Bank of Baroda

• Total Business (Deposit+Advances) increased to Rs 8,02,069 crore reflectinga growth of 19.3% (y-o-y).

• Gross Profit and Net Profit were Rs 8,999.15 crore and Rs4,480.72 crore respectively. Net Profit registered a growth of -10.5% over theprevious year.

• Credit-Deposit Ratio stood at 82.03% as against 86.86% last year.

• Retail Credit posted a growth of 6.7% constituting 16.6% ofyour Bank’s Gross Domestic Credit in FY13.

• MSME Credit posted a growth of 30.3% constituting 19.7% ofyour Bank’s Gross Domestic Credit in FY13.

• Net interest Margin (niM) as per cent of interest earning assets in globaloperations was at the level of 2.66% and in domestic operations at 3.11%during FY13.

• Net nPAs to net Advances stood at 1.28% this year against 0.54% lastyear.

• Capital Adequacy Ratio (CAR) as per Basel II stood at 13.30%.

• Net Worth improved to Rs 30,714.19 crore registering a rise of 17.2%.

• Book Value improved from Rs 637.37 to Rs 729.11 on year.

• Business per Employee moved up from Rs 1,466 lakh to Rs 1,689 lakhon year.

Segment-Wise Performance

The Segment Results for the year FY13 reveal that the contribution of TreasuryOperations was Rs 1,070.13 crore, that of Corporate/Wholesale Banking was minusRs 103.95 crore, that of Retail Banking was Rs 3,085.71 crore, and of OtherBanking Operations was Rs 2,221.71 crore. Your Bank earned a Profit after Tax (PAT)of Rs 4,480.72 crore after deducting Rs 1,442.37 crore of unallocatedexpenditure and Rs 350.51 crore towards provision for tax.

Dividend

Your Bank’s Directors have proposed a dividend of Rs 21.50 per share (onthe face value of Rs 10/-per share) for the year ended March 31st, 2013. The total outgoin the form of dividend, including taxes, will be Rs 1,059.62 crore.

Capital Adequacy Ratio (CAR)

Your Bank’s Capital Adequacy Ratio (CAR) was comfortable at 13.30% under Baselii as on 31st March 2013. Your Bank’s Net Worth as at 31st March 2013 was Rs30,714.19 crore comprising paid-up equity capital of Rs 422.52 crore andreserves (excluding revaluation reserves) of Rs 30,291.67 crore. An amount of Rs3,421.10 crore was transferred to reserves from the profits earned.

Provisions towards Retirement and Other Benefits During the year FY13, your Bankmade provision towards contribution to gratuity (Rs 133.00 crore), pension funds (Rs683.96 crore), leave encashment (Rs 204.38 crore) and additional retirement benefits (Rs184.29 crore) on actuarial basis. Total provisions under these four categoriesamounted to Rs 1,205.63 crore during the year FY13, against Rs 991.94 crore duringFY12. Total corpus available with your Bank at the end of March 2013 under these headswas: Rs 1,506.13 crore (gratuity), Rs 6,770.08 crore (pension funds), Rs 709.73 crore(leave encashment), and Rs 592.45 crore (additional retirement benefits).

Key Financial Ratios

Management Discussion and Analysis

Economic Scene in FY13 and Outlook for FY14

The projection of India’s real GDP growth for FY13 by the Central StatisticalOrganisation (CSO) at 5.0% is the lowest growth registered in this decade and even weakerthan the growth posted during the first year of global financial crisis. The weakening ofIndian economy during FY13 was broad based and primarily driven by sub-optimal monsoonrains, stagnant infrastructure, declining exports, subdued corporate investments and weakconsumption demand. Due to sluggish global growth, the hitherto resilient services sectoralso weakened considerably during FY13.

So far as the agriculture was concerned, its modest growth at 1.8% was mainly supportedby the Rabi (winter) crop, as the delayed monsoon affected the Kharif (summer) output.Industrial growth (including manufacturing, mining & quarrying, electricity, gas,water supply & construction) too declined significantly to 3.1% during FY13. A slew offactors responsible for this weak performance were poor global demand, weak supplylinkages, high input costs, sluggish investment activity, regulatory and environmentalbottlenecks, and lack of reliable power supply. Furthermore, the slowdown in consumptiondemand affected the growth of industrial sector, in general and of motor vehicles, foodproducts and apparel industries, in particular.

Weaknesses in domestic industrial activity and fragile global environment dragged downthe services sector growth to 6.6% in FY13.

While the overall growth slipped rather rapidly, the inflation, however, remainedrather sticky during the year suggesting a stagflationary state of the economy. Thoughboth the WPI and CPI based inflation rates slipped from their peak levels, they remainedway above the RBI’s comfort zone.

However, the WPI-based inflation consistently eased since October, 2012. From a high of8.06% in Sept, 2012 it fell to 5.96% in Mar, 2013. With rising demand deficit in themanufacturing sector, the core inflation too declined steadily from 5.56% in Aug, 2012 to3.48% in Mar, 2013. In contrast, the retail (CPI-based) inflation stayed at 10.39% in Mar,2013.

In view of the sharp deceleration in growth, the government has been introducingseveral corrective measures and reforms since mid-Sept, 2012 to help revive the economy.The reform measures pertained to Fiscal Sector (upward adjustment in the administeredprices of fuels to curb energy subsidies, expenditure control, medium-term fiscalconsolidation plan, launching of direct cash transfer programme, etc); to Balance ofPayments sector (Liberalisation of FDI in multi-brand retail, domestic airlines, powerexchanges, insurance & pension companies, etc., liberalization of ECBs & areduction in the withholding tax on interest payments from 20.0% to 5.0% for three years,increase in import duty on gold from 4.0% to 6.0% and hike in the limit of foreignholdings of domestic government & non-infrastructure corporate bonds, etc.); toInvestment (Creation of Cabinet Committee on Investment to fast track major infrastructureand other projects, deferment in the implementation of GAAR by two years to Apr 1, 2016);to Financial Sector (Encouragement to Mutual Fund industry outside of top 15 cities byallowing higher commissions and passing of Banking Bill raising voting caps & allowingnew banking licenses to be issued while strengthening the RBI’s role). Furthermore,in the Union Budget for FY14, the government was successful in containing the fiscaldeficit as a percentage of GDP at 5.2% and set a target of 4.8% for FY14.

India’s situation became more vulnerable on the external front during FY13. Thewidening of the Current Account Deficit (CAD) to a historically high level of 6.7% in Q3of FY13 heightened concerns about the sustainability and financing of CAD. Worsening tradedeficit and slower growth in services exports were the major factors behind the sharp risein CAD. Weak external demand, which affected merchandise exports adversely, combined withcontinued high imports of POL and gold, resulted in deterioration of the trade balance.During FY13, India’s merchandise exports contracted by 1.76% to US$ 300.6 billion,while imports rose by 0.44% to US$ 491.48 billion leaving a huge trade deficit of US$190.88 billion in FY13. According to the commodity-wise data released by the DGCI&S,merchandise export decline was mainly observed in items like engineering goods, petroleumproducts, textiles and iron ore.

Wider trade and current account deficits have a tendency to weaken the currency,raising domestic prices of imported commodities, further fuelling India’s alreadyhigh inflation rate. Thanks to the decent capital inflows during FY13, India’s rupeedepreciated by 6.7% against the greenback during FY13 despite a record high level ofcurrent account deficit. During the year under review, India received US$ 18 billion inthe form of FDI (net term), US$ 24 billion in Portfolio Inflows (net terms), US$ 30billion in the form of External Commercial Borrowings & Short-term Loans and US$ 24billion as the total banking capital.

Going forward into FY14, as per the projections of the Economic Advisory Council toPrime Minister, India’s economic growth is expected to rise to 6.4% in FY14 from 5.0%in the previous year on the back of recently introduced structural measures and anexpected normal monsoon. Moreover, steady easing of headline inflation (WPI-based) willprovide more space for monetary policy to support growth. While the government has shownits determination to contain the fiscal deficit, the current account deficit remains asource of concern. However, the nation can manage it by taking actions that are necessaryto encourage capital flows and by further streamlining the procedures.

Performance of indian Banking Sector in FY13 and Outlook for FY14

During FY13, both the deposit and lending growth of the banking industry deceleratedsignificantly on the back of overall economic slowdown and elevated inflationarypressures. On an average, the growth differential between deposit and credit kept hoveringbetween 250 and 300 bps with deposit growth outpacing the credit growth. This keptliquidity persistently tight in the banking industry.

The cost of deposits and other funds remained high throughout the year on account ofthe various monetary tightening measures undertaken by the Reserve Bank of India (RBI).People preferred to park their funds in higher yielding fixed deposits rather than currentor savings account (CASA). As a result, CASA accretion slowed for most banks which led toa high cost of funds for banks.

A broad-based industrial slowdown adversely impacted the asset quality of banks,especially of the state-owned banks as they were the ones who primarily supportedproductive sectors post the global crisis of FY09. Slowing loan growth weighed on the NIMs(net interest margins) of the banking industry. Low NIMs combined with higher credit costs(provisioning requirements) including the ones on restructured loans depressed theearnings of several banks during FY13. A sharp drop in new project sanctions during FY12and FY13 will be felt on the loan demand during FY14, as current sanctions exhaust.According to Standard & Poor’s (S&P) Ratings Agency, credit growth for Indianbanks is likely to remain muted at 15.0% in FY14 due to several economic and politicaluncertainties. While the revival of power, roads, metals and mining sectors depends moston government action, the revival of construction and consumer durables is directlyrelated to economic recovery and increased consumption. However, Indian bankingindustry’s core customer deposit base will continue to provide access to stablefunds.

According to S&P, while non-performing assets of banks will surge to 3.9% of grossloans in FY14, the banks’ return on assets will remain depressed, at about 0.9%.Moreover, the Indian banking industry would face a capital shortfall of US$ 3-4 billion ifit immediately tried to attain common equity Tier-1 ratio of 8.0% to comply with Basel IIIguidelines, which kicked in on April 1, 2013.

Risk Management

In order to ensure sustainable and consistent growth performance, your Bank hasdeveloped a sound risk management framework so that the risks assumed by the Bank areproperly assessed and monitored continuously. It may be noted that the ultimateresponsibility for setting up the risk management framework lies with the Board of theBank. It includes setting up risk appetite, framing policies and effective monitoring.Your Bank’s Board has put in place a robust Enterprise-wide Risk Managementarchitecture so that the risks remain within the risk appetite defined by the Board. Abrief outline of the mechanism for identifying, evaluating and managing various risks isas follows.

Liquidity Risk

Liquidity risk implies the "risk" when the Bank either does not havesufficient financial resources available to meet its financial obligations, as and whenthey are due, or can only access these financial resources at excessive and unsustainablecost. Liquidity risk may arise from the failure to recognize or address changes in marketconditions that affect the ability to liquidate assets quickly and with minimal loss invalue. In your Bank, the liquidity risk is measured and monitored by flow approach on adaily basis against prudential caps fixed for liquidity gap positions. Moreover, liquidityposition is projected every fortnight, for the subsequent three months on a dynamic basisthrough Dynamic Gap Reports. The quality of liquidity is further tested by working outvarious ratios under Stock Approach, wherein a series of prudential caps such as dailycall lending, daily call borrowings, net short-term borrowings and net credit to customerdeposit ratio and prime asset ratio, etc. are tested on a daily basis. The compliance toStock Approach caps ensures that the Bank has managed its liquidity through appropriatediversification and remained within the sustainable limit. The monitoring of liquidityrisk, cost of liquidity, opportunities and return from deployment, availablecontingencies, etc is done by the Asset Liability Committee (ALCO) which comprises ofGeneral Managers and Executive Directors and is headed by the Chairman and ManagingDirector. The prudential caps are monitored by ALCO by way of various regular and specialreports.

Credit Risk

Credit risk implies potential loss to the Bank on account of either lack of capacity orunwillingness of a counterparty to meet its obligations as per the agreed terms. Creditrisk is managed in your Bank through a clearly articulated framework that sets outpolicies, procedures and reporting. In line with international best practices, there is aclear segregation between risk takers and policy framers. Furthermore, the Bank hasadopted risk-based delegated lending power where higher discretionary lending powers havebeen delegated for low credit risk proposals. Your Bank also conducts industry studies toassess the risk prevalent in industries where the Bank has sizable exposure and also foridentification of sunrise industries. The industry reports are communicated to theBank’s field-level people to consider the same while lending to these industries.However, to avoid imprudent concentration, your Bank has put in place prudential capsacross industries, sectors and borrowers.

Your Bank has adopted a robust two dimensional credit rating system from 2007 onwardsand has now built up six-year’s data on credit rating and borrowers’ ratingmigration. This preparation has enabled your Bank to make an application to the RBI tomigrate to Foundation Internal rating based (FIRB) approach of credit risk under Basel IIrules. The FIRB implementation will also prepare your Bank to drive its business in moresystematic and sophisticated manner in terms of risk-based pricing, portfolio constructionand fixation of risk appetite.

Market Risk

Market Risk implies the "risk" of loss of earnings or economic value due toadverse changes in market rates or prices. The sources of market risk may be enumerated asunder.

• Interest rate risk: The risk that aries from changes in yield curves, creditspreads and volatility in interest rates.

• Currency exchange rate risk: The risk that arises from changes in exchange ratesand their volatility.

• Equity price risk: The risk that arises from changes in the prices of equities,equity indices, equity baskets and volatility in stock market.

The market risk may also arise from changes in commodity prices and volatility.However, your Bank does not have any exposure to commodity related markets.

Your Bank has clearly articulated policies to control and monitor its treasuryfunctions. These policies comprise management practices, procedures, prudential risklimits, review mechanisms and reporting systems. These policies are reviewed regularly inline with changes in financial and market conditions.

The Interest rate risk in your Bank is measured through Interest Rate Sensitivity GapReports and Earning at Risk. Furthermore, your Bank calculates duration, modifiedduration, Value at Risk for its investment portfolio consisting of fixed incomesecurities, equities and forex positions on monthly basis. It monitors the short-termInterest rate risk from the NII (Net Interest Income) perspective and long-term interestrate risk from the EVE (Economic Value of Equity) perspective. The Value at Risk for thetreasury positions is calculated for ten days holding period, at 99.0% confidence level.Moreover, the stress testing of fixed interest investment portfolio through sensitivityanalysis and equities through scenario analysis is regularly conducted in your Bank.

Based on the RBI directions, your Bank has also been estimating the "EconomicValue of Equity Impact" on a quarterly basis.

Operational Risk

Operational risk is the risk of loss on account of inadequate or failed internalprocesses, people and systems or external factors and also includes a legal risk.Operational Risk Management Committee (ORMC) of your Bank shoulders the responsibility ofmonitoring and controlling the operational risk by way of prescribing/amending processes,imposing controls and defining roles and responsibilities. Your Bank has a robustinspection and audit system to ensure that its internal guidelines, policies andprocedures are complied with. Your Bank is in the process of implementing a sophisticatedsystem to capture, measure, monitor and manage its operational risk exposures byinstalling an enterprise-level automated web based solution of international standard. Thesolution is expected to be operational before the end of the current year. This willenable your Bank to meet the quantitative and qualitative requirements of the StandardizedApproach (TSA) and Advanced Measurement Approach (AMA) of Basel II rules of OperationalRisk Capital Measurement.

Bank’s Preparedness for Basel iii

The Reserve Bank of India (RBI) has issued final Guidelines on Basel III on May 2,2012. The international regulations on new liquidity standards – Liquidity CoverageRatio and Net Stable Funding Ratio are currently subject to an observation period/revision by the BCBS [Basel Committee on Banking supervision] with a view to addressingany unintended consequences that the standard may have for financial market, creditextension and economic growth. Hence, the framework has been put on hold forimplementation.

A comparison of minimum capital requirement, under Basel- II vis--vis Basel- III, onfull implementation of capital rules is given below.

The RBI guidelines on capital rules have become effective from 1st April 2013. Apartfrom meeting the new capital rules, a risk insensitive Leverage Ratio will also berequired to be implemented from 30th June 2013. With the preponderance of common equity inthe tier I capital as well as total capital of the Bank, your Bank does not envisage anydifficulty in implementing Basel III capital rules.

Credit Monitoring Function

Credit monitoring on a continuous basis is one of the most important tools for ensuringthe quality of advance assets. Your Bank has the system of monthly monitoring of theadvance accounts at various levels to prevent asset quality slippages and to take timelycorrective steps to improve the quality of credit portfolio.

A separate department for Credit Monitoring functions at the Corporate level,headed by a General Manager, and one at the Regional/Zonal level, has been functioning inyour Bank since September 2008. A Slippage Prevention Task Force was formed at allZonal/Regional offices based on the Bank’s Domestic Loan Policy. This Task Force wasactivated for the purpose of arresting slippages and for initiating necessaryrestructuring in potentially sick accounts. This was achieved at an early stage inconformity with the laid down norms and guidelines. Your Bank has placed a special focuson sharpening the credit monitoring process for improving its asset quality, identifyingareas of concern and branches requiring special attention, working out strategies andensuring their implementation in a time bound manner.

The primary objectives of the Credit Monitoring Department at theCorporate level are fixed as under.

• Identification of weakness/Potential default/incipient sickness in the accountat an early stage;

• Initiation of suitable and timely corrective actions for preventing impairmentin credit quality, whenever signals are noticed in any account, e.g. decline in creditrating, delay in meeting liabilities in LC/Guarantee and delay in servicing of interest/installments etc;

• Prevention of slippage in the Asset Classification and relegation in CreditRatings through vigorous follow up;

• Identification of suitable cases for restructuring/ rescheduling/rephasement toexplore the possibility of further financing in deserving and genuine cases; Liaison withCDR Cell and functional units is undertaken on continuous basis.

• Taking necessary steps/regular follow up, for review of accounts and complianceof terms and conditions, thereby improving the quality of the Bank’s creditportfolio;

• Endeavouring for upward migration of Credit Ratings.

• Monitoring progress of accounts under BIFR.

