Report of the Board of Directors on Corporate Governance 1) Banks philosophy on Corporate Governance

"Corporate Governance is the application of best management practices, compliance of law in true letter and spirit and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders." The vision of Canara Bank is to emerge as a World Class Bank with best practices in the realms of Asset Portfolio, Customer Orientation, Product Innovation, Profitability and enhanced value for stakeholders. In its endeavour to attain the goal visualized, the bank is laying maximum emphasis on the effective system of Corporate Governance. The interaction between the Board, Senior Management and the Executives is so configured as to have a distinctly demarcated role so as to derive enhanced value to its stakeholders in particular and society in general. The overall objective is to optimize sustainable value to all stakeholders-depositors, Shareholders, customers, borrowers, employees and society through adherence to Corporate values, Codes of conduct and other standards of appropriate behaviour. 2) Board of Directors: The Board of the Bank has been constituted under Section 9(3) of the Banking Companies {Acquisition & Transfer of undertaking} Act 1970 and Nationalized Bank (Management & Miscellaneous Provision) Scheme 1970. The Board of the Bank consists of eminent personalities, who through their rich and varied experiences in Banking and other related fields have made significant contribution towards the progress of the bank. The composition of members of the Board and the details of attendance at the meetings are given in appendix A & B.

3)

Audit Committee :-

The formation and functioning of Audit Committee of the Board (ACB) is governed by the directives of Reserve Bank of India. i) ACB provides directions and also oversees the operation of the total Audit function of the Bank. ii) The terms of reference of ACB includes the following: a. To oversee the bank's financial reporting process and ensuring correct, adequate and credible disclosure of financial information. b. Reviewing with the management, the financial statements with special emphasis on accounting policies and practices, compliance with accounting standards and other legal requirements, concerning financial statements and

c.

Review the adequacy, quality and effectiveness of external and internal audit, internal control system, interaction with external auditors before finalization of Annual accounts and reports, review Bank's finance and risk management policies.

iii) ACB reviews the position with regard to issues raised in the Long Form Audit Report (LFAR). iv) It follows up on all the issues / concerns raised in the Inspection Report of RBI. v) ACB also makes a review of reports received from Compliance Cell, Inter-Branch Account Reconciliation (IBAR) section, etc. The composition of members of Audit Committee and the details of attendance at the meetings are given in Appendix A &B. 4) Remuneration Committee: Remuneration to Directors is paid as per Government of India guidelines. In terms of GOI Letter F.No 20/1/2005-BO.I Dt. 09.03.2007 Board of Directors of the Bank had constituted a Remuneration Committee to evaluate the performance as per GOI guidelines. The composition of members of Remuneration Committee and the details of attendance at the meetings are given in Appendix A &B.

4.1 The details of salary paid (including arrears) to the whole-time Directors of the
Bank, during the year 2009-10 are furnished here under. Name & Designation Shri. A C Mahajan Chairman & Managing Director Shri. Jagadish Pai K L Executive Director Shri H S Upendra Kamath Executive Director Shri M B N Rao Chairman & Managing Director (upto 30.06.2008) Shri D L Rawal Executive Director (upto 31.12. 2008) Shri G S Vedi Executive Director (upto 15.10.2008) Shri Alok Kumar Misra Executive Director (upto 03.06.2007) Shri B Swaminathan Executive Director (upto 31.01.2006) Amount ( Rs) 21,17,768 12,09,586 10,87,433 9,70,326

8,87,705 6,19,690 2,86,958 19,262

4.2 Non- Executive Directors are not being paid any other remuneration except Sitting Fees as fixed by Government of India.

5 ) (1 ) Shareholders'/ Investors' Grievances Committee :

The Shareholders/Investors Grievances Committee has been constituted in terms of Clause 49 of the Listing Agreement. The Committee monitors the redressal of the

