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" A Credible Show in Tough Times "

S. S. Mundra
Chairman & Managing Director

Dear Stakeholder,

I am delighted to report that during the year 2013-14 (FY14), Bank of Baroda delivered a healthy performance that is consistent with our guidance and promise to our stakeholders. With the help of our well crafted business model, we reaffirmed our standing as the largest nationalised bank of India in terms of total business. Moreover, we continued to make strong progress in our financial soundness indicators that are at the heart of our business strategy.

At this point, I deem it most appropriate to review the macroeconomic environment, within which Bank of Baroda operated during FY14.

Indian Economic Review

India’s underlying economic growth trends remained weak during FY14. The Central Statistical Organisation has estimated Indian economy to have grown by 4.9% in FY14, a shade lower than the government’s earlier projection but marginally above 4.5% clocked in FY13. While the farm sector has registered a healthy growth of 4.6%, a deep slowdown continued in the mining and manufacturing sectors that suffered from low investment sentiment, weak demand and policy bottlenecks. This is the first time since 1991-92 that India’s manufacturing sector has contracted, reflecting the stress confronting the sector. The services sector that accounts for nearly 60% of the economy, is expected to grow 6.9%, slightly slower than the previous year’s expansion of 7.0%.

High and persistent inflation remained a key macroeconomic challenge facing India throughout the year FY14. While the WPI-based inflation averaged at 5.92% in FY14, the CPI-based (retail) inflation averaged at 9.49%. The high inflation was a result of a number of factors, including elevated food prices feeding quickly into wages and core inflation, entrenched inflation expectations, sector-specific supply constraints particularly in agriculture, energy and transportation, the pass through from a weaker rupee and continuous upward adjustment in fuel prices.

Around June-July, 2013, India was faced with significant debt capital outflows and pressures on its currency, equity and bond markets, as global liquidity conditions tightened. Investor concerns were amplified with India’s high current account and fiscal deficits, persistent inflation and weaker macroeconomic fundamentals. The Reserve Bank of India (RBI) controlled the situation by tightening liquidity, relaxing limits on foreign direct investments (FDI) and external commercial borrowings (ECBs), encouraging non-resident Indian remittances and sharply increasing gold import duties.

Persistent inflation worries and external sector vulnerabilities prompted the RBI to raise the key policy rate – Repo rate by 75 bps between early May, 2013 and end Jan, 2014 despite growing industrial weaknesses.

On the reforms front, India’s parliament passed the land acquisition, pension and companies bills during FY14 and the Cabinet Committee on Investments (CCI) approved a sizeable quantum of previously stalled infrastructure projects. On the fiscal front, measures were implemented to raise diesel prices and reduce the financial losses of state electricity boards.

India’s external vulnerabilities fell significantly in the second half of FY14, helped by policy actions to shrink the current account and strengthen capital flows.

The Interim Budget presented by the government for FY15, reflected continued fiscal consolidation, with a fall in the fiscal deficit from 4.9% of GDP in FY13 to 4.6% of GDP in FY14 (as per the revised estimates) and further to 4.1% of GDP in FY15. While the revised estimate of fiscal deficit is lower in FY14, it is achieved by a reduction in plan revenue expenditure and capital expenditure. The subsidies, interest payments and pension have overshot the budgeted target.

Against the backdrop of a slowdown in the domestic economy and tepid global recovery, the growth of Indian banking sector too remained under pressure in FY14. Both deposits and credit grew at a slower pace of 14.6% and 14.3%, respectively on account of high inflation and subdued loan demand. The elevated deposit rates combined with lower credit volumes suppressed the net interest income of commercial banks. Moreover, as a result of the challenging macroeconomic environment and worsened repayment capacity of borrowers, banks’ asset quality deteriorated further in FY14 with a swollen pipeline of restructured assets.

However, banks with relatively stronger systems of credit monitoring and cash recovery were better equipped to shoulder this challenge and delivered a sound performance during FY14 despite stressful macroeconomic environment.

