Yes Bank Ltd

Macroeconomic and Industry Overview

The domestic economic growth after moderating to 6.8% in 2008-09 recovered to 8.0% in2009-10 helped by fiscal stimulus and accommodative monetary policy. With an improvementin the global economic landscape in 2010, domestic economic growth is expected toconsolidate further to 8.6% despite a partial withdrawal of fiscal stimulus and removal ofmonetary policy accommodation in 2010-11.

In terms of sectoral trends, growth turned broad-based in the year 2010-11. AgricultureGDP growth, which took a setback due to failure of South-West Monsoon in 2009, is expectedto recover to 5.4% in 2010-11 on the back of normal monsoon in 2010. Industrial productionremained buoyant in the first half with growth in the Index of Industrial Productionaveraging 11.9% in Q1 and 9.1% in Q2 of 2010-11. The momentum in industrial production hasseen a moderation in Q3 with average growth coming at 5.9%. Despite the recent moderationin IIP growth on account of an unfavourable base and tight monetary policy by the RBI in2010, overall Industry GDP is expected to grow at 8.1% in 2010-11 compared to 8.0% in theprevious financial year. The Service Sector GDP remained buoyant in Q1 and Q2 of 2010-11with growth coming at 9.4% and 9.6% respectively. The momentum in Services GDP moderatedto 8.7% in Q3 due to the partial withdrawal of fiscal stimulus. However, other sectorslike Trade, Hotels, Transport, Communication, Financing, Insurance, etc. have remainedextremely supportive of overall growth momentum within the services sector. For the year2010-11 as a whole, Services GDP is expected to attain a growth of 9.6%, moderately downfrom 10.1% in the previous financial year.

The Central Government had projected a fiscal deficit to GDP ratio of 5.5% for 2010-11at the start of the year. This was lower than the deficit of 6.4% in 2009-10 and in linewith the government’s intent to gradually remove fiscal stimulus with the economyshowing signs of sustaining the robust growth momentum. With recovery in domestic growth,inflationary concerns gained traction with WPI inflation starting the year in doubledigits. Average WPI inflation, which came at 3.6% in 2009-10, rose to 9.4% in 2010-11.Food and fuel were the key drivers of inflation during this period. A rise in structuralpart of the food inflation (especially protein based foods) along with firm globalcommodity prices led to a pickup in prices for some of the essential commodities.Deregulation of petrol prices along with a price hike in administered fuel items furtherenhanced the pass through. With food and fuel prices remaining elevated, core inflationhas started showing signs of a pickup. As a result, the RBI in an effort to curbinflationary expectations continued with the policy rate hikes that were initiated in Q42009-10. The RBI hiked repo and reverse repo rates by a cumulative of 175 basis points and225 basis points to 6.75% and 5.75% respectively between April-March 2010-11. The RBI alsocontinued tightening money market liquidity conditions by hiking CRR by 25 basis points to6.0% during the Annual Policy in April 2010. Additionally, the central bank in its SecondMid-Quarter Review in November 2010 took measures to prevent excessive leverage in thehousing sector by providing a ceiling for Loan to Value ratio at 80%, and increasing riskweights and provisioning requirements by 2% for housing loans offered at ‘teaserrates’. Besides the above mentioned changes, banks introduced the Base Rate system inJuly 2010 that would replace lending based on the BPLR system.

With the RBI intentionally keeping money market liquidity tight, the average dailysystemic liquidity moderated to Rs. 24,586 crores in Q1 of 2010-11 from an average surplusof Rs. 98,574 crores in Q4 2009-10. The quarterly surplus turned into a deficit in Q22010-11 during which daily borrowings from RBI averaged at Rs. 30,233 crores. The deficitliquidity situation got aggravated in Q3, during which daily borrowings from RBI averagedat Rs. 95,350 crores. While a deficit liquidity situation was desirable for effectivetransmission of monetary policy signals, the extent of deficit turned out to be muchhigher because of structural factors like greater than average increase in currency incirculation and government’s surplus cash balances with the RBI. Moreover, temporaryfrictional factors related to government disinvestments through IPOs and quarterly advancetax outflows exacerbated the problem. In order to maintain financial stability and bringdown the liquidity deficit close to the sustainable level of -1% of Net Demand and TimeLiabilities, the RBI took the following key measures in Q3: (1) started conducting secondLAF (Liquidity Adjustment Facility) on a daily basis, (2) cut SLR by 1% to 24% and allowedan additional 1% temporary dip in SLR maintenance, (3) announced Rs. 60,000 croresof bond repurchase through its Open Market Operation. As a result, the liquidity deficithas moderated with daily borrowing from RBI averaging at Rs. 83,085 crores in Q4 2010-11.Pickup in government expenditure towards the fiscal year end moderated, the tightness inoverall liquidity conditions.

In terms of monetary variables, aggregate deposits in the banking system increased byRs. 6,52,464 crores in 2009-10 resulting in a growth of 17.0%. In 2010-11, depositsincreased by Rs. 7,11,877 crores as of March 25, 2011 resulting in a year-on-year growthof 15.8%. Non-food credit disbursement by the banking system increased by Rs. 4,62,571crores in 2009-10 resulting in a growth of 16.9%. In 2010-11, non-food credit disbursementincreased by Rs. 6,78,077 crores as of March 25, 2011 resulting in a year-on-year growthof 21.2%.

From a macroeconomic stability point of view, the Third Quarter Monetary Policy Reviewnoted the need for fiscal policy to move in tandem with the monetary tightening in orderto address supply side inflationary concerns. According to the Union Budget 2011-12unveiled in February 2011, the government is expected to move on the path of fiscalconsolidation. The fiscal deficit to GDP ratio is expected to moderate to 4.6% in 2011-12from a downwardly revised 5.1% deficit in 2010-11.

MISSION AND BUSINESS STRATEGY

Our mission is to become the "Best Quality Bank of the World" in India andevolve our organisational ethos into the "Professionals Bank of India". In April2010, your bank launched the Version 2.0 of the Bank and announced the roll-out of astrategic roadmap for your Bank, to further accelerate business growth with an aim toachieve a balance sheet size of USD 30 billion and a pan India branch network of 750 witha human capital base of 12,000 by 2015. The Version 2.0 strategy is based on aRelationship-driven, service-centric approach to deliver customised and comprehensivefinancial solutions to suit the specific requirements of your Bank’s customers. YourBANK’s 7 Strategic Objectives for the Version 2.0 growth phase, built around CORERelationship Management are:

(1) Liabilities Generation (RANK #1): YES Bank focuses to increase the quantum ofCurrent and Savings Account (CASA) deposits and granular term deposits as a part of itsVersion 2.0 goals. For this purpose your Bank plans to use a business to business tocustomer (B2B2C) strategy. Key elements of this strategy involve identifying currentaccount rich corporate customer segments and offering them tailor made products, offeringwealth products to the owner promoters and directors of corporate customers and offeringsalary accounts to these companies under the Y-Corps Program. Your Bank also taps supplychain of large corporate customers by offering superior cash management and liquiditymanagement solutions. Further, the bank has tied up with various brokers and insurancefirms to offer innovative products to their customers as a part of its strategy to targetfinancial intermediaries who are a rich source of references of technology savvy andtransaction heavy customers. In addition, the Bank plans to continuously invest inexpanding the distribution network to further improve access to the customer base.

(2) Optimal Risk Management: Your Bank intends on maintaining high standards of assetquality through risk management and mitigation practices that are actively focused onevaluations of credit, market and operational risk. In conjunction with these practices,we intend to optimize our capital needs through our growth phase.

(3) Sustainable / Diversified Revenue Generation: Your Bank intends to expand itspresence by increasing its customer base in its Corporate and Institutional Banking,Commercial Banking and Branch Banking divisions through a focused customer relationshipmanagement approach. Our goal is to increase the amount of business we do with ourcustomers by building on our strong customer relationships and cross-selling our bankingand advisory products. As we go forward we intend to have a more evenly distributedbusiness across relationship groups thereby increasing granularity and diversity inrevenues.

(4) Superior Customer Service & Brand Management: Since our inception, we havebuilt our brand around five key pillars: trust, knowledge-driven human capital,technology, transparency and responsible banking. Your Bank intends to build this furtherthrough various activities such as advertising across print, television and Internet inIndia as well as internationally; organising, attending and sponsoring seminars;publishing knowledge-based publications; maintaining relationships with leadingeducational institutions; and continuing to improve the level of service that we offer toour customers. As a part of this strategy, your Bank launched a customer centricadvertising campaign that has had a strong resonance among its customers.

(5) Finest Human Capital Management: Your Bank’s management team is highlyexperienced and has a strong track record with demonstrated expertise in projectmanagement and execution and a history of significant corporate relationships. We believethat our management is supported by experienced and qualified human capital, to whom weoffer career growth opportunities in an entrepreneurial environment, along with attractivecompensation and suitable training programs. Your Bank continues to attract the bestquality talent from leading financial institutions and business schools in the country.During the calendar year 2010, YES Bank was the one of the leading recruiters at the topbusiness schools and the Institute of Chartered Accountants of India hiring over 150post-graduates. Your Bank will continue to augment its human capital base in line with thegrowing brand and business franchise.

(6) Effective Cost Management: Your Bank continues to maintain one of the best cost toincome ratios in the banking sector. The Bank intends to effectively manage cost byreducing waste, efficiently using resources, negotiating rates efficiently with ourvendors and reducing technology cost through innovations. Using resources efficiently is apart of our overarching Responsible Banking strategy, we have consistently endeavoured todevelop sustainable business solutions using innovative technologies.

(7) Continuous Strengthening of Systems, Controls, Processes & Procedures: YourBank will continue to develop technology-based solutions in conjunction with robustprocesses and controls through centralised operations, which not only provide a superiorservice to our customers but also minimise our operational costs and risks and provide astrong platform for scaling up the business.

Business Overview

After successfully concluding Version 1.0 of YES BANK on March 31, 2010, your Bank hasembarked on its journey into the next phase of growth and has launched YES BANK –VERSION 2.0 Building the Best Quality Bank of the World in India. This roll-out plan onthe strategic blueprint for the Bank was announced to all investors, stakeholders, clientsand the media in the beginning of the Financial Year 2010-11. You will be pleased to knowthat as we successfully complete one year of this most stimulating phase, your Bank isrelentlessly surging ahead with utmost dedication, passion and commitment, backed by adifferentiated financial and business model to achieve robust and sustained growth. Overthe last seven years since inception in 2004, your Bank has leveraged on CreativeManagement Frameworks, Innovation and cutting-edge Technology, concurrently ensuring aDevelopment Focus in its uncompromising pursuit to emerge as the Professionals’ Bankof India.

Your Bank’s sustained progress to become the Best Quality Bank of the World inIndia is based on the key pillars of GROWTH, TRUST, TECHNOLOGY, KNOWLEDGE-DRIVEN HUMANCAPITAL, TRANSPARENCY and RESPONSIBLE BANKING. Your Bank continuously strives to offerinnovative and professional business solutions to meet evolving customer needs acrosssegments.

Your Bank believes in creating a Global Institutional Trustmark in India by heralding atransformation in the banking sector by constantly creating, innovating and transformingto provide maximum benefit to all stakeholders. Your Bank has an impressive human capitalbase ranging from experts in the field of banking to industry sector specialists who gobeyond the traditional realm of banking to create long-term value for the clients.

This differentiated approach has resulted in your Bank receiving several recognitionsacross leading banking league tables from independent institutions of repute bothnationally and globally.

YES BANK was ranked as India’s No. 1 New Private Sector Bank in the FinancialExpress - E&Y Best Banks Survey 2010. YES BANK was also awarded the Fastest GrowingBank (balance sheet between Rs. 30,000 crores – Rs. 1,00,000 crores) at theBusinessworld Best Banks Awards 2010.

Your Bank was awarded as India’s No. 1 Mid-sized Bank (balance sheet < Rs.50,000 crores) at the Business Today-KPMG Best Bank Survey & Awards 2010. Thislandmark achievement is the 3rd consecutive year of this significant recognition by such aprestigious media house.

In yet another significant achievement, your Bank received its maiden InternationalInvestment Grade rating from Moody’s Investor Services. Your Bank was assigned a Baa3Long-Term and Prime-3 Short-Term global local-currency deposit ratings by Moody’s.The Baa3 rating is an investment grade rating, at par with India’s Sovereign DebtRating.

