Directors Report of Bank of Baroda

Mar 31, 2019

DIRECTORS’ REPORT

The Directors have pleasure in presenting the One Hundred and Eleventh Annual Report of your Bank with the audited Balance Sheet, Profit & Loss Account and the Report on Business and Operations for the year ended March 31,2019 (FY2019).

Financial Performance

A snapshot of the Bank’s financial performance is as below:

                                                                                                     Rs. in crore

Particulars	31.03.18	31.03.19	Growth (%)
Deposits	5,91,314.8	6,38,689.7	8.0%
of which- Domestic Deposits	4,66,973.8	5,17,966.6	10.9%
International Deposits	1,24,341.0	1,20,723.2	(2.9%)
Domestic Deposits	4,66,973.8	5,17,966.6	10.9%
of which- Current Account Deposits	31,193.1	34,327.6	10.1%
Savings Bank Deposits	1,61,130.0	1,74,076.2	8.0%
CASA Deposits	1,92,323.1	2,08,403.8	8.4%
Domestic CASA to Domestic Deposits (%)	41.2	40.2	Â
Advances	4,27,431.8	4,68,818.7	9.7%
of which- Domestic Advances	3,24,238.5	3,70,185.0	14.2%
International Advances	1,03,193.3	98,633.8	(4.4%)
Total Assets	7,19,999.8	7,80,987.4	8.5%
Net Interest Income (NII)	15,521.8	18,683.8	20.4%
Other Income	6,657.2	6,090.9	(8.5%)
of which-Fee Income	3,249.7	3,576.1	10.0%
Forex Income	909.2	693.2	(23.8%)
Trading Gains	1,877.6	989.5	(47.3%)
Recovery from PWO	620.7	832.0	34.0%
NII + Other Income	22,179.0	24,774.7	11.7%
Operating Expenses	10,173.4	11,288.0	11.0%
Operating Profit	12,005.6	13,486.8	12.3%
Provisions	14,796.4	12,788.7	(13.6%)
of which- Provisions for NPAs & Bad debts written off	14,211.7	12,192.4	(14.2%)
Profit Before Tax	(2,790.7)	698.2	Â
Provision for Tax	(358.9)	264.6	Â
Net Profit	(2,431.8)	433.5	Â
Appropriations/ Transfers	Â	Â	Â
Statutory Reserve	0	108.4	Â
Capital Reserve	0	210.4	Â
Revenue and Other Reserves	Â	Â	Â

 

I) General Reserve	(2431.8)	0	Â
II) Special Reserve u/s 36 (i) (viii) of the Income Tax Act 1961	0	182.1	Â
Proposed Dividend	0	0	Â

                                                                               Rs. in crore

Key Performance Indicators	31.03.18	31.03.19
Average Cost of Funds (%)	4.56	4.83
Average Yield (%)	6.84	7.28
Average Interest Earning Assets	6,37,987.0	6,86,743.0
Average Interest Bearing Liabilities	6,16,243.9	6,48,495.6
Net Interest Margin (%)	2.43	2.72
Cost-Income Ratio (%)	45.87	45.56
Return on Average Assets (ROAA) (%)	(0.34)	0.06
Return on Equity (%)	(7.64)	1.18
Book Value per Share (Rs.)	120.28	138.42
Basic EPS (Rs.)	(10.53)	1.64

The benefit of structural changes undertaken by the Government and Reserve Bank of India (RBI) finally bore fruit in FY 2019. The implementation of the Insolvency and Bankruptcy Code (IBC) has led to improvement in cash recovery in the banking system. In addition, the ratio of nonperforming loans to advances for Scheduled Commercial banks (SCBs) has also started to come down and now stands at 10.8% as on September 2018 from 11.5% as on March 2018. The steady uptick in credit growth during the year in conjunction with decline in non-performing loans implies underlying improvement in the operating performance of the banking system. However, deposit growth continues to remain a challenge. Banks have raised interest rates on deposits to mobilise them and this will lead to higher inflow of resources to the banking system.

Domestic deposits of the Bank increased by 10.9% in FY 2019 compared with an increase of 6.1% in FY 2018. Domestic credit growth was above industry growth at 14.2% which led to a 20.4% increase in net interest income (NII). Both domestic as well as international margins expanded. The net interest margin (NIM) improved from 2.43% to 2.72% in FY 2019. The cost to income ratio decreased marginally to 45.56%.

The Bank posted an operating profit of Rs.13,486.8 crore registering an increase of 12.3%. Total provisions (other than tax) and contingencies decreased by 13.6% and provisions for NPAs reduced by 14.2%. The Bank posted a net profit of Rs.433.5 crore.

Capital Adequacy Ratio (CAR)

                                                                   Ratios in %

Â	31.03.18	31.03.19
Capital Adequacy Ratio -Basel III	12.13	13.42
CET-I	9.23	10.38
Tier - I	10.46	11.55
Tier - II	1.67	1.87

The Capital Adequacy Ratio (CAR) and CET-1 of the Bank stood at 13.42% and 10.38% respectively as on March 31, 2019. The consolidated group capital adequacy ratio was higher at 14.52%. The Bank’s net worth as of March 31, 2019 was Rs.36,620 crore comprising of paid-up equity capital of Rs.530 crore, reserves of Rs.31,047 crore (excluding revaluation reserves, foreign currency translation reserves and other intangible assets) and share application money pending allotment worth Rs.5,042 crore. The book value of the share (FV Rs.2) was Rs.138.42.

Dividend

Bank is not eligible to pay dividend for the financial year 2018 19 on account of not meeting the eligibility criteria stipulated by RBI for this purpose.

Management Discussion and Analysis

Global Economy

The global economy slowed down to 3.6% in Calendar Year (CY) 2018 after growing at 3.8% in CY17. The slowdown was markedly visible in the second half of the calendar year. According to IMF, global growth is likely to slip further to 3.3% in CY19, before picking up to 3.6% in CY20. The dip in global growth was largely on account of a slowdown in growth in Europe and China. The US housing sector has also seen some deceleration after yields increased as a result of successive rate hikes by US Federal Reserve. Other factors that have contributed to the global slowdown are Brexit, imposition of tariffs by US and China and run-off of US fiscal stimulus. According to IMF, growth is likely to pick-up in H2CY19 on the back of accommodative monetary policies by major central banks, prospects of a positive US-China trade deal and China’s fiscal stimulus to boost domestic consumption. Growth in Emerging Market and Developing Economies (EMDEs) is expected to rebound to 4.8% in CY20 from 4.5% in CY18 and 4.4% in CY19. Advanced Economies (AEs) will continue to witness modest growth which is expected to level at 1.7% in CY20 versus 2.2% in CY18 and 1.8% in CY19. Downside risks to global growth may emerge from escalating trade tension between US and other countries, a no-deal Brexit and geopolitical risks driving oil prices higher.

Indian Economy

The Indian economy witnessed a growth of 7% in FY 2019, down from 7.2% in FY 2018. This is the slowest pace of growth in over 5 years. The drop is primarily on the back of a slowdown in the agriculture sector which is expected to clock only 2.7% growth in FY 2019, much lower than the 5% growth in FY 2018. The area sown under both Kharif and Rabi declined due to spatially distributed and below normal rainfall. Manufacturing which was hitherto driving growth in the larger part of the year is also seeing a slowdown now as both external and domestic demand seems to have slowed down. Construction is the only bright spot on the back of higher spending by state governments.

With growth coming off, retail inflation has also fallen to 3.4% in FY 2019 as compared to 3.6% in FY 2018. This was led by benign food inflation at around 0.2% in FY 2019 compared to 1.8% in FY 2018. Core inflation on the other hand remained elevated at 5.8% in FY 2019 as against 4.6% in the previous year. Higher oil prices in H1FY 2019 and stickiness in the health and education components drove the core CPI higher. However, core inflation has been steadily coming off towards the end of the year.

Domestic consumption has seen a cyclical slowdown with drop in auto sales and non-oil-non-gold and electronic imports. However, the announcement of measures such as “Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and expected upturn in government spending in the next quarters may provide the requisite boost to the economy. In addition, the government’s effort towards providing affordable housing and building infrastructure are also likely to support investment demand in the economy in the near term.

Developments in Indian Banking

With growth and inflation coming-off, RBI has reduced policy rates. The anticipation of change in stance and reduction in policy rates did lead to decline in 10-year government bond yields which had increased substantially in H1FY 2019 and had peaked at 8.18%. This was driven by increasing liquidity deficit on the back of FPI outflows. Higher oil prices and NBFC liquidity woes also contributed to upward pressure on yields. As a result, the RBI undertook durable liquidity infusion in the form of Open Market Operation (OMO) purchases of Rs.2.99 lakh crore and US$ swap. These measures coupled with the slowdown in global growth and the dovish outlook by major global central banks led to decline in yields in the latter half of FY 2019.

Credit growth of the banking system continued to improve in the year, from 10.0% as on March 31, 2018 to 13.2% as on March 31, 2019. Deposit growth that was lagging behind also showed an improvement to 10.0% as in March 2019 compared with 5.8% as in March 2018. This has been possible due to higher interest rates offered by banks.

The increase in credit growth is driven by government’s recapitalisation to the extent of Rs.1.06 lakh crore in Public Sector Banks (PSBs) in FY 2019. The structural reforms undertaken by the government and RBI are also visible in underlying improvement in stressed assets of the banking system. RBI has projected that the gross NPA ratio for the SCBs would fall to around 10.3% in March 2019 from 11.5% in March 2018. The slippage ratio has declined from 7.6% in March 2018 to 4.1% in September 2018. The Provision Coverage Ratio (PCR) has also increased significantly from the levels in March 2018. All these indicators point to a much stronger recovery in the banking system in the coming years.

Another significant reform in the year was further consolidation of the banking system which a number of Committees have recommended in the past from Narsimham Committee to Nayak Committee. The Government moved in this direction by way of a three-way merger between Bank of Baroda and Dena Bank and Vijaya Bank. With this amalgamation, Bank of Baroda has now become the second largest PSB in the country.

In view of the reforms undertaken by the government and RBI not only for resolution and recovery of non-performing assets but also a digital driven lending push and consolidation, the banking system is likely to see underlying improvement in profitability in the medium-term.

Business Performance

The highlights of business performance of the Bank are as below:

Resource Mobilisation and Credit Expansion

                                                                                    Rs. in crore

Particulars	31.03.18	31.03.19	Growth (%)
Deposits	5,91,314.8	6,38,689.7	8.0%
of which- Domestic Deposits	4,66,973.8	5,17,966.6	10.9%
International Deposits	1,24,341.0	1,20,723.2	(2.9%)
Domestic Deposits	4,66,973.8	5,17,966.6	10.9%
of which- Current Account Deposits	31,193.1	34,327.6	10.1%
Savings Bank Deposits	1,61,130.0	1,74,076.2	8.0%
CASA Deposits	1,92,323.1	2,08,403.8	8.4%
Domestic CASA Deposits (%)	41.2	40.2	Â
Advances	4,27,431.8	4,68,818.7	9.7%
of which- Domestic Advances	3,24,238.5	3,70,185.0	14.2%
International Advances	1,03,193.3	98,633.8	(4.4%)
Total Assets	7,19,999.8	7,80,987.4	8.5%

Domestic CASA balances registered a growth of 8.4% over the previous year. The CASA Ratio was maintained well above 40.0% for the financial year. Term Deposits posted a growth of 12.7% which is almost twice as much as the previous year. In order to augment the CASA portfolio, the Bank has opened 94,52,510 new CASA accounts during FY 2019. The Bank has taken several steps to improve its processes and strengthen the product proposition to meet the increasing requirements of customers. The account opening process for savings account has been digitised through tablets leading to a turnaround time of a few minutes. More than 70% accounts (Non FI) are opened digitally through tablets. The Bank has also initiated issuance of non-personalised debit cards. The Bank is planning to commence opening of current accounts through tablets.

The Bank also introduced new segmented offerings for women, senior citizens, expats and the salaried class to augment deposits. These schemes have received a encouraging response from our customers. Bank of Baroda has also rolled out Doorstep Banking Service for retail customers on a pilot basis.

The Bank has launched online opening of Demat and Trading Account this year and has become a pioneer among other scheduled Banks to extend such facility to the customers. In Application Supported by Blocked Amount (ASBA), the Bank was awarded by the Bombay Stock Exchange (BSE) for being a top performer in the primary market segment of IPO/FPO bids for FY 2018 .

Credit Expansion:

During FY 2019, the Bank continued to gain market share with a well-diversified credit portfolio. Domestic advances of the Bank increased by 14.2% during the year compared with an industry growth of 13.2%. The growth was led by retail and was well spread across other business verticals. Retail loan growth was 24.2%, led by home and auto loans at 22.2% and 49.4% respectively while corporate loan growth was 15.6%. The ratio of retail loans to total domestic loans increased from 19.6% to 21.5% during the year. The international loan book declined by 4.4% on account of continued focus of the Bank on re-balancing of assets and decline of Buyers’ Credit book.

The total assets of the Bank increased by 8.5% from Rs.7,19,999.8 crore on March 31, 2018 to Rs.7,80,987.4 crore as on March 31, 2019.

Operating Performance:

The highlights of operating performance of the Bank are as below:

                                                                                                           (Rs. in crore)

Particulars	31.03.18	31.03.19	Growth (%)
Interest Earned	43,648.5	49,974.1	14.5%
Interest Expended	28,126.8	31,290.3	11.2%
Net Interest Income (NII)	15,521.8	18,683.8	20.4%
Other Income	6,657.2	6,090.9	(8.5%)
of which- Fee Income	3,249.7	3,576.1	10.0%
Forex Income	909.2	693.2	(23.8%)
Trading Gains	1,877.6	989.5	(47.3%)
Recovery from PWO	620.7	832.0	34.0%
Operating Income (NII + Other Income)	22,179.0	24,774.7	11.7%
Operating Expenses	10,173.4	11,287.9	11.0%
Employee Expenses	4,606.9	5,039.1	9.4%
Other Operating Expenses	5,566.5	6,248.9	12.3%
Operating Profit	12,005.6	13,486.8	12.3%
Provisions	14,796.4	12,788.7	(13.6%)
of which-Provisions for NPAs & Bad debts written off	14,211.7	12,192.4	(14.2%)
Provision for Standard Advances	(369.0)	(35.49)	Â
Provision for Depreciation on Investment	768.2	138.5	(82.0%)
Other Provisions	185.5	493.3	166.1%
Profit Before Tax	(2,790.7)	698.2	Â
Provision for Tax	(358.9)	264.6	Â
Net Profit	(2,431.8)	433.5	Â

 

Key Performance Indicators	31.03.18	31.03.19
Cost of Deposits - Global (%)	4.50	4.68
Cost of Deposits - Domestic (%)	5.48	5.33
Cost of Deposits - International (%)	1.33	1.89
Yield on Advances - Global (%)	7.13	7.65
Yield on Advances (Domestic) (%)	8.87	8.67
Yield on Advances (International) (%)	2.70	4.12
Net Interest Margin - Global (%)	2.43	2.72
Net Interest Margin - Domestic (%)	2.88	2.93
Net Interest Margin - International (%)	1.10	1.71
Cost-Income Ratio (%)	45.87	45.56
Return on Average Assets (ROAA) (%)	(0.34)	0.06
Return on Equity (%)	(7.64)	1.18

The interest income of the Bank increased by 14.5% from Rs.43,648.5 crore in FY 2018 to Rs.49,974.1 crore in FY 2019. The yield on advances increased to 7.65% from 7.13%. The yield on domestic advances was 8.67% during FY 2019 against 8.87% during FY 2018. The reduction was on account of underlying change in credit mix to high quality borrowers. The yield on international loan book increased reflecting the run-off of low margin products such as Buyers’ Credit.

Total interest expenses stood at Rs.31,290.3 crore in FY 2019 as against Rs.28,126.8 crore in FY 2018. The domestic cost of deposits decreased to 5.33% in FY 2019 from 5.48% in FY 2018. The cost of deposits in the international book increased from 1.33% to 1.89% in line with the global interest rate environment. NII of the Bank increased by 20.4% from Rs.15,521.8 crore during FY 2018 to a level of Rs.18,683.8 crore during FY 2019. The NIM improved from 2.43% to 2.72% during FY 2019. The domestic and international NIM improved from 2.88% to 2.93% and 1.10% to 1.71% respectively. Other income of the Bank decreased by 8.5% to Rs.6,090.8 crore on account of decline in treasury gains by 47.3% to Rs.989.5 crore. Recovery from written-off accounts was higher at Rs.832 crore registering an increase of 34%.

Operating expenses increased by 11.0% to Rs.11,287.8 crore in FY 2019. Employee cost increased by 9.4% during the year to Rs.5,039.1 crore and other operating expenses increased by 12.3% to Rs.6,248.9 crore. The operating profit of the Bank grew by 12.3% to Rs.13,486.8 crore during FY 2019. Total provisions (other than tax) and contingencies decreased by 13.6% to Rs. 12,788.7 crore while provision for NPAs decreased by 14.2% to Rs.12,192.4 crore in FY 2019. As a result, the Bank posted a net profit of Rs.433.5 crore in FY 2019 against a net loss of Rs.2,431.8 crore in FY 2018.

Medium and Long-Term Strategy of the Bank

The Bank continues to pursue a multi-pronged strategy to build a future-ready, world class banking institution. The Bank believes in the power of data, digitisation and technology to transform banking. Bank of Baroda continues to invest in not only enhancing its IT backbone but also in creating cutting-edge digital platforms and partnering with leading technology players and/or fintech startups to provide the next generation of products and experience to customers. The Bank has established two state-of-the-art Centres of Excellence for Analytics and IT to help in rapidly scaling its capabilities in these areas. The Bank aims to build platforms wherein customers can do a range of transactions online and have access to information at their fingertips. Bank of Baroda is creating a learning organisation and investing in enhancing the skills of its workforce. The Bank also emphasises on centralisation and digitisation of operations to ensure that employees become more focused on customer facing roles.

Project Navoday - The Bank’s Transformation Journey Thus Far

For achieving medium and long-term strategic goals, the Project Management Office (PMO) of Project Navoday tracks all multidimensional initiatives undertaken across Business Units and Support Functions such as IT, HR, Operations & Services.

As part of the transformation journey, in addition to the strategic initiatives taken under various businesses, a pivotal role is being played out by Shared Services Centre in terms of centralisation and digitisation which eventually leads to better customer experience in the form of lower turnaround time for customers. The Bank is making a paradigm shift in facilitating the operating units to shift focus towards a ‘Sales and Service’ model. Deposit accounts are opened with Tablets in digital mode and processing of loans is being done in Centralised Processing Centres. Back-office work has moved away from branches which opens up time for branches to focus on more productive activities such as sales and marketing. The Bank benefits in the form of higher productivity and a better control environment.

Strategic tie-ups with market players in the field of agriculture, E-commerce and Fintech are enabling the Bank to augment its business besides improving market share. Strategic rationalisation of International Operations along with fungible credit limits have paved the way for more profitable operations across overseas territories.

A revamped Rewards, Recognition and Employee engagement framework reinforces the philosophy of ensuring that employees grow with the Bank. The Bank has put in place customer segmentation with a focus on hyper personalisation to crosssell products. Centres of Excellence in IT and Analytics are driving technological adoption and cutting-edge tools to improve business performance.

The Bank is leveraging the impetus gained to widen the spectrum of these initiatives in the backdrop of the amalgamation w.e.f. 1st April 2019.

Corporate Credit

Corporate credit in the bank is serviced through 10 Corporate Financial Services (CFS) branches and 4 Emerging Corporate Branches which manage about 80% of the total corporate credit portfolio of the bank. The corporate credit portfolio of the Bank increased by 15.6% during FY 2019 to Rs.185,943 crore.

During the year under review, the corporate credit portfolio reaped the benefits of transformation initiated in preceding years. With this revamp in approach towards corporate credit delivery, the risk profile of the portfolio further improved during the FY 2019 as observed in the rating distribution of domestic credit portfolio as below:

Credit Rating Distribution*	31.03.2017	31.03.2018	31.12.2018
A & above	39.27%	52.37%	60.21%
BBB	15.77%	14.90%	13.82%
Below BBB	21.80%	19.72%	15.86%
Unrated	23.16%	13.01%	10.11%

*External rating distribution of advances above Rs.5 crore,

Target Market approach: FY 2020

During the year, the target market approach has been further sharpened based on the objectives of improving credit performance, ensuring profitable deployment of capital, optimising overall yield and profitability and increasing bank’s market share in the performing and growing sectors. The structural framework adopted for the same is as follows:

-    Identification of industries / sectors based on industry outlook i.e. the combined output of various industry parameters including market size, growth indices, demand-supply outlook, cost structure, competition, financial performance, govt. policies and investment outlays.

-    Sector-wise business plan for target market lending based on exposure caps, existing exposures, and further appetite for fresh acquisitions for the current financial year.

-    Identification of corporates with defined pre-selection criteria such as ratings, financial parameters i.e. revenue, profit after tax (PAT), net worth, gross capital, financial ratios, viz. leverage ratio (debt-equity ratio, Net Debt / EBITDA, profitability ratio (Net profit/Sales, gross profit/Sales), operating profit margin, cash accrual / debt etc. and due diligence.

-    Precise Account Planning with structured calling plans for meetings, identifying business opportunities, approval and closure.

-    Execution of the business plan under target market approach through dedicated relationship managers across the Bank.

Under the above approach adopted by the Bank, nine sectors with 476 corporates were identified and 121 leads were generated out of which 87 leads amounting to Rs.33,127 crore were converted into business. Moving ahead with this strategy, 809 corporates (including mid-corporate clients) have been listed as target in FY 2020.

With a view to provide enhanced customer experience for International Trade Customers, and also to ensure seamless transactions management from initiation of requests to successful execution, the Bank launched a fully digitised and integrated trade system - BarodalNSTA (Baroda Integrated Solution for Trade Finance Access) which is compliant with SWIFT. BarodalNSTA provides secure online access via a front-end portal to clients for initiating transaction requests resulting in operational consistency and better governance with enhanced security and validations. It is a user-friendly application with attractive and convenient dashboards, providing real time tracking of transactions for customers with multiple features like comprehensive MIS, reports, courier tracking, calendar (for due date maintenance), etc.

MSME Credit

The Bank targets the MSME sector through 42 dedicated SME Processing Cells named ‘SME loan factories’, and a wide network of branches servicing the MSME segment with a target market approach.

Supporting the Government's efforts under MUDRA scheme on employment generation, the Bank lent Rs.6,023 crore to the sector. The Bank has also extended credit of Rs.1,154 crore to SC, ST and women entrepreneurs under the Stand-up India programme since the launch of the scheme. The MSME credit portfolio of the Bank increased to Rs.55,455 crore as on March 31, 2019, from Rs.51,730 crore as on March 31, 2018. The Bank has added 93,994 new MSME customers to its base in FY 2019. To provide access to working capital to MSMEs at competitive rates on Trade Receivables electronic Discount System (TReDS), the Bank has onboarded itself on all the three TReDS platforms. As on March 31, 2019, the TReDS business accounted for Rs.223 crore.

In support of the Government’s initiative to augment MSME units by speedy sanction of MSME loans through the ‘PSBloansin59minutes’ portal, the Bank was ranked first, out of all PSBs, as on March 31, 2019. To ease working capital constraints of MSME, arising out of GST implementation, the Bank has devised a special product for financing against GST receivables for the MSME segment. The supply chain business has an outstanding book of Rs.452 crore as on March 31, 2019 and is backed by a fully digitised supply chain financing product which has provided a new vehicle for sourcing of MSME customers, specifically vendors and suppliers of anchor corporates.

In addition, the Bank has 6 Area Specific Schemes for financing SME clusters. The total number of products increased to 26 including specialised products to cater to MSME units during the last financial year, denoting the thrust of the Bank on this segment. We have also adopted a new pricing strategy named CIBIL MSME Rank (CMR) based pricing for MSME enterprises with credit exposure above Rs.25 lakh and up to Rs.5 crore, which enables MSME businesses to have access to bank finance at competitive rates starting from as low as MCLR plus 0.05%. To reach out to newer business segments and to deliver the benefit of lower interest rates in comparison to NBFCs, the Bank is co-originating with different NBFCs and entered into co-origination arrangements with certain NBFCs.

The Bank has commissioned a dedicated team for financing commercial vehicles and construction and mining equipment for the MSME segment. For this purpose, Bank has entered into a strategic alliance with Tata Motor Finance Ltd. for capturing new business in the commercial vehicles segment. Further, the Bank has on-boarded clients under a new scheme ‘Value Chain Finance’ which is specifically designed for customers with maximum turnover of up to Rs.2,000 crore.

To ensure better reach to MSME market segments, the Bank has established a separate specialised team dedicated to sales and loan processing, deployed at SME Loan Factories. To ensure consistency in underwriting, faster turnaround time and timely collections, the Bank has implemented centralisation of MSME loan processing through Integrated SME Loan Factory (ISMELF) at 2 centres viz. Mumbai and New Delhi. The Bank is also participating in MSME schemes such as ‘One District One Product’ promoted by the Uttar Pradesh Government to ensure higher penetration. Government Schemes Processing Cells (GSPC) have been set up across India to enable seamless processing of Pradhan Mantri Mudra Yojana, Standup India, Pradhan Mantri Employment Generation Programme, National Urban Livelihoods Mission and State-specific Government sponsored schemes. Under the Support & Outreach Campaign for MSMEs, a Gol initiative, launched on November 2018, the Bank was assigned 100 districts and 100 days with key deliverables.

Retail Credit

The Bank has been undertaking a number of transformational initiatives to improve its market share in retail segment. Foreseeing the importance of retail lending in the economy, the Bank adopted a focused approach in the retail lending space since April 2016 and considerably increased the retail book from Rs.68,765 crore in March 2018 to Rs.85,390 crore as on March 31, 2019.

The initiatives include redesigning of products and processes to enhance the customer satisfaction by allowing higher eligibilities, lower pricing and standardised processing. Some of the steps undertaken by the Bank are as mentioned below.

-    Risk Based Pricing

-    Setting up of Centralised Processing Cell at Gandhinagar and Hyderabad

-    Empanelment of Direct Selling Agents (DSAs)

-    Empanelment of Contact Point Verification (CPV) agencies

-    Implementation of Loan Lifecycle Processing Systems

-    Focused and strategic approach on takeovers

-    Implementation of a pre-approved credit programme

-    Setting up of a dedicated call centre for collections

The Home Loan book has grown by 22.2% to Rs.54,612 crore as on March 31, 2019. The continued efforts on increasing Auto Loans has resulted in a growth of 49.4% with an increase in market share from less than 1% to approximately 3%. The disbursement of Auto Loans has also grown by 169.2%. Fresh sanctions for Education Loans have grown by 106.8%. The target given by the Ministry for Education Loans has been surpassed by 48%. In case of mortgage loans, the book has grown by 74.3%.

Rural and Agricultural Lending

The Bank has a network of 1845 branches in rural and 1546 branches in semi-urban areas which are leveraged for priority sector and agriculture lending. During FY 2019, the Bank opened 22 new rural and semi-urban branches. The Bank’s agriculture advances grew by 14.2% from Rs.49,583 crore as on March 31, 2018 to Rs.56,623 crore as on March 31, 2019. The Bank achieved all mandatory targets under Agriculture, Priority Sector, Small and Marginal Farmers (S&MF), Micro Enterprises, Loans to Non-corporate Farmers and weaker sections of the society during FY 2019 and earned a net commission of Rs.33.0 crore by selling net Priority Sector Lending Certificates (PSLC) worth Rs.7,700 crore.

The Bank is the Convener of State Level Bankers’ Committee (SLBC) in the states of Uttar Pradesh and Rajasthan and shoulders the Lead Bank responsibility in 48 districts across the country.

The Bank continues to be a leader in lending to the agriculture sector which received an impetus with the Government’s target of doubling the income of the farmers by FY 2022. The Bank has moved beyond granting simple farm credit, to a more diversified rural lending strategy by focusing on new products across rural customer segments like farm mechanisation, horticulture loans, warehouse receipt financing, food and agro-processing and adopting a community-based lending model for the small farmers and communities.

During the year, Bank issued 2.29 lakh Kisan Credit Cards. Baroda Kisan RuPay Card, an ATM enabled smart card, was issued to 13.46 lakh farmers. As a part of its microfinance initiatives, the Bank linked 26,630 Self Help Groups (SHGs) by granting loans amounting to Rs.482.69 crore. To facilitate credit linkages of Farmer Producer Organisations (FPOs), the Bank tied up with the Small Farmers’ Agribusiness Consortium (SFAC) for providing Credit Guarantee for collateral free loans and also as a preferred bank for the state of Maharashtra. The total Agricultural Advances as on March 31, 2019 were well above the regulatory requirements.

The Bank’s agriculture and rural strategy continues to focus on developing an ecosystem of alliances and partnerships with multiple players with the objective of increasing farm productivity; enhancing the income of farmers and serving the rural economy.

The Bank is developing an agri-digital platform - ‘Baroda Kisan’. The platform in partnership with strategic players aims to become a one-stop shop to cater to all major needs of a farmer ranging from notifications, weather forecast information, crop health, soil moisture, pest infection information, mandi prices crop specific advisory, input buying (like seeds, fertilizers, pesticides), equipment renting advisory services and innovative financing options for sale of agriculture produce.

Bank of Baroda observed a Kisan Pakhawada’ from October 1, 2018 to October 16, 2018 and celebrated the last day of the fortnight as Baroda Kisan Diwas to coincide with the International Food Day. In FY 2019, a total of 8,018 choupals were covered with participation of 2,38,974 farmers through 1,621 Kisan Melas, 339 Health Camps (soil / animal / farmer), 4,884 farmer meetings and 310 financial literacy camps.

The Bank has been awarded the Inclusive Finance India Award for Innovation and Inclusiveness in Priority Sector Lending by Bank (Public Sector) for 2018 by Access Assist. The Bank also received 4 awards including the Runner up in Overall Best Social Bank under the Large Banks category during the 14th ASSOCHAM Annual Banking Summit cum Social Banking Excellence Awards - 2018.

Priority Sector Lending

Priority sector advances of the Bank stood at Rs.1,47,109 crore as of March 31, 2019. The Bank was well above the mandated levels of priority sector advances and its other sub-components.

 Advances to SC/ST Communities

The outstanding advances to SC/ST communities went up from Rs.5,765 crore as of March 31, 2018 to Rs.7,212 crore as of March 31, 2019. The SC/ST communities accounted for 18.31% share in total advances granted to weaker sections by the Bank.

Furthermore, special thrust is laid by the Bank in financing SC/ ST communities under various Government sponsored schemes such as National Rural Livelihood Mission (NRLM), MUDRA Loan, Start-up India and Stand-up India. During this year, the Bank entered into various tie-ups with State Rural Livelihood Missions (SRLMs) in Tamil Nadu, Odisha, Chhattisgarh, Punjab and Uttar Pradesh for providing finance to women SHGs to further the mission of women empowerment. The Bank also tied up with SEWA for financing solar units for women salt workers (members of SEWA) in the Rann of Kutch, Gujarat.

Financial Inclusion (FI)

The Bank has increased the FI coverage by deploying 15,356 BC agents catering to 21,895 villages and other semi-urban and urban areas and also through 583 Branches in under-banked areas across the country. Total number of Basic Savings Bank Deposit (BSBD) accounts under financial inclusion stand at 372.6 lakh with an aggregate balance of Rs.12,690 crore as on March 31, 2019. The number of zero balance accounts have reduced from 11.53% in the previous year to 9.21% this year.

The Bank has taken a number of initiatives to harness the power of digitisation to deepen financial inclusion in the year.

-    Digitised instant account opening through eKYC authentication and Aadhaar seeding with PIN generation through tablets, account opening kiosks and business correspondent (BC) outlets with instant enrollment under Micro Insurance and debit card issuance.

-    Deployed micro and table-top ATMs in rural areas through BCs and expanded the Business Correspondent using Information and Communication (BC-ICT) model by adding 700 agents during the year.

-    Enabled increased utilisation of bank accounts, expansive cash-in cash-out network comprising 15,356 BCs who use 8,823 PINPAD and 1,882 portable Micro ATM devices.

-    Provision of 185 VSATs to BC agents functioning in grey areas across the country.

FY 2019 Performance Highlights under Financial Inclusion

-    101.2% of target achieved in respect of total BC outlets.

-    91.3% and 132.4% of targets achieved for BSBD account opening and amount under the same through branches respectively

-    The Bank achieved 233.9% and 284.6% of the target set for FY 2019 for BSBD account opening and amount under the same through BC points respectively.

Highlights of Performance under Pradhan Mantri Jan Dhan Yojana (PMJDY)

The Bank had 300.83 lakh accounts under PMJDY as on March 31, 2019, as against 239.29 lakh at the end of previous year, an increase of 25.7%. The Bank’s market share in incremental PMJDY accounts and outstanding deposits was 10.7% and 11.9% respectively. Outstanding balance in PMJDY accounts was Rs.9,312 crore as of March 31, 2019 as against Rs.6,595 crore at the end of previous year, an increase of 41.2%. RuPay debit Cards issued under PMJDY accounts increased to 276.62 lakh from 221.50 lakh. Aadhaar seeding in PMJDY accounts increased to 88.0% during the year from 83.9% last year.

Coverage through Social Security Schemes

The position of enrollment under social security schemes of the Government as on March 31, 2019 is as under:

Â	31.03.2018	31.03.2019
Pradhan Mantri Suraksha	59.52	90.37
Bima Yojana (in lakh)	Â	Â
Pradhan Mantri Jeevan Jyoti	18.14	25.30
Bima Yojana (in lakh)	Â	Â

Setting up Aadhaar Enrollment Centres

Banks, vide Gazette notification dated July 14, 2017 of Government of India, have been mandated to set up Aadhaar enrollment and update centres inside the branch premises with at least one centre in every 10 branches. Accordingly, the Bank has set up 608 Aadhaar enrollment centres as of March 31, 2019.

Performance of RRBs Sponsored by Bank of Baroda

The Bank has sponsored three Regional Rural Banks (RRBs): Baroda Uttar Pradesh Gramin Bank, Baroda Rajasthan Kshetriya Gramin Bank, and Baroda Gujarat Gramin Bank. The aggregate business of these three RRBs rose to Rs.62,298 crore as of March 31, 2019 from Rs.55,063 crore as of March 31, 2018, registering a growth of 13.1%. The three RRBs together posted a net profit of Rs.208.61 crore during FY 2019 against Rs.208.55 crore in the previous year. The net worth of these RRBs put together improved from Rs.2,401.78 crore as of March 31, 2018 to Rs.2,620.57 crore as of March 31, 2019.

International Operations

The Bank has 100 overseas branches/offices across 21 countries comprising of 45 overseas branches in 13 countries, 54 branches of the Bank’s eight overseas subsidiaries and one International Banking Unit (IBU) in GIFT City (SEZ), Gandhinagar, Gujarat, India which deals exclusively in foreign currency. In addition, the Bank has one Joint Venture viz. India International Bank (Malaysia) Bhd. in Malaysia and one associate bank viz. Indo Zambia Bank Ltd. in Zambia with 30 branches.

During FY 2018 and FY 2019, the Bank has undertaken strategic rationalisation of its overseas presence based on a comprehensive evaluation framework. During the year, Bank closed down its Offshore Banking Unit at Bahamas, wholesale banking unit in Bahrain, and surrendered banking license of subsidiary at Ghana which had three branches. Further, Muttrah branch at Oman was merged with the Greater Muttrah branch and Durban branch was merged with Johannesburg branch in South Africa. The rationalisation of operations based on the strategic review is continuing.

The Bank has presence in the world’s major financial centres of New York, London, Singapore, Brussels and Dubai. In the international arena, our Bank pursues a strategy of driving growth and value by meeting the international banking requirements of Indian corporates; catering to India linked cross-border trade flows for Indian and locally incorporated companies or firms and being the preferred Bank for NRIs/ Persons of Indian Origin. The Bank is continuously consolidating and reorganising its International Operations in line with the new global environment and focused on rebalancing the portfolio with a view to manage risks, shed low-yield assets and increase profitability.

As of March 31, 2019, the Bank’s total business from international branches was Rs.2,19,356 crore and constituted 19.8% of the global business. Total deposits were at Rs.1,20,723 crore while net advances were Rs.98,633 crore. It was a year of consolidation for the international operations.

The total deposits were lower by 2.9% whereas total advances fell by 4.4%. The reduction in business is mainly on account of rationalisation of the Bank’s overseas centres, UK subsidiarisation and run-off of Buyers’ Credit.

Incorporation of Subsidiary in UK

The Bank’s wholly owned new retail subsidiary at UK viz. Bank of Baroda (UK) Ltd. has been operationalised with effect from 17.12.2018. The retail business of the UK operations has shifted to the new subsidiary and wholesale business is retained under branch mode. The UK operations now comprise of 1 branch of the Bank and 10 branches of subsidiary.

Treasury Operations

The Bank operates its Treasury operations from a state-of-the-art dealing room at its Corporate Office in Mumbai. The Treasury is a prominent player in various markets e.g. Foreign Exchange, Interest rates, Fixed Income, Money Market, Derivative, Equity, Currency and Interest rate Futures and other alternate asset classes. The Bank is offering various services like interest rate swaps, currency swaps, and currency options, forward contracts through authorised branches dealing in foreign exchange across India.

The treasury is responsible for managing the funds position of the Bank and ensuring safety, liquidity and optimal yield on these funds. It maintains Statutory Reserve Requirements and invests in corporate bonds, commercial papers, equity, venture capital, mutual funds, etc. as a part of the fund management operations. The total size of the Bank’s Domestic Investment Book as of March 31, 2019 stood at Rs.1,72,412 crore. The share of SLR securities in total investments was 85.89%. The percentage of SLR securities (unencumbered) to NDTL at March 31, 2019 was at 27.98%.

The Bank demonstrated its capabilities in effectively dealing with extreme adverse circumstances in the market. The Bank has been able to capitalise on the opportunities offered by yield movements. The Bank managed its portfolio efficiently and maintained average yields on interest bearing investment for FY 2019 at 8.13% (including profit on sale). During FY 2019, the profit on Sale of Investment and Foreign exchange earnings are Rs.994 crore and Rs.445 crore respectively.

Government Business

The Government Business is an important part of the Bank’s strategy. It caters to the banking requirements of Central/ State Government and PSUs across India. The Bank is authorised to collect direct taxes through its designated branches and is an accredited banker to the Ministry of Health and Family Welfare.

The Bank is partnering with various departments at the Central and State levels in developing e-solutions in-line with the digital initiatives of the Government of India, leading to transparency and efficiency. MOUs with EPFO, Employees’ State Insurance Corporation, IRCTC, National Agriculture Market, Government e-Marketplace and Inland Waterways Authority of India have been signed to enhance fresh business opportunities.

During the year, Bank has developed customised software for the e-LC solution for Ministry of Defence. Bank of Baroda is the only Public Sector Bank to launch e-KVP utility through banks. The Bank has integrated itself on the e-PCS portal of Indian Port Association for all the 3 major ports across India. An MOU with the Kandla Port has been signed.

The Bank has been recognised by Pension Fund Regulatory Development Authority for the Achievement of the Targets under APY.

Wealth Management

During the year, the Wealth Management Department has been at the forefront in providing investment and insurance services to our customers. The Bank’s flagship programme, ‘Baroda Radiance’ continues to cater to the requirements of High Net Worth Individuals through a dedicated structure of relationship managers. The Bank aims at providing best-in-class solutions and services to its customers for which it is building digital solutions. Some of the initiatives taken during the year are:

-    'Baroda Wealth Solution', a digital platform, is implemented to enable seamless distribution of investment and insurance products to all customers. This platform will also be available to Bank’s customers in Mobile Banking and Internet Banking.

-    Bank extended the coverage of the product 'Group Credit Life' and 'Group Criti Care' to its retail borrowers, covering the credit risk in case of eventuality (life or critical illness).

-    Bank launched five health insurance products with portability and continuity benefits. This enables customers to migrate their health insurance policies to an insurer of their choice.

Stressed Asset Management

With an increase in non-performing loans over the years, the Bank has revamped its strategy to augment recoveries and reduce slippages. For this, the Bank has created a ‘Stressed Assets Management Vertical’, where all major and medium sized NPA accounts of Rs.10 lakh and above and all SARFAESI eligible accounts are handled by specialised units called Stressed Assets Recovery Branches (SARB) set up at Zonal and Regional level. The remaining accounts i.e. accounts below Rs.10 lakh are handled by respective branches with the help of Business Correspondents and outsourced Call Centres. Non-performing loans continued to decline for the Bank with gross NPA ratio declining to 9.61% as on March 31, 2019 from 12.26% as on March 31, 2018. Similarly, Net NPA ratio improved to 3.33% in March 2019 as compared to 5.49% in March 2018.

The movement of NPAs during the last two years are as under:

                                                                                                  (Rs. in crore)

Particulars	31.03.2018	31.03.2019
Gross NPA	56,480	48,233
Gross NPA (%)	12.26	9.61
Net NPA	23,483	15,609
Net NPA (%)	5.49	3.33
Additions to NPAs	24,239	13,614
Recovery/ Upgradations	5,530	8,759
Write offs including TWOs	4,948	13,102
Recoveries in written off accounts	621	832
Provision Coverage Ratio (including TWO) (%)	67.21	78.68
Provision Coverage Ratio (excluding TWO) (%)	58.42	67.64

As per asset classification, the bifurcation of loan book is as given below:

                                                      (Rs. in crore)

Asset Category	31.03.2018	31.03.2019
Standard advances	4,04,264	4,53,473
Gross NPA	56,480	48,233
Total Gross Advances	4,60,744	5,01,706
Gross NPAs comprising of
Sub-standard	13,131	9,014
Doubtful	35,447	32,398
Loss	7,903	6,821
Total Gross NPA	56,480	48,233

In order to address a large number of small NPA accounts, the Bank launched OTS schemes viz. Lakshya I and II (Lakshya Agriculture, Retail & MSME) during FY 2019. The Bank settled 109,327 accounts under these schemes with an aggregate settlement amount of Rs.639 crore and recovery and upgradation of Rs.543 crore. An application called One Time Settlement Tracking System has been implemented wherein customers can initiate settlement proceedings online. The Bank has also set up a legal war-room for real-time tracking of recovery proceedings and to aid accelerated decision making (378 high value suit-filed accounts were being monitored by the War Room).

The Bank has set up a solution provider cell to augment recoveries to ensure minimal slippages and to provide resolution strategies for large NPA accounts, with exposure above Rs.30 crore. For timely collections from retail and SME customers, a 350-member call centre with multi-lingual support has been set up. This is supported by feet-on-street staff to drive on-ground collections. A special taskforce of about 800 officials of the Bank has been deployed for recovery of small NPA and potential NPA accounts. Business Correspondents are incentivised for collections in crop loans.

The Bank has strengthened its NPA management with daily dashboards like Days Past Due (DPD) Report, NPA Movement Chart and Mock Runs for forecasting degradations to ensure reduction in slippages and improvement in collections. Further, the Bank is in the process of developing a mobile application which would enable the collection agents on the field to collect the amount based on data fed from the system and also update recovery details.

The Bank is in the process of implementing an Integrated Litigation Management system (ILMS), a pilot run of which has been completed. With this system, all the cases filed in DRT, suit filed cases with other courts and the status of action initiated by Bank under SARFAESI Act, etc. can be monitored on a real time basis.

In addition, the Bank has put in place the following measures on an ongoing basis to facilitate recovery of non-performing assets:

-    Assigning Nodal Officers at each DRT for follow-up of legal cases on a daily basis so as to minimise the delay in obtaining decrees and execution and to maximise recoveries.

-    Taking assistance from Advocates/Consultants to liaise with Official Liquidators (OL) to get the recoveries realised by OLs.

-    Liasoning with Official Liquidators, organising Recovery Camps across branches, close monitoring of stressed accounts and recovery agents at all levels and monthly e-auctions, especially in DRT suit filed NPA accounts.

-    Number of Wilful Defaulters declared during the current FY 2019 is 399, increasing the aggregate numbers substantially to 750. This number stood at 303 as on March 31, 2018.

Information Technology (IT)

The Bank is constantly evolving its products, systems and structure to meet the growing aspirations of the customers.

Digitisation of banking services is driving continuous upgradation of the IT infrastructure. Some of the major initiatives during the year include:

-    The Bank has upgraded its erstwhile Loan Management System (LMS) with a new Loan Lifecycle Processing System. This new system streamlines loan origination and tracking processes to enable faster loan disbursals and end-to-end processing of loan proposals using image-based workflow and Business Process Management (BPM) tool to improve Turn Around Time (TAT).

-    The Bank is implementing a Decision Management System which provides business policy owners with the ability to author, test, execute, and maintain score models, strategies and rules integrated with the LMS. This will substantially improve decision quality, consistency and efficiency of operations.

-    The Bank is in the process of upgrading the existing Internet Banking (Baroda Connect) with an advanced version, an enhanced user interface and a basket of new functionalities.

-    The Bank is in the process of implementing Oracle CRM for Branches, Contact Centres (CCs), Retail Loan Factories (RLFs), Small Medium Enterprise Loan Factories (SMELFs), City Sales Offices (CSOs) and Regional Offices.

-    In order to handle large volumes, the Bank upgraded to Unified Payments Interface (UPI) version 2.0. It aims to simplify and provide a single interface across all NPCI systems besides creating interoperability and providing superior customer experience.

-    The Bank has implemented a Centralised Communication Management (CCM) solution which facilitates automation of various communication/e-communication to customers on a monthly basis.

-    The Bank is in the process of implementing an API Banking platform to accelerate digital transformation and build capabilities to unlock the true value of digital assets, create business agility and promote innovation and collaboration.

