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SECTION-I
RESERCH METHODOLOGY 1. RESERCH OBJECTIVE:
1. To understand the basic functional areas and their respective functions. 2. To evaluate the companys performance in over all industry growth. 3. To measure individual functional area in banks performance. 4. The effect of various political, social, economical and technological factors.
2. RESERCH METHODOLOGY:
Source of Data: The data collected for the study was primary in nature as well as secondary data Research Instrument: Research tools were in depth interview of company employees. Sample Unit: Data collection from various departmental heads including Managers and executives. Sampling procedure: Non-probability judgment sample was selected for accurate information. Contact method: Here we have conducted personal interview for data collection.
SECTION-I
INTRODUCTION
1. History of Indian banking
A bank is a financial institution that provides banking and other financial services. By the term bank is generally understood an institution that holds a Banking Licenses. Banking licenses are granted by financial supervision authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making loans. There are also financial institutions that provide certain banking services without meeting the legal definition of a bank, a so-called Non-bank. Banks are a subset of the financial services industry. The word bank is derived from the Italian banca, which is derived from German and means bench. The terms bankrupt and "broke" are similarly derived from banca rotta, which refers to an out of business bank, having its bench physically broken. Moneylenders in Northern Italy originally did business in open areas, or big open rooms, with each lender working from his own bench or table. Typically, a bank generates profits from transaction fees on financial services or the interest spread on resources it holds in trust for clients while paying them interest on the asset. Development of banking industry in India followed below stated steps.
Banking in India has its origin as early as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu Jurist, who has devoted a section of his work to deposits and advances and laid down rules relating to rates of interest. Banking in India has an early origin where the indigenous bankers played a very important role in lending money and financing foreign trade and commerce. During the days of the East India Company, was the turn of the agency houses to carry on the banking business.
HDFC Bank Ltd. In the first half of the 19th century the East India Company established three banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843. These three banks also known as Presidency banks were amalgamated in 1920 and a new bank, the Imperial Bank of India was established in 1921. With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial Bank of India was taken by the newly constituted State Bank of India.
The Reserve Bank of India which is the Central Bank was created in 1935 by passing Reserve Bank of India Act, 1934 which was followed up with the Banking Regulations in 1949. These acts bestowed Reserve Bank of India (RBI) with wide ranging powers for licensing, supervision and control of banks. Considering the proliferation of weak banks, RBI compulsorily merged many of them with stronger banks in 1969.
The three decades after nationalization saw a phenomenal expansion in the geographical coverage and financial spread of the banking system in the country. As certain rigidities and weaknesses were found to have developed in the system, during the late eighties the Government of India felt that these had to be addressed to enable the financial system to play its role in ushering in a more efficient and competitive economy. Accordingly, a high-level committee was set up on 14 August 1991 to examine all aspects relating to the structure, organization, functions and procedures of the financial system. Based on the recommendations of the Committee (Chairman: Shri M. Narasimham), a comprehensive reform of the banking system was introduced in 1992-93. The objective of the reform measures was to ensure that the balance sheets of banks reflected their actual financial health. One of the important measures related to income recognition, asset classification and provisioning by banks, on the basis of objective criteria was laid down by the Reserve Bank. The introduction of capital adequacy norms in line with international standards has been another important measure of the reforms process.
HDFC Bank Ltd. 1. Comprises balance of expired loans, compensation and other bonds such as National Rural Development Bonds and Capital Investment Bonds. Annuity certificates are excluded. 2. These represent mainly non- negotiable non- interest bearing securities issued to International Bank. 3. At book value. 4. Comprises accruals under Small Savings Scheme, Provident Funds, Special Deposits of Non- Government In the post-nationalization era, no new private sector banks were allowed to be set up. However, in 1993, in recognition of the need to introduce greater competition which could lead to higher productivity and efficiency of the banking system, new private sector banks were allowed to be set up in the Indian banking system. These new banks had to satisfy among others, the following minimum requirements: (i) (ii) (iii) (iv) (v) It should be registered as a public limited company; The minimum paid-up capital should be Rs 100 crore; The shares should be listed on the stock exchange; The headquarters of the bank should be preferably located in a centre Financial Institutions like International Monetary Fund, International Bank for Reconstruction and Development and Asian Development
which does not have the headquarters of any other bank; and The bank will be subject to prudential norms in respect of banking operations, accounting and other policies as laid down by the RBI. It will have to achieve capital adequacy of eight per cent from the very beginning. A high level Committee, under the Chairmanship of Shri M. Narasimham, was constituted by the Government of India in December 1997 to review the record of implementation of financial system reforms recommended by the CFS in 1991 and chart the reforms necessary in the years ahead to make the banking system stronger and better equipped to compete effectively in international economic environment. The Committee has submitted its report to the Government in April 1998. Some of the recommendations of the Committee, on prudential accounting norms,
HDFC Bank Ltd. particularly in the areas of Capital Adequacy Ratio, Classification of Government guaranteed advances, provisioning requirements on standard advances and more disclosures in the Balance Sheets of banks have been accepted and implemented. The other recommendations are under consideration.
The banking industry in India is in a midst of transformation, thanks to the economic liberalization of the country, which has changed business environment in the country. During the pre-liberalization period, the industry was merely focusing on deposit mobilization and branch expansion. But with liberalization, it found many of its advances under the non-performing assets (NPA) list. More importantly, the sector has become very competitive with the entry of many foreign and private sector banks. The face of banking is changing rapidly. There is no doubt that banking sector reforms have improved the profitability, productivity and efficiency of banks, but in the days ahead banks will have to prepare themselves to face new challenges.
HDFC Bank Ltd. like India. Sibs network of 9033 domestic branches and 48 overseas offices is considered to be one of the largest for any bank in the world. The economic reforms unleashed by the government in early nineties included banking sector too, to a significant extent. Entry of new private sector banks was permitted under specific guidelines issued by RBI. A number of liberalization and de-regulation measures aimed at consolidation, efficiency, productivity, asset quality, capital adequacy and profitability have been introduced by the RBI to bring Indian banks in line with International best practices. With a view to giving the state-owned banks operational flexibility and functional autonomy, partial privatization has been authorized as a first step, enabling them to dilute the stake of the government to 51 per cent. The government further proposed, in the Union Budget for the financial year 2000-01, to reduce its holding in nationalized banks to a minimum of 33 per cent on a case by case basis. The banking system can be broadly classified as organized and unorganized banking system. The unorganized banking system comprises of moneylenders, indigenous bankers, lending pawnbrokers, landlords, traders, etc. Whereas the organized banking system comprises of Scheduled Banks and Non-Scheduled Banks that are permitted by RBI to undertake banking business.
HDFC Bank Ltd. (a) State cooperative bank, or (b) A company according to the definition of the companies Act1956, or (c) An institution notified by the central government, or (d) A corporation or a company incorporated by or under any law in force in any place outside India. Thus, (I) Indian Commercial Banks (II) Foreign Commercial Banks, and (iii) State Cooperative Banks fulfilling the above condition are considered as scheduled banks. Moreover under the RBI Act section 42, the Central Government has declared the following banks as scheduled banks. (i) (ii) (iii) State Bank of India and its seven subsidiary banks, Twenty nationalized banks, and Urban Banks.
In June 1980 there were 149 scheduled banks which included (i) (ii) (iii) (iv) Public Sector Banks Private sector Banks, Foreign Exchange Banks and State Cooperative Banks.
A bank which wants to register its name as scheduled bank has to apply to the Central Government. On receiving such application, the central government orders RBI to investigate the banks accounts. If RBI gives favorable reports, the central government sanctions its proposal, and the bank is listed under schedule annexure II and is considered as a scheduled bank. Some co-operative banks come under the category of scheduled commercial banks though not all co-operative banks. PUBLIC SECTOR BANKS
HDFC Bank Ltd. Public sector banks are those in which the Government of India or the RBI is a majority shareholder. These banks include the State Bank of India (SBI) and its subsidiaries, other nationalized banks, and Regional Rural Banks (RRBs). Over 70% of the aggregate branches in India are those of the public sector banks. Some of the leading banks in this segment include Allahabad Bank, Canara Bank, Bank of Maharashtra, Central Bank of India, Indian Overseas Bank, State Bank of India, State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Travancore, Bank of Baroda, Bank of India, Oriental Bank of Commerce, UCO Bank, Union Bank of India, Dena Bank and Corporation Bank.
