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  • 1. PROJECT ON “BANKING REGULATION ACT 1969” SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF DEGREE OF MASTERS OF COMMERCE (M.COM) FROM THE UNIVERSITY OF MUMBAI SUMBITTED BY SHREERAJ HARIHARAN M.COM PART-I (SEM-I) ROLL NO 36 2013-2014 UNDER THE GUIDANCE OF PROF. JAI KOTECHA LORD UNIVERSAL COLLEGE, TOPIWALA MARG, OFF STATION ROAD, GOREGAON (WEST), MUMBAI, 400062 1|P age
  • 2. DECLARATION I MR SHREERAJ HARIHARAN student of LORD UNIVERSAL COLLEGE, M.com Part-I (SEM I) hereby declare that I have completed project on “BANKING REGULATION ACT 1969”, in the academic year 20132014.This information is true &original to best of my knowledge Date: signature of student 2|P age
  • 3. Certificate This is to certify that this project entitled BANKING REGULATION ACT 1969for subject ADVANCE FINANCIAL ACCOUNTING is done by SHREERAJ HARIHARAN seat number 36 of M.com Part I Semester I in the academic year 2013-2014 and being submitted to University of Mumbai through LORD UNIVERSAL COLLEGE, Goregaon (west) (PROF. JAI KOTECHA) INTERNAL EXAMINER SIGNATURE EXTERNAL EXAMINER SIGNATURE (DR RUKI MIRCHANDANI) Principal SIGNATURE 3|P age
  • 4. Acknowledgement With deep satisfaction and immense pleasure I am presenting this project report on “BANKING REGULATION ACT 1969” in partial requirements for the M.COM course. I would like to extend my sincere gratitude and appreciation to my project guide Prof. JAI KOTECHA who assisted me into this project. It has indeed been a great experience working under her guidance during the course of the project. I would like to thank her for his valuable advice and support throughout this project. And last but not the least I would like to thank all the Faculty Members, staff of the institute for their help in making my project an unforgettable and great learning experience. Date: signature of student 4|P age
  • 5. CONTENTS Introduction...........................................................................................................6 History……………..............................................................................................7 DEFINITION OF BANKS ………………………………….....................................9 Applicability of the Banking Regulation Act, 1949....................................................................................................................11 Banking Policy………………………………………………….......................14 Control of Management ………………………………………………………20 Bank of Baroda…………………………..........................................................22 History…...............................................................................................23 Statement of Consolidated Cash Flow for the year ended 31st March 2013.....................................................................................................24 DIRECTORS’ REPORT…................................................................................31 Financial Statement Of Bank Of Baroda............................................................33 Bibliography…………………………………………………………………..72 5|P age
  • 6. INTRODUCTION The Banking companies act, presently known as banking regulation act was enacted owing to safeguard the interest of depositors, control abuse of power by some bank personnel controlling the banks in particular and to the interest of Indian economy in general. The Banking Regulation Act was passed as the Banking Companies Act 1949 and came into force w.e.f 16.3.49. Subsequently it was changed to Banking Regulations Act 1949 wef 01.03.66. However, it should be remembered that this act does not supersede the provision of companies act or any other law for the time being in force in respect of banking business. 6|P age
  • 7. HISTORY Banking in India in the modern sense originated in the last decades of the 18th century. The first banks were Bank of Hindustan (1770-1829) and The General Bank of India, established 1786 and since defunct. The largest bank, and the oldest still in existence, is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India in 1955. For many years the presidency banks acted as quasi-central banks, as did their successors, until the Reserve Bank of India was established in 1935. In 1969 the Indian government nationalized all the major banks that it did not already own and these have remained under government ownership. They are run under a structure know as 'profit-making public sector undertaking' (PSU) and are allowed to compete and operate as commercial banks. The Indian banking sector is made up of four types of banks, as well as the PSUs and the state banks; they have been joined since 1990s by new private commercial banks and a number of foreign banks. Banking in India was generally fairly mature in terms of supply, product range and reach-even though reach in rural 7|P age
  • 8. India and to the poor still remains a challenge. The government has developed initiatives to address this through the State bank of India expanding its branch network and through the National Bank for Agriculture and Rural Development with things like microfinance. 8|P age
  • 9. DEFINITION OF BANKS In India, the definition of the business of banking has been given in the Banking Regulation Act, (BR Act), 1949. According to Section 5(c) of the BR Act, 'a banking company is a company which transacts the business of banking in India.' Further, Section 5(b) of the BR Act defines banking as, 'accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and with drawable , by cheque , draft, order or otherwise.' This definition points to the three primary activities of a commercial bank which distinguish it from the other financial institutions. These are: (i) maintaining deposit accounts including current accounts, (ii) issue and pay cheques, and (iii) collect cheques for the bank's customer Different provisions of Banking regulations Act S. No. Parts Tocs Sections covered 1. I Preliminary 1 to 5A 2. II Business of Banking Companies 6 to 36 A 3. IIA Control over management 36AA to 36AC 9|P age
  • 10. 4. IIB Prohibition of certain activities in relation to banking Companies 36AD 5. IIC Acquisition of the undertakings of Banking Companies in certain cases 36AE to 36AJ 6. III Suspension of business and winding up of Banking Companies 36B to 45 7. IIIA Speedy provision for speedy disposal of winding up proceedings 45A to 45X 8. IIIB Provision relating to certain operation of Banking Companies 45Y to 45ZF 9. IV Miscellaneous 46 to 55A 10. V Application of the Act to cooperative Banks 56 10 | P a g e
  • 11. Applicability of the Banking Regulation Act, 1949 This Act applies to following categories of Banks Nationalized Banks Non-Nationalized Banks Cooperative Banks Business of banking Companies Section 6(1) and 6(2) r.w. 56(b) • Borrowing, raising or taking of money • Giving advance • Bills business • L/C , Bank Guarantee, Indemnity • Foreign exchange • Providing safe deposit vaults • Collecting and transmitting money 11 | P a g e
  • 12. • Managing, selling and realizing any property that may come into the possession of the bank in satisfaction or part satisfaction of any of its dues • Acquiring, holding and dealing with any property or any right, title or interest in any such property that may form the security or part of the security for any loans or advances or which may be connected with such security Undertaking and executing trusts • Acquiring, constructing, maintaining and altering of any building for the purpose of the bank • Acquiring and undertaking the whole or part of the business of any person or bank / company if its nature of business is as per the allowed business for the bank • Doing all such other things as are incidental or conducive to the promotion or advancement of the business of the bank • Any other business the Central Govt. may by notification specify as a allowed business • Banks are prohibited to do any other business Use of words bank, banker, banking or banking company • No company other than a banking company shall use as part of its name 15[or, in connection with its business] any of the words bank, banker or banking and no company shall carry on the business of banking in India unless it uses as part of its name at least one of such words. • No firm, individual or group of individuals shall, for the purpose of carrying on any business, use as part of its or 12 | P a g e
  • 13. his name any of the words bank, banking or banking company. • Nothing in this section shall apply to- (1) a subsidiary of a banking company formed for one or more of the purposes mentioned in sub-section (1) of section 19, whose name indicates that it is a subsidiary of that banking company; (2) any association of banks formed for the protection of their mutual interests and registered under section 25 of the Companies Act, 1956 (1 of 1956).] Applicability against other laws • Provisions of the Banking regulation Act, 1949 are not in substitution of other laws applicable, unless otherwise expressly said (Section 2 sub 56 (b) • Act is not applicable to – 1 Primary Agricultural Society – 2 Co-operative Land Mortgage Bank – 3 Any other co-operative society except as provided by Sec. 56(Section 3) 13 | P a g e