-    The Bank has implemented an automated reconciliation platform called Universal Transaction Reconciliation System (UTRS). This platform offers the capability to quickly configure two-way or multi-way reconciliation, thereby reducing risk and increasing compliance.

-    The Bank has embarked upon the journey of cloud adoption. The Bank has implemented e-mail, e-learning Management services and collaboration technology solutions on the public/ community cloud. The Bank has also implemented archival solution for email communication to strengthen compliance.

-    The Bank is in the process of implementing a Mobile Device Management solution (MDM) which will enable employees to securely access various banking applications using corporate-owned and employee-owned (BYOD) mobile devices from remote locations, thus increasing productivity and efficiency. This will also help the Bank in reducing cost of operations and business risks.

-    The Bank has best-in-class technology infrastructure for Data Centre conforming to Uptime Institute Tier-3 standards. The Bank has also built a Disaster Recovery Site in different seismic zones with redundancy built in every single point of failure to ensure uninterrupted service delivery to our customers. Bank of Baroda has additionally built Near Disaster Recovery Centre for Core Banking (Domestic & International) System and Treasury system to ensure zero data loss as part of its Business Continuity Planning and Disaster Recovery strategy.

The Bank has implemented state-of-the-art Data Centre tools for Network Management at its Data Centre and branches/offices. In addition, the Bank has also implemented application performance management for synthetic monitoring of internet banking and core banking applications. The Bank has set up two centres of excellence to build a future ready organisation.

IT Centre of Excellence (ITCoE)

The Bank has setup an ITCoE which works closely with business units to identify and implement related technologies for driving revenues and gaining efficiencies. The ITCoE aims to develop differentiated, market-leading technology solutions while driving business outcomes. ITCoE is bringing together a wide variety of cutting-edge skills such as design thinking, mobility, DevOps, Business Process Management and emerging technologies like Robotics Process Automation, API & Platform banking to execute on the twin mandates of improving business efficiency and taking new use-cases to market at speed.

Analytics and Artificial Intelligence Centre of Excellence (A&AICoE)

Under the ACoE, the Bank has established an enterprise-wide, data and analytics technology platform with petabyte scale - the Big Data Lake. Powered by leading data technologies and techniques like Data Lake, Machine Learning and IT, the ACoE aims at helping the Bank in traversing the journey from Data to Insights and from Actions to Results. ACoE is working with multiple lines of businesses to identify and realise new value-creation opportunities, and to build the Bank's capability in leveraging analytics to increase revenue, reduce costs and improve risk profiling.

Cyber Security

Over the years, the Bank has built a strong foundation for cyber security comprising of a comprehensive set of information security measures to counter cyber-attacks. The Bank has a well-defined cyber security governance framework in place that is operated through a combination of management structure, policy framework and operational controls.

In order to detect and prevent cyber incidents, the Bank has upgraded its Captive Security Operations Centre to Cyber Security Operations Centre (C-SOC) which operates on a 24x7 basis. During the year, the Bank has further added new technologies to C-SOC to identify, manage, respond and resolve cyber security incidents quickly and more efficiently. Further, the Bank has placed the following controls to enhance cyber security:

-    Data Centre and Disaster Recovery operations are ISO 27001:2013 certified - (set of international best practices related to Information Security).

-    Implemented multi-layered security architecture to protect IT Assets.

-    Periodic audits of applications and infrastructure to identify weaknesses in the existing system and to take steps to rectify deficiencies.

-    Phishing sites, rouge mobile apps and social media sites are monitored for malicious activities/contents and the same are taken down on detection through anti-phishing and brand protection services.

-    Advanced security solution implemented to detect and prevent Bank’s critical infrastructure from persistent threats and zero-day attacks.

-    Data Leakage Prevention solution to detect and prevent unauthorised usage or misuse of business sensitive information.

-    Technology for detection of anomaly in network traffic and its behaviour to detect network level attacks.

-    Implemented technology to protect the systems from Distributed Denial of Service (DDoS) and obtained clean pipe to ensure uninterrupted customer service.

The Bank has also taken various initiatives for educating customers through various channels such as SMS, ATM slips, ATM screens, Digital Displays, Website etc. Employees are sensitised in the field of cyber security through circulars, mandatory E-Learning courses, quarterly IS awareness magazine “Cyber Chunks” and Audio Visual Film among others. The Bank participates in the cyber security drills conducted by agencies such as IDRBT, CERT-In to test its capabilities and further strengthen defence against cyber-attacks. The Bank has an emergency response team and cyber crisis management plan in place and their effectiveness is periodically tested through drills.

Digital Transformation

The Bank is committed to digitisation and continuously strives to migrate transactions to digital channels which lead to better customer experience. As against a target of 50 crore digital Transactions allotted to the Bank for FY 2019 by the Ministry of Electronics and Information Technology (MeitY), the Bank achieved 107.6% of its target in February 2019.

The major focus of Digital Banking is to make our products available to customers through digital and mobile channels such as Mobile banking, Unified Payment Interface, BHIM Aadhaar, Multi-Function Kiosk, Self Service Passbook Printers, etc. The progress on digital initiatives is as follows:

-    Mobile Banking: The Bank’s new Mobile banking application MConnectPlus is available in 13 languages and has been extended to NRI customers. The user base has grown by 116% with 108% increase in transactions. Overall transaction amount increased by 120% to Rs.42,162 crore.

-    Unified Payment Interface (UPI): The Bank has extended its UPI application to all its RRBs .The Bank has tied up with TrueCaller app for providing UPI facility in September 2018. To increase customer convenience, the Bank went live on UPI 2.0 as an issuer on 20.03.2019. Overall transactions increased to Rs.122,408 crore.

-    Baroda Pay Point: During the year, the Bank launched Baroda Pay Point - a mobile/web-based fee collection portal for the payment and administrative needs of educational institutes and to help in canvassing additional CASA business and revenue income.

-    Debit Cards: The Bank offers a wide range of chip-based Debit Cards with customised offers to meet the changing lifestyles of the customers. The Bank has issued more than 72 million debit cards (including 44 million Rupay cards). The Bank launched RuPay qSPARC card - the National Common Mobility Card (NCMC) to enable customers to have a single card instead of a Debit and a Prepaid card separately.

-    Bharat Bill Payment System (BBPS): The BBPS System of the Bank has been certified both as a Customer Operating Unit (COU) and a Biller Operating Unit (BOU) by nPcI. The Bank is providing BBPS services in Mobile Banking, BHIM UPI, Net Banking and UMANG application through Net banking. The volume and value of transactions under BBPS increased by 296% and 261% during the year respectively.

-    Baroda FASTag (National E Toll Collection - NETC): The Bank has implemented and launched NETC on 12.07.2018 and branded it as Baroda FASTag.

-    ATMs: The Bank has 8,166 ATMs and 1,406 Cash Recyclers in India and with an availability of 95%. Our multifunction ATMs are focused on making banking a smooth experience.

-    Hi-Tech Digital Branch: The Bank has evolved an innovative concept by setting up Hi-tech Digital branches equipped with advanced gadgets like Artificial Intelligence Robot named Baroda Brainy and Digital Lab with free Wi-Fi services. In addition, the digital branches have self-service kiosks and an expert area which is equipped with Remote Tellers (Video Assistants) to assist the customers in a more interactive manner.

-    NACH eMandate: Bank of Baroda went live for eMandate Internet Banking on March 21, 2018. The Bank also went live with API Mandate (Internet Banking) as a destination bank on February 6, 2019.

-    Baroda Prepaid Card: The Bank offers three types of Prepaid cards to its customers.

a.    Baroda Gift Card: A perfect gifting option which can be used to make purchases or payments across the country.

b.    Baroda TravelEasy Card: A prepaid international currency card, which is available in three currencies i.e. US Dollars (USD), Euro, Sterling Pound (GBP). It is a reloadable and competitively priced card and can be issued to resident customers travelling abroad.

c.    Baroda Reloadable Card: A prefunded card that is ideal for recurring overheads like pocket money, travel allowances, daily/monthly wages, meal allowances, etc.

-    Cashless Villages: The Bank has transformed 281 villages into cashless villages by providing various digital products like Debit card, Mobile Banking, Internet Banking, UPI, BHIM QR, BHlM Aadhaar, POS machines, etc.

-    Digitisation of Records: As a step towards moving to paperless banking and freeing space at branches to make way for customer friendly lay out, digitisation of records has been undertaken by setting up a Document Management System (DMS). This is an ambitious project of the Bank under which around 22 crore papers have already been scanned covering over 3,200 branches. Over 2 lakh sq. ft. of space has been unlocked in the identified Branches.

FinTech

The Bank is cognisant of the transformational impact of FinTech on financial services industry. The Bank has played a pioneering role in collaborating with these players by becoming the first PSB to establish a dedicated FinTech vertical in 2016. As of March 2019, the Bank had 40+ partnerships with diverse FinTech startups working across lending, payments and innovative services. Some of our major initiatives during the year included:

-    Payments: The Bank became the first PSB to go live on Truecaller Pay for enabling digital payments using BHIM Baroda Pay UPI services. This tie-up gives us access to over 60 million, tech-savvy customers across the country. The Bank generated transactions of Rs.166 crore in first 6 months of going live.

-    BoB Innovation Centre: The Bank signed an MOU for setting up the BoB Innovation Centre (BoBIC) in collaboration with IIT, Mumbai at their campus. BoBIC is a first of its kind BFSI- Academia partnership which is powered by a strong ecosystem and aims to promote a culture of innovation and entrepreneurship in India.

Shared Services

The Bank has set-up a wholly owned subsidiary Baroda Global Shared Services Ltd. (BGSS) to focus on four core areas: ‘customer service, efficiency, speed & managing risk’. The Bank’s digitisation and centralisation strategy is embedded with shared services. A number of processes have moved to backoffice operations at the state-of-the-art Shared Services Centre (SSC) in GIFT City, Gandhinagar and Hyderabad. Centralisation has not only reduced the cost of transactions but enhanced risk management, controls and compliance practices.

During the year, the SSC made significant progress on centralisation of back office processes and enhancing risk management framework for the Bank. The centralisation of following functions has been undertaken at SSC:

1.    Migration of all deposit account opening, trade and forex transactions (foreign) and retail mortgage loans processing.

2.    Pension operations.

3.    Digital Banking and Credit Card Operations.

4.    Call centre for customers.

A pilot for agriculture operations, domestic trade, other branch transactions (FD, account maintenance etc.) and MSME Operations with selective branches/ region is underway. The SSC has more than 800 full time employees (FTEs) in non-voice (transaction processing) and ~ 750 FTEs in its call centre at GIFT City with Business Continuity Planning (BCP) presence in Mumbai and Hyderabad, centralising more than 65% of identified processes and activities.

During FY 2019, SSC has started a state of the art, 24X7 facility serving customers with focus on digital processing

There has been an improvement in turnaround time (TAT) along with reduction in error rates with specialisation of roles and enforcement of improved ‘First Time Right’ (FTR).’ Time and motion studies have been conducted of each transaction/ product in order to help in continuously improving the utilisation and productivity.

Operational Highlights:

1.    BGSS is operational round the clock and ISO Certified.

2.    Focus on automation of repeated tasks for better productivity across segments and setting up of express channels for priority processing. SSC is working on Robotics, AI and machine learning based applications in conjunction with the IT team.

3.    More than 650 Bank staff were released to the branches for sales and other services.

4.    Automation of cheque book, welcome kit, email/ SMS alerts has been activated for trade & forex customers.

SSC also enhances the risk management framework of the Bank by instituting stronger controls at every stage of a transaction/ process.

Marketing

The Bank has adopted an integrated marketing strategy across products and services that spans multiple customer touch points. We create narratives that emphasise on services rendered by us and help in engaging with our customers to strengthen their relationship with the brand.

During FY 2019, Bank was present across all mediums of communication including print, digital, out-of-home (OOH), television and radio with a host of both brand and product led campaigns to increase both aided and unaided recall for the brand. The Bank continues to create awareness by showcasing real life inspirational stories of its beneficiaries on two sponsored shows - ‘Hunnarbaaz’ on DD National and “Hum Hain Hunnarbaaz - Koshish Hamari Safalta Aapki” on CNBC Awaaz. Our brand ambassadors P. V. Sindhu and K. Srikanth helped us in reaching out to diverse audiences.

During the year, the Bank conceptualised and executed an extremely well received campaign with the themes -‘‘Behtar Se Behtareen” and “Power of Three” to announce the tripartite amalgamation of Vijaya Bank and Dena Bank with Bank of Baroda. The creative execution with children as protagonists is not only endearing but also stresses on the shared heritage of the three brands which enhance brand recall.

In line with our focus on digitisation and the large base of Gen Y customers, the department continues to leverage the digital marketing ecosystem to put up the building blocks for data-led and metric-driven digital marketing. The Bank ran 50+ digital campaigns through the year with the objective of establishing Bank of Baroda as an aspirational brand which engages, empowers and educates digital audiences by providing relevant content and fulfills banking needs by constantly analysing, measuring and improving experience, response and capabilities. The Bank is focussed on both Search Engine Optimisation and organic growth on social media channels to cover netizens and engage with them. The Bank’s Social Media Presence is summarised below:

Social Media Channels	No of likes / Followers as on 31.03.2019
Facebook Likes	10,52,000+
Twitter Followers	68,000+
YouTube Subscribers	24,300+
LinkedIn Followers	48,000+
Instagram Followers	49,200+

Branch Network

As of March 31, 2019, the branch network of the Bank is as under:

Â	31.03.2018		31.03.2019
	Number of Branches	% Share in Total	Number of Branches	% Share in Total
Domestic Branches	Â	Â	Â	Â
Metro	1167	21.35%	1203	21.66%
Urban	930	17.01%	959	17.27%
Semi-urban	1537	28.11%	1546	27.84%
Rural	1833	33.53%	1845	33.23%
Total	5467	100.00	5553	100.00
Overseas Branches/ Offices (including branches of overseas subsidiaries)	106	Â	100	Â

The Bank opened 92 new domestic branches and merged six of them with existing branches.

Currency Chests

The number of currency chests with the Bank increased from 98 to 100 with the addition of two currency chests at Vadakara (Kerala) and Kennedy Avenue (Amritsar) during the year. These chests support effective cash management in the Bank as well as vaulting cash on behalf of RBI. All the currency chests as well as branches are provided Note Sorting Machines (NSMs). Moreover, these currency chests have also helped the Bank in efficient management of cash at branches.

Corporate Social Responsibility (CSR)

The Bank has a long legacy and tradition of contributing actively to the social and economic development of the communities through various developmental activities. The Bank as a responsible corporate citizen continuously strives to contribute to the welfare of the society, particularly the upliftment of the underprivileged sections of the society to make sustainable social changes in their lives. Skill development through training for gainful employment, human welfare and other social activities for women and farmers continue to remain the Bank’s key focus areas. The Bank is helping different organisations engaged in various community development and socio-economic welfare activities for the benefit of weaker sections and rural citizens.

The Bank has established 49 Baroda Swarojgar Vikas Sansthan (BSVS) and RSETI centres in seven states of the country. These centres impart skill development programmes to youth from rural and semi-urban areas for generating self-employment. Till date these centres have conducted 12,990 training programmes and imparted training to 3,64,995 youth, out of which 2,37,507 have already secured employment or setup their own ventures. The settlement ratio is at 65%. Our 25 BSVS centres have been graded as “AA/A” (outstanding) based on the overall performance/functioning of the RSETIs, during FY 2018. 20 Baroda RSETIs operate from the Bank’s own premises.

The Bank has set up 51 Financial Literacy and Credit Counseling Centres (FLCCs) in eight states which provide financial counseling services and education to the people in rural and urban areas about various financial products and services available from the formal financial sector. These centres also take up activities that promote financial literacy, awareness about banking services, digital banking, financial planning and amelioration of debt-related distress of an individual.

Risk Governance and Internal Controls

The increased focus on risk and the supporting governance framework includes identifying the responsibilities of different parts of the Bank for addressing and managing risk. Often referred to as the ‘three lines of defence’, each of the three lines has an important role to play. These are:

i.    First line of defence - This comprises of all the Bank’s employees as they are required to own and ensure the effective management of risk and compliance with regulations, the Bank’s policies and guidelines.

ii.    Second line of defence - This comprises of the risk control owners, the risk management function and the compliance function. It is responsible for identifying, measuring, monitoring and reporting risk on an enterprise-wide basis independently from the first line of defence.

iii.    Third line of defence - An independent assurance is provided by the internal audit function by conducting internal risk-based and other audits. The reviews provide assurance to the Board that the overall governance framework including the risk governance framework is effective and that policies and processes are in place and consistently applied. The role of the audit function is defined and overseen by the Audit Committee of the Board.

Risk Management and Compliance

Risk is an integral part of the banking business and the Bank aims to achieve an appropriate trade-off between risk and returns. To ensure sustainable and consistent growth, the Bank has developed a sound risk management framework so that the risks assumed by the Bank are properly assessed and monitored. The Bank undertakes business activities within the defined risk appetite limits and policies approved by the Board of Directors of the Bank. Specific committees of the Board have been constituted to facilitate focused oversight on various risks. The Board has also constituted a Risk Management Committee of the Board which oversees the interlinkages among different type of risks. It is supported by onboarding specialists in the area. Policies approved from time to time by the Board of Directors or committees of the Board form the governing framework for each type of risk.

The Bank has a comprehensive Internal Capital Adequacy Assessment Process and stress test policy. The Pillar 2 risks such as Liquidity Risk, Interest Rate Risk, Concentration Risk and Capital Adequacy under both normal and stressed conditions are assessed as per the extant policies. A brief outline of the mechanism for identifying, evaluating and managing various risks within the Bank is as follows.

Enterprise Risk Management and Risk Appetite Statement The diversity of our lines of business requires a comprehensive Enterprise Risk Management approach to promote a bank-wide strong risk management culture to help in the early identification, assessment, measurement, aggregation and management of all risks and to facilitate capital allocation among various lines of business. All risks are approved within the overarching Risk Management Framework and are adequately hedged.

The Bank is constantly endeavouring to create a strong risk awareness culture by imparting trainings to the employees at all levels.

Credit Risk

Credit Risk is managed through a Board approved framework that sets out policies, procedures and reporting which is inline with international best practices. Adequate attention is given to the independence of the risk evaluators and business functions for establishing a sound credit culture and a well-structured credit approval process. Credit risk measurement models are validated by independent model validators for their discriminatory power, accuracy and stability.

The Bank’s experience in internal ratings over the years has enabled the Bank to obtain the regulator’s approval for running the Foundation Internal Rating (F-IRB) approach of credit risk under Basel II guidelines from March 31, 2013. Under the IRB approach, the banks develop their own empirical model to quantify required capital for credit risk.

The Bank has put in place prudential caps across industries, sectors and borrowers to manage credit concentration risk. The portfolio review cell carries out detailed reviews on sectoral exposure, credit concentration, rating distributions and migration.

The Bank has also implemented the Risk Adjusted Return on Capital (RARoC) framework for corporate credit exposures for evaluating credit risk exposures from the point of ‘economic value addition’ to the shareholders.

Market Risk

Market Risk implies the risk of loss of earnings or economic value due to adverse changes in market rates or prices of trading portfolio. The change in economic value of different market products is largely a function of change in factors such as interest rates, exchange rates, economic growth and business confidence. The Bank has well defined policies to control and monitor its treasury functions which undertake Market Risk positions.

The Bank measures and monitors interest rate risk in its trading book through duration, modified duration, PV01 and Value at Risk (VaR) on a daily basis. The foreign exchange risk is measured and monitored in terms of net overnight open position limits (NOOPL), VaR limits, Aggregate Gap Limits (AGL), Individual Gap Limits (IGL) on a daily basis. Equity price risk is measured and monitored through VaR limits and portfolio size limits, etc. At a transaction level, stop loss limits and dealer-wise limits have been prescribed and implemented. Under its stress testing framework, the Bank conducts comprehensive stress tests of its trading book portfolio on a quarterly basis.

Asset Liability Management

Liquidity Risk is the inability to meet expected and unexpected cash and collateral obligations at reasonable cost. At the Bank, the liquidity risk is measured and monitored through Flow Approach and Stock Approach and other prudential stipulations as per RBI’s extant guidelines. The Bank has implemented the Basel Ill Framework on Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards. The LCR Standard aims to ensure that banks maintain an adequate level of unencumbered High - Quality Liquid Assets that can be converted into cash to meet liquidity needs for a 30-calendar days’ time horizon under a significantly severe liquidity stress scenario specified by supervisors. The Bank has always been well above the stipulated level of LCR on a solo basis as well as on a consolidated basis.

Interest Rate Risk in the Banking Book (IRRBB) arises due to mismatch between rate sensitive assets and liabilities which may adversely impact the earnings/economic value of equity of the Bank with the change in interest rates. The Bank uses risk management tools such as Traditional Gap Analysis, Earning at Risk and Modified Duration of Equity for the measurement and monitoring of Interest rate risk in the banking book. The shortterm impact of interest rate movements on Net Interest Income [NII] is calculated through the ‘Earnings at Risk’ approach by taking into consideration parallel shift in yield curve, yield curve risk, basis risk and embedded options risk. The long-term impact of interest rate movements is measured and monitored through change in Market Value of Equity (MVE).

Operational Risk

The Bank has implemented a web-based Operational Risk Management system called SAS Enterprise Governance, Risk and Compliance (EGRC) for systemic and integrated management of Operational Risk. To mitigate and control operational risk at a transaction level, Bank of Baroda has established a Centralised Transaction Monitoring Unit for monitoring of all domestic transactions from the KYC/ AML/ CFT perspective. The Bank has segregated customer interface (front office) from the execution of transactions (back office) by centralising a number of back office functions. The Centralised Trade Finance Back Office (TFBO) for forex transactions has been set up to minimise operational risk in forex transactions. Roll out of Key Risk Indicators Programme (KRI), Risk Control and Self-Assessment Programme (RCSA) and root-cause analysis has further strengthened the control environment.

For improved fraud risk management, the Bank has completed the implementation of the first phase of Enterprise Fraud Risk Monitoring Solution (EFRMS) and the second phase is under implementation.

Basel III Implementation

The Basel Ill capital regulations have been implemented by Indian banks with effect from April 1, 2013. This implementation requires enhanced quality and quantity of capital on one side and enhanced disclosures on the other. For augmenting and improving the core capital of Banks, new measures for the inclusion of FCTR, DTA and Revaluation Reserves were introduced by RBI in March 2016. The Bank has started maintaining Capital Conservation Buffer (CCB) from March 2016 onwards and will reach the minimum prescribed level of 2.5% by FY 2020.

The Bank also maintains the regulatory mandated liquidity coverage ratio (LCR) as per the transitional arrangements prescribed by RBI.

Compliance

The compliance function is one of the key elements in the Bank’s corporate governance structure. The Bank has put in place a robust compliance system including a well-documented Compliance Policy, outlining the compliance philosophy of the bank, role and set up of the Compliance Department, composition of its staff and their specific responsibilities.

The compliance function advises senior management and the Board on the Bank’s compliance with applicable laws, rules and global standards and keeps them informed of developments in the area. It also educates employees about compliance issues by conducting periodic trainings and workshops for business staff and designated compliance officers. Knowledge management tools for this purpose have also been uploaded on the Bank’s site. The Bank has implemented a web-based compliance management solution for certification and monitoring of various regulatory, statutory and internal guidelines at each level in the Bank for further strengthening the compliance function.

KYC/ AML Compliance

The Bank has a well-defined KYC-AML-CFT Policy. On the basis of this Policy, KYC norms, AML standards and CFT measures and obligations of the Bank under Prevention of Money Laundering Act (PMLA) 2002, are implemented in the Bank. The Bank has elaborate systems to generate Cash Transaction Reports (CTRs) electronically for submission to Financial Intelligence Unit-lndia (FIU-IND). The Bank electronically files Counterfeit Currency Reports (CCRs), Non-profit Organisations Transaction Reports (NTRs) and cross border wire transfer (EFT) reports to FIU-IND, New Delhi on its portal every month within prescribed timelines.

The Bank has established a Central Transaction Monitoring Unit (CTMU) and put in place an AML Solution for monitoring and detection of unusual transaction patterns in customers’ accounts and generation of system-based transaction alerts on the basis of predefined alert parameters in the system.

System-based risk categorization of customers’ accounts is done on half yearly basis. Re-KYC of High Risk Customers is being done on half yearly basis after carrying out Money Laundering Risk Categorization Exercise, as per extant guidelines of the RBI. For this purpose, Bank has developed automated process flow for identification and generation of Notices for such customers to notify them for submission of requisite KYC Documents.

The Bank has also implemented Aadhar based e-KYC in collaboration with UIDAI on voluntary declaration of customers for e-KYC authentication.

The Bank is in the process of allotting Unique Customer Identification Code (UCIC) to all its existing customers as per the RBI guidelines and has implemented a Central KYC Registry for allotment of CKYC Numbers to individual customers, as per prescribed RBI guidelines. The guidelines in respect of beneficial owners are scrupulously followed.

Internal Audit

The Bank’s Central Internal Audit Division (CIAD) is responsible for internal audit. CIAD administers various streams of audits besides Risk Based Internal Audit (RBIA) of branches and offices. The Audit Committee of the Board oversees overall internal audit function and guides in developing effective internal audit, concurrent audit, IS Audit and all other audit functions of the Bank. The committee monitors the functioning of the Audit Committee of executives and internal audit department in the Bank.

CIAD operates through thirteen Zonal Internal Audit Divisions to carry out internal audit of branches/offices as per the periodicity decided by the Risk Based Internal Audit Policy. All branches of the Bank are covered under Risk Based Internal Audit. Out of the 4,881 branches audited during FY 2019, 4,151 branches (85.0%) were in Low Risk, 627 branches (12.9%) were in Medium Risk, 101 branches (2.1%) were in High Risk and 2 branches (0.04%) were in Very High-Risk category.

The Bank had engaged an independent firm as a knowledge partner for comprehensive review of the Audit function in-line with the processes focusing on centralisation of activities by use of technology, imaging solutions and digitisation. The audit transformation process was completed and audits under the revised approach commenced during the financial year.

Customer Service

The Bank is focused towards providing excellent customer experiences. It has been our constant endeavour to set industry benchmarks and pioneer innovations across products, processes and service delivery that are imperative to providing seamless experiences to our customers. We have been actively engaged in understanding and identifying gaps between customer needs and expectations through the Voice of the customers and employees, embedding customer experience goals in the organisation’s goals, building a “Client First Culture” and redesigning experiences (product design, systems and processes) for enhanced customer delight.

This year, the focus has been on “EASE of Banking” to improve experiences across every customer touch point. Several initiatives were undertaken round the year to ensure EASE - Enhanced Access and Service Excellence. The Bank has secured the second place among public sector banks in the ‘EASE of Banking Index, a strategic initiative undertaken by Government of India to imbibe best practices and provide superior customer experiences in Public sector Banks.

Some of the steps taken in this direction by the Bank are:

- The Bank has a wide array of financial services including Insurance and Investments and provides one-stop shop access to customers. The Bank has customised the service and marketing strategy for select customer segments, in order to meet their expectations. “Baroda Radiance” has been launched across all major cities and investment and wealth management services are now available to all our customers. Bank has on-boarded best-in-class investment advisors and relationship managers. A dedicated phone banking team also is now available for assisting Baroda Radiance customers.

-    Banking from home and mobile has been made more comfortable with the addition of multiple frequently used options and functionalities (nomination registration, request for account transfer, closure of term deposits, new one glance account statement across relationships) to the Bank’s popular mobile banking application. The internet and various other digital applications are being enhanced with new functionalities to provide better user experience.

-    Bank’s Contact Centre supports six regional languages in addition to English & Hindi. It is available 24*7 to handle emergencies (card blocking, reissuance, stop payments), enquiries or grievances. We also support four overseas locations - Mauritius, Botswana, Oman and Uganda.

-    The Bank has undertaken an end-to-end revamp of the grievance machinery with more convenience for customers. Some of the features include a comprehensive and well-established policy, real-time complaint status tracking, time bound auto escalation, options to attach documents, option to provide feedback on resolution quality and also an option to reopen a complaint.

-    At the apex level, the Bank has formed the Customer Service Committee, a sub-committee of the Board which addresses the issues relating to the formulation of policies and assessment of their compliance with the aim of consistent improvement in the quality of customer service. The Bank has also set up a Standing Committee on Procedures and Performance Audit of Customer Service. Its members include two eminent public personalities, all Executive Directors and the seven Functional Heads of the Bank. This Committee reviews practices and procedures prevalent and takes timely and effective compliance of the RBI instructions on Customer service. In addition, there are Branch Level Customer Service Committees for directly getting feedback from customers.

-    While the Bank is focused on enhancing the convenience of banking from home, the Bank is also monitoring the service levels across the network of branches through mystery shopping/service audits. The Bank is ensuring better ambience, more seating area and better basic amenities to all customers with special focus on “EASE” for senior citizens and the differently abled. Some of the flagship branches are undergoing a facelift and are being deliberately designed to provide a competitive edge while enhancing customer experience.

-    The Bank is driving hassle-free banking through alternate delivery channels (apart from ATMs and cash re-cyclers)-self-service pass books, multi-functional kiosks, tab banking, Baroda Pay Point, tie ups with BHIM Aadhar, enhanced UPI app and other initiatives of national importance such as Bharat Bill Payment System.

-    The Bank has transformed 281 villages into cashless villages by providing various digital products like Debit Cards, Mobile Banking, Internet Banking, UPI, BHIM QR, BHIM Aadhaar and POS machines.

-    As mentioned earlier, the Bank is continuously upgrading its IT infrastructure and driving digitisation in its processes. The Bank has launched a new loan processing system making end-to-end tracking of applications and loan disbursals faster. An enterprise wide CRM will also be rolled out shortly to improve quality of interactions and experiences at every touch point.

- The Bank has an ongoing ‘Client-First’ drive and continuous feedback is sought from customers and employees on experiences delivered at various touch points. The Bank publishes a Client-First Newsletter “Pratham”, which discusses best practices in the service industry and features stories on Barodians “living the client-first” values.

A customer’s journey with a bank involves multiple stages from queries about the Bank’s offerings to delivery of products and services. The Bank endeavours to meet the customer’s expectations at each stage of the journey and to ensure customer “wow”.

The Bank secured the 4th position in Forrester’s India CX Index, 2018 Rankings of Indian Banks. The Forrester’s CX Index score measures how successfully a company delivers customer experiences that create and sustain loyalty.

Vigilance

The vigilance function in the Bank aims at proactively supporting bona fide decisions and simultaneously acting as a deterrent for ensuring that no wrongdoing takes place. The thrust remains on identifying leakages within the organisation that may lead to financial losses and taking corrective and preventive action to plug them.

Regular vigilance audits are undertaken for sensitive branches and employees are sensitized on preventive aspects of vigilance through newsletters, circulars, meetings, etc. The number of staff accountability cases has been brought down by ensuring speedy disposal of vigilance matters. An exclusive portal ‘BoB e-Vigil’, incorporating online vigilance clearance, disciplinary proceedings status, and complaint management system has been operationalised.

Human Resources

The Bank has a rich talent pool with over 55,000+ employees on its rolls. The Bank continuously undertakes multiples initiatives for strengthening and developing its human resources viz., recruitment, addressing training needs of employees, employee engagement and capability building.

The second ‘Voice of Barodians’ Survey witnessed 87% employee participation where the Bank’s workforce expressed their perceptions, views and suggestions on a wide range of aspects impacting them. As a result of various HR interventions initiated by the Bank, the overall employee engagement level has increased from 55% in the last survey to 63%. The Bank has been awarded among the Best 50 PCI (People Capital Index) Companies by Jombay.

The following initiatives have been taken during the year which have direct and significant impact on Bank’s performance: Manpower Planning and Recruitment The Bank has built a new scientific manpower planning model designed to estimate skill-based manpower needs at various levels. This would help the Bank in taking key strategic decisions viz. recruitment, deployment, promotions, trainings, etc.

The Bank recruited 1,281 Officers and 1,617 in Clerical Cadre as Business Associates through direct recruitment during FY 2019. The Bank also hired specialised staff with expertise in niche and key focus areas to strengthen its capabilities and bench strength.

Baroda GEMS Growth and Empowerment Management System

The Bank has introduced a scientifically measurable Performance Management System (PMS) for all officers on a digital platform - Baroda GEMS (Growth and Empowerment Management System) to establish a transparent and performance driven culture. The role perquisites for Branch Heads are also linked with Baroda GEMS, to enable accurate measurement of achievement of KRAs.

Job Family

During the year, the concept of allocating employees to job families has been introduced in the Bank to enable well-rounded grooming of the employees and to provide them with better career opportunities through flexibility of movements across roles which are mapped out for each job family and ensure structured and timely deployment, exposure and development. Baroda Rewards for Individual & Team Excellence - BRITE The Bank has always been a front-runner in acknowledging employees’ contribution and believes that employees are strategic partners in quest for excellence. To instill the spirit of the core values and cover multiple dimensions of employee performance and motivation, a comprehensive suite of rewards and recognition programmes named as ‘Baroda Rewards for Individual & Team Excellence- BRITE’ has been institutionalised during the year to recognise both outstanding individual and team performance.

Baroda Anubhuti Programme

It is an employee engagement programme designed to foster the spirit of team bonding and collaboration, and creating a happy and fun workplace. Various initiatives like employee of the month, spot recognition -capturing ‘WoW’ moments, fun hour at all branches/offices, local community service/ social activities are undertaken to enhance the overall employee engagement levels. Mandatory community service programmes are carried out through all branches/offices once in six months.

Under the banner of Baroda Anubhuti, the Bank has been also conducting Annual Sports Day on the 4th Saturday in November and six Inter Zonal Sports & Cultural Tournaments in various disciplines across the country.

Wellness and Fitness Drives

The Bank has launched many initiatives for managing employee health and well-being, which include a mandatory health checkup scheme for employees and their spouses. During the year, through a Group Term Insurance cover, the Bank offered all permanent employees with the Life Insurance cover of Rs.20 lakh. The medical treatment needs of employees are met through a Group Medical Insurance Policy. The Bank regularly conducts Health checkup camps, fitness drives, yoga sessions, etc. to promote the health and well-being of our employees. Creche facility

During the year, as part of its employee friendly welfare measures, the Bank set up a state-of-the-art onsite creche facility at its Corporate Office in Mumbai in order to provide day care facilities for small children of employees. The Bank plans to extend this facility at the Head Office, Baroda and other select centres.

Learning and Development

The Bank’s approach to training identifies the functional, mandatory and behavioral training needs for employees at different levels of career development and addresses these requirements in a systematic manner. Mandatory training has been aligned to specific and critical job roles. The Bank also runs mandatory certification programs that are necessary before deployment in critical roles. The Bank is also investing in sharpening soft skills of its employees.

The Bank has undertaken various initiatives to build a learning environment through various innovative and digital channels like Baroda Gurukul, Baroda Margdarshak, Baroda Radio, Barodapedia, Baroda YouTube, a digital library, and weekly quizzes for knowledge updation.

Our e-learning platform hosts more than 280 modules and more than 8 lakh courses were completed by employees during FY 2019.

‘We Lead’ - Comprehensive Leadership Development Programme

The Bank has identified over 2,700 potential leaders to take over leadership positions in future through four distinctive programmes:

-    Baroda Senior Leadership Programme- for officers in Scales VI & VII

-    Baroda Emerging Leaders Programme- for officers in Scales IV

-    Baroda Rising Stars Programme- for officers in Scales IV

-    Sayaji Rao Gaekwad Scholars Programme - for Officers in Scales I, II & II

The first phase of the comprehensive leadership development programme - ‘We Lead’ has been completed and actions have been initiated for the next phase to extend the coverage of the programme.

Baroda Alok Chandra Bravery Award

During the year, the Bank instituted the ‘Baroda Alok Chandra Bravery Award’ to recognise exemplary acts of bravery beyond the call of duty by displaying courage for furthering, safeguarding and protecting the interests of the Bank. The Award is named in the memory of Late Shri Alok Chandra, who during the year, laid down his life while protecting Bank’s interests, while posted in Arwal Branch, Patna Region.

Career Progression

Concerted efforts have been taken by Bank for fostering career progression of employees, for rewarding them for their performance and motivating them. Horizontal movement of Officers across different functions is encouraged to provide them with wider exposure. During the FY 2019, promotion exercises were completed and 3,564 employees promoted in all scales and cadres.

HR policies and systems

The Bank is constantly updating its policies and systems to make them ‘Best in Class’. During FY 2019, various policies viz., Transfer, Promotion, policy on Equal Opportunities were put in place / updated to keep up with the changing times. Under the aegis of Staff Welfare Fund, the Bank has standardised the facilities at the Bank’s Holiday Homes and also, opened five more Holiday Homes during the year in Munnar, Panchmarhi, Shillong, Dharmshala and Baroda. The total number of Holiday Homes now stand at 50.

The Bank’s Human Resource Centralised Processing Cell (HRCPC) department processes all staff loan applications and other online TA/DA claims on the same day of receiving the applications, maintaining the TAT and contributing to employee satisfaction.

The Bank has continuously improved its HR technology platform, “Human Resources Network for Employee Services (HRNes)”. In order to address employees’ concerns and grievances, Bank has also put in place an online employee grievance redressal mechanism, named as “Baroda Samadhan”.

Thrust on Diversity

The Bank follows a non-discriminatory and equal opportunity policy for all its employees. The Bank is transparent in all issues relating to promotion, career path, transfer policy and employee benefit / welfare schemes. The Bank has also introduced ‘Job Roles’ for visually impaired employees. Further, the Bank has been increasing its recruitment of women employees. The percentage of women in the overall staff composition has increased to 23.7% in FY 2019 from 23.0% in FY 2018 and 22.7% in FY 2017.

In order to retain women employees at all levels and in recognition of the concomitant responsibilities of women, the Bank has also put in place various facilities to support women employees such as sabbatical leave and health check-up programmes for women employees among other initiatives. Besides, a day-care creche facility has been operationalised as mentioned earlier.

Reservation Cell

An exclusive Reservation Cell has been set up to monitor the reservation and other enabling provisions for SC/ST/PWD/ Ex-Serviceman and OBC employees. Executives in the rank of General Manager are appointed as Chief Liaison Officers for SC/ST/PWD and ex-serviceman employees and OBC employees, respectively, who ensure compliance of various guidelines pertaining to them. With effect from February 1, 2019, reservation of 10% for Economically Weaker Sections (EWSs) in all exercises for direct recruitment in the Bank is implemented.

The Bank provides reservations for Persons with Disabilities (PWDs) at the rate of 4% of the total vacancies arising in Officer, (identified posts) Clerical and Sub-Staff Cadre in a year, as per Government guidelines.

Caste Category wise Count as on 31.03.2019
Cadres	SC	ST	OBC	Ex - SM
Officer	4975	2292	7831	377
Clerk	3116	1780	4844	1742
Sub-staff	2303	831	2133	577
Grand Total	10394	4903	14808	2696
% to Total Employees	18.9	8.9	27.0	4.9

Periodical Meetings: The Bank holds Quarterly Meetings with the representatives of All India Bank of Baroda SC/ST Employees’ Welfare Association and half yearly meeting with the representatives of All India Bank of Baroda OBC Employees’ Welfare Association, as per the Government Guidelines.

Workshops & Training Programmes: Bank conducts following training programmes every year for members of AIBOBSCST Employees’ Welfare Association and AIBOBOBC Employees’ Welfare Association and Liaison Officers of SC/ STs and OBCs at Apex Academy, Gandhinagar:

-    Pre-Promotion Training for SC/ST candidates

-    Workshop on Reservation Policy

-    Training programme on Disciplinary proceedings

The Standing Committee on Social Justice and Empowerment met our Bank’s representatives on 15th January, 2019 at Jamnagar on priority sector lending to SCs, STs, OBCs, Minorities and Persons with Disabilities.

Premises Re-engineering

In an effort to improve the ambience of customer touch points, 360 identified branches across the country are being refurbished with special emphasis on maintaining a uniform look and feel in all branches. An Ambience Manual has been issued to standardise the ambience of branch premises keeping in view the ease of banking operations, use of new technology and customer convenience. The Bank has also undertaken a number of green initiatives during the year and successfully completed the construction of the new Regional office at Udaipur and a Disaster Recovery centre at Hyderabad. Bank in an attempt to reduce carbon footprint, uses energy efficient equipment, solar energy, and LED light fixtures in its branches. Use of recycled waste water and production of bio gas from solid waste are also explored in Bank’s major commercial buildings.

Implementation of Official Language (OL) Policy

The Bank continued to make exemplary progress in the implementation of the Official Language Policy of the Government of India and fulfilled all the assurances given to the Committee of Parliament on Official Language. Use of Hindi and other Indian languages for business growth as well as for providing digital products to the customers is a significant characteristic of the language policy adopted by our Bank. This has been appreciated by regulatory authorities.

Our initiatives included organising an All India seminar for banking faculties on ‘Opportunities for Credit Flow to Agriculture Sector’, publishing e-books/ books on various topics like Agricultural Best Practices, Baroda Kisan Diwas related literature as well as active participation in the 11th Vishwa Hindi Sammelan held at Mauritius.

This year, the Bank instituted one more award namely “Maharaja Sayajirao Lok Bhasha Samman” for honouring an eminent personality from other than the Hindi speaking community for contributing in the promotion and preservation of Hindi/Regional/Tribal languages, in addition to the “Maharaja Sayajirao Bhasha Samman” scheme of the Bank.

During the year, the Bank was awarded the First Prize by the Government of India under linguistic region ‘B’. Similarly, TOLIC, Varanasi was awarded with First Prize. Besides this, our Faizabad Regional Office, Zonal Office, Lucknow, TOLIC Jaipur, TOLIC, Baroda and TOLIC, Rajkot also received awards from Government of India through its Regional Implementation Offices.

The Bank’s House Journal ‘BoBMaitri’ and Hindi Patrika ‘Akshayyam’ received awards from Association of Business Communicators of India (ABCI) during the year in three different categories.

Domestic Subsidiaries and Joint Ventures

BOB Financial Solutions Ltd.

BOB Financial Solutions Limited (BFSL), formerly known as Bobcards Limited, is a wholly owned subsidiary of the Bank. It is a non-banking financial company and its primary business lines include credit cards, personal loans and merchant acquiring. During the year, it revamped its business strategy. BFSL’s credit cards base grew 84% YoY helped largely by a 1,200 strong field force deployed across 1,700+ branches of the Bank. BFSL introduced value added features, in the form of rewards points and various schemes through marketing partnerships with leading consumer brands which resulted in a 37% increase in spends on credit cards in H2 vs H1 (FY 2019). BFSL entered into a tripartite agreement with the Bank and TransUnion-CIBIL, for launching ‘Project Nirmaan’ - an initiative to pre-approve Bank’s customers for credit cards. More than 66,000 credit cards were issued under this programme. Further, a personal loan product was piloted for the BFSL employees and a select set of pre-approved credit card customers during FY 2019.

A plethora of technology initiatives were taken by the company to improve customer experience (like EMI on Card, Green Pin, Chabot, lending solution, revamped website and customer service portal), to reduce customer service turnaround times (robotics based solution, customer originations platform) and to enhance employee experience (HR Platform, centralised Help Desk).

BOB Capital Markets Ltd.

BOB Capital Markets Ltd. (BOBCAPS), a wholly owned subsidiary, is the investment banking arm of the Bank. It is a SEBI registered Category-I merchant banker. BOBCAPS offers the entire spectrum of financial services that include Initial Public Offerings, Private Placement of Debt, Corporate Restructuring, Business Valuation, Mergers & Acquisitions, Project Appraisal and Loan Syndication. BOBCAPS also undertakes advisory services on Securitisation and Structuring of Debts. It has five lines of businesses viz. Investment Banking - Equity; Investment Banking

- Debt; Institutional Broking, Retail Broking and Wealth Management.

During FY 2019, BOBCAPS completed five debt syndication transactions amounting to Rs.4,196 crore while the Stressed Asset Resolution team executed 5 transactions. The Company has secured 10 mandates for IPOs / FPOs / OFS, PE fund raise and M&A transaction resulting in a robust deal pipeline in equities. Institutional broking has ramped up its new client empanelments and revenue run rate during the year. It has recently commenced coverage of foreign institutional investors based outside India. In retail broking, rise in client acquisitions and business volumes are being driven by enhanced products and services like 3-in- 1 Demat, Trading and Bank Account, Prepaid brokerage, online account opening platform and quality research. The Company’s investment advisory team supports the Wealth Management vertical of the Bank.

The Nainital Bank Ltd.

The Nainital Bank Limited (NBL), originally promoted by Late Bharat Ratna Pandit Govind Ballabh Pant and others in 1922, became a subsidiary of Bank of Bank of Baroda in the year 1973.The Bank’s holding in Nainital Bank Ltd. is 98.57%. The total business of NBL increased to Rs.10,931 crore on March 31, 2019 from Rs.10,772.10 crore as on March 31, 2018. The net profit of the Bank was Rs.26.89 crore in FY 2019 against a profit of Rs.48.90 crore during the previous year. The Bank opened 2 new branches during FY 2019. During the year, NBL was ranked 3rd in the category of the Best Performing Private Bank in terms of average Aadhar generation and update by UIDAI for The Aadhaar Excellence Awards, 2018.

Baroda Global Shared Services Ltd.

Established during FY 2017, Baroda Global Shared Services Ltd. (BGSS), a wholly owned subsidiary of the Bank, commenced its operations during last financial year. BGSS’s strategy is to focus on four core sectors - customer service, efficiency, speed & managing risk. It is providing services to the Bank by helping it in digitising and centralising its backoffice operations at the state-of-the-art Shared Services Centre (SSC) GIFT City, Gandhinagar and at a second centre at Hyderabad. Centralisation has not only reduced the cost of transactions but enhanced risk management, controls and compliance practices.