Prevention of Slippages

As a part of an ongoing business strategy to improve upon the quality of assets, yourBank reaffirmed the need to look into the advances portfolio on a continuous basis,industry-wise as well as borrower-wise, to analyze the present position and the problemsforeseen in near future and to identify weaknesses/ potential default/incipient sicknessin the advance accounts at an early stage so as to initiate suitable and timely correctivemeasures for preventing impairment in credit quality. Your Bank launched an onlineweb-based software developed by its IT Department for MMRs (Monthly Monitoring Reports) inrespect of advance accounts with Fund-based plus non-fund-based exposure of Rs 10 croreand above in January 2013. This will enable speedy and effective monitoring of advancesand ensure timely action in respect of stressed accounts. Your Bank also initiated followup actions for ensuring expeditious review of accounts, compliance of terms andconditions, up-gradation in credit rating etc. in high value advance accounts forimproving the asset quality of its credit portfolio. During FY13, your Bank undertookrestructuring of various advances accounts in its global operations as per the table givenbelow.

Restructuring of Advance Accounts (Global) Done during FY 2012-13

Economic intelligence Unit

At the Corporate Office of your Bank, a specialized Economic Intelligence Unit (EIU)supports the Top Management in several critical areas like Macroeconomic Forecasting,Business Strategy Formulation, Investor Relations, Asset-Liability Management and indiscussions/deliberations with the Regulators (both domestic & international) andRating Agencies. The Unit regularly provides the Top Management as well as variousoperational units a periodic outlook on key macro variables like industrial andinfrastructural growth, inflation, interest rates, stocks’ movement, creditdeployment & resource mobilization of Banking industry, liquidity conditions andexchange rates.

By providing better understanding of macroeconomic aspects, corporate sector health andbanking sector policies, the EIU of Bank of Baroda supports Bank’s efforts in tappingbusiness opportunities and swiftly responding to market dynamics. The EIU brings out aweekly e-publication on macro-economic, policy and regulatory developments to share itsperspective with bankers, investors, regulators and other industry leaders. The divisionworks as an intellectual arm of your Bank in comprehending developments that eventuallyaid the development of rightly aligned strategies.

Internal Control Systems

Your Bank has a well established Central Inspection & Audit Division (CIAD) thatexamines the adherence to systems, policies and procedures of the Bank. The guidelinesreceived on various issues of internal control from RBI, Government of India, Bank’sBoard and the Audit Committee of the Board have become part of the Internal Control Systemfor better risk management. With the size of business increasing year after year, the CIADis constantly aiming for curbing the inherent risks through effective control mechanism soas to safeguard the Banks’ interest. The CIAD operates through thirteen ZonalInspection Centres to carry out the inspection of branches/offices as per the periodicitydecided by the Audit Committee of the Board and examines adherence to such systems ofinternal control and risk management.

The Audit Committee of the Board oversees the Internal Audit function of your Bank. Thecommittee guides in developing effective internal audit, concurrent audit, IS Audit andall other inspection & audit functions for improving the efficiency of systemiccontrols. The committee monitors the functioning of the Audit Committee of Executives andinspection/audit department in the Bank.

Audit Committee of Executives has been established and is one layer above the CIAD andit monitors the entire inspection system in the Bank. The Audit Committee of Executiveshas worked as a strong deterrent and preventive mechanism for frauds as it focuses onaudit system in the Bank and its effectiveness in getting the desired results. All thebranches of your Bank are covered under the Risk Based Internal Audit (RBIA). A total of3,046 branches were inspected during FY13. Out of these, 2,206 branches (72.42%) were inLow Risk, 735 branches (24.13%) were in Medium Risk and 105 branches (3.45%) were in HighRisk categories.

The I.S. Audit Cell working under Inspection Division, is based in Mumbai andperforming the function of Offsite Surveillance. In line with the guidelines issued by theDepartment of Financial Services, Ministry of Finance, your Bank has implemented thefollowing.

• Audit Committee of Executives has been established to oversee the work ofCentral Inspection & Audit Division and Zonal Audit Committees with effect from March2013. This is expected to strengthen further the level of compliance of systems,procedures and internal guidelines.

• The Concurrent Audit Policy, Manual and Scoring Sheets duly approved by AuditCommittee of the Board and Risk Based Concurrent Audit will be implemented from the nextfinancial year.

The coverage of Concurrent Audit has been increased to 834 branches in 2013-14 from 709branches in FY13 and will cover 64.36% of the Bank’s total deposits, 80.87% of itstotal advances and 71.13% of its total business as on 31.12.2012. As per the observationmade by the RBI during Annual Financial Inspection: 2011-12, Credit Audit will now benurtured as a specialized function within CIAD and the new structure will startfunctioning from July 2013. The Credit Audits were conducted in respect of 3,504 accountscovering fund-based and non-fund-based business of Rs 1,97,048 crore ensuring increasedlevel of compliance for large loans.

To summarise, your Bank’s Central Inspection & Audit Division has beeneffectively monitoring the compliance of systems & procedures laid down by its ownBoard, the Regulator and the Government of India.

Customer-Centric initiatives

As always, efficient customer service and customer satisfaction are the primaryobjectives of your Bank in its day to day operations. Your Bank is highly responsive tothe needs and satisfaction of its customers, and is committed to the belief that alltechnology, processes, products and skills of its people must be leveraged for deliveringsuperior banking experience to its customers.

Recently, your Bank has taken several measures to improve the customer service at itsbranches and at the same time, strengthened the customer complaint redressal machinery forfast disposal of customer complaints. Your Bank has implemented Standardized PublicGrievances Redressal System (SPGRS), a web-based customer complaint redressal module.

Some of the other major initiatives in improving the customer service during FY13 areas under.

1. Online Fixed Deposits- The Bank’s customers can now make onlineFixed Deposits through the system called Baroda Connect.

2. SMS alert facility a. Financial transactions: In respect oftransactions where the amount is greater than or equal to Rs 5,000 has been enabled to allresident savings and current deposit holders and overdraft customers of the Bank whosemobile numbers are registered in the Bank’s record (CBS system).

b. Non financial transactions: i. For renewal of term deposits: 30 days before duedate. ii. Communicating to the potentially dormant account holders (i.e. before theaccount becomes dormant) to operate the accounts. iii. To advise dormant account holdersto activate their accounts.

3. Intra-Bank Deposit Account Portability: This means savings, current and timedeposits accounts in your Bank may be transferred from one branch to another branchwithout changing the account number.

4. Activation of inoperative Accounts: A campaign was launched foractivation of Inoperative Accounts during the period 01.09.2012 to 30.12.2012. YourBank’s branches were advised to put their all out efforts for activation ofinoperative/dormant accounts and to prevent potential dormant accounts from becomingdormant/ inoperative.

5. Campaign for Mobile number/Email iD Registration: A campaign was launchedwith some incentives to staff from 01.01.2013 to 31.03.2013 to register mobile numbers andemail-ids in existing as well as new accounts.

6. Details of Principal nodal Officer in Pass Book: For convenience ofcustomers to lodge their grievances/ complaints, the process has been initiated toincorporate the details of Principal Nodal Officer and Banking Ombudsman in the passbookat the time of passbook printing. In the meantime, the branches have been advised to affixthese details in all passbooks by a rubber stamp.

7. Display of gross interest on Term Deposit: This means monthly orquarterly interest paid or tax deducted at source, etc., are displayed separately in thecustomer’s saving bank (SB) account statement.

8. Compensation for ATM failed Transactions: Branches were advised toresolve the complaints lodged on the ATM failed transactions, cash not dispensed, etc.,and the account is credited within seven working days from the date of lodging thecomplaint.

If not resolved, compensation of Rs 100 per day will be paid from the eighth day tillthe amount is re-credited automatically by the Bank.

9. NEFT/RTGS: To popularize remittance through NEFT [National Electronic FundsTransfer] and RTGS [Real time Gross settlement], the remittance request for fund transferup to Rs 50,000 is accepted from the walk-in customers.

Moreover, the following information is displayed on the Banks’ website.

1. Notice for CTS 2010 (Cheque Truncation System) Standards Cheque Book as per thedirection of the RBI.

2. Checklist along with all relevant forms for deceased account claim settlement.

3. Display of the list of inoperative/dormant/unclaimed deposit accounts on theBanks’ website (only name and address of the customers more than 10 years aredisplayed as per the advice of the RBI).

Efforts to improve Customer Service at Branches

The feedback on quality of customer service at branches is obtained through the BranchLevel Customer Service Committee meetings that are held every month in which customersfrom various cross sections of the society are invited including senior citizens andpensioners. The suggestions/views generated during the meetings are collated and anappropriate follow-up action is taken to examine the feasibility to implement thesuggestions for improving the service quality.

Your Bank is focused towards providing excellent customer service through all deliverychannels and has been making continuous efforts for enhancing the level of customers’satisfaction by leveraging technology to provide e-products and alternative deliverychannels e.g. ATM/Debit cards, POS, Internet Banking, Mobile Banking, etc., best suited tothe diverse needs of different customers. The varied interests and expectations ofcustomers are taken care of by improving upon various processes and procedures.

Compliance

Your Bank is a member of the Banking Codes and Standards Board of India (BCSBI) and hasadopted the "Code of Commitment to the Customers" prescribed by the BCSBI inAugust 2009. It has also adopted the "Code of Bank’s Commitment to MICRO andSmall Enterprises". These have been placed on your Bank’s website and also madeavailable to customers at the branches.

While announcing the "Annual Monetary and Credit Policy for the year FY11",the Governor, RBI, had proposed that banks should devote exclusive time in their BoardMeetings once in every six months to review and deliberate on issues concerning customerservice/customer care. To comply with this, two such six monthly reviews were undertakenby your Bank’s Board for the sub-periods January-June 2012 and July-December 2012, inmeetings dated 4th August 2012 and 3rd March 2013, respectively.

Customer Service Committee of the Board

Your Bank has a Sub-Committee of Board for Customer Service which is headed byyour Banks’ Chairman and Managing Director with the following members as on 31stMarch 2013.

This Sub-Committee addresses the issues relating to the formulation of policies andassessment of their compliance which brings about consistent improvement in the quality ofcustomer service. It also monitors the status of the number of deceased claims pending forsettlement beyond 15 days pertaining to depositors/locker hirers/depositors of safecustody articles, and reviews the status of implementation of awards passed by the BankingOmbudsman.

Standing Committee on Customer Service

Your Bank has also set up a Standing Committee on Procedures and Performance Auditon Customer Services, comprising of three eminent public personalities as membersalong with all the three Executive Directors and four General Managers of your Bank. ThisCommittee oversees timely and effective compliance of the RBI instructions on CustomerService and also reviews the practices and procedures prevalent in your Bank and takesnecessary corrective steps on an ongoing basis.

The suggestions emanating in the Branch Level Customer Service Committee meetings areobtained by your Bank’s Head Office on quarterly basis from Regional Offices andplaced before the Standing Committee on Procedure and Performance Audit on CustomerServices. The feedback of the committee meetings is then put up to the Customer ServiceCommittee of the Board of Directors.

Customer-Centric initiatives and Redressal of Complaints

• Your Bank has put in place a Customer Grievance Redressal Policy, approved bythe Board, and a well structured Customer Grievance Redressal Mechanism. The GeneralManager in charge of Operations & Services is designated as Nodal Officer for customercomplaints regarding your Bank. At Zonal and Regional levels, Zonal Heads and RegionalHeads are designated as Nodal Officers for their respective Zones and Regions. The namesof all Nodal Officers along with their contact numbers are displayed in all the branches.

• A note on Review of Customer Services & Grievances Redressal is placedbefore the Board of Directors every quarter giving position of customers’ complaintsreceived at your Bank’s Regional Offices and Head office. Subsequently, relevantfollow up measures with important initiatives are taken by your Bank for improving theservice quality to customers.

• To minimize customer complaints and to ensure hassle free customer service, aregular analysis is done on the complaints received from the customers and a suitableaction is taken on time so that there is no repetition of such complaints in future.

• Your Bank has Board-approved policies on customer services and the same areplaced on your Bank’s website.

To facilitate customers, as directed by Ministry of Finance (MOF), Govt. of India, videtheir letter No. DO:NO:1/3/2012-BO-III dated 11th June, 2012, to bring uniformity in allbanks and for maintaining centralized data base of all complaints, your Bank hasimplemented Standardized Public Grievance Redress System to enable the complainantsto lodge their grievances in a simple and easy manner through multiple channels.

Furthermore, to facilitate this, an icon "online complaints (SPGRS)"has been provided on the home page of your Bank’s website.

Features of SPGRS

• An icon "online complaints (SPGRS)" has been provided on the home pageof your Bank’s website.

• Immediately upon registering the grievances/complaints, an automatic tracker idis generated and the same is conveyed to the complainant on his e-mail id. On the basis ofthis tracker-id, a customer is able to know the current status of his complaint/grievance.

• The same tracker id is also sent to the concerned branch through e-mail forspeedy disposal of the grievances. An auto escalating matrix to next higher authority isalso provided in redressing the grievances depending upon the number of days taken toresolve the complaint.

• An auto generated text message is sent to the complainant at the time of closureof the grievances.

• Upon implementation of SPGRS, the "turnaround time" for the redressalof grievances/complaints lodged has been reduced drastically to an average of five toseven days.

• Your Bank has installed KIOSK, a dedicated computer system at all Zonal Officesalong with the Head Office, to enable the customers to lodge their grievances/complaintsonline.

Based on the feedback and suggestions from the grass root level customer committees andvarious studies/surveys, a slew of customer centric initiatives and measures were taken byyour Bank during the year under review to improve customer service at its branches.

Know Your Customer (KYC) norms/Anti-Money Laundering (AML) Standards/Combating ofFinancing of Terrorism (CFT) measures and Obligation of Bank under PMLA, 2002

Your Bank has a Board-approved KYC-AML-CFT Policy. The said Policy is the foundation onwhich the Bank’s implementation of KYC norms, AML standards, CFT measures andobligation of the Bank under Prevention of Money Laundering Act (PMLA) 2002 is based.

The major highlights of KYC-AML-CFT implementation across the Bank are as under.

• The Bank generates Cash Transaction Reports (CTRs) electronically forsubmission to Financial Intelligence Unit (FIU), through the electronic medium.

• The "AML Solution" for generating system-based alerts has beeninstalled and implemented.

• There is a system-based detection and submission of Suspicious TransactionReports (STRs) to the Financial Intelligence Unit (FIU).

• System-based Risk Categorization (from AML Measure) of Bank’scustomers’ accounts has been done every half year.

• The Bank files Counterfeit Currency Reports (CCRs) to FIU-IND, New Delhi.

• The Bank files Non Profit Organizations Transaction Reports (nTRs) toFIU-IND.

The full KYC compliance entails Staff Education as well as Customer Education for whichthe following measures are taken by the Bank.

• A comprehensive list of KYC documents is uploaded on the Bank’s website(www.bankofbaroda.com) for the benefit of customers.

• A KYC-AML page is created at the Bank’s INTRANET for posting referencematerial on KYC-AML-CFT education.

• Regular training sessions are conducted on the KYC-AML-CFT guidelines at theBank’s training establishments.

• Training is being arranged for the Bank’s senior officials/ executives atRBI, IBA (Indian Banks’ Association) and National Institute of Bank Management(NIBM).

• Sustained efforts are being made to create expertise at the Banks’ HeadOffice for the Corporate Oversight and also for the KYC Audit of branches.

Regional Back Offices and City Back Offices

Two types of Back Offices have been conceptualized and rolled out by your Bank –Regional Back Offices (RBO) and City Back Offices (CBO). The RBO deals with centralizedprocessing of account opening forms (AOF) and centralized processing of issuance ofPersonalized Cheque Books (PCB). Your Bank has ten RBOs - one each at Baroda, Bhopal,Delhi, Coimbatore, Mumbai, Lucknow, Jaipur, Kolkata, Pune and Jamshedpur. The RBOs areopening CASA accounts for 2,915 branches. The Centralised account opening activities ofseven RBOs have ensured coverage of 100.0% branches of eight zones of your Bank and theprocess has been initiated to roll out two more RBOs to cover all the remaining branchesof the Bank under the RBO process for account opening and maintenance.

The Personalised Cheque Book (PCB) issuance through Regional Back Offices providescustomers of the 3,908 branches of your Bank with this facility. Your Bank has extendedthis facility to all the branches in 12 out of its 13 zones. The remaining branches of theRajasthan Zone will soon be brought under the PCB issuance facility to cover customersacross entire India.

The CBOs deal with centralized upload of clearing transactions – both inward andoutward – as well as government collections and ECS transactions. Your Bank has 21CBOs (service branches) where clearing and ECS are centralized for branches in eachcity/centre. The centralization of clearing has also been introduced in 64 main branches(which handles clearing for local branches). The CBO concept has so far covered 1,372branches of your Bank. During FY13, your Bank has introduced fully automated chequeprocessing system at Mumbai, Ahmedabad and Surat.

Government Business & Currency Chest

Given below are the new business avenues opened by your Bank in the domain of GovernmentBusiness during FY13.

1. Your Bank has obtained permission for "Tax Collection" in the states ofJharkhand, Orissa, Assam, Tripura, West Bengal, Daman & Diu, Chhattisgarh, MP,Chandigarh, Kerala, Pondicherry.

2. Additional 350 branches have been authorized by your Bank for undertaking PPF/SCSSbusiness.

3. Your Bank undertook special campaigns for the mobilization of PPF accounts witheffect from 1st December, 2012 to 31st March, 2013 and total, 22,540 new PPF accounts weremobilized during the campaign period.

4. The Remittance business from Ministry of External Affairs through their missions/posts abroad has also been obtained. The International Business Branch (IBB) located inNew Delhi has been identified as Nodal branch for settlement of funds in respect ofBanking arrangements under the scheme.

5. The Bank implemented physical collection of Custom Duty at Kennedy Avenue Branch,Amritsar and B M Marg Branch, Jallandhar.

6. In Tamil Nadu, the payment of RTO taxes through e-mode has been made operational inyour Bank.

7. Around 15 more branches in Delhi and Himachal Pradesh of your Bank have beenactivated for the purpose of e-stamping.

8. Your Bank has activated the GBM module for the receipt and payment of RBI Bonds. Allthe authorized branches have now migrated the entire data into the GBM module and changedthe reporting system as per the RBI requirement.

