Annual Report - ING Vysya - 2009-2010

ING VYSYA BANK LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

The Board of Directors have pleasure in presenting the Seventy Ninth Annual
Report of the Bank together with the Audited Statements of Accounts for the
year ended 31-Mar-2010, Auditors' Report thereon and other documents and
statements as are required.



Financial and Business Performance:

For the year ended March 2010 the Bank posted a net profit of Rs. 242 Crore
compared to Rs. 189 Crore for 2008-09. The pre-tax profit improved to Rs.
372 Crore compared to Rs. 295 Crore during the previous year. The Net
Interest Income for the year 2009-10 increased to Rs. 830 Crore registering
an increase of 28%.

The aggregate business of the Bank reached Rs. 44,372 Crore as at 31-Mar-
2010 compared to Rs. 41,646 Crore as at 31-Mar-2009. The Total Deposits of
the Bank increased to Rs. 25,865 Crore registering a growth of 4%. The Net
Advances increased to Rs. 18,507 Crore by March 2010 compared from Rs.
16,756 Crore at the end of the previous year recording a growth of 10%.

The Bank has exceeded the regulatory target of 40% of adjusted net bank
credit for priority sector lending, having achieved a level of 41.8%
(previous year 42.9%). Export advances declined to Rs. 1,062.92 Crore from
Rs. 1,211.87 Crore at the end of the previous year. The export credit as a
percentage of net bank credit stood at 5.74%. As of 31-Mar-2010, the
outstanding credit to Scheduled Castes /Scheduled Tribes borrowers stood at
Rs. 50.60 Crore and the percentage of recovery to demand as on 31-Mar-2010
was 26.31 (previous year 48.45%) of the amounts fallen due. The Net NPA
Ratio as of 31-Mar-2010 is same as that of 31-Mar-2009 i.e. 1.20%.

Paid up-capital and Capital Adequacy Ratio:

The paid up capital of the Bank stood at Rs. 119.97 Crore as at 31-Mar-2010
as compared to Rs. 102.60 Crore, as at 31-Mar-2009.

The Bank has adopted the New Capital Adequacy Framework (Basel II) from 31-
Mar-2009. Under this framework, the Capital Adequacy Ratio (CAR) stood at
14.91% as at 31-Mar-2010 as against the Reserve Bank of India's (RBI)
stipulated minimum of 9%. Of this, Tier I Capital was 10.11% and Tier II
Capital was at 4.80%.

Under the previous norm (Basel I), the CAR stood at 12.94% as at 31-Mar-
2010. Of this, Tier I Capital was 8.84% and Tier II capital was 4.10% as
compared to 6.91% and 4.77% respectively as at 31-Mar-2009.

The detailed discussion on financials and business performance is presented
in the Management Discussion and Analysis Report, forming part of this
Annual Report.

Appropriation of Profits and Dividend:

In compliance with the requirement under the Banking Regulation Act, 1949
and the guidelines issued thereunder by the RBI, the Directors propose to
transfer Rs. 60.55 Crore (previous year Rs. 47.19 Crore) to Statutory
Reserve, Rs. 7.02 Crore (previous year Rs. 2.28 Crore) to Capital Reserve
and Rs. 0.87 Crore (previous year Rs. 2.30 Crore) to Investment Reserve,
for the year ended March 2010.

Taking into account the regulatory restrictions, the Board of Directors
recommend a dividend of 25% i.e. Rs. 2.50 per equity share of Rs. 10/- on
all the equity shares of the Bank increasing from 20% (i.e. Rs. 2/- per
equity share) of the previous year. The outflow on account of the proposed
dividend, including the dividend tax, would be Rs. 35.09 Crore.

The dividend recommended, on approval would be paid to all those
shareholders whose names appear as Beneficial Owners as at the end of 16-
Jun-2010 as per the list to be furnished by Depositories (viz., NSDL and
CDSL) in respect of the shares held in electronic form and those
shareholders whose names appear in the Register of Members of the Bank as
members after giving effect to all valid transfers of shares in physical
form which will be lodged with the Bank on or before 16-Jun-2010.

Consolidated Financial Statements:

As required under AS 21 issued by the Institute of Chartered Accountants of
India (ICAI), the Bank's consolidated financial statements are included in
this Annual Report incorporating the accounts of its wholly owned
subsidiary company viz., ING Vysya Financial Services Limited in line with
the basis of consolidation as explained in the Notes to the said
consolidated statements.

Employee Stock Option Scheme:

During the financial year 2009-10, eligible employees were granted
23,80,610 options under ESOS 2007 reaching a cumulative grant of 75,48,976
options. Considering the inadequate balance of 2,51,024 options available
in the existing ESOS 2007, it is proposed that a new Employee Stock Option
Scheme 2010 (ESOS 2010) be introduced with an outlay of 1,15,00,000 stock
options. A proposal for approval of ESOS 2010 is being placed before the
shareholders at the ensuing AGM.

The eligible employees were vested with 12,67,050 options under ESOS 2007
and 48,197 options under ESOS 2005.

The requisite particulars to be disclosed under the SEBI (Employee Stock
Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, in
respect of the options granted etc., under the existing schemes are
furnished in Annexure - I to this report.

Statutory Disclosures:

The particulars of employees required under Section 217(2A) of the

Companies Act, 1956 and the rules made thereunder, are given in the
annexure appended hereto (Annexure- II) forming part of this report. In
terms of Section 219(1)(b)(iv) of the Act, the Report and Accounts are
being sent to the shareholders excluding the aforesaid annexure. Any
shareholder interested in obtaining a copy of the said annexure may write
to Corporate Secretary at the Registered Office of the Bank.

The provisions of Section 217(1)(e) of the Companies Act, 1956 regarding
conservation of energy and technology absorption are not applicable to the
Bank. The Bank has, however, used information technology extensively in its
operations.

Subsidiaries:

The main object of ING Vysya Financial Services Limited (IVFSL), a wholly
owned subsidiary of the Bank, is to carry on business of nonfund / fee
based activities of marketing and distribution of various financial
products / services of IVBL / other companies, apart from recovery of the
old lease rentals due to the company.

Subsequent to transfer of the Wealth Management Services of IVFSL to the
Bank in Apr, 2007, IVFSL continues to provide the services to the Bank, as
may be required from time to time, on a non-exclusive contract basis.

Currently the recovery of past lease rentals is the only major income for
IVFSL besides receipt of reimbursement charges on outsourcing of manpower
to the Bank. IVFSL has been offering low cost hiring platform for the
resourcing needs of the Bank. There is growing need from the business
perspective to build capabilities within the IVFSL and use IVFSL as an
outsourcing platform for the Bank. The Bank has also expressed its interest
in availing outsourcing services from IVFSL. In order to build capabilities
and expand the activities of IVFSL long term plans are being drawn up.

IVFSL has earned a net profit of Rs. 0.81 Crore for the year 2009-10, as
against Rs. 0.37 Crore during the previous year.

As required under Section 212 of the Companies Act, 1956, the Balance
Sheet, Directors' Report and other documents pertaining to IVFSL, along
with a statement of interest of the Bank in the subsidiary, are attached to
the financial statements of the Bank.