Baroda Asset Management India Ltd.

Baroda Asset Management India Limited (“Baroda AMC”) became a wholly owned subsidiary of the Bank with effect from September 28, 2018 after buying out the 51% stake by the bank from its joint venture partner UniCredit S.p.A. (the parent company of Pioneer Global Asset Management S.p.A.). The Baroda AMC acts as the investment manager to Baroda Mutual Fund (“Baroda MF”), a mutual fund registered with the Securities and Exchange Board of India. The Average Assets under Management (AUM) of Baroda MF for FY 2019 were Rs.12,345 crore, registering an annual growth of 7%. Growth in average AUM under equity schemes was over 40%. Baroda AMC continues to expand its third-party distribution network, with particular focus on IFAs. The AUM from this segment has been growing steadily. With the completion of rationalisation and the scheme categorisation exercise and the regulatory changes around Total Expense Ratio, Baroda AMC will be better positioned to compete in the market. IndiaFirst Life Insurance Company Ltd.

Headquartered in Mumbai, IndiaFirst Life Insurance, is one of the country’s youngest life insurance companies, with a paid-up share capital of Rs.625 crore. The company is promoted by two of India’s largest public-sector banks - Bank of Baroda and Andhra Bank, which hold 44% and 30% stake in the company, respectively. During the year, IndiaFirst Life’s erstwhile founding partner Legal and General, UK, divested the 26% stake it held in the company. This stake was acquired by Carmel Point Investments India Private Limited incorporated by Carmel Point Investment Ltd, a body corporate incorporated under the laws of Mauritius and owned by private equity funds managed by Warburg Pincus LLC. The company’s is currently ranked 12th in Individual New Business (Annual Premium Equivalent), among the private players with Assets under Management (AUM) at Rs.15,039 crore as on March 31, 2019.

IndiaFirst Life was named the “Most Innovative Life Insurer of The Year (2018) - International" by Life Insurance International, UK, a body dedicated to offering benchmark intelligence centered exclusively on the global life insurance fraternity, besides being recognised among the “Best Brands 2018”, by the Economic Times, and being certified as a “Great Place to Work”.

India Infradebt Ltd.

India lnfradebt is the first Infrastructure Debt Fund (IDF) -NBFC and was sponsored by Bank of Baroda along with ICICI Bank. Citicorp Finance (India) Limited and LIC of India are other shareholders. It has been rated AAA by CRISIL, ICRA and India Ratings since its inception. It finances the relatively safe, completed infrastructure projects which have achieved one year of commercial operations and enjoys 100% income-tax exemption. The synergy with the Bank arises from its focus on lending to strong, stable infrastructure projects - mainly NHAI road projects and renewable energy projects. The company has delivered healthy growth in its first full five years of operations. Its loan book as on March 31, 2019 was Rs.9,809.5 crore and net profit for FY 2019 was Rs.223.7 crore.

Barodasun Technologies Ltd.

Barodasun Technologies Ltd. is a wholly owned IT subsidiary incorporated on 05.07.2017. The Bank has set-up a Centre of Excellence (CoE) to identify new emerging trends and provide technology differentiation. The CoE would provide design thinking skills, process design, architectural skills and core development capacity in current and future technologies to help businesses in leveraging technology for realising business outcomes.

A brief summary of domestic subsidiaries and Joint Ventures is as below:    (' in crore)

Entity (with date of registration)	Owned funds	Total assets	Net profit	Offices	Staff
BOB Financial Solutions Ltd	247.7	441.6	4.1	38	446
BOB Capital Markets Ltd.	153.8	161.33	(2.92)	1	114
The Nainital Bank Ltd.	624.0	8101.8	26.9	4	916
Baroda Global Shared Services Ltd.	12.0	14.1	1.5	3 locations (Gift City, Gandhinagar/ Hyderabad / Mumbai)	424
Baroda Asset Management India Ltd.	64.2	76.4	4.9	5	70
Baroda Trustee India Pvt. Ltd.	0.1	0.2	0.0	1	0
IndiaFirst Life Insurance Company Ltd.	663.5	15626.3	61.6	29	2101
India Infradebt Ltd.	1636.6	10403.4	189.9	1	21

Awards and Accolades

Date	Awards 2018-19
17.03.2019	“Best Banking & Finance Legal Team of the Year” award at the 8th Annual Indian Legal Era Awards 2018-19.
08.03.2019	Business Today Jury award for best Fintech Engagements.
20.02.2019	Multiple honours at the IBA Banking Technology 2019 Awards: -    Winner - Most Customer Centric Bank Using Technology” -    Runners Up - “Best Payment Initiatives” -    Baroda Rajasthan Gramin Bank adjudged ‘Best Technology Bank of the Year’
18.02.2019	CSR Excellence Award - TV9.
30.01.2019	Ms. Nikita Raut, Chief Manager, HR and Head, Mumbai Academy, topped Jombay’s Top 40 under 40 award for HR Professionals
25.01.2019	Finnoviti Award for ‘Fintech Initiatives’ at the Banking Frontiers’ Finnoviti Conference 2019.
28.01.2019	Leadership Capital and Out Performers awards at Atal Pension Yojana Awards 2018-19.
18.01.2019	5 honours at the 58th Association of Business Communicators of India (ABCI) Awards in the following categories - Indian Language Publications, Features (English), Features (Language), Headlines and Corporate Film.
11.01.2019	‘Best Home Loan Products 2018’ at FE Best Banks Award 2018.
11.12.2018	‘Inclusive Finance India Award-Best Bank in Priory Sector Lending’ for innovation & inclusiveness in PSBs category, at Inclusive Finance Summit, 2018.
08.12.2018	‘Best Bank in Supply Chain Finance” in the 4th edition of Asian Supply Chain Thought Leadership Summit & Awards -2018 held by the Institute of Supply Chain Management.
10.11.2018	“Best PSU Bank under MSME” & Best Bank Agriculture’ finance at Divya Bhaskar Eminence Awards 2018.
19.11.2018	Fiji Territory received the Business Excellence Award 2018 from President of Fiji.
16.11.2018	APY "Rise Above Rest Campaign" Award and APY "Best Performing Bank Award” for the campaign” Maker of Excellence" - PFRDA, Government Of India.
04.10.2018	Best Performing Bank at the UIDAI’s Aaadhar Excellence Awards 2018.
14.09.2018	Kirti Award - First Prize for official language implementation for the year 2017-18.
28.06.2018	Shri P. S.Jayakumar, MD & CEO, was conferred with "CEO of the Year" and the Bank bagged the "Retail Bank of the Year" at India Banking Summit & Awards 2018.
27.06.2018	The bilingual in-house journal ‘BoBMaitri’ and Hindi Magazine ‘Akshayyam’ were awarded with First and Special prizes respectively under All India House Journal Competition organised by RBI.
29.05.2018	“Apex India CSR Excellence Award 2017” for CSR Activities for BSVS (RSETI) Project.
11.05.2018	Recipient of National Award for Best Performance in SHG- Bank Linkages 2017-18 Public Sector Banks by Deendayal Antodaya Yojana, National Rural Livelihoods Mission.
14.05.2018	Appreciation & Honour from the World Trade Centre for launching” Digitised Supply Chain Finance” at 7th Global Economic Summit 2018.
13.04.2018	Winner of "Litigation Dept of the Year 2018" and First Runners Up - “In House Dept of the Year”, at the 7th Edition of IDEX Legal Awards.

Dividend Distribution Policy

As required under Regulation 43A of the SEBI (listing Obligations and Disclosure Requirements), 2015, the Bank has a dividend distribution policy in place which sets out the parameters and circumstances that will be taken into account by Board in determining distribution of dividend to its shareholders. The policy is given in this Annual Report and is also available on the Bank’s website at https://www.bankofbaroda.com/policy-documents.htm.

Board of Directors (Appointment /Cessation of Directors during the year)

Appointments

Shri Debasish Panda was nominated as Government Nominee Director w.e.f. 5th April, 2018 by the Central Government u/s 9 (3) (b) of The Banking Companies Acquisition and Transfer of Undertakings) Act, 1970, to hold the post until further orders.

Shri Shanti Lal Jain was appointed as Executive Director w.e.f. 20th September, 2018 by the Central Government u/s 9 (3) (a) of The Banking Companies Acquisition and Transfer of Undertakings) Act, 1970 for a period of -3- years i.e. up to 19th September, 2021.

Shri Vikramaditya Singh Khichi was appointed as Executive Director w.e.f. 1st October, 2018 by the Central Government u/s 9 (3) (a) of The Banking Companies Acquisition and Transfer of Undertakings) Act, 1970 for a period of -3- years i.e. upto 30th September, 2021.

Shri P.S. Jayakumar continues to be the Managing Director & CEO on extension of the term of his office w.e.f. 13th October, 2018 for a period of -1- year i.e. till 12th October, 2019.

Shri Srinivasan Sridhar was elected as Shareholder Director under section 9 (3) (i) of The Banking Companies Acquisition and Transfer of Undertakings) Act, 1970, for a period of -3-years from 12th December, 2018 to 11th December, 2021 Dr. Hasmukh Adhia was appointed as Non-Executive Chairman w.e.f. 1st March, 2019 by the Central Government u/s 9 (3) (h) of The Banking Companies Acquisition and Transfer of Undertakings) Act, 1970, for a period of -3- years.

Cessations

Shri Lok Ranjan ceased to be a Government Nominee Director w.e.f. 5th April, 2018 on the appointment of Shri Debasish Panda in his place.

Shri Ashok Kumar Garg ceased to be Executive Director w.e.f. 30th June, 2018 upon attaining the age of superannuation. Shri Ravi Venkatesan, ceased to be Non-Executive Chairman w.e.f. 14th August, 2018 on completion of his tenure of 3 years.

Shri Mayank K. Mehta ceased to be Executive Director w.e.f. 30th September, 2018 upon attaining the age of superannuation.

Smt. Usha A. Narayanan Director, ceased to be a Shareholders Director w.e.f. 12th December, 2018 on completion of her tenure of 3 years.

Board Evaluation

With the objective to continuously improve Board governance, an evaluation of the Board’s performance; performance of its committees and individual directors including independent directors is being conducted by an external consulting firm. The parameters of evaluation have been aligned with the provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and new SEBI Guidance Note on Board Evaluation dated January 5, 2017.

Auditors’ Compliance Certificate on Corporate Governance:

The Auditors’ Compliance Certificate regarding the compliance of the conditions of Corporate Governance for the year 2018-19 is annexed with this report pursuant to “Part ”E” of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Business Responsibility Report

Business Responsibility Report as required by SEBI has been hosted on the website of the Bank (www.bankofbaroda. co.in). Any member interested in obtaining a physical copy of the same may write to the Company Secretary of the Bank.

Directors’ Responsibility Statement

The Directors confirm that in the preparation of the annual accounts for the Financial Year ended March 31, 2019:

a)    The applicable accounting standards had been followed along with proper explanation relating to material departures, if any;

b)    The accounting policies framed in accordance with the guidelines of RBI were followed and the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit and loss of the Bank for that period;

c)    The directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of applicable laws to the Bank for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

d)    The directors had prepared the annual accounts on a going concern basis; and

e)    The directors had ensured that internal financial controls followed by the Bank are in accordance with guidelines issued by RBI in this regard and that such internal financial controls are adequate and were operating effectively.

Explanation: For the purposes of this clause, the term “internal financial controls” means the policies and procedures adopted by the Bank for ensuring the orderly and efficient conduct of its business, including adherence to Bank’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information;

f)    The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Acknowledgements

The Directors place on record their appreciation for the contributions made by the outgoing Chairman and NonExecutive Director Shri Ravi Venkatesan and other outgoing Directors viz. Shri Lok Ranjan, Shri Ashok Kumar Garg, Shri Mayank K. Mehta and Smt. Usha A. Narayanan.

The Directors express their sincere thanks to the Government of India, RBI, Securities and Exchange Board of India, other regulatory authorities and the overseas regulators for their continued co-operation, guidance and support.

The Directors would like to take this opportunity to express sincere thanks to our valued clients for their continued patronage and support.

The Directors acknowledge with deep appreciation the cooperation extended by all shareholders, banks and financial institutions, rating agencies, stock exchanges and all well-wishers in India and abroad.

The Directors also take this opportunity to place on record deep appreciation for the hard work and dedication of the employees of the Bank.

For and on behalf of the Board of Directors,

P. S. Jayakumar

Managing Director & CEO

 

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Mar 31, 2018

The Directors have pleasure in presenting the One Hundred and tenth Annual Report of your Bank with the audited Balance Sheet, Profit & Loss Account and the Report on Business and operations for the year ended March 31, 2018 (FY 2018).

Financial Performance

A snapshot of our Bank’s financial performance is as below:

(Rs. in crore)

Particulars	31.03.17	31.03.18	Growth (%)
Deposits	6,01,675.2	5,91,314.8	(1.7)
of which- Domestic Deposits	4,40,092.2	4,66,973.8	6.1
International Deposits	1,61,583.0	1,24,341.0	(23.1)
Domestic Deposits	4,40,092.2	4,66,973.8	6.1
of which - Current Account Deposits	26,761.8	31,193.1	16.6
Savings Bank Deposits	1,46,831.9	1,61,130.0	9.7
CASA Deposits	1,73,593.6	1,92,323.1	10.8
Domestic CASA to Domestic Deposits (%)	39.44	41.18
Advances	3,83,259.2	4,27,431.8	11.5
of which- Domestic Advances	2,77,523.7	3,24,238.5	16.8
International Advances	1,05,735.5	1,03,193.3	(2.4)
Total Assets	6,94,875.4	7,19,999.8	3.6
Net Interest Income (NII)	13,513.4	15,521.8	14.9
Other Income	6,758.1	6,657.2	(1.5)
of which-Fee Income	2,837.4	3,249.7	14.5
Forex Income	975.9	909.2	(6.8)
Trading Gains	2,618.0	1,877.6	(28.3)
Recovery from PWO	326.8	620.7	90.0
NII Other Income	20,271.5	22,179.0	9.4
Operating Expenses	9,296.4	10,173.4	9.4
Operating Profit	10,975.1	12,005.6	9.4
Provisions	8,502.4	14,796.4	74.0
of which: Provisions for NPAs & Bad debts written off	7,679.8	14,211.7	85.1
Profit Before Tax	2,472.7	(2,790.7)	-
Provision for Tax	1,089.6	(358.9)	-
Net Profit	1,383.1	(2,431.8)	-
Appropriations/ Transfers
Statutory Reserve	345.8	0
Capital Reserve	353.7	0

Revenue and Other Reserves
I) General Reserve	0	(2,431.8)
II) Special Reserve u/s 36 (I) (viii) of the Income Tax Act 1961	350.9	0
Proposed Dividend	332.8	0

(Rs. in crore)

Key Performance Indicators	31.03.17	31.03.18
Average Cost of Funds (%)	4.82	4.56
Average Yield (%)	6.85	6.84
Average Interest Earning Assets	6,15,834.7	6,37,987.0
Average Interest Bearing Liabilities	5,95,250.0	6,16,243.9
Net Interest Margin (%)	2.19	2.43
Cost-Income Ratio (%)	45.86	45.87
Return on Average Assets (ROAA) (%)	0.20	(0.34)
Return on Equity (%)	4.53	(7.64)
Book Value per Share (Rs.)	132.46	120.28
EPS (Rs.)	6.00	(9.19)

The financial year FY 2018 had been an eventful year. The credit growth in the banking sector picked up during second half of the financial year. However, on account of base effect and currency withdrawal in the beginning of the year, the deposit growth during the year touched a multi decade low. With the Insolvency and Bankruptcy Code (IBC) becoming operational and RBI mandating resolution of large part of NPAs of banking system to be resolved at NCLT it provided a momentum to the resolution process. During the last quarter of the financial year, the RBI aligned its guidelines on resolution of stressed assets with IBC repealing its earlier guidelines on resolution of such assets. It front ended the recognition of NPAs in the system and impacted the profitability of banks in the short run. In the above environment, Bank performed well with improvement in core operating efficiency.

The net interest income (NII) of the Bank increased by 14.9% during the year. The other income marginally declined by 1.5% on account of lower treasury gains due to hardening of bond yields in the second part of the financial year. However, core fee income increased by 14.5%. Recovery from technically written off accounts increased by 90%. The operating expenses registered increase of 9.4%.

The Bank posted an operating profit of Rs.12,006 crore registering an increase of 9.4%. Total provisions increased by 74% and higher GNPA pool led to increase in provisions for NPAs by 85%, leading to Bank posting loss of Rs.2,431.8 crore. On account of this, there was no amount transferred to statutory and capital reserves and the loss amount was appropriated from general reserve.

Reflecting on the improved operating performance, the net interest margin (NIM) improved from 2.19% to 2.43%. This was led by reduction in the average cost of funds to 4.56% from 4.82% and almost flat average yield on funds. The cost to income ratio remained steady at 45.87%.

Capital Adequacy Ratio (CAR) in %

	31.03.17	31.03.18
Capital Adequacy Ratio -Basel III	12.24	12.13
CET-I	8.98	9.23
Tier - I	9.93	10.46
Tier - II	2.31	1.67

The capital adequacy ratio of the Bank at 12.13% continues to be above regulatory requirements as of March 31, 2018. The Tier 1 capital was 10.46% and Common Equity Tier 1 (CET-1) was 9.23%. The consolidated group capital adequacy ratio was higher at 12.87%.

During the year, Bank made preferential allotment of 34,13,56,534 shares of Rs.2 at a price of Rs.157.46 per share amounting to Rs.5,375 crore to Government of India. Accordingly paid up equity share capital of the Bank increased by Rs.68.27 crore. Bank also raised Rs.1,350 crore through issuance of Additional Tier-1 bonds.

Bank’s net worth as of March 31, 2018 was Rs.31,820.2 crore comprising of paid-up equity capital of Rs.530.36 crore and reserves of Rs.31,289.9 crore (excluding revaluation reserves, foreign currency translation reserves and other intangible assets). The book value of the share (FV Rs.2/-) was Rs.120.28.

Dividend

Bank is not eligible to pay dividend for the financial year 201718 on account of not meeting the eligibility criteria stipulated by Reserve Bank of India for this purpose.

Dividend Distribution Policy

As required under Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements), 2015, Bank has dividend distribution policy in place which sets out the parameters and circumstances that will be taken into account by Board in determining distribution of dividend to its shareholders. The policy is given in this Annual Report and is also available on the Bank’s website at www.bankofbaroda. com/download/Dividend.pdf

Board of Directors (Appointment /Cessation of Directors during the year)

Appointments

Shri Lok Ranjan was nominated as Director w.e.f. August 26, 2017 by The Central Government u/s 9 (3) (b) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 to hold the post until further orders.

Smt. Soundara Kumar was elected as Shareholder Director under section 9 (3)(i) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, for a period of 3 years from December 24, 2017 to December 23, 2020.

Shri Bharatkumar D Dangar was elected as Shareholder Director under section 9 (3)(i) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, for a second term of 3 years from December 24,2017 to December 23,2020.

Cessations

Shri Mohammad Mustafa Director, ceased to be a Government Nominee Director w.e.f. August 26, 2017 on the appointment of Shri Lok Ranjan in his place.

Shri Prem Kumar Makkar Director, ceased to be a Non Workmen Director w.e.f. September 19, 2017 on completion of the tenure of -3- years.

Dr. R. Narayanaswamy Director, ceased to be a Shareholders Director w.e.f. December 24, 2017 on completion of the tenure of -3- years.

Board Evaluation

In FY 2017, the Bank engaged a reputed external consulting firm to conduct an independent evaluation of the Board, its committees and individual directors. In FY 2018, this evaluation was followed up by an independently administered questionnaire by the same consulting firm. The questionnaire was completed by all the directors. The questionnaire included a range of topics to evaluate the performance of the Board. These includes:-

- Composition & Effectiveness

- Governance

- Relations with Management Committees

- Continuous Improvement

The responses received from the Board members were compiled and a report was submitted by the consulting firm to all Directors on the Board. The Directors discussed the Report and agreed on a set of actions to drive further improvement in Board effectiveness.

Auditors’ Compliance Certificate on Corporate Governance:

The Auditors Compliance Certificate regarding the compliance of the conditions of Corporate Governance for the year 2017-18 is annexed with this report pursuant to “Part ”E” of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Business Responsibility Report

Business Responsibility Report as required by SEBI has been hosted on the website of the Bank (www.bankofbaroda. co.in). Any member interested in obtaining a physical copy of the same may write to the Company Secretary of the Bank.

Directors’ Responsibility Statement

The Directors confirm that in the preparation of the annual accounts for the Financial Year ended March 31, 2018:

a) The applicable accounting standards had been followed along with proper explanation relating to material departures if any;

b) The accounting policies framed in accordance with the guideline of Reserve Bank of India were followed and the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit and loss of the Bank for that period;

c) The directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of applicable laws to the Bank for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

d) The directors had prepared the annual accounts on a going concern basis; and

e) The directors had ensured that internal financial controls followed by the Bank are in accordance with guidelines issued by Reserve Bank of India in this regard and that such internal financial controls are adequate and were operating effectively.

Explanation. For the purposes of this clause, the term “internal financial controls” means the policies and procedures adopted by the Bank for ensuring the orderly and efficient conduct of its business, including adherence to Bank’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information;

f) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Acknowledgements

The Directors place on record their appreciation for the contributions made by the outgoing Directors viz. Shri Mohammad Mustafa, Shri Prem Kumar Makkar and Dr. R. Narayanaswamy.

The Directors express their sincere thanks to the Government of India, Reserve Bank of India, Securities and Exchange Board of India, other regulatory authorities and the overseas regulators for their continued co-operation, guidance and support.

Bank would like to take this opportunity to express sincere thanks to its valued clients for their continued patronage and support.

The Directors acknowledge with deep appreciation of the cooperation extended by all shareholders, banks and financial institutions, rating agencies, stock exchanges and all the well wishers in India and abroad.

The Directors also take this opportunity to place on record deep appreciation for the hard work and dedication of the employees of our Bank which enabled our Bank to record growth with quality year after year despite economic challenges and consolidate its position as one of the premier banks in the country.

For and on behalf of the Board of Directors,

P. S. Jayakumar

Managing Director & CEO

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Mar 31, 2017

The Directors have pleasure in presenting the One Hundred and Ninth Annual Report of your Bank with the audited Balance Sheet, Profit & Loss Account and the Report on Business and operations for the year ended March 31, 2017 (FY 2017)

Financial Performance

The snapshot of our Bank’s financial performance is as below:

Rs. in crore

Particulars	31.03.16	31.03.17	Growth (%)
Deposits	5,74,037.87	6,01,675.17	4.81
of which- Domestic Deposits	3,94,843.97	4,40,092.15	11.46
International Deposits	1,79,193.90	1,61,583.02	(9.83)
Domestic Deposits	3,94,843.97	4,40,092.15
of which - Current Account Deposits	19,285.57	26,761.77	38.76
Savings Bank Deposits	1,13,253.07	1,46,831.82	29.65
CASA Deposits	1,32,538.64	1,73,593.59	30.98
Domestic CASA to Domestic Deposits (%)	33.57	39.44
Advances	3,83,770.18	3,83,259.22	(0.13)
of which- Domestic Advances	2,63,268.38	2,77,523.73	5.42
International Advances	1,20,501.80	1,05,735.49	(12.25)
Total Assets	6,71,376.48	6,94,875.42	3.50
Net Interest Income (Nil)	12,739.85	13,513.41	6.07
Other Income	4,998.86	6,758.06	35.19
of which-Fee Income	3,599.28	3,813.22	5.95
Trading Gains	1,178.86	2,618.01	122.05
Recovery from PWO	220.72	326.83	47.96
Nil Other Income	17,738.71	20,271.47	14.27
Operating Expenses	8,923.14	9,296.40	4.18
Operating Profit	8,815.58	10,975.07	24.49
Provisions	15,513.64	8,502.37	(45.19)
of which: Provisions for NPAs & Bad debts written off	13765.89	7679.79	(44.21)
Profit Before Tax	(6,698.06)	2,472.70	-
Provision for Tax	(1,302.53)	1,089.56	-
Net Profit	(5,395.54)	1,383.14	-
Appropriations/ Transfers
Statutory Reserve	0	345.78
Capital Reserve	0	353.65
Revenue and Other Reserves
I) General Reserve	(5,395.54)	0
II) Special Reserve u/s 36 (I) (viii) of the Income Tax Act 1961	0	350.92
III) Investment Reserve 0 0 Account

IV)Transfer from Excess Appropriation of previous year	7.79	0
Proposed Dividend	0	332.78
Key Performance Indicators
Average Cost of Funds	5.08	4.82
Average Yield (%)	7.09	6.85
Average Interest Earning Assets	6,21,234.89	6,15,834.65
Average Interest Bearing Liabilities	6,16,002.63	5,95,249.99
Net Interest Margin (%)	2.05	2.19
Cost-lncome Ratio (%)	50.30	45.86
Return on Average Assets (ROAA) (%)	(0.78)	0.20
Return on Equity (%)	(17.64)	4.53
Book Value per Share (Rs.)	132.74*	132.46*
EPS (Rs.)	(23.89)*	6.00

*Post split of face value of the share to Rs. 2/-

The financial year 2016-17 had been a mix of opportunities and challenges. With asset quality challenges in the banking industry continuing, credit growth has been at multi decade low of 5.08% during FY 2017 on account of weak corporate demand. Despite the challenges, Bank performed well during the year leveraging its retail franchise.

The net interest income (Nil) of the bank increased by 6.07% to Rs. 13,513.41 crore as of March 31, 2017 while other income increased by 35.19% to Rs. 6,758.06 crore backed by 122.05% rise in treasury income to Rs. 2,618.01 crore as well as 5.95% growth in core fee income to Rs. 3,813.22 crore. Operating expenses increased by 4.18% to Rs. 9,296.40 crore.

Our Bank posted an operating profit of Rs.10,975.07 crore during FY2017 registering a growth of 24.49%. The provision cost (other than taxes) declined significantly by 45.19% to Rs. 8,502.37 crore compared to Rs. 15,513.64 crore last year and Bank posted a profit before tax of Rs. 2,472.70 crore. After making provision for tax of Rs. 1,089.56 crore, net profit for the year ended March 31, 2017 was Rs. 1,383.14 crore.

For the year ended March 31, 2017, the return on average assets was 0.20% while return on equity was 4.53%. The earnings per share (FV Rs. 2/-) were Rs. 6.00.

Capital Adequacy Ratio (CAR)

Ratios in %

	31.03.16	31.03.17
Capital Adequacy Ration-Basel III	13.17	12.24
CET-I	10.29	8.98
Tier-I	10.79	9.93
Tier-II	2.38	2.31

Capital Adequacy Ratio under Basel III was well above the regulatory requirements at 12.24% as of March 31, 2017. Tier 1 ratio was at 9.93% and common equity Tier 1 (CET-1) was at 8.98% under Basel III framework. Bank raised Rs.2,000 crore of debt capital by way of AT-1 bonds in two tranches of Rs.1,000 crore each in December 2016 and March 2017.

Bank’s Net Worth as of March 31, 2017 was Rs.30,519.80 crore comprising paid-up equity capital of Rs.462.09 crore and reserves (excluding revaluation reserves, FCTR & Net of Intangible assets) of Rs.30,057.71 crore. The book value of share (FV Rs.2/-) was Rs.132.46.

Dividend

Board of Directors of the bank has recommended a dividend of Rs.1.20 per share for the financial year ended March 31, 2017. The total outgo in the form of dividend, including taxes, will be Rs.332.79 crore. The payment of dividend is subject to requisite approvals.

Compliance

An independent compliance function is a key component of the bank’s second line of defence. This function is responsible for, among other things, ensuring that the bank operates with integrity and in compliance with applicable, laws, regulations and internal policies. The Board of Directors of the Bank oversees the management of the Bank’s compliance risk.

Our Bank has put in place a Board approved compliance policy outlining the compliance philosophy of the Bank. Compliance function in the Bank is an integral part of governance along with internal control and compliance risk management process. It ensures observance of regulatory / statutory provisions contained in various legislations viz. Banking Regulation Act, Reserve Bank of India Act, Foreign Exchange Management Act, Securities and Exchange Board of India Act and Prevention of Money Laundering Act and also the regulations of the various regulators where the Bank is having its offices / branches in overseas centers. It also ensures standards and codes prescribed by BCSBI (Banking Codes and Standard Board of India, IBA (Indian Banks Association), FEDAI (Foreign Exchange Dealers Association of India), FIMMDA (Fixed Income Money Market and Derivatives Association of India).

Bank is in the process of putting up a web based compliance management system to further strengthen the compliance function in the Bank.

The compliance function advises senior management and the Board on the Bank’s compliance with these applicable laws, rules and standards as well as keeping them informed of developments in the area. It also helps educating employees about compliance issues by conducting periodic trainings and workshops for business staff as well as designated compliance officers. Knowledge management tools for this purpose have also been uploaded on the Bank’s site.

Compliance function has an important role in supporting corporate values, policies and processes that help ensure that the Bank acts responsibly and fulfils all applicable obligations.

KYC/AML Compliance

Our Bank has well defined KYC-AML-CFT Policy, which is the foundation on which the Bank’s “Implementation of KYC norms, AML standards, CFT measures and obligation of the Bank under Prevention of Money Laundering Act (PMLA) 2002” is based. Bank electronically generates Cash Transaction Reports (CTRs) for submission to Financial Intelligence Unit-lndia (FIU-IND). AML Solution for generating system-based alerts on the basis of transactions in the accounts of the customers is in place. A central transaction monitoring unit (CTMU) also monitors of the transactions/ alerts generated in AML Solution and escalation of STRs, if found suspicious, to the Principal Officer. System-based risk categorization of Bank’s customers’ accounts is done on half yearly basis. Bank files Counterfeit Currency Reports (CCRs) and Non Profit Organizations Transaction Reports (NTRs) to FIU-IND, New Delhi every month. It generates cross border wire transfer reports every month through electronic mode for submission to FIU-IND, New Delhi. CBS system has been modified suitably so as not to accept cash deposits of Rs.50,000/- and above in absence of PAN / Form No. 60/61.

For further strengthening KYC compliance, online verification of PAN from NSDL has been operationalised. Bank has implemented Aadhaar based e-KYC in collaboration with UIDAI. Real-time checking of names from UNSCR list is available in all the branches as a step towards CFT Online scanning of the customer’s name with the names of the individuals/ entities appearing in the sanctions list or any other blacklist issued by Govt. Authorities, while opening of accounts has been put in place which generates the AML Alerts on predefined criteria. The Bank is in the process of allotting Unique Customer Identification Code (UCIC) to all its existing customers as per the RBI guidelines.

Bank has also carried out an independent review of its KYC, AML, & CFT policy and practices for the domestic branches and six overseas territories (UK, UAE, South Africa, Mauritius, Hong Kong and Bahamas) through independent reputed consultancy firms and taken steps to stream line the processes where required.

Internal Audit - The Third Line of Defence

The third line of the defence consists of an independent and effective internal audit function. Among other things, it provides independent review and objective assurance on the quality and effectiveness of the Bank’s internal control system, the first and second lines of defence and the risk governance framework as well as strategic and business planning and decision-making processes. The internal auditors are not involved in developing, implementing or operating the risk management function or other first or second line of defence functions.

Our Bank carries internal audit function through a Central Internal Audit Division (CIAD). CIAD administers various streams of audits besides Risk Based Internal Audit (RBIA) of branches and offices. Audit Committee of the Board oversees overall internal audit function of the Bank. The committee guides in developing effective internal audit, concurrent audit, IS Audit and all other audit functions of the Bank. The committee monitors the functioning of the Audit Committee of Executives and internal audit department in the Bank.

CIAD operates through thirteen Zonal Internal Audit Divisions to carry out internal audit of branches/offices as per the periodicity decided by the Risk Based Internal Audit Policy. All branches of the Bank are covered under Risk Based Internal Audit. Out of 4,566 branches audited during 2016-17, 3,669 branches (80.35%) were in Low Risk, -851-branches (18.64%) were in Medium Risk and 46 branches (1.01%) were in High Risk category.

During the year, Bank engaged an independent firm as a knowledge partner for comprehensive review of the Audit function in line with the processes focusing on centralization of activities by use of technology, imaging solutions and digitization. The whole gamut of audit approach will undergo a change with extensive use of technology, analytics, sampling and advanced audit methodology. Internal audit processes thus are being revamped aided by technology.

For streamlining the concurrent audit function with the objective of improved oversight and consistency in approach, Bank has revamped this mechanism whereby a single firm is appointed to conduct concurrent audit of all branches in a Zone. A single audit firm would bring in the benefits of uniformity of approach and with more accountability. It will bring in benefits of unified view on control & compliances, observations of irregularities and patterns if any.

Customer Service

Our Bank is sensitive and responsive to the customer needs and believes that technology, products, processes and human resources must be leveraged for delivering superior banking experience to its customers.

During the year, an independent study on Customer Satisfaction and Brand Health across all products lines was commissioned by the Bank through an independent reputed agency. The survey covered all the geographies across products like savings bank, current account, wealth management products, home loans, auto loans, agri loan, traders loan, mortgages, MSME and mid-large corporates. The findings of the survey provided valuable insights on customer satisfaction levels, loyalty levels and experience levels across the product lines and geographies. Bank is taking necessary steps to further improve the customer satisfaction levels with an aspiration to be the “Most Admired Service Brand” in the banking Industry.

At the Board level, the sub-committee of Board for customer service addresses the issues relating to the formulation of policies and assessment of their compliance with the aim of consistent improvement in the quality of customer service.

Our Bank has also set up a Standing Committee on Procedures and Performance Audit on Customer Services, comprising of two eminent public personalities as members along with all the Executive Directors and seven General Managers of Bank. This Committee oversees timely and effective compliance of the RBI instructions on Customer Service and also reviews the practices and procedures prevalent in Bank and takes necessary corrective steps on an ongoing basis. The suggestions emanating from the Branch Level Customer Service Committee meetings, which are held every month, are placed before the Standing Committee on Procedure and Performance Audit on Customer Services on quarterly basis. The feedback of the committee meetings is then put up to the Customer Service Committee of the Board of Directors.

For redressal of customer complaints, Our Bank has a policy in place on customer grievance redressal and the same is placed on the Bank’s website. Bank is also having a well structured Customer Grievance Redressal Mechanism, due to which the outstanding complaints have also come down significantly. The General Manager, Operations & Services, is designated as Principal Nodal Officer for customer complaints in our Bank. Moreover, all Zonal Heads and Regional Heads are designated as Nodal Officers for their respective Zones and Regions. Further, the names of all Nodal Officers along with their contact numbers are displayed in all the branches of our Bank.

Our Bank views each complaint seriously and undertakes root cause analysis of the complaints for suitable remedial measures including updation of the systems, procedures and sensitization of employees. Our Bank has a web based online complaint registration and redressal portal named as Standardized Public Grievance Redressal System (SPGRS) for lodgment of complaint by the customers online. SPGRS also has a facility to capture suggestions/ feedbacks.

Our Bank has appointed an Internal Ombudsman designated as Chief Customer Service Officer (CCSO). The Bank’s internal ombudsman is a forum made available to customers for grievance redressal before they approach the Banking Ombudsman. All complaints, which are rejected or partially accepted by the Bank, are examined by the Internal Ombudsman. It enhances the confidence of the customers in the Bank’s systems and hastens the process of grievance redressal, making it more transparent.

Our Bank is also a member of the Banking Codes and Standards Board of India (BCSBI) and has adopted the “Code of Commitment to the Customers” and the “Code of Bank’s Commitment to MICRO and Small Enterprises” prescribed by the BCSBI. These have been placed on our Bank’s website and also made available to customers at the branches. BCSBI monitors the implementation of the codes inter-alia by visits to branches to find out the status of ground-level implementation of codes and studies complaints received from customers and orders / awards issued by Banking Ombudsmen / Appellate Authority to find out whether there is any system-wide deficiency. During the rating exercise in 2016, our Bank has been rated “above average” in overall PSB category.

Vigilance

Our Bank gives importance to preventive vigilance to inculcate awareness on the compliance to internal systems and processes. In this connection, after root cause analysis of incidents of frauds, Bank has a system of conveying to the operating units about the deficiencies observed in observance of systems and procedures as a preventive vigilance measure. The employees are also sensitized about preventive vigilance through vigilance newsletter, circulars, meetings etc.

The concept of whistle blower is another effective tool for preventive vigilance. Our Bank has a well-defined whistle blower policy which acts as a deterrent for employees who may be prone to carrying out malicious activities. Bank has designed software which is used for lodgments of complaints online by the employees under whistle blower policy.

With the objective of bringing awareness among the staff about preventive vigilance and also to put forth consequences of flouting the rules and regulations which may lead to perpetration of frauds by unscrupulous elements, sensitive branches of the Bank are identified on the basis of risk perception and preventive vigilance audits are conducted.

To bring about greater transparency in procurement and tendering processes in the Bank, notice inviting tenders/ details of tenders awarded by the Bank and summary of tenders/ contracts concluded are put on the Bank’s website. Standardized Public Grievance Redress System (SPGRS) for uniform implementation in PSBs is also operational.

Vigilance in the Bank aims at ensuring proper justice and fair play in the organization, protecting the innocent; supporting quality decisions and striving to bring the real offenders to book thereby eliminating forces that thwart integrity and cause loss to the Bank.

Human Resources

Our Bank truly believes that our human resources is our biggest differentiator having a direct and significant impact on our Bank’s overall performance, both current and future. Our Bank has a rich reservoir of human resources comprising over 51,000 employees. As we march forward to realize the rising expectations of our stakeholders, it is imperative that our employees are motivated and fully engaged in the present dynamic and competitive environment. Bank’s HR team has been working hard to address the challenges from a human resources standpoint through a plethora of initiatives viz. recruitment and onboarding of talent in the wake of a large number seasoned bankers who are superannuating, focus on strengthening performance management through Project SparshPlus, addressing training needs, leadership development across the Bank, succession planning and higher levels of employee engagement aided by our first ever formally conducted employee engagement survey “Voice of Barodians”. Our Bank continues to take the lead in the conceptualization and execution of various HR transformation efforts, many of which have begun during FY 2017 and mark a first for Public Sector Banks in the country.

There were several positives that emerged from the “Voice of Barodians” Survey 2016 and also some areas that need to be strengthened further through a variety of action plans. These measures also include capability building initiatives to take on higher order challenges in the Bank’s transformation journey. Bank’s intent is to ensure that the employee experience across all levels is further enhanced so as to create a fun and happy place to work in. Towards this end, the Bank launched a series of initiatives for the employees, who are the main drivers for the Bank’s Business and the chief brand ambassadors for the Bank. These include:

Baroda Anubhuti Programme

This is an Employee Engagement programme for enhancing the employee experience at the workplace with initiatives such as Employee of the Month, Spot recognition - capturing “WoW” moments, “Zero Hour” (Fun hour) at all our branches/ offices, local “community service / social activity” by employees, sports and wellness activities

WELEAD - A comprehensive Leadership Programme

Our Bank has introduced a comprehensive Leadership Development Initiative ‘WeLead’, based on behavioural competencies with the objective of building a robust and sustainable pipeline of leaders for the future. This is through the following 4 distinctive programmes:

- Baroda Senior Leadership Programme - for Officers in Scales VI & VII of mandatory courses required for each critical role. Our Bank has been continuously upgrading our capabilities in the area of Learning and Development and has adopted several innovative efforts for this.

Launch of ‘Sparsh Plus’

The Bank has also unveiled ‘Sparsh Plus’ with the objective of revamping the performance and talent management systems in our Bank, aided by the best-in-class technology and digital tools. Our intent is to ensure that our people processes and systems provide our staff with role clarity and empower them to perform their role more effectively, help employees in their development and enable them to enhance their overall contribution.

Bridging the talent deficit and augmenting skillsets

While our Bank has been undertaking hiring on a sustained basis year on year, to cater to business requirements, various recruitment exercises were undertaken during the year to address the emerging manpower needs of our Bank such as recruitment of specialist officers and probationary officers among others.

Our Bank has also on-boarded specialists from the market having skill sets, knowledge and competencies for various critical positions in the Bank with the objective of augmenting our internal team’s capabilities in various strategic areas for the future and for adopting the best practices in the Market/Industry.

Sayajirao Gaekwad Fellowship Programme

Our Bank has instituted the Sayajirao Gaekwad Fellowship Programme in March 2017 in support of Startup India and Standup India initiatives. The Fellowship Programme seeks to encourage young professionals with entrepreneurial ideas to gain a one year experience in the banking and financial services industry and obtain organizational support in development of their start up idea. In addition, the selected Fellows are supporting the execution of several strategic initiatives currently underway in the Bank.

Employee Helpline (HR-Helpline)

Our Bank has launched a central HR helpline for all the employees for resolving their queries/ issues on HR matters, support them in times of distress and help them tide over any emergency situation or any other hardship, which may impede their personal or professional life. There is a dedicated team at corporate office which monitors the Employee Helpline on real time basis and resolves the issues/grievances/queries promptly.

Career Progression

Concerted efforts have been taken by our Bank for fostering career progression of employees to reward them for their performance and also to motivate them further to progress in their careers by fulfilling both the organizational as well as personal aspirations. Our Bank not only provides opportunities for upward movement in the hierarchy but also ensures horizontal movement of Officers across different functions to provide them wider exposure and carve out a definite career path for them.

Thrust on Diversity

Our Bank follows non-discriminatory and equal opportunity policies for all employees. Every employee in the organization has equal access to the available opportunities - whether they concern career progression, perquisites and benefits, welfare schemes, training, grievance redressal or other amenities. Promotion, career path, deployment and transfer policies are made open and transparent and all employees in the Bank are made aware of the same for uniform implementation.

In order to create a more diverse workplace, our Bank has been progressively increasing its recruitment of women employees over the last few years. The percentage of women in the overall staff composition has increased to 22.70% in FY 2017 from 22.05% in FY2016.

In order to retain women employees at all levels and in recognition of the concomitant responsibilities of women, our Bank has put in place various facilities to support women employees such as sabbatical leave, health check program for women employees and other initiatives.

Implementation of Official Language (OL) Policy

During the year FY 2017, our Bank made outstanding progress in implementing the Official Language Policy of Government of India. Besides compliance of various statutory requirements under Official Language Policy of the Union Government and directives issued by Reserve Bank of India, our Bank promoted Hindi as a tool for business development and connecting with the customers.

Our Bank adopted a well-structured Annual Action Plan for Official Language in order to achieve various targets set by the Government of India under its Annual Action Plan 2016-17 and the assurances given to the Committee of Parliament on Official Language during its visits to various offices/branches of the Bank. Our Bank has made significant progress in achieving many of the major targets of the Annual Action Plan. Our Bank has fulfilled all the assurances given to the Committee of Parliament on Official Language within the stipulated time frame.

The Meetings of Central Official Language Implementation Committee were organized regularly on quarterly basis. Under the guidance received from the Committee, several new initiatives were taken during FY 2017. Bank took important initiatives of providing M-Clip Services in Hindi and Baroda M-Connect Plus services in Hindi and Gujarati. Mobile Pass book services are being extended to our customers in Hindi and six other Regional Languages. The Bank also provided Online complaint module i.e. SPGRS services in Hindi for convenience of the customers. All alternate delivery channels viz. Self passbook printing machines, cheque deposit machines, cash deposit machines, Multi function Kiosks, Account Opening Kiosks etc. were equipped with Hindi user interface for the convenience of customers. All ATMs of the Bank were enabled for printing of transaction slips and mini statements in Hindi and major regional languages for the convenience of customers selecting Hindi or the language concerned as the language of their choice for interaction with the machine. As a major IT enabled initiative, Bank launched transactional SMS services in Hindi and 11 other Regional Languages on the occasion of World Hindi Day 2017.

During the year, our Bank organized an All India Seminar on “Demonetization and Digital India” in New Delhi wherein representatives/speakers/participants from different Public Sector Banks took part. An Inter Bank Seminar was organized at Corporate Office, Mumbai on “Importance and Challenges of Language in Digital Era”, which was attended by the Heads/representatives of OL and IT Departments of various PSBs/FIs in Mumbai. This initiative earned accolades from the RBI and Government of India and Parliamentary Committee on Official language. Our Bank celebrated World Hindi Day in January, 2017 at its overseas territories which was attended by eminent personalities related to Hindi Literature and valued customers and officials of Indian Embassies.

Our Bank has instituted an award namely “Maharaja Sayajirao Bhasha Samman” in memory of its founder Maharaja Sir Sayaji Rao Gaekwad-lll. The award consists of a Citation/ Memento and cash award of Rs. 1.51 lakh. During the year, Bank honoured Shri Ashutosh Rana, the eminent Actor and poet with this award.

Bank has expanded the ambitious initiative of regional language training to its employees across various linguistic regions so that they learn the basics of the concerned regional languages which would help them in discharging their duties well while dealing with the local customers.

The Third Sub-Committee of the Committee of Parliament on Official Language visited Bank’s branches/offices at Mount Abu and Alwar during the year. The Committee appreciated the efforts put in by the Bank for progressive use of Hindi. All the assurances given to the Committee have been fulfilled within the prescribed time frame. Our Bank was awarded Second prize for ‘ A’and ‘B’ linguistic Regions and consolation prize for Region ‘C’ by Reserve Bank of India (RBI) under the RBI Rajbhasha Shield Competition. Besides, Bank’s bilingual house journal Bobmaitri also received Third Prize. Jaipur, Varanasi, Goa, Guwahati, and Jodhpur offices of our Bank received awards from Govt. of India through its Regional Implementation Offices for their outstanding work. Bank also received Second Prize from Maharashtra State Level Bankers Committee. Bank continued with its unique scheme “Medhavi Vidyarthi Samman Yojana” for popularising Hindi amongst the students’ community. Under this scheme, cash prizes and commendation certificates are given to the two of the students securing First and Second positions in M.A. (Hindi) examinations. This scheme, at present, is applicable in 64 universities of the country.

