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" A Resilient Performance through Challenging Times "

SHRI S. S. Mundra
Chairman & Managing Director

T.P. - 1, F.P. 549/1, NEAR GEB COLONY,

ON THE 26TH JUNE, 2013

Ladies and Gentlemen,

It is my pleasure to welcome you to Bank of Baroda’s 17th Annual General Meeting here in Baroda. As the meeting is also being webcast, I would like to extend a welcome to our on-line audience also.

At the outset, I express my gratitude to all the stakeholders of Bank of Baroda for their continued support and patronage to the Bank.

The Annual Report, including the Audited Accounts of the Bank for the year ended March 31, 2013, has been in your hands for some time now. With your consent, I shall take it as read.

The year 2012-13 (FY13) was definitely a challenging year. We have had to respond to these challenges appropriately and diligently in order to protect the stakeholders’ interests. Let me now explain how we tackled these challenges and proved your Bank’s resilience once again. I will start by describing the environment in which your Bank generated the results for the year FY13.

Macroeconomic Environment in FY13

The year FY13 saw a sharp deterioration in macroeconomic environment with the GDP growth registering the decade’s lowest growth of 5.0% per annum. This was mainly due to the protracted weakness in industrial activity aggravated by domestic supply bottlenecks, and slowdown in the services sector reflecting weak external demand. The agricultural sector too posted subdued growth due to deficient monsoon rains. Despite the overall weakness in the economy, the headline inflation (WPI-based) though decelerated; it continued to remain elevated at levels above the Reserve Bank of India’s (RBI) comfort zone.

While growth in mining stayed weak at -0.6% in FY13, the manufacturing growth weakened from 2.7% in FY12 to 1.0% in FY13. Even the growth in power generation, construction and major services like trade, hotels, transport, finance, etc. declined in the band of 60bps to 310 bps during the year under review. A slew of factors responsible for this weak performance were poor global demand, weak supply linkages, high input costs, sluggish investment activity, regulatory and environmental bottlenecks, and lack of reliable power supply. Furthermore, the slowdown in consumption demand affected the growth of industrial sector, in general and of consumer goods like motor vehicles, food products and apparel industries, in particular.

Inflation measured in terms of WPI moderated to an average of 7.3% in FY13 from 8.9% in the previous year. However, food price inflation remained sticky at the elevated level. Furthermore, upward revisions in the administered prices of fuel components and the pass-through of high international crude prices to freely priced items, kept food inflation also on the higher side.

On account of weak global demand, India’s merchandise exports contracted by 1.76% to US$ 300.6 billion during FY13, while imports rose by 0.44% to US$ 491.48 billion leaving a huge trade deficit of US$ 190.88 billion in FY13. According to the commodity-wise data released by the DGCI&S, merchandise export decline was mainly observed in items like engineering goods, petroleum products, textiles and iron ore.

While the economy faced ‘stagflation’, the other biggest risk faced by the economy was the sharp increase in CAD (current account deficit) to 6.7% of GDP in Q3, FY13 primarily due to very high trade deficit. At this level the CAD is historically the highest and well above the sustainable level of 2.5% of GDP. Yet, the rupee-dollar exchange rate remained range bound, as the huge portfolio inflows and External Commercial Borrowings (ECBs) protected the rupee’s downward movement.

Banking Scenario in FY13

Given the all round weakness in the economy, Indian banking sector had to face a number of challenges during the year. Both the deposits and credit growth remained lackluster. The banks had to achieve a delicate balance of mobilizing term deposits by offering relatively higher deposit rates, given the availability of attractive alternate investment avenues including Gold, while simultaneously, ensuring robust CASA deposits. Yet, the deposits growth lagged behind the credit growth by 250 to 300 bps throughout the year. The credit growth was at 14.0% as at end March 2013 as against the RBI’s indicative projection of 16.0%, reflecting muted investment demand. Given the corporate investment slowdown and stalled projects in infrastructure sectors, the banks had to face heightened asset quality concerns.

A broad-based industrial slowdown adversely impacted the asset quality of banks, especially of the state-owned banks as they were the ones who primarily supported productive sectors post the global crisis of FY09. Slowing loan growth weighed on the NIMs (net interest margins) of the banking industry. Low NIMs combined with higher credit costs (provisioning requirements) including the ones on restructured loans depressed the earnings of several banks during FY13.

