Ladies and Gentlemen,

I have great pleasure in extending a warm welcome to all of you to the Fourteenth Annual General Meeting of your Bank. I thank you all for your continued trust, encouragement and support to the Bank.

The Directors’ Report, Auditor’s Report and Audited Accounts with the notes thereon for the year 2009-10 are with you for quite some time. With your consent, I shall take it as read.

The Annual Report sent to you gives you a detailed review of your Bank’s performance. In today’s meeting, I will like to share with you some thoughts on how your Bank is positioned and our strategies to convert it into a world class, high performing organization in the years
ahead.

Before I begin to discuss the specific issues of your Bank, I would like to briefl y describe the external environment in which we performed during the year 2009-10.

Economic and Banking Environment

Indian economy and its banking industry passed through many ups and downs throughout the year 2009-10. The fi rst half of the year was marked by a sharp contraction in agricultural output caused by deficient monsoon, a continued slowdown in fi nal consumption expenditure, a negative growth in exports/imports and a muted demand for bank credit.

However, in the second half of 2009-10, the economy witnessed a quick rebound thanks to the timely countercyclical policies of the Government and the Reserve Bank of India (RBI) in response to the global crisis, a pick up in several economies of the world and a recovery in capital infl ows.

Indian industry saw a substantial turnaround in the latter half of 2009-10. As a result, the industrial production for 2009-10 registered a growth of 10.4% as against 2.8% in 2008-09. The major growth drivers of industrial production were mining and manufacturing sectors and within the manufacturing sector, the capital goods and consumer durables sectors. Both exports and imports too turned positive by November-December, 2009 after contracting continuously for the previous 12 to 13 months.

However, inflation emerged as the major macro risk during 2009-10. While infl ationary pressures since late 2009 stemmed initially from rising food prices, non-food infl ation too picked up in the last quarter of 2009-10 with overall demand getting stronger and a rise in the administered prices of domestic fuels. The monthly headline infl ation for March, 2010 sharply rose to 11.04% - the highest since October, 2008.

Accelerated growth in both infl ation and industrial production prompted the RBI to normalize its Monetary Policy and move its focus to “recovery management” from “crisis management”. During the last quarter of 2009-10, the RBI raised Cash Reserve Ratio by 75 bps and Repo/ Reverse Repo rates by 25 bps each to anchor inflation expectations.

India’s merchandise trade managed to recover in the latter part of the year from the severe impact of global financial turmoil. However, taking the entire year 2009-10, Indian exports contracted by (-) 4.7% as against a growth of 3.4% in 2008-09.

Capital f ows continued to remain buoyant throughout the year 2009-10. During the year, total foreign investments amounted to US $ 66.5 billion as against US $ 21.3 billion in 2008-09. India’s foreign exchange reserves (FER) increased by US $ 27.1 billion during 2009-10 to reach US $ 279.1 billion at the end of March 2010. This was mainly attributed to higher capital infl ows in the form of portfolio investments during the year 2009-10.

Mirroring the real sector progress in the second half of 2009-10, the Indian banking industry too posted a decent performance during 2009-10. The Scheduled Commercial Banks’ Aggregate Deposits expanded by 17.1% (y-o-y) and Non-food Credit by 16.9% (y-o-y) during 2009-10. It may be noted that the PSU banks played a major role in fi nancing productive investments during 2009-10.

However, the banking industry as a whole had witnessed a considerable deceleration in credit demand till October, 2009. While the asset quality remained relatively stable, credit costs increased for several banks with the maturing of restructured loans. Furthermore, a rise in fi scal defi cit on account of deceleration in tax revenue growth gave rise to higher market borrowings during 2009-10. This resulted in heightened volatility in bond yields and posed tough challenges to the banking industry’s treasury operations.

Let me now give you a detailed account of your Bank’s business and fi nancial performance during 2009-10 against the economic backdrop just presented.

Overview of Bank’s Performance in 2009-10

It was another successful year for Bank of Baroda as once again it delivered impressive results, highlighting the sustainability of its performance despite ongoing economic uncertainty. Also, during this year, the Bank took forward its objective of “growth with quality” by creating a solid strategic base.

