INFORMATION MEMORANDUM

Private & Confidential For Private Circulation Only (This Information Memorandum is neither a Prospectus nor a Statement in Lieu of Prospectus)

ALLAHABAD BANK
Head Office: 2, Netaji Subhas Road, Kolkata 700 001. Tel.: (033) 22423373, 22420883 Fax.: (033) 22104048, 2242 4048 Website : www. allahabadbank.com. E-Mail : hoipo@allahabadbank.co.in Constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970

Private Placement of 2000 Unsecured, Non-convertible, Redeemable Subordinated Bonds (Tier II Bonds Series IV) of Face value Rs. 10,00,000/- each for cash at par aggregating Rs. 200 crores.
GENERAL RISK: Investment in debt and debt related securities involve a degree of risk and investors should not invest any fund in the debt instrument privately placed unless they can afford to take the risk attached to such investment. Investors are advised to read the Risk Factors carefully before taking an investment decision in this private placement. For taking an investment decision, the investors must rely on their own examination of the Bank and the private placement including the risks involved. The placement issue being made on private placement basis, this Information Memorandum has not been filed with Securities & Exchange Board of India (SEBI). The Placement have not been recommended or approved by SEBI nor does SEBI guarantee the accuracy or adequacy of this document. Specific attention of the investors is invited to the summarized and detailed Risk Factors on page 4 of the Information Memorandum.

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

CREDIT RATING: CARE has assigned rating AA (pronounced double A) to these Bonds. This rating are judged to be of high quality by all standards. They are also classified as high investment grade. Fitch Ratings India Pvt. Ltd. has assigned AA (Ind)(Double A Ind) rating to these Bonds. The outlook on the rating is stable. For details of the above rating definitions, the investors are advised to refer page no. 124. on Credit Rating in the Information Memorandum. The Rating(s) are not a recommendations to buy, sell or hold securities and investors should take their own decision. The rating may be subject to revision or withdrawal at any time by the assigning Rating Agency on the basis of new information.

LISTING: The Unsecured Non-convertible Redeemable Subordinated Bonds (Tier II Bonds Series IV) are proposed to be listed in the Wholesale Debt Segments (WDM) on the Bombay Stock Exchange(BSE)/National Stock Exchange of India (NSE) and in-principle approval from BSE has been received vide their letter no. List/Debt/Sym/Pg/2004 dated February 9, 2004. TRUSTEE: IDBI Trusteeship Services Limited, 10 Floor Nariman Bhavan, Nariman Point, Mumbai 400 021, has given their consent to the Issuer for being appointed as the Trustee for the present placement of Rs. 200 crores of Bonds. The text of consent letter from IDBI Trusteeship Services Limited to act as Trustee for and on behalf of the holder(s) of bonds is reproduced on page no. 123. ARRANGERS TO THE PLACEMENT: SPA Merchant Bankers Ltd., 602 Embassy Centre, Nariman Point, Mumbai 400021. Phone: 020-56338880. A.K. Capital Services Ltd. Flat No. N, Sagar Apartments, 6, Tilak Marg, New Delhi-110001. Phone No.011-23385704. REGISTRAR TO THE ISSUE: Karvy Consultants Ltd.- Karvy House, 46, Avenue 4, Street no.1, Banjara Hills, Hyderabad 500 034. Phone: 040-23312454 / 23326591/Fax No.040-23311968 (SEBI Registration No. INR6030221).
th

ISSUE OPEN ON: 22.3.2004

ISSUE CLOSES ON : 30.3.2004

Allahabad Bank-

TABLE OF CONTENTS :
SL.NO. I II III CONTENTS DEFINITIONS/ ABBREVATIONS RISK ENVISAGED BY MANAGEMENT AND MANAGEMENT PERCEPTIONS (MP) TO ADDRESS THE RISKS.. HIGHLIGHTS OF THE BANK.. PAGE NO. 3 4 10

PART I I GENERAL INFORMATION II CAPITAL STRUCTURE III TERMS OF THE PRESENT ISSUE . IV PARTICULARS OF THE ISSUE V BANK & MANAGEMENT. VI OVERVIEW OF THE BANKING SECTOR VII MAIN OBJECTS OF THE BANK. VIII BUSINESS OF THE BANK & ITS PRODUCTS AND SERVICES. IX BRANCH NETWORK OFTHE BANK. X DETAILS OF SOURCES OF FUNDS. XI DETAILS OF DEPLOYMENT OF FUNDS XII INVESTMENTS . XIII ASSET CLASSIFICATION, INCOME RECOGNITION & PROVISIONING. XIV ASSETS LIABILITY MANAGEMENT. XV INTERNAL CONTROL SYSTEM IN THE BANK.. XVI SUBSIDIARIES, AFFILIATES AND GROUP COMPANIES OF THE BANK XVII SIGNIFICANT REGULATORY MATTERS RELATED TO THE BANK. XVIII OVERVIEW OF ORGANISATION STRUCTURE, MANAGEMENT AND SUPPORT FUNCTIONS .. XIX CORPORATE GOVERNANCE .. XX HUMAN RESOURCES XXI INFORMATION TECHNOLOGY XXII STOCK MARKET DATA OF THE EQUITY SHARES OF THE BANK . XXIII MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL PERFORMANCE . XXIV BASIS FOR INTEREST RATE .. OUTSTANDING LITIGATIONS, DEFAULTS AND MATERIAL DEVELOPMENTS . XXV XXVI INVESTOR GRIEVANCE & REDRESSAL SYSTEM XXVII RISKS ENVISAGED BY MANAGEMENT & MANAGEMENT PROPOSALS (MP) TO ADDRESS THE RISKS

11 15 17 23 24 27 29 30 32 33 35 39 41 44 49 50 53 54 56 58 59 60 61 63 64 68 68

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

75 80 116 118 121

PART III I DECLARATION

123

Allahabad BankDEFINITIONS/ ABBREVATIONS

Term ALM ALCO Act Application Form ARC/ A.R.C. The Bank/ The Issuer Board/ BoD/ BOD Bond(s) Bondholder(s) Beneficial Owner(s) BGs BIS Bps Rating Agency CDSL CAR CRAR CAGR CDs CDR CPs DPGs DICGC DDA DRR DRT ECGC Rating Agency FY/ F.Y. FIs FIIs FB FIMMDA GOI/ GoI HRD HTM Issue/ Offer/ Offering Information Memorandum/ Offer Document IT IS LIC LCs MF/ MFs NSDL NRIs NPA/ NPAs NSE/ concerned Stock Exchange NBFCs NCLT NFB OCBs OTS OCS PLR PAN PSC Registrars to the Issue/ Registrars/ Registrar & Transfer Agents RBI Regional Stock Exchange RNBCs RRB Lead Arrangers SEBI SARFAESI SSIs SLR Trustees/ Trustees to the Bondholder(s) TDS VRS W/O Meaning/ Definition/ Complete Term Asset Liability Management Asset Liability Committee The Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970 as amended from time to time till date The form in terms of which, the investors shall apply for the Unsecured Non-convertible Redeemable Subordinated Bonds of the Bank Asset Reconstruction Corporation Allahabad Bank, a bank constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970 and a banking company within the meaning of the Banking Regulation Act, 1949, and having its Registered / Head Office at 2, Netaji Subhas Road, Kolkata 700 001. Board of Directors of the Bank or a Committee thereof Unsecured Non-convertible Redeemable Subordinated Bonds of Rs. 10,00,000/- each offered through private placement route under the terms of this Information Memorandum The Holder(s) of the Bond(s) in dematerialised form 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) Bank Guarantees Bank of International Settlements basis points Credit Analysis & Research Limited/ Fitch Ratings Central Depository Services (India) Limited Capital Adequacy Ratio Capital to Risk weighted Assets Ratio Compounded Annual Growth Rate Certificate(s) of Deposit(s) Corporate Debt Restructuring Commercial Papers Deferred Payment Guarantees Deferred Insurance Credit Guarantee Deemed Date of Allotment for the Bonds Debenture/ Bond Redemption Reserve Debt Recovery Tribunals Export Credit Guarantee Corporation of India Ltd. Credit Analysis & Research Limited/ Fitch Ratings Financial Year Financial Institutions Foreign Institutional Investors Fund Based Fixed Income Money Market & Derivatives Association of India Government of India Human Resource Development Held Till Maturity Private Placement of Unsecured Non-convertable Redeemable Subordinated Bonds of Rs. 10,00,000/- each for cash at par aggregating Rs. 200 crores offered under the terms of this Information Memorandum Memorandum of Information dated 17.3.2004 for Private Placement of Unsecured Non-convertible Redeemable Subordinated Bonds of Rs. 10,00,000/- each for cash at par aggregating Rs. 200 crores to be issued by Allahabad Bank Income Tax Information Systems Life Insurance Corporation of India Letters of Credit Mutual Fund(s) National Securities Depository Limited Non Resident Indians Non Performing Asset(s) National Stock Exchange of India Limited Non-Banking Finance Companies National Company Law Tribunal Non-Fund Based Overseas Corporate Bodies One Time Settlement Out-of-court Settlement Prime Lending Rate Permanent Account Number Priority Sector Credit Karvy Consultants Ltd. Reserve Bank of India Stock Exchange, Kolkata Residuary Non-Banking Companies Regional Rural Bank SPA Merchant Bankers Ltd./ A.K. Capital Services Ltd Securities and Exchange Board of India The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Small Scale Industries Statutory Liquidity Ratio IDBI Trusteeship Services Limited Tax Deducted at Source Voluntary Retirement Scheme Written Of

Allahabad BankRISK ENVISAGED BY MANAGEMENT AND MANAGEMENT PERCEPTIONS (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 perceptions thereof, reference page numbers have been provided, which can be used to obtain more details about the said risk. INTERNAL RISKS 1. Contingent Liabilities As on March 31, 2003 the contingent liabilities of the Bank were at Rs.10338.70 crores comprising claims against the Bank not acknowledged as debts (Rs. 381.88 crores), liability on account of outstanding forward exchange contracts (Rs. 8470.09 crores), guarantees on behalf of constituents (Rs.788.76 crores), acceptances, endorsements and other obligations (Rs. 696.49 crores) liability for partly paid instrument Rs.0.16 crores and others (Rs. 1.32 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. 2. Income Tax Proceedings Various proceedings against the Bank relating to Income Tax amounting to Rs. 106.45 crores (including cases filed against the Bank by the IT authorities to the tune of Rs. 106.45 crores) are pending in appeal with the Income Tax authorities. The Bank has not made any provision in this regard and adverse ruling, if any, shall affect the financials of the Bank. MP: The Income Tax department has filed the appeals before the Income Tax Appellate Tribunal, Kolkata. The Bank will contest the appeals and the management has every reason to believe that the order passed by the C.I.T (A) on appeals will be confirmed by the Income Tax Appellant Tribunal. 3. Profits of the Bank The growth in net profits of the Bank from Rs. 80.21 crores in FY 2001-02 to Rs. 165.99 crores in FY 2002-03 (growth of 106.94%) can be mainly attributed to treasury profits, which may not be sustainable in future. The Bank made a profit of Rs. 346.45 crores from sale of investments (treasury income) during FY03. MP: It may be noted that operating profit of the Bank has come from diversified income streams comprising net interest income, profit on sale of securities and other income which account for 176.37%, 67.16% and 34.49% of the total operating profit respectively. Hence, a substantial part of the growth in operating profits is accounted for by net interest income. 4. Non Performing Assets (NPAs) As on 31.03.2003 and 31.12.2003, the net NPAs of the Bank stood at 7.08% and 4.17% of its net advances amounting to Rs. 886.98 crores and Rs. 574.63 crores respectively 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 on page 41of the Information Memorandum. MP: The Net NPAs of the Bank have consistently been declining in percentage terms, from 10.57% as on 31.03.2002 to 7.08% as on 31.03.2003 and further to 4.17% as on 31.12.2003 and 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 over-dues. Besides Debt Recovery Tribunal (DRT) set up for faster settlement of recovery litigation, GoI has enacted The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 enabling FIs and Banks to 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 1811 parties/borrowers involving Rs. 575.71 crores and recovered Rs. 34.60 crores. Thus, the Bank has been taking recourse to all the available methods to recover its over dues from the borrowers. 5. Regional Concentration of the Bank Allahabad Bank has a regional concentration in Eastern & Central parts of the country accounting for approximately 79.19% of all branches in terms of numbers. The regional presence of the Bank may compromise its competitive position vis--vis its national level competitors. MP: The regional presence of the Bank may not be a hindrance to its growth prospects. The deposits of the Bank have grown at a CAGR st of 13.95% to Rs. 28107.40 crores and the advances have grown at a CAGR of 15.74% to Rs.13794.47crores during April 1999 to 31 December 2003. The Bank has 1931 branches and 140 extension counters as on 31.12.2003 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 on page 32 of the Information Memorandum. 6. Decline in Return Ratios Yield on Investment of the Bank (excluding profit on sale of investments) has shown a declining trend from 10.29% in FY 2001-02 to 9.64% in FY 2003. The Yield on Advances of the Bank has decreased from 10.59% to 10.11% 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

Allahabad BankBank. For example, the yield on 10 year GoI security, which was 7.36% as on 31.03.2002, has fallen to 6.21% on 31.03.2003. As compared to this decline of 115 Basis Point (or 1.15%), the yield on investment (domestic) for the Bank has fallen by 65 bps (or 0.65%). 7. Asset Liability Position 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. 9568.49 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 duration and liquidity mismatches. For more details on the Asset Liability position refer to the para Asset Liability Management on page 44 of the Information Memorandum. 8. Credit Risk The Banks main business of lending carries an inherent credit risk, which involves inability or unwillingness of a customer or counterparty to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions. MP: The Bank takes adequate care to minimise such risks by having a well-diversified loan portfolio. 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 5.00 Crores and above are assessed on Risk Assessment Module (RAM) developed with the help of CRISIL and rest are done on Credit Rating Grade Module (CRG) developed in house 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 on page 48 of the Information Memorandum. 9. Asset Concentration The top 5 industries (non-food) accounts for 21.22% and 27.52% of the gross credit exposure of the Bank as on 31.03.2003 and 31.12.2003 respectively. Also, the top ten borrowers of the Bank account for about 14.50% and 9.61% of the gross total advances of the Bank as on 31.12.2003 respectively. 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 31.03.2003 and as on 31.12.2003. 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 on page 35 of the Information Memorandum. 10. Outstanding Litigations against the Bank st As on 31 December 2003, there were 907 cases including writ petitions filed by employees/ ex-employees, suits/ writs by customers and consumer cases with aggregate claim of Rs. 145.50 crores for which no contingent liability has been provided. Out of these, the claim amount was above Rs. 100 lakhs in 18 cases. Further, there are 7instances, wherein criminal cases have been outstanding against the officials of the Bank in connection to the transactions of the Bank. In the above, there are 198 cases filed by the employees/ex-employees or family members of deceased employees against the Bank claiming service benefits such as withdrawal of VRS application and reinstatement in service/challenging order of dismissal from service/non-payment of terminal benefit like gratuity, non payment of family pension/not giving due promotion etc. which are pending before the Supreme Court/various High Courts/ Civil court/ Labour Court /Tribunals etc. None of the above claims relates to pecuniary benefits as well as is not quantified. For more details, investors are advised to refer to para on Outstanding Litigations on page 64 of the Offer Document 11. Net Interest Margin (NIM) The net interest (NIM) of the bank has declined from 3.26% in FY 2002 to 3.14% in FY 2003. MP: The slowdown in growth of net interest income and the related ratios can be mainly attributed to downward trend in the interest rates, which has resulted in the squeeze on the margins of the entire banking sector. Also, the Bank has been able to bring down its average cost of funds by 53 bps (6.83% in FY 2003 from 7.36% in FY 2002). While focusing on its core activity of commercial banking, the Bank is also taking steps to diversify its income stream and enhance the proportion of fee-based income to provide stability to its future income stream. 12. RBIs Annual Financial Inspection Report The Annual Inspection Report of RBI on the financial position of the Bank as on 31.03.2003 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 the Information Memorandum are on the basis of management and audit reports of the Bank. 13. Verma Committee Recommendations The Verma Committee, which carried out a study of the banking sector in 1998 and 1999, had suggested seven parameters for assessing a banks strength/weakness covering three major areas namely, solvency, earning capacity and profitability. Based on the above,

Allahabad BankAllahabad Bank was classified in the third category of banks, which complied with the Capital Adequacy requirement but did not meet five or six of the remaining parameters for the years 1998 and 1999. For an understanding of what the categorization signifies, investors may refer to para Verma Committee Recommendations on page 53 of the Information Memorandum. MP: The Bank has taken focused action to improve its profitability and performance by a multi-pronged strategy involving reduction in NPAs, increased emphasis reduction of the costs, introduction of better system and procedures and improvement it its operational efficiency and reduction in the staff costs. By making stepped recovery effect, the Net NPA as a percentage of Advances has come down to 4.17%. The Bank does not envisage impairment to banks solvency, earning capacity or profitability. 14. Accumulated Losses of the Bank in the past The Bank had accumulated losses aggregating Rs. 532 crores, which were adjusted against its capital on 31.03.1997. MP :The accumulated loss pertained to previous periods and was duly written off under the approval of the Govt. of India vide its letter no. th F. No. 12/2/96 B.O.I. dated 27 March 1997, permitting the Bank to reduce its paid-up capital by adjusting accumulated losses of Rs. 532 crores from its paid-up capital as on March 31, 1997. The Bank has been making net profits consecutively for more than five years and does not have any accumulated loss on its books at present. 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 on page 36 of the 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. 16. Credit Decisions The credit decisions of the Bank are subjected to various risk parameters. MP: In a dynamic environment, all the credit decisions are subjected to various risk parameters. Risk cannot be entirely eliminated and business decisions may suffer if risk angles are over emphasized. Bank is following a prudent policy where identification and mitigation of risk is of utmost importance. Prudential limits are fixed on various financial parameters to implement risk management guidelines. Bank has implemented various Credit Risk Management guidelines given by the Reserve Bank of India. Bank has fixed internal exposure ceilings based on credit rating of the borrowal account to mitigate concentration risk. The entire credit portfolio is divided into different segments which are classified under preferred/ discouraged/ cautious list. Bank has also stipulated criteria for taking exposures in a particular industry. Maximum industry wise stipulated exposure is 10 per cent of total advances except infrastructure and engineering for which special treatment is given. 17. Credit Policy of the Bank The credit policy followed by the Bank may materially influence its credit portfolio. MP: The Bank is having a comprehensive loan policy document. The policy is continuously upgraded in tune with market changes and revision in RBI guidelines. The policy aims at complying with various RBI guidelines regarding credit risk management and ultimately improving overall asset quality, risk bearing capacity and develop strong and healthy credit portfolio of the Bank. The prime focus while sanctioning the loan is integrity/ character coupled with ability to run the business even in adverse business conditions. The thrust of credit expansion is on small and retail advance. While sanctioning the advances, emphasis is given on viability of the activity, security and recoverability of advance. 18. Litigation against the Banks Subsidiaries and Co-Promoted Companies There are 4 cases of claims/suits filed against All Bank Finance Limited, a subsidiary of the Bank and the amount involved as on 31.12.2003 is Rs. 6.94 crores. Further, Income Tax dispute aggregating Rs. 35.23 crores are pending in Appellate Courts against All Bank Finance Limited. For details, ABFL please refer to the para on Litigation on page 66 of the Information Memorandum. 19. Jankiraman Committee Report Janakiraman Committee Report on the securities scam, 1992 has mentioned the name of All Bank Finance Limited, a subsidiary of the Bank in relation to a transaction involving ready purchase and forward sale of certain securities. The report states that the said transaction was more beneficial to the counter-party (i.e. M/s V.B. Desai) than to the subsidiary (i.e. All Bank Finance Limited). As per the report, the loss to the subsidiary in this transaction was not ascertainable at that time as the actual loss that the Company would eventually suffer would depend on the actual prices at which it is able to dispose off the shares presently held by it as also the additional shares, if any, lodged by the broker, after the legal difficulties relating to the delivery are resolved. MP: The outstanding from M/s. V.B. Desai as on 31.03.2003 was Rs.34.56 crores All Bank Finance Limiteds petitioned before the special court constituted under the special courts (Trial of offence relating to transaction securities) Act, 1992. has been decided and the special court had vide its order dated 1.11.2002 held that shares held as security by All Bank Finance Limited are the property of All Bank Finance Limited and they are entitled to transfer and sell the same. The market value of the said securities including accretions as on 5.2.2004 was Rs.56.46 crores out of which a sum of Rs.45.49 crores has been realized. 20. Subsidiary Companys Losses st AllBank Finance Ltd., a wholly owned subsidiary of Allahabad Bank has accumulated losses of Rs. 32.90 crores as on 31 March, 2003. MP: These accumulated losses are mainly on account of 50% provision made against a sum of Rs.34.56 crores due from a broker for sale of securities as per a contract with him. All Bank Finance Limited had taken legal action in the Special Court against the counter

Allahabad Bankparty. All Bank Finance Limiteds petitioned before the special court constituted under the special courts (Trial of offence relating to transaction securities) Act, 1992. has been decided and the special court had vide its order dated 1.11.2002 held that shares held as security by All Bank Finance Limited are the property of All Bank Finance Limited and they are entitled to transfer and sell the same. The market value of the said securities including accretions as on 5.2.2004 was Rs.56.46 crores out of which a sum of Rs.45.49 crores has been realized. The investors are advised to refer the note no. 8 to accounts in para title within Note to Accounts in Part XIII of the Auditors Report in Information Memorandum. 21. Contingent Liabilities of Subsidiaries of the Bank As on 31.03.2003, contingent liabilities of AllBank Finance Limited, a subsidiary of the Bank aggregated Rs. 39.85 crores. MP: The above contingent liabilities have arisen in the normal course of business of the company. 22. Contingent liabilities of RRBs sponsored by the Bank
st

As on 31 March 2003, contingent liabilities of RRBs sponsored by the Bank aggregated Rs.7.76 crores. MP: The above contingent liabilities have arisen in the normal course of business of the RRBs. 23. Accumulated losses of Regional Rural Banks (RRBs) st As on 31 March 2003, the 3 out of 7 RRBs sponsored by the Bank had accumulated losses aggregating Rs. 14.48 crores. MP: The losses pertain to the Sharda Gramin Bank, Tulsi Gramin Bank and Vindhyavasini Gramin Bank. In the current year, all these RRBs have made net profits. The above RRBs are under the restructuring plan of Government of India. The Bank is closely monitoring for the effective implementation of the plan. As a result, the accumulated losses of these RRBs have declined by 48.98% from Rs. 28.38 st st crores as on 31 March 2002 to Rs. 14.48 crores as on 31 March 2003. Moreover, all the 7 RRBs of the Bank taken together have made a consolidated net profit of Rs. 48.91 crores in the financial year 2002- 03. For more details on the RRBs and their financials, investors are advised to refer to the para on Regional Rural Banks on page 50 of the offer document. 24. 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 as stated on page of the Information Memorandum. EXTERNAL RISKS 1. Regulatory restrictions on the Bank and limitations of the powers of bondholders of the Bank There are a number of restrictions as per The Banking Companies (Acquisitions and Transfer of Undertaking ) Act, 1970 and Banking Regulations Act, 1949 (Amended), which impede flexibility of the Banks 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 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 Central Government approval is required.

Allahabad Bankviii. The financial disclosures in the Information Memorandum may not be available to the investors after listing on a continuous basis. 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. ix. 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. No banking company shall pay any dividend on its shares until all its capitalised expenses (including preliminary, organisational expenses, share selling commission, brokerage, amounts of losses and any other item represented by tangible assets) have been completely written off. 2. Sensitivity to the Economy and Extraneous Factors The Banks 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. MP: This is a common risk to every bank and state of the economy of India as of now does not give room for any major effect in the financial market. 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 resourceraising front, the Bank is actively endeavouring to broaden its reach and raise resources through its wide distribution network of 1931branches and 140 extension counters. For more details on the business environment of the Bank, investors are advised to refer to the para Management Discussion and Analysis of Financial Results on page 61 of the Information Memorandum. 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 138 years and does not perceive policy changes to be a major threat. 5. Disinter-mediation in the Financial Markets As the financial markets mature and with growing developments in the capital markets, the trend towards disinter-mediation 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, disinter-mediation brings with it the opportunity for the Bank to expand its fee-based activities. The Bank has been endeavouring to develop a presence in several financial services to earn fee based income by focusing on businesses such as foreign exchange, treasury, investments, cash management, insurance and depository, thus taking advantage of the disinter-mediation phenomenon. 6. Forex Risk Exchange Rate fluctuations may have an impact on the Banks 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 Banks 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 Banks 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 many micro and macro economic factors including the directives of the Reserve Bank of India which are likely to be market driven due to deregulation and thereby may result in increasing pressure on spreads and affect profitability. Interest rate volatility exposes the Bank to an interest rate risk or market risk. Such interest rate risk has a potential impact on net interest income or net interest margin as well as on the market value of the fixed income securities held by the Bank in its investment portfolio. 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 minimize 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.

Allahabad BankThe 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 on page 48 of the Information Memorandum. 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 managing operational risk, the Bank has laid down well-defined systems and procedures. The Bank has set up a separate department to improve the systems and procedures to suit the changing environment. The Bank has also in place a strong internal inspection and audit system. For managing IT related risks, the Information Systems Security Policy is in place. The Bank has an effective HRD department, which formulates and monitors delegation of duties and responsibilities at different level. 9. Financial Statements in the Information Memorandum The financial statements and derived ratios there from contained in the Information Memorandum are prepared/computed as per the permissible accounting practices. While due care has been taken to reflect the true economic reality regarding the financials of the Bank as far as possible, the investors may want to make their own adjustments to the same before arriving at an investment decision in the 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 31.03.2003 and 31.12.2003 was Rs. 938.16 crores and Rs. 1141.28 crores respectively. The present private placement of the Bank aggregates Rs. 200 crores. Cost per share of the bank to the Government of India is Rs.10/ The Book Value of the share as on March 31, 2003 and December 31, 2003 is Rs. 33.76/- and Rs. 39.59/- respectively (face value of Rs. 10/-). During FY 1996-97 the Bank had adjusted accumulated losses of Rs 532 crores, from its paid-up capital as on March 31, 1997 by setting off the same against the paid-up capital as on 31.3.97 AllBank Finance Limited a subsidiary of Allahabad Bank has entered into the following transactions with Allahabad Bank during the last three years: (a) AllBank Finance Limited is availing of following limits from Allahabad Bank: (Rs. in crores) Particulars Limit Outstanding balance March 31,2001 March 31,2002 March 31,2003 Cash credit 11.00 7.74 1.89 NIL (b) The following are other transactions between Allahahbad Bank and All Bank Finance Limited (Rs. In Crores) st 2001 2002 2003 Year ended March 31 Payment by ABFL to Allahabad Bank on account of 0.09 0.06 0.03 reimbursement of salary of officers of Allahabad Bank on deputation to ABFL Rent paid by ABFL to Allahabad Bank 0.20 0.05 0.006 For details of transactions between Allahahbad Bank and Regional Rural Banks (RRBs) sponsored by it, the investors are advised to refer to the para Regional Rural Banks on page 50 of the Information Memorandum. The financial information as contained in PART II under para I to para XIII including the notes to accounts, significant accounting policies as well as auditors qualifications has been duly certified by the statutory auditors of the Bank. As far as possible, these audited numbers have been used for computation or derivation of other financial information contained in the Information Memorandum. However, such other financial information contained in the Information Memorandum except as contained in PART II under para I to para XIII has been certified by the management of the Bank. In terms of recommendations of RBI Working Group on Consolidated Accounting and Other Quantitative Methods to Facilitate Consolidated Supervision (December 2001), all banks, whether listed or unlisted, should prepare and disclose Consolidated Financial Statement (CFS) from the financial year commencing from 1.04.2002 in addition to solo financial statements at present.

Allahabad BankHIGHLIGHTS OF THE BANK Bank with 138 years of existence. The Bank is professionally managed with a track record of profitability The Bank has a large network of branches spread throughout the country that may enable it to raise funds competitively. The domestic network of the Bank stood at 2071 offices as on 31.12.2003, which includes 1931branches and 140 extension counters. The Bank has also opened specialized branches to cater to the needs of industrial finance, trade finance, personal banking, international banking, NRIs and small-scale industries. Capital Adequacy Ratio of 11.15% and 11.76% as on 31.03.2003 and 31.12.2003 respectively, which is above minimum of 9% prescribed by RBI. Product portfolio includes Trade finance, Consumer Loans, Loan through Internet, Demat Services, Kisan Cards etc. Net NPA of to Net Advance Ratio of the bank decreased to 4.17% as on 31.12.03.as compared to 7.08% as on 31.3.03. Diversified loan portfolio spread over many industries with exposure not more than 10% to any single non-food industry. The bank has 257 Retail Boutiques which cater exclusively to consumer finance with outstanding at Rs. 1986.40 crores as on 31.12.03. The bank has set up training colleges at Lucknow and Kolkata to impart modern training to its employees. st Consistent Deposits growth: Deposits have grown by a CAGR of 13.95% during April 1999 to 31 December 2003. st Consistent Advances growth: Gross Advances have grown by a CAGR of 15.74% during April 1999 to 31 December 2003.

10

Allahabad Bank-

PART I

ALLAHABAD BANK
Head Office: 2, Netaji Subhas Road, Kolkata 700 001. Tel.: (033) 22423373, 22420883 Fax.: (033) 22104048, 2242 4048 Website : www. allahabadbank.com. E-Mail : hoipo@allahabadbank.co.in
Constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970

Private Placement of 2000 Unsecured, Non-Convertible, Redeemable Subordinated Bonds (Tier II Bonds Series IV) Face value of Rs. 10,00,000/- each for cash at par aggregating Rs. 200 crores I. GENERAL INFORMATION

Allahabad Bank, the oldest joint stock bank of the country was set up in the historic town of Allahabad on April 24, 1865, by a Group of Europeans. The bank has been constituted as a corresponding new bank in 1969, under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970. The bank is privately placing 2000 Unsecured Redeemable Non-Convertible Subordinated Bonds (Tier II Bonds Series IV) of Face Value Rs. 10,00,000/- each for cash at par aggregating Rs. 200 crores. AUTHORITY FOR THE PRESENT ISSUE This present issue of Bonds is being made pursuant to the Resolutions of the Board of Directors of the Bank, passed at its meeting held on January 14, 2004. Vide Ministry of Finance Govt of India, Department of Economics Affairs (Banking Division) circular letter No. F.No.11/7/2003-BOA dated th 24 November 2003; the earlier provision of obtaining prior approval of the Govt Of India has been dispensed with. REGISTRATION AND GOVERNMENT APPROVALS This present issue of Bonds is being made in accordance with extant RBI guidelines vide its circular no. DBOD. BP.BC.5/21.01.002/9899 dated 08-02-1999 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. 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 the Information Memorandum. The Bank 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 Bank is primarily responsible for the correctness, adequacy and disclosure of all relevant information in the Information Memorandum. The Bank herein also certifies that it has disclosed various material information including those relating to litigation like commercial disputes etc in the Information Memorandum for the said Issue. Further the Bank 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 Bank 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 Bank, any irregularities or lapses in this Information Memorandum. DISCLAIMER STATEMENT FROM THE LEAD ARRANGERS This Information Memorandum (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 to be issued by Allhahabad bank (AB)/ the Issuer/ the Bank). The Memorandum is for the exclusive use of the Institutions to whom it is delivered and it should not be circulated or distributed to third

11

Allahabad Bankparties. 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 Bank has exercised self due-diligence to ensure complete compliance of prescribed disclosure norms etc in this Memorandum. The role of SPA Merchant Bankers Ltd./A.K. Capital Service Ltd. in the assignment is confined to marketing and placement of the bonds on the basis of this Memorandum as prepared by the Bank. The SPA Merchant Bankers Ltd/ A.K. Capital Service Ltd. has neither scrutinized or vetted nor has it done any due-diligence for verification of the contents of this Memorandum. SPA Merchant Bankers Ltd/ A.K. Capital Service Ltd. shall use this Memorandum for the purpose of soliciting subscription(s) from qualified institutional investor(s) in the bonds to be issued by the Bank on private placement basis. It is to be distinctly understood that the aforesaid use of this Memorandum by SPA Merchant Bankers Ltd/ A.K. Capital Service Ltd. should not in any way be deemed or construed that the Memorandum has been prepared, cleared, approved or vetted by SPA Merchant Bankers Ltd./ A.K. Capital Service Ltd; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Memorandum; nor does it take responsibility for the financial or other soundness of this Issuer, its promoters, its management or any scheme or project of this Issuer. SPA Merchant Bankers Ltd./ A.K. Capital Service Ltd or any of its 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 Memorandum. DISCLAIMER STATEMENT FROM THE ISSUER Allahabad Bank accepts no responsibility for statements made otherwise than in the Information Memorandum or any other material issued by or at the instance of Allahabad Bank 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 Applications have been submitted to the National Stock Exchange (NSE)/ Bombay Stock Exchange (BSE) to list the Bond now being privately placed through this Information Memorandum and to seek a permission to deal in such bonds. The Bank shall comply with the requirements of the listing agreement to the extent applicable to it on a continuous basis. It is to be distinctly understood that the submission of this Information Memorandum to NSE/BSE or hosting of this Information Memorandum by NSE/BSE on its Web Site should not be any way be deemed or construed that Information Memorandum has been cleared by NSE/BSE or approved by NSE/BSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Information Memorandum; nor do it warrant that this Issuers 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 Funds, Gratuity Funds, Super-annuation Funds, Commercial Banks including Regional Rural Banks and Co-operative Banks (subject to RBI Permission) 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. All information considered adequate and relevant about the Issuer and the Bank 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. The Bank reserves the right to withdraw the placement prior to closing date in the event of any unforeseen development adversely effecting the economic and regulatory environment. In such event, the bank will refund the subscription money alongwith the interest payable on such subscription money, if any. LISTING The equity shares of the Bank are listed on the Stock Exchange, Mumbai, Calcutta Stock Exchange and the National Stock Exchange of India Limited (NSE). The Bank has made applications to the National Stock Exchange of India Limited (NSE)/ Bombay Stock Exchange (BSE) to list the Bonds to be issued and allotted under this Information Memorandum and to seek a permission to deal in such bonds. The bank shall comply with the requirement of the listing agreement to the extent applicable to it on a continuous basis. The Bank is obliged to update the Information Memorandum and keep the investors informed of any material changes till listing and commencement of trading. MINIMUM SUBSCRIPTION As the Issue of Bonds is being made on private placement basis, the requirement of minimum subscription shall not be applicable.

12

Allahabad BankCAUTIONARY 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 Bonds (Tier II Series IV) aggregating Rs. 200 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 OPENS ON ISSUE CLOSES ON DEEMED DATE OF ALLOTMENT STATUTORY AUDITORS M/s. N.C. Banerjee & Co. Chartered Accountants st Room No.9, 1 Floor, Commerce House, 2, Ganesh Chandra Avenue, Kolkata 700 013. Tel No. (033) 2373200. M/s. Manubhai & Co. Chartered Accountants th 11 Floor , B Wing, Premium House, Near Gandhigram Railway Station, Navarangpura, Ahmedabad 380 009 Tel No. (079) 658 0956. M/s Goel, Garg & Co. Chartered Accountant 102, Skylink, E-588, Greater Kailash II New Delhi 1100 48. Tel No. (011) 641 5777. M/s. T.K. Ghose & Co. Chartered Accountant 6, Kiron Shankar Roy Road, Kolkata 700 001. M/s. Prakash & Santosh Chartered Accountant Rolled Complex, Flat No.8 Upper Floor, Westcott Building, 37/17 Mall Kanpur 208001. M/s. Ramesh C. Agrawal & Co. Chartered Accountant 33, Shiv Charanlal Road, Near Manasrovar Cinema, Allahabad 211 003. LEAD ARRANGERS TO THE ISSUE SPA Merchant Bankers Ltd., 602, Embassy Centre, Nariman Point Mumbai 400021 Tel No. 022-56338880 Fax No. 022-22846318 E-mail: info@spacapital.com A.K. Capital Services Ltd Flat No. N, Sagar Aprtment 6, Tilak Marg, New Dehli - 110001 Tel No. 011-23385704 Fax No. 011-23385189 E-mail akcap@del2.vsnl.net.in 22 March, 2004 th 30 March, 2004 st 31 March, 2004
nd

13

Allahabad BankREGISTRAR TO THE ISSUE Karvy Consultants Ltd Karvy House, 46, Avenue 4, Street no.1, Banjara Hills, Hyderabad 500 034. Phone: 040-23312454 / 23326591 Fax No.: (040) 23311968) TRUSTEES FOR THE BONDHOLDERS IDBI Trusteeship Services Limited th 10 Floor, Nariman Bhawan, 227, Vinay K. Shah Marg, Nariman Point, Mumbai 400 021. Tel No. (022) 56314499 Fax No. (022) 56311776 COMPLIANCE OFFICER Mr. Narendra Singh Deputy General Manager (Finance & Accounts) Allahabad Bank Head Office 2,Netaji Subhas Road, Kolkata 700 001. Tel No. (033) 22420874 Fax No.(033) 22104048 E-mail: hogac@allahabadbank.co.in COMPANY SECRETARY Mr. Peter Barua Allahabad Bank Head Office 2,Netaji Subhas Road, Kolkata 700 001. Tel No. (033)2248 7896, 2248 5685 Fax No. (033)2248 9984 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 Sole Arranger/ Lead Arrangers to the Issue appointed by the Bank, there is/are no other broker(s) appointed by the Bank for the purpose of marketing the Issue. Therefore no person/ firm/ company other than SPA Merchant Bankers Ltd./A.K. Capital Services Ltd., whether member of recognised stock exchange(s) or otherwise, can act as Brokers to the Issue. CREDIT RATING Credit Analysis & Research Ltd (hereinafter referred to as CARE) has assigned a AA rating to the Rs. 200 crores Tier-II Subordinated th Bond Issue of the Bank vide its letter dated 17 March2004. Instruments carrying this rating are judged to be of high quality by all standards. They are also classified as high investment grade. Fitch Ratings India Pvt. Ltd. has assigned AA (Ind)(Double A Ind) rating to the Rs. 200 crores Tier-II Subordinated Bond Issue of the th Bank vide its letter dated 17 March2004. The outlook on the rating is stable. The text of the rating letter from CARE/Fitch Ratings is reproduced on page no.124.

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

14

Allahabad BankOther Credit Rating Rating as on NIL NIL NIL NIL Security Type NIL NIL NIL NIL Amount NIL NIL NIL NIL Rating Code NIL NIL NIL NIL Notes NIL NIL NIL NIL

Other than the above credit ratings for its Bonds 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. CORPORATE GOVERNANCE Allahabad banks corporate policy is based on sound principles of corporate Governance. It holds high the shareholders value while catering also to the need of economy national priorities and corporate growth. Bank believes in high standard of ethical values transparencies and disciplined approach to achieve excellence in all fields of activities. It is also committed to comply with the best international practices coupled with openness and fairness ,which will lead the Bank to enjoy from customers and shareholders a tradition of trust. The Bank seeks to proclaim corporate excellence by Upholding shareholders value within principles of ethics and legal framework Extending best of services to its customers. Proclaiming a free and fair environment for its customers and employees, investors and other sections of the society at large Ensuring a proactive Management free from bias, ensuring fair justice to all sections of the society. II. 1. A B 2. a. b. CAPITAL STRUCTURE As on March 31, 2003 SHARE CAPITAL Authorised Equity Share Capital 150,00,00,000 Equity Shares of Rs. 10/- each Issued Equity Share Capital, Subscribed & Paid-up Equity Share Capital 346700000 Equity Shares of Rs. 10/- each (Includes 246700000 equity shares of Rs 10/- each amounting to Rs.246,70,00,000 held by the Central Government) SHARE PREMIUM ACCOUNT Before the Issue After the Issue (Rs.) Face Value

1500,00,00,000 346,70,00,000 Nil Nil

NOTES ON CAPITAL STRUCTURE (1) Share Capital history (since nationalisation on July 19, 1969) (Rs. in crores) Year ended December 31, 1970 December 31, 1984 December 31, 1985 December 31, 1986 March 31, 1989 March 31, 1992 March 31, 1993 March 31, 1994 March 31, 1995 March 31, 1996 March 31, 1997 March 31, 2003 Increase/ (Decrease) in capital 0.12 14.83 10.00 31.50 50.00 65.00 90.00 356.20 160.00 (532.00) 100.00 Mode Acquisition of Share Capital on Nationalisation by GoI Contribution to Capital by GoI Contribution to Capital by GoI Contribution to Capital by GoI Contribution to Capital by GoI Contribution to Capital by GoI Contribution to Capital by GoI Contribution to Capital by GoI Contribution to Capital by GoI Contribution to Capital by GoI Adjustment of Accumulated losses against capital Fresh issue of capital (public issue) 346.70 1.17 16.00 26.00 57.50 107.50 172.50 262.50 618.70 778.70 246.70 Paid-up capital 1.05

2) The contribution of capital by the Government of India has been in form of re- capitalization bond. 3) Ministry of Finance has given their approval for adjustment of accumulated losses against capital vide letter F.No.12/2/96-BOA dated March 27, 1997.