Additionally, Mr. Rana Kapoor, Founder, Managing Director and CEO, YES BANK receivedthe Bombay Management Association "Entrepreneurial Banker of the Decade"(2001-2010) award, was ranked as the 2nd Most Valuable Indian CEO of the Year (Mid-sizedcategory) by BusinessWorld magazine in November 2010, and had earlier received the"Indian Business Leader of the Year" award at the FICCI-Horasis Global IndianBusiness Meeting 2010 in Spain.

We truly believe that these are some defining moments in the successful journey of yourBank as it strives to achieve the stated ultimate vision and strategy of developing intothe ‘Best Quality Bank of the World in India’ .

Relationship Capital

The cornerstone of your Bank's sustained success is the emphasis on buildinginstitutional Relationship Capital built on the foundation of long-term, corerelationships. Your Bank relies on a 'One-Bank Model' approach that is built on a3-dimensional structure of Relationship, Product and Knowledge, to create a differentiatedproposition and incremental value generation, throughout the clients' business lifecycle,across multiple customer segments and knowledge verticals as defined below:

Corporate & Institutional Banking

In its drive to become the ‘Best Quality Bank of the World in India’, yourBank leverages its relationship capital within the Corporate and Institutional Bankingsegment to ensure sustained profits and long-term value for its clients.

Your Bank’s Corporate & Institutional Banking (C&IB) division providescomprehensive financial and risk management solutions to clients generally with theturnover of a over Rs. 2000 crores. Your Bank's professional relationship experts providefinancial solutions to large Indian corporate groups.

Your Bank provides a comprehensive range of client focused Corporate Banking Services,including Working Capital Finance, Term Loans, specialised Corporate Finance products,Trade, Cash Management & Transactional Services, Treasury Services, Investment BankingSolutions and Liquidity Management Solutions to name a few. All product offerings aresuitably structured after in-depth research and assessment, taking into account theclient's risk profile and specific needs, because at your Bank, maintaining high creditquality, is of utmost priority.

Your Bank is committed to provide innovative financial solutions by leveraging onsuperior product delivery, Knowledge-based advisory, industry benchmark service levels anda strong client orientation. Your Bank has made significant inroads into developing corerelationships with a number of Indian companies.

Your Bank provides industry specific financial solutions by creating tailor-madeservices through superior structuring to best suit client requirements, which helps lowerentry barriers, strengthens business relationships, and ensures risk mitigation.

Commercial Banking

Commercial Banking (CB) has continued to work with the objective of being relationshippartners in Growth to serve this specialised segment of companies - generally with theturnover between Rs. 200 crores and Rs. 2000 crores. Aligned with the 7 StrategicObjectives of Version 2.0 of your Bank, CB aims at delivering superior customer service,strengthening systems, controls and processes, building superior Human Capital anddeveloping Core Relationships across geographies and industry segments. CB has its teammembers present in 12 locations across the country and will soon increase the presence to17 locations.

Focused on cultivating and harnessing relationship capital, the aim has been to alignour thought process and actions in line with the customer growth plans. Your Bank has beensuccessful in creating an effective partnership with most of its customers, to transactacross various banking products. We aim to further build on the cross sell in FY12 anddeepen the relationships, to eventually become a trusted Advisor to every client.

By continuously evolving innovative, sector-specific products and services, your Bankpaves the path for a sustained future for companies in this "High Octane" middlemarket segment, operating across the key focus sectors like Food and Agribusiness, LifeSciences & Health Care, Media and Entertainment, Engineering, Information Technology,Auto Ancillary and Infrastructure thereby laying the foundation for long-term growth.

New customer acquisition is the key to sustainable growth of CB, as well as for otherparts of the Bank. Utilization of CRM tools is maximized to ensure a scientific way ofprospecting new customers and identifying specific bankable opportunities, in line withthe regulatory guidelines. This helps us in delivering financial solutions tailor-made tothe specific lifecycle needs of such identified customers. This "LifecycleBanking" approach has been instrumental in the Bank understanding the aspirations ofour customers, and demonstrating the capability to influence sustainable growth andtransformation in a large number of the Bank's customers, resulting in strong customerretention and loyalty and a mutually enriching experience.

CB's Relationship Managers aim to deliver the highest standards in service to theircustomers by following a Money Doctor approach of diagnostic and prescriptive solutions,through a careful evaluation of client specific financial needs and providing tailo-madesolutions to them. These include structured products based on the customer's risk profileand growth requirements as well as general banking products and services like WorkingCapital, Term Funding, Liabilities, Investments, Insurance, Trade Finance, Cash Managementand Treasury amongst others. CB also offers a boutique of specialised services includingCapital Markets, Corporate & M&A Advisory, Corporate Finance and Project Advisoryand Finance in partnership with product groups to augment and suit the dynamic and variedrequirements of the customers.

Multinational Corporates Relationship Management

At your Bank, we understand the financial needs of Multinational Companies, in theirplans to increase their footprint in the Indian market. The Multinational Companies (MNC)Relationship Management team has been institutionalized within your Bank to provideKnowledge Driven Banking solutions to MNCs present in India, and those aspiring to enterIndia. Our differentiated approach through Dedicated Knowledge Banking teams, IndianMarket Expertise, World Class Banking solutions and Service Excellence, positions usfavourably to become the "Preferred HOST COUNTRY BANK for MNCs".

Government Relationship Management

The Government Relationship Management (GRM) team at your Bank understands thefinancial needs of the Union and State Government undertakings and agencies in theirprogress and development role of a growing India through its Knowledge Banking approach.This is further facilitated through your Bank’s Technology leadership deliveringproven, easy-to-use solutions for Government Undertakings and Agencies. Your Bank hasprovided financial and advisory services to Ministries of the Union Government, StateGovernments, Central & State Public Sector Undertakings (PSUs) and Agencies. Your Bankremains committed to delivering innovative, structured and comprehensive solutions, andhas accomplished several landmark transactions in this space with Maharatnas, Navratnas,Mini Ratnas and other Apex Institutions. In a short span of 6.5 years, the GRM group hasdeveloped robust relationships with over 300 entities across India. The GRM Group iscommitted to the core values of client origination, innovation and a superior serviceexperience that exemplifies all businesses at your Bank.

Branch Banking

Your Bank believes in providing an unparalleled banking experience embedded in thevision to become the ‘Best Quality Bank of the World in India’ to all itscustomers through its high quality, state of-the-art branch infrastructure backed bycutting-edge technology and a customer- centric approach.

Your Bank's branches are not only strategically located at premium high-streetlocations but also benchmarked with world-class design standards to ensure smoother andconvenient customer engagement. Your Bank's branches are highly accessible and facilitatewarmth, coherent communication and a consistent customer experience across all locations.The focus is not merely on facilitating transactions, but also on engaging, informing andinvolving customers in a personalised manner thereby providing incremental value to thecustomer experience at the branch. In fact, your Bank has been successful in ensuring thatits branches have transcended to the next level of serving as Community Centresfacilitating Community engagement, rather than merely being touch points.

Currently, your Bank's customers are being served through an extensive branch network,comprising 214 branches spread over 164 locations across India as well as over 250 fullyoperational ATMs. Your Bank will continue to expand its branch presence in line with itsvision of enabling financially efficient inclusive Banking through its state-of-the-arttechnology platform. While your Bank's branches have been designed to cater to allsegments of customers under the 'One-Bank Model', Branch Banking - Liabilities &Wealth Management, Business Banking and Retail Banking customers are the most frequentusers of this world-class infrastructure. The three segments, as elaborated subsequently,together constitute the Branch Banking business. This relationship line is an area of highfocus for your Bank and significant investments have been made to provide an exceptionalexperience to customers from each of these segments.

Under the aegis of Branch Banking, a comprehensive suite of innovative liability,wealth and financial products are provided to your Bank's customers:

Branch Banking - Liabilities & Wealth Management

Your Bank has a well defined segmented strategy and focuses on 16 identified sunrisesectors. These sunrise sectors have huge potential of growth given the India Growth story.The core objective of Branch Banking is to focus on these identified sectors and togenerate granular Current Accounts & Savings Accounts (CASA) by focusing on emergingentrepreneurs and SME businesses such as Professional Services - CA Firms, Law Firms,Healthcare Firms, Consultancy Firms, Broking Firms, Educational Institutes, TrustsAssociations Societies and Clubs (TASC), Travel and Tourism (Tour Operators), Media &Entertainment & Lifestyle Firms, Gems & Jewellery Firms, Retail Merchants, IT /ITeS, Logistics (Freight Forwarders), Realty & Infrastructure, Trade (Exporter /Importer), Hospitality (Hotels / Restaurants), Food & Beverages, Telecom, Pharma /Healthcare, Auto Ancillary, Electrical Goods Manufacturers, etc.

Your Bank has developed a comprehensive & customised business solution for all theidentified focused segments & individual customers (Resident & Non Resident) toaddress their Business and Wealth Management requirements. Your Bank goes beyond thetraditional realm of banking and delivers long term-value through:

a Effective Relationship Management

a Customised Product Solutions

a Premium Touch Points – Direct Access

a Advisory and Wealth Management Services

a. Relationship Segments

Your Bank provides an extensive array of Branch Banking offerings to strengthencustomer relationships. The Bank categorises its relationship base of Branch Bankingcustomers into three distinct groups based on the relationship size:

YES a which provides value-added services to customers by offering them a combinationof superior service standards and expertise in wealth management.

YES a which offers a combination of superlative service standards, expertise in wealthmanagement and customised investment advisory solutions, and value-added services likeconvenience benefits, concierge solutions and premium lifestyle privileges to its HighNetworth Individuals (HNIs) customers.

YES PRIVATE which offers personalised, confidential and tailor- made wealth managementand financial solutions to HNIs with additional services in the area of Private Equity,Art and Real Estate Advisory along with convenience benefits, concierge solutions andlifestyle services.

GLOBAL INDIAN BANKING encompasses the above three segments with the unanimous objectiveof providing a superior service experience to the Non-resident Indian customer, bypresenting a comprehensive suite of basic banking facilities, online remittances,differentiated Wealth Management and Investments in alternate asset classes.

b. Premium Touch points

Your Bank fulfills its promise of 'Superior Service Experience' by employing an arrayof customised solutions to meet all financial needs, combined with a world-class BranchAmbience, convenience of Direct Access, an exemplary Service Culture and KnowledgeExpertise.

Direct Access

Customers of your Bank can avail of a 24x7, consistent superior service experiencethrough various direct access touch points, branded 'YES TOUCH'. Your Bank stronglybelieves in the financially inclusive nature of technology, and is fully committed towardsensuring that the best-in-class technology platforms are leveraged to the fullest toextend superlative banking solutions to all customers in record time across variouschannels like Internet, Mobile, ATM and Phone using the latest technology. Customers canalso access information on your Bank's products and services through a well-structuredwebsite at www.yesbank.in

c. Advisory & Wealth Services

Your Bank follows an integrated approach towards providing complete 'Wealth ManagementSolutions', based on comprehensive Risk Profiling, Asset Allocation and InvestmentMonitoring Processes.

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

Industry Redefining Features powering Customer Satisfaction

To provide a superior banking experience, your Bank has created and implemented severalindustry redefining features which have revolutionised the traditional banking experiencein India by bringing the fastest, most efficient and convenient services to our valuablecustomers; right at their fingertips. These include:

a Single PIN access across all channels, including InternetBanking, ATM and Debit Card.

a "Two Factor Authentication" security processwhere customers need to include a second transaction password, which is sent as an instantSMS on their mobile phone to complete fund transfers.

a Online Real Time Gross Settlement (RTGS) and NationalElectronic Fund Transfer (NEFT) services available to customers to transfer funds to thirdparty accounts in over 54,000 branches nationally.

a "Mobile Money Services by YES BANK" - Your Bankin association with Nokia and Obopay India has launched a Mobile Payment Service whichenables transfer of funds using a mobile device, within a secure environment. Your Bank isone of the pioneer banks in the Mobile Payments space and has received the regulatoryapprovals from the Reserve Bank of India (RBI), India's Central Bank to act as the IssuingBank and the Custodian of Funds under these services. Mobile Money Services by YES BANKwill augment financial inclusion amongst the unbanked and under-banked consumer segmentsby bringing financial services to the consumer's mobile device, and will create afinancial ecosystem which is inclusive, sustainable and scalable. Going forward, theprogram application will be pre-embedded in Nokia mobile devices making the service highlyaccessible and user-friendly.

aThese services will be widely distributed leveraging offthe reach of Nokia's retail channel. Stop payment instructions for cheques, using the SMSfacility on mobile phones. Access to over 35,000 ATMs affiliated to MasterCard, NationalFinancial Switch and Cash Tree networks in India and over 1.25 mn ATMs associated withMasterCard globally.

a YES BANK international Debit Card-waivers on petrolsurcharge, zero lost card liability, unlimited free ATM transactions across partnernetworks, higher daily withdrawal and purchase limits.

a Online Mutual Funds platform - 'MFONLINE', which enablescustomers to purchase and sell mutual funds at the click of a mouse.