  • 14. Banking Policy • “Banking Policy “means policy specified by RBI from time to time in the interest of • -Banking system • -Monitory stability • -Sound economic growth • -Interest of depositors • -Volume of deposits and other resources of the bank • -Efficient use of the deposits and resources Section 5(ca) Cash Reserve (CRR) Section 18 r. w. 56 (j) • Every bank is required to keep cash reserve, with itself or by way of balance in the current account with RBI or Central / District Co-operative Bank or net balance in all such way, of minimum prescribed % amount of its DTL as of last Friday of fortnight • A return about this has to be submitted to RBI before 15thof each month about alternate Friday SLR (Statutory Liquidity Ratio) 14 | P a g e
  • 15. Bank shall maintain unencumbered approved securities, valued not exceeding the current market price, or an amount which shall not be less than 24% of the total of its demand and time liabilities (DTL) Restrictions on loans and advances • (1) Notwithstanding anything to the contrary contained in section 77 of the Companies Act, 1956 (1 of 1956), no banking company shall, • (a) grant any loans or advances on the security of its own shares, or • (b) enter into any commitment for granting any loan or advance to or on behalf of • (i) any of its directors, • (ii) any firm in which any of its directors is interested as partner, manager, employee or guarantor, or • (iii) any company [not being a subsidiary of the banking company or a company registered under section 25 of the Companies Act, 1956 (1 of 1956), or a Government company] of which 61[or the subsidiary or the holding company of which] any of the directors of the banking company is a director, managing agent, manager, employee or guarantor or in which he holds substantial interest, or • (iv) any individual in respect of whom any of its directors is a partner or guarantor. Licensing of banking companies 15 | P a g e
  • 16. • 68[(1) Save as hereinafter provided, no company shall carry on banking business in India unless it holds a licence issued in that behalf by the Reserve Bank and any such licence may be issued subject of such conditions as the Reserve Bank may think fit to impose.] • (2) Every banking company in existence on the commencement of this Act, before the expiry of six months from such commencement, and every other company before commencing banking business 69[in India], shall apply in writing to the Reserve Bank for a licence under this section. Power to publish information The Reserve Bank or the National Bank, or both, if they consider it in the public interest so to do, may publish any information obtained by them under this Act in such consolidated form as they think fit. Power of the Reserve Bank to give directions • (1) Where the Reserve Bank is satisfied that— • (a) in the 134[public interest]; or • 135[(aa) in the interest of banking policy; or] • (b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or • (c) to secure the proper management of any banking company generally, 16 | P a g e
  • 17. • it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions • (2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect. Amendments of provisions relating to appointments of managing directors, etc., to be subject to previous approval of the Reserve Bank. • No amendment of any provision relating to the maximum permissible number of directors. • No appointment or re-appointment or termination of appointment of a chairman. • Further powers and functions of Reserve Banks. • 1.(a) caution or prohibit banking companies or any banking company in particular against entering into any particular transaction or class of transactions, and generally give advice to any banking company; 17 | P a g e
  • 18. • (b) on a request by the companies concerned and subject to the provision of section 149[44A], assist, as intermediary or otherwise, in proposals for the amalgamation of such banking companies; • (c) give assistance to any banking company by means of the grant of a loan or advance to it under clause (3) of sub-section (1) of section 18 of the Reserve Bank of India Act, 1934 (2 of 1934); • (2) The Reserve Bank shall make an annual report to the Central Government on the trend and progress of banking in the country, with particular reference to its activities under clause (2) of section 17 of the Reserve Bank of India Act, 1934 (2 of 1934), including in such report its suggestions, if any, for the strengthening of banking business throughout the country. • (3) The Reserve Bank may appoint such staff at such places as it considers necessary for the scrutiny of the returns, statements and information furnished by banking companies under this Act, and generally to ensure the efficient performance of its functions under this Act. Certain provisions of the Act not to apply to certain banking companies. • (1) The provisions of section II, sub-section (1) of section 12, and sections 17, 18, 24 and 25 shall not apply to a banking company— • (a) which, whether before or after the commencement of the Banking Companies (Amendment) Act, 1959 (33 of 1959), has been refused a licence under section 22, or prohibited from accepting fresh deposits by a compromise, arrangement or scheme sanctioned by a court or by 18 | P a g e
  • 19. any order made in any proceeding relating to such compromise, arrangement or scheme, or prohibited from accepting deposits by virtue of any alteration made in its memorandum; or • (b) whose licence has been cancelled under section 22, whether before or after the commencement of the Banking Companies (Amendment) Act, 1959 (33 of 1959). • (2) Where the Reserve Bank is satisfied that any such banking company as is referred to in subsection (1) has repaid, or has made adequate provision for repaying all deposits accepted by the banking company, either in full or to the maximum extent possible, the Reserve Bank may, by notice published in the Official Gazette, notify that the banking company has ceased to be a banking company within the meaning of this Act, and thereupon all the provisions of this Act applicable to such banking company shall cease to apply to it, except as respects things done or omitted to be done before such notice.] 19 | P a g e
  • 20. CONTROL OVER MANAGEMENT • 36AA. Power of Reserve Bank to remove managerial and other persons from office. • (a)36AAA. Supersession of Board of directors of a multiState co-operative bank. • (b)36AAB. Order of winding up of multi-State co-operative bank to be final in certain cases • (c)Reimbursement to Deposit Insurance Corporation by liquidator or transferee bank • 36AA. Power of Reserve Bank to remove managerial and other persons from office. • (a)36AAA. Supersession of Board of directors of a multiState co-operative bank.  (b)36AAB. Order of winding up of multi-State co-operative bank to be final in certain cases • (c)Reimbursement to Deposit Insurance Corporation by liquidator or transferee bank • 36AB. Power of Reserve Bank to appoint additional directors, • 36AC. Part IIA to override other laws. • 36AD. Punishments for certain activities in relation to banking companies. 20 | P a g e
  • 21. SUSPENSION OF BUSINESS AND WINDING UP OF BANKING COMPANIES • High Court defined. • Suspension of business. • Winding up by High Court. • Court liquidator. • Reserve Bank to be official liquidator. • Application of Companies Act to liquidators. 21 | P a g e
  • 22. BANK OF BARODA Introduction Bank of Baroda (BoB) is an Indian stateowned banking and financial services company headquartered in Baroda, or Vadodara. It offers a range of banking products and financial services to corporate and retail customers through its branches and through its specialized subsidiaries and affiliates in the areas of retail banking, investment banking, credit cards, and asset management. Its total global business was 8,021 billion as of 31 March 2013, making it the second largest Bank in India after State Bank of India In addition to its headquarters in its home state of Gujarat, it has a corporate headquarters in the Bandra Kurla Complex in Mumbai. Based on 2012 data, it is ranked 715 on Forbes Global 2000 list.[4][5] BoB has total assets in excess of 3.58 trillion (short scale), 3,583 billion (long scale), a network of 4283 branches (out of which 4172 branches are in India) and offices, and over 2000 ATMs. The bank was founded by the Maharaja of Baroda, H. H. Sir Sayajirao Gaekwad III on 20 July 1908 in the Princely State of Baroda, in Gujarat. The bank, along with 13 other major commercial banks of India, was nationalized on 19 July 1969, by the Government of India and has been designated as a profit-making public sector undertaking (PSU). 22 | P a g e