A sharp drop in new project sanctions during FY12 and FY13 will be felt on the loan demand during FY14, as current pipeline of sanctions is getting exhausted at a faster pace. According to RBI, the non-food credit growth for Indian banks is likely to remain muted at 15.0% in FY14 due to several economic and political uncertainties. While the revival of power, roads, metals and mining sectors depends mostly on government action, the revival of construction and consumer durables is directly related to the overall economic recovery. However, we expect Indian banking industry’s core customer deposit base to continue to provide access to stable funds.

Key Highlights of Bank of Baroda’s Performance during FY13

While operating environment proved extremely challenging during FY13, your Bank could effectively consolidate its business in FY13 and emerged as the largest nationalized bank in terms of global business in the Indian banking space. Your Bank’s Global Business touched a level of Rs 8,02,069 crore as of end-March 2013 by registering a growth of 19.3% over its FY12 level of Rs 6,72, 248 crore.

While the banking industry faced difficulties in mobilizing deposits, your Bank posted an impressive growth of 23.1% in its Global (Total) Deposits. Its Global CASA (Low-cost) Deposits grew by 15.9% (y-o-y) to Rs 1,19,981 crore in FY13 with the Share of Domestic CASA staying at 30.4%.

Your Bank benefited from its strong capital base and liquidity position throughout FY13. Its CRAR (BASEL-II) at 13.30% and Tier-I capital at 10.13% as on 31st March 2013 indicate that your Bank is well capitalized not only for achieving its growth aspirations but also for achieving capital requirements for BASEL-II compliance.

Most importantly, your Bank again proved its strength in the Asset Quality during FY13 by restricting its gross NPA ratio to 2.40% and Net NPA ratio to 1.28% - one of the lowest in the large-sized PSU banking segment of the country.

It may be noted that your Bank responded to the tough economic environment by maintaining its conservative business settings. These include robust capital base, ample liquidity and prudent provisioning. Despite the fact that both retail as well as wholesale funding costs were high during FY13, your Bank remained well funded.

I would now like to discuss the detailed aspects of your Bank’s performance during the year under review.

Global Business

As mentioned before, the Global Business of your Bank reached the level of Rs 8,02,069 crore in FY13 with an annual growth of 19.3%, of which, Domestic Business grew by 17.4% to reach Rs 5,66,000 crore and Overseas Business by 24.2% to Rs 2,36,069 crore. While Global Deposits registered a growth of 23.1% (y-o-y), Global (Net) Advances expanded by 14.2%. In domestic operations, your Bank’s Deposits grew by 22.0% (y-o-y), whereas Advances (net) expanded by 11.0%. Factoring in this performance, your Bank’s market share in Deposits increased from 3.70% in FY07 to 4.35% in FY13 and in Advances from 3.53% to 3.99%.

Your Bank’s Global CASA (Low-cost) Deposits grew by 15.9% (y-o-y) to Rs 1,19,981 crore in FY13 and despite the continuation of rising interest rate scenario in India, the Share of Domestic CASA was protected at 30.4%.

As in the past, your Bank’s Overseas Operations provided a strong support to its overall business growth in FY13. During the year under review, your Bank’s total Overseas Offices increased from 89 to 100. As on 31st March, 2013, your Bank was present in 24 countries with 100 offices.

Total Business of your Bank’s Overseas branches registered a robust growth of 24.2% (y-o-y) in FY13 and contributed 29.4% to your Bank’s Total Business. While the contribution of Overseas operations to your Bank’s Gross Profit was at 24.6%, to its Core Fee-based income (i.e., Commission, Exchanges, brokerage, etc.) was at 34.2%.

Segment-wise Business

Your Bank managed to grow its credit portfolio by 14.2% in FY13 by appropriately tapping the available opportunities in various business segments like large and mid corporates, MSME, retail, agriculture, etc. Your Bank posted a growth of 30.3% in its SME segment; 6.7% in Retail Credit with 13.5% in Home Loans. While your Bank’s Farm Credit remained flat at Rs 28,739 crore (primarily due to a change in regulatory definitions), its Credit to Weaker Sections increased by 7.5%. The Bank’s Credit to Priority Sectors too expanded by 16.6% in FY13 and formed 39.31% of its Adjusted Net Bank Credit.

