Bank of baroda

In order to sustain our growth, we will need to maintain a minimum capital adequacy ratio. There is no
assurance that we will be able to access the capital markets when necessary to do so.
RBI requires a minimum capital adequacy ratio of 9.0% in relation to our total risk-weighted assets. We must maintain
this minimum capital adequacy level to support our continuous growth. Our capital adequacy ratio was 12.79 % on
September 30, 2005. The implementation of the Basel II capital adequacy standards could result in a decline in our
capital adequacy ratio. Our ability to support and grow our business could be limited by a declining capital adequacy
ratio if we are unable to or have difficulty accessing the capital markets.

---

xviii
BANK OF BARODA
We are required to maintain cash reserve and statutory liquidity ratios and increases in these requirements
could adversely affect our business.
As a result of the statutory reserve requirements imposed by RBI, we may be more exposed structurally to interest rate
risk than banks in many other countries. Under RBI regulations, we are subject to a cash reserve ratio requirement
under which we are currently required to keep 5.00% of our net demand and time liabilities in a current account with
RBI. RBI may increase the cash reserve ratio requirement as a monetary policy measure. We do not earn interest on
3.00% of the 5.00% cash reserves maintained with RBI. On the remaining cash reserves held with RBI, we earn
interest at rates (currently at 3.5% per annum) that are less than those for our retail and corporate loan portfolio. In
addition, under RBI regulations, our liabilities are subject to a statutory liquidity ratio requirement, according to which
25.00% of our net demand and time liabilities need to be invested in GoI securities and other approved securities.
Increases in cash reserve ratio and statutory liquidity ratio requirements could adversely affect our business and
financial performance.