annual report of bob

8/8/2019 Annual Report of BOB

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Dear Stakeholder,

It gives me great pleasure to present the Annual Report andFinancial Statements of Bank of Baroda

for the year ended31st March, 2010. The Banks business and financialperformance during the

year under review has demonstratedits strength and stability amid uncertain

economic environment.

Economic Review

Indian economic environment was fairly mixed and uncertainduring 2009-10 (FY10). The first half

of the year (i.e., H1,FY10) was overcast by the monsoon failure and a sharpdecline in foodgrain

production, a continued slowdown infinal consumption expenditure, a muted demand for

bankcredit and a negative growth in both exports and imports.

However in the second half of 2009-10 (i.e., H2, FY10),countercyclical policies, a pickup in the

global economy anda recovery in capital inflows helped India overcome anadverse monsoon and

see a quick rebound in the economy.Both exports and imports turned positive by November-

December, 2009 after contracting continuously for theprevious 12-13 months.

The headline inflation (WPI), after remaining subdued duringH1, FY10 increased at a faster pace

in H2, FY10 and cameclose to 10.0% (y-o-y) in March, 2010. At the same time,driven bymanufacturing and mining sectors, the industrialproduction recovered from 1.1% (y-o-y) in April,

2009 to15.1% (y-o-y) in February, 2010. Rapid growth in bothinflation and industrial production

has prompted the ReserveBank of India (RBI) to normalise its Monetary Policy andmove its focus

to recovery management from the earlierthrust on crisis management.

Moving Ahead

on Sustainable

Performance..

M. D. Mallya

Chairman & Managing Director

While the demand for bank credit remained highly subduedand skewed throughout the year underreview, credit costsincreased for several banks with the maturing of restructuredloans. Moreover,

higher level of government marketborrowings and resultant volatility in bond yields posed

toughchallenges for the banking industrys treasury operations.

Bank of Barodas Resilience to Shocks

While it is challenging to remain immune to the disruptionscreated by economic shocks, Bank of

Baroda has been ableto withstand the turbulence more effectively during FY09and FY10 mainly

due to its strong business fundamentals.Again in the year FY10, the Bank could

demonstrateconsistent performance by delivering much better quality ofearnings, healthier asset

quality compared to bankingindustry with higher provision coverage and lower interestrate risk. It

has been steadily improving its market sharealso. It expanded its global business level by 24.0%(y-o-y)to Rs 4,16,080 crore during the year FY10.

Despite ongoing global economic challenges, the Banksinternational operations continued to

remain its mainstayand contributed almost 24.0% to the Banks total businessand 20.0% to its

operating profits in FY10. The Banksinternational business grew by 31.0% (y-o-y) in FY10

withoutany compromise with credit quality. The Banks gross NPAin international operations

stood at 0.47% and net NPA atjust 0.11% in FY10.


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One of the greatest strengths of the Bank over a period oftime has been the trust and confidence

that it enjoys of itsstakeholders. Notwithstanding the unprecedented turbulentconditions created by

the global economic meltdown duringthe years FY09 and FY10, the Banks stakeholders

remained. firmly positive on the Banks business and financialperformance. I am happy to share

with you that the Banktoo met the stakeholders expectations in terms ofperformance,

transparency, corporate governance andintegrity in guidance during the last couple of years.New Initiatives

During the year under review, the Bank maintained its focuson introducing new business,

customer and technologyinitiatives to further strengthen its operations and leverageits

considerable domestic footprint.

The Bank launched a new business process reengineeringand organisational restructuring project

Navnirmaan-Baroda Next on 22nd June, 2009. The project envisagesredesigning and

streamlining of existing processes andstructures including revamp of the branch architecture

forbetter service and sales, higher revenue growth andimproved efficiency. The project is

primarily designed tooptimise on available resources to maximise business andprofits and to

build a next step for Bank of Baroda, that is,Baroda Next.The Bank achieved 100.0% Core Banking Solution (CBS)for all its domestic branches reflecting

the fastest ever rollout of such solutions in the Indian banking industry. TheBanks CBS branches

are enabled for inter-bank remittancesthrough the RTGS and NEFT. Around 94.0% of its

overseasbusiness is also covered under the CBS.

By 31st March 2010, the Banks ATM network expanded to1,315. Moreover, Base 24 has been

made fully operationalfor all domestic ATMs and for ATMs in the Banks sevenoverseas

territories. Today, the Banks customers enjoymultiple service channels like Baroda Connect

(InternetBanking), Phone Banking, Baroda Cash ManagementServices, NRI Services, Depository

Services, etc.

The Bank has implemented an Integrated Global TreasurySolution in its major overseas territories.

It has also startedproviding Online Institutional Trading to its corporatecustomers. During FY10,many other important technologicalinitiatives were taken in the domain of anti-money

laundering,document management system, payment messagingsolution, etc.

In order to improve credit flows under the retail businessand to consolidate that portfolio, the

Bank has realigned itsretail bouquet of products. The Bank has also launched anew subsidy-

linked housing loan scheme under the HomeLoan Product styled as Interest Subsidy Scheme

forHousing the Urban Poor.

A couple of years ago, the Bank introduced a Retail LoanFactory model as a fast delivery channel

for the benefit ofits retail customers. Going by the success of this initiative,the Bank opened six

new Retail Loan Factories during FY10,taking the total number of such factories to 30.

Leveraging its newly created robust technological platform,the Bank made Home Loan and

Education Loan ApplicationModules online during the year under review.

The Bank has always believed in making a difference to thesociety at large. The Bank took

several initiatives on theFinancial Inclusion front during FY10 to harness theemerging

opportunities for rural and agriculture lending. Toaugment its Agriculture advances, the Bank

conductedspecial campaigns for Crop Loans and Investment Credit.The Bank organized 2,857

Village Level Credit Camps anddisbursed Rs 2,484 crore to over 1.9 lakh borrowers

duringFY10. The Bank identified 450 thrust branches across Indiato enhance agricultural


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lending. The Bank formulatedvarious area-specific agricultural lending schemes withvarious

concessions in the rate of interest, charges, etc., inthe interest of poor farmers.

Towards the effective use of technology in rural agriculturallending, the Bank has introduced IT-

enabled smart cardbased technology for financial inclusion. With nine additionalBaroda Swarojgar

Vikas Sansthan (Baroda R-SETI) Centresopened during FY10, the total number of BSVS has

goneup to 25. Over two million no-frill savings accounts havebeen opened so far. As part of theFinancial InclusionInitiative, the Bank has opened four Financial Literacy andCredit Counselling

Centres (FLCCs) christened as SARTHEE.

Adding its offerings in wealth management products, theBank has entered into tie-up arrangements

with two moreleading asset management companies in FY10 fordistribution of mutual fund

products. The Banks joint venturein life insurance, in association with Andhra Bank and L &G

(U.K.) IndiaFirst Life Insurance Co. Ltd. commenced itsoperation during the year. The IndiaFirst

has received anoverwhelming response from the Banks customers acrossthe country, making the

company the fastest growingInsurance company to reach Rs 100 crore premiumcollections in the

first 100 days of its launch.

Business & Financial PerformanceThe Bank has reported a healthy growth in its business andprofits with improvement in all key

parameters during FY10.

