00161 1st Reading

ASIAN CASE RESEARCH JOURNAL, VOL. 16, issue 1, 1–28 (2012)

acrj
Organizational Changes in Bank
This case was prepared by
Assistant Professor Richa of Baroda
Awasthy of the International
Management Institute, New
Delhi, India, as a basis for It was a cold winter day in December 2007 in Delhi. Dr. Anil
class discussion rather than Khandelwal (Chairman and Managing Director (CMD)),
to illustrate either effective
or ineffective handling of of the Bank of Baroda (BoB), had returned from an award
an administra­tive or business function, where he received yet another award for his
situation.
achievements as a transformational leader. He had spoken
Please send all correspondence
to Dr. Richa Awasthy, Area-
about the changes implemented by him in BoB during a short
Organizational Behaviour, span of 3 to 4 years to an attentive and appreciative audience.
International Management
Institute, B-10, Qutab Insti- At the same time, he was also concerned about the future
tutional Area, Tara Crescent, of the bank and other changes which needed to be done to
New Delhi-110016, India.
Email: take the bank to newer heights. As he opened the blinds of
his office window and saw a perfect rainbow with its entire
spectrum of colours, he was reminded of the different hues of
the organization he had nurtured. Things were changing and
he was concerned about how the employees would perceive
this change. The big question in his mind was, whether he
had done enough for the changes that economic shift was
about to bring.

HISTORY OF THE BANK

BoB was established by Maharaja Sayajirao Gaekwad on 20

July 1908, in Gujarat with a paid up capital of $1 million.
From a small provincial banking institution, it grew into
a strong financial body with business prudence, financial
integrity and an abiding care and concern for the hard earned
savings of the customers. This became the central philosophy
that guided the business decisions taken by the bank. It was

© 2011 by World Scientific Publishing Co. DOI: 10.1142/S0218927512001612

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this philosophy that became the main asset of the bank for
the next 99 years of its existence.
As many as 38,063 employees manned 2,896 BoB
branches, out of which 70 were overseas. In fact, BoB was one
of the earliest banking institutions in India to venture into the
international financial arena by starting its first foreign branch
in Mombassa, Kenya in 1953, followed by a branch in London
in 1957. In 2007, the bank was ranked among the World’s
top 1000 banks in the London-based “The Banker Magazine”,
improving its earlier position of 416 in 2006, to 258. It was
also the first public sector bank to be assigned a Corporate
Governance Rating (CGR) in July 2004 by the rating agency
ICRA Ltd. The “CGR-2” rating that it had received indicated
the high level of corporate governance that it had ensured to
its clients. In 2007, besides the CMD Dr. Khandelwal, there
were two more executive directors and 10 members on the
Board of Directors.

GLOBAL BANKING INDUSTRY SCENARIO

The banking industry throughout the world has been under-

going change where efficiency and competitiveness hold the
key to survival. Intense competition from both domestic and
international players, the rapid introduction of new financial
products, changing consumer demands and application of
information technology and the way in which a commercial
bank conducts its business and provides service to its
customers has changed significantly (Mukherjee et al., 2002).
According to Hedley et al. (2007), “over the next ten years
banks will have to plan new strategies in order to survive
stiffening competition as the retail banking landscape is
expected to be completely reshuffled by 2015”.

INDIAN BANKING INDUSTRY SCENARIO

The banking industry in India was also undergoing a major

transformation due to twin challenges posed by continuous
deregulation of the Indian economy along with the crises

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organizational changes in bank of baroda  3

caused in the global economic scenario by subprime lending.

These multiple changes, happening one after another had
a ripple effect on every bank that is trying to graduate
from a completely regulated seller’s market to a completely
deregulated customer’s market. The opened up economy in
the 1990s and the government’s decision to privatize banks
was based on the recommendations of the Narasimham
Committee (1997). The challenge was much higher in
magnitude for public sector banks because of competition
with private or multinational banks. Post-2009, in the days
to come, the competition from foreign banks will become
more intense with the liberalization of foreign investments in
banks, in India. Table 3 gives a comparison between BoB and
other leading banks in India.
Banks have paid more attention to customer needs
and service quality, because the homogeneity that charac-
terizes the sector makes it extremely difficult for them to
achieve differentiation. The only way a bank can differentiate
itself is by giving better service. According to George and
Hedge (2004), “No matter how sophisticated the technology
employed, the decor, or the amenities available, a hospitality
establishment (which banks are ever closer to becoming) will
be judged, more often than not, by the performance of its
employees, and in particular, those in the frontline.”

TASKS BEFORE Dr. KHANDELWAL

Dr. Khandelwal, an eminent banker of 37 years standing had

been heading the bank as the CMD since 1 March 2005 until
his retirement on 31 December 2008. He found himself as the
captain of a ship, which was not in a position to sail through
the high tidal waves of private and multinational banks.
Today, success has become an impermanent achieve-
ment which can be taken away by competitors at any
time. It is a fundamental requisite for firms to continuously
innovate and evolve according to the ever-changing moods
of the customers for their survival and growth. If they fail,
unfortunately, there will be no tomorrow for them. 