9. For e-payment of Direct taxes by all the Bank’s branches, CA118 menu developedin Finacle which provides off line mode for the remittance of taxes.

10. Establishment of CPPC for processing and payment of pension to the Telecompensioners.

New Pension Scheme (nPS)

Your Bank has made operational the New Pension Scheme (NPS) under NPS-Lite. Afterlaunching the scheme on 14.09.2012 in your Bank, a total of 20,872 applications werecanvassed up to 31.03.2013 under the scheme.

Cash Management & Currency Chest

1. Your Bank has managed to maintain the Cash Deposits Ratio (Without ATM cash) at 0.30or below by constant monitoring and follow up with the Zones/Regions.

2. Your Bank has identified 30 centers for opening of new currency chest and has begunthe process of obtaining the sanction from various authorities.

Strategic Plan on Currency Management (2011-14)

As a customer-centric Initiative to improve payment system, your Bank has identified 30new centres for opening New Currency Chests under Strategic Plan on Currency Management2011-14, thereby increasing total No. of Currency Chest from 84 at present to 114.

Vigilance

Despite global changes towards automation and other drastic changes that are takingplace in the banking industry, its very nature remains person oriented. Banking unlikeproduction organisations demands personalised service hence the quality of its servicelargely depends upon the quality and attitude of its personnel.

It has been the endeavour of the Vigilance department of your Bank to encourage andenable the operating level staff as also those at controlling offices to exercise due careand caution to take preventive and detective measures. This helps in increasing efficiencyand creating an environment of security for the honest workforce.

Careful distinction is made by your Bank’s Vigilance department between the casesof gross negligence and the cases where business decisions have gone awry. Also,periodical monitoring of individual cases is carried out to ensure that inquiries arequickly concluded and are perceived as fair by all the concerned parties. Endeavour ismade towards ensuring that penalties, where necessary, are timely and just.

Vigilance machinery in your Bank is effectively performing its proactive role in newrisk prone areas emerging in computerised/e-banking environment, in addition tosensitising all categories of staff members with the various preventive measures.

To bring about greater transparency in procurement and tendering processes in yourBank, a notice inviting tenders/ details of tenders awarded by the Bank and summary oftenders/ contracts concluded are put on your Bank’s website for widest possiblepublicity.

Your Bank has introduced a facility for on-line application and tracking status thereofin respect of Housing loans, Education loans and Auto loans. Standardized Public GrievanceRedress System (SPGRS) as advised by the Ministry of Finance for uniform implementation inPSBs is made active with effect from 11th January, 2013.

It is heartening to note that with the awareness, alertness and diligence exhibited bythe operating staff, 40 fraudulent attempts by unscrupulous elements were thwarted in yourBank which saved it from a colossal financial loss.

Business Performance

Given below are the details of your Bank’s major achievements on the businessfront during FY13.

Resource Mobilisation and Asset Expansion

The share of Bank’s Deposits in total resources stood at 86.6% as of 31st March2013. The Total Deposits grew from Rs 3,84,871.11 crore to Rs 4,73,883.34 crore,posting a healthy growth of 23.1% over the previous year. Of this, Savings BankDeposits – a critical component of low cost deposits grew by 13.04% from Rs74,579.53 crore to Rs 84,302.61 crore.

The share of low cost deposits (Current + Savings) or CASA deposits in Total Depositswas at 25.3% and in Domestic Deposits at 30.4%.

Your Bank’s Total Advances expanded by 14.2% during FY13 led by 11.0% expansion inDomestic Advances and 21.89% expansion in Overseas Advances.

Composition of Funds – Global

Global Advances (net)

Wholesale & Mid Corporate Banking

Your Bank’s Wholesale Banking and Mid Corporate Division offers an array of loanproducts and services such as Term Loans, Short-Term Loans, Demand Loans, Working CapitalFacilities, Trade Finance Products, Bridge Loans, Syndicated Loans, Infrastructure Loans,Foreign Currency Loans, Loan Against Future Rent Receivables and many more to its largeand mid corporate clients depending upon their needs. The product offerings are flexibleand suitably structured taking into account the customers’ risk profile and specificneeds.

Over the years, your Bank has made significant progress in establishing healthybusiness relations with several multinationals, domestic business houses and prime publicsector companies.

Your Bank’s corporate customers are segmented as large and mid corporate. Thosewith sales turnover above Rs 500 crore are classified as large corporates and those havingannual sales turnover of between Rs 150 crore to Rs 500 crore are classified asmid-corporates.

The prospect of any banking industry is closely interlinked with the growth of theeconomy to which it belongs. Unfortunately, Indian economy has recorded the decade’slowest economic growth in FY13. The twin deficits viz. fiscal & current accountdeficits, high inflation & interest rates, volatile exchange rate, low privateinvestment in new projects, etc., have thwarted the growth story of the country.

However, even during this phase, your Bank identified sectors for credit expansion andcreated 94 new relationships through its Fast Track Desk. The Wholesale & MidCorporate departments have sanctioned fresh/increased credit facilities to the tune of Rs53,565 crore during the year to various sectors /industries with projects /units spreadacross the country. It also took a view for further exposure to sensitive sectors likeDomestic Commercial Real Estate, Power, Roads, Telecom, Iron & Steel etc.

Total domestic non-food gross advances of your Bank increased from Rs 2,01,822.71 croreas on 31.03.2012 to Rs 2,23,990.20 crore as on 31.03.2013. Approximately, 37.5% of theBank’s total gross domestic credit belonged to wholesale credit during FY13.

Your Bank set up a new business vertical, i.e., Mid Corporate Segment in FY13. Theobjective was to create a specialisation to accelerate the credit to Mid Corporateborrowers and substantially increase the number of mid corporate clients through dedicatedbranches. In order to have a focused business approach for catering to the valuedMid– Corporate business segment, initially 16 Mid Corporate branches were openedacross the country.

Your Bank’s aim is to harness Large Corporate business through CFS branches andMid Corporate business through Mid Corporate Branches thereby maximizing earnings fromboth the "On and Off" balance sheet business.

Your Bank’s Wholesale Banking Department also has a full-fledged ‘ProjectFinance Division’ (PFD). This PFD is well equipped with professionals from variousdisciplines who undertake the TEV (i.e. Technical Evaluation & Viability) studies foryour Bank’s clients.

The Department is also equipped with a Syndication Desk to syndicate domestic fundingrequirement of the clients. The Department earns decent fee-based income by carrying outTEV studies, vetting of projects, syndication deals, etc.

Your Bank’s Wholesale Banking Department also houses the "Domestic ForeignBusiness" Division (DFB). The DFB drives its business through all Authorized Branchesincluding its MIS and reporting/managing Export–Import business.

Your Bank has placed thrust on proper due diligence and screening to raise the bar onthe quality of appraisal to maintain asset quality.

A necessary precondition to achieve the above is rightly skilled employees or theagile, able and skilled manpower. Keeping this in view, your Bank continued its thrust onregular grooming of Credit and Forex Officers and provides specialized training within theBank as well as in collaboration with renowned institutions outside. Your Bank alsocontinued to recruit specialized officers and lateral recruitment of professionals likeCA/ICWA/CS/MBA as well as the experienced banking professionals.

It may be noted that your Bank has adopted a "Committee Approach for CreditApproval Process" for fast dispensation of credit proposals. These committees meet asfrequently as possible to reduce the Turn Around Time (TAT).

Retail Business

Retail banking services continued to remain an important business division for yourBank in FY13. Your Bank is focused on meeting the financial needs of personal and smallbusiness customers (traders) who are looking for accessible and affordable bankingservices.

The performance of your Bank’s Retail banking division during the year underreview is as under.

Growth under Retail Lending

Your Bank’s Retail Loan Book consists of five key products viz. Home Loan, AutoLoan, Education Loan, Traders Loan and Mortgage Loan, which constituted 80.4% of the totalRetail Loans at end-Mar, 2013. The other products namely LABOD/ ODBOD constituted 16.7% ofthe Bank’s total Retail loans.

Besides, the products like Baroda Personal Loan and other miscellaneous product viz.Doctors Loan, Loan against government securities, etc., constituted 2.9% of Retail Loans.

Total Retail Loans stood at Rs 38,046 crore as on 31.03.2013 as against the level of Rs35,668 crore as on 31.03.2012. A growth of Rs 2,379 crore (6.7%) was registered duringFY13 reflecting a slowdown in retail demand on account of economic slowdown and high fuelprices.

Growth under Five Key Retail Products

Under five key loan products which constituted 80.4% of total Retail Loans, an absolutegrowth of Rs 4,412 crore (16.9%) was posted during FY13.

• Under home Loans, an absolute growth of Rs 1,911 crore (13.5%) wasregistered during FY13.

• Under Auto Loans, an absolute growth of Rs 512 crore (21.1%) wasregistered during FY13.

• Under Baroda Traders Loans, an absolute growth of Rs 1,620 crore (29.1%)was registered during FY13.

• Under Baroda Mortgage Loans, an absolute growth of Rs 284 crore (13.0%)was registered during FY13.

• Under Education Loans, an absolute growth of Rs 86 crore (4.6%) wasregistered during FY13..

NPAS under the Retail Loans

The amount of non Performing Assets as on 31.03.2013 under your Bank’sRetail Loans Business stood at Rs 669.08 crore (1.76%) as against the level of Rs 681.67crore (1.99 %) as on 31.12.2012 and the level of Rs 653.47 crore (1.92%) as on 30.09.2012.The amount of non Performing Assets as on 31.03.2012 under Retail Loan was Rs682.37 crore (1.91%).

Savings Deposit of your Bank stood at Rs 81,995 crore as on 31.03.2013 reflecting agrowth of Rs 9,425 crore (12.98%) on y-o-y basis.

Retail Term Deposit of your Bank were at Rs 1,37,215 crore as on 31.03.2013indicating an annual growth of Rs 16,672 crore (13.83%).

Under Total Retail Deposits, i.e., Retail Term Deposit plus Savings Deposit, anabsolute growth of Rs 26,097 crore (13.51%) was posted during the year underconsideration.

Sale of Gold Coins

Around 77,459 Gold Coins of different denominations aggregating 696.076 kgs were soldduring the year FY13.

1. new Products Launched

A Retail Asset product styled as ‘Baroda Education Loan for VocationalEducation & Training Courses’ was introduced on 1st July 2012 during thisyear.

Baroda Double Dhamaka Deposit Scheme or a Term Deposit Product styled as "BarodaDouble Dhamaka" was introduced on 25th February 2013 offering an interest rate of9.34% for a period of seven years, six months and five days.

2. Product Modification

• During FY13, your Bank modified Baroda Additional Assured Advance (AAA)Scheme, a Top-Up Home Loan Product, by increasing the maximum limit to Rs 25 lakh andreducing the interest rate to Base Rate plus 1.50%.

• Baroda nagarik Bachat Khata was modified as Baroda Small Savings BankDeposit Scheme and followings features were added to make it more acceptable andattractive.

• Minimum initial deposit amount was reduced to NIL from Rs 50.

• Number of Withdrawals allowed in a month increased to four from three.

• Number of cheque leaves allowed free in a year is increased to 50 from theexisting ten.

• NIL Charges for non operation/ activation of inoperative /dormant accounts fromcharges applicable earlier.

• Availability of standing instruction, ECS and Internet Banking, which were notavailable earlier.

• Your Bank effected several modifications in key parameters of home Loan,Educational Loan and Baroda Traders’ Loan schemes to make the offerings underthese loans more attractive to your Bank’s retail customers.

3. Other Business initiatives

• Retail Loan Campaign- Retail Mansoon Dhamaka: For augmenting yourBanks’ Retail Loan portfolio, a Retail Loan Campaign, Mansoon Dhamaka was launchedduring the period 14th May, 2012 to 30th September, 2012. During the campaign period, afresh business of Rs 2,088.21 crore in 24,323 accounts was mobilized.

• Retail Loan Campaign- Retail Loan Festive Dhamaka (i): Going by the successof Retail Mansoon Dhamaka Campaign, a new campaign - "Retail Loan FestiveDhamaka" with a focus on Home Loans and Car Loans was launched between 1st October2012 and 30th November 2012. This was further extended up to 31st December 2012, going bythe response. Aggregate amount of sanctions until 31st December 2012 after the launch ofthis campaign stood at Rs 1,617.58 crore in 18,102 accounts.

• Retail Loan Campaign- Retail Loan Festive Dhamaka (ii): Going by the successof the above mentioned campaigns, a new campaign, "Retail Loan Festive Dhamaka(II)" focusing on the Home and Car Loans was launched from 1st January 2013 to 31stJanuary 2013, and further extended up to 31st March 2013. Aggregate amounts of sanctionsuntil 31st March 2013 after the launch of this Campaign were Rs 1,811.04 crore in 16,750-accounts.

• Baroda Maha Utsava Deposit Scheme: Term Deposit Product styled as"Baroda Maha Utsava Deposit Scheme" for 1111 days was introduced on 13th August2012 offering an interest rate of 9.15% replacing earlier scheme "Baroda UtsavDeposit Scheme" of 444 days with interest rate of 9.35%.

• Savings Bank Deposit Campaign (i): For mobilizing low cost deposits, aSavings Bank Deposit Campaign was launched on 1st July 2012 for a period of three months.An amount of Rs 2,301 crore (retained amount) as fresh Savings Bank Deposit was mobilizedin 16, 06,508 accounts during the campaign period.

• Savings Bank Deposit Campaign (ii): To further mobilise low cost deposits, asecond Campaign was launched on 1st January 2013 again for a period of three months. Anamount of Rs 2,700 crore (retained amount) as fresh Savings Bank Deposit was mobilized in13,89,750 accounts opened during this particular Campaign period.

• Opening of new Retail Loan factories: Three new Retail Loan factories wereopened during the year under review at Sodepur, Mehsana and Rajkot to stimulate the retailloan business.

Wealth Management Services

As a part of its customer centric measures, your Bank has been providing WealthManagement Services (WMS) for its HNI & affluent customers since June 2004. Atpresent, under its WMS, your Bank provides various third-party products in Life Insurance,Non Life Insurance including Health Insurance, Mutual Funds & Equity Trading undertie-up arrangements with different partners.

With a purpose to strengthen the Wealth Management segment, your Bank had formed twojoint ventures with leading international brands in Mutual Funds and Life Insurance. Theproducts of these two J.V. Companies are distributed through your Bank’s wide networkof branches across India. The sales have started showing encouraging growth since theinception of these joint venture companies.

Besides distributing the products of its J.V. Companies, your Bank has other tie-upswith National Insurance Company Ltd. for General Insurance and seven leading AssetManagement Companies for Mutual Fund products. Your Bank also has a tie up with IndiaInfoline Ltd for e-trading since Jan 2007 and has its own equity trading platform throughBOB Capital Market Ltd. which was launched for retail customers. Your Bank has takenseveral customer friendly & investor convenience measures by enabling all its branchesto accept ASBA applications for IPO/FPO and Rights Issue subscriptions. Furthermore, ithas launched an online ASBA application submission facility for its net-banking customerswith transaction rights to apply in IPO/ FPO/Rights issue from the comfort of theirhome/office. Your Bank has enabled 12 centers for accepting Syndicate ASBA applications.These customer centric measures are expected to contribute significantly to yourBank’s endeavor at CASA mobilization.

To improve its service standards further, your Bank has introduced a premium Collectionmodule for IndiaFirst Life Insurance policy holders. Moreover, your Bank’s Non-LifeInsurance products provide a cover to the assets financed by your Bank. This augments yourBank’s fee based income and also offers borrowal units the option to mitigate risksunder the umbrella of its Wealth Management services.

The year FY14 would see the Bank move to the next stage in qualitative WealthManagement Services. These include "insurance renewal premium collection"through ATMs and fund collection module for Baroda Pioneer. This will help yourBank’s branches to extend services to its investor customers. Your Bank’s tie uppartner for Non-life Insurance business will also take a further step by enabling issuanceand renewal of policy through the CBS platform and through the Bank’s i-bankingportal.

MSME Business

The importance of micro, small & medium enterprise sector (MSME) in thedevelopmental context of any country is well known.

According to the Dun & Bradstreet research (2012), the MSME sector in India ishighly heterogeneous in terms of the size of the enterprises, variety of products andservices, and levels of technology. The sector not only plays a critical role in providingemployment opportunities at comparatively lower capital cost than large industries butalso helps in industrialisation of rural and backward areas, reducing regional imbalancesand assuring more equitable distribution of national income and wealth. MSMEs complementlarge industries as ancillary units and contribute enormously to the socioeconomicdevelopment of the country.

Taking into account the importance of this sector, your Bank also considers units inmanufacturing/services sectors that have investment in Plant and Machinery/Equipmentrespectively, in excess of regulatory guidelines and have turnover up to Rs 150 crore, onthe same footing as MSME units. This is done to give a preferred attention to this‘expanded’ sector on the lines of regulatory MSME enterprises. For regulatoryreporting, however, your Bank strictly follows the regulatory definition and guidelines.

Performance of your Bank under the regulatory category of MSME was extremely strongduring FY13 despite challenging economic environment. In fact, to give a boost to thisbusiness, the interest rates applicable to these units were further rationalized by yourBank during the year under review to suit the specific requirements of MSME units.

It may be noted that your Bank successfully achieved all targets under this businessfixed at the beginning of the year.

Growth of Business

The total outstanding in MSME Sector works out to Rs 44,974 crore as on 31st March2013. The growth in MSME advances during the last three years is given in the table below.

Major Achievements in FY13

• The SME advances of Rs 44,974 crore as of end-Mar 2013 reflected a growth of Rs10,462 crore (30.31%) on a y-o-y basis.

• The advances of Rs 17,409 crore to Micro Enterprises in the total credit of Rs28,047 crore to MSE sector (as of the previous year) stood at 62.1% in FY13 comfortablysurpassing the mandatory target of 60.0% fixed by the RBI.

• The SME advances as on 31st Mar, 2013 contributed 19.7% to the Gross DomesticCredit of your Bank. The advances to Micro & Small enterprises reached the level of Rs38,227 crore as against the government set mandatory target of Rs 33,650 crore by end-Mar,2013.

