PROFILE OF HDFC BANK

The Housing Development Finance Corporation Limited (HDFC Ltd) was amongst the first to set up a bank in the private sector. The bank was incorporated on 30th August 1994 in the name of HDFC Bank Limited, with its registered office in Mumbai. It commenced its operations as a Scheduled Commercial Bank on 16th January 1995. The bank has grown consistently and is now amongst the leading players in the industry. In a milestone transaction in the Indian banking industry, Times Bank was merged with HDFC Bank Ltd., effective February 26, 2000. The amalgamation added significant value to HDFC Bank in terms of increased branch network, expanded geographic reach, enhanced customer base and skilled manpower. As of 1st April 2005, the Bank has an enviable network of 495 branches spread over 217 cities across the country. All branches are linked on an online real-time basis. It also has a network of over 900-networked ATMs across these cities. Moreover, all domestic and international Visa/Master Card, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders can access its ATM network.

Promoted in 1995 by Housing Development Finance Corporation (HDFC), India's leading housing finance company, HDFC Bank is one of India's premier banks providing a wide range of financial products and services to its over 11 million customers across over three hundred cities using multiple distribution channels including a pan-India network of branches, ATMs, phone banking, net banking and mobile banking. Within a relatively short span of time, the bank has emerged as a leading player in retail banking, wholesale banking, and treasury operations, its three principal business segments. The bank's competitive strength clearly lies in the use of technology and the ability to deliver world-class service with rapid response time. Over the last 13 years, the bank has successfully gained market share in its target customer franchises while maintaining healthy profitability and asset quality. As on December 31, 2007, the Bank had a network of 754 branches and 1,906 ATMs in 327 cities. For the quarter ended December 31, 2007, the bank reported a net profit of Rs. 4.3 billion, up 45.2%, over the corresponding quarter of previous year. Total deposits were Rs. 993.9 billion,

up 48.9% over the corresponding quarter of previous year. Total balance sheet size too grew by 46.7% to Rs.1,314.4 billion.

Vision & Mission:

HDFC Banks mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the banks risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Banks business philosophy is based on four core values - Operational Excellence, Customer Focus, Product Leadership and People.

Business Areas:
The bank has three key business areas: 1. Wholesale Banking Services: In this field target market is primarily large, blue-chip companies and to a lesser extent, emerging mid-sized corporates. For these corporates, bank provide a wide range of services, including working capital finance, trade services, transactional services, cash management, etc.. 2. Retail Banking Services: The objective of the Retail Bank is to provide target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed by world-class service and delivered to the customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile Banking.

3. Treasury Operations: Within this business, the bank has three main product areas a) Foreign Exchange and Derivatives, b) Local Currency Money Market & c) Debt Securities and Equities. With the liberalization of the financial markets in India, corporate need more sophisticated risk management information, advice and product structures. These are provided through the bank's Treasury team. The Treasury business is responsible for managing the returns and market risk on the bank's investment portfolio.

HDFC BANK TOP MANAGEMENT

Jagdish Capoor Aditya Puri Group heads A Rajan Abhay Aima Ashish Parthasarthy Bharat Shah CN Ram G Subramaniam Harish Engineer Kaizad Barucha Mandeep Maitra Sudhir Joshi Vinod Yennemadi Samir Bhatia Parlay Mondal Chairman Managing director

Operations Equities and private banking Trading Depository and merchant services Information technology Audit, compliance, service quality Wholesale banking Credit and market risk Human resources Treasury Finance, admin, legal Corporate banking Unsecured products

AWARDS AND HONORS WON BY THE HDFC BANK:

HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian Bank". Various honors can be summed up as follows:

1. The Business Today-KPMG Survey published in the leading Indian business magazine Business Today has named HDFC Bank "Best Bank in India" for the third consecutive year in 2005. 2. The Asset magazine named HDFC Bank "Best Cash Management Bank" and "Best Trade Finance Bank" in India, in 2006. 3. HDFC Bank named the "Most Customer Responsive Company - Banking and Financial Services" in The Economic Times - Avaya Global Connect Customer Responsiveness Awards 2005" 4. HDFC Bank has been named "Best Domestic Bank in India" in The Asset Triple A Country Awards 2005. 5. In 2004, HDFC Bank won the award for "Operational Excellence in Retail Financial Services" - India as part of the Asian Banker Awards 2003. 6. In 2003, Forbes Global named us in its ranking of "Best Under a Billion, 200 Best Small Companies for 2003". 7. Leading business newspaper The Financial Express named HDFC Bank the "Best New Private Sector Bank 2003" in the FE-Ernst & Young Best Banks Survey 2003. 8. NASSCOM and economictimes.com have named us the 'Best IT User in Banking' at the IT Users Awards 2003. 9. Company of the Year Award in The Economic Times Awards for Corporate Excellence 2004-05. Finance Asia Best Bank - India in 2005, "Best Domestic Commercial Bank India in 1999, 2000 and 2001 respectively and Best Local Bank India in 2002 and 2003.

INTRODUCTION
Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. This was followed by Bank of Hindustan. The oldest bank in existence in India is the State Bank of India being established as "The Bank of Calcutta" in Calcutta in June 1806. Couple of decades later, foreign banks like HSBC and 5

Credit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta was the most active trading port, mainly due to the trade of the British Empire, and due to which banking activity took roots there and prospered. The first fully Indian owned bank was the Allahabad Bank set up in 1865. By the 1900s, the market expanded with the establishment of banks like Punjab National Bank, in 1895 in Lahore; Bank of India, in 1906, in Mumbai - both of which were founded under private onwership. Indian banking sector was formally regulated by Reserve Bank of India from 1935. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. NATIONALIZATION The next significant milestone in Indian Banking happened in the late 1960s when the then Indira Gandhi government nationalized, on 19th July, 1969, 14 major commercial Indian banks, followed by nationalization of 6 more commercial Indian banks in 1980. The stated reason for the nationalisation was more control of credit delivery. After this, until the 1990s, the nationalised banks grew at a leisurely pace of around 4%-also called as the Hindu growth of the Indian economy To understand the indian banking sector more easily a diagram is shown regarding the name os the bank, its numbers shown in the bracket and also the category of bank under which it falls.

Structure of the organised banking sector in India.

History
At the beginning of the 20th century, Indian economy was passing through a relative period of stability. Around five decades have elapsed since the India's First war of Independence, and the social, industrial and other infrastructure have developed. At that time there were very small banks operated by Indians, and most of them were owned and operated by particular communities. The banking in India was controlled and dominated by the presidency banks, namely, the Bank of Bombay, the Bank of Bengal, and the Bank of Madras - which later on merged to form the Imperial Bank of India, and Imperial Bank of India, upon India's independence, was renamed the State Bank of India. There were also some exchange banks, as also a number of Indian joint stock banks. All these banks operated in different segments of the economy. The presidency banks were like the central banks and discharged most of the functions of central banks. They were established under charters from the British East India Company. The exchange banks, mostly owned by the Europeans, concentrated on financing of foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency banks, and the exchange banks. There was potential for many new banks as the economy was growing. Lord Curzon had observed then in the context of Indian banking: "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." Under these circumstances, many Indians came forward to set up banks, and many banks were set up at that time, and a number of them set up around that time continued to survive and prosper even now like Bank of India and Corporation Bank, Indian Bank, Bank of Baroda, and Canara Bank. These days lots of new facilities have been developed in banks.Today, vastly more powerful information technologies than word-of-mouth have become available to the world of finance: high-capacity telecommunications links, powerful and interconnected computers, cheap storage, value-added data networks, unbreakable encryption, and much, much more. These technologies led to numerous changes:

1 Internal management information systems permitted better control from a distance and enabled banks to grow in size, geographic reach, and scope of activities. 2 Easy credit verification and billing made widespread credit card operations feasible. Today, two thirds of all Indian adults carry a credit card. 3 Electronic funds transfer led to vast money flows. In 1994, the average number of funds transferred by CHIPS clearance system of major New York banks was about $1.2 trillion per day. In the U.K., the combined clearance systems accounted for about $200 billion per day, and the Swiss Interbank Clearing $135 billion daily. 4 The composition of bank employment changed. By 1961, only two years after G.E. began marketing the Electronic Recording Method of Accounting, the Bank of America had already replaced 2,332 book keepers. 5 Automatic teller machines permitted banks to reconfigure branches. Whereas the average cost for a teller transaction is $1.07, it is only $0.27 for an ATM transaction. There are more than 20, 00,000 ATM's machines installed in India and are projecting to further extend these machines soon.

