Annual Report - YES Bank - 2009-2010

YES BANK LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

To
The Members,

Your Directors have pleasure in presenting the Sixth Annual Report of your
Bank together with the audited Balance Sheet, Profit & Log Account and the
report on business and operations of the Bank for the year ended March 31,
2010.



Financial Performance (Rs. in crore)

Particulars April 2009 to April 1, 238 to
March 31. 2010 March 31, 2009

Deposits 26,799 16,169
Borrowing 4,749 3,702
Advances 22,193 12,403
Total Assets/Liabilities 36,382 22,901
Net Interest Income 788 509
Non Interest Income 576 437
Operating profit 864 528
Provisions and Contingencies 137 62
Profit before Tax 727 466
Provision for taxes 249 162
Net Profit 478 304
Add: Surplus/(Deficit) brought 406 245
forward from, last period
Amount available for appropriation 884 549
Appropriations:

Statutory Reserve under Section 119 76
17 of the Banking Regulation
Act, 1949

Capital Reserve 32 67
Investment Reserve - -
Proposed Dividend and Tax thereon 60 -
Surplus carried to Balance Sheet 673 406
Key Performance Indicators

Net Interest Margin 3.1% 2.9%
Return on Annual Average Assets 1.6% 1.5%
Return on Equity 23.7% 20.6%
Cost to Income Ratio 36.7% 44.2%
Non Interest Income to Net Revenues 42.2% 46.2%

Your Bank posted net revenues (Net Interest Income and other income) of
Rs.1,364 crore and Net Profit of Rs.478 crore for the Financial Year 2009-
i0. Net Revenues and Net Profit for the Financial Year 2008-09 was Rs. 946
crore and Rs. 304 crore respectively. Appropriations from the Net Profit
have been effected as per the table on the earlier page. Please refer to
the section on FINANCIAL AND OPERATING PERFORMANCE in Management Discussion
and Analysis for a detailed analysis of financial data.

Dividend:

In view of the excellent financial performance of your Bank and encouraging
future outlook as well as the objective of rewarding shareholders with cash
dividends while retaining capital to maintain a healthy Capital Adequacy
Ratio, to support future growth, the Board of Directors have recommended
maiden Dividend at a rate of Rs.1.50/- per equity share.

Capital wsing & Capital Adequacy Rate(CAR):

The Members of the Bank at their Fifth Annual General Meeting held on
September 3, 2009 had approved the issuance of the equity shares to
Qualifed Institutions Buyers under Qualified Institutions Placement
(QIP).The Bank had launched the QIP in the month of January 2010 and had
received a tremendous response to the issue, raising US$225 Million (Rs.
1033.88 crore) at a rate of Rs 269.50 per share. Your Bank has utilised the
proceeds of the issue of equity shares under QIP for enhancing the
solvency, Capital Adequacy Ratio and for general corporate purposes.

The paid-up capital of your Bank increased to Rs. 340 crore as at March
31,2010 from Rs. 297 crore as at March 31, 2009, post exercise of 43,25,630
employee stock options and allotment of 3,83,62,709 equity shares under
Qualified Institutions Placement during the Financial Year 2009-10.

Your Bank also raised a sum of Rs. 82 crore by way of Tier I perpetual
bonds, Rs. 93 crone by way of UpperTier II capital and Rs.560 crore by way
of Lower Tier II subordinated bonds during the Financial Year 2009-10.Your
Bank has utilised the proceeds of the issue of Tier I Perpetual Bonds and
Upper & Lower Tier II capital to augment the long-term capital resources
and to enhance the Capital Adequacy Ratio (CAR) for successfully
implementing its growth plans.

In line with the RBI circular on Capital Adequacy Framework, your Bank has
computed capital charge for operational, market and credit risk and its
Capital Adequacy Ratio as per Basel II accord as at March 31, 2010.

Your Bank is well capitalised with a Capital Adequacy Ratio (as per Basel
II) of 20.6% as at March 31, 2010; of which Tier I Capital Ratio was 12.9%
and Tier II Capital Ratio was 7.7%. The rating profile of your Bank's
exposure has resulted in an overall reduction in the risk weighted assets
of your Bank and an improved Capital Adequacy Ratio under Basel (II) accord
(20.6%) as compared to Basel (I) accord (17.3%) as at March 31, 2010. As at
March 31, 2009, the Capital Adequacy Ratio of the Bank was 16.6% as per
Basel II accord.

Employee Stock Option Scheme:

Your Bank has instituted Stock Option Plans to reward and retain employees
and to enable them to participate in your Bank's future growth and
financial success. The Stock Option Schemes also enable the Bank to hire
the best talent for its senior management and key positions. The Bank has
five Employee Stock Option Schemes viz. Joining Stock Option Plan I (JESOP
1), Joining Employee Stock Option Plan II (JESOP II), joining Employee
Stock Option Plan III (JESOP III),YBL ESOP (consisting of two sub scheme)
ESOP IV/PESOP I) and YBL JESOP V/PESOP II (Consisting of two sub schemes)
ESOP V/PESOP 11).

The Employee Stock Option Plans are administered by the Board Remuneration
Committee of the Bank.

The details of the grants/allocations under ESOP 1, JESOP 11, JESOP III,
YBL ESOP andYBL JESOPV/PESOP II respectively are as follows:

Jsop I (Grants) JESOP II

Total No. of Options : Nil Nil
granted/allocated
(during FY 2009-10)

The Pricing Formula : At par The closing price on the
stock exchange with the
highest trading volumes
on the last working day
prior to the date of
grant.

Options Vested : 19,01,000 8,26,250
(during FY 2009-10)

Options Exercised : 18,62,541 6,45,550
(during FY 2009-10)

The Total No of shares : 18,62,541 6,45,550
arising as a result of
exercise of options

Options-lapsed/Forfeited : 18,250 50,000
(during FY 2009-10)

Variation terms of : There is no variation in the terms of the
options options during the Financial Year ended
March 31, 2010.

Money realized by : 1,86,25,410 5,59,28,238
exercise of Options
(during FY 2009-10)

Total No of Options in : 11,14,779 15,71,950
force

Total No. of Options
granted to (during FY
2009-10)

(i) Total No. of Options : Nil Nil
who granted to Senior
Management Personnel
(SMP)

(ii) Any other employee : NA NA
who received a grant in
any one year of options,
amounting to 5% or more
of options granted
during that year

(iii) Identified : NA NA
employees who are granted
options, during any one
year equal to or
exceeding 1% of the
issued capital
(excluding outstanding
warrants and conversions)
of the Company at the
time of grant

Diluted Earnings Per : Rs. 14.87 per Share
Share (EPS) of the Bank
after considering the
effect of potential
equity shares on account
of exercise of options

Impact of the difference : Impact of using Fair value of options
between the Intrinsic instead of Intrinsic value for the
Value of the Options and FY 2009-10 is:
the FairValue of the Basic EPS-Rs. 14.47 per share instead
Options on Profits and Rs.15.65 per share
on EPS Diluted EPS - Rs.13.75 per share instead of
Rs.14.87 per share

Weighted average : 10 92.61
exercise prices

Weighted average fair : 5.29 44.38
values of the options

The Securities and Exchange Board of India ('SERI') has prescribed two
methods to account for stock grants; (i) the Intrinsic Value method; (ii)
the FairValue method.The Bank adopts the Intrinsic Value method to account
for the stock options, it grants to the employees.The Bank also calculates
the FairValue of options at the time of grant, using Black-Scholes pricing
model with the following assumptions:

i) Risk free interest : 6.54% - 6.81% 6.73%--7.45%
rate

ii) Expected life : 6.5yrs to 7.5yrs 6.5yrs to 7.5yrs


iii) Expected volatility : 50.58% 35.97% - 49.92%

iv) Expected dividends : 1.44% 1.13%-1.23%

v) The price of the : Not listed 92.61
underlying share in market
at the time of option
grant
JESOP III YBL ESOP
(Grants) (JESOP IV Grants)

Total No. of Options : Nil Nil
granted/allocated
(during FY 2009-10)

The Pricing Formula : The closing price on the stock exchange with
the highest trading volumes on the last
working day prior to the date

Options Vested : 17,85,000 2,50,000
(during FY 2009-10)

Options Exercised : 6,32,539 Nil
(during FY 2009-10)

The Total No of shares : 6,32,539 Nil
arising as a result of
exercise of options

Options-lapsed/Forfeited : 2,12,500 3,92,500
(during FY 2009-10)

Variation terms of : There is no variation in the terms of the
options options during the Financial Year ended
March 31, 2010.

Money realized by : 5,84,39,601 Nil
exercise of Options
(during FY 2009-10)

Total No of Options in : 29,24,961 38,93,500
force

Total No. of Options
granted to (during FY
2009-10)

(i) Total No. of Options : Nil Nil
who granted to Senior
Management Personnel
(SMP)

(ii) Any other employee : NA NA
who received a grant in
any one year of options,
amounting to 5% or more
of options granted
during that year

(iii) Identified : NA NA
employees who are
granted options,
during any one year
equal to or exceeding
1% of the issued capital
(excluding outstanding
warrants and conversions)
of the Company at the
time of grant

Diluted Earnings Per : Rs. 14.87 per Share
Share (EPS) of the Bank
after considering the
effect of potential
equity shares on account
of exercise of options

Impact of the difference : Impact of using Fair value of options
between the Intrinsic instead of Intrinsic value for the
Value of the Options and FY 2009-10 is:
the FairValue of the Basic EPS-Rs. 14.47 per share instead
Options on Profits and Rs.15.65 per share
on EPS Diluted EPS - Rs.13.75 per share instead of
Rs.14.87 per share

Weighted average : 100.57 175.32
exercise prices

Weighted average fair : 48.21 91.13
values of the options

The Securities and Exchange Board of India ('SERI') has prescribed two
methods to account for stock grants; (i) the Intrinsic Value method; (ii)
the FairValue method.The Bank adopts the Intrinsic Value method to account
for the stock options, it grants to the employees.The Bank also calculates
the FairValue of options at the time of grant, using Black-Scholes pricing
model with the following assumptions:

i) Risk free interest : 7.27%-8.23% 7.48%-8.55%
rate

ii) Expected life : 6.5yrs to 7.5yrs 4.5yrs to 7.5yrs

iii) Expected volatility : 35.82%-41.74 39.94%-64.92%

iv) Expected dividends : 1.13%-1.23% 1.13%-1.5%

v) The price of the : 100.57 175.32
underlying share in market
at the time of option
grant
YBL ESOP(PESOP YBL JESOP V (Grants/
I-Grants) Allocations)


Total No. of Options : 8,43,000 12,82,500
granted/allocated
(during FY 2009-10)

The Pricing Formula : The closing price on the stock exchange with
the highest trading volumes on the last
working day prior to the date

Options Vested : 10,06,000 Nil
(during FY 2009-10)

Options Exercised : 4,59,150 Nil
(during FY 2009-10)

The Total No of shares : 4,59,150 Nil
arising as a result of
exercise of options

Options-lapsed/Forfeited : 4,81,300 1,70,000
(during FY 2009-10)

Variation terms of : There is no variation in the terms of the
options options during the Financial Year ended
March 31, 2010.

Money realized by : 6,67,76,700 Nil
exercise of Options
(during FY 2009-10)

Total No of Options in : 40,05,300 18,35,000
force

Total No. of Options
granted to (during FY
2009-10)

(i) Total No. of Options : Nil Nil
who granted to Senior
Management Personnel
(SMP)

(ii) Any other employee : NA Aparajit Bhandarkar
who received a grant in (75,000)
any one year of options, Rakesh Arya (1,25,000)
amounting to 5% or more Saurabh Bhat(1,50,000)
of options granted
during that year

(iii) Identified : NA NA
employees who are
granted options,
during any one year
equal to or exceeding
1% of the issued capital
(excluding outstanding
warrants and conversions)
of the Company at the
time of grant

Diluted Earnings Per : Rs. 14.87 per Share
Share (EPS) of the Bank
after considering the
effect of potential
equity shares on account
of exercise of options

Impact of the difference : Impact of using Fair value of options
between the Intrinsic instead of Intrinsic value for the
Value of the Options and FY 2009-10 is:
the FairValue of the Basic EPS-Rs. 14.47 per share instead
Options on Profits and Rs.15.65 per share
on EPS Diluted EPS - Rs.13.75 per share instead of
Rs.14.87 per share

Weighted average : 162.83 168.48
exercise prices

Weighted average fair : 80.20 106.02
values of the options

The Securities and Exchange Board of India ('SERI') has prescribed two
methods to account for stock grants; (i) the Intrinsic Value method; (ii)
the FairValue method.The Bank adopts the Intrinsic Value method to account
for the stock options, it grants to the employees.The Bank also calculates
the FairValue of options at the time of grant, using Black-Scholes pricing
model with the following assumptions:

i) Risk free interest : 5.98%-8.5% 5.20% - 8.55%
rate

ii) Expected life : 1.5 yrs to 6 yrs 4.5 yrs to 7.5 yrs

iii) Expected volatility : 40.74% - 82.76% 61.31% - 82.76%

iv) Expected dividends : 1.13%-1.5% 1.5%

v) The price of the : 162.83 168.48
underlying share in market
at the time of option
grant
YBL PESOP II
(Grants/Allocation)

Total No. of Options : 73,63,000
granted/allocated
(during FY 2009-10)

The Pricing Formula : The closing price on the stock exchange with
the highest trading volumes on the last
working day prior to the date

Options Vested : 24,36,000
(during FY 2009-10)

Options Exercised : 7,25,850
(during FY 2009-10)

The Total No of shares : 7,25,850
arising as a result of
exercise of options

Options-lapsed/Forfeited : 11,56,000
(during FY 2009-10)

Variation terms of : There is no variation in the terms of the
options options during the Financial Year ended
March 31, 2010.

