2016-17 वित्तीय रिपोर्ट
"Your Directors have pleasure in presenting the One Hundred and Ninth Annual Report of your Bank with the audited Balance Sheet, Profit & Loss Account and the Report on Business and operations for the year ended March 31, 2017 (FY 2017)"
The snapshot of our Bank’s financial performance is as below:Rs. in crore
|of which- Domestic Deposits||3,94,843.97||4,40,092.15||11.46|
|of which - Current Account Deposits||19,285.57||26,761.77||38.76|
|Savings Bank Deposits||1,13,253.07||1,46,831.82||29.65|
|Domestic CASA to Domestic Deposits (%)||33.57||39.44|
|of which- Domestic Advances||2,63,268.38||2,77,523.73||5.42|
|Net Interest Income (NII)||12,739.85||13,513.41||6.07|
|of which-Fee Income||3,599.28||3,813.22||5.95|
|Recovery from PWO||220.72||326.83||47.96|
|NII + Other Income||17,738.71||20,271.47||14.27|
|of which: Provisions for NPAs & Bad debts written off||13765.89||7679.79||(44.21)|
|Profit Before Tax||(6,698.06)||2,472.70||-|
|Provision for Tax||(1,302.53)||1,089.56||-|
|Revenue and Other Reserves|
|I) General Reserve||(5,395.54)||0|
|II) Special Reserve u/s 36 (I) (viii) of the Income Tax Act 1961||0||350.92|
|III) Investment Reserve Account||0||0|
|IV)Transfer from Excess Appropriation of previous year||7.79||0|
|Key Performance Indicators|
|Average Cost of Funds||5.08||4.82|
|Average Yield (%)||7.09||6.85|
|Average Interest Earning Assets||6,21,234.89||6,15,834.65|
|Average Interest Bearing Liabilities||6,16,002.63||5,95,249.99|
|Net Interest Margin (%)||2.05||2.19|
|Cost-Income Ratio (%)||50.30||45.86|
|Return on Average Assets (ROAA) (%)||(0.78)||0.20|
|Return on Equity (%)||(17.64)||4.53|
|Book Value per Share (Rs.)||132.74*||132.46*|
|*Post split of face value of the share to Rs. 2/-|
The financial year 2016-17 had been a mix of opportunities and challenges. With asset quality challenges in the banking industry continuing, credit growth has been at multi decade low of 5.08% during FY 2017 on account of weak corporate demand. Despite the challenges, Bank performed well during the year leveraging its retail franchise.
The net interest income (NII) of the bank increased by 6.07% to Rs. 13,513.41 crore as of March 31, 2017 while other income increased by 35.19% to Rs. 6,758.06 crore backed by 122.05% rise in treasury income to Rs. 2,618.01 crore as well as 5.95% growth in core fee income to Rs. 3,813.22 crore. Operating expenses increased by 4.18% to Rs. 9,296.40 crore.
Our Bank posted an operating profit of Rs. 10,975.07 crore during FY 2017 registering a growth of 24.49%. The provision cost (other than taxes) declined significantly by 45.19% to Rs. 8,502.37 crore compared to Rs. 15,513.64 crore last year and Bank posted a profit before tax of Rs. 2,472.70 crore. After making provision for tax of Rs. 1,089.56 crore, net profit for the year ended March 31, 2017 was Rs. 1,383.14 crore.
For the year ended March 31, 2017, the return on average assets was 0.20% while return on equity was 4.53%. The earnings per share (FV Rs. 2/-) were Rs. 6.00.
Capital Adequacy Ratio (CAR)Ratios in %
|Capital Adequacy Ratio – Basel III||13.17||12.24|
|Tier - I||10.79||9.93|
|Tier - II||2.38||2.31|
Capital Adequacy Ratio under Basel III was well above the regulatory requirements at 12.24% as of March 31, 2017. Tier 1 ratio was at 9.93% and common equity Tier 1 (CET-1) was at 8.98% under Basel III framework. Bank raised Rs. 2,000 crore of debt capital by way of AT-1 bonds in two tranches of Rs. 1,000 crore each in December 2016 and March 2017.
Bank’s Net Worth as of March 31, 2017 was Rs. 30,519.80 crore comprising paid-up equity capital of Rs. 462.09 crore and reserves (excluding revaluation reserves, FCTR & Net of Intangible assets) of Rs. 30,057.71 crore. The book value of share (FV Rs. 2/-) was Rs. 132.46.
Board of Directors of the bank has recommended a dividend of Rs. 1.20 per share for the financial year ended March 31, 2017. The total outgo in the form of dividend, including taxes, will be Rs. 332.79 crore. The payment of dividend is subject to requisite approvals.
Management Discussion and Analysis
Global economic growth at 3.1% was slightly lower in 2016 compared to 3.2% in 2015. In consonance with the sluggish economic activity and production, global trade growth in 2016 at 2.3% was lower than the 2.6% observed in 2015. The significant international developments which had ramifications for the Indian economy in FY 2017 were Brexit, new administration in US favouring inward looking trade policies, a historic deal by OPEC and non-OPEC members to cut crude oil production so as to stabilize oil price, slowing of China and increased geo-political concerns. However, indications of improvement in global trade and global growth in FY 2018 augur well for the growth prospects for Indian economy.
The defining feature of Indian economy in FY 2017 was resilient growth despite challenging global economic environment and transient disruptions in the domestic economy. India’s economic growth was supported by normal monsoon after two consecutive years, relatively low levels of inflation, low current account deficit, robust forex reserves and most significantly, the reform orientation of the government. The smooth redemption of FCNR(B) deposit pointed to the deft liquidity management by the Reserve Bank of India.
FY 2017 witnessed withdrawal Rs. 500 and Rs. 1,000 currency notes (specified bank notes (SBNs) as legal tender, which accounted for 86% of the total value of currency in circulation and subsequent replenishment with new notes of Rs. 500 and Rs. 2,000 denomination. The demonetization initiative is expected to have a base broadening impact for GDP not with standing the transient dip in economic activity in certain sectors.
The biggest reform in the area of indirect tax, the GST Bill, was passed in the parliament and steps have been taken to ensure its implementation on July 1, 2017. Adoption of GST is expected to be a growth booster by reducing transaction cost, removing the cascading impact of taxes and taking India closer to a ‘One India-One market’. In addition, major initiatives were taken to relax FDI investment limits in a host of sectors including aviation, defence and railways, stepping up government expenditure to promote infrastructure and the rural economy, which have helped to sustain the growth momentum.
In another major reform, in May 2016, the Insolvency and Bankruptcy Code, 2016 was enacted providing an institutional framework for recovery and resolution in a time bound manner; for maximization of value of assets and for protection of investors and creditors.
As per second advance estimates of central statistical organization (CSO) released on February 28, 2017, the Indian economy is estimated to have grown by 7.1% for FY 2017. Food grains production is estimated at 270.10 million tonnes in 2016-17 registering growth of 6.7% over the previous year. The index of industrial production (IIP) showed a mixed trend reflecting weak investment and consumption demand. The lead indicator, composite PMI which had dropped below 50 during the period from October-December 2016 again crossed the 50 mark suggesting expansion of economic activity in February 2017. The composite PMI touched a high of 52.3 in March 2017 suggesting improvement in private sector activity. The services sector activity which was affected by the cash crunch during demonetization period, showed signs of improvement corroborated by high frequency indicators relating to railway traffic, telephone subscribers, foreign tourist arrivals, passenger car sales.
The pace of reforms was sustained throughout FY 2017 which is expected to have a significant bearing on the sustainable growth prospects of Indian economy. Apart from the passage of GST and Insolvency and Bankruptcy Code, there were many other significant reform initiatives that were undertaken such as introduction of the Monetary Policy Committee with explicit inflation targeting by the Reserve Bank of India, the merger of Railway Budget with Union Budget for holistic treatment of government’s revenue and expenses, removing the distinction between plan and non plan expenditure in the Union Budget. Apart from these structural reforms, new initiatives such as Stand-up India, Pradhan Mantri Ujjwala Yojana where free LPG connections are provided to women from BPL families were launched to make the growth process more inclusive.
As India charts the path of higher growth, there are downside risks from the volatility in global financial markets owing from Monetary Policy normalization by US Federal Reserve, the protectionism tilt in US, and geo-political risks. Taking into account the various forces that are shaping Indian economy, both the government as well as international agencies such as IMF, World Bank and ADB expect the country to grow by around 7.5% in FY 2018. Achieving still higher sustainable growth rate would require addressing the major macroeconomic challenges facing the Indian economy at the current juncture. These challenges including declining trend in private sector investments, weak balance sheets of corporates and high level of stressed assets in the banking sector will have a bearing on the sustainable growth prospects of Indian economy.
Developments in Indian Banking
Monetary policy making underwent a major transformation with the constitution of the Monetary Policy Committee (MPC) in September 2016. With the institution of MPC, a committee rather than the RBI governor determines the policy interest rate required to achieve the inflation target of 4% with a range of +/- 2% for the period August 2016 to March 2021. The first policy under the MPC dispensation was announced on October 4, 2016. RBI reduced the policy repo rate by 25 bps in October 2016 but there after maintained a status quo on rates as core inflation remained stubborn at around 4.5% and the liquidity remained comfortable due to the demonetization. However, RBI changed its policy stance from accommodative to neutral in the Sixth Bi monthly monetary policy announced on February 8, 2017. In the sixth bimonthly policy review, RBI reduced the LAF corridor by increasing the reverse repo rate in its April 2017 policy. Despite the RBI maintaining a status quo on rates for the most part of the year, the banks reduced their MCLR and deposit rates on the back of surplus liquidity in the system. The banking sector successfully managed the challenges thrown by the unprecedented withdrawal of the SBNs.
The performance of the banks in general continued to remain subdued as it grappled with the operational challenge of exchanging old notes with new ones during demonetization period of November 8, 2016 - December 31, 2016 as well as the asset quality concerns observed for quite some time. Besides, the credit growth from the banking sector in FY 2017 declined to multi year low of 5.1% on y-o-y basis.
On the asset quality issues of banks, a game changer initiative in the form of passage of the Bankruptcy Code which has the avowed objective of striking a resolution with 180 days of default is expected to bring about a fundamental change in the approach to resolution. Though it may take some time to get the requisite institutional infrastructure to make effective use of the Bankruptcy Code, the beginning has been made in right earnest as a number of cases have already been referred under the Bankruptcy Code. Apart from the developments on the Bankruptcy law, the existing schemes of 5:25, SDR, S4A were modified to make them more effective. RBI issued guidelines on banks’ exposure to large corporates to reduce systemic risks, relaxing restriction on AT-1 bonds to make them attractive by allowing utilization of reserves to pay coupon on these bonds. The possibility of instituting a bad bank was also debated to address the stressed assets of the banking system. A bad bank is expected to resolve stressed assets of the banking sector but would face logistical and capital challenges.
Demonetization offered an opportunity for widespread adoption of alternate payment channels which was incentivized by the government and RBI by reducing the charges on payments and levies applicable on transactions. The charges on USSD services were also reduced. Further, the BHIM (Bharat Interface for Money) app was launched on December 31, 2016 which is interoperable with other UPI apps and bank accounts. The unique feature of BHIM is that a bank account or virtual payment address is not required for payments or fund transfers. What is required is only the mobile number of the payee. The app is not bank specific and has been launched to promote cashless transaction across the urban as well as the rural population.
The banking landscape also underwent a massive change with SBI merging with its Associate Banks and Bharatiya Mahila Bank with effect from April 1, 2017. It is being considered that consolidation in the banking space would help address the stressed asset concerns as well as help to realise positive synergies that would improve the sector’s performance.
New payments banks, Indian Post Payments Bank Ltd and Airtel Payments Bank began operations during the year while others Paytm Payments bank Ltd, Jio Payments Bank Ltd., NSDL Payments Bank Ltd., & FINO Payments Bank Ltd. and one Small Finance Bank i.e AU Small Finance Bank are yet to commence operations. Further, six small finance banks began their operations. With the introduction of the new players and government’s incessant effort to promote digital payment habits, the competitive and technology landscape of banking in India is going through a phase of rapid transformation and forcing banks to reinvent their business models to remain competitive.
The highlights of business performance of our Bank is as below:
Resource Mobilization and Credit ExpansionRs. in crore
|of which- Domestic Deposits||3,94,843.97||4,40,092.15||11.46|
|of which - Current Account Deposits||19,285.57||26,761.77||38.76|
|Savings Bank Deposits||1,13,253.07||1,46,831.82||29.65|
|Domestic CASA to Domestic Deposits (%)||33.57||39.44|
|of which- Domestic Advances||2,63,268.38||2,77,523.73||5.42|
Total Deposits of our Bank rose from Rs. 5,74,037.87 crore to Rs. 6,01,675.17 crore, posting a growth of 4.81% over the previous year. Domestic CASA showed a robust growth of 30.98% to a level of Rs. 1,73,593.59 crore as of March 31, 2017 from Rs. 1,32,538.64 crore as of March 31, 2016. Of this, Savings Bank Deposits grew by 29.65% from Rs. 1,13,253.07 crore to Rs. 1,46,831.82 crore. The share of CASA deposits in domestic deposits as of March 31, 2017 increased to 39.44% from 33.57% last year. As a prudent liability management measure, our Bank continues to shed bulk preferential rate term deposits in favour of retail term deposits. Domestic retail term deposits ratio improved to 77.55% as of March 31, 2017 from 73.96% last year. During the year, deposits of around Rs. 11,500 crore of special FCNR (B) deposits scheme of September-November 2013 were paid off.
Significant increase in CASA deposits during FY 2017 was partly driven by deposit of old currency cash during period of demonetization. Even before demonetization exercise, Bank had a healthy CASA growth of 16% driven by launch of a focused CASA campaign for account activation and deepening relationships across the Bank and strengthening of digitization programme by improving internet banking and mobile banking platform, increasing POS penetration, etc.
