d) Disclosures on risk exposure in derivatives (i) Qualitative Disclosure
Policy on Integrated Treasury Operations ( Domestic) of the bank lays down the types of financial derivative instruments, scope of usages, approval procedures and the limits like open position limits, stop loss limits and counter party exposure limits for undertaking derivative transaction. The bank uses financial derivative transactions for hedging, it's on or off balance sheet exposure as well as for market making .Basically, these products are used for hedging risk, reducing cost and increasing the yield in such transactions and for proprietary trading.
The types of risk to which the bank is exposed to are credit risk, market risk, country risk and operational risk, the Bank has risk management policies (approved by the Board), which is designed to measure the financial risks for transactions in the trading book on a regular basis, by way of MTM, Value at Risk (VaR) and PV01, and to set appropriate risk limits. These are monitored by means of reliable and up to date Management Information Systems by the Risk Management Department of the Bank from time to time who, in turn, appraises the risk profile to the Risk management Committee of the Board, which is presided over by the Bank's Managing Director and CEO.
The counter parties to the transactions are banks and corporate entities. The deals are done under approved exposure limits. The bank has adopted the current exposure method prescribed by Reserve Bank of India for measuring Credit Exposure on Derivative products as per which the bank sums the total replacement cost (obtained by mark to market of all its contracts
with positive value i.e. when the bank has to receive money from the counter party) and an amount for potential future changes in credit exposure calculated on the basis of the total notional principal amount of the contract multiplied by the relevant credit conversion factors according to the residual maturity as detailed herein under:-
Conversion factor to be applied on notional principal amount:
The following sections outline the nature and terms of the derivative transactions generally undertaken by the Bank.
Interest rate contracts
Forward rate agreements give the buyer the ability to determine the underlying rate of interest for a specified period commencing on a specified future date (the settlement date). The underlying rate of interest could be an interest rate curve, interest rate index or bond yield. There is no exchange of principal and settlement is effected on the settlement date. The settlement amount is the difference between the contracted rate and the market rate prevailing on the settlement date.
Interest rate swaps involve the exchange of interest obligations with the counterparty for a specified period without exchanging the underlying (or notional) principal.
Interest rate caps and floors give the buyer the ability to fix the maximum or minimum rate of interest. The writer of the contract pays the amount by which the market rate exceeds or is less than the cap rate or the floor rate respectively. A combination of interest rate caps and floors can create structures such as interest rate collar, cap spreads and floor spreads.
Interest rate futures are standardized interest rate derivative contracts traded on a recognized stock exchange to buy or sell a notional security or any other interest bearing instrument or an index of such instruments or interest rates at a specified future date, at a price determined at the time of the contract.
Exchange rate contracts
Forward foreign exchange contracts are agreements to buy or sell fixed amounts of currency at agreed rates of exchange on future date. These instruments are carried at fair value, determined based on either FEDAI rates or market quotations.
Cross currency swaps are agreements to exchange principal amounts denominated in different currencies. Cross currency swaps may also involve the exchange of interest payments on one specified currency for interest payments in another specified currency for a specified period.
Currency options (including Exchange Traded Currency Option) give the buyer, on payment of a premium, the right but not an obligation, to buy or sell specified amounts of currency at agreed rates of exchange on or before a specified future date.
Currency futures contract is a standardized contract traded on an exchange, to buy or sell a certain underlying currency at a certain date in the future, at a specified price. The underlying instrument of a currency future contract is the rate of exchange between one unit of foreign currency and the INR.
The Bank's derivative transactions relate to sales and trading activities. Sale activities include the structuring and marketing of derivatives to customers to enable them to hedge their market risks (both interest rate and exchange risks), within the framework of regulations as applicable from time to time. The Bank deals in derivatives on its own account (trading activity) principally for the purpose of generating a profit from short term fluctuations in price yields or implied volatility. The Bank also deals in derivatives to hedge the risk embedded in some of its Balance Sheet assets or liabilities.
Constituents involved in derivative business
The Treasury front-office enters into derivative transactions with customers and inter-bank counterparties. The Bank has an independent backoffice and mid-office as per regulatory guidelines.
Derivative policy
The Bank has in place a Policy on Integrated Treasury Operations (Domestic) which covers various aspects that apply to the functioning of the derivative business. The derivative business is administered through various limits such as position limits, tenor limits, sensitivity limits, scenario-based profit and loss limits, stop loss limits that are approved by the Board of Directors. Limits are monitored on a daily basis by the mid-office.
Policy on Integrated Treasury Operations (Domestic) also covers Customer Suitability & Appropriateness, to ensure that derivative transactions entered into are appropriate and suitable to the customer's nature of business / operations. Before entering into a derivative
deal with a customer, the Bank scores the customer on various risk parameters and based on the overall score level it determines the kind of product that best suits its risk appetite and the customer's requirements.
