Bank of baroda

If we are not able to reduce the level of non-performing assets, our business and financial condition may be
adversely affected.
Our gross non-performing assets were Rs. 33,218.10 million as of March 31, 2005, representing 7.30% of our gross
advances, and Rs. 32,349.60 million as of September 30, 2005, representing 6.34% of our gross advances. Our net
non-performing assets were Rs. 6,196.40 million as of March 31, 2005, representing 1.45 % of our net advances, and
Rs. 5,472.50 million as of September 30, 2005, representing 1.13% of our net advances.
We have been able to reduce our net non-performing assets through recoveries, upgradation of non-performing assets
to “performing” categories and additional provisioning. However, our ability to continue to reduce or contain the level of
our gross and net non-performing assets may be affected by number of factors that are beyond our control, e.g.,
increased competition, a recession in the Indian economy including specific industries to which we are exposed,
decreases in agricultural production, declines in commodity and food grain prices, adverse fluctuations in interest and
exchange rates or adverse changes in Government policies, laws or regulations. In addition, the expansion of our
business may also cause the level of our non-performing assets to increase. As of September 30, 2005, approximately

---

xvi
BANK OF BARODA
60.72% of our gross industrial sector non-performing asset portfolio was concentrated in the following industries:
textiles - 24.62%; chemical and dyes - 19.25%; engineering - 10.45%; and metals - 6.40%. These industries together
constituted 24.53% of our total funded credit exposure to accounts larger than Rs. 10 million as of September 30, 2005.
Although our loan portfolio contains loans to a wide variety of businesses, financial difficulties in these industries could
increase our level of non-performing assets and adversely affect our business and financial condition.