of the following matters, namely:

i. the powers, functions and duties of local boards and restrictions, conditions or limitations, if any, subject to which they may be exercised or performed, the formation and constitution of local committees and committees of local boards (including the number of members of any such committee) the powers, functions and duties of such committees, the holding of meetings of local committees and committees of local boards and the conduct of business there at;

ii. the manner in which the business of the local boards shall be transacted and the procedure in connection therewith.; (a) the nature of shares of the corresponding new Bank, the manner in which and the conditions subject to which shares may be held and transferred and generally all matters relating to the rights and duties of shareholders. (b) the maintenance of register, and the particulars to be entered in the register in addition to those specified in sub-section (2F) of Section 3, the safeguards to be observed in the maintenance of register on computer, floppies or diskettes, inspection and closure of the register and all other matters connected therewith. (c) the manner in which general meetings shall be convened, the procedure to be followed thereat and the manner in which voting rights may be exercised. (d) the holding of meetings of shareholders and the business to be transacted thereat. (e) the manner in which notices may be served on behalf of the corresponding new Bank upon shareholders or other persons. (f) the manner in which the directors nominated under clause (g) of sub-section (3) of Section 9 shall retire. (g) the delegation of powers and functions of the Board of Directors of a corresponding new Bank to the general manager, director, or other employee of that Bank. (h) the conditions or limitations subject to which the corresponding new Bank may appoint advisors, officers or other employees and fix their remuneration and other terms and conditions of service. (i) the duties and conduct of advisors, officers or other employees of the corresponding new Bank. (j) the establishment and maintenance of Superannuation, pension, provident or other funds for the benefit of officers or other employees of the corresponding new Bank or of the dependants of such

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officers or other employees and the granting of Superannuation allowances, annuities and pensions payable out of such funds. (k) the conduct and defence of legal proceedings by or against the corresponding new Bank and the manner of signing and pleadings. (l) the provision of a seal for the corresponding new Bank and the manner and effect of its use. (m) the form and manner in which contracts binding on the corresponding new Bank may be executed. (n) the conditions and the requirements subject to which loans or advances may be made or bills may be discounted or purchased by the corresponding new Bank. (o) the persons or authorities who shall administer any pension, provident or other fund constituted for the benefit of officers or other employees of the corresponding new Bank or their dependants. (p) the preparation and submission of statements of programmes of activities and financial statements of the corresponding new Bank and the period for which and the time within which such statements and estimates are to be prepared and submitted; and (q) generally for the efficient conduct of the affairs of the corresponding new Bank.

V. MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION The contracts referred to in Para (A) below (not being contracts entered into in the ordinary course of the business carried on by the Bank or entered into more than 2 years before the date of this Information Memorandum) which are or may be deemed to be material have been entered into by the Bank. Copies of these contracts together with the copies of documents referred to in Para (B) below have been attached to the copy of this Information Memorandum and the same may be inspected at the Head Office of the Bank between 10:00 am and 12:00 noon on any working day until the closing of the subscription list. Material Contracts 1. Copy of letters appointing the Lead Arrangers to the issue. 2. Copy of letter appointing Registrar and Transfer Agents and copy of MoU entered into between the Bank and the Registrar. 3. Copy of appointing Trustees to the Bondholders. A. Documents 1. Memorandum and Articles of Association of the Bank. 2. Copy of the resolution of Board of Directors dated 19.07. 2006 authorising the current issue of Bonds. 3. Auditors Report dated 05.05, 2006 referred to in the Information Memorandum and their consent to include the same in the Information Memorandum. 4. Consent from the Directors, Auditors, Trustees to the Bondholders, Bankers to the Company, Lead Arrangers to the Issue, Registrars to the Issue referred to in this Information Memorandum to act in their respective capacities. 5. Copies of the initial listing application made to NSE. 6. Annual Reports of the Bank for Financial Years 2001-2002, 2002-2003, 2003-2004, 2004-2005 and 2005-2006. 7. Letter received from NSE conveying the in-principle approval for listing of the Bonds. 8. Letter from ICRA conveying the credit rating for the Bonds of the Bank and the rating rationale pertaining thereto. 9. Letter from CARE conveying the credit rating for the Bonds of the Bank and the rating rationale pertaining thereto. 10. Tripartite Agreement between the Bank, NSDL and Intime Spectrum Registry Limited for issue of bonds in dematerialised form. 11. Tripartite Agreement between the Bank, CDSL and Intime Spectrum Registry Limited for issue of bonds in dematerialised form.

