MUMBAI EDUCATIONAL TRUST

Institute of Management

Managerial Economics

A Project report On

Guided by: Prof. Johnson.

Presented By:

Nidhi Suvarna106 Jayesh Tadose107 Kashmira Tajne..108 Swati Tehra....109 Nikhil Tembey110

MMS II .Div B (2006-08)

ACKNOWLEDGEMENT
Thank You is a very gratifying word. Every project is incomplete without expressing grateful acknowledgements to the people who gave guidance and help throughout the project. First and foremost we thank Almighty for giving us the spirit to put in our best efforts towards our project. We are thankful to our faculty Prof. Johnson under whose guidance we made a project on Bank of Baroda. We are also very grateful to Mr. K.N. Suvarna (General Manager of Bank of Baroda) for providing us valuable insights and giving his precious time. It was a good learning experience wherein we learnt about the advancements being made by Bank of Baroda over the past five years. We would also like to appreciate the help provided by the College for the use of its library & computer infrastructure. Lastly, we would thank each of our group members because we believe that Each one makes a difference BIG or SMALL!!!

INDEX
Sr. No
1 2 3

Topic
Our Objective Indian Economic Landscape Banking Sector Nationalization Banking In Retail Financial Inclusion The IT Factor In Banking Bank Of Baroda An Introduction Products Offered by the Bank Consolidated Balance Sheet For The Years From 2000-01 To 2005-06. Profit & Loss Account For The Years From 2000-01 To 2005-06 Analysis Of The Profit & Loss Account And The Balance Sheet Comparative Study for the past 5 years Various Initiatives and their Impact Change of logo Rahul Dravid - Bank's Brand Ambassador Core Banking Solution Products Launched Third party products - Emerging Revenue Stream Retail banking - The New Growth Engine Technology- A Key Differentiator e-learning Recovery Management Credit Operations International Operations - The Jewel in the Bank's crown. Marketing initiatives Project Parivartan Regional Rural Banks (RRBs) Human Resources Initiative Financial Results For The Three Quarters ( Year 2006-07) Future Plans of the bank Recent News Conclusion Our Recommendations Bibliography And Webliography

Pg.No.
5 6 7

4 5 6 7 8 9 10

11 17 20 21 22 28 32

11 12 13 14 15 16

52 56 57 58 59 61

OUR OBJECTIVE
We have selected Bank of Baroda as our project to study the various reasons for the drastic changes in the bank and its effect on its financial statements for the past 5 years ie from 2000-01 to 2005-06. This project is a study of the Income and Cost variations for the past years and to understand and learn the various initiatives taken by the Bank.

INDIAN ECONOMIC LANDSCAPE

Indian economy has been on a high growth trajectory in the recent years. GDP growth was at 9% and will register a growth rate of 9.2% in the year 2006-07. Indian industry has witnessed a record growth rate of 9.6% and is expected to rise at 10.0% in the current year (2006-07). Agricultural sector has bounced back with a growth rate of 6% and will register a growth rate of 2.7% this year. Manufacturing sector has a witnessed a growth rate of 9.1% and is expected to be at 11.3% this year. Investment climate is full of confidence. India today is one of the most attractive investment destinations in Asia. Stock market has been booming with sensex crossing the 14K mark. Inflation is contained at around 6.12%. Interest rates have by and large remained stable especially, when viewed against pressures on liquidity. India's exports in 2005-06 have crossed US$ 100 billion and Imports US$ 140 billion. Foreign Direct Investment has crossed US$ 7 billion during 2005-06 with expectation that it will touch US$ 10 billion in 2006-07. Foreign Portfolio investment inflows have crossed US$ 10 billion mark during 2005 and are expected to touch US$ 15 billion in 2006. Foreign exchange kitty has been bulging it now stands at over US$ 160 billion. All these are demonstrative of buoyancy in the economy. India is emerging as an Economic & Knowledge Superpower. In less than a decade, India has emerged as the Electronic Back Office of the world. India is also emerging as Gem & Jewellery hub. Government has raised the GDP growth rate bar to 10% for future years. In tune with this confidence, India is expected to be at the 4th place globally by 2020, with double digit growth. India's Vision is to be part of the league of developed economies by 2020. Strong macro economic fundamentals have helped in creating a good investment climate. Indian banking sector can thus feel confident of a conducive growth environment during 2006-07. The banking and capital market institutions are fully geared up to face the challenge of meeting the financial needs of Indian corporate sector. However, as the Reserve Bank of India has warned through its Annual Monetary Policy 2006-07, our economy needs to prepare itself in FY07 for higher orders of pass-through into consumer prices, in respect of the overhang as well as the possibility of additional increases in crude prices in the future. Higher levels of international crude prices continue to pose a risk to economic growth and inflation for global economy in general and Indian economy in particular.

BANKING SECTOR
Nationalization
The most significant milestone in Indian Banking occurred on July 19, 1969 when the then Indira Gandhi government nationalized the 14 largest commercial banks. A second nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalisation was to give the government more control of credit delivery. After this, until the 1990s, the nationalised banks grew at a leisurely pace of around 4%, closer to the average growth rate of the Indian economy. The banking sector is the most dominant sector of the financial system in India. Significant progress has been made with respect to the banking sector in the post liberalization period. The financial health of the commercial banks has improved manifolds with respect to capital adequacy, profitability, asset quality and risk management. Further, deregulation has opened new opportunities for banks to increase revenue by diversifying into investment banking, insurance, credit cards, depository services, mortgage, securitization, etc. Liberalization has created a more competitive environment in the banking sector. The aggregate foreign investment (FDI plus FII) limit for the private sector banking has been raised to 74 percent in the recent country budget. The competition has increased within the banking sector (with the emergence of new private banks and foreign banks) as well as from other segments of the financial sector such as mutual funds, Non Banking Finance Companies, post offices and capital markets. The Indian banking system has a large geographic and functional coverage. Presently the total asset size of the Indian banking sector is US$ 270 billion while the total deposits amount to US$ 220 billion with a branch network exceeding 66,000 branches across the country. Revenues of the banking sector have grown at 6 per cent CAGR over the past few years to reach a size of US$ 15 billion. While commercial banks cater to short and medium term financing requirements, national level and state level financial institutions meet longer-term requirements. This distinction is getting blurred with commercial banks extending project finance. The total disbursements of the financial institutions in 2001 were US$ 14 billion. Banking today has transformed into a technology intensive and customer friendly model with a focus on convenience. The sector is set to witness the emergence of financial supermarkets in the form of universal banks providing a suite of services from retail to corporate banking and industrial lending to investment banking. While corporate banking is clearly the largest segment, personal financial services is the highest growth segment. The recent favourable government policies for enhancing limits of foreign investments to 49 per cent among other key initiatives have encouraged such activity. Larger banks will be able to mobilize sufficient capital to finance asset expansion and fund investments in technology

The financial sector is in a process of rapid transformation. Reforms are continuing as part of the overall structural reforms aimed at improving the productivity and efficiency of the economy. The role of an integrated financial infrastructure is to stimulate and sustain economic growth. The US$ 28 billion Indian financial sector has grown at around 15 per cent and has displayed stability for the last several years, even when other markets in the Asian region were facing a crisis. This stability was ensured through the resilience that has been built into the system over time. The financial sector has kept pace with the growing needs of corporate and other borrowers. Banks, capital market participants and insurers have developed a wide range of products and services to suit varied customer requirements. The Reserve Bank of India (RBI) has successfully introduced a regime where interest rates are more in line with market forces. Financial institutions have combated the reduction in interest rates and pressure on their margins by constantly innovating and targeting attractive consumer segments. Banks and trade financiers have also played an important role in promoting foreign trade of the country

Banking In Retail
With a jump in the Indian economy from a manufacturing sector, that never really took off, to a nascent service sector, Banking as a whole is undergoing a change. A larger option for the consumer is getting translated into a larger demand for financial products and customization of services is fast becoming the norm than a competitive advantage. With the Retail banking sector expected to grow at a rate of 30% [Chanda Kochhar, ED, ICICI Bank] players are focusing more and more on the Retail and are waking up to the potential of this sector of banking. At the same time, the banking sector as a whole is seeing structural changes in regulatory frameworks and securitization and stringent NPA norms expected to be in place by 2004 means the faster one adapts to these changing dynamics, the faster is one expected to gain the advantage. Potential for retail in India: Is sky the limit? The Indian players are bullish on the Retail business and this is not totally unfounded. There are two main reasons behind this. Firstly, it is now undeniable that the face of the Indian consumer is changing. This is reflected in a change in the urban household income pattern. The direct fallout of such a change will be the consumption patterns and hence the banking habits of Indians, which will now be skewed towards Retail products. At the same time, India compares pretty poorly with the other economies of the world that are now becoming comparable in terms of spending patterns with the opening up of our economy. For instance, while the total outstanding Retail loans in Taiwan is around 41% of GDP, the figure in India stands at less than 5%. The comparison with the West is even more staggering. Another comparison that is natural when comparing Retail sectors is the use of credit cards. Here also, the potential lies in the fact that of all the consumer expenditure in India in 2001, less than 1% was through plastic, the corresponding US figure standing at 18%.
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Financial Inclusion
Extending the benefits of banking to the have-nots, is the latest buzzword among bankers. A new model of rural banking is being developed with the help of intermediaries such as self-help groups and microfinance institutions, while banks are exploring new ways to use technology to lower the cost of delivering rural banking services. Cities have cornered the lions share of the benefits of growth. Also, there has been some backsliding on the push to rural and small scale credit since liberalisation. But the main problem is not of declining relative share in credit, it is the lack of access to banking. More than half of the Indian population suffers from financial exclusion. Only the extent varies from state to state. The north-eastern states, Uttaranchal and Jharkhand are some regions where over 75 per cent of the population is financially excluded, while Andhra Pradesh is the most developed in this regard with less than 25 per cent excluded. So what is to be done? Several PSU bank chiefs at Bancon 2006 argued that the entire bank nationalisation programme in 1969 and the subsequent rural push was nothing but an attempt to increase financial deepening and inclusion. That programme has certainly led to more people being able to access bank services the average coverage per bank branch reduced from 64,000 persons in 1969 to 14,000 by 1991. Now there is a sea change in the way banks are going about the job. For one, they are increasingly relying on intermediaries such as micro-credit institutions, franchisees and self-help groups to fund borrowers. New products such as kisan credit cards or Gramin Tatkal cards ( for project finance) are being used. NGOs are increasingly being involved in bank schemes, such as linking farmers with supply chains. Micro mutual funds, micro insurance and using the latest technology to overcome the difficulties posed by the illiteracy of many borrowers are other steps being taken. A similar, though much less revolutionary, approach is also being adopted in small scale finance, where the emphasis has shifted to utilising the opportunities thrown up by linkages between the small borrower and the banks large business clients, such as vendor financing. The Reserve Bank of India is also doing its bit. It has asked banks to open no-frills accounts, it has tried to regulate rising bank charges and has allowed banks to use NGOs and micro-finance institutions as intermediaries. As more and more of rural India becomes plugged into the commercial circuit, which will happen increasingly as a result of rising incomes, better infrastructure and the modernisation of agriculture, banks will, in their own interest, further expand their business into the countrys hinterland.