15

Allahabad Bank4) The bank made a public issue of 10 crores equity shares of Rs.10/- each for cash at par aggregating Rs. 100 crores. The issue rd st opened 23 October,2002 and closed on 31 October, 2002. The shares are listed on National Stock Exchange, Mumbai Stock Exchange and Calcutta Stock Exchange. 5) The GoI/Directors/Lead Managers have not entered into any buy-back and/or standby arrangements for purchase of the Bonds of the Bank with any person/ Institutions. 6) The Bank has not availed any Bridge Loan against the proceeds of this placement. (8) The number of shareholder of the bank were 207164 as on 31 March, 2003. (9)LIST OF TOP 10 SHAREHOLDERS AND THE NUMBER OF SHARES HELD BY THEM (as on December 31, 2003): Sr. No. Name of Shareholder Number of Shares Held % Shareholding 1. PRESIDENT OF INDIA 246700000 71.16 2. GENERAL INSURANCE CORPORATION LIMITED 1000000 0.29 3. UNITED BANK OF INDIA 797750 0.23 4. DR WASIF ELAHI 727293 0.23 5. VIDEOCON INTERNATIONAL LIMITED 700000 0.20 6. UTI BANK LIMITED 617275 0.18 7. ACCORD CAPITAL MARKETS LIMITED 85500 0.17 8. CENTRAL BANK OF INDIA 579986 0.17 9. SHANKAR LAL SARAF 507000 0.15 10. ACCORD CAPITAL MARKETS LIMITED 475000 0.14 10) SHAREHOLDING PATTERN (as on December 31, 2003): Sr. No. Category A Promoter's holding 1. Promoters -Indian Promoters (Govt of India) -Foreign Promoters 2. B. 3. a. b. c. 4. a. b. c. d. e. Persons acting in concert Sub Total * Non-Promoters Holding Institutional Investors Mutual Funds & UTI Banks, Financial Institutions, Insurance Companies (Central/ State Govt. Institutions/ Non Government Institutions) Foreign Institutional Investors Sub Total * Others Private Corporate Bodies Indian Public NRIs/ OCBs Trusts / H U F Clearing Members (NSDL/CDSL) Sub Total Grand Total Number of Shares Held 246700000 ---------246700000 ------3936068 --3936068 9219354 85188033 87030 405788 1163727 96063932 346700000 % Shareholding 71.16 --------71.16 -----1.13 --1.13 2.66 24.57 0.03 0.12 0.33 27.71 100.00 % Shareholding 71.16 ----71.16 --0.04 1.30 --1.34
st

SHAREHOLDING PATTERN (as on March 31, 2003): Sr. No. Category A Promoter's holding 1. Promoters -Indian Promoters (Govt of India) -Foreign Promoters 2. B. 3. a. b. c. Persons acting in concert Sub Total Non-Promoters Holding Institutional Investors Mutual Funds & UTI Banks, Financial Institutions, Insurance Companies (Central/ State Govt. Institutions/ Non Government Institutions) Foreign Institutional Investors Sub Total

Number of Shares Held 246700000 ----246700000 ---150000 4509302 --4659302

16

Allahabad Bank4. a. b. c. d. e. Others Private Corporate Bodies Indian Public NRIs/ OCBs Trusts / H U F Clearing members (NSDL/CDSL) Sub Total Grand Total 7048350 87697872 32598 247035 314843 95340698 346700000 2.03 25.30 0.01 0.07 0.09 27.50 100.00

1) No individual / Entity other than Government of India holds more than 1% of the shares of the bank. 2) Total foreign holding including NRI/OCB is 0.03% of the total equity. III. TERMS OF THE PRESENT ISSUE Allahabad Bank Proposes to issue Bonds that are unsecured non-convertible redeemable subordinated debts and (Tier II Bonds Series IV) of Rs. 10,00,000/- each for cash at par aggregating Rs. 200 crores (hereinafter referred to as The Bonds). NATURE & STATUS OF THE BONDS The Bonds are to be issued in the form of Unsecured Redeemable Non-Convertible Subordinated debts in the nature of Debenture. The Bonds will constitute direct, unsecured and subordinated obligations of the Bank, ranking pari passu with the existing subordinated debt of the Bank and subordinated to the claims of all other creditors and depositors of the Bank as regards repayment of principal and interest by the Bank. The Bonds shall be free of any restrictive clauses and shall not be redeemable at the initiative of the holder or without the consent of the Reserve Bank of India (RBI). INSTRUMENT & ISSUE DETAILS AT A GLANCE Issue Size Rs. 200 crores. Instrument Unsecured Redeemable Non-Convertible Subordinated Bonds in the nature of Debenture. Instrument Form In Dematerialised Form AA by CARE & AA (Ind)(Double A Ind) by Fitch Credit Rating Face Value Rs. 10,00,000/- per Bond Issue Price Rs. 10,00,000/- per Bond Minimum Application 10 (Ten) Bonds (Rs.1,00,00,000) and in multiples of 10 Bonds (Ten) (Rs. 1,00,00,000) thereafter Redemption/ At par at the end of 99 Months from the Deemed Date of Allotment Maturity Coupon Rate 5.90% p.a. Interest Payment Annually Listing Proposed on the National Stock Exchange of India Limited (NSE) & BSE Trustee IDBI Trusteeship Services Limited has been appointed by the Issuer Bank to act as Trustees for the bondholder(s) Interest on At the coupon rate (subject to deduction of tax at source, as applicable) from the date of realization Application Money of cheque(s)/ demand draft(s) upto one day prior to the Deemed Date of Allotment nd Issue opening date 22 March2004 th Issue closing date 30 March2004 Note : The Bank reserves the right to change the issue time table in consultation with the Arrangers and such change if any, will be communicated to the investors by the Bank. Consequently the Deemed Date of Allotment may be also be changed. OBJECTS OF THE BONDS The funds are proposed to be raised through private placement of bonds for the following reasons : 1. To provide long term funds for projected business growth of the bank. 2. To enhance the Tier II capital to meet the growth in Risk Weighted Asset and further strengthen the capital adequacy ratio. 3. To have an appropriate mix of Tier I and Tier II capital. AUTHORITY FOR THE ISSUE th The present issue is being made pursuant to the resolution of the Board of Directors of the Bank passed at its meeting held on 14 January , 2004. KEY TERMS Face Value & Issue Price Each Bond has a face value of Rs. 10,00,000/- and are issued at par i.e. Rs. 10,00,000/-. Minimum Application The application should be for a minimum of 10 Bond (Rs. 1,00,00,000/-) and in multiples of 10 Bond (Rs. 1,00,00,000/-) thereafter. Interest on Application Money Interest at the respective coupon rate i.e. @ 5.90% p.a. (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

17

Allahabad Bankmoney 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 refunded 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. Interest on the Bonds The Bonds shall carry interest at the coupon rate i.e. @ 5.90% p.a. (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 st certificate will be issued by the Bank) on the outstanding amount of the principal till redemption. Interest will be paid annually on 31 st March, each year throughout the tenure of the Bonds till final redemption. The first interest payment shall be made on 31 March, 2005 and the last interest payment for the broken period will be made at the time of final redemption of the Bonds on pro-rata basis. 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 above 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 st Interest on the Bonds shall accrue to the Bondholder(s) from 31 March, 2004, 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 changed (pre-poned/ postponed), the Deemed Date of Allotment may also be changed (pre-poned/ postponed) by the Bank at its sole and absolute discretion. Depository Arrangements The Bank has appointed Karvy Consultants Ltd.- (Address Karvy House, 46, Avenue 4, Street no.1, Banjara Hills, Hyderabad 500 034. Tel. No: (040) 23312454, 23320751 Fax No.: (040) 23311968) as Registrars & Transfer Agent for the present bond issue. The Bank is in the process of entering into Tripartite Agreement for depository arrangements with National Securities Depository Limited (NSDL) /Central Depository Services (India) Limited (CDSL) for issue and holding of Bonds in dematerialised form. 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. 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 Authorities, 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 only and adequate funds for the purpose shall be made available to the Registrar to the Issue by the Bank. Terms of Payment The full face value of the Bonds applied for is to be paid along with 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.

18

Allahabad BankPayment of Interest The interest will be payable 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. 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 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 Company Secretary, Allahabad Bank, Registered/ Head Office, 2 Netaji Subhas Road, Kolkata 700 001 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. Bondholder(s) should also consult their own tax advisers on the tax implications of the acquisition, ownership and sale of Bonds, and income arising thereon. 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 Boards are free from restrictive clause and are not redeemable before maturity at the instance of the holder or without the consent of the Reserve Bank of India. Redemption The face value of the Bonds will be redeemed at par, at the end of 99 Months (8 Years 3 Months) from the Deemed Date of Allotment. 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. On the Bank dispatching the redemption warrants to such Beneficiary(ies) by registered post/ courier, 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 Banks 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 The Record 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 the 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 buyers 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. This shall be the list, which shall be considered for payment of interest or repayment of principal amount, as the case may be.

19

Allahabad BankTrustees 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 on page 123 of the Information Memorandum. The Bank and Trustees will enter into a Trustee Agreement, inter alia, specifying the powers, authorities and obligations of the Trustee and the Bank. The Bondholder(s) shall, without further act or deed, be deemed to have irrecoverably given their consent to the Trustee or any of their agents or authorized officials to do all such act, deed, matters and things in respect of or relating to the Bonds as the Trustees may in their absolute discretion deemed necessary or required to be done in the interest of the Bondholder(s). Any payment made by the bank to the Trustees on behalf of the Bondholder(s) shall discharged the Bank protanto to the Bondholder(s). 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 Bank 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. b. c. d. e. f. g. Number of bonds applied for is less than the minimum application size; Applications exceeding the issue size; Bank account details not given; Details for issue of bonds in electronic/ dematerialised form not given; PAN/GIR and IT Circle/Ward/District not given; 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 Sole Arranger/ 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 50 Bonds and in multiples of 10 Bonds 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 Bankers to the Issue. The name of the applicants bank, type of account and account number must be filled in the Application Form. This is required for the applicants own safety and these details will be printed on the refund orders and interest/ redemption warrants. Since the application are of value more than Rs.50000/- the applicant or in the case of an application in joint name, 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 139 A (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 No.. 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 purposes. Application Forms without this information will be considered incomplete and a liable to be rejected. Applications may be made in single or joint names (not exceeding three). In the case of joint applications, all the payment 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 Bank 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. Public/ Private/ Religious/ Charitable Trusts, Provident Funds and Other Super-annuation Trusts and other investors requiring approved security status for making investments. Investors are advised to exercise due caution in selecting the appropriate option for which they wish to apply. Application Form must be accompanied by either demand draft(s) or cheque(s) drawn or made payable in favour of Allahabad BankBond Series IV 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 or Mumbai.

20

Allahabad BankInvestors in centers which do not have any banks, including a co-operative banks, which is a member or sub-member of the Bankers Clearing House located at any of the centers mentioned above, will be required to make payments only through demand drafts payable at any one of the above centers. Cash, outstation cheque, money orders, stock invest or postal order shall not be accepted by the Bank in respect of the subject bonds. The Bank assumes no responsibility for any application / cheque / demand draft lost in transit. An applicant should submit only one application form (and not more than one) for the total number of Bonds applied for. Two or more applications in single or joint names will be deemed to be multiple applications if the sole and / or first applicant is one and the same. The Bank reserves the right to accept or reject, in its absolute discretion, any or all multiple applications. No separate receipts shall be issued for the application money. However, the Bankers to the Issue at their Designated Branch (es) receiving the duly completed Application Forms will acknowledge the receipt of the applications by stamping and returning the acknowledgement slip to the applicant. Applications shall be deemed to have been received by the Issuer Company only when submitted to Banker to the Issue at their 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 present issue being a private placement, only those persons who are specifically addressed through a communication directly are eligible to apply for the bonds. No other shall apply. The categories of investors to whom a communication may be addressed directly by name are given hereunder. 1. Scheduled Commercial Banks; 2. Financial Institutions; 3. Insurance Companies; 4. Primary/ State/ District/ Central Co-operative Banks; 5. Provident, Gratuity and Super-annuation Funds; 6. Regional Rural Banks; 7. Mutual Funds; 8. Companies, Bodies Corporate authorized to invest in bonds; 9. Port Trusts. 10. Trust and Association of Persons. 11. Individuals (excluding minors and NRI, Foreign Nationals and Partnerships). Applications under Power of Attorney A certified true copy of the power of attorney and/or a copy of the approval of the relevant authority as the case may be, along with the names and specimen signature(s) of all the authorized signatories must be lodged along with 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. Applications by Provident Funds, Super-annuation Funds and Gratuity Funds The Government of India has permitted Provident, Super-annuation and Gratuity Funds, subject to their assessment of the risk-return prospectus, to invest up to 30 per cent in the Bonds and securities issued by public sector units (PSU) including PSU banks. 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. 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.

21

Allahabad BankNotices 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 news paper in Kolkata and/or will be sent by registered 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 at its Head /Registered Office 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 Articles. 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, with its subsidiaries and affiliates and other banks, financial institutions, credit bureaus, agencies, statutory bodies, as may be required and neither the Bank or its subsidiaries and affiliates 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 under section 117C of the Companies Act, 1956. TAX BENEFITS Goel Garg & Co., N.C. Banerjee & Co., Manubhai & Co., Ramesh C. Agrawal & Co, T. K. Ghose & Co., Prakash & Santosh have th advised the Bank vide their report dated 18 February, 2003, that following tax benefits would be available to the Bank and its Investors under the provision of current Direct Laws. A. TO THE BANK 1. In terms of section 10(15) of the Income Tax Act, 1961 interest on certain securities/ bonds as notified by Government of India is exempt from tax. 2. As per the provisions of Section 10(23G) of Income Tax Act, 1961 any income by way of dividend ( other than dividend mentioned in st Section 115-O), interest or long term capital gain of the Bank arising from investments made on or after the 1 day of June 1998 by way of shares or in long term finance, in any enterprise or undertaking where is wholly engaged in Business referred to in subsection (4) of Section 80- IA; Housing project referred to in subsection (10) of Section 80-IB or a hotel project or a hospital project which has been approved by the Central Government on application made by it in accordance with the rules made in this behalf and which satisfies the prescribed conditions, is exempt. 3. Income earned by way of dividend from domestic companies is exempt under section 10 (34) of the Income Tax Act, 1961 with effect from 01-04-2004. 4. Income specified under Section 10(35) of Income Tax Act, 1961 i.e. i. ii. iii. Income received in respect of the units of a Mutual Fund specified under clause (23D). Income received in respect of the units from the Administrator of the specified undertakings; Income received in respect of units from the specified company is not taxable in the hands of Banks from 01-04-2004.

5. As per the provisions of Section 36 (1) (vii) of the Income Tax Act, 1961, any bad debts or part thereof of the Bank which is written off as irrecoverable in the books of accounts of the Bank is allowable as deduction subject to the condition that when the Bank claims deduction under sub clause (viia) of section 36 (1) the amount of the deduction relating to any such bad debts or part thereof shall be limited to the amount by which such debts or part thereof exceeds the credit balance in the provision for bad and doubtful debts account under this sub-clause. 6. As per the provisions of Section 36 (1) (viia) of the Income Tax Act, 1961, in respect of any provision for bad and doubtful debts made, the Bank is entitled to a deduction not exceeding : a) 7.5% of the total income computed before making any deduction under this clause and chapter VIA ; b) 10% of the aggregate average advances made by the rural branch of the Bank computed in the prescribed manner; 6.1 However, the Bank at its option can claim, in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, of an amount not exceeding 10% of the amount of such assets shown in the books of accounts of the Bank on the last day of the previous year. The option is available upto year ending 31-03-2005 relevant to Assessment Year 2005-06.

22

Allahabad Bank6.2 Further with effect from 01-04-2004 the Bank at its option can claim further deduction in excess of the limits specified in the foregoing provisions for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government. In order to avail this benefit the Bank should disclose such income in the return of income under the head Profit and gains of business or profession. 7. As per the provisions of Section 43 D of the Income Tax Act, 1961, the interest income of the Bank in relation to such categories of Bad or Doubtful debts as prescribed in Rule 6EA of the Income Tax Rules, 1962 shall be chargeable to Tax in the year in which it is credited by the Bank to its Profit and Loss Account or in the year in which it is actually received by the Bank, whichever is earlier. As per the second provison to Section 48 of the Income Tax Act, 1961, the Long Term Capital Gains of the Bank arising on transfer of capital assets other then Bond or Debentures (not being capital indexed bond issued by Government) will be computed after indexing the cost of acquisition and improvement and same would be charged to tax at concessional rate of 20% plus applicable surcharge as per Section 112 of the Income Tax Act, 1961. In respect of long term capital gains arising from the transfer of the listed securities or units, tax shall be chargeable at the rate of 10% of the amount of capital gains plus applicable surcharge before giving effect to the provisions of second proviso to section 48 i.e. without indexing the cost of acquisition, if the Bank , opts for the same. As per the provisions of Section 54EC of the Income Tax Act, 1961 , and subject to conditions specified therein, the Bank is eligible to claim exemption from the tax arising on transfer of long term capital assets, by making investments of whole or part of capital gains in certain notified Bonds, within six months from the date of transfer of the capital assets. If only a portion of capital gain is invested , then the exemption is proportionally available.

8.

9.

10. As per the provisions of Section 54ED of the Income Tax Act, 1961 , and subject to conditions specified therein, capital gains arising from the transfer of investment held as long term capital assets, being listed securities or unit is fully exempt from tax if the bank invests within a period of six months after the date of such transfer , in equity shares forming part of an eligible issue of capital as defined in clause (i) to Explanation in the above section. If only a portion of capital gain is invested , then the exemption is proportionally available. B. TO THE INDIVIDUAL INVESTORS 1. As per the provisions of Section 54EC of the Income Tax Act, 1961 , and subject to conditions specified therein, Individual is eligible to claim exemption from the tax arising on transfer of long term capital assets, by making investments of whole or part of capital gains in certain notified Bonds, within six months from the date of transfer of the Bonds of the Bank. If only a portion of capital gain is invested , then the exemption is proportionally available 2. As per the provisions of Section 54ED of the Income Tax Act, 1961 , and subject to conditions specified therein, capital gains arising from the transfer of Bonds of the Bank held as long term capital assets, being listed securities or unit is fully exempt from tax if the Individual invests within a period of six months after the date of such transfer , in equity shares forming part of an eligible issue of capital as defined in clause (i) to Explanation in the above section. If only a portion of capital gain is invested , then the exemption is proportionally available. 3. As per the provisions Section 54F of the Income Tax Act, 1961 long term capital gains arising on transfer of Bonds of the Bank in the case of Individuals shall be exempt if the net consideration is invested in purchase of residential house within a period of one year before or two years from the date of transfer or the net consideration is invested in the construction of a residential house within a period of three years from the date of transfer. Where only a part of net consideration is invested then the exemption is proportionally available. The exemption is available subject to other conditions specified in that section. 4. As per the provisions of the Section 112 of the Income Tax Act, 1961 where the total income of any assessee includes any long term capital gains on transfer of Bonds of the Bank, the same is subject to the concessional rate of 20% plus applicable surcharge . 5. No wealth tax is payable in respect of investment in Bonds of the Bank C. TO THE MUTUAL FUNDS As per the provisions of Section 10(23D) of the Income Tax Act, 1961 interest income from investment in Bonds of the Bank or income by way of short term or long term capital gains arising from transfer of such bonds of the bank earned by the Mutual Fund registered under the SEBI Act, 1992 or regulation made there under, Mutual Fund set up by the Public Sector Banks or Public Financial Institutions and Mutual Fund authorized by the Reserve Bank of India would be exempt from Income Tax subject to the conditions as the Central Government may by notification in the official gazette specified in this behalf. IV. PARTICULARS OF THE ISSUE

OBJECTS OF THE ISSUE The funds are proposed to be raised through private placement of bonds are required for the following reasons : 1. To provide long term funds for projected business growth of the bank. 2. To enhance the Tier II capital to meet the growth in Risk Weighted Asset and further strengthen the capital adequacy ratio.

23

Allahabad Bank3. To have an appropriate mix of Tier I and Tier II capital. Capital Adequacy Position of the Bank The Capital Adequacy Ratio (CAR) of the Bank as on March 31, 2003 and December 31, 2003 was 11.15% and 11.76% respectively as against the RBI stipulation of 9.00%. Details of capital vis--vis risk weighted assets are as under: (Rs. in crores) Particulars 31.12.2003 31.3.2003 31.3.2002 31.3.2001 31.3.2000 31.3.1999 Capital Funds Tier I Capital Paid up Equity Capital 346.70 346.70 246.70 246.70 246.70 246.70 Less: investment in subsidiary 27.21 27.21 24.03 26.27 26.78 60.00 319.49 319.49 222.67 220.43 219.92 186.70 Reserves & Surplus 670.78 467.65 459.20 424.36 372.14 294.90 Total Tier I Capital 990.27 787.14 681.87 644.79 592.06 481.60 Tier II Capital Revaluation Reserve 104.12 104.46 104.93 105.44 105.96 106.52 General Provisions 53.08 29.04 34.58 21.77 0.27 -Subordinated Debt 292.97 336.97 301.29 226.61 226.61 101.61 Investment Fluctuation Reserve 123.81 123.81 41.48 12.14 35.48 70.76 Total Tier II Capital 573.98 594.28 482.28 365.96 368.32 278.89 Total Capital fund 1564.25 1381.42 1164.15 1010.75 960.38 760.49 Risk weighted Assets 13306.13 12394.96 10962.61 9627.04 8344.73 7325.48 Capital Adequacy Ratio (%) 11.76 11.15 10.62 10.50 11.51 10.38 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 came out with a public issue of equity shares in October 2002. The issue opening date was Oct 23 2002 and the issue closing date was Oct31 2002. The issue comprised of 10,00,00,000 equity shares of Rs. 10/- each for cash at par aggregating Rs. 1,00,00,00,000/- of which Rs.10 croes was earmarked for the employees of the bank. The Bank has also raised Tier II Capital by way of Private Placement of unsecured, redeemable bonds in the nature of Promissory Notes to augment capital adequacy as under: Issue Year of Deemed Issue Amount Tenure Credit Coupon Rate Redemption Series Placement Date of (Rs. in (in Rating (% p.a., Date Allotment Crores) months) annually) I 1999 16.12.99 125.00 88 NA 12.30 15.04.07 II 2001 15.10.01 95.00 66 NA 9.80 14.04.07 III 2003 31.03.03 100.00 85 NA 7.00 30.04.10 V. BANK & MANAGEMENT

HISTORY & BACKGROUND OF THE BANK Allahabad Bank, the oldest joint Stock Bank of the country, was set up in the historic town of Allahabad on April 24, 1865 by a Group of Europeans. At that juncture, in India, organised industry, trade and banking had just started taking shape. The Bank was started with a subscribed capital of Rs. 2 lacs and by the end of 19 century, it had branches at Jhansi, Kanpur, Lucknow, th Bareilly, Nainital, Kolkata and Delhi. In the early 20 century, with the start of Swadeshi Movement, Allahabad Bank witnessed a spurt in deposits and the reserves increased to over Rs. 30 lacs by 1910. In 1920, the Bank was taken over by P&O Banking Corporation at a bid price of Rs.436 per share. The Head Office and the Registered Office of the Bank were then shifted to Kolkata in 1923 for business considerations and operational convenience. In 1927, the Bank went into the fold of Chartered Bank that acquired the controlling interest in the P&O Banking Corporation. The Bank passed through the critical period of Great Depression during the early thirties, which caused a general stagnation in the global markets, without sparing the Indian Banking Industry. The Bank dovetailed its functioning in accordance with the exigencies of the Five Year Plans, which were started in 1951. In the post th independence era, Allahabad Bank maintained a steady growth and by 1964, the Bank had opened its 100 branch. On July 19, 1969, along with 13 other major commercial banks, Allahabad Bank was nationalised. At the time of nationalisation, the Bank had a network of 151 branches, deposits of Rs.114 crores and advances of Rs.82 crores to its credit. With nationalisation, the Bank spread its activities in the rural, unbanked and under-banked areas. At the end of 1979, the branch network of the Bank increased to 875 with the share of rural branches being 46.40%. Deposits of the Bank grew to Rs.735 crores at the end of 1979 while advances rose to Rs.407 crores. In order to bolster the rural economy, a plethora of Social Banking Schemes was introduced. Thus, Lead Bank Scheme (1969), Regional Rural Banks (1975), Twenty-point Programme (1975), New 20-point Programme (1981), Integrated Rural Development Programme
th

24

Allahabad Bank(1980) etc. were introduced in the Indian Banking industry. Directed lending to priority sectors, weaker sections, Scheduled Castes/ Scheduled Tribes and Other Backward Castes were given a greater thrust and the Bank responded to this initiative and increased its st presence in these areas also. As on 31 March, 2003 the Banks priority sector credit is at Rs. 5628.77 crores, forming 42.29% of net bank credit and agriculture credit is over Rs. 2250.47 crores constituting 16.91% of net credit. The Bank opened its 1000 branch on April 3, 1982. The Bank had also started opening specialised branches such as Industrial Finance Branches, International Branches, SSI Finance Branches, Recovery Branches etc. The Bank made a foray into merchant banking activity in 1984 and subsequently transferred the merchant banking activities to AllBank Finance Limited, a wholly owned subsidiary, in 1991. AllBank Finance Limited was registered as a Category-I Merchant Banker with SEBI and undertook activities such as project advisory services, loan syndication, issue management, leasing, trusteeship and portfolio investment services. Consequent upon the SEBI Rules and Regulations notified on December 9, 1997 for segregation of Capital Market and fund based activities into separate entities, the Company surrendered its Merchant Banking registration with SEBI with effect from July 1, 1998 and got itself registered as a NBFC with RBI on August 21, 1998. In October 1989, United Industrial Bank Limited was amalgamated into Allahabad Bank. One of the major challenges faced by the Bank was the accumulated losses incurred by it for three consecutive years, i.e. from 1992-93 to 1994-95, owing to the adoption of prudential accounting norms, in line with RBI directives. To overcome this situation and to strengthen the bank in various functional areas, a major revamping exercise was initiated. The Bank put a greater thrust on areas like technological up-gradation & modernization, improvement in customer service, credit management with focus to reduce non-performing assets etc. The Bank staged a turnaround in 1995-96 with a net profit of Rs.5.62 crores, which increased to Rs. 129.21 crores in 1997-98 and then to Rs. 135 crores in 1998-99. It had launched Gold Trading with the approval of Reserve Bank of India for import of gold under open general license. The Bank became the first nationalised bank in Eastern India to become a depository participant of National Securities Depository Limited (NSDL) to offer demat and related services and initiated Flexi-fix Deposit Scheme to mobilise resources. The Bank also introduced Kisan Card to facilitate agriculture related activities as well as to meet the domestic requirements of farmers. In order to boost credit off-take, the Bank has launched user-friendly and attractive products namely, consumer finance, car finance, educational loans, personal loan etc. The growth of the Bank over the years is given in the table below: (Rs. In crores) Year No. of branches Paid-up capital Deposits Advances 1865 1 0.02 0.01 0.01 1890 4 0.04 0.70 0.53 1910 15 0.20 5.53 4.66 1930 37 0.36 11.36 5.21 1950 58 0.46 27.16 14.97 1970 211 1.05 140.70 95.95 1989 1509 57.50 4,034.04 1,831.77 1999 1884 246.70 15,510.35 7,057.07 2000 1893 246.70 17642.10 8240.06 2001 1903 246.70 20106.02 10315.80 2002 1914 246.70 22665.94 11815.01 2003 1923 346.70 25463.38 13486.94 Dec 31, 2003 1931 346.70 28107.40 14674.93 Present Status As on 31.12.2003, the Bank has 1931 branches, comprising 959 rural, 322 semi-urban, 380 urban and 270 metropolitan, which formed 49.66%, 16.68%, 19.68% and 13.98% of the total respectively. The branches include 45 specialised branches (i.e. 4 Industrial Finance Branches, 17 SSI Finance Branches, 6 International Branches, 6 Recovery Branches, 1 NRI Branch, 1 Industrial Finance-cumInternational Branch, 2 Specialised Personal Banking Branch, 1 Specialised Savings Bank Branch, 3 Quick Collection Service Branch and 2 Trading Finance Branch, 1 Specialised commercial agriculture, 1 Forex cum Treasury Management) besides 16 Service Branches. The Bank has 140 Extension Counters. A number of Banks branches and offices are housed in the Banks owned premises situated at prime locations in major cities of the country. Structural Reorganisation of the Bank was completed with switch over from 4-tier structure to 3-tier structure by abolishing Zonal Office Tier for improving efficiency and productivity, boosting profitability by reducing operating costs and delay in decision making process. At present, the bank has 48 Regional Offices. It has 2 Staff Training Colleges and 4 Staff Training centers for imparting training and upgradation of knowledge base of Human Resources. The Bank has been fulfilling its responsibilities under the Service Area Approach. The Bank has sponsored 7 Gramin Banks (RRBs) (6 in Uttar Pradesh and 1 in Madhya Pradesh) and has Lead Bank responsibilities in 17ditricts (13 in Uttar Pradesh, 2 in Jharkhand and one each in Madhya Pradesh and West Bengal). The Bank has been entrusted with State Level Bankers Committee (SLBC) convenership in the newly formed state of Jharkhand. The Bank is continuing its utmost endeavor for economic uplift-ment of the state through its various developmental programmes. The Bank has set up a residential institute in the name of Birsha Munda Institute of Entrepreneurship Development at Hazaribagh as a part of promotional measures for enhancement of flow of bank credit in Jharkhand State. The institute has so far imparted training to 882 entrepreneurs, a majority of who are women, to take up various economic activities. The Bank came out with its maiden IPO in the month of October, 2002. The at par public issue evolve and overwhelming response from the retail investors. The Bank mobilized more than Rs.370/- crores against the offer size of Rs. 100/- crores. The number of
th.

25

Allahabad Bankapplications from retail investor to the issue exceeded 2.23 lacs. After the issue, the holding of the Govt. of India came down to 71.16%. Capital Adequacy Ratio has been improved to 11.15% as on 31.3.2003 due to increase in capital through maiden public issue. The Banks performance was noticeable in implementation of Kisan Credit Card launched on 1.9.1998 to ensure easy and timely supply of credit to farmers for their short-term working capital requirements for agricultural activities and also for domestic requirements e.g. education, consumable items, medical expenses etc. of its existing clients. The Bank received third prize for exceeding the disbursement target in 2000-01. During 2002-03, the Bank issued 98,029 cards as against the target of 60,000. The Bank has issued 3,64,642 Kisan st Credit Card upto 31 December 2003 since its inception involving a credit outlay of Rs.1023.52 crores. With the Kisan Credit Card a new feature of Group Personal Accident Insurance cover has been provided. The Bank has been giving much importance to Human Resource Development. It has sent some Officers for overseas training also. Computerisation and automation of operations continued to receive focused attention from the Bank. The Bank has 923 computerised st branches / extension counters which covers about 45% of total branches/extension counters as on 31 December, 2003 in addition to 71 ATMs. The bank launched tele-banking in 13 branches at 8 different center and Internet Banking in 5 branches. The Bank has also installed its own VSAT based INTRANET & WEBSITE. The Bank has computerised 76.30% of its business as at September, 2003. The Bank has undertaken strategic planning in order to become one of the strongest bank in the country in near future through both product and geographical diversification. For this purpose tie up arrangement have been made / being negotiated with various insurance companies and mututal funds such as ICICI Prudential, National Insurance Company, Life Insurance Corporation, EXIM Bank and Unit Trust of India. As a precursor to opening overseas branches, the bank has plan to open an Offshore Banking unit at Noida.

26

Allahabad BankVI. OVERVIEW OF THE BANKING SECTOR Structure of Indian Banking Industry

RBI

Co operative Banks

Commercial Banks

Regional Rural Banks

Rural

Urban / Primary

Scheduled

Non - Scheduled

Scheduled

Non-Scheduled

SBI and associates

Nationalized Banks

Private Sector Banks

Foreign Banks

Short Term Structure STCBs CCBs PACS

Long Term Structure SCARDB s PCARDB s

The formal banking system in India comprises the Reserve Bank of India, commercial banks, regional rural banks and the co-operative banks. In the recent past, private non-banking finance companies also have been active in the financial system, and are being regulated by the RBI. Scheduled Commercial Banks (SCBs) The scheduled commercial banks (SCBs) comprise of the following: Public Sector Banks (PSBs): The Banking sector in India has been characterized by the predominance of PSBs. The PSBs had 46,118 branches (SBI & Associates: 13,434; nationalised banks: 32,684) as on 30.06.2002. The aggregate assets of all PSBs stood at Rs. 11,55,736.77 Crores at end FY02 accounting for 75.27% of assets of all SCBs in India. The PSBs large network of branches enables them to fund themselves out of low-cost deposits. PSBs account for 81% of deposits, 74.43% of advances, and 77.63% of income, of all scheduled commercial banks at end FY02, thus clearly demonstrating their dominance of the Indian banking sector. Private Sector Banks: In July 1993, as part of The Banking sector reform process and as a measure to induce competition in The Banking sector, the RBI permitted entry by the private sector into The Banking system. This resulted in the introduction of 9 private sector banks. These banks are collectively known as the `new private sector banks, and operated through 803 branches at end FY01. With the merger of Times Bank Limited into HDFC Bank Limited in February 2000, there are only eight `new private sector banks at present. At end FY02, the total assets of private sector banks aggregated Rs. 2,67,679 Crores and accounted for 17.43% of the total assets of all SCBs. Although the share of private sector banks in total assets has increased from 12.61% at end FY01, new private sector banks have accounted for most of the gain. The new private sector banks share of assets of all private sector banks increased from 27.5% at endFY97 (2.4% of assets of SCBs) to 65.17% at end-FY02 (11.36% of assets of SCBs). The share of old private sector banks (in total assets of SCBs) has decreased marginally (from 6.4% at end FY97 to 6.07% at end FY02), as well as their share in total assets of private sector banks has declined from 72.5% at end FY97 to 34.82% at end FY02. Foreign Banks: Presently, there are 40 foreign banks operating in India with 203 branches. While 4 banks have 10 or more branches, 18 banks were operating with only one branch each. Some foreign banks have also set up representative offices in India. Thus, as on 30.06.2002, 63 banks had their presence in India, including 23 banks from 12 countries, which have only their representative offices here.

27

Allahabad BankAt end-FY02, the total assets of foreign banks aggregated Rs. 1,12,096 Crores and accounted for 7.3% of the total assets of all SCBs. The primary activity of most foreign banks in India has been in the corporate segment. However, in recent years, some of the larger foreign banks have started making consumer financing a larger part of their portfolios, based on the growth opportunities in this area in India. These banks also offer products such as automobile finance, home loans, credit cards and household consumer finance. The salient features in the evolution of Indian banking are as follows: The number of banks (including regional rural banks (RRBs) has increased from 89 in 1969 to 293 in 2002. The population per branch has declined significantly, from 75,000 in 1950 to 16,000 in 2002. With the nationalization of banks in 1969, the number of bank branches (including Regional Rural Banks) increased from 8,262 in 1969 to 66,186 in 2002. Most of the expansion has been in the rural and semiurban areas. Since 1950, the credit-deposit ratio of SCBs has declined to reach 62.3% as on 31.03.2002, with a corresponding increase in the investment-deposit ratio. The change has been largely due to the Governments regulations regarding the statutory liquidity ratio (SLR), and the preference for Government securities (as a result of the increase in the Government borrowing programme and the low risk-high return nature of the instrument). Priority sector lending increased from Rs. 14,834 Crores in 1984 to Rs.2, 10,308 Crores in 2002. (Credit to the agricultural sector and small-scale sector was one of the key objectives of the nationalization of banks.) Performance of Banking Industry On the funding side, during 2002-03 (up to 4.10.2002), aggregate deposits recorded a growth of 12.6% (Rs.1, 38,806 Crores) as compared with 9.4% (Rs.90,554 Crores) in the corresponding period of the previous year. During FY02, the aggregate deposits of SCBs increased to Rs. 1,12,340 Crores as on 29.03.2002 reflecting an increase of 13.60% (year on year), as compared with 16.20% during FY01. Deposit mobilization was higher during FY01 because of Rs. 25,700 Crores raised through India Millennium Deposits (IMD). On the assets side, bank credit to the commercial sector increased at a slower rate than the growth in bank deposits. Bank credit increased to Rs. 6,04,500 Crore as on 29.03.2002, reflecting an increase of 14.20% (yoy), compared with 16.60% (yoy) during FY01. The slower growth in bank credit was primarily because of the industrial slowdown. Non-food credit increased to Rs. 4,89,500 Crore as on 29.03.2002, showing an increase of 12.40% (yoy). By contrast, food credit of SCBs increased 37.10% (yoy) to Rs. 54,500 Crore as on 29.03.2002, in response to the increase in the quantum as well as the price of food grains procured. The investments made by SCBs in government and approved securities increased 19.50% (yoy) to Rs. 4,38,900 Crore as on 29.03.2002, compared with a growth of 17.80% (yoy) on 30.03.2001. As of end FY01, banks holding of SLR securities amounted to Rs. 1,06,000 Crore over and above the SLR requirement and was substantially higher than the net annual borrowings of the Central Government. Following the announcement of policy measures during FY02, there has been a decline in SCBs lending and deposit rates. The PLRs of major PSBs declined from 11% to 13% p.a. at end FY01 to between 10% to 12% p.a. at end FY02. Some PSBs reduced their PLRs by 25 to 100 basis points at the end of October 2002. The implicit yield on 91-day T-bills declined from 8.50% p.a. as on 23.03. 2001 to 7.04% p.a. as on 4.07.2001 and further to 6.05% p.a. on 20.03.2002. Reflecting the comfortable liquidity condition, deposit rates of PSBs, which were ranging from 4.00% to 10.50% in March 2001, softened to 4.25% to 8.25% by October 2002 in all maturities except for a marginal increase of 25 basis points at the short end of 15-day deposits. Long-term domestic deposit rates of PSBs declined to 8.0% to 8.75% by March 2002 from 9.5% to 10.50% in March 2001. During the current financial year (up to October 2002), deposit rates of PSBs for maturity periods up to one year have remained in the range of 4.25% to 6.75%. For longer maturities, as compared to March 2002, the rates for deposits of maturity over 1 year to 3 years declined by 75 basis points, while those for over 3 year maturity period declined by 50 to 100 basis points. Recent Trends in Banking Industry In recent years, The Banking industry has been undergoing rapid changes, reflecting number of underlying developments. The most significant has been enactment of the NPA Act to tackle high incidence on Non-Performing Assets. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Bill) 2002 was passed by Lok Sabha in November 2002. It sees to deal with Securitisation of assets, setting up of asset reconstruction company (ARCs), and enforcement of security interest. After the ordinance on Securitisation, Banks have been issuing notice to their defaulters for recovering money. Banks have issued more than 1100 notices, amounting to more than Rs. 10,000 Crore (around 9-10% of the estimated gross NPAs of the scheduled commercial banks and developmental financial institutions. The first asset reconstruction company called Asset Reconstruction Company of India Limited (ARCIL) has been incorporated and the major shareholders are ICICI Bank, Industrial Development Bank of India, State Bank of India each holding 24.5% in ARCIL. HDFC Bank owns 10% and other remaining is held by IDBI Bank and UTI Bank The retail loan market has grown at a CAGR of 34% over the last four years to reach about Rs. 45,000 Crore. Housing and Car Finance segment account for nearly 80% of the retail finance segment. Absorption of technology and up-gradation of technological infrastructure, which have accelerated and broadened dissemination of financial information while lowering the costs of many financial activities. This has also led to transparency in information to the public on deposits and advances and interest rate structures. The fiscal year 2002-03 for the Commercial Banks was by ad large characterised by soft interest rates regime with flexible interest rate structures. There has also been a good inflow of foreign exchange in the country, with taking the forex reserves of the country to all time high. There has been a comfortable resources growth with higher credit growth. Treasury operation s of Banks has been offering handsome opportunities of gains.

28

Allahabad BankThe stance of the Monetary Policy in recent years has been to maintain adequate liquidity in the market with a preference for soft interest rates. With a view to having a vibrant and resilient competitive financial sector for sustenance of the reform process in the real sector of the economy, the focus has been on the structural and regulatory measures to strengthen the financial system. These measures have been guided by the objectives of increasing operational efficacy of the Monetary policy, redefining the regulatory goal of Reserve Bank of India, strengthening prudential norms. These developments have manifold consequences for the institutional and systemic structure of the financial sector in general and banking in particular. The business profile of financial institutions is also undergoing change. Mergers and take-overs of smaller institutions have led to the emergence of trans-national conglomerates, offering services ranging from traditional commercial banking to investment banking and insurance. (Source: Published Banking Sector Reports, RBI Statistical data and other publicly available sources) Market Share in the Domestic Banking Industry Distribution of deposits, advances and income among the various categories of banks in India for is outlined below: (as % of the Market) Classification of Banks Deposits Advances Income Public Sector Banks 75.1 72.3 74.9 Foreign Banks 5.0 7.3 8.3 Regional Rural Banks 3.9 2.9 3.5 Other Scheduled Commercial Banks 16.0 17.5 13.3 Total 100.0 100.0 100.0 (Source: Deposits and Advance: BSR 2002, published by RBI; Income: RBI Report on Trend and Progress of Banking in India) VII. 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 organization, 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 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 withdraw able 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 by itself or through any agent approved by the Reserve Bank.

29

Allahabad BankCORPORATE STRATEGY The globalization of the economy and financial sector reforms have resulted in increased competition and thin margins. To achieve the corporate goal, the following strategies have been planned : 1. proliferate the Banks business 2. increase the banks' non fund and non interest income 3. offer affable customer service 4. open more specialized branches and expand personal banking, quick collection service, retail banking, forex banking, small scale industrial finance etc. 5. use technology to boost credit off-take 6. sharpen efficiency and efficacy 7. reduction of non-performing assets MISSION & VISION OF THE BANK The Mission of the Bank is to provide banking and allied financial services efficiently to various market segments. Thrust will be given to provide innovative tailor- made products and services at competitive prices to suit the needs of the customers through a well spread network of branches, taking advantage of the latest improvements in technology and skill. The Vision of the Bank is to become a technology driven, financially strong Bank, offering wide range of financial services with concern for customer-delight, productivity, efficiency and profitability. COMPETITIVE STRENGTHS Many new banks, both private and foreign, have entered the industry and offer new and innovative products at competitive rates. In this scenario, Allahabad Bank believes that its competitive advantages are: a) rich tradition of more than 138 years b) large and loyal customer base c) wide branch network d) specialised branches to cope with modern demand pattern e) diversified product portfolio f) committed and experienced work force g) technology CORPORATE FOCUS The Corporate focus of the Bank is: a) to improve efficiency to face competition especially in metropolitan and urban centres b) to increase productivity c) to augment its market share of Banking system deposits d) to develop its management information system e) to reduce NPAs f) to improve systems and control g) to upgrade products and services h) to provide adequate credit support to industry, trade and priority sector VIII. BUSINESS OF THE BANK & ITS PRODUCTS AND SERVICES Other than the offering traditional banking products such as corporate loans, the Bank has made its presence felt by introducing certain new products and value added services while continuing to popularize the existing products. Some of these new products are: * Retail Banking Boutiques: In the year 2000, Allahabad Bank came out with a unique strategy for marketing its retail loans by putting in place 57 dedicated Retail Banking Boutiques at potential centres across the country to act as exclusive delivery channels of various Retail Finance Schemes. The Bank posted young & dynamic officers in these boutiques and delegated them with adequate authority to sanction loan proposals related to the various schemes on the spot. These officers were also exposed to specialized training not only to serve the customer better but also to sell the retail products, if need be, by adopting door to door campaign. The number of Boutiques now stands at 257 with an outstanding of Rs. 1986.40 crores as on December 31, 2003. During the FY 2002-2003, the total disbursement under the various retail finance schemes was Rs. 1447.40 crores.

30

Allahabad BankBrief description of the Banks retail schemes is as under Sr. Scheme Details 1 Allahabad Bank Personal Loan Scheme Loan for purchase of entire range of consumer durable/ household appliances, renovation / repairing of house, purchase of vehicles/ personal computer, expenses in connection with any social/ religious obligations, any other purpose except for speculative purpose. 2 Allahabad Bank Personal Loan Scheme Loan for meeting personal needs without assigning any specific purpose. for Pensioners 3 Allahabad Bank Personal Loan Scheme Loan for any personal purpose including purpose for meeting expenses of for Doctors/ Medical Practitioners professional requirement. 4 Allahabad Bank Housing Finance Scheme Loan for construction of residential house on land already owned/ to be purchased, for purchase of house/ flat, for renovation / extension of house/ flat, for purchase of land and construction of house thereon, for taking over of housing loans from other housing finance companies/ financial institutions. 5 Allahabad Bank Housing Finance Scheme Loan for furnishing and/ or repairing of existing / new flats/ houses. for Furnishing and / or Repairing of existing/ new flats/ houses. 6 Alrent Liquid Loans against rent receivables for meeting business/ personal needs but not for speculative purposes. 7 Allahabad Bank Car Finance Scheme For purchase of new as well as pre owned multi utility vehicle for personal use. 8 Allahabad Bank Consumer Finance Loan for purchase of all consumer durables including two wheelers. Scheme 9 Allahabad Bank Loan against NSC/ KVP. Loan against NSC/ KVP for any business/ personal purpose other than speculative ones. 10 Overdraft Facility in Savings Bank A/Cs To meet immediate exigencies of salaried persons. 11 Allahabad Scheme Bank Educational Loan To provide financial assistance on reasonable terms to the poor and needy to undertake basic education and to meritorious students to pursue higher/ professional / technical education. Loan for any purpose for meeting business, credit needs by offering residential building as security in the form of equitable mortgage. Loan for purchasing two wheelers by salaried persons, professionals and self employed persons, businessman and agriculturalist. Loan is given to working and non-working woman for purchase of gold and diamond jewellery.

12 13 14

AL-Property Scheme All Bank Mobike Schemes AL Abhusan Scheme

Quick Collection Services (QCS): This scheme was launched in August 1998 for speedy collection of outstation cheques and for providing better customer service to corporate clients. Bank is offering this services to its corporate clients from three QCS branches Kolkata, New Delhi & Mumbai & three centers Chennai, Ludhiana.& Lucknow. Products available from these branches/ centers are Collect & Pay & Assured Credit Service. Loans on Internet: The Bank sanctions educational loans and car loans via internet. The educational loan facility granted by the Bank was launched in 1997 and was subsequently made possible via internet during 1999. Facility to apply on internet for education loan is available to the students of IIMs, IITs, Indian Institute of Science, Bangalore, Jamnalal Bajaj Institute of Management Mumbai, XLRI Jamshedpur & Indian School of Mines Dhanbad. Bank has so far sanctioned 636 educational loans amounting to more than Rs 11.81 crores through internet. Kisan Credit Card: The Card aims to provide adequate and timely financial assistance to the farmers for their agricultural activities amongst other requirements. During the year 2002-03, the Bank issued 98,029 cards as against the target of 60,000.The Bank has st issued 3,64,642 Kisan Credit Card upto 31 December 2003 since its inception involving a credit outlay ofRs.1023.52 crores The Bank is also providing Group/Personal Accident insurance cover to the holders of the Kisan Credit Card. Depository Services: The Bank has had the distinction of being the first nationalised Bank in the eastern region to be a depository participant of NSDL. An agreement was entered into with NSDL on August 1, 1998 to act as a Depository Participant of NSDL and to offer demat and related services to its customers. During the FY 2002-03, the Bank earned a commission of Rs. 40.79 lacs from 5338 accounts. The Bank has opened its second DP at Varanasi on 29.1.2004 throughCDSL and third DP at Lucknow on 12.02.2004 Flexi- Fix Deposit Scheme: This scheme was launched to provide liquidity of a savings bank account and higher yield of a fixed deposit. Banc-assurance: The Bank has signed a MoU with ICICI Prudential Life Insurance Corporation Limited for distribution of their life insurance products via the branches of the Bank under the referral model. The bank has also entered into a corporate agency tie up with National Insurance Co. Limited for selling of general (non-life) insurance products through Bank Branches .The bank is also providing Life Insurance cover to its depositors in association with Life Insurance Corporation Of India to the extent of Rs. 1.00 lacs on a very nominal premium.