• Going by the success of the loan factory model, your Bank opened six New SMELoan Factories during FY13.

• Your Bank introduced a New Product named as "MSME Capex Loan and CapexCard" during FY13 to further promote its MSME business.

Initiatives in MSME Financing During FY13

1. Your Bank opened five new SME Loan Factories at Indraprastha (New Delhi), Anand,Bhopal, Junagarh, and Jalandhar – taking the total of SME loan factories to 52 acrossIndia. The ‘loan-factory’ model is a pioneering concept introduced by your Bankto ensure better quality of credit appraisal, reduced turn-around time and improvedvolumes – thereby enabling your Bank to increase its MSME lending without sacrificingthe quality of credit.

2. Your Bank has already planned the SME Loan Factories, Specialized SME Branches andMSME cells at various branches for the fiscal year FY14.

3. Your Bank actively participated in various exhibitions and seminars during FY13 tobuild brand image of the Bank in MSME financing.

4. Your Bank organized an Awareness Programme in order to achieve total customerrelationship through enhanced cross selling, locational meetings, and involvement of tradebodies at national and state levels.

5. Your Bank introduced the system of monthly performance ranking to share performanceof SME Loan Factories amongst all and to recognize/felicitate/award best performing SMELoan Factory on half yearly/ annual basis as a proactive skill building and encouragingmeasure.

6. For the purpose of continuous knowledge updating and skill building of processing/marketing officers attached to the SME factories, your Bank organized external training/special courses at Training Centers and its own Staff College.

7. Your Bank has a plan to introduce a new product viz. ‘Standby Term Loan andWorking Capital Limit’ to SMEs with attractive value propositions.

8. Your Bank also introduced a "online loan application" for MSME borrowerswith tracking of the proposal.

9. Your Bank renewed a number of area specific schemes pertaining to a variety ofsectors/industries across India during FY13.

10. Your Bank also celebrated the MSME Festival during Jan-Mar 2013 to encourage staffat the SME Loan Factories and branches to re-double efforts at canvassing new business.11. Your Bank organized an SME borrowers’ meet at Aligarh & Raipur jointly withDun & Bradstreet for imparting relevant knowledge about Rating, Financial terms &balance sheet ratios etc.

The area-specific-schemes developed for certain pockets involving a cluster of unitsengaged in similar activities with good business potential yielded satisfactory resultsduring the year under review. The cluster Development was also undertaken with leaddistrict branches. Directed programmes of the Government of India, particularly theWeavers Credit Card and lending under Prime Minister’s Employment GenerationProgramme (PMEGP) received focused attention during FY13.

In recognition of your Bank’s performance in the MSME lending in the Western partof India, your Bank received an Award at the august hands of His Excellency, the Presidentof India for the year FY13 in New Delhi recently.

Rural and Agricultural Lending

Your Bank has always been a frontrunner in the area of Priority Sector, in general, andAgriculture lending, in particular. It has been harnessing the vast potential of the ruralmarket through its wide network of 1,436 rural branches and 1,162 semi-urban branches.

Even during FY13, your Bank opened 291 new branches in rural and semi-urbanareas.

Your Bank is the proud Convener of State Level Banker’s Committee (SLBC) in thestates of Uttar Pradesh and Rajasthan. Your Bank shoulders the Lead Bank Responsibility in45 districts in the states of Gujarat (12), Rajasthan (12), Uttar Pradesh (15),

Uttaranchal (2), Madhya Pradesh (2) and Bihar (2).

Your Bank has also sponsored three Regional Rural Banks (RRBs) in three states with anetwork of 1,526 branches and total business of Rs 29,282.38 crore as of end-March, 2013.

Priority Sector Advances of your Bank surged from Rs 68,527 crore as at theend-March 2012 to Rs 80,004 crore as at the end-March 2013 and formed 39.31% of theAdjusted Net Bank Credit (ANBC) against the mandated target of 40.00%. A shortfall inachieving the target is primarily due to some changes/modifications in the regulatorydefinitions pertaining to priority sectors.

Agriculture Advances: The Direct Agriculture Advances of your Bank rose toRs 22,645 crore with a rise of 10.9% over the previous year with an absolute growth of Rs2,220 crore. The total agriculture advances of your Bank recorded a flat growth of 0.02%(y-o-y) and reached the level of Rs 28,739 crore as at end-March 2013. As stated earlier,this is due to the impact of revised guidelines of Priority Sector Lending issued by theRBI and made applicable w.e.f.20.07.2012. Your Bank’s Direct Agricultural advancesformed 11.13 % of ANBC as at end-March 2013 against the mandated target of 13.50%. TheTotal Agricultural Advances were at 14.12% of ANBC against the mandated target of 18.00%.

Under its flagship agriculture loan product "Baroda Kisan Credit Card", yourBank issued as many as 2,74,665 Credit Cards during FY13 to provide credit to farmers.Your Bank has also launched Baroda Kisan RuPay Card, a ATM enabled Kisan Card, during theyear, for the convenience of the farming community. Your Bank financed as many as 3,32,141new farmers during FY13. As a part of its microfinance initiatives, your Bank creditlinked 10,912 Self Help Groups with an amount of Rs 198.45 crore during FY13 therebytaking the total number of SHGs credit linked to 1,65,328 amounting to Rs 1,369.97 crore.

Business and Social initiatives

Your Bank introduced various initiatives/strategies during FY13 to harness the emergingopportunities for rural and agriculture lending. Some of them are mentioned below.

• To augment Agriculture advances, your Bank conducted Special Campaignsviz. Kharif and Rabi campaigns for crop loans under which the disbursements of Rs 5,284crore and Rs 2,262 crore, respectively, were made. Another campaign for Investment Creditwas also launched under which disbursements of Rs 1,096 crore were made.

• Your Bank organized 4,245 Village Level Credit Camps and disbursed Rs2,922.48 crore to 2,06,375 borrowers during FY13.

• Your Bank identified 450 Thrust Branches across India to enhanceAgriculture lending which contributed 36.0% of total Agriculture outstanding as atend-March 2013.

• Your Bank formulated various Area-specific Schemes tailor-made to theneeds of local requirements, particularly where there is a concentration of activitieslike Cold storages, Poultry units, fishery etc. Suitable concessions in the rates ofinterest, charges, etc. were allowed under these schemes to garner maximum possiblebusiness.

• Your Bank launched automated loan processing system for improving the efficiencyof branches in processing of loan proposals under Agriculture thereby facilitating timelyavailability of credit to farmers in adequate quantity.

Baroda Grameen Paramarsh Kendra (BGPK): This is another initiative undertaken byyour Bank to help the rural community by providing credit counseling, financial literacyand other services like information on the prices of agricultural products, scientificfarming, etc. Your Bank had 52 BGPKs as on 31st March, 2013.

Also, one more Baroda Swarojgar Vikas Sansthan (BSVS),Baroda R-SETI Center was openedduring FY13. With this, the total number of BSVS went up to 47. Thus, each of yourBank’s Lead Districts now has a R-SETI as per the Indian government’sguidelines. A BSVS centre at Ajmer is exclusively for women entrepreneurs. The BSVSs areprimarily the institutes for training the youth and imparting knowledge and skillsrequired for taking up self-employment ventures. During FY13, around 42,601 youthbeneficiaries were trained out of which 27,891 have established self-employment ventures.Out of the total 1,64,899 beneficiaries trained by these centers so far, 1,02,996 haveestablished their self employment ventures.

Financial Literacy & Credit Counseling Centres (FLCC)-"SARAThEE":Based on the guidelines issued by the RBI, your Bank has established 45 FLCCs, christenedas "SARATHEE" to impart financial literacy and credit counseling services to theneedy people to help them avail financial services from the banking system and also toprovide counseling services to those who are under financial distress due to a debtburden.

Your Bank has opened these centers under its BSVS trust and services are provided bythese centers to all the concerned free of cost. Your Bank opened six new FLCCs duringFY13, taking the total number of FLCCs to 45 by end-Mar, 2013. Thus, each of theBank’s Lead Districts now has a FLCC centre.

Business Facilitators Model: This model has been implemented across the country toaccelerate Financial Inclusion of the excluded segment as well as to augment agricultureportfolio. Business Facilitators will mainly canvass loan applications for your Bank forwhich Bank will pay them compensation. Individuals including retired bank and governmentemployees, NGOs, farmers’ clubs and SHGs are engaged as agents to greatly improveyour Bank’s outreach in the rural/semi-urban areas.

Micro Loan Factory: Your Bank has opened Micro Loan Factories at Raebareli andSultanpur in U.P. The Micro Finance Loan Factory has a mobile van with facilities and allrelated stationeries/documents necessary for SHG financing. It is manned by officers whoare duly authorised to sanction and disburse loans up to Rs 25,000 to SHGs on the spot andat their door steps.

Performance of RRBs Sponsored by the Bank

Consequent upon the mergers of two of its RRBs during the year, the number of yourBank’s sponsored RRBs came down to three.

• Baroda Uttar Pradesh Gramin Bank, Head Office: Raebareli.

• Baroda Rajasthan Khetriya Gramin Bank, Head Office: Ajmer.

• Baroda Gujarat Gramin Bank, Head Office: Bharuch.

Two of the other banks’ RRBs were also merged with your Baroda Rajasthan RRBduring the year under review. Consequent upon the merger, the aggregate business of thesethree RRBs rose to Rs. 29,284.23 crore as of end-March, 2013 from Rs 26,257.43 crore as atend-March, 2012, registering a growth of 11.53%.

The three RRBs together posted a Net Profit of Rs 97.06 crore during FY13 as against Rs148.22 crore earned during FY12. The "Net Worth" and the "Reserves andSurplus" of all these RRBs put together improved from Rs 1,018.44 crore at end-March,2012 to Rs 1,234.42 crore at end-March, 2013 and from Rs 726.55 crore at end-March, 2012to Rs 777.52 crore at end-March, 2013, respectively.

Bank’s Committed Efforts towards Financial inclusion (Fi)

Financial Inclusion (FI) is being viewed in your Bank not just as a social commitment,but also as an instrument to bring about overall economic development of rural India so asto tap opportunities at the bottom of the pyramid of Indian economy through sustainableICT based delivery channels.

Your Bank’s Financial Inclusion Plan aims at providing banking services ataffordable cost to those segments of society who are deprived of it, thereby bringing theunbanked population/ areas into the formal financial sector.

Strategies & Models Adopted

The Ministry of Finance has identified around 6 lakh villages across India as anunbanked area. These villages are allocated to various banks under the service areaapproach. Your Bank had 21,526 villages under its service area as on 31/03/2013. TheMinistry of Finance and Reserve Bank of India has advised banks to provide bankingservices at affordable costs to these villages. Accordingly your Bank has approved a plan,which is disaggregated further to a village level to cover these 21,526 service areavillages by providing banking services to them in three years’ time i.e. 2013-2016.

The following three business models are adopted by your Bank for financial inclusion

1. ICT Based Business Correspondent Model

2. Mobile Van Model

3. Brick & mortar branches in FI villages.

Your Bank has covered 4,959 villages through the network of 1,436 brick and mortarrural branches, 3,474 villages through the BC model and 49 villages through the mobilevan.

During FY13, your Bank opened 151 brick and mortar branches in un-banked villages.

•  ICT Based Business Correspondent Model

In order to ensure that Financial Inclusion is implemented in a most efficient mannerand is fully integrated with CBS, your Bank has appointed two Service Providers for acomplete end to end solution, i.e., from enrolment of villagers to issuance of smart cardsto them. The purpose is to bring technology-based banking transactions to the doorsteps ofall villages.

The ICT based Business Correspondent Model is based on Application Service Provider(ASP) model with Biometric Smart Card based technology. Under this approach, BusinessCorrespondents visit villages with Point of Service (POS) devices for carrying outcustomer enrolments and transaction processing. These POS devices are directly connectedwith the CBS of the Bank using GPRS technology.

•  Mobile Van Model

The second business model adopted for implementation of financial inclusion is MobileVan model. Under this model, Mobile Vans move within a cluster of villages in service areaof the existing branch. The vans with the staff visit the identified villages during fixeddays in a week for providing banking services.

These mobile vans are equipped with the computer hardware and connected directly to theCBS of the Bank to enable the customers to operate their accounts through mobile vansinstantly. The account opening process and other activities including transactions inaccounts are carried out in Mobile vans, as is done in normal branches.

Your Bank has presently deployed five mobile vans in Gujarat, Uttar Pradesh, Bihar andGoa states covering 49 FI villages allotted to it. There is good response from the FIcustomers for your Bank’s mobile vans. These vans’ exterior is designed with aview to educate the rural masses about the Bank’s various deposit/loan schemes.

Ultra Small Branches (USBs)

As per the guidelines of Ministry of Finance, Government of India, your Bank has opened2,695 Ultra Small Branches by 31st Mar, 2013 across the country in villages havingpopulation above 2,000 which are covered through the Business Correspondent Model. YourBanks’ officers from the link branches are visiting these USBs on a pre-fixed dateand time. They would clear all the applications for account opening, loan requests,resolving grievances, arranging meetings with villagers on financial literacy, etc.besides advising villagers on various banking products.

This initiative of your Bank has facilitated improvement in financial literacy andconfidence building at the village level, which should eventually improve the responsesfor your Bank’s financial inclusion drive.

Financial Literacy: A Key to successful inclusion

The desired objective of Financial Inclusion can be achieved only when the Bank is ableto generate equal response from the villages. In order to invoke a response from thevillagers, the Bank needs to educate them on various banking facilities and its benefitsto them. In other words, financial literacy would be the key for success of financialinclusion initiatives of any bank. Therefore, all constituents of FI need to develop abond with each other not only to provide banking facilities but also to create massiveawareness of banking and banking products amongst the population through FinancialLiteracy, wherever a bank is implementing Financial Inclusion program.

Your Bank has taken the following major initiatives towards financial literacy in ruralparts of the country.

1. Around 47 Baroda Swarojgar Vikas Sansthan (Baroda RSETI) impart vocational trainingto unemployed youth in rural and semi-urban areas with the aim of equipping them to becomeself employed and have conducted 5,505 training programmes and trained 1,64,742 youth ofwhich 1,02,477 are self employed, with a settlement ratio of 62.20 % as on March 2013.

2. Around 45 Financial Literacy & Credit Counseling Centres (FLCCs)"SAARTHEE" are operational across the country. Since the inception of theseFLCCs, total 46,860 individuals visited these centres and in 33,050 cases, the issues wereresolved by end-Mar, 2013.

3. Around 52 Baroda Grameen Paramarsh Kendra’s facilitate financial education,credit counseling, information sharing and problem solving on technical issues, synergy& liaison with other organizations for value added services and development activitiesin rural areas.

4. Mobile Micro Finance Loan Factory has been established with a vision to providecredit and banking facilities to SHGs at their doorsteps under the SHG – Bank linkageprogram, ensuring a hassle free and prompt credit delivery within maximum of four days& hassle free credit to the SHGs.

5. "BYST-BoB Entrepreneurship Development Programme" (BYST) providesend-to-end support to disadvantaged young dynamic micro-entrepreneurs in the form ofloans, business mentors, training, and networking & marketing.

6. Tie up with Centre for Micro Finance (CmF), Jaipur to provide support in formationof Quality SHGs, facilitating credit linkages and training of branch staff thus helps indevelopment of villages in the service area of the Bank’s branches and improving themicro finance and agriculture lending.

7. Your Bank has also instituted a Professor Chair at the Institute of DevelopmentStudies (IDS), Jaipur one of the premier Research & Policy Advisory institutions witha view to examine space available to rural credit, rural development and agriculturedevelopment and also to study challenges and measures to overcome them. The objective isto conduct various studies on the above lines and learn from the feedback.

Product innovation in Financial inclusion

Your Bank has also been using financial inclusion as an opportunity to strengthen itsfunction of Corporate Social Responsibility (CSR). Your Bank is taking various steps toincrease banking awareness amongst the rural people, educate them on its products, ruralcredit, agriculture technical knowhow, credit counseling, knowledge sharing/problemsolving, up-lifting the women and the girl children, formation of farmers’ clubs& formation of SHGs, etc.

The project, with the help of imparting basic training and guidance, brought out thepotential of the unemployed youth by encouraging them to start their own business in ruralareas. With the introduction of new technologies, now customers are getting bankingservices instantly through business correspondents appointed in their villages.

Your Bank has introduced several customer-oriented products specifically designed forFI customers. Some of them are as follows.

Basic Savings Bank Deposit Account with in-Built OD Facility

The product is specially devised for individuals from Financial Inclusion villages withrelaxed KYC norms as per the RBI guidelines. The account can be opened without depositingamount which doesn’t attract any penalty and will be opened/ operated throughbusiness correspondent, branch and ATM.

Flexible RD Account (Yashasvi Jama Yojana)

This is a money back RD facility duly designed for financial inclusion account holdersto provide liquidity. The product offers money back facility, at the end of six months, anamount equivalent to 50.0% of the outstanding credit balance in the account can be paidback as per the requirement of depositor.

Baroda Kisan Credit Card (BKCC)

This product is for farmers to cover their needs like production credit, investmentcredit, personal loan needs as well as consumption needs. It is flexible in utilization ofthe limit as he can utilize the limits as per his requirements during the year.

Baroda General Credit Card (BGCC)

The BGCC is implemented through all the rural and semi-urban branches of the Bank tocater to the different needs of the villagers. insurance Product with Low Premium

Your Bank has also introduced a life insurance product with low premium for financialinclusion customers in coordination with India-first Life Insurance Company. This givesflexibility to customers to obtain cover from Rs. 5,000/- to Rs. 50,000/- at singlepremium of Rs. 20.99 per thousand for the period of five years.

