In my letter last year, I described our mission to transform Bank of Baroda into a contemporary Bank that uniquely combines the trust of public sector banks with the innovation, agility and performance of the leading private sector banks. Unlike air travel or power generation, banking cannot be left purely to market forces and private sector players. India needs well-run, profitable public sector banks because these institutions serve as the vehicles for inclusive economic development.
The biggest challenge for most public sector banks, including ours, is maintaining a high degree of competitiveness and differentiation given the evolving banking scenario. This is a more fundamental challenge than the issue of stressed assets that has dominated the discourse. The challenge is to reverse the erosion of market share and our best customers to private sector competitors. Banks need to fundamentally make a significant shift in behaviors and practices that have created the current situation of stressed assets plaguing the sector. Banks need to respond to the challenge posed by “Fintech” firms that are attempting to disrupt legacy banks, leaving them with costly infrastructure and the least profitable customers.
To accomplish its mission, our Bank has embraced a massive transformation called “Project Navoday” which entails a fundamental change in strategy, products and virtually every process of the Bank. More details about Project Navoday have been included in the MD & CEO’s Statement as well as in the Directors’ Report. The key to the success of this transformation lies in a significant upgradation of talent, capabilities and culture. Like every business, banks have become knowledge and technology intensive enterprises. Banking now requires incredible depth in areas such as risk management, project appraisal, treasury, credit assessment, fraud detection, real-time monitoring of millions of streams of data and deep analytics. In other words, banking is now an information business in which technology becomes the central nervous system.
It is therefore of little wonder that globally, banks are among the biggest users of IT with the best banks competing closely with Google and Facebook to hire PhDs in computer science, mathematics and physics.
Our Bank is in the midst of a complete overhaul of its technology and digital capabilities. A major upgrade to our Core Banking System and our internet and mobile banking capability, new systems for loan management, enterprise risk management, fraud detection, substantial investments in big data and analytics capability, alliances and partnerships with many innovative Fintech startups and cutting-edge pilots in the use of machine learning, Block-chain and robotic process automation are just some of the initiatives underway to catapult our Bank to a leader in the use of IT.
An even more sweeping transformation is underway in the way our Bank thinks about talent and people capability. There is a strong board-led focus on employee engagement, on role definition, performance and talent management, continuous learning, leadership development and succession planning.
Finally, we sustained our focus on improving Board governance. We were fortunate to have two talented new Directors join the Board. This year, we conducted an external Board evaluation for the first time and implemented many improvements to our Board processes. A very high level of participation and active engagement by every director is a distinguishing characteristic of our Board.
The seeds of transformation that we planted last year are beginning to germinate. We can see evidence of changing mindsets, enthusiasm and performance in most parts of the Bank. I am optimistic that the best years for Bank of Baroda lie ahead of us.
India''''s public sector banks are in the midst of a perfect storm- at the
center of not one but three storm fronts. The first one is the legacy
of bad loans and stressed assets. The magnitude of this has completely
consumed the attention of the management of most banks. The second
challenge is the eroding competitiveness of our public sector banks
relative to private sector competitors. India''''s private sector banks
account for about 25% of lending but over 50% of all profits and a
disproportionately smaller percentage of bad loans and frauds. In
recent months, the share of private sector lending has temporarily
risen to nearly half. What this means is that public sector banks are
systematically losing share and that two of our most profitable and
least risky customers. With the entry of many new players who have
gained banking licenses, the competitive challenge is set to increase
dramatically. The final challenge is that of technology. Globally,
venture capital backed startups are using technology to provide the
services that were historically the remit of banks and are often
providing these services better, faster and cheaper than large legacy
banks. Payments, retail lending, advisory services, are all being
disrupted by "fin tech". The risk for banks is that unless they move
quickly, their best customers and most profitable businesses will be
skimmed off leaving them stranded with high cost infrastructure like
branches and ATM networks and the least profitable customers.
At the Bank of Baroda, we are not immune to these storms but we are
better positioned to weather these challenges than many other banks.
Management has taken decisive steps to recognize stressed and
non-performing assets and aggressively deal with these. The main
motivation is to put this crisis behind us so that we can emerge
stronger and be able to focus on future rather than past. This is
absolutely critical so that management can deal with the challenges and
the many opportunities that lie ahead. The Board and I are confident
that the worst is behind us.
The Bank has also undertaken a comprehensive review of all parts of the
business and has evolved a detailed set of plans to fundamentally
reposition the Bank for the future. These plans are intended to create
a more agile and capable organization with better controls and
compliance. Non-core assets will gradually be sold to raise capital.