31

Allahabad BankIX. BRANCH NETWORK OF THE BANK The bank has 48 regional offices, controlling 1931 branches and 140 extension counters as on December 31, 2003, including 45 specialized branches. DISTRIBUTION OF BRANCH NETWORK The population group wise break up of branches In India is as follows: Population Group Number of Branches Rural 959 Semi-Urban 322 Urban 380 Metropolitan 270 Total 1931 Geographical Distribution of Branches is as under: State/ Union Territory Number of Branches Andhra Pradesh 23 Assam 61 Bihar 145 Chhattisgarh 25 Delhi 44 Goa 1 Gujarat 24 Haryana 29 Himachal Pradesh 3 Jammu & Kashimir 2 Jharkhand 87 Karnataka 18 Kerala 6 Madhya Pradesh 144 Maharashtra 81 Manipur 2 Meghalaya 1 Nagaland 4 Orissa 62 Punjab 40 Rajasthan 32 Tamil Nadu 25 Tripura 1 Uttar Pradesh 595 Uttaranchal 12 West Bengal 458 Andaman & Nicobar Island 1 Chandigarh (U.T.) 4 Pondicherry (U.T.) TOTAL 1 1931

% share to Total 49.66 16.68 19.68 13.98 100.00 % share of Total 1.19 3.16 7.51 1.29 2.28 0.05 1.24 1.50 0.16 0.10 4.51 0.93 0.31 7.46 4.19 0.10 0.05 0.21 3.21 2.07 1.66 1.30 0.05 30.82 0.62 23.72 0.05 0.21 0.05 100.00

SPECIALISED BRANCHES 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 45 specialized branches as on December 31, 2003 that are engaged in financing its corporate borrowers, smallscale industries, specialized trading etc. The details are as given below: Specialized Branches Industrial Finance International Recovery SSI Finance Industrial Finance cum International Non-Resident Indians Specialised Personal Banking Specialised Savings Bank Specialised Commercial Agricultural Quick Collection Service Trading Finance Forex cum Treasury Management Total Number of Branches 4 6 6 17 1 1 2 1 1 3 2 1 45

32

Allahabad BankX. DETAILS OF SOURCES OF FUNDS DEPOSITS As on Deposits Annual Growth Amount Annual Growth Percent Cost of Deposits (%) March 31, 1999 15510 1969 14.5 7.76 March 31, 2000 17642 2132 13.7 7.78 March 31, 2001 20106 2464 14.0 7.44 March 31, 2002 22666 2560 12.7 7.20 March 31, 2003 25463 2797 12.3 6.79 (Rs. in crores) Dec 31, 2003 28107 3354 13.55 5.80

Total deposits of the Bank as on December 31, 2003, touched a level of Rs.28107 crores. The same was Rs.25463 crores on March 31, 2003 adding Rs. 2644 crores. The deposits as on March 31, 2003 have grown at a rate of 12.30%compared to March 31, 2002. The Bank had a base of around 1.44 crores depositors as on March 31, 2003, resulting in an average deposit size of Rs. 17682 per depositor. The deposits per branch as on December 31 2003 stood at Rs. 14.56 crores. The share of low-cost deposits (Current Account and Savings bank accounts) in total deposits was 41.5% as on December 31, 2003. Improved customer services have resulted in increase in the share of low cost deposits in the overall deposit mix. Mobilization of low cost resources remained at the focus of attention of the Bank. Cost of Deposits declined to 5.80% during April-December 2003 from 6.79% during 2002-03. The Bank has developed a wide retail base catering to the needs of the common depositor. This is reflected in the large depositor base of the Bank. The category-wise break-up of total deposits during last 5 years is presented below: As on March 31, March 31, March 31, March 31, 1999 2000 2001 2002 Current Deposits 1503 1696 1845 1872 Savings Bank Deposits 4970 5701 6604 7701 Term Deposits 9037 10245 11657 13093 Total 15510 17642 20106 22666 The category-wise break-up of average cost of deposits during last 5 years is presented below: Year/ Period ended March 31, March 31, March 31, March 31, 1999 2000 2001 2002 Current Deposits 0.07 0.04 0.04 0.10 Savings Bank Deposits 3.94 3.99 3.59 3.74 Term Deposits 11.72 11.61 11.31 11.23 Total 7.76 7.78 7.44 7.20 March 31, 2003 2268 8725 14470 25463 March 31, 2003 0.03 3.61 10.04 6.79 (Rs. in crores) Dec31, 2003 1962 9702 16443 28107 (in %) Dec 31, 2003 0.01 3.42 8.43 5.80

Distribution of Deposits The share of rural & semi-urban branches of the Bank is 66.34%. The Bank is focusing in rural and semi-urban areas for retail finance. The population group-wise break-up of aggregate Domestic deposits for the last five years is as given in the table below: (in %) As on March 31, March 31, March 31, March 31, March 31, Dec 31, 1999 2000 2001 2002 2003 2003 Rural 21.09 21.35 21.79 21.11 20.43 19.55 Semi-Urban 19.35 19.81 20.10 20.01 19.35 18.28 Urban 30.03 30.68 30.85 30.83 31.04 29.32 Metropolitan 29.53 28.16 27.26 28.05 29.18 32.85 Total 100.00 100.00 100.00 100.00 100.00 100.00 Region-wise distribution of deposits (In India) The region-wise distribution of deposits (In India) (as per RBIs region classification) as a percentage of aggregate Domestic deposits of the Bank is given below: (in %) Region As on As on As on As on As on As on March 31, March 31, March 31, March 31, March 31, Dec 31, 1999 2000 2001 2002 2003 2003 Northern 11.82 11.78 11.26 11.50 11.43 11.97 North-Eastern 2.28 2.40 2.47 2.43 2.42 2.41 Eastern 36.77 36.86 37.28 36.70 36.51 36.48 Central 40.10 41.00 41.42 41.80 40.54 37.75 Western 6.44 5.55 5.15 5.11 6.13 8.39 Southern 2.59 2.41 2.42 2.46 2.97 3.00 Total 100.00 100.00 100.00 100.00 100.00 100.00 1. BORROWINGS As on December 31, 2003, the borrowings of Bank the are as follows: (Rs. in crores) Particulars of Borrowings from Amount Institutions, & Agencies 82.84 Unsecured Redeemable Bonds ---Banks 500.00 Borrowings Outside India 93.58 Total 676.42

33

Allahabad BankThe unsecured redeemable bonds (Tier II bonds) of Rs. 320 crores are included under Other Liabilities and Provisions in the Balance Sheet as per the guidelines of the Reserve Bank of India. The rates of interest in respect of these Bonds vary between 7% to 12.30%. The details are as under: Tier II Series I for Rs. 125 crores @ 12.30 % p.a. Tier II Series II for Rs. 95 crores @ 9.80 % p.a. Tier II Series III for Rs.100 crores @ 7.00 % p.a. Details of Unsecured Loans in the nature of subordinate debts from World Bank other than unsecured redeemable bonds aggregating Rs. 101.61 crores is as under: Rs. 101.61 crores availed @ 5.80% p.a ( presently ) on floating rate basis. Some of the details in respect of outstanding unsecured redeemable bonds (Tier II) and subordinated debts as on December 31, 2003 are as follows: (Rs. in crores) Sr. No. Name of the Lender Amount Rate of Interest Repayment Schedule Year Amount 1. Subordinate loan from World 101.61 2007 101.61 5.80 Bank 2. Tier II Bonds Series I 125.00 2007 125.00 12.30 3. Tier II Bonds Series II 95.00 2007 95.00 9.80 4. Tier II Bonds Series III 100.00 2010 100.00 7.00 Total 421.61 Covenants governing the major borrowings RBI RBI provides Export refinance against eligible Export Credit outstandings to banks at Bank rate. Banks are free to avail / repay the Export refinance on any working day NABARD NABARD provides refinance to Banks against the Term lending to Agriculture etc. Eligibility for claiming refinance at different rates are prescribed by NABARD and according to the repayment schedule the money are collected from the Bank SIDBI/IDBI SIDBI provides refinance to Banks against Term Lending to SSI sector etc. Eligibility for claiming refinance at different rates are prescribed by SIDBI and according to the repayment schedule the moneys are collected from the Bank .Details of Top 10 Borrowings of the Bank as on December 31, 2003 Sr. No. Name of the Lender Outstanding Balance (Rs. in crores) 1. Borrowing A 255.00 2. Borrowing B 245.00 3. Borrowing C 125.00 4. Borrowing D 101.61 5. Borrowing E 100.00 6. Borrowing F 95.00 7. Borrowing G 50.00 8. Borrowing H 36.80 9. Borrowing I 16.16 10. Borrowing J 13.80 * Borrowing under Tier II Bonds in each series has been treated as single borrowing. Interest Rate (%) 4.50 4.50 12.30 5.80 7.00 9.80 4.30 LIBOR+ 0.40 2.80 LIBOR+0.40

Detail 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. RBIs nominee director is on the Board of the Bank, the details of which are shown under the section Board of Directors. Fixed and Floating Rate Liabilities of the Bank The break-up of fixed and floating rate liabilities of the Bank as on December 31, 2003 is furnished in the following table: (Rs. in crores) Fixed Rate Liabilities Fixed Deposits 16443.52 Tier II Bonds 320.00 Other Unsecured Borrowings 676.41 Floating Rate Liabilities Balance in Savings Bank Account 9701.61 Subordinated Debt 101.61

34

Allahabad BankThe amount of Tier II Bonds and the Subordinated Debt in the table above are shown under Other Liabilities and Provisions in the Balance Sheet against Subordinated Deb. The fixed and floating rate liabilities of the Bank represent only the interest bearing liabilities. For non-interest bearing liabilities, please refer to the Balance Sheet. XI. DETAILS OF DEPLOYMENT OF FUNDS 1.DETAILS OF ADVANCES Population group wise classification of Gross Advances The population group-wise classification of the Banks Gross Advances is as under: (Rs. in crores) As on March 31, March 31, March 31, March 31, March 31, Dec 31, 1999 2000 2001 2002 2003 2003 Rural 756.34 877.37 1025.88 1236.24 2051.94 2398.75 Semi-Urban 597.83 678.67 779.77 930.95 1536.69 1838.38 Urban 1074.02 1313.28 1659.79 2003.80 2969.85 3453.22 Metropolitan 4628.88 5989.59 6787.17 7543.07 6925.26 6981.85 TOTAL 7057.07 8858.91 10252.61 11714.06 13483.74 14672.20 *Gross Bank Credit excludes Deposits under Rural Infrastructure Development Fund (RIDF), Advances under Provident Fund Pro Note etc. as on last Friday of March. 2. Growth of Advances The growth of the Banks Gross advances during the past five years, both in India and Overseas is as follows: Year/ Period ended March 31, March 31, March 31, March 31, March 31, 1999 2000 2001 2002 2003 Gross Credit 7565.71 8882.87 10315.76 11815.01 13486.94 Annual Increase (%) 20.21 17.40 16.13 14.53 14.15 (Rs. in crores) Dec 31, 2003 14674.93 15.91

3. Region wise Credit Exposure The region wise credit exposure of the Banks Gross Credit portfolio as on December 31, 2003 is given below. (Rs. in crores) Region Amount % of gross credit East 4261.94 29.05 West 3252.59 22.16 North 2189.40 14.92 South 1342.13 9.14 North Eastern 270.61 1.84 Central 3358.26 22.89 Total 14674.93 100.00

4. Sector wise Credit Portfolio (Domestic) The sector-wise credit portfolio of the Bank (In India) as on last reporting Friday of December 31 2003 is as under:(Rs. in crores) Sr. No. Industry Amount Exposure to gross bank credit (%) Gross Bank Credit 14478 1 Food Credit 812 5.60 2 Non Food Credit: 13666 94.40 2a Medium & Large Scale Industry 5134 35.47 2b Wholesale Trade 417 2.88 2c Priority Sector 6277 43.35 2d Other Sectors incl. Export Credit 1838 12.70 5. Industrywise Deployment of Gross Bank Credit as on December 31, 2003 (Rs. in crores) Industry Total Outstanding % exposure to the % exposure to the in Rs. Crores gross Industrial gross Credit of the Credit of the Bank Bank Coal & Mining 66 1.05 0.45 Iron & Steel 791 12.55 5.39 Other Metal & Metal Products 86 1.37 0.59 All Engineering including Electronics 610 9.67 4.16 Infrastructure (Power+Telecom+ Roads+Ports) 1208 19.16 8.23 Textiles (Cotton, Jute) 757 12.01 5.16 Sugar, Tea, Food Processing & Vegetable Oil 356 5.65 2.43 Tobacco & Tobacco Products 30 0.48 0.20 Paper & Paper Products 110 1.75 0.75 Rubber & Leather 92 1.46 0.63 Chemical, Dyes, Paints, Drugs & Pharma 673 10.68 4.59 Fertilizers and Petrochemicals Cement 90 1.43 0.61 Construction 121 1.92 0.83 Petroleum 318 5.05 2.17 Automobiles (including Trucks) 73 1.16 0.50

35

Allahabad BankComputer Software Others Total Industrial Credit outstanding 21 900 6302 0.33 14.28 100.00 0.14 6.13 42.96

7. The top 25 borrowers of the Bank have the following industry-wise classification in respect of advances of the Bank as on December 31, 2003 (Rs. in crores) Industry Outstanding to the % exposure to the % exposure to the Industry gross Industrial gross Credit of the Credit of the Bank Bank Coal & Mining 61 0.97 0.42 Iron & Steel 227 3.60 1.55 All Engineering including electronics 45 0.71 0.31 Infrastructure (Power+Telecom+ Roads+Ports) 710 11.27 4.84 Textiles 175 2.78 1.19 Paper 44 0.69 0.29 Chemicals including fertilizer 230 3.66 1.56 Petroleum 297 4.71 2.02 Automobiles 45 0.71 0.30 Total 1834 29.10 12.48 8. Exposure to top ten companies of the portfolio Account Name Industry Outstanding Amount % of gross Asset Quality Funded (Rs. in crores) advances Borrower A Infrastructure 294.80 2.00 Standard Borrower B Housing intermediary 169.79 1.16 Standard Borrower C Petroleum (Transportation) 142.58 0.97 Standard Borrower D Petroleum 136.05 0.92 Standard Borrower E Housing intermediary 128.11 0.87 Standard Borrower F Steel 108.91 0.74 Standard Borrower G Electricity 106.22 0.72 NPA-Doubtful Borrower H Housing intermediary 99.15 0.68 Standard Borrower I Fertilizer 85.32 0.58 Standard Borrower J Heavy Engineering Machinery 74.12 0.50 Standard 9. Exposure to top five business groups Name of Borrower Outstanding Amount (Rs. in crores) % of Gross Advances Group A 275.00 1.87 Group B 262.46 1.79 Group C 160.85 1.10 Group D 137.00 0.93 Group E 110.99 0.76 Total 946.30 6.45 10. Average Balances and Interest Rates The following table shows Average balances and Interest Rates of interest earning assets and interest bearing liabilities for the last three financial years: Year/ Period March 31 2001 March 31 2002 March 31 2003 December 31, 2003 Ended
Average Balance Interest 2071.36 1386.56 Averag e Rate 10.46 7.62 Average Balance 22439.72 20950.38 Interest 2272.84 1542.37 Avera ge Rate 10.13 7.36 Average Balance 25711.59 24196.99 Interest* 2570.33 1660.56 Aver age Rate 9.99 6.86 Average Balance 29028.96 27032.56 Interest 1974.42 1182.95 Average Rate 9.07 5.83

Average Interest earning assets Average Interest bearing liabilities

19800.06 18199.53

* Interest Income includes Rs.110.17 crores being interest on Income Tax Refund pertaining to earlier years. 11. Sanctions & Disbursements The following table provides a summary of the total sanctions and disbursements for the last five years: (Rs. in crores) Year/ Period ended March 31, March 31, March 31, March 31, March 31, Dec 31, 1999 2000 2001 2002 2003 2003 Sanctioned 2081.49 2251.93 2552.93 2849.19 3847.16 3570.83 Disbursed 1952.30 2178.07 2470.88 2753.31 3075.72 2520.58 12. Fixed and Floating Rate Assets of the Bank The break-up of fixed and floating rate assets of the Bank as on December 31, 2003 is furnished in the following table. (Rs. in crores) Particulars Domestic Fixed Rate Assets 4568.53 Floating Rate Assets 10106.40 Total 14674.93

36

Allahabad Bank13. Export Credit The export credit as at the end of December 31, 2003 was Rs. 676.82 crores. The bank, in order to improve the export credit has reduced the interest rate on Pre-shipment and Post shipment in the past. The position of export credit of the bank for last five years is appended below: (Rs in Crores) Year/ Period ended March 31, March 31, March 31, March 31, March 31, December 31, 1999 2000 2001 2002 2003 2003 Target 800.00 900.00 1000.00 900.00 974.00 1108.17 Achieved 552.58 685.97 712.95 604.05 686.27 676.82 Annual Export Business Turnover 2204.63 2435.28 2959.37 2780.13 3058.33 2311.64 % of Export Credit to Net Credit 7.99 8.37 7.45 5.50 5.47 4.90 14. Foreign Currency Loans Details of the Foreign Currency Loans portfolio for the last 5 years is as follows: Year/ Period ended March 31, March 31, 2000 2001 Foreign Currency Loans (USD mln.) 1.63 Mio 2.75 Mio Foreign Currency Loans (Total in Rs. crs.) 6.77 Crore 12.65 Crore (CHF: Swiss Franc, JPY: Japanese Yen)

March 31, 2002 10.52 Mio 48.25 Crore

March 31, 2003 10.86 Mio 49.95 Crore

December 31, 2003 46.08 Mio 211.95 Crore

15. Priority Sector Lending As per RBI norms, the Public 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 December 31, 2003, the Priority Sector credit stood at 44.51% of the Net Bank Credit and Agricultural credit stood at 17.26% of the Net Bank Credit. The Bank has disbursed Rs.2511.16 crores to agriculture sector upto 31.12.2003. During the FY 2002-03, the Bank issued 98029 Kisan Credit Card and cumulatively the Bank so far issued 364642 Credit Cards. Priority Sector credit is the principal business segment for a large number of the banks branches and the Banks strategy for Priority Sector Credit is focused on creating quality/high yielding loan assets in small/ medium enterprises in agriculture, SSI & services subsector so as to generate stable and remunerative income for the branches. Several policy initiatives have been taken during the last few years to substantially increase credit flow to Priority sectors and especially to the agricultural sectors. These initiatives include the following: 1. Financing under Kisan Credit Card Scheme. 2. Providing multiple credit facility for crop production, irrigation and farm mechanization. 3. Implementing area specific schemes for financing tea gardens. 4. Financing agriculture infrastructure. 5. Planning to finance commercial agricultural projects and agro-based projects through Commercial Agricultural Finance Branches. 6. Promoting rural industries through KVIC-Margin Money Scheme. 7. Executing Merchant Credit Scheme for financing trade and small businesses. 8. Formulating Banks own Housing Finance Scheme. 9. Providing Educational Loans to students of IITs, IIMs and other leading institutions. 10. Implementing Banks own Model village development programme in selected villages throughout the country. 11. Formulating and putting in place Village development credit package. 16. Details of Sector-wise distribution of Gross Priority Sector Advances for the last five years is given below (Rs. in crores) Year/ Period ended March 31, March 31, March 31, March 31, March 31, December 31, 1999 2000 2001 2002 2003 2003 Agriculture 1096.82 1412.29 1685.60 1994.07 2250.47 2511.16 Small Scale Industry 920.63 890.99 901.80 851.65 888.59 1202.37 Other Priority Sector Advances 973.60 1390.31 1735.77 2039.50 2489.71 2758.22 Gross Priority Sector Advances 2991.05 3693.59 4323.17 4885.22 5628.77 6471.75 % to Net Bank Credit 41.42% 44.25% 44.94% 44.37% 42.29 44.51 Targets (%) 40.00 % 40.00 % 40.00 % 40.00 % 40.00 % 40.00 % Gross Bank Credit represents Gross Advances of the Bank. Net Bank Credit is arrived at after deducting FCNR(B) and NRNR deposits as these are eligible for deductions while calculating the Net Bank Credit for the purpose of priority sector advances in line with RBI st Circular No. RPCD.BC.147/11.01.01/95-95 dated April 21, 1995. The calculation of Net Domestic Bank Credit as on 31 December 2003 is shown below: (Rs. in crores) Gross Domestic Bank Credit 14674.93 Less: NRNR Deposits 25.03 Less: FCNR Deposits 107.40 Less: Participation Certificates NIL Net Domestic Bank Credit 14542.50

37

Allahabad BankLead Districts As required by the GoI/ RBI, the Bank has been assigned the role of lead bank in 17 districts in 4 states, which are Uttar Pradesh, Madhya Pradesh, West Bengal and Jharkhand. 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 selfemployment 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. 17. Details of branch network, resources mobilised and advances made in the lead districts as on 31, December, 2003.are as under: (Rs. in crores) State No. of Lead No. of Total Total Advances Advances to Percentage to Districts Branches Deposits (A) Priority Sector Total Advances (B) (B/A) Uttar Pradesh 13 310 2440.89 1029.62 83.43 859.04 Madhya Pradesh 1 23 258.33 87.07 71.37 81.97 West Bengal 1 64 1049.40 293.51 120.96 41.21 Jharkhand 2 11 78.99 15.34 12.72 82.92 Total 17 408 3827.61 1425.54 1064.09 74.64 18. Loan Policy The Banks Lending policy conforms to various directives /instructions/guidelines issued by the Government of India/ Reserve Bank of India/ Bank's Board of Directors and the Top Management of the Bank. The purpose of the policy is to enunciate the thrust areas, risk factors, and set out credit exposure limits. The policy serves as a broad guideline for credit dispensation by the Bank. The main objective of the policy is to build up a well diversified and a quality credit portfolio with a focus on thrust areas and to optimise the return on lending and to avoid any possible negative mismatch in its ALM. The policy is flexible and intends to provide for changes in the economic scenario and also provides for any competitive element in banking as well as to include any reforms introduced from time to time. Keeping in view the diverse and changing credit needs of the people, the Bank strategically aims at segmentation of the market and offers suitable credit products. Bank is endeavouring to increasingly customize various loan products. Bank is also following prudential exposure norms relating to credit exposure to a single borrower/group within the overall norms laid down by RBI. Further, for managing concentration risk, the Bank has also laid down norms for restricting credit to a single industry to an extent of 10% of total credit of the Bank. As a further measure of dispersal of risk and improving healthy loan portfolio, thrust is also laid down on : a) Financing for exports. b) Agriculture including plantation and export oriented agricultural activities. c) SSI units d) Sunrise industries, such as Information Technology and Software Industry. e) Personal and Retail banking with finance schemes such as Consumer Loan Scheme, Personal Loan Scheme, and in particular Housing Loan Scheme f) Infrastructure finance. g) Encouraging loan delivery to women beneficiaries. h) Educational loans. i) Promoting non-fund business to boost up non-interest income. 19. Credit Approval Authority and Procedures The Banks Board delegates the credit sanction authority with prudential limits to its officers working in branches and administrative Offices. The Bank has designated adequate lending powers, which are reviewed periodically. The proposals falling beyond the delegated lending powers of C&MD are considered by the Management Committee of the Bank comprising of C&MD, ED, one nominee Director of RBI and Government of India each, besides three other Directors of the Bank. The Bank has laid down detailed procedure for sanction of various types of loans/credit facilities. The proposals for project finance from prospective/existing clients are appraised by officers having technical/credit skills. A detailed viability and sensitivity analysis is carried

38

Allahabad Bankout for each project. Similarly corporate finance /loans are extended after thorough appraisal of the projections/estimates and also after analysing economic/financial viability of the borrower/unit. In case of retail loans certain criteria have been stipulated. The retail proposals are duly scrutinized and the delegated authority accords the sanction if the proposal fulfils each of the criteria. In light of the RBI guidelines, the Bank has set up a Multi-Tier Credit Approving System, where the loan proposal be approved by an Approved Grid named as Credit Grid Committee initially at Head Office level. The Credit Grid Committee consist of Banks Senior Executives to evaluate the credit proposals in line with banks lending policy and credit risk management policy. Bank has in place a well spelt out credit rating system under which the borrowal accounts of Rs 2 lakhs and above are rated on several parameters and the risk is priced with a suitable mark over PLR based on the credit rating. Bank also has in place a well-defined Risk Management Policy aimed at mitigating credit related various risks. As a part of monitoring of credit risk, the Bank has also implemented a system of Credit Review and Audit as per RBI Guidelines. Bank also has in place a distinct and well-defined Loan Review Policy through which the entire loan portfolio of the Bank is also reviewed from time to time based on macro economic fundamentals. The Bank is continuously toning up the skills of the officers in credit appraisals by giving training both in house and outside agencies by NIBM, BTC. Etc., 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. 20. Amounts sanctioned by the Bank (Category-wise) in the FY 2002-03 are as follows Sanctioning Authority No. of Accounts Management Committee 70 Chairman & Managing Director Executive Director General Manager TOTAL Sanctioning Authority Power for Limits Management Committee of the Board Chairman & Managing Director Executive Director General manager Deputy General Manager Assistant General Manager Regional Manager / Chief manager Branch Headed by Scale-111 Branch Headed by Scale-11 Branch Headed by Scale-1 * Both fund based and non fund based put together XII. INVESTMENTS Investment Portfolio The investment portfolio of the Bank stood at Rs. 14825.48 crores as on December 31, 2003. The investment portfolio of the Bank as on December 31, 2003 is furnished as below. Particulars Amount (Rs. in crores) Government Securities 10503.95 Other Approved Securities 539.63 Shares 79.52 Debentures/ Bonds 2651.25 Subsidiaries and Joint Ventures 87.62 Others (CP/MF/Spl Sec.) 963.51 Total Gross Investments 14825.48 With the introduction of prudential norms, deregulation of interest and capital adequacy measures, there has been a gradual shift of focus to investment activities. Accordingly, the investment portfolio of the Bank has increased steadily over the years. A large proportion (more than 74.49%) of the Banks total investment is held in Government and approved securities. The Bank has been able to maintain a fairly consistent portfolio yield by changing portfolio mix by regular churning without changing the portfolio risk. Investment Strategy Domestic Portfolio Position as on December 31,2003 shows an increase of: 14 25 40 149 Fund 1952.78 74.43 84.55 53.40 2165.16 (Rs. in crores) Non-Fund 306.67 5.00 35.12 16.36 363.15

Full (Subject to prudential norms like single borrower Exposure norms, group Borrower exposure norms etc. 20 Crores 15 Crores 9 Crores 5 Crores 3 Crores 2 Crores 0.50 Crores 0.15 Crores 0.07 Crores

39

Allahabad BankTerminal book value by Rs. 2866.73 crores or 23.97% over earlier year; Average book value by Rs. 1961.58 crores or 16.32% over earlier year; Investment income (including profit) by Rs. 200.88 crores or 19.21 % over earlier year. Current yield on investment (which is measured by dividing interest income by the book value of investments) or return on investments stood at 9.64% as on March 31, 2003 as against 10.29% as on March 2002 for domestic investments. The drop in market yield levels during this period was approx. 0.65% due to soft interest regime. Duration of the Central Government securities portfolio, which shows the average time in which the investment could be realised after reckoning the prevailing yield for reinvestment of coupon income remains at 5.41 years.

Valuation of the Available For Sale segment as on December 31, 2003 as per RBI norms/FIMMDA rates show the following surplus positions. 1. Govt. Securities : Rs. 1069.82 crores. 2. Other SLR securities : Rs. 14.19 crores. 3. Bonds and debentures : Rs. 244.11 crores. Shares and mutual funds portfolio, which suffered depreciation of approximately Rs. 20.55 crores as on 31.12.2003, the Bank holds sufficient provision for the same. As against the above surplus in the Government Securities basket, the premium element on securities as on 31.12.2003 remains at Rs. 1044.77 crores or 11.04% of the face value, as against 6.76% in corresponding period of last year. Premium in absolute terms last year was Rs. 540.73 crores. The investment made by the bank in its subsidiary named Allbank Finance Limited which is under Held To Maturity segment is valued at book value of subsidiary. As against diminution of Rs. 7.39 crores in the mutual funds valuation as on 31.12.2003, bank made provision of Rs.7.39 crores. The depreciation has occurred mainly in the income fund units, which the bank has been selectively offloading depending upon market conditions.

There is investment of Rs. 34.17 crores in the units of UTI-US-64 (since converted into 6.75 tax free 2008). Valuation of trading segment of Rs. 128.04 crores as of December 31, 2003 resulted in a loss of Rs. 0.26 crores for which bank holds necessary provision. Profit on sale of securities for the period from 1 April, 2003 to 31 December, 2003 was Rs. 284.19 crores as against Rs. 336.94 crores for full year during 2002-03. st Secondary market turnover reached Rs. 18641.06 crores (excluding inter bank Repo transactions) for the period from 1 April, 2003 st to 31 December, 2003 as against Rs. 13337.99 crores during corresponding period of last year. Bank has not made any overseas investments .
st st

RBI guidelines on classification and valuation of investments permit transfer between Held To Maturity and any other segment only once at the beginning of each financial year. Thus, the present formation of strategy reckons these transfers also. The potential risk is in the form of interest rate risk, against which the portfolio needs to be immunized as far as possible. So far, the approach towards Duration of the portfolio has been reactive rather than proactive for following reasons. Issue of dated Central Government securities during the year was towards medium/long term. Even secondary market trading centered on the long-term securities. State Development Loans were, as is usually the case, issued for a standard 10-year maturity. Non-SLR Securities, which are issued in all tenors, were less in numbers and thus its Duration was not annualized.

The main objective is to preserve the current yield on a few securities, while utilizing the upward movement in prices in a few other securities. A volatile yield on Government Securities has had a sobering effect on Non-SLR portfolio, as the risk premium levels, which were almost non-existent at one stage, have started rising. The predominant players have come to recognize the importance of rating and the effect of lack of rating on liquidity and valuation. 1. Investments by the Bank As on Gross investments SLR Investments Held Till Maturity (HTM) Available For Sale Held For Trading % of HTM to entire portfolio March 31, 1999 7174.57 5141.24 ------------------------------------March 31, 2000 8269.38 6166.62 ------------------------------------March 31, 2001 8789.90 6692.26 2429.38 6318.38 42.14 17.80% March 31, 2002 10466.26 7798.45 2756.59 7687.83 26.76 18.07% March 31, 2003 12476.04 9229.08 3529.97 8854.61 91.46 21.36 (Rs. in crores) Dec 31, 2003 14825.48 11043.58 4030.23 10667.20 128.05 21.35

40

Allahabad BankAs on Gross Investments SLR Investments Permanent Investments Current Investments Current investments to SLR Investments (%) March 31, 1999 7174.57 5141.24 ------------------71.65 March 31, 2000 8269.38 6166.62 ------------------74.57 March 31, 2001 8789.90 6692.26 2429.38 6360.52 95.04 March 31, 2002 10466.26 7798.45 2756.59 7714.59 98.92 March 31, 2003 12476.04 9229.08 3529.97 8946.07 96.93 (Rs. in crores) Dec 31, 2003 14825.48 11043.58 4030.23 10795.25 97.75

The break up of investments for a period of five years is given in table below: Security Details 1998-99 1999-00 2000-01 Government Securities Other Approved Securities Shares Debentures & Bonds Subsidiaries & Joint Ventures Others (including Spl security) Total 4098.54 1042.70 48.50 1041.14 84.12 859.57 7174.57 5168.06 1006.52 79.80 1036.41 87.62 890.97 8269.38 5873.95 851.95 74.26 1008.36 87.62 893.76 8789.90

2001-02 7252.47 689.41 107.05 1427.24 87.62 902.47 10466.26

2002-03 8683.54 545.56 82.60 2198.13 87.62 878.59 12476.04

(Rs. in crores) Dec 31, 2003 10503.95 539.63 79.52 2651.25 87.62 963.51 14825.48

The Net investment figure shown in the Balance Sheet is obtained after deducting depreciation from the figure of Gross Investments shown above. 2. Yield on Investments The yield on investments (%) for the last five years is given below: As on March 31, March 31, 1999 2000 Yield including profit on sale of 11.49 12.00 investments (%) Yield excluding profit on sale of 11.19 11.11 investments (%)

March 31, 2001 11.66 11.04

March 31, 2002 12.50 10.29

March 31, 2003 12.58 9.64

Dec 31, 2003 11.53 8.81

XIII. 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 180 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 180 days and in respect of bills, if the account remains overdue for more than 180 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 180 days, in respect of all loans other than home loans. NPAS are further categorized into three groups i.e. Substandard, Doubtful and Loss Asset depending upon the period of delinquency and availability of tangible security. The table below gives the criteria for asset classification viz. Standard, sub-standard, doubtful and loss assetCategory 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 180 days. Borrowal accounts treated as NPA for not exceeding 1 years are classified as sub standard assets and borrowal accounts treated as NPA for more than 1 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-recognized and further interest accrued is collected on cash basis.

41

Allahabad BankProvisioning 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 realizable 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 0.25% 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, March 31, March 31, March 31, March 31, December31, 1999 2000 2001 2002 2003 2003 Standard Assets 6045.60 7188.71 8494.45 9813.16 11645.44 13215.79 Sub Standard Assets 594.50 574.55 552.30 662.40 436.01 396.37 Doubtful Assets 856.42 1046.65 1170.83 1290.97 1331.17 1019.13 Loss Assets 69.19 72.96 98.18 48.48 74.32 43.64 Gross NPAs 1520.11 1694.16 1821.31 2001.85 1841.50 1459.14 Gross Advances 7565.71 8882.87 10315.76 11815.01 13486.94 14674.93 Advances given above are Gross Advances while the Balance Sheet indicates Net Advances after setting off provisions, interest suspense etc: Gross Advances (Provisions, Interest Suspense and DICGC & ECGC claims) = Net Advances. Asset Classification of Performing and Non-Performing Assets for the last 5 years is given below: (as a % of Gross Advances) Classification of assets (%) as March 31, March 31, March 31, March 31, March 31, December 31, on 1999 2000 2001 2002 2003 2003 Standard Assets 79.91 80.93 82.35 83.06 86.35 90.06 Sub Standard Assets 7.86 6.47 5.35 5.61 3.23 2.70 Doubtful Assets 11.32 11.78 11.35 10.93 9.88 6.94 Loss Assets 0.91 0.82 0.95 0.40 0.54 0.30 Total 100 100 100 100 100 100 The asset quality of the Bank has improved considerably during he last 2 years. Gross NPA to Gross Advances dropped from 16.94% in FY02 to 13.65% in FY03 and further to 9.94% in Dec03, while Net NPA to Net Advances fell from 10.57% in FY02 to 7.08% in FY03 and further to 4.17% in Dec03. General Data on Non-Performing Assets The details of Non-Performing Assets of the Bank are furnished in the various tables below: (Rs. in crores) As on March 31, March 31, March 31, March 31, March 31, Dec 31, 2003 1999 2000 2001 2002 2003 Gross NPA at the beginning of the year 1458.93 1520.11 1694.16 1821.31 2001.85 1841.50 Addition during the year 315.26 434.35 407.54 530.62 410.60 167.50 Reduction during the year 254.08 260.30 280.39 350.08 570.95 549.86 Up-gradation 43.54 35.90 42.24 15.57 143.35 48.99 Cash Recovery 100.38 86.21 101.49 83.74 94.14 64.46 Compromise 29.49 42.63 65.97 86.33 106.52 80.96 As on March 31, March 31, March 31, March 31, March 31, Dec 31, 2003 1999 2000 2001 2002 2003 Write-off 80.67 95.56 70.69 164.44 226.94 355.45 Gross NPA at the end of the year 1520.11 1694.16 1821.31 2001.85 1841.50 1459.14 Provision 580.91 642.81 733.05 822.51 943.34 880.46 Interest Suspense 43.88 14.35 4.01 12.17 10.34 --DICGC & ECGC Balance 28.52 34.22 9.60 7.01 0.84 4.05 Net NPA at the end of the year 866.80 1002.78 1074.65 1160.16 886.98 574.63 The provision of Rs. 880.46 crores has been netted from gross credit in the Balance Sheet. Closing Balance of provision of NonPerforming Assets as on December 31, 2003 is Rs. 880.46 crores which has been deducted from the Gross Advances figure to arrive at the Net Advances figure as given in the Balance Sheet. Out of Rs.880.46 crores, provisions made during the year amounted to Rs.229.49 crores. This figure of Rs229.49 crores has been included in the Provisions & Contingencies figure, which has been charged to the Profit & Loss Account. (Rs. in crores) As on March 31, March 31, March 31, March 31, March 31, Dec 31, 2003 1999 2000 2001 2002 2003 Gross Advances 7565.71 8882.87 10315.76 11815.01 13486.94 14674.93 Gross NPAs 1520.11 1694.16 1821.31 2001.85 1841.50 1459.14 Gross NPAs to Gross Advances (%) 20.09 19.07 17.66 16.94 13.65 9.94 Net Advances 6912.40 8191.49 9569.10 10973.32 12543.60 13794.47 Net NPAs 866.80 1002.78 1074.65 1160.16 886.98 574.63 Net NPA to Net Advances (%) 12.54 12.24 11.23 10.57 7.08 4.17

42

Allahabad BankThe slab-wise details of the current NPA accounts as on December 31, 2003 are indicated below: Particulars Number of Accounts Gross NPA Amount Below Rs. 25,000/174773 136.50 Rs. 25,000/- and above 48832 1322.64 Interest de-recognized 272.13 2637.86

Industry-Wise Classification on Non-Performing Assets The industry classification of the top ten NPAs (borrower-wise classification) of the Bank as at December 31, 2003 is given hereunder: Sr. No. Industry Amount % of the Total Gross Asset Quality as on (Rs. in Crores) Advances December 31, 2003 1. Iron & Steel 78.92 0.54 Doubtful 2. Textiles 38.51 0.26 Doubtful 3. Electronics 32.39 0.22 Doubtful 4. Gems 29.02 0.20 Sub standard 5. Paint 28.47 0.19 Sub standard 6. Sugar 27.63 0.19 Sub Standard 7. Drugs & Pharmaceuticals 26.25 0.18 Doubtful 8. Power 21.15 0.14 Sub standard 9. Power 19.59 0.13 Doubtful 10. Others 18.99 0.13 Sub standard The details of top 10 NPAs in different industry sectors as on December 31, 2003 (Rs. in crores) Sr. No. Industry Total Advance to the Top ten NPA Amount in Top 10 NPAs as a % of industry (A) the industry (B) Advance given to industry (B/A) 1. Iron & Steel 791.35 134.12 16.95 2. Chemicals, dies, paints 673.33 118.70 17.63 drugs & pharma, fertilizer & petrochemicals 3. Sugar, tea, food 356.76 71.70 20.10 processing & vegetables 4. All engineering including 610.42 65.38 10.71 electronics 5. Infrastructure (power) 745.46 52.33 7.02 6. Metal & metal products 86.54 50.62 58.49 7. Cement 90.89 28.25 31.08 8. 9. 10. Construction Textiles ( Cotton, jute) Rubber & leather 121.55 757.07 92.59 14.29 10.07 3.73 11.76 1.33 4.03 (Rs. in crores) Interest in Arrears 36.55 23.48 36.53 3.15 2.98 5.47 4.85 11.85 3.38 7.05 Dec. 31, 2003
%
9.06 22.33 9.87 11.87 8.42 9.94

Top 10 Impaired Credits Name of the Borrower

Loans & Contingent Total Risk Provision Advances Credit Exposure Classification Held Borrower A 78.92 ---78.92 Doubtful 3 39.68 Borrower B 38.51 ---38.51 Doubtful 3 19.26 Borrower C 32.39 ---32.39 Doubtful 3 17.39 Borrower D 29.02 ---29.02 Sub standard 2.90 Borrower E 28.47 ---28.47 Sub standard 2.85 Borrower F 27.63 ---27.63 Sub standard 6.56 Borrower G 21.15 ---21.15 Sub standard 2.76 Borrower H 19.59 ---19.59 Doubtful 2 5.88 Borrower I 18.99 ---18.99 Sub standard 1.90 Borrower J 18.30 ---18.30 Doubtful 2 5.49 Sector-Wise Analysis of Gross Non-Performing Assets March 31, March 31, March 31, March 31, March 31, Sector 1999 2000 2001 2002 2003
Gross Advances Gross NPA
186.77 279.48192.65 658.90 861.21 1520.11

%
17.03 30.36 19.79 22.03 18.83 20.09

Gross Advances
1412.29 890.99 1390.31 3693.59 5189.28

Gross NPA
196.28 296.91 205.34 698.23 995.93

Gross Gross Adva- NPA nces

183.03 262.46 239.90 685.39 901.80

%
10.86 29.10 13.82 15.85 18.96

Gross Advances
1994.07 851.65 2039.50 4885.22

Gross NPA
221.92 285.94 265.94 773.80

%
11.13 33.57 13.03 15.83 17.73 16.94

Gross Advances
2250.47 888.59 2489.71 5628.77

Gross NPA
229.42 268.72 274.83 772.97

%
10.19 30.24 11.04 13.73 13.60 13.65

Gross Gross Adva-nces NPA

2511.16 1202.37 2758.22 6471.75 8203.18 14674.93 227.43 268.53 272.36 768.32 690.82 1459.14

Agriculture SSI Other PSC Total PSC Non PSC Total

1096.82 920.63 973.60 2991.05 4574.66 7565.71

13.90 1685.60 33.29

14.77 1735.77 18.90 4323.17

19.19 5992.59 1135.92 19.07 10315.76 1821.31

6929.79 1228.05

7858.17 1068.53 13486.94 1841.50

8882.87 1694.16

17.66 11815.01 2001.85

NPA Management Strategy The NPA cash recovery target for the year 2003-2004 was fixed at Rs. 185 crores. 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

43

Allahabad Bankopened Recovery 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). The Bank has been utilizing the revised guidelines of RBI for OTS/OCS. In addition to above, the Bank has also initiated following strategies for reduction of NPA. a) The Bank has set up committees at Head Office and Regional Offices to guide the NPA management efforts of the Bank. b) The recovery and up-gradation efforts are executed through a separate Recovery and Rehabilitation Department. c) An elaborate strategy has been drawn-up and implemented by the bank for reduction of NPAs. d) Credit monitoring system has been revamped. e) High value NPAs are reviewed individually. f) High incidence NPA areas are directly monitored by the General Managers at H.O. g) An incentive scheme has been launched to better the NPA recovery. h) Best use of new act to recover Bank's dues. Five-point short-term strategies a) All potential NPA accounts must be critically reviewed and monitored so as to sustain them as performing assets b) All potential performing asset accounts where up-gradation or cash recovery is possible should be followed up vigorously c) Emphatic stress should be given on all compromise settled cases for recovery of dues as per agreed terms d) Execution of Decrees and recovery thereof should be ensured e) All recovery proceedings before DRTs should be followed up for recovery of dues expeditiously Eleven-point long-term strategies a) Tight fencing of fresh addition b) Identify potential NPA accounts (Special Mentioned Accounts) c) Tackle sub-Standard accounts top priority basis d) Meet each and every NPA borrower e) Settlement efforts for each NPA account f) Make full use of Compromise Committee at i) Regional Offices ii) ELBs / VLBs g) Full use of High Power Head Office Compromise Committee h) Separate strategy for suit filed cases i) Strategy for decreed cases k) Strategy for rural branches i) Recovery Camp ii) Settlement Camp iii) Effective use of NPWD l) Strong monitoring by Regional Heads XIV. Asset Liability Management The maturity profile of global deposits as on December 31, 2003 is as under: Residual Maturity Amount (Rs. in crores) 1-14 days 368.17 15-28 days 294.97 29 days 3 months 1248.06 3-6 months 1398.72 6-12 months 2592.74 1-3 years 6931.87 3-5 years 5368.87 Over 5 years 9904.00 Total 28107.40 The maturity profile of deposits in the last three years as under: (Rs. In crores) March 31, 2001 March 31, 2002 March 31, 2003 December 31, 2003 Year/ Period ended Rs. in % Rs. in % Rs. in crores % Rs. in crores % crores crores Upto 1 Year 4975.55 24.75 3094.98 13.65 4453.47 17.49 5902.66 21.00 1 Year to 3 Years 12092.73 60.14 6539.35 28.85 6670.81 26.20 6931.87 24.66 3 Year to 5 Years 1891.57 9.41 4784.86 21.11 5064.24 19.88 5368.87 19.10 Over 5 Years 1146.17 5.70 8246.75 36.39 9274.86 36.43 9904.00 35.24 Total 20106.02 100 22665.94 100 25463.38 100 28107.40 100