  • 23. History In 1996, BoB Bank entered the capital market in December with an Initial Public Offering (IPO). The Government of India is still the largest shareholder, owning 66% of the bank's equity. In 1997, BoB opened a branch in Durban. The next year BoB bought out its partners in IUB International Finance in Hong Kong. Apparently this was a response to regulatory changes following Hong Kong’s reversion to the People’s Republic of China. The now wholly owned subsidiary became Bank of Baroda (Hong Kong), a restricted license bank. BoB also acquired Punjab Cooperative Bank in a rescue. BoB incorporate wholly owned subsidiary BOB Capital Markets Ltd. for broking business. In 1999, BoB merged in Bareilly Corporation Bank in another rescue. At the time, Bareilly had 64 branches, including four in Delhi. In Guyana, BoB incorporated its branch as a subsidiary, Bank of Baroda Guyana. BoB added a branch in Mauritius and closed its Harrow Branch in London. 23 | P a g e
  • 24. Statement of Consolidated Cash Flow for the year ended 31st March, 2013 (000's omitted) Year ended 31.03.2013 A. Cash flow from operating activities: Net Profit before taxes Adjustments for : Depreciation on fixed assets Depreciation on investments (including on Matured debentures) Bad debts written-off/Provision in respect of non-performing assets Provision for Standard Assets Provision for Other items (Profit) / loss on sale of fixed assets Payment/provision for interest on subordinated debt(treated separately) Sub total Adjustments for : (Increase)/Decrease in investments (Increase)/Decrease in advances (increase)/Decrease in other assets Increase/(Decrease) in borrowings Increase/(Decrease) in deposits Increase/(Decrease) in other liabilities and provisions Direct taxes paid (Net of Refund) Year ended 31.03.2012 5248,36,93 6336,03,70 321,70,12 220,55,42 295,48,16 238,81,36 3501,01,53 1892,81,38 395,21,36 848,50,50 1,22,56 930,27,55 449,66,42 523,98,03 (79,87) 914,36,03 11466,85,97 10650,35,21 (39140,60,32) (12781,39,85) (45049,07,56) (61884,83,95) 1889,31,06 (3545,00,45) 2852,58,41 1031,35,69 90022,94,80 81012,69,61 2981,82,56 1928,70,34 (1827,70,72) (1774,47,81) 24 | P a g e
  • 25. Net cash from operating activities (A) B. Cash flow from investing activities : Purchase of fixed assets Sale of fixed assets Net cash from investing activities (B) C. Cash flow from financing activities : Share capital Share premium Unsecured Subordinated Bonds Dividend Interest paid / payable on unsecured redeemable bonds Net cash from financing activities (C) Net increase in cash & cash equivalents (A)+(B)+(C) Cash and cash equivalents as at the beginning of the year Cash and cash equivalents as at the end of the year Notes: 1 Cash & Cash equivalents includes Cash on hand, Balance with RBI & Other banks and Money at call and Short Notice. 2 Components of Cash & Cash Equivalents 23196,14,20 14637,38,79 (560,09,92) 45,94,30 (514,15,62) (456,14,17) 40,02,44 (416,11,73) 10,13,29 839,86,71 102,30,00 (812,29,04) (930,27,55) 19,57,73 1625,11,20 188,37,19 (753,35,20) (914,36,03) (790,26,59) 165,34,89 21891,71,99 14386,61,95 65810,34,67 51423,72,72 87702,06,66 65810,34,67 As on 31st March 2013 As on 31st March 2012 25 | P a g e
  • 26. Cash & Balance with RBI Balances with Banks and Money at Call and Short Notice 14151,18,45 73550,88,21 22268,34,40 43542,00,27 Total Key Financial Indicators 87702,06,66 65810,34,67 Particular S.N s (In 31.03.20 31.03.20 31.03.20 31.03.20 31.03.20 o. Percentag 09 10 11 12 13 e) 1 Interest Income / Average Working Funds (AWF) 7.78% 6.86% 6.97% 7.58% 7.34% 2 Interest Expenses / AWF 5.14% 4.42% 4.16% 4.95% 4.98% 3 Net Interest Margin (NIM) 2.91% 2.74% 3.12% 2.97% 2.66% 4 Interest Spread / AWF 2.64% 2.44% 2.80% 2.64% 2.36% 5 NonInterest Income / AWF 1.42% 1.15% 0.89% 0.87% 0.76% 6 Operating 1.84% 1.56% 1.47% 1.32% 1.24% 26 | P a g e
  • 27. Expenses / AWF 7 Cost Income Ratio 45.38% 43.57% 39.87% 37.55% 39.79% 8 Gross (Operating ) Profit / AWF 2.22% 2.03% 2.22% 2.19% 1.88% 9 Net Profit / AWF 1.15% 1.26% 1.35% 1.28% 0.93% 10 Return on Net Worth 19.48% 22.19% 21.42% 19.11% 14.59% 11 Return on Assets 0.98% 1.10% 1.18% 1.12% 0.82% Return on 12 Average Assets 1.10% 1.21% 1.33% 1.24% 0.90% 13 Yield on Advances 9.50% 8.55% 8.48% 9.39% 8.90% 14 Cost of Deposits 5.71% 4.90% 4.56% 5.62% 5.80% Dividend Payout Ratio 15 (including Corporate Dividend Tax) 17.22% 20.90% 17.76% 16.22% 23.65% 16 Credit -- 81.94% 84.47% 86.77% 86.86% 82.03% 27 | P a g e
  • 28. Deposit Ratio Credit + Non SLR Investment (excluding Investment 17 87.44% s in Subsidiarie s) -Deposit Ratio 88.74% 90.29% 90.36% 86.17% Capital Adequacy 18 12.88% Ratio (BASEL I) 12.84% 13.02% 12.95% 12.09% Tier - I 7.79% 8.22% 8.96% 9.56% 9.20% Tier - II 5.09% 4.62% 4.06% 3.39% 2.89% Capital Adequacy 19 Ratio (BASEL II) 14.05% 14.36% 14.52% 14.67% 13.30% Tier - I 8.49% 9.20% 9.99% 10.83% 10.13% Tier - II 5.56% 5.16% 4.53% 3.84% 3.17% Particular S.No s (In 31.03.20 31.03.20 31.03.20 31.03.20 31.03.20 .. Percentag 09 10 11 12 13 e) 28 | P a g e
  • 29. 1 Employee s (number) 36838 38960 40046 42175 43108 2 Branches (number) 2974 3148 3418 3959 4336 3 Business per employee (Rs. in crore) 8.63 9.81 12.29 14.66 16.89 4 Average Business per employee (Rs in crore) 7.57 8.94 11.26 13.15 15.71 5 Gross Profit per employee (Rs. in lakhs) 11.69 12.67 17.43 20.35 20.88 6 Net Profit per employee (Rs. in lakhs) 6.05 7.85 10.59 11.87 10.39 7 Business per branch (Rs. in crore) 112.86 132.24 156.27 169.80 184.98 8 Gross Profit per 1.45 1.57 2.04 2.17 2.08 29 | P a g e
  • 30. branch (Rs. in crore) 9 Net Profit per branch (Rs. in crore) 0.75 0.97 1.24 1.26 1.03 Earnings 10 per share (Rupees) 61.14 83.96 116.37 127.84 108.84 Book Value per 11 share (Rupees) 313.82 378.44 505.71 637.37 729.11 30 | P a g e
  • 31. DIRECTORS’ REPORT "Your Directors have pleasure in presenting the One Hundred and Fourth 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, 2013 (FY13)." Performance Highlights  Total Business (Deposit+Advances) increased to Rs 8,02,069 crore reflecting a growth of 19.3% (y-o-y).  Gross Profit and Net Profit were Rs 8,999.15 crore and Rs 4,480.72 crore respectively. Net Profit registered a growth of -10.5% over previous year.  Credit-Deposit Ratio stood at 82.03% as against 86.86% last year.  Retail Credit posted a growth of 6.7% constituting 16.6% of your Bank’s Gross Domestic Credit in FY13.  MSME Credit posted a growth of 30.3% constituting 19.7% Gross Domestic Credit in FY13.  Net Interest Margin (NIM) as per cent of interest earning assets in global operations was at the level of 2.66% and in domestic operations at 3.11% during FY13.  Net NPAs to Net Advances stood at 1.28% this year against 0.54% last year.  Capital Adequacy Ratio (CAR) as per Basel II stood at 13.30%.  Net Worth improved to Rs 30,714.19 crore registering a rise of 17.2%.  Book Value improved from Rs 637.37 to Rs 729.11 on year. 31 | P a g e
  • 32.  Business per Employee moved up from Rs 1,466 lakh to Rs 1,689 lakh on year. 32 | P a g e
  • 33. Financial Statement Of Bank Of Baroda SCHEDULE -18 NOTES ON ACCOUNTS A Disclosure in terms of RBI requirements A-1. Capital Particulars Current Year Previous Year i) CRAR % Basel-II 14.67 % 14.52 % ii) CRAR - Tier l Capital (%) Basel-II 10.83 % 9.99 % 3.84 % 4.53 % 54.31 % 57.03 % v) Amount of subordinated debt raised as Tier-II Capital - - vii) Amount raised by issue of IPDI - Rs. 711.50 Crores viii) Amount raised by issue of Upper Tier II instruments - Rs. 1,500.00 Crores iii) CRAR – Tier ll Capital (%) Basel-II iv) Percentage of the shareholding of the Government of India A-2. Investments (Rs. in Crores) Particulars Current Year Previous Year (1) Value of Investments (i) Gross Value of Investments (a) In India (b) Outside India, 79,818.80 68,137.30 4,094.49 3,739.46 33 | P a g e
  • 34. (ii) Provisions for Depreciation (a) In India 553.80 336.96 (b) Outside India, 150.08 143.21 79,265.00 67,800.34 3,944.41 3,596.25 (i) Opening balance 480.17 527.80 (ii) Add: Provisions made during the year 343.55 112.08 (iii) Less: Write-off / write-back of excess provisions during the year 119.84 159.71 (iv) Closing balance 703.88 480.17 (iii) Net Value of Investments (a) In India (b) Outside India. 2) Movement of provisions held towards depreciation on investments A-2.1 Repo Transactions (in face value terms) 2.1 a. Repo Transactions (LAF) with RBI (Rs. in Crores) Daily Minimum Maximum Average Outstanding outstanding outstanding outstanding as on March during the during the during the 2012 year year year Securities sold under repo i. Government securities 504.85 8,797.88 2,348.41 7,000.00 ii. Corporate debt securities - - - - Securities purchased under 34 | P a g e