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BoB’s percentage return on assets for the year March,

2005 was -0.71% and the percentage net interest margin was
3.40% (refer Table 1 in the Exhibit 1). BoB’s total income,
total business and net profits are given in Table 2. Although
the total business as of financial year 2008 had reached $2.6
trillion, Dr. Khandelwal was worried whether the bank could
survive the turbulent competitive environment and whether
it can be safeguarded against hostile takeovers, where BoB
would have very little say.
Business Today in its ranking of banks in India has
given an overall ranking of 18 to BoB, an improvement in its
ranking of 22 in the previous year. BoB was rated among the
top ten banks by balance sheet size and by operating profits.
However, on operating expenses per employee it scored
19. Private sector players like Citibank and ICICI bank and
public sector bank like Corporation Bank performed better
(refer to Table 3 for detailed rankings as given by Business
Today, 2007).
The time had come for a change. Dr. Khandelwal
initiated the changes and spelt them out as Vision 2010, with
the clear cut mission to make BoB a top ranking national
bank of international standards, committed to augment stake-
holder’s value through concern, care and competence. His
aspiration for BoB was that it should emerge as a leader in
the public sector banking space in India, deploying the most
modern technology and pursuing the best global practices for
affording a world-class banking experience and the best value
to the customer, in order to position itself as a multi-specialist
banking organization.

CHANGING CUSTOMERS’ EXPECTATIONS

Globalization brought with it increased competition from

Indian private banks and foreign banks across the world
that had set up their operations in India. With the advent of
information technology (IT) and increasing marketing focus
on customers ensured that everyone knew “customer is the
king.” Personal experiences with foreign banks and/or shared
stories as narrated by their relatives or friends who settled in

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organizational changes in bank of baroda  5

foreign countries further heightened customers’ expectations.

No longer are they willing to wait in long queues, to wait for
the job to be carried over to the next day or to tolerate rude
behavior. An impressive ambience and the courteous service
of the Indian private banks and foreign banks have raised the
customers’ desire for quality of service. It is well understood
that quality service has become the source of competitive
advantage.
To address these challenges Dr. Khandelwal introduced
various multidirectional changes in marketing, technology,
structure, employee management etc. There were massive
changes in the organizational structure and the emphasis
of the organization changed from a development bank
mode to that of a market-driven financial conglomerate.
Dr. Khandelwal’s moves were prompted by his decision
to tap new markets and to introduce flexibility in the
organization in order to increase its ability to respond to
market changes.

EFFORTS AT CHANGE

Due to the above reasons, Dr. Khandelwal had chalked out

various plans to spruce up BoB from within. In this regard,
Dr. Khandelwal remarked, “BoB is on a treadmill. We have
undertaken a lot of changes.” Ms. Shankaran, a senior level
manager in BoB adds,
“After Dr. Khandelwal joined as CMD, he understood
that we were sliding down gradually and smaller banks
were coming closer to us. It took us some time to realize
that we were losing our status. That is what triggered
the need to transform, in order to regain our lost glory.
Earlier our logo was dull. We had outsourced consultants
for redesigning our logo. The logo and hoardings were
changed in June 2005. Now our logo has a bright color;
it’s the color symbolizing morning, it looks like a bird, it
reminds one of the early morning bright sun rays; also the
double B stands for ‘Best Bank”. We were lagging behind
small banks on the technology front. We lost our business
because our branches were not connected. BoB offered

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typical banking service, but it was not enough to gain

competitive advantage over our competitors in the pursuit
of higher standards. Service quality has become the key
slogan in the rising banks as they strive for competitive
advantage in a competitive atmosphere. BoB’s employees
are not computer-savvy or market-driven and the average
age of the employees is above 45 years. Similarly most of
the customers of BoB are pensioners. One of the lacunae
in BoB was its inability to attract young customers. Being
a public sector bank, where 51% of the share is with the
government, implementing radical changes was a big
challenge.”
The CMD started vision 2010 with the basic goal of
creating an operating architecture that would facilitate service
delivery of international standards by:
i) Increasing customer satisfaction and convenience;
ii) Freeing up time for branch manager and branch staff to
focus on sales and marketing;
iii) Simplifying process for employees;
iv) Enhancing BoB's competitiveness in the market;
v) Increasing the profitability through higher market share
and improved process efficiency.
All these changes were aimed at building trust, a binding
force and value added relationship with the customers to win
their hearts. The new BoB was heading to attract more and
more customers through the principles of customer delight,
approval and enthusiasm. The next sections elaborate how
various changes were implemented in the bank.

The Changing Face of BoB

As a first step in its makeover plan, BoB crafted a new logo

and corporate slogan. This involved understanding the
perceived and potential value of the brand where everything
from colors and symbols to the typeface, was evaluated.
Consumer research conducted with these specific objectives in
mind, brought to the fore two key issues:

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1) Although the brand had tremendous strength associated

with it, it needed to communicate modernity strongly; and
2) It needed to assure customers that apart from being a
trusted and a familiar brand, it was also a contemporary
one which changed with the times.
The existing logo of a coin embossed with an upside down
palm was changed with a modern rendition. The bank
launched a new brand identity ‘THE BARODA SUN’
on the 6th of June, 2005. The new logo of the bank was
launched all over the country, at the same day and at the
same time. The new logo’s color reflected that of the rising
sun, radiating its rays from the letters ‘BB’. The 2nd ‘B’ in
the logo appears as a bird flying across the morning sky. It
is as if the Bank is flying in to a dynamic state — always
proactive, striving for change. Its new color vermillion — a
shade of orange — also symbolized energy and vitality like
that of the sun. The redesigned logo was the identifying
stroke that communicated the innovation and futuristic
power of BoB and the redesigned typography made BoB
very contemporary. Earlier BoB’s tagline was “Akshyyam
Te Bhavishyanti” (Thou shall always be prosperous), and now
it is ‘India’s International Bank’. Now, their hundredth year
slogan was “Sau sau salaam (‘one hundred salutations’)”. The
next step was to sign a contract with Rahul Dravid, the then
Indian cricket team captain to be BoB’s brand ambassador.
However the bank employees were confused about
the effect of these changes in meeting the onslaught of
competition. They were so accustomed to the former insignia,
that the new logo was not very easy for them. A few
observations made by employees are listed below.
Shyama, a clerk in BoB who has been working in the
bank for the last 35 years, saw the new logo of BoB. He felt
it was bright. Two of his old friends working in different
companies also noticed this and pointed out this new change.
Shyam felt happy that people noticed this change; however,
deep down in his heart, he was not very comfortable. He
shared his feelings with other close colleagues in the office.

aOther than that of Dr. Anil Khandelwal, names of all other employees are

pseudonyms to protect anonymity.