Direct Benefit Transfer

The Government of India has decided to roll out Direct Benefit Scheme (DBT). Thepurpose of Direct Benefit Transfer is to ensure that beneficiaries directly receive thegovernment benefits to their accounts electronically, cutting down delays and pilferagesif any in existing distribution system. A lot of preparatory work has been done and a lotof work is ongoing in connection with the rollout of DBT. The government will transfercash benefits like subsidies, scholarships, pensions, NREGA wages, LPG subsidy, etc.directly to the bank accounts of the identified beneficiaries under this programme. Ashift to this method of transferring government benefits would be done in a phased andtime bound manner. Around 43 districts in 16 states have been identified for the firstphase of DBT under 26 selected schemes w.e.f 01/01/2013. It should be rolled out inanother 78 districts w.e.f. 01/07/2013. It is intended that the DBT scheme would be rolledout in all districts across India by 31/03/2013. The implementation of DBT scheme is donefrom the lead bank platform. Your Bank has the lead bank responsibility in 45 districts.Besides this, your Bank has to monitor the effective implementation of the DBT scheme.

Aadhaar Payment Bridge System (APBS)

APBS is the new payment service offered by National Payment Corporation of India (NPCI)using the Aadhaar Number issued by Unique Identification Authority of India. Thegovernment benefits are transferred to the accounts of the beneficiaries on the basis ofAadhaar number so that the bank details and account numbers of the beneficiaries need notbe maintained by the government departments/agencies. APBS is now operational in yourBank.

Aadhaar Enabled Payment System (AEPS)

AEPS is a bank led model which allows online interoperable financial transactions byPoS (Micro ATM) through the Business correspondent of any bank using the Aadhaarauthentication.

The four Aadhaar enabled basic types of banking transactions are as follows.

AEPS is in a testing phase in your Bank and will be operational by mid of May 2013.

Highlights of the Bank’s Performance in Fi up to 31/03/2013

• Your Bank has so far covered 4,959 villages out of 21,526 villages under itsservice area. Almost 90% of the villages are on the active transaction mode.

• Your Bank has opened 49.60 lakh "No-Frill Basic Saving BanksAccounts", out of which 8.69 lakh accounts were opened through the BusinessCorrespondent Agents (BCAs).

• The average balance outstanding in the "No-Frill accounts" of yourBank is around Rs. 1,200 crore.

• Your Bank has opened 2,695 Ultra Small Branches in villages with populationabove 2,000.

• Your Bank has approved a disaggregation plan up to the branch level to implementits FIP for 21,526 villages by March 2016.

• Your Bank has introduced "Micro-Insurance" product for FI customers.Your Bank is the 1st Bank to do so.

• Your Bank is operating five mobile vans in four states i.e. Gujarat, Bihar, Goaand Uttar Pradesh and has plans to deploy 100 more mobile vans.

• Your Bank has entered into an agreement with CSC e-governance Ltd. to enrolltheir CSCs in the Bank’s service area as BCAs on KIOSK platform under FI.

• Your Bank is fully prepared technologically for Aadhar based payments, UIDAILinkages, Village code updation etc.

Advances to SC/ST Communities during FY13

The outstanding advances granted by your Bank to SC/ ST communities have been growingyear after year. This is evident from the fact that the outstanding advances granted tothem went up from Rs 4,336.02 crore as at end-March, 2012 to Rs.4,712.66 crore as atend-March, 2013. In fact, the SC/ ST communities accounted for a share of 27.64% in thetotal advances granted to weaker sections by your Bank during the year underreview. Furthermore, a special thrust is laid by your Bank in financing SC/ST undervarious government sponsored schemes namely Swaranjayanti Gram Swarojgar Yojana (SGSY),Swarna Jayanti Shahari Rojgar Yojana (SJSRY), Prime Minister Employment GenerationProgramme (PMEGP), etc.

The Baroda Swarojgar Vikas Sansthans (BSVS) have been giving due preference to SC/STcommunities while selecting the trainees. It is heartening to indicate that so far, thesecentres have trained 72,365 youths under the SC/ST category.

International Operations

It was a historic year in the International Operations of your Bank with opening of100th overseas office at DIFC, Dubai. The branch was inaugurated by Shri P. Chidambaram,Union Minister of Finance, Government of India. Since its foray into international arenain the year 1953, your Bank has been consistently expanding its overseas network to tapthe global business opportunities.

International Business

During the year, the major advanced economies continued to face sluggish growth, fiscaldrag and severe austerity measures and its spillover effect continued to impinge on theother economies. Even during this difficult environment, the International Operations ofyour Bank maintained the healthy growth trend, by keeping a constant watch on thedevelopments and taking pre-emptive steps by suitably adjusting the business model.

Your Bank kept a constant watch on the emerging opportunities and there was greatersynergy amongst the overseas centres to derive the full benefit of the large network ofbranches.

Your Bank continued with its initiatives for customer convenience throughimprovements/enhancements in its IT infrastructure, modifications in products and servicesin line with the local requirements, expanding the branch network and publicity throughprint and electronic media. The year also saw your Bank entering two new centres throughbranches in Sydney, Australia and DIFC, Dubai. The Joint Venture Bank in Malaysia –India International Bank (Malaysia) Bhd. was also made operational during the year.

Business & Profit Performance

During FY13, the total business (Deposits + Advances) of your Bank’s overseasbranches registered a growth of 24.2%. While its Customer Deposits increased by 24.3%,Total Deposits by 26.2 % and Advances by 21.8%.

During FY13, the International Operations contributed a sizeable 29.4% to yourBank’s global business.

Total Assets

Total Assets of the Bank’s International Operations showed a healthy growth of30.1% on y-o-y basis, as they increased from Rs 1,28,398 crore as of March 2012 to Rs1,67,038 crore as on March 2013.

Profit

Even during this challenging period of surplus liquidity in the system and slowdown inthe credit offtake, the Gross Profit for the year FY13 registered a growth of 24.7% overthe level of previous year due to enhanced business level and improvement in spreads.However, the Net Profit posted a negative growth of 19.20% during the year on account ofhigher provisions.

The contribution of international operations to the Bank’s global Gross Profit was24.6%.

Asset Quality

The wide spread international presence of your Bank exposes it to increased creditrisk. Your Bank takes all steps for realistically assessing the credit needs of anyproject during the pre-disbursement stage and carefully monitors the appraisal and othertechnical, economic, commercial, organizational and financial aspects.

The global slowdown has impacted all sectors of the world economy and this has putadded pressure on the quality of assets. In response to this, your Bank has furtherenhanced the monitoring techniques to maintain the quality of assets. This required timelyidentification of stressed accounts and taking all possible steps for recoveries.Furthermore, an enhanced monitoring of restructured accounts was effected so that these donot slip to NPA categories.

However, the external environment did impact the quality of assets and Gross NPAs as %to Total Advances increased from 0.68% as of Mar’12 to 1.37% as on Mar’13.

International Presence

Your Bank’s international presence covered 24 countries through its 100branches/offices during FY13 are as under:

The Bank also has the following Joint Ventures:

Overseas Expansion

During FY13, your Bank opened 12 new branches/offices (including those of thesubsidiaries). This included opening of the branches of the Bank at Sydney, Australia;DIFC, Dubai, Sohar, Oman; Rose Belle, Mauritius and Electronic Banking Service Unit (EBSU)at DMCC, Dubai.

The branches of the subsidiaries were opened at Wellington and Manukau in New Zealand;Entebbe, Kabale and Industrial Area, Kampala in Uganda; Tema in Ghana and Gaborone West inBotswana

In addition, the Joint Venture Bank in Malaysia – ‘India International Bank(Malaysia) Bhd. also commenced operations during the year.

Future Plans

In order to further expand the branch network, your Bank has identified upcomingcentres in countries where it is already present. This will further consolidate yourBanks’ operations and improve/protect the market share. Your Bank also has plans toenter new countries offering opportunities for profitable growth of business.

Necessary infrastructure is being created in your Bank for further expanding thenetwork in UAE, Uganda, Kenya, and Botswana. Your Bank is awaiting approval of the RBI foropening of two additional branches in the U.K.

The overseas expansion is being considered in line with the various directives issuedfrom Ministry of Finance, Government of India regarding the overseas expansion of PublicSector Banks of India.

Syndication Centres

Your Bank has Global Syndication Centre at London and Regional Syndication Centres atDubai and Singapore, which focus on the business of Syndication Loans in InternationalMarket. Your Bank has set up an International Merchant Banking Cell (IMBC) at CorporateOffice, Mumbai, which mainly caters to the requirements of Indian corporates. Your Bank isan active player in the Syndication Loan Market and also participates in loan origination.

Products and Services

Your Bank is having a single Core Banking Solution at all its overseas branches andsubsidiaries. This facilitates introduction of new products and services and also helps incarrying out modification/improvement in line with the requirements of customers in thecountry of operation.

The technology is being fully utilized by your Bank to have a competitive edge bycontinuous improvement and innovation. Due publicity is given through electronic and printmedia to the target customers of your Bank.

Technology in Overseas Operations

• The No. of ATMs at overseas Territories and subsidiaries increased to 89 (54on-site and 35 off-site) as on 31st March, 2013 from 76 (45 onsite and 31 offsite) as on31st March, 2012. Further, three more ATMs are in the process of being installed.

• Many of the territories/Subsidiaries are moving to Chip based debit cards.

• Transaction based internet banking branded as "Baroda Connect" isimplemented in 12 overseas territories/ subsidiaries viz UAE, United Kingdom, Oman,Mauritius, Fiji, Seychelles, Australia, Kenya, Uganda, Botswana, New Zealand and Ghana.Moreover, a "view-based internet banking" is implemented in Tanzania.

• Global Treasury Solution has been implemented at US, UK, UAE, Bahamas, Bahrain,Hongkong, Singapore and Belgium.

• Implementation of Centralized SWIFT activity has been completed and is operatingfrom your Bank’s Data Centre. Except US Territory, all Territories/Subsidiaries arerouting their Swift operations through SWIFT Cell, Data Centre.

• Payment Messaging System is a middleware between Core Banking Solution (Finacle)and SWIFT which help in Straight through Processing of incoming and outgoing SWIFTmessages with Anti Money Laundering check. The same has been implemented in all/Subsidiaries, except in the US Territory.

• The AML Erase (Batch mode) has been implemented in 21 Territories/Subsidiaries.

• The Anti Money Laundering Online List Matching solution has been implemented at21 Territories/Subsidiaries, except the US territory.

Risk Management in Overseas Operations

The Basel II guidelines were implemented at all the overseas territories of your Bankwith effect from 31st March, 2008 and your Bank has adopted a Standardised Approach forCredit Risk, Standardised Duration Method for Market Risk and Basic Indicator Approach forOperational Risk.

Your Bank has set up a separate Risk Management Department at overseas centres to dealwith Credit, Market & Operational Risk and has posted specialized Risk Managers tosuch centres. This has resulted in strengthening of Risk Management Systems and theirimplementation.

The BOB RAM Model for internal Credit Rating implemented at overseas centres hasfurther strengthened the credit monitoring process by capturing vital information relatedto advances accounts and their pricing.

The ASCROM Model for Asset Classification and Credit Monitoring has been implemented atall the overseas territories of your Bank.

Regulatory Compliance in Overseas Operations

Your Bank follows stringent of the home/host country regulatory norms and alwaysremains a regulation-compliant Bank. All the regulatory guidelines/changes/issues areattended on top priority basis.

To handle the compliance issues, your Bank has posted dedicated officers at overseascentres whose skills are continuously enhanced through training and other avenues. Thecompliance is seen not merely a regulatory requirement but also to protect the interestand reputation of the Bank and other stakeholders.

All the overseas territories/subsidiaries have the Policies/ Manuals in varied areas ofbanking as per their respective regulatory requirements. These are periodically reviewedto ensure their conformity with the regulatory guidelines and requirements.

Treasury Operations

Your Bank operates a State of the Art Dealing Room at Baroda Sun Tower at its CorporateOffice in Mumbai. Through this dealing room, your Bank is well positioned to scale up itsTreasury Operations. The Treasury Division handles your Bank’s domestic treasuryoperations and covers activities in various markets i.e. Foreign Exchange, Interest Rates,Fixed Income, Derivatives, Equity and other alternative asset classes. The advancedtechnology platforms are used by your Bank to offer a basket of financial products to itsclients including interest rate swaps, currency swaps, forwards and options.

Your Bank has also put in place a sophisticated Automated Dealing system to offer theauto generated real time foreign exchange rates to the clients of its authorised branchesspread across the country. As a customer friendly initiative, during the year FY13,enhancements were made by replacing the old servers with high end servers forBOB-Authorised Dealing System facilitating improved and faster processing of transactionscutting delays and breakdown in customer service.

Under the Business Process Re-engineering, your Bank has successfully implementedGlobal Treasury solution across major financial centers. The Global Treasury Platform isrunning smoothly in nine centres, notably, Mumbai, London, Bahamas, Brussels, Dubai,Bahrain, Singapore, Hong Kong and New York. The tenth implementation of Treasury solutionat DIFC Dubai, an offshore Banking unit is on the cards.

During FY13, promotion of growth and control of stubborn inflation were the keymonetary policy challenges. The RBI reduced the Repo and Reverse repo rates by 100 bps andinfused liquidity by cutting CRR by 75 bps during the last year. The RBI also conductedOpen Market Operations to the extent of Rs 1,27,180 crore to infuse liquidity into thesystem. Higher than announced borrowing programme and high inflation put pressure on Giltyields until November, 2012. This and the pause by RBI in changing monetary policy ratesresulted in the 10-year benchmark gilt to trade in the range of 8.05%-8.25% during July toDecember, FY13. However, after the resumption of Open Market Operations by the RBI in Dec,2012 and easing of policy rates in January 2013, the 10 year Gilt touched a low of 7.80%while ending the year at 7.95%.

Against a backdrop of weak economic growth and corrective steps & measures by thegovernment to control fiscal deficit, your Bank’s Treasury accumulated securitiesoffering higher yields and maintained a prudent duration for its fixed income portfolio.This strategy was useful for the Bank to maintain a good average yield on its Investmentsand also helped in booking of profit on sale of Investments when the rate cutting cycleresumed in the last quarter of the year. The average yield on Domestic SLR investments was7.76%. During FY13, the Treasury earned Rs 7,450 crore as Interest/Discount earnings,while the Profit on Sale of Investment and Exchange Earnings were Rs 617 crore and Rs 803crore, respectively.

Your Bank’s Treasury offers customized solutions using available products vizInterest Rate Swaps (IRS), Currency Swaps (CIRS), Forwards and Options to meet theInterest rate and Foreign Exchange risk mitigation requirements of the corporate clients.During the year, your Bank’s Treasury actively participated in the arbitrageopportunities available between various asset classes including Money Market CBLO, Call,Market Repo, Government Securities and Forex markets. The Treasury actively utilised themarket movements and used Overnight Indexed swaps for harnessing available hedging andtrading opportunities.

The sentiment in Equity markets improved during second half of FY13 due to FII inflows,reform initiatives announced by the Government and improving fundamentals of the USeconomy. The Equity Desk of the Treasury actively churned its portfolio and booked profitsat regular intervals whenever an opportunity emerged in the markets.

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

The Foreign exchange desk of the Treasury retained its position as one of the premiermarket players in the Forex desks of the Public Sector Banks. The Proprietary trading deskwas active in cashing in of available arbitrages, using volatility in the markets andmobilised resources in a tight liquidity position impacting the Indian markets.

Your Bank’s Treasury Mid-Office monitors market exposures and limits fixed by theBoard of Directors, on a real time basis. The Risk Management parameters, includingValue-at-risk (VaR) are used to measure Market Risk on all portfolios. These measures arebacked up by the Back Testing on risk numbers and Stress Testing of various investment andcurrency portfolios.

Corporate Social Responsibility (CSR)

As a responsible corporate citizen, your Bank is considering donation to National/StateRelief Funds and to any individual, trust, society, charitable/social institutes of reputeengaged in social activities for the benefit of vast variety of people.

Donations are given to promote various activities. They are extended essentially as asocial welfare measure on a noncommercial basis to individual trusts, social workorganizations/ institutions, etc.

In particular, your Bank has been giving donations for the following purposes:

• For the spread of education – including for the girl child and womenfolk inremote villages.

• To reputed colleges/public schools and other similar institutions.

• To reputed hospitals engaged in charity or in service of weaker sections

• Assisting families of soldiers died in wars and handicapped soldiers

• Old age homes

• Preservation of places of historical interest like gardens, forts, temples etc.

• Promotion of efforts for protection, conservation and cleaning of environmentincluding plantation/re-plantation, rivers, lakes, forests, sanctuaries etc.

• Adoption of gardens in cities where your Bank’s name can be publicized

• Family planning activities

• For measures promoting prevention of cruelty to animals and for setting up andmaintaining animal and bird Hospitals

• For promoting the promotion and use of non exhaustible sources of energy likesolar power, gobar gas plants in rural areas

• Vaccination projects for controlling spread of diseases/ epidemics

• Providing support to organizations extending support to handicapped persons likeblind, lame, deaf and dumb, etc. or suffering from any other disabilities

• Promotion of measures for pollution control

• Other matters/ projects of social and human value

During the Financial Year FY13, your Bank disbursed donations amounting to Rs.699.74lakh to various organizations engaged in the field of education, health, women welfareetc. The activity-wise disbursement of donations are as follows.

Besides these activities, your Bank has established Baroda Swarozgar Vikas Sansthan forimparting training to unemployed youth, free of cost, for gainful self employment andentrepreneurship skill development which help them improve their family economic statusand also gives a boost to various regional economies within these locations. All the LeadDistricts of your Bank have Baroda Rural Self Employment Training Institute (R-SETI).

Your Bank has also established Baroda Gramin Paramarsh Kendra for knowledge sharing,problem solving and credit counseling for rural masses across the country. In order tospread awareness among the rural mass on various financial and banking services and tospeed up the process of financial inclusion, your Bank has also established FinancialLiteracy and Credit counseling Centres (FLCC). As on 31st March, 2013 your Bank had 45FLCCs.

Asset Quality Management

The year FY13 was a challenging year for the Indian banking industry from theperspective of Asset Quality due to a fragile economic environment. However, your Bankcontinued its practice of rigorous monitoring and recovery of the NPA portfolio to preventany serious deterioration in its asset quality. Yet, an overstretched economic downturndid impact your Bank’s asset quality to some extent during FY13.

Indian banks, in general, witnessed heavy incidence of slippages in FY13 due tovolatile financial markets both within and outside India, higher inflation and higherinterest rate regime throughout the year FY13.

