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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 20-F

|           |  |                                                                                               
|---------- |  | ----------------------------------------------------------------------------------------------
|(Mark One)
|           |  |                                                                                               
|[  ]       |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|           |  |                                                                                               
|[X]        |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934           
|           |  | For the fiscal year ended March 31, 2003                                                      
|OR         |  |                                                                                               
|[  ]       |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      
|           |  | For the transition period from to                                                             

Commission file number 001-15216

HDFC BANK LIMITED

(Exact name of registrant as specified in its charter)


Not Applicable
(Translation of Registrants name into English)

India
(Jurisdiction of incorporation or organization)

Sandoz House
Dr. Annie Besant Road
Worli, Mumbai 400 018
India
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

|                                                                  |  |                                          
|----------------------------------------------------------------- |  | -----------------------------------------
|Title of each class                                               |  | Name of each exchange on which registered
|American Depositary Shares                                        |  | The New York Stock Exchange              
|                                                                  |  |                                          
|Each representing three equity shares, par value Rs. 10 per share |  |                                          
|(Title of Class)                                                  |  |                                          

Securities registered pursuant to Section 12(g) of the Act.
Not Applicable

Securities for which there is a reporting obligation pursuant to Section 15(d)of the Act.
Not Applicable
(Title of Class)



| |  | Indicate the number of outstanding shares of each of the issuers classes of
capital or common stock as of the close of the period covered by the annual
report.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

279,718,938 Equity Shares



| |  | Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

[X] Yes [    ] No



| |  | Indicate by check mark which financial statement item the registrant has
elected to follow.
| |  | -------------------------------------------------------------------------------------------

[    ] Item 17 [X] Item 18

September 26, 2003





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TABLE OF CONTENTS



|                                                                                      |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|CROSS REFERENCE SHEET                                                                
|EXCHANGE RATES                                                                       
|FORWARD LOOKING STATEMENTS                                                           
|BUSINESS                                                                             
|RISK FACTORS                                                                         
|PRICE RANGE OF OUR AMERICAN DEPOSITARY SHARES AND EQUITY SHARES                      
|DESCRIPTION OF EQUITY SHARES                                                         
|DIVIDEND POLICY                                                                      
|SELECTED FINANCIAL AND OPERATING DATA                                                
|SELECTED STATISTICAL INFORMATION                                                     
|MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|MANAGEMENT                                                                           
|PRINCIPAL SHAREHOLDERS                                                               
|RELATED PARTY TRANSACTIONS                                                           
|TAXATION                                                                             
|OVERVIEW OF THE INDIAN BANKING SECTOR                                                
|SUPERVISION AND REGULATION                                                           
|EXCHANGE CONTROLS                                                                    
|RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES                               
|USE OF PROCEEDS                                                                      
|ADDITIONAL INFORMATION                                                               
|Certification of Principal Executive Officer                                         
|Certification of Principal Financial Officer                                         
|Certification pursuant to Section 906                                                



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TABLE OF CONTENTS

|                                                                                      |                                                        |  |      |     | 
|------------------------------------------------------------------------------------- | ------------------------------------------------------ |  | ---- | --- | 
|                                                                                      |                                                        |  | Page
|Cross Reference Sheet                                                                 |                                                        |  | 2    |    
|Exchange Rates                                                                        |                                                        |  | 4    |    
|Forward Looking Statements                                                            |                                                        |  | 5    |    
|Business                                                                              |                                                        |  | 6    |    
|Risk Factors                                                                          |                                                        |  | 30   |    
|Price Range of Our American Depositary Shares and Equity Shares                       |                                                        |  | 38   |    
|Description of Equity Shares                                                          |                                                        |  | 40   |    
|Dividend Policy                                                                       |                                                        |  | 41   |    
|Selected Financial and Operating Data                                                 |                                                        |  | 42   |    
|Selected Statistical Information                                                      |                                                        |  | 44   |    
|Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                        |  | 59   |    
|Management                                                                            |                                                        |  | 80   |    
|Principal Shareholders                                                                |                                                        |  | 89   |    
|Related Party Transactions                                                            |                                                        |  | 90   |    
|Taxation                                                                              |                                                        |  | 93   |    
|Overview of the Indian Banking Sector                                                 |                                                        |  | 99   |    
|Information About India:                                                              |                                                        |  |      |    
|                                                                                      | Supervision and Regulation                             |  |      | 101 | 
|                                                                                      | Exchange Controls                                      |  |      | 114 | 
|                                                                                      | Restrictions on Foreign Ownership of Indian Securities |  |      | 115 | 
|Use of Proceeds                                                                       |                                                        |  | 117  |    
|Additional Information                                                                |                                                        |  | 118  |    
|Index to Financial Statements                                                         |                                                        |  | F-1  |    

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CROSS REFERENCE SHEET

|               |  |                                                            |  |                                                                |  |                                                        |     |  |     |  |  | 
|-------------- |  | ---------------------------------------------------------- |  | -------------------------------------------------------------- |  | ------------------------------------------------------ | --- |  | --- |  |  | 
|1              |  |                                                            |  |                                                                |  |                                                        |     |  |     |  |  | 
|Form 20-F Item |  |                                                            |  |                                                                |  |                                                        |     |  |     |  |  | 
|Number         |  | Item Caption                                               |  | Location                                                       |  | Page                                                  
|               |  |                                                            |  |                                                                |  |                                                       
|Part I         |  |                                                            |  |                                                                |  |                                                        |     |  |     |  |  | 
|Item 1         |  | Identity of Directors, Senior Management and Advisors      |  | Not Applicable                                                 |  |                                                        |     | 
|Item 2         |  | Offer Statistics and Expected Timetable                    |  | Not Applicable                                                 |  |                                                        |     | 
|Item 3         |  | Key Information                                            |  | Exchange Rates                                                 |  |                                                        | 4   | 
|               |  |                                                            |  |                                                                |  | Risk Factors                                           |     |  | 30  | 
|               |  |                                                            |  |                                                                |  | Selected Financial and Operating Data                  |     |  | 42  | 
|Item 4         |  | Information on the Company                                 |  | Business                                                       |  |                                                        | 6   | 
|               |  |                                                            |  |                                                                |  | Selected Statistical Information                       |     |  | 44  | 
|               |  |                                                            |  |                                                                |  | Management's Discussion and Analysis                   |     |  | 59  | 
|               |  |                                                            |  |                                                                |  | Principal Shareholders                                 |     |  | 89  | 
|               |  |                                                            |  |                                                                |  | Related Party Transactions                             |     |  | 90  | 
|               |  |                                                            |  |                                                                |  | Overview of the Indian Banking Sector                  |     |  | 99  | 
|               |  |                                                            |  |                                                                |  | Supervision and Regulation                             |     |  | 101 | 
|Item 5         |  | Operating and Financial Review and Prospects               |  | Management's Discussion and Analysis                           |  |                                                        | 59  | 
|Item 6         |  | Directors, Senior Management and Employees                 |  | Business - Employees                                           |  |                                                        | 25  | 
|               |  |                                                            |  | Management                                                     |  |                                                        | 80  | 
|               |  |                                                            |  |                                                                |  | Principal Shareholders                                 |     |  | 89  | 
|Item 7         |  | Major Shareholders and Related Party Transactions          |  | Principal Shareholders                                         |  |                                                        | 89  | 
|               |  |                                                            |  | Related Party Transactions                                     |  |                                                        | 90  | 
|Item 8         |  | Financial Information                                      |  | Financial Statements                                           |  |                                                        | F-1 | 
|Item 9         |  | The Offer and Listing                                      |  | Price Range of Our American Depositary Share and Equity Shares |  |                                                        | 38  | 
|Item 10        |  | Additional Information                                     |  | Management                                                     |  |                                                        | 80  | 
|               |  |                                                            |  |                                                                |  | Description of Equity Shares                           |     |  | 40  | 
|               |  |                                                            |  |                                                                |  | Taxation                                               |     |  | 93  | 
|               |  |                                                            |  |                                                                |  | Supervision and Regulation                             |     |  | 101 | 
|               |  |                                                            |  |                                                                |  | Exchange Controls                                      |     |  | 114 | 
|               |  |                                                            |  |                                                                |  | Restrictions on Foreign Ownership of Indian Securities |     |  | 115 | 
|               |  |                                                            |  |                                                                |  | Additional Information                                 |     |  | 118 | 
|Item 11        |  | Quantitative and Qualitative Disclosures About Market Risk |  | Business -- Risk Management                                    |  |                                                        | 23  | 
|               |  |                                                            |  | Selected Statistical Information                               |  |                                                        | 44  | 
|               |  |                                                            |  |                                                                |  | Notes to Financial Statements                          |     |  | F-7 | 
|Item 12        |  | Description of Securities Other than Equity Securities     |  | Not Applicable                                                 |  |                                                        |     | 
|Part II        |  |                                                            |  |                                                                |  |                                                        |     |  |     |  |  | 
|Item 13        |  | Defaults, Dividend Arrearages and Delinquencies            |  | Not Applicable                                                 |  |                                                        |     | 

2



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|               |  |                                                                              |  |                      |  |                                |     |  |     |  |  | 
|-------------- |  | ---------------------------------------------------------------------------- |  | -------------------- |  | ------------------------------ | --- |  | --- |  |  | 
|Form 20-F Item |  |                                                                              |  |                      |  |                                |     |  |     |  |  | 
|Number         |  | Item Caption                                                                 |  | Location             |  | Page                          
|               |  |                                                                              |  |                      |  |                               
|Item 14        |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | Use of Proceeds      |  |                                | 117 | 
|Part III       |  |                                                                              |  |                      |  |                                |     |  |     |  |  | 
|Item 18        |  | Financial Statements                                                         |  | Financial Statements |  |                                | F-1 | 
|               |  |                                                                              |  |                      |  | Report of Independent Auditors |     |  | F-2 | 
|Item 19        |  | Exhibits                                                                     |  | Exhibits             |  |                                |     | 

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EXCHANGE RATES

Fluctuations in the exchange rate between the Indian rupee and the US
dollar will affect the US dollar equivalent of the Indian rupee price of the
equity shares on the Indian stock exchanges and, as a result, will affect the
market price of the ADSs in the United States. These fluctuations will also
affect the conversion into US dollars by the depositary of any cash dividends
paid in Indian rupees on the equity shares represented by ADSs.

Until fiscal 2002,the rupee consistently declined against the dollar since
1980. However, the Indian rupee appreciated in 2003 as against 2002. The
rupees appreciation has been due to remittances from exporters, non- resident
Indians and foreign direct investment, alongwith weakening of dollar against
major currencies.

The following table sets forth, for the periods indicated, information
concerning the exchange rates between Indian rupees and US dollars based on the
noon buying rate in the city of New York for cable transfers of Indian rupees
as certified for customs purposes by the Federal Reserve Bank of New York:

|            |  |               |       |               |  |      |       |     |  |  |       |  |  |  |       | 
|----------- |  | ------------- | ----- | ------------- |  | ---- | ----- | --- |  |  | ----- |  |  |  | ----- | 
|Fiscal Year |  | Period End(1) |       | Average(1)(2) |  | High |       | Low
|            |  |               |       |               |  |      |       |    
|1998        |  |               | 39.53 |               |  |      | 37.37 |     |  |  | 40.40 |  |  |  | 35.71 | 
|1999        |  |               | 42.50 |               |  |      | 42.27 |     |  |  | 43.60 |  |  |  | 39.41 | 
|2000        |  |               | 43.65 |               |  |      | 43.46 |     |  |  | 43.75 |  |  |  | 42.50 | 
|2001        |  |               | 46.85 |               |  |      | 45.88 |     |  |  | 47.47 |  |  |  | 46.63 | 
|2002        |  |               | 48.83 |               |  |      | 47.70 |     |  |  | 48.91 |  |  |  | 46.58 | 
|2003        |  |               | 47.53 |               |  |      | 48.43 |     |  |  | 49.07 |  |  |  | 46.85 | 



|(1) |  | The noon buying rate at each period end and the average rate for each
period differed from the exchange rates used in the preparation of our
financial statements.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Represents the average of the noon buying rate on the last day of each
month during the period.                                                                   

The following table sets forth the high and low noon buying rate for the
Indian rupee for each of the previous nine months.

|              |  |            |       |         |  |      |       |     |  |  |       |  |  |  |       | 
|------------- |  | ---------- | ----- | ------- |  | ---- | ----- | --- |  |  | ----- |  |  |  | ----- | 
|Month         |  | Period End |       | Average |  | High |       | Low
|              |  |            |       |         |  |      |       |    
|December 2002 |  |            | 48.00 |         |  |      | 48.15 |     |  |  | 48.32 |  |  |  | 47.96 | 
|January 2003  |  |            | 47.83 |         |  |      | 47.96 |     |  |  | 48.10 |  |  |  | 47.83 | 
|February 2003 |  |            | 47.66 |         |  |      | 47.75 |     |  |  | 47.92 |  |  |  | 47.65 | 
|March 2003    |  |            | 47.53 |         |  |      | 47.67 |     |  |  | 47.85 |  |  |  | 47.53 | 
|April 2003    |  |            | 47.37 |         |  |      | 47.39 |     |  |  | 47.46 |  |  |  | 47.34 | 
|May 2003      |  |            | 47.05 |         |  |      | 47.12 |     |  |  | 47.35 |  |  |  | 46.85 | 
|June 2003     |  |            | 46.40 |         |  |      | 46.70 |     |  |  | 47.15 |  |  |  | 46.40 | 
|July 2003     |  |            | 46.15 |         |  |      | 46.21 |     |  |  | 46.49 |  |  |  | 46.06 | 
|August 2003   |  |            | 45.88 |         |  |      | 45.96 |     |  |  | 46.18 |  |  |  | 45.80 | 

Although we have translated selected Indian rupee amounts in this report
into US dollars for convenience, this does not mean that the Indian rupee
amounts referred to could have been, or could be, converted into US dollars at
any particular rate, the rates stated below, or at all. All translations from
Indian rupees to US dollars are based on the noon buying rate in the City of
New York for cable transfers in Indian rupees at US$1.00 = Rs. 47.53 on March
31, 2003. The Federal Reserve Bank of New York certifies this rate for customs
purposes on each date the rate is given. The noon buying rate on 05 September
2003, was Rs. 45.88 per US$1.00.

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FORWARD LOOKING STATEMENTS

We have included statements in this report which contain words or phrases
such as will, aim, will likely
result, believe, expect,
will continue, anticipate,
estimate, intend, plan,
contemplate, seek to, future,
objective, goal, project,
should, will pursue and similar expressions or variations of these
expressions, that are forward-looking statements. Actual results may differ
materially from those suggested by the forward-looking statements due to
certain risks or uncertainties associated with our expectations with respect
to, but not limited to, our ability to successfully implement our strategy, the
market acceptance of and demand for various banking services, future levels of
non-performing loans, our growth and expansion, the adequacy of our allowance
for credit and investment losses, technological changes, volatility in
investment income, cash flow projections and our exposure to market and
operational risks. By their nature, certain of the market risk disclosures are
only estimates and could be materially different from what actually occur in
the future. As a result, actual future gains, losses or impact on net interest
income could materially differ from those that have been estimated.

In addition, other factors that could cause actual results to differ
materially from those estimated by the forward-looking statements contained in
this document include, but are not limited to: general economic and political
conditions in India and the other countries which have an impact on our
business activities or investments, the monetary and interest rate policies of
India, inflation, deflation, unanticipated turbulence in interest rates,
foreign exchange rates, equity prices or other rates or prices, the performance
of the financial markets in India and globally, changes in domestic and foreign
laws, regulations and taxes, changes in competition and the pricing environment
in India, and regional or general changes in asset valuations. For further
discussion on the factors that could cause actual results to differ, see Risk
Factors.

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BUSINESS

Overview

We are a leading private sector bank and financial services company in
India. Our goal is to be the preferred provider of financial services to
leading corporations and middle and upper-income individuals in India. Since
commencing operations in January 1995, we have grown rapidly while maintaining
strong asset quality and a low-cost funding structure. Our strategy is to
provide a comprehensive range of financial products and services for our
customers through multiple distribution channels, with high quality service and
superior execution. We have three principal business activities: wholesale
banking, retail banking and treasury operations. We are regulated as banking
company by the Reserve Bank of India (or RBI) in accordance with rules and regulation by the RBI
from time to time.

While our business has expanded rapidly over the past nine years, we have
maintained a disciplined growth strategy and a strong balance sheet. At March
31, 2003, our total customer assets (which consist of loans and credit
substitutes) represented 67.2% of our deposits. At March 31, 2003, customer
deposits represented 78.3% of our total liabilities. On average, checking
accounts and low-interest savings accounts represented 35.0% of these deposits
in fiscal 2003. These low-cost deposits, which include the cash float
associated with our transactional services, led to a cost of funds for fiscal
2003 of 5.1%. At March 31, 2003, our net non-performing loans and impaired
credit substitutes constituted 0.5% of our net customer assets.

Since we commenced operations, we have made substantial investments in our
technology platform and distribution capabilities. In addition to our growing
branch and ATM network, we offer 24-hour automated telephone banking, real-time
internet banking and banking services by mobile telephone. We have centralized
transaction processing and open, scaleable systems that can accommodate
significant future growth. These resources give us the capability to deliver a
broad selection of banking products through multiple delivery channels that are
convenient for our customers. We believe this positions us well to grow as the
Indian financial services industry evolves.

We were incorporated in August 1994 as a public limited company under the
laws of India. On February 26, 2000 we merged with Times Bank Limited. The
merger was a stock-for-stock transaction where we issued one share for every
5.75 shares of Times Bank Limited resulting in the issue of 23,478,261 our
shares being issued. Our legal name is HDFC Bank Limited, though we are also
known commercially as HDFC Bank. Our principal corporate and registered office
is located at Sandoz House, Dr. Annie Besant Road, Worli, Mumbai 400 018,
India, our telephone is 91-22-2495 1616, and our website is www.hdfcbank.com.
Our registered agent in the United States is Depositary Management Corporation,
570 Lexington Avenue, 44th Floor, New York, NY 10022 .

We are part of the HDFC group of companies founded by our parent, Housing
Development Finance Corporation Limited (HDFC Limited), a public limited
company under the laws of India. HDFC Limited and its 100% owned subsidiary,
HDFC Investments Limited, own approximately 24.4% of our outstanding equity
shares. For more information, please see Principal Shareholders.

Our Business Strategy

Our goal is to be the leading private sector bank to leading corporations
and middle and upper-income individuals in India by providing a comprehensive
range of products and services as well as superior customer service at
competitive prices. Our business strategy emphasizes the following elements:



| |  |  | Increase our market share in Indias expanding banking and
financial services industry by following a disciplined growth strategy
and delivering high quality customer service.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Indias banking and financial services industry is undergoing a
period of change and expansion. We believe this process will be further
hastened by the growth of the Indian economy, expansion of the middle
and upper-income classes as well as increasing globalization. In
addition to benefiting from this growth, we believe we can increase our
market share by following a disciplined, targeted strategy. We believe
we can distinguish ourselves from many of our competitors by

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| |                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | continuing to emphasize high quality service, efficient and
reliable execution, multiple distribution channels and comprehensive
product offerings at a good value to our customers.



| |  |  | Leverage our technology platform and open, scaleable systems to
deliver more products to more customers and to control operating costs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Since beginning operations in 1995, we have invested heavily in our
technology platform and systems and believe we can increasingly leverage
these systems to deliver additional products to more customers. We refer
to our systems as open because they are compatible, in terms of
connectivity, with a variety of hardware and software systems and as
scaleable because the capacity of our systems can be increased so as
to accommodate more customers and more products without overhauling all
aspects of the system. Our multiple distribution mechanisms include an
electronically-linked branch network, 24-hour ATMs, telephone banking,
internet banking and banking by mobile telephone. This investment has
provided us with centralized transaction processing in Mumbai, together
with a number of regional centers. We also outsource certain back-office
functions to reduce operating costs. As a result, we believe we can
efficiently expand both the types of products offered and the base of
customers served.



| |  |  | Maintain our current high standards for asset quality through
disciplined credit risk management.
| | - |  | -------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have maintained high quality loan and investment portfolios
through careful targeting of our customer base, a comprehensive risk
assessment process and diligent risk monitoring and remediation
procedures. Under US GAAP, our ratio of gross non-performing assets to
customer assets (which includes gross loans and credit substitutes) was
1.6% at March 31, 2003, and our net non-performing assets were 0.5% of
net customer assets. For our own management and Indian reporting
purposes, we choose to follow non-performing loan and general loan
provisioning policies that generally result in greater provisioning and
are more conservative than those required under US GAAP. We believe we
can continue to maintain our conservative asset policies while still
achieving growth.



| |  |  | Develop innovative products and services that attract our targeted
customers and address inefficiencies in the Indian banking sector.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We concentrate on developing and delivering products and services
that address the evolving needs of our targeted customers and the
inefficiencies in the Indian financial sector. For example, through our
cash management services, we provide payment and collection mechanisms
that are more efficient and cost effective than the traditional Indian
systems. We have leveraged our experience in transactional
services by becoming the first private sector bank to be appointed to
collect direct taxes. We are one of the few private sector banks to have
recently got a mandate to collect indirect taxes like excise duty and
service tax. In retail banking, we were the first or one of the first
banks to offer international debit cards, real-time internet banking and
banking services by mobile telephone. We plan to continue to capitalize
on opportunities to be the first mover in products and services that
utilize our technological and delivery strengths without requiring
significant capital commitment.



| |  |  | Continue to develop products and services that reduce our cost of
funds.
| | - |  | ------------------------------------------------------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We believe we have one of the lowest overall cost of funds in the
Indian banking industry. For fiscal 2003, our average cost of funds was
5.1%. We believe we can maintain and enlarge this low-cost funding base
by increasing our base of retail deposits as well as the free float
generated by our cash management, stock exchange clearing and other
services. In the retail sector, we believe we can increase our deposit
base by offering a superior range of products and high quality service
and by expanding our geographic reach to targeted locations. We believe
we can increase our transactional services through a variety of
measures, including aggressive cross-selling to our corporate and
institutional client base and expanding our services to cover dividend
distribution and tax collection.

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| |  |  | Focus on high earnings growth with low volatility.
| | - |  | --------------------------------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our earnings have grown rapidly, both on an aggregate basis and a
per share basis. Our aggregate earnings have grown at a compound average
rate of 36.2% per year during the three-year period ending March 31,
2003. This was driven in part by a growth in retail assets portfolio and
an increase in branch expansion to provide a stable and a low cost
retail fund base. Our basic earnings per share grew from Rs. 11.10 for
fiscal 2002 to Rs. 12.57 for fiscal 2003. We intend to maintain our
focus on earnings growth with low volatility through conservative risk
management techniques and maintaining our focus on low cost funding. In
addition, we intend not to rely heavily on revenue derived from trading
so as to limit volatility.

Our Principal Business Activities



| |                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our principal banking activities consist of wholesale banking, retail
banking and treasury operations. The following table sets forth our net
revenues attributable to each area for the last three years.

|                    |              |     |                                   |         |      |     |         |         |      |     |         |          |  |     |       |       |  |  |      |       |  
|------------------- | ------------ | --- | --------------------------------- | ------- | ---- | --- | ------- | ------- | ---- | --- | ------- | -------- |  | --- | ----- | ----- |  |  | ---- | ----- | -
|                    |              |     | Years ended March 31,            
|                    |              |     |                                  
|                    |              |     | 2001                              |         | 2002 |     | 2003    |         | 2003 |     | 2003   
|                    |              |     |                                   |         |      |     |         |         |      |     |        
|                    |              |     | (in millions, except percentages)
|Wholesale banking   |              | Rs. | 2,942.3                           |         |      | Rs. | 2,803.1 |         |      | Rs. | 3,165.8 |          |  | US$ | 66.6  |       |  |  | 28.0 | %    
|Retail banking      |              |     | 2,874.8                           |         |      |     | 3,883.3 |         |      |     | 5,988.4 |          |  |     | 126.0 |       |  |  | 53.0 | %    
|Treasury operations |              |     | 551.1                             |         |      |     | 1,762.6 |         |      |     | 2,147.2 |          |  |     | 45.1  |       |  |  | 19.0 | %    
|                    |              |     |                                   |         |      |     |         |         |      |     |         |          |  |     |       |       |  |  |      |      
|                    | Net revenues |     | Rs.                               | 6,368.2 |      |     | Rs.     | 8,449.0 |      |     | Rs.     | 11,301.4 |  |     | US$   | 237.7 |  |  |      | 100.0 | %
|                    |              |     |                                   |         |      |     |         |         |      |     |         |          |  |     |       |       |  |  |      |      

Wholesale Banking

Overview

We provide our corporate and institutional clients a wide array of
commercial banking products and transactional services with an emphasis on high
quality customer service and relationship management.

Our principal commercial banking products include a range of financing
products, documentary credits (primarily letters of credit) and bank
guarantees, foreign exchange and derivative products and corporate deposit
products. Our financing products include loans and credit substitutes such as
bills discounting, commercial paper and other funded products. Our foreign
exchange and derivatives products assist corporations in managing their
currency and interest rate exposures.

Our principal transactional services include cash management services,
capital markets transactional services and correspondent banking services. We
provide physical and electronic payment and collection mechanisms to a range of
corporations, financial institutions and government entities. We were the first
private sector bank to be appointed by the government of India to collect
direct taxes. Our capital markets transactional services include custodial
services and stock exchange clearing bank services. We provide custodial
services primarily to Indian mutual funds. We are a clearing bank for seven
major Indian stock exchanges, including the National Stock Exchange and The
Stock Exchange, Mumbai. In addition, we provide correspondent banking services,
including cash management services and funds transfers, to approximately 20
foreign banks and more than 900 cooperative banks.

For our commercial banking products, we generally target the top end of
the Indian corporate sector, including companies that are part of the large
private sector business houses, large public sector enterprises and
multinational corporations. We also target suppliers and distributors of top
end corporations as a part of the supply chain initiative for both our
commercial banking products and transactional services. We provide
transactional services to a wide range of corporations, as well as financial
institutions and government entities. We aim to provide our corporate customers
with high quality customized service. We have relationship managers

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who focus on particular clients and who work with teams that specialize in
providing specific products and services, such as cash management and treasury
advisory services.

Commercial Banking Products

Commercial Loan Products and Credit Substitutes

Our principal financing products are working capital facilities consisting
of short or medium-term loans, cash credit facilities and bill discounting.
Cash credit facilities are revolving credits provided to our customers, which
are secured by working capital such as inventory, and accounts receivable. Bill
discounting consists of short term loans which are secured by bills of exchange
that have been accepted by our customers or drawn on another bank. In many
cases, we provide a package of working capital financing that may consist of
loans and a cash credit facility as well as documentary credits or bank
guarantees. We also purchase commercial paper, non-convertible debentures and
redeemable preference shares and selectively extend longer-term loans. More
than 90% of our loans are denominated in rupees with the balance being
denominated in various foreign currencies, principally the US dollar. All our
loans have been made to customers in India. More than one-half of our loans
have original maturities of less than one year. If a borrower wishes to renew
or rollover the loan, we apply substantially the same standards as we would to
granting a new loan except that we do not usually perform an entirely new
credit review. Typically, we perform an annual credit review of each loan
customer and update the review during the course of the year as circumstances
warrant, and we rely on such review in connection with a rollover or renewal.
The following table sets forth the asset allocation of our commercial loans and
financing products by asset type. For accounting purposes, we classify cash
credit facilities and bills discounting as loans, and classify commercial
paper, debentures and preference shares as credit substitutes.

|                        |                            |     |               |          |      |     |          |          |      |     |           |          |  |     |         |         |  |  |       |      |  
|----------------------- | -------------------------- | --- | ------------- | -------- | ---- | --- | -------- | -------- | ---- | --- | --------- | -------- |  | --- | ------- | ------- |  |  | ----- | ---- | -
|                        |                            |     | At March 31, 
|                        |                            |     |              
|                        |                            |     | 2001          |          | 2002 |     | 2003     |          | 2003 |     | 2003     
|                        |                            |     |               |          |      |     |          |          |      |     |          
|                        |                            |     | (in millions)
|Gross commercial loans: |                            |     |               |          |      |     |          |          |      |     |           |          |  |     |         |         |  |  |       |     
|                        | Term loans                 |     | Rs.           | 23,678.5 |      |     | Rs.      | 32,181.8 |      |     | Rs.       | 43,005.0 |  |     | US$     | 904.8   |  |  |       | 36.4 | %
|                        | Cash credit facilities     |     |               | 8,267.1  |      |     |          | 10,010.9 |      |     |           | 18,769.5 |  |     |         | 394.9   |  |  |       | 15.9 |  
|                        | Bills discounting          |     |               | 11,844.8 |      |     |          | 16,640.8 |      |     |           | 26,760.7 |  |     |         | 563.0   |  |  |       | 22.6 |  
|                        |                            |     |               |          |      |     |          |          |      |     |           |          |  |     |         |         |  |  |       |     
|                        | Total commercial loans     |     | Rs.           | 43,790.4 |      |     | Rs.      | 58,833.5 |      |     | Rs.       | 88,535.2 |  |     | US$     | 1,862.7 |  |  |       | 74.8 |  
|                        |                            |     |               |          |      |     |          |          |      |     |           |          |  |     |         |         |  |  |       |     
|Credit substitutes:     |                            |     |               |          |      |     |          |          |      |     |           |          |  |     |         |         |  |  |       |     
|                        | Commercial paper           |     |               | 8,679.7  |      |     |          | 12,028.9 |      |     |           | 6,009.7  |  |     |         | 126.4   |  |  |       | 5.1  |  
|                        | Non-convertible debentures |     |               | 12,105.0 |      |     |          | 21,874.3 |      |     |           | 22,898.7 |  |     |         | 481.8   |  |  |       | 19.4 |  
|                        | Preference shares          |     |               | 1,614.3  |      |     |          | 1,222.8  |      |     |           | 844.4    |  |     |         | 17.8    |  |  |       | 0.7  |  
|                        |                            |     |               |          |      |     |          |          |      |     |           |          |  |     |         |         |  |  |       |     
|                        | Total credit substitutes   |     | Rs.           | 22,399.0 |      |     | Rs.      | 35,126.0 |      |     | Rs.       | 29,752.8 |  |     | US$     | 626.0   |  |  |       | 25.2 |  
|                        |                            |     |               |          |      |     |          |          |      |     |           |          |  |     |         |         |  |  |       |     
|Customer
assets         |                            | Rs. | 66,189.4      |          |      | Rs. | 93,959.5 |          |      | Rs. | 118,288.0 |          |  | US$ | 2,488.7 |         |  |  | 100.0 | %   
|                        |                            |     |               |          |      |     |          |          |      |     |           |          |  |     |         |         |  |  |       |     

While we generally lend on a cash-flow basis, we also require collateral
from the majority of our borrowers.   All borrowers must meet our internal credit
assessment procedures, regardless of whether the loan is secured. Our secured
demand and short-term loans are generally secured against receivables and
inventory. Our medium and long-term loans are generally secured by fixed
assets. We may also require corporate parent or personal guarantees or other
collateral. We generally do not make purely collateral-based loans, project
loans or loans to property developers.   See Risk
ManagementCredit
RiskCorporate Credit Risk.

In addition to our loan products, we provide cash credit facilities, which
are revolving overdraft lines of credit for meeting working capital needs.
These facilities are generally secured in the same manner as our short-term
loans. We typically extend cash credit facilities for one year, subject to
annual review. We provide bills discounting through negotiable instruments.
These instruments can then be re-discounted with other banks or financial
institutions, which provides us liquidity.

We provide financing to corporations through a variety of credit
substitutes. We apply the same credit evaluation process to these investments
and arrangements as we do to our loans. We purchase a variety of debt
securities including commercial paper generally for 90-day periods,
non-convertible debentures generally for periods ranging from 30 days to five
years and preference shares which are usually redeemable in one to
five years.

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We price our loans based on a combination of our own cost of funds, market
rates and our rating of the customer. Currently we have prime lending rates
that vary by the term of the loans. An individual loan is priced on a fixed or
floating rate basis based on one of these rates with a margin that depends on
the credit assessment of the borrower.

The RBI has recently advocated for banks a benchmark Prime Lending Rates
(PLR) taking into account their actual cost of funds, operating expenses, a
minimum margin to cover regulatory requirement of provisioning, capital charge
and the profit margin. Since all other lending rates can be determined with
reference to the benchmark PLR, the system of tenor-linked PLR has been
proposed to be discontinued.

The RBI requires banks to lend to specific sectors of the economy. For a
detailed discussion of these requirements, see Information About
India-Supervision and Regulation-Regulations Relating to Making Loans-Directed
Lending.

Bills Collection, Documentary Credits and Guarantees

We provide bills collection, documentary credit facilities and bank
guarantees for our corporate customers. Documentary credits and bank guarantees
are typically provided on a revolving basis. The following table sets forth,
for the years indicated, the value of transactions processed of our bills
collection, documentary credits and bank guarantees:

|                    |       |     |                                   |         |      |     |         |         |      |     |         |         |  |     |         |         |  |  |      |       |  
|------------------- | ----- | --- | --------------------------------- | ------- | ---- | --- | ------- | ------- | ---- | --- | ------- | ------- |  | --- | ------- | ------- |  |  | ---- | ----- | -
|                    |       |     | Years ended March 31,            
|                    |       |     |                                  
|                    |       |     | 2001                              |         | 2002 |     | 2003    |         | 2003 |     | 2003   
|                    |       |     |                                   |         |      |     |         |         |      |     |        
|                    |       |     | (in millions, except percentages)
|Bills collection    |       | Rs. | 76,751                            |         |      | Rs. | 109,909 |         |      | Rs. | 117,809 |         |  | US$ | 2,478.6 |         |  |  | 76.9 | %    
|Documentary credits |       |     | 26,340                            |         |      |     | 22,981  |         |      |     | 25,721  |         |  |     | 541.2   |         |  |  | 16.8 |      
|Bank guarantees     |       |     | 8,738                             |         |      |     | 13,539  |         |      |     | 9,696   |         |  |     | 204.0   |         |  |  | 6.3  |      
|                    |       |     |                                   |         |      |     |         |         |      |     |         |         |  |     |         |         |  |  |      |      
|                    | Total |     | Rs.                               | 111,829 |      |     | Rs.     | 146,429 |      |     | Rs.     | 153,226 |  |     | US$     | 3,223.8 |  |  |      | 100.0 | %
|                    |       |     |                                   |         |      |     |         |         |      |     |         |         |  |     |         |         |  |  |      |      

Bills collection.We provide bill collection services for our corporate
clients in which we collect bills on behalf of a corporate client from the bank
of our clients customer. We do not advance funds to our client until receipt
of payment.

Documentary credits.We issue documentary credit facilities on behalf of
our customers for trade financing, sourcing of raw materials and capital
equipment purchases. The term is typically less than one year.

Bank guarantees.We provide bank guarantees on behalf of our customers
to guarantee their payment or performance obligations. The term of our
guarantees is generally less than 24 months but can have tenors up to five
years. A large part of our guarantee portfolio consists of margin guarantees to
brokers issued in favor of stock exchanges. These are typically one year
guarantees generally secured by cash and share margins of 25-40%.

Foreign Exchange and Derivatives

We offer our corporate customers foreign exchange and derivative products
including spot and forward foreign exchange contracts, interest rate swaps,
currency swaps and other derivatives. We are a leading participant in many of
these markets in India and believe we are one of the few Indian banks with
significant expertise in derivatives, a market currently dominated by the
foreign banks. We provide these products to our corporate clients through the
joint efforts of our wholesale banking and treasury groups. See
TreasuryForeign Exchange and Derivatives. We have recently been allowed
in India to offer to customers rupee options and exchange traded interest rate
futures by RBI.

Trading in Gold

The abolition of the Gold Control Act in the mid Nineties made the import
of gold into India more lucrative and potentially rewarding. After the Act was
abolished, the Government of India authorized about 10 institutions

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comprising banks and non banking entities to enter the business of importing
bullion into India for sale to end user clients. Since 1997, more entities
have entered this line of business and at last count, the number of such
institutions has crossed 18. HDFC Bank entered this segment last year to
leverage its distribution and servicing strengths and cater primarily to the
domestic bullion trader segment. We import gold on a consignment basis
typically on concluding an arrangement to sell.

Wholesale Deposit Products

At March 31, 2003, we had wholesale deposits totaling Rs. 68.2 billion
which represented 30.5% of our total deposits and 23.9% of our total
liabilities. We offer both non-interest-bearing current accounts and time
deposits. We accept time deposits from our corporate customers with terms
ranging from seven days to five years. Under RBI regulations, we cannot pay
interest for periods less than seven days. We are allowed to vary the interest
rates on our wholesale deposits based on the size of the deposit (deposits
greater than Rs. 1.5 million) so long as the rates are the same for all
customers of that deposit size on that day for that maturity. See
Selected
Statistical Information for further information about our total deposits.

Transactional Services

Cash Management Services

We are a leading provider of cash management services in India. Our
services make it easier for our corporate customers to expedite inter-city
check collections, make payments to their suppliers more efficiently, optimize
liquidity and reduce interest costs. In addition to benefiting from the cash
float, which reduces our overall cost of funds, we also earn commissions for
these services.

Our primary cash management service is check collection and payment.
Through our electronically linked branch network, correspondent bank
arrangements and centralized processing, we can effectively provide nationwide
collection and disbursement systems for our corporate clients. This is
especially important because there is no nationwide payments system in India,
and checks must generally be returned to the city from which written in order
to be cleared. Because of mail delivery delays and the variations in city-based
interbank clearing practices, check collections can be slow and unpredictable,
which can mean uncertainty and inefficiencies in cash management. We believe we
have a strong position in this area relative to most other participants in this
market. Although the public sector banks have extensive branch networks, most
of their branches typically are still not electronically linked. In practice,
the foreign banks are restricted in their branching ability.

At March 31, 2003, approximately 1,500 clients used our cash management
services. These clients include leading private sector companies, public sector
undertakings and multinational companies. We also provide these services to
most Indian insurance companies, many mutual funds, brokers, financial
institutions and various government entities.

We have implemented a straight through processing solution to link our
wholesale banking and retail banking systems. This has led to reduced manual
intervention in transferring funds between the corporate accounts which are in
the wholesale banking system and beneficiary accounts residing in retail
banking systems. This new initiative will help in reducing transaction costs.

HDFC Bank today has over 400 commercial clients directly using the Banks
corporate internet banking solutions, e-net. The number of beneficiaries, which is the
respective vendors and distributors is over 16,000. The Bank currently processes
transactions valued around Rs 52,000 million every month through e-net.

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Clearing Bank and Stock Exchange Services

We serve as a cash-clearing bank for seven major stock exchanges in India,
including the National Stock Exchange and The Stock Exchange, Mumbai. Prior to
1997, each Indian stock exchange typically used just one clearing bank. We
introduced the concept of multiple clearing banks by seeking to participate in
the clearing business of the National Stock Exchange. Today, most Indian stock
exchanges use several banks for these services. In fiscal 2003, we estimate
that we handled approximately 60% of the cash clearing volumes on the National
Stock Exchange and more than 40% on The Stock Exchange, Mumbai.

As a clearing bank, we provide the stock exchanges or their clearing
corporations with a means for collecting cash payments due to them from their
members or custodians and to make payments to these institutions. We make
payments once the funds are deposited by the broker or custodian with us. In
addition to benefitting from cash float, which enables us to reduce our cost
of funds, in certain cases we earn a commission on such services.

We believe our clearing bank services are at the core of our range of
stock market and broker-related services, which also include working capital
funding and margin guarantees to brokers, depositary accounts for retail
customers and loans against securities. For further information about our stock
exchange-related services, see  Retail Banking  Other Services and
Products  Individual Depositary Accounts and   Retail Banking  Retail Loan
Products  Loans Against Securities.

Custodial Services

We provide custodial services principally to Indian mutual funds, as well
as to domestic and international financial institutions. These services include
safekeeping of securities and collection of dividend and interest payments on
securities. Most of the securities under our custody are in book-entry
(dematerialized) form, although we provide custody for securities in physical
form as well for our wholesale banking clients. We earn revenue from these
services based on the value of assets under safekeeping and the value of
transactions handled.

Correspondent Banking Services

We act as a correspondent bank for more than 900 cooperative banks and
approximately 20 foreign banks. We provide cash management services, funds
transfers and services such as letters of credit, foreign exchange transactions
and foreign check collection. We earn revenue on a fee for service basis and
benefit from the cash float, which enables us to reduce our cost of funds.

We are well positioned to offer this service to cooperative banks and
foreign banks in light of the structure of the Indian banking industry and our
position within it. Cooperative banks are generally restricted to a particular
state, and foreign banks have limited branch networks. The customers of these
banks frequently need services in other areas of the country that their own
bank cannot provide. Because of our technology platforms, geographical reach
and electronic connectivity of our branch network, we can provide these banks
with the ability to provide such services to their customers. By contrast,
although the public sector banks have extensive branch networks and also
provide correspondent banking services, their branches typically operate
independently of one another and do not constitute an electronically connected
nationwide network.

Tax Collections

Effective April 1, 2001, we were appointed by the government of India to
collect direct taxes. We were the first new private sector bank to be appointed
to provide this service. In the fiscal year 2003 we collected more than Rs. 91
billion of direct taxes for the government of India. We earn a fee from each
tax collection and benefit from the cash float. We hope to expand our range of
transactional services by providing more services to government entities.

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We are one of the few private sector banks to have recently received a mandate
from RBI to collect indirect taxes on behalf of the Central Board of Excise and
Customs (CBEC). We are awaiting allotment of specific circles for CBEC
collections prior to commencing this activity.

Marketing and Customers

We are committed to providing high quality, customized service to our
corporate and institutional clients. We have dedicated relationship managers
each responsible for a set of accounts. Our relationship managers work with
other staff who specialize in particular products and services such as cash
management services, foreign exchange services and other fee-based services in
order to cross-sell products and to expand our relationship with the customer.
For example, our treasury advisory group works with our wholesale banking group
to provide foreign exchange and derivative products to our corporate clients.
Our retail group representatives work with our wholesale banking group to offer
Corporate Salary Account packages to employees of our corporate clients. In
these ways, we emphasize not only high quality service in the delivery of
traditional banking products, but also working with our customers to develop
services and products that meet almost their entire financial needs.

Our primary target market for our commercial banking products is the top
end of the corporate market in India. This includes private sector companies
affiliated with the best known Indian business houses, large public sector
companies and leading multinational companies. We focus in particular on large
manufacturing companies. At March 31, 2003, we had more than 650 customers in
our primary target area of which we defined approximately 350 as core
relationships.

We have extended our commercial banking products and transactional
services to suppliers and customers of our corporate clients. For enterprises
that have dealings with large corporate customers of the Bank we extend credit
facilities for transactions. This helps our corporate customers complete their
supply chain management (SCM) and help their business associates to optimize
their borrowing.

Over the past 2 years, we have acquired the supply chain business of over
40 large corporate customers thereby developing relationships with around 700
dealers and around 3,800 vendors. We have a range of products for SCM clients
including bills discounting, invoice discounting, purchase order discounting,
current account with various product features, overdrafts, cash credit, loans,
cash management services, and internet banking to name some.

We provide our transactional services to a wide range of corporations,
financial institutions and government entities. For example, we provide
employee trust customers and insurance companies with custody services,
security settlement services and nationwide payments. For our mutual fund
clients, we market our services as a one-stop shop, providing custodial
services, cash management collection, redemption services and mutual fund
sales.

As a leading provider of cash clearing services to stock exchanges, we
deal with a large number of domestic and foreign brokers to whom we extend
various transactional services and in some cases working capital facilities. We
also extend to this segment margin guarantees including on a product program
basis for mid-sized brokers.

Retail Banking

Overview

Our retail banking group strives to be a one-stop shop for the financial
needs of middle and upper-income and high net worth individuals. We provide a
comprehensive range of financial products including deposit products, loans,
credit cards, debit cards, bill payment services, third party mutual funds,
investment advice and other services. We offer high quality service and greater
convenience by leveraging our technology platforms and multiple distribution
channels. Our goal is to provide banking and financial services to our retail
customers on an anytime, anywhere, anyhow basis.

We market our services aggressively through our branches, personal bankers
and direct sales associates, as well as through our relationships with
stockbrokers and corporate clients and through franchise arrangements

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with cooperative banks. We seek to develop a relationship with a retail
customer and then expand it by offering more products and expanding our
distribution channels so as to make it easier for the customer to do business
with us. We believe this strategy, together with the general growth of the
Indian economy and the Indian middle and upper classes, affords us significant
opportunities for growth.

At March 31, 2003, we had 231 branches, including 20 extension counters,
and 732 ATMs. We expect to add approximately 60 branches and 200 ATMs by March
2004, subject to regulatory approvals. We plan to continue to expand our other
distribution channels, such as our telephone banking, internet banking and
mobile banking. A second avenue for growth will be to target our marketing
efforts to particular segments of the retail market. We seek to acquire
customers who are high net worth individuals through our priority and preferred
banking services, in which we offer an extensive range of products and
dedicated customer service representatives. We work with our corporate banking
group to target corporations where we can offer our Corporate Salary Account
product package to hundreds or thousands of employees at a time. We also plan
to put greater emphasis on targeting the affluent non-resident Indian
population through specialized deposit products, non-resident tax services and
our internet banking channel. A third avenue for growth will be to expand our
products. We offer credit cards and have recently commenced distributing a
range of insurance products underwritten by other companies in
the near future.

Retail Loan Products

We offer a wide range of
retail loans, including loans against
securities, auto loans, personal loans and two-wheeler loans. Price, speed
of commitment and quality of service are the key competitive factors. Our
retail loans were 26.3% of our gross loans at March 31, 2003. Apart from our branches, we use
our ATM screens and website to promote our loan products, and we employ
additional sales methods depending on the type of product. Because there is no
credit bureau in India, we perform our own credit analyses of the borrowers or
the value of the collateral. See   Risk Management 
Credit Risk  Retail Credit
Risk.

The following table shows the value and share of our retail loan products:

|                         |  |                   |         |                   |  |       |          |  |  |     |       |  |  |            |       |  
|------------------------ |  | ----------------- | ------- | ----------------- |  | ----- | -------- |  |  | --- | ----- |  |  | ---------- | ----- | -
|                         |  | At March 31, 2003
|                         |  |                  
|                         |  |                   |         |                   |  |       |          |  |  |     |       |  |  | % of total
|                         |  | Number of loans   |         | Value in millions |  | value
|                         |  |                   |         |                   |  |      
|Loans against securities |  |                   | 21,000  |                   |  | Rs.   | 5,583.4  |  |  | US$ | 117.5 |  |  |            | 17.7  | %
|Auto loans               |  |                   | 69,000  |                   |  |       | 16,361.9 |  |  |     | 344.2 |  |  |            | 51.7  |  
|Personal loans           |  |                   | 54,000  |                   |  |       | 5,352.7  |  |  |     | 112.6 |  |  |            | 16.9  |  
|Two wheeler loans        |  |                   | 54,000  |                   |  |       | 1,142.7  |  |  |     | 24.0  |  |  |            | 3.6   |  
|Credit cards             |  |                   | 181,000 |                   |  |       | 811.7    |  |  |     | 17.1  |  |  |            | 2.6   |  
|Other retail loans       |  |                   | 6,000   |                   |  |       | 2,379.0  |  |  |     | 50.1  |  |  |            | 7.5   |  
|                         |  |                   |         |                   |  |       |          |  |  |     |       |  |  |            |       |  
|Total                    |  |                   | 385,000 |                   |  | Rs.   | 31,631.4 |  |  | US$ | 665.5 |  |  |            | 100.0 | %
|                         |  |                   |         |                   |  |       |          |  |  |     |       |  |  |            |       |  

Loans Against Securities

We offer loans against equity securities, mutual fund units and against
bonds issued by RBI that are on our approved list. We lend only against shares
in book-entry (dematerialized) form, which ensures that we obtain perfected and
first priority security interests. The minimum margin for lending against
shares is 40%. We also limit our loans to Rs. 2.0 million per retail customer
in line with regulatory guidelines and limit the amount of our total exposure
secured by particular securities. We currently mark collateral subject to price
variations to market at least every week or more often if conditions require
and demand additional collateral as necessary.

Auto Loans

We offer auto loans at fixed interest rates for financing new automobile
and used car purchases. In addition to the pledge of the vehicle, we generally
obtain post-dated checks covering all payments at the time the loan is made. It
is a criminal offense in India to issue a bad check. These loans typically
range in value from Rs. 100,000 to Rs. 3.0 million, with a repayment period
ranging from 12 to 60 months. We also offer a corporate employee

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car loan program and a preferred customer car loan program for existing
deposit account holders. Subject to subsequent credit verification, we offer
pre-approved auto loans for certain of our Corporate Salary Account customers
and select branch customers and high networth individuals. In addition to our
general marketing efforts for retail loans, we market this product through
relationships with car dealers, corporate packages and joint promotion programs
with automobile manufacturers in more than 50 cities across India.

Personal Loans

We offer unsecured personal loans at fixed rates, in amounts ranging from
Rs. 25,000 to Rs. 1,000,000, repayable in equal monthly installments over a
period of 12 to 60 months. We obtain post-dated checks to cover all payments at
the time the loan is made. Our personal loan products include loans for
salaried individuals, corporate employee loan programs, personal loans to
self-employed professionals (such as doctors and chartered accountants), personal loans to self-employed businessmen and
educational loans.

Two Wheeler Loans

We offer loans at fixed rates
in amounts ranging from Rs. 7,000 to Rs.
200,000, repayable in monthly installments typically over a period up to 36 months for
financing the purchase of new scooters or motor cycles. We obtain post-dated
checks to cover all payments at the time the loan is made. Subject to
subsequent credit verification, we offer fast approval processes, including fax
and internet approvals. The bank considers the two wheeler loan segment as an
opportunity to be a significant player. The bank expects to increase its
geographical presence significantly for this product in fiscal 2004.

The Bank has discontinued marketing consumer durable loans from a risk and
profitability perspective.

Business Loans

We offer
business loans to address the borrowing needs of the trading
community typically around the bank branches by offering them various facilities like
credit lines, term loans for expansion/addition of facilities, discounting of
credit card receivables, letters of credit, guarantees and other basic trade
finance products and cash management services. The sizes of advances typically
vary between Rs. 100,000 to Rs. 100 million and tenor varies between a year to
5 years for term loans with repayments through equated monthly installments.
The lending is normally secured with current assets hypothecated to us with
additional collateral of immovable property and fixed assets in some cases.

Credit Card Receivables

We offer silver and gold credit cards with the average receivable per
active card ranging between Rs. 5,000 to Rs. 6,000. Customers are billed every
month, and are expected to repay a minimum percentage of the billed value, and
can revolve the balance at their option, or repay the full amount.
Approximately 70% of the billed amount typically is revolved between one month
and the next.

Commercial Vehicles

We cater to the needs of the transport industry
by financing commercial
vehicles. We also selectively provide working capital, bank guarantees and
trade advances to customers who are transport operators. The average size of
the disbursement for commercial vehicles is around Rs. 400,000 with repayment spread
over three to four years in the form of equated monthly instalments, secured by
the vehicle.

Construction Equipment Finance

We serve the infrastructure sector of the country by financing
construction equipment used for highways, ports, mining and other construction
related activities. Our loans range from Rs. 500,000 to Rs. 20 million for a
tenor upto five years. In addition to the funding of domestic assets, we also
finance imported assets for which

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we open foreign letters of credit and offer
treasury services like forward exchange cover. We co-ordinate with almost 25
manufacturers and jointly promote our financing options to their clients.

Housing Loans

We have recently commenced the housing loan business
through an arrangement with HDFC Ltd., whereby we will sell the HDFC Home Loan product. HDFC Ltd. will approve and disburse these loans which would be booked
in the books of HDFC Ltd. For such loans, we will be paid a sourcing fee which is currently approximately 0.7% of the approved loan. HDFC Ltd. will provide
credit, legal and technical appraisal for these loans. HDFC Ltd. is obligated to sell to us upto 70% of the fully disbursed home loans sold by us through the issue of mortgage backed pass through certificates (PTCs) and the balance would be retained by HDFC Ltd. The mortgage backed PTCs will be invested
in by us at the underlying home loan yields less a fee paid to HDFC Ltd. for administration and servicing of the loans.
This fee is currently at 1.5% per annum.

The arrangement seeks to leverage the strengths of the two organizations in terms of HDFC Ltds product
acceptance, operational efficiencies and credit expertise on one hand and our sales origination and distribution on the other.

Other Retail Loans

These primarily constitute overdraft facilities
against time deposits
placed with us. We typically lend up to 75%-90% of the amount of the time deposit
with us.

Retail Deposit Products

Retail deposits provide the bank with a low cost,
stable funding base and
have been a key focus area for us since commencing operations. The following
chart shows the number of accounts and value of total deposits by our various
deposit products:

|        |       |     |                     |           |            |     |                |         |            |  |      |       |   |  |                    |       |  |  |      |       |  
|------- | ----- | --- | ------------------- | --------- | ---------- | --- | -------------- | ------- | ---------- |  | ---- | ----- | - |  | ------------------ | ----- |  |  | ---- | ----- | -
|        |       |     | At March 31, 2003  
|        |       |     |                    
|        |       |     |                     |           |            |     |                |         |            |  |      |       |   |  | Number of accounts |       |  |  |     
|        |       |     | Value (in millions) |           | % of total |     | (in thousands) |         | % of total
|        |       |     |                     |           |            |     |                |         |           
|Savings |       | Rs. | 42,857.1            |           |            | US$ | 901.7          |         |            |  | 27.5 | %     |   |  | 2,097              |       |  |  | 68.8 | %    
|Current |       |     | 18,273.6            |           |            |     | 384.5          |         |            |  | 11.8 |       |   |  | 167                |       |  |  | 5.5  |      
|Time    |       |     | 94,470.7            |           |            |     | 1987.6         |         |            |  | 60.7 |       |   |  | 786                |       |  |  | 25.7 |      
|        |       |     |                     |           |            |     |                |         |            |  |      |       |   |  |                    |       |  |  |      |      
|        | Total |     | Rs.                 | 155,601.4 |            |     | US$            | 3,273.8 |            |  |      | 100.0 | % |  |                    | 3,050 |  |  |      | 100.0 | %
|        |       |     |                     |           |            |     |                |         |            |  |      |       |   |  |                    |       |  |  |      |      

Our individual retail account holders receive the benefit of a wide range
of direct banking services, including a free ATM card, access to our growing
branch and ATM network, access to our other distribution channels and
eligibility for utility bill payment and other services. Our retail deposit
products include the following:



| |  |  | Current accounts, which are non-interest-bearing checking accounts
designed primarily for small businesses. Customers have a choice of
regular and premium product offerings with different minimum average
quarterly account balance requirements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Savings accounts, which are demand deposits in checking accounts
designed primarily for individuals and trusts. These accrue interest at
a fixed rate set by the RBI (currently 3.5% per annum).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  |  | Fixed or time deposits, which pay a fixed return over a
predetermined time period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | Special value-added accounts which offer our customers added
value and convenience. These include a fixed deposit account that
allows for automatic transfers from the fixed deposit to savings, as
well as a fixed deposit account with an automatic overdraft facility of
up to 75% to 90% of the balance in the account. We also offer Corporate
Salary Accounts, which allow the employer to make salary payments to a
group of employees with one transfer, which we disburse directly into
individual employees accounts held with us. The employees receive
preferred customer services, such as preferred rates on loans and in
some cases lower minimum balance requirements. See Retail
BankingCustomers and MarketingCorporate Salary
Account.
|
| |  |  | E-Broking accounts are offered as checking accounts to customers of
stock brokers where all transactions are routed electronically between
the broker and beneficiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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Other Services and Products

International Debit Cards

Our international debit card allows our customers to purchase goods and
make ATM transactions in India and abroad. Our debit cards may be used with
more than 51,000 merchants in India and more than 10 million merchants
worldwide, and at more than 3,500 ATMs in India and more than 800,000 ATMs
worldwide. In addition to an annual fee charged to most debit card holders, we
receive a portion of the fee charged to the merchant (or to the customer of
another bank in the case of ATM transactions) for each transaction. We believe
we are one of the largest debit card issuers in India, with approximately 1.4
million current holders. We were the first bank in India to issue international
Visa Electron debit cards on a nationwide basis, and currently issue both Visa
Electron and MasterCard Maestro cards.

Bill Payment Services

We offer our customers utility bill payment services for more than 45
leading utility companies including insurance, electricity, telephone, mobile
phone and leading internet service providers. Customers can also review and
access their bill details through our direct banking channels. This service is
valuable to customers because utility bills must otherwise be paid in person in
India. Although other banks offer this service, we believe we are one of the
few banks to offer it through multiple distribution channelsATMs, telephone
banking, internet banking and mobile telephone banking. We had approximately
100,000 registered users of this service at March 31, 2003. We currently offer
this service free to our customers and charge the utility a fee. We have now
outsourced the bill pay operations and will also be charging a nominal fee to
our customers with effect from October, 2003.

Individual Depositary Accounts

We provide depositary accounts to individual retail customers in
connection with the holding of debt and equity securities. Securities traded on
the Indian exchanges are generally not held through a broker's account or in
street name. Instead, an individual will have his own account with a depositary
participant for the particular exchange. Depositary participants, including us,
provide services through the major depositories established by two major stock
exchanges.

Depositary participants record ownership details and effectuate transfers
in book-entry form on behalf of the buyers and sellers of securities. We
provide a complete package of services, including account opening, registration
of transfers and other transactions and information reporting. For retail
customers, we only provide depositary services for securities in scripless or
dematerialized form and provide dematerialization and rematerialization
services. We earn fixed fees based on the opening and maintenance of the
account as well as variable revenue based on the value of transactions
processed.

Mutual Fund Sales

We offer our retail customers units in most of the large and reputable
mutual funds in India. We earn front-end commissions for new sales and in some
cases additional fees in subsequent years. We distribute mutual fund products
primarily through our branches. We also target select customer segments such as
institutional buyers and high net worth retail customers. We offer our in-house
research to add value to the customers investment decisions.

Investment Advice

We offer our customers a broad range of investment advice including advice
regarding the purchase of Indian debt and equity securities and mutual funds,
as well as advice on other investment products. We provide our high net worth
private banking customers a personal investment advisor.

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Internet Brokerage

In October 2000, we acquired a minority equity stake in an affiliate
company, HDFC Securities Private Limited, which provides stock brokerage
services through the internet and other channels.

Credit Cards

Our credit card business has been in operation since December 2001, when
we soft launched our credit card in Chennai. The business was operational in
fifteen cities for the fiscal 2003 and we had a credit card base of
approximately 181,000 card at March 31, 2003. We offer silver and gold credit
cards with
standard limits ranging from Rs.15,000 to Rs. 300,000. In addition to this,
there are value-added co-branded product offerings like the eSeva card, and the
Health Plus Card which offer features like ease of payment options for
Government utilities, Medical Insurance, etc. This product, being only in the second
full year of operation, is yet to break even.

Electronic Data Capture (EDC) Terminals

We deploy Electronic Data Capture (EDC) Terminals at merchant locations to
improve acceptability of our credit and debit cards issued and to earn fees as
a acquirer of card transactions. We earn a fee for all transactions acquired by
the Bank and the float on the banking account maintained by the merchant. At
the end of fiscal 2003 we had more than 21,000 EDC terminals installed at
various merchant locations across the country.

Insurance

We have tied up with HDFC Standard Life Insurance Company, a related party
as a corporate agent for distribution of life insurance products to our
customers. We offer life insurance solutions to our retail customers. We earn
upfront commission on new premiums collected as well as trail income in the
subsequent years while the policy continues in force.

Retail Distribution Channels

In
order to provide anytime, anywhere, anyhow retail banking products
and service, we have multiple distribution channels, including a branch network
with 231 branches, including 20 extension counters, in 123 cities across India
staffed with dedicated service specialists, 732 ATMs, 24-hour telephone
banking, mobile telephone banking and internet banking. For further information
about our distribution channels, see Distribution
Channels.

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Customers and Marketing

Our target market for our retail services comprises middle and upper
income persons and high net worth individuals. We also target small businesses,
trusts and non-profit corporations. At March 31, 2003, 1.0% of our retail
customers contributed approximately 30% of our retail deposits. We have a
marketing strategy that focuses on key market segments primarily in the nine
Indian cities. We also obtain new customers through joint marketing efforts
with our wholesale banking department, in which we feature our Corporate Salary
Account package. We also cross-sell our retail products to customers we obtain
through our capital markets transactional services to stock brokers, such as
our depositary account customers. In addition, we market our products through
our branches, telephone sales calls, dedicated sales staff for niche market
segments and foreign marketing activities targeting non-resident Indians.
Finally, we market our auto loan and consumer durable loan products through
joint efforts with relevant manufacturers.

We use third-party agents or direct sales associates to identify
prospective new customers. In the case of deposit accounts these are then
contacted by our own staff. An affiliated company, HBL Global
Limited, employs some of the direct sales staff. See Related Party
TransactionsHBL Global Limited.

We have programs that target particular segments of the retail market,
such as the following:

Private and Preferred Banking.Our private and preferred banking programs
provide customized financial planning to high net worth individuals in order to
preserve and enhance their wealth. Private banking customers receive a personal
investment advisor who serves as their single-point HDFC Bank contact, and who
compiles personalized portfolio tracking products, including mutual fund and
equity tracking statements. Our private banking program also offers equity
investment advisory products. While not as service intensive as our private
banking program, preferred banking offers similar services to a slightly
broader target market. Top revenue generating customers of our preferred
banking program are channeled into our private banking program.

Corporate Salary Accounts.We market our Corporate Salary Accounts
package to corporations and their employees. With just one transfer, the
employer can make salary payments to a group of employees, as we debit the
employers account and credit each of the employees individual accounts.
Employees receive individual deposit accounts, generally with no or lower
minimum balance requirements, preferred rates on loans, free ATM and debit
cards, telephone banking, an overdraft facility of up to 50% of net take-home
salary and our utility bill payment service. At March 31, 2003, we had more
than 10,500 companies disbursing their payrolls through us, with more than
850,000 salary accounts. These constitute approximately 41% of our total
savings accounts by number and approximately 27% of our retail savings deposits
by value.

Non-Resident Indian Services.Non-resident Indians are an important
target market segment for us given their relative affluence and strong links to
family members in India. Our non-resident deposits were Rs. 3.3 billion at
March 31, 2000. Since that time we have expanded our marketing efforts and our
non-resident deposits have grown by more than 500% to Rs. 19.3 billion at March
31, 2003. We offer products such as convertible, non-repatriable and
repatriable rupee accounts, along with our international debit card.

Treasury

Our treasury group manages our balance sheet, including our maintenance of
reserve requirements and our management of market and liquidity risk. Our
treasury group also provides advice and execution services to our corporate and
institutional customers with respect to their foreign exchange and derivatives
transactions. In addition, our treasury group seeks to optimize profits from
our proprietary trading, which is principally concentrated on Indian government
securities. We have technologically sophisticated trading operations located in
Mumbai with the latest voice systems and electronic terminals with access to
real-time market information feeds.

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Our client-based activities consist primarily of advising corporate and
institutional customers and transacting spot and forward foreign exchange
contracts, rupee-based derivatives and cross-currency derivatives. We have been
recently allowed by RBI to offer Indian rupee options and exchange traded futures to our
clients. Our primary customers are multinational corporations, large and
medium-sized domestic corporations, financial institutions and public sector
undertakings. We also advise and transact with some small companies and non-resident Indians. We believe we have become a
significant participant in these markets by virtue of the strength of our
client service and our structuring and execution capabilities. We are also a
competitive Indian option for public sector undertakings and similar
institutions who have traditionally used foreign banks for structured foreign
exchange and derivative products because most Indian banks did not have
the necessary expertise.

The following describes our activities in the foreign exchange and
derivatives markets, domestic money markets and equities market. See also
Risk Management for a discussion of our management of market risk
including liquidity risk, interest rate risk and foreign exchange risk.

Foreign Exchange

We trade spot and forward foreign exchange contracts, primarily with
maturities of up to one year with our customers. To support our clients
activities, we are an active participant in the Indian interbank foreign
exchange market. We also trade to a more limited extent for our own account. We
believe we are a market maker in the dollar-rupee segment. Although spreads are
very narrow, our total volume of trading is significant with US$ 31.6 billion
in foreign exchange traded in fiscal 2003.

The major participants in the foreign exchange market are the State Bank
of India and other large public sector banks as well as the large foreign
banks. We believe we are one of the few private sector banks that is a
significant participant.

The RBI imposes limits on our ability to borrow or lend in foreign
currencies and on our capital account transactions. In addition, the RBI limits
our overnight exposure. We also impose additional limits on intraday and
overnight exposure. We aim to have a near square position at the end of each
day. As a contractual matter, trades between participants are generally not
netted, although the practice of bilateral netting is developing. In addition,
mechanisms for broader electronic trading are being developed, and a clearing
corporation has been established that would clear foreign exchange as
well as money market trades among bank participants. See also Risk
ManagementMarket RiskPrice Risk.

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Derivatives

We believe we are one of the few Indian
banks that is a significant
participant in the derivatives market, which is dominated by foreign banks. We
offer rupee-based interest rate swaps, cross-currency interest rate swaps,
forward rate agreements, options and other products. We also engage in
proprietary trades of rupee-based interest rate swaps and use them as part of
our asset liability management.

The Indian derivatives market is relatively young and is still developing,
largely due to regulatory restrictions on the use and trading of derivatives.
The RBI prohibits banks from having unmatched positions in G7 derivatives at
any time, prohibits interest
rate rupee options, and limits the ability of corporations to use derivatives. Banks
have recently been allowed by the RBI to trade in rupee currency options. The RBI has
also allowed banks to use interest rate futures to cover the interest rate risk
in Government Securities. Consistent with RBI regulations, we generally
maintain a matched book with respect to our positions at all times (other than
rupee-based interest rate swaps and now rupee currency options).

Domestic Money Market and Debt Securities Desk

Our principal activity in the domestic money market and debt securities
market is to ensure that we comply with our reserve requirements. These consist
of a cash reserve ratio, which we meet by maintaining balances with the RBI,
and a statutory liquidity ratio, which we meet by purchasing Indian government
securities. See also Information About IndiaSupervision and RegulationLegal
Reserve Requirements. Our local currency desk primarily trades Indian
government securities for our own account. We also participate in the interbank
call deposit market and engage in limited trading of other debt instruments.

Equities Market

We trade a very limited amount of equities of
Indian companies for our own
account. At March 31, 2003, we had a Board approved limit of Rs. 100 million (currently Rs. 200 millions) for such
equity investments for proprietary trading, although our exposure at March 31,
2003 was small, at approximately Rs. 22.8 million. We set limits on the amount
invested in any individual company as well as stop-loss limits.

Distribution Channels

We deliver our products and services through a variety of distribution
channels, including traditional bank branches, ATMs, telephone and mobile
telephone banking and the internet.

Branch Network

At March 31, 2003, we had an aggregate of 231 branches, including 20
extension counters. Our branch network covers 123 cities in India, with 72
branches concentrated in the four largest cities, Mumbai, Delhi, Chennai and
Kolkata (Calcutta). We centralize our processing of transactions and back
office operations in the same four cities. This structure enables the branch
staff to focus on customer service and selling our products. All of our
branches are electronically-linked so that our customers can access their
accounts from any branch regardless of where they have their account.

Approximately 90% of our branches focus exclusively on providing retail
services and products. The range of products and services available at other
branches depends in part on its size and location. Our extension counters are
small offices primarily within office buildings, that provide specific
commercial and retail banking services. Except for seven locations, each branch
and extension counter has at least one ATM.

As part of its branch licensing conditions, the RBI requires that at least
25% of our branches (not including extension counters) be located in semi-urban
or rural areas. A semi-urban area is defined as a center with a population of
greater than 10,000 but less than 100,000 people. A rural area is defined as a
center with a

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population of less than 10,000 people. The population figures relate to the
census prevailing at the time the branch is opened. As a result, 53 of our
branches are in semi-urban or rural areas.

Subject to receiving the necessary licenses from the RBI, we plan to add
an aggregate of approximately 60 branches or extension counters by March 31,
2004.

Automated Teller Machines

At March 31, 2003, we had a total of 732 ATMs, of which 268 are located at
our branches or extension counters and 464 are located off-site, including at
large residential developments, or on major roads in metropolitan areas. All
our ATMs are available 24 hours per day. By March 2004, we intend to expand our
ATM network to approximately 925 ATMs.

Customers can use our ATMs for a variety of functions including
withdrawing cash, monitoring bank balances and, at most of our ATMs, making
deposits, ordering demand drafts and paying utility bills. Customers can access
their accounts from any of our ATMs, regardless of where they originally opened
their account. Our ATM cards cannot be used in non-HDFC Bank ATM machines,
although our debit cards can be used. ATM cards issued by banks in the Plus,
Cirrus and Amex networks can be used in our ATMs and we receive a fee for each
transaction. These fee-generating transactions account for approximately 3.8%
of our total ATM transactions in fiscal 2003.

Telephone Banking Call Centers

We provide telephone banking services to our customers in 80 cities. This
service covers approximately 60% of our customer base. Customers can access
their accounts over the phone through our 24-hour automated voice response
system and can order check books, inquire as to balances and order stop
payments. In Delhi and Mumbai, customers can also engage in financial
transactions (such as cash transfers, opening deposits and ordering demand
drafts). In nine cities we also have staff available 9 hours each day (four
hours on weekends and holidays) to assist customers who want to speak directly
to one of our telephone bankers. Our telephone banking service receives more than
1,200,000 customer calls every month.

Internet Banking

In September 1999, we launched NetBanking, a real-time internet banking
service. Through our website, customers can access account information, track
transactions, transfer funds between accounts and to third parties who maintain
accounts with the bank, make fixed deposits, pay bills, request stop payments
and make demand draft requests. We encourage use of our internet banking
service by offering some key services free or at a lower cost. We use 128-bit
encryption technology to ensure all transactions are secure. More than 900,000
of our customers have registered for internet banking services, with
approximately 13% of that number using NetBanking at least once a quarter.
NetBanking is also an important channel for serving our non-resident Indian
customers.

Mobile Telephone Banking

We launched mobile telephone banking services in January 2000, making us
the first bank to do so in India. Currently our customers in more than 72
cities are eligible to sign up for mobile telephone banking which allows them
to access their account on their mobile telephone screens and to conduct a
variety of banking transactions including balance inquiries, stop payment
orders and utility bill payments. We use short messaging services, or SMS, as
the main platform for this service. Approximately 189,000 of our customers have registered to use the
mobile telephone banking services. Approximately 132,000 mobile telephone
banking transactions take place every month.

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Risk Management

Risk is inherent in our business, and sound risk management is critical to
our success. The major types of risk we face are credit risk and market risk,
which includes liquidity risk and price risk. We also face operational risk. We
have developed and implemented comprehensive policies and procedures to
identify, monitor and manage risk across the bank.

Credit Risk

Credit risk is the possibility of loss due to the failure of any
counterparty to abide by the terms and conditions of any financial contract
with us. We identify and manage this risk through (a) our target market
definitions, (b) our credit approval process, (c) our post-disbursement
monitoring and (d) our remedial management procedures.

Corporate Credit Risk

We primarily target large manufacturing corporations in our corporate
lending activities. Although we have some middle market borrowers, our
corporate lending is generally concentrated among highly rated customers. In
addition to market targeting, the principal means of managing credit risk is
the credit approval process. We have policies and procedures to evaluate the
potential credit risk of a particular counterparty or transaction and to
approve the transaction. For our corporate clients, we have a detailed risk
grading system that is applied to each counterparty on an annual basis. We also
have limits for funded exposure to individual industries and for borrowers and
groups of borrowers, regardless of whether the exposure is in the form of loans
or non-funded exposures. We also have a review process that ensures the proper
level of review and approval depending on the size of the facility and risk
grading of the credit.

Our risk grading system is similar to that used by rating
agencies and is based on a combination of quantitative, qualitative and
capitalization measures. We assign each customer or counterparty a numerical
grade, based on an analysis of key ratios such as interest coverage, debt
coverage, profit margin and leverage, as well as capitalization or tangible net
worth. We also consider qualitative variables such as industry risk, market
position, management competence and other factors. This grade may be modified
depending on the maturity of the instrument being considered.

We are subject to RBI policies that limit our exposure to particular
counterparties and with respect to particular instruments. The RBI provides
that without prior approval not more than 15% of our capital funds (under
Indian GAAP) may be extended as credit exposure to an individual borrower, and
not more than 40% of our capital funds may be extended as credit exposure to a
group of companies under the same management. Effective April 1, 2003 in
reckoning the credit exposure for single and group borrower the weightage for
non fund based exposures which hitherto was 50% is now 100%. We had six
exposures to companies that were above the general limit at March 31, 2003 for
which we had approvals of the RBI. During fiscal 2003, the bank
carried approvals from RBI to extend credit exposures over the prescribed norms
for seventeen corporates and three groups of companies under the same
management. At that date, our largest exposure to a single borrower was 30.0%
of our capital funds, and our largest group exposure was 46.3% of our capital
funds; all these borrowers are performing according to the terms of the
contracts.

The RBI prohibits loans to companies with which we have any directors in
common. We obtained approval for an exception to this policy that allows us to
hold until maturity a loan to HDFC, made by Times Bank, which loan we acquired
as part of the merger with Times Bank. The RBI also requires that a portion of
our lending activities be directed to specific priority sections. See
Information About IndiaSupervision and Regulation.

We follow a policy of portfolio diversification by industry. At March 31,
2003, our customer assets in any single industry did not exceed 10% of our
total outstanding customer assets. All working capital loans are subject to
review at annual or shorter intervals.

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While we make our lending decisions largely on a cash-flow basis, we also
take collateral for a large number of our loans. Our short and medium-term
loans are typically secured by a first charge over inventory and receivables,
and in some cases are further supported by a second charge over fixed assets.
Longer term loans are usually secured by a charge over fixed assets. For some
loans, we also require guarantees or other letters of support from the
corporate parent. We generally do not make project loans or loans to property
developers, although we may take a charge over real property as part of the
security for a loan to a corporate borrower. Although we take collateral, we
may not always be able to realize its value in a default situation. See Risk
FactorsWe may be unable to foreclose on our collateral when borrowers default
on their obligations to us which may result in failure to recover the expected
value of collateral security exposing us to a potential loss.

Our credit approval process for corporate loans requires three different
officers to approve the credit. Although the particular level of approval
varies depending on the size of the loan and the borrower risk grading, no
corporate loan can be made without all three approvals.

Once a loan is made, we undertake ongoing credit analysis and monitoring
at several levels. Our policies are designed to promote early detection of
counterparty, industry or product exposures that require special monitoring.
The Risk Management Committee of our board of directors, together with our
senior credit officers, monitors overall portfolio risk as well as individual
problem loans and potential problem loans on a regular basis. Our senior credit
officers also work with our relationship managers to monitor individual
counterparty performance and condition as well as industry wide market trends.
We update our grading of all counterparties on an annual basis. A variety of
other reports and analyses are prepared periodically. Remedial strategies are
developed once a loan is identified as a problem loan. Exposures that slip
below targeted market norms or risk standards are placed on a phase-out list,
and an exit process for each exposure is put into operation.

See
Selected Statistical Information for a discussion of our policies
regarding classification of loans and advances as non-performing (and certain
differences between our policies and the practices of US banks), our policies
regarding provisioning for loans and information concerning our non-performing
assets and allowance for credit losses.

Retail Credit Risk

Our retail credit policy and approval process are designed for the fact
that we have high volumes of relatively homogeneous, small value transactions
in each retail loan category. Because of the nature of retail banking, our
credit policies are based primarily on statistical analyses of risks with
respect to different products and types of customers. We monitor our own and
industry experience to determine and periodically revise product terms and
desired customer profiles. We then verify that an individual customer meets our
lending criteria. Our retail loans are generally either secured or made against
delivery of post-dated checks to cover all payments. In India bouncing of
checks is a criminal offence. In the case of most automobile loans as well as
unsecured personal loans, we require that the borrower provide post-dated
checks for all payments on the loan at the time the loan is made. Loans against
shares, automobile loans and consumer loans are all secured loans. We will
generally lend up to 60% of the market value of shares in the case of a loan
against shares, 90% of the value of the automobile in case of automobile loans
and 85% of the value of the two wheeler in the case of two wheeler loans.

Foreign Exchange, Derivatives and Trading Activities

The credit risk of our foreign exchange and derivative transactions is
managed the same way as we manage our corporate lending risk. We apply our risk
assessment grading system to our counterparties and set individual counterparty
limits. With respect to debt securities, we primarily trade government of India
securities for our own account.

Market Risk

Market risk refers to potential losses arising from volatility in interest
rates, foreign exchange rates, equity prices and commodity prices Market risk
arises with respect to all market risk sensitive financial instruments,

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including securities foreign exchange contracts, equity and derivative
instruments, as well as from balance sheet or structural positions. The
objective of market risk management is to avoid excessive exposure of our
earnings and equity to loss and to reduce our exposure to the volatility
inherent in financial instruments.

Our board of directors reviews and approves the policies for the
management of market risks and dealing authorities and limits. The Risk
Management Committee of the board monitors market risk policies and procedures
and reviews market risk limits. The board of directors has delegated the
responsibility for ongoing general market risk management to the Asset
Liability Committee. This committee, which is chaired by the managing director
and includes the heads of our business groups, meets every alternate week and
more often when conditions require. The Asset Liability Committee reviews our
product pricing for deposits and assets as well as the maturity profile and mix
of our assets and liabilities. It articulates the interest rate view of the
bank and decides on future business strategy with respect to interest rates. It
reviews and sets funding policy. It also reviews developments in the markets
and the economy and their impact on our balance sheet and business. Finally, it
ensures adherence to market risk limits and decides on the banks inter segment
transfer pricing policy.

The Financial Control Department is responsible for collecting data,
preparing regulatory and analytical reports and monitoring whether the interest
rate and other policies and limits established by the Asset Liability Committee
are being observed. Our treasury group also assists in implementing
asset-liability strategy and in providing information to the Asset Liability
Committee.

Market risk department specifies risk valuation methodology of various
treasury products, formulates procedures for portfolio risk valuation, assesses
market risk factors and assists in monitoring market risks for various treasury
desks. Our treasury back-office is responsible for reporting market risks of
the treasury desks.

The following briefly describes our policies and procedures with respect
to asset liability management, liquidity risk, price risk and other risks such
as foreign exchange and equities risks.

Asset Liability Management

We generally fund our core customer assets, consisting of loans and credit
substitutes, with our core customer liabilities, consisting principally of
deposits. We also borrow in the short-term interbank market. We use the
majority of our funds to make loans or purchase securities. Most of our
liabilities and assets are short-term.

We maintain a substantial portfolio of liquid high-quality Indian
government securities. While generally this market provides an adequate amount
of liquidity, the interest rates at which funds are available can sometimes be
volatile. We prepare regular maturity gap analyses to review our liquidity
position, and must submit a monthly analysis to the RBI.

We measure our exposure to fluctuations in interest rates primarily by way
of a gap analysis. We classify all rate sensitive assets and liabilities into
various time period categories according to contracted residual maturities or
anticipated re-pricing dates, whichever is earlier. The difference in the
amount of assets and liabilities maturing or being re-priced in any time period
category gives us an indication of the extent to which we are exposed to the
risk of potential changes in the margins on new or re-priced assets and
liabilities. We place limits on the gap between the assets and liabilities that
may be reset in any particular period.

Our Asset Liability Committee addresses two principal aspects of our asset
liability management program.

First, the Asset Liability Committee monitors the liquidity gap and, at
the corporate level, recommends appropriate financing or asset deployment
strategies depending on whether the gap is a net asset position or a net
liability position, respectively. Operationally, in the short term, our
treasury group implements these recommendations through market borrowings or
placements.

Second, the Asset Liability Committee monitors our interest rate gap and,
at the corporate level, recommends re-pricing of our asset or liability
portfolios. Operationally, in the short term, our treasury group implements
these recommendations by entering into interest rate swaps.

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In the longer term, our wholesale banking and retail banking groups
implement these recommendations through changes in the interest rates offered
by us for different time period categories to either attract or discourage
deposits and loans in those time period categories.

See
Selected Statistical Information for information on our
asset-liability gap and the sensitivity of our assets and liabilities to
changes in interest rates.

Liquidity Risk

The purpose of liquidity management is to ensure sufficient cash flow to
meet all financial commitments and to capitalize on opportunities for business
expansion. This includes our ability to meet deposit withdrawals either on
demand or at contractual maturity, to repay borrowings as they mature and to
make new loans and investments as opportunities arise.