The IT factor in Banking

Thanks to the advances in technology, the bank customer now has ATMs, mobile banking, any-branch banking, electronic funds transfer, etc.; treasury managers have transparent Negotiated Dealing Systems (NDS) and Order-Matching NDS (NDS-OM); and commercial bankers have the comfort of real-time gross settlement (RTGS). Core banking solutions (CBS) is the buzzword. They help centralize the transactions and banking channels (branches, the Internet, phone, etc.) on a real time basis. Technology will also change the future of strategic relationships. Since banks offer related financial services like insurance, tax advice, securities market operations and depository functions, the future may see changing alliances with service providers. For example, a cellphone user may switch his service provider if it does not link its services to his bank. Public sector banks, which were late on the button in terms of technology deployment, can still derive great benefits from it. For one thing, it is the weapon that, when added to their size, puts them on a level playing field with their private peers. Benefits include reduced transaction cost and time, and faster branch reconciliation. Technology is critical in building up a reliable credit information system and customer database, thereby reducing the transaction cost involved in checking encumbrances and collaterals and also facilitating better pricing of risk. one thing, it

10

The Heritage
It all started with a visionary Maharaja's uncanny foresight into the future of trade and enterprising in his country. On 20th July 1908, under the Companies Act of 1897, and with a paid up capital of Rs 10 Lacs started the legend that has now translated into a strong, trustworthy financial body, THE BANK OF BARODA. It has been a wisely orchestrated growth, involving corporate wisdom, social pride and the vision of helping others grow, and growing itself in turn. The founder, Maharaja Sayajirao Gaekwad, with his insight into the future, saw "a bank of this nature will prove a beneficial agency for lending, transmission, and deposit of money and will be a powerful factor in the development of art, industries and commerce of the State and adjoining territories." These words are etched into the mind, body and soul of what has now become a banking legend. Bank of Baroda is a bank in India established on July 20, 1908 in the princely state of Baroda in Gujarat. The bank, along with 13 other major commercial banks of India, was nationalized on 19th July, 1969 by the Government of India. In its international expansion Bank of Baroda followed the Indian Diaspora, and especially that of the Gujratis. Bank of Baroda has total assets of about Rs.1133bn (endMar 2006), a network of over 2800 branches and offices, and about 700 ATMs. Bank of Baroda offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, credit cards and asset management. Bank Of Baroda is the fifth largest bank in India with business crossing Rs. 1,78,000 crores.. The headquarters of Bank Of Baroda is at Bandra Kurla Complex in Mumbai and the present Chairman is Mr. Anil K. Khandelwal.

Mission Statement
To be a top ranking National Bank of International Standards committed to augmenting stake holders' value through concern, care and competence

Striving for Excellence

International Standards Organisation (ISO) has come out with various quality standards applicable to the service industry. With the aim to create an effective organizational structure by setting up a standard operational system of international standards for quality services , Bank has moved in the direction of securing ISO Certification as per its latest standard ISO 9001

11

In its journey towards improving Quality Management 525 branches and offices including 47 specialised branches have been brought under ISO Certification.

Domestic Operations
Bank of Baroda has set up dedicated desks at the Specialized Integrated Treasury Branch (SITB), headed by experienced professionals, for undertaking various types of treasury activities in different financial markets. Apart from activities pertaining to management of funds and liquidity, the domestic treasury also handles financial instruments like:

Commercial Papers (CP) Certificate of Deposits (CD) Government Securities Treasury Bills (TB) Bonds and Debentures Equities and various other derivatives.

The products and services offered by SITB cater to the inter-bank market as well as to the Corporate customers of the bank. The Bank is an active participant both in the inter-bank market and the corporates for all the products. The Bank offers its customers, including firms, companies, corporate bodies, institutions, provident funds trusts, Regional Rural Banks, Urban Cooperative Banks and NonBanking Financial Companies opportunities to invest in Government Securities as allowed by Reserve Bank of India for non-competitive bidding. To give this sector a stronghold on finance and to enable economic independence, Bank of Baroda has special offerings that extend credit facilities to small and marginal farmers, agricultural labourers and cottage industry entrepreneurs. With the objective of developing rural economy through promotion of agriculture, trade, commerce, industry and extending credit facilities particularly to small and marginal farmers, agricultural labourers and small entrepreneurs, Bank of Baroda, over the years, has reached out to larger part of rural India. Bank of Baroda extends loans for agricultural activities and a host of services for farmers well tuned to the rural market, and aim to make a Self Reliant Rural India.

Forex Operations
Bank of Baroda, one of the major public sector banks in India having a strong global presence with a wide network of 61 overseas offices, including those of subsidiaries, spread over 21 countries, is considered as a market leader in foreign exchange operations in India. At present the Bank is having branches / offices in countries like Bahamas , Belgium , Botswana , China , Fiji lands , Guyana , Hong Kong , Kenya , Mauritius , Malaysia , Seychelles , South Africa , Singapore , Sultanate of Oman , Tanzania ,

12

Thailand , Uganda , United Arab Emirates , United Kingdom , United States of America , Zambia. The Bank has completed 50 years of operations in overseas territories The modern state-of-the-art dealing room at its Specialised Integrated Treasury Branch (SITB) at Mumbai provides the necessary wherewithal to its 95 designated branches across the length and breadth of the country authorized to handle foreign exchange business of its clientele. The bank has retained its primacy as a leading market maker both in spot and forward markets, along with foreign exchange swap markets. The forex dealing desk at the SITB is provided with all modern communication facilities and is in the process of linking all its authorized branches via Reuters Automated Dealing System, to provide on-line quotes for foreign exchange transactions. Through its large network of authorized branches, the bank caters to the foreign exchange needs of its clientele engaged in export and import trade and the SITB provides rates for conversion of all major world currencies like U S Dollar, Sterling Pounds, Euro, Swiss Francs, Japanese Yen and other exotic currencies. The services to the customers of the Bank include hedging of foreign currency risks by providing forward covers and various derivatives product Since most of its overseas branches are strategically situated at places where sizeable Non-resident Indians are residing, the Bank is in a position to deliver its products promptly and efficiently to its NRI customers. The range of products includes remittance facilities and acceptance of deposits in Indian Rupees (NRE / NRO) as well as in designated foreign currencies (FCNR). Resident as well as Returning Indians can avail of benefits like Resident Foreign Currency Accounts (RFC).

The Logo

The old logo was an emblem which had been crafted to represent wealth, safety, industrial development and an inclination to better and promote the country's agrarian economy. The emblem showed a coin, symbolizing wealth, embossed with an upraised palm, a safety cover for the

13

depositor's money, with a cogwheel that promoted industrial growth in tandem with the two corn ears that stood for the progress of the staple agricultural growth in the country. The new logo is a unique representation of a universal symbol. It comprises dual B letterforms that hold the rays of the rising sun. We call this the Baroda Sun. The sun is an excellent representation of what the bank stands for. It is the single most powerful source of light and energy its far reaching rays dispel darkness to illuminate everything they touch. At Bank of Baroda, they seek to be the source that will help all their stakeholders realise their goals. To the customers, they seek to be a one-stop, reliable partner who will help them address different financial needs. To the employees, they offer rewarding careers and to their investors and business partners, maximum return on their investment. The single-colour, compelling vermillion palette has been carefully chosen, for its distinctiveness as it stands for hope and energy. The logo's new colour reflects the rising sun, radiating its rays across the letterform BB'. The 2nd B' in the double 'B' letter appears like a bird flying across the morning sky. It is like the Bank flying into a dynamic state - always proactive, striving for change. Its new colour vermillion - a shade of orange - also signifies energy like the sun. The Baroda Sun is a fitting face for their brand because it is a universal symbol of dynamism and optimism it is meaningful for their audiences and easily decoded by all. Their new corporate brand identity is much more than a cosmetic change. It is a signal that they recognize and are prepared for new business paradigms in a globalised world. At the same time, they will always stay in touch with their heritage and enduring relationships on which the bank is founded. By adopting a symbol as simple and powerful as the Baroda Sun, they hope to communicate both.

The Ethics
Between 1913 and 1917, as many as 87 banks failed in India. Bank of Baroda survived the crisis, mainly due to its honest and prudent leadership. This financial integrity, business prudence, caution and an abiding care and concern for the hard earned savings of hard working people, were to become the central philosophy around which business decisions would be effected. This cardinal philosophy was over the 94 years of its existence, to become its biggest asset. It ensured that the Bank survived the Great War years. It ensured survival during the Great Depression. Even while big names were dragged into the Stock Market scam and the Capital Market scam, the Bank of Baroda continued its triumphant march along the best ethical practices.

The Initiatives
Marketing

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The mid-eighties marked the beginning of the shift to a buyers` market. The Bank orchestrated its business strategies around the centrality of the customer. It diversified into areas of merchant banking, housing finance, credit cards and mutual funds. A string of segment specific branches entrenched operations in the profitable markets. Overseas operations were revamped and structural changes intensified in the territories to cater to second generation NRIs. Slowly but surely, the move to become a one stop financial supermarket had been set in motion. Service delivery standards were stipulated. Technology was adopted to add punch. Employees across the board were inculcated with the marketing concept. Aggressive marketing became the new business philosophy. People Bank of Baroda has always had an immense faith in the infinite potential of its people. This has been historically demonstrated in its recruitment practices, developmental initiatives, placement processes and promotion policies. Strategic HR interventions like, according cross border and cross cultural work exposure to its managers, hiring diverse functional specialists to support line functionaries and complementing the technical competencies of its people by imparting conceptual, managerial and leadership skills, gave the Bank competitive advantage. The elaborate man management policies also made the Bank a breeding ground for business leaders. The Bank provided around a dozen CEOs to the industry- men who went on to build other great institutions. People initiatives were blended with IR initiatives to create an effectively harmonious workplace, where everyone prospered. Financial New norms for capital adequacy required new capital management strategies. In 1995 the Bank raised Rs 300 crores through a Bond issue. In 1996 the Bank tapped the capital market with an IPO of Rs 850 crores, Despite adverse market conditions prevailing then, the issue was over subscribed, reflecting the positive public perception of the Bank's fundamental financial strength.