Moreover, your Bank achieved all the targets under the Statement of Intent that it had committed to the Government of India (on business, profi tability and asset quality fronts) for the year 2009-10 at the beginning of the year.

Let us now discuss the main highlights of your Bank’s performance during the year under review.

Global Business

The Global Business of your Bank reached Rs 4,16,080 crore by end- March, 2010 with an annual growth of 24.0%. While Global Deposits registered a growth of 25.3% (y-o-y), Global (Net) Advances expanded by 22.2%. In domestic operations, your Bank’s Deposits grew by 22.4% (y-o-y), whereas Advances (net) expanded by 21.3%. Your Bank consciously maintained its business growth well above the banking industry’s average to further improve its market share.

Your Bank’s low cost deposits (CASA) grew at the healthy pace of 25.5% (y-o-y) in global operations during 2009-10. Within India also, the growth of CASA deposits was 25.1%, which helped improve the domestic CASA share to 35.63% from the previous year’s 34.87%.

You are aware that your Bank enjoys considerable advantage from its extensive overseas operations in 25 countries through 78 offices. Cashing in on the early signs of global recovery and surging trade volumes, your Bank’s Overseas Credit expanded at the pace of 25.1%, whereas Overseas Deposits grew by 36.1% on year on year basis during 2009-10. Your Bank’s Overseas Business contributed almost 24.0% to its Global Business during the year under review

Segment-wise Business

Your Bank maintained its thrust on wellbalanced growth across all business segments during 2009-10. Within India, its credit to Priority Sector grew by 23.7% (y-o-y) to Rs 48,552 crore in 2009-10 and formed 44.43% of the Adjusted Net Bank Credit. Within this segment, Agricultural Advances of your Bank recorded a growth of 27.4% to reach Rs 21,617 crore by end-March, 2010. Your Bank’s Credit to Weaker Sections too grew by a robust 34.2% and touched Rs 10,945 crore by end-March, 2010.

Your Bank’s Retail Credit posted a growth of 23.5% (y-o-y) in 2009-10 and attained the level of Rs 24,248 crore by end-March, 2010. Similarly, its Home Loan book expanded by 24.8% and reached the level of Rs 10,313 crore by year end. Your Bank’s credit to Micro, Small & Medium Enterprises (MSME) showed a robust growth of 44.0% and touched Rs 21,111 crore by the end of 2009-10.

Net Interest Income

Your Bank’s Net Interest Income grew by 15.9% (y-o-y) to reach Rs 5,939 crore in 2009-10 supported by a sequentialimprovement in the Bank’s Net Interest Margin (NIM) on the back of relatively higher share of CASA deposits, reduced
dependence on high cost bulk deposits and timely downward revisions in deposit rates. While your Bank’s Global NIM stood at 2.74%, its Domestic NIM stood at 3.12% during 2009-10.

Profi tability

Your Bank’s Net Profit witnessed a respectable growth of 37.3% (y-o-y) in 2009-10 to touch Rs 3,058 crore by end- March, 2010 on the back of healthy business growth, prudent control over cost of funds, better operational effi ciency and lower provisions on account of stable asset quality.

Asset Quality

Your Bank continued to maintain its good performance in asset quality management during 2009-10 also. While the Indian banking industry witnessed remarkable increase in nonperforming assets during 2009-10, your Bank could restrict its Gross NPA to 1.36% and Net NPA to 0.34% thanks to its robust systems of credit origination and monitoring. The Bank’s Incremental Delinquency Ratio was contained at 1.13% in 2009-10. Your Bank’s rigorous follow up of all NPA accounts has yielded it Cash Recovery of Rs 383 crore, besides upgrading of accounts of over Rs 194 crore into standard advances. Moreover, your Bank could recover Rs 300 crore from the prudentially written off accounts during the year under review. Your Bank’s NPA Coverage Ratio stood at the healthy level of 74.90% in 2009-10 as against the regulatory requirement of 70.00%.

Cost-Income Ratio

Your Bank’s Cost-Income Ratio declined from 45.38% in 2008-09 to 43.57% in 2009-10 reflecting a significant improvement in operating efficiency during the year under review.