PRIVATE SECTOR BANKS Private Banks are essentially comprised of two types: Old banks and New banks The old private sector banks comprise those, which were operating before Banking Nationalization Act was passed in 1969. On account of their small size, and regional operations, these banks were not nationalized. These banks face intense rivalry from the new private banks and the foreign banks. The banks that are included in this segment include: Bank of Madura Ltd. (now a part of ICICI Bank), Bharat Overseas Bank Ltd., Bank of Rajasthan, Karnataka Bank Ltd., Lord Krishna Bank Ltd., The Catholic Syrian Bank Ltd., The Dhanalakshmi Bank Ltd., The Federal Bank Ltd., The Jammu & Kashmir Bank Ltd., The Karur Vysya Bank Ltd., The Lakshmi Vilas Bank Ltd., The Nedungadi Bank Ltd. and Vysya Bank. The new private sector banks were established when the Banking Regulation Act was amended in 1993. Financial institutions promoted several of these banks. After the initial licenses, the RBI has granted no more licenses. These banks are gearing up to face the foreign banks by focusing on service and technology. Currently, these banks are on an expansion spree, spreading into semi-urban areas and satellite towns. The leading banks that are included in this segment include Bank of Punjab Ltd., Centurion Bank Ltd., Global Trust Bank Ltd., HDFC Bank Ltd., ICICI
HDFC Bank Ltd. Banking Corporation Ltd., IDBI Bank Ltd., IndusInd Bank Ltd. and UTI Bank Ltd. Co-operative Banks Co-operative banks act as substitutes for moneylenders, and offer timely and adequate short-term and long-term institutional credit at reasonable rates of interest. Co-operative banks are relatively similar in terms of functions to the other banks except for the following: a) They are organized and managed on the principal of co-operation, self-help, And mutual help. b) They operate under the rule of "one member, one vote". c) Operate on "no profit, no loss" basis. d) Co-operative bank conducts all the main banking functions of deposit mobilization, supply of credit and provision of remittance facilities. Cooperative banks offer limited banking products and are functionally specialists in agriculture-related products, and even in providing housing loans of late. Urban Co-operative Banks offer working capital loans and term loans as well. e) Co-operative banks primarily operate in the agriculture and rural sector. However, UCBs, SCBs, and CCBs function in semi urban, urban, and metropolitan areas too f) Co-operative banks are probably the first government sponsored, government-supported, and government-subsidized financial agency in India. They get financial and other aid from the Reserve Bank of India NABARD, central government and state governments. They are the "most favored" banking sector with risk of nationalization. g) Co-operative banks normally concentrate on "high revenue" niche retail segments. Development Banks Development banks are primarily intended to encourage industrial development by providing adequate flow of funds to industrial projects. In other words, these 9
HDFC Bank Ltd. institutions undertake the responsibility of aiding all-round development in the countrys economy by promoting new industrial projects, and providing financial assistance for the expansion, diversification, and up gradation of the existing units. Development Banks may be classified as All India development banks and Regional development banks. While All India development banks include Industrial Development Bank of India and Industrial Finance Corporation of India, examples of Regional development banks include State Financial Corporation and State Industrial Development Corporation. B. Non-scheduled Banks: The banks, which are not included in the second schedule of RBI Act, 1934, are known as non-scheduled banks. Such banks total share capital is less than five lakh. These banks are not governed according to the RBI Act and they receive no benefits from the RBI. These banks have no place in the list of recognized banks of the RBI. These banks are not much trusted by the people and they do not get handsome deposits. Since 1951 the numbers of such banks have been gradually decreasing. In 1979 there were only five non-scheduled banks. Generally now days we found many cooperative banks which are belongs to the non-schedule co-operative banks. Following are the types of non-schedule banks they are work like the schedule banks but here difference in its status and it not having the status of the schedule banks. a. b. c. d. e. f. g. (a) Deposits Banks: Generally, banks which provide short-term loans to business and industrial units and which mobilize savings of people as deposits are called deposit banks. Deposit banks Deposits Banks Cooperative Banks Central Banks Exchange Banks Investment or Industrial Banks Land Development Banks Savings Banks
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HDFC Bank Ltd. accept deposits from people, and provide short-term advances. They provide overdraft and cash credit facilities to merchants. To meet the long-term requirement of industrial units is not possible for these banks. They accept three types of deposits- saving bank deposits, fixed deposits and current account deposits. They accept these deposits which are payable on demand or on short notice, and provide funds to trading and commercial units for short durations.
(b) Cooperative Banks Cooperative banks meet the short-term financial needs of farmers. Agriculturists, petty farmers and artisans organize themselves on cooperative principles and form cooperative societies and banks. Cooperative banks raise funds through various means, besides receiving all kinds of deposits to make them available as lendable funds to its members. In India developed cooperative banks supply finance for agriculture and nonagriculture activities. (c) Central Banks A central bank is a special institution which controls and regulates the entire banking structure of country. It also strives to maintain monetary stability of the country. Central bank is also known as the apex bank of a country. Since it functions in the best interest of the country and making profits is unknown to it, it is entrusted the right it issue currency notes. No other bank is allowed this right. It operates in close cooperation with the government of implementing economic policies, thereby promoting economic development.
(d) Exchange Banks: There is a difference in financing of foreign trade and financing of internal trade. Generally a person carrying on international trade requires foreign currencies to meet his obligation. It is here that exchange banks play the role of financing the dealer for
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HDFC Bank Ltd. setting transactions involved in foreign trade, there are specialized banks for exchange business. In India, there is an Export-Import Bank (EXIM). (e) Investment or Industrial Banks: Investment banks provide long-term credit to industries. They raise their funds by way of share capital, debentures, and long-term deposits from the public. They also raise funds by the issue of bonds for business operations and government agencies. Usually they underwrite fresh issue of shares and debentures of companies. Such banks also buy the entire issue of new securities of public limited companies and try to get them subscribed at a higher price by the public. (f) Land Development Banks: Land development banks were earlier known as land mortgage banks. In India, there is limited number of such banks. There are special institutions providing long-term loans to agricultures and farmers. They provide loans on security of land and other immovable properties. They supply long-term funds for periods exceeding six years. Agriculturists and farmers need such funds for making permanent improvements to land and for buying farming machinery and equipment. (g) Savings Banks: Savings Banks are specialized institutions, which encourage general public to save something from their earnings. In other words such banks pool the small savings of middle and lower income sections of society. They are the banks in the true sense of the term and their main aim is to promote and collect of the public. Not only the depositors are given interest, but also they are allowed to withdraw in times of need. The numbers of withdrawal are, however, restricted. Separate savings banks are organized in various nations. The government can also run a savings bank. In India the postal department runs the postal saving bank all over the country.
Economic factors
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HDFC Bank Ltd. Economic factors show the way in which economy is moving. How these all affect the industry should be analyzed. Economic factors such as Interest rates, inflation rates, unemployment rates, gross national product, sectoral growth rate of agriculture, industry infrastructure, level of disposable income, availability of credits affect each industry.
1. GDP:
Gross domestic product (GDP) is the measure of national income. Its trend shows the actual picture of countrys economy. It is a measure of wealth and health of economy. India is one of the fastest growing economies in world today. Everybody is looking at India. Its GDP is higher than most countries in the world.
Source: CMIE
In the FY 2004 GDP grew at 8%. This affect positively on banking sector. Overall economy boosted. There was increase in transactions and increase in investment. Demand for money increased and good sign for economy. GDP is expected to grow at 7% in FY2005. Which is good sign for economy.