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They shared a similar perception. Rajesh said, “For the last

29 years we have been looking at the same old logo, this new
logo is good but….”
Mr. Raman, Senior Manager in BoB mentioned that
this Hindi slogan was not understood in Tamil Nadub Their
regular customers wanted to know what it meant. “What is
this sau, sau?” asked their regular customer Mr. Krishnan.
Another respondent in the corporate office told the case
writer, “Our marketing function has undergone a paradigm
shift. One can say that we have reinvented ourselves.”
Ms. Shivani Patekar, working with BoB for the last 15
years, reacted, “how will a new slogan or Rahul Dravid help
the bank in getting business? Customer choice will be based
on the interest rate and not on the colour of our logo!”

Technology for Value Creation

Apart from marketing, BoB launched several innovative,

value-added products and services to project a customer-
friendly image. All branches of the bank were connected
through Core Banking Solution (CBS) and customers could
make transactions from any branch. CBS by Infosys was
implemented across the bank for better technology interface.
BoB opened many ATMs, 8 am to 8 pm branches and 24-
hour banking facilities at a few branches. Mr. Aggarwal,
manager of the Delhi region said, “CBS was implemented on
a war-footing.” The bank also conducted training programs
for experienced employees. Most of the training focused on
training employees on new technology.
The CMD also used the latest technology available
to provide highly innovative solutions. All channels of
customer support such as branch operations, ATM, telephone
banking, and Internet banking were integrated in an online,
real time mode with a multitude of host systems. The bank’s
investment in technology has facilitated the large volume of
business it handles.

bThe slogan is in Hindi, the national language of India. In the state of Tamil Nadu,

the commonly spoken language is Tamil and not Hindi.

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Banking Beyond Banking

Dr Khandelwal planned a major organizational restructuring

exercise. The key aspects involved redesigning of branches,
providing alternate channels; focus on a lean structure and
technological up gradation. Modifications in organizational
structure were carried out, creating centralized processing
units with specialist roles to facilitate smooth and efficient
loan processing. Branch roles were realigned to be focused
on attaining sales targets. While traditionally, banking meant
“borrowing and lending”, now the word has taken on a
different meaning altogether. BoB no longer restricted itself to
traditional banking activities, but explored newer avenues to
increase business and capture new markets. The bank started
selling mutual funds, life insurance policies and introduced
many new products by keeping in mind, different market
segments like:
i) Retail
ii) Small and medium enterprises (SMEs)
iii) Wholesale (Mid corporate and large corporate) and
iv) RuralAgricultural Businesses.

Regrouping of Branches Along the New Business Segments

The wholesale banking segment migrated from different

branches and was housed in Corporate Finance Service
branches at various centers. Other branches in metropolitan
cities and urban centers focused on Retail and/or SME
Banking. Semi-urban branches also focused on Retail and/or
SME Banking, depending on the potential customers. Rural
branches largely focused on Rural and Agriculture Banking.
After this, from among the clerical staff, the branches
appointed Universal Tellers, who had the authority to pass
cash transactions independently up to $770.162. BoB started
the loan factory concept, which functions like an assembly
line. The loan processing task was divided into small tasks
which were carried out by different people and within a
given time period. Now it took only six days to sanction

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home loans. Similarly, now it took only ten minutes to open

a new account. The bank opened Gen Next branches, where
the branch ambience was designed to attract the younger
generation. There was a special area called the ‘Yo! Zone’
where customers could watch TV, relax in a reading lounge
and have access to free browsing on the internet.

INSIDE STORY

Due to the organization’s new-found aim of becoming

a financial powerhouse, the large-scale changes caused
enormous tension within the organization. BoB was plagued
by multiple problems, which found their roots in the
mismanagement of affairs.
Innovations in services demanded an extended skill set
of employees. Training programmes were conducted which
emphasized progression of knowledge, skill set, attitude and
technology of the employees. The high age profile staff found
computer training a cumbersome task. In fact, many of them
were trying their hands on the computer for the very first
time. Employees were finding these changes unacceptable
as learning new skills all of a sudden and adapting to the
process orientation was proving to be difficult. The approach
towards creating these new skill sets, however, led to one
unintended consequence. This made training a constant
feature in BoB.
Along with the training to the employees, management
also took steps to set right the reward — punishment system
to promote customer focus. Each and every employee was
given targets to open new accounts. The bank announced
rewards for opening new accounts: $0.55 for opening one
account in urban/metro areas and $0.66 for opening a
new account in rural areas. The bank became zero-tolerant
towards customer complaints. Employees were transferred or
terminated, based on customers’ complaints.
Performance management became more objective and
target driven, as compared to earlier times. However, many
old timers were not comfortable in going out to the market to
enroll new customers. Mr. Mukesh said, “Earlier, to be a bank