Money realized by : 7,95,84,745
exercise of Options
(during FY 2009-10)

Total No of Options in : 1,36,46,150
force

Total No. of Options
granted to (during FY
2009-10)

(i) Total No. of Options : Anindya Datta (1,00,000)
who granted to Senior R. Ravichander (75,000)
Management Personnel Sanjeev Kapoor (1,00,000)
(SMP)

(ii) Any other employee : NA
who received a grant in
any one year of options,
amounting to 5% or more
of options granted
during that year

(iii) Identified : NA
employees who are
granted options,
during any one year
equal to or exceeding
1% of the issued capital
(excluding outstanding
warrants and conversions)
of the Company at the
time of grant

Diluted Earnings Per : Rs. 14.87 per Share
Share (EPS) of the Bank
after considering the
effect of potential
equity shares on account
of exercise of options

Impact of the difference : Impact of using Fair value of options
between the Intrinsic instead of Intrinsic value for the
Value of the Options and FY 2009-10 is:
the FairValue of the Basic EPS-Rs. 14.47 per share instead
Options on Profits and Rs.15.65 per share
on EPS Diluted EPS - Rs.13.75 per share instead of
Rs.14.87 per share

Weighted average : 121.39
exercise prices

Weighted average fair : 55.10
values of the options

The Securities and Exchange Board of India ('SERI') has prescribed two
methods to account for stock grants; (i) the Intrinsic Value method; (ii)
the FairValue method.The Bank adopts the Intrinsic Value method to account
for the stock options, it grants to the employees.The Bank also calculates
the FairValue of options at the time of grant, using Black-Scholes pricing
model with the following assumptions:

i) Risk free interest : 4.96%-8.51%
rate

ii) Expected life : 1.5yrs to 4.5yrs

iii) Expected volatility : 61.31%-82.76%

iv) Expected dividends : 1.5%

v) The price of the : 121.39
underlying share in market
at the time of option
grant

Directors:

The Board, on nomination by the Indian Promoter, Mr. Rana Kapoor, has
appointed Mr. S.L. Kapur, currently a Director of the Sank as a Non
Executive Part Time Chairman of the Bank.The appointment is w.e.f. April
27, 2010.The approval of Members in this regard is being sought at the
ensuing Annual General Meeting of the Bank.The Reserve Bank of India vide
its letter DBOD No. 14882/29.47.001/2009-10 dated February 25, 2010 has
approved the appointment of Mr. S.L. Kapur as the Non Executive Part time
Chairman of the Bank for a period of 1 (one) year.

In accordance with the provisions of the Companies Act, 1956 and the
Articles of Association of the Bank, Ms. Radha Singh and Mr. Ajay Vohra
shall retire by rotation at the ensuing Annual General Meeting and being
eligible, offer themselves for re-appointment,

Corporate Governance:

Your Bank is committed to achieving the highest standards of Corporate
Governance. Accordingly, your Board functions as trustees of the
shareholders and seeks to ensure that the longterm economic value for its
shareholders is achieved while balancing the interest of all the
stakeholders.

A separate section on Corporate Governance standards followed by your Bank
as stipulated under Clause 49 of the Listing Agreement with the Stock
Exchanges is enclosed as an Annexure to this report.

Auditors:

M/s. B S R & Co, Chartered Accountants will retire at the conclusion of the
forthcoming Annual General Meeting and are eligible for re-appointment,
subject to the approval of the Reserve Bank of India. Members are requested
to consider their re-appointment on a remuneration to be decided by the
Board or Committee thereof for the ensuing Financial Year i.e. 2010-11.

Statutory Disclosures:

The statement containing particulars of employees as required under Section
217(2A) of the Companies Act, 1956 forms part of this report. In terms of
Section 219(I)(b)(iv) of the Act, the same is open for inspection at the
Registered Office of your Bank. Copies of this statement may be obtained by
the members by writing to the Company Secretary of your Bank.

The provisions of Section 217(I)(e) ofthe CompaniesAct, 1956 do not aoDlv
to Your Bank.Your Bank is constantly pursuing its goal of technological
upgradation in a cost efficient manner for delivering quality customer
service.

Directors' Responsibility Statement:

Pursuant to the requirement under Section 217(2AA) of the Companies Act,
1956, with respect to the Directors' Responsibility Statement, it is hereby
confirmed that:-

(I) in the preparation of the accounts for the Financial Year ended March
31, 2010 the applicable accounting standards have been followed along with
proper explanation relating to material departures;

(II) the Directors have selected such accounting policies and, applied them
consistently and made judgments and estimates that were reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Bank as at March 31, 2010 and of the profit of the Bank for the year under
review;

(III) the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
Bank and for preventing and detecting fraud and other irregularities; and

(VI) the Directors have prepared the annual accounts of the Bank on a'going
concern' basis.

Acknowledement:

Your Directors take this opportunity to express their deep and sincere
gratitude to the customers of the Bank for their confidence and patronage,
as well as to the Reserve Bank of India, Government of India and Regulatory
Authorities for their co-operation, support and guidance.Your Directors
would like to express a deep sense of appreciation for the commitment shown
by the employees in supporting the Bank in its endeavour to create the BEST
QUALITY BANK OF THE WORLD IN INDIA.Your Directors would also like to
express their gratitude to the members for their trust and support.

For and on behalf of the Board of Directors

Rana Kapoor Bharat Patel S.L. Kapur Arun K. Mago
Managing Director Director Non Executive Director
& CEO Chairman

Place: Mumbai
Date : April 27, 2010

Management Discussion & Analysis

MACRO-ECONOMIC AND INDUSTRY OVERVIEW:

The Indian economy is back on course to its pre-crisis growth trajectory,
with the momentum in recovery led by a stronger and faster than earlier
anticipated rebound in industrial activity. Overall, real GDP growth has
been estimated at 7.2% for the Financial Year 2010 as compared to 6.7% for
the Financial Year 2009 despite the impact of a delayed and deficient
monsoon.

In terms of sectoral trends, growth has been broad-based. While industrial
production continued to witness incremental gains, averaging 13.2% in Q3,
as compared to 9.0% in Q2 and 3.8% in Q1, the recovery momentum was also
supported by continued resilience in Services, despite a phased withdrawal
of extraordinary and crisis-driven fscal measures. Excluding the government
sector, services grew impressively by 9.1% in Q3 versus 7.9% in Q2. A
delayed and deficient monsoon, however, severely impacted the Kharif crop
which constitutes nearly 52% of the total agricultural output. With a
shortfall of 23% in precipitation, the weak south-west monsoon led to a
drought in several states in 2009. However, higher outlook for the Rabi
crop has buoyed overall prospects for agriculture and the sector is
estimated to have contracted only by 0.2% in the Financial Year 2010.

The first half of the year 20 10 saw the economy taking calibrated steps
towards consolidation in the recovery process. While the overall
sentimentwas buoyed bythethumping success ofthe proreform Congress-led UPA
coalition in the parliamentary elections in May 2009, in the real economy,
fiscal as well as monetary policy continued to maintain a pro-growth
expansionary stance with a view to stabilise the economy. As a result, the
July 2009 budget projected the fiscal defcit at 6.8% of GDP for the
Financial Year 2010, signifcantly above 5.5% seen in the interim budget
announced in February 2009. On the monetary policy front,

the Reserve Bank of India (RBI) had cut key short-term rates - the Repo and
the Reverse Repo by 25 bps each, to 4.75% and 3.25% respectively in the
annual monetary policy review in April 2009. While the first quarter
monetary policy statement in July 2009 was seen adopting a mildly hawkish
tone, the key challenge for the monetary policy remained that of
accommodating the government's huge borrowing programme whilst ensuring
adequate credit flow to productive sectors. Inflation remained fairly muted
on a high statistical base and WPI inflation entered negative territory
during June-August 2009.

In the second half of the year 2009, with growth on a fairly stable footing
domestically as well as globally, the RBI in tandem with central banks in
other emerging markets adopted a calibrated approach to exiting the crisis-
induced monetary measures. As a first step, the central bank restored the
Statutory Liquidity Ratio (SLR) for Scheduled Commercial Banks to its pre-
crisis level of 25% from 24% of their Net Demand andTime Liabilities
(NDTL), effective November 2009. The RBI also announced the withdrawal of
some unconventional measures like refinance facilities and forex swap
facility, and tightened the norms on commercial real estate exposure and
loan loss provisions for banks. In terms of specifcs the RBI restored the
Export Credit Refnance Facility limit to its pre-crisis level of 15% from
50% of eligible outstanding export credit that was announced in November
2008. Further, the central bank also announced the withdrawal of the
following refinance facilities: (I) Special refinance facility for
scheduled commercial banks (2) Special term Repo facility for scheduled
commercial banks for funding to MFs, NBFCs, and HFCs and increased the
provisioning requirement for advances to the commercial real estate sector
classifed as 'standard assets' from 0.40% to I%. In addition, the RBI
directed banks to augment their provisioning cushions consisting of
specific provisions against NPAs as well as floating provisions, and to
ensure that the total provisioning coverage ratio, including floating
provisions, be not less than 70%, by the end of September 2010.

With inflation on a rapidly escalating trajectory due to supplyside
weaknesses, the monetary policy focus shifted to liquidity management to
anchor inflation expectations. As a result, the Third Quarter monetary
policy saw the central bank hiking the Cash Reserve Ratio by 75 bps to
5.75% and limit the risk of potential asset price bubbles. The move,
implemented in two phases - 50 bps effective from the fortnight beginning
February 13, 2010 and 25 bps hike effective from the fortnight beginning
February 27, 2010 translated into a direct reduction of Rs. 36,000 crore
from systemic liquidity. Recognising the risk of a spillover of high food
prices into a generalised price rise, the RBI announced an intra-policy
hike of 25 bps in both the Repo and the Reverse Repo in March 2010. With
the negative output gap narrowing, demand side pressures, however,
continued to reflect in core inflation which was reported at 4.72% for
March 2010 up from 4.22% in February 2010 and 3.35% (revised) in January
2010. With a view to further anchor inflation expectations, the RBI
followed this with another 25 bps hike across the board - the Repo, Reverse
Repo and the Cash Reserve Ratio in the Annual Monetary Policy Statement on
April 20, 2010.

In terms of monetary aggregates, the growth in non-food bank credit of
16.9% at the end of March 2010 was in line with the RBI's indicative
projection at 16%, with the YTD increment (over March 31, 2009) in non-food
credit at Rs. 4,62,571 crore as compared to an increment of Rs. 4,11,824
crore for the same period last year.

From a macroeconomic stability point ofview,theThird Quarter monetary
policy had also noted the need for the fscal policy to move in tandem with
the monetary exit and address the real supply-side bottlenecks.
Subsequently, the Union Budget for the Financial Year 201 I unveiled in
February 20 10 was also seen adopting a gradualist approach towards
withdrawal of the stimulus with the fscal defcit realistically projected at
5.5% of GDP for the Financial Year 20 I I.The budget also accorded top
priority to fiscal consolidation without compromising on allocations to the
key drivers of growth viz., Infrastructure and Agriculture. All these
developments have been defnite sentiment 'positives'. With positives seen
emerging across the board, the play out between growth and inflation will
now be influenced by the monsoon outlook.

Business Overview:

Your Bank believes in delivering superior stakeholder value through a
professionally-driven work environment. By embracing Professional
Entrepreneurship, your Bank propels its progress and differentiates its
growth strategies from others.The sustained progress of your Bank is based
on the key pillars of GROWTH, TRUST, TECHNOLOGY, KNOWLEDGE-DRIVEN HUMAN
CAPITAL, TRANSPARENCY and RESPONSIBLE BANKING. Your Bank is committed to
offer innovative and professional business solutions that are customised to
meet the growing and dynamic needs of customers across segments.

Your Bank also believes in bringing about a professional transformation in
banking by combining traditional and modern ways of thinking, to provide
maximum beneft to all our stakeholders. By continuously striving to create,
innovate and transform, your Bank goes beyond the traditional realm of
banking to create long-term value for all stakeholders.

Your Bank has an equitable proportion of experts ranging from the field of
banking to specific industry sectors, each contributing their knowledge and
expertise individually and through collective thinking, thereby ensuring
that every solution, product and innovation works in tandem with your
Bank's customers' needs, at every stage of evolution of their business.

This differentiated approach has resulted in your Bank receiving several
recognitions across leading banking league tables from independent
institutions of repute, while winning multiple awards and accolades across
product and service categories, both nationally and globally.

Your Bank was ranked as the Fastest Growing Bank (balance sheet < Rs.
30,000 cr) at the Businessworld Best Bank Awards 2009. Your Bank was also
ranked as India's No. l MidSized Bank (balance sheet < Rs. 24,000 cr) at
the Business Today-KPMG Best Bank Survey & Awards 2009 & 2008.
Additionally, Mr. Rana Kapoor Founder/Managing Director & CEO. YES BANK was
ranked as the V Most Valuable Indian

CEO of the Year by Businessworld in November 2009:

These recognitions validate your Bank's innovative business model that is
based on the principles of Professional Entrepreneurship which are
encapsulated within the Business strategy, while offering a combination of
Relationship, Product, Knowledge and Service Capital to all customers
through a unique 'One-Bank Model' approach.

Relationship Capital:

To ensure quality growth, your Bank has put special focus and emphasis on
building institutional Relationship Capital. As the Professionals' Bank of
India, your Bank goes an extra mile to build long-term, core relationships.
Your Bank's 'One-Bank Model' approach is built on a 3-dimensional structure
of Relationship, Product and Knowledge, to create a differentiated
proposition and incremental value generation, throughout the clients'
business lifecycle, across multiple customer segments and knowledge
verticals as defined below:

Crarporate & Institutional Banking:

Your Bank's professional contributions within the Corporate and
Institutional Banking segment have ensured that every partnership delivers
profits as well as long-term value.

The Corporate & Institutional Banking (C&IB) division at your Bank provides
comprehensive financial and risk management solutions to clients generally
with a turnover of over Rs.1000 crore. Your Bank's professional
relationship experts provide financial solutions to the following
categories of institutions:

* Large Indian Corporate Groups
* Public Sector Enterprises
* Central and State Governments
* Government Bodies
* Multinational Companies
* Financial Institutions and Banks

Your Bank provides a comprehensive range of client-focused Corporate
Banking Services, including Working Capital Finance, Term Loans,
specialised Corporate Finance products, Trade, Cash Management
&Transactional Services, Treasury Services, Investment Banking Solutions
and Liquidity Management Solutions to name a few. All product offerings are
suitably structured after in-depth research and assessment, taking into
account the client's risk profile and specific needs, because at your Bank,
maintaining high credit quality, is of utmost priorityYour Bank is
committed to provide innovative financial solutions by leveraging on
superior product delivery, knowledge-based advisory, industry benchmark
service levels and a strong client orientation. Your Bank has made
significant inroads into developing core relationships with a number of
Indian companies in collaboration with various Government institutions at
the Central, State and District levels.