Total Advances of the Bank maginally declined during FY 2017 mainly on account of focus on re-balancing of its loan book and shedding off low yielding assets particularly in international operations to replace them longer term higher yielding local credit. The year also saw liquidation of around Rs. 10,000 crore of loan portfolio built against special FCNR (B) deposits scheme of September-November 2013. However, domestic credit grew by 5.42% during the year mainly on account of growth in corporate and retail assets where business transformation programme progressed and started yielding results.
Total assets grew by 3.50% from Rs. 6,71,376.48 crore as of March 31, 2016 to Rs. 6,94,875.42 crore as of March 31, 2017.
In terms of notification issued by Government of India, old currency notes Rs. 500 and Rs. 1,000 denominations called Specified Bank Notes (SBNs) ceased to be legal tender with effect from November 09, 2016. These notes, which constituted 86% of notes in circulation, were allowed to be exchanged at bank counters subject to a ceiling or deposited in banks for credit to accounts upto December 30, 2016. The demonetization of SBNs led to unprecedented rush at counters of branches of our Bank and put a severe test on the operational capabilities. All the employees and entire machinery of Bank rose to the occasion in extending service to large footfalls in the branches as well as extending handholding support to them. The number of transactions carried was manifold to the normal volumes. Details of cash transactions undertaken at Bank’s branches from 10.11.16 to 30.12.16 are as under:
|Particulars||No. of Transactions (lakh)||Amount (Rs. crore)|
|Cash Deposited at the Branches||204.48||65,088|
|Cash Withdrawn at Branches||292.77||25,295|
|Cash Withdrawn at ATMs||104.35||2,714|
|Cash Withdrawn from BCs||22.50||354|
|Old Currency Notes Exchanged at Branches||30.83||1,078|
During the above period, over 23 million new customers were added to Bank’s fold and over 4 lakh dormant accounts were activated.
While demonetization exercise helped increase CASA deposits of the Bank, it also brought into sharp focus, the need for moving to digital and self-service channels. It has created perfect market conditions for alternative digital payment systems, in addition to debit/credit cards. Bank accelerated and strengthened its presence in various digital product offerings and also added new products separately detailed under digital section.
The highlights of operating performance of Bank are as below:Rs. in crore
|Net Interest Income (NII)||12,739.85||13,513.41||6.07|
|of which-Fee Income||3,599.28||3,813.22||5.95|
|Recovery from PWO||220.72||326.83||47.96|
|NII + Other Income||17,738.71||20,271.47||14.27|
|Other Operating expenses||3,945.12||4,658.63||18.08|
|of which: Provisions for NPAs & Bad debts written off||13765.89||7679.79||(44.21)|
|Provision for Standard Advances||(258.11)||776.58||-|
|Provision for Depreciation on Investment||341.47||19.29||(94.43)|
|Profit Before Tax||(6,698.06)||2,472.70||-|
|Provision for Tax||(1,302.53)||1,089.56||-|
|Key Performance Indicators|
|Average Cost of Deposits (%)||5.05||4.78|
|Average Yield on Advances (%)||7.35||7.27|
|Net Interest Margin (%)||2.05||2.19|
|Cost-Income Ratio (%)||50.30||45.86|
|Return on Average Assets (ROAA) (%)||(0.78)||0.20|
|Return on Equity (%)||(17.64)||4.53|
Total Interest income of the bank decreased by 4.22% from Rs. 44,061.27 crore in FY 2016 to Rs. 42,199.92 crore in FY 2017 mainly on account of almost flat growth in advances, reduction in MCLR, and reversal of interest in SDR and S4A accounts in view of RBI guidelines. The average yield on advances (based on daily average) slightly decreased from 7.35 % in FY 2016 to 7.27% in FY 2017
Total interest expenses also decreased from Rs.31,321.42 crore in FY 2016 to Rs. 28,686.51crore in FY 2017. Interest expenses on deposits during the year declined by a higher percentage of 8.41%. The average cost of deposits (based on daily average) decreased from 5.05% in FY 2016 to 4.78% in FY 2017
Accordingly, net interest income (NII) of the Bank increased by 6.07% to Rs. 13,513.41 crore during FY 2017 from a level of Rs. 12,739.85 crore in FY 2016 on improved asset liability management.
Other income of the bank increased by 35.19% to Rs. 6,758.06 crore backed by 122.05% rise in treasury income to Rs. 2,618.01 crore as well as 5.95% growth in core fee income to Rs. 3,813.22 crore. During the year, bank has been able to capitalize on the benign interest rate environment and also registered 5.95% growth in core fee income in the background of moderate credit growth in domestic operations and de-growth in international operations. Recovery from written off accounts was Rs. 326.83 crore registering increase of 47.96%.
Operating expenses increased by 4.18% to Rs. 9,296.40 crore. While employee cost decreased by 6.83% during the year to Rs. 4,637.77 crore due to base effect, other operating expenses increased by 18.08% to Rs. 4.658.63 crore which included additional expenses incurred during demonetization exercise.
Bank posted an operating profit of Rs. 10,975.07 crore during FY 2017 registering a growth of 24.49%. The provision cost (other than taxes) declined significantly by 45.19% to Rs. 8,502.37 crore compared to Rs. 15,513.64 crore last year. Provisions for NPAs & Bad debts written off also decreased by 44.21% to Rs. 7,679.79 crore.
Bank posted a profit before tax of Rs. 2,472.70 crore. After making provision for tax of Rs. 1,089.56 crore, net profit for the year ended March 31, 2017 was Rs. 1,383.14 crore.
For the year ended March 31, 2017, return on average assets was 0.20% while return on equity was 4.53%.
Business Transformation Journey- Project Navoday
During the year, our Bank embarked upon a comprehensive Business Transformation Exercise christened “Project Navoday”. Bank aims to drive accelerated and profitable growth by bridging the gap with competition and over time, leapfrog past them. Bank is pursuing a differentiated strategy to build a contemporary full-service universal bank and become India’s premier Bank with global standing which:
- Provide a thrust to the ‘under-served’ customer segments (e.g. integrated rural banking comprising agriculture and financial inclusion, supporting government-sponsored programs)
- Offer solutions beyond credit & deposits for the ‘well-served’ segments, capturing the cash flows & transactions, especially for Corporates, MSME and Retail
- Build the international network to be a significant differentiator, offering single RMs, fungible limits across the network and multi-currency financing capability
- Digitize the core technology backbone and building new digital platforms
Our Bank has undertaken to execute this vision through initiatives across business units and functions, structured along 5 key dimensions:
- Transform and grow ‘core’ business units (Retail, Corporate, MSME, Agri & rural and the international), while managing the stressed assets
- Building the capabilities for the future (e.g. new products like Supply chain financing, Cash Management, Digital, Wealth Management and centralization of operations to improve efficiency)
- ‘Nurture’ the organization and ‘unleash’ the talent pool through dedicated leadership and talent initiatives
- ‘Embed change’ and ‘sequence’ change through focused efforts on execution and capability building
- Building new alliances and undertaking new acquisitions
Bank has identified over 120 strategic initiatives cutting across all segments of businesses, functions/processes. To drive these initiatives Project Management Office (PMO) has been set up supported by 100 Change Leaders for cascading the Change Management to ground level team. The execution of the project started during the year and Bank is progressing steadily on course in this transformation journey. Details of the steps taken are mentioned at the respective item of this Directors Report.
Large Corporate and Mid Corporate departments were merged during FY 2017. 9 Corporate Financial Branches (CFS) and 14 Mid Corporate branches are functioning pan India and are managing 85% of Corporate Credit portfolio of our Bank. Corporate credit contributes 48% of the total domestic advances of the Bank. During the year, 117 new corporate customers were added.
Acapabilities beyond credit and deposits to become a knowledge-based, relationship-led corporate Bank. For this, number of measures have been undertaken or are underway. Bank has established centralized corporate credit vertical with specialist teams to standardize credit assessment. This is supplemented with identification of target sectors and markets for the Bank. A tech-enabled Relationship Manager (RM) model was adopted at CFS and Mid-Corporate branches. These RMs are supported by dedicated capability building programs. Bank also revamped the pricing policy and processes to focus on profitability and institutionalized account planning to identify and capture greater wallet share and deep relationships. International business is being leveraged as competitive advantage to serve clients in multiple geographies with multi-currency facilities.
While the above measures aim towards revamp in approach towards corporate credit delivery and identification of target markets, systems are strengthened to ensure improvement in the quality of loan portfolio. The Bank has onboarded external agencies and also utilized the services of credit bureau for financial / market due diligence. As a result of these measures, the credit quality of the portfolio improved during the year as observed by the rating distribution of domestic credit portfolio as detailed below:
|Credit Rating distribution*||FY 2016||FY 2017|
|A & above||29.26%||39.27%|
|*External rating distribution of advances above Rs. 5.00 crore.|
Along with steps, new products like supply chain financing, cash management and electronic platform for trade finance are being designed to meet the needs of corporate customers. One of these products viz. supply chain financing is under final stage of testing before final rollout.
Domestic Foreign Business (DFB) division of Corporate Banking vertical takes care of the requirements of cross border remittances and trade from / to India and supports Authorized branches dealing with Forex business.
MSME is a vital sector to the nation’s economy in providing employment to millions of people. Our Bank supports credit to this sector through 54 SME Loan factories and wide network of branches. MSME advances of Bank were Rs. 58,090 crore as of -March 31, 2017. The MSME advances as of March 31, 2017 contributed 19.50% to the gross domestic advances of our Bank. The advances to Micro & Small enterprises were at the level of Rs. 50,413 crore. Our Bank is participating actively in the Pradhan Mantri Mudra Yojana (PMMY) scheme and has achieved 16% YOY growth in number of accounts under Micro Enterprises category as against the target of 10% stipulated by Prime Minister’s Task force.
As a part of business transformation, Bank is in the process of revamping the structure of SME credit with clear focus on Sales and Processing teams, concomitantly tied up strategic partnership with Fin-tech and e-commerce players for end to end solutions and credit. Key elements of our Bank’s strategy are MSME vertical to focus on priority sector loans (non-agriculture) and handle Government programs such as Stand Up India; design targeted product programs (specific to particular geographies and industries) for traditional small and medium enterprise customers; build products leveraging the Bank’s data (e.g. CA balances, POS transaction data, repayment history of retail loans taken by MSME owners) to underwrite clients primarily targeting micro enterprises; tap into the growing digital lending opportunity by building a completely online MSME lending platform; develop products to specifically target current and emerging ecosystem-based opportunities in the space of supply chain finance and e-commerce seller finance; focus on acquisition of and deepening of high-value MSME relationships by creating a dedicated RM vertical for MSME; driving FX sales to MSME clients through dedicated sales teams etc.
Our Bank has entered into tie up with Fintech companies as these partnerships will help our Bank to create better, faster, cheaper services to the MSME customers and open windows for value additions in terms of better due diligence, marketing opportunities and speedier service delivery.
Retail Credit of our Bank is primarily dispensed through 71 Specialized Mortgage Stores (SMSs) and wide network of branches. During the year, the Bank opened -5-new SMSs at Panaji, Vapi, Jabalpur, Udaipur and Gandhinagar. Bank carried out review and redesign of Retail Loan Products such as increase in loan limits/Income Multiplier/FOIR/Risk based pricing of home loan/auto loan/mortgage loans linked to Credit Bureau score, Centralization of Retail credit process through setting up a Centralized Processing Center (CPC) at Baroda (since relocated at Gandhinagar) on Pilot basis for three Zones of the Bank. The Bank has put in place a policy for sourcing / joint sourcing of home loans through DSAs. In addition, Bank empanelled four Digital DSAs for purpose of canvassing quality Home Loan/ Personal Loan & educational loan proposals. The Bank also put in place a policy for sale & purchase of retail assets through direct assignment of cash flows & underlying Securities. Bank also added few more products like takeover of home loans with an option of top up facility, Overdraft against property to non-individuals, preapproved top up loan to existing home loan borrowers as well as liability customers etc. which has helped in increasing the retail loan portfolio of the Bank during the year.
During the year, Bank also launched new product ‘Debit Card EMI for Debit Card Holders’ in 25 identified cities under which customers can purchase products from various online e-commerce portal stores.
Major innovations thus undertaken and underway under retail credit were building customized credit scoring models, supported by simplified loan pricing policy designed with competitive rates; tailored products launched to cater to customer needs; dedicated sales team being deployed to build sales culture; pre-approved limits for home loans, personal loans and car loans driven by analytics; top-up and simplified balance transfer program for Home Loans; LAP extended to partnerships, private limited companies with minimum financial requirements; Debit Card EMI product being rolled out and partnerships being forged with DSAs to drive business
Our Bank’s retail loan book consists of five key products viz. home loan, auto loan, education loan, traders loan against property and mortgage loan. These constituted 84.71% of total retail loans portfolio as of March 31, 2017. Home loans grew by Rs. 5,200 crore (20.83%) reaching a level of Rs. 30,168 crore and mortgage loans grew by Rs. 1,767 crore (92.35%) reaching a level of Rs. 3,681 crore as of March 31, 2017. Auto loan, traders loans and education loans were at a level of Rs. 4,394 crore, Rs. 8,835 crore and Rs. 2,054 crore respectively. The other retail loan products included personal loan and other miscellaneous loans.
Total Retail Loans stood at Rs. 57,994 crore as of March 31, 2017 and constituted 19.5% of the Bank’s domestic advances.
Rural and Agricultural Lending
Our Bank has always been a front runner in the area of Priority Sector and Agriculture lending. It has been harnessing the potential of the rural market through its wide network of 1,812 rural branches and 1,523 semi-urban branches. During FY 2017, our Bank has opened 62 new branches in rural and semi urban areas.
Our Bank is the Convener of State Level Bankers’ Committee (SLBC) in the states of Uttar Pradesh and Rajasthan. Bank shoulders the Lead Bank responsibility in 48 districts of India comprising of 14 in Gujarat, 12 in Rajasthan, 15 in Uttar Pradesh, 2 each in Uttarakhand, Madhya Pradesh and Bihar and 1 in Delhi.