In spite of various depressed economic parameters, the fresh slippages during the year,were at 2.29% of the opening Standard Advances of your Bank. Against the backdrop of highslippages, the ratio of Gross NPA to Gross Advances was at 2.40% as on 31st Mar, 2013.Consequently, the ratio of Net NPA to Net Advances increased to 1.28% by end-Mar, 2013.

However, your Bank’s Loan Loss Coverage ratio (including the technical write-offs)was at 68.24% in FY13 - a relatively higher level, if compared to your Bank’s peersfrom the PSU banking segment.

During the year under review, your Bank laid down a comprehensive structure of recoveryand credit monitoring function at the Branch, Region, Zone and Corporate levels. Besidesthis, the Nodal officers at each DRT centre were advised to follow-up the legal cases onday to day basis so as to minimize the delay in obtaining decrees and execution thereof inorder to expedite and maximize recoveries. For Recoveries of all DRT Suit filed NPAaccounts, the assets charged to the banks are now being sold through E-auction to get afair market value of assets charged to the Bank. Additionally, ARCs have been appointed asrecovery agents and consultants have been appointed for liaison with Official Liquidatorto speed up the recoveries.

Your Bank continued its emphasis on follow-up mechanism to explore recovery prospectsof NPA accounts. The system of monitoring of large value NPA accounts of say Rs 25 lakhand above, directly from the corporate office has ensured proactive action by branches,advocates and recovery agents. Therefore, the cash recovery in NPA accounts during FY13was Rs 625.57 crore, higher than the cash recovery of Rs 580.46 crore during FY12. Theupgradation was also higher at Rs 341 crore during FY13 compared to Rs 336 crore duringFY12.

During FY13, your Bank laid specific focus on recovery of small accounts by organizingLok Adalats and Recovery Camps at village/town level. Your Bank also launched an incentivelinked recovery scheme called "Sankalp – V", to enlist personalizedattention of each and every staff member in pursuing recovery efforts of small valueaccounts with an outstanding up to Rs 15 lakh. The cash recovery made during the year FY13under the scheme was very impressive at over Rs 231 crore.

The asset classification wise breakup of advances portfolio of your Bank is as under.

(Rs. crore)

information Technology

Your Bank has undertaken a total end-to-end business and IT strategy project coveringyour Bank’s domestic, overseas and subsidiary operations.

• Your Bank has built the best of technology infrastructure by implementing astate-of-the-art Data Centre conforming to Uptime Institute Tier-3 standard and also aDisaster Recovery Site in different seismic zone with redundancy built in every singlepoint of failure to ensure uninterrupted banking service delivery to customers. Aftersuccessfully migrating Data Centre to new Data Centre in the Bank’s own premises,your Bank had undertaken Disaster Recovery Centre expansion during the year to support itsbusiness growth and technology expansion.

• Your Bank has undertaken various other technology initiatives like windowsserver virtualization, desktop virtualization and backup consolidation as greeninitiatives and also to improve Data Centre operational efficiency, Applicationvirtualization, Bandwidth up-gradation, ASM & RAC Implementation, migration of Bankwide network to new technology based on MPLS for improving uptime and on demand upgradehas been successfully implemented. Enterprise Management System was upgraded and newmodules deployed to effectively manage and monitor Bank’s growing IT infrastructure.

• The Core Banking infrastructure has been upgraded by your Bank from PA-RISC toItanium servers in all 23 Overseas Territories for supporting additional business volumes.Various new Regulatory initiatives like Linking of UID numbers, Account numberportability, Capturing KYC related information, Simplified account opening procedures,Addition of village codes in core banking system, Implementation of

Adhaar Payment Bridge System(APBS), Centralization of Loan Processing at RLF and SMEs,Biometric Authentication for CBS Login at Branches, Deployment of NPSLite (a scheme toprovide financial security for economically disadvantaged people for protecting theirfuture during old age), automated processing of payments to NREGA, NPS and MGPSYSbeneficiaries etc were added during the year. Core Banking Solution was implemented inSydney Branch, Australia. The robust technology platform has enabled your Bank to open100th International Branch during the year. Your Bank’s RRBs are also on CBS Platformand as notified by GOI, your Bank has successfully migrated RRBs of Central Bank of Indiaand Punjab National Bank with 350 branches into one of RRBs’ of your Bank.

• Internet Banking - BARODA CONNECT

The Internet Banking, viz., Baroda Connect (Retail portal) has been completely revampedin your Bank to enhance its look and feel and user-friendliness. Your Bank continued toadd more facilities under its Internet Banking channels. Other enhanced features such asTax payments of various States, Integration of GRIPS (Government Revenue Receipts for WestBengal), Credit to Loan accounts, Bill payments, Online donations to Prime Minister ReliefFund, India Life Insurance premium payment through e-banking, IMPS(Immediate Paymentservices) through e-banking were added during the year. Your Bank’s Internet bankingfacility is made available on all Smart-phones/ tablets offering comfort of anywhereBanking to its customers. Internet Banking has also been implemented in total 13 overseasterritories viz. Tanzania, Uganda, Kenya, Mauritius, Seychelles, Botswana, New Zealand,UAE, FIJI and by adding Transaction based Internet Banking in UK, Oman and Ghana and viewbased in Australia during the Financial Year. View Based e-banking is also provided in allBank sponsored RRBs. In order to enhance security and confidence in Internet Banking, yourBank introduced enhanced security features by deploying Fraud Management Solution,including two factor authentications in India and 5 Overseas territories viz. UAE, UK, NewZealand, Kenya and Uganda by enabling ARCOT OTP, PULL OTP and SMS OTP.

Your Bank has initiated the process of implementing Fraud Management Solution forremaining six overseas territories where transaction-based e-Banking is implemented.View-based Internet Banking for US territory, PPF through e-banking, Inter-Bank fundtransfer through Internet Banking for UAE have also been initiated by your Bank. Your Bankalso proposes to implement Transaction based Internet banking for its sponsored RRBs, withtwo-factor authentication.

• Mobile Banking – BARODA M-CONNECT

As one more alternate delivery channel, many features were added to Mobile Banking byyour Bank to provide various facilities to customers, viz., IMPS i.e. Immediate PaymentServices Person to Account (P2A) fund transfer, enabling mobile banking application in alli-Phones and i-Pads in addition to Blackberry, Android, Windows, enabling of NUUP(NationalUnified USSD Platform) etc.

Your Bank is also in process of implementing P2M (person to Merchant) fund transferunder IMPS and has acquired India First Life Insurance as the first merchant. Your Bankproposes to enable Mobile Banking application for Windows8, Implementation of Mobilebanking in Uganda and UAE etc. It has also initiated implementation of Mobile banking inits sponsored RRBs.

• ATM

The ATM Switch is upgraded in your Bank to a higher version along with Hardwareup-gradation with many enhanced features for better performance, speedy ATM transactionsand ease of ATM expansion during the year. The ATM switch is upgraded for India, UAE,Oman, Mauritius, Fiji, Tanzania, Botswana, T&T and New Zealand. Many customer centricinitiatives such as implementation of Rupay ATM Cards, Rupay POS and Rupay KCC Cards,Brown label ATMs, Collection of Insurance premium for IndiaFirst Life Insurance Policyholders through ATMs, ATM Transaction receipt printing in HINDI, Regional Language Screenselection for Gujarati, Marathi and Tamil, Talking ATMs for visually impaired persons,implementation of Fraud management Solution in ATMs/ POS in India have been added duringthe year. Your Bank has successfully launched Rupay ATM and Rupay KCC cards for its RRBsalso.

Your Bank has also proposed some more Customer Centric initiatives like ImmediatePayment Services (IMPS) through ATMs, Regional Language screen selection in ATMs (forMalyalam, Telugu, Kannada, Bengali), Cheque book request through ATMs, NEFT through ATMs,Rupay e-commerce, multi-factor authentication for card not present transactions, VisaDebit card for UAE, BSP(Bank South Pacific) Interchange Implementation for FIJI, Prepaidcard withdrawals through ATMs, Chip Based Card Implementation in India, Oman andMauritius, Card to Card fund transfer, Bill Payment through ATMs etc.

Payment Systems

• All branches of your Bank (which are CBS-compliant) are enabled for interbankremittances through RTGS and NEFT. The RTGS and NEFT have also been interfaced with yourBank’s internet banking portal. The Straight through Processing (STP) of NEFT &RTGS have been implemented for the Bank as well as RRBs. RTGS & NEFT has also beenimplemented in Uganda.

• Internet Payment Gateway services for debit cards/credit cards are increasinglyoffered to merchants and internet shopper as a safe and secure channel for onlinepurchases.

• Cash Management System is a full-function web enabled cash management solutionoffered to your Bank’s customers, covering services like Receipt Management(Collections), Payment Management and Invoice Management (Receivable and PayableManagement).

• New Credit Card Management System has been implemented to provide comprehensivemanagement and support for your Bank’s Credit Card operations.

• The SWIFT facility for worldwide inter-bank financial communication is providedat Foreign Exchange Authorized Branches in India as also in 22 overseas territories byadding UK and Australia during the year.

• The Payment Messaging Solution (PMS) is implemented in 22 overseas territoriesby adding UK and Australia during the year & all authorized branches in India. PMSfacilitates validation and formatting of SWIFT messages generated from CBS as per SWIFTstandards, and also goes through AML check.

• During the year under review, a grid based Cheque Truncation System (CTS) wasimplemented in all MICR Centres in Southern States, Kolkata, Ludhiana and Chandigarh inaddition to Delhi. Your Bank has also initiated the process of implementation of CTS inMumbai and Western Grid of Maharashtra, Gujarat and Madhya Pradesh.

• Automated Cheque Processing Centre (Inward & Outward) was implemented inMumbai and Surat and Ahmedabad were added during the year, as a part of Business ProcessRe-engineering under its Project Navnirmaan.

• For regulatory compliance, the Anti Money Laundering (AML) has been implementedin India and 22 overseas territories by adding Belgium during the year. Your Bank has alsoimplemented Risk Management solution. Your Bank has also implemented Phase I AML solutionin all its sponsored RRBs and implementation for Phase II AML is in progress.

Other initiatives

• Your Bank has implemented Customer Relationship Management as a new initiativefor providing better services to customers through a contact centre over phone in order toimprove their satisfaction and loyalty. Existing customers/Prospective customers may callon Toll Free no. (1800223344 & 18001024455) wherein following services can be availedof.

• Issuance of a cheque book

• Enquiry about products and services

• Account Enquiry – Balance, Transaction, Amount in Clearing etc.

• Hot-listing of ATM cards

• Stop payment marking / un-marking

• Request for issuance of debit card.

• Request for re-generation of debit card PIN

• Support for e-banking users

• Re-generation of mobile banking password

• On-line (paperless) TPIN generation facility

Other information regarding products and services of your Bank is also provided toprospective customers/account holders. The CRM applications is linked to sales officeslike Retail Loan Factories (RLFs), City Sales Offices (CSOs) wherein the leads generatedat contact centre on the basis of enquiry about the products by customers are transferredto these offices for further processing.

Your Bank has also completed a launch of recovery processes through contact centrewherein customers are informed about the EMI and due amounts. This shall facilitatecustomers to deposit EMI/due amount on demand dates.

• The Retail Depository Services are made available to your Bank’s Retail aswell as Corporate customers. With a centralized depository application, branches areequipped to provide depository services for both NSDL as well as CDSL. With Online TradingSystem, your Bank will be able to provide complete suite of online services to thecustomers for trading in instruments like equities, mutual funds, bonds and initial publicoffering (IPOs).

• For improving your Bank’s service delivery, the Back Office functions havebeen centralized at City Back Offices and Regional Back Offices. Your Bank now has 70 CityBack Offices and 10 Regional Back Offices. The personalized cheque book issuance has beencentralized. Your Bank has also started centralized FCNR operations.

• The Integrated Global Treasury Solution has been implemented in UK, UAE,Bahamas, Bahrain, Hongkong, Singapore, Belgium and in India, reducing the cost ofoperations and better fund management.

• Enterprise wide GL Solution has been implemented. This provides variety ofinputs to your Bank for strategic decision making in business development and alsogenerates enterprise wide consolidated reports.

• The Centralized Payroll, Salary module, e-TDS module and Leave Module have beenimplemented for all your Bank’s offices in India.

• The Human Resource Networking for Employees Service has been implemented withthe objective of creating a central database of the Bank employees for facilitatingdecision-making, promotion and selection exercise as also for automating other HRprocesses.

• Your Bank had also undertaken as a part of its business strategy, Data Warehousefor providing flexible and interactive source of strategic information, CustomerRelationship Management for better customer insight and uniform customer view acrosschannels.

• Your Bank has upgraded existing applications like Exchange, e-Business suitewith enhanced features, encompassing Customer Relationship Management, HRNes andEnterprise wide GL modules.

• The IT setup has been developed for account opening process and transactions,both online and offline, to be carried out through Business Correspondent thus enablingFinancial Inclusion. The Mobile Van Banking is launched in Gujarat, UP & Bihar on apilot basis as the Bank’s Financial Inclusion initiative.

Your Bank has fully automated its Loan Processing (Retail, Agri and SME) modules forbetter and quick customer service. Your Bank also provides a single click Online loanApplication feature for Home Loan, Auto Loan and Education Loan.

Your Bank has also initiated automation of Loan processing for MID-Corporate andCorporate customers.

• A robust Information Security Management System was put in place during the yearunder review to protect the technology against security threat. A Comprehensive Audit byExternal Agencies is being successfully carried out by your Bank for its Core BankingSolution and all other applications as well as for Data Centre/Disaster Recovery centreInfrastructure.

• Your Bank has set up a Security Operation Centre (SOC) for enhanced IT security.

• Your Bank’s both Data Centre and Disaster Recovery Centre are ISO 27001certified.

• Your Banks has Implemented Fraud Management Solution for Internet Banking, ATM& POS. In order to enhance security and confidence in Internet Banking, your Bankintroduced Fraud Management Solution, including two factor authentications in India andfive Overseas territories viz. UAE, UK, New Zealand, Kenya and Uganda by enabling ARCOTOTP, PULL OTP and SMS OTP.

• As a security measure, Your Bank has also enabled SMS Alerts delivery facilityto its customers for all transactions made through alternate delivery channels and for allCBS transactions worth Rs.5000 and more.

• Your Bank is regularly conducting VAPT (Vulnerability assessment &Penetration Testing) of external facing applications, eBanking log monitoring etc.

• Your Bank has enabled a Fraud Risk Management system for day-to-day monitoringof suspicious transactions at Branches for protecting interest of customers.

• While cyber-attacks have become more unpredictable and electronic paymentsystems vulnerable to new types of misuse, it is imperative that banks introduce certainminimum checks and balances to minimise the impact of such attacks and to arrest/minimisethe damage. To minimise the damage, your Bank has initiated following additional securitymeasures which will be enabled shortly.

• All new debit and credit cards will be issued for domestic usage unlessinternational usage is specifically sought by the customer.

• Convert existing MagStrip Cards to EMV Chip card.

• PIN enabled POS

• Enabling additional security as addition of Digital signatures for CorporateInternet Banking.

Direct Benefit Transfer

• Your Bank has initiated Direct Beneficiary Transfer under Aadhaar Payment BridgeSystem (APBS) and wages payment for Mahatma Gandhi National Rural Employment Guarantee Act(MGNREGA).

• For MGNREGA transactions, your Bank has started Pilot Project for Sanganer Blockin State of Rajasthan during the year and processed 9,593 transactions amounting Rs.86,54,676/-

• Under APBS, your Bank has linked 1, 31,735 Adhaar Card and provided credit to6,635 beneficiary amounting Rs 49,01,659/-

• Your Bank has also initiated another project for Direct Beneficiary transfer inassociation with Central Project Scheme Monitoring System (CPSMS).

E-business

Your Bank’s e-business department provides different types of Alternate DeliveryChannels (ADC) such as ATMs, Internet Banking (Baroda Connect), Mobile Banking, RTGS/NEFT,Phone Banking, Internet Payment Gateway (IPG), Contact Centres etc. In addition to this,the e-banking department of your Bank looks after Depository Services, Cash ManagementServices. This year, your Bank introduced different variants of Debit Cards i.e. MaestroPIN Debit Card and RuPay Debit Card. In addition to this, your Bank also launched a newvariant of Pre-paid Card i.e. Baroda Travel Easy US Dollar Travel Card. Also, OnlineTrading facility for Retail customers of your Bank was launched in July 2012. Theperformance of various sections under the e-Business Department during FY13 is summarisedbelow.

ATM/DEBiT Card Operations

new initiatives & Achievement during FY13

a) Maestro PIN Debit Card: Launched in April’12

b) RuPay Debit Card : Launched in September’12

c) Onsite ATM – Installation of Cheque Drop Box in all onsite ATMs

d) Issuance of debit cards in Nagrik Bachat Khata with effect from 5th Dec, 2012.

Baroda Connect (internet Banking)

New initiatives during FY13

a) Credit/transfer to loan account through Baroda Connect.

b) Online FDR for NRIs/PIO enabled.

c) Online payment of premium of India First Insurance

BARODA RTGS/nEFT

Baroda Cash Management Services

• During FY13, the total number of transactions in BCMS was 30.91 lakh as against14.19 lakh during FY12, with a total turnover was Rs.27,480.62 crore as against Rs 10,355crore during FY12 and a profit of Rs 97.27 lakh was earned during FY13.

• The number of customer has increased from 206 as on 31/03/12 to 308 as on31/03/13.

• It is proposed to extend these services to 100 more centres in a phased manner.

Baroda e-Gateway (internet Payment Gateway)

• As on 31st March 2013, a total of 148 Merchants were registered as against 124as on 31st March 2012 and the total turnover during FY13 was Rs 50.85 crore. A Profit ofRs 65.68 lakh was earned during FY13 from this activity.

Other new initiatives taken during FY13

• Online Trading launched for Retail Customers.

• Baroda Travel Easy US Dollar Travel Card has been launched.

• Debit Card failed transaction complaint registration through Contact Centre hasbeen started.

• Contact Centre for NRIs has also been launched.