Your Bank provides industry specifc financial solutions by creating tailor-
made services through superior structuring to best suit client
requirements, which helps to lower entry barriers, strengthens business
relationships, and ensures risk mitigation.

Commercial Banking:

By continuously evolving sector-specific products and services, your Bank
paves the path for a sustained future for Emerging Corporates, Your Bank
understands the financial needs of growth-focused, fast-paced enterprises
that are emerging as leaders in their respective industry domains, through
YES BANK's Knowledge Banking approach, and the objective of being the Bank
for 'Future Industries of India'. Your Bank has institutionalised
Commercial Banking (CB) dedicated to serve this specialised segment of
companies generally with a turnover between Rs. 100 crore and Rs. 1000
crore, and provide a strong backbone as Partners to clients throughout
their lifecycle, and be a key strategic value driver.

CB targets companies in the 'high octane' middle market segment, operating
across the key emerging sectors like Food and Agribusiness, Life Sciences &
Health Care, Media and Entertainment, Engineering, Telecommunications,
Information Technology and Infrastructure, thereby laying the foundation of
long-term growth. CB's Relationship Managers aim to deliver the highest
standards of service to their customers by following a Money Doctor
approach of Diagnostic and Prescriptive solutions, through a careful
evaluation of client-specific financial needs and providing tailor-made
solutions to them. These include structured products based on the
customer's risk profile and growth requirements as well as general banking
products and services like Working Capital, Term Funding, Liabilities,
Investments, Insurance, Trade Finance and Treasury amongst others.

Empowered with CRM tools and a relationship-driven team, CB delivers
fnancial solutions customised to address the specifc lifecycle needs of the
identifed customers across the above mentioned sectors. This 'lifecycle
banking' approach has been instrumental in influencing sustainable growth
and transformation of a large number of your Bank's customers, resulting in
strong customer loyalty and a mutually enriching experience.

Branch Banking:

Your Bank believes in providing a consistent superior banking experience to
all its customers through its high quality, state-of-the-art branch
infrastructure.The experience is further enhanced through cutting-edge
technology and a customercentric approach.

Backed by aesthetic design, your Bank's branches are not only strategically
located at premium high-street locations but also benchmarked with world-
class design standards to ensure smoother and convenient customer
engagement. Your Bank's branches are highly accessible and facilitate
coherent communication and a consistent superior customer experience,
across all locations. The focus is not merely on facilitating transactions,
but also on engaging, informing and involving customers in a personalised
mannerthereby providing incremental value to the customer experience at the
branch. Your Bank has been successful in ensuring that its branches have
transcended to the next level of customer engagement by serving as
Community Centres, facilitating Community Engagement and Transformation,
rather than merely as transactional touch points.

Currently, your Bank's customers are being served through an extensive
branch network, comprising of 150 branches spread over 124 locations across
India as well as over 200 fully operational ATMs.Your Bank will continue to
expand its branch presence in line with its vision to enable fnancially
efficient and inclusive Banking, through its state-of-the-art technology
platform and a world-class Branch Banking experience.

While your Bank's branches have been designed to cater to all segments of
customers under the 'One-Bank Model', Branch Banking-Liabilities &Wealth
Management, Business Banking and Retail Banking customers are the most
frequent users of this world-class infrastructure. The three segments, as
elaborated subsequently, together constitute the Branch Banking business.
This relationship line is an area of high focus for your Bank, and
significant investments have been made to provide a consistent superior
experience to its customers from across each of these segments.

Under the aegis of Branch Banking, a comprehensive suite of Liability
Wealth and Financial products are provided to your Bank's customers:

CORE PRODUCTS:

Branch Barking Individual/Non-individual:-

* Savings Accounts (with multiple variants)
* Current Accounts (with multiple variants)
* No-frills Accounts Non-resident Accounts (with multiple variants)
* Fixed Deposits (for various tenors)
* 5-YearTax Efficient Fixed Deposits
* Smart Saver Accounts

A unique proposition, which combines the high returns of a Fixed Deposit
with the complete liquidity of a Savings Account

* Smart Salary Accounts

An innovative Corporate Salary Programme, backed by superior technology
that enables convenience and direct access

* Capital Market Services

* Premium Banking & Wealth Management

* Structured Products & Wealth Advisory for Resident & Non-resident Indians

Business Banking:

* Secured Term Loans for Business

* Unsecured Loan under CGTMSE Scheme

* Working Capital Finance

- Overdraft/Cash Credit

- Overdraft against Credit Card Receivables

- Order Invoice/Financing

- Supply Chain Finance

- Trade Finance

Retail Banking:-

Working Capital:

- Overdraft

- Order Invoice/Financing

- Supply Chain Finance

Term Loan:-

- Loan against Property (LAP)

- Loan against Securities (LAS)

- Business Loans

- Personal Loans

- Home Loans

CROSS-SELL PRODUCTS:

* Transaction Banking Services:-

- Cash Management Services

- Trade Finance

- Direct Banking

* Wealth Management Services:-

- Life and General Insurance

- Mutual Funds/Portfolio Management Services

- Demat Accounts

* Treasury Products

Branch Banking - Liabilities & Wealth Management:

This is one of the highest priority businesses and is served by a
significantly large Human Capital base of your Bank. Leveraging on its
professional strengths, this business caters to both individuals and non-
individuals including emerging entrepreneurs and Small & Medium Enterprises
(SMEs). The core objective of Branch Banking is to generate Current
Accounts & Savings Accounts (CASA) by focusing on specific industry
verticals such as Professional Services - Chartered Accountant Firms, Law
Firms, Healthcare Firms, Consultancy Firms, Broking Houses, Educational
Institutes, Trusts, Associations, Societies, Clubs, Travel & Tourism, Media
& Entertainment, Gems and Jewellery, Retail Merchants, IT/ITeS, Logistics,
Realty & Infrastructure,Trade (Export/Import), Hospitality, Food &
Beverages. By focusing on the above verticals, the Bank caters to the
Banking and Wealth Management needs of individuals (Resident & Non-Resident
Indians) and small businesses with credibility and trust. Your Bank goes
beyond the traditional realm of banking and delivers long-term value
through:

- Customised Relationship Segments
- Premium Touch points
- Advisory & Wealth Services

a. Relationship Segments:

Your Bank invests in enduring customer relationships through its extensive
array of Branch Banking offerings. The Bank categorizes its relationship
base of Branch Banking customers into three distinct categories based on
the relationship size:

YES Prosperity which provides value-added services to customers by offering
them a combination of superior service standards and expertise in wealth
management,

YES First which offers a combination of superlative service standards,
expertise in wealth management and customised advisory solutions, and
value-added services like convenience benefits, concierge solutions and
premium lifestyle privileges to its High Net Worth customers.

Yes Private which offers personalised, confidential and tailormade wealth
management and financial solutions to very High Net Worth Individuals with
additional services in the area of Private Equity, Art and Real Estate
Advisory along with convenience benefits, concierge solutions and lifestyle
services.

GLOBAL INDIAN BANKING encompasses the above three segments with the
unanimous objective of providing a superior service experience to the Non-
Resident Indian (NRI) customer, by presenting a comprehensive suite of
basic banking facilities, online remittances, differentiated wealth
management and investments in alternate asset classes.

b. Premium Touch points:

Your Bank aims to provide every Branch Banking client an array of
customised solutions to meet all financial needs, combined with a world-
class Branch Ambience, convenience of Direct Access, an exemplary Service
Culture and Knowledge Expertise to deliver a 'Consistent Superior Service
Experience'.

Direct Access:

Even though your Bank's branches are extremely convenient and designed for
extensive engagement, the customers of your Bank can avail of a 240,
consistent superior service experience through various direct access touch
points, branded 'YES TOUCH'. Your Bank strongly believes in the financially
inclusive nature of technology, and is fully committed towards ensuring
that the best-in-class technology platforms are leveraged to the fullest to
extend superlative banking solutions to all customers in record time,
across various channels like Internet, Mobile, ATM and Phone. Customers can
also access information on your Bank's products and services through a
comprehensive, well-structured website at wwwyesbank.in

c. Advisory & Wealth Services:

Since inception, your Bank has developed and followed an integrated
approach to provide complete'Wealth Management Solutions', based on
comprehensive Risk Profiling, Asset Allocation and Investment Monitoring
Processes.

These solutions are anchored on timely advice provided to customers in the
form of regular performance updates and reports on product and market
developments, based on their investment strategy. Your Bank provides an
impressive line-up of reputed third party-products including Investments
(across mutual funds of 29 AMCs), Bancassurance (Life Insurance Max NewYork
Life Insurance, General Insurance - Bajaj Allianz General Insurance),
Structured Products and Alternative Investments (Art Advisory, Structured
Products and Realty Funds) to customers, thereby helping them attain a
higher level of diversification in their investment portfolio,

Industry Redefining Features Powering Customer Satisfaction:

Your Bank has created and implemented several industry redefining features
in its endeavour to provide a superior banking experience. Your Bank is
committed to continuously introduce products and services on a sustained
basis, that revolutionise the traditional banking experience in India by
bringing the fastest, most efficient and convenient services to our
valuable customers; right at their fingertips. These include:

* Single PIN access across all channels, including Internet Banking, ATM
and Debit Card

* Two-Factor Authentication security process where customers need to
include a second transaction password, which is sent as an instant SMS on
their mobile phone to complete fund transfers

* Online ReaITime Gross Settlement (RTGS) and National Electronic Fund
Transfer (NEFT) services available to customers to transfer funds to third
party accounts in over 55,000 branches nationally

* YES Mobile Money Services -Your Bank in association with Nokia and Obopay
India has launched a Mobile Payments Service which enables transfer of
funds using a mobile device, within a secure environment.Your Bank is one
of the pioneer banks in the Mobile Payments space and has received the
regulatory approvals from the RBI to act as the Issuing Bank and the
Custodian of Funds underthese services. YES Mobile Money Services will
augment financial inclusion amongst the un-banked and under-banked consumer
segments by bringing financial services to the consumer's mobile device,
and will create a financial ecosystem which is inclusive, sustainable and
scalable. Going forward, the program application will be preembedded in
Nokia mobile devices making the service highly accessible and user-
friendly. These services will be widely distributed by leveraging the
extensive reach of Nokia's retail channel

* Stop payment instructions for cheques, using the SMS facility on mobile
phones

* Access to over 35,000 ATMs affiliated to MasterCard, National Financial
Switch and CashTree networks in India and over 1.25 mn ATMs associated with
MasterCard globally

* YES BANK International Debit Card - Waivers on petrol surcharge, zero
lost card liability, unlimited free ATM transactions across partner
networks, higher daily withdrawal and purchase limits

* MFONLINE - The online Mutual Funds platform - which enables customers to
purchase, sell and redeem mutual funds at the click of a mouse

* Periodic research, analysis and market updates documented in a report
format are provided to customers on the managed products segment. These
reports, like the 'Daily Fund Watch', provide valuable information on
market trends and investment opportunities for customers and fund managers
to optimise their portfolio returns

* YES TOUCH - Phone Banking integrates Voice, Email, Chat and Video in
partnership with CISCO, Scansoft for speech-recognition and Servion Global
for system integration and implementation. This is the first implementation
of a 240, speech enabled contact centre in the Banking & Financial Services
segment in Asia

* The Centralised Customer Query Management System, diligently tracks
customer feedback and propels it towards a positive closure

* Wi-Fi and Radio Frequency Identification (RFID) enabled 'Bank Branch of
the Future' in New Delhi which provides an unparalleled and never-before
Banking Experience

* The Money Monitor -A personal finance aggregation tool on the Internet,
launched in partnership with YODLEE, which provides seamless information
ofthe client's financial health by aggregating data from over I l ,000
financial and related sites across the world (including accounts with other
Banks, Credit Cards, Insurance policies, Reward & Mileage points, and
Investments) thereby providing a single view across own and family accounts

* The wide range of transactions that can be conducted Online include:

* Real-time payments using RTGS and NEFT payment systems.

* Requests for demand drafts, cheque books, cheque status, stop payments,
purchase of fixed deposits and TDS enquiry on fixed deposits, amongst
others

* Utility bill payments across India, including the facility to make
charitable contributions to various religious and NGO institutions

* E-standing instructions towards bill payments

* Facility to view and download account statements

* Facility to view and initiate standing instructions

* E-mail alerts based on transaction thresholds and account activity

* Integrated view across Corporate and Cash Management services (payments
and collections)

* Differential bulk transactions, along with file-level encryption for
corporate clients

* Air-ticket reservations and e-shopping funded by direct debits

* Real-time payments to various e-brokerage accounts

* Foreign exchange trading for corporate clients

* Facility to request and view real-time balances and transaction
information

Business Banking:

Your Bank actively partners Small and Emerging businesses to support a
strong and growing economy. To ensure the same, your Bank has established a
dedicated Business Banking unit. Driven by Knowledge Banking and backed by
a team of professionals, your Bank delivers a comprehensive suite of
products, services and resources to meet varied business requirements. Your
Bank ensures that identified Small & Medium Businesses, generally with a
turnover between Rs. 10 crore to Rs. 100 crone, excel in the future as they
are the driving force and role models spearheading a large number of
innovations.They are also the key contributors to the sustainable
development and growth of the economy. Your Bank caters to all the service
requirements of these SMEs across various product segments like Fund based
lending, Cash Management, Payment Solutions, Direct Banking, Trade services
and Advisory through a strong branch network of 56 branches across
signifcant SME clusters.

The core objective of Business Banking is to provide SMEs direct access to
finance (including term finance) and other Trade services, by offering a
state-of-the-art transaction services platform and liability management
proposition, thereby fostering growth, competitiveness and employment
creation that are key to achieving sustainable economic growth.

Your Bank's strategy to attract SME customers includes:

Offering a customised service proposition tailor-made for high
transactional volumes in the key businesses of
Infrastructure/Infrastructure Services, Telecom, Food & Agribusiness,
Pharma/Healthcare, Logistics, Education, Traders, Auto Ancillary,
Electrical Goods Manufacturers and Lifestyle Products.