As stated earlier, its Global Business touched a newmilestone of Rs 4,16,080 crore in FY10

reflecting a growthof 24.0% (y-o-y). Both its domestic deposits and advancesincreased at the

above-industry pace of 22.4% and 21.3%,respectively. The Banks domestic low-cost or

CASAdeposits grew by an unprecedented 25.1% taking the shareof domestic CASA deposits to

35.63% in FY10 versus34.87% in FY09. Its Social Sector Advances or PrioritySector Credit

surpassed the mandatory requirement andposted a growth of 24.0% (y-o-y). The Bank recorded

agrowth of 44.0% in SME credit, 27.0% in farm credit and24.0% in retail credit reflecting a

well-diversified growthachievement.

In its overseas business, while the Banks deposits grew by36.0% (y-o-y), its advances grew by

25.0% during FY10.Within total overseas deposits, the customer deposits grewby 33.7%. Total

assets of the Banks overseas operations. ncreased from Rs 51,165 crore to Rs 68,375 crore

registering

a growth of 33.6% during the year under review.

The growth in profits was led by healthy topline growth,prudent management of deposit costs

and better operatingefficiency. The Banks Net Profit at Rs 3,058.33 crore forFY10 reflected a

robust year-on-year growth of 37.3%.

As the Banks primary objective has been to grow withquality, the Bank focused on containing

the impaired assetsto the minimum possible level. While the Gross NPA indomestic operationsstood at 1.64% at end-March 2010, thesame for Overseas O perations was at 0.47%. In spite

ofgrowing slippages for Indian banking industry during FY10,our Bank succeeded in restricting

its global Gross NPA levelto 1.36% and Net NPA level to 0.34% by end-March, FY10.While the

RBI has extended the deadline for recovery fromthe Agricultural Debt Relief accounts till end-

June, 2010,the Bank has continued to classify these accounts as NPAas a prudent measure.

Despite this, the Bank enjoys one ofthe lowest ratios for Gross and Net NPA in the industry.


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TheBanks NPA coverage ratio at 74.90% as on 31st March,2010 has been comfortably above

the norm of 70.0% setrecently by the RBI.

The Banks Return on Average Assets (ROAA) at 1.21%,Earnings per Share (EPS) at Rs 83.96,

Book Value perShare (BVPS) at Rs 378.40, and ROE (Return on Equity)at 22.19% reflect a

significant improvement over theirprevious years levels. The Banks Capital Adequacy Ratiotoo

stood at the healthy level of 14.36% with the Tier 1 capitalat 9.20% during FY10. The BanksCost-Income ratio alsoeased from 45.38% to 43.57% on year-on-year basis.

Looking Forward

Bank of Barodas long standing reputation for financialsoundness, long-term customer

relationships and proactivemanagement are as important today as ever. Going forwardalso, the

Bank would continue with its thrust on growth withquality. At the same time, it would try to

grow above theindustry average on the back of strongly positive growthoutlook for India in

FY11.

The Bank would try to protect or improve further the currentlevels of its key financials like

ROAA, ROE, EPS, BVPS,asset quality, etc., through its dedicated focus on low-costdeposit

mobilization & fee-based income, efficient pricingof deposits and loans, reduction in high cost orlow yieldingbulk business and through improved credit origination andeffective credit

monitoring.

In all core operations, the Bank has put in place strategiesthat seek to address near-term challenges

as well as toseize opportunities to strengthen its foundations forsustainable growth. The focus of

these strategies has beenon well-balanced, qualitative growth, service and operationalexcellence

and people management.

In fact, the Bank has been aggressively recruiting the best

possible talent in the country from the premier Institutionsduring the last couple of years. The Bank

has been workingon the business process reengineering (BPR) project inconsultation with the

Mckinsey & Co. so as to achieve theoptimum use of technology and right skilling of the

manpowerto yield maximum customer satisfaction. During FY10, theBank also launched a seriesof marketing campaigns topromote its brand value. The same would continue in futurealso, in

order to strengthen the Banks market share bothfrom the asset and liablity sides.

The Bank has been actively designing strategies forenhancing sales and raising brand equity

through continuousmarket research. The Bank has also focused on evolving aStrategic Mass

Communication and Events Plan to ensurebrand enhancement. Besides this, significant initiatives

incustomer education would continue for putting in place aneffective Customer Relationship

Management system in theBank.

Banks Corporate Goals & Strategy

For the year 2010-11, the Bank has selected the mottoLeveraging technology for augmenting

business growthand profitability.The ultimate objective of the Top Management of the Bankis to equip the Bank with more

stability and growth-orientation. To attain this goal, we have adopted a BusinessModel that

focuses on achieving sustainable growth. Thismodel has four pillars Healthy CASA, Well-

diversifiedAdvances Portfolio, Strong back up of Non-interest incomeand Stringent NPA

Management. The Bank is well gearedto ensure that its performance will be driven across all

theseparameters.


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The Bank is aware of the fact that the market leadershipcan be achieved only through a visionary,

strategic andsustainable model of pursuit and perseverance. The successlies in attaining the

acceptance of our stakeholders aboutthe Banks core values, passion for customer service andthe

credibility of leaders, which alone would give our Banka unique place in the banking space. In a

bid to gain bettermarket share, we will work relentlessly to provide financialstability and brand

value that matters the most.It will be our endeavour in FY11 to work towards morecustomer-centricity by upgrading our

institutional processes,systems and capabilities. In the current economic environment,prudence and

proactive vigilance are most important toconvert challenges into opportunities. So, our central focuswill

be on risk management and growth with quality.

In our pursuit to move towards the top position in the industry,

I solicit your continued cooperation and patronage.

M. D. Mallya

Chairman & Managing Di

DIRECTOR REPORTPerformance Highlights

Total Business(Deposit+Advances) increased toRs 4,16,080 crore reflecting a

growth of 24.0%.

Gross Profit and Net Profit were Rs 4,935 crore and Rs 3,058 crore respectively. Net

Profit registered a growth of 37.3% over previous year.

Credit-Deposit Ratio stood at84.55% as against 81.94% last year.

Retail Credit posted a growth of23.5% constituting

18.15% of the Banks Gross Domestic Credit in FY10.

Net Interest Margin (NIM) in global operations as percent of interest earning assetswas at the level of2.74%and in domestic operations at 3.12%.

Net NPAs to Net Advances stood at0.34% this year against 0.31% last year.

Capital Adequacy Ratio (CAR) as per Basel I stood at 12.84% and as per Basel II

at 14.36%.

Net Worth improved to Rs 13,785.14 crore registering a rise of 20.6%.

Book Value improved from Rs 313.82 to Rs 378.44 on year.

Business per Employee moved up from Rs 911 lakh to Rs 1,068 lakh on year.

Segment-Wise Performance

The Segment Results for the year 2009-10 (FY10) reveal thatthe contribution ofTreasury Operations was Rs 1,048 crore,that of Corporate/Wholesale Banking was Rs1,585 crore,that of Retail Banking was Rs 779 crore, and of Other BankingOperations was Rs 2,732 crore. The Bank earned a Profit afterTax (PAT) of Rs 3,058crore after deducting Rs 1,906 crore ofunallocated expenditure and Rs 1,180 croretowards provisionfor tax.

Dividend


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The Banks Directors have proposed a dividend of Rs 15/- pershare (on the face valueof Rs 10/-per share) for the yearended March 31st, 2010. The total outgo in the form ofdividend,including taxes, will be Rs 639.26 crore.