Liquidity is managed on a daily basis by the treasury group under the
direction of the Asset Liability Committee. The treasury group is responsible
for ensuring that we have adequate liquidity, ensuring that our funding mix is
appropriate so as to avoid maturity mismatches and to prevent price and
reinvestment rate risk in case of a maturity gap, and monitoring local markets
for the adequacy of funding liquidity.

Price Risk

Price risk is the risk arising from price fluctuations due to market
factors, such as changes in interest rates and exchange rates. Our treasury
group is responsible for implementing the price risk management process within
the limits approved by the board of directors. These limits are independently
monitored by the treasury operations group. We measure price risk through a
two-stage process, the first part of which is to assess the sensitivity of the
value of a position to changes in market factors to which our business is
exposed. We then assess the probability of these changes or the volatility of
market factors. We manage price risk principally by establishing limits for our
money market activities and foreign exchange activities.

We monitor and manage our exchange rate risk through a variety of limits
on our foreign exchange activities. The RBI also limits the extent to which we
can deviate from a near square position at the end of the day (where sales
and purchases of each currency are matched). Our own policies set limits on
maximum open positions in any currency during the course of the day as well as
overnight position limits. We also have gap limits that address the matching of
forward positions in various maturities and for different currencies. In
addition, the RBI approves the aggregate gap limit for us. This limit is
applied to all currencies. We also have stop-loss limits that require our
traders to realize and restrict losses.

We evaluate our risk on foreign exchange gap positions on a daily basis
using a Value at Risk model applied to all our outstanding foreign exchange
instruments. Our Value at Risk model statistically
estimates the potential loss in earnings that would arise if we held our
foreign exchange gap positions for three days. We currently use three days for
our estimate, as this is the period within which we are 99% confident that we
could theoretically close out all our foreign exchange gap positions and incur
a loss that is less than our estimated Value at Risk. Our Value at Risk model
is applied to our holdings on a portfolio basis, and takes into account
reductions in risk that may arise from diversification amongst the different
currencies that we are exposed to. Our Value at Risk model uses historical data
for foreign exchange provided by Reuters. As at March 31, 2003 the Value at
Risk relating to all foreign exchange instruments we held was estimated at Rs.
91.7 million.

We impose position limits on our trading portfolio of marketable
securities. These limits, which vary by tenor, restrict the holding of
marketable securities of all kinds depending on our expectations about the
yield curve. We also impose trading limits such as stop-loss limits and
aggregate contract limits, which require that trading losses be kept below
prescribed limits and as a result may require the realization of losses and
elimination of positions.

Our treasury operations department monitors actual positions against the
required limits. The treasury operations department is independent of the
treasury department and has a separate reporting line to the managing director
through the head of operations and transactional banking.

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Our derivatives risk is managed by the fact that we do not enter or
maintain unmatched positions with respect to non-rupee-based derivatives. Our
proprietary derivatives trading is primarily limited to rupee-based interest
rate swaps.

Operational Risk

Operational risks are risks arising from matters such as non-adherence to
systems and procedures or from frauds resulting in financial or reputational
loss. Our internal audit and compliance department plays an essential role in
monitoring and limiting our operational risk. The primary focus of the audit
department is:



| |  |  | to independently evaluate the adequacy of all internal controls,                                 
| | - |  | -------------------------------------------------------------------------------------------------
|
| |  |  | to ensure adherence to the operating guidelines, including regulatory and legal requirements, and
|
| |  |  | to pro-actively recommend improvements.                                                          

The department also performs special investigations and ad hoc reviews. In
addition, our internal audit and compliance department liaises with statutory
auditors, central bank authorities and other regulatory bodies.

In order to ensure total independence, the internal audit and compliance
departments report directly to the chairman of the board of directors and the
Audit and Compliance Committee of the board as well as indirectly to the
managing director. The Audit and Compliance Committee meets every two months to
review all procedures, the effectiveness of the controls and compliance with
RBI regulations. In addition, the committee conducts a half-yearly review of
the performance of the department itself.

Pursuant to RBI guidelines, some activities are required to be audited
continuously. More than half of our business, measured by transaction volume,
is subject to concurrent auditing, including foreign exchange, derivatives,
equities, securities transactions, depositary services, retail liability
operations, reversals to the profit and loss account and monitoring of
inter-branch routing accounts. All other lines of business, our information
technology department, branches, services and products are audited on a set
schedule, which is usually quarterly or half-yearly. Our information technology
is also subject to audit review and certification of all software, including
application software and system controls.

We are also subject to inspections conducted by the RBI under the Indian
Banking Regulation Act. The RBI has adopted the global practice of subjecting
banks to examination on the basis of the CAMELS model, a model that assigns
confidential ratings to banks based on their capital adequacy, asset quality,
management, earnings, liquidity and systems.

Competition

We face strong competition in all of our principal lines of business. Our
primary competitors are large public sector banks, other private sector banks,
foreign banks and, in some product areas, non-banking financial institutions.

Wholesale Banking

Our principal competitors in wholesale banking are public and new private
sector banks as well as foreign banks. The large public sector banks have
traditionally been the market leaders in commercial lending. Foreign banks have
focused primarily on serving the needs of multinational companies and Indian
corporations with cross-border financing requirements including trade,
transactional and foreign exchange services, while the large public sector
banks have extensive branch networks and large local currency funding
capabilities.

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Retail Banking

In retail banking, our principal competitors are the large public sector
banks, which have much larger deposit bases and branch networks, other new
private sector banks and foreign banks in the case of retail loan products. The
retail deposit share of the foreign banks is quite small by comparison to the
public sector banks, and have also declined in the last five years, which we
attribute principally to competition from new private sector banks. However,
some of the foreign banks have a significant presence among non-resident
Indians and also compete for non-branch-based products such as auto loans and
credit cards.

We face significant competition primarily from foreign banks in the debit
and credit card segment. In mutual fund sales and other investment related
products, our principal competitors are brokers, foreign banks and new private sector banks.

Treasury

In our treasury advisory services for corporate clients, we compete
principally with foreign banks in foreign exchange and derivatives trading, as
well as the State Bank of India and other public sector banks in the foreign
exchange and money markets business.

Employees

We had 4,791 employees, 3,742 employees, and 2,800 employees at March 31,
2003, 2002 and 2001, respectively. At March 31, 2003 approximately 10.3% of our
employees were managers or senior managers, and 4.0% were assistant vice
presidents, vice presidents or group heads. By geographical location,
approximately 49.9%, 24.2%, 19.4% and 6.5% of our employees are located in the
western, northern, southern and eastern regions of India respectively. More
than 95% of our employees have university degrees.

We consider our relations with our employees to be good. Our employees do
not belong to any union.

We use incentives in structuring compensation packages and have
established a performance-based bonus scheme under which permanent employees
have a variable pay component of their salary.

In addition to basic compensation, employees are eligible to participate
in our provident fund and other employee benefit plans. The provident fund, to
which both we and our employees contribute, is a savings scheme, required by
government regulation, under which we at present are required to pay to
employees a minimum 9.5% annual return. If the return is not generated
internally by the fund, we are liable for the difference. Our provident fund
has generated sufficient funds internally to meet the annual return requirement
since inception of the funds. We have also set up a superannuation fund to
which we contribute defined amounts. In addition, we contribute specified
amounts to a gratuity fund set up pursuant to Indian statutory requirements.

We focus on training our employees on a continuous basis. We have a
training center in Mumbai, where we conduct regular training programs for our
employees. Management and executive trainees undergo a 8-12 week training
module covering every aspect of banking. We offer courses conducted by both
internal and external faculty. In addition to ongoing on-the-job training, we
provide employees courses in specific areas or specialized operations on a
need-based basis, with training program modules varying from two to four days
in length.

Properties

Our registered office and corporate headquarters are located at Sandoz
House, Dr. Annie Besant Road, Worli, Mumbai 400 018, India.

We lease our headquarters property as well as our administrative center at
Kamala Mills Compound in Lower Parel, Mumbai. We own our 120,000 square foot
operations, training and information technology centers in Chandivili, Mumbai.
At March 31, 2003, we had a network consisting of 231 branches, including 20
extension counters, and 732 ATMs including 464 at non-branch locations. These
facilities are located throughout India. Nineteen of these branches are located
on properties owned by us, the remaining facilities are located on leased
properties. The net book value of all our owned properties at March 31, 2003
was Rs. 1,416.4 million. We are also in the process of
constructing our own
corporate office at Lower Parel, Mumbai which should be commissioned during
the third quarter of fiscal 2004.

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Legal and Regulatory Proceedings

We are involved in a number of legal proceedings in the ordinary course of
our business. However, we are currently not a party to any proceedings which,
if adversely determined, might have a material adverse effect on our financial
condition or results of operations.

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RISK FACTORS

You should carefully consider the following risk factors as well as the
other information contained in this report in evaluating us and our business.

Risks Relating to Our Business

If we are unable to manage our rapid growth, our business could be
adversely affected.

Our asset growth rate has been significantly higher than the Indian GDP
growth rate and the Indian banking industry growth rate over the last five
fiscal years. For example, our total assets in the three-year period ended
March 31, 2003 grew at a compound annual growth rate of 37.5%. Our rapid growth
has placed, and if it continues will place, significant demands on our
operational, credit, financial and other internal risk controls. An inability
to manage our growth effectively could have a material adverse effect on our
business, our future financial performance and the price of our equity shares
and our ADSs.

Our business is vulnerable to volatility in interest rates.

Our results of operations depend to a great extent on our net interest
income. In fiscal 2003, net interest revenue before allowances for credit
losses represented 62.5% of our net revenue before such allowances. Changes in
market interest rates could affect the interest rates charged on our
interest-earning assets differently from the interest rates paid on our
interest-bearing liabilities. This difference could result in an increase in
interest expense relative to interest income leading to a reduction in our net
interest income. Interest rates are highly sensitive to many factors beyond our
control, including the RBIs monetary policies, deregulation of the financial
sector in India, domestic and international economic and political conditions
and other factors. Any volatility in interest rates could adversely affect our
business, our future financial performance and the price of our equity shares
and ADSs. Over the period from March 31, 2002, to March 31, 2003, year-end
yields on the Indian governments ten-year bonds moved from 7.36% to 6.16%,
with a high of 8.20% and low of 5.83% in fiscal 2002-03.

If the level of non-performing loans in our portfolio increases, then our
business could suffer.

Our gross non-performing loans and impaired credit substitutes represented
1.6% of our gross customer assets at March 31, 2003, 1.9% at March 31, 2002,
2.1% at March 31, 2001 and 3.2% at March 31, 2000. Our non-performing loans and
impaired credit substitutes net of specific loan loss provisions represented
0.5% of our net customer assets portfolio at March 31, 2003, 0.6% at March 31,
2002, 0.7% at March 31, 2001 and 1.7% at March 31, 2000. After acquiring Times
Bank in February 2000, our gross non-performing loans increased by 150.4%,
while our total loan portfolio increased by 54.7%. At March 31, 2003, we had
provided for 71.1% of our total non-performing loans. We cannot assure you that
our provisions will be adequate to cover any further increase in the amount of
non-performing loans or any further deterioration in our non-performing loan
portfolio. In addition, we are a young bank and we have not experienced a
significant, prolonged downturn in the economy.

A number of factors which are not in our control could affect our ability
to control and reduce non-performing loans. These factors include developments
in the Indian economy, movements in global commodity markets, global
competition, changes in interest rates and exchange rates and changes in
regulations, including with respect to directed lending. In addition, the
expansion of our business and our entry into the credit card business may cause
our non-performing loans to increase and the overall quality of our loan
portfolio to further deteriorate. If our non-performing loans increase, we may
be unable to execute our business plan as expected and that could adversely
affect the price of our equity shares and ADSs.

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Because of our many transactions with stock market participants, our
business could suffer if there is a prolonged or significant downturn on the
Indian stock exchanges.

We provide a variety of services and products to participants involved
with the Indian stock exchanges. These include working capital funding and
margin guarantees to share brokers, personal loans against securities and
initial public offering finance for retail customers, stock exchange clearing
services and depositary accounts. At March 31, 2003, loans to Indian and
foreign institutional share brokers were Rs. 424.9 million, retail loans
secured against shares were Rs. 3,218.9 million and margin guarantees were Rs.3,192.7
million. Loans to share brokers represented 0.28% and retail loans
secured against
shares represented 2.14% of our total gross loans and credit substitute
portfolio at March 31, 2003. As a result of these transactions, we have
significant exposure to this industry.

As a result of our exposure to this industry, a significant or prolonged
downturn on the Indian stock exchanges could have a material adverse effect on
our business and could cause the price of our equity shares and ADSs to go
down.

We face greater credit risks than banks in more developed countries.

One of our principal activities is providing financing to our clients,
almost all of whom are based in India. We are subject to the credit risk that
our borrowers may not pay us in a timely fashion or at all. The credit risk of
all our borrowers is higher than in other developed countries due to the higher
uncertainty in our regulatory, political and economic environment and
difficulties that many of our borrowers face in adapting to instability in
world markets and rapid technological advances taking place across the world.
Higher credit risk may expose us to potential losses which would adversely
affect our business, our future financial performance and the price of our
equity shares and ADSs.

We may be unable to foreclose on collateral when borrowers default on
their obligations to us which may result in failure to recover the expected
value of collateral security.

Although we typically lend on a cash-flow basis, we take collateral for a
large proportion of our loans, consisting of liens on inventory, receivables
and other current assets, and in some cases, charges on fixed assets and
financial assets, such as marketable securities.

As a part of the financial sector reforms, the government of India
recently passed a new law called Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002. The Act
provides banks and other lenders increased with powers which we believe could
lead to better and faster realization of the collateral underlying against the
non performing assets. We cannot guarantee that we will be able to realize the
full value on our collateral, due to, among other things, delays on our part in
taking immediate action, delays in bankruptcy foreclosure proceedings, stock
market downturns, defects in the perfection of collateral and fraudulent
transfers by borrowers. In the event a specialized regulatory agency gains
jurisdiction over the borrower, creditor actions can be further delayed.

RBI has put in place a CDR framework for
restructuring of debt of viable corporates facing problems. The framework, which is expected to come
in force during the current fiscal year, envisages that for debt amounts of Rs. 200 million and above referred by
lenders/borrowers to the CDR cell, lenders holding greater than 75% of the referred debt can decide to restructure the referred debt and
such decision a would be binding on the remaining 25% or less of the lenders even if they do not agree to the restructuring. This could
force us to agree to a long-drawn restructuring of debt, in preference to foreclosure of security or a one-time settlement, which has
generally been our practice, hitherto.

We compete directly with banks that are much larger than we are.

We face strong competition in all areas of our business, and many of our
competitors are much larger than we are. We compete directly with the large
public sector banks, which generally have much larger deposit bases, more
capital and larger customer bases than we do. We also compete directly with
foreign banks, some of which are a part of the largest multinational financial
companies in the world.

Due to competitive pressures, we may be unable to successfully execute our
growth strategy and offer products and services at reasonable returns, which
may impact our business and our future financial performance.

Our funding is primarily short and medium-term and if depositors do not
roll over deposited funds upon maturity our business could be adversely
affected.

Most of our funding requirements are met through short-term and
medium-term funding sources, primarily in the form of retail deposits. However,
a portion of our assets have long-term maturities, creating a potential for
funding mismatches. In our experience, a substantial portion of our customer
deposits has been rolled over upon

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maturity and has been, over time, a stable source of funding. However, if a
substantial number of our depositors do not roll over deposited funds upon
maturity, our liquidity position could be adversely affected which could have a
material adverse effect on our business.

We could be subject to volatility in income from our treasury operations.

Treasury revenue is vulnerable to volatility in the market caused by
changes in exchange rates, interest rates, equity prices and other factors. Any
increase in interest rates would have an adverse effect on the value of our
fixed income securities portfolio and may have an adverse effect on our net
interest revenue. Any decrease in our income due to volatility in income from
these activities could have a material adverse effect on the price of our
equity shares and ADSs.

We intend to enter new product lines in which we may not be successful.

We intend to continue to explore new business opportunities in both retail
and corporate banking. For example, we launched a credit card business in the
fiscal 2002. We do not expect our credit card operations to be profitable in
the initial years of operation, and we cannot assure you that we have
accurately estimated how long it will take us to become profitable or the risks
and costs of this business. Our inability to succeed in this or any other new
product launch could adversely affect our future financial performance and the
price of our equity shares and our ADSs.

We have high concentrations of funded exposures to certain customers and
to certain sectors and if any of these exposures were to become non-performing,
the quality of our asset portfolio could be adversely affected.

At March 31, 2003, our ten largest exposures, which include the aggregate
of all outstanding balances of loans and investments, totaled approximately Rs.
38.1 billion. This represented approximately 14.7% of our net loans and
investments and 145.9% of our shareholders equity. Our largest single funded
exposure, based on outstanding balances at that date, was Rs. 6,242.2 million.
This represented approximately 2.4% of our net loans and investments and
approximately 23.9% of our shareholders equity. At March 31, 2003, none of
our ten largest funded exposures based on outstanding balances was classified
as non-performing. Our largest non-performing loan was our
35th largest funded
exposure based on outstanding principal balance. However, if any of our ten
largest exposures were to become non-performing, the quality of our asset
portfolio and the price of our equity shares and ADSs could be adversely
affected.

At March 31, 2003,
as a percentage of gross loans and credit substitutes, approximately 21.1% were individual or
retail advances, 8.9% were to automotive manufacturers and 5.5% were to
companies in the heavy chemicals industry. At that date, Rs. 1,660.0 million or
70.1% of our gross non-performing loan portfolio was concentrated in four
industries: automotive, iron and steel, textiles and electronics. Recently,
there has been some upturn in the automotive and iron and steel industries,
while the position in textile and electronic industries has not shown any
significant variation. Some of these sectors could be affected in future by
change in trade regulations, commodity prices or slowdown in industrial growth.
Industry specific difficulties in these and other sectors could increase our
level of non-performing loans and adversely affect our business, our future
financial performance and the price of our equity shares and ADSs.

HDFC Limited controls a significant percentage of our share capital and
exercises substantial influence over board decisions.

HDFC Limited and its subsidiaries owned 24.4% of our equity at March 31,
2003. So long as HDFC Limited and its subsidiaries hold at least a 20.0% equity
stake in us, HDFC Limited is entitled to nominate directors who are not
required to retire by rotation to our board including the chairman and our
managing director, subject to RBI approval. Accordingly, HDFC Limited may be
able to exercise substantial control over our board and over matters subject to
a shareholder vote.

We may face potential conflicts of interest relating to our principal
shareholder, HDFC Limited.

We have no agreements with HDFC Limited or any other HDFC group companies,
which restrict us from offering products and services that are offered by them.
Our relationship with these companies may however cause us to arrive at
mutually beneficial arrangements which could limit the extent to which we may
compete

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with HDFC Limited and HDFC group companies. As a result, any conflicts of
interest between HDFC Limited and us or any other HDFC group companies and us
could adversely affect our business and the price of our equity shares and
ADSs.

We have recently entered into an
arrangement with HDFC relating to our
housing loans business. See BusinessRetail Loan Products-Housing Loans.

Material changes in Indian banking regulations and infrastructure could
harm our business.

We operate in a highly regulated environment in which the RBI extensively
supervises and regulates all banks. Our business could be directly affected by
any changes in policies for banks in respect of directed lending and reserve
requirements. In addition, we could be subject to other changes in laws and
regulations such as those affecting the extent to which we can engage in
specific businesses, as well as changes in other governmental policies, income
tax laws and accounting principles. The RBI has issued guidelines on banks
exposure to the capital markets. The guidelines place a ceiling on bank
financing of equities and investments in shares equal to 5% of a banks total
outstanding advances at the end of the prior year. Certain funded and
non-funded exposures are subject to the ceiling. For more information on the
new guidelines on exposure to the capital markets, see Supervision and
RegulationRegulation Relating to Capital Markets
Exposure. We cannot assure
you that laws and regulations governing the banking sector will not change in
the future or that any changes will not adversely affect our business, our
future financial performance and the price of our equity shares and our ADSs.

Currently, there is no nationwide payment system in India, and checks must
generally be returned to the city from which written in order to be cleared.
Because of mail delivery delays and the variation in city based interbank
clearing practices , check collections can be slow and unpredictable. Through
our electronically linked branch network, correspondant bank arrangements and
centralized processing, we effectively provide nationwide collection and
disbursement system for our corporate clients. We enjoy cash float and earn
fees from these services.

The RBI is currently working on a new inter-bank settlement system called
the Real Time Gross Settlement (RTGS). Once implemented the system would
facilitate real time settlements between banks, initially in select locations.
This could have an adverse impact on the cash float enjoyed so far from
some of our cash management services and hence our future financial performance
and the price of our equity shares and our ADS.

Significant fraud, systems failure or calamities could adversely impact
our business.

We seek to protect our computer systems and network infrastructure from
physical break-ins as well as fraud and systems failures. Computer break-ins
and power disruptions could affect the security of information stored in and
transmitted through our computer systems and network infrastructure. We employ
security systems, including firewalls and password encryption, designed to
minimize the risk of security breaches. Although we intend to continue to
implement security technology and establish operational procedures to prevent
break-ins, damage and failures, there can be no assurance that these security
measures will be successful. A significant failure of security measures could
have a material adverse effect on our business and our future financial
performance.

In addition, both our centralized data center and our back-up systems are
separately located in the greater Mumbai area. In the event of a regional
disaster such as an earthquake, there is the possibility that both systems
could be simultaneously damaged or destroyed. In addition, we have established
a remote disaster recovery site at Chennai which replicates our network and
certain applications which are currently based in Mumbai. We believe that we
will be able to retrieve critical applications within an optimal time frame.

Risks Relating to Investments in Indian Companies

A slowdown in economic growth in India could cause our business to suffer.

Our performance and the quality and growth of our assets are necessarily
dependent on the health of the overall Indian economy. A slowdown in Indian
economy could adversely effect our business, including our ability to grow our
asset portfolio, the quality of our assets, and our ability to implement our
strategy.

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In addition, the Indian economy is in a state of transition. The share of
the services sector of the economy is rising while that of the industrial,
manufacturing and agricultural sectors is declining. It is difficult to gauge
the impact of these fundamental economic changes on our business.

Indian law limits our ability to raise capital outside India and may limit
the ability of others to acquire us, which could prevent us from operating our
business or entering into a transaction that is in the best interests of our
shareholders.

Indian law constrains our ability to raise capital outside India through
the issuance of equity or convertible debt securities and we may not be able to
raise sufficient funds within India to support our growth. Generally, any
foreign investment in, or an acquisition of, an Indian company requires
approval from relevant government authorities in India including the RBI. As a
result, our ability to seek and obtain additional equity investment by foreign
investors is constrained. In addition, these restrictions may prevent us from
entering into a transaction, such as an acquisition by a non-Indian company,
which would otherwise be beneficial for us and the holders of our equity shares
and ADSs.

Political instability or changes in the government in India could delay
the liberalization of the Indian economy and adversely affect economic
conditions in India generally, which could impact our financial results and
prospects.

Since 1991, successive Indian governments have pursued policies of
economic liberalization, including significantly relaxing restrictions on the
private sector. Nevertheless, the role of the Indian central and state
governments in the Indian economy as producers, consumers and regulators has
remained significant. The leadership of India has changed four times since
1996. The current coalition-led central government, which came to power in
October 1999, has announced policies and taken initiatives that support the
continued economic liberalization policies that have been pursued by previous
central governments. We cannot assure you that these liberalization policies
will continue in the future. The rate of economic liberalization could change,
and specific laws and policies affecting banking and finance companies, foreign
investment, currency exchange and other matters affecting investment in our
securities could change as well. A significant change in Indias economic
liberalization and deregulation policies could adversely affect business and
economic conditions in India generally and our business in particular.

If regional hostilities increase, our business could suffer and the price
of our equity shares and ADSs could go down.

India has from time to time experienced social and civil unrest and
hostilities with neighbouring countries. In recent years there have been
military confrontations between India and Pakistan in the Kashmir region. These
hostilities and tensions could lead to political or economic instability in
India and a possible adverse effect on Indian stock exchanges, our business,
our future financial performance and the price of our equity shares and ADSs.

Conditions in the Indian securities market may affect the price or
liquidity of our equity shares and ADSs.

The Indian securities markets are smaller and more volatile than
securities markets in more developed economies. The Indian stock exchanges have
in the past experienced substantial fluctuations in the prices of listed
securities. Although the price of our stock has not been as volatile as the
markets generally, future fluctuations could have a material adverse affect on
the price of our equity shares and ADSs.

Risks Relating to the ADSs and Equity Shares

You will not be able to vote your ADSs.

Investors in ADSs will have no voting rights unlike holders of the equity
shares who have voting rights. Under the deposit agreement, the depositary will
abstain from voting the equity shares represented by the ADSs. If you wish, you
may withdraw the equity shares underlying the ADSs and seek to vote the equity
shares you obtain upon withdrawal. However, this withdrawal process may be
subject to delays and you may not be able to redeposit the equity shares as
described below. For a discussion of the legal restrictions triggered by a

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withdrawal of the equity shares from the depositary facility upon surrender of
ADSs, see Information About IndiaRestrictions on Foreign Ownership of Indian
Securities.

Your ability to withdraw equity shares from the depositary facility is
uncertain and may be subject to delays.

Indias restrictions on foreign ownership of Indian companies limit the
number of equity shares that may be owned by foreign investors. Foreign
investors generally require government approval. Investors who withdraw equity
shares from the depositary facility will be subject to Indian regulatory
restrictions on foreign ownership upon withdrawal. It is possible that this
withdrawal process may be subject to delays. An ADS holder who surrenders an
ADS and withdraws shares may be able to redeposit those shares in the
depositary facility in exchange for ADSs. In addition, an investor who has
purchased shares in the Indian market may be able to deposit them in the ADS
program. However, in either case, the deposit or redeposit of equity shares may
be limited by securities law restrictions and will be restricted so that the
cumulative aggregate number of shares that can be deposited or redeposited as
of any time cannot exceed the cumulative aggregate number represented by ADSs
converted into underlying shares as of such time. For a discussion of the legal
restrictions triggered by a withdrawal of equity shares from the depositary
facility upon surrender of ADSs, see Information About IndiaRestrictions on
Foreign Ownership of Indian Securities.

Your ability to sell in India any equity shares withdrawn from the
depositary facility may be subject to delays if specific government approval is
required.

Investors seeking to sell in India any equity shares withdrawn upon
surrender of an ADS will require RBI approval for each transaction unless the
sale of those equity shares is made on an Indian stock exchange or in
connection with an offer made under the Indian regulations regarding takeovers.
Further, since currency exchange controls exist in India, the RBI will approve
the foreign currency equivalent of the price at which your equity shares are
transferred based on a specified form, and a higher price per share may not be
permitted. Additionally, except in limited circumstances, if you seek to
convert the rupee proceeds from your sale of equity shares in India into
foreign currency and then repatriate that foreign currency from India, you will
have to obtain an additional RBI approval for each transaction. If approval is
required, we cannot guarantee that any approval will be obtained in a timely
manner or at all. Because of possible delays in obtaining requisite approvals,
investors in equity shares may be prevented from realizing gains during periods
of price increases or limiting losses during periods of price declines.

There is a limited market for the ADSs.

Although our ADSs are listed and traded on the New York Stock Exchange, we
cannot be certain that any trading market for our ADSs will be sustained, or
that the present price will correspond to the future price at which our ADSs
will trade in the public market. Indian legal restrictions may also limit the
supply of ADSs. The only way to add to the supply of ADSs would be through an
additional issuance. We cannot guarantee that a market for the ADSs will
continue.

Settlement of trades of equity shares on Indian stock exchanges may be
subject to delays.

The equity shares represented by our ADSs are listed on the National Stock
Exchange, The Stock Exchange, Mumbai and The Stock Exchange, Ahmedabad.
Settlement on these stock exchanges may be subject to delays and an investor in
equity shares withdrawn from the depositary facility upon surrender of ADSs may
not be able to settle trades on these stock exchanges in a timely manner.

You may be unable to exercise preemptive rights available to other
shareholders.

A company incorporated in India must offer its holders of equity shares
preemptive rights to subscribe and pay for a proportionate number of shares to
maintain their existing ownership percentages prior to the issuance of any new
equity shares, unless these rights have been waived by at least 75% of the
companys shareholders present and voting at a shareholders general meeting.
US investors in our ADSs may be unable to exercise preemptive rights for our
equity shares underlying our ADSs unless a registration statement under the
Securities Act is effective with respect to those rights or an exemption from
the registration requirements of the Securities Act is available. Our decision
to file a registration statement will depend on the costs and potential
liabilities

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associated with any registration statement as well as the perceived benefits of
enabling US investors in our ADSs to exercise their preemptive rights and any
other factors we consider appropriate at the time. We do not commit that we
would file a registration statement under these circumstances. If we issue any
securities in the future, these securities may be issued to the depositary,
which may sell these securities in the securities markets in India for the
benefit of the investors in our ADSs. There can be no assurance as to the
value, if any, the depositary would receive upon the sale of these securities.
To the extent that investors in our ADSs are unable to exercise preemptive
rights, their proportional interests in us would be reduced.

Because the equity shares underlying our ADSs are quoted in rupees in
India, you may be subject to potential losses arising out of exchange rate risk
on the Indian rupee and risks associated with the conversion of rupee proceeds
into foreign currency.

Fluctuations in the exchange rate between the US dollar and the Indian
rupee may affect the value of your investment in our ADSs. Specifically, if the
relative value of the Indian rupee to the US dollar declines, as it has
generally over the past several years, each of the following values will also
decline:



| |  |  | the US dollar equivalent of the Indian rupee trading price of our
equity shares in India and indirectly the US dollar trading price of
our ADSs in the United States may also decline;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the US dollar equivalent of the proceeds that you would receive
upon the sale in India of any equity shares that you withdraw from the
depositary; and                                
|
| |  |  | the US dollar equivalent of cash dividends, if any, paid in Indian
rupees on the equity shares represented by our ADSs.                                                               

Investors that seek to convert the rupee proceeds of a sale of equity
shares withdrawn upon surrender of ADSs into foreign currency and export the
foreign currency will need to obtain the approval of the RBI for each such
transaction. In addition, investors that seek to sell equity shares withdrawn
from the depository facility will have to obtain approval from the RBI, unless
the sale is made on a stock exchange or in connection with an offer made under
the regulations regarding takeovers. Holders of rupees in India may also
generally not purchase foreign currency without general or special approval
from the RBI.

We have unsecured subordinated debt that, in case of payment default,
could result in an issuance of a significant number of equity shares.

Certain of our subordinated debt agreements with various government-owned
Indian financial institutions contain provisions (which are commonly found in
loan agreements of this nature in India) that entitle the primary lenders to
exercise the right to convert at their option in most cases, up to 20% of
outstanding principal and interest into fully-paid shares (at a conversion
price equal to the par value, Rs. 10, of the equity shares) where the borrower
is in default under the loan agreement. Although we have never missed a payment
on this or any other debt, in the event we were to default on all such debt,
the number of shares that could be so issued could represent a significant
proportion of our equity share capital and could dilute the effective ownership
of other shareholders, including holders of our equity shares and the ADSs. See
Description of Equity SharesIssuance of Equity Shares under Subordinated
Debt.

The future sales of securities by our company or existing shareholders may
depress the market price of our ADSs.

The market price of our ADSs could decline as a result of sales of a large
number of our equity securities on an Indian stock exchange or elsewhere, or
the perception that sales could occur. These sales might also make it more
difficult for us to sell equity securities in the future at a time and at a
price we deem appropriate.

You may be subject to Indian taxes arising out of capital gains if you
exchange your ADSs for equity shares and sell the equity shares.

Generally, capital gains, whether short-term or long-term, arising on the
sale of the underlying equity shares in India are subject to Indian capital
gains tax. For purposes of computing the amount of capital gains subject to
tax, Indian law specifies that the cost of acquisition of the equity shares
will be deemed to be the share price prevailing on The Stock Exchange, Mumbai
or the National Stock Exchange on the date the depositary advises

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the custodian to redeem receipts in exchange for underlying equity shares. The
period of holding of such equity shares for determining whether the gain is
long-term or short-term commences on the date of the giving of such notice by
the depositary to the custodian. Investors are advised to consult their own tax
advisers and to consider carefully the potential tax consequences of an
investment in our ADSs.

You may be subject to Indian taxes on dividend payable on your ADSs

In view of changes in the Indian Income Tax law, effective financial year
2003-04 a Company paying the dividend is subject to dividend distribution tax @
12.5%, plus surcharge of 2.5% on the total amount it distributes as dividend to
its shareholders in addition to the normal corporate tax on its income See
TaxationIndian Tax

You may not be able to enforce a judgment of a foreign court against us.

We are a limited liability company incorporated under the laws of India.
All but one of our directors and executive officers and some of the experts
named in this document are residents of India and almost all of our assets
and the assets of these persons are located in India.

India is not a party to any international treaty in relation to the
recognition or enforcement of foreign judgments. We have been advised by our
Indian legal advisors that recognition and enforcement of foreign judgments is
provided for under Section 13 of The Code of Civil Procedure, 1908 of India on
a statutory basis and that foreign judgments shall be conclusive regarding any
matter directly adjudicated upon except:



| |  |  | where the judgment has not been pronounced by a court of competent jurisdiction;                                                                                                                             
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | where the judgment has not been given on the merits of the case;                                                                                                                                             
|
| |  |  | where it appears on the face of the proceedings that the judgment
is founded on an incorrect view of international law or a refusal to
recognize the law of India in cases in which Indian law is applicable;
|
| |  |  | where the proceedings in which the judgment was obtained were opposed to natural justice;                                                                                                                    
|
| |  |  | where the judgment has been obtained by fraud; or                                                                                                                                                            
|
| |  |  | where the judgment sustains a claim founded on a breach of any law in force in India.                                                                                                                        

It may not be possible for investors in our ADSs to effect service of
process outside India upon us or our directors and executive officers and
experts named in the prospectus that are residents of India or to enforce
judgments obtained against us or these persons in foreign courts predicated
upon the liability provisions of foreign countries, including the civil
liability provisions of the federal securities laws of the United States.
Moreover, it is unlikely that a court in India would award damages on the same
basis as a foreign court if an action were brought in India. Furthermore, it is
unlikely that an Indian court would enforce foreign judgments if it viewed the
amount of damages as excessive or inconsistent with Indian practice.

There may be less company information available in Indian securities
markets than securities markets in developed countries.

There is a difference between the level of regulation and monitoring of
the Indian securities markets and the activities of investors, brokers and
other participants and that of markets in the United States and other developed
economies. The Securities and Exchange Board of India and RBI are responsible
for improving disclosure and other regulatory standards for the Indian
securities markets. The Securities and Exchange Board of India has issued
regulations and guidelines on disclosure requirements, insider trading and
other matters. There may, however, be less publicly available information about
Indian companies than is regularly made available by public companies in
developed economies.

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PRICE RANGE OF OUR AMERICAN DEPOSITARY SHARES AND EQUITY SHARES

Our ADSs, each representing three equity shares, par value Indian Rs. 10
per share, are listed on the New York Stock Exchange under the symbol HDB.
Our equity shares, including those underlying the ADSs, are listed on the
National Stock Exchange of India under the symbol HDFCBANK, The Stock Exchange,
Mumbai under the code 500180 and The Stock Exchange, Ahmedabad under the Stock
Code 00500. The majority of trading in our equity shares is carried out on the
National Stock Exchange and The Stock Exchange, Mumbai.

Trading prices of our ADSs on the New York Stock Exchange

The following table shows:



| |  |  | the reported high and low prices for our ADSs in U.S. dollars on
the New York Stock Exchange; and
| | - |  | -------------------------------------------------------------------------------------------------
|
| |  |  | the average daily trading volume for our ADSs on the New York Stock
Exchange.                    

|     |                                 |  |               |       |                           |  |        |       |  |  |  |        | 
|---- | ------------------------------- |  | ------------- | ----- | ------------------------- |  | ------ | ----- |  |  |  | ------ | 
|     |                                 |  | Price per ADS |       | Average daily ADS trading
|     |                                 |  |               |       |                          
|     |                                 |  | High          |       | Low                       |  | volume
|     |                                 |  |               |       |                           |  |       
|2002 |                                 |  |               |       |                           |  |        |       |  |  |  |       
|     | Third Quarter                   |  | US$           | 15.20 |                           |  | US$    | 12.71 |  |  |  | 40,370 | 
|     | October                         |  |               | 14.25 |                           |  |        | 12.70 |  |  |  | 27,013 | 
|     | November                        |  |               | 13.51 |                           |  |        | 12.16 |  |  |  | 54,195 | 
|     | December                        |  |               | 13.98 |                           |  |        | 11.85 |  |  |  | 42,125 | 
|2003 |                                 |  |               |       |                           |  |        |       |  |  |  |       
|     | January                         |  |               | 15.24 |                           |  |        | 13.26 |  |  |  | 37,414 | 
|     | February                        |  |               | 16.25 |                           |  |        | 15.22 |  |  |  | 87,211 | 
|     | March                           |  |               | 15.87 |                           |  |        | 14.86 |  |  |  | 71,078 | 
|     | April                           |  |               | 17.50 |                           |  |        | 15.43 |  |  |  | 45,922 | 
|     | May                             |  |               | 17.17 |                           |  |        | 16.01 |  |  |  | 44,128 | 
|     | June                            |  |               | 19.25 |                           |  |        | 16.98 |  |  |  | 41,090 | 
|     | July                            |  |               | 23.40 |                           |  |        | 18.75 |  |  |  | 85,559 | 
|     | August                          |  |               | 23.84 |                           |  |        | 21.45 |  |  |  | 50,105 | 
|     | September(through September 23) |  |               | 22.50 |                           |  |        | 20.25 |  |  |  | 54,363 | 

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Trading prices of our equity shares on the National Stock Exchange

The following table shows:



| |  |  | the reported high and low market prices for our equity shares in
rupees on the National Stock Exchange;                                              
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the imputed high and low closing sales prices for our equity shares
translated into US dollars based on a rate of Indian Rs. 47.53 per US
dollar; and
|
| |  |  | the average daily trading volume for our equity shares on the
National Stock Exchange.                                                               

|     |                |     |              |       |              |  |               |       |     |     |                |     |  |  |     |     |  |  |         |         | 
|---- | -------------- | --- | ------------ | ----- | ------------ |  | ------------- | ----- | --- | --- | -------------- | --- |  |  | --- | --- |  |  | ------- | ------- | 
|     |                |     | Price per    |       | Price per    |  |              
|     |                |     | equity share |       | equity share |  | Average
daily
|     |                |     |              |       |              |  | Equity share 
|     |                |     | High         |       | Low          |  | High          |       | Low |     | trading volume
|     |                |     |              |       |              |  |               |       |     |     |               
|1998 |                | Rs. | 86.1         |       |              |  | 48.0          |       |     | US$ | 1.8            |     |  |  | 1.0 |     |  |  | 139,901 |        
|1999 |                |     | 191.6        |       |              |  | 49.2          |       |     |     | 4.0            |     |  |  | 1.0 |     |  |  | 178,159 |        
|2000 |                |     | 295.0        |       |              |  | 157.0         |       |     |     | 6.2            |     |  |  | 3.3 |     |  |  | 153,552 |        
|2001 |                |     |              |       |              |  |               |       |     |     |                |     |  |  |     |     |  |  |         |        
|     | First Quarter  |     |              | 279.0 |              |  |               | 210.6 |     |     |                | 5.9 |  |  |     | 4.4 |  |  |         | 193,332 | 
|     | Second Quarter |     |              | 250.0 |              |  |               | 197.1 |     |     |                | 5.3 |  |  |     | 4.1 |  |  |         | 91,066  | 
|     | Third Quarter  |     |              | 229.0 |              |  |               | 199.6 |     |     |                | 4.8 |  |  |     | 4.2 |  |  |         | 100,367 | 
|     | Fourth Quarter |     |              | 238.0 |              |  |               | 195.0 |     |     |                | 5.0 |  |  |     | 4.1 |  |  |         | 94,126  | 
|2002 |                |     |              |       |              |  |               |       |     |     |                |     |  |  |     |     |  |  |         |        
|     | First Quarter  |     |              | 255.0 |              |  |               | 228.6 |     |     |                | 5.4 |  |  |     | 4.8 |  |  |         | 73,986  | 
|     | Second Quarter |     |              | 241.5 |              |  |               | 199.8 |     |     |                | 5.1 |  |  |     | 4.2 |  |  |         | 80,868  | 
|     | Third Quarter  |     |              | 226.0 |              |  |               | 200.0 |     |     |                | 4.8 |  |  |     | 4.2 |  |  |         | 57,928  | 
|     | October        |     |              | 217.0 |              |  |               | 186.0 |     |     |                | 4.6 |  |  |     | 3.9 |  |  |         | 106,893 | 
|     | November       |     |              | 200.1 |              |  |               | 188.0 |     |     |                | 4.2 |  |  |     | 4.0 |  |  |         | 106,691 | 
|     | December       |     |              | 223.0 |              |  |               | 187.3 |     |     |                | 4.7 |  |  |     | 3.9 |  |  |         | 159,129 | 
|2003 |                |     |              |       |              |  |               |       |     |     |                |     |  |  |     |     |  |  |         |        
|     | January        |     |              | 243.5 |              |  |               | 209.9 |     |     |                | 5.1 |  |  |     | 4.4 |  |  |         | 118,242 | 
|     | February       |     |              | 256.0 |              |  |               | 222.0 |     |     |                | 5.4 |  |  |     | 4.7 |  |  |         | 137,045 | 
|     | March          |     |              | 252.3 |              |  |               | 205.0 |     |     |                | 5.3 |  |  |     | 4.3 |  |  |         | 80,765  | 
|     | April          |     |              | 250.0 |              |  |               | 231.0 |     |     |                | 5.3 |  |  |     | 4.9 |  |  |         | 138,101 | 
|     | May            |     |              | 257.0 |              |  |               | 239.1 |     |     |                | 5.4 |  |  |     | 5.0 |  |  |         | 102,269 | 
|     | June           |     |              | 267.2 |              |  |               | 239.0 |     |     |                | 5.6 |  |  |     | 5.0 |  |  |         | 200,851 | 
|     | July           |     |              | 303.5 |              |  |               | 252.6 |     |     |                | 6.4 |  |  |     | 5.3 |  |  |         | 300,959 | 
|     | August         |     |              | 291.6 |              |  |               | 235.1 |     |     |                | 6.1 |  |  |     | 4.9 |  |  |         | 71,066  | 

At March 31, 2003, there were 254,978 holders of record of our equity
shares, excluding ADS, of which 28 had registered addresses in the United
States and held an aggregate of 4,095 of our equity shares.

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DESCRIPTION OF EQUITY SHARES

We incorporate by reference the information disclosed under Description
of Equity Shares in our registration statement on Form F-1, dated July 20,
2001 (File No. 333-13718).

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DIVIDEND POLICY

The Banks dividend policy is based on the need to balance the twin
objectives of appropriately rewarding shareholders with cash dividends and of
retaining capital to meet the Banks investment needs and to maintain a healthy
capital adequacy ratio to support future growth.

Under Indian law, a company pays dividends upon a recommendation by its
board of directors and approval by a majority of the shareholders at the annual
general meeting of shareholders held within six months of the end of each
fiscal year. The shareholders have the right to decrease but not increase the
dividend amount recommended by the board of directors. Dividends may be paid
out of company profits for the fiscal year in which the dividend is declared.
We have paid dividends every year since fiscal 1997.

Consistent with our dividend policy we have had a track record of moderate
but steady increases in dividend declarations and the dividend payout
ratio(1)
in the last few years has been in the range of 22% to 35%.

The following table sets forth, for the periods indicated, the dividend
per equity share and the total amount of dividends paid on the equity shares,
both exclusive of dividend tax. All dividends were paid in rupees. For
convenience of the reader, we have provided US dollar equivalent amounts, which
have been computed on the basis of the March 31, 2003, noon buying rate of Rs.
47.53 per US dollar.

|                        |  |                  |      |                                |  |     |       |  |  |               |       |  |  |     |      | 
|----------------------- |  | ---------------- | ---- | ------------------------------ |  | --- | ----- |  |  | ------------- | ----- |  |  | --- | ---- | 
|                        |  | Dividend         |      |                               
|                        |  | per equity share |      | Total amount of dividends paid
|                        |  |                  |      |                               
|                        |  |                  |      |                                |  |     |       |  |  | (in millions)
|Relating to Fiscal Year |  |                  |      |                                |  |     |       |  |  |              
|1999                    |  | Rs.              | 1.30 |                                |  | US$ | 0.027 |  |  | Rs.           | 260.0 |  |  | US$ | 5.5  | 
|2000                    |  |                  | 1.60 |                                |  |     | 0.033 |  |  |               | 323.9 |  |  |     | 6.8  | 
|2001                    |  |                  | 2.00 |                                |  |     | 0.041 |  |  |               | 487.2 |  |  |     | 10.3 | 
|2002                    |  |                  | 2.50 |                                |  |     | 0.051 |  |  |               | 703.4 |  |  |     | 14.8 | 
|2003                    |  |                  | 3.00 |                                |  |     | 0.063 |  |  |               | 849.5 |  |  |     | 17.9 | 

Our dividends are generally declared and paid in the fiscal year following
the year to which they relate. The dividend relating to fiscal year 2003 was
paid in June 2003. This was subject to a dividend distribution tax of 12.5%
plus a surcharge of 2.5% which was paid by the Bank. The shareholders of the
Bank were not subjected to any withholding tax. The above tax actions were a
result of changes in tax laws effective for dividends paid in fiscal 2004
onwards. For dividend paid in fiscal 2003, there was no distribution tax
liability on the Bank but the dividend was taxable in the hands of the
shareholders.

Future dividends will depend on our revenues, cash flow, financial
condition (including capital position) and other factors. ADS holders will be
entitled to receive dividends payable in respect of the equity shares
represented by ADSs. The equity shares represented by ADSs will rank equally
with our existing equity shares in respect of dividends.

Before paying any dividend on our equity shares, we are required under the
Indian Banking Regulation Act to write off all expenses capitalized under
Indian GAAP. Before declaring dividends, we are required to transfer at least
25% of the balance of profits of each year determined in accordance with Indian
GAAP to a reserve fund. The government of India may, however, on recommendation
of the RBI, exempt us from this requirement. We require prior approval from the
RBI to pay a dividend of more than 25% of the par value of our shares. We also
require prior approval from the RBI to pay an interim dividend.

For a description of the tax consequences of dividends paid to our
shareholders, see TaxationIndian TaxTaxation of
Distributions.

(1)  Dividend payout ratio is dividend paid (before dividend distribution tax) upon net income for the year.

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SELECTED FINANCIAL AND OPERATING DATA

The following table sets forth our selected financial and operating data.
The financial data have been derived from our financial statements prepared in
accordance with US GAAP. The summary income statement data for the fiscal years
ended March 31, 2001, 2002 and 2003 and the summary balance sheet data as of
March 31, 2002 and 2003 are derived from our audited financial statements
included in this annual report, together with the report of Deloitte Haskins
and Sells, independent auditors. Our summary balance sheet data as of March 31,
1999, March 31, 2000 and March 31, 2001 and our summary income statement data
for the fiscal years ended March 31, 1999 and March 31, 2000 are derived from
our audited financial statements not included in this report. For the
convenience of the reader, the summary financial data as of and for the year
ended March 31, 2003 have been translated into US dollars at a rate of US$1.00
= Rs. 47.53.

You should read the following data with the more detailed information
contained in Managements Discussion and Analysis of Financial Condition and
Results of Operations and our financial statements.

|                                                                                   |  |                                             |          |      |  |      |           |      |  |      |           |      |  |     |           |  |  |     |           |  |  |     |         | 
|---------------------------------------------------------------------------------- |  | ------------------------------------------- | -------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- | ---- |  | --- | --------- |  |  | --- | --------- |  |  | --- | ------- | 
|                                                                                   |  | Year ended March 31,                        |          |      |  |     
|                                                                                   |  |                                             |          |      |  |     
|                                                                                   |  | 1999                                        |          | 2000 |  | 2001 |           | 2002 |  | 2003 |           | 2003
|                                                                                   |  |                                             |          |      |  |      |           |      |  |      |           |     
|                                                                                   |  | (in millions, except per equity share data)
|Selected income statement data:                                                    |  |                                             |          |      |  |      |           |      |  |      |           |      |  |     |           |  |  |     |           |  |  |     |         | 
|Interest revenue                                                                   |  | Rs.                                         | 3,779.9  |      |  | Rs.  | 6,812.5   |      |  | Rs.  | 12,561.5  |      |  | Rs. | 16,448.0  |  |  | Rs. | 19,424.8  |  |  | US$ | 408.6   | 
|Interest expense                                                                   |  |                                             | 2,305.1  |      |  |      | 3,765.1   |      |  |      | 7,573.4   |      |  |     | 10,762.5  |  |  |     | 11,902.0  |  |  |     | 250.5   | 
|                                                                                   |  |                                             |          |      |  |      |           |      |  |      |           |      |  |     |           |  |  |     |           |  |  |     |         | 
|Net interest revenue                                                               |  |                                             | 1,474.8  |      |  |      | 3,047.4   |      |  |      | 4,988.1   |      |  |     | 5,685.5   |  |  |     | 7,522.8   |  |  |     | 158.1   | 
|Allowance for credit losses, net                                                   |  |                                             | 15.3     |      |  |      | 455.9     |      |  |      | 247.0     |      |  |     | 451.6     |  |  |     | 741.5     |  |  |     | 15.6    | 
|                                                                                   |  |                                             |          |      |  |      |           |      |  |      |           |      |  |     |           |  |  |     |           |  |  |     |         | 
|Net interest revenue after allowance for
credit losses                             |  |                                             | 1,459.5  |      |  |      | 2,591.5   |      |  |      | 4,741.1   |      |  |     | 5,233.9   |  |  |     | 6,781.3   |  |  |     | 142.5   | 
|Non-interest revenue, net                                                          |  |                                             | 645.7    |      |  |      | 1,082.0   |      |  |      | 1,627.1   |      |  |     | 3,215.1   |  |  |     | 4,520.1   |  |  |     | 95.2    | 
|                                                                                   |  |                                             |          |      |  |      |           |      |  |      |           |      |  |     |           |  |  |     |           |  |  |     |         | 
|Net revenue                                                                        |  |                                             | 2,105.2  |      |  |      | 3,673.5   |      |  |      | 6,368.2   |      |  |     | 8,449.0   |  |  |     | 11,301.4  |  |  |     | 237.7   | 
|Non-interest expense                                                               |  |                                             | 961.7    |      |  |      | 1,640.4   |      |  |      | 3,162.5   |      |  |     | 4,196.0   |  |  |     | 6,057.9   |  |  |     | 127.5   | 
|                                                                                   |  |                                             |          |      |  |      |           |      |  |      |           |      |  |     |           |  |  |     |           |  |  |     |         | 
|Income before income taxes                                                         |  |                                             | 1,143.5  |      |  |      | 2,033.1   |      |  |      | 3,205.7   |      |  |     | 4,253.0   |  |  |     | 5,243.5   |  |  |     | 110.2   | 
|Income tax expense                                                                 |  |                                             | 403.1    |      |  |      | 642.3     |      |  |      | 1,065.1   |      |  |     | 1,294.6   |  |  |     | 1,729.7   |  |  |     | 36.4    | 
|                                                                                   |  |                                             |          |      |  |      |           |      |  |      |           |      |  |     |           |  |  |     |           |  |  |     |         | 
|Net income                                                                         |  | Rs.                                         | 740.4    |      |  | Rs.  | 1,390.8   |      |  | Rs.  | 2,140.6   |      |  | Rs. | 2,958.4   |  |  | Rs. | 3,513.8   |  |  | US$ | 73.8    | 
|                                                                                   |  |                                             |          |      |  |      |           |      |  |      |           |      |  |     |           |  |  |     |           |  |  |     |         | 
|Per equity share data:                                                             |  |                                             |          |      |  |      |           |      |  |      |           |      |  |     |           |  |  |     |           |  |  |     |         | 
|Earnings per share, basic                                                          |  | Rs.                                         | 3.83     |      |  | Rs.  | 7.05      |      |  | Rs.  | 8.97      |      |  | Rs. | 11.10     |  |  | Rs. | 12.57     |  |  | US$ | 0.26    | 
|Earnings per share, diluted                                                        |  |                                             | 3.83     |      |  |      | 7.03      |      |  |      | 8.87      |      |  |     | 11.04     |  |  |     | 12.51     |  |  |     | 0.26    | 
|Dividends                                                                          |  |                                             | 1.30     |      |  |      | 1.60      |      |  |      | 2.00      |      |  |     | 2.50      |  |  |     | 3.00      |  |  |     | 0.06    | 
|Book value(1)                                                                      |  |                                             | 18.33    |      |  |      | 36.72     |      |  |      | 44.88     |      |  |     | 79.06     |  |  |     | 93.36     |  |  |     | 1.96    | 
|Equity shares outstanding at end of period
(in millions of equity shares)          |  |                                             | 194.6    |      |  |      | 238.1     |      |  |      | 239.7     |      |  |     | 279.0     |  |  |     | 279.7     |  |  |     | 279.7   | 
|Weighted average equity shares outstanding-
basic (in millions of equity shares)   |  |                                             | 193.1    |      |  |      | 197.2     |      |  |      | 238.6     |      |  |     | 266.6     |  |  |     | 279.5     |  |  |     | 279.5   | 
|Weighted average equity shares outstanding-
diluted (in millions of equity shares) |  |                                             | 193.1    |      |  |      | 197.7     |      |  |      | 241.2     |      |  |     | 267.9     |  |  |     | 281.3     |  |  |     | 281.3   | 
|Selected balance sheet data:                                                       |  |                                             |          |      |  |      |           |      |  |      |           |      |  |     |           |  |  |     |           |  |  |     |         | 
|Total assets                                                                       |  | Rs.                                         | 47,406.6 |      |  | Rs.  | 119,967.7 |      |  | Rs.  | 161,128.5 |      |  | Rs. | 243,032.2 |  |  | Rs. | 311,840.7 |  |  | US$ | 6,560.9 | 
|Cash and cash equivalents                                                          |  |                                             | 5,415.2  |      |  |      | 16,181.9  |      |  |      | 26,121.1  |      |  |     | 34,590.6  |  |  |     | 23,944.9  |  |  |     | 503.8   | 
|Term placements                                                                    |  |                                             |         |      |  |      |          |      |  |      |          |      |  |     |          |  |  |     | 7,747.4   |  |  |     | 163.0   | 
|Loans, net of allowance                                                            |  |                                             | 15,323.6 |      |  |      | 36,058.5  |      |  |      | 51,083.2  |      |  |     | 71,528.9  |  |  |     | 118,299.9 |  |  |     | 2,488.9 | 
|Investments held for trading                                                       |  |                                             |         |      |  |      |          |      |  |      |          |      |  |     | 3,837.6   |  |  |     | 3,976.1   |  |  |     | 83.7    | 
|Investments available for sale                                                     |  |                                             | 21,825.1 |      |  |      | 58,700.5  |      |  |      | 69,928.9  |      |  |     | 80,320.6  |  |  |     | 98,929.2  |  |  |     | 2,081.4 | 
|Investments held to maturity                                                       |  |                                             |         |      |  |      |          |      |  |      |          |      |  |     | 35,429.9  |  |  |     | 38,426.7  |  |  |     | 808.5   | 
|Non-performing loans, net                                                          |  |                                             | 254.8    |      |  |      | 844.6     |      |  |      | 485.5     |      |  |     | 536.4     |  |  |     | 683.3     |  |  |     | 14.4    | 
|Total liabilities                                                                  |  |                                             | 43,838.1 |      |  |      | 111,224.4 |      |  |      | 150,368.7 |      |  |     | 220,971.3 |  |  |     | 285,727.6 |  |  |     | 6,011.6 | 
|Long-term debt                                                                     |  |                                             | 1,460.0  |      |  |      | 1,720.0   |      |  |      | 2,220.6   |      |  |     | 2,157.9   |  |  |     | 2,116.0   |  |  |     | 44.5    | 
|Short-term borrowings                                                              |  |                                             | 5,478.8  |      |  |      | 15,734.7  |      |  |      | 16,671.2  |      |  |     | 21,600.3  |  |  |     | 21,579.6  |  |  |     | 454.0   | 
|Total deposits                                                                     |  |                                             | 29,151.2 |      |  |      | 84,277.2  |      |  |      | 116,581.1 |      |  |     | 176,538.1 |  |  |     | 223,760.0 |  |  |     | 4,707.7 | 
|Shareholders equity                                                               |  |                                             | 3,568.4  |      |  |      | 8,743.3   |      |  |      | 10,759.8  |      |  |     | 22,060.9  |  |  |     | 26,113.1  |  |  |     | 549.3   | 



|(1) |  | Represents the difference between total assets and total liabilities,
divided by the number of shares outstanding at the end of each reporting
period.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

42



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##### Table of Contents



|                             |                           |     |               |          |      |     |          |          |      |     |           |          |      |     |           |           |  |     |           |           |  |     |         |         | 
|---------------------------- | ------------------------- | --- | ------------- | -------- | ---- | --- | -------- | -------- | ---- | --- | --------- | -------- | ---- | --- | --------- | --------- |  | --- | --------- | --------- |  | --- | ------- | ------- | 
|                             |                           |     | At March 31, 
|                             |                           |     |              
|                             |                           |     | 1999          |          | 2000 |     | 2001     |          | 2002 |     | 2003      |          | 2003
|                             |                           |     |               |          |      |     |          |          |      |     |           |          |     
|                             |                           |     | (in millions)
|Period average:(2)           |                           |     |               |          |      |     |          |          |      |     |           |          |      |     |           |           |  |     |           |           |  |     |         |        
|Total assets                 |                           | Rs. | 35,261.1      |          |      | Rs. | 65,223.3 |          |      | Rs. | 130,056.0 |          |      | Rs. | 202,013.2 |           |  | Rs. | 257,020.8 |           |  | US$ | 5,407.5
|Interest-earning assets      |                           |     | 32,215.1      |          |      |     | 59,837.7 |          |      |     | 119,714.5 |          |      |     | 183,488.8 |           |  |     | 230,452.0 |           |  |     | 4,848.6 |        
|Loans, net of allowance      |                           |     | 10,120.9      |          |      |     | 19,210.1 |          |      |     | 39,004.4  |          |      |     | 59,374.9  |           |  |     | 82,461.2  |           |  |     | 1,734.9 |        
|Total liabilities            |                           |     | 31,980.1      |          |      |     | 59,023.2 |          |      |     | 120,216.2 |          |      |     | 185,512.4 |           |  |     | 232,933.8 |           |  |     | 4,900.8 |        
|Interest-bearing liabilities |                           |     | 24,079.2      |          |      |     | 41,920.6 |          |      |     | 86,738.9  |          |      |     | 137,681.1 |           |  |     | 175,598.6 |           |  |     | 3,694.4 |        
|Long-term debt               |                           |     | 1,113.4       |          |      |     | 1,598.0  |          |      |     | 1,718.2   |          |      |     | 2,159.7   |           |  |     | 2,280.3   |           |  |     | 48.0    |        
|Short-term borrowings        |                           |     | 4,527.0       |          |      |     | 7,338.0  |          |      |     | 10,472.9  |          |      |     | 18,105.9  |           |  |     | 15,362.9  |           |  |     | 323.2   |        
|Total deposits               |                           |     | 24,226.6      |          |      |     | 45,752.6 |          |      |     | 97,110.9  |          |      |     | 142,854.5 |           |  |     | 186,847.7 |           |  |     | 3,931.2 |        
|Of which:                    |                           |     |               |          |      |     |          |          |      |     |           |          |      |     |           |           |  |     |           |           |  |     |         |        
|                             | Interest-bearing deposits |     |               | 18,438.8 |      |     |          | 32,984.6 |      |     |           | 74,547.8 |      |     |           | 117,415.5 |  |     |           | 157,955.4 |  |     |         | 3,323.3 | 
|Shareholders equity         |                           |     | 3,281.0       |          |      |     | 6,200.1  |          |      |     | 9,839.8   |          |      |     | 16,500.8  |           |  |     | 24,087.0  |           |  |     | 506.8   |        



|(2) |  | Average balances are the average of daily outstanding amounts.
|--- |  | --------------------------------------------------------------

|                                                                                   |  |                                    |      |      |  |      |      |      |  |      |      |  |  |  |      |  |  |  |      | 
|---------------------------------------------------------------------------------- |  | ---------------------------------- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- |  |  |  | ---- |  |  |  | ---- | 
|                                                                                   |  | At or for the year ended March 31,
|                                                                                   |  |                                   
|                                                                                   |  | 1999                               |      | 2000 |  | 2001 |      | 2002 |  | 2003
|                                                                                   |  |                                    |      |      |  |      |      |      |  |     
|                                                                                   |  | (in percentages)                  
|Profitability:                                                                     |  |                                    |      |      |  |      |      |      |  |      |      |  |  |  |      |  |  |  |      | 
|Net income as a percentage of:                                                     |  |                                    |      |      |  |      |      |      |  |      |      |  |  |  |      |  |  |  |      | 
|Average total assets                                                               |  |                                    | 2.1  |      |  |      | 2.1  |      |  |      | 1.6  |  |  |  | 1.5  |  |  |  | 1.4  | 
|Average shareholders equity                                                       |  |                                    | 22.6 |      |  |      | 22.4 |      |  |      | 21.8 |  |  |  | 17.9 |  |  |  | 14.6 | 
|Dividend payout ratio(3)                                                           |  |                                    | 35.1 |      |  |      | 23.3 |      |  |      | 22.8 |  |  |  | 23.8 |  |  |  | 24.2 | 
|Spread(4)                                                                          |  |                                    | 4.0  |      |  |      | 4.5  |      |  |      | 3.6  |  |  |  | 2.4  |  |  |  | 2.6  | 
|Net interest margin(5)                                                             |  |                                    | 4.6  |      |  |      | 5.1  |      |  |      | 4.2  |  |  |  | 3.1  |  |  |  | 3.3  | 
|Cost-to-net revenue ratio(6)                                                       |  |                                    | 45.7 |      |  |      | 44.7 |      |  |      | 49.7 |  |  |  | 49.7 |  |  |  | 53.6 | 
|Cost-to-average assets ratio(7)                                                    |  |                                    | 2.7  |      |  |      | 2.5  |      |  |      | 2.4  |  |  |  | 2.1  |  |  |  | 2.4  | 
|Capital:                                                                           |  |                                    |      |      |  |      |      |      |  |      |      |  |  |  |      |  |  |  |      | 
|Total capital adequacy ratio(8)                                                    |  |                                    | 11.9 |      |  |      | 12.2 |      |  |      | 11.1 |  |  |  | 13.9 |  |  |  | 11.1 | 
|Tier 1 capital adequacy ratio(8)                                                   |  |                                    | 8.3  |      |  |      | 9.6  |      |  |      | 8.7  |  |  |  | 10.8 |  |  |  | 9.5  | 
|Tier 2 capital adequacy ratio(8)                                                   |  |                                    | 3.6  |      |  |      | 2.6  |      |  |      | 2.4  |  |  |  | 3.1  |  |  |  | 1.6  | 
|Average shareholders equity as a percentage of average total assets               |  |                                    | 9.3  |      |  |      | 9.5  |      |  |      | 7.6  |  |  |  | 8.2  |  |  |  | 9.4  | 
|Asset quality:                                                                     |  |                                    |      |      |  |      |      |      |  |      |      |  |  |  |      |  |  |  |      | 
|Gross non-performing loans as a percentage of gross loans                          |  |                                    | 2.3  |      |  |      | 4.4  |      |  |      | 2.9  |  |  |  | 2.7  |  |  |  | 2.0  | 
|Gross non-performing loans and credit substitutes to gross customer assets(9)      |  |                                    | 1.6  |      |  |      | 3.2  |      |  |      | 2.1  |  |  |  | 1.9  |  |  |  | 1.6  | 
|Net non-performing loans as a percentage of net loans                              |  |                                    | 1.7  |      |  |      | 2.3  |      |  |      | 1.0  |  |  |  | 0.7  |  |  |  | 0.6  | 
|Net non-performing loans and credit substitutes to net customer assets(9)          |  |                                    | 1.2  |      |  |      | 1.7  |      |  |      | 0.7  |  |  |  | 0.6  |  |  |  | 0.5  | 
|Net non-performing loans as a percentage of total assets                           |  |                                    | 0.5  |      |  |      | 0.7  |      |  |      | 0.3  |  |  |  | 0.2  |  |  |  | 0.2  | 
|Specific allowance for credit losses as a percentage of gross non-performing loans |  |                                    | 29.3 |      |  |      | 47.5 |      |  |      | 67.6 |  |  |  | 72.6 |  |  |  | 71.1 | 
|Total allowance for credit losses as a percentage of gross non-performing loans    |  |                                    | 29.3 |      |  |      | 56.4 |      |  |      | 77.1 |  |  |  | 81.9 |  |  |  | 78.8 | 
|Allowance for credit losses as a percentage of gross total loans                   |  |                                    | 0.7  |      |  |      | 2.5  |      |  |      | 2.2  |  |  |  | 2.2  |  |  |  | 1.6  | 



|(3) |  | Represents the ratio of total dividends payable on equity shares relating
to each fiscal year, excluding the dividend distribution tax, as a
percentage of net income of that year. Dividends of each year are
typically paid in the following fiscal year. See Dividend
Policy.                                                                                                                                                                                                                            
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|
|(4) |  | Represents the difference between yield on average interest-earning
assets and cost of average interest-bearing liabilities. Yield on average
interest-earning assets is the ratio of interest revenue to average
interest-earning assets. Cost of average interest-bearing liabilities is
the ratio of interest expense to average interest-bearing liabilities,
including current accounts which are non-interest bearing.                                                                                  
|   
|(5) |  | Represents the ratio of net interest revenue to average interest-earning
assets. The difference in net interest margin and spread arises due to the
difference in the amount of average interest-earning assets and average
interest bearing liabilities. If average interest-earning assets exceed
average interest-bearing liabilities, net interest margin is greater than
spread. If average interest-bearing liabilities exceed average
interest-earning assets, net interest margin is less than spread.
|   
|(6) |  | Represents the ratio of non-interest expense to the sum of net interest
revenue and non-interest revenue.                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(7) |  | Represents the ratio of non-interest expense to average total assets.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(8) |  | Tier 1 and Tier 2 capital adequacy ratios are computed in accordance with
the guidelines of the RBI, based on financial statements prepared in
accordance with Indian GAAP. See Information About IndiaSupervision and
Regulation.                                                                                                                                                                                                                                                                         
|   
|(9) |  | Customer assets consist of loans and credit substitutes. Credit
substitutes consist of investments in commercial paper, debentures and
preference shares.                                                                                                                                                                                                                                                                                                                                                     

43



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##### Table of Contents






SELECTED STATISTICAL INFORMATION

The following information should be read together with our financial
statements included in this report as well as Managements Discussion and
Analysis of Financial Condition and Results of Operations. All amounts
presented in this section are in accordance with US GAAP.

Average Balance Sheet

The table below presents the average balances for interest-earning assets
and interest-bearing liabilities together with the related interest revenue and
expense amounts, resulting in the presentation of the average yields and cost
for each period. The average balance is the daily average of balances
outstanding. The average yield on average interest-earning assets is the ratio
of interest revenue to average interest-earning assets. The average cost on
average interest-bearing liabilities is the ratio of interest expense to
average interest-bearing liabilities. The average balances of loans include
non-performing loans and are net of allowance for credit losses. We have not
recalculated tax-exempt income on a tax-equivalent basis.



|                                           |             |     |                                   |          |          |     |          |         |         |  |      |      |  
|------------------------------------------ | ----------- | --- | --------------------------------- | -------- | -------- | --- | -------- | ------- | ------- |  | ---- | ---- | -
|                                           |             |     | Years ended March 31,            
|                                           |             |     |                                  
|                                           |             |     | 2001                             
|                                           |             |     |                                  
|                                           |             |     |                                   |          |          |     | Interest |         | Average
|                                           |             |     | Average                           |          | revenue/ |     | yield/  
|                                           |             |     | Balance                           |          | expense  |     | cost    
|                                           |             |     |                                   |          |          |     |         
|                                           |             |     | (in millions, except percentages)
|Assets:                                    |             |     |                                   |          |          |     |          |         |         |  |      |     
|Interest-earning assets:                   |             |     |                                   |          |          |     |          |         |         |  |      |     
|Cash equivalents and term
placements       |             | Rs. | 20,901.0                          |          |          | Rs. | 1,307.5  |         |         |  | 6.3  | %   
|Investments available for
sale:            |             |     |                                   |          |          |     |          |         |         |  |      |     
|                                           | Tax free(1) |     |                                   | 7,870.4  |          |     |          | 632.4   |         |  |      | 8.0  | %
|                                           | Taxable     |     |                                   | 51,938.7 |          |     |          | 5,723.5 |         |  |      | 11.0 | %
|Investments held to maturity               |             |     |                                  |          |          |     |         |         |         |  |     |     
|Investments held for trading               |             |     |                                  |          |          |     |         |         |         |  |     |     
|Loans, net                                 |             |     | 39,004.4                          |          |          |     | 4,898.1  |         |         |  | 12.6 | %   
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |     
|Total interest-earning
assets              |             | Rs. | 119,714.5                         |          |          | Rs. | 12,561.5 |         |         |  | 10.5 | %   
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |     
|Non-interest-earning assets:               |             |     |                                   |          |          |     |          |         |         |  |      |     
|Cash                                       |             | Rs. | 391.5                             |          |          |     |          |         |         |  |      |     
|Property and equipment                     |             |     | 2,462.4                           |          |          |     |          |         |         |  |      |     
|Other assets                               |             |     | 7,487.6                           |          |          |     |          |         |         |  |      |     
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |     
|Total non-interest earning
assets          |             |     | 10,341.5                          |          |          |     |          |         |         |  |      |     
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |     
|Total assets                               |             | Rs. | 130,056.0                         |          |          | Rs. | 12,561.5 |         |         |  | 9.7  | %   
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |     
|Liabilities:                               |             |     |                                   |          |          |     |          |         |         |  |      |     
|Interest-bearing liabilities:              |             |     |                                   |          |          |     |          |         |         |  |      |     
|Savings account deposits                   |             | Rs. | 14,024.5                          |          |          | Rs. | 434.5    |         |         |  | 3.1  | %   
|Time deposits                              |             |     | 60,523.3                          |          |          |     | 5,956.3  |         |         |  | 9.8  | %   
|Short-term borrowings                      |             |     | 10,472.9                          |          |          |     | 947.1    |         |         |  | 9.0  | %   
|Long-term debt                             |             |     | 1,718.2                           |          |          |     | 235.5    |         |         |  | 13.7 | %   
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |     
|Total interest-bearing
liabilities         |             | Rs. | 86,738.9                          |          |          | Rs. | 7,573.4  |         |         |  | 8.7  | %   
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |     
|Non-interest-bearing
liabilities:          |             |     |                                   |          |          |     |          |         |         |  |      |     
|Non-interest-bearing
deposits(2)           |             | Rs. | 22,563.1                          |          |          |     |          |         |         |  |      |     
|Other liabilities                          |             |     | 10,914.2                          |          |          |     |          |         |         |  |      |     
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |     
|Total non-interest-bearing
liabilities     |             |     | 33,477.3                          |          |          |     |          |         |         |  |      |     
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |     
|Total liabilities                          |             | Rs. | 120,216.2                         |          |          | Rs. | 7,573.4  |         |         |  | 6.3  | %   
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |     
|Shareholders equity                       |             |     | 9,839.8                           |          |          |     |          |         |         |  |      |     
|Total liabilities and
shareholders equity |             | Rs. | 130,056.0                         |          |          | Rs. | 7,573.4  |         |         |  | 5.8  | %   
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |     

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                           |             |     |                                   |          |          |     |          |         |         |  |      |     |  
|------------------------------------------ | ----------- | --- | --------------------------------- | -------- | -------- | --- | -------- | ------- | ------- |  | ---- | --- | -
|                                           |             |     | Years ended March 31,            
|                                           |             |     |                                  
|                                           |             |     | 2002                             
|                                           |             |     |                                  
|                                           |             |     |                                   |          |          |     | Interest |         | Average
|                                           |             |     | Average                           |          | revenue/ |     | yield/  
|                                           |             |     | Balance                           |          | expense  |     | cost    
|                                           |             |     |                                   |          |          |     |         
|                                           |             |     | (in millions, except percentages)
|Assets:                                    |             |     |                                   |          |          |     |          |         |         |  |      |    
|Interest-earning assets:                   |             |     |                                   |          |          |     |          |         |         |  |      |    
|Cash equivalents and term
placements       |             | Rs. | 35,324.8                          |          |          | Rs. | 2,150.9  |         |         |  | 6.1  | %  
|Investments available for
sale:            |             |     |                                   |          |          |     |          |         |         |  |      |    
|                                           | Tax free(1) |     |                                   | 13,859.8 |          |     |          | 1,080.9 |         |  |      | 7.8 | %
|                                           | Taxable     |     |                                   | 48,395.9 |          |     |          | 4,586.5 |         |  |      | 9.5 | %
|Investments held to maturity               |             |     | 24,130.9                          |          |          |     | 2,280.3  |         |         |  | 9.5  | %  
|Investments held for trading               |             |     | 2,402.5                           |          |          |     | 218.7    |         |         |  | 9.1  | %  
|Loans, net                                 |             |     | 59,374.9                          |          |          |     | 6,130.7  |         |         |  | 10.3 | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Total interest-earning
assets              |             | Rs. | 183,488.8                         |          |          | Rs. | 16,448.0 |         |         |  | 9.0  | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Non-interest-earning assets:               |             |     |                                   |          |          |     |          |         |         |  |      |    
|Cash                                       |             |     | 712.4                             |          |          |     |          |         |         |  |      |    
|Property and equipment                     |             |     | 3,799.0                           |          |          |     |          |         |         |  |      |    
|Other assets                               |             |     | 14,013.0                          |          |          |     |          |         |         |  |      |    
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Total non-interest earning
assets          |             |     | 18,524.4                          |          |          |     |          |         |         |  |      |    
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Total assets                               |             | Rs. | 202,013.2                         |          |          | Rs. | 16,448.0 |         |         |  | 8.1  | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Liabilities:                               |             |     |                                   |          |          |     |          |         |         |  |      |    
|Interest-bearing liabilities:              |             |     |                                   |          |          |     |          |         |         |  |      |    
|Savings account deposits                   |             | Rs. | 23,005.5                          |          |          | Rs. | 700.0    |         |         |  | 3.0  | %  
|Time deposits                              |             |     | 94,410.0                          |          |          |     | 8,458.5  |         |         |  | 9.0  | %  
|Short-term borrowings                      |             |     | 18,105.9                          |          |          |     | 1,328.1  |         |         |  | 7.3  | %  
|Long-term debt                             |             |     | 2,159.7                           |          |          |     | 275.9    |         |         |  | 12.8 | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Total interest-bearing
liabilities         |             | Rs. | 137,681.1                         |          |          | Rs. | 10,762.5 |         |         |  | 7.8  | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Non-interest-bearing
liabilities:          |             |     |                                   |          |          |     |          |         |         |  |      |    
|Non-interest-bearing
deposits(2)           |             |     | 25,439.0                          |          |          |     |          |         |         |  |      |    
|Other liabilities                          |             |     | 22,392.3                          |          |          |     |          |         |         |  |      |    
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Total non-interest-bearing
liabilities     |             |     | 47,831.3                          |          |          |     |          |         |         |  |      |    
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Total liabilities                          |             | Rs. | 185,512.4                         |          |          | Rs. | 10,762.5 |         |         |  | 5.8  | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Shareholders equity                       |             |     | 16,500.8                          |          |          |     |          |         |         |  |      |    
|Total liabilities and
shareholders equity |             | Rs. | 202,013.2                         |          |          | Rs. | 10,762.5 |         |         |  | 5.3  | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                           |             |     |                                   |          |          |     |          |         |         |  |      |     |  
|------------------------------------------ | ----------- | --- | --------------------------------- | -------- | -------- | --- | -------- | ------- | ------- |  | ---- | --- | -
|                                           |             |     | Years ended March 31,            
|                                           |             |     |                                  
|                                           |             |     | 2003                             
|                                           |             |     |                                  
|                                           |             |     |                                   |          |          |     | Interest |         | Average
|                                           |             |     | Average                           |          | revenue/ |     | yield/  
|                                           |             |     | balance                           |          | expense  |     | cost    
|                                           |             |     |                                   |          |          |     |         
|                                           |             |     | (in millions, except percentages)
|Assets:                                    |             |     |                                   |          |          |     |          |         |         |  |      |    
|Interest-earning assets:                   |             |     |                                   |          |          |     |          |         |         |  |      |    
|Cash equivalents and term
placements       |             | Rs. | 21,622.7                          |          |          | Rs. | 1,233.4  |         |         |  | 5.7  | %  
|Investments available for
sale:            |             |     |                                   |          |          |     |          |         |         |  |      |    
|                                           | Tax free(1) |     |                                   | 7,779.1  |          |     |          | 494.5   |         |  |      | 6.4 | %
|                                           | Taxable     |     |                                   | 75,867.8 |          |     |          | 5,649.5 |         |  |      | 7.5 | %
|Investments held to maturity               |             |     | 36,775.4                          |          |          |     | 3,763.2  |         |         |  | 10.2 | %  
|Investments held for trading               |             |     | 5,945.8                           |          |          |     | 478.9    |         |         |  | 8.1  | %  
|Loans, net                                 |             |     | 82,461.2                          |          |          |     | 7,805.3  |         |         |  | 9.5  | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Total interest-earning
assets              |             | Rs. | 230,452.0                         |          |          | Rs. | 19,424.8 |         |         |  | 8.4  | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Non-interest-earning assets:               |             |     |                                   |          |          |     |          |         |         |  |      |    
|Cash                                       |             |     | 848.3                             |          |          |     |          |         |         |  |      |    
|Property and equipment                     |             |     | 5,924.5                           |          |          |     |          |         |         |  |      |    
|Other assets                               |             |     | 19,796.0                          |          |          |     |          |         |         |  |      |    
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Total non-interest earning
assets          |             |     | 26,568.8                          |          |          |     |          |         |         |  |      |    
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Total assets                               |             | Rs. | 257,020.8                         |          |          | Rs. | 19,424.8 |         |         |  | 7.6  | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Liabilities:                               |             |     |                                   |          |          |     |          |         |         |  |      |    
|Interest-bearing liabilities:              |             |     |                                   |          |          |     |          |         |         |  |      |    
|Savings account deposits                   |             |     | 36,419.7                          |          |          |     | 1,125.1  |         |         |  | 3.1  | %  
|Time deposits                              |             |     | 121,535.7                         |          |          |     | 9,506.2  |         |         |  | 7.8  | %  
|Short-term borrowings                      |             |     | 15,362.9                          |          |          |     | 973.1    |         |         |  | 6.3  | %  
|Long-term debt                             |             |     | 2,280.3                           |          |          |     | 297.6    |         |         |  | 13.1 | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Total interest-bearing
liabilities         |             | Rs. | 175,598.6                         |          |          | Rs. | 11,902.0 |         |         |  | 6.8  | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Non-interest-bearing
liabilities:          |             |     |                                   |          |          |     |          |         |         |  |      |    
|Non-interest-bearing
deposits(2)           |             |     | 28,892.3                          |          |          |     |          |         |         |  |      |    
|Other liabilities                          |             |     | 28,442.9                          |          |          |     |          |         |         |  |      |    
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Total non-interest-bearing
liabilities     |             |     | 57,335.3                          |          |          |     |          |         |         |  |      |    
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Total liabilities                          |             | Rs. | 232,933.8                         |          |          | Rs. | 11,902.0 |         |         |  | 5.1  | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    
|Shareholders equity                       |             |     | 24,087.0                          |          |          |     |          |         |         |  |      |    
|Total liabilities and
shareholders equity |             | Rs. | 257,020.8                         |          |          | Rs. | 11,902.0 |         |         |  | 4.6  | %  
|                                           |             |     |                                   |          |          |     |          |         |         |  |      |    



|(1) |  | Yield on tax free securities are not on a tax equivalent basis.       
|--- |  | ----------------------------------------------------------------------
|   
|(2) |  | Includes current accounts and cash floats from transactional services.

