Private and Confidential Information Memorandum

STATE BANK OF HYDERABAD (Associate of the State Bank of India) Head Office: Gunfoundry, Hyderabad 500 001 (AP). Tel No: (040) 23387201 - 208, Fax: (040) 23387562 Website: www.sbhyd.com
PRIVATE PLACEMENT OF UNSECURED, REDEEMABLE, NON-CONVERTIBLE, SUBORDINATED BONDS AGGREGATING TO Rs. 500 CRORE

GENERAL RISKS Investors are advised to read the Risk factors carefully before taking an investment decision in this offering. For taking an investment decision the investor must rely on their examination of the offeror and the offer including the risks involved. The securities have not been recommended or approved by Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this document. Specific attention of investors is invited to the Chapter on Risk Factors in this Information Memorandum of Private Placement. OFFERORS ABSOLUTE RESPONSIBILITY The Offeror, having made all reasonable inquiries, accepts responsibility for, and confirms that this Information Memorandum contains all information with regard to the Offeror and the Offer, which is material in the context of the Offer, that the information contained in this Information Memorandum is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. The Arranger is not required to file this document with SEBI/ROC as it is on private placement and not an Offer to the general Public. CREDIT RATING ICRA has assigned a LAAA (pronounced as L-Triple A) rating to the captioned debt programme of the Bank. This is the highest credit quality rating assigned by ICRA. The rated instrument carries the lowest credit risk. The rating is not recommended to buy, sell or hold Securities and investors should take their own decision. The rating may be subject to revision or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating. The rating obtained is subject to revision at any point of time in the future. The rating agencies have a right to suspend, withdraw the rating at any time on the basis of new information, etc. LISTING The Unsecured Redeemable Non-Convertible Subordinated Bonds are proposed to be listed on the Bombay Stock Exchange. (BSE) BOND TRUSTEE IDBI Trusteeship Services Ltd., have given their consent to the Bank vide their letter dated September 26, 2005 for being appointed as Bond Trustee for the present private placement.
Arranger to the Private Placement SBI Capital Markets Limited 202, Maker Tower E, Cuffe Parade, Mumbai 400 005. Tel: (022) 2218 9166 Fax: (022) 2218 8332 www.sbicaps.com Co-Arranger to the Private placement UTI Bank Ltd. Central Office, Cuffe Parade, Mumbai www.utibank.com Registrars to the Placement M/s.Karvy Computershare Private Limited, Banjara Hills, Hyderabad.

Issue Opens: September 28, 2005

Issue Closes: September 30, 2005

TABLE OF CONTENTS DEFINITIONS AND ABBREVIATIONS......................................................................... 3 DEFINITIONS............................................................................................................ 3 ABBREVIATIONS ..................................................................................................... 4 FORWARD-LOOKING STATEMENTS......................................................................... 8 RISK FACTORS AND MANAGEMENT PERCEPTION THEREOF .............................. 9 INTERNAL RISK FACTORS ..................................................................................... 9 EXTERNAL RISK FACTOTRS................................................................................ 13 PART I ........................................................................................................................ 18 GENERAL INFORMATION......................................................................................... 18 ELIGIBILITY ................................................................................................................ 18 AUTHORITY FOR THE PLACEMENT ................................................................................ 18 GENERAL DISCLAIMER ............................................................................................... 18 LISTING ..................................................................................................................... 20 CAUTION ................................................................................................................... 20 MINIMUM SUBSCRIPTION ............................................................................................ 21 UNDERTAKING BY THE BANK ....................................................................................... 21 PROHIBITION BY SEBI................................................................................................ 21 CREDIT RATING ......................................................................................................... 22 CREDIT RATING DURING PREVIOUS THREE YEARS ....................................................... 22 TRUSTEES ................................................................................................................. 22 PRIVATE PLACEMENT PROGRAMME ............................................................................. 22 PRIVATE PLACEMENT MANAGEMENT TEAM .................................................................. 22 CAPITAL STRUCTURE OF THE BANK ..................................................................... 24 TERMS OF THE PRESENT PLACEMENT ................................................................ 26 TAX BENEFITS .......................................................................................................... 42 PARTICULARS OF THE PLACEMENT...................................................................... 46 OVERVIEW OF THE BANKING SECTOR ................................................................. 47 BANK AND MANAGEMENT ....................................................................................... 51 PROMOTERS, GROUP COMPANIES, JOINT VENTURES AND ASSOCIATES ...... 81 STOCK MARKET DATA ............................................................................................. 85 FINANCIAL SUMMARY .............................................................................................. 86 MANAGEMENT DISCUSSION AND ANALYSIS ........................................................ 87 OUTSTANDING LITIGATION, DEFAULTS & MATERIAL DEVELOPMENTS............ 90 RISK FACTORS AND MANAGEMENT PERCEPTION THEREOF ............................ 93 PART II ..................................................................................................................... 102 A. GENERAL INFORMATION................................................................................ 102 C. STATUTORY AND OTHER INFORMATION ..................................................... 126 D. MAIN PROVISIONS OF THE STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT, 1959 AND THE SUBSIDIARY BANKS GENERAL REGULATIONS, 1959...... 129 E. MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ................... 140 PART III .................................................................................................................... 141 DECLARATION ........................................................................................................ 141

DEFINITIONS AND ABBREVIATIONS DEFINITIONS : Term(s) Board / Board of Directors Book Closure / Record Date Bonds Offeror / Bank Depository Depositories Act Depository Participant Director (s) Financial Year / Fiscal / FY Head Office of the Bank ITSL / Trustee Issue / Offer / Private Placement Issuer / Offeror Information Memorandum / Memorandum I.T. Act Offer Size RBI Registrar SEBI SEBI Act SEBI Guidelines Description The Board of Directors of State Bank of Hyderabad or committee thereof The date of closure of register of Bond for payment of interest. Unsecured Redeemable Non-Convertible Subordinate Bonds State Bank of Hyderabad constituted under the State Bank of India (Subsidiary Banks) Act, 1959 A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time The Depositories Act, 1996, as amended from time to time A depository participant as defined under the Depositories Act. Director(s) of State Bank of Hyderabad unless otherwise specified Period of twelve months ended March, 31 of that particular year. High Bank Towers, Gunfoundry, Hyderabad 500 001, A.P. IDBI Trusteeship Services Ltd. Private Placement of the Bonds State Bank of Hyderabad The Offer Document for the Private Placement of Bonds The Income Tax Act, 1961 as amended from time to time. Unsecured, Redeemable, Non-Convertible, Subordinate Bonds aggregating Rs.500 crore. The Reserve Bank of India Registrar to the Offer, in this case being M/s Karvy Consultants Pvt. Ltd. The securities and Exchange Board of India constituted under the SEBI Act, 1992. Securities and Exchange Board of India Act, 1992, as amended from time to time. SEBI (Guidelines for Disclosure and Investor Protection) 2000 issued by SEBI on January 27, 2000, as amended, including instructions and clarifications issued by SEBI from time to time.

ABBREVIATIONS ALCO ALM AGL ARC AS ASCB BSE CAR CDR CDSL CRAR CRR DICGC DP ECGC FDI FEDAI GoI GDP ICAI IGL MoF NDTL NPA NRI NSDL RBI RRBs SARFAESI Act Asset-Liability Management Committee Asset Liability Management Aggregate Gap Limits Asset Reconstruction Companies Accounting Standard All Scheduled Commercial banks The Stock Exchange, Mumbai Capital Adequacy Ratio Corporate Debt Restructured Central Depository Services (India) Ltd. Capital to Risk-weighted Assets Ratio Cash Reserve Ratio Deposit Insurance and Credit Guarantee Corporation of India Ltd. Depository Participant Export Credit Guarantee Corporation of India Ltd. Foreign Direct Investment Foreign Exchange Dealers Association of India Government of India/Central Government Gross Domestic Product Institute of Chartered Accountants of India Individual Gap Limits Ministry of Finance Net Demand and Time Liabilities Non-Performing Assets Non Resident Indians National Securities Depository Ltd. Reserve Bank of India Regional Rural Banks Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act SBI State Bank of India SBI (SB) Act State Bank of India (Subsidiary Banks) Act, 1959 SEBI Securities and Exchange Board of India SLR Statutory Liquidity Ratio The Bank State Bank of Hyderabad The Board The Board of Directors of the Bank The Companies Act The Companies Act, 1956 VRS Voluntary Retirement Scheme

PRIVATE PLACEMENT OF BONDS ISSUED BY STATE BANK OF HYDERABAD Dear Sir/ Madam, State Bank of Hyderabad (the Bank) is proposing to issue Bonds on a private placement basis as described in this Memorandum. Investors are required to make payment through demand draft(s) / cheque(s) payable in favour of State Bank of Hyderabad A/c-Bonds Issue and crossed Account Payee only. The full face value of the Bonds has to be paid up on application. The Bank reserves the right to reject in full or part any or all of the offers received by them to invest in these Bonds without assigning any reason for such rejections. You are requested to confirm your acceptance to the terms and conditions outlined in this Memorandum of Private Placement by sending the Application Form along with the cheque(s) / demand draft(s) to the Arranger/Banks branches. Your acceptance of the terms and conditions outlined in this Memorandum will constitute an offer to invest in the above referred Private placement and will be subject to acceptance by the Bank. Please note that this Private Placement Memorandum is restricted for circulation only to the investors to whom the above has been addressed personally and this Memorandum cannot be transferred/circulated to others. The information contained herein is to be retained in strict confidence. Should you require any further clarifications regarding the above-mentioned Private placement, we request you to contact the undersigned. Yours Faithfully, For State Bank of Hyderabad Sd/Authorised Signatory Place: Hyderabad Date: September 28, 2005

DISCLAIMER This Memorandum of Private Placement (Memorandum) is neither a prospectus nor a statement in lieu of prospectus and does not constitute an offer to the public to subscribe for or otherwise acquire the Bonds issued by State Bank of Hyderabad (the Bank/the Offeror). The document is for the exclusive use of the Person(s)/Institution(s) to whom it is delivered and it should not be circulated or distributed to third party (ies). Apart from this Information Memorandum, no Offer Document or Prospectus has been prepared in connection with this Bond Offer and that no Prospectus in relation to the Issuer or the Bonds relating to this Offer has been delivered for registration nor such a document is required to be registered under the applicable laws. The Arranger is not required to file this document with SEBI/ROC/RBI as it is on private placement and not an Offer to the general Public. This Memorandum is issued by the Bank. The views contained herein do not necessarily reflect the views of its directors, employees, affiliates, subsidiaries or representatives and should not be taken as such. The Memorandum has been prepared by the Bank to provide general information on the Bank and does not purport to contain all information a potential investor may require. Where this Memorandum summarizes the provisions of any other document, that summary should not be relied upon and the relevant document should be referred to for the full effect of the provisions. The information relating to the Bank contained in the Memorandum is believed by the Bank to be accurate in all respects as of the date hereof. The Memorandum shall not be considered as a recommendation to purchase the bonds and recipients are urged to determine, investigate and evaluate for themselves, the authenticity, origin, validity, accuracy, completeness, adequacy or otherwise the relevance of information contained in this Memorandum. The recipients are required to make their own independent valuation and judgment of the Bank and the Bonds. It is the responsibility of potential investors to also ensure that they will sell these bonds in strict accordance with this Information Memorandum and other applicable laws, so that the sale does not constitute an offer to the public, within the meaning of the Companies Act 1956. The potential investors should also consult their own tax advisors on the tax implications relating to acquisition, ownership, sale or redemption of Bonds and in respect of income arising thereon. Investors are also required to make their own assessment regarding their eligibility for making investment(s) in the Bonds of the Bank. The Bank or any of its Directors, employees, advisors, affiliates, subsidiaries or representatives do not accept any responsibility and/ or liability for any loss or damage however arising and of whatever nature and extent in connection with the said information. Neither the Arranger nor any of their respective affiliates or subsidiaries have independently verified the information set out in this Memorandum or any other information (written or oral) transmitted or made to any prospective lender in the course of its evaluation of the Offeror. The Arranger make no representation or warranty, express or implied, as to the accuracy or completeness of the Information Memorandum, and the Arranger do not accept any responsibility for the legality, validity, effectiveness, adequacy or

enforceability of any documentation executed or which may be executed in relation to this Offer. The recipients of this Memorandum agree that unless and until the definitive written agreements between the Bank and any such recipient with respect to a possible transaction have been executed and delivered and have become legally effective, and then only to the extent of the specified terms and provision of such definitive agreements, neither the Bank nor any of its Directors, employees, advisors, affiliates, subsidiaries or representatives shall be under any legal obligation of any kind what so ever with respect to any such transaction by virtue of the delivery of this Memorandum or its content or of any other written or oral expression by any of the Directors, employees, advisors, affiliates, subsidiaries or representatives of the Bank. Force Majeure The Bank reserves the right to withdraw the Offer prior to the earliest closing date in the event of any unforeseen development adversely affecting the economic and regulatory environment or otherwise. In such an event, the Bank will refund the application money, if any, along with interest payable on such application money, if any, without assigning any reason. This Information Memorandum is issued by the Bank and signed by its authorized signatory. Date: September 28, 2005 Signatory Sd/Authorised

FORWARD-LOOKING STATEMENTS This Information Memorandum may contain certain forward-looking statements. These forward-looking statements generally can be identified by words or phrases such as we believe, expect, estimate, anticipate, intend, plan or other words or phrases of similar import. Similarly, statements that describe our objectives, plans or goals are also forward-looking statements. All forward-looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from our expectations include, among others: a) General economic and business conditions in India; b) Our ability to successfully implement our strategy, our growth and expansion plans and technological changes; c) Changes in the value of the Indian rupee and other currency changes; d) Changes in the Indian and international interest rates; e) Changes in laws and regulations that apply to the Indian Banking Industry; f) Increasing competition in, and the conditions of, the Indian Banking Industry; g) Changes in political conditions in India; and h) Changes in the foreign exchange control regulations in India. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. In accordance with SEBI requirements, our bank will ensure that investors in India are informed of material developments until such time as the grant of listing and trading permission by the Stock Exchanges.

RISK FACTORS AND MANAGEMENT PERCEPTION THEREOF The Investors should carefully consider the following risk factors as well as the other details and information contained in this Information Memorandum in evaluating the Bank and its business before investing the Bonds offered by this Information Memorandum. INTERNAL RISK FACTORS (Risk factors and management perception as required on few of the topics given below)1. Contingent Liabilities As on March 31, 2005 the contingent liabilities of the Bank were at Rs.11100 crores comprising claims against the Bank not acknowledged as debts (Rs. 19 crores), liability on account of outstanding forward exchange contracts (Rs. 7593 crores), guarantees on behalf of constituents (Rs. 125crores), acceptances, endorsements and other obligations (Rs. 1908 crores) and others (Rs. 329 crores). Management Perception The contingent liabilities have arisen in the normal course of business of the Bank and are according to the prudential norms prescribed by RBI. 2. Profits of the Bank The net profits of the Bank has fallen from Rs. 381.20 crores in FY 2003-04 to Rs. 250.89 crores in FY 2004-05 (negative growth of 34.18%) mainly due to fall in treasury profit. Management Perception The year 2004-05 has been a difficult year for the banking industry, with the treasury profits of almost all banks declining due to hardening of interest rates. Our bank is no exception to this phenomenon. Despite this setback, Bank has responded effectively to the changed scenario and earned Net profit of Rs 250.89 crores during the year after making all the provisions. It may be noted that operating profit of the Bank has come from diversified income streams comprising net interest income, profit on sale of securities and other income, which account for 134.92%, 11.22% and 47.83% of the total operating profit respectively for the FY 2004-05, which is sustainable in future. 3. Non-Performing Assets (NPAs) As on 31,03.2004 and 31.03.2005, the net NPAs of the Bank stood at Rs.77.22 crores and Rs.95.32 crores i.e., 0.65% and 0.61% of its net advances amounting to Rs.1826.83 crores and Rs.15544.35 crores respectively in absolute terms. In the event of non-recovery of these assets, the Bank may have to provide for these NPAs, which might affect the profitability of the Bank in future. Management Perception The Net NPAs of the Bank have remained low. The Banks provision on NPAs is more than the amount prescribed under IRAC norms. The net NPA ratio of the Bank stood at mere 0.61% as on 31.03.2005. The Bank is taking steps to reduce the proportion of non-performing assets through aggressive recovery drives combined with improved

risk management practices. Further, there have been substantial changes in the legislative and operating environment enabling FIs and Banks to pursue recovery of overdues. Besides Debt Recovery Tribunal (DRT) set up for faster settlement of recovery litigation, GOI has enacted The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 enabling FIs and Banks to securitise and reconstruct financial assets and enforce security more effectively. Reserve Bank of India has formulated detailed guidelines for operation of the scheme. The Bank is invoking the provisions of the Securitisation Act to enhance recovery. Thus, the Bank has been taking recourse to all the available methods to recover its over dues from the borrowers. 4. Regional Concentration of the Bank State Bank of Hyderabads core geographical area of operation comprises of the Telangana region in Andhra Pradesh, Hyderabad-Karnataka region of Karnataka and Marathwada region of Maharashtra. The Bank has a network of 658 branches, which accounts for about 70.82% of its total branch network throughout the country and accounts for 53.34% of the total business of the Bank. Management Perception The presence of the Banks core traditional area spread over in three states provides a unique advantage to the Bank and improves its growth prospects. Total Deposits of the Bank have grown by 94.92% to Rs28, 929.52 crores and advances have grown by 85.21% to Rs15, 599.74 crores during the past 5 years. The Bank has 929 branches and 80 extension counters as on 31.03.2005. 5. Decline in Return Ratios The Average Yield on Investment (domestic) of the Bank has shown a declining trend from 8.50 % in FY 2004 to 8.00% in FY 2005. The Average Yield on Advances of the Bank has decreased from 9.11% to 8.32% during the same period. Management Perception Average Yield on investments has come down because of the decline in the general interest rate structure of the economy during past years. The continuous downward trend in the interest rates over past years has been the major reason for decline in Yield on Investment of the Bank. For example, the yield on 10 year GoI security (semiannualised yield), which was 6.21% on 31.03.2003 has come down to 5.16% on 31.03.2004. However, the G-Sec yields started hardening due to the higher crude oil prices, higher inflation, etc. and as on 30.06.2005, the yield on 10 year GoI security was at 6.89% (semi annualized). We believe that the declining interest scenario has now reversed and the yield on advances and investments will start improving. 6. Depreciation charge to P& L account due to Transfer of Securities from AFS to HTM Consequent upon transfer of certain Government Securities from Available for Sale (AFS) category to Held to Maturity (HTM) as permissible, depreciation expenses amounted to Rs 307.95 crores in the FY05. Management Perception The above-referred securities were transferred from AFS to HTM to insulate the Bank from further decline in prices. While improvement in prices, will enable selling the

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securities, no further provisioning is necessary in case of a price fall as HTM category is exempted from mark to market. 7. Adverse affect of the revised RBI policy on the Capital Adequacy of the Bank The provision of capital charge for market risk in AFS securities and operational risk capital from 31.03.2007 will adversely affect the Capital Adequacy Ratio of the Bank in coming years. Management Perception The Bank has already initiated steps to improve the capital funds and is hence making this offer for subordinated bonds for Rs. 500 crores to further shore up CRAR that would take care of capital charge for market risk on AFS securities from 31.03.2006 and operational risk capital proposed from 31.03.2007. 8. Asset Liability Position As per the statement of structural liquidity as on the 31st March 2005, the gaps in the first two time buckets are positive and well within the tolerance levels stipulated by RBI and ALM policy of our Bank. Further, all the cumulative gaps in the other time buckets are also within the tolerance limits fixed by the Bank. A large portion of the funding of the Bank is in the form of short and medium term deposits. The asset liability position of the Bank could be adversely affected if the depositors do not roll over the deposits. A comprehensive contingency plan has been put in place to address fully any problems relating to liquidity. Management Perception As per the normal behavioral pattern and past experience, a large portion of the deposits gets rolled over. The Bank feels that in the event of these deposits not being rolled over, the fresh accretion of deposits would take care of the Asset Liability mismatches. In addition, as on 31.03.2005, the Bank had excess SLR securities to the tune of Rs.6166.60 crore, while the investments of Rs.8384.60 crore are in the longterm (over 5 years) category, which can be utilized to correct any medium term mismatches. Moreover, the Bank has an Asset Liability Management system in place to actively monitor and manage liquidity mismatches. 9. Credit Risk The Banks main business of lending carries an inherent credit risk, which involves inability or unwillingness of a customer or counter-party to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions. Management Perception The Bank has a rigorous and well-defined credit appraisal system. Prudential exposure norms and various internal exposure norms are followed to avoid credit concentration and to minimize and mitigate credit risk. Credit risk assessment is in place for capturing the risk profiles of the accounts. The Bank ensures that Risk Management Department is independent of the operational department. Bank has a comprehensive loan policy document covering areas of credit and credit risk.

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10. Asset Concentration Top five industries amount for 19.77% and 17.36% of non-food credit of the bank as on 31.3.2004 and 31.3.2005 respectively. Top five borrowers account for 7.57% as on 31.3.2005 respectively. Management Perception Exposure norms are in place to avoid asset concentration. Portfolio reviews and reviews of implementation of exposure management norms are undertaken at regular intervals to check asset concentration. Except for some specified industries, exposure limits for individual industry is capped at 15 percent of the bank's total fund-based exposure to avoid concentration of assets in a few industries. 11. Outstanding Litigations against the Bank There are outstanding litigations (42 cases), as on 31.03.2005 the financial implication of which cannot be estimated. For details, please refer to the chapter on Litigation in the Information Memorandum. Management Perception These claims are not likely to affect the operations and finances of the Bank. 12. Litigation against the Bank sponsored RRBs There are 45 cases of claims/suits filed against 4 Gramin Banks sponsored by State Bank of Hyderabad. For details, please refer to the chapter on Litigation of the Information Memorandum. Management Perception These claims against these Gramin Banks are not likely to affect the operations and finances of State Bank of Hyderabad. 13. RBIs Annual Financial Inspection Report The Annual Inspection Report of RBI on the financial position of the Bank as on 31.03.2004 has identified certain weaknesses in the system, operational and other deficiencies. Management Perception The bank has taken the necessary action to rectify the various deficiencies pointed out in the Annual Financial Inspection which is a regular supervisory exercise carried out by RBI in respect of all banks and financial institutions. A comprehensive compliance report has already been submitted to the regulatory authorities furnishing details of corrective actions initiated by the bank. 14. Utilization of Funds The utilization of the funds proposed to be raised through this private placement is entirely at the discretion of the Bank and no monitoring agency has been appointed to monitor the deployment of funds. Management Perception The funds raised through this private placement are not meant for any specific project and hence a monitoring agency may not be required. The Bank is managed by professionals under the supervision of its Board of Directors. Further, the Bank is

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subject to a number of regulatory checks and balances as stipulated in its regulatory environment. Therefore, the management believes that the funds raised via this private placement would be utilized only towards satisfactory fulfillment of the Objects of the Offer. 15. Credit Decisions The credit decisions of the Bank are subject to various risk parameters. Management Perception In a dynamic environment, all the credit decisions are subjected to various risk parameters. As such the Bank is following a prudent policy marked by in built checks and balances, where identification and mitigation of risk are the key objectives. Prudential limits are fixed on various financial parameters to implement risk management guidelines. Bank has implemented various Credit Risk Management guidelines given by the Reserve Bank of India. Bank has fixed internal exposure ceilings based on credit rating of the borrowal account to mitigate concentration risk. Portfolio/Industry wise exposure limit is fixed as a risk mitigation tool. As part of the credit risk management system, the Bank has also confined, by and large, the high value credit exposures to specially designated branches, which are equipped to handle such exposures. Bank has also stipulated criteria for taking exposures in a particular industry. Maximum industry wise stipulated exposure is 15 per cent of total advances. The Due Diligence in respect of the retail assets has been strengthened to protect the quality of this portfolio. 16. Credit Policy of the Bank The credit policy followed by the Bank may materially influence its credit portfolio. Management Perception The Bank has a comprehensive loan policy document. The loan policy is regularly updated in the light of market changes and revision in RBI guidelines. Loan policy aims at continued growth of assets while endeavoring to ensure that they remain performing and standard. EXTERNAL RISK FACTOTRS 1. Regulatory restrictions on the Bank and limitations of the powers of bond holders of the Bank There are a number of restrictions as per the State Bank of India (Subsidiary Banks) Act, 1959, which impede the flexibility of the Bank's operations and affect/restrict investor's right. i. The Banks can carry on business/activities as specified in the Act. There is no flexibility to pursue profitable avenues if they arise, in contrast with companies under the Companies act, where shareholders can amend the Object clause by a Special Resolution Act. ii. There are restrictions in the Banking regulation Act regarding: a) Setting up of subsidiaries by a bank b) Management of the Bank including appointment of directors c) Borrowings and creation of floating charge thereby hampering leverage. d) Expansion of business as the branches need to be licensed e) Opening of new place of business and transfer of existing place of business

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f) Disclosures in the profit & loss account and Balance sheet g) Production of documents and availability of records for inspection by shareholders h) Reconstruction of banks through amalgamation etc i) Further issues of capital including issue of rights share for which prior SBI/RBI approval is needed j) The Bank is prohibited from trading activity. This may act as operational constraint. iii. Every Banking Company is required to create a Reserve fund by transfer of a sum equivalent to not less than twenty percent of profit as disclosed in the Profit & Loss account before any dividend is declared. iv. Every Bank has to maintain assets in India, which would be not less than 75% of the Bank's demand and time liabilities in India, which in turn may prohibit the Bank from creating overseas assets and exploiting overseas business opportunities. v. The financial disclosures in the Information Memorandum may not be available to investors after listing, on a continuous basis. vi. Various rights/powers of shareholders available under the Companies Act in this behalf are not available to shareholders of Banks as the provisions of the Companies Act are not applicable to the Bank. Rights like calling for general meetings, inspection of minutes and other material records, application by members for investigation of affairs of a company, application for a relief in case of oppression and mismanagement, voluntary winding up are not available to shareholders of a Bank. vii. As per section 19(2) of State Bank of India (Subsidiary Bank's) Act, 1959, no person other than the State Bank, shall be entitled to exercise voting rights in respect of any shares held by such person in excess of one percent of the issued capital of the subsidiary bank concerned. viii. No banking company shall pay dividend on its shares until all its capitalised expenses (including preliminary, organisational expenses, share selling commission, brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have been completely written off. The bank has no such assets/capitalized expenses as on 31.03.2005. Other than Deferred Tax Asset which has been specifically excluded from this clause by Reserve Bank of India. ix. As per Section 9 (1) of the State Bank of India Act,1959 no person shall be registered as a shareholder in respect of any shares in a subsidiary bank held by him, whether in his own name or jointly with any other person, in excess of two hundred shares, or be entitled to payment of any dividend on the excess shares held by him, or to exercise any of the rights of a shareholder in respect of such excess shares otherwise than for the purpose of selling them: Provided that nothing contained in this sub-section shall apply toa) the State Bank; b) a State Government; c) a Corporation; d) an insurer as defined in the Insurance Act, 1938; e) a local authority; f) a Co-operative society; g) a trustee of a public or private religious or charitable trust;

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Increase in regional hostilities, terrorist attacks and other acts of violence and war could adversely affect the country's economic growth and development thereby the financial markets including the Bank's business and its future financial performance. The performance, quality, and growth of the Bank are dependent on the health of the overall Indian economy. Slowdown in economic growth in India could affect the business of the Bank. Management Perception: The bank has been functioning well with all these constraints and is expected to continue to grow as hitherto. The Bank is expanding its product and services offered to diversify its income streams. The Bank's thrust on retail products is expected to provide growth. Risk management systems, credit supervision, special emphasis on recovery of NPAs and close monitoring will enable the Bank to closely monitor the health of its credit portfolio. The slowdown witnessed in the Indian and global economy in the past few years has not materially affected the Bank's profitability. 2. Sensitivity to the Economy and Extraneous Factors The Banks performance is never the less highly correlated to the performance of the economy and the financial markets. The health of the economy and the financial markets in turn depends on the domestic economic growth, state of the global economy and business and consumer confidence, among other factors. Any event disturbing the dynamic balance of these diverse factors would directly or indirectly impact the performance of the Bank including the quality and growth of its assets. 3. Competition from Existing and New Commercial Banks Competition in the financial sector has increased with the entry of new players and is likely to increase further as a result of further deregulation in the financial sector. The Bank may face competition both in raising resources and in deploying them. Management Perception: The Bank has an established broad-based presence and has been taking steps to enhance customer satisfaction by upgrading skills, systems and technology to meet such challenges. The Bank is attempting to add quality assets on competitive terms. The Bank is also taking steps to enlarge its product bouquet with a special emphasis on enhancement in the non-fund based income. On the resource-raising front, the Bank is actively endeavouring to broaden its reach and raise resources through its wide distribution network of 929 branches, 80 extension counters. 4. Changes in Regulatory Policies The operations of the Banking Industry are subject to regulations by the Government/RBI. Major changes in Government/ RBI policies relating to banking sector may have an impact on the operations of the Bank. Management Perception: The policy changes may provide both opportunities and challenges for the Bank. The Bank has a long presence in the banking sector, for more than 65 years and does not perceive policy changes to be a major threat. 5. Disintermediation in the Financial Markets As the financial markets mature and with growing developments in the capital markets, the trend towards disintermediation may be increasingly in evidence. In such a scenario, many companies including the current and potential borrowers of the Bank 15

may access capital markets directly for their financing needs and reduce their dependence on the banking system. This may have an adverse impact on the level of deposits and also on the level and mix of advances portfolio and the profitability of the Banks. Management Perception: The Bank has, in recent years, launched several retail lending schemes and value added products so as to broaden its borrower base. Further, disintermediation brings with it the opportunity for the Bank to expand its feebased activities. The Bank has been endeavouring to develop a market presence for extension of several financial services to earn fee based income by focusing on businesses such as foreign exchange, treasury, investments, cash management, insurance, depository, debenture trustee, etc. thereby turning the disintermediation phenomenon. 6. Forex Risk Exchange Rate fluctuations may have an impact on the Banks financial performance. Management Perception: As per RBI guidelines, banks are not allowed to keep open position on their foreign exchange transactions beyond prescribed limits on a daily basis. Foreign exchange transactions beyond such limits, if any, must be squared off at the end of each day. Hence, the risk from exchange rate fluctuations is minimised. The Board of Directors of the Bank has also prescribed limits for gaps or mismatches in maturities of Banks foreign currency assets and liabilities and forward transactions in foreign exchange. The Bank operates within the limits fixed for gaps or mismatches in maturities of Banks foreign currency assets and liabilities and forward transactions in foreign exchange, thus minimising the risks of mismatches in maturities and interest rates. 7. Interest Rate Risk Present interest rates on deposits and advances are based on many micro and macro economic factors including the directives of the Reserve Bank of India which are likely to be market driven due to deregulation and thereby may result in increasing pressure on spreads and affect profitability. Interest rate volatility exposes the Bank to an interest rate risk or market risk. Such interest rate risk has a potential impact on net interest income or net interest margin as well as on the market value of the fixed income securities held by the Bank in its investment portfolio. Management Perception: These risks are inherent in the banking business. However, the Bank has put in place a system of regular review of lending and deposit rates in order to minimise the interest rate risk. The Asset Liability Management Committees of the Bank reviews the risk on a regular basis. Continuous Risk Management measures are initiated depending upon the movement in the market interest rates. The movement in the interest rates is closely monitored for appropriate action. 8. Operational Risk Operational risk is defined as the risk of loss resulting from inadequate or failed internal process, people and systems or external events i.e., computer break-ins, power disruptions, fraudulent activities, natural disaster, human error or omission or sabotage. Management Perception: For managing operational risk, the Bank has laid down well-defined systems and procedures. The Bank has set up a separate department to 16

strive continuously to improve the systems and procedures to suit the changing environment which is periodically reviewed by the Operational Risk Management Committee. The Bank has also in place a strong internal inspection and audit system. For managing IT related risks, the IT policy and Information Systems Security Policy are in place. The Bank has an effective Organisational Planning Department, which formulates and monitors delegation of duties and responsibilities at different levels. Note to Risk Factors 1. Net worth (excluding revaluation reserves) of the Bank as on 31.03.2004 and 31.03.2005 was Rs. 1573.76 crores and Rs 1765.65 crores respectively. 2. The Private Placement size is Rs.500 crores. 3. The Book Value of the share as on March 31, 2004 and March 31, 2005 was at Rs. 9123/- and Rs. 10235 /- respectively (face value of Rs. 100/-). 4. State Bank of Hyderabad would like to clarify that inspection by RBI is a regular exercise and is carried out periodically by RBI for all banks and financial institutions. The reports of RBI are strictly confidential. The Bank has informed the RBI the actions already taken and measures that are under implementation in respect of observations made by RBI. 5. As per the provisions of Section 15(1) of the Banking Regulation Act, 1949 no banking company shall pay any dividend on its shares until all its capitalised expenses (including preliminary expenses, organisational expenses, share selling commission, brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have been completely written off. 6. No person holding shares in the Bank in respect of any shares held by him/her can exercise voting rights on a poll in excess of 1% of the total voting rights of all the shareholders of the Bank. 7. Transactions between State Bank of Hyderabad and its Associates w.r.t. related party transactions are given under the head Financial Information. 8. The face value per share of the promoters is Rs. 100/-. HIGHLIGHTS OF THE BANK Member of the State Bank Group, the largest banking Group in India. The Group has the biggest network of branches and the highest market share of deposits and advances in the country. Uninterrupted record of profitability since incorporation. Low net NPA ratio of 0 .61%. The Capital Adequacy Ratio of the Bank is at 11.74% as at the end of 31st March 2005 which is higher than the stipulated minimum of 9%. Deposits growth during the year 2004-05 was 19.25% as against ASCB growth of 14.97% Credit growth during the year 2004-05 was at 32.05% against ASCB growth 28.37%. Return on Assets and Return on Equity as on 31.03.2005 were 0.72% and 15.03% respectively. 100% Business has been computerised.