Bank of Baroda: A Credible Show in Tough times

During FY14, your Bank was able to post strong growth of 20.4% (y-o-y) in global business supported by 20.1% in global deposits and 21.0% growth in global advances despite sluggish economic environment. A major part of this growth was driven by two initiatives in the past one year – a) set up of a new vertical for mobilization of deposit resources and b) focused efforts to diversify its loan-book in favour of retail, MSME and agriculture credit, as opportunities in large-sized corporate segment had dried up.

Your Bank’s international business too grew at a stronger pace of 33.3% (y-o-y), partly driven by massive rupee depreciation during FY14. Healthy mobilization of domestic CASA deposits at the rate of 16.0% (y-o-y) and shedding of high-cost preferential deposits helped your Bank defend its NIM in domestic operations at 2.87% in FY14.

Supported by healthy Net Interest Income (at Rs 11,965 crore), Core Fees (Rs 2,117 crore), Treasury Gains (Rs 1,783 crore) and Recoveries from Written-Off Accounts (Rs 563 crore) combined with prudent control over Total Expenses (up 14.4%, y-o-y), your Bank posted Gross Profit at Rs 9,291 crore (up 3.2%, y-o-y) and Net Profit at Rs 4,541 crore (up 1.3%, y-o-y) during FY14.

Your Bank’s incremental slippages and additions to restructuring pipeline kept on declining sequentially throughout the year FY14 in line with the Bank’s guidance at the beginning of the year. Between the third quarter and the fourth quarter of FY14, your Bank’s Gross NPA declined from 3.32% at end-December, 2013 to 2.94% at end-March, 2014 and Net NPA declined from 1.88% to 1.52%. Improvement in asset quality was broad-based and partly driven by asset sales worth Rs 671.93 crore in Q4, FY14. Restructuring activity too remained low in FY14 as compared to its level in FY13.

The Bank’s Provision Coverage Ratio (PCR) too improved sequentially from 61.68% in Q2, FY14 to 62.22% in Q3, FY14 to 65.45% in Q4, FY14. As you know, PCR is a macroprudential measure, with a view to augmenting provisioning buffer in a counter-cyclical manner, when the banks are making good profits.

Your Bank’s Capital Adequacy Ratio continued to reflect its capital strength. The CRAR was 12.87% in terms of Basel II and 12.28% in terms of Basel III at end-March, 2014.

In nutshell, your Bank further strengthened its financial position in the Indian banking space during FY14 supported by its cautiously optimistic business model, lower risks on asset quality, focus on CASA deposits and strong capital positioning.

Strategic Initiatives during FY14

Corporate Credit

The year FY14 was marked by low credit appetite by the corporate sector on account of weak investment sentiment. Your Bank had to think innovatively to garner relevant corporate business opportunities. During FY14, your Bank introduced a new product christened as “Top-Up Facility” for meeting the working capital requirements of corporates. Additionally, your Bank also reviewed and revisited the features of existing products to make them more competitive such as Corporate loans, Bid Bond Guarantees, Loans against future receivables etc. Moreover, your Bank rationalized the interest rate structure so as to spur the overall investment sentiment.

As a strategic business decision, your Bank’s Project Finance Department was hived off during FY14 and merged with Baroda Capital Markets Ltd, which has a dedicated team of professionals. Baroda Capital Markets Ltd. now supports the Bank’s Corporate Credit Division by undertaking Techno Economic Viability (TEV) studies and arranging funds for corporates by way of Loan Syndication, etc.

Retail Business

With the purpose to place special emphasis on deposits as an important resource, your Bank created a new business vertical “Deposit Resources” so as to create a strong liability franchise and generate synergy in business models. This new vertical focuses on ensuring consistent and significant growth in Low-cost Deposits (CASA) and Retail Term Deposits. A number of initiatives were undertaken during the year FY14 for strengthening and reviving the relationship with existing customers for improving CASA deposits and promoting debit cards. Furthermore, some special drives were launched for activation of dormant accounts.

