1. Introduction of organization 2.

Identify the industry & the competition Over the past couple of years, the Indian banking sector has displayed a high level of resiliency in the face of high domestic inflation, rupee depreciation and fiscal uncertainty in the US and Europe. In order to stimulate the economy and support the growth of banking sector, the Reserve Bank of India (RBI) adopted severe policy measures such as increasing the key monetary policy rates such as repo and reverse repo 16 times since April 2009 to Oct 2011 and tightening provisioning requirements. Amidst this economic scenario, the key challenge for the Indian banking system continues in improving their operational efficiency and implement prudent risk management practices. Some of the key trends expected to emerge in the near future are as under:Economy slowdown likely to impact the demand for credit High interest rates, subdued industrial production and domestic consumption impacted the growth of the Indian economy which slowed down from 8.4% in FY11 to 6.5% during FY12.The scheduled commercial banks (SCBs) overall credit grew at a slower pace during FY12 at 17% y-o-y as compared to 21.5% registered during FY11.As per the recent RBI data, the non-food bank credit increased by 15.5% in Oct2012 over its corresponding month previous year, as compared to 18.2% witnessed in Oct2011 over its corresponding month previous year. Similarly, credit to industry and services sector recorded a slower growth of 15.2% and 13.7% respectively as against 23.1% and 18.4% during the same period. As per RBIs second quarter review of monetary policy for FY13, the GDP growth estimates for FY13 is revised downwards from 6.5% forecasted earlier to 5.8%.Any further slowdown in the Indian economic growth is likely to impact the demand for bank credit. RBI may lower key policy rates, if inflationary pressures ease Inflation continued to remain sticky and much above the RBIs comfort zone throughout the year. In fact headline inflation as measured by WPI remained above 7.5% from Feb to Oct 2012. As a result the RBI has kept the repo rate at an elevated level, reducing it by 50 basis points only once during 2012, in April-12 to support growth. However, in order to support the flow of funds to the productive sectors of the economy and ease the liquidity crunch in the banking system the RBI has cut the CRR by 175basis points during the course of the year which stands at 4.25%, as on Nov 2012. Given the easing of international commodity prices, particularly of crude, decline in core inflation as demand conditions moderate, there has been some steady moderation in inflation in the recent period. As a result the RBI might decide to ease the policy rate during end Jan 13. Asset quality will need to be closely monitored During FY12, asset quality of banks was severely impaired, as revealed by the steep increase in non-performing assets (NPAs) of SCBs, particularly for public sector banks (PSBs)owing to their significant exposure to troubled sectors such as power, aviation,

real estate and telecom. There was a significant increase noted in the NPA levels during FY12. Gross NPAs value recorded a y-o-y growth of 45.3% and net NPAs registered a yo-y growth of 55.6% during FY12. As per RBI, this increase was due to inadequate credit appraisal process coupled with unfavorable economic situation in the domestic as well as foreign market. Apart from increase in NPAs, the weakening asset quality trend was also apparent from the significant increase in restructured assets. Restructured standard advances of the SCBs, recorded a y-o-y growth of around 58.5% during FY12 aned the ratio of restructured standard advances to gross advances also increased from about 3.5% in FY11 to 4.7% in FY12. As per the recent data available with CDR cell as on Sep 2012, a total of 466 cases have been referred to the cell, with 327 cases amounting to Rs. 1,873.9 bn have been approved since the start of CDR mechanism. Of the total cases referred, 64 cases corresponding to Rs. 311.2 bn were under finalisation of restructuring packages as on Sep 2012 as compared to 34 cases amounting to Rs. 264.5 bn as on Sep 2011. The slowdown in the economy increases in the risk of default and restructuring of loans can increase which could further lead to deterioration of asset quality. However, implementation of stringent policies could prevent a sharp deterioration in asset quality. More impetus on fee based and non-interest income services