Directors:

Mr. Wilfred Nagel resigned as Director effective 27-Jan-2010. The Board
places on record its appreciation for the valuable contributions rendered
by him during his tenure as Director on the Board.

Mr. Peter Henri Maria Staal was appointed by the Board of Directors as an
Additional Director effective 21-Jan-2010 to hold office till the 79th AGM.
A notice, as required under Section 257 of the Companies Act, 1956 has been
received by the Bank for his appointment as a Director of the Bank. A
proposal to appoint him as a Director, liable to retire by rotation, is
being placed before the shareholders at the ensuing AGM.

Mr Lars Kramer was appointed as a Director in casual vacancy effective 28-
Apr-2010, caused by the resignation of Mr. Wilfred Nagel, to hold office
till such date up to which Mr. Nagel would have held his office if he had
not resigned, i.e., till the date of 81st AGM to be held in 2012.

Part-time Chairman:

In terms of approval of Reserve Bankof India vide its letter DBOD No.
20390/08.57.001 /2008-09 dated 28-May-2009, Mr. K R Ramamoorthy, the
current Part-time Chairman of the Bank, will be completing his term on 07-
Jul-2010, when he reaches the upper age limit of 70 years. Steps are being
taken to appoint a successor to Mr. K R Ramamoorthy.

Retirement of Directors by rotation:

Mr. Aditya Krishna, Mr. Santosh Ramesh Desai and Mr. Richard Cox will
retire by rotation in terms of Section 256 of the Companies Act, 1956 at
the ensuing Annual General Meeting and being eligible, offer themselves for
re-appointment. A brief resume of each of these Directors is furnished in
the Annexure to the Notice convening the ensuing Annual General Meeting.

Registrars and Share Transfer (R & T) Agents:

Karvy Computershare Private Limited, Hyderabad continues to be the R & T
Agents for the shares of the Bank.

Auditors:

The Statutory Auditors viz., M/s. S R Batliboi & Co., Chartered Accountants
who were re-appointed at the 78th Annual General Meeting held on 04-Sep-
2009 are retiring at this AGM and being eligible for re-appointment under
the guidelines of Reserve Bank of India (RBI), offer themselves for re-
appointment for the fourth consecutive year.

The Shareholders are requested to appoint the above auditors and authorize
the Board of Directors to determine their remuneration. Shareholders are
also requested to authorize the Board of Directors to appoint Branch
Auditors and determine their remuneration. The re-appointment of Auditors
is subject to the approval of the Reserve Bank of India.

Other Reports:

As required under Clause 49 of the Listing Agreement entered into with the
Stock Exchanges, a detailed report on Corporate Governance is included in
this Annual Report.

Directors' Responsibility Statement:

As required by Section 217(2AA) of the Companies Act, 1956, the Directors
confirm:-

(i) that in the preparation of the annual accounts, the applicable
accounting standards had been followed along with proper explanation
relating to material departures;

(ii) that they had selected such accounting policies and applied them
consistently and made judgements and estimates that were reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Bank at the end of the financial year and of the profit of the Bank for the
year under review;

(iii) that they had 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;

(iv) that they had prepared the accounts for the financial year ended 31-
Mar-2010 on a going concern basis.

Acknowledgements:

The Board of Directors place on record their gratitude for the guidance and
co-operation received from the Reserve Bank of India and other regulatory
bodies. The Directors also place on record their appreciation of the
encouragement and patronage received from valued customers and other
stakeholders like financial institutions, bondholders etc., and look
forward to their continued support. The Directors also take this
opportunity to express their appreciation for the good work and efforts put
in by the employees of the Bank.

Finally, the Directors acknowledge the Members for their trust and support.

For and on behalf of the Board

Place: Bangalore K.R. Ramamoorthy
Date : 29-Apr-2010 Chairman

Statutory Disclosures as of 31-Mar-2010 regarding ESOS under Clause 12 of
the Securities and Exchange Board of India (Employee Stock Option Scheme
and Employee Stock Purchase Scheme) Guidelines,1999

ESOS 2002 ESOS 2005
(as modified
in 2005)
Tranche 1 Tranche 2 Tranche 1 Tranche 2
(Loyalty
Options)
Options Granted

- Pre Rights Issue 2005 166800 160490 - -
- Post Rights Issue 2005 327980 429524 465212 525285

Pricing Formula Exercise price is equivalent to 75% of the
average price of the shares during the past
six months in the Stock Exchange where the
Stocks are traded in highest number.

AGM Resolution 29-Sep-01 29-Sep-01 22-Sep-05 22-Sep-05

Options Vested
- Pre Rights Issue 60450 28868 - -
Post Rights Issue 290610 339536 291957 508100

Options Exercised

- Pre Rights Issue 59740 27568 - -
Post Rights Issue 264480 294077 205558 167980

Total number of Shares
arising as a result of
exercise of Options

Pre Rights Issue 59740 27568 - -
Post Rights Issue 264480 294077 205558 167980

Options Lapsed:

Pre Rights Issue 25065 25541 - -
Post Rights Issue 63500 134967 157005 29090

Variation of terms NIL NIL NIL NIL
of options

Money realised by 22348560.00 28672507.50 25211302.00 31046063.60
exercise of options
(in Rs.)

Total number of options - 480 102649 328215
in force Employee wise
details of grant to
Senior Managerial
Personnel

Total number of options - 480 102649 328215
Mr. B Ashok Rao - 11900 5000 -
Mr. Bishwajit Mazumder - - - -
Mr. Janak Desai - - - -
Mr. Jan Van Wellen - - - -
Mr. Jayant Mehrotra - - 5000 -
Mr. Manjunatha M S R 5040 5440 3000 -
Ms. Meenakshi A - - - -
Mr. Prasad C V G - - - -
Mr. Prasad J M - - 5500 -
Mr. Samir Bimal - - 7000 -
Mr. Shailendra Bhandari - - - -
Mr. Uday Sareen - - - -
Mr. M V S Appa Rao 5040 5440 4500 500

Any other employee who NIL NIL NIL NIL
received a grant in any
one year of the options
amounting to 5% or more
of the options granted
during that year.

Indentified employee who NIL NIL NIL NIL
were granted options
during any one year,
equal to or exceeding
1% of the issued capital
(exclude outstanding
warrants and conversion)
of the company at the
time of grant.

ESOS 2007
Options Granted

- Pre Rights Issue 2005 -
- Post Rights Issue 2005 75,48,976

Pricing Formula Exercise price is equivalent to 75% of the
average price of the shares during the past
six months in the Stock Exchange where the
Stocks are traded in highest number.

AGM Resolution 11-May-07

Options Vested
- Pre Rights Issue -
Post Rights Issue 2923796

Options Exercised

- Pre Rights Issue -
Post Rights Issue 307277

Total number of Shares
arising as a result of
exercise of Options

Pre Rights Issue -
Post Rights Issue 307277

Options Lapsed:

Pre Rights Issue -
Post Rights Issue 247100

Variation of terms NIL
of options

Money realised by 48055522
exercise of options
(in Rs.)