PART III

DECLARATION All the relevant provisions of the Companies Act, 1956, the Banking Regulation Act, 1949, Securities and Exchange Board of India, the guidelines issued by the Government and any other competent authority have been complied with and no statement made in this Information Memorandum is contrary to the provisions of the Companies Act, 1956 and rules framed thereunder. All the legal requirements applicable till the date of this Information Memorandum have been complied with. Further it is certified that, all disclosures made in this Information Memorandum are true and correct.

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The Issuer Company accepts no responsibility for the statements made otherwise than in this Information Memorandum or any other material issued by or at the instance of the issuer and that any one placing reliance on any other source of information would be doing so at his own risk. Signed by Mr. A. K. Ray pursuant to the authority granted by the Board of Directors of the Bank at their meeting held on 19.07., 2006: (A. K. Ray) General Manager ( Treasury, IB & Accounts) Dated: August 3rd, 2006. Place: Kolkata, West Bengal.

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ADDRESSES OF COLLECTING BRANCHES OF THE BANK BANKERS TO THE ISSUE United Bank of India Old Court House Street Branch, 11, Hemant Basu Sarani, (16 Old Court House Street), Kolkata – 700 001. Tel No. (033) 22486285/2549, 22435708. Fax No. 91-33- 22487536. Centre Address STD

Code Telephone Number(s)

Fax Number(s)

Chennai 117, Post Box No. 8270 Armanian Street, Chennai – 600 001

044 2534-1097 2534 0580

Bangalore 40 Kempegowda Road Bangalore – 560 009

080 2225 2910 2225 0412

Hyderabad 4-3-331 Bank Street Hyderabad – 500 195

040 2475 6811 2475 5486

2475 5486 2475 6994

Ahmedabad Lal Darwaja, Post Box No. 170 United Bank of India Building Ahmedabad – 380 001

079 2550-6957 2550-6274

2550-6272

New Delhi J C Das Building 90/8 Connaught Circus, (Near Madras Hotel) New Delhi – 110 001

011 2336 0661

2334-7012

Mumbai Post Box No. 298 United Bank of India Building 25, Sir Pheroz Shah Mehta Road, Fort Mumbai – 400 001

022 2287 3656 2287 1261/62

2288 6909

Guwahati Hem Barua Road, Panbazar Guwahati – 781 001

0361 254 0281 254 0043

254 0042/43

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Head Office, 11, Hemanta Basu Sarani, (16, Old Court House Street), Kolkata – 700 001, West Bengal. Tel.: (033) 22483857, 22106803 Fax.: 91-33-22489391, 22130989.

APPLICATION FORM FOR UNSECURED REDEEMABLE NON-CONVERTIBLE SUBORDINATED (TIER-II) BONDS The Board of Directors, United Bank of India, 11, Hemanta Basu Sarani, (16, Old Court House Street), Kolkata – 700 001, West Bengal. Dear Sirs, Having read, understood and agreed to the contents and terms and conditions of United Bank of India’s Information Memorandum dated August 3rd., 2006, I/We hereby apply for allotment to me/us, of the under mentioned Bonds (hereinafter referred to as “Bonds”), out of the Private Placement Issue. I/We irrevocably give my/ our authority and consent to IDBI Trusteeship Services Limited, to act as my/our Trustees and for doing such acts and signing such documents as are necessary to carry out their duties in such capacity. The amount payable on application as shown below is remitted herewith. I/We not that the Board of Directors are entitled in their absolute discretion to accept or reject this application in whole or in part without assigning any reason whatsoever. I/We confirm that I/we have not received and will not receive any commission or brokerage or any other incentive in any form, directly or indirectly, for subscribing to the Issue. APPLICANT’S DETAILS (PLEASE READ CAREFULLY THE INSTRUCTIONS ON THE NEXT PAGE BEFORE FILLING UP THIS FORM)