Traditionally, banks have derived limited income from fee based services such as wealth management, credit card services, treasury services, investment banking and advisory services. However, as the economy is showing signs of slowdown and the demand for credit is slowed banks are struggling to keep their margins intact. Also, with changing times, consumer needs have changed with various avenues of investment available. This is likely to increase banks focus on offering fee based services as the earnings from such services are more stable than interest bearing products and it also helps in mitigating risk via diversification of products and services. Financial inclusion to play a key role in the near future As per census 2011, huge section of Indian population is still unbanked. The overall percentage of households availing banking services in India stood at around 59% as on 2011, which means still over 40% of total households, lacks access to formal banking services. This is largely driven by rural areas and/or low income group (LIG) population, due to their financial illiteracy, low level of income and savings, lack of collateral and absence of verifiable credit history. Thus, in recent years, the RBI and GoI have increased its focus on providing formal banking/financial services to the huge unbanked population. It is encouraging banks to develop low cost products and services designed to suit the requirements of this group of population.

RBI has undertaken several policy initiatives to promote financial inclusion, such as encouraging opening of no-frills accounts, engaging intermediaries to provide financial and banking services. In the course of action, there has been increase in number of nofrill accounts from 50.3 mn in FY10 to 105.5 mn in FY12, registering a CAGR of 44.8% during this period. Similarly, the number of business correspondent (BC) agents also noted a CAGR of 70.2% during the same period. RBI also advised banks to allocate minimum 25% of the total new branches in unbanked rural centres during a year. In the process, the number of banking outlets in villages with population above 2,000 and less than 2,000 also witnessed a CAGR of 73.5% and 55.7% during FY10 to FY12. Further, in India there are several micro-finance institutions (MFIs) and self-help groups (SHGs) which lend credit to the LIG. This is expected to play a significant role in achieving financial inclusion by extending credit to the LIG. Banks will expand in overseas market In order to sustain the business growth amid highly competitive market and slowing Indian economy, banks are likely to expand in the overseas market. They will try to tap emerging opportunities by expanding into newer markets such as Africa, former Soviet region and other South East Asian countries, in which India has maintained good trade relations. They can set up captive operations or expand through inorganic means by undergoing M&A with banks in foreign countries. However, high capital cost for setting up foreign operations can act a deterrent in the way of expansion. Mobile banking, next major technological leap With the adoption of technology, the Indian banking sector has undergone significant transformation from local branch banking to anywhere-anytime banking. Over the past couple of years, there has been huge growth registered in the number of transactions done through mobile devices. As per RBI, there were 49 banks with a customer base of about 13 mn offering mobile banking services as at the end of Mar 2012. During FY12, around 25.6 mn mobile banking transactions valued at Rs. 18.2 bn were transacted, recording a growth of 198% y-o-y and 174% y-o-y respectively. This rapid growth is driven by availability of 3G/4G network, increasing number of smart phones and several telecom companies offering economical data usage packages. In order to encourage cashless transactions, particularly for small value transactions, the RBI raised the cap on mobile banking without end-to-end encryption from Rs. 1,000 to Rs. 5,000. Further, the transaction limit of Rs. 50,000 per customer per day was removed, by permitting banks to fix the transaction limits based on their own risk perception. In the near term, it is expected to emerge as one of the most preferred medium for banking transactions.

Competition set to intensify In Aug 2011, the RBI drafted guidelines for licensing of new banks in the private sector. Thus, with the entry of new players in the market, competition among banks will increase. This is expected to benefit the consumers in the long-run as with increased competition banks will adopt fresh strategies to retain and attract customers and protect their market share. For instance, increasingly banks are tying up with insurance companies to sell insurance products. In this business model, both bank and insurance companies share the commission. Further, with the deregulation of savings rate in Oct 2011, competition among banks has already intensified. Passage of Banking Laws (Amendment) Bill aimed at attracting more foreign investments With an aim to reform and strengthen Indias banking sector, the Lok Sabha passed the Banking Amendment Bill in Dec 2012. Once, the bill is passed by RajyaSabha as well, it will pave way for RBI to issue new banking licenses to private sector and attract more foreign investments in the sector. The Bill also proposes to enhance the voting rights of investors in case of both public sector and private sector banks from existing 1% to 10% of public sector banks and from 10% to 26% of private sector banks. This move will attract more foreign investment in the sector. The Competition Commission clause in the new Bill allows the RBI to continue with its role as the banking regulator, while the Competition Commission of India (CCI) will regulate mergers and acquisitions (M&A) and will have powers to investigate and clear M&As in the banking sector. Moreover, the bill has a clause, which will allow foreign banks to convert their Indian operations into local subsidiaries or transfer its shareholding to a holding company of the bank without paying stamp duty.