In compliance to the directives of Government of India as per Annual Action Plan, Bank carried out Official Language inspection of overseas branches at Fiji, Australia and New Zealand to promote and propagate Hindi amongst local staff members and conducted Hindi Workshop for them. Our Bank published books in Hindi during the year viz.”Grameen Vipananevam Banking Vyavasay” by Corporate Office, “Banking Paridrishya” by Jaipur, “Banking ke Vividh Aayam” by Baroda, “Banking - NayaDaur, NayaParivesh” by Pune and “Maangjama Rashiyan - Banking ka Aadhar” by New Delhi offices for providing qualitative/informative reading material in Hindi language.

Domestic Subsidiaries and Joint Ventures

The performance of the Bank’s Domestic Subsidiaries and Associates was satisfactory during FY 2017.

BOB CARDS Limited is a wholly owned subsidiary of the Bank and is into the business of issuance of Credit Cards and Merchant Acquiring. Gradually, widening its scope of work based on the skill-sets and expertise acquired in the payment card industry over a period of time, Bobcards Ltd. undertook ancillary activity of providing support services to our Bank’s debit card operations.

Envisaging huge growth opportunities for cards and digital payments in India, the Company is gearing up to be a consumer credit and payment leader in the evolving market landscape by introducing new business lines under the NBFC domain besides revamping the existing businesses. Bobcards Ltd. aims to be a consumer finance company for Credit Card (CC) and Personal Loans (PL) business. In addition, it will provide product and servicing capabilities for POS business and sourcing of Retail/SME products for the Bank.

FY 2017 witnessed various initiatives undertaken by the company for its overall growth. In the wake of demonetization, in order to promote cashless transactions, Bank launched a nationwide campaign for enrollment of new POS merchants during November and December 16 whereby more than 60,000 new POS installations were carried out and POS base increased to over 85,000. Post-demonetization, the POS transaction volumes scaled up to Rs.30 crore per day as against earlier volume of ’8 crore. The number of transactions also increased from 25,000 per day to 2 lakh transactions per day. The monthly transaction volume increased from Rs.244 crore to Rs.700 crore. Bobcards has successfully expanded its POS Product Suite by adding m-POS (Mobile POS Terminals) and QR based acquiring (m-VISA& Bharat QR Code). The company continued to focus on issuance of quality cards, resultant to which transaction volumes through Credit Card Business increased significantly. The process of tapping the potential in the travel segment has been initiated to bring more such agents to our fold. Total 24,770 new cards have been issued till February 2017 despite the shift in thrust for POS installation after de-monetization. As a mass marketing initiative, Bobcards has tie-up with XLRI, Jamshedpur for issuance of Co-branded cards to its alumni.

Providing prompt and courteous service to customers continued to be the major strength of the Company, which not only enabled it to emerge as a customer friendly organization but also helped in retaining quality customers. Quick grievance redressal approach resulted in high level of customer satisfaction and response.

BOB Capital Markets Limited is a wholly owned subsidiary established by Bank in 1996. Main businesses of BOBCAPS are Investment Banking (Debt Restructuring, Project Finance, M&A, Debt Capital Markets and Equity Capital Markets), Institutional & Retail Equity Broking and Distribution of Financial Products. The Company also has a license for Portfolio Management Services (PMS).During FY 2017, the Company has embarked on a significant scale up in its key businesses. The company has successfully strengthened its teams in businesses such as Investment Banking, Broking and Wealth Management / Distribution- to be able to leverage strengths of our Bank and establish BOBCAPS as one of the leading and most respected player in its businesses.

The Nainital Bank Limited was promoted by Late Bharat Ratna Pandit Govind Ballabh Pant and others became an Associate Bank of Bank of Baroda in the year 1973. Shareholding of our Bank in Nainital Bank Ltd. is 98.57%. The Total Business of Bank which was Rs.8,049.22 crore as of Martch 31, 2016 has increased to Rs.10,132.66 crore as of March 31, 2017, showing growth of 25.88%. Bank has opened 11 new branches &established -5-Loan processing units by the name Naini Loan Points (NLPs). Bank also installed 13 white label ATMs with collaboration with TCPSL. Bank issued 22,688 debit cards to its customers during FY 2017.

Baroda Pioneer Asset Management Company Limited, a Joint Venture with Pioneer Global Asset Management SpA, is in its eighth year of operation. In light of a good year for the Mutual Fund Industry, Baroda Pioneer Asset management Company has also been able to increase its AUM. The average AUM of the company for FY 2017 was Rs.10,535 crore. Further, the company has improved its asset mix, with share of liquid reducing and that of fixed income going up. This helped the company to maintain its budgeted margins during the year. The company continued to focus on developing the banking and IFA channels for distribution. This helped in getting the flows in the fixed income and equity segments. The company’s SIP book is also growing steadily and has seen inflows from beyond the top 15 towns of the country. Gathering assets in equity funds and building the momentum in fixed income segment continues to be the top agenda for the company. The company continues to explore enhanced technological solutions to continuously improve its service delivery.

India First Life Insurance Company Ltd a joint venture company with Andhra Bank and Legal & General group, commenced its business operations on November 16, 2009 and has received an overwhelming response for its products across the country. India First is amongst the fastest Life Insurance Company to break even in the 5^th year of operation and its industry ranking is 8^th among the private players with market share of 4.5% and AUM (Asset under Management) at Rs. 9,061 crore as of March 31, 2017.

India Infradebt Limited (Infradebt) It is the first Infrastructure Debt Fund (IDF) under a non-banking finance company structure set up and was promoted by ICICI Bank Limited, Bank of Baroda, Citicorp Finance (India) Limited and Life Insurance Corporation of India in which Bank is holding 30% stake. The Company’s principal activity is to re-finance part of the debt liabilities of the Infrastructure Projects which have completed one year of commercial operations. The Company has made aggregate disbursements of Rs. 4,712 crore to 22 road projects under PPP format awarded by NHAI, 18 renewable energy projects and two other Infrastructure projects (Hospitals) as of March 31, 2017. As of March 31, 2017, India Infradebt Ltd. has raised a total of Rs. 4,205 crore of funds through Non-Convertible Debentures.

Baroda Global Shared Services Ltd. It is a newly formed wholly owned subsidiary of our Bank. The subsidiary is formed with the objective of migrating some of the back-office processes to handle through a centralized set up. The Company is yet to be operationalised.

A brief synopsis of domestic subsidiaries, associates and Joint Ventures is as below:

(Rs. in lakh)

Entity (with date of registration)	Owned Funds	Total Assets	Net Profit	Offices	Staff
BOB Capital Markets Ltd. (11.03.1996)	16,317	16,554	560	1	57
BOBCARDS Ltd. (29.09.1994)	23,647	35,651	2,644	38	135
Baroda Pioneer Asset Management Co. Ltd. (05.11.1992)	4,864	6,150	107	3	75
Baroda Pioneer Trustee Co Pvt Ltd. (23.12.2011)	8	11	1	1	0
IndiaFirst Life Insurance Co. Ltd. (05.11.2009)	55,061	1,11,248	3,517	24	1,294
The Nainital Bank Ltd. (31.07.1992)	56,969	7,699	4,846	353	922
India Infradebt Ltd. (31.10.2012)	42,006	4,93,942	4,810	1	17
BOB Shared Services Ltd. (15.03.2017) Operations yet to be started	12			1	-

Awards and Accolades

During FY 2017, our Bank has won following awards and accolades on both business and financial parameters.

Date	Awards
15.02.2017	Bank was awarded 2nd prize by Maharashtra State Level Bankers Committee in the area of Official Language Implementation during 2015-16 under Rajbhasha Shield Yojana under Public sector Category held in Pune.
14.02.2017	Bank was awarded for “Excellence in Banking, (PSU Sector)” and “Excellence in Education Loan” at 7th My FM Stars of the Industry awards for Excellence in Banking, Insurance and Financial Services held in Mumbai on 14th February, 2017.
08.02.2017	Bank was awarded Amity Corporate Excellence Award for being the First Bank to Launch Digital Portal Branch by Amity University, Noida & Greater Noida Campus. The Award received during 17th International Business Horizon Inbush Era World Summit 2017 on 8th to 10th February 2017 held at Noida.
16.12.2016		Bank was awarded in three categories: Skoch Award Platinum- Banking Category; Skoch Award Platinum for Cash on Mobile and Skoch Award Platinum for Digital Portable Branch by Skoch Group. The Award received during Skoch Technologies for Growth Award 2016 held at New Delhi on 16th December, 2016.
26.10.2016		Bank won -4- Awards at the 56th Association of Business Communicators of India (ABCI) Awards as under: 1. Bank’s Wall Calendar 2016 - Bronze 2. Bilingual Publications - Bronze 3. Special Column (English) - Bronze 4. Features (Language) -Akshayyam - Silver
23.09.2016		Bank received The Best Official Language Implementation’ award and special award for Bank’s Hindi Magazine ‘Akshayyam’ for the year 2016 by reputed Literary Organization “Aashirwad” at Mumbai.
31st Aug to 6th Sept. 2016		Bank ranked 21st amongst Best Indian Brands 2016 in Brand Equity - The Economic Times dated 3151 August to 6th September, 2016.
01.09.2016		Bank was awarded runner-up-award - ‘Public Sector Bank’ category for the year 2013-14 at ‘FE India’s Best Bank’ by The Financial Express (FE) a function held in Mumbai on 01.09.2016

Registrar & Share Transfer Agent, Share Transfer System and Redressal of Investors’ Grievances

Bank has established Investors’ Services Department, headed by the Company Secretary at Corporate Office, Mumbai wherein Shareholders can mail their requests / complaints for resolution at the address given below. They can also lodge their complaints online through SPGSR.

Dividend Distribution Policy

As required under Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements), 2015, our Bank has a dividend distribution policy in place which sets out the parameters and circumstances that will be taken into account by Board in determining distribution of dividend to its shareholders. The policy is given in this Annual Report and is also available on the Bank’s website at www.bankofbaroda. com/download/Dividend.pdf

Board of Directors (Appointment /Cessation of Directors during the year)

Appointments

Prof. Biju Varkkey was nominated as a Part Time Non-Official Director w.e.f. 25.04.16 by the Central Government u/s 9(3)(h) and (3-A) of section 9 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, for a period of 3 years or until further orders, whichever is earlier.

Shri Gopal Krishan Agarwal was nominated as Parttime Non-Official Director w.e.f. 26.07.16 by the Central Government u/s 9(3)(g) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, under Chartered Accountant category for a period of three years or until further orders, whichever is earlier.

Shri Ashok Kumar Garg was appointed as Executive Director by the Central Government u/s 9(3)(a) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, w.e.f. 9^th August, 2016 for a period upto 30.06.2018 i.e. the date of his superannuation or until further orders, whichever is earlier.

Smt. Papia Sengupta was appointed as Executive Director by the Central Government u/s 9(3)(a) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, w.e.f. 1^st January, 2017 for a period upto 30.09.2019 i.e. the date of her attaining the age of superannuation or until further orders, whichever is earlier.

Shri Ajay Kumar was nominated as Director by the Central Government u/s 9(3)(c) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, w.e.f. 13^th January, 2017 to hold the post until further orders.

Cessations

Shri Bhuwanchandra B Joshi. Executive Director, ceased to be Executive Director w.e.f. 1^st January, 2017 on his attaining the age of superannuation from the Bank’s service.

Smt. Surekha Marandi, Director, ceased to be a Director w.e.f. 13^th January, 2017 on the appointment of Shri Ajay Kumar in her place.

Board Evaluation

Bank engaged the services of a reputed external specialist firm to conduct an independent Board evaluation and review of overall effectiveness of the Board. The firms global methodology for conducting board reviews was followed for this purpose. This entailed effectiveness assessment of the following areas of the Board - a) Board strategy and alignment, b) Management of the Board by the Chairperson, c) Functioning of the Board committees, d) Relationship between the Board and the management team, e) Quality of the Board processes, f) Board composition and g) Quality of discussions/decisions taken by the Board in key areas like risk management, talent etc. In addition, at an individual level, members of the Board were assessed in areas like a) Overall engagement and alignment, b) Quality of their contribution, c) Openness in listening and receiving feedback, d) Ability to challenge and take/oppose tough decisions etc.

For conducting the assessment a combination of three methods was followed. This included in depth structured one on one interviews with all members of the Board. In addition, key personnel of the Bank such as the CFO and Company Secretary were also interviewed. The review team attended Board meetings and committee meetings to observe and study the Board dynamics in a live environment. The minutes of the previous Board and committees meetings and the Board materials used to present policies and support decisions were analyzed.

The results of the review were shared with the Chairman and the Board members in a daylong session. As part of this session a workshop was conducted in September 2016 to determine and align on key next steps and actions that the Board and management agreed to undertake following from the Board review. A follow on session was conducted in April 2017 to assess the effectiveness of the actions. It was unanimously concluded that significant progress had been made in a short span of time.

Auditors’ Compliance Certificate on Corporate Governance:

The Auditors Compliance Certificate regarding the compliance of the conditions of Corporate Governance for the year 2015-16 is annexed with this report pursuant to “Part ”E” of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Business Responsibility Report

Business Responsibility Report as required by SEBI has been hosted on the website of the Bank (www.bankofbaroda. co.in). Any member interested in obtaining a physical copy of the same may write to the Company Secretary of the Bank.

Directors’ Responsibility Statement

The Directors confirm that in the preparation of the annual accounts for the Financial Year ended March 31, 2017:

a) the applicable accounting standards had been followed along with proper explanation relating to material departures if any;

b) the accounting policies framed in accordance with the guideline of Reserve Bank of India were followed and the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit and loss of the Bank for that period;

c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of applicable laws to the Bank for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

d) the directors had prepared the annual accounts on a going concern basis; and

e) the directors had ensured that internal financial controls followed by the Bank are in accordance with guidelines issued by Reserve Bank of India in this regard and that such internal financial controls are adequate and were operating effectively.

Explanation. For the purposes of this clause, the term “internal financial controls” means the policies and procedures adopted by the Bank for ensuring the orderly and efficient conduct of its business, including adherence to Bank’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information;

f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Acknowledgements

The Directors place on record their appreciation for the contributions made by the outgoing Directors viz. Shri Bhuwanchandra B Joshi and Smt. Surekha Marandi.

The Directors express their sincere thanks to the Government of India, Reserve Bank of India, Securities and Exchange Board of India, other regulatory authorities and overseas regulators for their continued co-operation, guidance and support.

Bank would like to take this opportunity to express sincere thanks to its valued clients and customers for their continued patronage and support.

The Directors acknowledge with deep appreciation of the cooperation extended by all shareholders, banks and financial institutions, rating agencies, stock exchanges and all the well wishers in India and abroad.

The Directors also take this opportunity to place on record deep appreciation for the hard work and dedication of the employees of our Bank which enabled our Bank to record growth with quality year after year despite economic challenges and consolidate its position as one of the premier banks in the country.

For and on behalf of the Board of Directors,

R S. Jayakumar

Managing Director & CEO

---

Mar 31, 2014

The Directors have pleasure in presenting the One Hundred and Sixth Annual Report of your Bank with the audited Balance Sheet, Profit & Loss Account and the Report on Business and operations for the year ended March 31,2014 (FY14).

Performance Highlights

- Total Business (Deposit Advances) increased to Rs 9,65,900 crore reflecting a growth of 20.43% (y-o-y).

- Gross Profit and Net Profit were Rs 9,291 crore and Rs 4,541 crore respectively. Net Profit registered a growth of 1.35% over the previous year.

- Credit-Deposit Ratio stood at 86.15% as against 82.03% last year.

- Retail Credit posted a growth of 20.96% constituting 16.6% of your Bank''s Gross Domestic Credit in FY14.

- MSME Credit posted a growth of 21.21% constituting 20.3% of your Bank''s Gross Domestic Credit in FY14.

- Net Interest Margin (NIM) as per cent of interest earning assets in global operations was at the level of 2.36% and in domestic operations at 2.87% during FY14.

- Net NPAs to Net Advances stood at 1.52% this year against 1.28% last year.

- Capital Adequacy Ratio (CAR) as per Basel II stood at 12.87%.

- Capital Adequacy Ratio (CAR) as per Basel III stood at 12.28%

- Net Worth improved to Rs 34,933 crore registering a rise of 13.7%.

- BookValue improved from Rs729.11 to Rs 813.50 on year.

- Business per Employee moved up from Rs 1,689 lakh to Rs 1,865 lakh on year.

Segment-Wise Performance

The Segment Results for the year FY14 reveal that the contribution of Treasury Operations was Rs 1,527.24 crore, that of Corporate/Wholesale Banking was minus Rs 461.11 crore, that of Retail Banking was Rs 3,359.84 crore, and of Other Banking Operations was Rs 2,458.02 crore. Your Bank earned a Profit after Tax (PAT) of Rs 4,541.08 crore after deducting Rs 1,386.68 crore of unallocated expenditure and Rs 956.23 crore towards provision for tax.

Dividend

Your Bank''s Directors have proposed a final dividend of Rs 10.50 per share. The final dividend together with interim dividend of Rs 11 per share paid in January 2014 results in total dividend of Rs 21.5 per share (on the face value of Rs 10/-per share) for the year ended March 31st, 2014. The total outgo in the form of dividend, including taxes, will be Rs 1,083.68 crore.

Capital Adequacy Ratio (CAR)

Your Bank''s Capital Adequacy Ratio (CAR) was comfortable at 12.87% under Basel II and at 12.28% under Basel III as on 31st March 2014. Moreover, your Bank''s Tier 1 ratio was at 9.28% and common equity Tier 1 was at 8.95% under Basel III framework.

Your Bank''s Net Worth as at 31st March 2014 was Rs 34,933.06 crore comprising paid-up equity capital of Rs 430.68 crore and reserves (excluding revaluation reserves) of Rs 34,502.38 crore. An amount of Rs 3,457.40 crore was transferred to reserves from the profits earned.

Provisions towards Retirement and Other Benefits

During the year FY14, your Bank made provision towards contribution to gratuity (Rs 100.72 crore), pension funds (Rs 1,014.76 crore), leave encashment (Rs 106.18 crore) and additional retirement benefits (Rs 54.71 crore) on actuarial basis. Total provisions under these four categories amounted to Rs 1,276.37 crore during the year FY14, against Rs 1,205.63 crore during FY13. Total corpus available with your Bank at the end of March 2014 under these heads was: Rs 1,532.62 crore (gratuity), Rs 7,893.50 crore (pension funds), Rs 735.69 crore (leave encashment) and Rs 647.17 crore (additional retirement benefit).

Key Financial Ratios

Particulars FY 14 FY13

Return on Average Assets (ROAA) (%) 0.75 0.90

Average Cost of Funds (%) 5.37 5.75

Average Yield (%) 7.68 8.29

Average Interest Earning Assets (Rs crore) 5,07,082.68 4,24,761.33

Average Interest Bearing Liabilities (Rs crore) 5,02,176.05 4,15,246.10

Net Interest Margin (%) 2.36 2.66

Cost-Income Ratio (%) 43.44 39.79

BookValue per Share (Rs) 813.50 729.11

EPS (Rs) 107.38 108.84



A Dedicated Cell for Training & Development

Looking to the importance of Training and Development in the context of large scale recruitment in the Bank combined with the need for grooming of the existing work force in the context of the growing competition, your Bank created a new cell for "Learning" and a new functional position as Chief Learning Officer (CLO) in the Bank during FY14. The CLO is of the level of a General Manager and supports the organization through learning interventions.

The broad mandate of this new vertical is as follows.

- Institutionalizing and enhancing E-learning for effective knowledge management.

- Fostering a learning environment across the organization through innovative interventions.

- Helping customers to understand and use your Bank''s products and services through customer education.

- Aligning training with operational priorities by designing suitable courses through collaboration with other functional heads.

- Steering the Baroda Academy towards the objectives for which it was set up.

Your Bank has 15 training establishments spread all over the country including its apex Staff College at Ahmedabad. The Staff College has successfully completed its glorious journey of 49 years and stepped into the Golden Jubilee year on 21st November, 2013. Golden Jubilee year was launched by your Bank''s Chairman & Managing Director on the same day. A series of learning events took place throughout the year to commemorate the Golden Jubilee year. During the year, a new Training Centre was commissioned at Bangalore.

Faculty members of the Bank have authored good number of research papers that were presented in national and international conferences and subsequently published as well.

The training system in your Bank extensively uses case study methodology and has built up a pool of case studies developed by faculty members to make training highly experiential and simulation-based.

A good number of innovative steps have been taken by the Bank in the domain of training over the years. The training system of your Bank bagged a National Award for Innovative Training Practices in various industries by securing third position, awarded by the Indian Society for Training & Development (ISTD) during the year FY14.

Large Scale Training on Products

Your Bank carried out a campaign called "ASCEND" for large scale product training to impart product knowledge to the front line officers on Retail Liability, Retail Asset and e-Business products. The campaign was run entirely by the trainers and operational bankers, and it covered 5,987 employees amounting to about 95% of the target group.

Similarly two rounds of All India quiz christened "Baroda Gyani" were organized to bring more awareness on product knowledge. More than 4,000 employees from sub-staff to officers participated in this competition upgrading their product knowledge. E-learning modules on retail products were also launched for this purpose.

Adoption of new Training Policy

Your Bank has a Board approved comprehensive training policy. It covers entire spectrum of training activities that include a) laying down streamlined processes, b) a full-fledged training structure, c) capacity building, d) measurement of training efficacy and, e) intervention methodology.

Special Thrust on Development of SC/ST/Other Backward Communities

Your Bank is committed to the constitutional safeguards and social objectives for development and welfare of persons belonging to SCs, STs and other backward classes in the Society. Around 49 programmes covering 1,221 SC and 573 ST employees were conducted during FY14 to prepare them for promotion exercise. Similarly, 9,602 SC employees, 3,795 ST employees and 10,292 OBC employees were imparted training during FY14 in various key banking areas.

Training to Customers: "Customer Connect" Campaign

As part of customer education, the training system ran a campaign during Feb-Mar 2014 to impart training to customers for using net banking and mobile banking services. More than 15,342 customers were trained at various centres and the initiative will continue throughout the calendar year.

Capability Building Initiatives

To build knowledge power of its employees, your Bank has been focusing on comprehensive grooming of the staff in key banking areas like credit, forex, Priority Sector, Retail Banking, CBS, Financial Inclusion, Risk Management etc. Besides, your Bank conducts comprehensive training programme called "On-Boarding Programme" for newly recruited officers and clerks using in-house resources and through a tie-up with reputed external agencies. The Bank conducted more than 2,337 in-house training programs during the year FY14 covering 49,044 participants in addition to the external training of officers and executives at various business schools in India and abroad. Your Bank is at an advanced stage to take the next big step in the area of e-learning to augment its capabilities to reach out to every single employee.

External Training

During FY14, around 988 staff members were nominated to various external training programmes. Your Bank considers External Training an integral part of capacity building, wherein employees at all levels are exposed to such programmes to learn and adopt the best practices existing in the industry.

Some of the noteworthy and dedicated programmes organised during the year FY14 were:

- Top Management Programme for General Managers and Deputy General Managers of your Bank at ISB, Hyderabad from 13th to 18th May 2013.

- Top Management Programme for two batches of newly promoted Assistant General Managers and Chief Managers at International Management Institute (IMI), New Delhi from 13th to 17th May 2013 and from 20* to 24th May 2013.

- A Leadership Development Programme for newly promoted Assistant General Managers of the Bank from 7th to 12th October 2013 at Centre for Organization Development, Hyderabad.

- Integrated Treasury Bourse Programme in association with Trinity Academy, Mumbai from 26th August to 5th September 2013 for treasury officers.

- Talent management training on ''Communication and Influence'' and ''People Development and Team Focus'' for the identified officers during Oct-Dec2013.

- Executive Development Programme on Rational Emotive Behavior Therapy (REBT) from 5th to 7th December 2013 at University of Mumbai.

- A dedicated Programme for Agriculture Officers of your Bank from 2nd to 7th December 2013 at Manipal Academy of Banking, Bangalore.

- Nearly 3,000 new clerks were on-boarded in tie-up with NIIT-I FBI thus covering all the new clerks who joined the Bank post June, 2013. More than 800 existing clerks were trained under a refreshers'' course "UTKARSH" by I FBI.

- A programme on "Positive Approach to Vigilance Administration for Disciplinary Authorities" on 18th & 19th October 2013 at New Delhi.

- A Faculty Development Programme was conducted from 16th to 21st December2013 by M/s Fourth Quadrant Training Pvt. Ltd.

Business Process Re-engineering (Project Navnirmaan)

Ever since your Bank changed its brand identity, there has been a tremendous growth in its brand recall value, which in turn gave rise to enhanced expectations from all stakeholders. The expectations were further strengthened by your Bank''s tag line as India''s International Bank and its mission to be a ''National Bank of International Standards''. However, your Bank has responded well to these expectations by restructuring its products and processes in an optimum fashion.

Actually, the process of change began with the setting up of Retail Loan Factories in 2007. Subsequently, your Bank commissioned a comprehensive change programme in June 2009 that sought to rebuild the Bank for the future underthe name Project Navnirmaan.

This project touched all aspects of your Bank''s processes, structures and systems with an objective to simplify processes, improve branch productivity and provide best- in-class service to its customers.

The change programme has been successful and this initiative has been one of the major factors to help your Bank bag a number of awards and accolades establishing itself truly as India''s International Bank.

The major achievements under the project Navnirmaan during FY14 are enumerated as under.

- Baroda-Next Branch: Around 1,433 metro and urban branches have been rolled out as Baroda Next branches in your Bank until end of FY14.

- Branch Front-end Automation: The Queue Management System (QMS), Cheque Deposit Machines and Personalized Pass Book Printers were installed in 9,840 and 1,200 branches, respectively.

- City Back Office (CBO): Clearing operations were centralized for all branches (linked to CBO). At present, there are 85 CBOs operational throughout the country.

- Regional Back Office (RBO): Two RBOs at Bareilly and Ahmedabad were added during the year taking the total strength to 12. Altogether 3,653 branches are linked for CASA opening and 4,263 branches linked for PCB (Personalized Cheque Book) issuance.

- Credit centralization Pilot (RLF/SMELF): The Retail and SME credit centralization pilot of your Bank initiated in FY14 is under progress at the Loan Factories in Baroda.

- Sustainability of NAVNIRMAAN initiatives/impact:

Process Compliance Audit (PCA) - A certification procedure for Baroda Next branches was introduced through which process compliance/adherence by branches are being evaluated by your Bank''s inspecting officers. Till date, 907 branches have been covered under the PCA.

- Train the Trainers Programme: A two days'' programme was held at Staff College Ahmadabad from 29th to 30* June, 2013-in connection with holding workshops at all zones for branch heads, sales heads, relationship managers, customers service and branch hosts of Baroda Next branches.

- Change Leader-cum-RBDM Conclave: A two days'' conclave was held at Staff College, Ahmadabad during 12-13 August, 2013.

- Contact Centre: Your bank has two Contact Centres at Lucknow and Vadodara. In addition to the existing basket of service, Mobile Banking assistance service has been added during the year. The service timing has been increased to 6am to 10pm (from earlier 8am to 8pm) for better customer convenience.

- E- Lobby: Your Bank has started 45 independent E-Lobbies in different zones. It offers the following six services- Cash Dispenser (ATM), Bunch Note Acceptor (BNA), Self Service Automatic Passbook Printing Kiosk, Cheque Deposit Machine (CDM), Internet Banking Kiosk and Phone Banking facility.

- Innovation Committee: With a view to encourage a culture of innovation across the organization, your Bank set up an Innovation Committee in March 2014 with the following objectives - developing new products and services, innovation in internal processes that add value to customers and the Bank, innovation in service delivery that delights the customers.

Marketing

During FY14, your Bank continued to promote its brand and various products and services through various marketing initiatives. This involved effective utilization of different media vehicles such as Print, Electronic (TV, Radio, Online etc.) and OOH, apart from supporting the "Below-the-Line" (BTL) activities undertaken by the Zones and Regions.

The highlights of various marketing / communication activities undertaken during FY14 are given below:

Your Bank, encouraged from the success of its initiative of FY13i.e. BRAND Engagement Program, launched the next edition of ''Bank of Baroda Canvas Competition'' during January 2014 to continue and harness the potential of long- term relationship formed with the younger audience as well as their influencers i.e. parents and teachers. This year again the momentum was to build long-term relationship with both existing and new educational institutions and as such, students across the country were invited to submit their entries through their respective schools on a pre- determined topic and winning entries were selected on National/Regional levels by a select panel of judges. The brand-association formed with the target audience through involvement of the Bank''s mascot i.e. ''Stickman" increased significantly this year and participants were invited to name the stickman. A judicious mix of on-ground activities at the Zonal and Regional levels were used in the campaign to maximize the number of entries in the said competition.

In addition to the above initiative, your Bank undertook various Product Promotion Campaigns to promote its products and services amongst target audience through advertising across different geographies. Besides focusing on providing information on various products and services, particularly Saving Deposits, Current Deposits, Home Loans, Car Loans and SME Loans, new product-lines like Consumer Durable loans and Alternate Delivery Channels (ADCs) were aggressively promoted. Furthermore, special customer segments were also targeted viz; Special Campaigns for Doctors and NRIs etc. through judicious use of various media vehicles on Pan India basis. Information relating to expansion of branch network, both domestic and overseas, was also given due publicity largely through print medium which helped enhancing your Bank''s brand image and visibility.

Your Bankalso participated in various events such as Pravasi Bhartiya Diwas 2014, FICCI-IBA Banking Conference 2013, World Ranking Snooker Tournament-Indian Leg, India-Australia Cricket Series 2013, MINT Annual Banking Conclave, BKC Financial Institutions Employees Marathon and Standard Chartered Mumbai Marathon 2014, among many other events to continue the brand association with the customers and stakeholders thereby increasing the recall value.

During FY14, as part of its public relations task, your Bank had wide media coverage of its activities across the country, which helped in enhancing your Bank''s brand image.

Awards and Industry Recognition for Bank of Baroda

Your Bank won several awards and recognitions during FY14 from the reputed media houses and other prestigious organizations on various business and financial parameters for its steady and all round performance, superior management thereby contributing to the growth of the economy.

Given below are some select awards won by your Bank during the year FY14:

- Your Bank''s Chairman & Managing Director Shri S S Mundra, ranked 41st in the list of Top 100 India Inc''s Most Powerful CEOs as per CD-ET (Corporate Dossier- Economic Times) Inc''s Survey 2013, published in Economic Times issue dated 12.07.2013. He was also ranked 3rd amongst CEOs of Public Sector Banks as per the survey.

- Your Bank ranked 20th amongst ''Best Indian Brands'' - Brand Equity Economic Times Survey. This was published in Economic Times issue dated 31st July 2013.

- Your Bank won a Special Award for Best IT Team among Public Sector Banks at IDRBT Banking Technology Excellence Awards 2012-13.

- Your Bank was recognized as the Best Public Sector Bank under the category ''Global Business Development'' by Dun & Bradstreet - Polaris Financial Technology Banking Awards 2013.

- The Reserve Bank Rajbhasha Competition, 28.08.2013, Mumbai gave your Bank the following prizes.

a) First Prize in Region ''C

b) Second Prize in Region ''A'' & ''B''

c) Third Prize for ''AKSHAYYAM'' in Hindi House - Bilingual House Journal Competition

d) Third Prize for ''BOBMAITRI'' in - Bilingual House Journal Competition

- The Sunday Standard Best Bankers'' Awards - Best Banker - HR constituted by The New Indian Express Group, was conferred on Shri S S Mundra, Chairman & Managing Director of your Bank during FY14.

- Your Bank received an award in Indira Gandhi Rajbhasha Shield Competition, 14.09.2013, New Delhi.

- First Prize for the Year 2011-12 was given for your Bank''s exemplary performance in Official Language Implementation.

- In the ASSOCHAM 9th Annual Banking Summit-cum- Social Banking Excellence Awards 2013, 16.09.2013, New Delhi, your Bank was the Winner in Public Sector Banks Category in recognition of its distinguished and commendable work done in the field of ''Social Banking''.

- Your Bank improved its ranking from 66th to 52nd in The Asian Banker - Region''s Largest Bank category, in September 2013 special issue 122 of The Asian Banker.

- Your Bank won the following awards during the 53rd Annual Awards Nite of the Association of Business Communications of India (ABCI), 18.10.2013, Hotel Taj, Colaba, Mumbai.

a) Special Column (English) - BronzeTrophy for BOBMAITRI

b) Special Column (Language) - Silver Trophy for Apni Baat - Akshayyam

c) Headlines - Bronze Trophy for Corporate Ad (Stamp Creative)

- Your Bank was ranked No.3 in THEBWReal500 - India''s 50 Biggest Financial Companies published in Business World Issue dated 04.11.2013.

- Your Bank was ranked No.50 in BT500 India''s Most Valuable Companies published in Business Today November 10 2013 issue.

- Your Bank was rated as the 3rd Fastest Growing Large Bank and 4th ''Best Bank- in Large Bank Category'' in a Survey of India''s Best Banks by - BW-PwC Survey. This Survey was published in Business World issue dated 30th December 2013.

- Your Bank was ranked 22nd in Brand Equity Top Service Brands published in Brand Equity Issue dated 18.12.2013, retaining its brand ranking position as that of last year.

- Your Bank was ranked 28th in Fortune India 500 lists published in Fortune India Magazine Special issue December 2013.

- Your Bank received the MSME Banking Excellence Award -2013 as the Best Bank in MSME by Chamber of Indian Micro Small and Medium Enterprises on 09.01.2014 at New Delhi.

- Your Bank was ranked 27th in India''s Biggest 500 Companies - Top 500 company listing 2013 published in ET 500 Magazine issue January 2014.

- Your Bank was awarded "Best Bank - Public Sector" by ABP News in Banking, Financial Services & Insurance Awards on 14.02.2014 in Mumbai.

- Your Bank was awarded for "Excellence in Banking (PSU)" by My FM Stars of the Industry award on 14.02.2014 in Mumbai.

- Your Bank was awarded for "Excellence in Home Loan Banking" by My FM Stars of the Industry award on 14.02.2014 in Mumbai.

- Your Bank received the ''Global Excellence & Leadership Award'' in the category of ''50 most talented CSR Professionals of India'' by World CSR Congress in Mumbai on 18/02/2014.

- Your Bank was ranked 53rd on Net Revenue and 45th on Market Capitalization in FE 500 list published in Financial Express Magazine February 2014 issue.

- Your Bank was ranked No.1 in the Public Sector Bank Category in FE-EY Best Banks Survey 2012-13 published in The Financial Express Magazine March 2014 issue.

- Your Bank''s Eastern UP Zone, Lucknow was awarded the 1st Prize by Government Of India for Implementation of Official Language (Hindi) in Banks for the year 2012- 13 by Official Language Dept, Ministry of Home Affairs, Government of India at a function held in Chandigarh.

Premises Re-Engineering and Ambience Enhancement

The major achievements of your Bank in the area of "Premises re-engineering and ambience enhancement" during the year FY14 are as given below.

- Construction of office building cum currency chest at Varanasi was completed. This building is equipped with ultra modern gadgets and systems with energy efficient equipments and rain water harvesting system. The eco-friendly materials were used in its construction. Your Bank''s presence by this building in Varanasi is admired by one and all. Now, it has become one of the landmark buildings of the city.

- As per the directives from Ministry of Finance, your Bank linked its corporate office with all zonal and regional offices through State-of-the Art Video Conferencing (VC) systems based on MPLS Connectivity. Interaction of functional heads through VC has made the decision making process more efficient, quick and cost effective.

- During FY14, your Bank adopted all technology centric initiatives in the form of e-tendering, e-procurement etc. and this was implemented in a phased manner.

- You Bank ensured that all payments to vendors are made through RTGS/NEFT.

- In tune with your Bank''s policy to have its administrative offices in owned premises, your Bank purchased land at Bangalore (Karnataka), Hyderabad (AP), Faizabad (UP) Indore (MP), Udaipur (Rajasthan), Dehradun (Uttrakhand), Jaipur (Rajasthan) and New Raipur (Chhatisgarh), Bareilly (UP) and Ernakulam (Kerala) for construction of commercial /residential buildings.

- Looking to the ever increasing rentals, area optimisation of every corner of the available premises is being ensured by your Bank. Layouts are being revisited while renovation and furnishing of branches and offices is being done by introducing eco-friendly and ergonomically designed sleek furniture items. The area norms for acquisition of the premises have also been reviewed and implemented.

- To have uniformity in systems and procedures pan- India, Premises Policy Guidelines, Constructions Manual, Refurbishment Manual were designed and formulated. Agencies have been identified for quick procurement of the furniture items and to have similar and identical design to get aesthetically pleasant look and vibrant indoor environment.

Projects implemented during FY14

- The construction of office building cum currency chest at Varanasi.

- Construction of residential complex at Janakpuri, New Delhi.

- The construction of multi-storey integrated office building at Jaipur.

- Construction of BSVS at Ajmer, Dungarpur, Banswada and Pratapgarh.

- The setting-up of e-lobbies at 45 various locations in the country.

- Your Bank purchased residential flats at various places for newly transfered officers.

Projects under implementation

- Construction of BSVS at Alirajpur, Jaipur, Surat, Bharuch and Jhabua.

- Construction of administrative and residential buildings at New Raipur.

- Construction of residential cum commercial complex at Indore (MP).

- Construction of own building for Disaster Recovery Site at Hyderabad.

- Renovation of Bank of Baroda Institute of Information Technology at Gandhinagar (Gujarat).

- Construction of Regional Office Building at Faizabad.

- Renovation of residential building and flats at Nehru Enclave, Lucknow.

Future Plans for Estate Management

- To facelift the Bank''s Building at Parliament Street, New Delhi.

- To redevelop the Bhandup Staff Quarters building, Mumbai, thereby to construct about 138 residential flats for transfered officers/executives.

- The redevelopment of Jogeshwari Staff Quarters, Mumbai, to construct a building for residential and commercial use.

- To construct the training centre at Bangalore.

- Construction of BSVS at various centres across India as per the directives from the Government of India.

- To set up the Baroda Academy (i.e., training Centre) at Gandhinagar (Ahmedabad), Bangalore, Greater Noida and Bhubhneshwar.

Brick & Mortar Branch Expansion

Given below is the information on your Bank''s brick and mortar distribution channels as on 31 st March, 2014, which is observed to be closer to common customers as compared to the E-Banking channels that are generally preferred by the tech savvy urban masses.

Area Classification Number of % Share in (India) Branches Total

Metro 980 20.11

Urban 849 17.42

Semi-urban 1273 26.11

Rural 1772 36.36

Total 4874 100.00

Overseas 60 --

Domestic Subsidiaries and Associates

The performance of your Bank''s Subsidiaries, Joint Ventures and Associates was quite satisfactory during FY14.

BOBCARDS Ltd. turned around during FY11 due to the recovery in NPA accounts. Subsequently, it posted profits during FY12 and FY13. During FY14, the company focused on all qualitative aspects of business development, which resulted in better profitability, quality card base and ME base. The Company introduced a range of Titanium Cards, Signature Cards, Assure Cards, Corporate Platinum Cards and Bobcards Elite with premium features like added privileges and offers. Special schemes for corporate and HNI customers were also launched during the year. The Company has drawn up aggressive plans for the enlargement of Card and Merchant Base for the coming year.

BOB Capital Markets Ltd. was professionally strengthened during the year by deputing a team of Project Finance Department and embarked upon undertaking techno- economic viability (TEV) studies, debt restructuring and corporate finance services on a large scale for various customers. Throughout the year, the focus remained on investment advisory services, debt and equity syndication and capital market activities. The Company commenced institutional broking business and also launched an Online Institutional Trading platform from October 2009. The On-Line Retail Trading platform, which was commercially launched on July 20, 2012 was extensively modified to make it much simpler and easier to use by customers to have the benefit of user-friendly retail trading platform. The company, functioning in a very competitive market, is ever alert to opportunities in the market and is poised to grow bigger in the coming years.

The Nainital Bank Ltd. was promoted by Late Bharat Ratna Pandit Govind Vallabh Pant and others and became Associate Bank of Bank of Baroda in the year 1973. Today, the shareholding of Bank of Baroda in Nainital Bank Ltd. is 98.57% and is a subsidiary of the Bank. The State of Uttarakhand, vide its communique dated August 3, 2012, has notified that The Nainital Bank Limited be treated at par with other PSU Banks. The Bank has initiated branch expansion initiatives and has already established a Regional Office at Dehradun and has aggressive plans to ramp up its scale of operations. The Bank has launched e-stamping facility in 15 branches and has initiated several new IT initiatives e.g Mobile banking & e-banking etc. The Bank also took various initiatives to increase its retail segment particularly in housing loan & consumer loan to high income salaried employees of Government Departments & PSU as well as professionals.

Baroda Pioneer Asset Management Company Ltd. a joint venture with Pioneer Global Asset Management SpA, is in its sixth year of operation. During the year under review, the Company was able to strengthen its AUM (Asset under Management) significantly which rose by 75.0% on year on year basis as of March''14and was able to add one lakh folios despite weak sentiments prevailing in both debt and equity markets. The key to this growth was strong focus on the institutional segment which helped the Company to grow its debts and money market products coupled with focus on Systematic Investment Plans (SIPs) for retail investors. The Company has increased the number of investor servicing points from 77 to 203 during the year. There was a substantial growth in Company''s average assets under management (AAUM) during the year which has placed it among the top 20 mutual funds in India and is ranked 19th for the month of March, 2014. The Company''s (AAUM) growth was robust on year on year basis and was at 11% whereas industry growth was at 10.0%, as per the AMFI (Association of Mutual Funds of India) website. With equity markets remaining volatile, SIPs continue to be one of the best ways for the Company to channelize customers'' savings into the equity market.

India First Life Insurance Company Ltd., a joint venture company with Legal & General group, commenced its business operations on 16th November 2009 and has received an overwhelming response for its products across the country. The Company has won Model Insurer Award (Asia) for the three successive years. India First garnered new business registering a year on year growth of 67.0%. Its industry-wide new business ranking improved from 9th position last year to 7th position in the current year (Feb ''14). Increase in the new business (NB) premium has improved the market share from 3.0% last year to 5.0% current year (Feb''14). Number of customers grew by 46.0% year on year on account of new distribution tie-ups which include RRBs/ NBFCs/Brokers through Alternate Channel Distribution. Renewal collection grew by 23.0% year on year leading to increase in premium income for the Company and subsequent increase in the policy and premium persistence. The Company''s total revenue increased by 46.0% (y-o-y). Company''s major initiative with the Bank includes launch of premium option through mobile banking for Bank of Baroda customers and financial inclusion branch module.

India Infradebt Limited is a joint venture company with ICICI Bank Limited, ICICI Home Finance Company Limited, Citicorp Finance (India) Limited and Life Insurance Corporation of India. The Company was incorporated on October 31, 2012 in Mumbai and has been issued registration certificate No.N-13.02039 dated 08.02.2013 by the Reserve Bank of India to operate as an Infrastructure Debt Fund - Non Banking Financial Company (IDF-NBFC). The Company''s principal activity is to re-finance part of the debt liabilities of the Project Companies.

India Infradebt Limited (Infradebt) is India''s first Infrastructure Debt Fund structured as Non Banking Financial Company (IDF-NBFC). Infradebt closely worked with National Highways Authority of India, Ministry of Finance (MoF) and Ministry of Road Transport & Highways towards the successful implementation of IDF framework.

During the year, it became the first IDF-NBFC to be rated "AAA" by CRISIL in July 2013 for its proposed debenture issue. Subsequently, in December 2013, ICRA also assigned a rating of AAA to the debenture issue programme of Infradebt consequent to the efforts of Infradebt in convincing various authorities.

Infradebt is primarily focusing on sectors like roads and ports. During the year, the Board Credit & Risk Committee has approved provision of financial assistance to a few proposals in the roads sector, in addition to the sanction provided to HEL (Himalayan Expressway Ltd.). Furthermore, Infradebt would constantly keep identifying additional projects for takeout financing and envisages closing additional transactions over the next few months.

Baroda Pioneer Trustee Company Pvt. Ltd. Baroda Pioneer Trustee Company Pvt. Ltd. is the trustee to Baroda Pioneer Mutual Fund. As a trustee, the Company ensures that the transactions entered into by Baroda Pioneer Asset Management Company Limited are in accordance with the SEBI (Mutual Funds) Regulations, 1996 and also reviews the activities carried on by the AMC.

(Rs lakh)

Entity (with date of Country Owned Total Net Profit Offices Staff registration) Funds Assets

BOB Capital India 14,277 .82 15,791 .55 686.64 1 38

Markets Ltd. (11.03.1996)

BOBCARDSLtd. India 17,292 .00 21,939 .00 2,811.00 37 191 (29.09.1994)

Baroda India 6,626 .40 7,258 .67 (-)982.46 1 85

Pioneer Asset Management Co. Ltd. (05.11.1992)

Baroda Pioneer India 5.70 11.95 2.22 1 0 Trustee Co Pvt Ltd. (23.12.2011)

India First Life India 60,500 .00 7,11, 617.59 2,547.35 48 1,549 Insurance Co. Ltd. (19.06.2008)

The Nainital Bank India 44,528 .00 5,34, 259.00 6,542.00 116 843 Ltd. (31.07.1922)

India Infradebt Ltd. India 32,893 .74 33,157 .37 2,092.67 1 11 (31.10.2012)

During the period under review, your Bank made noteworthy progress regarding implementation of Official Language Policy of Government of India. Besides compliance of various statutory requirements of Official Language Act and Rules, your Bank took the initiative of promoting and utilizing Hindi as a tool for establishing better connect with customers and ensuring them the best possible service.