From the assets side also, your Bank placed added thrust on retail business to make its loan-book more balanced. To achieve this, your Bank reduced the rate of interest on Baroda Housing Loan so as to make it attractive and competitive. The Baroda Housing Loan was made available at Base Rate, i.e., at 10.25% for any amount and any tenure to new as well as existing borrowers. The rates were also reduced and made attractive on products like Loan against Future Rent Receivables, Car Loans, etc.

Encouraged by the success of its novel business model – Retail Loan Factory (RLF) - your Bank opened five New RLFs at Bharuch, Junagarh, Visakhapatnam, Meerut and Moradabad during FY14 taking the total strength of RLFs to 45.

MSME Business

A number of initiatives were taken by your Bank to support the MSME sector, given its potential to generate employment and growth. First of all, the rate of interest on MSME loans was rationalized in June 2013 to make such loans more attractive and competitive. Your Bank also introduced a new product named as “MSME Capex Loan and Capex Card'' during FY14 to take care of this sector’s specific requirements. To further promote its MSME business, your Bank celebrated MSME Festival from 1st November 2013 to 28th February 2014. In the larger interest, to deliberate on the issues facing the MSME sector, your Bank organized the MSME Conclave with heads of its SME Loan Factories and also arranged the MSME Round Table conference at various places.

Your Bank has a rich set up of 52 SME Loan Factories (SMELFs), which sanctioned loans to the tune of Rs 17,230 crore during the financial year under review.

Priority Sectors

Considering the significance of agriculture in the socioeconomic fabric of India, your Bank launched Agriculture Loan Factories (in line with the Retail and SME Loan Factories) in FY14 for bettering customer service and improving the volume and quality of agriculture advances. These factories are expected to help your Bank to lay specific focus on agriculture loans. As in the past years, your Bank conducted Special Campaigns during FY14 to augment agriculture advances in both the Rabi and Kharif seasons.

Furthermore, your Bank introduced tailor-made area specific schemes to cater to the specific needs of the local farming community. Appropriate concessions in interest rates and charges were given to retain its attractiveness. Your Bank strongly supported the growth and development of social sectors through its various outfits like Baroda Swarojgar Vikas Sansthan (BSVS), Baroda R-Seti Centres, Financial Literacy Centres and Micro Loan Factories.

Financial Inclusion

Your Bank has been a frontrunner in the Financial Inclusion efforts. It looks at it not just as a social commitment but as an effective and profitable business proposition. As per the targets set under the three-year plan period i.e. for 2013- 14 to 2015-16, your Bank has achieved the annual targets of village coverage well ahead of its timeline for the FY14.

Moreover, it launched the Kiosk Banking Model by virtually inaugurating 1,000 Kiosks on its 106th foundation day, i.e. 20th July 2013. It may be noted that your Bank has arrangements with Common Service Centers (CSCs) to avail their services as Business Correspondents for running the Kiosk centers. These centers are ICT enabled frontend service delivery points at the village level and urban centers for delivery of government, financial, social and private sector services in the areas of agriculture, health, education, entertainment, banking, insurance, pension, utility payments, etc.

During FY14, your Bank began addressing the issue of urban financial inclusion by launching Urban Kiosks at Abgaonkala in Harda district of Madhya Pradesh on 19th January 2014. As on 31st March 2014, your Bank set up more than 1,000 Urban Kiosks at various locations across the country.

Asset Quality

Depressed macro-economic environment for more than two years continued to haunt the productive sectors during FY14 also, as a result of which, the asset quality in the banking Industry remained under stress. However, your Bank with its rigorous credit monitoring and NPA recovery systems was able to arrest effectively the rising trend in slippages during the year under review.

From day one of the year FY14, your Bank kept a close watch on potential NPAs. For this, it constituted a Slippages Prevention Task Force (SPTF) at the regional level to keep a tab on stressed accounts. Each and every borrower’s account was tracked closely to avoid any last minute rise in NPAs. Besides this, the nodal officers at each DRT (Debt Recovery Tribunal) centre were assigned the role of a follow-up of legal case on day to day basis so as to minimize delays in obtaining decrees and execution thereof in order to expedite and maximize recoveries.

