BACKGROUND ING Vysya is a private sector bank in India; it offers banking solutions like retail banking, foreig n exchange,

corporate banking, consumer loans, and wholesale banking. During FY10 the bank set up 27 new branches (including conversion of 19 extension counters to branche s) across India, as a result the number of branches increased from 441 to 468. The bank continues to generate sizable proportion of its business from South India. Around 45% of its deposits and 50% of advances come from Karnataka, Andhra Pradesh and Tamil Nadu where it has good reach, especially in semiurban and rural areas. In the western, nort hern, and eastern regions of the country, the banks presence is limited Primarily to the metros and Tier I cities. As of March 2010, it had one wholly owned subsidiary, I NG Vysya Financial Services Limited (IVFSL). The main business of IVFSL is Tocarry on business of nonfund/fee based activities of marketing and distribution of various fina ncial products/services of ING Vysya and other companies, apart from recovery of the old lease rentals due to the company. The ING Group of Dutch is the majority stake owner in ING Vysya, the bank benefits from management support from its parent; the group has seven representatives on the elevenmember board of ING Vysya. The group has provi ded funding support to ING Vysya from time to time; which provides the stability to the bank both on an ongoing basis as well as in the event of any distress. intoduction ING Vysya Bank Ltd (ING Vysya) is an entity formed with the coming together of erstwhile, Vysya Bank Ltd (Vysya Bank), of India and ING Group (Dutch), in 2002. Vysya Bank was set up in 1930. In 1996 it entered into a strategic alliance with the erstwhile Bank Brussels Lambert SA (BBL), which was later acquired by ING Group. ING Group increased its stake in ING Vysya to around 44% in 2002; in the same year, the banks name was changed to the current one. KEY HIGHLIGHTS Operational, funding, and management support from ING Group ING Group, which holds 44.4% stake as on March 31, 2010 in ING Vysya through investment subsidiaries registered in Mauritius, is the single-largest shareholder in the bank. The group has provided loans, as well as infused equity capital into the bank in the form of rights and preferential allotment; in September 2009, ING Vysya raised Rs.4.15 billion through a combination of preferential allotment of equity shares to ING Group and private placement with

qualified institutional buyers. In 2008-09, ING Group infused Rs.2.95 billion into ING Vysya in the form of Tier I perpetual bonds and Upper Tier II bonds. The group also provides operational support to the bank in the form of risk management processes and systems, and also offers products from its global suite of products to Indian customers. Adequate capitalization and resource profile ING Vysya has adequate capitalization backed by financial support from its parent. The bank had Tier I capital adequacy ratio (CAR) and overall CAR of 10.1% and 14.9% respectively as on March 31, 2010. ING Vysya also has an adequate resource profile supported by its increased proportion of low cost current account and savings account (CASA) deposits. The banks CASA deposits increased to 32.6% of total deposits as on March 31, 2010 (industry average of 35.4 per cent) from 27% as on March 31,2009. Moderate asset quality ING Vysya has moderate asset quality because unsecured retail asset portfolio and corporate loan book. The banks gross nonperforming assets (NPAs), at 3% as on March 31, 2010, were higher than the industry average of 2.4%. The gross NPAs were 1.8% as on March 31, 2009. However, the bank has restructured advances of around Rs.2.5 billion during 2008-0 9 and 2 0 0 9-10. The outstanding restructured advances were around Rs.1.4 billion constituting around 0.8% of its advances as on March 31, 2009. FINANCIAL PROFILE Interest income dropped, however resource profile improved in FY10 ING Vysya witnessed a significant growth of 27.7% in its NII for FY10. NII growth was on account of ~12% decline in interest cost during the year. Interest cost declined mainly due to increased proportion of low cost CASA deposits to 32.6% of the total deposits in FY10 from 27% in FY09. The cost of deposits decreased to 4.6% in FY10 from 6.2% in FY09. However total deposits grew by merely 4% while total interest income de grew by 0.3% y-o-y. Non interest income (which includes commission, exchange and brokerage and profit on sale of investments) grew by 9% during the year; as a result pre provisioning profit grew to Rs. 6.1 billion in FY10 as compared to Rs. 4.1 billion in FY09. But total provisions and contingencies which grew phenomenally by 172% over FY09 has limited the PAT growth to 12.2% y o y. PAT stood at Rs. 2.4 billion for FY10 as against Rs. 1.8 billion for FY09. As on March 31, 2010, ING Vysya had gross NPAs of 3% of the total advances, against 1.9% as on March 31, 2009. However, higher provisions made have maintained net NPAs at 1.2% as on March 31, 2010 and were at similar

levels as on March 31, 2009. Consequently provision cover for NPAs increased to ~60% as on March 31, 2010, from 36% as on March 31, 2009 INDUSTRY PROFILE Banking The Indian banking system emerged relatively unscathed from the global economic downturn of 200809. While credit growth slowed down, banks were able to control the level of non performing assets (NPAs), thanks partly to the Reserve Bank of Indian allowing one time restructuring of accounts. NPAs as a proportion of gross advances increased slightly from 2.3 per cent as on March 31, 2009 and 2.5 per cent as the end of March 31, 2010. The government has been supporting the growth of public sector banks by infusing capital as per requirement. The government is expected to continue to maintain its strong support for the banking system, while simultaneously imposing stringent prudential norms to ensure its orderly growth. Aggregate y-o-y bank credit growth was 22 per cent as of the first week of November 2010, primarily supported by large borrowings for 3G spectrum and broadband wireless access auctions. Despite hike in deposit rates by 50 bps (on an average) in the first half of 2010-11, the deposit growth rate has been 14-15 per cent till 5th November, 2010. This is primarily because of investors preferring to channelise their savings to other avenues on account of negative real interest rates on bank deposits. For inflows to revive, the deposit rates will need to be more attractive. Realising this, several banks increased their deposit rates by a further 2575 bps in the first week of October 2010.