Management has conducted a detailed review of our business portfolio
and intends to gradually exit unprofitable businesses and segments;
this will improve margins and free up capital that can be deployed in
pursuit of better quality customers and many good business
opportunities that exist. We can expect to see the Bank rapidly return
to historical levels of profitability.
Technology will play a critical role in revitalizing our Bank.
Information is the lifeblood of a bank and banks are increasingly very
sophisticated information processing units. Our Bank has a solid
technology foundation with good infrastructure, core banking system and
good software for communication and collaboration. Importantly, the
Bank has also devoted significant attention to ensuring cybersecurity
and privacy. Over the next few quarters, there will be a significant up
gradation of capabilities in four areas. First, in reengineering and
automating core business processes to enable speed, efficiency and
control. Second, in closing the gap in internet and mobile banking.
Third, in improving our capability in the vital area of big data and
analytics. And finally, in transforming into a more digitally savvy
Bank where increasingly we are digital by default rather than digital
Unquestionably, the most important transformation that we will need to
make is the transformation of our people and organizational capability.
This is central to the success of everything else. This year, the Bank
undertook an employee engagement survey for the first time. The
response has been overwhelming and highlighted a number of critical
areas for improvement. The next three years will see a massive
investment in employee learning, in identifying and accelerating the
development of future leaders and in building organizational capability
in key areas. Finally, this year we began the process of
systematically strengthening our Board and board governance. We are
fortunate to have a number of new Directors who bring much needed
skills in areas such as HR, IT audit and compliance. We are also
augmenting expertise through the appointment of globally respected
experts as advisors to the Board in areas such as IT HR, Risk, and
financial inclusion. We have radically shifted our focus from
transactional matters towards strategy risk and policy issues. I am
optimistic that these changes will gradually bring about a sustainable
improvement in the performance of the Bank.
The past year has been a year of dramatic change at our Bank. It is a
year which has witnessed the induction of private sector executives
into the roles of MD and Chairman. Our stakeholders expect not just an
improvement in results but a metamorphosis of this proud 108 year old
institution into a contemporary Bank that uniquely combines the trust
of public sector banks with the innovation and performance of the
leading private sector banks. This is the mission that we have
undertaken and are focused on.
I am pleased to report that during the year 2014-15 (FY15), Bank of
Baroda not only displayed its resilience to challenges in the Indian
economy, but also sustained its performance in these challenging times.
With the help of well crafted business model, the Bank crossed the 10
trillion mark of business during the year by diversifying its
operations across all the verticals and using technology to its
At this point, I deem it most appropriate to review the macroeconomic
environment, within which Bank of Baroda operated during FY15.
Indian Economic Review
During FY15, the Indian economy witnessed a gradual movement from
stagflation, that is, stagnating growth and high inflation, to a phase
of emerging green shoots of growth and sharp decline in inflation. The
collapse of international commodity prices, in particular of crude oil
prices, reduced political uncertainty, improved policy environment,
increasing pace of reforms and fiscal consolidation have resulted in a
better growth prospects for Indian economy.
The cyclical upturn signaling improvements in macro-economic stability
showed up in lower than expected inflation, and manageable current
account deficit with stable rupee and rising foreign exchange reserves.
The CPI (combined) inflation slipped from 8.59% in April 2014 to 5.17%
in March 2015, wholesale price index (WPI) dipped to (-) 2.33% by March
2015 on the back of sharp decline in fuel and food prices. Though, the
exports and imports remained subdued due to weak domestic and global
economies, the buoyant inflows driven by the sharp rally in stock
market, kept the external sector stable. The current
account deficit was at 1.6% in Q3 FY15 as against 2% in Q2, FY15. Also,
foreign exchange reserves touched an all time high of US $343.0 billion
Further, the Union Budget focused investment driven growth by
increasing public expenditure on infrastructure especially roads and
railways. Though, the Government achieved fiscal deficit target of 4.1%
set for 2014-15, it adopted a moderate path for further fiscal
consolidation by postponing the glide path to 3% from 2 years to 3
years. Moreover, the central government passed a number of key
legislations relating to coal and insurance during FY15.
Even so, the macroeconomic environment remained weak during FY15 with
agriculture being affected adversely both during the kharif and rabi
season due to deficit and unseasonal rains. The Index of Industrial
production which saw some better growth in the first quarter of FY15,
slumped thereafter as structural constraints led to persistent decline
in the production of core industries such as steel, natural gas and
fertilizers. Also, capital goods production was marked by volatility
due to stalled investments, risk aversion and weak demand. The consumer
goods production was also affected by lower rural incomes and
significant deceleration in corporate sales growth. The services sector
growth remained mixed.