Priority Sector Advances of our Bank increased from Rs. 1,13,121 crore as of March 31, 2016 to Rs. 1,27,672 crore as of March 31, 2017 and formed 41.66% of the Adjusted Net Bank Credit (ANBC). The Direct Agriculture advances of our Bank increased to Rs. 29,952 crore with an absolute growth of Rs. 1,858 crore (6.61%) during the year. The total agriculture advances of our Bank has grown by Rs. 10,475 crore and reached Rs. 47,297 crore as of March 31, 2017. The Total Agricultural Advances were at 18.02% of ANBC.
Under ‘Baroda Kisan Credit Card’, our Bank issued as many as 0.70 lakh Credit Cards during the financial year. Baroda Kisan RuPay Card, an ATM enabled smart card, was issued to 12.74 lakh farmers. Bank financed as many as 2,33,876 new farmers during FY 2017 granting them loans worth Rs. 2,832 crore. As a part of its microfinance initiatives, Bank credit linked 26,100 Self Help Groups by granting loans amounting to Rs. 263 crore during FY 2017.
As a part of business transformation, the focus areas under the Agriculture and Rural Strategy are to enable farmers to increase their productivity, increased remuneration/ realization and to work with full set of alliance partners. Four Pillars of our Bank’s Integrated Rural Banking Strategy are (i) Enable increased utilization of bank accounts; Instant account opening enabled by Aadhar seeding, PIN generation through automated machines and spot debit card issuance and Expansive cash-in cash-out network comprising 20,000 BCs and 4 lakh POS terminals (ii) Move beyond simple credit (e.g., crop loans) to a more diversified rural lending strategy and focus on new product categories across rural customer segments, namely, farm mechanization, horticulture loans, crop loans, warehouse receipt financing and adopting a community based lending model for the small farmers and communities (iii) developing an ecosystem of alliances and partnerships to better serve the rural economy like financial services providers: Agri finance companies, insurance companies, private equity firms; seed and fertilizer companies, warehouses and cold-storages, Agri universities, drip irrigation companies etc. and (iv) set-up an integrated rural banking organization within the Bank, that caters to the agri and financial inclusion initiatives
Strategic partnerships entered with key agri players for building the rural ecosystem include RML AGTECH, a technology company for providing technical knowledge to the farmers right from crop selection to marketing, so as to improve the productivity and profitability of the farmers; leading micro irrigation companies viz. Netafim Irrigation India Pvt. Ltd and Jain Irrigation Systems Limited to provide credit to farmers to purchase micro irrigation equipments; tie-up with five collateral managers viz. Edelweiss Agri. Value Chain Ltd, Shree Shubham Logistics Limited, Sidhivinayak Agri Processing Pvt. Ltd, CNX Corporation Ltd and Arya Collateral Warehousing Services Pvt. Ltd to finance farmers to prevent distress selling; tie-up with dairy companies viz. Heritage Foods Limited & Kwality Limited to finance the farmers for purchase of milch animals. Tie-up with PSG College of Arts & Science for conducting research activities and also providing training to the villagers for increasing productivity of the farmers.
Advances to SC/ST Communities during FY 2017: The outstanding advances to SC/ST communities went up from Rs. 5,298 crore as of March 31, 2016 to Rs. 5,312 crore as at March 31, 2017. SC/ST communities accounted for a share of 14.19% in the total advances granted to weaker sections by the Bank. Furthermore, a special thrust is laid by our Bank in financing SC/ST under various government sponsored schemes namely National Rural Livelihood Mission (NRLM) etc.
Stand-Up India: The Stand-Up India initiative of the Government is aimed at promoting entrepreneurship among SC/ST and Women segment. In FY 2017, the Bank sanctioned a total number of 1,063 loans under “Stand Up India” scheme. Total amount sanctioned under the scheme as of March 31, 2017 was Rs. 223.59 crore.
Financial Inclusion (FI)
To provide universal banking services to all sections of the society including deprived ones at an affordable cost, our Bank has taken it as not just a social commitment, but also to tap the business opportunities through sustainable ICT based delivery channels.
Towards promoting financial inclusion along with digital programme of the Government, our Bank has taken a number of initiatives which include among others:
- Digitized account opening by instant opening of accounts enabled by Aadhar seeding, with PIN generation through automated machines and spot debit card issuance;
- A comprehensive mobile banking solution supporting the entire rural community to eliminate cash;
- Seeding of Aadhaar through alternative delivery channels like ATM, SMS, Internet, BC points;
- Deployment of micro and table-top ATMs in rural areas through BCs;
- Massive expansion of the BC model;
- Driving SHG/ JLG-based lending;
- Expanding the scope of services of BCs like mobilizing deposits, follow up & recovery in small loan accounts including NPA & PWO accounts and providing special incentives for same to enable them to remain financially viable;
- Enabling enrolment of micro insurance schemes viz. PMSBY & PMJJBY through internet banking and SMS etc.
The products/services offered at BC Points are basics savings bank deposit account opening with in-built Overdraft facility, instant account opening / E-KYC account opening, cash withdrawal, cash deposit and funds transfer, Aadhaar based cash withdrawal, deposits and fund transfer (AEPS), Card based cash withdrawals, IMPS (Immediate Payment Service), deposit in current account, cash credit account, overdraft account, loan account, term deposit account, micro insurance – PMJJBY and PMSBY, Aadhaar Seeding, Mobile Seeding, Atal Pension Yojana etc.
Our Bank has adopted various models for providing banking services under financial inclusion viz. Information and Communication Technology (ICT)-POS based BC model, Kiosk based BC Model and Brick and Mortar branch.
Urban Financial Inclusion: Besides people living in rural areas, large population of urban poor including migrants from villages to urban areas who have no access to formal banking services. In order to bring them under the purview of formal banking system, our Bank has deployed 9,177, urban BCs under Kiosk Model at various locations across the country.
Highlights of performance under Financial Inclusion during the year
- Our Bank has deployed 15,609 BCs out of which 4,931 BCs are deployed in SSAs. All 21,895 villages allocated to the Bank have been covered through various models out of which 20,080 are covered through BC model, 1815 through brick and mortar branches.
- Bank surpassed target set for FY 2017 in respect of total BC outlets and individual BC deployed with achievement 107.09% & 125.71% respectively.
- Bank achieved 92.19% and 126.70% of the targets for 2016-17 for opening of Basic Saving Bank Deposit (BSBD) accounts and amount in such accounts through branches and 165.24% and 184.72% of such targets through BC points.
- Bank achieved 147.17% and 145.23% of the targets for 2016-17 for number of transactions and amount of transactions in FI accounts opened through branches and 368.60% and 421.31% of such targets through BC points.
- Bank achieved 88.41% and 82.48% of the targets in respect of Overdraft accounts opened and amount disbursed in such BSBD accounts.
Pradhan Mantri Jan Dhan Yojana (PMJDY): PMJDY is a comprehensive financial inclusion plan wherein the ambit of financial inclusion is enlarged to make it more meaningful. Every household having a bank account gets access to banking and credit facilities which helps in enabling them to secure their savings in a formal banking system and also to come out from the habit of raising funds from informal sources. Every person who opens the account under PMJDY gets a RuPay debit card and is eligible for accidental insurance cover of for Rs. 1,00,000/-. After six months of satisfactory conduct of account, the account holder becomes eligible for an overdraft facility up to Rs. 5,000/-. The account holders who opened account between 15.08.2014 to 31.01.2015 got additional term life insurance of Rs. 30,000/- from LIC. Financial Literacy is another important aspect of PMJDY.
Bank has 196.40 lakh accounts under PMJDY as of March 31, 2017 with deposit balance of Rs. 4,747 crore as against 125.29 lakh accounts with balance of Rs. 2,500 crore as of March 31, 2016, showing an increase of 56.76% in number of accounts and 89.88% in deposit balances. Bank has issued 184.78 lakh RuPay cards to eligible PMJDY account holders as of March 31, 2017 as against 118.91 lakh card issued as of March 31, 2016. The position of Aadhaar seeding of such accounts as of March 31, 2017 was 72.87% as against 44.37% on March 31, 2016. As of March 31, 2017, Bank has enrolled 15.57 lakh customers under PMJJBY (life insurance) and 44.37 lakh under PMSBY (accidental insurance).
Performance of RRBs Sponsored by Bank of Baroda
Our Bank has sponsored three Regional Rural Banks (RRBs) viz. Baroda Uttar Pradesh Gramin Bank, Baroda Rajasthan Kshetriya Gramin Bank, and Baroda Gujarat Gramin Bank. The aggregate business of these three RRBs rose to Rs. 49,854 crore as of March 31, 2017 from Rs. 42,347 crore as of March 31, 2016, registering a growth of 17.73%. The three RRBs together posted a Net Profit of Rs. 202.31 crore during FY 2017 against Rs. 168.54 crore the previous year. The Net Worth of these RRBs put together improved from Rs. 2,019.56 crore as of March 31, 2016 to Rs. 2,221.87 crore as of March 31, 2017.
Our Bank has international presence across 24 countries through 107 branches/offices. Bank’s has 59 branches in 15 countries while 47 branches operate through Bank’s 8 Overseas Subsidiaries. In addition, Bank has one Representative Office in Bangkok. Bank has two Joint Ventures viz. Indo Zambia Bank Ltd. in Zambia having 32 branches and India International Bank (Malaysia) Bhd. in Malaysia having one branch. During FY 2017, the Bank opened two new branches in its overseas subsidiary in Uganda at Lugazi and in Ghana at Kumasi. In October 2016, Tsim Sha Tsui (TST) branch in Hong Kong was merged with Central Branch in Hong Kong. Bank has presence in world’s major financial centers in New York, London, Singapore, Hong Kong, Brussels and Dubai. Bank has received the license from RBI and is in the process of opening an International Business Unit (IBU) branch in India at GIFT SEZ in Gandhinagar, Gujarat.
In the international arena, our Bank pursues strategy of driving growth and value by meeting the international banking requirements of Indian corporates; catering to India-linked cross-border trade flows for Indian and locally incorporated companies/firms and being preferred Bank for NRIs/ persons of Indian origin. To drive value, our Bank has plans to improve internal operations by initiatives such as setting up of a centralized back-office; realigning the structure into geographic clusters focused on business development while strengthening controls and compliance; boost local talent in geographies of operations and building digital capabilities for cost efficiency.
As of March 31, 2017, our Bank’s total business from international branches was Rs. 2,67,318 crore and constituted 27.14% of the global business. Total deposits were Rs. 1,61,583 crore while net advances were Rs. 1,05,735 crore. It was a year of consolidation for the international operations. The operating profit of international operations stood at Rs. 2,039 crore and net profit at Rs. 560 crore in FY 2017. Bank has calibrated the growth and reoriented its strategy of its international operations in line with the new global environment. It focused on rebalancing the portfolio with a view to shed the low yielding assets and increasing profitability. The year also saw liquidation of around Rs. 10,000 crore of asset portfolio built against special FCNR (B) deposits scheme in the period from September to November 2013.
As of March 31, 2017, of the total International loan-book, 48.14% comprised of Buyers’ Credit/BP/BD portfolio where the exposure was on the banks. 22.53% of the exposure was India related corporate by way of ECB/ Syndicated Loans. Exposure to non-Indian entities by way of syndicated loans was at 4.62% and remaining 25.71% exposure was by way of local credit.
During the year, Bank repatriated surplus capital funds to the tune of US$ 138 million from the overseas branches for optimum deployment of the capital.
Bank’s overseas subsidiaries continued to perform well and have focused on sustaining healthy asset quality and improved profitability.
The Bank has initiated steps for consolidating and reorganizing its International operations. It continued to sharpen its focus on managing the risks in international operations in the emerging global environment. Bank is also considering rationalizing its overseas operations including exiting from some centres which are not strategic in the current environment.
Our Bank is planning to carve out retail business in UK in the form of a 100 % owned subsidiary, which will give boost to the retail business of the Bank as well as comply with the local regulatory guidelines.
Our Bank operates its Treasury operations from state of art dealing room at its Corporate Office in Mumbai. Treasury handles domestic treasury operations and is a prominent player in various markets e.g. Foreign Exchange, Interest rates, Fixed Income, Money Market, Derivative, Equity, Currency and Interest Rate Futures and other alternate asset classes. Bank is offering various services like interest rate swaps, currency swaps, and currency options, forward contracts through advanced dealing systems and through Authorized branches dealing in Foreign exchange across India.
Total size of the Bank’s Domestic Investment Book as of March 31, 2017 stood at Rs. 1,22,169 crore. The share of SLR securities in total investments was 89.44%. The per cent of SLR Securities to NDTL at March 31, 2017 was at 23.57%.
Bank has been able to capitalize on the opportunity offered by higher yields in the first half of the year and has added bonds to the portfolio. Bank managed its portfolio efficiently and maintained average yield on SLR investment as of March 31, 2017 at 7.76 %. During FY 2017, Bank’s realized profit on Sale of Investment and Foreign exchange earnings are Rs. 2,618 crore and Rs. 976 crore respectively and earned Rs. 12,656 crore as Interest/ Discount.
Bank’s Treasury mid-office monitors market exposures and limits fixed by the Bank on real time basis. The Risk management parameters, including Value-at Risk (VAR) are used to measure market risk on all portfolios. The VAR numbers are regularly back tested for evaluating the strength of the model. Stress testing is done on various investments and currency positions.
Government Business forms an important part of the business strategy of the Bank which caters to the needs /requirements of Govt Ministries & PSU besides payment of Pension on pan India basis. Our Bank is an accredited banker to the Ministry of Health and Family Welfare. Some important functions undertaken by the vertical include collection of various Taxes, Treasury operations in Gujarat, deposit schemes like senior citizens savings scheme, Sukanya Samriddhi Yojana, KVP, NSC & Public Provident Fund Accounts, investment opportunities in Government Sovereign Bonds, Gold Monetization Schemes and social security schemes like APY & NPS, collection bank role for Indian Railway etc.