Shareholders/Investors grievances like transfer of shares, non- receipt of shares certificate/refund order/dividend warrants, etc. Shareholders Grievances Statistics: Complaints Received Complaints not solved to the satisfaction of shareholders Pending complaints None of the above complaints were pending for more than a month. In terms of Clause 46 of the Listing Agreement, Shri B Nagesh Babu, Company Secretary is the Compliance Officer of the Bank. The Composition of members of Shareholders'/Investors' Grievances Committee and details of attendance at the meeting are given in appendix A & B. (2) Other Committees: (a) Management Committee: The Management Committee of the Board is constituted as per the provisions of the Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1970. The Management Committee exercises all the powers vested with the Committee in respect of sanctioning of credit proposals, compromise/ settlement of loans, write-off proposals, approval of capital and revenue expenditure, acquisition and hiring of premises, filing of suits/ appeals, investment, donations and any other matter referred to or delegated to the Committee by the Board. The composition of members of Management Committee and the details of attendance at the meetings are given in Appendix A&B. (b)Risk Management Committee: The Bank has evolved suitable Risk Management Policies consistent with the size of the Bank, level of complexity, risk profile and scope of operations of the Bank. A Board Level Risk Management Committee has been formed, with the responsibility of devising policy and strategy for integrated Risk Management System for the Bank. As the Risk Management system is required to be implemented through a Committee approach, three high level committees viz. Credit Risk Management Committee, Market Risk Management Committee and Operational Risk Management Committee are in place to deal with the issues relating to Risk Management covering all generic risks. The C&MD or ED of the Bank is the Chairman for all the three Committees, assisted by the Senior Level Executives of the Bank. The composition of members of Risk Management Committee of the Board and the details of attendance at the meetings are given in appendix A & B. (c)Asset Liability Management Committee: 956 Nil Nil

Based on RBI directives, the Bank has set up an internal Asset Liability Management Committee (ALCO) headed by C&MD or ED of the Bank. The other members of the Committee include the Senior Executives of the Bank.

The scope of ALCO functions is as follows: (A) Liquidity risk management (B) Management of market risk (C) Trading risk management (D) Funding and capital Planning (E) Profit Planning & Growth Planning The ALCO deliberates in detail over the liquidity position and the impact of changes in the interest rates of both assets and liabilities on the Net- Interest Income. 6) General Body meetings: The details of last three Annual General Meetings held are furnished here below: Date 26.07.2007 18.06.2008 Time 10 am 4 pm Venue Chowdiah Memorial Hall, G D Park Extension, Vyalikaval, Bangalore-560 003 Jnanajyothi Auditorium, Central College, Palace Road, Bangalore 560 001

21.07.2009

4 pm

No special resolutions were put through in last three Annual General Meetings and there were no postal ballot exercise. Details of attendance of Directors at the Seventh Annual General Meeting are given in Appendix B. 7) Disclosures: The related party transactions of the Bank are disclosed in the notes on accounts schedule 17 of the Balance Sheet as on 31.03.2010. The Bank has complied with all matters related to capital market since its listing of shares. There are no penalties or strictures imposed on the Bank by the stock exchanges or SEBI or any other statutory authorities on any matter related to capital Markets, during the last three years. The Bank has complied with all the mandatory requirements prescribed by Regulatory Authorities. The extent of implementation of non-mandatory requirements of clause 49 of the Listing Agreement are as under: Sr. No. Non Mandatory Requirement Status of Implementation

1.

The Board A non-executive Chairman may be entitled to maintain a Chairmans office. Remuneration Committee

2.

3.

Shareholder Rights

4. 5.

Audit qualifications Training of Board Members

6.

Mechanism for non-executive Members

evaluating Board

7.

Whistle Blower Policy

The Bank is having a whole time C&MD. Board is Constituted as per Section (9)(3) of Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970. Hence this clause is not applicable for the Bank. Remuneration committee has been constituted as per the guidelines of GOI, as detailed elsewhere in the Annual Report. The Bank has sent Annual financial results along with the summary of significant developments during the year, to all the shareholders. Efforts are being made to move towards a regime of unqualified financial statements. The Board Members are imparted training, by deputing them for training programmes conducted by Reputed Agencies. A complete overview of Business Model along with the Government Guidelines regarding their responsibilities and code of conduct is given to each Member. Composition of Board of Directors is regulated by the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 and the Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1970. Hence this clause is not applicable for us. Bank has implemented Whistle Blower policy as per extant GOI Guidelines and the protection has been extended to the Whistle Blower.