Your Bank prepared a well-structured annual action plan for the achievement of various targets set by the Government of India under its Annual Implementation Programme 2013-14 and the assurances given to the Committee of Parliament on Official Language during its visits to various offices/ branches of the Bank. Through continuous monitoring and regular efforts at various levels, your Bank could achieve all the major targets of the Programme and fulfilled all the assurances given to the Committee of Parliament on Official Language.

The Meetings of Central Official Language Implementation Committee, presided over by Chairman and Managing Director of the Bank, were organized regularly on quarterly basis. Under the guidance received from the Committee, several new initiatives were taken during the year FY14. Your Bank took a major initiative of automating the Quarterly Hindi Progress report submission system in the Bank. The Bank implemented Pragati online package'' across the Bank. The package was made available on the Bank''s wide area network. All the operating units, administrative offices were provided user ID and passwords for submitting Rajbhasha Reports. Your Bank started sending systems- generated letters pertaining to opening of accounts in bilingual (Hindi-English) format through its Regional Back Offices. Through this package, every month lakhs of letters were generated in bi-lingual form which helped the Bank in meeting to a great extent its targets set under the Official Language programme. Your Bank brought more branches under the coverage of an IT programme used to generate and print pass-books and account statements in Hindi at the branches situated in linguistic regions A and B. For the convenience of customers, the facility of getting transaction slips in Hindi from ATMs was expanded further and now majority of your Bank''s ATMs are covered under it. Your Bank introduced display of screen in additional four Indian Languages i.e Telugu, Tamil, Malyalam and Kannada during the year. Your Bank also prepared an Inward- Outward package viz. Document Management System for maintaining records of inward/outward letters as per the linguistic region-wise reporting requirements of its OL policy.

To increase financial literacy amongst masses, your Bank prepared cartoon booklets, animation films in Hindi and also in some regional languages on developing the habit of saving, features of Kisan Credit Card and on the need of timely repayment of loans. These cartoon booklets and animation films were christened as "Chhoti Bachat badi Khushhali", " Aam ke aam guthliyon ke daam" and " Samay Par Karj Ka Bhugtan, Jindagi Bane Aasaan" in their Hindi edition. Marathi, Gujarati, Bangla, Punjabi editions of these booklets/films were also released. These Booklets/animation films were sent to Regional Offices/ Zonal Offices of the Bank for their effective utilization.

Your Bank has been pioneer in spreading and promoting the use of Hindi through the forum of Nagar Rajbhasha Samitis. During the year under review, your Bank, with the approval of Home Ministry, Government of India constituted four new Nagar Rajbhasha Samitis. These committees are functioning at Jodhpur, Rajkot, Surat and Bareilly under the convenorship of your Bank. Nagar Rajbhasha Samiti, Baroda and Jaipur are the oldest TOLICs (i.e., Town Official Language Implementation Committees) working underyour Bank''s convenorship.

The Third Sub-Committee of parliament on official language visited your Bank''s branches/offices at Chitrakoot and Anand. The Committee also reviewed efforts of your Bank''s Corporate Office in its visit to Mumbai. The Committee was full of praise of the efforts put in by your Bank for promotion of the use of Hindi language.

Your Bank''s efforts were well recognised by Government of India and Reserve Bank of India also. Government of India awarded your Bank with the 1st Prize in the Indira Gandhi Rajbhasha Shield Competition consecutively for the second year. Your Bank''s Chairman and Managing Director (CMD) received this award from Honorable President of India at a function held at Vigyan Bhawan, New Delhi on Hindi Diwas 2013. Further, your Bank was awarded first prize for '' C Region and second prizes for Region ''A'' and B'' by Reserve Bank of India (RBI) under the RBI Rajbhasha Shield Competition. The Bank''s In-House Magazine BOBMAITRI'' and Hindi Magazine ''Akshayyam'' were also awarded with the third prize by the RBI. Your Bank''s CMD received these awards from the Governor of RBI. These magazines also won two awards from Association of Business Communicators of India.

Your Bank continued with its flagship scheme "Medhavi Vidyarthi Samman Yojana" for popularising Hindi amongst the students'' community. Under this scheme, cash prizes and commendation certificates signed by your Bank''s CMD are given to those students who have scored highest marks in M.A.(Hindi). This scheme, at present, is applicable in 64 universities of the country.

Your Bank has published three books in Hindi during the year viz.''Proudyogiki aur Grahak Seva", "Thodi Si Dhoop" and "Maharaja Sayaji Rao Gaekwad III", for providing qualitative reading material in the Hindi language.

Board of Directors

Shri Bhuwanchandra B. Joshi appointed as a Whole Time Director (designated as Executive Director) w.e.f. 05.08.2013 by the Central Government u/s 9 (3) (a) of

The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, to hold office up to 31.12.2016 i.e. the date of his superannuation or until further orders, whichever is earlier.

Dr. K. P. Krishnan, IAS, nominated as a non executive Director, representing Government of India, w.e.f. 19-02- 2014, vice Shri Alok Nigam, IAS.

Shri Sudhir Kumar Jain appointed as a Whole Time Director (designated as Executive Director) ceased to be a Director with effect from 08.07.2013 on his elevation as Chairman and Managing Director of Syndicate Bank.

Shri Ajay Mathur, a part time non- official Director/Non executive director, ceased to be a Director with effect from 04.05.2013 on completion of his term.

Shri Satya Dev Tripathi, a part time non- official Director/ non executive director ceased to be a Director with effect from 30.08.2013 on completion of his term.

Shri V.B. Chavan, a part time non- official Director / Non executive director ceased to be a Director with effect from 31.01.2014 on attaining the age of superannuation.

Shri Alok Nigam, IAS, a part time non- official Director/ Non executive director ceased to be a Director with effect from 18.02.2014 on the nomination of Dr. K.P. Krishnan, IAS, in his place.

Directors'' Responsibility Statement

The Directors confirm that in the preparation of the annual accounts for the year ended March 31, 2014:

- The applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

- The accounting policies framed in accordance with the guidelines of the Reserve Bank of India, were consistently applied.

- Reasonable and prudent judgment and estimates were made so as to give true and fair view of the state of affairs of your Bank at the end of financial year and of the profit of your Bank for the year ended on March 31, 2014;

- Proper and sufficient care was taken for the maintenance of adequate accounting records in accordance with the provisions of the applicable laws governing banks in India; and

- The accounts have been prepared on a going concern basis.

Acknowledgement

The Directors express their sincere thanks to the Government of India, Reserve Bank of India, Securities and Exchange Board of India, other regulatory authorities, various financial institutions, banks and correspondents in India and abroad for their valuable guidance and support.

The Directors acknowledge with appreciation the assistance and cooperation extended by all stakeholders of your Bank like customers, shareholders and well wishers in India and abroad.

The Directors place on record deep appreciation for the hard work and dedication of the members of your Bank''s staff at different levels, which enabled your Bank to record high quality, consistent growth year after year despite economic challenges and consolidate its position as one of the premier banks in the country.



For and on behalf of the Board of Directors,



S. S. Mundra

Chairman and Managing Director

---

Mar 31, 2013

The Directors have pleasure in presenting the One Hundred and Fifth Annual Report of your Bank with the audited Balance Sheet, Profit & Loss Account and the Report on Business and operations for the year ended March 31,2013 (FY13). Performance Highlights - Total Business (Deposit Advances) increased to Rs 8,02,069 crore reflecting a growth of 19.3% (y-o-y). - Gross Profit and Net Profit were Rs 8,999.15 crore and Rs 4,480.72 crore respectively. Net Profit registered a growth of -10.5% over the previous year. - Credit-Deposit Ratio stood at 82.03% as against 86.86% last year. - Retail Credit posted a growth of 6.7% constituting 16.6% of your Bank's Gross Domestic Credit in FY13. - MSME Credit posted a growth of 30.3% constituting 19.7% of your Bank's Gross Domestic Credit in FY13. - Net Interest Margin (NIM) as per cent of interest earning assets in global operations was at the level of 2.66% and in domestic operations at 3.11% during FY13. - Net NPAs to Net Advances stood at 1.28% this year against 0.54% last year. - Capital Adequacy Ratio (CAR) as per Basel II stood at 13.30%. - Net Worth improved to Rs 30,714.19 crore registering a rise of 17.2%. - Book Value improved from Rs 637.37 to Rs 729.11 on year. - Business per Employee moved up from Rs 1,466 lakh to Rs 1,689 lakh on year. Segment-Wise Performance The Segment Results for the year FY13 reveal that the contribution of Treasury Operations was Rs 1,070.13 crore, that of Corporate/Wholesale Banking was minus Rs 103.95 crore, that of Retail Banking was Rs 3,085.71 crore, and of Other Banking Operations was Rs 2,221.71 crore. Your Bank earned a Profit after Tax (PAT) of Rs 4,480.72 crore after deducting Rs 1,442.37 crore of unallocated expenditure and Rs 350.51 crore towards provision for tax. Dividend Your Bank's Directors have proposed a dividend of Rs 21.50 per share (on the face value of Rs 10/-per share) for the year ended March 31st, 2013. The total outgo in the form of dividend, including taxes, will be Rs 1,059.62 crore. Capital Adequacy Ratio (CAR) Your Bank's Capital Adequacy Ratio (CAR) was comfortable at 13.30% under Basel II as on 31st March 2013. Your Bank's Net Worth as at 31st March 2013 was Rs 30,714.19 crore comprising paid-up equity capital of Rs 422.52 crore and reserves (excluding revaluation reserves) of Rs 30,291.67 crore. An amount of Rs 3,421.10 crore was transferred to reserves from the profits earned. Provisions towards Retirement and Other Benefits During the year FY13, your Bank made provision towards contribution to gratuity (Rs 133.00 crore), pension funds (Rs 683.96 crore), leave encashment (Rs 204.38 crore) and additional retirement benefits (Rs 184.29 crore) on actuarial basis. Total provisions under these four categories amounted to Rs 1,205.63 crore during the year FY13, against Rs 991.94 crore during FY12. Total corpus available with your Bank at the end of March 2013 under these heads was: Rs 1,506.13 crore (gratuity), Rs 6,770.08 crore (pension funds), Rs 709.73 crore (leave encashment), and Rs 592.45 crore (additional retirement benefits). Key Financial Ratios Particulars FY13 FY12 Return on Average Assets (ROAA) (%) 0.90 1.24 Average Cost of Funds (%) 5.75 5.64 Average Yield (%) 8.29 8.55 Average Interest Earning Assets (Rs crore) 4,24,761.33 3,47,223.21 Average Interest Bearing Liabilities (Rs crore) 4,15,246.10 3,43,397.26 Net Interest Margin (%) 2.66 2.97 Cost-Income Ratio (%) 39.79 37.55 Book Value per Share (Rs) 729.11 637.37 EPS (Rs) 108.84 127.84 Corporate Social Responsibility (CSR) As a responsible corporate citizen, your Bank is considering donation to National/State Relief Funds and to any individual, trust, society, charitable/social institutes of repute engaged in social activities for the benefit of vast variety of people. Donations are given to promote various activities. They are extended essentially as a social welfare measure on a non- commercial basis to individual trusts, social work organizations/ institutions, etc. In particular, your Bank has been giving donations for the following purposes: - For the spread of education - including for the girl child and womenfolk in remote villages. - To reputed colleges/public schools and other similar institutions. - To reputed hospitals engaged in charity or in service of weaker sections - Assisting families of soldiers died in wars and handicapped soldiers - Old age homes - Preservation of places of historical interest like gardens, forts, temples etc. - Promotion of efforts for protection, conservation and cleaning of environment including plantation/re-plantation, rivers, lakes, forests, sanctuaries etc. - Adoption of gardens in cities where your Bank's name can be publicized - Family planning activities - For measures promoting prevention of cruelty to animals and for setting up and maintaining animal and bird Hospitals - For promoting the promotion and use of non exhaustible sources of energy like solar power, gobar gas plants in rural areas - Vaccination projects for controlling spread of diseases/ epidemics - Providing support to organizations extending support to handicapped persons like blind, lame, deaf and dumb, etc. or suffering from any other disabilities - Promotion of measures for pollution control - Other matters/ projects of social and human value During the Financial Year FY13, your Bank disbursed donations amounting to Rs.699.74 lakh to various organizations engaged in the field of education, health, women welfare etc. The activity-wise disbursement of donations are as follows. Sr. Activity No. of Amount No. Donations (Rs lakh) 1. Education 4 24.00 2. Health 3 4.50 3. Women Welfare 1 2.00 4. Social Welfare Activities 5 669.24 TOTAL 13 699.74 Besides these activities, your Bank has established Baroda Swarozgar Vikas Sansthan for imparting training to unemployed youth, free of cost, for gainful self employment and entrepreneurship skill development which help them improve their family economic status and also gives a boost to various regional economies within these locations. All the Lead Districts of your Bank have Baroda Rural Self Employment Training Institute (R-SETI ). Your Bank has also established Baroda Gramin Paramarsh Kendra for knowledge sharing, problem solving and credit counseling for rural masses across the country. In order to spread awareness among the rural mass on various financial and banking services and to speed up the process of financial inclusion, your Bank has also established Financial Literacy and Credit counseling Centres (FLCC). As on 31st March, 2013 your Bank had 45 FLCCs. Asset Quality Management The year FY13 was a challenging year for the Indian banking industry from the perspective of Asset Quality due to a fragile economic environment. However, your Bank continued its practice of rigorous monitoring and recovery of the NPA portfolio to prevent any serious deterioration in its asset quality. Yet, an overstretched economic downturn did impact your Bank's asset quality to some extent during FY13. Indian banks, in general, witnessed heavy incidence of slippages in FY13 due to volatile financial markets both within and outside India, higher inflation and higher interest rate regime throughout the year FY13. In spite of various depressed economic parameters, the fresh slippages during the year, were at 2.29% of the opening Standard Advances of your Bank. Against the backdrop of high slippages, the ratio of Gross NPA to Gross Advances was at 2.40% as on 31st Mar, 2013. Consequently, the ratio of Net NPA to Net Advances increased to 1.28% by end-Mar, 2013. However, your Bank's Loan Loss Coverage ratio (including the technical write-offs) was at 68.24% in FY13 - a relatively higher level, if compared to your Bank's peers from the PSU banking segment. During the year under review, your Bank laid down a comprehensive structure of recovery and credit monitoring function at the Branch, Region, Zone and Corporate levels. Besides this, the Nodal officers at each DRT centre were advised to follow-up the legal cases on day to day basis so as to minimize the delay in obtaining decrees and execution thereof in order to expedite and maximize recoveries. For Recoveries of all DRT Suit filed NPA accounts, the assets charged to the banks are now being sold through E-auction to get a fair market value of assets charged to the Bank. Additionally, ARCs have been appointed as recovery agents and consultants have been appointed for liaison with Official Liquidator to speed up the recoveries. Your Bank continued its emphasis on follow-up mechanism to explore recovery prospects of NPA accounts. The system of monitoring of large value NPA accounts of say Rs 25 lakh and above, directly from the corporate office has ensured proactive action by branches, advocates and recovery agents. Therefore, the cash recovery in NPA accounts during FY13 was Rs 625.57 crore, higher than the cash recovery of Rs 580.46 crore during FY12. The upgradation was also higher at Rs 341 crore during FY13 compared to Rs 336 crore during FY12. During FY13, your Bank laid specific focus on recovery of small accounts by organizing Lok Adalats and Recovery Camps at village/town level. Your Bank also launched an incentive linked recovery scheme called "Sankalp - V", to enlist personalized attention of each and every staff member in pursuing recovery efforts of small value accounts with an outstanding up to Rs 15 lakh. The cash recovery made during the year FY13 under the scheme was very impressive at over Rs 231 crore. The asset classification wise breakup of advances portfolio of your Bank is as under. (Rs. crore) Asset Category (Gross) 31st March 2013 31st March 2012 Standard 324828.74 286542.59 Gross NPA 7982.58 4464.75 Total 332811.32 291007.34 Gross NPA is comprising of: Sub-standard 4981.15 2661.82 Doubtful 2628.33 1318.71 Loss 373.10 484.22 Total Gross NPA 7982.58 4464.75 Information Technology Your Bank has undertaken a total end-to-end business and IT strategy project covering your Bank's domestic, overseas and subsidiary operations. - Your Bank has built the best of technology infrastructure by implementing a state-of-the-art Data Centre conforming to Uptime Institute Tier-3 standard and also a Disaster Recovery Site in different seismic zone with redundancy built in every single point of failure to ensure uninterrupted banking service delivery to customers. After successfully migrating Data Centre to new Data Centre in the Bank's own premises, your Bank had undertaken Disaster Recovery Centre expansion during the year to support its business growth and technology expansion. - Your Bank has undertaken various other technology initiatives like windows server virtualization, desktop virtualization and backup consolidation as green initiatives and also to improve Data Centre operational efficiency, Application virtualization, Bandwidth up-gradation, ASM & RAC Implementation, migration of Bank wide network to new technology based on MPLS for improving uptime and on demand upgrade has been successfully implemented. Enterprise Management System was upgraded and new modules deployed to effectively manage and monitor Bank's growing IT infrastructure. - The Core Banking infrastructure has been upgraded by your Bank from PA-RISC to Itanium servers in all 23 Overseas Territories for supporting additional business volumes. Various new Regulatory initiatives like Linking of UID numbers, Account number portability, Capturing KYC related information, Simplified account opening procedures, Addition of village codes in core banking system, Implementation of Adhaar Payment Bridge System(APBS), Centralization of Loan Processing at RLF and SMEs, Biometric Authentication for CBS Login at Branches, Deployment of NPSLite (a scheme to provide financial security for economically disadvantaged people for protecting their future during old age), automated processing of payments to NREGA, NPS and MGPSYS beneficiaries etc were added during the year. Core Banking Solution was implemented in Sydney Branch, Australia. The robust technology platform has enabled your Bank to open 100th International Branch during the year. Your Bank's RRBs are also on CBS Platform and as notified by GOI, your Bank has successfully migrated RRBs of Central Bank of India and Punjab National Bank with 350 branches into one of RRBs' of your Bank. Alternate Delivery channels - Internet Banking - BARODA CONNECT The Internet Banking, viz., Baroda Connect (Retail portal) has been completely revamped in your Bank to enhance its look and feel and user-friendliness. Your Bank continued to add more facilities under its Internet Banking channels. Other enhanced features such as Tax payments of various States, Integration of GRIPS (Government Revenue Receipts for West Bengal), Credit to Loan accounts, Bill payments, Online donations to Prime Minister Relief Fund, India Life Insurance premium payment through e-banking, IMPS(Immediate Payment services) through e-banking were added during the year. Your Bank's Internet banking facility is made available on all Smart-phones/ tablets offering comfort of anywhere Banking to its customers. Internet Banking has also been implemented in total 13 overseas territories viz. Tanzania, Uganda, Kenya, Mauritius, Seychelles, Botswana, New Zealand, UAE, FIJI and by adding Transaction based Internet Banking in UK, Oman and Ghana and view based in Australia during the Financial Year. View Based e-banking is also provided in all Bank sponsored RRBs. In order to enhance security and confidence in Internet Banking, your Bank introduced enhanced security features by deploying Fraud Management Solution, including two factor authentications in India and 5 Overseas territories viz. UAE, UK, New Zealand, Kenya and Uganda by enabling ARCOT OTP, PULL OTP and SMS OTP. Your Bank has initiated the process of implementing Fraud Management Solution for remaining six overseas territories where transaction-based e-Banking is implemented. View-based Internet Banking for US territory, PPF through e-banking, Inter-Bank fund transfer through Internet Banking for UAE have also been initiated by your Bank. Your Bank also proposes to implement Transaction based Internet banking for its sponsored RRBs, with two-factor authentication. - Mobile Banking - BARODA M-CONNECT As one more alternate delivery channel, many features were added to Mobile Banking by your Bank to provide various facilities to customers, viz., IMPS i.e. Immediate Payment Services Person to Account (P2A) fund transfer, enabling mobile banking application in all i-Phones and i-Pads in addition to Blackberry, Android, Windows, enabling of NUUP(National Unified USSD Platform) etc. Your Bank is also in process of implementing P2M (person to Merchant) fund transfer under IMPS and has acquired India First Life Insurance as the first merchant. Your Bank proposes to enable Mobile Banking application for Windows8, Implementation of Mobile banking in Uganda and UAE etc. It has also initiated implementation of Mobile banking in its sponsored RRBs. - ATM The ATM Switch is upgraded in your Bank to a higher version along with Hardware up-gradation with many enhanced features for better performance, speedy ATM transactions and ease of ATM expansion during the year. The ATM switch is upgraded for India, UAE, Oman, Mauritius, Fiji, Tanzania, Botswana, T&T and New Zealand. Many customer centric initiatives such as implementation of Rupay ATM Cards, Rupay POS and Rupay KCC Cards, Brown label ATMs, Collection of Insurance premium for IndiaFirst Life Insurance Policy holders through ATMs, ATM Transaction receipt printing in HINDI, Regional Language Screen selection for Gujarati, Marathi and Tamil, Talking ATMs for visually impaired persons, implementation of Fraud management Solution in ATMs/ POS in India have been added during the year. Your Bank has successfully launched Rupay ATM and Rupay KCC cards for its RRBs also. Your Bank has also proposed some more Customer Centric initiatives like Immediate Payment Services (IMPS) through ATMs, Regional Language screen selection in ATMs (for Malyalam, Telugu, Kannada, Bengali), Cheque book request through ATMs, NEFT through ATMs, Rupay e-commerce, multi-factor authentication for card not present transactions, Visa Debit card for UAE, BSP(Bank South Pacific) Interchange Implementation for FIJI, Prepaid card withdrawals through ATMs, Chip Based Card Implementation in India, Oman and Mauritius, Card to Card fund transfer, Bill Payment through ATMs etc. Payment Systems - All branches of your Bank (which are CBS-compliant) are enabled for interbank remittances through RTGS and NEFT. The RTGS and NEFT have also been interfaced with your Bank's internet banking portal. The Straight through Processing (STP) of NEFT & RTGS have been implemented for the Bank as well as RRBs. RTGS & NEFT has also been implemented in Uganda. - Internet Payment Gateway services for debit cards/credit cards are increasingly offered to merchants and internet shopper as a safe and secure channel for online purchases. - Cash Management System is a full-function web enabled cash management solution offered to your Bank's customers, covering services like Receipt Management (Collections), Payment Management and Invoice Management (Receivable and Payable Management). - New Credit Card Management System has been implemented to provide comprehensive management and support for your Bank's Credit Card operations. - The SWIFT facility for worldwide inter-bank financial communication is provided at Foreign Exchange Authorized Branches in India as also in 22 overseas territories by adding UK and Australia during the year. - The Payment Messaging Solution (PMS) is implemented in 22 overseas territories by adding UK and Australia during the year & all authorized branches in India. PMS facilitates validation and formatting of SWIFT messages generated from CBS as per SWIFT standards, and also goes through AML check. - During the year under review, a grid based Cheque Truncation System (CTS) was implemented in all MICR Centres in Southern States, Kolkata, Ludhiana and Chandigarh in addition to Delhi. Your Bank has also initiated the process of implementation of CTS in Mumbai and Western Grid of Maharashtra, Gujarat and Madhya Pradesh. - Automated Cheque Processing Centre (Inward & Outward) was implemented in Mumbai and Surat and Ahmedabad were added during the year, as a part of Business Process Re-engineering under its Project Navnirmaan. - For regulatory compliance, the Anti Money Laundering (AML) has been implemented in India and 22 overseas territories by adding Belgium during the year. Your Bank has also implemented Risk Management solution. Your Bank has also implemented Phase I AML solution in all its sponsored RRBs and implementation for Phase II AML is in progress. Other Initiatives - Your Bank has implemented Customer Relationship Management as a new initiative for providing better services to customers through a contact centre over phone in order to improve their satisfaction and loyalty. Existing customers/Prospective customers may call on Toll Free no. (1800223344 & 18001024455) wherein following services can be availed of. - Issuance of a cheque book - Enquiry about products and services - Account Enquiry - Balance, Transaction, Amount in Clearing etc. - Hot-listing of ATM cards - Stop payment marking / un-marking - Request for issuance of debit card. - Request for re-generation of debit card PIN - Support for e-banking users - Re-generation of mobile banking password - On-line (paperless) TPIN generation facility Other information regarding products and services of your Bank is also provided to prospective customers/account holders. The CRM applications is linked to sales offices like Retail Loan Factories (RLFs), City Sales Offices (CSOs) wherein the leads generated at contact centre on the basis of enquiry about the products by customers are transferred to these offices for further processing. Your Bank has also completed a launch of recovery processes through contact centre wherein customers are informed about the EMI and due amounts. This shall facilitate customers to deposit EMI/due amount on demand dates. - The Retail Depository Services are made available to your Bank's Retail as well as Corporate customers. With a centralized depository application, branches are equipped to provide depository services for both NSDL as well as CDSL. With Online Trading System, your Bank will be able to provide complete suite of online services to the customers for trading in instruments like equities, mutual funds, bonds and initial public offering (IPOs). - For improving your Bank's service delivery, the Back Office functions have been centralized at City Back Offices and Regional Back Offices. Your Bank now has 70 City Back Offices and 10 Regional Back Offices. The personalized cheque book issuance has been centralized. Your Bank has also started centralized FCNR operations. - The Integrated Global Treasury Solution has been implemented in UK, UAE, Bahamas, Bahrain, Hongkong, Singapore, Belgium and in India, reducing the cost of operations and better fund management. - Enterprise wide GL Solution has been implemented. This provides variety of inputs to your Bank for strategic decision making in business development and also generates enterprise wide consolidated reports. - The Centralized Payroll, Salary module, e-TDS module and Leave Module have been implemented for all your Bank's offices in India. - The Human Resource Networking for Employees Service has been implemented with the objective of creating a central database of the Bank employees for facilitating decision-making, promotion and selection exercise as also for automating other HR processes. - Your Bank had also undertaken as a part of its business strategy, Data Warehouse for providing flexible and interactive source of strategic information, Customer Relationship Management for better customer insight and uniform customer view across channels. - Your Bank has upgraded existing applications like Exchange, e-Business suite with enhanced features, encompassing Customer Relationship Management, HRNes and Enterprise wide GL modules. - The IT setup has been developed for account opening process and transactions, both online and offline, to be carried out through Business Correspondent thus enabling Financial Inclusion. The Mobile Van Banking is launched in Gujarat, UP & Bihar on a pilot basis as the Bank's Financial Inclusion initiative. - Your Bank has fully automated its Loan Processing (Retail, Agri and SME) modules for better and quick customer service. Your Bank also provides a single click Online loan Application feature for Home Loan, Auto Loan and Education Loan. Your Bank has also initiated automation of Loan processing for MID-Corporate and Corporate customers. Information Security - A robust Information Security Management System was put in place during the year under review to protect the technology against security threat. A Comprehensive Audit by External Agencies is being successfully carried out by your Bank for its Core Banking Solution and all other applications as well as for Data Centre/Disaster Recovery centre Infrastructure. - Your Bank has set up a Security Operation Centre (SOC) for enhanced IT security. - Your Bank's both Data Centre and Disaster Recovery Centre are ISO 27001 certified. - Your Banks has Implemented Fraud Management Solution for Internet Banking, ATM & POS. In order to enhance security and confidence in Internet Banking, your Bank introduced Fraud Management Solution, including two factor authentications in India and five Overseas territories viz. UAE, UK, New Zealand, Kenya and Uganda by enabling ARCOT OTP, PULL OTP and SMS OTP. - As a security measure, Your Bank has also enabled SMS Alerts delivery facility to its customers for all transactions made through alternate delivery channels and for all CBS transactions worth Rs.5000 and more. - Your Bank is regularly conducting VAPT (Vulnerability assessment & Penetration Testing) of external facing applications, eBanking log monitoring etc. - Your Bank has enabled a Fraud Risk Management system for day-to-day monitoring of suspicious transactions at Branches for protecting interest of customers. - While cyber-attacks have become more unpredictable and electronic payment systems vulnerable to new types of misuse, it is imperative that banks introduce certain minimum checks and balances to minimise the impact of such attacks and to arrest/minimise the damage. To minimise the damage, your Bank has initiated following additional security measures which will be enabled shortly. - All new debit and credit cards will be issued for domestic usage unless international usage is specifically sought by the customer. - Convert existing MagStrip Cards to EMV Chip card. - PIN enabled POS - Enabling additional security as addition of Digital signatures for Corporate Internet Banking. Direct Benefit Transfer - Your Bank has initiated Direct Beneficiary Transfer under Aadhaar Payment Bridge System (APBS) and wages payment for Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). - For MGNREGA transactions, your Bank has started Pilot Project for Sanganer Block in State of Rajasthan during the year and processed 9,593 transactions amounting Rs. 86,54,676/- - Under APBS, your Bank has linked 1, 31,735 Adhaar Card and provided credit to 6,635 beneficiary amounting Rs 49,01,659/- - Your Bank has also initiated another project for Direct Beneficiary transfer in association with Central Project Scheme Monitoring System (CPSMS). E-business Your Bank's e-business department provides different types of Alternate Delivery Channels (ADC) such as ATMs, Internet Banking (Baroda Connect), Mobile Banking, RTGS/NEFT, Phone Banking, Internet Payment Gateway (IPG), Contact Centres etc. In addition to this, the e-banking department of your Bank looks after Depository Services, Cash Management Services. This year, your Bank introduced different variants of Debit Cards i.e. Maestro PIN Debit Card and RuPay Debit Card. In addition to this, your Bank also launched a new variant of Pre-paid Card i.e. Baroda Travel Easy US Dollar Travel Card. Also, Online Trading facility for Retail customers of your Bank was launched in July 2012. The performance of various sections under the e-Business Department during FY13 is summarised below. ATM/DEBIT Card Operations Particulars 31/03/2012 31/03/2013 Addition during the year No. of ATMs 2,012 2,630 618 operationalised No. of Debit 80.44 103.76 23.32 Cards Issued (lakh) New Initiatives & Achievement during FY13 a) Maestro PIN Debit Card: Launched in April'12 b) RuPay Debit Card : Launched in September'12 c) Onsite ATM - Installation of Cheque Drop Box in all onsite ATMs d) Issuance of debit cards in Nagrik Bachat Khata with effect from 5th Dec, 2012. Baroda Connect (Internet Banking) Particulars 31/03/2012 31/03/2013 Addition during the year No. of Users 8,10,430 10,76,635 2,66,205 No. of A/cs 32,49,216 45,79,969 13,30,753 Linked New Initiatives during FY13 a) Credit/transfer to loan account through Baroda Connect. b) Online FDR for NRIs/PIO enabled. c) Online payment of premium of India First Insurance BARODA RTGS/NEFT Particulars 2011-12 2012-13 RTGS NEFT RTGS NEFT No. of Inward 16,62,070 61,37,139 21,83,550 1,31,42,497 Transactions No. of Outward 21,47,527 29,48,252 27,45,872 53,77,922 Transactions Avg Transactions per 7,720 28,376 9,929 76,361 day (Inward) -during last month i.e. March Avg Transactions per 9,338 13,211 11,713 25,092 day (Outward) - during last month i.e. March Baroda Cash Management Services - During FY13, the total number of transactions in BCMS was 30.91 lakh as against 14.19 lakh during FY12, with a total turnover was Rs.27,480.62 crore as against Rs 10,355 crore during FY12 and a profit of Rs 97.27 lakh was earned during FY13. - The number of customer has increased from 206 as on 31/03/12 to 308 as on 31/03/13. - It is proposed to extend these services to 100 more centres in a phased manner. Baroda e-Gateway (Internet Payment Gateway) - As on 31st March 2013, a total of 148 Merchants were registered as against 124 as on 31st March 2012 and the total turnover during FY13 was Rs 50.85 crore. A Profit of Rs 65.68 lakh was earned during FY13 from this activity. Other New Initiatives taken during FY13 - Online Trading launched for Retail Customers. - Baroda Travel Easy US Dollar Travel Card has been launched. - Debit Card failed transaction complaint registration through Contact Centre has been started. - Contact Centre for NRIs has also been launched. - Standardized Public Grievance Redressal system has been launched from Contact Centre (for registration of customer complaints). - Recovery of Retail Loans (EMIs) through ECS has been started on pilot basis in two Zones of your Bank, notably, the Greater Mumbai and Northern Zones in April 2013. - Your Bank is ready for a pilot launch of National Automated Clearing House (ECS credits). - The Complaints registration through Contact Centre (SPGRS Portal) has also been initiated in your Bank. Proposed Initiatives/Strategies for FY14 - To launch 50 e-lobbies (with ATM, Bulk Note Acceptor, Self Service Passbook Printer Kiosk, Internet Banking Kiosk, Cheque Deposit Machine & Phone Banking facility). - Installation of Self Service Passbook Printer Kiosks in all Baroda Next Branches. - To install 50-100 Bulk Note Acceptors. ATM/Debit Card - Card to Card transfer - ATM Bill Pay - Non-Personalized Debit Card - Biometric ATMs/Debit Card - NEFT through ATM - Talking ATM - Request for Cheque book through ATM Baroda Connect (Internet Banking) - Online premature payment of Fixed Deposit Receipt - Online facility of Saving Bank and Recurring Deposit - Providing convenient login without one-time-password with the help of QNA (for registered customers). - Revamping pages of "Baroda Connect" Corporate portal. - IMPS payments through Net Banking. Baroda M-Connect (Mobile Banking) - Enabling Merchant Payments - Implementation of Fraud Management Solution Baroda Pre-paid Cards - Online issuance of Baroda Gift Card - Issuance of reloadable cards. Contact Centre - Outbound calls for Recovery and Sales. - Web Chat - SMS/Voice/Emails blasts - Expanded IVR (i.e. Mini Statement, request for account statement) Human Resources Human resource Development is a critical element of your Bank's overall strategy for ensuring profitable and qualitative growth. Today, your Bank is endowed with a competent and highly motivated employee base of around 43,108 people who are engaged in handling its mammoth business operations. Your Bank has adopted a very balanced people strategy to create a composite and responsible Human Resource culture in the Bank that can drive growth and also adequately face various challenges of the current times, viz. the large retirements, massive induction of talent, huge training requirements and challenges of succession and productivity. A comprehensive HR strategy and Framework has been drawn up to take care of all these challenges in an integrated manner through a focused HR transformation project called Project SPARSH which is unique and path-breaking in the entire industry. This journey of HR Transformation was started in August'2011 and over the last one year, various landmark HR initiatives have been launched in your Bank which are futuristic and designed to make Bank of Baroda one of the best places to work for its employees. For this, your Bank wants to create cutting edge HR policies and processes through which it can become a role model for all other banks and in the process, leverage the full potential of its human capital to substantially improve the employee productivity. Formulation of Talent Management system: Developing the next line of leaders in the Bank Your Bank took a big step for developing the next line of leaders for the future by putting in place a Talent Management system which proactively identifies future potential leaders to effectively mitigate the risks arising out of the anticipated leadership gaps in the next five years and also grooms these future leaders through a systematic development agenda. Through a systematic and structured process, the Bank was able to clearly identify around 15.0% to 20.0% people in specific scales of officers viz. in Scales III, IV, V and VI as the future leaders. A grooming plan has been laid down for each of them. The process is envisaged as an annual exercise so that the pool of identified people and the various talent management activities envisioned are continuously reviewed and refined. A first of its kind "Baroda Annual Leadership Conclave" was conceptualized to provide the members of the Talent pool to broaden their perspectives on banking and industry trends and help them connect and network with their peers and senior leadership in the Bank, and the first such conclave was held in Mumbai on 11-12 August, 2012. Strategic workforce planning and Recruitment strategy A scientific manpower planning model was developed by your Bank to estimate manpower needs by level, skills and by branch. With its help, your Bank has also undertaken the strategic workforce planning for the next few years to feed into various other HR functions like recruitment planning, career progression vacancies and postings & deployment. Your Bank has put in place a clearly defined Recruitment strategy which looks at broad-basing recruitment from different channels, hiring of larger numbers in view of the emerging requirements as thrown up by the strategic workforce planning and also articulating a clearly-defined Employer Value proposition with the acronym "F I R S T" as shown below: A specially designed 'Career portal' has been launched on the Bank's website which defines this Value proposition further with clearly laid out sections related to why your Bank should be the preferred choice for any prospective applicant, what is the career path, the recruitment channels available, different facets of working at Bank of Baroda and testimonials from Bank's existing employees. All these strategies are designed to improve Bank's Employer Branding significantly. In order to tackle the challenge of making the large number of fresh recruits productive in the quickest possible time, your Bank initiated a very structured "on-boarding programme" consisting of both functional and cultural components which enabled them to be work-ready quickly and also helped in their cultural assimilation within the Bank. "Baroda Manipal School of Banking" The Baroda Manipal School of Banking is a special initiative taken jointly by Bank of Baroda and Manipal Global education to train students for a Banking career in Bank of Baroda on a "first-day, first-hour" productivity model. The students undergo a focused one-year programme which is tailored to the Bank's requirements and which leads to the award of a post-graduate diploma in Banking and Finance, before they are absorbed in your Bank as Probationary officers. This innovative Resourcing channel was initiated during the year FY12 but after completing the one year course, the students have started joining the Bank from FY13 onwards. Around three batches of students numbering 526 have already joined the Bank while another four batches of students numbering around 864 are undertaking the said one-year course at present. Capability Building Initiatives With the objective of bringing the desired focus and developmental orientation, your Bank rebranded its training system as "Baroda Academy" and launched various training initiatives under this Baroda Academy umbrella in order to create a learning organization, help in better grooming and development of its people and thereby significantly improve organization's performance. On the processes side, several landmark initiatives were introduced like publication of a comprehensive annual training calendar, introduction of self-nominations as an additional channel of training nominations, introduction of the system of training credits, introduction of tests at the end of every training program, creation of a pool of expert practitioners as Associate Faculty, enhancement and standardization of course content, drive for building a directory of Case Studies for use in training programmes, preparation of a Training policy, Training Manuals, etc. All these initiatives have brought about a renewed focus to the Training and development function and helped in making training a very potent tool for human capital development in the Bank. Various IT tools have been put in place to streamline the training processes and enable large-scale implementation of all the training initiatives. On specific capability building initiatives, your Bank has, in line with the renewed focus given to training, carried out substantial training and developmental activities during FY13, which included comprehensive grooming programmes in the area of Credit, Forex, Dealings, Branch Management, Planning, Risk Management, etc. besides soft skills programmes and ensuring all-round development and grooming of young officers and new recruits. Your Bank conducted 2,198 training programmes in- house (through its network of 12 Training Centres across the country, one IT training center and an Apex Training College at Ahmedabad) and thereby trained 43,465 people during the year. Besides, your Bank also sent around 2015 employees for undergoing training in various reputed external training institutes of the country and even abroad. As part of the overall grooming plan for the Talent pool members, customized programmes were conducted through specialized external training institutions covering specific developmental areas. Select Deputy General Managers and Assistant General Managers of your Bank were sent to undergo a Top Management programme at one of India's best B-Schools viz. ISB, Hyderabad whereas in another initiative, your Bank trained an additional 150 specially identified people across the Bank to undergo a focused Mentoring programme so that they could act as 'mentors' to newly recruited officers, taking the total number of trained mentors in the Bank to around 500. Leadership Development (Project UDAAN) Taking into account the critical need for building leadership competencies in people, your Bank had launched a comprehensive leadership development program named as 'Project UDAAN' in FY12, covering Branch Heads of all Urban/Metro Branches and all Assistant General Managers and Deputy General Managers with the objective of creating leaders for the future. The programme was structured around three modules of leadership viz. 'Leading Self', 'Leading Others' and 'Leading Business' and each of the three modules are being addressed through a combination of off-site forum events and coaching clinics. The programme covered around 960 participants across seven zones of your Bank during the year FY12 and the same was continued in FY13 to cover an additional 760 more participants in another five batches. Such a massive and comprehensive leadership development effort is first of its kind for an Indian state-owned Bank. Implementation of HR Technology Your Bank has created a very comprehensive HR technology platform covering HRM, Training, Payroll & Leave modules christened as the Human Resources Network for Employee Services (HRNes). This technology platform has enabled automation of various HR functionalities and various modules/ various new processes were automated/ implemented during the year. Recruitment Drive Your Bank has been undertaking focused hiring efforts on a sustained basis year on year, to cater to superannuation, sustained business growth and rapid Branch expansion. Various recruitment exercises were undertaken during the year to address the emerging manpower requirements in your Bank. Recruitment of Specialist officers, probationary officers, recruitment of young MBAs directly from the campuses of renowned Business Schools were initiated to meet the needs of your Bank, both in terms of replacements for normal attrition and factoring in the business growth needs. Your Bank recruited 1,246 Officers in various Grades/Scales (both Generalists & Specialists), 1,731 Clerks and 700 Subordinate staff members during FY13. The recruitment process is continued in the year 2013-14 also with various recruitment projects underway for filling up almost 2,800 posts of officers and 3,500 posts of clerks. Framework for Career Progression Special efforts were made during the year under review to fulfill the growing aspirations of the employees for faster career progression, thereby, motivating employees for higher productivity. Your Bank has been regularly promoting people in all grades / scales, year after year, without a break, in order to keep on continuously rewarding its top performers and make them assume higher responsibilities faster. In keeping with this trend, a large number of promotion exercises were undertaken during FY13 also resulting in the elevation of around 3,793 people within the Bank in all cadres/grades/scales, as depicted in the table below. Sub-Staff to Clerk 160 Clerk to Officer 553 JM-I to MM-II (Officer to Manager) 1332 MM-II to MM-III (Manager to Sr Manager) 1055 MM-III to SM-IV (Sr. Manager to Chief Manager) 480 SM-IV to SM-V (Chief Manager to Asstt. Gen. 160 Manager) SM-V to TEG-VI (Asstt. Gen. Manager to Dy. Gen. 35 Manager) TEG-VI to TEG-VII (Dy. Gen. Manager to General 18 Manager) Special Thrust on Development of SC/ST/Other Backward Communities Your Bank is committed to the constitutional safeguards and social objectives for development and welfare of persons belonging to SCs, STs and other backward classes in the society. Your Bank is one of those banks in the entire banking industry that have the highest number of employees belonging to SCs and STs, which itself shows the commitment of the Bank towards their development and upliftment. Some of the highlights of your Bank's efforts for development and welfare of people belonging to SCs and STs are enumerated as under. Reservation in Employment Your Bank observes all guidelines stipulated by the Government of India for reservation of posts in employment in All India recruitment and local recruitment. Around 15.0% posts are reserved for SCs and 7.5% posts are reserved for STs in all India recruitments as also for selection to Baroda Manipal School of Banking (i.e., another channel of resourcing started by the Bank). For other recruitments made on regional basis, appropriate percentage prescribed for various States is being observed. Special efforts are made like offering pre-recruitment orientation training to SC/ST applicants for recruitment in your Bank. Relaxation in age limit and qualifications are given and interviews of SC/ST candidates are taken on relaxed standards in order to ensure that appointment of candidates to the reserved posts happens. In the Interview Panel for recruitment, a member belonging to SC/ST is invariably associated. Candidates belonging to SC/ST, who are called for interview, are reimbursed traveling expenses. In addition to providing reservation in employment, your Bank is also providing reservation and other enabling mechanisms in career growth and promotions to SC and ST employees as per the existing guidelines. Pre-promotion training before participating in promotion exercises is also provided to these candidates. Around 10.0% of the available residential accommodation of your Bank is reserved for the SC/ST candidates. The staff strength and representation of SCs and STs as of 31st March 2013 is as under. Cadre Total SC SC % ST ST% Officers 17933 3044 16.97 1261 7.03 Clerks 16869 2392 14.18 1158 6.86 Substaff 8306 2836 34.14 769 9.26 Total 43108 8272 19.19 3188 7.39 SC/ST Cell An exclusive SC/ST Cell in your Bank has been set up to monitor the reservation and other enabling provisions for SC/ ST employees. An executive in the rank of General Manager is appointed as Chief Liaison Officer for SC/ST employees to ensure compliance of various guidelines pertaining to the SC/ ST employees. A Liaison Officer for SC/ST has been appointed in each Zone of the Bank who takes care of all matters and grievance redressal of SC/ST employees of that Zone. Meeting with SC/ST Welfare Association With a view to have direct dialogue and review of reservation and other special provisions for SC and ST, your Bank holds quarterly meetings with the representatives of SC/ST Welfare Association of the Bank. Your Bank's Chairman and Managing Director and Senior Executives including the Chief Liaison Officer for SC/ST participate in such meetings. Bharat Ratna Dr. Babasaheb Ambedkar Memorial Trust Your Bank has established the "Bharat Ratna Dr. Babasaheb Ambedkar Memorial Trust" in 1991 for promoting welfare activities for the benefit of SC/ST employees and their family members. Apart from scholarships to children of employees belonging to SC/ST, the Trust also provides scholarship to needy students belonging to SC/ST community, in general, in major centres of the country. Visit of National Commission for Scheduled Castes The National Commission for Scheduled Castes visited your Bank at various places during the year as shown in the following table to review the implementation of the reservation policy of the Government of India for SCs in your Bank, had discussions and interactions and examined the level of implementation of the policies and programmes. Sr Place of Meeting Date No 01 Jaipur 26.05.2012 02 Dehradhun 25.07.2012 03 Bangalore 22.08.2012 04 Bhopal 27.09.2012 The National Commission for SCs for verification of Rosters and other working service safeguards visited the Bank at Baroda on 05.12.2012 and also at Jaipur on 31.01.2013. The suggestions and guidance of the Commission are being scrupulously observed by your Bank. Various other commissions and parliamentary committees formed for promoting the welfare of different backward classes and safeguarding the interest/working conditions of different sections of society also visited your Bank as per the details given below and were apprised of the steps taken by the Bank in implementing all the relevant government guidelines and the different welfare measures adopted by the Bank to ensure their overall development and meeting of social objectives. - The National Commission for Safai Karamcharis at Goa on 11.02.2013 - Study visit of the Committee on Government Assurances, Rajyasabha (for Persons with disabilities) at Mumbai on 22.01.2013 - Meeting with Parliamentary Committee on Welfare of OBCs at Mumbai on 07.02.2013. Business Process Re-engineering (Project NAVNIRMAAN) After almost four years of the BPR-led transformation, your Bank now stands tall in the Indian Banking space. First ever Annual Conference of Indian Public Sector Banks on Business Process Reengineering (BPR) was hosted by Bank of Baroda in Mumbai on 14 July, 2012, along with Union Bank of India under the aegis of the Ministry of Finance, Government of India. Key areas of the "NAVNIRMAAN" Transformation - Your Bank has created the "Baroda-Next" line of branches with a modular design, clear front/back office separation, comfortable customer waiting area, suitable frontline automation and dedicated sales & service teams at all metro and urban centres. - It has carried out the upgradation of Back Offices through: - Process Redesign - Workflow-based Systems replacing Manual process and use of machines. - Enlargement (to make room for new work-step migration) - Your Bank has aggressively rolled out the Baroda-Next Branches and Back Offices across the country. - Your Bank has created a Sustainability enabler e.g. Documentation, Technology enablement, Performance Management and Training and Re-training. - Your Bank has rolled out the Sales processes at branch and enterprise-wide Sales Accountability Model (Baroda-Next Sales Operating Model). - Your Bank undertakes periodic customer and Employee Satisfaction Surveys for impact evaluation. The BPR performance of your Bank has created a positive impact both in terms of business growth and customer/ employee satisfaction through the following. - Baroda-Next Branch- Around 1,382 metro/urban branches have been rolled out as Baroda Next branches in your Bank so far. - Branch Front-end Automation- The Queue Management System (QMS) & Cheque Deposit Machine (CDS) machines are installed in 93 and 40 branches, respectively. - City Back Office (CBO) - Clearing operations have been centralized for all branches (linked to CBO). Three CBOs at Mumbai, Ahmadabad and Surat have been automated. - Regional Back Office (RBO) - Altogether 2,925 and 3,900 branches are linked for CASA opening and PCB (Personalized Cheque Book) issuance, respectively. - Credit centralization Pilot (RLF/ SMELF) - The Retail and SME credit centralization pilot is under progress at the Loan Factories in Baroda. - Rollout Sales Operating Model at each Baroda Next branch- The Sales Operating Model at 32 Regions covering 739 Baroda-Next branches has been rolled out. - Mid-corporate vertical- Separate Mid-corporate vertical has been created and 15 Mid-corporate branches have been opened at important locations. - Academy of Excellence- Continuous sensitization, training and capability building at all levels remain an integral part of the Baroda Next rollout programme. It involves a Zonal /Regional Kick-off, Branch Meeting; Boot camp, Branch-based Training, External Sales Trainings and Conclaves. - Sustainability of Navnirmaan initiatives/impact- A certification procedure for Baroda Next branches has been introduced in terms of which process compliance/ adherence are being evaluated by your Bank's Internal inspectors and CSAT/ESAT are being evaluated externally by the Market Research Agencies. Marketing During FY13, your Bank continued to promote its brand and various products and services through advertising, customer engagement programs and in-branch display. In the process, your Bank endeavoured to use different media vehicles such as Print, Electronic and OOH apart from supporting the on- ground activities undertaken by branches in the Zones/Regions. The highlights of various marketing/communication activities undertaken during FY13 are given below. Your Bank initiated a unique Brand Engagement Program titled 'Bank of Baroda Canvass Competition' on 14th November 2012 - Children's Day, to create a platform for building a long-term relationship with a younger audience as well as their influencers i.e. parents/teachers. The Competition was designed to invite entries from school children across the country on a pre-determined topic and winning entries were selected on National/Zonal/Regional levels by a select panel of judges. Your Bank's mascot i.e. 'Stickman' was also leveraged extensively during the Competition to help establish a brand- association with the Target audience. A judicious mix of Print & Radio Media was used in the Campaign to maximise the number of entries in the Competition. Around cities, where our Regional Offices are present, were primarily targeted. A total of 1.98 Lakh students representing over 3,000 schools from across the country participated in the Competition, during a short span of 45 days, giving your Bank an opportunity to engage with them in the near future. Your Bank undertook various Product Promotion Campaigns to promote its products and services amongst target audience through advertising across different geographies. The focus was on providing information on various products and services, particularly Savings Deposits, Current Deposits, NRI Deposits, Home Loan, Car Loan, SME Loans and Alternate Delivery Channels through judicious use of various media vehicles. Information relating to expansion of branch network, both domestic and overseas, was also given due publicity largely through print medium which helped in enhancing your Bank's brand image & visibility. Your Bank also took the initiative of educating its customers through publication of special literature on Alternate Delivery Channels and products & services relating to SME segment. It also participated in various events such as Pravasi Bhartiya Diwas 2013, FICCI - IBA Banking Conference, Dun & Bradstreet - Exporter's Excellence Awards, MINT Annual Banking Conclave, CII's Manufacturing Summit and Standard Chartered Mumbai Marathon 2013, among many others to interact with customers and also for creating brand association with them. During FY13, as part of its Public Relations task, your Bank had wide Media Coverage of its activities across the country which helped in maintaining the Bank's Brand image. Your Bank also won several awards from reputed Media Houses and other Organizations during the Year on various business parameters, a list of which is appended below. Awards and industry Recognition for Bank of Baroda Your Bank received several awards during FY13, for its consistent outstanding and all-round performance (both business and financial), superior management, dedication to excellence and contribution to rural economy and financial inclusion. Given below are a few select awards won by Bank during the year FY13 - Bloomberg UTV Financial Leadership Award -Best PSU Bank - 07.04.012, Mumbai - Best CIO Award of BFSI sector from Institute of Public Enterprises, 2012 - June, Hyderabad - Reserve Bank Rajbhasha Shield - 29.06.2012, Mumbai a) First Prize in Region A b) Second Prize in Region B c) Consolation Prize in bilingual house journal - Bob Maitri - The Sunday Standard FINWIZ 2012 Awards - 20.08.2012, New Delhi - Best Indian Bank - Large (Runner Up) - Best Public Sector Banker - Large (Runner Up) - Dun & Bradstreet - Polaris Financial Technology Banking Awards - 24.08.2012, Mumbai a) Best Public Sector Bank under the category Global Business Development b) Overall Best Public Sector Bank - Banking Technology Award-2011 by IBA - 27.08.2012, Mumbai a) Use of Technology in Training & e-learning - Winner b) Best Customer Relationship initiatives - 1st Runner up c) Best use of Business Intelligence - 1st Runner up d) Best use of mobility tech in Banking - 2nd Runner up e) Best Risk management & Security initiatives - 2nd Runner up - Silver Trophy for effective implementation of Automated storage Management & Oracle RAC from SKOCH Digital Inclusion Award- 2012, 04.09.2012, New Delhi - Business India Best Bank Award 2012 - 14.09.2012, Mumbai - Indira Gandhi Rajbhasha Shield Competition, New Delhi a) First Prize - 14.09.2012 b) Second Prize for Akshayyam in Hindi House - Journal Competition - (Association of Business Communicators of India) ABCI Awards 2012, 19.10.2012 a) Special Column (English) - Bobmaitri, Silver Trophy b) Special Column (Language) - Akshayyam, Silver Trophy c) Corporate Web-site - Bank of Baroda website, Silver Trophy - Forbes India Leadership Award - Best CEO Public Sector, 28.09.2012, Mumbai to Shri M D Mallya - CNBC TV18 - 'India Best Banks and Financial Institutions Award 2012' - Best Public Sector Bank, 17.10.2012, Mumbai presented to Shri M D Mallya - Best Large Bank 2012 - Business World November 26th 2012 Issue - Best Large Bank 2012 - Business Today - KPMG - December 2012 - Best Public Sector Bank Award by State Forum of Bankers Club, Kerala, December 2012, at Ernakulam - Business Standard Banker of the Year (2011-12) was conferred on Shri. M D Mallya, Former CMD of Bank of Baroda in January 2013. Conferred on 23.03.2013. - My FM Stars of the Industry Award for Excellence in Banking (PSU) - Silver awarded by Radio FM on 14.02.2013 in Mumbai - My FM Stars of the Industry Award for Excellence in Home Loan Banking - Bronze awarded by Radio FM on 14.02.2013 in Mumbai - FE Best Banks Award 2011-12 for 'Best PSU Bank' awarded by Financial Express Group on 20.02.2013 in Mumbai - "Strategic Communication and Leadership Award" by Asian Confederation of Business and World CSR Congress at Corporate Affairs Award Ceremony, Mumbai on 18/02/2013 - The Most Efficient Public Sector Bank by Dalal Street Investment Journal on 23/03/2013. - National Award for 2011-12, conferred for excellence in the field of Khadi & village Industries by Khadi & Village Industries Commission on 3rd April,2013 Premises Re-Engineering and Ambience Enhancement Given below are the major achievements of your Bank in the area of "Premises re-engineering and ambience enhancement" during the year FY13. - Your Banks' administrative office cum residential complex at Jamshedpur was completed. It was equipped with ultra modern gadgets and systems with energy efficient equipments, rain water harvesting system and eco- friendly materials. Your Bank's presence by this building in the Steel City is admired by one and all. Now, it has become landmark building of Jamshedpur city. - As per the directives from Ministry of Finance, your Bank linked its Corporate Office and all Zonal and Regional Offices through State-of-the Art Video Conferencing systems with MPLS Connectivity. Interaction of functional heads through VC has expedited the decision making process in a more efficient and cost effective manner. - Your Bank is also marching towards technology based initiatives in the form of e-tendering, e-procurement, etc., and implemented these initiatives in a phased manner during FY13. - All payments to vendors are being made through RTGS/ NEFT or credit to beneficiary account. - In tune with your Bank's policy to have its administrative offices in owned premises, your Bank purchased land at Bangalore (Karnataka), Hyderabad (AP), Faizabad (UP) Indore (MP), Udaipur, Haldwani (Uttrakhand ), Dehradun (Uttrakhand), Jaipur (Rajasthan) and New Raipur (Chhatisgarh) for construction of commercial buildings. - Looking to the ever increasing rentals, a need is being felt to use every nook and corner of the available premises. Layouts were revisited while renovation and furnishing of branches/offices was done by introducing eco-friendly and ergonomically designed sleek furniture items. The area norms for acquisition of the premises were also reviewed and implemented. - To have uniformity in systems and procedures pan-India, Premises Policy Guidelines, Constructions Manual, Refurbishment Manual were formulated and agencies for modular and chairs were also identified for quick procurement of the furniture items and to have similar and identical design to get aesthetically pleasant look. Projects implemented during FY13 - Your Bank constructed a commercial complex at Mylapore, Chennai having Zonal Office, Branch & Currency Chest. - A residential complex at Cenotaph Road, Chennai was constructed wherein there were three 3-BHK flats, twelve 2-BHK and one General Guest house, and state of the art VIP guest house. - Your Bank constructed a residential complex at East of Kailash, New Delhi wherein there are 14 executive flats (four 3BHK flats, ten 2BHK flats) and one top executives/ guest house. - The construction of commercial cum residential complex at (Tata Nagar) Jamshedpur was wherein there are 23 2-BHK flats. Projects under implementation - The construction of residential complex at Janakpuri, New Delhi of your Bank is in the advanced stage of completion. - The construction of office building cum currency chest at Varanasi is also nearing the completion. - The construction of Multi storey integrated office building at Jaipur is in the advanced stage of completion. - The construction of BSVS at Ajmer, Banswada, Dungarpur, Pratapgarh are also under implementation. - The construction of administrative and residential buildings at New Raipur is under implementation. - The construction of residential cum commercial complex at Indore (MP) is under implementation. Future Plans for Estate Management - To facelift the Bank's Building at Parliament Street, New Delhi - To redevelop the Ram Nagar Premises at Coimbatore, to have optimum utilisation of available space for Branch/ officers' flats. - To construct an own building for Disaster Recovery Site at Hyderabad. - To renovate the Bank of Baroda Institute of Information Technology at Gandhinagar (Gujarat) - To undertake the redevelopment of Bhandup Staff Quarters building, Mumbai, thereby to construct about 138 residential flats for transferee Officers/ Executives. - To undertake the redevelopment of Jogeshwari Staff Quarters, Mumbai, to construct a building for residential and commercial use. - To construct a training centre at Bangalore. - To construct an Administrative Regional Office Building at Faizabad. - To construct the BSVS at various centres across India as per the directives from the Government of India. Domestic Subsidiaries and Associates The performance of "Subsidiaries, Joint Venture & Associates" of Bank of Baroda was satisfactory during FY13. The BOBCARDS Limited turned around during FY11 and made profit during FY12 and FY13. The Company has focused on all qualitative aspects of business development, which has resulted in better profitability, quality card base and ME base. The Company has introduced a range of Platinum Cards with premium features like added privileges & offers. The Company has drawn up aggressive plans for enlargement of Card & Merchant Base. The BOB Capital Markets Ltd. has been activated by recruiting a professional team. The focus is on investment advisory services, Debt & Equity Syndication and Capital market activities. The Company commenced institutional broking business and has also launched an Online Institutional Trading Platform from October 2009. The Company commercially launched an On-Line Retail Trading platform on July 20, 2012. The Nainital Bank Ltd. was promoted by Late Bharat Ratna Pandit Govind Vallabh Pant and others and became Associate Bank of Bank of Baroda in the year 1973. Today, the shareholding of Bank of Baroda in Nainital Bank Ltd. is 98.57% and is a subsidiary of the Bank. The State of Uttarakhand, vide its communique dated August 3, 2012, has notified that The Nainital Bank Limited be treated at par with other PSU Banks. The Bank has initiated branch expansion initiatives and has already established a Regional Office at Dehradun and has aggressive plans to ramp up its scale of operations. The Bank has launched e-stamping facility in 15 branches and has initiated several new IT initiatives such as Mobile banking & e-banking, etc. Baroda Pioneer Asset Management Company Ltd. is a joint venture with Pioneer Global Asset Management SpA and is in its fifth year of operation. During the year under review, the Company was able to strengthen its AUM significantly which rose by 75.0% on year on year basis as of Mar'13 and was able to add one lakh folios despite weak sentiments prevailing in Debt & Equity markets. The key to this growth was strong focus on the institutional segment which helped the Company grow its debts & money market products coupled with focus on Systematic Investment Plans for retail investors. Several new NFOs were launched during the year and two new channels were added to take care of the third party products. The Company has increased the number of investor servicing points from 77 to 203 during the year under review. IndiaFirst Life Insurance Company Ltd. is a joint venture company with Andhra Bank and Legal & General Group, U.K. It commenced its business operations on 16th November 2009 and has received an overwhelming response for its products across the country. The Company has outperformed the industry by having maximum year on year growth of 34.0%. The Company was the 22nd entrant in the Life Insurance space & has become the 8th largest player among private players within a span of less than four years. The IndiaFirst has launched MagicBoard, a one- of- its kind portable sales process tool. The Company has won Model Insurer Award (Asia) for the 3rd successive year. India Infradebt Ltd. is a joint venture company with ICICI Bank Ltd., ICICI Home Finance Company Ltd., Citicorp Finance (India) Ltd. and Life Insurance Corporation of India. The Company was incorporated on Oct 31, 2012 in Mumbai and has been issued registration certificate No. N-13.022039 dated 08.02.2013 by the RBI to operate as an infrastructure Debt Fund - Non Banking Financial Company (IDF-NBFC). The Company's principal activity is to refinance part of the debt liabilities of the project companies. (Rs. lakh) Entity (with date of Owned Total Net Country Offices Staff registration) Funds Assets Profit BOB Capital Markets India 13,591.17 15,018.28 596.79 1 30 Ltd., 11 Mar, 1996 BOBCARDS Ltd 29 India 14,546.46 16,019.04 1,922.74 33 102 Sept, 1994 Baroda Pioneer Asset Mgmt Co. Ltd., 5 Nov, India 1,749.46 2,525.75 -1,871.98 1 88 1992 lndiaFirst Life India 37,586.92 4,19,621.90-3,958.40 35 1,476 Insurance Co. Ltd., 19 June, 2008 Nainital Bank Ltd, 31 India 40,065.36 4,31,808.79 5,106.10 107 830 July, 1922 India Infra debt Ltd. India 30,801.66 30,813.10 801.66 1 1 31.10.2012 Implementation of Official Language (OL) Policy During the period under review, your Bank made significant progress with regard to implementation of Official Language policy and ensured compliance of various statutory requirements of Official Language Act/Official Language Rules. Your Bank could achieve all major targets set by the Government o India under its Annual Implementation Programme and fulfilled the assurances given to the Committee of Parliament on Official Language. In recognition of your Bank's outstanding performance, the Bank was awarded 1st prize in Indira Gandhi Rajbhasha Shield by Shri Pranab Mukherjee, Hon'ble President of India. Your Banks' in-House Hindi Magazine-Akshayam was also awarded Second prize at the hands of Shri Pranab Mukherjee, Hon'ble President of India for the year FY12. During the year FY13, your Bank's In-House Magazine 'BOBMAITRI' and Hindi magazine 'AKSHYAAM' got 3rd prize in the RBI Rajbhasha shield Competition. The Town Official Language Implementation Committees functioning at Jaipur and Baroda under your Bank's convenorship were awarded 1st prize for their outstanding performance by the Department of Official Language, Government of India. Your Bank's Zonal Office at Pune, Regional office at Jodhpur and Zonal office at Ahmedabad too got 1st, 2nd and 3rd prizes, respectively. Your Bank's in-House Hindi Magazine 'Akshayyam' was awarded with 'Gold Prize under Indian Language Publication category by the 'ABCI' and 'Apni Baat' with silver prize under special column (Language) category. In addition to the above two magazines, a publication of your Bank's Hindi web Magazine Baroda Hindi.com has been popularsing the use of Hindi language through technology. The Hindi magazines are regularly published by different Town Official Language Implementation Committees functioning under your Banks' convenorship. The Town Official Language Implementation Committees functioning under the convenorship of your Bank discharged their responsibilities excellently. During the year, three newly constituted Town Official Language Implementation Committees started functioning at Jalandhar, Varanasi and Haldwani under your Bank's Convenorship and now your Bank is the Convenor of nine Town Official Language Implementation Committees. The Third Sub-Committee of Parliament on Official Language visited your Bank's branches at Jaisalmer, Vikas Nagar and Rudraprayag and appreciated the efforts put in by the Bank in the area of Official Language Implementation. Your Bank was able to come out with a Programme to generate and print pass books and account statements in Hindi at the branches situated in linguistic regions A and B, through Finacle System on the CBS platform. During the year under review, your Bank started printing the ATM slips in Hindi for the convenience of customers and introduced a display of ATM screen in Gujarati and Marathi languages in addition to Hindi and English. During the year, 'Pragati online package' was also developed for consolidation of quarterly progress report regarding the use of Hindi and online submission of Hindi reports. During FY13, Hindi version of your Bank's Book of Instructions was uploaded on the Bank's Intranet. During the year FY13, your Bank published two books in Hindi namely "Financial Inclusion & Indian Languages" and "Samvaad" for prorogating the use of Hindi in the Indian banking industry. Board of Directors Shri S. S. Mundra appointed as the Chairman and Managing Director of the Bank w.e.f. 21.01.2013 by the Central Government u/s 9 (3) (a) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 to hold the office till 31.07.2014 i.e. the date of his superannuation or until further orders, whichever is earlier. Shri P. Srinivas appointed as a Whole Time Director (designated as Executive Director) w.e.f. 18.06.2012 by the Central Government u/s 9 (3) (a) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, to hold office up to 30.06.2016 i.e. the date of his superannuation or until further orders, whichever is earlier. Shri Sudhir Kumar Jain appointed as a Whole Time Director (designated as Executive Director) w.e.f. 18.06.2012 by the Central Government u/s 9 (3) (a) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 for a period of five years, or until further orders, whichever is earlier. Shri Ranjan Dhawan appointed as a Whole Time Director (designated as Executive Director) w.e.f. 01.11.2012 by The Central Government u/s 9 (3) (a) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, to hold office up to 30.09.2015 i.e. the date of his superannuation or until further orders, whichever is earlier. Shri N. S. Srinath, a Whole Time Director (designated as Executive Director) ceased to be a Director with effect from 01.06.2012 on completion of his term. Dr. (Smt.) Masarrat Shahid, a part time non- official Director ceased to be a Director with effect from 29.10.2012 on completion of her term. Shri Rajiv Kumar Bakshi , a Whole Time Director (designated as Executive Director), ceased to be a Director with effect from 01.11.2012 on completion of his term. Shri M. D. Mallya, Chairman and Managing Director, ceased to be a Director with effect from 01.12.2012 on completion of his term. Directors' Responsibility Statement The Directors confirm that in the preparation of the annual accounts for the year ended March 31, 2013: - The applicable accounting standards have been followed along with proper explanation relating to material departures, if any; - The accounting policies framed in accordance with the guidelines of the Reserve Bank of India, were consistently applied. - Reasonable and prudent judgment and estimates were made so as to give true and fair view of the state of affairs of your Bank at the end of financial year and of the profit of your Bank for the year ended on March 31, 2013; - Proper and sufficient care was taken for the maintenance of adequate accounting records in accordance with the provisions of the applicable laws governing banks in India; and - The accounts have been prepared on a going concern basis. Acknowledgement The Directors express their sincere thanks to the Government of India, Reserve Bank of India, Securities and Exchange Board of India, other regulatory authorities, various financial institutions, banks and correspondents in India and abroad for their valuable guidance and support. The Directors acknowledge with appreciation the assistance and cooperation extended by all stakeholders of your Bank like customers, shareholders and well wishers in India and abroad. The Directors place on record deep appreciation for the hard work and dedication of the members of your Bank's staff at different levels, which enabled your Bank to record high quality, consistent growth year after year despite economic challenges and consolidate its position as one of the premier banks in the country. For and on behalf of the Board of Directors, S. S. Mundra Chairman and Managing Director