Capital Adequacy

Your Bank’s Capital Adequacy Ratio stood at the comfortable level of 14.36% under Basel II as on 31st March, 2010 with Tier I Capital at 9.20%. During the year under review, the Bank strengthened its Capital Base by raising Rs 1,000 crore through unsecured subordinated bonds and Rs 900 crore through innovative perpetual bonds.

Net Worth

Your Bank’s Net Worth significantly improved to Rs 13,785.14 crore in 2009- 10 registering a year on year growth of 20.6%.

Return on Average Assets

Your Bank’s Return on Average Assets improved from 1.09% in 2008-09 to 1.21% in 2009-10 on sustainable improvement in core earnings and operating effi ciency.

Return on Equity

Your Bank’s Return on Equity improved from 19.48% in 2008-09 to 22.19% in 2009-10 on sustained improvement in profi tability and productivity.

Book Value per Share

Your Bank’s Book Value per Share too improved signifi cantly from Rs 313.82 in 2008-09 to Rs 378.44 in 2009-10 reflecting a decent growth of 20.6% (y-o-y).

Earning Per Share

Your Bank’s Earnings per Share also improved signifi cantly from Rs 61.14 in 2008-09 to Rs 83.96 in 2009-10 reflecting a strong growth of 37.3% (y-o-y).

Business per Employee

Your Bank’s Business per Employee grew by a robust 17.2% (y-o-y) from Rs 911 lakh in 2008-09 to Rs 1,068 lakh in 2009- 10, as your Bank could leverage effectively its newly created technology and marketing platforms.

Now, let me share with you the details of your Bank’s new strategic initiatives during the year under review.

Bank’s Key Strategic Initiatives

The Human Resource (HR) strategies have been a key component of your Bank’s overall strategic effort towards business transformation. The prime objective of the HR function is to harness the employee potential for serving the customers better. Your Bank is endowed with a competent and highly motivated employee base of around 38,071, who are engaged in handling the extensive business operations of the Bank across the globe. During 2009-10, your Bank undertook a major initiative towards Business Process Reengineering to improve the sales and marketing orientation of its employees. The salient features of this project are as follows.

Business Process Re-engineering

Your Bank embarked upon a massive Business Process Re-engineering and Organization Restructuring initiative and launched Project Navnirmaan in the month of June, 2009. This project aims to harness the power of technology and align its processes to bring about enterprisewide sales orientation and process simplification.

Through redesigned work streams and centralization of non-customer facing activities, by fi ne-tuning of its various business units and by focusing on ensuring effi cient working of its branches, your Bank is hoping to tone up its service delivery system to achieve enhanced business and profi tability.

The Baroda Next Branch Model under this Project, to be rolled out in all the Metro and Urban branches of your Bank is intended to provide superior customer experience through improved layout and ambience, besides simplifi ed/ redesigned processes aided by self-service, front-end automation, and shifting of many transaction handling processes to different back offices to ensure efficient turnaround time.

There are several projects at various stages of implementation under Navnirmaan. Broadly, these are: (1) Ideal future branch model with sales focus, (2) Effective usage of alternate delivery channels, (3) World-class “Lean Service Factory”, (4) Call centre, (5) Centralised MIS & Business Intelligence Unit, (6) Restructuring of organisation, (7) Credit flow redesign, (8) Capability building within the organisation for ensuring sustainability of the change efforts through the Academy of Excellence.

New Technology Platform

Your Bank achieved 100.0% Core Banking Solutions (CBS) for all its domestic branches during September, 2009. All the CBS branches of your Bank are enabled for inter-bank remittances through RTGS and NEFT. The CBS has also been implemented in your Bank’s 46 overseas branches. Your Bank’s ATM network expanded to 1,315 during 2009-10. Your Bank launched several new IT products and services such as Online Trading Project, ATM Switch application, Phone Banking, 3D Secure Implementation under the Internet Payment Gateway Project, and Payment Messaging Solution, etc, during the year under review.