Digital Bank of Baroda pioneered the shift from manual operating systems to a computerized work environment. Starting with ledgers, to ledger posting machines, through ALPMs, the Bank graduated to the use of Unix based systems to Mainframes, to client server based Total Branch Mechanization Systems. Today, the Bank has 1918 computerized branches, covering 70% of its network and 91.64% of its business. Alive to the growing complexities of an intensely competitive marketplace and the mounting expectations of customers fuelled by this competition, the Bank reworked its distribution strategy. It

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ventured beyond the brick and mortar delivery channel into ATMs and the OmniBOB range of anytime, anywhere electronic channels of PC banking, telephone banking. The ebanking products used state of the art technologies like digital certificates, smart card authentication and secure networking. The new IT strategy, in the process of implementation will see the deployment of Core Banking Systems, Multi Service Transaction Switch, Payment Gateways - all geared to deliver convenience banking Quality In its relentless striving for quality perfection, the Bank secured the ISO 9001:2000 certification for 15 branches. By end of the current financial, the Bank is targeting 54 more branches for this quality certification.

PRODUCTS OFFERED BY THE BANK

Baroda Remit Xpress
In keeping with the Banks goal of emerging as a true international bank of India, the Bank has launched an Online International Money Transfer Service BarodaRemitXpress. Bank has enhanced the offerings to the NRIs. It would provide NRIs a unique and robust online remittance solution from USA, UK and Eurozone. The
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services are supported by the highly professional team to offer us complete peace of mind. This online service is bank-neutral, thus not requiring the senders and the recipients to have a bank account with them. They are committed to offer us an impeccable experience compared to any other remittance solution available.

Deposits
Bank of Baroda offers various deposit plans that we can choose from depending on the term period, nature of deposit and its unique saving and withdrawal features. Apart from competitive interest rates and convenient withdrawal options, their deposit plans offer other features such as overdraft facility, outstation cheque collections, safe deposit lockers, ATM's etc There are three types of Deposit plans namely Fixed, Current and Savings. Fixed deposits are categorised into deposits with a term period of less than 12 months, more than 12 months and recurring deposits. These deposit plans offer convenient solutions to both working individuals as well as senior citizens. Current and saving deposits are ideal for individuals who wish to take advantage of multiple benefits within the same plan and even be eligible to opt for overdrafts. Advances Lending Schemes The Bank has formulated various lending schemes for individuals, businessman & Small and Medium Enterprises, Corporates, Agriculturists as per their requirements. All the KYC norms pertaining to advances will be adhered to before granting any advance. Reasons for rejection of loans will be conveyed to the customers wherever possible.

Baroda Vaibhav Lakshmi loan - This product specially designed for working women takes care of all kinds of expenses and it can be availed as term loan or overdraft facility without any security. Concession in Education loan interest rates - The bank offers 1% concession in interest rates to girl borrowers.

E-Products

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Internet Banking & Mobile Banking It is a Hi-Tech Convenience Banking product of Bank of Baroda. Baroda Internet Banking and Baroda Mobile Banking are two services which allow customers to access their account at their convenience through the internet or mobile phone. These products offer a truly round the clock, around the globe banking service at our select branches. After registration with the designated branch you can access your account via the internet for balance enquiries, transaction details, ordering a cheque book and ascertain the status of your order.

Baroda e-money Transfer

The Bank of Baroda e-remittance facility at select branches expedites payments and transfer of funds through electronic media. This facility is for both retail and corporate customers enabling efficient and instant transfer of funds.

Baroda RTGS Scheme

Baroda Real Time Gross Settlement scheme (RTGS) is an online Inter - Bank funds transfer facility through RBI gateway available at select branches, which ensures high degree of security, confidentiality and operational reliability.

NRI Accounts
The range of products includes remittance facilities and acceptance of deposits in Indian Rupees (NRE / NRO) as well as in designated foreign currencies (FCNR). Resident as well as Returning Indians can avail of benefits like Resident Foreign Currency Accounts (RFC). Bank has got 103 authorized branches doing International business in India. These branches are having SWIFT facilities. Bank of Baroda with its wide network of Overseas Branches spread over 21 countries serves Non-resident Indians with a wide range of deposits and investment banking services. At present, the Bank has 61 branches/offices overseas.

Collection Services
Immediate Credit of Outstation Cheques Immediate credit of local as well as outstation cheques upto Rs.15,000/- (as per banks extant guidelines) is provided to the customers who are maintaining satisfactory accounts against nominal service charges. In the event of cheques being returned unpaid, the customer will have to pay interest for the period for which funds are utilized.
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All cheques (local and outstation) deposited by the customers are cleared by the Bank as follows: High Value Clearing: This facility is available for the clients of selected branches at designated centers. Cheques of high value (Over Rs.1/- lakh per instrument) are cleared on the same day subject to depositing the cheques/instruments in time. Local Clearing: Cheques are cleared normally on the third working day, depending on the center subject to depositing of the cheques / instruments in time. National Clearing: Cheques drawn on Metropolitan centers listed in national clearing are cleared in 8 days. All cheques drawn on other centers are cleared in 14 days.

Consolidated Balance Sheet for the years from 2000-01 to 2005-06.

Amount in Rupees (000's Omitted)

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As on 31.3.2002

As on 31.3.2003

As on 31.3.2004

As on 31.3.2005

As on 31.3.2006

Capital & Liabilities Capital Reserves & Surplus Deposits Borrowings Other Liabilities & Provisions TOTAL Assets Cash and balances with Reserve Bank of India Balances with Banks and Money at Call and Short Notice Investments Advances Fixed Assets Other Assets TOTAL Contingent Liabilities 149157018 244195004 303183237 2943392 35334236 618044637 6926529 45851951 709100745 2943424 40926339 663663655 6253308 50391732 764178458 2945258 48363961 729673238 8751089 61353096 851086642 294,52,74 5333,22,71 81333,46,4 3 1640,83,37 6062,18,45 94664,23,7 0 365,52,74 7478,90,72 93661,99,16 4802,20,07 7083,90,04 113392,52,73

2712,32,19 25810676 63663434 238331342 336629867 6923829 37741597 709100745 34658239 33512767 301793831 353480816 6973198 33759607 764178458 30567839 6541,87,91 42100265 380188104 356008822 8152686 34068926 851086642 37074,44,11 43400,38,3 9 860,80,33 4074,40,77 94664,23,7 0 36710,37,6 5

3333,43,34 10121,20,60 35114,21,87 59911,77,84 920,72,69 3991,16,39 113392,52,73

39200,53,70

Consolidated Profit & Loss Account for the years from 2000-01 to 2005-06.

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Amount in Rupees (000's Omitted)

Year ended 31st March, 2002

Year ended 31st March, 2003

Year ended 31st March, 2004

Year ended 31st March, 2005

Year ended 31st March, 2006

I. Income Interest Earned Other Income Total II. Expenditure Interest Expended Operating Expenses Provisions and Contingencies Total III. Profit Net. Profit for the year Available for Appropriation Appropriation Transfer to : a) Statutory Reserve b) Capital Reserve c) Revenue and Other Reserves d) Staff Welfare Account e) Dividend (including Dividend Tax) TOTAL 1364817 2834 2825220 82398 11840000 5459269 1932000 70710 3697434 2417500 25096 5076930 169,21,00 NIL 340,67,37 206,73,99 7,61 1455,01,11 59555483 9931663 69487146 60975553 12617020 73592573 61470693 17190059 78660752 6431,41,78 13048278 77362456 7100,00,35 1191,68,50 8291,68,85

40761062 15633502 7633313 64027877

39941914 16484398 9438417 65864729

35754825 18053025 15182941 68990793

3452,14,60 19821861 16250736 70594057

3875,08,73 2384,75,27 1204,88,88 7464,72,88

5459269 5459269

7727844 7727844

9669959 9669959

676,83,99 676,83,99

826,95,97 826,95,97

100000 Nil 1927700 7727844 2150433 9669959 166,95,62 676,83,99 207,67,69 826,95,97

Analysis of the Profit & Loss Account and the Balance Sheet
For the year 2001-02 Expenditure: The operating expenses during the year 2001-02 (Rs. 1,56,33,502) had reduced as

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compared to that of the previous year i.e. 2000-01 (Rs. 1,60,75,984). The operating expenses which reduced during this year mainly included the following : 1. Payment to and Provisions for Employees 2. Rent Taxes and Lightning 3. Printing and stationery. 4. Advertising and Publicity 5. Law charges. Income: Total Income during this year increased to Rs.6,94,87,146 from Rs. 6,46,36,194 in the previous year ie it has grown by 7.5% , with interest income growing by 3.4% . The reasons for this were : 1) Profit on sale of investments this year increased from Rs. 10,19,686 (Year 2000-01) to Rs. 41,53,817. 2) Income earned by way of Dividends etc. from Subsidiaries/ Companies and /or Joint ventures abroad / in India increased to Rs. 50,832 from Rs. 14060 in the previous year. Overall View of the year 2001-2002 Bank of Baroda increased its global credit portfolio by 22.8% and total deposits by 14.3% during the year. Investments during the year increased by 20%. As a result , Banks balance sheet has expanded by 12% to Rs. 70910.07 crores. Bank retains its position among the premier banks in the country. Costs are firmly under control. Growth in expenses has been contained at only 3.9% . This has been possibly mainly due to a fall of 7.8% in staff expenses. Interest expenses on the other hand had grown by 6.7% . Consequently operating profit has jumped by 26.3% from Rs. 1036.47 crore during 2000-2001 to Rs.1309.26 crore during 2001-2002. Net profit of the bank has almost doubled to Rs. 545.93 crore. This has been possible even after making adequate and appropriate provisions as per RBI guidelines. Business per employee has seen quantum jump from Rs. 175.78 lacs as of March 2001 to Rs. 245.42 lacs as of March 2002. Bank operationalised its state-of-the-art integrated treasury branch during the year. Income from treasury operations contributes 43% of the domestic income.

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Bank has succeeded in further reducing its net NPA (Non Performing Assets) to net advances ratio to 5.06% from 6.77%.

Analysis of the Profit & Loss account for the year 2002-03 Expenditure: The operating expenses during the year 2002-03 (Rs.1,64,84,398 ) had increased as compared to that of the previous year i.e. 2001-02 (Rs. 1,56,33,502). The reasons for this was: The payments to & provisions for the employees had risen from Rs.10,56,26,39,000 for the year ended 31st March,2002 to Rs.11,28,58,81,000 for the year ended 31st March,2003. 2) The operating expenses pertaining to Advertisement & Publicity had risen from Rs.5,73,35,000 for the year ended 31st March,2002 to Rs.9,46,40,000 for the year ended 31st March,2003
1)

Income: Income during this year increased to Rs.7,35,92,573 from Rs. 6,94,87,146 in the previous year. The profit on the sale of investments had risen from Rs.4,15,38,17,000 for the year ended 31st March,2002 to Rs.6,31,51,84,000 for the year ended 31st March,2003. 2) However the profit on the sale of land, buildings and other assets had reduced from Rs.11,375,000 for the year ended 31st March,2002 to Rs.490,000 for the year ended 31st March,2003.
1)

Overall view of the year 2002-03 Operating profit of the Bank increased by 31.1% from Rs. 1309.26 crore during 2001-02 to Rs. 1716.63 crore during 2002-03. Net profit of the Bank at Rs. 772.78 crore had shown rise of 41.6% over previous year. While total income had grown by 5.9%, total expenses increased a rise of merely 0.1% during 2002-03. Costs were firmly under control. While the staff expenses by a moderate 2.5%, interest expenses have declined by 2.0%. Bank had recorded a growth of 9.3% in average deposits and 12.8% in average advances. Average business increased by 10.5% during the year.