44

Allahabad BankMaturity Profile of the Asset Liability as on the last reporting Friday of December 31, 2003: (Rs. in crores) Maturity 1-14 15-28 29 days 3-6 6-12 1-3 3-5 Over 5 Total days days 3 months months months years years years 1. Outflows Capital ------------------------------------------346.70 346.70 Reserves & Surplus ------------------------------------------- 1025.96 1025.96 Deposits 362.86 290.62 1229.77 1377.51 2552.98 6812.50 5276.21 9692.54 27594.99 Borrowings ------------------5.14 8.3 14.36 2.59 ------30.39 Other Liability & 648.49 394.02 254.00 171.97 80.00 114.16 361.61 326.42 2350.67 Provision A: Total Outflows 1011.35 684.64 1483.77 1554.62 2641.28 6941.02 5640.41 11391.62 31348.71 B: Cumulative Outflows 1011.35 1695.99 3179.76 4734.38 7375.66 14316.68 19957.09 31348.71 2. Inflows Cash 183.04 ------------------------------------------183.04 Balance with RBI 158.68 13.08 55.34 61.99 114.88 306.56 237.43 436.17 1384.13 Balance with Other 73.60 30.00 25.00 ------------50.00 ------------178.60 Banks Investments 138.09 5.38 68.55 312.17 1200.05 1437.08 1934.36 9588.12 14683.80 Advances Performing 371.50 226.87 911.61 1354.71 869.62 4645.23 1873.15 2689.82 12942.51 NPAs ------------------------------------356.74 232.02 588.76 Fixed Assets ------------------------------------------346.84 346.84 Other Assets 150.00 420.00 145.00 99.27 100.00 30.00 20.00 76.76 1041.03 C: Total Inflows 1074.91 695.33 1205.50 1828.14 2284.55 6468.87 4421.68 13369.73 31348.71 3. Mismatches D: Mismatch (C-A) 63.56 10.69 -278.27 273.52 -356.73 -472.15 -1218.73 1978.11 ------E: % Mismatch (D as a 6.28 1.56 -18.75 17.59 -13.51 -6.8 -21.61 17.36 ------% of A) F: Cumulative 63.56 74.25 -204.02 69.50 -287.23 -759.38 -1978.11 0.00 ------Mismatch G: % Cumulative 6.28 4.38 -6.41 1.46 -3.89 -5.30 -9.91 0.00 ------Mismatch F as % of B Maturity Profile of the Asset Liability as on the last reporting Friday of March 2003: (Rs. in crores) Maturity 1-14 15-28 29 days 3-6 6-12 1-3 3-5 Over 5 Total days days -3 months months months years years years 1. Outflows Capital ------------------------------------------346.70 346.70 Reserves & Surplus ------------------------------------------883.22 883.22 Deposits 292.79 212.16 658.75 908.41 1738.49 6390.30 5041.10 9459.08 24701.08 Borrowings 1.91 2.78 4.84 27.15 7.01 43.69 Other Liability & 131.64 25.00 105.00 115.00 50.00 209.53 489.55 100.63 1226.35 Provision A: Total Outflows 424.43 237.16 765.66 1026.19 1793.33 6626.98 5537.66 10789.63 27201.04 B: Cumulative Outflows 424.43 661.59 1427.25 2453.44 4246.77 10873.75 16411.41 27201.04 2. Inflows Cash 185.01 ------------------------------------------181.05 Balance with RBI 194.58 232.86 442.71 870.15 Balance with Other 194.19 65.00 50.00 35.00 50.00 394.19 Banks Investments 95.91 5.06 43.73 117.61 60.16 1142.54 1317.29 9870.65 12652.95 Advances Performing 240.02 149.61 441.71 397.96 700.64 5424.15 1400.65 2192.49 10947.23 NPAs 374.29 544.42 918.71 Fixed Assets 349.73 349.73 Other Assets 50.00 50.00 130.00 312.43 320.64 10.00 10.00 883.07 C: Total Inflows 765.13 269.67 665.44 863.00 1081.44 6821.27 3335.09 13400.00 27201.04 3. Mismatches D: Mismatch (C-A) 340.70 32.51 -100.22 -163.19 -711.89 194.29 -2202.57 2610.37 ------E: % Mismatch (D as a 80.27 13.17 -13.09 -15.09 -39.70 2.93 -39.77 24.19 ------% of A) F: Cumulative 340.70 373.21 272.99 109.80 -602.09 -407.80 -2610.37 0.00 ------Mismatch G: % Cumulative 80.27 56.41 19.12 4.47 -14.17 -3.75 -15.90 0.00 ------Mismatch F as % of B

45

Allahabad BankMaturity Profile of the Asset Liability as on the last reporting Friday of March 2002: Maturity 1-14 15-28 29 days3-6 6 - 12 1 - 3 yrs. 3 - 5 yrs. days days 3 mths mths mths 1. Outflows Capital Reserve & Surplus Deposits Borrowings Other Liability and Provision A: Total Outflows B: Cumulative Outflows 2. Inflows Cash Balance with RBI Balance with other Banks Investments Advances performing NPAs Fixed Assets Other Assets C: Total Inflows 3. Mismatches D: Mismatch (C-A) E: % Mismatch a % of A) F: Cum. Mismatch (D as 45.59 106.61 7.47 28.75 583.07 139.88 662.37 128.94 540.66 -1585.18 71.58 -21.02 353.12 -799.98 -16.50 -446.86 446.86 4.94 0.00 0.00 (Rs. in crores) Over 5 Total yrs. 246.70 810.72 418.92 190.93 0.22 167.05 5.50 585.97 196.65 554.38 1265.20 1262.90 11006.08 2.00 22.00 7.82 38.00 8.00 66.00 22.60 269.00 3464.34 19.12 149.00 3632.46 1108.73 7.57 286.66 2460.38 246.70 810.72 19271.48 67.33 1003.21 21399.44 65055.63 136.12 16.00 293.79 68.17 70.00 5.00 30.00 129.74 251.92 70.00 343.98 377.87 212.68 313.00 101.00 88.03 1783.49 626.00 1806.49 1252.00 340.12 265.29 14.30 65.95 477.61 85.80 877.65 171.69 713.37 218.82 2817.34 4434.66 5008.24 665.70 346.03 17.84 4278.61 10838.87 646.15 17.79 8378.49 340.54 0.00 0.00 1035.03 360.96 449.06 164.31 76.64 83.55 880.00 366.40 1363.40 551.82 8784.21 8372.35 1005.82 346.03 839.69 21399.44 0.00 0.00 115.00 162.03 656.01 477.49 140.00 210.00 108.00 204.83 5955.97 30.00 4048.76 999.90 1176.07 1296.02 146.46 23.55 55.00 66.67 19.70 80.00 8.47 19.70 190.00 128.45 521.75 15.92 90.00 224.35 635.80 226.52 938.89 22.61 35.18 84.69 1139.98 4491.29 1728.33 1467.60 456.23 6889.69 542.56 605.87 365.07 371.50 9491.96 366.60 717.27 357.88 357.88 89.00 163.54 13.00 610.42 370.88 318.52 6.31 92.00 416.83 452.20 3.50 58.00 513.70 703.77 6.59 45.00 755.36 7332.23 21.92 187.00 7541.15 4785.43 12.76 50.55 4848.74 518.17 9045.10 (Rs. in crores) Over 5 Total yrs. 246.70 824.98 7455.25 246.70 824.98 21763.16 140.08 1127.26 24102.18 56936.47 0.00 146.46 1220.53 499.69 10412.46 9054.51 1062.10 365.07 1341.36 24102.18

610.42 981.30 1398.13 1911.83 2667.19 10208.34 15057.08 24102.18

249.33 207.29

45.59 152.20

735.27 1397.64 1938.30

G: % Cum. Mismatch (F 7.47 15.51 52.59 73.10 72.67 3.46 -2.97 as % of B) Maturity Profile of the Asset Liability as on the last reporting Friday of March 2001: Maturity 1-14 15-28 29 days- 3 - 6 6 - 12 1 - 3 yrs. 3 - 5 yrs. days days 3 mths mths mths 1. Outflows Capital Reserve & Surplus Deposits Borrowings Other Liability and Provision A: Total Outflows B: Cumulative Outflows 2. Inflows Cash Balance with RBI Balance with other Banks Investments Advances performing NPAs Fixed Assets Other Assets C: Total Inflows 3. Mismatches D: Mismatch (C-A) E: % Mismatch (D as a % of A) F: Cum. Mismatch G: % Cum. Mismatch (F as % of B) -100.77 -433.37 -17.42 512.60 37.66 -33.06 79.23 2.97 -623.53 -8480.34 -46.64 -75.06 136.12

578.38 1311.02 1336.90 11297.68

585.97 782.62 1361.00 2672.02 4008.92 15306.60 18939.06 21399.44

271.66 271.66

449.06 613.37 76.64 78.37

-544.30 -9024.64 -8378.49 -13.58 -58.96 -44.24

46

Allahabad BankAsset Liability Mismatch for last three years: Year / Period ending 1-14 15-28 days days Dec 31, 2003 145.34 March 31, 2003 669.66 March 31, 2002 462.03 March 31, 2001 357.02 Structural Liquidity for last three years Maturity 111.17 45.59 22.85 229.94 29 days -3 months -158.99 11.19 307.94 -150.23 3-6 months 6-12 months 1-3 years 3-5 years -1268.40 -1800.81 -1180.17 1571.79 (Rs. in crores) Over 5 years Total 1737.10 1808.75 1125.92 5557.83 00 00 00 00

235.89 -384.51 -417.60 109.24 -721.98 -121.64 125.35 -413.51 -450.41 -293.98 -1104.66 -6167.71

Total Inflow Total Outflow March March March Dec. 31, March March March Dec. 31, 31, 2001 31, 2002 31, 2003 2003 31, 2001 31, 2002 31, 2003 2003
1400.74 600.72 969.71 882.58 215.90 997.89 1210.71 276.79 967.75 1532.86 434.64 1203.08 1043.72 370.78 1119.94 420.55 193.05 689.95 541.05 231.20 956.56 1387.52 323.47 1362.07 1575.83 2651.04 7040.39 5718.07 11684.52 31742.91

March 31, 2001

357.02 229.94 -150.23

(Rs. In crores) Mismatch March March Dec. 31, 31, 2003 31, 2003 2002
462.03 22.85 307.94 669.66 45.59 11.19 109.24 -721.98 -121.64 -1800.81 1808.75 0.00 145.34 111.17 -158.99 235.89 -384.51 -417.60 -1268.40 1737.10 0.00

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

705.59 890.20 1249.77 1811.72 999.57 764.85 1140.53 679.26 1014.39 1478.75 2266.53 1783.93 1427.90 2200.73 6175.50 6306.06 6705.46 6622.79 12343.21 6756.47 6827.10 3584.81 3776.23 3627.14 4449.67 2013.02 4956.40 5427.95 7940.24 10681.21 12534.55 13421.62 2382.40 9555.29 10725.80 22056.57 24764.46 28050.92 31742.91 22056.57 24764.46 28050.92

-293.98 125.35 -1104.66 -413.51 -6167.71 -450.41 1571.79 -1180.17 5557.83 1125.92 0.00 0.00

ALM Policy of the Bank With the globalizations of economy and financial sector reform taking place in the country, the risks associated with the banking business have become more complex and have gone up to a large extent. As a result, the progress of integration of domestic market with the external markets has been witnessing increasing competition among the banks. Most of the interest rates have already been deregulated by RBI requiring the banks to take prompt and strategic decisions to maintain their margin and profitability. The bank is already having its own Asset Liability Management Policy and the data coverage as on 31.03.03 was 100%. The ALM reports regarding Structural Liquidity and Interest Rate Sensitivity are being prepared every month and the short term Dynamic Liquidity Report is prepared every fortnight. The bank appointed NIBM as a consultant to establish ALM in the bank and they delivered the package along with a decision support system. ALM Strategy of the Bank The ALM strategy of the bank includes the following: 1) To maintain requisite liquidity: The day-to-day liquidity is monitored by the Treasury Department at H.O. 2) To control the cost of deposits: In this respect the bank has been emphasizing for low cost stable deposits. 3) To maintain the net interest margin: The bank strives to invest its surplus fund in investments where risk is less but the yield is better. The bank has already divided its investment portfolio in three categories viz. a) Trading Book b) Available for Sale c) Held till Maturity, as stipulated. 4) To reduce interest rate risk and default risk in the banking book: The bank has endeavored to diversify its Credit portfolio and to expand the credit portfolio in the retail segment. The Asset Liability Management Committee (ALCO) of the bank monitors the liquidity and interest rate sensitivity position of the bank periodically. The bank monitors its liquidity and interest rate sensitivity gaps meticulously. The bank calculates the duration of its investment portfolio on an ongoing basis. To take quick decision on the changing market scenario the ALCO of the bank decides the interest rates on its deposits and loans as also the Prime Lending Rate (PLR) of the bank. The bank sends its officers for training to various institutes of repute to update their knowledge and to acquaint them with the changes taking place on ALM and / or Risk Management. Financial Ratios and Other Financial Information of the Bank for the Last Five Years ( Rs. in crores unless stated) 31, March 31, March 31, March 31, March 31, March 31, Dec 1999 2000 2001 2002 2003 2003 Average balances of interest earning assets Average Interest Rate (%) Interest Income Average interest bearing liabilities Interest rate for the above / average cost of funds (%) Interest Expenses Interest expenses apportioned to interest earning assets (%) Ratio of average earning assets to average interest bearing liabilities Net Interest Income Net Interest Margin (NII/Earning assets) (%) Gross Yield (Gross Income/AWF) (%) 15393.50 10.36% 1594.82 14029.60 7.87% 1104.03 7.17% 1.10 490.79 3.19% 10.95% 17679.35 10.44% 1845.19 16203.61 7.91% 1280.97 7.25% 1.09 564.22 3.19% 10.99% 19800.06 10.46% 2071.36 18199.53 7.62% 1386.56 7.00% 1.09 684.80 3.46% 10.92% 22439.72 10.13% 2272.84 20950.38 7.36% 1542.37 6.87% 1.07 730.47 3.26% 11.00% 25711.59 9.99% 2570.33 24196.99 6.86% 1660.56 6.45% 1.06% 909.77 3.14% 11.24% 29028.96 9.07% 1974.42 27032.25 5.83% 1182.95 5.43% 1.07% 791.47 3.64% 10.37%

47

Allahabad BankYield Spread (spread/AWF) (%) Cost of Borrowing (%) Return on Average Assets (%) Average share capital & reserves to average total assets (%) Cash EPS (Rs per share) 2.98% 8.83% 0.82% 3.42% 9.98 2.95% 9.81% 0.36% 3.31% 10.96 3.24% 11.84% 0.19% 3.16% 11.61 3.02% 9.35% 0.33% 2.96% 17.96 2.94% 9.47% 0.59% 3.91% 14.64 3.39% 7.81% 1.02% 5.44% 18.44

The above ratios have been computed on the basis of annual financial statements of Allahabad Bank for the above periods. % shown as on 31.12.2003 are on annualized basis.

Notes: 1. Interest earning assets consist of performing loans, investments in approved and unapproved securities, proportionate cash with Reserve Bank of India, call money/term money lent, deposits kept abroad, etc. 2. Interest bearing liabilities consist of deposits, call money borrowings, refinances, subordinate debts, Tier II bonds, etc. 3. Interest expenses apportioned to interest earning assets are calculated by multiplying total interest expenses by the ratio of average interest earning assets to average interest bearing liabilities. 4. Gross yield equals interest income divided by average interest earning assets. 5. Average cost of loan funds equals interest expenses divided by average interest bearing liabilities. 6. Yield spread represents the difference between gross yield and average cost of loan funds. 7. Return on average assets is the net profit for the year divided by average total assets. CAPITAL ADEQUACY RATIO The RBIs 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 amount of revaluation reserves on the Banks 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 General The Bank recognizes that management of risk is fundamental to the business of banking. The Banks approach to risk management is proactive. The primary goal of risk management is not to avoid risks inherent in business but to steer them consciously and actively. The basic objective is to strike a balance between risk and returns. For promoting a balance between risk and returns. adoption of best practices in Banking system, the Bank has set up a separate department named Risk Management Department to confront various types of financial & non-financial risks. Credit Risk Management Policy A high-powered Credit Risk Management Committee headed by ED has been formed. The committee pronounces policy on standards for presentation of credit proposals, financial covenants, rating standards and benchmarks, delegation of credit approving powers, prudential limits on credit exposures, asset concentrations, risk monitoring and evaluation, pricing of loans, provisioning and regulatory/legal compliance. Risk Management policies has been framed duly approved by Board of Directors. The policy addresses various key aspects like risk management structure, roles & responsibilities of Credit Risk Management Committee, Risk Management Department, process of risk management, risk gradation system, risk management monitoring, portfolio management, MIS, risk based pricing etc. The bank also implemented risk based supervision as per directive of the Reserve bank of India. The bank has installed a customized package to assess the credit risk comprising of Industry Risk, Business Risk, Financial Risk and Management Risk. This has enabled bank to undertake Portfolio Analysis on half yearly basis. Credit Risk Supervision & its Preparedness The Bank has modified its MIS to capture historical data for calculating Probability of Default (PD), Loss Given Default (LGD) and exposure at default for effective Risk Based Supervision as well as to asses the adequacy of provisions.

48

Allahabad BankThe Bank is also planning to introduce the revised inspection system based on degree of risk involved in the operation of branches & controlling offices. Knowledge and skill of Risk Management Architecture is being updated through intensive in-house training system. For Effective implementation of risk based supervision the bank has introduced credit audit in pilot basis as a part of Loan Review Mechanism. Market Risk With ongoing globalization and deregulation, the volatility of financial markets has increased substantially and its going to increase further in future. This will expose banks earnings as well as economic value to higher degree of risk. In order to cope with the challenges of free market economy, the bank has already formulated and implemented AssetLiability Management System. An Asset- Liability Management committee (ALCO) looks after the structural liquidity mismatch within the risk parameters laid down by the bank. The committee also takes care of interest rate risk, liquidity risk, equity risk, maturity mismatch risks and other type of risks related to market variables i.e foreign exchange rate, equity pricing, commodity pricing, etc. Operational Risk Operational risk is a result of failure of operating system in a bank due to certain reasons like fraudulent activities, natural disaster, human error or omission or sabotage. For mitigating and controlling the same, bank has strong and established internal control system. Apart from that, we also have a separate department, which formulates and monitors delegation of duties and responsibilities at different level. The department also keeps on formulating rules and checkpoints for improving System and Procedures to suit the changing environment. The Bank has formed operational risk management committee to look into operational risk aspect. Forex Risk In terms of the guidelines of the Reserve Bank of India, open positions are permitted to be maintained within the levels stipulated by the Management. The Bank is maintaining such open positions within the limits so prescribed by the Banks Board of Directors. Further, the Board of Directors of the Bank has also prescribed limits for gaps or mismatches in maturities of Banks Foreign Currency assets and liabilities and forward transactions in foreign exchange. The Bank is operating within the limits so fixed, thus minimizing the risks of mismatches in maturities and interest rates. The Value at Risk model prescribed by the FEDAI has been adopted and is being monitored so as to minimize the risks. Counter-party limits have also been fixed for dealings with the other banks with which the Bank has day-today dealings so as to limit the risk on individual counter-party banks. XV. INTERNAL CONTROL SYSTEM IN THE BANK

Internal inspection
Branches / Offices of the Bank are subjected to Regular Inspection by internal inspecting Officials at periodical intervals of 12 / 18 months. The Inspection Reports of branches / offices under the jurisdiction of Regional Offices are scrutinized and the broad thrust areas are taken up with the R.O.s concerned for speedy rectification. In respect of Branches rated Unsatisfactory, a brief summary is placed before the higher authorities, and the observations of the higher authorities are taken up with the branches for compliance. Similar is the case with Special Reports, which the Inspecting Officials submit from the spot itself in case of some serious type of irregularity observed during the course of inspection, for which urgent remedial steps are warranted to protect the interest of the Bank. Moreover, the progress towards up-gradation of Unsatisfactory Branches is placed before the Audit Committee of executives and observations / suggestions are promptly taken up for implementation. System audit All Branches are subjected to System Audit as on 28th February every year by the Regional Office concerned, to ensure that Banks laid down systems and procedures in vital operational areas are duly followed. Internal Inspectors / Concurrent Auditors also point out if any deficiency is observed on this score during the course of their inspection of Branches / Offices, so that prompt remedial measures are taken. Concurrent audit Branches including Large Branches, ELBs, VLBs, and other critical Branches are further subjected to Concurrent Audit, that is, simultaneous checking of transactions within a few days of its occurrence, by outside Chartered Accountant Firms. It is ensured that the deficiencies / shortcomings, including revenue loss, if any, are promptly rectified by the Branches concerned. Revenue audit Branches, which are not covered under Concurrent Audit, are subjected to Revenue Audit, also by outside C. A. Firms, so as to plug any possible revenue loss. E.D.P. audit EDP Audit is periodically conducted in TBM/ALPM Branches to ensure safety, security and integrity of data, so as to achieve the organizational goals effectively and efficiently. Dealing room inspection The Dealing Rooms of the Bank are subject to concurrent audit by the Chartered Accountant Firms. Other special investigation Whenever warranted, Special Investigation is also conducted at the Branch / Office concerned, to unearth any fraud / forgery etc. and plug the loophole. Vigilance Mechanism The Bank has a well-organised vigilance set-up to take care of the vigilance efficiently and effectively. Vigilance mechanism pursued by the Bank to contain fraud/forgery and malpractices in the Bank has been quite effective. The guidelines emanated from Central Vigilance Commission/RBI/GoI in respect of vigilance matters are promptly implemented and adhered to. Special emphasis is given to expeditious completion of disciplinary cases. Special emphasis is also laid on Preventive Vigilance and Educative Vigilance so as to ensure observance of the prescribed systems and procedures at field level and augment awareness about the need and implication of

49

Allahabad BankPreventive Vigilance among the Rank and File. Training programme for the employees for internal control and preventive vigilance are regularly held at the Banks training centre. Periodicals on vigilance are brought out. Apart from routine inspection/audit, Surprise Vigilance Inspection of branches is conducted on an ongoing basis. Housekeeping Housekeeping, which includes Balancing of Books, is constantly monitored and is generally satisfactory. Inter-branch reconciliation was given focused attention during the last few years and the lead-time was maintained at less than three months. The Bank has established systems and procedures for balancing of books of accounts for which specific guidelines have been provided to the field functionaries for proper house keeping. The Bank has centralised system of data processing and reconciliation of inter-branch transaction. Now with the de-centralised process, the data creation for inter-branch transaction is done at regional level. Matching reconciliation is done on a monthly/quarterly basis through IBR software at its Head Office. XVI. SUBSIDIARIES, AFFILIATES AND GROUP COMPANIES OF THE BANK Subsidiary Company Allbank Finance Ltd. is a wholly owned subsidiary of Allahabad Bank. The subsidiary was incorporated under the name of Allahabad Bank Nominees Ltd. on September 29, 1951 under the Indian Companies Act, 1913 primarily to hold the shares, debentures etc of the clients of Allahabad Bank purported to be securities against advances granted to them by the Bank to cope up with relevant provisions of the Companies Act and Banking Regulation Act. In 1957, its name was changed to Allahabad Bank Nominees Pvt. Ltd. Subsequently, the word Pvt. was deleted on April 12, 1961 in accordance with Section 43 A of Companies Act, 1956. On September 30, 1975, a fresh incorporation certificate was issued. The name of the company was changed to Allbank Finance Ltd. on February 27, 1991. The subsidiary was set up to undertake merchant banking activities and to undertake the business of leasing and all other kind of related financial services. Consequent upon the SEBI Rules and Regulations notified on December 9, 1997 for segregation of Capital Market and fund based activities into separate entities, the Company surrendered its Merchant Banking registration with SEBI with effect from July 1, 1998 and got itself registered as a NBFC with RBI on August 21, 1998. AllBank Finance Ltd. has not raised any Public Deposit and so it is not required to maintain CRR and SLR. The detailed financials of All Bank Finance Limited are as set out in the Part XIII of the Auditors Report in the Information Memorandum. The Board of Directors of the Bank has taken a decision to merge the subsidiary company with the Bank, for which necessary preparatory work is in progress. The merger will improve the financial position of the Bank and also facilitate asset growth through release of capital. Regional Rural Banks sponsored by Allahabad Bank The Bank has sponsored seven Regional Rural Banks (RRB) in the States of Uttar Pradesh and Madhya Pradesh in order to provide banking services in rural areas in pursuance of GoI policies. The RRBs together have 508 branches, deposits of Rs. 1699.64 crores and advances of Rs. 665.54 crores as on March 31, 2003. During the financial year 2002-2003, the growth of deposits and advances was11.78% and 20.77% respectively. For the year ended March 31, 2003, RRBs sponsored by the Bank have posted combined profit of Rs. 48.91 crores (without adjusting for the combined accumulated losses). All the RRBs are covered under the restructuring programme of the Government of India. Bhagirath Gramin Bank th Bhagirath Gramin Bank, established on 19 September 1976 has its Head Office at Sitapur in Uttar Pradesh. The operational area of the bank covers Sitapur in Uttar Pradesh. The audited financial position of Bhagirath Gramin Bank for the last five years is as under: Bhagirath Gramin Bank FY 1999 FY 2000 FY 2001 FY 2002 (Rs. in crores) FY2003 1.00 107.30 425.60 97.93 79.19 18.26 0.89

Capital 1.00 1.00 1.00 1.00 Reserves & Surplus 36.46 52.60 71.94 89.57 Deposits 295.63 328.32 367.65 385.89 Advances 48.88 49.79 71.10 76.34 Priority sector advances 47.15 48.36 56.51 60.91 Profit/ (Loss) 14.09 16.22 19.32 17.66 Productivity Per Employee 0.85 0.93 0.89 0.79 Transactions between Bahgirath Gramin Bank and Allahabad in the past three are as under : (Rs. in crores) Particulars (As on march 31) 2001 2002 2003

Deposit with Allahabad Bank 278.68 292.19 230.95 Refinance outstanding 2.97 3.47 NIL Chhatrasal Gramin Bank th Chhatrasal Gramin Bank, established on 30 March 1982 has its Head Office at Rath Road, Orai in Uttar Pradesh. The operational area of the bank covers district Jalaun, Hamirpur and Mahoba under Jhansi and Chitrakut dham divisions of Uttar Pradesh. The audited financial position of Chhatrasal Gramin Bank for the last five years is as under:

50

Allahabad BankChhatrasal Gramin Bank Capital Reserves & Surplus Deposits Advances Profit/ (Loss) Accumulated losses Productivity Per Employee FY 1999 1.00 118.59 42.77 1.22 11.60 0.56 FY 2000 1.00 135.90 45.17 1.79 9.81 0.74 FY 2001 1.00 165.50 60.85 2.57 7.24 0.92 FY 2002 1.00 186.31 81.42 2.82 4.42 1.09 (Rs. in crores) FY 2003 1.00 0.11 213.60 102.78 4.54 -1.29

Transaction between Chatrasal Gramin Bank and Allahabad Bank in the past three years are as under : (Rs. in crores) Particulars (As on march 31) 2001 2002 2003 Deposit with Allahabad Bank 91.76 78.75 63.03 Refinance outstanding 0.59 0.78 0.94 Saryu Gramin Bank Sarayu Gramin Bank established on August 9, 1983 has its Head Office at L.R.P Road, Lakhimpur-Kheri, Uttar Pradesh. The operational area of the bank covers Lahimpur-Kheri district in Uttar Pradesh. The audited financial position of Sarayu Gramin Bank for the last five years is as under: Saryu Gramin Bank FY 1999 FY 2000 FY 2001 FY 2002 1.00 33.48 153.06 75.48 69.09 9.07 1.48 (Rs. in crores) FY2003 1.00 43.34 154.60 94.73 87.15 9.86 1.62

Capital 1.00 1.00 1.00 Reserves & Surplus 10.68 16.56 24.69 Deposits 105.03 113.98 142.18 Advances 33.50 40.68 55.04 Priority sector advances 30.24 36.51 51.21 Profit/ (Loss) 4.92 5.94 8.13 Productivity Per Employee 1.25 1.39 1.43 Transactions between Saryu Gramin bank and Allahabad bank are as under : (Rs. in crores) Particulars (As on march 31) 2001 2002 2003 Deposit with Allahabad Bank Refinance outstanding 64.81 3.52 37.88 4.67 43.21 10.16

Sharda Gramin Bank st Sharda Gramin Bank, established on 31 March 1979 has its Head Office at Satna in Madhya Pradesh. The operational area of the bank covers Satna district in Madhya Pradesh. The financial position of Sharda Gramin Bank for the last five years is as under: Sharda Gramin Bank Capital Reserves & Surplus Deposits Advances Priority sector advances Profit/ (Loss) Accumulated losses Productivity Per Employee FY 1999 1.00 96.55 20.25 21.75 0.54 16.92 0.72 FY 2000 1.00 118.78 23.16 22.13 1.15 15.77 0.63 FY 2001 1.00 141.81 35.46 26.02 2.57 13.20 0.74 FY 2002 1.00 162.27 46.47 33.56 1.28 12.17 0.89 (Rs. in crores) FY 2003 1.00 -188.03 62.45 45.61 1.80 10.36 1.08

Transactions between Sharda Gramin Bank and Allahabad bank are as under : (Rs. in crores) Particulars (As on march 31) 2001 2002 2003 Deposit with Allahabad Bank Refinance outstanding 75.69 0.04 73.24 0.04 45.97 NIL

Sravasthi Gramin Bank th Sravasthi Gramin Bank, established on 4 March 1980 has its Head Office at Bahraich in Uttar Pradesh. The operational area of the bank covers two districts namely Bahraich and Sravasthi in Uttar Pradesh. The audited financial position of Sravasthi Gramin Bank for the last five years is as under:

51

Allahabad BankSravasthi Gramin Bank Capital Reserves & Surplus Deposits Advances Priority sector advances Profit/ (Loss) Accumulated losses Productivity Per Employee FY 1999 1.00 164.81 59.26 63.76 6.12 10.98 0.77 FY 2000 1.00 1.36 203.24 79.20 75.55 12.34 0.95 FY 2001 1.00 15.60 244.25 97.49 81.94 14.24 0.99 (Rs. in crores) FY 2002 FY 2003 1.00 17.51 252.93 101.76 86.62 6.44 1.16 1.00 24.30 281.16 111.22 96.25 6.83 1.28

Transactions between Sravasthi Gramin Bank and Allahabad Bank in the past three years are as under : (Rs. in crores) Particulars (As on march 31) 2001 2002 2003 Deposit with Allahabad Bank Refinance outstanding 116.76 1.44 119.00 2.86 108.90 0.36

Tulsi Gramin Bank th Tulsi Gramin Bank, established on 26 March 1981 has its Head Office at Banda in Uttar Pradesh. The operational area of the bank covers Banda and Chitrakoot district in Uttar Pradesh. The audited financial position of Tulsi Gramin Bank for the last five years is as under. (Rs. in crores) Tulsi Gramin Bank FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 Capital 1.00 1.00 1.00 1.00 Reserves & Surplus Deposits 150.65 179.38 203.93 231.49 Advances 57.88 66.66 88.50 108.23 Profit/ (Loss) 1.44 3.57 6.19 4.25 Accumulated losses 23.01 19.43 13.25 9.37 Productivity per Employee 0.73 0.86 0.88 0.90 Transactions between Tulsi Gramin Bank and Allahabad Bank in the past three years are as under : (Rs. in crores) Particulars (As on march 31) 2001 2002 2003 1.00 273.54 139.74 6.49 2.88 1.09

Deposit with Allahabad Bank 97.72 57.87 83.46 Refinance outstanding 2.60 NIL 4.70 Vindhyavasini Gramin Bank th Vindhyavasini Gramin Bank, established on 30 March 1983 has its Head Office at Mirzapur in Uttar Pradesh. The operational area of the bank covers two districts namely Mirzapur and Sonebhadra in Uttar Pradesh. The audited financial position of Vindhyavasini Gramin Bank for the last five years is as under: Vindhyavasini Gramin Bank FY 1999 FY 2000 FY 2001 FY 2002 (Rs. in crores) FY 2003

Capital 1.00 1.00 1.00 1.00 1.00 Reserves & Surplus Deposits 93.90 103.01 126.46 148.83 158.41 Advances 42.86 49.13 53.58 61.20 76.12 Priority sector advances 39.45 44.46 47.85 55.37 69.76 Profit/ (Loss) 0.85 1.87 2.37 0.64 1.12 Accumulated losses 5.43 3.56 1.19 1.18 1.24 Productivity Per Employee 1.08 1.21 1.19 1.18 1.32 Transactions between Vindhyavasini Gramin Bank and Allahabad Bank in the past three years are as under : (Rs. in crores) Particulars (As on march 31) 2001 2002 2003 Deposit with Allahabad Bank Refinance outstanding 97.72 2.60 57.87 NIL 47.95 NIL

52

Allahabad BankContingent liabilities of Regional Rural Banks As on March 31 2003, the contingent liabilities of Regional Rural Banks aggregating Rs. 7.76 crore as given in the following table. Sl. Name of the Gramin Bank Amount of contingent liability No (Rs. In crore) 1. Bhagirath Gramin Bank 6.15 2. Shravasthi Gramin Bank 0.81 3. Sharda Gramin Bank 0.76 4. Vindhyavasini Gramin Bank 0.04 Total 7.76 As per the RRB Act, RRBs are exempted from payment of Income Tax. They have complied with the CRR and SLR requirements. XVII. SIGNIFICANT REGULATORY MATTERS RELATED TO THE BANK

REGULATORY FRAMEWORK Allahabad Bank 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 Companies (Acquisition and Transfer of Undertakings) Act 1970, Banking Regulation Act, 1949 the RBI Act, 1934 and other related enactment such as the Bankers 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. The Allahabad Bank 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 Allahabad Bank may engage in, is specified and regulated by the Banking Regulation Act, 1949. Pursuant to the provisions of Banking Regulation Act, 1949, Allahabad Bank 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,Allahabad Bank 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) 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, Allahabad Bank 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.

Verma Committee Recommendations The Verma Committee was set up to identify weak and potentially weak banks in the country and for making recommendations for strengthening these banks and reducing systemic risk. The Verma Committee has suggested seven parameters for assessing a banks strength/ weakness covering three major areas namely: 1. Solvency 2. Earning Capacity and 3. Profitability. These parameters are as follows: Solvency Capital Adequacy Ratio, Coverage Ratio Earning Capacity Return on Assets, Net Interest Margin Profitability Ratio Ratio of operating profit to average working funds, Ratio of cost to income, Ratio of staff cost to net interest income (NII) + all other income. The above ratios are well known parameters on which banks performance and sustainability are judged. A study of these ratios in respect of a bank, historically or in comparison with its peers, gives a view of its growing strength or weakness over a period as also its ability to compete against others in the market. The working group observed that based on the above analysis, public sector banks could be classified in terms of their strengths or weakness under three broad categories: 1. Banks where none of the seven parameters are met. 2. Banks where all the parameters are met. 3. Banks where some of the seven parameters are not met.

53

Allahabad BankAllahabad Bank has been placed amongst nine banks in the third category for compliance with CAR but non-compliance with five or six of the remaining efficiency parameters for financial year 1998 and financial year 1999. The Bank has put in place the required systems to bring the entire operations under the purview of Asset Liability Management. The Bank has stepped up the recovery efforts and the net NPA has come down to 4.17%. The Bank has Risk Management Department in addition to a Credit Risk Management Cell. The Bank does not envisage impairment to banks solvency, earning capacity or profitability. 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 the Bank under section 35 of the Banking Regulation Act, 1949 was conducted by the Reserve Bank of India with reference to its position as on 31.03.2003. The Annual Inspection Report of the Reserve Bank of India has identified certain weaknesses in the system, operational irregularities 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. XVIII. OVERVIEW OF ORGANISATION STRUCTURE, MANAGEMENT AND SUPPORT FUNCTIONS Organisation Structure & Management Hierarchy and Responsibilities The Bank functions under the supervision of the Board of Directors consisting of the Chairman and Managing Director, the Executive Director and other Directors as nominated by the Government of India. The Bank has a management structure comprising Head Office, the Regional Office and the branches, covering major geographical areas. Board of Directors Sr. Name, Age and No. Experience 1 Shri O. N. Singh, CMD Age: 57 Yrs. Experience: 32 Yrs. 2 Shri K.K. Rai, ED Age: 59 Yrs. Experience: 40 Yrs. Shri G. Bhujabal Govt. Director Age: 46 Yrs. Experience: 20 Yrs. Ms. Sewali Chowdhary RBI Nominee Director Age: 54 Yrs Experience: 25 Yrs, Chief General Manager, RBI, Kolkata Shri R.B. Chaubey Director representing workmen Age: 57 Yrs. Experience : 33 Yrs. Shri Biswabandhu Bhattacharya Director representing officers. Age: 56 Yrs. Experience: 32 Yrs. Shri Bhupatiraju Subbaraju, Director Age: 57 Yrs. Experience: Social & educational activist Smt. Deepa Gupta Director Date of Appointment 04.12.2003 Date of Expiry of current term 31.07.2006 Residential Address 1A, Ronaldshay Road, Alipore Kolkata- 700027. Flat No. 9 Middleton Mansion 9, Middleton Street Kolkata. 20/4 Lodhi Colony New Delhi- 110 003 Other Director-ships AllBank Finance Ltd. (Chairman) AllBank Finance Ltd.

08.01.2001

30.06.2004

20.03.2002

Until further orders of GoI

National Insurance Academy, Pune Loss prevention association of India, Mumbai -Nil-

09/01/2004

Until further orders of GoI

Golap Kutir GNB Road, Silpukhuri Guwahati 781003, Assam

04.07.2000

03.07.2004 till the successor arrives

House No. B 16/38 B-3 Pandey Haveli Varanasi.

-Nil-

25.11.2003

24.11.2006

36A, Girish Avenue First Floor Kolkata- 700 003

-Nil-

28.08.2001

27.08.2004

50-52-15/4, Seetamma dara (NE), Vizag Distt. A.P. L-33, Kailash Colony New Delhi - 110048

-Nil-

05.11.2001

04.11.2004

-Nil-

54

Allahabad BankAge: 38 Yrs. Experience: CA

10

11

12.

Shri Amitav Kothari Director Age : 50 Yrs. Experience : 27 Yrs. As Chartered Accountant Dr. Zafar Obaid Director Age : 30 Yrs. Experience : Social Worker Shri Nakul Sen Anand Director Age : 57 Yrs. Experience :Financial Services Shri Deb Kishore Bhattacharya Director Age: 51 yrs Experience: High Court Advocate

20.12.2001

20.12.2004

8E, Neelkanth Apartment, 26B, Camac Street Kolkata - 700016 26, Dr. Rajendra Prasad Road New Delhi-110001

-Nil-

06.02.2002

05.02.2005

Zed Info Solutions (India) Private Limited

01.03.2002

28.02.2005

Anand Villa 10, Canal Road Jammu 97, Kusum Apartments 11, Gurusaday Road Kolkata - 700019

-Nil-

28.07.2003

27.07.2006

Nil

Management of the Bank The overall supervision and control of the Banks functions rests with the Board of Directors which consists of the Chairman & Managing Director and Executive Director, both appointed by the GOI, other Directors representing the Government, Reserve Bank of India, Employees and Officers of the Bank. The day-to-day affairs of the Bank are managed by the CMD, the ED, the Banks General Managers, Deputy General Managers who are assisted by a team of competent professionals. Key Management Personnel Name & Qualification Shri. O.N. Singh B.Com. (H), LLB., FCA, CAIIB Sri KK Rai BA, CAIIB Dr.Bikash Ghosh M.Sc(Ag) PhD, Dip. In Management Sri Jai Narayan Pandey M.Com, BL, CAIIB, Cert. Co-op DBKM, Dip. In Bank Management Sri Pankaj Mishra M.Sc(Ag), PGD in Bank Management Sri Bijan Ray, B.Com, ACA, CAIIB Sri Ram Somokhon Tripathi B.Com, CA, CAIIB Sri Samirananda Roy B.Com Sri Rabindra Kishore Nath M.Com, CAIIB Sri. Probir Moulik M.Sc. (Ag) Sri. Ajmal Saeeduddin B.Com., CA, DBM. Date of Joining the Bank 04/12/2003 05/01/2001 02/08/1971 05/11/1964 Experience in the Industry 32 years 40 years 33 years 39 years Position Held Chairman & Managing Director Executive Director General Manager General Manager Functional Responsibility Chairman & Managing Director Executive Director Credit Inspection, PSC & MSD

16/11/1972 16/08/1971 02/01/1973 19/11/2001 19/03/1965 16/11/1972 16/08/1971

31 years 32 years 31 years 31 years 38 years 31 years 32 years

General Manager General Manager General Manager General Manager General Manager General Manager General Manager

Personnel & Administration Recovery & Rehabilitation Finance & Accounts and Treasury Chief Vigilance Officer Regional Office, Kolkata (Metro) SPD, CA & Board Secretariat Deptt. Regional Office, Lucknow

Note: Except for Sri. O.N. Singh, Chairman & Managing Director, Sri KK Rai, Executive Director and Sri S.Roy, General Manager & CVO, all Key Managerial Personnel are working in this Bank since beginning of their career and hence experience in the bank is equivalent to the experience in the Industry. Sri. O.N. Singh and Sri K.K. Rai have been in this Bank for approx. 2 months and 3 years respectively, whereas Sri S.Roy has been serving since 2001 in our Bank.