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HDFC Bank Ltd. There is consistent increase in growth rate of GDP. The Goldman Sachs has projected long term trend in GDP, which is expected to be higher than other developing countries like china and Brazil.
2. Inflation
High inflation can adversely affect Indian economy. It is a high inflation period in India due to increase in crude oil prices in international market and below average monsoon in India this year. It is the joint responsibility of RBI and Government to bring down inflation. RBI through some measures like change in interest rate cut in CRR and SLR and open market operations control the inflation. This will directly have a impact on banking sector if there is rise in CRR ratio, the banks will left with less amount to offer to public and can affect their profitability. Interest rate changes can affect banks as well. High inflation discourages deposits especially long term. Because the real increase in deposit will be negligible if there is high inflation. So, people invest their money in mutual funds and stock market to earn higher return.
4. Agriculture credit:
As per the agenda of its Common Minimum Program (CMP), the UPA government plans to double agricultural credit by 2007. This means a CAGR of 25% over the next three years. The agricultural credit has been growing at a healthy 17-18% in the last three years. At a more realistic 20% CAGR too, the agricultural credit would touch around 14
HDFC Bank Ltd. Rs1500bn by 2007. This means a bonanza for farmers, as it will put more money in their hands. Exhibit: Expected growth in agricultural credit
1600 1400 1200
Rs. bn
1000 800 600 400 200 0 2001 2002 2003 2004 2005E 2006E 2007E
A look at the composition of total agricultural credit shows some interesting details. The exposure of commercial banks in total agricultural credit has declined over the last few years from 53% in 2001 to 50% in 2004, while on the other hand the share of Co-op banks have shown a corresponding increase. Banks will be asked to directly lend to the farmers instead of following the usual indirect lending practice of subscribing to NABARD bonds.
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100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
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50 6 44
50 7 43
53 7 40
53 8 39
50 8 42
50 7 43
50 6 44
53 8 39
E 04 20 20
98
99
00
01
02
03
19
20
20
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5. STOCK market
Recently there is a bullish trend in stock market. Sensex is going to touch 6000 points. Most of the shares are at their historic high positions. Investors confidence in stock market has increased. They expect this trend to persist for a long time. This has affected negatively on banking industry. People has attracted toward direct investment in shares as they are giving higher return than banks. Mutual funds are performing best, so all these factors have contributed toward fall in deposits. But on the other economy flourishes, demand for money for investment is increasing.
6. INTEREST rate
By monetary policy 2004-05 RBI kept interest rate unchanged at 6%. Before that Interest rate was decreasing. This will lead to increase in demand for loans because if the loans are available at cheaper rate then people will ask for more loans to make investments.
Technological Factors
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05
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Technology in Banks:
Both public and private banks are spending large amounts of money on technology to provide innovative products and services to their customers with more convenience and satisfaction. Technology is reducing the cost of transaction and helping to increase customer base and enable wider reach. These innovations are happening not only in the retail-banking segment but also in the corporate segment. Today, banks are able to provide products, which were a distant dream in the past. For example, RBI declared that it is going to start an innovative payment and settlement system named Real Time Gross Settlement, which will make the banking, services faster and more efficient for the customers. Funds transfer between banks under the system will be on real time basis. Technology is changing the way banks interface with their customers, resulting in increased customer base for the banks. The customer need not go to a branch for a transaction; he can do it via Internet, mobile phone or even the landline. Core Banking Solution Core banking solution is the buzzword today and every bank is trying to adopt it. It is a centralized banking platform through which a bank can control its entire operation. The adoption of core banking solution will help banks to roll out new products and services. ATMs China has around 65,000 installed ATMs and the global average is of two or three ATMs per branch. Compared to these figures, India is far behind with an installed ATMs base of around 10,000. Though banks plan to invest heavily in new ATMs in the coming two to three years, it is expected that there will be only around 17,000 ATMs by the end of 2004.
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SECTION-II
ABOUT HDFC BANKS PROFILE
1. ABOUT HDFC BANK
The Housing Development Finance Corporation (HDFC) was amongst the first to receive an 'in-principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of RBI's liberalization of the Indian Banking industry in 1994. The Bank was incorporated in August 1994 in the name of 'HDFC Bank Limited' with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995 HDFC Bank, the pioneer of the retail-banking movement in India, is one of the fastest growing and most profitable banks in India with a strong urban presence. The bank, with a market share of 2.5% has a wide reach across the country with a branch network of 425 branches and 950 ATMs. Strong understanding of the retail sphere (46% of total advances in 9mFY05) and technology initiatives has made the bank the second largest private sector bank in the country. The bank has largely outpaced the sector growth over the last few years, but of late the growth momentum has been subdued due to competitive reasons. HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 250 branches spread over 135 cities across the country. All branches are linked to each other through an online real- time basis. Customers in 80 locations are also serviced through Phone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centres where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE have a strong and active member base. The Bank also has a chain of over 800 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international
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HDFC Bank Ltd. Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express credit/charge cardholders. HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the bank's branches have connectivity which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The Bank has made substantial efforts and investments in acquiring the best technology available internationally to build the infrastructure required for a world-class bank. In terms of software, the Corporate Banking business is supported by Flexcube, while the Retail Banking business by Finware, both from i-flex Solutions Ltd. The systems are open, scalable and web-enabled. The Bank has prioritized its engagement in technology and the internet as one of its key goals and has already made significant progress in web- enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share. The Bank has received recognition both nationally and internationally for 'The Best Bank' on various parameters in publications like Euro money and Finance Asia. The Bank's IT department has a total staff strength of 120 (approx.), with a mix of functional and technical specialists. The project managers for new IT initiatives are designated both from this group and from businesses. Almost all the project development and application maintenance activities are outsourced to IT vendors.
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HDFC Bank Ltd. HDFC was incorporated in 1977 with the primary objective of meeting a social need that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million. Against the milieu of rapid urbanization and a changing socio-economic scenario, the demand for housing has grown explosively. The importance of the housing sector in the economy can be illustrated by a few key statistics. According to the National Building Organisation (NBO), the total demand for housing is estimated at 2 million units per year and the total housing shortfall is estimated to be 19.4 million units, of which 12.76 million units is from rural areas and 6.64 million units from urban areas. The housing industry is the second largest employment generator in the country. It is estimated that the budgeted 2 million units would lead to the creation of an additional 10 million man-years of direct employment and another 15 million man-years of indirect employment. MILE STONES Acquired TimesBank in merger from Times Of India Group (5 6% present holding) in 2000. HDFC owns only 24.4%, rest owned by public and private equity investors JP Morgan Chase (5 -6%). Large Foreign Insitutional Investors (in India) including Putnam, etc. (big vote in Indian equity markets) 10-11% W arburg Pincus has a significant holding in HDFC (its promoter Having identified housing as a priority area in the Ninth Five Year Plan (1997-2002), the National Housing Policy has envisaged an investment target of Rs. 1,500 billion for this sector. In order to achieve this investment target, the Government needs to make low cost funds easily available and enforce legal and regulatory reforms.
Mission
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HDFC Bank Ltd. HDFC Bank's mission is to be a world-class Indian Bank. The Bank's aim is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services in the segments that the bank operates in and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity and regulatory compliance. HDFC Bank's business philosophy is based on four core values: Operational Excellence, Customer Focus, Product Leadership and People. (source: Annual report-2004-05)
Organizational Goals
HDFCs main goals are as follows: Develop close relationships with individual households, Maintain its position as the premier housing finance institution in the country, Transform ideas into viable and creative solutions, Provide consistently high returns to shareholders, and To grow through diversification by leveraging off the existing client base.
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SHARE HOLDING PATTERN Share Holding Pattern Indian Promoters Foreign collaborators Indian inst/Mut Fund FIIs/GDR Free float Shareholders 24.20% 13.10% 2.10% 26.90% 33.70% 215,630
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HDFC has a staff strength of 1029, which includes professionals from the fields of finance, law, accountancy, engineering and marketing. Click here for details of Senior Management (Source: Annual report 2004-05)
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Vice Chairman
Executive Director
Managing Director
Account Manager
Assistant
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Teller Authorizer
Clearinghouse
Sales Executive
Personal Banker
Teller
Functions
Branch manager
Require approval from BM for transaction more than 50,000 RS. organising coordinating and motivating employees in the organization. Develop his territory.