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STATE BANK OF HYDERABAD (Associate of the State Bank of India, Constituted under State Bank Of India (Subsidiary Banks) Act, 1959) Head Office: Gunfoundry, Hyderabad 500 001. (AP). Tel No: 23387201 - 208: Fax: (040) 23387562 Website: www.sbhyd.com Private Placement of Tier II, Unsecured, Non- Convertible, Redeemable Subordinated Bonds aggregating Rs. 500 Crores PART I GENERAL INFORMATION State Bank of Hyderabad (herein after referred to as the Bank or the Issuer) has been constituted under the State Bank of India (Subsidiary Banks) Act, 1959 herein after referred to as the SBI (SB) Act. The Bank is privately placing to eligible applicants, as mentioned elsewhere in this Information Memorandum, Unsecured, Redeemable, Non-Convertible Subordinated Bonds aggregating Rs. 500 crores of the face value of Rs. 1,00,000/- each ('the Issue').. ELIGIBILITY This being a private placement of debt securities, the eligibility norms of SEBI DIP Guidelines, 2000 are not applicable. AUTHORITY FOR THE PLACEMENT This private placement of Bonds is being made pursuant to the circular resolution dated 24.09.2005 passed by the Executive Committee of Board of Directors of the Bank permitting to raise Subordinated Debts up to Rs. 500 crores. Further, State Bank of India, Central Office, has approved the issue of subordinated bonds vide their letter no: SBD/BNJ/1686 dated 14th September 2005. The Bank can carry on its existing activities and its planned future activities in view of the existing approvals, and no further approvals from any Government authority are required by the Bank to carry on its said activities. GENERAL DISCLAIMER This Information Memorandum is neither a Prospectus nor a statement in lieu of Prospectus. It does not constitute an offer or an invitation to the Public at large to subscribe to Tier II Bonds (Bonds) issued by State Bank Of Hyderabad. This Information Memorandum is not intended for distribution and is for the consideration of the person to whom it is addressed and should not be reproduced by the recipient. It cannot be acted upon by any person other than to whom it has been specifically addressed. It is not intended to be offered to more than forty-nine investors. Multiple copies hereof given to the same entity shall be deemed to be offered to the same investor. Apart from this Information Memorandum, no other document has been prepared in connection with this Bond Issue and that no document in relation to the Issuer or this Bond Issue has been delivered for registration to any authority. This Information Memorandum has been prepared in accordance with Schedule II of the Companies Act 1956, Chapter VI of the SEBI (DIP) Guidelines to give information 18

regarding the Bank to investors proposing to invest in this issue of Bonds and it does not purport to contain all the information that any such party may require. The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Information Memorandum contains all information with regard to the Issuer, and the Issue, which is material in the context of the Issue, that the information contained in this Information Memorandum is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this document or any of such information or the expression of any such opinions or intentions misleading in any material respect. Potential investors are required to make their own independent valuation and judgment before making the investment and they are believed to be experienced in investing in debt markets and are able to bear the economic risk of investing in the Bonds. It is the responsibility of potential investors to have obtained all consents, approvals or authorizations required by them to make an offer to subscribe for, and purchase of the Bonds. Potential investors have not relied on any advice given by the Arranger in connection with their offer to subscribe for and purchase the Bonds and acknowledge that the Arranger does not owe them any duty of care in respect of their offer to subscribe for and purchase of the Bonds. It is the responsibility of potential investors to ensure that any transfer of the Bonds is in accordance with this Information Memorandum and the applicable laws, and ensure that the same does not constitute an offer to the public. Potential investors should also consult their own tax advisors on the tax implications of the acquisition, ownership, sale and redemption of Bonds and income arising thereon. The Arranger does not take any responsibility either for the financial soundness of the Bonds offered or for the correctness of the statement made in this Information Memorandum. The Arranger has relied exclusively upon the information provided by State Bank Of Hyderabad and has neither verified independently, nor assumes responsibility for the accuracy and completeness of this Information Memorandum, or any other information or documents supplied or approved by State Bank Of Hyderabad. The Arranger holds no responsibility for any misstatement in or omission by the Bank, publicly available information or any other information about the Bank available in the market. Neither the Arranger nor any officer or employee of the Arranger accept any liability whatsoever for any direct or consequential loss arising from any use of this document or its contents. Disclaimer Statement from the Issuer The Bank accepts no responsibility for statements made otherwise than in the Information Memorandum or in the advertisements or other material issued by or at the instance of the Bank and the Arranger and that anyone placing reliance on any other source of information would be doing so at his/her own risk. Disclaimer in respect of Jurisdiction This Issue is made in India to Investors as specified under section Who Can Apply of this Information Memorandum, who shall be specifically approached by the Bank/ Arranger. This Information Memorandum does not, however, constitute an offer to sell or an invitation to subscribe to bonds offered hereby in any other jurisdiction to any person to whom it is unlawful to make an offer or invitation in such jurisdiction. Any

19

person into whose possession this Information Memorandum comes is required to inform himself about and to observe any such restrictions. Any disputes arising out of this Issue will be subject to the exclusive jurisdiction of the district courts of Hyderabad. The Issuer shall make all information available to the investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever. Disclaimer Clause of the Bombay Stock Exchange of India Ltd. A copy of this Information Memorandum has been submitted to The Bombay Stock Exchange of India Ltd. (hereinafter referred to as BSE) where Banks securities are proposed to be listed in terms of the extant Guidelines. BSE does not in any manner: 1. warrant, certify or endorse the correctness or completeness of any of the contents of this Information Memorandum; or 2. warrant that the Banks securities will be listed or will continue to be listed on the Exchange; or 3. take any responsibility for the financial or other soundness of the Bank, its promoters, its management or any scheme or project of the Bank. Every person who desires to apply for or otherwise acquire any securities of the Bank may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against BSE whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/ acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever. The delivery of this Information Memorandum hereunder shall not under any circumstances create any implication that there has been no change in the affairs of the Bank since the date thereof or that the information contained herein is correct as of any time subsequent to this date. LISTING Application shall be made to the Bombay Stock Exchange of India Ltd. to list the bonds of the Bank now being offered through this Information Memorandum and for permission to deal in such Bonds. If the permissions to deal in and for an official quotation of the Bonds is not granted by BSE, the Bank shall forthwith repay, without interest all such moneys received from the applicants in pursuance of this Information Memorandum. If such monies are not repaid within eight days after the Bank becomes liable to repay them (i.e. from the date of refusal or within 70 days from the date of the closing of the subscription list, whichever is earlier), then the Bank will be liable to repay the monies, with interest, as prescribed under Section 73 of the Companies Act, 1956. CAUTION Though the provisions of Sub-section (1) of Section 68-A of the Companies Act, 1956

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do not apply to an issue of Bonds, attention of the investors is drawn to the provisions as a matter of abundant precaution: Any person who makes in a fictitious name, an application to a company for acquiring, or subscribing for, any shares therein, or otherwise induces a company to allot, or register any transfer of shares therein to him, or any other person in fictitious name, shall be punishable with imprisonment for a term which may extend to five years UNDERWRITING The Bonds offer is not underwritten. Minimum Subscription The provisions of Section 69 of the Companies Act 1956 are not applicable for the bonds issue. UNDERTAKING BY THE BANK The Bank undertakes: a. to attend to the complaints received in respect of the Issue expeditiously and satisfactorily; b. to take all steps for completion of necessary formalities for listing and commencement of trading at the Stock Exchange where the securities are to be listed are taken within 7 working days of finalisation of basis of allotment; c. to apply in advance for the listing of the securities; d. that the funds required for despatch of refund orders/allotment letters by registered post shall be made available; e. that the Allotment Letters/Refund Orders to the applicants shall be despatched within specified time; f. that no further issue of securities shall be made till the securities offered through this Offer Document are listed or till the application monies are refunded on account of non- listing; g. that necessary cooperation with Credit Rating Agency (ies) shall be extended in providing true and adequate information till the debt obligations in respect of the instrument are outstanding; h. to forward the details of utilisation of the funds raised through the Bonds duly certified by the statutory auditors, to the bond trustees at the end of each half-year; i. to disclose the complete name and address of the bond trustees in the annual report; j. to provide a compliance certificate to the bond holders on a yearly basis in respect of compliance with the terms and conditions of placement of Bonds as contained in the memorandum, duly certified by the bond trustee. PROHIBITION BY SEBI The Bank, its associates and companies with which the directors of the Bank are associated as directors or promoters are not prohibited from accessing the capital market/Corporate Debt Securities Market under any order or directions passed by SEBI.

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CREDIT RATING ICRA has assigned a LAAA (pronounced as L-Triple A) rating to the captioned debt programme of the Bank. This is the highest credit quality rating assigned by ICRA. The rated instruments carry the lowest credit risk. The rating is not a recommendation to buy, sell or hold Securities and investors should take their own decision. The rating may be subject to revision or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating. The rating obtained is subject to revision at any point of time in the future. The rating agencies have a right to suspend, withdraw the rating at any time on the basis of new information etc. CREDIT RATING DURING PREVIOUS THREE YEARS The Credit Rating received by the Bank are as follows: Year Credit Rating Credit Rating Amount Raised Agency Received (Rs. Crs.) 2004-05 ICRA Ltd LAAA 150 TRUSTEES The Bank has appointed IDBI Trusteeship Services Ltd, Nariman Point, Mumbai, as Bond Trustees registered with SEBI, for the holders of the Bonds (hereinafter referred to as Trustees). PRIVATE PLACEMENT PROGRAMME Opening date Closing Date Deemed Date of Allotment September 28, 2005 September 30, 2005 September 30, 2005

Note: The Bank reserves the right to vary (pre-pone/postpone) any of the above date(s) at its sole and absolute discretion without giving any reasons or prior notice. In such a case, investors will be intimated about the revised time schedule by the Bank. PRIVATE PLACEMENT MANAGEMENT TEAM Arranger
SBI Capital Markets Ltd. 202, Maker Tower E Cuffe Parade Mumbai 400 005 Tel: (022) 2218 9166 Fax: (022) 2218 8332 Email: fig@ sbicaps.com

Registrar to the Offer

Bankers to the Offer

State Bank of Hyderabad Nariman Point, Mumbai 400 021. Telephone No. 022-22844096, Fax 022-22851321. www.sbhyd.com

M/s.Karvy computer share private Limited, Banjara Hills, Hyderabad.

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Trustees
IDBI Trusteeship Services Ltd 10th Floor, Nariman Bhawan 227,Vinay K. Shah Marg, Nariman Point, Mumbai-400021 Tel. 022 5631 1771/2/3 Fax :5631 1776 www.idbitrustee.com

COMPLIANCE OFFICER The investors can contact the Compliance Officer for Bonds in case of any preissue/post-issue related problems such as non-credit of letter(s) of allotment/bond certificate(s) in the demat account, non-receipt of refund order(s), interest warrant(s)/cheque(s) etc. Mr. C V Krishnakumar General Manager-Treasury State Bank of Hyderabad-Head Office Gunfoundry, Hyderabad 500 001. Andhra Pradesh. Tel No: (040) 23387201 208, Fax 040 23387562 Email: sbhasd@sancharnet.in

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CAPITAL STRUCTURE OF THE BANK No. of Shares A. Authorised Capital 5,000,000 Equity Shares of Rs. 100 each B. Issued, Subscribed and Paid-up Capital 1,7,25,000 Equity Shares of Rs. 100 each C. Paid Up Capital after the Present Offer 17,25,000 Equity Shares of Rs. 100 each (As on March 31, 2005) Face Value Issue Value (Rs.) (Rs.) 50,00,00,000 50,00,00,000 17,25,00,000 17,25,00,000 17,25,00,000 17,25,00,000

Notes to Capital Structure: 10 Following is the capital history since 1985: Year ended March 31 Increase (Decrease) in capital Mode (No. and Amount of Shares) Cumulative Paid-up capital

50,000 shares Opening Balance/ Issue of 50,000 shares Shares at Face Value of Rs.100/ Issue of Shares at of RS.100/1959 Rs.0.50 crore premium of Rs.Nil per share each etc 4,25,000 shares 3,75,000 shares Rights shares at face value of Rs.100 1985 of RS.100/RS.4.25 crore each Rights shares at face value 17,25,000 shares 13,00,000 of Rs.100 Rs.17.25 crore 1987 shares of Rs.100/- each The entire paid up share capital the Bank is held by State Bank of India. 11 Shareholding Pattern (as on March 31, 2005): Sr. Category No. A. Promoters Holding 1. Promoters* - Indian Directors/Relatives - Foreign Promoters 2. Persons acting in Concert Total Number of Shares % Held Shareholding 1725000 NIL 1725000 100.00% NIL 100.00

*The Promoter Group of the company comprises of the State Bank of India. 1. The Bank has not raised any bridge loan against the proceeds of this Private Placement. 2. The Bank has not issued any Equity Shares out of revaluation reserves or for consideration other than cash.

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3. The shareholders of the Bank do not hold any warrant, option or any debentures, which would entitle them to acquire further shares in the Bank. 4. The number of issued shares of the Bank as on date of the issue is 17,25,000. 5. The Bank as part of its ongoing capital augmentation programme may issue bonds/securities/loans etc. as deemed necessary.

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TERMS OF THE PRESENT PLACEMENT The Bank is intending to raise an aggregate amount of Rs. 500 crores (through the issue of Unsecured Redeemable Non-Convertible Subordinated Bonds of face value of Rs. 10 lakh each for cash at par (hereinafter referred to as the Bonds) by way of private placement. The Bonds being offered are subject, interalia to the terms of this Information Memorandum, the application form, the Memorandum and Articles of Association of the Bank, and the provisions of the Companies Act, 1956, State Bank Of India (Subsidiary Banks) Act 1959 and The Banking Regulations Act, 1949. In addition, the bonds shall be subject to such other terms and conditions to be incorporated in the Bond Trust Deed / Letter of allotment and to the extent applicable, the provisions of the Depositories Act 1996, the relevant Statutory Guidelines and Regulations for allotment and listing of securities issued from time to time by the Government of India (GoI), SEBI and the Stock Exchanges concerned. This Information Memorandum does not, however, constitute an offer to sell or an invitation to subscribe to bonds offered hereby in any other jurisdiction to any person to whom it is unlawful to make an offer or invitation in such jurisdiction. The Issue hereunder shall be made in India to Investors specified under clause Who Can Apply of this Information Memorandum, who shall be specifically approached by the bank/Arranger. This Information Memorandum does not constitute an offer to sell or an invitation to subscribe to Bonds offered hereby to any person to whom it is not specifically addressed. OBJECTS The Issue proceeds would be used to strengthen the Tier II capital funds position and the long term resources of the bank. Instrument at a Glance: Issue Size Instrument Rs. 500 crore Unsecured, Redeemable Non-Convertible, Subordinated Bonds in the nature of Promissory Notes. LAAA by ICRA Rs. 10,00,000/- per Bond 10 bonds and thereby in multiples of one bond 115 months from the Deemed Date of Allotment Bulleted Redemption at par at the end of 115 months from the Deemed Date of Allotment 7.45% p.a. subject to TDS as applicable Annual Interest on application money will be paid to 26

Credit Rating Face Value/ Issue Price Minimum Application Size Tenor Redemption Coupon Rate Interest Payment Interest on Application

Money

Investors at the Coupon Rate (subject to deduction of tax at source, as applicable) from the date of ummarizing of cheque(s)/demand draft(s), upto but not including the Deemed Date of Allotment None Proposed listing at BSE NSDL and CDSL Demat mode

Put & Call option Listing Depository Issuance & Trading

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

UNSECURED REDEEMABLE NON-CONVERTIBLE SUBORDINATED BONDS The bonds will constitute direct, unsecured and subordinated obligations of the Bank, subordinate to the claims of all other creditors and depositors of the Bank as regards repayment of principal and interest by the Bank out of its own funds. The Bonds will be negotiable instruments in the nature of Promissory Notes, transferable by endorsement and delivery. KEY TERMS Tenor The Bonds will mature on the expiry of 115 months from the Deemed Date of Allotment. Coupon The investors will receive interest at 7.45% p.a. subject to TDS as applicable. Face Value Per Bond Each Bond has a face value of Rs.1, 00,000/- and is issued at par at Rs.1, 00,000/-. Minimum Application Size The minimum investment shall be 10 (ten) bonds i.e. Rs.10,00,000/- and in multiples of 1 (one) Bond i.e. Rs.1,00,000 thereafter. Deemed date of allotment September 30, 2005 shall be the deemed date of allotment of the Bonds. All the benefits under the bonds will accrue to the investor from this date even though the actual allotment may take place on a date other than the specified deemed date of allotment. Credit Rating ICRA has assigned a LAAA (pronounced as L-Triple A) rating to the captioned debt programme of the Bank. This is the highest credit quality rating assigned by ICRA. The rated instrument carries the lowest credit risk. The rating is not recommended to buy; sell or hold Securities and investors should take their own decision. The rating may be subject to revision or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating. The rating obtained is subject to revision at any

27

point of time in the future. The rating agencies have a right to suspend, withdraw the rating at any time on the basis of new information etc. Listing Application shall be made to the Bombay Stock Exchange of India Ltd. To list the bonds of the Bank now being offered through this Information Memorandum and for permission to deal in such Bonds. If the permissions to deal in and for an official quotation of the Bonds is not granted by BSE the Bank shall forthwith repay, without interest all such moneys received from the applicants in pursuance of this Information Memorandum. If such monies are not repaid within eight days after the Bank becomes liable to repay them (i.e. from the date of refusal or within 70 days from the date of the closing of the subscription list, whichever is earlier), then the Bank will be liable to repay the monies, with interest, as prescribed under Section 73 of the Companies Act, 1956. UNDERWRITING The Bonds offer is not underwritten. INTEREST ON APPLICATION MONEY Interest at the coupon rate (subject to deduction of tax at source) will be paid in respect of all valid applications including the refunds. Such interest shall be paid from the date of ummarizing of the cheques/demand drafts up to the date immediately preceding the Deemed Date of Allotment. Refund cheques/Warrants/Demand Drafts will be mailed within seven days of Deemed Date of Allotment. The Interest Cheque(s)/ Demand Draft(s) for Interest on Application Money shall be dispatched by the Bank alongwith allotment advise/ Rejection letter, as the case may be, and will be dispatched by registered post to the sole/ first applicant, at the sole risk of the applicant. INTEREST ON THE BONDS The Bonds will carry interest at the rate of 7.45 % p.a. for tenure of 115 months from the deemed date of allotment. The interest will be paid from the Deemed Date of Allotment (subject to deduction of tax at source at the rates prevailing from time to time under the Income Tax Act, 1961 or any other statutory modification or re-enactment thereof) and is payable annually on April 1st each year for the previous year ended on March 31st during the tenure of the Bonds except for the last interest payment. If any interest payment date falls on a day, which is not a business day in Hyderabad, Andhra Pradesh (Business Day being a day on which Commercial Bank are open for business in Hyderabad, Andhra Pradesh), then payment of interest will be made on the next business day but without liability for making payment of interest for the delayed period. The interest payable shall be calculated by multiplying the coupon rate by the principal amount, multiplying such product by actual number of days in the interest period concerned dividing by 365 (a leap year would be considered as 366 days for the purpose of interest calculation).

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INTEREST PERIOD a. The first interest period is defined as the actual number of days falling between the Deemed Date of Allotment to 31st March including both the first date and the last date. The first interest payment would be made on 1st April 2006. b. The second interest period is defined as the actual number of days between 1st April 2005 and 31st March 2007 including both the dates and so on. c. The last interest period is defined as the actual number of days falling between 1st April and redemption date including both the first date and the last date. The last interest payment would be made on the redemption date along with the redemption of principal amount. PAYMENT OF INTEREST The interest payment would be made by Electronic Clearing System or by means of cheques/demand drafts/(Interest warrants payable at par at specified branches of the Bank) and will be mailed to the Bondholders. Payment of interest will be made to the holders of the Bonds whose names appear in the list of beneficiaries given by NSDL/CDSL to the Bank on Record Date. RECORD DATE The Record Date will be 30 days prior to each Interest Payment Date or the Date of Redemption as the case may be. TAX DEDUCTION AT SOURCE Tax as applicable under the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof will be deducted at source. The investor(s) desirous of claiming exemption from deduction of income tax at source on the interest on application money are required to submit the necessary certificate(s), in duplicate, along with the application form in terms of Income Tax rules. Interest payable subsequent to the Deemed Date of Allotment of Bonds will be treated as Interest on Securities as per Income Tax Rules. Bondholders desirous of claiming exemption from deduction of income tax at source on the interest payable on Bonds should submit tax exemption certificate/ document, under Section 193 of the Income Tax Act, 1961, if any, at the office of the Bank, at least 45 days before the payment becoming due. Regarding deduction of tax at source and the requisite declaration forms to be submitted, prospective investor is advised to consult his tax consultant. PUT/CALL OPTION No put/call option is available for the Bonds. REDEMPTION The face value of the Bond will be redeemed at par, on expiry of 115 months from the deemed date of allotment. The Bond will not carry any obligation, for interest or otherwise, after the date of redemption. The Bonds held in the Dematerialised Form shall be taken as discharged on payment of the redemption amount by the Bank on maturity to the registered Bondholders whose name appear in the Register of Bondholders on the record date. Such payment will be a legal discharge of the liability of the Bank towards the Bondholders. On such payment being made, the Bank will

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inform NSDL/CDSL and accordingly the account of the Bondholders with NSDL/CDSL will be adjusted. No Put/Call option is available on the bonds. However, the consent of Reserve Bank of India will be taken before redemption of bonds on due date as required in terms of their guidelines addressed to all commercial banks vide their communication DBOD.BP.BC 13/21.01.002/2005-06 dated 04.07.2005. EFFECT OF HOLIDAYS Should any of the dates defined above or elsewhere in the Information Memorandum, excepting the Deemed Date of Allotment, fall on a Sunday or a Public Holiday, the next working day shall be considered as the effective date(s). In case any Interest Payment Date(s) and/or the Date of Redemption falls on a holiday, interest/ redemption will be paid on the next working day (i.e. a day on which scheduled commercial banks are open for business). No additional interest will be paid as a result of the interest payment and/or Redemption being made on a day falling after the Interest Payment Date/ Date of Redemption under this condition. ISSUE OF BONDS IN DEMATERIALISED FORM The Bank will be issuing the Bonds in dematerialised form. The Bank will be opening the accounts with NSDL and CDSL for issuing these Bonds. Applicant should mention their Depository Participants name, DP-ID and Beneficiary Account Number in the appropriate place in the Application Form. The Bank will take necessary steps to credit the Depository Account of the allottee(s) with the number of bonds allotted. Responsibility for correctness of applicants demographic details given in the application form vis-a-vis his/her depository participant would rest with the applicant and the bank would not be liable with regard to the above in any manner whatsoever. DEPOSITORY ARRANGEMENT The Bank has appointed M/s Karvy Computershare Pvt. Ltd., Hyderabad as Registrars and Transfer Agents for Bond Issuance. The Bank will enter into depository arrangements with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) for the issue of the bonds. TRANSFER OF BONDS The transfer of bonds in dematerialised form would be in accordance with the rules/procedures as prescribed by Depository/Depository Participant. TERMS OF PAYMENT Applications should be for a minimum of 10 Bonds. All cheques /drafts should be in favour of State Bank of Hyderabad A/c-Bonds Issue and crossed Account Payee only. The entire amount of Rs. 10 lakh (Rs. Ten Lakh only) per bond is payable on application. PROCEDURE FOR APPLICATION AND MODE OF PAYMENT This being a Private Placement Offer, Investors who are established/Resident in India and who have been addressed through this Communication directly, only are eligible to apply. Applications for the Bonds must be in the prescribed form (enclosed) and completed in BLOCK LETTERS in English and as per the instructions contained therein.

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Applications complete in all respects (along with all necessary documents as detailed in the memorandum of information) must be submitted before the last date indicated in the issue time table or such extended time as decided by the Bank, at any of the designated collection ummari, accompanied by the subscription amount by way of cheque(s)/draft(s) drawn on any bank including a co-operative bank which is situated at and is a member of the Bankers clearing house located at a place where the application form is submitted. Outstation cheque(s)/Bank draft(s) drawn on Bank(s) not participating in the clearing process at the designated clearing ummari will not be accepted. Money orders/postal orders will also not be accepted. The Bank assumes no responsibility for any applications/cheques/ DDs lost in mail. All cheques /drafts should be in favour of State Bank of Hyderabad Bonds Issue and crossed Account Payee only. The entire amount of Rs. 10 lakh (Rs. Ten Lakh only) per bond is payable on application. No separate receipt will be issued for the Application money. However, the Banks designated collection branches or Arranger receiving the duly completed Application Form will acknowledge receipt of the application by stamping and returning to the applicant the Acknowledgment Slip at the bottom of the each Application Form. As a matter of precaution against possible fraudulent encashment of Interest Warrants/Cheques due to loss/misplacement, the applicant should furnish the full particulars of his or her bank account (i.e. Account Number, name of the bank and branch) at the appropriate place in the Application Form. Interest warrants will then be made out in favour of the bank for credit to his/her account so specified and ummarizin to the investors, who may deposit the same in the said bank. SUCCESSION In the event of the demise of the sole/first holder of the Bond(s) or the last survivor, in case of joint holders for the time being, the Bank will ummarizi the executor or administrator of the deceased Bondholder, or the holder of succession certificate or other legal representative as having title to the Bond(s). The Bank shall not be bound to ummarizi such executor or administrator, unless such executor or administrator obtains probate, wherever it is necessary, or letter of administration or such holder is the holder of succession certificate or other legal representation, as the case may be, from a Court in India having jurisdiction over the matter. The Bank may, in its absolute discretion, where it thinks fit, dispense with production of probate or letter of administration or succession certificate or other legal representation, in order to ummarizi such holder as being entitled to the Bond(s) standing in the name of the deceased Bondholder on production of sufficient documentary proof or indemnity or on such other terms and conditions as acceptable to the Bank. Where a non-resident Indian becomes entitled to the Bond by way of succession, the following steps have to be complied with:

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i. ii.

Documentary evidence to be submitted to the Legacy Cell of the RBI to the effect that the Bond was acquired by the NRI as part of the legacy left by the deceased holder. Proof that the NRI is an Indian national or is of Indian origin.

Such holding by the NRI will be on a non-repatriation basis. REGISTER OF BONDHOLDERS The Register of bondholders containing necessary particulars will be maintained by the Bank at such place(s) as it may decide. TRUSTEES TO THE BONDHOLDERS The Bank has appointed IDBI Trusteeship Services Ltd. To act as Trustees for the Bondholders (hereinafter referred to as The Trustees). The Bank and the Trustees will enter into a Trustee Agreement specifying inter alia, the powers, authorities and obligations of the Trustees and the Bank. By applying for the Bonds, the Bondholders shall without further action or deed, be deemed to have irrevocably given their consent to and authorised the Trustees or any of their agents or authorised officials to do interalia all acts, deeds, matters and things in respect of or relating to the Bonds. All the rights and remedies of the Bondholders shall vest in and shall be exercised by the Trustees without reference to the Bondholders. No Bondholder shall be entitled to proceed directly against the Bank unless the Trustees, having become so bound to proceed, failed to do so. The Trustees will endeavour to protect the interest of the Bondholders in the event of default in regard to timely payment of interest and principal by the Bank. DEBENTURE REDEMPTION RESERVE State Bank Of Hyderabad is a Banking Company within the meaning of the Banking Regulation Act, 1949. The resources through the current issue of the Bank are being raised by the Bank for augmenting the Tier-II Capital for strengthening the Capital Adequacy and enhancing its long-term resources. Department of Company Affairs, Ministry of Law Justice and Company Affairs, Government of India has vide general clarification no.6/3/2001-CL.V dated 18/04/2002 clarified that Banks need not create Debenture Redemption Reserve as specified under section 117C of the Companies Act, 1956. BONDHOLDER NOT A SHAREHOLDER The Bondholder will not be entitled to any of the rights and privileges available to the Shareholders. If, however, any resolution affecting the rights attached to the bonds is placed before the members of the Bank, such resolution will first be placed before the Bondholders for their consideration. RIGHTS OF BONDHOLDERS a. The Bonds shall not, except as provided in the Act, confer upon the holders thereof any rights or privileges available to the members of the Bank including the right to receive Notices or Annual Reports of, or to attend and/or vote, at the General Meeting of the Bank. However, if any resolution affecting the rights attached to the Bonds is to be placed before the shareholders, the said resolution will first be placed before the concerned registered Bondholders for their consideration. In

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b.

c.

d.

e.

f.

g. h.

terms of Section 219(2) of the Act, holders of Bonds shall be entitled to a copy of the Balance Sheet on a specific request made to the Bank. The rights, privileges and conditions attached to the Bonds may be varied, modified and/or abrogated with the consent in writing of the holders of at least three-fourths of the outstanding amount of the Bonds or with the sanction of Special Resolution passed at a meeting of the concerned Bondholders, provided that nothing in such consent or resolution shall be operative against the Bank, where such consent or resolution modifies or varies the terms and conditions governing the Bonds, if the same are not acceptable to the Bank. The registered Bondholder or in case of joint-holders, the one whose name stands first in the Register of Bondholders shall be entitled to vote in respect of such Bonds, either in person or by proxy, at any meeting of the concerned Bondholders and every such holder shall be entitled to one vote on a show of hands and on a poll, his/her voting rights shall be in proportion to the outstanding nominal value of Bonds held by him/her on every resolution placed before such meeting of the Bondholders. The quorum for such meetings shall be at least five Bondholders present in person. The Bonds are subject to the provisions of the Companies Act, 1956, the Memorandum and Articles, the terms of this Information Memorandum and Application Form. Over and above such terms and conditions, the Bonds shall also be subject to other terms and conditions as may be incorporated in the Trustee Agreement/ Letters of Allotment/ Bond Certificates, guidelines, notifications and regulations relating to the issue of capital and listing of securities issued from time to time by the Government of India and/or other authorities and other documents that may be executed in respect of the Bonds. Save as otherwise provided in this Prospectus, the provisions contained in Annexure C and/or Annexure D to the Companies (Central Governments) General Rules and Forms, 1956 as prevailing and to the extent applicable, will apply to any meeting of the Bondholders, in relation to matters not otherwise provided for in terms of the Issue of the Bonds. A register of Bondholders will be maintained in accordance with Section 152 of the Act and all interest and principal sums becoming due and payable in respect of the Bonds will be paid to the registered holder thereof for the time being or in the case of joint-holders, to the person whose name stands first in the Register of Bondholders. The Bondholders will be entitled to their Bonds free from equities and/or cross claims by the Bank against the original or any intermediate holders thereof. Bonds can be rolled over only with the positive consent of the Bondholders.

MODIFICATION OF RIGHTS The rights, privileges, terms and conditions attached to the Bond may be varied, modified or abrogated with the consent, in writing, of those holders of the Bond who hold at least three fourth of the outstanding amount of the Bond or with the sanction accorded pursuant to a resolution passed at a meeting of the Bondholders, provided that nothing in such consent or resolution shall be operative against the Bank where such consent or resolution modifies or varies the terms and conditions of the Bond, if the same are not acceptable to the Bank.

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APPLICATIONS MAY BE MADE BY: 12 Provident/Superannuation/Gratuity/Pension Funds. 13 Commercial Banks, Financial Institutions and Insurance Companies, societies registered under the applicable laws in India and authorised to invest in bonds. 5. State/Central Co-operative Banks, Development Co-operative Banks, Land Development Banks, RRBs, Primary Co-operative Banks. 6. Mutual Funds, Companies, Bodies Corporate, Trusts and Association of Persons and Individuals. 7. Port Trusts. 8. Scientific and/or Industrial Research Organisations, authorised to invest in bonds.Other Government and Non-government agencies authorised to invest in these bonds as per present and relevant government guidelines. Although above investors are eligible to apply, only those persons, who are individually addressed through direct communication by the Bank, are eligible to apply for the Bonds. No other person may apply. Posting of Information Memorandum on the Designated Stock Exchange website should not be construed as an offer to issue and has been posted only as it is stipulated by SEBI. Investors should check about their eligibility before making any investment. The Applications must be accompanied by certified true copies of (1) Memorandum and Articles of Association/constitution/Bye-laws (2) Resolution ummarizing investment and containing operating instructions (3) Specimen signatures of authorised signatories and (4) Necessary forms for claiming exemption from deduction of tax at source on the interest income / interest on application money, wherever applicable. Application by Provident Funds, Superannuation Funds and Gratuity Funds The Government of India has, vide its Gazette notification dated 06.03.2003, in partial modification of notification no. F.11 (3-PD/98) dated March 31, 1999 has permitted Provident, Superannuation and Gratuity Funds to invest up to 30% of incremental accretions in the bonds/securities of public sector companies as defined under Section 2 (36-A) of the Income Tax Act, 1961. Also, an additional amount of 30% of the incremental accretions, can be invested at the discretion of the Board of Trustees in any of the remaining three prescribed categories of investments. The Bank is a public sector bank within the meaning of the said section, and hence Provident Funds, Superannuation Funds and Gratuity Funds can invest in the Bonds. The applications must be accompanied by certified true copies of (i) Trust Deed/Bye Laws/Resolutions, (ii) Resolution ummarizing investment and (iii) specimen signatures of the authorised signatories. Those desirous of claiming tax exemptions on interest on application money are compulsorily required to submit a certificate issued by the Income Tax Officer along with the Application Form. For subsequent interest payments, such certificates have to be submitted periodically. Applications by Commercial Banks Investment by commercial banks in subordinated debt issues of other banks would attract 100% risk weights for the investing bank. The applications must be in

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conformity with extant RBI guidelines and accompanied by certified true copies of i) Board Resolution ummarizing investment, ii) Power of Attorney and iii) specimen signatures of authorised signatories. Application by Regional Rural Banks Reserve Bank of India, vide circular No.RPCDNB.BC.98/03.05.34/94/95 dated January 2, 1995 and amended vide Circular No. RPCD.RRB.BC.882/03.05.34/96-97 dated December 13, 1996 has permitted RRBs to invest their surplus non-SLR funds in Bonds of public sector undertakings. However, the investments are subject to the prudential and single exposure norms of RBI. The applications must be accompanied by certified true copies of (i) Government Notification/Certificate of Incorporation/Articles and Memorandum of Association/Other deed governing the constitution, (ii) resolution ummarizing investment, (iii) Power of Attorney (iv) specimen signatures of authorised signatories and (v) income tax recognition certificate/Form 15 AA. Application by Primary/District/State/Central Co-Operative Banks/Land Development Banks Any State Co-operative Bank (SCB)/District Central Co-operative Bank (DCCB)/Primary Co-operative Bank (PCB)/Land Development Banks (LDBs) in any State would be eligible to invest in these Bonds with necessary approval. Reserve Bank of India vide notification NO. BR.CIR.72/16.20.00/93-94 dated 16th May 1994 have clarified that the primary co-operative banks can invest their surplus funds upto 10% of their deposits in Bonds of public sector undertakings, provided inter-alia that a provision exists for such investments in the respective state Co-operative Societies Act/Multi State Co-operative Societies Act and the Banks should take permission from the Registrar of Co-operative Societies of the State, for such investments. Further, Reserve Bank of India vide notification no. BR.12/16.20.00/95-96 dated Jan 6, 1996 has requested the Registrar of Co-operative Societies of all States to grant general permission to the primary co-operative banks for such investments, subject to their complying with other conditions and safety measures laid down by Reserve Bank of India from time to time. As per RBI circular no. PPF.ROC.9/07.02.03/98-99 dated June 23, 1999; Central/State Co-operative Banks can invest in PSU bonds an amount not exceeding 10% of their deposits and 5% of their average non-SLR surplus funds after obtaining requisite permission. The applications must be accompanied by certified true copies of i) Resolution ummarizing investment/Power of Attorney and ii) specimen signatures of authorised signatories. Application by Trusts Trusts, whose Trust Deeds provide for investment in Bonds may apply to this issue of bonds, subject to the approval of the Charity Commissioner or other appropriate authority as the case may be. The application must be accompanied by certified true copies of i) Trust Deed/Bye Laws, ii) Certificate of Registration, iii) Resolution ummarizing investment and containing operating instructions, iv) Specimen signatures of authorised signatories and v) Income exemption certificate (including interest on application money) / Form 15 AA (if applicable).