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organizational changes in bank of baroda  11

manager was a respectable job. People would wait for us to

meet us. Now, we have to find customers.” Other remarked
that when they joined the bank, bank jobs are “islands of high
wages, it is no longer true — fresh recruits in the IT sector
and in foreign banks get more than us.”
A large section of employees began feeling alienated.
Mr. Banerjee has been with BoB for the last 34 years and is in
charge of two of the most important departments: marketing
and human resource. He has seen all the ups and downs of
BoB. On 10 October 2007, Mr. Banerjee (GM for Marketing
and HR) was shocked to see the latest data on the employee
attrition rate (refer to Table 5 Figure 2). As evident from
Table 5, over the last five years, BoB’s employee attrition rate
had been increasing. In 2004, the attrition rate was 1.34% and
in July 2007, it was 2.82%. The number of people terminated
was increasing, as was the number of people who were
opting for Voluntary Retirement Scheme (VRS). Restructuring
during the downturn was proving tough for employees.
Young bankers were leaving the bank as soon as they got any
opportunity and seniors were desperate to opt for VRS.
Prior to the modifications, the subordinate staff union
and the officers’ association were very strong in BoB. They
were involved in most of the important decisions taken by
the bank. In fact, union members used to sit with the manage-
ment to decide transfer matters. When Dr. Khandelwal took
a firm decision to go ahead with the transformation of the
bank, the unions were marginalized, with the bank adopting
the carrot and stick philosophy. Efforts were made to explain
the need for change. New communication channels were
created to communicate the changes that were taking place
for every employee in the Bank. These included SAMPARK,
an on-line feedback channel, where employees could write
directly to the CMD, and the CMD letters written to all
employees. However, SAMPARK, according to most of
the employees, is not considered a trustworthy channel of
communication. Employees felt scared to give their frank
opinion to the CMD. One of the respondents asked, ‘who will
bell the cat?’
Many people at BoB felt that because of this spurt
in growth, working hours have grown considerably.

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Mr. Chopra, a clerk in a Delhi regional branch said, “When

CBS was implemented, we used to come to the bank every
Sunday for five months. We spent three days and nights
in the bank. One day, even the female staff stayed back
overnight. Not only this, with the new 8 am to 8 pm banking
and other rapid changes, our bank timings has also increased.
We know what time we enter the bank; however, the time to
call off the day is not certain.” The relaxed working routine
is converted into a overhyped one. Their performance is
monitored; closely and regularly. Due to the goal oriented
framework, they face competition from those who used to
share their work earlier. Nobody is willing to work for a
colleague. Everybody is trying hard to get new accounts.
Their physical endurance limit is being overlooked. The end
result is stress, anxiety and physical over exertion in the staff.
Mr. Sharma in the Delhi branch shared, “My son has got a
job and he is asking me to take the VRS. I get tired when I
have to travel from one place to another, to meet customers
for loan requirements and to open new accounts. By the
evening, I feel totally drained.”
The restructuring also involved altering work arrange-
ments in ways that disrupted employees’ social lives. The
new competitive atmosphere did not allow them leave even
for important social events. One of Mr. Shyam’s colleagues
could not avail his leave for his son’s wedding. Another such
instance was when an employee was denied leave to attend
the last rites and prayers observed for his mother on the 13th
dayc after her death.
Another significant change pointed out by the branch
manager was that now he wielded greater authority as
compared to earlier times. Yet, he still looked up to his
seniors for many decisions and felt less empowered as
compared to the branch managers of private banks.
Many employees find problems in upward and
downward communication. Although it is apparent that the

cAs per Hindu customs, parent’s mortal remains are burnt in a pyre by male

relatives, usually sons. It is followed by a mourning period and several ceremonies,

the most important one is the feast organized on the 13th day after death. Rituals
around death are followed to ensure departed soul reaches heaven and blesses the
family. Failure to do so would lead to social ostracization.

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organizational changes in bank of baroda  13

bank has attempted to address these problems, the need for

systematic improvement remains. A respondent remarked,
“Targets are imposed in BoB.” The case writer observed an
interaction between Mr. Khanna (senior manager) and his
secretary Mr. Gupta. Mr. Khanna had recently joined this
office and before meeting his staff he asked his secretary
“Tell me, what are the problems they face?” The secretary
answered, “Sir they will interact with you and brief you.”
Mr. Khanna replied, “No! What can they tell us? We will tell
them what to do.”
Doubts were soon raised regarding whether the CMD
had gone 'too fast too soon,' and more importantly, whether
he would be able to steer the employees and the organization
through the changes he had initiated.

Voice of the Customer

Dr. Khandelwal was keen to understand how BoB’s

customers have seen the changes in the Bank. However, no
information is available in the public domain that compares
the customer service of various banks for 2006–2007,
including in journals that routinely rank various banks of
several parameters.
So a customer satisfaction survey was conducted to
evaluate their satisfaction with BoB’s service quality and
the findings are given in Table 4 (see also Figure 1). Most
respondents claimed that BoB has become more customer-
centric and that the customers have benefited from the new
work culture. Most of the customers of BoB are middle-aged
business men or elderly pensioners. They expect branch
employees to talk to them and spend time with them. They
rarely use ATMs or net banking. Also, BoB’s image of
being India’s ‘International Bank’ has been a positive point
in boosting the Bank’s image. A respondent told us that
wherever Gujarati traders go, BoB goes with them. It was
mentioned that in the south of India, the customers were
traditionally Gujarati businessmen who settled there. Also,
the customer base was becoming more diverse now. Younger
customers frequently compared services offered by BoB

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with other private sector banks and claimed that ICICI bank
offered better client services and technology backed products
such as telebanking and net banking. The relationship
managers were young and enthusiastic. However, older
customers were happy with their BoB as it offered several
traditional facilities such as locker facilities for their valuables,
familiar bank routines as they were uncomfortable with net
banking and telebanking.
However, customers frequently complained of inade-
quate staff and system failures. Delays take place in transac-
tions due to system failures and as system repairs have to
be routed through the central office, customer demands,
particularly demands for cash withdrawals cannot be met.
Also, customers get angry as the branch staff is unable to
provide concrete answers to customer queries regarding how
long it will take for the system to become functional. BoB
has recently introduced a levy of additional cash handling
charges for cash deposited after 4 pm in accounts other than
savings accounts. This has led to a section of customers being
unhappy as they claim, “We did not ask the bank to extend
its working hours, and so what is the point of taxing the
customers?”