44



---



##### Table of Contents



Analysis of Changes in Interest Revenue and Interest Expense Volume and Rate Analysis

The following table sets forth, for the periods indicated, the allocation
of the changes in our interest revenue and interest expense between average
volume and changes in average rates.

|                                   |          |     |                               |          |                               |     |              |        |        |     |          |        |              |     |         |         |        |     |         |         |   |     |          |          |  
|---------------------------------- | -------- | --- | ----------------------------- | -------- | ----------------------------- | --- | ------------ | ------ | ------ | --- | -------- | ------ | ------------ | --- | ------- | ------- | ------ | --- | ------- | ------- | - | --- | -------- | -------- | -
|                                   |          |     | Fiscal 2002 vs. Fiscal 2001   |          | Fiscal 2003 vs. Fiscal 2002  
|                                   |          |     | Increase (decrease)(1) due to |          | Increase (decrease)(1) due to
|                                   |          |     |                               |          |                              
|                                   |          |     |                               |          |                               |     | Change       |        |        |     |          |        |              |     |         |         | Change |     |         |         |  
|                                   |          |     |                               |          |                               |     | in           |        |        |     |          |        |              |     |         |         | In     |     |         |         |  
|                                   |          |     | Net                           |          | average                       |     | Change in    |        | Net    |     | Average  |        | Change in   
|                                   |          |     | Change                        |          | volume                        |     | Average rate |        | change |     | Volume   |        | Average rate
|                                   |          |     |                               |          |                               |     |              |        |        |     |          |        |             
|                                   |          |     | (in millions)                
|Interest revenue:                  |          |     |                               |          |                               |     |              |        |        |     |          |        |              |     |         |         |        |     |         |         |   |     |          |         
|Cash and cash equivalents          |          | Rs. | 843.4                         |          |                               | Rs. | 902.3        |        |        | Rs. | (58.9    | )      |              | Rs. | (917.4  | )       |        | Rs. | (834.3  | )       |   | Rs. | (83.1    | )       
|Investments available for sale:    |          |     |                               |          |                               |     |              |        |        |     |          |        |              |     |         |         |        |     |         |         |   |     |          |         
|                                   | Tax free |     |                               | 448.4    |                               |     |              | 481.2  |        |     |          | (32.8  | )            |     |         | (586.4  | )      |     |         | (474.2  | ) |     |          | (112.2   | )
|                                   | Taxable  |     |                               | (1,136.9 | )                             |     |              | (390.4 | )      |     |          | (746.5 | )            |     |         | 1,063.0 |        |     |         | 2,603.5 |   |     |          | (1,540.5 | )
|Investments held to maturity       |          |     | 2,280.3                       |          |                               |     | 2,280.3      |        |        |     |         |        |              |     | 1,482.8 |         |        |     | 1,194.9 |         |   |     | 287.9    |         
|Investments held for trading       |          |     | 218.7                         |          |                               |     | 218.7        |        |        |     |         |        |              |     | 260.2   |         |        |     | 322.5   |         |   |     | (62.3    | )       
|Loans, net                         |          |     | 1,232.6                       |          |                               |     | 2,558.1      |        |        |     | (1,325.5 | )      |              |     | 1,674.7 |         |        |     | 2,383.8 |         |   |     | (709.1)  |         
|                                   |          |     |                               |          |                               |     |              |        |        |     |          |        |              |     |         |         |        |     |         |         |   |     |          |         
|Total interest-earning assets      |          | Rs. | 3,886.5                       |          |                               | Rs. | 6,050.2      |        |        | Rs. | (2,163.7 | )      |              | Rs. | 2,976.9 |         |        | Rs. | 5,196.2 |         |   | Rs. | (2,219.3 | )       
|                                   |          |     |                               |          |                               |     |              |        |        |     |          |        |              |     |         |         |        |     |         |         |   |     |          |         
|Interest expense:                  |          |     |                               |          |                               |     |              |        |        |     |          |        |              |     |         |         |        |     |         |         |   |     |          |         
|Savings account deposits           |          | Rs. | 265.5                         |          |                               | Rs. | 278.2        |        |        | Rs. | (12.7    | )      |              | Rs. | 425.2   |         |        | Rs. | 408.2   |         |   | Rs. | 17.0     |         
|Time deposits                      |          |     | 2,502.2                       |          |                               |     | 3,334.9      |        |        |     | (832.7   | )      |              |     | 1,047.7 |         |        |     | 2,430.3 |         |   |     | (1,382.6 | )       
|Short-term borrowings              |          |     | 381.0                         |          |                               |     | 690.2        |        |        |     | (309.2   | )      |              |     | (355.1  | )       |        |     | (201.2  | )       |   |     | (153.9   | )       
|Long-term debt                     |          |     | 40.4                          |          |                               |     | 60.5         |        |        |     | (20.1    | )      |              |     | 21.8    |         |        |     | 15.4    |         |   |     | 6.4      |         
|                                   |          |     |                               |          |                               |     |              |        |        |     |          |        |              |     |         |         |        |     |         |         |   |     |          |         
|Total interest-bearing liabilities |          | Rs. | 3,189.1                       |          |                               | Rs. | 4,363.8      |        |        | Rs. | (1,174.7 | )      |              |     | 1,139.6 |         |        |     | 2,652.7 |         |   |     | (1,513.1 | )       
|                                   |          |     |                               |          |                               |     |              |        |        |     |          |        |              |     |         |         |        |     |         |         |   |     |          |         
|Net interest revenue               |          | Rs. | 697.4                         |          |                               | Rs. | 1,686.4      |        |        | Rs. | (989.0   | )      |              | Rs. | 1,837.3 |         |        | Rs. | 2,543.6 |         |   | Rs. | (706.2   | )       
|                                   |          |     |                               |          |                               |     |              |        |        |     |          |        |              |     |         |         |        |     |         |         |   |     |          |         



|(1) |  | The changes in net interest revenue between periods have been reflected
as attributed either to volume or rate changes. For purposes of this
table, changes which are due to both volume and rate have been allocated
solely to changes in rate.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Yields, Spreads and Margins

The following table sets forth, for the periods indicated, the yields,
spreads and interest margins on our interest-earning assets.

|                                                                                         |  |                                   |           |      |  |      |           |   |  |     |           |  
|---------------------------------------------------------------------------------------- |  | --------------------------------- | --------- | ---- |  | ---- | --------- | - |  | --- | --------- | -
|                                                                                         |  | Years ended March 31,            
|                                                                                         |  |                                  
|                                                                                         |  | 2001                              |           | 2002 |  | 2003
|                                                                                         |  |                                   |           |      |  |     
|                                                                                         |  | (in millions, except percentages)
|Interest revenue                                                                         |  | Rs.                               | 12,561.5  |      |  | Rs.  | 16,448.0  |   |  | Rs. | 19,424.8  |  
|Average interest-earning assets                                                          |  |                                   | 119,714.5 |      |  |      | 183,488.8 |   |  |     | 230,452.0 |  
|Interest expense                                                                         |  |                                   | 7,573.4   |      |  |      | 10,762.5  |   |  |     | 11,902.0  |  
|Average interest-bearing liabilities(1)                                                  |  |                                   | 86,738.9  |      |  |      | 137,681.1 |   |  |     | 175,598.5 |  
|Average total assets                                                                     |  |                                   | 130,056.0 |      |  |      | 202,013.2 |   |  |     | 257,020.8 |  
|Average interest-earning assets as a percentage of average total
assets                  |  |                                   | 92.0      | %    |  |      | 90.8      | % |  |     | 89.7      | %
|Average interest-bearing liabilities as a percentage of average total
assets             |  |                                   | 66.7      | %    |  |      | 68.2      | % |  |     | 68.3      | %
|Average interest-earning assets as a percentage of average interest-
bearing liabilities |  |                                   | 138.0     | %    |  |      | 133.3     | % |  |     | 131.2     | %
|Yield                                                                                    |  |                                   | 10.5      | %    |  |      | 9.0       | % |  |     | 8.4       | %
|Cost of funds(2)                                                                         |  |                                   | 6.9       | %    |  |      | 5.8       | % |  |     | 5.1       | %
|Spread(3)                                                                                |  |                                   | 3.6       | %    |  |      | 2.4       | % |  |     | 2.6       | %
|Net interest margin(4)                                                                   |  |                                   | 4.2       | %    |  |      | 3.1       | % |  |     | 3.3       | %



|(1) |  | For purposes of this table average interest-bearing liabilities include
current accounts.
|--- |  | -----------------------------------------------------------------------------------------
|   
|(2) |  | Excludes equity.                                                                         

45



---



##### Table of Contents





|(3) |  | Spread is the difference between yield on average interest-earning assets
and cost of average interest-bearing liabilities. Yield is the ratio of
interest revenue to average interest-earning assets. Cost of funds is
the ratio of interest expense to average interest-bearing liabilities
(including checking account balances which currently carry a zero interest
rate).                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(4) |  | Net interest margin is the ratio of net interest revenue to average
interest-earning assets. The difference in net interest margin and spread
arises due to the difference in amount of average interest-earning assets
and average interest-bearing liabilities. If average interest-earning
assets exceed average interest-bearing liabilities, net interest margin is
greater than the spread. If average interest-bearing liabilities exceed
average interest-earning assets, net interest margin is less than the
spread.

Returns on Equity and Assets

The following table presents selected financial ratios for the periods
indicated.

|                                                                     |  |                                   |           |      |  |      |           |   |  |     |           |  
|-------------------------------------------------------------------- |  | --------------------------------- | --------- | ---- |  | ---- | --------- | - |  | --- | --------- | -
|                                                                     |  | Years ended March 31,            
|                                                                     |  |                                  
|                                                                     |  | 2001                              |           | 2002 |  | 2003
|                                                                     |  |                                   |           |      |  |     
|                                                                     |  | (in millions, except percentages)
|Net income                                                           |  | Rs.                               | 2,140.6   |      |  | Rs.  | 2,958.4   |   |  | Rs. | 3,513.8   |  
|Average total assets                                                 |  |                                   | 130,056.0 |      |  |      | 202,013.2 |   |  |     | 257,020.8 |  
|Average shareholders equity                                         |  |                                   | 9,839.8   |      |  |      | 16,500.8  |   |  |     | 24,087.0  |  
|Net income as a percentage of average total assets                   |  |                                   | 1.6       | %    |  |      | 1.5       | % |  |     | 1.4       | %
|Net income as a percentage of average shareholders equity           |  |                                   | 21.8      | %    |  |      | 17.9      | % |  |     | 14.6      | %
|Average shareholders equity as a percentage of average total
assets |  |                                   | 7.6       | %    |  |      | 8.2       | % |  |     | 9.4       | %

The following table sets forth, for the periods indicated, information
related to our investments available for sale.



|                      |  |               |          |            |  |            |       |       |  |           |       |            |  |            |          |       |  |       |          |       |  |     |         |  |  |     |       |  |  |     |          | 
|--------------------- |  | ------------- | -------- | ---------- |  | ---------- | ----- | ----- |  | --------- | ----- | ---------- |  | ---------- | -------- | ----- |  | ----- | -------- | ----- |  | --- | ------- |  |  | --- | ----- |  |  | --- | -------- | 
|                      |  | At March 31, 
|                      |  |              
|                      |  | 2001          |          | 2002      
|                      |  |               |          |           
|                      |  |               |          |            |  | Gross      |       | Gross |  |           |       |            |  |            |          |       |  | Gross |          | Gross |  |     |         | 
|                      |  | Amortized     |          | unrealized |  | unrealized |       | Fair  |  | Amortized |       | unrealized |  | unrealized |          | Fair 
|                      |  | cost          |          | gain       |  | loss       |       | value |  | cost      |       | gain       |  | loss       |          | value
|                      |  |               |          |            |  |            |       |       |  |           |       |            |  |            |          |      
|                      |  | (in millions)
|Government
securities |  | Rs.           | 32,502.1 |            |  | Rs.        | 196.8 |       |  | Rs.       | 68.2  |            |  | Rs.        | 32,630.7 |       |  | Rs.   | 34,322.1 |       |  | Rs. | 752.8   |  |  | Rs. | 4.7   |  |  | Rs. | 35,070.2 | 
|Other debt
securities |  |               | 36,358.3 |            |  |            | 332.0 |       |  |           | 479.2 |            |  |            | 36,211.1 |       |  |       | 33,752.7 |       |  |     | 505.9   |  |  |     | 141.7 |  |  |     | 34,116.9 | 
|                      |  |               |          |            |  |            |       |       |  |           |       |            |  |            |          |       |  |       |          |       |  |     |         |  |  |     |       |  |  |     |          | 
|Total debt
securities |  |               | 68,860.4 |            |  |            | 528.8 |       |  |           | 547.4 |            |  |            | 68,841.8 |       |  |       | 68,074.8 |       |  |     | 1,258.7 |  |  |     | 146.4 |  |  |     | 69,187.1 | 
|Non-debt
securities   |  |               | 1,179.4  |            |  |            |      |       |  |           | 92.3  |            |  |            | 1,087.1  |       |  |       | 11,051.4 |       |  |     | 151.3   |  |  |     | 69.2  |  |  |     | 11,133.5 | 
|                      |  |               |          |            |  |            |       |       |  |           |       |            |  |            |          |       |  |       |          |       |  |     |         |  |  |     |       |  |  |     |          | 
|Total                 |  | Rs.           | 70,039.8 |            |  | Rs.        | 528.8 |       |  | Rs.       | 639.7 |            |  | Rs.        | 69,928.9 |       |  | Rs.   | 79,126.2 |       |  | Rs. | 1,410.0 |  |  | Rs. | 215.6 |  |  | Rs. | 80,320.6 | 
|                      |  |               |          |            |  |            |       |       |  |           |       |            |  |            |          |       |  |       |          |       |  |     |         |  |  |     |       |  |  |     |          | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                      |  |               |          |            |  |            |         |       |  |     |       |  |  |     |          | 
|--------------------- |  | ------------- | -------- | ---------- |  | ---------- | ------- | ----- |  | --- | ----- |  |  | --- | -------- | 
|                      |  | At March 31, 
|                      |  |              
|                      |  | 2003         
|                      |  |              
|                      |  |               |          |            |  | Gross      |         | Gross |  |     |       | 
|                      |  | Amortized     |          | unrealized |  | Unrealized |         | Fair 
|                      |  | cost          |          | gain       |  | Loss       |         | Value
|                      |  |               |          |            |  |            |         |      
|                      |  | (in millions)
|Government
securities |  | Rs.           | 45,149.6 |            |  | Rs.        | 784.8   |       |  | Rs. | 19.1  |  |  | Rs. | 45,915.3 | 
|Other debt
securities |  |               | 29,357.8 |            |  |            | 1,802.3 |       |  |     | 186.7 |  |  |     | 30,973.4 | 
|                      |  |               |          |            |  |            |         |       |  |     |       |  |  |     |          | 
|Total debt
securities |  |               | 74,507.4 |            |  |            | 2,587.1 |       |  |     | 205.8 |  |  |     | 76,888.7 | 
|Non-debt
securities   |  |               | 21,649.8 |            |  |            | 493.0   |       |  |     | 102.3 |  |  |     | 22,040.5 | 
|                      |  |               |          |            |  |            |         |       |  |     |       |  |  |     |          | 
|Total                 |  | Rs.           | 96,157.2 |            |  | Rs.        | 3,080.1 |       |  | Rs. | 308.1 |  |  | Rs. | 98,929.2 | 
|                      |  |               |          |            |  |            |         |       |  |     |       |  |  |     |          | 

The following table sets forth, for the periods indicated, information
related to our investments held to maturity.



|                      |  |               |   |            |  |            |   |           |  |       |   |            |  |            |   |           |  |       |          |       |  |     |         |  |  |     |       |  |  |     |          | 
|--------------------- |  | ------------- | - | ---------- |  | ---------- | - | --------- |  | ----- | - | ---------- |  | ---------- | - | --------- |  | ----- | -------- | ----- |  | --- | ------- |  |  | --- | ----- |  |  | --- | -------- | 
|                      |  | At March 31, 
|                      |  |              
|                      |  | 2001          |   | 2002      
|                      |  |               |   |           
|                      |  |               |   |            |  | Gross      |   | Gross     |  |       |   |            |  |            |   |           |  | Gross |          | Gross |  |     |         | 
|                      |  | Fair          |   | unrealized |  | unrealized |   | Amortized |  | Fair  |   | unrealized |  | unrealized |   | Amortized
|                      |  | value         |   | gain       |  | loss       |   | cost      |  | value |   | gain       |  | loss       |   | cost     
|                      |  |               |   |            |  |            |   |           |  |       |   |            |  |            |   |          
|                      |  | (in millions)
|Government
securities |  | Rs.           |  |            |  | Rs.        |  |           |  | Rs.   |  |            |  | Rs.        |  |           |  | Rs.   | 14,597.3 |       |  | Rs. | 1,209.8 |  |  | Rs. |      |  |  | Rs. | 13,387.5 | 
|Other debt
securities |  |               |  |            |  |            |  |           |  |       |  |            |  |            |  |           |  |       | 22,292.0 |       |  |     | 460.1   |  |  |     | 210.5 |  |  |     | 22,042.4 | 
|                      |  |               |   |            |  |            |   |           |  |       |   |            |  |            |   |           |  |       |          |       |  |     |         |  |  |     |       |  |  |     |          | 
|Total debt
securities |  |               |  |            |  |            |  |           |  |       |  |            |  |            |  |           |  |       | 36,889.3 |       |  |     | 1,669.9 |  |  |     | 210.5 |  |  |     | 35,429.9 | 
|Non-debt
securities   |  |               |  |            |  |            |  |           |  |       |  |            |  |            |  |           |  |       |         |       |  |     |        |  |  |     |      |  |  |     |         | 
|Total                 |  | Rs.           |  |            |  | Rs.        |  |           |  | Rs.   |  |            |  | Rs.        |  |           |  | Rs.   | 36,889.3 |       |  | Rs. | 1,669.9 |  |  | Rs. | 210.5 |  |  | Rs. | 35,429.9 | 
|                      |  |               |   |            |  |            |   |           |  |       |   |            |  |            |   |           |  |       |          |       |  |     |         |  |  |     |       |  |  |     |          | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                      |  |               |          |            |  |            |         |           |  |     |      |  |  |     |          | 
|--------------------- |  | ------------- | -------- | ---------- |  | ---------- | ------- | --------- |  | --- | ---- |  |  | --- | -------- | 
|                      |  | At March 31, 
|                      |  |              
|                      |  | 2003         
|                      |  |              
|                      |  |               |          |            |  | Gross      |         | Gross     |  |     |      | 
|                      |  | Fair          |          | unrealized |  | Unrealized |         | Amortized
|                      |  | Value         |          | gain       |  | Loss       |         | Cost     
|                      |  |               |          |            |  |            |         |          
|                      |  | (in millions)
|Government
securities |  | Rs.           | 20,392.6 |            |  | Rs.        | 1,145.5 |           |  | Rs. | 7.3  |  |  |     | 19,254.4 | 
|Other debt
securities |  |               | 19,715.7 |            |  |            | 580.9   |           |  |     | 37.5 |  |  |     | 19,172.3 | 
|                      |  |               |          |            |  |            |         |           |  |     |      |  |  |     |          | 
|Total debt
securities |  |               | 40,108.3 |            |  |            | 1,726.4 |           |  |     | 44.8 |  |  |     | 38,426.7 | 
|Non-debt
securities   |  |               |         |            |  |            |        |           |  |     |     |  |  |     |         | 
|Total                 |  | Rs.           | 40,108.3 |            |  | Rs.        | 1,726.4 |           |  | Rs. | 44.8 |  |  | Rs. | 38,426.7 | 
|                      |  |               |          |            |  |            |         |           |  |     |      |  |  |     |          | 

46



---



##### Table of Contents



The following table sets forth,
for the periods indicated, an analysis of
the residual maturity profile of our investments in government and corporate debt
securities classified as available for sale securities and their yields.

|                      |  |                                   |          |                   |  |                   |      |       |  |        |          |       |  |        |      |       |  |     |          |  |  |  |      |   |  |               |         |  |  |  |       |  
|--------------------- |  | --------------------------------- | -------- | ----------------- |  | ----------------- | ---- | ----- |  | ------ | -------- | ----- |  | ------ | ---- | ----- |  | --- | -------- |  |  |  | ---- | - |  | ------------- | ------- |  |  |  | ----- | -
|                      |  | At March 31, 2003                
|                      |  |                                  
|                      |  |                                   |          |                   |  |                   |      |       |  |        |          |       |  |        |      |       |  |     |          |  |  |  |      |   |  | More than ten
|                      |  | Up to one year                    |          | One to five years |  | Five to ten years |      | years
|                      |  |                                   |          |                   |  |                   |      |      
|                      |  | Amount                            |          | Yield             |  | Amount            |      | Yield |  | Amount |          | Yield |  | Amount |      | Yield
|                      |  |                                   |          |                   |  |                   |      |       |  |        |          |       |  |        |      |      
|                      |  | (in millions, except percentages)
|Government securities |  | Rs.                               | 11,861.1 |                   |  |                   | 8.09 | %     |  | Rs.    | 15,734.5 |       |  |        | 9.43 | %     |  | Rs. | 17,234.2 |  |  |  | 7.50 | % |  | Rs.           | 1,085.6 |  |  |  | 6.42  | %
|Other debt securities |  |                                   | 11,822.0 |                   |  |                   | 8.39 | %     |  |        | 11,149.4 |       |  |        | 8.33 | %     |  |     | 7,630.5  |  |  |  | 8.03 | % |  |               | 421.6   |  |  |  | 14.91 | %
|                      |  |                                   |          |                   |  |                   |      |       |  |        |          |       |  |        |      |       |  |     |          |  |  |  |      |   |  |               |         |  |  |  |       |  
|Total debt securities |  |                                   | 23,683.1 |                   |  |                   | 8.24 | %     |  |        | 26,883.9 |       |  |        | 8.98 | %     |  |     | 24,864.7 |  |  |  | 7.66 | % |  |               | 1,507.2 |  |  |  | 8.80  | %
|                      |  |                                   |          |                   |  |                   |      |       |  |        |          |       |  |        |      |       |  |     |          |  |  |  |      |   |  |               |         |  |  |  |       |  
|Total amortized cost  |  |                                   | 23,431.0 |                   |  |                   |      |       |  |        | 25,932.0 |       |  |        |      |       |  |     | 23,650.6 |  |  |  |      |   |  |               | 1,493.9 |  |  |  |       |  
|Total market value    |  | Rs.                               | 23,683.1 |                   |  |                   |      |       |  | Rs.    | 26,883.9 |       |  |        |      |       |  | Rs. | 24,864.7 |  |  |  |      |   |  | Rs.           | 1,507.2 |  |  |  |       |  
|                      |  |                                   |          |                   |  |                   |      |       |  |        |          |       |  |        |      |       |  |     |          |  |  |  |      |   |  |               |         |  |  |  |       |  

Funding

Our funding operations are designed to ensure both stability and cost of
funding and effective liquidity management. The primary source of funding is
deposits raised from retail customers, which were 69.5% of total deposits at
March 31, 2003. Wholesale banking deposits represented 30.5% of total deposits
at March 31, 2003.

Total Deposits

The following table sets forth, for the periods indicated, our outstanding
deposits and the percentage composition by each category of deposits. The
average cost (interest expense divided by average of daily balances) of savings
deposits was 3.1% in fiscal 2001, 3.0% in fiscal 2002 and 3.1% in fiscal 2003.
The average costs of time deposits was 9.8% in fiscal 2001, 9.0% in fiscal 2002
and 7.8% in fiscal 2003.

|                                     |  |                                   |           |            |  |        |       |            |  |        |           |            |  |  |       |   |  |     |           |  |  |  |       |  
|------------------------------------ |  | --------------------------------- | --------- | ---------- |  | ------ | ----- | ---------- |  | ------ | --------- | ---------- |  |  | ----- | - |  | --- | --------- |  |  |  | ----- | -
|                                     |  | Years ended March 31,            
|                                     |  |                                  
|                                     |  | 2001                              |           | 2002       |  | 2003  
|                                     |  |                                   |           |            |  |       
|                                     |  | Amount                            |           | % of total |  | Amount |       | % of total |  | Amount |           | % of total
|                                     |  |                                   |           |            |  |        |       |            |  |        |           |           
|                                     |  | (in millions, except percentages)
|Non-interest-bearing demand deposits |  | Rs.                               | 28,559.8  |            |  |        | 24.5  | %          |  | Rs.    | 42,201.8  |            |  |  | 23.9  | % |  | Rs. | 49,509.6  |  |  |  | 22.1  | %
|Savings deposits                     |  |                                   | 19,030.0  |            |  |        | 16.3  |            |  |        | 29,574.5  |            |  |  | 16.8  |   |  |     | 46,631.4  |  |  |  | 20.8  | %
|Time deposits                        |  |                                   | 68,991.3  |            |  |        | 59.2  |            |  |        | 104,761.8 |            |  |  | 59.3  |   |  |     | 127,619.0 |  |  |  | 57.1  | %
|                                     |  |                                   |           |            |  |        |       |            |  |        |           |            |  |  |       |   |  |     |           |  |  |  |       |  
|Total                                |  | Rs.                               | 116,581.1 |            |  |        | 100.0 | %          |  | Rs.    | 176,538.1 |            |  |  | 100.0 | % |  | Rs. | 223,760.0 |  |  |  | 100.0 | %
|                                     |  |                                   |           |            |  |        |       |            |  |        |           |            |  |  |       |   |  |     |           |  |  |  |       |  

As of March 31, 2003, time deposits in excess of Rs. 4.5 million
(approximately US$100,000) have a balance to maturity profile as follows:

|                                                                |  |                   |          |               |  |               |         |        |  |      |         |         |  |             |         |  |  |     |         | 
|--------------------------------------------------------------- |  | ----------------- | -------- | ------------- |  | ------------- | ------- | ------ |  | ---- | ------- | ------- |  | ----------- | ------- |  |  | --- | ------- | 
|                                                                |  | At March 31, 2003
|                                                                |  |                  
|                                                                |  | Up to 3           |          |               |  |               |         |        |  |      |         | 9 to 12 |  | More than 1
|                                                                |  | months            |          | 3 to 6 months |  | 6 to 9 months |         | months |  | Year
|                                                                |  |                   |          |               |  |               |         |        |  |     
|                                                                |  | (In millions)    
|Balance to maturity for deposits
exceeding Rs. 4.5 million each |  | Rs.               | 28,338.5 |               |  | Rs.           | 8,244.4 |        |  | Rs.  | 4,109.6 |         |  | Rs.         | 4,465.8 |  |  | Rs. | 6,918.8 | 

Short-term Borrowings

The following table sets forth for the periods indicated, information
related to our short-term borrowings, which are comprised primarily of
money-market borrowings, excluding deposits.

|                                           |  |                                   |          |      |  |      |          |   |  |     |          |  
|------------------------------------------ |  | --------------------------------- | -------- | ---- |  | ---- | -------- | - |  | --- | -------- | -
|                                           |  | Year ended March 31,             
|                                           |  |                                  
|                                           |  | 2001                              |          | 2002 |  | 2003
|                                           |  |                                   |          |      |  |     
|                                           |  | (in millions, except percentages)
|Period end balance                         |  | Rs.                               | 16,671.2 |      |  | Rs.  | 21,600.3 |   |  | Rs. | 21,579.6 |  
|Average balance during the period(1)       |  |                                   | 10,472.9 |      |  |      | 18,105.9 |   |  |     | 15,362.9 |  
|Maximum month-end balance                  |  |                                   | 21,593.2 |      |  |      | 29,857.9 |   |  |     | 32,221.7 |  
|Average interest rate during the period(2) |  |                                   | 9.0      | %    |  |      | 7.4      | % |  |     | 6.3      | %
|Average interest at period end(3)          |  |                                   | 12.1     | %    |  |      | 6.5      | % |  |     | 6.9      | %



|    |  |                                                                                                                             
|--- |  | ----------------------------------------------------------------------------------------------------------------------------
|(1) |  | Average of daily balances outstanding.                                                                                      
|   
|(2) |  | Represents the ratio of interest expense on short-term borrowings to the
average of daily balances of short-term borrowings.
|   
|(3) |  | Represents the weighted average rate of short-term borrowings outstanding
at March 31, 2001, 2002 and 2003.                 

47



---



##### Table of Contents



Subordinated Debt

We also obtain funds from the issuance of unsecured non-convertible
subordinated debt securities, which qualify as Tier 2 risk-based capital under
the RBIs guidelines for assessing capital adequacy. This subordinated debt was
privately placed in three tranches. The debt is repayable on various dates
between July 2004 and September 2006 with coupon rates ranging from 11.0% to
13.75%. Prepayment is not allowed. See Note 16 to our financial statements. For
a discussion of our capital adequacy ratios, see Managements Discussion and
Analysis of Financial Condition and Results of OperationsCapital.

Asset Liability Gap and Price Sensitivity Data

The following table sets forth, for the periods indicated, our
asset-liability gap position.



|                                               |  |                          |          |            |  |      |          |        |  |        |          |      |  |            |          |   |  |       |           |  
|---------------------------------------------- |  | ------------------------ | -------- | ---------- |  | ---- | -------- | ------ |  | ------ | -------- | ---- |  | ---------- | -------- | - |  | ----- | --------- | -
|                                               |  | At March 31, 2003(1),(2)
|                                               |  |                         
|                                               |  |                          |          |            |  |      |          |        |  |        |          |      |  |            |          |   |  | Total
|                                               |  |                          |          |            |  |      |          |        |  | 91-180 |          | 6-12 |  | within one
|                                               |  | 0-28 days                |          | 29-90 days |  | days |          | months |  | year  
|                                               |  |                          |          |            |  |      |          |        |  |       
|                                               |  | (in millions)           
|Cash and cash
equivalents(3)                   |  | Rs.                      | 15,957.7 |            |  | Rs.  | 862.7    |        |  | Rs.    | 324.4    |      |  | Rs.        | 987.1    |   |  | Rs.   | 18,131.9  |  
|Term placements                                |  |                          |          |            |  |      | 2,274.7  |        |  |        | 2,257.0  |      |  |            | 308.9    |   |  |       | 4,840.6   |  
|Investments held for
trading                   |  |                          |          |            |  |      | 3,976.1  |        |  |        |          |      |  |            |          |   |  |       | 3,976.1   |  
|Investments available
for sale                 |  |                          | 102.9    |            |  |      | 473.9    |        |  |        | 4,872.0  |      |  |            | 18,234.3 |   |  |       | 23,683.1  |  
|Investments held to
maturity                   |  |                          | 3,581.9  |            |  |      | 4,912.5  |        |  |        | 1,421.6  |      |  |            | 15,352.5 |   |  |       | 25,268.5  |  
|Loans, net(4)                                  |  |                          | 35,368.1 |            |  |      | 33,799.5 |        |  |        | 10,964.2 |      |  |            | 8,471.6  |   |  |       | 88,603.4  |  
|Accrued interest
Receivable                    |  |                          | 6,283.8  |            |  |      |          |        |  |        |          |      |  |            |          |   |  |       | 6,283.8   |  
|Other assets                                   |  |                          | 8,864.3  |            |  |      |          |        |  |        |          |      |  |            |          |   |  |       | 8,864.3   |  
|                                               |  |                          |          |            |  |      |          |        |  |        |          |      |  |            |          |   |  |       |           |  
|Total financial
Assets                         |  |                          | 70,158.7 |            |  |      | 46,299.4 |        |  |        | 19,839.2 |      |  |            | 43,354.4 |   |  |       | 179,651.7 |  
|                                               |  |                          |          |            |  |      |          |        |  |        |          |      |  |            |          |   |  |       |           |  
|Deposits(5),(6)                                |  |                          | 31,323.8 |            |  |      | 11,281.2 |        |  |        | 11,686.4 |      |  |            | 34,922.4 |   |  |       | 89,213.8  |  
|Securities sold under
repurchase
agreements    |  |                          | 4,600.0  |            |  |      |          |        |  |        |          |      |  |            |          |   |  |       | 4,600.0   |  
|Debt(7)                                        |  |                          | 7,859.9  |            |  |      | 4,975.0  |        |  |        | 8,626.9  |      |  |            | 55.2     |   |  |       | 21,517.0  |  
|Other liabilities                              |  |                          | 18,063.3 |            |  |      | 8,711.4  |        |  |        |          |      |  |            |          |   |  |       | 26,774.7  |  
|Total financial
Liabilities                    |  |                          | 61,847.0 |            |  |      | 24,967.6 |        |  |        | 20,313.3 |      |  |            | 34,977.6 |   |  |       | 142,105.5 |  
|                                               |  |                          |          |            |  |      |          |        |  |        |          |      |  |            |          |   |  |       |           |  
|Asset/liability gap                            |  |                          | 8,311.7  |            |  |      | 21,331.8 |        |  |        | (474.1   | )    |  |            | 8,376.8  |   |  |       | 37,546.2  |  
|                                               |  |                          |          |            |  |      |          |        |  |        |          |      |  |            |          |   |  |       |           |  
|Cumulative gap                                 |  |                          | 8,311.7  |            |  |      | 29,643.5 |        |  |        | 29,169.4 |      |  |            | 37,546.2 |   |  |       | 37,546.2  |  
|Cumulative gap as a
percentage of total
assets |  |                          | 11.8     | %          |  |      | 64.0     | %      |  |        | 147.0    | %    |  |            | 86.6     | % |  |       | 20.9      | %

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                               |  |                          |           |              |  |           |           |       |  |  |          |   |  |     |           |  
|---------------------------------------------- |  | ------------------------ | --------- | ------------ |  | --------- | --------- | ----- |  |  | -------- | - |  | --- | --------- | -
|                                               |  | At March 31, 2003(1),(2)
|                                               |  |                         
|                                               |  | Greater                  |           |              |  |           |           |       |  |  |          |   |  |    
|                                               |  | than one                 |           | Greater than |  |           |           |       |  |  |          |  
|                                               |  | year and                 |           | three years  |  | Greater   |           |       |  | 
|                                               |  | up to three              |           | and up to    |  | than five |           |       |  | 
|                                               |  | years                    |           | five years   |  | years     |           | Total
|                                               |  |                          |           |              |  |           |           |      
|                                               |  | (in millions)           
|Cash and cash
equivalents(3)                   |  | Rs.                      | 5,703.3   |              |  | Rs.       | 109.7     |       |  |  |          |   |  | Rs. | 23,944.9  |  
|Term placements                                |  |                          | 2,486.0   |              |  |           | 176.6     |       |  |  | 44.2     |   |  |     | 7,747.4   |  
|Investments held for
trading                   |  |                          |           |              |  |           |           |       |  |  |          |   |  |     | 3,976.1   |  
|Investments available
for sale                 |  |                          | 12,700.7  |              |  |           | 14,183.2  |       |  |  | 48,362.2 |   |  |     | 98,929.2  |  
|Investments held to
maturity                   |  |                          | 2,912.6   |              |  |           | 7,480.8   |       |  |  | 2,764.9  |   |  |     | 38,426.7  |  
|Loans, net(4)                                  |  |                          | 22,964.9  |              |  |           | 3,392.0   |       |  |  | 3,339.6  |   |  |     | 118,299.9 |  
|Accrued interest
Receivable                    |  |                          |           |              |  |           |           |       |  |  |          |   |  |     |           |  
|Other assets                                   |  |                          |           |              |  |           |           |       |  |  | 90.9     |   |  |     | 8,955.2   |  
|Total financial
Assets                         |  |                          | 46,767.5  |              |  |           | 25,342.3  |       |  |  | 54,601.8 |   |  |     | 306,363.3 |  
|                                               |  |                          |           |              |  |           |           |       |  |  |          |   |  |     |           |  
|Deposits(5),(6)                                |  |                          | 132,171.3 |              |  |           | 2,374.9   |       |  |  |          |   |  |     | 223,760.0 |  
|Securities sold under
repurchase
agreements    |  |                          |           |              |  |           |           |       |  |  |          |   |  |     | 4,600.0   |  
|Debt(7)                                        |  |                          | 1,043.9   |              |  |           | 1,000.0   |       |  |  | 134.7    |   |  |     | 23,695.6  |  
|Other liabilities                              |  |                          |           |              |  |           |           |       |  |  |          |   |  |     | 26,774.7  |  
|Total financial
Liabilities                    |  |                          | 133,215.2 |              |  |           | 3,374.9   |       |  |  | 134.7    |   |  |     | 278,830.3 |  
|                                               |  |                          |           |              |  |           |           |       |  |  |          |   |  |     |           |  
|Asset/liability gap                            |  |                          | (86,447.7 | )            |  |           | 21,967.4  |       |  |  | 54,467.1 |   |  |     | 27,533.0  |  
|                                               |  |                          |           |              |  |           |           |       |  |  |          |   |  |     |           |  
|Cumulative gap                                 |  |                          | (48,901.5 | )            |  |           | (26,934.1 | )     |  |  | 27,533.0 |   |  |     | 27,533.0  |  
|Cumulative gap as a
percentage of total
assets |  |                          | (104.6    | %)           |  |           | (106.3    | %)    |  |  | 50.4     | % |  |     | 9.0       | %



|(1) |  | Assets and liabilities are classified into the applicable maturity
categories based on residual maturity or re-pricing date, whichever is
earlier.                                                                                                                                                             
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Items that neither mature nor re-price are included in the greater than
five years category.                                                                                                                                                                                                                 
|   
|(3) |  | Cash and cash equivalents include balances with the RBI to satisfy its
cash reserve ratio requirements. These balances are held in the form of
overnight cash deposits but we classify these balances to the applicable
maturity categories on a basis proportionate to the classification of
related deposits.
|   
|(4) |  | Non-performing loans are classified in the greater than five years
category.                                                                                                                                                                                                                                 
|   
|(5) |  | Based on management estimates, 85% of non-interest-bearing non-maturity
deposit accounts have been classified as greater than one year and up to
five years category and 15% in the 0-28 days category.                                                                                                    
|   
|(6) |  | Based on management estimates, 90% of interest-bearing non-maturity
deposit accounts have been classified as greater than one year and up to
five years category and 10% in the 0-28 days category.                                                                                                        
|   
|(7) |  | Includes short-term borrowings and long-term debt.                                                                                                                                                                                                                                                             
|   
|    |  | For further information on how we manage our asset liability risk, see
BusinessMarket Risk.                                                                                                                                                                                                                 

48



---



##### Table of Contents



Loan Portfolio and Credit Substitutes

At March 31, 2003, our gross loan portfolio was Rs. 120.2 billion and
represented approximately 435,000 loan contracts outstanding. At March 31, 2003, our
gross credit substitutes outstanding were Rs. 29.8 billion and represented 183
credit substitutes outstanding. All our gross loans and credit substitutes are
to Indian borrowers and 94.4% are denominated in rupees. For a description of
our wholesale and retail loan products, see BusinessWholesale
BankingCommercial Banking ProductsCommercial Loan Products and Credit
Substitutes and Retail BankingRetail Loan Products.

The following table sets forth, for the periods indicated, our gross loan
portfolio classified by product group.

|                                    |  |               |          |      |  |      |          |      |  |      |          |  |  |     |           |  |  |     |           | 
|----------------------------------- |  | ------------- | -------- | ---- |  | ---- | -------- | ---- |  | ---- | -------- |  |  | --- | --------- |  |  | --- | --------- | 
|                                    |  | At March 31, 
|                                    |  |              
|                                    |  | 1999          |          | 2000 |  | 2001 |          | 2002 |  | 2003
|                                    |  |               |          |      |  |      |          |      |  |     
|                                    |  | (in millions)
|Working capital                     |  | Rs.           | 8,132.1  |      |  | Rs.  | 14,638.6 |      |  | Rs.  | 19,974.7 |  |  | Rs. | 28,200.8  |  |  | Rs. | 45,521.9  | 
|Term loans                          |  |               | 4,951.9  |      |  |      | 15,804.2 |      |  |      | 23,678.5 |  |  |     | 30,579.8  |  |  |     | 43,005.0  | 
|Investment in finance leases        |  |               | 275.7    |      |  |      | 218.0    |      |  |      | 137.2    |  |  |     | 52.9      |  |  |     | 8.3       | 
|Retail loans                        |  |               | 2,069.7  |      |  |      | 6,305.0  |      |  |      | 8,447.1  |  |  |     | 14,301.3  |  |  |     | 31,631.4  | 
|                                    |  |               |          |      |  |      |          |      |  |      |          |  |  |     |           |  |  |     |           | 
|Gross loans                         |  | Rs.           | 15,429.4 |      |  | Rs.  | 36,965.8 |      |  | Rs.  | 52,237.5 |  |  | Rs. | 73,134.8  |  |  | Rs. | 120,166.6 | 
|Credit substitutes                  |  |               | 6,762.8  |      |  |      | 13,056.2 |      |  |      | 22,344.2 |  |  |     | 35,329.9  |  |  |     | 30,255.4  | 
|                                    |  |               |          |      |  |      |          |      |  |      |          |  |  |     |           |  |  |     |           | 
|Gross loans plus credit substitutes |  | Rs.           | 22,192.2 |      |  | Rs.  | 50,022.0 |      |  | Rs.  | 74,581.7 |  |  | Rs. | 108,464.7 |  |  | Rs. | 150,422.0 | 
|                                    |  |               |          |      |  |      |          |      |  |      |          |  |  |     |           |  |  |     |           | 

Maturity and Interest Rate Sensitivity of Loans

The following table sets forth, for the periods indicated, the maturity
and interest rate sensitivity of our loans.

|            |  |                   |          |               |  |            |          |  |  |     |         | 
|----------- |  | ----------------- | -------- | ------------- |  | ---------- | -------- |  |  | --- | ------- | 
|            |  | At March 31, 2003
|            |  |                  
|            |  | Due in one        |          | Due in one    |  | Due after 
|            |  | year or less      |          | to five years |  | five years
|            |  |                   |          |               |  |           
|            |  | (in millions)    
|Retail      |  | Rs.               | 15,753.8 |               |  | Rs.        | 14,732.8 |  |  | Rs. | 1,144.8 | 
|Wholesale   |  | Rs.               | 77,401.8 |               |  | Rs.        | 10,380.2 |  |  | Rs. | 753.2   | 
|            |  |                   |          |               |  |            |          |  |  |     |         | 
|Gross loans |  | Rs.               | 93,155.6 |               |  | Rs.        | 25,113.0 |  |  | Rs. | 1,898.0 | 
|            |  |                   |          |               |  |            |          |  |  |     |         | 

|                                                   |                |     |                   |          |               |     |            |          |  |     |         |         | 
|-------------------------------------------------- | -------------- | --- | ----------------- | -------- | ------------- | --- | ---------- | -------- |  | --- | ------- | ------- | 
|                                                   |                |     | At March 31, 2003
|                                                   |                |     |                  
|                                                   |                |     | Due in one        |          | Due in one    |     | Due after 
|                                                   |                |     | year or less      |          | to five years |     | five years
|                                                   |                |     |                   |          |               |     |           
|                                                   |                |     | (in millions)    
|Interest rate classification of loans by maturity: |                |     |                   |          |               |     |            |          |  |     |         |        
|                                                   | Variable rates |     | Rs.               | 1,858.9  |               |     |            |         |  |     |         |        | 
|                                                   | Fixed rates    |     | Rs.               | 91,296.7 |               |     | Rs.        | 25,113.0 |  |     | Rs.     | 1,898.0 | 
|                                                   |                |     |                   |          |               |     |            |          |  |     |         |        
|Gross loans                                        |                | Rs. | 93,155.6          |          |               | Rs. | 25,113.0   |          |  | Rs. | 1,898.0 |        
|                                                   |                |     |                   |          |               |     |            |          |  |     |         |        

Concentration of Loans and Credit Substitutes

Pursuant to the guidelines of the RBI, our funded exposure to individual
borrowers generally may not exceed 15% of our capital funds calculated under
Indian GAAP. We had six exposures to companies that were above the general
limit at March 31, 2003 for which we had approvals of the RBI. During fiscal
2003, we carried approvals from the RBI to extend credit exposures over the
prescribed norms for seventeen corporates and three group of companies under
the same management. Our exposure to a group of companies under the same
management control generally may not exceed 40% of our capital funds without
the prior approval of the RBI. In some cases, the exposure to a group of
companies under the same management control may be up to 50% of our capital
funds. For a further information, see Information About IndiaSupervision and
Regulation.

49



---



##### Table of Contents



The following table sets forth, for the periods indicated, our gross loans
and credit substitutes outstanding by the borrowers industry or economic
activity and as a percentage of our gross loans and fair value of credit
substitutes.



|                                                    |  |                                   |          |      |  |      |       |   |  |     |          |  |  |  |       |   |  |     |          |  |  |  |       |  
|--------------------------------------------------- |  | --------------------------------- | -------- | ---- |  | ---- | ----- | - |  | --- | -------- |  |  |  | ----- | - |  | --- | -------- |  |  |  | ----- | -
|                                                    |  | At March 31,                     
|                                                    |  |                                  
|                                                    |  | 1999                              |          | 2000 |  | 2001
|                                                    |  |                                   |          |      |  |     
|                                                    |  | (in millions, except percentages)
|1. Automotive manufacturers                         |  |                                   | 935.8    |      |  |      | 4.2   |   |  |     | 1,614.2  |  |  |  | 3.2   |   |  |     | 3,138.6  |  |  |  | 4.2   |  
|2. Heavy industrial organic
chemical                |  |                                   | 69.6     |      |  |      | 0.3   |   |  |     | 498.3    |  |  |  | 1.0   |   |  |     | 317.3    |  |  |  | 0.4   |  
|3. Hire purchase                                    |  |                                   | 875.8    |      |  |      | 4.0   |   |  |     | 2,057.7  |  |  |  | 4.1   |   |  |     | 2,394.7  |  |  |  | 3.2   |  
|4. Fertilizers                                      |  |                                   | 1,148.7  |      |  |      | 5.2   |   |  |     | 1,528.6  |  |  |  | 3.1   |   |  |     | 3,136.8  |  |  |  | 4.2   |  
|5. Consumer goods                                   |  |                                   | 69.6     |      |  |      | 0.3   |   |  |     | 445.4    |  |  |  | 0.9   |   |  |     | 2,794.2  |  |  |  | 3.7   |  
|6. Petrochemicals, fuel,
oils,
lubricants           |  |                                   | 1,049.3  |      |  |      | 4.7   |   |  |     | 2,821.4  |  |  |  | 5.6   |   |  |     | 6,898.1  |  |  |  | 9.3   |  
|7. Cement manufacturers                             |  |                                   | 229.8    |      |  |      | 1.0   |   |  |     | 929.9    |  |  |  | 1.9   |   |  |     | 3,173.2  |  |  |  | 4.3   |  
|8. Leasing companies                                |  |                                   | 702.4    |      |  |      | 3.2   |   |  |     | 1,606.7  |  |  |  | 3.2   |   |  |     | 1,731.5  |  |  |  | 2.3   |  
|9. Heavy Engineering                                |  |                                   | 662.5    |      |  |      | 3.0   |   |  |     | 824.1    |  |  |  | 1.6   |   |  |     | 4,808.2  |  |  |  | 6.5   |  
|10. Electrical machinery                            |  |                                   | 1,152.1  |      |  |      | 5.2   |   |  |     | 1,298.2  |  |  |  | 2.6   |   |  |     | 1,669.8  |  |  |  | 2.2   |  
|11. Mfg of dairy, bakery and
confectionery products |  |                                   |          |      |  |      |       |   |  |     | 55.3     |  |  |  | 0.1   |   |  |     | 24.1     |  |  |  |       |  
|12. Others                                          |  |                                   | 15,296.6 |      |  |      | 68.9  |   |  |     | 36,342.2 |  |  |  | 72.7  |   |  |     | 44,495.2 |  |  |  | 59.7  |  
|13. Total                                           |  | Rs.                               | 22,192.2 |      |  |      | 100.0 | % |  | Rs. | 50,022.0 |  |  |  | 100.0 | % |  | Rs. | 74,581.7 |  |  |  | 100.0 | %
|                                                    |  |                                   |          |      |  |      |       |   |  |     |          |  |  |  |       |   |  |     |          |  |  |  |       |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                    |  |                                   |           |      |  |  |       |   |  |     |           |  |  |  |       |  
|--------------------------------------------------- |  | --------------------------------- | --------- | ---- |  |  | ----- | - |  | --- | --------- |  |  |  | ----- | -
|                                                    |  | At March 31,                     
|                                                    |  |                                  
|                                                    |  | 2002                              |           | 2003
|                                                    |  |                                   |           |     
|                                                    |  | (in millions, except percentages)
|1. Automotive manufacturers                         |  |                                   | 9,999.2   |      |  |  | 9.2   |   |  |     | 13,393.2  |  |  |  | 8.9   | %
|2. Heavy industrial organic
chemical                |  |                                   | 4,449.5   |      |  |  | 4.1   |   |  |     | 8,298.1   |  |  |  | 5.5   |  
|3. Hire purchase                                    |  |                                   | 5,367.0   |      |  |  | 4.9   |   |  |     | 5,877.1   |  |  |  | 3.9   |  
|4. Fertilizers                                      |  |                                   | 3,342.3   |      |  |  | 3.1   |   |  |     | 5,165.9   |  |  |  | 3.4   |  
|5. Consumer goods                                   |  |                                   | 2,933.7   |      |  |  | 2.7   |   |  |     | 4,367.4   |  |  |  | 2.9   |  
|6. Petrochemicals, fuel,
oils,
lubricants           |  |                                   | 10,312.2  |      |  |  | 9.5   |   |  |     | 4,248.3   |  |  |  | 2.8   |  
|7. Cement manufacturers                             |  |                                   | 2,990.6   |      |  |  | 2.8   |   |  |     | 4,171.9   |  |  |  | 2.8   |  
|8. Leasing companies                                |  |                                   | 2,862.1   |      |  |  | 2.6   |   |  |     | 4,166.1   |  |  |  | 2.7   |  
|9. Heavy Engineering                                |  |                                   | 3,903.4   |      |  |  | 3.6   |   |  |     | 3,830.1   |  |  |  | 2.5   |  
|10. Electrical machinery                            |  |                                   | 3,581.4   |      |  |  | 3.3   |   |  |     | 3,430.4   |  |  |  | 2.3   |  
|11. Mfg of dairy, bakery and
confectionery products |  |                                   | 526.7     |      |  |  | 0.5   |   |  |     | 3,091.0   |  |  |  | 2.1   |  
|12. Others                                          |  |                                   | 58,196.6  |      |  |  | 53.7  |   |  |     | 90,382.5  |  |  |  | 60.2  |  
|13. Total                                           |  | Rs.                               | 108,464.7 |      |  |  | 100.0 | % |  | Rs. | 150,422.0 |  |  |  | 100.0 | %
|                                                    |  |                                   |           |      |  |  |       |   |  |     |           |  |  |  |       |  

Our ten largest funded exposures consisting of loans, investments
including credit substitutes at March 31, 2003 totaled approximately Rs. 38.1
billion and represented approximately 25.3% of our total net loan and
credit substitutes. The largest group of companies under the same management
control accounted for approximately 4.2% of our loans and credit substitutes.

Directed Lending

The RBI has established guidelines requiring Indian banks to lend 40% of
their net bank credit to certain specified sectors called priority sectors.
Priority sectors include small-scale industries, the agricultural sector, food
and agro-based industries and small businesses. See Information About
IndiaSupervision and Regulation.

We are required to comply with the priority sector lending requirements at
the last reporting friday of each fiscal year, a date specified by
RBI for reporting. Apart from our loans to the specified sectors
outlined above, we may invest in bonds of specified institutions to meet our
mandated lending requirements. Any shortfall in lending to priority sector/agriculture requires contribution
to the Rural Infrastructure Development Fund (RIDF) established in National
Bank for Agriculture and Rural Development (NABARD). The extent of contributions
to RIDF is related to the extent of shortfall in lending to priority
sector/agriculture. The interest rate on these deposits is inversely
related to the shortfall in agriculture lending. These
deposits also satisfy part of our priority sector requirement.

The following table sets forth, for
the periods indicated, our directed lending broken down by sector.

|                       |                        |     |               |       |      |     |         |         |      |     |         |         |  |     |         |         |  |    |          |         | 
|---------------------- | ---------------------- | --- | ------------- | ----- | ---- | --- | ------- | ------- | ---- | --- | ------- | ------- |  | --- | ------- | ------- |  | -- | -------- | ------- | 
|                       |                        |     | At March 31, 
|                       |                        |     |              
|                       |                        |     | 1999          |       | 2000 |     | 2001    |         | 2002 |     | 2003   
|                       |                        |     |               |       |      |     |         |         |      |     |        
|                       |                        |     | (in millions)
|Directed lending:      |                        |     |               |       |      |     |         |         |      |     |         |         |  |     |         |         |  |    |          |        
|                       | Agriculture            |     | Rs.           | 771.4 |      |     | Rs.     | 1,630.3 |      |     | Rs.     | 1,206.8 |  |     | Rs.     | 1,493.4 |  |    | Rs       | 8,858.8 | 
|                       | Small scale industries |     |               | 932.1 |      |     |         | 3,249.2 |      |     |         | 1,772.8 |  |     |         | 2,730.5 |  |    |          | 2,949.6 | 
|                       | Other                  |     |               | 291.2 |      |     |         | 978.6   |      |     |         | 3,788.6 |  |     |         | 3,509.2 |  |    |          | 2,372.6 | 
|                       |                        |     |               |       |      |     |         |         |      |     |         |         |  |     |         |         |  |    |          |        
|Total directed lending |                        | Rs. | 1,994.7       |       |      | Rs. | 5,858.1 |         |      | Rs. | 6,768.2 |         |  | Rs. | 7,733.1 |         |  | Rs | 14,181.0 |        
|                       |                        |     |               |       |      |     |         |         |      |     |         |         |  |     |         |         |  |    |          |        

50



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##### Table of Contents



Non-Performing Loans

The following discussion of non-performing loans is based on US GAAP. For
classification of non-performing loans under Indian regulatory requirements,
see Information About IndiaSupervision and Regulation.

Our non-performing loan portfolio has been affected by both the general
economic situation in India and by our merger with Times Bank. The Indian
economy has expanded steadily during the past three years with GDP growth of,
4.0% in fiscal 2001, 5.4% in fiscal 2002 and 4.4% in fiscal 2003. Since 1991,
the government of India has pursued a policy of gradual liberalization and
deregulation. Indian corporations have had to respond to these pressures
through a process of restructuring and repositioning. This restructuring
process is taking place in several industries, primarily in sectors where many
small, unprofitable manufacturing facilities have existed, such as the iron and
steel and textiles industries. This led to a decline in the operating
performance of some Indian corporations and the impairment of related loan
assets in the financial system, including some of our assets. The decline in
certain sectors of the Indian economy has been offset by growth in segments
such as financial services and information technology.

When we merged with Times Bank in February 2000, we reviewed their loan
portfolio and adjusted the book values of their loans acquired to fair values,
which adjustments reflected provisions consistent with our own provisioning
policy. We subsequently phased out some loans that were not in line with our
own lending policies.

At March 31, 2003, our gross non-performing loans as a percentage of gross
loan assets was 2.0% and our gross non-performing loans net of valuation
allowances as a percentage of net loan assets was 0.6%. We have made total
specific valuation allowances for 71.1% of gross non-performing loans. These
allowances are based on the expected realization of cash flows from these
assets and from the underlying collateral. All of our non-performing loans are
rupee-denominated. At March 31, 2003, we had sixteen non-performing loans in
the directed lending sector. Non-performing loans to the directed lending
sector as a percentage of gross loans was 0.1%.

The following tables set forth, for the periods indicated, information
about our gross non-performing loan portfolio.

|                                                                                            |  |                                   |          |      |  |      |          |      |  |      |          |   |  |     |          |   |  |     |           |  
|------------------------------------------------------------------------------------------- |  | --------------------------------- | -------- | ---- |  | ---- | -------- | ---- |  | ---- | -------- | - |  | --- | -------- | - |  | --- | --------- | -
|                                                                                            |  | At March 31,                     
|                                                                                            |  |                                  
|                                                                                            |  | 1999                              |          | 2000 |  | 2001 |          | 2002 |  | 2003
|                                                                                            |  |                                   |          |      |  |      |          |      |  |     
|                                                                                            |  | (in millions, except percentages)
|Non-performing loans:                                                                       |  |                                   |          |      |  |      |          |      |  |      |          |   |  |     |          |   |  |     |           |  
|Working capital loans                                                                       |  | Rs.                               | 65.8     |      |  | Rs.  | 1,126.7  |      |  | Rs.  | 727.6    |   |  | Rs. | 993.9    |   |  | Rs. | 1,455.6   |  
|Term loans                                                                                  |  |                                   | 161.9    |      |  |      | 401.1    |      |  |      | 609.5    |   |  |     | 785.7    |   |  |     | 810.2     |  
|Investment in finance leases                                                                |  |                                   | 132.9    |      |  |      | 77.4     |      |  |      | 65.9     |   |  |     | 39.6     |   |  |     | 26.9      |  
|Retail loans                                                                                |  |                                   |         |      |  |      | 3.2      |      |  |      | 93.3     |   |  |     | 140.7    |   |  |     | 74.9      |  
|                                                                                            |  |                                   |          |      |  |      |          |      |  |      |          |   |  |     |          |   |  |     |           |  
|Gross non-performing loans                                                                  |  | Rs.                               | 360.6    |      |  | Rs.  | 1,608.4  |      |  | Rs.  | 1,496.3  |   |  | Rs. | 1,959.9  |   |  | Rs. | 2,367.6   |  
|                                                                                            |  |                                   |          |      |  |      |          |      |  |      |          |   |  |     |          |   |  |     |           |  
|Specific valuation allowances                                                               |  | Rs.                               | 105.8    |      |  | Rs.  | 763.8    |      |  | Rs.  | 1,010.8  |   |  | Rs. | 1,423.5  |   |  | Rs. | 1,684.3   |  
|Unallocated valuation allowances                                                            |  |                                   |         |      |  |      | 143.5    |      |  |      | 143.5    |   |  |     | 182.4    |   |  |     | 182.4     |  
|Non-performing loans net of specific valuation allowance                                    |  |                                   | 254.8    |      |  |      | 844.6    |      |  |      | 485.5    |   |  |     | 536.4    |   |  |     | 683.3     |  
|Gross loan assets                                                                           |  | Rs.                               | 15,429.4 |      |  | Rs.  | 36,965.8 |      |  | Rs.  | 52,237.5 |   |  | Rs. | 73,134.8 |   |  | Rs. | 120,166.6 |  
|Net loan assets                                                                             |  |                                   | 15,323.6 |      |  |      | 36,058.5 |      |  |      | 51,083.2 |   |  |     | 71,528.9 |   |  |     | 118,299.9 |  
|Gross non-performing loans as a percentage of gross loans                                   |  |                                   | 2.34     | %    |  |      | 4.35     | %    |  |      | 2.86     | % |  |     | 2.68     | % |  |     | 1.97      | %
|Non-performing loans net of specific valuation allowance as a
percentage of net loan assets |  |                                   | 1.66     | %    |  |      | 2.34     | %    |  |      | 0.95     | % |  |     | 0.74     | % |  |     | 0.58      | %
|Specific valuation allowance as a percentage of gross non-
performing loans                 |  |                                   | 29.34    | %    |  |      | 47.49    | %    |  |      | 67.55    | % |  |     | 72.63    | % |  |     | 71.14     | %
|Total valuation allowance as a percentage of gross
non-performing
loans                     |  |                                   | 29.34    | %    |  |      | 56.41    | %    |  |      | 77.14    | % |  |     | 81.94    | % |  |     | 78.84     | %

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Recognition of Non-Performing Loans

We classify our loan portfolio into loans that are performing and loans
that are non-performing or impaired.

We consider a loan to be performing when no principal or interest payment
is two quarters or more past due and where we expect to recover all amounts due
to us.

We have analyzed our gross loans into their performance status as follows:

|                                 |                       |     |              |       |      |     |          |         |      |     |               |         |  |     |          |         |  |     |           |         | 
|-------------------------------- | --------------------- | --- | ------------ | ----- | ---- | --- | -------- | ------- | ---- | --- | ------------- | ------- |  | --- | -------- | ------- |  | --- | --------- | ------- | 
|                                 |                       |     | At March 31,
|                                 |                       |     |             
|                                 |                       |     | 1999         |       | 2000 |     | 2001     |         | 2002 |     | 2003         
|                                 |                       |     |              |       |      |     |          |         |      |     |              
|                                 |                       |     |              |       |      |     |          |         |      |     | (in millions) |         |  |     |          |         |  |     |          
|Performing                       |                       | Rs. | 15,068.8     |       |      | Rs. | 35,357.4 |         |      | Rs. | 50,741.2      |         |  | Rs. | 71,174.9 |         |  | Rs. | 117,799.0 |        
|Non-performing or impaired:      |                       |     |              |       |      |     |          |         |      |     |               |         |  |     |          |         |  |     |           |        
|                                 | On accrual status     |     |              |      |      |     |          | 481.4   |      |     |               | 235.4   |  |     |          | 61.6    |  |     |           | 51.9    | 
|                                 | On non-accrual status |     |              | 360.6 |      |     |          | 1,127.0 |      |     |               | 1,260.9 |  |     |          | 1,898.3 |  |     |           | 2,315.7 | 
|                                 |                       |     |              |       |      |     |          |         |      |     |               |         |  |     |          |         |  |     |           |        
|Total Non-performing or impaired |                       |     | 360.6        |       |      |     | 1,608.4  |         |      |     | 1,496.3       |         |  |     | 1,959.9  |         |  |     | 2,367.6   |        
|                                 |                       |     |              |       |      |     |          |         |      |     |               |         |  |     |          |         |  |     |           |        
|Total                            |                       | Rs. | 15,429.4     |       |      | Rs. | 36,965.8 |         |      | Rs. | 52,237.5      |         |  | Rs. | 73,134.8 |         |  | Rs. | 120,166.6 |        
|                                 |                       |     |              |       |      |     |          |         |      |     |               |         |  |     |          |         |  |     |           |        

Non-performing or impaired loans consist of loans that are on accrual
status as well as loans that have been placed on non-accrual status.

We place loans on non-accrual status when interest or principal payments
are two quarters past due, at which time no further interest is accrued and
overdue interest not collected is reversed. We make specific allowances for all
loans on non-accrual status based on the loss we expect to incur for each such
loan.

We also identify other loans as non-performing or impaired even when
principal or interest payments are less than two quarters past due but where we
believe recovery of all principal and interest amounts is doubtful. We make
specific and unallocated allowances for these loans based on our estimate of
losses inherent in the loan portfolio.

Our policy of placing loans on non-accrual status when interest or
principal payments are 180 days or more overdue is consistent with what is
required by the RBI and, we believe, is the general market practice in India. However,
it is longer than the practice that US banks are required to follow (where
loans are placed on non-accrual if delinquent for 90 days, unless well secured
and in the process of being collected). The RBI has announced that beginning March 31, 2004, Indian banks will
be required to follow a 90-day non-accrual standard. We have already migrated from a quarterly to a monthly cycle for interest payments on loans. We
have already made modifications to our systems to be in compliance with this
directive well before the due date. We do not anticipate that this change will
have a material impact on our financial position or results of operation.

Our methodology for determining specific and unallocated allowances for
non-performing loans is discussed below separately for each category of loan.

Commercial Loans.We make specific allowances for credit losses for all
commercial loans on non-accrual status. We also make specific allowances for
commercial loans that are on accrual status, when we consider these loans to be
impaired despite being less than two quarters past due.

We identify commercial loans on accrual status as being impaired based on
our assessment of each wholesale banking customer, taking into account
quantitative and qualitative factors such as payment status, adverse situations
that may affect the borrowers ability to repay, the value of any collateral
held, our view of the industry and general economic conditions.

Impairment is measured for each non-performing wholesale banking customer
for the aggregate of all commercial loans made to that customer. We establish a
specific allowance for the difference between the carrying value of the loan
and the present value of expected future cash flows including the net
realizable value

52



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of any collateral, discounted at the loans effective interest rate. We do not
establish a specific allowance for loans where the fair value of any collateral
we hold exceeds the outstanding loan balance.

We do not make unallocated allowances for our commercial loan portfolio.
The reason we do not make any unallocated allowances for this portfolio is
because our loan portfolio consists of a small number of large loans, which
enables us to individually monitor each loan for potential impairment.
Additionally, the tenure of these loans is generally short which increases our
ability to predict impairment.

Commercial loans that experience insignificant payment delays and payment
shortfalls are generally not classified as impaired but are placed on a
surveillance watch list and closely monitored for deterioration. We determine
the significance of payment delays and payment shortfalls on a case-by-case
basis, taking into consideration all of the circumstances surrounding the loan
and the borrower, including the length of the delay, the reasons for the delay,
the borrowers prior payment record and the amount of the shortfall in relation
to the principal and interest owed.

Retail Loans.Retail loans principally consist of loans against
securities, auto loans and other personal loans. We make specific allowances
for all retail loans that are on non-accrual status where the fair value of the
collateral is less than the outstanding amount of the loan. We also make
unallocated allowances for retail loans that are on an accrual status, which
consist of loans that are less than two quarters past due. Our retail loan
portfolios comprise groups of a larger number of small value homogeneous loans.
Our unallocated allowance is based on our estimate of the expected amount of
losses inherent in each retail loan portfolio.

Our specific and unallocated allowances are determined separately for each
product category, as follows:

Loans Against Securities.For loans made where marketable securities are
held as collateral, we monitor margin positions of customers based on the
market price of the underlying collateral. To the extent that declines in the
market value of the collateral cause our margin to be eroded, we generally call
for additional margin to be deposited by the customer to restore the loan to
value ratio to an acceptable level. In the event that the customer does not
meet such margin calls within a short time frame, we give notice of our intent
to liquidate the collateral. After the notice period, subject to market
conditions, we sell the underlying collateral. We establish a specific
allowance for any shortfall between the proceeds realized and the carrying
value of the loan.

At each reporting date, we stratify our loans against securities portfolio
based on loan to value ratios computed using current market prices for the
collateral. The probability of loss increases with increased loan to value
ratios as our margin gets eroded in such instances. For each loan to value
strata which is above an acceptable loan to value ratio, we make an unallocated
allowance which reflects the estimated shortfall between the aggregate amount
of loans and the net realizable value of the collateral held for the loans in
such strata. We estimate our loss factors based on historical delinquency rates
and losses we have incurred on this portfolio.

Auto Loans.Our auto loans are secured by a pledge of the underlying
vehicle that has been financed. In the event of a default, we initiate a
collection process which includes repossession and sale of the vehicle.

We establish a specific allowance for the entire balance outstanding for
all auto loans that are on non-accrual status, which is when the loan is past
due for two quarters or more. We also establish a specific allowance for all
auto loans where we have repossessed and sold the vehicle, based on the
difference between the carrying value of the loan and the realized value of the
collateral.

We establish an unallocated allowance for auto loans that are past due for
less than two quarters. We do this by stratifying such loans based on the
number of days past due. We establish an unallocated allowance for each strata
which reflects our estimate of the shortfall between the aggregate carrying
value of the loans in that strata and the net realizable value of the
collateral. Our estimate of the expected loss for each strata is based on
historical losses we have observed.

Other Personal Loans.Our other personal loans consist primarily of
unsecured installment loans. We establish a specific allowance for the entire
balance outstanding for all personal loans that are on non-accrual status,
which is when the loan is past due for two quarters or more.

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We establish an unallocated allowance for personal loans that are past due
for less than two quarters. We do this by stratifying such loans based on the
number of days past due. We establish an unallocated allowance for each strata
which reflects our estimate of the amount of loss based on historical losses we
have observed.

Lease Financing. Aggregate rentals on finance lease transactions, net of
related unearned income and security deposits collected from the lessee, are
evaluated for impairment on the same basis as for commercial loans. Unearned
income is recognized as income using the internal rate of return method over
the primary period of the lease. Income on non-performing leases is recognized
on the same basis as for non-performing
commercial loans.

Credit Cards.Delinquency in our credit cards business is measured,
tracked and managed on also Days Past Due (DPD) basis with reference to the
original billing date for payment. An account is considered past due or
delinquent when a contractually agreed payment is not received on a date
mutually agreed between the cardholder and the Bank. We create a 100% provision
for an account when the delinquency status reaches 180 days past due and at this point the account is considered to be charged-off from
the portfolio.

Commercial Vehicle and Construction equipment finance. Our
commercial vehicle loans are secured by a pledge of the underlying assets
financed. In the event of default a collection process is initiated which
includes repossessions and sale. We create an allowance of 100% in cases where
the amount is past 180 days due.

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Analysis of Non-Performing Loans and Credit Substitutes by Industry Sector

The following table sets forth, for the periods indicated, our
non-performing loans by borrowers industry or economic activity and as a
percentage of our loans in the respective industry or economic activity sector.



|                                          |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       |         |       |  |       |         |            |  |  |      |   |  |      |         |  |  |     |         |  |  |  |      |  
|----------------------------------------- |  | --------------------------------- | ----- | ---------- |  | ---- | ----- | ----- |  | ----- | ---- | ---------- |  | ----- | ------- | ----- |  | ----- | ------- | ---------- |  |  | ---- | - |  | ---- | ------- |  |  | --- | ------- |  |  |  | ---- | -
|                                          |  | At March 31,                     
|                                          |  |                                  
|                                          |  | 1999                              |       | 2000       |  | 2001
|                                          |  |                                   |       |            |  |     
|                                          |  |                                   |       |            |  | Non- |       |       |  |       |      |            |  |       |         | Non-  |  |       |         |            |  |  |      |   |  | Non- |         |  |  |    
|                                          |  | Gross                             |       | performing |  |      |       |       |  | Gross |      | performing |  |       |         |       |  | Gross |         | performing |  |  |      |  
|                                          |  | Loans                             |       | loans      |  | %    |       | loans |  | loans |      | %          |  | loans |         | loans |  | %    
|                                          |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       |         |       |  |      
|                                          |  | (in millions, except percentages)
|Individual
advances                       |  | Rs.                               |       |            |  | Rs.  |       |       |  |       |      |            |  | Rs.   | 6,305.0 |       |  | Rs.   | 3.2     |            |  |  | 0.1  | % |  | Rs.  | 8,447.1 |  |  | Rs. | 10.1    |  |  |  | 0.1  | %
|Distilleries                              |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 252.6   |       |  |       | 208.7   |            |  |  | 82.6 |   |  |      | 196.0   |  |  |     | 154.0   |  |  |  | 78.6 |  
|Textiles                                  |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 857.8   |       |  |       | 326.5   |            |  |  | 38.1 |   |  |      | 641.9   |  |  |     | 331.4   |  |  |  | 51.6 |  
|Manufacture of
rubber and
rubber
products |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 42.0    |       |  |       | 39.4    |            |  |  | 93.8 |   |  |      | 279.6   |  |  |     | 39.4    |  |  |  | 14.1 |  
|Fertilizers                               |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 1,240.0 |       |  |       | 28.1    |            |  |  | 2.3  |   |  |      | 2,540.5 |  |  |     | 28.3    |  |  |  | 1.1  |  
|Drugs and
pharmaceuticals                 |  |                                   | 53.0  |            |  |      | 30.1  |       |  |       | 56.7 |            |  |       | 704.2   |       |  |       | 35.4    |            |  |  | 5.0  |   |  |      | 877.1   |  |  |     | 36.5    |  |  |  | 4.2  |  
|Petrochemicals                            |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 956.9   |       |  |       | 0.6     |            |  |  | 0.1  |   |  |      |         |  |  |     |         |  |  |  |      |  
|Iron and steel                            |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 846.1   |       |  |       | 209.7   |            |  |  | 24.8 |   |  |      | 1,072.4 |  |  |     | 207.4   |  |  |  | 19.3 |  
|Manufacture of
metal
products             |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 307.4   |       |  |       | 61.6    |            |  |  | 20.0 |   |  |      | 298.2   |  |  |     | 21.7    |  |  |  | 7.3  |  
|Engineering                               |  |                                   | 318.0 |            |  |      | 131.6 |       |  |       | 41.3 |            |  |       | 544.1   |       |  |       | 277.1   |            |  |  | 50.9 |   |  |      | 2,533.4 |  |  |     | 184.7   |  |  |  | 7.3  |  
|Electrical
machinery                      |  |                                   | 402.0 |            |  |      | 41.2  |       |  |       | 10.2 |            |  |       | 765.2   |       |  |       | 50.0    |            |  |  | 6.5  |   |  |      | 1,121.9 |  |  |     | 49.4    |  |  |  | 4.4  |  
|Automotive
manufacturers                  |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 672.8   |       |  |       | 39.3    |            |  |  | 5.8  |   |  |      | 1,831.9 |  |  |     | 41.7    |  |  |  | 2.3  |  
|Miscellaneous
industries                  |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 1,259.4 |       |  |       | 21.9    |            |  |  | 1.7  |   |  |      |         |  |  |     |         |  |  |  |      |  
|Construction                              |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 101.3   |       |  |       | 24.7    |            |  |  | 24.3 |   |  |      | 651.3   |  |  |     | 23.5    |  |  |  | 3.6  |  
|Software
development                      |  |                                   | 183.0 |            |  |      | 143.5 |       |  |       | 78.5 |            |  |       | 223.3   |       |  |       | 4.4     |            |  |  | 2.0  |   |  |      |         |  |  |     |         |  |  |  |      |  
|Diamond, gems
and jewellery
exports       |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 862.6   |       |  |       | 156.0   |            |  |  | 18.1 |   |  |      | 862.6   |  |  |     | 129.3   |  |  |  | 15.0 |  
|Other wholesale
trade                     |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 485.4   |       |  |       | 45.9    |            |  |  | 9.5  |   |  |      | 517.0   |  |  |     | 43.1    |  |  |  | 8.3  |  
|Share brokers                             |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 2,939.0 |       |  |       | 2.3     |            |  |  | 0.1  |   |  |      | 1,748.0 |  |  |     | 105.0   |  |  |  | 6.0  |  
|Investment and
finance and
leasing        |  |                                   | 731.0 |            |  |      | 14.2  |       |  |       | 1.9  |            |  |       | 769.2   |       |  |       | 46.7    |            |  |  | 6.1  |   |  |      | 777.0   |  |  |     | 40.7    |  |  |  | 5.2  |  
|Other chemicals                           |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       |         |       |  |       |         |            |  |  |      |   |  |      |         |  |  |     |         |  |  |  |      |  
|Electricity
generation                    |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       |         |       |  |       |         |            |  |  |      |   |  |      |         |  |  |     |         |  |  |  |      |  
|Activities allied
to agriculture          |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       |         |       |  |       |         |            |  |  |      |   |  |      |         |  |  |     |         |  |  |  |      |  
|Plastic and
plastic
products              |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       |         |       |  |       |         |            |  |  |      |   |  |      |         |  |  |     |         |  |  |  |      |  
|Electronics                               |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       | 737.4   |       |  |       | 26.9    |            |  |  | 3.6  |   |  |      | 867.7   |  |  |     | 50.1    |  |  |  | 5.8  |  
|Glass and glass
products                  |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       |         |       |  |       |         |            |  |  |      |   |  |      |         |  |  |     |         |  |  |  |      |  
|Mfg of Dairy
products                     |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       |         |       |  |       |         |            |  |  |      |   |  |      |         |  |  |     |         |  |  |  |      |  
|Retail trade                              |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       |         |       |  |       |         |            |  |  |      |   |  |      |         |  |  |     |         |  |  |  |      |  
|                                          |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       |         |       |  |       |         |            |  |  |      |   |  |      |         |  |  |     |         |  |  |  |      |  
|Total                                     |  |                                   |       |            |  | Rs.  | 360.6 |       |  |       |      |            |  |       |         |       |  | Rs.   | 1,608.4 |            |  |  |      |   |  |      |         |  |  | Rs. | 1,496.3 |  |  |  |      |  
|                                          |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       |         |       |  |       |         |            |  |  |      |   |  |      |         |  |  |     |         |  |  |  |      |  
|Specific allowance
for credit
losses      |  |                                   |       |            |  | Rs.  | 105.8 |       |  |       |      |            |  |       |         |       |  | Rs.   | 763.8   |            |  |  |      |   |  |      |         |  |  | Rs. | 1,010.8 |  |  |  |      |  
|Non-performing
loans, net                 |  |                                   |       |            |  | Rs.  | 254.8 |       |  |       |      |            |  |       |         |       |  | Rs.   | 844.6   |            |  |  |      |   |  |      |         |  |  | Rs. | 485.5   |  |  |  |      |  
|                                          |  |                                   |       |            |  |      |       |       |  |       |      |            |  |       |         |       |  |       |         |            |  |  |      |   |  |      |         |  |  |     |         |  |  |  |      |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                          |  |                                   |          |            |  |      |         |       |  |       |       |            |  |     |          |      |  |     |         |  |  |  |      |  
|----------------------------------------- |  | --------------------------------- | -------- | ---------- |  | ---- | ------- | ----- |  | ----- | ----- | ---------- |  | --- | -------- | ---- |  | --- | ------- |  |  |  | ---- | -
|                                          |  | At March 31,                     
|                                          |  |                                  
|                                          |  | 2002                              |          | 2003      
|                                          |  |                                   |          |           
|                                          |  |                                   |          |            |  | Non- |         |       |  |       |       |            |  |     |          | Non- |  |     |         | 
|                                          |  | Gross                             |          | performing |  |      |         |       |  | Gross |       | Performing |  |     |          |     
|                                          |  | loans                             |          | loans      |  | %    |         | loans |  | Loans |       | %         
|                                          |  |                                   |          |            |  |      |         |       |  |       |       |           
|                                          |  | (in millions, except percentages)
|Individual
advances                       |  | Rs.                               | 14,301.3 |            |  | Rs.  | 134.1   |       |  |       | 0.9   | %          |  | Rs. | 31,631.4 |      |  | Rs. | 74.9    |  |  |  | 0.2  | %
|Distilleries                              |  |                                   | 147.6    |            |  |      | 147.6   |       |  |       | 100.0 |            |  |     | 191.0    |      |  |     | 142.1   |  |  |  | 74.4 |  
|Textiles                                  |  |                                   | 457.3    |            |  |      | 321.4   |       |  |       | 70.3  |            |  |     | 698.5    |      |  |     | 372.0   |  |  |  | 53.7 |  
|Manufacture of
rubber and
rubber
products |  |                                   |          |            |  |      |         |       |  |       |       |            |  |     |          |      |  |     |         |  |  |  |      |  
|Fertilizers                               |  |                                   | 1,706.2  |            |  |      | 72.8    |       |  |       | 4.3   |            |  |     | 3,760.4  |      |  |     | 30.2    |  |  |  | 0.8  |  
|Drugs and
pharmaceuticals                 |  |                                   | 1,442.1  |            |  |      | 133.8   |       |  |       | 9.3   |            |  |     |          |      |  |     |         |  |  |  |      |  
|Petrochemicals                            |  |                                   |          |            |  |      |         |       |  |       |       |            |  |     |          |      |  |     |         |  |  |  |      |  
|Iron and steel                            |  |                                   | 937.6    |            |  |      | 440.1   |       |  |       | 46.9  |            |  |     | 1,141.8  |      |  |     | 437.3   |  |  |  | 38.0 |  
|Manufacture of
metal
products             |  |                                   |          |            |  |      |         |       |  |       |       |            |  |     | 897.9    |      |  |     | 3.4     |  |  |  | 0.3  |  
|Engineering                               |  |                                   | 1,640.2  |            |  |      | 147.9   |       |  |       | 9.0   |            |  |     | 2,581.3  |      |  |     | 56.1    |  |  |  | 2.2  |  
|Electrical
machinery                      |  |                                   | 1,853.4  |            |  |      | 66.2    |       |  |       | 3.6   |            |  |     | 1,430.8  |      |  |     | 76.1    |  |  |  | 5.3  |  
|Automotive
manufacturers                  |  |                                   | 8,856.0  |            |  |      | 41.9    |       |  |       | 0.5   |            |  |     | 12,096.3 |      |  |     | 642.9   |  |  |  | 5.3  |  
|Miscellaneous
industries                  |  |                                   |          |            |  |      |         |       |  |       |       |            |  |     | 675.7    |      |  |     | 5.6     |  |  |  | 0.7  |  
|Construction                              |  |                                   | 67.6     |            |  |      | 23.5    |       |  |       | 34.9  |            |  |     | 207.5    |      |  |     | 23.4    |  |  |  | 11.3 |  
|Software
development                      |  |                                   | 683.9    |            |  |      | 74.6    |       |  |       | 10.9  |            |  |     |          |      |  |     |         |  |  |  |      |  
|Diamond, gems
and jewellery
exports       |  |                                   | 1,029.4  |            |  |      | 131.5   |       |  |       | 12.8  |            |  |     | 1,343.4  |      |  |     | 130.9   |  |  |  | 9.7  |  
|Other wholesale
trade                     |  |                                   | 1,174.2  |            |  |      | 46.2    |       |  |       | 3.9   |            |  |     | 1,882.8  |      |  |     | 43.4    |  |  |  | 2.3  |  
|Share brokers                             |  |                                   | 639.5    |            |  |      | 7.4     |       |  |       | 1.2   |            |  |     | 823.9    |      |  |     | 6.7     |  |  |  | 0.8  |  
|Investment and
finance and
leasing        |  |                                   | 79.2     |            |  |      | 40.7    |       |  |       | 57.9  |            |  |     |          |      |  |     |         |  |  |  |      |  
|Other chemicals                           |  |                                   | 455.2    |            |  |      | 61.6    |       |  |       | 13.5  |            |  |     | 469.1    |      |  |     | 51.9    |  |  |  | 11.1 |  
|Electricity
generation                    |  |                                   | 486.0    |            |  |      | 26.8    |       |  |       | 5.5   |            |  |     | 1,577.1  |      |  |     | 26.8    |  |  |  | 1.7  |  
|Activities allied
to agriculture          |  |                                   | 15.2     |            |  |      | 15.2    |       |  |       | 100   |            |  |     | 216.5    |      |  |     | 16.4    |  |  |  | 7.6  |  
|Plastic and
plastic
products              |  |                                   | 15.9     |            |  |      | 3.1     |       |  |       | 19.5  |            |  |     | 26.9     |      |  |     | 3.2     |  |  |  | 11.9 |  
|Electronics                               |  |                                   | 960.8    |            |  |      | 23.5    |       |  |       | 2.5   |            |  |     | 1,754.6  |      |  |     | 207.8   |  |  |  | 11.8 |  
|Glass and glass
products                  |  |                                   |          |            |  |      |         |       |  |       |       |            |  |     | 135.9    |      |  |     | 11.0    |  |  |  | 8.1  |  
|Mfg of Dairy
products                     |  |                                   |          |            |  |      |         |       |  |       |       |            |  |     | 3,091.0  |      |  |     | 3.4     |  |  |  | 0.1  |  
|Retail trade                              |  |                                   |          |            |  |      |         |       |  |       |       |            |  |     | 2,484.8  |      |  |     | 2.1     |  |  |  | 0.1  |  
|                                          |  |                                   |          |            |  |      |         |       |  |       |       |            |  |     |          |      |  |     |         |  |  |  |      |  
|Total                                     |  |                                   |          |            |  | Rs.  | 1,959.9 |       |  |       |       |            |  |     |          |      |  | Rs. | 2,367.6 |  |  |  |      |  
|                                          |  |                                   |          |            |  |      |         |       |  |       |       |            |  |     |          |      |  |     |         |  |  |  |      |  
|Specific allowance
for credit
losses      |  |                                   |          |            |  | Rs.  | 1,423.5 |       |  |       |       |            |  |     |          |      |  | Rs. | 1,684.3 |  |  |  |      |  
|Non-performing
loans, net                 |  |                                   |          |            |  | Rs.  | 536.4   |       |  |       |       |            |  |     |          |      |  | Rs. | 683.3   |  |  |  |      |  
|                                          |  |                                   |          |            |  |      |         |       |  |       |       |            |  |     |          |      |  |     |         |  |  |  |      |  

Our gross non-performing loans as a percentage of gross loans in the
respective industries was the highest in the distilleries, textiles
and iron and
steel.

