CHAIRMAN'S STATEMENT

Moving Ahead
on Sustainable
Performance..
M. D. Mallya
Chairman & Managing Director

Dear Stakeholder, While the demand for bank credit remained highly subdued
It gives me great pleasure to present the Annual Report and and skewed throughout the year under review, credit costs
Financial Statements of Bank of Baroda for the year ended increased for several banks with the maturing of restructured
31st March, 2010. The Banks business and financial loans. Moreover, higher level of government market
performance during the year under review has demonstrated borrowings and resultant volatility in bond yields posed tough
its strength and stability amid uncertain economic challenges for the banking industrys treasury operations.
environment. Bank of Barodas Resilience to Shocks
Economic Review While it is challenging to remain immune to the disruptions
Indian economic environment was fairly mixed and uncertain created by economic shocks, Bank of Baroda has been able
during 2009-10 (FY10). The first half of the year (i.e., H1, to withstand the turbulence more effectively during FY09
FY10) was overcast by the monsoon failure and a sharp and FY10 mainly due to its strong business fundamentals.
decline in foodgrain production, a continued slowdown in Again in the year FY10, the Bank could demonstrate
final consumption expenditure, a muted demand for bank consistent performance by delivering much better quality of
credit and a negative growth in both exports and imports. earnings, healthier asset quality compared to banking
However in the second half of 2009-10 (i.e., H2, FY10), industry with higher provision coverage and lower interest
countercyclical policies, a pickup in the global economy and rate risk. It has been steadily improving its market share
a recovery in capital inflows helped India overcome an also. It expanded its global business level by 24.0% (y-o-y)
adverse monsoon and see a quick rebound in the economy. to Rs 4,16,080 crore during the year FY10.
Both exports and imports turned positive by November- Despite ongoing global economic challenges, the Banks
December, 2009 after contracting continuously for the international operations continued to remain its mainstay
previous 12-13 months. and contributed almost 24.0% to the Banks total business
The headline inflation (WPI), after remaining subdued during and 20.0% to its operating profits in FY10. The Banks
H1, FY10 increased at a faster pace in H2, FY10 and came international business grew by 31.0% (y-o-y) in FY10 without
close to 10.0% (y-o-y) in March, 2010. At the same time, any compromise with credit quality. The Banks gross NPA
driven by manufacturing and mining sectors, the industrial in international operations stood at 0.47% and net NPA at
production recovered from 1.1% (y-o-y) in April, 2009 to just 0.11% in FY10.
15.1% (y-o-y) in February, 2010. Rapid growth in both One of the greatest strengths of the Bank over a period of
inflation and industrial production has prompted the Reserve time has been the trust and confidence that it enjoys of its
Bank of India (RBI) to normalise its Monetary Policy and stakeholders. Notwithstanding the unprecedented turbulent
move its focus to recovery management from the earlier conditions created by the global economic meltdown during
thrust on crisis management. the years FY09 and FY10, the Banks stakeholders remained