8) Means of communication: Canara Bank provides information relating to Bank through its Annual Report which contains Report of the Board of Directors on Corporate Governance, the Directors report, audited accounts, cash flow statements, etc. The shareholders are also intimated of its performances, through publication in news papers, intimation to stock exchanges, press releases and through website at www.canarabank.com. The Bank also displays official News releases, presentations in its website. In terms of Clause 41 of the Listing Agreement, Financial Results and other price sensitive informations are furnished to Stock Exchanges. Publication of Results: Quarter Ended 31.03.2009 Date of Publication 30.04.2009 Newspaper Vernacular National Udayavani Business Line, Business Standard

& Financial Chronicle 30.06.2009 30.09.2009 31.12.2009 23.07.2009 27.10.2009 29.01.2010 Udayavani Prajavani Kannada Prabha Business Standard Financial Express Business Standard

9) General Shareholders' Information: Financial Calendar Financial year Book closure Date (Both days inclusive) Last Date for receipt of proxy forms Date of Annual General Meeting Dividend Payment Date Probable date of despatch of dividend warrants Listing on Stock Exchanges : 2009-2010

Canara Bank shares are listed at the following Stock Exchanges. Stock Codes of respective stock exchanges are furnished against their names. 1 2 3 The Bangalore stock Exchange Limited Bombay Stock Exchange Ltd. National Stock Exchange of India Limited CANBANK 532483 CANBK

Annual Listing fee to stock exchanges for the year 2009-10 have been paid within the prescribed due date. Market Price Data Bombay Stock Exchange Ltd. High Low Volume (Rs) (Rs) No.
212 297 295 289 294 329 395 399 437 414 412 158 200 232 235 252 270 313 325 362 360 369 37,55,169 46,36,795 38,44,523 31,04,236 18,07,452 31,12,493 43,11,592 25,65,570 30,71,803 17,58,573 9,55,750

Month

Year
2009 2009 2009 2009 2009 2009 2009 2009 2009 2010 2010

National Stock Exchange of India Ltd. High Low Volume (Rs) (Rs) No.
212 298 293 289 300 268 396 399 438 413 412 159 201 232 235 250 328 312 325 362 360 373 1,99,45,807 2,27,32,935 2,03,49,478 1,37,88,242 95,43,361 1,70,18,801 2,03,76,611 1,55,95,556 1,60,92,519 96,81,411 59,12,303

April May June July August September October November December January February

March

2010

442

393

13,74,514

442

392

1,05,49,915

5500

Performance in comparison to Broad Based Indices

CANARA BANK Share Price & S&P CNX NIFTY Low
400

CANARA BANK Share Price & S&P CNX NIFTY HIGH 5500 450 425

5000

350

5000

400 375 350

4500 Price/Index
4500 Price/Index 300

4000

325 300

4000

250

3500
3500 200

275 250 225

3000

3000 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Months NSE- Nifty Share Price

150

2500
Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Month

200

NSE Nifty

Share Price

CANARA BANK Share Price & NSE-Bank Nifty-Low 10000 9500 9000 8500 Price/Index 8000 7500 7000 6500 6000 5500 5000 4500
Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Months

CANARA BANK Share Price & NSE Bank Nifty high

400 375 350 325

10000 9500 9000 8500 Price/Index 8000 7500 7000 6500 6000 5500 5000
Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Month

450 425 400 375 350 325 300 275 250 225 200 SHARE PRICE

300 275 250 225 200 175 150

Index

Price

Index

Price

CANARA BANK Share Price & BSE Sensex Low

CANARA BANK Share Price & BSE Sensex high

17000 16000 350 15000 400

18000 17000 16000

450 425 400 375 350 325

Price/Index

Price/Index

14000 13000 12000 11000

300

15000 14000 13000

250

300 275 250

200 10000 9000

Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Month

12000
150

225 200
Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Month

11000

Sensex

Price

Sensex

Price

CANARA BANK Share Price & BSE-Index-Bankex Low 11000 10000 9000 Price/Index 8000 7000 6000 5000 4000
Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Month

CANARA BANK Share Price & BSE Bankex High

400 375 350 325 300 275 250 225 200 175 150

450 10500 425 400 9500 Price/Index 375 350 8500 325 300 275 6500 250 225 5500
Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Month