Future prospects One could imagine that all these changes like Internal management information systems, facilities of credit cards, Electronic funds, Direct payroll deposit systems, Automatic teller machines strengthened banks by making them faster, smarter, broader, and more global. But this is not so. To the contrary. Even though banks have become bigger, they have been weakened. One of the major reasons is that the new technologies have accelerated the entry of rival institutions that were more adept in utilizing them. Today, American banks' share in borrowing dropped from 36% in 1974 to 22%. For thrift institutions, it dropped from 21% in 1976 to 8% in 1994. Commercial banks' share of total financial intermediary assets dropped from a steady 40% in the 60s through 80s to below 30% in 1994, the first time that deposits in non-banks were greater than in banks.

One major reason for the decline was the growth of alternative sources of funds. Information technology enabled investors to evaluate securities and to be reached directly by borrowers. Thus, commercial paper outstanding as a percentage of business loans rose from 5% in 1970 to above 20% in 1994. Computers could be used to evaluate credit risk by using various quantitative methods, and this made it possible for non-banks to transform loans into marketable securities. This technique of securitization by non-banks is now also moving to small business loans. In response, banks increased non-lending activities. The share of their non-interest income rose from 17% in 1977 to 34% in 1994. Their commercial real estate loans, as a percentage of assets, doubled from 4% in 1970 to 9% in 1994. And they began to be heavily active in financial derivatives. In non-lending activities, too, banks fell behind institutions without banking charters but with superior operational or technological ability. In credit card processing, banks lost all but 20% of the market to non-banks such as First Data Resources. Banks were slow in offering Electronic Data Interchange (EDI) services that standardized invoicing and payments for transactions. When EDI emerged outside of banks it reduced the need for bank intermediaries. ATMs, too, proved a mixed blessing. The linkage of ATMs to banks declined: physically, over 41% of American ATMs are not located at banks anymore. As this reduction in physical presence continued, the banks' advantage of proximity declined. Customers deal with machines that are now interlinked by vast ATM networks, and care little about who is behind them -- a bank, a near-bank, a non-bank, or a distant bank. Institutionally, over 13,000 ATMs are operated by non-banks, and their share is increasing. ATMs led to a reduction in branches. Between 1990 and 1992, 4,000 bank branches were closed; by 1997, another 15,000 are projected to be eliminated. This retreat from brick-and-mortar has long-term effects on banks as organizations. In the past, the work process was organized such that the employees would come to the place where the information relevant to the business was present, physically or in the knowledge of their co-workers, and the customers would come to the employees. But this flow is being reversed as it is becoming much cheaper to move information than people.

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Therefore, data will move to the employees, wherever they are; customers, too, will be everywhere. In the process, banks will gradually become virtual organizations -networks of specialists sharing information, decentralized boutique operations interacting, and customers distributed around the globe, often equally virtual as the banks. Many employees will work at home or at far-away locations. Indeed, the concept of stable employment itself will change to ad-hoc arrangements and to independent contractors working for multiple employers. For many tasks, these employees will, be located at the lowest cost locations -- perhaps not Tokyo and New York but Manila and Bombay. By focusing on ATMs as teller-less branches, banks lost sight that these were merely one electronic form of customer interface, and a fairly inconvenient one at that. Thus, banks were unprepared for the emergence of terminals and network relations outside their control, as the Internet emerged as a locus of commercial activity in which vast numbers of customers are connected to a vast number of businesses, transacting with each other in increasingly secure and authenticated ways. Financial institutions are only feebly using the Internet as a business tool. In late 1993, when data for user activity on the Internet was still being broken down, J.P. Morgan and Citibank topped the list of bank users, with respectively 7 billion and 80 million bytes out of Internet NSFNet backbone and 600 million bytes into the Internet by Morgan. But this traffic was trivial relative to what some non-financial users were logging, less than 1/100 of 1 percent of the of the biggest Internet users among technology firms. In America, the penetration of micro-computers will reach 40% in 1996. By the year 2000, estimates US News and World Report , there will be 13 million American households banking by computer. As this happens, customers can out-migrate electronically to distant banks or other types of institutions. Yet banking's strength is based on proximity to customers, and its core competency is relations. How could that be preserved when a bank becomes a branchless virtual organization?

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PRODUCTS AT A GLANCE
ACCOUNTS & DEPOSITS Savings Accounts Regular Savings Account Savings Plus Account Savings Max Account No Frills Account Retail Trust Account Salary Accounts Payroll Classic Regular Premium Defense Salary Account Kid's Advantage Account Pension Saving Bank Account Family Savings Group

Current Accounts Plus Current Account Trade Current Account Premium Current Account Regular Current Account

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Reimbursement Current Account RFC - Domestic Account

Fixed Deposits Regular Fixed Deposit Super Saver Account Sweep-in Account

Demat Account Safe Deposit Lockers HDFC Bank Preferred / Classic

Private Banking Loans Personal Loans Home Loans Two Wheeler Loans New Car Loans Used Car Loans Overdraft Against Car Express Loans Gold Loan Educational Loan

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 Cards

Loan Against Securities Loan Against Property Loans Against Rental Receivables Commercial Vehicle Finance Vehicle Working Capital Finance Construction Equipment Finance

Credit Cards Silver Credit Card Gold Credit Card Woman's Gold Credit Card Platinum Plus Credit Card Corporate Credit Card Business Credit Card Titanium Credit Card Value Plus Credit Card Health Plus Credit Card HDFC Bank Idea Silver Card HDFC Bank Idea Gold Card

Debit Cards Easy Shop International Debit Card Easy Shop Gold Debit Card Easy Shop International Business Debit Card

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Easy Shop Woman's Advantage Debit Card

Prepaid Cards Forex Plus Card Gift Plus Card

Investments & Insurance Mutual Funds Insurance General & Health Insurance Bonds Financial Planning Knowledge Centre Equities & Derivatives

Forex Services

Trade Finance Travelers Cheques Foreign Currency Cash Foreign Currency Drafts Foreign Currency Cheque Deposits Foreign Currency Remittances Cash To Master Forex Plus Card

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Growing with America

In the next decades, the firm acquired a major credit insurer and a casualty insurance company. In 1944, we organized an insurance unit that later became American Health & Life Insurance Company. In 1968, Commercial Credit became a wholly owned subsidiary of Control Data Corporation.

Going Public

Wall Street legend Sanford I. Weill assumed control of the operations of Commercial Credit in 1986 and took the company public. Within two years, the company acquired Primerica Corporation, the parent company of several investment, Bank services and insurance firms, including the well-known Smith Barney.

Joining the Travelers Group

In 1992, Primerica purchased 27% of Travelers Insurance, a company with one of the most recognizable logos in the U.S. - the red umbrella. Less than a year later, Primerica purchased the remaining 73% of Travelers, which later adopted the name Travelers Group. In subsequent years, Travelers Group acquired Shearson-Lehman's retail brokerage, Aetna's property and casualty business, Security Pacific Bank Services, and Salomon Brothers, creating the nation's third largest investment house Salomon Smith Barney.

The Creation of HDFC group

In 1998, Travelers Group merged with banking powerhouse HDFC corp. to create HDFC group, a global Bank services company serving 20 million customers worldwide. HDFC group's businesses include asset management, banking, credit and charge cards, insurance, investments, investment banking and trading.

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An International Company with a New Name

In 1999, we purchased 128 offices of Texas-based Associates First Capital, giving us more than 2,000 offices in 45 states. We then turned our focus to Canada, buying Associates First Capital offices there. In September, we changed our name to HDFC Bank to proudly recognize our affiliation with our parent company and to better reflect what we do today. As a member of HDFC group, we continue to provide you with a full range of exceptional products and services to help you find a Bank solution that's right for you. HDFC group is the world's most global Bank services company whose other subsidiaries

Include HDFC Bank, Travelers Life and Annuity, Smith Barney, and Primerica. A Global Leader in the New Millenium

In November of 2000, HDFC group acquired Associates First Capital Corporation; the largest publicly traded finance company in the U.S. with managed assets of more than $100 billion and 2,750 offices in the U.S. and 13 other countries. The Associates has a particularly strong presence in Japan and in Europe, where it has more than 700,000 customers. This transaction marked a defining moment in HDFC group's history, building upon its leadership position in the global economy.