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Applications by Corporate Bodies/Companies/Fis/Statutory Corporations The applications must be accompanied by certified true copies of (i) Memorandum and Articles of Association/Constitution/Bye-laws, (ii) Resolution ummarizing investment and containing operating instructions, (iii) Specimen signatures of authorised signatories and (iv) Form 15 AA for claiming exemption from deduction of tax on the interest income (including interest on application money), if applicable. Applications under Power of Attorney In case of applications under Power of Attorney by limited companies or other bodies corporates or commercial banks or Regional Rural Banks/Primary/District/Central cooperative banks or, individuals, a certified copy of Power of Attorney with a copy of the relevant authority/resolution (other than individuals) must be deposited along with the Application Form. Application under Power of Attorney or by limited companies In case of applications made under a Power of Attorney or by a Limited Company or a Body Corporate or Registered Society or Mutual Fund, and scientific and/or industrial research ummarizing s or Trusts etc, the relevant Power of Attorney or the relevant resolution or authority to make the application, as the case may be, together with the certified true copy thereof along with the certified copy of the Memorandum and Articles of Association and/or Bye-Laws as the case may be must be attached to the Application Form or lodged for scrutiny separately with the photocopy of the Application Form, quoting the serial number of the Application Form and the Banks branch where the application has been submitted, at the office of the Registrars to the Issue after submission of the Application Form to the bankers to the issue or any of the designated branches as mentioned on the reverse of the Application Form, failing which the applications are liable to be rejected. Such authority received by the Registrars to the Issue more than 10 days after closure of the subscription list may not be considered. Individuals Individuals are also entitled to apply to the bond issue subject to the application qualifying for the minimum application amount and is valid in all other respects. Those desirous of claiming tax exemptions on interest on application money are compulsorily required to submit relevant declaration Form (as per I.T. Act 1961) along with the Application Form. For subsequent interest payments, such Forms have to be submitted periodically. In the case of joint applications, the number of such applicants should not be more than three. All communications and cheques for interest/redemption will be addressed to the applicant whose name appears first, at the address stated in the application form/register of Bondholders PAYMENT INSTRUCTIONS All Application Forms, duly completed, together with Cheque/Bank Drafts for the amount payable on application must be delivered before the closing of the issue list to the specified branches of State Bank Of Hyderabad named herein or to the Arranger to the Issue.

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Payment should be made by Cheque / Bank Draft. Cheques/Bank Drafts should be drawn on any Bank (including Co-operative Bank) which is situated at and is a member or sub-member of the Bankers Clearing House located at the place where the application is submitted. Outstation Cheque or Bank Drafts will not be accepted. Applications accompanied by such Cheques, or Bank Drafts are liable to be rejected. All Cheques or Bank Drafts must be made payable to State Bank Of HyderabadBond Issue and should be crossed A/c payee only. In case of payment by Cheque or Bank Draft, a separate instrument must accompany each Application form. No receipt will be issued for the application money. However, the Bankers to the Issue and/or their branches receiving the application will acknowledge receipt by stamping and returning to the applicant the acknowledgement slip at the bottom of each Application Form. For further instructions, please read the Application Form carefully. It is mandatory for the applicant to fill in the relevant columns in the Application Forms giving the particulars of their savings/current bank account number, the name and address of the bank with which such account is held to enable the issuer to print the said details in the Refund Orders in the name of the Payee. In case of Joint Applications, the first applicant must mention these details. Applications not containing these details are liable to be rejected. PAN/GIR NUMBER All Applicants should mention their Permanent Account Number or the GIR Number allotted under Income Tax Act, 1961 and the Income Tax Circle / Ward / District. In case where neither the PAN nor the GIR Number has been allotted, the fact of such a non-allotment should be mentioned in the Application Form in the space provided. SIGNATURES Signatures should be made in English or in any of the Indian languages. Thumb impressions must be attested by an authorised official of a bank or by a Magistrate/Notary Public under his/her official seal. NOMINATION FACILITY As per Section 109 A of the Companies Act, 1956, only individuals applying as sole applicant/Joint Applicant can nominate, in the prescribed manner, a person to whom his Bonds shall vest in the event of his death. Non-individuals including holders of Power of Attorney cannot nominate. DISPOSAL OF APPLICATIONS AND APPLICATION MONEY The Bank reserves, in its own, absolute and uncontrolled discretion and without assigning any reason, the right to accept in whole or in part or reject any application. If an application is rejected in full, the entire application money received will be refunded to the applicant. If the application is rejected in part, excess of the application money received will be refunded to the applicant within one week from the date of allotment of the bonds. No interest will be payable on the application money so refunded. Refund will be made by cheques or demand drafts drawn in favour of the sole/first applicant (including the details of his savings/ current account number and the name of the bank with whom the account is held) and will be dispatched by registered

37

post/courier. Such refund orders Demand Drafts/Cheques will be payable at par at specified ummari. The Bank has undertaken to make adequate funds available to the Registrar to the Offer for complying with the requirements of dispatch of Allotment Letters/Refund Orders by registered post/courier. DISPUTES & GOVERNING LAW The Bonds are governed by and shall be construed in accordance with the Indian Laws. The District Courts in Hyderabad, Andhra Pradesh alone shall have the jurisdiction in connection with any matter arising under these precincts. TRADING OF BONDS The trading of privately placed Debt securities would be permitted in standard denomination of Rs. 10.00 lakh in the anonymous, order driven system of the Stock Exchange in a separate trading segment. The marketable lot would be Rs. 10.00 lakh. All class of investors would be permitted to trade subject to the standard denomination/marketable lot. The trades executed on spot basis shall be required to be reported to the Stock Exchange. NOTICES Notice required to be given by the Bank to the Bondholders shall be deemed to have been given if sent by ordinary post/courier to the First Bondholder or if published in one All India English daily newspaper and one regional language newspaper. Any notice required to be given by the Bondholders shall be sent by registered post/courier/by hand delivery to the Bank or to such persons at such address as may be notified by the Bank from time to time. FUTURE BORROWINGS The Bank will be entitled to borrow/raise loans or avail finance in whatever form as also issue bonds / other securities in any manner having such ranking in priority, pari passu or otherwise and change the capital structure, including issue of shares of any class, on such terms and conditions as the Bank may think appropriate, without the consent of or intimation to the Bondholder(s) in this connection. MISCELLANEOUS A Register of Bondholders shall be maintained at the Head Office of the Bank. Such Register shall be closed thirty (30) business days prior to each interest payment date. In case of dissolution/bankruptcy/insolvency/winding up of Bondholders, the Bond certificates shall be transmittable to the Legal Representative(s)/Successor(s) or the Liquidator, in accordance with the law on such terms as may be deemed appropriate by the Bank. REGISTRARS M/s Karvy Computershare Pvt. Ltd., Banjara Hills, Hyderabad are acting as Registrar and Transfer agents for the Bank.

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TRUSTEES The Bank has appointed IDBI Trusteeship Services Ltd, 10th Floor, Nariman Bhavan, 227 Vinay K Shah Marg, Nariman Point, Mumbai 400002 as Bond Trustees registered with SEBI, for the holders of the Bonds (hereinafter referred to as Trustees). The Bank will enter into a Trustee Agreement/Trust Deed, inter-alia, specifying the powers, authorities and obligations of the Bank and the Trustees in respect of the Bonds. The Bondholders shall, without any further act or deed, be deemed to have irrevocably given their consent to and authorised the Trustees or any of their Agents or authorised officials to do, all incidental acts, deeds and things necessary in terms of this Memorandum of Private Placement. All rights and remedies under the Trust Deed/Trust Agreement and/or other security documents shall rest in and be exercised by the Trustees without having it referred to the Bondholders. Any payment made by the Bank to the Trustees on behalf of the Bondholder(s) shall discharge the Bank pro tanto to the Bondholder(s). The Trustees will protect the interest of the Bondholders in the event of default by the Bank in regard to timely payment of interest and repayment of principal and they will take necessary action at the cost of the Bank. The Trustees may appoint a nominee director on the Board of the Bank in consultation with other institutional Bondholders in the event of default. The major events of default which happen and continue without being remedied for a period of 30 days after the dates on which the monies specified in (i) and (ii) below become due and will necessitate repayment before stated maturity are as follows: i. Default in payment of monies due in respect of interest/principal owing upon the Bonds; ii. Default in payment of any other monies including costs, charges and expenses incurred by the Trustees. Other events of default are: i. Default is committed in the performance or observance of any covenant, condition or provision contained in these presents and/or the financial Covenants and Conditions (other than the obligation to pay principal and interest) and, except where the Trustees certify that such default is in their opinion incapable of remedy (in which case no notice shall be required), such default continues for 30 days after written notice has been given thereof by the Trustees to the Bank requiring the same to be remedied. ii. Any information given by the Bank in its applications to the Bondholders, in the reports and other information furnished by the Bank and the warranties given/deemed to have been given by it to the Bondholders/trustees is misleading or incorrect in any material respect. iii. The Bank is unable to or has admitted in writing its inability to pay its debt as they mature. iv. A Receiver or a Liquidator has been appointed or allowed to be appointed of all or any part of the undertaking of the Bank and such appointment is not dismissed within 60 days of appointment. v. The Bank ceases to carry on its business.

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RIGHTS, POWERS AND DISCRETION OF THE TRUSTEES In addition to the other powers conferred on the Trustees and provisions for their protection and not by way of limitation or derogation of anything contained in this Agreement nor of any statute limiting the liability of the Trustees, it is expressly stated as follows: a. The Trustees shall not be bound to give notice to any person of the execution hereof or to see to the performance or observance of any of the obligations hereby imposed on the Bank or in any way to interfere with the conduct of the Banks business unless and until the rights under the Bonds shall have become enforceable and the Trustees shall have determined to enforce the same; b. Save as herein otherwise expressly provided the Trustees shall, as regards all trusts, powers, authorities and discretions, have absolute and uncontrolled discretion as to the exercise thereof and to the mode and time of exercise thereof and in the absence of fraud shall not be responsible for any loss, costs, charges, expenses or inconvenience that may result from the exercise or non- exercise thereof and in particular they shall not be bound to act at the request or direction of the Bondholders under any provisions of these presents unless sufficient monies shall have been provided or provision to the satisfaction of the Trustees made for providing the same and the Trustees are indemnified to their satisfaction against all further costs, charges, expenses and liability which may be incurred in complying with such request or direction; c. With a view to facilitate any dealing under any provision of these presents the Trustees shall have full power to consent (where such consent is required) to a specified transaction or class of transactions conditionally; d. The Trustees shall not be responsible for the monies paid by applicants for the Bonds; e. The Trustees shall not be responsible for acting upon any resolution purporting to have been passed at any meeting of the Bondholders in respect whereof minutes have been made and signed even though it may subsequently be found that there was some defect in the constitution of the meeting or the passing of the resolution or that for any reason the resolution was not valid or binding upon the Bondholders; f. The Trustees shall have full power to determine all questions and doubts arising in relation to any of the provisions hereof and every such determination bonafide made (whether or not the same shall relate wholly or partially to the acts or proceedings of the Trustees) shall be conclusive and binding upon all persons interested hereunder; g. The Trustees shall not be liable for anything whatsoever except a breach of trust knowingly and intentionally committed by the Trustees; h. The Trustees shall not be liable for any default, omission or delay in performing or exercising any of the powers or trusts herein expressed or contained or any of them or in enforcing the covenants herein contained or any of them or in giving notice to any person or persons of the execution hereof or in taking any other steps which may be necessary, expedient or desirable for any loss or injury which may be occasioned by reason thereof unless the Trustees shall have been previously requested by notice in writing to perform, exercise or do any of such steps as aforesaid by the holders representing not less than three-fourths of the nominal amount of the Bonds for the time being outstanding or by a Special Resolution duly passed at a meeting of the Bondholders and the Trustees shall not be bound to perform, exercise or do any such acts, powers or things or to take any such steps unless and until sufficient monies shall have been provided or provision to the

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satisfaction of the Trustees made for providing the same by or on behalf of the Bondholders or some of them in order to provide for any costs, charges and expenses which the Trustees may incur or may have to pay in connection with the same and the Trustees are indemnified to their satisfaction against all further costs, charges, expenses and liabilities which may be incurred in complying with such request. i. Provided nevertheless that nothing contained in this clause shall exempt the Trustees from or indemnify them against any liability for breach of trust nor any liability which by virtue of any rule or law would otherwise attach to them in respect of any negligence, default or breach of trust which they may be guilty of in relation to their duties hereunder.

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TAX BENEFITS 14 TO THE BANK1. Under Section 10(23G) of the Income Tax Act, 1961 any income by way of dividends, interest or long term capital gains of the Bank arising from Investments made on or after the first day of June 1998, by way of Bonds/securities or long term finance in any enterprise wholly engaged in the business of: i. developing or ii. maintaining and operating or iii. developing, maintaining and operating any infrastructure facility which has been approved by the Central Government and which satisfied the prescribed conditions as per rule 2E of the Income Tax Rules, 1962, is exempt from tax. 2. Under Section 36(1)(viia) of the Income Tax Act in respect of any provision made for bad and doubtful debts, the Bank is entitled to a deduction not exceeding: i. 7.5% of the total income (computed before making any deductions under this clause and Chapter VIA) and ii. 10% of the aggregate average advances made by the rural branches of the Bank computed in the prescribed manner. Also the Bank shall, at its option, be allowed a further deduction in excess of the limit specified above, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government provided such income has been disclosed in its return of income under the head Profits and gains of business or profession. 3. In addition to the deduction available under Section 36(1)(viia) of the Income Tax Act, the Bank is entitled to claim a deduction under Section 36(1)(vii) of the Income Tax Act for the amount of bad debts written off as irrecoverable in the accounts. The deduction shall be limited to the amount by which such debt or part thereof, which exceeds the credit balance in the provision for bad and doubtful debts account made under Section 36(1)(viia) and subject to the compliance of provisions of Section 36(2)(v). 4. Under the provisions of Section 43D of the Income Tax Act interest income on certain categories of bad or doubtful debts as specified in Rule 6EA of the Income Tax Rules having regard to the guidelines issued by Reserve Bank of India in relation to such debts shall be chargeable to tax, only in the year in which it is actually received or the year in which it is credited to the Profit and Loss Account by the Bank, whichever is earlier.

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5. Under Second Proviso to Section 48 of the Income Tax Act, the long term capital gains of the Bank arising on transfer of capital assets other than bonds and debentures (not being capital indexed bonds) will be computed after indexing the cost of acquisition, improvement and would be charged at a concessional rate of 20% as per Section 112 of the Income Tax Act plus applicable surcharge and education cess. Alternatively, at the option of the bank, where the tax payable in respect of any such long term capital gains exceeds 10% of the amount of capital gains arrived at without indexing the cost, the capital gains is charged at 10% plus applicable surcharge and education cess. 6. Under the provisions of 54EC of the Income Tax Act and subject to conditions specified therein, the Bank is eligible to claim exemption from the tax arising on long-term capital gains, by investing the capital gain in long term specified asset (being certain notified bonds), within six months from the date of transfer of capital asset. If only a portion of the capital gains is invested, then the exemption is proportionately available. If the specified asset is transferred or converted into money at any time within a period of three years from the date of acquisition, the amount of capital gains on which tax was not charged earlier shall be deemed to be income chargeable by way of Long Term Capital Gains of the year in which the specified asset is transferred. 7. Under Section 54ED of the Income Tax Act, capital gains arising from the transfer of investment held as long term capital asset, being listed securities or unit is exempt fully from tax if the Bank invests within a period six months from the date of such transfer, the whole of the capital gains in acquiring specified equity shares forming part of an eligible issue of capital as defined in clause (i) to explanation in the above section. Where only a part of the capital gains is so invested then the exemption is proportionately available. The exemption is available subject to other conditions specified in that Section. If the specified equity shares are sold or otherwise transferred within a period of one year from the date of acquisition, the amount of capital gains on which tax was not charged earlier shall be deemed to be income chargeable as Long Term Capital Gain of the year in which the specified equity shares are transferred. 8. In accordance with Section 10(34) of the Income Tax Act, dividend income as referred to in Section 115-O of the Act, is exempt from tax in the hands of the Bank. 9. In accordance with Section 10(35) of the Income Tax Act, the following income shall be exempt in the hands of the Bank:

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15 Income received in respect of the units of a Mutual Fund specified under clause (23D); or b) Income received in respect of units from the Administrator of the specified undertaking; or c) Income received in respect of units from the specified company; Provided that this exemption does not apply to any income arising from transfer of units of the Administrator of the specified undertaking or of the specified company or of a mutual fund, as the case may be. 10. In accordance to the section 10(38) of the Income Tax Act, any income arising from the transfer of a long term capital asset being an equity share in a company or a unit of a equity oriented fund is exempt from tax, subject to provisions of the Chapter VII of the Finance (No.2) Act 11. In accordance to the section 88E, where the total income of the bank in the previous year includes any income under the head Profits & Gains of business or profession arising from taxable securities transactions, be entitled to deduction from income tax, an amount equal to this security transaction tax paid by the bank in respect of the taxable securities transactions. TO THE RESIDENT BONDHOLDERS OF THE BANK: Capital Gains: The difference between the sale price on transfer and cost of acquisition of the bond held by bondholder as a capital asset, will be treated as long term capital gain/loss in the hands of the investor, provided such bond was held for a continuous period of more than twelve months. 12. As per Section 54ED of the Income Tax Act, long term capital gains arising from transfer of Bonds/securities of the Bank on its Bonds/securities being listed, is fully exempt from tax if the assessee invests within a period of six months from the date of transfer, the whole of the capital gains in acquiring equity Bonds/securities forming part of an eligible issue of capital as defined in clause (i) to explanation in the above section. Where only a part of the capital gains is so invested, then the exemption is proportionately available. The exemption is available subject to conditions specified in that Section. If the specified equity shares are sold or otherwise transferred within a period of three years from the date of acquisition, the amount of capital gains on which tax was not charged earlier shall be deemed to be income chargeable under the head Capital Gains of the year in which the specified equity shares are transferred. 13. As per the provisions of Section 54F of the Income Tax Act, 1961, long term capital gains arising in the hands of an individual or HUF on transfer of Bonds/securities of the Bank shall be exempt if the net consideration is invested in purchase of residential house within a period of one year

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before or two years from the date of transfer or constructs a residential house within a period of three years from the date of transfer. The exemption is available proportionately if only a portion of the net consideration is invested as above. The exemption is subject to other conditions specified in that Section. If the new residential house is transferred within a period of three years from the date of purchase or construction, the amount of capital gains on which tax was not charged earlier, shall be deemed to be income chargeable under the head Capital Gains of the year in which the residential house is transferred. 14. Under Section 112 of the Income Tax Act, where the Total Income of any assessee includes any long term capital gains on transfer of Bonds/debenture of the Bank, then the tax will be at rate of tax at 20% of amount capital gain plus applicable surcharge and education cess. It may be noted no benefit of cost indexation u/s 48 is available, on bonds issued as per the proviso to section 48. 15. No Wealth Tax is payable in respect of investments in Bonds/securities of the Bank. 16 BENEFITS AVAILABLE TO MUTUAL FUNDS As per the provisions of Section 10(23D) of the Act, dividend income from Investments in Bonds/securities of the Bank or income by way of short term or long term capital gains arising from transfer of such Bonds/securities earned by Mutual Funds registered under the Securities and Exchange Board of India Act, 1992 or Regulations made there under, mutual funds set up by the Public Sector Banks or Public Financial Institutions and Mutual Funds authorized by the Reserve Bank of India would be exempt from Income tax subject to the conditions as the Central Government may by notification in the Official Gazette specify in this behalf.

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PARTICULARS OF THE PLACEMENT OBJECTS OF THE PLACEMENT The present Issue of Bonds is being made to a. Augment the capital base of the Bank to meet its future capital adequacy requirements. b. Augment the long-term resources of the Bank. CAPITAL ADEQUACY POSITION OF THE BANK The Capital Adequacy Ratio (CAR) of the Bank as on March 31, 2003 was 14.91%, 14.29 % as on March 31, 2004 and 11.74 % as on March 31, 2005 as against the RBI stipulation of 9.00%. Details of capital vis--vis risk weighted assets are as under: (Rs crores) Year ended March 31 2001 2002 2003 2004 2005 Eligible Tier I Capital 727.11 866.01 980.40 1013.89 1205.78 505.31 Eligible Tier II Capital 207.11 380.05 707.07 661.32 1485.71 Total Capital 934.22 1246.06 1720.96 1867.10 9958.92 12045.38 15908.17 Total Risk-Adjusted Assets 7607.22 9114.30 14.91 Capital Adequacy Ratio (%) 12.28 13.67 14.29 11.74 REQUIREMENT OF CAPITAL ENHANCEMENT The Bank expects substantial growth in its business activities and operations in the coming years. The risk-weighted assets of the Bank are expected to increase with rise in business level. The capital requirement will also increase due to Basel II norms. Increase in Tier I capital through plough-back of profits alone may not be enough to enable the Bank to maintain sufficient capital adequacy ratio. In view of these factors, the Bank proposes to augment its Net worth in order to sustain a healthy CAR. USE OF OFFER PROCEEDS The proceeds of this offer will be utilized for the regular business activities of the Bank. The Bank has to increase its Capital to match the growth in Assets and maintain level of CAR higher than the minimum prescribed level. The requirement of Capital has increased on account of phased convergence to Basel II norms by Reserve Bank of India and growth in credit.

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OVERVIEW OF THE BANKING SECTOR

Scheduled Banks in India

Scheduled Commercial Banks

Scheduled Co operative Banks -

Public Sector Banks

Private Sector Banks

Foreign Banks

Regional Rural Banks

Nationalized Banks

SBI & its Associates.

Old Private Banks

New Private Banks

Structure of Indian Banking Industry The formal banking system in India comprises the Reserve Bank of India, Commercial Banks, Regional Rural Banks and the Co-operative Banks. In the recent past, private non-banking finance companies also have been active in the financial system, and are being regulated by the RBI. Scheduled Commercial Banks (SCBs) The scheduled commercial banks (SCBs) comprise of Public Sector Banks (SBI Group + Nationalised banks), Private Sector Banks and Foreign Banks. Public Sector Banks (PSBs) The banking sector in India has been characterized by the predominance of PSBs. The PSBs had 46,683 branches (SBI & Associates: 13,593; Nationalised Banks: 33,090) as on 31st March 2004. The aggregate assets of all PSBs stood at Rs.14,71,427.67 Crores at end FY04 accounting for nearly 74.50% of assets of all SCBs in India as on March 31st, 2004. The PSBs large network of branches enables them to fund themselves with low-cost deposits. PSBs account for 77.90% of deposits, 73.20% of advances, and 74.88% of income, of all Scheduled Commercial Banks at end FY- 04, thus demonstrating clearly their dominance of the Indian banking sector. Private Sector Banks In July 1993, as part of the banking sector reform process and as a measure to induce competition in the banking sector, the RBI permitted entry by the private sector into the banking system. This resulted in the addition of 10 private sector banks. These banks are collectively known as the `new private sector banks. Private sector banks operated through 5,607 branches as at end FY 2003-04. As on March 31st, 2004, total assets of private sector banks aggregated Rs.3,67,276.18 crore and accounted for 18.60% of the total assets of all SCBs. Although the share of private sector banks in total assets has increased from 12.61% as at the end FY01 to 18.60% as on March, 2004, new private sector banks have accounted for most of the gain. The new private sector banks share of the assets of all private sector banks increased from 27.5% at end-

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FY97 to 67.14 % on 31.3.2004 (12.48% of assets of SCBs). The share of old private sector banks in total assets of SCBs has decreased marginally from 6.40% at the end FY 1996-97 to 6.11% at the end of 2003-04. Foreign Banks Presently, there are 33 foreign banks operating in India with 220 branches as on March 31st, 2004. At end-FY 2003-04, the total assets of Foreign Banks aggregated Rs.1,36,315.72 crore and accounted for 6.90% of the total assets of all SCBs. The primary activity of most Foreign Banks in India has been in the corporate segment. However, in recent years, some of the larger foreign banks have started making consumer financing a larger part of their portfolios, based on the growth opportunities in this area in India. These banks also offer products such as automobile finance, home loans, credit cards and household consumer finance. (Rs in Crores)
Deposits Advances Total Income Category 2000-01 2001-02 2002-03 2000-01 2001-02 2002-03 2000-01 2001-02 2002-03 Public Sector Banks 968624 1079167 1226838 480118 548437 632740 117252 128464 137602 Private Sector 169433 207174 268549 116841 138949 170896 20817 31846 33153 Banks 64511 69313 79756 48632 52168 60507 12964 12035 13012 Foreign Banks Regional Rural 44539 17710 5561 Banks Source: RBI Publications for Banking Sector Statistics

Public Sector Banks Year Income Interest Earned Other income Expenditure Interest expended Operating expenses Provisions and contingencies Operating profit Net Profit Net interest spread

2003-04 137,601.81 109,496.25 28,105.56 121,055.44 65,764.53 32,362.56 22,928.35 39,474.72 16,546.37 43,731.72

2002-03 128,464.38 107,232.05 21,232.33 116,168.92 69,852.59 28,894.55 17,421.78 29,717.24 12,295.46 37,379.46

2001-02 117,252.36 100,710.96 16,541.40 108,947.51 69,153.77 26,422.05 13,371.69 21,676.54 8,304.85 31,557.19

Source: RBI Report on trends and Progress of Banking in India 2003-04

The salient features in the evolution of Indian Banking are as follows: The number of banks, including Regional Rural Banks (RRBs) has increased from 89 in 1969 to 290 in June, 2004. The population per branch has declined significantly, from 75,000 in 1950 to 16,000 in 2004. With the nationalization of Banks in 1969, the number of Bank branches (including Regional Rural Banks) increased from 8,262 in 48

1969 to 66,970 in march 2004. Though most of the expansion was in rural and semiurban areas the share of rural branches has marginally declined to 48.00% in June, 2004 from 48.40 as at end- June, 2003. The credit-deposit ratio of SCBs has reached 58.70% as on March 31, 2004, with investment plus credit-deposit ratio being 66.40% as on March 31, 2004. Priority sector lending, which comprises lending to agriculture, SSI and other Priority sectors, increased to Rs.2,45,672 crore in 2003-04 and the percentage of outstanding advances under Priority sector to Net Bank Credit stood at 44% as against the minimum stipulated level of 40%. Performance of Banking Industry During 2005-2006 (up to 26.08.05), aggregate deposits has recorded a growth of 4.22% (Rs. 74,623 Crore) as compared with 3.66% (Rs.56,134 Crore) in the corresponding period of the previous year. Bank credit increased y-o-y by Rs.293189 Crore as on August 2005, reflecting an increase of 32.28% (YOY). Though there were clear indications for pick up of credit in 2003-04, there was change in the composition of credit off take. Food credit recorded a growth of Rs.248 crores (0.62%). Non-food credit registered a welcome increase of Rs. 2,92,941crores (33.73%) y-o-y reflecting a turnaround in the industrial climate. The investments made by SCBs in government and approved securities increased by Rs. 20766 Crores (19.00%) as on 31.03.04 over the last year. Recent Trends in Banking Industry In recent years, the Banking Industry has been undergoing rapid changes, reflecting number of underlying developments. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI Act) was enacted. It seeks to deal with Securitisation of assets, setting up of Asset Reconstruction Company (ARCs), and more importantly enforcement of security for realisation of dues without the intervention of court or Tribunals. The first asset reconstruction company called Asset Reconstruction Company of India Limited (ARCIL) has been incorporated. Absorption of technology and upgradation of technological infrastructure, have accelerated and broadened dissemination of financial information while lowering the costs of many financial activities. This has also led to transparency in information to the public on deposits and advances and interest rate structures. For the commercial banks, the fiscal year 2004-05 was by and large characterised by firming up of interest rates. There has also been a good inflow of foreign exchange into the country, taking the forex reserves of the country to all time high crossing USD 140 billion mark. With higher credit growth after three years of considerable gains from Treasury operations, banks experienced a sharp decline in profits from treasury operations in the year 2004-05. banks have been increasingly deploying resources for extending credit to all segments of the market- particularly in the retail segment. Housing finance segment accounts for nearly 80% of the retail finance segment. The stance of the Monetary Policy in recent years has been to maintain adequate liquidity in the market with minimum intervention. With a view to having a vibrant and

49

resilient competitive financial sector for sustenance of the reform process in the real sector of the economy, the focus has been on structural and regulatory measures to strengthen the financial system. These measures have been guided by the objectives of increasing operational efficacy of the Monetary policy, redefining the regulatory goal of Reserve Bank of India, and strengthening of prudential norms. These developments have manifold consequences for the institutional and systemic structure of the financial sector in general and banking in particular. The business profile of financial institutions is also undergoing change. Mergers and takeovers of smaller institutions have led to the emergence of transnational conglomerates, offering services ranging from traditional commercial banking to investment banking and insurance. Reserve Bank of India has been erecting the framework for the banks to adopt Basel-II standards and norms by 2007. There are indications that the Indian banking industry will soon witness a period of consolidation and realignment.

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BANK AND MANAGEMENT HISTORY & BACKGROUND OF THE BANK State Bank of Hyderabad was constituted as Hyderabad State Bank on August 8th 1941 under the Hyderabad State Bank Act, 1941. The Bank started as the central bank to the erstwhile princely State of Hyderabad for managing its currency Osmania Sikka - and public debt, besides functioning as a commercial bank. The first branch of the Bank was opened at Gunfoundry, Hyderabad on 5th April 1942. In 1953 the Bank took over the assets and liabilities of the Hyderabad Mercantile Bank Ltd., and in the same year, the Bank started conducting Government and Treasury business as an agent of Reserve Bank of India. In 1956, the Bank was taken over by Reserve Bank of India as its first subsidiary and its name was changed from Hyderabad State Bank to State Bank of Hyderabad The Bank became a subsidiary of the State Bank of India on 1st October, 1959 and is now the largest Associate Bank of State Bank of India. The Banks core geographical area of operation continues to be the erstwhile State of the Nizam of Hyderabad comprising of Telangana region in Andhra Pradesh, Hyderabad-Karnataka region of Karnataka and Marathwada region in Maharashtra. With 70.82% of its branches located in these areas, the Bank has been playing a catalytic role in the economic development of these regions through financing of commerce, industry and agriculture. The Bank has, over the years, also broad-based its operations in other parts of the country and now has a network of 1344 outlets (929 branches and 80 Extension Counters, 5 satellite offices and 330 ATMs) spread over 12 States and 2 Union Territories. 289 branches conduct government business (State/Central) and 215 branches maintain currency chests. The Bank has established 70 specialized branches that focus on identified specific segments of business like Personal & Services Banking, Agricultural Development Banking, and Small Scale Industries. Treasury Branches for Government business, etc. All branches of the Bank are computerized and have extended working hours. All ATMs of the Bank are linked to the network of more than 5000 ATMs of the State Bank Group enabling customers to draw cash anywhere in the country at any time. The Single Window Services facility at branches provides convenience to customers to conduct all their banking transactions at a single point in the branch. Organizational Set-up: The organizational set-up is represented by the Managing Director at the top assisted by the Chief General Manager and 6 General Managers lokking after the functions of operations, Commercial and International Banking, Planning & Development, Treasury, Inspection & vigilance; and Information & Technology. The Bank has 6 decentralized units i.e., Zonal Offices at Hyderabad, Secunderabad, Warangal, Vizag, Gulbarga and Aurangabad and two independent Regional Offices at New Delhi and

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Mumbai headed by Deputy General Managers. The Bank also has a Commercial Module comprising of branches dealing with high-value corporate business. Top executives of the bank at the Head Office are as under:
STATE BANK OF HYDERABAD - ORGANISATIONAL STRUCTURE
----------------------------------------------------------------------------------------------------------------------MANAGING DIRECTOR

MD's Dept.