Distilleries.The distilleries industry overall has not been
experiencing unusually adverse conditions. However, we have a high percentage
of non-performing loans to this industry as a result of our relatively small
overall exposure in this industry, coupled with the non-performance of a single
large borrower. This borrower has been experiencing specific, severe liquidity
problems that are not related to the state of the industry as a whole.

Textiles.The textiles industry experienced a reduction in exports
following the devaluation of the south-east Asian currencies in 1998, which
resulted in less competitive Indian textile exports. The reduction in exports

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was also due to reduced demand in the entire region and changes in
international fashions. We have a positive outlook in the medium-term for the
yarn segment of the industry, given expected higher price realizations.

Iron and Steel.Over the last few years, a sharp reduction in
international steel prices has had a significant impact on the companies in
this sector. In addition, a substantial reduction in import tariffs over the
last three years led to price competition from certain countries, significantly
reducing domestic prices. Indian steel exports have also been impacted by
duties imposed by several importing countries. While the fiscal 2003 brought
some relief to the industry and improved profitability, our outlook in the
medium-term for the sector is negative due to pressure on prices, continued
sluggishness in domestic demand and the high financial leverage of most
companies in the sector.

Top Ten Non-Performing Loans

At March 31, 2003, we had 40 wholesale non-performing loans outstanding,
of which the top ten represented 75.5% of our gross non-performing loans, 76.4%
of our net non-performing loans and 1.5% of our gross loan portfolio.

The following table sets forth, for the period indicated, information
regarding our ten largest non-performing loans. The table also sets forth the
value (as set forth on the borrowers books) of collateral securing the loan.
However, the net realizable value of such collateral may be substantially less
or may be zero.

|           |  |                                   |  |             |  |             |       |           |  |               |         |             |  |                 |       |           |  |     |       |           |  |  |  | 
|---------- |  | --------------------------------- |  | ----------- |  | ----------- | ----- | --------- |  | ------------- | ------- | ----------- |  | --------------- | ----- | --------- |  | --- | ----- | --------- |  |  |  | 
|           |  | At March 31, 2003                
|           |  |                                  
|           |  |                                   |  |             |  |             |       |           |  |               |         |             |  | Principal       |       |           |  |     |       |           |  | 
|           |  |                                   |  |             |  |             |       |           |  |               |         |             |  | outstanding net |       |           |  |     |       | Currently
|           |  |                                   |  |             |  | Type of     |       | Gross     |  | of allowance  |         |             |  |                 |       | servicing
|           |  |                                   |  |             |  | banking     |       | principal |  | for credit    |         | Collateral- |  | all interest   
|           |  | Industry                          |  | arrangement |  | outstanding |       | losses    |  | our share     |         | payments(1)
|           |  |                                   |  |             |  |             |       |           |  |               |         |            
|           |  |                                   |  |             |  |             |       |           |  | (in millions) |         |             |  |                 |       |           |  |     |       |           |  | 
|Borrower A |  | Automotive manufacturers          |  | Multiple    |  | Rs.         | 642.8 |           |  | Rs.           | 64.4    |             |  | Rs.             |      |           |  | No 
|Borrower B |  | Iron and Steel                    |  | Consortium  |  |             | 227.4 |           |  |               | 79.2    |             |  |                 | 104.7 |           |  | No 
|Borrower C |  | Electronics                       |  | Multiple    |  |             | 183.9 |           |  |               | 166.4   |             |  |                 | 200.0 |           |  | No 
|Borrower D |  | Distilleries                      |  | Multiple    |  |             | 142.1 |           |  |               | 27.3    |             |  |                 | 55.0  |           |  | No 
|Borrower E |  | Diamond gems and jewellery export |  | Consortium  |  |             | 129.1 |           |  |               | 30.3    |             |  |                 | 37.9  |           |  | No 
|Borrower F |  | Textiles                          |  | Consortium  |  |             | 120.8 |           |  |               | 69.1    |             |  |                 | 91.4  |           |  | No 
|Borrower G |  | Iron and steel                    |  | Consortium  |  |             | 110.1 |           |  |               | 23.2    |             |  |                 | 47.7  |           |  | No 
|Borrower H |  | Iron and steel                    |  | Consortium  |  |             | 93.9  |           |  |               | 10.7    |             |  |                 | 14.2  |           |  | No 
|Borrower I |  | Textiles                          |  | Multiple    |  |             | 78.3  |           |  |               | 36.1    |             |  |                 | 47.7  |           |  | No 
|Borrower J |  | Electrical machinery              |  | Consortium  |  |             | 59.9  |           |  |               | 15.4    |             |  |                 | 20.4  |           |  | No 
|           |  |                                   |  |             |  |             |       |           |  |               |         |             |  |                 |       |           |  |     |       |           |  |  |  | 
|Total      |  |                                   |  |             |  |             |       |           |  | Rs.           | 1,788.3 |             |  | Rs.             | 522.1 |           |  | Rs. | 619.0 |           |  |  |  | 
|           |  |                                   |  |             |  |             |       |           |  |               |         |             |  |                 |       |           |  |     |       |           |  |  |  | 



|(1) |  | We classify loans as non-performing once we determine that the payment of
interest or principal is doubtful. Since the classification occurs even
before the borrower stops paying interest and principal, some of our
non-performing loans other than our ten largest non performing loans are
currently servicing all interest payments.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest Foregone

Interest foregone is the interest due on non-performing loans that has not
been accrued in our books of accounts. The following table sets forth, for the
periods indicated, the cumulative amount of interest foregone.

|            |  |                   |       | 
|----------- |  | ----------------- | ----- | 
|            |  | Interest foregone
|            |  |                  
|            |  | (in millions)    
|Fiscal 1999 |  | Rs.               | 30.4  | 
|Fiscal 2000 |  |                   | 86.4  | 
|Fiscal 2001 |  |                   | 202.2 | 
|Fiscal 2002 |  |                   | 325.5 | 
|Fiscal 2003 |  |                   | 334.0 | 

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Restructuring of Non-Performing Loans

Our non-performing loans are restructured on a case-by-case basis after
our management has determined that restructuring is the best means of realizing
repayment of the loan. These loans continue to be on a non-accrual basis and
will be reclassified as performing loans only after sustained performance under
the loans renegotiated terms for at least a period of one year.

We may
also be compulsorily required to restructure loans if decided by a
majority of  the lenders under a Corporate Debt
Restructuring system in line with RBI guidelines.

The following table sets forth, for the periods indicated, our
non-performing loans that have been restructured through rescheduling of
principal repayments and deferral or waiver of interest.

|                                                                        |  |              |  |      |   |      |   |      |       |                                   |       |     |       |  |       |     |  |  |       |  |  |     |       |   |  |  |     |  
|----------------------------------------------------------------------- |  | ------------ |  | ---- | - | ---- | - | ---- | ----- | --------------------------------- | ----- | --- | ----- |  | ----- | --- |  |  | ----- |  |  | --- | ----- | - |  |  | --- | -
|                                                                        |  | At March 31,
|                                                                        |  |             
|                                                                        |  | 1999         |  | 2000 |   | 2001 |   | 2002 |       | 2003                             
|                                                                        |  |              |  |      |   |      |   |      |       |                                  
|                                                                        |  |              |  |      |   |      |   |      |       | (in millions, except percentages) |       |     |       | 
|Gross restructured loans                                                |  | Rs.          |  |      |  |      |   | Rs.  | 370.5 |                                   |       | Rs. | 502.1 |  |       | Rs. |  |  | 172.2 |  |  | Rs. | 2.7   |  
|Allowance for credit losses                                             |  |              |  |      |   |      |  |      |       |                                   | 227.4 |     |       |  | 320.5 |     |  |  |       |  |  |     | 119.3 |   |  |  | 2.7 |  
|Net restructured loans                                                  |  |              |  |      |   |      |  |      |       |                                   | 143.1 |     |       |  | 181.6 |     |  |  |       |  |  |     | 52.9  |   |  |  |    |  
|Gross restructured loans as a percentage of gross non-
performing loans |  |              |  |      |   |      |  |      |       |                                   | 23.0  | %   |       |  | 33.6  | %   |  |  |       |  |  |     | 8.8   | % |  |  | 0.1 | %
|Net restructured loans as a percentage of net non-
performing loans     |  |              |  |      |   |      |  |      |       |                                   | 16.9  | %   |       |  | 37.4  | %   |  |  |       |  |  |     | 2.7   | % |  |  |    |  

There were certain loans where the restructuring done during the earlier
years has been withdrawn during the fiscal 2003.

Non-Performing Loan Strategy

Our non-performing loan strategy is focused on early problem recognition
and active remedial management efforts. As we are involved primarily in working
capital finance, we track our borrowers performance and liquidity on an
ongoing basis. This enables us to define remedial strategies proactively and
manage our exposures to industries or customers that we believe are displaying
deteriorating credit trends. Relationship managers drive the recovery effort,
together with strong support from the credit group from the corporate office in
Mumbai. Recovery is pursued vigorously through the legal process, enforcement
of collateral, negotiated one-time settlements and other similar strategies.
The particular strategy pursued depends upon the level of cooperation of the
borrower and on our assessment of the borrowers management integrity and
long-term liability.

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Allowance for Credit Losses

The following table sets forth, for the periods indicated, movements in
our allowance for credit losses.

|                                                                  |                                                                      |                                                      |       |                               |      |      |       |       |       |      |         |               |       |     |         |         |       |     |         |         |        |  
|----------------------------------------------------------------- | -------------------------------------------------------------------- | ---------------------------------------------------- | ----- | ----------------------------- | ---- | ---- | ----- | ----- | ----- | ---- | ------- | ------------- | ----- | --- | ------- | ------- | ----- | --- | ------- | ------- | ------ | -
|                                                                  |                                                                      |                                                      |       | For the years ended March 31,
|                                                                  |                                                                      |                                                      |       |                              
|                                                                  |                                                                      |                                                      |       | 1999                          |      | 2000 |       | 2001  |       | 2002 |         | 2003         
|                                                                  |                                                                      |                                                      |       |                               |      |      |       |       |       |      |         |              
|                                                                  |                                                                      |                                                      |       |                               |      |      |       |       |       |      |         | (in millions) |       |     |         |         |       |     |         |        
|Specific allowance for credit losses
at the beginning of the year |                                                                      | Rs.                                                  | 90.6  |                               |      | Rs.  | 105.8 |       |       | Rs.  | 763.8   |               |       | Rs. | 1,010.8 |         |       | Rs. | 1,423.5 |        
|                                                                  |                                                                      |                                                      |       |                               |      |      |       |       |       |      |         |               |       |     |         |         |       |     |         |        
|                                                                  | Additions to allowance for credit losses for the year:               |                                                      |       |                               |      |      |       |       |       |      |         |               |       |     |         |         |       |     |         |         |       
|                                                                  |                                                                      | Working capital                                      |       |                               | 14.1 |      |       |       | 191.2 |      |         |               | 201.9 |     |         |         | 366.5 |     |         |         | 615.6  |  
|                                                                  |                                                                      | Term loans                                           |       |                               | 14.3 |      |       |       | 154.3 |      |         |               | 135.2 |     |         |         | 253.8 |     |         |         | 327.5  |  
|                                                                  |                                                                      | Leasing finance                                      |       |                               | 10.8 |      |       |       | 20.3  |      |         |               | 2.5   |     |         |         |      |     |         |         |       |  
|                                                                  | Less allowances no longer required on account of
recoveries          |                                                      |       | (24.0                         | )    |      |       | (53.4 | )     |      |         | (92.6         | )     |     |         | (207.6  | )     |     |         | (201.6  | )     
|                                                                  |                                                                      |                                                      |       |                               |      |      |       |       |       |      |         |               |       |     |         |         |       |     |         |        
|                                                                  | Net expense for additions to specific allowance for
credit losses    |                                                      |       | 15.2                          |      |      |       | 312.4 |       |      |         | 247.0         |       |     |         | 412.7   |       |     |         | 741.5   |       
|                                                                  | Transferred on acquisition of Times Bank Limited:                    |                                                      |       |                               |      |      |       |       |       |      |         |               |       |     |         |         |       |     |         |         |       
|                                                                  |                                                                      | Working capital                                      |       |                               |     |      |       |       | 243.9 |      |         |               |      |     |         |         |      |     |         |         |       |  
|                                                                  |                                                                      | Term loans                                           |       |                               |     |      |       |       | 101.7 |      |         |               |      |     |         |         |      |     |         |         |       |  
|                                                                  |                                                                      | Provision
no longer required on account of writeoffs |       |                               |     |      |       |       |      |      |         |               |      |     |         |         |      |     |         |         | (480.7 | )
|                                                                  |                                                                      |                                                      |       |                               |      |      |       |       |       |      |         |               |       |     |         |         |       |     |        
|                                                                  | Specific allowance for credit losses at the end of fiscal year       |                                                      |       | 105.8                         |      |      |       | 763.8 |       |      |         | 1,010.8       |       |     |         | 1,423.5 |       |     |         | 1,684.3 |       
|                                                                  |                                                                      |                                                      |       |                               |      |      |       |       |       |      |         |               |       |     |         |         |       |     |         |        
|                                                                  | Unallocated allowance for credit losses at the beginning of the year |                                                      |       |                              |      |      |       |      |       |      |         | 143.5         |       |     |         | 143.5   |       |     |         | 182.4   |       
|                                                                  | Additions during the year                                            |                                                      |       |                              |      |      |       | 143.5 |       |      |         |              |       |     |         | 38.9    |       |     |         |        |       
|                                                                  |                                                                      |                                                      |       |                               |      |      |       |       |       |      |         |               |       |     |         |         |       |     |         |        
|Unallocated allowance for credit losses
at the end of the year    |                                                                      |                                                      |      |                               |      |      | 143.5 |       |       |      | 143.5   |               |       |     | 182.4   |         |       |     | 182.4   |        
|Total allowance for credit losses
at the beginning of the year    |                                                                      |                                                      | 90.6  |                               |      |      | 105.8 |       |       |      | 907.3   |               |       |     | 1,154.3 |         |       |     | 1,605.9 |        
|Provision
no longer required on account of writeoffs              |                                                                      |                                                      |      |                               |      |      |      |       |       |      |        |               |       |     |        |         |       |     | (480.7  | )      
|                                                                  |                                                                      |                                                      |       |                               |      |      |       |       |       |      |         |               |       |     |         |         |       |     |        
|                                                                  | Net addition to total allowance for
the year charged to expense      |                                                      |       | 15.2                          |      |      |       | 455.9 |       |      |         | 247.0         |       |     |         | 451.6   |       |     |         | 741.5   |       
|                                                                  | Transferred on acquisition of Times Bank Limited                     |                                                      |       |                              |      |      |       | 345.6 |       |      |         |              |       |     |         |        |       |     |         |        |       
|                                                                  |                                                                      |                                                      |       |                               |      |      |       |       |       |      |         |               |       |     |         |         |       |     |         |        
|Total allowance for credit losses at the end of the year          |                                                                      | Rs.                                                  | 105.8 |                               |      | Rs.  | 907.3 |       |       | Rs.  | 1,154.3 |               |       | Rs. | 1,605.9 |         |       | Rs. | 1,866.7 |        
|                                                                  |                                                                      |                                                      |       |                               |      |      |       |       |       |      |         |               |       |     |         |         |       |     |         |        

The following table sets forth the allocation of the total allowance for
credit losses at March 31, 2003:

|                            |  |                   |         | 
|--------------------------- |  | ----------------- | ------- | 
|                            |  | At March 31, 2003
|                            |  |                  
|Commercial                  |  | Rs.               | 1,582.6 | 
|Retail                      |  |                   | 74.9    | 
|Leasing finance             |  |                   | 26.8    | 
|Unallocated                 |  |                   | 182.4   | 
|                            |  |                   |         | 
|Allowance for credit losses |  | Rs.               | 1,866.7 | 
|                            |  |                   |         | 

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MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial
condition and results of operations together with our audited financial
statements included in this report. The following discussion is based on our
audited financial statements, which have been prepared in accordance with US
GAAP, and on information publicly available from the RBI and other sources. Our
fiscal year ends on March 31 of each year so all references to a particular
fiscal year are to the twelve months ended March 31 of that year.

Introduction

Overview

We are a leading private sector bank and financial services company in
India. Our principal business activities are wholesale banking, retail banking
and treasury operations. Through our wholesale banking operations we provide
loans, deposit products, documentary credits, guarantees and foreign exchange
and derivative products. We also provide cash management services, clearing and
settlement services for stock exchanges, custody services for mutual funds and
correspondent banking services. Our retail banking division provides a variety
of deposit products as well as loans, credit cards, bill payment services,
debit cards, mutual funds, investment advisory services and depositary
services. Our treasury group manages our balance sheet and provides foreign
exchange and derivative products for our clients.

Our revenue consists of interest and dividend revenue, which comes from
financing products, investments and other sources, as well as non-interest
revenue, which comes primarily from our transactional services, sales of
securities and foreign exchange and derivative transactions, trade finance
offerings, and distribution services. Our interest and dividend revenue is
primarily generated by interest on loans, securities and other activities. We
offer working capital and term loans, invest in leases to corporate customers
and also lend to retail customers. The primary components of our securities
portfolio are statutory liquidity ratio investments, credit substitutes and
other securities. Statutory liquidity ratio investments principally consist of
Government of India treasury securities. Credit substitutes, principally
consisting of our investments in commercial paper, debentures and preference
shares issued by corporations, are part of the financing products we provide to
our customers. Other investments include investment grade bonds issued by
public sector undertakings and public financial institutions principally to
meet RBI directed lending requirements, asset backed securities, mortgage
backed securities as well as equity securities and mutual funds. Interest from
other activities consists primarily of interest from interbank loans and
interest paid by the RBI on cash deposits to meet our statutory cash reserve
ratio requirements.

Two important measures of our results of operations are net interest
revenue, which is equal to our interest and dividend revenue net of interest
expense, and net interest revenue after allowance for credit losses. Interest
expense includes interest on deposits as well as on borrowings. Our interest
revenue and expense are affected by fluctuations in interest rates as well as
volume of activity. Our interest expense is also affected by the extent to
which we fund our activities with low-interest or non-interest deposits
(including the float on transactional services), and the extent to which we
rely on borrowings. Our allowance for credit losses includes our loan loss
provision. Impairments of credit substitutes are not included in our loan-loss
provision, but are included as realized losses on securities.

We also use net interest margin and spread to measure our results. Net
interest margin represents the ratio of net interest revenue to average
interest-earning assets. Spread represents the difference between yield on
average interest-earning assets and cost of average interest-bearing
liabilities including current accounts which are non-interest bearing at zero
cost.

Our non-interest revenue includes fee and commission income, realized
gains and losses on sales of securities and spread from foreign exchange and
derivative transactions. Our principal sources of fee and commission revenue
are documentary credits and bank guarantees, retail banking services, cash
management services and capital market services.

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Our non-interest expense includes expenses for salaries and staff
benefits, premises and equipment, depreciation and amortization, and
administrative and other expenses. The costs of outsourcing back office and
other functions are included in administrative and other expenses.

Our financial condition and results of operations are affected by general
economic conditions prevailing in India. The Indian economy has grown steadily
over the past three years. GDP growth was, 4.0% in fiscal 2001, 5.4% in fiscal
2002 and 4.4% in fiscal 2003. In addition, interest rates have generally
declined during the last three years in line with global trends due to huge
inflows of external money, consequent appreciation of the Indian rupee to the
US dollar the RBIs policy of assuring adequate liquidity to the banking system
and generally lowering the rate at which it lends to Indian banks.

For
additional information, see Overview of the Indian Banking
Sector.

Critical Accounting Policies

Loan Loss Allowances

Our allowance for credit losses consists of specific and unallocated
allowances. Our allowance is an estimate and is therefore inherently
subjective. Our estimate is susceptible to significant revision as more
information becomes available.

We establish specific allowances for all loans that are past due for two
quarters or more. In addition, we establish specific and unallocated allowances
for loans that are past due for less than two quarters where we do not expect
to recover all principal and interest amounts due to us.

For our commercial loans, we have established specific allowances for all
loans that are past due for two quarters. We have also established specific
allowances for loans past due for less than two quarters that are considered
impaired, based on an assessment of each wholesale banking customer which takes
into account qualitative and quantitative factors. We do not establish
unallocated allowances for commercial loans.

For our loans against securities portfolio, we have established specific
allowances for all loans that are past due for two quarters and for loans where
we have liquidated the collateral. In addition, we have provided an unallocated
allowance for loans past due for less than two quarters where the loan to value
ratio is not acceptable.

For our auto loans and commercial vehicle loans, we have established
specific allowances for the entire balance of all loans that are past due for
more than two quarters and for loans where we have repossessed and sold the
collateral. In addition, we have established an unallocated allowance for loans
past due for less than two quarters based on the number of days overdue and
historical loss rates.

For
our other personal loans including credit cards receivables, we have
established specific allowances for the entire balance of all loans that are
past due for more than two quarters. In addition we have established an
unallocated allowance for loans past due for less than two quarters based on
the number of days overdue and historical loss rates. In accordance with RBI
guidelines with effect from March 31, 2004, loans shall be placed on non 
accual status when interest or principal payments are one quarter overdue.

For more information on the methodologies we have used to establish our
allowance for credit losses, see Selected Statistical
InformationNon-Performing LoansRecognition of Non-Performing Loans.

Interest accrual and revenue recognition

Interest income from loans is recognized on an accrual basis when earned
except in respect of loans placed on non-accrual status, where it is recognized
when received. Loans are generally placed on non-accrual status when they are
past due for more than two quarters. The Bank generally does not charge up
front loan origination fees. Nominal application fees are charged which offset
the related costs incurred.

Fees and commissions from guarantees issued are amortized over the
contractual period of the commitment, provided the amounts are collectible.

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Dividends are recognized when declared.

Realized gains and losses on sales of securities are recorded on the trade
date and are determined using the weighted average cost method.

Other fees and income are recognized when earned, which is when the
service that results in the income has been provided.

Valuation of Investments

We account for our investments in securities in accordance with SFAS No.
115, Accounting for Certain Investments in Debt and Equity Securities. SFAS No.
115 requires that investments in debt and equity securities be reported at fair
value, except for debt securities classified as held to maturity securities,
which are reported at amortized cost.

Securities that are held principally for resale in the near term are
recorded in the trading assets account at fair value, with changes in fair
value recorded in earnings.

Debt securities which management has the positive intent and ability to
hold to maturity are classified as held to maturity and recorded at amortized
cost.

Securities with readily determinable fair values that are not classified
as held to maturity or trading are classified as available for sale and
recorded at fair value. Unrealized gains and losses on such securities, net of
applicable taxes, are reported in accumulated other comprehensive income
(loss), a separate component of shareholders equity.

Declines in the fair values of held to maturity and available for sale
securities below their cost that are other than temporary are reflected in
earnings as realized losses, based on managements best estimate of the value
of the investment.

Investments consist of government securities, other debt and equity
securities, asset and mortgage backed securities and credit substitute
securities.

Credit substitute securities are typically comprised of commercial paper,
short term debentures and preference shares issued by the same customers with
whom we have a lending relationship in its wholesale banking business.
Investment decisions for credit substitute securities are subject to the same
credit approval processes as for loans, and webear the same customer risk as we
do for loans extended to those customers. Additionally the yield and maturity
terms are generally directly negotiated by us with the issuer. Fair values for
such securities are estimated based on present values at current interest rates
for such instruments.

Estimates of any declines in the fair values of such securities that are
other than temporary are measured on a case by case basis together with loans
under the overall program to those customers and recognized as realized losses.
As our exposures to such securities are similar to our exposures on its loan
portfolio, additional disclosures have been provided on the maturity profile
and impairment status in Note 8 and on concentrations of credit risk in Note 11
of the Financial Statements.

All other securities are actively managed as a part of our treasury
operations and are held primarily to meet our statutory and regulatory
requirements. The issuers of such securities are either the government, public
financial institutions or private issuers. These investments are typically
purchased from the market, and debt securities are generally public rated. Fair
values for such securities are based on market quotations.

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Fiscal Year Ended March 31, 2003 Compared to Fiscal Year Ended March 31,
2002

Net Interest Revenue After Allowance For Credit Losses

Our net interest revenue after allowances for credit losses increased
29.6% from Rs. 5,233.9 million in fiscal 2002 to Rs. 6,781.3 million in fiscal
2003. The following table sets out the components of net interest revenue after
allowance for credit losses:

|                                                       |  |                      |          |      |  |     |          | 
|------------------------------------------------------ |  | -------------------- | -------- | ---- |  | --- | -------- | 
|                                                       |  | Year ended March 31,
|                                                       |  |                     
|                                                       |  | 2002                 |          | 2003
|                                                       |  |                      |          |     
|                                                       |  | (in millions)       
|Interest and dividend revenue                          |  | Rs.                  | 16,448.0 |      |  | Rs. | 19,424.8 | 
|Interest expense                                       |  |                      | 10,762.5 |      |  |     | 11,902.0 | 
|                                                       |  |                      |          |      |  |     |          | 
|Net interest revenue                                   |  |                      | 5,685.5  |      |  |     | 7,522.8  | 
|Allowance for credit losses, net                       |  |                      | 451.6    |      |  |     | 741.5    | 
|                                                       |  |                      |          |      |  |     |          | 
|Net interest revenue after allowance for credit losses |  | Rs.                  | 5,233.9  |      |  | Rs. | 6,781.3  | 
|                                                       |  |                      |          |      |  |     |          | 

The increase in net interest revenue after allowances for credit losses
was as a result of an increase in total interest revenue of 18.1% from Rs.
16,448.0 million in fiscal 2002 to Rs. 19,424.8 million in fiscal 2003, offset
in part by an increase in total interest expense of 10.6% from Rs. 10,762.5
million in fiscal 2002 to Rs. 11,902.0 million in fiscal 2003, and an increase
in the allowance for credit losses from Rs. 451.6 million in fiscal 2002 to
Rs. 741.5 million in fiscal 2003.

The increase in our net interest revenue after allowance for credit losses
reflected the increase in our average volume of interest earning assets of
25.6%, as a result of general growth in our business. Our net interest margin
increased marginally from 3.1% in fiscal 2002 to 3.3% in fiscal 2003 while
the spread we achieved increased from 2.4% to 2.6% in those years,
respectively. The average checking accounts and low interest saving accounts
represented 35.0% of total deposits in fiscal 2003 as against 33.9% in fiscal
2002.

Interest and Dividend Revenue

The following table sets out the components of interest and dividend
revenue:

|                                            |  |                      |          |      |  |     |          | 
|------------------------------------------- |  | -------------------- | -------- | ---- |  | --- | -------- | 
|                                            |  | Year ended March 31,
|                                            |  |                     
|                                            |  | 2002                 |          | 2003
|                                            |  |                      |          |     
|                                            |  | (in millions)       
|Interest on loans                           |  | Rs.                  | 6,130.7  |      |  | Rs. | 7,805.3  | 
|Interest on securities, including dividends |  |                      | 8,166.4  |      |  |     | 10,386.1 | 
|Other interest revenue                      |  |                      | 2,150.9  |      |  |     | 1,233.4  | 
|                                            |  |                      |          |      |  |     |          | 
|Total interest and dividend revenue         |  | Rs.                  | 16,448.0 |      |  | Rs. | 19,424.8 | 
|                                            |  |                      |          |      |  |     |          | 

Interest revenue from loans increased by 27.3% from Rs. 6,130.7 million in
fiscal 2002 to Rs. 7,805.3 million in fiscal 2003, reflecting an increase in
the average volume of loans as a result of the general growth in our business,
offset in part by a decrease in yields.

Our average volume of loans increased 38.9% from Rs. 59,374.9 million in
fiscal 2002 to Rs. 82,461.2 million in fiscal 2003. Our average volume of
corporate loans increased by 24.0% from Rs. 49,682.2 million in fiscal 2002 to
Rs. 61,614.7 million in fiscal 2003 due to increase in business. Our average
retail loans increased by 115.1% from Rs. 9,692.7 million in fiscal 2002 to Rs.
20,846.5 million in fiscal 2003 primarily because of the expansion of our core
retail loan products and our expansion into new geographical areas.

Yields on our loans decreased from an average of 10.3% in fiscal 2002 to
9.5% in fiscal 2003. Corporate loan yields declined in line with the general
decline in interest rates and due to increased competition.

Interest and dividend revenue from securities increased by 27.2% from Rs.
8,166.4 million in fiscal 2002 to Rs.10,386.1 million in fiscal 2003. The
following table sets out the components of interest and dividend revenue from
securities:

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|                                                    |  |                      |         |      |  |     |          | 
|--------------------------------------------------- |  | -------------------- | ------- | ---- |  | --- | -------- | 
|                                                    |  | Year ended March 31,
|                                                    |  |                     
|                                                    |  | 2002                 |         | 2003
|                                                    |  |                      |         |     
|                                                    |  | (in millions)       
|Interest on statutory liquidity ratio investments   |  | Rs.                  | 4,083.7 |      |  | Rs. | 4,963.9  | 
|Interest and dividends on credit substitutes        |  |                      | 2,346.1 |      |  |     | 2,479.5  | 
|Other interest and dividends from securities        |  |                      | 1,736.6 |      |  |     | 2,942.7  | 
|                                                    |  |                      |         |      |  |     |          | 
|Total interest and dividend revenue from securities |  | Rs.                  | 8,166.4 |      |  | Rs. | 10,386.1 | 
|                                                    |  |                      |         |      |  |     |          | 

Our interest revenue from statutory liquidity ratio securities, which is
derived from government of India treasury securities held primarily to meet our
statutory liquidity ratio requirement, increased by 21.6% from Rs. 4,083.7
million in fiscal 2002 to Rs. 4,963.1 million in fiscal 2003 primarily as a
result of an increase in the volume of investments, offset in part by a
decrease in yields. The average volume of our statutory liquidity ratio
investments increased by 23.6% from Rs. 44,362.4 million in fiscal 2002 to Rs.
54,821.6 million in fiscal 2003 due to the increase in total liabilities subject
to reserve requirements. Yields from statutory liquidity ratio securities
declined marginally from 9.2% in fiscal 2002 to 9.1% in fiscal 2003, reflecting
the general decline in interest rates during this period.

Our interest and dividend revenue from credit substitutes increased by
5.7% from Rs. 2,346.1 million in fiscal 2002 to Rs. 2,479.5 million in fiscal
2003 primarily as a result of an increase in the volume of investments, offset
in part by a decrease in yields. The average volume of our credit substitute
investments increased by 14.1% from Rs. 25,023.9 million in fiscal 2002 to Rs.
28,558.8 million in fiscal 2003 because of growth from existing and new
customers. Yields from credit substitutes declined from 9.4% in fiscal 2002 to
8.7% in fiscal 2003, reflecting the general decline in interest rates during
this period and increased competetion.

Our
interest and dividend revenue from other securities increased by 70.0%
from Rs. 1,736.6 million in fiscal 2002 to Rs. 2,943.5 million in fiscal 2003
primarily as a result of an increase in the volume of investments, offset by a
decrease in yields. The average volume of our other investments increased by
121.6% from Rs. 19,402.8 million in fiscal 2002 to Rs. 42,987.3 million in
fiscal 2003 primarily because of additional tax-exempt investments and
investments made to comply with our directed lending obligations. Yields from
other securities declined from 9.0% in fiscal 2002 to 6.9% in fiscal 2003,
reflecting the general decline in interest rates during this period.

Other interest revenue decreased by 42.7% from Rs. 2,150.9 million in
fiscal 2002 to Rs. 1,233.4 million in fiscal 2003. This decline was due to
smaller number of interbank placements in US dollars as the interest
differential between the US market and India narrowed..

Interest Expense

Our total interest expense increased by 10.6% from Rs. 10,762.5 million in
fiscal 2002 to Rs. 11,902.0 million in fiscal 2003, reflecting primarily the
increase in our deposit base as a result of the general growth of our business.
Our average cost of funds decreased from 5.8% to 5.1% in fiscal 2003.

Our interest expense on deposits increased by 16.1% to Rs. 10,631.3
million in fiscal 2003 as a result of an increase in the average volume of
deposits caused by our growth. Our average total deposits increased by 30.8 %
from Rs. 142.8 billion in fiscal 2002 to Rs. 186.8 billion in fiscal 2003 as a
result of our expanded branch network, offset partly by decrease in yields.

Our average cost of deposits decreased from 6.4% in fiscal 2002 to 5.7% in
fiscal 2003 as a result of a decline in cost of term deposits from 9.0% to 7.8%
and an increase in the proportion of average current and savings account
balances to average total deposits from 33.9% in fiscal 2002 to 35.0% in fiscal
2003.

Our interest expense on short-term borrowings decreased by 26.7% from Rs
1,328.1 million in fiscal 2002 to Rs. 973.1 million in fiscal 2003 as a result
of decrease in borrowings in the interbank call-money market. Our interest
expense on long-term debt increased by 7.9% from Rs. 275.9 million in fiscal
2002 to Rs. 297.6 million in fiscal 2003

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Allowance for Credit Losses

The following table sets forth, for the periods indicated, movements in
our allowance for credit losses:

|                                                                  |                                                                      |                                                                 |  |  |  |      |         |                               |       |     |         |         |        |  
|----------------------------------------------------------------- | -------------------------------------------------------------------- | --------------------------------------------------------------- |  |  |  | ---- | ------- | ----------------------------- | ----- | --- | ------- | ------- | ------ | -
|                                                                  |                                                                      |                                                                 |  |  |  |      |         | For the years ended March 31,
|                                                                  |                                                                      |                                                                 |  |  |  |      |         |                              
|                                                                  |                                                                      |                                                                 |  |  |  | 2002 |         | 2003                         
|                                                                  |                                                                      |                                                                 |  |  |  |      |         |                              
|                                                                  |                                                                      |                                                                 |  |  |  |      |         | (in millions)                
|Specific allowance for credit losses at the beginning of the year |                                                                      |                                                                 |  |  |  | Rs.  | 1,010.8 |                               |       | Rs. | 1,423.5 |        
|                                                                  | Additions to allowance for credit losses for the year:               |                                                                 |  |  |  |      |         |                               |       |     |         |         |       
|                                                                  |                                                                      | Working capital                                                 |  |  |  |      |         |                               | 366.5 |     |         |         | 615.6  |  
|                                                                  |                                                                      | Term loans                                                      |  |  |  |      |         |                               | 253.8 |     |         |         | 327.5  |  
|                                                                  |                                                                      | Leasing finance                                                 |  |  |  |      |         |                               |      |     |         |         |       |  
|                                                                  | Less allowance no longer required                                    |                                                                 |  |  |  |      |         | (207.6                        | )     |     |         | (201.6  | )     
|                                                                  |                                                                      |                                                                 |  |  |  |      |         |                               |       |     |         |        
|                                                                  | Net expense for additions to specific allowance for credit losses    |                                                                 |  |  |  |      |         | 412.7                         |       |     |         | 741.5   |       
|                                                                  | Allowance no longer required on account of write-offs                |                                                                 |  |  |  |      |         |                              |       |     |         | (480.7  | )     
|                                                                  |                                                                      |                                                                 |  |  |  |      |         |                               |       |     |         |        
|                                                                  | Specific allowance for credit losses at the end of fiscal year       |                                                                 |  |  |  |      |         | 1,423.5                       |       |     |         | 1,684.3 |       
|                                                                  |                                                                      |                                                                 |  |  |  |      |         |                               |       |     |         |        
|                                                                  | Unallocated allowance for credit losses at the beginning of the year |                                                                 |  |  |  |      |         | 143.5                         |       |     |         | 182.4   |       
|                                                                  |                                                                      | Additions during the year                                       |  |  |  |      |         |                               | 38.9  |     |         |         |       |  
|                                                                  |                                                                      |                                                                 |  |  |  |      |         |                               |       |     |         |        
|                                                                  | Unallocated allowance for credit losses at the end of the year       |                                                                 |  |  |  |      |         | 182.4                         |       |     |         | 182.4   |       
|                                                                  |                                                                      |                                                                 |  |  |  |      |         |                               |       |     |         |        
|                                                                  | Total allowance for credit losses at the beginning of the year       |                                                                 |  |  |  |      |         | 1,154.3                       |       |     |         | 1,605.9 |       
|                                                                  |                                                                      | Allowance no longer required on account of writeoff             |  |  |  |      |         |                               |      |     |         |         | (480.7 | )
|                                                                  |                                                                      | Net addition to total allowance for the year charged to expense |  |  |  |      |         |                               | 451.6 |     |         |         | 741.5  |  
|                                                                  |                                                                      | Transferred on acquisition of Times Bank Limited                |  |  |  |      |         |                               |      |     |         |         |       |  
|                                                                  |                                                                      |                                                                 |  |  |  |      |         |                               |       |     |         |        
|                                                                  | Total allowance for credit losses at the end of the year             |                                                                 |  |  |  |      | Rs.     | 1,605.9                       |       |     | Rs.     | 1,866.7 |       
|                                                                  |                                                                      |                                                                 |  |  |  |      |         |                               |       |     |         |        

Our net expense for the change in our allowance for credit losses was Rs.
451.6 million in fiscal 2002 and Rs. 741.5 million in fiscal 2003. This
increase in expense reflected higher gross additions to non-performing loans in
fiscal 2003 compared to fiscal 2002.

Non-Interest Revenue

Our non-interest revenue increased by 40.6 % from Rs. 3,215.1 million in
fiscal 2002 to Rs. 4,520.1 million in fiscal 2003. The following table sets out
the components of our non-interest revenue:

|                                                   |  |                      |         |      |  |     |         | 
|-------------------------------------------------- |  | -------------------- | ------- | ---- |  | --- | ------- | 
|                                                   |  | Year ended March 31,
|                                                   |  |                     
|                                                   |  | 2002                 |         | 2003
|                                                   |  |                      |         |     
|                                                   |  | (in millions)       
|Fees and commissions                               |  | Rs.                  | 1,620.5 |      |  | Rs. | 2,306.4 | 
|Realized gains (losses) on sales of AFS securities |  |                      | 344.4   |      |  |     | 721.7   | 
|Trading Account                                    |  |                      | 600.9   |      |  |     | 507.8   | 
|Foreign exchange                                   |  |                      | 391.4   |      |  |     | 445.3   | 
|Derivative transactions                            |  |                      | 249.7   |      |  |     | 501.9   | 
|Other                                              |  |                      | 8.2     |      |  |     | 37.0    | 
|                                                   |  |                      |         |      |  |     |         | 
|Total non-interest revenue                         |  | Rs.                  | 3,215.1 |      |  | Rs. | 4,520.1 | 
|                                                   |  |                      |         |      |  |     |         | 

Our fee and commission revenue is discussed below. In fiscal 2002 we had a
net realized gain on sales of securities of Rs. 344.4 million, compared to
realized gain of Rs. 721.7 million in fiscal 2003. The increase in profit in
fiscal 2003 is on account of fall in yield in investments in fiscal 2003
over fiscal 2002.

The bank made a profit of Rs. 507.8 million on account of trading in the
held for trading category of securities. This was mainly on account of
increased market values, caused by the decline in interest rates in the fiscal
year and increased trading activity in the securities market.

Revenue from foreign exchange increased by 13.8% from Rs. 391.4 million in
fiscal 2002 to Rs. 445.3 million in fiscal 2003, primarily due to an increase
in volumes of corporate foreign exchange business.

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The following table sets out the sources of our fee and commission
revenue:

|                                                        |  |                      |         |      |  |     |         | 
|------------------------------------------------------- |  | -------------------- | ------- | ---- |  | --- | ------- | 
|                                                        |  | Year ended March 31,
|                                                        |  |                     
|                                                        |  | 2002                 |         | 2003
|                                                        |  |                      |         |     
|                                                        |  | (in millions)       
|Documentary credits, bank guarantees and other services |  | Rs.                  | 341.9   |      |  | Rs. | 455.8   | 
|Retail banking services                                 |  |                      | 770.6   |      |  |     | 1,211.1 | 
|Cash management services                                |  |                      | 125.0   |      |  |     | 187.3   | 
|Capital market services                                 |  |                      | 286.1   |      |  |     | 342.3   | 
|Distribution services                                   |  |                      | 96.9    |      |  |     | 109.9   | 
|                                                        |  |                      |         |      |  |     |         | 
|Total fee and commission income                         |  | Rs.                  | 1,620.5 |      |  | Rs. | 2,306.4 | 
|                                                        |  |                      |         |      |  |     |         | 

Fees and commissions from documentary credits and bank guarantees
increased by 33.3% primarily due to increase of bills for collection volumes
to corporate customers.

Fees from retail banking services increased by 57.2%, principally driven
by an increase in the volumes of ATM transactions for other banks customers,
debit card transactions, increase in the processing fees relating to retail
loans and service charges for non maintenance of minimum balances, and channel
transactions.

Fees from cash management services increased by 49.8% primarily because of
an increase in the number of new clients and greater transaction volumes
however, this was offset by a decline in the commission rates on cash
management services as a result of increased competition.

Net fees from capital market services increased by 19.6% principally
because our depositary transactions and dematerialization requests saw an
increase in activity due to the recovery in the stock markets.

Non-Interest Expense

Our non-interest expense was comprised of the following:

|                              |  |                      |         |      |  |     |         | 
|----------------------------- |  | -------------------- | ------- | ---- |  | --- | ------- | 
|                              |  | Year ended March 31,
|                              |  |                     
|                              |  | 2002                 |         | 2003
|                              |  |                      |         |     
|                              |  | (in millions)       
|Salaries and staff benefits   |  | Rs.                  | 1,184.6 |      |  | Rs. | 1,661.2 | 
|Premises and equipment        |  |                      | 913.8   |      |  |     | 1,343.6 | 
|Depreciation and amortization |  |                      | 675.7   |      |  |     | 1,052.4 | 
|Administrative and other      |  |                      | 1,421.9 |      |  |     | 2,000.7 | 
|                              |  |                      |         |      |  |     |         | 
|Total non-interest expense    |  | Rs.                  | 4,196.0 |      |  | Rs. | 6,057.9 | 
|                              |  |                      |         |      |  |     |         | 

Total non-interest expense increased by 44.4% from Rs. 4,196.0 million in
fiscal 2002 to Rs. 6,057.9 million in fiscal 2003. As a percentage of our net
revenues, non-interest expense increased to 53.61% in fiscal 2003 compared
to 49.7% in fiscal 2002. This is on account of the increase in infrastructure
costs for our branch and ATM expansion, expansion of geography for retail loan
products, launch of our credit card business which is expected to take another 18 to 24 months to breakeven, increased selling and marketing expenditure for our
retail business and reduction in net revenues on account of higher allowances
for credit losses.

Salaries and staff benefits rose by 40.2% from Rs. 1,184.6 million in
fiscal 2002 to Rs. 1,661.2 million in fiscal 2003 principally due to increased
headcount to support our growth. As a
percentage of net revenues, salaries and staff benefits increased marginally
from 14.4% in fiscal 2002 to 14.7% in fiscal 2003. Our headcount increased from
3,742 employees as of March 31, 2002 to 4,791 employees as of March 31, 2003.

Our premises and equipment expense increased as a percentage of net
revenues from 10.8% in fiscal 2002 to 11.9% in fiscal 2003 principally because
we expanded our distribution network from 171 branches and 479 ATMs at March
31, 2002 to 231 branches and 732 ATMs at March 31, 2003.

Depreciation and amortization expense as a percentage of net revenues
increased from 8.0% in fiscal 2002 to 9.3% in fiscal 2003. This is primarily
because of the increase in premises (both branch and ATM) and technology
infrastructure.

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Our administrative and other expense as a percentage of net revenues
increased from 16.8% in fiscal 2002 to 17.7% in fiscal 2003, principally
because of our growth in retail loans and investments in new lines of business
especially, the two wheeler, commercial vehicle and credit card business. The
principal components of our administrative and other expense were as set out in
the table below:

|                                            |  |                      |         |      |  |     |         | 
|------------------------------------------- |  | -------------------- | ------- | ---- |  | --- | ------- | 
|                                            |  | Year ended March 31,
|                                            |  |                     
|                                            |  | 2002                 |         | 2003
|                                            |  |                      |         |     
|                                            |  | (in millions)       
|Outsourcing and other professional services |  | Rs.                  | 189.7   |      |  | Rs. | 392.1   | 
|Communications                              |  |                      | 370.6   |      |  |     | 519.2   | 
|Stationery and office supplies              |  |                      | 177.2   |      |  |     | 275.3   | 
|Sales and marketing                         |  |                      | 349.8   |      |  |     | 647.3   | 
|Other                                       |  |                      | 334.6   |      |  |     | 166.8   | 
|                                            |  |                      |         |      |  |     |         | 
|Total administrative and other expense      |  | Rs.                  | 1,421.9 |      |  | Rs. | 2,000.7 | 
|                                            |  |                      |         |      |  |     |         | 

Income Tax

Our income tax expense increased by 33.6% from Rs. 1,294.6 million in
fiscal 2002 to Rs. 1,729.7 million in fiscal 2003. Our effective rate of tax
increased from 30.4% in fiscal 2002 to 33.0% in fiscal 2003, principally due
to an increase of 1.05% in the statutory income tax rate and lesser permanent
differences. Tax-exempt income principally
consists of dividends and investment income from tax-exempt investments such as
preference shares, and infrastructure bonds. Of our total income tax expense of
Rs. 1,729.7 million in fiscal 2003, our current income tax expense was Rs.
1,769.6 million and our deferred income tax benefit was Rs. 39.9 million.

Net Income

As a result of the foregoing factors, our net income after taxes increased
by 18.8% from Rs. 2,958.4 million in fiscal 2002 to Rs. 3,513.8 million in
fiscal 2003. Our basic earnings per equity share increased by 13.2% from Rs.
11.10 to Rs. 12.57 per equity share. Our diluted earnings per share increased
by 13.32% from Rs. 11.04 to Rs. 12.51 per equity share. Our basic earnings per
ADS was Rs. 37.71 per ADS for fiscal 2003, where each ADS represents three
equity shares. Our diluted earnings per ADS was Rs. 37.53 per ADS for fiscal
2003.

Fiscal Year Ended March 31, 2002 Compared to Fiscal Year Ended March 31,
2001

Net Interest Revenue After Allowance For Credit Losses

Our net interest revenue after allowances for credit losses increased
10.4% from Rs. 4,741.1 million in fiscal 2001 to Rs. 5,233.9 million in fiscal
2002. The following table sets out the components of net interest revenue after
allowance for credit losses:

|                                                       |  |                      |          |      |  |     |          | 
|------------------------------------------------------ |  | -------------------- | -------- | ---- |  | --- | -------- | 
|                                                       |  | Year ended March 31,
|                                                       |  |                     
|                                                       |  | 2001                 |          | 2002
|                                                       |  |                      |          |     
|                                                       |  | (in millions)       
|Interest and dividend revenue                          |  | Rs.                  | 12,561.5 |      |  | Rs. | 16,448.0 | 
|Interest expense                                       |  |                      | 7,573.4  |      |  |     | 10,762.5 | 
|                                                       |  |                      |          |      |  |     |          | 
|Net interest revenue                                   |  |                      | 4,988.1  |      |  |     | 5,685.5  | 
|Allowance for credit losses, net                       |  |                      | 247.0    |      |  |     | 451.6    | 
|                                                       |  |                      |          |      |  |     |          | 
|Net interest revenue after allowance for credit losses |  | Rs.                  | 4,741.1  |      |  | Rs. | 5,233.9  | 
|                                                       |  |                      |          |      |  |     |          | 

The increase in net interest revenue after allowances for credit losses
was as a result of an increase in total interest revenue of 30.9% from Rs.
12,561.5 million in fiscal 2001 to Rs. 16,448.0 million in fiscal 2002, offset
in part by an increase in total interest expense of 42.1% from Rs. 7,573.4
million in fiscal 2001 to Rs. 10,762.5 million in fiscal 2002. There was an
increase in the allowance for credit losses from Rs. 247.0 million in fiscal
2001 to Rs. 451.6 million in fiscal 2002.

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The increase in our net interest revenue after allowance for credit losses
reflected the increase in our average volume of interest earning assets of
53.3%, as a result of general growth in our business. This was offset in part
by a decrease in the net interest margin and the spreads we achieved. Our net
interest margin decreased from 4.2% in fiscal 2001 to 3.1% in fiscal 2002 while
the spread we achieved decreased from 3.6% to 2.4% in those years,
respectively. The decreases in net interest margin and spread were primarily
due to a drop in yields on assets arising from a general decline in interest
rates and a reduction in the low cost deposits. The average checking accounts
and low interest saving accounts represented 33.9% of total deposits in fiscal
2002 as against 37.7% in fiscal 2001.

Interest Revenue

The following table sets out the components of interest and dividend
revenue:

|                                            |  |                      |          |      |  |     |          | 
|------------------------------------------- |  | -------------------- | -------- | ---- |  | --- | -------- | 
|                                            |  | Year ended March 31,
|                                            |  |                     
|                                            |  | 2001                 |          | 2002
|                                            |  |                      |          |     
|                                            |  | (in millions)       
|Interest on loans                           |  | Rs.                  | 4,898.1  |      |  | Rs. | 6,130.7  | 
|Interest on securities, including dividends |  |                      | 6,355.9  |      |  |     | 8,166.4  | 
|Other interest revenue                      |  |                      | 1,307.5  |      |  |     | 2,150.9  | 
|                                            |  |                      |          |      |  |     |          | 
|Total interest and dividend revenue         |  | Rs.                  | 12,561.5 |      |  | Rs. | 16,448.0 | 
|                                            |  |                      |          |      |  |     |          | 

Interest revenue from loans increased by 25.2% from Rs. 4,898.1 million in
fiscal 2001 to Rs. 6,130.7 million in fiscal 2002, reflecting an increase in
the average volume of loans as a result of the general growth in our business,
offset in part by a decrease in yields.

Our average volume of loans increased 52.2% from Rs. 39,004.4 million in
fiscal 2001 to Rs. 59,374.9 million in fiscal 2002. Our average volume of
corporate loans increased by 49.1% from Rs. 33,321.1 million in fiscal 2001 to
Rs. 49,682.2 million in fiscal 2002 due to increase in business. Our average
retail loans increased by 70.5% from Rs. 5,683.3 million in fiscal 2001 to Rs.
9,692.7 million in fiscal 2002 primarily because of the expansion of our core
retail loan products and our expansion into new geographical areas.
          Yields on our loans decreased from an average of 12.6%in fiscal 2001 to
10.3% in fiscal 2002. Corporate loan yields declined in line with the general
decline in interest rates and due to increased competition.

Interest and dividend revenue from securities increased by 28.5% from Rs.
6,355.9 million in fiscal 2001 to Rs. 8,166.4 million in fiscal 2002. The
following table sets out the components of interest and dividend revenue from
securities:

|                                                    |  |                      |         |      |  |     |         | 
|--------------------------------------------------- |  | -------------------- | ------- | ---- |  | --- | ------- | 
|                                                    |  | Year ended March 31,
|                                                    |  |                     
|                                                    |  | 2001                 |         | 2002
|                                                    |  |                      |         |     
|                                                    |  | (in millions)       
|Interest on statutory liquidity ratio investments   |  | Rs.                  | 3,199.4 |      |  | Rs. | 4,083.7 | 
|Interest and dividends on credit substitutes        |  |                      | 1,844.2 |      |  |     | 2,346.1 | 
|Other interest and dividends from securities        |  |                      | 1,312.3 |      |  |     | 1,736.6 | 
|                                                    |  |                      |         |      |  |     |         | 
|Total interest and dividend revenue from securities |  | Rs.                  | 6,355.9 |      |  | Rs. | 8,166.4 | 
|                                                    |  |                      |         |      |  |     |         | 

Our interest revenue from statutory liquidity ratio securities, which is
derived from government of India treasury securities held primarily to meet our
statutory liquidity ratio requirement, increased by 27.6% from Rs. 3,199.4
million in fiscal 2001 to Rs. 4,083.7 million in fiscal 2002 primarily as a
result of an increase in the volume of investments. This was offset in part by
a decrease in yields. The average volume of our statutory liquidity ratio
investments increased by 51.5% from Rs. 29,285.6 million in fiscal 2001 to Rs.
44,362.4 million in fiscal 2002 due to the increase in total liabilities
subject to reserve requirements. Yields from statutory liquidity ratio
securities declined from 10.9% in fiscal 2001 to 9.2% in fiscal 2002,
reflecting the general decline in interest rates during this period.

Our interest and dividend revenue from credit substitutes increased by
27.2% from Rs. 1,844.2 million in fiscal 2001 to Rs. 2,346.1 million in fiscal
2002 primarily as a result of an increase in the volume of investments, offset
in part by a decrease in yields. The average volume of our credit substitute
investments increased by 46.7% from Rs. 17,053.7 million in fiscal 2001 to Rs.
25,023.9 million in fiscal 2002 because of growth from

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existing and new customers. Yields from credit substitutes declined from 10.8%
in fiscal 2001 to 9.4% in fiscal 2002, reflecting the general decline in
interest rates during this period.

Our interest and dividend revenue from other securities increased by 32.3%
from Rs. 1,312.3 million in fiscal 2001 to Rs. 1,736.6 million in fiscal 2002
primarily as a result of an increase in the volume of investments, offset by a
decrease in yields. The average volume of our other investments increased by
44.0% from Rs. 13,469.8 million in fiscal 2001 to Rs. 19,402.8 million in
fiscal 2002 primarily because of additional tax-exempt investments and
investments made to comply with our directed lending obligations. Yields from
other securities declined from 9.7% in fiscal 2001 to 9.0% in fiscal 2002,
reflecting the general decline in interest rates during this period.

Other interest revenue increased by 64.5% from Rs. 1,307.5 million in
fiscal 2001 to Rs. 2,150.9 million in fiscal 2002. This growth was due in part
to our larger cash reserve ratio requirement. In addition, we engaged in a
greater number of interbank placements driven by money market activities in
which we swapped rupees into dollars to take advantage of temporary conditions
in the foreign exchange swap market.

Interest Expense

Our total interest expense increased by 42.1% to Rs. 10,762.5 million in
fiscal 2002, reflecting primarily the increase in our deposit base as a result
of the general growth of our business. Our average cost of funds decreased from
6.9% to 5.8% in fiscal 2002.

Our interest expense on deposits increased by 43.3% to Rs. 9,158.5 million
in fiscal 2002 as a result of an increase in the average volume of deposits
caused by our growth . Our average total deposits increased by 47.1% from Rs.
97.1 billion in fiscal 2001 to Rs. 142.8 billion in fiscal 2002 as a result of
our expanded branch network.

Our average cost of deposits decreased slightly from 6.6% in fiscal 2001
to 6.4% in fiscal 2002 as a result of a decline in cost of term deposits to
9.0% from 9.8% which was partly offset by a decline in the proportion of
average current and savings account balances to average total deposits from
37.7% in fiscal 2001 to 33.9% in fiscal 2002. The reduction was primarily on
account of low stock exchange clearing transactions. The stock market crisis in
March 2001 led to lower stock exchange volumes in fiscal 2002.

Our interest expense on short-term borrowings increased by 40.2% from Rs
947.1 million in fiscal 2001 to Rs. 1,328.1 million in fiscal 2002 as a result
of an increase in borrowings in the interbank call-money market. Our interest
expense on long-term debt increased by 17.2% from Rs. 235.5 million in fiscal
2001 to Rs. 275.9 million in fiscal 2002 reflecting primarily an increase in
our subordinated debt by 50.0 million in March 2001, the full year impact of
which is being seen in the fiscal 2002.

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Allowance for Credit Losses

The following table sets forth, for the periods indicated, movements in
our allowance for credit losses:

|                                                                  |                                                                      |                                                                 |       |                               |       |      |         |         |       | 
|----------------------------------------------------------------- | -------------------------------------------------------------------- | --------------------------------------------------------------- | ----- | ----------------------------- | ----- | ---- | ------- | ------- | ----- | 
|                                                                  |                                                                      |                                                                 |       | For the years ended March 31,
|                                                                  |                                                                      |                                                                 |       |                              
|                                                                  |                                                                      |                                                                 |       | 2001                          |       | 2002
|                                                                  |                                                                      |                                                                 |       |                               |       |     
|                                                                  |                                                                      |                                                                 |       | (in millions)                
|Specific allowance for credit losses at the beginning of the year |                                                                      | Rs.                                                             | 763.8 |                               |       | Rs.  | 1,010.8 |        
|                                                                  | Additions to allowance for credit losses for the year:               |                                                                 |       |                               |       |      |         |         |      
|                                                                  |                                                                      | Working capital                                                 |       |                               | 201.9 |      |         |         | 366.5 | 
|                                                                  |                                                                      | Term loans                                                      |       |                               | 135.2 |      |         |         | 253.8 | 
|                                                                  |                                                                      | Leasing finance                                                 |       |                               | 2.5   |      |         |         |      | 
|                                                                  |                                                                      |                                                                 |       |                               |       |      |         |        
|                                                                  | Less allowance no longer required due to                             |                                                                 |       | (92.6                         | )     |      |         | (207.6  | )    
|                                                                  | Net expense for additions to specific allowance for credit losses    |                                                                 |       | 247.0                         |       |      |         | 412.7   |      
|                                                                  |                                                                      |                                                                 |       |                               |       |      |         |        
|                                                                  | Transferred on acquisition of Times Bank Limited:                    |                                                                 |       |                               |       |      |         |         |      
|                                                                  |                                                                      | Working capital                                                 |       |                               |      |      |         |         |      | 
|                                                                  |                                                                      | Term loans                                                      |       |                               |      |      |         |         |      | 
|                                                                  |                                                                      |                                                                 |       |                               |       |      |         |        
|                                                                  | Specific allowance for credit losses at the end of fiscal year       |                                                                 |       | 1,010.8                       |       |      |         | 1,423.5 |      
|                                                                  |                                                                      |                                                                 |       |                               |       |      |         |        
|                                                                  | Unallocated allowance for credit losses at the beginning of the year |                                                                 |       | 143.5                         |       |      |         | 143.5   |      
|                                                                  |                                                                      | Additions during the year                                       |       |                               |      |      |         |         | 38.9  | 
|                                                                  |                                                                      |                                                                 |       |                               |       |      |         |        
|                                                                  | Unallocated allowance for credit losses at the end of the year       |                                                                 |       | 143.5                         |       |      |         | 182.4   |      
|                                                                  |                                                                      |                                                                 |       |                               |       |      |         |        
|                                                                  | Total allowance for credit losses at the beginning of the year       |                                                                 |       | 907.3                         |       |      |         | 1,154.3 |      
|                                                                  |                                                                      | Net addition to total allowance for the year charged to expense |       |                               | 247.0 |      |         |         | 451.6 | 
|                                                                  |                                                                      | Transferred on acquisition of Times Bank Limited                |       |                               |      |      |         |         |      | 
|                                                                  |                                                                      |                                                                 |       |                               |       |      |         |        
|                                                                  | Total allowance for credit losses at the end of the year             |                                                                 | Rs.   | 1,154.3                       |       |      | Rs.     | 1,605.9 |      
|                                                                  |                                                                      |                                                                 |       |                               |       |      |         |        

Our net expense for the change in our allowance for credit losses was Rs.
247.0 million in fiscal 2001 and Rs. 451.6 million in fiscal 2002. This
increase in expense reflected higher gross additions to non-performing loans in
fiscal 2002 compared to fiscal 2001. In fiscal 2002 we also provided an
unallocated allowance of Rs. 38.9 million against our retail loan products.

Non-Interest Revenue

Our non-interest revenue increased by 97.6 % from Rs. 1,627.1 million in
fiscal 2001 to Rs. 3,215.1 million in fiscal 2002. The following table sets out
the components of our non-interest revenue:

|                                                   |  |                      |         |      |  |     |         | 
|-------------------------------------------------- |  | -------------------- | ------- | ---- |  | --- | ------- | 
|                                                   |  | Year ended March 31,
|                                                   |  |                     
|                                                   |  | 2001                 |         | 2002
|                                                   |  |                      |         |     
|                                                   |  | (in millions)       
|Fees and commissions                               |  | Rs.                  | 1,302.1 |      |  | Rs. | 1,620.5 | 
|Realized gains (losses) on sales of AFS securities |  |                      | (74.2   | )    |  |     | 344.4   | 
|Trading Account                                    |  |                      |        |      |  |     | 600.9   | 
|Foreign exchange                                   |  |                      | 252.5   |      |  |     | 391.4   | 
|Other                                              |  |                      | 0.7     |      |  |     | 8.2     | 
|Derivative transactions                            |  |                      | 146.0   |      |  |     | 249.7   | 
|                                                   |  |                      |         |      |  |     |         | 
|Total non-interest revenue                         |  | Rs.                  | 1,627.1 |      |  | Rs. | 3,215.1 | 
|                                                   |  |                      |         |      |  |     |         | 

Our fee and commission revenue is discussed below. In fiscal 2001 we had a
net realized loss of on sales of securities of Rs. 74.2 million, compared to
realized gain of Rs. 344.4 million in fiscal 2002. We realized net losses on
sales of securities in fiscal 2001 primarily because of losses on equity
securities of Rs. 87.3 million due to adverse market conditions in the last
quarter of our fiscal year. However, in fiscal 2002 with a substantial
reduction in market yields, there was an increase in prices of securities and
bonds. The Bank has prudently utilized this opportunity increase its trading
profits without materially compromising the yields on its investment portfolio,
resulting in a realized gain of Rs. 344.4 million on the available for sale
portfolio.

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The bank made a profit of Rs. 600.9 million on account of trading in the
held for trading category of securities. This was mainly on account of
increased market values, caused by the decline in interest rates in the fiscal
year and increased trading activity in the securities market.

Revenue from foreign exchange increased by 55.0% from Rs. 252.5 million in
fiscal 2001 to Rs. 391.4 million in fiscal 2002, primarily due to an increase
in volumes of corporate foreign exchange and gains on the ADR proceeds received
by the Bank, pursuant to its public offering on July 20, 2001. This was partly
offset by a marginal decrease in spreads on foreign exchange contracts.

The following table sets out the sources of our fee and commission
revenue:

|                                                        |  |                      |         |      |  |     |         | 
|------------------------------------------------------- |  | -------------------- | ------- | ---- |  | --- | ------- | 
|                                                        |  | Year ended March 31,
|                                                        |  |                     
|                                                        |  | 2001                 |         | 2002
|                                                        |  |                      |         |     
|                                                        |  | (in millions)       
|Documentary credits, bank guarantees and other services |  | Rs.                  | 461.4   |      |  | Rs. | 341.9   | 
|Retail banking services                                 |  |                      | 395.2   |      |  |     | 770.6   | 
|Cash management services                                |  |                      | 111.6   |      |  |     | 125.0   | 
|Capital market services                                 |  |                      | 320.8   |      |  |     | 286.1   | 
|Distribution services                                   |  |                      | 13.1    |      |  |     | 96.9    | 
|                                                        |  |                      |         |      |  |     |         | 
|Total fee and commission income                         |  | Rs.                  | 1,302.1 |      |  | Rs. | 1,620.5 | 
|                                                        |  |                      |         |      |  |     |         | 

Fees and commissions from documentary credits and bank guarantees
decreased by 25.9% primarily due to reduced volumes of guarantees to stock
brokers due to new exposure norms and depressed conditions in the capital
market. This was partially offset by an increase in volumes to the corporate
customers. However, a decrease in commission rates of corporate clients negated
the increase in volumes.

Fees from retail banking services increased by 95.0%, principally driven
by an increase in the volumes of ATM transactions for other banks customers,
debit card transactions, increase in the processing fees relating to retail
loans and service charges for non maintenance of minimum balances.

Fees from cash management services increased by 12% primarily because of
an increase in the number of new clients and greater transaction volumes. Cash
management volumes put through our system increased by approximately 44% during
fiscal 2002. However, this was offset by a decline in the commission rates on
cash management services.

Net fees from capital market services decreased by 10.8% principally
because our depositary transactions and dematerialization requests saw a
decline due to decreased activity in the stock markets and an overall slump in
the capital market sector.

Non-Interest Expense

Our non-interest expense was comprised of the following:

|                              |  |                      |         |      |  |     |         | 
|----------------------------- |  | -------------------- | ------- | ---- |  | --- | ------- | 
|                              |  | Year ended March 31,
|                              |  |                     
|                              |  | 2001                 |         | 2002
|                              |  |                      |         |     
|                              |  | (in millions)       
|Salaries and staff benefits   |  | Rs.                  | 918.5   |      |  | Rs. | 1,184.6 | 
|Premises and equipment        |  |                      | 656.5   |      |  |     | 913.8   | 
|Depreciation and amortization |  |                      | 538.8   |      |  |     | 675.7   | 
|Administrative and other      |  |                      | 1,048.7 |      |  |     | 1,421.9 | 
|                              |  |                      |         |      |  |     |         | 
|Total non-interest expense    |  | Rs.                  | 3,162.5 |      |  | Rs. | 4,196.0 | 
|                              |  |                      |         |      |  |     |         | 

Total non-interest expense increased by 32.7% from Rs. 3,162.5 million in
fiscal 2001 to Rs. 4,196.0 million in fiscal 2002. As a percentage of our net
revenues, non-interest expense remained constant at 49.7% in fiscal 2002
compared to fiscal 2001. This is despite the increase in additional
infrastructure costs for the branch and ATM expansion, expansion of geography
for retail loan products, launch of the credit card business and increased
selling and marketing expenditure for our retail business.

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Salaries and staff benefits rose by 29.0% from Rs. 918.5 million in fiscal
2001 to Rs. 1,184.6 million in fiscal 2002 principally due to increased
headcount to support our growth. As a
percentage of net revenues, salaries and staff benefits decreased from 14.4% in
fiscal 2001 to 14.0% in fiscal 2002. Our headcount increased from 2,751
employees as of March 31, 2001 to 3,742 employees as of March 31, 2002.

Our premises and equipment expense increased as a percentage of net
revenues from 10.3% in fiscal 2001 to 10.8% in fiscal 2002 principally because
we expanded our distribution network from 131 branches and 207 ATMs at March
31, 2001 to 171 branches and 479 ATMs at March 31, 2002. We also added new
infrastructure for credit card processing at Chennai and a separate Information
Technology Center at Chandivili, Mumbai in this fiscal year.

Depreciation and amortization expense as a percentage of net revenues
decreased from 8.5% in fiscal 2001 to 8.0% in fiscal 2002. This is primarily
because the new infrastructure for credit cards was commissioned only towards
the latter half of the year and the full year impact of the same shall be seen
only in the next fiscal.

Our administrative and other expense as a percentage of net revenues
increased from 16.5% in fiscal 2001 to 16.8% in fiscal 2002, principally
because of our growth in retail loans and investments in new lines of business.
The principal components of our administrative and other expense were as set
out in the table below:

|                                            |  |                      |         |      |  |     |         | 
|------------------------------------------- |  | -------------------- | ------- | ---- |  | --- | ------- | 
|                                            |  | Year ended March 31,
|                                            |  |                     
|                                            |  | 2001                 |         | 2002
|                                            |  |                      |         |     
|                                            |  | (in millions)       
|Outsourcing and other professional services |  | Rs.                  | 172.9   |      |  | Rs. | 189.7   | 
|Communications                              |  |                      | 308.3   |      |  |     | 370.6   | 
|Stationery and office supplies              |  |                      | 172.8   |      |  |     | 177.2   | 
|Sales and marketing                         |  |                      | 183.7   |      |  |     | 349.8   | 
|Other                                       |  |                      | 211.0   |      |  |     | 334.6   | 
|                                            |  |                      |         |      |  |     |         | 
|Total administrative and other expense      |  | Rs.                  | 1,048.7 |      |  | Rs. | 1,421.9 | 
|                                            |  |                      |         |      |  |     |         | 

Income Tax

Our income tax expense increased by 21.5% from Rs. 1,065.1 million in
fiscal 2001 to Rs. 1,294.6 million in fiscal 2002. Our effective rate of tax
decreased from 33.2% in fiscal 2001 to 30.4% in fiscal 2002, principally due
to a decrease of 3.85% in the statutory income tax rate. Tax-exempt income
principally consists of dividends and investment income from tax-exempt
investments such as preference shares, mutual fund units and infrastructure
bonds. Of our total income tax expense of Rs. 1,294.6 million in fiscal 2002,
our current income tax expense was Rs. 1,400.2 million and our deferred income
tax benefit was Rs. 105.6 million.

Net Income

As a result of the foregoing factors, our net income after taxes increased
by 38.2% from Rs. 2,140.6 million in fiscal 2001 to Rs. 2,958.4 million in
fiscal 2002. Our basic earnings per equity share increased by 23.7% from Rs.
8.97 to Rs. 11.10 per equity share, which reflected the impact of the ADR issue
on July 20, 2001 on our weighted average number of equity shares outstanding.
Our diluted earnings per share increased by 24.5% from Rs. 8.87 to Rs. 11.04
per equity share. Our basic earnings per ADS was Rs. 33.30 per ADS for fiscal
2002, where each ADS represents three equity shares. Our diluted earnings per
ADS was Rs. 33.12 per ADS for fiscal 2002.

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Related Party Transactions

The Bank enters into transactions with related parties in the normal
course of business. The principal related parties are the Banks affiliates,
the subsidiaries and affiliates of HDFC and
companies that are owned by the Banks employees and officers. These
transactions are generally at arms length and in line with the market pricing.
The Bank does not have any obligation to provide financial support or meet any
obligations of these related parties. For further information see Related
Party Transactions.

Liquidity and Capital Resources

Our growth over the last five years has been financed by a combination of
cash generated from operations, increases in our customer deposits, borrowings
and new issuances of equity capital including our ADR offering completed in
July 2001.

Cash Flows from Operations

Our operations generated cash flows of Rs. 6,774.9 million, Rs. 4,571.0
million and Rs. 14,487.5 million in the fiscal years ended March 31, 2001, 2002
and 2003, respectively.

Net cash from operations in fiscal 2003 of Rs. 14,487.5 million resulted
primarily from net income of Rs. 3,513.8 million, a net increase in other
liabilities of Rs. 11,075.2 million resulting from an increase in remittances
in transit in our cash management services business, partly offset by an
increase in other assets of Rs. 2,406.2 million, an increase in our accrued
interest expense on our deposits and borrowings of Rs. 2,718.6 million and non
cash adjustments for allowances for credit losses, amortization of investments,
depreciation and amortization and stock based compensation aggregating Rs.
2,759.8 million. These increases were offset in part by an increase in trading
account assets of Rs. 138.5 million and an increase in accrued interest income
on our loans of Rs. 2,199.9 million.

Net cash from operations in fiscal 2002 of Rs. 4,571.0 million resulted
primarily from net income of Rs. 2,958.4 million, a net increase in other
liabilities of Rs. 4,340.9 million resulting from an increase in remittances in
transit in our cash management services business, an increase in our accrued
interest expense on our deposits and borrowings of Rs. 1,214.8 million,
increase in other assets Rs. 347.5 million principally arising from checks in
course of collection at the balance sheet date and non cash adjustments for
allowances for credit losses, depreciation and amortization and stock based
compensation aggregating Rs. 1,763.0 million. These increases were offset in
part by, an increase in accrued interest income on our loans of Rs. 1,774.1
million. Checks in course of collection offset the net increase in deposits
until cleared.

Net cash generated from operations in fiscal 2001 of Rs. 6,774.9 million
resulted primarily from net income of Rs. 2,140.6 million, a net increase in
other liabilities of Rs. 4,328.7 million resulting from an increase in
remittances in transit, non cash adjustments for allowances for credit losses,
depreciation and amortization and stock based compensation aggregating Rs.
935.7 million. These increases were offset in part by an increase in accrued
interest income on our loans of Rs. 688.7 million, an increase in other assets
of Rs. 1,933.8 million.

Cash Flows from Investing Activities

Net cash used in investing activities was Rs. 30,282.2 million, Rs.
68,286.9 million, and Rs. 71,828.2 million in the years ended March 31, 2001,
2002 and 2003 respectively. Our investing activities principally consist of
making loans to our wholesale and retail customers, making investments
primarily to comply with the statutory liquidity reserve requirements of the
RBI and for our own account, and capital expenditures for our branch network,
technology and infrastructure.

We used net cash in investing activities in fiscal 2003 of Rs. 71,828.2
million primarily to increase our loans, net of repayments, by Rs. 47,512.5
million, increase our term placements by Rs. 7,747.4 million, increase

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our net investment portfolio including repurchase transactions by Rs. 14,051.0
million and for capital expenditures of Rs. 2,533.5 million to expand our
branch network and other infrastructure.

We used net cash in investing activities in fiscal 2002 of Rs. 68,286.9
million primarily to increase our loans, net of repayments, by Rs. 20,897.3
million, increase our net investment portfolio including repurchase
transactions by Rs. 45,808.0 million and for capital expenditures of Rs.
1,682.6 million to expand our branch network and other infrastructure.

We used net cash in investing activities in fiscal 2001 of Rs. 30,282.2
million primarily to increase our loans, net of repayments, by Rs. 15,271.7
million, increase our net investment portfolio including repurchase
transactions by Rs. 13,876.7 million and for capital expenditures of Rs.
1,150.7 million.

Our loans, investments and fixed assets are discussed in greater detail in
the section Financial Condition below.

Cash Flows from Financing Activities

Net cash provided by financing activities was Rs. 33,446.5 million, Rs.
72,185.4 million, and Rs. 46,695.0 million in the years ended March 31, 2001,
2002 and 2003, respectively. Our financing sources are primarily our deposit
base, short term and long term borrowings and issuance of equity.

Net cash provided by financing activities in fiscal 2003 of Rs. 46,695,
million resulted primarily from issuance of equity shares of Rs. 86.7 million
as a result of options that were excersised, an increase in our deposits of Rs.
47,221.9 million offset in part by repayments of long-term debt of Rs. 41.9
million, a decrease in our short term and long-term borrowings aggregating Rs.
62.6 million, and dividends paid of Rs. 697.5 million.

Net cash provided by financing activities in fiscal 2002 of Rs. 72,185.4
million resulted primarily from issuance of equity shares and ADSs of Rs.
7,890.6, an increase in our deposits of Rs. 59,957.0 million and an increase in
our short term and long-term borrowings aggregating Rs. 4,929.1 million, offset
in part by repayments of long-term debt of Rs. 62.7 million and dividends paid
of Rs. 528.6 million.

Net cash provided by financing activities in fiscal 2001 of Rs. 33,446.5
million resulted primarily from an increase in our deposits of Rs. 32,303.9
million and an increase in our short term and long-term borrowings aggregating
Rs. 1,532.1 million, offset in part by repayments of long-term debt of Rs. 95.0
million and dividends paid of Rs. 351.5 million.

Our financing sources are discussed in greater detail in the section
Financial Condition below.

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Financial Condition

Assets

The following tables set forth the principal components of our assets at
March 31, 2002 and 2003:

|                                                |              |     |               |           |      |     |           |           | 
|----------------------------------------------- | ------------ | --- | ------------- | --------- | ---- | --- | --------- | --------- | 
|                                                |              |     | At March 31, 
|                                                |              |     |              
|                                                |              |     | 2002          |           | 2003
|                                                |              |     |               |           |     
|                                                |              |     | (in millions)
|Cash and cash equivalents                       |              | Rs. | 34,590.6      |           |      | Rs. | 23,944.9  |          
|Term placements                                 |              |     |              |           |      |     | 7,747.4   |          
|Investments held for trading                    |              |     | 3,837.6       |           |      |     | 3,976.1   |          
|Investments available for sale                  |              |     | 80,320.6      |           |      |     | 98,929.2  |          
|Investments held to maturity                    |              |     | 35,429.9      |           |      |     | 38,426.7  |          
|Securities purchased under agreements to resell |              |     | 2,823.5       |           |      |     |          |          
|Loans, net                                      |              |     | 71,528.9      |           |      |     | 118,299.9 |          
|Accrued interest receivable                     |              |     | 4,084.0       |           |      |     | 6,283.8   |          
|Property and equipment                          |              |     | 3,658.1       |           |      |     | 5,277.5   |          
|Other assets                                    |              |     | 6,759.0       |           |      |     | 8,955.2   |          
|                                                |              |     |               |           |      |     |           |          
|                                                | Total assets |     | Rs.           | 243,032.2 |      |     | Rs.       | 311,840.7 | 
|                                                |              |     |               |           |      |     |           |          

Our total assets increased 28.3% to Rs. 311.8 billion at March 31, 2003.
This increase was comprised of increases of 18.2% in total investments and
65.4% in loans, partly offset by a decrease in cash and cash equivalents of
8.4%.

Investments available for sale increased by 23.2% to Rs. 98.93 billion at
March 31, 2003. This was primarily due to increases in our statutory liquidity
ratio securities, asset backed securities, mortgage backed securities, mutual
fund units and investments qualifying for directed lending. Our statutory
liquidity ratio requirements increased due to growth in our liabilities subject
to reserve requirements. Of our total available for sale investment portfolio
at March 31, 2003, 46.4% consists of securities issued by the government of
India and state governments.

Net loans increased 65.4% to Rs. 118.3 billion at March 31, 2003, due to
increases in both our wholesale and retail products. Our retail loans increased
by 121.2% to Rs. 31.6 billion with our increased focus on retail loans.

Our property and equipment increased 44.3% to Rs. 5.3 billion at March 31,
2003 as we expanded our branch network from 171 branches to 231 branches and
our ATM network from 479 ATMs to 732 ATMs and invested in other infrastructure
to support our growth.

