Ladies and Gentlemen,

Good Morning and Welcome to the 12th Annual General Meeting of your Bank.

The Annual Report, including the Audited Accounts of the Bank for the year ended March 31, 2008 has been with you for sometime. With your consent, I shall take it as read. This is my first interaction with you after joining the Bank as Chairman & Managing Director on 7th May 2008 and I take this opportunity to thank you all for making it convenient to attend this meeting.

The current year is an historic year for us as it is the Centenary Year for the Bank. The Bank's history has followed the history and growth of Indian economy. Once confined to a small, princely state, the Bank today is an 'International Bank' operating in twenty-five countries spread over five continents. Its noteworthy feature is its uninterrupted profit performance and consistent record in dividend payment for the past 100 years. With its 2,853 domestic branches, 63 extension counters and 1,106 ATMs the Bank has created a strong customer base in India. The Bank's track record in the market, its sound financials and its contribution to social sectors, market-making and policymaking has given it a unique and distinct identity in the Indian banking universe.

There were a number of accomplishments in the year 2007-08 that we are proud of. But let me first present a snapshot of economic and banking environment in which we had to carry out our business in 2007-08.

Economic Scenario:

The year 2007-08 was the third year in a row, when the Indian economy grew at the rate of 9.0 per cent and above. Its growth at 9.0 per cent was supported by an agricultural growth of 4.5 per cent, industrial growth of 8.1 per cent and the services growth of 10.7 per cent. As per the quick estimates of the Central Statistical Organisation, its gross domestic savings rate stood at the healthy level of 34.8 per cent, whereas its gross domestic investment rate attained the level of 35.9 per cent. Moreover, India attracted an investment of 37.5 per cent of GDP - up by around 9.3 percentage points from the investment figure of 28.2 per cent in 2003-04. With the improved productivity and rising investment, India's medium-term prospects for growth certainly look promising.

In the short run, however, one sees some stresses on India's macroeconomic indicators. Towards the end of 2007-08, inflation started inching up due to steadily rising prices of foodgrains, metals and crude oil across the globe. International crude oil prices were steadily and sharply rising since June 2007, reflecting tight supply situation, geo-political tensions and weakening of the dollar. The industrial growth too slowed down to 5.1 per cent in Q4, 2007-08 as a result of higher prices of key intermediates and a slowdown in world economic demand.

Banking Environment:

Indian banking industry witnessed a kind of cyclical slowdown in credit expansion during 2007-08. The non-food credit extended by scheduled commercial banks (SCBs) grew by 22.3 per cent as against 28.5 per cent in 2006-07. Similarly, the aggregate deposits of SCBs increased by 22.2 per cent in 2007-08 compared to 23.8 per cent in 2006-07. Though the banking industry's deposit mobilization slowed down a bit, its lendable resources were augmented substantially through capital raised from public issues and innovative capital instruments.

To talk about the policy environment, the RBI placed thrust on aggregate demand management to anchor inflationary expectations. The successive increases in the cash reserve ratio (CRR) last year (from 6.0% in March 2007 to 7.50% in November 2007) and zero interest on the CRR balances have had significant impact on the banks' net interest margins. Operating cost pressures also kept mounting due to higher investments in franchise, technology and manpower. The public sector banks still face a greater burden due to the impending wage agreement. Despite these challenges, Indian banking industry delivered good risk-adjusted returns in 2007-08 on the back of relatively stronger macroeconomic fundamentals, favourable demographic profile and prompt regulatory actions.

Let me now present before you the Bank's business and financial performance during the year 2007-08.The year's results have already been covered in detail in both the press and the Annual Report. Therefore, I will present a fairly brief summary of results this morning.

Bank's Business Performance:

The Bank scaled a new high for its global business by reaching the level of Rs 2,58,735 crore in 2007-08 that reflected a growth of 24.1 per cent. Its global customer base expanded to 33 million. While its domestic deposits grew by 22.8 per cent, domestic advances registered a growth of 25.5 per cent. The credit to social sectors or priority sector credit comfortably surpassed the mandatory requirement and formed 47.1 per cent of the net bank credit. While the Bank's credit to SME segment expanded by 31.1 per cent, the credit to agriculture sector grew by 28.0 per cent. Its credit to retail sector registered a growth of 18.0 per cent. The Bank delivered this performance in the year in which there was a noticeable deceleration in credit growth at the industry level.

I am happy to report that the Bank achieved all the SOI (Statement of Intent) targets pertaining to business, profitability and asset quality that it had committed to the Government of India for the year 2007-08.