2 Jeeef<e&ke efjhees& 2009-10

firmly positive on the Banks business and financial The Bank has always believed in making a difference to the
performance. I am happy to share with you that the Bank society at large. The Bank took several initiatives on the
too met the stakeholders expectations in terms of Financial Inclusion front during FY10 to harness the
performance, transparency, corporate governance and emerging opportunities for rural and agriculture lending. To
integrity in guidance during the last couple of years. augment its Agriculture advances, the Bank conducted
special campaigns for Crop Loans and Investment Credit.
New Initiatives
The Bank organized 2,857 Village Level Credit Camps and
During the year under review, the Bank maintained its focus disbursed Rs 2,484 crore to over 1.9 lakh borrowers during
on introducing new business, customer and technology FY10. The Bank identified 450 thrust branches across India
initiatives to further strengthen its operations and leverage to enhance agricultural lending. The Bank formulated
its considerable domestic footprint. various area-specific agricultural lending schemes with
The Bank launched a new business process reengineering various concessions in the rate of interest, charges, etc., in
and organisational restructuring project Navnirmaan- the interest of poor farmers.
Baroda Next on 22nd June, 2009. The project envisages Towards the effective use of technology in rural agricultural
redesigning and streamlining of existing processes and lending, the Bank has introduced IT-enabled smart card
structures including revamp of the branch architecture for based technology for financial inclusion. With nine additional
better service and sales, higher revenue growth and Baroda Swarojgar Vikas Sansthan (Baroda R-SETI) Centres
improved efficiency. The project is primarily designed to opened during FY10, the total number of BSVS has gone
optimise on available resources to maximise business and up to 25. Over two million no-frill savings accounts have
profits and to build a next step for Bank of Baroda, that is, been opened so far. As part of the Financial Inclusion
Baroda Next. Initiative, the Bank has opened four Financial Literacy and
The Bank achieved 100.0% Core Banking Solution (CBS) Credit Counselling Centres (FLCCs) christened as
for all its domestic branches reflecting the fastest ever roll SARTHEE.
out of such solutions in the Indian banking industry. The Adding its offerings in wealth management products, the
Banks CBS branches are enabled for inter-bank remittances Bank has entered into tie-up arrangements with two more
through the RTGS and NEFT. Around 94.0% of its overseas leading asset management companies in FY10 for
business is also covered under the CBS. distribution of mutual fund products. The Banks joint venture
By 31st March 2010, the Banks ATM network expanded to in life insurance, in association with Andhra Bank and L &
1,315. Moreover, Base 24 has been made fully operational G (U.K.) IndiaFirst Life Insurance Co. Ltd. commenced its
for all domestic ATMs and for ATMs in the Banks seven operation during the year. The IndiaFirst has received an
overseas territories. Today, the Banks customers enjoy overwhelming response from the Banks customers across
multiple service channels like Baroda Connect (Internet the country, making the company the fastest growing
Banking), Phone Banking, Baroda Cash Management Insurance company to reach Rs 100 crore premium
Services, NRI Services, Depository Services, etc. collections in the first 100 days of its launch.
The Bank has implemented an Integrated Global Treasury Business & Financial Performance
Solution in its major overseas territories. It has also started The Bank has reported a healthy growth in its business and
providing Online Institutional Trading to its corporate profits with improvement in all key parameters during
customers. During FY10, many other important technological FY10.
initiatives were taken in the domain of anti-money laundering, As stated earlier, its Global Business touched a new
document management system, payment messaging milestone of Rs 4,16,080 crore in FY10 reflecting a growth
solution, etc. of 24.0% (y-o-y). Both its domestic deposits and advances
In order to improve credit flows under the retail business increased at the above-industry pace of 22.4% and 21.3%,
and to consolidate that portfolio, the Bank has realigned its respectively. The Banks domestic low-cost or CASA
retail bouquet of products. The Bank has also launched a deposits grew by an unprecedented 25.1% taking the share
new subsidy-linked housing loan scheme under the Home of domestic CASA deposits to 35.63% in FY10 versus
Loan Product styled as Interest Subsidy Scheme for 34.87% in FY09. Its Social Sector Advances or Priority
Housing the Urban Poor. Sector Credit surpassed the mandatory requirement and
A couple of years ago, the Bank introduced a Retail Loan posted a growth of 24.0% (y-o-y). The Bank recorded a
Factory model as a fast delivery channel for the benefit of growth of 44.0% in SME credit, 27.0% in farm credit and
its retail customers. Going by the success of this initiative, 24.0% in retail credit reflecting a well-diversified growth
the Bank opened six new Retail Loan Factories during FY10, achievement.
taking the total number of such factories to 30. In its overseas business, while the Banks deposits grew by
Leveraging its newly created robust technological platform, 36.0% (y-o-y), its advances grew by 25.0% during FY10.
the Bank made Home Loan and Education Loan Application Within total overseas deposits, the customer deposits grew
Modules online during the year under review. by 33.7%. Total assets of the Banks overseas operations