Capital Adequacy Ratio (CAR)

The Banks Capital Adequacy Ratio (CAR) is comfortable at14.36% under Basel II as on

31st March 2010. During the year,the Bank strengthened its capital-base by raising Rs1,000crore through unsecured subordinated bonds and Rs 900 crorethrough innovativeperpetual bonds.The Banks Net Worth as at 31st March 2010 was Rs 13,785.14crore comprising paid-up equity capital of Rs 365.53 crore andreserves (excluding revaluation reserves) of Rs13,419.61crore. An amount of Rs 2,419.07 crore was transferred toreserves from theprofits earned.

Other Prudential Measures

As a prudent measure, the Bank has made provision towardscontribution togratuity (Rs131.93 crore), pension funds(Rs 120.21 crore), leave encashment (Rs 134.29 crore)

andadditional retirement benefits (Rs 16.28 crore) on actuarial

basis. Total provisions under these four categories amountedto Rs 402.71 crore during

the year 2009-10, against Rs550.60 crore during 2008-09. Total corpus available with

the Bank at the end of March 2010 under these heads is: Rs 948.54

crore(gratuity), Rs 2,835.10 crore (pension funds), Rs 488.31

crore (leave encashment), and Rs 340.56 crore(additional

retirement benefits).

Management Discussion and Analysis

Economic Scenario in 2009-10

Indian economy strongly rebounded during the year FY10ahead of most countries in theworld, thanks to the timelymonetary easing and strong fiscal stimulus provided bytheReserve Bank of India (RBI) and the Central Government,respectively, in the wakeof the global crisis. Other factors thatfacilitated its bounce-back during FY10 were animprovingglobal economy, a return of risk appetite in financial marketsand large capitalinflows.Moreover, India was not at the centre of the crisis and its growthis largely dependent on

domestic drivers. So, the global crisiscould not dent the countrys medium-term growthpotential.

The Governments advance estimates for the year have putIndias real GDP growth at7.2% for FY10 reflecting a markedimprovement over the 6.7% recorded in FY09. Themaincontributors to this growth have been manufacturing (8.9%),mining & quarrying(8.7%) and the services sector (8.8%).Agriculture output, however, is estimated to havefallen by0.2% as against a growth of 1.6% in FY09 reflecting the poorSouth-Westmonsoon rains. According to the Governmentreports, production of foodgrains andoilseeds is likely to havedeclined by 8.0% and 5.0%, respectively, on year on yearbasis.


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However, the adverse impact of sub-normal monsoonhas been contained to a largeextent by a better-than-expectedrabi (winter) crop in FY10.Within the manufacturing sector, the industries like infrastructure,cement, steel, automobiles,machinery & equipment, transportequipment, rubber, plastic & chemical products, etc.,havegrown strongly during FY10. However, sectors like consumernon-durables, power

generation and labour intensive export-oriented industries like textiles, gems & jewellery,etc., continuedto remain fragile.The expansion of services sector was healthier at 8.8% in FY10.However, it slowed downfrom a year earlier due to a moderatepace of spending by the Government oncompensation toemployees.Final consumption expenditure too remained subduedduring FY10, as growth in bothprivate and Government finalconsumption expenditure slowed down. However,investmentdemand, especially gross fixed capital formation showed agradual recovery

during the year.The Wholesale Price Index (WPI) inflation, after remainingsignificantly subdued during

the first half of FY10, increasedat a faster pace in the second half and reached 9.9%byMarch, 2010. While a significant portion of inflation could beexplained by a shortfall inagricultural production and spikesin international crude oil prices, indications ofgeneralization ofinflation became increasingly evident starting from November2009.Inflation in non-food manufactured products increasedfrom (-) 0.4% in November 2009to 4.7% in March 2010.

A rebound in the economy and rising inflation pressuresprompted the RBI to signal thebeginning of an exit from its crisispolicy stance since October 2009 when it restored theStatutoryLiquidity Ratio (SLR) to 25.0% and tightened provisioningrequirements forproperty loans. Subsequently, it raised theCash Reserve Ratio (CRR) by 75 bps to 5.75%in late January,2010. Again, it raised the Repo and Reverse Repo Rates by 25bps each

on March 19th 2010 ahead of the Annual MonetaryPolicy in April, 2010 to guard againstinflationary expectationsbecoming entrenched. This was the first change in policyratessince April 2009.

A strong revival in global demand brought back Indias exportgrowth to a positive zone inNovember 2009 after 13 months ofyear-on-year declines. Imports too moved to positivegrowth inDecember 2009 after 12 months of year on year contraction. Incumulativeterms, however, exports declined by 11.3% (y-o-y)in Apr-Feb, FY10, while importsdeclined by 13.5%. The tradedeficit during the first eleven months of FY10 stood at US$95.42billion as against US$ 114.72 in the corresponding period ofFY09. The robustgrowth in invisible receipts observed duringthe past few years was reversed in FY10 due

to the laggedimpact of recession in advanced economies. Despite lowertrade deficit, thefall in invisibles surplus led to marginally highercurrent account deficit during FY10. Thelatest available datashow that the current account deficit during April-December,2009stood at US$ 30.3 billion, higher than US$ 27.5 billionduring April-December, 2008.

A noteworthy feature of economic revival during FY10 was theresumption of largecapital inflows led by both the FII and FDIinflows. According to the RBI Report, the FII(net) investmentin India during FY10 was US$ 29 billion while FDI inflowsamounted toUS$ 33.1 billion during April-February, FY10. Innominal terms, the rupee appreciated


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against the US Dollarby 11.5% during FY10 primarily due to an upsurge incapitalinflows. However, an increase in inflation differentials betweenIndia and itstrading partners during the year resulted in muchhigher appreciation of real exchangerate.During FY10, Indias foreign exchange reserves (FER)increased by US$ 27.1 billion to

reach US$ 279.1 billion as atend-March 2010. Furthermore, the RBI purchased 200metrictonnes of gold from the IMF on November 3, 2009 as part ofthe RBIs FERmanagement operations.Indias external debt stock at US$ 251.4 billion at end-December2009 recorded anincrease of US$ 26.8 billion over its level atMarch 2009 primarily on account of anincrease in long-term debt.Indian equity markets displayed vibrancy and increasedmomentum during FY10 exceptfor some occasional correctionscaused by Dubai World default and the Greek sovereign

debtconcerns during the last two quarters of FY10. On the whole,the benchmark indicesSensex and the Nifty gained 81.0%and 74.0% respectively, on year-on-year basis,

primarily onthe back of huge FII inflows.The Central Governments fiscal deficit for FY10 is expectedto remain within the 6.8% ofGDP target. Stronger divestmentreceipts and direct tax revenue could make up for theshortfall,if any, in 3G auction proceeds and indirect tax collections,

while higher than budgeted spending on pensions and food &fertilizer subsidies can beaccommodated through savings onother accounts.The Governments record market borrowings programmeproceeded well and in a non-disruptive manner during FY10with limited impact on bond yields.The Union Budget for FY11 has set the goal of reducing thefiscal deficit to 5.5% of GDPin FY11 and further to 4.8% in FY12and to 4.1% in FY13. This will be facilitated by the

expectedfall in expenditure items and likely revenue buoyancy, going forward.The Union Budget for FY11 began the exit from fiscal stimulusby partially rolling backsome of the duty relaxations introducedduring the crisis period. It hiked the excise dutyfrom 8.0%to 10.0%. The other tax proposals included rationalizationof income tax slabs,additional excise duty on petrol &diesel, and a restoration of 5.0% customs duty onpetroleumproducts, including crude oil. A landmark reform in the areaof governmentsubsidy is the introduction of nutrient-basedsubsidy for fertilizers. This policy is expectedto improveagricultural productivity, contain the subsidy bill over time andofferenvironmental benefits. Furthermore, the governmenthas decided not to issue any morespecial off-budget bondsfrom FY11 to finance subsidies for fuel, food andfertlisers.Another major fiscal development is a revival programme forthe disinvestment of

state-owned enterprises listed on the stockexchanges. During FY10, the governmentraised a record Rs33,500 crore through this route, whereas the FY11 Budget callsforrealisation of Rs 40,000 crore through disinvestment.The outlook for India, going forward, looks strongly positive.Its economy has beenshowing steady improvement. Industrialrecovery is expected to take firmer hold on theback of risingdomestic and external demand. Exports and imports havebounced backsince October-November, 2009. Flows of fundsto the commercial sector from both bank