Total number of options 6994599
in force Employee wise
details of grant to
Senior Managerial
Personnel

Total number of options 6994599
Mr. B Ashok Rao 282500
Mr. Bishwajit Mazumder 64000
Mr. Janak Desai 695000
Mr. Jan Van Wellen -
Mr. Jayant Mehrotra 725000
Mr. Manjunatha M S R 24000
Ms. Meenakshi A 70000
Mr. Prasad C V G 57000
Mr. Prasad J M 323000
Mr. Samir Bimal 587000
Mr. Shailendra Bhandari -
Mr. Uday Sareen 700476
Mr. M V S Appa Rao 10000

Any other employee who NIL
received a grant in any
one year of the options
amounting to 5% or more
of the options granted
during that year.

Indentified employee who NIL
were granted options
during any one year,
equal to or exceeding
1% of the issued capital
(exclude outstanding
warrants and conversion)
of the company at the
time of grant.

The details on Employee compensation cost is given under 'Employee Stock
Option Scheme' in the Notes on Accounts (Schedule 18) of the Balance Sheet
(page no. 53)

MACRO ECONOMIC AND BANKING INDUSTRY DEVELOPMENTS:

Real Gross Domestic Product (GDP) growth for the third quarter of 2009-10
was at 6% and the advance estimate of GDP growth is placed at 7.2% for
2009-10. The turnaround in GDP growth witnessed during the first quarter of
2009-10 was sustained during the second and third quarter, spurred by
robust revival in industrial performance and fiscal expenditure driven
services activities. The performance of the agricultural sector remained
subdued due to the impact of the deficient South-West monsoon, the major
part of the impact being reflected in the third quarter GDP of the year.
The industrial recovery, besides exhibiting acceleration in the last few
months, has also become more broad-based. Most of the lead indicators of
services sector activities also suggest revival in growth momentum.

The declining trend in India's merchandise exports, which began in October
2008, continued for thirteen consecutive months up to October 2009. However
the rate of decline in exports showed persistent moderation starting from
June 2009. In November 2009, there was reversal in the trend, with exports
turning around sharply by exhibiting a growth of 18.2% as compared with a
decline of 13.5% in November 2008; and has been positive since then.

The inflationary momentum is clearly visible in terms of the increase in
Wholesale Price Index (WPI) by 9.90 % in March 2010 reflecting the increase
in food and fuel prices as well as the impact of the waning of base effect.
The upward revision of prices of petrol and diesel (effective 02-Jul-2009),
increase in prices of freely priced products under the fuel group in line
with hardening of international crude oil prices, and higher prices of
sugar, vegetables and drugs and medicines drive the current inflation.

The budget moved one step towards a selective roll-back of fiscal stimulus
with a 2% hike in excise duty and certain other changes in indirect taxes.
Fiscal deficit target for Financial Year (FY) 11 is set at 5.5%, a sharp
reduction from 6.7% in FY10. Important assumptions which the government is
making are a robust growth in indirect taxes, large-scale disinvestment and
lower fuel subsidies.

The domestic financial markets continued to witness low risks and greater
volumes in various market segments. During 2009-10, the rupee strengthened
by 11.4% against the US dollar on the back of continued capital inflows,
revival in growth performance of the Indian economy and general weakening
of the US dollar in the international markets. During the financial year,
the Indian equity market outperformed most emerging market economies by
registering an increase of 81% and relatively lower volatility.

BANKING INDUSTRY DEVELOPMENT:

The Reserve Bank of India (RBI) embarked on the monetary exit marking an
end to a 15-month phase of monetary accommodation. In the monetary policy
announcement in Jan'10, Cash Reserve Ratio was hiked by 75 bps to 5.75%,
while other key rates were left unchanged. The RBI raised both the Repo and
the Reverse Repo rates by 25 bps in an interim policy announcement in
Mar'10 to counter the higher than expected inflation. Further, through the
Annual Policy Statement issued in Apr'10, the RBI hiked the Cash Reserve
Ratio by additional 25 bps to 6.0% and also both the Repo and the Reverse
Repo rates were increased by additional 25 bps. An increased confidence in
recovery encouraged RBI to clearly and explicitly shift their stance from
'managing the crisis' to 'managing the recovery'.

Non-food credit growth (y-o-y) of Scheduled Commercial Banks (SCBs)
decelerated over twelve months following the peak reached in October 2008,
which could be partly explained by the availability of alternate Non-
Banking sources of funding, including internal resources of corporates,

besides the impact of the economic slowdown on credit from the demand side.
Non-food credit growth has shown a reversal in trend since November 2009
increasing from 10.3% (y-o-y) as on November 6, 2009 to 17.2% as of end-
Mar, 2010.

In a move to increase transparency in pricing credit, starting July 2010,
all categories of loans would be priced only with reference to the Base
Rate (as against BPLR earlier), which will be Bank specific. Following the
change, the base rate is likely to come down from the existing Benchmark
Prime Lending Rate (BPLR) levels of 11-16%. The move is also aimed at
increasing credit flow to small and mediumterm enterprises at reasonable
rates as henceforth, Banks will not be permitted to resort to any lending
below the base rate subject to certain exceptions.

OVERVIEW OF FINANCIAL AND BUSINESS PERFORMANCE:

During the financial year 2009-10, the Bank has reported healthy growth in
its financial performance, in its business and improvement in its financial
and other operating parameters.

The Bank recorded a net Profit After Tax (PAT) of Rs. 242 Crore for the
year 2009-10, an increase of 28% from Rs. 189 Crore reported in the
previous year. Operating profit (before provisions and contingencies) grew
strongly by 51% to Rs. 642 Crore from Rs. 425 Crore reported in the
previous year. Provision and contingencies for the financial year 2009-10
was higher at Rs. 270 Crore, due to certain one time provision on account
of restructuring and additional provision that the Bank was required to
make in order to enhance its provision cover to achieve the provision
coverage ratio of 70% that RBI has mandated all commercial banks to achieve
by Sept, 2010.

The Net Total Income of the Bank for the year rose by 21% to Rs. 1,450
Crore from Rs. 1,197 Crore reported during the previous year. During this
period, the Net Interest Income (NII) grew by 28% to Rs. 830 Crore from Rs.
650 Crore reported in the previous financial year. The increase in NII was
contributed by significant improvement in the Net Interest Margin (NIM)
which was at 3.21% for the financial year 2009-10 against 2.84% that was
reported in the previous financial year. This was achieved on the back of
significant improvement in the cost of deposits and increase in the
proportion of low cost deposits. Fee and Other Income increased by 13% to
Rs. 620 Crore from Rs. 548 Crore. Operating expenses increased by only 5%
to Rs. 808 Crore from Rs. 772 Crore in the previous year due to several
cost control measures initiated during the year. The staff strength stood
at 6,249 as at 31 March 2010 against 6,227 as at the previous year end. The
Cost to Income Ratio has improved to 56% against 65% in the previous year.

Return on Average assets increased to 0.80% from 0.70% reported in the
previous year inspite of significantly higher provision in the current
financial year.

During the year the Bank successfully raised additional capital of around
Rs. 415 Crore through a Qualified Institutional Placement (QIP) and
Preferential issue to ING Group, Foreign Promoters. The QIP issue received
good response, with a mix of domestic and foreign institutions
participating in the issue. The capital adequacy ratio of the Bank as per
Basel II stood at 14.91 % as of 31 March 2010 with Tier 1 capital ratio at
10.11 %.

