Dear Stakeholders,
It is indeed a privilege to have the opportunity to lead Bank of
Baroda, an institution which has a rich history and stellar record of serving all
stakeholders over a period of 116 years. It will be my endeavor, as MD and CEO, to build
on this tradition of trust and service.
It gives me pleasure to present the highlights of the Bank's
performance during the financial year 2023-24. Details of the achievements and initiatives
taken are provided in the Annual Report.
During FY24, Indian economy remained resilient amidst slowing and
divergent growth prospects in most economies. The strong macroeconomic fundamentals,
improved profitability of corporates, moderating inflation, improving external sector
position, and continuing fiscal consolidation have sustained the growth momentum. This
helped to overcome headwinds of geopolitical uncertainty, high interest rates and
disruptions in supply chains due to crisis in Middle East. The Indian banking system has
been well positioned with better asset quality, high capital adequacy and robust
profitability. However, the increased liquidity tightness has posed a challenge to the
banking industry in terms of deposit mobilization. Amidst these challenges, the Bank has
introduced structural initiatives in the form of new products and measures to improve its
performance and hasset new milestones during the year.
During the year, there has been an overall consistent improvement
across the major parameters of business size, earnings, margins, profitability, and asset
quality. The Banks Global Business has crossed the INR 24 lakh crore mark and the organic
Retail advances have gone past INR 2 Lakh crore mark in FY24. It is noteworthy that the
Banks performance has been consistent; with the quarterly net profit being above INR 4000
crore level in each of the quarters during the year while Return on Asset (ROA) has been
upwards of1% for 7 quarters in a row. Further, the RBI has also lifted there strictions of
on boarding customers through the ‘bob World' route and the Bank can now onboard
customers through this channel. This performance is not just an indication of our
financial strength, but a testament to the trust and confidence that our stakeholders have
in us.
Financial Performance
Prudent Liability Management
At an industry level, mobilising deposits has been a challenge due to
factors such as moderation in system liquidity, alternative attractive investment and
saving options and credit growth outpacing deposit growth. The CASA growth, in particular,
has been an area of challenge as the growth in term deposits has benefitted from higher
term deposit rates spurred by pass through effect of policy rate hikes during May 2022
-February 2023. The Bank has managed to grow the deposits following a multi-pronged
strategy of offering a diverse andcustomer centric savings product suite and introducing
attractive tenor deposit products to suit the saving needs of diverse customers. In FY24,
the Global Deposits of the Bank have grown by 10.2% with domestic deposit growing by
7.7%and international deposits by 27.0%. Despite the challenges, the CASA deposits have
grown by 5.4% to reach a level of INR 4,66,401 crore with domestic CASA remaining above
the40% level mark at 41.33%. Further, the Bank has also raised funds through
infrastructure bonds and capital issuances to complement its growing funds base.
Advances growth with a focus on Retail loans
The Bank has pursued a strategy of calibrating its advancesgrowth with
deposits while focusing on high yielding retailloans. In FY2024, the Retail portfolio has
crossed INR 2 lakhcrore mark to reach INR 2,14,942 crore, registering thus a growth of
20.7%. Within retail basket, the auto loans havegrown by 23.8%, home loans by 14.1% and
education loansby 19.6%. The Agriculture and MSME loans have grownby 11.6% and 10.4%
respectively. Corporate loans haveincreased by 11.6% following a strategy of focusing
onrelationship management and segmentation approach tooffer focused services to the
customers.
Much better Asset Quality
During the year, there has been significant improvement inthe asset
quality of the Bank with GNPA ratio declining from3.79% to 2.92% - a multiyear low level.
The Net NPA ratiotoo has declined from 0.89% to 0.68%. A mix of write-offs,upgradations
and recoveries have contributed to reduction in NPAs. The provision coverage ratio
(including TWO) hasreached a level of 93.30% in FY24 as against 92.43% in FY23.The
slippage ratio, a measure of new accretion to NPAs, hasdeclined from 1.07% in FY23 to
0.99% in FY24. The collectionefficiency (excluding agriculture) has been at 98% as ofMarch
2024. Also, the share of SMA 1 and SMA2 accounts asa per cent of standard advances (CRILC
data) has fallen from0.32% as March 2023 to 0.15% as of March 2024.
Expense management
Despite the higher expenses on account of wage settlementand pension
liability, the operating expenses of the Bankhave grown by 15.2% during the year with
employee costrising by 18.4% and other operating expenses by 11.4%. TheCost to income
ratio, an indicator of operational efficiency,has remained stable at a level of 47.71% in
FY24.