Bank has entered into partnership / alliances with some key projects of national importance in FY 2017. The Bank received approval from Union Government for extending its services as payment & settlement banker for Government e-Market Portal (GeM Portal), maintaining their pool account and advising bank for e–BGs, implementation of which is under progress. Bank is also getting associated with Government of India’s prestigious e-NAM portal covering pan India 7100+ APMCs to act as payment & settlement banker to the portal and also to tap the emerging business opportunities in agri & allied activities in NAM eco system. Bank is set to offer its services of e-LC and Cash Management Services to the Ministry of Defence.
Bank actively participated in various drives/ campaigns under Union Government’s Digital India initiative. Bank is one of the few banks authorized to undertake Goods & Service Tax (GST) collection which is scheduled to be implemented from July 01, 2017. Bank has received accreditation as well as aggregator status under Non Tax Revenue Portal (NTRP) / Public Funds Management System (PFMS).
Bank is serving more than 2.50 Lakh pensioners. During the year, Bank opened 91,954 new PPF accounts. Our Bank was adjudged as the Best Performing PSU Bank by PFRDA for opening 2,03,849 Atal Pension Yojana (APY) accounts during the year.
Total earnings from this vertical were Rs. 69 crore during the year.
During FY 2017, our Bank added two new tie-up partners in standalone health insurance and general insurance each in addition to existing partners in mutual fund, life insurance and general insurance. In addition, Bank developed Baroda m-invest; a mobile based investment App for mutual funds for providing paperless investment experience to the customers. Bank added 1,25,000 new SIPs during FY 2017. In life insurance, apart from PMJJBY policies, 1.79 lakh lives were covered under insurance coverage. Bank earned Rs. 58.85 crore during the year through sales and distribution of mutual fund and insurance products.>
Management of non performing assets (NPAs) and other stressed assets continues to be one of the biggest challenges facing the Indian banking industry impacting the profitability of the banks. To tackle the mounting stressed assets, RBI has undertaken several initiatives. These include creating an empowered Joint Lenders’ Forum (JLF) for identification of incipient stress, introducing restructuring mechanism under the Strategic Debt Restructuring (SDR) scheme, enabling flexible refinancing under 5:25 scheme, easing norms around sustainable structuring of stressed assets (S4A), and revising guidelines for their sale.
FY 2017 had been a challenging year for our Bank also in terms of stress in asset quality. The movement in stressed book of the Bank during the year was as under:(Rs crore)
|Title||FY 2016||FY 2017|
|Gross NPA Ratio||9.99%||10.46%|
|Net NPA Ratio||5.06%||4.72%|
|Additions to NPAs||27,828||13,312|
|Recovery / Upgradations||2,015||6,766|
|Write offs including TWOs||1,554||4,348|
|Recoveries in Written off Accounts||221||327|
|Provision Coverage Ratio (Including TWO)||60.09%||66.83%|
|Provision Coverage Ratio (Excluding TWO)||52.11%||57.68%|
The breakup of advances portfolio of our Bank as per asset classification as of March 31, 2017 was as under-(Rs crore)
|Asset Category (Gross)||March 31, 2016||March 31, 2017|
|Gross NPA comprising of:|
|Total Gross NPA||40,521||42,719|
Our Bank has developed a comprehensive organizational structure for recovery and credit monitoring across different levels and taken a number of measures to strengthen systems and processes to manage stressed assets which include:
- Set up of legal war-room for real-time tracking of recovery proceedings and to aid accelerated decision making (~140 high value suit-filed accounts being monitored)
- Strengthening Bank’s legal/ fraud investigation capabilities and ability to handle recovery cases enhanced through onboarding of external experts
- 39 accounts identified for action under Indian Bankruptcy Code (IBC), of which, 13 cases have been filed in NCLT and tracked through war-room
- ‘Solution provider’ cell setup to provide resolution strategies for stressed accounts, with currently 65 large NPA accounts with exposure above Rs. 100 crore under process of being resolved
- Collections call center setup (~200 agents) for retail loans with multi-lingual support and augmented with feet-on-street staff to drive on-ground collections
- 900-member strong Bank taskforce deployed for NPA and potential NPA recovery in small accounts
- Business Correspondents incentivized for crop loan collections
In addition Bank has in place the following measures on ongoing basis towards recovery of non performing assets:
- Assigning Nodal Officer at each of DRT for follow-up of legal cases on daily basis so as to minimize the delay in obtaining decrees and execution and maximize recoveries.
- For recoveries in all DRT Suit filed NPA accounts, the assets charged to the Bank are sold through e-auction to get fair market value.
- Recovery Agents for assisting in taking possession of assets & other pre/post sale activities
- Consultants to liaise with Official Liquidators (OL) to get the recoveries realized by OLs.
- Maximum participation in National Lok Adalats is ensured to expedite recovery in suit filed & non suit filed NPA accounts.
- Recovery Camps were regularly conducted by our Bank’s branches to recover & reduce long pending cases and expedite recoveries in small accounts.
- Special incentive scheme named “Sankalp-X” Scheme was launched during the year to intensify recovery efforts of smaller value accounts with an outstanding up to Rs. 25 laks. Cash recovery made during FY 2017 under the scheme was at Rs. 116.88 crore.
- Monitoring of large value of NPA accounts of Rs. 1 crore and above directly from Corporate Office.
While our Bank has taken steps to strengthen systems and processes to manage stressed assets, it has been proactive in providing against non performing assets. Provision Coverage Ratio (PCR) of the Bank including provision held for technically written off (TWO) accounts was 66.83% while PCR excluding provision for TWO accounts was 57.68%. With better provision coverage ratios, our Bank is better positioned to take decisive actions for resolution of stressed assets issue.
The Insolvency and Bankruptcy Code, 2016 and amendment of Banking Regulation Act, 1949 Enactment of the Insolvency and Bankruptcy Code, 2016 by the Parliament and promulgation of the NPA ordinance amending Section 35 A of Banking Regulation Act and empowering the RBI to direct banks to tackle the NPA problem by either intervening directly or by appointing oversight committees are latest important steps taken by the Government to address the issue of NPAs in the banks. The Insolvency and Bankruptcy Code aims to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals. It provides for a time bound Corporate Insolvency Resolution (CIR) Process for all corporates prior to liquidation, during which creditors have the ability to consider measures to resolve the financial distress of the corporates and to maintain and preserve its continued business operations by framing a plan referred to as a resolution plan. A period of 180 days has been prescribed for the purpose of completion of the entire CIR process with a further extension of 90 days in exceptional cases.
The code provides resolution with minimum involvement of NCLT and other authorities. The entire resolution will be carried out by the professionals (Insolvency Professionals) and the committee of creditors will have pivotal role who will decide the direction of resolution process. Further, the secured creditors will have priority over Crown Debts (Government Dues). The Code will help the banks to reduce time frame for resolution of NPAs and getting fair value for assets.
Our Bank has identified 39 accounts where Insolvency Resolution Process can be initiated under the Code of which, 13 cases have been filed in NCLT.
Our Bank has the system of monitoring of advance accounts at various levels (Branch/Region/Zone and Corporate) to prevent slippages and to take timely corrective actions to improve asset quality. Credit Monitoring vertical at the Corporate Office enables early identification of weakness/ potential default/incipient sickness in the advance accounts for initiating suitable and timely corrective actions for preventing impairment in advance accounts / deterioration in credit quality. Accounts with incipient stress are identified under Special Mention Accounts (SMA) categories of SMA0, SMA1 and SMA2.
All SMA2 accounts are followed up for the formation of the Joint Lenders Forum (JLF) and options to resolve stress under Corrective Action Plan are explored by way of rectification, restructuring and recovery. The vertical also undertakes identification of suitable cases under restructuring/ Strategic Debt Restructuring (SDR)/ 5:25 refinancing/ Scheme for Sustainable Structuring of Stressed Assets (S4A).
The Position of Restructured Assets and SDR and S4A Scheme are as under:(Rs crore)
|Sr No.||Asset Categorization||Total Restructured advances||Of the total restructured advances|
|March 31, 2017||Accounts under SDR||Accounts under S4A|
|March 31, 2017||March 31, 2017|
|1||Restructured Standard Advances||No.of Borrowers||11,820||12||9|
|2||Restructured NPAs||No.of Borrowers||26,129||24||1|
|3||Total Restructured Advances||No.of Borrowers||37,949||36||10|
The position of Assets under Flexible restructing (5/25 scheme) are as under:(Rs crore)
|Particulars||Year ended March 31, 2017|
|Number of borrowers under flexible structuring||11|
|Amount of loans taken up for flexible struturing||5,932.59|
Follow up of accounts of Rs. 1 crore and above is done by way of Monthly Monitoring Reports for taking timely corrective actions. The monitoring is carried on line web based platform. Based on the MMRs, various parameters like information on short reviews, overdues, credit turnovers, credit ratings, pending stock statements, observations in stock audits and credit audits, pending legal audits, insurance coverage and LC’s devolved and Bank guarantees invoked are monitored. Follow up actions are taken for ensuring expeditious review of accounts, rectification of irregularities, compliance of terms and conditions in high value advance accounts for maintaining the health of credit portfolio.
Bank is in the process of implementing Early Warning Signals System solution which would receive data from Bank’s internal systems viz. core banking system, risk rating system as well as external sources like internet, social Media, credit bureaus, rating agencies and other external sources to provide early warning signals for monitoring of credit and taking timey remedial actions.
Information Technology (IT)
Our Bank has best of technology infrastructure and a stateof- the-art Data Centre conforming to Uptime Institute Tier-3 standard and a Disaster Recovery Site in different seismic zone with redundancy built in every single point of failure to ensure uninterrupted banking service delivery to customers. In addition to the Disaster Recovery Centre, Bank has also implemented the Near Disaster Recovery Centre to ensure Near Zero Data Loss as part of its Business Continuity Planning and Disaster Recovery strategy.
Bank has been undertaking regular capacity planning and upgrades to support growing demand of business at various service delivery channels. Bank has implemented Enterprise Management System and modules have been deployed to effectively manage and monitor Bank’s growing IT infrastructure.
Bank has deployed a centralized IT architecture to provide the Core Banking Solution (CBS) and other application platform to all its domestic branches and 23 overseas territories, providing ease of management & monitoring and optimization of resources. Bank’s Regional Rural Banks (RRBs) are also on the CBS Platform with delivery channels. Bank has initiated the upgradation of Core Banking Solution (CBS) to Finacle 10.x and e-banking upgradation to 11.x.
Bank has initiated implementation of following solutions to provide new products to the customers and digitizing the core operating processes:
- Supply chain finance solution to provide integrated commercial and financial solutions to the supply and distribution channels of corporates. Supply chain financing would support to the commercial relationship between the clients and their suppliers and customers.
- A new and comprehensive retail Internet Banking Solution across account services and delivery channels which will help in driving the Digital India initiative. The solution would provide the customers with access to the new state-of-the-art payment and communication infrastructure.
- Loan Management System to streamline loan origination and tracking process. The solution will enable end to end processing of loan proposals using image based workflow and Business Process Management (BPM) to digitize the processes and improve TAT.
- Fraud Risk Management System (FRMS) solution which will provide enterprise wide fraud detection and prevention covering the risks associated with indicative list of channels and applications under online and/ or offline mode. The solution covers prevention and detection of frauds at different process stages of the below mentioned applications and channels for all types of transactions.
- Early Warning Signals System (EWS) solution which would receive data from Bank’s internal systems viz. core banking system, risk rating system as well as external sources like internet, social Media, Information from credit bureaus, rating agencies and other external sources to provide early warning signals for monitoring of credit and taking timey remedial actions.
- Bank is also creating analytics center of excellence to reap benefits of analytics capabilities across various line of businesses such as marketing, planning, retail business, risk, fraud, security and compliance.
- Bank has embarked upon the journey of cloud adoption. In this direction Bank has implemented public and hybrid cloud services for many communication and collaboration technology solutions. Bank has also implemented archival solution for email communication to strengthen the compliance.
- Bank has continuous endeavor to bring more value to its customers by way of implementing technology innovations. In this direction, Bank is working with technology innovations such as Robotics Process Automation, Block Chain Technology and Artificial Intelligence to bring more efficiency and transparency in the business process.
In addtion to the above, Bank implemented Unified Payments Interface (UPI) which offers architecture and a set of standard Application Programming Interface (API) specifications to facilitate online payments. It aims to simplify and provide a single interface across all NPCI systems besides creating interoperability and superior customer experience.
Bank has also implemented Internet Payment Gateway (IPG) which is a payment and settlement system for a merchant to collect payment from their customer for online sale of products or services.
For liabilities account opening, our Bank has implemented scan based account opening which scan forms and exports through Omniscan 3.1 instead of sending the physical copy of the same. The purpose of this migration project is to bring down the TAT of account opening process.
Over the years, Bank has built a strong foundation of cyber security comprising a comprehensive set of information security measures to counter against cyber-attacks. To further strengthen security posture, Bank is in process of implementing advanced technology solutions in the area of Network Security, Server Security, Application Security and Security Analytics. Bank’s Data Centre and DR operations are certified to ISO27001 standard which is a set of international best practices in the field of information security and provides assurance to all the stakeholders.
Bank has captive Security Operations Centre, which is equipped with advanced tools to monitor Cyber security events. Security operations centre operates on 24X7 basis and continuously monitors activities on Servers, Network devices, Security devices, Critical databases etc. for security violations. Periodic security assessments are conducting through in-house qualified professionals as well as outside auditors. Identified vulnerabilities are quickly closed.
Bank monitors phishing websites and fraudulent mobile apps. In case of observance of any phishing site or fraudulent mobile app, the same is taken down. This protects our customers from sharing their sensitive information and credentials on fake websites and on rogue mobile applications.
