Bank of baroda

As of
Bank rate
Reverse
Deposit rate for
Prime lending
Repo rate
1-3 year term
rate for 5 major
for 5 major
Scheduled
Scheduled
Commercial Banks
Commercial
Banks
(as percentages)
March 31, 2003
6.25
5.00
4.25-6.00
10.75-11.50
March 31, 2004
6.00
4.50
4.00-5.25
10.25-11.00
March 31, 2005
6.00
4.75
5.25-6.25
(1)
10.25-10.75
September 30, 2004
6.00
4.50
5.00-5.50
(1)
10.25-11.00
September 30, 2005
6.00
5.00
(2)
5.25-6.25
(1)
10.25-10.75
Source: Reserve Bank of India statistical data.
(1)
Relates to rates for major banks for term deposits of more than one year maturity.
(2)
With effect from October 25, 2005, the reverse repo rate stands at 5.25%.
Seasonal trends in the Indian economy affect the banking industry and therefore our business. The period from October
to March is the busy period in India for economic activity and accordingly we generally experience high volumes of
business during this period. Economic activity in the period from April to September is lower than in the busy period;
accordingly, our business volumes are generally lower during this period.
Critical Accounting Policies
Interest on advances is recognised on an accrual basis except in respect of advances classified as non-performing,
where interest income is recognised upon realisation. Prior to March 31, 2004, advances were classified as non-performing
if any amount of interest or principal remained overdue for more than 180 days. From March 31, 2004, this period was
shortened to 90 days. See also the discussion under the section titled “Selected Statistical Information” on page 238 of
this Red Herring Prospectus.
Income from fees, commissions other than on Government business, exchange, brokerage, discount on foreign bills
purchased and interest on overdue bills/advance bills are recognised upon realisation.
In accordance with the RBI guidelines, we classify our investments into three categories. Securities that we intend to hold
until maturity are classified as Held to Maturity securities. These securities are recorded on our balance sheet at their
acquisition cost and any premium paid to acquire these securities is amortised in our statement of profit and loss over the
remaining years to maturity of the securities. For fiscal 2003, fiscal 2004 and part of fiscal 2005, these investments were
not allowed to exceed 25% of our total investments. Following a change in the RBI guidelines in September 2004, these
investments are not allowed to exceed 25% of our net demand and time liabilities. Securities that are held with the
intention to trade by taking advantage of short-term price or interest rate movements are classified as Held for Trading,
and securities not falling into either of the first two categories are classified as Available for Sale. Our investments are
accounted for under various sub-categories, including government securities, equity shares, preference shares, debentures
and bonds, mutual funds and commercial paper. For Held for Trading and Available for Sale securities, any appreciation
or depreciation in value is aggregated within each sub-category. We provide for any net depreciation in value and ignore
any net appreciation in value.
Gains or losses on the sale of investments are recognised in our profit and loss account. In addition, the amount of gain
on the sale of Held to Maturity investments is appropriated to our capital reserve account.
Over the period starting from fiscal 2002, our policy has been to build up our investment fluctuation reserve to reach a
level of 5.0% of our investment portfolio in Available for Sale and Held for Trading categories by the end of fiscal 2006.
We have already reached the level of 5.0% as on June 30, 2005.
Hedge and non-hedge (market making) transactions are recorded separately. Hedging derivatives are accounted for on
an accrual basis. Trading derivative positions are marked-to-market and the resulting losses, if any, are recognized in our
profit and loss account. Profit, if any, is not recognized. Income and expenditure relating to interest rate swaps are

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