Is BoB Ready for Future Challenges in the Year 2009

Onwards?

Competition is going to be even tougher in the days to come.

Post-2009, competition from foreign banks will become even
more intense, with the liberalization of entry norms for
foreign banks in India. Mints (newspaper) article (March 27,
2007) on the Indian banking industry presented views of four
leading foreign banks in India:
“The CEOs of four leading foreign banks in India — Sanjay
Nayar of Citibank, Neeraj Swaroop of Standard Chartered,
Romesh Sobti of ABN AMRO and Vishwavir Ahuja of
Bank of America — were asked to give their views on six
contemporary issues — the Indian market, foreign banks’
edge over the competition, the profile of the competition,
capital infusion to support growth in India, innovations

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organizational changes in bank of baroda  15

and finally, on their plans in April 2009 when the Indian

banking regulator is set to revise the ownership norms, in
April 2009.”
A newspaper reported: “Given a choice, all four are
keen to grow in India through acquisitions. They admit that
competition is intensifying both from private banks as well as
their counterparts in the public sector, and the foreign banks
are no longer the sole innovators in the Indian financial space.
Yet, all four CEOs are bullish in the Indian market. They
are ready to commit any amount of capital, to seize growth
opportunities with both hands.”
In a nutshell, BoB’s competitors are moving beyond
ATMs. The banking industry is expanding and in the process
it is making the best use of technological advancements and
their human resources as well. Banks are finding innovative
ways to improve service quality and keep customers happy.
BoB still needs to work on sagging morale among the
workforce and increasing complaints from customers.
Dr. Khandelwal wondered, as his retirement drew
close, whatever changes that have been initiated in the bank
over the last 2–3 years were sufficient. What should be BoB’s
strategy now, in response to the challenges posed by the
employees?

Acknowledgments

The authors would like to thank anonymous reviewers on

earlier draft of this case study and the cooperation of BoB
personnel at the corporate, zonal, regional and branch levels.

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Journal of Bank Marketing, 22(6): 390–406.
Narasimha Committee Report 1997. www.indianembassy.org/enews/
apr98.pdf<http://www.indianembassy.org/enews/apr98.pdf>
Tiwari, R. and Buse, S. 2007. The Mobile Commerce Prospects: A
Strategic Analysis of Opportunities in the Banking Sector. Hamburg
University Press.

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 1st Reading

organizational changes in bank of baroda  17

Chart 1

Organizational Structure of Bank of Baroda

BOARD OF DIRECTORS

CHAIRPERSON AND MANAGING DIRECTOR

(Holding/Parent Company-Bank of Baroda)

EXECUTIVE DIRECTOR
(Holding/Parent Company-Bank of Baroda)

BARODA CORPORATE CENTRE, HEAD OFFICE,

MUMBAI BARODA

1. IT OPERATIONS AND
2. PLANNING
SERVICES
3. VIGILANCE: CENTRAL
INSPECTION DIVISION
4. HRM AND GENERAL
ADMINISTRATION
5. PROJECTS, RETAIL
BANKING AND MARKETING
6. TREASURY AND
CORPORATE ACCOUNTS
7. PRIORITY SECTOR, RRBs
AND OFFICIAL LANGUAGE
8. RECY., LEGAL AND RISK
MANAGEMENT
9. CREDIT AND CORPORATE
BANKING
10. CREDIT APPROVAL,
ASSO. BANKS,
SUBSIDIARIES

DOMESTIC OPERATIONS INTERNATIONAL OPERATIONS

DOMESTIC BRANCH INDIAN SUBSIDIARIES DOMESTIC FOREIGN OVERSEAS BRANCH OVERSEAS

BANKING AND ASSOCIATE BANKS BUSINESS BANKING SUBSIDIARIES

• BoB
• ZONES (13) CAPITAL 41 BRANCHES IN
INTEGRATED
• REGIONS MARKET THE 16 BRANCHES IN
TREASURY AND
(43) LTD. FOLLOWING 12 THE FOLLOWING
94 AUTHORISED TRRITORIES
• BRANCHES • BoB ASSET TRRITORIES
BRANCHES
(2705) MGMT. CO.
LTD. 1. UK
• BoB KENYA LTD.
• BoB 2. UAE & OMAN
3. USA • BoB UGANDA LTD.
HOUSING
4. MAURITIUS • BoB BoTSWANA
FIN. LTD.
5. SEYCHELLES LTD.
• BoB CARDS
LTD. 6. FIJI • BoB GUYANA LTD.
• NAINITAL 7. BELGIUM • BoB HONG KONG
BANK LTD. 8. BAHAMAS LTD.
(ASSO. 9. SOUTH AFRICA • INDOZAMBIA BANK
BANK) 10. CHINA LTD.
11. MALAYSIA
12. SINGAPORE

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18  ACRJ

Financial performance: For the current study the following financial parameters were taken
into consideration: Net Interest Margin, Interest spread, Return on Net worth, Return on Assets,
Dividend payout Ratio, Credit-Deposit ratio and Capital Adequacy Ratio (refer to the following
table).