  • 35. reverse repo i. Government securities 304.71 6,690.55 129.58 - ii. Corporate debt securities - - - - A-2.2 Non-SLR Investment Portfolio i) Issuer composition of Non SLR investments (Rs. in Crores) No . Issuer (1) (2) Extent of Extent of Extent of Extent of ‘Below Private ‘Unrated’ ‘Unlisted’ Amount Investmen Placemen Securitie Securitie t Grade’ t s s Securities (3) (4) (5) (6) (7) (i) PSUs 1,061.36 427.06 - - 107.08 (ii) FIs 1,024.96 853.58 73.64 - 73.64 (iii) Banks 4,687.40 847.30 408.85 64.06 97.20 2,339.47 1,146.50 790.66 214.80 159.05 Subsidiarie (v) s /Joint 1,234.94 Ventures 1,234.94 - - - 4,194.55 376.30 955.33 50.88 305.25 -703.88 - - - - 13,838.8 0 4,885.68 2,228.48 329.74 742.22 (iv) Private Corporate (vi) Others Provision held (vii towards ) depreciatio n Total 35 | P a g e
  • 36. ii) Non-performing Non-SLR investments (Rs. in Crores) Particulars Current Year Opening balance Previous Year 250.70 231.58 88.85 21.71 - 2.59 Closing balance 339.55 250.70 Total provisions held 290.98 227.53 Additions during the year Reductions during the year A-2.3 Derivatives A-2.3.1 Forward Rate Agreement / Interest Rate Swap (Rs. in Crores) Particulars i) The notional principal of swap agreements ii) Losses which would be incurred if counterparties failed to fulfill their obligations under the agreements iii) Collateral required by the bank upon entering into swaps iv) v) Current Previous Year Year 17,477.59 13,745.00 179.62 142.89 — — Concentration of credit risk arising from the swaps 977.85 601.4 The fair value of the swap book 732.07 256.29 A-2.3.2 Exchange Traded Interest Rate Derivatives: (Rs. in Crores) Sr. No. Particulars Amount (i) Notional principal amount of exchange traded interest rate derivatives undertaken during the year (instrument-wise) A. Interest Rate Future (IRF) 445.37 (ii) Notional principal amount of exchange traded interest NIL 36 | P a g e
  • 37. rate derivatives outstanding as on 31st March 2012 (instrument-wise) (iii) Notional principal amount of exchange traded interest rate derivatives outstanding and not "highly effective" (instrument-wise) NIL (iv) Mark-to-market value of exchange traded interest rate derivatives outstanding and not "highly effective" (instrument-wise) NIL A-2.3.3 Disclosures on risk exposure in derivatives (i) Qualitative Disclosure The Treasury Policy of the bank lays down the types of financial derivative instruments, scope of usages, approval procedures and the limits like open position limits, stop loss limits and counter party exposure limits for undertaking derivative transactions. The Bank uses financial derivative transactions for hedging, its on or off balance sheet exposures as well as for market making. Basically, these products are used for hedging risk, reducing cost and increasing the yield in such transactions and for proprietary trading. The types of risk to which the bank is exposed to are credit risk, market risk, country risk and operational risk, The Bank has risk management policies (approved by Board of Directors of the Bank), which is designed to measure the financial risks for transactions in the trading book on a regular basis, by way of MTM, VaR and PV01, and to set appropriate risk limits. These are monitored by means of reliable and up to date Management Information Systems by the Risk Management Department of the Bank from time to time who, in turn, appraises the risk profile to the Risk management Committee of Directors, which is presided over by the Bank’s Chairman and Managing Director. The counter parties to the transactions are banks and corporate entities. The deals are done under approved exposure limits. The bank has adopted the current exposure method prescribed by Reserve Bank 37 | P a g e
  • 38. of India for measuring Credit Exposure on Derivative products as per which the bank sums the total replacement cost (obtained by mark to market of all its contracts with positive value i.e. when the bank has to receive money from the counter party) and an amount for potential future changes in credit exposure calculated on the basis of the total notional principal amount of the contract multiplied by the relevant credit conversion factors according to the residual maturity as detailed herein under:- Conversion factor to be applied on notional principal amount Residual Maturity Interest Rate Contract Exchange Rate Contract Less than one year 0.50% 2.00% One year and above 1.00% 10.00% Over five years 3.00% 15.00% The hedge/non-hedge (market making) transactions are recorded separately. Hedging derivatives are accounted for on an accrual basis. Trading derivative positions are marked-to-market (MTM) and the resulting losses, if any, are recognized in the Profit and Loss Account. Profit, if any is not recognized. Income and Expenditure relating to interest rate swaps are recognized on the settlement date. Gains/losses on termination of the trading swaps are recorded on the termination date as income/expenditure. (ii) Quantitative Disclosures (Rs. in Crores) Sr. No. Particulars Currency Interest rate Derivatives Derivatives Derivatives (Notional Principal Amount) 422.78 17,177.27 a) For hedging 300.34 9,228.38 b) For trading (i) 122.44 7,948.89 22.11 604.84 (ii) Marked to Market Positions (1) 38 | P a g e
  • 39. a) Asset (+) 26.89 724.9 b) Liability (-) -4.78 -120.06 32.75 963.43 0.44 452.05 a) On hedging derivatives -0.02 275.61 b) On trading derivatives 0.46 176.44 (iii) Credit Exposure (2) (iv) (v) Likely impact of one percentage change in interest rate (100*PV01) Maximum and Minimum of 100*PV01 observed during the year 1.61&0.46 256.01&172.33 a) On hedging - 100.29&53.19 b) On trading 1.61&0.46 189.21&122.24 A-2.4 Asset Quality A-2.4.1 Non-Performing Asset A. Movement of NPAs (Rs. in Crores) Current Previous Year Year Gross NPAs as on 1st April 2011 (Opening Balance) 3,152.50 2,400.69 Additions (Fresh NPAs) during the year 3,443.31 1,897.01 Sub-Total (A) 6,595.81 4,297.70 Less : (i) Upgradations 335.55 189.17 (ii) Recoveries (excluding recoveries made from upgraded accounts) 580.46 455.49 (iii) Write-offs 1,215.05 500.54 Sub-total (B) 2,131.06 1,145.20 Gross NPAs as on 31st March 2012 (closing balance) (A-B) 4,464.75 3,152.50 B) Non-Performing Assets (Rs. in Crores) Particulars Current Previous 39 | P a g e
  • 40. Year (i) Net NPAs to Net Advances (%) Year 0.54 0.35 (a) Opening balance 3,152.50 2,400.69 (b) Additions during the year 3,443.31 1,897.01 (c) Reductions during the year 2,131.06 1,145.20 (d) Closing balance 4,464.75 3,152.50 790.88 602.32 (b) Additions during the year 1,988.72 718.15 (c) Reductions during the year 1,235.96 529.59 (d) Closing balance 1,543.64 790.88 (a) Opening balance 2,361.62 1,798.37 (b) Provisions made during the year 1,836.42 1,178.86 (c) Write-off/ write-back of excess provisions 1,276.93 615.61 (d) Closing balance 2,921.11 2,361.62 (ii) Movement of NPAs (Gross) (iii) Movement of Net NPAs (a) Opening balance (iv) Movement of provisions for NPAs (excluding provisions on standard assets) C) Sector-wise NPAs Sl. No. Sector Percentage of NPAs to Total Advances in that sector Current Previous Year Year 1 Agriculture & allied activities 3.99 3.47 2 Industry (Micro & small, Medium and Large) 1.12 1.76 3 Services 2.72 1.22 4 Personal Loans 3.66 1.72 D) Overseas Assets, NPAs and Revenue (Rs.in Crores) 40 | P a g e
  • 41. Particulars Total Assets Current Year Previous Year 12,7861.71 582.92 Total NPAs Total Revenue 90,767.70 366.27 4,032.74 2,951.23 A- 2.4.2 Particulars of Accounts Restructured. (Rs. in Crores) CDR SME Debt Others Mechanism Restructuring No. of Borrowers Standard advances Amount outstanding restructured Sacrifice (diminution in the fair value) No. of Borrowers Sub standard Amount outstanding advances restructured Sacrifice (diminution in the fair value) No. of Borrowers Doubtful advances Amount outstanding restructured Sacrifice (diminution in the fair value) No. of Borrowers TOTAL 16 (3) 1,534.03 (166.01) 277 (203) 9,620 (9,786) 505.76 6,813.28 (487.22) (2,189.38) 262.81 (11.06) 4.27 (4.91) 33.67 (52.74) (1) 6 (22) 2042 (129) (154.24) 17.04 (12.9) 5.09 (4.42) (4.5) 0.07 (0.16) 0.19 (0.1) (-) 2 (13) 40 (109) (-) 1.93 (0.01) 2.06 (11.91) (-) (0.01) 0.1 (0.12) 16 (4) 285 (238) 11702 (10024) Amount outstanding 1,534.03 (320.25) Sacrifice (diminution in the fair value) 262.81 (15.56) 524.73 6,820.43 (500.13) (2,205.71) 4.34 (5.08) 33.96 (52.96) 41 | P a g e
  • 42. Figures in bracket denote previous year numbers * In respect of one restructured account, the bank shall amortize the provision towards diminution in fair value of the said advance and the additional provision required for restructured standard asset over a period of 8 quarters starting from the first quarter of financial year 20122013 as per the directives from Reserve Bank of India vide their letter dated 2nd April 2012. A-2.4.3 Details of financial assets sold to Securitization / Reconstruction Company or Asset Reconstruction (Rs. in Crores) Current Year Particulars (i) No. of accounts Previous Year 3 3 - - 6.52 5.05 Additional consideration realized in respect of accounts transferred in earlier years - - (v) Aggregate gain / (loss) over net book value 6.52 5.05 (ii) Aggregate value (net of provisions) of accounts sold to SC / R C (iii) Aggregate consideration (iv) A-2.4.4 Details of non-performing financial assets purchased/sold A. Details of non-performing financial assets purchased: (Rs. in Crores) Particulars Current Year Previous Year 1. (a) No. of accounts purchased during the year - - (b) Aggregate outstanding - - 2. (a) Of these, number of accounts restructured during the year - - (b) Aggregate outstanding - - B. Details of non-performing financial assets sold: 42 | P a g e