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Mar 31, 2012

The Directors have pleasure in presenting the One Hundred and Fourth Annual Report of Your Bank with the audited Balance Sheet, Profit & Loss Account and the Report on Business and Operations for the year ended March 31,2012 (FY12).

Performance Highlights

- total Business (Deposit Advances) increased to Rs 6,72,248 crore reflecting a growth of 25.86%.

- Gross Profit and Net Profit were Rs 8,580.62 crore and Rs 5,006.96 crore respectively. Net Profit registered a growth of 18.04 % over previous year.

- Credit-Deposit Ratio stood at 86.86% as against 86.77% last year.

- Retail Credit posted a growth of 9.97% constituting 17.36% of your Bank's Gross Domestic Credit in FY12.

- Net Interest Margin (NIM) as per cent of interest earning assets in global operations was at the level of 2.97% and in domestic operations at 3.51%.

- Net NPAs to Net Advances stood at 0.54% this year against 0.35% last year.

- Capital Adequacy Ratio (CAR) as per Basel II stood at 14.67%.

- Net Worth improved to Rs 26,203.67 crore registering a rise of 32.67%.

- Book Value improved from Rs 504.43 to Rs 637.37 on year.

- Business per Employee moved up from Rs 1,229 lakh to Rs 1,466 lakh on year.

Segment-Wise Performance

The Segment Results for the year FY12 reveal that the contribution of Treasury Operations was Rs 887.72 crore, that of Corporate/Wholesale Banking was Rs 965.87 crore, that of Retail Banking was Rs 2,782.37 crore, and of Other Banking Operations was Rs 2,959.73 crore. Your Bank earned a Profit after Tax (PAT) of Rs 5,006.96 crore after deducting Rs 1,569.89 crore of unallocated expenditure and Rs 1,018.84 crore towards provision for tax.

Dividend

Your Bank's Directors have proposed a dividend of Rs 17 per share (on the face value of Rs 10/-per share) for the year ended March 31st, 2012. The total outgo in the form of dividend, including taxes, will be Rs 812.29 crore.

Capital Adequacy Ratio (CAR)

Your Bank's Capital Adequacy Ratio (CAR) was comfortable at 14.67% under Basel II as on 31st March 2012.

Your Bank's Net Worth as at 31st March 2012 was Rs 26,203.67 crore comprising paid-up equity capital of Rs 412.38 crore and reserves (excluding revaluation reserves) of Rs 25,791.29 crore. An amount of Rs 4,194.67 crore was transferred to reserves from the profits earned.

Provisions towards Retirement and Other Benefits

During the year FY12, your Bank made provision towards contribution to gratuity (Rs 145.63 crore), pension funds (Rs 671.88 crore), leave encashment (Rs 93.46 crore) and additional retirement benefits (Rs 80.97 crore) on actuarial basis. Total provisions under these four categories amounted to Rs 991.94 crore during the year FY12, against Rs 1,160.42 crore during FY11. Total corpus available with your Bank at the end of March 2012 under these heads was: Rs 1,416.85 crore (gratuity), Rs 5,935.62 crore (pension funds), Rs 566.01 crore (leave encashment), and Rs 446.62 crore (additional retirement benefits).

Key Financial Ratios

Particulars FY12 FY11

Return on Average Assets (ROAA) (%) 1.24 1.33

Average Cost of Funds (%) 5.64 4.67

Average Yield (%) 8.55 7.76

Average Interest Earning Assets (Rs crore) 3,47,223.21 2,82,109.79

Average Interest Bearing Liabilities (Rs crore) 3,43,397.26 2,80,098.94

Net Interest Margin (%) 2.97 3.12

Cost-Income Ratio (%) 37.55 39.87

Book Value per Share (Rs) 637.37 504.43

EPS (Rs) 127.84 116.37

Business Performance

Given below are the details of your Bank's major achievements on business front during the year FY12.

Resource Mobilisation and Asset Expansion

The share of Bank's Deposits in total resources stood at 86.04% as of 31st March 2012. The Total Deposits grew from Rs 3,05,439.48 crore to Rs 3,84,871.11 crore, reflecting a growth of 26.01% over the previous year. Of this, Savings Bank Deposits - an important constituent of low cost deposits - grew by 15.71% from Rs 64,454.04 crore to Rs 74,579.53 crore. The share of low cost deposits (Current Savings) in Total Deposits was at 26.90% and in Domestic Deposits at 33.18%.

Your Bank's Total Advances expanded by 25.67% during FY12 led by 19.28% expansion in Domestic Advances and 43.92% expansion in Overseas Advances.

Composition of Funds - Global

Particulars End End Growth March 2011 March 2012 (%) (Rs crore) (Rs crore)

Deposits 3,05,439.48 3,84,871.11 26.01

- Domestic 2,33,323.30 2,80,135.26 20.06

- Overseas 72,116.18 1,04,735.85 45.23

Borrowings 22,307.85 23,573.05 5.67

Global Advances

Particulars End End Growth March 2011 March 2012 (%) (Rs crore) (Rs crore)

Advances 2,28,676.36 2,87,377.29 25.67

- Domestic 1,69,407.86 2,02,075.39 19.28

- Overseas 59,268.50 85,301.90 43.92

Wholesale Banking

A strong corporate credit culture and healthy growth in credit

- moderately above Banking industry average have been the consistent differentiators of Bank of Baroda for the past four years.

In fact, your Bank's Wholesale Banking Division offers a full range of loan products and services such as Term Loans, Short-Term Loans, Demand Loans, Working Capital Facilities, Trade Finance Products, Treasury Products, Bridge Loans, Syndicated Loans, Infrastructure Loans, Cross Currency/ Interest Rate Swaps, Foreign Currency Loans, Loan Against Future Rent Receivables and many more to its large and mid corporate clients depending upon their needs. The product offerings are flexible and suitably structured taking into account the customers' risk profiles and specific needs.

Based on the superior product delivery, passionate service orientation, timely and speedier sanctions with a customer-centric approach, your Bank has made significant achievements in providing an array of Wholesale Banking products and services to several multinationals, domestic business houses and prime public sector companies.

The Department places major thrust on faster delivery through efficient channels and adoption of better practices in credit administration. During FY12, the efforts were also made to improve the speed of decision making without compromising the quality of decision.

During FY12, the non-food credit growth, in general, remained low in the Indian banking industry. However, even during this phase, your Bank's Wholesale Banking Division created 130 new relationships through its Fast Track Desk. The department sanctioned fresh/increased credit facilities to the tune of Rs 60,955 crore during the year to various sectors /industries with projects /units spread across the country.

Under Wholesale Banking, the corporate customers are identified as large and mid corporates. Those having annual sales turnover of between Rs 150 crore to Rs 500 crore are classified as mid-corporates, and those with sales turnover over Rs 500 crore are classified as large corporates.

Sensing the need to focus and serve the potential mid corporate segment, your Bank took an important initiative of opening specialized Mid Corporate Branches in various potential locations throughout the country. These branches are equipped with mix of experienced and professionally qualified staff. Attaching high importance to the segment, your Bank arranged for training in soft skills plus domain-expertise knowledge for its staff identified for these specialized branches through an International Management Consultancy firm.

Your Bank also opened one more specialized CFS (Corporate Financial Services) Branch taking total number of CFS Branches to eleven.

Your Bank's Wholesale Banking Department also has a full-fledged 'Project Finance Division' (PFD). The PFD is well equipped with professionals from various disciplines and undertakes TEV (i.e. Technical Evaluation & Viability) studies for clients of your Bank as well as that of other banks. The Department is also equipped with Syndication Desk to syndicate domestic funding requirement of the clients. The Department earns significant fee-based income by carrying out TEV studies, vetting of projects and through syndication deals.

Your Bank attaches higher degree of importance to the quality of appraisal and efficient processing of credit proposals at all levels to maintain the asset quality and realizes the importance of skilled and motivated employees to achieve the same. Keeping this in view, your Bank continued its thrust on regular grooming of Credit and Forex Officers. Your Bank also continued to recruit specialized officers from campuses and lateral recruitment of professionals cum experienced staff.

Retail Business

As in the past, Retail Business continued to be one of the important segments of overall business during FY12. Your Bank's performance under its Retail Banking Segment during the year under consideration is as under.

Growth under Retail Lending

Your Bank's Retail Loan Book consisted of five key products (namely Home Loan, Auto Loan, Education Loan, Traders Loan and Mortgage Loan) which together constituted 74.0% of total retail loans and other products namely LABOD/ ODBOD that constituted 21.0% of total retail loans during FY12. Besides, the products like Baroda Personal Loan and other miscellaneous product viz. Doctors Loan, Loan against Government securities etc contributed around 5.0% to total retail loans.

Total Retail Loan outstanding as on 31st Mar, 2012 was Rs 35,668 crore as against the level of Rs 32,435 crore as on 31st Mar, 2011. A growth of Rs 3,233 crore (9.97%) was registered under total retail loans during FY12 as against a growth of 33.76% (Rs 8,187 crore) registered during FY11. The growth in retail business of your Bank during FY12 was in line with the overall segmental business trend witnessed by the Indian banking industry.

Growth under Five Key Retail Products

Under five key products which constituted 74.0% of total retail loans, an absolute growth of Rs 3,102 crore (13.43%) was registered during the year FY12 as against a growth of Rs 4,095 crore (21.56%) during the previous financial year.

Under Home Loans, an absolute growth of Rs 1,594 crore (12.71%) was registered during the year FY12 as against a growth of Rs 2,227 crore (21.59%) during the previous year.

Under Auto Loans, an absolute growth of Rs 384 crore (18.76%) was registered in FY12 as against a growth of Rs 612 crore (42.58%) during FY11.

Under Baroda Traders Loans, an absolute growth of Rs 876 crore (18.63 %) was registered in FY12 as against a growth of Rs 852 crore (22.15%) during FY11.

Under Baroda Mortgage Loans, an absolute growth of only Rs 97 crore (4.68%) was registered during FY12 as against a growth of Rs 176 crore (9.40%) during FY11.

Under Education Loans, an absolute growth of Rs 150 crore (8.72%) was registered during FY12 versus a growth of Rs 226 crore (15.11%) during FY11.

Under LABOD /ODBOD, a growth of Rs 2,307 crore was registered. Under Baroda Personal Loans, a negative growth of Rs 2,183 crore was posted over the level of 31st Mar, 2011 due to repayment of Loan for Earnest Money Deposits during the year FY12. The repayments of short term loans primarily led to low growth under the total retail loans during the year under consideration.

NPA under the Retail Loan

The amount of Non Performing Assets as on 31st Mar, 2012 under Retail Loan was Rs 682 crore (1.91%) versus the level of

Rs. 662 crore (2.13%) as on 31st Dec, 2011 and Rs 649 crore (2.17%) as on 30th Sept, 2011. As on 31st Mar, 2011,the NPA was at the level of Rs 580 crore(1.79%).

Savings Bank Deposits

Your Bank's overall Saving Deposits stood at a level of Rs 72,570 crore as on 31.03.2012 registering a growth of Rs 9,611 crore (15.27%) over the level of Rs 62,959 crore as on 31.03.11. During the last FY 2010-11, a growth of Rs11,717 crore i.e. 22.87% was registered over the level of 31.03.2010.

Retail Term Deposits

Retail Term Deposit of your Bank stood at the level of Rs 1,18,727 crore as on 31st Mar, 2012 as against the level of Rs 95,325 crore as on 31st Mar, 2011 registering a growth of Rs 23,402 crore i.e. 24.55% versus the growth of Rs 12,295 crore i.e. 14.80% registered during the last financial year.

Under Total Retail Deposits i.e. Retail Term Deposit plus Savings Deposits, an absolute growth of Rs 33,013 crore i.e. 20.85% was posted during FY12 as against the growth of Rs 24,012 crore i.e.17.88.% registered during FY11.

Initiatives in Retail Banking during FY12

New Products Launched

- Baroda First Wealth Pack, a combo of two products namely Baroda First Savings Bank and Baroda First Regular Deposit jointly with two Insurance Products namely ULIP & Term Insurance Plan was launched on 2nd Jan, 2012. Until end-Mar, 2012, a total of 53,516 Packs were sold by your Bank.

- Baroda Samriddhi Quarterly Recurring Deposit & Baroda Samriddhi Half yearly Recurring Deposit Schemes were launched on 6th March 2012 primarily to facilitate Agriculturists, Self Employed & Professionals etc.

- Sales Operating Model was launched at 163 Baroda Navnirman Branches for developing Sales & Service culture to generate Business Leads.

Product Modification

- During FY12, a proposal was approved for increasing the maximum limit under Baroda Home Loan to Resident Indians and NRIs/PIOs at all Metro and Urban Centers from the existing Rs100 lakh to Rs300 lakh.

- Prepayment charges for foreclosure of Home Loan Accounts were completely waived with effect from 15th Dec, 2011.

Business Initiatives

- Savings Bank Deposit Campaigns: For mobilizing low cost deposits, a Savings Bank Deposit Campaign was launched on 1st Jun, 2011 for two months. The period of this campaign was later extended upto 31st Aug, 2011 foreseeing the challenge of mobilizing savings bank deposits in a rising interest rate scenario. To accelerate the pace of Savings Bank accretion, Savings Bank campaign was reintroduced during 2nd Jan, 2012 to 31st Mar, 2012, besides the launch of a special incentive scheme

i.e. "Evening with CMD & Picnic with staff" for the award winning branches & regional offices.

- Retail Loan campaign: With a view to harness the potential of ongoing festive season and to augment your Bank's Retail Loan Book with a special focus on Home Loans and Car Loans, a Retail Loan Festival Campaign was launched during 26th Sept to 30th Nov, 2011. Going by the success of Retail Loan Campaign, it was further extended till 31st Mar, 2012, with a modification by increasing ROI concession from 0.25% to 0.50% in Auto Loans. Both the SB Deposit Campaign and the Retail Loan Campaigns yielded good results.

- Opening of New City Sales Offices: Nine City Sales Offices were opened at Haldwani, Raebareilly, Faizabad, Raipur, Bhopal, Indore, Bengaluru, Ghaziabad & Rajkot during FY12.

- Opening of New Retail Loan factories: Three new Retail Loan factories were opened at Haldwani , Dehradun and Nasik during FY12.

- Delegation of Additional Discretionary Powers for Concessions: All Zonal Heads of your Bank were delegated with powers for considering concession to the extent of 100bps in the applicable interest rate on Baroda Trader Loan for mobilizing fresh business & to augment Retail Loan Book during FY12.

- Providing Group Life Insurance Cover: The Facility of Group Credit Life Insurance cover was approved for Auto

Loans and Personal Loan Borrowers, in addition to facility presently available for Home Loans & Education Loans. During FY12, a total of 18 death claims were settled by the insurers.

- Strategies adopted for Prevention of Frauds: A system of verification of various steps undertaken by the branches for fraud prevention under Retail Loans through a checklist was also introduced.

- Under the Home Loan Suraksha Beema Scheme (A Tie- up Arrangement with National Insurance Co. Ltd) a total of ten Accidental Death Insurance claims were settled by the insurer during the year under consideration.

Wealth Management Services

As a part of its customer centric measures, your Bank has been providing Wealth Management Services for its HNI & affluent customers since June 2004. At present, your Bank provides various 3rd party products in Life Insurance, Non Life Insurance including Health Insurance, Mutual Funds & Equity Trading under tie-up arrangements with different partners. Moving ahead further in the segment, your Bank also formed two joint ventures with leading international brands in Mutual Fund and Life Insurance.

The Baroda Pioneer Asset Management Co. Ltd., your Bank's joint venture in mutual fund in association with Pioneer Investments of Italy and the India First Life Insurance Co. a joint venture in life insurance with Andhra Bank and L&G of U.K. have successfully positioned themselves in the Indian marketplace with consistently improving performance since their inception.

The year FY12 was destabilizing for Indian equities with wild fluctuations impacting the overall sentiment of investors. In these testing times, your Bank changed its strategies by focusing on mutual fund investments through a SIP route to safeguard the customers from the unpredicted movement in the market. The strategies were successful with a large number of customers yielding benefits and your Bank's business performance in the format being intact while nurturing a disciplined saving/ investing habit amongst its customers. During the last two years, your Bank has been endeavoring to widen the scope of ASBA (application supported by Blocked Amount) facility by extending it to a number of designated branches and enabling an on-line ASBA Facility for its net banking customers. During FY12, your Bank introduced Syndicate ASBA Facility for those customers who wish to make IPO/FPO/NFO application through other intermediaries such as brokers.

It is heartening to note that the initiatives of your Bank under its Wealth Management segment have been encouragingly contributing to its overall non-interest income.

MSME Business

The Micro, Small and Medium Enterprises (MSME) segment is a vital component of Indian economy. This sector accounts for around 40.0% of the nation's total industrial production, 34.0% of industrial exports, 95.0% of industrial units and 35.0% of total employment in manufacturing and services sectors. The contribution of Services Sector within the SME segment is quite significant; especially the IT enabled services, hospitality services, tourism, couriering, transportation, etc.

To give a focused attention to emerging SMEs in India, your Bank has been considering other commercial units with a turnover up to Rs 150 crore at par with the SMEs. To promote the growth of SME Sector, your Bank has launched a special and novel delivery model, viz. SME Loan Factory, which at present, is operational in 46 centres of your Bank and well accepted in the market place. The SME Loan Factory is an innovative model for streamlining processes and for timely sanctions of SME loan proposals. The model comprises of the Central Processing Cell for speedy appraisal and sanctioning of proposals within the stipulated deadline and a sales team to follow up on leads generated by branches. Given its success, your Bank has plans to open more such loan factories in the ensuing year. Your Bank has SME Loan Factories at all major business centres across the country, viz. Agra, Ahmedabad, Allahabad, Bangalore, Bareilly, Baroda, Bhilwara, Bhubhaneshwar, Bulsar, Bharuch, Chandigarh, Chennai, Coimbatore, Dehradun, two Factories in Delhi, Ernakulam,Gandhidham,Gorakhpur Hyderabad, Haldwani,Indore, Jaipur, Jamshedpur, Jamnagar, Jodhpur, Kanpur, Kolhapur, Kolkata, Lucknow, Ludhiana, 3 Factories in Mumbai, Meerut, Mehsana, Nagpur, Nashik, Pune,Patna, Rajkot, Raipur, Surat, Shahajahanpur, Varanasi and Vishakhapatnam. These SME Loan Factories sanctioned loans aggregating Rs 18,619 crore during FY12 as against Rs 14,530 crore in the previous year.

Growth of Business

The total outstanding in MSME Sector works out to Rs 34,512 crore as on 31st March 2012. The growth in lending to MSME Sector during the last three years is given in the table below.

Year Growth (%, YoY)

2009-10 43.98%

2010-11 29.63%

2011-12 26.11%

The percentage growth of MSME credit during FY10 was relatively high as the advances up to Rs 20 lakh to Retail Trade were classified for the first time under the "Micro & Small Enterprises Sector" during this year in line with the RBI's revised guidelines issued during September, 2009. The growth rate was normalized during the year FY11.

The Bank took the following initiatives in its SME business

segment during the year under review.

- The SME advances of Rs 34,512 crore as of end-Mar 2012 reflected a growth of Rs 7,147 crore (26.11%) over the SME advances of Rs 27,365 crore in the previous year.

- The advances of Rs15,455 crore to Micro Enterprises in total credit of Rs 28,047 crore to MSE sector stood at 55.10% in FY12 comfortably reaching the mandatory target fixed by the RBI.

- The SME advances as on 31st Mar, 2012 contributed 16.8% to the gross domestic advances of your Bank.

- The advances to Micro & Small enterprises reached the level of Rs 28,047 crore as against the government set mandatory target of Rs 27,000 crore by end-Mar, 2012.

- I n FY12, your Bank opened ten New SME Loan Factories and eight New SME Specialized Branches.

- Your Bank introduced a New Product named as "Baroda Channel Financing" on pilot basis during FY12 to further promote its MSME business.

- Your Bank also introduced "Baroda Entrepreneur Awards" for Micro & Small Enterprises

Initiatives in MSME Financing During FY12

1. Your Bank introduced five new customer-centric area- specific products to suit the local cluster needs during FY12 while renewing the existing ten customer-centric area specific products.

2. Your Bank sponsored a Workshop on "Management Skills to source financing and Management of Technology by SMEs" for entrepreneurs arranged by AIMA at Hyedrabad, Ahemedabad, Jaipur.

3. Your Bank introduced "Protrack"{an e-tracking system for SME credit proposals} with a view to have a firm control over turnaround time.

4. Your Bank celebrated SME Festival from 1st January

2012 to 31st March, 2012 in order to give boost to SME advances. Some concessions in rate of interest and service charges were also announced for loans sanctioned during the festival period.

5. Your Bank participated in the Workshops arranged by the CGTMSE on Bank Credit to Micro & Small Enterprises and the Role of Credit Guarantee.

6. Your Bank focused on collateral free credit under the CGTMSE scheme through special campaign.

7. To achieve total customer relationship through enhanced cross selling, several meetings at different locations were conducted and various trade bodies were involved at the national and the state level.

8. Your Bank undertook continuous knowledge updating and skill building of processing/ marketing officers attached to its SME factories through external training and special courses at the training centers and staff college.

9. Your Bank introduced monthly performance ranking to share performance of SME Loan Factories amongst all and to recognize/ felicitate/ award the best performing SME Loan Factory on Half yearly/ annual basis.

10. The MOU was entered by your Bank with the NSIC for sourcing applications of MSME borrowers from it.

11. Your Bank released a booklet called Practical Guide to help entrepreneurs by giving them information on Your Bank's SME products and also on the CGTMSE scheme.

12. Your Bank also signed a MOU with four credit rating agencies for rating of the SME accounts.

Rural and Agricultural Lending

As you all are aware, your Bank has always been a frontrunner in the area of Priority Sector and Agriculture lending. It has been harnessing the vast potential of the rural market through its wide network of 1,270 rural branches and 1,045 semi-urban branches.

Even during FY12, your Banks opened 314 new branches in rural and semi-urban areas.

Your Bank is the proud Convener of State Level Banker's Committee (SLBC)in the states of Uttar Pradesh and Rajasthan. Your Bank shoulders the Lead Bank Responsibility in 45 districts in the states of Gujarat (12),Rajasthan (12), Uttar Pradesh (15), Uttaranchal (2), Madhya Pradesh (2) and Bihar (2).

Your Bank has also sponsored five Regional Rural Banks (RRBs) in various states with a network of 1,300 branches and total business of Rs 21,700 crore as of end-March, 2012.

Performance of Priority Sector Lending in FY12

Priority Sector Advances of your Bank surged from Rs 57,364 crore as at the end-March 2011 to Rs 68,527 crore as at the end-March 2012 and formed 43.37% of the Adjusted Net Bank Credit (ANBC) against the mandated target of 40.00%.

Agriculture Advances: The Direct Agriculture advances of your Bank rose to Rs 21,423 crore with a rise of 24.86%over the previous year with an absolute growth of Rs 4,266 crore during the year. The total agriculture advances of your Bank recorded a growth of 18.38% over the previous year and rose to Rs 29,036 crore as at end-March 2012. Your Bank's Direct Agricultural advances formed 13.56% of ANBC as at end-March 2012 against the mandated target of 13.50%. Even the Total Agricultural Advances were at 18.06% of ANBC against the mandated target of 18.00%.