The Bank's overseas business too grew by 24.6 per cent primarily due to a sharp increase of 35.7 per cent in overseas advances. This is particularly noteworthy as the global economy has been under the pressure of financial market turbulence in 2007-08. Our overseas business contributed 20.0 per cent to our overall business and 23.8 per cent to our net profits in 2007-08.

Bank's Financial Highlights:

Despite the pressures of heightened competition and tighter monetary environment, the Bank earned the gross profit of Rs 3,029 crore and the net profit of Rs 1,436 crore during 2007-08. The Bank's net profit registered a growth of 39.9 per cent on year on year basis. The Bank's net interest margin (as % of interest earning assets) was at the level of 2.90 per cent even though the Bank's cost of deposits sharply increased from 4.77 per cent in 2006-07 to 5.69 per cent in 2007-08.

The Bank's non-interest income grew at the rate of 48.7 per cent primarily supported by substantial treasury gains and good recovery from the prudentially written-off (PWO) accounts.

Through continuous monitoring and concerted efforts at all levels, the Bank was able to bring down its gross and net NPA during the year both in percentage as well as absolute terms. The gross NPA were reduced from Rs 2,092.14 crore in 2006-07 to Rs 1,981.38 crore in 2007-08. Similarly, the net NPA were reduced from Rs 501.67 crore to Rs 493.55 crore. In percentage terms, while the gross NPA were reduced from 2.47 per cent to 1.84 per cent, net NPA were reduced from 0.60 per cent to 0.47 per cent in a year's time. The asset quality for the Bank improved further with the rise in the share of standard advances from 97.5 per cent at the end of 2006-07 to 98.2 per cent at the end of 2007-08.

The Bank's NPA coverage ratio stands at the comfortable level of 75.09 per cent. The aggressive efforts at recovery resulted in the cash recovery of Rs 588.73 crore in the NPA account and Rs 363.33 crore in the PWO accounts.

The overall results indicate the underlying strength of the Bank's financials. The Bank's NIM at 2.90 per cent, gross profit to average working assets ratio at 1.96 per cent, net NPA at 0.47 per cent, and capital adequacy ratio at 12.91 per cent (as per the Basel I) reflect the Bank's sound financials.

The statistics on shareholders' ratios too reflect an improvement. Whereas earnings per share (EPS) improved from Rs 28.18 in 2006-07 to Rs 39.41 in 2007-08, the book value per share (BV) improved from Rs 231.59 to Rs 261.54 during the same period. The Bank's return on equity (ROE) too improved from 12.17 per cent to 15.07 per cent. The Bank's net worth also increased by 12.9 per cent to reach the level of Rs 9,526.97 crore by the end of 2007-08.

The Bank was able to show a noticeable improvement in its key efficiency and productivity ratios during 2007-08. In comparison with the year 2006-07, the Bank's return on average assets (ROAA) improved from 0.80 per cent to 0.89 per cent, the cost-income ratio declined from 51.30 per cent to 49.21 per cent, business per employee improved from Rs 548 lakh to Rs 704 lakh and business per branch improved from Rs 7,523 lakh to Rs 8,925 lakh.

Bank's Key Strategic Initiatives:

In its quest to become a multi-specialist bank, the Bank took a large number of business oriented and customer-centric initiatives during 2007-08.

It completed the CBS (core banking solutions) roll-out in 1,700 branches in India and overseas territories covering more than 90.0 per cent of its total business and expanded the ATM network to touch the count of 1,100 by end-March 2008. It launched biometric ATMs and took many other technology-driven initiatives such as -- online payment of direct taxes, Baroda Easypay and online railway booking facility.

During the year 2007-08, the Bank opened a record number of 125 branches, merged four branches and opened two Gen Next branches to attract the young IT professionals to its books in Pune and Bangalore.

Amid various sales and marketing initiatives during the year, the Bank expanded the network of retail loan factories to 15 and SME loan factories to 27 and launched many new products (both from the assets & liabilities sides) to suit the changing needs of the customers belonging to different social groups. Adding further to the stream of new wealth management products, the Bank entered into a tie-up with India Infoline Ltd. for offering to its customers an online e-trading facility in equity and derivatives and also made tie-ups with a few more global asset management companies for distribution of mutual fund products.

The Bank has a long history of supporting rural development initiatives with an objective of creating a healthy rural economy. Consistent with this, the Bank adopted Dungarpur district in Rajasthan (one of the most backward tribal districts in India) for total integrated rural development and 100 per cent financial inclusion in October, 2007 and has already achieved the goal of 100 per cent financial inclusion in this district. Similarly, the Bank identified 500 villages for 100 per cent financial inclusion in 2007-08 and achieved that goal also in the same year.