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

a YES TOUCH - Phone Banking integrates Voice, E-mail, Chatand Video in partnership with CISCO, Scansoft for speech-recognition and Servion Globalfor ystem integration and implementation. This is the first and only implementation of a24x7, speech enabled contact centre in the BFSI segment in Asia.

a Centralised Customer Query Management System diligentlytracks customer feedback and propels it towards a positive closure.

a Wi-Fi and RFID enabled 'Bank Branch of the Future' in NewDelhi, which provides an unparalleled and never-before banking Experience.

The Money Monitor - A personal finance aggregation tool on the Internet, launched inpartnership with YODLEE, which provides seamless information of the client's financialhealth by aggregating data from over 11,000 Financial and related sites across the world(including Accounts with other Banks, Credit Cards, Insurance policies, Reward &Mileage points, and Investments) thereby providing a single view across own and familyaccounts.

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

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

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

a Utility bill payments across India including the facilityto make charitable contributions to various religious and NGO institutions.

a E-standing instructions towards bill payments. Facilityto view and download account statements. Facility to view and initiate standinginstructions.

a E-mail alerts based on transaction thresholds and accountactivity.

a Integrated view across Corporate and Cash Managementservices (payments and collections).

a Differential bulk transactions along with file-levelencryption, for corporate clients.

a Air-ticket reservations and e-shopping funded by directdebits.

a Real-time payments to various e-brokerage accounts.

a Foreign exchange trading for corporate clients.

a Facility to request and view real-time balances andtransaction information.

Business Banking

Your Bank supports Small and Emerging businesses which are the growth drivers of ourgrowing economy. To ensure the same your Bank has established a dedicated Business Bankingunit. Driven by Knowledge Banking and backed by a team of professionals, your Bankdelivers a professional suite of products, services and resources to meet varied businessrequirements. The Business Banking unit caters to the unique banking requirements of Small& Medium Businesses in identified sectors generally with turnover between Rs. 5 croresand Rs. 200 crores. The Business Banking unit provides complete banking and advisoryservices to these small and emerging businesses, who are the driving force behindinnovation and sustainable development and growth of the economy. Your Bank caters to allthe service requirements of these SMEs across various product segments like Fund basedlending (Working Capital and Term financing) , Cash Management (Collections and PaymentSolutions, Direct Banking, Trade and Treasury services and Advisory through a strongbranch network of 56 branches across significant SME clusters.

Your Bank aims at fostering growth, competitiveness and employment creation that arekey to achieving sustainable economic growth at the same time, greater focus on lending onMSME has also contributed towards fulfilling the Priority Sector Lending requirements ofyour Bank. The Business Banking Group ensures high level of customization for hightransaction volumes across sectors including Infrastructure / Infrastructure Services,Telecom, Food & Agri-Business, Pharma / Healthcare, Logistics, Education,Importers/Exporters, Service providers, Traders, Auto Ancillary, Electrical GoodsManufacturers and Lifestyle Products.

Your Bank attracts SME customers by:

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

a Offering holistic banking solutions to customers throughservices of Business Banking Relationship Managers and Service Managers for all theirbanking needs (inluding business, wealth management and advisory) at the branch level.

a Offering liability products like Cash Management Services(CMS), Payment Solutions, Net Banking, Phone Banking and Trade Services.

Retail Banking

Your Bank makes its own contribution towards robust economic growth by professionallysupporting Small Business Enterprises in their growth phase. To actualize this strategyand improve flow of credit facility to Micro & Small Enterprises, your Bank hasinstitutionalized a separate business vertical - Retail Banking (Assets), which focuses onentities with annual turnover of up to Rs. 5 crores. As part of our overall"knowledge based lending strategy", the Bank has evolved a dedicated strategyfor MSME target segments such as Pharmaceuticals, Auto Ancillary, Infrastructure, New AgeService Organisation, Transport & Logistics to name a few. By adopting this strategy,your Bank expects to provide credit both to Small as well as to Micro Enterprises.

Driven by various innovative solutions, your Bank enables Businesses to maximize theirpotential and excel in future.

These Small Business Enterprises are critical to the economic growth of the country andyour Bank ensures that all their banking requirements are met through lending productslike Working Capital for MSME clients & Consumer Loans viz. Loan Against Property,Home Loans, Personal & Small Business Loans (Secured & Unsecured), Education Loansand Loan Against Securities for Owners, Promoters, Directors & Top Management of MSMEclients. These are supported through a 360-degree relationship banking by offering PaymentSolutions, Cash Management, Trade Services and Foreign Exchange services. Your Bankenables Small Business Enterprises to increase their productivity through state-of-the-arttransactions services and liability management propositions thereby fosteringcompetitiveness and growth of these enterprises. Your Bank is presently offering theseservices in 44 Branches spread across 26 locations and is committed to growing this veryimportant business segment.

Your Bank's key differentiators for the Small Business Enterprises are:

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

a Need-based banking solutions made possible through acustomised Relationship Management approach at the branch level.

a Superior service experience through operationalexperience, innovation and technology.

a Door step banking for a great banking experience.

Indian Financial Institutions Relationship Management

The Indian Financial Institutions (IFI) team spearheads the Bank’s relationshipwith the key domestic financial institutions segment. The team achieves this by supportingproduct delivery while creating and sharing industry knowledge with internal and externalstakeholders. IFI’s product suite includes Debt, Trade Finance, Treasury Services,Working Capital Finance, Cash Management & Transactional Services, LiquidityManagement Solutions and other Corporate Finance solutions.

The team’s clientele range from Banks, Mutual Funds, Financial Institutions,Insurance Companies, NBFCs, Housing Finance Companies and Co-operative Banks to capitalmarket participants such as Stock Exchanges, Stock Brokers, Commodity Brokers, PrivateEquity Funds, Provident Funds, Primary Dealers and Depositories. The team manages thecritical function of inter-bank relationships across the entire domestic banking space.Apart from establishing counterparty limits for trade and treasury functions, therelationship with other Banks and Financial Institutions is also leveraged for syndicationof loans for Wholesale and Commercial Banking customers, and to raise resources throughrefinancing existing loan portfolios. The team also initiates tie-ups with leadingbrokerage houses and NBFCs to offer various banking products to their customers. IFI alsoplays a key role in raising debt capital for your Bank in the form of Tier II SubordinatedBonds and Tier I Perpetual Bonds. During FY 2010-11, IFI successfully raised Rs. 225crores of Perpetual Bonds and Rs. 946 crores of Upper Tier II and Lower II Capital.

The year also witnessed significant expansion of IFI’s NBFC relationships withdisbursements to eminent institutions across the country. The team also expanded itspresence in the capital markets space with the onboarding of prime broking clients and thesuccessful launch of several country-wide account tie-ups with leading brokerage houses.The introduction of a short term fixed deposit proposition for institutional clientsapplying in IPOs through the ASBA method was a pioneering effort from the team. Theproduct is now a market norm. Further, in order to strengthen its current position in thecapital markets segment, your Bank has now opened dedicated Capital Markets Desk at 42 ofits branches in key centers across the country.

Successful penetration of the Co-operative Banking segment, with significant rise indeposits and Cash Management tie-ups was another important milestone during the year forthe IFI team. During the year, the Bank has introduced various products for Co-operativeBanks to enable them to offer the best of products to their customers using yourBank’s pioneering technological platforms. Your Bank was also a key partner at thetwo day conference of Maharashtra’s Co-operative Banks held at Nasik in January 2011which was attended by over 2,500 delegates. A Knowledge Report authored by your Banktitled ‘Co-operative Banking in India’ was released during the event by ShriChagan Bhujbal, Minister for Public Works Department, Government of Maharashtra.

International Banking

Your Bank was conceived with the dream of building the ‘Best Quality Bank of theWorld in India’ - a high- quality, knowledge-driven institution with the highestlevels of professional ethics, integrity and competencies. Keeping up with the tradition,your Bank has taken yet another leap by achieving institutional excellence inInternational Banking. With its roots firmly grounded in professional entrepreneurship,your Bank has created a far reaching network with over 500 international banks, financialinstitutions and official bodies across the globe.

The International Banking business offers a complete suite of products; including Debt,Trade Finance, Treasury Services, Investment Banking Solutions, Financial Advisory andGlobal Indian Banking to international customers of your Bank. These products are offeredthrough partnerships and tie-ups with International Banks and Institutions in targetgeographies. Additionally, your Bank has also tied up with exchange houses in the GCCcountries and various Investment Banking boutiques, and is always looking to enhance ourcurrent product suite for our international client base.

YES-International Banking has successfully conducted numerous large-ticket offshoreborrowings and negotiated overseas trade transactions for the Bank’s eclecticclientele. We are pleased to inform you that your Bank received its maiden internationalcredit rating from Moody’s Investor Service, with a rating of "Baa3" whichis at par with India’s sovereign rating.

Your Bank is also seeking to become the most preferred host-country banker to itscounterparts around the world, and has launched INR Vostro Accounts to that very end. Andour arrival on the international stage on the back of rapid growth with sustained superiorcredit quality did not go unnoticed. Your Bank has, in a short span of six years ofoperations, made its debut on the FT Banker Top 1,000 list with a Ranking of 890.

Your Bank continued working with the Multilateral Agencies, some of which haveexpressed their commitment to the Bank by way of direct fund-based limits and customertransactions vis--vis External Commercial Borrowings. Your Bank availed a USD 25 millionterm loan from Wells Fargo Bank, which was guaranteed by The Overseas Private InvestmentCorporation (OPIC), the U.S. Development Finance Institution. This is a first-of-its-kindstructure in India with OPIC guaranteeing the loan to Wells Fargo.

Overall the International Banking team strives to evolve best-in-class solutions forboth, your Bank's customers who conduct business overseas, as well as the Bank’sglobal customers such as:

a Foreign Banks with or without any presence in India

a Multilateral/Development Agencies and Institutions

a Private Equity fund houses with a focus on India

a Investment/Merchant Banking Boutiques

a NBFCs registered in India and backed by Foreign banks

Product Capital

Your Bank has created a range of products to professionally service customers acrossdifferentiated market segments. The ‘One-Bank Model’ approach built on a3-Dimensional organisational structure of Relationship, Product and Knowledge enablesgreater cross-sell and up-sell of these products to customers. This approach enables yourBank to further augment its existing relationships by providing multiple engagementopportunities, and introducing customised products across the customer’s growthlifecycle.

Financial Markets

Backed by experienced professionals, the Financial Markets Group at YES BANK offers acompetitive and comprehensive line-up of financial market products and services to itsclients.

Your Bank's Financial Markets (FM) business model provides effective Risk Managementsolutions relating to foreign currency and interest rate exposures of its corporateclients. FM proactively assists clients in creating a thorough awareness about the risksthey face with respect to Capital Raising, Investments, Exports, Imports and any othermarket risks. The Financial Markets group offers a structure comprising of differentbusiness units to seamlessly cater to the specific client requirements.

Your Bank provides customised solutions to clients to hedge foreign currency andinterest rate exposures through products such as Foreign Exchange Forwards, Options andSwaps. The client offerings are duly guided and supported by professionals comprising ofEconomists and Research Analysts who provide the latest analysis for generating qualityRisk Management ideas and solutions.

Your Bank has created a buoyant Debt Capital Markets (DCM) franchise with a deep rootedknowledge of the underlying market dynamics, coupled with strong distribution andstructuring capabilities. Since inception, the DCM group has originated and efficientlyexecuted over 300 transactions, across the product suite, for clients includingCorporates, PSUs, Central and State Government entities and many NBFCs. Your Bank wasranked No. 8 in the Thomson Reuters’

Top Lead Managers of Indian Rupee Bonds for the year 2010. Further your Bank was rankedNo. 9 by Bloomberg in the India Domestic Bonds underwriting league tables for the year2010.

Financial Markets also conduct proprietary trading to maximize earnings by optimal risktaking across key fixed income, equities and global foreign exchange markets.Additionally, the business unit is responsible for Balance Sheet Management, Liquiditymonitoring, maintenance of Cash and Statutory Reserve requirements and day-to-day fundmanagement of the Bank. Subordinated and hybrid debt capital for your Bank is also raisedby the Financial Markets Group. Your Bank was amongst the first in India to implementMUREX (MXG 2000), an integrated, cross-asset trading platform. Your Bank continues toexcel as reflected hereunder:

ICRA (Moody's affiliate in India) has reaffirmed your Bank's A1+ rating for its Rs. 75bn Certificate of Deposit programme. A1+ rating indicates the highest level of safety inthe short-term.