Amidst the weak operating economy, the deposit and credit growth of
scheduled commercial banks remained lacklustre throughout the year. For
banks, capital conservation and efficient utilization of capital has
become an important challenge in view of stringent Basel -III capital
norms, asset quality challenges and higher provisions. The asset
quality was the major concern of the banking sector in view of subdued
economic growth and worsened repayment capacity of the borrowers.
With the sharp fall in the inflation, the RBI reduced the SLR by 150
bps and benchmark repo rate was reduced by 50 bps during the year. The
banks were in a position to reduce the deposit rates in the last
quarter of the FY15.
Apart from this, the banking sector participated actively in the
Pradhan Mantri Jan Dhan Yojana, the biggest financial inclusion
initiative of the Central Government. As of March 31,2015, the banks
opened a record 14.7 crore accounts with a balance of Rs 15,670 crore
in such accounts. Besides this, the banking space is set to widen with
the introduction of newer market participants such as small banks and
payment banks in near future.
However, banks with relatively stronger systems of credit monitoring
and cash recovery were better equipped to cope with this challenge and
delivered a sound performance during FY15 despite challenging
Bank of Baroda: Sustaining Performance amidst Challenging times
During FY15, despite the macro headwinds, your Bank's global
businesses crossed the 10 trillion mark and touched Rs 10,45,625 crore
by registering a growth of 8.25%. The domestic business grew at a
higher rate of 8.43% in FY15 and reached Rs 7,06,148 crore. During the
year, your Bank pursued the strategy of continuing to diversify its
loan book in favour of retail, MSMe and agriculture credit, as
opportunities in large-sized corporate segment had dried up. Further,
as a part of conscious strategy, your Bank shed bulk and high cost
deposits significantly to contain the liability costs.
Your Bank's international business grew at 7.88% (y-o-y) to reach Rs
3,39,477 crore in FY15. Healthy mobilization of domestic CASA deposits
at the rate of 13.60% (y-o-y) and shedding of high-cost preferential
deposits helped your Bank to improve its NIM in domestic operations at
2.91% in FY15 as against 2.87% in FY14.
Your Bank posted Operating Profit of Rs 9,915 crore (up 6.01%, y-o-y)
supported by healthy Net Interest Income (at Rs 13,187 crore), Core
Fees (Rs 2,200 crore), Treasury Gains (Rs 2,013 crore) and Recoveries
from Written-Off Accounts (Rs 188.54 crore) combined with prudent
control over Total Expenses. However, due to higher tax and non-tax
provisions, your Bank posted Net Profit of Rs 3,398 crore (down 25.16%,
y-o-y) during FY15.
Due to continuous stress in the economy and slow recovery, the banking
industry continued to face the challenge of maintaining asset quality
during the year under review also.Asset Quality therefore continued to
show increased stress during the year. However, asset quality saw some
improvement between the third quarter and the fourth quarter of FY15,
wherein the Gross NPA declined from 3.85% at end-December, 2014 to
3.72% at end-March, 2015 and Net NPA declined from 2.11% to 1.89%. For
the full year, the Gross NPA and Net NPA were at 3.72% and 1.89% in
FY15 as against 2.94% and 1.52% in FY14, respectively. The Bank's
Provision Coverage Ratio (PCR) remained at 64.99% in FY15 as against
65.45% in FY14.
Your Bank's Capital Adequacy Ratio continued to reflect its capital
strength. The CRAR was healthy at 13.33% in terms of
Basel II and 12.60% in terms of Basel III at end-March, 2015, with Tier
1 capital ratios at 10.14% and 9.87%, respectively. Common Equity Tier
1 was at 9.35% as per Basel III norms.
Strategic Initiatives during FY15 Corporate Credit
The year FY15 was marked by low credit appetite by the corporate sector
on account of weak investment sentiment and issues relating to
infrastructural and other bottlenecks. Your Bank thus adopted a
cautious approach towards corporate credit growth. As a result your
Bank has relatively lower credit growth of 7.82%.During the year your
Bank introduced the system of "Online loan application tracking" to
facilitate knowing status of loan applications. Through this, the
applicant would be able to track the status of his application by
logging through 'loan tracking' link provided on your Bank's
To promote Forex business and increase fee based income, your Bank
added 3 more "Authorised 'B' Category" Branches to deal in
Forex Business directly.
