Bank of baroda

Regulations on Asset Liability Management
At present, the RBI’s regulations for asset liability management require banks to draw up asset-liability gap statements
separately for rupee and for four major foreign currencies. These gap statements are prepared by scheduling all assets
and liabilities according to the stated and anticipated re-pricing date, or maturity date and behaviour studies that may be
conducted by banks. These statements have to be submitted to the RBI on a quarterly basis. The RBI has advised banks
to actively monitor the difference in the amount of assets and liabilities maturing or being re-priced in a particular period
and place internal prudential limits on the gaps in each time period, as a risk control mechanism. Additionally, the RBI
has asked banks to manage their asset-liability structure such that the negative liquidity gap in the 1-14 day and 15–28
day time periods does not exceed 20.0% of cash outflows in these time periods. This 20.0% limit on negative gaps was

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made mandatory with effect from April 1, 2000. The Board of Directors has approved of these limits. In respect of other
time periods, up to one year, our Bank, on the basis of the RBI’s direction has laid down internal norms in respect of
cumulative negative liquidity gaps. It is not mandatory for banks to lay down internal norms in respect of negative liquidity
gaps for time periods greater than one year. In case of interest rate sensitivity, our Bank has set limits on the maximum
permissible impact on the net interest income during the one year period, due to a general change in the interest rates.
Foreign Currency Dealership
RBI has granted us a full-fledged authorised dealers’ licence to deal in foreign exchange through our designated
branches. Under this licence, we have been granted permission to:
engage in foreign exchange transactions in all currencies;
open and maintain foreign currency accounts abroad;
raise foreign currency and rupee denominated deposits from NRIs;
grant foreign currency loans to on-shore and off-shore corporations;
open documentary credits;
grant import and export loans;
handle collection of bills, funds transfer services;
issue guarantees; and
enter into derivative transactions and risk management activities that are incidental to our normal functions authorised
under our organizational documents.
Our foreign exchange operations are subject to the guidelines specified by RBI under the Foreign Exchange Management
Act, 1999. As an authorised dealer, we are required to enrol as a member of the Foreign Exchange Dealers Association
of India, which prescribes the rules relating to foreign exchange business in India.
Authorised dealers, like us, are required to determine their limits on open positions and maturity gaps in accordance with
the RBI’s guidelines and these limits are approved by RBI. Further, we are permitted to hedge foreign currency loan
exposures of Indian corporations in the form of interest rate swaps, options, currency swaps and forward rate agreements,
subject to certain conditions.