55

Allahabad BankThe Key Managerial Personnel are on the roll of the Bank as permanent employees. The Key Managerial Personnel are entitled to the Compensation and benefits as applicable to all the permanent employees of the Bank. All the Key managerial Personnel are of the General Manager and higher grade and hence that compensation fall in the scale of Rs.19340 21300 p.m. The other benefit includes the festival loan, housing loan, reimbursement of certain expenses etc. as per employees service rules. Changes in Key Management Personal (since 01/01/1999) Name & Qualification Position Held Sri. O.N. Singh Chairman & Managing Director Dr. B. Samal Chairman & Managing Director Dr. B. Samal Chairman & Managing Director Sri Harbhajan Singh Sri K.K Rai Dr. Bikash Ghosh Sri Jai Narayan Pandey Sri Bishambhar Nath Sharma Sri Pankaj Mishra Sri Madhusudhan Rai Sharma Sri Bijan Ray Sri Gulshan Rai Bhatia Sri V.Muthu Swami Sri Sushil Kumar Pal Sri Narinder Kumar Sood Sri Uday Shankar Ghose Sri Ram Somokhan Tripathi Sri Subir Gangopadhyay Sri M.S.Bhattacharya Sri Samirananda Roy Sri P Gopala Krishna Murthy Sri Medam Venkata Reddy Sri Shyam Sunder Thapar Sri Rabindra Kishore Nath Sri Dipankar Bhattacharya Sri Pran Nath Rattan Sri. M.N. Roy Ajmal Saeeduddin Sri Sushil Kumar Pal Sri Probir Moulik Sri Medam Venkata Reddy Sri Shyam Sunder Thapar Sri Subir Gangopadhyay Sri. M.N. Roy XIX. CORPORATE GOVERNANCE Allahabad banks corporate policy is based on sound principles of corporate Governance. It holds high the shareholders value while catering also to the need of economy national priorities and corporate growth. Bank believes in high standard of ethical values transparencies and disciplined approach to achieve excellence in all fields of activities. It is also committed to comply with the best international practices coupled with openness and fairness ,which will lead the Bank to enjoy from customers and shareholders a tradition of trust. The Bank seeks to proclaim corporate excellence by Upholding shareholders value within principles of ethics and legal framework Extending best of services to its customers. Proclaiming a free and fair environment for its customers and employees, investors and other sections of the society at large Ensuring a proactive Management free from bias, ensuring fair justice to all sections of the society. Board Meeting During the financial 2002-03, 14 board meetings were held on following dates as against minimum of 6 meetings prescribed under clause 12 of Nationalized Banks ( Management and Miscellaneous Provision) Scheme 1970 Sl. Date Sl. Date Sl. Date Sl. Date 1. 11.04.2002 5. 30.07.2002 9. 23.11.2002 13. 04.03.2003 2. 13.05.2002 6. 14.08.2002 10. 02.12.2002 14. 29.03.2003 3. 05.06.2002 7. 20.09.2002 11. 17.12.2002 4. 10.06.2002 8. 02.11.2002 12. 29.01.2003 Chairman & Managing Director Executive Director General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager & CVO General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager Reason for change Appointed by the Govt. of India w.e.f. 04/12/2003. Retired w.e.f. 31/03/2003 Appointed by the Govt. of India w.e.f. 20/04/2000. He was Executive Director in this Bank. Completed tenure on 31.03.2000 Appointed by Government of India w.e.f. 05/01/2001 Promoted w.e.f. 20/02/1999 Promoted w.e.f. 20/02/1999 Retired w.e.f. 31/07/1999 Promoted w.e.f. 01/08/1999 Retired w.e.f. 31/12/1999 Promoted w.e.f. 01/01/2000 Retired w.e.f. 30/06/2000 Retired w.e.f. 30/06/2000 Promoted w.e.f. 01/07/2000 Retired w.e.f. 30/09/2000 Retired w.e.f. 31/12/2000 Promoted w.e.f. 17/04/2001 Promoted w.e.f. 17/04/2001 Retired w.e.f. 31/07/2001 Appointed on 19/11/2001 Retired w.e.f. 31/01/2002 Promoted w.e.f. 09/02/2002 Promoted w.e.f. 09/02/2002 Promoted w.e.f. 09/02/2002 Retired w.e.f. 31/03/2002 Retired w.e.f. 31/07/2002 Promoted w.e.f 11/01/2003 Promoted w.e.f 11/01/2003 Retired w.e.f. 31/01/2003 Promoted w.e.f 01/02/2003 Retired w.e.f. 31/05/2003 Retired w.e.f. 31/05/2003 Retired w.e.f. 31/01/2004 Retired w.e.f 31/01/2004

56

Allahabad BankCommittees of Directors / Executives : The Bank has constituted various committees of directors and / or executive to look into different areas strategic importance in terms of Reserve bank of India and Govt. Of India, guidelines on Corporate Governance and Risk Management System. The important committee of the board are as under : (a) Management Committee of the Board In pursuance of clause 13 of Nationalized Bank (Management & Miscellaneous provision) Scheme, 1970 read with the directive of the Ministry of Finance, Government of India, a management Committee of the Board has been constituted to consider various matters of materials significance like sanctioning high value loan proposal, compromise/write-off, sanction of capital and revenue expenditure premises, investments, donation etc. The committee consists the Chairman and Managing Director, Executive Director, Nominee Directors of Reserve Bank of India and Got. Of India and Director nominated by Govt. of India under section 9 (3) (g), who constitute as Regular Member of the committee and two other Directors nominated by the Board for a period of 6 months each on rotation basis. During the year 18 meeting of Management Committee were held. (b) Audit Committee of the Board The Bank in pursuance to the directives of Reserve Bank of India and having regard to the fundamentals of corporate governance originally constituted an audit committee on 31.05.1994 and further reconstituted at regular intervals, latest being with effect from 08.03.2002. The committee comprise of 5 directors with Non- Executive Independent Director holding professional qualification of Chartered Accountant, as Chairman of the Committee. The member of committee are the Executive Director, Nominee Director of Govt. Of India and Reserve Bank of India and 2 other directors. The main function of Audit Committee is to assess and review the financial reporting system of the Bank to ensure that the financial statements are correct, sufficient and credible. It reviews with the management the annual financial statement before their submission to the Board. The Audit Committee also provides direction and oversees the operations of total audit function of the Bank including the organization, operation and quality control of internal audit and inspection within the Bank and follow up on the Statutory/External audit of the Bank and inspections of the RBI. The Committee also reviews the adequacy of internal control system, structure of internal audit department, its staffing pattern and discussion with the internal auditors/ Inspectors on any significant finding and follow-up action thereon. It further reviews the financial and risk management policies of the Bank. Regarding Statutory Audit, the Audit Committee interacts with the External Auditors before finalization of Annual/ Semi- annual Financial Accounts and Reports. It also follows up on various issues raised in the Long Form Audit Report (LFAR). During the year 2002-2003, 10 meetings of the audit Committee of the Board were held. (c) Committee of Directors: The Committee of Directors has been constituted to review disposal of vigilance and non-vigilance disciplinary cases and other cases of strategic importance in term of Reserve Bank of India & Government of India guidelines on corporate Governance & Risk Management System. The committee consists the Chairman and Managing Director, Executive Director, Nominee Directors of Reserve Bank of India and Govt. Of India. The Committee of Directors met 3 times during 2002-03. (d) Shareholders/ Investors' Grievances Committee: The Bank has constituted the Shareholders/Investors Grievances Committee on 04.03.2003 with a purpose of redressal of shareholders and investors complaints on matter of their interest. The committee include Executive Director and three other Non-Executive Directors out of which two are on rotational basis of six months. The Committee ensures that all Shares Certificates are issued within a period of one month of the date of lodgment for transfer, subdivision, consolidation, renewal, etc. The Committee further monitors the redressal of investors' complaints in a time bound manner. The Bank received 3911 number of complaints during the year 2002-03, out of which 3813 complaints have been resolved to the satisfaction of investors. 98 complaints were pending as on 31.03.2003 for completion of process, which have since been resolved. 115 cases of transfers involving 40500 shares were pending as on 31.03.2003, which has since been effected. The Committee held its first meeting on 29-03-2003. Sri Narendra Singh, Deputy General Manger, Finance & Accounts has been designated as the Compliance Officer of the Bank. Sri Peter Barua, Company Secretary, also acts as Secretary to the above committee.

57

Allahabad Bank(e) Risk Management Committee: In pursuance to the directives of the Reserve Bank of India, a risk management committee of the board has been constituted on 04.03.2003. The committee consists the Chairman and Managing Director, Executive Director, Nominee Directors of Reserve Bank of India and Govt. Of India and four other Directors. The Risk Management Committee will devise the policy and strategy for integrated risk management containing various risk exposure of the Bank including credit risk. The Committee held its first meeting on 29-03-2003. (f) Share Transfer Committee The Bank is having a Share Transfer Committee comprising of 2 officials from the Bank and 2 from the Registrar and Share Transfer Agent M/s. Karvy Consultant Limited. The Committee meets at regular intervals and gives effect to transfer / transmission of shares. (g) ALM Committee In pursuance of the RBI guidelines, an Asset Liability Management Committee (ALCO) of the Bank comprising of the Chairman and Managing Director / Executive Director, Functional / Departmental Heads has been formed. In our Bank all the General Managers of Head Office participate in the meetings. The Committee is responsible for adhering to the directives of the Board / any other committee of the board in respect of Asset Liability Management. The ALCO is a decision making authority responsible for Balance Sheet planning. A total of 14 meetings of the ALCO were held during the year 2002-03. Remuneration of Directors The remuneration including traveling and halting expenses to Non-Executive Directors is being paid as decided by the Central Govt. in consultation with the Reserve bank of India from time to time in terms of Section 17 of Nationalized Bank Scheme 1970. The Chairman and Managing Director and Executive Director are being paid remuneration and reimbursement of traveling and halting expenses as per rules framed by the govt. of India in this regard. General Body Meeting The details of General body meeting held during the year 2003-04 are given below: Name of Meeting Date & Time First Annual General Meeting 30.06.2003 at 11 AM

Venue J.B.S. Science City Auditorium Haldaen Avenue Kolkata-46

XX. HUMAN RESOURCES The total manpower of the Bank as on December 31, 2003 was 19443 comprising 6667 officers, 9054 clerks and 3722 sub-staff. The manpower position of the Bank for the last five years is as under: As on March 31, March 31, March 31, March 31, March 31, December 31, 1999 2000 2001 2002 2003 2003 Officer 6858 6813 6501 6789 6714 6667 Award Staff 10620 10731 10202 8893 9003 9054 Sub-Staff 4867 4581 4306 4178 3798 3722 Total Number of Employees 22345 22125 21009 19860 19515 19443 The business per employee of the Bank has been on the increasing trend. The employee productivity parameters during the last five years are depicted in the table below: (Rs. in lacs) As on March 31, March 31, March 31, March 31, March 31, December 30, 1999 2000 2001 2002 2003 2003 Business per Employee 90.21 105.68 129.48 153.54 183.29 204.09 Net Profit per Employee 0.60 0.31 0.19 0.40 0.87 1.25 Human Resources Development The Bank has accorded high importance and given top priority to Human Resources Development and allied function in order to upgrade the knowledge , skill and concept at every level in the context of the emerging realities. In tune with the changes taking place in the Financial including the Banking Sector in the country the Bank has streamlined its HRM Policy perspective and objectives so as to enable it to respond proactively to the environmental challenges within and outside. Requisite steps and course of actions have been duly initiated to enhance the efficiency, resilience and competitive spree of the Bank in various ambits of functioning as under: 1. RECRUITMENT The Bank has strived to inject professionalism and functional expertise of the personnel in two fold e.g. by making selective recruitment in specialist cadre and probationary officer ii) by raising potential personnel from within.

58

Allahabad Bank2. CAREER PATH / PROMOTION In order to make the promotion process more flexible it has been contemplated to incept fast track promotions in various grades while according due importance to the aspect of seniority as well. To focus on improving skills of manpower for meeting emerging needs in this moment of change and in the context of the emerging trends and realities the Bank has accorded a high importance and given a top-slot to the HRD and allied functions like i) functional productivity, ii) managerial productivity and iii) individual productivity. INTERNAL TRAINING The Bank has been imparting training to its officers and staff members through 6 Internal Training Institutes out of which 2 are meant for officers and 4 for Award Staff members. In order to make the Internal Training more effective and result-oriented the measures like i) review and revision of training curricula. ii) application of training methodology comprising audio visual games and appliances, case studies, role playing, mock interviews, in basket exercise, group discussion, field visits etc. are resorted to. iii) faculty selection and developments of faculties through induction training, training in specific subjects, participation in seminars/conferences, identification of training needs, evaluation of faculty members, external and in-house training etc.

3.

4. PREPARATION OF TRAINING PLAN Preparation of perspective plan is made on the basis of the review of the past-plan, the requirement of the current and ensuing periods and the recommendations in respect of training and development coming from the demand centres as well as out of the appraisal system. 5. 6. OVERSEAS TRAINING In order to have glimpses of and exposure to the International Banking developments, Executives are deputed to various Overseas Programmes from time to time. OTHER HRD ACTIVITIES i) inter-face with External Organisations, ii) counseling of individual grievances, iv) consideration and giving due cognizance of individual suggestions, v) organising seminar on bank marketing and going to customers, vi) conducting special training programmes on internal control, vii) imparted on-the-job training to RBI officers/Executives and students deputed by different institutions, viii) providing faculty support on HRD and allied issues, ix) communication with Government, RBI, IBA, FIB, other Banking & financial Institutions within the country and outside with other Banks and bodies in regard to HRD tools, techniques and issues are made from time to time etc. x) performance management. xi) leadership development etc., so as to transform our Bank to a universal financial services organisation.

XXI. INFORMATION TECHNOLOGY In the fast changing economy, banking in India gradually transformed from prudential to a liberalized and competitive banking. Technology has become a important tool for Banks to carve a niche for themselves and to have an edge over competition

Induction of Information Technology in Allahabad Bank started with computerisation of two Branches, one at Mumbai and the other at New Delhi with Advance Ledger posting Machines as pilot projects in 1985. Since then, the Bank has always been in the forefront of Public Sector Banks in introducing appropriate technology in its various Offices / Branches in line with the guidelines / guidelines received from Government of India, RBI, IBA etc. Bank has availed of Modernisation and Institutional Development Loan of Rs 63.41 crores from World Bank with an objective to introduce latest technology for the customers. The Bank has so far computerised 923 Branches / extension counters out of which 645 branches are running with Total Branch Automation (TBA) package and 278 branches / extension counters are partially computerised. Work on computerisation of another 115 Branches are under progress and 109 Branches will be converted from partial to total mechanisation project by March 04. Bank has computerised 77 % of its Bank business under computerisation. To comply with the CVC directives to cover 100% of Banks business through computerisation, Bank is all set ready to achieve it by Dec.04. In Hindi speaking areas, to facilitate the customers, the bank has so far implemented Bilingual Software in 50 Branches. In order to spread the awareness of computerisation among the rural mass, bank has also computerised 102 rural branches, some of which are situated at the remote area. Bank has computerised all its specialized Branches including the International Business Branches, Service Branches, Industrial Finance Branches etc. Apart from computerisation of the Branches, the Banks strategy towards technological up-gradation includes installation of ATM, Telebanking, Internet banking etc. Bank has already installed 71 ATMs at important centres across the country and establishment of connectivity among the ATMs through switch will be completed by Mar 04. Bank has signed an agreement with Corporation Bank to mutually share over 1100 ATMs at important centres across the country. Tele-banking facilities based on Interactive Voice Response System (IVRS) is available at 13 Branches and internet banking facility is also available for the corporate customers in 5 branches. The Bank is providing various technology based customer services e.g. EFT(Electronic Fund Transfer), ECS (Electronic clearing Services), NDS ( Negotiated Dealing System) and PDO ( Public Debt Office) etc launched by RBI. The bank is also participating in SFMS (Structured Financial Messaging Solution) and RTGS ( Real Time Gross Settlement) projects launched by RBI. The facility for online Direct Tax Collection has been effected in 63 branches & is planned to be extended to 163 branches by 31.03.04.

59

Allahabad BankThe Bank has initiated introduction of Centralized Banking Solution covering 400 high business branches to achieve effective control and risk management as well as provide the facility of single platform thus facilitating customer relationship management. For introduction of appropriate technology in line with the trend prevailing in the banking Industry, the Bank is going to appoint some premium institutions as consultant of the Bank. The Bank has setup up intra-city leased line network to connect 66 major Branches and Offices in 9 cities and has plan to connect another 200 Branches in the current year. This will enable the bank to provide better customer service. The Banks Corporate Office at Kolkata and all of its 48 Regional Offices are computerised. By use of its 24 VSAT installed under INFINET of IDRBT, currently connects its 117 administrative offices / important branches across the country. The bank has its own homepage (http://www.allahabadbank.co.in) on internet for assisting the customers to know the various products and schemes of the bank as well as application and sanction of various retail loan scheme. XXII. STOCK MARKET DATA OF THE EQUITY SHARES OF THE BANK The equity shares of the Bank are listed on the Stock Exchange, Mumbai, National Stock Exchange of India Limited (NSE) and Kolkata Stock Exchange. (i) The following table shows the high and low of daily closing share prices of the Bank on The Stock Exchange, Mumbai (BSE) and the National Stock Exchange of India Limited (NSE) for the periods indicated: Period BSE NSE High (Rs.) Low (Rs.) Average * (Rs.) High (Rs.) Low (Rs.) Average * (Rs.) 2002-2003 18.30 9.20 13.55 18.75 9.00 13.64 April 2003 16.20 13.00 14.71 16.20 13.15 14.72 May 2003 22.90 15.15 17.38 22.40 15.00 17.34 June 2003 20.70 16.65 17.74 21.00 16.50 17.73 July 2003 19.90 16.50 18.25 19.85 16.50 17.16 August 2003 21.50 18.00 19.04 21.85 18.00 19.04 September 2003 20.20 17.05 18.28 20.15 17.00 18.12 October 2003 24.65 18.50 21.47 25.30 18.55 21.40 November 2003 24.00 20.00 21.92 23.80 20.00 21.91 December 2003 27.50 21.65 24.10 26.95 19.50 24.09 * Average of the daily closing share price (ii) The following table shows the number of shares traded on the days High and Low prices of the Banks shares recorded on The Stock Exchange, Mumbai (BSE) and the National Stock Exchange of India Limited (NSE) for the last nine months: Period BSE NSE High Low High Low Date Number Date Number Date Number Date Number of of of of shares shares shares shares traded traded traded traded April 2003 9.4.2003 445000 1.4.2003 34000 9.4.2003 1129000 1.4.2003 168000 May 2003 30.5.2003 1313000 2.5.2003 283000 30.5.2003 3734000 2.5.2003 408000 June 2003 4.6.2003 412000 24.6.2003 134000 4.6.2003 1653000 24.6.2003 360000 July 2003 28.7.2003 576000 2.7.2003 181000 17.7.2003 2255000 2.7.2003 505000 August 2003 28.8.2003 687000 6.8.2003 162000 28.8.2003 2195000 13.8.2003 603000 September 2003 1.9.2003 241000 19.9.2003 89000 1.9.2003 796000 23.9.2003 364000 October 2003 20.10.2003 1800000 3.10.2003 68000 20.10.2003 5760000 7.10.2003 879000 November 2003 12.11.2003 303000 25.11.2003 125000 12.11.2003 1252000 21.11.2003 492000 December 2003 30.12.2003 263000 2.12.2003` 163000 29.12.2003 890000 2.12.2003 474000 (iii)The total volume of securities traded in each month on The Stock Exchange, Mumbai (BSE) and the National Stock Exchange of India Limited (NSE) during the current Financial Year is as follows: Period Total number of shares traded BSE NSE April 2003 2566000 8880000 May 2003 9880000 34060000 June 2003 4630000 15589000 July 2003 7012000 23012000 August 2003 7437000 22994000 September 2003 2756000 10466000 October 2003 12275000 41626000 November 2003 3144000 10974000 December 2003 6913000 21272000 The equity shares of the Bank are actively traded at all the Stock Exchanges where they are listed. XXIII. MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL PERFORMANCE

60

Allahabad BankFinancial Highlights of the Bank for the last three financial years as per the audited balance sheets of the Bank are as given in the following table: Year/ Period ended March 31, March March Dec. 31, %age %age %age 2001 31, 2002 31, 2003 2003 change change change from from 2001 from 2002 Dec. 2002 to to 2002 to 2003 Dec. 2003 Total Income 2310.36 2657.76 3094.70 2422.12 15.04 16.44 7.73 Interest Income 2071.36 2272.84 2570.33 1974.42 9.73 13.09 1.76 Other Income 239.00 384.92 524.37 447.70 61.05 36.22 45.25 Total Expenditure 2044.34 2249.76 2578.87 1866.04 10.04 14.62 0.52 Interest Expenditure 1386.56 1542.37 1660.56 1182.95 11.24 7.66 (2.35) Operating Expenditure 657.78 707.40 918.31 683.09 7.54 29.81 5.90 Profit Before Provisions & Contingencies Provisions & Contingencies Net Profit 266.01 226.10 39.91 407.99 327.77 80.22 515.83 349.84 165.99 556.08 313.84 242.24 53.37 44.97 101.00 26.43 6.73 106.91 41.87 11.42 119.69

Significant items of income and expenditure for the first nine months ended December31, 2003 (Comparison of financials for the first nine months ended December31,2003 with the corresponding period in the previous year) Net Profit: Net Profit of the Bank increased from Rs. 110.26 crores in the first nine months ended December31, 2002 to Rs 242.24 crores in December 31, 2003 showing a growth of 119.69%. Interest Income: Total interest income increased from Rs. 1940.13 crores to Rs.1974.42 crores. Of the components of interest income, income on advances improved from Rs. 912.33 crores in December 2002 to Rs 986.37 crores in December, 2003. Global Net Advances of the Bank increased by 17.88% from Rs. 11701.98 crores as on 31-12-2002 to Rs. 13794.47 crores as on 31-12-2003. Other Income: In view of increasing pressure on interest spread, the Bank considers income from non-fund/non interest business equally important for generating additional income to improve profitability. Other income of the Bank comprises income from commission, exchange and brokerage, income from investment trading and forex operations, dividend income and miscellaneous income. These incomes are earned in the normal course of business of the Bank. Profit on sale of investments during nine months ended December 2003 increased to Rs. 284.18 crores as against Rs. 174.25 crores in the previous corresponding period. Bank's income from commission, exchange and brokerage showed a rise by Rs. 25.18 crores in the nine months ended December, 2003. The total other income has grown by 45.26% from Rs.308.21 crores during the nine months period ended December 31, 2002 to Rs. 447.70 crores during the first nine months ended December31,2003. Interest Expenses: Interest paid on deposits declined from Rs. 1176.07 crores in nine months ended December2002 to Rs. 1152.29 crores in nine months ended December 2003 with the growth in global deposits from Rs. 24752.59 crores as on December 2002 to Rs. 28107.40 crores as on December 2003. Operating Expenses: Establishment expenses of the Bank for the first nine months ending 31 December 2003 increased marginally to Rs.398.66 from Rs.395.23 crores over corresponding period of previous year. Other operating expenses of the Bank for the first nine st months ending 31 December 2003 increased to Rs.284.43 (including amortization expenses on investment of Rs.43.39 crores ) from Rs.249.80 crores (including amortization expenses on investment of Rs.14.84 crores) over corresponding period of previous year. Total Income: Total income of the Bank went up by Rs. 173.78 crores from Rs.2248.34 crores in nine months ended December2002 to Rs. 2422.12 crores in nine months ended December,2003. Total Expenditure: While the total income of the Bank went up by Rs. 173.78 crores, the total expenditure of the Bank increased only by Rs. 9.64 crores or from Rs. 1856.40 crores to Rs. 1866.04 crores. Significant items of income and expenditure during 2002-03 (comparison of financials for the year ended March 2003 with March 2002) Net Profit: Net Profit of the Bank increased from Rs. 80.21 Crores in 2001-02 to Rs. 165.99 Crores in 2002-03 showing a growth of 106.91%. Interest Income: Interest income from advances improved from Rs. 1060.22 Crores in 2001-02 to Rs. 1211.90 Crores in 2002-03. Gross Advances of the Bank increased by 14.15 % from Rs. 11815.01 Crores as on 31-03-2002 to Rs. 13486.94 Crores as on 31-03-2003. Gross investments of the Bank increased by 19.20% from Rs. 10466.26 Crores as on 31-03-2002 to Rs. 12476.04 Crores as on 31-032003. Interest earned on investment also went up to Rs. 1187.75 Crores in 2002-03 from Rs. 1111.93 Crores in 2001-02. The net interest income of the Bank improved from Rs. 730.47 Crores in 2001-02 to Rs. 909.77 Crores in 2002-03. Other Income: Commission and exchange income of the Bank declined slightly from Rs. 143.47 Crores in 2001-02 to Rs. 143.21 Crores in 2002-03. Due to an active securities market profit on sale of investments increased from Rs. 193.03 Crores in 2001-02 to Rs. 336.95 crores in 2002-03. Consequently total other income of the Bank increased from Rs. 384.91 Crores in 2001-02 to Rs. 524.37 Crores in 2002-03. 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 increased from Rs. 1508.08 Crores in 2001-02 to Rs. 1614.90 Crores in 2002-03 due to growth in deposits from Rs. 22665.94 Crores as on 31-03-2002 to Rs. 25463.38 Crores as on 31-03-2003.
st

61

Allahabad BankOperating Expenses: Establishment expenses of the Bank for the year ended 31 March 2003 increased to Rs.513.50 from Rs.492.45 st crores in previous year. Other operating expenses of the Bank for the year ended 31 March 2003 increased to Rs.404.81(including bad debt written off to the tune of Rs.175.62 crores) from Rs.214.95 crores (including bad debt written off to the tune of Rs.2.20 crores) in previous year. 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: Banks 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 959 rural branches where it has monopoly in business. The large network of rural and semiurban branches ensure that a huge captive business automatically flows in to the bank. Servicing Behavior: The Bank has been servicing all its principal and interest liabilities on time and there have been no defaults. Business Environment In terms of economic growth, 2002-03 has not been very encouraging. The economy, hitch was already battling with lack of demand, had to contend with drought like situation in several parts of the country as also the uncertainty caused by the war in Gulf. Lack of adequate rainfall resulted in negative growth in agriculture, which not only pulled down the overall growth rate but also affected the sectors dependent on rural economy. As per advance CSO estimates, GDP growth for 2002- 03 is placed at 4.4% propped up by higher growth rates in industrial (5.8%) and services sectors (7.1%). While the annual rate of inflation on an average basis was lower at 3.3% as against 3.6% in the previous year, there has been an increase in the rate as measured by Wholesale Price Index (WPI). Inflation rose to 6.2% on a point-to-point basis by the end of March 03. With peace returning in the Middle-East and consequent easing of petroleum prices, inflation rate is expected to settle at lower levels. As inflationary situation remained benign for better part of the last year, a soft interest rate environment prevailed even with high government borrowings. This was facilitated by easy liquidity conditions. Banks reduced their term deposit rates, more pronouncedly for longer term. In consonance with lower cost of funds, banks have reduced their lending rates too. Besides big corporates, declining interest rates have benefited retail customers too, specially in the housing sector. Situation in external sector remained buoyant. Backed by higher exports, quicker repatriation of export proceeds, high remittances and largely non-debt inflows, foreign exchange reserves increased by as much as US $21.3 billion during the year and exceeded US $75.0 billion by the year end. Large reserves provided a cushion to bear the burden of increased crude oil prices during the last quarter. Money supply (M3) and deposit growth of ASCBs at 12.1% and 12.2% respectively was within expected levels. Substantial increase in credit flow to the commercial sector reflects industrial recovery. Non-food credit (net of ICICI merger effect) rose by 17.8% as against 13.6% in the previous year. Also the incremental non- food credit-deposit ratio has been significantly high at 79%. While the global economic scenario remains uncertain, Indian economy is expected to bounce back, aided by normal monsoon as forecast by the Meteorological Department. Increased infrastructure spending, higher demand for corporates and continued buoyancy in retail sector is expected to drive the demand for credit during the coming years. Asset Management & Recovery Through concerted efforts at all levels, there has been substantial reduction in NPAs on account of Cash Recovery, Up-gradation and Compromise/Write-Off to the tune of Rs.570.95 crore during 2002-03. Cash recovery by the Bank was Rs.94.14 crore as compared to Rs.83.74 crore during 2001-02. Continuous efforts have enabled the Bank to upgrade NPAs to the tune of Rs.143.35 crore. In addition to above, the bank has recovered a sum of Rs.106.52 crores through compromise settlement & written off a sum of Rs.226.94 crores. Through continuous and close monitoring, the Bank has also been able to contain the slippages at much lower level than the last year. The Bank had set up Task Forces for recovery in all the regional offices. The active involvement of this special task force has been instrumental in substantially containing slippages and thereby enabling reduction in the NPAs. During the year 2002-03, the slippages was Rs.410.60 crore as against the figure of Rs.530.62 crores during previous year. The initiatives of the Bank in improving asset quality and containing NPAs are reflected in the rise in the share of standard assets from 83.05% in the earlier year to 86.35% during 2002-03. Gross non-performing advances at Rs.1841.50 crore constitutes 13.65% of gross advances, which is lower than the last years figures of 16.94%. There is a decrease in gross NPAs by Rs.160.35 crore as compared to
st

62

Allahabad Bankthe gross NPAs as of March 02. Net NPAs as percentage to net advances have reduced from 10.57% as of March 02 to 7.08% as of 31 st March' 03 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 has come as a big positive for the banking sector and will go a long way in improving the recovery climate in the country. The Bank has sent notices to 1811 borrowers under the Act, involving an amount of Rs.575.71 crore. Commercial & Institutional Credit The year 2002-03 witnessed a general slow down in economic and industrial activity in the initial stages but showed signs of picking up towards the end of the year. During the initial part of the year, demand for fresh credit from industry and trade as also credit off-take was low. Intense competition prevailed amongst banks in extending credit at lower rates. The softening of interest rates has made it possible for top rated large corporates to demand funds at cheap rates. For profitable deployment of funds, the Bank had to tap segments hitherto not focused upon. Recognising the importance of small and medium segment in the economy, the Bank introduced two new schemes named Merchant Credit Scheme and all Bank Trade for Small and Medium Segment, aimed at providing this segment with short and medium-term finance at softer rates. In order to facilitate expeditious credit delivery to this segment 9 Mid Business Boutiques were opened and additional powers were also given to field functionary to get good result from this scheme. Retail banking The huge size of the Indian market, advent of consumerism and potential for expanding the clientele base are amongst a host of factors that have led to the retail revolution that the country is witnessing today. Retail Banking is providing the much-needed succour in the wake of increasing financial disintermediation that the banks are experiencing. In order to provide a major impetus to the retail banking segment, a separate Marketing Department was set up under the charge of a Asstt. General Manager. Major modifications were made in almost all the retail products during the year by systematically taking up for review all the products and making them more competitive. New products launched include : All Bank Mobike Scheme - Loan for purchasing of two wheelers by salaried persons, professionals and self employed persons, businessman and agriculturalist, AL-Property Scheme - Loan for any purpose for meeting business, credit needs by offering residential building as security in the form of equitable mortgage, AL Abhusan Scheme - Loan is given to working and non-working woman for purchase of gold and diamond jewellery. Other retail initiatives include rationalisation of service charges, simplified documentation, intensive training through locational seminars and a focused publicity campaign. Banks Treasury operation Treasury operations of the Bank continue to occupy the centre- stage in the Banks focused approach towards improving efficiency and maximising profit. With the setting up of Specialised Integrated Treasury Branch at Mumbai, the Bank has leveraged the advantages of integration, technology and information. Bank is expected to get the good result from the same in coming years. While ensuring full compliance with various regulatory prescriptions and managing the liquidity position with fleet- footed pro-activeness, it has increased trade volumes in all financial markets. The Bank has emerged as one of the major players in the domestic debt market taking both long term and trading positions. The Treasury Mid Office, which has already been established as part of the integration process, is gradually being made functional and provides support in respect of identifying, measuring and mitigating various market risks by using sophisticated tools like Value at Risk (VaR). With integration in the offing, the activities of the mid office are also being strengthened further. Material Developments: In the opinion of the Directors of the Bank, there have been no material developments after the date of the last financial statements as disclosed in the Information Memorandum, which would materially and adversely affect or are likely to affect the trading or profitability of the Bank or the value of its assets, or its ability to pay its liabilities within the next twelve months, other than what has been already set out elsewhere in this Information Memorandum. Particulars Regarding Listed Companies There is no other listed company under the same management. XXIV. BASIS FOR INTEREST RATE Qualitative Factors 1. Nationalised Bank of the country with an impressive track record . 2. Bank Capital Adequacy Ratio comfortably placed at 11.15% , well above the RBI norms of 9.00% as on 31.3.2003. 3. Operating Profit of the bank increased by by 26.43% from Rs.407.99 crores during 2001-02 to Rs.515.83 crores during 2002-03. 4. Net NPA to Net Advance ratio of the bank decreased to 7.08%as on 31.3.2003 from 10.57% as on 31.3.2002. 5. Net profit of the bank at Rs.165.99 crores as on 31.3.2003 has shown a rise of 106.94% over previous year. 6. Bank has recorded a growth of 12.30% in deposit and 14.15% in advance during 2002-03. XXV. OUTSTANDING LITIGATIONS, DEFAULTS AND MATERIAL DEVELOPMENTS

63

Allahabad BankAgainst the Bank As on 31 December 2003, there were 907cases including writ petitions filed by employees/ ex-employees, suits/ writs by customers and consumer cases with aggregate claim of Rs. 145.50 crores for which no contingent liability has been provided for. Out of these cases, 226 pertain to consumer protection, 14 pertain to Banking Ombudsman, 198 pertain to Service matter compensation, 61 pertain to premises/eviction matters, 135 pertain to recovery of dues in the civil court, 22 pertain to other banking operations and 233 pertain to other money claims. Out of these, the claim amount is above Rs. 100 lakh in 18 cases, the details of these cases are given in the table in the following section. In addition, there are following cases against the Bank. Criminal offences: There are 7 instances, wherein criminal cases have been outstanding against the officials of the Bank in connection to the transactions of the Bank. Others: There are 198 cases filed by the employees/ex-employees or family members of deceased employees against the Banks claiming service benefits such as withdrawal of VRS application and reinstatement in service/challenging order of dismissal from service/non-payment of terminal benefit like gratuity, non payment of family pension/not giving due promotion etc. which are pending before the Supreme Court/various High Courts/ Civil court/ Labour Court /Tribunals etc. None of the above claims relates to pecuniary benefits as well as not quantified. The details of 18 cases wherein the claim amount is more than Rs. 100 lakhs are as given in the following table (Rs. In crores) SL Suit No. / Complainant / Claim Subject Matter Regional Remarks No Forum Branch Name Amount. Office 1 OA No. 1324 of The Janata 11.07 Bills Jalandhar Forged L/C purported to be issued 07.09.1999 Sahkari Bank by us, payment made by the DRT, Mumbai Ltd. Pune, Vs plaintiff Bank. Allahabad Bank & others. Suit is pending. [ CT Ludhiana ]. 2 TS1156 of 1999, High Lal Baba Tube 10.00 Money Claim Kolkata Suit filed against the Bank in Court, Kolkata Co. Pvt. Ltd. (Metro) June 1999, claiming a decree for [ IFB, Kolkata damages for alleged wrongful ] acts, negligence etc. of Bank. The matter is not appearing in the list of hearing. 3 CS No. 587/99, High Court, Kolkata Asian Vegpro. Ind. Ltd. [Chow-ringhee Br.] 29.01 Money Claim - do The suit was filed in 1999. Company has claimed decree on the ground of loss suffered by the Co. by reason of Banks alleged delay in sanctioning credit facility specially opening of L/C. The suit was filed in 2000. Party has claimed this amount on account of alleged non payment of rent, municipal taxes & interest there on & cost of damage in furniture fixture for 24, Park Street, which Bank has already vacated. Claiming decree for Rs. 1.11 Crore towards wrongful debit and deduction from the plaintiffs c/c a/c contrary to the agreement made between the Bank and the borrower. For decree towards refund of excessive interest realised and loss & damages suffered for the reason of wrongful freezing of banks a/c. Suit filed for not returning the original shipment documents and not releasing of funds and other alleged wrongful acts etc.
st

CS ---- 88/2000 High Court, Kolkata

Candlewood Holding Ltd. EZO ( Previous Premises on 24, Park St.)

2.84

Money Claim

- do -

MS 11/98, Alipore Court

Plastoman Pvt. Ltd. [ Southern Avenue Br.] BCL Financial Services Ltd. [IFB, CAL ] Abhinandan International Pvt. Ltd. [International Branch.] Taya Mastya Super feeds Pvt. Ltd. [Inter-

1.11

Money Claim

- do -

CS 145/2002

9.12

Suit for damages

- do -

WP 181/2003 at HC, Kolkata

3.56

Suit for damages

- do -

CS No. 392/2000 High Court, Kolkata

2.46

Damage suit

- do -

The Co. filed damage suit against WBFC, WBIDC & Allahabad Bank. Bank is proforma party.

64

Allahabad Bank9 10 DRT, Kolkata OA 132/1999 DRT, Kolkata OA 131/1999 national Branch.] SBI [ Southern Avenue Br.] SBI [Southern Avenue Br.] 2.40 1.02 Recovery suit Recovery suit - do - do Suit against Demon Finance. Bank th is the 5 respondent. The case is for alleged issuance of FDR & SBI allowed loan against such FDR. Bank has filed a suit for recovery of Rs.46.82 lacs. The borrower has filed counter claim of Rs.1.54 Crore on account of damages, losses suffered and goodwill. Suit has been filed for the declaration and permanent injunction by the Co. against IPLC, New Delhi and the Bank in respect of the two bank guarantees viz. one for Rs.60lacs dated 05/03/1998 and another for Rs.50lacs dated 01/08/1997 issued by the Bank at their instance in favour of M/s IPLC New Delhi. The suit was filed on 1997. Funds withdrawn from Trust account. Case is pending in NCDRT, New Delhi. This is due to internal dispute among the Management Committee of the Trust. Branch has filed an application for recovery before DRT, Mumbai for Rs. 2070.84 Lacs. Company has filed counter claim of Rs. 2404 Lacs against the Bank for not granting adequate finance as required by them. Compensation claimed for delay in sanction of credit.

11

TA 1114/2000 DRT Allahabad

Ashish Fabrics [ Meerut Cantt. Br. ]

1.54

Case stand transferred to DRT Lucknow.

Meerut

12

05/07/2002

M/s Modi Pon Fiber Company [ Modinagar Br.]

1.10

Suit for declaration and injunction

---do---

13

14

155 Of 1997 & 156 of 1997 National Con-sumer Dispute Redressal Commission, New Delhi. OA No. 1451 DRT, Mumbai Date of filing case : 29-09-1999

Prativa Pratisthan [ Juhu Ville Parle Br. & Andheri Br.] Chase Bright Steel Ltd. [ IFB, Mumbai ]

1.90 11.84

Consumer Case

Mumbai

24.04

Counter claim against the Bank.

- do -

15

5846 of 1998 High Court Mumbai

16 17 18

Spl. Case No. 744/2001 83/96 Suit No. 1768/96 filed in the City Civil Court, Hyderabad.

The city civil court has ordered for transfer of suit to DRT, Hyerabad on an interim application filed by the bank for simultaneous hearing along with the banks suit. The Bank has not made any provision in this regard. These cases have been classified as claims against the bank not acknowledged as debt. There are no material litigation filed by any of the key personnel in the top executive grade.

Vishal Development Corporation [ Goregaon Br. ] Ind Agro Synergy Ltd. // C. L. Nagpur Mecon India Doranda Sangfroid Remedies Ltd.

1.15

Counter claim against the Bank

- do -

1.86 5.28 2. 35

Counter claim against the Bank Money Suit Counter claim against the Bank

Nagpur Ranchi Hydera-bad.

Conuterclaim against Bank forestall recovery Banks case. Suit for recovery of interest.

to

Income Tax Matters As on 31.12.2003, there are disputed Income Tax demands pertaining to past periods, involving a disputed amount of Rs106.45 crores. The Income Tax Department has filed the appeals before the Income Tax Appellate Tribunal, Kokata. The bank will contest the appeals and the management has every reason to believe that the order passed by CIT (A) on appeals will be confirmed by the Income Tax Appellate Tribunal. Except the provisions as mentioned above, no other provision have been made by the Bank and any adverse ruling may affect the financials of the Bank. The details of the cases are as given under:

65

Allahabad BankAssess ment year Bad debts written off u/s 36(1)(VI) Major grounds of appeal Others Total disputed amount (Rs. in crores) Tax amount including interest

Prior accounting expenditure

2001-02 2002-03

18.30 -

Dis allowance of expenses U/s 14. (a) Appeals pending before Income Tax Appellant Tribunal 10.69 97.69 3.45 1.54 122.73 -

Provision for bad debt u/s 36(1)(VIa)

130.13 124.27 Total

62.09 44.36 106.45

Except as mentioned above: No proceedings have been launched against the Bank for any of the offences under any enactment, irrespective of whether specified in Paragraph 1 of Part I of Schedule XIII to the Companies Act. No such litigation or disputes are pending as on today and there are no defaults or outstanding statutory dues. There are no pending proceedings initiated for economic offences. Details of past cases, where any penalties have been imposed by the concerned authorities (if any) are as under: No disciplinary action/ investigation has been taken by the Securities and Exchange Board of India/ Stock Exchange against the Bank and its Directors The Bank has not defaulted in meeting 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. No penalty has been imposed by SEBI against the Bank & its branches. 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. Servicing Behavior There has been no default in meeting statutory dues, institutional dues and dues towards payment of interest or principal on due dates to holders of Bonds and Fixed Deposits. 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. 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. Against the subsidiary As on 31 December 2003, 4 cases with an aggregate claim of Rs. 6.95 crores have been filed against Allbank Finance Ltd. Further, Income Tax disputes aggregating Rs. 35.23 crores are pending in appellate courts against All Bank Finance Limited. The details of these cases are as given in the following tables. Civil Cases Sr. Name of the Date of Name of Nature of the case Amount Latest Position No. Plaintiff filing the the Court involved/ case Relief sought 1. Twinpack 14.01.97 MRTP Case filed by the Rs.0.47 The case came up for hearing on Industries Ltd Commicompany for the Crores 5.11.2003 for hearing on the Ssion, New restrictive trade question of maintainability of the Delhi practices due to delay complaint and the matter in Public Issue of the adjourned to 26.3.04 for further Co. and the proceedings. consequential loss incurred by the said Company. 2. M S Shoes (Two 1531/95 Delhi High For not meeting the Rs.2.99 Suit No. 1531 / 1995 came up for cases) filed on Court. underwriting Crore hearing on 15.12.03. The ADJ 4.7.95 and commitment after hearing the matter has 1299/97 directed to list the case for future filed on date. 16.7.97. Suit No. 1299/97 came up for
st

66

Allahabad Bankhearing 10.11.03 for filing of written statements by various defendants. The Company has file a complaint case being no. 353/2000 under Section 12B of MRTP Act, 1969 as amended up to date for payment along with 24% interest. Honble MRTP Commission has been pleased to dismiss the complaint. This matter came up for hearing on 23.10.03 Ld. Division Bench consisting of Honble Judge Dalveer Bhandari and HR Malhotra has been pleased to dismiss the Writ petition of M/S. M. S Shoes Ltd against Allbank Finance Ltd. and upheld the decision of MRTP Commission. Matter came up for hearing on 6.3.02 when the opponent party sought for time since their advocate was sick. Court allowed time. Hearing is postponed as petitioner is taking time.

3.

M. S. Shoes (East) Ltd.

5.12.2002

Delhi High Court.

Writ petition filed by the company against the order of the MRTP

Rs. 2.99 Crores

4.

Shri Amit Chakraborty, Ex. Project Executive

18.1.2000

Calcutta High Court

Writ petition no.189/2000 claiming leave encashment on resignation of service

Rs.0.50 lac

Income Tax Assessment year Assessment Year 1993-94 Assessment Year 1994-95 Assessment Year 1996-97 Assessment Year 1997-98 Assessment Year 1998-99 Assessment Year 1999-00 Except as mentioned above: No proceedings have been launched against AllBank Finance Ltd. for any of the offences under any enactment, irrespective of whether specified in Paragraph 1 of Part I of Schedule XIII to the Companies Act. No such litigation or disputes are pending as on and there are no defaults or outstanding statutory dues. In the past, no penalties have been imposed by any regulatory authority. AllBank Finance Ltd has not defaulted in meeting 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. There are no pending proceedings initiated for economic offences. Against the Directors of the Subsidiary A criminal case has been filed by M/s M.S. Shoes East Limited in Delhi High Court against Allahabad Bank, All Bank Finance and one of the directors of All Bank Finance relating to attachment and sale of property of M.S. Shoes East Limited by Debt Recovery Tribunal at a price less than the fair market value of the property. Except as stated above, there are no outstanding litigations, disputes or penalties against the Directors of the All Bank Finance Limited, 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. 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 the 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. Interest of Directors of the Bank The Directors of the Bank are interested to the extent of shares held by them and/ or by their friends and relatives or which may be subscribed by them and/ or allotted to them by 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. Disputed Demand of Income Tax (Rs. in lacs) 1062.42 529.41 456.22 614.18 444.59 416.47

67

Allahabad BankThe Directors of the Bank are not interested in the appointment of or acting as Underwriters, 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 Prospectus or proposed to be acquired by it. Save as stated above, no amount or benefit has been paid or given to the Banks 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. XXVI. INVESTOR GRIEVANCE & REDRESSAL SYSTEM Shareholders'/ Investor Grievances Committee consists of 4 members out of which two are independent directors of the Bank (Smt.Deepa Gupta, Shri. Nakul Sein Anand). The committee is headed by a non-executive independent director Smt.Deepa Gupta who is a Chartered Accountant. Shri Peter Barua is the secretary to the committee. The committee meets at least once a quarter and reviews the shareholders grievances redressal systems. The terms of reference of Shareholders'/ Investor Grievances Committee are to redress the shareholders compliant in respect of: Share transfers, Transmission of shares, Issue of duplicate shares, Dematerialization and dematerialization of shares, Non-receipt and revalidation of dividend warrants, Non-receipt of Annual Report etc.