Net Interest Income & Margins

On the back of subdued demand for credit and elevated costs of funds, your Bank’s Net Interest Income grew by 9.7% (y-o-y) during FY13. Yet, as per the guidance given by your Bank, its Net Interest Margin (NIM) was protected around 3.11% in Domestic Operations and 2.66% in Global Operations due to prudent asset-liability management.


Your Bank’s Operating Profit (Gross Profit) remained in positive growth zone by growing at 4.9% (y-o-y) in the year FY13 to Rs 8,999.15 crore despite limited business opportunities and higher employee expenses. However, the Net Profit for FY13 was lower at Rs 4,480.72 crore versus Rs 5,006.96 crore in FY12 on the back of higher provisions against the NPAs.

As stated earlier, your Bank continued with its prudent approach of maintaining relatively higher provision coverage ratio. Its Loan Loss Coverage Ratio stood at 68.24% as on 31st March, 2013 – much better than its peers from the large-sized PSU banking segment.

Asset Quality

Continued macro weaknesses made quality of assets the prime concern of the Indian banking sector. Yet, your Bank could restrict its Gross NPA to 2.40% and Net NPA to 1.28% during FY13 - the lowest level in the large-sized PSU segment, thanks to your Bank’s well-balanced loan-book, robust systems of credit monitoring and efficient processes of asset recovery. Your Bank’s rigorous follow up of all NPA accounts and timely response to early warning signals resulted in Cash Recovery of Rs 625.57 crore. Your Bank could upgrade accounts to the tune of Rs 340.93 crore to standard category. Moreover, your Bank recovered Rs 352.37 crore from the prudentially written off accounts. Your Bank’s NPA Provision Coverage Ratio stood at the rich level of 68.24% in FY13 – one of the best in the large-sized PSU banking universe.

Cost-Income Ratio

Despite the burgeoning costs on account of branch expansion and modernization and added staff expenses (due to wage-hike related expenses plus pension norms standardization, etc), your Bank’s Cost-Income Ratio was well maintained at 39.79% in FY13 – again one of the lowest for large-sized Indian banks.

Capital Adequacy

Your Bank’s Capital Adequacy Ratio stood at a very high level of 13.30% under Basel II as on 31st March, 2013 with Tier I Capital at 10.13%. During the last quarter of the year under review, Government of India infused capital funds to the extent of Rs 850 crore into your Bank by way of preferential allotment of equity in favour of the Government of India to enable your Bank to support its national and overseas banking operations. With this, the shareholding of Government of India in your Bank increased from 54.31% at end-Mar, 2012 to 55.41% at end-Mar, 2013.

Net Worth

Your Bank’s Net Worth too grew healthily by 17.0% (y-o-y) to Rs 30,714 crore during FY13 reflecting your Bank’s sound financial management.

Return on Average Assets

Your Bank’s Return on Average Assets was protected at 0.90% during FY13 in line with the Top Management’s guidance despite lower business volumes and higher provisioning requirements.

Return on Equity

Despite widening of the equity base, your Bank’s Return on Equity stood at the level of 14.59% as on 31st March, 2013.

Book Value per Share

Your Bank’s Book Value per Share improved from Rs 637.37 in FY12 to Rs 729.69 in FY13, reflecting a growth of 14.5% (y-o-y).

Earnings per Share

Your Bank’s Earnings per Share was also decent at Rs 108.84 in FY13.

Business per Employee

Your Bank’s staff productivity has been improving on a steady basis. Even during the year under review, your Bank’s Business per Employee grew handsomely by 15.2% from Rs 14.66 crore in FY12 to Rs 16.89 crore in FY13.

Your Bank undertook several strategic initiatives during the FY13 to speed up its journey to establish itself as the most admired bank of the country. Let me now elaborate your Bank’s new initiatives during the year under review.

Bank’s Key Strategic Initiatives

Overseas Business

Since its foray into international arena in the year 1953, your Bank has been consistently expanding its overseas presence to tap business opportunities across the world. During FY13, your Bank’s 100th overseas office at DIFC, Dubai was inaugurated by the Hon’ble Union Finance Minister, Government of India to commemorate this historic moment. As on 31st Mar, 2013, the Bank had operations in 24 countries with 100 offices. These 100 offices comprised of 60 branches of the Bank, 39 branches of its overseas subsidiaries and one representative office. Your Bank’s wide international presence provides it with significant risk-diversification benefits across the globe. During FY13, your Bank opened 12 new branches/ offices (including those of the subsidiaries). These were opened at Sydney, Australia; DIFC, Dubai, Sohar, Oman; Rose Belle, Mauritius and Electronic Banking Service Unit (EBSU) at DMCC, Dubai. In addition, the Joint Venture Bank in Malaysia – ‘India International Bank (Malaysia) Bhd. also commenced operations during the year.