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and non-bank sourceshave picked up. Business outlook surveys by the RBI andotheragencies suggest that business optimism has improved.On balance, under theassumption of normal monsoon andsustained good performance of the industrial andservicessectors, the RBI has projected real GDP growth for India forFY11 at 8.0% withan upside bias.

Performance of Indian Banking Sector in FY10Indian banking industry stood firm and resilient amid the globalcrisis on the back of itsimproved productivity since the mid-1990s and a robust regulatory and supervisoryframework.The Industrys financial soundness indicators remained strongwith theReturn on Average Assets (ROAA) at 1.13%, CapitalAdequacy Ratio (CAR) at 13.98%and Net NPA ratio at 1.05%as at end-March, 2009.During the year FY10, the banking industry posted a decentbusiness and financialperformance despite several challenges.For instance, the scheduled commercial banks(SCB)Aggregate Deposits grew by 17.1% (y-o-y). Within this, theterm deposits grew by16.2%, primarily due to a sharp declinein interest rates offered on term deposits by

several banks. Ascredit growth was quite muted until November, 2009, thebanksstruggled to protect their net interest margins by reducing thepressure on cost of deposits. A slower growth in term depositsresulted in a slowergrowth of broad money supply or M3 by16.8% (y-o-y) during FY10. However, the banksdemanddeposits grew healthily by 22.8% (y-o-y) during FY10 reflectingthe industrysaggressive efforts to mobilize low-cost (CASA)deposits to reduce the pressure on costof funds.

Amongst the sources of money supply, Net Bank Credit to theGovernment grew at astrong pace till mid-November, 2009,as the Government financed majority of its marketborrowingrequirements during this period. However, after November, 2009the growth inthis component eased considerably. On year onyear basis, the Net Bank Credit to

Government (including theRBI Credit) increased by 30.6% during FY10.The demand for non-food credit from the commercial sectorstarted improving fromNovember, 2009 and eventually posteda growth of 16.9% (y-o-y) by end-March 2010 asagainst theReserve Bank of Indias (RBIs) indicative target of 16.0%. Inthe year up toOctober 2009, deceleration in non-food credithad continued and reached a low of10.3%. With the industrialrecovery getting increasingly broad-based, demand for non-food credit revived since end-November 2009 and pushedupwards the incrementalcredit-deposit ratio in the second halfof FY10. While, the state-owned banks played amajor rolein credit expansion during FY10, credit extended by privatebanks alsoshowed some improvement in FY10 over last year.However, as per the RBI report, the

loan portfolio of foreignbanks contracted further in FY10.Reflecting the revival in credit demand from the private sector,the SCBs investment in

SLR securities increased at a lower rateof 18.5% (y-o-y) as on March 26, 2010 as against20.0% a yearago. The SCBs holdings of SLR securities was at 28.8% of theirnetdemand and time liabilities at the end of March, 2010.Disaggregated data on sectoral deployment of gross bankcredit in FY10 put out by theRBI show an improvement in creditgrowth (y-o-y) to all major sectors like agriculture,industry,services and retail loans from November 2009 onwards.


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Within industrial sector, the sectors like infrastructure, basicmetals and metal products ledthe demand. Within servicessector, credit growth for transport operators, computersoftware,tourism, hotels, restaurants & trade accelerated in February2010. The credit toreal estate decelerated sharply in FY10mainly on account of change in the concept of realestateintroduced in September 2009.

Asset quality of Indian banks too remained largely stableduring the year FY10 exceptfor a few banks. The fears ofrising delinquencies have faded now with improvingeconomicoutlook and resumption of capital inflows.

For the year FY11, the outlook for Indian banking industryremains positive. With

improving economic prospects for India,many International Credit Rating Agencies have

revised theiroutlook for the Indian banking industry in the recent past.For instance, the

Moodys Rating Agency has changed thefundamental credit outlook for the Indian

banking systemfrom negative to stable on the back of favourable trendsin Indias

economic indicators over the last few months. Eventhe Fitch Rating Agency has stated

in its latest report on AsianBanking Industry that the operating environment for banks inAsia (including India) has strengthened unexpectedly fast in

June-December, 2009 shifting concerns away from potentialbad loans arising fromsevere economic slowdown to concernsover asset price bubbles.

Risk Management

Managing various types of financial risks is an integral part of thebanking business. Bankof Baroda has a robust and integratedRisk Management system to ensure that the risksassumedby it are within the defined risk appetites and are adequatelycompensated. TheRisk Management Architecture in the Bankcomprises Risk Management Structure, RiskManagementPolices and Risk Management Implementation and MonitoringSystems.

Risk Management Structure

The overall responsibility of setting the Banks risk appetiteand effective risk managementrests with the Board and apexlevel management of the Bank. Bank has constituted aSubCommittee of the Board on ALM (Asset Liability Management)and Risk Managementto assist the Board on financial riskrelated issues. The Bank has a full fledged RiskManagementDepartment headed by a General Manager and consisting ofa team ofqualified, trained and experienced employees. TheBank has set up separate committees,

of Top Executives ofthe Bank to supervise respective risk management functionsasunder.

Asset Liability Management Committee (ALCO) is basically

responsible for the management of Market Risk and BalanceSheet Management. It hasthe responsibility of managingdeposit rates, lending rates, spreads, transfer pricing, etcinline with the guidelines of Reserve Bank of India. It also plansout strategies to meetasst-liability mismatches.

Credit Policy Committee (CPC) has the responsibility toformulate and implement various enterprise-wide credit riskstrategies including lendingpolicies and also to monitor Bankscredit risk management functions on a regular basis.


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Operational Risk Management Committee (ORMC)hasthe responsibility of mitigation of operational risk by creationand maintenance of anexplicit operational risk managementprocess.

Risk Management Policy

The Bank has Board approved policies and procedures in placeto measure, manage and

mitigate various risks that the Bank isexposed to. In order to provide ready reference andguidanceto the various functionaries of the Risk Management System inthe Bank, theBank has in place Asset Liability Management andGroup Risk Policy, Domestic LoanPolicy, Mid Office Policy, OffBalance Sheet Exposure Policy (domestic), BusinessContinuityPlanning Policy, Pillar III Disclosure Policy, Stress Test Policyand Stress TestFramework, Operational Risk ManagementPolicy, Internal Capital Adequacy AssessmentProcess(ICAAP), Credit Risk Mitigation and Collateral ManagementPolicy duly approvedby the Board.