Bank is in touch with Governmental agencies and industrial bodies such as Cert-In, NCIIPC, RBI-CSITE, IDRBT etc. and receiving threat/vulnerability advisories from such bodies and quickly acting upon it. To ensure preparedness against probable cyber threats, Bank is actively participating in the cyber security drills conducted by Cert-In, IDRBT, RBI-CSITE.
Our Bank’s Digital Banking team has been making significant progress as part of our efforts to take forward the Bank’s Digital Transformation which is taking place against the backdrop of several growth stimuli being driven by the Government such as Start up India, Digital India and Make in India. Our favourable demographic dividend along with deepening of mobile penetration has created the enabling factors to usher in the Digital Revolution in our country, which has disrupted the banking and financial services landscape. As more and more of our customers look to transition to cashless modes of payment, Bank seeks to handhold and guide the customers through this journey.
Bank has been at the forefront of innovation through the following:
Digital Portable Branch
Our Bank has evolved an innovative concept of pre-fabricated banking outlet equipped with Self Service machines to meet routine customer requirements and space for 2-3 officials/ BCs for a face to face interaction/ handholding. These outlets are highly secure, conducive to varying weather conditions and are conceptualized to offer 24x7 convenient banking facilities. Self Service machines are designed to offer Instant Account opening, Debit Card dispensation, Cash withdrawal, Passbook updation, Funds transfer, Utility Bill payment, Account based enquiry services etc.
Bank opened the First Digital Portable Branch in September 2016 at Bhagesara Village in Pratapgarh District, located in the Sultanpur Region in the state of Uttar Pradesh. This Digital Branch has the state-of-the art digital technology available for usage of the residents in the hinterland - an Automatic Account Opening Machine, a Pass Book Printer and an ATM. This innovative initiative of our Bank has been lauded by the local people and is being expanded further in this financial year. This was achieved on the back of well co-ordinated team work given the leadership of our Zonal, Region and Branch office in Eastern UP, supported by the Corporate Office departments including Digital Banking, Facilities Management and Technology.
Account Opening Kiosk
In order to provide hassle free and convenient banking services through alternate delivery channels to our customers by leveraging technology, our Bank has launched an innovative Self Service Kiosk called Account Opening Kiosk with a Debit Card Dispensing Kiosk. Our Account Opening Kiosk is a complete digital process which facilitates instant account opening and issuance of Non personalized debit card to our customers. The Kiosk enables digitization of the account opening process as per our standard application format with a self-service option provided to our customers to open the account instantly and thereafter avail of the non-personalized debit card instantly with Green PIN facility.
Our Digital Banking team continues to focus on strengthening digital and alternate delivery channels to our customers through the revamp of our proposition through the following channels:
- ATMs, which will continue to support the cash needs of our customers
- E-Lobbies which are being christened as ‘Me Lobby’ having upgraded facilities, which includes Baroda Non- Stop Lobby comprising five self-service machines viz. Cash Recycler, ATM, Multi-Function Kiosk, Passbook Printer and Digital Signage System for providing 24x7 banking services. Our Bank has also introduced “Baroda Express – 24X7” lobby, which is a lean version of the Baroda Non-Stop Lobby for smaller centers by refurbishing the existing ATMs and providing additional services such as Cash Recycler and Passbook Printer
- Internet Banking platform Baroda Connect, which has been enriched with multiple features to provide ease of use and better control for our customers
- Mobile Banking - Our completely revamped Mobile Banking application M-connect Plus with a 360 Degree view of Customer Accounts, has been launched this year which provides a robust, secure, scalable and feature rich innovative experience to our customers.
- Mobile Wallet - In our pursuit to enhance customer convenience, our Bank has launched “Baroda M-CLIP”, our Bank’s Mobile Wallet in July 2016. This is a simple, secure and easy to use mobile application for Online Purchases. Features are Person to Person (P2P) fund transfer, Mobile/DTH/Data Recharge, Gift cards of various brands, bill payments and other such needs.
- Internet Payment Gateway - Our Bank is in the process of owning the entire Internet Payment Gateway infrastructure, to provide an electronic payment platform Baroda E Gateway to its merchants for e-commerce business by enabling payment collection using credit card/ debit card and net banking.
- Bharat Bill Payment System (BBPS) - This is an initiative of national importance which offers real time bill payment service to customers/ non customers across geographic and demographic lines. BBPS is a tiered platform wherein our Bank participates as Customer Bharat Bill Payment Operating Units (Customer BBPOU) through various channels. BBPS is a simple, secure and easy to use bill payment platform which offers interoperable and accessible bill payment services to customers with instant confirmation of receipt of payment.
- UPI for retail payment systems – Our Bank has also launched Baroda MPAY- UPI, which is a new initiative of National Payments Corporation of India (NPCI) that aims to simplify and provide a single interface across all existing retail payment systems in India.
- Global Contact Center - Our Bank has also operationalized state-of-the-art Contact Centers at GIFT City as well as at Bengaluru. Our Contact Centre provides most of the banking services through the telephone channel through a Toll Free Number from anywhere in the country and globe. A dedicated Toll free number has been provided for Pradhan Mantri Jan Dhan Yojana (PMJDY) and other Financial Inclusion customers.
Our Bank has forged 15+ partnerships across the financial services spectrum: Lending, payments, wealth management, technology, e-commerce etc., with the intent to make our Bank of Baroda the preferred partner for Fintech firms.
The Sayajirao Gaekwad Fellowship Program instituted by our Bank seeks to promote Entrepreneurs in diverse fields of Fintech, Agritech, E- Commerce etc. in support of Standup India and Startup India initiatives
Back Office Operations
To improve its service delivery and quality in the back office support processes while improving controls and compliance and as a strategic step towards building capabilities for the future, our Bank’s operating architecture is being revamped through digitization of processes and centralization of backoffice operations. Our Bank is currently building a state-ofthe- art ‘Shared Services Centre’ at GIFT City with multiple floors. Incorporated as a subsidiary Baroda Global Shared Services Limited, it is led by industry experts and top-notch talent both in-house and external.
Towards this strategic initiative, a 24x7 centralized contact center catering to domestic & international operations has already been established in GIFT City. Centralized mortgage processing with scan-based workflow has also been implemented for 3 zones and operational. In addition, Bank has implemented scan-based account opening process across 1,300+ branches in 8 zones. A Trade Finance Back Office for Gujarat branches is also operational with enhanced compliance controls on trade and remittance transactions.
More geographies would be added gradually with the optimization of processes and building up of capabilities. Existing Regional Back Offices (RBOs) mapped to 5,375 branches of our Bank as of March 31, 2017 would also operate from a central place at Shared Service Center.
Cash Management & Currency Chest
Our Bank has -96- Currency Chests of which -5- currency chests (at Gwalior, Samtanagar, Gaurigunj, Delhi Road Alwar & Asilmetta) have been opened during the financial year ended March 31, 2017. These are used for effective cash management in the Bank besides vaulting cash on behalf of Reserve Bank of India. All the currency chests as well as branches are provided Note Sorting Machines (NSMs). In addition, 5 nos. of hand held currency authenticating devices have also been provided to all Currency Chests for preventing circulation of counterfeit currency notes. During recent demonetization exercise, all Currency Chests played pivotal role in handling receipt of old currency; distribution of new currency to customers and efficient management of cash in times of exceptional build up of liquidity.
During the year, our Bank carried out a survey on Customer Satisfaction and Brand Health through a reputed independent agency to assess the customer satisfaction level at different touch points of the Bank. The survey covered all the geographies and products like savings bank accounts, current accounts, wealth management products, home loans, auto loans, agri loans, trader’s loan, mortgages, MSME and mid and large corporates. Our Bank’s aspiration is to be the “Most admired Service Brand” in the banking Industry.
Steps undertaken during the year to strengthen our brand presence are:
- A well designed marketing initiative rolled out to increase the awareness about our digital products along with different other products and services.
- Effective utilization of different media vehicles such as Print, Electronic (TV / Radio), Digital and Out of Home (OOH) for Above-The-Line (ATL) activities as well as to support the Below-The-Line (BTL) activities.
- Brand endorsements by Ms. P V Sindhu and Mr. K Srikanth, well known badminton players. These two players symbolize performance and bring a rare combination of dedication and commitment to their profession. The personality of these players is in close sync with Bank’s approach to business – Care, Concern and Competence in domestic as well as International markets.
- National Supporter of FIFA U-17: our Bank is the first Brand in the country to come onboard as the National Supporter of FIFA U-17 World scheduled to be organized in the month of October 2017. Along with the FIFA World Cup a MXIM (Mission XI Million) activity has been rolled out to reach XI Million students through school program, workshops, football festivals etc. Bank’s presence in these programs provides an opportunity to tap business and future mind space as it creates direct connect with students, parents, teachers, schools etc.
- Social Media for engaging customers: Bank has been regularly posting engaging content in the Social Media platforms and undertook various campaigns to serve different objectives e.g. online brand building, awareness with defined target segments, business acquisition, promote Alternate Delivery Channels to reduce cost of customer service etc to engage with the desired target audience. The performance of Bank in Social Media Channels is given below:
|Social Media Channel||Statistics (as of March 31, 2017)|
- Aided and Un-aided Recall of the Brand: In order to increase the Brand recall, Bank has put in place well designed outdoor medium plan at strategic locations across India which are as under:
- The naming rights of Sikandarpur & Andheri Metro Stations, brand visibility at Amritsar, Chandigarh and other international airports, are high end marketing properties created for the brand. Keeping this objective into consideration, our Bank is also having visibility at prominent Airports with large number of display units.
- Branding in Malls: Malls in the city today are strategically located and provide good opportunity for innovative branding and for the first time our Bank has visibility at 27 prominent malls in 11 Centres.
- Cinema Advertising has also been explored by our Bank for brand building wherein a captive set of audience is available for the Brand communication on the big screen.
- Brand Enhancement: Since branch is the primary customer touch point, Bank has initiated Branch facelift and utilize this as a medium to communicate with the customers and improve on the brand image.
- Product promotion campaigns to promote its products and services amongst target audience through advertising across different geographies.
- Participation in events such as FICCI-IBA Banking Conference 2016, Standard Chartered Mumbai Marathon 2017 etc for increasing visibility and brand recall value.
During FY 2017, our Bank was recognized as a leading brand when it was ranked 21st amongst best Indian Brands 2016 in Brand Equity by Economic Times dated 31st August to 6th September, 2016.
Branch Network of the Bank
As of March 31, 2017, the branch net work of our Bank was as under:
|Title||March 31, 2016||March 31, 2017|
|No. of Branches||% Share in Total*||No. of Branches||% Share in Total*|
|Domestic: Area Classification (India)|
|Overseas(including branches of subsidiaries and one representative office)||106||-||107||-|
|* Data as of March 31, 2016 is as per 2001 census while data as of March 31, 2017 is as per 2011 census|
During FY 2017, Bank opened-99- new branches and merged/ closed -7- branches. Two of the new branches opened were state of art digital portable branches. The concept has been well received by our customers and is being expanded further in FY 2018.
Corporate Social Responsibility (CSR)
Our Bank has a legacy and tradition of contributing actively to the social and economic development of the community through various developmental activities. Bank believes that we owe a solemn duty to the less fortunate and underprivileged members of the society to make sustainable social change in their lives. Education, health, human welfare and other social activities are Bank’s main focus areas in its continued efforts to make a difference to the society at large.
Some of the activities undertaken by the Bank under CSR on ongoing basis are:
- Baroda Swarojgar Vikas Sansthan - BSVS (Baroda R-SETI): Our Bank has established 49 BSVS in six states of the country. 45 of these BSVSs are in our lead districts and 4 are in non- lead districts. By imparting vocational skills training to youth from rural and semi urban areas, they help in generating self employment among them. Till date these BSVSs have conducted 10,380 training programmes and imparted training to 2,92,939 youth, out of which 1,97,826 have already secured either employment or setup their own venture. The settlement ratio is at 67.53%.
- Financial Literacy & Credit Counseling Centres (FLCC): our Bank has set up 51 FLCCs in eight states of the country for providing financial counseling services and to educate the people in rural and urban area to various financial products and services available from the formal financial sector. These centers also take up activities that promote financial literacy, awareness about banking services, financial planning and amelioration of debt-related distress of an individual.
Internal Control Systems
The increased focus on risk and the supporting governance framework includes identifying the responsibilities of different parts of the Bank for addressing and managing risk. Often referred to as the “three lines of defence”, each of the three lines has an important role to play. These are:
- The business line – the first line of defence – has “ownership” of risk, whereby it acknowledges and manages the risk that it incurs in conducting its activities.
- The risk management function is responsible for further identifying, measuring, monitoring and reporting risk on an enterprise-wide basis as part of the second line of defence, independently from the first line of defence. The compliance function is also deemed part of the second line of defence.
- The internal audit function is charged with the third line of defence, conducting risk-based and other audits and reviews to provide assurance to the Board that the overall governance framework, including the risk governance framework, is effective and that policies and processes are in place and consistently applied.
Controls in Business - The First Line of Defence
For strengthening internal controls and improving compliance culture across the organization, our Bank has initiated the realignment of structure of the organization to sharpen the controls and compliance following principle of (i) segregation of business and control functions and (ii) centralization of certain operations and processes which could be taken out of branches to increase efficiency and strengthen controls while enhancing customer experience. At corporate level, our Bank is in the process of segregating credit relationship and credit approval functions. The corporate organization has been segregated into corporate banking and corporate credit and steps have been initiated for similar segregation in retail and MSME banking.
The centralization of processes and operations at Shared Service Center (SSC) at GIFT City, Gandhinagar, Gujarat enabling better controls over adherence to compliance requirements is in progress. Besides, Bank has set up a Transaction Monitoring Unit (TMU) for independent monitoring of exceptional transactions and monitoring and closure of alerts thrown out of AML system.
Bank is also considering building a process with emphasis on strengthening self-assessment by the business units.