  • 43. (Rs. in Crores) Particulars Current Year 1. No. of accounts sold 2. Aggregate outstanding Previous Year 3 3 68.33 8.07 6.52 5.05 3. Aggregate consideration received A-2.4.5 Provisions on Standard Asset (Rs. in Crores) Item Provisions towards Standard Assets as per RBI norms Current Year 1,390.06 Previous Year 911.35 A.2.5 Business Ratios (Rs. in Crores) Particulars Current Previous Year Year (i) Interest Income as a percentage to Average Working Funds 7.58 6.97 (ii) Non-interest income as a percentage to Average Working Funds 0.87 0.89 (iii) Operating Profit as a percentage to Average Working Funds 2.19 2.22 1.24 1.33 14.66 12.29 0.12 0.11 (iv) Return on Assets (v) Business (Core Deposits plus advances) per employee (Rs in Crores) (vi) Profit per employee (Rs. in Crores) A. 2.6 Maturity pattern of certain items of assets and liabilities (As compiled by the management and relied upon by the auditors) (Rs. in Crores) 1 2 to 8 to 15 to 29 Over Over Over Over Over Total 43 | P a g e
  • 44. day 292 5.19 Depo (681 sits 0.06 ) 7 14 28 days 3 days days days to 3 mon mon ths ths & up to 6 mon ths 2123 9.74 (156 85.4 8) 6 mon ths & up to 1 year 1 year & up to 3 year s 1011 1100 1432 4689 6978 5752 86.0 3.69 9.7 9.67 2.9 4.98 9 (141 (115 (318 (582 (350 (787 59.6 74.8 80.7 93.1 87.6) 69.3 1) 6) 4) 5) 6) 221 6010 8268 6769 9.76 Adva .72 .23 .28 (318 nces (405 (471 (516 9.22 5.21) 9.87) 5.89) ) 3796 9.99 (270 56.9 5) 3123 8.21 (292 23.8 1) 3 5 year year s& s up to 5 year s 1448 0.81 (104 17.8 1) 4549 8.33 (427 60.8 1) 3848 71.11 (3054 39.48 ) 3090 8955 3129 4314 2873 9.28 0.2 8.26 3.37 77.29 (301 (433 (289 (527 (2286 60.5 14.6 91.2 98.9 76.36 5) 3) 4) 9) ) 1059 4852 419 1186 290. 764. 5737 1231 1633 1282 8320 Invest 3.25 4.47 .65 .93 33 51 .41 .49 .1 8.27 9.4 ment (139 (420 (308 (102 (261. (473. (288 (107 (199 (730 (7126 s 21.9 10.4 .78) 1.37) 94) 73) 8.74) 7.89) 4.7) 1.1) 0.63) 3) 4) 1062 61.0 508. 39.3 25.4 1751 2387 2042 1399 4729 2357 8.26 Borro 3 8 2 4 .06 .02 .77 .66 .69 3.05 (126 wings (324 (451. (71.9 (293. (154 (230 (46.2 (273 (186 (2230 69.9 .42) 79) 2) 75) 3.06) 5.3) 4) 9.36) 2.08) 7.85) 1) Forei gn Curre ncy asset s 854 5.19 (964 1.29 ) 2916 1021 4883 6054 4.67 2.72 .32 .54 (230 (507 (277 (535 54.0 7.95) 8.3) 3.27) 9) 2382 6.91 (167 15.2 4) 1511 1804 1217 1331 5106 9.83 8.4 0.83 32.84 .43 (161 (106 (106 (1068 (663 87.1 77.7 88.6 09.82 6.2) 2) 4) 2) ) Forei 173 1755 5960 5852 2710 2269 2193 4997 1656 8926 1333 gn 7.17 6.76 .54 .08 5.95 0.71 7.97 .56 7.48 .66 32.88 44 | P a g e
  • 45. Curre (959 (892 (323 (605 (160 (180 (134 (114 (118 (102 (1089 ncy 1.3) 8.37) 1.94) 7.93) 73.1 28.6 64.9 83.1 53.4 47.8 60.83 liabilit 7) 3) 7) 7) 5) 9) ) ies • Figures in bracket denote previous year numbers • The distribution of Assets and Liabilities has been done as per the “Asset Liability Management and Group Risk Policy-2011” of the Bank • The Distribution of provisions and other deductions, while arriving at the net advances, has been done in proportion to the gross Standard Advances. • Distribution of provision on foreign currency liabilities has been done in proportion to the distribution of the parent liability. A-2.7 Exposures A-2.7.1 Exposure to Real Estate Sector (Rs. in Crores) Category Current Year Previous Year a) Direct exposure (i) Residential Mortgages – Lending fully secured by mortgages on residential property that is or will be occupied by the borrower or that is rented; Of which Individual housing loans eligible for inclusion in priority sector (ii) Commercial Real Estate – 15,729 13,085.20 (9,880.57) (8,074.83) 5,834.96 6,082.45 Lending secured by mortgages on commercial real estates (office buildings, retail space, multi-purpose commercial premises, multi-family residential buildings, multi-tenanted commercial premises, industrial or warehouse space, hotels, land acquisition, development and construction, etc.). Exposure would also include nonfund based (NFB) limits; 45 | P a g e
  • 46. (iii) Investments in Mortgage Backed Securities (MBS) and other securitised exposures – a. Residential, 0.41 17.84 13.13 43.54 83.18 10.00 5,496.72 4,618.91 27,157.40 23,857.95 b. Commercial Real Estate. b) Indirect Exposure Fund based and non-fund based exposures (i) National Housing Bank (NHB) (ii) Housing Finance Companies (HFCs) Total Exposure to Real Estate Sector A-2.7.2 Exposure to Capital Market (Rs. in Crores) Items Current Previous Year Year Direct investment in equity shares, convertible bonds, convertible debentures and units of equity-oriented mutual funds the corpus of which is not exclusively invested in corporate debt; 1,846.09 1,361.79 Advances against shares/bonds/ debentures or other securities or on clean basis to individuals for investment in shares (ii) (including IPOs/ESOPs), convertible bonds, convertible debentures, and units of equityoriented mutual funds; 70.60 12.16 Advances for any other purposes where shares or convertible bonds or convertible (iii) debentures or units of equity oriented mutual funds are taken as primary security; 12.57 4.80 Advances for any other purposes to the extent secured by the collateral security of (iv) shares or convertible bonds or convertible debentures or units of equity oriented mutual 116.39 5.37 (i) 46 | P a g e
  • 47. funds i.e. where the primary security other than shares/convertible bonds/convertible debentures/units of equity oriented mutual funds Rs does not fully cover the advances Secured and unsecured advances to (v) stockbrokers and guarantees issued on behalf of stockbrokers and market makers 159.72 206.46 Loans sanctioned to corporates against the security of shares / bonds/debentures or other securities or on clean basis for meeting (vi) promoter’s contribution to the equity of new companies in anticipation of raising resources; - 123.74 Bridge loans to companies against expected equity flows/issues; - 0.13 Underwriting commitments taken up by the banks in respect of primary issue of shares (viii) or convertible bonds or convertible debentures or units of equity oriented mutual funds; 0.60 - (ix) Financing to stockbrokers for margin trading 1.90 150.11 731.52 741.88 2,939.39 2,606.44 (vii) (x) All exposures to Venture Capital Funds (both registered and unregistered) Total Exposure to Capital Market The exposure to Capital Market of Rs. 2,939.39 Crores is within the limit of Rs. 7,900.25 Crores (i.e. 40% of Bank’s Net worth Rs.19,750.63 Crores as on 31.03.2011). The direct exposure to Capital Market is Rs. 2,663.28 Crores and is within 20% of the Bank’s Net Worth (Rs.3,950.12 Crores). A-2.7.3 Risk Category wise Country Exposure (Rs. in Crores) Category Exposure (net) as at Provision held as at Exposure (net) as at Provision held as at 47 | P a g e
  • 48. 31st March 2012 31st March 2012 31st March 2011 31st March 2011 Insignificant 16,820.37 8.78 11,525.14 5.19 Low 13,082.91 13.85 11,681.36 12.22 479.44 - 769.28 - 62.23 - 337.49 - Very High 1,577.95 - 1,212.04 - Restricted 22.05 - 6.66 - Off-credit 0.38 - 0.06 - 32,045.33 22.63 25,532.03 17.41 Moderate High Total A-2.7.4 Single Borrower Limit (SBL)/ Group Borrower Limit (GBL) exceeded by the bank. (Rs. in Crores) Name of the Single Borrower Year borrower Exposure Limit Balance as on 31st March 2012 Total Limit Sanctioned 201112 - - - - 201011 - - - - Name of the Group Borrower Year borrower Exposure Limit Balance as on 31st March 2011 Total Limit Sanctioned 201112 - - - - 201011 - - - - A-2.7.5 Amount of Unsecured Advances The amount of advances, for which intangible securities, such as charge over the rights, licenses, authority etc. have been taken as 48 | P a g e
  • 49. security is Rs. 1033.30 Crores and the same has been classified as unsecured, forming part of unsecured advances as reflected in schedule 9 of the balance sheet. Such advances to total unsecured advances are 2.20 %. One account with unsecured loan of Rs.277.23 Crores has intangible collateral valued at Rs. 1099.28 Crores as per valuation report dated 23.04.2010. In respect of other accounts for unsecured outstanding of Rs. 756.07 Crores, the estimated value of intangible security is not taken. A-2.7.6 Concentration of Deposits, Advances, Exposures and NPAs 2.7.6. a) Concentration of Deposits (Rs. in Crores) Current Previous Year Year Total Deposits of twenty largest depositors Percentage of Deposits of twenty largest depositors to Total Deposits of the bank 36,576.98 30,464.99 9.50 9.97 2.7.6. b) Concentration of Advances (Rs. in Crores) Current Previous Year Year Total Advances to twenty largest borrowers Percentage of Advances to twenty largest borrowers to Total Advances of the bank 42,897.70 36,312.71 10.22 11.19 2.7.6. c) Concentration of Exposures (Rs. in Crores) Current Previous Year Year 49 | P a g e