Liabilities and Shareholders Equity

The following tables set forth the principal components of our liabilities
and shareholders equity at March 31, 2002 and 2003:

|            |                               |  |     |               |  |      |     |           |  | 
|----------- | ----------------------------- |  | --- | ------------- |  | ---- | --- | --------- |  | 
|            |                               |  |     | At March 31, 
|            |                               |  |     |              
|            |                               |  |     | 2002          |  | 2003
|            |                               |  |     |               |  |     
|            |                               |  |     | (in millions)
|Liabilities |                               |  |     |               |  |      |     |          
|            | Interest bearing deposits     |  | Rs. | 134,336.3     |  |      | Rs. | 174,250.4 | 
|            | Non-interest bearing deposits |  |     | 42,201.8      |  |      |     | 49,509.6  | 
|            |                               |  |     |               |  |      |     |          
|            | Total deposits                |  |     | 176,538.1     |  |      |     | 223,760.0 | 

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| |                                             |                                            |  |               |           |      |  |          |           | 
| | ------------------------------------------- | ------------------------------------------ |  | ------------- | --------- | ---- |  | -------- | --------- | 
| |                                             |                                            |  | At March 31, 
| |                                             |                                            |  |              
| |                                             |                                            |  | 2002          |           | 2003
| |                                             |                                            |  |               |           |     
| |                                             |                                            |  | (in millions)
| | Securities sold under repurchase agreements |                                            |  | 643.9         |           |      |  | 4,600.0  |          
| | Short-term borrowings                       |                                            |  | 21,600.3      |           |      |  | 21,579.6 |          
| | Accrued interest payable                    |                                            |  | 4,178.5       |           |      |  | 6,897.3  |          
| | Long-term debt                              |                                            |  | 2,157.9       |           |      |  | 2,116.0  |          
| | Accrued expenses and other liabilities      |                                            |  | 15,852.6      |           |      |  | 26,774.7 |          
| |                                             |                                            |  |               |           |      |  |         
| |                                             | Total liabilities                          |  |               | 220,971.3 |      |  |          | 285,727.6 | 
| | Shareholders equity                        |                                            |  | 22,060.9      |           |      |  | 26,113.1 |          
| |                                             |                                            |  |               |           |      |  |         
| |                                             | Total liabilities and shareholders equity |  | Rs.           | 243,032.2 |      |  | Rs.      | 311,840.7 | 
| |                                             |                                            |  |               |           |      |  |         

Our total liabilities increased 29.3% to Rs. 285.7 billion at March 31,
2003. This increase was principally comprised of an increase of 29.7% in
interest bearing deposits, increase in securities sold under repurchase
transactions by 614.4%, and an increase of 68.9% in accrued expenses and other
liabilities.

The increase in our interest bearing deposits was principally due to
general growth in our business, new customers acquired as we expanded our
branch network and greater penetration of our customer base achieved through
cross sales of our products. Of our interest bearing deposits at March 31,
2003, retail deposits accounted for 54.2%, and wholesale deposits accounted for
the balance. The maturity profile of our interest bearing deposits is fairly
short, with approximately 47.1% expected to mature within one year.

Non-interest bearing deposits increased by 17.3%. Of our non-interest
bearing deposits at March 31, 2003, wholesale deposits accounted for 63.1% with
retail deposits accounting for the balance. Our non-interest bearing deposits
include floats arising out of our cash management and capital markets services
to our customers.

Accrued expenses and other liabilities increased principally because of an
increase of 257.1% in deposits for new accounts and an increase of 171.7%
increase in remittances in transit. Remittances in transit increased due to an
increase in our cash management services volumes.

Long-term debt decreased by Rs. 41.9 million because of a repayment of a
loan by the Employees Welfare Trust amounting to Rs. 17.5 million. Our long
term debt includes subordinated debt of Rs 2 billion which qualifies for Tier 2
capital. In the event of a default, a portion of the debt is mandatorily
converted to equity.

Most of our funding requirements are met through short term and medium
term funding sources. Of our total non-equity sources of funding, deposits
accounted for approximately 78.3% (of which retail deposits were approximately
54.5%) with short term borrowings accounting for approximately 9.2% and long
term debt accounting for approximately 0.7%. In our experience, a substantial
portion of our deposits are rolled over upon maturity and are, over time, a
stable source of funding. The continuation of our deposit base could be
adversely affected in the event of a deterioration in the economy and if the
interest rates offered by the Bank differ significantly from those offered by
our competitors.

Shareholders
equity increased 18.3% to Rs. 26,113.1 million at March 31,
2003, primarily due to the increase in our retained earnings. Of our net income
of Rs. 3,513.8 million in fiscal 2003, we transferred Rs. 969.0 million to
statutory reserve as required under Indian law and paid dividends of Rs. 697.5
million. By law, our statutory reserve is not distributable. Our shareholders
equity also includes Rs. 864.7 million of unrealized gains on available for
sale securities, net of tax.

We may need additional capital to support our growth, principally to
maintain our capital ratios within the RBIs guidelines. Although there is no
assurance that future financing will be available at terms which are acceptable
to us, we may seek additional funds through public or private debt or equity
offerings and through increases in our deposit base. We believe that our
existing cash balances, funds generated from operations and borrowings will be
sufficient for us to meet our liquidity requirements for at least the next
twelve months.

Financial Instruments and Off Balance Sheet arrangements

Foreign Exchange and Derivatives

We enter into foreign exchange and derivative transactions for our
customers and for our own account. Our foreign exchange contracts arise out of
spot and forward foreign exchange transactions with corporate and non-corporate
customers and inter-bank counterparties. Our derivative contracts include
rupee-based derivatives and

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cross-currency derivatives primarily for
corporate customers. We also trade rupee-based interest rate swaps for our own
account. We earn profit by way of a margin as a mark-up over the exchange or
interest rate offered on customer transactions. We earn profit on inter-bank
transactions by way of a spread between the purchase rate and the sale rate.
These profits are recorded as income from foreign exchange and derivative
transactions. The RBI imposes limits on our ability to hold derivatives. For
further information see   Treasury  Derivatives.

The following table presents the aggregate notional principal amounts of
our outstanding foreign exchange and derivative contracts at March 31, 2002 and
2003, together with the related fair value, which is the mark-to-market impact
of the derivative and foreign exchange products on the reporting date.

|                              |       |     |               |           |            |     |          |       |            |     |           |           |  |     |       |       | 
|----------------------------- | ----- | --- | ------------- | --------- | ---------- | --- | -------- | ----- | ---------- | --- | --------- | --------- |  | --- | ----- | ----- | 
|                              |       |     | At March 31, 
|                              |       |     |              
|                              |       |     | 2002          |           | 2003      
|                              |       |     |               |           |           
|                              |       |     | Notional      |           | Fair value |     | Notional |       | Fair value
|                              |       |     |               |           |            |     |          |       |           
|                              |       |     | (in millions)
|Interest rate swap agreements |       | Rs. | 39,809.6      |           |            | Rs. | (16.0    | )     |            | Rs. | 174,841.7 |           |  | Rs. | 0.4   |      
|Interest rate caps            |       |     | 1,286.9       |           |            |     | 2.7      |       |            |     | 1,549.2   |           |  |     |      |      
|Forward exchange contracts    |       |     | 119,849.2     |           |            |     | 514.8    |       |            |     | 197,725.5 |           |  |     | 127.1 |      
|Currency swap agreements      |       |     | 11,932.0      |           |            |     | 277.2    |       |            |     | 9,659.5   |           |  |     | (6.7  | )    
|                              |       |     |               |           |            |     |          |       |            |     |           |           |  |     |       |      
|                              | Total |     | Rs.           | 172,877.7 |            |     | Rs.      | 778.7 |            |     | Rs.       | 383,775.9 |  |     | Rs.   | 120.8 | 
|                              |       |     |               |           |            |     |          |       |            |     |           |           |  |     |       |      

Our trading activities for the above derivative instruments are carried
out in the inter-bank market, which is a non-exchange informal market. However,
these markets generally either provide price discovery or sufficient data to
reliably estimate fair values of financial instruments.

The Bank adopted SFAS No. 133, Accounting for Derivatives Instruments and
Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an amendment of FASB Statement No
133, with effect from April 1, 2001. In doing so, the Bank did not incur any
transition adjustments to earnings.

Guarantees and Documentary Credits

As a part of our commercial banking activities, we issue guarantees and
documentary credits such as letters of credit and guarantees to enhance the
credit standing of our customers, for which we charge fees and commissions.

Amounts of guarantees and documentary credits outstanding are set out
below:

|                       |       |     |               |          |      |     |          |          | 
|---------------------- | ----- | --- | ------------- | -------- | ---- | --- | -------- | -------- | 
|                       |       |     | At March 31, 
|                       |       |     |              
|                       |       |     | 2002          |          | 2003
|                       |       |     |               |          |     
|                       |       |     | (in millions)
|Bank guarantees:       |       |     |               |          |      |     |          |         
|Financial guarantees   |       | Rs. | 6,814.1       |          |      | Rs. | 5,743.6  |         
|Performance guarantees |       |     | 10,136.2      |          |      |     | 8,445.4  |         
|Documentary credits    |       |     | 9,444.1       |          |      |     | 11,715.1 |         
|                       |       |     |               |          |      |     |          |         
|                       | Total |     | Rs.           | 26,394.4 |      |     | Rs.      | 25,904.1 | 
|                       |       |     |               |          |      |     |          |         

Guarantees and documentary credits outstanding decreased by 1.9% to Rs.
25.9 billion at March 31, 2003, principally due to growth in documentary
credits, offset by a reduction in performance guarantees and financial
guarantees.

Loan Sanction Letters

In some cases we issue sanction letters to customers, indicating our
intent to provide new loans. The amount of loans referred to in these letters
that have not yet been made increased from Rs. 46.1 billion at March 31, 2002
to Rs. 58.5 billion at March 31, 2003. If we were to make these loans, the
interest rates would be dependent on lending rates in effect on the date the
loans were made. We are not obligated to make these loans, and the sanctions
are subject to periodic review. See also Note 22 of our Financial Statements.

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Capital

We are subject to the capital adequacy requirements of the RBI, which are
primarily based on the capital adequacy accord reached by the Basle Committee
of the Bank of International Settlements ( or Basel Committee) in 1988. For a
description of the RBIs capital adequacy guidelines, see Information About
India  Supervision and Regulation   Capital Adequacy Requirements. We are
required to maintain a minimum ratio of total capital to risk adjusted assets
as determined by a specified formula of 9.0%, at least half of which must be
Tier 1 capital, which is generally shareholders equity.

The RBI participated in a Quantitative Impact Study (QIS) conducted by the
Basel Committee to assess the impact of the new Capital Accord. A broader
internal process of preparing banks for the complexity of the new Accord and
the costs involved in adherence is also underway. We were one of the few banks to have participated in the initial study. The RBI has forwarded its
comments on the Third Consultative Paper of the New Basel Capital Accord to the
Basel Committee in July 2003.

The RBI has emphasised the need to take into account the structural
characteristics of different economies as also preserving the spirit of
simplicity and flexibility to ensure universal application of the New Accord.

Our regulatory capital and capital adequacy ratios as measured in
accordance with Indian GAAP are as follows:

|                                            |               |     |               |          |      |     |           |          |  
|------------------------------------------- | ------------- | --- | ------------- | -------- | ---- | --- | --------- | -------- | -
|                                            |               |     | At March 31, 
|                                            |               |     |              
|                                            |               |     | 2002          |          | 2003
|                                            |               |     |               |          |     
|                                            |               |     | (in millions)
|Tier 1 capital                              |               | Rs. | 16,924.6      |          |      | Rs. | 19,850.2  |         
|Tier 2 capital                              |               |     | 4,871.6       |          |      |     | 3,414.7   |         
|                                            |               |     |               |          |      |     |           |         
|                                            | Total capital |     | Rs.           | 21,796.2 |      |     | Rs.       | 23,264.9 |  
|                                            |               |     |               |          |      |     |           |         
|Total risk weighted assets and contingents  |               | Rs. | 156,521.7     |          |      | Rs. | 209,177.1 |         
|Capital adequacy ratios:                    |               |     |               |          |      |     |           |         
|                                            | Tier 1        |     |               | 10.8     | %    |     |           | 9.49     | %
|                                            | Total capital |     |               | 13.9     | %    |     |           | 11.12    | %
|Minimum capital ratios required by the RBI: |               |     |               |          |      |     |           |         
|                                            | Tier 1        |     |               | 4.5      | %    |     |           | 4.5      | %
|                                            | Total capital |     |               | 9.0      | %    |     |           | 9.0      | %

As shown above, our Tier 1 capital ratio decreased to 9.49% and our total
capital ratio decreased to 11.12% at March 31, 2003. This decrease is
primarily due to growth of our risk weighted assets. In addition, as these
regulatory ratios are computed in accordance with Indian GAAP, Tier 2 capital
includes any general provisions made in our Indian GAAP financial statements
for potential future loan losses.

Our Indian GAAP financial statements include general provisions of Rs.
1,173.4 million and Rs. 1,147.0 million at March 31, 2002 and 2003,
respectively, which qualify for Tier 2 capital subject to a ceiling of 1.25% of
risk weighted assets.

In an effort to create a need for banks to follow a prudent policy for
utilizing gains realized on sale of investments, the RBI issued guidelines on
the need to appropriate a minimum of 5% of the investment portfolio to an
investment fluctuation reserve over a period of five years. The bank currently
carries an investment fluctuation reserve of Rs 2,400.8 million in Indian GAAP
which is 2.51 % of the investment portfolio, excluding investments held to
maturity.

Capital Expenditures

Our capital expenditure consists principally of branch network expansion,
as well as investments in our technology and communications infrastructure.
Since March 31, 2002, we have invested approximately Rs. 300 million in capital
expenditures. We have current plans for an aggregate capital expenditure of
approximately Rs.

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2.0 billion for fiscal 2004 when we intend to invest approximately Rs 80 million
for our disaster recovery plan, Rs. 1.2 billion in technology, Rs. 300 million
to expand our branch network, Rs. 300 million for new Electronic Data Capture
(EDC) terminals and Rs. 200 million to install approximately 200 new ATMs. At
March 31, 2003, we had entered into capital commitments of Rs. 587.5 million
which we plan to fund through internal accruals. However, we have no
commitments to make the balance of the planned capital expenditures and the
foregoing amounts and purposes may change depending on business conditions.

Contractual Obligations and Commercial Commitments

Contractual Obligations

|                                      |  |                        |         |                  |  |           |         |           |  |               |         |  |  |     |         |  |  |     |         | 
|------------------------------------- |  | ---------------------- | ------- | ---------------- |  | --------- | ------- | --------- |  | ------------- | ------- |  |  | --- | ------- |  |  | --- | ------- | 
|                                      |  | Payments due by period
|                                      |  | Total                  |         | Less than 1 year |  | 1-3 years |         | 4-5 years |  | After 5 years
|                                      |  | (in millions)         
|Long-term debt(1)                     |  | Rs.                    | 2,044.4 |                  |  | Rs.       | 30.4    |           |  | Rs.           | 1,005.9 |  |  | Rs. | 1,005.9 |  |  | Rs. | 2.2     | 
|Capital lease
obligations(2)          |  |                        | 71.6    |                  |  |           | 27.1    |           |  |               | 43.8    |  |  |     | 0.7     |  |  |     |        | 
|Operating leases(3)                   |  |                        | 3,348.5 |                  |  |           | 568.2   |           |  |               | 1,136.6 |  |  |     | 562.0   |  |  |     | 1,081.7 | 
|Unconditional
purchase
obligations(4) |  |                        | 587.5   |                  |  |           | 587.5   |           |  |               |        |  |  |     |        |  |  |     |        | 
|Total contractual
cash obligations    |  | Rs.                    | 6,052.0 |                  |  | Rs.       | 1,213.2 |           |  | Rs.           | 2,186.3 |  |  | Rs. | 1,568.6 |  |  | Rs. | 1,083.9 | 



|(1) |  | Long term debt mainly consists of Rs. 2,000 million of subordinated debt.                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Capital lease obligations pertain to assets taken on lease like ATMs,
VSATs and other equipment which were taken over at the time of our merger
with Times Bank.                      
|   
|(3) |  | Operating leases are principally the operating lease arrangements entered
by us with parties for the lease of office, branch and ATM premises and
residential premises for executives.
|   
|(4) |  | Unconditional purchase obligations principally constitute the capital
expenditure commitments in fiscal 2003. See Capital Expenditure section in
Managements Discussion and Analysis 

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Commercial Commitments

Our commercial commitments principally consists of letters of credit,
guarantees, foreign exchange and derivative contracts.

Based on historical trends, the probability that the Bank would have to make
payments under the guarantees is negligible. Additionally, in many cases,
the Bank holds collateral in various forms against these guarantees.
Accordingly, the Bank has not recognized any liability in respect of guarantees
issued or modified after December 31, 2002 as required by FASB Interpretation
No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees
(FIN 45), issued in November 2002.

As part of its risk management activities, the Bank continuously monitors the
credit-worthiness of the customer as well as the guarantee exposure; however,
if the customer fails to perform the specified obligation to the beneficiary,
the beneficiary may draw upon the guarantee by presenting documents that are in
compliance with the guarantee. In that event the Bank makes payment on account
of the indebtedness of the customer or makes payment on account of the default
by the customer in the performance of an obligation, to the beneficiary up to
the full notional amount of the guarantee. The customer is obligated to
reimburse the Bank for any such payment. If the customer fails to pay, the Bank
would, as applicable, liquidate collateral and/or set off accounts.

The residual maturity of the above is set forth in the following table:

|                                   |                                            |               |           |                  |  |           |           |           |  |              |           |  |  |     |         |  |  |     |         | 
|---------------------------------- | ------------------------------------------ | ------------- | --------- | ---------------- |  | --------- | --------- | --------- |  | ------------ | --------- |  |  | --- | ------- |  |  | --- | ------- | 
|                                   | Amount of commitment expiration per period
|                                   |                                            | Total amounts |           |                  |  |           |           |           |  |              |           |  |  |     |         |  |  |    
|                                   |                                            | committed     |           | Less than 1 year |  | 1-3 years |           | 4-5 years |  | Over 5 years
|                                   |                                            | (in millions)
|Documentary Credits                |                                            | Rs.           | 11,715.1  |                  |  | Rs.       | 10,664.2  |           |  | Rs.          | 1,044.2   |  |  | Rs. | 0.2     |  |  | Rs. | 6.5     | 
|Guarantees                         |                                            |               | 14,189.0  |                  |  |           | 3,037.0   |           |  |              | 5,875.7   |  |  |     | 2,214.4 |  |  |     | 3,061.9 | 
|Forward exchange
contracts         |                                            |               | 197,725.5 |                  |  |           | 188,880.6 |           |  |              | 8,844.9   |  |  |     |        |  |  |     |        | 
|Derivative contracts*              |                                            |               | 186,050.5 |                  |  |           | 14,652.8  |           |  |              | 166,071.1 |  |  |     | 3,859.8 |  |  |     | 1,466.7 | 
|Total contractual
cash obligations |                                            | Rs.           | 409,680.1 |                  |  | Rs.       | 217,234.6 |           |  | Rs.          | 181,835.9 |  |  | Rs. | 6,074.4 |  |  | Rs. | 4,535.1 | 

*     Denotes notional principal amounts.

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MANAGEMENT

Directors and Executive Officers

Our organizational documents provide that until otherwise determined by a
general meeting of shareholders, the number of our directors shall not be less
than three or more than 15 directors, excluding directors appointed pursuant to
the terms of our issued debt. Our board of directors currently consists of nine
members (as of March 31, 2002; ten members).

As per Indian Companies Act, 1956, two third of our directors are liable
to retire by rotation, with one third of these retiring at each annual general
meeting. However, any retiring director may be re-appointed by resolution of
the shareholders.

Under the terms of our organizational documents, HDFC Limited has a right
to nominate the directors who are not required to retire by rotation, so long
as HDFC Limited, its subsidiaries or any other company promoted by HDFC Limited
either singly or in aggregate holds not less than 20% of our paid up equity
shares. Two directors who are not liable to retire nominated by HDFC Limited
include the chairman and the Managing Director. The India Private Equity Fund
(Mauritius) and Indocean Financial Holding Limited, two funds advised by J P
Morgan Partners Advisors Pte Ltd (collectively the Strategic Investor) have
the right to appoint two directors so long as their combined equity share
holding is 10% or greater, and one director if less than 10% but at least 7%.
Mr. Anil Ahuja and Mr. Arnold Chavkin were nominated by The Indian Private
Equity Fund (Mauritius) and Indocean Financial Holding Limited. Mr. Arnold
Chavkin retired from the office of the Director with effect from 13th August,
2002. Mr. Anil Ahuja was a nominee of the Strategic Investor. Since
the shareholding of the Strategic Investors had reduced to less than 7% of the
share capital of the Bank, Mr. Anil Ahuja no longer represents the interest of
the Strategic Investors. He is now on the Board of the Bank in his individual
capacity. The Bennett Coleman Group has the right to appoint one director so
long as its equity holding does not fall below 5%. Mr. Vineet Jain has been
nominated by the Bennett Coleman Group.

The Banking Regulation Act, 1949 requires that not less than 51% of the
board members shall have special knowledge or practical experience in one or
more of the following areas ; accounting, finance, agriculture and rural
economy, banking, co-operation, economics, law, small scale industry and any
other matter as the RBI may specify. Out of these, not less than two
directors shall have specialised knowledge or practical experience in respect of
agriculture and rural economy, co-operation or small scale industry. We have
adhered to this requirement. Dr. (Mrs.) Amla Samanta has specialized knowledge
and experience with small-scale industries and Dr. Venkat Rao Gadwal has
specialized knowledge and experience in the agricultural sector.

Interested directors may not vote at board proceedings, except where the
interest is based solely on a contract of indemnity for which the director is a
surety, the interest is based on the directors involvement as director of
another company and holder of shares of that company, or where a proper
notification has been given under the Companies Act, 1956.

None of our directors or executive officers hold 1% or more of our shares
except as set forth in the section Principal Shareholders.

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Our board of directors at March 31, 2003 had the following members:

|                        |  |                        |  |     |    | 
|----------------------- |  | ---------------------- |  | --- | -- | 
|Name                    |  | Position               |  | Age
|                        |  |                        |  |    
|Mr. Jagdish Capoor      |  | Chairman               |  |     | 64 | 
|Mr. Aditya Puri         |  | Managing Director      |  |     | 53 | 
|Mr. Anil Ahuja          |  | Non-executive Director |  |     | 41 | 
|Dr. V. R. Gadwal        |  | Non-executive Director |  |     | 65 | 
|Mr. Vineet Jain         |  | Non-executive Director |  |     | 37 | 
|Mr. K. M. Mistry(1)     |  | Non-executive Director |  |     | 49 | 
|Dr. (Mrs.) Amla Samanta |  | Non-executive Director |  |     | 48 | 
|Mrs. Renu Karnad(2)     |  | Non-executive Director |  |     | 51 | 
|Mr. Arvind Pande(3)     |  | Non-executive Director |  |     | 61 | 



|1) |  | Mr. K .M. Mistry resigned as
director of the bank with effect from 12th
August, 2002 and was appointed de novo as additional director on
27th
March, 2003.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2) |  | Mrs. Renu Karnad was appointed as additional director with effect from
17th July, 2002.                                                                   
|  
|3) |  | Mr. Arvind Pande was appointed as additional director with effect from
15th January, 2003.                                                                
|  
|4) |  | Mr. J. S. Baijal resigned as
director of the bank with effect from 12th
August, 2002.                                                                     
|  
|5) |  | Mr. Arnold Chavkin resigned
as director of the bank with effect from 13th
August, 2002                                                                    
|  
|6) |  | Mr. D. M Satwalekar resigned
as director of the bank with effect from 2nd July, 2002.                                                                     

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Our executive officers at March 31, 2003 are as follows:

|                       |  |                                                        |  |     |    | 
|---------------------- |  | ------------------------------------------------------ |  | --- | -- | 
|Name                   |  | Position                                               |  | Age
|                       |  |                                                        |  |    
|Mr. Aditya Puri        |  | Managing Director                                      |  |     | 53 | 
|Mr. Vinod G. Yennemadi |  | Head, Finance, Administration, Legal, and Secretarial  |  |     | 61 | 
|Mr. Samir Bhatia       |  | Head, Corporate Banking                                |  |     | 40 | 
|Mr. Harish Engineer    |  | Head, Wholesale Banking                                |  |     | 54 | 
|Mr. Sudhir Joshi       |  | Head, Treasury                                         |  |     | 56 | 
|Mrs. Uma Krishnan(1)   |  | Head, Credit Cards and Non Resident Business           |  |     | 41 | 
|Mr. C.N. Ram           |  | Head, Information Technology                           |  |     | 46 | 
|Mr. Bharat Shah        |  | Head, Custody and Depository Services                  |  |     | 56 | 
|Mr. H. Srikrishnan     |  | Head, Transactional Banking and Operations             |  |     | 41 | 
|Mr. G. Subramanian     |  | Head, Audit, Compliance, Vigilance and Service
Quality |  |     | 56 | 
|Mr. Paresh Sukthankar  |  | Head, Credit and Market Risk and Human Resources       |  |     | 40 | 
|Mr. Neeraj Swaroop     |  | Head, Retail Banking                                   |  |     | 44 | 



|1) |  | Mrs. Uma Krishnan has resigned from the service of the company effective
from 30 September, 2003.
|-- |  | -------------------------------------------------------------------------------------------------

The business address for our directors and officers is Sandoz House, Dr. Annie
Besant Road, Worli, Mumbai 400 018, India.

The following are brief biographies of our directors:

Mr. Jagdish Capoorholds a Masters of Commerce and is a Certified
Associate of the Indian Institute of Bankers. Mr. Capoor was appointed as a
part-time chairman of the Bank for a period of 3 years with
effect from 6th
July, 2001. Prior to joining us, Mr. Capoor was a Deputy Governor of the RBI.
Mr. Capoor served as the Chairman of Bharatiya Reserve Bank Note Mudran Ltd and
presently serves as chairman of Agricultural Finance Corporation Ltd and is a
director in Indian Hotels Co. Ltd. and Asset Care Enterprise Ltd., an asset reconstruction company. He is also a member of the Board of
Governors of the Indian Institute of Management, Indore a member of the
governing board of The Stock Exchange, Mumbai, and a member of the Academic Advisory Board of Asian Business School.

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Mr. Aditya Puriholds a Bachelor of Commerce degree from Punjab University
and is an associate member of the Institute of Chartered Accountants of India.
Mr. Puri has been our Managing Director since September, 1994. Mr. Puri has
over 26 years of experience in both domestic and international banking. Prior
to joining us Mr. Puri was chief executive officer of Citibank Malaysia from
1992 to 1994. At the Annual General Meeting of the Bank held on
30th May, 2002,
the shareholders approved the reappointment of Mr. Puri as Managing Director
for another period of three years with effect from September 30, 2002.

Mr. Anil Ahujaholds a Bachelor of Technology degree from the Indian
Institute of Technology, New Delhi and a Post Graduate Diploma of Business
Management from the Indian Institute of Management, Ahmedabad. Mr. Ahuja has
served as non-executive directors since July 16, 1999. Presently, he is a CEO
of J.P. Morgan Partners Advisors. He also serves as a director on the boards of
HDFC Securities Limited and MTR Foods Limited. In the past, he has served as
an executive director to Indocean Chase Capital Advisors and as a vice
president of Citibank N.A. Mr. Ahuja was a nominee of The India Private
Equity Fund (Mauritius) Limited and Indocean Financial Holding Limited
(Strategic Investors).Since the shareholding of the Strategic Investors has
reduced to less than 7% of the share capital of the Bank, Mr. Ahuja no longer
represents the interest of the Strategic Investors. He is now on the Board in
his individual capacity.

Dr. V.R. Gadwalholds a Bachelor and Master of Science degrees from
Osmania University and a doctrate in agriculture from the Indian Agricultural
Research Institute. He is also a Fellow of the Botanical Society of India and a
Fellow of the Indian Society of Genetics and Plant Breeding. Dr. Gadwal has
been one of our non-executive directors since March 15, 1999. Dr. Gadwal also
serves as consultant and advisory to agricultural research and development
institutions such as Maharashtra Hybrid Seeds Co. Ltd. (MAHYCO) and MAHYCO
Research Foundation.

Mr. Vineet Jainholds a Bachelor degree in Science and a degree in
International Business Administration. Mr. Jain has been our non-executive
director since April 14, 2001. He also serves as the managing director of
Bennett, Coleman & Co. Limited; as director of Times Internet Limited, Times
Online Money Limited and Times Infotainment Media Limited and as Chairman of
Press Trust of India Ltd. Mr. Jain is a nominee of the Bennett Coleman group,
and is liable to retire by rotation.

Mr. K .M. Mistryholds a degree of Bachelor of Commerce in Advanced
Accountancy and Auditing and is also a Chartered Accountant. He joined as a director of the bank since
September 12, 1994 and resigned from directorship on 12th August, 2002 on completing his
initial term of eight years as a director of the bank. He was appointed de novo as additional director
on 27th March, 2003. Mr. Keki Mistry
is the Managing Director of Housing Development Finance Corporation Ltd and
serves as director in HDFC Developers Ltd, HDFC Investments Ltd, HDFC Trustee
Company Ltd, HDFC Standard Life Insurance Co Ltd, HDFC Chubb General Insurance
Co. Ltd, Gruh Finance Ltd, Credit Information Bureau (India) Ltd,
Infrastructure Leasing & Financial Services Ltd, Intelenet Global Services
Ltd, Sun Pharmaceuticals Industries Limited, Mahindra Holidays and Resorts
India Limited, The Great Eastern Shipping Co. Limited, The Bombay Chamber of
Commerce and Industry and Association of Leasing & Financial Services
Companies.

Dr. (Mrs.) Amla Samantaholds a Bachelor of Science degree, and Masters
and a Doctrate degree in Biochemistry. Dr. Samanta has been our non-executive
director since April 26, 1996. Dr. Samanta possesses specialised knowledge and
wide experience in small scale industries. In addition, Dr. Samanta is a
director of Samanta Organics Private Limited, and is also the proprietor of
Samanta Pharmachem.

Mrs. Renu Karnadis a law graduate and also holds a masters degree in
Economics from Delhi University. She was appointed as an additional director of
the Bank pursuant to section 260 of the Companies Act,1956 with
effect 17th July, 2002 Mrs. Karnad has been with HDFC Ltd since 1978 and was appointed as
the executive director of HDFC Ltd in 2000. She is in charge of overall
business activities for HDFC Ltd in North India region and state of Gujarat and
oversees all aspects of lending operations on an all India basis. She is a
director in HDFC Ltd, HDFC Asset Management Co. Ltd , Gruh Finance Ltd, HDFC
Realty Ltd, Credit Information Bureau (India ) Ltd (CIBIL ), Feedback Ventures
Ltd , HDFC Chubb General Insurance Ltd and Mother Dairy Fruits & Vegetables
Limited.

Mr. Arvind Pandeis Bachelor of Science from Allahabad University, and a
Bachelor and Masters of Arts in Economics from Cambridge University, U. K. He
started his career in the Indian Administrative Services and has

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held various responsible positions in the Government of India. He was a Joint
Secretary to the Prime Minister of India for his expertise in Economics,
Science and Technology issues. He was a director of department of Economic
Affairs and Ministry of Finance, Government of India and has dealt with World
Bank aided projects. He was the Chairman and Chief Executive Officer of The
Steel Authority of India Limited (SAIL).

The following are brief biographies of our existing executive officers:

Mr. Vinod G. Yennemadiholds a Bachelor of Commerce degree, and is also a
Fellow of the Institute of Chartered Accountants in India and an Associate of
the Institute of Chartered Accountants in England and Wales. Mr. Yennemadi has
been the Head, Finance, Administration, Legal, and Secretarial since April
1994. In addition, Mr. Yennemadi serves as a director of Softcell Technologies
Limited, HDFC Securities Limited, SolutionNET India Private Limited, Atlas
Documentary Facilitators Private Limited, Flexcel International Private Limited
and as a trustee for the HDFC Bank Employee Welfare Trust. Mr. Yennemadi
resigned from the boards of HBL Global and Acsys Systems Private Limited in the
month of April and August, 2002.

Mr. Samir Bhatiaholds a Bachelor of Commerce degree from the University
of Bombay, a Cost Accountancy degree from the Institute of Cost and Works
Accountants of India, and a Chartered Accountancy from the Institute of
Chartered Accountants of India. He is currently our Head, Corporate Banking,
and had previously served as our Regional Head, Corporate Banking in various
regions of India since September 1994.

Mr. Harish Engineerholds a Bachelor of Science degree in Physics and
Chemistry, and a Diploma in Business Management. Mr. Engineer is currently our Head, Financial
Institution Group since November 1999 and had previously served as Head, Corporate
Banking since July 1994.

Mr. Sudhir Joshiholds a Bachelor of Science degree in Chemistry from the
University of Pune and is a Certified Associate of the Indian Institute of
Bankers. Mr. Joshi has held the position of Head, Treasury since April 2000. He
was Head, Financial Investment Group for a brief period between February 2000
to March 2000. From June 1995 until joining us, Mr. Joshi served as Treasurer of Times Bank Limited.

Mr. C.N. Ramholds a Bachelor of Technology degree in Electrical
Engineering from the Indian Institute of Technology and a Post Graduate Diploma
in Management from the Indian Institute of Management. Mr. Ram has served as
Head, Information Technology since July 1994. In addition, he also serves as a
director on the board of a number of companies, including our affiliates SolutionNET India Private Limited, Flexcel International Private Limited and Softcell
Technologies Limited. Mr. Ram served on the Board of Acsys Software Private
Limited upto August 19, 2002 .

Mr. Bharat Shahholds a Bachelor of Science degree from Bombay University,
and a Higher National Diploma in Applied Chemistry from London University. He
has served as our Head, Custody and Depositary Services since December 1994,
and served in the past as our Head, Human Resources. Mr. Shah also serves as a
non-executive director of Computer Age Management Services Private Limited,
HDFC Securities Limited, Atlas Documentary Facilitators Private Limited and
Contech Software Limited. Mr. Bharat Shah resigned from the Board of Acsys
Software Private Limited and Contech Software Limited with effect from August
19, 2002 and July 31, 2002 respectively.

Mr. H. Srikrishnanholds a Bachelor of Commerce degree and a Post Graduate
Diploma in Business Administration, both from the University of Madras. Mr.
Srikrishnan has served as Head, Transactional Banking and Operations since July
1997, and prior to that served as Vice President of Operations. He also serves
as a director on the boards of SolutionNET India Private Limited and Flexcel
International Private Limited.

Mr. G. Subramanianholds a Bachelor of Science degree in Chemistry from
Madras Christian College and is a Certified Associate of the Indian Institute
of Bankers, Mr. Subramanian has been the Head, Audit, Compliance, Vigilance and
Service Quality since January 1995. Prior to that Mr. Subramanian was deputy
general manager of the RBI. Mr. Subramanian also serves as a director on the
board of Computer Age Management Services Limited.

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Mr. Paresh Sukthankarholds a Bachelor of Commerce degree and Masters in
Management Studies from Bombay University. Mr. Sukthankar has held the position
of Head, Credit and Market Risk since September 1994 and since
December 1999 also supervises the Human Resources function.

Mr. Neeraj Swaroopholds a Bachelor of Technology degree from the Indian
Institute of Technology, a Masters of Business Administration from the Indian
Institute of Management, and a Diploma in Retail Bank Management from the
Graduate School of Retail Bank Management, University of Virginia. He has held
the position of Head, Marketing and Retail Assets since April 1999 and is
currently Head, Retail Banking. Mr. Swaroop also serves as a director on the
board of SolutionNET Limited.

Corporate Governance

Audit and Compliance Committee

The terms of reference of the Audit and Compliance Committee are in
accordance with paragraph C and D of clause 49(II) of the Listing Agreement
entered into with the Stock Exchanges. The Audit and Compliance Committee
approves and reviews our audit and compliance procedures, techniques and other
regulatory requirements. It also reviews our internal control systems and the
functioning of our branches and divisions, recommend appointment and removal
of external auditors and fixing of their fees, pre-approving all services to
be provided by our auditors, reviewing with management the annual financial
statements with special emphasis on accounting polices and practices,
compliance with accounting standards and other legal requirements concerning
financial statements. The members of the Audit and Compliance Committee were
Mr. Jagdish Capoor, Mr. Anil Ahuja Dr. (Mrs.) Amla Samanta and Mr. Arvind
Pande as of March 31, 2003.

Mr. D.M Satwalekar and Mr. K.M Mistry, who were the members of the Audit
and Compliance Committee resigned from the Board and consequently from the
Committee with effect from July 2, 2002 and August 12, 2002, respectively. Mrs.
Renu Karnad was a member with effect from July 17 upto March 27, 2003.

As of March 31,2003 our Board did not have an audit committee financial
expert serving on the audit committee.

Risk Monitoring Committee

The Risk Monitoring Committee monitors our credit and market risk policies
and procedures, approves and reviews dealing authorities and limits for our
treasury operations and reviews our risk monitoring systems and risk reporting
procedures. The committee also ensures that our credit exposure to any one
group or industry does not exceed the internally set limits and that the risk
is diversified. The members of the committee as on March 31, 2003 were Mr.
Aditya Puri, Mr. Anil Ahuja and Mrs. Renu Karnad.

Mrs. Renu Karnad has been inducted as a member with effect from July 17,
2002.

Credit Approval Committee

The Credit Approval Committee approves credit exposures that are beyond
the powers delegated to our executive officers. The members of the committee as
of March 31, 2003 were Mr. Jagdish Capoor, Dr. (Mrs.) Amla Samanta and Mr.
Aditya Puri.

Mr. D.M Satwalekar and Mr. K.M Mistry resigned from the Board and
consequently from the Committee with effect from July 2, 2002 and August 12,
2002, respectively.

Compensation Committee

The Compensation Committee has the following purposes:



| |  |  | to review the overall compensation structure and policies with a
view to retain and motivate our employees;
| | - |  | -----------------------------------------------------------------------------------------------------------

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| |  |  | to review our position in the industry in relation to compensation
levels through compensation surveys;                                  
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | to consider employee stock grants; and                                                                                                   
|
| |  |  | to consider any other compensation related issues or matters
relating to our employees other than the managing director and the
chairman.

The members of the Compensation Committee as on March 31, 2003 were Mr.
Anil Ahuja, Dr. (Mrs.) Amla Samanta and Dr. V.R. Gadwal.

Mr. Jagdish Capoor has been appointed as a member of the Committee with effect
from April 15, 2003.

Share Committee ( Shareholders and Investors Grievance Committee )

The Share Committee approves and monitors transfers, transmissions,
splitting and consolidation of our shares and bonds. The committee also
monitors responses/redressals to complaints from shareholders relating to
transfer of shares, non-receipt of balance sheet, dividends and other issues.
The members of the committee as on March 31, 2003 were Mr. Jagdish Capoor and
Mr. Aditya Puri.

Mr. K. M. Mistry resigned from the board and consequently from the
Committee with effect from August 12, 2002.

Premises Committee

The Premises Committee approves the purchase or lease of premises for the
use of our branches, ATM premises, executive offices and residential premises
for executives in accordance with the guidelines set by the board of directors.
The members of the committee are Mr. Aditya Puri, Dr. (Mrs.) Amla Samanta and
Mr. K. G. Krishnamoorthy, the latter in an advisory capacity.

Nomination Committee

The Bank has constituted a Nomination Committee for recommending
appointment of independent / non-executive directors on the Board of the Bank.
The Nomination Committee will be required to scrutinize the nominations
received for the independent / non-executive directors with reference to their
qualifications and experience. It will assess the formal qualifications,
previous experience, track record, integrity of the candidate to ensure that he
/ she is the Fit and Proper person. The integrity of the candidate may be
assessed on the basis of the features like criminal records, financial
position, civil actions undertaken to pursue personal debts, refusal of
admission to and expulsion from professional bodies, sanctions applied by
regulators or similar bodies and previous questionable business practices. The
Committee was constituted on April 15, 2003.

The members of the Nomination Committee are Mr. Jagdish Capoor, Mr. Anil
Ahuja, Dr. V. R. Gadwal and Mr. Arvind Pande.

Committees of Executives

We have also constituted committees of executives that meet frequently to
discuss and decide on management of assets and liabilities, as well as matters
including other operations and personnel, and other operational issues.

Corporate Governance Rating

We were one of the first four companies in India which
subjected itself to a Corporate Governance and Value Creation (GVC)
rating by the rating agency, The Credit Rating Information Services of India
Limited (CRISIL). The rating provides an independent assessment of an entitys current performance and an expectation on its balanced value
creation and corporate governance practices in future. The Bank has been assigned a CRISIL GVC Level 1 rating
which indicates that the Bank's capability with respect to wealth
creation for all its stakeholders, while adopting sound corporate governance practices is the highest.

Borrowing Powers of Directors

Under our articles of association, our directors may, by way of a
resolution at a meeting of the board, direct the bank to borrow money for our
business purposes. Borrowings may be made upon such terms and conditions as the
directors determine to be appropriate. Such terms may include the lenders
right to appoint directors, the

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allotment of shares to certain public financial institutions, and (with prior
shareholder and regulatory approval) the allotment of shares to other entities.

Compensation of Directors and Executive Officers

The compensation of our managing director is approved by the shareholders
and the RBI on the recommendation of the board of directors. In fiscal 2003,
none of our executive officers earned a salary plus bonus in excess of US$
200,000. Our chairman, pursuant to his service contract, receives a salary of
Rs. 600,000 per annum, company-leased accommodation, and use of a company car.
At the 8th Annual General Meeting held on May 30, 2002, the shareholders of the
bank revised remuneration payable to the managing director from September 30,
2002, for a period of three years. Accordingly, our managing director receives
a monthly salary of Rs. 300,000/- and other emoluments being more or less
unchanged. For the fiscal year ended March 31, 2003, the aggregate amount of
compensation paid to all of our executive officers was approximately Rs. 70.6
million. For the fiscal year ended March 31, 2003, the aggregate amount accrued
by us to provide pension, retirement or similar benefits for our directors and
executive officers was approximately Rs. 5.7 million.

Under our organizational documents, each director, except the Managing
Director, is entitled to remuneration for attending each meeting of the board
or of a board committee. The amount of remuneration is set by the board from
time to time in accordance with limitations prescribed by the Indian Companies
Act or the government of India. Remuneration for attending a board meeting is
Rs. 5,000. We reimburse directors for travel and related expenses in connection
with board and committee meetings and with related matters.

The RBI has issued guidelines relating to salary and other remuneration
payable to the Chairman, Managing Director and Whole Time Directors of new
Private Sector Banks. Pursuant to the recent guidelines, the RBI has permitted
banks to fix the performance bonus payable to the Managing Director / Whole
Time Directors on either of the two criteria:



|(a) |  | upto a maximum of 25% of the salary; or                                                                                                                                            
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | the average bonus paid to the officers / employees. The average bonus
paid to officers / employees is calculated by dividing the total salary
bill by the total bonus paid to them.

Other than our chairman and managing director, none of our directors has a
service contract with us.

Employees Stock Option Scheme

In January 2000, our shareholders approved our employees stock option
scheme. Under the terms of the plan, we may issue stock options to our
employees and executive directors, each of which is convertible into one equity
share. We reserved 10 million equity shares, with an aggregate nominal par
value of Rs. 100 million, for issuance under the plan. The plan provided for
the issuance of options at the recommendation of the Compensation Committee, at
an average of the daily closing price on The Stock Exchange, Mumbai during the
60 days preceding the date of the grant of options.

On January 5, 2001, we granted 3,642,600 options to officers and employees
under the plan at an option price of Rs. 225.43 each. These options also vest
at the rate of 30%, 30% and 40% on each successive anniversary of the grant
date.

On February 8, 2002 we granted 1,406,900 options to officers and
employees (other than those granted options in January 2000 and January 2001)
under the plan at an option price of Rs. 226.96 each. These options also vest
at the rate of 30%, 30% and 40% on each successive anniversary of the grant
date.

In June 2003, our shareholders approved
the creation of a new stock option scheme which proposes to reserve 10 million equity shares,
with an aggregate nominal par value of Rs. 100 million for
issuance as stock options. The Compensation
Committee is yet to decide on the framework of the scheme.

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Employees Welfare Trust

An Employees Welfare Trust (the EWT) was established in 1994 for various welfare
activities for the benefit of the Banks employees. In pursuance to the Trust objectives, grants are allotted to employees,
directors and advisors at a price designated by the trustees. The vesting period varies at the discretion of the trustees from grant to grant,
but is generally 12 to 24 months. Since November 1994, the EWT has granted an aggregate of 8,865,800 grants.

Other Compensation

All employees, including our managing director and officers, receive the
benefit of our gratuity and provident fund retirement schemes. Our
superannuation fund covers all employees at manager level or above, including
our managing director. Our gratuity fund, required under Indian law, is a
defined benefit plan that, upon retirement, death while employed or termination
of employment, pays a lump sum equivalent to 15 days salary for each completed
year of service. The superannuation fund is a retirement plan under which we
annually contribute 13% (15% for the managing director) of the employees
eligible annual salary to the administrator of the fund. Under the provident
fund, required by Indian law, both we and the employee contribute monthly at a
determined rate (currently 12% of the employees salary) to a fund set up by
us, which is administered by a board of trustees. We retain liability for
future payments under the gratuity fund, but not under the superannuation or
provident funds.

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PRINCIPAL SHAREHOLDERS

The following table contains information relating to the beneficial
ownership of our equity shares at March 31, 2003:



| |  |  | each person or group of affiliated persons known by us to
beneficially own 5.0% or more of our equity shares; and
| | - |  | -----------------------------------------------------------------------------------------------------------------
|
| |  |  | all of our directors and officers as a group.                                                                    

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting and investment power
with respect to equity shares. Unless otherwise indicated, the persons in the
table have sole voting and sole investment control with respect to all equity
shares beneficially owned.

We were founded by Housing Development Finance Corporation Limited, known
as HDFC Limited, the leading housing finance company in India. At March 31,
2003, HDFC Limited, together with its subsidiaries, held an aggregate of 24.4 %
of our equity shares.

In February 2000, we merged with Times Bank Limited in a stock-for-stock
transaction. Times Bank shareholders received one of our equity shares for
every 5.75 equity shares of Times Bank. As a result, we allotted 23,478,261 new
equity shares par value Rs. 10. The primary shareholders of Times Bank were the
Bennett Coleman Company and its affiliates, which currently hold 18,992,408 of
our equity shares.

In May 1999, the NatWest UK Group, which previously held 40,000,000 of our
equity shares (a then 20% equity stake), sold 10,000,000 equity shares to HDFC
Investments Limited, 19,999,900 equity shares to The India Private Equity Fund
(Mauritius) Limited and 9,999,900 equity shares to Indocean Financial Holding
Limited. The India Private Equity Fund and Indocean Financial Holding Limited
are both advised by J P Morgan Partners Advisors Pte Ltd, the Indian affiliate
of J.P. Morgan Partners.

|                                                       |  |               |            |                            |  |  |      |  
|------------------------------------------------------ |  | ------------- | ---------- | -------------------------- |  |  | ---- | -
|                                                       |  | Number of     |            | Percentage of total equity
|                                                       |  | equity shares |            | shares
outstanding(4)     
|                                                       |  |               |            |                           
|HDFC group                                             |  |               | 68,860,000 | (1)                        |  |  | 24.4 | %
|Funds advised by J P Morgan Partners Advisors Pte Ltd. |  |               | 15,603,638 | (2)                        |  |  | 5.53 |  
|Bennett Coleman group                                  |  |               | 18,992,408 | (3)                        |  |  | 6.73 |  



|(1) |  | Includes: 38,860,000 equity shares held directly by HDFC Limited and
30,000,000 equity shares held by HDFC Investment Limited, which is
controlled by HDFC Limited. Under the Indian Banking Regulation Act, no
person holding equity shares in a banking company can vote more than 10.0%
of the outstanding equity shares.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes: 11,620,886 equity shares held by The India Private Equity Fund
(Mauritius) Limited and 3,982,752 equity shares held by Indocean
Financial Holding Limited.                                                                                                                                                        
|   
|(3) |  | Includes: 11,649,929 equity shares held by Bennett Coleman & Company
Limited, 2,486,956 equity shares held by Dharmayug Investments Limited and
4,855,523 equity shares held by other Bennett Coleman group entities.                                                                                                       
|   
|(4) |  | The percentage of total equity shares outstanding is reckoned with the
outstanding number of shares in Indian GAAP.                                                                                                                                                                                                         

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RELATED PARTY TRANSACTIONS

The following is a summary of transactions we have engaged in with our
principal shareholder, HDFC Limited and its subsidiaries and other related
parties since April 1, 2002. HDFC Limited is our promoter company. The HDFC
group companies own 24.4% of our equity shares. See Principal
Shareholders.

All transactions with HDFC group companies are on terms that we believe
are as favorable to us as those that could be obtained from a non-affiliated
third party in an arms-length transaction. In addition, our banking license
from the RBI stipulates that we can only transact business with HDFC Limited
and its affiliates on an arms-length basis.

Atlas Documentary Facilitators Company Private Limited (ADFC)

ADFC specializes in back-office processing. We regularly transact
business with ADFC. In fiscal 2003, we paid ADFC approximately Rs. 94.2 million
for back-office processing services to the Bank, at unit rates in line with the
market. As at March 31, 2003, the Bank had provided a security deposit
amounting to Rs. 6.0 million to ADFC Private Limited for the various services
provided by ADFC. A fully cash collateralized loan amount of Rs. 1.8 million
was also outstanding as at the balance sheet date. We have made an equity
investment of Rs. 0.2 million in ADFC which represents 29.0% of ADFC share
capital. We believe that the transactions entered into with ADFC are at arms
length.

HBL Global Private Limited

HBL Global Private Limited is a subsidiary of Atlas Documentary
Facilitators Company Private Limited, and provides the Bank with direct sales
support for certain products of the Bank. HBL Global was paid fees of Rs.
500.6 million in the year ended March 31, 2003 which is line with the market
rates. The Bank does not presently have any direct investment in HBL Global.
As at March 31, 2003 the bank had provided a security deposit of Rs. 40 million
for the services provided by it.

Flexcel International Private Limited (Flexcel)

Flexcel is a joint venture that has been promoted by the Bank and a
leading financial technology provider. Flexcel provides application service
provider (ASP) services to smaller banks. We have an investment of Rs. 15.3
million in Flexcel. A loan amount of Rs. 5.1 million was outstanding as on the
balance sheet date.

Salisbury Investments Private Limited

The Bank has paid security deposit of Rs. 21 million and Rs. 1.1 million
towards rent for the residential accommodation of the Managing Director to
Salisbury Investments Private Limited in which the relatives of the Managing
Director hold a stake. The value of security deposit and rent is based on an
independent assessment by a professional property valuation expert.

HDFC Securities Limited (HSL)

In October 2000, we acquired an equity stake in HDFC Securities Limited,
which provides broking services through the internet and other channels. We own
29.5% of the equity shares and HDFC group companies own an aggregate of 71.5%.
The two funds advised by Indocean Chase Capital Advisors own the balance. We
have invested Rs. 8.8 million in HDFC Securities. We have paid Rs 6.1 million
for sales assistance provided by HSL and Rs 6.4 million as rent and maintenance
charges. In the current year as HDFC Banks share of total accumulated losses
made by HDFC Securities Limited exceeded the investment value, the same has
been written off.

HDFC Limited (HDFC)

From time to time, we borrow medium to long term funds, some of which are
from affiliates. At March 31, 2003, HDFC Limited held Rs. 27.5 million of the
debt issued by HDFC Bank Employees Welfare Trust which

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we have accounted this borrowing on
our balance sheet, purely from a US GAAP requirement. We have
obtained regulatory approval to maintain a loan to HDFC Limited for Rs. 375
million that was originally made by and acquired from
Times Bank Ltd. The loan is due to mature in 2004. The Bank earned an interest
of Rs. 33.2 million from the said loan.

Housing Loans

We
have recently commenced the housing loan business through an
arrangement with HDFC Ltd., whereby we will sell the HDFC Home Loan
product. HDFC Ltd. will approve and disburse these loans which would
be booked in the books of HDFC Ltd. For such loans, we will be paid a
sourcing fee which is currently approximately 0.7% of the approved
loan. HDFC Ltd. will provide credit, legal and technical appraisal
for these loans. HDFC Ltd. is obligated to sell to us upto 70% of the
fully disbursed home loans sold by us through the issue
of mortgage backed pass through certificates (PTCs) and the balance
would be retained by HDFC Ltd. The mortgage backed PTCs will be
invested in by us at the underlying home loan yields less a fee paid
to HDFC Ltd. for administration and servicing of the loans. This fee
is currently at 1.5% per annum.

The
arrangement seeks to leverage the strengths of the two organizations
in terms of HDFC Ltds product acceptance, operational efficiencies
and credit expertise on one hand and our sales origination and
distribution on the other.

Property

We
have three premises located on properties owned or leased by HDFC Ltd. In
fiscal 2003, we paid an aggregate of Rs. 5.7 million per annum in rental fees
to HDFC Ltd. for use of these properties. We believe that we pay market rates for
these properties. We have also given HDFC Ltd. a deposit of Rs. 0.2 million to
secure these leased properties and have paid Rs. 1.8 million to
HDFC Ltd. as
maintenance and service charges.

Enterprises under common control of HDFC Ltd., our largest shareholders
include:

HDFC Developers Ltd.

HDFC Investments Ltd.

HDFC Asset Management Company Ltd.

GRUH Finance Ltd.

HDFC Holdings Ltd.

HDFC Trustee Co. Ltd.

HDFC Realty Ltd.

HDFC Chubb General Insurance Company Ltd.

HDFC Standard Life Insurance Company Ltd.

Intelenet Global Services Ltd.

HDFC Realty Limited (HDFC Realty)

We paid Rs. 0.5 million to HDFC Realty towards property related services.

HDFC Standard Life Insurance Company Ltd. (HDFC Standard Life)

We paid Rs. 0.5 million to HDFC Standard Life as life risk premium for its
employees covered under superannuation.

HDFC Asset Management Company Ltd. (HDFC AMC)

We paid Rs. 2.9 million as rent and maintenance charges to HDFC AMC and
placed a security deposit of Rs. 1.7 million to secure leased property. The
Bank received Rs. 29.7 million from HDFC AMC for distribution of units of
mutual funds.

We have entered into banking transactions with some of the above
parties in the normal course of business and we believe the same to be at arms length.

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Other Strategic Investments

We frequently partner with other HDFC group companies when making
strategic investments. We currently have four strategic investments where HDFC
group companies are co-investors. As per regulatory guidelines, we cannot hold more than a 30% equity
stake in another company. The following is a list of our strategic investments
and the equity investment by us and HDFC group companies:

|                                                        |  |                                                                 |  |            |      |               |  |           |      |       |  |  |      |            |  | 
|------------------------------------------------------- |  | --------------------------------------------------------------- |  | ---------- | ---- | ------------- |  | --------- | ---- | ----- |  |  | ---- | ---------- |  | 
|                                                        |  |                                                                 |  |            |      |               |  |           |      |       |  |  |      | Total HDFC
|                                                        |  |                                                                 |  |            |      | HDFC Bank     |  | HDFC Bank |      | Group
|Company                                                 |  | Type of business                                                |  | investment |      | ownership     |  | ownership
|                                                        |  |                                                                 |  |            |      |               |  |          
|                                                        |  |                                                                 |  |            |      | (in millions) |  |           |      |       |  |  |      |           
|Computer Age Management Services Private Limited (CAMS) |  | Computerized registrar and transfer agent Services              |  | Rs.        | 24.7 |               |  |           | 19.0 | %     |  |  | 49.0 | %         
|SolutionNET
India Private Ltd.                          |  | Web page design and internet banking   Applications             |  | Rs.        | 7.6  |               |  |           | 19.0 | %     |  |  | 50.0 | %         
|Softcell Technologies Limited(Softcell)                 |  | Business-to-business and business-to-Customer internet services |  | Rs.        | 26.0 |               |  |           | 12.0 | %     |  |  | 26.0 | %         

We routinely conduct business with some of the companies in which we have
made strategic investments and we believe the same to be at arms
length. In fiscal 2003, we paid CAMS Rs. 0.5 million,
Solution NET India Ltd. Rs. 0.1 million and Softcell Rs. 6.0 million for
providing software-related services to us. We have also paid Rs. 7.6 million to
Solution NET India Ltd and Rs. 35.4 million to Softcell Technologies Limited
as capital advances or amounts for purchase of fixed assets. During the year we
sold our investment in Acsys Systems Private Ltd.

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TAXATION

Indian Tax

The following discussion summarizes the Indian tax consequences for
investors in ADSs and equity shares received upon redemption of ADSs who are
not resident in India whether of Indian origin or not. This discussion is based
on the provisions of the Indian Income Tax Act, 1961, including the special tax
regime for ADSs contained in Section 115AC, which has recently been extended to
cover additional ADSs that an investor may acquire in an amalgamation or
restructuring of the company, and certain regulations implementing the Section
115AC regime. The Indian Income Tax Act is amended every year by the Finance
Act of the relevant year. Some or all of the tax consequences of the Section
115AC regime may be amended or modified by future amendments to the Indian
Income Tax Act.

The summary is not intended to constitute a complete analysis of the tax
consequences under Indian law of the acquisition, ownership and sale of ADSs
and equity shares by non-resident investors. Potential investors should,
therefore, consult their own tax advisors on the tax consequences of such
acquisition, ownership and sale, including specifically the tax consequences
under Indian law, the law of the jurisdiction of their residence, any tax
treaty between India and their country of residence, and in particular the
application of the regulations implementing the Section 115 AC regime.

Residence

For the purpose of the Income Tax Act, an individual is a resident of
India during any fiscal year, if he (a) is in India in that year for 182 days
or more, or (b) having within the four years preceding that year been in India
for a period or periods amounting in all to 365 days or more and is in India
for period or periods amounting in all to 60 days or more in that year. The
period of 60 days is substituted by 182 days in case of Indian citizen or
person of Indian origin who being resident outside India comes on a visit to
India during the financial year or an Indian citizen who leaves India for the
purposes of his employment during the financial year. A company is resident in
India in any fiscal year if it is registered in India or the control and
management of its affairs is situated wholly in India in that year. A firm or
other association of persons is resident in India except where the control and
the management of its affairs are situated wholly outside India.

Taxation of Distributions

Due to a recent change in the Income Tax Act, pursuant with effect from
financial year 2003-2004, dividends paid to shareholders (whether or not
resident in India) will not be subject to tax in the hands of the
shareholders. However a company paying the dividend is subject to a dividend
distribution tax of 12.5% plus a surcharge of 2.5% on the total amount it pays
as a dividend to its shareholders, in addition to the normal corporate tax on
its income.

Taxation on Redemption of ADSs

The acquisition of equity shares upon a redemption of ADSs by a
non-resident investor will not give rise to a taxable event for Indian tax
purposes.

Taxation on Sale of Equity Shares or ADSs

Any transfer of ADSs or equity shares outside India by a non-resident
investor to another non-resident investor does not give rise to Indian capital
gains tax.

Subject to any relief under any relevant double taxation treaty, a gain
arising on the sale of an equity share to a resident of India or where the sale
is made inside India will generally give rise to a liability for Indian capital
gains tax. Such tax is required to be withheld at source. Where the equity
share has been held for more than 12 months (measured from the date of advice
of redemption of the ADS by the depositary),the rate of tax is 10.0%. Where
the equity share has been held for 12 months or less, the rate of tax varies
and will be subject to tax at normal rates of income-tax applicable to
non-residents under the provisions of the Indian Income Tax Act, subject to a
maximum of 48.0% in the case of foreign companies. In addition,
non-certificated foreign assessees

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are subject to a surcharge of 2%. The actual rate depends on a number of
factors, including without limitation the nature of the non-resident investor.
During the period the underlying equity shares are held by non-resident
investors on a transfer from the depositary upon redemption of ADRs, the
provisions of the Avoidance of Double Taxation Agreement entered into by the
government of India with the country of residence of the non-resident investors
will be applicable in the matter of taxation of any capital gain arising on a
transfer of the equity shares. The double taxation treaty between the United
States and India does not provide US residents with any relief from Indian tax
on capital gains.

For purposes of determining the amount of capital gains arising on a sale
of an equity share for Indian tax purposes, the cost of acquisition of an
equity share received upon redemption of an ADS will be the price of the share
prevailing on the Stock Exchange, Mumbai or the National Stock Exchange on the
date on which the depositary advises the custodian of such redemption, not the
acquisition cost of the ADS being redeemed. The holding period of an equity
share received upon redemption of an ADS will commence from the date of advice
of redemption by the depositary. The exact procedures for the computation and
collection of Indian capital gains tax are not settled.

By Finance Act 2003, no capital gains is payable on equity shares of the
Company purchased after 1.3.2003 and before a.1.3.2004 and held for a period of
12 months or more. The above exemption is to be reviewed in the Budget for
fiscal 2004 and there is uncertainty as to its continuation in fiscal 2004.

Rights

Distribution to non-resident holders of additional ADSs or equity shares
or rights to subscribe for equity shares made with respect to ADSs or equity
shares are not subject to tax in the hands of the non-resident holder.

It is unclear as to whether capital gain derived from the sale of rights
by a non-resident holder not entitled to exemption under a tax treaty to
another non-resident holder outside India will be subject to Indian capital
gains tax. If rights are deemed by the Indian tax authorities to be situated
within India, as our situs is in India, the gains realized on the sale of
rights will be subject to customary Indian taxation as discussed above.

Stamp Duty

Upon the issuance of the equity shares underlying the ADSs, we are
required to pay a stamp duty of 0.1% per share of the issue price. A transfer
of ADSs is not subject to Indian stamp duty. Normally, upon the acquisition of
equity shares from the depositary in exchange for ADSs representing such equity
shares in physical form, an investor would be liable for Indian stamp duty at
the rate of 0.5% of the market value of the equity shares at the date of
registration. Similarly, a sale of equity shares by an investor would also be
subject to Indian stamp duty at the rate of 0.5% of the market value of the
equity shares on the trade date, although customarily such tax is borne by the
transferee, that is, the purchaser. However, our equity shares are compulsorily
deliverable in dematerialized form except for trades up to 500 shares only
which may be for delivery in physical form. Under Indian stamp law, no stamp
duty is payable on the acquisition or transfer of equity shares in
dematerialized form.

Other Taxes

At present, there are no taxes on wealth, gifts and inheritance which may
apply to the ADSs and underlying equity shares.

Service Tax

Brokerage or commissions paid to brokers in connection with the sale or
purchase of shares is subject to a service tax of 5.0% (currently at 8%). The
stockbroker is responsible for collecting the service tax and paying it to the
relevant authority.

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United States Tax

The following summary describes the material United States federal income
tax consequences relating to an investment in our equity shares or ADSs in this
offering as of the date hereof. This summary is based on the Internal Revenue
Code of 1986, as amended, its legislative history, existing final, temporary
and proposed Treasury Regulations, rulings and judicial decisions, all as
currently in effect and all of which are subject to prospective and retroactive
rulings and changes. We will not seek a ruling from the Internal Revenue
Service with regard to the United States federal income tax treatment relating
to investment in our equity shares or ADSs and, therefore, there can be no
assurance that the IRS will agree with the conclusions set forth below.

This summary does not purport to address all United States federal income
tax consequences that may be relevant to a particular investor and you are
urged to consult your own tax advisor regarding your specific tax situation.
The summary applies only to holders who hold equity shares or ADSs as
capital
assets (generally, property held for investment) under the United States
Internal Revenue Code, and does not address the tax consequences that may be
relevant to investors in special tax situations including, for example:



| |  | insurance companies;                                                                                                                    
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | regulated investment companies and real estate investment trusts;                                                                       
| 
| |  | tax-exempt organizations;                                                                                                               
| 
| |  | broker-dealers;                                                                                                                         
| 
| |  | traders in securities that elect to mark to market;                                                                                     
| 
| |  | banks or other financial institutions;                                                                                                  
| 
| |  | investors whose functional currency is not the United States dollar;                                                                    
| 
| |  | United States expatriates;                                                                                                              
| 
| |  | investors that hold our equity shares or ADSs as part of a hedge, straddle or conversion transaction;                                   
| 
| |  | holders that purchase or otherwise acquire equity shares or ADSs other than through this offering; or                                   
| 
| |  | holders that own, directly, indirectly, or constructively 10.0% or more of the total combined voting power of our equity
shares or ADSs.

This summary assumes that we are not a passive foreign investment company
for United States federal income tax purposes. Please see the discussion under
Passive Foreign Investment Company Rules below.

Further, this summary does not address the alternative minimum tax
consequences of an investment in equity shares or ADSs or the indirect
consequences to holders of equity interests in entities that own our equity
shares or ADSs. In addition, this summary does not address the state, local and
foreign tax consequences of an investment in our equity shares or ADSs.

You should consult your own tax advisor regarding the United States
federal, state, local and foreign and other tax consequences of purchasing,
owning, and disposing of our equity shares or ADSs in your particular
circumstances.

Taxation of US Holders

You
are a US Holder if you are a beneficial owner of equity shares or
ADSs and you are for United States federal income tax purposes:



| |  |  | a citizen or resident of the United States;
| | - |  | -------------------------------------------

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| |  |  | a corporation, or any other entity taxable as a corporation,
created or organized in or under the laws of the United States or any
state thereof, including the District of Columbia;                                  
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | an estate the income of which is subject to United States federal
income tax regardless of its source; or                                                                                                              
|
| |  |  | a trust if a court within the United States is able to exercise
primary supervision over its administration and one or more United
States persons have the authority to control all substantial decisions
of the trust.

If a partnership holds equity shares or ADSs, the tax treatment of a
partner will generally depend upon the status of the partner and upon the
activities of the partnership. A prospective investor who is a partner of a
partnership holding our equity shares or ADSs should consult its own tax
advisor.

A
Non-US Holder is a beneficial owner of equity shares or ADSs that is
not a US Holder.

For United States federal income tax purposes, a US Holder of an ADS will
be treated as the owner of the equity shares represented by the ADS.
Accordingly, no gain or loss will be recognized upon the exchange of an ADS for
equity shares. A US Holders tax basis in the equity shares will be the same as
the tax basis in the ADS surrendered therefor, and the holding period in the
equity shares will include the period during which the holder held the
surrendered ADS. However, the US Treasury has expressed concerns that parties
to whom depositary shares are pre-released may be taking actions that are
inconsistent with the claiming of foreign tax credits by the holders of ADSs.
Accordingly, the analysis of the creditability of Indian taxes paid with
respect to the ADSs could be affected by future actions that may be taken by
the US Treasury.

Distributions on Equity Shares or ADSs

Cash distributions made by us to a US Holder with respect to equity shares
or ADSs (including net amounts withheld in respect of Indian withholding taxes)
generally will be taxable to such US Holder as ordinary dividend income when
such US Holder receives the distribution, actually or constructively, to the
extent of our current or accumulated earnings and profits (as determined for
United States federal income tax purposes). Distributions in excess of our
current or accumulated earnings and profits will be treated first as a
non-taxable return of capital reducing such US Holders tax basis in the equity
shares or ADSs. Any distribution in excess of such tax basis will be treated as
capital gain and will be either long-term or short-term capital gain depending
upon whether the US Holder held the equity shares or ADSs for more than one
year.

Subject to certain limitations, a US holder may be entitled to a credit or
deduction against its US federal income taxes for the amount of any Indian
taxes that are withheld from dividend distributions made to such US holder.
The decision to claim either a credit or deduction must be made annually, and
will apply to all foreign taxes paid by the US holder to any foreign country or
US possession with respect to the applicable tax year. The limitation on
foreign taxes eligible for credit is calculated separately with respect to
specific classes of income. Dividends received with respect to the equity
shares or ADSs will be treated as foreign source income and will constitute
passive income or, in the case of certain holders, financial services
income for United States foreign tax credit limitation purposes. The rules
regarding the availability of foreign tax credits are complex and US holders
may be subject to various limitations on the amount of foreign tax credits that
are available. We therefore urge you to consult your tax advisor regarding the
availability of the foreign tax credit under your particular circumstances. A
US holder will not be eligible for a foreign tax credit against its US federal
income tax liability for any Indian taxes paid by us unless it is a US
corporation owning 10% or more of our voting stock.

Dividends paid by us generally will not be eligible for the dividends
received deduction available to certain United States corporate shareholders.

The amount of any cash distribution paid in Indian rupees will equal the
US dollar value of the distribution, calculated by reference to the exchange
rate in effect at the time the distribution is received by the depositary (in
the case of ADSs) or by the US Holder (in the case of equity shares held
directly by such US Holder), regardless of whether the payment is in fact
converted to US dollars at that time. A US Holder should not recognize any
foreign currency gain or loss if such Indian rupees are converted into US
dollars on the date received. If the Indian rupees are not converted into US
dollars on the date of receipt, however, gain or loss may be recognized

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upon a subsequent sale or other disposition of the Indian rupees. Such foreign
currency gain or loss, if any, will be United States source ordinary income or
loss.

Sale or Exchange of Equity Shares or ADSs

A US Holder will generally recognize capital gain or loss upon the sale,
exchange or other disposition of the equity shares or ADSs measured by the
difference between the US dollar value of the amount received and the US
Holders tax basis (determined in US dollars) in the equity shares or ADSs. Any
gain or loss will be long-term capital gain or loss if the equity shares or
ADSs have been held for more than one year and will generally be United States
source gain or loss. Your ability to deduct capital losses is subject to
limitations.

Passive Foreign Investment Company Rules

US Holders generally will be subject to a special, adverse tax regime that
would differ in certain respects from the tax treatment described above if we
are, or were to become, a passive foreign investment company
(PFIC) for
United States federal income tax purposes. Although the determination of
whether a corporation is a PFIC is made annually, and thus may be subject to
change, we do not believe that we are, nor do we expect to become, a PFIC for
United States federal income tax purposes. However, the matter is not free from
doubt. We urge you to consult your own tax advisor regarding the adverse tax
consequences of owning the equity shares or ADSs of a PFIC and making certain
elections designed to lessen those adverse consequences.

Taxation of Non-US Holders

Distributions on Equity Shares or ADSs

Non-US Holders generally will not be subject to United States federal
income or withholding tax on dividends received from us with respect to equity
shares or ADSs, unless such income is considered effectively connected with the
Non-US Holders conduct of a United States trade or business (and, if required
by an applicable income tax treaty, the income is attributable to a permanent
establishment maintained in the United States).

Sale or Exchange of Equity Shares or ADSs

Non-US Holders generally will not be subject to United States federal
income tax on any gain realized upon the sale, exchange or other disposition of
equity shares or ADSs unless:



| |  |  | such gain is considered effectively connected with the Non-US
Holders conduct of a United States trade or business (and, if required
by an applicable income tax treaty, the income is attributable to a
permanent establishment maintained in the United States); or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | if such Non-US Holder is an individual that is present in the
United States for 183 days or more during the taxable year of the
disposition and certain other conditions are met.                                                                                     

In addition, if you are a corporate Non-US Holder, your earnings and
profits that are attributable to such effectively connected income (subject to
certain adjustments) may be subject to an additional branch profits tax at a
rate of 30% (or such lower rate as may be specified by an applicable income tax
treaty).

Backup Withholding and Information Reporting

In general, dividends on equity shares or ADSs, and payments of the
proceeds of a sale, exchange or other disposition of equity shares or ADSs,
paid to a US Holder within the United States or through certain United
States-related financial intermediaries are subject to information reporting
and may be subject to backup withholding at a 30.0% rate unless the holder:

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| |  |  | is a corporation or other exempt recipient; or                                                                                   
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | provides an accurate taxpayer identification number and certifies
that no loss of exemption from backup withholding has occurred.

Non-US Holders generally are not subject to information reporting or
backup withholding. However, such holders may be required to provide a
certification to establish their non-US status in connection with payments
received within the United States or through certain US-related financial
intermediaries.

You generally may obtain a refund of any amounts withheld under the backup
withholding rules that exceed your income tax liability by filing a refund
claim with the United States Internal Revenue Service.

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OVERVIEW OF THE INDIAN BANKING SECTOR

The information in this section has been extracted from publicly available
documents from various sources, including officially prepared materials from
the government of India and its various ministries and the Reserve Bank of
India, and has not been prepared or independently verified by us. This is the
latest available information to our knowledge.

General

The Indian banking sector primarily consists of commercial and cooperative
banks. The commercial banks include public sector banks, new and old private
sector banks, foreign banks and regional rural banks. Commercial banks offer
all the traditional services such as taking deposits, making loans, and
providing payment and money transmission services as well as domestic and
foreign treasury products, settlement and clearing services, advisory services
and auxiliary financial services. Commercial banks in India have traditionally
focused on meeting the short and medium-term financial needs of industry, trade
and agriculture. The cooperative banks primarily serve customers in the
agricultural sector and small businesses in urban and semi-urban areas.

The following table sets forth, for the periods indicated, the number of
Indian commercial banks by category.

|                            |  |              |     |      |  |      |     |  |  |  |     | 
|--------------------------- |  | ------------ | --- | ---- |  | ---- | --- |  |  |  | --- | 
|                            |  | At
March 31,
|                            |  |             
|                            |  | 2000         |     | 2001 |  | 2002
|                            |  |              |     |      |  |     
|Public sector banks         |  |              | 27  |      |  |      | 27  |  |  |  | 27  | 
|Old private sector banks    |  |              | 24  |      |  |      | 23  |  |  |  | 22  | 
|New
private sector banks(1) |  |              | 8   |      |  |      | 8   |  |  |  | 8   | 
|Foreign banks               |  |              | 42  |      |  |      | 42  |  |  |  | 40  | 
|Regional rural banks        |  |              | 196 |      |  |      | 196 |  |  |  | 196 | 
|                            |  |              |     |      |  |      |     |  |  |  |     | 
|Total commercial banks      |  |              | 297 |      |  |      | 296 |  |  |  | 293 | 
|                            |  |              |     |      |  |      |     |  |  |  |     | 



| | (1) |  | Comprises private sector commercial banks formed after July 1993
when the Reserve Bank of India permitted the establishment of new
private sector banks.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Sources: Reserve Bank of India Report on Trends and Progress of Banking
in India, 2001-2002, 2000-2001, and 1999-2000.                                  

The geographic spread and reach of commercial banks is vast, with
approximately 70% of their branches located in rural or semi-urban areas of the
country. A large number of these branches belong to the public sector banks.

Public Sector Banks

Public sector banks make up the largest category in the Indian banking
system. They include the State Bank of India (a government-controlled bank and
today the largest bank in India) and its associates (other
government-controlled banks with a regional presence) and other nationalized
banks. In addition, the 196 regional rural banks are typically
government-owned. Excluding the regional rural banks, the remaining public
sector banks accounted for 75.3% of the assets of all commercial banks at March
31, 2002. Public sector banks compete on the basis of providing products and
services through their vast branch networks and their relatively low cost of
funds due to their relatively higher proportion of retail deposits.

Private Sector Banks

At March 31, 2002, the Indian private sector banks consisted of 22 old
private sector banks which existed before the July 1993 banking reforms and
eight new private sector banks, including us, which began operations after July
1993. In response to the need to introduce greater competition and achieve
higher productivity and efficiency in the Indian banking industry, the RBI
issued guidelines in 1993 which permitted the entry of new

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private sector banks into the industry. At March 31, 2002, private sector banks
accounted for approximately 17.4% of total assets of all commercial banks. New
private sector banks, though small in number, hold over 65.2% of the total
assets of all private sector banks and compete by providing efficient service,
quick responses to loan applications, technology-based, cost effective
solutions and innovative products and services using multiple channels of
delivery.

Foreign Banks

There were 40 foreign banks operating in India at March 31, 2002. The
major foreign banks include ABN Amro, American Express Bank, Bank of America,
Citibank, Deutsche Bank, Hong Kong and Shanghai Banking Corporation and
Standard Chartered Grindlays Bank. At March 31, 2002, foreign banks accounted
for 7.3% of total assets of commercial banks. The primary activity of most
foreign banks in India has been serving corporate customers in the wholesale
segment, including meeting the banking needs of their global customers who have
operations in India. Some of the larger foreign banks have a significant
presence in consumer finance products such as automobile finance, home loans,
credit cards and household consumer finance.

Deposit and Total Asset Data

The following table sets forth, for the periods indicated, the profile of
total estimated assets and the aggregate deposit distribution in the Indian
banking industry and the market share among commercial banks at March 31, 2002.

|              |                          |     |                                   |          |              |     |          |          |  |  |       |      |  
|------------- | ------------------------ | --- | --------------------------------- | -------- | ------------ | --- | -------- | -------- |  |  | ----- | ---- | -
|              |                          |     |                                   |          |              |     |          |          |  |  |      
|              |                          |     | At
March 31,                      |          | Market share
|              |                          |     |                                   |          | at March 31,
|              |                          |     | 2001                              |          | 2002         |     | 2002    
|              |                          |     |                                   |          |              |     |         
|              |                          |     | (in billions, except percentages)
|Deposits:     |                          |     |                                   |          |              |     |          |          |  |  |       |     
|              | Public sector banks      |     | Rs.                               | 8,954.6  |              |     | Rs.      | 9,687.5  |  |  |       | 77.8 | %
|              | Old private sector
banks |     |                                   | 737.5    |              |     |          | 804.5    |  |  |       | 6.5  |  
|              | New private sector banks |     |                                   | 628.9    |              |     |          | 889.9    |  |  |       | 7.1  |  
|              | Foreign banks            |     |                                   | 592.9    |              |     |          | 645.1    |  |  |       | 5.2  |  
|              | Regional
rural banks(1)  |     |                                   | 370.3    |              |     |          | 432.2    |  |  |       | 3.4  |  
|              |                          |     |                                   |          |              |     |          |          |  |  |       |     
|Total         |                          | Rs. | 11,284.2                          |          |              | Rs. | 12,459.2 |          |  |  | 100.0 | %   
|              |                          |     |                                   |          |              |     |          |          |  |  |       |     
|Total Assets: |                          |     |                                   |          |              |     |          |          |  |  |       |     
|              | Public sector banks      |     | Rs.                               | 10,297.7 |              |     | Rs.      | 11,557.4 |  |  |       | 72.5 | %
|              | Old private sector banks |     |                                   | 846.0    |              |     |          | 932.3    |  |  |       | 5.9  |  
|              | New private sector banks |     |                                   | 787.8    |              |     |          | 1,744.5  |  |  |       | 11.0 |  
|              | Foreign banks            |     |                                   | 1,018.2  |              |     |          | 1,121.0  |  |  |       | 7.0  |  
|              | Regional rural banks     |     |                                   | 496.4    |              |     |          | 568.0    |  |  |       | 3.6  |  
|              |                          |     |                                   |          |              |     |          |          |  |  |       |     
|Total         |                          | Rs. | 13,446.14                         |          |              | Rs. | 15,923.2 |          |  |  | 100.0 | %   
|              |                          |     |                                   |          |              |     |          |          |  |  |       |     

(1)  Figures for regional rural banks are as March 29 , 2002.

Source: Reserve Bank of India, Report on Trends and Progress of Banking in
India, 2001-2002, and 2000-2001.

Other Financial Institutions

In addition to commercial banks, a variety of financial intermediaries in
the public and private sector participate in Indias financial sector,
including financial institutions, non-bank finance companies, other specialized
financial institutions and state-level financial institutions. The traditional
boundaries between different types of financial intermediaries are becoming
more blurred, and these financial intermediaries also compete with us and other
commercial banks.

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SUPERVISION AND REGULATION

The main legislation governing commercial banks in India is the Banking
Regulation Act. Other important legislation includes the Reserve Bank of India
Act, the Negotiable Instruments Act and the Bankers Books Evidence Act.
Additionally, the RBI, from time to time, issues guidelines to be followed by
the banks, under the various provisions of the Banking Regulation Act.

Reserve Bank of India Regulations

The RBI is the central banking and monetary authority in India. Commercial
banks in India are required under the Banking Regulation Act to obtain a
license from the RBI to carry on banking business in India. Before granting the
license, the RBI must be satisfied that specific conditions are complied with,
including (a) that the bank has the ability to pay its present and future
depositors in full as their claims accrue; (b) that the affairs of the bank
will not be or are not likely to be conducted in a manner detrimental to the
interests of present or future depositors; (c) that the bank has adequate
capital and earnings prospects; and (d) that the public interest will be served
if the license is granted to the bank. The RBI can cancel the license if the
bank fails to meet the above conditions or if the bank ceases to carry on
banking operations in India.