Spin-off Plans Ensure a Bright Future

At the end of 2001, HDFC group announced its plans to spin off its wholly owned subsidiary Travelers Property Casualty Corporation by selling up to 20% in an initial public offering and spinning off its remaining majority interest on a pro-rata basis to HDFC group shareholders in a tax-free transaction. The initial public offering took place in the first quarter of 2002, with the spin-off concluded at year-end 2002. HDFC group units will continue to offer Travelers Property Casualty products. The

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spin-off enables HDFC group to focus its resources more fully on higher growth areas of global Bank services and, at the same time, positions Travelers Property Casualty as an independent public company. Crossing Boarders

In the third quarter of 2001, HDFC group purchased Mexico's "Banacci" (Grupo Financiero Banamex-Accival), renamed it Grupo Financiero

Banamex and integrated operations in Mexico under the Banamex brand name. It is the largest foreign acquisition in Mexico and largest Bank sector deal ever in Latin America.

Expanding our Reach In the third quarter of 2002, HDFC group completes the acquisition of Golden State Bancorp, parent company of First Nationwide Mortgage and Cal Fed, second-largest U.S. thrift. The transaction enabled HDFC Bank to expand its retail distribution franchise in key California and Nevada markets and add approximately 1.5 million new customers.

Accelerating Growth In the first quarter of 2004, HDFC group announced the acquisition of Washington Mutual Finance Corporation for $1.25B. The acquisition included 409 WMF offices located in 25 states, primarily in the Southeastern and Southwestern United States. The company has more than 2,300 employees and total assets of approximately $4 billion, as of September 30, 2003. "This transaction, which solidifies HDFC Banks position as the leading community-based lender in the U.S., exemplifies how we are focusing our proven acquisition capabilities on incremental acquisitions that expand the reach of our businesses both geographically and strategically," said Bob Willumstad, HDFC group President and Chief Operating Officer.

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STRUCTURE OF THE ORGANIZATION

THE COMPANY OWES ITS SUCCESS TO ITS STRONG MANAGEMENT TEAM, MOST OF WHICH HAS BEEN THERE SINCE ITS INCEPTION.

ORGANIZATION STRUCTURE:
National Sales and Marketing Head

Vice President-Investment Assistant Vice President-Investment

Vice President-Sales Assistant Vice President-Sales

Zonal manager investment Senior Investment manager Manager Investment

Regional Sales Head Branch Manager Team Leader

Relationship Manager Associate Relationship Manager Asst. Relationship Managers . Relationship Executive.

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PROBLEMS OF THE ORGANIZATION

The company plans its raw material requirement from the sales projection, which was done by the marketing department of the company. At the end of every month, marketing department creates its budgeted sales for the existing product and new products. Marketing department creates its budgeted sales by considering demand of the product, actual sales in the previous month and the sales in the current month of the previous year. Production, Planning and Material Control Department (PPMC) is based on the sales projection and calculates the requirement of the raw material for each department for each product. PPMC department authenticates raw material issued. After the PPMC Department calculates the requirement of the raw materials, the purchasing department places an order to the vendor or supplier for each department. Then the supplier dispatches the material in the factory premises. Now the raw material proceeds through the testing process. Here it is checked whether the raw material is as per the standard quality prescribed by company at the time of placing an order. At the time of testing they also allocate specific identification number to each material so that it can be referred at the time of production, if any defect occurs. Then raw materials are issued to the production department. Company is following batch production process. They assign the batch number and lot number so that if any problem occurs while it is consumed they can detect the fault.

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COMPETITION INFORMATION ICICI BANK

Loans are for salaried & self employed individuals Loans are available from Rs. 20000 to Rs. 15 lakhs Tenures from 12 to 60 months No security & guaranter required All loans are done via EMI- equated monthly installments Processing fees of 2% 3 months bank statement Latest 2 salary slips Latest 2 years ITR Proof of turnover, proof of continuity current job,ID proof, residence proof, office proof and proof of qualification of highest degree.

HDFC Bank
EMI as low as Rs. 36 per Rs. 1000 per month for 36 months & 50% off processing fees.

Bank of India
Personal loans for as low as 18% per annum for 5 years.

SBI
Term- 2 years, the total amount- 100000 (11,75%), 500000 (11.75%) & 1000000 (19%).

ICICI Bank India is the largest private bank in India and the second largest in the entire banking sector (consisting of banks belonging to both public and private sector). Only

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State Bank of India (SBI), controlled entirely by the Government of India has a bigger business than ICICI Bank. About ICICI Bank India Founded in 1955 as Industrial Credit and Investment Corporation of India, ICICI Limited was established by the Government of India in the 1960s as a Financial Institution like Industrial Development Bank of India (IDBI) to finance large industrial projects. ICICI then, was not a bank and hence could not take retail deposits and was not required to comply with Indian banking requirements for liquid reserves. ICICI borrowed funds from various agencies like the World Bank, often at concessional rates. These funds were deployed in large corporate loans. However, the scenario changed drastically in1990s when ICICI founded a separate legal entity and named it "ICICI Bank".ICICI Bank,as the name would suggest, undertook normal banking operations like accepting deposits, issuing credit cards, providing car loans etc. The experiment was so successful that ICICI merged into ICICI Bank and this "reverse merger" happened in 2002. ICICI Bank's Trade Roaming Current Account is a unique amalgamation of domestic banking features of the Roaming Current Account and Global Trade Services. It offers a composite banking solution to exporters and importers. An important part of this is the "zero balance" account that enables you to utilize your financial resources more effectively.

Account Standard Classic Premium Gold GoldPlus Platinum

Quarterly Average Balance Requirement Rs.10,000 Rs.25,000 Rs.50,000 Rs.1,00,000 Rs.3,00,000 Rs.5,00,000

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ICICI Banks fourth quarter results were not that encouraging. The profit after tax (PAT) recorded a growth of approximately 40%, which is higher than the growth in previous quarters of FY08. However, it was better expense management, which resulted in such growth numbers. The operating expenses (including salaries) grew by 20%, which was lesser when compared to average growth of 26% in the previous three quarters. What is important is that the bank laid stress on maintaining the current cost-to-income ratio in future. This, to a certain extent, can also mean that in case of a slowdown in credit off-take, cost rationalisation would be the strategy to post high growth in PAT as compared to growth in top line. .

SWOT ANALYSIS OF THE TRADE FINANCE OPERATIONS

STRENGTHS OF THE HDFC BANK1. HDFC Bank has 32 softwares as a whole for their various operational purposes, in which currently 22 are in use. The number of softwares in HDFC Bank is comparatively very high in comparison to other banks. In trade of HDFC Bank there are at least six softwares used: Capture Branch operation BG Professor SWIFT Alliance Flexcube corporate LSS

These softwares are helpful in facilitating the work of the bank and if one Software is disturbed due to some or the other reasons then other can be helpful. This will ensure the continuity of the work without disturbance.

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2. Goodwill of the bank attracts lots of customers from various parts of the city. The awards and honors won by the bank are very helpful in increasing the faith of the traders in the bank. 3. There are lots of trade services provided by the bank as per the requirement of the customer. Export, import, bank guarantee, letter of credit. The aim is that a trader must be able to find all the facilities of his requirement in the bank itself only then he will find a reason to come to bank again and again. This gives an image of one stop shop of the Bank. 4. Efficient employees are the assets of any company. Unless and until the employees are not efficient, the company cannot perform efficiently. The employees of the bank are efficient enough to perform the assigned task well and take the emerging challenges of the market. 5. Centralized banking facilitates smoothen and centralized flow of all the transactions related to trade. All the trade related transactions are informed to Mumbai head office before proceeding further. The head office has to know the nature and frequency and all the transactions happening at various branches. 6. The mode of payment, which is used by HDFC BANK, is not only used by this bank but it is used all over the country by all the other banks to settle international payment. Hence we can say that this mode of payment is internationally accepted and well recognized. It is the SWIFT (Society for Worldwide Inter Bank Financial Telecommunication). All the international level transactions are carried on with the help of SWIFT. This helps the bank to carry out its transactions very well within TAT. Hence, it is one of the strength of the bank, which is helping it to grow, and proving it within international standards.

WEAKNESS OF THE HDFC BANK-

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1. They have reduced their trade charges due to present level of competition. The competition is low in comparison to any other big city but the bank itself faces huge competition with the SBI & PNB, which is spread like grains at every part of the city. The trade charges of the other relative banks are low so HDFC Bank also needs to keep the charges low to compete well with the other banks. 2. HDFC Bank follows centralized banking due to which proper reporting has to be done to central office at each and every moment. These frequent reporting cause unnecessary delay in the workings of the bank. e.g. Any nationalized bank takes half an hour to open any BG but HDFC Bank takes four hours for the same thing. 3. Lots of softwares are very difficult to be handled by the employees, since one employee cannot be efficient in handling all the 32 softwares.