  • 50. Total Exposure to twenty largest borrowers/customers 44,872.71 38,237.82 Percentage of Exposures to twenty largest borrowers/customers to Total Exposure of the bank on borrowers/customers 8.99 9.73 2.7.6. d) Concentration of NPAs (Rs. in Crores) Previous Current Year Year Total Exposure to top four NPA accounts 709.92 383.89 2.7.6. e) Provision Coverage Ratio (Rs. in Crores) Previous Current Year Year PCR to Gross NPA (including technical write-off) 80.05% 85.00% A-2.8 Miscellaneous A-2.8.1 Amount of Provisions for Taxation during the year (Rs. in Crores) Current Year Provision for Tax including Wealth tax & deferred tax Less reversal of Tax provisions relating to previous years Net Provision for tax Previous Year 1,443.98 1,652.91 425.14 244.27 1,018.84 1,408.64 A-2.8.2 Disclosure of penalties imposed by RBI During the financial year 2011-12, the bank has not been subjected to any penalty for contravention or non-compliance with any requirement 50 | P a g e
  • 51. of the Banking Regulation Act, 1949, or any rules or conditions specified by the Reserve Bank of India in accordance with the said Act. A-2.8.3 Off-balance sheet SPVs sponsored (which are required to be consolidated as per accounting norms) Name of the SPV sponsored Domestic Overseas NIL NIL A-3. SLR Investments: (Rs. in Crores) Previous Year Current Year Book Value Govt. sec SLR(CG,SG 69,207.34 & TB)* Approved sec-SLR 163.26 Market Value Book Value Market Value 69207.34 59404.47 59404.47 163.26 540.70 536.28 *incl. SLR Securities kept with CCIL/ MCX / USE / NSE A-4. Break up of Provisions and Contingencies A-4.1 The break-up of provisions and contingencies appearing in Profit & Loss Account is as under: (Rs. in Crores) Particulars Provision for depreciation on investment Bad debts written off / Provision made towards NPA Provision for standard assets Provision for taxes (including deferred taxes, and Wealth tax) Current Year Previous Year 236.33 9.01 1,568.87 1,055.47 448.17 223.85 1,018.84 1,408.64 Other Provision and Contingencies 51 | P a g e
  • 52. Provision towards sacrifice of interest in restructured standard and sub-standard accounts 296.32 -4.87 Provision for Country Risk Management 5.22 2.06 25.00 15.00 -25.08 30.76 3,573.67 2,739.92 Provision for staff welfare expenses Others Total A-4.2 Floating Provisions – Comprehensive Disclosures (Rs. in Crores) Particulars a. Opening balance in the floating provisions account Current Year Previous Year 850.35 550.35 b. The quantum of floating provisions made in the accounting year - 300.00 c. Amount of draw down made during the accounting year - - 850.35 850.35 d. Closing balance in the floating provisions account. A-4.3 Draw Down from Reserves During the financial year 2011-12, there has been no draw down from Reserves. A-5. Disclosure of complaints I. Customer Complaints Particulars (a) No. of complaints pending at the beginning of the year (b) No. of complaints received during the year Current Year Previous Year 160 91 11365 6239 52 | P a g e
  • 53. (c) No. of complaints redressed during the year 10889 6170 (d) No. of complaints pending at the end of the year 636* 160 * out of these 525 complaints are pending for less than 30 days. II. Awards passed by the Banking Ombudsman Current Year Previous Year (a) No. of unimplemented Awards at the beginning of the year 01 02 (b) No. of Awards passed by the Banking Ombudsman during the year 12 21 (c) No. of Awards implemented during the year 09 22 (d) No. of unimplemented Awards at the end of the year 04 01 Particulars A-6. Status of Letters of Comfort I Letters of Comfort (LOC’s) issued during the Current Financial Year. During the current financial year Bank has not issued any Letter of Comfort to meet the requirements of the overseas/domestic regulators while seeking their approval for establishing subsidiaries / opening of branches. II Cumulative position of LOC’s outstanding on 31.03.2012 The Bank has issued the following Letter of Comforts (i) During financial year 2008-09 to meet the requirements of the overseas/ domestic regulators while seeking their approval for establishing subsidiaries/ opening of branches, the Letter of Comfort was issued to Reserve Bank of New Zealand for the Bank’s subsidiary in that country As per audited accounts as on 31.03.2012, the deposits 53 | P a g e
  • 54. of the subsidiary are Rs. 80.90 Crores and outside liabilities are Rs.0.46 Lacs The LOC issued by Bank of Baroda covers this entire amount of Rs. 81.36 Crores i.e. deposit and outside liabilities. However, the net worth of the subsidiary is Rs.170.33 Crores and as such there is no liability arising on account of operations of the subsidiary for the period ended 31st March 2012. (ii) During financial year 2010-11, the Bank has issued Letter of comfort to the Bank of Negara Malaysia to the extent of the Bank’s 40% shareholding in the joint venture Bank – India International Bank (Malaysia) Bhd’ (IIBMB)- The Bank is yet to commence operations and therefore no financial liabilities arise to Bank of Baroda. A-7 Income earned for marketing third party products (Rs. in Crores) Nature of Income Current Year Previous Year For selling life insurance policies 19.30 23.42 For selling non life insurance policies 11.33 11.50 For selling mutual fund projects 1.73 1.82 Equity broking product 0.46 0.82 Bancassurance Business 0.21 2.48 A-8 Sale of Investment held under Held to Maturity (HTM) Category in excess of 5% of the Book value of the investment held in HTM category at the beginning of the year Opening Bal. Sale/ Market value of Closing Bal. of of investment transfer investment Addition Investment (HTM) during the (HTM) category (HTM) 31.03.12 01.04.2011 year 31.03.12 - - - - - A-9 Disclosure on imposition of penalty for bouncing of SGL forms Year ended Date of bouncing SGL form Amount Remarks 54 | P a g e
  • 55. 2012 - - - - 2011 - - - - B. Disclosure in terms of Accounting Standards (AS) issued by the Institute of Chartered Accountants of India: B-1. Employee Benefits (AS-15) B- 1.1 The Bank has adopted the Accounting Standard (AS-15) issued by ICAI, effective from 07.12.2006. The standard has been revised and notified on 17.12.2007. The provisions contained in AS-15 give option to the bank, to charge the transitional liability as an expense in its Profit and Loss Account spread over a period of 5 years. Bank has exercised this option and accordingly made an incremental provision for employee benefits such as pension, gratuity, leave encashment and other retirement benefits to the extent of 1/5th of the total transitional liability commencing from financial year 2007-08, which is crystallized on Actuarial valuation at Rs.901.00 Crores, which has been fully provided as on March 31, 2012 B-1.2 GRATUITY The Bank pays gratuity to employees who retire or resign from Bank’s service, after initial service period of five years. Accordingly, the Bank makes contributions to an in-house trust, towards funding this gratuity, payable every year. In accordance with the gratuity fund’s rules, actuarial valuation of gratuity liability is calculated based on certain assumptions regarding rate of interest, salary growth, mortality and staff attrition as per the projected unit credit actuarial method. The investment of the funds is made according to investment pattern prescribed by the Government of India. The gratuity payable is worked out by way of 3 different schemes and the entitlement is based on what is most beneficial to employees. B- 1.3 PENSION B. 1.3.1 Bank of Baroda pays pension, a defined benefit plan covering 55 | P a g e