Risk Management and Compliance - The Second Line of Defence
To ensure sustainable and consistent growth, our Bank has developed a sound risk management framework so that the risks assumed by the Bank are properly assessed and monitored. Bank undertakes business activities within the risk appetite limits and policies approved by the Board of Directors of the Bank. Specific committees of the Board have been constituted to facilitate focused oversight on various risks. The Board has also constituted a Risk Management Committee of Board which oversees the inter linkages between different type of risks. Policies approved from time to time by the Board of Directors or committees of the Board form the governing framework for each type of risk.
A brief outline of the mechanism for identifying, evaluating and managing various risks within our Bank is as follows.
Asset Liability Management
Our Bank’s Asset Liability Management (ALM) is aimed at strategic planning, implementation, and control processes that affect the volume, mix, maturity, rate sensitivity, quality and liquidity of the Bank’s assets and liabilities. Asset Liability Management Committee (ALCO), which comprises of functional heads and Executive Directors and is headed by the Managing Director & CEO, ensures that the risk profile of the Bank, in terms of Liquidity Risk and Interest Rate Risk, is within the risk tolerance limits.
Liquidity Risk is the inability to meet expected and unexpected cash and collateral obligation at reasonable cost. In our Bank, the liquidity risk is measured and monitored through Flow Approach and Stock Approach and other prudential stipulations as per the latest guidelines of the RBI. Bank has implemented Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards. The LCR standard aims to ensure that banks maintain an adequate level of unencumbered High Quality Liquid Assets that can be converted into cash to meet liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario specified by the RBI. Bank has always been well above the stipulated level of LCR on solo basis as well as on consolidated basis.
Interest Rate Risk arises due to mismatch between rate sensitive assets and liabilities which adversely impact the earnings of the Bank with the change in rate of interest in the market. For measurement and monitoring of Interest rate risk, both Traditional Gap and Duration Gap approaches are followed. The short-term impact of interest rate movements on NIM is worked out through “Earnings at Risk” approach taking into consideration Yield curve risk, Basis risk and Embedded Options Risk. The long-term impact of interest rate movements on Market Value of Equity is also worked out through Duration Gap approach. Advanced techniques such as stress testing of liquidity risk by way of simulation, sensitivity and scenario analysis are used at regular intervals and tested against the contingency funding plan.
Bank’s comprehensive contingency funding plan has been formalized to foresee and mitigate liquidity crisis both for temporary and long-range liquidity disruptions. With a powerful suite of analytical and reporting tools, an efficient liquidity and interest rate risk management has been facilitated, enabling strategic decision-making and generating alerts against potential deviations.
Lending is a continuous activity in the Bank with due focus on identification, measurement, monitoring and control of credit risk. Credit risk is risk arising due to uncertainty in counterparty’s ability to meet its obligations in accordance with agreed terms. The goal of credit risk management is to maximize Bank’s risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. The effective management of credit risk at the individual customer level transactions as well as at the portfolio level is a critical component of a comprehensive approach to risk management and essential to the long-term success of the Bank.
Credit Risk is managed in our Bank through a Board approved framework that sets out policies, procedures and reporting which are in line with international best practices. Adequate attention is given to the independence of the risk evaluators and policy framers for addressing sound credit process culture. our Bank has a well structured credit approval process, which functions within the defined Board approved credit policy.
Credit Risk Rating involves a method of systematically classifying credit proposals according to their quality and inherent risk characteristics. Rating is an important single point indicator of credit quality to the Bank as also to other stakeholders (viz. regulators, analysts, auditors etc.). Our Bank has adopted a robust web based two dimensional credit rating system which consists of borrower rating as well as facility rating. Facility rating depends on type of collateral offered and its coverage. The combined rating of the borrower is arrived at by the combination of these two dimensions depicting expected loss and is used for determining the appropriate pricing of the loans.
Over the years Bank has gained good experience in internal rating and has thus built up data on credit rating migration. This robust platform has enabled Bank to get an approval of regulator for a parallel run under Foundation Internal Rating Based (FIRB) approach of Credit Risk under Basel II rules from March 31, 2013. Under the IRB approach the banks are allowed to develop their own empirical model to quantify required capital for credit risk. IRB implementation has helped the Bank with improved risk management systems and strong risk assessment processes.
Bank’s Corporate Research Cell prepares industry report studies through industry experts to assess the risk prevalent in industries where the bank has sizable exposure and also for the identification of sunrise industries. To manage imprudent concentration, Bank has also put in place prudential caps across industries, sectors and borrowers. The Portfolio Review Cell carries out detailed studies on sectoral exposure, credit concentration, ratings distribution and migration, and charts out credit strategy of the Bank based on these studies.
Our Bank has also implemented the Risk Adjusted Return on Capital (RAROC) Framework for corporate credit exposures. RAROC is defined as the ratio of risk adjusted return to capital employed. It facilitates us to evaluate whether the credit risk asset generates adequate profit to add economic value to shareholders’ funds.
Market Risk implies the “risk” of loss of earnings or economic value due to adverse changes in market rates or prices. The change in economic value of different market products is largely a function of change in interest rates, exchange rates, economic growth, business confidence etc. Our Bank has clearly articulated policies to control and monitor its treasury functions which undertake Market Risk positions. These policies comprise management practices, procedures, prudential risk limits, review mechanisms and reporting systems. These policies are reviewed regularly in line with changes in financial and market conditions. The Interest Rate Risk in the Bank is measured through Interest Rate Sensitivity Gap Reports and Earning at Risk. Furthermore, Bank calculates Duration, Modified Duration, PV01, Value at Risk for its investment portfolio consisting of fixed income securities on daily basis. It monitors the short-term Interest rate risk from the NII (Net Interest Income) perspective and long-term interest rate risk from the EVE (Economic Value of Equity) perspective. Moreover, the stress testing of fixed interest investment portfolio through sensitivity analysis and equities through scenario analysis is regularly conducted in the Bank. The Foreign Exchange Risk and Equity Price Risk is monitored too and measured through daily marking to market, Sop Loss Limits, VaR limits, portfolio size limits, IGL, AGL etc. The Value at Risk for the treasury positions is calculated through historical simulation method for a ten days holding period, at 99.0% confidence level.
Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This includes legal risk but excludes strategic and reputational risks. Operational Risk is integral part of all activities and business of the banks. Hence it is required to be managed with active engagement from all stakeholders.
Operational Risk Management Committee (ORMC) of our Bank has the responsibility of controlling the operational risk losses so that they do not cause material impact to the banks functioning. Bank has initiated measures to modify the processes and install new systems to improve the control environment. Roll out of Key Risk Indicators programme, Risk Control and Self Assessment Programme and Root cause analysis during the current year will further strengthen the control environment.
Pillar 2 Risk
The Bank has a comprehensive Internal Capital Adequacy Assessment Process Policy. The Pillar 2 risks, such as Liquidity Risk, Interest Rate Risk in Banking Book, Concentration Risk etc and overall Risk Management practices as well as adequacy of Capital under both normal and stressed conditions are assessed as per the Policy. Basel III Implementation The Basel III capital regulations have been implemented by Indian banks with effect from April 1, 2013. This implementation requires enhanced quality and quantity of capital on one side and more elaborate disclosure on the other. For augmenting and improving Core Capital of Bank, new measures for the inclusion of FCTR, DTA and Revaluation Reserves were introduced by RBI in March 2016. Also from March 2016 onwards Bank has started maintaining Capital Conservation Buffer (CCB) in a phased manner and will reach 2.5% by FY 2019.
As regards liquidity coverage ratio, Bank is fully geared up to achieve the prescribed ratios as per Basel and RBI guidelines. For the financial year ended March 31, 2017, LCR was well above regulatory requirements.
Our Bank has taken several initiatives such as driving an Enterprise wide Risk Management project for development of required system and processes for measuring and monitoring the trends of the risks of the Bank, engaging in the development of application scorecard of retail advances portfolios and Implementation of centralized decision management system for program lending, recalibrating Bank’s Credit Rating Model (BOBRAM) to include parameters which would further increase the discrimination power of the model and entering into a credit guarantee arrangement for certain pool of home loan borrowers, reducing the risk of default of the portfolio.
An independent compliance function is a key component of the bank’s second line of defence. This function is responsible for, among other things, ensuring that the bank operates with integrity and in compliance with applicable, laws, regulations and internal policies. The Board of Directors of the Bank oversees the management of the Bank’s compliance risk.
Our Bank has put in place a Board approved compliance policy outlining the compliance philosophy of the Bank. Compliance function in the Bank is an integral part of governance along with internal control and compliance risk management process. It ensures observance of regulatory / statutory provisions contained in various legislations viz. Banking Regulation Act, Reserve Bank of India Act, Foreign Exchange Management Act, Securities and Exchange Board of India Act and Prevention of Money Laundering Act and also the regulations of the various regulators where the Bank is having its offices / branches in overseas centers. It also ensures standards and codes prescribed by BCSBI (Banking Codes and Standard Board of India, IBA (Indian Banks Association), FEDAI (Foreign Exchange Dealers Association of India), FIMMDA (Fixed Income Money Market and Derivatives Association of India).
Bank is in the process of putting up a web based compliance management system to further strengthen the compliance function in the Bank.
The compliance function advises senior management and the Board on the Bank’s compliance with these applicable laws, rules and standards as well as keeping them informed of developments in the area. It also helps educating employees about compliance issues by conducting periodic trainings and workshops for business staff as well as designated compliance officers. Knowledge management tools for this purpose have also been uploaded on the Bank’s site.
Compliance function has an important role in supporting corporate values, policies and processes that help ensure that the Bank acts responsibly and fulfils all applicable obligations.
KYC/ AML Compliance
Our Bank has well defined KYC-AML-CFT Policy, which is the foundation on which the Bank’s “Implementation of KYC norms, AML standards, CFT measures and obligation of the Bank under Prevention of Money Laundering Act (PMLA) 2002” is based. Bank electronically generates Cash Transaction Reports (CTRs) for submission to Financial Intelligence Unit-India (FIU-IND). AML Solution for generating system-based alerts on the basis of transactions in the accounts of the customers is in place. A central transaction monitoring unit (CTMU) also monitors of the transactions/ alerts generated in AML Solution and escalation of STRs, if found suspicious, to the Principal Officer. System-based risk categorization of Bank’s customers’ accounts is done on half yearly basis. Bank files Counterfeit Currency Reports (CCRs) and Non Profit Organizations Transaction Reports (NTRs) to FIU-IND, New Delhi every month. It generates cross border wire transfer reports every month through electronic mode for submission to FIU-IND, New Delhi. CBS system has been modified suitably so as not to accept cash deposits of Rs. 50,000/- and above in absence of PAN / Form No. 60/61.
For further strengthening KYC compliance, online verification of PAN from NSDL has been operationalised. Bank has implemented Aadhaar based e-KYC in collaboration with UIDAI. Real-time checking of names from UNSCR list is available in all the branches as a step towards CFT. Online scanning of the customer’s name with the names of the individuals/ entities appearing in the sanctions list or any other blacklist issued by Govt. Authorities, while opening of accounts has been put in place which generates the AML Alerts on predefined criteria. The Bank is in the process of allotting Unique Customer Identification Code (UCIC) to all its existing customers as per the RBI guidelines.
Bank has also carried out an independent review of its KYC, AML, & CFT policy and practices for the domestic branches and six overseas territories (UK, UAE, South Africa, Mauritius, Hong Kong and Bahamas) through independent reputed consultancy firms and taken steps to stream line the processes where required.
Internal Audit – The Third Line of Defence
The third line of the defence consists of an independent and effective internal audit function. Among other things, it provides independent review and objective assurance on the quality and effectiveness of the Bank’s internal control system, the first and second lines of defence and the risk governance framework as well as strategic and business planning and decision-making processes. The internal auditors are not involved in developing, implementing or operating the risk management function or other first or second line of defence functions.
Our Bank carries internal audit function through a Central Internal Audit Division (CIAD). CIAD administers various streams of audits besides Risk Based Internal Audit (RBIA) of branches and offices. Audit Committee of the Board oversees overall internal audit function of the Bank. The committee guides in developing effective internal audit, concurrent audit, IS Audit and all other audit functions of the Bank. The committee monitors the functioning of the Audit Committee of Executives and internal audit department in the Bank.
CIAD operates through thirteen Zonal Internal Audit Divisions to carry out internal audit of branches/offices as per the periodicity decided by the Risk Based Internal Audit Policy. All branches of the Bank are covered under Risk Based Internal Audit. Out of 4,566 branches audited during 2016-17, 3,669 branches (80.35%) were in Low Risk, -851-branches (18.64%) were in Medium Risk and 46 branches (1.01%) were in High Risk category.
During the year, Bank engaged an independent firm as a knowledge partner for comprehensive review of the Audit function in line with the processes focusing on centralization of activities by use of technology, imaging solutions and digitization. The whole gamut of audit approach will undergo a change with extensive use of technology, analytics, sampling and advanced audit methodology. Internal audit processes thus are being revamped aided by technology.
For streamlining the concurrent audit function with the objective of improved oversight and consistency in approach, Bank has revamped this mechanism whereby a single firm is appointed to conduct concurrent audit of all branches in a Zone. A single audit firm would bring in the benefits of uniformity of approach and with more accountability. It will bring in benefits of unified view on control & compliances, observations of irregularities and patterns if any.
Our Bank is sensitive and responsive to the customer needs and believes that technology, products, processes and human resources must be leveraged for delivering superior banking experience to its customers.
During the year, an independent study on Customer Satisfaction and Brand Health across all products lines was commissioned by the Bank through an independent reputed agency. The survey covered all the geographies across products like savings bank, current account, wealth management products, home loans, auto loans, agri loan, traders loan, mortgages, MSME and mid-large corporates. The findings of the survey provided valuable insights on customer satisfaction levels, loyalty levels and experience levels across the product lines and geographies. Bank is taking necessary steps to further improve the customer satisfaction levels with an aspiration to be the “Most Admired Service Brand” in the banking Industry.