Total deposits of the Bank aggregated to Rs. 25,865 Crore, an increase of
4% over the previous year. The Bank focused on improving the mix of low
cost deposits during the year and running off most of the high cost bulk
deposits that were required to be taken in the previous year. Due to this
Current and Savings Account (CASA) deposits increased by 26% from Rs. 6,712
Crore at March 2009 to Rs. 8,427 Crore at March 2010. Consequently, CASA
deposits as a proportion of total deposits increased to 33% against 27% in
the previous year.

Total assets increased by 6% to Rs. 33,880 Crore from Rs. 31,864 Crore at
March 2009. Net Advances increased by 10% to Rs. 18,507 Crore from Rs.
16,756 Crore as at the end of the previous financial year.

Retail Bank advances (including SME) contributed to 58% of the advances.
Net Priority Sector Advances as of 31-Mar-2010 constituted 41.8% of
adjusted Net Bank Credit as against the target of 40% stipulated by the
RBI.

The net NPA of the Bank as at March 2010 stood at Rs. 222 Crore, which was
1.20% of Net Advances and similar to the previous year.

INTERNAL CONTROL SYSTEMS:

The internal control system of the Bank is reinforced through three lines
of defence i.e. Business Owners, Risk Management (credit, operational,
market risk) and Internal Audit.

The Bank's internal controls have been developed to provide reasonable
assurance that the organization's business objectives will be achieved and
risks identified and managed effectively. The internal control of the Bank
is aligned with the overall organizational structure. Apart from basic
operational controls at a Branch level, there are two additional levels of
control: the Regional office and the Corporate Office. The Internal Audit
Department acts as an independent entity analyzing effectiveness and
adequacy of the internal controls of the Bank through frequent audit and
reviews.

The Bank has an adequate control system, which is overseen in line with
Section 292A of the Companies Act, 1956 by the Audit Committee of the Board
which reviews the working of internal auditors and statutory auditors to
ensure compliance. Appropriate action is taken if deficiencies are
reported. In order to improve the compliance culture and as a part of the
plan for continuous improvement in the compliance culture of the Bank and a
better understanding of the internal controls, a number of workshops and
education programmes have been conducted for the Bank's employees.

BUSINESS REVIEW:

An overview of various business segments along with their key performance
achievements in 2009-10 is presented below.

RETAIL BANKING:

The growth in Retail Banking business was robust during the current
financial year and the Bank witnessed a healthy growth across key financial
and operating parameters. The retail bank is organized to meet the needs of
a wide range of customer segments. The main verticals are Branch Banking,
Business Banking (SME), Consumer Loans and Agricultural & Rural Banking
(ARB). The key priorities for the Bank were acquisition of new customers,
deepening customer relationship through segmentation and cross-sell,
profitable expansion of distribution and building an enhanced brand
presence to serve the target segments.

BRANCH BANKING:

This year the Bank primarily focused on consolidating the expansion of
2008-09 and set up 27 new branches (including conversion of 19 Extension
Counters to branches) across India. As a result the number of branches (
excluding RCCs and ARMBs) increased from 441 to 468. The Bank added six
ATMs during the year, taking the total to 357 ATMs as of March 2010. The
Bank's focus on semi-urban and under-banked markets continued with 37% of
the branches outside the top 15 cities of India. The Savings Bank deposits
during the year grew by 28%; this was a result of our distribution,
differential sales model and customer segmentation.

The Bank continued to provide unique products and services by providing
customers an easier Banking experience, transparency and control as the key
pillars. To ensure this the Bank product program approval process certifies
that the new products are suitable to meet the customer needs and meets the
standards of the key pillars. Internally, employees were trained on how to
provide seamless, easier Banking experience to our customers. The Bank's
Platina Preferred Banking, Aspira Salary Solutions and Orange Banking
services were segmented to address the diverse needs of different customer
segments in the Retail Banking space, with specifically trained personnel
and products.

Keeping in mind the demands of the modern customers and their need for
flexibility the Bank continued to invest in upgrading the key processes and
products. The primary objectives of the several re-engineering projects
were to reduce wait time and provide greater control to the customer. Some
of the highlights were upgrade of mobile banking allowing customers to
order cheques or book term deposits, allowing customers to access their
wealth portfolio online and transact on mutual funds, single view statement
of relationships held across branches and products, automatic cheque re-
order, instant replacement of lost PINS and instant replacement of debit
cards at our branches. SMS update channel has emerged as a convenient
option for the Bank's customers, allowing them to keep themselves updated
on the transactions in their account with 9.35 Lakh customers having signed
up for this service. The internet banking usage also rose with user base
increasing by 37% to 2 Lakh users. The Phone Banking centre expanded to
cater to the needs of the growing customer base 240. Another initiative
this year was to reduce consumption of paper with sign-up of e-Statements.
The Bank was successful in encouraging a significant number of customers to
sign-up for this service.

The debit cards base increased by 3 lakh customers this year which
translated to increased usage at our ATMs, providing greater convenience to
customers and reducing servicing costs. The Bank also doubled the number of
customers opting to use their debit cards at point-of-purchase through a
series of targeted, sustained education campaigns and contests, resulting
in a 30% increase in usage of debit cards for shopping.

Platina Wealth Management Services witnessed a growth of 33% in the
customer base, 34% growth in Assets Under Management and doubling the
income from cross-selling of third party products. This was a result of the
personalized services offered through a dedicated Wealth Manager, backed by
research, product team, support staff and a seamless online interface.

The Credit Cards program has been revamped to offer more products and
enhanced features. The Bank is also partnering with the Government to offer
Biometric cards to beneficiaries of the National Rural Employment Guarantee
(NREG) and Social Security Pension Scheme (SSP) programs. The Bank has
enrolled over 91,000 customers and has disbursed over Rs. 21 Crore of
wages.

The Bank participated and promoted the awareness of the 'Earth Hour' as a
social initiative by requesting support from employees, customers, service
providers and the local Bangalore Community.

The Bank launched a 360 degree advertising campaign to highlight the
'easier' features embedded in its products and services. The advertisement
aimed to reinforce the unique positioning of the Bank of having the benefit
of strong Indian lineage resulting in personal service and backed by the
experience of a global player, thus allowing the Bank to offer
international products. The series of three advertisements featured the
benefits of auto-cheque reorder, instant debit cards replacement and mobile
banking. The advertisements helped increase the brand awareness and
intention to purchase a product from ING Vysya Bank. The campaign was
supported by a set of activities on other medium, noteworthy being the
launching of the advertisements on YouTube, which received over 3 Lakh
impressions and Meru Cab road shows in Delhi and Hyderabad. The campaign
has won critical acclaim for the use of creative insight and media.

BUSINESS BANKING (SME):

The Bank has traditionally focused on Micro, Small and Medium Enterprise
business, which accounts for a sizeable proportion of total advances. This
segment serves the needs of business enterprises with annual sales turnover
of up to Rs. 150 crore for both domestic and export credit requirements.
Apart from regular working capital facilities, the Bank also offers
structured products to cater to the needs of clients. This segment has
contributed significantly towards priority sector advances of the Bank. The
clear focus, strategy and strong relationship teams and distribution, has
helped ensure strong growth in this segment. This segment continues to be a
priority, with a focus on new to Bank customer acquisition, product
innovation, customer service and relationship management.