CHIEF GENERAL MANAGER

AGM (BPR)

GENERAL MANGAER (OPERATIONS)

GENERAL MANAGER (C & IB)

GENERAL MANAGER (TREASURY)

GENERAL MANAGER (INSPECTION & CVO)

GENERAL MANAGER (TECHNOLOGY)

GENERAL MANAGER (P&D)

6 Zones, RO -Delhi & Mumbai, Gunfoundry Br. Scope Complex Br.

DGM (PER & HRD)

Commercial Module (DGM Branches)

DGM (A&S)

DGM (Inspection)

DGM (CPPD)

DGM (RRB)

DGM (Credit)

AGM (Central Accounts Dept)

CM (ABSOT)

AGM (Compliance)

AGM (Core Banking)

DGM (PER & HRD) CM (HRD) & All STCs

CM (Personal) CM (Indsustrial Relations)

DGM (Recovery)

Commercial Module (AGM Branches)

AGM (Marchent Banking)
CM (BalanSheet) CM (Govt. A/cs)
CM (PPG)

AGM (Vigilance)

CM (MIS)

AGM (D&RB)

DGM (Credit Audit)

C.M.(Systems & Procedures)

CM (SIB) CM (AGR)

CM (ARMC)

AGM(Industrial Rehabilitation)
CM (GALC), Nagapur Mgr (AGCL), Mumbai

CM (Risk Management)

CM (P & SB) CM (Lead Bank)

AGM (P & ES) Premises

DGM (Law)

CM(International Banking)

Mgr (FMC), Bangalore

AGM (Marketing)

DGM (Domestic Treasury)

CM(C & I Banking)

CM (Estates) CM (Stationery)
AGM (Planning)

AGM (Security)

DGM (Forex Treasury)

CM (DPD)

CM (ALM)

AGM (PR & Liaison)

CM (OPD)

CM (Insurance)

CM (OAD)

CM(ADV), CM(GB) GM (O)Sectt. Mrg(Grievances Cell)

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CM (BOD) CM (OLD)

Business Profile The total deposits of the Bank as at the end of March, 2005 was Rs.28929.52 crores and the total advances stood at Rs15599.74 crores. The Banks advances to priority sector stood at Rs. 6388.72 crores and constituted 40.65 % of its net bank credit. Advances to agriculture stood at Rs. 2113.42 crores and export credit stood at Rs. 1119.10 crores. The gross NPA ratio has come down sharply from 5.56% as on 31.03.2004 to 3.46% as on 31.03.2005. The Banks provision on NPAs is more than the amount prescribed under IRAC norms. The net NPA ratio of the Bank stood at 0.61% as on 31.03.2005. The Bank has recorded Net profits of Rs. 250.90 crores for the year ended 31st March 2005. New Products launched by the Bank The following new products were launched by the bank to cater to the needs of the present day demands in the market: Personal Segment o SBH Varun Mitra o SBH Vanita Gold o SBH Paryatan Scheme o Rakshak Suvidha Scheme O Kanya Vivah Suvidha Scheme o Valmiki Ambedkar Awas Yojana o Adhyapak Suvidha Scheme o Credit to credit card holders o Personnel Rupee loans to NRIs o SBH Fast Credit o SBH Rail Plus o SBH Sanchar Plus o SBH Siri Sampada o SBH Journalist Plus o Tax Suvidha Scheme Small Industries and Business Segment o SME Credit Plus o SME Smart Score o Udyogabandhu Scheme o Laghu Udyami Credit Card Scheme o Fin Bowl Scheme o Doctor Plus o Software Professional Plus o Tourism Finance o Rajiv Yuva Shakti o Technological Upgradation of Rice Mills o Shramajeevi Yojana Commercial & Institutional Segment o Rent Plus Scheme o Mortgage Loan Scheme

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Agriculture Segment o Medicinal and Aromatic Plants o Gram Nivas Scheme o Sahayog Nivas Scheme o Kisan Credit Card Scheme o Agro-clinic Schemes O Star Kisan Credit Card Scheme

Cross-Selling All branches are authorized to conduct the business of selling SBI Life products and General Insurance business (non-life). Accredition is obtained from IRDA to impart bancassurance (life) training. Corporate agency of United India Insurance Company Ltd. Has been obtained for non-life insurance activities. For sale of mutual fund units, the bank has a tie-up with SBI Mutual Fund. Future plans: A few important corporate goals of the bank for FY 2005-06 are as follows: Operating profits of Rs.950 crores. Increase of 2 basis points in the market share of the Bank in deposits of SCBs with growth of Rs. 4800 crores. Increase of 8 basis points in the market share of the Banks in advances of SCBs with growth of Rs.4000 crores. Increase in non-interest income of branches by at least 17% All branches to be networked with core banking solutions. Extension of transaction based internet banking facility. Main Objects of the Bank The SBI (SB) Act was enacted, providing for formation of seven subsidiaries to SBI including SET and for the constitution, management and control of the subsidiary banks so formed and for matters connected there with or incidental thereto. Chapter II Section 4(3) of the SBI (SB) Act provides that the Bank shall carry on the business of banking and other business in accordance with the provisions of the ACT and shall have the power to acquire and hold property whether moveable or immoveable for the purpose of its business and to dispose off the same. Business of the Bank Sections 36, 36(A), 37 and 38 of Chapter VI of the SBI (SB) Act provide that: Subsidiary Bank to Act as Agent of State Bank: 36 (1) A Subsidiary Bank shall, if so required by the State Bank, act as Agent of the State Bank at any place in India for a. Paying, receiving, collecting and remitting money, bullion and securities on behalf of any government in India; and b. Undertaking and transacting any other business which the Reserve Bank may, from time to time, entrust to State Bank. Subsidiary Bank to Act as Agent of Reserve Bank: Section 36(A) A Subsidiary Bank shall, if so required by the Reserve Bank, act as Agent of the Reserve Bank at all places in India where it has a branch for:

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a. Paying, receiving, collecting and remitting money, bullion and securities on behalf of any government in India; and b. Undertaking and transacting any other business which the Reserve Bank may, from time to time, entrust to it. Section 36A(4) A subsidiary bank may transact any business or perform any functions entrusted to it under sub-section (1) by itself or through any agency approved by the Reserve Bank. Other business, which the Bank may undertake Section 37(1): Subject to the other provisions contained in this Act, a subsidiary bank may carry on and transact the business of banking as defined in clause (b) of Section 5 of the Banking Regulation Act, 1949, and may engage in one or more of the other forms of business specified in sub-section (1) of section 6 of that Act. Clause (b) of Section 5 of the Banking Regulation Act, 1949, states-Banking means the accepting for the purpose of lending or investment, deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft or otherwise. Section 37(2): The Central Government may, after consultation with Reserve Bank and the State Bank, by order in Writing: a. Authorise a subsidiary bank to do such other forms of business as the Central Government may consider necessary or expedient; b. Direct as any form of business as is mentioned in the order, shall be carried on subject to such restrictions, conditions and safeguards as may be specified therein; or c. Prohibit a subsidiary bank from carrying on or transacting any form of business which, but for this clause, it is lawful for the subsidiary bank to engage in. Business, which the Bank may not transact: Section 37 (3) Save as otherwise provided under Sub-section (2) of Section 37 of the SBI (SB) Act a subsidiary bank shall not engage in any form of business other than referred to in sub-section (1) of Section 37 of the said Act. Bank may acquire the Business of Other Banks: Section 38 (1) A subsidiary bank may, with the approval of the State bank, and shall, if the Reserve Bank, in consultation with State Bank, so direct, enter into negotiations for acquiring the business, including the assets and liabilities of any other banking institutions. BRANCH NETWORK OF THE BANK The Bank has 6 Zonal Offices, a Commercial module and 27 Regional Offices. The 929 branches and 80 extension counters as on March 31, 2005, (including 70 specialized branches (excluding currency chest branches)) are under the control of these modules. The Zonal offices, the Commercial Module, two of the Regional Offices (Mumbai & New Delhi) and six of the branches are headed by Deputy General Managers.

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Distribution of Branch Network The population group-wise break up of branches as on March 31, 2005 in India is as follows: Population Group Number of branches % Share to Total Rural 286 30.79 Semi-Urban 290 31.22 Urban 197 21.20 Metropolitan /Port Town 156 16.79 Total 929 100 Geographical Distribution of Branches is as under: % Share to State / Union Territory No. of branches Total ANDHRA PRADESH 579 62.33 DELHI 10 1.08 GUJARAT 6 0.65 HARYANA 5 0.54 KARNATAKA 115 12.38 KERALA 6 0.65 MADHYA PRADESH 3 0.32 MAHARASHTRA 164 17.65 ORISSA 5 0.54 PONDICHERRY 1 0.11 PUNJAB 2 0.22 RAJASTHAN 2 0.22 TAMIL NADU 19 2.05 U T (CHANDIGARH) 1 0.11 UTTAR PRADESH 5 0.54 WEST BENGAL 6 0.65 TOTAL 929 100.00 The following is the break-up of specialized branches of the Bank Specialised Branches ADBs Industrial Finance NRI Overseas Personal & Commercial P&SB SIB SSI Treasury Commercial 56 No.of branches 24 3 1 2 2 8 8 5 2 2

Service branches 12 Asset recovery 1 Total 70 (Bank has 211 Currency chest branches and 187 branches conduct Govt. business BUSINESS OF THE BANK & ITS PRODUCTS AND SERVICES DEPOSITS As on Deposits (Global) Annual Growth Amount Annual Growth Percent Cost of Deposits (Global) (%) (Rs. In crores) 31-Mar-01 31-Mar-02 31-Mar-03 31-Mar-04 31-Mar-05 14841.86 17402.75 20598.94 24257.85 28929.51 2314.84 2560.89 3196.19 3658.91 4671.66 18.48 17.25 18.37 17.76 19.25 7.86 7.83 7.01 5.97 5.20

Total global deposits of the Bank as on March 31, 2005, touched a level of Rs. 28929.51 crores. The same was Rs. 24257.85 crores on 31st March 2004 and in 200405 the growth was thus Rs.4671.66 crores. The category-wise break-up of total deposits during last 5 years is presented below: (Rs. In crores) As on March March March March March 31, 2001 31, 2002 31, 2003 31, 2004 31, 2005 Current Deposits 2321.30 2484.14 2551.88 3062.42 3490.99 Savings Bank 2784.27 3194.22 3939.69 4756.82 5435.22 Deposits Term Deposits 9055.76 10981.03 13418.32 15677.35 19242.13 Bank Deposits 680.53 743.36 689.05 761.26 761.17 Total 14841.86 17402.75 20598.94 24257.85 28929.51 Distribution of Deposits The population group-wise break-up of total domestic deposits for the last five years is as given in the table below: As on March March March March March 31, 2001 31, 2002 31, 2003 31, 2004 31, 2005 Rural 1301.63 1435.73 1590.24 1831.47 2178.39 Semi-Urban 3609.54 4117.49 4665.66 5222.72 6072.30 Urban 2738.32 3252.57 3742.83 4342.15 5103.17 Metropolitan 7192.37 8596.96 10600.21 12861.51 15575.65 Total 14841.86 17402.75 20598.94 24257.85 28929.51 ADVANCES Growth of Advances The growth of the Banks advances during the past five years, both in India and Overseas is as follows: (Rs. In crores) Year ended March 31 2001 2002 2003 2004 2005

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Advances Annual growth amount Annual growth (%) Yield on advances

7091.49 1010.58 16.62 11.04

8422.58 1331.09 18.77 10.93

9662.60 1240.02 14.72 9.96

11813.68 2151.08 22.26 9.11

15599.74 3786.06 32.05 8.32

Population group wise classification of Advances The population group-wise classification of the Banks advances is as under: (Rs. In crores) As on March March 31, March 31, March March 31, 2001 2002 2003 31, 2004 31, 2005 Rural 716.24 795.93 930.51 998.26 1350.94 Semi-Urban 1386.39 1569.97 1884.20 2320.21 2932.75 Urban 991.39 1103.36 1416.54 1821.67 2358.68 Metropolitan 3997.47 4953.32 5431.35 6673.54 8957.37 Total 7091.49 8422.58 9662.60 11813.68 15599.74 (Domestic) Total 7091.49 8422.58 9662.60 11813.68 15599.74 TREASURY & INTERNATIONAL OPERATIONS: Investments The gross investments of the Bank in Government, approved and other securities increased from Rs. 14585.69 crores as at the end of March 2004 to Rs. 14604.74 crores as at the end of March 2005, recording a growth rate of 0.13 % (Rs. 19.05 crores). Due to hardening of the interest rates during the year, the banks profit on sale of investments declined substantially from Rs. 411.55 crores in 2003-04 to Rs. 79.96 crores in 2004-05. The average yield on investments has come down from 8.50% during 2003-04 to 8.00% during the year 2004-05. The modified duration of the investment portfolio (excluding reverse repos) improved from 4.80 to 4.13 which is advantageous in rising rate scenario. International Banking The foreign exchange turnover of the Bank increased from Rs.12240.00 crores in 2003-04 to Rs. 1439.28 crores during 2004-05, thus registering a growth of Rs. 2149.8 crores (17.56 %). Purchase transactions constituted Rs 6345.15 crore of the turnover while sales transactions accounted for 8044.13 crore. The profit generated from forex business during the year 2004-05 recorded Rs.25.18 crores as against Rs. 23.02 crores recorded during 2003-04. There was a continued demand for export credit denominated in foreign currency during the year. Such credit stood at USD 170.00 millions, as at the end of the year, as against USD 172.39 millions, as at the end of the previous year. The level of export credit (including credit denominated in foreign currency), as at the end of March 2005, was Rs. 1119.09crores, constituting 7.12 % of the Net Bank Credit. The Bank has also been offering foreign currency loans (FCNR loans) to its customers at LIBOR related rates and the outstanding foreign currency loans amounted to USD millions, as at the end of the year.

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Technological Upgradation ATMs: As at the end of August 2005 the bank has installed 333 ATMs in major cities and at important centers all over India. Value-added services: The following value-added services are provided to the customers: Sl. No. Service No. of branches Eligible Introduced 1 Bill Collection 581 581 2 Cash Module 920 920 3 CBDT Module (Focal Point Branches) 15 15 4 Clearing Module 581 581 5 Customer Signature 920 920 6 DD Printing 920 920 7 E-mail 932 932 8 Enquiry Terminal 38 38 9 E-recon 581 581 10 Forex Module/Stand Alone Trade Finance NA 23 (Please refer to annexure) 11 Govt. Module 273 273 12 Internet Banking 279 13 OLTAS 273 273 14 Payment of college fees 3 1 15 PPF 315 315 16 SFMS SWIFT 54 48 17 Single Window Service 911 911 18 TDR Printing 603 603 19 Telebanking 25 25 Other Projects Core Banking Solution (CBS) Connectivity to State Bank network has been established at 537 branches/offices of the bank to enable implementation of Core banking Solutions and Internet Banking. Further 305 branches have been connected by leased lines awaiting connection of ISDN lines. The Core Banking Solution has been implemented at 279 branches. All the branches of the Bank are scheduled to be migrated to CBS in the calendar year. Extension counter connectivity 15 extension counters of the fully computerized branches have been connected to the Wide Area Network. Realtime Gross Settlement System (RTGS): The Bank has gone live on RTGS in July 2004 for Inter-Bank Transactions. This will shortly be extended for customer transactions, across the Bank.

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ALM Project The IT ALM-CIS solution has been implemented at all branches. ALM data of branches is being sent regularly to ALM Projects Dept. SBI Corporate Centre, Mumbai for consolidation. ALM data have been brought under auto-mailing mode in December 2004. Video-conferencing: Video-conferencing facility has been installed at all Zonal and Regional Offices, Commercial branches and Treasury Department, Mumbai. The facility is being used for conferencing with SBI for treasury operations under Group Synergy. Banks web-site: The Banks web-site has been designed to render a professional look with dynamic and interactive features like branch search facility, EMI, compound interest calculators, enquiries on various products of the Bank and facilities to download NRE a/c opening form. Hindi version of the web-site is also available. Human Resource Development & Training Human Resource / Manpower Profile The total strength of the Bank as at the end of March 2005 stood at 13107 as against 13278 as at the end of March 2004. The staff strength comprised of 4771 Officers, 5564 Clerks / Cashiers and 2772 Subordinate Staff. Of these 1383 are ex-defence personnel and 224 belong to Physically Handicapped category. Womens Representation As at the end of March 2005, there were 1838 women employees in the Bank compared to 1853 as at the end of March 2004. The Bank continues to provide equal opportunity to women in their career progression. Scheduled Castes / Scheduled Tribes Representation As at the end of March 2005, there were 2633 Scheduled Caste employees comprising of 975 Officers, 1006 Clerks/Cashiers and 652 Sub-ordinate Staff. There were 601 Scheduled Tribe employees comprising of 237 Officers, 225 Clerks/Cashiers and 139 Subordinate Staff as at the end of March 2005. All guidelines of the Government of India for safeguarding the interests of SC/ST employees have been complied with. Training During the year 2004.05 197 training programmes were organized at the 3 Staff Training centers imparting training to 4957 under Officer wing, 2094 under award staff wing , 274 subordinate staff and Watch and Ward 122 employees under computer wing. With a view to empowering the employees with adequate knowledge and requisite skills to perform their roles and to improve their working efficiency, in house training has been an on going activity in our bank. With a view to equipping our officials in specialized areas we have conducted several programmes on Risk Management, International Banking, Preventive vigilance, NPA Management and Marketing, Programme for Armed Guards, BANKMASTER, Core Banking Solution Awareness Programme and Programme for SC / ST employees.

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During the year, 802 officials were deputed to ourside training institutions such as Staff Bank Staff College, Hyderabad, State Bank Academy, Gurgaon, State Bank Institute for Rural Development, Hyderabad, State Bank Institute for Information and Communication Management, Hyderabad, NIBM Pune, BTC, Mumbai, CAB, Pune etc. Loan Policy State Bank of Hyderabads Loan Policy (hereinafter referred to as The Loan Policy or The Policy) is aimed at accomplishing its mission of all-round growth with maximum profits, achievement of pre-eminence in banking with commitment to excellence, in rendering customer, shareholder and employee satisfaction, while continuing to emphasise on its development banking role to be fulfilled through a skilled and committed workforce and technological upgradation. The Loan Policy of the Bank has successfully withstood the test of time and with inbuilt flexibilities, has been able to meet the challenges in the market place. The policy exists and operates at both formal and informal levels. The formal policy is well documented and sought to be implemented through circular instructions and periodic guidelines and apart from the Book of Instructions, where procedural aspects are highlighted. The policy, at the holistic level is an embodiment of the Banks approach to sanctioning, managing and monitoring credit risk and aims at making the systems and controls effective. The Loan Policy also aims at striking a balance between underwriting assets of high quality, and customer oriented selling. The basic tenets of State Bank of Hyderabads Loan Policy are as follows: 10 The Policy applies to all lending subject to the general or special directives of RBI/Government of India, as also the prudential guidelines applicable to all credit exposures of the Bank. 11 It aims at spotting and seizing opportunities and revamping our products and delivery mechanism as well as innovating new products ahead of competition. 12 The Policy establishes a commonality of approach regarding credit basics, appraisal skills, documentation standards and awareness of institutional concerns and strategies, while leaving enough room for flexibility and innovation. d. Computerisation and development of an efficient management information system based on a reliable database and faster communication for better overall credit risk management are accorded due priority in the policy. e. Optimum exposure levels are set out in the Policy to different sectors in order to ensure growth of assets in an orderly manner. 13 The Policy sets out minimum scores / hurdle rates (in terms of Credit Risk Assessment parameters) for new/ additional exposures. 14 Banks general approach to Export Credit and Priority Sector Advances is set out in the Policy. 15 The Policy lays down norms for take over of advances from other banks/Fis. 16 Banks stand on granting credit facilities to companies whose directors is in the defaulters list of RBI is covered in the Policy. 17 The Policy aims at continued growth of assets while endeavoring to ensure that these remain performing and standard.

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The Board of the Bank is the apex authority in formulating all matters of policy in the bank. The Credit Risk Management Committee (CRMC), deals with issues relating to credit policy and procedures on a Bank-wide basis. The CRMC and/or the Management Committee (MC) sets broad policies for managing credit risk including industrial rehabilitation, sets parameters for growth of credit portfolio within the boundaries of exposure limits, reviews credit appraisal systems, approves policies for compromises, write-offs, etc. and sets guidelines for general management of NPAs besides dealing with the issues relating to Delegation of Powers.

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ASSET CLASSIFICATION, INCOME RECOGNITION & PROVISIONING ASSET CLASSIFICATION The Bank classifies its assets in compliance with RBI guidelines. Under these guidelines, an asset is classified as non-performing if any amount of interest/ principal remains overdue for more than 90 days in respect of term loans. In respect of overdraft/ cash credit, an asset is classified as non-performing if the account remains out of order for a period of more than 90 days and in respect of bills, if they remain overdue for more than 90 days. In case of retail assets, the Bank classifies an asset as non-performing where any amount of interest/ principal remains overdue for more than 90 days, in respect of all loans. NPAs are further ummarizing into three groups i.e. Substandard, Doubtful and Loss Asset depending upon the period of delinquency and availability of tangible security. The table below gives the criteria for asset classification viz. Standard, sub-standard, doubtful and loss assetCategory Classification 1. Performing Standard Assets An asset which has not posed any problem and which does not carry more than the normal business risk 2.Non-Performing a)Sub-Standard An asset which has been non-performing for a period less Assets than or equal to twelve months b) Doubtful Assets An asset, which has been non-performing for a period of over 12 months c) Loss Assets Asset where loss has been identified by the Bank or auditors/ RBI and any non-performing asset where the value of security is less than 10% of the dues to the bank. For this purpose, all advances are segregated into performing assets (standard assets) and non-performing assets. A borrowal account is classified as Non Performing Asset (NPA) when interest and/or installment are overdue for more than 90 days. Borrowal accounts treated as NPA for a period of 12 months are classified as sub standard assets and borrowal accounts treated as NPA for more than 12 months are treated as doubtful assets. NPAs where securities are less than 10% of the dues to the bank and which are considered as irrecoverable are treated as loss assets. When an account is classified as NPA, interest already debited to the account but not realized, is de-recognized and further interest accrued is recognized on cash basis. Provisioning and WriteOffs As per RBI guidelines, provisions are arrived on all outstanding NPAs, as under: Sub-Standard A general provision of 10 percent on total outstanding without Assets making any allowance for DICGC/ECGC guarantee cover and securities available. Additional provision of 10 per cent, i.e., a total of 20 per cent on the outstanding balance for unsecured exposures, which are identified as substandard. Doubtful Assets 20%, 30%, 60% or 100% for secured portion of Doubtful assets upto one year (DA 1), one to three years (DA 2), more than three 63

years (DA 3) if it had slipped to DA 3 on or before 31.3.2004 and more than three years (DA 3) if it had slipped to DA 3 after 31.03.2004 respectively and at 100% for the unsecured portion of the outstanding after netting retainable or ummarizin amount of the guarantee claims already received/ lodged with DICGC/ECGC, if any. Loss Assets 100% of the outstanding after netting retainable amount of the guarantee claims already received/lodged with DICGC/ECGC, if any Standard Assets A general provision of 0.25% Details of Non-Performing Assets of the Bank PARTICULARS Gross NPA at the beginning of the year Addition during the year Reduction during the year Gross NPAs as at 31st March Net NPAs as at the 1st April Net NPAs as at the 31st March 2002-03 898.52 266.45 425.13 739.84 898.52 315.39 2003-04 739.84 371.96 420.45 691.35 739.84 77.22 (Rs in Crores) 2004-05 691.35 191.43 329.46 553.32 691.35 95.32

Movement of Provision for Non-Performing Assets (excluding provisions for standard assets) (Rs in Crores) 31.3.2005 31.3.2004 31.3.2003 Opening balance as on 1st April 567.56 372.84 390.28 Less : Write off during the year 131.15 234.37 261.53 Sub-total 436.41 138.47 128.75 Less: Write back of floating provision 0 0 0 Add : Provisions made during the year 0 429.09 244.09 st Closing Balance as on 31 March 436.41 567.56 372.84 Asset Classification of Performing and Non-Performing Assets for the last 5 years is given below: (Rs. In crore) March March March March Classification of assets March 31, 31, 31, 31, as on 31, 2005 2004 2003 2002 2001 Standard Assets 6564.14 8017.61 9416.05 11749.60 15449.03 Sub Standard Assets 341.92 230.46 244.42 230.73 119.20 Doubtful Assets 645.94 546.50 394.05 391.86 362.03 Loss Assets 87.43 121.56 101.37 68.76 72.09 Gross NPAs 1075.29 898.52 739.84 691.35 553.32 Gross Advances 7639.43 8916.13 10155.89 12440.95 16002.35 Advances given above are Gross Advances while the Balance Sheet indicates Net Advances after setting off provisions, interest suspense etc: Gross Advances (Provisions, Interest Suspense and DICGC & ECGC claims) = Net Advances. 64

Asset Classification of Performing and Non-Performing Assets for the last 5 years is given below: (As a % of Gross Advances) Classification of March March March March March assets (%) as on 31, 2001 31, 2002 31, 2003 31, 2004 31, 2005 Standard Assets 85.92 89.92 92.72 94.44 96.54 Sub Standard Assets 4.48 2.28 2.41 1.85 0.74 Doubtful Assets 8.46 6.13 3.88 3.15 2.26 Loss Assets 1.14 1.36 1.00 0.55 0.45 NPA 14.08 10.08 7.28 5.56 3.46 Total 100.00 100.00 100.00 100.00 100.00 NPA MANAGEMENT STRATEGY Several proactive measures, initiated by the Bank, have resulted in containing Gross NPA level despite growth in advances by 109.47% during the past 4 years. In percentage terms, the Gross NPA ratio declined from 14.07 % in March 2001 to 3.46 % in March 2005, while Net NPA ratio declined from 7.82 % to 0.61 % in the same period. With the aim of improving asset quality, the following measures have been initiated: 18 Constant review of large borrowal accounts to ensure proper end use of funds 19 Measurement of risk through credit rating / scoring 20 Benchmarking of financial and performance ratios 21 Effective loan review mechanism and portfolio management 22 Fixing prudential exposure limits in consonance with RBI guidelines 23 Constant review of economic scenario to identify systemic sector-wise risks 24 System of timely detection of sickness 25 Extending the ambit of Credit Audit for covering advances of Rs.2 crores and above 26 Adherence to various terms and conditions stipulated in the sanction letter 27 Monitoring of advances by constant on-site and off-site inspection 28 Review of Special Mention Accounts above Rs. 10 lacs on a monthly basis by the Top Management 29 Intensive training of officers for improvement of credit assessment skills 30 Utilisation of Securitisation Act for recovery of impaired assets 31 Restructuring / Rehabilitation through CDR / normal route RISK MANAGEMENT The Bank has achieved substantial progress in the implementation of risk management systems, envisaged in RBI guidelines. An integrated Risk Management approach is followed, with a well-designed organisational structure, and comprehensive policies and procedures laid down to manage credit, market and operational risks. The Bank has constituted: 32 Risk Management Committee of the Board (RMCB), which monitors the overall risks assumed by the Bank, 65

33 Asset Liability Committee (ALCO), which monitors the liquidity and interest rate risks, 34 Credit Risk Management Committee (CRMC), which deals with issues relating to credit policy and procedures on a bank-wide basis, 35 Investment Committee, which deals with investment decisions, and 36 Operational Risk Management Committee (ORMC) that monitors and manages the Operational Risks. These committees meet at periodic intervals. The Bank has a well-established credit approval process, including comprehensive credit appraisal and established procedures for application forms, documents, etc. A comprehensive system of risk assessment is in place whereby credit rating is assigned to every borrower. An independent review group is also established to vet the riskassessed credit rating of individual borrower accounts. A comprehensive Loan Policy document that encompasses the various facets of credit risk management is in place. This is reviewed at regular intervals, and modifications to suit the banks needs are carried out. The Bank has a loan review mechanism, which undertakes review of the pre and post sanction process of all borrowal accounts with sanctioned limits of Rs. 200 lakh and above. The Bank carries out portfolio analysis of borrowal accounts with, which enables it to assess the distribution of standard assets and non-performing assets industry/sector-wise, distribution of standard assets risk rating-wise, extent of nonperforming assets in every industry as a percentage of total exposure within the industry and overall credit, and also undertake a constant review of economic scenario to ummarizi sector-wise risks. The analysis enables the Bank to carry out redressal measures and initiate suitable steps to address the identified credit risks. The process of review/renewal of borrowal accounts is carried out in a systematic manner to assist in assessing the health of the borrowal account and timely detection of sickness. The bank is not required to have a country risk management policy as according to RBI guidelines only banks that have more than 1% of their net funded assets in a particular country are required to have a country risk management policy vis--vis that country. In respect of Market Risk Management, including Liquidity and Interest Rate Risk Management, the Bank has introduced a scientific system of Asset-Liability Management. The market risk management policy is adequately spelt out in the ALM policy of the Bank, and is managed within the overall risk framework laid down by the Asset Liability Committee. The ALCO monitors market risk on an ongoing basis. Tolerance limits in accordance with RBI guidelines are fixed, and the Bank has always ensured adequate liquidity at all times. The investment policy has been laid down, which embraces the preferred mix of securities, sector-wise ceilings, limits for purchase and buyback transactions, etc., which is monitored by the Investment Committee. Operational Risk covers the whole gamut of residual risks not covered under either Credit or Market Risk. In order to mitigate operational risks, the Bank ensures a comprehensive internal control system, effective systems & procedures, recovery mechanisms and contingency plans, and regular and comprehensive audit of all its

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business units and administrative offices at regular intervals. The Bank has also introduced Risk Focused Internal Audit, as part of its attempt at introducing improved system of internal audit. ASSET LIABILITY MANAGEMENT (ALM) The ALM system was implemented in the Bank in 1999. An Asset Liability Management Policy has been put in place for the purpose of identifying and measuring of liquidity and Interest Rate Risks and for the formulation of appropriate strategies to manage such risks. Data is being collected from all the branches through e-mails and floppies at fortnightly intervals enabling the ALCO to make timely decisions for managing market risks. The ALCO is a key operational unit for managing the banks funds flow and balance sheet within the risk parameters laid down by the Board. The ALCO met 20 times during the year to monitor and review risks and returns, raising and deployment of resources, fine-tuning the Banks lending ,setting Banks lending and deposit rates and directing the investment activities of the Bank. Oracle Financial Services Application (OFSA) is the common ALM solution provider for the entire State Bank Group. The Credit Information System (CIS), which is a single source of granular data on all advances, has being installed in the branches. This information is being used by IT-ALM Project and Core Banking Project. The Bank is exposed to three broad categories of risk: credit risk, market risk and operational risk. The Bank continues to identify, monitor, measure and manage risk across the bank. A Risk Management Committee at the Board level has been formed to oversee the Banks Risk Management policies and procedures. An Asset Liability Committee (ALCO) has been constituted in the Bank to monitor the mismatches and initiate corrective measures to improve profitability. The Credit Risk Management Department reviews and monitors the performing assets and provides guidance to the branches. Exposure to the capital market is reviewed by the Audit Committee on a regular basis. The Bank has made a provision of Rs. NIL crore towards country risk management as per the recent Reserve Bank of India guidelines The Bank has achieved substantial progress in the implementation of risk management systems, envisaged in RBI guidelines. An integrated Risk Management approach is followed, with a well designed organizational structure, and comprehensive policies and procedures laid down to manage credit, market & operational risks. The Bank has constituted 37 Risk Management Committee of the Board (RMCOB), which monitors the overall risks assumed by the Bank 38 Asset Liability Management Committee (ALCO), which monitors the liquidity and interest rate risks 39 Credit Policy Committee (CPC), which deals with issues relating to credit policy and procedures on a bank-wide basis

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40 Investment Committee, which deals with investment decisions, and 41 Operational Risk Management Committee (ORMC) that monitors and manages the Operational Risks. These committees meet at periodic intervals The Bank has a well established credit approval process, including comprehensive credit appraisal and established procedures for application forms, documents, etc. A comprehensive system of risk assessment is in place whereby credit rating is assigned to every borrower. An independent review group is also established to vet the riskassessed credit rating of individual borrower accounts. A comprehensive Loan Policy document that encompasses the various facets of credit risk management is in place. This is reviewed at regular intervals, and modifications to suit the banks needs are carried out. The Bank has a loan review mechanism, which undertakes review of the pre and post sanction process of all borrowal accounts with sanctioned limits of Rs.200 lacs and above. The Bank carries out portfolio analysis of all borrowal accounts with sanctioned limits of Rs.50 lacs and above at half-yearly intervals, which enables it to assess the distribution of standard assets and non-performing assets industry/ sector-wise, distribution of standard assets risk rating-wise, extent of non-performing assets in every industry as a percentage of total exposure within the industry and overall credit, and also undertake a constant review of economic scenario to recognize sector-wise risks. The analysis enable the Bank to carry out redressel measures and initiate suitable steps to address the identified credit risks. The process of review / renewal of borrowal accounts is carried out in a systematic manner to assist in assessing the health of the borrowal account and timely detection of sickness. The Bank has laid down counterparty bank exposure limits for various operating departments, which is integrated and monitored on a monthly basis. Country Risk Management Policy has been dawn up, duly approved by the Board. These are reviewed at periodic intervals. In respect of Market Risk Management, including Liquidity and Interest Rate Risk Management, the Bank has introduced a scientific system of Asset Liability Management. The market risk management policy is adequately spelt out in the ALM policy of the Bank, and is managed within the overall risk framework laid down by the Asset Liability Management Committee. The ALCO monitors market risk on an ongoing basis. Tolerance limits in accordance with RBI guidelines are fixed, and the Bank has always ensured adequate liquidity at all times. The investment policy has been laid down, which embraces the preferred mix of securities, sector-wise ceilings, limits for purchase and buyback transactions, etc., which is monitored by the Investment Committee. Operational Risk covers the whole gamut of residual risks not covered under either Credit or Market Risk. In order to mitigate operational risks, the Banks ensures a comprehensive internal control system, effective systems & procedures, recovery mechanisms and contingency plans and regular and comprehensive audit of all its business units and administrative offices at regular intervals. The Bank has also

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introduced Risk Focused Internal Audit, as part of its attempt at introducing improved system of internal audit. 42 Credit Risk Management Credit risk primarily arises in the Banks lending and investment operations due to the failure of any party, principally the borrowers, to abide by the terms and conditions of any financial contract with the Bank, including failure to make required repayments on loans due to the Bank. The Banks standardized credit approval process includes a well-established procedure of credit evaluation and approval. The Risk Management Department measures, monitors and manages credit risk for each borrower. The Bank has a comprehensive system for tracking the rating profile of the Banks loan portfolio. The Bank has adopted very stringent and selective credit growth standards. In order to assess the credit risk associated with any credit proposal, the Bank assess a variety of risks relating to the borrower and the relevant industry. The Bank has an exhaustive and structured process for monitoring credit exposures. Its aim is to: 43 Ensure compliance with the terms and conditions of the credit approval; 44 Periodically review performance of the borrowers against projections; 45 Detect early warning signals and take appropriate corrective prompt actions; and 46 Conduct rapid portfolio review to right-size exposures. Credit Procedure The credit process in the Bank is divided into three components the pre-sanction process, the sanction process and the post sanction process. Pre-sanction process The corporate office specifies through its corporate credit policies and periodic guidelines, the criteria for asset selection, risk acceptance level, exposure norms as well as account profitability standards. The regional head and the branch head are responsible for drawing up strategic business and marketing plans, including identifying target markets strictly in conformity with these policies. Any deviation proposed from the corporate policies must necessarily be with the prior concurrence of the corporate office. Credit Sanction process The Bank already has in place a streamlined committee system for sanctioning corporate credit. The committees have been empowered suitably through delegation of powers. 47 Market Risk Management Procedure The market risk management policies of the Bank are determined by the ALCO, which also recommends overall market risk appetite to the Risk Management Committee. The Banks business is also subject to market risk, which arises in relation to nontrading positions, and customer originated transactions and flows.