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Average investments increased by 15.4% during the year. Retail credit demonstrated a steady growth of 55.1% and constituted 8.8% of domestic credit portfolio as of March03. Banks earning per share (EPS) and Book Value per Share (BV) had consequently risen to Rs.26.11 and Rs.139.36 respectively during 2002-03. Business per employee had seen an improvement from Rs.245.42 lacs as of March02. to Rs.252.31 lacs as of March03. Bank had succeeded in further reducing its net NPA to net advances ratio to 3.72% from 4.98%.

Analysis of Profit & Loss account for the year 2003-04 Expenditure: The total operating expenses had risen from Rs.1,64,84,398 in 2003 to Rs.1,80,53,027 as on 31st March,2004 because the expenses for advertisement & publicity had increased from Rs.94,640 in 2003 to Rs.2,41,086 in 2004. Income: Income during this year increased to Rs.7,86,60,752 from Rs. 7,35,92,573 in the previous year. This was due the rise in sale of investments from Rs.63,15,184 for the year ended 31st March,2003 to Rs.1,01,75,298 for the year ended 31st March,2004 Overall view of the year 2003-04

Operating profit of the Bank increased by 44.78% from Rs.1716.63 crore during 2002-03 to Rs.2485.3 crore during 2003-04. Net profit of the Bank at Rs.967 crore has shown a rise of 25.13% over previous year. While total income grew by 6.89%,total expenses registered a fall 4.64%. Bank recorded a growth of 7.16% in average deposits and 4.50% in average advances. Bank succeeded in further reducing its net NPA to net advances ratio to 2.99% from 3.72%. Average investments increased by 26.4% during the year.

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Staff expenses increased by 10.98% and other expenses by a moderate 6.33%,interest expenses declined by 10.48% Banks Earning per Share (EPS) and Book Value per Share (BV) have consequently risen to Rs.32.97 and Rs.166.46 respectively. Business per employee has seen an improvement from Rs.252.31 lacs to Rs.272.76 lacs.

Analysis of the Profit & Loss account for the year 2004-05 The net profit this year had fallen down by nearly 30% . The reasons for this were: There was a sharp decline in profit on sale of investments. It stood at Rs.53,51,502 as compared to last years Rs. 1,01,75,298. This was almost a 47.41% drop. 2) The operating expenses under Insurance have risen from Rs.4,20,329 for the year ended 31st March,2004 to Rs.6,34,595 for the year ended 31st March,2005.
1)

Expenditure: The expenditure has increased from Rs.6,89,90,793 in 2004 to a total of Rs.7,05,94,057 for the 2005. Overall view of the year 2004-05 Total Business increased from Rs.1,08,568 crore to Rs.1,24,734 crore showing an increase of 14.89% during the year. Gross profit of the Bank is Rs.2301.91 crore and Net profit is Rs.676.84 crore. Net worth increased to Rs.5391 crore from Rs.4882 crore with rise of 10.43%. Book value increased from Rs.166.46 to Rs.183.83. Credit-Deposits Ratio increased from 51.17% to 55.82%. Bank has succeeded in further reducing its net NPA to net advances ratio to 1.45% from 2.99%.

Business per employee has seen an improvement from Rs.272.76 lacs to Rs.316 lacs. Treasury Management for 2004-05: The specialized integrated treasury branch has been able to establish itself as a leading player in Foreign Exchange bourse. The bank has been handling both the domestic treasury operations and foreign exchange dealing activities. In terms of RBI guidelines, the bank has during the year transferred a portion of Govt. Securities (SLR) kept in "Available for Sale" category to "Held to Maturity" category.
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The resultant depreciation of Rs.738.08 crores has been charged to Profit & Loss Account. The Bank has made a provision of Rs.2.83 crores during the year towards Country Risk Management. No loan assets were sold to securitisation company / restructuring company during the year. The Reserve Bank of India has not imposed any penalty on Bank u/s 44 of the Banking Regulation Act 1949.South Gujarat Local Area Bank Ltd. (SGLAB), has been amalgamated with the Bank in terms of a scheme of amalgamation issued by the Government of India, with effect from June 24, 2004. The net deficit of Rs 5.42 Crore [computed under the purchase method as per AS-14 "Accounting for Amalgamation"] has been absorbed by the Bank. Any future surplus in excess of Rs 5.42 Crore will be distributed to the erstwhile shareholders of SGLAB. An amount of Rs.171.03 Crores (previous year Rs.171.03 Crores) relating to expenditure on Voluntary Retirement Scheme (VRS) has been charged during the year to the Profit & Loss Account in accordance with RBI guidelines. Thus the entire amount relating to VRS expenditure has been charged off. The Bank has, pursuant to the Board resolution dated 07.08.2000, approved as an extension to the benefit under its existing scheme the provision of medical benefits to the retired employees on a contributory basis; and contributed Rs.15 crores during the year 2000-01 by a charge to the Profit and Loss account, which together with the contributions received from the retired eligible employees and after meeting expenses incurred has been included under 'Other Liabilities Others' in Schedule - 5 Rs.6.86 Crores (Previous year Rs. 11.19 Crores). The Bank has not made any further contribution during the year to this scheme, pending approval of the same by the Govt. of India. The bank has been one of the major players in the Call Money Market and the CBLO segment encashing any available opportunity. Analysis of the Profit & Loss account for the year 2005-06 Expenditure: The operating expenses on advertisement & publicity has increased from Rs.1,04,113 for the year ended 31st March,2005 to Rs.2,56,427 for the year ended 31st March,2006.The operating expenses under Other Expenditure have increased from Rs.17,08,001 in 2005 to Rs.35,26,658 for 2006. Income: Income during this year increased to Rs.8,29,16,885 from Rs. 7,73,62,456 in the previous year. 1) The interest earned during the had increased . Overall view of the year 2005-06 Total Business (Deposit + Advances) increased from Rs.1,24,734 crore to Rs.1,53,574 crore Growth by 23.12% Gross Profit and Net Profit were Rs.2,031.85 crore and Rs.826.96 crore respectively. Net Profit registered a growth of 22.18% over previous year.
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Retail Credit posted a robust growth of 53.21% - constituting 18.92% of Total Domestic Credit against 16.96% last year. Net NPAs to Net Advances declined from 1.45% last year to 0.87%. Net Worth improved from Rs.5,391.00 crore to Rs. 7,619.73 crore a rise of 41.34%. Book Value improved from Rs.183.83 to Rs. 209.18. Business Per Employee moved up from Rs.316 lacs last year to Rs. 396.00 lacs

COMPARATIVE STUDY FOR THE PAST 5 YEARS

Total Advances

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Total Advances
70000 60000 Rs. In Crore 50000 40000 30000 20000 10000 0 2001 2002 2003 2004 2005 2006 Year 27421 33663 35348 35601 43400 59912

Source: Annual Reports of BOB from 2001-2006

One of the major components where the funds were deployed into was Advances. The advances during the five year period i.e. from the year 2001 to 2006 showed a rising trend as seen in the Bar chart above. It grew from Rs. 27421crore in 2000-01 to Rs. 59912 Crore in 2005-06. Thus it shows an increase of Rs 32491 crore in the total advances

Total Deposits
TOTAL DEPOSITS
2006 2005 Year 2004 2003 2002 2001 0 20000 40000 81333 72967 66366 61804 54070 60000 80000 100000 93662

Rs. in Crore

Source: Annual Reports of BOB from 2001-2006

One of the main sources of income for the bank is its Deposits. These include Savings Bank Deposits, Term Deposits, Demand Deposits that comes from banks, its branches in and outsides India and others. As seen in the bar chart above the total deposits have been increasing Rs 54070 crores in 2000-01 to Rs 93662 crores in 2005-06.

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Business Per Employee

BUSINESS PER EMPLOYEE 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

3.96 2.52 2.73 3.16

Rs. in Crore

2.45 1.76

2001

2002

2003

2004

2005

2006

Year
Source: Annual Reports of BOB from 2001-2006

The Business per employee shows a rising trend from Rs. 1.76 crores in 2000-01 to Rs. 3.96 crores in the year 2005-06. The employees have been showing greater efficiency in their working styles due to introduction of better technology especially the Core Banking Solutions (CBS) which has also helped them to provide quicker and better services to their customers. The Business per employee is defined by the following formulae :

Total Deposits+ Total Advances Business per employee= ___________________________ Total no. of employees

Total Business

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TOTAL BUSINESS
180000 160000 140000 120000 100000 80000 60000 40000 20000 0 153574 124734 81491 95468 101715 108568

Rs.in Crore

2001

2002

2003 Year

2004

2005

2006

Source: Annual Reports of BOB from 2001-2006

As it can be observed from above that the business has been increasing every year .this is due to the various measures taken by the bank which will be explained below.

Net Profit
NET PROFIT
120000 100000 Rs. in Crore 80000 60000 40000 20000 0 2001 2002 2003 Year 2004 2005 2006 30113 54593 77279 96700 82696 67683

Source: Annual Reports of BOB from 2001-2006

The Net Profit shows a rising trend from 2000-01 to 2003-04.But during the year 2004-05 there was a decline in the net profit. One of the major reason for the decline was a fall in the Profit on Sale of Investments by nearly 48% than the previous year (Rs. 10175298 thousands). Besides this there was an increase in the Operating expenses that is Insurance during the period 2004-05 increased to Rs 634595 thousands from Rs. 420329 thousands in the previous year . However the net profit shows a rise again in the year 2005-06.

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Branches
BRANCHES
2760 2740 2720 No. of 2700 Branches 2680 2660 2640 2002 2003 2004 Year 2005 2006

Source: Annual Reports of BOB from 2001-2006

It can be observed that in the year 2002-03 there has been a tremendous increase in the number of branches. The reason for this is that Bank of Baroda had merged with Banaras State Bank Ltd. on 19th June 2002.This strengthened the Banks network mainly in the state of Uttar Pradesh , Delhi and Tamil Nadu. Thereafter there has been a slight fall in the number of branches in the year 2003-04. This is due to the merger of 38 branches during this year

VARIOUS INITIATIVES AND THEIR IMPACT

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With changing times and in tune with the changing customer aspirations across the globe, Bank of Baroda is also changing. It has set in motion a series of steps to transform itself into a modern, technology-enabled customer-centric, world-class banking organization, meeting best global practices and standards in banking and in service delivery. Major innovations and initiatives in the arena of technology, banking products and processes, service delivery channels and human resources have been set in motion, with a view to providing world class banking experience to the Bank's customers across the globe.