Personal Banker
Maintain contacts with walk-in customers, existing customers and provide satisfactory service to them. Handle all the complaint of the customers and resolve it. Maintain daily stock reports and take approval from the PB authorizer.
Teller Authorizer
He gives approval to all types cheques and DDs by checking all the details and validity of it. At the end of the day all the cash on hand in the bank require signature of him.
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HDFC Bank Ltd. Report of cash loading in ATM is to be submitted to him. He is responsible for it.
Teller
Maintain daily transactions of cheque withdrawal, cheque deposits, cash withdrawal cash deposit, fund transfer and DD etc. Check the validity of all the above transactions.
Clearinghouse
All the cheques are being transferred to this department and it checks the sign, balance amount in his/ her a/c, date of issuing. It also maintains the transaction with other branches and banks. DRF forms are being handled by this department.
Sales Executive
Generate new inquiries by cold calling and tele marketing. Handle existing and new customers. Maintain customer relation ships.
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Features
Comforts of free Phone Banking, Mobile Banking and NetBanking from practically anywhere, anytime with your savings account. International Debit Card to shop at over 80 lakh establishments in 140 countries. Pay your electricity, mobile phone and telephone bills through the phone, Internet or the ATM with the unique BillPay Facility. All this is yours for a minimum balance of just Rs. 5000/-.
e-Age Advantages
HDFC Bank uses state-of-the-art technology to give you an array of value-added services. Use this convenient facility to pay your electricity, phone and mobile phone bills with a single call, mouse click or from any of HDFC Banks ATMs. The bill amount for all services you have registered for is presented online.
ATM facility
User can access their account with International Debit card, 24 hours a day, 365 days a year from ATMs spread across India." Withdraw cash form over 1000 ATMs in India & over 5.3 lakh ATMs across the globe.
You can conveniently bank across the counter at any of our 467 branches across the country, absolutely FREE, for transactions up to Rs. 50,000/- per day. For transactions over
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HDFC Bank Ltd. this limit, you incur nominal charges. 3.50% interest per annum* credited to your account, at quarterly intervals.
Sweep-In Account
With the Sweep-In facility, you can automatically transfer funds from your Fixed Deposit to your Savings Account whenever needed.
Fees
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You can open your Savings Account with a minimum deposit of only Rs. 5,000/-. * Alternatively, you automatically gain access to a zero balance Savings Account, when you open a Fixed Deposit for Rs. 50,000/-. When you select this option, you are not charged a service fee, even if you are unable to maintain an average balance of Rs. 5,000/-.* your minimum average quarterly balance maintained must be Rs. 5,000/-. If youre minimum average quarterly balance is less than Rs. 5,000/- a service charge of Rs. 750/- will be levied per quarter.
2. Current account
The Advantages
You can access your account anytime and anywhere, to withdraw cash, deposit cash/cheques, make balance inquiries or ask for mini-statements, or make a cheque book request. Useful inter-city banking Safe & convenient intra-city banking
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HDFC Bank Ltd. Acceptance of cash at the home branch is as per branch's discretion Safe deposit locker available in select cities and branches for valuables and important documents. Free personalized cheque book of 50 leaves for enhanced security. Rs. 2/- per leaf is charged for subsequent cheque books. For banking services that complement your business, open a Regular Current Account with HDFC Bank right away.
Fees
All you need is to maintain an average balance of Rs.10,000/- per quarter. (Nonmaintenance of this balance entails a nominal charge of Rs. 750/-)
4. Demat Account
Mutilated certificates, lost certificates, postal delays and counterfeit shares are a thing of the past. Enter a world of safe, secure and convenient buying, selling and transacting without suffering endless paperwork and delays. Convert your securities to electronic format with the HDFC Bank Demat Account. It's as easy as opening a bank account. HDFC Bank provides online access to your Demat Account, so that you can check your holding using the NetBanking facility.
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HDFC Bank Ltd. Change of name, address, dividend mandate, registration of power of attorney, transmission etc. can be effected across companies held in demat form by a single instruction to the DP.
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5. Private Banking
Private Banking is a comprehensive and exclusive service, offered by HDFC Bank, to select high net worth individuals and institutions. The service is provided by an advisory team specialized in financial and investment services. These experienced professionals put together unbiased and objective guidance based on strong research and in-depth analysis of financial instruments taking into account your financial goals and requirements. An experienced Relationship Manager serves as your one-point contact, for your complete banking and investment needs and requirements.
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Applying for a New Car Loans is absolutely simple. Just fill the online Apply form and representative get in touch with you shortly. Phone Banking service is also available.
Criteria
For salaried individuals: Minimum age of Applicant: 21 years Maximum age of Applicant at loan maturity: 58 years Minimum employment: 1 year in current employment and minimum 2 years of employment Minimum Annual Income: Rs 100000 net annual income Telephone: Must at residence For self employed: Minimum age of Applicant: 21 years Maximum age of Applicant at loan maturity: 65 years Minimum employment: At least 3 years in business Minimum Annual Income: Net profit Rs. 60000 p.a for standard cars and Rs.100000 p a for mid-sized and premium cars Telephone: Must at residence For partnership firms: Minimum Income: Net profit Rs. 60000 p.a for standard cars and Rs.100000 p a for midsized and premium cars Minimum turnover: Turnover Rs 4.5 lacs Telephone: One phone at least at business and at residence of the loan executing partner For private limited company: Minimum Income: Net profit Rs. 60000 p.a for standard cars and Rs.100000 p a for midsized and premium cars
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HDFC Bank Ltd. Minimum turnover: Turnover Rs 4.5 lacs Telephone: One phone at least at business premises For public limited company: Minimum Income: Net profit Rs. 60000 p.a for standard cars and Rs.100000 p a for midsized and premium cars Minimum turnover: Turnover Rs 4.5 lacs Telephone: One phone at least at business premises
DOCUMENTATION
For salaried individuals: Proof of Identity: - Passport copy, PAN Card, Voters Id car, driving license (Laminated, Recent, Legible) Income Proof: - Latest salary slip with form 16. Address Proof: - Ration card/Driving license/Voters card/passport copy/telephone bill/ electricity bill/Life insurance policy PAN Card. Bank Statement: - Not mandatory For self employed: Proof of Identity: - Passport copy, PAN Card, Voters Id car, driving license (Laminated, Recent, Legible) Income Proof: - Latest ITR Address Proof: - Ration card/Driving license/Voters card/passport copy/telephone bill/ electricity bill/Life insurance policy PAN Card. Bank Statement: - Waived for small cars, for mid - sized and premium cars if income is greater than Rs 1.5 lacs then bank statement requirement can be waived. For partnership firms: Proof of Identity: - NA Income Proof: - Audited balance sheet, Profit & loss Account for latest two years and the latest 2 years IT returns of the company
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HDFC Bank Ltd. Address Proof: - Telephone Bill/Electricity Bill/Shop & Establishment Act certificate/SSI registered certificate/Sales Tax certificate Bank Statement: - Waived for small cars, for mid - sized and premium cars if income is greater than Rs 1.5 lacs then bank statement requirement can be waived. For private limited company: Proof of Identity: - NA Income Proof: - Audited balance sheet, Profit & loss Account for latest two years and the latest 2 years IT returns of the company Address Proof: - Telephone Bill/Electricity Bill/Shop & Establishment Act certificate/SSI registered certificate/Sales Tax certificate Bank Statement: - NA For public limited company: Proof of Identity: - NA Income Proof: - Audited balance sheet, Profit & loss Account for latest two years Address Proof: - Telephone Bill/Electricity Bill/Shop & Establishment Act certificate/SSI registered certificate/Sales Tax certificate Bank Statement: - NA
7. Personal Loans
A wedding in the family. Maybe your house needs renovation. Or your daughter has obtained admission to a medical college. These are moments in life when you may need a helping hand. That's when you can rely on HDFC Bank Personal Loan. We offer all kind of personal loan meeting your personal requirements in India. The procedures are simple, documentation is minimal and approval is quick.