Your Bank strengthened its retail portfolio by placing special emphasis
both on asset as well as on the liability side so as to increase
customer satisfaction and also to generate synergy in its retail
business model. On the liability side, with the formation of a special
vertical of Deposit Resources, focus was placed on garnering higher
share of retail term deposits while continuing to shedding the high
cost bulk deposits. A number of initiatives were undertaken during the
year for strengthening and reviving the relationship with existing
customers for improving CASA deposits and promoting debit cards.
Furthermore, some special drives were launched for activation of
dormant accounts and funding of zero balance accounts to widen the
active customer base.
From the assets side, your Bank placed added thrust on retail business
to make its loan-book more balanced. To achieve this, your Bank
introduced special measures to increase the attractiveness of its
products. Under Home Loans, new schemes were introduced such as linking
of Home Loan Advantage scheme with SB accounts, for funding premium for
home loan borrowers a personal loan scheme was introduced, and a
pre-approval home loan scheme was also introduced. Also, modifications
and improvement to education loan schemes were also effected keeping in
view the needs for higher education. Also, various campaigns were
carried out to place targeted focus on retail business.
Your Bank has now extensive presence of 60 RLFs in FY15 catering to the
retail sector across the country.
To give a boost to the MSME business as well as its employment
generating potential, your Bank undertook a number of initiatives
during the year under review. With the purpose to effectively finance
the micro enterprises, your Bank established Baroda Micro Enterprise
Cell to facilitate focused attention on financing of Micro Enterprise.
As at end March, 2015, your Bank operationalised 80 such cells. Your
Bank introduced new schemes such as Integrated Development of leather
sector (IDLS) scheme, promoted by Footwear Design & Development
Institute, Baroda, self employment programme
for individuals and group enterprises/SHGs (Restructured SJSRY scheme)
and new schemes were designed for chemical and pharmaceuticals sector
in Bharuch Region. Also, many area specific schemes were introduced
given the demand and business potential. Apart from this, your Bank
organized campaigns and celebrated MSME festivals to increase the
awareness among borrowers. Moreover, to reduce the turnaround time,
your Bank rolled out Lending Automation Processing System (LAPS) in all
SME Loan Factories.
Your Bank has a set up of 54 SME Loan Factories (SMELFs) as of March
2015 across the country.
Your Bank has always focused on rural areas with its wide network of
1,912 rural branches and 1,386 semi-urban branches as on March 31,2015.
In order to tap emerging opportunities, your Bank undertook various
initiatives during the year under review. With the purpose of
increasing awareness among farmers, your Bank undertook two special
campaigns viz., Joden Kisan and investment credit. Given the area
specific needs, your Bank formulated tailor made schemes to address
their unique requirements and also concessional rate of interest were
offered to them to enhance its attractiveness.
Furthermore, your Bank launched Agriculture Loan Factories for better
customer service and improving the volume and quality of the
agriculture advances. Three such factories are functioning in Mehsana
in Gujarat, Bareilly in U.P and Muzaffarpur in Bihar.
Your Bank strongly supported the growth and development of social
sectors through its various outfits like Baroda Swarojgar Vikas
Samsthan (BSVS), Baroda R-Seti Centres, Financial Literacy Centres and
Micro Loan Factories.
With the launching of Pradhan Mantri Jan Dhan Yojana (PMJDY) during
FY15, the financial inclusion received a massive impetus wherein its
coverage and ambit was enlarged as compared to the earlier initiatives
and it is operating under defined timelines in a mission mode. As
always, your Bank has been a frontrunner even in this initiative as it
looks at it not just as a social commitment but as an effective and
profitable business proposition. Your Bank has achieved all the targets
set under PMJDY well ahead of its timelines. As on 31.03.2015, your
Bank has mobilized deposits of Rs 1,101 crore in PMJDY accounts with
average balance per account above Rs 2500. Moreover, the share of Bank
of Baroda in opening PMJDY account is at 5.7% of the total accounts
opened by all banks and share in deposits mobilized is at 7.86%.
Apart from this, your Bank continued its pursuit of achieving the
targets set under disaggregated Financial Inclusion Plan (FIP) 2016.
Your Bank surpassed the target of covering 22,030 villages as against
the target of 16,324. Similarly, your Bank surpassed its targets for
opening of "Basic Savings Bank Deposit Account" and opening of
urban kiosk, and opening of accounts through BC mode.
Given the importance of financial literacy in achieving meaningful
financial inclusion, your Bank undertook Financial Literacy campaigns
to educate villagers on various banking facilities and particularly,
the benefits of savings, Aadhaar seeding, maintaining minimum balance,
eligibility for availing
Overdraft, use and safekeeping of RuPay cards, USSD facility,
eligibility of availing accidental & life insurance, lodgment of claim
under insurance, micro insurance products, pensions, benefits of KCC,
GCC, prompt repayment, and availability of other retail and SME loans
to them. Your Bank has set up a proper institutional structure for this
purpose in the form of Baroda Sawarojgar Vikas Sansthan (Baroda RSETI).