As a licensed banking company, we are regulated and supervised by the RBI.
The RBI requires us to furnish statements and information relating to our
business. It has issued guidelines for commercial banks on recognition of
income, classification of assets, maintenance of capital adequacy and
provisioning for non-performing assets. The RBI has set up a Board for
Financial Supervision, under the chairmanship of the Governor of the RBI. This
Board is assisted by the Department of Financial Supervision of the RBI in
supervising commercial banks and financial institutions. The appointment of the
auditors of the banks is subject to the approval of the RBI. The RBI can direct
a special audit in the interest of the depositors or in the public interest.

Regulations Relating to the Opening of Branches

Banks are required to obtain licenses from the RBI to open new branches.
Permission is granted based on factors such as the financial condition and
history of the company, its management, adequacy of capital structure and
earning prospects and the public interest. The RBI may cancel the license for
violations of the conditions under which it is granted. Under the banking
license granted to us by the RBI, we are required to have at least 25% of our
branches located in rural/semi-urban areas. A rural area is defined to have a
population of less than 10,000. A semi-urban area is defined to have a
population of greater than 10,000 but less than 100,000. These population
figures relate to the latest census conducted by the government of India.

Capital Adequacy Requirements

The RBI has promulgated minimum capital adequacy standards for banks based
on the guidelines of the Basle Committee on Banking Regulations and Supervisory
Practices. Under these guidelines, we are required to maintain a minimum ratio
of capital to risk adjusted assets and off-balance sheet items of 9.0%, at
least half of which must be Tier 1 capital.

The total capital of a banking company is classified into Tier 1 and Tier
2 capital. Tier 1 capital, the core capital, provides the most permanent and
readily available support against unexpected losses. It comprises paid-up
capital and reserves consisting of any statutory reserves, free reserves and
capital reserve in terms of Indian Income Tax Act as reduced by equity
investments in subsidiaries, intangible assets, gap in provisioning and losses
in the current period and those brought forward from the previous period.

Tier 2 capital consists of undisclosed reserves, revaluation reserves (at
a discount of 55%), general provisions and loss reserves (allowed up to a
maximum of 1.25% of weighted risk assets), investment fluctuation reserve,
hybrid debt capital instruments (which combine features of both equity and debt
securities), cumulative perpetual preference shares (which should be fully paid
up and should not contain clauses that permit redemption by the holder) and
subordinated debt with an initial maturity of not less than five years. Any
subordinated debt is subject to progressive discounts each year for inclusion
in Tier 2 capital and total subordinated debt considered

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as Tier 2 capital cannot exceed 50% of Tier 1 capital. A banks investment in
Tier 2 bonds issued by other banks is subject to a ceiling of 10% of the banks
total capital. The Banking Regulation Act does not allow banks established on
or after January 15, 1937 to issue preferred equity.

Risk adjusted assets and off-balance sheet items considered for
determining the capital adequacy ratio are the risk weighted total of specified
funded and non-funded exposures. Degrees of credit risk expressed as percentage
weighting have been assigned to various balance sheet asset items and
conversion factors to off-balance sheet items. The value of each item is
multiplied by the relevant weight or conversion factor to produce risk-adjusted
values of assets and off-balance-sheet items. Financial guarantees are treated
as similar to funded exposure and are subject to similar risk weighting. The
credit conversion factor for certain off-balance sheet items such as
performance bonds, bid bonds and standby letters of credit related to
particular transactions is 50% while that for short-term self liquidating
trade-related contingencies such as documentary credits collateralized by the
underlying shipments is 20%. All open foreign exchange position limits of the
bank carry a 100% risk weight. Capital requirements have also been prescribed
for open foreign currency exposures and open positions in gold. Investment in
government and approved securities are also assigned a risk weight for market
risk. The aggregate risk weighted assets are taken into account for determining
the capital adequacy ratio.

The New Capital Accord

The RBI participated in a Quantitative Impact Study (QIS) conducted by the
Basel Committee to assess the impact of the new Capital Accord. A broader
internal process of preparing banks for the complexity of the new Accord and
the costs involved in adherence is also underway. We were one of the few banks to have participated in the initial study. The RBI forwarded its
comments on the Third Consultative Paper of the New Basel Capital Accord to the
Basel Committee of Banking Supervision in July 2003.

The RBI has emphasised the need to take into account the structural
characteristics of different economies as also preserving the spirit of
simplicity and flexibility to ensure universal application of the New Accord.

Loan Loss Provisions and Non-Performing Assets

In April 1992, the RBI issued formal guidelines on recognition of income,
classification of assets, provisioning against assets and valuation of
investments applicable to banks, which are revised from time to time. These
guidelines are applied for the calculation of non-performing assets under
Indian GAAP. The discussion of asset quality in this prospectus is under US
GAAP and the US GAAP standards applied are set forth in Selected Statistical
Information.

The principal features of these RBI guidelines, which have been
implemented with respect to our loans, debentures, lease assets and bills, are
set forth below.

Non-Performing Assets

A non-performing asset is an asset in respect of which any amount of
interest or principal has remained past due for more than two quarters. In
particular, loans are not classified as non-performing until the borrower has
missed two interest payments (180 days) or two principal payments (180 days).
Interest in respect of non-performing assets is not recognized or credited to
the income account unless collected. The RBI has announced that ending March
2004, loans should be classified as non-performing if they are 90 days past
due, and that loans should require monthly interest payments.

Asset Classification

Assets are classified as described below:



| |  |  | Standard Assets.Assets that do not have any problems or do not
carry more than normal risk attached to the business.
| | - |  | --------------------------------------------------------------------------------------------------------------------

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| |  |  | Sub-Standard Assets.Assets that are non-performing assets for a
period not exceeding 18 months (12 months with effect from March 31,
2005).                                         
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Doubtful Assets.Assets that are non-performing assets for more
than 18 months and have not been written off, either wholly or
partially (12 months with effect from March 31, 2005).
|
| |  |  | Loss Assets.Assets that are considered uncollectible and
identified as a loss by us, the RBI or our external auditors.                                                              

Renegotiated or rescheduled loans must have no past due amounts for one
year after renegotiation or rescheduling for the loan to be upgraded.

Provisioning and Write-Offs

Provisions are based on guidelines specific to the classification of the
assets. The following guidelines apply to the various asset classifications:



| |  |  | Standard Assets.A general provision of 0.25% of loans and advances is required.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Sub-Standard Assets.A specific provision of 10% of the loan outstanding is required.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | Doubtful Assets.A 100% specific provision is required to be
taken against the unsecured portion of the doubtful asset and charged
against income. The value assigned to the collateral securing a loan is
the amount reflected on the borrowers books or the realizable value
determined by third-party appraisers. In cases where there is a secured
portion of the asset, depending upon the period for which the asset
remains doubtful, a 20% to 50% provision of the loan outstanding is
required to be made against the secured asset as follows:
|



| |  |  | Up to one year:20% provision.       
| | - |  | ------------------------------------
|
| |  |  | One to three years:30% provision.   
|
| |  |  | More than three years:50% provision.



|
|
|

While the provisions as indicated above are mandatory, a higher provision
in a loan account would be required if the auditors consider it necessary.

New Act relating to recovery of non performing assets

As a part of the financial sector reforms the government of India recently
promulgated a new act called Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act 2002. The act provides banks
and other lenders increased powers in the recovery of the collateral underlying
against the non performing assets.

Regulations Relating to Making Loans

The provisions of the Banking Regulation Act govern making loans by banks
in India. The RBI issues directions covering the loan activities of banks. Some
of the more important guidelines of RBI, which are now in effect, are as
follows:



| |  |  | The RBI has prescribed norms for bank lending to non-bank financial
companies.
| | - |  | ------------------------------------------------------------------------------

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| |  |  | Banks are free to determine their own lending rates but each bank
must declare its prime lending rate as approved by the board of
directors. The prime lending rate is a reference or benchmark rate for
banks and banks can offer loans at below prime lending rates. Separate
prime lending rates can be fixed for short-term and long-term credit.
Each bank should also indicate the maximum spread over the prime
lending rate for all credit exposures other than consumer credit. The
interest charged by banks on advances up to Rs. 200,000 to any one
entity (other than most consumer banking loans) must not exceed the
prime lending rate. Interest rates in specified categories of advances
are regulated by the RBI.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The RBI has recently advocated for banks a benchmark PLR taking
into account their actual cost of funds, operating expenses, a minimum
margin to cover regulatory requirement of provisioning/capital charge
and the profit margin. Since all other lending rates can be determined
with reference to the benchmark PLR, the system of tenor-linked PLR has
been proposed to be discontinued. Matter is in a consultative stage and the guidelines have not yet been finalised.                                                                                                                                                                                                                                                     

There are guidelines on loans against shares in respect of amount, margin
and purpose.

Directed Lending

Priority Sector Lending

The RBI has established guidelines requiring banks to lend a minimum of
40.0% of their net bank credit (total domestic loans less marketable debt
instruments and exemptions permitted by the RBI from time to time; currently
specified categories of deposits from non-resident Indians are exempted) to
specified sectors called priority sectors. Priority sectors include small-scale
industries, the agricultural sector, food and agro-based industries, small
business enterprises and weaker sections of society.

The RBI also has set out the minimum percentage of net bank credit that
banks may direct to specific priority sectors. The minimum percentage of credit
to agriculture sector is 18% and that for weaker sections is 10%. The balance
can be loaned to the following:



| |  |  | Credit to small scale industrial units which are entities engaged
in manufacturing, processing and providing services and whose
investment in plant and machinery does not exceed Rs. 10.0 million;                       
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Credit to small businesses including small road and water transport
operators, retail traders and professional and other self employed
persons;                                                                           
|
| |  |  | Educational and other loans to the weaker sections of society; and                                                                                                                                                        
|
| |  |  | Direct home loans up to Rs. 1.0 million disbursed in urban and
metropolitan areas and investment in bonds of National Housing Bank and
Housing and Urban Development Corporation exclusively for the financing
of housing;

Any shortfall in
lending to priority sector/agriculture requires contribution to the Rural Infrastructure Development Fund (RIDF) established
in National Bank for Agriculture and Rural Development (NABARD). The extent of contributions to RIDF is related to the extent
of shortfall in lending to priority sector/agriculture. The interest rate on these deposits is inversely related to the shortfall
in agriculture lending.

The RBI requires banks to lend up to 3.0% of their incremental deposits in
the previous fiscal year towards housing finance. This can be in the form of
home loans to individuals or subscription to the debentures and bonds of
National Housing Bank and housing development institutions recognized by the
government of India.

Export Credit

The RBI also requires us to make loans to exporters at concessional rates
of interest. This enables exporters to have access to an internationally
competitive financing option. Pursuant to existing guidelines, 12% of our net

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bank credit is required to be in the form of
export credit. We provide export credit for pre-shipment and post-shipment
requirements of exporter borrowers in rupees and foreign currencies.

The RBI has prescribed ceiling rates on rupee export credit linked to the
relevant tenor linked PLR. Within this the banks have the freedom to charge
rates below the prescribed rates. The RBI has recently deregulated the ceiling
rate on export credit for certain tenors.

Regulation Relating to Bridge Loans

Banks may consider approval of bridge loan or interim finance to its
customers for a maximum period of four months against commitments made by
other financial institutions or banks only in cases where the latter lending
institution faces temporary liquidity constraint. These loans are subject to
the following conditions specified by the RBI:



| |  |  | the bank extending bridge loan or interim finance must obtain prior
approval of other banks and financial institutions, which have approved
the term loans; and                                                                          
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the approving bank must obtain a commitment from other banks and
financial institutions that the latter would directly remit the amount
of term loan to it at the time of disbursement.                                                  
|
| |  |  | Banks are also permitted to sanction bridge loans to companies
for a period not exceeding one year against expected equity flows /
issues. Such loans are required to be accommodated within the ceiling
as may be prescribed by the RBI.

Credit Exposure Limits

As a prudent measure aimed at better risk management and avoidance of
concentration of credit risk, the RBI has prescribed credit exposure limits for
banks in respect of their lending to individual borrowers and borrower groups.

The RBI limits exposure to individual borrowers to not more than 15% of
capital funds of the bank and limits exposure to a borrower group to not more
than 40% of capital funds of the bank. In the case of infrastructure projects,
such as power, telecommunications, road and port projects, an exposure of up to
50% of capital funds is allowed.

Exposure is the aggregate of:



| |  |  | all approved fund-based limits or outstandings (whichever are
higher);                                           
| | - |  | -----------------------------------------------------------------------------------------------------------------
|
| |  |  | investments in shares, debentures and commercial papers of
companies and public sector undertakings; and         
|
| |  |  | 50% of approved non-fund-based limits, underwriting and similar
commitments or outstandings, whichever is higher.

The definition of capital funds for determining the exposure ceilings has
been revised to include both Tier I and Tier II capital with effect from March
31, 2002.

Our loan exposures to individual borrowers and borrower groups are within
the above limits, except in some cases where we have obtained the approval of
RBI for exceeding the above limits.

In addition, with effect from April 1, 2003, non-funded exposures will be
valued at 100% and foreign exchange and derivative contracts will be valued at
their replacement cost value in determining individual and group borrower
exposures.

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To ensure that exposures are evenly spread, the RBI requires banks to fix
internal limits of exposure to specific sectors. These limits are subject to
periodical review by the banks. We have fixed a ceiling of 12% on our exposure
to any one industry and monitor our exposures accordingly.

Regulation Relating to Capital Markets Exposure

The RBI has issued revised guidelines on financing by banks of equities
and investments in shares. The revised guidelines place a ceiling on the
overall exposure of a bank to the capital markets. The following exposures are
subject to the ceiling:



| |  |  | Direct investment by a bank in equity shares, convertible bonds,
debentures and units of equity-oriented mutual funds.                                                                           
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Advances against shares to individuals for investments in equity
shares (including initial public offerings), bonds and debentures,
units of equity-oriented mutual funds and similar securities.
|
| |  |  | Secured and unsecured advances to stockbrokers and guarantees
issued on behalf of stockbrokers and market makers.                                                                                

The ceiling is equal to 5% of the banks total outstanding advances as
reduced by the amount of bills rediscounted (including commercial paper) at
March 31 of the previous year. Within this ceiling, the total investment in
shares, convertible bonds and debentures and units of equity oriented mutual
funds by a bank should not exceed 20% of its net worth. Non-fund based
facilities and investment by banks in non-convertible debentures and other
similar instruments (excluding commercial paper) should not be included in
computing the total outstanding advances of the bank. Further, for purposes of
computing the ceiling, direct investment in shares by banks will be calculated
at the historical cost of such shares.

Exposures subject to the ceiling will not include collateral consisting of
equity shares, bonds and debentures pledged to a bank by a corporate customer,
other than Non-Banking Financial Companies (NBFC), to secure a loan for working
capital or other productive purposes which do not involve stock broking or
investment in capital markets. Advances made by banks to individuals for
personal purposes like education, housing, consumption etc. will also be
outside the 5% ceiling.

The RBI has issued revised guidelines/ clarifications regarding
computation of capital market exposure, which require the bank to monitor the
exposure gross of cash margins as well as exclude the amount of bills
rediscounted from the total advances. Based on the revised guidelines, the
banks capital market exposure was 4.93% as on March 31
2003 still well within
the stipulated norm of 5%.

Regulations Relating to Investments

There are no limits on the amount of investments by banks in
non-convertible debt instruments. However, credit exposure limits specified by
the RBI in respect of a banks lending to individual borrowers and borrower
groups apply in respect of these investments. The RBI requires that the net
incremental investment by banks in equity securities, convertible bonds and
debentures and units of equity oriented mutual funds cannot exceed 5% of a
banks advances(including commercial paper) in the previous fiscal year.
Further, this cannot exceed 20% of the Banks networth. Investments in
debentures convertible into equity and equity related mutual funds are included
in this 5% limit. In April 1999, the RBI, in its monetary and credit policy
stated that the investment by a bank in subordinated debt instruments,
representing Tier 2 capital, issued by other banks and financial institutions
should not exceed 10% of the investing banks capital funds.

Restrictions on Investments in a Single Company

No bank may hold shares in any company exceeding 30% of the paid up share
capital of that company or 30% of its own paid up share capital and reserves,
whichever is less.

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Limit on Transactions through Individual Brokers

The guidelines issued by the RBI require banks to empanel brokers for
transactions in securities. The guidelines also require that a disproportionate
part of the banks business should not be transacted through only one broker or
a few brokers. The RBI specifies that not more than 5.0% of the total
transactions through empaneled brokers can be transacted through one broker. If
for any reason this limit is breached, the RBI has stipulated that the board of
directors of the bank concerned should ratify this action.

Prohibition on Short Selling

The RBI does not permit short selling of securities by banks.

Valuation of Investments

The RBI has issued guidelines for the valuation of investments. These
guidelines require banks to classify their entire portfolio of approved
securities under three categories namely held for
trading,  available for
sale and held to maturity. However, for disclosure and valuation purpose
as per Indian GAAP the investments are classified under six groups (hereafter
called groups)government securities, other approved securities, shares,
debentures and bonds, investments in subsidiaries and joint ventures and other
investments.

The held to maturity category cannot exceed 25% of the total investments
of the Bank, excluding investments classified as exceptions by the RBI and
debentures in the nature of deemed advances. Securities held in the ''held to
maturity category would have to be valued at cost and any premium paid over
face value would be amortized over the period of maturity of the instrument.
Investment held under Held For Trading cannot be held for more than 90 days.

Investments in the available for sale and held for trading categories are
required to be marked to market based on market quotes or on the basis of the
yield curve provided by the Fixed Income Money Market Dealers Association of
India and Primary Dealers Association of India. Any net loss on the revaluation
of investments of each group in the held for trading  and available for
sale category would have to be recognized in the income account. Net gain on
revaluation of investments shall not be recognized in the income account. Banks
would be able to shift investments from one category to another category only
with the approval of the board of directors.

With a view to building up of adequate reserves to guard against any
possible reversal of interest rate environment in future due to unexpected
developments, banks have been advised to build up Investment Fluctuation
Reserve (IFR) of a minimum 5 per cent of the investment portfolio within a
period of 5 years. IFR should be computed with reference to investments in two
categories, viz., Held for Trading and Available for Sale. It will not be
necessary to include investment under Held to Maturity category for the
purpose of computation of IFR. However, banks are free to build up a higher
percentage of IFR up to 10 per cent of the portfolio depending on the size and
composition of their portfolio, with the approval of their Board of Directors.
Banks should transfer maximum amount of the gains realized on sale of
investment in securities to the IFR. The IFR, consisting of realized gains from
the sale of investments from the two categories, viz., Held for Trading and
Available for Sale, would be eligible for inclusion in Tier 2 capital as
hitherto. Transfer to IFR shall be as an appropriation of net profit below the
line after appropriation to statutory reserve.

Regulations Relating to Deposits

The RBI has permitted banks to independently determine rates of interest
offered on fixed deposits. However, no bank is permitted to pay interest on
current account deposits. Further, banks can pay interest of 3.5% per annum on
savings deposits. In respect of savings and time deposits accepted from
employees, we are permitted by the RBI to pay an additional interest of 1% over
the interest payable on deposits from the public.

Domestic time deposits can have a minimum maturity of seven days and
maximum maturity of ten years. Time deposits from non-resident Indians
denominated in foreign currency can have a minimum maturity of one

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year and maximum maturity of three years. Rupee time deposits from non-resident
Indians can have a minimum maturity of six months and maximum maturity of three
years.

Starting April 1998, the RBI has permitted banks the flexibility to offer
varying rates of interests on domestic deposits of the same maturity subject to
the following conditions:



| |  |  | Time deposits are of Rs. 1.5 million and above; and                                                                                                                    
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Interest is paid in accordance with the schedule of interest rates
disclosed in advance by the bank and not pursuant to negotiation
between the depositor and the bank.

To arrest the strengthening of the Indian rupee as against the US dollar,
the RBI has capped the interest rate to be offered to non-residents on their
Indian rupee deposits at libor + 100 basis points effective September 15, 2003.

Insurance of Deposits

Demand and time deposits of up to Rs. 100,000 accepted by Indian banks
have to be mandatorily insured with the Deposit Insurance and Credit Guarantee
Corporation, a wholly-owned subsidiary of the RBI. Banks are required to pay
the insurance premium for the eligible amount to the Deposit Insurance and
Credit Guarantee Corporation on a semi-annual basis. The cost of the insurance
premium cannot be passed on to the customer.

Regulations Relating to Knowing the Customer

The RBI requires banks to open accounts only after verifying the identity
of customers as to their name, residence and other details to ensure that the
account is being opened by the customer in his own name. To open an account, a
prospective customer requires an introduction by:



| |  |  | an existing customer who has had his own account with the bank for
at least six months duration and has satisfactorily conducted that
account; or
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a well known person in the local area where the prospective
customer is residing.                                                                

If the prospective customer does not have an introducer, documents of the
prospective customer, like his identity card, passport or details of bank
accounts with other banks, are required to be submitted.

With a view to safeguarding banks from being unwittingly used for the
transfer or deposit of funds derived from criminal activities (both in respect
of deposit and borrowal accounts) RBI has recently reinforced their earlier
instructions/guidelines on Know Your Customer norms and Cash transaction.
The guidelines are also applicable to foreign currency accounts/transactions.
The guidelines have been issued under section 35(A) of the Banking Regulation
Act, 1949 and the steps initiated in compliance with the various guidelines are
required to be advised to RBI. The guidelines also envisage that the board of
directors of banks should have in place adequate policies that establish
procedures to verify the bona fide identification of individual/corporates
opening an account.

To further plug the money laundering activities, the Income Tax authorities have
mandated banks to accept cash deposits over Indian Rupees 50,000 only against
the evidence of a permanent account number ( PAN ). Banks have to provide
information to the revenue authorities on a periodic basis on all cash deposits
done over Indian Rupees 50,000.

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Legal Reserve Requirements

Cash Reserve Ratio

A banking company such as HDFC Bank is required to maintain a specified
percentage of its demand and time liabilities by way of a balance in a current
account with the RBI. This is to maintain the solvency of the banking system.
The cash reserve ratio was 5.0% as on March, 31, 2003 (4.5% effective June
14,2003). For this purpose, the following liabilities are not considered:



| |  |  | inter-bank liabilities; and                                                     
| | - |  | --------------------------------------------------------------------------------
|
| |  |  | refinance from RBI and other institutions permitted to offer refinance to banks.

The RBI pays no interest on the cash reserves up to 3.0% of the demand and
time liabilities and pays interest at the prevailing Bank Rate ( currently 6%
per annum) on the balance.

The cash reserve ratio has to be maintained on an average basis for a
two-week period and should not fall below 70% of the required cash reserve
ratio on any particular day.

Statutory Liquidity Ratio

In addition to the cash reserve ratio, a banking company like us is
required to maintain in India a specified percentage of its total demand and
time liabilities by way of liquid assets like cash, gold or approved
securities, such as government of India securities and state government
securities. This is to maintain liquidity in the banking system. The percentage
of this liquidity ratio is fixed by the RBI from time to time. Currently, the
RBI requires banks to maintain a liquidity ratio of 25% on its total demand and
time liabilities. For this purpose the following liabilities are not
considered:



| |  |  | any advance taken from the RBI or from institutions notified in this regard; and
| | - |  | --------------------------------------------------------------------------------
|
| |  |  | interbank liabilities to the extent of interbank assets.                        

Regulations for Asset Liability Management

At present, RBI regulations for asset liability management require banks
to draw up two types of asset-liability gap statements separately for rupee and
for four major foreign currencies. These gap statements are prepared by
scheduling all assets and liabilities according to the stated or anticipated
re-pricing date, or maturity date. These statements have to be submitted to the
RBI on a quarterly basis. The RBI has advised banks to actively monitor the
difference in the amount of assets and liabilities maturing or being re-priced
in a particular period and place internal prudential limits on the gaps in each
time period, as a risk control mechanism. Additionally, the RBI requires banks
to manage their asset-liability structure so that the negative liquidity gap in
the one to 14 day and 15 to 28 day time periods does not exceed 20% of the cash
outflows in these time periods.

Foreign Currency Dealership

RBI has granted us a full authorized dealers license to deal in foreign
exchange through our designated branches. Under this license, we have been
granted permission to:



| |  |  | engage in foreign exchange transactions in all currencies;                      
| | - |  | --------------------------------------------------------------------------------
|
| |  |  | open and maintain foreign currency accounts abroad;                             
|
| |  |  | raise foreign currency and rupee-denominated deposits from non resident Indians;

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| |  |  | grant foreign currency loans to on-shore and off-shore corporations;                                                                                        
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | open documentary credits;                                                                                                                                   
|
| |  |  | grant import and export loans;                                                                                                                              
|
| |  |  | handle collection of bills, funds transfer services;                                                                                                        
|
| |  |  | issue guarantees; and                                                                                                                                       
|
| |  |  | enter into derivative transactions and risk management activities
that are incidental to our normal functions authorized under our
organizational documents.

Our foreign exchange operations
are subject to the guidelines specified by
the RBI in the Foreign Exchange Management Act, (FEMA), 2000. As an authorized dealer, we are
required to enroll as a member of the Foreign Exchange Dealers Association of
India, which prescribes the ground rules relating to foreign exchange business
in India.

Authorized dealers such as HDFC Bank are required to determine their
limits on open positions and maturity gaps in accordance with RBI guidelines
and these limits are approved by the RBI. Further, we are permitted to hedge
foreign currency loan exposures of Indian corporations in the form of interest
rate swaps, currency swaps and forward rate agreements, subject to specific
conditions.

Statutes Governing Foreign Exchange and Cross Border Business Transactions

The foreign exchange and cross border transactions undertaken by banks are
subject to the provisions of Foreign Exchange Management Act. All branches
should monitor all non-resident accounts to prevent money laundering. These
transactions are regulated by the Foreign Exchange Management Act, (FEMA), 2000 and will be
regulated by the Prevention of Money Laundering Act, once it is put in force.

Requirements of Banking Regulation Act

Reserve Fund

Any bank incorporated in India is required to create a reserve fund to
which not less than 25% of the profits of each year before dividends must be
transferred. If there is an appropriation from this account, the bank is
required to report the same to the RBI within 21 days, explaining the
circumstances leading to the appropriation.

Restrictions on Payment of Dividends

The Banking Regulation Act requires that a bank shall pay dividends on its
shares only after all its expenses capitalized under Indian GAAP (including
preliminary expenses, organization expenses, share selling commission,
brokerage on public offerings, amounts of losses and any other item of
expenditure not represented by tangible assets) have been written off.

Prior approval of the RBI is required for a dividend payment above 25% of
par value of a companys shares or for an interim dividend payment.

The government of India may, on recommendation of the RBI, exempt a bank
from requirements relating to its reserve fund and the restrictions on dividend
payments.

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Restriction on Share Capital and Voting Rights

Banks can issue only ordinary shares. Banks incorporated before January
15, 1937 can also issue preference shares. The Banking Regulation Act specifies
that no shareholder in a banking company can exercise voting rights on poll in
excess of 10% of total voting rights of all the shareholders of the banking
company.

Restriction on Transfer of Shares

RBI approval is required before we can register the transfer of shares for
an individual or group which acquires 5.0% or more of our total paid up
capital.

Regulatory Reporting and Examination Procedures

The RBI is empowered under the Banking Regulation Act to inspect a bank.
The RBI monitors prudential parameters at quarterly intervals. The results of
these inspections are provided to the bank, but are required by law to be kept
confidential. To this end and to enable off-site monitoring and surveillance by
the RBI, the banks are required to report to the RBI on financial and operating
measures such as:



| |  |  | assets, liabilities and off-balance sheet exposures;                                   
| | - |  | ---------------------------------------------------------------------------------------
|
| |  |  | the risk weighting of these exposures, the capital base and the capital adequacy ratio;
|
| |  |  | the unaudited balance sheet / statement of income for each month/quarter;              
|
| |  |  | asset quality;                                                                         
|
| |  |  | concentration of exposures;                                                            
|
| |  |  | connected and related lending and the profile of ownership, control and management; and
|
| |  |  | other prudential parameters.                                                           

The RBI also conducts periodical on-site inspections on matters relating
to the banks portfolio, risk management systems, internal controls, credit
allocation and regulatory compliance, at intervals ranging from one to three
years. We have been subject to the on-site inspection by the RBI at yearly
intervals. The inspection report, along with the report on actions taken by us,
has to be placed before our board of directors. On approval by our board of
directors, we are required to submit the report on actions taken by us to the
RBI. The RBI also discusses the report with our management team including our
chief executive officer.

The RBI also conducts on-site supervision of our selected branches with
respect to their general operations and foreign exchange related transactions.

Penalties

The RBI can impose penalties on banks and its employees in case of
infringement of regulations under the Banking Regulation Act. The penalty can
be a fixed amount or be related to the amount involved in any contravention of
the regulations. The penalty may also include imprisonment.

Assets to be Maintained in India

Every bank is required to ensure that its assets in India (including
import-export bills drawn in India and RBI approved securities, even if the
bills and the securities are held outside India) are not less than 75% of its
demand and time liabilities in India.

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Secrecy Obligations

Our obligations relating to maintaining secrecy arise out of common law
principles governing our relationship with our customers. We cannot disclose
any information to third parties except under clearly defined circumstances.
The following are the exceptions to this general rule:



| |  |  | where disclosure is required to be made under any law;                       
| | - |  | -----------------------------------------------------------------------------
|
| |  |  | where there is an obligation to disclose to the public;                      
|
| |  |  | where we need to disclose information in our interest; and                   
|
| |  |  | where disclosure is made with the express or implied consent of the customer.

We are required to comply with the above in furnishing any information to
any parties. We are also required to disclose information if ordered to do so
by a court. The RBI may, in the public interest, publish the information
obtained from the bank.

Appointment and Remuneration of our Chairman, Managing Director and other Directors

We require prior approval of the RBI to appoint our chairman and managing
director and any other directors and to fix their remuneration. The RBI is
empowered to remove the appointee on the grounds of public interest or the
interest of depositors or to ensure the proper management of the bank. Further,
the RBI may order meetings of the banks board of directors to discuss any
matter in relation to the bank, appoint observers to these meetings and in
general may make changes to the management as it may deem necessary and can
also order the convening of a general meeting of the company to elect new
directors.

RBI has recently issued guidelines relating to salary and other remuneration
payable to the Chairman, Managing Director and Whole Time Directors of new
Private Sector Banks. Pursuant to these guidelines, the RBI has permitted
banks to fix the performance bonus payable to the Managing Director / Whole
Time Directors on either of the two criteria:

(a)  upto a maximum of 25% of the salary; or

(b)  the average bonus paid to the officers / employees. The average bonus paid
to officers / employees is calculated by dividing the total salary bill by the
total bonus paid to them.

Securities and Exchange Board of India Regulations and Guidelines

The Securities and Exchange Board of India was established to protect the
interests of public investors in securities and to promote the development of,
and to regulate, the Indian securities market. We are subject to Securities and
Exchange Board of India regulations in respect of our activities as agents for
collecting subscriptions to public offerings of securities made by other
companies. These regulations provide for registration with the Securities and
Exchange Board of India for each of these activities, the functions,
responsibilities and a code of conduct applicable for these activities.

Finance Act 2003

The recent Finance Act 2003 made some changes in the tax laws, which may
have an effect on our business. The statutory tax rates ( including surcharge)
for companies has been hiked from 35.7% in fiscal year ended March 2003 to
36.75% for the fiscal ended March 2004. Further any amount declared,
distributed or paid by a domestic company by way of dividends on or after April
1, 2004 shall be charged to additional income tax @12.5% and such dividend will
be exempt in hands of the recipient. The Finance Act 2003 also



| |  | Exempted Long-term capital gains arising from transfer of listed shares acquired on or after March 1, 2003 but before
March 1, 2004.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------

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| |  | Provided for a further deduction to banks in respect of provision for bad and doubtful debts.                                                               
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Provided that Business loss and depreciation of hotels and banking companies can be carried forward upon their
amalgamations.                               
| 
| |  | Individuals required to be non-resident in India for at least 9 years out of the 10 years preceding the relevant year to
qualify as not ordinarily resident.
| 
| |  | Certain changes in the provision relating to disallowance in respect of certain payments to non-residents without deduction
of tax at source.               

Regulations Relating to Setting up of Off-shore Banking Units

The Government of India introduced Special Economic Zones (SEZs) with a view to
providing an internationally competitive and a hassle-free environment for
export production. Offshore Banking Units (OBUs) have now been permitted to be
set up in SEZs. These units would be virtually foreign branches of Indian banks
but located in India. These OBUs, inter alia, would be exempted from cash
reserve requirements and would be able to provide finance to SEZ units and SEZ
developers at international rates of interest.

Corporate Debt Restructuring Framework

Corporate Debt Restructuring (CDR)

RBI has put in place a CDR framework for restructuring of debt of viable corporates facing problems.
The framework, which is expected to come in force during the current fiscal year, envisages that for debt amounts of Rs. 200 million
and above referred by lenders/borrowers to the CDR cell, lenders holding greater than 75% of the referred debt can decide to restructure the
referred debt and such a decision would be binding on the remaining 25% or less of the lenders even if they do not agree to the restructuring. This
could force us to agree to a long-drawn restructuring of debt, in preference to foreclosure of security or a one-time
settlement, which has generally been our practice, hitherto.

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EXCHANGE CONTROLS

Restrictions on Conversion of Rupees

There are restrictions on the conversion of rupees into dollars. Before
February 29, 1992, the RBI determined the official value of the rupee in
relation to a weighted basket of currencies of Indias major trading partners.
In the February 1992 budget, a new dual exchange rate mechanism was introduced
by allowing conversion of 60% of the foreign exchange received on trade or
current account at a market-determined rate and the remaining 40% at the
official rate. All importers were, however, required to buy foreign exchange at
the market rate except for specified priority imports. In March 1993, the
exchange rate was unified and allowed to float. In February 1994 and again in
August 1994, the RBI announced relaxations in payment restrictions in the case
of a number of transactions. Since August 1994, the government of India has
substantially complied with its obligations owed to the International Monetary
Fund, under which India is committed to refrain from using exchange
restrictions on current international transactions as an instrument in managing
the balance of payments. Effective July 1995, the process of current account
convertibility was advanced by relaxing restrictions on foreign exchange for
various purposes, such as foreign travel and medical treatment.

Restrictions on Sale of the Equity Shares underlying the ADSs and for Repatriation of Sale Proceeds

ADSs issued by Indian companies to non-residents have free transferability
outside India. However, under Indian regulations and practice, the approval of
the RBI is required for the sale of equity shares underlying the ADSs (other
than a sale on a stock exchange or in connection with an offer made under the
takeover regulations) by a non-resident of India to a resident of India as well
as for renunciation of rights to a resident of India. Contrary to prior
regulations, an investor who surrenders an ADS and withdraws equity shares may
be entitled to redeposit those equity shares in the depositary facility in
exchange for ADSs and the depositary may accept deposits of outstanding equity
shares purchased by a non-resident on the local stock exchange and issue ADSs
representing those equity shares. However in each case, the aggregate number of
equity shares redeposited or deposited by such persons cannot exceed the number
represented by ADSs converted into underlying equity shares.

Pursuant to the announcement of the Finance Minister in the Budget for
fiscal 2002, the RBI has issued a notification inter-alia permitting Indian
companies to sponsor ADR/GDR issues against shares held by its shareholders at
a price to be determined by the lead manager.Investors who seek to sell in
India any equity shares (other than a sale on a stock exchange or in connection
with an offer made under the takeover regulations) withdrawn from the
depositary facility and to convert the rupee proceeds from the sale into
foreign currency and repatriate the foreign currency from India will, subject
to the foregoing, have to obtain RBI approval for each transaction.

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RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES

The government of India regulates ownership of Indian companies by
foreigners. Foreign investment in Indian securities is generally regulated by
the Foreign Exchange Management Act, 1999. The Foreign Exchange Management Act,
1999, when read together with a series of regulations issued thereunder by the
RBI, which permits transactions involving the inflow or outflow of foreign
exchange and empowers the RBI to prohibit or regulate such transactions.

The Foreign Exchange Management Act permits most transactions involving
foreign exchange except those prohibited or restricted by the RBI. The Foreign
Exchange Management Act has eased restrictions on current account transactions.
However, the RBI continues to exercise control over capital account
transactions (i.e., those that alter the assets or liabilities, including
contingent liabilities, of persons). The RBI has issued regulations under the
Foreign Exchange Management Act to regulate the various kinds of capital
account transactions, including certain aspects of the purchase and issuance of
shares of Indian companies.

The RBI has issued a notification under the provisions of the Foreign
Exchange Management Act relaxing the requirement of prior approval for an
Indian company making an ADS issue provided that the issuer is eligible to
issue ADSs pursuant to the guidelines issued by the Ministry of Finance and has
the necessary approval from the Foreign Investment Promotion Board.

Under the foreign investment rules, the following restrictions are
applicable to foreign ownership:



| |  |  | Under the foreign direct investment route, foreign investors may
own our equity shares only with the approval of the Foreign Investment
Promotion Board; this approval is granted on a case-by-case basis;                                                                                                                                                                                                                                                                                                                                                                 
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Under the Issue of Foreign Currency Convertible Bonds and Equity
Shares (through Depositary Receipt Mechanism) Scheme, 1993, foreign
investors may purchase ADSs or GDRs, subject to the receipt of all
necessary government approvals at the time the depositary receipt
program is set up. With a view to liberalizing the operational
procedures, the government of Indias Ministry of Finance and the RBI
have granted a general approval to ADS or GDR issues, subject to
specified restrictions; and                                                                
|
| |  |  | Under the portfolio investment route, foreign institutional
investors, subject to registration with the Securities and Exchange
Board of India and the RBI, non-resident Indians, subject to a
resolution of the Board of Directors and a special resolutions of the
shareholder ; may be permitted to own in the aggregate up to 49% of our
equity shares that are not represented by ADSs or GDRs; no single
foreign institutional investor may own more than 10% of our equity
shares and no single non-resident Indian may own more than 5% of our
total equity shares.

Foreign direct investment currently amount to 13.25% of our equity shares
as of March 31, 2003.

As an investor in ADSs, you do not need to seek the specific approval from
the government of India to purchase, hold or dispose of your ADSs. In our ADS
offering, we obtained the approval of the relevant stock exchanges and the
Foreign Investment Promotion Board. We were not required to obtain the prior
approval of the RBI.

Notwithstanding the foregoing, if a foreign institutional investor,
non-resident Indian or overseas corporate body were to withdraw its equity
shares from the ADS program, its investment in the equity shares would be
subject to the general restrictions on foreign ownership noted above and may be
subject to the portfolio investment restrictions, including the portfolio
investment limitations mentioned above. The application of these limitations,
however, is not clear. Secondary purchases of securities of Indian companies in
India by foreign direct investors or investments by non-resident Indians,
persons of Indian origin, overseas corporate bodies and foreign institutional
investors above the ownership levels set forth above require government of
India approval on a case-by-case basis. It is unclear whether similar
case-by-case approvals of ownership of equity shares withdrawn from the
depositary facility by foreign institutional investors, non-resident Indians
and overseas corporate bodies would be required.

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Further, if you withdraw your equity shares from the ADS program and your
direct or indirect holding in us exceeds 15% of our total equity, you would be
required to make a public offer to the remaining shareholders under the
Takeover Code.

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USE OF PROCEEDS

On July 20, 2001, we completed our initial public offering outside India,
which consisted of 12,472,884 ADSs (which included the underwriters
overallotment option of 1,626,898 ADSs, which was exercised in full), each ADS
representing three of our equity shares, par value Rs. 10 per equity share.
Our registration statement on Form F-1 (File No. 333-13718) for this offering
was declared effective by the SEC on July 19, 2001. All the securities
registered were sold and the offering has terminated. Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated were the
joint global coordinators and joint bookrunners for the offering.

The ADSs were offered at an initial price to public of US$13.83 per ADS,
for a total amount of US$172.5 million. The underwriters discount amounted to
US$6.9 million. Expenses from the offering, not including the underwriters
discount, were borne by the underwriters and depositary. The net offering to
us, after deducting expenses and the underwriters discount, were approximately
US$165.6 million.

The net proceeds were used by us and deployed in our core banking
businesses.

None of the net proceeds were used to make payments to our directors,
officers, 10% holders, or affiliates nor did any of the expenses constitute
such payments.

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ADDITIONAL INFORMATION

In accordance with the Securities Act, we filed with the Securities and
Exchange Commission a registration statement on Form F-1, which includes
relevant exhibits and schedules with respect to the ADSs and the underlying
equity shares issued in our initial public offering. The registration
statement, including its exhibits and schedules, may be inspected without
charge at the principal office of the Securities and Exchange Commission
located at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
regional offices of the Securities and Exchange Commission located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.

Copies of this material may also be obtained by mail from the Public
Reference Branch of the Securities and Exchange Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.

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INDEX TO FINANCIAL STATEMENTS

|                                                                                     |  |      |     | 
|------------------------------------------------------------------------------------ |  | ---- | --- | 
|                                                                                     |  | Page
|                                                                                     |  |     
|Financial Statements of HDFC Bank Limited:                                           |  |      |     | 
|Report of independent auditors                                                       |  |      | F-2 | 
|Balance sheets as of March 31, 2002 and 2003                                         |  |      | F-3 | 
|Statements of income for the years ended March 31, 2001, 2002 and 2003               |  |      | F-4 | 
|Statements of cash flows for the years ended March 31, 2001, 2002 and 2003           |  |      | F-5 | 
|Statements of shareholders equity for the years ended March 31, 2001, 2002 and 2003 |  |      | F-6 | 
|Notes to financial statements                                                        |  |      | F-7 | 

F-1

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INDEPENDENT AUDITORS REPORT

To the Board of Directors
HDFC Bank Limited:

We have audited the accompanying balance sheets of HDFC Bank Limited (the
Bank) as of March 31, 2002 and 2003, and the related statements of income,
cash flows and shareholders equity for each of the years in the three year
period ended March 31, 2003. These financial statements are the responsibility
of the Banks management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Bank as of March 31, 2002 and
2003, and the results of its operations and cash flows for each of the years
in the three year period ended March 31, 2003, in conformity with accounting
principles generally accepted in the United States of America.

As described in Note 2 (a) to the financial statements, these financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America, which differ in certain
material respects from accounting principles generally accepted for banks in
India, which form the basis of the Banks general purpose financial
statements.

/s/ DELOITTE HASKINS & SELLS



CHARTERED ACCOUNTANTS
Mumbai, India
April 15, 2003

F-2

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HDFC BANK LIMITED
BALANCE SHEETS
As of March 31, 2002 and 2003

|                                                                                                                                                   |                                       |                            |                                            |     |                 |           |           |     |           |           |         |     |         |         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | -------------------------- | ------------------------------------------ | --- | --------------- | --------- | --------- | --- | --------- | --------- | ------- | --- | ------- | ------- | 
|                                                                                                                                                   |                                       |                            |                                            |     | As of March 31,
|                                                                                                                                                   |                                       |                            |                                            |     |                
|                                                                                                                                                   |                                       |                            |                                            |     | 2002            |           | 2003      |     | 2003     
|                                                                                                                                                   |                                       |                            |                                            |     |                 |           |           |     |          
|                                                                                                                                                   |                                       |                            |                                            |     | (In millions)  
|                                                                                                                                                   | ASSETS:                               |                            |                                            |     |                 |           |           |     |           |           |         |     |        
|Cash and cash equivalents                                                                                                                          |                                       | Rs.                        | 34,590.6                                   |     |                 | Rs.       | 23,944.9  |     |           | US$       | 503.8   |    
|Term placements                                                                                                                                    |                                       |                            |                                           |     |                 |           | 7,747.4   |     |           |           | 163.0   |    
|Investments held for trading, at market                                                                                                            |                                       |                            | 3,837.6                                    |     |                 |           | 3,976.1   |     |           |           | 83.7    |    
|Investments available for sale, at market                                                                                                          |                                       |                            | 80,320.6                                   |     |                 |           | 98,929.2  |     |           |           | 2,081.4 |    
|Investments held to maturity, at amortized cost                                                                                                    |                                       |                            | 35,429.9                                   |     |                 |           | 38,426.7  |     |           |           | 808.5   |    
|Securities purchased under agreements to resell                                                                                                    |                                       |                            | 2,823.5                                    |     |                 |           |          |     |           |           |        |    
|Loans (net of allowance of Rs 1,605.9 and Rs 1,866.7, respectively)                                                                                |                                       |                            | 71,528.9                                   |     |                 |           | 118,299.9 |     |           |           | 2,488.9 |    
|Accrued interest receivable                                                                                                                        |                                       |                            | 4,084.0                                    |     |                 |           | 6,283.8   |     |           |           | 132.2   |    
|Property and equipment                                                                                                                             |                                       |                            | 3,658.1                                    |     |                 |           | 5,277.5   |     |           |           | 111.0   |    
|Other assets                                                                                                                                       |                                       |                            | 6,759.0                                    |     |                 |           | 8,955.2   |     |           |           | 188.4   |    
|                                                                                                                                                   |                                       |                            |                                            |     |                 |           |           |     |           |           |         |    
|                                                                                                                                                   |                                       | Total assets               |                                            | Rs. | 243,032.2       |           |           | Rs. | 311,840.7 |           |         | US$ | 6,560.9 |        
|                                                                                                                                                   |                                       |                            |                                            |     |                 |           |           |     |           |           |         |    
|                                                                                                                                                   | LIABILITIES AND SHAREHOLDERS EQUITY: |                            |                                            |     |                 |           |           |     |           |           |         |     |        
|Liabilities                                                                                                                                        |                                       |                            |                                            |     |                 |           |           |     |           |           |         |    
|Interest-bearing deposits                                                                                                                          |                                       | Rs.                        | 134,336.3                                  |     |                 | Rs.       | 174,250.4 |     |           | US$       | 3,666.1 |    
|Non-interest bearing deposits                                                                                                                      |                                       |                            | 42,201.8                                   |     |                 |           | 49,509.6  |     |           |           | 1,041.6 |    
|                                                                                                                                                   |                                       |                            |                                            |     |                 |           |           |     |           |           |         |    
|                                                                                                                                                   |                                       | Total deposits             |                                            |     | 176,538.1       |           |           |     | 223,760.0 |           |         |     | 4,707.7 |        
|Securities sold under repurchase agreements                                                                                                        |                                       |                            | 643.9                                      |     |                 |           | 4,600.0   |     |           |           | 96.8    |    
|Short-term borrowings                                                                                                                              |                                       |                            | 21,600.3                                   |     |                 |           | 21,579.6  |     |           |           | 454.0   |    
|Accrued interest payable                                                                                                                           |                                       |                            | 4,178.5                                    |     |                 |           | 6,897.3   |     |           |           | 145.1   |    
|Long-term debt                                                                                                                                     |                                       |                            | 2,157.9                                    |     |                 |           | 2,116.0   |     |           |           | 44.5    |    
|Accrued expenses and other liabilities                                                                                                             |                                       |                            | 15,852.6                                   |     |                 |           | 26,774.7  |     |           |           | 563.5   |    
|                                                                                                                                                   |                                       |                            |                                            |     |                 |           |           |     |           |           |         |    
|                                                                                                                                                   |                                       | Total liabilities          |                                            |     | 220,971.3       |           |           |     | 285,727.6 |           |         |     | 6,011.6 |        
|                                                                                                                                                   |                                       |                            |                                            |     |                 |           |           |     |           |           |         |    
|Contingencies (See Note 25)                                                                                                                        |                                       |                            |                                           |     |                 |           |          |     |           |           |        |    
|Shareholders equity:                                                                                                                              |                                       |                            |                                            |     |                 |           |           |     |           |           |         |    
|Equity shares: par valueRs.10 each;
authorized 450,000,000 shares; issued and
outstanding 279,032,838 shares and 279,718,938 shares,
respectively |                                       |                            | 2,790.3                                    |     |                 |           | 2,797.2   |     |           |           | 58.8    |    
|Additional paid in capital                                                                                                                         |                                       |                            | 11,679.1                                   |     |                 |           | 11,758.9  |     |           |           | 247.4   |    
|Advance received pending allotment of shares                                                                                                       |                                       |                            |                                           |     |                 |           | 146.5     |     |           |           | 3.1     |    
|Retained earnings                                                                                                                                  |                                       |                            | 4,684.8                                    |     |                 |           | 6,532.1   |     |           |           | 137.4   |    
|Statutory reserve                                                                                                                                  |                                       |                            | 2,280.9                                    |     |                 |           | 3,249.9   |     |           |           | 68.4    |    
|Deferred stock based compensation                                                                                                                  |                                       |                            | (198.2                                     | )   |                 |           | (60.2     | )   |           |           | (1.3    | )  
|Accumulated other comprehensive income                                                                                                             |                                       |                            | 824.0                                      |     |                 |           | 1,688.7   |     |           |           | 35.5    |    
|                                                                                                                                                   |                                       |                            |                                            |     |                 |           |           |     |           |           |         |    
|                                                                                                                                                   |                                       | Total shareholders equity |                                            |     | 22,060.9        |           |           |     | 26,113.1  |           |         |     | 549.3   |        
|                                                                                                                                                   |                                       |                            |                                            |     |                 |           |           |     |           |           |         |    
|                                                                                                                                                   |                                       |                            | Total liabilities and shareholders equity |     | Rs.             | 243,032.2 |           |     | Rs.       | 311,840.7 |         |     | US$     | 6,560.9 | 
|                                                                                                                                                   |                                       |                            |                                            |     |                 |           |           |     |           |           |         |    

See accompanying notes to financial statements

F-3

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##### Table of Contents



HDFC BANK LIMITED
STATEMENTS OF INCOME
For each of the years ended March 31, 2001, 2002 and 2003

|                                                       |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |       |       |       |       | 
|------------------------------------------------------ | ----------------------------------------------------------------------- | -------------------------- | ------------------------------- | ------------------ | ------- | ------------------------------------------------- | ------- | ------- | ------- | -------- | ------- | -------- | ------- | -------- | -------- | ----- | ----- | ----- | ----- | 
|                                                       |                                                                         |                            |                                 |                    |         | Years ended March 31,                            
|                                                       |                                                                         |                            |                                 |                    |         |                                                  
|                                                       |                                                                         |                            |                                 |                    |         | 2001                                              |         | 2002    |         | 2003     |         | 2003    
|                                                       |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |         
|                                                       |                                                                         |                            |                                 |                    |         | (In millions, except share and per share amounts)
|Interest and dividend revenue:                         |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |      
|                                                       | Loans                                                                   |                            | Rs.                             | 4,898.1            |         |                                                   | Rs.     | 6,130.7 |         |          | Rs.     | 7,805.3  |         |          | US$      | 164.2 |      
|                                                       | Trading account                                                         |                            |                                 |                   |         |                                                   |         | 218.7   |         |          |         | 478.9    |         |          |          | 10.1  |      
|                                                       | Securities, including dividend                                          |                            |                                 | 6,355.9            |         |                                                   |         | 7,947.7 |         |          |         | 9,907.2  |         |          |          | 208.4 |      
|                                                       | Other                                                                   |                            |                                 | 1,307.5            |         |                                                   |         | 2,150.9 |         |          |         | 1,233.4  |         |          |          | 25.9  |      
|                                                       |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |       |      
|                                                       |                                                                         |                            | Total interest revenue          |                    |         | 12,561.5                                          |         |         |         | 16,448.0 |         |          |         | 19,424.8 |          |       |       | 408.6 |      
|                                                       |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |       |      
|Interest expense:                                      |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |      
|                                                       | Deposits                                                                |                            |                                 | 6,390.8            |         |                                                   |         | 9,158.5 |         |          |         | 10,631.3 |         |          |          | 223.7 |      
|                                                       | Short-term borrowings                                                   |                            |                                 | 947.1              |         |                                                   |         | 1,328.1 |         |          |         | 973.1    |         |          |          | 20.5  |      
|                                                       | Long-term debt                                                          |                            |                                 | 235.5              |         |                                                   |         | 275.9   |         |          |         | 297.6    |         |          |          | 6.3   |      
|                                                       |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |       |      
|                                                       |                                                                         |                            | Total interest expense          |                    |         | 7,573.4                                           |         |         |         | 10,762.5 |         |          |         | 11,902.0 |          |       |       | 250.5 |      
|                                                       |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |       |      
|Net interest revenue                                   |                                                                         |                            | 4,988.1                         |                    |         |                                                   | 5,685.5 |         |         |          | 7,522.8 |          |         |          | 158.1    |      
|                                                       | Allowance for credit losses, net                                        |                            |                                 | 247.0              |         |                                                   |         | 451.6   |         |          |         | 741.5    |         |          |          | 15.6  |      
|Net interest revenue after allowance for credit losses |                                                                         |                            | 4,741.1                         |                    |         |                                                   | 5,233.9 |         |         |          | 6,781.3 |          |         |          | 142.5    |      
|Non-interest revenue, net:                             |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |      
|                                                       | Fees and commissions                                                    |                            |                                 | 1,302.1            |         |                                                   |         | 1,620.5 |         |          |         | 2,306.4  |         |          |          | 48.5  |      
|                                                       | Trading account gains, net                                              |                            |                                 |                   |         |                                                   |         | 600.9   |         |          |         | 507.8    |         |          |          | 10.7  |      
|                                                       | Realized (losses)/ gains on sales of available for sale securities, net |                            |                                 | (74.2              | )       |                                                   |         | 344.4   |         |          |         | 721.7    |         |          |          | 15.2  |      
|                                                       | Foreign exchange transactions                                           |                            |                                 | 252.5              |         |                                                   |         | 391.4   |         |          |         | 445.3    |         |          |          | 9.4   |      
|                                                       | Derivative transactions                                                 |                            |                                 | 146.0              |         |                                                   |         | 249.7   |         |          |         | 501.9    |         |          |          | 10.6  |      
|                                                       | Other, net                                                              |                            |                                 | 0.7                |         |                                                   |         | 8.2     |         |          |         | 37.0     |         |          |          | 0.8   |      
|                                                       |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |       |      
|                                                       |                                                                         |                            | Total non-interest revenue, net |                    |         | 1,627.1                                           |         |         |         | 3,215.1  |         |          |         | 4,520.1  |          |       |       | 95.2  |      
|                                                       |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |       |      
|                                                       |                                                                         |                            |                                 | Total revenue, net |         |                                                   | 6,368.2 |         |         |          | 8,449.0 |          |         |          | 11,301.4 |       |       |       | 237.7 | 
|                                                       |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |       |      
|Non-interest expense:                                  |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |      
|                                                       | Salaries and staff benefits                                             |                            |                                 | 918.5              |         |                                                   |         | 1,184.6 |         |          |         | 1,661.2  |         |          |          | 35.0  |      
|                                                       | Premises and equipment                                                  |                            |                                 | 656.5              |         |                                                   |         | 913.8   |         |          |         | 1,343.6  |         |          |          | 28.3  |      
|                                                       | Depreciation and amortization                                           |                            |                                 | 538.8              |         |                                                   |         | 675.7   |         |          |         | 1,052.4  |         |          |          | 22.1  |      
|                                                       | Administrative and other                                                |                            |                                 | 1,048.7            |         |                                                   |         | 1,421.9 |         |          |         | 2,000.7  |         |          |          | 42.1  |      
|                                                       |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |       |      
|                                                       |                                                                         | Total non-interest expense |                                 |                    | 3,162.5 |                                                   |         |         | 4,196.0 |          |         |          | 6,057.9 |          |          |       | 127.5 |      
|                                                       |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |       |      
|Income before income tax                               |                                                                         |                            | 3,205.7                         |                    |         |                                                   | 4,253.0 |         |         |          | 5,243.5 |          |         |          | 110.2    |      
|                                                       | Income tax                                                              |                            |                                 | 1,065.1            |         |                                                   |         | 1,294.6 |         |          |         | 1,729.7  |         |          |          | 36.4  |      
|                                                       |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |       |      
|Net income                                             |                                                                         | Rs.                        | 2,140.6                         |                    |         | Rs.                                               | 2,958.4 |         |         | Rs.      | 3,513.8 |          |         | US$      | 73.8     |      
|                                                       |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |       |      
|Per share information: (see note 28)                   |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |      
|                                                       | Earnings per equity sharebasic                                         |                            | Rs.                             | 8.97               |         |                                                   | Rs.     | 11.10   |         |          | Rs.     | 12.57    |         |          | US$      | 0.26  |      
|                                                       | Earnings per equity sharediluted                                       |                            | Rs.                             | 8.87               |         |                                                   | Rs.     | 11.04   |         |          | Rs.     | 12.51    |         |          | US$      | 0.26  |      
|Per ADS information (where 1 ADS represents 3 shares): |                                                                         |                            |                                 |                    |         |                                                   |         |         |         |          |         |          |         |          |          |      
|                                                       | Earnings per ADSbasic                                                  |                            |                                 |                   |         |                                                   | Rs.     | 33.30   |         |          | Rs.     | 37.71    |         |          | US$      | 0.78  |      
|                                                       | Earnings per ADSdiluted                                                |                            |                                 |                   |         |                                                   | Rs.     | 33.12   |         |          | Rs.     | 37.53    |         |          | US$      | 0.78  |      

See accompanying notes to financial statements

F-4

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##### Table of Contents



HDFC BANK LIMITED
STATEMENTS OF CASH FLOWS
For each of the years ended March 31, 2001, 2002 and 2003

|                                                                             |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |        |   |          |       | 
|---------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | --- | ------------------------------------------------------------------ | ----------------------------------------- | - | --------------------- | -------- | --------- | - | ---------- | --------- | --------- | - | ---------- | -------- | ------ | - | -------- | ----- | 
|                                                                             |                                                                                 |     |                                                                    |                                           |   | Years ended March 31,
|                                                                             |                                                                                 |     |                                                                    |                                           |   |                      
|                                                                             |                                                                                 |     |                                                                    |                                           |   | 2001                  |          | 2002      |   | 2003       |           | 2003     
|                                                                             |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |          
|                                                                             |                                                                                 |     |                                                                    |                                           |   | (In millions)        
|Cash flows from operating activities:                                        |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |       
|                                                                             | Net income                                                                      |     | Rs.                                                                | 2,140.6                                   |   |                       | Rs.      | 2,958.4   |   |            | Rs.       | 3,513.8   |   |            | US$      | 73.8   |  
|                                                                             | Adjustment to reconcile net income to net cash provided by operating activities |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |        |  
|                                                                             |                                                                                 |     | Allowance for credit losses                                        |                                           |   | 247.0                 |          |           |   | 451.6      |           |           |   | 741.5      |          |        |   | 15.6     |      
|                                                                             |                                                                                 |     | Depreciation and amortization                                      |                                           |   | 538.8                 |          |           |   | 675.7      |           |           |   | 1,052.4    |          |        |   | 22.1     |      
|                                                                             |                                                                                 |     | Amortization of deferred stock based compensation                  |                                           |   | 135.0                 |          |           |   | 89.8       |           |           |   | 138.0      |          |        |   | 2.9      |      
|                                                                             |                                                                                 |     | Amortization of deferred acquisition costs                         |                                           |   | 14.9                  |          |           |   | 46.7       |           |           |   | 66.3       |          |        |   | 1.4      |      
|                                                                             |                                                                                 |     | Amortization of investments                                        |                                           |   |                      |          |           |   | 499.2      |           |           |   | 761.6      |          |        |   | 16.0     |      
|                                                                             |                                                                                 |     | Provision for deferred income taxes                                |                                           |   | 15.7                  |          |           |   | (105.6     | )         |           |   | (102.8     | )        |        |   | (2.2     | )    
|                                                                             |                                                                                 |     | Accrued interest income                                            |                                           |   | (688.7                | )        |           |   | (1,774.1   | )         |           |   | (2,199.9   | )        |        |   | (46.2    | )    
|                                                                             |                                                                                 |     | Net realized (gain)/ loss on sale of available for sale securities |                                           |   | 74.2                  |          |           |   | (344.4     | )         |           |   | (721.7     | )        |        |   | (15.2    | )    
|                                                                             |                                                                                 |     | Accrued interest expense                                           |                                           |   | 1,896.5               |          |           |   | 1,214.8    |           |           |   | 2,718.6    |          |        |   | 57.3     |      
|                                                                             |                                                                                 |     | Loss/(gain) on disposal of property and equipment, net             |                                           |   | 6.0                   |          |           |   | 8.1        |           |           |   | (10.8      | )        |        |   | (0.2     | )    
|Net change in:                                                               |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |       
|                                                                             |                                                                                 |     | Other assets                                                       |                                           |   | (1,933.8              | )        |           |   | 347.5      |           |           |   | (2,406.2   | )        |        |   | (50.6    | )    
|                                                                             |                                                                                 |     | Other liabilities                                                  |                                           |   | 4,328.7               |          |           |   | 4,340.9    |           |           |   | 11,075.2   |          |        |   | 233.0    |      
|                                                                             |                                                                                 |     | Trading account assets                                             |                                           |   |                      |          |           |   | (3,837.6   | )         |           |   | (138.5     | )        |        |   | (2.9     | )    
|                                                                             |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |        |   |         
|                                                                             |                                                                                 |     |                                                                    | Net cash provided by operating activities |   |                       | 6,774.9  |           |   |            | 4,571.0   |           |   |            | 14,487.5 |        |   |          | 304.8 | 
|                                                                             |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |        |   |         
|Cash flows from investing activities:                                        |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |       
|                                                                             | Net change in term placements                                                   |     |                                                                    |                                          |   |                       |          |          |   |            |           | (7,747.4  | ) |            |          | (163.0 | )
|                                                                             | Activity in available for sale securities:                                      |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |        |  
|                                                                             |                                                                                 |     | Purchases                                                          |                                           |   | (157,509.6            | )        |           |   | (300,993.8 | )         |           |   | (382,916.3 | )        |        |   | (8,056.3 | )    
|                                                                             |                                                                                 |     | Proceeds from sales                                                |                                           |   | 133,665.8             |          |           |   | 243,462.6  |           |           |   | 341,254.1  |          |        |   | 7,179.8  |      
|                                                                             |                                                                                 |     | Maturities, prepayments and calls                                  |                                           |   | 12,430.5              |          |           |   | 25,514.1   |           |           |   | 24,209.6   |          |        |   | 509.4    |      
|Activity in held to maturity securities:                                     |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |       
|                                                                             |                                                                                 |     | Purchases                                                          |                                           |   |                      |          |           |   | (23,281.5  | )         |           |   | (56,274.0  | )        |        |   | (1,184.0 | )    
|                                                                             |                                                                                 |     | Maturities, prepayments and calls                                  |                                           |   |                      |          |           |   | 10,213.3   |           |           |   | 52,896.0   |          |        |   | 1,112.9  |      
|                                                                             | Net change in repos and reverse repos                                           |     |                                                                    | (2,463.4                                  | ) |                       |          | (722.7    | ) |            |           | 6,779.6   |   |            |          | 142.6  |  
|                                                                             | Increase in loans originated, net of principal collections                      |     |                                                                    | (15,271.7                                 | ) |                       |          | (20,897.3 | ) |            |           | (47,512.5 | ) |            |          | (999.6 | )
|                                                                             | Additions to property and equipment                                             |     |                                                                    | (1,150.7                                  | ) |                       |          | (1,682.6  | ) |            |           | (2,533.5  | ) |            |          | (53.3  | )
|                                                                             | Proceeds from sale or disposal of property and equipment                        |     |                                                                    | 16.9                                      |   |                       |          | 101.0     |   |            |           | 16.2      |   |            |          | 0.3    |  
|                                                                             |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |        |   |         
|                                                                             |                                                                                 |     | Net cash used in investing activities                              |                                           |   | (30,282.2             | )        |           |   | (68,286.9  | )         |           |   | (71,828.2  | )        |        |   | (1,511.2 | )    
|                                                                             |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |        |   |         
|Cash flows from financing activities:                                        |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |       
|                                                                             | Net increase in deposits                                                        |     |                                                                    | 32,303.9                                  |   |                       |          | 59,957.0  |   |            |           | 47,221.9  |   |            |          | 993.5  |  
|                                                                             | Net increase/(decrease) in short-term borrowings                                |     |                                                                    | 936.5                                     |   |                       |          | 4,929.1   |   |            |           | (20.7     | ) |            |          | (0.4   | )
|                                                                             | Proceeds from issuance of long-term debt                                        |     |                                                                    | 595.6                                     |   |                       |          |          |   |            |           |          |   |            |          |       |  
|                                                                             | Repayments of long-term debt                                                    |     |                                                                    | (95.0                                     | ) |                       |          | (62.7     | ) |            |           | (41.9     | ) |            |          | (0.9   | )
|                                                                             | Proceeds from issuance of equity shares and ADSs                                |     |                                                                    | 57.0                                      |   |                       |          | 7,890.6   |   |            |           | 86.7      |   |            |          | 1.8    |  
|                                                                             | Proceeds from application received for shares pending allotment                 |     |                                                                    |                                          |   |                       |          |          |   |            |           | 146.5     |   |            |          | 3.1    |  
|                                                                             | Payment of dividends and dividend tax                                           |     |                                                                    | (351.5                                    | ) |                       |          | (528.6    | ) |            |           | (697.5    | ) |            |          | (14.7  | )
|                                                                             |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |        |   |         
|                                                                             |                                                                                 |     | Net cash provided by financing activities                          |                                           |   | 33,446.5              |          |           |   | 72,185.4   |           |           |   | 46,695.0   |          |        |   | 982.4    |      
|                                                                             |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |        |   |         
|Net change in cash                                                           |                                                                                 |     | 9,939.2                                                            |                                           |   |                       | 8,469.5  |           |   |            | (10,645.7 | )         |   |            | (224.0   | )     
|Cash and cash equivalents, beginning of year                                 |                                                                                 |     | 16,181.9                                                           |                                           |   |                       | 26,121.1 |           |   |            | 34,590.6  |           |   |            | 727.8    |       
|                                                                             |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |        |   |         
|Cash and cash equivalents, end of year                                       |                                                                                 | Rs. | 26,121.1                                                           |                                           |   | Rs.                   | 34,590.6 |           |   | Rs.        | 23,944.9  |           |   | US$        | 503.8    |       
|                                                                             |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |        |   |         
|Supplementary cash flow information:                                         |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |       
|                                                                             | Interest paid                                                                   |     | Rs.                                                                | 5,641.0                                   |   |                       | Rs.      | 9,547.7   |   |            | Rs.       | 9,183.4   |   |            | US$      | 193.2  |  
|                                                                             | Income taxes paid                                                               |     | Rs.                                                                | 1,426.8                                   |   |                       | Rs.      | 1,487.0   |   |            | Rs.       | 2,374.7   |   |            | US$      | 50.0   |  
|Supplementary information on non cash transactions:                          |                                                                                 |     |                                                                    |                                           |   |                       |          |           |   |            |           |           |   |            |          |       
|Investments transferred from available for sale to held to maturity category |                                                                                 | Rs. |                                                                   |                                           |   | Rs.                   | 22,627.0 |           |   | Rs.        |          |           |   | US$        |         |       
|Investments transferred from held to maturity to available for sale category |                                                                                 | Rs. |                                                                   |                                           |   | Rs.                   |         |           |   | Rs.        | 450.0     |           |   | US$        | 9.5      |       
|Investments transferred from held to trading to available for sale category  |                                                                                 | Rs. |                                                                   |                                           |   | Rs.                   |         |           |   | Rs.        | 1,162.3   |           |   | US$        | 24.5     |       

See accompanying notes to financial statements

F-5

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##### Table of Contents



HDFC BANK LIMITED
STATEMENTS OF SHAREHOLDERS EQUITY
For each of the years ended March 31, 2001, 2002 and 2003

|                                                                  |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     |          |  
|----------------------------------------------------------------- |  | --------------------------------------- | ----------- | ------- |  | ------- | ------- | ---------- |  | -------- | -------- | --------- |  | ------------ | ----- | ------------- |  | ------------- | ------- | -------- |  | ----- | ------- | ----- |  | --- | ------ | - |  | --- | ------- | - |  | --- | -------- | -
|                                                                  |  |                                         |             |         |  |         |         |            |  | Advance  |          |           |  |              |       |               |  |               |         |          |  |       |         |      
|                                                                  |  |                                         |             |         |  |         |         | received   |  |          |          |           |  |              |       | Accumulated   |  |              
|                                                                  |  |                                         |             |         |  | Equity  |         | Additional |  | pending  |          |           |  |              |       |               |  |               |         | Deferred |  | other |         | Total
|                                                                  |  | Number of                               |             | share   |  | paid in |         | allotment  |  | Retained |          | Statutory |  | stock based  |       | comprehensive |  | Shareholders
|                                                                  |  | equity shares                           |             | capital |  | capital |         | of shares  |  | earnings |          | reserve   |  | compensation |       | income (loss) |  | equity       
|                                                                  |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |              
|                                                                  |  | (In millions, except for equity shares)
|Balance at March
31, 2000                                         |  |                                         | 238,130,261 |         |  | Rs.     | 2,381.3 |            |  | Rs.      | 3,916.2  |           |  | Rs.          |      |               |  | Rs.           | 1,733.8 |          |  | Rs.   | 1,013.0 |       |  | Rs. | (198.7 | ) |  | Rs. | (102.3  | ) |  | Rs. | 8,743.3  |  
|Shares purchased by
EWT Plan
(See Note 19)                        |  |                                         | (48,375     | )       |  |         | (0.5    | )          |  |          | (9.5     | )         |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     | (10.0    | )
|Shares issued upon
exercise of
options                            |  |                                         | 1,656,400   |         |  |         | 16.5    |            |  |          | 50.5     |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     | 67.0     |  
|Net income                                                        |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               | 2,140.6 |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     | 2,140.6  |  
|Dividends,
including dividend
tax                                 |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               | (351.5  | )        |  |       |         |       |  |     |        |   |  |     |         |   |  |     | (351.5   | )
|Amortization of
deferred stock
based
compensation                 |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     | 135.0  |   |  |     |         |   |  |     | 135.0    |  
|Transfer to
statutory reserve                                     |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               | (525.3  | )        |  |       | 525.3   |       |  |     |        |   |  |     |         |   |  |     |         |  
|Unrealized gain on
available for
sale securities,
net             |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     | 35.4    |   |  |     | 35.4     |  
|                                                                  |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     |          |  
|Balance at March
31, 2001                                         |  |                                         | 239,738,286 |         |  |         | 2,397.3 |            |  |          | 3,957.2  |           |  |              |      |               |  |               | 2,997.6 |          |  |       | 1,538.3 |       |  |     | (63.7  | ) |  |     | (66.9   | ) |  |     | 10,759.8 |  
|Shares issued upon
exercise of
options                            |  |                                         | 1,875,900   |         |  |         | 18.8    |            |  |          | 68.3     |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     | 87.1     |  
|Shares issued as
ADSs upon IPO in
the United States
(See Note 20) |  |                                         | 37,418,652  |         |  |         | 374.2   |            |  |          | 7,429.3  |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     | 7,803.5  |  
|Net income                                                        |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               | 2,958.4 |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     | 2,958.4  |  
|Dividends,
including dividend
tax                                 |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               | (528.6  | )        |  |       |         |       |  |     |        |   |  |     |         |   |  |     | (528.6   | )
|Stock options
issued                                              |  |                                         |             |         |  |         |         |            |  |          | 224.3    |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     | (224.3 | ) |  |     |         |   |  |     |         |  
|Amortization of
deferred stock
based
compensation                 |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     | 89.8   |   |  |     |         |   |  |     | 89.8     |  
|Transfer to
statutory reserve                                     |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               | (742.6  | )        |  |       | 742.6   |       |  |     |        |   |  |     |         |   |  |     |         |  
|Unrealized gain on
available for
sale securities,
net             |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     | 890.9   |   |  |     | 890.9    |  
|                                                                  |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     |          |  
|Balance at March
31, 2002                                         |  |                                         | 279,032,838 |         |  |         | 2,790.3 |            |  |          | 11,679.1 |           |  |              |      |               |  |               | 4,684.8 |          |  |       | 2,280.9 |       |  |     | (198.2 | ) |  |     | 824.0   |   |  |     | 22,060.9 |  
|Shares issued upon
exercise of
options                            |  |                                         | 686,100     |         |  |         | 6.9     |            |  |          | 79.8     |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     | 86.7     |  
|Net income                                                        |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               | 3,513.8 |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     | 3,513.8  |  
|Dividends,
including dividend
tax                                 |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               | (697.5  | )        |  |       |         |       |  |     |        |   |  |     |         |   |  |     | (697.5   | )
|Advance paid
pending allotment
of shares                          |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              | 146.5 |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     | 146.5    |  
|Amortization of
deferred stock
based
compensation                 |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     | 138.0  |   |  |     |         |   |  |     | 138.0    |  
|Transfer to
statutory reserve                                     |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               | (969.0  | )        |  |       | 969.0   |       |  |     |        |   |  |     |         |   |  |     |          |  
|Unrealized gain on
available for
sale securities,
net             |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     | 864.7   |   |  |     | 864.7    |  
|                                                                  |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     |          |  
|Balance at March
31, 2003                                         |  |                                         | 279,718,938 |         |  | Rs.     | 2,797.2 |            |  | Rs.      | 11,758.9 |           |  | Rs.          | 146.5 |               |  | Rs.           | 6,532.1 |          |  | Rs.   | 3,249.9 |       |  | Rs. | (60.2  | ) |  | Rs. | 1,688.7 |   |  | Rs. | 26,113.1 |  
|                                                                  |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     |          |  
|Balance at March
31, 2003                                         |  |                                         |             |         |  | US$     | 58.8    |            |  | US$      | 274.4    |           |  | US$          | 3.1   |               |  | US$           | 137.4   |          |  | US$   | 68.4    |       |  | US$ | (1.3   | ) |  | US$ | 35.5    |   |  | US$ | 549.3    |  
|                                                                  |  |                                         |             |         |  |         |         |            |  |          |          |           |  |              |       |               |  |               |         |          |  |       |         |       |  |     |        |   |  |     |         |   |  |     |          |  

See accompanying notes to financial statements

F-6

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##### Table of Contents



HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS

1. The Bank

HDFC Bank Limited (the Bank) was incorporated in August 1994 with its
registered office in Mumbai, India. The Bank is a banking company governed by
Indias Banking Regulations Act, 1949. The Banks shares are listed on The
Stock Exchange, Mumbai, the National Stock Exchange, India, The Stock
Exchange, Ahmedabad and its ADSs are listed on the New York Stock Exchange.

The Banks largest shareholder is HDFC Limited, who controls 24.4% of the
Banks equity. The India Private Equity Fund (Mauritius) and Indocean
Financial (Holding) Ltd., both funds advised by Indocean Chase Capital
Advisors (the Indian affiliate of J.P. Morgan Partners), have a combined stake
of 5.5 % of the Banks equity. The balance of the Banks equity is widely held
by the public and by foreign and Indian institutional investors.

The Bank provides a wide range of traditional banking and financial
services including corporate lending, trade finance, cash management,
corporate finance advisory services, foreign exchange, retail lending, credit
cards and custodial and depositary services. In addition, the Bank trades in
debt and equity securities and derivatives on its own account.

2. Summary Of Significant Accounting Policies

a. Basis of presentation and consolidation

The Bank does not have any subsidiaries. Entities where the Bank controls
between 20% to 50% of the voting stock of the investee company are considered
affiliates and are accounted for using the equity method.

These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America (US
GAAP). US GAAP differs in certain material respects from accounting
principles generally accepted in India, the requirements of Indias Banking
Regulations Act and related regulations issued by the Reserve Bank of India
(RBI) (collectively Indian GAAP), which form the basis of the statutory
general purpose financial statements of the Bank in India. Principal
differences insofar as they relate to the Bank include: determination of the
allowance for credit losses; valuation of investments; accounting for:
deferred income taxes, stock based compensation, retirement benefits and
affiliates, and the presentation and format of the financial statements and
related notes.

b. Use of Estimates

The preparation of financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of these financial statements and the reported amounts
of revenues and expenses for the years presented. Actual results could differ
from these estimates. Material estimates included in these financial
statements that are susceptible to change include the allowance for credit
losses and the valuation of unlisted investments.

c. Cash and cash equivalents

The Bank considers all highly liquid financial instruments, which are
readily convertible into cash and have original maturities of three months or
less on the date of purchase, to be cash equivalents. The carrying value of
cash equivalents approximates fair value.

d. Intangible assets

The Bank capitalizes the cost of purchased goodwill.

Until March 31, 2001, the Bank amortized the cost of goodwill on a
straight-line basis over its estimated useful life.

With effect from April 1, 2001, the Bank adopted Statement of Financial
Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets,
and ceased to amortize the remaining unamortized cost at March 31, 2001 of
goodwill that arose on the acquisition of Times Bank Limited. In accordance
with the two step methodology required by SFAS No. 142, the Bank tests the
carrying value of goodwill for impairment annually on March 31 or upon the
occurrence of triggering event.

The adoption of SFAS No. 142 resulted in an increase in net income for
the year ended March 31, 2002 of Rs. 6.7 million.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

e. Customer acquisition costs

Customer acquisition costs principally consist of commissions paid to
third party referral agents who obtain retail loans and are deferred and
amortized as a yield adjustment over the life of the loans. Advertising and
marketing expenses incurred to solicit new business are expensed as incurred.

f. Investments in securities

The Bank accounts for its investments in securities in accordance with
SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities. SFAS No. 115 requires that investments in debt and equity
securities be reported at fair value, except for debt securities classified as
held to maturity securities, which are reported at amortized cost.

Securities that are held principally for resale in the near term are
recorded in the trading assets account at fair value, with changes in fair
value recorded in earnings.

Debt securities which management has the positive intent and ability to
hold to maturity are classified as held to maturity and recorded at amortized
cost.

Securities with readily determinable fair values that are not classified
as held to maturity or trading are classified as available for sale and
recorded at fair value. Unrealized gains and losses on such securities, net of
applicable taxes, are reported in accumulated other comprehensive income
(loss), a separate component of shareholders equity.

Declines in the fair values of held to maturity and available for sale
securities below their cost that are other than temporary are reflected in
earnings as realized losses, based on managements best estimate of the value
of the investment.

Investments consist of government securities, other debt and equity
securities and credit substitute securities.

Credit substitute securities are typically comprised of commercial paper,
short term debentures and preference shares issued by the same customers with
whom the Bank has a lending relationship in its wholesale banking business.
Investment decisions for credit substitute securities are subject to the same
credit approval processes as for loans, and the Bank bears the same customer
risk as it does for loans extended to those customers. Additionally the yield
and maturity terms are generally directly negotiated by the Bank with the
issuer. Fair values for such securities are estimated based on present values
at current interest rates for such instruments.

Estimates of any declines in the fair values of such securities that are
other than temporary are measured on a case by case basis together with loans
under the overall program to those customers and recognized as realized
losses. As the Banks exposures to such securities are similar to its
exposures on its loan portfolio, additional disclosures have been provided on
the maturity profile and impairment status in Note 8 and on concentrations of
credit risk in Note 11.

All other securities are actively managed as a part of the Banks
treasury operations and are held primarily to meet the Banks statutory and
regulatory requirements. The issuers of such securities are either the
government, public financial institutions or private issuers. These
investments are typically purchased from the market, and debt securities are
generally publicly rated. Fair values for such securities are based on market
quotations.

As of March 31, 2001 all securities were classified as available for
sale. With effect from April 1, 2001, the Bank transferred securities with a
fair value of Rs. 22,627.0 million to the held to maturity category.

During the fiscal year ended March 31,2003 the Bank transferred
securities with an amortized cost of Rs 450.0 million at a fair value of 409.9
million from the held to maturity to available for sale category and
securities with a fair value of Rs. 1,112.7 million from the trading to
available for sale category.

g. Loans

The Bank grants commercial and consumer loans to customers. Commercial
loans are made to customers as either short or medium term loans, cash credit
facilities or bills discounting. Cash credit facilities are revolving credits
provided to customers which are secured by working capital such as inventory
or accounts receivable. Bills discounting consists of short term loans that
are secured by bills of exchange that have been accepted by the Banks
customers or drawn on another bank.

Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their
outstanding unpaid principal balances adjusted for an allowance for credit
losses.