* Offering holistic banking solutions to customers through the services of
Business Banking Relationship Managers and Service Managers for all their
banking needs (including business, wealth management and advisory) at the
branch level Offering liability products like Cash Management Services
(CMS), Payment Solutions, Net Banking, Phone Banking and Trade Services

Retail Banking:

Your Bank makes its own contribution towards robust economic growth by
professionally supporting small businesses in their growth phase. Driven by
various innovative solutions, your Bank enables businesses (in the turnover
range of up to Rs. 10 crore) to maximise their potential and excel in
future, These Small Business Enterprises are critical to the economic
growth of the country, and your Bank ensures that all their banking
requirements are met through lending products like Secured & Unsecured
Working Capital Business Loans including 'Loan Against Property' and 'Loan
Against Securities' for SMEs and individuals. These products are supported
through 360-degree relationship banking by offering Payment Solutions, Cash
Management,Trade Services and Foreign Exchange services. Your Bank enables
Small Business Enterprises to increase their productivity through state-of-
the-art transaction services and liability management propositions, thereby
fostering competitiveness and growth of these enterprises.Your Bank will
grow this business in a phased manner and launch its products and services
in 36 branches in 20 locations by September 20 10.

Your Bank's key differentiators forthe Small Business Enterprises are:

One-stop solution offering a complete suite of Banking products including
lending and liability products and solutions like Internet Banking, Payment
Solutions, Cash Management Services (CMS) and Trade Services

* Need-based banking solutions made possible through a customised
Relationship Management approach at the branch level Indian Financial
Institutions Relationship Management

* Your Bank believes in creating enhanced value for its stakeholders,
customers, employees and communities through professional partnerships.

* The Indian Financial Institutions (IFI) team at your Bank spearheads
relationship development with various Banks and Financial Institutions
nationally. This is achieved by supporting product delivery while creating
and sharing industry knowledge with internal and external stakeholders. IFI
Relationship Management experts at your Bank offer an array of services to
the following set of clients:

- Domestic Banks (Govt. owned, Private and Co-operatives)
- Mutual Funds
- Insurance Companies
- Non-Banking Finance Companies (NBFCs)
- Housing Finance Companies (HFCs)
- Private Equity Funds
- Brokers (both Capital market and Commodity market)

The IFI team at your Bank leverages its existing relationships with various
Banks and Financial Institutions to raise resources, and to get counter-
party limits for your Bank. Additionally, IFI offers a wide variety of
products including Debt,Trade Finance, Guarantees, Treasury Services,
Working Capital Finance, Cash Management & Transactional Services and
Liquidity Management Solutions to your Bank's customers by entering into
partnerships with other Banks and Financial Institutions. This relationship
with other Banks and Financial Institutions is also leveraged for
syndication of loans for your Bank's Corporate and Commercial Banking
customers, and to raise resources through refinancing your Bank's loan
portfolios.The IFI team leads your Bank's efforts towards raising debt
capital in the form of Hybrid Tier I and Tier II bonds from various Indian
institutions. Your Bank provides capital market specifc solutions, thereby
facilitating a superior experience for the brokers customers. During the
year, your Bank has entered into a partnership with India Infoline whereby
the technology platforms ofYES BANK and India Infoline have been integrated
to offer customers a seamless online trading experience.

Additionally, your Bank in association with other business groups
successfully raised Rs. 560 crores of Lower Tier II capital in September
2009 and January 20 10, and Rs. 82 crores of Hybrid Tier I (Perpetual Debt)
Capital in February 2010 from pedigree investors like LIC, GIC and
IFCI.Your Bank also raised Rs. 93 crores of 15 years UpperTier 11 capital
with a call option with your Bank at the end of 10 years, from PROPARCO in
France.

International Banking:

Your Bank was conceived with the dream of building a highquality,
knowledge-driven institution with the highest levels of professional
ethics, integrity and competencies. Keeping up with tradition, your Bank
has taken yet another professional leap by achieving institutional
excellence in International Banking. With its roots firmly grounded in
professional entrepreneurship, your Bank has created a far reaching network
with international banks and financial institutions, across geographies.

In a year marked by uncertainties in the financial market, which changed
the contours of the global market, the International Banking group at your
Bank has been able to record impressive growth in business, and has
successfully created visibility for your Bank's brand and presence
internationally. Additionally, the International Banking group has
strengthened its global strategy with a clear focus on servicing the
correspondent banks' businesses in India and the business of our customers.

The International Banking business offers a complete suite of products
including Debt, Trade Finance, Treasury, Investment Banking, Financial
Advisory and Global Indian Banking to international customers of your Bank.
These products are offered through partnerships and tie-ups with
International Banks and Institutions in the target geographies.
Additionally, your Bank has tied up with exchange houses in GCC countries
and Investment Banking boutiques, and constantly enhances its current
product suite for its international customer base, on an ongoing basis.

Your Bank has been ableto make a positive impact on Multilateral Agencies,
some of which have expressed their commitment to the Bank by way of direct
fund based limits and customer transactions by way of ECBs. Your Bank
raised subordinated debt from PROPARCO, the private sector arm of Agence
Francaise de Developpement (AFD), a French Multilateral and long-term FCY
loan from DEG, the private sector arm of KFW the German Multilateral
agency. Your Bank's International Banking division endeavours to further
deepen the relationship as well as add new Multilaterals as active
relationships.

These initiatives intend to evolve customer centric solutions for your
Bank's International customers such as:

- Foreign Banks with or without any presence in India
- Multilateral/Development Agencies and Institutions
- Private Equity Fund houses with a focus on India
- Investment/Merchant Banking Boutiques
- NBFCs registered in India and backed by Foreign banks

The dedicated India Business Facilitation Desk (IBFD) has been acclaimed by
international counterparts and complements international corporations at
every stage of their business establishment ranging from providing sectoral
advisory to complete banking solutions including support services like
setting up of an office/establishment in India.

Product Capital:

Your Bank has created a range of products to professionally service
customers across differentiated market segments.

The 'One-Bank Model' approach built on a 3-Dimensional organisational
structure of Relationship, Product & Knowledge enables greater cross-sell
and up-sell of these products to customers. This approach enables your Bank
to further augment its existing relationships by providing multiple
engagement opportunities, and introducing customised products across the
customer's growth lifecycle.

Financial Markets:

Backed by experienced professionals, the Financial Markets Group at YES
BANK offers a competitive and comprehensive line-up of financial market
products and services to its customers. Your Bank's Financial Markets (FM)
business model provides effective Risk Management solutions relating to
foreign currency and interest rate exposures of clients. FM assists clients
In creating a complete understanding of risks faced by them with respect to
Capital Raising, Investments, Exports, Imports and any other market risks.

Your Bank provides customised solutions to clients to hedge foreign
currency and interest rate exposures through products such as Foreign
Exchange Forwards, Options and Swaps. The dient offerings are supported by
professionals comprising of Economists and Research Analysts who provide
the latest analysis for generating quality Risk Management ideas and
solutions.

Your Bank has created a buoyant Debt Capital Markets (DCM) Franchise with
deepened knowledge of the underlying market dynamics, coupled with strong
distribution and structuring apabilities. Since inception, the DCM group
has originated and efficiently executed over 300 transactions, across the
product suite for clients including Corporates, PSUs, Central and State
Government entities and many NBFCs. Your Bank was ranked No. 10 in the
Thomson Financial's Top Lead Managers of Indian Rupee Bonds for the year
2009. Further, your Bank was ranked No. 12 by Bloomberg in the India
Domestic Bonds underwriting league tables for the year 2009.

The Financial Markets Group conducts proprietary trading to maximise
earnings from risk taken across key fxed income, equities and global
foreign exchange markets. Additionally, the business is responsible for
Balance Sheet Management, Liquidity Monitoring, maintenance of Cash and
Statutory Reserve requirements and day-to-day fund management of the Bank.
Subordinated and hybrid debt capital for your Bank is also raised by the
Financial Markets team. Your Bank was amongst the first to implement MUREX
(MXG 2000), an integrated, cross-asset platform product.

Further, ICRA (Moody's affliate in India) has reaffrmed your Bank's A I +
rating for its Rs. 5000 crores Certificate of Deposit programme. A I +
rating indicates the highest level of safety in the short-term.

Investment Banking:

YES BANK aims at maximising investor value by focusing on investment
banking solutions. Your Bank's team of highly capable and experienced
professionals strive to meet and exceed its clients' goals across business
domains.

The Investment Banking business had a slow start to the year due to the
lack of investor appetite, virtual unavailability of credit and the
generally heightened pessimism with respect to the timing and form of
recovery. While India has been quick to bounce back, the global investment
committees of Private Equity (PE) funds and other investors remained very
restrained on committing new capital, searching forthe elusive bottom and
signs of recovery. Cautious outlook by Indian entrepreneurs, particularly
on outbound deals, coupled with limited debt financing options in the
offshore markets also pulled down the Mergers and Acquisitions (M&A)
activity during the year. Your Bank did however see renewed interest from
global companies with strong balance sheets to enter/expand their India
footprint as they sought growth and momentum outside their respective home
markets.

In spite of the slowdown in the number of PE and outbound M&A deals during
the year, where your Bank has created a niche for itself over the past 6
years, the year witnessed the consummation of many significant transactions
and the addition of several new clients. Further, your Bank was quick to
react to the upswing in capital markets and renewed investor sentiment
during the year and executed prestigious Equity Capital Market (ECM)
transactions. The Investment Banking team has now consummated more than 90
transactions across various product categories including M&A/Joint Venture
Advisory Services, PE placements and ECM. The performance of the team is
reflected in the consistent ranking received by your Bank on being amongst
the Top 10 Deal Makers across prestigious league tables every year. As a
testimony to your Bank's strong global footprint in the Investment Banking
practice,YES BANK was amongst the finalists in 5 transaction categories in
the Asia, Middle-East, Africa and Oceania region at the Global M&A Advisor
Awards held in NewYork,while securing Rank I in the following three
categories:

* Corporate/Strategic Acquisition of the Year - Acquisition of controlling
stake in Infomedia India by TV-18 Group

* Media/Entertainment/Telecom Deal of the Year Acquisition of controlling
stake in Infomedia India by TV-18 Group

* Green/Environmental Deal of the Year - Acquisition of Honiton Energy
Holdings Plc by Colossus Holdings Pte Ltd.

Your Bank's Investment Banking division constantly endeavours to work as
a'Trusted Advisor' at every stage of the customer'slifecycle. This firm
commitment has led to the generation of repeat business from several of our
privileged clients. The approach is characterised by proactively partnering
with customers in their business lifecycle by developing long-term advisory
and banking relationships from deal origination to execution. The enviable
cross-border M&A franchise built by your Bank over the years, advising
Indian entrepreneurs in their global aspirations, has led to the
development of a deep network of relationships with other Investment Banks
and Advisory Boutiques in countries across Asia, Europe, Africa and the
Americas, further enabling proactive research to generate acquisition ideas
and identification of suitable targets. Some of the noteworthy transactions
advised during this fscal year include:

Mergers and Acquisitions Advisory:

* Exclusive Strategic and Financial Advisor to SGPL, for divestment of 100%
equity ownership in the following companies to Techno Electric Engineering
Co Limited.

- Super Wind Project Private Limited, a company owning and operating 45MW
of wind turbines

- Simran Wind Project Private Limited, a company owning and operating more
than 50MW of wind turbine

Private Equity Placement:

- Exclusive Advisor to ING Group for an investment of Rs. 270 crores by a
family office in ING's Life Insurance business in India

- Exclusive Advisor to SR Credits Private Limited for sale of 10.45% equity
stake in Coastal Projects to Sequoia Capital, Fidelity and Sabbineni
Holdings for Rs.111 crores

Equity Capital Market (related transactions):

- Joint Book Runner to the GDR issue of (USD 108 mn) for Suzlon Energy
Limited

- Sole Manager to the QIP Issue of (Rs. 83 crores) for Delta Corp Limited

- Syndicate member for the Initial Public Offering (IPO) of DQ
Entertainment (International) Limited, which got over-subscribed 86 times

Manager to the Open Offer to the shareholders of India Carbon Limited and
GMR Ferro Alloys & Industries Limited

Corporate Finance:

Your Bank's achievements in Corporate Finance are a clear reflection of its
professional approach. Leveraging on its indepth knowledge of the emerging
sectors and strategies that create long-term value, your Bank continues to
be a positive contributor to the Indian economy.

Your Bank's Corporate Finance practice offers clients a combination of
professional advisory services and customised structured financial products
to meet varied requirements. The team provides an 'out-of-the-box'
solution-driven approach to create win-win solutions for companies as well
as lenders.Your Bank assists its clients in obtaining superior financial
returns in a -isk-mitigated manner due to substantial 'knowledge
arbitrage', over the market.

Your Bank has built a robust internal system for tracking the exposure to
sensitive sectors such as capital markets and real estate on a daily basis,
vis-a-vis internal limits and the regulatory imits as stipulated by the
RBI.

Your Bank's Corporate Finance division offers a complete range of financial
services encompassing project conceptualisation to financial closure to
specialised banking including a combination of customised and structured
advisory products, to meet specialised and complex requirements. These
offerings include:

Infrastructure Banking Group (IBG):

Since inception, your Bank has leveraged on its professional strengths to
deliver superior banking solutions to the Infrastructure sector. Backed by
a dedicated team of experts, iBG has managed to build a sizeable
infrastructure asset within a short span.of time. For infrastructure
lending, your Bank has a specialised Infrastructure Banking Group with
separate teams of specialists for sub-sectors like energy, telecom,
transportation and urban infrastructure.This year, the IBG has further
renewed its focus on core industries such as coal, cement, minerals, mines
and other industrial infrastructure by setting up a dedicated team for the
same.The IBG offers clients the entire gamut of services right from
advisory to financial closure, covering the entire lifecycle of the
project.

Having realised that besides debt, the client also needs support in raising
equity, your Bank has a specialised Investment Banking team which helps
clients in the conventional infrastructure sectors to tap the equity
market. Thus, your Bank offers both debt and equity solutions to the client
under one roof.

Your Bank also believes that besides funding, the infrastructure sector
also needs an enabling environment to facilitate the development and
implementation of projects and the Bank is closely working with private and
government agencies on policy formation. This in-depth understanding and
expertise built over the years has helped your Bank bag many prestigious
mandates this year in sectors such as Roads, Ports, Power and Solid Waste
Management. This has also helped your Bank to effectively deliver a value-
added proposition to clients in their ventures in the infrastructure
sector.