OPPORTUNITIES OF THE BANK: 1. Lots of traders are still untapped whom the bank can trap. There is a great opportunity in front of the bank to trap these traders, by offering them through telecalling, e-mails or any other ways, they can be very profitable for the bank. 2. Regular and loyal customers can help in building goodwill and more customers. In trade also like in other business customer loyalty is very important. There are many opportunities with the bank in the form of loyal customers.

THREAT OF THE BANK

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1. The most important threat which appears in HDFC Bank are the competitors in which the major competitors are State Bank of India, Punjab National Bank, ICICI Bank and Central Bank of India who have many branches and thats why it is more convenient for the people to approach that bank. Apart from that they have their own goodwill which is a threat for the trade of HDFC Bank. 2. Since new Private Sector Banks like UTI Bank and Kotak Mahindra Bank and some foreign bank like ABN Amro Bank are also planning to start their operations with their expertise, the future seems to be highly uncertain for HDFC Bank.

SIGNIFICANCE OF THE STUDY

Significance of the project is to find out prospect investors and also to provide key information about the investors perception and preferences by Financing of External Trade in HDFC Bank industry. The study will help in getting information about their performance at distributors as well as at their own investment center or why people go for Financing of External Trade in HDFC Bank for investments. Study will also helps in finding out the problems related to distribution.

MANAGERIAL USEFULNESS OF THE STUDY

The study provides the problems related to distribution of Financing of External Trade in HDFC Bank so that they can improve the service rendered by them as a distributor. The study will also give information about prospective investors both individual as well as institutional clients in areas of surrey where they can get lead.

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The study provides the complete information about all close competitors in Financing of External Trade in HDFC Bank investment. It provides the AMC a feedback from customers regarding their problems and perception about investing in Financing of External Trade in HDFC Bank so that they can improve their services

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CONCEPTUAL DECISION TRADE FINANCE

It consists of all the things about the trading terms. Like every trade involves import, export, letter of credit, bank guarantee, inward remittance and outward remittance. Along with discussing the banks trading activities the concept of all the trading terms has been discussed below. Trade is an important part of commerce. It refers to the sale, transfer or exchange of goods and services for a certain price. Exchange of goods and services is the basis of trade finance. Trade can be classified into two parts: 1. External trade 2. Internal trade

1. External trade:
External trade or foreign trade involves trading of goods among countries of the world. Every country buys and sells different goods from and to other countries. Goods worth crores are bought and sold. Foreign trade is an important economic activity because it enables the countries participating in it to secure resources for economic development as well as for balance of payment. For some countries foreign trade is the most important economic activity because most of their industrial activities are dependant on it. Nature of external trade: It consists of export trade and import trade. Export trade involve sale of goods of purchases to other countries. Imports consist transactions from other countries. When goods are traded then it is called visible trade. External trade in services is called invisible trade. When goods are imported into a country with the purpose of re-exporting them to some country, it is known as entrepot trade.

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There are two types of external trade: 1. Import of goods and services 2. Export of goods and services

External Trade Services

As a business professional they need flexibility, which helps in closing a deal faster, and maintaining goodwill with business associates. At Bank, they have always been committed to understand customers needs. A. Export of goods and services Banks offers a wide range of export services designed to assist the business and its opportunities around the world. Routing all the export related transactions it helps in facilitating all the export related hassles of the customers. The customers can get the following facilities with the expertise and experience of the bank: 1. Faster payment 2. Competitive exchange rates 3. Increased control over foreign receivables 4. Improved cash flows 5. Competitive charges. All the above mentioned facilities are available for the following export bills: 1) Export documents against payment 2) Export documents against acceptance 3) Export bills under letter of credit 4) They also provide packing credit and bill discounting facilities.

B. Import of goods and services

Banks offers its customers a comprehensive range of import services. Bank is highly respected in the world of in international finance a cross border transaction. The bank has correspondent relationship with other reputed international banks throughout the world can provide all the services to importers who may be importing from any part of the world.

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The following facilities are available for importers: 1. Direct remittance The customer may require the exporter overseas to dispatch the goods first and then remit the payment for the goods. The exporter would then dispatch the goods to the customer. The overseas exporter will then send the documents directly to customer. When customer approaches bank along with the documents for sending remittance to the exporter, bank ensures that the remittance is done promptly. Documentation for Direct Remittance: a) Request Letter cum Debit Authority cum OGL cum FEMA Declaration b) IE Code Number Certificate c) Form A1 d) KYC Report e) Transport Docs in original - Bill of Lading / Airway Bill f) Invoice g) Bill of Entry (Exchange Control Copy) 2. Advance remittances Overseas exporter may require customer to make full payment in advance for the goods to be exported. The exporter would dispatch the goods to customer after he receives full payment from importer. For this purpose, Bank will make remittance in foreign currency to the exporter at a very competitive rate. Documentation for sending Advance Remittance a) Request Letter cum Debit Authority cum OGL cum FEMA Declaration b) IE Code Number Certificate c) Form A1. (Duplicate) d) KYC Report e) Purchase Order / Proforma Invoice with Advance payment term. f) Bill of Entry Declaration with Commercial Invoice 30

g) Bank Guarantee from the Exporters Bank if Advance amount is > $ 1, 00,000. 3. Import bills under letter of credit In a business cycle, as buyer needs to pay for his purchases in international and domestic markets. Letter of credit helps to facilitate purchase of goods in international and domestic trading operations. All Banks letters of credit issued are valued and accepted worldwide.

When the importer opens an LC through Bank for imports of goods, it is an undertaking by Bank that if the exporter exports the goods and produces the documents as stipulated in the Letters of Credit, then Bank would honor the draft(s).

4. Import collection: The exporter from overseas exports the goods the customer. The overseas exporter / exporter's bank sends the documents to Bank on collection. Bank will then intimate the customer about the receipt of the documents. All customer need to do is to authorize us to debit your a/c and send the remittance to the exporters bank. If it is a sight bill (Documents against Payment), then the necessary documents and debit authority is collected from customer (importer) and remittance is paid to the exporters bank and the documents are released to him. If it is a usance bill (Documents against Acceptance), then the acceptance letter is taken from customer and the documents are released. On the due date remittance is made to the exporters bank by debiting customers account. 5. Letter of credit: The letter of credit is demanded by the exporter to ensure its payment through a reliable source. The letter of credit is then issued by the importers bank that ensures the exporter that if the importer delays or fails to make the payment within stipulated period of time then the bank itself will make the payment. That is in any case the exporter will not be a

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sufferer and payment will be made to him. Being Indias leading private sectors bank, it assures its customers that all the letters of credit issued will be valued and accepted by all the business counterparts overseas. 6. Bank guarantee: The bank issues bank guarantees on behalf of its customers to fulfill any obligation under the business contracts with the help of which the business can improve along with relationships with the bank

EXTERNAL TRADE FINANCE SERVICES PROVIDED BY HDFC BANK

We can discuss the Trade finance services provided by HDFC Bank into 4 parts: 1. Import of goods and services including letter of credit and bank guarantee 2. Export of goods and services 3. Inward remittance 4. Outward remittance

IMPORT OF GOODS AND SERVICES

Import of Goods and Services into India is being allowed in terms of Section 5 of the Foreign Exchange Management Act 1999 (42 of 1999), read with Notification No. GSR 381(E) dated May 3, 2000 as amended from time to time.

IMPORT TRADE FINANCE INTRODUCTION

The Directorate General of Foreign Trade (DGFT) under Ministry of Commerce & Industry, Department of Commerce, and Government of India regulates import trade. Authorized dealers, while undertaking import transactions, should ensure that the imports 32

into India are in conformity with the Export Import Policy in force and Foreign Exchange Management (Current Account Transactions) Rules, 2000 framed by Government of India vide Notification No. G.S.R.381 (E) dated May 3, 2000 and the directions issued by Reserve Bank under Foreign Exchange Management Act from time to time. Authorized dealers should follow normal banking procedures and adhere to the provisions of Uniform Customs and Practices for Documentary Credits (UCPDC), etc. while opening letters of credit for import into India on behalf of their constituents.