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The Bank has sophisticated systems, which are used for ummarizi market risks, data warehousing and performing analytic for both trading and investment portfolio. Daily risk reports are prepared ummarizing the risk in foreign exchange, interest rate, etc., across different markets. The Bank has adopted a twin track limit system to manage its risk positions that distinguishes between risk limits and stop loss limits. The Bank uses a daily Value at Risk measure for controlling market risk. 48 Operational Risk Management Procedure The Banks Operational Risk Group manages operational risk at the apex level and reports to the Risk Management Committee. The Group monitors and ensures that appropriate operational risk management frameworks are in place, adhering to the Operational Risk Policy. It proactively reviews and manages potential risks that arise from changes in the regulatory, economic, political environment. The Group discusses monthly operational risk reports and analyzes frauds, potential losses, noncompliance, breaches etc., and recommends corrective measures. The Bank has a sophisticated system, developed in coordination with an international consultant, to capture Operational Risk in a qualitative-quantitative framework (including Key Risk Indicators, Controls, Incident Reporting, Internal Loss Data, generation of Value at Risk number) and to control it across the organization.

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Other Statistical Information Lending to Sensitive Sectors The Bank has a limited lending exposure to the Sensitive Sectors, with a view to insulate itself against adverse market movements. The exposure to these sectors as at 31st March 2004 and as on 31.03.2005, were as follows: Rs. In crore Sensitive sectors 31.3.2005 31.3.2004 Capital Markets 13.20 3.40 Real Estate Sector 25.60 42.91 Commodity Sector 278.12 394.35 Total 316.94 440.66 As % of Total Advances 1.98% 3.54% As % of Total Customer Assets 0.97% 1.56% Classification of Investments as per RBI norms: As on March 31, i. Govt securities ii. Other approved securities iii. Shares iv. Debentures and Bonds v. Subsidiaries and/or joint ventures vi. Others (units of UTI & Mutual Funds) Total 2002-03 2003-04 10112 13382 204 194 90 65 679 577 6 6 1428 308 12518 14532 (Rs. In crores) 2004-05 13415 130 62 403 6 543 14559

Maturity Profile of Assets and Liabilities is as follows: Residual Maturity Pattern based on restated Balance Sheet for the Year ended March 31, 2005 (Rs in crores) Maturity Deposits Loan Investme Borro Foreign Currency attern Advances nt wings Securitie s Assets Liabiliti es 2161.31 2352.99 38.77 66.33 302.72 160.92 1 14 days 729.29 391.54 767.62 0 124.29 3.59 15 28 days 2243.64 555.11 525.34 2.35 537.21 632.39 29 days 3 months 3035.45 460.21 500.46 1.15 83.25 80.08 3 6 months 6075.06 432.42 306.56 1.4 13.01 72.36 6 months 1 year 6876.54 4554.10 1726.99 0.94 68.86 82.72 1 3 years 3768.02 3212.57 2278.38. 0.25.. 0 0 3 5 years 3760.33 3068.15 8460.63 0.08 0 0 Above 5 years 72.50 1129.34 1023.06 Total 28649.64 15027.10 14604.75

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In compiling the above data, certain assumptions as per RBI guidelines and instructions have been made. Residual Maturity Pattern based on restated Balance Sheet for the year ended March 31, 2004 (Rs in crores) Maturity Deposits Loans & Investment Borrowing Foreign Buckets Advances Securities Currency Liabilitie Assets s 2292.19 1192.54 1959.27 804.17 249.02 310.96 1 14 days 602.49 392.56 103.60 0 84.52 161.01 15 28 days 2960.06 868.29 764.37 3.61 311.24 353.79 29 days 3 months 1476.39 626.59 292.07 5.12 485.89 79.60 3 6 months 3502.50 773.96 559.38 6.66 8.1 101.85 6 months 1 year 3837.66 1063.29 5.47 39.81 104.69 1 3 years 11253.39 1113.94 1904.53 0.29 26.33 0 3 5 years 1143.64 710.93 2538.51 8424.20 0.09 0 0 Above 5 years Total 23941.59 11344.05 15070.71 825.41 1204.91 1111.90 Residual Maturity Pattern based on restated Balance Sheet for the Year ended March 31, 2003 (Rs Crores) Maturity Deposits Loans & Investment Borrowings Foreign Currency Buckets Advances Securities Liabilities Assets 1994.94 1017.88 712.93 2.28 574.27 146.38 1 14 days 359.23 381.72 151.88 0 121.50 75.79 15 28 days 1685.60 492.50 880.57 3.98 185.64 229.86 29 days 3 months 1904.12 449.45 542.59 8.52 288.21 45.69 3 6 months 2899.53 591.87 298.88 11.74 31.55 114.61 6 months 1 year 9987.07 3939.63 1237.34 20.24 10.78 114.26 13 years 800.98 887.17 1679.16 .79 0 0 35 years 613.23 1745.16 7079.14 0.08 0 0 Above 5 years Total 20244.70 9505.38 12582.49 47.63 1211.95 726.59 Unsecured Borrowings Rs in crores 31.03.2003 31.03.2004 31.03.2005 46 43 73

Borrowings in India

72

Borrowings outside India

416

782 275 1100

743 275 1091

Unsecured Non-convertible Redeemable 275 Bonds (Subordinated for Tier-II Capital) TOTAL Key financial Ratios Ratios
Interest Income as a percentage to average working funds Non-Interest Income as a percentage to average working funds Operating profit as a percentage to average working funds Return on Assets Business per employee (Rs. In lacs) Profit per employee (Rs.in lacs) Credit/Deposits Ratio (%) Interest Spread / Average Working Funds (%) Net profit / Average Working Funds (%) Operating Expenses / Average Working Funds (%) Return on Average Net Worth (%) Yield on Advances Yield on Investments (%) Cost of Deposits (%) Gross Profit per Employee (Rs in lakhs) Business per Branch (Rs in lakhs) Tier I Capital Tier II Capital Dividend Payment ratio

797

31.3.2001 31.3.2002 31.3.2003 31.3.2004 31.3.2005

10.09 1.72 2.67 0.9 166.44 1.13 52.82 3.65 0.90 3.09 21.77 11.04 11.71 7.82 3.38 2517 9.65 1.84 3.02 1.02 192.23 1.68 52.49 3.27 1.14 2.46 25.74 10.93 11.06 7.83 4.45 2927 8.75 1.95 3.21 1.15 227.23 2.25 50.17 3.16 1.28 2.34 26.80 9.96 10.08 7.00 5.67 3400 7.77 2.48 3.56 1.24 274.1 2.87 51.93 2.95 1.34 2.3 26.99 9.11 8.50 5.97 7.64 4035 7.33 1.33 2.25 0.72 342.3 1.91 55.43 3.04 0.79 2.27 15.03 8.32 8.00 5.20 5.44 4829

Definitions of Key Ratios : Credit / Deposit Ratio Average Working Funds (AWF) Interest spread / AWF (%) Gross profit / AWF Net Profit / AWF (%) Operating expenses / AWF (%) Return on average networth (%) Yield on Advances (%) Yield on Investments (%)

: Total advances / Aggregate deposits : Average of total assets : Interest income less interest expenses/AWF : Profit prior to provisions and contingencies and Extraordinary Items/AWF : Net Profit / AWF : Non-interest expenditure / AWF : Net Profit / Average of opening and closing Networth. : Interest earned on advances / Average of advances. : Interest earned on investments/

73

Average of investments Cost of deposits (%) : Interest on deposits / Average of deposits Business per employee (Rs.lakhs) : Total business/Employee Strength Profit per employee (Rs. Lakhs) : Profit prior to provisions and contingencies and Extraordinary items/Employee strength. Business per branch (Rs.lakh) : Total business/Number of Branches. Profit per branch (Rs. Lakh) : Profit prior to provisions and contingencies and Extraordinary items/ No. of branches. Note: The above financial information is based on audited financials of respective years RELATED PARTY TRANSACTION Related party Transactions for the financial year ended March 31, 2005, have been provided in the document. SUBSIDIARY The Bank has no subsidiary. ASSOCIATE COMPANY The Bank has no associate companies.

74

MANAGEMENT OF THE BANK The composition of the Board of Directors of the Bank is as under: Name & Address of Director A.K.Purwar Chairman, SBI Corporate Centre, Mumbai- 400 031 S.K.Hariharan Dy.Managing Director & GE, SBI Corporate Centre, Mumbai 400 021 Amitabha Guha Managing Director State Bank of Hyderabad Head Office, Hyderabad 500 001 Appointed to the Board Since 13.11.2002 Qualifications/ Specialisations Representing SBI, M.Com., CAIIB Representing SBI, B.Sc. EC of Board of Directors Committees on which also a member

16.05.2005

22.05.2004

M.Sc.

R.N.Kar General Manager Reserve Bank of India Saifabad Hyderabad S.P.S.Sangwan Under Secretary, Ministry of Finance, Dept. of Economic Affairs, (Banking Division), Parliament Street, New Delhi 110 001 M.N.Rao General Manager, (A&S Group) Corporate Centre Madam Cama Road

05.01.2004

M.A., M.Phil., CAIIB., M.Sc. (Fin)

49 EC of Board of Directors 50 Risk Manage ment Committ ee of Board -Special Committee of Board for monitoring Large Value frauds -Customer Service Committee of Board -Directors Committee 51 EC of Board of Directors -Audit Committee of Board -Directors Committee -Directors Committee

25.03.2004

M.A., B.Ed., Dip. In Russian Language

01.01.2001

Representing SBI M.Sc.

-EC of Board -Audit Committee of Board -Risk Management Committee of Board

75

Mumbai 400 021 Y.Sinha Dy. General Manager, (A&S Group), Corporate Centre Madam Cama Road Mumbai 400 021 Sanjay Tandon SCO 201-3, 3rd Floor, Sector 34-B Subcity Centre Chandigarh 160 022 S.Suryanarayana 1-11-212/3, Flat No 102 Lane No.2, Street No.4 Gurumurthy Lane Annapurnas Prabhat Kusum Complex Begumpet Hyderabad 500 016 Smt. Uma Ghurka 28, Nagarjuna Hills Punjagutta Hyderabad 500 082

01.01.2004

Representing SBI B.A.(Hons.), C.A.I.I.B.

-EC of Board -Audit Committee of Board -Risk Management Committee of Board -EC of Board

15.11.1999

B.Com. (Hons.), FCA, Grad CWA

20.06.2003

B.Com., FCA

-Audit Committee of Board -Special Committee of Board for monitoring Large Value frauds -Risk Management Committee of Board -Customer Service Committee of Board -Audit Committee of Board -Special Committee of Board for monitoring Large Value frauds -Customer Service Committee of Board -EC of Board -Risk Management Committee of Board

07.07.2003

B.Tech(Elec) from IIT Madras

Shri P.Laxminarayan Rau 61, Chandragiri Colony Trimulgherry Secunderabad Shri Peri Subba Rao, State Bank of Hyderabad Head Office, Gunfoundry Hyderabad 500 001 Shri K.N.Thigale State Bank of Hyderabad Shagunj Branch Aurangabad

10.06.2004

B.Sc., P.G.Diploma in Mktg. & Sales management B.Sc., MBA, LLB, CAIIB

12.03.2003

-Special Committee of Board for monitoring Large Value frauds

18.10.2002

B.Sc.

-Special Committee of Board for monitoring Large Value frauds

Key Managerial Personnel Name & Date of

Qualifications 76

Experience

Functional

Designation)

Joining M.Sc. M.A., CAIIB Part I M.Sc., (Maths) Gold Medalist, CAIIB B.Sc., CAIIB B.Com., CAIIB B.Com. (Hons.), ICWA Inter B.Com., CAIIB

Amitabha Guha 22.05.2004 P.Dinakara 13.02.2003 Rao R.P.Sinha 07.06.2005 K.S.Mohanan 21.05.2004

(With Issuer Bank) 16 M 31 M 4M 16 M 10 M 14 M 10 M

Responsibility Managing Director Chief General Manager General Manager (Technology) General Manager (Operations) General Manager (Insp.) & C.V.O. General Manager (C&IB) General Manager (Plg. & Dev.) G M (Treasury)

R.Muralikrishna 01.12.2004 Supratik Chatterjee M.Sudhir 29.07.2004 22.11.2004

CV 26.09.2005 M A (English) 1 day Krishnakumar The Key Managerial Personnel are permanent officials and on the rolls of the Bank.

Corporate Governance: The Bank places special emphasis on transparency, integrity, responsibility, accountability and fairness in all its policies and practices. As a good corporate citizen, the Bank takes utmost care to protect the interest of all the stakeholders viz., customers, employees, Government and the society at large. The Bank has well developed policies, systems and procedures to achieve these objectives. The policies, systems and procedures are continuously reviewed in order to keep pace with the changing economic and social environment. Good Corporate Governance in the Bank is sought to be ensured through the following organizational structure/informations: Board of Directors Various Committees of the Board of Directors. Other Committees Other Disclosures 1. BOARD OF DIRECTORS The Board of State Bank of Hyderabad consists of eminent persons with considerable expertise and experience in Banking, Finance, Auditing, Entrepreneurial and other allied fields. The Board has Directors nominated by State Bank of India including the Chairman and Managing Director and 4 non official Directors, one nominee Director each of the Reserve Bank of India and the Government of India, a workman Director and a officer-employee Director. There is no other Executive Director on the Board except Managing Director. All the non-official Directors have declared that they have no pecuniary relationship vis--vis the Bank. 2. COMMITTEES OF THE BOARD

77

The Board has constituted various Committees to oversee operational issues. 1. Executive Committee In terms of Section 35(1) of the State Bank of India (Subsidiary Banks) Act, 1959, an Executive Committee of the Board of Directors has been constituted to consider various matters relating to the day to day operations of the Bank, namely sanctioning of credit proposals, investments, approval of capital and revenue expenditure, administrative matters etc. falling beyond the powers of the Banks Executives and Head Office Credit Committees. The Committee consists of the Managing Director, four Directors nominated by the State Bank of India one of whom shall be the Chairman or an Officer Director nominated by SBI, from the quorum for the meetings of the Committee. The Committee met 14 times during the last year. 2. Directors Committee of Board Directors Committee has been formed to review/approve following items: Extension of Service of Scale-V Officers and above, Review of pending disciplinary action cases; and, Review of working of Vigilance Department The Committee comprises of following members: Dy. Managing Director & Group Executive of State Bank of India Managing Director of the Bank Government nominee on the Board of the Bank RBI Nominee on the Board of the bank The Committee met 4 times during the last year. 3. Audit Committee of the Board A Board-level Audit Committee has been constituted to ensure that internal control and audit functions in the Bank are carried out satisfactorily. The Committee provides directions and also oversees the operations of the entire audit functions in the Bank. The Chairman of the Audit Committee is Shri S.Suryanarayana, a Chartered Accountant by profession. Its other members are as under: Smt. Uma Ghurka RBI Nominee Director SBI Nominee Director The Committee reviews the inspection reports of all branches with Not Satisfactory ratings. Reviews of selected specialized branches and large branches are also undertaken by it. The committee also considers the follow up measures to be taken on the following: Inspection Report of RBI Inter Branch Adjustment Account Un-reconciled long outstanding entries in inter-branch, inter-bank account and NOSTRO accounts

78

Major areas of house-keeping, including arrears in balancing of books at various branches Performance of Inspection & Audit Department Review of Banks exposure in the Capital Market.

One of the important functions of the Committee is to interact with the external auditors before the finalization of the annual and half yearly/ quarterly accounts and reports of the Bank. The committee met Seven times during the year. 4. Risk Management Committee of the Board The Risk Management Committee of the Board oversees integrated Risk Management to manage various balance sheet risks in a cohesive manner. The Committee consists of following members: Managing Director State Bank of India Nominee Shri S.Suryanarayana Shri P.Laxminarayan Rau The Committee met 2 times during the year 2004-05. 5. Special Committee of the Board For Monitoring Large Value Frauds Reserve Bank of India has desired to pay focused attention for monitoring of large value frauds. In this connection, a special committee has been constituted with the following members: Managing Director Shri S.Suryanarayana Smt.Uma Ghurka Shri Peri Subba Rao Shri K.N.Thigale The main functions of this special committee is to monitor and review all the frauds of Rs 1 crore and above. The committee is expected to meet four times a year or more frequently if warranted. The committee met 4 times during the year, since no fraud of more than Rs 1 crore was reported during the period 2004-05. 6. Customer Service Committee of the Board Reserve Bank of India has desired to pay focused attention for customer service rendered by the Banks. With a view to bringing ongoing improvements in the quality of customer service in the bank, it has been decided to constitute a Committee with the following members: Managing Director of the Bank Shri S.Suryanarayana Smt. Uma Ghurka The committee was constituted during the year and met once during the year. None of the complaint was pending for disposal at the end of the year. 7. Against the Directors of the Bank

79

There are no outstanding litigations, disputes or penalities against the Directors of the Bank, including tax liabilities, economic offences, criminal or civil prosecution for any offence, irrespective of whether specified under any enactment in Paragraph 1 of Part 1 of Schedule XIII, of the Companies Act, 1956 or any other liability in their personal capacities or as Director/Partner/Sole Proprietor in the Bank or any other company/firm to the best of our knowledge. There are no litigations against the Directors involving violation of statutory regulations or criminal offences. No disciplinary action has ever been taken by the Securities and Exchange Board of India or Stock Exchanges and no penalty has been imposed by any authority to the best of our knowledge. 8. Other Committees (i) Investment Committee The Investment Committee is mainly responsible for vetting of proposals for investments/ disinvestments of funds in Non-SLR securities. The Committees role is only advisory, it does not have any financial powers and such powers are exercised by respective authorities as per the delegation in the bank. The following functionaries are the members of the Investment Committee:Chief General Manager (Chairperson) General Manager (Treasury) / General Manager (C&IB) Deputy General Manager (Domestic Treasury) / Deputy General Manager (Accounts & Services) / Deputy General Manager(Credit) / Deputy General Manager (Recovery) Assistant General Manager / Chief Manager(Domestic Treasury) non-member Secretary. The Committee meets as and when required. (ii) Assets and Liabilities Committee Asset-liability management functions are supervised by the Asset liability Management Committee (ALCO) headed by the Managing Director. The other members of the committee are Chief General Manager and General Managers. This committee manages risks such as market risk, liquidity risk and interest risk faced by the bank with a view to improving the return. The committee periodically meet to consider and decide on the product mix and their pricing taking into account the risks involved and prevailing competitive environment in the market. ALCO plays a key role in positioning the balance sheet on risk-return perspectives. The committee met 20 times during the year.

80

PROMOTERS, GROUP COMPANIES, JOINT VENTURES AND ASSOCIATES PROMOTERS AND THEIR BACKGROUND State Bank of India The State Bank of India was constituted on 1st July 1955, pursuant to the State Bank of India Act, 1955 (the "SBI Act") for the purpose of creating a state-partnered and state-sponsored bank integrating the former Imperial Bank of India. In 1959, the State Bank of India (Subsidiary Banks) Act was passed, enabling the Bank to take over eight former state-associated banks as its subsidiaries. SBI is India's largest bank, with approximately 9,102 branches in India and 54 international offices. Its Associate Banks have a domestic network of around 4,665 branches, with strong regional ties. SBI also has subsidiaries and joint ventures outside India, including Europe, the United States, Canada, Mauritius, Nigeria, Nepal, and Bhutan. SBI has the largest retail banking customer base in India. SBI is engaged in corporate banking for many of India's most significant corporates and institutions, including State-owned enterprises, as well as providing banking services to commercial, agricultural, industrial and retail customers throughout India. SBI services its most important corporate customers, including certain state-owned enterprises, through its Corporate Banking Group, and its other customers, including other large corporations and State-owned enterprises, small scale industries, agriculture and personal banking customers through its National Banking Group. The National Banking Group also provides financial services to the Government and the state governments, including tax collection and payment services. SBI is engaged in international banking and has foreign operations in 28 countries with a global network of 54 branches. SBI has a presence in diverse segments of the Indian financial sector, including asset management, factoring and commercial services, insurance, credit cards and payment services. As at 31st March, 2005, calculated based on RBI data, SBI's estimated market share in aggregate deposits of all scheduled commercial banks in India equalled 18.02 percent including India Millennium Deposits, a deposit scheme denominated in foreign currencies launched by SBI for non-resident Indians. SBI's estimated market share in domestic advances was 16.96 percent as on the last reporting Friday of March 2005, calculated based on RBI data for "All Scheduled Commercial Banks" ("ASCB") in India. As at 31st March 2005, SBI recorded market share of approx. 25.85% in countries foreign trade as against 24% during the corresponding period of the previous year. The assets of SBI are diversified across business segments, industries, and groups. SBI's corporate headquarters ("Corporate Centre") is located at State Bank Bhavan, Madame Cama Road, Mumbai - 400 021. SBI is committed to using its effort to adopt technology to achieve efficiency in its business operations. SBI is moving towards centralised database using enhanced technology to credit it "CBS". The CBS will enable on time, real time transaction processing and provide live interface to a multitude of technology delivery channels.

81

FINANCIALS OF ASSOCIATES & GROUP COMPANIES Name of Nature Date of Year Equity Reserv the of Incorporati Capital es SBI DFHI Ltd 08.03.98 Primar y SBI Capital Offers investment Banking services 02.02.88 SBI Factors & Commercial Services P t Ltd Factori 26.02.91 SBI Funds Management Pvt. Mutual Fund 07.02.92 CIBIL Credit Information Bureau 21.08.2000 SBI Card Credit card GE Capital Business Process & Management Services Pvt Ltd SBI Life 11 10 2000 UTI Trustee C. Pvt. Ltd 14.11.02 Trustee of UTI MF UTI Asset Mgt Co. Pvt. Ltd 14.11.02 Investment Mgt Services 2004 2004 0.10 0.0029 10 124.94 2002 2003 200 200 414.7 502.7 7 761.4 223.9 232.0 245.9 11.57 13.79 13.97 7.27 10.3 14.8 NIL NIL NIL NIL NIL 24.98 NIL NIL 15. NIL NIL NIL

PAT 184.48 129.89 177.57 18.81 28.35 63.23 0.46 2 22 1.59 0.55 6.2 10.09 -0.47 0 52 1.56 16.57 59.92 2 95 0 29 -7.49 -16.41 0.0029 124.94

EPS (inRs ) 92.24 64.94 61.04 3.24 4.89 10.9 1.85 8.88 6.32 1.11 12.23 20.18 N. A N. A N. A N.A 1.66 3.8 1.09 3.21 7.26 NIL NIL NIL 0.29 124.93

2004 290.91 2002 2003 2004 2002 2003 2004 2002 2003 2004 2002 2003 2004 2002 2003 2004 2002 58.03 58.03 58.03 25 25 25 50 50 50 8.75 18.75 25.00 100 100 100 27

2003 27 2004 27 2002 125.00 2003 125.00 2004 175.00

82

Name of the Nature of company activity

Date of Incorporation

Year

Equity Capital

Reserves

PAT

EPS (inRs.)

Banking SBI (Subsidiary Banks) Act, 1959 SBIndor Banking

SBBJ

2002 2003 2004 2005 2002 2003 2004 2005

50.00 702.11 50.00 853.45 50.00 1098.57 50.00 1247.68 17.5 395.10 17.5 566.17 17.5 772.68 17.5 36.00 36.00 36.00 36.00 24.75 24.75 24.75 24.75 314.00 314.00 314.00 314.00 50.00 50.00 50.00 50.00 886.06 315.57 394.96 545.97 720.45 1117.25 1387.43 1706.1 2019.62 253.6 311.44 453.41 480.25 560.14 672.8 875.26 1079.98

164.5 203.28 301.52 205.65 125.10 200.32 226.26 133.18 65.89 115.92 176.38 206.26 232.94 322.02 430.36 287.07 82.01 92.55 177.39 41.16 120.93 171.04 244.6 247.13

329 406.55 603.04 411.30 715.85 1144.69 1292.91 761.01 183.06 322 489.94 572.94 941.17 1301.09 1738.83 1159.88 26.12 29.47 56.49 13.10 241.86 342.08 489.2 494.26 59.00 69.94 81.79

SBM

Banking

SBP

Banking

2002 2003 2004 2005 2002 2003 2004 2005

SBS

Banking

2002 2003 2004 2005

SBT

Banking

2002 2003 2004 2005

SBI

1.7.1955 (SBI Act, 1955)

2003 526.29 16677.08 3105.00 2004 526.29 19704.97 3681.00 2005 526.29 23545.8 4304.52

The following table sets out details of the SBI's International Subsidiaries, Joint Ventures and Associates outside India as at 31st March 2004. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES OUTSIDE INDIA (AS AT 31ST MARCH 2004) (Rs millions) Bank's Name Date of Total Net Shareholding Establishment Owned Profit (%) Assets Funds

83

SBI (Canada) SBI (California) SBI International (Mauritius) Ltd. INMB Bank Ltd., Nepal SBI Bank Limited 1 Bank of Bhutan 2

5th May, 1982 3rd September, 1982 12th October, 1989 3 27th March, 1994 4 th 26 November, 1981 7th My, 1993 28th May, 1968

6,739.4 6,617.0 697.5 7,679.1 1,378.3 4,531.3 341.3 12,351.4 917 3 868.7 868.7

100 100 98 51 50 20 60

(22.2) 33.7 49.7 47.9 29 2 164.2 (40.8)

Commercial Bank 5th December, 2003 of India LLC, Moscow 1. Data as on 16th July 2003. 2. Data as on 31st December 2003. 3. As a joint venture. 4. As a subsidiary.

The following tables set out certain performance highlights of the Associate Banks as at 31st March 2005
Ownership Deposits

Advances (Rs .in crores) 12248 9040.65 9124 15823 6807 15221 68263.65

Name of the Bank (per cent) State Bank of Bikaner and Jaipur State Bank of Indore State Bank of Mysore (SBM) State Bank of Patiala (SBP) State Bank of Saurashtra (SBS) State Bank of Travancore (SBT) Total 75.07 98.05 92.33 100 100 75.01 (Rs .in crores) 19038 13807.07 13585 26496 12671 24133 109730

Operating Profit (Rs .in crores) 729.64 352.09 451.66 852.97 368.15 802.05 3556.56

Return on Equity (per cent) 15.85 14.74 27.27 14.04 5.18 21.87

NON-BANKING SUBSIDIARIES AND JOINT VENTURES OF THE PROMOTER: In addition to the Associate Banks, SBI also has a network of non-banking subsidiaries and joint ventures in India engaged in business other than commercial banking. At 31st March, 2004, total assets. In SBI's financial statements, investments in subsidiaries and joint ventures (both in India and abroad) are valued at historical cost after provisions, if any. SBI's Investme Net Assets Owners nt profit (per (Rs. in (Rs. in (Rs. in cent) millions) millions) millions) 100.00 500.0 738. 1 100.9 69.88 135.0 1878.6 15..9 66.00 1657. 1 28599.5 1740.9 86.16 108.0 4815.4 632.3

Non-Banking Subsidiaries SBI Funds Management Pvt. Ltd SBI Factors and Commercial Services Pvt. Ltd SBIDFHI Ltd SBI Capital Market Ltd.

84

Non- Banking Joint Ventures SBI Life Insurance Company Ltd SBI Cards and Payment Services Pvt. Ltd Credit Information Bureau GE Capital Business Process Management Services Pvt Ltd 7400 60.00 40.00 4000 12950 600.0 100.0 1080 48665 8297.6 2546 7207 1641 599.2 37. 1 3097

REGIONAL RURAL BANKS PROMOTED BY STATE BANK OF INDIA SBI, along with the Government, including respective state governments, has promoted 30 Regional Rural Banks ("RRBs") spread over 102 districts in 16 States with a network of approximately 2,350 branches. The aggregate deposits and advances of the sponsored RRBs stood at Rs.78,137.8 million and Rs.34,019.0 million respectively at 31st March, 2004. The net profit of the combined RRBs in fiscal year 2004 was Rs. 184.4 million. SBI had, as of March 2004, contributed Rs.1,349.7 million for the recapitalisation of 29 RRBs, which were in the process of financial restructuring. CONTINGENT LIABILITIES/LEGAL PROCEEDINGS/DISPUTES SBI and its Banking Subsidiaries have contingent liabilities, which pertain to their normal banking activities. A major portion of these contingent liabilities are a source of income for them. Most of these contingent liabilities are adequately covered through individual security mechanisms as also duly counted for maintaining Capital Adequacy in line with RBI guidelines. SBI and its Associates, Subsidiaries and Affiliates are also party to various legal proceedings / disputes in the ordinary course of business of banking / other business. However, none of such proceedings / disputes, even if determined adversely to SBI and its Associates, Subsidiaries and Affiliates would have, by law, any material adverse effect on the business or financial condition of SET since each subsidiary bank is a separate statutory corporation, constituted and governed by the SBI (SB) Act. SPONSORED RRBS OF SBH The Bank has sponsored four Regional Rural Bank- Sri Saraswati Grameena Bank, Sri Satavahana Grameema Bank, Sri Golconda Grameena Bank and Sri Rama Grameena Bank. All these RRBs have a combined network of 165 branches.The aggregate deposits and advances of all the sponsored RRBs stood at Rs.932.14 crores and Rs.559.14 crores respectively as on 31st March 2005 All RRBs are earning profits and do not have any accumulated losses. Their combined profit for FY 05 stood at Rs.15.40 crores. STOCK MARKET DATA The Banks shares are not listed as it is fully owned by SBI and hence not applicable.

85

FINANCIAL SUMMARY The Financial Summary has been taken from the Audited results provided by the auditors. (Rs. in crore) st Year ended March 31 2003 2004 2005 % of % of change change from from 2004 2003 to to 2005 2004 Total Income 2529 2920 2747 15.46 -5.92 Interest Income 2067 2213 2325 7.06 5.06 Other Income 462 707 422 53.03 -40.31 Expenditure 1771 1906 2034 7.62 6.72 Interest Expenditure 1320 1372 1363 3.94 -0.65 Operating Expenditure 451 534 671 18.40 25.65 Profit before Provisions & 758 1014 713 33.77 -29.68 Contingencies Provisions & Contingencies 457 633 462 38.51 -27.01 Net Profit 301 381 251 26.57 -34.12

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MANAGEMENT DISCUSSION AND ANALYSIS Significant items of Income and Expenditure during 2004-05 (Comparison of Financials for the year ended March 2005 with March 2004) Net Profit: The year 2004-05 has been difficult for the banking industry, with the treasury profits of almost all banks declining due to hardening of interest rates. Our bank was no exception. Despite this setback, the Bank has earned Net profit of Rs 250.90 crores during the year after making all provisions. Interest Income: The Interest income had been increasing steadily on account of an increase in advances which is advantageous in rising interest rate scenario. Other Income: Due to hardening of interest rates during the year, the Banks profit on sale of investments declined substantially from Rs 411.51 crores in 2003-04 to Rs 79.96 crores in 2004-05 in line with the industry trend. This caused a sharp fall in noninterest income. However, excluding profits on sale of investments non-interest income increased by 15.46%. Interest Expenses: The interest expenses decreased marginally by 0.65% in 200405 despite hardening of interest rates and substantial growth of in deposits. This was due to a reduction in the average cost of deposits. Operating Expenses: The operating expenses increased by 25.48% primarily on account of payments to & provisions for employees and also increase in amortisation charges and normal rise in overheads. Significant items of Income and Expenditure during 2003 -04 (Comparison of Financials for the year ended March 2004 with March 2003) Net Profit: The net profit had increased by 26.48% during 2003-04 due to an increase in interest as well as other income particularly, profit on sale of investments. Interest Income: Interest income had increased by 7.05% with substantial increase in advances and investments. Other Income: The other income had increased by 53.26% supported by a good rise in profit on sale of investments. Interest Expenses: The interest expenses increased by 3.95% due to increase in the level of deposits. Operating Expenses: The operating expenses increased by 18.42% primarily on account of increase in depreciation on the banks property as a consequence of technology upgradation. Significant items of Income and Expenditure during 2002-03 (Comparison of Financials for the year ended March 2003 with March 2002)

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Net Profit: The net profit had increased by 33.07% over the previous year due to an increase in interest as well as non-interest income particularly on account of profit on sale of investments. Interest Income: The Interest income had increased by 7.77% as levels of advances and investments rose significantly. Other Income: Non-interest income had increased by 26.35% supported by a sharp rise in profit on sale of investments. Interest Expenses: The interest expenses increased by 4.01% due to increase in level of deposits. Operating Expenses: The operating expenses recorded a normal increase of 8.79%. Other matters relating to the Operations of the Bank Unusual or Infrequent events and transactions: No unusual or infrequent events and transactions occurred in the last three years. Significant economic changes that materially affected or are likely to affect income from continuing operations: Changes in the interest rate structure with any upward movement in interest rate would reduce the value of the investment portfolio. However, interest revenue from advances will, in such a scenario, improve. Future relationship between costs and revenue: The freedom to determine interest rates and the keen market competition have resulted in narrowing of spreads and reduction in profitability. However the Bank has been able to mobilise low cost deposits and keep its cost of deposits low. The Net Interest Margin stood at comfortable level of 3.45% for the year ending 31.03.2005. The Bank has succeeded in increasing its Non-interest Income (excluding profit on sale of investments), thus sustaining profitability. Extent of seasonality in the business: Banks overall business is not likely to be affected by seasonality as its business portfolio is adequately broad-based. Non-dependence on a few customers: The operations of the Bank are well spread out. The bank has a large customer base of more than 67 lakhs and a diversified credit portfolio to prevent any concentration in exposures both industry-wise and client-wise. This insulates the bank to a large extent from any possible adverse conditions affecting any particular industry segment. Competitive Conditions: The Bank has 286 rural branches where it has monopoly in business. The large network of rural and semi-urban branches (numbering 576) ensures that a huge captive business automatically flows in to the bank. In metro centres, the Bank faces a stiff competition from other Banks, including private sector banks and foreign banks. In spite of this, the bank has succeeded in registering good performances over the last few years as evidenced by the fact that the growth rates of the bank have consistently surpassed the growth rates of ASCB..

