Bank of baroda

External Risk Factors
The Indian and global banking industry is very competitive and the ability of banks to grow depends on their
ability to compete effectively.
In India, we compete with public and private sector Indian commercial banks as well as foreign commercial banks.
Outside of India we compete with local and foreign banks and financial institutions, both public and private sector.
Many of our competitors in India and internationally are large institutions, which may have much larger customer and
deposit bases, larger branch networks and more capital than we do. Some of the banks with which we compete may be
more flexible and better positioned to take advantage of market opportunities than us. In particular, private banks in
India and many of our competitors outside of India may have operational advantages in implementing new technologies,
rationalizing branches and recruiting employees through incentive-based compensation.
Both the Indian and global financial sectors may experience further consolidation, resulting in fewer banks and financial
institutions. The Government has also recently announced measures that would permit foreign banks to establish
wholly-owned subsidiaries in India and invest up to 74% in Indian private sector banks, which is likely to further

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increase competition in the Indian banking industry. RBI has introduced a two-phase road map for allowing ownership
of private banks in India by foreign banks. In the first phase up to March 2009, foreign banks are permitted to convert
existing branches into wholly owned subsidiaries or acquire shares in select Indian private sector banks that are
identified by RBI for restructuring up to the limit of 74%. In the second phase from April 2009, subject to guidelines that
will be issued by RBI, foreign banks will be permitted to undertake merger and acquisition transactions with private
sector banks within an overall investment limit of 74%, thus enabling consolidations between foreign banks and private
sector banks. Therefore, we may face more competition from larger banks as a result of any such consolidation.
The Government is also actively encouraging banks and other financial institutions to significantly increase their
lending to the agriculture sector, which will make this segment more competitive.
These competitive pressures affect the Indian and international banking industry as a whole, including our Bank, and
our future success will depend in large part on our ability to respond in an effective and timely manner to these
competitive pressures.