HDFC Bank Ltd. Convenience of service at your doorstep. Repayment options of 12 to 48 months to suit your wallet. One of the lowest interest rates. No guarantor/security/collateral required. And if you are an HDFC Bank account holder, we have special rates for you.
8. Home loans
Buying a property requires a complete knowledge of real estate and in today's complex financial market it is difficult to choose the appropriate home loan company. HDFC Bank brings home loans at your doorstep. With over 25 years of experience of our parent company HDFC Ltd. and their dedicated team of experts offering a complete package to meet your housing finance needs, and ever eager to guide you with a basket of value added products and services.
9. Credit cards
To help you keep up with the changing times, HDFC Bank offers the finest payment solutions, from Debit Cards to Credit Cards, all internationally valid. Specifically, the HDFC Bank Credit Cards are available as two variants, the HDFC Bank International Silver Card and the HDFC Bank International Gold Card From the best insurance package to the most powerful Rewards Program and the most attractive discount schemes, you will find everything you would naturally expect from HDFC bank. 36
HDFC Bank Ltd. o International Gold Card o International Silver Card o Health Plus International Credit Card o E-Seva International Silver Card
Introducing the HDFC Bank International Gold Credit Card, customized to suit your conveniences and make your lifestyle a truly cherish able golden experience.
Cash Advance
In a situation where you need cash, just step into any one of our ATMs or VISA Member ATMs and withdraw cash up to 40% of your credit limit at a very nominal charge (Please refer to the Schedule of charges).
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HDFC Bank Ltd. Your Card now gets you the highest Free Credit Period of up to 55 days from the date of purchase (subject to the submission of the charge by the Merchant). Subsequently, if you carry forward your outstanding balance you just pay a nominal interest of 2.95% p.m.
Comprehensive Insurance
Provide insurance covers against the various risks you might face. What's special is that the Add-on Card member gets all the insurance covers with the same amounts as the Primary Card member.
Accidental Death:
In case of death in an air accident your nominated next of kin will receive a compensation of Rs.25,00,000. And in case of death in a rail or road accident, your nominated next of kin will receive a compensation of Rs.3,00,000.
Purchase Protection:
All purchases made on your Card are automatically insured against any loss or damage due to burglary or fire. This insurance is valued up to a sum of Rs.50,000 and for a period of 180 days from the date of purchase.
Household Insurance:
As a HDFC Bank Gold Cardmember, you will be covered against fire and burglary of your household contents up to Rs.75,000.
Air Ticketing:
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HDFC Bank Ltd. You can get a discount of 3.5% on domestic and 5.5% on international air tickets and have the tickets delivered at your doorstep. All you have to do is call our authorized travel agent and have them delivered at your doorstep*.
Rail Ticketing:
Our tie-ups with an authorized travel agent(s) across the country ensure that the tickets are delivered at your doorstep.* (subject to their availability).
Loss of Baggage
Post the arrival of your flight, if your checked-in baggage is reported lost/ misplaced, you would be reimbursed up to Rs.60,000 for international flights and up to Rs.20,000 for domestic flights.
Delayed Flight
If your flight gets delayed beyond 12 hours from its scheduled departure time, you would be reimbursed up to Rs.15,000 for international flights and up to Rs.5000 for domestic flights.
Loss of Passport
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HDFC Bank Ltd. During international travel, if you happen to lose your Passport/ Visa, you would be reimbursed expenses incurred in obtaining a new Passport/ Visa subject to a limit of Rs.25,000.
Hijacking
In an unfortunate event of your flight getting Hijacked, you would be eligible to claim upto Rs.300,000 @ Rs.12,500 per hour for international and connecting domestic flights and upto Rs.1,50,000 @ Rs.6,250 per hour for domestic flights.
Note: The Hijacking cover is applicable upto a maximum period of 24 hours post 12 hours
of hijacking. All the travel-related covers applicable to international flights will apply to connecting domestic flights also. Insurance covers are not provided by HDFC Bank. Exclusions/Limitations are applicable as per policies issued by the Insurance companies with whom the Bank is tied up.
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HDFC Bank Ltd. Bank immediately blocks all transactions on your Card and delivers a new Card to you free of cost. Rewards Program Enjoy the benefits of our exciting Rewards Programme. You will earn 2 Rewards Points for every Rs.100 spent on your Card. You can accumulate these Rewards Points for a maximum of 18 months and redeem them for exciting gifts and offers, as soon as you accumulate 1000 points. Please note that cash advances and other fee charges do not qualify for the Rewards programme.
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HDFC Bank Ltd. Most cards charge interest at the rate of 2.95% per month. Transfer the same balance to HDFC Bank's credit card and you will pay interest at the rate of only 1.65% per month. For existing customers of HDFC Bank, we offer a special rate of 1.45% per month for 6 months. Why pay more when you have another way out?
Hassle-free travel
Travel bookings were never so easy. Dreams of a quiet family vacation are often ruined by hassles of travel bookings. Now with the HDFC Bank International Silver Card, book your train and air tickets from the comfort of your home or office.
Train Bookings
Forget those long queues at railway ticket counters and enjoy the convenience of booking train tickets from your home. Our tie-up with SITA Travels for booking of train tickets, will ensure that you can now get train tickets delivered to you at your home. Nominal cost for delivery is charged.
Airline bookings
Avail a 3.5% discount on domestic and 5.5% discount on international travel as a valued HDFC Bank card holder.
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Add on Cards
Get up to 3 supplementary cards for your spouse, parents, siblings (own brother/sister), son and/or daughter (over 18 years) and allow them to enjoy the many benefits of a HDFC Bank International Silver Credit Card. Earn 2 reward points for every Rs. 100 charged to your card. Save these points and redeem them for exciting gifts and offers. What's more - you can save these reward points up to 18 months.
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HDFC Bank Ltd. In case the cardholder is injured in an accident, hospitalization expenses will be covered up to a maximum of Rs. 25,000.
Purchase protection:
All purchases made on the card are automatically insured against any loss or damage due to burglary or fire. This insurance is valued up to a sum of Rs. 25,000 and is applicable for a 90-day period from the date of purchase.
10. Net banking Online Banking / Internet Banking Now up-to-the second access anytime anywhere!
While many banks offer online banking or internet banking facilities, most of them do not offer up-to-the-second account information. Which means that if a cheque issued by you has been debited from your account in the morning, your account status will not reflect this when you log-in to your account in the afternoon. That's because, the account is updated at the end of each day and not instantaneously. HDFC Bank Online is a pioneer with regards to online banking or internet banking services in India and has contributed immensely to changing the face of banking in India. With Net Banking, you can not only view your account balance but also open a Fixed Deposit, transfer funds, pay your electricity, telephone or mobile phone bills and much more. Run through our interactive Net Banking demo to learn more about its various online banking or internet banking features. Also you can now register for this service over the phone! Call our Phone Banking numbers in your city and use your TIN (Telephone Identification Number) to register right away! These services have made banking online in India a pleasure.
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HDFC Bank Ltd. And now, we are proud to introduce for the first time in India a new, powerful feature for our Net Banking customers - One View. With One View you can view not only your HDFC Bank accounts but also your ICICI Bank, Citibank, HSBC, Standard Chartered Bank, Global Trust Bank accounts, Citibank credit cards and HDFC Bank Demat accounts. So you can actually view six banks at the same time on one screen! What's more the service is absolutely FREE! Click here to learn more about One View.
Security
Net Banking uses 128-bit encryption Secure Socket Layer (SSL) technology, one of the most secure forms of transacting and the highest level of security commercially available on the Internet. The site authenticity and security is certified by Version, an independent international authority.