Table 1.  Data for Financial Years (FY) March 2002 to FY 2007

Particulars (In Percentage) 31.03.2003 31.03.2004 31.03.2005 31.03.2006 31.03.2007

Net Interest Margin 2.94% 3.34% 3.40% 3.26% 3.23%

Interest Spread/AWF 2.74% 3.11% 3.18% 2.99% 3.04%

Return on Net Worth 18.73% 19.81% 12.55% 10.85% 12.17%

Return on Assets 1.01% 1.14% 0.71% 0.73% 0.72%

Dividend Payout Ratio

(Including Corporate 24.94% 22.24% 24.67% 25.11% 24.59%
Dividend Tax)

Credit — Deposit Ratio 55.56% 51.17% 55.82% 67.15% 74.35%

Capital Adequacy Ratio 12.65% 13.91% 12.61% 13.65% 11.80%

Tier — I 8.10% 8.47% 8.21% 10.98% 8.74%

Tier — II 455% 5.44% 4.40% 2.67% 3.06%

Source: BoB website.

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organizational changes in bank of baroda  19

Table 2.  Data on Total Income, Total Business and Net Profits for Financial Years (FY) March
2002 to FY 2007–2008 (up to Dec’ 07)

(Amounts in FY02–03 FY03–04 FY04–05 FY05–06 FY06–07 FY07–08 (9 Months

billion $) Period  up to Dec’07)

Total Business 1017.15 1085.68 1247.33 1535.74 2085.37 2324.18

(Deposits +
Advances)
Total Income 73.59 78.66 77.45 81.7732 103.86 99.79
Net Profit 7.73 9.67 6.77 8.2696 10.26 11.59
Equity Capital 2.94 2.95 2.95 3.66 3.66 3.66

CAR (%) 12.65 13.91 12.61 13.65 11.80 13.51

EPS ($) 26.11 32.97 23.08 27.1 28.18 31.82
Source: BoB website.
Total business as of March’ 2008 has reached $2.6 trillion.

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 Table 3.  Best Banks, 2007–08

RANKS       GROWTH
20  ACRJ

S0218927512001612.indd 20
2007 2006 BANKS   Growth Growth in Growth Growth in Changes Changes 3-year 3-year 3-year 3-year
in Total Loans & in Fee Operating in Market in Market CAGR CAGR of CAGR CAGR of
Deposits Advances Income Profit (%) Share of Share of of Total Loans & of Fee Operating
(%) (%) (%) Deposits CASA Deposits Advances Income Profit (%)
(basis (basis (%) (%) (%)
points) points)

1 1 HDFC   22 33.89 33.52 41.76 -0.0593 0.2869 30.96 38.31 63.31 40.66
Bank

      rank 20 15 11 6 26 3 5 7 3 3

2 5 HSBC   40 37.65 25.93 50.53 0.1323 -0.0727 28.87 33.95 40.29 35.53

      rank 5 10 16 5 7 26 6 9 11 4

3 7 Indian   36 35.4 31.76 15.84 0.2021 0.0118 18.34 32.36 21.78 5.59
Overseas
Bank

      rank 6 11 13 21 6 11 22 14 23 14

4 16 ABN   35 21.99 35.4 75.05 0.0422 -0.0047 39.79 40.03 47.55 41.67
AMRO

      rank 9 32 9 1 14 15 4 5 8 2

5 4 Axis Bank   47 65.26 60.75 37.11 0.3169 0.4551 41.04 57.92 62.38 25.69

      rank 3 1 1 11 4 2 3 2 4 6

6 3 Standard   20 25.03 52.22 35.7 -0.0548 -0.224 19.65 23.06 243.84 19.3
Chartered

      rank 25 29 3 14 24 33 17 32 1 8

7 7 State Bank   22 34.73 -6.03 36.15 -0.0415 -0.0805 19.6 33.5 19.83 -0.34
of
Hyderabad

      rank 22 12 34 13 22 27 19 12 29 25
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5/29/2012 4:21:34 PM
 Table 3.  (Continued)

RANKS       GROWTH

S0218927512001612.indd 21
2007 2006 BANKS   Growth Growth in Growth Growth in Changes Changes 3-year 3-year 3-year 3-year
in Total Loans & in Fee Operating in Market in Market CAGR CAGR of CAGR CAGR of
Deposits Advances Income Profit (%) Share of Share of of Total Loans & of Fee Operating
(%) (%) (%) Deposits CASA Deposits Advances Income Profit (%)
(basis (basis (%) (%) (%)
points) points)

8 18 Union 15 16.87 41.22 36.45 -0.2834 0.1058 18.99 28.47 50.98 10.5
Bank of
India

      rank 33 35 6 12 33 6 21 25 6 11

9 2 ICICI Bank   40 34 33.8 51.07 0.8805 0.5971 50.14 46.66 44.91 35.29

      rank 4 14 10 4 1 1 2 3 9 5

10 20 Indian   15 29.24 -61.67 52.03 -0.1494 -0.0121 15.65 27.18 -12.02 19.18
Bank

      rank 32 22 35 3 31 16 30 27 35 9

11 12 Federal   21 26.95 24.79 35.56 -0.0301 0.0161 17 24.61 29.24 11.96

Bank

      rank 24 26 18 15 19 9 26 31 13 10

12 6 Corporation   29 24.99 16.72 19.55 0.0436 0.1105 22.24 29.19 24.89 7.92
Bank

      rank 13 30 25 20 13 5 11 22 17 12

13 11 Oriental   27 31.45 44.78 8.78 0.0414 0.0014 21.51 30.9 51.47 -5.43
Bank of
Commerce

      rank 15 16 5 27 15 13 14 17 5 31

14 10 Citibank   36 34.37 0.75 38.26 0.1081 -0.1045 22.78 29.14 8.31 20.92
N.A.

      rank 8 13 31 9 8 29 10 23 33 7
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organizational changes in bank of baroda  21

5/29/2012 4:21:34 PM
 Table 3.  (Continued)