The business clocked a healthy Balance Sheet growth with a book size of
around Rs. 4,700 Crore as at March 2010 along with reduced delinquencies
and Fee Income growth of over 20%. The Bank will continue the focus on
profitable growth in the coming financial year as well.

CONSUMER LOANS:

Consumer Loans include Home, Personal, Home Equity Loans, Loan against
Commercial Property, Loans for Commercial Vehicles & Construction Equipment
and Car Loans. Loans for cars, commercial vehicles and construction
equipment have been re-launched in February 2010 and March 2010
respectively. Home loans and Home Equity constitute a large part of our
consumer loans portfolio. The Bank's focus area of growth will be home
loans and loan against property (residential and commercial). The Bank also
offers the personal loan product on a selective basis.

AGRICULTURAL AND RURAL BANKING (ARB):

The total advances managed by Agricultural and Rural Banking business
segment crossed Rs. 1,800 Crore in the current financial year.

The Bank has a network of 84 rural branches mostly spread in AP, Karnataka
and TamiINadu. The Bank has a wide range of products like Kisan Credit
Card, Produce Loans, Gold loans and term loans catering to diverse needs of
the farming community. The Bank has started retail agricultural lending at
a few places in North India and has plans to expand further to meet the
needs of farmers, especially in Punjab, Rajasthan and Haryana. The Bank has
been actively participating in lending to Micro finance activity and made a
beginning in the West and North during the year.

With a view to actively contribute to the efforts of 'Financial Inclusion',
the Bank accelerated the direct lending to SHGs (Self Help Groups) and
indirectly through MFIs (Micro Finance Institutions) apart from opening 'No
Frill' savings Bank accounts and issue of Smart cards to the beneficiaries
under NREGP and SSP on pilot basis in a few villages of AP and Karnataka.
The Bank has successfully implemented the Debt Waiver/Relief Scheme
announced by the Government of India. The scheme benefited over 18,000
farmers, of these, nearly 14,000 farmers benefited under the waiver scheme
and the remaining under the relief scheme.

PRIVATE BANKING:

In its aim to become an advising Private Banking (PB) platform of choice
for its clients, the Bank continues to focus on a strong adviceled offering
across a gamut of investment products and classes. During the year, fixed
income mutual funds and bonds saw a good demand from clients while equity
appetite started building with recovery in the economic sentiments.
Euromoney Private Banking Survey 2010 ranked ING Vysya Bank among the top
10 in Best Private Banking Services Overall category in India.

Going forward, PB is looking to further strengthen the team in various
centers as part of the growth strategy. The focus would continue to be on
offering strong advisory services on a comprehensive platform.

WHOLESALE BANKING:

The Wholesale Banking business (WSB) provides a wide range of banking
products and services to India's leading corporate and fast growing
businesses. The fund-based products include working capital finance, term
finance and structured finance facilities. The nonfund based products
mainly consist of letter of credit, financial and performance guarantees
etc. WSB's fee-based high-value added products are cash management
services, financial market transactions and structured hedge products,
trade services, corporate finance and debt syndication advisory. WSB's
advisory services focus on advising clients on mergers and acquisitions,
capital restructuring and capital raising. The Bank also accepts rupee and
foreign currency deposits from our corporate customers.

Wholesale fund based assets have increased to around Rs. 7,900 Crore
registering a growth of about 12%, with emphasis on asset quality and
tighter credit controls. In the same period, wholesale deposits were
reduced in line with the strategy of the Bank to increase the share of
retail deposits and reduce reliance on wholesale funding.

The Wholesale Bank is organized into two overlapping groups, (i) Client
Coverage and (ii) Products and Services. While the Client Coverage group is
responsible for managing relationships with identified client sub-groups,
the Products and Services group is responsible for product and service
delivery to the entire Wholesale Banking client base. WSB's principal
wholesale client coverage and relationship management groups are as
follows:

CORPORATE & INVESTMENT BANKING GROUP (C&IB):

The C&IB Group is responsible for managing relationships with large
corporates typically with sales turnover exceeding Rs. 1,000 Crore and MNC
relationships, irrespective of turnover. The primary focus of the C&IB
relationship managers is to market High Value Added (HVA) products viz.
Debt Capital Markets, Corporate Finance, Financial Markets and Advisory
services.

C&IB Group is also responsible for coordinating with ING Bank N.V. for
offering their products and cross-selling of Retail Banking products and
services to corporate clients and their employees.

During the period under review C&IB increased its book size to around
Rs.4,900 Crore.

EMERGING CORPORATES GROUP (EC):

The Emerging Corporates clientele is serviced from ten cities within the
Bank's extensive network and focuses on managing relationships with
manufacturing, processing and services sector companies with an annual
sales turnover between Rs. 150 Crore and Rs. 1000 Crore.

A wide range of products are offered to meet the needs of this business
segment, with special focus on export credit, working capital finance, cash
management services, term loans, non-fund based facilities like letters of
credit, guarantees and structured finance products. In partnership with
Retail and Private Banking, the EC group provides wealth management
solutions, loans, advances, salary accounts, and allied services to the
employees & promoters / directors of the companies we deal with. Debt
Capital Market (DCM) & Corporate Finance (CF) were the new products
launched during the financial year 2009-10.

Given the global reach of ING's global network, EC also caters to the cross
border needs of its clients in supporting their business requirements
outside India via funding and advisory services. Whilst offering complete
financial services solutions both at corporate as well as individual level,
the EC segment also plays a substantial role in meeting the Bank's export
credit commitments. In the current financial year, the Emerging Corporate
group has added about 40 new lending relationships across different
sectors. Assets managed by the segment stood at around Rs. 2,600 Crore as
at March 2010.

BANKS AND FINANCIAL INSTITUTIONS GROUP:

The Banks and Financial Institutions (FI) Group, is a dedicated group
created to leverage the business opportunities with Private and Public
Sector Banks and financial institutions across India. The Group has primary
responsibility for origination of transactions and product and service
delivery to the Bank/Fl client base including funding products,
correspondent Bank relationships, treasury products, asset purchase & sale
and deposit products.

FINANCIAL MARKETS (FM):

The financial year 2009 -10 was a year that saw large and unexpected swings
in the global markets. The Bank has been able to realign its focus to the
emerging opportunities while developing its strengths on the existing
platforms. The year saw a major revamp in systems and processes surrounding
the business making it robust as well as building for future growth in a
stable and sustainable manner. Most importantly, the unit has emerged
strongly as a knowledge driven function not just with markets, clients and
product but also on research as well as value addition to internal and
external clients.

The FM unit in the Bank consists of four key units - Trading & Market
Making, Sales, Structuring and Asset & Liability Management (ALM). The
Trading & Market Making unit has once again demonstrated robust
understanding and agility in uncertain conditions. The unit has
consistently provided liquidity internally and externally in the key
markets we trade and has been contributing to building a scalable business
within the FM unit.