CHANGE OF LOGO
In tandem with these initiatives and with a view to project a more modern and contemporary personality befitting the 21st century and reflecting the modern customers' aspirations, the Bank pioneered a major re-branding exercise, in the PSB segment. The 6th of June, 2005 was a new dawn for your Bank in many ways. This was the day the Bank launched its new brand identity THE BARODA SUN'. With a view to position and project itself differently in the crowded market place particularly among the public sector banks - the new brand also incorporates the tag line India's International Bank'. This tagline truly reflects the Bank's extensive global footprints and over 50 years of overseas experience The Bank implemented the re-branding programme across its over 2,800 locations in 21 countries in a record time of 53 days. The global roll out included external signages, stationery, collaterals, locators, identity cards, mementos and a host of other applications Their new brand identity is much more than a cosmetic change. It is a signal that they recognize and they are prepared for new business paradigms in a globalised world. At the same time, the Bank will always stay in touch with its heritage and enduring relationships on which the Bank is founded. Launch of the new logo also symbolized a new promise to create a Bank of the Future and a new Bank for the next 100 years. It further conveys a brand promise- a promise to deliver world-class service.

RAHUL DRAVID - BANK'S BRAND AMBASSADOR

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The celebrity connection has been successfully leveraged by organizations world over to build brand positioning and brand recall. Buyers' decision-making process is sought to be

influenced by a strategy woven around the concept of 'Mind share leading to Market share'. In tune with these trends, your Bank also launched on the 6th of June 2005 Rahul Dravid - an internationally acclaimed cricketer and the present Captain of the Indian Cricket Team - as the Bank's Brand Ambassador. The Bank has found in Rahul Dravid a perfect brand fit. His legendary and international stature is in sync with the stature of the Bank. Rahul Dravid shares with the Bank common values of honesty, simplicity, dedication and commitment. Just like your Bank, he is dependable, consistent and reliable. He has all through performed well in his field and has successfully weathered many crisis. So has your Bank over the last 98 years.

CORE BANKING SOLUTION

The Bank's Core Banking Solution is a unique one. It is comprehensive and yet a single solution across all the countries where the Bank is operating. The solution has interfaced and integrated various applications like Enterprise-wide General Ledger, Risk Management, Anti-money Laundering, Cheque Transaction, Credit Cards, Mutual Funds, Online Trading, Data Warehousing, Customer Relationship Management, RTGS, NEFT, Global Treasury, Securitization, Human Resources Management System (HRMS), Employee Pay Roll. It has also interfaced and integrated with various delivery channels. In the first phase, CBS has been rolled out in 126 branches across India as of 31st March, 2006, with plans to cover additional 750 branches during the current year.

PRODUCTS LAUNCHED

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The huge size of the Indian market, advent of consumerism and potential for expanding the clientele base are amongst a host of factors that have led to the retail revolution that the country is witnessing today. Hence Bank of Baroda has launched many products in the past five years which has helped it to make further inroads into the retail sector. In the year 2002-03,major modifications were made in almost all the retail products during the year by systematically taking up for review all the products and making them more competitive. New products launched were: Super Savings Bank A/C Baroda property loan Assured additional advance International Debit Card Project was launched during the year In the year 2004-05 five assets products were introduced: Baroda Home Improvement Loan Baroda Festival Loan Baroda Professional Loan Baroda Eco-friendly Gas Kit Loan Baroda Loan for Executive Development A liability product, Baroda Premium Current Account was also introduced in certain select centers. The Bank also entered into a MOU with National Insurance Company Ltd. For selling their Non-Life insurance product under corporate agency arrangement on Non-risk sharing basis. In the year 2003-04 the products launched were: Baroda Vidya: an educational loan product. Baroda Gyan: an educational loan product for higher studies in India. Baroda Family Loan: A hassle free family loan. Baroda loan to Defense personnel. For promoting two wheeler loans, an all India tie-up arrangement was made with Yamaha Motor India Ltd. and with Bajaj Auto Ltd. for the state of Gujarat. Again in the year 2005-06, some more products were introduced. They were: Baroda Loan for Executive Development Baroda Vaibhav Lakshmi Baroda Loan to Doctors Baroda Desh Videsh Yatra Loan and Baroda Housing Loan to NRIs / PIOs

The new liability products are: Nagrik Bachat Khata (i.e., No Frill Account) and Savings

34

Bank Accounts with Zero balances for the categories such as Salary Accounts of Employees of various Organizations, Agents of LIC/GIC and their Subsidiaries, Students, Persons getting compensation from Central / State governments for acquisition of land and other properties.

THIRD PARTY PRODUCTS - EMERGING REVENUE STREAM

Recognizing the importance of third party products for generating additional revenue to the Bank, the Bank entered into tie-ups with different entities during the year -UTI Mutual Fund for selling UTI's mutual fund products; National Insurance Company Ltd. for Baroda Health - Mediclaim Insurance scheme. Under the corporate agency arrangement with National Insurance Company Ltd. for selling their Non-life insurance products on non-risk sharing basis, your Bank earned a commission of Rs.3.00 crore during the year.

RETAIL BANKING - THE NEW GROWTH ENGINE

Aggressive expansion of retail credit continued to be a major thrust area for the Bank in FY06. In order to achieve this, several major initiatives were taken during the year. These include - Operationalisation of 17 Central Processing Cells forexpeditious processing and sanctioning of proposals; setting up of 114 MoneyPlex outlets dedicated retail boutiques - across the country. Further, Special Campaigns in the form of Bachat Utsav, Current and Traders Loan campaigns, Baroda Housing loan campaigns were launched. These initiatives have paid good dividends. Retail Credit improved from Rs 6,383.06 crore as at end-March 2005 to Rs 9,779.36 core as at end-March 2006, reflecting a growth of 53.21% during the year. The Retail Credit as percentage of Gross Domestic Advances has increased from 16.96% in March 2005 to 18.92% in March 2006.Baroda Housing Loan and Baroda Traders Loan were the major contributors to the Retail Credit growth during the year.

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TECHNOLOGY A KEY DIFFERENTIATOR

With change being the only constant in the modern day business environment, the Bank has embarked on a major transformation programme to align its business and processes with customer needs and expectations. The Bank has been implementing the planned change in a measured pace towards realizing its vision without losing sight of its cherished values and ethos. During the year 2003-04 the Bank had computerized over 91.64% of its business. Bank has achieved 100% computerization in all Metro, Urban and Semi-Urban branches and overseas branches .Core Banking is implemented in 7 overseas territories. Government business is fully computerized. Bank of Baroda was the first Public Sector Bank to have deployed ALM and Risk Management Systems. Banks back office systems for Reconciliation, MIS Reporting have been automated. Video Conferencing systems are used to connect Banks key offices. Long-term strategy: Bank has evolved a comprehensive business strategy encompassing organizational restructuring, HR, Branding, Marketing, and Customer Focused Technology Deployment. Banks technology implementation plan involves not just core banking but deployment of an end-to-end enterprise suite of applications like Global Treasury, Internet Banking,Tele Banking,CRM,etc.Bank is in the final stages of selecting a System Integrator for implementing its IT Enabled Business Transformation Programme.Pilots for Corporate Financial Services, Business Financial Services and Personal Financial Services have been completed. Universal Teller Concept is implemented in PFS branches; Business Process Reengineering has been completed for all Lines of Business Pilot Branches. Implementation of Core banking solution at Fiji and Uganda was done in the year 200405.Bank has networked over 400 branches with a combination of leased lines, ISDN lines and VSATS. The bank will empower the customer with 24X7 anywhere banking. The bank has three MICR processing centers at Rajkot, Headband and Coimbatore, etc.. Plans are underway to participate in all the national initiatives of RBI/IDRBT like National EFT, Cheque Truncation Project. Bank is in the process of aligning itself for reporting under US-GAAP standards.

Technology- Enabled Business Transformation Project 'Project Shikhar'

With a view to providing greater convenience and alternate delivery channels to the

36

customers, the Bank launched a few more IT initiatives during the year 2005-06. They were:

Interconnectivity of over 1300 branches in India (connected to Bank's Data Centre). Commissioning of 464 new ATMs across the country taking the total tally to 634. Enlarging the Debit Card base to reach around 9, 50,000 from 3, 00,000. Roll out of Core Banking Solution in 126 branches across 13 centers in the country. Introduction of Multi-City cheque facility at 16 centers across the country. 544 Branches brought under RTGS. 74 branches brought under NEFT operation. Extension of i-BOB Branches to reach 600.

The year 2005-06 started with the signing of agreement with Hewlett Packard (HP) as System Integrator and Technology Partner for assisting the Bank in implementation of the Business Transformation Programme inclusive of Core Banking Solution. This move is intended to provide its Indian and International customers and partners with world-class products and services on 24X7 basis. Two immediate outcomes of this partnership with HP have been the already commissioned State-of-the-Art Global Data Centre and the progressive roll out of CBS branches across the country.

E-LEARNING
With shrinking shelf life of technology, products and the ever-changing business scenario in the dynamic and highly competitive environment, training in the present form of classroom teaching alone would not be sufficient. Therefore, your Bank, as part of its HRMS Solution, is proposing to have a web-enabled e-learning platform.