It is a trust formed by the Bank way back in 2003 for undertaking skill
building activities for unemployed rural youth and providing hand
holding support to them till their settlement in their respective
venture. Further, there are Financial Literacy & Credit Counseling
Centres (FLCCs) "SAARTHEE" that are operational across the country
and Baroda Grameen Paramarsh Kendra that facilitate financial
education, credit counseling, information sharing and problem solving
on technical issues, synergy & liaison with other organizations for
value added services and development activities in rural areas.
Due to continuous stress in the economy and slow recovery, the banking
industry continued to face the challenge of maintaining asset quality
during the year under review also. Asset Quality therefore continued to
show increased stress during the year leading to increase in gross NPA
level to Rs 16,261 crore during FY 15 (3.72% of gross advances) from
level of Rs 11,876 crore (2.94% of gross advances) last year.
Similarly, total restructured advances of the Bank increased to Rs
31,572 crore in FY 15 as against Rs 26,537 crore in FY 14.
Your Bank has developed a comprehensive structure for recovery and
credit monitoring function at the Branch, Region, Zone and Corporate
levels. From day one of FY15, your Bank kept a close watch on potential
stress accounts. Apart from large accounts, , your Bank laid specific
focus on recovery of small accounts by organizing Lok Adalats and
Recovery Camps at village/town level. Moreover special Schemes called
Bhagirath Prayas were also launched during first half of the FY15. Your
Bank also launched an incentive linked recovery scheme called
"Sankalp-VII", to enlist personalized attention of each and every
staff member in pursuing recovery efforts.
Your Bank is highly responsive to the needs and satisfaction of its
customers, and is committed to the belief that all technology,
processes, products and skills of its people must be leveraged for
delivering superior banking experience to its customers. To improve
the customer convenience further, your Bank introduced SMS alerts,
missed call facility, comprehensive information about cheques for
inward clearing and removal of maintenance charges on inoperative
accounts. To get feedback on Bank's services, your Bank undertook
online customer satisfaction survey to know about the customer's
views / problems faced by customers and to take remedial measures.
Information Technology Structure
Your Bank has been using Information and Communication Technology (ICT)
not only to improve its own internal processes but also to increase
facilities and services for its customers.
With the purpose to enhance the customer experience in alternative
delivery channels, your Bank introduced new facilities in its internet
Banking viz., Baroda Connect channel.
The new enhanced features includes such as online e-banking
registration, view and deposit to PPF accounts, Salary upload facility,
Mobile OTP generation through smartphone, Tax payments of various
States, and IMPS (Immediate Payment services), etc. Moreover, Internet
Banking facility is made available on all Smart-phones/tablets offering
comfort of anywhere banking to its customers. Internet Banking has been
implemented in total 16 overseas territories viz. Tanzania, Uganda,
Kenya, Mauritius, Seychelles, Botswana, New Zealand, UAE, Fiji, UK,
Oman, Ghana, Australia, Trinidad & Tobago, Guyana and USA. Internet
banking is also provided in all the RRBs sponsored by Bank.
Mobile Banking - one more alternate delivery channel that offers
various facilities to your Bank's customers was completely revamped
by enhancing its look and feel, user-friendliness and user experience
for technology savvy customers. The Mobile Banking platform offers many
features and facilities to customers, viz., icon based user interface,
balance enquiry, mini statement, fund transfer, stop payment, cheque
status, and other services. Mobile banking application is made
available in all i-Phones, Blackberry, Android, Windows devices.
Through mobile banking it is facilitated to make payments for Mobile
top- up / DTH top-up, Insurance premium payment, Online shopping,
Over-the counter payments, fees payments to schools/colleges/
universities, Utility Bill payments, Travel & Ticketing, Temple
Donations, and Non internet based railway ticket booking through mobile
phones using IMPS - IRCTC.