  • 56. the employees who have opted for pension and also to the employees joining the bank’s service on or after 29.9.1995 but before 01.04.2010. The plan provides for a pension on a monthly basis to these employees on their cessation from Bank’s service in terms of Bank of Baroda (Employees’) Pension Regulations, 1995. Employees covered under Bank of Baroda (Employees’) Pension Regulations, 1995 are not eligible for Bank’s contribution to Provident fund. B. 1.3.2 New Pension Scheme In terms of Bipartite Settlement and Joint Note dated 27.04.2010 between IBA and Employees Organisations’ on extending another option for pension, employees joining the services of the Bank on or after 01.04.2010 are eligible for the Defined Contributory Pension Scheme, which is introduced by the Bank in terms of the Joint Note / Settlement dated 27.04.2010, similar to the one governed by the provisions of New Pension Scheme introduced for the employees of Central Government w.e.f. 01.01.2004 and as modified from time to time. Hence they are not eligible for becoming members of Bank’s Provident Fund Scheme and Pension Scheme. In respect of the employees of the Bank who have joined the services of the Bank on or after 01.04.2010, deduction towards New Pension Scheme at the rate of 10% of the pay and Dearness Allowance from the salary with a matching contribution by Bank is being made. B-1.3.3 Prudential Regulatory treatment (reopening of Pension) During the year 2010-11, the Bank had reopened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result of exercise of which by 18,989 employees, the Bank had incurred a liability of Rs.1829.90 Crores. In terms of the requirements of AS 15 - Employee Benefits, the entire amount of Rs.1829.90 Crores was required to be charged to the Profit and Loss Account. However, the RBI had issued a circular no. DBOD.BP.BC.80/21.04.018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits – Prudential Regulatory Treatment, dated February 9, 2011. In 56 | P a g e
  • 57. accordance with the provisions of the said Circular, the Bank has charged an amount of Rs.731.96.Crores (representing two-fifth of Rs.1829.90 Crores) upto March 31, 2012. The unrecognised balance amount of Rs.1097.94 Crores shall be accounted for and charged off over the balance period stipulated in the said circular. This amount does not include any employees relating to separated/ retired employees. B- 1.4 Provident Fund The Bank is statutorily required to maintain a provident fund as a part of its retirement benefits to its employees who joined Bank’s service on or before 31.03.2010. This fund is administered by a Bank managed trust. Each employee contributes 10% of their basic salary and eligible allowances and the Bank contributes an equal amount to the fund. The investment of the fund is made according to investment pattern prescribed by the Government of India. B- 1.5 LEAVE ENCASHMENT An employee is entitled to encash privilege leave standing to his/her credit subject to a maximum of 240 days on the date of superannuation/Voluntary Retirement/death. However, on resignation, an employee is entitled to get encashment to the tune of 50% of the privilege leave standing to the credit subject to a maximum of 120 days. B- 1.6 ADDITIONAL RETIREMENT BENEFIT The scheme for additional retirement benefit provides that an officer on his Retirement/ Voluntary retirement/ Death shall be eligible for additional retirement benefit, provided he had completed-25-years of service in Bank. In the same manner, award staff member on Retirement/ Voluntary Retirement/ Death shall be eligible for additional retirement benefit, provided he had completed – 30-years of service in Bank. However, in case of dismissal, discharge, termination, compulsory 57 | P a g e
  • 58. retirement and resignation additional retirement benefit shall not be payable, irrespective of any number of years of service B- 1.7 Disclosures Principal Actuarial Assumptions [Expressed as Weighted Averages] (Rs. in Crores) TYPE OF PLAN PENSION LEAVE GRATUITY ARB ENCASHMENT Discount rate 8.75% 8.50% 8.50% 8.50% Salary Escalation Rate 4.00% 4.00% 4.00% 4.00% Attrition Rate 2.00% 2.00% 2.00% 2.00% Expected Rate of Return on plan Assets 8.00% - 8.00% - Reconciliation of opening and closing balance of liability (Rs. in Crores) TYPE OF PLAN PENSION a) PVO as at 01.04.2011 LEAVE GRATUITY ARB ENCASHMENT 6654.04 559.91 1327.35 441.52 b) Add- Interest Cost 563.82 48.43 111.95 37.28 c) Add- Current Service Cost 146.39 33.9 53.96 12.25 d) Less- Benefits Paid 334.44 48.16 128.45 30.47 3.74 -28.07 52.04 -13.96 7033.55 566.01 1416.85 446.62 e) Add- Actuarial loss/gain(-) on obligation f) PVO as at 31.03.2012 58 | P a g e
  • 59. Reconciliation of opening & closing balance of fair value of plan assets (Rs. in Crores) TYPE OF PLAN PENSION Gratuity a) Fair Value of plan assets as on 01-04-2011 4388.57 906.86 431.11 101.05 1167.53 420.5 97.58 - e) Less- Benefits Paid 334.44 128.45 f) Add- Actuarial gain/(-)loss -10.06 8.88 b) Add- Expected Return on Plan Assets c) Ad- Contributions d) Add- transfer from other trust and members g) Fair Value of Plan Assets as on 31.03.2012 5740.29 1308.84 Amount recognized in the Balance Sheet (Rs. in Crores) TYPE OF PLAN PENSION LEAVE GRATUITY ARB ENCASHMENT a) PV of obligation 7033.55 566.01 b) Fair value of plan assets 5740.29 - c) Difference 1293.26 566.01 d) Unrecognised transitional liability 1097.94 - 195.32 566.01 e) Liability Recognised in the BS 1416.85 446.62 1308.84 - 108.01 446.62 - - 108.01 446.62 Amount recognized in the P & L Account (Rs. in Crores) TYPE OF PLAN PENSION a) Current Service 146.39 LEAVE GRATUITY ARB ENCASHMENT 33.90 53.96 12.25 59 | P a g e
  • 60. Cost b) Interest Cost 563.82 48.43 -431.11 - -101.05 - 13.80 -28.07 43.17 13.96 e) Transitional liability recognised in the year 378.98 39.20 37.60 45.40 Expenses Recognised in P&L 671.88 93.46 145.63 80.97 c) Expected Return on Plan Assets d) Net Actuarial Loss/gain(-) 111.95 37.28 Expected contribution for next period (2012-13) (Rs. in Crores) Particulars Pension Expected contribution Gratuity 401.57 136.01 Investment Pattern (Rs. in Crores) Particulars Pension Gratuity Central Government Securities 23.91 % 20.33 % State Government Securities 20.74 % 21.56 % Corporate (PSU) 34.69 % 29.41 % 3.05 % 2.12 % 17.61 % 26.58 % 100.00 % 100.00 % Corporate (Private) Others Total B.2. Segment Reporting (AS-17) Part A -Business Segments (Rs. in Crores) Busin ess Treasury Segm ent Corporate / Wholesale Banking Retail Banking Other Banking Operations Total 60 | P a g e
  • 61. Curr Partic Curre Prev Curre Prev Prev Curre Prev Curre Prev ent ulars nt Yr Year nt Yr Year Year nt Yr Year nt Yr Year Yr Reven 7325. 5597 13132 9840. 8488 5983 4150. 3273 33096 24695 ue 07 .84 .6 82 .31 .4 07 .04 .05 .1 Result 887.7 882. 965.8 1702. 2782 1341 2959. 2750 7595. 6676. 2 51 7 31 .37 .07 73 .61 69 5 Unallo cated Expen se 1569. 1026. 89 18 Operat ing Profit 6025. 5650. 80 32 Incom e taxes 1018. 1408. 84 64 Extraordinar y Profit/l oss Net Profit Other Inform ation - - 5006. 4241. 96 68 - - Segm 10369 8594 14020 11637 6316 5395 13561 9921 44268 35549 ent 4.34 8.22 7.90 5.42 1.52 4.06 8.27 8.99 2.03 6.69 Assets Unallo cated Assets 4639. 2900. 44 49 Total Assets 44732 35839 1.47 7.18 61 | P a g e
  • 62. Segm ent 97324 8090 13159 10954 5928 5078 12728 9339 41549 33462 Liabiliti .89 1.71 5.59 2.36 1.81 6.11 7.87 3.28 0.16 3.46 es Unallo cated Liabiliti es 4354. 2730. 46 18 Total Liabiliti es 41984 33735 4.62 3.64 Capital 6369. 5046 8612. 6833. 3879 3167 8330. 5825 27191 20873 emplo 46 .51 31 07 .71 .95 39 .71 .87 .24 yed Unallo cated 284.9 170.3 8 Total Capital 27476 21043 .85 .54 Part B - Geographic Segments (Rs. in Crores) Segment s Domestic Particula Current rs Yr Prev. Yr International Current Yr Revenue 29,063.31 21,743.87 4,032.74 Assets Prev. Yr Total Current Yr Prev. Yr 2,951.2 33,096.05 24,695.10 3 3,19,459. 2,67,629. 1,27,861. 90,767. 4,47,321. 3,58,397. 76 48 71 70 47 18 Notes on Segment Reporting : 1. As per guidelines of RBI on compliance with Accounting Standards AS-17, The Bank has adopted “Treasury Operations”, Wholesale, Retail and “Other Banking Operations” as Primary business segments and 62 | P a g e
  • 63. “Domestic” and “International” as secondary / geographic segments for the purpose of compliance with AS-17 on segment Reporting issued by ICAI. 2. Segment revenue represents revenue from external customers. 3. In determining the segment results, the funds transfer price mechanism followed by the bank has been used. 4. Capital employed for each segment has been allocated proportionate to the assets of the segment. 5. Results, Revenue and Capital Employed of International operations is included in other banking operations. B-3. Related Party disclosures (AS - 18) Names of the Related Parties and their relationship with the Bank: (a) Subsidiaries i. BOB Capital Markets Limited ii. BOB Cards Limited iii. The Nainital Bank Limited iv. Bank of Baroda (Botswana) Limited v. Bank of Baroda (Kenya) Limited vi. Bank of Baroda (Uganda) Limited vii. Bank of Baroda (Guyana) Inc. viii. Bank of Baroda (UK) Limited ix. Bank of Baroda (Tanzania) Limited x. Baroda Capital Markets (Uganda) Limited. (Subsidiary of Bank of Baroda Uganda Ltd.) xi. BOB Trinidad & Tobago Ltd xii. Bank of Baroda (Ghana) Ltd. xiii. Bank of Baroda (New Zealand) Ltd. (b) Associates i. Baroda Uttar Pradesh Gramin Bank ii. Nainital-Almora Kshetriya Gramin Bank 63 | P a g e