Your Bank organized a number of Lok Adalats and Recovery Camps at village/ town level to provide special focus on recovery of small accounts. Your Bank also launched an incentive-linked recovery scheme “Sankalp VI”, to enlist personalized attention of each and every staff member in pursuing recovery efforts in small value accounts with an outstanding up to Rs 25 lakh and recovered Rs 155.19 crore during FY14 under the said scheme.

As a part of its strategy of NPA management, your Bank put for sale of NPL accounts under individual as well as portfolio sale categories during the last quarter of FY14 and elicited good response from the market. In fact, it could sell 23 accounts (with outstanding dues at Rs 671.93 crore) and realized against them Rs 522.21 crore in a combination of cash and security receipts.

Customer Service

In Bank of Baroda, we believe in providing worldclass customer service with a personal touch and we continuously strive towards improvement. Towards this goal, your Bank has been effectively using technology. For instance, your Bank has a web-based online complaint registration and redressal system in the name of Standardized Public Grievance Redress System (SPGRS). An icon is provided on your Bank’s website through which the Bank’s customers can lodge complaints online. The system not only facilitates a speedy redressal but also enables the Bank to maintain centralised data-base of all complaints. Recently, your Bank has modified the SPGRS so that even non-customers can lodge their complaints and/or suggestions. Moreover, your Bank’s customer can re-open their complaints within 15 days, if they are not satisfied with the redressal system.

Information Technology Structure

Your Bank has been using Information and Communication Technology (ICT) not only to improve its own internal processes but also to increase facilities and services for its customers.

To enhance the customer experience in alternative delivery channels, your Bank revamped its Internet Banking, viz., Baroda Connect to a great extent during FY14 to enhance its look and feel, user-friendliness and also added more facilities. Thus, the Baroda Connect now offers a host of facilities ranging from creation of online FDR, recurring deposits to tax payments, online donations to various institutions, payments of premiums, aadhaar seeding through internet banking, IMPS (Immediate Payment services) among the others. Moreover, Internet Banking facility was made available on all smart-phones/ tablets offering comfort of anywhere banking to its customers. Internet Banking is now extended to your Bank’s 14 overseas territories viz. Tanzania, Uganda, Kenya, Mauritius, Seychelles, Botswana, New Zealand, UAE, Fiji, UK, Oman, Ghana, Australia and USA. Internet banking is also provided in all the RRBs sponsored by your Bank.

Mobile Banking - one more alternate delivery channel that offers various facilities to your Bank’s customers, viz., balance enquiry, mini statement, fund transfer, stop payment, cheque status, debit card blocking, and other services. To widen the usage of Mobile banking application, your Bank made it available in all i-Phones and i-Pads in addition to Blackberry, Android, and Windows devices. Immediate Payment Services (IMPS) was also implemented in FY14 covering Person to Account (P2A), Merchant Payments (P2M), Aadhaar based remittance (P2U).

Through e-Lobbies, your Bank has moved on to the next level of customer engagement by enabling 24 X 7 services for its customers by installing devices like Bunch Note Acceptors, Self-Service Pass Book Printers, Cheque Deposit Kiosk, Internet Banking Kiosks in these e-Lobbies.

To ensure the safety of transactions through alternate delivery channels, with the cyber-attacks being unpredictable and electronic payment systems vulnerable to new types of misuse, your Bank initiated various additional security measures such as issuing debit and credit cards only for domestic usage unless international usage is specifically sought by the customers, converting existing MagStrip Cards to Europay MasterCard and Visa (EMV) Chip card, installation of PIN enabled POS machines and introducing additional security in the form of Digital signatures for Corporate Internet Banking.

During the year FY14, your Bank installed 3,624 new ATMs, opened 45 e-Lobbies and provided a number of Bunch Note Acceptors, Self-service Pass book Printers, etc. to its branches. Your Bank also provided Note Counting Machines to almost all its branches and strengthened the structure of its Retail and SME Loan Factories – to mobilise business with quality. In short, Information Technology has made a visible difference in the functioning of your Bank and conduct of its banking operations.