Classification of Derivatives Book
The derivative book is classified into trading and hedging book. Classification of the derivative book is made on the basis of the definitions of the trading and hedging specified in the RBI guidelines. The trading book is managed within the trading limits provided in Policy on Integrated Treasury Operations (Domestic) which was approved by the Board of Directors.
Hedging Policy
For derivative contracts designated as hedging instruments, the Bank documents, at inception of the hedge, the relationship between the hedging instrument and the hedged item, the risk management objective for undertaking the hedge and the methods used to assess the hedge effectiveness. Hedge effectiveness is ascertained at the time of inception of the hedge and periodically thereafter. Hedge effectiveness is measured by the degree to which changes in the fair value or cash flows of the hedged item that are attributable to a hedged risk are offset by changes in the fair value or cash flows of the hedging instrument using various qualitative and quantitative methods.
The hedging book consists of transactions to hedge Balance Sheet assets or liabilities. The tenor of hedging instrument may be less than or equal to the tenor of underlying hedged asset or liability. The Bank, as part of its risk management strategy, makes use of derivative instruments for hedging the risk embedded in some of its financial assets or liabilities recognized on the Balance Sheet. In case of a fair value hedge, the changes in the fair value of the hedging instruments and hedged items are recognized in the Profit and Loss Account and in case of cash flow hedges, the changes in fair value of effective portion are recognized in Reserves and Surplus under ‘Cash Flow Hedge Reserve' and ineffective portion of an effective hedging relationship, if any, is recognized in the Profit and Loss Account.
Provisioning, collateral and credit risk mitigation
The Bank enters into derivative transactions with counterparties based on their business ranking and financial position. Appropriate credit covenants are stipulated where it is required, as trigger events to call for collaterals or terminate a transaction and minimize the risk. Further, to mitigate the current exposure in non-centrally cleared forex and derivative transactions, Bank has entered into Credit Support Annex (‘CSA') agreements with major international counterparty banks and few Indian financial institutions.
The hedge/non-hedge (market making) transactions are recorded separately. Derivative positions, unless designated as hedges, are marked-to-market (MTM)
and the resulting losses, if any, are recognized in the Profit and Loss Account. Profit, if any is not recognized. Income and Expenditure relating to interest rate swaps are recognized on accrual basis. Gains/losses on termination of the trading swaps are recorded on the termination date as income/expenditure.
The Bank, at the minimum, confirms to the RBI guidelines with regard to provisioning requirements. Overdue receivables representing crystallized positive mark to market value of a derivative contract are transferred to the account of the borrower and treated as non-performing assets, if these remains unpaid for 90 days or more.
The notional principal amounts of derivatives reflect the volume of transactions outstanding as at the Balance Sheet date and do not represent the amounts at risk.
For the purpose of this disclosure, currency derivatives include currency options purchased and sold and cross currency interest rate swaps, Currency Futures, Fx-Swaps (Currency Swaps), Fx Spot and Forward Contracts.
For the purpose of this disclosure, interest rate derivatives include interest rate swaps, forward rate agreements and interest rate caps and floors.
Credit Default Swaps (CDS)
Valuation Methodology- As per RBI guidelines on CDS dated February 10, 2022 the banks are required to value their CDS contracts by using daily CDS curve published by FIMMDA Or any other proprietary model if it results in a more conservative valuation. The Bank uses the FIMMDA curve for valuing CDS positions; the Bank does not use any internal proprietary model for CDS valuation.
However, the Bank does not have any CDS deal outstanding as on 31st March 2026. (Previous Year-NIL)
e) Implementation of IFRS Converged Indian Accounting Standards (Ind AS)
RBI vide Circular DBR.BRBC.No.29/21.07.001/2018-19 dated March 22, 2019 deferred implementation of Ind AS till further notice. However, RBI requires all banks to submit Proforma Ind AS financial statements every half year. Accordingly, the Bank is preparing and submitting to RBI Proforma Ind AS financial statements every half year after approval of Steering Committee, headed by the Executive Director, formed for monitoring the implementation of Ind AS in the Bank.
g) Disclosure on amortization of expenditure on account of enhancement in family pension of employees of Banks
The Bank has estimated an additional liability on account of revision in family pension for employees as per IBA Joint Note dated November 11, 2020, amounting to ' 1454.41 Crore. RBI vide their Circular no. RBI/2021 -22/105 DOR. ACC. REC.57/21.04.018/2021 -
22 dated October 04, 2021 has permitted Banks to amortize the said additional liability over a period of not exceeding 5 (five) years, beginning with financial year 2021-22, subject to a minimum of 1/5th of the total amount being expensed every year. Bank has opted for the said provision of RBI and accordingly had charged the remaining liability during year ended March 31, 2026. This liability is fully amortised and there is no unamortised balance as on March 31,2026.
h) Reserves and Surplus Statutory Reserve
The Bank has made an appropriation of ' 5,005.27 Crores (Previous Year: ' 4,895.29 Crores) out of profits for the year ended March 31, 2026 to the Statutory Reserve pursuant to the requirements of Section 17 of the Banking Regulation Act, 1949 and RBI guidelines dated September 23, 2000.