Asset Quality

As stated earlier, our country entered the year FY13 faced with a depressed macro-economic environment, which gave rise to the problem of rising delinquencies and loan defaults. To address these concerns, your Bank stepped up its credit monitoring process by taking several initiatives in identifying the incipient sickness/potential default/weaknesses in the advance accounts for taking corrective actions including restructuring in deserving cases, for prevention of slippages and maintaining good asset quality. The Monthly Monitoring Report (MMR) format in respect of advance accounts with “fund and non-fund based” exposure of Rs 10 crore and above was introduced during the course of the year. This enabled speedy and effective monitoring of advances and ensured timely action in respect of stressed accounts. Besides, your Bank also initiated follow up actions for ensuring expeditious review of accounts, compliance of terms and conditions, up-gradation in credit rating etc. in high value advance accounts for improving the asset quality of the credit portfolio.

To address the growing asset quality concerns, your Bank continued its practice of rigorous monitoring and recovery of the NPA portfolio. During FY13, it made all out efforts to maintain the asset quality by laying down a comprehensive structure of recovery and credit monitoring function at the branch, region, zone and corporate office level. Besides this, the Nodal officers at each DRT (Debt Recovery Tribunal) 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. 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. Your Bank continued its emphasis on follow-up mechanism to explore recovery prospects of NPA accounts. The system of monitoring the 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.

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 satisfactory at over Rs 231 crore.

Customer Service

In order to improve the customer service, your Bank introduced an icon for “online complaints” on the Bank’s website, wherein the complainants can lodge their grievances in a simple and easy manner through multiple channels. Furthermore, your Bank installed a KIOSK -- a dedicated computer system at all Zonal Offices along with the Bank’s Head Office, to enable the customers to lodge their grievances/complaints on-line.

Corporate Credit

With the aim of accelerating credit to mid-corporate borrowers and increasing the business in this domain through specialised branches, your Bank set up a new business vertical, i.e., Mid Corporate Segment. In order to have a focused business approach for catering to the valued Mid– Corp borrowers, your Bank opened 16 Mid-Corporate branches (in the first phase) across the country. The focus has been on harnessing Large Corporate business through CFS (Corporate Financial Service) branches and Mid Corporate business through Mid Corporate Branches, thereby maximizing overall earnings from the on and off balance sheet business.

In line with the announcement by the Finance Minister in his Budget speech for FY12, your Bank, co-promoted the country’s First Infrastructure Debt Fund – M/s India Infradebt Limited to facilitate the flow of long term debt fund to Infrastructure sector.

Retail Business

In order to offer attractive returns to the depositors and also to improve its ALM (asset-liability) profiles, your Bank introduced a Term Deposit Product styled as “Baroda Double Dhamaka” on 25th February 2013 offering an interest rate of 9.34% for a period of seven years, six months and five days.

Your Bank strengthened its retail portfolio by effecting major changes in its Home Loan product by increasing the maximum age from 65 years to 70 years and by easing the eligibility criterion to suit the customer requirements. Also, the maximum period of loan repayment was increased to 30 years from 25 years, thus helping borrowers to lengthen their repayment schedule. It was also decided to offer an insurance cover under the Master Group Personal Accidental Policy for Home Loan Borrowers.

MSME Business

To give a boost to the MSME business, your Bank opened five new SME Loan Factories at Indraprastha (New Delhi), Anand, Bhopal, Junagarh, and Jalandhar – taking the total of SME loan factories to 52 across India. The ‘loan-factory’ model is a pioneering concept introduced by your Bank to ensure better quality of credit appraisal, reduced turn-around time and improved volumes – thereby enabling your Bank to increase its MSME lending without sacrificing the quality of credit.