Risk Management - Implementation and Monitoring

System

In the financial services industry, the main risk exposures that

the Bank faces are Liquidity Risk, Credit Risk, Market Risk and

Operational Risk.

Liquidity Risk

Liquidity risk is the risk that the Bank either does not have thefinancial resources availableto meet all its obligations andcommitments as they fall due or it has to access these

resourcesat excessive cost. During the year under review, the financialsystem exhibited afair level of liquidity with some adjustmentsdone by the monetary authority to balancecredit growth andcontrol inflation.The Banks ALCO has the overall responsibility of monitoringliquidity risk of the Bank.

The liquidity risk is measured byflow approach on a daily basis through StructuralLiquidityGap reports and on a dynamic basis by Dynamic Gap reportson fortnightlybasis for the next three months. Under StockApproach, the Bank has established aseries of caps onactivities such as daily call lending, daily call borrowings, netshort termborrowings and net credit to customer deposit ratioand prime asset ratio, etc. The AssetLiability Management(ALM) Cell, working in the Risk Management Departmentreviewsthe liquidity position on a daily basis to ensure thatthe negative liquidity gap does notexceed the tolerance limitin the respective time buckets. Specialized IntegratedTreasuryBranch, Mumbai assesses the domestic liquidity in respectof all foreigncurrency exposures. In respect of overseasoperations, each territory assesses its

currency wise liquidityposition at prescribed intervals. The funding requirements incaseof contingencies are also examined at regular intervalsto prepare the Bank to meet anyexigencies of a shortfall infunds position. The Bank has managed its liquidity byprudentdiversification of the deposit base, control on the level of bulkdeposit, and readyaccess to wholesale funds under normalmarket conditions. The Bank has significantlevel of marketablesecurities, which can be sold, used for repo borrowings orascollaterals, if required.


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Credit Risk

Credit Risk is the risk that the counterparty to a financialtransaction will fail to dischargean obligation resulting in afinancial loss to the Bank. Credit risk managementprocessesinvolve identification, measurement, monitoring and control ofcreditexposures.

In order to provide clarity to the operating functionaries, theBank has various policies inplace such as Domestic LoanPolicy, Investment Policy, Off-Balance Sheet ExposurePolicy,etc, wherein the Bank has specified various prudential capsfor credit riskexposures. The Bank also conducts industrystudies to assess the risk prevalent inindustries where theBank has sizable exposure and also for identification ofsunriseindustries. The industry reports are communicated to theoperating functionariesto consider the same while lending tothese industries.

The Bank has adopted various credit rating models to measurethe level of credit risk in

a specific loan transaction. The Bankuses a robust rating model developed to measure

credit riskfor majority of the business loans (non personal loans). Therating model has

the capacity to estimate probability of default (PD), Loss Given Default (LGD) and

unexpected losses in a

specific loan asset.

Apart from estimating PD and LGD, the credit rating model will

also help the Bank in several other ways as under.

To migrate to Rating Based Approaches of computation of

Risk Weighted Assets

To price a specific credit facility considering the inherent

credit risk.

To measure and assess the overall credit risk and to evolve

a desired profile of credit risk. Apart from assessing credit risk at the counterparty level, theBank has appropriateprocesses and systems to assess creditrisk at portfolio level. The Bank undertakesportfolio reviewsat regular intervals to improve the quality of the portfolio or tomitigatethe adverse impact of concentration of exposures tocertain borrowers, sectors or

industries.Market Risk

Market risk implies possibility of loss arising out of adverse pricemovements of financialinstruments like bonds, equity, forexcontracts, etc. The objective of market riskmanagement is toavoid excessive exposure of the Banks earnings and equity tosuchlosses and to reduce the Banks exposure to the volatilityinherent in financial instrumentssuch as securities, foreignexchange contracts, equity and derivative instruments, as


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wellas balance sheet or structural positions. The primary risk thatarises for the Bank as afinancial intermediary is interest raterisk due to the Banks asset-liability managementactivities.Other market related risks to which the Bank is exposed areforeign exchangerisk on foreign currency positions, liquidity,or funding risk, and price risk on tradingportfolios.

The Bank has clearly articulated policies to control and monitorits treasury functions.The Bank also has an asset liabilitymanagement policy to address the market risk.These policiescomprise management practices, procedures, prudential risklimits, reviewmechanisms and reporting systems. Thesepolicies are revised periodically in line withchanges in financialand market conditions.The Interest rate risk is measured through interest ratesensitivity gap reports andEarning at Risk. Furthermore, theBank calculates duration, modified duration, Value atRisk forits investment portfolio consisting of fixed income securities,equities and forex

positions on monthly basis. The Bankmonitors the short-term Interest rate risk by NII(Net InterestIncome) perspective and long-term interest rate risk by EVE(Economic

Value of Equity) perspective. The Value at Risk forthe treasury positions is calculatedfor 10 days holding periodat 99% confidence level. The stress testing of fixedinterestinvestment portfolio through sensitivity analysis and equitiesthrough scenarioanalysis is regularly conducted. Based onthe RBI directions, the Bank is also estimatingthe EconomicValue of Equity impact on a quarterly basis.

Operational Risk

Operational risk is the risk of loss on account of inadequate orfailed internal process,people and systems or external factors.As stated above, the Operational RiskManagement Committee(ORMC) has the responsibility of monitoring the operational riskof the Bank. The Bankmonitors operational risk by reviewingwhether its internal systems and procedures are

duly compliedwith. The Bank collects and analyses loss and near miss data onoperationalrisk based on different parameters on a half yearlybasis and, wherever necessary,corrective steps are taken.

Banks Compliance with BASEL II

The Bank has a very large overseas presence amongst theIndian banks and hasimplemented the Basel-II Guidelines from31st March 2008. In keeping with theguidelines of the ReserveBank of India, the Bank has adopted Standardized ApproachforCredit Risk, Basic Indicator Approach for Operational Risk, andStandardized Duration

Approach for Market Risk for computingthe capital adequacy ratio. The Bank has,therefore, beencomputing the Capital to Risk Weighted Assets Ratio (CRAR)on parallel

basis under Basel-I and Basel-II Guidelines. TheBank is also providing additional capitaltowards OperationalRisk under Basel II guidelines. The CRAR of the Bank issummarizedas under.

As on

Basel I

B

asel II


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31.03.2008

12.91%- base 1

12.94%- base 2

31.03.2009

12.88%14.05%

31.03.2010

12.84%

14.36%In compliance with the PillarII guidelines of the Reserve Bankof India under Basel IIframework, the Bank formulated its Policyof Internal Capital Adequacy AssessmentProcess (ICAAP) toassess internal capital in relation to various risks the Bank isexposedto. Stress Testing and scenario analysis are used toassess the financial andmanagement capability of the Bank tocontinue to operate effectively under exceptional

but plausibleconditions. Such conditions may arise from economic, legal,political,environmental and social factorsThe Bank has a Board approved Stress Testing Policy describingvarious techniques used togauge their potential vulnerabilityand the Banks capacity to sustain such vulnerability. TheBankconducted its ICAAP tests on semi annual frequency along withstress tests as per theICAAP Policy of the Bank.The disclosure under Pillar-III of market discipline guidelinesof the RBI has been doneas on 30th September, 2009 and 31stMarch, 2010. The year-end disclosure as on

31st March, 2010is part of the Annual Report and is displayed on the Banks website aswell. The half-yearly disclosure as on 30thSe p te mb e r,2009 has also been displayedon the Banks web site.

