" A Resilient
SHRI S. S. Mundra
Chairman & Managing Director
AT THE 17TH ANUAL GENERAL METING OF THE SHAREHOLDERS
OF THE BANK HELD AT SIR SAYAJIRAO NAGARGRIHA,
VADODARA MAHANAGAR SEVA SADAN,
BANK OF BARODA CENTENARY YEAR (2007-2008),
T.P. - 1, F.P. 549/1, NEAR GEB COLONY,
OLD PADRA ROAD, AKOTA, VADODARA – 390020.
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
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
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.
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%.
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.
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.
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.
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.
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
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
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.
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.
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.
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.
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.
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.
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
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
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
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
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
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
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
S. S. MUNDRA
Chairman and Managing Director