Moreover, your Bank actively participated in various exhibitions and seminars during FY13 to build brand image of the Bank in MSME financing. Additionally, it organized an Awareness Programme in order to achieve total customer relationship through enhanced cross selling, locational meetings, and involvement of trade bodies at the national and state levels. To update the knowledge and skills of the processing and marketing officers attached to the SME factories, your Bank organized external training plus special courses at Training Centers and its own Staff College. The Bank introduced an “online loan application” for MSME borrowers and renewed a number of area specific schemes pertaining to a variety of industries across India during FY13. It also celebrated the MSME Festival during Jan-Mar 2013 to encourage staff at the SME Loan Factories and branches to re-double efforts at canvassing new business.

Priority Sector

Your Bank introduced various strategies during FY13 to tap the emerging opportunities in rural and agriculture banking, the major ones being described below.

In order to augment agriculture advances, your Bank conducted Special Campaigns viz. Kharif and Rabi campaigns for crop loans under which the disbursements of Rs 5,284 crore and Rs 2,262 crore, respectively, were made. Another campaign for Investment Credit was also launched under which disbursements of Rs 1,096 crore were made. The Bank also organized 4,245 Village Level Credit Camps and disbursed Rs 2,922.48 crore to around 2,06,375 borrowers during FY13. It identified 450 Thrust Branches across India to enhance agriculture lending which contributed 36.0% of total agriculture outstanding as at end-March 2013.

Additionally, it formulated various Area-specific Schemes, tailor-made to the local requirements, particularly where there is concentration of activities like cold storages, poultry units, fishery etc. Suitable concessions in the rates of interest, charges, etc. were allowed under these schemes to garner maximum possible business.

Your Bank also introduced an automated loan processing system for improving the efficiency of branches in processing of loan proposals under agriculture thereby facilitating timely availability of credit to farmers in adequate quantity.

Financial Inclusion (FI)

Your Bank has been actively participating in the Direct Benefit Transfer (DBT) scheme of the government and particularly shouldering this responsibility in its 45 lead districts. It made operational the Aadhaar Payment Bridge System (APBS) wherein the benefits are transferred directly into beneficiaries’ accounts based on the Aadhaar number. This means the government agencies need not maintain bank details and account number of beneficiaries. To further smoothen the transactions by using the Aadhaar Enabled Payment System (AEPS) that allows online inter-operable financial transactions by PoS (Micro ATM) through the Business correspondent of any bank using the Aadhaar authentication, your Bank has made it operational by mid-May 2013.

Your Bank continued with full vigour its drive towards FI. It opened 170 branches in rural operations of which 101 were opened in unbanked rural centres during FY13. It established 2,695 Ultra Small Branches across the country during the year under consideration. For MGNREGA transactions, your Bank set up a Pilot Project for Sanganer Block in the state of Rajasthan during the year and processed 9,593 transactions amounting Rs 86.55 lakh. Under APBS, your Bank linked 1, 31,735 Adhaar Cards and provided credit to 6,635 beneficiaries amounting to Rs 49.02 lakh.

Under its FI plan for FY14, your Bank plans to open new physical branches in 200 unbanked villages; set up a Business Correspondent model in 3,700 villages, introduce banking through Mobile Vans in 1,400 villages and establish Kiosk model in 1,000 villages. Cumulatively, your Bank will cover additional 6,300 unbanked villages under its FI plan during FY14.

Information Technology Structure

To encourage the usage of alternate delivery channels, your Bank completely revamped its Internet Banking, viz., Baroda Connect (Retail portal) by enhancing its “look and feel” and promoting the user friendliness. Moreover, 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 was made available on all Smart-phones/ tablets offering comfort of anywhere banking to its customers. Internet Banking was also extended to 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 internet banking in Australia during FY13. A view-based e-banking was provided in all the RRBs sponsored by your Bank. In order to enhance security and confidence in the Internet Banking, your Bank introduced enhanced security features by deploying 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.

To encourage your Bank’s customers to use mobile banking, your Bank added several new features. Your Bank proposes to enable Mobile Banking application for Windows8, and implementation of Mobile banking in Uganda and UAE. Your Bank has also initiated implementation of Mobile banking in its sponsored RRBs.

Your Bank’s ATM Switch was upgraded during the year under review to a higher version along with a hardware up-gradation with many enhanced features for better performance, speedy ATM transactions and ease of ATM expansion during the year. Your Bank could successfully launch the Rupay ATM and Rupay KCC cards for its RRBs during the year under review.