The Loan Syndications (LS) group provides comprehensive syndication and sell-downservices to the valuable clients of your Bank. With its proven domestic and internationalcredentials over the last 5 years, the group has successfully catered to clients’expectations, facilitated Bank’s portfolio churn and increased the non-interestincome of your Bank.

The group’s appraisal skills and sales capabilities are evident from the fact thatit has successfully placed Rs. 6,600 crores (~$1.45 billion) to approximately 21 banks andfinancial institutions, both domestic and international. This has enabled your Bank tomove up from 14th to 7th rank in the India Loans Mandated Arranger by Bloomberg (a reputedinternational company).

The clientele involved pedigree players across the infrastructure, manufacturing andhospitality segments.

Investment Banking

Your Bank aims to add value to its large and mid-market corporate as well as financialsponsor clients by proactive idea generation and seamless execution of their strategicinitiatives across domestic and international M&A and Capital Sourcing (Private Equityand ECM).

FY11 witnessed renewed momentum in Mergers and Acquisitions ("M&A"),Private Equity ("PE") and Equity Capital Markets ("ECM"). This wasprimarily due to positive data/ outlook from key developed markets, high month-on-monthgrowth being delivered by emerging economies including India and increased availability ofBank credit for corporate expansion purposes. This resulted in renewed optimism/confidence amongst corporates to again pursue capital raising and inorganic growth.

In order to de-risk our business model, sustain business and deliver growth even in achallenging environment, your Bank focused on adding products and markets to itsinvestment banking business. One of the key initiatives undertaken in this directionincludes the creation of exclusive partnerships with strong home country investment Banksin key cross border M&A corridors for sustained transaction flow. Your Bank enteredinto an alliance with Poalim Capital Markets, Israel; Hana Daetoo Investment Bank, SouthKorea; Shinsei Bank, Japan, all of which are top ranking institutions in their respectivecountries. This is in addition to existing non-exclusive alliances that your Bank has inmarkets including Germany, France, Italy and Nordic region among others.

The year witnessed consummation of many significant transactions across products andaddition of several new clients, taking the tally of total consummated transactions by theInvestment Banking team to over 100 since inception. The main highlight of the InvestmentBanking teams performance in FY11 has been the diversity in the nature of assignmentscompleted which include M&A (sell-side and buy-side; domestic and cross-border),successful ECM issuances, PE fund raising and market placement. These transactions includeleading growth sectors of the Indian economy such as infrastructure, food and agribusinessand information technology. The performance of the team is reflected in the consistentranking received by your Bank of being amongst the Top deal makers across prestigiousleague tables every year. As a testimony to your Bank's strong focus on renewable energy,YES BANK has secured 1st position for the 2nd consecutive year at the Global M&AAdvisor Awards held in New York for the "Green / Environmental Deal of the Year"in the Asia, Middle-East, Africa and Oceania region category.

Some of the noteworthy transactions consummated during this fiscal year include:

a Exclusive buy side advisor to United Phosphorous Limitedon its acquisition of controlling stake in Sipcam Isagro, Brazil, a leading cropprotection production and distribution company in the Brazilian agrochemicals market

a Exclusive buy side advisor to Mahindra & MahindraLimited on its acquisition of EPC Industries Limited, a niche player in the MicroIrrigation and Industrial & Infrastructure piping space

a Exclusive sell side advisor to APW President SystemsLimited, a leading manufacturer of customised racks and enclosure systems on the sale ofits business to Schneider Electric, France, a global specialist in energy managementsolutions

a Exclusive buy side advisor to Jain Irrigation SystemsLimited on its acquisition of controlling stake in Sleaford Quality Foods Limited, UK, aleading supplier of dried, dehydrated and canned foods in UK

a Exclusive advisor to Sadbhav Infrastructure ProjectLimited, a wholly owned subsidiary of Sadbhav Engineering Limited to raise Rs. 400 croresfrom Norwest Venture Partners and The Xander Group Inc. to fund its existing roaddevelopment projects and bid for new road development projects under various national andstate highway development programs.

a Provided investment advisory services to GlobalEnvironment Fund on its investment of Rs. 100 crores in Saisudhir Infrastructure Limited,a Hyderabad based EPC company focused on developing water supply and sanitation,irrigation, electricity transmission and distribution infrastructure in India

a Co-Book Running Lead Manager to the Initial PublicOffering of Rs. 775 crores of A2Z Maintenance & Engineering Services Limited, aleading EPC company providing integrated design, testing, installation, construction, andcommissioning services on a turn-key basis to the power transmission and distributionsector

a Exclusive strategic advisor to DEG – DeutscheInvestitions-und Entwicklungsellscaft mbh, member of KfW Bank Group (KfW Bankengruppe), anarm of the government of the Federal Republic of Germany on the sale of their investmentin an Indian listed company

Corporate Finance

Your Bank continues to be a front runner in the country’s economic growth byleveraging its in-depth knowledge of the emerging and core sectors with solutions thatcreate long-term value in the Corporate Finance domain.

The Corporate Finance practice offers "one stop customised solutions" toclients’ various requirements including projects financing for infrastructure,education, health, hospitality and real estate sectors; project advisory services andstructured finance products.

The Corporate Finance Group endeavors to assist clients in obtaining superior financialreturns in a risk mitigated manner due to substantial "Knowledge Arbitrage" overthe market, thus resulting in a win-win situation for all stakeholders.

Infrastructure Banking Group (IBG)

For infrastructure lending, your Bank has a specialised Infrastructure Banking Group(IBG) with specialists for sectors like Energy, Telecom, Transportation, UrbanInfrastructure and Manufacturing. Since inception IBG has been a key pillar in theCorporate Finance practice. IBG offers clients, the entire gamut of services right fromadvisory to financial closure, covering the entire lifecycle of the project.

This year, a dedicated Relationship Team has been set up for Infrastructure sectorwhich has further strengthened IBG. This team constitutes of relationship champions withInfrastructure domain experience, thereby making it easier to cater to the unique needs ofthe Infrastructure clients of your Bank.

Within a short span of time, IBG has managed to build a sizeable infrastructure assetwith successful closure of many marquee tombstone deals in roads, ports, power and urbaninfrastructure space with leading infrastructure groups in the country.

Your Bank firmly believes that besides funding, the infrastructure sector also needs anenabling environment to facilitate the development and implementation of projects. YourBank hence works closely with private and government agencies on policy formation.

Your Bank is now recognised as a formidable player for underwriting and arrangingfinancing of large infrastructure projects.

Structured Finance Group

Your Bank has expanded and established a strong and experienced Structured Financeteam, qualified and dedicated to providing financial structured products, which hascommercial and strategic importance to the client. The team also provides structuredsolutions and funding to the emerging sectors namely sports, media and entertainmentindustry, thus setting a unique precedent in the Banking industry.

The Structured Finance Group offers clients the expertise that it has built from yearsof experience gained in structuring numerous transactions both in domestic and foreigncurrency. This group leverages their strong regulatory and legal understanding and iscapable of structuring complex transactions; thereby providing solutions to the clientsthat helps them achieve higher risk weighted returns. The group specializes in overseasacquisition financing, equity/quasi equity products such as CCD and OFCD, pool buy-outs(both agriculture and non agriculture), microfinance/gold loan pool buy-outs, financing ofreceivables, etc.

Healthcare, Hospitality, Education and Urban Realty Group

Your Bank also houses a dedicated financing team for Urban Amenities, Healthcare,Education and Hospitality sector comprising specialists with extensive prior experience inthese sectors. The Realty Banking Group is an important component of the Corporate Financeteam and offers an entire spectrum of services including project conceptualization,advisory, structuring, JV partner identification, and raising/arranging financing in thecommercial and residential Real Estate, Healthcare, Education and Hospitality sectorsacross diverse geographies.

The Realty Banking practice has added a dedicated relationship team this year to focuson the overall banking requirements of its clients. This team comprises of relationshipexperts with experience in this specialised focus sectors to provide exceptional servicesand solutions which cater to diverse requirements covering end to end financial solutionsto your Bank’s Urban Amenities and other sector clients. In the short period of timesince its inception, the group has managed to build a considerable portfolio by closingseveral significant transactions year after year.

Transaction Banking

The Transaction Banking Group at your Bank is a core Product Group catering toclientele across all business segments viz. Wholesale, Commercial and Retail. Thespecialised product domains under this group include Cash Management Services, TradeFinance & Services, Capital Markets & Escrow Services and Direct Banking Services.Your Bank has also made a strong foray into Merchant Acquisition business primarilytowards building a strong liability base and focused upon key knowledge verticals in linewith the Knowledge Banking strategy.

The Cash Management Services under Transaction Banking

Group offer value added solutions for Working Capital Management of the corporatecustomer aimed at streamlining the domestic supply chain business flows by optimizing thepayables and receivables cycles and providing superior liquidity management options. TheTrade Finance and Services is aimed at addressing the trade related requirements, both onthe domestic and international front, covering Import and Export services and multipleunderlying financing structures. The Capital Markets & Escrow Services domain catersto a range of corporate customers' requirements of Bankers to Issue services,Interest/Dividend Payout Services and Escrow Account Services for capital market andnon-capital market transactions. Direct Banking represents all alternate banking channelsviz. Cards (Credit/ Debit/ Prepaid); ATMs, Internet banking & Mobile Banking.

Your Bank has always been one of the pioneers in leveraging latest technology todeliver banking products and services addressing the diverse requirements of thecorporate. Your Bank has been recognised in the industry for being the forerunner in itsparticipation in industry defining initiatives such as:

a Being a pilot Bank along with 6 leading institutions inparticipating in the NPCI led initiative - Interbank Mobile Payment Service (IMPS) foroffering interbank electronic fund transfer service through mobile phones.

a Being one of the first set of Banks to be empanelled asSelf Certified Syndicate Bank with SEBI for providing Application Supported by BlockedAmount (ASBA) facility.

a Being one of the pilot Banks to be included by RBI forthe Cheque Truncation Services (CTS) facility.

Your Bank has been awarded the prestigious "The Asian Banker TechnologyImplementation Awards" for ‘Best Financial Supply Chain project’ and‘Best Multi-channel Capability (Mobile Money Services)’ in 2011. Your Bank hasalso been conferred with a Special citation by Financial Insights Innovation Award (FIIA),2011 for ‘Mobile Money Services’ in Singapore. Your Bank has also won theFinancial Insights Innovation Award (FIIA), 2010 for Innovation in Business Intelligenceand also received a Certificate of Recognition for Continuous Linked Settlement initiativein the same year.

Knowledge Capital

Your Bank has established key knowledge verticals across sunrise sectors of the Indianeconomy and leverages Knowledge Capital as one of the key differentiators to developinnovative solutions to reinforce long-term and sustainable partnerships with itsstakeholders.

Knowledge has been institutionalised as a key ingredient in all internal and externalprocesses of your Bank. It helps to facilitate structuring of innovative, superior andsustainable financial solutions, based on efficient product delivery, industry benchmarkedservice levels and strong client orientation.

Knowledge Banking

Your Bank focuses on developing in-depth knowledge of the Future Businesses of Indiasuch as Food and Agribusiness, Healthcare, Life Sciences, Media and Entertainment, LightEngineering, Telecommunications, Information Technology, Infrastructure and Retailingamongst others. Your Bank’s in-depth knowledge of emerging sectors has enabled it todeliver efficient and customised banking solutions to these sunrise sectors therebyplaying a significant part in driving the economic growth of the country.

Food & Agribusiness Strategic Advisory & Research (FASAR)

Your Bank has established a Food & Agribusiness Strategic Advisory and Research(FASAR) division to provide professional, end-to-end financial solutions for stakeholdersacross the entire agricultural value chain. The FASAR team is driven by sector expertswith relevant educational background and professional industry expertise. They providesectoral knowledge on industry trends and enhance growth prospects in the Agribusinesssector. In the recent years, FASAR has been working on some path breaking initiatives likedeveloping Integrated Agro Food Parks, Modern Terminal Markets, etc. apart from providingpolicy advisory to various Union and State Government entities. FASAR has also beenproviding strategic advisory to various companies in the field of Food and Agribusinessincluding assisting them in their international foray – and has developed expertisein providing advisory services on Large Scale Commercial farming in Africa, Development ofIntegrated Dairy Farms, Market Assessment Studies and Entry Strategies, Studies on AgriValue Chain, Advisory on Development of Mega Food Parks and Cold Chains, etc.. Theinitiatives have made your Bank a much sought after advisory and research unit in the foodand agribusiness sector. Through these efforts your Bank has achieved a key knowledge andthought leadership position amongst the stakeholders in this highly important sector ofthe Indian economy.