Structured Finance Group:

Your Bank has expanded and established a strong and experienced Structured
Finance Team (SIFT), qualified and dedicated to provide structured
financial products, which are of commercial and strategic importance for
the client.The SFT also provides structured solutions and funding to the
emerging sectors namely sports, media and entertainment, which sets a
unique precedent in the Banking industry.

The SFT offers clients the expertise that it has built from years of
experience gained in structuring numerous transactions both in domestic and
foreign currencyThis group leverages its strong regulatory and legal
understanding and is capable of structuring complex transactions, thereby
providing solutions to the client that help them achieve higher risk
weighted returns.

The group specialises in Off-Balance Sheet Securitisation transactions,
Overseas acquisition fnancing, equity/quasiequity products such as CCD and
OFCD, pool buy-outs (both agriculture and non-agriculture), microfnance
loan pool buyouts, financing of receivables, etc. During the year, the
Structured Finance team has executed a few landmark transactions in
OffBalance Sheet Securitisation in the Microfnance sector and financing of
Receivables, etc.

Realty Banking:

This team provides advisory and funding services like project
conceptualisation and structuring, JV partner identification, and
raising/arranging fnancing in the commercial and residential real estate
sectors across diverse geographies and Special Economic Zones. The group
has successfully completed several transactions for high profle corporates
from the sector/industry.

Project Advisory & Syndications:

This team provides comprehensive syndication services to your Bank's
clients. With its proven domestic and international credentials, the team
caters to all financing requirements of companies including project fnance
as well as specialised fnancing for acquisitions, asset purchases, sell
downs and leveraged buyouts. In the year 2009, your Bank was ranked 11th in
the Syndicated Loan Rankings - Indian Rupee Loans by Thomson Reuters and
14th in the India Loans Mandated Arranger by Bloomberg. Key deals closed by
the group during the year included syndication of Rs. 500 crore for
Medanta-Medicity, a 1200 bed hospital in Gurgaon, promoted by noted
cardiologist Dr. Naresh Trehan, and a syndication of Rs. 300 crore for the
setup of a 1.34 MMTPA cement plant and 20 MW thermal power plant in
Rajasthan, being set up by Indo Zinc Limited, an India Cements Limited
Group company.

Private Equity (PE):

The PE Group is furthering your Bank's focus by developing specialist funds
that will leverage the domain expertise your Bank has built over the years.
Currently, it is 'co-sponsoring' the South Asia Clean Energy Fund (SACEF)
in collaboration with the Global Environment Fund, USA (GEF). SACEF is a
USD 200 mn fund targeting investments in clean energy, clean technology,
and energy efficiency across India, Sri Lanka, Nepal and Bangladesh.

Collectively, the Corporate Finance practice offers a combination of
professional advisory services and customised products to assist clients in
obtaining superior financial returns, in a risk mitigated manner based on
'Knowledge Arbitrage'.

Transaction Banking:

Your Bank's technology driven approach has expanded the scope of customer
service right from transaction execution to information facilitation,
serving the core objective of optimum management of all operational,
administrative and regulatory activities. To fulfil this promise, the
Transaction Banking Group (TBG) at your Bank has integrated and upgraded
its product suite to offer a'Composite Package' enabling total outsourcing
of the corporate treasury functions for its clientele across all
relationship segments viz. Corporate and Institutional, commercial, Small
and Medium Enterprises and Government.

The Transaction Banking Group at your Bank is a core product group focused
on 'Financial Supply Chain Management' of corporates, and broadly consists
of three specialised product domains namely Cash Management and Direct
Banking Services, Trade Finance and Services, and Capital Markets, Escrow
Account & Securities Services. The Group has successfully developed and
implemented unique and customised product Dropositions for specific
industry verticals, at times playing a pioneering role in the market.

The Cash Management and Direct Banking Services offer alue-added solutions
for the Working Capital Management -equirements of your Bank's corporate
customers, which are aimed at streamlining the domestic supply chain
business =ows by optimising the payables and receivables cycles _nd
providing superior liquidity management options. Your Dank has been at the
forefront in promoting paperless Tansactions through its best-in-class
electronic payment :: atform,thereby contributing to the organisational
objective of environment conservation. Your Bank has leveraged technology
to deliver banking products and services through different direct banking
channels like Internet, Mobile, ATM and Phone, to untouched
geographies/customer segments under the traditional banking model. Your
Bank has also launched a first-of-its-kind 'YES Mobile Money Services' in
partnership with Nokia & Obopay, thereby supporting the cause of financial
inclusion. Further, your Bank has entered into a strategic collaboration
with First Data Corporation to establish a widespread network of Automated
Teller Machines (ATMs) across various cities in India to ensure greater
convenience to the banking populace.

The Trade Finance and Services is aimed at addressingthetrade related
requirements of your Bank's corporate customers, both on the domestic and
international front, covering Import and Export services and the underlying
fnancing structures like Letters of Credit, Bank Guarantees, Buyers Credit,
Packing Credit, Pre-shipment Credit, Post-shipment Credit and Open Account
Remittances. Trade Finance also covers Channel Financing and Bill
Discounting facilities for domestic corporate customers.

The Capital Markets, Escrow Account and Securities Services domain caters
to a range of corporate customers' requirements of Bankers to Issue
services for Initial Public Offers, Rights Issues and Qualifed Institutions
Placements. Additionally, the domain offers Interest/Dividend Payout
Services and Escrow Account Services for transactions including Open
Offers, and Purchase of Shares, Lease Rental Discounting, Business Transfer
Arrangements and Trust & Retention Account Arrangements.

Powered by a highly effcient transaction banking desk, a continuously
expanding product suite developed through a knowledge banking led strategy,
strong delivery channels and consistent superior services; your Bank meets
and exceeds the expectations of all its corporate customers with unmatched
credibility.

Your Bank has won the prestigious Financial Insights Innovation Award
(FIIA) 2010 for Innovation in Business Intelligence and also received a
Certificate of Recognition forthe Continuous Linked Settlement initiative,
which was recognised as one of the top 50 initiatives in ASIAPAC.Your Bank
has also been recognised with a Special Citation for its Innovative &
Superior Direct Banking strategy, at the Financial Insights Innovation
Awards (FIIA) 2009 and has also won the Financial Insights Innovation Award
(FIIA) 2008 for the Most Innovative e-Payments Solution in AsiaPacific,
thus establishing the benchmarks for customer service excellence.

Knowledge Capital:

Knowledge Capital is one of the key differentiators of your Bank. It has
been established with the objective of creating knowledge verticals across
sunrise sectors of the Indian economy, and to develop innovative solutions
to reinforce long-term and sustainable partnerships with key stakeholders.

Knowledge has been institutionalised as a key ingredient in all internal
and external processes of your Bank. It helps to facilitate structuring of
innovative, superior and sustainable fnancial solutions, based on efficient
product delivery, industry benchmarked service levels, and strong client
orientation.

Knowledge Banking:

Your Bank's in-depth knowledge of emerging sectors has enabled it to
deliver efficient and customised banking solutions, due to which there has
been significant traction in developing new opportunities and ideas that
add long-term shareholder value.

Your Bank focuses on key sectors such as Food and Agribusiness, Healthcare,
Life Sciences, Media and Entertainment, Light Engineering,
Telecommunications, Information Technology, Infrastructure and Retailing
amongst others, which are the Future Industries of India.Your Bank is
committed to support the growth and development of these sunrise sectors to
facilitate the overall development of the country through strategic
initiatives.

Food & Agribusiness Strategic Advisory & Research:

Your Bank aims to be a dominant player in the Food and Agribusiness (F&A)
sector by providing professional, end-to-end financial solutions for
stakeholders across the entire agricultural value chain. The Food &
Agribusiness Strategic Advisory and Research (FASAR) team is driven by
sector experts with the relevant educational background and professional
industry expertise,They provide sectoral knowledge on industry trends and
enhance growth prospects in the Agribusiness sector. In recent years, FASAR
has been working on some path-breaking initiatives like developing
Integrated Agro Food Parks, Modern Terminal Markets, etc. apart from
providing policy advisory to various Union & State Government entities.
FASAR has also been providing strategic advisory to various companies in
the Food & Agribusiness sector along with assisting them in their
international forays. Through these efforts, your Bank has achieved a key
knowledge and thought leadership position amongst stakeholders in this
highly important sector of the Indian economy.

Strategic Initiatives and Advisory-Government (SIA-G):

Strategic Initiatives and Advisory-Government (SIA-G) is a specialised
division of your Bank that manages government relationships and strategic
advisory. The division has developmental expertise in key sectors such as
Infrastructure (including Social Infrastructure), Agriculture, Tourism &
Hospitality, and e-Governance.

The core focus of SIA-G is to cement your Bank's relationships with apex
stakeholders and governments with a special emphasis on Central and State
Governments. SIA-G has achieved significant success by getting your Bank
empanelled in several states and Public Sector Enterprises to take the
banking business under their purview. In addition, the division has
initiated in some very successful international affiliations for your Bank
to create strategic business opportunities. The division works with the
government through policy advocacy, project advisory, and development
support particularly in attracting private sector investments for
development through Public-Private Partnerships (PPP), in addition to
enhancing Industry-University relations, creation of Knowledge publications
and addressing stakeholders at industry-led events. Through these efforts,
your Bank has been able to contribute to the development of key sectors,
and also position its knowledge capabilities, sectoral expertise and
capture the mindshare of niche stakeholders and thought leaders, thus
creating opportunities for other business groups. The SIA-G division also
works towards creating strategic opportunities for to enhance business for
the Branch Banking division of your Bank. Headquartered in New Delhi at
your Bank's Global Innovation Centre, the division also has presence in
Mumbai, Bangalore and Hyderabad.

Responsible Banking:

Your Bank aims to achieve its professional goals by adhering to the Triple
Bottom Line ethos of'People, Planet and Profit'thereby creating enduring
value and competitive advantage. Through responsible initiatives, your Bank
reaches out to the sunrise sectors and the financially un-banked and
underbanked sections of the society, and supports a sustainable future.

Responsible Banking is one of the key platforms of your Bank, and is a key
differentiator that has been institutionalised with the objective of
developing innovative business solutions for social and environmental
issues.Your Bank was established with the vision of creating a commercially
viable financial institution with sustainability principles incorporated
within its business strategy. The Responsible Banking division is an
integral part of your Bank's operations which continuously works towards
mainstreaming sustainability.

More specifically, your Bank works towards:

* Mainstreaming sustainability within the Indian banking community by
adopting a multi-stakeholder approach of dialogue with peers, governmental
and non-governmental bodies, industry and academia

* Operating in a 'Sustainability Zone' by working between pure profit and
pure philanthropy to address Environmental, Social and Governance (ESG)
issues-This approach not only promotes new sustainable businesses but also
mitigates risks associated with poor environmental or social performance

* Offering innovative fnancial solutions to address a wide spectrum of
issues from sustainable livelihoods, food security, climate change, public
health, education, information technology and biotechnology among others

Your Bank not only makes direct investments in sustainable development, but
also leverages its position of indirect control over investment and
management decisions of its partner clients,thereby influencingthe business
community at large.This allows your Bank to align itself with broader
sustainability goals.

Your Bank is actively engaged in providing Responsible Corporate
Citizenship (RCC) advisory services to its existing and potential
clients.The team strives to establish your Bank as a corporate citizen of
repute by actively generating sustainable economic, social and
environmental value with all stakeholders. RCC has a special focus on
helping the most marginalised through socially responsible initiatives.
This division works to mainstream sustainability for businesses,
governments and non-profits engaged in environmental, education, health and
livelihood sectors where social entrepreneurship is a key driver.

The Responsible Banking strategy is mainstreamed within your Bank as
'Responsible Banking in Thought' (providing cuttingedge thought leadership
in this space) and'Responsible Banking in Action' (developing specifc
banking products and services in line with our Responsible Banking
strategy).

Responsible Banking in Thought is a think tank that incubates innovative
business models for social issues.The core function of the team is to
develop high quality intellectual capital. It also establishes linkages
with like-minded players of repute, both locally and internationally. Along
with the socially responsible investor community, it seeks to actively
create innovative business approaches to development.The team serves as a
specialised resource division for mainstreaming sustainability into other
key business groups of the Bank. For example, an active Reduce, Re-use &
Recycle (R3) program ensures that every Business and support function is
critically analysed for resource wastage by the Responsible Banking and
Infrastructure Management teams. Wastage is proactively addressed with
technological solutions and/or process simplifications to ensure improved
service delivery and reductions in harmful environmental impacts.

Besides being the First Indian Bank to become a signatory to UNEP-FI
principles for sustainable development, and a signatory to the Carbon
Disclosure Project, your Bank remains committed to work with other national
and international development agencies to influence the financial sector in
India and abroad. In 2009, your Bank also became a signatory to the UN
Global Compact principles.

In recognition of these initiatives at such a nascent stage, your Bank was
ranked as the No. I Emerging Markets Sustainable Bank of the Year - Asia at
the Financial Times/IFC Washington Sustainable Banking Awards in 2008 in
London. Your Bank received a'Commendation Certificate' for a'Strong
Commitment to Excel' at the CII-ITC Sustainability Awards at the 4t'
Sustainability Asia Summit held in November 2009 in New Delhi.This
recognition gains further importance in light of the fact this was the
first year that the Bank was eligible to apply.

Responsible Banking in Action encompasses four specialised business
verticals: Microfnance; Agribusiness, Rural & Social Banking (ARSB);
Sustainable Investment Banking (SIB), and Private Equity (PE) which offer
products and services that promote sustainable development.

Your Bank is committed to creating Equal Financial Opportunities, and
enabling Financial Inclusion. Your Bank approaches Microfinance by
instituting specific transactions to position it as a new asset class,
appealing to a broad range of investors and lenders, and expanding access
to capital by bringing in the power of capital markets. Your Bank achieves
this primarily through a two-pronged strategy with intervention from the
Microfinance Institutions Group (MIG), and by providing the last mile
connect by mainstreaming micro clients at the Bottom-of-the-Pyramid through
YES SAMPANN.