Your Bank is regularly conducting VAPT (Vulnerability Assessment & Penetration Testing) of external facing applications, e-banking log monitoring, etc. Even for its branches, your Bank heightened the security systems by enabling a Fraud Risk Management system for day-to-day monitoring of suspicious transactions at branches.

Human Resource Initiatives

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 Indian banking industry.

Your Bank has taken a major step to develop the next line of leaders for the future by putting in place a Talent Management System which proactively identifies future potential leaders to cater to the leadership gaps likely to arise in the next five years. Your Bank has developed a scientific manpower planning model to estimate manpower needs by level, skills and by branch. It has also done a strategic workforce planning for the next few years to feed into various other HR functions like recruitment planning, career progression vacancies and postings/deployment, etc.

In order to make the large number of fresh recruits productive in the quickest possible time, your Bank has initiated a very structured “On-Boarding Programme” consisting of both functional and cultural components which would enable employees to be work-ready quickly and also help in their cultural assimilation within the Bank.

Another major initiative is the Baroda Manipal School of Banking jointly taken by your Bank and Manipal Global education to train students for a banking career within your Bank 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 leads to the award of a post-graduate diploma in Banking and Finance, before they are absorbed in the Bank as Probationary officers.

Risk Management

To ensure sustainable and consistent growth, your Bank has developed a sound risk management framework so that the risks assumed by the Bank are properly assessed and monitored on a continuous basis. Your Bank’s Board has put in place a robust Enterprise-wide Risk Management architecture so that the risks remain within the risk appetite defined by the Board.

In your Bank, the Funds Transfer Pricing (FTP) process is getting configured using the best practice methods and policies. Your Bank is implementing OFSAA (Oracle Financial Services Analytical Applications) Funds Transfer module which facilitates transfer pricing at an account level based on Matched Maturity concept.

It may be noted that the RBI made a transition from CAMELS based Supervision to Risk Based Supervision (RBS) approach from 1st April 2013 for our Bank. The RBS approach requires that the Bank should reorient its organizational set up so as to have (i) efficient risk management architecture (ii) risk focused internal audit (iii) strong management information system and information technology support (iv) mechanism to address HR issues pertaining to risk management and (v) clearly defined standards of corporate governance and compliance function. Your Bank’s Board had already assessed your Bank’s preparation in this regard in Nov, 2012 and your Bank is fully geared to function under this new framework.

Under the Basel II/ Basel II regimes, Capital Adequacy is not the sole evidence of the soundness of any bank. The supervisory review process under Pillar 2 of Basel II framework is intended to ensure not just that banks have adequate capital to support risks in their business but also to ensure that they have proper risk management architecture to monitor and manage risks. Towards this end, your Bank has already put in place the Internal Capital Adequacy Assessment Process (ICAAP) and mechanism for Supervisory Review and Evaluation Process (SREP). Your Bank has developed an appropriate Corporate Governance mechanism including a strategy and processes to assess the inherent risks and remedial actions to ensure that they are within the prudential limits.

While your Bank has made a successful migration to Basel II framework, with the preponderance of common equity in the Tier I capital as well as Total Capital of the Bank, your Bank does not envisage any difficulty in implementing the Basel II capital rules.

Awards & Accolades

During FY13, your Bank received several awards for its excellent performance across various Business & Financial Parameters and also for Superior Leadership.

Some of these awards included- Bloomberg UTV Financial Leadership Award –Best PSU banking; Dun & Bradstreet – Polaris Financial Technology Banking Awards; Best Public Sector bank under the category Global Business Development-Overall Best Public Sector Bank; Banking Technology Award-2011 by IBA; Use of Technology in Training & e-learning – Winner; Best Customer Relationship initiatives – 1st Runner up; Best use of Business Intelligence – 1st Runner up; Best use of mobility tech in Banking – 2nd Runner up; Best Risk management & Security initiatives – 2nd Runner up; Business India Best Bank Award 2012; Forbes India Leadership Award – Best CEO Public Sector; CNBC TV18 – ‘India Best Banks and Financial Institutions Award 2012’ – Best Public Sector Bank; Best Large Bank 2012 – Business World November 26th 2012 Issue; Best Large Bank 2012 – Business Today – KPMG – December 2012; Business Standard Banker of the Year (2011-12); FE Best Banks Award 2011-12 for ‘Best PSU Bank’ awarded by Financial Express Group; “Strategic Communication and Leadership Award” by Asian Confederation of Business and World CSR Congress at Corporate Affairs Award Ceremony.