IMPORT OF GOODS
General: -- Rules and Regulations from the Exchange Control angle to be followed by the authorized dealers while undertaking import payment transactions on behalf of their clients are set out in the following paragraphs. Where specific regulations do not exist, authorized dealers may be governed by normal trade practices. Authorized dealers may particularly note to adhere to "Know Your Customer" (KYC) guidelines issued by Reserve Bank (Department of Banking Operations & Development) in all their dealings.

Form A 1: -- Applications by persons, firms and companies for making payments, exceeding USD 500 or its equivalent, towards imports into India must be made on appropriate form A 1.

Import Licenses: -- Authorized dealers may freely open Letters of credit and allow remittances for import of goods unless they are included in the negative list requiring licence under the EXIM Policy in force. In such cases, licenses marked For Exchange Control purposes should be called for and special conditions, if any, attached to such licenses adhered to Exchange Control copy of the import licence submitted by importer for opening of Letter of Credit or making remittance, when fully utilized, should be retained by authorized dealers and may be preserved till its scrutiny by the internal auditors or inspectors is completed.

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 Interest on Import Bills:-- Authorized dealers may allow payment of interest on usance bills or overdue interest for a period of less than three years from the date of shipment at the rates prescribed in the Master Circular on trade credits.

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IMPORT LETTER OF CREDIT Parties to a letter of credit transaction:

Beneficiary/ Beneficiary/ sellersellerInIn whose favour whose favour LC is is opened LC opened

Applicant/ Applicant/ buyerbuyerOn whose On whose behalf LC is is behalf LC opened opened Opening bankOpening bankThis opens LC This opens LC

Advising bankAdvising bankWhich advices Which advices the LC the LC

Parties toto a Parties a letter ofof credit letter credit transaction transaction

Reimbursing Reimbursing bankbankNostro bank Nostro bank

Confirming Confirming bankbankWhich confirms Which confirms the LC the LC

Negotiating Negotiating bankbankBeneficiarys Beneficiarys bank bank

Applicant:-- The applicant should give a precise detail for the opening of the letter of credit. The applicant should indemnify banks against rules and regulations imposed by the foreign countries. (Article 5 & 18)

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Beneficiary:-- The beneficiary in whose favour the credit is established can in no case avail himself of the contractual relationship existing between the banks or between the applicant for the credit and the issuing bank. (Article 3) Issuing bank:-- The issuing bank gives a conditional undertaking and reimburses the negotiating bank against submission of the prescribed documents. It should verify the documents presented under the credit within 7 banking days following the day of receipt of the documents and if any discrepancy is found it will refuse reimbursement. Advising bank:-- The bank advising the letter of credit acts without any engagement on its part but will take reasonable care to check the authenticity of the Credit. If incomplete or unclear instructions are received, it will give the preliminary information to the Beneficiary without any responsibility on its part. (Article 7, 12) Confirming Bank:-- When the confirmation to a credit is added by a confirming bank at the specific request of the opening bank it constitutes a definite, equitable undertaking on the part of the Confirming Back in addition to the Opening Back, provided the stipulated documents are presented in accordance with the terms and conditions of the Credit with in the due date. (Article 9 & 13) Negotiating Bank:-- The nomination of a bank by the opening bank for negotiation of documents under a credit does not constitute any undertaking on the nominated bank unless the credit is confirmed by it. Negotiating bank may be the bank of the beneficiary of the credit and / or a bank, which pays value against a set of documents drawn under a credit. Issuing bank will reimburse the nominated bank if it has negotiated the documents as per the letter of credit terms. (Article 9&10) Reimbursing bank:-- Reimbursing bank will reimburse the claim made by the negotiating bank or by any claiming bank under a documentary credit under the authority of the opening bank. It need not insist for submission of any certificate of compliance from the negotiating bank along with their claim if it was not specifically insisted in the

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credit. Issuing bank will have prior arrangement or provide sufficient funds with the reimbursing bank for honoring the reimbursing claim as and when it is made. (Article19)

Application for letter of credit:

Application for the letter of credit requires the following information: 1. Revocable/irrevocable 2. Without recourse 3. Amount (state currency) 4. By cable/ airmail/swift 5. Beneficiarys full name and address 6. Merchandise 7. Shipment by steamer/post-parcel/airfreight 8. Country of origin 9. Usance of draft 10. Freight prepaid/paid at destination 11. Insurance by beneficiaries/covered here 12. Part shipment/permitted /prohibited 13. Transhipment permitted/prohibited 14. Shipment from shipment to. 15. Latest date of shipment 16. Latest date of presentation of documents 17. Documents must be presented for negotiation withindays from shipment date 18. Licence no. 19. Import permitted under pare noExim policy 2002-07 20. We confirm described merchandise can be imported against above mentioned licence/para of foreign trade policy 2004-09 (OGL) 21. Special instructions, if any

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Documents under the letter of credit

Draft: The beneficiary should draw it as per the tenor stipulated in the letter of credit. It should be drawn either on the issuing bank or on the confirming bank or on the nominated bank as per the stipulations of the documentary credit. It should indicate the LC no. and the name of the bank. Packing list: It contains buyers name, items, dimensions, weight (gross and net both) of the goods, the quantity which is to be delivered. Certificate of origin: The goods, value, shipper, bill of lading number etc. should be verified of their originality. This should be issued by the chamber of commerce or any other authority as indicated in the letter of credit. (Article 21) Work test certificate: It certifies that the goods are well tested of their function as per the demand of the buyer. Certificate of warranty: It certifies regarding the warranty period of the goods. Purchase order: It is the very first document between both the parties. It contains the details regarding the goods required to be purchased. Certificate of compliance It certifies that the terms of the purchase order has been well taken care of regarding

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well functioning of the goods and quickly dispatched. Commercial invoice: a. The beneficiary as mentioned in the letter of credit should draw the invoice. b. It should be drawn in the name of the opener of the credit. c. The description of the merchandise should be exactly in agreement with that mentioned in the letter of credit. d. The reference number of the letter of credit and the bank, which has opened, should be mentioned in the invoice. e. The invoice value should not exceed the value of letter of credit. f. Terms of the contract such as CIF, CFR, and FOB should be clearly indicated in the invoice as mentioned in the credit. g. Other particulars such as bill of lading, shipping marks, Import Licence number, gross weight, net weight etc. h. The invoice should conform to article 37 of the UCPDC. Bill of lading: a. b. c. d. e. The bill of lading should be in sets with the number of non-negotiable copies as stipulated in the letter of credit. The shipping company or its authorized agents should sign on it. It should be marked clean and should not have any indication to the defective conditions of packages or goods, etc. The description of the goods should be as per the letter of credit requirement and should agree with the description in the invoice. The letter of credit should call for shipped on board bill of lading. Bill of lading should evidence goods having being loaded on the vessel and also the date on which it was loaded. f. Freight prepaid or freight to be paid at destination should be clearly indicated in the bill of lading as per the letter of credit terms (article 33).

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CHARGES BY HDFC BANK:

For import letter of credit: Commitment charges for the full validity of the credit Usance charges according to the tenor In the case of LC established with 100% cash margin charges may be fixed by the banks at their discretion irrespective of the value of the credit. In the case of extension of the validity period of credit, if it falls within a 3 months period for which commitment charges has already been recovered, a minimum amendment commission will be recovered. Any amendment to a letter of credit other than extension of the validity of its value, minimum commission will be charged. 1) IMPORTS BILLS: Advance Payment Charges: .125% (Min Rs 500/) + Rs 500/ Swift Charges

Direct Payment Charges: .125% (Min Rs 500/) + Rs 500/ Swift Charges

2) Collection Bills (Sight payment and Usance Payment) Charges: .25% (Min Rs 500/) + Rs 500/ Swift Charges

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 LETTER OF CREDIT LC: LC opening against cash margins. Services like LC, advising and confirming also done. Local LC requires 110% cash margin FCY LC requires 120% cash margin. Charges: Rs 1000/ Documentation Charges. + Rs 1500/ Swift Charges.

BANK GUARANTEE:

BG:

BG opening against cash margins. 100% cash margins required.

Charges:

Rs 1000/- Documentation Charges. + 1.8% of the amount.

Bank guarantee in INR backed by FD (> = 100 % of facility amount) Inland Letter of Credit backed by FD (> = 110 % of facility amount) Foreign Letter of Credit backed by FD(> = 120 % of facility amount)

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 EXPORTS BILLS: Advance Export Bill (RBI Reporting, GR Attestation) Charges: .0625% (Min Rs 500/)

Collection Bills (LC Bill, Site Bills and Usance Bills) Charges: .0625% (Min Rs 500/) BRC Issuance Charges: Rs 100/Sending of Docs to Importer Bank Charges: Rs 1000/ (Courier Charges)

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EXPORT TRADE FINANCE

INTRODUCTION: As far as export is concerned the bank provides export finance to the exporting country as and when required. Export finance is a short term, working capital finance allowed to an exporter. Funds should be available to the exporter at the required time.