During the year FY15, your Bank launched the first Cash Recyclers in
the country on July 20, 2014. The unique aspect of Cash Recycler is
that, it is enabled to accept cash as well as dispense cash apart from
balance enquiry, mini statement and PIN change facilities. These have
found good response from retail as well as business customers with ease
of operation and 24x7 availability. As of end March 2015, your Bank has
installed 390 Cash Recyclers. Moreover, your Bank installed 1,776 new
ATMs and opened 106 NonStop e-Lobbies equipped with Five Self Service
machines viz. Cash Recycler, ATM, Multi Function Kiosk, Passbook
Printer and Digital Signage System for providing 24x7 routine banking
services during the year. Your Bank also provided self service passbook
printers to all Metro and Urban branches apart from select high
footfall semi-urban and rural branches. In short, IT has made a visible
difference in the functioning of your Bank and conduct of its banking
H. R. Initiatives
Your Bank has adopted a very balanced people strategy to create a
composite and responsible Human Resource in the Bank that can drive
growth and also adequately meet the various challenges of the current
times, viz, the large retirements, massive induction of talent, huge
training requirements and challenges of successions.
During FY15, your Bank undertook automation and centralization of
various routine HR activities such as claims and reimbursements,
thereby achieving faster turn around time in settling of claims.
Further, your Bank has put in place a manpower planning tool which
determines manpower required for different Branches / units on a
scientific basis. The output from the manpower planning tool
facilitates various manpower planning related decisions, that is,
recruitment, new hire allocation, transfers and promotions. Even the
performance management for your Bank's officer has been completely
automated making the system more robust, objective and quicker.
To enhance the "Employee Engagement", your Bank undertook various
initiatives like conduct of satisfaction surveys and workshops for
interaction between juniors and seniors. These workshops were conducted
to improve the employee connect with HR and top management.
Furthermore, to reward the top performers, your Bank has performance
linked incentive scheme for its employees.
With a view to identify and groom young potential leaders, your Bank
has implemented a well orchestrated Talent Management System that
proactively identifies future potential leaders based on various
criteria and also grooms them through a systematic developmental plan
for each of the identified future leader.
Against the backdrop of massive recruitments in view of large
retirements, training and developments of new recruits has assumed
significant importance. Further, training has now emerged as a critical
function in the organizational endeavour to compete and keep the
workforce fit enough to take on the competition. Your Bank has
instituted learning systems through Baroda Academy which consists of
series of innovations and path breaking initiatives to groom staff in
key banking areas like credit, forex, core banking etc. apart from on
boarding new recruits. During FY15, your Bank rolled out state of the
art Learning Management System for e-learning courses which are
available on the internet providing the convenience of time and place.
Your Bank is the first Bank to launch 'Mobile Snippets' a Mobile
App for the benefit of employees. This enables the employees to access
daily banking news, gist of important BOB / RBI circulars, in-house
publications, announcements for upcoming events and video messages.
Moreover, Baroda Apex Academy has a Facebook page for informal
learning. Further, to broad base learning, your Bank organized events
such as motivational speeches, video shows and group activities etc
under the name Mind Gym Series. Apart from this, your Bank also sought
to engage in external trainings so as to widen the knowledge base of
its employees. In recognition of the efforts towards learning
practices, your Bank received a number of awards from prestigious
organization such as Golden Peacock, IBA and others.
Risk is inevitable in the banking business and hence, a sound risk
management framework is the touchstone of an efficient bank. Your Bank
has robust architecture to address various risks inherent in its
business viz - Credit Risk, Market Risk, Operational Risk, Liquidity
Risk, Interest Rate Risk etc. The architecture includes mechanism of
defining risk appetite, its monitoring, reporting and review. The
objective of the architecture is to ensure that the asset quality is
sustained against economic shocks and sufficient capital buffers are
available to withstand them. The prudent risk taking culture revolves
around continual and optimal enhancement in our systems, process,
awareness and skill sets, so that a balance of support and control
functions is achieved.
Few of the testimonies of enhanced risk management practices are that
the Reserve Bank of India has permitted bank for a parallel run under
Foundation Internal Rating-based (FIRB)
Approach in respect of Credit Risk. For Market Risk, your Bank has set
up Global Mid Office in Mumbai, which facilitate cost-efficient and
more effective way of measuring, monitoring and reporting the Market
Risk positions in its global operations. The systems to operationalise
the Global Mid Office, compliant with Internal Model Approach of Basel
II norms are in advance stage of implementation. In respect of
Operational Risk, your bank has implemented a web based sophisticated
Operational Risk Management solution, which is one of the best
available solution in the industry. Similarly for Asset Liability
Management, Fund Transfer Pricing and Profitability Analysis, Oracle
Financial Services Analytical Application Infrastructure has been
Your Bank has successfully implemented Basel III norms pertaining to
capital quantity and quality, Leverage Ratio and Liquidity Coverage
Ratio with the transition rules specified by the Reserve bank of India.