7500

200

Bank Ex

Price

Bank Ex

Price

Registrar and transfer Agent Karvy Computershare Pvt. Ltd Unit: Canara Bank Karvy House, No.46, Avenue IV Street No.1, Banjara Hills HYDERABAD 500 034 Share Transfer System

Share Certificate along with transfer deed should be forwarded to M/s Karvy Computershare Pvt. Ltd, Registrar and Share Transfer Agents of the Bank. Distribution of Shareholding Category (31.03.2010) Sl No. Category 1 2 3 4 5 6 Government of India Banks & Financial Institutions Mutual Funds Bodies Corporate NRIs/OCBs Resident Individuals/HUF /Trust etc. 7 Foreign Institutional investors 8 TOTAL # Nominal value of each share is Rs.10/Value wise: (31.03.2010)

wise: # No. of shares 300000000 31485913 8070610 1983985 252308 20625670 47581514 410000000 % of shareholding 73.17 7.68 1.97 0.48 0.06 5.04 11.60 100

Shareholding Nominal No. of value (Rs) Shareholder s Up to 5000 5001 to 10000 10001 to 20000 20001 to 30000 30001 to 40000 40001 to 50000 50001 to 100000 100001 and above TOTAL 92703 6125 763 173 42 104 97 261 100268

% 92.46 6.11 0.76 0.17 0.04 0.10 0.10 0.26 100

No. of Shares 13236513 5150401 1153758 439061 149973 455931 724688 388689675 410000000

% 3.23 1.26 0.28 0.11 0.03 0.11 0.18 94.80 100

Dematerialisation of shares and liquidity:

The Bank's shares are traded compulsorily in dematerialized form only. The Bank has entered into agreement with M/s National Securities Depository Limited (NSDL) and M/s Central Depositories Services (India) Limited (CDSL) for Dematerialisation of the Bank's shares. The ISIN allotted to the Bank's shares is INE476A01014. Dematerialisation of the shares ensures easy liquidity.

Demat /Physical Holding (31.03.2010) Number of % Number of % Shareholder Shares s 34608 34.52 8235287 2.01 54687 10973 100268 54.54 10.94 100 98636126 303128587 410000000 24.06 73.93 100

Physical Electronic-NSDL Electronic-CDSL TOTAL

There are no outstanding GDRs / ADRs / Warrants or any convertible instruments Address for Correspondence

Canara Bank Secretarial Department C & MD's Secretariat Head Office, 112 J C Road BANGALORE - 560 002 Email ID: hosecretarial@canbank.co.in

Appendix A

i. COMPOSITION OF BOARD OF DIRECTORS (31.03.2010)

Sl NO. 1. 2. 3. 4. 5. NAME SHRI A C MAHAJAN SHRI.JAGDISH PAI K L SHRI H S UPENDRA KAMATH DR. KRISHNAN SMT. VANI J SHARMA TYPE C&MD ED ED GOI RBI TERM OF OFFICE 01.07.200831.07.2010 04.02.200930.06.2011 26.03.200931.12.2013
Nominated on 10.06.2008 Nominated on 27.02.2007

MEMBERSHIP OF OTHER BOARDS 6 2 5 3 Nil

10

6. 7. 8. 9.

SHRI D D

RUSTAGI

WD NED NED NED NED SD

SHRI SUNIL GUPTA DR. YOGENDRA PATI TRIPATHI SHRI S SHABBEER PASHA

10 SHRI PANKAJ GOPALJI THACKER . 11 SHRI P V MAIYA .

15.09.200814.09.2011 23.11.2007 22.11.2010 23.11.2007 22.11.2010 20.02.200919.02.2012 20.02.200919.02.2012 27.07.2007 26.07.2010

Nil 4 Nil 3 1 5

ii. PARTICULARS OF DIRECTORS WHOSE TERM HAS ENDED DURING

2009-2010 1. 2. KEY C&MD ED GOI RBI OD NED SD WD NA SHRI AJAY MATHUR SHRI S K KOHLI NED OD 13.10.2006 12.10.2009 08.03.200707.03.2010 N.A. N.A.