EARN FOREIGN EXCHANGE

IMPORT PAYMEN T

HELP IN MEETING INTERNATIONA L OBLIGATI ON BENEFIT S OF EXPORT

FAVOURABLE BALANCE OF PAYMEN T GENERA TE EMPLOYMENT

INCREAS E GDP

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TYPES OF EXPORT FINANCE: A. PRE-SHIPMENT FINANCE

It helps in financial assistance for the execution of an export order from the date of receipt of an export order till the date of shipment It is a type of loan or advance granted to an exporter for financing the purchase, processing or packing of goods on the basis of confirmed and irrevocable order or any other evidence including Letter of Credit.

Types of pre-shipment finance

1) packing credit: Follow up of packing Credit Advances: a) Submission of Stock Statement: Exporter should submit stock statement reporting the stocks, which are under pledge or hypothecation to the bank for securing the Packing Credit Advance. Frequency of submission of stock statement must be decided by the Authorized Dealer at the time of sanctioning the packing Credit and should be adhered to, by the exporter. b) Physical inspection of stocks: Stocks pledged/hypothecated by the exporter must be duly inspected by the Authorized Dealer at regular interval Liquidation of Packing Credit advances: Packing credit advance will always be liquidated with the export proceeds of the relevant shipment. At this stage the pre-shipment liability of the exporter will be converted into post shipment liability. For any reasons, if export does not take place at all, the entire advance will be recovered at commercial rate penal interest as decided by the banks. With the recent liberalization and deregulation of interest rates, banks will have operational flexibility for liquidating packing credit advances as per RBIs guidelines issued with effect from 14.12.1994.

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Criteria to be applied for allowing above relaxation: Even though Reserve Back has now permitted the above relaxation for liquidating a Packing credit advance, each Bank has got their own conditions to extend this facility to the exporter-customer. In general, the following conditions are observed while extending this facility to the exporter: Bank should ensure that substitution is commercially necessary and unavoidable. The sanctioning authority must also satisfy him about the valid reasons as to why packing credit extended for shipment of a particular commodity cannot be liquidated in the normal. It is suggested that as far possible, the substitution of contract should be allowed if the exporter maintains account with the same bank or it has the approval of the members of the consortium. Overdue Packing Credits and ECGC procedures: If the borrower fails to pay the amount on due date / extended due date and bank considers it as overdue, an overdue report of advance should be made to concerned Regional / Branch office of ECGC in prescribed form within 30 days. If the overdue position persists, back should take necessary steps to realize dues as per its usual recovery procedure and the default to ECGC. This default report should be sent to concerned Regional / Branch office of ECGC in prescribed form within one month from date of recalling the advance or within 4 month from date / extended due date of the loan amount whichever is earlier. Payment of ECGC premium may be discontinued after the month in which the default is reported to the month in which insolvency of the exporter is reported ECGC. Back should recover the overdue by liquidating the securities, if any, available. Nursing programme can be initiated, if found feasible, with the consent of ECGC. If recovery is not possible, bank can prefer Claim under the WTPC Guarantee within 6 months from the date of report of default.

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Pre-shipment credit in foreign currency (PCFC) PCFC was introduced on 8 November 1993. All convertible currencies Similar terms and conditions like P/C-L/C or Order Running Account also available Only for cash exports Banks may source the funds either by using the offshore funds available with them such as balances in EEFC /RFC/ ESCROW accounts Source of funds -Any foreign currency funds Prior permission of RBI not required Liquidated by discounting of bills under rediscounting of Export Bills abroad SELFLIQUIDATING. Cost of borrowing abroad not to exceed1% over LIBOR by the Banks (Competitive international rates). Exporters at a cost not exceeding 2% over the appropriate LIBOR excluding the holding tax by Banks having Overseas Branches and 2.5%by other banks. Normally for 180 days. If no export within 360 days PCFC adjusted at TT selling rate for currency concerned - Interest will be charged at appropriate rates on rupee equivalent of the principal amount at ECNOS (plus a penal rate as per banks discretion). Running account facility can be given. Forward Contracts can be booked for future drawls account facility. It would be in order for banks to liquidate PCFC granted to a Diamond Dollar account holder by dollar proceeds from sale of cut and polished diamonds to another DDA holder. Diamond Dollar Accounts can be maintained by Firms/ Cos. With a track record of at least three years and having an average annual turnover of Rs.5 crores or above during the preceding three licensing years. FEATURES:

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Running Account facilities Effective 14 March 1992, banks can grant pre-shipment advances for exports of any commodity, without prior lodgment of L/C, export orders under Running Account. Conditions for Running Account Need-based facility Exporters with good track record L/Cs firm orders can be produced within reasonable time (for products under SCC L/Cs firm orders to be produced within one month Exporters in EOUs, EPZs and SEZs also eligible No such facility for sub-suppliers.

B. POST SHIPMENT FINANCE

It is an advance against receivables which is in the form of shipping documents. If the bank has given the pre-shipment credit to the bank then he cannot deny the post-shipment credit, if asked. Types of post-shipment finance: 1. Export bills purchased/negotiated/discounted: The risk of non-payment is there if letter of credit is not there. The risk is more pronounced if documents are under acceptance. In order to safeguard the interest of the bank and also the exporter, ECGC offers coverage of credit risks through their guarantees/policies at the post-shipment stage. The general banks cover the advance under the Whole Turnover Post Shipment Guarantee scheme. But the HDFC Bank never trusts the ECGC. In addition to this the exporter is advised to go for separate buyer wise policy also. 2. Export bills negotiated: All the documents presented to the bank for negotiation should be strictly in accordance with the L/C terms. Even the slightest deviation from those terms and conditions specified in the L/C can give an excuse to the

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issuing bank for non-payment. 3. Advances against bills sent on collection basis: In some cases the exporter himself may requests for sending the bills for collection basis. Bank may allow advance against these collection bills to an exporter. Concessive rate of interest is charged for this advance from the exporter according to the period. 4. Advances against exports on consignment basis: Goods are exported on consignment basis at the risk of the exporter. Eventual remittance of sale proceeds will be made by agent. The overseas branch of the bank will be instructed to deliver the documents against trust receipt. 5. Advances against undrawn balances: In certain line of trade it is the practice of the exporter to leave a part of the amount as undrawn balance. Authorized dealers can handle such bills provided the undrawn balance is inconformity with the normal level of balance left undrawn in the particular line of export trade subject to a maximum of 10% of the full export value. Advances against undrawn balance can be made at a concession rate of interest for a maximum period of 90 days. 6. Advances against duty drawback: Where the domestic cost of production of certain goods is higher in relation to international price, the exporter may get support from the government so that he may compete effectively in the overseas market. The government of India and other agencies provides export incentives under the export promotion scheme. this can only be in the form of refund of excise and customs known as duty drawback. Bank grants advances to exporter against their entitlements under above category at low interest rate for a maximum period of 90 days.

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GENERAL GUIDELINES OF THE BANK FOR SANCTIONING EXPORT FINANCE TO CUSTOMERS: 1. Banks should meet the genuine credit requirements of the export sector promptly and in full. They should review their internal arrangements and take such action as is necessary, including delegating enough powers to Branch Managers/Regional Managers to export sector. Queries should not be raised in piecemeal or information sought at various stages, leading to delays in extending credit. 2. Bank may adopt a flexible attitude with regard to debt equity ratio; margin and security norms but there could be no compromise in respect of viability of the proposal and the integrity of the borrower. 3. Exporters should be able to satisfy their banker about their capacity to execute the orders within the stipulated time and have proper expertise to manage the export business. 4. The quantum of finance sought should commensurate with the expected export turnover and the cost of inputs required. 5. If the exports will be covered under letters of credits, banks would need to be satisfied about the standing of the credit opening bank and also the acceptability of the conditions specified in the credit. 6. Where exports are not covered by Letters of Credit and will be on the basis of firm contracts, banks may insist for obtaining a satisfactory status report on the overseas buyer.