Strategic Initiatives & Government Advisory (SIGA)

Strategic Initiatives & Government Advisory (SIGA) is a specialised division ofyour Bank that manages the Bank’s engagement with the Government and other keystakeholders in its efforts to support development and economic growth in India. Thedivision also offers strategic advisory to achieve this objective drawing on expertise inkey sectors such as Infrastructure (including Social Infrastructure), Agriculture,

Tourism & Hospitality and e-Governance both within the team and across the Bank.The division has worked with the Government through policy advocacy, project advisory anddevelopment support particularly in attracting private sector investments for developmentthrough Public-Private Partnerships (PPP) in addition to enhancing Industry Universityrelations, creation of Knowledge publications and addressing stakeholders at industry ledevents.

SIGA has been successful in cementing your Bank's relationships with apex stakeholders,with a special emphasis on Central and State Governments and communicating yourBank’s strategy and achievements to them. SIGA has achieved noteworthy success ingetting your Bank empanelled with several State Governments, agencies and Public SectorEnterprises to undertake banking business under their purview. In addition, the divisionhas brought in some very successful international affiliations for your Bank and createdstrategic business opportunities as spin-offs.

Through these efforts, your Bank has been able to contribute to the development of keysectors and also position its knowledge capabilities, sectoral expertise and capture themindshare of niche stakeholders and thought-leaders, thus creating opportunities for otherbusiness groups. In addition, SIGA is working towards creating strategic opportunities forenhancement of business for the Branch Banking division of your Bank.

Responsible Banking

Your Bank aims to build the ‘Best Quality Bank of the World in India’ byadhering to the triple bottom line ethos i.e. 'People, Planet and Profit'- therebycreating enduring value, competitive advantage and sustainability leadership. Throughresponsible initiatives, your Bank reaches out to the emerging sectors and the financiallyun-banked sections of the society, and promotes an Indian Society that is inclusive tosustainable development. .

Responsible Banking is one of the key platforms of your Bank, and is a keydifferentiator that has been institutionalised with the objective of developing innovativebusiness solutions for social and environmental progress. Your Bank was established with avision of creating a commercially viable financial institution with sustainabilityprinciples incorporated within its business strategy. Responsible Banking is an integralpart of your Bank's focus and it works towards operationalising sustainability for ourstakeholders and ourselves.

More specifically your Bank works towards:

a Mainstreaming sustainability within the Indian bankingcommunity by adopting a multi-stakeholder approach of dialogue with peers, governmentaland non-governmental bodies, industry and academia.

a Addressing Environmental, Social and Governance (ESG)issues. This approach mitigates risks associated with environmental or social performanceand supporting new sustainable businesses.

a Offering innovative financial solutions to address a widerange of issues from sustainable livelihoods, food security, climate change, publichealth, education, information technology and biotechnology among others.

Your Bank makes direct investments in sustainable development and leverages itsposition of indirect control over investment and management decisions of its partnerclients, thereby influencing the business community at large. This allows your Bank tosupport others on their sustainability journeys and encourages your Bank to do better onits own.

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

The Responsible Banking strategy is embedded within your Bank as 'Responsible Bankingin Thought' (strategy and thought leadership) and 'Responsible Banking in Action'(developing specific banking products and services in line with our Responsible Bankingstrategy).

Responsible Banking in Thought is a think tank that incubates innovative businessmodels for social issues. The core function of the team is to develop high qualityintellectual capital. It also establishes linkages with like-minded players of repute,both locally and internationally. Along with the socially responsible investor community,it actively seeks to create innovative business approaches to development. The team servesas a specialised resource division for mainstreaming sustainability into other keybusiness units.

Reduce, Re-use & Recycle (R) program ensures that every back and front endfunction is critically analysed for resource wastage by the Responsible Banking andInfrastructure Management teams. Wastage is proactively addressed with technologicalsolutions and/or process simplifications to ensure improved service delivery andreductions in harmful environmental impacts.

Besides being the First Indian Bank to become a signatory to UNEP-FI principles forsustainable development, and a signatory to the Carbon Disclosure Project, your Bank isalso a signatory to the UN Global Compact principles. Your Bank remains committed to workwith other national and international development agencies to influence the financialsector in India and abroad.

In recognition of these initiatives at such a nascent stage, Your Bank received a'Commendation Certificate' for 'Significant Achievement' at the CII-ITC SustainabilityAwards at the 5th Sustainability Asia Summit held on November 30, 2010 in New Delhi. Thiswas the second consecutive year that the Bank was recognised by this institution.

Responsible Banking in Action encompasses five specialised business verticals:Microfinance; Inclusive & Social Banking; Agribusiness & Rural Banking (ARB);Sustainable Investment Banking (SIB) and Private Equity (PE) which offer products andservices that promote sustainable development.

Your Bank has initiated the "Green Initiative in Corporate Governance",instituted by the Ministry of Corporate Affairs ("MCA") which allows paperlesscompliances by companies through electronic mode. Starting from Financial Year 2010-11,your Bank will now make available an electronic copy of the Annual Report which can beobtained through email.

Microfinance

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

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

Housing is one of the key drivers that determine the quality of life of a household.Hence, access to affordable housing is critical in improving the lives of families.‘Affordable housing’ or ‘Micro-housing’ as a concept has developed inthe last few years and several projects have been launched targeted at low-income grouphouseholds. However, the most critical missing link is affordable mortgage for thelow-income households. MIG will jointly work with the ‘Inclusive and SocialBanking’ team of your Bank to roll out ‘Micro-housing’ as a new product andenvisages supporting both the demand and supply side of the micro-housing market.

Inclusive & Social Banking (ISB)

Inclusive & Social Banking (ISB) is a specialised division of your Bank focused onthe ‘Bottom-of-the-Pyramid’ market segment. ISB proposes to leverage the'Technology Edge' of your Bank along with it's 'Relationship Capital' in Social,Commercial and Government sectors to promote inclusive growth based on market principles.ISB aims to create viable business models to provide comprehensive financial services to‘Bottom-of-the-Pyramid’ market in a commercially viable and sustainable mannerusing "Frugal Innovations".

ISB is currently experimenting with various models of providing different financialservices such as direct micro-credit, micro saving and micro insurance, No Frill SavingsAccount (NFSA) in urban, semi-urban and rural settings across various geographical andsocio-economic contexts. The direct macro-lending program is the first institutionallysponsored direct intervention model for microfinance in India. It provides the last mileconnectivity at the ‘Bottom-of-the-Pyramid’ offering affordable, customisedfinancial services including credit, savings and insurance. Leveraging technology andusing innovative methodologies such as credit scoring, ISB works towards creating credithistories for an urban as well as rural population that remains excluded from formalfinance.

ISB is working towards offering micro- remittance services across major domesticremittance corridors. ISB will be rolling out specialised low cost branches mostly inrural and semi-urban areas. Product offerings in these branches will vary depending on thetype of catchment area. In urban areas the focus will be more on offering non-creditproducts like remittances, liability products (NFSA, Recurring Deposits, Fixed Deposits,Reverse recurring deposits) and third party product distribution. In semi-urban and ruralareas, along with the liability products, credit will be offered through the best and themost proven (in terms of reasonable cost/ low risk) Self Help Group (SHG) model, alreadyoperational in one of the rural branches. Along with the SHG products other asset productsviz. YES Smart Saver, GCC, KCC, etc. will also be offered depending on the requirement.

In order to implement the Financial Inclusion Plan in a sustainable manner, your Bankis following the innovative Business Correspondent (BC) model to reach out to a largersegment of the populace in the catchment area of the branch. The focus would be toidentify appropriate BC/BC agents and channelize the product and services through them andmanage this relationship. ISB will also be identifying partnering organisations as an"Anchor Institutional Partner" for all the branches to ensure sustainablebusiness volume. Technology will be leveraged to the maximum extent possible to reducecost and operational risks.

Agribusiness & Rural Banking (ARB)

In its endeavour to provide end to end financial solutions to stakeholders across theentire agricultural value chain, your Bank has domiciled a specialised group viz.,"Agribusiness and Rural Banking" within its Development and Knowledge Bankingdivision. It houses several experts with backgrounds across different sectors in the Food& Agribusiness domain in addition to having a rich banking experience. This dualexpertise gives them the advantage of understanding the client’s business in greaterdepth and offering tailor-made solutions. This has resulted in putting the Bank in goodstead in the F&A domain over the years, achieved through some path-breaking structureswhich have stood the test of the regulator’s scrutiny. Despite its limited reach interms of branch network in rural areas, the Bank has been able to consistently achieve itsPriority Sector Lending (PSL) targets for the last three years through certain innovativefinancial models. Several structured products such as structured farmer financing, vendorfinancing, dealer/ distributor financing, etc., have been evolved by the group in the pastfew years, which have not only contributed to the achievement of the Bank’s PSLtargets while minimizing delinquencies but also won national and international recognitionat various fora. Recently the Bank has forayed into Commodity Financing wherein financewould be extended against the agricultural produce stored by farmers etc., in accreditedwarehouses. The Bank has entered into a strategic partnership with National CollateralManagement Services Limited for the same and is in the process of building partnershipswith other such nationally reputed collateral management agencies.

Sustainable Investment Banking (SIB)

Your Bank has established a specialised investment advisory known as SIB forsustainable ventures with a focus on:

(i) Alternate Energy & Environment Advisory and (ii) Social Enterprises & RuralAdvisory. The team is one of the few specialised Investment Banking divisions activelyinvolved in supporting initiatives on renewable energy, clean technology and sociallysustainable sectors (broadly defined as healthcare, education, livelihood creation, waterand sanitation, etc.).

SIB successfully secured strategic seed-stage investment for an Australian companywhich has developed a patented solar technology with an aim to produce low cost and highquality power with wide applicability. This transaction established SIB’s credentialsin the area of cross border technology transfer and technology commercialisation, a highlyspecialised and challenging area given the risks involved in such an early stage ofinvestment.

The group also acts as the exclusive Country Advisor for the Global Environment Fund,USA (GEF) one of the largest and oldest private equity firms focused on investing in theenvironmental space. During the year, the team provided investment advisory services toGEF for their USD 25.5 mn private equity investment in Saisudhir Infrastructures Limited.a Hyderabad-based engineering, procurement and construction (EPC) company focusedprimarily on developing water supply and sanitation, irrigation and electricitytransmission and distribution infrastructure across India.

In addition, with a view to strengthen the carbon advisory service offering to itsclients, your Bank has entered into an exclusive strategic alliance with a leading UKbased carbon broker named ‘CarbonDesk’ under the aegis of which both partiesjointly organized The CarbonDesk Knowledge Forum in Mumbai and Delhi for the Bank’sclients. Through this alliance your Bank seeks to provide high-quality risk managementservices for the carbon portfolio of its clients.

SIB also recognizes its role and responsibility in extending awareness on the conceptof Sustainability across stakeholders and has participated as Key Speakers/ KnowledgePartners in various forums such as the ‘Renewable Energy Certificates Conclave 2010(November 2010, Mumbai); ‘Green Investing in India’ (December, 2010, Paris); andthe ‘VCCircle Cleantech Investment Summit’ (January 2011, Delhi). The team alsocontributed to the crucial chapter on finance in The Climate Group’s flagship report– "India’s Clean Revolution" (released in March 2011).

1. Tatva Investment Programme:

To deepen its impact on the sustainability space, your Bank proposes to establish aSyndicate, which will eventually comprise YES BANK and upto two to three financialinstitutions towards a socially and environmentally responsible equity investmentprogramme (referred to as "Tatva"). Tatva will invest equity in early stageSmall & Growth Enterprises profitably delivering positive people and planet impact. Tothis end, your Bank is committing INR 500 mn as the Anchor Investor to the Tatva programmethesis.

Tatva was selected for funding under SCAF - a regional technical assistance programmerun by Asian Development Bank (ADB) and United Nations Environment Programme (UNEP)designed to support the creation of a seed capital investment strategy focused on theclean energy sector within the broader investment offerings of venture capital fundsacross Asia.

2. SACEF:

Your Bank has co-sponsored the South Asia Clean Energy Fund (SACEF), with GEF asprincipal sponsor. The Fund has successfully achieved its first close at approximately USD57 mn and is now actively looking for investments in the target space of clean energy,clean technology and energy efficiency.