H. R. initiatives

Your Bank has been pursuing a balanced and comprehensive Human Resources policy in view of various challenges faced by the public sector banks in the form of large retirements, massive induction of talent, and huge training requirements. Your Bank has launched “Career Portal” on its website which projects the unique aspects of working at Bank of Baroda. This has helped in providing a huge impetus to the “Employer Branding” of your Bank.

During FY14, your Bank further strengthened its “Onboarding Programme” which aims at cultural assimilation of new recruits into this institution by introducing a Mentoring programme “Baroda Sarthy”. Under “Baroda Sarthy”, a senior employee – the Mentor handholds the new entrant to enable his or her smooth transition into the Bank and helps him or her adapt to the value system and working of your Bank. Besides, your Bank has also implemented Talent Management System. This system proactively identifies future potential leaders based on various criteria and also grooms them through a systematic developmental plan.

To enhance the “Employee Engagement”, your Bank undertook various initiatives like conduct of satisfaction surveys and workshops for interaction between juniors and seniors. These workshops were conducted to improve the employee connect with HR and top management. Furthermore, to reward the top performers, your Bank very recently launched a revised performance linked incentive scheme for its employees.

Against the backdrop of massive recruitments in view of large retirements, training and developments of new recruits has assumed significant importance. In the context of the growing competition, your Bank created a new functional position as Chief Learning Officer (CLO) in the Bank. The CLO is of the level of a General Manager and supports the organization through learning interventions.

A good number of innovative steps were taken by your Bank in training as well. The training system of your Bank bagged the National Award for Innovative Training Practices in various industries by securing third position, awarded by the Indian Society for Training & Development (ISTD) during the current year.

Your Bank has a Board approved comprehensive training policy so that it covers the entire spectrum of training activities. The training is imparted for improving the understanding of different products of the Bank. The training is conducted either within the Bank or through external training programmes so that employees are able to learn and adopt best industry practices with a wider perspective. During FY14, the external training programmes were organized at various prestigious organizations such as International School of Business (ISB) Hyderabad; International Management Institute (IMI), New Delhi; Centre for Organization Development, Hyderabad; University of Mumbai; Manipal Academy of Banking, Bangalore and other such institutes.

Risk Management

Significant emphasis is placed in your Bank on improving risk assessment standards and credit monitoring process to identify stressed borrower at an early stage. Your Bank has well-defined policies to address various risks – Credit Risk, Market Risk, Operational Risk, Liquidity Risk, etc., and the Bank sees to it that all these risks remain well within the risk appetite defined by its Board of Directors.

By taking a series of measures, including building bank-wide risk management systems, streamlining business processes, innovation and improving management tools and methods, your Bank further solidified its management of all types of risks during the year FY14 to support the needs of its various business lines.

In the year under review, your Bank reviewed its risk management architecture to prepare for advanced approaches under the Basel II framework. Your Bank applied for moving to Foundation IRB approach (i.e. foundation internal ratings based approach) of Credit Risk and received approval from the RBI for a parallel run. For Market Risk, your Bank has been developing a Global Mid Office in Mumbai, which will facilitate a cost-efficient and more effective way of measuring, monitoring and reporting the Market Risk positions in its global operations as per the Internal Modelbased approach under the Basel II norms. In the area of Operational Risk, your Bank is implementing the best available solutions, which will enable the Bank to analyze and control its Operational Risk in a more sophisticated and effective manner. On implementation of the said Solution, your Bank’s preparedness for the quantitative and qualitative requirements of “Advanced Measurement Approach for Operational Risk” will be fully met.

In order to rationalise Transfer Price Mechanism, your Bank has initiated the process of switching over from the existing manual procedure to a new system-based solution using the software OFSAA V 6.X Module, which will make the exercise more scientific and realistic.

You may be aware that in India, with effect from April 1, 2013, Basel-III capital regulations have begun to be implemented. Your Bank has already made all transitional arrangements for a smoother transition to this new capital framework by March 31, 2019.