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INWARD REMITTANCE AND OUTWARD REMITTANCE IN HDFC BANK OUTWARD REMITTANCE:

It is the way in which money from a country goes to another country in some other way than export or import of goods. Outward Remittances (Miscellaneous) for other purposes can be remitted with ease. Remittances by way of DD / TT / Swift can be affected through banks strong network of correspondent banks to any part of the world. All transactions are subjected to FEMA regulations. Outward Remittance (Miscellaneous) List BTQ / Business Travel / Gift Remittances / Medical Treatment / Student Remittances / Donations / Immigration / Employment Abroad / Maintenance of Family / Subscription fees / Examination fees of Foreign Universities / Repatriation of all NRI accounts of Individual customers / Exhibition Fee / Conference Invitation / Credit Card Payments / Subscription of Magazines and periodicals / Repatriation of sale proceeds of property / Repatriation from NRO a/c / Repatriation of funds relating to OCB / Repatriation under the Liberalized remittance scheme of USD 25,000/- per calendar year for Resident Individuals.

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INWARD REMITTANCE:
GENERAL: Foreign exchange due or accrued as remuneration for services rendered in or outside India, or in the settlement of any lawful obligation, or an income on asset held outside India, or as inheritance, settlement or gift is to be sold to an authorized person within 7 days from the date of receipts. FOREIGN INWARD REMITTANCE PAYMENT SYSTEM (FIRPS): Foreign exchange dealers association of India (FEDAI) has evolved FIRPS to facilitate quick transmission of funds to beneficiaries in India against inward remittance received from abroad through banking channels in rupees as well as in foreign currency. ISSUE OF BANK CERTIFICATE: Authorized Dealers should issue bank certificates against receipt of inward remittance or realization of foreign exchange on security papers if the amount exceeds Rs. 15000/- in value, bearing distinctive serial numbers and reference numbers. REMITTANCE THROUGH HDFC BANK TO OTHER BANKS (OUTWARD): Rs. 0.25/- per. 1000/- per transaction (Minimum- Rs50, Maximum- Rs.1000)

TYPES OF INTERNATIONAL/EXTERNAL TRADE SETTLEMENT:

In international business the settlement can be done by the following ways: 1) Advance payment. 2) Open account. 3) Bill on collection basis.

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4) Follow up of overdue bills (when the terms are not under LC). 5) Documentary credit Advance payment: When the buyers credit is doubtful or the seller wants the payment before dispatching the goods then he asks for the advance payment where the money is paid before taking the ownership of the goods. Open account: By an agreement between buyer and the seller manufactured goods will be delivered to the buyer directly or to his order and the buyer will pay at the end of the agreed period. Bill on collection basis: It is an agreement by which the seller after shipping the goods submits the documents to his bank as agent for collection. Bill of exchange may be defined as an order given by the exporter to the importer to pay the amount of sale value mentioned in it. It is sent along with the other documents by the exporter bank within 21 days of shipment of the goods (if the documents are under LC term then the bank may deny to make the payment to the exporters bank if the documents are received after 21 days, since it will treat it as a discrepancy. Once discrepancies have been found the exporter will get the amount only if the importer wishes. The issuing bank has no obligation in the case where any discrepancy is found) to the importer bank so that he can give it to importer. Bill of exchange is first among all the documents given to the importer and when importer makes the payment then only he is entitled to receive other documents with the help of which he can release his goods from the dock. Follow up of overdue bills (when the terms are not under LC): It is the duty of the importers bank that if the payment by the importer is not made to the exporter after the due date then he must return the documents back to the exporters bank within 180 days so that the exporters bank can crystallize the bill. If importers bank has

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not send the documents after 180 days then the exporter reports this to RBI(in case if the exporter is in India).RBI then prepares a list of defaulters. It will also make necessary adjustments in the balance of payments. When exporter gets his documents back he will call his goods also back to him. After this no transaction is possible. In such a case exporter has to look for alternate buyer. Documentary credit: It provides complete financial security to the seller of the goods. Once a letter of credit is established by the buyers bank on the behalf of the buyer in favour of the seller and the seller submits the set of required documents to the opening bank or to the nominated bank seller is assured of the payment.

Types of documentary credit:

a) Revocable- irrevocable credit A revocable letter of credit may be amended or cancelled at any moment without the prior notice to the beneficiary. Irrevocable credit has to be amended or cancelled with the consent of Applicant and Beneficiary. b) Confirmed credit: When a bank in the exporters country has added its confirmation by way of an additional undertaking to make payment at the specific request of the issuing bank, it becomes a confirmed credit (article 9). c) Back to back credit: In the case where exporter is not the actual manufacturer and he gets his work done by the sub - suppliers and if the sub suppliers demand letter of credit in their favour, the exporter approaches his banker to establish second set of letters of credit on the basis of export letter of credit received by him. The second set of credit opened by the bank at the request of the exporter is known as back to back credit.

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BANK GUARANTEE:
The term bank guarantee can be defined as: a guarantee given by a bank to a third person, to pay him a certain sum on behalf of the banks customer, on the customer failing to fulfill any contractual or legal obligations towards the third person. Various types of bank guarantees: 1. Financial guarantee: These are the guarantee issued by bank on behalf of the customers, in lieu of the customer being required to deposit cash security or earnest money. These kinds of guarantees are mostly issued on behalf of customers dealing with government departments. If the contractor does not fulfill his obligation then the government department invokes the guarantee and collects the money from the bank. 2. Performance guarantee: These are the guarantees issued by the bank on behalf of its customer whereby the bank assures a third party that the customer will perform the contract entered into by the customer as per the condition stipulated in the contract, failing which the bank will compensate the third party up to the amount specified in the guarantee. Banks obligation to pay primary Bank guarantees are called the life blood of international commerce and even though they are an off shoot of a primary contract between the debtor and the creditor, these guarantees are independent commitments taken by bank on behalf of the customers. The obligation of the bank is irrespective of the disputes between the beneficiary and the debtor.

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Precautions which bank takes while issuance of bank guarantee: The banks criteria taken into consideration while issuance of bank guarantee on the following basis: 1) Amount guaranteed: when the bank issues a guarantee, first and the foremost consideration that it takes is the amount he is called upon to issue. In the guarantee agreement the amount has to be specifically stated both in figures and words. Care should be taken to state whether the amount is inclusive of all interest, charges, taxes and other levies. This is important to avoid unnecessary disputes regarding the liability of the bank. 2) Period of guarantee: Bank always specifies the period for which their guarantee subsists and an additional period during which a claim has to be made on the bank to make payment. The former period during which the guarantee subsists is called the validity period and the latter the claim period. If any default has been committed by the debtor (i.e. the banks customer) it should be within the validity period. It is thus necessary as a matter of great caution that this period e specified to the exact date. Once this outer limit for the bank to guarantee default of the debtor is fixed then the creditor can make a claim only if the default has occurred within this period, an for any default beyond this date the bank cannot be held liable. Claim period in a guarantee: in a guarantee it is necessary to provide for a period slight longer than the validity period for the beneficiary to make a claim. The claim period is usually a few months more than the validity period of the guarantee.

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OBJECTIVES
To study the Financing of External Trade in HDFC Bank industry in detail To study the Investment procedure in Financing of External Trade in HDFC Bank To study the Accounting and Valuation methods of Financing of External Trade in HDFC Bank To study in brief various Financing of External Trade in HDFC Bank promoted by other competitors To study the investors Preference regarding Investment in Financing of External Trade in HDFC Bank

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SCOPE OF THE STUDY

In current scenario, the bank rates have been cut down rapidly due to severe competition, so people are not going for contemporary deposits because that cannot provide them the better returns or the desired interest rates. So, they can look for some other investment options like Financing of External Trade in HDFC Bank, which can provide them higher returns in medium to long term and can easily meet their financial goals. To look out for new prospective customers who are willing to invest in Financing of External Trade in HDFC Bank. A Pioneering Beginning founded by Alexander Duncan as Commercial Credit in 1912, our company was a pioneer in the consumer finance industry. In 1916, we offered an installment loan program to help people purchase what was then an ex HDFC ng new invention - the automobile. That led to the development of installment buying plans for home appliances and other consumer goods.

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RESEARCH METHODOLOGY Primary Objective:

The primary objective is to study, understand and analyze various aspects related to the Investment patterns of Trusts and Societies.