Service and Technology Capital

Your Bank relies on exceptional Service and Technology to build the ‘Best QualityBank of the World in India’. Various mission critical back-end functions includingkey Business Processes, Quality Assurance, External & Internal Service DeliveryStandards, Technology Architecture, Risk Management and Internal Audit as well as yourBank’s high quality Human Capital function seamlessly to deliver a world-classbanking experience. Your Bank continuously integrates innovative information technologiesand management programs to not only ensure efficient service delivery and human resourcemanagement, but also to significantly reduce consumption of critical resources, i.e.paper, electricity and water.

Business Processes - Creating a Quality Organisation

To deliver optimum results, YES BANK has seamlessly extended its professional outlookacross its business processes. Your Bank envisions to become the "Best Quality Bankof the World in India'' by 2015. In recognition of the Bank's Strategic Intent, your Bankimbibes a culture of professional entrepreneurship where every employee plays an importantrole in the Bank's growth. Your Bank incorporates highly professional practices into itsbusiness process to generate added efficiencies and long-term growth. These processesensure an effective maintenance mechanism through ongoing feedback as well as complaintresolution from employees as well as customers. Prudent internal and external auditpolicies, effective risk management systems and state-of-the-art technology platforms helpin implementation of optimum business processes and are key to ensuring your Bank's corecustomer promise of providing a "Superior Service Experience".

Some key business processes initiatives implemented towards the same include:

a Two world-class National Operating Centres (NOC) basedout of Mumbai and Gurgaon have been established with a focus on providing an immediateresponse to customer requests, as also to provide Business Continuity Planning. The NOCshouse the centralised back office functions of various businesses including the YES TOUCHContact Centre, which is located at NOC, Gurgaon.

a Adherence to Business Excellence frameworks and Qualitypractices such as Five S, Quality Circle, Lean Six Sigma and ISO 9001 Standard. BackOffice operations at both the NOCs and 101 key branches are covered under the ISO 9001(Quality Management System) certification. Your Bank’s Complaints Handling systemsare certified for ISO 10002.

a Business processes are supported by best-in-classbusiness solutions and superior information technology platforms - with a view to optimiseproductivity (based on Time and Motion & Time and Material studies). Criticalevaluation of all critical to quality parameters, including an End to End (e2e)review/analysis of all critical business processes.

a Your Bank is committed to building a culture of Quality& Innovation. Steps taken in this direction include benchmarking, identification &implementation of Best and Next Innovative Practices, with a view to enhance CustomerExperience.

a Framework for measurement of Customer Experience - with aview to ensure that customer feedback across each experience / touchpoints (includingcustomer complaint registers, customer satisfaction surveys, telephonic surveys andemployee feedback) is collected, analysed and actioned upon.

a Leveraging Social Media as a new channel for CustomerService to address queries / complaints, receive feedback & garnering inputs onservice (VOC) and share relevant content about products & services, brand building andpress release.

a The Customer Query Management System (CQMS) is used asthe single touch point for handling, escalating and resolving customer grievances.

a The Query Resolution Unit (QRU) formed as a part of theYES TOUCH Phone Banking Service, ensures effective follow-up and resolution of customerqueries and complaints.

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

Embedding a Continuous Improvement Approach:

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

The Service Quality Strategy

Your Bank has a three pronged structure to bolster customer service – CustomerExperience, Innovation and Quality Assurance Units. The Customer Experience unit capturesthe Voice of the Customer (VOC) assesses the performance on key Service Drivers. TheInnovation initiatives are managed through the Innovation Centre which acts as a clearinghouse for ideas to help your Bank implement Next Practices across products, services andchannels. The Quality Assurance unit draws upon quality methodologies practised byworld-class organisations in building institutional excellence.

Specific Quality Goals have been classified into the categories of "ProcessManagement" and "External & Internal Service Delivery", in line withyour Bank's Quality Policy and Quality Objectives. Quality improvement drives likeWorkforce suggestion schemes, Lean Six Sigma, Quality Circles, Five S, ISO 9001 & ISO10002 are being driven across business units of the Bank as well as branches.

Process Management (PM) aims to continually monitor current processes, benchmark themagainst competition, incorporate best practices, knowledge dissemination and introducerobust mechanisms for process improvements, while identifying wastages to drive effectivewaste management and cost control. PM uses quality tools to facilitate ease of executionof transactions, through automation of manual processes and ensures adequacy andeffectiveness of training for employees.

External Service Delivery i.e. Customer Satisfaction Level at your Bank is measuredusing Dashboards, Voice of the Customer (VOC), Branch Service Committee Meetings and SigmaScore Cards. These initiatives not only help build mutually beneficial customerrelationships, but also ensure stringent Service Level Agreements (SLAs) with relevantOperations Units across the Bank. Additionally, it provides an efficient MIS supportplatform for effective decision-making at the management level.

Internal Service Delivery

Your Bank’s external service delivery is a manifestation of the internal serviceprinciples instituted within the Bank, that seek to align and influence the organisationalbehaviour of your Bank's Human Capital towards delivering on the stated service valueproposition of providing customers with a - 'Superior Service Experience'.

The YES SERVICE Programme - an Internal Service proposition is disseminated through awell-defined and ongoing Service Marketing programme and measured through MysteryShopping, On-Job Monitoring and in Branch Executive Leadership Team (BELT) programmes heldperiodically across key branches nationally.

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

Your Bank has been awarded the 'IMC RBNQ Performance Excellence Trophy’ - ServicesCategory, at the IMC Ramkrishna Bajaj National Quality (IMC RBNQ) Awards, 2010. Your Bankwas the only Bank to be awarded the IMC RBNQ Certificate of merit. The IMC RBNQ award,based on the Malcolm Baldrige Business Excellence Framework, USA, is one of the mostprestigious Awards in India, in the realm of Business Excellence (Leadership, StrategicPlanning, Customer & Market Focus, Measurement, Analysis & Knowledge Management,Workforce Focus, Process Management and Results).

Your Bank received two awards at Qimpro:

a BestPrax Award for Innovation in the Service Sector atthe Qimpro Convention 2010, for its nomination titled "Focused Information BasedService Delivery". This is the second consecutive year for your Bank to receive thisaward for innovation.

a ‘BestPrax Compass’ award as part of theBestPrax Benchmark Competition 2010, for its "Knowledge Banking" practice. YourBank was the only organization selected in the Services Sector.

Your Bank has been accredited with ISO 9001:2008 certification from BVQI for its backoffice operations & 101 branches across India to deliver consistent superior serviceby ensuring process standardization.

Your Bank has received certification for its "Customer Service - ComplaintsManagement System (ISO 10002:2004)". Your Bank is the first Indian Bank and the thirdone globally in the banking Industry to achieve this certification, as per BritishStandard’s Institution (BSI) as on August 25, 2010. ISO 10002 provides the standardon the process of handling complaints related to products & services within the Bank.

Your Bank has deployed ‘Five S’ across 137 Branches, back office operations& support functions; This simple yet extremely powerful technique, has not only helpedin building workplace efficiency but also helped to get engagement of teams on localimprovements and waste reduction initiatives.

Your Bank has Implemented 166 Quality Circles for customer service & processimprovement across Branches and back office operations to solve work-area problems.Quality Circles are groups of employees who meet together on a regular basis to identify,define, analyze and solve work related problems using the seven basic QC tools. QualityCircle is one of the employee participation methods aimed at development of skills,capabilities, confidence and creativity of the workforce through cumulative process ofeducation, training, work experience and participation.

Your Bank has created a Knowledge Pool of Six Sigma/Lean Change Agents and ElementaryProblem Solving Agents. To build a culture of improvement, your Bank has been undertakingseveral Improvement Projects both Strategic and Tactical Improvement in nature. The formerare targeted towards projects that impact the strategic business objectives. The latterare tactical improvements that are carried out by teams on the shop-floor.

Processes have well defined metrics and performance is tracked through dashboards on anongoing basis. The leadership of each business unit continuously reviews the existingprocesses, initiates improvements and works towards instilling process thinking among theworkforce.

Information Technology

Your Bank has adopted innovative modern technology and best in class internationalbanking practices with respect to governance frameworks – to ensure that it rendersthe highest standards of service quality and operational excellence to its customers. As anew generation Bank, your Bank has deployed "Technology" as a Strategic Businessenabler - to build a distinct competitive advantage and to achieve superior standards ofCustomer Service. The technology architecture and the innovative IT Outsourcing structurehas enabled your Bank to achieve high standards of Customer Service at comparatively lowercost structures. Innovations like Money Monitor (aggregation of customer accounts of alltypes across 11,000 institutions globally), Mobile Money Services, dual factorauthentication, one view of customer relationship, and most advanced voice enabled IVRhelps the products and sales teams to offer superior products and services.

Your Bank’s Technology team focuses on enabling innovative, timely, effective andefficient solutions to make your Bank the ‘Best Quality Bank of the world inIndia’. The values are:

a Achieve customer delight through service excellence andfuturistic solutions.

a Build a motivated, lean and high performance team.

a Build a culture of risk appreciation, transparency andcost consciousness.

a Be proactively aligned with business and organisationalneeds.

Additionally your Bank continues to strengthen its strategic partnerships with some ofthe best known IT majors globally, to develop innovative system features in order toimprove process efficiencies and create sector-specific banking solutions. Additionallythe development of a robust Business Continuity plan in your Bank addresses risks andsecures systems that are vital to business operations.

In the current fiscal, the following initiatives were undertaken:

a A Business Intelligence platform provided to users of theBank with focused dashboards relevant to their role and function has been extended as"Insights to Engage" to enable better customer engagement and superior customerservice.

a Mobile Money Services by YES BANK, an innovative mobilepayment service launched in partnership with Nokia augments Financial Inclusion amongstthe unbanked and under-banked consumer segments by bringing financial services to theconsumers’ mobile phone and has created a financial eco-system which is inclusive,sustainable and scalable. This cutting-edge technology facilitates convenience and ease ofusage in making mobile payments through mobile phones, across the country.

a YES BANK has been awarded "The Asian BankerTechnology Implementation Awards" for ‘Best HR Systems Implementation’ in2010 and for ‘Best Financial Supply Chain project’ and ‘Best Multi-channelCapability (Mobile Money Services)’ in 2011.

a YES BANK also garnered Special citation award by‘Financial Insights Innovation Awards 2011’ for ‘Mobile MoneyServices’ in Singapore.

a YES BANK got the most coveted award in‘Implementation of IT Governance Practices’ by ISACA.

a YES BANK shortlisted in top 3 for the second consecutiveyear at NASSCOM IT User Award for Mobile Money Services.

a Your Bank’s strategic partnership with Cordys forimplementation of a Business Process Management Suite has helped in automation ofprocesses, straight through processing, robust audit mechanisms and flexibility to quicklylaunch new customer products.

a Your Bank is evaluating cutting edge technologies likeVirtualisation, Cloud computing and Social Media to invest in the best in class IT systemsand practices and in order to ensure that the its technology platform becomes a StrategicBusiness tool for building a Competitive Advantage.

Partners

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

Key Partnerships

Risk Management

Long-term financial security and success of your Bank is built on a robust riskmanagement system. Through proactive and improved risk management practices, yourBank’s risk management function continuously works towards achieving financialstability and enhancing stakeholder value. The Risk Management Architecture of your Bankis overseen by the Risk Monitoring Committee (RMC), an independent board levelsub-committee that strives to put in place specific policies, frameworks and systems foreffectively managing the various risks. These policies and procedures are constantlyreviewed and updated at regular intervals.

Credit Risk

Your Bank’s Credit Risk management is governed by a comprehensive and well-definedCredit Policy which is approved by the Board. It encompasses credit approval processes forall business segments along with the guidelines for monitoring and mitigating the risksassociated with them. All corporate credit exposures are approved either through the"Three Initial System" (3 approving authorities) or through the ManagementCredit Committee. While exercising their financial powers these designatedcommittees/functionaries exercise highest level of due diligence and ensure adherence tothe Bank’s Credit policy and other regulatory guidelines.

The appraisal process encompasses a detailed risk assessment and rating of all obligorsusing your Bank’s rating models. These models have been developed in conjunction witha reputed external credit rating agency and cover all corporate business segments of yourBank. The ratings of customers are assessed based on their financial performance, industrycharacteristics, business positioning, project risks, operating performance and other nonfinancial parameters such as quality of management and conduct of account.