Banking Sector in India

Last Updated: July 2013 Indian Banking Sector: Brief Introduction Indias Rs 77 trillion (US$ 1.30 trillion)-banking industry is well at par with global standards and norms. Prudent practises and conventional framework adopted by the regulator, Reserve Bank of India (RBI), have insulated Indian banks from the global financial crisis. The country has 87 scheduled commercial banks with deposits worth Rs.71.6 trillion (US$ 1.21

trillion) as on 31 May, 2013. Of this, 26 are public sector banks, which control over 70 per cent of Indias banking sector, 20 are private banks and 41 are foreign banks. Of the total, 41 banks are listed with a total market capitalisation of Rs.9.35 trillion (US$ 158.16 billion) as per the recent statistics. Key Statistics

According to the RBIs Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks, September 2012, Nationalised Banks accounted for 52.0 per cent of the aggregate deposits, while the State Bank of India (SBI) and its Associates accounted for 22.3 per cent. The share of New Private Sector Banks, Old Private Sector Banks, Foreign Banks, and Regional Rural Banks in aggregate deposits was 13.6 per cent, 4.8 per cent, 4.3 per cent and 2.9 per cent, respectively. Nationalised Banks accounted for the highest share of 50.9 per cent in gross bank credit followed by State Bank of India and its Associates (22.1 per cent) and New Private Sector Banks (14.7 per cent). Foreign Banks, Old Private Sector Banks and Regional Rural Banks had shares of around 4.9 per cent, 4.9 per cent and 2.6 per cent, respectively. India's foreign exchange (forex) reserves stood at US$ 280.19 billion for the week ended July 12, 2013, according to data released by the central bank. The value of foreign currency assets (FCA) - the biggest component of the forex reserves stood at US$ 252.14 billion, according to the weekly statistical supplement released by the RBI. The number of mobile banking transactions doubled to 5.6 million in January 2013 from 2.8 million in January 2012. The value of these transactions increased three-times to Rs 625 crore (US$ 105.73 million) during the month from Rs 191 crore (US$ 32.31 million) in the corresponding month last year. Moreover, non-resident Indians (NRIs) parked deposits aggregating US$ 14.18 billion in the financial year ended March 2013, depicting an increase of 19 per cent over the previous year.

Recent Developments

India's leading infrastructure development and finance company Infrastructure Leasing & Financial Services Limited (IL&FS), has inked a Memorandum of Understanding (MoU) with Industrial and Commercial Bank of China (Asia) Limited (ICBC (Asia)), for mutual cooperation in infrastructure project development services and financial services related thereto. The agreement envisages a scope of cooperation between the two financial entities for providing infrastructure project development services, including financial services relating thereto, trade, corporate banking, investment banking and treasury related services, debt raising, advisory and other form of permissible economic cooperation for such projects across Northern and Eastern Asia and is expected to facilitate more business opportunities for both the institutions in these geographies. Meanwhile, Standard Chartered Bank has announced that it will buy US-based Morgan Stanleys domestic private wealth management business. The deal, to be completed by