RECOVERY MANAGEMENT
Bank had as a pro-active measure, way in the year 2000, engaged an internationally
37

renowned consulting firm to develop Risk Management Systems with all its nuances keeping in view size, complexity, variety and spread of Banks operations. Bank now has built up a properly articulated Risk Management Architecture, comprising of risk management organizational structure, risk principles, risk processes, risk control and risk audit, all with a view to identify, manage, monitor and control various categories of risks confronting the Ban. The underlying objective is to ensure continued stability and efficiency in the operations of the Bank. As a part of banks knowledge management initiative, in-house as also external training had been arranged for upgrading the knowledge level of Banks offices at various levels in respect of contemporary risk management systems.
NON PERFORMING ASSETS
14 12 Percentage (%) 10 8 6 4 2 0 2002 2003 2004 Year 2005 Net 4.94 NPA 3.67 12.39 11.02 10.52 Gross NPA 7.3 2.99 1.45 3.9 0.87 2006

Source: Annual Reports of BOB from 2001-2006

During the year 2001-02 , cash recovery by the bank was higher at Rs. 457.17 crore (including Rs. 37.10 crore recovered in accounts written off) , as compared to Rs. 419 crore during 2000-01. Continuous efforts have enabled the Bank to upgrade NPAs of Rs. 133 crore. Pro-active measures by the Bank to identify and monitor potential NPAs have helped prevention of slippage in many cases. Bank vigorously pursued recovery in NPAS under the Banks guidelines for one time settlement of NPAs for small loans with limits upto Rs. 25000/- . The initiatives of the Bank in improving asset quality and containing NPA were reflected in the rise in the share of standard assets from 87.58% in the earlier year to 88.98% during 2002-03. In 2003-04 Credit Risk Management Cell was established with professionally qualified and experienced team to enforce and monitor compliance of credit risk parameters and prudential limits set. Monthly newsletters Eco-track and Industry Monitor are prepared covering microeconomic analysis and emerging trends for various industrial sectors to support credit risk management initiative. Asset Liability Management Committee

38

(ALCO) was set up providing stable net interest margin, optimal earnings, adequate liquidity and effective control on the Market Risk meets monthly. Information on past losses due to various operational risk factors relating to system, procedure, employee lapses or external events are collected on half-yearly basis. Cash Recovery by the Bank was Rs.566.09 crore in 2004-05 as compared to Rs.493.82 crore during 2003-04.Under the securitization and reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 the Bank sent notices to 1108 borrowers under the act involving an amount of Rs.665.05 crore. One of the most notable features of the Bank's performance during the year was in the area of NPA management. Through well co-coordinated and sustained efforts across the Bank, global gross NPA level was brought down from 7.30% in 2005 to 3.90% in 2006 a decline by 46.57%. Global net NPA level declined from 1.45% in the previous year to 0.87% in March, 2006. The sustained efforts of your Bank in improving the Asset Quality and containing the NPAs are reflected in the rise in the share of Standard assets from 92.70% in the previous year to 96.10% during FY06. The Bank's NPA coverage ratio is at a healthy level of 78.33% as on 31st March 2006. Cash Recovery of NPAs amounted to Rs.421.75 crore and upgradation of NPA accounts aggregated to Rs.167.12 crore during the year. With effective credit monitoring, slippages could be restricted to 1.30% of the Opening Standard Advances of the year as against 1.96% last year. The Bank could also recover a sum of Rs.166.79 crore from the prudentially written off accounts the largest amount by far in the recent years.

CREDIT OPERATIONS

39

Recognising the importance of small and medium segment in the economy in 2002-03, the Bank introduced 2 new schemes for small and medium enterprises (SMEs), aimed at providing this segment with short and medium-term finance at softer rates. In the year 2002-03 bank has created an Infrastructure Financing Cell for processing of proposals related to the sector. The Bank had set up a capital of Rs.5000 crore for infrastructure financing and total limit sanctioned to this sector, as on 31 st March, 03 was at Rs.1968 crore. The basic focus has been on power, road, ports, Special Economic Zones (SEZs) and telecom sector. The bank had earned approximately Rs.85 crore towards interest, upfront fee, commission etc. from these projects during the current fiscal. In the year 2003-04 the bank financed various gas based power plants in Andhra Pradesh and Tamil Nadu. The Bank posted smart credit growth of 38.04% in FY06. A number of new initiatives facilitated this growth. These include setting up of Fast Track Desk for processing new big-ticket business proposals at Baroda Corporate Centre (BCC), centralized technoeconomic viability (TEV) study of projects etc. The credit operations function was also strengthened structurally during the year, besides implementation of Lending Automation Process System (LAPS) for speedier processing and appraisal of corporate credit proposals. The Bank also entered into MoU / MoC with various entities like EXIM Bank, SIDBI, IDFC, Power Finance Corporation for co-financing of projects in India and abroad. The Bank also signed up with SMERA (SME Rating Agency of India Ltd.) for rating SME units and CRISIL for rating of SSI units under NSICCRISIL Performance and Credit Rating Scheme.

INTERNATIONAL OPERATIONS - THE JEWEL IN THE BANK'S CROWN

40

The Bank's International experience spans over 50 years. Its global footprints extend to 20 countries across 4 continents. The Bank has the distinction of having the largest overseas presence among Indian banks, in terms of its own branch network. International operations contributed to 11.0% of the operating profit of the Bank and 13.2% to Banks business during the financial year ended March03.During the year the Bank had initiated several steps including introduction of retail products targeting local populace, technology up gradation, fine-tuning of human resources management and restructuring of East African operations for enhanced profitability and productivity of its international operations. The Bank conducts its domestic foreign business through 94 authorized branches, of which 4 are Position Maintaining Offices (PMOs). Total foreign exchange turnover during the year amounted to Rs.2251.86 crore contributed by Rs. 10344.12 crore of export credit turnovers. Foreign exchange business contributed Rs.405.58 crore to income during the year. Export credit recorded a growth of 25.6% and at Rs.2181 crore constituted 8.95% of net bank credit. Net profit in 2003-04 registered a handsome growth of 23.44% over last year. The contribution of overseas branches continued to be significant during the year 2003-04 under review with a share of 19.09% to the net profits of the bank and 13.84% of its business. The Bank is reentered Tanzania during this year. Bank launched Resident Indian Foreign Currency Deposit Account facilitating the resident Indians to hold deposits in foreign currency up to $25,000 or equivalent in GBP/EUR.Total foreign exchange turnover during the year amounted to Rs.24,984 crore including export credit turnover of Rs.9,194.17 crore.Export Credit at Rs.2,130.33 crore constitutes 8.10%of the net credit of the Bank. Overseas branches registered a growth of 19.79% each in deposits and advances portfolio in 2004-05.All the overseas operations and ventures have continued to generate profits except Tanzania. The assets size has increased by 28.19% during 2004005and the net profit from core operations recorded a growth of 48.38% over the last year. Net profit from core operations excluding extraordinary items increased by 48%. Banks customers in UAE are availing 24*7 and anywhere banking through ATMs in GCC countries in 2004-05.Bank in UAE has partnered with C-Sam and UAE Exchange Centre for introducing Wallet Service, a money transfer service from UAE to India

In 2005-06, the Bank opened 2 new offices a branch at Leicester, UK and a Representative Office at Bangkok, Thailand.

41

International Operations have been contributing good share to the Bank's top line and bottom-line - 16.08% to the Bank's global Balance Sheet and 27.88% to global profit as of March, 2006. Gross NPAs and Net NPAs of International Operations are comparable to the best international standards they were 1.31% and 0.1% respectively as at 31st March, 2006.

MARKETING INITIATIVES - KEY DIFFERENTIATOR FOR CUSTOMER INTIMACY:

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The Bank's Vision envisages transforming the Bank into a marketing-oriented organization, reaching out and acquiring customers and delivering both banking and financial services through various delivery platforms. The new strategy requires the setting of a new Sales Structure within the Bank. This is being progressively put in place. Marketing Managers, Marketing Officers and Sales Officers are deployed in all the Zones and Regions to aggressively drive business growth. These sales teams would work on a full time sales role. They have been re-skilled and re-tooled to become aggressive sales persons and order getters. The strategy, even in its nascent stage, has begun to pay off. In a 45-day Savings Bank Account Opening' Campaign, more than 1.27 million new customers opened Savings Accounts with the Bank. This outbound selling will become the principal plank around which sales - especially retail sales -will grow in the Bank. The marketing efforts have improved the Bank's ranking in the Economic Times Brand Equity Survey and it is now in the top 20 best service brands of the country. A popular business channel referred the Bank as the leader in the 12-hour banking category. The Bank was also short-listed for re-branding awards by a Television Channel and a Professional Management Association. It is proposed to continue these tasks over the year so as to emerge as India's International Bank', driven by the customer, enabled by the State of the Art Technology and reposition itself as a dominant retail and sales Bank providing anytime, anywhere service delivery across nearly 2,800 customer touch points in 21 countries. The central objective being pursued in these endeavors is to convert the branches from transaction processing centres into sale and service outlets.

PROJECT PARIVARTAN- URBAN RETAIL DELIVERY MODEL: A RETAIL LOAN FACTORY IN THE MAKING
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The bank has engaged the services of McKinsey and Company- a world-class consultancy firm- to help the bank implement its strategic vision-2010. Under Project Parivartan- a joint initiative of the bank and the McKinsey Team, a business performance transformation program had been implemented to capitalize on various initiatives already taken by the bank so as to help achieve the bank's aspirations. The project has identified 18 specific strategic priorities for the Bank across the urban retail, wholesale, SME and rural / agri businesses. In the first leg PROJECT PARIVARTAN' is focusing on urban retail pilot in Mumbai, delivered by dedicated retail team and supported by technology-enabled simplified processes. The pilot roll out of urban retail in Mumbai began in April 2006. The new retail delivery model and improved processes are proposed to be implemented across 20 centres in the country during the year 2006-07. With the implementation of these strategies, the retail base of the Bank is expected to witness a paradigm shift.

PERFORMANCE OF REGIONAL RURAL BANKS (RRBs)

In the year 2004-05 Bank had sponsored as many as 19 RRBs jointly with the State and the Central Government spread over 5 states-U.P., Uttranchal, Rajasthan,Gujarat,M.P. The total business of the RRBs had surged to Rs.7465.65 crore increasing by 14.48% as of March 2004.The combined profit was Rs.51.02 crore.The net worth and the reserves and surplus of the RRBs improved from 168.28 crore to 217.61 crore. During the year, 17 out of 19 sponsored RRBs of the Bank were amalgamated into 4 larger RRBs. The total number of RRBs sponsored by the Bank thus stands reduced to 6, as on 31st March, 2006.

Baroda Eastern Uttar Pradesh Gramin Bank, Head Office: Raebareli. Baroda Western Uttar Pradesh Gramin Bank, Head Office: Bareilly Baroda Rajasthan Gramin Bank, Head Office: Ajmer Baroda Gujarat Gramin Bank, Head Office: Bharuch Jhabua-Dhar Kshetriya Gramin Bank, Head Office: Jhabua Nainital-Almora Kshetriya Gramin Bank, Head Office:Haldwani

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Aggregate Business of these 6 RRBs has risen to Rs.8,586.95 crore, reflecting a growth rate of 15.02% over the previous year. They posted a Net Profit of Rs.22.17 crore in FY06. The Net Worth and the Reserves & Surplus of these RRBs improved from Rs.217.60 crore as of end-March 2005 to Rs.239.77 crore as of end-March, 2006 and from Rs.126.34 crore as of end-March 2005 to Rs.146.41 crore as of end-March 2006 respectively Rural Innovations Bank has set up an innovative institution by the name of Baroda Swarojgar Vikas Sansthan(BSVS) at Lucknow,Jaipur,Gandhinagar,Surat,Theur in 2004-05 .68 courses were conducted and 1375 beneficiaries were trained by these BSVS and 475 of these availed the loan and started suitable economic activities in their local areas. Bank has also set up 90 new Farmers clubs and 35 new PMRY clubs.