Robust earnings
In FY2024, the robust growth in earnings has been aidedby higher income
growth and lower provisions. The interestincome has grown by 25.7% to a level of INR
1,12,606 crore.Interest expenses have grown at a higher rate of 40.7% dueto repricing of
deposits at higher rate to INR 67,884 crore. Asa result of prudent asset liability
management, the Banks' netinterest income has crossed the INR 44,000 crore mark,
withgrowth at 8.1%. The non-interest income has shown buoyanttraction growing at 44.6% to
INR 14,495 crore with particularlythe commission exchange and brokerage componentsurging
by 19.9% and robust recovery from TWO accounts.Despite the wage revision and pension
related expenses, theBank has managed to contain its costs. As result, the Banksoperating
profit crossed the INR 30,000 crore mark, thusregistering a growth of 15.3%. With
improving asset quality,the total provisions have declined. As a result, the net profithas
increased by 26.1% to INR 17,789 crore in FY24.
Healthy Capital Ratios
The Banks capital position has strengthened further duringthe year
despite higher capital requirements with increasedrisk weights on some loan products. The
CRAR of the Bankas of March 24 has been at 16.31% with CET-1 ratio at 12.54%due to higher
retained earnings. The LCR has been healthyat 120.6%.
Key Initiatives undertaken during the yearRetail Deposit Oriented
Growth
Deposit mobilisation has been the most significant challengeamidst
tight liquidity situation as well as changing Indianhouseholds saving habits. This has
meant requiring innovativestrategies to support deposits growth. The Bank launched aunique
campaign titled ‘BOB Ke Sang Tyohaar Ki Umang'that focused not only on the asset
side, but also on theliability side. As a part of the strategy, the Bank has
pushedaggressively for increasing CASA deposits. The productoffering and process of
deposit mobilisation has witnessedtransformation with innovative & cutting-edge SB
& CAProducts. The basket includes 3 new SB Accounts; bob LITE,bob BRO, bob NRI Power
Pack, 7 New Current Accounts; bobLite Current Account, bob Women Power Current Account,
bob Smart Current Account, bob Gold Current account, bobPlatinum Current Account, bob
Rhodium Current Account,bob Diamond Current Account. The Bank also revampedexisting CA
& Salary SB accounts and has given extensivefocus for acquiring new accounts. The
purpose is to offerproducts catering to the diverse savings requirements ofcustomers with
special features to address the same such asfamily needs, student requirements and so on.
For instance,the Bank introduced the bob Parivar Concept, "My Family,My Bank,"
which extends a range of benefits to familymembers. This initiative includes tiered
offerings for PremiumCustomers, segmenting them based on their CASA balancesinto three
categories: Rise, Shine, and Sparkle. The Sparklecustomers receive personalized services
through assignedpersonal Relationship Managers to build strong connect andimprove the
banking services.
Moreover, special emphasis was placed on increasingthe penetration of
key CASA enablers, which include POSsystems, QR codes with sound boxes and cash
managementservices. Additionally, efforts have been made to activatedormant accounts,
initiate DEAF activations, and fundingof zero balance accounts. On the digital front, the
Bank hassignificantly increased client acquisition through variousdigital channels such as
VCIP and TAB mode. Bank'sintegration with the Ministry of Corporate Affairs Portal
foropening Current Accounts of newly formed companies hasresulted in the opening of a
total of 5,186 current accounts.Further, Bank has established a dedicated Defence
BankingVertical, which is headed by a Chief Defence Banking Advisor,a retired Lieutenant
General. This vertical is further supportedby Deputy Defence Banking Advisors who are
posted at keylocations to effectively penetrate the Defence segment.
Fees and Flows
The Bank has emphasised the initiative called ‘fees and flows'by
introducing several initiatives such as implementation theconcept of relationship manager
for large and mid-corporatesegment. The idea of relationship manager has been tomeasure
the Share of Wallet (SOW), of all these accounts andleverage the main relationship for
multiple other engagements.Further, there has been a significant emphasis on the
cashmanagement services that has supported capturing flow offunds. The Bank's Cash
Management Services business hasprovided a wide range of omni-channel digital solutions
forCorporate and Government customers to manage their cashflows and liquidity. It also
offers integrated and paperlesspayment solutions to the customers on real-time
informationon all receipts, including electronic payments, cheques,and cash deposits at
all branches. In FY 2023-24, BarodaCash Management Services continued to rapidly expandits
footprint, acquiring over 2,600 new relationships. Morethan 9,000 large customers are
utilizing the Bank's CashManagement Services, executing over 8 crore transactionsduring
the year.