• Standardized Public Grievance Redressal system has been launched from ContactCentre (for registration of customer complaints).

• Recovery of Retail Loans (EMIs) through ECS has been started on pilot basis intwo Zones of your Bank, notably, the Greater Mumbai and Northern Zones in April 2013.

• Your Bank is ready for a pilot launch of National Automated Clearing House (ECScredits).

• The Complaints registration through Contact Centre (SPGRS Portal) has also beeninitiated in your Bank.

Proposed initiatives/Strategies for FY14

• To launch 50 e-lobbies (with ATM, Bulk Note Acceptor, Self Service PassbookPrinter Kiosk, Internet Banking Kiosk, Cheque Deposit Machine & Phone Bankingfacility).

• Installation of Self Service Passbook Printer Kiosks in all Baroda NextBranches.

• To install 50-100 Bulk Note Acceptors.

ATM/Debit Card

• Card to Card transfer

• ATM Bill Pay

• Non-Personalized Debit Card

• Biometric ATMs/Debit Card

• NEFT through ATM

• Talking ATM

• Request for Cheque book through ATM

Baroda Connect (internet Banking)

• Online premature payment of Fixed Deposit Receipt

• Online facility of Saving Bank and Recurring Deposit

• Providing convenient login without one-time-password with the help of QNA (forregistered customers).

• Revamping pages of "Baroda Connect" Corporate portal.

• IMPS payments through Net Banking.

Baroda M-Connect (Mobile Banking)

• Enabling Merchant Payments

• Implementation of Fraud Management Solution

Baroda Pre-paid Cards

• Online issuance of Baroda Gift Card

• Issuance of reloadable cards.

Contact Centre

• Outbound calls for Recovery and Sales.

• Web Chat

• SMS/Voice/Emails blasts

• Expanded IVR (i.e. Mini Statement, request for account statement)

Human Resources

Human resource Development is a critical element of your Bank’s overall strategyfor ensuring profitable and qualitative growth. Today, your Bank is endowed with acompetent and highly motivated employee base of around 43,108 people who areengaged in handling its mammoth business operations.

Your Bank has adopted a very balanced people strategy to create a composite andresponsible Human Resource culture in the Bank that can drive growth and also adequatelyface various challenges of the current times, viz. the large retirements, massiveinduction of talent, huge training requirements and challenges of succession andproductivity. A comprehensive HR strategy and Framework has been drawn up to take care ofall these challenges in an integrated manner through a focused HR transformation projectcalled Project SPARSh which is unique and path-breaking in the entire industry.

This journey of HR Transformation was started in August’2011 and over the last oneyear, various landmark HR initiatives have been launched in your Bank which are futuristicand designed to make Bank of Baroda one of the best places to work for its employees. Forthis, your Bank wants to create cutting edge HR policies and processes through which itcan become a role model for all other banks and in the process, leverage the fullpotential of its human capital to substantially improve the employee productivity.

Formulation of Talent Management system: Developing the next line of leaders in theBank

Your Bank took a big step for developing the next line of leaders for the future byputting in place a Talent Management system which proactively identifies future potentialleaders to effectively mitigate the risks arising out of the anticipated leadership gapsin the next five years and also grooms these future leaders through a systematicdevelopment agenda. Through a systematic and structured process, the Bank was able toclearly identify around 15.0% to 20.0% people in specific scales of officers viz. inScales III, IV, V and VI as the future leaders. A grooming plan has been laid down foreach of them. The process is envisaged as an annual exercise so that the pool ofidentified people and the various talent management activities envisioned are continuouslyreviewed and refined. A first of its kind "Baroda Annual Leadership Conclave"was conceptualized to provide the members of the Talent pool to broaden their perspectiveson banking and industry trends and help them connect and network with their peers andsenior leadership in the Bank, and the first such conclave was held in Mumbai on 11-12August, 2012.

Strategic workforce planning and Recruitment strategy

A scientific manpower planning model was developed by your Bank to estimate manpowerneeds by level, skills and by branch. With its help, your Bank has also undertaken thestrategic workforce planning for the next few years to feed into various other HRfunctions like recruitment planning, career progression vacancies and postings &deployment.

Your Bank has put in place a clearly defined Recruitment strategy which looks atbroad-basing recruitment from different channels, hiring of larger numbers in view of theemerging requirements as thrown up by the strategic workforce planning and alsoarticulating a clearly-defined Employer Value proposition with the acronym "F I RS T" as shown below:

A specially designed ‘Career portal’ has been launched on theBank’s website which defines this Value proposition further with clearly laid outsections related to why your Bank should be the preferred choice for any prospectiveapplicant, what is the career path, the recruitment channels available, different facetsof working at Bank of Baroda and testimonials from Bank’s existing employees. Allthese strategies are designed to improve Bank’s Employer Branding significantly.

In order to tackle the challenge of making the large number of fresh recruitsproductive in the quickest possible time, your Bank initiated a very structured "on-boardingprogramme" consisting of both functional and cultural components which enabledthem to be work-ready quickly and also helped in their cultural assimilation within theBank.

"Baroda Manipal School of Banking"

The Baroda Manipal School of Banking is a special initiative taken jointly by Bank ofBaroda and Manipal Global education to train students for a Banking career in Bank ofBaroda on a "first-day, first-hour" productivity model. The students undergo afocused one-year programme which is tailored to the Bank’s requirements and whichleads to the award of a post-graduate diploma in Banking and Finance, before they areabsorbed in your Bank as Probationary officers.

This innovative Resourcing channel was initiated during the year FY12 but aftercompleting the one year course, the students have started joining the Bank from FY13onwards. Around three batches of students numbering 526 have already joined the Bank whileanother four batches of students numbering around 864 are undertaking the said one-yearcourse at present.

Capability Building Initiatives

With the objective of bringing the desired focus and developmental orientation, yourBank rebranded its training system as "Baroda Academy" and launchedvarious training initiatives under this Baroda Academy umbrella in order to create alearning organization, help in better grooming and development of its people and therebysignificantly improve organization’s performance.

On the processes side, several landmark initiatives were introduced like publication ofa comprehensive annual training calendar, introduction of self-nominations as anadditional channel of training nominations, introduction of the system of trainingcredits, introduction of tests at the end of every training program, creation of a pool ofexpert practitioners as Associate Faculty, enhancement and standardization of coursecontent, drive for building a directory of Case Studies for use in training programmes,preparation of a Training policy, Training Manuals, etc. All these initiatives havebrought about a renewed focus to the Training and development function and helped inmaking training a very potent tool for human capital development in the Bank. Various ITtools have been put in place to streamline the training processes and enable large-scaleimplementation of all the training initiatives.

On specific capability building initiatives, your Bank has, in line with the renewedfocus given to training, carried out substantial training and developmental activitiesduring FY13, which included comprehensive grooming programmes in the area of Credit,Forex, Dealings, Branch Management, Planning, Risk Management, etc. besides soft skillsprogrammes and ensuring all-round development and grooming of young officers and newrecruits. Your Bank conducted 2,198 training programmes in-house (through its network of12 Training Centres across the country, one IT training center and an Apex TrainingCollege at Ahmedabad) and thereby trained 43,465 people during the year. Besides,your Bank also sent around 2015 employees for undergoing training in variousreputed external training institutes of the country and even abroad. As part of theoverall grooming plan for the Talent pool members, customized programmes were conductedthrough specialized external training institutions covering specific developmental areas.

Select Deputy General Managers and Assistant General Managers of your Bank were sent toundergo a Top Management programme at one of India’s best B-Schools viz. ISB,Hyderabad whereas in another initiative, your Bank trained an additional 150 speciallyidentified people across the Bank to undergo a focused Mentoring programme so that theycould act as ‘mentors’ to newly recruited officers, taking the total number oftrained mentors in the Bank to around 500.

Leadership Development (Project UDAAn)

Taking into account the critical need for building leadership competencies in people,your Bank had launched a comprehensive leadership development program named as ‘ProjectUDAAn’ in FY12, covering Branch Heads of all Urban/Metro Branches and allAssistant General Managers and Deputy General Managers with the objective of creatingleaders for the future.

The programme was structured around three modules of leadership viz. ‘LeadingSelf’, ‘Leading Others’ and ‘Leading Business’ and each of thethree modules are being addressed through a combination of off-site forum events andcoaching clinics. The programme covered around 960 participants across seven zones of yourBank during the year FY12 and the same was continued in FY13 to cover an additional 760more participants in another five batches. Such a massive and comprehensive leadershipdevelopment effort is first of its kind for an Indian state-owned Bank.

Implementation of hR Technology

Your Bank has created a very comprehensive HR technology platform covering HRM,Training, Payroll & Leave modules christened as the Human Resources Network forEmployee Services (HRNes). This technology platform has enabled automation of various HRfunctionalities and various modules/ various new processes were automated/ implementedduring the year.

Recruitment Drive

Your Bank has been undertaking focused hiring efforts on a sustained basis year onyear, to cater to superannuation, sustained business growth and rapid Branch expansion.Various recruitment exercises were undertaken during the year to address the emergingmanpower requirements in your Bank. Recruitment of Specialist officers, probationaryofficers, recruitment of young MBAs directly from the campuses of renowned BusinessSchools were initiated to meet the needs of your Bank, both in terms of replacements fornormal attrition and factoring in the business growth needs. Your Bank recruited 1,246Officers in various Grades/Scales (both Generalists & Specialists), 1,731Clerks and 700 Subordinate staff members during FY13. The recruitment processis continued in the year 2013-14 also with various recruitment projects underway forfilling up almost 2,800 posts of officers and 3,500 posts of clerks.

Framework for Career Progression

Special efforts were made during the year under review to fulfill the growingaspirations of the employees for faster career progression, thereby, motivating employeesfor higher productivity. Your Bank has been regularly promoting people in all grades /scales, year after year, without a break, in order to keep on continuously rewarding itstop performers and make them assume higher responsibilities faster. In keeping with thistrend, a large number of promotion exercises were undertaken during FY13 also resulting inthe elevation of around 3,793 people within the Bank in all cadres/grades/scales,as depicted in the table below.

Special Thrust on Development of SC/ST/Other Backward Communities

Your Bank is committed to the constitutional safeguards and social objectives fordevelopment and welfare of persons belonging to SCs, STs and other backward classes in thesociety. Your Bank is one of those banks in the entire banking industry that have thehighest number of employees belonging to SCs and STs, which itself shows the commitment ofthe Bank towards their development and upliftment. Some of the highlights of yourBank’s efforts for development and welfare of people belonging to SCs and STs areenumerated as under.

Reservation in Employment

Your Bank observes all guidelines stipulated by the Government of India for reservationof posts in employment in All India recruitment and local recruitment. Around 15.0% postsare reserved for SCs and 7.5% posts are reserved for STs in all India recruitments as alsofor selection to Baroda Manipal School of Banking (i.e., another channel of resourcingstarted by the Bank). For other recruitments made on regional basis, appropriatepercentage prescribed for various States is being observed. Special efforts are made likeoffering pre-recruitment orientation training to SC/ST applicants for recruitment in yourBank. Relaxation in age limit and qualifications are given and interviews of SC/STcandidates are taken on relaxed standards in order to ensure that appointment ofcandidates to the reserved posts happens. In the Interview Panel for recruitment, a memberbelonging to SC/ST is invariably associated. Candidates belonging to SC/ST, who are calledfor interview, are reimbursed traveling expenses. In addition to providing reservation inemployment, your Bank is also providing reservation and other enabling mechanisms incareer growth and promotions to SC and ST employees as per the existing guidelines.Pre-promotion training before participating in promotion exercises is also provided tothese candidates. Around 10.0% of the available residential accommodation of your Bank isreserved for the SC/ST candidates.

The staff strength and representation of SCs and STs as of 31st March 2013 is as under.

SC/ST Cell

An exclusive SC/ST Cell in your Bank has been set up to monitor the reservation andother enabling provisions for SC/ ST employees. An executive in the rank of GeneralManager is appointed as Chief Liaison Officer for SC/ST employees to ensure compliance ofvarious guidelines pertaining to the SC/ ST employees. A Liaison Officer for SC/ST hasbeen appointed in each Zone of the Bank who takes care of all matters and grievanceredressal of SC/ST employees of that Zone.

Meeting with SC/ST Welfare Association

With a view to have direct dialogue and review of reservation and other specialprovisions for SC and ST, your Bank holds quarterly meetings with the representatives ofSC/ST Welfare Association of the Bank. Your Bank’s Chairman and Managing Director andSenior Executives including the Chief Liaison Officer for SC/ST participate in suchmeetings.

Bharat Ratna Dr. Babasaheb Ambedkar Memorial Trust

Your Bank has established the "Bharat Ratna Dr. Babasaheb Ambedkar MemorialTrust" in 1991 for promoting welfare activities for the benefit of SC/ST employeesand their family members. Apart from scholarships to children of employees belonging toSC/ST, the Trust also provides scholarship to needy students belonging to SC/ST community,in general, in major centres of the country.

Visit of national Commission for Scheduled Castes

The National Commission for Scheduled Castes visited your Bank at various places duringthe year as shown in the following table to review the implementation of the reservationpolicy of the Government of India for SCs in your Bank, had discussions and interactionsand examined the level of implementation of the policies and programmes.

The National Commission for SCs for verification of Rosters and other working servicesafeguards visited the Bank at Baroda on 05.12.2012 and also at Jaipur on 31.01.2013. Thesuggestions and guidance of the Commission are being scrupulously observed by your Bank.

Various other commissions and parliamentary committees formed for promoting the welfareof different backward classes and safeguarding the interest/working conditions ofdifferent sections of society also visited your Bank as per the details given below andwere apprised of the steps taken by the Bank in implementing all the relevant governmentguidelines and the different welfare measures adopted by the Bank to ensure their overalldevelopment and meeting of social objectives.

• The National Commission for Safai Karamcharis at Goa on 11.02.2013

• Study visit of the Committee on Government Assurances, Rajyasabha (for Personswith disabilities) at Mumbai on 22.01.2013

• Meeting with Parliamentary Committee on Welfare of OBCs at Mumbai on 07.02.2013.

Business Process Re-engineering (Project NAVNIRMAAN)

After almost four years of the BPR-led transformation, your Bank now stands tall in theIndian Banking space. First ever Annual Conference of Indian Public Sector Banks onBusiness Process Reengineering (BPR) was hosted by Bank of Baroda in Mumbai on 14 July,2012, along with Union Bank of India under the aegis of the Ministry of Finance,Government of India.

Key areas of the "NAVNIRMAAN" Transformation

• Your Bank has created the "Baroda-Next" line of branches with amodular design, clear front/back office separation, comfortable customer waiting area,suitable frontline automation and dedicated sales & service teams at all metro andurban centres.

• It has carried out the upgradation of Back Offices through:

- Process Redesign

- Workflow-based Systems replacing Manual process and use of machines.

- Enlargement (to make room for new work-step migration)

• Your Bank has aggressively rolled out the Baroda-Next Branches and Back Officesacross the country.

• Your Bank has created a Sustainability enabler e.g. Documentation, Technologyenablement, Performance Management and Training and Re-training.

• Your Bank has rolled out the Sales processes at branch and enterprise-wide SalesAccountability Model (Baroda-Next Sales Operating Model).

• Your Bank undertakes periodic customer and Employee Satisfaction Surveys forimpact evaluation. The BPR performance of your Bank has created a positive impact both interms of business growth and customer/ employee satisfaction through the following.

• Baroda-next Branch- Around 1,382 metro/urban branches have been rolledout as Baroda Next branches in your Bank so far.

• Branch Front-end Automation- The Queue Management System (QMS) &Cheque Deposit Machine (CDS) machines are installed in 93 and 40 branches, respectively.

• City Back Office (CBO) - Clearing operations have been centralized forall branches (linked to CBO). Three CBOs at Mumbai, Ahmadabad and Surat have beenautomated.

• Regional Back Office (RBO) - Altogether 2,925 and 3,900 branches arelinked for CASA opening and PCB (Personalized Cheque Book) issuance, respectively.

• Credit centralization Pilot (RLF/ SMELF) – The Retail and SME creditcentralization pilot is under progress at the Loan Factories in Baroda.

• Rollout Sales Operating Model at each Baroda next branch- The SalesOperating Model at 32 Regions covering 739 Baroda-Next branches has been rolled out.

• Mid-corporate vertical- Separate Mid-corporate vertical has been createdand 15 Mid-corporate branches have been opened at important locations.

• Academy of Excellence- Continuous sensitization, training and capabilitybuilding at all levels remain an integral part of the Baroda Next rollout programme. Itinvolves a Zonal /Regional Kick-off, Branch Meeting; Boot camp, Branch-based Training,External Sales Trainings and Conclaves.

• Sustainability of navnirmaan initiatives/impact- A certificationprocedure for Baroda Next branches has been introduced in terms of which processcompliance/ adherence are being evaluated by your Bank’s Internal inspectors andCSAT/ESAT are being evaluated externally by the Market Research Agencies.

Marketing

During FY13, your Bank continued to promote its brand and various products and servicesthrough advertising, customer engagement programs and in-branch display. In the process,your Bank endeavoured to use different media vehicles such as Print, Electronic and OOHapart from supporting the on-ground activities undertaken by branches in theZones/Regions. The highlights of various marketing/communication activities undertakenduring FY13 are given below.

Your Bank initiated a unique Brand Engagement Program titled ‘Bank of BarodaCanvass Competition’ on 14th November 2012 - Children’s Day, to create aplatform for building a long-term relationship with a younger audience as well as theirinfluencers i.e. parents/teachers. The Competition was designed to invite entries fromschool children across the country on a pre-determined topic and winning entries wereselected on National/Zonal/Regional levels by a select panel of judges. Your Bank’smascot i.e. ‘Stickman’ was also leveraged extensively during the Competition tohelp establish a brand-association with the Target audience. A judicious mix of Print& Radio Media was used in the Campaign to maximise the number of entries in theCompetition. Around cities, where our Regional Offices are present, were primarilytargeted. A total of 1.98 Lakh students representing over 3,000 schools from across thecountry participated in the Competition, during a short span of 45 days, giving your Bankan opportunity to engage with them in the near future.