  • 64. iii. iv. v. vi. vii. Baroda Rajasthan Gramin Bank Baroda Gujarat Gramin Bank Jhabua-Dhar Kshetriya Gramin Bank Baroda Pioneer Asset Management Co. Ltd. Indo Zambia Bank Limited (c) Joint Ventures i. India First Life Insurance Company Ltd. ii. India International Bank (Malaysia) Bhd. (D) Key Management Personnel: S.No Name Designation Remuneration Current Previous Year Year 1 Shri M.D.Mallya Chairman & Managing Director 25,37,459 21,87,200 2 Shri Rajiv Kumar Bakshi Executive Director 21,97,317 18,37,145 3 Shri N.S.Srinath Executive Director 21,22,495 13,57,347 * Amount includes arrears on account of VI pay commission and incentives. The transactions with the Subsidiaries and Associate Banks have not been disclosed in view of para 9 of the (AS) – 18 Related Parties Disclosure, which exempts state controlled enterprises from making any disclosure pertaining to their transactions with other related parties which are also state controlled. B-4. Earning Per Share (AS-20) Particulars Net profit after tax (Rs. In Crores) Number of Shares (weighted) Basic & Diluted earning per share Current Year Previous Year 5006.96 4241.68 39,16,53,059 36,44,90,716 127.84 116.37 64 | P a g e
  • 65. Nominal value per share Rs. 10.00 Rs. 10.00 B-5. Accounting for Taxes on Income (AS-22) The Bank has complied with the requirements of AS 22 on Accounting for Taxes on Income issued by ICAI and accordingly deferred tax assets and liabilities are recognized. The net balance of deferred tax liabilities as on 31st March 2012 amounting to Rs.255.97 Crores consists of the following: (Rs. in Crores) 31.03.2012 31.03.2011 Asset Liability Asset Liability Difference between book depreciation and Depreciation under Income Tax Act on fixed assets - 89.93 - 52.29 Deduction under section 36 (1) (viii) of the Income-Tax Act, 1961 - - - - Depreciation on HTM Securities - 426.45 Amount disallowed U/S 40 (a) (ia) of the IT Act 9.84 Provision for leave encashment 174.43 Provision for doubtful debts and advances (foreign) 76.14 Total: - - 216.56 9.70 - - 158.86 - - - - 260.41 516.38 168.56 268.85 Net Deferred Tax Liabilitiy 255.97 - 100.29 B-6. Discontinuing operations (AS 24) During the financial year 2011-12 the bank has not discontinued the operations of any of its branches, which resulted in shedding of liability and realization of the assets and no decision has been finalized to discontinue an operation in its entirety, which will have the above effect. B-7. Impairment of Assets (AS-28) 65 | P a g e
  • 66. In view of the absence of indication of material impairment within the meaning of clause 5 to clause 13 of AS 28 Impairment of Assets, no impairment of fixed assets is required in respect of current financial year. B-8. Provisions, Contingent Liabilities and Contingent Assets (AS29) B-8.1 Movement of provisions for Liabilities (excluding provisions for others) (Rs. in Crores) Particulars Legal Cases / contingencies Current Year Previous Year Balance as on 1st April 2011 8.70 4.75 Provided during the year 1.31 3.95 10.01 8.70 Balance as on 31st March 2012 Timing of outflow / uncertainties Outflow on settlement/crystallization The Bank has provided for claims against the bank which have not been acknowledge as debt as per the policy framed by it. B-8.2 Contingent Liabilities Such liabilities as mentioned at Serial No (I) to (VI) of Schedule 12 of Balance Sheet are dependent upon, the outcome of court, arbitration, out of court settlement, disposal of appeals, the amount being called up, terms of contractual obligations, development and raising of demand by concerned parties respectively. No reimbursement is expected in such cases. C. Other Notes to Accounts C-1. Balancing of Books and Reconciliation Initial matching of debit and credit outstanding entries in various heads of accounts included in Inter office Adjustments has been completed upto 31.03.2012, the reconciliation of which is in progress. 66 | P a g e
  • 67. C-2. Capital During the year, the Bank has allotted 1,95,77,304 equity shares of Rs. 10/- each at a premium of Rs. 830.10 per share to Life Insurance Corporation of India as determined by the Board in accordance with regulation 76 (1) of SEBI Issue of Capital and Disclosures Requirements Regulation on preferential basis. The total amount of capital received by the Bank on this account is Rs.1644.69 Crores. C-3. Capital Reserves Capital Reserve includes appreciation arising on revaluation of immovable properties and amount subscribed by Government of India under the World Bank’s Scheme for Export Development Projects for small / medium scale industries. C-4. Investments C-4.1 In terms of RBI Guidelines, during the year, the bank has transferred a portion of Government Securities (SLR) kept in “Available for Sale” category to “Held to Maturity” category. The resultant depreciation of Rs.49.01 Crores (previous year Rs.75.80 Crores) has been charged to the Profit & Loss Account. C-4.2 Profit on sale of investments held under “Held to maturity” category amounting to Rs. 44.20 Crores has been taken to the Profit and Loss Account and thereafter an amount of Rs. 22.40 Crores has been appropriated to the Capital Reserve, net of taxes and amount transferred to Statutory Reserve under section 17 of the Banking Regulation Act, 1949. C-5 Provision for Taxes C-5.1 Provision for Taxes has been arrived at after due consideration of decisions of the appellate authorities and advice of counsels. C-5.2 Tax paid in advance /tax deducted at source appearing under “Other Assets” amounting to Rs.1993.11 Crores (previous year 67 | P a g e
  • 68. Rs.1316.28 Crores) represents amounts adjusted by the department / paid by the Bank in respect of disputed tax demands for various assessment years. No provision is considered necessary in respect of the said demands, as in the bank’s view, duly supported by counsels opinion and / or judicial pronouncements, additions / disallowances made by the Assessing Officer are not sustainable. C-5.3 The Bank has claimed deduction under section 36(1) (viii) of the Income-tax Act,1961 in respect of the eligible business as specified in the said section and has accordingly transferred a sum of Rs. 533.85 Crores to the corresponding Special Reserve account and reported under Other Reserve. C-6. Premises C-6.1 Execution of conveyance deeds is pending in respect of certain properties at Rs. 78.37 Crores (Previous Year Rs.88.63 Crores) – (Original Cost). C-6.2 Certain properties of the Bank are stated at revalued amounts. The gross amount of the revaluation included in premises as at the year Rs.1777.43 Crores (including Rs.30.55 Crores at overseas offices) and net of depreciation the revaluation amounts to Rs.1173.68 Crores (Previous Year Rs.1242.49 Crores). C-6.3 Premises include assets under construction/acquisition amounting to Rs. 51.87 Crores (Previous Year Rs. 43.77 Crores). C-7. BOB Fiscal Services Limited (BOBFSL), erstwhile wholly owned subsidiary of Bank of Baroda, had passed a special resolution for voluntary winding up of the company on 24.09.1990 and the liquidator was appointed for the same. BOBFSL entered into an agreement with Bank of Baroda pursuant to which entire assets and liabilities of BOBFSL were transferred to BOB as a going concern / as sale in liquidation of the entire business w.e.f. 28.2.1991. As the company could not be liquidated due to pending legal cases; a decision to merge BOBFSL with Bank of Baroda was taken in 68 | P a g e
  • 69. the Annual General Meeting of BOBFSL held on 30th March 2007. The Bank has approved the merger of BOBFSL with Bank of Baroda in its Board meeting on 28.01.2009 and authorized Bank to file necessary petition for merger of BOBFSL with BOB before the High Court. C-8. The Bank has taken over specified Assets & Liabilities of The Memon Co-operative Bank Ltd on 18th April, 2011 as per approval granted by RBI vide letter no. UBD.CO.MEROER No. 7814/09.16.901/2010.11 dated 04th March, 2011. Out of the deficit of Rs.149.25 Crores on account of the said take over, the Bank has proportionately charged Rs. 49.75 Crores of the said deficit to the Profit and Loss Account during the year ended March 31, 2012. The balance amount of Rs.99.50 Crores will be charged proportionately during the remaining period till Financial Year 2013-14, as approved by RBI vide letter no. DBOD.No.BP.1311/21.04.048/2010-11 dated 25th July, 2011. C-9. The Bank has made provision @ 20% on the Secured Substandard Advance as against the Regulatory requirement of 15%. Further the Bank has made an additional ad-hoc provision of Rs. 342.79. Crores for the year ended March 31, 2012 (previous year Rs. 320.08 Crores) in certain non performing domestic advance accounts. C-10. The Board of Directors has proposed dividend of Rs.17/- per share (on face value of Rs.10/-) which is subject to compliance of Section 15 of Banking Regulation Act, 1949 and consequential notification to be issued to this effect by the Government of India under Section 53 of Banking Regulation Act, 1949 and approval of the shareholders. C-11. Previous Year figures have been regrouped/ rearranged wherever considered necessary to conform current year presentation. 69 | P a g e
  • 70. BIBLIOGRAPHY WWW.GOOGLE.COM WWW.SCRIB.COM www.bankofbaroda.co.in SHREERAJ HARIHARAN ROLL NO 36 M.COM PART- I SEMESTER- I 70 | P a g e
  • 71. 71 | P a g e