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Servicing Behavior: The Bank has been servicing all its principal and interest liabilities on time and there have been no defaults. Material Developments: In the opinion of the Directors of the Bank, there have been no material developments after the date of the last financial statements as disclosed in the Information Memorandum, which would materially and adversely affect or are likely to affect the trading or profitability of the Bank or the value of its assets, or its ability to pay its liabilities within the next twelve months, other than what has been already set out elsewhere in this Information Memorandum.

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OUTSTANDING LITIGATION, DEFAULTS & MATERIAL DEVELOPMENTS Save as stated herein: There is no outstanding or pending litigation, suit, criminal or civil prosecution, proceeding initiated for offence (irrespective of whether specified in paragraph (I) of Part 1 of Schedule XIII of the companies Act). There are no defaults, non payments or overdues of statutory dues, institutional or bank dues or dues towards holders of debentures, bonds and fixed deposits and arrears of preference shares, other than unclaimed liabilities of the Bank, its Promoters or Promoter Group companies. No disciplinary action has been taken by SEBI or any stock exchanges against the Bank, its Promoters or Directors. There are no outstanding litigations against the directors of the Bank. There are no other litigations except the following, mentioned below: CASES FILED AGAINST THE BANK The summary of litigations outstanding as on March 31st 2005 is as follows: # A. B. C. D. Particulars Cases pending in various Civil/High Courts filed by customers and others Suits/Writs filed by employees/exemployees in various Civil / High Courts and other courts Consumer Cases filed against the Bank Premises Cases Total No. of Cases 46 Amount involved (Rs. in crores) 15.97 Financial Implication cannot be estimated as of now 0.19 0.37 16.53

1 2 49

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Disputed Tax Liabilities (Rs. in crores)

Sr. No . A.Y. Appeal Pending before Major grounds of Appeal Tax amount incl. interest

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

1994-95 1995-96 1996-97 1996-97 1997-98 1997-98 1998-99 1998-99 1998-99 1999-00 1999-00 2000-01 2000-01 2000-01 2000-01 2001-02 2001-02 2001-02 2001-02 2002-03 2002-03 2002-03 2002-03 2002-03

High court High court High court ITAT ITAT ITAT ITAT ITAT ITAT High court ITAT ITAT ITAT ITAT ITAT ITAT ITAT ITAT ITAT CIT CIT CIT CIT CIT

Interest on investments-Accrual basis Interest on investments-Accrual basis Interest on investments Accrual basis Broken period interest on investments Bad debts u/s 36(1)(vii) Broken period interest on investment Bad debts u/s 36(1)(vii) Unrealised int. on NPAs Broken period interest on investments Unrealised interest on NPAs Broken period int. on investments Broken period int. on investments Unrealised int. on NPAs Proportionate expenditure on exempted income Depreciation on typewriters Broken period on investments Unrealised int. on NPAs Proportionate exp.on exempted income Depreciation on typewriters Broken period interest on investments Unrealised int. on NPAs Proportionate exp. On exempted income Depreciation on typewriters Nostro accounts

31.80 6.39 1.54 3.23 24.54 15.05 4.30 1.38 15.39 2.02 23.51 62.36 4.90 1.60 0.01 32.13 2.38 1.85 0.01 120.78 1.93 2.06 0.01 0.94

CASES FILED AGAINST THE RRBS SPONSORED BY THE BANK AS ON MARCH 31, 2005 The summary of litigations outstanding as on March 31st 2005 is as follows: Sr . N o. A. B. Particulars No. of Cases Amount involved (Rs. in crores) 0.03 Financial Implication cannot be estimated as of now Nil Nil 0.03

Cases pending in various Civil/High Courts filed by customers and others Suits/Writs filed by employees/exemployees in various Civil / High Courts and other courts Consumer Cases filed against the Bank Premises Cases Total

1 44

C. D.

Nil Nil 45

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AGAINST THE DIRECTORS OF THE BANK There are no outstanding litigations, disputes or penalties against the Directors of the Bank, including tax liabilities, economic offences, criminal or civil prosecution for any offence, irrespective of whether specified under any enactment in Paragraph 1 of Part 1 of Schedule XIII, of the Companies Act, 1956 or any other liability in their personal capacities or as Director / Partner / Sole Proprietor in the Bank or any other company / firm to the best of our knowledge. There are no litigations against the Directors involving violation of statutory regulations or criminal offences. No disciplinary action has ever been taken by the Securities and Exchange Board of India or Stock Exchange and no penalty has been imposed by any authority to the best of our knowledge. MATERIAL DEVELOPMENTS In the opinion of the Bank, there have been no material developments after the date of the last financial statements as disclosed in the Information Memorandum, which would materially and adversely affect or are likely to affect the trading or profitability of the Bank or the value of its assets, or its ability to pay its liabilities within the next twelve months, other than what has been already set out elsewhere in this Information Memorandum. INVESTOR GRIEVANCE & REDRESSAL SYSTEM The Bank has appointed a Compliance officer to deal with the Investors grievances Mr. C V Krishnakumar, General Manager-Treasury State Bank of Hyderabad-Head Office Gunfoundry, Hyderabad 500 001. Telephone No. 040-23387446. The investors can contact the Compliance Officer in case of any pre-issue/ post-issue related problems such as non-credit of letter(s) of allotment/ bond certificate(s) in the demat account, non-receipt of refund order(s), interest warrant(s)/ cheque(s) etc.

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RISK FACTORS AND MANAGEMENT PERCEPTION THEREOF The Investors should carefully consider the following risk factors as well as the other details and information contained in this Information Memorandum in evaluating the Bank and its business before investing the Bonds offered by this Information Memorandum. INTERNAL RISK FACTORS (Risk factors and management perception as required on few of the topics given below)1. Contingent Liabilities As on March 31, 2005 the contingent liabilities of the Bank were at Rs.11100 crores comprising claims against the Bank not acknowledged as debts (Rs. 19 crores), liability on account of outstanding forward exchange contracts (Rs. 7593 crores), guarantees on behalf of constituents (Rs. 125crores), acceptances, endorsements and other obligations (Rs. 1908 crores) and others (Rs. 329 crores). Management Perception The contingent liabilities have arisen in the normal course of business of the Bank and are according to the prudential norms prescribed by RBI. 9. Profits of the Bank The net profits of the Bank has fallen from Rs. 381.20 crores in FY 2003-04 to Rs. 250.89 crores in FY 2004-05 (negative growth of 34.18%) mainly due to fall in treasury profit. Management Perception The year 2004-05 has been a difficult year for the banking industry, with the treasury profits of almost all banks declining due to hardening of interest rates. Our bank is no exception to this phenomenon. Despite this setback, Bank has responded effectively to the changed scenario and earned Net profit of Rs 250.89 crores during the year after making all the provisions. It may be noted that operating profit of the Bank has come from diversified income streams comprising net interest income, profit on sale of securities and other income, which account for 134.92%, 11.22% and 47.83% of the total operating profit respectively for the FY 2004-05, which is sustainable in future. 3. Non-Performing Assets (NPAs) As on 31,03.2004 and 31.03.2005, the net NPAs of the Bank stood at Rs.77.22 crores and Rs.95.32 crores i.e., 0.65% and 0.61% of its net advances amounting to Rs.1826.83 crores and Rs.15544.35 crores respectively in absolute terms. In the event of non-recovery of these assets, the Bank may have to provide for these NPAs, which might affect the profitability of the Bank in future. Management Perception The Net NPAs of the Bank have remained low. The Banks provision on NPAs is more than the amount prescribed under IRAC norms. The net NPA ratio of the Bank stood at mere 0.61% as on 31.03.2005. The Bank is taking steps to reduce the proportion of non-performing assets through aggressive recovery drives combined with improved

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risk management practices. Further, there have been substantial changes in the legislative and operating environment enabling FIs and Banks to pursue recovery of overdues. Besides Debt Recovery Tribunal (DRT) set up for faster settlement of recovery litigation, GOI has enacted The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 enabling FIs and Banks to securitise and reconstruct financial assets and enforce security more effectively. Reserve Bank of India has formulated detailed guidelines for operation of the scheme. The Bank is invoking the provisions of the Securitisation Act to enhance recovery. Thus, the Bank has been taking recourse to all the available methods to recover its over dues from the borrowers. 4. Regional Concentration of the Bank State Bank of Hyderabads core geographical area of operation comprises of the Telangana region in Andhra Pradesh, Hyderabad-Karnataka region of Karnataka and Marathwada region of Maharashtra. The Bank has a network of 658 branches, which accounts for about 70.82% of its total branch network throughout the country and accounts for 53.34% of the total business of the Bank. Management Perception The presence of the Banks core traditional area spread over in three states provides a unique advantage to the Bank and improves its growth prospects. Total Deposits of the Bank have grown by 94.92% to Rs28, 929.52 crores and advances have grown by 85.21% to Rs15, 599.74 crores during the past 5 years. The Bank has 929 branches and 80 extension counters as on 31.03.2005. 5. Decline in Return Ratios The Average Yield on Investment (domestic) of the Bank has shown a declining trend from 8.50 % in FY 2004 to 8.00% in FY 2005. The Average Yield on Advances of the Bank has decreased from 9.11% to 8.32% during the same period. Management Perception Average Yield on investments has come down because of the decline in the general interest rate structure of the economy during past years. The continuous downward trend in the interest rates over past years has been the major reason for decline in Yield on Investment of the Bank. For example, the yield on 10 year GoI security (semiannualised yield), which was 6.21% on 31.03.2003 has come down to 5.16% on 31.03.2004. However, the G-Sec yields started hardening due to the higher crude oil prices, higher inflation, etc. and as on 30.06.2005, the yield on 10 year GoI security was at 6.89% (semi annualized). We believe that the declining interest scenario has now reversed and the yield on advances and investments will start improving. 6. Depreciation charge to P& L account due to Transfer of Securities from AFS to HTM Consequent upon transfer of certain Government Securities from Available for Sale (AFS) category to Held to Maturity (HTM) as permissible, depreciation expenses amounted to Rs 307.95 crores in the FY05. Management Perception The above-referred securities were transferred from AFS to HTM to insulate the Bank from further decline in prices. While improvement in prices, will enable selling the

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securities, no further provisioning is necessary in case of a price fall as HTM category is exempted from mark to market. 7. Adverse affect of the revised RBI policy on the Capital Adequacy of the Bank The provision of capital charge for market risk in AFS securities and operational risk capital from 31.03.2007 will adversely affect the Capital Adequacy Ratio of the Bank in coming years. Management Perception The Bank has already initiated steps to improve the capital funds and is hence making this offer for subordinated bonds for Rs. 500 crores to further shore up CRAR that would take care of capital charge for market risk on AFS securities from 31.03.2006 and operational risk capital proposed from 31.03.2007. 8. Asset Liability Position As per the statement of structural liquidity as on the 31st March 2005, the gaps in the first two time buckets are positive and well within the tolerance levels stipulated by RBI and ALM policy of our Bank. Further, all the cumulative gaps in the other time buckets are also within the tolerance limits fixed by the Bank. A large portion of the funding of the Bank is in the form of short and medium term deposits. The asset liability position of the Bank could be adversely affected if the depositors do not roll over the deposits. A comprehensive contingency plan has been put in place to address fully any problems relating to liquidity. Management Perception As per the normal behavioral pattern and past experience, a large portion of the deposits gets rolled over. The Bank feels that in the event of these deposits not being rolled over, the fresh accretion of deposits would take care of the Asset Liability mismatches. In addition, as on 31.03.2005, the Bank had excess SLR securities to the tune of Rs.6166.60 crore, while the investments of Rs.8384.60 crore are in the longterm (over 5 years) category, which can be utilized to correct any medium term mismatches. Moreover, the Bank has an Asset Liability Management system in place to actively monitor and manage liquidity mismatches. 9. Credit Risk The Banks main business of lending carries an inherent credit risk, which involves inability or unwillingness of a customer or counter-party to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions. Management Perception The Bank has a rigorous and well-defined credit appraisal system. Prudential exposure norms and various internal exposure norms are followed to avoid credit concentration and to minimize and mitigate credit risk. Credit risk assessment is in place for capturing the risk profiles of the accounts. The Bank ensures that Risk Management Department is independent of the operational department. Bank has a comprehensive loan policy document covering areas of credit and credit risk.

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10. Asset Concentration Top five industries amount for 19.77% and 17.36% of non-food credit of the bank as on 31.3.2004 and 31.3.2005 respectively. Top five borrowers account for 7.57% as on 31.3.2005 respectively. Management Perception Exposure norms are in place to avoid asset concentration. Portfolio reviews and reviews of implementation of exposure management norms are undertaken at regular intervals to check asset concentration. Except for some specified industries, exposure limits for individual industry is capped at 15 percent of the bank's total fund-based exposure to avoid concentration of assets in a few industries. 11. Outstanding Litigations against the Bank There are outstanding litigations (42 cases), as on 31.03.2005 the financial implication of which cannot be estimated. For details, please refer to the chapter on Litigation in the Information Memorandum. Management Perception These claims are not likely to affect the operations and finances of the Bank. 12. Litigation against the Bank sponsored RRBs There are 45 cases of claims/suits filed against 4 Gramin Banks sponsored by State Bank of Hyderabad. For details, please refer to the chapter on Litigation of the Information Memorandum. Management Perception These claims against these Gramin Banks are not likely to affect the operations and finances of State Bank of Hyderabad. 13. RBIs Annual Financial Inspection Report The Annual Inspection Report of RBI on the financial position of the Bank as on 31.03.2004 has identified certain weaknesses in the system, operational and other deficiencies. Management Perception The bank has taken the necessary action to rectify the various deficiencies pointed out in the Annual Financial Inspection which is a regular supervisory exercise carried out by RBI in respect of all banks and financial institutions. A comprehensive compliance report has already been submitted to the regulatory authorities furnishing details of corrective actions initiated by the bank. 14. Utilization of Funds The utilization of the funds proposed to be raised through this private placement is entirely at the discretion of the Bank and no monitoring agency has been appointed to monitor the deployment of funds. Management Perception The funds raised through this private placement are not meant for any specific project and hence a monitoring agency may not be required. The Bank is managed by professionals under the supervision of its Board of Directors. Further, the Bank is

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subject to a number of regulatory checks and balances as stipulated in its regulatory environment. Therefore, the management believes that the funds raised via this private placement would be utilized only towards satisfactory fulfillment of the Objects of the Offer. 15. Credit Decisions The credit decisions of the Bank are subject to various risk parameters. Management Perception In a dynamic environment, all the credit decisions are subjected to various risk parameters. As such the Bank is following a prudent policy marked by in built checks and balances, where identification and mitigation of risk are the key objectives. Prudential limits are fixed on various financial parameters to implement risk management guidelines. Bank has implemented various Credit Risk Management guidelines given by the Reserve Bank of India. Bank has fixed internal exposure ceilings based on credit rating of the borrowal account to mitigate concentration risk. Portfolio/Industry wise exposure limit is fixed as a risk mitigation tool. As part of the credit risk management system, the Bank has also confined, by and large, the high value credit exposures to specially designated branches, which are equipped to handle such exposures. Bank has also stipulated criteria for taking exposures in a particular industry. Maximum industry wise stipulated exposure is 15 per cent of total advances. The Due Diligence in respect of the retail assets has been strengthened to protect the quality of this portfolio. 16. Credit Policy of the Bank The credit policy followed by the Bank may materially influence its credit portfolio. Management Perception The Bank has a comprehensive loan policy document. The loan policy is regularly updated in the light of market changes and revision in RBI guidelines. Loan policy aims at continued growth of assets while endeavoring to ensure that they remain performing and standard. EXTERNAL RISK FACTOTRS 1. Regulatory restrictions on the Bank and limitations of the powers of bond holders of the Bank There are a number of restrictions as per the State Bank of India (Subsidiary Banks) Act, 1959, which impede the flexibility of the Bank's operations and affect/restrict investor's right. i. The Banks can carry on business/activities as specified in the Act. There is no flexibility to pursue profitable avenues if they arise, in contrast with companies under the Companies act, where shareholders can amend the Object clause by a Special Resolution Act. ii. There are restrictions in the Banking regulation Act regarding: a) Setting up of subsidiaries by a bank b) Management of the Bank including appointment of directors c) Borrowings and creation of floating charge thereby hampering leverage. d) Expansion of business as the branches need to be licensed e) Opening of new place of business and transfer of existing place of business

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f) Disclosures in the profit & loss account and Balance sheet g) Production of documents and availability of records for inspection by shareholders h) Reconstruction of banks through amalgamation etc i) Further issues of capital including issue of rights share for which prior SBI/RBI approval is needed j) The Bank is prohibited from trading activity. This may act as operational constraint. iii. Every Banking Company is required to create a Reserve fund by transfer of a sum equivalent to not less than twenty percent of profit as disclosed in the Profit & Loss account before any dividend is declared. iv. Every Bank has to maintain assets in India, which would be not less than 75% of the Bank's demand and time liabilities in India, which in turn may prohibit the Bank from creating overseas assets and exploiting overseas business opportunities. v. The financial disclosures in the Information Memorandum may not be available to investors after listing, on a continuous basis. vi. Various rights/powers of shareholders available under the Companies Act in this behalf are not available to shareholders of Banks as the provisions of the Companies Act are not applicable to the Bank. Rights like calling for general meetings, inspection of minutes and other material records, application by members for investigation of affairs of a company, application for a relief in case of oppression and mismanagement, voluntary winding up are not available to shareholders of a Bank. vii. As per section 19(2) of State Bank of India (Subsidiary Bank's) Act, 1959, no person other than the State Bank, shall be entitled to exercise voting rights in respect of any shares held by such person in excess of one percent of the issued capital of the subsidiary bank concerned. viii. No banking company shall pay dividend on its shares until all its capitalised expenses (including preliminary, organisational expenses, share selling commission, brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have been completely written off. The bank has no such assets/capitalized expenses as on 31.03.2005. Other than Deferred Tax Asset which has been specifically excluded from this clause by Reserve Bank of India. ix. As per Section 9 (1) of the State Bank of India Act,1959 no person shall be registered as a shareholder in respect of any shares in a subsidiary bank held by him, whether in his own name or jointly with any other person, in excess of two hundred shares, or be entitled to payment of any dividend on the excess shares held by him, or to exercise any of the rights of a shareholder in respect of such excess shares otherwise than for the purpose of selling them: Provided that nothing contained in this sub-section shall apply toa) the State Bank; b) a State Government; c) a Corporation; d) an insurer as defined in the Insurance Act, 1938; e) a local authority; f) a Co-operative society; g) a trustee of a public or private religious or charitable trust;

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Increase in regional hostilities, terrorist attacks and other acts of violence and war could adversely affect the country's economic growth and development thereby the financial markets including the Bank's business and its future financial performance. The performance, quality, and growth of the Bank are dependent on the health of the overall Indian economy. Slowdown in economic growth in India could affect the business of the Bank. Management Perception: The bank has been functioning well with all these constraints and is expected to continue to grow as hitherto. The Bank is expanding its product and services offered to diversify its income streams. The Bank's thrust on retail products is expected to provide growth. Risk management systems, credit supervision, special emphasis on recovery of NPAs and close monitoring will enable the Bank to closely monitor the health of its credit portfolio. The slowdown witnessed in the Indian and global economy in the past few years has not materially affected the Bank's profitability. 2. Sensitivity to the Economy and Extraneous Factors The Banks performance is never the less highly correlated to the performance of the economy and the financial markets. The health of the economy and the financial markets in turn depends on the domestic economic growth, state of the global economy and business and consumer confidence, among other factors. Any event disturbing the dynamic balance of these diverse factors would directly or indirectly impact the performance of the Bank including the quality and growth of its assets. 3. Competition from Existing and New Commercial Banks Competition in the financial sector has increased with the entry of new players and is likely to increase further as a result of further deregulation in the financial sector. The Bank may face competition both in raising resources and in deploying them. Management Perception: The Bank has an established broad-based presence and has been taking steps to enhance customer satisfaction by upgrading skills, systems and technology to meet such challenges. The Bank is attempting to add quality assets on competitive terms. The Bank is also taking steps to enlarge its product bouquet with a special emphasis on enhancement in the non-fund based income. On the resource-raising front, the Bank is actively endeavouring to broaden its reach and raise resources through its wide distribution network of 929 branches, 80 extension counters. 4. Changes in Regulatory Policies The operations of the Banking Industry are subject to regulations by the Government/RBI. Major changes in Government/ RBI policies relating to banking sector may have an impact on the operations of the Bank. Management Perception: The policy changes may provide both opportunities and challenges for the Bank. The Bank has a long presence in the banking sector, for more than 65 years and does not perceive policy changes to be a major threat. 5. Disintermediation in the Financial Markets As the financial markets mature and with growing developments in the capital markets, the trend towards disintermediation may be increasingly in evidence. In such a scenario, many companies including the current and potential borrowers of the Bank 99

may access capital markets directly for their financing needs and reduce their dependence on the banking system. This may have an adverse impact on the level of deposits and also on the level and mix of advances portfolio and the profitability of the Banks. Management Perception: The Bank has, in recent years, launched several retail lending schemes and value added products so as to broaden its borrower base. Further, disintermediation brings with it the opportunity for the Bank to expand its feebased activities. The Bank has been endeavouring to develop a market presence for extension of several financial services to earn fee based income by focusing on businesses such as foreign exchange, treasury, investments, cash management, insurance, depository, debenture trustee, etc. thereby turning the disintermediation phenomenon. 6. Forex Risk Exchange Rate fluctuations may have an impact on the Banks financial performance. Management Perception: As per RBI guidelines, banks are not allowed to keep open position on their foreign exchange transactions beyond prescribed limits on a daily basis. Foreign exchange transactions beyond such limits, if any, must be squared off at the end of each day. Hence, the risk from exchange rate fluctuations is minimised. The Board of Directors of the Bank has also prescribed limits for gaps or mismatches in maturities of Banks foreign currency assets and liabilities and forward transactions in foreign exchange. The Bank operates within the limits fixed for gaps or mismatches in maturities of Banks foreign currency assets and liabilities and forward transactions in foreign exchange, thus minimising the risks of mismatches in maturities and interest rates. 9. Interest Rate Risk Present interest rates on deposits and advances are based on many micro and macro economic factors including the directives of the Reserve Bank of India which are likely to be market driven due to deregulation and thereby may result in increasing pressure on spreads and affect profitability. Interest rate volatility exposes the Bank to an interest rate risk or market risk. Such interest rate risk has a potential impact on net interest income or net interest margin as well as on the market value of the fixed income securities held by the Bank in its investment portfolio. Management Perception: These risks are inherent in the banking business. However, the Bank has put in place a system of regular review of lending and deposit rates in order to minimise the interest rate risk. The Asset Liability Management Committees of the Bank reviews the risk on a regular basis. Continuous Risk Management measures are initiated depending upon the movement in the market interest rates. The movement in the interest rates is closely monitored for appropriate action. 10. Operational Risk Operational risk is defined as the risk of loss resulting from inadequate or failed internal process, people and systems or external events i.e., computer break-ins, power disruptions, fraudulent activities, natural disaster, human error or omission or sabotage. Management Perception: For managing operational risk, the Bank has laid down well-defined systems and procedures. The Bank has set up a separate department to 100

strive continuously to improve the systems and procedures to suit the changing environment which is periodically reviewed by the Operational Risk Management Committee. The Bank has also in place a strong internal inspection and audit system. For managing IT related risks, the IT policy and Information Systems Security Policy are in place. The Bank has an effective Organisational Planning Department, which formulates and monitors delegation of duties and responsibilities at different levels. Note to Risk Factors 1. Net worth (excluding revaluation reserves) of the Bank as on 31.03.2004 and 31.03.2005 was Rs. 1573.76 crores and Rs 1765.65 crores respectively. 2. The Private Placement size is Rs.500 crores. 3. The Book Value of the share as on March 31, 2004 and March 31, 2005 was at Rs. 9123/- and Rs. 10235 /- respectively (face value of Rs. 100/-). 4. State Bank of Hyderabad would like to clarify that inspection by RBI is a regular exercise and is carried out periodically by RBI for all banks and financial institutions. The reports of RBI are strictly confidential. The Bank has informed the RBI the actions already taken and measures that are under implementation in respect of observations made by RBI. 5. As per the provisions of Section 15(1) of the Banking Regulation Act, 1949 no banking company shall pay any dividend on its shares until all its capitalised expenses (including preliminary expenses, organisational expenses, share selling commission, brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have been completely written off. 6. No person holding shares in the Bank in respect of any shares held by him/her can exercise voting rights on a poll in excess of 1% of the total voting rights of all the shareholders of the Bank. 7. Transactions between State Bank of Hyderabad and its Associates w.r.t. related party transactions are given under the head Financial Information. 8. The face value per share of the promoters is Rs. 100/-. HIGHLIGHTS OF THE BANK Member of the State Bank Group, the largest banking Group in India. The Group has the biggest network of branches and the highest market share of deposits and advances in the country. Uninterrupted record of profitability since incorporation. Low net NPA ratio of 0 .61%. The Capital Adequacy Ratio of the Bank is at 11.74% as at the end of 31st March 2005 which is higher than the stipulated minimum of 9%. Deposits growth during the year 2004-05 was 19.25% as against ASCB growth of 14.97% Credit growth during the year 2004-05 was at 32.05% against ASCB growth 28.37%. Return on Assets and Return on Equity as on 31.03.2005 were 0.72% and 15.03% respectively. 100% Business has been computerised.

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PART II A. GENERAL INFORMATION

CONSENTS Consents in writing of the Arranger to the Issue, Directors, Trustees, Registrars, Legal Advisors and Compliance Officer to act in their respective capacities have been obtained. EXPERT OPINION Save as stated elsewhere in the Information Memorandum, the Bank has not obtained any other expert opinion. CHANGES IN DIRECTORS DURING THE LAST THREE YEARS The changes that took place in the Board of Directors since 1st September, 2001 are as follows: Date of Change S. Name Reason for No. Change Appointment Ceased from 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. Janki Ballabh A. K. Purwar D. P. Roy R. Sundar Raman K.S.V. Krishanama Chari Rajendra Kakker A.G.Kalmankar Amitabha Guha Sanjay Tandon K.S.V. Krishanama Chari C. Bhattacharya A.G.Kalmankar S.K. Hariharan A.R.Samajdar M.N.Rao Y. Sinha Radhey Shyam P.Krishnamurthy R.N.Kar Ramesh Chand S.P.S.Sangwan S.Suryanarayana D.V.Satyanarayana Raju Smt.Uma Ghurka Dr.S.Raja Kutty P.Laxminarayan Rau N.S.Peshkar K.N.Thigale T.Madhusudhana Rao Peri Subba Rao 01/11/2000 13/11/2002 20/04/1999 01/10/2001 09/10/2000 17/06/2002 06/06/2003 22/05/2004 15/11/1999 12/06/2002 08/10/2003 31/05/2004 16/05/2005 23/02/2000 01/01/2001 01/01/2004 25/07/2000 01/07/2003 05/01/2004 30/10/2000 25/03/2004 20/06/2003 01/10/1999 07/07/2003 15/07/1999 10/06/2004 15/10/1996 18/10/2002 05/11/1998 12/03/2003 31/10/2002 ----30/09/2001 31/05/2002 10/06/2002 05/06/2003 22/05/2004 -----31/07/2003 30/05/2004 11/05/2005 ----30.09.2003 -----30/06/2003 04/01/2004 ----24/03/2004 -------06/07/2003 ---09/06/2004 ----14/10/2002 --04/11/2001 ---Retirement Continue till date Retirement Retirement Transfer Resignation Transfer Continue till date Continue till date Retirement Changed Transfer Continue till date Retirement Continue till date Continue till date Changed Transfer Continue till date Changed Continue till date Continue till date Changed Continue till date Changed Continue till date Completion of tenure Continue till date Completion of tenure Continue till date

102

CHANGES IN AUDITORS DURING THE LAST THREE YEARS Since the RBI appoints the Auditors each year, the changes have been effected as per RBIs Approval. The changes are given below: Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Name of the Auditors M/s.L.U.Krishnan & Co., M/s.Hingorani M & Co., M/s.Mittal Gupta & Co., G Basu & Co. S N Mukherji & Co. Hariharan Narayan & Co. M/s.Rao & Narayana M/s.B.L.Ajmera & Co., M/s.Hingorani M. & Co M/s.Varadachary & Co., M/s.Dhamija & Sukhija & Co., M/sS.Mann & Co., M/s.Dhamija & Sukhija M/s.Doogar & Associates Year of Change 2002-03 2002-03 2002-03 2002-03 2002-03 2002-03 2003-04 2003-04 2003-04 2003-04 2003-04 2003-04 2004-05 2004-05 Added / Retired Added Added Added Retired Retired Retired Retired Retired Retired Added Added Added Retired Added

AUTHORITY FOR THE PRESENT ISSUE This private placement of Bonds is being made pursuant to the circular resolution passed by the Executive Committee of the Board of Directors of the Bank. The Board has authorised the General Manager (Treasury) to issue the Information Memorandum. LETTERS OF ALLOTMENT/ REFUND The Bank shall credit the allotted securities to the respective beneficiary account / dispatch the Letter of Allotment, if applicable or Refund Orders/Letter of Regret, as the case may be, by Registered Post or as per extant postal rules at the sole risk of the applicant to the applicant within thirty days from the date of allotment. Further, the Bank agrees that a) as far as possible, allotment of bonds shall be made within 30 days of the closure of the issue. b) Interest shall be paid at 15% p.a. if the allotment has not been made and/or the refund orders have not been dispatched to the investors within 30 days from the date of the closure of the issue, for any delay beyond 30 days from the 31st day till the date of dispatch of refund order. BASIS OF ALLOTMENT The Bank reserves the right to reject in full or partly any or all the offers received by them to invest in these Bonds without assigning any reason for such rejections.

103

ISSUE MANAGEMENT TEAM Arranger to the Issue

SBI Capital Markets Ltd. 202, Maker Tower E Cuffe Parade Mumbai 400 005 Tel: (022) 2218 9166 Fax: (022) 2218 8332 Email: fig@ sbicaps.com

Trustee to the Bond Holders IDBI Trusteeship Services Ltd.,Mumbai 10th Floor, Nariman Bhawan 227,Vinay K. Shah Marg, Nariman Point, Mumbai-400021 Tel. 022 5631 1771/2/3 Fax:5631 1776 www.idbitrustee.com

Registrar to the Issue M/s.Karvy Computershare Private Limited, Banjara Hills, Hyderabad.

COMPLIANCE OFFICER The Bank has appointed a Compliance officer to deal with the Investors grievances Mr. C V Krishnakumar General Manager-Treasury State Bank of Hyderabad-Head Office Gunfoundry, Hyderabad 500 001. Tel No: (040) 23387389

104

Yea r end ed 31.0 3.20 01 INCOME Interest Earned Other Income TOTAL EXPENDITURE Interest Expended Operating Expenses Provisions and Contingencies TOTAL PROFIT/LOSS C/f profit/(loss) Net Profit for the year Capital Reserve (Investment appreciation) TOTAL APPROPRIATIONS Transfer to Statutory Reserves Investment Fluctuation Reserve (excess / short 169 4 288 1982 108 3 451 298 1832 0 150

Year ended 31.03.2002

Year ended 31.03.2003

Year ended 31.03.2004

Year ended 31.03.2005 Jun-05

1918 365 2283

2067 462 2529

2213 707 2920

2325 422 2747

660 101 761

1269 415 373 2057 0 226

1320 451 457 2228 0 301

1372 534 633 2539 0 381

1363 671 462 2496 0 251

396 211 84 691

70

0 150

0 226

0 301

0 381

0 251

70

45

68

90

95

75

70

provision towards depn. on Investments net of taxes and Statutory Reserves)

-10 Transfer to Capital Reserves (Profit on sale of Inv. under "HTM" Category Redemption Reserve for Bonds Dividend -19 7

65

140

228

-119 7

0 19

0 58

0 59

105

(inclusive of Dividend Tax where applicable) Other Reserve Balance carried over to Balance Sheet TOTAL Earnings per share Basic/Diluted) (in Rs.)