Credit Monitoring Function

The Bank has created a system for continuous monitoringof its Credit Portfolio to protectthe quality of its loan assets.Furthermore, the Bank has the system for monthlymonitoringof advances accounts at various levels to prevent slippagesand to takecorrective steps well in time to improve the asset quality.

The Bank has created a separate department forCredit

Monitoring at the corporate level, headed by a GeneralManager, and also one at the Regional/Zonal level. TheDepartment started functioningsince September 2008 to stepup quality of credit monitoring, as economicconditions worsened following the global financial crisis. The SlippagePrevention TaskForce was formed at all Zonal/Regional officesof the Bank. Moreover, the BanksDomestic Loan Policy hasbeen aligned with appropriate provisions for the purposeofarresting slippages at an early stage in conformity with the laiddown norms andguidelines. The Bank has placed a specialfocus on sharpening its credit monitoringprocess for improvingthe asset quality, identifying areas of concern and/orbranchesrequiring special attention, working out strategies and ensuringtheirimplementation in a time-bound manner.


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The primaryobjectives of the Credit Monitoring Department

at the corporate level are as under:

Identification of weakness / Potential default / incipient

sickness in the account at an early stage;Initiation of suitable and timely corrective actions forpreventing impairment in creditquality, whenever signalsare noticed in any account, e.g. decline in credit rating,delay inmeeting liabilities in LC/Guarantee and delay inservicing of interest/ installments etc;

Prevention of slippage in the Asset Classification and

relegation in Credit Ratings through vigorous follow up;

Identification of suitable cases for restructuring/rescheduling/ rephasement as well as

further financing indeserving and genuine cases with matching contributionfrom theborrower;

Taking necessary steps / regular follow up, for review ofaccounts and compliance ofterms and conditions, therebyimproving the quality of Banks credit portfolio;

To work towards improving the Credit Ratings.

Restructuring of Advances Accounts

As a part of an on-going business strategy to improve upon thequality of assets, the Bankhas reaffirmed the need to monitorthe quality of advances portfolio on a continuous basis,

industry-wise as well as borrower-wise. It also requires an analysis ofthe present positionand problems foreseen in near future andto identify weaknesses/potential default/incipientsickness in theadvances accounts at an early stage so as to initiate suitableand timely

corrective measures for preventing impairment of

credit quality.The Banks Credit Monitoring Department at the CorporateOffice has taken severalinitiatives in identifying the incipientsickness/potential default/weaknesses in theadvancesaccounts for taking corrective actions including restructuringin deservingcases as per the RBI guidelines for supportingentrepreneurs facing temporary cash flowproblems due toeconomic challenges.

During the year FY10, the Bank undertook restructuring ofvarious advances accounts as per the table given below.Besides, in its International Operations, the Bank undertookrestructuring of 43 borrowalaccounts working out to an overalloutstanding balance of Rs 1,796.98 crore duringFY10.The Bank also initiated follow up actions for ensuring expeditiousreview of accounts,compliance of terms and conditions, up-gradation in credit rating, etc., in high value


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advance accountsfor improving the asset quality of the Banks credit portfolio.Thisproactive approach has greatly helped the Bank in maintainingbetter asset quality inthe industry.

Economic Intelligence Unit

At the Corporate Office of the Bank, a specialized EconomicIntelligence Unit (EIU)

supports the Top Management in criticalareas like Business Strategy Formulation,Investor Relations,Asset-Liability Management and in discussions/deliberationswith theRegulators (both domestic & international) and RatingAgencies. The Unit regularlyprovides the Top Managementand the Banks various operational units a periodicoutlook onkey macro variables like industrial and infrastructural growth,inflation, interestrates, stock movement, credit deployment& resource mobilization of the bankingindustry, liquidity andexchange rates.By providing better understanding of macroeconomic aspects,corporate sector healthand financial sector policies, the EIU ofBank of Baroda supports the Banks efforts intapping businessopportunities and swiftly responding to market dynamics.

The EIU also brings out a weekly e-publication on macro-economic, policy andregulatory developments to share itsperspective with the top management, marketparticipants andith industry leaders. The division works as an intellectual armof the Bank incomprehending developments that helps in thedevelopment of rightly aligned strategies.

Internal Control Systems

The Bank has a well established Central Inspection & Audit

Division (CIAD) that examines the adherence to systems,policies and procedures of the Bank. The guidelines receivedon various issues ofinternal control from Reserve Bank ofIndia, Government of India, Board and Audit

Committee ofthe Board have become part of the Internal Control Systemfor better riskmanagement. CIAD operates through ten zonalinspection centres to carry outinspection of branches/officesas per the periodicity decided by the Audit Committee ofBoardand examines adherence to such systems of internal controland risk management[including various aspects such as KnowYour Customer (KYC)/ Anti-Money Laundering(AML) etc].The Regular Branch Inspection Report is the most comprehensivefeed-back to theManagement about the degree of complianceof the Banks systems and procedures andguidelines atthe operational level and, hence, the most important toolfor exercising control.The compliance is monitored throughsubmission of Rectification Certificate by the auditeeunits dulycountersigned by the reporting authorities.

All the branches are covered under Risk Based Internal Audit(RBIA). The assessmentof level of risk and its direction is asper the Risk Matrix prescribed by the Reserve Bankof Indiawhich helps the Management in identifying areas of high riskrequiring attentionon priority basis. The position of the riskcategorization of the branches is reviewed by

Audit Committeeof the Board on quarterly basis.

Besides Regular Inspection of Branches, various otherinspections are also carried outin the Bank such as Inspectionof Subsidiaries, Associates, Functional Departments


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atCorporate, Head Office, Training Centres, AdministrativeOffices, Management Auditof the Controlling Offices of theBank, its Subsidiaries and Regional Rural Banks(RRBs).Overseas branches are inspected through the Banks InternalAuditors posted atthose centres.During FY10, 2,357 Risk Based Internal Audits (RBIAs) of thedomestic branches were

carried out by the Inspecting Officersattached to various Zonal Inspection Centres acrossthe country.Around 438 inspections of overseas branches were carried outby the Internal

Auditors posted overseas. Besides, ManagementAudit of M.P. & Chhattisgarh Zone,North Zone, Maharashtra& Goa Zone, Projects & IT / Inter Branch Operations / HRM/Wholesale Banking Departments at Baroda Corporate Centre,and Nainital Bank Ltd.(Subsidiary) was carried out during FY10.Concurrent Audit of the Bank covered 611 branches includingSpecialized IntegratedTreasury Branch which handles Fundsand Investment Management and FOREX

Dealing Operationsof the Bank. Concurrent Audit covers more than 79.0% oftotaldomestic advances and 69% of total domestic business ofthe Bank, besides

100.0% domestic investments and FOREXDealing Operations.The CIAD oversees Credit Audit function which examinescompliance with extant sanction and post-sanction processes/procedures laid down bythe Bank from time to time, as per theRBI guidelines. The objectives of Credit Audit areas follows.

Improvement in the quality of credit.

Review of sanction process and compliance status of

large loans.

Feedback on regulatory compliance.

Independent review of Credit Risk Assessment.