Despite, the weakness in the global economies across advanced and
emerging economies, the overseas business of your Bank continued to
contribute significantly to its overall (global) business. Your
Bank's wide-spread overseas presence provides it with significant
risk diversification benefits across the globe. Your Bank's large
network of branches in overseas territories and its continued thrust on
overseas expansion helped exploit rich business opportunities even
during FY15. As of 31st March 2015, it had operations in 24 countries
with 104 offices. These 104 offices comprised of 60 overseas branches
of your Bank, 43 branches of its overseas subsidiaries and one
representative office. During the year under review, your Bank opened
two new branches at Meru in Kenya and Mwanza in Tanzania.
Key Achievements in FY15
In spite of the challenging business environment, your Bank ended the
year under review with a satisfactory set of results.
- Your Bank's Global Business expanded by 8.25% (y-o-y) to Rs
10,45,625 crore by end March 15. Within this, the Domestic Business
expanded by 8.43% to Rs 7,06,148 crore and the Overseas Business
increased by 7.88% to Rs 3,39,477 crore.
- The Global Deposits registered a growth of 8.55% (y-o-y) to Rs
6,17,560 crore by end March 15. Within this, the Domestic Deposits
expanded by 9.29% to Rs 4,14,278 crore and the Overseas Deposits rose
by 7.08% to Rs 2,03,282 crore.
- Amidst aforementioned challenges, Your Bank's CASA deposits
increased by 11.25% (y-o-y) to Rs 1,62,969 crore.
- The share of Domestic CASA as on 31st March 2015 stood at 33.01% as
against 31.76% as on end-March 2014.
- The Global Advances increased by 7.82% (y-o-y) to Rs 4,28,065 crore
by end March 15. Within this, the Domestic Advances rose by 7.24% to Rs
2,91,870 crore and the Overseas Advances surged by 9.10% to Rs 1,36,195
- The Retail Credit of your Bank increased by 14.06% (y-o-y) to Rs
52,488 core during FY15, of which Home Loans increased by 15.26% to Rs
- Your Bank's SME Credit portfolio increased by 9.46% (y-o-y) to Rs
61,993 crore by end- March 2015. The Farm Credit increased by 31.55%
and reached the level of Rs 37,403 crore and its credit to weaker
sections increased by 9.28% to Rs 22,510 crore.
- Your Bank's Operating Profit stood at Rs 9,915 crore and Net
Profit at Rs 3,398 crore in FY15.
- The Return on Average Assets (ROAA) stood at 0.49% in FY15.
- Despite capital infusion by Government of India, the Return on
Equity (ROE) was at 9.21% as at 31st March 2015.
- Your Bank managed to improve its NIM at 2.91% in Domestic
Operations and protect NIM at 2.31% in Global Operations during FY15.
- Given your Bank's prudent approach, its Provision Coverage Ratio
was at 64.99% as on 31st March 2015
- relatively higher in a PSU banking segment.
- Your Bank's Capital Strength gets reflected in its CRAR (Basel
II) at 13.33% and Tier I capital at 10.14% as on 31st March 2015.
- Your Bank's Cost-Income Ratio was at 43.63% for FY15.
- While its Earning per Share stood at Rs 15.83, its Book Value per
Share stood at Rs 166.83.
Awards & Accolades
During the year FY15, your Bank received several awards for its
noteworthy performance across various business and financial
parameters. The major ones were as follows.
- The Bank of Baroda conferred "Best Bank - Global Business
Development (Public Sector)" & "Best Bank
- Overall (Public Sector)" Award in Dun & Bradstreet - Polaris
Financial Technology Banking Awards 2014
- Your Bank was awarded "Best PSU for MSME" by India SME Forum on
11th July, 2014 at New Delhi
- The Bank of Baroda awarded Skoch Order of Merit in India's Best
2014 Financial Inclusion & Deepening Awards 2014 by Skoch Consultancy
Services Pvt. Ltd
- Your Bank Ranked 21st amongst Best Indian Brands 2014 in Brand
Equity - The Economic Times dated 06.08.2014
- The Bank of Baroda has won National Prize - First Rank in
"Innovative Training Practices" for the year 2014 from "Indian
Society for Training and Development"(ISTD) at Bhubaneshwar
- Your Bank was conferred 'The Most Efficient Public Sector Bank'
for the year 2014 by Dalal Street Investment Journal in the 'Best
PSU's of India Awards' held at New Delhi.
These awards and recognition are particularly valuable, as they
acknowledge the merits of your Bank's successful business model that
made a difference to the nation's progress.
From the macroeconomic stability perspective, Indian economy has been
witnessing lower inflation, lower current account deficit, robust
foreign exchange reserves, contained fiscal deficit, momentum in
reforms and therefore, improved growth prospects. Hence, Indian economy
is better placed to withstand the challenges emanating from the
possible interest rate reversal in United States and its implication on
the domestic economy and weakening external demand.