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Request for a new Fixed Deposit, make a Fixed Deposit inquiry or even make a TDS inquiry on your Fixed Deposits. Request for a cheque book, enquire about the status of a cheque issued or stop cheque payment request in an emergency. Request for Demand Draft this will be delivered to your mailing address. Free Online Third-Party Transfer facility instantly transfers funds between your accounts and to a third party who has an account with the bank. Convenience of paying your utility bills Pay your mobile phone, electricity and telephone bills through the Internet using the Bill Pay facility. Demat on the NET helps you view your Demat Account, account holdings, transactions in the account company-wise, and get details regarding pay-in, pay-out dates, etc.
Features
1. Credit card Payment Pay your HDFC Bank Credit card dues through this option. 2. Statement Download You can download your account statement onto your PC for the period of 5 months from the given date. 3. Change Customer profile you can update your mailing address and all your communication from bank will go to this new address. 4. Funds Transfer funds between your accounts, even if they are in different branches/cities. You can also transfer funds to any person having an HDFC Bank account anytime, anywhere, using our Third Party Funds Transfer option. To avail of TPT facility, you have to sign the declaration form, which is available on the Net or at any of our branches. 5 Fixed Deposit Inquiries
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HDFC Bank Ltd. Access details of your Fixed Deposit Account such as Principal Balance, Term of Deposit, Rate of Interest, Maturity Date, Maturity Amount and Instructions for Payment. 6 Demand Draft* Request Issue a DD from your account at special rates. Just select the account to be debited from and give us details of the amount, location and beneficiary. We will even have the Demand Draft couriered to you at your mailing address. (DDs will be issued only where the bank has a branch or has an arrangement with a local bank). 8. Demand Draft Request at Beneficiary's address Net Banking offers a new facility to all its customers. Issue a Demand Draft on the Beneficiary's name and address of your choice. Just select the account to be debited from and give us the details of the amount and beneficiary's name & address where you want the Demand Draft to be delivered. The Demand Drafts would only be delivered within India. (DDs will be issued only where the Bank has a branch or has an arrangement with a local Bank). Note: 1) This facility is only open to users who have registered for Third Party Transfer (TPT). 9. TDS Inquiry Access information on Tax Deducted at Source for all your deposits for the current or previous financial year. 10. Stop Payment Request Request Stop Payment on a cheque or series of cheques online by just entering the cheque number and the reason for stopping payment. 11. Cheque Status Inquiry View the status of a specific cheque issued on any of your accounts. 12. Cheque Book Request Request for a new cheque book online. Your cheque book will be couriered to the address on our records.
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13. Account Balance Inquiry Check your savings or current account balance, including information regarding Uncleared Funds, Ledger Balances, Overdraft Limits and Sweep-In Amounts. 14. Account Statement Inquiry View all the transactions on your account for either the current period (i.e. from date of last statement mailed to you), or a specific period determined by you. You can also request your statement via mail (mailing address will be as per bank records). 15. Customer Support You can use this option to communicate with the Bank for requests, instructions and queries. 16. Demat on the NET If you also hold a Demat Account with us, you can now access your account online. Through Demat on the Internet, you can see your holdings as on the close of the last business day. View your transactions for the last 7 days. Check the status of the shares submitted for Demat in the last one month. We also provide you with an ISIN search and a calendar to know the various settlement details on various exchanges. 17. Direct Pay An option exclusively for HDFC Bank NetBanking customers, which allows online purchases in a safe and secure environment. Shop online at websites, which offer our Direct Pay facility, such as Sify.com, Fabmart.com, VSNL.com and many more. Through Direct Pay, your account would be debited and the merchant's/ website's account gets credited instantaneously.
18. BillPay Pay your mobile phone, electricity and telephone bills through the Internet using the BillPay facility.
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19. Security With NetBanking, you can carry out all your banking and shopping transactions safely and with total confidentiality. The entire system is secured, using the whole gamut of security architecture including firewalls, filtering routers, 128-bit encryption and digital certification. So you are absolutely sure that all your online transactions are safe and protected. New Fixed Deposit Request/DD Request will be processed only during banking hours on the next working day. You can enjoy NetBanking for FREE. Moreover, we have special discounted rates for Stop Cheque Payment instructions and Demand Draft requests made through NetBanking.
Investment Services Investment Advisory Services - A dedicated team of Advisors offer professional advice on a range of financial instruments in line with your asset allocation.
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HDFC Bank Ltd. Portfolio Investment Scheme - You can trade on recognized Indian stock exchanges under the Portfolio Investment Scheme (PIS) through designated branches of HDFC bank. E-Age Advantages Free Email Alerts - You can receive regular updates on your bank account via email. Bill Pay facility - You can pay your Indian utility bills from the convenience of your home, through Phone Banking, Net Banking or the ATM. As per the finance (No 2) Act 2004, all fees & charges mentioned in the Tariffs, Charges or Fees Brochures will attract Service Tax @10% & Education Cess @2% of the service tax amount effective 10th September 2004. The same will appear as separate debits in the statements. (Source: HDFC Banks Brochure)
11 FINANCE DEPARTMENT
1.1. INTRODUCTION OF FINANCE DEPARTMENT
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In this modern era it is very easy to know how much important the finance is in the business. As current position of the market is totally different from ancient where it was very easy to get the finance. But now a days it is not so, it is very difficult task to raise funds from market. As today people are facing lot of problem and have less confidence on the market so it is difficult to raise fund without proper planning. For the bank as it is a Financial Institution we can consider finance as lifeblood of this business. The company should manage to get sufficient finance. The company should use to keep proper planning for the finance of its own and also of the large no. of depositors who are there with the bank. We can define financial management as a task of acquisition and utilization of funds needed in the business in a manner so that organizations goal can be achieved. In HDFC Bank, its chief Financial Officer and Treasurer manage the finance. Due to proper policies and separate management the company can have proper operation of finance.
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HDFC Bank Ltd. for the bank Finance itself is business. There are different types of organizational structure such as group organization, line organization, line and staff organization. HDFC Bank has line of authority and line of authority is vertical i.e. authority passes from top to bottom and responsibility passes from bottom to top level management. As HDFC Bank is very big company and it has large cliental base so it is very difficult and complicated to manage its finance in proper way. There we need of concrete and proper policies to have proper management of it. Because of big size of the bank one cannot manage all the accounts of it alone. So, company has to appoint many different persons so that there is proper maintenance of the funds of different persons is possible.
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HDFC Bank Ltd. structure are two different problems. Capitalization refers to the total amount of long-term capital and capital structure refers to the proportionate relationship among various sources of fund. Capital structure concern with type of funds. Each firm should select that type of capital structure, which can help it in achieving the desired objectives of financial management. So it will be differ from firm to firm. From the schedules, which are attached with this section, we can see that HDFC Bank has adopted a flexible capital structure. In case of share capital it has issued 2 types of share capital i.e. Equity Shares and Preference Shares. Then in case of Reserve and Surplus the company has different and variety of reserve and surplus. And also in case of borrowings, company has borrowed from various sources also from outside India the company has taken certain amount. As HDFC Bank is popular at International level so its easy for this bank to go for borrowing from outside India. If we talking about new public issue than too bank can have good response from market but as per the current financial position of the bank is sound so it does not need more finance.
HDFC Bank Ltd. type of asset, which is more permanent in business. While taking decision about big company or organization we should think of long time period. So it is necessary to study fixed asset composition. Although the banker very generally regard working capital section of balance sheet as for more important than fixed assets. Even then banker making term loan repayable over a period of years finds his interest in the fixed asset also. The schedule showing various fixed assets of the company can be seen with this section. We can see return on fixed assets as follows. RETURN ON FIXED ASSETS FIXED ASSETS Particulars Return on Fixed Assets 2004 (in %) 82.59 2003 (in %) 73.33 2002 (in %) 80.06 = EARNING AFTER INTEREST AND TAXES/
From above calculation we can see that ROFA of the company is showing volatility as in the year 2002, ROFA was 80.06% which reduced to 73.33% in 2003 and again increased in the year 2004 to 82.59%. This implies that company is not having steady growth in ROFA because company has employed more assets in 2003 but they were not able to earn the same percentage increase compared to percentage increase in fixed assets.