At the Board level, the sub-committee of Board for customer service addresses the issues relating to the formulation of policies and assessment of their compliance with the aim of consistent improvement in the quality of customer service.
Our Bank has also set up a Standing Committee on Procedures and Performance Audit on Customer Services, comprising of two eminent public personalities as members along with all the Executive Directors and seven General Managers of Bank. This Committee oversees timely and effective compliance of the RBI instructions on Customer Service and also reviews the practices and procedures prevalent in Bank and takes necessary corrective steps on an ongoing basis. The suggestions emanating from the Branch Level Customer Service Committee meetings, which are held every month, are placed before the Standing Committee on Procedure and Performance Audit on Customer Services on quarterly basis. The feedback of the committee meetings is then put up to the Customer Service Committee of the Board of Directors.
For redressal of customer complaints, Our Bank has a policy in place on customer grievance redressal and the same is placed on the Bank’s website. Bank is also having a well structured Customer Grievance Redressal Mechanism, due to which the outstanding complaints have also come down significantly. The General Manager, Operations & Services, is designated as Principal Nodal Officer for customer complaints in our Bank. Moreover, all Zonal Heads and Regional Heads are designated as Nodal Officers for their respective Zones and Regions. Further, the names of all Nodal Officers along with their contact numbers are displayed in all the branches of our Bank.
Our Bank views each complaint seriously and undertakes root cause analysis of the complaints for suitable remedial measures including updation of the systems, procedures and sensitization of employees. Our Bank has a web based online complaint registration and redressal portal named as Standardized Public Grievance Redressal System (SPGRS) for lodgment of complaint by the customers online. SPGRS also has a facility to capture suggestions/ feedbacks.
Our Bank has appointed an Internal Ombudsman designated as Chief Customer Service Officer (CCSO). The Bank’s internal ombudsman is a forum made available to customers for grievance redressal before they approach the Banking Ombudsman. All complaints, which are rejected or partially accepted by the Bank, are examined by the Internal Ombudsman. It enhances the confidence of the customers in the Bank’s systems and hastens the process of grievance redressal, making it more transparent.
Our Bank is also a member of the Banking Codes and Standards Board of India (BCSBI) and has adopted the “Code of Commitment to the Customers” and the “Code of Bank’s Commitment to MICRO and Small Enterprises” prescribed by the BCSBI. These have been placed on our Bank’s website and also made available to customers at the branches. BCSBI monitors the implementation of the codes inter-alia by visits to branches to find out the status of ground-level implementation of codes and studies complaints received from customers and orders / awards issued by Banking Ombudsmen / Appellate Authority to find out whether there is any system-wide deficiency. During the rating exercise in 2016, our Bank has been rated “above average” in overall PSB category.
Our Bank gives importance to preventive vigilance to inculcate awareness on the compliance to internal systems and processes. In this connection, after root cause analysis of incidents of frauds, Bank has a system of conveying to the operating units about the deficiencies observed in observance of systems and procedures as a preventive vigilance measure. The employees are also sensitized about preventive vigilance through vigilance newsletter, circulars, meetings etc.
The concept of whistle blower is another effective tool for preventive vigilance. Our Bank has a well-defined whistle blower policy which acts as a deterrent for employees who may be prone to carrying out malicious activities. Bank has designed software which is used for lodgments of complaints online by the employees under whistle blower policy.
With the objective of bringing awareness among the staff about preventive vigilance and also to put forth consequences of flouting the rules and regulations which may lead to perpetration of frauds by unscrupulous elements, sensitive branches of the Bank are identified on the basis of risk perception and preventive vigilance audits are conducted.
To bring about greater transparency in procurement and tendering processes in the Bank, notice inviting tenders/ details of tenders awarded by the Bank and summary of tenders/ contracts concluded are put on the Bank’s website. Standardized Public Grievance Redress System (SPGRS) for uniform implementation in PSBs is also operational.
Vigilance in the Bank aims at ensuring proper justice and fair play in the organization, protecting the innocent; supporting quality decisions and striving to bring the real offenders to book thereby eliminating forces that thwart integrity and cause loss to the Bank.
Our Bank truly believes that our human resources is our biggest differentiator having a direct and significant impact on our Bank’s overall performance, both current and future. Our Bank has a rich reservoir of human resources comprising over 51,000 employees. As we march forward to realize the rising expectations of our stakeholders, it is imperative that our employees are motivated and fully engaged in the present dynamic and competitive environment. Bank’s HR team has been working hard to address the challenges from a human resources standpoint through a plethora of initiatives viz. recruitment and onboarding of talent in the wake of a large number seasoned bankers who are superannuating, focus on strengthening performance management through Project SparshPlus, addressing training needs, leadership development across the Bank, succession planning and higher levels of employee engagement aided by our first ever formally conducted employee engagement survey “Voice of Barodians”. Our Bank continues to take the lead in the conceptualization and execution of various HR transformation efforts, many of which have begun during FY 2017 and mark a first for Public Sector Banks in the country.
There were several positives that emerged from the “Voice of Barodians” Survey 2016 and also some areas that need to be strengthened further through a variety of action plans. These measures also include capability building initiatives to take on higher order challenges in the Bank’s transformation journey. Bank’s intent is to ensure that the employee experience across all levels is further enhanced so as to create a fun and happy place to work in. Towards this end, the Bank launched a series of initiatives for the employees, who are the main drivers for the Bank’s Business and the chief brand ambassadors for the Bank. These include:
Baroda Anubhuti Programme
This is an Employee Engagement programme for enhancing the employee experience at the workplace with initiatives such as Employee of the Month, Spot recognition – capturing “WoW” moments, “Zero Hour” (Fun hour) at all our branches/ offices, local “community service / social activity” by employees, sports and wellness activities
WELEAD – A comprehensive Leadership Programme
Our Bank has introduced a comprehensive Leadership Development Initiative ‘WeLead’, based on behavioural competencies with the objective of building a robust and sustainable pipeline of leaders for the future. This is through the following 4 distinctive programmes:
- Baroda Senior Leadership Programme – for Officers in Scales VI & VII
- Baroda Emerging Leaders Programme – for Officers in Scales V
- Baroda Rising Stars Programme – for Officers in Scales IV
- Sayaji Rao Gaekwad Scholars Programme – for Officers in Scales I, II & III
Introduction of the Life Cycle Concept of Training
The Bank has introduced the Life Cycle Concept of Training which aims at imparting specific training programs at different levels which are aligned to the role requirements of employees at different stages of their career. Training has been aligned to specific job roles by introducing the concept of mandatory courses required for each critical role. Our Bank has been continuously upgrading our capabilities in the area of Learning and Development and has adopted several innovative efforts for this.
Launch of ‘Sparsh Plus’
The Bank has also unveiled ‘Sparsh Plus’ with the objective of revamping the performance and talent management systems in our Bank, aided by the best-in-class technology and digital tools. Our intent is to ensure that our people processes and systems provide our staff with role clarity and empower them to perform their role more effectively, help employees in their development and enable them to enhance their overall contribution.
Bridging the talent deficit and augmenting skillsets
While our Bank has been undertaking hiring on a sustained basis year on year, to cater to business requirements, various recruitment exercises were undertaken during the year to address the emerging manpower needs of our Bank such as recruitment of specialist officers and probationary officers among others.
Our Bank has also on-boarded specialists from the market having skill sets, knowledge and competencies for various critical positions in the Bank with the objective of augmenting our internal team’s capabilities in various strategic areas for the future and for adopting the best practices in the Market/Industry.
Sayajirao Gaekwad Fellowship Programme
Our Bank has instituted the Sayajirao Gaekwad Fellowship Programme in March 2017 in support of Startup India and Standup India initiatives. The Fellowship Programme seeks to encourage young professionals with entrepreneurial ideas to gain a one year experience in the banking and financial services industry and obtain organizational support in development of their start up idea. In addition, the selected Fellows are supporting the execution of several strategic initiatives currently underway in the Bank.
Employee Helpline (HR-Helpline)
Our Bank has launched a central HR helpline for all the employees for resolving their queries/ issues on HR matters, support them in times of distress and help them tide over any emergency situation or any other hardship, which may impede their personal or professional life. There is a dedicated team at corporate office which monitors the Employee Helpline on real time basis and resolves the issues/grievances/queries promptly.
Concerted efforts have been taken by our Bank for fostering career progression of employees to reward them for their performance and also to motivate them further to progress in their careers by fulfilling both the organizational as well as personal aspirations. Our Bank not only provides opportunities for upward movement in the hierarchy but also ensures horizontal movement of Officers across different functions to provide them wider exposure and carve out a definite career path for them.
Thrust on Diversity
Our Bank follows non-discriminatory and equal opportunity policies for all employees. Every employee in the organization has equal access to the available opportunities – whether they concern career progression, perquisites and benefits, welfare schemes, training, grievance redressal or other amenities. Promotion, career path, deployment and transfer policies are made open and transparent and all employees in the Bank are made aware of the same for uniform implementation.
In order to create a more diverse workplace, our Bank has been progressively increasing its recruitment of women employees over the last few years. The percentage of women in the overall staff composition has increased to 22.70% in FY 2017 from 22.05% in FY 2016.
In order to retain women employees at all levels and in recognition of the concomitant responsibilities of women, our Bank has put in place various facilities to support women employees such as sabbatical leave, health check program for women employees and other initiatives.
Implementation of Official Language (OL) Policy
During the year FY 2017, our Bank made outstanding progress in implementing the Official Language Policy of Government of India. Besides compliance of various statutory requirements under Official Language Policy of the Union Government and directives issued by Reserve Bank of India, our Bank promoted Hindi as a tool for business development and connecting with the customers.
Our Bank adopted a well-structured Annual Action Plan for Official Language in order to achieve various targets set by the Government of India under its Annual Action Plan 2016-17 and the assurances given to the Committee of Parliament on Official Language during its visits to various offices/branches of the Bank. Our Bank has made significant progress in achieving many of the major targets of the Annual Action Plan. Our Bank has fulfilled all the assurances given to the Committee of Parliament on Official Language within the stipulated time frame.
The Meetings of Central Official Language Implementation Committee were organized regularly on quarterly basis. Under the guidance received from the Committee, several new initiatives were taken during FY 2017. Bank took important initiatives of providing M-Clip Services in Hindi and Baroda M-Connect Plus services in Hindi and Gujarati. Mobile Pass book services are being extended to our customers in Hindi and six other Regional Languages. The Bank also provided Online complaint module i.e. SPGRS services in Hindi for convenience of the customers. All alternate delivery channels viz. Self passbook printing machines, cheque deposit machines, cash deposit machines, Multi function Kiosks, Account Opening Kiosks etc. were equipped with Hindi user interface for the convenience of customers. All ATMs of the Bank were enabled for printing of transaction slips and mini statements in Hindi and major regional languages for the convenience of customers selecting Hindi or the language concerned as the language of their choice for interaction with the machine. As a major IT enabled initiative, Bank launched transactional SMS services in Hindi and 11 other Regional Languages on the occasion of World Hindi Day 2017.
During the year, our Bank organized an All India Seminar on “Demonetization and Digital India” in New Delhi wherein representatives/speakers/participants from different Public Sector Banks took part. An Inter Bank Seminar was organized at Corporate Office, Mumbai on
Our Bank has instituted an award namely “Maharaja Sayajirao Bhasha Samman” in memory of its founder Maharaja Sir Sayaji Rao Gaekwad-III. The award consists of a Citation/ Memento and cash award of Rs. 1.51 lakh. During the year, Bank honoured Shri Ashutosh Rana, the eminent Actor and poet with this award.
Bank has expanded the ambitious initiative of regional language training to its employees across various linguistic regions so that they learn the basics of the concerned regional languages which would help them in discharging their duties well while dealing with the local customers.
The Third Sub-Committee of the Committee of Parliament on Official Language visited Bank’s branches/offices at Mount Abu and Alwar during the year. The Committee appreciated the efforts put in by the Bank for progressive use of Hindi. All the assurances given to the Committee have been fulfilled within the prescribed time frame. Our Bank was awarded Second prize for ‘ A’ and ‘B’ linguistic Regions and consolation prize for Region ‘C’ by Reserve Bank of India (RBI) under the RBI Rajbhasha Shield Competition. Besides, Bank’s bilingual house journal Bobmaitri also received Third Prize. Jaipur, Varanasi, Goa, Guwahati, and Jodhpur offices of our Bank received awards from Govt. of India through its Regional Implementation Offices for their outstanding work. Bank also received Second Prize from Maharashtra State Level Bankers Committee. Bank continued with its unique scheme “Medhavi Vidyarthi Samman Yojana” for popularising Hindi amongst the students’ community. Under this scheme, cash prizes and commendation certificates are given to the two of the students securing First and Second positions in M.A. (Hindi) examinations. This scheme, at present, is applicable in 64 universities of the country.
In compliance to the directives of Government of India as per Annual Action Plan, Bank carried out Official Language inspection of overseas branches at Fiji, Australia and New Zealand to promote and propagate Hindi amongst local staff members and conducted Hindi Workshop for them. Our Bank published books in Hindi during the year viz.”Grameen Vipananevam Banking Vyavasay” by Corporate Office, “Banking Paridrishya” by Jaipur, “Banking ke Vividh Aayam” by Baroda, “Banking – NayaDaur, NayaParivesh” by Pune and “Maangjama Rashiyan – Banking ka Aadhar” by New Delhi offices for providing qualitative/informative reading material in Hindi language.
Domestic Subsidiaries and Joint Ventures
The performance of the Bank’s Domestic Subsidiaries and Associates was satisfactory during FY 2017.
BOB CARDS Limited is a wholly owned subsidiary of the Bank and is into the business of issuance of Credit Cards and Merchant Acquiring. Gradually, widening its scope of work based on the skill-sets and expertise acquired in the payment card industry over a period of time, Bobcards Ltd. undertook ancillary activity of providing support services to our Bank’s debit card operations.