Loans are reported at the principal amount outstanding, inclusive of
interest accrued and due. Interest is accrued on the unpaid principal balance
and is included in interest income. Loans are placed on non-accrual status
when interest or principal payments are two quarters past due, at which time
no further interest is accrued and overdue interest is written off against
interest income. Loans are returned to accrual status when all principal and
interest amounts contractually due are brought current and future payments are
reasonably assured. To the extent that interest is accrued on loans that are
more than one quarter overdue but not yet considered for non-accrual
status, the Bank considers the collectibility as a part of the allowance for
credit losses (see below). In accordance with RBI guidelines with effect from
March 31, 2004, loans shall be placed on non-accrual status when interest
or principal payments are one quarter overdue.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

h. Allowance for credit losses

The Bank provides an allowance for credit losses based on managements
best estimate of losses inherent in the loan portfolio. The allowance for
credit losses consists of specific and unallocated components. The allowance
for credit losses is evaluated on a regular basis by management and is based
upon managements view of the probability of recovery of loans in light of
historical experience, nature and volume of the loan portfolio, adverse
situations that may affect the borrowers ability to repay, the estimated
value of any underlying collateral, factors affecting the industry which the
loan exposure relates to and prevailing economic conditions. This evaluation
is inherently subjective as it requires estimates that are susceptible to
significant revision as more information becomes available. Credit losses are
charged against the allowance when management believes that the loan balance
cannot be recovered. Subsequent recoveries, if any, are credited to the
allowance.

The Bank evaluates its entire credit portfolio on a periodic basis and
grades its accounts considering both qualitative and quantitative criteria.
Non homogeneous loans are considered impaired when, based on current
information and events, it is probable that the Bank will be unable to collect
scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. Factors considered by management in
determining impairment include payment status, the financial condition of the
borrower, the value of collateral held, and the probability of collecting
scheduled principal and interest payments when due.

Impairment is measured for each non homogeneous loan customer in the
aggregate for all facilities, including term loans, cash credits, bills
discounted and lease finance, based on either the present value of expected
future cash flows discounted at the loans effective interest rate, the loans
obtainable market price, or the net realizable value of the collateral if the
loan is collateral dependent.

Non-homogenous loans that experience insignificant payment delays and
payment shortfalls are generally not classified as impaired but are placed on
a surveillance watch list and closely monitored for deterioration. Management
determines the significance of payment delays and payment shortfalls on a
case-by-case basis, taking into consideration all of the circumstances
surrounding the loan and the borrower, including the length of the delay, the
reasons for the delay, the borrowers prior payment record, and the amount of
the shortfall in relation to the principal and interest owed.

For loans made where marketable securities are held as collateral, the
Bank monitors margin positions of customers based on the market price of the
underlying collateral. To the extent that declines in the market value of the
collateral cause the Banks margin to be eroded, the Bank generally calls for
additional margin to be deposited by the customer to restore the loan to value
ratio to an acceptable level. In the event that the customer does not meet
such margin calls within a short time frame, the Bank gives notice of its
intent to liquidate the collateral. After the notice period, subject to market
conditions, the Bank sells the underlying collateral. The Bank recognizes as a
realized loss any shortfall between the proceeds realized and the carrying
value of the loan.

At each reporting date, the Bank stratifies its loans against securities
portfolio based on loan to value ratios computed using current market prices
for the collateral. The probability of loss increases with increased loan to
value ratios and with increased volatility in the equities markets. The Bank
establishes a specific allowance for the shortfall in collateral for all loans
where the loan to value ratio exceeds 100% and it is probable that the
borrower will not repay the full amount of the outstanding principal or
interest. Additionally, the Bank also establishes an unallocated allowance for
credit losses using loss factors for loans which fall into a high risk loan to
value strata based on historical losses incurred in each such strata in the
last 3 years.

Retail loans other than loans made with shares as collateral are
comprised of large groups of smaller balance homogeneous loans. Such loans are
collectively evaluated for impairment and an unallocated allowance is
established using a historical default rate determined separately for each
class of loan. The Bank does not separately identify individual retail
consumer loans for impairment disclosures. Additionally, the Bank provides a
specific allowance for loan losses for retail loans that have payment arrears
of two quarters or more in an amount equivalent to the outstanding principal
and interest balance.

Loans include aggregate rentals on finance lease transactions, net of
related unearned income and security deposits collected from the lessee.
Unearned income is recognized as income using the internal rate of return
method over the primary period of the lease. Income on non-performing leases
is recognized on the same basis as non-performing loans.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

i. Property and equipment

Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided over the estimated useful lives of fixed assets on a
straight-line basis at the following rates:

|                       |  |                                            |        |                          |  |                          |        |  |  |  |        | 
|---------------------- |  | ------------------------------------------ | ------ | ------------------------ |  | ------------------------ | ------ |  |  |  | ------ | 
|                       |  | Rate of depreciation Years ended March 31,
|                       |  |                                           
|Type of Asset          |  | 2001                                       |        | 2002                     |  | 2003                    
|                       |  |                                            |        |                          |  |                         
|Buildings              |  |                                            | 1.61%  |                          |  |                          | 1.61%  |  |  |  | 1.61%  | 
|Leasehold improvements |  | Over the period of lease                   |        | Over the period of lease |  | Over the period of lease
|ATMs                   |  |                                            | 12.50% |                          |  |                          | 12.50% |  |  |  | 12.50% | 
|VSAT terminals         |  |                                            | 10.00% |                          |  |                          | 10.00% |  |  |  | 10.00% | 
|Office equipment       |  |                                            | 16.21% |                          |  |                          | 16.21% |  |  |  | 16.21% | 
|Computer equipment     |  |                                            | 33.33% |                          |  |                          | 33.33% |  |  |  | 33.33% | 
|Motor cars             |  |                                            | 25.00% |                          |  |                          | 25.00% |  |  |  | 25.00% | 
|Software               |  |                                            | 25.00% |                          |  |                          | 25.00% |  |  |  | 25.00% | 

In fiscal 2001, the Bank revised its estimates of useful lives for
certain assets. The revised depreciation rates have been accounted for
prospectively, and resulted in a net increase in depreciation expense of Rs.
48.6 million in the year ended March 31, 2001.

j. Impairment or disposal of long lived assets

Whenever events or circumstances indicate that the carrying amount of
tangible long lived assets may not be recoverable, the Bank subjects such long
lived assets to a test of recoverability based on the undiscounted cash flows
from use or disposition of the asset. Such events or circumstances would
include changes in the market, technology obsolescence, adverse changes in
profitability or regulation. If the asset is impaired, the Bank recognizes an
impairment loss estimated as the difference between fair value and the
carrying value.

In October 2001, the Financial Accounting Standard Board (FASB) issued
SFAS No. 144, Accounting for the impairment or disposal of long-lived
assets. SFAS No. 144 requires that those long-lived assets be measured at the
lower of carrying amount or fair value less cost to sell, whether reported in
the continuing operations or in discontinued operations. Under this standard,
discontinued operation may no longer be measured at net realizable value or
include amounts for operation losses that have not yet occurred.

The Bank adopted SFAS No. 144 with effect from April 1, 2002, with no
material impact on its results of operations, financial position or cash
flows.

k. Foreclosed or repossessed assets

Assets acquired through or in lieu of foreclosure or through repossession
are generally held for sale and initially recorded at fair value on the date
of foreclosure or repossession. On subsequent dates, such assets are
periodically evaluated by management for changes in fair value, and are
carried at the lower of the fair value on the date of foreclosure or
repossession and the net realizable value on the balance sheet date. Net
realizable value represents the anticipated sale price less the estimated
costs of disposal. Revenues and expenses from the operation of such assets and
changes in the fair value are included in earnings.

l. Income tax

Income tax comprises the current tax provision and the net change in the
deferred tax asset or liability in the year.

Deferred tax assets and liabilities are recognized for the future tax
consequences of temporary differences between the carrying values of assets
and liabilities and their respective tax bases, and operating loss carry
forwards. Deferred tax assets are recognized subject to managements judgement
that realization is more likely than not. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in
the years in which the temporary differences are expected to be received or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in the income statement in the period of enactment of the
change.

m. Financial instruments

The Bank enters into forward exchange contracts and currency swaps with
its corporate clients (See below in Note 2(w)). The Bank also enters into
interest rate swaps with its corporate clients as well as for trading
purposes. Interest rate swaps are accounted for at their fair value based on
the yield curve of the transaction with changes in fair value recognized in
earnings.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

n. Retirement benefits

Gratuity

In accordance with Indian law, the Bank provides for gratuity, a defined
benefit retirement plan covering all eligible employees. The plan provides for
lump sum payments to vested employees at retirement, death while in employment
or on termination of employment in an amount equivalent to 15 days salary
payable for each completed year of service. Vesting occurs upon completion of
five years of service. The Bank makes annual contributions to a fund
administered by trustees and managed by the Life Insurance Corporation of
India (LIC) in an amount notified by the LIC. The Bank accounts for the
liability for future gratuity benefits in accordance with SFAS No. 87,
Employers Accounting for Pensions, based on an external actuarial valuation
carried out annually.

Superannuation

Employees of the Bank are entitled to receive retirement benefits under
the Banks superannuation fund. The superannuation fund is a defined
contribution plan under which the Bank annually contributes a sum equivalent
to 13% of the employees eligible annual salary to the LIC, who administer the
fund. The Bank has no liability for future superannuation fund benefits other
than its annual contribution, and recognizes such contributions as an expense
in the year incurred.

Provident fund

In accordance with Indian law, all employees of the Bank are entitled to
receive benefits under the provident fund, a defined contribution plan in
which both the employee and the Bank contribute monthly at a determined rate
(currently 12% of employees salary). These contributions are made to a fund
set up by the Bank and administered by a board of trustees. Employees are
credited with interest, which is subject to a government specified minimum
rate. The Bank has no liability for future provident fund benefits other than
its annual contribution and any shortfall between the government specified
rate and the rate at which employees are credited, and recognizes such
contributions as an expense in the year incurred.

o. Revenue recognition

Interest income from loans and from investments in finance leases is
recognized on an accrual basis when earned except in respect of loans or
finance leases placed on non-accrual status, where it is recognized when
received. The Bank generally does not charge up front loan origination fees.
Nominal application fees are charged which offset the related costs incurred.

Fees and commissions from guarantees issued are amortized over the
contractual period of the commitment, provided the amounts are collectible.

Dividends are recognized when declared.

Realized gains and losses on sales of securities are recorded on the
trade date and are determined using the weighted average cost method.

Other fees and income are recognized when earned, which is when the
service that results in the income has been provided.

Provision for credit card reward points is based on their expected
redemption value as per prevailing market practice.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

p. Foreign currency transactions

The Banks functional currency is the Indian rupee. Foreign currency
transactions are recorded at the exchange rate prevailing on the date of the
transaction. Foreign currency denominated monetary assets and liabilities are
converted into Indian rupees using exchange rates prevailing on the balance
sheet dates. Gains and losses arising on conversion of foreign currency
denominated monetary assets and liabilities and on foreign currency
transactions are included in the determination of net income.

q. Stock Based Compensation

The Bank has elected to use the intrinsic value method specified under
APB Opinion No. 25 to account for the compensation cost of stock options and
awards granted to employees of the Bank. The Bank uses the fair value approach
for any options that are granted to individuals who do not qualify as
employees in accordance with FASB Interpretation No. 44. Pro formadisclosures
required by SFAS No. 123, as amended by SFAS 148, have been provided in Note
19.

r. Debt issuance costs

Issuance costs of long-term debt are amortized over the tenure of the
debt.

s. Dividends

Any dividends declared by the Bank are based on the profit available for
distribution as reported in the statutory financial statements of the Bank
prepared in accordance with Indian GAAP. Additionally, the Banking Regulation
Act requires the Bank to transfer 25% of its Indian GAAP profit after tax to a
non-distributable statutory reserve. Accordingly, in certain years, the net
income reported in these financial statements may not be fully distributable.
As of March 31, 2003, the amount available for distribution is Rs. 13,977
million. Dividends for the years ended March 31, 2001, 2002 and 2003 were Rs.
2.00, Rs. 2.50 and Rs. 3.00 per equity share, respectively.

t. Earnings per share

The Bank reports basic and diluted earnings per equity share in
accordance with SFAS No. 128, Earnings Per Share. Basic earnings per equity
share has been computed by dividing net income by the weighted average number
of equity shares outstanding for the period. For the purpose of determining
the weighted average number of equity shares outstanding, the Bank treats cash
received from optionees who exercise their option as issued shares even if the
administrative formalities of allocating equity shares have not been
completed. Diluted earnings per equity share has been computed using the
weighted average number of equity shares and dilutive potential equity shares
outstanding during the period, using the treasury stock method for options,
except where the result would be anti dilutive. The Bank also reports basic
and diluted earnings per ADS, where each ADS represents three equity shares.
Earnings per ADS have been computed as earnings per equity share multiplied by
the number of equity shares per ADS. A reconciliation of the number of shares
used in computing earnings per share has been provided in Note 28.

u. Comprehensive Income

The Bank reports comprehensive income in accordance with SFAS No.130,
Reporting Comprehensive Income. Accounting principles generally require that
recognized revenue, expenses, gains and losses be included in net income.
Unrealized gains and losses on available for sale securities along with net
income are components of comprehensive income. Details on comprehensive income
have been provided in Note 29.

v. Segment information

The Bank operates in three segments, namely wholesale banking, retail
banking and treasury services. Segment-wise information has been provided in
Note 24.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

w. Derivative Financial Instruments

The Bank adopted SFAS No. 133, Accounting for Derivatives Instruments and
Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities an amendment of FASB Statement No
133, with effect from April 1, 2001. In doing so, the Bank did not incur any
transition adjustments to earnings.

In accordance with the above standards, the Bank recognizes all
derivative instruments, including certain derivative instruments embedded in
other contracts, as assets or liabilities in the balance sheet and measures
them at fair value, unless those instruments qualify to be accounted for as
hedge contracts. For a derivative not designated as a hedging instrument,
changes in fair value are recognized in net income in the period of change.

Certain forward exchange contracts and currency swaps qualify as a hedge
of the foreign currency exposure of a foreign currency denominated
transaction. SFAS No. 133 provides for matching the timing of the recognition
of the gain or loss on such hedge contracts with the recognition of the
changes in the fair value of the item being hedged in net income.

The Bank enters into forward exchange contracts or currency swaps with
its customers as accommodations. The Bank also enters into forward exchange or
currency swap contracts to lay off such customer accommodation exposures in
the inter-bank foreign exchange markets, and also to take trading positions
and to cover its own foreign exchange exposures. All such instruments are
carried at fair value, determined based on market quotations.

The Bank enters into rupee interest rate swaps for trading purposes. The
Bank also enters into interest rate currency swaps and interest rate swaps in
foreign currency cash flows, as customer accommodations and lays these off in
the inter-bank market. Such contracts are carried on the balance sheet at fair
value, determined based on market quotations.

x. New Accounting Pronouncements

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 requires entities to record the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred. When the liability is initially recorded, the entity
capitalizes the cost by increasing the carrying amount of the related
long-lived assets. Over time, the liability is accrued to its present value
each period and the capitalized cost is depreciated over the useful life of
the related asset. Upon settlement of the liability, an entity either settles
the obligation for its recorded amount or incurs a gain or loss upon
settlement. The standard is effective for fiscal years beginning after June
15, 2002 with earlier application encouraged.

In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain
Financial Institutions  an amendment of FASB Statements No. 72 and No. 144
and FASB Interpretation No. 9. SFAS No. 147 removes acquisitions of financial
institutions, except for transactions between two or more mutual enterprises,
from the scope of both SFAS No. 72 and Interpretation 9 and requires that
those transactions be accounted for in accordance with SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. The
standard is effective for acquisitions for which the date of acquisition is on
or after October 1, 2002.

None of the above standards have any impact on the results of operations,
financial position or cash flows of the Bank for the year ended March 31,
2003.

y. Convenience Translation

The accompanying financial statements have been expressed in Indian
rupees (Rs.), the Banks functional currency. For the convenience of the
reader, the financial statements as at and for the year ended March 31, 2003
have been translated into US dollars at US$1.00 = Rs. 47.53 based on the noon
buying rate for cable transfers on March 31, 2003 as certified for customs
purposes by the Federal Reserve Bank of New York. Such translation should not
be construed as a representation that the rupee amounts have been or could be
converted into United States dollars at that or any other rate, or at all.

z. Reclassifications

Certain amounts in fiscal 2001 and fiscal 2002 have been reclassified to
conform to the presentation in the fiscal 2003. These reclassifications have
no effect on the stockholders equity or net income as previously reported.

3. Cash and cash equivalents

Cash and cash equivalents as of March 31, 2002 and 2003 include balances
of Rs. 10,983.2 million and Rs. 19,152.8 million, respectively, maintained
with the RBI for meeting the Banks cash reserve ratio requirement. This
balance is subject to withdrawal and usage restrictions.

4. Term placements

Term placements comprises of placements with banks and
financial institution in the ordinary course of business. These placements
have remaining maturities for periods between 3 months and 6 years.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

5. Investments, held for trading

The portfolio of trading securities at March 31, 2002 and 2003 is as
follows:

|                                                                |       |     |                      |         |            |     |            |      |       |     |     |     |  |     |         |         | 
|--------------------------------------------------------------- | ----- | --- | -------------------- | ------- | ---------- | --- | ---------- | ---- | ----- | --- | --- | --- |  | --- | ------- | ------- | 
|                                                                |       |     | As of March 31, 2002
|                                                                |       |     |                     
|                                                                |       |     |                      |         |            |     | Gross      |      | Gross |     |     |     | 
|                                                                |       |     | Amortized            |         | unrealized |     | unrealized |      | Fair 
|                                                                |       |     | cost                 |         | gains      |     | losses     |      | value
|                                                                |       |     |                      |         |            |     |            |      |      
|                                                                |       |     | (In millions)       
|Government of India securities                                  |       | Rs. | 3,247.3              |         |            | Rs. | 9.0        |      |       | Rs. | 0.7 |     |  | Rs. | 3,255.6 |        
|Securities issued by
government of India
sponsored
institutions |       |     | 330.7                |         |            |     |           |      |       |     | 5.9 |     |  |     | 324.8   |        
|Debentures                                                      |       |     | 254.3                |         |            |     | 2.9        |      |       |     |    |     |  |     | 257.2   |        
|                                                                |       |     |                      |         |            |     |            |      |       |     |     |     |  |     |         |        
|                                                                | Total |     | Rs.                  | 3,832.3 |            |     | Rs.        | 11.9 |       |     | Rs. | 6.6 |  |     | Rs.     | 3,837.6 | 
|                                                                |       |     |                      |         |            |     |            |      |       |     |     |     |  |     |         |        

|                                                                |       |     |                      |         |            |  |            |   |       |     |      |      |  |     |         |         | 
|--------------------------------------------------------------- | ----- | --- | -------------------- | ------- | ---------- |  | ---------- | - | ----- | --- | ---- | ---- |  | --- | ------- | ------- | 
|                                                                |       |     | As of March 31, 2003
|                                                                |       |     |                     
|                                                                |       |     |                      |         |            |  | Gross      |   | Gross |     |      |      | 
|                                                                |       |     | Amortized            |         | unrealized |  | unrealized |   | Fair 
|                                                                |       |     | cost                 |         | gains      |  | losses     |   | value
|                                                                |       |     |                      |         |            |  |            |   |      
|                                                                |       |     | (In millions)       
|Government of India securities                                  |       | Rs. | 3,783.4              |         |            |  |           |   |       | Rs. | 36.6 |      |  | Rs. | 3,746.8 |        
|Securities issued by
government of India
sponsored
institutions |       |     | 37.0                 |         |            |  |           |   |       |     | 5.4  |      |  |     | 31.6    |        
|Debentures                                                      |       |     | 207.4                |         |            |  |           |   |       |     | 9.7  |      |  |     | 197.7   |        
|                                                                |       |     |                      |         |            |  |            |   |       |     |      |      |  |     |         |        
|                                                                | Total |     | Rs.                  | 4,027.8 |            |  |            |  |       |     | Rs.  | 51.7 |  |     | Rs.     | 3,976.1 | 
|                                                                |       |     |                      |         |            |  |            |   |       |     |      |      |  |     |         |        
|                                                                | Total |     | US$                  | 84.8    |            |  |            |  |       |     | US$  | 1.1  |  |     | US$     | 83.7    | 
|                                                                |       |     |                      |         |            |  |            |   |       |     |      |      |  |     |         |        

Interest and dividends on trading securities and gross realized
gains and gross realized losses from sales of such securities are
set out below:

|                              |       |  |                      |   |      |     |       |       |      |     |        |       |  |     |      |      | 
|----------------------------- | ----- |  | -------------------- | - | ---- | --- | ----- | ----- | ---- | --- | ------ | ----- |  | --- | ---- | ---- | 
|                              |       |  | Year ended March 31,
|                              |       |  |                     
|                              |       |  | 2001                 |   | 2002 |     | 2003  |       | 2003
|                              |       |  |                      |   |      |     |       |       |     
|                              |       |  | (In millions)       
|Gross realized gains on sale  |       |  |                     |   |      | Rs. | 680.3 |       |      | Rs. | 793.4  |       |  | US$ | 16.7 |     
|Gross realized losses on sale |       |  |                     |   |      |     | (79.4 | )     |      |     | (285.6 | )     |  |     | (6.0 | )   
|Dividends and interest        |       |  |                     |   |      |     | 218.7 |       |      |     | 478.9  |       |  |     | 10.1 |     
|                              |       |  |                      |   |      |     |       |       |      |     |        |       |  |     |      |     
|                              | Total |  |                      |  |      |     | Rs.   | 819.6 |      |     | Rs.    | 986.7 |  |     | US$  | 20.8 | 
|                              |       |  |                      |   |      |     |       |       |      |     |        |       |  |     |      |     

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

6. Investments, available for sale

The portfolio of available for sale securities at March 31, 2002 and 2003
is as follows:

|                                                                |                            |       |          |                      |          |            |       |            |         |       |       |       |       |     |          |          |          | 
|--------------------------------------------------------------- | -------------------------- | ----- | -------- | -------------------- | -------- | ---------- | ----- | ---------- | ------- | ----- | ----- | ----- | ----- | --- | -------- | -------- | -------- | 
|                                                                |                            |       |          | As of March 31, 2002
|                                                                |                            |       |          |                     
|                                                                |                            |       |          |                      |          |            |       | Gross      |         | Gross |       |       |       |    
|                                                                |                            |       |          | Amortized            |          | unrealized |       | unrealized |         | Fair 
|                                                                |                            |       |          | cost                 |          | gains      |       | losses     |         | value
|                                                                |                            |       |          |                      |          |            |       |            |         |      
|                                                                |                            |       |          | (In millions)       
|Government of India securities                                  |                            | Rs.   | 34,277.3 |                      |          | Rs.        | 752.8 |            |         | Rs.   | 1.8   |       |       | Rs. | 35,028.3 |         
|Securities issued by government of
India sponsored institutions |                            |       | 19,303.2 |                      |          |            | 428.4 |            |         |       | 140.4 |       |       |     | 19,591.2 |         
|State government securities                                     |                            |       | 44.8     |                      |          |            |      |            |         |       | 2.9   |       |       |     | 41.9     |         
|Securities issued by state
government sponsored institutions    |                            |       | 549.4    |                      |          |            | 6.0   |            |         |       |      |       |       |     | 555.4    |         
|Credit substitutes (See Note 8)                                 |                            |       | 13,900.1 |                      |          |            | 71.5  |            |         |       | 1.3   |       |       |     | 13,970.3 |         
|                                                                |                            |       |          |                      |          |            |       |            |         |       |       |       |       |     |          |         
|                                                                | Fixed maturity investments |       |          | 68,074.8             |          |            |       | 1,258.7    |         |       |       | 146.4 |       |     |          | 69,187.1 |         
|Asset backed securities                                         |                            |       | 8,383.5  |                      |          |            | 125.5 |            |         |       |      |       |       |     | 8,509.0  |         
|Equity securities                                               |                            |       | 133.4    |                      |          |            | 13.5  |            |         |       | 3.2   |       |       |     | 143.7    |         
|Mutual fund units                                               |                            |       | 2,534.5  |                      |          |            | 12.3  |            |         |       | 66.0  |       |       |     | 2,480.8  |         
|                                                                |                            |       |          |                      |          |            |       |            |         |       |       |       |       |     |          |         
|                                                                |                            | Total |          | Rs.                  | 79,126.2 |            |       | Rs.        | 1,410.0 |       |       | Rs.   | 215.6 |     |          | Rs.      | 80,320.6 | 
|                                                                |                            |       |          |                      |          |            |       |            |         |       |       |       |       |     |          |         

|                                                                |                            |       |          |                      |          |            |         |            |         |       |       |       |       |     |          |          |          | 
|--------------------------------------------------------------- | -------------------------- | ----- | -------- | -------------------- | -------- | ---------- | ------- | ---------- | ------- | ----- | ----- | ----- | ----- | --- | -------- | -------- | -------- | 
|                                                                |                            |       |          | As of March 31, 2003
|                                                                |                            |       |          |                     
|                                                                |                            |       |          |                      |          |            |         | Gross      |         | Gross |       |       |       |    
|                                                                |                            |       |          | Amortized            |          | unrealized |         | unrealized |         | Fair 
|                                                                |                            |       |          | cost                 |          | gains      |         | losses     |         | value
|                                                                |                            |       |          |                      |          |            |         |            |         |      
|                                                                |                            |       |          | (In millions)       
|Government of India securities                                  |                            | Rs.   | 45,128.6 |                      |          | Rs.        | 782.3   |            |         | Rs.   | 19.1  |       |       | Rs. | 45,891.8 |         
|Securities issued by government of
India sponsored institutions |                            |       | 17,545.8 |                      |          |            | 1,581.9 |            |         |       | 125.8 |       |       |     | 19,001.9 |         
|State government securities                                     |                            |       | 21.0     |                      |          |            | 2.5     |            |         |       |      |       |       |     | 23.5     |         
|Corporate Bonds                                                 |                            |       | 324.2    |                      |          |            | 3.8     |            |         |       | 4.8   |       |       |     | 323.2    |         
|Securities issued by state
government sponsored institutions    |                            |       | 514.2    |                      |          |            | 38.2    |            |         |       | 6.5   |       |       |     | 545.9    |         
|Credit substitutes (See Note 8)                                 |                            |       | 10,973.6 |                      |          |            | 178.4   |            |         |       | 49.6  |       |       |     | 11,102.4 |         
|                                                                |                            |       |          |                      |          |            |         |            |         |       |       |       |       |     |          |         
|                                                                | Fixed maturity investments |       |          | 74,507.4             |          |            |         | 2,587.1    |         |       |       | 205.8 |       |     |          | 76,888.7 |         
|Mortgage backed security                                        |                            |       | 4,650.6  |                      |          |            | 86.2    |            |         |       |      |       |       |     | 4,736.8  |         
|Asset backed securities                                         |                            |       | 14,538.6 |                      |          |            | 375.8   |            |         |       | 62.6  |       |       |     | 14,851.8 |         
|Equity securities                                               |                            |       | 148.8    |                      |          |            | 23.5    |            |         |       | 3.1   |       |       |     | 169.2    |         
|Mutual fund units                                               |                            |       | 2,311.8  |                      |          |            | 7.5     |            |         |       | 36.6  |       |       |     | 2,282.7  |         
|                                                                |                            |       |          |                      |          |            |         |            |         |       |       |       |       |     |          |         
|                                                                |                            | Total |          | Rs.                  | 96,157.2 |            |         | Rs.        | 3,080.1 |       |       | Rs.   | 308.1 |     |          | Rs.      | 98,929.2 | 
|                                                                |                            |       |          |                      |          |            |         |            |         |       |       |       |       |     |          |         
|                                                                |                            | Total |          | US$                  | 2,023.1  |            |         | US$        | 64.8    |       |       | US$   | 6.5   |     |          | US$      | 2,081.4  | 
|                                                                |                            |       |          |                      |          |            |         |            |         |       |       |       |       |     |          |         

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

The contractual residual maturity of fixed maturity available for sale
securities as of March 31, 2003 is set out below:

|                                   |       |     |                      |          |            |     |            |          |  |     |       |         | 
|---------------------------------- | ----- | --- | -------------------- | -------- | ---------- | --- | ---------- | -------- |  | --- | ----- | ------- | 
|                                   |       |     | As of March 31, 2003
|                                   |       |     |                     
|                                   |       |     | Amortized cost       |          | Fair value |     | Fair value
|                                   |       |     |                      |          |            |     |           
|                                   |       |     | (In millions)       
|Within one year                    |       | Rs. | 23,431.0             |          |            | Rs. | 23,683.1   |          |  | US$ | 498.3 |        
|Over one year through five years   |       |     | 25,932.0             |          |            |     | 26,883.9   |          |  |     | 565.6 |        
|After five years through ten years |       |     | 23,650.6             |          |            |     | 24,814.5   |          |  |     | 522.1 |        
|Over ten years                     |       |     | 1,493.8              |          |            |     | 1,507.2    |          |  |     | 31.7  |        
|                                   |       |     |                      |          |            |     |            |          |  |     |       |        
|                                   | Total |     | Rs.                  | 74,507.4 |            |     | Rs.        | 76,888.7 |  |     | US$   | 1,617.7 | 
|                                   |       |     |                      |          |            |     |            |          |  |     |       |        

Available for sale investments of Rs. 35,069.6 million and Rs
45,915.3 million as of March 31, 2002 and 2003, respectively, are held
to meet the Banks statutory liquidity ratio requirements. These
balances are subject to withdrawal and usage restrictions, but may be
freely traded by the Bank within those restrictions.

Interest and dividends on available for sale securities and gross
realized gains and gross realized losses from sales of such securities
are set out below:

|                              |       |     |                       |         |      |     |         |         |      |     |         |         |  |     |       |       | 
|----------------------------- | ----- | --- | --------------------- | ------- | ---- | --- | ------- | ------- | ---- | --- | ------- | ------- |  | --- | ----- | ----- | 
|                              |       |     | Years ended March 31,
|                              |       |     |                      
|                              |       |     | 2001                  |         | 2002 |     | 2003    |         | 2003
|                              |       |     |                       |         |      |     |         |         |     
|                              |       |     | (In millions)        
|Gross realized gains on sale  |       | Rs. | 548.2                 |         |      | Rs. | 484.9   |         |      | Rs. | 991.4   |         |  | US$ | 20.9  |      
|Gross realized losses on sale |       |     | (622.4                | )       |      |     | (140.5  | )       |      |     | (269.7  | )       |  |     | (5.7  | )    
|Dividends and interest        |       |     | 6,355.9               |         |      |     | 5,667.4 |         |      |     | 6,144.0 |         |  |     | 129.3 |      
|                              |       |     |                       |         |      |     |         |         |      |     |         |         |  |     |       |      
|                              | Total |     | Rs.                   | 6,281.7 |      |     | Rs.     | 6,011.8 |      |     | Rs.     | 6,865.7 |  |     | US$   | 144.4 | 
|                              |       |     |                       |         |      |     |         |         |      |     |         |         |  |     |       |      

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##### Table of Contents



HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

7. Investments, held to maturity

The portfolio of held to maturity securities at March 31, 2002 and
2003 is as follows

|                                                                |       |     |                      |          |         |     |              |         |              |     |       |       |  |     |          |          | 
|--------------------------------------------------------------- | ----- | --- | -------------------- | -------- | ------- | --- | ------------ | ------- | ------------ | --- | ----- | ----- |  | --- | -------- | -------- | 
|                                                                |       |     | As of March 31, 2002
|                                                                |       |     |                     
|                                                                |       |     |                      |          |         |     | Gross        |         | Gross        |     |       |       | 
|                                                                |       |     |                      |          |         |     | unrecognized |         | unrecognized |     |       |       | 
|                                                                |       |     | Fair                 |          | holding |     | holding      |         | Amortized   
|                                                                |       |     | value                |          | gains   |     | losses       |         | cost        
|                                                                |       |     |                      |          |         |     |              |         |             
|                                                                |       |     | (In millions)       
|Government of India securities                                  |       | Rs. | 14,597.3             |          |         | Rs. | 1,209.8      |         |              | Rs. |      |       |  | Rs. | 13,387.5 |         
|Securities issued by
government of India sponsored
institutions |       |     | 559.7                |          |         |     | 28.4         |         |              |     |      |       |  |     | 531.3    |         
|Securities issued by state
government sponsored
institutions    |       |     | 372.7                |          |         |     | 17.3         |         |              |     |      |       |  |     | 355.4    |         
|Credit substitutes (See Note 8)                                 |       |     | 21,359.6             |          |         |     | 414.4        |         |              |     | 210.5 |       |  |     | 21,155.7 |         
|                                                                |       |     |                      |          |         |     |              |         |              |     |       |       |  |     |          |         
|                                                                | Total |     | Rs.                  | 36,889.3 |         |     | Rs.          | 1,669.9 |              |     | Rs.   | 210.5 |  |     | Rs.      | 35,429.9 | 
|                                                                |       |     |                      |          |         |     |              |         |              |     |       |       |  |     |          |         

|                                                                |       |     |                      |          |         |     |              |         |              |     |      |      |  |     |          |          | 
|--------------------------------------------------------------- | ----- | --- | -------------------- | -------- | ------- | --- | ------------ | ------- | ------------ | --- | ---- | ---- |  | --- | -------- | -------- | 
|                                                                |       |     | As of March 31, 2003
|                                                                |       |     |                     
|                                                                |       |     |                      |          |         |     | Gross        |         | Gross        |     |      |      | 
|                                                                |       |     |                      |          |         |     | unrecognized |         | unrecognized |     |      |      | 
|                                                                |       |     | Fair                 |          | holding |     | holding      |         | Amortized   
|                                                                |       |     | value                |          | gains   |     | losses       |         | Cost        
|                                                                |       |     |                      |          |         |     |              |         |             
|                                                                |       |     | (In millions)       
|Government of India securities                                  |       | Rs. | 20,392.6             |          |         | Rs. | 1,145.5      |         |              | Rs. | 7.3  |      |  | Rs. | 19,254.4 |         
|Securities issued by
government of India sponsored
institutions |       |     | 562.6                |          |         |     | 40.7         |         |              |     |     |      |  |     | 521.9    |         
|Securities issued by state
government sponsored
institutions    |       |     |                     |          |         |     |             |         |              |     |     |      |  |     |         |         
|Credit substitutes (See Note 8)                                 |       |     | 19,153.1             |          |         |     | 540.2        |         |              |     | 37.5 |      |  |     | 18,650.4 |         
|                                                                |       |     |                      |          |         |     |              |         |              |     |      |      |  |     |          |         
|                                                                | Total |     | Rs.                  | 40,108.3 |         |     | Rs.          | 1,726.4 |              |     | Rs.  | 44.8 |  |     | Rs.      | 38,426.7 | 
|                                                                |       |     |                      |          |         |     |              |         |              |     |      |      |  |     |          |         
|                                                                | Total |     | US$                  | 843.9    |         |     | US$          | 36.3    |              |     | US$  | 0.9  |  |     | US$      | 808.5    | 
|                                                                |       |     |                      |          |         |     |              |         |              |     |      |      |  |     |          |         

The contractual residual maturity of fixed maturity held to
maturity securities as of March 31, 2003 is set out
below:

|                                   |       |     |                      |          |                |     |                |          |  |     |       |       | 
|---------------------------------- | ----- | --- | -------------------- | -------- | -------------- | --- | -------------- | -------- |  | --- | ----- | ----- | 
|                                   |       |     | As of March 31, 2003
|                                   |       |     |                     
|                                   |       |     | Fair value           |          | Amortized cost |     | Amortized cost
|                                   |       |     |                      |          |                |     |               
|                                   |       |     | (In millions)       
|Within one year                    |       | Rs. | 25,435.0             |          |                | Rs. | 25,268.6       |          |  | US$ | 531.6 |      
|Over one year through five years   |       |     | 11,383.4             |          |                |     | 10,393.2       |          |  |     | 218.7 |      
|After five years through ten years |       |     | 3,289.9              |          |                |     | 2,764.9        |          |  |     | 58.2  |      
|                                   |       |     |                      |          |                |     |                |          |  |     |       |      
|                                   | Total |     | Rs.                  | 40,108.3 |                |     | Rs.            | 38,426.7 |  |     | US$   | 808.5 | 
|                                   |       |     |                      |          |                |     |                |          |  |     |       |      

Held to maturity investments of Rs. 13,387.5 million and Rs. 19,254.4
million as of March 31, 2002 and 2003 respectively, are held to meet the
Banks statutory liquidity ratio requirements. These balances are subject to
withdrawal and usage restrictions, but may be freely traded by the Bank
within those restrictions.

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##### Table of Contents



HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

Interest on held to maturity securities is set out below:

|         |       |     |                       |   |      |     |         |         |      |     |         |         |  |     |      |      | 
|-------- | ----- | --- | --------------------- | - | ---- | --- | ------- | ------- | ---- | --- | ------- | ------- |  | --- | ---- | ---- | 
|         |       |     | Years ended March 31,
|         |       |     |                      
|         |       |     | 2001                  |   | 2002 |     | 2003    |         | 2003
|         |       |     |                       |   |      |     |         |         |     
|         |       |     | (In millions)        
|Interest |       | Rs. |                      |   |      | Rs. | 2,280.3 |         |      | Rs. | 3,763.2 |         |  | US$ | 87.2 |     
|         |       |     |                       |   |      |     |         |         |      |     |         |         |  |     |      |     
|         | Total |     | Rs.                   |  |      |     | Rs.     | 2,280.3 |      |     | Rs.     | 3,763.2 |  |     | US$  | 87.2 | 
|         |       |     |                       |   |      |     |         |         |      |     |         |         |  |     |      |     

On April 1, 2001, the Bank transferred securities with a fair value of
Rs. 22,627.0 million from the available for sale category to the held to
maturity category. The unrealized gain on the transfer has been taken to
comprehensive income. The balance in other comprehensive income as at March,
31, 2002 and 2003 on account of the transfer is Rs 56.0 million and Rs. 60.5
million, respectively.

On April 14, 2002, the Bank transferred securities with an amortized
cost of Rs. 450.0 million from held to maturity category to the available
for sale category for reasons permitted by SFAS No. 115, primarily due to
downgrades in credit ratings. The unrealized holding loss of Rs. 40.1
million on the date of the transfer has been recorded in other comprehensive
income, a separate component of shareholders equity.

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##### Table of Contents



HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

8. Credit Substitutes

Credit substitutes consist of securities that are negotiated as part of
an overall extension of credit to certain customers. Such securities share many
of the risk and reward characteristics of loans and are managed by the Bank
together with other facilities extended to the same customers. The fair values
of credit substitutes have been analyzed by type of instrument as of March 31,
2002 and 2003 are as follows:

|                                                 |                               |     |                 |          |            |     |                |          |            |     |          |          |  |     |          |          | 
|------------------------------------------------ | ----------------------------- | --- | --------------- | -------- | ---------- | --- | -------------- | -------- | ---------- | --- | -------- | -------- |  | --- | -------- | -------- | 
|                                                 |                               |     | As of March 31,
|                                                 |                               |     |                
|                                                 |                               |     | 2002            |          | 2003      
|                                                 |                               |     |                 |          |           
|                                                 |                               |     | Amortized cost  |          | Fair value |     | Amortized cost |          | Fair value
|                                                 |                               |     |                 |          |            |     |                |          |           
|                                                 |                               |     | (In millions)  
|Available for sale credit substitute
securities: |                               |     |                 |          |            |     |                |          |            |     |          |          |  |     |          |         
|Debentures                                       |                               | Rs. | 1,871.2         |          |            | Rs. | 1,941.4        |          |            | Rs. | 4,963.9  |          |  | Rs. | 5,092.7  |         
|Commercial paper                                 |                               |     | 12,028.9        |          |            |     | 12,028.9       |          |            |     | 6,009.7  |          |  |     | 6,009.7  |         
|                                                 |                               |     |                 |          |            |     |                |          |            |     |          |          |  |     |          |         
|                                                 | Total                         |     | Rs.             | 13,900.1 |            |     | Rs.            | 13,970.3 |            |     | Rs.      | 10,973.6 |  |     | Rs.      | 11,102.4 | 
|                                                 |                               |     |                 |          |            |     |                |          |            |     |          |          |  |     |          |         
|Held to maturity credit substitute
securities:   |                               |     |                 |          |            |     |                |          |            |     |          |          |  |     |          |         
|Debentures                                       |                               | Rs. | 19,932.9        |          |            | Rs. | 20,076.8       |          |            | Rs. | 17,806.0 |          |  | Rs. | 18,268.4 |         
|Preferred shares                                 |                               |     | 1,222.8         |          |            |     | 1,282.8        |          |            |     | 844.4    |          |  |     | 884.7    |         
|                                                 |                               |     |                 |          |            |     |                |          |            |     |          |          |  |     |          |         
|                                                 | Total                         |     | Rs.             | 21,155.7 |            |     | Rs.            | 21,359.6 |            |     | Rs.      | 18,650.4 |  |     | Rs.      | 19,153.1 | 
|                                                 |                               |     |                 |          |            |     |                |          |            |     |          |          |  |     |          |         
|                                                 | Total credit substitutes, net |     | Rs.             | 35,055.8 |            |     | Rs.            | 35,329.9 |            |     | Rs.      | 29,624.0 |  |     | Rs.      | 30,255.5 | 
|                                                 |                               |     |                 |          |            |     |                |          |            |     |          |          |  |     |          |         
|                                                 | Total credit substitutes, net |     |                 |          |            |     |                |          |            |     | US$      | 623.3    |  |     | US$      | 636.6    | 
|                                                 |                               |     |                 |          |            |     |                |          |            |     |          |          |  |     |          |         

The fair values of credit substitutes have been analyzed as follows:

|                                                              |  |                 |          |      |  |      |          |   |  |     |       |  
|------------------------------------------------------------- |  | --------------- | -------- | ---- |  | ---- | -------- | - |  | --- | ----- | -
|                                                              |  | As of March 31,
|                                                              |  |                
|                                                              |  | 2002            |          | 2003 |  | 2003
|                                                              |  |                 |          |      |  |     
|                                                              |  | (In millions)  
|Performing                                                    |  | Rs.             | 35,279.9 |      |  | Rs.  | 30,205.5 |   |  | US$ | 635.5 |  
|                                                              |  |                 |          |      |  |      |          |   |  |     |       |  
|Impairedgross balance                                        |  |                 | 104.8    |      |  |      | 104.8    |   |  |     | 2.2   |  
|Less amounts written off for impairments other than
temporary |  |                 | (54.8    | )    |  |      | (54.8    | ) |  |     | (1.1  | )
|                                                              |  |                 |          |      |  |      |          |   |  |     |       |  
|Impaired credit substitutes, net                              |  |                 | 50.0     |      |  |      | 50.0     |   |  |     | 1.1   |  
|                                                              |  |                 |          |      |  |      |          |   |  |     |       |  
|Total credit substitutes, net                                 |  | Rs.             | 35,329.9 |      |  | Rs.  | 30,255.5 |   |  | US$ | 636.6 |  
|                                                              |  |                 |          |      |  |      |          |   |  |     |       |  

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##### Table of Contents



HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

Impaired credit substitutes as of March 31, 2002 and 2003 have been analyzed as
follows:

|                                                                          |                        |       |       |                |       |      |       |       |       |     |     |     |     | 
|------------------------------------------------------------------------- | ---------------------- | ----- | ----- | -------------- | ----- | ---- | ----- | ----- | ----- | --- | --- | --- | --- | 
|                                                                          |                        |       |       | As of March 31
|                                                                          |                        |       |       |               
|                                                                          |                        |       |       | 2002           |       | 2003 |       | 2003 
|                                                                          |                        |       |       |                |       |      |       |      
|                                                                          |                        |       |       | (In millions) 
|Gross impaired credit substitutes:                                        |                        |       |       |                |       |      |       |       |       |     |     |    
|                                                                          | on accrual status     |       | Rs.   | 100.0          |       |      | Rs.   | 100.0 |       |     | US$ | 2.1 |    
|                                                                          | on non-accrual status |       |       | 4.8            |       |      |       | 4.8   |       |     |     | 0.1 |    
|                                                                          |                        |       |       |                |       |      |       |       |       |     |     |     |    
|                                                                          |                        | Total |       | Rs.            | 104.8 |      |       | Rs.   | 104.8 |     |     | US$ | 2.2 | 
|                                                                          |                        |       |       |                |       |      |       |       |       |     |     |     |    
|Gross impaired credit substitutes by industry:                            |                        |       |       |                |       |      |       |       |       |     |     |    
|                                                                          | Textiles              |       | Rs.   | 100.0          |       |      | Rs.   | 100.0 |       |     | US$ | 2.1 |    
|                                                                          | Oil and gas           |       |       | 4.8            |       |      |       | 4.8   |       |     |     | 0.1 |    
|                                                                          |                        |       |       |                |       |      |       |       |       |     |     |     |    
|                                                                          |                        | Total |       | Rs.            | 104.8 |      |       | Rs.   | 104.8 |     |     | US$ | 2.2 | 
|                                                                          |                        |       |       |                |       |      |       |       |       |     |     |     |    
|Average impaired credit substitutes                                       |                        | Rs.   | 104.8 |                |       | Rs.  | 104.8 |       |       | US$ | 2.2 |    
|                                                                          |                        |       |       |                |       |      |       |       |       |     |     |     |    
|Interest foregone on impaired credit substitutes                          |                        | Rs.   | 2.4   |                |       | Rs.  | 3.2   |       |       | US$ | 0.1 |    
|                                                                          |                        |       |       |                |       |      |       |       |       |     |     |     |    
|Interest income recognized on impaired credit substitutes                 |                        | Rs.   |      |                |       | Rs.  |      |       |       | US$ |    |    
|                                                                          |                        |       |       |                |       |      |       |       |       |     |     |     |    
|Interest income recognized on impaired credit substitutes on a cash basis |                        | Rs.   |      |                |       | Rs.  |      |       |       | US$ |    |    
|                                                                          |                        |       |       |                |       |      |       |       |       |     |     |     |    

As of March 31, 2003, the Bank has not committed any additional funds to
borrowers whose credit substitutes were impaired.

9. Securities sold under repurchase agreements and securities purchased under resell agreements

Securities sold under agreements to repurchase are classified as secured
borrowings and generally mature within 14 days of the transaction date. Such
repurchase transactions are recorded at the amount of cash received on the
transaction. Repurchase transactions outstanding as of March 31, 2002 and 2003
are Rs. 643.9 million and Rs. 4,600.0 million, respectively. As of March 31,
2003, investments available for sale with a fair value of Rs. 4,867.7 million
were pledged as collateral. The Bank may be required to provide additional
collateral in the event that there is deterioration in the fair values of the
underlying securities.

Securities purchased under agreements to resell are classified separately
from investments and generally mature within 14 days of the transaction date.
Such resell transactions are recorded at the amount of cash advanced on the
transaction. Resell transactions outstanding as of March 31, 2002 and 2003 are
Rs. 2,823.5 million and Rs. 0.0 million, respectively.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

10. Loans

Loans analyzed by facility as of March 31, 2002 and 2003 are as follows:

|                                  |             |       |          |                 |          |      |          |           |           |     |       |         |         | 
|--------------------------------- | ----------- | ----- | -------- | --------------- | -------- | ---- | -------- | --------- | --------- | --- | ----- | ------- | ------- | 
|                                  |             |       |          | As of March 31,
|                                  |             |       |          |                
|                                  |             |       |          | 2002            |          | 2003 |          | 2003     
|                                  |             |       |          |                 |          |      |          |          
|                                  |             |       |          | (In millions)  
|Working capital finance           |             | Rs.   | 28,200.8 |                 |          | Rs.  | 45,521.9 |           |           | US$ | 957.6 |        
|Term loans                        |             |       | 30,579.8 |                 |          |      | 43,005.0 |           |           |     | 904.8 |        
|Investment in finance leases      |             |       | 52.9     |                 |          |      | 8.3      |           |           |     | 0.2   |        
|Retail loans                      |             |       | 14,301.3 |                 |          |      | 31,631.4 |           |           |     | 665.5 |        
|                                  |             |       |          |                 |          |      |          |           |           |     |       |        
|                                  | Gross loans |       |          | 73,134.8        |          |      |          | 120,166.6 |           |     |       | 2,528.1 |        
|Less: Allowance for credit losses |             |       | 1,605.9  |                 |          |      | 1,866.7  |           |           |     | 39.2  |        
|                                  |             |       |          |                 |          |      |          |           |           |     |       |        
|                                  |             | Total |          | Rs.             | 71,528.9 |      |          | Rs.       | 118,299.9 |     |       | US$     | 2,488.9 | 
|                                  |             |       |          |                 |          |      |          |           |           |     |       |        

The contractual residual maturity of gross loans as of March 31, 2003 is
set out below:

|                                   |                   |     |                      |          |       |     |            |          |            |     |       |     |  |     |          |          |  |     |          |           | 
|---------------------------------- | ----------------- | --- | -------------------- | -------- | ----- | --- | ---------- | -------- | ---------- | --- | ----- | --- |  | --- | -------- | -------- |  | --- | -------- | --------- | 
|                                   |                   |     | As of March 31, 2003
|                                   |                   |     |                     
|                                   |                   |     | Working              |          |       |     |            |          | Investment |     |       |     |  |     |          |          | 
|                                   |                   |     | capital              |          | Term  |     | in finance |          | Retail     |     |       |     | 
|                                   |                   |     | finance              |          | loans |     | leases     |          | loans      |     | Total
|                                   |                   |     |                      |          |       |     |            |          |            |     |      
|                                   |                   |     | (In millions)       
|Maturity profile of loans:         |                   |     |                      |          |       |     |            |          |            |     |       |     |  |     |          |          |  |     |          |          
|Within one year                    |                   | Rs. | 42,892.7             |          |       | Rs. | 34,509.1   |          |            | Rs. |      |     |  | Rs. | 15,753.8 |          |  | Rs. | 93,155.6 |          
|Over one year through
five years   |                   |     | 2,628.6              |          |       |     | 7,743.3    |          |            |     | 8.3   |     |  |     | 14,732.8 |          |  |     | 25,113.0 |          
|After five years through
ten years |                   |     | 0.6                  |          |       |     | 752.6      |          |            |     |      |     |  |     | 1,144.8  |          |  |     | 1,898.0  |          
|                                   |                   |     |                      |          |       |     |            |          |            |     |       |     |  |     |          |          |  |     |          |          
|                                   | Total Gross Loans |     | Rs.                  | 45,521.9 |       |     | Rs.        | 43,005.0 |            |     | Rs.   | 8.3 |  |     | Rs.      | 31,631.4 |  |     | Rs.      | 120,166.6 | 
|                                   |                   |     |                      |          |       |     |            |          |            |     |       |     |  |     |          |          |  |     |          |          
|                                   | Total Gross Loans |     | US$                  | 957.6    |       |     | US$        | 904.8    |            |     | US$   | 0.2 |  |     | US$      | 665.5    |  |     | US$      | 2,528.1   | 
|                                   |                   |     |                      |          |       |     |            |          |            |     |       |     |  |     |          |          |  |     |          |          

Gross loans analyzed by performance are as follows:

|           |                   |     |                 |          |      |     |           |           |  |     |         |         | 
|---------- | ----------------- | --- | --------------- | -------- | ---- | --- | --------- | --------- |  | --- | ------- | ------- | 
|           |                   |     | As of March 31,
|           |                   |     |                
|           |                   |     | 2002            |          | 2003 |     | 2003     
|           |                   |     |                 |          |      |     |          
|           |                   |     | (In millions)  
|Performing |                   | Rs. | 71,174.9        |          |      | Rs. | 117,799.0 |           |  | US$ | 2,478.3 |        
|Impaired   |                   |     | 1,959.9         |          |      |     | 2,367.6   |           |  |     | 49.8    |        
|           |                   |     |                 |          |      |     |           |           |  |     |         |        
|           | Total Gross Loans |     | Rs.             | 73,134.8 |      |     | Rs.       | 120,166.6 |  |     | US$     | 2,528.1 | 
|           |                   |     |                 |          |      |     |           |           |  |     |         |        

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

Impaired loans as of March 31, 2002 and 2003 have been analyzed by
facility as follows:

|                                           |                                            |       |         |         |                 |         |         |         |         |         |      |      |      |      | 
|------------------------------------------ | ------------------------------------------ | ----- | ------- | ------- | --------------- | ------- | ------- | ------- | ------- | ------- | ---- | ---- | ---- | ---- | 
|                                           |                                            |       |         |         | As of March 31,
|                                           |                                            |       |         |         |                
|                                           |                                            |       |         |         | 2002            |         | 2003    |         | 2003   
|                                           |                                            |       |         |         |                 |         |         |         |        
|                                           |                                            |       |         |         | (In millions)  
|Working capital finance                    |                                            | Rs.   | 993.9   |         |                 | Rs.     | 1,455.6 |         |         | US$     | 30.6 |     
|Term loans                                 |                                            |       | 785.7   |         |                 |         | 810.2   |         |         |         | 17.0 |     
|Net investment in finance leases           |                                            |       | 39.6    |         |                 |         | 26.9    |         |         |         | 0.6  |     
|Retail loans                               |                                            |       | 140.7   |         |                 |         | 74.9    |         |         |         | 1.6  |     
|                                           |                                            |       |         |         |                 |         |         |         |         |         |      |     
|                                           | Gross impaired loans                       |       |         | 1,959.9 |                 |         |         | 2,367.6 |         |         |      | 49.8 |     
|Less: Specific allowance for credit losses |                                            |       | 1,423.5 |         |                 |         | 1,684.3 |         |         |         | 35.4 |     
|                                           |                                            |       |         |         |                 |         |         |         |         |         |      |     
|                                           | Impaired loans, net of specific allowance  |       | Rs.     | 536.4   |                 |         | Rs.     | 683.3   |         |         | US$  | 14.4 |     
|                                           |                                            |       |         |         |                 |         |         |         |         |         |      |     
|Gross impaired loans:                      |                                            |       |         |         |                 |         |         |         |         |         |      |     
|                                           | without valuation allowance               |       | Rs.     | 536.4   |                 |         | Rs.     | 683.3   |         |         | US$  | 14.4 |     
|                                           | with valuation allowance                  |       |         | 1,423.5 |                 |         |         | 1,684.3 |         |         |      | 35.4 |     
|                                           |                                            |       |         |         |                 |         |         |         |         |         |      |     
|                                           |                                            | Total |         | Rs.     | 1,959.9         |         |         | Rs.     | 2,367.6 |         |      | US$  | 49.8 |     
|                                           |                                            |       |         |         |                 |         |         |         |         |         |      |     
|Gross impaired loans:                      |                                            |       |         |         |                 |         |         |         |         |         |      |     
|                                           | on accrual status                         |       | Rs.     | 61.6    |                 |         | Rs.     | 51.9    |         |         | US$  | 1.1  |     
|                                           | on non-accrual status                     |       |         | 1,898.3 |                 |         |         | 2,315.7 |         |         |      | 48.7 |     
|                                           |                                            |       |         |         |                 |         |         |         |         |         |      |     
|                                           |                                            |       | Total   |         | Rs.             | 1,959.9 |         |         | Rs.     | 2,367.6 |      |      | US$  | 49.8 | 
|                                           |                                            |       |         |         |                 |         |         |         |         |         |      |     
|Gross impaired loans by industry:          |                                            |       |         |         |                 |         |         |         |         |         |      |     
|                                           | Automotive                                |       | Rs.     |        |                 |         | Rs.     | 642.9   |         |         | US$  | 13.5 |     
|                                           | Iron and steel                            |       |         | 440.1   |                 |         |         | 437.3   |         |         |      | 9.2  |     
|                                           | Textiles                                  |       |         | 321.4   |                 |         |         | 372.0   |         |         |      | 7.8  |     
|                                           | Electronic Machinery                      |       |         | 66.2    |                 |         |         | 207.8   |         |         |      | 4.4  |     
|                                           | Distilleries and beverages                |       |         | 147.6   |                 |         |         | 142.1   |         |         |      | 3.0  |     
|                                           | Diamonds, gems and jewelry exporters      |       |         | 131.5   |                 |         |         | 130.9   |         |         |      | 2.8  |     
|                                           | Others (none > than 5% of impaired loans) |       |         | 853.0   |                 |         |         | 434.6   |         |         |      | 9.1  |     
|                                           |                                            |       |         |         |                 |         |         |         |         |         |      |     
|                                           |                                            | Total |         | Rs.     | 1,959.8         |         |         | Rs.     | 2,367.6 |         |      | US$  | 49.8 |     
|                                           |                                            |       |         |         |                 |         |         |         |         |         |      |     

Summary of information relating to impaired loans as of March 31, 2001,
2002 and 2003 is as follows:

|                                                             |  |                 |       |      |  |      |       |      |  |     |       |  |  |     |      | 
|------------------------------------------------------------ |  | --------------- | ----- | ---- |  | ---- | ----- | ---- |  | --- | ----- |  |  | --- | ---- | 
|                                                             |  | As of March 31,
|                                                             |  |                
|                                                             |  | 2001            |       | 2002 |  | 2003 |       | 2003
|                                                             |  |                 |       |      |  |      |       |     
|                                                             |  | (In millions)  
|Average impaired loans, net of allowance                     |  | Rs.             | 665.1 |      |  | Rs.  | 511.0 |      |  | Rs. | 609.9 |  |  | US$ | 12.8 | 
|Cumulative interest foregone on impaired assets              |  | Rs.             | 202.2 |      |  | Rs.  | 325.5 |      |  | Rs. | 334.0 |  |  | US$ | 7.0  | 
|Interest income recognized on impaired loans                 |  | Rs.             | 42.0  |      |  | Rs.  | 27.2  |      |  | Rs. | 7.7   |  |  | US$ | 0.2  | 
|Interest income recognized on impaired loans on a cash basis |  | Rs.             | 2.0   |      |  | Rs.  | 15.2  |      |  | Rs. | 1.1   |  |  | US$ |     | 

As of March 31, 2003, the Bank has not committed any additional funds to
borrowers whose loans were impaired.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

Changes in the allowance for credit losses are as follows:

|                                                           |                 |     |                 |        |      |     |         |        |   |     |      |       |  
|---------------------------------------------------------- | --------------- | --- | --------------- | ------ | ---- | --- | ------- | ------ | - | --- | ---- | ----- | -
|                                                           |                 |     | As of March 31,
|                                                           |                 |     |                
|                                                           |                 |     | 2002            |        | 2003 |     | 2003   
|                                                           |                 |     |                 |        |      |     |        
|                                                           |                 |     | (In millions)  
|Specific allowance for credit losses, beginning of year    |                 | Rs. | 1,010.8         |        |      | Rs. | 1,423.5 |        |   | US$ | 29.9 |      
|Gross provision for credit losses                          |                 |     | 620.3           |        |      |     | 943.1   |        |   |     | 19.8 |      
|Allowance no longer required due to:                       |                 |     |                 |        |      |     |         |        |   |     |      |      
|                                                           | Cash recoveries |     |                 | (100.7 | )    |     |         | (201.6 | ) |     |      | (4.2  | )
|                                                           | Write-offs      |     |                 | (106.9 | )    |     |         | (480.7 | ) |     |      | (10.1 | )
|                                                           |                 |     |                 |        |      |     |         |        |   |     |      |      
|Specific allowance for credit losses, end of year          |                 | Rs. | 1,423.5         |        |      | Rs. | 1,684.3 |        |   | US$ | 35.4 |      
|                                                           |                 |     |                 |        |      |     |         |        |   |     |      |      
|Unallocated provision for credit losses, beginning of year |                 | Rs. | 143.5           |        |      | Rs. | 182.4   |        |   | US$ | 3.8  |      
|Additions during the year                                  |                 |     | 38.9            |        |      |     |        |        |   |     |      |      
|                                                           |                 |     |                 |        |      |     |         |        |   |     |      |      
|Unallocated provision for credit losses, end of year       |                 | Rs. | 182.4           |        |      | Rs. | 182.4   |        |   | US$ | 3.8  |      
|                                                           |                 |     |                 |        |      |     |         |        |   |     |      |      
|Total allowance for credit losses, end of year             |                 | Rs. | 1,605.9         |        |      | Rs. | 1,866.7 |        |   | US$ | 39.2 |      
|                                                           |                 |     |                 |        |      |     |         |        |   |     |      |      

Interest and fees on loans analyzed by facility are as follows:

|                        |       |     |                       |         |      |     |         |         |      |     |         |         |  |     |      |       | 
|----------------------- | ----- | --- | --------------------- | ------- | ---- | --- | ------- | ------- | ---- | --- | ------- | ------- |  | --- | ---- | ----- | 
|                        |       |     | Years ended March 31,
|                        |       |     |                      
|                        |       |     | 2001                  |         | 2002 |     | 2003    |         | 2003
|                        |       |     |                       |         |      |     |         |         |     
|                        |       |     | (In millions)        
|Working capital finance |       | Rs. | 2,306.9               |         |      | Rs. | 2,388.2 |         |      | Rs. | 2,861.8 |         |  | US$ | 60.2 |      
|Term loans              |       |     | 2,249.1               |         |      |     | 2,945.3 |         |      |     | 2,922.2 |         |  |     | 61.5 |      
|Finance leases          |       |     | 17.1                  |         |      |     | 9.8     |         |      |     | 5.1     |         |  |     | 0.1  |      
|Retail loans            |       |     | 325.0                 |         |      |     | 787.4   |         |      |     | 2,016.2 |         |  |     | 42.4 |      
|                        |       |     |                       |         |      |     |         |         |      |     |         |         |  |     |      |      
|                        | Total |     | Rs.                   | 4,898.1 |      |     | Rs.     | 6,130.7 |      |     | Rs.     | 7,805.3 |  |     | US$  | 164.2 | 
|                        |       |     |                       |         |      |     |         |         |      |     |         |         |  |     |      |      

11. Concentrations of credit risk

Concentrations of credit risk exist when changes in economic, industry
or geographic factors similarly affect groups of counterparties whose
aggregate credit exposure is material in relation to the Banks total credit
exposure. The Bank manages its credit risk collectively for credit
substitute securities and its loan portfolio as these instruments are
usually negotiated as part of an overall lending program for corporate
customers; accordingly, information on concentrations of credit risk has
been provided for these exposures together.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

The Banks portfolio of loans and credit substitute securities is broadly
diversified along industry and product lines, and as of March 31, 2002 and
2003 the exposures are as follows:

|                                      |       |                                   |                      |             |  |       |                |          |  |     |          |           |  |     |         |         |  |  |      |       | 
|------------------------------------- | ----- | --------------------------------- | -------------------- | ----------- |  | ----- | -------------- | -------- |  | --- | -------- | --------- |  | --- | ------- | ------- |  |  | ---- | ----- | 
|                                      |       |                                   | As of March 31, 2002
|                                      |       |                                   |                     
|                                      |       |                                   |                      |             |  |       | Fair values of |          |  |     |          |           |  |     |         |         |  |  |     
|Category                              |       | Gross                             |                      | credit      |  |       |                |          |  |     |          |           |  |     |         |        
|                                      |       | loans                             |                      | substitutes |  | Total |                | Total    |  | %  
|                                      |       |                                   |                      |             |  |       |                |          |  |    
|                                      |       | (In millions, except percentages)
|Petrochemicals, fuel oils,
lubricants |       | Rs.                               | 8,376.2              |             |  | Rs.   | 1,936.0        |          |  | Rs. | 10,312.2 |           |  | US$ | 211.2   |         |  |  | 9.5  |      
|Automotive manufacturers              |       |                                   | 8,856.0              |             |  |       | 1,143.2        |          |  |     | 9,999.2  |           |  |     | 204.8   |         |  |  | 9.2  |      
|Hire purchase                         |       |                                   | 1,434.1              |             |  |       | 3,932.9        |          |  |     | 5,367.0  |           |  |     | 109.9   |         |  |  | 4.9  |      
|Heavy industrial organic chemicals    |       |                                   | 2,253.0              |             |  |       | 2,196.5        |          |  |     | 4,449.5  |           |  |     | 91.2    |         |  |  | 4.1  |      
|Heavy engineering                     |       |                                   | 1,640.2              |             |  |       | 2,263.2        |          |  |     | 3,903.4  |           |  |     | 80.0    |         |  |  | 3.6  |      
|Electrical machinery                  |       |                                   | 1,853.4              |             |  |       | 1,728.0        |          |  |     | 3,581.4  |           |  |     | 73.3    |         |  |  | 3.3  |      
|Fertilizers                           |       |                                   | 1,706.2              |             |  |       | 1,636.1        |          |  |     | 3,342.3  |           |  |     | 68.4    |         |  |  | 3.1  |      
|Cement                                |       |                                   | 1,487.1              |             |  |       | 1,503.5        |          |  |     | 2,990.6  |           |  |     | 61.2    |         |  |  | 2.8  |      
|Consumer Goods                        |       |                                   | 1,439.2              |             |  |       | 1,494.5        |          |  |     | 2,933.7  |           |  |     | 60.1    |         |  |  | 2.7  |      
|Leasing companies                     |       |                                   | 29.3                 |             |  |       | 2,832.8        |          |  |     | 2,862.1  |           |  |     | 58.6    |         |  |  | 2.6  |      
|Telecom                               |       |                                   | 2,166.9              |             |  |       | 323.2          |          |  |     | 2,490.1  |           |  |     | 51.0    |         |  |  | 2.3  |      
|Iron and steel                        |       |                                   | 937.6                |             |  |       | 1,518.4        |          |  |     | 2,456.0  |           |  |     | 50.3    |         |  |  | 2.3  |      
|Other chemicals                       |       |                                   | 455.2                |             |  |       | 1,912.6        |          |  |     | 2,367.8  |           |  |     | 48.5    |         |  |  | 2.2  |      
|Others (none > than 2%)               |       |                                   | 40,500.4             |             |  |       | 10,909.0       |          |  |     | 51,409.4 |           |  |     | 1,052.8 |         |  |  | 47.4 |      
|                                      |       |                                   |                      |             |  |       |                |          |  |     |          |           |  |     |         |         |  |  |      |      
|                                      | Total |                                   | Rs.                  | 73,134.8    |  |       | Rs.            | 35,329.9 |  |     | Rs.      | 108,464.7 |  |     | US$     | 2,221.3 |  |  |      | 100.0 | 
|                                      |       |                                   |                      |             |  |       |                |          |  |     |          |           |  |     |         |         |  |  |      |      

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

|                                      |       |                                   |                      |             |  |                |          |          |  |     |          |           |  |     |         |         |  |  |      |       | 
|------------------------------------- | ----- | --------------------------------- | -------------------- | ----------- |  | -------------- | -------- | -------- |  | --- | -------- | --------- |  | --- | ------- | ------- |  |  | ---- | ----- | 
|                                      |       |                                   | As of March 31, 2003
|                                      |       |                                   |                     
|Category                              |       |                                   |                      |             |  | Fair values of |          |          |  |     |          |           |  |     |         |         |  | 
|                                      |       | Gross                             |                      | credit      |  |                |          |          |  |     |          |           |  |     |         |        
|                                      |       | loans                             |                      | substitutes |  | Total          |          | Total    |  | %  
|                                      |       |                                   |                      |             |  |                |          |          |  |    
|                                      |       | (In millions, except percentages)
|Automotive manufacturers              |       | Rs.                               | 12,096.3             |             |  | Rs.            | 1,296.9  |          |  | Rs. | 13,393.2 |           |  | US$ | 281.8   |         |  |  | 8.9  |      
|Heavy industrial organic chemicals    |       |                                   | 5,993.2              |             |  |                | 2,304.9  |          |  |     | 8,298.1  |           |  |     | 174.6   |         |  |  | 5.5  |      
|Hire purchase                         |       |                                   | 2,307.4              |             |  |                | 3,569.7  |          |  |     | 5,877.1  |           |  |     | 123.6   |         |  |  | 3.9  |      
|Fertilizers                           |       |                                   | 3,760.4              |             |  |                | 1,405.5  |          |  |     | 5,165.9  |           |  |     | 108.7   |         |  |  | 3.4  |      
|Consumer Goods                        |       |                                   | 4,367.4              |             |  |                |         |          |  |     | 4,367.4  |           |  |     | 91.9    |         |  |  | 2.9  |      
|Petrochemicals, fuel oils,
lubricants |       |                                   | 3,584.5              |             |  |                | 663.8    |          |  |     | 4,248.3  |           |  |     | 89.4    |         |  |  | 2.8  |      
|Cement                                |       |                                   | 1,464.6              |             |  |                | 2,707.3  |          |  |     | 4,171.9  |           |  |     | 87.8    |         |  |  | 2.8  |      
|Leasing companies                     |       |                                   | 29.7                 |             |  |                | 4,136.4  |          |  |     | 4,166.1  |           |  |     | 87.7    |         |  |  | 2.7  |      
|Heavy engineering                     |       |                                   | 2,581.3              |             |  |                | 1,248.8  |          |  |     | 3,830.1  |           |  |     | 80.6    |         |  |  | 2.5  |      
|Electrical machinery                  |       |                                   | 1,430.8              |             |  |                | 1,999.6  |          |  |     | 3,430.4  |           |  |     | 72.2    |         |  |  | 2.3  |      
|Manufacturing of dairy, bakery,       |       |                                   |                      |             |  |                |          |          |  |     |          |           |  |     |         |         |  |  |      |      
|confectionery products                |       |                                   | 3,091.0              |             |  |                |         |          |  |     | 3,091.0  |           |  |     | 65.0    |         |  |  | 2.1  |      
|Others (none > than 2%)               |       |                                   | 79,460.0             |             |  |                | 10,922.6 |          |  |     | 90,382.6 |           |  |     | 1,901.5 |         |  |  | 60.2 |      
|                                      |       |                                   |                      |             |  |                |          |          |  |     |          |           |  |     |         |         |  |  |      |      
|                                      | Total |                                   | Rs.                  | 120,166.6   |  |                | Rs.      | 30,255.5 |  |     | Rs.      | 150,422.1 |  |     | US$     | 3,164.8 |  |  |      | 100.0 | 
|                                      |       |                                   |                      |             |  |                |          |          |  |     |          |           |  |     |         |         |  |  |      |      

The Bank has a geographic concentration of credit risk, with exposure
to borrowers based in Mumbai comprising 45.5% and 36.1% of the total loan
and credit substitute security portfolio as of March 31, 2002 and 2003,
respectively. While such borrowers are based in Mumbai, they may use the
funds provided by the Bank for a variety of uses that may or may not be
related to the economy in Mumbai. Loan and credit substitute exposures as of
March 31, 2002 and 2003 based on the region in which the instruments are
originated are as follows:

|                                  |  |                                   |          |                      |          |                |          |     |          |     |          |     |           |  |      |  |       | 
|--------------------------------- |  | --------------------------------- | -------- | -------------------- | -------- | -------------- | -------- | --- | -------- | --- | -------- | --- | --------- |  | ---- |  | ----- | 
|                                  |  |                                   |          | As of March 31, 2002
|                                  |  |                                   |          |                     
|Region of origination             |  |                                   |          |                      |          | Fair values of |          |     |          |     |          |     |           | 
|                                  |  | Gross                             |          | credit               |          | Total          |          |     |          |    
|                                  |  | loans                             |          | substitutes          |          | exposure       |          | %  
|                                  |  |                                   |          |                      |          |                |          |    
|                                  |  | (In millions, except percentages)
|Mumbai                            |  | Rs.                               | 28,411.3 |                      |          | Rs.            | 20,896.3 |     |          | Rs. | 49,307.6 |     |           |  | 45.5 | 
|Western region, other than Mumbai |  |                                   | 8,064.5  |                      |          |                | 1,713.5  |     |          |     | 9,778.0  |     |           |  | 9.0  | 
|Northern region                   |  |                                   | 13,064.3 |                      |          |                | 7,031.5  |     |          |     | 20,095.8 |     |           |  | 18.5 | 
|Eastern region                    |  |                                   | 7,053.0  |                      |          |                | 1,972.6  |     |          |     | 9,025.6  |     |           |  | 8.3  | 
|Southern region                   |  |                                   | 16,541.7 |                      |          |                | 3,716.0  |     |          |     | 20,257.7 |     |           |  | 18.7 | 
|                                  |  |                                   |          |                      |          |                |          |     |          |     |          |     |           |  |      | 
|                                  |  | Total                             |          | Rs.                  | 73,134.8 |                |          | Rs. | 35,329.9 |     |          | Rs. | 108,464.7 |  |      |  | 100.0 | 
|                                  |  |                                   |          |                      |          |                |          |     |          |     |          |     |           |  |      | 

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HDFC BANK LIMITED

NOTES TO FINANCIAL STATEMENTS(Continued)


|                                  |  |                                   |          |                      |           |                |          |          |          |     |          |     |           |     |         |     |         |  |      |  |       | 
|--------------------------------- |  | --------------------------------- | -------- | -------------------- | --------- | -------------- | -------- | -------- | -------- | --- | -------- | --- | --------- | --- | ------- | --- | ------- |  | ---- |  | ----- | 
|                                  |  |                                   |          | As of March 31, 2003
|                                  |  |                                   |          |                     
|Region of origination             |  |                                   |          |                      |           | Fair values of |          |          |          |     |          |     |           |     |         |     |         | 
|                                  |  | Gross                             |          | credit               |           | Total          |          | Total    |          |     |          |    
|                                  |  | loans                             |          | substitutes          |           | exposure       |          | exposure |          | %  
|                                  |  |                                   |          |                      |           |                |          |          |          |    
|                                  |  | (In millions, except percentages)
|Mumbai                            |  | Rs.                               | 35,102.1 |                      |           | Rs.            | 19,149.8 |          |          | Rs. | 54,251.9 |     |           | US$ | 1,141.4 |     |         |  | 36.1 | 
|Western region, other than Mumbai |  |                                   | 17,374.2 |                      |           |                | 4,321.0  |          |          |     | 21,695.2 |     |           |     | 456.5   |     |         |  | 14.4 | 
|Northern region                   |  |                                   | 22,825.3 |                      |           |                | 4,053.2  |          |          |     | 26,878.5 |     |           |     | 565.5   |     |         |  | 17.9 | 
|Eastern region                    |  |                                   | 14,488.1 |                      |           |                | 747.1    |          |          |     | 15,235.2 |     |           |     | 320.5   |     |         |  | 10.1 | 
|Southern region                   |  |                                   | 30,376.9 |                      |           |                | 1,984.4  |          |          |     | 32,361.3 |     |           |     | 680.9   |     |         |  | 21.5 | 
|                                  |  |                                   |          |                      |           |                |          |          |          |     |          |     |           |     |         |     |         |  |      | 
|                                  |  | Total                             |          | Rs.                  | 120,166.6 |                |          | Rs.      | 30,255.5 |     |          | Rs. | 150,422.1 |     |         | US$ | 3,164.8 |  |      |  | 100.0 | 
|                                  |  |                                   |          |                      |           |                |          |          |          |     |          |     |           |     |         |     |         |  |      | 

The Banks exposures to its five largest borrowers as of March 31, 2002
and 2003 are as follows:

|           |  |                      |         |              |  |                   |         |       |  |     |         | 
|---------- |  | -------------------- | ------- | ------------ |  | ----------------- | ------- | ----- |  | --- | ------- | 
|           |  | As of March 31, 2002
|           |  |                     
|           |  |                      |         |              |  | Investments       |         |       |  |    
|           |  |                      |         |              |  | (including credit |         | Total
|           |  | Loans                |         | substitutes) |  | exposure         
|           |  |                      |         |              |  |                  
|           |  | (In millions)       
|Borrower 1 |  | Rs.                  | 5,000.0 |              |  | Rs.               | 794.0   |       |  | Rs. | 5,794.0 | 
|Borrower 2 |  |                      | 2,210.0 |              |  |                   | 1,142.0 |       |  |     | 3,352.0 | 
|Borrower 3 |  |                      | 950.0   |              |  |                   | 1,756.2 |       |  |     | 2,706.2 | 
|Borrower 4 |  |                      | 809.7   |              |  |                   | 1,531.0 |       |  |     | 2,340.7 | 
|Borrower 5 |  |                      | 1,490.0 |              |  |                   |        |       |  |     | 1,490.0 | 

|           |  |                      |         |              |  |                   |         |          |  |       |         |  |  |     |       | 
|---------- |  | -------------------- | ------- | ------------ |  | ----------------- | ------- | -------- |  | ----- | ------- |  |  | --- | ----- | 
|           |  | As of March 31, 2003
|           |  |                     
|           |  |                      |         |              |  | Investments       |         |          |  |       |         |  |  |    
|           |  |                      |         |              |  | (including credit |         | Total    |  | Total
|           |  | Loans                |         | substitutes) |  | exposure          |         | exposure
|           |  |                      |         |              |  |                   |         |         
|           |  | (In millions)       
|Borrower 5 |  | Rs.                  |        |              |  | Rs.               | 6,242.2 |          |  | Rs.   | 6,242.2 |  |  | US$ | 131.3 | 
|Borrower 1 |  |                      | 3,000.0 |              |  |                   | 2,594.8 |          |  |       | 5,594.8 |  |  |     | 117.7 | 
|Borrower 6 |  |                      |        |              |  |                   | 5,244.7 |          |  |       | 5,244.7 |  |  |     | 110.3 | 
|Borrower 2 |  |                      | 3,276.5 |              |  |                   | 1,356.6 |          |  |       | 4,633.2 |  |  |     | 97.5  | 
|Borrower 7 |  |                      |        |              |  |                   | 4,554.7 |          |  |       | 4,554.7 |  |  |     | 95.8  | 

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

12. Property and equipment

Property and equipment by asset category is as follows:

|                               |  |                                 |         |                 |         |      |         |      |         |     |       |     |       | 
|------------------------------ |  | ------------------------------- | ------- | --------------- | ------- | ---- | ------- | ---- | ------- | --- | ----- | --- | ----- | 
|                               |  |                                 |         | As of March 31,
|                               |  |                                 |         |                
|                               |  |                                 |         | 2002            |         | 2003 |         | 2003
|                               |  |                                 |         |                 |         |      |         |     
|                               |  |                                 |         | (In millions)  
|Land and premises              |  | Rs.                             | 1,531.8 |                 |         | Rs.  | 1,933.5 |      |         | US$ | 40.7  |    
|Software and systems           |  |                                 | 619.1   |                 |         |      | 579.5   |      |         |     | 12.2  |    
|Equipment and furniture        |  |                                 | 3,419.9 |                 |         |      | 5,589.8 |      |         |     | 117.6 |    
|                               |  |                                 |         |                 |         |      |         |      |         |     |       |    
|                               |  | Property and equipment, at cost |         |                 | 5,570.8 |      |         |      | 8,102.8 |     |       |     | 170.5 | 
|Less: Accumulated depreciation |  |                                 | 1,912.7 |                 |         |      | 2,825.3 |      |         |     | 59.5  |    
|                               |  |                                 |         |                 |         |      |         |      |         |     |       |    
|                               |  | Property and equipment, net     |         | Rs.             | 3,658.1 |      |         | Rs.  | 5,277.5 |     |       | US$ | 111.0 | 
|                               |  |                                 |         |                 |         |      |         |      |         |     |       |    

Depreciation charged for the years ended March 31, 2001, 2002 and 2003
was Rs.532.1 million, Rs. 675.7 million and Rs. 1,052.4 million
respectively.