In March 2015, the IMF has raised its forecast for India for 2015 to
7.5% from 6.3% projected earlier in response to the revision of its
methodology for estimating GDP. Moreover, the IMF considers that Indian
economy will be the fastest growing emerging market economy in the
world driven by stronger investment following improvements to business
climate. However, it is with a broad based recovery, the banking
industry would see better credit demand as well as improvement in asset
quality. Further, Moody's upgraded India's sovereign rating outlook
to 'positive' from 'stable' in April 2015.
Even so, the growth in FY16 may be moderate given the uncertainties
pertaining to monsoon as there are forecast of a less than normal
monsoon, geopolitical risks surrounding oil prices, the uneven effects
of currency and commodity prices and any unforeseen natural disaster.
During FY15, Bank of Baroda made significant progress towards building
a preferred bank for its stakeholders. Despite challenging environment,
its earnings remained resilient; its fresh slippages started easing and
its strong funding position enabled it to continue to support its
During FY16, Bank of Baroda will continue to focus on further
strengthening its capital and funding position so as to grow its
business sustainably with better profitability. Your Bank is confident
that with its strategic focus on people, processes and technology, it
will remain in the leadership position in the emerging business
Bank's Corporate Goals and Strategy
Supported by its achievements during FY15, your Bank has chosen to
continue its motto of "Race Ahead" with addition "From Good to
Great" to consolidate the synergy generated last year amidst emerging
economic and banking scenario and by transforming from being a Good
Bank to a Great Bank. Hence, the Bank has identified "RACE AHEAD"
from Good to Great as its motto for FY16. The word RACE denotes the
R for - Retail Leaning A for - Asset Quality C for - Capacity Building
E for - Earnings Focus
In FY16, your Bank would consolidate the progress made so far and would
focus on improving profitability and profitability ratios at a much
faster pace by leveraging its vast technological advantage and
extensive alternate delivery channel network. However, the movement
from Goodness to Greatness involves considerable hard work and
consistency in its performance in all spheres of activities to touch
the hallowed goal of Greatness.
To strengthen the approach towards Retail Leaning, your Bank will
emphasize on aggressively canvassing low-cost current and saving
deposits plus retail term deposits as against the high-cost bulk
deposits. Simultaneously, the focus will be on Retail Credit, MSME and
Agriculture credit to make the loan- book more diversified. Further,
your Bank plans to utilize its technological advantage to its benefits
by extensive use of alternate delivery channels such as ATMs, internet
banking, mobile banking, usage of cards (credit, debit and gift), and
POS machines to garner more retail business.
Similar to its efforts to improve Asset Quality in FY15, your Bank will
focus on credit appraisal including stringent KYC and documentation,
and monitoring, NPA recovery and up- gradation in a big way and further
arrest the fresh slippages. Moreover, with better regulatory
environment in terms of new bankruptcy code and commercial courts
augurs well for maintaining better asset quality. Your Bank also plans
to include sector specific focus to ensure better recovery, for
instance, in case of agriculture, added focus would be laid on
financial literacy and educating borrowers about benefits of timely
Capacity Building is another area where your Bank has been investing
significantly. During FY15, your Bank opened 351 new Branches,
installed 1,776 new ATMs, opened 106 NonStop e-Lobbies and provided a
number of Bunch Note Acceptors, Self-service Pass book Printers, Cash
Recyclers etc. to its branches. Your Bank will accord high priority to
generate benefits from this extensive network and efficient alternate
delivery channels spread across the country and globe during FY16.
To respond to increasing competition and other challenges, your Bank
will make its business model more cost-efficient and try to improve its
Earnings through an optimum mix of interest income and non-interest
income. To achieve this, it will optimize the use of technology as the
change agent. Your Bank will not only focus on traditional business
unit but also non-interest income sources and fee income from various
avenues. Your Bank will continue to focus on improving its return
Additionally, your Bank will continue to harness its advantage of its
wide overseas presence by widening its geographical presence as well as
initiate measures and products so as to increase attractiveness of its
products as also cater to diverse population across the globe.
With its intrinsic strengths in the form of capital, human resources,
technology and iconic brand, your Bank is well positioned for growth
during FY16. In the current economic environment, your Bank will
consolidate its positions by preserving its healthy ratios and building
on it further to ensure buoyant growth in its profitability and return
We are encouraged by and grateful for the ongoing support of all our
shareholders. I solicit your continued cooperation and patronage in
future also. ,
Managing Director and CEO