Chairman & Managing Director Executive Director Government of India Director Reserve Bank of India Director Officer Director Non-Executive Director Shareholder Director Workmen Director Not Applicable

iii. COMPOSITION OF COMMITTEES OF THE BOARD

11

iii. COMPOSITION OF COMMITTESS OF THE BOARD

COMMITTEE Management Committee

MEMBERS Shri Jagdish Pai K L Shri H S Upendra Kamath Smt. Vani J. Sharma Shri D D Rustagi Shri S Shabbeer Pasha Shri P V Maiya Risk Management Shri A C Mahajan Shri Jagdish Pai K L Committee Shri H S Upendra Kamath Smt. Vani J. Sharma Dr. Yogendra Pati Tripathi Shri P V Maiya Audit Committee Shri Sunil Gupta chairs the Shri Jagdish Pai K L meeting. Shri H S Upendra Kamath Dr. K P Krishnan Smt. Vani J. Sharma Shri S Shabbeer Pasha Shareholders'/Investors' Shri Pankaj Gopalji Thacker Shri Jagdish Pai K L Grievances Committee Shri H S Upendra Kamath Shri D D Rustagi Remuneration Dr. K P Krishnan Smt. Vani J. Sharma Committee Shri Sunil Gupta Shri S Shabbeer Pasha

CHAIRMAN Shri A C Mahajan

12

Appendix B DETAILS OF ATTENDANCE OF DIRECTORS

SL
NO. NAME

BOARD MEETING
Attended/ Held

MANAGEMENT COMMITTEE MEETING

Attended / Held

AUDIT COMMITTEE MEETING

Attended / Held

SIGC* MEETING
Attended / Held

RISK MANAGEMENT COMMITTEE MEETING

Attended / Held

REMUNERATION
COMMITTEE

LAST ANNUAL GENERAL MEETING

NO.

OF

SHARES HELD

Attended / Held

1. SHRI 3. SHRI 4. DR. 6. SHRI

A C MAHAJAN L

16/16 14/16 16/16 14/16 14/16 16/16 15/16 16/1 6 14/16 10/16 10/16

23/23 18/23 22/23 -21/23 12/12 7/11 11/11 15/19 -9/12

-11/11 9/11 10/11 9/11 -11/11 -4/4 ---

-2/2 2/2 --2/2 ---2/2 --

8/8 7/8 8/8 -7/8 -2/2 6/6 --5/6

---1/1 1/1 -1/1 -1/1 ---

Nil Nil

2. SRI.JAGADISH PAI K
H S KAMATH K P KRISHNAN

UPENDRA

50
Nil Nil Nil 500 Nil 100 Nil 200

5. SMT. VANI J SHARMA

D D RUSTAGI

7. SHRI SUNIL GUPTA 8. DR. YOGENDRA PATI TRIPATHI 9. SHRI S SHABBEER PASHA 1 SHRI PANKAJ GOPALJI 0. THAKKER 1 SHRI P V MAIYA 1.

13

DETAILS OF ATTENDANCE OF DIRECTORS WHOSE TERM HAS ENDED DURING 2008-2009 1 SHRI AJAY MATHUR 5/7 9/12 5/5 --- . 2 SHRI S K KOHLI 10/14 6/11 --1/2 -X Dates of Dates of Dates of Dates Dates of Dates of Date of .
Meeting Meeting Meeting 28.04.09 29.04.09 04.06.09 22.06.09 22.07.09 25.08.09 06.10.09 26.10.09 07.11.09 20.11.09 15.01.10 27.01.10 28.01.10 24.02.10 08.03.10 26.03.10 11.04.09 28.04.09 13.05.09 04.06.09 09.06.09 22.06.09 08.07.09 22.07.09 08.08.09 26.08.09 11.09.09 24.09.09 13.10.09 07.11.09 20.11.09 11.12.09 29.12.09 20.01.10 27.01.10 10.02.10 24.02.10 08.03.10 26.03.10 11.04.09 29.04.09 08.07.09 22.07.09 11.09.09 26.10.09 20.11.09 21.12.09 28.01.10 23.02.10 17.03.10 of Meetin 06.10.0 9 08.03.1 0 Meeting Meeting 28.04.09 22.06.09 26.08.09 13.10.09 29.12.09 27.01.10 08.03.10 26.03.10 04.06.09 Meetin g 21.07.0 9

100 10

KEY : SIGC NA : Shareholders'/ Investors' Grievances Committee Meeting. : Not Applicable

14