Under its flagship agriculture loan product "Baroda Kisan Credit Card", your Bank issued as many as 3,09,685 Credit Cards during FY12 to provide credit to farmers. Your Bank financed as many as 3,73,283 new farmers during FY12. As a part of its microfinance initiatives, your Bank credit linked 19,455 Self Help Groups with an amount of Rs 214 crore during FY12 thereby taking the total number of SHGs credit linked to 1,54,397 amounting to Rs1,171 crore.

Business and Social Initiatives

Your Bank introduced various initiatives/strategies during FY12 to harness the emerging opportunities for rural and agriculture lending. Some of them are mentioned below.

1. To augment the Agriculture advances, your Bank conducted special campaigns viz. Kharif and Rabi campaign for crop loans under which the disbursements of Rs 3,676 crore and Rs 2,013 crore were made respectively. Another Campaign for Investment Credit was also launched under which disbursements of Rs 1,178 crore were made.

2. Your Bank organized 5,944 Village Level Credit Camps and disbursed Rs 3,338 crore to 2,84,062 borrowers during FY12.

3. Your Bank identified 450 Thrust Branches across India to enhance Agriculture lending which constituted 33% of total Agriculture lending as at end-March 2012.

4. Your Bank formulated various area-specific schemes tailor made to the needs of local requirements, particularly where there is a concentration of industries like Rice Mills, Cold storages, cotton ginning units, Poultry units, etc. Suitable concessions in rate of interest, charges, etc. were allowed under these schemes to garner maximum possible business. As many as 22 area specific schemes were formulated to increase your Bank's agricultural lending.

Baroda Grameen Paramarsh Kendra (BGPK) is another initiative undertaken by your Bank to help the rural community by providing credit counseling, financial literacy and other services like information on the prices of agricultural produces, scientific farming, etc. Your Bank had 52 BGPKs as on 31st March, 2012.

About ten more Baroda Swarojgar Vikas Sansthan (BSVS),Baroda R-SETI Centers were opened during FY12. With this, the total number of BSVS has gone up to 46. Thus, each of your Bank's Lead Districts now has a R-SETI as per the GOI guidelines. Ajmer BSVS centre is exclusively for women entrepreneurs. The BSVS are primarily the institutes for training the youth and imparting knowledge and skills required for taking up self-employment ventures. During FY12, 42,786 youth beneficiaries were trained out of which 25,791 have established self-employment ventures. Out of the total 1,22,228 beneficiaries trained by these centers so far, 75,050 have established their self employment ventures.

Financial Literacy and Credit Counseling Centres (FLCC)-"SARATHEE"

Based on the guidelines issued by the RBI, your Bank has established 39 FLCCs, christened as "SARATHEE" to impart financial literacy and credit counseling services to the needy to help them avail financial services from Banking system and also to provide counseling services to those who are under financial distress due to debt burden.

Your Bank has opened these centers under its BSVS trust and counseling services are provided to the concerned free of cost.

Your Bank has opened 21 new FLCCs during FY 12, taking the total number of FLCCs to 39 by end-Mar, 2012.Your Bank will be opening FLCCs in each of its lead district in due course.

Business Facilitators Model

This model has been implemented across the country to accelerate Financial Inclusion of the excluded segment as well as to augment agriculture portfolio. Business Facilitators will mainly canvass loan applications for your Bank for which Bank will pay them compensation. Individuals including retired Bank and Government staff, NGOs, Farmers clubs and SHGs are engaged as agents to greatly improve your Bank's outreach in the rural/semi-urban areas.

Micro Loan Factory

Your Bank has a opened Micro Loan Factoryat Rae Bareilly and Sultanpur in U.P. The Micro Finance Loan Factory has a mobile van with facilities and all related stationeries/ documents on SHG financing. It is manned by officers who are duly authorised to sanction and disburse loans upto Rs 25,000 to SHGs on the spot and at their door steps.

Performance of RRBs Sponsored by the Bank

Your Bank has sponsored five RRBs as under.

- Baroda Uttar Pradesh Gramin Bank,

Head Office: Raebareli.

- Baroda Rajasthan Gramin Bank,

Head Office: Ajmer.

- Baroda Gujarat Gramin Bank,

Head Office: Bharuch.

- Nainital-Almora Kshetriya Gramin Bank,

Head Office: Haldwani.

- Jhabua-Dhar Kshetriya Gramin Bank,

Head Office: Jhabua.

The aggregate business of these five RRBs rose to Rs 21,693 crore as of March, 2012 from Rs 18,803 crore as at end-March, 2011, registering a growth of 15.37%.

The five RRBs together posted a Net Profit of Rs 120 crore during FY12 as against Rs 117 crore earned during FY11.

The "Net Worth" and the "Reserves and Surplus" of all these RRBs put together improved from Rs 730 crore at end-March, 2011 to Rs 883 crore at end-March, 2012 and from Rs 453 crore at end-March, 2011 to Rs 566 crore at end-March, 2012, respectively.

Bank's Efforts towards Financial Inclusion (FI) Targeted villages and models adopted

- As per the original communication received from RBI in January 2010, your Bank prepared a Financial Inclusion (FI) plan to cover 20,000 villages under Financial Inclusion within a span of three years commencing from 2010-11 to 2013-14.

- However, the Finance Minister in his speech on Union Budget for FY11 gave emphasis on the coverage of villages having population of more than 2,000 under FI by March 2012.

- Accordingly, 2,864 villages having population of more than 2,000 were allocated to your Bank through SLBCs for provision of basic banking services by March 2012.

- Out of the above, 1,200 villages were targeted to be covered in FY11 and the rest in FY12.

- Your Bank has adopted ICT based Business Correspondent (BC) model and Mobile Banking van model for coverage of the allotted villages. Wherever feasible, new branches are also being opened.

Service Providers

- Your Bank has selected M/s TCS and M/s HCL Info systems as the service providers for end to end solution under the BC model. The service area has been allocated to these service providers.

- Out of 2,864 villages allocated to your Bank by SLBCs, 1,979 villages are allotted to M/s tcs and 885 villages to M/s HCL.

Technology and Data Security

- The FI data and transactions are integrated to your Bank's CBS (Core Banking Solution) through an FI server/ Gateway of the service provider. The FI server is kept in the Data Centre of your Bank for which the vendor will have only limited access to the application software for the purpose of maintenance. The data will be under the control of your Bank. Hence the data security is well taken care of.

- Smart cards are issued to the customers after uploading the accounts in CBS and KYC verification by the link branches.

Business Correspondents (BC)

- The service provider has appointed corporate BCs at the state/zonal level. The field level business agents are selected in consultation with your Bank's link branches following the BC selection policy approved by the Board.

- The technical training to BCs is provided by the service provider as and when BCs are appointed. Your Bank's R-SETI, Training Centres and Baroda Grameen Paramarsh Kendras (BGPK) have been providing training on banking products and customer service. The BCs are also encouraged to take up the BC certificate programme of IIBF {Indian Institute of Banking & Finance, Mumbai} through accredited training establishments. All your Bank's BSVS centres are accredited by IIBF for this purpose.

Training of Your Bank Staff in Financial Inclusion

- Training to about 1,079 Branch Managers involved in FI activity was completed by Your Bank's training centres during FY12.

- Your Bank has tied-up with National Institute of Rural Development (NIRD), Hyderbad for designing and conducting special training programme for its officers on FI.

- Your Bank has also introduced e-learning module on FI on your Bank's intranet portal for educating the staff.

Monitoring the Implementation under Financial Inclusion

- Your Bank has a clear structure for implementation and monitoring of Financial Inclusion.

- In order to have an effective supervision of the BCs, retired bank officials are appointed as BC supervisors for every 10-15 BC agents.

- Your Bank's Chairman & Managing Director (CMD), Executive Directors (EDs) and General Managers (GMs) at the Corporate Office are visiting villages in different states.

- Besides, all the regional heads and zonal heads are also visiting the villages in their respective regions/ zones and monitoring the activities regularly.

- Your Bank's Board reviews the implementation of Financial Inclusion in your Bank every month on various parameters suggested by the Ministry of Finance, Government of India.

Publicity

- Specially designed banners/posters/leaflets are being used by your Bank's Zones/Regions/Branches at various stages of FI.

- Leaflets/posters have been prepared in regional languages and distributed in the villages.

- Usage of publicity material has helped to keep the people updated with the FI concept and also to remain informed about the FI enrolment dates, venue etc.

- Your Bank's Swabhiman logo is being used in village sign boards, BC ID cards, T- shirts, Caps etc.

Financial Literacy Efforts

- Your Bank has opened 39 Financial Literacy and counseling Centres (FLCC) out of 45 lead districts of the Bank.

- Your Bank has also established 46 R-SETIs (Baroda Swarojgar Vikas Sansthan) of which 42 are in its lead districts which will also facilitate financial literacy efforts.

- Village level meetings are organized by your Bank in all the identified villages to create awareness on the banking products and services.

- Camps are also organized in the villages at the time of enrolment.

Mobile Banking Vans

- Your Bank has introduced Mobile Banking vans for increasing the pace of Financial Inclusion.

- These vans will have connectivity to CBS through CDMA technology and they visit the villages on specified dates and time. The services are provided by your Bank's own staff travelling in the van.

- Five such Vans have been made operational and they cover around 41 villages. (One in Gujarat, two in UP,one in Bihar and one in Goa.)

Performance

- Your Bank has completed coverage of 100% villages allotted under financial inclusion well before the dead line of end- Mar, 2012. More than 7.61 lakh FI accounts have been opened in these villages as against the target of 7.10 lakh.

Ultra Small Branches (USBs)

The technology based BC model is an evolving concept and various issues were encountered by your Bank in implementation of FI through this model. The Ministry of Finance, Government of India as well as the RBI were issuing various guidelines from time to time to make implementation of financial inclusion more effective. In the strategy and guidelines on financial inclusion issued by Ministry of Finance in Oct, 2011,there was a suggestion to open brick and mortar branches in larger habitations with population of 5,000 and above in the under-banked districts. However, keeping the viability of brick and mortar branches in such villages, they further issued guidelines on opening of thin structures called Ultra Small Branches in all the villages allotted for financial inclusion.

USB Model Adopted by the Bank

- A BC is appointed in a village and provided with POS machine/ hand held terminal to provide banking services in the village through USB.

- The place for USB is identified preferably in Gram Panchayat or Common Service Centre in village.

- The board is displayed inside each USB indicating various banking services being provided by your Bank at USB. There is also a board giving details of BC, his contact number, name/contact number of link branch, fixed day/ time of visit by officer etc. for the convenience of villagers.

- The business correspondent is providing services like cash deposits, payments up to certain limit, remittances, account balance enquiry, mini-statement etc.

- A bank officer from the link branch visits the USB once in week at pre-fixed time and day for financial inclusion activities in village, as specified by the Ministry of Finance.

- Minimum furniture such as table, three to four chairs etc. have been provided in an ultra small branch.

Initiatives Taken for Effectiveness of USBs

- The village level publicity campaign has been conducted to create awareness amongst the villagers, with the help of Gram Panchayats as well as in some cases block development offices.

- The signboard along with swabhimaan logo is displayed at a prominent place in the village indicating details of the BC and link branch along with working hours.

- The BCs are provided with a brief profile of the villages including population of village, number of households in village, number of KCCs/ GCCs issued in respective village and other details, so that they can perform with better focus on village needs.

- All USBs are mapped for weekly visits by the officers of respective link branch. We have also devised a proper reporting system for monitoring these visits by the respective regional offices and corporate office.

- All the BCs are provided with the uniform T-Shirts, Caps and Identity cards in all the villages.

- The uniform posters about the services available at USBs are provided to all the zones and regions in local languages for displaying at the USBs.

- In order to overcome shortages and cater to the requirement of manpower in officer cadre, we are starting capacity building programmes to train other cadres to perform the job role of officers in the same spirit as desired by the MOF from visiting officer. The preference would be given to local staff as far as possible so that they can converse in the local language and get appropriately connected with villagers. This will also facilitate a confidence building amongst the villagers about the FI initiatives of your Bank/ Govt. of India. The pilot project of such capacity building initiative would be started in Gujarat and rolled out in other states upon success of said pilot project.

Advances to SC/ST Communities during FY12

The outstanding advances granted by your Bank to SC/ST communities have been growing year after year. This is evident from the fact that the outstanding advances granted to these beneficiaries went up from Rs 3,760 crore as at end-March, 2011 to Rs 4,336.02 crore as at end-March, 2012. In fact, the SC/ST communities accounted for a share of 27.0% in the total advances granted to weaker sections by the Bank during the year under review. Furthermore, a special thrust is laid by your Bank in financing SC/ST under various government sponsored schemes namely Swaranjayanti Gram Swarojgar Yojana (SGSY),Swarna Jayanti Shahari Rojgar Yojana (SJSRY), Prime Minister Employment Generation Programme (PMEGP), etc. Baroda Swarojgar Vikas Sansthans (BSVS) have been giving due preference to SC/ST communities while selecting the trainees. It is heartening to indicate that so far, these centres have trained 55,761 youths under the SC/ST category.

International Business

The global economy has not fully come out of the turmoil witnessed following the global financial crisis in 2008 in spite of the prompt measures taken by several countries around the world. Even in such challenging scenario, the International Operations of your Bank could achieve excellent results during FY12 and again proved the Bank's resilience to global shocks.

In order to achieve the stated goals, it was necessary to continuously understand the economic and banking environment in which your Bank operates, take lessons and make suitable changes in the business approach and actions. Your Bank kept a continuous watch on the trends emerging in the economic/financial sectors of the countries of its operation by factoring in the impact of global events.

Your Bank is in an advantageous position having large network of overseas branches and strong customer base built over the years. Your Bank has taken various technological and other initiatives at its overseas centres to garner a larger share of the business.

The excellent performance was possible during FY12 due to the Bank's focused attention and persistent efforts to stretch and improve upon its own capabilities and the support that it received from all its stakeholders.

The International Operations of your Bank are keeping pace with the fast changing environment to become increasingly more competitive in global terms and aiming for higher growth with profitability

The Branch Expansion plan was continued during the year to take advantage of the business opportunities. During the year FY12, five new branches/offices were opened, including four branches of the subsidiaries. Your Bank primarily concentrated on expanding the network in countries where it is already present to tap the opportunities offered by the upcoming centres and enhance the market share in the country of operation.

Business and Profit Performance

During FY12, the total business (Deposits Advances) of your Bank's overseas branches registered a growth of 44.64%. The Customer Deposits increased by 40.41%, Total Deposits by 45.23 % and Advances by 43.92%. The growth numbers look slightly aggressive because of the depreciation of rupee to the tune of 14.11% between end-March, 2011 and end-March, 2012.

During FY12, the International Operations contributed a sizeable 28.27% to the Bank's global business in line with its business aspirations.

Total Assets

Total Assets of your Bank's International Operations increased from Rs 91,273 crore as of March 2011 to Rs 1,28,398 crore as on March 2012 registering a growth of 40.67% during the year.

Profit

The Gross Profit for the year FY12 registered a healthy growth of 48.51% over the level of previous year. The Net Profit too recorded commensurate growth of 45.19% during the year. Your Bank was able to improve the spreads and also show good increase in Other Income.

Contribution of international operations to your Bank's global Net Profit is 23.35%.

Asset Quality

In the current scenario of economic downturn and uncertainties, there was a stringent monitoring of assets by the Bank's Top Management to safeguard your Bank's interest. Your Bank has put in place an efficient loan processing, credit audit and credit monitoring mechanism.

Borrowal accounts experiencing liquidity mismatch/crunch due to recessionary trends prevailing in the global economy/delay in projects for reasons beyond their control were restructured during the year FY12 based on their future cash flows and keeping the RBI guidelines in the matter in focus. These accounts as well as the accounts restructured in previous years were monitored regularly to maintain the asset quality and avoid any slip back.

Gross Advances during the year increased by 43.73% over the level of Mar'11, which means your Bank could maintain the healthy growth trend even during the challenging times. There were a few slippages and the Gross NPAs of your Bank as percentage to Total Advances marginally increased from 0.62% as of Mar'11 to 0.68% as on Mar'12.

International Presence

Your Bank's international presence covered 24 countries through its 89 offices during FY12 as under.

Bank's Overseas Branches/Offices 55

Bank's Representative Offices 2

Branches of Bank's Overseas Subsidiaries 32

Total 8

In addition to the above, your Bank's associate in Zambia has 14 branches.

Overseas Expansion

During the year FY12,your Bank opened five new branches/ offices (including that of the subsidiaries). An Electronic Banking Service Unit (EBSU) was opened at Hamriya Free Zone, Sharjah (UAE) and four branches of the subsidiaries were opened at Ovino Market (Uganda), Kakamega (Kenya), Nyali (Kenya) and Mon Repos (Guyana). The Representative Office in Malaysia was closed during the year as the Joint Venture Bank, namely, 'India International Bank (Malaysia) Bhd.' is expected to commence operations during the year FY13.

Future Plans in Overseas Business

Your Bank has initiated steps for further expanding its overseas network to tap the opportunities for canvassing business and enhancing the profitability. Necessary infrastructure is being created for further expanding the network in UAE, Oman, Mauritius, Uganda, New Zealand, Tanzania, Botswana and Ghana.

Your Bank has received 'In Principle' approval for up gradation of its Representative Office in Australia to a branch. An approval of RBI is awaited for opening of two additional branches in U.K. New centres are being identified in countries where your Bank is already present and also in new territories for further expanding the branch network.

Syndication Centre

Your Bank has Global Syndication Centres at London and Dubai which focus on the business of Syndication Loans in International Market. The Offshore Banking Unit in Singapore has been further strengthened to play a more active role in canvassing the business. The International Merchant Banking Cell (IMBC) set up at the Bank's Corporate Office, Mumbai plays a supportive role to the Regional Syndication Centres and also canvasses substantial business as there was increased demand from Indian Corporates for Foreign Currency resources.

The Bank's IMBC also actively participates in loan origination.

Products and Services

Your Bank has taken several steps to leverage the technology for introduction of products and services to meet the requirements of customers in the area of operation.

Your Bank's products and services are compatible with those offered by multi-national banks and local banks. These are being popularized through marketing campaigns in electronic and print media.

Technology

- The number of ATMs at overseas territories and subsidiaries increased to 76 (45 onsite and 31 offsite) as on 31st March, 2012 from 68 (42 onsite and 26 offsite) as on 31st March, 2011.

- The Global Treasury Solution is implemented by your Bank at UK, UAE, Bahamas, Bahrain, Hong Kong, Singapore and Belgium.

- The Centralized SWIFT activity is operating from the Data Centre of your Bank.

- All Territories/Subsidiaries except UK and USA are routing their Swift operations through SWIFT Cell, Data Centre.

- The Payment Messaging System implemented is a middleware between Core Banking Solution (Finacle) and SWIFT, which help in "Straight Through Processing of Incoming and Outgoing SWIFT Messages" with Anti Money Laundering check. It is implemented in all Territories/ Subsidiaries, except in UK and USA.

- The Anti Money laundering Erase (Batch mode) is implemented in all the overseas centres of your Bank except in Belgium and USA.

- An "Anti Money Laundering Online List Matching Solution" is also implemented in all the overseas centres with the exception of USA.

E-Banking in Overseas Operations

Your Bank is gradually implementing and popularizing the e-banking services at its overseas centres.

Transaction based e-banking has been implemented in UAE, UK, Mauritius, Fiji, Seychelles, Uganda, Kenya, Botswana and New Zealand. It is in the process of being implemented in Oman and Tanzania. (At present, a view based e-banking is available at both these centres).

In T&T, Guyana and South Africa, it will be introduced in the next phase which will start shortly.

The transaction based e-banking is being implemented gradually at the Overseas Centres looking to their retail base and the cost effectiveness.

Risk Management in Overseas Operations

Your Bank implemented Basel II guidelines at all its overseas territories with effect from 31st March 2008 and has already adopted Standardised Approach for Credit Risk, Standardised Duration Method for Market Risk and Basic Indicator Approach for Operational Risk.

The Risk Management Systems and their implementation are being continuously strengthened. A separate Risk Management Department has been set up at all centres to effectively deal with the credit, market and operational risk. Risk Managers are posted at all the overseas territories and subsidiaries of your Bank.

During the year under review, BOB RAM Model was implemented at all the overseas centres for capturing vital information related to advances accounts and their pricing.

An ASCROM Model for Asset Classification and Credit Monitoring is also in the advanced stage for implementation at your Bank's overseas centres.

Regulatory Compliance

Your Bank is well known for its regulatory compliance and has always followed home country regulations rigorously.

Your Bank has a dedicated compliance team at major overseas centres for ensuring regulatory compliance across all the businesses and operations. They are responsible for identification and assessment and compliance related matters from a regulatory compliance perspective and monitoring and reporting.

All the overseas centres have prudential policies in place as per the local regulatory requirements. The territories/subsidiaries ensure that these are periodically reviewed in line with the type of business undertaken, changing scenario and taking into account modifications if any in the regulatory guidelines.

Treasury Operations

Your Bank operates a State of the Art Dealing Room at Baroda Sun Tower at its Corporate Office in Mumbai. Through this dealing room your Bank is well positioned to scale up its Treasury Operations. The Treasury handles your Bank's domestic treasury operations and covers activities in various markets i.e. Foreign Exchange, Interest Rates, Fixed Income, Derivatives, Equity and other alternative asset classes. The advanced technology platforms are used by your Bank to offer a basket of financial products to its clients including Interest rate swaps, currency swaps, forwards and options.

Your Bank has also put in place a sophisticated Automated Dealing system to offer auto generated real time foreign exchange rates to the clients of its authorised branches spread across the country. As a customer friendly initiative, during the year FY12, enhancements were made in the "Global Treasury Solution" facilitating instant flow of information about credits received by your Bank in favour of its customers through its foreign correspondents.

Under the Business Process Re-engineering, your Bank has successfully implemented Global Treasury solution across major financial centres. The Global Treasury Platform is running smoothly in Mumbai, London, Bahamas, Brussels, Dubai, Bahrain, Singapore, Hongkong and New York.

During the year FY12, managing growth and price stability emerged as the key challenges against the backdrop of a slowing economy weighed down by the impact of tight monetary policy and slower economic growth. The advance estimates of Indian economy suggest a growth of approximately 6.9% in FY12, after having grown at the rate of 8.4% in each of the two preceding years. This indicates a slowdown compared not just to the previous two years but 2003 to 2011 (except FY09 a year of global financial crisis). During FY12, the RBI hiked interest rates by 125 bps taking repo rate to 8.50% before signaling a pause in Dec, 2011. To infuse liquidity into the system, the RBI reduced CRR [Cash Reserve Ratio] by a cumulative 125 bps in the last quarter of FY12 and conducted open market operations to the extent of Rs 1,29,252 crore.

Your Bank's Treasury offers customized solutions using available products viz IRS, CIRS, Forwards and Options to meet the Interest rate and Foreign Exchange risk mitigation requirements of the corporate clients. During FY12, your Bank's Treasury Division was active in taking benefit of the arbitrage opportunities available between various Treasury market asset classes including Money Market CBLO, Call, Market Repo, Government Securities and Forex markets. The Treasury actively utilised the market movements and used Overnight Indexed swaps, INBMK swaps for harnessing available hedging and trading opportunities.

Tight monetary policy coupled with a higher than announced borrowing program resulted in the benchmark 10 year Government security touching a high level of 9.0% in Nov, 2011. Against this backdrop, the Treasury focused on maintaining appropriate duration of portfolio, keeping minimal adverse impact on valuation and maintaining a good average yield on investment portfolio. The average yield on Domestic SLR investments was 7.87%. During FY12, the Treasury earned Rs 6,032 crore as Interest/Discount earnings, while the Profit on Sale of Investment and Exchange Earnings were Rs 622 and 412 crore, respectively.

The Indian Equity markets were subdued for most part of FY12. This was due to the cumulative impact of weaker recovery of the US economy, European sovereign debt crisis and muted FII inflows into the emerging markets including India. The FII inflows picked up during the last quarter resulting in the market moving to higher levels. The Equity Desk of the Treasury actively churned its portfolio and booked profits at regular intervals whenever an opportunity emerged in the markets.

The unfolding of the euro zone crisis and uncertainty surrounding the global economy have impacted the Indian economy causing drop in growth, higher current account deficit (CAD) and declining capital inflows. As in 2008, the transmission of the crisis has been mainly through the Balance- of-payments (BoP) channel. Export growth too decelerated in the third quarter of FY12, while imports remained high, primarily because of very high international oil prices. At the same time, foreign institutional investment flows declined, straining the capital account and the rupee exchange rate that touched an all-time low of Rs 54.23 per US dollar on 15 December 2011 during intra-day trading

The Foreign exchange desk of the Treasury retained its position as one of the premier market players in the Forex desks of the Public Sector Banks. The Proprietary trading desk was active in cashing in of available arbitrages, using volatility in the markets and mobilised resources in a tight liquidity position impacting the Indian markets. The turnover of the Foreign Exchange deskof your Bank's Treasury increased by nearly 14.0% on y-o-y basis during FY12.

Your Bank's Treasury Mid-Office monitors market exposures and limits fixed by the Board of Directors, on a real time basis. The Risk Management parameters, including Value-at-risk (VaR) are used to measure Market Risk on all portfolios. These measures are backed up by the Back Testing on risk numbers and Stress Testing of various investment and currency portfolios.

Corporate Social Responsibility (CSR)

As a responsible corporate citizen, it has been the vision of your Bank to empower the community through socio-economic development of underprivileged and weaker sections. In its continued efforts to make a difference to the society at large, your Bank intensified its efforts further in this direction in FY12.

Your Bank has established Baroda Swarozgar Vikas Sansthan (Baroda R-SETI) for imparting training to unemployed youth, free of cost for gainful self employment and entrepreneurship skill development which help them improve their family economic status and also gives a boost to various regional economies within these locations. All the Lead Districts of your Bank have R-SETI each. About 46 such Sansthans have been established by your Bank in which more than 1,22,000 youth have been trained and around 75,000 have been gainfully self employed.

Your Bank has established 52 Baroda Gramin Paramarsh Kendra for knowledge sharing, problem solving and credit counseling for rural masses across the country. In order to spread awareness among the rural mass on various financial and banking services and to speed up the process of financial inclusion, your Bank has also established 21 Financial Literacy and Credit counseling Centres (FLCC)during FY12 making the total number of FLCCs to 39.

Asset Quality Management

The year FY12 has been a challenging year for the banking industry to maintain the Asset Quality due to a fragile economic environment. However, your Bank has continued its practice of rigorous monitoring and recovery of the NPA portfolio besides preventive mechanism for restricting slippages at the minimum level. Your Bank has continued its leadership position in the NPA management area in the Indian banking sector.

Indian banks, in general, witnessed heavy incidence of slippages in FY12 due to volatile financial markets both within and outside India, higher inflation and higher interest rate regime throughout the year FY12. In spite of various depressed economic parameters impacting the Bank, fresh slippages, during the year,were kept under control at 1.44% of the opening Standard Advances of your Bank. Against the backdrop of high slippages, the ratio of Gross NPA to Gross Advances was at 1.53% as on 31st Mar, 2012.Consequently, the ratio of Net NPA to Net Advances marginally increased to 0.54% by end-Mar, 2012.

Your Bank continued to maintain the Loan Loss Provisioning ratio at higher level than the mandated norms set by the RBI during FY11. Its Loan Loss Provisioning ratio was higher at 80.05% as on 31st Mar, 2012 after taking into account the Prudential/ Technically Written-off advances.

During the year under review, your Bank laid down a comprehensive structure of recovery and credit monitoring function at the Branch, Region, Zone and Corporate levels. Besides this, the Nodal officers at each DRT centre were assigned the role of a follow-up of legal cases on day to day basis so as to minimize the delay in obtaining decrees and execution thereof in order to expedite and maximize recoveries. Additionally, Lok Adalats, Recovery Camps and Village Chaupal Meets were regularly conducted by your Bank's branches to reduce long pending cases and expedite recoveries in small accounts.

Your Bank continued its emphasis on follow-up mechanism to explore recovery prospects of NPA accounts. The system of monitoring of large value NPA accounts of say Rs 25 lakh and above directly from the corporate office has ensured proactive action by branches, advocates, recovery agents, etc. Therefore, the cash recovery in NPA accounts during FY12 was Rs 580 crore, much higher than the cash recovery of Rs 455 crore during FY11. The upgradation was substantially higher at Rs 336 crore during FY12 compared to Rs 189 crore during FY11.

During the year FY12, your Bank laid specific focus on recovery of small accounts by organizing Lok Adalats and Recovery Camps at village/town level. Your Bank also launched an incentive- linked recovery scheme called "Sankalp - IV" to enlist personalized attention of each and every staff member in pursuing recovery efforts of small value accounts with an outstanding up to Rs 15 lakh. The cash recovery made during the year FY12 under the scheme was very impressive at Rs 191 crore.

The asset classification wise breakup of advances portfolio of your Bank is as under.

(crore)

Asset Category (Gross) 31st March 2012 31st March 2011

Standard 2,86,542.59 2,28,173.03

Gross NPA 4,464.75 3,152.50

Total 2,91,007.34 2,31,325.53

Gross NPA is comprising of:

Sub-standard 2,661.82 1,097.23

Doubtful 1,318.71 1,336.64

Loss 484.22 718.63

Total Gross NPA 4,464.75 3,152.50

Information Technology

Your Bank has undertaken a total end-to-end business and IT strategy project covering your Bank's domestic, overseas and subsidiary operations.

- Your Bank has built the best of technology infrastructure by implementing a state-of-the-art Data Centre conforming to Uptime Institute Tier-3 standard and also a Disaster Recovery Site in different seismic zone with redundancy built in every single point of failure to ensure uninterrupted banking service delivery to customers. After successfully migrating Data Centre to new Data Centre in the Bank's own premises during previous financial year, your Bank had undertaken Disaster Recovery Centre expansion during the year to support its business growth and technology expansion.

- Your Bank has also undertaken various other technology initiatives like windows server virtualization, desktop virtualisation and backup consolidation as green initiatives and also to improve Data Centre operational efficiency. Bank wide network was migrated to new technology based on MPLS for improving uptime and on demand upgrade. Enterprise Management System was upgraded and new modules deployed to effectively manage and monitor Bank's growing IT infrastructure.

- The Core Banking System was migrated to higher version with enhanced features. Various new modules like Fixed Assets maintenance, sales tracker module, centralized service tax, EBRC (Bank Realisation Certificate) module, account number portability, workflow automation for New Pension Scheme - Swavalamban were implemented during the year.

- I n order to enhance security and confidence in Internet Banking, your Bank introduced enhanced security features by deploying Fraud Management Solution, including two factor authentications. Your Bank continued to add more facilities under its Internet Banking channels. Internet Banking, viz., Baroda Connect, now provides speedy and secured facility to transfer funds to self, third party (within BOB) and inter-bank. Other facilities available are online opening of Fixed Deposits, Railways Freight Payment, online payment of Direct and Indirect Taxes and certain State Government Taxes, utility bills, rail tickets, online shopping, donation to temples and institutional fee payment. Corporates also have the facility of direct salary uploads, trade finance. Various State Tax payments have been enabled during the year. The SMS Alerts, RTGS/ NEFT transactions are also provided in internet banking portal. ASBA (Application Supported by Blocked Amount) functionality has been provided in Baroda Connect for Online subscription to Initial Public Offers and Follow-on Public Offers for applying for Equity Shares. Transaction based Internet Banking has also been implemented in Uganda, Botswana, New Zealand, UAE, Kenya, Mauritius, Seychelles, Fiji and UK providing facilities such as fund transfer to self and third party, bill payments, corporate salary upload and online shopping. View based internet banking has been implemented overseas in Oman and Tanzania.

- Mobile Banking - BARODA M-CONNECT - one more alternate delivery channel was added to provide various facilities to customers, viz., Balance Enquiry, Mini Statement, Linking of Multiple Accounts, Fund Transfer, Request to the Bank, Bill Payments, Ticket Booking, Shopping, Feedback/ Complaints etc. The IMPS was also enabled through Mobile Banking for interbank fund transfer.

- The AT

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Mar 31, 2011

The Directors have pleasure in presenting the One Hundred and Third Annual Report of the Bank with the audited Balance Sheet, Profit & Loss Account and the Report on Business and Operations for the year ended March 31, 2011 (FY11).

Performance Highlights

- Total Business (Deposit+Advances) increased to Rs 5,34,116 crore reflecting a growth of 28.30%.

- Gross Profit and Net Profit were Rs 6,981.61 crore and Rs 4,241.68 crore respectively. Net Profit registered a growth of 38.7% over previous year.

- Credit-Deposit Ratio stood at 86.77% as against 84.47% last year.

- Retail Credit posted a growth of 33.8% constituting 18.88% of the Banks Gross Domestic Credit in 2010-11.

- Net Interest Margin (NIM) as per cent of interest earning assets in global operations was at the level of 3.12% and in domestic operations at 3.72%.

- Net NPAs to Net Advances stood at 0.35% this year against 0.34% last year.

- Capital Adequacy Ratio (CAR) as per Basel I stood at 13.02% and as per Basel II at 14.52%.

- Net Worth improved to Rs 19,750.63 crore registering a rise of 43.27%.

- Book Value improved from Rs 378.44 to Rs 504.43 on year.

- Business per Employee moved up from Rs 981 lakh to Rs 1,229 lakh on year.

Segment-Wise Performance

The Segment Results for the year 2010-11 reveal that the contribution of Treasury Operations was Rs 882.51 crore, that of Corporate/Wholesale Banking was Rs 1,525.49 crore, that of Retail Banking was Rs 1,517.89 crore, and of Other Banking Operations was Rs 2750.61 crore. The Bank earned a Profit

after Tax (PAT) of Rs 4,241.68 crore after deducting Rs 1,026.18 crore of unallocated expenditure and Rs 1,408.64 crore towards provision for tax.

Dividend

The Banks Directors have proposed a dividend of Rs 16.50 per share (on the face value of Rs 10/-per share) for the year ended March 31st, 2011. The total outgo in the form of dividend, including taxes, will be Rs 753.35 crore.

Capital Adequacy Ratio (CAR)

The Banks Capital Adequacy Ratio (CAR) is comfortable at 14.52% under Basel II as on 31st March 2011. During the year, the Bank strengthened its capital-base by raising Rs 1,500 crore through unsecured subordinated bonds and Rs 711.50 crore through innovative perpetual bonds.

The Banks Net Worth as at 31st March 2011 was Rs 19,750 crore comprising paid-up equity capital of Rs 392.81 crore and reserves (excluding revaluation reserves) of Rs 19,357.82 crore. An amount of Rs 3,488.33 crore was transferred to reserves from the profits earned.

Provisions towards Retirement and Other Benefits

During the year 2010-11, the Bank has made provision towards contribution to gratuity (Rs 382.90 crore), pension funds (Rs 788.55 crore), leave encashment (Rs.-21.20 crore) and additional retirement benefits (Rs 10.17 crore) on actuarial basis. Total provisions under these four categories amounted to Rs 1,160.42 crore during the year 2010-11, against Rs 402.71 crore during 2009-10. Total corpus available with the Bank at the end of March 2011 under these heads was: Rs 1,289.75 crore (gratuity), Rs 5,177.08 crore (pension funds), Rs 506.31 crore (leave encashment), and Rs 396.13 crore (additional retirement benefits).

Key Financial Ratios

Particulars 2010-11 2009-10

Return on Average Assets (ROAA) (%) 1.33 1.21

Average Interest Bearing Liabilities (Rs crore) 2,80,098.94 2,15,886.21

Average Cost of Funds (%) 4.67 4.98

Average Interest Earning Assets (Rs crore) 2,82,109.79 2,16,735.54

Average Yield (%) 7.76 7.70

Net Interest Margin (%) 3.12 2.74

Cost-Income Ratio (%) 39.87 43.57

Book Value per Share (Rs) 504.43 378.44

EPS (Rs) 116.37 83.96



Operations and Services

Customer-Centric Initiatives

As always, efficient customer service and customer satisfaction are the primary objectives of the Bank in its day to day operations. The Bank is highly responsive to the needs and satisfaction of its customers, and is committed to the belief that all technology, processes, products and skills of its people must be leveraged for delivering superior banking experience to its customers without fail.

Recently, the Bank has taken several measures to improve customer service at the branches and at the same time, strengthened the customer complaint redressal machinery for fast disposal of customer complaints.

Efforts to Improve Customer Service at Branches

The feedback on quality of customer service at branches is obtained through the Branch Level Customer Service Committee meetings that are held every month in which customers from various cross sections of the society are invited including Senior Citizens and Pensioners. The suggestions/views generated during the meetings are collated and appropriate follow up action is taken to examine the feasibility to implement the suggestions for improving the quality of customer service rendered at the branches.

The Bank is focused towards providing excellent customer service through all delivery channels and has been making continuous efforts for enhancing the level of customers satisfaction by leveraging technology to provide e-products and alternative delivery channels best suited to the diverse needs of different customers. The varied interests and expectations of customers are taken care of by improving upon the various processes and procedures.

Compliance

The Bank is a member of the Banking Codes and Standards Board of India (BCSBI) and has adopted the Code of Commitment to the Customers revised by the BCSBI in August 2009 and also, Code of Banks Commitment to MICRO and Small Enterprises. The Code has been placed on the Banks website and also made available to customers at the branches.

While announcing the Annual Monetary and Credit Policy for the year 2010-11, the Governor, Reserve Bank of India, had proposed that Banks should devote exclusive time in their Board Meetings once in every six months to review and deliberate on issues concerning Customer Service/Customer Care. To comply with this, two such six-monthly reviews were undertaken by the Banks Board for the sub-periods January-June 2010 and July-December 2010 during the Board Meetings dated 20th November 2010 and 26th March 2011, respectively.

Customer Service Committee of the Board

The Bank has a Sub-Committee of Board for Customer Service which is headed by the Banks Chairman and Managing Director with the following members as on 31st March 2011.

1. Shri M. D. Mallya - Chairman and Managing Director

2. Shri Rajiv Kumar Bakshi - Executive Director

3. Shri N. S. Srinath - Executive Director

4. Dr Masarrat Shahid - Director

5. Shri Maulin Vaishnav - Director

This Sub-Committee addresses the issues relating to the formulation of policies and assessment of its compliances which brings about consistent improvement in the quality of customer service. It also monitors the status of the number of deceased claims pending for settlement beyond 15 days pertaining to Depositors/Locker Hirers/Depositors of safe custody articles, and reviews the status of implementation of Awards passed by Banking Ombudsman. The Committee also addresses issues relating to systemic deficiencies existing in the Bank, if any brought out by such Awards. The details of the attendance of the meetings of “Customer Service Committee of the Board” held on 21st June 2010, 4th September 2010, 27th December 2010 and 26th March 2011 during financial year 2010-11 are as follows.



Meetings Name of the held Director Period period Meetings of their attended tenure

Shri M. D. Mallya 01-04-2010 4 4 to 31-03-2011

Shri Rajiv Kumar Bakshi 01-04-2010 4 4 to 31-03-2011

Shri N.S. Srinath 01-04-2010 4 4 to 131-03-2011

Dr Masarrat Shahid 01-04-2010 4 4 to 31-03-2011

Shri Maulin Vaishnav 03-09-2010 2 2 to 31-03-2011

Shri A. Somasundaram 01-04-2010 1 1 to 30-07-2010



Standing Committee on Customer Service

The Bank has also set up a Standing Committee on Procedures and Performance Audit on Customer Services, comprising of three eminent public personalities as members along with both the Executive Directors and four General Managers of the Bank. This Committee oversees timely and effective compliance of the RBI instructions on Customer Service and also reviews the practices and procedures prevalent in the Bank and takes necessary corrective steps on an on-going basis.

The suggestions emanating in the Branch Level Customer Service Committee meetings are obtained by the Head Office on quarterly basis from Regional Offices and placed before the Standing Committee on Procedure and Performance Audit on Customer Services. The feedback of the Committee meetings is then put up to the Customer Service Committee of the Board of Directors.

Customer-Centric Initiatives and Redressal of Complaints

- The Bank has put in place a Customer Grievance Redressal Policy, approved by the Board, and a well structured Customer Grievance Redressal Mechanism. The General Manager in charge of the Operations and Services” is designated as Nodal Officer for customer complaints regarding the Bank. At Zonal and Regional levels, Zonal Heads and Regional Heads are designated as Nodal Officers for their respective Zones and Regions. The names of all Nodal Officers along with their contact numbers are displayed in all the branches.

- A Note on Review of Customer Services & Grievances Redressal Machinery is placed before the Board of Directors every quarter giving position of customer complaints received at Regional Offices and Head office and the follow up measures with important initiatives taken by the Bank for improving the customer services during the period.

- To eradicate customer complaints fully and ensure hassle free customer service, analysis is done on the complaints received from the customers and suitable timely action is taken so that there is no repetition of such complaints in future.

- The Bank has Board approved policies on Customer Services and the same are placed on the Banks website.

Based on the feedback and suggestions from the grass root level customer committees and various studies/surveys, a slew of customer centric initiatives and measures were taken by the Bank during the year under review to improve customer service at its branches.

KYC-AML-CFT

Know Your Customer (KYC) norms/ Anti-Money Laundering (AML) standards/ Combating of Financing of Terrorism (CFT) measures and obligation of Bank under PMLA, 2002.

The Bank has Board approved KYC-AML-CFT Policy in place. The said Policy is the foundation on which the Banks implementation of KYC norms, AML standards, CFT measures and obligation of the Bank under Prevention of Money Laundering Act (PMLA) 2002 is based.

The major highlights of KYC-AML-CFT implementation across the Bank are as under.

- Generation of Cash Transaction Reports (CTRs) 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 Suspicious Transaction Reports (STR) to the Financial Intelligence Unit (FIU).

- System based Risk Categorization (from AML Measure) of Banks customers accounts every half year.

- Filing of Counterfeit Currency Reports (CCRs) to FIU- IND, New Delhi.

The full KYC compliance entails staff education as well as customer education for which the following measures have been taken by the Bank.

- A comprehensive list of KYC documents is uploaded on the Banks website (www.bankofbaroda.com) for the benefit of customers.

- A KYC-AML page is created at the Banks Intranet for posting reference material on KYC-AML-CFT education.

- Regular Training Sessions are conducted on KYC-AML-CFT guidelines at the Banks training establishments.

- Training is being arranged for the Banks Senior Officials/Executives at RBI, IBA and National Institute of Bank Management (NIBM).

- Sustained efforts are made to create expertise at the Banks Head Office for Corporate Oversight and also for the KYC Audit of branches.

Government Business

The Banks Government Business department has primarily focused on three activities, notably, Control and Maintenance, Business Development and Pension Back Office during the year 2010-11.

To facilitate its activities, the Department created a special vertical for its operations in New Delhi, headed by an Assistant General Manager for ensuring better liaison with various ministries and departments of Government of India. The main achievement of this department during the year 2010-11 may be summarized as follows.

1) The Bank received authorisation for payment of pension to all Central Civil Pensioners in the country.

2) Also, the Railway Board, RBI and CGA authorised the Bank to undertake pension payment to the Railway

Pensioners under Single Window Scheme (SWS) under which reimbursement of pension paid would be available at CAS, Nagpur.

3) Processing of pension of more than 55,000 Railway Pensioners would also be done at CPPC under the Single Window System (SWS) with effect from April, 2011.

4) During the review period, the Bank got authorisation for e-payment of State Taxes in the States of Tamil Nadu, Kerala, Uttarakhand, Karnataka, Andhra Pradesh, West Bengal and Delhi.

5) Conclusion of Agreement with Stock Holding Corporation of India (SCHIL) for sale of e-stamps. This business has commenced in the State of Gujarat.

6) Special Savings Bank Product for Pensioners “Baroda Pensioners Savings Bank Account” was launched where pensioners get overdraft equivalent to two- month pension.

7) Collection of RTO Fees in the State of Gujarat and Tamil Nadu.

8) Moreover, the Bank is now the Direct Agency Bank for Railway Receipt and Payment Business instead of Sub Agent of State Bank of India at nine locations.

9) For the benefit of the Pan Indian Customers, a proposal has been sent to Ministry of Finance for authorising 700 additional branches for PPF/SCSS Business.

10) The Bank implemented a revised accounting procedure and system for Postal as well as Railway Receipt & Payment Business for automated reimbursement process and to eliminate losses due to a negative float.

11) Commencement of the Payment of Income Tax through ATMs.

12) The customers were enabled to view their 26AS Statement of Income Tax deposited through the Banks Internet Banking facility - Baroda Connect.

13) The Bank was authorized for collection of Custom Duty through e-mode at all locations in the country.

Vigilance

Vigilance activity in the Bank is an integral part of the managerial function and primarily aims at (1) ensuring integrity, (2) protecting the innocent (i.e., supporting quality decisions), (3) eliminating forces that thwart integrity, and (4) preventing the losses -- both the financial as well as reputational for the Bank.

A rational distinction is drawn between a business loss, which has arisen as a consequence of a bona-fide commercial decision, and an extraordinary loss, which has occurred due to mala-fide, motivated or reckless performance of duties. On the one hand, to keep the morale of the employees high and on the other hand, to weed out the attempts of the unscrupulous persons, efforts are made to bring the departmental action to its logical conclusion expeditiously.

The Vigilance machinery in the Bank is effectively performing its proactive role in new risk prone areas emerging in computerized/ e-Banking environment, in addition to sensitising all categories of staff members with the various preventive measures. The Bank has been taking suitable steps towards preventive, detective and punitive vigilance as per the Government of India guidelines.

With a view to share the various modus operandi of ingenious frauds with the staff members, Quarterly Vigilance Newsletter has been introduced by the Vigilance Department of the Bank to keep the staff alert so that they should not fall prey to such attempts. The Bank has also introduced a scheme for granting rewards to employees for detecting and foiling attempts of frauds/prevention of frauds with a view to encourage the vigil and alertness displayed by the employees while performing the duties and thereby detecting/foiling the attempted frauds. With the awareness, alertness and diligence exhibited by the operating staff, 58 fraudulent attempts by unscrupulous elements were thwarted, during the year April 2010 to March 2011, which saved the Bank from substantial financial loss.