The Risk Management function of your Bank works in close co-ordination with variousBusiness segments to periodically review the individual borrower relationships, identifyearly warning signals and assess the overall health of borrowing units. Your Bank hastaken proactive measures to ensure that delinquencies are maintained at a minimum levelthrough robust post sanction monitoring processes. There is an independent and dedicatedteam which works towards ensuring compliance to the sanctioned terms and conditionsthrough an internal tracking system and generating portfolio level MIS covering variouscredit quality indicators like sectoral exposure, credit concentration, ratingsdistribution and migration, etc.

There is also an independent portfolio analytics unit which monitors the entire creditportfolio across all segments, carries out detailed sectoral studies, identifies portfoliotrends and reviews credit policies and programs.

Your Bank also has an active legal department that helps in assessment and managementof material legal risks. The department has developed a comprehensive set of standarddocuments for various types of credit products.

Market Risk

Your Bank’s Market Risk management is governed by a comprehensive Market RiskPolicy, ALM Policy, Liquidity Policy, Investment Policy, Hedging Policy, Stress TestingPolicy, Derivative Policy and a Derivative Appropriateness Policy to ensure that risksunderwritten across business activities are within the stipulated risk appetite of theBank and also to aggregate similar risks. These policies have been benchmarked withindustry best practices and RBI regulations. Your Bank has an integrated andstraight-through processing state-of-the-art treasury system for enabling better riskmanagement.

Your Bank measures liquidity, currency, and interest rate risks through various metricsviz. Liquidity gap analysis, Dynamic Cash Flow Analysis, Liquidity Ratios, Value at Risk(VaR), Earnings at Risk (EaR), Duration of Equity, Sensitivity Analysis, etc. usinginternal risk models. Your Bank regularly conducts stress testing to monitor theBank’s vulnerability towards unfavourable shocks.

Your Bank monitors and controls its risk, using various internal and regulatory risklimits for trading book and banking book which are set according to a number of criteriaincluding economic scenario, business strategy, management experience, peer analysis andthe Bank’s risk appetite. The risk reporting mechanism in the Bank comprisesdisclosures and reporting to the various management committees viz. Investment committee,Asset Liability Committee, etc.

Operational Risk

Your Bank in accordance with the regulatory guidelines has implemented a comprehensiveoperational risk management policy and put in place a framework to identify, assess andmonitor risks; strengthen controls; improve customer service; and minimise operatinglosses. Your Bank has also constituted the Operational Risk Management Committee, which isthe primary driver for implementing the best industry practices in Operational RiskManagement.

Basel–II and Capital Management

Your Bank also has an enterprise wide risk management unit called ‘CapitalCompliance Unit’. This unit is responsible for BASEL-II compliance, migration toadvanced approaches for capital charge computation, integrated bank-wide stress testing ofrisks and for ensuring that the Bank maintains sufficient buffer capital against varioustypes of risks which your Bank is exposed to. This unit helps in further strengthening theoverall risk architecture of your Bank.

Your Bank has successfully migrated to BASEL-II capital adequacy norms since March 31,2009 under which it has adopted the ‘Standardised Approach’ for measurement ofCredit Risk., ‘Basic Indicator Approach’ for Operational Risk and ‘TheStandardised Duration Approach’ for Market Risk. Your Bank has also formulated anextensive policy on Internal Capital Adequacy Assessment Process (ICAAP) commensurate withthe Bank’s size, level of complexity, risk profile and scope of operations. Your Bankhas thus evolved a robust enterprise wide risk management framework which is geared wellenough to support the business plan of the Bank.

Internal Audit

Your Bank believes that professionalism plays a pivotal role in ensuring robust riskmanagement practices and controls. Your Bank’s Internal Audit department performsindependent and objective assessment to monitor adequacy, effectiveness and adherence tothe internal controls, processes and procedures instituted by the management.

This function supports your Bank’s role in safeguarding its assets. The functionhas adopted a Risk-Based approach of Internal Audit (RBIA). The primary focus of the auditis on key risk areas, which are of substantial importance to the Bank. The RBIA approachhas been thoughtfully structured taking into account RBI guidelines and international bestpractices. The Internal Audit function reports to the Managing Director & CEO forregular activities and to the Audit and Compliance Committee for Audit Planning &Reporting. Additionally, your Bank also subjects its operations to Concurrent Audit byreputable audit firms to complement its internal audit function. The Concurrent Auditcovers core activities such as credit portfolio, financial markets, operations, andbranches. All audit reports are circulated to the relevant management teams and the Auditand Compliance Committee of the Board.

Compliance

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

Human Capital Management

Since inception, YES BANK has nurtured the values of Professionalism to its core. YourBank pursues a strong Employee Value Proposition of ‘Creating & SharingValue’, with a vision to build an organisation, driven by ProfessionalEntrepreneurship. All YES BANKers truly partner to direct, manage and accelerate thedevelopment of YES BANK as the Professionals’ Bank of India and the Bank for theFuture Businesses of India.

YES BANK recognizes that the real source of competitive advantage for an organisationis the power of its Human Capital. Your Bank cultivates an environment where people withdiverse backgrounds come together to create long-term value and has hired the finestquality Human Capital across all its functions and businesses. This young, extremelydynamic and professional team effectively works across organisational boundaries, to builda culture that shifts the focus from activities to outcomes. Your Bank ensures ServiceExcellence through high-quality Human Capital. Equipped with a team of industry andbanking experts, your Bank continuously delivers quality performance while realizingcustomer service objectives, creating positive employee attitudes through effectiverecognition programs and measuring results through consistent customer feedback. The aimis to build a culture and environment that supports Professional Entrepreneurship.

The Human Capital engagement practices at your Bank are targeted at developing theBank’s brand as a "Preferred Employer of Choice". The Bank continues to bestrongly focused on attracting and retaining the best talent from India and abroad. Withina short span of time, management talent at your Bank has been regarded as one of the bestin the Indian Banking sector, as demonstrated by the several recognitions and awardsreceived over the last seven years. Some of the key features of your Bank’s policiesand practices are illustrated below:

Talent Acquisition & Development

Your Bank aims to become an "Employer of Choice" for the brightest and bestquality Human Capital available in the market. The total employee strength of your Bank,as on March 31, 2011, was 3929 .

Building superior Human Capital Management frameworks is one of the key objectives foryour Bank. This is being achieved by coordinated efforts through high quality knowledgeenhancement frameworks, mentorship by leaders and a structured and Comprehensive Trainingand Development road map.

The YES SCHOOL OF BANKING (YSB) was institutionalized in 2007 with a vision to create aCentre of Excellence for learning solutions in Banking and related areas. All Learning andDevelopment Initiatives for executives in the Bank are fronted under the aegis of YESSCHOOL OF BANKING. The YSB initiative has scaled new heights during the Financial Year2010-11, with a plethora of new focused learning initiatives being launched for variousbusiness groups. Your Bank has also signed knowledge partnerships with organisations likeDun & Bradstreet, Franklin Covey South Asia, Dale Carnegie Foundation & RedwoodEdge for institutionalizing Competency-based Management Development Programs focused atmiddle, senior and top level management bands. This is in continuation to the vision, tocreate and deliver Benchmark Learning and Development initiatives for all executives ofthe Bank and to become a Banking Industry Talent Creator and knowledge warehouse bybuilding a pool of qualified executives with practical skill sets required for the BankingIndustry.

Your Bank firmly believes in the ethos of Knowledge dissemination and facilitatesseveral outreaching knowledge engagement activities with select B-Schools, EngineeringColleges and Agricultural Institutes across the country through the YES SCHOOL OF BANKINGled YES-University & School Relationship Management (USRM) Program. Your Bank hasfurther strengthened its strategic relationships with Top Business Schools andUniversities in India through campus engagement, alumni networks etc. to employ talentedyoung managers in various management levels across all business groups. The focus on ourCampus relationship is to augment and develop young talent and to enhance knowledgepartnerships.

As part of the YES-USRM Initiative, YES BANK has created a strategic partnership withWall Street Journal Asia (WSJ) for executing knowledge workshops as part of the‘Future Leadership India Series’ across key campuses in India. YES BANK has alsopartnered with Cocubes.com, a premier online portal to create an engagement platform forconnecting with premier B-schools across India. Your Bank will use this platform to engagewith students and share knowledge and awareness about the Banking Industry in general andYES BANK in particular.

Your Bank continues to be highly focussed on inducting the highest quality ofmanagement talent through its flagship and uniquely differentiated Talent AcquisitionPrograms like the YES Professional Entrepreneurship Program, (Y-PEP).This innovativeTalent Acquisition Program was institutionalized in August 2006 and has contributedsubstantially to create an enviable talent pool to further support the growth ambitions ofthe Bank. In the first 4 years of Y-PEP, your Bank has received an overwhelming responseacross the country with Y-PEP executives mobilized across various business verticals. Thisyear, your Bank was one of the leading recruiters on Tier 1 campuses with 171 offers,taking the total strength of ‘Y-PEPs’ in YES BANK to 590+ by May, 2011. These171 management graduates have been hired from the top Business Schools across the countryincluding all IIMs, ISB, FMS, JBIMS, XLRI, SP Jain, NITIE, MDI, NMIMS, Symbiosis, etc.This highly qualified talent pool of ‘Y-PEPs’ is being consciously created toconsistently augment, and support the Bank’s knowledge based, state-of-the-arttechnology-driven services across key banking relationships, products, knowledge advisorygroups, and critical support functions. The continued trust and confidence of these youngprofessionals validates the success of the innovative Y-PEP and showcases YES BANK as an"Employer of Choice" across premier B-School campuses. To further augment thisvision, YES BANK in association with Businessworld launched the 2nd edition of the‘YES BANK Businessworld Transformation Series 2010’, a Case Study Challengeevent for premier B-school students across India and abroad. The objective of this seriesis to infuse the concept of Entrepreneurship and Innovation Driven Growth in the futureleaders of India. YES BANK offered on-the-spot internships and pre-placement interviews toall the students who made it to the Grand Finale.

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

‘YES for YOU’, your Bank’s HR-IT system has received significantenhancements with the launch of new, innovative features and modules during the FinancialYear 2010-11. These new interventions have, apart from further improving the Human CapitalManagement process efficiency, also contributed towards cost management and reduction indowntime in consolidation and availability of sensitive Human Capital information on areal-time basis.

With its superior differentiated strategy on Human Capital, your Bank continues togarner recognition and accolades at leading global forums in the field of Human CapitalManagement. Your Bank received the award for being the ‘Organisation with BestPractices in Talent Management’ at the ‘Talent Excellence Awards’ inLondon. YES BANK was the only Indian Bank to win an award at this event. YES BANK alsoreceived an award for being the ‘Organisation with Most Innovative HR Practices’at the ‘South-East Asia Human Resources Excellence Awards 2010’ in Malaysia. Mr.Rana Kapoor, Founder, Managing Director & CEO, YES BANK received an award for‘Institution Building’ at the 1st SIAS (Sri Lanka, India, Africa, and Singapore)Achievers & Leaders Awards in Colombo. Mr. Rana Kapoor was named as one of the‘Most Powerful HR Professionals of India – CEO with HR Orientation’ -Source HR Powerlist 2010-11 released by the World HRD Congress in September, 2010.

Your Bank was awarded the 5th BEST EMPLOYER BRAND IN INDIA at the World HRD Congress -5th Employer Branding Awards 2010-11 held in Mumbai during February 2011. The Bank alsowon 4 significant awards at the ‘World HRD Congress’ Summit held in Mumbai inFebruary 2011 that witnessed the participation of 487 companies across 89 countries. These4 awards are as follows:

a Award For Innovation In Recruitment

a Award For Excellence In HR Through Technology

a Award For Best HR Strategy In Line With Business

a Award For Continuous Innovation In HR Strategy At Work

Financial And Operating Performance

The Balance Sheet of your Bank grew significantly by 62.2% as at March 31, 2011compared to March 31, 2010. During this fiscal, your Bank recorded a growth of 54.8% inits loan book with advances increasing to Rs. 34,363.6 crores, while, depositsdemonstrated a growth of 71.4% to reach Rs. 45,938.9 crores as on March 31, 2011.