89

205

52

117

150

226

301

381

251

70 408

871

1313

1747

2210

1454 (Rs. in crores)

106

107

STATEMENT OF ASSETS AND LIABILITIES

Rs. in crores

Financial Year Ended as on March 31 A. ASSETS 1. Cash in hand 2. Balances with RBI

2001

2002

2003

2004

2005

Jun-05

73 1012

73 1239

65 1762

74 1744

73 1318

103 1419

3. Balances with Banks in India

47

33

64

621

1231

742

4. Balances with Banks outside India

269

829

41

154

255

277

5. Money at Call and Short Notice

207

27

10

200

827

6. Investments in India

8758

9828

12519

14532

14559

15504

7. Investments Outside India

8. Advances in India

7091

8423

9663

11814

15600

16227

9. Advances outside India

10.Fixed Assets (Net of Rev. Reserve) 11.Other Assets

97 1079

103 1386

115 1875

165 1532

172 1514

198 1432

A. TOTAL OF (A)

18426

22121

26131

30646

34922

36729

B. LIABILITIES

108

1. Demand Deposits From Banks From Others 2. Savings Deposits 3. Term Deposits From Banks From Others 329 9056 397 10981 264 13418 239 16730 248 19242 0 22403 351 2321 2784 347 2484 3194 425 2552 3940 522 3063 4757 513 3491 5435 242 2841 6082

4. Borrowings In India Outside India

94 0

78 0

46 370

43 782

73 744

6504 0

5. Other Liabilities and Provisions

2485

3367

3590

2661

3136

2396

6. Subordinated Debts

244

275

275

275

275

275

B. TOTAL OF (B)

17664

21123

24880

29072

33157

34893

C. NET ASSETS (C=A-B) Represented by:

762

998

1251

1574

1765

1836

D. SHARE CAPITAL

17

17

17

17

17

17

E. RESERVES AND SURPLUS

1. Statutory Reserve

219

287

378

473

548

548

2. Capital Reserve (Bond Redemption)

120

109

Reserve 3. Share Premium 0 0 0 0 0

0 0

4. Investment Fluctuation Reserve

35

100

240

468

468

468

5. Revenue and Other Reserve

371

594

616

616

732

733

6. Balance of Profit and Loss Account TOTAL (E)

0 745

0 981

0 1234

0 1557

0 1748

70 1819

F. TOTAL (D+E)

762

998

1251

1574

1765

1836

110

CONTINGENT LIABILITIES FINANCIAL YEAR Claims against the Bank not acknowledged as debts Liability for partly paid Investment Liability on account of outstanding forward exchange contracts Guarantees given on behalf of constituents (Net of Margin) Acceptances, endorsements and other obligations (Net of Margin) Other Items for which the Bank is contingently liable TOTAL BILLS FOR COLLECTION 2000-01 67 0 5473 750 1249 74 7613 1050 2001-02 73 0 6899 787 1106 70 8935 2957 2002-03 84 0 8299 898 1214 81 10576 900 Rs. in crores 2004-05 2003-04 24 0 6007 1110 1323 213 8677 1057 19 0 7593 1251 1909 329 11101 775

BREAK UP OF UNSECURED LOANS AS ON 31.03.2004 AND 31.03.2005 31.03.2005 I. Borrowings in India i) Reserve Bank of India 66 ii) Other Banks 6 iii) Other Institutions and Agencies II. Borrowings outside India III. Tier II Bonds (a) Subordinated Debt (12 yr maturity) (b) 7 Yr Unsecured Redeemable Bonds TOTAL (I+II+III) 744

(Rs. in crores) 31.03.2004

22 21 782

275 1091

275 1100

DETAILS REGARDING LOANS AND ADVANCES TO PERSONS/COMPANIES IN WHICH DIRECTORS ARE INTERESTED

Name of The Director Type of Bank's Exposure Nil Nil

Amount in Lakhs as on 31.03.05 Nil

Asset Classification Nil

111

STATEMENT OF FACE VALUE, BOOK VALUE AND MARKET VALUE OF GROSS INVESTMENTS AS ON 31st MARCH, 05 (Rs. in crores) Book Value Market Value 5086.13 8329.55 0 13415.68 5086.13 8495.59 0 13581.72

Sn A

Investments Govt. Securities Held to Maturity Available for sale Held for trading Total of A

Face Value 4624.92 7594.56 0 12219.48

Other App Securities Held to Maturity Available for sale Held for trading Total of B 7.33 128.75 0 136.08 7.33 128.73 0 136.06 7.33 153.52 0 160.85

Shares Held to Maturity Available for sale Held for trading Total of C 32.37 19.8 0.01 52.18 32.37 54.27 0.34 86.98 32.37 92.1

0.3
124.77

Bonds/Debentures Held to Maturity Available for sale Held for trading Total of D

297.24
122.55 0 419.79

287.88
121.73 0 409.61

287.88
121.37 0 409.25

Others Held to Maturity Available for sale Held for trading Total of E GRAND TOTAL 3.25 3.25 3.25

466.69
0 469.94 13297.47

553.16
0 556.41 14604.74

539.68
0 542.93 14819.52

112

SIGNIFICANT ACCOUNTING POLICIES 1. General: The accompanying financial statements are prepared on historical cost basis and conform to the generally accepted accounting practices and statutory provisions, except otherwise stated. Transactions involving Foreign Exchange: 2.1 All monetary assets and liabilities are converted at the FEDAI rates prevailing at the close of the year. 2.2 Income and expenditure items are translated at the exchange rates prevailing on the date of vouching the transaction or at the year end rates in respect of unvouched items, accounted as on the balance sheet date. 2.3 Profit or loss on outstanding forward contracts is accounted for as per FEDAI guidelines. 2.4 Acceptances/endorsements and other obligations including guarantees in foreign currency are translated at year end FEDAI rates.

2.

3. Investments: All investments are grouped into 3 categories viz., (1) Held To Maturity (HTM), (2) Available For Sale (AFS) and (3) Held For Trading (HFT). For disclosure purposes they are stated in six classifications. All investments held under HTM category are aggregated classification wise, and accounted for at acquisition cost. However, excess of cost over the face value being premium is amortised over the period remaining to maturity. Securities held under Available For Sale (AFS) category are valued scrip-wise, at market / estimated realisable value (worked out as per RBI guidelines) and aggregated classification-wise. The net depreciation under each group of classification, if any, is fully provided for while net appreciation is ignored. Securities held under Held For Trading (HFT) category are valued scrip-wise at monthly intervals at market value /estimated realisable value (worked out as per RBI guidelines) and aggregated classification-wise. The net depreciation under each group of classification, if any, is fully provided for while net appreciation is ignored. 3.3 3.4 3.5 Brokerage/commission/incentive received on subscription is adjusted against the cost of the securities. Investments in RRBs are accounted for on carrying cost basis. Provision is made for any diminution thereon. Investments are stated in the balance sheet net of depreciation / provision for non performing investments.

113

Depreciation provision on non-performing investments is provided as per IRAC norms and the diminution of these investments is not netted against the appreciation of other investments within each group of classification. The Bank was hitherto calculating the profit on sale of securities at Highest Cost below the sale price method. With effect from April 1, 2004, the Bank has adopted the Weighted Average Holding Cost method and the calculation of profit on sale of securities is recognised accordingly. Advances: Advances are net of interest suspense, bills rediscounted with IDBI/SIDBI, amounts received from DICGC/ECGC and provision made for NPAs in accordance with the prudential norms prescribed by RBI. Provision is made @ 0.25% on Standard Assets. 5. Fixed Assets: 5.1 Premises and other fixed assets are accounted for at historical cost. 5.2 Premises include freehold as well as leasehold properties. The land and buildings allotted by Government/Government agencies are capitalised based on letters of Allotment/Agreements and physical possession. 5.3 Capital Work in Progress also includes advances for purchase of assets. Depreciation: Depreciation (except on computers/ATMs) is provided on written down value method at the rates prescribed under the Income Tax Act, 1961. Depreciation on computers/ATMs is provided for on Straight Line Method at the rate of 33.33% per annum irrespective of the date of addition. Computer softwares not forming integral part of hardware is depreciated fully during the year of purchase. No depreciation is provided on the assets in the year of sale/disposal. Leasehold properties are amortised over the period of lease. In respect of leased assets, depreciation is provided for on capital recovery method. 7. Staff Benefits: Provision for gratuity, leave encashment and pension benefits are made based on actuarial valuation. Separate funds for gratuity/pension are created. "Payments to and Provisions for Employees" includes bonus as per statutory requirement.

8. Net Profit and Contingency Fund: a) Net Profit is arrived at after accounting for the following " Provisions and Contingencies". Depreciation on Investments Provision for Income Tax, Wealth Tax Provision for Loan Losses Provision for Standard Assets and Other usual and necessary provisions and transfer to contingencies.

114

b) Contingency funds are grouped in the Balance Sheet under the head "Other Liabilities and Provisions". 9. Revenue, Income and Expenditure Recognition: 9.1 Income: I). Interest and other income are recognised on accrual basis except the following, which are recognised on cash basis. Interest and other income on non performing assets as per the norms prescribed by RBI, Commission on LCs / Bank guarantees, Income from Merchant Banking activities, Insurance claims, Interest/commission on overdue demand bills purchased on realization Locker rentals. II) Dividend on shares and income on units of mutual funds are recognised on cash basis. Income on assured schemes of mutual funds are recognised on accrual basis. III) Interest earned is net of unrealised income of previous year on advances identified as non-performing assets for the first time during the year as per norms laid down by RBI. 9.2 Expenditure: Revenue expenditure is accounted for on accrual basis, except expenses on electricity, telephone, rentals, property taxes and annual maintenance contracts which are accounted for on cash basis. Expenditure on account of Voluntary Retirement Scheme (VRS): The total amount of ex-gratia and additional provisions required for gratuity and pension funds under VRS is amortised over a period of 5 years commencing from 31st March, 2001 and accordingly 1/5th of the total is charged to Profit and Loss account in the current year. With this, the balance under the head Voluntary Retirement Scheme Deferred Revenue Expenditure is NIL .

I)

10. Lease accounting: Lease income is recognised based on the internal rate of return method over the primary period of the lease and accounted for in accordance with the guidelines issued by the Institute of Chartered Accountants of India. 11. INCOME TAX : Provision for income tax comprises of current tax and Deferred tax which is reckoned, after considering items of timing differences that originate in one period and are capable of reversal in one or more subsequent period/s EFFECTS OF CHANGES IN SIGNIFICANT ACCOUNTING POLICIES During the five consecutive financial years ended 31st March,2005, various guidelines were issued by RBI on Income Recognition, Asset classification, Provisioning in respect of Standard Assets/ Non Performing Advances, Other Assets, Classification of Investments, Valuation thereof, Treatment of depreciation on investments/ fixed/ 115

leased Assets and amortization of Voluntary Retirement scheme expenditure etc. Necessary amendments in the accounting policies have been carried out by the Bank in the relevant years, to be in conformity with the RBI guidelines. The year-wise changes in accounting policies with their consequential effect in the year of change are as under: In the year 2004-05 accounting policy in respect of following have changed: Interest accrued and due on Term Deposits which was accounted for as Interest Liability up to last year is being capitalized as deposit from the year 2004-05. Consequently, an amount of Rs.1052.87 crore was regrouped and shown as part of deposits as on 31.03.04. Due to change in accounting policy in respect of booking profit on sale of investment from "Cost" to "Weighted Average Cost Method", the profit for the year ended on 31.03.2005 is lower to the extent of Rs.2.64 Crore. In the year 2003-04, accounting policy in respect of following have changed : Hitherto, legal expenses were debited to the respective accounts and any recovery made was also credited to the same accounts. As per RBI guidelines, such expenses are now debited to the P&L account and the recovery also credited to the P&L account effective from 01.04.03. The delinquency norms for asset classification have been changed from 180 days to 90 days for the year 2003-04. The provision on Non Performing Assets are arrived at on amount outstanding net of interest suspense/ interest not collected if any, are 10% of outstanding sub-standard assets, 20% to 50% on doubtful assets and 100% of the unsecured portion of the outstanding after deducting eligible amount of claims under ECGC schemes as also on loss assets. In the year 2002-03, accounting policy in respect of following have changed : The expenses on purchase of computer software during the year are accounted as fixed assets and depreciated @60% as per income tax rules, instead of Charges account as in the earlier years. Consequently, the profit and fixed assets stand overstated by Rs.9.58 lakh. During the year the method of accounting of leave encashment benefit has been changed from cash basis to accrual basis as per AS-15. The liability ascertained on the basis of actuarial valuation upto 31st March 2003 amounting to Rs.4.12 crore has been charged to Profit & Loss account. As a result, the net profit for the year is reduced by Rs.4.12 crore and the expenditure under Payments for and Provisions for employees is increased by Rs.4.12 crore with consequent impact on other liabilities and Revenue and Other Reserves. In the year 2001-02, accounting policy in respect of following have changed : Consequent upon change in the accounting policy in respect of revaluation of unclaimed balances in Nostro accounts at the year end as per FEDAI rates, an amount of Rs.2.00 crore has been charged to Profit & Loss account thereby reducing profit of this financial year.

116

In the year 2000-01, accounting policy in respect of following have changed : During the course of the year, RBI revised the prudential norms for identification / classification / provisioning of NPAs and recognition of unrealised income thereon. The Bank has also taken a decision that in respect of the advanes where DICGC claims have been preferred but are pending, the claim will not be treated as security. Due to the multitude of changes introduced and large number of accounts involved, the effect on the levels of NPAs, effect on classification among categories, additional provisions made, reduction in interest income due to de-recognition are not ascertainable and the effect on the profit is not quantified. During the year in compliance wit the amendment of guidelines of RBI for classification and valuation of investments, the Bank has transferred 24.75% of its investments held in current category hitherto to Held to Maturity. The balance have been classified as Available for Sale. Due to this change, the profit for the year is lower by Rs.4.84 crore. The method of charging of depreciation on computers has been changed during the year from Written Down Value method to Straight Line Method in pursuance of RBI directives and rate of charging depreciation has also been changed as per RBI directives. The impact on account of this change is lower depreciation to the extent of Rs.28.46 lakh with consequent increase in profit . CAPITAL ADEQUACY RATIO Particulars Capital to Risk Weighted Assets Ratio [CRAR] Tier I Capital to Risk Weighted Assets Ratio Tier II Capital to Risk Weighted Assets Ratio 2005 11.74% 7.58% 4.16% 2004 14.29% 8.42% 5.87%

ADDITIONAL DISCLOSURES In terms of the Reserve Bank of India guidelines, the following additional disclosures have been made and the data as computed by the management is relied upon by the auditors: [Rs. in crores] Particulars 2004-05 2003-04 A Percentage of share holding of the State Bank of India. 100% 100% B Percentage of Net NPA to Net Advances 0.61% 0.65% C Details of Provisions and Contingencies debited to the Profit and Loss Account of the year: Provisions made towards NPAs 0.00 360.00 Depreciation on Investment 319.51 0.22 Provision for income tax (including deferred tax) 22.25 193.19 Provision for Wealth Tax 0.07 0.05 Provision for Wage Revision 96.00 0.00 Provision for Restructured Accounts 4.39 8.60 Provision for Contingent Liabilities 8.85 17.09 Provision for Standard Assets 9.25 6.00 Other provisions 2.00 47.86 Total 462.32 633.01 D Subordinate debt raised as Tier II Capital 275.00 275.00 During the year 2000-01 Rs. Nil During the year 2001-02 Rs. 120.00 crore During the year 2002-03 Rs. 150.00 crore 117

During the year 2003-04 Rs. Nil During the year 2004-05 Rs. Nil Total Rs.275.00 E Business Ratios: i. Interest income as a percentage to average working funds 7.33% ii. Non-interest income as a percentage to average working funds 1.33% iii. Operating profit as a percentage to average working funds iv. Return on assets (net profit as a percentage to total assets at the end of the 2.25% year) 0.72 v. Business (Deposits plus Advances) per employee (crore) vi. Profit per employee (crore) 339.74 1.91

7.77% 2.48% 3.56% 1.25% 265.86 2.87

COUNTRY RISK EXPOSURE AND PROVISIONS THERE AGAINST The net funded exposure on 31.03.2005 of the bank in respect of foreign exchange transaction with each country is within 2% of the total Assets of the bank and hence no provision and disclosure is required. COMPLIANCE WITH ACCOUNTING STANDARDS (2004-2005) (a) Segmental Reporting (AS 17) The Banks operations are solely in financial services and consists of providing Banking services including commercial lending activities, treasury operations etc. The Bank has identified the following 2 reportable segments as Primary segments for disclosing the revenue /result and Capital employed. 1. Domestic Banking operations (DBO) Domestic Treasury operations (DTO)
Business Segments Particulars
Revenue Inter Segment Revenue Total Revenue Segment Result Unallocated Income/Expenses Operating Profit Income Taxes Extraordinary/profit/loss Net Profit OTHER INFORMATION Segment Assets Unallocated Assets Total Assets Segment Liabilities Inter Segment Liabilities Total Segment Liabilities Unallocated Liabilities Total Liabilties ** ** ** ** 16439.07 131.89 14466.99 14598.88 16369.53 142.14 13724.62 18023.97 34651.72 20184.73 13957.62 30387.37 16804.89 16439.07 16369.53 18023.97 13957.62

Other Banking Residual Operations Total Operations Current Previous Current Previous Current Previous Current Previous Year Year Year Year Year Year Year Year Treasury
1278.55 (936.01) 342.54 301.72 1660.21 (980.66) 679.55 674.03 1456.44 936.01 2392.45 399.76 1257.90 980.66 2238.56 337.91 ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 34463.04 459.25 34922.29 34783.61 0.00 34783.61 138.68 34922.29 30327.15 318.95 30646.10 30529.51 0.00 30529.51 116.59 30646.10 ** 250.90 2734.99 0.00 2734.99 701.48 11.74 713.22 22.25 2918.11 0.00 2918.11 1011.94 2.26 1014.20 255.00 ** 381.20

13582.48 (14466.99) (13582.48)

118

Inter-segmental revenue represents notional transfer price paid by the Central Funding Unit (CFU) to the deposit mobilising segments and the price paid by the lending/investing segments to CFU. PART B GEOGRAPHIC SEGMENTS There is only one segment, i.e. Domestic Segment. (b) Related party transactions (AS 18) Key Management Personnel S Name Designation L (S/Sri) Managing Director Managing Director 1. A.G.Kalmankar 2. Amitabha Guha Total (c) Earning per share (AS 20) Particulars 31.03.05 Earning Per (absolute) Earning Per (diluted) Share Share 1454.46 N.A. 31.03.04 2209.86 N.A. Particular s Salary & Allowances Salary & Allowances Upto 31.05.04 From 01.06.04 Period Amount Rs. 67769.70 366278.30 434048.00

(d) Accounting for deferred taxes assets/liabilities (AS 22) DEFERRED INCOME TAX In compliance with AS-22 Accounting for Taxes on Income issued by ICAI, the Bank has recognized Deferred Tax Asset/Liability upto 31.03.2001 by considering items of timing differences between taxable income and accounting income for 10 years prior to 31.03.2001. As a matter of prudence, Deferred Tax Asset amounting to Rs.137.69 crores, arising on account of items of timing differences prior to that date, was not recognized upto 31.03.2004, out of which Rs.72.81 crores has been recognized during the year and adjusted against the deferred tax liability for the year. The major components of deferred tax assets/liabilities are: COMPONENTS OF 31.03.2005 31.03.2004 DEFERRED TAX DTL DTA DTL DTA Provision for NPAs, 125.46 96.22 --Depreciation on Investments 94.33 31.21 --Depreciation on Fixed Assets 3.43 2.04 --Leave Encashment 15.72 12.52 --5.33 Adhoc Provision for Loan ---Losses Carry Forward IT Losses 22.58 NIL --Additional Provision for -26.35 -11.53 119

Doubtful Debts & Others Total Net DTA

97.76 --

190.11 92.35

33.25 --

125.60 92.35

ADDITIONAL DISCLOSURES: In terms of the guidelines issued by the RBI, the following additional disclosures are made: 31.03.2005 31.03.2004 i) Shareholding Percentage of shareholding of Govt. of India Nil Nil ii) Non-Performing Assets The Percentage of Net NPAs to Net Advances iii) Tier II Capital Amount of subordinated debts Unsecured Redeemable Bonds 0.61% 275.00 cr. 0.65% 275.00 cr.

d) ISSUER COMPOSITION OF NON-SLR INVESTMENTS AS ON 31.03.2005 (Rs. in crores) Sl. No. Issuer Amount Extent of private placement Extent of below investments grade securities 18.74 53.41 0.00 28.28 0.00 0.00 100.43 Extent of Unrated Securities Extent of unlisted securities

1 2 3 4 5 6 7

PSU Fis Banks Private Corporates Subsidiaries/Joint ventures Others Provision held towards depreciation TOTAL

120.38 200.28 88.48 87.45 6.33 556.42 (45.27) 1014.07

88.55 149.50 88.48 70.61 6.33 0.00 403.47

33.48 64.78 5.00 53.87 6.33 556.42 719.88

79.55 97.35 18.00 15.07 6.33 65.00 281.30

Non-Performing Non-SLR Investments (Rs. in crores) Particulars Opening Balance Additions during the year since 1st April Reduction during the above period Closing balance Total provision held 2004-05 Amount 36.52 0.00 6.60 29.92 29.92

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Securities sold under repos and purchased under reverse repos, under Liquidity Adjustment Facility of RBI (Rs. in Crores) Minimu Maximum Outstanding during 2004-05 Daily Closing as m average on 31.03.2005 Securities sold under Repos 0.000 970.00 545.41 NIL Securities purchased under 0.00 3250.00 1094.71 NIL reverse repos MOVEMENT OF NPAs (Rs. in Crores) 31.03.2005 31.03.2004 Gross NPAs as at beginning of year (including interest suspense Rs.39.70 Crores) Additions during the year* Reductions during the year* * includes interest suspense Gross NPAs as at the end of year (including Interest Suspense Rs.20.24 Crores) Net NPAs 691.35 191.43 329.46 553.32 95.32 739.84 371.96 420.45 691.35 77.22

i) MOVEMENT OF PROVISION HELD TOWARDS NPAs (excluding provisions on Standard Assets) (Rs . in Crores) 31.03.2005 31.03.2004 Opening Balance 473.97 348.34 Add: Provisions made during the year -NIL360.00 Less: 234.37 131.15 a) write-off -----NILb )write back of excess provisions Closing balance 342.82 473.97 (b) Movement of Provisions for NPI/Depreciation on investments 31.03.05 (Rs.in Crores) PARTICULARS 31.03.05 31.03.04 Opening Balance 31.03.2004 (a ) 53.65 63.83 0.22 ADD: a) Diminution in value on shifting from 307.95 AFS to HTM category b) Diminution in value on shifting from 10.70 HFT to AFS category c) Provision for ARCIL Investments 9.16 327.81 d) Provision for Non-Performing 1.09 Investments e) Provision for depreciation on HFT 0.04 securities Sub-Total (b) 328.94

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LESS: Write back on recoveries in NPI Write back of provision utilised and book value of Investments reduced Write back on account of depreciation provision in AFS SUB-TOTAL (c) Closing balance as on 31.03.2005 (a+b-c)

2.09 327.81 7.34 337.24 45.35 10.40 53.65

ix) Maturity patterns as on 31.03.2005 The Maturity Pattern of Loans & Advances, Investments & Securities, Deposits and Borrowings (under various Maturity Buckets prescribed by the Reserve Bank of India) are as follows:
Rs. IN CRORES 1-14 days 15 to 28 days MATURITY PATTERN OF LOANS & ADVANCES (GROSS)* INVESTMENT SECURITIES (GROSS) DEPOSITS* BORROWINGS (GROSS) FOREIGN CURRENCY ASSETS FOREIGN CURRENCY LIABILITIES 2352.99 38.77 2161.31 66.33 302.72 160.92 391.54 767.62 729.29 0.00 124.29 3.59 555.11 525.34 2243.64 2.35 537.21 623.39 29 days and upto 3 months Over 3 months and upto Over 6 months and upto Over 1 year and upto 3 years Over 3 years and upto 5 years 15027.10 14604.75 28649.64 72.50 1129.34 1023.06 over 5 Years Total

6 months 12 months 460.21 500.46 3035.45 1.15 83.25 80.08 432.42 306.56 6075.06 1.40 13.01 72.36

4554.10 3212.57 3068.15 1726.99 2278.38 8460.63 6876.54 3768.02 3760.33 0.94 68.86 82.72 0.25 0 0 0.08 0 0

[*] excluding foreign currency deposits and advances, which are included in Foreign Currency Assets & Liabilities. The above maturity pattern has been compiled by the management from the information received from the branches, ratios prescribed by RBI for determining core and volatile portion and apportionment made at Head Office on the basis of behavioral and maturity and other adjustments wherever considered necessary. x) Lending to Sensitive Sectors j) LENDING TO SENSITIVE SECTORS PARTICULARS Capital Market Sector Real Estate Sector Commodities Sector Finance to Margin Trading 31.03.2005 13.22 25.60 278.12 NIL (Rs. in Crores) 31.03.2004 3.40 42.91 394.35 NIL

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k) INVESTMENTS MADE IN SHARES ETC.(GROSS VALUE) (Qualifying for Capital Market Exposure) (Rs. in Crores) 31.03.2005 31.03.2004 Equity Shares 23.93 26.54 Convertible debentures 0.00 0.00 Units of equity oriented mutual funds 168.62 100.82 The aggregate amount of advances 10.18 3.27 outstanding against shares xi) Corporate Debt Restructuring Particulars Total amount of loan assets Amount of Standard assets Amount of Sub-standard assets Total 31.03.2005 118.08 118.08 NIL (Rs. in Crores) Total 31.03.2004 31.54 12.00 19.54

xii) Restructured Advances ( excluding those under CDR) Sr. No. a) b) c) d) Particulars Total amount of loan assets The amount of standard assets The amount of sub-standard assets The amount of doubtful assets (Rs. in Crores) 31.03.2005 31.03.200 4 22.35 53.86 17.89 36.79 4.46 3.15 Nil 13.92 (Rs. in crores) 31/3/04 31/03/05 51.25 51.25 6.63 7.75 300 300

xiii) Statement of Dividend for the last five years Dividend (Excl. Tax) Tax Dividend Rate (%) 31/3/01 6.04 0.61 35 31/3/02 7.76 45 31/3/03 17.25 2.21 100

KEY ACCOUNTING RATIOS FOR LAST 5 YEARS

For the Year Earnings per Share (EPS) (Rs.) Book Value per Share / (Tangible Net Worth/No. of shares.) Return on Net worth (%) (Net Profit/ Average Tangible Net Worth) 2001 870.74 4415.77 2002 1312.97 5787.88 2003 1747.22 7251.83 2004 2209.86 9123.30 2005 1454.46 10235.65

21.77%

25.73%

26.80%

26.99%

15.03%

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CAPITALISATION STATEMENT AS ON 31.03.2005 Borrowings Short -Term Debts Long - Term Debts (incl. Sub-ordinated Debt) Total Shareholders Funds Equity Reserves & Surplus (excluding Revaluation Reserve) Total 1765.65 Debt/Equity Ratio NETWORTH STATEMENT For the Year end March 31st Share Capital Reserve & Surplus Statutory Reserve Investment Fluctuation Reserve Revenue & Other Reserves Balance of Profit and Loss Account (Adjusted) Total Reserves Total (Capital & Reserves) NETWORTH Networth Excluding Revaluation Reserve Net Profit Income Tax Return Average Net Worth Return on Average Net Worth (PAT Basis) Return on Average Net Worth (PBT Basis)

March 31, 2005 March 31, 2004 Amount Amount Rs. in Crores Rs. in Crores 809.70 281.47 1091.17 17.25 1748.40 1765.65 0.62 803.87 296.55 1100.42 17.25 1556.52 1573.77 0.70

(Rs. in crores) 2004 2005 2001 17.25 219.24 34.61 490.62 0.00 744.47 761.72 761.72 761.72 150.22 103.88 254.10 689.94 21.77% 36.83% 2002 17.25 287.18 100.00 593.98 2003 17.25 377.60 240.00 616.09 17.25 472.90 467.52 616.09 17.25 547.17 467.52 732.71

0.00 0.00 0.00 0.00 981.16 1233.69 1556.51 1748.40 998.41 1250.94 1573.76 1765.65 998.41 1250.94 1573.76 1765.65 998.41 1250.94 1573.76 1765.65 226.49 301.40 381.20 250.90 156.50 143.07 255.00 22.25 382.99 444.47 636.20 273.15 880.07 1124.68 1412.35 1669.71 25.74% 43.52% 26.80% 39.52% 26.99% 45.05% 15.03% 16.36%

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TAX SHELTER STATEMENT (Rs. in crores) State Bank of Hyderabad Tax Shelter Statement For Five Consecutive Financial Years Ending 31st March Details 2000 2001 2002 2003 2004 Tax Rate 38.50% 39.55% 35.70% 36.75% 35.88% Provision For Tax In Books 121.62 103.88 156.50 143.07 255.00 Net Profit (As Per Book) 411.45 448.39 600.05 757.95 1014.2 1 Adjustments Add: Depreciation As Per Books 16.54 16.50 17.70 24.44 41.93 Provisions Provision For Bonus 0.01 0.03 0.20 1.70 Interest Recd On Investments 24.73 40.68 406.99 213.36 452.28 Donations Made 0.50 0.70 0.21 0.01 0.91 Amortisation On Investments 4.62 0.65 0.65 Others 0.01 0.01 4.13 Total 41.76 62.54 425.56 242.79 496.82 Less Depreciation As Per It Schedule 16.86 17.10 19.50 25.20 48.13 Payment of Interest Tax 11.55 Dividend Income Exempt 18.65 22.32 22.70 36.68 34.51 Interest Eligible For Deduction 12.97 26.88 21.12 8.69 6.16 u/s 23(G) Provision For Standard Assets Bonus deductible 0.15 0.14 Interest on Investment on Due Basis Profit on Sale of Permanent 40.35 105.09 206.99 411.51 Category Deduction U/S 36(1)(Viia) 112.08 120.35 141.83 188.17 219.21 Deduction U/S 80g 0.44 0.65 0.11 0.01 0.92 Provision For Depreciation On 41.48 13.24 57.30 60.82 Investments Others 5.76 0.84 1.01 42.50 18.09 Total 178.31 269.97 324.60 565.69 799.49 Business Income After 274.90 240.96 406.99 435.05 711.54 Adjustments Income form Other Sources Total Income 274.90 240.96 406.99 435.05 711.54 Tax On Long term Capital Gains Total Tax 105.83 95.29 145.29 159.88 255.27 Less: Advance tax/TDS/Self 119.58 138.82 171.52 173.52 319.64 ass. Tax Net Tax payable/refund -13.75 -43.53 -26.23 -13.32 -64.37

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C.

STATUTORY AND OTHER INFORMATION

MINIMUM SUBSCRIPTION The provisions as to minimum subscription are not applicable for the Private Placement of Bonds. UTILISATION OF OFFER PROCEEDS Pending the utilisation of net proceeds of the Offer as specified under the section Objects of Offer, the net proceeds will be invested in high quality, interest bearing liquid instruments including deposits with banks for the necessary duration EXPENSES OF THE OFFER The expenses of the Offer payable by the Bank inclusive of fees payable to the Arranger, stamp duty, fees payable to trustees, fees payable to the Registrars to the Offer, listing fees and other miscellaneous expenses is estimated not to exceed 1.00% of the offer size and will be met out of the proceeds of the Offer. ARRANGER TO THE ISSUE The fees payable to the Arranger are as set out in the relevant appointment letters, copies of which are kept open for inspection at the Registered Office of the Bank. REGISTRAR TO THE ISSUE The fees payable to the Registrar are as set out in the relevant appointment letters, copies of which are kept open for inspection at the Registered Office of the Bank. TRUSTEES FOR THE BONDHOLDERS The fees payable to the Trustees for the Bondholders are as set out in the relevant appointment letters, copies of which are kept open for inspection at the Registered Office of the Bank. OTHER EXPENSES The other expenses include fees and reimbursement of expenses towards listing fees, credit-rating fees etc. UNDERWRITING COMMISSION AND BROKERAGE The issue is not underwritten and hence no underwriting commission is payable. No broker is appointed hence no brokerage is payable. OUTSTANDING DEBENTURE OR BOND OFFERS As of March 31, 2005, the Bank has outstanding Bonds of Rs 275 crore. OUTSTANDING PREFERENCE SHARES As of date, the Bank does not have any outstanding preference shares. CAPITALISATION OF RESERVES OR PROFITS The bank has not capitalised any reserves or profits during the last five financial years.

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PREVIOUS PLACEMENT BY THE BANK The Bank has raised Tier II Capital by way of Private Placement of unsecured, redeemable bonds in the nature of Promissory Notes to augment capital adequacy as under: Year of Placement 1995-96 2001-02 2002-03 Tenor Credit Rating Size (Months) (Rs crore) 119.42 72 Not rated 125.00 64 Not rated 150.00 86 ICRA LAAA Coupon (% p.a) 16.50% 11.50% 9.50% Redempti on Date 2001 23.05.2006 02.04.2009

PREVIOUS COMMISSION AND BROKERAGE Commission or brokerage has been paid by the Bank for earlier issues as per guidelines and within the stipulated limit. OPTION TO SUBSCRIBE The Bank has not given any person nor does it propose to give any person any option to subscribe to the bonds of the bank. UNDERTAKING REGARDING PURCHASE OF PROPERTY There is no property which the Bank has purchased or acquired or proposes to purchase or acquire, which is to be paid for wholly or partly out of the proceeds of the present issue or the purchase or acquisition of which has not been completed on the date of this Offer Document, other than property as given hereunder: a) The contracts for the purchase or acquisition whereof were entered into, or may be entered into, in the ordinary course of the Banks business, such contracts not being made in contemplation of the offer nor the offer in consequence of the contract or In respect of which the amount of the purchase money is not material.

b)

The Bank has not purchased any property in which any of its directors had or have any direct or indirect interest or in respect of any payment thereof. REVALUATION OF ASSETS The bank has not revalued its fixed assets in the last 5 years CLASSES OF SHARES The authorised capital of the Bank is Rs 50 crores divided into 50,00,000 Equity Shares of Rs.100 each. PAYMENT OR BENEFIT TO PROMOTERS OR OFFICERS OF THE COMPANY Except as stated otherwise in this Information Memorandum, no amount or benefit has been paid or given since the inception of the Bank. TERMS OF APPOINTMENT OF MANAGING DIRECTOR In terms of Section 29 (1) of State Bank of India (Subsidiary Banks) Act, 1959, the State Bank of India, after consulting the Board of Directors of State Bank of Hyderabad and with the approval of Reserve Bank of India, appointed Shri Amitabha Guha as 127

Managing Director of State Bank of Hyderabad for a period of two years from the date of his assuming charge of the position, vide clause (aa) of Sec 25 of SBI (Subsidiaries Banks) Act 1959 dated 22.05.2004. ISSUE OTHERWISE THAN FOR CASH There has not been any issue of equity shares for consideration other than cash, otherwise than as mentioned in the chapter on Capital Structure. PAYMENT OR BENEFIT TO THE DIRECTORS AND OFFICERS OF THE BANK No amount or benefit has been paid or given or is intended to be paid or given to any Director or Officer of the Bank except their normal remuneration and/or reimbursement for the services rendered to the Bank to which they are entitled to or may become entitled to under the provisions of the Bank Nationalisation Act or otherwise in accordance with the Law. PREVIOUS ISSUES BY THE BANK- OUTSTANDING Bonds issued by the Bank outstanding as on the date of Offer Document and terms of issue Year of Placement 2001-02 2002-03 Tenor Credit Size (Months) Rating (Rs crore) 125.00 64 Not rated 150.00 86 ICRA LAAA Coupon (% p.a) 11.50% 9.50% Redempti on Date 23.05.2006 02.04.2009

NATURE AND INTEREST OF DIRECTORS No Director of the Bank is interested in the appointment of any of the Managers, Registrars and Bankers to the Issue. No Director of the Bank is interested in any property acquired by the Bank within two years of the date of the Offer Document or proposed to be acquired by it. The Bank has not purchased any property in which any of its Directors had or have any direct or indirect interest or in respect of any payment thereof. The Bank has no plans, at present, to acquire any running business out of the proceeds of the Issue. The Directors have no interest in any loan or advance given by the Bank to any person(s)/ Company (ies) nor is any beneficiary of such loan or advance related to any of the Directors.

