Bank Of Baroda

1. Disclosures on risk exposure in derivatives-
 
 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
 
 2.  Status of Letters of Comfort
 
 A.  Letters of Comfort (LOCs) issued during the Current Financial
 Year.
 
 During the current financial year Bank has issued only one Letter of
 Comfort 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 but no amount is quantified as the licence is yet to come.
 
 B.  Cumulative position of LOCs outstanding on 31.03.2009.
 
 Bank has no outstanding Letter of Comfort issued in favour of the
 foreign / domestic regulators for the purpose of establishing
 subsidiaries / opening of branches except as mentioned in A above.
 
 B.  Disclosure in terms of Accounting Standards (AS) issued by the
 Institute of Chartered Accountants of India:
 
 1 Net Profit or Loss for the Period, prior period items and changes in
 accounting policies (AS-5)
 
 1.1 Exceptional items of Rs. 95.01 Crores (Net of Tax Rs. 62.70 Crores)
 represents profit on winding up of Bank of Baroda (Hongkong) Ltd, a
 subsidiary of the Bank. and Profit on sale of 51% holding in BOB AMC
 Ltd.
 
 1.2 Depreciation on revalued assets has been provided on written down
 value as per the Companies Act, 1956 and not on the basis of the
 remaining useful life of the assets.
 
 2.  Employee Benefits (AS-15)
 
 Bank has adopted the Accounting Standard (AS-15) issued by ICAI and
 effective from 07.12.2006. The standard has been revised and notified
 on 17.12.2007.  The provisions contained in AS-15 gives 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.
 
 Gratuity:
 
 The Bank pays gratuity to employees who retire or resign from Banks
 service. The Bank makes contributions to an in-house trust, towards
 funding this gratuity, payable every year. In accordance with the
 gratuity funds 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.
 
 Pension
 
 Bank of Baroda pays pension, a defined benefit and deferred retirement
 plan covering the employees who have opted for pension and also to the
 employees joining the banks service on or after 29.9.1995.  The plan
 provides for a pension on a monthly basis to these employees on their
 cessation from Banks service based on the respective employees salary
 and years of qualifying service with the Bank. Employees covered under
 Bank of Baroda (Employees) Pension Regulations, 1995 are not eligible
 for Banks contribution to Provident Fund.
 
 Pension fund is managed by in-house trustees.
 
 Provident Fund
 
 Bank of Baroda is statutorily required to maintain a provident fund as
 a part of its retirement benefits to its employees. This fund is
 managed by in-house trustees.  Each employee contributes 10% of his or
 her basic salary and Bank of Baroda contributes an equal amount to the
 fund. The investment of the fund is made according to investment
 pattern prescribed by the Government of India.
 
 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 50%
 of the privilege leave standing to the credit subject to a maximum of
 120 days.
 
 Additional Retirement Benefit
 
 The scheme for additional retirement benefit provides that an officer
 on his Retirement/ Voluntary retirement/ death shall be eligible for
 payment of 6 months emoluments as additional retirement benefit,
 provided he had completed 25 years of service in the 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
 retirement and resignation additional retirement benefit shall not be
 payable, irrespective of any number of years of service.
 
 Notes on Segment Reporting:
 
 1. As per guidelines of RBI on compliance with Accounting Standards,
 Bank has adopted Treasury Operations, Wholesale, Retail and Other
 Banking Operations as Primary business segments and Domestic and
 International as secondary / geographic segments for the purpose of
 compliance with AS-17 on Segment Reporting issued by ICAI.
 
 2.  In determining the segment results, the funds transfer price
 mechanism followed by the bank has been used.
 
 3.  Segment revenue represents revenue from external customers.
 
 4.  Capital employed for each segment has been allocated proportionate
 to the assets of the segment.
 
 4.  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 (Hong Kong) Limited
 
 viii) Bank of Baroda (Guyana) Inc.
 
 ix) Bank of Baroda (UK) Limited
 
 x) Bank of Baroda (Tanzania) Limited
 
 xi) Baroda Capital Markets (Uganda) Limited.  (Subsidiary of Bank of
 Baroda Uganda Ltd.)
 
 xii) BOB Trinidad & Tobago Ltd.
 
 xiii) Bank of Baroda (Ghana) Ltd.
 
 xiv) Baroda (New Zealand) Ltd.
 
 (b) Associates:
 
 i) Baroda Uttar Pradesh Gramin Bank
 
 ii) Nainital-Almora Kshetriya Gramin Bank
 
 iii) Baroda Rajasthan Gramin Bank
 
 iv) Baroda Gujarat Gramin Bank
 
 v) Jhabua-Dhar Kshetriya Gramin Bank
 
 vi) Indo Zambia Bank Limited
 
 vii) UTI Asset Management Company Ltd.
 
 viii) UTI Trustee Company Pvt. Limited
 
 ix) Baroda Pioneer Asset Management Co. Ltd.
 
 (c) Key Management Personnel:
 
 i) Mr. M.D. Mallya, CMD
 
 (From 07.05.2008 onwards)
 
 ii) Dr. A.K.Khandelwal (Ex-CMD)
 
 i) Mr.V.Santhanaraman, ED
 
 ii) Mr. Satish C. Gupta, ED (Upto 05.11.2008)
 
 iii) Mr. Rajiv Kumar Bakshi, ED (From 06.11.2008 onwards)
 
 Aggregate Remuneration paid to Key Management Personnel Rs. 38.12 lac
 (Previous year Rs. 17.60 lac)
 
 3.  Discontinuing operations (AS24)
 
 During the financial year 2008-09 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.
 