Initiatives in Retail Business

Your Bank opened 178 new domestic branches and merged four branches during 2009-10. The Bank’s Retail Business continued to be one of the thrust areas for achieving business growth during 2009-10. In order to achieve the sustained business growth, your Bank improved and customized several retail lending products and launched a number of business mobilisation campaigns spread over the year. Going by the past success, your Bank opened six new Retail Loan Factories during 2009-10. Furthermore, it introduced online modules for Home Loan and Education Loan Applications. At the instance of Ministry of Finance, Government of India, your Bank launched a new subsidy linked housing loan scheme styled as “Interest Subsidy Scheme for Housing the Urban Poor” on October 10, 2009.

Initiatives in Priority Sector & Farm Loan Business

Your Bank has always been a frontrunner in the area of Priority Sector and Agriculture lending, harnessing the vast potential of the rural market through its wide network of 1,126 rural branches and 721 semiurban branches. Your Bank has identifi ed 450 Thrust Branches across India to enhance Agriculture lending which constituted 34.0% of total Agriculture lending as at end-March 2010. Towards effective use of technology in rural agricultural lending, your Bank introduced IT-enabled smart card based technology for fi nancial inclusion. Also, around nine Baroda Swarojgar Vikas Sansthan (BSVS) / Baroda R-SETI Centres were opened during 2009-10.

Your Bank also implemented the Business Facilitators Model across the country to accelerate Financial Inclusion of the excluded segment as well as to augment its agriculture portfolio. These Business Facilitators mainly canvass loan applications for the Bank. Your Bank achieved 100.0% Financial Inclusion in 21 out of 44 of its lead districts. Over two million no-frill savings accounts have been opened in your Bank so far. Furthermore, your Bank opened four Financial Literacy and Credit Counselling Centres christened as “SAARTHEE” at Ajmer, Raebareli, Amethi and Baroda. These centres would be providing fi nancial literacy and credit counselling to needy persons.

Initiatives in MSME Business

The Micro, Small and Medium Enterprises (MSME) segment has been a vital component of the Indian economy. To promote the growth of this sector, your Bank took several measures during the year under review. It set up three new SME Loan factories during 2009-10. Dedicated SME Meets and Interactive Sessions were held at several centres with SME customers. Your Bank introduced seven new customercentric area specifi c products to suit the local cluster needs. Your Bank celebrated a special SME Month from 1st December, 2009 to 31st December, 2009, which was subsequently extended up to 15th January, 2010 in order to give boost to SME business. Certain concessions in the rate of interest and service charges were announced for loans sanctioned during the celebration period.

Initiatives to Diversify Income Streams

During the year under review, the Bank diversifi ed into life insurance business by forming a three-way Joint Venture amongst
Bank of Baroda, Andhra Bank and Legal & General Group Plc (UK). The company named as IndiaFirst Life Insurance Company
Ltd. received an overwhelming responsefrom the Bank’s esteemed customers across the country making the company the fastest ever Insurance company to reach Rs 100 crore premium collections in the fi rst 100 days.

Initiatives in Overseas Business

Given the current state of many developed countries, your Bank’s Overseas Management primarily focused on strengthening the risk management and AML systems. To improve the overseas penetration, your Bank launched aggressive marketing campaigns, expanded customer base and took various steps in the interest of long-term growth of overseas business. Your Bank also continued with its branch expansion plans to take advantage of the business opportunities available in various countries around the world. During 2009-10, four new branches of the Bank’s subsidiaries were opened at San Fernando (Trinidad & Tobago), Chaguanas (Trinidad & Tobago), Mukono (Uganda) and Lira (Uganda). Moreover, the Reserve Bank of New
Zealand registered your Bank’s subsidiary, Bank of Baroda (New Zealand) Ltd., as a Bank from 1st September, 2009. Your Bank also implemented CBS at all the overseas centres except New York and Brussels in order to take maximumadvantage of the ‘State of the Art Technology’ and provide quality products and Services to customers at a competitive price. Besides, your Bank launched various new products and services and enhanced the features of existing schemes to synchronise with the governmentspecifi c schemes.

Corporate Social Responsibility (CSR) Initiatives

Keeping in view the commitment of your Bank to address various social causes as a necessary aspect of its Corporate Governance, the Bank, through its untiring efforts, empowered the community towards the socio-economic development of the underprivileged and weaker sections. As stated earlier, your Bank has so far established 25 Baroda Swarozgar Vikas Sansthan (Baroda R-SETI) for imparting training to the unemployed youth, free of cost for gainful self employment and entrepreneurship skill development which would help them improve their family economic status and also give a boost to the local economy in those locations. These Santhans so far have trained more than 37,000 youth out of which around 22,000 were gainfully self employed.