Envisaging huge growth opportunities for cards and digital payments in India, the Company is gearing up to be a consumer credit and payment leader in the evolving market landscape by introducing new business lines under the NBFC domain besides revamping the existing businesses. Bobcards Ltd. aims to be a consumer finance company for Credit Card (CC) and Personal Loans (PL) business. In addition, it will provide product and servicing capabilities for POS business and sourcing of Retail/SME products for the Bank.
FY 2017 witnessed various initiatives undertaken by the company for its overall growth. In the wake of demonetization, in order to promote cashless transactions, Bank launched a nationwide campaign for enrollment of new POS merchants during November and December 16 whereby more than 60,000 new POS installations were carried out and POS base increased to over 85,000. Post-demonetization, the POS transaction volumes scaled up to Rs. 30 crore per day as against earlier volume of Rs. 8 crore. The number of transactions also increased from 25,000 per day to 2 lakh transactions per day. The monthly transaction volume increased from Rs. 244 crore to Rs. 700 crore. Bobcards has successfully expanded its POS Product Suite by adding m-POS (Mobile POS Terminals) and QR based acquiring (m-VISA& Bharat QR Code). The company continued to focus on issuance of quality cards, resultant to which transaction volumes through Credit Card Business increased significantly. The process of tapping the potential in the travel segment has been initiated to bring more such agents to our fold. Total 24,770 new cards have been issued till February 2017 despite the shift in thrust for POS installation after de-monetization. As a mass marketing initiative, Bobcards has tie-up with XLRI, Jamshedpur for issuance of Co-branded cards to its alumni.
Providing prompt and courteous service to customers continued to be the major strength of the Company, which not only enabled it to emerge as a customer friendly organization but also helped in retaining quality customers. Quick grievance redressal approach resulted in high level of customer satisfaction and response.
BOB Capital Markets Limited is a wholly owned subsidiary established by Bank in 1996. Main businesses of BOBCAPS are Investment Banking (Debt Restructuring, Project Finance, M&A, Debt Capital Markets and Equity Capital Markets), Institutional & Retail Equity Broking and Distribution of Financial Products. The Company also has a license for Portfolio Management Services (PMS).During FY 2017, the Company has embarked on a significant scale up in its key businesses. The company has successfully strengthened its teams in businesses such as Investment Banking, Broking and Wealth Management / Distribution- to be able to leverage strengths of our Bank and establish BOBCAPS as one of the leading and most respected player in its businesses.
The Nainital Bank Limited was promoted by Late Bharat Ratna Pandit Govind Ballabh Pant and others became an Associate Bank of Bank of Baroda in the year 1973. Shareholding of our Bank in Nainital Bank Ltd. is 98.57%. The Total Business of Bank which was Rs. 8,049.22 crore as of Martch 31, 2016 has increased to Rs. 10,132.66 crore as of March 31, 2017, showing growth of 25.88%. Bank has opened 11 new branches & established -5–Loan processing units by the name Naini Loan Points (NLPs). Bank also installed 13 white label ATMs with collaboration with TCPSL. Bank issued 22,688 debit cards to its customers during FY 2017.
Baroda Pioneer Asset Management Company Limited, a Joint Venture with Pioneer Global Asset Management SpA, is in its eighth year of operation. In light of a good year for the Mutual Fund Industry, Baroda Pioneer Asset management Company has also been able to increase its AUM. The average AUM of the company for FY 2017 was Rs. 10,535 crore. Further, the company has improved its asset mix, with share of liquid reducing and that of fixed income going up. This helped the company to maintain its budgeted margins during the year. The company continued to focus on developing the banking and IFA channels for distribution. This helped in getting the flows in the fixed income and equity segments. The company’s SIP book is also growing steadily and has seen inflows from beyond the top 15 towns of the country. Gathering assets in equity funds and building the momentum in fixed income segment continues to be the top agenda for the company. The company continues to explore enhanced technological solutions to continuously improve its service delivery.
IndiaFirst Life Insurance Company Ltd a joint venture company with Andhra Bank and Legal & General group, commenced its business operations on November 16, 2009 and has received an overwhelming response for its products across the country. IndiaFirst is amongst the fastest Life Insurance Company to break even in the 5th year of operation and its industry ranking is 8th among the private players with market share of 4.5% and AUM (Asset under Management) at Rs. 9,061 crore as of March 31, 2017.
India Infradebt Limited (Infradebt) It is the first Infrastructure Debt Fund (IDF) under a non-banking finance company structure set up and was promoted by ICICI Bank Limited, Bank of Baroda, Citicorp Finance (India) Limited and Life Insurance Corporation of India in which Bank is holding 30% stake. The Company’s principal activity is to re-finance part of the debt liabilities of the Infrastructure Projects which have completed one year of commercial operations. The Company has made aggregate disbursements of Rs. 4,712 crore to 22 road projects under PPP format awarded by NHAI, 18 renewable energy projects and two other Infrastructure projects (Hospitals) as of March 31, 2017. As of March 31, 2017, India Infradebt Ltd. has raised a total of Rs. 4,205 crore of funds through Non-Convertible Debentures.
Baroda Global Shared Services Ltd. It is a newly formed wholly owned subsidiary of our Bank. The subsidiary is formed with the objective of migrating some of the back-office processes to handle through a centralized set up. The Company is yet to be operationalised.
A brief synopsis of domestic subsidiaries, associates and Joint Ventures is as below:(Rs crore)
|Entity (with date of registration)||Owned Funds||Total Assets||Net Profit||Offices||Staff|
|BOB Capital Markets Ltd. (11.03.1996)||16,317||16,554||560||1||57|
|BOBCARDS Ltd. (29.09.1994)||23,647||35,651||2,644||38||135|
|Baroda Pioneer Asset Management Co. Ltd. (05.11.1992)||4,864||6,150||107||3||75|
|Baroda Pioneer Trustee Co Pvt Ltd. (23.12.2011)||8||11||1||1||0|
|IndiaFirst Life Insurance Co. Ltd. (05.11.2009)||55,061||1,11,248||3,517||24||1,294|
|The Nainital Bank Ltd. (31.07.1992)||56,969||7,699||4,846||353||922|
|India Infradebt Ltd. (31.10.2012)||42,006||4,93,942||4,810||1||17|
|BOB Shared Services Ltd.(15.03.2017) Operations yet to be started||12||-||-||1||-|
Awards and Accolades
During FY 2017, our Bank has won following awards and accolades on both business and financial parameters.
|15.02.2017||Bank was awarded 2nd prize by Maharashtra State Level Bankers Committee in the area of Official Language Implementation during 2015-16 under Rajbhasha Shield Yojana under Public sector Category held in Pune.|
|14.02.2017||Bank was awarded for “Excellence in Banking, (PSU Sector)” and “Excellence in Education Loan” at 7th My FM Stars of the Industry awards for Excellence in Banking, Insurance and Financial Services held in Mumbai on 14th February, 2017.|
|08.02.2017||Bank was awarded Amity Corporate Excellence Award for being the First Bank to Launch Digital Portal Branch by Amity University, Noida & Greater Noida Campus. The Award received during 17th International Business Horizon Inbush Era World Summit 2017 on 8th to 10th February 2017 held at Noida.|
|16.12.2016||Bank was awarded in three categories: Skoch Award Platinum- Banking Category; Skoch Award Platinum for Cash on Mobile and Skoch Award Platinum for Digital Portable Branch by Skoch Group. The Award received during Skoch Technologies for Growth Award 2016 held at New Delhi on 16th December, 2016.|
|26.10.2016||Bank won -4- Awards at the 56th Association of Business Communicators of India (ABCI) Awards as under: 1. Bank’s Wall Calendar 2016 – Bronze 2. Bilingual Publications – Bronze 3. Special Column (English) – Bronze 4. Features (Language) – Akshayyam - Silver|
|23.09.2016||Bank received ‘The Best Official Language Implementation’ award and special award for Bank’s Hindi Magazine ‘Akshayyam’ for the year 2016 by reputed Literary Organization “Aashirwad” at Mumbai.|
|31st Aug to 6th Sept. 2016||Bank ranked 21st amongst Best Indian Brands 2016 in Brand Equity – The Economic Times dated 31st August to 6th September, 2016.|
|01.09.2016||Bank was awarded runner-up-award - ‘Public Sector Bank’ category for the year 2013-14 at ‘FE India’s Best Bank’ by The Financial Express (FE) a function held in Mumbai on 01.09.2016|
Registrar & Share Transfer Agent, Share Transfer System and Redressal of Investors’ Grievances
Bank has established Investors’ Services Department, headed by the Company Secretary at Corporate Office, Mumbai wherein Shareholders can mail their requests / complaints for resolution at the address given below. They can also lodge their complaints online through SPGSR.
Dividend Distribution Policy
As required under Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements), 2015, our Bank has a dividend distribution policy in place which sets out the parameters and circumstances that will be taken into account by Board in determining distribution of dividend to its shareholders. The policy is given in this Annual Report and is also available on the Bank’s website at www.bankofbaroda.com/download/Dividend.pdf
Board of Directors (Appointment /Cessation of Directors during the year)
Prof. Biju Varkkey was nominated as a Part Time Non-Official Director w.e.f. 25.04.16 by the Central Government u/s 9(3)(h) and (3-A) of section 9 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, for a period of 3 years or until further orders, whichever is earlier.
Shri Gopal Krishan Agarwal was nominated as Parttime Non-Official Director w.e.f. 26.07.16 by the Central Government u/s 9(3)(g) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, under Chartered Accountant category for a period of three years or until further orders, whichever is earlier.
Shri Ashok Kumar Garg was appointed as Executive Director by the Central Government u/s 9(3)(a) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, w.e.f. 9th August, 2016 for a period upto 30.06.2018 i.e. the date of his superannuation or until further orders, whichever is earlier.
Smt. Papia Sengupta was appointed as Executive Director by the Central Government u/s 9(3)(a) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, w.e.f. 1st January, 2017 for a period upto 30.09.2019 i.e. the date of her attaining the age of superannuation or until further orders, whichever is earlier.
Shri Ajay Kumar was nominated as Director by the Central Government u/s 9(3)(c) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, w.e.f. 13th January, 2017 to hold the post until further orders.
Shri Bhuwanchandra B Joshi, Executive Director, ceased to be Executive Director w.e.f. 1st January, 2017 on his attaining the age of superannuation from the Bank’s service.
Smt. Surekha Marandi, Director, ceased to be a Director w.e.f. 13th January, 2017 on the appointment of Shri Ajay Kumar in her place.
Bank engaged the services of a reputed external specialist firm to conduct an independent Board evaluation and review of overall effectiveness of the Board. The firms global methodology for conducting board reviews was followed for this purpose. This entailed effectiveness assessment of the following areas of the Board - a) Board strategy and alignment, b) Management of the Board by the Chairperson, c) Functioning of the Board committees, d) Relationship between the Board and the management team, e) Quality of the Board processes, f) Board composition and g) Quality of discussions/decisions taken by the Board in key areas like risk management, talent etc. In addition, at an individual level, members of the Board were assessed in areas like a) Overall engagement and alignment, b) Quality of their contribution, c) Openness in listening and receiving feedback, d) Ability to challenge and take/oppose tough decisions etc.
For conducting the assessment a combination of three methods was followed. This included in depth structured one on one interviews with all members of the Board. In addition, key personnel of the Bank such as the CFO and Company Secretary were also interviewed. The review team attended Board meetings and committee meetings to observe and study the Board dynamics in a live environment. The minutes of the previous Board and committees meetings and the Board materials used to present policies and support decisions were analyzed.
The results of the review were shared with the Chairman and the Board members in a daylong session. As part of this session a workshop was conducted in September 2016 to determine and align on key next steps and actions that the Board and management agreed to undertake following from the Board review. A follow on session was conducted in April 2017 to assess the effectiveness of the actions. It was unanimously concluded that significant progress had been made in a short span of time.
Auditors’ Compliance Certificate on Corporate Governance:
The Auditors Compliance Certificate regarding the compliance of the conditions of Corporate Governance for the year 2015-16 is annexed with this report pursuant to “Part ”E” of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Business Responsibility Report
Business Responsibility Report as required by SEBI has been hosted on the website of the Bank (www.bankofbaroda.co.in). Any member interested in obtaining a physical copy of the same may write to the Company Secretary of the Bank.
Directors’ Responsibility Statement
The Directors confirm that in the preparation of the annual accounts for the Financial Year ended March 31, 2017:
- the applicable accounting standards had been followed along with proper explanation relating to material departures if any;
- the accounting policies framed in accordance with the guideline of Reserve Bank of India were followed and the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit and loss of the Bank for that period;
- the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of applicable laws to the Bank for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;
- the directors had prepared the annual accounts on a going concern basis; and
- the directors had ensured that internal financial controls followed by the Bank are in accordance with guidelines issued by Reserve Bank of India in this regard and that such internal financial controls are adequate and were operating effectively.
Explanation. For the purposes of this clause, the term “internal financial controls” means the policies and procedures adopted by the Bank for ensuring the orderly and efficient conduct of its business, including adherence to Bank’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information;
- the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
The Directors place on record their appreciation for the contributions made by the outgoing Directors viz. Shri Bhuwanchandra B Joshi and Smt. Surekha Marandi.
The Directors express their sincere thanks to the Government of India, Reserve Bank of India, Securities and Exchange Board of India, other regulatory authorities and overseas regulators for their continued co-operation, guidance and support.
Bank would like to take this opportunity to express sincere thanks to its valued clients and customers for their continued patronage and support.
The Directors acknowledge with deep appreciation of the cooperation extended by all shareholders, banks and financial institutions, rating agencies, stock exchanges and all the well wishers in India and abroad.
The Directors also take this opportunity to place on record deep appreciation for the hard work and dedication of the employees of our Bank which enabled our Bank to record growth with quality year after year despite economic challenges and consolidate its position as one of the premier banks in the country.
For and on behalf of the Board of Directors,
P. S. Jayakumar
Managing Director & CEO