 4.  Impairment of Assets (AS-28)
 
 In view of the absence of indication of material impairment within the
 meaning of clause 5 to clause 13 of Accounting Standard-28 Impairment
 of Assets, no impairment of fixed assets is required for in respect of
 current financial year.
 
 5.  Provisions, Contingent Liabilities and Contingent Assets (AS-29)
 
 5.1 Movement of provisions for Liabilities (excluding provisions for
 others)
 
                        (Rs. in Crores)
 
 Legal Cases / contingencies
 13.43
 13.43
 
 Outflow on settlement/crystallization
 
 The Bank has provided for claims against the bank which have not been
 acknowledged as debt as per a policy framed by it.
 
 6. 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, devolvement and raising of demand
 by concerned parties respectively. No reimbursement is expected in such
 cases.
 
 C.  Other Notes to Accounts
 
 1.  Balancing of Books and Reconciliation
 
 1.1 The balancing / Reconciliation of control accounts with subsidiary
 ledgers / registers is in progress in certain branches.
 
 1.2 Initial matching of debit and credit outstanding entries in various
 heads of accounts included in Inter office Adjustments has been
 completed up to 31.12.2008, the reconciliation of which is in progress.
 
 1.3 Reconciliation of accounts with banks, Nostro, Drafts / TTs
 payable, Suspense, dividend / Interest / refund orders paid / payable
 etc. is in progress.  The impact, if any, on the Profit and Loss
 Account and the Balance Sheet, though not quantified, in the opinion of
 the management will not be material.
 
 1.4 Net credit of Rs. 441.09 crores representing other liabilities on
 account of foreign currency translation of assigned capital, unremitted
 profit, accumulated loss and head office interest free funds, for which
 reconciliation is pending, has been included under other liabilities.
 
 2.  Capital Reserves
 
 2.1 Capital Reserve includes appreciation arising on revaluation of
 immovable properties and amount subscribed by Government of India under
 the World Banks Scheme for Export Development Projects / Industrial
 Export Projects for small / medium scale industries.
 
 2.2 During the current financial year, the Bank has revalued two
 foreign immoveable properties by an amount of Rs. 0.59 Crores. The
 amount of revaluation has been shown as an addition to Fixed Assets and
 credited to Revaluation Reserve Account under Capital Reserves as part
 of Reserves and Surplus.
 
 3.  Investments
 
 3.1 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.38.22 Crores (previous year Rs. 37.08 Crores) has
 been charged to the Profit & Loss Account.
 
 3.2 Profit on sale of investments held under Held to maturity
 category amounting to Rs.723.64 Crores has been taken to the Profit and
 Loss Account and thereafter an amount of Rs.358.26 crores has been
 appropriated to the Capital Reserve, net of taxes and transfer to
 Statutory Reserve under section 17 of the Banking Regulation Act, 1949
 
 4.  Provision for Taxes.
 
 4.1 Provision for Taxes are arrived at after due consideration of
 decisions of the appellate authorities and advice of counsels.
 
 4.2 Tax paid in advance / tax deducted at source appearing under Other
 Assets amounting to Rs.  1019.84 Crores (previous year Rs 1092.51
 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 banks view, duly supported by counsels opinion and / or
 judicial pronouncements, additions / disallowances made by the
 Assessing Officer are not sustainable.  4.3 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.220 Crores to the corresponding
 Special Reserve account. The Bank has also transferred a sum of Rs.200
 Crores from the General Reserve to Special Reserve account for the
 previous year.
 
 5.  During the year, the bank has annulled the forfeiture of 100 equity
 shares (previous year 400 equity shares).
 
 6.  Premises-
 
 6.1 Execution of conveyance deeds is pending in respect of certain
 properties aggregating to Rs 79.72 Crores (Previous year Rs.78.74
 Crores) - (original cost).
 
 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-end
 is Rs.1766.66 Crores (Previous Year Rs.1765.99 Crores) and net of
 depreciation the revaluation amounts to Rs. 1448.34 Crores (Previous
 year Rs.1519.09 Crores).
 
 6.3 Premises include assets under construction / acquisition amounting
 to Rs.74.79 Crores (Previous year Rs.87.48 Crores).
 
 7.  During the year ended March 31, 2009, Tier II Bonds amounting to
 Rs. 409.10 Crores have been redeemed and Tier I Bonds amounting to Rs.
 300.20 crores and Tier II Bonds amounting to Rs. 1500.00 Crores
 (Previous year Rs.2703.62 Crores including Rs.1203.62 Crores
 corresponding to US $ 300 Million issued by way of Medium Term Loans)
 were raised.
 
 8.  Other Reserves include an amount of Rs.673.95 Crores (previous year
 Rs.253.95 Crores) on account of special reserves created under
 requirements of Income Tax Act.
 
 9.  Bank has made a provision of Rs. 325.00 Crores (Previous year Rs
 100 Crores) on an estimated basis for salary revision of officers &
 award staff due w.e.f.  November 1, 2007.
 
 10.  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 the Annual General Meeting of BOBFSL held
 on 30th March 2007. The legal formalities for the same are under
 process and pending such formalities; no impact of the same is given in
 accounts.
 
 11.  In terms of Agricultural Debt Waiver Relief Scheme 2008, framed by
 the Government of India, the Bank has lodged a provisional claim of Rs
 506.04 Crores out of which a sum of Rs. 208.91 crores has already been
 received by it.
 
 12.  Previous year figures have been regrouped / rearranged wherever
 considered necessary.