Wholesale Microfinance Lending - Through MIG's product suite including term
loans, loan syndications and rated capital market loan products (pool
securitisation, debentures, commercial paper and loan assignments), your
Bank aims to catalyse the growth of the Indian microfinance industry by
increasing its access to a wider pool of investors and reducing the costs
of funds through a mix of lower cost of funds and transaction costs to
enable a scale up, thus ensuring provision of affordable, fairly priced and
customised financial solutions to the Bottom-of-the-Pyramid. MIG thus is
the primary channel to create an enabling macro-environment through
engagements with stakeholders including MFIs, investors, rating agencies,
policymakers, government agencies and the regulator where the group's
activities indirectly affectthe lives of 750,000 people.

Direct Microfinance Lending - YES SAMPANN is the first institutionally
sponsored direct intervention model for microfinance in India. It provides
last mile connectivity at the Bottom-of-the-Pyramid offering affordable,
customised financial services including credit, savings and insurance.
Leveraging technology and using innovative methodologies such as credit
scoring,YES SAMPANN works towards creating credit histories for an urban
population that remains excluded from formal finance. Though YES SAMPANN is
as yet at a pilot stage with operations out of three urban branches serving
6,638 individual clients, it is strategically positioned to be a full-
service business group.

Agribusiness, Rural and Social Banking (ARSB):

Your Bank has a strong focus on sustainable business solutions for
agriculture, rural and social issues of the country. It is your Bank's
constant endeavour to support business initiatives and innovative
strategies that help drive inclusive growth.

ARSB is your Bank's specialised group focused on fulfilling the financial
needs of agriculture and allied sectors. It extends a range of banking
products and services to various stakeholders across the Agribusiness value
chain. Despite a limited reach in terms of branch network in rural areas,
the group has been able to consistently achieve Priority Sector Lending
(PSL) targets for the last three years and has also generated surplus
assets for selling down to other banks.This has been achieved by developing
innovative financial models, some of which have won national and
international recognition at various forums. In 2008, the scope of the
group was expanded to Social Banking to cater to the banking needs of the
un-banked and underbanked sections of society.

Sustainable Investment Banking (SIB):

SIB is your Banks specialised investment advisory for sustainable ventures
commanding expertise in the areas of : (i) Alternate Energy & Environment
Advisory and (ii) Social Enterprises & Rural Advisory. The team is one of
the few specialised Investment Banking divisions actively involved in
supporting initiatives on renewable energy, clean technology and socially
sustainable sectors (broadly defined as healthcare, education, livelihood
creation, water and sanitation, etc.),

The SIB group also acts as the Exclusive Country Advisor for the Global
Environment Fund, USA (GEF) one of the largest and oldest private equity
frms focused on investing in the environmental space. Recognising the
importance of a global approach to sustainability and the potential for
cross-border deal flow, SIB has developed international alliances and now
acts as the Exclusive Country Advisor for clients of Cleantech Australasia,
New Equity Services (Israel) and Lahti Science and Business Park (Finland).

Private Equity:

As India fast becomes the most favoured emerging market for foreign
investments, the economic, political and regulatory climate for private
equity investors has become encouraging. Your Bank makes conscious efforts
to promote sunrise sectors with high growth potential. The Private Equity
team makes investments in the sustainability space and is currently
sponsoring a USD 200 mn South Asia Clean Energy Fund (SACEF) in
collaboration with the Global Environment Fund, USA (GEF).

Service arid Technology Capital:

Your Bank believes that Service and Technology play a vital role in a
bank's professional existence.

Service andTechnology ensure the perpetual running of various functions
across the Bank. These critical back-end functions include key Business
Processes, Quality Assurance, External & Internal Service Delivery
Standards, Technology Architecture, Risk Management and Internal Audit as
well as your Bank's high quality Human Capital. Your Bank continuously
integrates innovative information technologies and management programs to
not only ensure efficient service delivery and human resource management,
but also to signifcantly reduce consumption of critical resources, i.e.
paper, electricity and water.

Business Process:

To deliver optimum results, your Bank has seamlessly extended its
professional outlook across its business processes.Your Bank envisions
becoming the 'Best Quality Bank of the World in India' by 2015. In
recognition of your Bank's strategic intent, the Bank imbibes a culture of
professional entrepreneurship where every employee plays an important role
in the Bank's growth. Your Bank incorporates highly professional practices
into its business processes to generate added efficiencies and longterm
growth.These processes ensure an effective maintenance mechanism through
ongoing feedback as well as complaint resolution from employees as well as
customers. Prudent internal and external audit policies, effective risk
management systems and state-of-the-art technology platforms help in
implementation of optimum business processes, and are key to ensuring your
Bank's core customer promise of providing a Consistent Superior Service
Experience.

Some key business process initiatives implemented towards the same include:

* Two world-class National Operating Centres (NOC) based out of Mumbai and
Gurgaon have been established with a focus on providing an immediate
response to customer requests, as also to provide Business Continuity

Planning. The NOCs house the centralised back-office functions of various
businesses including theYESTOUCH Phone Banking Service Centre, which is
located at NOC, Gurgaon

* Adherence to Quality practices such as Five S, Quality Circle, Lean Six
Sigma and ISO 9001 Standard. All business processes at both the NOCs and
100 key branches are ISO 9001 certified

* Business processes are supported by best-in-class business solutions and
superior information technology platforms - with a view to optimise
productivity based on 'Time and Motion' and 'Time and Material' studies

* Benchmarking and critical evaluation of all quality parameters, including
an End-to-End (e2e) review/analysis of all critical business processes


* Framework for measurement of Customer Experience - with a view to ensure
that customer feedback across each experience/touch-point (including
customer complaint registers, customer satisfaction surveys, telephonic
surveys, and employee feedback) is collected, analysed and actioned

* The Customer Query Management System (CQMS) is used as the one single
touch point for handling, escalating and resolving customer grievances

* The Query Resolution Unit (QRU) formed as a part of the YES TOUCH Phone
Banking Service, ensures effective follow-up and resolution of customer
queries and complaints

* Adherence to Banking Codes and Standards Board of India (BCSBI), Goiporia
Committee recommendations and the Committee on Procedures and Performance
Audit of Public Services (CPPAPS) guidelines

Quality Assurance and the Service Delivery Unit provide a framework,
through which your Bank imbibes a culture of continuous improvement. The
Quality Policy at your Bank states - 'YES BANK will strive to ensure a
consistent Superior Service Experience through Operational Excellence,
Innovation, Cutting-edge Technology and Best-in-class Systems and Processes
in its mission to become the Best Quality Bank of the World in India by
2015'.

The Quality Strategy:

Your Bank has evaluated and drawn upon quality methodologies practised by
world-class organisations in building quality practices. Specific Quality
goals have been classified into the categories of 'Process Management' and
'External & Internal Service Delivery', in line with your Bank's Quality
Policy and Objectives. Quality improvement drives like Workforce suggestion
schemes, Lean Six Sigma, Quality Circles, Five S & ISO 9001 are being
implemented across business units of your Bank as well as branches.

Process Management (PM) aims to continually monitor current processes,
benchmark them against competition, incorporate best practices ensure
knowledge dissemination and introduce robust mechanisms for process
improvements, while identifying wastages to drive effective waste
management and cost control. PM uses Quality tools to facilitate ease of
execution of transactions, through automation of manual processes and
ensures adequacy and effectiveness of training for employees.

External Service Delivery, i.e. Customer Satisfaction levels at your Bank,
is measured using Dashboards, Voice of the Customer (VOC), Branch Service
Committee Meetings and Sigma Score Cards. These initiatives not only help
forge mutually beneficial customer relationships but also ensure stringent
Service Level Agreements (SLAB) with relevant operations units across your
Bank. Additionally, it provides an efficient MIS support platform for
effective decision-making at the management level.

Internal Service Delivery:

The external service delivery at your Bank is a manifestation of the
internal service principles instituted within the Bank, that seek to align
and influence the organisational behaviour of your Bank's Human Capital
towards delivering on the stated service value proposition of providing
customers with a - Consistent Superior Service Experience.

The YES SERVICE Programme - an Internal Service proposition is disseminated
through a well-defined and ongoing Service Marketing programme and measured
through Mystery Shopping, on-the-job Monitoring and in Branch Executive
Leadership Team (BELT) programmes held periodically across key branches
nationally.

Within a short period, your Bank has several achievements to its credit, to
highlight a few:

The'Certifcate of Merit'Award in the Services Category, in the IMC
Ramakrishna Bajaj National Quality (IMC RBNQ) Award 2009. The 'Certificate
of Merit' is a significant accomplishment since it was your Bank's maiden
application for the Award. Additionally, this is a noteworthy achievement
given that your Bank is the only Bank to win the award, in the very first
instance of its application, apart from being the only Bank amongst all the
awardees this year. It is indeed a true recognition of your Bank's unique
business model, differentiated approach, adoption of best practices - and
the ability of your Bank's model to transform the banking experience in our
country, and evolve your Bank, into a world class organisation.

Additionally, your Bank was awarded the Qimpro BestPrax Compass Award, 2009
for Innovative Practices in Customer Service Channels. This is a true
recognition of Innovation and Service Excellence, through an outstanding
and unique Direct

Banking Platform:

Your Bank has been accredited with ISO 9001:2008 certifcation from BVQI for
its back-office operations and 100 branches across India in delivering a
constitent superior service experience by ensuring process standardisation.
Additionally, your Bank has deployed Five S in I 10 Branches, back offce
operations and Support Functions.This simple yet extremely powerful
technique has not only helped in building workplace efficiency but also
helped in engaging teams on local improvements and waste reduction
initiatives.

Your Bank has created a knowledge pool of Six Sigma/Lean Change Agents to
develop a culture of improvement. Your Bank has also been undertaking Large
and Small Improvement Projects. The former are targeted towards projects
that impact the strategic business objectives.The latter are tactical
improvements that are carried out by teams in the branches.

Information Technology:

To ensure a highly professional banking experience, your Bank has made
significant investments in technology. Being the Professionals' Bank of
India, your Bank delivers the latest technology to its customers across all
touch points.

Your Bank has always been at the forefront when it comes to leveraging on
the latest technology to provide products and services to its customers.
This philosophy is also reflected in the five brand pillars of your Bank
where technology has been identified as a key pillar and is considered a
true differentiator. Many first-mover implementations have provided your
Bank with long lasting advantages, as also won many accolades and awards
for your Bank. With one of the finest direct banking platforms, your Bank
is the first Bank in India to offer two-factor authentication, single PIN
access across all electronic channels and Wi-Fi enabled branches to make
your Bank truly world-class.

All parts of your Bank use IT to deliver superior products and services to
its customers. Innovations like Money Monitor, Mobile payments, Two-factor
authentication, Mobile Banking, RFID in branches, one-view of customer
relationship, and highly advanced speech enabled IVR enable products and
sales teams to offer superior customer offerings.

Additionally, your Bank continues to strengthen its strategic partnerships
with some of the best known IT majors globally, to develop innovative
system features in order to improve process efficiencies and create sector-
specific banking solutions. :~urther the development ora robust Business
Continuity plan our Bank addresses risks and secures systems that are vital
business operations the current fiscal, the following initiatives were
undertaken:

A Business Intelligence platform provided to customers of your Bank with
focused dashboards relevant to their role and function.This platform is a
key differentiator viz. regular market offerings and focuses on providing
the right information to the right people at the right time

YES BANK has been awarded the Financial Insights Innovation Award (RIA) for
Innovation in Business Intelligence in February 2010, in Singapore

The Mobile Payments platform in partnership with Nokia and Obopay was
launched as a pilot in Pune.This first-of -its-kind platform for mobile
payments facilitates pre-paid accounts for Mobile users while allowing them
to:

* Make bill payments

* Make payments to other mobile account holders

* Merchant payments at the point of sales

* Potential to extend to the Microfinance business

Your Bank entered into a strategic partnership with Cordys for
implementation of a Business Process Management Suite to further help
automation of processes, straight-through processing, robust audit
mechanisms and flexibility to quickly launch new customer products

Your Bank entered into a partnership with First Data Corporation for its
ATM outsourcing in line with its strategy to partner with best-in-class
service providers.This move has given your Bank a substantial cost
advantage viz. ATM management on one side, and the ability to scale up much
faster at the other end

Partners:

Your Bank has formed strategic relationships with eminent Indian and global
companies. These partnerships will not only widen business platforms but
will also lay the foundation for a sustainable future.

Key Partnerships:

Organisation Purpose

Agricultural Insurance Company Agricultural Insurance

Bajaj AllianZ General Insurance

Bharti Airtel Telecom Connectivity

Bill Desk Online Bill Payment Facility

Cash Tech Cash Management and Financial
Supply Chain Solutions

CMC NSDL Depository Participation(DP)

CISCO Technology Innovation and
Infrastructure

Cordys Business Process Management Suite

De La Rue Teller Automation and Cash,
Dispenser Machines

eFunds ATM and Card Payments Solutions

First Data Corporation ATM Outsourcing

IBM Technoloy Hardware

Oracle Unlimited License Agreement for
Database

Oracle Financial Services Core Banking and Internet Banking
Solution

Intel Technologies Wireless Fidelity (Wi-Fi)
Branch Banking Solutions

J P Morgan Chase International Pre-paid Travel Card

MasterCard International International Gold and Silver Debit
Cards

Max NewYork Life Life Insurance

Murex Integrated Risk Management and
Treasury Solution

Microsoft Enterprise Agreement for Servers
Desktops and other products

NABARD/NABCONS Strategic Advisory for Food and
Agribusiness Sector

NewGen Software Technologies Cheque Truncation Solution

NSIC Financial Solutions and Advisory
for Small Scale Industries

Nokia Mobile Payments platform

Nluance YES TOUCH. Phone Banking Service-
Speech Recognition Solution

Nucleus Software Retail,Assets, Platform

Obopay Mobile Payments

Portwise Internet Banking Security Solutions

Reliance Inffocomm WAN MPLS Backbone and Data Centre
Hosting

Reuters Dealing Solution and Online
Forex Trading Platform

Servion Global Integration Partners for the
YESTOUCH Phone Banking Service

SIDBI Financial Solutions for SMEs

Sify Communications Redundant WAN MPLS Backbone and
ATM Connectivity

VSNL Data Centre Hosting

Wipro Total Technology Outsourcing

Wincor Nixdorf Self Service Solutions: Automated
Teller Machines (ATM) and Financial
Kiosks

Yodlee Inc. Online Personal Finance Management-
MONEY MONITOR

Risk Management:

Managing and reducing business risks play a pivotal role in achieving long-
term financial security and success, and to ensure the same, your Bank has
a full-fledged risk management department. Through proactive and improved
risk management practices, your Bank's risk management function
continuously works towards achieving financial stability and enhancing
stakeholder value.