Balance sheet
Balance sheet of the year ended 2004 (in crore)
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HDFC Bank Ltd. BALANCE SHEET DATA YEAR Advances Rs m Deposits Rs m Credit/Deposit ratio Yield on advances Cost of deposits Net Interest Margin Net fixed assets Share capital Free reserves Net worth Borrowings Investments Total assets Debt/equity ratio Return on assets Return on equity Capital adequacy ratio Net NPAs X % % % Rs m Rs m Rs m Rs m Rs m Rs m Rs m X % % % %
2002 68,137 176,538 38.6 9.2 5.2 2.8 3,711 2,814 11,685 19,423 18,230 120,040 237,874 11.1 1.2 15.3 13.9 0.5
2003 117,549 223,761 52.5 6.6 4.8 2.9 5,286 2,821 13,832 22,448 22,847 133,881 304,241 12.6 1.3 17.3 11.1 0.4
2004 177,445 304,089 58.4 6.2 3.4 3.3 6,169 2,848 15,310 26,919 29,078 192,568 423,070 14.7 1.2 18.9 11.7 0.2
Balance sheet data of the year ended 2004 BALANCE SHEET DATA YEAR Advances Rs m Deposits Rs m Credit/Deposit ratio Yield on advances Cost of deposits Net Interest Margin x % % % 2002 68,137 176,538 38.6 9.2 5.2 2.8 2003 117,549 223,761 52.5 6.6 4.8 2.9 2004 177,445 304,089 58.4 6.2 3.4 3.3
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Net fixed assets Share capital Free reserves Net worth Borrowings Investments Total assets Debt/equity ratio Return on assets Return on equity Capital adequacy ratio Net NPAs
Rs m Rs m Rs m Rs m Rs m Rs m Rs m x % % % %
3,711 2,814 11,685 19,423 18,230 120,040 237,874 11.1 1.2 15.3 13.9 0.5
5,286 2,821 13,832 22,448 22,847 133,881 304,241 12.6 1.3 17.3 11.1 0.4
6,169 2,848 15,310 26,919 29,078 192,568 423,070 14.7 1.2 18.9 11.7 0.2
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FINACIAL SUMMARY Year Ending (YOY) Interest Income Interest Income Growth Net Interest Income Net Interest Margin Gross profit margin PAT PAT Growth Dividend per share Dividend payout RoA RoNW Net NPAs Mkt Capitalization Mkt Cap / Sales Rs m % Rs m % % Rs m % Rs % % % % Rs m x 2.5 23.7 1.2 15.8 0.5 61,901 4.1 6,293 2.8 12.4 2,971 31/03/2002 17,030 31/03/2003 20,136 18.2 8,216 2.9 12.1 3,876 30.5 3 21.8 1.3 17.8 0.4 62,756 3.6 31/03/2004 25,489 26.6 13,378 3.3 20.7 5,095 31.4 3.5 19.6 1.2 19.4 0.2 90,278 4.5
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HDFC Bank Ltd. Retail profits grew 117.8% to Rs 159 crore, compared with Rs 73 crore in the previous year. However, it suffered a 25% dip in treasury revenues to Rs 100.7 crore from Rs 133.4 crore. The bank suffered a treasury loss of Rs 12.7 crore from Rs 43.5 crore in the previous year. During the quarter, net interest income grew 42.4% to Rs 513.6 crore. Interest income rose by 30.2% to Rs 867.2 crore from Rs 665.8 crore. Other income rose by 56.6% to Rs 220 crore from Rs 140.5 crore. Other income includes commissions of Rs 176.8 crore (Rs 100 crore), profit on sale of investments Rs 20.5 crore (loss of Rs 8.2 crore) and foreign exchange and derivatives Rs 25.5 crore (Rs 48 crore). Operating expenses rose by 51.7% to Rs 328.7 crore compared with Rs 216.7 crore. Operating profit rose by 42.4% to Rs 404.9 crore from Rs 284.3 crore. During FY05, the banks gross balance sheet size grew 21.6% to Rs 51,429 crore. Gross deposits rose by 19.6% to Rs 36,354 crore from Rs 30,409 crore. Net advances rose by 44.1% to Rs 25,566 crore (Rs 17,741 crore) in the previous year. (TIMES NEWS NETWORK WEDNESDAY, APRIL 13, 2005 )
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SECTION- V
STRATEGIC ANALYSIS
1. Market Analysis
Indian banking, a conservative club with exclusive membership, was forced to open its doors to some new members in the id-90s. These new membersthe private banks, helped by the winds of liberalizationchanged the face of banking as we knew it, forever.
Share of Indian Banks Total Assets March 2004 Source: RBI BULLETIN 2004 Earlier, the banking sector had just two types of players. On the one hand, there were the foreign banks, which were choosy and decided who to accept as a customer. At the other extreme were the public sector banks which catered to the masses but which were seriously found wanting in terms of products and services. Then there were the old private sector banks and co-operative banks, but they were mainly community-oriented. A large number of middle-class customers, though a tolerant lot, were looking for a change. This was the scenario when the new private banks stepped into the picture in 1995, HDFC Bank being the first.
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HDFC Bank Ltd. When HDFC Bank entered the scene, market shares were skewed heavily in favor of public sector banks. They held 86.19 per cent of the deposits, with the foreign banks holding 7.14 per cent and the old private banks holding 6.67 per cent share. Thanks then the public sector banks did not believe in pursuing customers, preferring instead to wait for them to come to the banks. Given the width of distribution, most customers had virtually no choice. Foreign banks, meanwhile, concentrated primarily on the large metros and the immediate vicinity of their branches. While most foreign banks were happy waiting for their customers to come to the branches, some American banks had begun developing Direct Sales Agents to go to the customers doorstep and solicit deposits.
2. ACTUAL CONSUMER STATEMENTS OF DISSATISFACTION WITH BOTH SEGMENTS ARE DETAILED BELOW
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Reasons for dissatisfaction with public sector banks It looks like a railway platform. No one like to stand the rush and noise. Nobody cares whether a customers work is done or not. The whole attitude is that of a government employee. The whole bank is a mess with people shouting and files all over. Their standard is to give cash in five minutes. It always takes 30 minutes. They do not treat you as a customer, more like a beggar.
Reasons for dissatisfaction with foreign banks The required minimum balance is very much high. The whole atmosphere is artificial. They look for posh people. They charge you for everything. They talk to you nicely but you know that it is unnatural. They are trained. Their smiles are synthetic.
3. Acquisition Strategies
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An effective Acquisition Strategy is based on acquiring profitable customers at a low cost and is based on an effective business plan that covers a host of activities:
These are the marketing strategies which must require sustaining in the market and we can say these are the hygienic factors for the company. Following strategies are merely measures to improve operational effectiveness. Customer segmentation Value proposition Pricing Strategy Distribution Strategy Technology Strategy Product range Strategy Choice of Channels for servicing as an Acquisition Strategy
Customer segmentation
Research revealed that there were basically two types of customers: those who were willing to pay for service and those who werent. These customers lay in two buckets, either with public sector banks or foreign banks. What was revealing was that there were several customers who were willing to pay for service but currently banked with public sector banks, as they had no choice. This was the market that appealed to HDFC Bank and was consciously targeted for conversion with success. Those customers who were unwilling to pay for service with public sector banks and those who associated with foreign banks for the status attached to them were not targeted as it would have been a waste of resources.
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Pricing Strategy
In 1995 there were only two pricing points for consumers. One could choose between a foreign bank with an opening balance of Rs 10,000 and upwards or a public sector bank at Rs 500, with polarized levels of service. HDFC Bank decided to offer international levels of service and technology at Rs 5,000, thus suddenly growing the market as a huge chunk of public sector bank customers who were willing to pay for service found an alternative.