Value addition to clients has been a key driver for all sales opportunities
and the Sales unit in close coordination with the other relationship
functions, has enhanced client relationships further. FM's focus has always
been on offering client solutions so as to meet their Financial Market and
Risk Management needs efficiently, as also in the need for simplicity over
complexity. FM is happy to have moved further towards that goal, notjust in
providing analysis and insight into the world of Financial Markets but also
enabling clients reach prudent solutions in an un-cluttered and relevant
manner.

FM's Structuring team has ably supported both our clients as well as
counterparty requirements by making markets and structuring solutions. FM
has emerged even stronger this year as a team that has a deep understanding
of products and one that can support clients in navigating their way
through ups and downs of markets. This year also saw a significant
enhancement and consolidation of the various systems at the Structuring
Desk to further enhance our core strengths in this domain.

Post crisis of the last year, liquidity management provided different kind
of challenges as well as opportunities, almost all of them difficult to
forecast at the beginning of the year. The ALM team has contributed to the
Bank's strategy in exploiting these conditions and successfully managed
interest rate and liquidity risks at each stage.

All of these have been helped by an on-going process revamp to build in
scalability and consistency into the business. The enhanced operations and
risk management platforms have not only aided business growth this year but
will also serve as a valuable platform for the future.

RISK MANAGEMENT AND PORTFOLIO QUALITY:

The risk management policy of the Bank, monitored at the highest levels, is
based on a thorough analysis of key risk areas of Credit Risk, Market Risk
and Operational Risk.

CREDIT RISK:

Credit Risk Management (CRM) is an important component of risk management
in banks. The Bank has put in place an appropriate organization structure,
credit risk policy frame work, product approval process, borrower selection
norms, security and documentation requirements, monitoring and follow-up
standards, asset classification norms, etc., to achieve these objectives.
The Risk Management and Review Committee (RMRC) of the Board is primarily
responsible for owning and managing the risk policy in the Bank. The Chief
Risk Officer assisted by other executives at Corporate Office and
Zonal/Regional Offices carries out the CRM function. Credit is handled
across different segments, viz., Corporate and Institutional, Emerging
Corporates, Banks and Financial Institutions, Financial Markets, Business
Banking (SME), Agricultural and Rural Banking, Private Banking and Consumer
Finance. The Credit Policy document is updated annually, incorporating both
revised regulatory and internal guidelines on various types of credit
products and under-writing standards. The Policy also covers exposure
norms, industry/ sectoral exposure limits, methods of appraisal, delegation
of approval powers, guidelines for recovery and restructuring, etc. Most
credit exposures have primary and/or collateral securities, with
appropriate legal documentation. Other risk mitigating measures like
escrowing cash-flow, Electronic Clearing Service (ECS) mandates, financial
or other covenants are stipulated depending upon the type of borrower and
facilities availed. Financial Markets products are offered to corporate
clients in accordance with the Bank's Board approved 'Appropriateness
Policy'. All borrower accounts are subject to periodical unit visits,
security verification and review/renewal. Review of Industry Portfolios,
Watch List accounts, accounts having overdue/adverse mark to market
exposures, or other irregularities are carried out periodically with a view
to identifying early warning signals, taking remedial action and minimizing
delinquencies. Facilities to borrowers whose business may be affected by
economic downturn were also restructured after ascertaining their
viability. Portfolio quality of Consumer Assets is reviewed monthly and
appropriate corrective action have been taken, based on trends. There are
dedicated Collections and Recovery teams. Recoveries are made by
enforcement of securities, foreclosure of mortgages and other legal
remedies. Asset classification and provisioning is done in accordance with
RBI guidelines. Continuous efforts are being made to improve Credit MIS
infrastructure using IT resources of the Bank, with a view to gather timely
information, both at individual borrower account level, group level and as
a portfolio. The Bank has taken appropriate steps to be compliant with
Basel II norms. Particularly in the first half of financial year 2009-10,
the Indian economy still felt the impact of the global economic slow-down.
While exporters were affected by issues in importing countries, domestic
businesses also experienced issues e.g. the volatility and increases in raw
material cost, elongated payment cycles and FX fluctuations. Some of our
borrower clients faced cash-flow and debt servicing issues. The Bank
continued to provide support to viable businesses by restructuring term
loans and participation in restructuring plans agreed under the Corporate
Debt Restructuring Scheme. In other cases, steps had to be taken to contain
exposures, improve recoveries or obtain additional collaterals. The Bank is
confident that the robust risk management practices put in place will
enable the Bank to manage issues arising out of such cyclicality. Some of
the additional steps taken were: (i) More frequent review of affected
sectors and stressed accounts; (ii) Strengthening credit approval norms;
(iii) Regular revisiting of product norms and processes for Consumer
Finance portfolio; and (iv) Strengthening collection processes for consumer
loans.

MARKET RISK:

Market Risk Management (MRM) focuses on three businesses and their risks:
(1) Trading and Market Making, (2) Asset and Liability Management, and (3)
Structured Products and Sales. An in-house developed 'Value at Risk'
module, combined with various controls, supports MRM in the day-to-day
control of the Trading activities in the Bank. For effective Asset and
Liability management, an Asset Liability Committee (ALCO) has been
operating in the Bank to manage inter alia the capital position, liquidity
and interest rate risks of the Bank's entire balance sheet. MRM provides
ALCO the necessary information and various tools to manage risks, such as
Value at Risk, Event Risk, Earnings at Risk and balance sheet simulations
for the impact of volume growth and changes in interest margins, and
monitors adherence to the several limits and relevant prudential norms
approved by the Board. With these tools, ALCO sets the ING Vysya Reference
Rate (IVRR) and spreads on IVRR for various products, based on the Bank's
strategy. Going forward, MRM will also provide inputs for calculating the
Bank's Base Rate, in line with the recent circular from RBI. Structured
Products and Sales mainly provide corporate clients a range of instruments
to hedge their business exposures that are sensitive to foreign exchange
and/or interest rate fluctuations. MRM is responsible for the independent
valuation, reporting and monitoring of the mark to market value of these
structured products. MRM is the overall coordinator of the support units
within the Bank for Financial Markets products, and controls and monitors
the activities of the desk within the regulatory authority's framework. MRM
is also involved in advising the Bank in the risk based pricing of
products, and market risk awareness within the business units of Retail and
Wholesale in respect of regulatory requirements and international
standards, and to advise management on the optimal product mix strategy.

OPERATIONAL RISK (ORM):

The Operational Risk Management (ORM) function manages the operational,
information and security risks. The Board and senior management are kept
informed of operational risk issues on a periodic basis. The Operational
Risk Management Policy is approved by the Risk Management and Review
Committee (RMRC). This Committee reviews the policy regularly. The Country
Operational Risk Committee (ORC) and Regional Operational Risk Committees
meet on a periodic basis to discuss and take decisions on operational risk
issues.

The Bank has defined operational risk as the risk of direct or indirect
loss resulting from inadequate or failed internal processes, people and
systems, or from external events including the risk of reputation loss. The
Bank has clearly defined risk categories which help to implement the
operational risk framework. The Bank also uses a Non-Financial Risk
Dashboard (NFRD) to provide integrated risk information on compliance,
operational, information and security risk using a consistent approach and
risk language.