Most of your Bank’s social activities are linked to rural masses. Your Bank has so far established 52 Baroda Gramin Paramarsh Kendra for knowledge sharing, problem solving and credit counseling for rural masses across the country. In order to spread awareness among the rural mass on various fi nancial and banking services and to speed up the process of financial inclusion, your Bank has established four Financial literacy and Credit counseling Centres at Ajmer, Amethi, Baroda and Raebareli.

Your Bank has adopted 101 villages across India for their all-around development and to provide financial assistance for development of infrastructure facilities like setting up village libraries, community hall and solar lighting systems in villages. Earlier, your Bank had adopted Dungarpur District in Rajasthan for total integrated rural development and 100.0% financial inclusion, which has already been achieved. Furthermore, under this project, your Bank has provided scholarships to 50 tribal girls to promote education among tribal community.

The Road Ahead

While the Indian economy may pull back slightly after the strong showing in therecent months, the receding effects of global crisis on the U.S. economy -- India’s major trade partner and prospects for strong domestic private investment and consumption suggest that India’s real GDP is set to grow at 8.0% with an upside bias during 2010-11, up from 7.4% in 2009- 10. In that case, the RBI’s guidance for the Indian banking industry’s deposit and non-food credit growth at 18.0% and 20.0%, respectively, appears to be achievable. Growth may slightly ease in the year 2011-12, as monetary and fi scal stimulus is further withdrawn to check galloping pace of headline infl ation, which is currently in double digits.

However, the current policy mix should prove conducive to achieving strong growth with relatively lower infl ation over the medium term. The RBI intends to further raise policy rates along with possibly reserve requirements. This means long-term interest rates are likely to resume a rising trend with a return to more normal economic and financial conditions.

India’s strong domestic growth drivers, relatively higher dependence on domestic sources of fi nancing and lower dependence on external official creditors wouldinsulate it from unpredictable changes in global investor and creditor confi dence in 2010-11.

Against this guidance, I would now like to share with you, your Bank’s business objectives for the year 2010-11. As in the past couple of years, your Bank would continue to perform with thrust on sustainable growth. We will try to achieve this by – (a) maintaining healthy CASA growth, (b) achieving balanced growth across all business segments such as wholesale, retail, MSME, agriculture and overseas operations, (c) keeping a strong back up of fee-based income and, (d) implementing stringent management of asset quality.

Your Bank will continue to leverage its Technology, Brand value and Human Resource strengths to serve its customers in the best possible way. Hence, its Motto for the financial year 2010-11 is “Leveraging Technology for Augmenting Business Growth and Profitability”. The project “Navnirmaan” launched in 2009- 10 should help your Bank in optimizing the available physical and human resources for maximizing business and profit.

Your Bank will continue to remain committed to create as much sustainable value for its stakeholders as possible. It is well prepared and poised to make use of growing economic opportunities to add to its strength. During the last couple of years, which were marked with rising economic challenges and uncertainties, your Bank has aligned itself well with the new normal environment. It has also built strong strategic foundations to sustain its performance in the years ahead.

The first quarter of 2010-11 has demonstrated that your Bank is well positioned and on the right course to achieve its set business objectives for 2010-11.

Acknowledgement

I would like to take this opportunity to thank the Members of the Board for their valuable guidance, support and prudent counsel. I and my colleagues on the Board place on record our appreciation for continued support and guidance received from the Government of India, RBI, SEBI, other regulatory authorities, various financial institutions, banks and correspondents in India and abroad.

We also place on record our appreciationfor the unstinted trust and support of our customers, shareholders, investors and vendors.

As in the past, our performance during 2009-10 was driven by the dedication and commitment of our fellow Barodians. On your as well as on behalf of the Board of Directors, I salute the employees of the Bank on the sterling overall performance for the year 2009-10.

Before I conclude, I would like to thank all of you for your presence and interest in the Bank.

05th July 2010

Thank you.

M.D. MALLYA
Chairman and Managing Director