Annual Report 2009-10 3

increased from Rs 51,165 crore to Rs 68,375 crore registering possible talent in the country from the premier Institutions
a growth of 33.6% during the year under review. during the last couple of years. The Bank has been working
The growth in profits was led by healthy topline growth, on the business process reengineering (BPR) project in
prudent management of deposit costs and better operating consultation with the Mckinsey & Co. so as to achieve the
efficiency. The Banks Net Profit at Rs 3,058.33 crore for optimum use of technology and right skilling of the manpower
FY10 reflected a robust year-on-year growth of 37.3%. to yield maximum customer satisfaction. During FY10, the
Bank also launched a series of marketing campaigns to
As the Banks primary objective has been to grow with
promote its brand value. The same would continue in future
quality, the Bank focused on containing the impaired assets
also, in order to strengthen the Banks market share both
to the minimum possible level. While the Gross NPA in
from the asset and liablity sides.
domestic operations stood at 1.64% at end-March 2010, the
same for Overseas Operations was at 0.47%. In spite of The Bank has been actively designing strategies for
growing slippages for Indian banking industry during FY10, enhancing sales and raising brand equity through continuous
our Bank succeeded in restricting its global Gross NPA level market research. The Bank has also focused on evolving a
to 1.36% and Net NPA level to 0.34% by end-March, FY10. Strategic Mass Communication and Events Plan to ensure
While the RBI has extended the deadline for recovery from brand enhancement. Besides this, significant initiatives in
the Agricultural Debt Relief accounts till end-June, 2010, customer education would continue for putting in place an
the Bank has continued to classify these accounts as NPA effective Customer Relationship Management system in the
as a prudent measure. Despite this, the Bank enjoys one of Bank.
the lowest ratios for Gross and Net NPA in the industry. The Banks Corporate Goals & Strategy
Banks NPA coverage ratio at 74.90% as on 31st March,
For the year 2010-11, the Bank has selected the motto
2010 has been comfortably above the norm of 70.0% set
Leveraging technology for augmenting business growth
recently by the RBI.
and profitability.
The Banks Return on Average Assets (ROAA) at 1.21%,
The ultimate objective of the Top Management of the Bank
Earnings per Share (EPS) at Rs 83.96, Book Value per
is to equip the Bank with more stability and growth-
Share (BVPS) at Rs 378.40, and ROE (Return on Equity)
orientation. To attain this goal, we have adopted a Business
at 22.19% reflect a significant improvement over their
Model that focuses on achieving sustainable growth. This
previous years levels. The Banks Capital Adequacy Ratio
model has four pillars Healthy CASA, Well-diversified
too stood at the healthy level of 14.36% with the Tier 1 capital
Advances Portfolio, Strong back up of Non-interest income
at 9.20% during FY10. The Banks Cost-Income ratio also
and Stringent NPA Management. The Bank is well geared
eased from 45.38% to 43.57% on year-on-year basis.
to ensure that its performance will be driven across all these
Looking Forward parameters.
Bank of Barodas long standing reputation for financial The Bank is aware of the fact that the market leadership
soundness, long-term customer relationships and proactive can be achieved only through a visionary, strategic and
management are as important today as ever. Going forward sustainable model of pursuit and perseverance. The success
also, the Bank would continue with its thrust on growth with lies in attaining the acceptance of our stakeholders about
quality. At the same time, it would try to grow above the the Banks core values, passion for customer service and
industry average on the back of strongly positive growth the credibility of leaders, which alone would give our Bank
outlook for India in FY11. a unique place in the banking space. In a bid to gain better
The Bank would try to protect or improve further the current market share, we will work relentlessly to provide financial
levels of its key financials like ROAA, ROE, EPS, BVPS, stability and brand value that matters the most.
asset quality, etc., through its dedicated focus on low-cost It will be our endeavour in FY11 to work towards more
deposit mobilization & fee-based income, efficient pricing customer-centricity by upgrading our institutional processes,
of deposits and loans, reduction in high cost or low yielding systems and capabilities. In the current economic environment,
bulk business and through improved credit origination and prudence and proactive vigilance are most important to
effective credit monitoring. convert challenges into opportunities. So, our central focus
In all core operations, the Bank has put in place strategies will be on risk management and growth with quality.
that seek to address near-term challenges as well as to In our pursuit to move towards the top position in the industry,
seize opportunities to strengthen its foundations for I solicit your continued cooperation and patronage.
sustainable growth. The focus of these strategies has been
on well-balanced, qualitative growth, service and operational
excellence and people management. M. D. Mallya
In fact, the Bank has been aggressively recruiting the best Chairman & Managing Director

4 Jeeef<e&ke efjhees& 2009-10