the end of 2013, would boost Standard Chartereds private wealth assets under management by 25 per cent or about US$ 750 million. Marking another milestone in achieving financial inclusion, Vodafone India and ICICI Bank have partnered to launch a mobile money transfer and payment service, M-Pesa. The service will allow customers to transfer money to any mobile phone in India, remit funds to bank accounts, deposit and withdraw cash from designated outlets, pay utility bills, and shop at select merchant establishments. The new service will initially be offered in West Bengal, Bihar and Jharkhand through 8,300 authorised agents. It will be made available across India by 2014-15. Public sector lender SBI intends to make a strong position in refinance market in 2013. The bank offers lowest lending rates for buying homes. The fast growing market of home loans transferred from other banks consists 25 per cent of the total home loans disbursed by the bank in FY13. SBI made Rs 30,000 crore (US$ 5.08 billion) of home loans in 2012-13. Meanwhile, US-based Customers Bancorp Inc (CUBI) has plans to infuse US$ 51 million in multiple securities of Religare Enterprises Ltd. Religare is currently aspiring for a banking licence to enter the banking industry. The investments will take place through a combination of primary and secondary market transactions.

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Indentify the potential profitability of industry Who has succeeded & failed in the industry & why What ii PEST factor affect the industry? What is the current firm level strategy? what is Business level stratrgy??

Our business strategy emphasizes the following : Increase our market share in Indias expanding banking and financial services industry by following a disciplined growth strategy focusing on quality and not on quantity and delivering high quality customer service. Leverage our technology platform and open scaleable systems to deliver more products to more customers and to control operating costs. Maintain our current high standards for asset quality through disciplined credit risk management. Develop innovative products and services that attract our targeted customers and address inefficiencies in the Indian financial sector. Continue to develop products and services that reduce our cost of funds.

Focus on high earnings growth with low volatility. 8. What is the business level strategy of major competitors? 9. What is the current financial strategy? 10. What is current marketing strategy?? 11. What is production strategy? 12. What are the current HR & system (IT) strategy? 13. What SWOT exists of the organization? Strengths

HDFC bank is the second largest private banking sector in India having 2,201 branches and 7,110 ATMs HDFC bank is located in 1,174 cities in India and has more than 800 locations to serve customers through Telephone banking The banks ATM card is compatible with all domestic and international Visa/Master card, Visa Electron/ Maestro, Plus/cirus and American Express. This is one reason for HDFC cards to be the most preferred card for shopping and online transactions HDFC bank has the high degree of customer satisfaction when compared to other private banks The attrition rate in HDFC is low and it is one of the best places to work in private banking sector HDFC has lots of awards and recognition, it has received Best Bank award from various financial rating institutions like Dun and Bradstreet, Financial express, Euromoney awards for excellence, Finance Asia country awards etc HDFC has good financial advisors in terms of guiding customers towards right investments

Weakness

HDFC bank doesnt have strong presence in Rural areas, where as ICICI bank its direct competitor is expanding in rural market HDFC cannot enjoy first mover advantage in rural areas. Rural people are hard core loyals in terms of banking services. HDFC lacks in aggressive marketing strategies like ICICI The bank focuses mostly on high end clients Some of the banks product categories lack in performance and doesnt have reach in the market The share prices of HDFC are often fluctuating causing uncertainty for the investors

Opportunities

HDFC bank has better asset quality parameters over government banks, hence the profit growth is likely to increase

The companies in large and SME are growing at very fast pace. HDFC has good reputation in terms of maintaining corporate salary accounts HDFC bank has improved its bad debts portfolio and the recovery of bad debts are high when compared to government banks HDFC has very good opportunities in abroad Greater scope for acquisitions and strategic alliances due to strong financial position

Threats

HDFCs nonperforming assets (NPA) increased from 0.18 % to 0.20%. Though it is a slight variation its not a good sign for the financial health of the bank The non banking financial companies and new age banks are increasing in India The HDFC is not able to expand its market share as ICICI imposes major threat The government banks are trying to modernize to compete with private banks RBI has opened up to 74% for foreign banks to invest in Indian market

14 what strategy alternative are available to the organization? 15 what are the pors & cons of these alternatives? 16 which alternatives should be implanted 17 how should this alternative to be controlled? 18 which alternative should be pursued & why 19 what are the future prospect for the origination?

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