Distribution Strategy
It is also important to know where your most important markets are, and thus focus on those for best results. RBI data (July 2003), for example, shows that the top 10 cities account for 38 per cent of the all-India market in deposits. It therefore enables us to concentrate on getting maximum market share in those markets by offering a wide range of products and services. Once the top ten centers were covered, focus was shifted to the next 20 cities. This focus on the top 30 cities covered 49 per cent of the deposit market. HDFC bank also consciously decided to have a Centralized Processing Unit (CPU) that took care of all back-office functions and thus left branches to concentrate on selling. This allowed the bank to set up smaller branches at a lower cost
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Cross-Selling Strategy
With a wide network and multiple channel access, customers deal with the bank in several ways. Each interaction is an opportunity to cross-sell another product. After all, historically it has always been cheaper to sell to an existing customer than to acquire a new one. More banks are also leveraging routine communication such as account statements to carry marketing messages and cross-sell products while driving down communication costs.
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HDFC Bank Ltd. While one may talk of various strategies and products etc. one needs to be alert to the changes that the Internet is bringing about. It has already challenged established paradigms, and will also force company to change their thinking. The medium obviously affords a wide reach and it is a boon, especially in reaching out to our NRI customers. Also, the interactivity of the medium offers an opportunity to have a one-to-one dialogue with the customers and get their feedback instantaneously. As and when web cams become a norm in most homes, one can also envision a virtual relationship manager (like Anna Nova the virtual web caster).
SECTION- VI
1. SWOT ANALYSIS OF HDFC BANK 1. STRENGTHS
Blue chip excellent management and processes
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HDFC Bank Ltd. Cutting edge technology, at least by Indian standards Lowest funding costs Best access among Indian banks to capital markets CRISIL assigns AAA rating to HDFC bank on 4/11/2005 which indicates sound position in the sector. Very low beta HDFCS distribution network is the biggest strength of the company. HDFC bank is giving low interest rate on housing finance than other private banks. In private sector banking, HDFC bank has the highest number of branches in semiurban area. The bank has connection with SWIFT international network for easy transfer of money. HDFC has strong management to operate its function.
2. WEAKNESS
Scale, some state banks a re larger much larger though sitting targets right now The company has large amount of non-performing loans. The bank has less concentration in rural areas. HDFC bank is taking higher charges on Demand draft, fund Transfer in regular current a/c than other nationalize bank. HDFC bank is not accepting cash deposit from third-party.
3. OPPORTUNITY
Fast growing Indian economy and massive rise of middle class Rapid expansion of distribution network and retail offerings Merger with HDFC some MoUs for products are in place; others emerging Low beta Low valuation Depreciating dollar
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HDFC Bank Ltd. The polarized banking scenario, with a large unfulfilled need gap, a bank that offered the best of both worlds had a ready and waiting market. Company also has opportunity from the dissatisfaction of the customers of public sector bank and foreign bank. Company gets benefit by minimizing the remedies of both private bank and foreign bank. 4.
THREATS
The 0.1% banking transaction tax will discourage cash transactions. Due to government liberalization and globalization policy, banking sector became open for everybody. So, newer and newer private and foreign firms are opening their branches in India. This has intensified the competition
Liquidity in co operative banks also make problem for the private banks. Miracle restructuring of state banks. Either that or they go nuts in trying to compete Indian Economic growth peters off.
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HDFC Bank Ltd. in the private sector, as part of RBI's liberalization of the Indian Banking industry in 1994. HDFC Bank, the pioneer of the retail-banking movement in India, is one of the fastest growing and most profitable banks in India with a strong urban presence. The bank, with a market share of 2.5% has a wide reach across the country with a branch network of 425 branches and 950 ATMs. Strong understanding of the retail sphere (46% of total advances in 9mFY05) and technology initiatives has made the bank the second largest private sector bank in the country. The bank has largely outpaced the sector growth over the last few years, but of late the growth momentum has been subdued due to competitive reasons. Rapid expansion of distribution network and retail offerings As Indian economy is rising and massive power of middle class family is also increased, HDFC bank is going to expand its distribution network and retail offering in semi-urban areas. The polarized banking scenario, with a large unfulfilled need gap, a bank that offered the best of both worlds had a ready and waiting market. Bank also has opportunity from the dissatisfaction of the customers of public sector bank and foreign bank and gets benefit by minimizing the remedies of both private bank and foreign bank.
The 0.1% banking transaction tax will discourage cash transactions. Due to government liberalization and globalization policy, banking sector became open for everybody. So, newer and newer private and foreign firms are opening their branches in India. This has intensified the competition Liquidity in co operative banks also make problem for the private banks.
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HDFC Bank Ltd. The merger of bank with chubb insurance has also lead to improve its corporate image as a universal bank. The bank has formulated a strong international strategy on the basis of their presence in the areas of information technology, investment banking and banking products. The positioning of the bank in present is in Home loans and good brand image amongst Indians. The bank has appointed HBL Global pvt Ltd. and DSA (Direct selling Agents) to market its different products and services. As per the charges the bank has bit high charges as compared to government and other banks.
SUGGESTIONS
Its marketing people should be through with knowledge of the product and their features, which will lead to attract more and more number of investors.
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HDFC Bank Ltd. The number of ATM centers should be increased so that it would be stand as assets for them at the time when they require the attention of the investors. To make focus on the rural side because there is lot of potential in this part where much of concentration is not made rather then having a full flagged branch bank has to develop its mobile branch like that of the other government banks so as to expand its area towards villages and towns. It focuses only on the areas, which are flourished with or where there is abundant of money, here they are lacking behind because per the experience now a days in rural areas also there is lot of potential for this type of bank. In case of charges they should have competitive charges as compared to that of other banks so that the investors who all are forwarding themselves towards other bank will divert their mind and will happily invest with HDFC. In marketing mix especially the promotion part should be developed like opening balance of the account should be less than two thousand five hundred i.e. it should be between thousand to two thousand and they should have to consider the charges of 750 Rs and try to reduce it. Bank should have to give cash pick up , cash delivery and cheque pick up to and from the customers which can also increase their customer base. HDFC bank is not accepting cash deposit from third-party but this facility is provided by other banks like UTI etc. Bank should have to provide this facility. HDFC bank takes charges on transaction of cash which deposit to other branches of it. So bank should have to eliminate these charges as it is not taken by other banks.
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SECTION- VII
BIBLIOGRAPHY
BOOKS M.Y.KHAN, INDIAN FINANCIAL SYSYEM, 3rd edition Publication by TATA McGraw hill. Ashwathappa, Personnel Management, 3rd edition. Philip Kotler, Marketing Management, 11th edition, Pearson education Asia Publication. Walker, Boyed, Mullins, Larrenche, Marketing Strategy, 4th edition, Tata McGraw hill publications. Thompson and Stickland, Strategic Management 13th edition, Tata McGraw-Hill publications. Ravi Shankar, Service Marketing 1st edition, Tata McGraw-Hill publications. MAGAZINE Banking finance, Editor R.G Agrawal and Associates, March 2005 NEWSPAPERS Business standard Economics times WEBSITES www.hdfc.com www.HDFCBANK.COM www.personalfn.com www.equitymaster.com www.indiainfoline.com www.1000ventures.com/business_guide search engine - www.Google.com Search engine - www.ultavista.com
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4,551.00 4,202.90
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INCOME DATA
INCOME DATA YEAR Interest income Other income Interest expense Net interest income Operating expense Gross profit Gross profit margin Provisions/contingencies Profit before tax Extraordinary Inc (Exp) Tax Profit after tax Net profit margin (Source: www.equitymaster.com) Rs m Rs m Rs m Rs m Rs m Rs m % Rs m Rs m Rs m Rs m Rs m % 2002 2003 2004 25,489 4,800 12,111 13,378 8,100 5,278 20.7 4,984 7,190 0 2,095 5,095 20 17,030 20,136 3,333 4,656
10,737 11,920 6,293 4,180 2,113 12.4 1,192 4,254 0 1,283 2,971 17.4 8,216 5,771 2,445 12.1 3,226 5,709 0 1,833 3,876 19.2
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