The Risk Management Architecture of your Bank is overseen by the Risk
Monitoring Committee (RMC), an independent board level sub-committee that
strives to put in place specific policies, frameworks and systems for
effectively managing the various risks. These policies and procedures are
constantly reviewed and updated at regular intervals.

Credit Risk:

Your Bank follows a comprehensive and well-defined credit approval process
for all proposals to clearly outline the quantum of risk associated with
them. These processes encompass a detailed risk assessment and rating of
all obligors using your Bank's rating models. These models have been
developed in conjunction with a reputed external credit rating agency, and
cover all corporate business segments of your Bank.The ratings of customers
are assessed based on their financial data, industry characteristics,
business positioning, project risks, operating performance and other non-
financial parameters such as conduct of account. All credit exposures are
approved either through the Three Initial System (3 approving authorities)
or through the Internal Credit Committee. While exercising their financial
powers these designated committees/functionaries exercise the highest level
of due diligence and ensure adherence to the Bank's Credit policy and other
regulatory guidelines.

The Risk Management function of your Bank works in close co-ordination with
various business segments to periodically review the individual borrower
relationships, identify early warning signals and assess the overall health
of borrowing units. Your Bank has taken proactive measures to ensure that
delinquencies are maintained at a minimum level through robust post
sanction monitoring processes. There is an independent and dedicated team
which works towards ensuring compliance to the sanctioned terms and
conditions through an internal tracking system and generating portfolio
level MIS covering various credit quality indicators like overdue analysis,
ratings distribution, sectoral exposure, etc.

There is also an independent portfolio risk management team which monitors
concentration risk (both name and sector) and conducts integrated stress
testing across various material risks. This team carries out detailed
sectoral studies and analysis, and worktowards further strengthening the
overall risk architecture of your Bank.

Your Bank also has an active legal department that helps in assessment of
material legal risks at the transaction level. The department has developed
a comprehensive set of standard documents for various types of credit
products.

Your Bank has successfully migrated to BASEL II Capital Adequacy norms
since March 31, 2009 under which it has adopted the 'Standardised Approach'
for measurement of Credit Risk.Your Bank has also formulated an extensive
policy on Internal Capital Adequacy Assessment Process (ICAAP) commensurate
to the Bank's size, level of complexity, risk profile and scope of
operations.Your Bank continuously endeavours to increase the percentage of
its externally rated portfolio which helps to release capital and enhance
return to shareholders.

Market Risk:

Your Bank's Market Risk management is governed by a comprehensive Market
Risk Policy, ALM Policy, Liquidity Policy, Investment Policy and a Customer
Appropriateness Policy, to iterate consistency across business activities
and aggregate similar risks. These policies have been benchmarked with
industry best practices and RBI regulations. Your Bank has an integrated
and straight-through processing, state-of-the-art treasury system for
enabling better risk management.

Your Bank measures liquidity, currency, and interest rate risks through
various metrics viz. EWMA based Value at Risk (VaR), Earnings at Risk
(EaR), Duration of Equity, Sensitivity Analysis, etc. using internal risk
models. Your Bank regularly conducts stress testing to monitor the Bank's
vulnerability towards unfavourable shocks. Additionally, your Bank has also
complied with the requirements of the Basel II capital accord for Market
Risk under which it has adopted the 'Standardised Duration Approach' for
measurement of Market Risk.

Further, your Bank monitors and controls its risk using various internal
and regulatory risk limits for trading book and banking boolk, which are
set according to a number of criteria including economic scenario, business
strategy, management experience, peer analysis and the Bank's risk
appetite. The risk reporting mechanism in the Bank comprises of disclosures
and reporting to the various management committees viz. Investment
Committee, Asset Liability Committee, Risk Monitoring Committee, etc.

Operational Risk:

Your Bank in accordance with the regulatory guidelines has implemented a
comprehensive operational risk management policy and put in place a
framework to identify, assess and monitor risks; strengthen controls;
improve customer service; and minimise operating losses.Your Bank has also
constituted the Operational Risk Management Committee, which is the primary
driver for implementing the best industry practices in Operational Risk
Management. Further, to ensure full compliance with the requirements of the
Basel II capital accord and the Reserve Bank of India guidelines, your Bank
has adopted the 'Basic Indicator Approach' for the measurement of
Operational Risk.

Internal Audit:

Your Bank believes that professionalism plays a pivotal role in ensuring
robust risk management practices and controls. Being the Professionals'
Bank of India, your Bank's Internal Audit Department performs independent
and objective assessment to monitor adequacy, effectiveness and adherence
to the internal controls, processes and procedures instituted by the
management.

This function supports your Bank's role in safeguarding its assets. The
function has adopted a Risk-Based approach of Internal Audit (RBIA).The
primary focus of the audit is on key risk areas, which are of substantial
importance to the Bank. The RBIA approach has been thoughtfully structured
taking into account RBI guidelines and international best practices. The
Internal Audit function reports to the Managing Director & CEO for regular
activities, and to the Audit and Compliance Committee for Audit Planning &
Reporting. Additionally, your Bank also subjects its operations to
Concurrent Audit by reputable audit firms to complement its internal audit
function. The Concurrent Audit covers core activities such as credit
portfolio, fnancial markets, operations, and branches. All audit reports
are circulated to the relevant Management teams and the Audit and
Compliance Committee of the Board.

Compliance:

Your Bank has institutionalised a strong compliance culture across the
organisation, pursuant to its strategic goals of transparency and trust
amongst all its stakeholders. Your Bank has a dedicated Compliance
Department for ensuring regulatory compliance across all its businesses and
operations. The key functions of this department include dissemination of
key regulatory updates affecting the various businesses of the Bank, review
of new products and processes from a regulatory compliance perspective,
provide guidance on compliance related matters, impart training to
employees on compliance aspects, etc. Your Bank has also put in place a
'Know Your Customer' & 'Anti-Money Laundering' Policy approved by the Board
of Directors and transaction monitoring procedures as per RBI guidelines.

Human Capital Management:

Since inception, your Bank has nurtured the values of professionalism and
has build a culture that supports Professional Entrepreneurship. Your Bank
pursues a strong Employee Value Proposition of'Creating & Sharing Value',
with a vision to build the Professionals' Bank of India. All YES BANK'ers
truly partner to direct, manage and accelerate the development of your Bank
as the Bank for the'Future Businesses of India.

Your Bank recognises that the real source of competitive advantage for an
organisation is the power of its Human Capital. Your Bank cultivates an
environment where people with diverse backgrounds come together to create
long-term value and has hired the finest quality Human Capital across all
its functions and businesses.This young, extremely dynamic and professional
team effectively works across organisational boundaries, to build a culture
that shifts the focus from activities to outcomes. Your Bank ensures
Service Excellence through high-quality human capital. Equipped with a team
of industry and banking experts, your Bank continuously develops quality
performance while realising customer service objectives, creating positive
employee attitudes through effective recognition programs and measuring
results through consistent customer feedback. The aim is to build a culture
and environment that supports professional entrepreneurship.

The Human Capital engagement practices at your Bank are targeted at
developing the Bank brand as the 'Preferred Employer of Choice'. Your Bank
continues to be strongly focused on attracting and retaining the best
talent from India and abroad. Within a short span of time, management
talent at your Bank has come to be regarded as one of the best in the
Indian Banking sector, as demonstrated by the several recognitions and
awards received over the last six years. Some of the key features of your
Bank's policies and practices are illustrated below:

Talent Acquisition & Development:

Your Bank aims to become an 'Employer of Choice' for the brightest and best
quality Human Capital available in the market. The total employee strength
of your Bank, as on March 31, 2010, was 3034.

Building superior Human Capital Management frameworks is one of the key
objectives of your Bank.This will be achieved through coordinated efforts
through high quality knowledge enhancement frameworks, mentorship by
leaders and a structured and comprehensive Training and Development road
map.

The YES SCHOOL OF BANKING (YSB) was institutionalised in 2007 with a vision
to create a Centre of Excellence for learning solutions in Banking and
related areas. All Learning and Development Initiatives for executives of
your Bank are fronted under the aegis of the YES SCHOOL OF BANKING.The YSB
initiative has scaled new heights during the Financial Year 200910, with a
plethora of new focused learning initiatives being launched for various
business groups.Your Bank has also signed a partnership with organisations
like Franklin Covey South Asia & the Dale Carnegie Foundation for
institutionalising Competency-based Management Development Programs focused
at middle, senior and top level management bands.This is in continuation to
the vision, to create and deliver Benchmark Learning and Development
initiatives for all executives of your Bank, and to become a Banking
Industry Talent Creator and knowledge warehouse by building a pool of
qualifed executives with practical skill sets required for the Banking
Industry.

Your Bank also firmly believes in the ethos of Knowledge dissemination and
facilitates several outreaching knowledge engagement activities with select
B-Schools, Engineering Colleges and Agricultural Institutes across the
country through the YES SCHOOL OF BANKING led University and School
Relationship Management (USRM) Program. Your Bank has further strengthened
its strategic relationships withTop Business Schools and Universities in
India through campus engagement, alumni networks, etc. to employ talented
young managers in various management levels across all business groups.The
focus of our Campus relationships is to augment and develop young talent
and to enhance knowledge partnerships.

Your Bank continues to be highly focused on inducting the highest quality
of management talent through its flagship and uniquely differentiated
Talent Acquisition Programs like the YES Professional Entrepreneurship
Program (YPEP).This innovative Talent Acquisition Program was
institutionalised in August 2006, and has contributed substantially to
create an enviable talent pool to further support the growth ambitions of
your Bank. In the first 3 years of Y -PEP your Bank has received an
overwhelming response across the country with 250 YPEP executives mobilised
across various business verticals.This year, your Bank was one of the
leading recruiters on Tier I campuses with 151offers, taking the total
strength of Y PEPS in your Bank to 400+ by May 2010. These 151 management
graduates/CA professionals have been hired from the top Business Schools
and CA Campuses across the country including all IIMs, ISB, FMS, JBIMS,
XLRI, SP Jain, NITIE, MDI, NMIMS, Symbiosis, etc. As the Bank moves ahead
in each endeavour to become the Professionals' Bank of India, this highly
qualified talent pool of Y PEPS is being consciously created to
consistently augment, and support the Bank's knowledge based, state-of-the-
art technology-driven services across key banking relationships, products,
knowledge advisory groups, and critical support functions. The continued
trust and confidence of these young professionals validates the success of
the innovative Y -PEP program, and showcases your Bank as an 'Employer of
Choice' across premier B-School campuses. To further augment this vision
your Bank in association with Businessworld launched the 'YES BANK
Businessworld Transformation Series', a Case Study Challenge event for
premier B-school students across India. The objective of this series is to
infuse the concept of Entrepreneurship and Innovation Driven Growth amongst
the Future Leaders of India.

YES for YOU: YES BANK's HR - IT SYSTEM:

'YES for YOU', your Bank's HR-IT system has been significantly upscaled
during the Financial Year 2009-10, with the launch of new, innovative
features and modules.These new interventions have, apart from further
improving the Human Capital Management process efficiency, also contributed
in cost management and reducing downtime towards consolidation and
availability of sensitive Human Capital information on a real-time basis.

With its superior differentiated strategy on Human Capital, your Bank
continues to garner recognition and accolades at leading global forums in
the field of Human Capital Management.The Bank has won 3 significant awards
at the'World HRD Congress' Summit held in Mumbai in February 2010 that
witnessed the participation of 179 companies across 70 countries. These
awards are:

* The RASBIC award for the Organisation with the 'Most Innovative
Recruitment & Staffing Program/Initiative' for the Financial Year 2009- 10

* The Global HR Excellence Award for the 'Organisation with Innovative HR
Practices' for the Financial Year 2009-10

* The Employer Branding Award for 'Innovation in Recruitment' for the
Financial Year 2009-10

FINANCIAL AND OPERATING PERFORMANCE

Summary:

The Balance Sheet of your Bank grew significantly by 58.9% as at March 31,
2010 compared to March 31, 2009. During this fiscal, your Bank recorded a
growth of 78.9% in its loan book with Advances increasing to Rs. 22,193
crores, while Deposits demonstrated a growth of 65.7% to reach Rs. 26,799
crones as on March 31, 2010.

Your Bank's Net Interest Income showed a substantial increase of 54.7% from
Rs. 509 crores in 2008-09 to Rs. 788 crores in 2009-10 on the back of
strong growth in Advances and Deposits and increasing margins. Your Bank
also showed a healthy growth in Non Interest Income, which grew from Rs.437
crores in 2008-09 to Rs. 576 crones in 2009-10, representing an increase of
31.7%, primarily on the back of improving macro-economic environment and
gain in market share across key Non Interest Income streams.Your Bank also
consolidated these gains by increasing efficiencies and controlling growth
in Operating Expenses to 19.5% in the Financial Year 2009- 10 (Rs. 500
crores) over the Financial Year 2008-09 (Rs. 418 crores). Operating Profit
before Tax consequently increased 63.6% to Rs.864 crores for the Financial
year 2008-09. Net Profit after Tax was Rs.478 Crores for the Financial Year
2000-10. an increase of 57.2% when compared to a Net Profit of Rs.304
Crores for the Financial Year 2008-09. The Return On Average Assets was
1.6% while Return On Equity was 23.7% for the year ended March 31, 2010.

Summarised Financial Position (Rs. in crores)

Particulars March 31, 2010 March 31, 2009 Growth% over
March 31, 2009
Assets:

Advances 22,193 12,403 78.9%
Investments 10,210 7,117 43.5%
Others 3,979 3,381 17.7%
Total Assets 36,382 22,901 58.9%

Liabilities:

Shareholders' funds 3,090 1,624 90.2%
Deposits 26,799 16,169 65.7%
Borrowings 4,749 3,702 28.3%
Others 1,744 1,406 24.2%

Total Liabilities 36,382 22,901 58.9%

Your Bank's total Assets increased 58.9% to Rs. 36,382 crores as at March
31, 2010 from Rs. 22,901 crores as at March 31, 2009. Advances grew by
78.9% to Rs. 22,193 crones, on the back of substantial increase in lending
to large and midsize corporate. Corporate and Institutional Banking (large
corporations, government-owned corporations and institutions, multi-
national corporations and Indian financial institutions) & Commercial
Banking (mid-market corporations, operating across various industries)
constituted nearly 94.69% of your Bank's Non PSL advances as at March 31,
2010.