As on 31.12.2003, No Nil complaint is pending. The details of the Compliance Officer of the Bank are as follows: Mr. Narendra Singh Deputy General Manager (Finance & Accounts) Allahabad Bank Head Office 2,Netaji Subhas Road, Kolkata 700 001. Tel No. (033) 22420874 Fax No.(033) 22104048 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, M/s. Karvy Consultants Ltd.- Karvy House, 46, Avenue 4, Street no.1, Banjara Hills, Hyderabad 500 034. [Tel No. 040 23312454 / 23320751, Fax No. (040 23311968] in case of queries/ complaints, if any, regarding this issue. XXVII. RISKS ENVISAGED BY MANAGEMENT & MANAGEMENT PROPOSALS (MP) TO ADDRESS THE RISKS Following are certain issues for the investors to consider before taking an investment decision in the Information Memorandum. In some of the risk factors and management perceptions thereof, reference page numbers have been provided, which can be used to obtain more details about the said risk. RISK ENVISAGED BY MANAGEMENT AND MANAGEMENT PERCEPTIONS (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 perceptions thereof, reference page numbers have been provided, which can be used to obtain more details about the said risk. INTERNAL RISKS 1. Contingent Liabilities As on March 31, 2003 the contingent liabilities of the Bank were at Rs.10338.70 crores comprising claims against the Bank not acknowledged as debts (Rs. 381.88 crores), liability on account of outstanding forward exchange contracts (Rs. 8470.09 crores), guarantees on behalf of constituents (Rs.788.76 crores), acceptances, endorsements and other obligations (Rs. 696.49 crores) liability for partly paid instrument Rs.0.16 crores and others (Rs. 1.32 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. 2. Income Tax Proceedings Various proceedings against the Bank relating to Income Tax amounting to Rs. 106.45 crores (including cases filed against the Bank by the IT authorities to the tune of Rs. 106.45 crores) are pending in appeal with the Income Tax authorities. The Bank has not made any provision in this regard and adverse ruling, if any, shall affect the financials of the Bank.

68

Allahabad BankMP: The Income Tax department has filed the appeals before the Income Tax Appellate Tribunal, Kolkata. The Bank will contest the appeals and the management has every reason to believe that the order passed by the C.I.T (A) on appeals will be confirmed by the Income Tax Appellant Tribunal. 3. Profits of the Bank The growth in net profits of the Bank from Rs. 80.21 crores in FY 2001-02 to Rs. 165.99 crores in FY 2002-03 (growth of 106.94%) can be mainly attributed to treasury profits, which may not be sustainable in future. The Bank made a profit of Rs. 346.45 crores from sale of investments (treasury income) during FY03. MP: It may be noted that operating profit of the Bank has come from diversified income streams comprising net interest income, profit on sale of securities and other income which account for 176.37%, 67.16% and 34.49% of the total operating profit respectively. Hence, a substantial part of the growth in operating profits is accounted for by net interest income. 4. Non Performing Assets (NPAs) As on 31.03.2003 and 31.12.2003, the net NPAs of the Bank stood at 7.08% and 4.17% of its net advances amounting to Rs. 886.98 crores and Rs. 574.63 crores respectively 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 on page 41of the Information Memorandum. MP: The Net NPAs of the Bank have consistently been declining in percentage terms, from 10.57% as on 31.03.2002 to 7.08% as on 31.03.2003 and further to 4.17% as on 31.12.2003 and 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 over-dues. Besides Debt Recovery Tribunal (DRT) set up for faster settlement of recovery litigation, GoI has enacted The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 enabling FIs and Banks to 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 1811 parties/borrowers involving Rs. 575.71 crores and recovered Rs. 34.60 crores. Thus, the Bank has been taking recourse to all the available methods to recover its over dues from the borrowers. 5. Regional Concentration of the Bank Allahabad Bank has a regional concentration in Eastern & Central parts of the country accounting for approximately 79.19% of all branches in terms of numbers. The regional presence of the Bank may compromise its competitive position vis--vis its national level competitors. MP: The regional presence of the Bank may not be a hindrance to its growth prospects. The deposits of the Bank have grown at a CAGR st of 13.95% to Rs. 28107.40 crores and the advances have grown at a CAGR of 15.74% to Rs.13794.47crores during April 1999 to 31 December 2003. The Bank has 1931 branches and 140 extension counters as on 31.12.2003 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 on page 32 of the Information Memorandum. 6. Decline in Return Ratios Yield on Investment of the Bank (excluding profit on sale of investments) has shown a declining trend from 10.29% in FY 2001-02 to 9.64% in FY 2003. The Yield on Advances of the Bank has decreased from 10.59% to 10.11% 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 7.36% as on 31.03.2002, has fallen to 6.21% on 31.03.2003. As compared to this decline of 115 Basis Point (or 1.15%), the yield on investment (domestic) for the Bank has fallen by 65 bps (or 0.65%). 7. Asset Liability Position 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. 9568.49 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 duration and liquidity mismatches. For more details on the Asset Liability position refer to the para Asset Liability Management on page 44 of the Information Memorandum. 8. Credit Risk The Banks main business of lending carries an inherent credit risk, which involves inability or unwillingness of a customer or counterparty to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions. MP: The Bank takes adequate care to minimise such risks by having a well-diversified loan portfolio. 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 5.00 Crores and above are assessed on Risk Assessment Module (RAM) developed with the help of CRISIL and rest are done on Credit Rating Grade Module (CRG) developed in house 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

69

Allahabad Bankmitigating 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 on page 48 of the Information Memorandum. 9. Asset Concentration The top 5 industries (non-food) accounts for 21.22% and 27.52% of the gross credit exposure of the Bank as on 31.03.2003 and 31.12.2003 respectively. Also, the top ten borrowers of the Bank account for about 14.50% and 9.61% of the gross total advances of the Bank as on 31.12.2003 respectively. 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 31.03.2003 and as on 31.12.2003. 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 on page 35 of the Information Memorandum. 10. Outstanding Litigations against the Bank st As on 31 December 2003, there were 907 cases including writ petitions filed by employees/ ex-employees, suits/ writs by customers and consumer cases with aggregate claim of Rs. 145.50 crores for which no contingent liability has been provided. Out of these, the claim amount was above Rs. 100 lakhs in 18 cases. Further, there are 7instances, wherein criminal cases have been outstanding against the officials of the Bank in connection to the transactions of the Bank. In the above, there are 198 cases filed by the employees/ex-employees or family members of deceased employees against the Bank claiming service benefits such as withdrawal of VRS application and reinstatement in service/challenging order of dismissal from service/non-payment of terminal benefit like gratuity, non payment of family pension/not giving due promotion etc. which are pending before the Supreme Court/various High Courts/ Civil court/ Labour Court /Tribunals etc. None of the above claims relates to pecuniary benefits as well as is not quantified. For more details, investors are advised to refer to para on Outstanding Litigations on page 64 of the Offer Document 11. Net Interest Margin (NIM) The net interest (NIM) of the bank has declined from 3.26% in FY 2002 to 3.14% in FY 2003. MP: The slowdown in growth of net interest income and the related ratios can be mainly attributed to downward trend in the interest rates, which has resulted in the squeeze on the margins of the entire banking sector. Also, the Bank has been able to bring down its average cost of funds by 53 bps (6.83% in FY 2003 from 7.36% in FY 2002). While focusing on its core activity of commercial banking, the Bank is also taking steps to diversify its income stream and enhance the proportion of fee-based income to provide stability to its future income stream. 12. RBIs Annual Financial Inspection Report The Annual Inspection Report of RBI on the financial position of the Bank as on 31.03.2003 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 the Information Memorandum are on the basis of management and audit reports of the Bank. 13. Verma Committee Recommendations The Verma Committee, which carried out a study of the banking sector in 1998 and 1999, had suggested seven parameters for assessing a banks strength/weakness covering three major areas namely, solvency, earning capacity and profitability. Based on the above, Allahabad Bank was classified in the third category of banks, which complied with the Capital Adequacy requirement but did not meet five or six of the remaining parameters for the years 1998 and 1999. For an understanding of what the categorization signifies, investors may refer to para Verma Committee Recommendations on page 53 of the Information Memorandum. MP: The Bank has taken focused action to improve its profitability and performance by a multi-pronged strategy involving reduction in NPAs, increased emphasis reduction of the costs, introduction of better system and procedures and improvement it its operational efficiency and reduction in the staff costs. By making stepped recovery effect, the Net NPA as a percentage of Advances has come down to 4.17%. The Bank does not envisage impairment to banks solvency, earning capacity or profitability. 14. Accumulated Losses of the Bank in the past The Bank had accumulated losses aggregating Rs. 532 crores, which were adjusted against its capital on 31.03.1997. MP :The accumulated loss pertained to previous periods and was duly written off under the approval of the Govt. of India vide its letter no. th F. No. 12/2/96 B.O.I. dated 27 March 1997, permitting the Bank to reduce its paid-up capital by adjusting accumulated losses of Rs. 532 crores from its paid-up capital as on March 31, 1997. The Bank has been making net profits consecutively for more than five years and does not have any accumulated loss on its books at present. 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 on page 36 of the Information Memorandum.

70

Allahabad BankMP: 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. 16. Credit Decisions The credit decisions of the Bank are subjected to various risk parameters. MP: In a dynamic environment, all the credit decisions are subjected to various risk parameters. Risk cannot be entirely eliminated and business decisions may suffer if risk angles are over emphasized. Bank is following a prudent policy where identification and mitigation of risk is of utmost importance. Prudential limits are fixed on various financial parameters to implement risk management guidelines. Bank has implemented various Credit Risk Management guidelines given by the Reserve Bank of India. Bank has fixed internal exposure ceilings based on credit rating of the borrowal account to mitigate concentration risk. The entire credit portfolio is divided into different segments which are classified under preferred/ discouraged/ cautious list. Bank has also stipulated criteria for taking exposures in a particular industry. Maximum industry wise stipulated exposure is 10 per cent of total advances except infrastructure and engineering for which special treatment is given. 17. Credit Policy of the Bank The credit policy followed by the Bank may materially influence its credit portfolio. MP: The Bank is having a comprehensive loan policy document. The policy is continuously upgraded in tune with market changes and revision in RBI guidelines. The policy aims at complying with various RBI guidelines regarding credit risk management and ultimately improving overall asset quality, risk bearing capacity and develop strong and healthy credit portfolio of the Bank. The prime focus while sanctioning the loan is integrity/ character coupled with ability to run the business even in adverse business conditions. The thrust of credit expansion is on small and retail advance. While sanctioning the advances, emphasis is given on viability of the activity, security and recoverability of advance. 18. Litigation against the Banks Subsidiaries and Co-Promoted Companies There are 4 cases of claims/suits filed against All Bank Finance Limited, a subsidiary of the Bank and the amount involved as on 31.12.2003 is Rs. 6.94 crores. Further, Income Tax dispute aggregating Rs. 35.23 crores are pending in Appellate Courts against All Bank Finance Limited. For details, ABFL please refer to the para on Litigation on page 66 of the Information Memorandum. 19. Jankiraman Committee Report Janakiraman Committee Report on the securities scam, 1992 has mentioned the name of All Bank Finance Limited, a subsidiary of the Bank in relation to a transaction involving ready purchase and forward sale of certain securities. The report states that the said transaction was more beneficial to the counter-party (i.e. M/s V.B. Desai) than to the subsidiary (i.e. All Bank Finance Limited). As per the report, the loss to the subsidiary in this transaction was not ascertainable at that time as the actual loss that the Company would eventually suffer would depend on the actual prices at which it is able to dispose off the shares presently held by it as also the additional shares, if any, lodged by the broker, after the legal difficulties relating to the delivery are resolved. MP: The outstanding from M/s. V.B. Desai as on 31.03.2003 was Rs.34.56 crores All Bank Finance Limiteds petitioned before the special court constituted under the special courts (Trial of offence relating to transaction securities) Act, 1992. has been decided and the special court had vide its order dated 1.11.2002 held that shares held as security by All Bank Finance Limited are the property of All Bank Finance Limited and they are entitled to transfer and sell the same. The market value of the said securities including accretions as on 5.2.2004 was Rs.56.46 crores out of which a sum of Rs.45.49 crores has been realized. 20. Subsidiary Companys Losses st AllBank Finance Ltd., a wholly owned subsidiary of Allahabad Bank has accumulated losses of Rs. 32.90 crores as on 31 March, 2003. MP: These accumulated losses are mainly on account of 50% provision made against a sum of Rs.34.56 crores due from a broker for sale of securities as per a contract with him. All Bank Finance Limited had taken legal action in the Special Court against the counter party. All Bank Finance Limiteds petitioned before the special court constituted under the special courts (Trial of offence relating to transaction securities) Act, 1992. has been decided and the special court had vide its order dated 1.11.2002 held that shares held as security by All Bank Finance Limited are the property of All Bank Finance Limited and they are entitled to transfer and sell the same. The market value of the said securities including accretions as on 5.2.2004 was Rs.56.46 crores out of which a sum of Rs.45.49 crores has been realized. The investors are advised to refer the note no. 8 to accounts in para title within Note to Accounts in Part XIII of the Auditors Report in Information Memorandum. 21. Contingent Liabilities of Subsidiaries of the Bank As on 31.03.2003, contingent liabilities of AllBank Finance Limited, a subsidiary of the Bank aggregated Rs. 39.85 crores. MP: The above contingent liabilities have arisen in the normal course of business of the company. 22.
st

Contingent liabilities of RRBs sponsored by the Bank

As on 31 March 2003, contingent liabilities of RRBs sponsored by the Bank aggregated Rs.7.76 crores. MP: The above contingent liabilities have arisen in the normal course of business of the RRBs. 23. Accumulated losses of Regional Rural Banks (RRBs)

71

Allahabad BankAs on 31 March 2003, the 3 out of 7 RRBs sponsored by the Bank had accumulated losses aggregating Rs. 14.48 crores. MP: The losses pertain to the Sharda Gramin Bank, Tulsi Gramin Bank and Vindhyavasini Gramin Bank. In the current year, all these RRBs have made net profits. The above RRBs are under the restructuring plan of Government of India. The Bank is closely monitoring for the effective implementation of the plan. As a result, the accumulated losses of these RRBs have declined by 48.98% from Rs. 28.38 st st crores as on 31 March 2002 to Rs. 14.48 crores as on 31 March 2003. Moreover, all the 7 RRBs of the Bank taken together have made a consolidated net profit of Rs. 48.91 crores in the financial year 2002- 03. For more details on the RRBs and their financials, investors are advised to refer to the para on Regional Rural Banks on page 50 of the offer document. 24. 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 as stated on page of the Information Memorandum. EXTERNAL RISKS 1. Regulatory restrictions on the Bank and limitations of the powers of bondholders of the Bank There are a number of restrictions as per The Banking Companies (Acquisitions and Transfer of Undertaking ) Act, 1970 and Banking Regulations Act, 1949 (Amended), which impede flexibility of the Banks operations and affect/restrict investors right. These are as under: 1. 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. 2. 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. 3. 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 percent of such profit. 4. 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. 5. 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. 6. 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. 7. There are restrictions in the Banking Regulation Act regarding, h. Management of a bank including appointment of directors. i. Borrowings and creation of floating charge thereby hampering leverage. j. Expansion of business, as the branches need to be licensed. k. Disclosures in the profit & loss account and balance sheet. l. Production of documents and availability of records for inspection by shareholders. m. Reconstruction of banks through amalgamation. n. Further issues of capital including issue of bonus shares/rights shares for which prior Central Government approval is required. 8. The financial disclosures in the Information Memorandum may not be available to the investors after listing on a continuous basis. 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. 9. 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. No banking company shall pay any dividend on its shares until all its capitalised expenses (including preliminary, organisational expenses, share selling commission, brokerage, amounts of losses and any other item represented by tangible assets) have been completely written off. 2. Sensitivity to the Economy and Extraneous Factors The Banks 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. MP: This is a common risk to every bank and state of the economy of India as of now does not give room for any major effect in the financial market. 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.
st

72

Allahabad BankMP: 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 resourceraising front, the Bank is actively endeavouring to broaden its reach and raise resources through its wide distribution network of 1931branches and 140 extension counters. For more details on the business environment of the Bank, investors are advised to refer to the para Management Discussion and Analysis of Financial Results on page 61 of the Information Memorandum. 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 138 years and does not perceive policy changes to be a major threat. 5. Disinter-mediation in the Financial Markets As the financial markets mature and with growing developments in the capital markets, the trend towards disinter-mediation 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, disinter-mediation brings with it the opportunity for the Bank to expand its fee-based activities. The Bank has been endeavouring to develop a presence in several financial services to earn fee based income by focusing on businesses such as foreign exchange, treasury, investments, cash management, insurance and depository, thus taking advantage of the disinter-mediation phenomenon. 6. Forex Risk Exchange Rate fluctuations may have an impact on the Banks 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 Banks 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 Banks 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 many micro and macro economic factors including the directives of the Reserve Bank of India which are likely to be market driven due to deregulation and thereby may result in increasing pressure on spreads and affect profitability. Interest rate volatility exposes the Bank to an interest rate risk or market risk. Such interest rate risk has a potential impact on net interest income or net interest margin as well as on the market value of the fixed income securities held by the Bank in its investment portfolio. 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 minimize 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 on page 48 of the Information Memorandum. 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 managing operational risk, the Bank has laid down well-defined systems and procedures. The Bank has set up a separate department to improve the systems and procedures to suit the changing environment. The Bank has also in place a strong internal inspection and audit system. For managing IT related risks, the Information Systems Security Policy is in place. The Bank has an effective HRD department, which formulates and monitors delegation of duties and responsibilities at different level. 9. Financial Statements in the Information Memorandum The financial statements and derived ratios there from contained in the Information Memorandum are prepared/computed as per the permissible accounting practices. While due care has been taken to reflect the true economic reality regarding the financials of the Bank as far as possible, the investors may want to make their own adjustments to the same before arriving at an investment decision in the 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.

73

Allahabad BankNOTES TO RISK FACTORS Net worth (excluding revaluation reserves) of the Bank as on 31.03.2003 and 31.12.2003 was Rs. 938.16 crores and Rs. 1141.28 crores respectively. The present private placement of the Bank aggregates Rs. 200 crores. Cost per share of the bank to the Government of India is Rs.10/ The Book Value of the share as on March 31, 2003 and December 31, 2003 is Rs. 33.76/- and Rs. 39.59/- respectively (face value of Rs. 10/-). During FY 1996-97 the Bank had adjusted accumulated losses of Rs 532 crores, from its paid-up capital as on March 31, 1997 by setting off the same against the paid-up capital as on 31.3.97 AllBank Finance Limited a subsidiary of Allahabad Bank has entered into the following transactions with Allahabad Bank during the last three years: a. AllBank Finance Limited is availing of following limits from Allahabad Bank: (Rs. in crores) Particulars Cash credit Limit 11.00 March 31,2001 7.74 Outstanding balance March 31,2002 1.89

March 31,2003 NIL

b. The following are other transactions between Allahahbad Bank and All Bank Finance Limited (Rs. In Crores) st Year ended March 31 2001 2002 2003 Payment by ABFL to Allahabad Bank on account of 0.09 0.06 0.03 reimbursement of salary of officers of Allahabad Bank on deputation to ABFL Rent paid by ABFL to Allahabad Bank 0.20 0.05 0.006 For details of transactions between Allahahbad Bank and Regional Rural Banks (RRBs) sponsored by it, the investors are advised to refer to the para Regional Rural Banks on page 50 of the Information Memorandum. The financial information as contained in PART II under para I to para XIII including the notes to accounts, significant accounting policies as well as auditors qualifications has been duly certified by the statutory auditors of the Bank. As far as possible, these audited numbers have been used for computation or derivation of other financial information contained in the Information Memorandum. However, such other financial information contained in the Information Memorandum except as contained in PART II under para I to para XIII has been certified by the management of the Bank. In terms of recommendations of RBI Working Group on Consolidated Accounting and Other Quantitative Methods to Facilitate Consolidated Supervision (December 2001), all banks, whether listed or unlisted, should prepare and disclose Consolidated Financial Statement (CFS) from the financial year commencing from 1.04.2002 in addition to solo financial statements at present.

74

Allahabad BankPART II
I. GENERAL INFORMATION

Consents Consents in writing of the Lead Managers to the Issue, Directors, Auditors, Legal Advisor, Compliance Officer, Co- Managers to the Issue, Advisor to the Issue, Bankers, and Registrars to the Issue to act in their respective capacities have been obtained. and such consents have not been withdrawn up to 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 the Information Memorandum, and such consents and reports have not been withdrawn up to date of opening of the issue. Expert Opinion Save as stated else where in the Information Memorandum, the Bank has not obtained any other expert opinion. Changes in Directors The changes that have taken place in the Board of Directors since April 1, 1999 are as follows: Name of Director Shri U.P. Singh Shri Sunil Arora Shri S K Batra Shri Sunil Arora Shri S.C. Sharma Shri D. Chatterji Shri P.K. Haldar Prof. (Dr.) S.K. Biswas Shri J. Mohan Dr. Ramdas M. Pai Km. Sayeeda Khatoon Smt. Neeva Konwar Shri Harbhajan Singh Shri B. Samal Shri R. B. Choubey Shri Ashok Kumar Shri K. B. Chakraborty Shri V. K. Sharma Shri K. K. Rai Shri S. K. Batra Shri D. Choudhury Shri V.K. Sharma Shri Anand Sinha Shri B. Raju Subbaraju Smt. Deepa Gupta Shri Amitav Kothari Shri Zafar Obaid Shri Nakul S. Anand Shri D. Choudhury Shri G. Bhujabal Shri Anand Sinha Shri Surinder Kumar Dr. B. Samal Shri Ashok Kumar Shri Deb Kishore Bhattacharya Shri Biswabandhu Bhattacharya Shri O. N. Singh Ms. Sewali Chowdhury Shri Surinder Kumar Reasons for change Relinquished Charge Appointed Appointed Relinquished Charge Relinquished Charge Relinquished Charge Relinquished Charge Relinquished Charge Relinquished Charge Relinquished Charge Relinquished Charge Relinquished Charge Retired as CMD Appointed as CMD Appointed Appointed Relinquished charge Appointed Appointed as Executive Director Relinquished Charge Appointed Relinquished Charge Appointed Appointed Appointed Appointed Appointed Appointed Relinquished Charge Appointed Relinquished Charge Appointed Relinquished Charge Relinquished Charge Appointed Appointed Appointed as CMD Appointed Relinquished Charge Date of change April 14, 1999 April 15, 1999 November 18, 1999 November 18, 1999 January 20, 2000 January 20, 2000 January 20, 2000 January 20, 2000 January 20, 2000 January 20, 2000 January 20, 2000 January 20, 2000 March 31, 2000 April 20, 2000 July 4, 2000 July 13, 2000 October 29, 2000 October 30, 2000 January 8, 2001 April 20, 2001 April 20, 2001 June 13, 2001 June 13, 2001 August 28, 2001 November 05, 2001 December 20, 2001 February 06, 2002 March 01, 2002 March 20, 2002 March 20, 2002 June 11, 2002 June 11, 2002 March 31, 2003 July 12, 2003 July 28, 2003 November 25, 2003 December 4, 2003 January 9, 2004 January 9, 2004

75

Allahabad BankChanges in Auditors Given below are the changes in the Banks Auditors during the past three years. Since the RBI appoints Auditors each year, these changes have been effected as per RBIs approval. Year 31.03.1999 31.03.1999 31.03.2000 31.03.2000 31.03.2000 31.03.2000 31.03.2001 31.03.2001 31.03.2001 31.03.2001 31.03.2001 31.03.2001 31.03.2002 31.03.2002 31.03.2003 31.03.2003 31.03.2003 31.03.2003 Added/Retired Retired Retired Added Added Retired Retired Retired Retired Retired Added Added Added Added Added Retired Added Added Retired Name of the Auditor M/S S. S. Kothari & Associates M/S C. S. Hariharan & Co. M/S De Chakraborty & Sen M/S George Read & Co M/S Ghiya & Co M/S P.L. Tandon & Co M/S George Read & Co M/S Parikh & Jain M/S S C Vasudeva & Co M/S N C Banerjee & Co M/S Nandy Halder & Ganguli M/S Goel Garg & Co M/S Manubhai & Co M/S M.K. Goswami & Co M/S M.K. Goswami & Co. M/S T.K. Ghose & Co. M/S Ramesh C Agarwala & Co. M/S Nandy Halder & Ganguly Retired Retired Added by RBI Added by RBI Completed the term Completed the term Retired Completed the term Completed the term Added by RBI Added by RBI Added by RBI Added by RBI Added by RBI Retired Added by RBI Added by RBI Retired Reason

Authority for the Present Issue This present issue of Bonds is being made pursuant to the Resolutions of the Board of Directors of the Bank, passed at its meeting held on 14.1.2004. The present issue of Bonds is being made in accordance with extant RBI guidelines vide its circular no. DBOD. BP.BC.5/21.01.002/98-99 dated 08-02-1999 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. Adequate funds for the purpose shall be made available by the Bank to the Registrar to the Issue. No receipt will be issued by the Bank. However, the nominated branches of the Bankers to the Issue 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 at Mumbai and payable at par at all the places where applications are accepted. The subscription received in respect of this Private Placement Issue will be kept in a separate bank account and the Bank shall have access to such funds after allotment.

76

Allahabad BankProcedure 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 along with Refund Order(s), as the case may be, will be despatched by Registered Post at the sole risk of the applicant to the sole/ first applicant within 15 days of closer of the Issue. The Bank will provide adequate funds to the Registrars to the Issue, for the purpose of despatch of Letter(s) of Regret/ Refund Order(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 Authorities, 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. Over-subscription 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/ de-materialised 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; g.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 its full, unqualified and absolute right of allotment/ rejection in full or prorata at its discretion without assigning any reason thereof. However the broad basis to be followed by the Bank would be as under: At the end of each banking day during the currency of the issue, a sum of total subscription amount realised and credited to Banks account would be ascertained by the Bank and if the cumulative realised amount upto that date is less than or equal to Rs. 200 crores, then all the applicant(s) till that date would be given full and firm allotment. For the amounts credited to the Banks account on the day wherein the cumulative credit exceeds Rs. 200 crores, allotment will be made on pro-rata basis based on balance amount available for allotment on that day. The allotment shall be subject to rounding-off to the nearest multiple of marketable lot (i.e. in multiples of 1 Bond). Interest on Application Money Interest at the respective coupon rate 5.90% (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 along-with 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 along-with the interest on refunded money. The interest cheque(s)/ demand draft(s) for interest on application money (along-with 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) along-with 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 M/s. N.C. Banerjee & Co. Chartered Accountants st Room No.9, 1 Floor, Commerce House, 2, Ganesh Chandra Avenue, Kolkata 700 013. Tel No. (033) 2373200. M/s. Manubhai & Co. Chartered Accountants th 11 Floor , B Wing, Premium House, Near Gandhigram Railway Station, Navarangpura, Ahmedabad 380 009 Tel No. (079) 658 0956.

77

Allahabad BankM/s Goel, Garg & Co. Chartered Accountant 102, Skylink, E-588, Greater Kailash II New Delhi 1100 48. Tel No. (011) 641 5777. M/s. T.K. Ghose & Co. Chartered Accountant 6, Kiron Shankar Roy Road, Kolkata 700 001. M/s. Prakash & Santosh Chartered Accountant Rolled Complex, Flat No.8 Upper Floor, Westcott Building, 37/17 Mall Kanpur 208001. M/s. Ramesh C. Agrawal & Co. Chartered Accountant 33, Shiv Charanlal Road, Near Manasrovar Cinema, Allahabad 211 003. LEAD ARRANGERS TO THE ISSUE SPA Merchant Bankers Ltd., 602, Embassy Centre, Nariman Point Mumbai 400021 Tel No. 022-56338880 Fax No. 022-22846318 E-mail: info@spacapital.com REGISTRAR TO THE ISSUE Karvy Consultants Ltd. Karvy House, 46, Avenue 4, Street No. 1, Banjara Hills, Hyderabad 500 034. Phone No. : (040)-23312454/23326591 Fax No. : (040)-23311968 TRUSTEES FOR THE BONDHOLDERS IDBI Trustship Services Ltd. th 10 Floor, Nariman Bhawan, Nariman Point, Mumbai 400 021.

A.K. Capital Services Ltd Flat No. N, Sagar Aprtment 6, Tilak Marg, New Dehli - 110001 Tel No. 011-23385704 Fax No. 011-23385189 E-mail akcap@del2.vsnl.net.in

78

Allahabad BankCOMPLIANCE OFFICER Mr. Narendra Singh Deputy General Manager (Finance & Accounts) Allahabad Bank Head Office 2,Netaji Subhas Road, Kolkata 700 001. Tel No. (033) 220 4813 Fax No. (033) 2214048 COMPANY SECRETARY Mr. Peter Barua Allahabad Bank Head Office 2,Netaji Subhas Road, Kolkata 700 001. Tel No. (033)2248 7896, 2248 5685 Fax No. (033)2248 9984 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 Sole Arranger/ Lead Arrangers to the Issue appointed by the Bank, there is/are no other broker(s) appointed by the Bank for the purpose of marketing the Issue. Therefore no person/ firm/ company other the Sole Arranger/ Lead Arrangers to the Issue, whether member of recognised stock exchange(s) or otherwise, can act as Brokers to the Issue. CREDIT RATING AGENCIES Credit Analysis & Research Ltd. nd Kalpataru House, 2 Floor, Kamani Marg, Sion (East) Mumbai - 400022 Tel No. (022) 56602871-75. Fax No. (022) 56602878 E-mail: care@careratings.com Website:www.carerating.com Fitch Ratings India Pvt. Ltd. th 5 Floor, Nirmal, Nariman Point, Mumbai 400 021. Tel No. (022)-56370920-28 Fax No. (022)-56370924

79

Allahabad BankII. FINANCIAL INFORMATION AUDITORS REPORT To The Board of Directors Allahabad Bank Head Office, 2, Netaji Subhas Road Kolkata 700 001. Dear Sirs, 1. In terms of our appointment for the purpose of certification of the statement of accounts to be incorporated in the Information Memorandum proposed to be issued by the Bank in connection with the Private Placement of 2000 Unsecured Redeemable NonConvertible Subordinated Bonds (Tier II Bonds Series IV) of face value of Rs. 10 lakhs each for cash aggregating to Rs. 200 crores, we state as follows: a) We have relied upon the Audited accounts of the Bank for the five consecutive financial years ended on March 31, 2003 being the last date upto which the accounts of the Bank have been made up and audited by the Auditors of the Bank of those respective years. b) We have also conducted limited review of the financial results of the Bank for the nine months period ended December 31 , 2003 in terms of the Reserve Bank of India circular DBS. ARS. No. BC 13/08.91.001/2000-01 dated May 17, 2001 and DBS. ARS. No. BC. 4/08.91.001/2001-02 dated October 25, 2001. c) We have performed such other tests and procedures, which in our opinion were necessary for the examination. 2. In accordance with the requirements of clause B of part II of Schedule II of The Companies Act, 1956 and SEBI (Disclosure of Investors Protection) Guidelines 2000, we report as follows : a) The Profit & Loss Account of Allahabad Bank for the nine months period ended December 31 , 2003 (reviewed) and each of the five financial years ended on March 31, 2003 (audited) are as set out in Part I enclosed. b) The Assets and Liabilities of Allahabad Bank as at December 31 , 2003 (based on the Balance Sheet as approved by the Management) which have not been audited and for each of the five financial years ended March 31, 2003 (audited) are as set out in Part II enclosed. c) The aforesaid statements of Profit & Loss Account and Assets & Liabilities: i) read together with Significant Accounting Policies and Significant Changes in Accounting Policies as set out in Part-III, Material Notes on Accounts and Notes on Adjustments as set out in Part IV and subject to auditors qualifications for which no adjustments could be carried out, as set out in Part V, have been drawn after giving effect to adjustments and regrouping as and where, in our opinion, considered appropriate and ii) have been prepared by the Bank in accordance with the guidelines issued by the Reserve Bank of India from time to time and subject to the limitations of disclosures required under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970/1980. 3. Allahabad Bank has only one subsidiary i.e. All Bank Finance Limited which is wholly owned subsidiary. The bank is having 100% equity holding in its subsidiary as on March 31, 2003 and December 31, 2003. The statements of Profit & Loss Account, Assets and Liabilities of All Bank Finance Limited the subsidiary company of Allahabad Bank of each of the five financial years ended on March 31, 2003 and for the nine months period ended December 31, 2003 read together with the Significant Accounting Policies, Changes in Accounting Policies, Material Notes & subject to Notes on Adjustments and Qualifications of the auditors for which no adjustments could be carried out, are as set out in Part XIII. We further report that in respect of the five financial years ended March 31, 2003, & nine months period ended December 31, 2003 the amount of dividend transferred to the shareholders by Allahabad Bank and the dividend declared by the subsidiary is given in Part VI. 4. We have also examined i) the accompanying statements of Key Accounting Ratio for five consecutive financial years ended 31 March, 2003 & nine months st period ended 31 December 2003 as set out in Part VII . ii) Statement of Capitalization as on 31.12.2003 as set out in Part VIII. iii) Details of Outstanding Unsecured liabilities as on 31 March, 2003 and 31 December, 2003 as set out in Part IX. iv) Tax shelters statement for five consecutive financial years ended 31 March, 2003 and for nine months period ended 31 December, 2003 as set out in Part X. .
st st st st st st st st

80

Allahabad Bankv) Contingent liabilities statement as on 31 March, 2003 and 31 December, 2003 as set out in Part XI. vi) Consolidated audited accounts of Allahabad bank and its subsidiaries for the year ended 31 March, 2003 as set out in Part XII. And report that in our opinion this have been correctly computed subject to consequential effect for non-adjustment of qualifications as detailed in Annexure-V . Yours faithfully,
st st st

For M/s N.C.Banerjee & Co. Chartered Accountants

For M/s T.K. Ghose & Co Chartered Accountants

Partner For M/s Manubhai & Co. Chartered Accountants

Partner For M/s Prakash & Santosh Chartered Accountants

Partner

Partner

For M/s Goel Garg & Co. Chartered Accountants

M/s. Ramesh C. Agrawal & Co Chartered Accountants

Partner

Partner

Date: 25/02/2004

81

Allahabad BankPART I PROFIT AND LOSS ACCOUNT OF ALLAHABAD BANK Financial year ended (Rs. In crores) Mar 31, 99 Mar 31, 2000 Mar 31 ,2001 Mar 31, 2002 Mar 31, 2003 Period Ended, Dec 31, 2003 Audited Revie-wed

A.

INCOME Interest Earned Int. & Disc. On advance/ bills Income on Investments Interest on Balance with RBI and other interbank funds Interest on Income Tax Others Sub-Total OTHER INCOME Commission, Exchange & Brokerage Profit on Sale of Investments (Net) Profit on Sale of Land/Bldg. & other Assets (Net) Profit on Exch. Transaction (Net) Income earned by way of dividends from subsidiaries/Companies/JVs in India Miscellaneous Income Sub-Total TOTAL INCOME 131.62 12.79 0.06 30.46 11.51 22.49 208.93 1803.75 131.27 73.56 0.05 29.97 11.42 11.05 257.32 2102.51 142.59 48.45 -0.04 28.96 13.29 5.75 239.00 2310.36 143.47 193.03 0.03 28.73 14.90 4.76 384.92 2657.76 143.21 114.42 336.94 284.18 -0.04 26.29 10.07 7.89 0.02 29.93 5.82 13.34 759.76 775.20 58.54 Nil 1.32 1594.82 884.59 901.56 57.73 Nil 1.31 1845.19 1064.05 934.67 68.85 2.56 1.23 2071.36 1117.87 1054.28 78.29 21.28 1.12 2272.84 1211.90 986.37 1187.75 961.89 59.53 110.17 0.98 23.97 1.76 0.42

2570.33 1974.41

524.36 447.71 3094.69 2422.12

EXPENDITURE Interest Expended Interest on Deposits Interest on RBI/Inter/Bank Borrowings Others Sub-Total Operating Expenses Payment & Prov. for employees & wages Rent, Taxes and Lighting Insurance Printing & Stationery Advertisement & Publicity Postage, Telegram, Telephones, etc. Repairs & Maintenance Law Charges Directors Fees, Allowance & Expenses Auditors' fees & expenses Other Expenditure Depreciation on Bank's properties Sub-Total 325.99 29.85 7.94 7.95 1.95 10.99 7.02 3.52 Nil 1.84 56.41 12.58 466.04 400.17 34.39 8.82 9.59 3.45 12.02 8.50 5.16 Nil 2.28 66.69 17.96 569.03 469.33 39.78 11.32 11.09 3.49 13.19 8.36 2.94 0.29 4.20 61.92 20.49 646.40 463.10 44.59 11.97 11.13 2.90 12.41 9.11 2.78 0.36 4.22 80.49 34.99 678.05 484.15 376.65 49.11 12.98 11.51 3.45 10.75 10.24 2.50 0.72 5.01 38.34 10.59 8.04 3.63 8.19 9.61 1.77 0.48 4.65 1087.86 0.45 15.72 1104.03 1260.66 0.69 19.62 1280.97 1354.18 2.22 30.16 1386.56 1508.08 1.19 33.10 1542.37 1614.89 1152.29 11.25 34.41 1.06 29.60

1660.55 1182.95

259.78 172.09 38.77 27.05 888.97 661.09

82

Allahabad BankFinancial year ended Mar 31, 99 Mar 31, 2000 Mar 31 ,2001 Mar 31, 2002 Mar 31, 2003 Period Ended, Dec 31, 2003 1570.07 1850.00 2032.96 2220.42 2549.52 1844.04 233.68 98.68 135.00 Nil Nil 135.00 -5.63 Nil 20.88 150.25 40.50 Nil 70.00 4.84 27.14 2.99 4.78 150.25 27.63 Nil 56.45 Nil 22.33 106.41 7.73 Nil 7.73 98.68 252.51 183.18 69.33 Nil Nil 69.33 Nil 35.29 4.78 109.40 20.80 Nil 45.00 Nil 24.67 2.71 16.22 109.40 23.97 35.29 108.25 17.97 0.80 186.28 Nil 3.10 3.10 183.18 277.40 230.60 46.80 11.39 4.50 39.91 Nil 23.33 16.22 79.46 11.98 Nil 45.00 Nil 10.00 1.02 11.46 79.46 28.83 55.64 143.32 3.27 2.39 233.45 Nil 2.85 2.85 230.60 437.34 338.25 99.09 29.35 10.48 80.22 Nil 0.67 11.46 92.35 24.09 1.56 Nil 30.00 16.05 Nil 20.65 92.35 68.21 3.82 260.06 3.29 3.94 339.32 Nil 1.07 1.07 338.25 545.17 578.08 360.62 321.74 184.55 256.34 29.35 10.79 22.01 7.90

TOTAL EXPENDITURE Gross Profit before provisions for Income Tax and Extraordinary items Provisions and Contingencies (before extraordinary items) Net Profit/(Loss) for the year (before extraordinary items) Less : Extraordinary Items Add: Tax on Extraordinary Item Net Profit/(Loss) for the year (after extraordinary items) Prior Period Adjustment Amt. Recd. From Inv., Fluct. Res. Profit & Loss brought forward Profit available for appropriation APPROPRIATION Transfer to Statutory Reserve Transfer to Capital Reserve Transfer to Revenue & other Reserve Transfer to/from Inv. Fluct Reserves Proposed / interim Dividend. Dividend Tax Balance carried over to Balance Sheet TOTAL Break-up of Provisions & Contingencies Prov. for Inc .Tax, Int. Tax & Wealth Tax Depreciation on Investment Prov. For Bad & Doubtful Debts Provision for Std. Adv. Others Sub-total Less : Excess Provision Withdrawn Depreciation on Investment Others Sub-Total Total

165.99 242.23 Nil 7.67 20.65 Nil Nil 19.37

194.31 261.60 41.50 4.33 Nil 90.00 34.67 4.44 Nil Nil Nil Nil 34.67 4.44

19.37 222.49 194.31 261.60 152.43 111.43 19.43 4.51 11.12 Nil 4.04 7.32 173.13 229.49

360.62 352.28 Nil Nil Nil 30.54 Nil 30.54

360.62 321.74

83

Allahabad BankPART II: ASSET & LIABILITY STATEMENT OF ALLAHABAD BANK As at A Assets 1 Cash in hand 2 Balances with RBI 3 Balances with Bank in India Balances with Bank outside India 4 Money at Call & Short Notice 5 Investments in India Investments outside India Total Investments 6 Advances in India Advances outside India Total Advances 7 Fixed Assets** 8 Other Assets Total ( A ) B. Liabilities 1 Demand Deposits From Banks From Others 2 Savings Deposits 3 Term Deposits From Banks From Others Total Deposits (1+2+3) 4 Borrowings In India Outside India Total Borrowing 5 Other Liabilities & Prov. (including subordinate debts) (Subordinate Debts) Total ( B ) C. Net Assets ( C = A - B) Represented by : D. Share Capital E. Reserves & Surplus 1.Statutory Reserve 2. Capital Reserve 158.02 Nil 178.82 Nil 190.80 Nil 214.89 1.56 256.39 5.89 256.39 5.89 246.70 246.70 246.70 246.70 346.70 346.70 70.36 0.10 70.46 1040.14 (101.61) 16620.96 550.68 34.39 0.19 34.58 1217.87 (226.61) 18894.55 551.13 68.24 1.94 70.18 962.86 (226.61) 21139.06 651.83 60.57 Nil 60.57 1057.40 (321.61) 23783.91 733.69 43.69 NIL 43.69 1373.55 (421.61) 26880.62 991.64 582.85 93.57 676.42 1586.43 (421.61) 30370.25 1207.51 527.24 8509.69 15510.36 650.70 9593.79 17642.10 845.70 10810.99 20106.02 863.44 12230.30 22665.94 699.09 13771.48 25463.38 605.70 15837.82 28107.40 49.30 1454.12 4970.01 60.04 1636.39 5701.18 65.47 1780.13 6603.73 52.50 1819.10 7700.60 74.96 2192.67 8725.18 37.03 1925.24 9701.61 120.35 1976.10 104.41 105.04 NIL 7115.20 Nil 7115.20 7041.25 NIL 7041.25 83.47 625.82 17171.64 141.57 1830.08 110.58 81.37 NIL 8208.65 Nil 8208.65 8240.06 NIL 8240.06 93.68 739.69 19445.68 156.69 1959.19 269.76 92.15 NIL 8707.16 NIL 8707.16 9582.71 NIL 9582.71 125.87 897.36 21790.89 183.47 1483.55 481.32 65.15 NIL 10346.06 NIL 10346.06 11004.51 NIL 11004.51 134.93 818.61 24517.60 225.35 1320.41 419.03 45.03 Nil 12359.74 NIL 12359.74 12623.60 NIL 12623.60 125.49 753.61 27872.26 195.73 1805.97 180.35 42.88 NIL 14752.12 NIL 14752.12 13874.48 NIL 13874.48 115.39 610.84 31577.76 31.03.99 (Rs. in crores) 31.03.2000 31.03.2001 31.03.2002 31.03.2003 31.12.2003 Audited Reviewed

84

Allahabad Bank3. Investment Fluctuation Reserve 4. Revenue & Other Reserve 5. Balance of Profit & Loss Account . Total ( E ) Total (B+D+E) 70.76 70.42 4.78 303.98 17171.64 31.03.99 50.45 35.48 73.91 16.22 304.43 19445.68 12.15 190.72 11.46 405.13 21790.89 41.47 208.42 20.65 486.99 24517.60 123.81 239.48 19.37 644.94 27872.26 123.81 252.23 222.49 860.81 31577.76

F.

As at G. Contingent Liabilities 1 Claims against the Bank not Acknowledged as Debts.