Pick up early warning signals and suggest remedial

measures.

Recommend corrective action to improve credit quality,

credit administration and credit skills of staff, etc.During FY10, 2,331 large accounts were subjected to creditaudit covering aggregatelimit of Rs 1,09,680 crore (FB Rs85,666 crore and NFB of Rs 24,014 crore). All thereportsduring the current year of the eligible accounts for credit audithave beenattended to and closed after compliance/necessarydirections to the concerned Zones.The CIAD compiles Risk Profile Templates of the Bank on selfassessment basisquarterly, as per direction of the ReserveBank of India. After approval by the respective


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FunctionalHeads and final approval from Board of Directors, it is submittedto RBI onquarterly basis. As per Risk Profile Templates, theBanks overall risk level is LOW anddirection is STABLE ason 31st March, 2010.The CIAD through its Information Security (IS) Audit Cell /External Auditors conducts IS

Audit of select branches and DataMigration Audit of branches shifting to Core Banking

Solutions(CBS) platform from the legacy system.The Bank conducts training programmes for Inspecting Officersattached to ZonalInspection Centers on Information SecurityAudit and Risk Based Internal Audit. Similarprogrammes werealso conducted for the Concurrent Auditors to update theirknowledgebase.

Agenda placed before the Audit Committee of the Board forreview includes total auditfunction of the Bank. The complianceof direction of Audit Committee of the Board ismonitoredthrough Action Taken Report (ATR) system. The compliance ofdirections

received from Reserve Bank of India and Governmentof India are placed before the AuditCommittee of the Board for review.

Operations and ServicesCustomer-centric Initiatives Taken by the Bank in

FY10

As always, efficient customer service and customer satisfactionare the primary objectivesof the Bank in its day to dayoperations. The Bank is highly responsive to the needsandsatisfaction of its customers, and is committed to the belief thatall technology,processes, products and skills of its people mustbe leveraged for delivering superiorbanking experience to itscustomers on a sustainable basis.Recently, the Bank has taken several measures to improvecustomer service at thebranches and at the same time,strengthened the customer complaint redressal

machinery forfast disposal of the customer complain


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(iii)Shri N.S.Srinath - Executive Director(iv)Shri A.Somasundaram - Director(v)Dr. Masarrat Shahid - DirectorThe sub-committee addresses the issues relating to theformulations of policies andassessment of its compliances,which brings about consistent improvement in the quality

ofcustomer service. The sub-committee also monitors the statusof the number ofdeceased claims pending for settlementbeyond 15 days pertaining to depositors/lockerhirers/depositorsof safe custody articles. It reviews the status of implementationof the

Awards of Banking Ombudsman and also addressesissue of systemic deficienciesexisting in the Bank, if any,brought out by the Awards.The details of the attendance of the meeting of CustomerService Committee of theBoard held on 22.06.2009,29.08.2009, 05.12.2009 and 05.03.2010 during FY10 areasfollows.Name of the DirectorPeriod

Meetings held

during the

period of their

tenureMeetingsattendedShri M.D.Mallya01.04.2009 to31.03.201044

Shri V. Santhanaraman01 .04 .2009 to31.08.200922Shri Rajiv Kumar Bakshi01.04 .2009 to31.03.201044Shri N.S.Srinath07.12.2009 to31.03.2010

11Shri A.Somasundaram01.04.2009 to31.03.201043Dr. Masarrat Shahid24.11.2009 to


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31.03.201021The Bank has conceptualized two types of Back office

operations City Back Office (CBO) and Regional BackOffice (RBO). The City BackOffice has been designedto handle the centralised processing of clearing andcollectionfunctions, including the ECS, of all the branchesin a city/centre. Such centralisation isintended to relievethe staff of the branches from the load of cumbersomeback-officefunctions and enable them to focus more onsales and service. The -21- servicebranches and -47-main offices are functioning on the CBO model. TheseCBOs shallcater to 1,090 branches.Three Regional Back Offices (RBOs), one each at Baroda,Jaipur and Coimbatore, are already in operation. The RBOsDirectors' Report

Launch of "Navnirmaan - Baroda Next"

Annual Report 2009-1013Standing Committee on Customer Service

The Bank has also set up a Standing Committee on Proceduresand Performance Audit

on Customer Services as per thedirectives of RBI. The committee comprises three

eminentpublic personalities as members along with four GeneralManagers of the Bank.

The committee is chaired by theExecutive Director of the Bank.

The committee is set up to oversee timely and effectivecompliance of the RBI instructions

on customer service and,also, review the practices and procedures prevalent in the

Bankand take necessary corrective steps on an ongoing basis.

A brief report on the performance of the Standing committeeis submitted periodically to

the Customer Service Committeeof Board.KYC/AML

Know Your Customer (KYC) norms/Anti-Money Laundering(AML) standards/

Combating of Financing of Terrorism(CFT) and obligation of Bank under PMLA,

2002

The Bank has Board approved KYC-AML-CFT Policy inplace. The said Policy is the

foundation on which the Banksimplementation of KYC norms, AML standards andCFTmeasures is based.The major highlights of KYC-AML-CFT implementation acrossthe Bank are as under.Generation of Cash Transaction Reports (CTRs)


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electronically for submission to Financial Intelligence Unit

(FIU), through the electronic medium.Installation/Implementation of AML Solution for generating

system based alerts.System-based detection and submission of SuspiciousTransaction Reports (STR) to the Financial IntelligenceUnit (FIU)System based Risk Categorization (from AML Measure)of the Banks customers every half year.Filing of Counterfeit Currency Reports (CCRs) to FIU-IND,New Delhi.

The full KYC compliance entails staff education as well ascustomer education for whichthe following measures are takenby the Bank.

A comprehensive list of KYC documents is uploaded on theBanks web site (www.bankofbaroda.com) for the benefitof customers

A KYC-AML page is created at the Banks INTRANET forposting reference material on KYC-AML education.Regular training sessions are conducted on KYC-AML-CFTguidelines at the Banks training establishments.Training is organized for the Banks senior officials /executives at RBI, IBA and National Institute of BankManagement (NIBM).Sustained efforts are made to develop expertise at theBanks Head Office for corporate oversight and, also, KYC

Audit of branches.Government Business

The Bank


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Annual Report 2009-1029The construction projects completed during the course of theyear and in use/operation are -Baroda Sun Tower at C-34 , Bandra Kurla complex,

MumbaiBuilding for Branch at Rajpipla.VKI, Jaipur.Pant Nagar, SIDCUL.Increased Use of IT to Improve Efficiency

The Estate Management Department of the Bank has beenextensively usingInformation Technology in its day to dayfunctioning to improve efficiency. For instance,

payments tocontractors etc. are being made through the RTGS/NEFT mode.Other Activities of Estate Management Division

As a part of the Banks conscious efforts to reduce rentalburden, continued efforts arebeing made to ensure optimumuse of existing premises and to surrenderexcess/surpluspremises to the extent possible. As a result, the Bank couldsurrender asmuch as 85,631 sq.ft. leased area during FY10. Itis the policy of the Bank to go in forsurrendering maximum areaevery year. The Estate Management Department hasreleaseda revised Premises Policy Guidelines for 2009-2012. It hasalso developed theConstruction Work Manual and framed thePurchase Policy which will be released shortlyfor the benefit ofall the functionaries at various levels. The detailed guidelinesonrefurbishment will also be released soon.