Capital Reserve
Capital Reserve includes appreciation arising on revaluation of immovable properties, amount subscribed by Government of India under the World Bank's Scheme for Export Development Projects for small / medium scale industries and others.
During the year ended March 31, 2026, the Bank appropriated ' 1,122.55 Crores (Previous Year: '451.49 Crore), being the profit from sale of investments under HTM category and profit on sale of immovable properties, net of taxes and transfer to statutory reserve, from the Profit and Loss Account to the Capital Reserve.
Investment Fluctuation Reserve
In accordance with RBI guidelines, banks are required to create an Investment Fluctuation Reserve (IFR) equivalent to 2% of their HFT and AFS investment portfolios, within a period of three years starting fiscal 2019, subject to profit availability after statutory appropriation. During the year ended March 31, 2026, the Bank has made ' 920 Crores appropriation to the Investment Fluctuation Reserve from the Profit and Loss Account. (Previous Year: ' NIL)
Share Premium
The Bank has set off accumulated losses amounting to ' Nil Crores by utilizing an equivalent amount standing to the credit of share premium account of Bank as on the date of set off during the year ended 31.03.2026 after obtaining approval from shareholders as well as Reserve Bank of India.
Special Reserve
During the year ended March 31,2026, the Bank appropriated ' 1,826.40 Crore (Previous Year '1,446.53 crore) in Special Reserve created u/s 36 (1) (viii) of the Income Tax Act, 1961, Out of which ' 326.40 crores pertains to the FY 2024-25.
AFS Reserve
In accordance with RBI Master Direction on Classification, Valuation and Operation of Investment Portfolio of Commercial Banks, bank has AFS reserve of ' 439.60 crore (net of Deferred Tax) as on March 31, 2026 (net of Deferred Tax) (Previous Year: ' 1,618.35 crore)
B. Disclosure in terms of Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI).
B-1 Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies (Accounting Standard -5)
(i) Prior Period Items:
During the year, there were no material prior period income / expenditure items.
(ii) Accounting policy:
The Bank has continued to follow the same accounting policies and practices in preparation of Audited financial statements for the year ended March 31,2026 as followed in the previous financial year ended March 31,2025.
B-2 - AS 11- Changes in foreign exchange rates:
Movement of foreign currency translation reserve
B-3 Employee Benefits (Accounting Standard -15)
The Bank has adopted the Accounting Standard (AS-15) issued by ICAI.
B-3.1 Gratuity
The Bank pays gratuity to employees who Exit from Bank's service, after initial service period of five years. Accordingly, the Bank makes contributions to an inhouse trust, towards funding this gratuity, payable every year. In accordance with the rule of Gratuity Fund, actuarial valuation of gratuity liability is calculated based on certain assumptions regarding rate of interest, salary growth, mortality and staff attrition as per the Projected Unit credit actuarial method. The investment of the funds is made according to investment pattern prescribed by the Government of India.
The gratuity payable is worked out by way of three different schemes (BOBOSR,1979 /BPS, Gratuity Act,1972 and Bank of Baroda Gratuity Fund Rules) and the entitlement is based on what is most beneficial to employees.
B-3.2.1 Bank pays pension, a defined benefit plan covering the employees who have opted for pension and also to the employees joining the bank's service on or after 29.9.1995 but before 01.04.2010. The plan provides for a pension on a monthly basis to these employees on their cessation from service of the Bank in terms of Bank of Baroda (Employees') Pension Regulations, 1995. Employees covered under Bank of Baroda (Employees') Pension Regulations, 1995 are not eligible for Bank's contribution to Provident fund. At the time of cessation, those eligible for pension are paid commutation of Pension as provided by the said Regulations. While the Bank contributes its contribution at 10% of eligible employees' Basic and certain allowances, additional contribution is also made based on the Actuarial calculations.
B-3.2.2 New Pension Scheme In terms of Bipartite Settlement and Joint Note dated 27.04.2010 between IBA and Employees Organizations' on extending another option for pension, employees joining the services of the Bank on or after 01.04.2010 are eligible for the Defined Contributory Pension Scheme, which was introduced by the Bank in terms of the Joint Note / Settlement dated 27.04.2010 similar to the one governed by the provisions of New Pension Scheme i.e. National Pension System (NPS) introduced for the employees of Central Government w.e.f 01.01.2004 and as modified from time to time. Hence, they are not eligible for becoming members of Bank's Provident Fund Scheme and Pension Scheme. The Defined Contributory Pension Scheme National Pension System (NPS) is regulated by PFRDA (Pension Fund Regulatory and Development Authority).