Your Bank’s net interest income grew at an impressive rate of 58.2% from Rs. 788.0crores in FY 2009-10 to Rs. 1,246.9 crores in FY 2010-11 on the back of strong growth inadvances and relatively stable margins. Your Bank also displayed steady growth in noninterest income, which grew from Rs. 575.5 crores in FY 2009-10 to Rs. 623.3 crores in FY2010-11, representing an increase of 8.3%. The Bank has added a significant number oflarge, medium and small corporates to its customer base and intends to increase cross sellof products to its customers thereby increasing wallet share and improving granularnon-interest income streams. Your Bank also consolidated these gains by increasingefficiencies and controlling growth in operating expenses to 35.9% in FY 2010-11 (Rs.679.8 Crores) over FY 2009-10 (Rs. 500.2 Crores). Operating profit before tax consequentlyincreased 37.9% to Rs. 1,190.4 crores for FY 2010-11 compared to Rs. 863.3 crores for FY2009-10. Net Profit after tax was Rs. 727.1 crores for FY 2010-11, an increase of 52.2% ascompared to a net profit of Rs. 477.7 crores for FY 2009-10. The effective tax rate in FY2010-11 was 33.4%. The return on average assets was 1.5% while return on equity was 21.1%for the year ended March 31, 2011. The return on assets and return on equity have been inexcess of 1.5% and 20% respectively for the past 3 years.

Summarised Financial Position:

(Rs. in crores)

Your Bank’s total assets increased 62.2% to Rs. 59,007.0 crores as at March 31,2011 from Rs. 36,382.5 crores as at March 31, 2010. Advances grew by 54.8% to Rs. 34,363.6crores, on the back of growth in lending to SMEs along with large and mid-sizedcorporates. Corporate and Institutional Banking (large corporations, government-ownedcorporations and institutions, multinational corporations and Indian financialinstitutions) & Commercial Banking (mid-market corporations, operating across variousindustries) constituted 88.0% of your Bank’s advances as at March 31, 2011. BranchBanking (SMEs and Retail) grew at an impressive rate over FY11 in line with the Version2.0 goals of the Bank to increase granularity. The Yield on Advances for the yeardecreased by 0.8% from 10.8% in FY 2009-10 to 10% in FY 2010-11 due to fall in interestrates in the first half of the year.

Total investments as at March 31, 2011 increased 84.4% to Rs. 18,828.8 crores from Rs.10,209.9 crores as at March 31, 2010. This growth can be attributed to the increase inGovernment Securities of Rs. 3,960.7 crores, Corporate bonds of Rs. 3,128.3 crores, OtherInvestment of Rs. 1,599.0 crores and a reduction in Equity Shares of Rs. 69.2 crores.

Your Bank’s deposits increased by an impressive 71.4% to Rs. 45,938.9 crores as atMarch 31, 2011 which comprised of Rs. 3,933.8 crores of demand deposits, Rs. 817.0 croresof savings deposits, Rs. 41,188.1 crores of term deposits. Term Deposits increased by71.8% during FY 2010-11 while Savings deposits increased by 109.0% and current depositsincreased by 62.1% as at March 31, 2011 over March 31, 2010. The Bank has seen an increasein the composition of granular deposits which grew at 100.7% of on account of anincreasing branch franchise and consequently the customer base of the Bank.

The rising interest rates in the economy in the second half of the fiscal year resultedin a marginal increase in cost of funds for your Bank. A more granular funding franchiseaccompanied with the ratings upgrade of Bank’s subordinate debt by both ICRA and CAREin June and July 2010 respectively, moderated the increase in cost of funds to 0.1% duringthe FY 2010-11 to 7.1% as compared to cost of funds of 7.0% in FY 2009-10. The decrease inthe yields on advances coupled with stable cost of funds resulted in marginal decline inthe net interest margins of 2.9% in FY 2010-11 compared to 3.1% in FY 2009-10.

Your Bank‘s shareholders funds as at March 31, 2011 increased to Rs. 3,794.1crores from Rs. 3,089.6 crores as at March 31, 2010 on account of, exercise of 7,479,855stock options for Rs. 84.1 crores and due to Rs. 727.1 crores net profit after tax for thefinancial year 2010-11. The Shareholder’s Funds decreased by Rs. 101.2 crores onaccount of provision created for dividend of Rs. 2.50 per share as recommended by theBoard of Directors.

Selective Operating Result Data:

(Rs. in crores)

The increase in net interest income to Rs. 1,246.9 crores in FY 2010-11 was driven by74.0% increase in average interest bearing assets and relatively stable net interestmargin. Increase in the average interest bearing assets was primarily due to strong growthin advances and investments portfolio during the Financial Year 2010-11.

Continued emphasis on cross–selling multiple products to existing relationshipsenabled your Bank to earn Rs. 623.3 crores of other income for FY 2010-11 as compared toRs. 575.5 crores for FY 2009-10. The percentage of non-interest income to net revenues(net interest income plus non-interest income) was 33.3% in FY 2010-11. The key sources ofnon-interest income continued to be from granular streams like transaction banking andtrade finance activities and branch banking fees.

Your Bank continued to make substantial investments towards human capital, informationtechnology and branch expansion to meet its growth targets. Your Bank has increased itstotal human capital from 3,034 as at March 31, 2010 to 3,929 as at March 31, 2011 on theback of hiring talent from financial institutions and leading business schools and postgraduate programs across the country on the back of improving brand franchise. Operatingexpenses increased by 35.9% from Rs. 500.2 crores for FY 2009-10 to Rs. 679.8 crores in FY2010-11. The management’s continued focus on cost control has resulted in a cost toincome ratio of 36.3% in FY 2010-11 compared to 36.7% in FY 2009-10. Employee costsaccounted for 53.3% of non-interest expenses for FY 2010-11 as against 51.4% for FY2009-10.

Key Ratios

Net Profit after tax increased to Rs. 727.1 crores for FY 2010-11 as against Rs. 477.7crores for FY 2009-10. For the Financial Year 2010-11, return on average assets was 1.5%whereas the return on equity was 21.1%. The increase in profits resulted in an increase indiluted earnings per shares from Rs. 14.9 in FY 2009-10 to Rs. 20.3 in FY 2010-11. TheBook Value Per Share increased from Rs. 91.0 as at March 31, 2010 to Rs. 109.3 as at March31, 2011 on the back of strong growth and significant retention of earnings for the year.

Despite a strong growth in advances, Your Bank had Net Non-Performing Assets (NPA) toNet Advances ratio of 0.03% as at March 31, 2011 as compared to 0.06 % as at March 31,2010. The gross non-performing assets stood at Rs. 80.5 crores as at March 31, 2011 ascompared to Rs. 60.2 crores as at March 31, 2010. The Specific loss provision balance wasRs. 71.4 crores as at March 31, 2011 resulting in a specific cover of 88.6%. The generalloan loss provision made during FY 2010-11 was Rs. 52.1 crores as compared to Rs. 38.9crores for FY 2009-10. The total provision cover stood at 300% as at March 31, 2011 inline with the conservative provisioning norms followed by your Bank.

SHAREHOLDERS’ FUNDS & CAPITAL MANAGEMENT

Your Bank’s shareholder funds were Rs. 3,794.1 crores as at March 31, 2011 ascompared to Rs. 3,089.6 crores as at March 31, 2010.

Tier-I Capital

The increase in Tier-I Capital was on account of (1) Profit after Tax for the FY2010-11 of Rs. 727.1 crores less dividend declared at Rs. 2.50 per share aggregating Rs.101.2 crores (including dividend declaration tax) and (2) Exercise of 7,479,855 stockoptions by employees aggregating Rs. 84.1 crores and (3) Issuance of Hybrid Tier Iinstruments in form of Innovative Perpetual Debt Instruments aggregating Rs. 225.0 crores.

Tier- II Capital

During the financial year 2010-11, raised Rs. 946.4 crores of subordinated debt throughprivate placement issues of unsecured, redeemable, non-convertible, subordinated bondsfrom various financial institutions.

Your Bank had a capital adequacy ratio of 16.5% (as per Basel II) as at the end of FY2010-11. As per Basel II, Tier I capital ratio was 9.7% and the Tier II capital ratio was6.8% as at March 31, 2011.

In line with the RBI circular on new capital adequacy framework, currently forcomputing capital requirement, your Bank has adopted the standardized approach for creditrisk, standardized duration approach for market risk and Basic indicator approach foroperational risk. Your Bank has also put in place a Board approved policy on InternalCapital Adequacy Assessment Process (ICAAP) which defines and sets processes to review andimprove the techniques used for identification, measurement and assessment of all materialrisks and resultant capital requirements.

Risks and Threats

The ongoing global economic recovery amidst an environment of extremely accommodativemonetary policies adopted by the central banks in most of the developed countries haveresulted in a significant pick up in global commodity prices. The geopolitical unrest inparts of Middle East and North Africa has increased the potential risk of a disruption incrude oil production. The combination of demand and supply pressures have led to a spiralin the oil and commodity (base metal, iron etc.) prices.

While the risk of a double dip recession in advanced countries have abated over thelast year, new downside risks are building on account of weak sovereign balance sheets andhigh commodity prices, especially oil.

High oil prices have increased the upside risk for inflation in most of the emergingmarket economies, especially India. Moreover, the change in the dietary pattern on accountof rising incomes among the middle and lower income groups has resulted in an increaseddemand for protein rich food items. With capacity constraints and the absence of anysignificant improvement in agriculture productivity in recent years, the increase indemand is likely to result in higher food inflation from a structural perspective.

High and persistent commodity prices have started impacting input prices and overallcore inflation. While the Union Budget for FY12 announced certain measures to addresssupply side factors causing inflation, the impact of such measures would only be reflectedin the medium to long-term horizon. As a result, the Reserve Bank of India(‘RBI’) is likely to continue with its monetary policy tightening in FY12 inorder to anchor inflationary expectations. Rising interest rates in an environment oftight domestic liquidity and higher input prices can moderate the ongoing robust domesticgrowth momentum. This could potentially put pressure on corporate margins in FY12.

Changes in RBI regulations requiring banks to set up a higher number of rural branchescould result in lower profitability for banks. Also, RBI awarding additional licensescould potentially result in increase in competition in the banking industry.

Opportunities

The global economic environment has improved significantly since the lows of theeconomic crisis of 2008-09. The developed economies including US and Europe have shownimproving consumer sentiment and improving employment. This has lead to an overallimproved global economic environment and a lowering of risk of a double dip. Further theIndian economy continues to witness a sustained growth of over 8% over the last year. Thishas resulted in robust corporate earnings and higher disposable income at an individuallevel.

Indian banking continues to experience demographic tailwinds. The large middle classwith increasing incomes and banking needs along with a huge unbanked population below theage of 25 offer an enormous retail opportunity for banks in India. Further the ability touse technology to profitably deliver banking solutions to masses is an excitingopportunity, for instance, using mobile banking to provide payment solutions to unbankedpopulation could offer an enormous opportunity. Further, the goal of financial inclusionwould benefit immensely from key government initiatives like the UID program. The use ofsmart cards in various programs would help develop the knowledge infrastructure forenhancing the reach of the banking sector.

India continues to present a significant opportunity to develop domesticinfrastructure. In the next Five Year Plan Period (2012-17), over USD 1 trillion ofinvestments would be required in the infrastructure sector for India to achieve doubledigit growth on a sustainable basis. Your Bank has developed significant skills in theinfra financing field and continuities to be a leading advisor, and syndications bank inthis space.

Outlook

The economy continues to be on a strong growth trajectory and the annual EconomicSurvey pegs the growth to be around 9% in FY12. Robust private consumption is likely tounderpin the overall growth momentum. However, investments are likely to moderate as theeffect of tight monetary policy plays out. Additionally, high global commodity prices haveincreased the downside risk for global growth. As a result we expect overall GDP growth tostay around 7.8% in FY12, indicating a moderation when compared with the government’sestimate of 8.6% growth in FY11.

Average WPI inflation in FY11 has come at 9.4%. With economic growth expected to stayclose to potential, rising global commodity prices are likely to provide upside risk toinflation. As a result, although we expect inflation to start moderating on account of theongoing monetary policy tightening, the correction is likely to be extremely gradual. Weexpect average WPI inflation to stay around 8.0% in FY12.

On the fiscal front, the government has budgeted for a reduction in fiscal deficit to4.6% of GDP in FY12 from 5.3% in FY11. We however expect upside risks to the fiscaldeficit projections as the subsidy bill is likely to overshoot the budgeted estimates dueto high global commodity prices, especially oil. As a result, the overall fiscal deficitin FY12 can be expected to come around 5% of GDP.

The impact of high global commodity prices would also be reflected in the externalaccounts as high crude oil prices result in higher oil import bill. We expect the currentaccount deficit to GDP ratio to deteriorate marginally from -2.7% in FY11 to -2.9% inFY12. However, the ongoing recovery in the global economy and the close to potentialdomestic economic expansion would continue to support higher software exports.Additionally, capital flows are also expected to be marginally higher. As a result, weexpect the overall Balance of Payment to come at USD 17 bn in FY12 compared to anestimated level of USD 16 bn in FY11.