Branch NetworkGiven below is the information on the Banks brick Andmortar distribution channels ason 31st March, 2010, whichare observed to be closer to customers as compared tothee-banking channels, which are generally preferred by the techsavvy urban masses.Area Classification(India)Number ofBranches% Share inTotalMetro67322Urban58019Semi-urban72123


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Rural1,12636Total3,100

100Overseas48--Domestic Subsidiaries and Associates

The performance of Subsidiaries & the Associates of Bankof Baroda was satisfactory

during FY10. The BOBCARDS Ltd.has successfully cleaned up its balance-sheet and is

in theprocess of setting up a new business plan. The BOB CapitalMarkets Ltd. has been

activated by appointing a professionalCEO and recruiting a professional team. The

Company hascommenced an Institutional Broking business in October 2009and will be

commencing retail broking shortly. The BarodaPioneer Asset Management Co. Ltd. is in

its second year ofoperation and has witnessed significant growth in their AssetUnderManagement (AUM). This Company also has plans tolaunch various new schemes

shortly. As stated earlier, theIndiaFirst has received an overwhelming response from

theBanks customers across the country making it the fastest everinsurance company to

reach Rs 100 crore premium collectionsin the first 100 days of its operations.

The Bank has initiated steps for construction of premises forestablishment of BarodaSwarojagar Vikas Sansthan (BSVS)at various locations such as Baroda, Bulsar, Jaipur,

Ajmer,Rampur and Pantnagar SIDCUL. The Bank has taken a specialinitiative toincrease awareness level to adhere to GreenBuilding norms, energy saving measuresand also to createbarrier free environment for the handicapped.

RefurbishmentOn implementation of CBS at all its branches, the Bank hasmade it a point to ensure thatmaximum number of branches areput under refurbishment, upgradation, face lifting,redesigningand improved ambience for facilitating convenient banking tocustomersDuring FY10, 396 branches have been refurbished.The Bank has also initiated steps forstandardization of theinterior of branches and offices. Under Business Process Re-engineering, the Bank has initiated steps to establish RegionalBack Offices (RBO) andCity Back Offices (CBO) at differentcentres of the country. The RBOs at Jaipur andBaroda havealready been furnished as per the requirement and madeoperational. TheRBOs at Bhopal and Coimbatore are underrefurbishment.Directors' ReportBaroda Sun Tower - New Building at BKC, Mumbai


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31 July 1922India23,979.102,87,712.244,337.49

103734Directors' ReportRelease of "Akshayyam" - Hindi house journal.day banking. During the year FY10, more than 450 employeeswere trained at theBanks Corporate Office apart from thetraining imparted by various other administrativeoffices acrossthe Bank.The Third Sub-committee of Parliament on Official Languagevisited Regional Office,Goa and Allahabad of our Bank andappreciated the efforts/work done by the Bank inthe area ofOfficial Language Implementation.Two of our Bank employees have written books on burningissues/topics of banking under

Reserve Bank of Indias originalbook writing in Hindi scheme.The Bank's in-house Hindi magazine "Akshayyam" was awardedby the Reserve Bank ofIndia under Hindi magazine category.The magazine was also awarded by the ABCI,Mumbai withGold (First) prize under Indian Language Publication category.Besides, theBanks House Journal "BOBMAITRI" was awardedwith bronze prize by the ABCI, Mumbaiunder bilingual HouseJournal category.Board of Directors

Shri N. S. Srinath, was appointed by the Central Governmentas Whole time Director,designated as Executive Director on07th December 2009, under section 9(3) (a) of theBankingCompanies (Acquisition & Transfer of Undertakings) Act, 1970,to hold theposition till 31st May 2012 or until further orders,whichever is earlier. He was appointedconsequent upon ShriV Santhanaraman, ceasing to be a Director on hisattainingsuperannuation on 31st August 2009.Shri Alok Nigam, IAS was nominated by the CentralGovernment as a Director on09th December 2009 under section9(3) (b) of the Banking Companies (Acquisition &Transfer ofUndertakings) Act, 1970 representing the Central Governmentvice Shri

Amitabh Verma, IAS who ceased to be a Director onthe nomination of Shri Nigam. ShriNigam shall hold office untilfurther orders from the Central Government.Dr. (Smt.) Masarrat Shahid was nominated by the CentralGovernment, as a part time non-official Director on 29thImplementation of Official Language (OL) Policy

During the year FY10, the Bank made significant progress inpromoting and propagating theuse of Official Language andensured compliance of various other statutoryrequirementsbesides recommendations of Parliament Committee on OfficialLanguage. TheBank could achieve all major targets set by theGovernment of India. In recognition of theBank's outstandingperformance, the Bank was appreciated at various levels.The Town Official Language Implementation Committeesfunctioning at Jaipur andBaroda under the convenorship ofthe Bank have discharged their responsibilitiesexcellently andprovided suitable guidance to their member Banks. The BanksJaipur


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committee was awarded first prize by Government ofIndia for its outstandingperformance/functioning. Besides,its Staff College, Ahmedabad and Zonal office, Jaipurwerealso awarded by the respective Regional O.L. Implementationoffices, Ministry ofHome affairs for implementation of O.L.Policy of Government of India in their area ofoperations.

The Bank has successfully completed one year of computertraining programme on useofHindi based Unicode fonts fortheir employees with a view to promote use ofHindi inday-to-


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Annual Report 2009-1031October, 2009 under section 9(3) (h) of the Banking Companies(Acquisition & Transfer ofUndertakings) Act, 1970. Dr. Shahidwas nominated for a second term of three years from29thOctober, 2009 to 28th October 2012 or until further orders,whichever is earlier.

Shri Amarjit Chopra, who was nominated as Director for aperiod of three years on13th October 2006, by the CentralGovernment under section 9 (3) (g) of the BankingCompanies(Acquisition & Transfer of Undertakings) Act, 1970, ceased tobe a Directoron 12th October 2009, on the expiry of his termof appointment.Directors Responsibility StatementThe Directors confirm that in the preparation of the annualaccounts for the year ended March 31, 2010:The applicable accounting standards have been followedalong with proper explanation relating to materialdepartures, if any;

The accounting policies framed in accordance with the

guidelines of the Reserve Bank of India, were consistentlyapplied.Reasonable and prudent judgement and estimates were

made so as to give true and fair view of the state of affairsof the Bank at the end of financial year and of the profit ofthe Bank for the year ended March 31, 2010;Proper and sufficient care was taken for the maintenance

of adequate accounting records in accordance with theprovisions of the applicable laws governing banks in India;andThe accounts have been prepared on a going concern basis.Acknowledgement

The Directors express their sincere thanks to the Governmentof India, Reserve Bank ofIndia, Securities and ExchangeBoard of India, other regulatory authorities, variousfinancialinstitutions, banks and correspondents in India and abroad fortheir valuable

guidance and support.The Directors acknowledge with appreciation the assistanceand cooperation extended byall stakeholders of the Bank likecustomers, shareholders and well wishers in India andabroad.The Directors place on record deep appreciation for the hardwork and dedication of themembers of the staff at differentlevels, which enabled the Bank to record high quality,consistentgrowth even during the turbulent times and consolidate itsposition as one ofthe leading banks in the country.For and on behalf of the Board of Directors,


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M. D. Mallya

Chairman and Managing Director

Mumbai25th May, 20

annual report of bob

Documents