31.03.2000 31.03.2001 31.03.2002 31.03.2003 31.12.2003 126.03 141.75 146.71 162.65 136.32

2 Disputed IT demand under appeal/ refer etc.

NIL

NIL

351.51

86.58

219.23

106.45

3 Liability for partly paid Investments 4 Liability on account of outstanding Forward Exchange Contracts 5 Guarantees given on behalf of constituents 6 Acceptance, endorsements and other obligations 7 (i) Other items for which the bank is contingently liable (ii) Liability on account of rounding of interest tax 8 Others Total (G) BILLS FOR COLLECTION ** Excluding revaluation reserve

0.16 2247.51

0.16 4378.09

0.16 4870.66

0.16 6109.80

0.16 8470.09

0.16 11637.82

691.42 696.01 1.28 Nil Nil 3686.83 610.25

748.39 830.92 3.38 Nil Nil 6086.97 750.89

666.20 666.25 2.33 Nil Nil 6698.86 939.98

636.36 777.08 2.67 Nil Nil 7759.36 893.50

788.77 696.49 1.31 Nil Nil 10338.70 831.84

869.84 990.49 0.64 Nil Nil 13741.72 804.46

85

Allahabad BankDetails of adjustments Year ended INCOME Depreciation on Revalued Premises Prior Year Income Total Income EXPENDITURE Prior Year Expenditure Depreciation on Revalued Premises Total Expenditure Gross Profit before provision for Income tax and extraordinary items Less Provisions & Contingencies Provision for Pension Provision for NPA Provision for Subsidiary Total Provisions Total Adjustments Appropriation Transfer to Revenue & Other reserves Net Profit as per Statement of Profit & Loss Adjustments ADJUSTED NET PROFIT -28.16 135.00 -28.16 106.84 -41.50 69.33 -41.50 27.83 71.81 39.91 71.81 111.72 17.70 80.22 17.70 97.92 67.15 165.99 67.15 233.14 12.75 242.24 12.75 254.99 -6.18 25.27 -0.94 18.15 -28.16 25.58 56.45 -33.90 48.13 -41.50 -72.86 ---72.86 71.81 --12.00 --12.00 17.70 --68.00 --68.00 67.15 ----11.97 -11.97 12.75 3.61 -1.32 2.29 -10.01 -7.93 -1.23 -9.16 6.63 -1.07 -1.17 -2.24 -1.05 -6.31 -1.11 -7.42 5.70 3.57 -1.06 2.51 -0.85 -1.07 -0.76 -1.83 0.78 -1.32 -6.40 -7.72 -1.23 -1.30 -2.53 -1.17 -2.12 -3.29 -1.11 -0.61 -1.72 -1.06 2.72 1.66 -0.76 -0.29 -1.05 Mar 31, 99 Mar 31, 2000 Mar 31, 2001 Mar 31, 2002 (Rs. in crores) Mar 31, Period 2003 Ended, Dec 31, 2003

Increase/decrease in Assets & Liabilities Nature of adjustments ASSETS Investments Advances Fixed Assets Other Assets Increase/decrease in Assets

March 31, 1999

March 31, 2000

March 31, 2001

March 31, 2002

March 31, 2003

Period ended Dec 31,2003

0.94 -25.27 1.32 -10.01 -33.02

33.90 -56.45 1.23 6.63 -14.69

--1.17 -1.05 0.12

-12.00 1.11 5.70 18.81

-68.00 1.06 -0.85 68.21

11.97 -0.76 0.78 13.51

LIABILITIES Revaluation Reserves Revenue & Other Reserves Other Liabilities Increase/decrease in Liabilities 1.32 -28.16 -6.18 -33.02 1.23 -41.50 25.58 -14.69 1.17 71.81 -72.86 0.12 1.11 17.70 --18.81 1.06 67.15 -68.21 0.76 12.75 -13.51

86

Allahabad BankPART III A. SIGNIFICANT ACCOUNTING POLICIES 1. General: a) The financial statements are prepared on historical cost basis and conform to the statutory provisions and prevailing practices in India , except as otherwise stated. b) The financial statements also conform to the Reserve Bank of India (RBI) guidelines issued from time to time on income recognition, asset classification, provisioning and other related matters. 2. Transactions involving Foreign Exchange: a) Foreign currency balances whether of assets or liabilities [including deposits mobilized under FCNR (B) Scheme, EEFC Scheme, RFC Scheme etc.] and outstanding forward exchange contracts are converted at year end rates as advised by Foreign Exchange Dealers Association of India (FEDAI). The resultant profit/loss on revaluation of forward exchange contracts and NOSTRO accounts is taken to revenue as per FEDAI guidelines. b) Income and Expenditure items relating to foreign currency are converted at the rates of exchange ruling on the date of transaction. c) Acceptances, endorsements and other obligations including guarantees are stated at FEDAI advised rates prevailing at the year end. 3. Investments: 3.1 The investment portfolio of the Bank is classified in accordance with Reserve Bank of India guidelines under three categories viz. "Held to Maturity", "Available for Sale" and "Held for Trading". The disclosure of investments under all the three categories mentioned above is made under six classifications viz. (a) Government securities, (b) Other approved securities, (c) Shares, (d) Debentures & Bonds, (e) Subsidiaries/joint ventures and (f) Others. (a) Investments classified as 'Held to Maturity' (other than in Regional Rural Banks) are carried at acquisition cost. In case the acquisition cost is higher than the face value, the excess is amortized over the period remaining to maturity, and provision is made for: (i) (ii) (b) depreciation in the value of debentures/bonds which are deemed to be in the nature of advances by applying the RBI prudential norms of asset classification and provisioning applicable to advances. diminution, other than temporary, in the value of investments in subsidiaries/joint ventures.

3.2

Investments classified as " Available for Sale" are marked to market scrip-wise at quarterly intervals and resultant net depreciation is recognised and net appreciation, if any, is ignored under each classification. The book value of the individual scrip is not changed with the revaluation as indicated above. (c ) Investments classified as "Held for Trading" are revalued scrip-wise at monthly interval and resultant net depreciation is recognised and net appreciation, if any, is ignored under each classification. The book value of the individual scrip is not changed with the revaluation as indicated above. (d) Investments in Regional Rural Banks are valued at carrying cost. 3.3 In respect of non-performing securities (where interest/principal is in arrears for more than 180 days), income is not recognized and appropriate provision is made for depreciation in the value of the securities by applying prudential norms of asset classification and such depreciation is not set-off against the appreciation in respect of other performing securities. Cost of acquisition of investments: i) is net of incentives/commission and front-end fees received in case of securities subscribed. ii) excludes commission, brokerage and stamp duty. Profit/loss on sale of investments is recognised in the Profit and Loss Account. An amount equivalent to the profit on sale of investments under "Held to Maturity" category, is first taken to the Profit and Loss Account and thereafter appropriated to the "Capital reserve account". For the purpose of determining market value of investments, Stock exchange quotations or rates put up by FIMMDA/PDAI are adopted. In absence of such quotations/rates, the market value is determined by applying appropriate Yield to Maturity rates as prescribed by FIMMDA / PDAI or as per norms laid down by the Reserve Bank of India.

3.4

3.5

3.6

87

Allahabad Bank4. Advances: a) Advances classified as performing and non-performing are as per guidelines prescribed by RBI and are shown net of provisions for non-performing advances. b) The provision made for standard advances (performing) in terms of RBI guidelines is however included in "Other Liabilities and Provisions". 5. Fixed Assets: a) Premises including freehold and leasehold and other Fixed Assets are stated at historical cost except certain premises, which are stated at their revalued amount. . b) Capital expenditure incurred during construction period is included under Other Assets. c) Depreciation is provided on diminishing balance method at the rates prescribed in Schedule XIV to the Companies Act, 1956 except that in respect of ALPMs & Computers, where depreciation is provided on straight line method @ 33.33% as per RBI Guidelines.. d) In respect of revalued assets the amount of additional depreciation consequent to revaluation is transferred from Revaluation Reserve to the Profit & Loss Account. e) Premium on leasehold land is amortised over the period of the lease. 6. Non-Banking Assets: Non-Banking Assets acquired in satisfaction of claims are stated at cost. 7. Retirement Benefits to Employees: a) Liability for gratuity, leave encashment and pension benefits to employees are provided for on the basis of actuarial valuation at the year end. b) Expenditure towards ex-gratia and additional contribution in respect of gratuity and pension under Voluntary Retirement Scheme (VRS) is treated as Deferred Revenue Expenditure amortised over a period of five years in terms of RBI Guidelines. 8. Recognition of Income and Expenditure: Income and Expenditure are accounted for on accrual basis other than those stated below: a) Interest and Other Income on advances classified as non-performing assets are recognised to the extent realized. b) Income from interest on refund of Income Tax and interest tax are accounted for in the year the order is passed by the concerned assessing officer. 9. Net profit: The net profit is arrived at after accounting for the following " a) Provisions for Income Tax (including deferred tax) and Wealth Tax in accordance with the Statutory requirements. b) Provisions on advances / Investments. c) Adjustments to the value of investments. d) Transfers to provisions and contingencies. e) Other usual and necessary provisions. B. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES BETWEEN 01.04.1998 AND 31.12.2003 1. During the five consecutive financial years ended March 31, 2003, various guidelines were issued by the Reserve Bank of India on Income Recognition, Asset Classification, Provisioning in respect of standard Assets / Non-Performing Advances /Other Assets, Classification of Investment, Valuation thereof, Treatment of Depreciation on Investment, amortisation of Voluntary Retirement. Scheme expenditure and Depreciation on ALPMs and Computers. Necessary amendments in the accounting policies have been carried out by the bank in the relevant years, to be in conformity with the Reserve Bank of India guidelines. 2 Acceptances, endorsements and other obligations including guarantees in transactions involving foreign exchange were stated at st st rates prevailing on the date of commitment upto 31 March, 2001. In the year ended on 31 March, 2002, the same were treated at year end rate as advised by FEDAI.

88

Allahabad Bank3. During the year 2002-03 the method of providing liability in respect of leave encashment was changed from cash basis to accrual basis. As a result of this change, the liability ascertained on the basis of actuarial valuation upto 31.3.2002 amounting to Rs. 41.36. Crores is charged to revenue and other reserves and liability for the year 2002-03 amounting to Rs. 10.37 Crores (including Rs. 5.50 paid during the year) is charged to Profit & Loss Account. As a result, the profit for the year was lowered by Rs.4.87 Crores. 4. Income from Commission earned on Letter of Credit, Bank Guarantee, Merchant Banking, Govt. Business, Locker and Interest on st matured term deposit were accounted for on accrual basis during the year 2002-03 as against cash basis upto 31 March 2002. As a result, the profit for the year is lower by Rs.25.22 crores. PART IV A. MATERIAL NOTES ON ACCOUNTS 1. (i) Adequate provision has been made for Non-performing Advances in terms of Reserve Bank of India (RBI) guidelines. (ii) A general provision @ 0.25% has been made on Performing Advances in terms of RBI guidelines. (iii) In compliance with RBI directives, the Bank has made an additional provision of Rs. 60.00 crores (previous year ending 31.3.2003 Rs 30.00 crores) up to 31.12.2003 towards switching over to 90 days norms for identification of NPAs by 31.03.2004. (iv) Prudential floating provision of Rs. 80.00 crores (previous year Rs 12.00 crores) is held as at 31.03.2003 in respect of gross NonPerforming Advances over and above the minimum provision prescribed by RBI with a view to strengthening the financial stability of the Bank. 2. (i) Under Inter-Branch reconciliation, initial matching of entries has been done up to 31.12..2003. Reconciliation of unmatched entries as per IBR department with the balance in Branch Adjustment Account and transactions between Head Office and branches including branches inter-se, is in progress. In terms of RBI's circular, segregation of debit & credit entries in Inter Branch Account pertaining to the period up to 31.03.2002 and remaining outstanding as on 31.03.2003 have resulted in net credit, hence no provision is considered necessary. (ii) At some branches, preparation of details / balancing/reconciliation of accounts relating to Deposits, Advances, Bills Payable, Drafts Payable/Drafts Paid without Advice, Funds in Transit, Clearing Suspense, POB / ROB accounts, Provident Fund contributions, Sundry Creditors, Balances with Banks including RBI, State Bank of India, NOSTRO Accounts and Borrowings of SIDBI are in progress. Pending completion of aforesaid balancing / reconciliation / matching as specified above, in the opinion of the management, the overall impact, if any, in the accounts is not likely to be significant. 3. The provision for income tax (including deferred tax) aggregating to Rs 283.52 crores as on 31.12.2003 (previous year ending 31.03.2003 Rs. 222.54 crores) held is considered adequate by the Bank on the following basis: i) The provision for the year has been made after considering various judicial decisions on disputed issues. ii) Provision is not considered necessary in respect of disputed demands of Rs 106.45 crores as on 31.12.03 (Previous year ending 31.03.2003 Rs. 219.23 crores) contested by the department of Income Tax against the decision of CIT (Appeal). The Bank does not envisage any additional liability in view of judicial decisions. 4. i) Certain premises were revalued on the basis of the reports of the approved valuers in the year ended 31.03.1997 and upward revision amounting to Rs. 125.99 Crores was credited to Capital Reserve Account. Additional depreciation of Rs.0.76 crores for the nine months period ending 31.12.2003 (Previous year ending 31.03. 2003 Rs.1.06 crores) due to revaluation has been transferred from Capital Reserve and shown in Miscellaneous Income. ii) Depreciation has been charged on composite cost of land and building, where cost of land is not available and the quantum thereof is not ascertainable. ii) Premium on leasehold lands has been amortized over the period of lease, based on cost or written down value, where original cost is not available. iv) Premises include certain properties amounting to Rs. 6.50 crores as on 31.3.2003 (Previous Year Rs. 6.54 crores) for which registration formalities are yet to be completed. (i) In terms of the RBI guidelines, provision for depreciation in the value of Investments under Available for Sale category amounting to Rs. 30.35 crores as on 31.12.2003 has been credited to the Profit and Loss Account under the head Expenditure-Provisions and Contingencies. During the year 2002-03, the bank had debited Rs.16.16 crores to Profit & Loss Account under the head Expenditure-Provisions and Contingencies. An amount of Rs 7.67 crores as on 31.3.2003 (Previous Year Rs. 0.67 crores - net of tax benefit and consequent reduction in the transfer to statutory reserve) has been transferred from Investment Fluctuation Reserve Account to Profit & Loss Account.

5.

89

Allahabad Bank6. (i) ii) In terms of RBI guidelines for building up Investment Fluctuation Reserve, the Bank has transferred Rs. 90.00 crores as on 31.3.03 (Previous Year Rs. 30.00 crores) to Investment Fluctuation Reserve from Profit & Loss Account. In respect of Investments of face value of Rs.405.59 crores as on 31.3.03 (previous year Rs.398.00 crores) the Bank is yet to receive scrips/certificates. However, out of Rs 405.59 crores, the Bank is holding Letters of Allotment in respect of securities for Rs 388.15 crores as on 31.3.03 (previous year Rs. 312.76 crores).

7.

Investment in shares (at book value) excluding investments considered as exempted from capital market exposure as per RBI guidelines : (Rs. in Crores) As on 31.12.2003 (a.) (b.) Investment in Equity Shares Unit of Equity oriented Mutual Funds Total 49.53 50.21 99.74
st st

As on 31.03.2003 52.62 84.06 136.68

8.

An amount of Rs. 22.01 crores for the nine months period ending 31 December, 2003 (Previous year ending 31 March, 2003 Rs. th 29.35 crores) being 1/5 of the total expenditure under Voluntary Retirement Scheme introduced during the financial year 20002001 is charged to the Profit & Loss Account in accordance with RBI guidelines. The balance amount of Rs 54.65 crores as on 31.12.2003 (Previous Year ending 31.3.2003 Rs. 76.66 crores) included in "Others" (Sundries & Suspense) under the head "Other Assets will be amortised over the residual period. Interest earned on others includes Rs. 110.17 Crores as on 31.3.03 being interest on Income Tax Refund pertaining to earlier years.

9.

10. There were no material prior period items of Income/ Expenditure during the year requiring disclosure as per Accounting Standard (AS) 5 Net Profit or Loss for the period, Prior Period Items, and Changes in Accounting Policies issued by ICAI. 11. Segment Reporting - Accounting Standard (AS) 17, segment information is given below : A. Business Segment Business Segment Banking Operations 31.12.03 Revenue Segment Revenue Results Unallocated Expenses Unallocated Revenue Operating Profit Provisions & Contingencies Income Taxes Net Income Other Information Segment Assets Unallocated Assets Total assets Segment Liabilities Unallocated Liabilities Capital & Reserves Total Liabilities There are no significant residual operations carried on by the Bank B. Geographical Segment : Not Applicable 22013.63 20685.62 7628.76 5626.11 23316.04 21764.14 8080.10 5919.45 31396.14 346.77 31742.91 29642.39 727.86 1372.66 31742.91 27683.59 367.33 28050.92 26311.73 568.90 1170.29 28050.92 1746.51 379.48 2237.67 344.03 673.83 312.89 746.86 224.62 2420.34 692.37 138.06 1.77 556.08 210.32 103.52 242.24 2984.53 568.65 162.99 110.17 515.83 208.22 141.62 165.99 31.3.03 Treasury 31.12.03 31.3.03 31.12.03 (Rs. in crores) Total 31.3.03

90

Allahabad Bank(i). Other Banking Operation : Consists of Corporate Banking, Retail Banking, Personal and Commercial Banking, Cash Management Services, Deposits and allied services such Credit Cards and Depository Participant Services. (ii). Treasury Operation includes dealing in Government and other Securities, Money Market Operations and Forex Operations. (iii). Allocation of costs : a) Expenses directly attributed to particular segment are allocated to the relative segment. b) Expenses not directly attributable to specific segment are allocated in proportion to number of employees / business managed. (iv). Investment for SLR securities in excess of statutory requirements is considered as investment for Treasury Operations. 12. Related Party Disclosures as on 31.3.2003 - Accounting Standard (AS) 18 List of Related Parties and Transaction (if any) a) Key Management Personnel. S.No. 1 2 Name Dr B Samal Shri K K Rai Designation Chairman & Managing Director Executive Director Remuneration (Amount in Rs.) 4,65,984 4,17,232

b) Subsidiary : All Bank Finance Limited (wholly owned ) c) Regional Rural Banks sponsored the bank: S. No. 1 2 3 4 5 6 7 Vindhyavasini Gramin Bank Bhagirath Gramin Bank Chhatrasal Gramin Bank Saravasthi Gramin Bank Tulsi Gramin Bank Sharda Gramin Bank Sarayu Gramin Bank Name

13. Earning Per Share as on 31.3.2003 Accounting Standard (AS) 20 : a) Basic Earning Per Share b) Diluted Earning Per Share Calculation for Basic Earning Per Share S. No. A B C D Particulars Net Profit for the year attributable to Equity Share holders Weighted average number of Equity Shares Basic Earning per Share (A/B) Nominal Value per share For the year 2002-03 Rs. 165.99 crores 28.20 crores Rs. 5.89 Rs. 10/Rs 5.89 Not Applicable

91

Allahabad Bank14. Deferred Tax Assets and Deferred Tax Liabilities: Accounting for Taxes on Income - Accounting Standard (AS) 22 The Bank has recognized Deferred Tax Assets/ Liabilities and has accounted for net Deferred Tax of Rs. 8.97 crores as on 31.12.2003 by crediting to Profit & Loss A/C under the head Expenditure Provision & Contingencies . An amount of Rs. 21.62 crores (Net) as on 31.3.2003 has been debited to Profit & Loss A/C by way of adjustment of Deferred Tax. The major components of Deferred Tax Assets/ Liabilities, as on 31.12.2003 are as under : (Rs. in Crores) Particulars Interest Accrued but not due on securities held as Investments Contribution to Pension Fund paid in Advance Contribution to Gratuity Fund paid in Advance Depreciation of Fixed Assets Provision for Leave En-cashment Total Net Deferred tax liability 7.37 Crores. 15. Banks net funded exposure in respect of foreign exchange transactions as on 31.03.2003 with each country is below 2% of the total assets of the Bank. Hence, no provision and disclosure is required as per the RBI circular DBOD.BP.BC. 71/21.04.103/2002-03 dated 19.02.2003. 16. During the year 2002-03 the Bank made an initial public issue of 10,00,00,000 Equity Shares of Rs. 10 each at par aggregating to Rs 100 crores. Consequently the paid up capital of the bank has been increased to Rs 346.70 crores as on 31.3.2003 from Rs 246.70 crores in the preceding year. 17. Disclosure in terms of RBI guidelines: a.) Significant Performance Indicators (i) (ii) (iii) Percentage of shareholding of the Government of India Percentage of Net NPAs to Net Advances Details of Provisions and Contingencies In Profit & Loss Account: a. Provision for Standard Advances @ 0.25 % Others b. Provision made towards NPAs c. Provision for Depreciation on Investments d. Provision for Income Tax & Wealth Tax e. Other Provisions ( net ) Total Provisions (iv) (v) Subordinated Debt raised as Tier II Capital Capital Adequacy Ratio [Tier I 7.44% (Previous Year ending 31.3.2003 6.35%) Tier II 4.32% (Previous Year ending 31.3.2003 4.80%)] b.) (i) Business Ratios Interest Income as a percentage to Working Funds 31.12.2003 8.45%* 2002-03 9.34% 4.04 229.49 (30.54) 103.53 7.32 313.84 421.61 11.76% 4.51 173.13 19.43 141.64 11.13 349.84 421.61 11.15% 31.12.2003 71.16% 4.17% (Rs. in Crores) 2002-03 71.16% 7.08% Deferred Tax Assets 4.69 4.69 Deferred Tax Liabilities 1.55 3.71 1.05 5.75 12.06

92

Allahabad Bank(ii) (iii) (iv) (v) (vi) Non-Interest Income as a percentage to Working Funds Operating Profit as a percentage to Working Funds Return on Assets Business (Deposits plus Advances) per employee Profit per employee 1.92%* 2.38%* 1.02%* 204 lacs * 1.25 lacs * 31.12.2003 1841.50 167.50 549.86 1459.14 574.63** 1.90% 1.87% 0.59% 183 Lacs 0.87 Lacs 2002-03 2001.85 410.60 570.95 1841.50 886.98**

c) Movement in Non Performing Advances (i) (ii) Gross NPA at the beginning of the year Additions during the year

(iii) Deduction during the year (iv) Gross NPAs at the end of the year (v) Net NPA at the end of the year *On annualize basis

**The sum of Rs. 3.18 crores as on 31.12.2003 (Previous Year ending 31.3.2003 Rs.11.18 crores) has been netted with gross advances on account of receipts from DICGC/ECGC and certain amounts held in other liabilities. (Rs. In Crores) d) Movement of provisions towards NPAs 31.12.2003 2002-03 (i) ii) iii) Opening Balance Add: Provision made during the year Less: Write off, write back of excess provision during the year 943.34 229.49 292.37 880.46 822.51 182.63 61.80* 943.34 (Rs. In Crores) e) Movement of provisions for depreciation for Non Performing Investments (i) iii) Opening Balance Less: Write off, Write back of excess Provision during the year (ii) Add: Provision made during the year/adjustment for shifting (iv) Closing Balance 31.12.2003 104.31 (0.41) (30.54) 73.36 2002-03 108.23 19.43 23.35 104.31 (Rs. In Crores) f) Lending to Sensitive Sector (i) Advances to Capital Market Sector As at 31.03.2003 2.46 27.91 186.34 As at 31.03.2002 6.96 27.22 176.46 (Rs. In Crores) As at 31.03.2002 424.58 381.26 43.32

(iv) Closing Balance

* In addition to this, a sum of Rs. 175.62 crores has also been written off during the year by debiting directly to the Profit & Loss Account.

(ii) Advances to Real Estate Sector (iii) Advances to Commodities Sector

g) Restructuring of Loans ( Non Corporate Debt Restructuring cases ) (i) Total amount of Loan Assets subjected to restructuring (ii) Total amount of Standard Assets subjected to restructuring (iii) Total amount of Sub-standard/Doubtful Assets subjected to restructuring

As at 31.03.2003 312.18 288.32 23.86

93

Allahabad Bankh) Corporate Debt Restructuring (i) Total amount of Loan Assets subjected to restructuring under CDR (ii) Total amount of Standard Assets subjected to restructuring (iii) Total amount of Sub-standard/Doubtful Assets subjected to restructuring (Rs.In Crores) As at 31.03.2003 95.14 95.14 Nil

i) Maturity pattern of assets and liabilities as on 31.3.2003 Maturity Pattern 1 to 14 days 15 to 28 days 29 days and upto 3 months Over 3 months and upto 6 months Over 6 months and upto 1 year Over 1 year and upto 3 years Over 3 years and upto 5 years Over 5 years Total Deposits 705.55 405.95 1681.74 1806.75 3955.82 7014.37 3807.50 6085.70 25463.38 Loans& Advances 376.05 147.52 563.54 777.92 1133.48 4757.43 2113.26 2674.40 12543.60 Investment Securities 88.33 5.00 44.33 121.03 104.12 1375.00 1379.36 9254.56 12371.73 Foreign Currency Assets Liabilities 61.27 1.27 16.62 44.36 0 8.87 0 0 132.39 52.66 4.08 17.85 12.64 25.12 20.04 0 0 132.39 (Rs In Crores) Borrowings 0.59 0 8.81 5.14 3.16 23.89 2.10 0 43.69

The disclosures made in para 17 (f) & (i) with regard to lending to sensitive sector and maturity pattern of assets & liabilities as on 31.03.2003 are based on the information compiled by the bank and relied upon by the auditors. 18. During the year 2002-03 the Bank has raised Rs.100 crores as Tier II Capital through Private placement of 7.00% p.a. subordinated, unsecured, non-convertible, redeemable bonds for a tenure of 85 months. 19. The period of 12 years for final adjustment of amalgamation of erstwhile United Industrial Bank Ltd. (UIBL) ended on 30.10.2001 and the process of valuation of Assets & Liabilities for final adjustment in consultation with RBI is in progress. 20. Cash Flow Statement for the year ended 31.03.2003. (Rs. in '000) I. Particulars Cash Flow from Operating Activities Interest received during the year From Advances, Investments etc. Other Income Less: Interest paid during the year on Deposits, Borrowings etc Operating Expenses including Provisions & Contingencies Depreciation on Fixed Assets a. Cash Profit generated from operations 2002-03 2001-02

25703328

22728375

5233476 16148944 12681483

30936804

3837787 15080823

26566162

28830427 2106377 387667 2494044

10351734

25432557 1133605 349885 1483490

b. Increase (Decrease) in Liabilities Deposits Other Liabilities & Provisions 27974430 1569953 29544383 25599241 (54858) 25544383

94

Allahabad Bankc. Decrease (Increase) in Assets Advances Investments Other Assets Net Cash Flow from Operating Activities (a+b+c) II Cash Flow from Investing Activities Sale/disposal of fixed assets Purchase of fixed assets Net Cash Flow from Investing Activities 5710 (288678) (282968) 4513 (433689) (429176) (20615224) (15178308) 787155 (35006377) (2967950) (14097980) (16389031) 844524 (29642487) (2614614)

III

Cash Flow from Financing Activities Borrowings Interest on Borrowings Dividends (including tax) Tier II Bonds (Series II) Issue of Shares Net Cash generated from Financing Activities Total Cash Flow during the year (I.+II.+III.)

(168732) (456624) (160427) 1000000 1000000 1214217 (2036701)

(96177) (342862) (110200) 950000 0 400761 (2643029)

IV.

Cash and Cash equivalent at the Beginning of the year Cash and Balances with RBI Balances with Banks and Money At Call and Short Notice Total

16670242

21158770

5464607 22134849

3619108 24777878

V.

Cash and Cash equivalent at the end of the year Cash and Balances with RBI Balances with Banks and Money at Call and Short Notice Total Total Cash Flow during the year (V. IV.)

15457589 4640559 20098148 (2036701)

16670242 5464607 22134849 (2643029)

21. Previous year's figures have been regrouped/reclassified wherever considered necessary. NOTES ON ADJUSTMENTS 1. Necessary adjustments arising from Auditors qualifications wherever quantifiable and material in respect of previous years have been carried out while preparing the Statements of Profit & Loss and Assets & Liabilities (Part I & II). 2. Necessary amendments in the Accounting policies have been made by the Bank to give effect to various guidelines issued by the RBI on Income Recognition, Assets Classification Provisioning on Standard Assets / Non performing Assets / other Assets, Classification of Investments, valuation and Treatment of depreciation thereof. Accordingly, the amounts for the respective years are based on RBI guidelines prevailing in the said years. 3.The pension liability was actuarially determined on 31 March 1998 and the same was amortised over a period of four years. The short / excess provision in respective years have been adjusted as per the details given below:
st

95

Allahabad Bank(Rs in Crore) Year 1998-99 1999-00 2000-01 Adjustment in Profit & Loss A/c. -6.18 25.58 -72.86

4. In respect of Investment in wholly owned subsidiary, the following adjustments (short+ / Excess -) have been made on the basis of Auditors observations: (Rs. in Crore) Year Adjustment in Profit & Loss A/c. 1998-99 -0.94 1999-00 -33.90 31 December 2003 -11.97 5. In absence of adequate information, adjustment in respect of prior period have been made in the immediately preceding period. 6. Excess provision made on account of Non performing assets in the preceding years and subsequently utilized in next years are as follows: (Rs. in Crore) Year Adjustment in Profit & Loss A/c. 1998-99 25.27 1999-00 56.45 2001-02 -12.00 2002-03 -68.00

96

Allahabad BankPART V AUDITORS QUALIFICATIONS FOR WHICH ADJUSTMENTS COULD NOT BE CARRIED OUT 1. Income on Commission earned on Letters of Credit and Bank Guarantees, Income from Merchant Banking and Government Transactions, Insurance claims and Locker rent, Interest on Matured Term deposits, Leave encashment benefits upto 31.3.2002 have been accounted for on cash basis which is not in accordance with Accounting Standard 9 issued by the Institute of Chartered Accountants of India. In some of the branches, reconciliation of differences between Advance Control Account and Subsidiary records is in progress. Pending such reconciliation, consequential effect on accounts is not ascertainable. At some branches, preparation of details/balancing/reconciliation of accounts relating to Deposits, Advances, Bills Payable, Drafts Payable/Drafts Paid without Advice, Funds in Transit, Clearing Suspense, Payment/Receipts on POB/ROB accounts, Provident Fund contributions, Stationery stocks, Sundry Creditors, Balances with Banks including RBI, State Bank of India, NOSTRO Accounts, Borrowings from SIDBI and Acceptances is in progress. Pending completion of aforesaid balancing / reconciliation / matching as specified above, the impact of consequential adjustments on the Profit & Loss Account, Balance Sheet and Capital Adequacy Ratio, Maturity Pattern of Assets & Liabilities as well as other ratios is not ascertainable. Under Inter-Branch reconciliation, initial matching of entries has been done upto December 2003. Reconciliation of unmatched entries as per IBR department with the balance in Branch Adjustment Account and transactions between Head Office and branches including branches inter-se, is in progress. Interest on Double Deposit Plan (DDP) for broken period upto 31.3.2002 has not been provided and quantum is not ascertained. In terms of RBI directives regarding the depreciation on ALPMs and Computers has been changed to straight line method from diminishing balanced method w.e.f. from 1.4.2000. The deficiency / surplus arising from retrospective re-computation of depreciation has not been worked out. The treatment as accorded is also not in consonance with AS-6 (Revised) Depreciation Accounting as issued by the Institute of Chartered Accountants of India. Leave encashment benefits to employees was accounted for on payment basis upto 31.3.2002, which is not in accordance with the Accounting Standards 15 issued by the Institute of Chartered Accountants of India.

2. 3.

4.

5. 6.

7.

8. The effect of observations in the foregoing paragraphs on the accounts, as also capital adequacy ratios and other ratios/disclosures could not be determined for want of information. PART VI STATEMENT OF DIVIDEND DECLARED BY THE BANK AND ITS SUBSIDIARIES A. HOLDING COMPANY ALLAHABAD BANK Year ended For the Year Number of shares (in crores) Rate of Dividend (%) Amount of Dividend (Rs. in crores) * Interim Dividend B. SUBSIDIARIES ALL BANK FINANCE LIMITED Year ended For the Year Number of shares (in crores) Rate of Dividend (%) Amount of Dividend (in Rs.)

March 31, 1999 1998-1999 24.67 11.00 27.14

March 31, 2000 1999-2000 24.67 10.00 24.67

March 31, 2001 2000-2001 24.67 4.05 10.00

March 31, 2002 2001-2002 24.67 6.50 16.04

March 31, 2003 20022003 34.67 10.00 34.67

December 31, 2003 2003-2004* 34.67 10.00 34.67

March 31, 1999 1998-1999 0.60 ---------

March 31, 2000 1999-2000 0.60 ---------

March 31, 2001 2000-2001 0.60 ---------

March 31, 2002 2001-2002 0.60 ---------

March 31, 2003 2002-2003 0.60 ---------

December 31, 2003 2003-2004 0.60 ---------

97

Allahabad BankPART VII : Key Accounting Ratios Year ended March 31 1999 2000 2001 2002 2003 Nine months ended 31.12.2003 (Reviewed) 4.73 29.74 15.92 8.93 28.60 25.38 10.35** 34.83 29.71**

Audited Earning Per Share (Rs.) Net Asset Value per Share (Rs.) (Excl RR) Return on Net Worth - before extraordinary items (%) Computation of the above ratios Earning Per Share (Rs.) Adjusted Profit Add Extraordinary Item (Net) Sub Total No of Shares (In Crores) Earning Per Share (Rs.) Net Asset Value per Share (Rs.) (Excl Revaluation Reserve) Net worth excl. RR No of Shares (In Crores) Net Asset Value per Share (Rs.) (Excl RR) Return on Net Worth - before extraordinary items (%) Adjusted Profit before Extraordinary Items Net worth excl. RR Return on Net Worth - before extraordinary items(%) OTHER RATIOS Net NPA to Net Advance Ratio (%) Interest Income/Working Fund (%) Non-Interest Income/Working Fund (%) Return on Assets (%) Operating Profit/Working Funds (%) Business per employee (Rs /lacs) Net Profit per employee (Rs/lacs) Capital Adequacy Ratio (%) Tier I Tier II Credit/Deposit Ratio (%) Interest Spread/Average Working Fund(%) Operating Exp. /Avg. Working Funds (%) Return on Average Net Worth (%) Yield on Advances (%) Yield on Investments (%) Cost of Deposits (%) Operating Profit per employee (Rs./ lacs) Business per Branch (Rs. / lacs) Operating Profit per Branch (Rs. / lacs) 12.54 9.68 1.27 0.77 1.42 90 0.60 10.38 6.57 3.81 50.07 2.98 2.83 23.98 12.42 11.19 7.76 1.05 1205.47 12.41 12.24 9.64 1.34 0.35 1.49 105 0.31 11.51 7.10 4.41 50.35 2.95 2.80 10.94 11.47 11.11 7.78 1.14 1363.66 13.34 11.23 9.79 1.13 0.18 1.26 129 0.19 10.50 6.70 3.80 51.31 3.24 3.11 5.96 11.31 11.04 7.44 1.27 1551.58 13.99 10.57 9.41 1.59 0.32 1.69 153 0.40 10.62 6.22 4.40 52.13 3.02 2.93 11.21 10.59 10.29 7.20 2.05 1752.92 21.32 7.08 9.34 1.90 0.59 1.87 183 0.87 11.15 6.35 4.80 52.97 3.30 3.33 19.70 10.11 9.64 6.79 2.64 2025.48 26.82 106.84 550.68 19.40 27.83 551.13 5.05 118.61 651.83 18.20 116.79 733.69 15.92 251.70 991.64 25.38 550.68 24.67 22.32 551.13 24.67 22.34 651.83 24.67 26.42 733.69 24.67 29.74 991.64 34.67 28.60 106.84 Nil 106.84 24.67 4.33 27.83 Nil 27.83 24.67 1.12 111.72 6.89 118.61 24.67 4.80 97.92 18.87 116.79 24.67 4.73 233.14 18.56 251.70 28.20* 8.93 4.33 22.32 19.40 1.12 22.34 5.05 4.80 26.42 18.20

254.99 14.11 269.10 34.67 10.35** 1207.51 34.67 34.83

269.10 1207.51 29.71**

4.17 8.45** 1.92** 1.02** 2.38** 204 1.25** 11.76 7.44 4.32 52.20 3.39** 2.92** 31.07** 9.59** 8.81** 5.80** 2.86 2215.54 28.80

98

Allahabad BankDefinitions of Key Ratios: All the Financial Ratios/ Capital Adequacy Ratios as specified in the offer document and the disclosures regarding NPAs conform to the norms as specified by RBI Credit/Deposit ratio Average Working Fund (AWF) Interest Spread/AWF (%) Operating Profit/AWF (%) Return/AWF (%) Operating Expenses/AWF (%) Cost of deposits (%) Yield on Investments (%) Yield on Advances (%) Return on Average Net Worth (%) Business per employee (Rs. lacs) Operating Profit per employee (Rs. lacs) Business per Branch (Rs. lacs) Operating profit per Branch (Rs. lacs) Total Advances/Total Deposits Total Average of monthly total assets as per Form X Net Interest Earned/AWF Profit prior to provisions and contingencies/AWF Net Profit/AWF Non-interest expenditure/AWF Interest expended/Average Deposits as per Form X Interest earned on Investments/Average Investments as per Form X Interest earned on Advances/Average Advances as per Form X Net Profit/Average of Opening & Closing Net Worth Total Deposits excl. Bank Deposits plus Total Advances/Employee Strength Profit prior to provisions and contingencies/Employee Strength Total Deposits excl Bank Deposits and Advances/No of Branches Profit prior to provisions and contingencies/No of Branches

* on the basis of weighted average of no. of equity shares as the bank had come out with the public issue of Rs.100 crores during October, 2002. ** On annualised basis PART VIII . Capitalisation Statement and as at December 31, 2003 (Rs. in crores) Particulars Pre Issue Post Issue as adjusted for the proposed Issue of Bonds of Rs. 200 crores Loan Funds Long Term 452.00* 652.00* Short Term 646.02 646.02 Total Debt 1098.02 1298.02 Shareholders Funds Share Capital 346.70 346.70 Reserves and Surplus(excluding revaluation reserve) 794.58 794.58 Total Equity 1141.28 1141.28 Long Term Debt/ Equity Ratio 0.39 0.57 Including Tier II Bonds PART IX. Details of Outstanding Unsecured Liabilities As on Demand Deposits from Banks Demand Deposits from Others Saving Bank Deposits Term Deposits from Banks Term Deposits from Others Unsecured Subordinated Bonds TIRE II Series I Unsecured Subordinated Bonds TIRE II Series II Unsecured Subordinated Bonds TIRE II Series III Subordinate Loans from World Bank Borrowings from Reserve Bank of India Borrowings from Other Banks Borrowings from Other Institutions & Agencies Miscellaneous including Borrowing Outside India Total March 31, 2003 74.95 2192.67 8725.18 699.09 13771.48 125.00 95.00 100.00 101.61 43.69 25928.67 (Rs. in crores) Dec. 31, 2003 37.03 1925.24 9701.61 605.70 15837.82 125.00 95.00 100.00 101.61 500.00 82.84 93.57 29205.42

99

Allahabad BankPART X. Tax Shelter For the Year/ Half Year ended Tax Rate Tax at actual rate on profit Adjustments Permanent Differences i) Interest on Tax free bonds ii) Dividend (exempt from tax) iii) Others Total Timing Difference i) Difference between both Depreciation IT Depreciation on Fixed Assets ii) Interest on securities iii) Provision for bad and doubtful debts/ bad debts written off iv) Difference between the profit/ loss on investment shown in Profit & Loss Account and the Income Tax Return v) Other Adjustments vi) Brought forward Losses Total Net Adjustments Tax Saving thereon Total Taxation Taxation on VRS expenses being extra ordinary item Tax before Extra-Ordinary item March 31, 1999 35% 37.39 March 31, 2000 38.50% 10.71 March 31, 2001 39.55% 44.19 March 31, 2002 35.70% 34.96 (Rs. in crores) March 31, Dec 31, 2003 2003 36.75% 35.875% 85.68 91.48

(0.52) (6.47) (6.99) (2.57) (34.99) (71.44) 32.33 12.37 (88.75) (153.05) (160.04) (56.01) Nil -----

(2.12) (11.41) (13.53) (3.33) (25.54) 25.05 (2.03) 80.76 -74.91 61.38 ---* 10.71 --10.71

(3.00) (13.29) 10.88 (5.41) (10.54) (12.88) 47.54 (31.33) 2.70 -(4.51) (9.92) (3.92) 40.27 4.50 44.77

(3.87) (14.89) 2.17 (16.59) (4.01) (55.33) 140.53 (31.79) 45.88 -95.28 78.69 ----* 34.96 10.48 45.44

(8.32) (10.07) (8.47) (26.86) 2.49 (61.00) (168.96) (15.68) --(243.15) (270.01) (99.23) (13.55) 10.79 (2.76)

(12.00) (5.82) (6.35) (24.17) 4.55 (39.39) (142.50) (10.00) --(187.34) (211.51) (75.88) 15.60 7.90 23.50

Note: The Income Tax liability for the five financial years ended March 31, 2003 has been computed as per the relevant Income Tax returns/ communications sent to the Assessing Officer. The tax liability for 9 months ended 31.12.2003 is calculated on the estimated basis. PART XI. Contingent Liabilities 1. The Bank has following contingent liabilities for which no provisions have been made in the books of accounts of the Bank for the year ended March 31, 2003 and period ended December 31, 2003: Sr. No. Particulars Amount (Rs. in crores) March 31, Dec 31, 2003 2003 Claims against the Bank not acknowledged as debts 162.65 136.32 Liability for partly paid investments 0.16 0.16 Outstanding forward exchange contracts 8470.09 11637.82 Guarantees given on behalf of constituents In India 767.01 858.20 Outside India 21.76 11.64 Acceptances, Endorsements and Other Obligations 696.49 990.49 Estimated amounts of contracts remaining to be executed on Capital -------Accounts Disputed Income Tax Liabilities 219.23 106.45 Others 1.31 0.64 Total 10338.70 13741.72 831.84 804.46

Bills for Collection 2.

We have examined all the contracts, claims and litigations against the Bank and have analysed the likely impact of the same as indicated above. We certify that apart from the contingent liabilities indicated above, the Bank does not have any other contingent liabilities.