The Bank has developed a comprehensive framework supporting the process of
identifying, measuring and monitoring operational, information and security
risks. The Bank applies scorecards to measure the quality of operational,
information and security risk processes within the Bank. The Bank's Crisis
Management Policy and Business Continuity Plan provide a cohesive overview
of its emergency action plans, the crisis management governance, business
continuity processes, and respective roles and responsibilities.

The Information Risk Management (IRM) function within ORM operates with the
mission of ensuring confidentiality, integrity and availability of
information and associated information processing assets through the
disciplined use of risk management practices. The function has defined a
comprehensive suite of policies, standards and guidelines and compliance is
measured and monitored on a regular basis. The function actively measures
and monitors information risk within the key IT risk areas. The result of
this process is used by the business units to budget, plan, and implement
appropriate risk mitigation actions.

The Bank currently qualifies for the basic indicator approach for
operational risk capital assessment. The capital requirement for
Operational Risk has been computed as per the Basel II guidelines
prescribed by the Reserve Bank of India.

INFORMATION TECHNOLOGY (IT):

The IT Service Management Group (ITSMG), the technology organization of the
Bank manages the Bank's enterprise-wide technology needs. The Bank
continues to endeavor to be at the forefront of technology usage in the
financial services sector. The Bank strives to use information technology
as a strategic tool for its business operations to gain a competitive
advantage and to improve our overall productivity and efficiency. The
Bank's technology initiatives are aimed at enhancing value, offering
improved convenience and service to customers while optimizing costs. The
Bank has a technology blue print aligned to the business strategy.

The Bank's technology team's efforts in re-engineering retail customer
facing processes were rewarded with industry recognition through the
prestigious CIO 100 Award for 2009. The Bank continued leveraging our core
Banking and retail platform in innovative ways viz. meal card and
reimbursement card products which received favorable mention in the media;
cash concentration and cash pooling products and online salary upload
through the internet Banking platform. The Bank has further built upon the
new platform introductions in wealth management and mobile Banking
introduced last year, by enabling customers to execute transactions,
instead of simple view access. The Bank has introduced the One-Glance-View
facility, through email and paper based statements, by which our retail
customers can get a 360 degree view of their entire relationship with the
Bank. On the payments front, ING Vysya Bank was the first Bank in India to
launch an automated, mandate-based authorization and transaction processing
system for inward ECS, thereby enhancing safety and security for our
customers who transact through this channel. The Bank has completed the
replacement of its treasury systems and introduced an innovative mobile
based voice recording system for its Private Banking business.

OPERATIONS:

Keeping in tune with the financial sector's need for austerity, Operations
began the year with a focus on items which would give it a competitive edge
- cost, quality, time and flexibility, without compromising on operational
efficiency. Reaching standards of 99.14% TAT adherence, successfully moving
to an online platform for wealth management customers, migrating the
treasury operations into a new software to ensure seamless processing,
switching over NEFT/RTGS transactions to an improved version to make it
more stable and efficient are some milestones, amongst others worth a
mention. The Cash Management Services (CMS) customers have a new product
ING P@Y a corporate payments engine, which would help them make their
payments electronically or otherwise, by just handing over a debit mandate
to the Bank with beneficiary and other details. Business continuity plans
have been put in place and tested to ensure least disruption to customer
services. Due emphasis was put on quality controls and projects undertaken
to make processes leaner for faster delivery to customers. The efforts were
duly acknowledged by Credit Information Bureau (India) Limited (CIBIL) as
being the first Bank to submit the data with 99.5% success and by the
Regulators as the first Bank to have submitted Basic Statistical Returns I
& II. Operations will continue its drive in the coming year to provide
consistent, uninterrupted, timely and effective service to its customers.

INTERNAL AUDIT:

The operations of the Bank including the information systems functions are
subjected to audit by the Internal Audit Department which is an independent
function reporting directly to the Audit Committee of the Board. The
Internal Audit Department follows the Risk Based Audit approach across the
Bank, wherein process and control gaps, if any, are identified with
suitable recommendations for remedial actions. In addition, key functions
such as Financial Markets, Retail Deposits and Investments Operations,
Centralized Trade Finance Operations, Centralized Back Office Operations of
Private Banking amongst others are covered under concurrent audit. Audit of
key regulatory compliance is the focus of a dedicated cell within the
department. Findings of Internal Audit are followed up for timely closure
and effective resolution by the management.

COMPLIANCE:

In line with the RBI's guidelines on compliance function in Banks in India,
a Compliance Framework involving compliance risk identification and
assessment, risk mitigation, compliance monitoring, incidents management,
compliance advisory, training and communication etc., has been developed
and embedded in the compliance organization structure. Compliance culture
and awareness have been further strengthened through e-learning modules on
function specific areas across various business and support functions. The
training has covered about 4,500 employees across the Bank during the year.
Compliance monitoring has been intensified through a network of Compliance
Officers at corporate office level supported by Nodal Compliance Officers
at Business / Support Function levels. The Compliance department consists
of officials with varied and vast skills and experience in banking, risk
management, audit, law etc.

HUMAN CAPITAL MANAGEMENT:

The Bank has made substantive investments in training and development.
Sales and service training continued to be the focus area for the year. In
line with this, a short module on Customer service titled 'Face Reading'
was launched at the branch level and a fully expanded version titled
'Service Excellence' has been designed and is targeted to cover all the
branches over the next 12 months. The front line sales staff has been
covered under separate sales and compliance modules.

Development Tracks aimed at skill building for employees who aspire to take
on higher responsibilities was reinforced and launched covering 245
employees. In order to bring in a more scientific focus to the way training
requirements are drawn, development centers were rolled out for specific
departments in line with their score cards. As on date around 4,300
employees have undergone training on various modules through a total of 238
programs . It translates to 3.4 man days for the year.

This year saw an increased focus on engaging with our key talents - 'Carpe
Diem 2009' was launched with the objective of providing our emerging
leadership with the opportunity to share their ideas and insights on how to
engine growth for IVBL. HR received more than 35 entries and the top four
were asked to present. The top two ideas are currently being executed by
cross functional teams.

Communication channels like CEO Connect ensure that the employees are
informed of all key initiatives. The IVB values have been integrated in all
our processes & policies to ensure that the Bank has a uniform culture
across all functions and lines of business.

The Human Capital Management (HCM) project, which was initiated at the end
of the last financial year, was successfully launched and has stabilized
over last six months. There has been considerable focus on HR service
delivery and every process has been measured and improved thus improving
the basic hygiene needs of the employees. All the legacy systems have been
migrated into HCM. Consequently there has been greater transparency and
visibility of information to employees, thus reducing risk and providing
better control.

OPPORTUNITIES AND RISKS:

As part of its operations, the Bank sights a number of opportunities and
faces threats to its strategy.

The opportunities include:

* Increasing radius with new product offerings, product enhancement and
packaging on both lending and fee products.

* Leveraging and scaling up the branch network and sales structure to
further grow low cost deposits

* Increasing cross sell by deepening of existing relationships.

* Continuing to drive operating leverage through the branch and ATM
distribution network.