SOLE/FIRST APPLICANT’S NAME IN FULL SIGNATORY/AUTHORISED SIGNATORY

SECOND APPLICANT’S NAME

THIRD APPLICANT’S NAME

ADDRESS (Do not repeat name) (Post Box No. alone is not sufficient)

TEL FAX PIN CODE

SOLE/ FIRST APPLICANT CATEGORY (Tick one) INVESTMENT DETAILS � Scheduled Commercial Bank � Financial Institution

Face Value/ Issue Price Rs. 10,00,000/- (Rupees Ten Lacs Only) per Bond

� Insurance Company Minimum Application 1 Bond and in multiples of 1 Bond thereafter Tenure 10 Years � Primary/ State/ District/ Central Co-

operative Bank Coupon Rate 9.25% p.a. � Regional Rural Bank Interest Payment Semi-annually � Provident/ Pension/ Gratuity/

Superannuation Fund Amount payable per Bond (i)

Rs. 10,00,000/-

� Mutual Fund � Company/ Body Corporate

No. of Bonds applied for (ii)

� Others (please specify) –

Total amount payable (i) x (ii)

PAYMENT DETAILS Total amount payable Cheque/ Demand Draft

No.

(Rs. in figures)

(Rs. in words) Dated

Drawn on (Name of the Branch

SOLE/ FIRST APPLICANT’S BANK DETAILS (Ref. Instructions) INCOME TAX DETAILS (Ref. Instructions) Bank Name Sole/ First

Applicant Second Applicant

Third Applicant

Branch P.A,N./ G.I.R.

For Office Use Only

Date of Receipt of Application / 0 8 / 0 6

Date of Clearance of Cheque

Application No. ______

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City Account Type of Account

� Savings

�Current

�Others

I.T. Circle/ Ward/ District No.

TO BE FILLED IN ONLY IF THE APPLICANT IS AN INSTITUTION Name of the Authorised Signatory(ies) Designation Signature 1. 1. 2. 2. 3. 3. 4. 4.

DETAILS FOR ISSUE OF BONDS IN ELECTRONIC/ DEMATERIALISED FORM APPLICANT’S SIGNATURE(S) Depository Name � NSDL � CDSL Sole/ First Depository Participant Second DP-ID Number Client-ID Beneficiary Account Name of the Applicant

Third Applicant

--*------------*-----------*-----------(Tear Here)------------*---------*-----------* -------------*--------- ACKNOWLEDGEMENT SLIP

Head Office, 11, Hemanta Basu Sarani, (16, Old Court House Street), Kolkata – 700 001, West Bengal. Tel.: (033) 22483857, 22106803 Fax.: 91-33-22489391, 22130989.

Application 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.

INSTRUCTIONS

1. Application forms must be completed in full in BLOCK LETTERS IN ENGLISH. A blank space must be left between

All future communication in connection with this application should be addressed to the Registrars, ““Intime Spectrum Regisrty Limited” [Address: C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup (W), Mumbai – 400078, Tele: 022-55555491 Fax -91-22-5555-5499] quoting full name of Sole/ First Applicant, Application No., Number of Bonds applied for, Date, Bank and Branch where the application was submitted and Cheque/ Demand Draft Number and Issuing Bank

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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. Cheque(s)/ Demand Draft(s) should be drawn in favour of “United Bank of India” and crossed “Account Payee Only”. Cheque(s)/ Demand draft(s) may be drawn on any bank including a co-operative bank, which is a member or a sub-member of the Banker’s Clearing House located at Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, New Delhi , Mumbai or Guwahati.

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

4. As a matter of precaution against possible fraudulent encashment of interest warrants due to loss/misplacement, applicants are requested to mention the full particulars 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 risk.

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

6. 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.

7. The application would be accepted as per the terms of the Scheme outlined in the Information Memorandum for Private Placement dated August 3rd., 2006.