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D.1 PROVISIONS OF STATE BANK OF HYDERABAD (SBH) ACT, 1956 AUTHORISED CAPITAL Section 9 of the SBH Act, 1956 provides that the authorised capital of the Bank shall be One crore of rupees divided into shares of Rs 100 each. The authorised capital of the Bank may be increased or reduced by the State Bank with the approval of the Reserve Bank. It was subsequently increased to Rs 50 Crores ISSUED CAPITAL As per Section 10 of the SBH Act, 1956 the Bank may, with the approval of SBI and RBI, increase from time to time, its issued capital but no increase in the issued capital shall be made in such a manner that the State Bank holds at any time less than fiftyfive per cent of the issued capital of the Bank. D.2 MAIN PROVISIONS OF THE STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT, 1959 AND THE SUBSIDIARY BANKS GENERAL REGULATIONS, 1959. The General Regulations extracted in this document are as existing now. The relevant provisions of the SBI (Subsidiary Banks) Act 1959 (THE ACT) / Subsidiary Banks General Regulations (G.R.) Framed under the Act inter alia are as under: DISPOSAL OF PROFITS Sec. 40 (1): After making provision for bad and doubtful debts, depreciation in assets, equalization of dividends, contribution to staff and superannuation funds and for all other matters for which provision is necessary by or under this Act or which are usually provided for by banking companies, a Subsidiary bank may, out of its net profits, declare a dividend. Sec. 40 (2): The rate of dividend shall be determined by the Board of Directors of the Subsidiary Bank concerned. VOTING RIGHTS Chapter IV of the Subsidiary Banks General Regulations 1959 provides that : G.R. 25 (1): Subject to the provisions contained in section 19 of the Act, each shareholder of a subsidiary Bank who has been registered as a shareholder for a period of not less than three months prior to the date of a general meeting of that subsidiary bank shall be entitled to vote on every resolution placed before the meeting. G.R. 25 (2): Every shareholder entitled to vote as aforesaid who, not being a company, is present in person or by proxy or who being a company is present by a duly authorised representative, or by proxy shall have one vote on a show of hands and in case of a poll shall have one vote for each share held by him. G.R. 26 (1): A shareholder, of a subsidiary bank, being a company, may by a resolution or a power of attorney authorise any of its officials or any other person to act as its representative at any general meeting of the shareholders of the subsidiary bank and the person so authorised (referred to as a duly authorised representative in these Regulations) shall be entitled to exercise the same powers on behalf of the company which he represents, as if he were an individual shareholder of the subsidiary bank. The authorisation so given may be in favour of two persons in the alternative and in such a case any one of such persons (but not both) may act as the duly authorised representative of the company.

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G.R. 29: No person who is an officer or an employee of a subsidiary bank may be appointed a duly authorised representative or a proxy in respect of a general meeting of that bank. MEETING OF SHAREHOLDERS NOTICE CONVENING A GENERAL MEETING G.R. 17(1): A notice convening a General Meeting of the shareholders of a subsidiary bank signed by the Chairman or the Managing Director of that bank shall be published at least twenty-eight days before the date of the meeting in the Gazette of India and also in at least two principal daily newspapers circulating at the place where the head office of the subsidiary bank is situated. G.R.17 (2): Every such notice shall state the time, date and location of such meeting, and also the business that shall be transacted at the meeting. SPECIAL GENERAL MEETING G.R. 18 (1): The Board may, at any time and shall, if a requisition for such a meeting has been received from either the State Bank or other shareholders holding shares carrying, in the aggregate, not less than 20 per cent of the total voting rights of all the shareholders, convene or cause to be convened, a Special General Meeting of shareholders. BUSINESS AT GENERAL MEETINGS G.R. 19(1): No business other than that specified in sub-section (2) of section 44 of the Act shall be transacted or discussed at the Annual General Meeting, except with the consent of the Chairman or other person presiding at the meeting, unless not less than six weeks notice of the same has been given to the Chairman or the Managing Director or the subsidiary bank either by the State Bank or by at least ten other shareholders qualified to vote at the meeting. Such notice shall take the form of a definite resolution to be put to the meeting, and shall be included in the notice of the meeting. G.R. 19 (2): Except with the consent of the Chairman or other person presiding at the meeting, no business shall be transacted or discussed at any special general meeting, except the business for which the meeting has been specifically convened. QUORUM AT GENERAL MEETINGS G.R. 20: No business shall be transacted at any meeting of the shareholders whether it is the Annual General meeting or any Special General Meeting, unless a quorum of at least five shareholders consisting of the State Bank represented by a proxy or by a duly authorised representative and four other shareholders entitled to vote at such meeting in person or by proxy or by duly authorised representatives is present at the commencement of such business, and if within fifteen minutes from the time appointed for the meeting a quorum is not present the Chairman or the person presiding at the general meeting may dissolve the meeting or adjourn it to the same day in the following week at the same time and location, and if at such adjourned meeting a quorum is not present, the shareholders who are present in person or by proxy or by duly authorised representative shall form a quorum: Provided that no annual general meeting shall be adjourned to a date later than three months after the 31st December # and if adjournment of the meeting to the same day in the following week would have this effect, the annual general meeting shall not be adjourned but the business of the meeting shall be commenced either as soon within

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one hour from the time appointed for the meetings as a quorum may be present, or immediately after the expiry of one hour from that time and those shareholders who are present in person or by proxy or by duly authorised representative at such time shall form a quorum. # changed to March 31 CHAIRMAN AT GENERAL MEETINGS G.R. 21(1): The Chairman or in his absence such one of the directors as may generally or in relation to any particular meeting be authorised by the Chairman in this behalf shall preside at a general meeting, and in the absence of the Chairman and the person so authorised and also failing any such authorisation the shareholders who are present in person or by proxy or by duly authorised representatives at the meeting may elect any other director to preside at the meeting. G.R. 21 (2): The person presiding at a general meeting shall regulate the procedure at the general meeting, and, in particular, shall have power to decide the order in which shareholders may address the meeting, to fix a time limit for speeches, to apply the closure when, in his opinion, any matter has been sufficiently discussed and to adjourn the meeting. PERSONS ENTITLED TO ATTEND THE GENERAL MEETINGS G.R. 22 (1): All directors, the auditor for the time being and all shareholders of the Subsidiary bank shall, subject to the provisions of sub-regulation (2), be entitled to attend a general meeting. VOTING AT GENERAL MEETINGS G.R. 23 (1): Save as otherwise provided in section 31 of the Act, every matter submitted to a General Meeting of a subsidiary bank shall be decided by a majority of votes. G.R. 23(2): A declaration by the person presiding at a general meeting of a subsidiary bank that a resolution has been carried or rejected thereat upon a show of hands by those shareholders present who are entitled to vote on the resolution shall be conclusive, and an entry to that effect in the book of proceeding of the subsidiary bank shall be sufficient evidence of that fact, without proof of the number or proportion of the votes recorded in favour of, or against, such resolution, unless immediately on such declaration a poll be demanded in writing on behalf of the State Bank of by at least four other shareholders present and entitled to vote at the meeting. G.R. 23 (4): The decision of the person presiding at the meeting as to the qualification of any person to vote, and also in the case of a poll, as to the number of votes any person is competent to exercise shall be final. TRANSFER OF SHARES Chapter IV of the State Bank of India (Subsidiary Banks) Act 1959 provides thatSec. 18 (1) : Save as otherwise provided in sub-section (2) the shares of a subsidiary bank shall be freely transferable. Sec. 18 (2) : Nothing contained in sub-section (1) shall entitle the State Bank to transfer any shares held by it in any subsidiary bank if such transfer will result in reducing the shares held by it to less than fifty five per cent of the issued capital of that subsidiary bank. Sec. 19 (1) : No person shall be registered as a shareholder in respect of any shares in a subsidiary bank held by him, whether in his own name or jointly with any other

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person, in excess of two hundred shares, or be entitled to payment of any dividend on the excess shares held by him, or to exercise any of the rights of a shareholder in respect of such excess shares otherwise than for the purpose of selling them : Provided that noting contained in this sub-section shall apply to (a) the State Bank; (b) a State Government; (c) a Corporation; (d) an insurer as defined in the Insurance Act, 1938; (e) a local authority; (f) a co-operative society; (g) a trustee of a public or private religious or charitable trust; (h) a shareholder of an existing bank who is allotted any shares under sub-section (9) of Section 13. Sec. 19 (2) : Notwithstanding anything contained in sub-section (1), No person referred to in the proviso to that sub-section, other than the State Bank, shall be entitled to exercise voting rights in respect of any shares held by such person in excess of one per cent of the issued capital of the subsidiary bank concerned. Sec. 20 : Notwithstanding anything contained in the Acts hereinafter mentioned in this section, the shares of a subsidiary bank shall be deemed to be included among the securities enumerated in section 20 of the Indian Trusts act, 1882, and also to be approved securities for the purposes of the Insurance Act, 1938, and the Banking Companies Act, 1949. Sec.21: Every subsidiary bank shall keep at its head office, a register, in one or more books, of the shareholders, and shall enter therein the following particulars so far as they may be available:a. the names, addresses and occupations, if any, of the shareholders and a statement of the shares held by each shareholder, distinguishing each share by its denoting number; b. the date on which each person is so entered as a shareholder; c. the date on which any person ceases to be a shareholder; and d. such other particulars as may be prescribed. Sec. 22: Notwithstanding anything contained in section 19, no notice of any trust, express, implied or constructive shall be entered on the register of shareholders of a subsidiary bank or be receivable by it in respect of its shares. Chapter II of the Subsidiary Banks General Regulations 1959 provides thatG.R. 13 (1): Every transfer of the shares of a subsidiary bank shall be in writing in the form contained there in or in any usual or common form which the subsidiary bank shall approve. G.R. 13 (2): The instrument of transfer of any share shall be submitted to the Board or its Executive Committee and shall be signed by or on behalf of the transferor and the transferee, and the transferor shall be deemed to remain the holder of such shares until the name of the transferee is entered in the share register. Each signature to such transfer shall be duly attested by the signature of one witness who shall add his address and occupation. G.R. 13 (3) : Upon receipt by the Board or its Executive Committee of an instrument of transfer with the request to register the transfer, the Board or its Executive Committee shall, unless it declines the registration under Regulation 14, within two months from the date on which the instrument of transfer was delivered to the subsidiary bank for submission to the Board or its Executive Committee, cause the transfer to be registered.

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G.R. 14 (1) : The Board or its Executive Committee may decline to register any transfer of shares unless:G.R. 14 (1) (b) : a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and the transferee has been submitted to the Board or its Executive Committee. G.R. 14 (1) (c) : The instrument of transfer is accompanied by the certificate of the shares to which it relates, and such other evidence as the subsidiary bank may reasonably require in evidence of the right of the transferor to make the transfer. G.R. 14 (1) (d) : It is satisfied after such enquiry as it may consider necessary that the transferee is qualified to be registered as a shareholder in respect of the shares covered by the instrument of transfer. G.R. 14 (2) : The Board or its Executive Committee may suspend the registration of transfer during any period in which the register is closed. G.R. 16 (2) : The Board or its Executive Committee may at any time cause such enquiries to be made as it shall deem fit for the purpose of ascertaining whether any person registered as a shareholder of the subsidiary bank whether alone or jointly with another or others, is not or has ceased to be, qualified to be so registered in respect of any share and upon being satisfied that any such person is, contrary to the provision of subsection (1) of section 19 of the Act, registered, by inadvertence or other wise, in respect of any shares held by him whether in his own name or jointly with another person or persons so as to make such total holdings in excess of the total nominal value of twenty thousand rupees, it shall determine which of such shares shall be deemed to constitute such excess and shall inform the shareholder or, where such excess is held jointly, each of the joint shareholders, that in accordance with section 19 of the Act he is, and in the case of joint holders they are, not entitled to the payment of any dividend on any such share not to exercise any of the rights of a shareholder otherwise than for the purpose of the transfer of such share and shall make an entry in the register to that effect. G.R. 17 : Subject to the provisions of sub-section (3) of section 44 of the Act. G.R. 17 (1) : A Notice convening a general meeting of the shareholders of a subsidiary bank signed by the chairman or the [managing director] of that bank shall be published at least twenty-eight days before the date of the meeting in the Gazette of India and also in at least two principal daily newspapers circulating at the place where the head office of the subsidiary bank is situated. G.R. 17 (2) : Every such notice shall state the time, date and location of such meeting, and also the business that shall be transacted at the meeting. G.R. 18 (1) : The Board may, at any time and shall, if a requisition for such a meeting has been received from either the State Bank or other shareholders holding shares carrying, in the aggregate, not less than 20 per cent of the total voting rights of all the shareholders convene or cause to be convened, a special general meeting of shareholders. G.R. 18 (2) : The requisition referred to in sub-regulation (1) shall state the purpose for which the special general meeting is required to be convened, and may consist of several documents in like form each signed by one or more of the requisitionists. G.R. 18 (3) : The time, date and location of a general meeting shall be decided by the Board: Provided that a special general meeting convened on requisition shall be convened not later than three months of the receipt of the requisition. G.R. 19 (1) : No business other than that specified in sub-section (2) of section 44 of the Act shall be transacted or discussed at the annual general meeting, except with

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the consent of the chairman or other person presiding at the meeting, unless not less than six weeks notice of the same has been given to the chairman or the [Managing Director] of the subsidiary bank either by the State Bank or by at least ten other shareholders qualified to vote at the meeting. Such notice shall take the form of a definite resolution to be put to the meeting, and shall be included in the notice of the meeting. G.R. 19 (2) : Except with the consent of the Chairman or other person presiding at the meeting no business shall be transacted or discussed at any special general meeting, except the business for which the meeting has been specifically convened. SHARES AND SHARE REGISTERS Chapter II of the Subsidiary Banks General Regulations 1959 provides that G.R.3 : The shares of a subsidiary bank shall be moveable property. G.R.4(1) : Subject to the provisions of the Act and these Regulations, the register of shareholders of a subsidiary bank shall be maintained by, and be under the control of, the Board or its Executive Committee and the decision of the Board or its Executive Committee as to whether or not a person is entitled to be registered as a holder in respect of any share shall be final. G.R.4 (2) : In particular, and without prejudice to the foregoing provision, the Board or its Executive Committee shall, as regards the entries in the register of shareholders of that bank, have the power to examine and pass or refuse to pass transfers and transmissions and to approve or refuse to approve transferees of shares and to give certificates of shares. G.R.5(1) : Except as otherwise provided by these regulations, no minor or person who has been found by a Court of competent jurisdiction to be of unsound mind shall be entitled to be registered as a shareholder. G.R.5(2) : In the case of firms, shares shall be registered in the names of the individual partners, and no firm, as such, shall be entitled to be registered as a shareholder. G.R.6(2) : In the case of joint holders of any shares, their names and other particulars required by subregulation (1) shall be grouped under the name of the first of such joint holders. G.R.6(3) : A shareholder resident outside India shall furnish to the subsidiary bank an address in India, and such address shall be entered in the register and be deemed to be his registered address for the purposes of the Act and these regulations. G.R.7 : If any share stands in the name of two or more persons the person first named in the register shall, as regards voting, receipt of dividends, service of notice and all or any other matter connected with the subsidiary bank, except the transfer of the shares, be deemed the sole holder thereof SUCCESSION G.R.15(1) : The executors or administrators of the estate of a deceased sole holder of a share of subsidiary bank, or the holder of a succession certificate issued under Part X of the Indian Succession Act, 1925 in respect of such share or a person in whose favour a valid instrument of transfer of such share was executed by such person or by the deceased sole holder during the latters life-time, shall be the only persons who may be recognized by the subsidiary bank as having any title to the share of the deceased shareholder. In the case of a share of a subsidiary bank registered in the names of two or more holders, the survivor or survivors and on the death of the last survivor, the executors or administrators of his estate, or any person who is the holder

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of a succession certificate in respect of such survivors interest in the share, or a person in whose favour a valid instrument of transfer of the share was executed by such person or such last survivor during the latters life-time shall be the only person who may be recognized by the subsidiary bank as having any title to such share. The subsidiary bank shall not be bound to recognize such executors or administrators unless they shall have obtained probate or letters of administration or other legal representation as the case may be from a duly constituted Court in India having effect at the place where the Head Office of the subsidiary bank is situated. Provided nevertheless that in any case where the Board or its Executive Committee shall in its absolute direction think fit, it shall be lawful for the Board or its Executive Committee to dispense with the production of a succession certificate, letters of administration or such other legal representation upon such terms as to indemnity or other wise as it may think fit. G.R.15(2) : Subject to the provisions of the Act and these regulations, any such person becoming entitled to a share of a subsidiary bank in consequence of the death of a shareholder and any person becoming entitled to a share in consequence of the insolvency, bankruptcy or liquidation of a shareholder shall upon production of such evidence, as the Board or its Executive Committee may require, be entitled:G.R.15(2) (a) : to be registered as a shareholder in respect of the share upon his satisfying the Board or its Executive Committee in the same manner as if he were the proposed transferee under regulation 14 that he is qualified to be registered as a shareholder; or G.R. 15(2) (b) : to make such transfer of the share as the person from whom he derives his title, could have made. INCORPORATION AND SHARE CAPITAL OF STATE BANK OF HYDERABAD Chapter II of the SBI (Subsidiary Banks) Act 1959 provides as under: Sec 7 (1) : On the appointed day, the issued capital of a new bank shall consist of such amount divided into fully paid up shares of hundred rupees each, as the State Bank may, with the approval of the Reserve Bank fix. Sec 7 (4) : Without prejudice to the provisions contained in sub-section (3), a new bank may, with the approval of the State Bank and the Reserve Bank, increase from time to time, its issued capital and the capital so increased shall consist of fully paid up shares to be issued in such manner as the State Bank may, with the approval of the Reserve Bank, direct. Sec 7 (5) : No increase or reduction in the issued capital of a new bank shall be made in such a manner that the State Bank holds at any time less than 55 per cent of the issued capital of that bank. CONSTITUTION OF THE BOARD OF DIRECTORS, THEIR POWERS, THEIR REMUNERATIONS Chapter V of the SBI (Subsidiary Banks) Act 1959 provides as under : Sec 24(1) : The State Bank may, from time to time, give directions and instructions to a subsidiary bank in regard to any of its affairs and business, and that bank shall be bound to comply with the directions and instructions so given. Sec 24(2) : Subject to any such directions and instructions, the general superintendence and conduct of the affairs and business of a subsidiary bank shall, as from the appointed day, vest in a Board of Directors who may, with the assistance of the Managing Director, exercise all powers and do all such acts and things as may be exercised or done by that bank.

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Sec 25(1) : Subject to the provisions of sub-section (2), the Board of Directors of a subsidiary bank shall consist of the following: (a) the chairman for the time being of the State Bank, ex-officio; (aa) the Managing Director appointed under sub- section (1) of section 29, or under section 32; (b) an officer of the Reserve Bank, to be nominated by that bank; (c) not more than five directors to be nominated by the State Bank of whom not more than three shall be officers of that bank; (ca) one director, from among the employees of the subsidiary bank, who are workmen, to be appointed by the Central Government in the manner provided in the rules made under this Act. (cb) one director, from among such of the employees of the subsidiary banks as are not workmen, to be appointed by the Central Government in the manner provided in the rules made under this Act; (d) two directors to be elected in the prescribed manner by the shareholders, other than the State Bank; provided that if the total amount of holdings of all such shareholders registered in the books of the subsidiary bank three months before the date fixed for election is below five per cent of the total issued capital, or if there are no shareholders other than the State Bank registered on the books of the subsidiary bank, the directors to be elected by the shareholders shall be nominated by the State Bank and such directors shall, for the purposes of this Act, be deemed to be directors elected under this clause; (e) a director, if any, to be nominated by the Central Government. Sec 26(1) : A director of a subsidiary bank nominated under clause (b) or clause (c) or clause (e) of subsection (1) of Section 25 or appointed under clause (ca) or clause (cb) of that sub-section shall hold office during the pleasure of the authority nominating or appointing him. Sec 26 (2) : Subject to the provisions contained in Section 25, a director elected under clause (d) of subsection (1) of that section shall hold office for three years and thereafter until his successor is duly elected, and shall be eligible for re-election. Provided that no such director shall hold office continuously for a period exceeding six years. Sec 26 (2A) : Subject to the provisions contained in Section 25 and in sub-section (1), a director nominated under clause (c) and not being an officer of the State Bank or a director appointed under clause (ca) or clause (cb) or a director, not being an officer of the Central Government, nominated under clause (e) of sub-section (1) of section 25, shall hold office for such term not exceeding three years, as the central government may specify and thereafter until his successor shall have been duly nominated or appointed, and shall be eligible for re-nomination or re-appointment, as the case may be. Provided that no such Director shall hold office continuously for a period exceeding six years. MANAGING DIRECTOR OF A SUBSIDIARY BANK Sec.29(1) : The State Bank shall, after consulting the Board of Directors of a subsidiary bank, and with the approval of the Reserve Bank, appoint a Managing Director for that subsidiary bank; Sec.29(3)(b) : The Managing Director of a subsidiary bank shall hold office for such term not exceeding four years and subject to such conditions as the State Bank may, with the approval of the Reserve Bank, specify at the time of his appointment;

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Sec.29(4) : The Managing Director vacating his office shall be eligible for reappointment. Sec.29(5) : The State Bank may, with the approval of the Reserve Bank, for any sufficient reason, remove from office the Managing Director of a subsidiary bank; Provided that no such Managing Director shall be removed from office unless he has been given an opportunity of showing cause against such removal. CASUAL VACANCIES CASUAL VACANCY OF MANAGING DIRECTOR Sec. 32 : If the Managing Director of a subsidiary bank is rendered incapable of discharging his duties by reason of infirmity or otherwise or is absent on leave or otherwise in circumstances not involving the vacation of his office, the State Bank may appoint another person to officiate for the Managing Director until the date on which the Managing Director resumes duty. CASUAL VACANCIES AMONG DIRECTORS Sec.33 (1) : Where any vacancy occurs before the expiry of the term of office of a director of a subsidiary bank (other than the Managing Director or a director appointed under clause (ca) or clause (cb) of subsection (1) of section 25, the vacancy shall be filled a. in the case of a director nominated under clause (c) of sub-section (1) of section 25, not being an officer of the State Bank, by nomination by the State Bank; b. in the case of a director elected under clause (d) of sub-section (1) of section 25, by election or where the proviso to that clause is applicable, by nomination by the State Bank; Provided that where the duration of the vacancy in the office of an elected director is likely to be less than six months, the vacancy may be filled by the remaining directors by co-opting a person from among the shareholders entitled to elect a director under clause (d) of sub-section (1) of section 25 who is not disqualified under section 27; c. in the case of a director nominated under clause (e) of sub-section (1) of section 25, not being an officer of the Central Government, by nomination by that Government in consultation with the State Bank. Sec. 33 (2) : A person nominated or elected or co-opted as the case may be, under sub-section (1) shall hold office for the unexpired portion of the term of his predecessor. Sec. 33 (3) : Where any vacancy occurs before the expiry of the term of office of a director appointed under clause (ca) or clause (cb) of sub-section (1) of section 25, such vacancy shall be filled in accordance with the said clause (ca) or, as the case may be, clause (cb) and the director so appointed shall hold office for the period specified under sub-section (2A) of Section 26. REMUNERATION OF DIRECTORS Sec.30 : A director of a subsidiary bank shall be paid for attending the meetings of the Board of Directors or of any of its committees and for attending to any other business of the subsidiary bank such fees and allowances as may be prescribed. Provided that no fees shall be payable to the Chairman of the State Bank (or the Managing Director of the subsidiary bank) or any other director who is a whole time officer of the Central Government or the Reserve Bank or the State Bank. POWER AND REMUNERATION OF MANAGING DIRECTOR

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Sec. 29 (2) : Subject to the general control of the Board of Directors, the day to day administration and management of the affairs of a subsidiary bank shall vest in the Managing Director, and the Managing Director shall exercise such other powers and perform such other duties as may be delegated to him by the Board of Directors. Sec.29(3) : The Managing Director of a subsidiary bank shall devote his whole time to the affairs of that bank :Provided that the Managing Director of the subsidiary bank may, with the approval of the State Bank and the Reserve Bank be a director of any other institution; shall receive such salary and allowances as may be determined by the State Bank with the approval of the Reserve Bank. EXECUTIVE AND OTHER COMMITTEES OF THE BOARD OF DIRECTORS Sec.35(1) : There shall be an executive committee in respect of a subsidiary bank consisting of such directors as may be prescribed : Provided that if any such director being an officer of the State Bank and nominated by that bank under clause (c) of sub-section (1) of section 25, is for any reason unable to exercise his functions or to discharge his duties in relation to the executive committee, the State Bank may depute any of its officers to exercise all the functions and to discharge all the duties of such director in relation to the executive committee whenever such director is so unable to exercise his functions or discharge his duties; and the officer so deputed shall, for all purposes of this Act, in so far as it applies to the executive committee, be deemed to be a director of the subsidiary bank. Sec.35(2) : Subject to any regulations made under this Act, the executive committee may deal with any matter within the competence of the Board of Directors. Sec.35(3) : A copy of the minutes of every meeting of the executive committee of a subsidiary bank shall be forwarded to the State Bank and be laid before the Board of Directors of the subsidiary bank as soon as possible after the meeting. Sec.35(4) : Without prejudice to the powers of the executive committee, and subject to any regulations made under this Act, the Board of Directors of a subsidiary bank may constitute such and so many other committees, whether consisting wholly of the directors or wholly of other persons, or partly of the directors and partly of other persons, as it deems fit, to exercise such powers and perform such duties as may, subject to such conditions, if any, as the Board of Directors may impose, be delegated to them by the Board of Directors. MEETINGS OF THE BOARD OF DIRECTORS Sec.34(1) : The Board of Directors of a subsidiary bank shall meet at such time and place and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed. Sec.34(2) : The chairman of the State Bank shall preside at every meeting of the Board of Directors of a subsidiary bank and, in his absence such one of the directors as may generally or in relation to any particular meeting be authorised by the Chairman in this behalf shall preside: and in the absence of the Chairman and also failing such authorisation, the directors of the subsidiary bank present at the meeting shall elect one from among themselves to preside at the meeting. Explanation For the purposes of this sub-section absence from a meeting means non-attendance for any reason whatsoever at the meeting or any part of the meeting during which any business is transacted. Sec.34(3) : All questions at a meeting of the Board of Directors of a subsidiary bank shall be decided by a majority of the votes of the directors present, and in case of

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equality of votes, the person presiding at the meeting shall have a second or casting vote. Sec.34(4) : Where any of the directors specified in clauses (a) and (b) of sub-section (1) of section 25 or any of the directors, being an officer of the State Bank specified in clause (c) of that sub-section is unable to attend any meeting of the Board of Directors of a subsidiary bank, and the State Bank or any other such director as may be present at the meeting considers that the State Bank would not be adequately or effectively represented at such meeting by reason of the absence of any such director, the State Bank or the director present may give notice in writing to that subsidiary bank that the meeting should be adjourned to such date as may be indicated in the notice; Or that any matter, action, step or proceeding proposed to be considered, taken or carried out at that meeting, should not be so considered, taken or carried out: or that no decision should be taken at that meeting on any such matter, action step or proceeding; and that subsidiary bank and its Board of Directors shall be bound to comply with such notice and act accordingly.

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E. MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION Material Contracts and Documents State Bank of India (Subsidiary Banks) Act, 1959 Credit Rating Letters for the current Placements. Terms of Appointment of Managing Director. Original Documents of Property purchased and registered in the name of the Bank. Board Resolution approving the proposed Bond placement. Consent letters of the Registrars, the Trustees to the Bondholders, and the Directors of the Bank. Annual Reports of the Bank for the last five years. Certificates in relation to the Placement. Agreements and approvals for floating of joint ventures and associates. Certificate form Trustees for concurrence with the Trustee Clauses The above documents are available for the inspection by the investors with the Compliance Officer to the Private Placement at the Head Office of the Bank between 10.00 a.m. to 2.00 p.m. on all working days during which the proposed private placement remains open.

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PART III DECLARATION It is hereby declared that full disclosures have been made and all the relevant provisions of the State Bank Of India (Subsidiary Banks) Act, 1959, Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 as amended from time to time and the legal requirements connected with this placement as also the guidelines, instructions, etc. issued by SEBI, Government and any other competent authority in this behalf have been complied with and no statement made in this Information Memorandum is contrary to the provisions of the said Acts/Regulations/ Guidelines and rules thereunder. The Issuer accepts no responsibility for the statement made otherwise than in the Information Memorandum or in the advertisement or any other material issued by or at the instance of the Issuer and that any one placing reliance on any other source of information would be doing so at his own risk. Signed by the General Manager (Treasury), pursuant to the authority granted by the Executive Committee of the Board of Directors of State Bank Of Hyderabad. For State Bank Of Hyderabad Date: 26th September 2005 Place: Hyderabad

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STATE BANK OF HYDERABAD

(Associate of the State Bank of India) Head Office: High Bank Towers, Gunfoundry, Hyderabad 500 001 (AP). Tel No: (040) 23387201 - 208, Fax: (040) 23387562 Website: www.sbhyd.com

Dear Sirs, Having read and understood the contents of the Memorandum of Private Placement, we apply for allotment to us of the Unsecured, Redeemable Non-Convertible, Subordinated Bonds The amount payable on application as shown below is remitted herewith On allotment, please place our name on the Register of Bond holders. We bind ourselves to the terms and conditions as contained in the Information Memorandum for Private Placement. We note that the Bank is entitled in its absolute discretion to accept or reject this application whole or in part without assigning any reason whatsoever. (PLEASE READ THE INSTRUCTIONS CAREFULLY BEFORE FILLING THIS FORM) Form in which certificate is to be issued [ ] Demat DP NAME: NSDL [ ] CDSL [ ] DPID: CLIENT ID: We understand that in case of allotment of Bonds to us / our Beneficiary Account as mentioned above would be credited to the extent of Bonds allotted. In case the Bonds allotted to us cannot be credited to our Beneficiary Account for any reason whatsoever, we will accept physical Bonds certificates. The application shall be for a minimum of 10 (Ten) Bonds and in Multiples of 10 (Ten) Bonds thereafter No. of Bonds applied for (In words) No. of Bonds applied for (In figures) Amount (Rs.) (in words) Date Cheque / Demand Draft drawn on Cheque /Demand Draft No.

Application Form Sr. No.

We are applying as {Tick ( ) whichever is applicable}

1 4 7 10 Company Body Corporate Co-operative Banks Mutual Fund NBFC & Residuary NBFC 2 5 8 11 Commercial Bank Financial Institution Provident/Superannuation/Gra tuity Funds Association of Persons 3 6 9 12 Regional Rural Bank Insurance Companies Port Trusts Others (Please specify)

Application Details First Applicants Name in Full (Block letters) Second Applicants Name in Full Third Applicants Name in Full

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Mailing Address in Full (Do not repeat name. Post Box No. alone is not sufficient.) Pin: Tax Details Tel: Fax: IT Circle / Ward / District Not Allotted

PAN or GIR No.

Details of Bank Account Bank Name & Branch______________________________________________________________ _________ Account No: ____________________________ Nature of Account _______________________________________________________ Tax Deduction Status: (Please tick one) Fully Exempt (Please furnish exemption certificate): ____________________________________________________________________ Tax to be deducted at Source: ____________________________________________________________________ ______________ Specimen Signature Name of the Authorised Signatory 1. 2. Designation Signature

Acknowledgement Slip shall be given to the Investors as shown below the Instructions. -----------------------------------------------------------Tear Here----------------------------------------STATE BANK OF HYDERABAD (Associate of the State Bank of India) Head Office: High Bank Towers, Gunfoundry, Hyderabad 500 001 (AP).
Tel No: (040) 23387201 - 208, Fax: (040) 23387562 Website: www.sbhyd.com

Sr. No.: Received from ____________________________________________ Address_______________________________________________ __________________________________________ an application for _________________ Bonds along with Cheque/Demand Draft No. __________ Dated _________ Drawn on _____________ for Rs. __________ (Rupees________________________________________ ___________________________________________ only) (Note: Cheques and Drafts are subject to realisation)

ACKNOWLEDGEMENT SLIP

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INSTRUCTIONS
1) Application Forms must be completed in BLOCK LETTERS IN ENGLISH. A blank space must be between two or more parts of the name. For Example A B C D E L I M I T E D 2) Application forms duly completed in all respect must be lodged at the collection centers mentioned below, before the closing of the subscription. Cheques/Demand Drafts should be in favour or State Bank of Hyderabad Bonds Issue and crossed Accounts Payee only. Cheques / Demand drafts may be drawn on any bank including a co-operative bank, which is situated at and is a member or sub-member of the Bankers clearing house located at the Designated Collection centers as mentioned elsewhere in the Information Memorandum. 3) Cash, outstation cheques, money orders, postal orders and stock invest will NOT be accepted. 4) As a matter of precaution against possible fraudulent encashment of interest warrants due to loss / misplacement, applicants are requested to mention the full particulars of their bank account as specified in the Application Form. Interest warrants will then be made in favour of the bank for credit to the applicants account. In case the full particulars are not given, cheques will be issued in the name of the applicant at his own risk. 5) Receipt of application will be acknowledged by the Bank in the Acknowledgement Slip appearing below the Application Form. No separate receipt will be issued. 6) All applicants should mention their permanent Account No. or the GIR number allotted under the Income Tax Act, 1961 and the Income Tax Circle/Ward district. In case where neither the PAN nor GIR is allotted, the fact of non-allotment should be mentioned in the application form in the space provided. 7) The Application would be accepted as per the terms and conditions of the Bonds outlined in the Memorandum of Private Placement. 8) Signatures should be made in English. Signatures made in any other Indian language must be attested by an authorized official of a Bank or by a Magistrate/Notary Public under his/her official seal. 9) Those desirous of claiming tax exemptions on interest on application money are compulsorily required to submit a certificate issued by the Income Tax Officer / relevant declaration forms as pr Income Tax Act, 1961 along with the application form. In case the above documents are not enclosed with the application forms, TDS will be deducted on interest on application money. For subsequent interest payments such certificates have to be submitted periodically. Application forms can be submitted to the offices of the Arranger mentioned in the Information Memorandum or at the branches of State Bank of Hyderabad as mentioned in the Information Memorandum and shown below: Designated Collection Centres State Bank of Hyderabad Nariman Point Branch, Mumbai DGM Shri Brijendra Sharma Telephone No. 022-22844096, Fax 022-22851321 SBI Capital Markets Limited 202, Maker Tower E, Cuffe Parade, Mumbai 400 005 Tel: 022 2218 9166 Fax: 022 2218 8332

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