Sustainability Initiatives
Green deposits and climate change framework
With climate change assuming significant importance givenincreased
instances and intensity of events, the Bank on its part is committed to drive positive
changes through itsgreen initiatives. The Bank recognizes the urgent need toaddress
environmental challenges and actively contributesto a sustainable future. The Bank has
launched severalgreen initiatives under the name of "bob Earth" to reaffirmits
commitment and responsibility towards protecting &preserving the gifts of nature for
our future generations.
A major initiative of the Bank has been introduction of newdeposit
product "bob earth Green Term Deposit" to mobilizeresources for activities
addressing global warming & climatechange related issues and promoting a greener
earth. Theobjective of the Green Deposit is to promote environmentfriendly initiatives by
encouraging depositors to invest ingreen projects and activities that contribute to
sustainabledevelopment. The funds acquired through the Green Depositswill be used to fund
environment friendly projects to reducethe global temperature as well as to make the earth
greener.
The Bank has implemented Green Finance Framework forraising of the
Green deposits and enabling flow of creditfor the Green Activities. The criteria has been
defined forchannelisation of credit to 9 green activities. The -9- eligibleareas include
Renewable energy, energy efficiency, cleantransportation, sustainable water and waste
managementamong others. As of March 24, the Bank has an outstandingof INR 15,268 crore for
financing renewable energy projectsunder Corporate credit segment.
The Bank has introduced special schemes such as RooftopSolar System
financing scheme. To encourage the autobuyers to prefer an electric vehicle, the Bank is
offeringconcessional ROI @25bps for electric auto loans.
With respect to the Bank's own operations, the Bank has -177-branches
being run on Solar energy thus saving an approx.3500 Tons of Carbon Dioxide emission. The
Bank's 10 ownedbuildings have solar panels installed in their premises of 123KW total
capacity. All the domestic branches have LED lightsinstalled.
Regarding water and waste management, the Bank has set upa rain water
harvesting system in some of the administrativebuildings. Waterless urinals have been
installed in severaladministrative buildings saving approx. 30 lakh liters of waterduring
the year. For waste management, the Bank has a Bio-Gas plant (capacity of 500 kg wet
waste) installed at Bank'sBKC premises which produces cooking gas and organicmanure. The
Bank has digitised approval process throughthe paperless office initiative.
The Banks ESG rating by Sustainalytics has improved fromHigh Risk to
Medium Risk and the Bank is Ranked at 329 outof 1060 peer Banks.
Regulatory action
The RBI's material supervisory concerns in Oct 2023regarding the
onboarding of the customers onto the Bank'smobile application have been addressed through
a multi-dimensional strategy. At the operational level, there hasbeen a revamp of the
entire onboarding process with addedsecurity features as well as participation of
customers inthe onboarding process. Disciplinary actions have beentaken against employees
involved irrespective of the cadre.The culture of compliance has been reinforced across
theorganisation and it has been given paramount importance inall operations of the Bank.
In May 2024, the RBI has lifted therestrictions of onboarding customers through the
‘bob World'route and the Bank can now onboard customers through thischannel.
The Way Forward
The Bank is now on a firm footing in terms of both operationaland
financial performance and is well positioned to supportthe growth aspirations of the
Indian economy and fulfil theexpectations of all stakeholders. With a wider
geographicaland customer reach, introduction of new products, reductionin turn-around time
and focus on digitisation, the Bank isuniquely positioned to grow and gain market share.
Ourendeavour is to build a future-ready, world-class bankinginstitution that creates value
for all its stakeholders andbecomes an even better organization known for its corevalues
and commitment to compliance.
I would like to acknowledge and thank the outgoing Chairmanof the Board
Shri Hasmukh Adhia and all the members ofthe Board for their valuable support, guidance,
and inputsto the management in all our endeavours. I also thank theDepartment of Financial
Services, Ministry of Finance andReserve Bank
As of March 31, 2024, the branch network of the bank is asunder: of
India for their support and guidance fromtime to time. I acknowledge and thank all our
employeesfor their hard work, dedication and commitment. At Bankof Baroda, we look forward
to your continued patronage,support and goodwill as we march ahead on our quest
forexcellence.