* Continuing to expand the distribution footprint

* Further upgrading our technology and service platforms to support
business growth and meet customer expectations.

Risks that must be managed include, amongst others:

* Inflationary pressures and consequent hardening of interest rates;

* Tightening of Liquidity in the Banking system and effective management of
ALM.

* Increase in Non Performing Assets (NPAs) in case the early signs of
recovery are not sustained.

* Impact of Global events on the Indian economy.

OUTLOOK:

The Bank expects GDP growth for the year 2010-11 to be around 8-8.5% with
inflation between 6.5-7%. On the back of this higher growth expectation,
higher investment activity and revival of private consumption, credit
growth for the Banking industry is expected to revive in 2010-11. The Bank
expects the sector to grow advances by around 20-21% in 2010-11.

The Indian Banking system has performed credibly amongst the economic
upheaval that the global economy and the Indian economy to some extent went
through in the past 18 months. However, concerns on higher inflation,
deterioration in the asset quality of Indian banks due to the large
restructured assets on their balance sheet and sufficient availability of
capital for growth are some of the challenges that the Indian Banking
industry will need to address.

Your Directors are pleased to present the Non Financial Report for the year
2009-10. The Report deals both with Corporate Social Responsibility and
Sustainability Development.

CORPORATE SOCIAL RESPONSIBILITY (CSR):

ING Vysya Foundation (IVF) was incorporated in October 2004 to promote
Corporate Social Responsibility of ING Group entities in India. The Bank is
the substantial contributor to the Foundation every year. The mandate for
the Foundation is to promote primary education for underprivileged
children. This approach is part of worldwide 'Chances for Children'
programme (CFC) of ING Group.

During the year, the Foundation has worked with NGO partners, who are
engaged in

(a) enrolling children (never been to school and out of school) back to
school (b) preparing children through bridge schools and pre-primary
schools for enrolling in formal schools (c) retaining and continuing
education of the children who are already enrolled.

The partners have different approaches / programmes to cater to various
groups of children. The community learning program helps in attaining the
age-appropriate learning skills of children living in slums. The
residential program provides an opportunity for the drug addicted children
and child labourers living on the streets to be in school. Learning centre
models are for children who are living in slums or in rural areas and also
children from red-light areas.

During the year the foundation has partnered with the following NGOs:

S. Name of the NGO Location Programme
No. Partner

1. Ardar Hyderabad School Adoption program

2. Akshara Foundation Bangalore Community Library program

3. Akshara Foundation Bangalore Pre-school program

4. Sukrupa Bangalore Residential program for
children with single
parents/orphans

5. Makkala Jagriti Bangalore Community Learning centre for
children living in slums

6. Christel House Bangalore Formal School for children
living in slums

7. Aurobindo Chaudhari Delhi Pre-school program for
Memorial Great Indian children living in slums
Dream Foundation

8. Hamari Muskaan Kolkata Learning centre for children
in red-light area

9. Pratham Vulnerable Mumbai Residential program for former
Council for Children child labourers

10. Support Mumbai Residential program for
rehabilitated drug addicted
street children

11. IIMPACT Lucknow Learning centre for girl
children

12. UNICEF India Chances for Children program

Annual Fund raising Campaign - 'I believe I can Fly' : IVF launched an
annual fund raising campaign during the month of September 2009. The
employees of the Bank actively participated in the campaign and helped in
raising about Rs. 53 Lakh (Rupees Fifty Three Lakh) towards this cause. The
amount so collected will be contributed to educate children under the care
of existing partners.

Volunteer program : IVF provides opportunities to employees to volunteer
for the development and growth of children, living in difficult
circumstances, such as children living in slums, child labour, children
never been to school, drop outs, orphan children and so on. During the year
several volunteer initiatives were organized under the 'Hope Brigade'
program. One such program was the 'Home buddies campaign' aimed to provide
a platform for employees to interact with children, under the care of our
NGO partners to help develop reasoning and logic, and age appropriate
learning skill. Around 50 employees enrolled themselves as volunteers for
this program, during the year. Another volunteer program was 'ING Global
Challenge - Chances for Children'. In 2007, Asia pacific had launched ING
Global Challenge to raise awareness on the 'Chances for Children' program
and also to provide its employees an opportunity to volunteer to promote
the cause of education for underserved children. This year's edition marked
the 20th anniversary of the day the UN adopted the Convention on the Rights
of the Child. In India, 1,500 employees from Bank along with 1,200 children
in 30 locations across the country had celebrated ING Global Challenge.
Musical shows, painting competitions, fun picnic, cricket matches, visit to
various historical sites and many more events were conducted all over
India.

Contribution towards Karnataka and Andhra Pradesh Flood Relief : The Bank
and its employees together had contributed Rs. 66 Lakh (Rupees Sixty Six
Lakh) towards the Karnataka and Andhra Pradesh flood relief programmes
during October 2009.

SUSTAINABLE DEVELOPMENT:

The Bank endeavors to ensure that the projects financed by it, are
environmentally and socially sound and sustainable. Towards its endeavor
for sustainable development, the Bank has adopted the following policies:

I) General Environmental and Social Risk (G-ESR) policy

II) Equator Principles (EP) Policy

III) Specific Environmental and Social Risk (S-ESR) Policy

The Bank has integrated the following commitments in its General
Environmental and Social Risk (G-ESR) policy under para 2.1

* Commitment to Sustainability
* Commitment to 'Do No Harm'
* Commitment to Responsibility
* Commitment to Accountability
* Commitment to Transparency

Every year the Bank submits the Annual Environmental and Social Performance
Report to International Finance Corporation (IFC), covering Environmental
Management System and Project Environmental and Social Compliance.

The Bank has also adopted the Equator Principles (EP) policy. EP is a set
of voluntary environmental and social guidelines for ethical project
finance. These principles commit banks and other signatories not to finance
projects that fail to meet these guidelines. The EP is based on the social
and environmental policies and guidelines of the International Finance
Corporation (IFC) and the World Bank. Child labour, involuntary
resettlement and protection of natural heritages are examples of social and
environmental issues covered by the EP. The Bank has also adopted the EP,
which forms part of its Credit Risk Manual.

Initiatives under Sustainable Development:

* The Bank runs a kids portal to educate the children on nature,
environment and saving of money. On entering the portal viz.,
www.kidzzbank.com children are taken on a voyage of discovery, hand held by
the portal pal 'NEO'.

* The Bank and its employees participated in the global movement called
'Earth Hour' to show solidarity against climate change. At Bangalore, ING
Vysya Bank took lead as in the previous year to spread awareness on Climate
Change and Global Warming, joining hands with 'World Wide Fund of Nature'
(WWF) and 'The Indus Entrepreneurs' (TIE). The employees of the Bank
participated in the Earth Hour programme on 27-Mar-2010 by switching off
lights for an hour, from 8.00 pm to 9.00 pm.

The Bank has also undertaken various 'Financial Inclusion' initiatives with
the objective of providing banking / financial services to all people in a
fair, transparent and equitable manner at affordable cost. The Bank has put
in place a three year plan for Financial Inclusion with the objective to
ensure that all the villages having a population of above 2,000 and
allocated to the Bank are financially included and have access to basic

banking products and services.