RANKS       GROWTH
22  ACRJ

S0218927512001612.indd 22
2007 2006 BANKS   Growth Growth in Growth Growth in Changes Changes 3-year 3-year 3-year 3-year
in Total Loans & in Fee Operating in Market in Market CAGR CAGR of CAGR CAGR of
Deposits Advances Income Profit (%) Share of Share of of Total Loans & of Fee Operating
(%) (%) (%) Deposits CASA Deposits Advances Income Profit (%)
(basis (basis (%) (%) (%)
points) points)

15 24 Bank of 28 30.32 24.26 40.78 0.0823 -0.0273 19.08 22.81 22.16 2.23
India

      rank 14 18 19 8 10 22 20 33 22 17

16 19 Andhra   22 26.19 22.11 32.54 -0.0386 -0.0253 21.8 29.35 21.08 0.04
Bank

      rank 21 27 20 16 21 21 13 21 26 22

17 21 Syndicate   47 41.69 12.2 37.16 0.4255 -0.0126 15.86 20.64 44.13 -2.31
Bank

      rank 2 4 27 10 2 18 29 35 10 27

18 22 Bank of   33 39.57 28.4 25.95 0.2818 -0.0575 19.63 32.93 22.72 -0.95
Baroda

      rank 11 7 15 18 5 25 18 13 21 26

19 31 State Bank of   31 29.13 36.18 41.2 0.0485 -0.0831 22.11 33.66 20.57 -0.11
Bikaner
& Jaipur

      rank 12 23 8 7 12 28 12 11 28 23

20 13 Punjab   17 29.44 24.84 10.75 -0.3736 -0.4849 16.74 26.94 23.66 1.16
National
Bank

      rank 30 20 17 25 34 35 27 28 19 19
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5/29/2012 4:21:34 PM
 RANKS       QUALITY OF ASSETS PRODUCTIVITY AND EFFICIENCY QUALITY OF EARNINGS

2007 2006 BANKS   Total NPA Net NPA/ Cost/ Cost/Avg. Operating Change Increase Return Fee ROCE Net

S0218927512001612.indd 23
NPA Coverage Net Income Asset Profit / in Return in on Income/ (%) Interest
Growth (%) Advances Ratio (%) Ratio Employee on Assets DPTI ** Assets Total Income/
Rate (%) (%) ($ billion) (basis (%) (%) Income AWF
(%) points) (%) (basis
points)

1 1 HDFC   1.9 69.15 0.43 46.32 2.94 0.0013 0.0007 -5.57 1.25 16.6 19.46 0.05
Bank

      rank 29 12 6 12 32 7 15 21 5 4 13 5

2 5 HSBC   2.2 75.04 0.43 45.18 3.43 0.0029 0.0016 -0.18 1.54 21.62 16.38 0.06

      rank 32 8 5 8 34 3 11 14 2 2 21 1

3 7 Indian   1.73 70.34 0.55 47.08 1.96 0.0007 -0.0013 -7.85 1.19 8.16 27.31 0.04
Overseas
Bank

      rank 26 11 11 14 16 17 29 25 7 25 1 6

4 16 ABN   1.33 78.91 0.12 48.78 3.49 0.0029 0.0017 14.99 1.2 19.18 21.63 0.05
AMRO

      rank 15 6 1 20 35 4 9 3 6 3 8 4

5 4 Axis Bank   0.57 36.39 0.72 47.13 1.98 0.0014 -0.0008 -10.94 0.9 14.85 21.04 0.03

      rank 2 32 14 15 17 6 24 29 18 6 10 30

6 3 Standard   1.61 29.97 1.43 37.46 2.67 0.0032 0.0035 3.58 2.32 26.26 26.33 0.05
Chartered

      rank 21 34 30 1 31 2 5 11 1 1 2 3

7 7 State Bank   0.85 81.63 0.22 44.61 1.8 0.0008 -0.0002 10.66 1.03 10.94 21.72 0.03
of
Hyderabad

      rank 5 4 3 7 12 13 20 5 12 14 7 16
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organizational changes in bank of baroda  23

5/29/2012 4:21:34 PM
 RANKS       QUALITY OF ASSETS PRODUCTIVITY AND EFFICIENCY QUALITY OF EARNINGS

2007 2006 BANKS   Total NPA Net NPA/ Cost/ Cost/Avg. Operating Change Increase Return Fee ROCE Net
24  ACRJ

S0218927512001612.indd 24
NPA Coverage Net Income Asset Profit / in Return in on Income/ (%) Interest
Growth (%) Advances Ratio (%) Ratio Employee on Assets DPTI ** Assets Total Income/
Rate (%) (%) ($ billion) (basis (%) (%) Income AWF
(%) points) (%) (basis
points)

8 18 Union   1.3 67.44 0.96 42.45 1.54 0.0007 0.0007 7.52 0.82 6.63 17.34 0.03
Bank of
India

      rank 13 13 20 5 5 14 16 9 22 30 17 19

9 2 ICICI Bank   1.26 50.5 1.02 53.25 2.24 0.0018 -0.0011 -3.44 0.9 16.04 13.17 0.02

      rank 12 23 21 30 27 5 28 18 17 5 30 34

10 20 Indian   0.67 50.47 0.35 47.85 2.4 0.0007 0.0029 15.97 1.35 2.95 24 0.04
Bank

      rank 3 24 4 17 28 18 6 2 4 35 4 9

11 12 Federal   1.37 83.74 0.44 39.85 1.78 0.0009 0.0008 6.53 1.17 10.39 21.27 0.03
Bank

      rank 17 3 7 2 11 10 14 10 8 18 9 15

12 6 Corporation   1 75.7 0.47 41.35 1.72 0.001 -0.0008 -7.26 1.02 11.35 15.02 0.03
Bank

      rank 8 7 9 4 8 9 26 23 13 13 26 18

13 11 Oriental   0.98 84.22 0.49 43.49 1.5 0.0009 -0.0024 -11.89 1.12 6.84 15.35 0.03
Bank of
Commerce

      rank 7 2 10 6 4 11 35 30 10 29 25 32

14 10 Citibank   0.73 36.58 1.02 45.94 3.31 0.0042 -0.002 -0.88 1.36 10.87 16.44 0.06
N.A.