DOMESTIC SUBSIDIARIES & ASSOCIATES:

The performance of the subsidiaries during the Financial Year 2005-06 has been good. The Bank has infused equity capital of Rs.80.00 crore and Rs.30.00 crore in BOBCARDS Limited and The Nainital Bank Limited respectively. The Bank has acquired one third holding of National Housing Bank in BOB Housing Finance Limited so as to make it wholly owned subsidiary with a view to eventually merge it with the Bank. BOBCARDS Limited has introduced various customer centric initiatives for cardholders as well as for Merchant Establishments with new products and value addition in existing products during the year. A summary of performance of the subsidiaries is as follows:
Subsidiary BOB Assets Management Co. Ltd. BOBCARDS Ltd. BOB Capital Markets Ltd. BOB Housing Finance Ltd. The Nainital Bank Ltd. Owned Funds 27.70 118.00 86.77 73.40 112.73 Total Assets 27.70 230.10 232.08 295.57 1321.42 Net (Profit/(Loss) 0.33 5.78 -0.22 5.31 12.17 Offices Staff 02 80 01 27 79 20 294 16 19 664

*Excluding those on deputation from Bank of Baroda

A turnaround strategy is being contemplated for BOB Capital Markets Limited as well as for BOB Asset Management Co. Limited with a view to ensure that these entities become sizable players in the market in their respective field.

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All overseas branches, overseas subsidiaries and joint venture posted net profits during the year. Total business (Deposits and Advances) of overseas operations recorded an impressive growth of 33%. Deposits grew by more than 41%, Assets by about 29% and Net Profits by about 28% during the year.

HUMAN RESOURCES INITIATIVE

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The Bank has the tradition of continuous enrichment of its human assets so that they deliver value to business. This is rooted on the belief that the Bank's human resources are the most valuable intangible asset, with potential for continuous appreciation in value. The bank has adopted a futuristic business driven HR policy for all round HR reformation and rejuvenation in the Bank.As part of implementation of Business-driven HR Policy, yourBank has evolved its HR Mission Statement - CREATING COMPETENCE AND PASSION FOR BUSINESS EXCELLENCE The HR initiatives help in creating a vibrant workplace,enhancing employee motivation,development of the bank.The bank is laying a major emphasis on talent acquisition and management to have a competitive edge.The bank provides all opportunities for faster growth and development and the bank has also recruited probationary officers.Training focus has been on the allround development of the people through the enrichment of job knowledge,etc. The bank has taken a very focused and innovative strategic HRD initiative to seamlessly integrate the Business and IT strategies. In the year 2002-03 Human Resource Information System (HRIS) was introduced. This system envisages centralized data base with the staff members as the end users in various capacities. This is now integrated with Banks CBS for simultaneous rollout. A Board Level Steering Committee on HR had been appointed in the year 2003-04 with two leading HR & management professionals in the field.25,170 employees have been trained by conducting 1,250 in-house training programmes at its various training centers. The bank deputed 545 officials to reputed external institutions in the country and overseas in various management and behavioral programmes. Bank has placed a major thrust on talent acquisition and management to have a competitive edge and with this objective it has already put in place a revamped HR Resourcing Policy. Bank is constantly paying attention for career progression by undertaking promotion exercise from one cadre to another and posting officers on overseas assignments. All Banaras State Bank Ltd. (EBSBL) employees are governed under the uniform service conditions applicable in Bank of Baroda. Bank regularly conducts pre-promotion training programmes for SC/ST candidates for promotion exercises right upto promotions to chief managerial positions and also helps them in upgrading their skills and knowledge. Highlights for the year 2003-04 are: -revamping the training & creating of a learning organization -creating a customer-centric focus -major leadership initiatives -bringing about attitudinal change -digital competence across the levels to operate in a digitally enabled core banking environment.

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The bank regularly conducts promotion exercises right upto the level of Chief Manager. Increase in HR capital adequacy through strategic alignment and partnership will be part of the banks overall strategy. Various Knowledge management initiatives like elearning, barodanet have been started for the customers were undertaken in the year 200405.The bank deputed 639 officials to reputed external institutions in the country and overseas. In the year 2005-06 Bank has launched innovative employee-centric initiatives and has undertaken revamp of key systems, policies and practices. Many of these initiatives are perhaps the first of their kind in the banking industry. These initiatives include: HR BLUEPRINT FOR BUSINESS DRIVEN HR REFORMS: A Board approved Strategy Document in HRD outlining various organization-wide HR Reforms / Interventions has been adopted for implementation. NEW GROUP HR STRUCTURE: A new Group HR Organizational Structure have been conceptualized and is being put in place to provide strategic linkage with the business needs. It is an integral part of the HR Transformation Model. HUMAN RESOURCES MANAGEMENT SYSTEM (HRMS) & EMPLOYEE PAY ROLL SYSTEM: The Bank is implementing a Single Web-enabled HRMS solution named 'HRNes' & Employee Pay Roll System for its global operations. This will bring greater efficiency and convenience in HR operations and would provide better delivery of HR services. The System christened as HRMS-HR Network for Employee Services provides many functionalities built on work flows and integrates employees self service and i-learning. KHOJ - THE ORGANIZATION-WIDE TALENT IDENTIFICATION & DEVELOPMENT PROGRAMME FOR OFFICERS AND CLERICAL STAFF : Under this initiative, employees with high potential, selected through scientific process of identification, will be deployed in key business areas. These employees will be provided with suitable grooming and career growth opportunities.

SAMPARK- SOS EMPLOYEE HELPLINE: SOS Employee HELP Line has been set up through which employees who are in distress can directly approach the Bank's Chairman & Managing Director for immediate relief.

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Matters requiring urgent attention like life & death issues, medical emergency, overwhelming circumstances in personal life of employees, hardships due to natural calamities etc. are dealt on priority and relief wherever required are provided without any delay. PARAMARSH- EMPLOYEE COUNSELLING CENTRE: The Bank has set up an Employee Counselling Centre for providing psychological assistance and guidance to employees to enable them to overcome any stress, complexities, conflicts in their personal lives and lead a better social and work life. It works on the principle of neutrality and confidentiality. The first such center has been set up at Mumbai where services of a professional Clinical Psychologist are available and the Bank is in the process of setting up such centers at other places for the benefit of its employees. HR RESOURCING POLICY: A new HR Resourcing Policy has been formulated to take care of various recruitment needs of the Bank consequent upon abolition of the erstwhile Banking Service Recruitment Board (BSRB). PERFORMANCE APPRAISAL SYSTEM FOR CLERICAL & SUB-STAFF: With the objective of promoting organization-wide performance culture, hitherto uncovered employees in the Clerical and Sub- Staff cadre have been brought in under a new performance appraisal system. EXTERNAL TRAINING AND OVERSEAS TRAINING FOR EXECUTIVES / OFFICERS: The Bank makes extensive use of external training resources of reputed Management Institutes and Training Institutions in India and abroad, with a view to provide specialized training in newer areas of skills as also to provide wider exposure to executives and officers. During the year, 512 executives / officers were deputed for external training programmes in different functional, managerial and behavioural areas. A specially structured Leadership Development Programme for the Bank's top management was conducted during the year at Management Development Institute, Gurgaon, with focus on action planning for achieving the goals under the Bank's Vision2010.

BARODA LEADERSHIP DEVELOPMENT CENTRE

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The Bank plans to set-up a world-class Leadership Development Centre, to groom and prepare future leaders for the Bank VIGILANCE The Bank has taken suitable steps towards preventive, detective and punitive vigilance as per the government guidelines. The vigilance machinery of the Bank is effectively performing its role in new risk prone areas emerging in e-banking environment and also in retail banking. Study of fraud prone areas indicating loopholes in the systems or the obsolescence of the systems and the procedures is undertaken to improve controls and update operational procedures. On occurrence of such instances detailed examination of the associated systems and procedures is carried out with a view of eliminating factors and processes likely to have an adverse effect on the Bank. OFFICIAL LANGUAGE POLICY: Hindi workshops were organized at Corporate Levels as well as Zones and Regions. Bank organized various competitions on the occasion of Hindi Day celebration at various levels which has helped in increasing use of Hindi in day-to-day work. Bilingual Data Processing software-BIBAS was provided to the newly computerized rural/semi-urban branches. The Bank's performance in the use of Hindi Language registered excellent progress during the year FY06. Special attention was paid to compliance of various statutory requirements and targets of Annual Implementation Programme of Government of India, Ministry of Home Affairs. In recognition of the Bank's outstanding performance, the Bank secured first prize in RBI Rajbhasha Shield Competition in all the three linguistic regions i.e. Regions A, B & C for the year FY05. Your Bank has also received the first prize in all-India Indira Gandhi Rajbhasha Shield Competition. This is a historic achievement for your Bank. The Bank also won Second Prize for our house journal BOBMAITRI' awarded by Reserve Bank of India among all the house journals of banks. The Town Official Language Implementation Committee functioning under your Bank's convenorship at Baroda and Jaipur have been awarded the First Prize from the Government of India, Ministry of Home Affairs for their outstanding performance in their respective regions. At the Regional level, Zonal office, Delhi and Jaipur have received the First and the Second Prize respectively in the Region A. The Regional Office at Anand and the Zonal Office at Baroda have received the First and the Third prizes respectively in the Region B and The Regional Office at Hyderabad has received the First prize in the Region C from the Government of India, Ministry of Home Affairs for their Excellent Performance in the Official Language Implementation. The Bank's Hindi journal Akkshyam is awarded a Special Prize by the Rashtriya Hindi Academy, Roopambra, and Kolkata and by the ABCI, Mumbai. The Bilingual Software Baroda Shakti Office has been provided to various offices that helped increasing the
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use of Hindi in the Bank's day-to-day work. The Hindi Workshops, Seminars, Computer Training Programmes are organized at the Corporate level as well as various Zones and Regions. The Bank's intranet can be accessed for Hindi Aaj Ka Hindi Shabd and the HRD Hummings are displayed in Hindi on daily basis. The State Level Hindi Seminars have been organised at Bangalore, Hyderabad, Jaipur, Lucknow, Ahmedabad and Delhi. The Writers/Scholars of different Indian languages and Hindi have appreciated the efforts of the Bank in propagating the use of Hindi.

