Steady Player

Bank of Baroda (BOB) offers banking services and products to large industries, small and medium enterprises, and to retail and agricultural customers. The bank has a strong presence in states like Gujarat and Maharashtra. At the end of Q1FY12, its network of branches stood at 3,409, and the number of automated teller machines (ATMs) at 1,657. Around 34.4 per cent of its branches are situated in rural areas. Sectoral outlook Banks, the dominant financial intermediaries in India, have made good progress over the last five years, as is evident from several parameters such as annual credit growth, profitability, and gross non-performing assets (NPAs). While the annual rate of credit growth clocked over the past five years stands at 23 per cent, the average return on net worth over this period is a respectable 15 per cent. However, the prospects of the banking sector have become clouded owing to the steep hike in interest rates by the central bank. This is one rate-sensitive sector that tends to underperform when interest rates are on their way up. Positives Improvement in tier I capital. During 2010-11, the government of India infused Rs 165 billion in public sector banks (PSBs) to raise their tier I capital to 8 per cent and to augment its stake in PSBs to at least 58 per cent. After this move, the tier I capital of PSBs has improved. Apart from State Bank of India, these banks may not require significant capital infusion in the short-term. Hence, the government of India has budgeted for a relatively lower capital infusion of only Rs 60 billion for PSBs in 2011-12. Less capital for credit provisioning. Despite fresh slippages, credit provisioning for 2011-12 may be lower, thanks to change of norms by the Reserve Bank of India (RBI). According to a rece