Research Design:
The research is based on the information collected by the help of the questionnaires filled. The first three questions aim at the basic introductory information of the organization and the person being interviewed thus rendering the follow up work easier. The fourth question is about the financial standing of an organization, it gives an idea about the financial status of the society being approached. The fifth question aims at generating information about the various sources of funds of the societies. The sixth and seventh questions deal about the financial performance of the societies. The eighth question is to find out about what a society does with the surplus amount generated by them. The ninth question is meant to gather information about the people who are instrumental in advising and putting to action the investment plans for the society. The tenth question is about what kind of investments are preferred by the society, on the basis of the organization or on the basis of the time period. The eleventh question talks about the institutions in which the societies make their investments in, say the banks or other institutes. The twelfth question tries to assess what is it exactly that the societies look for, while investing. For example do they prefer a high rate of interest, or safety, or location, etc.. Thus the research is based only on the basis of the information gathered with the help of the questionnaires.

Sample design:
The objective is to study the investment pattern of various Trusts and Societies. For this purpose I obtained a list of all the trusts situated in Delhi. Due to lack of time I had to

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focus my study on all the Societies situated in South Delhi. I made a list of all the trusts situated in the south and targeted them in order to generate the required information.

Data Collection:
Data has been collected from sources like books, periodicals, journals, newspapers, Internet and through the questionnaires. PRIMARY DATA: Primary data was collected from the sample by a self-administered questionnaire in presence of the interviewer. SAMPLE SIZE The survey is conducted among 100 respondents. SAMPLE AREA Delhi SAMPLE DURATION 3 months

SECONDARY DATA: The chief sources of secondary data were magazines, newspapers, journals etc. Research methodology means the method carried out to study the problem. It shows the type of the sample design used, its size and the procedure used to dew sample. The extent of precision achieved and the method used for handling any special problem during the course of the study.

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DATA ANALYSIS

1.

Does HDFC Bank have reasonable rate of interest for providing loans for external trade?

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
yes no cant say 93% 4% 3%

yes no cant say

Interpretation
The response to the above question heavily states that HDFC bank charge reasonable rate of interest for external trade loans as 93% of respondents belong to yes category.

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2.

Are you fully aware of the Functions, Features and Range of the finance that HDFC is offering ?
a) Yes b) No

A B

Yes No

76 5

Range Satisfaction

6%

a Yes b No

94%

Findings Out of total people surveyed 94% of them say that they are satisfied with the present range of finance and rest 6% suggest that some changes should introduce:

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3. Do you think that the criteria for selection to finance should anything to do with education?

60% 50% 40% 30% 20% 10% 0%

yes no cant say 27% 52% 21%

yes no cant say

Interpretation
As regards the relationship between financing criteria and educational qualification, the response is quite hazy. 27% of the respondents are of the opinion that the financing criteria should be guided by educational qualification of the candidates whereas 52% of the respondents are not for such a link and it is understood that they put more emphasis to their experience over the education of fresh candidates.21% of respondents cant say anything.

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4.

Do you think that HDFC Bank providing finance is essential for the consumer productivity with the bank in the present day scenario?

80% 70% 60% 50% 40% 30% 20% 10% 0%

yes no cant say 79% 5% 16%

yes no cant say

Interpretation
79% of the respondents agree whereas 5% dont and 16% cant say anything about it.

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5.

Do you believe that there exists any bias in financial process or selection criteria of HDFC bank?

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

yes no cant say 34% 48% 18%

yes no cant say

Interpretation
48% of the officials claim that there is no bias or prejudice on the part of the bank administration so far as financial process and practice of the bank is concerned but that does not give us license to reject the response of the 34% of the employees who think that there exists some sort of bias in the recruitment and training of the officials. Whereas 18% of the employees cant say anything about biasness.

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Q.6

What is the satisfaction level of consumers with number of branches of HDFC Bank ?
SATISFACTION LEVEL WITH NUMBER OF BRANCHES
25 20 15 10 5 0 Very Satisfied Somewhat Satisfied Neither Satisfied nor Dissatisfied Somewhat Dissatisfied 4 0 Very Dissatisfied 20 16 10

Interpretation
HDFC Bank has 57 Branches all over India, and in Delhi alone it has 13 Branches. From the study we can see that about 40% of the total respondent has said that they are somewhat satisfied with the number of Branches of HDFC Bank, and only 8% of the total respondents have said they are very satisfied with number of Branches. There is a large portion of respondent (32%) who are neither satisfied nor dissatisfied with number of HDFC Bank Branches whereas 10% of the respondents are somewhat dissatisfied.

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Q. 7

Is minimum balance for financing in external trade with HDFC bank (rs. 10000) too high?

IS MINIMUM BALANCE (RS. 10000) TOO HIGH ?

No 11%

Yes 89%

Yes No

89% 11%

Interpretation
The Banks which operate in the Private Sector have not been able to gain such a foothold in the Market of Saving Accounts when compared to the Nationalized Banks 89% of people are not satisfied with this minimum balance ,whereas 11% are satisfied

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Q. 8 What factor having most bearing on choosing HDFC Bank?

FACTOR HAVING MOST BEARING ON CHOOSING A BANK

Rate of Interest Offered 3%

Others 16%

Branch near Office/Residenc e 36%

Reputation of Bank 45%

Reputation of bank Branch near office/residence Rate of interest Others

45% 36% 3% 16%

Interpretation
All Banks are keen to find out that one reason that made a prospective client make up their mind to open an Account with the Bank, this is a very important aspect but the truth of the matter is that there is no single one reason which convinced the customer to open an account with the Bank , a variety of reasons in acting in tandem help a prospective customer make up his mind.

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FINDINGS
1. The trusts can participate in finance of only those institutions which have the Trustee Security and Benefit Status under Sec. 11(5)(ix)). Due to this legal compulsion the options with the trusts to invest in the fixed deposits gets restricted. All the more, the trusts usually have very large amounts and placing these deposits with small and not very reliable companies is not advisable because of safety reasons. HDFC enjoys a reputation of never having defaulted in its interest payments or refund of deposits. HDFC holds the Numero Uno position. As was said earlier with the people considering banks to be the safest options for deposits all that HDFC needs to do is to bank upon its unquestionable strength. 2. An awareness needs to be created amongst the masses about the importance of Credit Ratings and what it actually means to earn such credible ratings as FAAA & MAAA for 11 consecutive years which has been a significant achievement of HDFC over the years. 3. The additional questions that formed a part of the post interview discussion brought into light the fact that the people come to know about the various schemes offered by the financial institutions through the newspapers, magazines and journals. With the response available, it was seen that HDFC needs to strengthen upon the reach of its advertisements. 4. A lot of stress has been laid on spreading the information regarding the financing schemes in the report. In this context HDFC is constrained because it can advertise only in a statutory format approved by the NHB. But advertising is absolutely essential and the corporation must advertise within the framework prescribed by the NHB. 5. To conclude, it can be said that the biggest asset of HDFC is its goodwill and the corporation must exploit this goodwill to the maximum possible extent to increase the participation of the general public at large and the trust sin particular in its fixed deposits schemes.

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SUGGESTION & RECOMMENDATION

The following are the points of consideration :1. It is required that the depositor trust and the potential depositor trust be sent a comparative interest rate table showing the rate of interest being offered by the various housing finance companies and other such institutions. 2. It is so because when HDFC cuts interest rates the media publicizes it widely, while when other housing finance companies do the same it goes unnoticed. This has given an impression to the trusts that HDFC is paying lower rate of interest. 3. The fact that people consider banks to be more safe than any other institution and safety being the most preferred criteria for their selection of investment schemes, HDFC Ltd can bank upon advertising in a manner that emphasizes the companys advantage in this aspect. 4. The role of advertising has been very limited in collecting deposits. This needs to change, for more advertising brings more deposits. 5. The deposit schemes can be advertised to the trusts by post. A brochure giving details of the deposit schemes can be sent to the trusts who have not been participating in the deposit scheme of HDFC. 6. It is known that HDFC is at a disadvantage as are other housing finance companies when it comes to advertising due to the restriction by the NHB. But still the deposits schemes must be advertised within the framework laid down by the NHB. 7. Most people known HDFC as a lending institution and do not know that HDFC also accepts deposits. This fact makes it very important to advertise vigorously, the deposit schemes of the corporation. 8. To increase the goodwill of the corporation further in the minds of the depositors. HDFC should send greetings to its depositors on such occasions as festivals. Small New Year gifts such as cards, calendars, diaries, etc can also be sent.

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LIMITATIONS
As far as limitations are concerned present research work has been completed in the face of following major constraints. The date used in my research study is secondary data. Latest data and information about Financing of External Trade in HDFC Bank is very less. The data is available till the year 2007 in most of the cases. Limited analytical techniques have been used due to the nature of data available on the subject.

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