While these awards and titles mean recognition for your Bank’s superior performance, they also bring more responsibility to it. The Team Baroda is aware that all stakeholders expect much more from the Bank now.

The Team Baroda has to live up to these expectations and let me add that we find this an exciting challenge to meet.

The Road Ahead

The economic outlook for FY14 is promising on account of easing of headline (WPI-based) inflation and gradual narrowing of trade deficit. Furthermore, the prospects for the Indian economy have also improved due to falling international commodity prices, expansionary global liquidity conditions and probable good monsoon. Also, there would be fiscal stimulus ahead of the general election in 2014 that would support the economy. Moreover, the Cabinet Committee on Investments (CCI) is fast tracking the projects that were stalled for a long time. There are encouraging signs of progress on power debt restructuring. The interest rates have also begun softening which should promote the investment demand.

Against this backdrop, your Bank will continue to grow its business sustainably in FY14 also. In order to achieve this goal, your Bank would focus on people, processes and technology following a strict code of business conduct and ethics.

Today, your Bank is in a position of strength, driven by a strong balance sheet, good deposit franchise, rich capital adequacy, consistent leadership and prudent risk management systems.

For the year FY14, the motto of your Bank is designed in such a manner that it refocuses the Bank towards addressing the current concerns and ensures a strong path forward.

“BACK To BASICS” is the motto of your Bank for FY14.

“BASICS” is defined in such a manner that each letter represents the critical banking function.

B for – Business growth (to increase the market share)
A for – Asset Quality (to be kept the highest)
S for – Solvency & Liquidity (to be maintained through proper ALM)
I for – Innovation (to be the key differentiator)
C for – Customer Centricity (to be the key driver)
S for – Systems & Procedure (to be continuously updated to support above pillars)

To further sharpen the focus, your Bank has recently created two new business verticals, notably the “Deposit Resources, Wealth Management & Marketing” and the “Government Business”.

During FY14, your Bank plans to open 625 new branches under its Branch Expansion Plan across India. It also plans to enhance its self-service channels significantly with the objective of providing world class hassle free services to its customers. It proposes to add 3,500 additional ATM s and cash dispensers plus “self-service passbook printing kiosks” in 1,500 branches and also 25,000 POS (Point of Sale) machines. It plans to deploy 100 bunch note acceptors, 50 self-service 24×7 e-lobbies equipped with cash dispensers, cash acceptors, cheque deposit machines, internet banking kiosks, self-service passbook printing kiosks, and hotline to the Bank’s contact centers. Your Bank also proposes to develop single note acceptors for cash acceptance in smaller centers.

Your Bank plans to focus on mobilizing low cost CASA deposits and re-balancing the credit portfolio more in favour of retail, SME and agriculture. Your Bank also proposes to focus on non-interest income and prudent control over expenses. Furthermore, your Bank would pursue prudent management of bad debts by containing slippages.

We remain totally committed to our “Growth with Quality” model that has performed well during this difficult economic period. We are also committed to growing your Bank in a consistent and profitable way. Your Bank has all fundamentals in place to deliver improved results in the financial year FY14. Your Bank is well capitalised; it has sound asset quality; it has enjoyed consistent leadership; and its liability franchise and liquidity are very strong. Your Bank’s management of risk and controls has been significantly strengthened in the aftermath of global financial crisis.

Cashing in on these strengths, I am very confident that your Bank’s Board and Management will continue to grow the value for all its stakeholders in the coming year and thereafter.


I would like to take this opportunity to thank the Members of the Board for their valuable guidance, support and prudent counsel. I and my colleagues on the Board place on record our appreciation for continued support and guidance received from the Government of India, RBI, SEBI, other regulatory authorities, various financial institutions, banks and correspondents in India and abroad.

We also place on record our appreciation for the unstinted trust and support of our customers, shareholders, investors and vendors.

As in the past, our performance during FY13 was driven by the dedication and commitment of our employees. On your behalf as well as on behalf of the Board of Directors, I salute the employees of the Bank on another impressive performance for the year FY13.

Before I conclude, I would like to thank all of you for your presence and interest in the Bank.

Thank you.

Chairman and Managing Director

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