FINANCIAL RESULTS FOR APR-JUNE, 2006-07 (Q1:FY07)

Results at a Glance
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Parameter Total Income Interest Income Other Income Total Expenses Interest Expenses Operating Expenses Operating Profit Provisions & Contingencies Provision for taxes Net Profit
Source : www.bankofbaroda.com

EndJune06 2,297.62 2,020.10 277.52 1,741.77 1,137.77 604.00 555.85 305.42 87.11 163.32

EndJune05 1,882.01 1,673.24 208.77 1,406.63 914.54 492.09 475.38 276.91 41.53 156.94

% Change 22.08 20.73 32.93 23.83 24.41 22.74 16.93 10.30 109.75 4.07

Total Business Total Business of the Bank increased by 28.20% from Rs 1,25,711.17 crore to Rs 1,61,158.06 crore between end-June 2005 to end-June 2006. During this period, while Total Deposits increased by 23.09% to Rs 99,778.40 crore from Rs 81,063.78 crore, Total Advances increased by 37.48% to Rs 61,379.67 crore from Rs 44,647.39 crore. Retail Lending Banks Retail Portfolio has expanded healthily by 56.46% from Rs 6,566.06 crore to Rs 10,273.12 crore between end-June 2005 and end-June 2006. As at end-June 2006, the Banks Retail Credit as % of Total Domestic Credit stood at 19.7% against 17.1% as at end-June 2005.

QUARTER 1 (JUN'06) 2,500.00 2,000.00 1,500.00 1,000.00 500.00 0.00 June05 June06 52 276.91 156.94 305.42 163.32 1,882.01 1,406.63 2,297.62 1,741.77 Total income Total Expenses Provisions & Contingencies Net Profit

QUARTER 1 (JUN'06) 2,500.00 2,000.00 1,500.00 1,000.00 500.00 0.00 June05 June06 276.91 156.94 305.42 163.32 1,882.01 1,406.63 2,297.62 1,741.77 Total income Total Expenses Provisions & Contingencies Net Profit

Financial Results For Jul-Sept, 2006-07 (Q2:FY07)

Results at a Glance
EndSeptember 06 2507.66 2185.92 321.74 1891.96 1295.15 596.81 615.70 159.33 168.01 288.36 EndSeptember 05 2003.59 1694.04 309.55 1508.27 912.28 595.99 495.32 125.70 110.55 259.07 % Change

Parameter Total Income Interest Income Other Income Total Expenses Interest Expenses Operating Expenses Operating Profit Provisions & Contingencies Provision for taxes Net Profit

25.16% 29.04% 3.93% 25.43% 41.96% 0.13% 24.30% 26.75% 51.97% 11.30%

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Source : www.bankofbaroda.com

QUARTER 2 (SEPT'06)
3000 2500 2000 1500 1000 500 0 288.36 159.33 June05 259.07 125.7 June06 2507.66 1891.96 2003.59 1508.27 Series1 Series2 Series3 Series4

Financial Results for Oct-Dec, 2006-07 (Q3:FY07)

Results at a Glance
EndDecember 06 2720.07 2387.00 333.67 2063.76 1426.23 637.53 656.91 141.69 186.09 329.13 EndDecember 05 2047.66 1773.29 274.37 1538.42 959.93 578.49 509.24 225.06 82.00 202.18 % Change

Parameter Total Income Interest Income Other Income Total Expenses Interest Expenses Operating Expenses Operating Profit Provisions & Contingencies Provision for taxes Net Profit
Source : www.bankofbaroda.com

32.82% 34.61% 21.61% 34.15% 48.58% 10.21% 29% -37.04% 126.94% 62.79%

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QUARTER 3 (DEC'06)

June06 Series4 Series3 Series2 June05 Series1

500

1000

1500

2000

2500

3000

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FUTURE PLANS OF BANK OF BARODA

TECHNOLOGY PLAN FOR FY07
As part of implementation of the technology-enabled Business Transformation Project, the Bank's plans for the year include:

Roll out of Core Banking Solution (CBS) in additional 750 branches including some overseas territories like UAE & Oman, UK, USA, Singapore, Mauritius taking the total number of branches under CBS to around 900. Roll out of applications like Credit Risk Management System facilitating Basel II compliance, Enterprise-wide General Ledger for consolidation of enterprise balance sheet, Human Resources Management System (HRMS) and Employee Pay Roll System enabling centralized Human Resources Management, AntiMoney Laundering (AML) for better compliance with KYC norms, Internet Banking to provide online banking convenience to the customers. Commissioning of Disaster Recovery Centre (DRC). Operationalisation of Phone and Mobile Banking. Launching of full-fledged internet banking. Introduction of Mail and Messaging System to facilitate easier communication and faster decision delivery.

VISION-2010 FOR INTERNATIONAL OPERATIONS:

To position the bank as uncontested 'India's International Bank' To evolve as a customer centric bank, offering world class products and services and banking experience to customers through local and global best practices and by leveraging technology. To improve the contribution to bank's global balance sheet from 16% to 20% and to bank's global net profit from 28% to 30% by 2010

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RECENT NEWS Bank of Baroda launches online trading services

2007-01-25 15:43:12 Source : Moneycontrol.com

Bank of Baroda had announced on the 27th January 2007 , the launch of its Online Trading services for its customers in Mumbai - a step in its plan to provide Comprehensive Suite of Products and Services under its Wealth Management initiative. The Bank has entered into an alliance with India Infoline Limited for providing Brokerage Platform, besides research and analysis services to the customers. Christened Baroda e-trading, this offering will offer multiple options to the customers for trading in equity shares, online or off-line, on NSE or BSE, in cash segment as well in derivatives segments from the same screen. Customers can deposit cheques and the system will automatically update the broker ledger of the client and set limit for trading. Customers can also access information about various corporates and live movements of prices in the stock exchanges

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CONCLUSION

Expansionary phase of Indian economy triggered by globalization and encouraging investment climate has brought in its wake unprecedented expansion in bank credit. However, in tandem with such surge in credit growth, banks have been experiencing pressures on their resources. Signs of steep hardening in market-determined interest rates are visible. Some banks have already raised their PLR and interest rates on retail loans particularly housing loans. Reckoning the difficulties faced by the banks, tax concessions on banks' time deposits for 5 years and above tenure have been announced in the recent Union Budget. To meet the future competitive challenges against the backdrop of roadmap of banking industry beyond 2009, when they would be fully exposed to competition, banks are bracing themselves to be ready through adoption of newer technology, strengthening their capital base to become Basel-II compliant, reducing their NPAs, bringing down operating costs, undertaking organizational restructuring and sharpening their customer-centric initiatives. Emergence of a few large Indian banks through Merger and Acquisition route to effectively compete with large global banks may not be far off, when viewed against such preparedness and positive signs from regulators. In the face of globalization for meeting various risks, banks are setting up robust enterprise-wide integrated risk management systems with high emphasis on developing risk management skills across the organization. Sensitizing the operating units of banks towards the integrated approach to risk management tools has, therefore, become essential. Thus, not withstanding intense competition, the expansionary phase of the economy is expected to provide ample opportunities for the growth of banking industry. Indian banking system is increasingly becoming competitive and is getting integrated with global banking. Banks are in a war game to acquire customers. Service delivery standards are being benchmarked to global standards. Technology and marketing are becoming the key differentiators. Implementation of Basel-II norms is posing new challenges. Impaired assets are continuing to be a major area of concern. Banks are under increasing pressure to improve their profitability to meet the high operating costs and to shore up the capital.

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OUR RECOMMENDATIONS
To make improvements in the banking sector in India, we can compare the Indian banking system with the Chinese. Why Chinese bank stocks are hot property although their banking system is far worse than India? Comparisons between the Indian and Chinese economies tend to be humbling experiences for Indians, but the banking sector is an exception. Chinese banks, according to most experts, are the Achilles heel of the economy. They are ponderous state-owned dinosaurs that lend where the state tells them to and, thus, suffer from a mountain of bad debts. They have poor credit appraisal systems, excessive government influence on resource allocation and weak governance, bad asset quality, limited competition and low capitalization. How is it, then, that Industrial and Commercial Bank of Chinas (ICBC) recent IPO was the largest in the world? Why did the $21.9-billion (including greenshoe) IPO attract institutional bids for about $300 billion worth of shares, while Hong Kong retail investors queued up to put in orders worth a massive $55 billion? There were two classes of investors in Chinese bank IPOs. One of them hoped to make immediate gains on listing, a strategy that has proved to be successful, given the infatuation with China. The second category believes that since banks provide a classic play on the economy, investment in a Chinese bank is equivalent to investing in its booming economy. We believe that there is greater freedom in pricing loans. Also, over the four years to 2004, the number of branches went down by 25 per cent while the employee base contracted by 10 per cent. Also the Chinese have gone about banking reform very shrewdly cleaning up bank balance sheets periodically and enticing foreign investors into them. This strategy if implemented in India could prove us helpful. The high NPAs are the price that the Chinese government has consciously agreed to pay for its strategy of pushing rapid growth. It would help the Indian Government if it adopts this approach.

Unfortunately, the attitude of the Indian government is very different. While it wants the state banks to compete in a market-led system, it denies them the tools to do so. What purpose is served, for example, by limiting the FII stake in SBI to 20 per cent? Why are PSU banks not allowed to have their own salary structures? It is well known that Indian banks lack scale and consolidation will do them a world of good. But all that the government does is talk endlessly about consolidation. And, finally, instead of allowing foreign banks to become strategic partners, at least with the weaker Indian banks, all it does is postpone foreign competition. In short, when they lap up the IPOs of Chinese banks, investors are voting with their money for the Chinese government, not the banks. There is no such confidence in the Indian government which needs to be changed

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WHAT THE FUTURE HOLDS FOR US

Revolutionary and discontinuous changes in the operating environment are a stark reminder that business success is 'impermanent'. The emergence of IT as a major driver for change, has accentuated the need to initiate a major transformation program. The conversion to an IT savvy market driven bank will be a prerequisite to survival and growth. A major and strategic step in hi-tech, was the establishment of the Integrated Treasury branch, as a forerunner to full-fledged global treasury operations. At Bank of Baroda, change is a journey. It has a beginning. There will be no end. It will be a long and difficult march. And the Bank will emerge stronger, more resilient and positioned to become India's first bank of truly global standards. The relocation to the imposing Baroda Corporate Centre, is a true reflection of the Bank's resolve to move ahead of the times. It will not be out of place now, as it stands on the threshold of a digital era, to echo the same sentiments that guided the Bank in its platinum jubilee year - 'a promising future is the sequel to a glorious past'

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BIBLIOGRAPHY
Business World (December 4, 2006) Pg. nos 52 , 66, 70. Annual Reports of Bank of Baroda from the year 2000-01 to 2005-06. The Economic Times o 25th January , 2007 o 8th February , 2007

WEBLIOGRAPHY
www.bankofbaroda.com www.businessworld.in www.en.wikipedia.org www.hindustantimes.com (year 2004) www.moneycontrol.com (25th Jan ,2007) www.in.rediff.com (25th Nov , 2005)

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