100

Allahabad BankPART XII: Consolidated Financial Statement Consolidated Balance Sheet as on 31st March 2003 Particulars CAPITAL & LIABILITIES Capital Reserves & Surplus Minorities Interest Deposits Borrowings Other liabilities & provisions Total ASSETS Cash & Balances with Reserve Bank of India Balances with banks and money at call and short notice Investments Loans & Advances Fixed Assets Other Assets Goodwill on Consolidation Debit Balance of Profit & Loss A/C Total Contingent Liabilities Bills for collection Consolidated Profit & Loss Account for the year ended March 31, 2003 (Rs. In Crores) Particulars I. Income Interest earned Other income Total II. EXPENDITURE Interest expended Operating expenses Provisions & Contingencies Total Share of earnings/loss in Associates Consolidated Net profit/(loss) for the year before deducting Minorities' Interest Less: Minorities' Interest Consolidated profit/(loss) for the year attributable to the group Add: Brought forward consolidated profit/(loss) attributable to the group Total III. APPROPRIATIONS 17 15 16 1660.53 920.05 349.70 2930.28 17.45 183.44 ---13 14 2580.30 515.97 3096.27 Schedule Year ended 31-3-2003 6 7 8 9 10 11 1545.76 464.05 12406.75 12547.45 360.35 795.39 NIL NIL 28119.75 10367.39 831.84 1 2 2A 3 4 5 346.70 885.62 NIL 25462.51 43.69 1381.23 28119.75 Schedule (Rs. In Crores) As on 31.03.2003

12

183.44 20.65 204.09

101

Allahabad Bank41.50 Transfer to Statutory Reserves Transfer to Other Reserves Transfer to Government/Proposed Dividend 86.66 39.11

Balance carried over to consolidated Balance Sheet Total Earnings per Share The schedules referred to above form an integral part of the accounts. SCHEDULE 1 - CAPITAL Particulars Authorised Capital (1,50,00,00,000 Shares of Rs.10 each) Issued Capital (34,67,00,000 Shares of Rs.10.each) Subscribed Capital (34,67,00,000 Shares of Rs.10 each) Called-up Capital (34,67,00,000.Shares of Rs.10 each) Less: Calls unpaid Add: Forfeited shares Total SCHEDULE 2 - RESERVES & SURPLUS Particulars Statutory Reserves Capital Reserves Capital Reserves on Consolidation Share Premium Revenue and other Reserves Balance in Profit and Loss Account Total SCHEDULE 2A - MINORITIES INTEREST Particulars Minority interest at the date on which the parent - subsidiary relationship came into existence Subsequent increase / decrease Minority interest on the date of Balance Sheet

36.82 204.09 6.50

(Rs. in crores) As on 31.3.2003

1500.00 346.70 346.70 346.70 NIL NIL 346.70 (Rs. in crores) As on 31.3.2003

256.39 238.02 44.57 NIL 309.82 36.82 885.62 (Rs.in crores) As on 31.3.2003

-------------

102

Allahabad BankSCHEDULE 3 DEPOSITS Particulars A. I. Demand Deposits (I) From banks (ii) From others II. Savings Bank Deposits III. Term Deposits (I) From banks (ii) From others Total (I+II+III) B. (i) Deposits of branches in India (ii) Deposits of branches outside India Total (i+ii) SCHEDULE 4 BORROWINGS Particulars I. Borrowings in India (I) Reserve Bank of India (ii) Other banks (iii) Other institutions and agencies II. Borrowings outside India Total (I and II) Secured borrowings included in I and II above SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS Particulars I. II. Bills payable Inter -office adjustments (net) NIL NIL NIL 43.69 NIL 43.69 699.10 13770.71 25462.51 25462.51 NIL 25462.51 (Rs. in crores) As on 31.3.2003 74.95 2192.57 8725.18 (Rs. in crores) As on 31.3.2003

(Rs. in crores) As on 31.3.2003

253.02 NIL 130.02 16.35 981.84 1381.23

III. Interest accrued VI. Deferred Tax Liabilities V. Others (including provisions) Total

103

Allahabad BankSCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA Particulars I. Cash in hand (including foreign currency notes) (Rs. in crores) As on 31.3.2003

225.35

II. Balances with Reserve Bank of India (i) In Current Account (ii) In Other Accounts Total (I & II) SCHEDULE 7 BALANCES WITH BANKS & MONEY AT CALL & SHORT NOTICE Particulars I. In India (i) Balances with banks (a) In Current accounts (b) In Other Deposit accounts (ii) Money at call and short notice (a) With banks (b) With other institutions Total (i & ii) NIL NIL 419.03 139.03 280.00 1320.41 NIL 1545.76 (Rs. in crores) As on 31.3.2003

II. Outside India (i) In Current account 9.66 35.36 NIL 45.02 464.05 (Rs. in crores) Particulars I. Investment in India in (i) Government securities 9457.87 545.56 53.98 1721.36 89.63 538.35 Total II. Investments outside India in (i) Government securities including local authorities NIL 12406.75 As on 31.3.2003

(ii) In Other Deposit accounts (iii) Money at call and short notice Total Grand Total (I & II) SCHEDULE 8 INVESTMENTS

(ii) Other approved securities (iii) Shares (iv) Debentures and Bonds (v) Investment in Associates (vi) Others

104

Allahabad Bank(ii) Investment in Associates (iii) Other Investments Total Grand Total (I) & (II) NIL NIL NIL 12406.75

III. Investment in India (i) Gross value of Investments 12513.07 106.32 12406.75

(ii) Aggregate of Provisions for Depreciation (iii) Net Investment

IV. Investments outside India (i) Gross value of Investments NIL NIL NIL (Rs. in crores) Particulars A. (i) Bills purchased and discounted (ii) Cash credits, overdrafts and loans repayable on demand (iii) Term loans Total B. (i) Secured by tangible assets (includes advances against book debts) (ii) Covered by Bank/ Government Guarantees (iii) Unsecured Total C. I. Advances in India (I) Priority sector (ii) Public sector (iii) Banks (iv) Others C. II. Advances outside India (I) Due from banks (ii) Due from others (a) Bills purchased & discounted (b) Syndicated Loans (c) Others Total NIL NIL NIL NIL NIL 12547.45 5353.30 1825.34 19.14 5349.67 9399.54 1722.01 1425.90 12547.45 As on 31.3.2003 464.12 6146.33 5937.00 12547.45

(ii) Aggregate of Provisions for Depreciation (iii) Net Investment SCHEDULE 9 ADVANCES

105

Allahabad BankSCHEDULE 10 - FIXED ASSETS Particulars I. Premises At cost as on 31 March of the preceding year Additions during the year Deductions during the year Depreciation to date Total I IA. Premises under construction II. Other Fixed Assets (including Furniture and Fixtures) At cost as on 31 March of the preceding year Additions during the year Deductions during the year Depreciation to date Total II IIA. Leased Assets At cost as on 31 March of the preceding year Additions during the year including adjustments Deductions during the year including provisions Depreciation to date Total IIIA Total ( I+ IA+ II+IIA ) III. Capital Work - in - progress ( Leased Assets ) net of Provisions Total ( I+IA+II+ IIA+III ) 360.35
st st st

(Rs. in crores) As on 31.3.2003

288.80 2.42 NIL 29.02 262.20 NIL

245.50 26.44 0.64 175.72 95.58

18.73 0.00 3.97 12.19 2.57 360.35 NIL

SCHEDULE 11 - OTHER ASSETS (Rs. in crores) Particulars I. Inter-Office Adjustments (net) II. Interest accrued III. Tax paid in advance/tax deducted at source IV. Stationery and stamps V. Non-banking assets acquired in satisfaction of claims VI. Deferred Tax assets VII. Others Total As on 31.3.2003 157.51 353.51 99.22 6.31 0.06 NIL 178.78 795.39

106

Allahabad BankSCHEDULE 12 CONTINGENT LIABILITIES Particulars I. Claims against the bank not acknowledged as debts II. Liability for partly paid investments III. Liability on account of outstanding forward exchange contracts IV. Guarantees given on behalf of constituents (a) In India (b) Outside India V. Acceptances, endorsements and other obligations VI. Other items for which the Bank is contingently liable Total 767.01 21.76 696.49 1.31 10367.39 (Rs. in crores) As on 31.3.2003 410.57 0.16 8470.09

SCHEDULE 13 - INTEREST AND DIVIDENDS EARNED Particulars I. Interest/discount on advances/bills II. Income on investments III. Interest on balances with Reserve Bank of India and other inter-bank funds IV. Others Total

(Rs. in crores) Year ended 31.3.2003 1211.76 1197.86 59.53 111.15 2580.30

SCHEDULE 14 - OTHER INCOME Particulars I. Commission, exchange and brokerage II. Profit on sale of land, buildings and other assets Less: Loss on sale of land, buildings and other assets III. Profit on exchange transactions Less: Loss on exchange transactions IV. Profit on sale of investments Less: Loss on sale of investments V. Profit on revaluation of investments Less: Loss on revaluation of investments VI. a) Lease finance income b) Lease management fee c) Overdue charges d) Interest on lease rent receivables VII. Miscellaneous income Total

(Rs. in crores) Year ended 31.3.2003 143.36 0.04 -0.08 31.12 -4.83 346.45 -9.50 NIL NIL 0.63 NIL NIL NIL 8.78 515.97

107

Allahabad BankSCHEDULE 15 - INTEREST EXPENDED Particulars I. Interest on deposits II. Interest on Reserve Bank of India/ inter-bank borrowings III. Others Total (Rs. in crores) Year ended 31.3.2003 1614.75 11.37 34.41 1660.53

SCHEDULE 16 - OPERATING EXPENSES Particulars I. II. Payments to and provisions for employees Rent, taxes and lighting

(Rs. in crores) Year ended 31.3.2003 513.65 49.11 11.51 3.45 38.80 0.82 0.72 5.01 2.99 10.75 10.24 12.98 0.00 260.02

III. Printing and stationery IV. Advertisement and publicity V.(a) Depreciation on Bank's property other than Leased Assets V.(b) Depreciation on Leased Assets VI. Directors' fees, allowances and expenses VII. Auditors' fees and expenses (including branch auditors' fees and expenses) VIII. Law charges IX. Postage, telegrams, telephones, etc. X. Repairs and maintenance

XI. Insurance XII. Amortisation of Goodwill, if any XIII. Other expenditure Total SHARE OF EARNINGS/LOSS IN ASSOCIATES Details of Associates Name Bhagirath Gramin Bank Chhatrasal Gramin Bank Saryu Gramin Bank Sharda Gramin Bank Sravasthi Gramin Bank Tulsi Gramin Bank Vindhyavasini Gramin Bank TOTAL Allahabad Bank Share @35%

920.05 (Rs. in crores) Current Profit 18.00 4.54 9.86 1.99 6.83 7.46 1.17 49.85 17.45

Opening Reserve 89.57 -4.42 33.48 2.96 17.51 -9.37 -2.40 127.33 44.57

108

Allahabad BankRelevant Principal Accounting Policies on the Consolidated Accounts. 1. Basis of preparation of consolidation Accounts. The accompanying financial statements have been prepared to comply, in all material aspects, with applicable Statutory/ Regulatory provisions, Accounting standards and generally accepted accounting principles and practices prevailing in India except otherwise stated. 2. Consolidation procedure: 2.1 Consolidated financial statements have been prepared on the basis of audited financial statements of Allahabad Bank (Parent) and one non-banking subsidiary (referred to as non-banking entity) and after eliminating inter-group transactions, un-realised profits/ loss and making necessary adjustments wherever required. The financial statements of the subsidiary is drawn upto the same reporting st date as that of the parent i.e; 31 March 2003. 2.2 The difference between the cost of its investment in the sponsored banks (RRB) and the bank's portion of the equity of the RRB is recognised in the financial statements as Capital Reserve in totality. 3. Investments in Non-banking Entity. Investments are accounted for at cost or market price whichever is less. Provision for diminution in the value of investment is made for decrease in value of such investment at the end of the year. 4. Fixed Assets / Depreciation :- Non-banking Entity 4.1 Fixed Assets :Fixed Assets are capitalised at cost including installation cost and expenses. 4.2 Leased Assets :Assets purchased are capitalised, on installation, at cost and installation expenses. 4.3 Depreciation :Depreciation is provided on straight-line method at the rate prescribed in schedule-XIV of the Companies Act, 1956, in respect of assets other than leased assets. Depreciation on leased asset is provided as per guidance note on accounting for lease issued by ICAI. According to which Leased Equalization account and Lease Adjustment account have been created. Depreciation on fixed asset (including leased asset classified as NPA) has been provided on straight line method at the rates prescribed in schedule XIV of the Companies Act, 1956. 5. Revenue Recognition :- Non-banking entity i) Lease rentals are considered on the due date in terms of lease agreement. ii) Lease rentals are not considered where, leased assets have been classified as Non-Performing assets (NPA) under prudential norms as prescribed by RBI. iii) Management Fees :The fees are accounted for as and when assignment is finalised and documentation has been completed. Relevant Notes on Account to the Consolidated Accounts 1.The individual financial statement of Allahabad Bank and its subsidiary, Allbank Finance Limited have been considered in the preparation of consolidated financial statement. Allahabad Bank holds entire equity in its subsidiary and 35% in the equity of 7 Regional Rural Banks (RRB). 2.The bank and its subsidiary are operating in different circumstances and in different fields. It is not practicable for the bank and its subsidiary to follow an uniform accounting policy in following areas :1) Amortisation of V.R.S. payment. 2) Deferred taxation accounting. 3) Provision in the value diminution of investment. 4) Provision for retirement benefits. 5) Depreciation on fixed assets. 3. In respect of AllBank Finance Limited, following significant notes are considered :i) The payment of Bonus Act 1965 is not applicable.

109

Allahabad Bankii) The company provided Rs.22.71 crore in previous year towards provisions for doubtful debts against a sum of Rs.34.56 crore due by a broker, out of which a sum of Rs.5.43 crore was transferred as profit for the year, based on the consideration that provision @ 50% of the entire outstanding would be sufficient to cover future contingent loss, if any. iii) A provision for diminution in the value of investment for Rs.0.22 crore was made in the accounts for the year ended 31/03/2003. 4. Related Party Disclosure :- AS-18 Payment to All Bank Finance Limited Wisemens Consultancy (P) Ltd Dr. Surinder. P.S.Pruthi. Allahabad Bank Dr. B. Samal Sri K. K. Rai Chairman & M.D. Executive Director Rs.4,65,984.00 Rs.4,17,232.00 Nature of relationship Directors Company Director Amount Rs.24,000.00 Rs.2,54,221.00

5. A profit of Rs.62.02 Crore (comprising of Rs.17.45 Crore for the current year and Rs.44.54 Crore in respect of earlier years) in respect of seven Regional Rural Banks (RRB) sponsored by Allahabad Bank, has been considered in the consolidated statement based on Equity Method of Accounts. 6. Segment Reporting (AS - 17) The business of the subsidiary company, a non-banking entity has been considered as residual business in consolidated segment reporting Rs in Crores Business Segments Treasury Other Banking Residual Total Operations Revenue 2237.67 746.86 1.57 2986.10 Result Unallocated expenses Unallocated revenue Operating Profit Before Extraordinary items Provisions & Contingencies Income Tax Net Profit OTHER INFORMATION Segment Assets Unallocated Assets Total Assets Segment Liabilities Unallocated Liabilities Total Liabilities Capital & Reserve Total Liabilities 7. This being the first year of preparation of consolidated accounts, the previous years figures have not been given. 20685.62 5626.11 68.83 21764.14 5919.45 68.83 27752.42 367.33 28119.75 26380.56 568.90 26949.46 1170.29 28119.75 344.03 224.62 17.45 586.10 162.99 110.17 533.28 208.22 141.62 183.44

110

Allahabad BankPART XIII. ACCOUNTS OF ALL BANK FINANCE LIMITED (SUBSIDIARY COMPANY) To The Board of Directors Allahabad Bank 2, N.S. Road, Kolkata - 700 001 Dear Sirs, As desired for the purpose of certification of statement of accounts to be incorporated in the Information Memorandum proposed to be issued by Allahabad Bank in connection with the Private Placement of Unsecured Redeemable Non-Convertible Non-Cumulative Subordinated Bonds aggregating upto Rs. 200 crores, we state as follows: 1. We have examined the audited financial statement of accounts of All Bank Finance Limited for the five financial years ending on March 31, 2003 being the last date upto which the accounts have been made and audited by the Auditors of the Company of those respective years and financial statements for the nine months period ending December 31, 2003 which have been complied from the books maintained at corporate office at 15A, Hemant Basu Sarani Kolkata 700 001 and approved by the Board of Directors. The aforesaid financial statements read with significant notes on accounts have been prepared in accordance with the Companies Act, 1956 and as per SEBI Guidelines as amended from time to time and subject to limitations for disclosure required therein. The Profit & Loss Account five financial years ending 31, March 2003 and nine months period ending 31, December 2003 and the Balance Sheet as at the end of respective years / period and the significant accounting policies are prepared from the aforesaid accounts and making such adjustment and re-grouping which were in our opinion considered appropriate subject to notes on account as per audit report of the respective years and various qualifications made in the auditors report of respective years.

2. 3.

For M/s N.C.Banerjee & Co. Chartered Accountants

For M/s T.K. Ghose & Co Chartered Accountants

Partner For M/s Manubhai & Co. Chartered Accountants

Partner For M/s Prakash & Santosh Chartered Accountants

Partner For M/s Goel Garg & Co. Chartered Accountants

Partner M/s. Ramesh C. Agrawal & Co Chartered Accountants

Partner

Partner

Date: 25/02/2004

111

Allahabad BankA. PROFIT & LOSS STATEMENT OF ALL BANK FINANCE LIMITED FOR THE FIANACIAL YEAR ENDED March 31, 1999 March 31, March 31, 2000 2001 March 31, 2002 (Rs. in crore) March 31, Period 2003 Ended, Dec 31, 2003 Reviewed 0.19 1.22 0.46 0.01 0.01 0.01 NIL 1.90 0.06 0.90 0.04 0.14 0.01 5.43 NIL 6.58 0.03 0.40 0.00 9.67 0.16 0.05 NIL (0.09) 4.32 0.20 0.12 0.01 NIL 3.47 0.04 0.02 0.06 (0.29) 3.24 0.13 0.82 17.74 9.54 38.33

Audited INCOME Lease Income Hire Purchase Income Investment Income/Interest Profit from sale of investment Income from Merchant Banking activities Other income Liabilities/Provision Written Back Prior Period Adjustment (income) Total EXPENDITURE Personnel Cost Administration & Other Expenditure Interest Depreciation Provision for Doubtful Debt/Advances Provision for Shortfall in Investment Other Expenses Prior Period Adjustments (loss on sale of investment) Total PROFIT /(LOSS) BEFORE TAX Provision for Income Tax NET PROFIT /(LOSS) FOR THE YEAR Prior Period Adjustments Provision for Investments ADJUSTED NET PROFIT (LOSS) Profit / Losses of the Subsidiary so far as it concerns the member of Allahabad Bank 1.03 0.40 (0.22) (2.24) 5.11 0.39 0.75 0.89 0.66 0.56 0.13 NIL NIL 3.38 0.94 NIL 0.94 0.09 NIL 1.03 0.35 0.73 0.51 0.72 0.47 NIL NIL NIL 2.78 0.69 NIL 0.69 (0.29) NIL 0.40 0.34 0.65 0.82 0.68 1.23 0.03 NIL NIL 3.75 (0.51) NIL (0.51) 0.29 NIL (0.22) 0.24 1.06 0.49 0.55 1.47 0.33 NIL NIL 4.14 (2.24) NIL (2.24) NIL NIL (2.24) 0.15 0.74 0.12 0.28 1.74 0.23 0.14 NIL 3.40 3.18 NIL 3.18 1.93 NIL 5.11 1.51 0.01 2.68 1.82 0.21 1.11 1.51 1.01 0.89

0.09 0.19 0.00 0.09 0.24 0.19 0.01 7.61 8.42 29.91 NIL 29.91 (1.93) 11.96 39.94

39.94

112

Allahabad BankB. ASSET & LIABILITY STATEMENT OF ALL BANK FINANCE LIMITED (Rs. In crores) As at 31.03.99 31.03.00 31.03.01 Audited Sources of Fund 1 a b 2 a b Shareholders' Funds Share Capital Reserves & Surplus Loan Funds Secured Loans Unsecured Loans Total: Application of Funds 3 a b c Fixed Assets Gross Block Less : depreciation Net Block Less: Lease Adjustment Total 4 5 a b c d Investment Current Assets, Loans & Advances Sundry debtors Cash & Bank Balance Other Current Assets Loans & Advances Total Current Assets 6 a b c 7 Less: Current Liabilities & Provisions Current Liabilities Provision Net Current Assets Profit & Loss(Debit Balance) Total : (2.80) (12.70) 9.21 45.97 63.73 (3.32) (13.21) 8.17 45.28 63.44 (4.60) (14.67) 13.54 45.80 67.85 (2.60) (16.23) 8.11 48.03 62.00 (1.60) (18.07) 12.29 44.86 60.11 (2.00) (4.82) 39.77 2.98 60.11 12.46 1.03 0.09 11.13 24.71 13.18 0.54 2.13 8.85 24.70 13.42 0.09 7.11 12.19 32.81 13.56 0.15 6.14 7.09 26.94 18.31 0.11 6.54 7.00 31.96 1.12 2.94 37.13 5.40 46.59 14.78 4.74 10.04 3.10 6.94 1.61 18.62 5.39 13.23 4.84 8.39 1.60 19.22 6.06 13.16 6.22 6.94 1.57 19.22 6.60 12.62 7.85 4.77 1.09 15.23 6.41 8.82 6.09 2.73 0.23 15.23 6.50 8.73 6.11 2.62 14.74 3.60 0.02 63.73 3.31 0.02 63.44 7.74 Nil 67.85 1.89 Nil 62.00 NiL NIL 60.11 NIL NIL 60.11 60.00 0.11 60.00 0.11 60.00 0.11 60.00 0.11 60.00 0.11 60.00 0.11 31.03.02 31.03.03 31.12.03 Reviewed

113

Allahabad BankC. SIGNIFICANT ACCOUNTING POLICIES 1. 2. a). (i) (ii) (iii) b) c) d) e) SYSTEM OF ACCOUNTING The Company follows the accrual basis of accounting as required by the Companies Act, 1956 unless otherwise stated. REVENUE RECOGNITION Lease Finance The accounting standard 19 (AS-19) on leases comes into effect in respect of all assets leased during accounting period commencing on or after 1.4.2001. Since the company has not sanctioned any lease on or after 1.4.2001, the AS-19 is not applicable to the company. Lease Rentals are considered on the due dates in terms of the lease agreement. Lease Rentals are not considered where Leased Assets have been classified as Non-performing Asset (NPA) under the Prudential Norms announced by Reserve Bank of India (RBI). Management Fees The fees are accounted for as and when the assignment is finalized and documentation has been completed. Fixed Assets Fixed Assets are capitalised at cost inclusive of installation expenses as incurred by the Company. Leased Assets Assets purchased and given on lease are capitalised on installation at cost and/or installation expenses. Depreciation a) Assets other than given on Lease Depreciation is provided on straight-line method at rates prescribed in Schedule XIV of the Companies Act, 1956. b) Assets given on Lease Depreciation on Leased Assets is provided as per the Guidance Notes on Accounting for Leases issued by the Institute of Chartered Accountant of India. Lease Equalization Account and Lease Adjustment Account have been created as prescribed by the Guidance Note. Depreciation on all the fixed assets (including Leased Assets classified as Non Performing Assets) has been provided on straight line method at the rates prescribed in Schedule XIV of the Companies Act, 1956. f) Investment Long Term Investments are valued at cost. Provision for diminution in value of investment is made for decrease in value of such investment as at the end of the year. Current Investments are valued at the lower of cost and market value. In cases where investments are listed but Market Quotations are not available, the value of the investment has been taken at Re 1/- per Company. g) Prudential Norms The directions issued by the Reserve Bank of India regarding prudential norms for Non-Banking Financial Companies for income recognition, asset classification and provisions have been followed. Significant Changes in Accounting Policies st There have been no material changes in the Accounting Standards during the five years ended on 31 March, 2003. D. Notes on Accounts for the year ended 31.03.2003 : Contingent liabilities not provided for : a) Disputed Income Tax and Interest Tax liability in respect of matters pending before various Appellate authorities where the Company expects to succeed. (Rs. in Lacs) Asst. Year 31.03.2003 31.03.2003 31.03.2002 31.03.2002 Income Tax Interest Tax Income Tax Interest Tax 1993-94 1062.42 1062.42 1994-95 529.41 29.05 529.41 29.05 1996-97 456.22 37.14 456.22 37.14 1997-98 614.18 614.18 1998-99 444.59 444.59 1999-00 416.47 24.52 416.47 24.52 2000-01 24.18 -

(b) Claims against the Company not acknowledged as Debts: Rs 347.04 lacs (Previous Year Rs 352.53 lacs)

114

Allahabad Bank2. Payments where Directors are Interested Payment to 1 2 Wise Mens Consultancy (P) Ltd. Dr. Surinder P.S. Pruthi Relationship Directors Co. Director Nature of transaction Consultancy Charges Travelling & Conveyance Amount (Rs.) 24,000/2,54,221/-

(Previous year Rs. 24,000/-) (Previous year Rs. 1,36,377/-)

3. As on 31.03.2003, Rs. 272.93 lacs have been shown as advance income tax, tax deducted at source and income tax refund receivable. This amount is pending adjustment at various stages of assessments and appeals. 4 In accordance with Accounting Standard 22 issued by the Institute of Chartered Accountants of India on Accounting for taxes on income, the Company has deferred tax assets of Rs. 1005.46 lacs as on 1.4.2002 arising out of provisions made on doubtful debts. Considering the deferred tax assets as at the beginning of the current financial year and the current years profit, deferred tax assets have not been recognised keeping in view the uncertainty of sufficient taxable income in future. No provision has been made for bonus to employees as salary of all employees exceed the eligibility limit under The Payment of Bonus Act, 1965 A sum of Rs 34.56 crores (Previous year : Rs 34.66 crores) is due from a broker on account of sale / purchase of securities. The Company had made a provision of Rs 22.71 crores in previous years towards provision for doubtful debt. The Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992 passed an Order on 01 November, 2002 declaring that the shares held under dispute with the broker are the property of the Company and directing all parties concerned, including the Custodian, to take necessary steps to complete validation and transfer of shares to the Company. The Company is entitled to bonus shares issued and dividend declared during the period of the dispute which are held by the Custodian, in terms of the Order. The Special Court has directed that on realization, appropriate credit would be given to the account of the Broker. The Court has also directed that all claims and counter claims between the Company and the broker stand mutually settled and satisfied on transfer and sale (including encashment of accretions) of such securities. Considering the fact that the securities are old and there might be procedural delays in transfer, it has been considered prudent to follow a conservative approach and maintain the provision @50% of the entire outstanding. A part of the shares have already been transferred in the name of the Company as on the date of the balance sheet and the remaining shares are in the process of being transferred. In view of the Special Courts order, the Company is hopeful of recovering the entire amount of outstanding dues. 7 8 9 Provision for diminution in the value of Investments for the year ended 31.03.2003, of Rs 22.43 lacs (Previous year : Rs 33.24 lacs) has been charged to the Profit & Loss A/c. Provision for retirement benefits, i.e. gratuity and leave encashment have been made on accrual basis. The figures have been rounded off to the nearest rupee and the figures of the previous year have been rearranged or regrouped wherever necessary.
st

5 6

NOTES ON ADJUSTMENTS : Appropriate adjustments resulting from Auditors qualifications wherever quantifiable and material adjustments for previous years wherever practicable have been carried out while preparing the statements of Profit & Loss and Assets & Liabilities. AUDITORS QUALIFICATIONS FOR WHICH ADJUSTMENTS COULD NOT BE CARRIED OUT There are no material audit qualifications for which adjustments could not be carried out in the accounts for the period 1.4.1998 to 31.3.2003.

115

Allahabad BankIII. STATUTORY AND OTHER INFORMATION Minimum Subscription As the Issue of Bonds is being made on private placement basis, the requirement of minimum subscription shall not be applicable. Expenses of the Issue The expenses of the Issue payable by the Bank such as fees to the Sole Arranger/ Lead Arrangers fees, 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 out of the proceeds of the Issue. Fees Payable to the Intermediaries The fees payable and the terms of appointment of intermediaries such as Sole Arranger/ Lead Arrangers to the issue, legal advisors to the issue, tax consultants, registrars to the issue, trustees for the bondholders, credit rating agency(ies) etc are set out in the relevant appointment letters, copies of which are kept open for inspection at the Registered 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 Sole Arranger/ 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 went for its maiden equity issue of 10,00,00,000 (Ten Crores) shares of Rs. 10/- each, for cash at par aggregating to Rs.100,00,00,000 (One Hundred Crores) crores. The issue opened on October 23, 2002 and closed on October 31, 2003. The issue rd was oversubscribed by 3.68 times. The shares were allotted on 23 November 2002. The despatch of share certificates and refund orders was completed on 26.11.2002. The shares have been listed at Mumbai, Kolkata and National Stock Exchanges on 27.11.2002. Besides the above the Bank has raised Tier II Capital by way of private placement of unsecured subordinated bonds to augment capital adequacy as under: Issue Series Year of Deemed Date Issue Amount Tenure Credit Rating Coupon Rate (% Redemption Placement of Allotment (Rs. in Crores) (in months) p.a., annually) Date +I 1999 16.12.99 125 88 Unrated 12.30 15.4.07 II 2001 15.10.01 95 66 Unrated 9.80 14.4.07 III 2003 31.3.03 100 85 Unrated 7.00 30.4.10 Except as stated elsewhere in the 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. Previous Commission and Brokerage No sum has been paid or is payable as commission or brokerage for subscribing to or agreeing to subscribe to or procuring or agreeing to procure subscription for any of the shares of the Bank since its nationalisation on July 19, 1969. Offer Otherwise than for Cash There have not been any issues for consideration other than cash, save as except stated elsewhere in the Information Memorandum. Option to Subscribe Save as otherwise stated in the 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: the contracts for the purchase or acquisition whereof were entered into, or may be entered into, in the ordinary course of the Banks business, such contracts not being made in contemplation of the Issue or in consequence of the contract; or 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 Chief Executive Officer In exercise of the powers conferred by clause (a) of sub section (3) of Sec 9 of the Banking Companies (Acquisition and Transfer of undertakings) Act, 1970, read with sub-clause (1) of clause 3, clause 5, clause 6, clause 7 and sub-clause (1) of clause 8 of the Nationalised Banks (Management & Miscellaneous Provisions) Scheme, 1970 the Central Government, after consultation with the Reserve Bank of India, has appointed Mr. O.N. Singh as Chairman and Managing Director of the Bank upto 31.7.2006 vide Gazette Notification No. F.No. 9/14/2003-B.O.I. dated 4.12.2003. His compensation details are as follows: Salary Other benefit : : Rs. 24050 per month in the scale of Rs 24050-650-26000 /- with effect from 4.12.2003. Allowances and Perquisites such as dearness allowance, city compensatory allowance, housing, Leave Travel Allowance, Contribution to Provident Fund, Gratuity, Super-annuation, Reimbursement of medical expenses, entertainment expenses and others.

116

Allahabad BankTerms 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 Shri K. Krishna Rai as th Whole time Director (designated as Executive Director) of the Bank upto 30 June 2004 vide notification F no. 9/38/2000-B.O.I. dated January 5, 2002.:His compensation details are as follows : th Salary Rs. 23550/- Per Month in the scale of Rs.22050-500-24050/- with effect from 8 January, 2001. Other benefits: Perquisites as per Government of India guidelines such as housing, Leave Travel Allowance, Contribution to Provident Fund, Gratuity, Super-annuation, Reimbursement of medical expenses, entertainment expenses. 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. The cumulative expenditure on Travelling Allowance (T.A.), Hotel/ Halting Expenses (H.A.) and fees for Directors for the year 2002-03.is as follows (Rs. in lac) Year ended March 31, 2003 Amount Travelling Allowance 53.22 Hotel/Halting Allowance 18.73 Fees Total 0.34 72.29

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 are of the General Manager and higher grade and hence that compensation falls in the scale of Rs.19340-21300 p.m. 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 sole arranger/ lead arrangers, registrars, bankers, trustees, rating agency(ies) etc. No Director of the Bank is interested in any property acquired by the Bank within two years of the date of the 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 its reserves or profits after nationalisation. REVALUATION OF ASSETS The Bank revalued its premises located at various canters during 1991-92 and 1996-97 and the difference between market value and book value of the premise was credited to Capital Reserve- Fixed Asset and debited to Revalued Premise Account. The total amount credited to Capital Reserve Fixed Asset is as under: Year 1991-92 1996-97 Amount (Rs. in crores) 121.43 126.04

117

Allahabad BankIV. MAIN PROVISIONS OF THE BANK NATIONALISATION ACT Relevant provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980 as amended by the Banking Companies (Acquisition and Transfer of Undertakings) Amendment Act, 1994 & Banking Companies (Acquisition and Transfer of Undertakings) Amendment Act, 1995 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 One Thousand and Five Hundred crores to be divided into One Hundred and Fifty crores 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. Three Thousand crores, or be less than Rs. One Thousand and Five Hundred Crores. 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; Such amounts as the Central Government may, after consultation with the Reserve Bank, contribute to such paid-up capital; 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.

b) c)

The entire paid-up capital of the corresponding new Bank, except the paid-up capital raised by public Issue under clause (c) of SubSection 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 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) b) the Central Government after consultation with the Reserve Bank by cancelling any paid up capital which is lost, or is un-represented by available assets; 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 Super-annuation 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.

118

Allahabad Bank 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. 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) ii) 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; 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.

119

Allahabad Bankmore 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. (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; represent the interest of depositors; or represent the interests of farmers, workers and artisans.

(B) (C)

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 Subsection (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 there-under, to provide for all matters for which provision is expedient for the purpose of giving effect to the provisions of this Act. 2) a) 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: 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; the manner in which the business of the local boards shall be transacted and the procedure in connection therewith.;

b)

b) (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) (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. b) (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. b) (d) the holding of meetings of shareholders and the business to be transacted thereat. b) (e) the manner in which notices may be served on behalf of the corresponding new Bank upon shareholders or other persons. b) (f) the manner in which the directors nominated under clause (g) of sub-section (3) of Section 9 shall retire.

c) 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. d) the conditions or limitations subject to which the corresponding new Bank may appoint advisors, officers or other employees

120

Allahabad Bankand fix their remuneration and other terms and conditions of service. e) the duties and conduct of advisors, officers or other employees of the corresponding new Bank. f) the establishment and maintenance of Super-annuation, pension, provident or other funds for the benefit of officers or other employees of the corresponding new Bank or of the dependants of such officers or other employees and the granting of Super-annuation allowances, annuities and pensions payable out of such funds. g) the conduct and defence of legal proceedings by or against the corresponding new Bank and the manner of signing and pleadings. h) the provision of a seal for the corresponding new Bank and the manner and effect of its use. i) the form and manner in which contracts binding on the corresponding new Bank may be executed. j) 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. k) 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. l) 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 generally for the efficient conduct of the affairs of the corresponding new Bank. Provisions of the Articles of Association of the Bank (hereinafter referred to as the Article(s) are reproduced below. V. MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION The agreements/consent letters/ certificates in relation to the issue entered by the Bank are available at the Head Office of the Bank.

121

Allahabad BankPART III

DECLARATION All the relevant provisions of the Banking Companies (Acquisition & Transfer of Undertaking) Act, 1970, the Banking Regulation Act, 1949, Securities and Exchange Board of India, the guidelines issued by the Government and any other competent authority as amended from time to time have been complied with and no statement made in this Information Memorandum is contrary to the provisions of the said Acts/ Regulations/Guidelines and Rules there under. 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. The Bank 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. O.N. Singh pursuant to the authority granted by the Board of Directors of the Bank at their meeting held on 14.01.2004

(O.N. Singh) Chairman & Managing Director Dated: 17.3.2004 Place: Kolkata

122

Allahabad Bank
IDBI Trusteeship Services Ltd. (ISO 9001 : 2000 Trustee Company) th Regd. Office : 10 Floor, Nariman Bhawan, 227, Vinay K. Shah Marg, Nariman Point, Mumbai 400 021.

ASHOKE MOTWANI MANAGING DIRECTOR & CEO Doc No. 92 ITSL/2004 February 19, 2004 Mr. Narendra Singh, Dy. General Manager (F&A) Allahabad Bank, Head Office 2, Netaji Subhash Road, Kolkata 700 001. Dear Mr. Singh, Proposed Tier II Bond Issue aggregating Rs. 200 Crores Appointment of Bond Trustee We acknowledge with thanks the receipt of your letter No.HO/SD/960 dated February 18, 2004 appointing us as Trustee for the proposed Tier II bonds series, aggregating Rs.200 crores. We are agreeable to act as Bond Trustees and confirm our acceptance of the assignment on the following terms and conditions :

a) Acceptance Fee b) Annual Service Charges

Rs. 25,000/- plus service tax as applicable (one time) Rs.20,000/- p.a. plus service tax as applicable payable annually on December 5 every year form the date of consent letter till the bonds are fully redeemed. In case of redemption of any series during the year service charges shall be payable on prorata basis in respect of that series.
th

c) The Bank shall enter into Bond Trustee Agreement for the said Bond Issue.

Apart from acting as Bond Trustees, we would also facilitate listing of these Bonds on the recognized Stock Exchanges as required in terms of extant SEBI guidelines. You may include our name as bond Trustee in the Offer Document / Listing Application proposed to be filed with the Stock Exchanges.

Assuring you of our best services at all the times. Yours sincerely,

(Ashok Motwani)

123

Allahabad BankCREDIT ANALYSIS & RESEARCH LTD. nd Kalpataru Point, 2 Floor, Karmani Marg, Sion (East), Mumbai 400 022, India, Tel : 56602871-75/2402 4541-43 Fax No. 022-56602878 March 17, 2004 Shri. R.S. Tripathi General Manager (Finance & Accounts) Allahabad Bank Head Office, 2, N.S. Road Kolkata 700 001. Dear Sir, Confidential Dear Sir, Creidt Rating for proposed Tier II Unsecured Subordinated Bonds issue upto Rs. 200 Crores Please refer to the request for rating of Tier II Unsecured Subordinated Bonds issue of your bank upto Rs.200 crores. 1. Our Rating Committee has assigned CARE AA [Double A] rating to the proposed bonds issue up to an amount of Rs. 200 crores . The Bonds would have a bullet repayment between 99-120 months from the date of allotment . Instruments with this rating are judged to be of high quality by all standards. They are also classified as high investment grade. They are rated lower than CARE AAA securities because of somewhat lower margins of protection. Changes in assumptions may have a greater impact or long term risks may be somewhat larger. Overall, the difference with CARE AAA rated securities is marginal. Our rating symbols for various ratings for long and medium term instruments and explanatory notes thereon are annexed. Please send us a written confirmation regarding your acceptance of the rating assigned and use thereof, as early as possible, but if any case within two weeks from the date of this letter. Please note that, unless accepted, the above rating should not be used for any purpose whatsoever. If you accept the rating assigned by us, please arrange to get the rating revalidated, in case the proposed Bond issue is not made within six months from the date of this letter. In case there is nay change in the size or terms of the proposed bond issue, please get the rating revalidated. Please arrange to submit us a copy of the documents pertaining to the bond issue including the offer document. Please inform us the details of the issue (date of issue, name of the investor/s, amounts of repayment/s etc.) as soon as it has been placed. Care reserves the right to suspend / withdraw / revise the rating assigned on the basis of new information or in the event of failure on the part of the bank to furnish such information, material and clarification as may be required by CARE. CARE shall also be entitled to publicise/disseminate such suspension / withdrawal / revision in the assigned rating in any manner considered appropriate by it, without reference to you. CARE ratings are not recommendations to buy, sale or hold any security.

2. 3.

4. 5. 6. 7. 8.

9.

10. If you need any clarification, you are welcome to approach us in this regard. Tanking You, Yours faithfully

[S. Nag] General Manager Encl : a/a

124

Allahabad BankAnnexure EXPLANATORY NOTES REGARDING RATING SYMBOLS OF CARE CARE AAA Instruments carrying this rating are considered to be of the best quality, carrying negligible investment risk. Debt service payments are protected by stable cash flows with good margin. While the underlying assumptions may change, such changes as can be visualized are most unlikely to impair the strong position of such instruments. Instruments carrying this rating are judged to be of high quality by all standards .they are also classified as high investment grade. They are rated lower than CARE AAA securities because of somewhat lower margin of protection. Changes in assumptions may have a greater impact or the long term risks may be somewhat larger. Overall, the difference with CARE AAA rated securities is marginal. Instruments with this rating are considered upper medium grade instruments and have many fabourable investment attributes. Safety for principal and interest are considered adequate . Assumptions that do not materialize may have a greater impact as compared to the instruments rated higher. Such instruments are considered to be of investment grade. They indicate sufficient safety for payment of interests and principals at the time of rating. However, adverse changes in assumptions are more likely to weaker the company serving capability compared to the higher rated instrument. Such instruments are considered to be speculative with inadequate protection for interest and principal payments. Instruments with such rating are generally classified susceptible to default. While interest and principal payments are being met, adverse changes in business conditions are likely to lead to default. Such instruments carry high investment risk with likelihood of default in the payment of interest and principal. Such instruments are of the lowest category. They are either in default or are likely to be in default soon.

CARE AA

CARE A

CARE BBB

CARE BB CARE B CARE C CARE D

125

Allahabad Bank-

Fitch Ratings
Confidential 17 March 2004 Allahabad Bank Head Office 2, Netaji Subhash Road, Kolkata 700 001 Kind Attn : Mr. R.S. Tripathi, General Manager Dear Sir, Sub : Rating of proposed Rs.2000 million Subordinated Debt Programme of Allahabad Bank Fitch Ratings India Private Limited has assigned AA(Ind) (Double A Ind) rating to the proposed Rs.2000 million Subrodinated Debt

programmes of Allahabad Bank . The outlook on the rating is stable . Definitions of rating symbols for long-term debt instrument are enclosed.

This rating is based on information provided by the bank as well as the discussions we had with banks management team during the due diligence exercises.

You are requested to confirm in writing acceptance of the above rating within two weeks from the date of issue of this letter. In order to maintain our rating through the term of our agreement, you are requested to send us all relevant information and other data necessary for our ongoing monitoring. Notwithstanding the above , Fitch Ratings India reserve the right to change the rating, should business, financial or other conditions warrant and disseminate the same as per the terms of our agreement.

Yours truly,

ANANDA BHOUMIK Vice President R, JAYKUMAR Director - Ratings

126

Allahabad BankADDRESSES OF COLLECTING BRANCHES OF THE BANK

Allahabad Bank
Head Office: 2, Netaji Subhas Road, Kolkata 700 001 Tel-(033) 22423373, 22420883 Fax.: (033) 22104048, 2242 4048 Center Mumbai Kolkata Address 37, Samachar Marg, Mumbai 14, India Exchange Place, Kolkata 700 001 STD Code 022 033 Telephone Number(s) 22655739,22661119, 22662018, 22661861 22208992, 22205028 Fax Number(s) 22661935 22203015

ADDRESSES OF SOLE ARRANGER/ LEAD ARRANGERS TO THE ISSUE

SPA Merchant Bankers Limited

Centre Mumbai New Delhi Bangalore Kolkata Jaipur Address 602, Embassy Centre, Nariman Point, Mumbai 400 021. 25,C Block, Community Centre, Janak puri, New Delhi 110058 rd S- 309, 3 Floor, Manipal Centre, South Block, Dickenson Road, Bangalore 4/1, Red Cross Place Kolkata 700 001. UL- 15, Amber Tower, Sanchar Chand Road, Jaipur 302001. Contact Person Mr.SreeKumar/ Mr.Sandeep Shah Mr. Puneet Pandey / Mr Amir Suleman Mr. Vikash Bhalla Mr. Rakesh Ray / Mr. Abhijit Sinha Mr. Rajesh Jajoo STD Code 022 011 080 033 0141 Telephone No. 56307574, 22843141,5633880-4, 22843332 25572340, 25531902, 25532474 25092206, 25092207,36915051 22100818, 22100819, 5107044, 5107144 Fax No. 22871192, 22846318 25572763, 25532644 25092208 22100819 5107144

A.K. Capital Services Limited

Centre Mumbai Address 135/136, Free Press House, th 13 Floor, Free Press Journal Marg, Nariman Point, Mumbai 400 021. Flat No. N, Sagar Apartments, 6, Tilak Marg, New Delhi - 110 001. Office No. 711, 7th Floor, Brigade Tower, No-135, Brigade Road, Bangalore - 560 025. nd 211, Shail Complex, II Floor, Opp. Madusudan House, Shilp Char Rasta, C.G. Road, Navrangpura, Ahmedabad 380 009. 3D, Ali Towers, 22, Greams Road, Chennai - 600 006. Oswal Chambers, th 5 Floor, 2, Church Lane, Kolkata - 700 001 5-9-93/1, Shakti Sai Complex, 2/7, nd 2 Floor, Chapel Road, Hyderabad 500 001. Contact Person Mr. Vikas Jain/ Mr. Vibhu Agarwal/ Ms. Apoorva Srivastava Ms. Neetan Singh/ Mr. Sarvesh Sharma/ Mr. Ajeet Chauhan/ Ms. Jyoti Soneja Mr. Kishore Sheshadri/ Mr. Mahesh Chopra Mr. Jinesh Shah STD Code 022 Telephone No. 56349300 Fax No. 56360977

New Delhi

011

23385704, 23382380, 23388235 2292770, 2223404, 2077119 30910590

23385189

Bangalore

080

2292770

Ahmedabad

079

30910590

Chennai Kolkata Hyderabad

Mr. A. George Mr. Premanshu Sharma/ Mr. Vikramjit Sarkar Ms. Neetu Rai/ Mr. Rajesh Pathania

044 033 040

28295339, 28293345 30928044 22428023 22428024 55638862

28290341

22428024 55638862

127