Your Bank undertook various Product Promotion Campaigns to promote its products andservices amongst target audience through advertising across different geographies. Thefocus was on providing information on various products and services, particularly SavingsDeposits, Current Deposits, NRI Deposits, Home Loan, Car Loan, SME Loans and AlternateDelivery Channels through judicious use of various media vehicles. Information relating toexpansion of branch network, both domestic and overseas, was also given due publicitylargely through print medium which helped in enhancing your Bank’s brand image &visibility.

Your Bank also took the initiative of educating its customers through publication ofspecial literature on Alternate Delivery Channels and products & services relating toSME segment. It also participated in various events such as Pravasi Bhartiya Diwas 2013,FICCI – IBA Banking Conference, Dun & Bradstreet – Exporter’sExcellence Awards, MINT Annual Banking Conclave, CII’s Manufacturing Summit andStandard Chartered Mumbai Marathon 2013, among many others to interact with customers andalso for creating brand association with them.

During FY13, as part of its Public Relations task, your Bank had wide Media Coverage ofits activities across the country which helped in maintaining the Bank’s Brand image.

Your Bank also won several awards from reputed Media Houses and other Organizationsduring the Year on various business parameters, a list of which is appended below.

Awards and industry Recognition for Bank of Baroda

Your Bank received several awards during FY13, for its consistent outstanding andall-round performance (both business and financial), superior management, dedication toexcellence and contribution to rural economy and financial inclusion.

Given below are a few select awards won by Bank during the year FY13

• Bloomberg UTV Financial Leadership Award –Best PSU Bank – 07.04.012,Mumbai

• Best CIO Award of BFSI sector from Institute of Public Enterprises, 2012 –June, Hyderabad

• Reserve Bank Rajbhasha Shield – 29.06.2012, Mumbai

a) First Prize in Region A

b) Second Prize in Region B

c) Consolation Prize in bilingual house journal – Bob Maitri

• The Sunday Standard FINWIZ 2012 Awards – 20.08.2012, New Delhi

• Best Indian Bank – Large (Runner Up)

• Best Public Sector Banker – Large (Runner Up)

• Dun & Bradstreet – Polaris Financial Technology Banking Awards –24.08.2012, Mumbai

a) Best Public Sector Bank under the category Global Business Development

b) Overall Best Public Sector Bank

• Banking Technology Award-2011 by IBA – 27.08.2012, Mumbai

a) Use of Technology in Training & e-learning – Winner

b) Best Customer Relationship initiatives – 1st Runner up

c) Best use of Business Intelligence – 1st Runner up

d) Best use of mobility tech in Banking – 2nd Runner up

e) Best Risk management & Security initiatives – 2nd Runner up

• Silver Trophy for effective implementation of Automated storage Management &Oracle RAC from SKOCH Digital Inclusion Award- 2012, 04.09.2012, New Delhi

• Business India Best Bank Award 2012 – 14.09.2012, Mumbai

• Indira Gandhi Rajbhasha Shield Competition, New Delhi

a) First Prize – 14.09.2012

b) Second Prize for Akshayyam in Hindi House – Journal Competition

• (Association of Business Communicators of India) ABCI Awards 2012, 19.10.2012

a) Special Column (English) - Bobmaitri, Silver Trophy

b) Special Column (Language) – Akshayyam, Silver Trophy

c) Corporate Web-site – Bank of Baroda website, Silver Trophy

• Forbes India Leadership Award – Best CEO Public Sector, 28.09.2012, Mumbaito Shri M D Mallya

CNBC TV18 – ‘India Best Banks and Financial Institutions Award 2012’– Best Public Sector Bank, 17.10.2012, Mumbai presented to Shri M D Mallya

• Best Large Bank 2012 – Business World November 26th 2012 Issue

• Best Large Bank 2012 – Business Today – KPMG – December 2012

• Best Public Sector Bank Award by State Forum of Bankers Club, Kerala, December2012, at Ernakulam

• Business Standard Banker of the Year (2011-12) was conferred on Shri. M DMallya, Former CMD of Bank of Baroda in January 2013. Conferred on 23.03.2013.

• My FM Stars of the Industry Award for Excellence in Banking (PSU) – Silverawarded by Radio FM on 14.02.2013 in Mumbai

• My FM Stars of the Industry Award for Excellence in Home Loan Banking –Bronze awarded by Radio FM on 14.02.2013 in Mumbai

• FE Best Banks Award 2011-12 for ‘Best PSU Bank’ awarded by FinancialExpress Group on 20.02.2013 in Mumbai

• "Strategic Communication and Leadership Award" by Asian Confederationof Business and World CSR Congress at Corporate Affairs Award Ceremony, Mumbai on18/02/2013

• The Most Efficient Public Sector Bank by Dalal Street Investment Journal on23/03/2013.

• National Award for 2011-12, conferred for excellence in the field of Khadi &village Industries by Khadi & Village Industries Commission on 3rd April,2013

Premises Re-Engineering and Ambience Enhancement

Given below are the major achievements of your Bank in the area of "Premisesre-engineering and ambience enhancement" during the year FY13.

• Your Banks’ administrative office cum residential complex at Jamshedpur wascompleted. It was equipped with ultra modern gadgets and systems with energy efficientequipments, rain water harvesting system and eco- friendly materials. Your Bank’spresence by this building in the Steel City is admired by one and all. Now, it has becomelandmark building of Jamshedpur city.

• As per the directives from Ministry of Finance, your Bank linked its CorporateOffice and all Zonal and Regional Offices through State-of-the Art Video Conferencingsystems with MPLS Connectivity. Interaction of functional heads through VC has expeditedthe decision making process in a more efficient and cost effective manner.

• Your Bank is also marching towards technology based initiatives in the form ofe-tendering, e-procurement, etc., and implemented these initiatives in a phased mannerduring FY13.

• All payments to vendors are being made through RTGS/ NEFT or credit tobeneficiary account.

• In tune with your Bank’s policy to have its administrative offices in ownedpremises, your Bank purchased land at Bangalore (Karnataka), Hyderabad (AP), Faizabad (UP)Indore (MP), Udaipur, Haldwani (Uttrakhand), Dehradun (Uttrakhand), Jaipur (Rajasthan) andNew Raipur (Chhatisgarh) for construction of commercial buildings.

• Looking to the ever increasing rentals, a need is being felt to use every nookand corner of the available premises. Layouts were revisited while renovation andfurnishing of branches/offices was done by introducing eco-friendly and ergonomicallydesigned sleek furniture items. The area norms for acquisition of the premises were alsoreviewed and implemented.

• To have uniformity in systems and procedures pan-India, Premises PolicyGuidelines, Constructions Manual, Refurbishment Manual were formulated and agencies formodular and chairs were also identified for quick procurement of the furniture items andto have similar and identical design to get aesthetically pleasant look.

Projects implemented during FY13

• Your Bank constructed a commercial complex at Mylapore, Chennai having ZonalOffice, Branch & Currency Chest.

• A residential complex at Cenotaph Road, Chennai was constructed wherein therewere three 3-BHK flats, twelve 2-BHK and one General Guest house, and state of the art VIPguest house.

• Your Bank constructed a residential complex at East of Kailash, New Delhiwherein there are 14 executive flats (four 3BHK flats, ten 2BHK flats) and one topexecutives/ guest house.

• The construction of commercial cum residential complex at (Tata Nagar)Jamshedpur was wherein there are 23 2-BHK flats.

Projects under implementation

• The construction of residential complex at Janakpuri, New Delhi of your Bank isin the advanced stage of completion.

• The construction of office building cum currency chest at Varanasi is alsonearing the completion.

• The construction of Multi storey integrated office building at Jaipur is in theadvanced stage of completion.

• The construction of BSVS at Ajmer, Banswada, Dungarpur, Pratapgarh are alsounder implementation.

• The construction of administrative and residential buildings at New Raipur isunder implementation.

• The construction of residential cum commercial complex at Indore (MP) is underimplementation.

Future Plans for Estate Management

• To facelift the Bank’s Building at Parliament Street, New Delhi

• To redevelop the Ram Nagar Premises at Coimbatore, to have optimum utilisationof available space for Branch/ officers’ flats.

• To construct an own building for Disaster Recovery Site at Hyderabad.

• To renovate the Bank of Baroda Institute of Information Technology atGandhinagar (Gujarat)

• To undertake the redevelopment of Bhandup Staff Quarters building, Mumbai,thereby to construct about 138 residential flats for transferee Officers/ Executives.

• To undertake the redevelopment of Jogeshwari Staff Quarters, Mumbai, toconstruct a building for residential and commercial use.

• To construct a training centre at Bangalore.

• To construct an Administrative Regional Office Building at Faizabad.

• To construct the BSVS at various centres across India as per the directives fromthe Government of India.

Domestic Subsidiaries and Associates

The performance of "Subsidiaries, Joint Venture & Associates" of Bank ofBaroda was satisfactory during FY13.

The BOBCARDS Limited turned around during FY11 and made profit during FY12 andFY13. The Company has focused on all qualitative aspects of business development, whichhas resulted in better profitability, quality card base and ME base. The Company hasintroduced a range of Platinum Cards with premium features like added privileges &offers. The Company has drawn up aggressive plans for enlargement of Card & MerchantBase.

The BOB Capital Markets Ltd. has been activated by recruiting a professional team.The focus is on investment advisory services, Debt & Equity Syndication and Capitalmarket activities. The Company commenced institutional broking business and has alsolaunched an Online Institutional Trading Platform from October 2009. The Companycommercially launched an On-Line Retail Trading platform on July 20, 2012.

The nainital Bank Ltd. was promoted by Late Bharat Ratna Pandit Govind Vallabh Pantand others and became Associate Bank of Bank of Baroda in the year 1973. Today, theshareholding of Bank of Baroda in Nainital Bank Ltd. is 98.57% and is a subsidiary of theBank. The State of Uttarakhand, vide its communiqu dated August 3, 2012, has notifiedthat The Nainital Bank Limited be treated at par with other PSU Banks. The Bank hasinitiated branch expansion initiatives and has already established a Regional Office atDehradun and has aggressive plans to ramp up its scale of operations. The Bank haslaunched e-stamping facility in 15 branches and has initiated several new IT initiativessuch as Mobile banking & e-banking, etc.

Baroda Pioneer Asset Management Company Ltd. is a joint venture with Pioneer GlobalAsset Management SpA and is in its fifth year of operation. During the year under review,the Company was able to strengthen its AUM significantly which rose by 75.0% on year onyear basis as of Mar’13 and was able to add one lakh folios despite weak sentimentsprevailing in Debt & Equity markets. The key to this growth was strong focus on theinstitutional segment which helped the Company grow its debts & money market productscoupled with focus on Systematic Investment Plans for retail investors. Several new NFOswere launched during the year and two new channels were added to take care of the thirdparty products. The Company has increased the number of investor servicing points from 77to 203 during the year under review.

indiafirst Life insurance Company Ltd. is a joint venture company with Andhra Bankand Legal & General Group, U.K. It commenced its business operations on 16th November2009 and has received an overwhelming response for its products across the country. TheCompany has outperformed the industry by having maximum year on year growth of 34.0%. TheCompany was the 22nd entrant in the Life Insurance space & has become the 8th largestplayer among private players within a span of less than four years. The IndiaFirst haslaunched MagicBoard, a one- of- its kind portable sales process tool. The Company has wonModel Insurer Award (Asia) for the 3rd successive year.

India infradebt Ltd. is a joint venture company with ICICI Bank Ltd., ICICI HomeFinance Company Ltd., Citicorp Finance (India) Ltd. and Life Insurance Corporation ofIndia. The Company was incorporated on Oct 31, 2012 in Mumbai and has been issuedregistration certificate No. N-13.022039 dated 08.02.2013 by the RBI to operate as aninfrastructure

Debt Fund – Non Banking Financial Company (IDF-NBFC). The Company’s principalactivity is to refinance part of the debt liabilities of the project companies.

(Rs. lakh)

Implementation of Official Language (OL) Policy

During the period under review, your Bank made significant progress with regard toimplementation of Official Language policy and ensured compliance of various statutoryrequirements of Official Language Act/Official Language Rules. Your Bank could achieve allmajor targets set by the Government o India under its Annual Implementation Programme andfulfilled the assurances given to the Committee of Parliament on Official Language.

In recognition of your Bank’s outstanding performance, the Bank was awarded 1stprize in Indira Gandhi Rajbhasha Shield by Shri Pranab Mukherjee, Hon’ble Presidentof India. Your Banks’ in-House Hindi Magazine-Akshayam was also awarded Second prizeat the hands of Shri Pranab Mukherjee, Hon’ble President of India for the year FY12.

During the year FY13, your Bank’s In-House Magazine ‘BOBMAITRI’ andHindi magazine ‘AKSHYAAM’ got 3rd prize in the RBI Rajbhasha shield Competition.The Town Official Language Implementation Committees functioning at Jaipur and Barodaunder your Bank’s convenorship were awarded 1st prize for their outstandingperformance by the Department of Official Language, Government of India. Your Bank’sZonal Office at Pune, Regional office at Jodhpur and Zonal office at Ahmedabad too got1st, 2nd and 3rd prizes, respectively. Your Bank’s in-House Hindi Magazine‘Akshayyam’ was awarded with ‘Gold Prize under Indian Language Publicationcategory by the ‘ABCI’ and ‘Apni Baat’ with silver prize under specialcolumn (Language) category.

In addition to the above two magazines, a publication of your Bank’s Hindi webMagazine Baroda Hindi.com has been popularsing the use of Hindi language throughtechnology. The Hindi magazines are regularly published by different Town OfficialLanguage Implementation Committees functioning under your Banks’ convenorship.

The Town Official Language Implementation Committees functioning under the convenorshipof your Bank discharged their responsibilities excellently. During the year, three newlyconstituted Town Official Language Implementation Committees started functioning atJalandhar, Varanasi and Haldwani under your Bank’s Convenorship and now your Bank isthe Convenor of nine Town Official Language Implementation Committees.

The Third Sub-Committee of Parliament on Official Language visited your Bank’sbranches at Jaisalmer, Vikas Nagar and Rudraprayag and appreciated the efforts put in bythe Bank in the area of Official Language Implementation.

Your Bank was able to come out with a Programme to generate and print pass books andaccount statements in Hindi at the branches situated in linguistic regions A and B,through Finacle System on the CBS platform.

During the year under review, your Bank started printing the ATM slips in Hindi for theconvenience of customers and introduced a display of ATM screen in Gujarati and Marathilanguages in addition to Hindi and English. During the year, ‘Pragati onlinepackage’ was also developed for consolidation of quarterly progress report regardingthe use of Hindi and online submission of Hindi reports.

During FY13, Hindi version of your Bank’s Book of Instructions was uploaded on theBank’s Intranet. During the year FY13, your Bank published two books in Hindi namely"Financial Inclusion & Indian Languages" and "Samvaad" forprorogating the use of Hindi in the Indian banking industry.

Shri S. S. Mundra appointed as the Chairman and Managing Director of the Bankw.e.f. 21.01.2013 by the Central Government u/s 9 (3) (a) of The Banking Companies(Acquisition and Transfer of Undertakings) Act, 1970 to hold the office till 31.07.2014i.e. the date of his superannuation or until further orders, whichever is earlier.

Shri P. Srinivas appointed as a Whole Time Director (designated as ExecutiveDirector) w.e.f. 18.06.2012 by the Central Government u/s 9 (3) (a) of The BankingCompanies (Acquisition and Transfer of Undertakings) Act, 1970, to hold office up to30.06.2016 i.e. the date of his superannuation or until further orders, whichever isearlier.

Shri Sudhir Kumar Jain appointed as a Whole Time Director (designated as ExecutiveDirector) w.e.f. 18.06.2012 by the Central Government u/s 9 (3) (a) of The BankingCompanies (Acquisition and Transfer of Undertakings) Act, 1970 for a period of five years,or until further orders, whichever is earlier.

Shri Ranjan Dhawan appointed as a Whole Time Director (designated as ExecutiveDirector) w.e.f. 01.11.2012 by The Central Government u/s 9 (3) (a) of The BankingCompanies (Acquisition and Transfer of Undertakings) Act, 1970, to hold office up to30.09.2015 i.e. the date of his superannuation or until further orders, whichever isearlier.

Shri n. S. Srinath, a Whole Time Director (designated as Executive Director) ceasedto be a Director with effect from 01.06.2012 on completion of his term.

Dr. (Smt.) Masarrat Shahid, a part time non- official Director ceased to be aDirector with effect from 29.10.2012 on completion of her term.

Shri Rajiv Kumar Bakshi , a Whole Time Director (designated as Executive Director),ceased to be a Director with effect from 01.11.2012 on completion of his term.

Shri M. D. Mallya, Chairman and Managing Director, ceased to be a Director witheffect from 01.12.2012 on completion of his term.

Directors’ Responsibility Statement

The Directors confirm that in the preparation of the annual accounts for the year endedMarch 31, 2013:

• The applicable accounting standards have been followed along with properexplanation relating to material departures, if any;

• The accounting policies framed in accordance with the guidelines of the ReserveBank of India, were consistently applied.

• Reasonable and prudent judgment and estimates were made so as to give true andfair view of the state of affairs of your Bank at the end of financial year and of theprofit of your Bank for the year ended on March 31, 2013;

• Proper and sufficient care was taken for the maintenance of adequate accountingrecords in accordance with the provisions of the applicable laws governing banks in India;and

The accounts have been prepared on a going concern basis.

Acknowledgement

The Directors express their sincere thanks to the Government of India, Reserve Bank ofIndia, Securities and Exchange Board of India, other regulatory authorities, variousfinancial institutions, banks and correspondents in India and abroad for their valuableguidance and support.

The Directors acknowledge with appreciation the assistance and cooperation extended byall stakeholders of your Bank like customers, shareholders and well wishers in India andabroad.

The Directors place on record deep appreciation for the hard work and dedication of themembers of your Bank’s staff at different levels, which enabled your Bank to recordhigh quality, consistent growth year after year despite economic challenges andconsolidate its position as one of the premier banks in the country.

For and on behalf of the Board of Directors,

S. S. Mundra

Chairman and Managing Director