      rank 4 31 22 10 33 1 34 16 3 15 19 2
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5/29/2012 4:21:34 PM
 RANKS       QUALITY OF ASSETS PRODUCTIVITY AND EFFICIENCY QUALITY OF EARNINGS

2007 2006 BANKS   Total NPA Net NPA/ Cost/ Cost/Avg. Operating Change Increase Return Fee ROCE Net

S0218927512001612.indd 25
NPA Coverage Net Income Asset Profit / in Return in on Income/ (%) Interest
Growth (%) Advances Ratio (%) Ratio Employee on Assets DPTI ** Assets Total Income/
Rate (%) (%) ($ billion) (basis (%) (%) Income AWF
(%) points) (%) (basis
points)

15 24 Bank of   1.26 64.48 0.74 52.13 2.05 0.0006 0.0017 7.62 0.79 10.25 20.65 0.03
India

      rank 11 16 15 28 20 25 10 8 25 19 11 26

16 19 Andhra   0.97 86.52 0.17 50.05 2.12 0.0007 -0.0006 8.04 1.13 11.38 17.78 0.03
Bank

      rank 6 1 2 22 23 16 23 7 9 12 16 11

17 21 Syndicate   1.68 72.81 0.76 50.06 1.84 0.0006 -0.0008 -4.99 0.8 6.99 22.18 0.03
Bank

      rank 25 10 17 23 14 26 25 20 23 28 6 24

18 22 Bank of   1.08 47.39 0.6 51.3 1.98 0.0006 -0.0001 -0.84 0.72 9.26 12.45 0.03
Baroda

      rank 9 28 13 25 18 19 19 15 28 21 32 20

19 31 State Bank of   1.34 51.68 1.09 52.57 2.43 0.0005 0.0036 9.01 0.89 14.61 19.99 0.04
Bikaner
& Jaipur

      rank 16 22 26 29 29 28 4 6 19 7 12 7

20 13 Punjab   2.41 67.25 0.75 50.73 2.16 0.0006 -0.0004 -4.41 0.95 9.19 15.55 0.04
National
Bank

      rank 34 14 16 24 25 27 22 19 15 23 23 8

Source: Best banks, 2007, Business Today, Feb. 2008 (http://specials.indiatoday.com/specials/businesstoday/pdf/tr_combine.pdf) NPA: Non-Performing
Assets CAGR: Compounded Annual Growth Rate Figures in bold in each cell are inter se ranks** OPTI: Operating Profit/Net Income AWF: Average Working
Fund ROCE: Return on Capital Employed CASA: Current Account Savings Account The 2006 rankings were published in the issue of Business Today dated
February 25, 2007. Note: Indian Bank — for ranking purposes, we have taken out the miscellaneous income figure of $5.47 billion from fee income but have
taken it as a part of operating profit.
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organizational changes in bank of baroda  25

5/29/2012 4:21:35 PM
 1st Reading

26  ACRJ

Table 4.  Customer Satisfaction Parameters

Mean Sign
Parameters
Then Now  
Politeness 2.98 3.80 *

Understanding behaviour 3.15 3.65 *

Personal attention 3.15 3.68 *

Keeping promise 3.03 3.45 *

*Significance at p < .05 (95% confidence interval).

Scale Details: 5 — Always, 4 — Often, 3 — Sometimes, 2 — Rarely, 1 — Never.

C o mp aris o n

3.8

3.6
Mean

3.4

3.2

3
Then Now
3.25244 3.61814

Figure 1.  Customer Satisfaction Comparison.

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organizational changes in bank of baroda  27

Table 5.  Employee Attrition Rate

01.01.2002 Total No. of Death VRS Resignation Retirement Termination

Employees

O 11319 11 13 23 108 6
C 19043 36 1 25 4 8
S 8564 42 2 2 1 8
TOTAL 38926 89 16 50 113 22
01.01.2003
O 11467 22 2 14 57 18
C 19512 31 1 15 79 8
S 8606 46 1 4 67 11
TOTAL 39916 99 4 33 203 37
01.01.2004
O 11988 30 20 25 56 29
C 18982 51 4 24 79 32
S 8498 68 1 7 75 31
TOTAL 39468 149 25 56 210 92
01.01.2005
O 11785 32 16 33 81 34
C 18835 52 10 24 70 36
S 8354 54 1 4 73 35
TOTAL 38974 138 27 61 224 105
01.01.2006
O 12349 21 27 56 100 30
C 17949 52 8 35 129 23
S 8188 61 3 4 73 22
TOTAL 38486 134 38 95 302 75
01.01.2007
O 13366 32 112 161 147 17
C 16529 64 46 49 159 32

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28  ACRJ

Table 5.  (Continued)

01.01.2002 Total No. of Death VRS Resignation Retirement Termination

Employees

S 7905 43 12 7 98 30
TOTAL 37800 139 170 217 404 79
30.09.2007
O 13687 21 163 141 160 15
C 15474 38 41 39 195 24
S 7690 44 7 6 112 35
TOTAL 36882 103 211 186 467 74
VRS = Voluntary Retirement Scheme, O = Officer, C = Clerks, S = Support staff in employee table.

Employee Attrition Rate

2.5
% Attrition Rate

1.5 Series1

0.5

0
2002 2003 2004 2005 2006 1.1.07 30.9.07
Year

Figure 2.  BoB Employee Attrition Rate.

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