Total Investments as at March 31, 2010 increased 43.5% to Rs.10,210 crones
from Rs. 7,117 crores as at March 31, 2009. This growth can be attributed
to the increase in SLR Investments of Rs. 2,106 crores, Equity Shares of
Rs. 77 crores, Other Investment of Rs. 1,042 crores and a reduction in
Corporate Bonds of Rs. 132 crores.

Your Bank's Deposits increased by an exceptional 65.7% to Rs. 26,799 crores
as at March 31, 2010 which comprised of Rs. 2,427 crores of Demand
Deposits, Rs. 391 crores of Savings Deposits, Rs. 23,981 crores of Term
Deposits and Certificates of Deposit. Term Deposits and Certifcates of
Deposit increased by 62.5% during the Financial Year 2009-10 while Savings
Deposits increased by 103.6% and Current Deposits increased by 99.0% as at
March 31, 2010 over March 31, 2009.

The falling interest rates in the economy resulted in reduction in the cost
of Deposits for your Bank. This coupled with increasing contribution of
balances in Current Accounts and Savings Accounts resulted in a fall of 2.1
% in the cost of funds during the Financial Year 2009-10 to 6.9% as
compared to cost of funds of 9.0% in the Financial Year 2008-09. The Yield
on Advances for the year dropped by 2.0% from 12.8% in the Financial Year
2008-09 to 10.8% in the Financial Year 2009-10 in line with the falling
rate environment.The fall in the cost of Funds coupled with a higher
average Credit/Deposit ratio resulted in an expansion of Net Interest
Margins from 2.9% for 2008-09 to 3.1% for the Financial Year 2009-10.

Your Bank's Shareholders' Funds as at March 31, 2010 increased to Rs. 3,090
crones from Rs. 1,624 crones as at March 31, 2009 primarily on account of
the successful offering of 3.84 crores shares @ Rs. 269.50 per share, net
of share issue expenses aggregating Rs. 1019 crores by way of a Qualified
Institutions Placement in January 2010, exercise of 0.43 crores of Stock
Options for Rs. 28 crores and due to Rs. 478 crores Net Profit after Tax
during the Financial Year 2009-10.The Shareholders' Funds decreased by
Rs.60 Crores on account of providers created for Dividend of Rs.1.50 per
share as recommended by the Board of Directors.

Selective Operating Result Data:
(Rs. in crones)
Particulars

Financial Financial Growth % Over
Year Year Financial Year
2009-10 2008-09 2008-09

Net Interest Income 788 509 54.7%
Non Interest Income 576 437 31.7%
Total Income 1,364 946 44.1%
Operating Expenses 500 418 19.5%
Employee Costs 257 218 17.8%
Other Costs 243 200 21.3%
Operating Profit 864 528 63.6%

Provisions and 137 62 121.7%
Contingencies

Profit before Tax 727 466 55.9%

Provision for Taxes 249 162 53.5%

Net Profit 478 304 57.2%

The increase in Net Interest Income to Rs. 788 crores in the Financial Year
2009-10 was driven by 40.7% increase in average interest bearing assets and
Net Interest Margin of 3.1 %. Increase in the average interest bearing
assets was primarily due to strong growth in Advances and Investments
portfolio during the Financial Year 2009- 10.

Continued emphasis on cross-selling multiple products to existing
relationships enabled your Bank to earn Rs. 576 crores of other income for
the Financial Year 2009-10 as compared to Rs. 437 crores for the Financial
Year 2008-09. The percentage of Non Interest Income to Net Revenues (Net
Interest Income plus Non Interest Income) was 42.2% in the FinancialYear
2009-10. The key sources of Non Interest Income continued to be from
fnancial advisory revenue, income from transaction banking and trade
finance activities, income from financial markets, retail and other fee
income.

Your Bank continued to make substantial investments towards Human Capital,
information technology and branch expansion to meet its growth targets.
Your Bank has increased its total Human Capital from 2,671 as at March 31,
2009 to 3,034 as at March 31, 2010 on the back of hiring talent from peer
banks and top-rung post graduate programs across the country.

Operating Expenses increased by 19.5% from Rs. 418 crores for the Financial
Year 2008-09 to Rs. 500 crones in the Financial Year 2009-10. The
management's continued focus on cost control has resulted in a cost to
income ratio of 36.7% in the Financial Year 2009-10 compared to 44.2% in
the Financial Year 2008-09. Employee costs accounted for 51.4% of Non
Interest Expenses forthe FinancialYear 2009-10 as against 52.1% for the
Financial Year 2008-09.

KEY RATIOS

Key Ratios Financial Year
2009-10 2008-09

Return on Equity 23.7% 20.6%
Return on Annual Average Assets 1.6% 1.5%
Basic Earnings per Share Rs. 15.65 10.24
Diluted Earnings per Share Rs. 14.87 10.14
Book Value Rs. 90.96 54.69
Non Interest Income to Net Revenues 42.2% 46.2%
Cost to Income 36.7% 44.2%
Gross NPA Ratio 0.27% 0.68%
Net NPA Ratio 0.06% 0.33%

Net Profit afterTax increased to Rs.478 crores for the Financial Year 2009-
10 as against Rs. 304 crones for the Financial Year 2008-09. For the
Financial Year 2009-10, Return On Average assets was 1.6% whereas the
Return On Equity was 23.7%. The increase in profits resulted in an increase
in diluted earnings per shares from Rs. 10.14 in the Financial Year 2008-09
to Rs. 14.87 in the Financial Year 2009-10. The Book Value per share
increased from Rs. 54.69 as at March 31, 2009 to Rs. 90.96 as at March 31,
2010 on the back of strong earnings growth and share premium from issue of
equity shares by way of the Qualified Institutions Placement and the
exercise of stock options and retained earnings for the year.

Despite a strong growth in advances, Your Bank had Net Non Performing
Assets (NPA) to Net Advances ratio of 0.06% as at March 31, 2010 as
compared to 0.33 % as at March 31,2009.The gross non-performing assets
stood at Rs.60 crores as at March 3 I , 2010 as compared to Rs. 85 crores
as at March 31, 2009. The specific loss provision balance was Rs.47 crores
as at March 31, 2010 resulting in a specifc cover of 78.43%. The general
loan loss provision made during the Financial Year 2009-10 was Rs. 39
crones as compared to Rs. 26 crores for the Financial Year 2008-09.The
total provision cover stood at 274% as at March 31, 2010 in line with the
conservative provisioning norms followed by your Bank.


SECTORAL DISTRIBUTION OF LOANS:

Your Bank continues to focus on industry sectors (which have been selected
based on the overview of macroeconomic factors, industry analysis, the
Bank's domain knowledge and expertise in addition to the directives from
the Reserve Bank and Government of India) to drive its portfolio growth.
The knowledge-driven banking approach ensures a well-diversified, highly
resilient and healthy portfolio mix. Accordingly, your Bank's portfolio is
largely distributed amongst Food and Agribusiness contributing (16.9%),
Infrastructure (20.6%), Engineering (19.1%), Telecommunications Media and
Information Technology (TMT) (13.3%), Life sciences & Healthcare (8.0%) and
others (22.1%). To meet priority sector lending targets, your Bank is
working with channel partners including micro-finance companies and NBFCs
for origination, monitoring and collections. Your Bank has also built
structured credit solutions around agriculture input suppliers/purchasers
of large corporates, thereby using the distribution network of these
companies to originate and lend to agricultural producers.

SHAREHOLDERS' FUNDS & CAPITAL MANAGEMENT:

Your Bank's shareholders' funds were Rs. 3,090 crores as at March 31, 2010
as compared to Rs. 1,624 crones as at March 3 I , 2009.

Tier-I Capital:

The increase in Tier-I Capital was on account of (I) Issue of 3.84 crores
shares at Rs. 269.50 per share aggregating Rs. 1,0 19 crores (net of share
issue expenses) (2) Profit afterTax for the Financial Year 2009- 10 of
Rs.478 crores less Dividend declared at Rs. 1.50 per share aggregating
Rs.60 crores (including dividend declaration tax) and (3) Exercise of 0.43
crores stock options by employees aggregating Rs. 28 crores and (4)
Issuance of Hybrid Tier I instruments in form of innovative Perpetual Debt
Instruments aggregating Rs. 82 crores.

Tier - II:

Capital During the Financial Year 2009-10, your Bank raised Rs. 560 crores
of subordinated debt through private placement issues of unsecured,
redeemable, non-convertible, subordinated, bonds from various financial
institutions and another Rs. 93 crores (EURO 13.25 million) UpperTier II
capital from PROPARCO, the French government investment arm.

Your Bank had a Capital Adequacy Ratio of 20.6% (as per Basel II) as at the
end of the Financial Year 2009- I 0. As per Basel II, Tier I Capital Ratio
was 12.9% and the Tier II Capital Ratio was 7.7% as at March 31,2010.

Capital Adequacy Ratios in percent March 31, 2010 March 31, 2009

Total capital ratio CAR out of 20.6% 16.6%
the above
Tier I Capital 12.9% 9.5%

Tier II Capital 7.7% 7.1%

In line with the RBI circular on new Capital Adequacy Framework, currently
for computing capital requirement, your Bank has adopted the Standardized
Approach for Credit Risk, Standardised Duration Approach for Market Risk
and Basic Indicator Approach for Operational Risk. Your Bank has also put
in place a Board approved policy on Internal Capital Assessment Process
(ICAAP) which defines and sets processes to review and improve the
techniques used for identification, measurement and assessment of all
material risks and resultant capital requirements.

RISKS AND THREATS:

The RBI in response to the market conditions in the second half of fiscal
2009, provided liquidity support and reduced policy rates. Inflation
concerns have forced the RBI to withdraw its liquidity support measures and
increase both policy rates and reserve requirements signalling a tighter
money environment. The Government on its part plans to continue its
borrowing program, which could also put pressure on rates. Though the
credit off-take showed a pick-up in the last quarter of the Financial Year
2009- 10, it was subdued for most of the fiscal. The continuation of such a
phenomenon, accompanied by tightening of monetary policy could put pressure
on margin of banks as they may not be able to pass on higher cost of funds
to their borrowers. Rising inflation could subdue economic growth and
saving rates consequently impacting profitability of banks.

The Financial Year 2009-10 has seen a significant pick-up in consumer
spending in both India as well as leading global economies. However, the
threat of a double-dip of leading western economies is considered real by
many leading global economists. Such a scenario may put a significant
strain on certain industries, especially export oriented industries,
possibly resulting in increased credit costs. Further, this could impact
consumer spending and credit off-take, thereby slowing down expansion
plans. Also, foreign capital has had a crucial role to play in financing
investment initiatives. A double-dip would result in slowdown of the flow
of such funds thereby constraining a sustained recovery in investments and
capital growth.

We intend to expand our asset and liability base and branch footprint. Our
ability to add branches in metropolitan and urban locations is dependent on
obtaining branch licenses from the Reserve Bank of India. A change in the
regulation on branch licensing could lead to unexpected delays in the roll-
out of branches. Further, branch expansion is also dependent on cost-
effective availability of suitable real estate and execution of roll-out of
the associated infrastructure.

Opportunities:

The robust recovery of the domestic economy from the financial crisis of
2008-09 reflects the strong fundamentals of the Indian Economy and the
resilience of the Indian Consumer. India is expected to experience strong
growth over the next few years accompanied by the expansion and deepening
in penetration of the banking sector in India. A growing middle class with
technologically savvy, multiple banking requirements will serve as a huge
market of the growth plans of your Bank in the near future.The shift in
demographics towards a higher proportion of younger working population, the
changing attitudes towards borrowings, higher income levels amongst the
growing middle class, and the large pent-up demand for housing, cars, etc.,
all augur well for the long-term, sustainable growth of consumer lending in
the Indian market over the next few years.

The rural sector has shown greater resilience than the urban sector partly
due to a lower level of global integration. Given that a large percentage
of population lives in rural India and that the population is under-banked,
there is an enormous opportunity for expansion of banking in India.This
population has the potential to show lower credit losses in a down-turn
given its counter-cyclical character. Further, evolving technologies like
mobile banking will provide opportunities to tap million of customers
(especially rural customers) who were hitherto untapped in the past.

The huge expansion of Infrastructure over the next plan period will create
opportunities for banks either directly in project finance or in providing
short-term funds for companies involved in these projects. Furthermore,
there is an expectation of significant capacity expansion in the near
future which would augment the credit requirement of corporate India,
thereby significantly improving credit off-take.

OUTLOOK:

India's economic recovery has been remarkable with the Financial Year 2009-
10 GDP estimated to grow by 7.2% (Advance Estimates, CSO, GOI) and expected
to gain further traction in the Financal Year 2010-11 with GDP projected to
grow between 8.0%-8.75% (RBI and GOI respectively) Hitherto, consumption
led recovery is now seen paving way for investment-led resurgence as the
capacity utilisation levels improve in the coming quarters. The lead
indicators of economic activity, viz. non-oil imports, non-food credit, PMI
Survey on business outlook all point towards a sustained momentum in the
growth trajectory.

With growth firmly in saddle, the focus of the monetary policy has now
tilted towards inflation management on the back of a worrisome inflation
trajectoryThe headline WPI inflation in March 2010 was significantly higher
at 9.9%, exceeding RBI's baseline projection of 8.5%. Towards anchoring
inflationary expectations, the RBI has however, adopted a calibrated
approach in the pace of monetary tightening. Going forward, the monsoon
outlook for the Financial Year 2010-11 will have a bearing on growth and
inflation projections. A normal monsoon will support a stronger growth
momentum which will enable RBI to normalise policy rates closer to pre-
crisis levels. While the headline WPI inflation has likely peaked in March
2010, we expect the annual average inflation around 6.0-6.5% in the
Financial Year 2010-I I. Monetary tightening is expected to continue
through the Financial Year 2010- 11 with increases in the Repo and the

Reverse Repo rates and hikes in the Cash Reserve Ratio requirement.