Overseas Business

The overseas business of your Bank continued to contribute significantly to its overall (global) business. Your Bank’s wide-spread overseas presence provides it with significant risk diversification benefits across the globe. Your Bank’s large network of branches in overseas territories and its continued thrust on overseas expansion helped exploit rich business opportunities even during FY14. As of 31st March 2014, it had operations in 24 countries with 102 offices. These 102 offices comprised of 60 overseas branches of your Bank, 41 branches of its overseas subsidiaries and one representative office. During the year under review, your Bank opened three new branches/offices, i.e. an Electronic Banking Unit at Shabiya, UAE and two branches of the overseas subsidiaries at Kariakoo in Tanzania and Kololo in Uganda.

Key Achievements in FY14

In spite of the challenging business environment, your Bank ended the year under review with a strong set of results.

  • Your Bank’s Global Business expanded by 20.4% (y-o-y) to Rs 9,65,900 crore by end March 14. Within this, Domestic Business expanded by 15.1% to Rs 6,51,223 crore and Overseas Business increased by 33.3% to Rs 3,14,677 crore.

  • Global Deposits registered a growth of 20.1 % (y-o-y) to Rs 5,68,894 crore by end March 14. Within this, Domestic Deposits expanded by 10.9% to Rs 3,79,054 crore and Overseas Deposits rose by 43.6% to Rs 1,89,840 crore.

  • Amidst aforementioned challenges, Your Bank’s CASA Deposits increased by 22.19% (y-o-y) to Rs 1,46,488 crore.

  • Share of Domestic CASA as on 31st March 2014 stood at 31.76%.

  • Global Advances increased by 21.0% (y-o-y) to Rs 3,97,006 crore by end-March 14. Within this, Domestic Advances rose by 21.3% to Rs 2,72,169 crore and Overseas Advances surged by 20.2% to Rs 1,24,837 crore.

  • Retail Credit of your Bank increased by 21.0% (y-o-y) to Rs 46,019 crore during FY14, of which Home Loans increased by 21.9% to Rs 19,558 crore.

  • Your Bank’s SME Credit portfolio increased by 21.2% (y-o-y) to Rs 56,634 crore by end- March 2014. Farm Credit increased by 2.8% and reached the level of Rs 28,432 crore and Credit to Weaker Sections increased by 20.9% to Rs 20,599 crore.

  • Your Bank’s Operating Profit stood at Rs 9,291 crore (up 3.2%, y-o-y) and Net Profit at Rs 4,541 crore (up 1.3%, y-o-y) in FY14.

  • Return on Average Assets (ROAA) stood at 0.75% in line with market expectations.

  • Despite capital infusion, Return on Equity (ROE) was protected at 13.0% as on 31st March 2014.

  • Your Bank managed to protect its NIM at 2.87% in Domestic Operations and at 2.36% in Global Operations during FY14 despite sluggish credit demand.

  • Given your Bank’s prudent approach, its Provision Coverage Ratio consistently improved throughout the year and stood at 65.45% as on 31st March 2014 – much higher in relative terms compared to its peers.

  • Your Bank’s Capital Strength gets reflected in its Capital Adequacy ratios. Its CRAR (Basel II) was at 12.87% and Tier I capital at 9.54% as on 31st March 2014. Its CRAR (Basel III) was at 12.28%, Tier 1 Capital at 9.28% & Core Tier 1 Capital at 8.95% as on 31st March 2014.

  • Your Bank’s Cost-Income Ratio continued to be at a relatively lower level of 43.44% for FY14.

  • While its Earning per Share stood at Rs 107.38, its Book Value per Share stood at Rs 813.50.

Awards & Accolades

During the year FY14, your Bank received several awards for its noteworthy performance across various business and financial parameters. The major ones were as follows.

  • Best Public Sector Bank under the category ‘Global Business Development’ by Dun & Bradstreet – Polaris Financial Technology Banking Awards 2013.

  • Banking Technology Excellence Award 2013 among PSBs by IDRBT.

  • Your Bank was awarded 1st Rank in the Public Sector Bank Category in Financial Express-Ernst & Young Best Banks Survey 2012-13 published in The Financial Express Magazine March 2014 issue.