Furthermore, the Bank had many HR interventions with a special thrust on internal talent discovery, upgradation of managerial skills through training and improving the motivational level of its employees. During 2007-08, the Bank launched HRness (Human Resource Network for Employees' Services) - a web-enabled enterprise wide HR solution to ensure greater efficiency and user-friendliness in HR operations.

To strengthen its character as the India's International Bank, the Bank opened 11 new overseas offices, which included four branches/offices and one representative office at Sydney, Australia. The branches of two new subsidiaries commenced operations at Trinidad & Tobago and Ghana. Also, four new branches of existing subsidiaries were opened in the year 2007-08. The Bank upgraded its existing operations in Hong Kong (with restricted bank licence) to a full-service bank. From April 2007, the Bank's two branches in Hong Kong commenced full service banking operations.

So far as its subsidiaries are concerned, a turnaround strategy was formulated for the BOB Capital Markets Ltd., by introducing stock broking operations and for BOB Asset Management Co. Ltd., by converting it into a joint venture company with the Pioneer Group of Italy.

Future Challenges and Road Ahead:

The global economy is teetering on the brink of a severe economic downturn leading to a downward revision in the baseline forecast for world economic growth. The deepening credit crisis in developed countries, as triggered by the continuing housing slump, the pressure on the U.S. dollar, persisting global imbalances and the soaring oil and non-oil commodity prices are slowing growth of the world economy. In global markets, the crude oil prices have increased by 55 per cent from 1st January through 11th July 2008.

As an important part of the global economy, India cannot be completely insulated from these global weaknesses. The country imports about 70 per cent of its crude oil requirement. A spiral in oil prices has been exerting tremendous pressure on India's oil import bill. The higher oil import bill along with investment outflows from the weakening stock market have resulted in the depreciation of rupee by 8.6 per cent in the calendar year 2008 till July 11th. With industrial growth slipping to 5 per cent in the first two months of 2008-09, inflation touching a 13-year high of 11.89 per cent on June 28th and a slowdown in corporate earnings, the economic environment looks challenging to banking industry in 2008-09. Against this backdrop, the RBI will have to focus on aggregate demand management and continue with its aggressive monetary tightening. In the year 2008-09, the Repo rate has already been raised by 75 bps to 8.5 per cent and the CRR by 125 bps to 8.75 per cent and a possibility of further tightening cannot be ruled out.

This defines a challenging environment for the Indian banking industry characterized by more pressures on its net interest margins, treasury profits, third party product distribution and asset quality management.

But I am confident that India has sufficient strengths in the form of higher rates of domestic savings and investment and large-sized domestic market that will help it weather the current economic slowdown.

Similarly, our Bank will face the year 2008-09 with its implicit strengths in the form of good base of capital and liquidity, a healthy balance sheet and robust risk management capabilities. Our corporate goal for the year 2008-09 is -"To leverage technology as an enabler for providing superior customer experience and broad-based business expansion with cost consciousness". We will try to remain ahead of the curve by focusing on "growth" while maintaining very prudent credit risk standards. With 100 years of experience behind us, we are confident to overcome the present challenges with ease.

Corporate Governance:

The Bank's commitment to strong values and business ethics, coupled with its article of faith to augment shareholder value, is at the core of its corporate governance policy. The rating agency ICRA has reaffirmed the CGR2 (pronounced C G R Two) rating assigned to the corporate governance practices of Bank of Baroda in September 2007. The CGR2 rating implies that in ICRA's current opinion, the rated bank has adopted and follows such practices, conventions and codes as would provide its financial stakeholders a high level of assurance on the quality of corporate governance. The rating reflects the Bank's transparent ownership structure, well-defined delegation of power and accountability, satisfactory risk management practices and an elaborate audit function, carried out both by its inspection division and by independent audit firms. The rating favourably factors in the oversight function played by the Board and the continuing regulatory emphasis and surveillance to improve upon the governance practices and processes at the Bank.

Acknowledgement:

The Bank's new initiatives could not have come about without the active involvement and support of its staff members. Our staff is aware of the challenges and has fully embraced the Bank's core principles about banking. The customers have been extending their patronage and we are confident of their support for the coming year also. The Board of Directors places on record its 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.

To round off, I would like to thank the shareholders for their large turnout and for their interest in the Bank again this year.

Thank you.