Business Performance

Given below are the details of the Banks major achievements on business front during 2010-11.

Resource Mobilisation and Asset Expansion

The share of Banks deposits in total resources stood at 85.22% as of 31st March 2011. The total deposits grew from Rs 2,41,261.93 crore to Rs 3,05,439.48 crore, posting a growth of 26.60% over the previous year. Of this, Savings Bank Deposits

- an important constituent of low cost deposits grew by 22.67%

- from Rs 52,543.92 crore to Rs 64,454.04 crore. The share of low cost deposits (Current plus Savings) in Total Deposits (Domestic plus Overseas) was at 28.68% and in Domestic Deposits at 34.36%.

During the year 2010-11, interest rates offered on the most popular buckets of retail term deposits of commercial banks in India increased by 200 to 250 bps making low cost deposits a less attractive proposition. Across the banking industry, the

share of low cost deposits (CASA) to total deposits shrank sharply during 2010-11. Even for Bank of Baroda the domestic CASA share marginally declined from 35.63% to 34.36% on a year on year basis.

The Banks Global Advances expanded significantly and much above the banking industry average by 30.65% during 2010-11 led by 28.69% expansion in domestic advances and 36.59% expansion in overseas advances.

Unlike the experience of Indian banking industry, Bank of Barodas Total Credit growth (at 30.65%) was in proper alignment with its Total Deposit growth (at 26.60%) during 2010-11.

Composition of Funds - Global

Particulars End End Growth March March 2010 2011 (Rs crore) (Rs crore)

Deposits 2,41,261.93 3,05,439.48 26.60%

- Domestic 1,85,500.25 2,33,323.30 25.78%

- Overseas 55,761.68 72,116.18 29.33%

Borrowings 13,350.09 22,307.85 67.10%

Global Advances

Particulars End End Growth March March 2010 2011 (Rs crore) (Rs crore)

Advances 1,75,035.28 2,28,676.36 30.65%

- Domestic 1,31,643.62 1,69,407.86 28.69%

- Overseas 43,391.66 59,268.50 36.59%

Wholesale Banking

A strong corporate credit culture and consistent growth in credit way above the banking industry average have been the key differentiators of Bank of Baroda.

The Banks Wholesale Banking Division offers a full range of loan products and services such as Term Loans, Short- Term Loans, Demand Loans, Working Capital Facilities, Trade Finance Products, Treasury Products, Bridge Loans, Syndicated Loans, Infrastructure Loans, Cross Currency/ Interest Rate Swaps, Foreign Currency Loans, Loan Against Future Rent Receivables and many more to its large and mid corporate clients depending upon their needs. The product offerings are flexible and suitably structured taking into account the customers risk profiles and specific needs.

Based on the superior product delivery, passionate service orientation, timely and speedier sanctions with a customer- centric approach, the Bank has made significant achievements into providing an array of Wholesale Banking products and services to several multinationals, domestic business houses and prime public sector companies.

The Wholesale Banking Department started the year 2010-11, with a motto - “Year of Strengthening Corporate Relationship”

and the focus was to improve the share of business from the existing customers, thereby, strengthening the relationship with them and also building new relationships by targeting the Corporates who were hitherto not banking with the Bank.

Under Wholesale Banking, the Corporate Customers are identified as Large and Mid Corporates. Those having annual sales turnover of over Rs 150 crore but up to Rs 500 crore are classified as Mid Corporates, and those having a sales turnover of above Rs 500 crore are classified as Large Corporates.

During 2010-11, the Wholesale Banking Division sanctioned fresh facilities to 239 first time entrants amounting to Rs 36,318.67 crore through its Fast Track scheme and achieved increase in the existing accounts to the tune of Rs 41,660.31 crore, thus, the total sanctions from the department reaching a figure of Rs 77,978.98 crore. This exceeds the total sanctions for the previous year by almost Rs 7,900 crore. The major sanctions were given to sectors like iron & steel, metals & metallic products, commercial real estate and infrastructure segments like power, roads, telecommunication, etc.

Reduction in Turnaround Time in Wholesale Banking

The Department placed a major thrust on faster delivery through efficient channels and adoption of better practices in credit administration. Efforts were also made to improve the speed of decision making without compromising the quality of decision. Simplification of credit proposal formats was carried out, so that all vital information was captured with a sense of objectivity, thereby quickening the decision-making process. This helped the Bank a great deal in reducing the turnaround time. The Department targets to reduce the time taken for according a sanction to less than 25 days.

Project Finance Division

The Project Finance Division, a part of the Wholesale Banking Department earned total fee income of Rs 19.14 crore during 2010-11 through conducting 156 TEV (i.e., Technical Evaluation & Viability) studies and vetting of projects and syndication deals. This is in comparison to the fees of Rs 6.84 crore earned during 2009-10 out of TEV, vetting of projects and

also Syndication deals. The Division finalized 15 syndication deals during the year as against three deals during the last year. Furthermore, the fee receipts during the year have increased to Rs 14.67 crore as against Rs 3.98 crore last year. Out of the total booked Syndication fees of Rs 30.42 crore, the amount already received was Rs 14.67 crore and the balance amount of Rs 15.75 crore will be received during the year 2011-12.

Marketing Efforts in Wholesale Banking

The Department is planning to have a full-fledged Market Intelligence Unit and a vibrant Marketing Team to target newer companies from the perspective of significant business opportunities, especially in loan syndication. The Project Finance Division attached to the department has been tracking the Projects Today database on a regular basis and identifying upcoming projects. The Relationship Officers identified to handle various states of India and attached to Wholesale Banking Department are also on the move to their respective states to have a continuous liaison with the existing units and to help the Zonal Offices in those states in targeting the new customers.

Other Initiatives

Additionally, the Banks Wholesale Banking Division took the following initiatives during 2010-11 to strengthen this portfolio further.

1) A substantial improvement was brought about in communication channels between the Corporate Office and Operating Units of the Bank by creating separate e-mail IDs for different purposes like agreement in principle, modifications and submission of credit proposals, etc.

2) A dedicated focus was given to upgradation of skills and knowledge levels of officers working in the Department including the new campus recruits.

3) A thrust was placed on regular grooming of Credit Officers and Forex Officers to handle the credit portfolio of large number of branches.

4) A Plan was made to open additional Corporate Financial Services branches in North Mumbai, Greater Noida and Surat.

5) The Department closely tracked the Mid Corporate segment accounts by identifying the segment as a separate line of business. It is now proposing to open 14 exclusive Mid-Corporate branches during the year 2011-12, for which licenses were obtained from the RBI.

6) The Department organized several customers meeting and one-to-one meetings between the Corporates and the Members of Top Management of the Bank to have first-hand information on their business and credit requirements.

7) The Department took active interest in recruiting specialized officers from campuses and Institute of Chartered Accountants of India (ICAI) and placing

them in vital areas of credit administration across the branches/administrative offices, etc., for bringing in new blood and filling the vacancies arising out of attrition and retirement.

Retail Business

As in the past, the Retail Business continued to be one of the thrust areas for achieving business growth during the year 2010-11. The Banks performance during Financial Year 2010- 11 under Retail Banking Segment is as under.

Growth under Retail Lending

Retail Loan outstanding was Rs 32,434.84 crore as on 31st March, 2011, as against the level of Rs 24,247.71 crore as on 31st March, 2010. A growth of 33.76% (Rs 8,187.12 crore) was registered during 2010-11 as against a growth of 23.53% (Rs 4,619.76 crore) registered during the previous year. The growth under five key products (excluding LABOD/ODBOD etc) was 21.56% (Rs 4,094.72 crore) over the level of Rs 18,992.00 crore at end-March, 2010. During the same period of 2009-10, growth under the five key products was 22.65% (Rs 3,507.36 crore) over the level of Rs 15,484.63 crore as of end-March, 2009.

NPA under the Retail Loan

The amount of Non Performing Assets as on 31st March, 2011 under Retail Loan was Rs 579.83 crore (1.79%) as against the level of Rs 511.77 crore (2.11%) as on 31st March, 2010.

Savings Bank Deposits

The Banks Domestic Savings Deposits stood at a level of Rs 62,959.07 crore as on 31st March, 2011 registering a growth of 22.83% (Rs 11,702 crore) over the level of Rs 51,257.55 crore as on 31st March, 2010.

Initiatives in Retail Banking during 2010-11 New Products Launched

- A new Retail Asset Product styled as Baroda Traders Loan against the Security of Gold Ornaments/ Jewellaries was launched during 2010-11. Also, its variant termed as “Baroda Advance against Gold Ornaments /Jewellaries” was launched at all Metro and Urban branches of the Bank.

- A Retail Asset scheme under Baroda Personal Loan styled as Baroda Loan to Retirees for Pension Option was introduced on 4th December, 2010 for a limited period up to 11th December, 2010.

- Education Loan Interest Subsidy Scheme for students belonging to Economically Weaker Sections was launched as per the directives of Ministry of Human Resource Development, Government of India.

- A new Term Deposit Product styled as Baroda Utsava Deposit Scheme for 444 days was introduced on 15th October 2010 at the interest rate of 8.10% which was revised from time to time and last increased to 9.35% with effect from 1st March, 2011. A fresh deposit of Rs 19,918 crore was mobilized up to end-March, 2011 under the product.

- Two new Retail Liability Products under Savings Bank Segment styled as Baroda Pensioners Savings Account and a Life Insurance linked Savings product styled as Baroda Jeevan Suraksha Savings Account under a tie-up arrangement with IndiaFirst Life Insurance Company were launched on 15th January 2011.

Business Initiatives

- To mobilise low cost deposits aggressively, a Savings Bank Deposit Campaign was launched on 21st June, 2010 for the period of three months. An amount of Rs 1,944 crore as fresh Savings Bank Deposit was mobilized during this campaign. A second Savings Bank Deposit Campaign was launched from 1st December, 2010 to 31st March, 2011, which generated a fresh Savings Bank Deposit to the tune of of Rs 3,081 crore under 1,014,589 accounts.

- For augmenting Retail Loan Portfolio, a Retail Loan Festival Campaign was launched from 1st October, 2010 to 31st December, 2010. During the campaign, a total of Rs 1,218 crore was disbursed under both Home and Auto Loans. Another Retail Loan Campaign specially focused on Home Loans and Auto Loans was launched from 1st February 2011 to 31st March, 2011. A fresh business of Rs 891.74 crore was generated during this campaign.

- To increase the attractiveness, maximum period of deposits under Recurring Deposit and Yatha Shakti Jama Yojna were increased to 120 months from the existing 36 months.

- Interest Rate Structure on Car Loans was revised from Quantum Based Interest Rates to Tenor Based Interest Rates with effect from 1st September, 2010.

- To facilitate the borrowers, an Online Auto Loan Application Module was made live with effect from 9th August, 2010.

- A Tie-up Arrangement was made with IndiaFirst Life Insurance Company for providing Life Insurance Cover to the Banks Home Loan borrowers.

- A “Reward & Recognition Scheme” for the Banks staff under Group Credit Insurance scheme in a tie-up arrangement with Kotak Life Insurance and IndiaFirst Life Insurance was initiated with effect from 1st October, 2010.

- The Bank opened a new Gen-next branch in NOIDA during

the first quarter of 2010-11 and now the total number of Gen Next Branches is eight.

- Five new Retail Loan Factories at Karol Bagh New Delhi, Raipur, Ludhiana and Nasik were opened during 2010- 11, whereas one existing RLF at Jodhpur was closed. With this the total tally of the Banks Retail Loan Factories (RLFs) is 35.

- Existing accounts of Home Loans and Education Loans were also brought into the ambit of Group Credit Life Insurance Cover under the tie-up arrangement with Kotak Life Insurance and IndiaFirst Life Insurance with effect from 31st December, 2010.

Wealth Management Services

As a part of customer centric measures, the Bank has been providing Wealth Management Services to its high net worth (HNI) and affluent customers as a Total Financial Solution at one place since June 2004. At present, the Bank provides through the network of its branches, various third party products in Life Insurance, Non Life Insurance including Health Insurance, Mutual Funds and Equity Trading under the tie-up arrangements with different partners.

Moreover, during the last couple of years, the Bank has formed two joint ventures (JV) with the leading international brands in the Mutual Fund and Life Insurance segments.

Baroda Pioneer Asset Management Co. Ltd., a joint venture in Mutual Fund in association with Pioneer Investments of Italy, and IndiaFirst Life Insurance Co., a joint venture in Life Insurance with Andhra Bank and L&G of U.K. have successfully positioned themselves in the Indian market with encouraging performance even in the initial stages of their business.

The extension of ASBA (Application Supported by Blocked Amount) facility (i.e., the supplementary process of applying in IPO/FPO/Right issues) to 2,100 more branches during the year, has enabled almost all branches to provide the additional value added services to its customers. This is a step further in our endeavor to protect customers interest and provide them with new services. The Bank also launched during the year an on-line ASBA Facility for its Net Banking customers, which provides the convenience of a simple, instant, secure and 24x7 facility to apply for IPO/FPO/NFO to the Barodaconnect (i.e., the Banks internet banking platform) customers from the comfort of their homes/residences.

The Bank has also established Baroda Gold Lounge in 13 select strategically located branches, which are distinct dedicated spaces to provide par excellence investment advisory services to HNI customers of the Bank. Initiatives taken by the Bank under the Wealth Management Services have started contributing encouragingly to its non-interest income.

MSME Business

The Micro, Small and Medium Enterprises (MSME) segment is a vital component of Indian economy. This sector accounts for around 40.0% of total industrial production, 34.0% of industrial exports and 95.0% of industrial units and 35.0% of total employment in manufacturing and service sectors of India. The contribution of services sector within the SME segment is

quite significant, especially the IT enabled services, hospitality services, tourism, couriering, transportation, etc.

To give a focused attention to emerging SMEs in India, the Bank has been considering other commercial units with a turnover up to Rs 150 crore at par with the SMEs. To promote the growth of SME sector, the Bank has launched a special and novel delivery model, viz. SME Loan Factory, which at present, is made operational in 36 centres of the Bank and well accepted in the market place. The SME Loan Factory is an innovative model for streamlining processes and for timely sanction of SME loan proposals. The model comprises of the Central Processing Cell for speedy appraisal and sanctioning of proposals within the stipulated deadline and a sales team to follow up on leads generated by the branches. Going by the past success, the Bank is planning to open more such loan factories in the ensuing year. The Bank has SME Loan Factories at all major business centres across the country viz. Agra, Ahmedabad, Bangalore, Bareilly, Baroda, Bhilwara, Bhubhaneshwar, Bulsar, Chandigarh, Chennai, Coimbatore, Dehradun, two Factories in Delhi, Hyderabad, Indore, Jaipur, Jamshedpur, Jamnagar, Jodhpur, Kanpur, Kolhapur, Kolkata, Lucknow, Ludhaina, 3 Factories in Mumbai, Nagpur, Nashik, Pune, Rajkot, Raipur, Surat, Varanasi and Vishakhapatnam. These SME Loan Factories together sanctioned loans aggregating Rs 14,530 crore during 2010-11 as against Rs 11,071 crore in the previous year.

Growth of Business

The total outstanding in MSME Sector works out to Rs 27,365 crore as on 31st March 2011. The growth in lending to MSME Sector during the last three years is given in the table below.

Year Growth (%, YoY)

2008-09 24.18%

2009-10 43.98%

2010-11 29.63%

The percentage growth of MSME credit during 2009-10 was relatively high as the advances up to Rs 20 lakh to Retail Trade were classified for the first time under the “Micro & Small Enterprises Sector” in 2009-10, in line with the RBIs revised guidelines issued during September, 2009. The growth rate

was normalized during the year 2010-11.

The Bank took the following initiatives in its SME business segment during the year under review.

Initiatives in MSME Financing During 2010-11

1. During this year, the Bank introduced five new customer- centric, area-specific products to suit the local cluster needs along with the renewal of eight existing customer-centric area-specific products.

2. The Bank sponsored a workshop on “Management Skills to Source Financing and Management of Technology by SMEs” for entrepreneurs organized by the AIMA at Faridabad.

3. The Bank introduced “Protrack” - an e-tracking system for the SME credit proposals with a view to have control over the turnaround time.

4. The Bank celebrated SME Festival from 1st January 2011 to 28th February 2011 in order to give boost to SME advances. Some concessions in the rate of interest and service charges were announced for loans sanctioned during the celebration period.

5. The Bank participated in the Workshops arranged by CGTMSE on Bank Credit to Micro & Small Enterprises and the Role of Credit Guarantee.

6. The Bank accorded higher importance to Increase the flow of credit to MSME with a special emphasis on Micro Enterprises.

7. The Bank focused on collateral free credit under the CGTMSE scheme through a special campaign.

8. The Bank achieved total customer relationship through enhanced cross selling, locational meetings, involvement of trade bodies at the national and state levels.

9. The Bank placed emphasis on continuous knowledge updating and skill building of processing/marketing officers attached to its SME factories with the help of external and internal training outfits.

Rural and Agricultural Lending

The Bank has always been a frontrunner in the area of Priority Sector and Agriculture lending, harnessing the vast potential of the rural market through its wide network of 1,171 rural branches

and 832 semi-urban branches. The Bank has opened 157 new branches in rural and semi-urban areas during 2010-11. The Bank is the convener of the State Level Bankers Committee (SLBC) in UP and Rajasthan. The Bank also shoulders the Lead Bank Responsibility in 45 districts in the states of Gujarat (12), Rajasthan (12), Uttar Pradesh (15), Uttaranchal (2), Madhya Pradesh (2) and Bihar (2).

Moreover, there are five Bank sponsored Regional Rural Banks (RRBs) in various states with a network of 1,223 branches and total business of Rs 18,800 crore as of end-March, 2011.

Performance of Priority Sector Lending in 2010-11

Priority Sector Advances of the Bank surged from Rs 48,552.36 crore as at the end-March 2010 to Rs 57,363.60 crore as at the end-March 2011 and formed 43.57% of the Adjusted Net Bank Credit (ANBC) against the mandated target of 40.00%.

Agriculture Advances (both direct and indirect) of the Bank recorded a growth of 13.47% over the previous year and rose to Rs 24,529.22 crore as at end-March 2011. However, the Banks lending to Direct Agriculture depicted a stronger growth of 28.72% (y-o-y) to Rs 17,157.83 crore during 2010-11.

Under its flagship agriculture loan product “Baroda Kisan Credit Card”, the Bank issued as many as 2,44,558 Credit Cards during 2010-11 to provide credit to farmers. The Bank financed as many as 2,72,415 new farmers during the year under review. As a part of its microfinance initiatives, the Bank credit-linked 19,257 Self Help Groups (SHGs) with an amount of Rs 163.77 crore during 2010-11, thereby taking the total number of SHGs credit-linked to 1,34,942 amounting to Rs 956.96 crore.

Business and Social Initiatives

Besides posting a healthy business growth, the Bank undertook several initiatives during 2010-11 to harness the emerging opportunities for rural and agriculture lending. Some of them are mentioned below.

1. To augment its Agriculture advances, the Bank conducted special campaigns, viz. Kharif and Rabi campaigns for crop loans, under which the disbursements of Rs 2,317 crore and Rs 1,231 crore were made, respectively. Another Campaign for Investment Credit was also undertaken under which disbursements of Rs 993 crore were made.

2. The Bank organized 3,323 Village Level Credit Camps and disbursed Rs 3,169 crore to 2,30,599 borrowers during 2010-11.

3. The Bank identified 450 Thrust Branches across India to enhance Agriculture Lending which constituted 34.0% of the total Agriculture Lending as at end-March 2011.

4. The Bank formulated various area-specific schemes, tailor made to the needs of local requirements, particularly where there is a concentration of industries like Rice Mills, Cold storages, cotton ginning units, Poultry units, etc. Moreover, suitable concessions in the rate of interest, service charges, etc., were allowed under these schemes to garner maximum possible business. As many as 22 area specific schemes were formulated to increase the lending to agriculture sector.

5. Baroda Grameen Paramarsh Kendra (BGPK) - was another initiative undertaken by the Bank to help the rural community by providing credit counseling, financial literacy and other services like information on the prices of agricultural produces, scientific farming, etc. The Bank established 52 BGPKs as on 31st March, 2011.

6. Furthermore, eleven more Baroda Swarojgar Vikas Sansthan (BSVS), Baroda R-SETI centres were opened during the year under review. With this, the total number of BSVS went up to 36. Besides, Raebareli and Ajmer BSVS were created exclusively for women entrepreneurs. The BSVS are primarily the institutes for training the youth and imparting knowledge and skills required for taking up self-employment ventures. During the year 2010-11, around 42,212 youth beneficiaries were trained out of which 28,331 have established self-employment ventures. It is heartening to see that out of the total 79,442 beneficiaries trained by these centres so far, 50,035 have already established their self employment ventures.

Financial Literacy and Credit Counseling Centres (FLCC)-“SARATHEE”

Based on the guidelines issued by the RBI, the Bank has established 18 FLCCs, christened as “SARATHEE” to impart financial literacy and credit counseling services to the needy people to help them avail financial services from the banking

system and also to provide counseling services to those who are under financial distress due to the debt burden. The Bank has opened these centres under its BSVS trust. Free counseling services are being provided to the concerned free of cost. The Bank opened 14 new FLCCs during 2010-11, taking the total number of FLCCs to 18 as on end-March 2011. The Bank has firmed up a plan to open FLCCs in each of its lead districts in due course.

Business Facilitators Model

This model has been implemented across India to accelerate the process of Financial Inclusion of the excluded segment as well as to augment the Banks agriculture portfolio. Business Facilitators will mainly canvass loan applications for the Bank for which the Bank will pay them compensation. Individuals including retired bankers and Government employees, NGOs, farmers clubs and SHGs are engaged as agents to improve the Banks outreach in the rural and semi-urban areas.

Micro Loan Factory

Additionally, the Bank has opened Micro Loan Factories at Raebareli and Sultanpur in U.P. The Micro Finance Loan Factory has a mobile van with facilities and all related stationeries/ documents on the SHG financing. It is manned by officers who are duly authorised to sanction and disburse loans up to Rs 25,000 to SHGs on the spot and at their doorsteps.

Performance of RRBs Sponsored by the Bank

The Bank has sponsored five RRBs as under.

- Baroda Uttar Pradesh Gramin Bank, Head Office: Raebareli.

- Baroda Rajasthan Gramin Bank, Head Office: Ajmer.

- Baroda Gujarat Gramin Bank, Head Office: Bharuch.

- Nainital-Almora Kshetriya Gramin Bank, Head Office: Haldwani.

- Jhabua-Dhar Kshetriya Gramin Bank, Head Office: Jhabua.

The aggregate business of these five RRBs rose to Rs 18,803.05 crore as of end-March, 2011 from Rs 16,244.41 crore as at end-March, 2010, registering a year on year growth of 15.75%.

The five RRBs together posted a net profit of Rs 116.53 crore during 2010-11 as against Rs 118.93 crore earned during 2009-10. The “Net Worth” and the “Reserves and Surplus” of all these RRBs put together improved from Rs 609.12 crore at end-March, 2010 to Rs 729.96 crore at end-March, 2011 and from Rs 354.43 crore at end-March, 2010 to Rs 452.68 crore at end-March, 2011, respectively.

Banks efforts towards Financial Inclusion

The Bank has formulated a three-year Financial Inclusion (FI) Plan as per the RBI guidelines issued in 2010 that was approved by the Banks Board. However, keeping in view the mandate given by the Government of India, the SLBCs allotted

2,864 villages to the Bank, each having population more than 2,000 that are to be covered under the FI Plan by March 2012, of which 1,200 villages were targeted to be covered by March 2011. The Bank comfortably surpassed this target and extended banking services to 1,228 villages during the year 2010-11. The remaining villages are proposed to be covered in the year 2011-12.

To reach out to such unbanked villages, two delivery channels have been adopted i.e. ICT based Business Correspondent (BC) Model which is based on the Application Service Provider (ASP) model with Biometric Smart Card based technology wherein Business Correspondents visit villages with Point of Service (POS) devices for carrying out transactions. Under this model, the customers can operate their accounts using their Smart Cards though the biometric authentication. The second delivery channel adopted is Mobile Banking. Under this, the Mobile Vans move within a cluster of villages in close proximity to the Banks existing branches. The Vans with the Banks staff visit the identified villages during some fixed days in a week for providing banking services. At present, a Mobile van has been deployed in Charada branch of Mehsana, Gujarat and three more vans have been deployed at Allahabad, Varanasi and Bihar.

As per the directive of the Government of India, the Banks Chairman and Managing Director, Executive Directors and Corporate General Managers have been visiting the villages

under the FI Plan regularly to oversee the implementation and progress of the Banks FI mission.

Advances to SC/ST Communities during 2010-11

The outstanding advances granted by the Bank to SC/ST communities have been growing healthily year after year. This is evident from the fact that the outstanding advances granted to these beneficiaries went up from Rs 3,100 crore as at end- March, 2010 to Rs 3,760 crore as at end-March, 2011.

In fact, the SC/ST communities accounted for a share of 28% in the total advances granted to Weaker Sections during the year under review.

Furthermore, a special thrust is laid by the Bank in financing SC/ ST communities under various government sponsored schemes namely Swaranjayanti Gram Swarojgar Yojana (SGSY), Swarna Jayanti Shahari Rojgar Yojana (SJSRY), Prime Minister Employment Generation Programme (PMEGP), etc.

It is heartening to note that the Baroda Swarojgar Vikas Sansthans (BSVS) have been giving due preference to SC/ ST communities while selecting the trainees. So far, these centres have trained 29,721 youths under the SC/ST category of which 18,735 have already established their self employment ventures.

International Business

The improvement in global economic scenario, strong economic revival especially in the advanced countries and a substantial growth in the International Trade flows supported growth of business and profitability of International Operations. The Bank leveraged on its long experience of international banking, strong and loyal customer base, time-tested business model, technological initiatives to live up to its position as the Indias International Bank.

During 2010-11, there was a better than expected growth in the business and profits of the Banks International Operations. The asset growth was further assisted by Foreign Currency requirements of Indian Corporates for their overseas expansion, and, also, to take advantage of the difference in cost of resources. To meet the requirements of borrowers, the Bank raised Foreign Currency resources in timely fashion at overseas centres at the finest terms supported by the Banks strong credit story.

The Bank kept continuous watch on economic, social and political developments around the world to safeguard its business interests. The business model was aligned and risk management functions were further strengthened to take care of any shocks in the ever-changing international scenario.

The overseas branch network was further expanded to 85 branches/offices offering further opportunities for generating profitable growth of business.

Business and Profit Performance

During 2010-11, the total business (Deposits + Advances) of the Banks Overseas Branches registered a growth of 32.51% (y-o-y). The Customer Deposits increased by 23.44%, Total Deposits by 29.33 % and Advances by 36.59%. The International Operations contributed 24.6% to the Banks global business as on 31st March, 2011.

Total Assets

Total Assets of the Banks International Operations increased from Rs 68,375 crore to Rs 91,273 crore registering a growth of 33.49% during the year.

Net Profit

The Gross Profit for the year 2010-11 registered a healthy growth of 23.94% over the level of previous year. The Net Profit, however, declined by 7.32% due to an unfavourable statistical base effect. During the year 2009-10, the Net Profit had increased sharply because of the reversal of provisions made under Mark to Market of Investments. The contribution of international operations to the Banks Total Net Profit stood at 19.15% during 2010-11.

Asset Quality

Consistent with its past practices, the Bank took all the necessary safeguards at the time of asset creation and ensured monitoring of assets on an ongoing basis to be in readiness for any eventualities in the economic scenario around the world.

The accounts restructured in previous years as per the RBI norms were continuously monitored during 2010-11 to ward off any deterioration in the asset quality. In NPA accounts, there were continuous efforts for upgradation/recoveries as per the norms in the country of operation. As a result, the Gross NPAs to Total Advances were contained at 0.62% as on March 2011. The Net NPAs too were modest at 0.19%.

International Presence

With the commencement of operations in New Zealand, the Bank extended its overseas presence to 26 countries with 85 branches/offices as under.

Banks Overseas Branches 54

Banks Representative Offices 3

Branches of Banks Overseas Subsidiaries 28

Total 85

In addition to the above, the Banks associate in Zambia has 12 branches.

Overseas Expansion

During the year 2010-11, the Bank opened seven new branches/ offices (including the ones for its overseas subsidiaries). A branch was opened at Ilford, Essex (U.K.) and five Electronic Banking Service Units (EBSUs) in UAE at RAKIA, Ras Al Khaimah, Al Qusais, Dubai, Sh. Zayed Road, Dubai, Al Karama, Dubai and National Paints, Sharjah. The subsidiary in New Zealand - Bank of Baroda (New Zealand) - commenced operations with the opening of branch at Auckland.

Future Plans in Overseas Business

In order to serve the ever increasing expatriate Indian population and corporates around the world and canvass more diversified business for the Bank, ambitious overseas expansion plans have been drawn by the Bank. It proposes to further expand its network by opening additional branches in countries where it is already present, and, also wants to enter new territories. Steps have been initiated for opening of two branches and two EBSUs in UAE, one branch in Oman and one branch in Mauritius. The work related to the opening of eight new branches of the subsidiaries is at an advanced stage. The subsidiaries in Uganda, Kenya and New Zealand will be opening two branches each and in Botswana and Guyana, one additional branch will be opened.

The Banks applications for setting up of a subsidiary in Suriname and Canada, opening of a branch in Qatar and upgradation of a Representative Office in Australia to a branch are under process by the host country regulators. The Bank has already initiated steps for identification of new centres for overseas expansion.

Syndication Centre

The Banks Global Syndication Centres at London and Dubai, supported by the Offshore Banking Unit at Singapore and other branches in major financial centres, are actively catering to the needs of Indian and local corporates for Foreign Currency funds. The International Merchant Banking Cell (IMBC), set up at the Banks Corporate Office, Mumbai, plays an active role in the business on account of raising of substantial resources by Indian Corporates. The IMBC now actively participates in the loan origination.

Products and Services

After implementation of the Core Banking Solution in its overseas operations, the Bank launched various new products and services to meet the requirements of diversified groups of customers. New products, developed after extensive market research, have found wide acceptability with local population.

Technology Upgradation in Overseas Operations

- The number of ATMs at overseas territories and subsidiaries increased to 68 (42 onsite and 26 offsite) as on 31st March, 2011 from 55 (36 onsite and 19 offsite) as on 31st March, 2010.

- Global Treasury Solution was implemented at the Banks operations in UK, UAE, Bahamas, Bahrain, Hong Kong, Singapore and Belgium. The Banks subsidiary in Uganda has also initiated process for implementation of

Treasury Module as per the requirements of the country of operation.

- Implementation of a Centralized SWIFT activity was completed and made operational from the Banks Data Centre in Mumbai.

- Except UK and US Territories, all Territories/Subsidiaries have started routing their Swift operations through the SWIFT Cell, Data Centre. The XMM application was implemented in the place of SAM and PC Connect.

- The Payment Messaging System too was implemented. It is a middleware between Core Banking Solution (Finacle) and SWIFT which helps in Straight-Through-Processing of incoming and outgoing SWIFT messages with Anti Money Laundering check. The same was implemented in all the overseas territories/subsidiaries except in UK and USA.

- The Anti Money laundering Erase (Batch mode) was implemented in all the overseas centres except, Belgium and USA.

- Anti Money Laundering Online List Matching Solution too was implemented at all the centres of the Bank except USA.

E-Banking

- The Bank has made “View based E-Banking” available in its operations in Fiji, Oman, Tanzania and UK.

- The Bank has implemented “Transaction-based Internet Banking” in Uganda, Botswana, UAE, New Zealand, Kenya, Mauritius and Seychelles.

- The Bank has firmed up its plan to cover all the remaining overseas centres under this facility during 2011-12.

Risk Management in Overseas Operations

The Bank has put in place an appropriate risk management system, comprising of necessary elements of active Board and senior management oversight, adequate policies, procedures and limits, adequate management information systems and comprehensive internal control for risk identifications, risk measuring, risk monitoring and risk control for its overseas operations. The Bank has implemented BASEL II guidelines in all the Overseas Territories with effect from 31st March, 2008 and has adopted Standardised approach for Credit Risk, Standardised Duration Method for Market Risk and Basic Indicator Approach for Operational Risk.

To prepare for the adoption of the advanced approaches, the Bank has developed customized BOB RAM internal Rating Module for its UK and UAE territories, covering major portion of the overseas business. In a phased manner, the BOB RAM will be introduced in all the other territories. The Bank has posted highly skilled and qualified Risk Managers in all the major overseas territories, to put in place the requisite risk management practices in overseas operations and to comply with the extant guidelines of host and home country regulators.

Regulatory Compliance

The compliance structure of the Bank is based on the extant guidelines of the home countrys regulator. All the overseas

territories have put in place the centre-specific compliance policies consistent with the corporate compliance policy of the Bank. A compliance function is being carried out by the designated compliance officer in the territory. The Bank scrupulously follows all the Anti Money Laundering and Know Your Customers guidelines of the Host and Home country regulators.

Treasury Operations

The global economic scenario presented a mixed picture during 2010-11. While growth in emerging market economies (EMEs) remained strong, it was on an upswing in the US and the Euro areas. However, the sharp increase in oil prices during the course of the year as a result of the events in the Middle East and North Africa added tremendous uncertainty to the pace of global recovery. Coupled with rising prices of food and commodity, the spike in oil prices significantly heightened the inflationary concerns. Balancing the concerns on twin challenges of taming inflation and managing economic growth, the RBI started hiking policy rates since March 2010. During the year 2010-11, the RBI cumulatively hiked the repo rate by 175 bps and the reverse repo by 225 bps, albeit in a calibrated fashion.

The advance estimate of the GDP growth for 2010-11, given by the Central Statistical Organisation, Government of India is at 8.6%. The benchmark 10 year G-Sec yield moved touching a high of 8.25% and a low of 7.37% with an average yield of approximately 7.90% during the year under review. Against this backdrop of rise in yields and rate hikes, the Bank Treasurys focus was to enhance the overall yield on its SLR portfolio. The average yield on Domestic SLR investment portfolio for the year was 7.68%. Keeping in view the macro economic situation, the Modified Duration of SLR investments under Available for Sale category was kept at 2.62 years. During the year, the Bank earned Rs 4,645.83 crore by way of Interest/Discount earned on Investments, Rs 457.24 crore as Profit on Sale of Investment and Rs 307.61 crore as Foreign Exchange earnings. The Treasury actively utilised the market movements and used the Overnight Index Swaps and INBMK Swaps for hedging and trading opportunities. The Treasury offers customized solutions using available instruments viz. IRS, CIRS, Forwards & Options to meet Interest Rate and Foreign Exchange Risk Mitigation requirements of corporate clients. The Treasury actively tried to benefit from the arbitrage opportunities available between various asset classes including Money market, CBLO, Market Repo, Government Securities and resources generated through the USD/INR swaps.

During the year under review, the Treasury mobilized long term resources for the Bank through a mix of Upper Tier II and Perpetual Bond instruments. The total amount raised was Rs 2,211.50 crore in four tranches at the finest terms supported by the Banks strong credit story.

Post financial crisis of 2008, the Indian economy showed strong growth for a second consecutive year. However, the Industrial production slowed down in the second half of 2010-11 impacted by the rising input cost pressures. There were robust FII inflows in the first half of the financial year 2010-11. Reflecting the

investor confidence, the BSE Sensitive Index touched a high of 21,108 during the year. However, the equity investors booked profits and there was a net FII outflow in the last quarter of 2010- 11 on account of events in the Middle East and North Africa, high oil prices and continuing inflation. Taking advantage of the market movements, the Equity Desk of the Banks Treasury actively churned its portfolio and recorded good profits. During the year, the Banks Equity Desks turnover increased by more than 60.0% over previous year, and it doubled its profit over the corresponding period.

The Foreign Exchange Desk of the Banks Treasury too retained its prominence as a key market maker in the Indian Banking Industry. The Proprietary trading desk was active in encashing the arbitrage between the Futures and OTC markets. The Foreign Exchange Desk was able to manage the volatility efficiently with more than 25.0% increase in the turnover in both the Inter-Bank and Merchant Desks. The Inter-Bank to Merchant Forex turnover ratio for the Bank was 8.28 against Market ratio of 2.85.

During the year 2010-11, the Bank inaugurated a new State of the Art Dealing Room at Baroda Sun Tower at its Corporate Office in Mumbai. Through this new Dealing room, the Bank is well positioned to scale up its Treasury Operations in the coming years. The Treasury handles the Banks Domestic Treasury Operations and covers activities in various markets i.e. Foreign Exchange, Interest Rates, Fixed Income, Equity and other alternative assets. The advanced technology platforms are being used by the Bank to offer a basket of financial products to its clients including Interest Rate and Currency Swaps, Forwards and Options. Through the enhanced Automated Dealing System, the Bank is able to offer auto generated real time foreign exchange rates to its clients through the authorised branches in India.

Under the Business Process Reengineering (BPR), the Bank has successfully implemented a Global Treasury Solution across major financial centres. The Global Treasury Platform is running smoothly in Mumbai, Europe (London and Brussels), Dubai, Bahrain, Singapore, Bahamas and Hong Kong. During the year 2010-11, the roll out of the Global Treasury Platform was initiated in the Banks New York operations.

The Treasury Mid Office monitors market exposures and limits fixed by the Banks Board of Directors on real time basis. The

Risk Management measures such as Value at Risk (VaR) is used to measure Market Risk on all portfolios. These measures are backed up by the Back Testing on risk numbers and Stress Testing of portfolios.

Corporate Social Responsibility (CSR)

Like in business, the Bank aspires to score high on Corporate Conscience. As a responsible corporate citizen, it is the vision of the Bank to empower the community through socio-economic development of underprivileged and weaker sections. In its continued efforts to make a difference to the society at large, the Bank further intensified its efforts in this direction during the year 2010-11.

The Bank has established Baroda Swarozgar Vikas Sansthan (Baroda R-SETI) for imparting training to unemployed youth, free of cost for gainful self employment and entrepreneurship skill development which help them improve their family economic status and also gives a boost to the local economies from where they operate.

So far, 36 such Santhans have been established by the Bank in which more than 79,000 young persons have been trained and around 50,000 have been gainfully self employed.

The Bank has established 52 Baroda Gramin Paramarsh Kendra for knowledge sharing, problem solving and credit counseling for rural masses across the country. In order to spread awareness among the rural masses on various financial and banking services and to speed up the process of financial inclusion, the Bank has also established 14 Financial literacy and Credit counseling Centres (FLCCs) during the year 2010- 11 taking the total number of FLCCs to 18.

Asset Quality Management

Bank of Baroda has rightly earned a reputation for excellence in the Asset Quality management. Even during the year 2010- 11, the Bank was able to maintain the best asset quality in the Indian banking system by smartly and strategically managing its Non Performing Asset (NPA) portfolio.

A close monitoring and follow up systems for recovery of NPA together with a well-defined mechanism to catch early warning signals to prevent slippages has helped the Bank to maintain its NPA at the lowest possible levels.

In spite of higher slippages observed in general in the Indian banking industry because of continuing adverse effects of economic downturn and high volatility in the financial indicators, the Bank could restrict its Gross NPA to 1.36% of Gross Advances as at 31st March, 2011 - the same level as in the previous year. Even its Net NPA ratio was contained at 0.35% as at 31st March, 2011 versus 0.34% as on 31st March, 2010.

The Banks outstanding performance in the asset quality management was reflected in the modest level of incremental delinquency ratio at 1.09% in 2010-11 as against 1.17% in 2009-10. This ratio is measured as “Additional Delinquencies as a per cent of the Opening Standard Advances of the Bank at the beginning of the year”.

Consistent with its past record, the Bank maintained higher Loan Loss or Provision Coverage Ratio against its NPA portfolio than the mandatory norm of 70% set by the RBI. The Banks NPA Coverage Ratio as on 31st March, 2011 was 74.91% as against 74.90% as on 31st March, 2010. The Loan Loss or Provision Coverage Ratio taking into account the technical write-offs worked out to 85.0% as on 31st March, 2011 as against 87.0% as on 31st March, 2010.

The Bank also adopted a strong follow-up mechanism for speedy recovery/resolution of its NPAs by expediting the legal action as well as through the compromise/OTS route. This strategy yielded the Bank Cash Recovery of over Rs 455.49 crore during 2010-11 as aga

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Mar 31, 2010

The Directors have pleasure in presenting the One Hundred and Second Annual Report of the Bank with the audited Balance Sheet, Profit & Loss Account and the Report on Business and Operations for the year ended March 31, 2010 (FY10).

Performance Highlights

- Total Business (Deposit+Advances) increased to Rs 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 at 84.55% as against 81.94% last year.

- Retail Credit posted a growth of 23.5% constituting 18.15% of the Bank’s Gross Domestic Credit in FY10.

- Net Interest Margin (NIM) in global operations as per cent of interest earning assets was at the level of 2.74% and in domestic operations at 3.12%.

- Net NPAs to Net Advances stood at 0.34% 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 that the contribution of Treasury Operations was Rs 1,048 crore, that of Corporate/Wholesale Banking was Rs 1,585 crore, that of Retail Banking was Rs 779 crore, and of Other Banking

Operations was Rs 2,732 crore. The Bank earned a Profit after Tax (PAT) of Rs 3,058 crore after deducting Rs 1,906 crore of unallocated expenditure and Rs 1,180 crore towards provision for tax.

Dividend

The Bank’s Directors have proposed a dividend of Rs 15/- per share (on the face value of Rs 10/-per share) for the year ended March 31st, 2010. The total outgo in the form of dividend, including taxes, will be Rs 639.26 crore.

Capital Adequacy Ratio (CAR)

The Bank’s Capital Adequacy Ratio (CAR) is comfortable at 14.36% under Basel II as on 31st March 2010. During the year, the Bank strengthened its capital-base by raising Rs 1,000 crore through unsecured subordinated bonds and Rs 900 crore through innovative perpetual bonds.

The Bank’s Net Worth as at 31st March 2010 was Rs 13,785.14 crore comprising paid-up equity capital of Rs 365.53 crore and reserves (excluding revaluation reserves) of Rs 13,419.61 crore. An amount of Rs 2,419.07 crore was transferred to reserves from the profits earned.

Other Prudential Measures

As a prudent measure, the Bank has made provision towards contribution to gratuity (Rs 131.93 crore), pension funds (Rs 120.21 crore), leave encashment (Rs 134.29 crore) and additional retirement benefits (Rs 16.28 crore) on actuarial basis. Total provisions under these four categories amounted to Rs 402.71 crore during the year 2009-10, against Rs 550.60 crore during 2008-09. Total corpus available with the

Key Financial Ratios

Particulars 2009-10 2008-09

Return on Average Assets (ROAA) (%) 1.21 1.09

Average Interest Bearing Liabilities (Rs crore) 2,15,886.21 1,71,666.55

Average Cost of Funds (%) 4.98 5.81

Average Interest Earning Assets (Rs crore) 2,16,735.54 1,75,818.59

Average Yield (%) 7.70 8.58

Net Interest Margin (%) 2.74 2.91

Cost-Income Ratio (%) 43.57 45.38

Book Value per Share (Rs) 378.44 313.82

EPS (Rs) 83.96 61.14

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).





Board of Directors

Shri N. S. Srinath, was appointed by the Central Government as Whole time Director, designated as Executive Director on 07th December 2009, under section 9(3) (a) of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970, to hold the position till 31st May 2012 or until further orders, whichever is earlier. He was appointed consequent upon Shri V Santhanaraman, ceasing to be a Director on his attaining superannuation on 31st August 2009.

Shri Alok Nigam, IAS was nominated by the Central Government as a Director on 09th December 2009 under section 9(3) (b) of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970 representing the Central Government vice Shri Amitabh Verma, IAS who ceased to be a Director on the nomination of Shri Nigam. Shri Nigam shall hold office until further orders from the Central Government.

Dr. (Smt.) Masarrat Shahid was nominated by the Central Government, as a part time non-official Director on 29th

October, 2009 under section 9(3) (h) of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970. Dr. Shahid was nominated for a second term of three years from 29th October, 2009 to 28th October 2012 or until further orders, whichever is earlier.

Shri Amarjit Chopra, who was nominated as Director for a period of three years on 13th October 2006, by the Central Government under section 9 (3) (g) of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970, ceased to be a Director on 12th October 2009, on the expiry of his term of appointment.

Directors’ Responsibility Statement

The Directors confirm that in the preparation of the annual accounts for the year ended March 31, 2010:

The applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

The accounting policies framed in accordance with the guidelines of the Reserve Bank of India, were consistently applied.

Reasonable and prudent judgement and estimates were made so as to give true and fair view of the state of affairs of the Bank at the end of financial year and of the profit of the Bank for the year ended March 31, 2010;

Proper and sufficient care was taken for the maintenance of adequate accounting records in accordance with the provisions of the applicable laws governing banks in India;

and

The accounts have been prepared on a going concern basis.

Acknowledgement

The Directors express their sincere thanks to the Government of India, Reserve Bank of India, Securities and Exchange Board of India, other regulatory authorities, various financial institutions, banks and correspondents in India and abroad for their valuable guidance and support.

The Directors acknowledge with appreciation the assistance and cooperation extended by all stakeholders of the Bank like customers, shareholders and well wishers in India and abroad.

The Directors place on record deep appreciation for the hard work and dedication of the members of the staff at different levels, which enabled the Bank to record high quality, consistent growth even during the turbulent times and consolidate its position as one of the leading banks in the country.

For and on behalf of the Board of Directors,

M. D. Mallya

Chairman and Managing Director Mumbai 25th May, 2010