  • MSME Banking Excellence Award-2013 as the Best Bank in MSME by the Chamber of Indian Micro Small and Medium Enterprises.

  • The Sunday Standard Best Banker’s Award – Best Banker-HR constituted by The New Indian Express Group.

  • ASSOCHAM 9th Annual Banking Summit –cum-Social Banking Award 2013-Winner in Public Sector Banks Category in the field of ‘Social Banking’.

  • “Excellence in Home Loan Banking” Award by My FM Stars of the Industry.

  • The ‘Global Excellence and Leadership Award’ in the category of 50 most talented CSR Professionals of India by the World CSR Congress.

These awards and recognition are particularly valuable, as they acknowledge the merits of your Bank’s successful business model that made a difference to the nation’s progress.

Looking Forward

We expect India’s economic growth to revive during FY15 on the back of political stability and likely stepping up of economic reforms. The growth in FY15 is expected to be spurred by the revival of investment, a boost to investment and consumer sentiment, continuing gains in employment and incomes and a firming in exports. With GDP growth expected to pick up, banking business is likely to witness higher optimism during FY15. According to India’s largest credit rating agency CRISIL – credit quality pressures are bottoming out for the Indian banking industry, even though improvement will be gradual due to continued economic uncertainties.

During FY14, Bank of Baroda made significant progress towards building a preferred bank for its stakeholders. Despite challenging environment, its earnings remained resilient; its fresh slippages started easing and its strong funding position enabled it to continue to support its borrowers.

During FY15, Bank of Baroda will continue to focus on further strengthening its capital and funding position so as to grow its business sustainably. Your Bank is confident that with its strategic focus on people, processes and technology, it will remain in the leadership position in the emerging business environment.

Bank’s Corporate Goals and Strategy

Supported by its achievements during FY14, your Bank has selected a motto that aptly described its commitment to move ahead in the global banking space. The Bank has identified “RACE AHEAD” as its motto for the FY15. The word RACE denotes the following:

R for – Retail Leaning

A for – Asset Quality

C for– Capacity Building

E for – Earnings

Your Bank believes that focusing on these four aspects should help it in not only achieving a significant business growth but also improve its profitability and soundness indicators.

To strengthen the approach towards Retail Leaning, your Bank will emphasize on aggressively canvassing low-cost current and saving deposits plus retail term deposits as against the high-cost bulk deposits. Simultaneously, the focus will be on Retail Credit, MSME and Agriculture credit to make the loan-book more diversified.

Similar to its efforts to improve Asset Quality management in FY14, your Bank will focus on credit monitoring, NPA recovery and up-gradation in a big way and further arrest the fresh slippages.

Capacity Building is another area where your Bank has been investing significantly. During FY14, your Bank opened 601 new Branches, installed 3,624 new ATMs, opened 45 e-Lobbies and provided a number of Bunch Note Acceptors, Self-service Pass book Printers, etc. to its branches. Your Bank also provided Note Counting Machines to almost all its branches and strengthened the structure of Retail and SME Loan Factories – its innovative business model - in the country. Your Bank will continue to give high priority to this aspect during FY15 to make its processes more efficient and customer service more prompt.

To respond to increasing competition and other challenges, your Bank will make its business model more cost-efficient and try to improve its Earnings through an optimum mix of interest income and non-interest income. To achieve this, it will constantly optimise the use of technology as the change agent.

Additionally, your Bank proposes to launch ‘Adarsh Grameen Branches’ shortly. These branches will be constructed by your Bank on its owned plot of land in rural areas and will include branch premises, manager’s residence and assembly areas. The assembly area will be having audio-visual facilities to enable various activities like agri-clinic, vocational education, medical camp etc. This endeavour will not only provide your Bank to take forward the mission of Financial Inclusion, but also generate a lot of goodwill for your Bank.

With its intrinsic strengths in the form of capital, human resources, technology and iconic brand, your Bank is well positioned for growth during FY15.

We are encouraged by and grateful for the ongoing support of all our shareholders. I solicit your continued cooperation and patronage in future also.

Chairman & Managing Director

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