In respect of the employees of the Bank, who have joined the services of the Bank on or after 01.04.2010, deduction towards New Pension Scheme i.e. National Pension System (NPS) at the rate of 10% of the basic pay and dearness allowance from the salary with a matching contribution is made by the Bank and remitted to the NSDL which maintains the accounts. Funds are managed by the Pension Fund Manager. However, in terms of 11th BPS / 8th Joint Note dated 11.11.2020, Bank's contribution has been enhanced from 10 % to 14 % of pay plus dearness allowance w.e.f. 11th November, 2020.
B-3.3 Provident Fund
The Bank is statutorily required to maintain a provident fund as a part of its retirement benefits to its employees who joined Bank's service on or before 31.03.2010. This fund is administered by a trust managed by the Bank. Each employee who is member of PF contributes 10% of their basic salary and eligible allowances and the Bank contributes an equal amount to the PF in case of PF optee. The investment of the fund is made according to investment pattern prescribed by the Government of India.
An employee is entitled to encash privilege leave standing to his/her credit subject to a maximum of 255 days (reference 12th BPS / 9th Joint Note dated 08.03.2024) on the date of superannuation/Voluntary Retirement/death.
However, on resignation, an employee is entitled to get encashment to the tune of 50% of the privilege leave standing to the credit subject to a maximum of 120 days. B-3.5 Additional Retirement Benefit (ARB)
The scheme for additional retirement benefit provides that an officer who had joined the Bank prior to 01.07.1979 on his Retirement/ Voluntary retirement/ Death shall be eligible for payment of 6 months emoluments as additional retirement benefit, provided he/ she had completed twenty-five years of service exclusively in Bank of Baroda (excluding eVB/eDB and any other amalgamated Banks) and satisfy the conditions mentioned in BOB officer's service regulations.
In the same manner, award staff member who had joined the Bank prior to 01.04.2019 on Retirement/ Voluntary Retirement/ Death shall be eligible for additional retirement benefit, provided he/ she had completed thirty-years of service exclusively in Bank of Baroda (excluding eVB/eDB and any other amalgamated Banks) and satisfy the conditions mentioned in BOB officer's service regulations.
However, in case of dismissal, discharge, termination, compulsory retirement and resignation, additional retirement benefit shall not be payable irrespective of any number of years of service.
B-3.6 Disclosures
I. Defined Benefit Plans (Gratuity and Pension)
a) Change in present value of Defined Benefit Obligation
The estimates of future salary growth, factored in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market. Such estimates are very long term and are not based on limited past experience / immediate future. Empirical evidence also suggests that in very long term, consistent high salary growth rates are not possible. The said estimates and assumptions have been relied upon by the auditors.
B-4. Segment Reporting (Accounting Standard -17)
B-4.1 Segment Identification
I. Primary (Business Segment): The following are the primary segments of the Bank:-
i. Treasury
The Treasury Segment includes the entire investment portfolio and trading in foreign exchange contracts and derivative contracts. The revenue of the treasury segment primarily consists of fees and gains or losses from trading operations and interest income on the investment portfolio.
ii. Corporate / Wholesale Banking
The Corporate / Wholesale Banking segment comprises all the lending activities which are not included under Retail Banking.
iii. Retail Banking
The Retail Banking Segment comprises of borrower accounts having exposure of upto ' 7.5 Crores. Digital Banking sub segment under retail segment represents balances of Digital Banking Units functioning in the bank as per RBI directive.
iv. Other Banking Operations
Segments not classified under (i) to (iii) above are classified under this primary segment.
II) Secondary (Geographical Segment)
i) Domestic Operations - Branches/Offices having operations in India
ii) Foreign Operations - Branches/Offices having operations outside India and offshore banking units having operations in India
III. Segment revenue represents revenue from external customers.
IV. Allocation of Income, Expenses, Assets and Liabilities
Treasury banking operation is separate unit. The income and expenses of treasury operations are directly attributable to treasury segment.
The income and expense of other segments are recognized as under:
a) The interest income and interest expense are allocated on the basis of actual interest received for wholesale banking operations and on the basis of advances of wholesale banking operations respectively.
b) After allocation of above interest income and expense, the residual interest received/ paid is attribute to retail banking operations.
c) Other income/ other expenses are allocated in the proportion of Interest income earned by the wholesale banking / retail banking segment. Capital employed for each segment has been allocated proportionately to the assets of the respective segment.
The Bank has certain common assets and liabilities, which cannot be attributed to any segment, and the same are treated as unallocated.
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