13. Other assets

Other assets include the following:

|                                                                                                         |       |     |                 |         |      |     |         |         |  |     |      |       | 
|-------------------------------------------------------------------------------------------------------- | ----- | --- | --------------- | ------- | ---- | --- | ------- | ------- |  | --- | ---- | ----- | 
|                                                                                                         |       |     | As of March 31,
|                                                                                                         |       |     |                
|                                                                                                         |       |     | 2002            |         | 2003 |     | 2003   
|                                                                                                         |       |     |                 |         |      |     |        
|                                                                                                         |       |     | (In millions)  
|Checks in the course of collection                                                                       |       | Rs. | 4,054.3         |         |      | Rs. | 2,944.5 |         |  | US$ | 62.0 |      
|Security deposits for leased property                                                                    |       |     | 724.4           |         |      |     | 879.0   |         |  |     | 18.5 |      
|Sundry accounts receivable                                                                               |       |     | 798.6           |         |      |     | 2,781.1 |         |  |     | 58.5 |      
|Advance tax (net of provision for taxes)                                                                 |       |     | 295.1           |         |      |     | 888.6   |         |  |     | 18.7 |      
|Advances to vendors                                                                                      |       |     | 330.5           |         |      |     | 403.8   |         |  |     | 8.5  |      
|Advances for capital work in progress                                                                    |       |     | 237.9           |         |      |     | 98.8    |         |  |     | 2.1  |      
|Prepaid expenses                                                                                         |       |     | 132.4           |         |      |     | 736.6   |         |  |     | 15.5 |      
|Commission accrued                                                                                       |       |     | 94.0            |         |      |     |        |         |  |     |     |      
|Goodwill arising on the acquisition of TBL, net of
amortization and
write offs (See Note 2(d) and below) |       |     | 53.6            |         |      |     | 53.6    |         |  |     | 1.1  |      
|Other                                                                                                    |       |     | 38.2            |         |      |     | 169.2   |         |  |     | 3.5  |      
|                                                                                                         |       |     |                 |         |      |     |         |         |  |     |      |      
|                                                                                                         | Total |     | Rs.             | 6,759.0 |      |     | Rs.     | 8,955.2 |  |     | US$  | 188.4 | 
|                                                                                                         |       |     |                 |         |      |     |         |         |  |     |      |      

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

Transitional disclosures on adoption of SFAS 142:

|                            |  |                       |  |     |         |                                         |         |      |         |      |         |      |         |     |         |     |      |     |      | 
|--------------------------- |  | --------------------- |  | --- | ------- | --------------------------------------- | ------- | ---- | ------- | ---- | ------- | ---- | ------- | --- | ------- | --- | ---- | --- | ---- | 
|                            |  | Years ended March 31,
|                            |  |                       |  |     |         |                                        
|                            |  |                       |  |     |         | 2001                                    |         | 2002 |         | 2003 |         | 2003
|                            |  |                       |  |     |         |                                         |         |      |         |      |         |     
|                            |  |                       |  |     |         | (In millions, except per share amounts)
|Net income:                 |  | As reported           |  | Rs. | 2,140.6 |                                         |         | Rs.  | 2,958.4 |      |         | Rs.  | 3,513.8 |     |         | US$ | 73.8 |    
|Add : Goodwill amortization |  |                       |  |     |         |                                         | 6.7     |      |         |      |        |      |         |     |        |     |      |     |      | 
|                            |  |                       |  |     |         |                                         |         |      |         |      |         |      |         |     |         |     |      |     |      | 
|Adjusted net income         |  |                       |  |     |         | Rs.                                     | 2,147.3 |      |         | Rs.  | 2,958.4 |      |         | Rs. | 3,513.8 |     |      | US$ | 73.8 | 
|                            |  |                       |  |     |         |                                         |         |      |         |      |         |      |         |     |         |     |      |     |      | 
|Basic earnings per share    |  | As reported           |  | Rs. | 8.97    |                                         |         | Rs.  | 11.10   |      |         | Rs.  | 12.57   |     |         | US$ | 0.26 |    
|                            |  |                       |  |     |         |                                         |         |      |         |      |         |      |         |     |         |     |      |     |      | 
|As adjusted                 |  |                       |  |     |         |                                         | 9.00    |      |         |      | 11.10   |      |         |     | 12.57   |     |      |     | 0.26 | 
|                            |  |                       |  |     |         |                                         |         |      |         |      |         |      |         |     |         |     |      |     |      | 
|Diluted earnings per share  |  | As reported           |  | Rs. | 8.87    |                                         |         | Rs.  | 11.04   |      |         | Rs.  | 12.51   |     |         | US$ | 0.26 |    
|                            |  |                       |  |     |         |                                         |         |      |         |      |         |      |         |     |         |     |      |     |      | 
|As adjusted                 |  |                       |  |     |         |                                         | 8.90    |      |         |      | 11.04   |      |         |     | 12.51   |     |      |     | 0.26 | 
|                            |  |                       |  |     |         |                                         |         |      |         |      |         |      |         |     |         |     |      |     |      | 

14. Deposits

Deposits include demand deposits, which are non-interest-bearing, and
savings and time deposits, which are interest-bearing. Deposits as of
March 31, 2002 and 2003 are as follows:

|                  |                                      |                                 |       |           |                 |           |      |           |           |           |     |         |         |         | 
|----------------- | ------------------------------------ | ------------------------------- | ----- | --------- | --------------- | --------- | ---- | --------- | --------- | --------- | --- | ------- | ------- | ------- | 
|                  |                                      |                                 |       |           | As of March 31,
|                  |                                      |                                 |       |           |                
|                  |                                      |                                 |       |           | 2002            |           | 2003 |           | 2003     
|                  |                                      |                                 |       |           |                 |           |      |           |          
|                  |                                      |                                 |       |           | (In millions)  
|Interest-bearing: |                                      |                                 |       |           |                 |           |      |           |           |           |     |        
|                  | Savings deposits                     |                                 | Rs.   | 29,574.5  |                 |           | Rs.  | 46,631.4  |           |           | US$ | 981.1   |        
|                  | Time deposits                        |                                 |       | 104,761.8 |                 |           |      | 127,619.0 |           |           |     | 2,685.0 |        
|                  |                                      |                                 |       |           |                 |           |      |           |           |           |     |         |        
|                  |                                      | Total interest-bearing deposits |       |           | 134,336.3       |           |      |           | 174,250.4 |           |     |         | 3,666.1 |        
|                  | Non-interest bearing demand deposits |                                 |       | 42,201.8  |                 |           |      | 49,509.6  |           |           |     | 1,041.6 |        
|                  |                                      |                                 |       |           |                 |           |      |           |           |           |     |         |        
|                  |                                      |                                 | Total |           | Rs.             | 176,538.1 |      |           | Rs.       | 223,760.0 |     |         | US$     | 4,707.7 | 
|                  |                                      |                                 |       |           |                 |           |      |           |           |           |     |         |        

As of March 31, 2002 and 2003, time deposits of Rs. 86,299.1 million
and Rs. 97,330.0 million, respectively, have a residual maturity of less than
one year. The balance of the deposits mature between one and five years.

As of March 31, 2002 and 2003, time deposits in excess of Rs. 4.5
million (approximately US$ 100,000) aggregated Rs. 42,918.5 million and Rs.
52,077.1 million, respectively.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

15. Short-term borrowings

Short-term borrowings as of March 31, 2002 and 2003 are comprised of the
following:

|                                        |                            |     |                 |          |      |     |          |          |  |     |       |       | 
|--------------------------------------- | -------------------------- | --- | --------------- | -------- | ---- | --- | -------- | -------- |  | --- | ----- | ----- | 
|                                        |                            |     | As of March 31,
|                                        |                            |     |                
|                                        |                            |     | 2002            |          | 2003 |     | 2003    
|                                        |                            |     |                 |          |      |     |         
|                                        |                            |     | (In millions)  
|Borrowed in the call market             |                            | Rs. | 15,866.1        |          |      | Rs. | 11,767.1 |          |  | US$ | 247.6 |      
|Overdrawn nostro balances               |                            |     | 19.0            |          |      |     | 80.4     |          |  |     | 1.7   |      
|Term borrowings from institutions/banks |                            |     | 1,358.5         |          |      |     | 8,610.0  |          |  |     | 181.1 |      
|Foreign currency borrowings             |                            |     |                |          |      |     | 237.4    |          |  |     | 5.0   |      
|Bills rediscounted                      |                            |     | 3,390.0         |          |      |     | 750.0    |          |  |     | 15.8  |      
|Export credit refinanced by the RBI     |                            |     | 966.7           |          |      |     | 134.7    |          |  |     | 2.8   |      
|                                        |                            |     |                 |          |      |     |          |          |  |     |       |      
|                                        | Total                      |     | Rs.             | 21,600.3 |      |     | Rs.      | 21,579.6 |  |     | US$   | 454.0 | 
|                                        |                            |     |                 |          |      |     |          |          |  |     |       |      
|Total borrowings outstanding:           |                            |     |                 |          |      |     |          |          |  |     |       |      
|                                        | Maximum amount outstanding |     | Rs.             | 29,857.9 |      |     | Rs.      | 32,221.7 |  |     | US$   | 677.9 | 
|                                        |                            |     |                 |          |      |     |          |          |  |     |       |      
|                                        | Average amount outstanding |     | Rs.             | 17,269.5 |      |     | Rs.      | 15,362.9 |  |     | US$   | 323.2 | 
|                                        |                            |     |                 |          |      |     |          |          |  |     |       |      
|Weighted average interest rate          |                            |     | 7.4             | %        |      |     | 6.3      | %        |  |     | 6.3   | %    
|                                        |                            |     |                 |          |      |     |          |          |  |     |       |      

Short-term borrowings are mainly comprised of money market borrowings.
These borrowings are unsecured and are availed of by the Bank as part of its
treasury operations.

16. Long-term debt

Long-term debt as of March 31, 2002 and 2003 is comprised of the following:

|                          |       |     |                 |         |      |     |         |         |  |     |      |      | 
|------------------------- | ----- | --- | --------------- | ------- | ---- | --- | ------- | ------- |  | --- | ---- | ---- | 
|                          |       |     | As of March 31,
|                          |       |     |                
|                          |       |     | 2002            |         | 2003 |     | 2003   
|                          |       |     |                 |         |      |     |        
|                          |       |     | (In millions)  
|Subordinated debt         |       | Rs. | 2,000.0         |         |      | Rs. | 2,000.0 |         |  | US$ | 42.1 |     
|Capital lease obligations |       |     | 93.0            |         |      |     | 71.6    |         |  |     | 1.5  |     
|Term borrowings           |       |     | 64.9            |         |      |     | 44.4    |         |  |     | 0.9  |     
|                          |       |     |                 |         |      |     |         |         |  |     |      |     
|                          | Total |     | Rs.             | 2,157.9 |      |     | Rs.     | 2,116.0 |  |     | US$  | 44.5 | 
|                          |       |     |                 |         |      |     |         |         |  |     |      |     

The scheduled maturities of long-term debt are set out below:

|                                 |            |  |       |         |                 |         |      |      |     |      | 
|-------------------------------- | ---------- |  | ----- | ------- | --------------- | ------- | ---- | ---- | --- | ---- | 
|                                 |            |  |       |         | As of March 31,
|                                 |            |  |       |         |                
|                                 |            |  |       |         | 2003            |         | 2003
|                                 |            |  |       |         |                 |         |     
|Due in the year ending March 31: |            |  |       |         |                 |         |      |     
|                                 | 2004       |  | Rs.   | 57.5    |                 |         | US$  | 1.2  |    
|                                 | 2005       |  |       | 1,030.3 |                 |         |      | 21.7 |    
|                                 | 2006       |  |       | 19.5    |                 |         |      | 0.4  |    
|                                 | 2007       |  |       | 1,003.6 |                 |         |      | 21.1 |    
|                                 | Thereafter |  |       | 5.1     |                 |         |      | 0.1  |    
|                                 |            |  |       |         |                 |         |      |      |    
|                                 |            |  | Total |         | Rs.             | 2,116.0 |      |      | US$ | 44.5 | 
|                                 |            |  |       |         |                 |         |      |      |    

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

Long-term debt as of March 31, 2002 and 2003 includes unsecured
non-convertible subordinated debt aggregating Rs. 2,000.0 million. This
debt is subordinate to present and future senior indebtedness of the Bank
and qualifies as Tier 2 risk-based capital under the RBIs guidelines for
assessing capital adequacy. This subordinated debt was privately placed in
three tranches, and does not permit prepayment by the Bank. Details are as
follows:

The first tranche aggregating Rs. 1,000.0 million was issued on various
dates between January 29, 1998 and March 20, 1998 and carries a coupon rate
of 13.00%. This tranche is repayable on various dates between July 28, 2004
and September 19, 2004.

The second tranche aggregating Rs. 500.0 million was issued on various
dates between March 30, 1999 and June 5, 1999 and carries a coupon rate of
13.75%. This tranche is repayable on various dates between June 29, 2006 and
September 4, 2006.

The third tranche aggregating Rs. 500.0 million was issued on March 22
and March 23, 2001 and carries a coupon rate of 11.00%. This tranche is
repayable by June 22, 2006.

The capital lease obligation was assumed in the acquisition of TBL and
is secured by computers, ATMs and VSAT terminals acquired from TBL.

The term borrowing as of March 31, 2002 consists of a Rs. 45.0 million
unsecured loan borrowed from HDFC Limited, a related party, with a coupon
rate of 12.5% payable in 2003, which matured during the year and was renewed
by a new loan amounting to Rs. 27.5 million at a rate of interest of 11.5%.
Additionally, the Bank has a loan with an unpaid balance of Rs. 19.9
million and Rs.16.9 million as of March 31, 2002 and 2003, respectively,
representing a loan from the Indian Renewable Energy Development Authority.
This loan was obtained at a concessional coupon rate of 2.5% and used to
finance the purchase of solar power equipment. The loan is secured by a
charge on the solar power system in use at the Banks central transaction
processing facility in Mumbai.

17. Accrued expenses and other liabilities

Accrued expenses and other liabilities include the following:

|                                                   |       |     |                |          |      |     |          |          |  |     |       |       | 
|-------------------------------------------------- | ----- | --- | -------------- | -------- | ---- | --- | -------- | -------- |  | --- | ----- | ----- | 
|                                                   |       |     | As of March 31
|                                                   |       |     |               
|                                                   |       |     | 2002           |          | 2003 |     | 2003    
|                                                   |       |     |                |          |      |     |         
|                                                   |       |     | (In millions) 
|Bills payable                                      |       | Rs. | 8,673.8        |          |      | Rs. | 8,511.2  |          |  | US$ | 179.1 |      
|Remittances in transit                             |       |     | 4,534.9        |          |      |     | 12,323.1 |          |  |     | 259.3 |      
|Provisions for expenses                            |       |     | 377.7          |          |      |     | 410.6    |          |  |     | 8.6   |      
|New account deposits                               |       |     | 907.9          |          |      |     | 3,242.4  |          |  |     | 68.2  |      
|Deferred income tax payable, net                   |       |     | 636.6          |          |      |     | 1,162.3  |          |  |     | 24.5  |      
|Vendor accounts payable                            |       |     | 244.1          |          |      |     | 593.5    |          |  |     | 12.6  |      
|Cash margins on guarantees and documentary credits |       |     | 19.8           |          |      |     | 13.3     |          |  |     | 0.3   |      
|Unearned income                                    |       |     | 206.7          |          |      |     | 474.7    |          |  |     | 10.0  |      
|Other                                              |       |     | 251.1          |          |      |     | 43.6     |          |  |     | 0.9   |      
|                                                   |       |     |                |          |      |     |          |          |  |     |       |      
|                                                   | Total |     | Rs.            | 15,852.6 |      |     | Rs.      | 26,774.7 |  |     | US$   | 563.5 | 
|                                                   |       |     |                |          |      |     |          |          |  |     |       |      

18. Income taxes

The income tax expense comprises the following:

|                                      |                    |     |                       |         |      |     |         |         |      |     |         |         |  |     |      |      | 
|------------------------------------- | ------------------ | --- | --------------------- | ------- | ---- | --- | ------- | ------- | ---- | --- | ------- | ------- |  | --- | ---- | ---- | 
|                                      |                    |     | Years ended March 31,
|                                      |                    |     |                      
|                                      |                    |     | 2001                  |         | 2002 |     | 2003    |         | 2003
|                                      |                    |     |                       |         |      |     |         |         |     
|                                      |                    |     | (In millions)        
|Current income tax expense            |                    | Rs. | 1,049.4               |         |      | Rs. | 1,400.2 |         |      | Rs. | 1,769.6 |         |  | US$ | 37.2 |     
|Deferred income tax expense (benefit) |                    |     | 15.7                  |         |      |     | (105.6  | )       |      |     | (39.9   | )       |  |     | (0.8 | )   
|                                      |                    |     |                       |         |      |     |         |         |      |     |         |         |  |     |      |     
|                                      | Income tax expense |     | Rs.                   | 1,065.1 |      |     | Rs.     | 1,294.6 |      |     | Rs.     | 1,729.7 |  |     | US$  | 36.4 | 
|                                      |                    |     |                       |         |      |     |         |         |      |     |         |         |  |     |      |     

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

The following is the reconciliation of estimated income taxes at the Indian
statutory income tax rate to income tax expense as reported:

|                                                                    |                                        |                                               |                    |     |                       |         |         |       |        |         |         |      |        |         |       |     |      |      | 
|------------------------------------------------------------------- | -------------------------------------- | --------------------------------------------- | ------------------ | --- | --------------------- | ------- | ------- | ----- | ------ | ------- | ------- | ---- | ------ | ------- | ----- | --- | ---- | ---- | 
|                                                                    |                                        |                                               |                    |     | Years ended March 31,
|                                                                    |                                        |                                               |                    |     |                      
|                                                                    |                                        |                                               |                    |     | 2001                  |         | 2002    |       | 2003   |         | 2003   
|                                                                    |                                        |                                               |                    |     |                       |         |         |       |        |         |        
|                                                                    |                                        |                                               |                    |     | (In millions)        
|Net income before taxes                                             |                                        | Rs.                                           | 3,205.7            |     |                       | Rs.     | 4,253.0 |       |        | Rs.     | 5,243.5 |      |        | US$     | 110.3 |    
|Effective statutory income tax rate                                 |                                        |                                               | 39.55              | %   |                       |         | 35.70   | %     |        |         | 36.75   | %    |        |         | 36.75 | %  
|Expected income tax expense                                         |                                        |                                               | 1,267.9            |     |                       |         | 1,518.3 |       |        |         | 1,927.0 |      |        |         | 40.5  |    
|Adjustments to reconcile expected income tax
to actual tax expense: |                                        |                                               |                    |     |                       |         |         |       |        |         |         |      |        |         |       |    
|                                                                    | Permanent differences:                 |                                               |                    |     |                       |         |         |       |        |         |         |      |        |         |       |     |     
|                                                                    |                                        | Stock based compensation (net of
forfeitures) |                    |     | 48.8                  |         |         |       | 30.1   |         |         |      | 50.3   |         |       |     | 1.1  |     
|                                                                    |                                        | Income exempt from taxes                      |                    |     | (250.1                | )       |         |       | (143.8 | )       |         |      | (273.1 | )       |       |     | (5.5 | )   
|                                                                    |                                        | Other, net                                    |                    |     | (3.5                  | )       |         |       | (86.4  | )       |         |      | 6.8    |         |       |     | 0.1  |     
|                                                                    | Effect of change in statutory tax rate |                                               |                    | 2.0 |                       |         |         | (23.6 | )      |         |         | 18.7 |        |         |       | 0.4 |     
|                                                                    |                                        |                                               |                    |     |                       |         |         |       |        |         |         |      |        |         |       |    
|                                                                    |                                        |                                               | Income tax expense |     | Rs.                   | 1,065.1 |         |       | Rs.    | 1,294.6 |         |      | Rs.    | 1,729.7 |       |     | US$  | 36.4 | 
|                                                                    |                                        |                                               |                    |     |                       |         |         |       |        |         |         |      |        |         |       |    

The tax effects of significant temporary differences are as follows:

|                                  |                                                                                    |                        |       |                 |         |      |         |       |         |     |      |      |      | 
|--------------------------------- | ---------------------------------------------------------------------------------- | ---------------------- | ----- | --------------- | ------- | ---- | ------- | ----- | ------- | --- | ---- | ---- | ---- | 
|                                  |                                                                                    |                        |       | As of March 31,
|                                  |                                                                                    |                        |       |                
|                                  |                                                                                    |                        |       | 2002            |         | 2003 |         | 2003 
|                                  |                                                                                    |                        |       |                 |         |      |         |      
|                                  |                                                                                    |                        |       | (In millions)  
|Tax Effect of:                    |                                                                                    |                        |       |                 |         |      |         |       |         |     |      |     
|Deductible temporary differences: |                                                                                    |                        |       |                 |         |      |         |       |         |     |      |     
|                                  | Provision for loan losses                                                          |                        | Rs.   | 436.0           |         |      | Rs.     | 572.0 |         |     | US$  | 12.0 |     
|                                  | Investment income deferred for tax                                                 |                        |       |                |         |      |         | 23.9  |         |     |      | 0.5  |     
|                                  | Minimum alternate tax credit                                                       |                        |       | 23.0            |         |      |         | 23.7  |         |     |      | 0.5  |     
|                                  | Other                                                                              |                        |       | 73.3            |         |      |         | 138.5 |         |     |      | 2.9  |     
|                                  |                                                                                    |                        |       |                 |         |      |         |       |         |     |      |      |     
|                                  |                                                                                    | Deferred tax asset     |       |                 | 532.3   |      |         |       | 758.1   |     |      |      | 15.9 | 
|                                  |                                                                                    |                        |       |                 |         |      |         |       |         |     |      |      |     
|Taxable temporary differences:    |                                                                                    |                        |       |                 |         |      |         |       |         |     |      |     
|                                  | Property and equipment                                                             |                        |       | 531.2           |         |      |         | 834.6 |         |     |      | 17.6 |     
|                                  | Unrealized gain on available for sale securities arising on the
acquisition of TBL |                        |       | 67.9            |         |      |         | 69.9  |         |     |      | 1.5  |     
|                                  | Unrealized gain on securities available for sale                                   |                        |       | 426.4           |         |      |         | 972.1 |         |     |      | 20.4 |     
|                                  | Unrealized gain on investments transferred to held to maturity
category            |                        |       | 49.5            |         |      |         | 34.4  |         |     |      | 0.7  |     
|                                  | Investment income deferred for tax                                                 |                        |       | 84.8            |         |      |         |      |         |     |      |     |     
|                                  | Debt issue expenses                                                                |                        |       | 9.1             |         |      |         | 9.4   |         |     |      | 0.2  |     
|                                  |                                                                                    |                        |       |                 |         |      |         |       |         |     |      |      |     
|                                  |                                                                                    | Deferred tax liability |       |                 | 1,168.9 |      |         |       | 1,920.4 |     |      |      | 40.4 | 
|                                  |                                                                                    |                        |       |                 |         |      |         |       |         |     |      |      |     
|Net deferred tax liability        |                                                                                    | Rs.                    | 636.6 |                 |         | Rs.  | 1,162.3 |       |         | US$ | 24.5 |     
|                                  |                                                                                    |                        |       |                 |         |      |         |       |         |     |      |      |     

Management believes that the realization of the recognized deferred tax
assets is more likely than not based on expectations as to future taxable
income.

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##### Table of Contents



HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

19. Stock based compensation

The stock based compensation plans of the Bank are as follows:

In January 2000, shareholders of the Bank approved the Employees Stock
Option Scheme (the Plan). Under the terms of the Plan, the Bank may issue
stock options to employees and directors of the Bank, each of which is
convertible into one equity share. The Bank has reserved 10 million equity shares, with an aggregate nominal value of Rs. 100 million, for issuance under
the Plan.

The Plan provides for the issuance of options at the recommendation of
the Compensation Committee of the Board (the Compensation Committee), at
an average of the daily closing price on The Stock Exchange, Mumbai during the
60 days preceding the date of the grant of options, which is the minimum
prescribed option price under regulations issued by the Securities and
Exchange Board of India.

Such options vest at the discretion of the Compensation Committee,
subject to a maximum vesting not exceeding five years, and the vesting period
applicable is notified to optionees at the time the grants are made. Such
options are exercisable for a period following vesting at the discretion of
the Compensation Committee, subject to a maximum of five years, and is
notified to optionees at the time of the grant.

On January 4, 2001, the Bank granted 3,642,600 options to employees under
the Plan at an option price of Rs. 225.43 each. Such options also vest at the
rate of 30%, 30% and 40% on each successive anniversary of the grant date. The
option price computed in accordance with the formula was Rs. 0.18 higher than
the closing quoted market price on the date of the grant; accordingly, no
stock based compensation arose on these grants.

On February 8, 2002, the Bank granted 1,406,900 options to employees
under the Plan at an option price of Rs.226.96 each. Such options also vest at
the rate of 30%, 30% and 40% on each successive anniversary of the grant date.
The option price computed in accordance with the formula was Rs.1.91 higher
than the closing quoted market price on the date of the grant; accordingly, no
stock based compensation arose on these grants.

For the purpose of determining the weighted average number of equity
shares outstanding, the Bank treats cash received from optionees who exercise
their option as issued equity shares even if the administrative formalities of
allocating equity shares have not been completed.

Activity in the options available to be granted under the Employee Stock
Option Scheme is as follows:

|                                                   |  |                                 |            |      |  |      |            |   |  |  |           | 
|-------------------------------------------------- |  | ------------------------------- | ---------- | ---- |  | ---- | ---------- | - |  |  | --------- | 
|                                                   |  | Options available to be granted
|                                                   |  |                                
|                                                   |  | Years ending March 31,         
|                                                   |  |                                
|                                                   |  | 2001                            |            | 2002 |  | 2003
|                                                   |  |                                 |            |      |  |     
|Options available to be granted, beginning of year |  |                                 | 5,772,300  |      |  |      | 2,513,600  |   |  |  | 1,534,200 | 
|Options granted                                    |  |                                 | (3,642,600 | )    |  |      | (1,406,900 | ) |  |  |          | 
|Forfeited/lapsed                                   |  |                                 | 383,900    |      |  |      | 427,500    |   |  |  | 514,100   | 
|                                                   |  |                                 |            |      |  |      |            |   |  |  |           | 
|Options available to be granted, end of year       |  |                                 | 2,513,600  |      |  |      | 1,534,200  |   |  |  | 2,048,300 | 
|                                                   |  |                                 |            |      |  |      |            |   |  |  |           | 

F-32



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##### Table of Contents



HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

Activity in the options outstanding under the Employee Stock Option Scheme
is as follows:

|                                                               |  |                       |           |       |  |          |        |       |  |         |           |          |  |     |        |  |  |          |           |   |  |     |        | 
|-------------------------------------------------------------- |  | --------------------- | --------- | ----- |  | -------- | ------ | ----- |  | ------- | --------- | -------- |  | --- | ------ |  |  | -------- | --------- | - |  | --- | ------ | 
|                                                               |  | Years ended March 31,
|                                                               |  |                      
|                                                               |  | 2001                  |           | 2002  |  | 2003    
|                                                               |  |                       |           |       |  |         
|                                                               |  |                       |           |       |  | Weighted |        |       |  |         |           | Weighted |  |     |        |  |  | Weighted
|                                                               |  |                       |           |       |  | average  |        |       |  |         |           | average  |  |     |        |  |  | average 
|                                                               |  |                       |           |       |  | exercise |        |       |  |         |           | exercise |  |     |        |  |  | exercise
|                                                               |  | Options               |           | price |  | Options  |        | price |  | Options |           | price   
|                                                               |  |                       |           |       |  |          |        |       |  |         |           |         
|Options outstanding, beginning of year                         |  |                       | 4,227,700 |       |  | Rs.      | 131.33 |       |  |         | 7,168,400 |          |  | Rs. | 179.15 |  |  |          | 7,788,100 |   |  | Rs. | 189.48 | 
|Granted                                                        |  |                       | 3,642,600 |       |  |          | 225.43 |       |  |         | 1,406,900 |          |  |     | 226.96 |  |  |          |          |   |  |     |       | 
|Exercised                                                      |  |                       | (318,000  | )     |  |          | 131.33 |       |  |         | (359,700  | )        |  |     | 131.33 |  |  |          | (671,100  | ) |  |     | 132.00 | 
|Forfeited                                                      |  |                       | (383,900  | )     |  |          | 131.33 |       |  |         | (427,500  | )        |  |     | 188.43 |  |  |          | (514,100  | ) |  |     | 218.48 | 
|                                                               |  |                       |           |       |  |          |        |       |  |         |           |          |  |     |        |  |  |          |           |   |  |     |        | 
|Options outstanding, end of year                               |  |                       | 7,168,400 |       |  | Rs.      | 179.15 |       |  |         | 7,788,100 |          |  | Rs. | 189.48 |  |  |          | 6,602,900 |   |  | Rs. | 193.07 | 
|                                                               |  |                       |           |       |  |          |        |       |  |         |           |          |  |     |        |  |  |          |           |   |  |     |        | 
|Weighted average fair value of
options granted
during the year |  |                       |           |       |  | Rs.      | 225.43 |       |  |         |           |          |  | Rs. | 225.05 |  |  |          |           |   |  |     |        | 
|                                                               |  |                       |           |       |  |          |        |       |  |         |           |          |  |     |        |  |  |          |           |   |  |     |        | 

An Employees Welfare Trust (the EWT) was established in
1994 for various welfare activities for the benefit of the Banks employees. The EWT borrowed funds from third parties and
initially subscribed to an aggregate of 10,000,000 equity shares of the Bank at the same price as available to other shareholders, and
from time to time, also made open market purchases of shares. In pursuance to the Trusts objectives, grants are allotted to employees, directors
and advisors at prices designated by the trustees. The vesting period varies at the discretion of the trustees from grant to grant,
but is generally 12 to 24 months.

Purely from an accounting perspective under US GAAP, as required by AICPA Statement
of Position No. 93-6, the Bank is required to account for the equity shares of the Bank held by the EWT as treasury shares until transferred
and report the external borrowings of the EWT as borrowings of the Bank. Consequently, dividends paid to the EWT are eliminated, and the interest
cost incurred by the EWT and stock based compensation are charged as an expense by the Bank. Since November 1994, the EWT has granted
an aggregate of 8,865,800 grants. The Bank has recognized deferred stock based compensation on each grant as the difference between the closing price
on The Stock Exchange, Mumbai and applicable grant price. The Bank has recognized stock based compensation expense under this scheme of Rs. 69.9 million, Rs. 56.7 million
and Rs. 125.9 million, for the years ended March 31, 2001, 2002 and 2003 respectively.

F-33



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##### Table of Contents



HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

Activity
in the grants available to be allotted by the EWT is as
follows:

|                                                   |  |                        |           |      |  |      |            |   |  |  |           |  
|-------------------------------------------------- |  | ---------------------- | --------- | ---- |  | ---- | ---------- | - |  |  | --------- | -
|                                                   |  | Years ending March 31,
|                                                   |  |                       
|                                                   |  | 2001                   |           | 2002 |  | 2003
|                                                   |  |                        |           |      |  |     
|Grants
available to be allotted, beginning of year |  |                        | 2,758,000 |      |  |      | 2,806,375  |   |  |  | 1,244,775 |  
|Equity
shares purchased by the Trust               |  |                        | 48,375    |      |  |      |           |   |  |  |          |  
|Grants
allotted                                    |  |                        |          |      |  |      | (1,561,600 | ) |  |  | (15,000   | )
|Grants
cancelled                                   |  |                        |          |      |  |      |           |   |  |  | 21,000    |  
|                                                   |  |                        |           |      |  |      |            |   |  |  |           |  
|Grants
available to be allotted, end of year       |  |                        | 2,806,375 |      |  |      | 1,244,775  |   |  |  | 1,250,775 |  
|                                                   |  |                        |           |      |  |      |            |   |  |  |           |  

Activity
in the allotted grants outstanding with the EWT is as follows:

|                                                               |  |                 |            |       |  |          |       |       |  |        |            |          |  |     |        |  |  |          |           |   |  |     |        | 
|-------------------------------------------------------------- |  | --------------- | ---------- | ----- |  | -------- | ----- | ----- |  | ------ | ---------- | -------- |  | --- | ------ |  |  | -------- | --------- | - |  | --- | ------ | 
|                                                               |  | As of March 31,
|                                                               |  |                
|                                                               |  | 2001            |            | 2002  |  | 2003    
|                                                               |  |                 |            |       |  |         
|                                                               |  |                 |            |       |  | Weighted |       |       |  |        |            | Weighted |  |     |        |  |  | Weighted
|                                                               |  |                 |            |       |  | average  |       |       |  |        |            | average  |  |     |        |  |  | Average 
|                                                               |  |                 |            |       |  | exercise |       |       |  |        |            | exercise |  |     |        |  |  | Exercise
|                                                               |  | Grants          |            | price |  | Grants   |       | price |  | Grants |            | price   
|                                                               |  |                 |            |       |  |          |       |       |  |        |            |         
|Grants
allotted, beginning
of year                             |  |                 | 2,390,000  |       |  | Rs.      | 29.02 |       |  |        | 1,051,600  |          |  | Rs. | 29.50  |  |  |          | 1,097,000 |   |  | Rs. | 38.64  | 
|New
grants                                                     |  |                 |           |       |  |          |      |       |  |        | 1,561,600  |          |  |     | 37.35  |  |  |          | 15,000    |   |  |     | 35.00  | 
|Grants
exercised                                               |  |                 | (1,338,400 | )     |  |          | 27.58 |       |  |        | (1,516,200 | )        |  |     | 30.97  |  |  |          | (15,000   | ) |  |     | 35.00  | 
|Grants
cancelled                                               |  |                 |           |       |  |          |      |       |  |        |           |          |  |     |       |  |  |          | (21,000   | ) |  |     | 38.64  | 
|                                                               |  |                 |            |       |  |          |       |       |  |        |            |          |  |     |        |  |  |          |           |   |  |     |        | 
|Grants
allotted, end of year                                   |  |                 | 1,051,600  |       |  | Rs.      | 29.50 |       |  |        | 1,097,000  |          |  | Rs. | 38.64  |  |  |          | 1,076,000 |   |  | Rs. | 38.64  | 
|                                                               |  |                 |            |       |  |          |       |       |  |        |            |          |  |     |        |  |  |          |           |   |  |     |        | 
|Weighted average fair value of
grants allotted during the year |  |                 |            |       |  |          |      |       |  |        |            |          |  | Rs. | 227.80 |  |  |          |           |   |  | Rs. | 229.70 | 
|                                                               |  |                 |            |       |  |          |       |       |  |        |            |          |  |     |        |  |  |          |           |   |  |     |        | 

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##### Table of Contents



HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

Had compensation cost for the Banks stock option plans been determined
based on the fair value at the grant dates for awards, consistent with the
method prescribed by SFAS No. 123, as amended by SFAS 148, the Banks net
income and earnings per share would have been as per the pro forma amounts
indicated below:

|                                                                                 |  |                       |  |     |         |                                         |  |      |         |      |  |      |         |   |  |     |      |   |  | 
|-------------------------------------------------------------------------------- |  | --------------------- |  | --- | ------- | --------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | --- | ---- | - |  | 
|                                                                                 |  | Years ended March 31,
|                                                                                 |  |                       |  |     |         |                                        
|                                                                                 |  |                       |  |     |         | 2001                                    |  | 2002 |         | 2003 |  | 2003
|                                                                                 |  |                       |  |     |         |                                         |  |      |         |      |  |     
|                                                                                 |  |                       |  |     |         | (In millions, except per share amounts)
|Net Income:                                                                      |  | As reported           |  | Rs. | 2,140.6 |                                         |  | Rs.  | 2,958.4 |      |  | Rs.  | 3,513.8 |   |  | US$ | 73.8 |  
|Add: Stock-based employee
compensation expense
included in net income            |  | As reported           |  |     | 135.0   |                                         |  |      | 89.8    |      |  |      | 138.0   |   |  |     | 2.9  |  
|Less: Stock based
compensation expense
determined under fair
value based method: |  | Pro forma             |  |     | (298.6  | )                                       |  |      | (393.6  | )    |  |      | (329.4  | ) |  |     | (6.8 | )
|                                                                                 |  |                       |  |     |         |                                         |  |      |         |      |  |      |         |   |  |     |      |   |  | 
|Net Income:                                                                      |  | Pro forma             |  | Rs. | 1,977.0 |                                         |  | Rs.  | 2,654.6 |      |  | Rs.  | 3,322.4 |   |  | US$ | 69.9 |  
|                                                                                 |  |                       |  |     |         |                                         |  |      |         |      |  |      |         |   |  |     |      |   |  | 
|Basic earnings per share                                                         |  | As reported           |  | Rs. | 8.97    |                                         |  | Rs.  | 11.10   |      |  | Rs.  | 12.57   |   |  | US$ | 0.3  |  
|                                                                                 |  | Pro forma             |  |     | 8.29    |                                         |  |      | 9.96    |      |  |      | 11.88   |   |  |     | 0.2  |  
|Diluted earnings per share                                                       |  | As reported           |  | Rs. | 8.87    |                                         |  | Rs.  | 11.04   |      |  | Rs.  | 12.51   |   |  | US$ | 0.3  |  
|                                                                                 |  | Pro forma             |  |     | 8.19    |                                         |  |      | 9.91    |      |  |      | 11.81   |   |  |     | 0.2  |  
|Basic earnings per ADS                                                           |  | As reported           |  |     |        |                                         |  | Rs.  | 33.30   |      |  | Rs.  | 37.71   |   |  | US$ | 0.8  |  
|                                                                                 |  | Pro forma             |  |     |        |                                         |  |      | 29.88   |      |  |      | 35.64   |   |  |     | 0.7  |  
|Diluted earnings per ADS                                                         |  | As reported           |  |     |        |                                         |  | Rs.  | 33.12   |      |  | Rs.  | 37.53   |   |  | US$ | 0.8  |  
|                                                                                 |  | Pro forma             |  |     |        |                                         |  |      | 29.73   |      |  |      | 35.43   |   |  |     | 0.7  |  

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##### Table of Contents



HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

The fair value of options used to compute pro forma net income and basic
earnings per equity share have been estimated on the dates of each grant using
the Black-Scholes option pricing model with the following assumptions:

|                        |           |  |                       |     |      |           |             |     |   |   |   |   | 
|----------------------- | --------- |  | --------------------- | --- | ---- | --------- | ----------- | --- | - | - | - | - | 
|                        |           |  | Years ended March 31,
|                        |           |  |                      
|                        |           |  | 2001                  |     | 2002 |           | 2003       
|                        |           |  |                       |     |      |           |            
|Dividend yield          |           |  | 1                     | %   |      |           | 1           | %   |   |   |  |  
|Expected volatility     |           |  | 27.2                  | %   |      |           | 30.2        | %   |   |   |  |  
|Risk-free interest rate |           |  |                       |     |      |           |             |     |   |   |   |  
|                        | ESOS Plan |  |                       | 9.0 | %    |           |             | 7.1 | % |   |   |  | 
|                        | EWT Plan  |  |                       | 9.0 | %    |           |             | 6.2 | % |   |   |  | 
|Expected lives:         |           |  |                       |     |      |           |             |     |   |   |   |  
|                        | ESOS Plan |  | 7.1 years             |     |      | 7.1 years |             |     |   |  |  
|                        | EWT Plan  |  |                       |    |      |           | 1-2.1 years |     |   |   |  |  

The following summarizes information about stock options outstanding as of
March 31, 2003:

|     |  |                                                |  |                |           |                      |  |                |  |     |        |  |  |               |  | 
|---- |  | ---------------------------------------------- |  | -------------- | --------- | -------------------- |  | -------------- |  | --- | ------ |  |  | ------------- |  | 
|     |  |                                                |  |                |           | As of March 31, 2003
|     |  |                                                |  |                |           |                     
|     |  |                                                |  | Number of      |           | Weighted             |  | Weighted      
|     |  |                                                |  | shares arising |           | average              |  | average       
|Plan |  | Range of exercise price                        |  | out of options |           | remaining life       |  | exercise price
|     |  |                                                |  |                |           |                      |  |               
|ESOS |  | Rs.131.33 to Rs.226.96 (or US$2.69 to US$4.65) |  |                | 6,767,200 |                      |  | 0.4 years      |  | Rs. | 193.88 | 
|     |  |                                                |  |                |           |                      |  |                |  |     |        |  |  | (or US$4.08 )
|EWT  |  | Rs. 36.30 to 39.93 (or US$0.74 to US$0.82)     |  |                | 1,076,000 |                      |  | 0.6 years      |  | Rs. | 38.64  | 
|     |  |                                                |  |                |           |                      |  |                |  |     |        |  |  | (or US$0.81 )

20. Share Capital

On July 20, 2001, the Bank issued 10,845,986 ADSs, representing 32,537,958
equity shares pursuant to its initial public offering in the United States, at
an issue price of US$13.83 per ADS. On July 25, 2001, the underwriters to the
issue exercised their over allotment option; accordingly, the Bank issued a
further 1,626,898 ADSs representing 4,880,694 equity shares. The net proceeds
of the issue, after expenses and underwriting discount, was Rs. 7,803.5
million.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

21. Retirement benefits

Gratuity

The following table sets out the funded status of the Gratuity Plan and
the amounts recognized in the Banks financial statements as of March 31, 2002
and 2003.

|                               |                                                        |                                               |     |                 |      |      |     |      |       |   |     |      |      |  
|------------------------------ | ------------------------------------------------------ | --------------------------------------------- | --- | --------------- | ---- | ---- | --- | ---- | ----- | - | --- | ---- | ---- | -
|                               |                                                        |                                               |     | As of March 31,
|                               |                                                        |                                               |     |                
|                               |                                                        |                                               |     | 2002            |      | 2003 |     | 2003
|                               |                                                        |                                               |     |                 |      |      |     |     
|                               |                                                        |                                               |     | (In millions)  
|Change in benefit obligations: |                                                        |                                               |     |                 |      |      |     |      |       |   |     |     
|                               | Projected benefit obligation, beginning of the year    |                                               | Rs. | 15.6            |      |      | Rs. | 34.0 |       |   | US$ | 0.7  |     
|                               | Service cost                                           |                                               |     | 9.1             |      |      |     | 11.6 |       |   |     | 0.2  |     
|                               | Interest cost                                          |                                               |     | 1.5             |      |      |     | 3.0  |       |   |     | 0.1  |     
|                               | Actuarial loss                                         |                                               |     | 9.3             |      |      |     | 17.8 |       |   |     | 0.4  |     
|                               | Benefits paid                                          |                                               |     | (1.5            | )    |      |     | (1.4 | )     |   |     | (0.0 | )   
|                               |                                                        |                                               |     |                 |      |      |     |      |       |   |     |      |     
|                               |                                                        | Projected benefit obligation, end of the year |     |                 | 34.0 |      |     |      | 65.0  |   |     |      | 1.4  |  
|                               |                                                        |                                               |     |                 |      |      |     |      |       |   |     |      |     
|Change in plan assets:         |                                                        |                                               |     |                 |      |      |     |      |       |   |     |     
|                               | Fair value of plan assets, beginning of the year       |                                               |     | 10.2            |      |      |     | 25.9 |       |   |     | 0.5  |     
|                               | Actual return on plan assets                           |                                               |     | 1.0             |      |      |     | 2.8  |       |   |     | 0.1  |     
|                               | Employer contributions                                 |                                               |     | 4.7             |      |      |     | 7.0  |       |   |     | 0.1  |     
|                               | Benefits paid                                          |                                               |     | (1.5            | )    |      |     | (1.4 | )     |   |     | (0.0 | )   
|                               | Assets received from erstwhile Times Bank Limited plan |                                               |     | 12.1            |      |      |     |     |       |   |     |     |     
|                               | Actuarial (loss)                                       |                                               |     | (0.7            | )    |      |     | (3.4 | )     |   |     | (0.1 | )   
|                               |                                                        |                                               |     |                 |      |      |     |      |       |   |     |      |     
|                               |                                                        | Fair value of plan assets, end of the year    |     |                 | 25.8 |      |     |      | 30.9  |   |     |      | 0.6  |  
|                               |                                                        |                                               |     |                 |      |      |     |      |       |   |     |      |     
|                               |                                                        | Accrued benefit                               |     | Rs.             | (8.2 | )    |     | Rs.  | (34.1 | ) |     | US$  | (0.8 | )
|                               |                                                        |                                               |     |                 |      |      |     |      |       |   |     |      |     

Net gratuity cost for the years ended March 31, 2001, 2002 and 2003 comprises
the following components:

|                                                       |                   |     |                       |     |      |     |      |      |      |     |      |     |  |     |      |     | 
|------------------------------------------------------ | ----------------- | --- | --------------------- | --- | ---- | --- | ---- | ---- | ---- | --- | ---- | --- |  | --- | ---- | --- | 
|                                                       |                   |     | Years ended March 31,
|                                                       |                   |     |                      
|                                                       |                   |     | 2001                  |     | 2002 |     | 2003 |      | 2003
|                                                       |                   |     |                       |     |      |     |      |      |     
|                                                       |                   |     | (In millions)        
|Service cost                                           |                   | Rs. | 4.6                   |     |      | Rs. | 9.1  |      |      | Rs. | 11.6 |     |  | US$ | 0.3  |    
|Interest cost                                          |                   |     | 0.8                   |     |      |     | 1.5  |      |      |     | 3.0  |     |  |     | 0.1  |    
|Expected return on plan assets                         |                   |     | (0.6                  | )   |      |     | (1.0 | )    |      |     | (2.5 | )   |  |     | (0.1 | )  
|Actuarial (gain) loss                                  |                   |     | 3.6                   |     |      |     |     |      |      |     | (2.5 | )   |  |     | (0.1 | )  
|Amortization of actuarial loss in excess of 10% of PBO |                   |     |                      |     |      |     | 0.4  |      |      |     |     |     |  |     |     |    
|                                                       |                   |     |                       |     |      |     |      |      |      |     |      |     |  |     |      |    
|                                                       | Net gratuity cost |     | Rs.                   | 8.4 |      |     | Rs.  | 10.0 |      |     | Rs.  | 9.6 |  |     | US$  | 0.2 | 
|                                                       |                   |     |                       |     |      |     |      |      |      |     |      |     |  |     |      |    

The assumptions used in accounting for the gratuity plan for the years
ended March 31, 2001, 2002 and 2003
are set out below:

|                                                             |  |                       |      |      |  |      |      |  |  |  |      | 
|------------------------------------------------------------ |  | --------------------- | ---- | ---- |  | ---- | ---- |  |  |  | ---- | 
|                                                             |  | Years ended March 31,
|                                                             |  |                      
|                                                             |  | 2001                  |      | 2002 |  | 2003
|                                                             |  |                       |      |      |  |     
|                                                             |  | (%)                  
|Discount rate                                                |  |                       | 11.0 |      |  |      | 9.5  |  |  |  | 9.0  | 
|Rate of increase in compensation levels of covered employees |  |                       | 7.0  |      |  |      | 7.0  |  |  |  | 10.0 | 
|Rate of return on plan assets                                |  |                       | 11.0 |      |  |      | 10.0 |  |  |  | 8.0  | 

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

Superannuation

The Bank contributed Rs. 13.3 million, Rs. 14.5 million and Rs.
16.6 million to the superannuation plan for the years ended March 31, 2001,
2002 and 2003, respectively.

Provident fund

The Bank contributed Rs. 30.2 million, Rs. 42.5 million and Rs. 55.6
million to the provident fund for the years ended March 31, 2001, 2002 and
2003, respectively.

22. Financial instruments

Foreign exchange and derivative contracts

The Bank enters into foreign exchange forward contracts, currency swaps
and rupee based interest rate swaps with inter-bank participants on its own
account and for customers. These transactions enable customers to transfer,
modify or reduce their foreign exchange and interest rate risks.

Forward foreign exchange contracts are commitments to buy or sell foreign
currency at a future date at the contracted rate. Currency swaps are
commitments to exchange cash flows by way of interest in one currency against
another currency and exchange of notional principal amount at maturity based on
predetermined rates.

The market and credit risk associated with these products, as well as the
operating risks, are similar to those relating to other types of financial
instruments. Market risk is the exposure created by movements in interest rates
and exchange rates, during the tenure of the transaction. The extent of market
risk affecting such transactions depends on the type and nature of the
transaction, value of the transaction and the extent to which the transaction
is uncovered. Credit risk is the exposure to loss in the event of default by
counter-parties. The extent of loss on account of a counter-party default will
depend on the replacement value of the contract at the ongoing market rates.

The following table presents the aggregate notional principal amounts of
the Banks outstanding foreign exchange and interest rate derivative contracts
as of March 31, 2002 and 2003, together with the fair values on each reporting
date.

|                              |  |                 |           |       |  |          |       |       |  |          |           |       |  |     |       |   |  |      |         |  |  |     |      |  
|----------------------------- |  | --------------- | --------- | ----- |  | -------- | ----- | ----- |  | -------- | --------- | ----- |  | --- | ----- | - |  | ---- | ------- |  |  | --- | ---- | -
|                              |  | As of March 31,
|                              |  |                
|                              |  | 2002            |           | 2003  |  | 2003    
|                              |  |                 |           |       |  |         
|                              |  |                 |           |       |  | Fair     |       |       |  |          |           | Fair  |  |     |       |   |  | Fair
|                              |  | Notional        |           | value |  | Notional |       | value |  | Notional |           | value
|                              |  |                 |           |       |  |          |       |       |  |          |           |      
|                              |  | (In millions)  
|Interest rate swap agreements |  | Rs.             | 39,809.6  |       |  | Rs.      | (16.0 | )     |  | Rs.      | 174,841.7 |       |  | Rs. | 0.4   |   |  | US$  | 3,678.6 |  |  | US$ |     |  
|Currency options              |  |                 | 1,286.9   |       |  |          | 2.7   |       |  |          | 1,549.2   |       |  |     |      |   |  |      | 32.6    |  |  |     |     |  
|Forward exchange contracts    |  |                 | 119,849.2 |       |  |          | 514.8 |       |  |          | 197,725.5 |       |  |     | 127.1 |   |  |      | 4,160.0 |  |  |     | 2.7  |  
|Currency swap agreements      |  |                 | 11,932.0  |       |  |          | 277.2 |       |  |          | 9,659.5   |       |  |     | (6.7  | ) |  |      | 203.2   |  |  |     | (0.1 | )

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

Guarantees

As a part of its commercial banking activities, the Bank has issued
guarantees and documentary credits, such as letters of credit, to enhance the
credit standing of its customers. These generally represent irrevocable
assurances that the Bank will make payments in the event that the customer
fails to fulfill his financial or performance obligations. Financial
guarantees are obligations to pay a third party beneficiary where a customer
fails to make payment towards a specified financial obligation. Performance
guarantees are obligations to pay a third party beneficiary where a customer
fails to perform a non-financial contractual obligation. The guarantees are
generally for a period not exceeding 18 months.

The credit risk associated with these products, as well as the operating
risks, are similar to those relating to other types of financial instruments.

The fair values of guarantees and documentary credits have been estimated
based on fees currently charged for such contracts.

Details of guarantees and documentary credits outstanding are set out
below:

|                       |                        |       |         |          |                 |  |          |         |          |  |       |       |       |  | 
|---------------------- | ---------------------- | ----- | ------- | -------- | --------------- |  | -------- | ------- | -------- |  | ----- | ----- | ----- |  | 
|                       |                        |       |         |          | As of March 31,
|                       |                        |       |         |          |                
|                       |                        |       |         |          | 2002            |  | 2003     |         | 2003    
|                       |                        |       |         |          |                 |  |          |         |         
|                       |                        |       |         |          | (In millions)  
|Nominal values:        |                        |       |         |          |                 |  |          |         |          |  |       |      
|Bank guarantees:       |                        |       |         |          |                 |  |          |         |          |  |       |      
|                       | Financial guarantees   |       | Rs.     | 6,814.1  |                 |  | Rs.      | 5,743.6 |          |  | US$   | 120.8 |      
|                       | Performance guarantees |       |         | 10,136.2 |                 |  |          | 8,445.4 |          |  |       | 177.7 |      
|Documentary credits    |                        |       | 9,444.1 |          |                 |  | 11,715.1 |         |          |  | 246.5 |      
|                       |                        |       |         |          |                 |  |          |         |          |  |       |       |      
|                       |                        | Total |         | Rs.      | 26,394.4        |  |          | Rs.     | 25,904.1 |  |       | US$   | 545.0 | 
|                       |                        |       |         |          |                 |  |          |         |          |  |       |       |      
|Estimated fair values: |                        |       |         |          |                 |  |          |         |          |  |       |      
|                       | Guarantees             |       | Rs.     | 188.1    |                 |  | Rs.      | 85.1    |          |  | US$   | 1.8   |      
|                       | Documentary credits    |       |         | 30.9     |                 |  | Rs.      | 18.7    |          |  |       | 0.4   |      
|                       |                        |       |         |          |                 |  |          |         |          |  |       |       |      
|                       |                        | Total |         | Rs.      | 219.0           |  |          | Rs.     | 103.8    |  |       | US$   | 2.2   | 
|                       |                        |       |         |          |                 |  |          |         |          |  |       |       |      

Based on historical trends, the probability that the Bank would have to
make payments under the above guarantees is low. Additionally, in many
cases, the Bank holds collateral in various forms against these guarantees.
Accordingly, the Bank has not recognized any liability in respect of guarantees
issued or modified after December 31, 2002 as required by FASB Interpretation
No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees
(FIN 45), issued in November 2002.

As part of its risk management activities, the Bank continuously monitors
the credit-worthiness of the customer as well as the guarantee exposure;
however, if the customer fails to perform the specified obligation to the
beneficiary, the beneficiary may draw upon the guarantee by presenting
documents that are in compliance with the guarantee. In that event the Bank
makes payment on account of the indebtedness of the customer or makes payment
on account of the default by the customer in the performance of an obligation,
to the beneficiary up to the full notional amount of the guarantee. The
customer is obligated to reimburse the Bank for any such payment. If the
customer fails to pay, the Bank would, as applicable, liquidate collateral
and/or set off accounts.

Loan sanction letters

The Bank has issued sanction letters indicating its intent to provide new
loans to certain customers. The aggregate of loans contemplated in these
letters that had not yet been made was Rs. 58,478.8 million as of March 31,
2003. If the Bank were to make such loans, the interest rates would be
dependent on the lending rates in effect when the loans are disbursed. The Bank
has no commitment to lend under these letters. Among other things, the making
of a loan is subject to a review of creditworthiness of the customer at the
time the customer seeks to borrow, at which time the Bank has the unilateral
right to decline to make the loan.

23. Estimated fair value of financial instruments

The Banks financial instruments include financial assets and liabilities
recorded on the balance sheet, as well as off-balance sheet instruments such as
foreign exchange and derivative contracts. Management uses its best judgement
in estimating the fair value of the Banks financial instruments; however,
there are inherent weaknesses in any estimation technique. Therefore, for
substantially all financial instruments, the fair value estimates presented
herein are not necessarily indicative of all the amounts the Bank could have
realized in a sales transaction as of either March 31, 2002 or 2003. The
estimated fair value amounts for the years ended March 31, 2002 and 2003 have
been measured as of the respective year ends, and have been not been
reevaluated or updated for purposes of these financial statements subsequent to
those respective dates. As such, the estimated fair values of these financial
instruments subsequent to the respective reporting dates may be different than
the amounts reported at each year end.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

Financial instruments valued at carrying value:

The respective carrying values of certain on-balance-sheet financial
instruments approximated their fair value. These financial instruments include
cash and amounts due from banks, interest-bearing deposits in banks, securities
purchased and sold under resale and repurchase agreements, accrued interest
receivable, short-term borrowings, acceptances, accrued interest payable, and
certain other assets and liabilities that are considered financial instruments.
Carrying values were assumed to approximate fair values for these financial
instruments as they are short-term in nature and their recorded amounts
approximate fair values or are receivable or payable on demand.

Trading securities:

Trading securities are carried at fair value based on quoted market
prices. For more information on the fair value of these securities, refer to
Note 5.

Available for sale securities:

Available for sale investments principally comprise debt securities and
are carried at fair value. Such fair values were based on quoted market prices,
if available. If quoted market prices did not exist, fair values were estimated
using market yield on balance period to maturity on similar instruments and
similar credit risk. The fair values of asset backed securities is estimated
based on revised estimated cash flows at each balance sheet date, discounted at
current market pricing for transactions with similar risk. For more information
on the fair value of these securities, refer to Note 5.

Held to maturity securities:

Held to maturity securities are carried at amortized cost less diminution
other than temporary, if any. Fair values of these securities were based on
quoted market prices, if available. If quoted market prices did not exist, fair
values were estimated using market yield on balance period to maturity on
similar instruments and similar credit risk. For more information on these
securities, refer to Note 7.

Loans:

The fair values of consumer installment loans and other consumer loans
that do not reprice frequently were estimated using discounted cash flow
models. The discount rates were based on current market pricing for loans with
similar characteristics and risk factors. Since substantially all individual
lines of credit and other variable rate consumer loans reprice frequently, with
interest rates reflecting current market pricing, the carrying values of these
loans approximate their fair values.

The fair values of commercial loans that do not reprice or mature within
relatively short time frames were estimated using discounted cash flow models.
The discount rates were based on current market interest rates for loans with
similar remaining maturities and credit ratings. For commercial loans that
reprice within relatively short time frames, the carrying values approximate
their fair values.

For purposes of these fair value estimates, the fair values of impaired
loans were computed by deducting an estimated market discount from their
carrying values to reflect the uncertainty of future cash flows.

Deposits:

The fair value of demand deposits, savings deposits, and money market
deposits without defined maturities are the amounts payable on demand. For
deposits with defined maturities, the fair values were estimated using
discounted cash flow models that apply market interest rates corresponding to
similar deposits and timing of maturities. For variable-rate deposits with
fixed repricing dates, the first repricing date was considered the maturity
date for purposes of fair value calculation.

Long-term debt:

The fair values of the Banks unquoted long-term debt instruments were
calculated based on a discounted cash flow model. The discount rates were based
on yield curves appropriate for the remaining maturities of the instruments.

Term Placements:

The fair values of term placements were estimated using discounted cash flow
models. The discount rates were based on current market pricing for placements
with similar characteristics and risk factors.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

A comparison of the fair values and carrying values of financial instruments
other than derivatives (see Note 22) is set out below:

|                                                |  |                 |           |            |  |          |           |            |  |     |           |  |  |     |           | 
|----------------------------------------------- |  | --------------- | --------- | ---------- |  | -------- | --------- | ---------- |  | --- | --------- |  |  | --- | --------- | 
|                                                |  | As of March 31,
|                                                |  |                
|                                                |  | 2002            |           | 2003      
|                                                |  |                 |           |           
|                                                |  | Carrying        |           | Estimated  |  | Carrying |           | Estimated 
|                                                |  | value           |           | fair value |  | value    |           | fair value
|                                                |  |                 |           |            |  |          |           |           
|                                                |  | (In millions)  
|Financial Assets:                               |  |                 |           |            |  |          |           |            |  |     |           |  |  |     |           | 
|Cash and cash equivalents                       |  | Rs.             | 34,590.6  |            |  | Rs.      | 34,590.6  |            |  | Rs. | 23,944.9  |  |  | Rs. | 23,944.9  | 
|Term placements                                 |  |                 |          |            |  |          |          |            |  | Rs. | 7,747.4   |  |  | Rs. | 7,944.6   | 
|Investments held to maturity                    |  |                 | 35,429.9  |            |  |          | 36,889.3  |            |  |     | 38,426.7  |  |  |     | 40,108.3  | 
|Investments held for trading                    |  |                 | 3,837.6   |            |  |          | 3,837.6   |            |  |     | 3,976.1   |  |  |     | 3,976.1   | 
|Investments available for sale                  |  |                 | 80,320.6  |            |  |          | 80,320.6  |            |  |     | 98,929.2  |  |  |     | 98,929.2  | 
|Securities purchased under agreements to resell |  |                 | 2,823.5   |            |  |          | 2,823.5   |            |  |     |          |  |  |     |          | 
|Loans                                           |  |                 | 71,528.9  |            |  |          | 71,504.9  |            |  |     | 118,299.8 |  |  |     | 121,078.4 | 
|Accrued interest receivable                     |  |                 | 4,084.0   |            |  |          | 4,084.0   |            |  |     | 6,283.9   |  |  |     | 6,283.9   | 
|Financial Liabilities:                          |  |                 |           |            |  |          |           |            |  |     |           |  |  |     |           | 
|Interest-bearing deposits                       |  |                 | 134,336.3 |            |  |          | 135,052.4 |            |  |     | 174,250.4 |  |  |     | 175,075.4 | 
|Non-interest bearing deposits                   |  |                 | 42,201.8  |            |  |          | 42,201.8  |            |  |     | 49,509.6  |  |  |     | 49,509.6  | 
|Securities sold under repurchase agreements     |  |                 | 643.9     |            |  |          | 643.9     |            |  |     | 4,600.0   |  |  |     | 4,600.0   | 
|Short term borrowings                           |  |                 | 21,600.3  |            |  |          | 21,600.3  |            |  |     | 21,579.6  |  |  |     | 21,579.6  | 
|Accrued interest payable                        |  |                 | 4,178.5   |            |  |          | 4,178.5   |            |  |     | 6,896.3   |  |  |     | 6,896.3   | 
|Long-term debt                                  |  |                 | 2,157.9   |            |  |          | 2,249.8   |            |  |     | 2,116.0   |  |  |     | 2,399.8   | 
|Accrued expenses and other liabilities          |  |                 | 15,852.6  |            |  |          | 15,852.6  |            |  |     | 26,774.7  |  |  |     | 26,774.7  | 

24. Segment Information

The Bank operates in three segments: wholesale banking, retail banking and
treasury services. The revenue and related expense recognition policies are set
out in Note 2. Substantially all operations and assets are based in India.

The wholesale banking segment provides loans and transaction services to
corporate customers. Revenues of the wholesale banking segment consist of
interest earned on loans made to corporate customers, investment income from
credit substitutes, interest earned on the cash float arising from transaction
services, and fees from such transaction services. The principal expenses of
the segment consist of interest expense on funds borrowed from other segments,
premises expenses, personnel costs, other direct overheads and allocated
expenses.

The retail banking segment serves retail customers through a branch
network and other delivery channels. This segment raises deposits from
customers and makes loans and provides advisory services to such customers.
Revenues of the retail banking segment are derived from interest earned on
retail loans, fees for banking and advisory services and interest earned from
other segments for surplus funds placed with those segments. Expenses of this
segment primarily comprise interest expense on deposits, infrastructure and
premises expenses for operating the branch network and other delivery channels,
personnel costs, other direct overheads and allocated expenses.

The treasury services segment undertakes trading operations on the
proprietary account, foreign exchange operations and derivatives trading.
Revenues of the treasury services segment primarily consist of fees and gains
or losses from trading operations.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

Segment-wise income and expenses include certain allocations. Interest
income is charged by a segment that provides funding to another segment, based
on yields benchmarked to an internally developed composite yield curve which
broadly tracks market discovered interest rates. Transaction charges are made
by the retail banking segment to the wholesale banking segment for the use by
corporate customers of the retail banking segments branch network or other
delivery channels; such transaction costs are determined on a cost plus basis.

Directly identifiable shared overheads are generally allocated at actual
amounts incurred. Indirect shared costs, principally corporate office expenses,
are generally allocated equally to each segment. Income taxes for each segment
have been allocated based on the effective rate applicable to the Bank,
adjusted for specifically identifiable permanent differences relating to each
segment.

Summarized segment information for the years ended March 31, 2001, 2002
and 2003 is as follows:

|                                                        |                              |     |                       |          |         |     |          |          |           |     |         |          |          |     |           |           |         |     |          |          |  |     |         |          |  |     |         |           |  |     |         |          |  |     |         |          | 
|------------------------------------------------------- | ---------------------------- | --- | --------------------- | -------- | ------- | --- | -------- | -------- | --------- | --- | ------- | -------- | -------- | --- | --------- | --------- | ------- | --- | -------- | -------- |  | --- | ------- | -------- |  | --- | ------- | --------- |  | --- | ------- | -------- |  | --- | ------- | -------- | 
|                                                        |                              |     | Years ended March 31,
|                                                        |                              |     |                      
|                                                        |                              |     |                       |          |         |     | 2001     |          |           |     |         |          |          |     |           |           | 2002    |     |          |          |  |     |         |          |  |     | 2003    |           |  |     |        
|                                                        |                              |     |                       |          |         |     |         
|                                                        |                              |     | Wholesale             |          | Retail  |     | Treasury |          | Wholesale |     | Retail  |          | Treasury |     | Wholesale |           | Retail  |     | Treasury
|                                                        |                              |     | banking               |          | banking |     | services |          | Banking   |     | banking |          | services |     | banking   |           | banking |     | services
|                                                        |                              |     |                       |          |         |     |          |          |           |     |         |          |          |     |           |           |         |     |         
|                                                        |                              |     | (In millions)        
|Net interest
revenue                                    |                              | Rs. | 2,285.3               |          |         | Rs. | 2,229.5  |          |           | Rs. | 473.3   |          |          | Rs. | 2,553.7   |           |         | Rs. | 2,948.5  |          |  | Rs. | 183.3   |          |  | Rs. | 2,237.5 |           |  | Rs. | 4,325.0 |          |  | Rs. | 960.3   |         
|Allowance for credit
losses                             |                              |     | 205.2                 |          |         |     | 41.8     |          |           |     |        |          |          |     | 412.7     |           |         |     | 38.9     |          |  |     |        |          |  |     | 662.3   |           |  |     | 79.2    |          |  |     |        |         
|                                                        |                              |     |                       |          |         |     |          |          |           |     |         |          |          |     |           |           |         |     |          |          |  |     |         |          |  |     |         |           |  |     |         |          |  |     |         |         
|Net interest
revenue,
after allowance
for credit losses |                              |     | 2,080.1               |          |         |     | 2,187.7  |          |           |     | 473.3   |          |          |     | 2,141.0   |           |         |     | 2,909.6  |          |  |     | 183.3   |          |  |     | 1,575.2 |           |  |     | 4,245.8 |          |  |     | 960.3   |         
|Non-interest
revenue                                    |                              |     | 862.2                 |          |         |     | 687.1    |          |           |     | 77.8    |          |          |     | 662.1     |           |         |     | 973.7    |          |  |     | 1,579.3 |          |  |     | 1,590.6 |           |  |     | 1,742.6 |          |  |     | 1,186.9 |         
|Non-interest
expense                                    |                              |     | 825.0                 |          |         |     | 2,160.7  |          |           |     | 176.8   |          |          |     | 1,117.3   |           |         |     | 2,870.1  |          |  |     | 208.6   |          |  |     | 1,203.0 |           |  |     | 4,329.5 |          |  |     | 525.4   |         
|                                                        |                              |     |                       |          |         |     |          |          |           |     |         |          |          |     |           |           |         |     |          |          |  |     |         |          |  |     |         |           |  |     |         |          |  |     |         |         
|Income before
income tax                                |                              |     | 2,117.3               |          |         |     | 714.1    |          |           |     | 374.3   |          |          |     | 1,685.8   |           |         |     | 1,013.2  |          |  |     | 1,554.0 |          |  |     | 1,962.8 |           |  |     | 1,658.9 |          |  |     | 1,621.8 |         
|                                                        |                              |     |                       |          |         |     |          |          |           |     |         |          |          |     |           |           |         |     |          |          |  |     |         |          |  |     |         |           |  |     |         |          |  |     |         |         
|Segment assets:                                         |                              |     |                       |          |         |     |          |          |           |     |         |          |          |     |           |           |         |     |          |          |  |     |         |          |  |     |         |           |  |     |         |          |  |     |         |         
|                                                        | Segment average
total assets |     | Rs.                   | 60,448.0 |         |     | Rs.      | 29,877.5 |           |     | Rs.     | 39,730.4 |          |     | Rs.       | 124,378.3 |         |     | Rs.      | 43,218.1 |  |     | Rs.     | 33,454.8 |  |     | Rs.     | 172,541.6 |  |     | Rs.     | 79,682.3 |  |     | Rs.     | 28,289.5 | 
|                                                        |                              |     |                       |          |         |     |          |          |           |     |         |          |          |     |           |           |         |     |          |          |  |     |         |          |  |     |         |           |  |     |         |          |  |     |         |         

25. Commitments and contingent liabilities

Commitments and contingent liabilities other than for off balance sheet
financial instruments (see Note 22) are as follows:

Capital commitments

The Bank has entered into committed capital contracts, principally for
branch expansion and technology upgrades. The estimated amounts of contracts
remaining to be executed on the capital account as of March 31, 2002 and 2003
aggregated Rs. 413.7 million and Rs. 587.5 million, respectively.

Contingencies

The Bank is party to various legal and tax-related proceedings in the
normal course of business. The Bank does not expect the outcome of these
proceedings to have a material adverse effect on the Banks results of
operations or financial condition.

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

26. Related party transactions

The Banks principal related parties consist of HDFC Limited, its
principal shareholder, and its affiliates as well as companies where directors
and officers have an equity interest. The Bank enters into transactions with
its related parties, such as providing banking services, sharing costs and
service providers, purchasing services, making joint investments, and borrowing
from related parties and subletting premises. The Bank is prohibited from
making loans to companies with which it has directors in common; however, it
obtained RBI approval to maintain a loan to HDFC Limited that was originally
made by and acquired from Times Bank. The Bank also makes loans at concessional
rates to its employees. The Banks related party balances and transactions are
summarized as follows:

Balances payable to related parties are as follows:

|                            |       |     |                 |         |      |     |         |         |  |     |      |      | 
|--------------------------- | ----- | --- | --------------- | ------- | ---- | --- | ------- | ------- |  | --- | ---- | ---- | 
|                            |       |     | As of March 31,
|                            |       |     |                
|                            |       |     | 2002            |         | 2003 |     | 2003   
|                            |       |     |                 |         |      |     |        
|                            |       |     | (In millions)  
|Balances in current account |       | Rs. | 1,803.4         |         |      | Rs. | 720.1   |         |  | US$ | 15.1 |     
|Balances in fixed deposits  |       |     | 863.1           |         |      |     | 344.1   |         |  |     | 5.9  |     
|Long term debt              |       |     | 45.0            |         |      |     | 27.5    |         |  |     | 0.6  |     
|Borrowings                  |       |     |                |         |      |     | 1,200.0 |         |  |     | 25.2 |     
|Amounts payable             |       |     | 17.4            |         |      |     | 6.1     |         |  |     | 0.1  |     
|                            |       |     |                 |         |      |     |         |         |  |     |      |     
|                            | Total |     | Rs.             | 2,728.9 |      |     | Rs.     | 2,297.8 |  |     | US$  | 46.9 | 
|                            |       |     |                 |         |      |     |         |         |  |     |      |     

Balances receivable from related parties are as follows:

|                                   |       |     |                 |         |      |     |       |         |  |     |      |      | 
|---------------------------------- | ----- | --- | --------------- | ------- | ---- | --- | ----- | ------- |  | --- | ---- | ---- | 
|                                   |       |     | As of March 31,
|                                   |       |     |                
|                                   |       |     | 2002            |         | 2003 |     | 2003 
|                                   |       |     |                 |         |      |     |      
|                                   |       |     | (In millions)  
|Deposits to secure leased property |       | Rs. | 22.4            |         |      | Rs. | 85.4  |         |  | US$ | 1.8  |     
|Loans and overdrafts               |       |     | 377.2           |         |      |     | 418.1 |         |  |     | 8.8  |     
|Loans to officers and employees    |       |     | 589.8           |         |      |     | 690.9 |         |  |     | 14.5 |     
|Capital advances                   |       |     | 42.4            |         |      |     | 1.7   |         |  |     |     |     
|Other deposits                     |       |     | 2.5             |         |      |     | 46.0  |         |  |     | 1.0  |     
|                                   |       |     |                 |         |      |     |       |         |  |     |      |     
|                                   | Total |     | Rs.             | 1,034.3 |      |     | Rs.   | 1,242.1 |  |     | US$  | 26.1 | 
|                                   |       |     |                 |         |      |     |       |         |  |     |      |     

Purchases of fixed assets from related parties for the years ended March
31, 2002 and 2003 were Rs. 40.7 million and Rs. 43.0 million, respectively.
Sales of fixed assets to related parties for the year ended March 31, 2002 and
2003 were Rs. 12.8 million and Rs. 0.0 million, respectively.

Included in the determination of net income are the following significant
transactions with related parties:

|                             |                                           |     |                       |     |      |     |        |        |      |     |        |        |   |     |       |       |  
|---------------------------- | ----------------------------------------- | --- | --------------------- | --- | ---- | --- | ------ | ------ | ---- | --- | ------ | ------ | - | --- | ----- | ----- | -
|                             |                                           |     | Years ended March 31,
|                             |                                           |     |                      
|                             |                                           |     | 2001                  |     | 2002 |     | 2003   |        | 2003
|                             |                                           |     |                       |     |      |     |        |        |     
|                             |                                           |     | (In millions)        
|Service charges income       |                                           | Rs. | 1.5                   |     |      | Rs. | 1.7    |        |      | Rs. | 29.9   |        |   | US$ |      |      
|Service charges expense      |                                           |     |                      |     |      |     | (12.3  | )      |      |     | (13.9  | )      |   |     | (0.3  | )    
|Outsourcing charges          |                                           |     | (33.8                 | )   |      |     | (224.7 | )      |      |     | (594.8 | )      |   |     | (12.5 | )    
|Interest income              |                                           |     | 45.0                  |     |      |     | 34.7   |        |      |     | 34.7   |        |   |     | 0.7   |      
|Rent and maintenance expense |                                           |     | (6.3                  | )   |      |     | (10.1  | )      |      |     | (18.3  | )      |   |     | (0.4  | )    
|                             |                                           |     |                       |     |      |     |        |        |      |     |        |        |   |     |       |      
|                             | Net income (expense) from related parties |     | Rs.                   | 6.4 |      |     | Rs.    | (210.7 | )    |     | Rs.    | (562.4 | ) |     | US$   | (12.5 | )
|                             |                                           |     |                       |     |      |     |        |        |      |     |        |        |   |     |       |      

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

27. Capital adequacy

The Bank is a banking company within the meaning of the Indian Banking
Regulation Act, 1949, registered with and subject to examination by the RBI.
Failure to meet minimum capital requirements could lead to regulatory actions
by the RBI that, if undertaken, could have a material effect on the Bank and
its financial position.

The Banks regulatory capital and capital adequacy ratios are measured in
accordance with Indian GAAP and are as follows:

|                                            |               |               |           |                 |          |      |           |       |          |     |         |       |       | 
|------------------------------------------- | ------------- | ------------- | --------- | --------------- | -------- | ---- | --------- | ----- | -------- | --- | ------- | ----- | ----- | 
|                                            |               |               |           | As of March 31,
|                                            |               |               |           |                
|                                            |               |               |           | 2002            |          | 2003 |           | 2003 
|                                            |               |               |           |                 |          |      |           |      
|                                            |               |               |           | (In millions)  
|Tier 1 capital                              |               | Rs.           | 16,924.6  |                 |          | Rs.  | 19,850.2  |       |          | US$ | 417.6   |      
|Tier 2 capital                              |               |               | 4,871.6   |                 |          |      | 3,414.7   |       |          |     | 71.8    |      
|                                            |               |               |           |                 |          |      |           |       |          |     |         |      
|                                            |               | Total capital |           | Rs.             | 21,796.2 |      |           | Rs.   | 23,264.9 |     |         | US$   | 489.4 | 
|                                            |               |               |           |                 |          |      |           |       |          |     |         |      
|Total risk weighted assets and contingents  |               | Rs.           | 156,521.7 |                 |          | Rs.  | 209,177.1 |       |          | US$ | 4,499.7 |      
|                                            |               |               |           |                 |          |      |           |       |          |     |         |      
|Capital ratios of the Bank:                 |               |               |           |                 |          |      |           |       |          |     |         |      
|                                            | Tier 1        |               |           | 10.81           | %        |      |           | 9.49  | %        |     |         | 9.49  | %    
|                                            | Total capital |               |           | 13.93           | %        |      |           | 11.12 | %        |     |         | 11.12 | %    
|Minimum capital ratios required by the RBI: |               |               |           |                 |          |      |           |       |          |     |         |      
|                                            | Tier 1        |               |           | 4.50            | %        |      |           | 4.50  | %        |     |         | 4.50  | %    
|                                            | Total capital |               |           | 9.00            | %        |      |           | 9.00  | %        |     |         | 9.00  | %    

28. Earnings per equity share

A reconciliation of the equity shares used in the computation of basic and
diluted earnings per equity share has been provided below. None of the
potential equity shares outstanding during the fiscal years ended March 31,
2001, 2002 and 2003 were anti-dilutive.

|                                                                                             |  |                       |             |      |  |      |             |  |  |  |             | 
|-------------------------------------------------------------------------------------------- |  | --------------------- | ----------- | ---- |  | ---- | ----------- |  |  |  | ----------- | 
|                                                                                             |  | Years ended March 31,
|                                                                                             |  |                      
|                                                                                             |  | 2001                  |             | 2002 |  | 2003
|                                                                                             |  |                       |             |      |  |     
|Weighted average number of equity shares used in
computing basic earnings per equity share   |  |                       | 238,560,981 |      |  |      | 266,609,698 |  |  |  | 279,596,510 | 
|Effect of potential equity shares for stock options
outstanding                              |  |                       | 2,646,439   |      |  |      | 1,263,690   |  |  |  | 1,795,656   | 
|                                                                                             |  |                       |             |      |  |      |             |  |  |  |             | 
|Weighted average number of equity shares used in
computing diluted earnings per equity share |  |                       | 241,207,420 |      |  |      | 267,873,388 |  |  |  | 281,392,166 | 
|                                                                                             |  |                       |             |      |  |      |             |  |  |  |             | 

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HDFC BANK LIMITED
NOTES TO FINANCIAL STATEMENTS(Continued)

The following are reconciliations of basic and diluted earnings per equity
share and earnings per ADS :

|                                                                |  |                       |       |      |  |      |       |  |  |     |       | 
|--------------------------------------------------------------- |  | --------------------- | ----- | ---- |  | ---- | ----- |  |  | --- | ----- | 
|                                                                |  | Years ended March 31,
|                                                                |  |                      
|                                                                |  | 2001                  |       | 2002 |  | 2003
|                                                                |  |                       |       |      |  |     
|Basic earnings per share                                        |  | Rs.                   | 8.97  |      |  | Rs.  | 11.10 |  |  | Rs. | 12.57 | 
|Effect of potential equity shares for stock options
outstanding |  |                       | 0.10  |      |  |      | 0.06  |  |  |     | 0.06  | 
|                                                                |  |                       |       |      |  |      |       |  |  |     |       | 
|Diluted earnings per share                                      |  | Rs.                   | 8.87  |      |  | Rs.  | 11.04 |  |  | Rs. | 12.51 | 
|                                                                |  |                       |       |      |  |      |       |  |  |     |       | 
|Basic earnings per ADS                                          |  | Rs.                   | 26.91 |      |  | Rs.  | 33.30 |  |  | Rs. | 37.71 | 
|Effect of potential equity shares for stock options
outstanding |  |                       | 0.30  |      |  |      | 0.18  |  |  |     | 0.18  | 
|                                                                |  |                       |       |      |  |      |       |  |  |     |       | 
|Diluted earnings per ADS                                        |  | Rs.                   | 26.61 |      |  | Rs.  | 33.12 |  |  | Rs. | 37.53 | 
|                                                                |  |                       |       |      |  |      |       |  |  |     |       | 

29. Comprehensive income

The following is a summary of the items comprising comprehensive income:

|                                                             |                            |     |                       |         |      |     |         |         |      |     |         |         |  |     |      |       | 
|------------------------------------------------------------ | -------------------------- | --- | --------------------- | ------- | ---- | --- | ------- | ------- | ---- | --- | ------- | ------- |  | --- | ---- | ----- | 
|                                                             |                            |     | Years ended March 31,
|                                                             |                            |     |                      
|                                                             |                            |     | 2001                  |         | 2002 |     | 2003    |         | 2003
|                                                             |                            |     |                       |         |      |     |         |         |     
|                                                             |                            |     | (In millions)        
|Net income                                                   |                            | Rs. | 2,140.6               |         |      | Rs. | 2,958.4 |         |      | Rs. | 3,513.8 |         |  | US$ | 73.8 |      
|Unrealized gain (loss) on available for sale
securities, net |                            |     | 35.4                  |         |      |     | 890.9   |         |      |     | 1,688.7 |         |  |     | 35.5 |      
|                                                             |                            |     |                       |         |      |     |         |         |      |     |         |         |  |     |      |      
|                                                             | Total comprehensive income |     | Rs.                   | 2,176.0 |      |     | Rs.     | 3,849.3 |      |     | Rs.     | 5,202.5 |  |     | US$  | 109.3 | 
|                                                             |                            |     |                       |         |      |     |         |         |      |     |         |         |  |     |      |      

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EXHIBIT INDEX

|            |  |                                                                                                                                                                                                                                                     
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Document                                                                                                                                                                                                                             
|            |  |                                                                                                                                                                                                                                                     
|1.1         |  | Certificate of Incorporation and Memorandum and Articles of
Association of HDFC Bank Limited, as amended and currently in
effect (incorporated by reference exhibit filed with the
Registrants form 20-F for the fiscal year ended
March 31, 2002).
|2.1         |  | Form of Deposit Agreement, including, as an exhibit, the form
of American depositary receipt (incorporation by reference
exhibits filed with Registration Statement on Form F-1 of HDFC Bank Limited
(File No. 333-13718)).                         
|2.2         |  | Specimen of certificate representing the equity shares, par
value Rs. 10 each (incorporation by reference exhibits filed with
Registration Statement on Form F-1 of HDFC Bank Limited (File
No. 333-13718)).                                        
|4.1         |  | Employment contract of Aditya Puri (incorporation by reference
exhibits filed with Registration Statement on Form F-1 of HDFC Bank Limited
(File No. 333-13718))                                                                                    
|4.2         |  | Employee Stock Option Scheme, as
currently in effect (incorporated by reference exhibit filed with the
Registrants form 20-F for the fiscal year ended
March 31, 2002).                                                                            
|12.1        |  | Certification of Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                             
|12.2        |  | Certification of Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                             
|13.1        |  | Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.