Analysis of Banking Requirements of Various Business Units

A Project Report

Presented to
Indian Business Academy, Bangalore

On
June 27, 2005

in
Partial Fulfillment of the Requirement of summer project for the course of Post
Graduate Diploma in Business Management.

by

S.Sandeep Reddy
FP46/149
Indian Business Academy
Bangalore
This is to certify, that Mr S.Sandeep Reddy is a bonafide student of Indian
Business Academy, Bangalore and is presently pursuing a Post Graduate
Diploma in Business Management.

Under my guidance, he has submitted his project report titled “Analysis of

Banking Requirements of Various Business Units” in partial fulfillment of
the requirement for the summer internship project during the Post Graduate
Diploma in Business Management.

This report has not been previously submitted as part of another degree or
diploma of another Business School or University.

Mr Manish Jain, CEO, Indian Business Academy

INDIAN BUSINESS ACADEMY

Lakshmipura, Thataguni Post
Kanakpura Main Road,
Bangalore – 560 062
INDIA
Tel: +91-80-28435931/32/33/34
Fax: +91-80-28435935
This is to certify, that Mr S.Sandeep Reddy is a bonafide student of Indian
Business Academy, Bangalore and is presently pursuing a Post Graduate
Diploma in Business Management.

Under my guidance, she has submitted his project report titled “Analysis of
Banking Requirements of Various Business Units” in partial fulfillment of
the requirement for the summer internship project during the Post Graduate
Diploma in Business Management.

This report has not been previously submitted as part of another degree or
diploma of another Business School or University.

Prof. Ramesh Thaghat, Dean, Indian Business Academy

INDIAN BUSINESS ACADEMY

Lakshmipura, Thataguni Post
Kanakpura Main Road,
Bangalore – 560 062
INDIA
Tel: +91-80-28435931/32/33/34
Fax: +91-80-28435935
This is to certify, that Mr.S.Sandeep Reddy is a bonafide student of Indian
Business Academy, Bangalore and is presently pursuing a Post Graduate
Diploma in Business Management.

Under my guidance, he has submitted his project report titled “Analysis of

Banking Requirements of Various Business Units” in partial fulfillment of
the requirement for the summer internship project during the Post Graduate
Diploma in Business Management.

This report has not been previously submitted as part of another degree or
diploma of another Business School or University.

Prof. Chitra Parthasarathy, Indian Business Academy

INDIAN BUSINESS ACADEMY

Lakshmipura, Thataguni Post
Kanakpura Main Road,
Bangalore – 560 062
INDIA
Tel: +91-80-28435931/32/33/34
Fax: +91-80-28435935
I, Mr S.Sandeep Reddy, the undersigned, a student of Indian Business
Academy, Bangalore, declare that this project report titled “Analysis of
Banking Requirements of Various Business Units” is submitted in partial
fulfillment of the requirement for the summer internship project during the
Post Graduate Diploma in Business Management, a prestigious Post
Graduate Diploma awarded by Indian Business Academy, Bangalore.

This is my original work and has not been previously submitted as a part of
another degree or diploma of another Business school or University.

The findings and conclusions of this report are based on my personal study
and experience, during the tenure of my summer internship.

Mr. S.Sandeep Reddy, B.Com, PGDBM 2004-06

INDIAN BUSINESS ACADEMY

Lakshmipura, Thataguni Post
Kanakpura Main Road,
Bangalore – 560 062
INDIA
Tel: +91-80-28435931/32/33/34
Fax: +91-80-28435935
 ACKNOWLEDGEMENT

First and foremost, I would like to extend my sincere gratitude to Mr. T.V.N Raghuram State

Head-Corporate Operations Hyderabad, for giving me the opportunity to do a project at

HDFC without which this project would not have become a reality.

I would also like to take this opportunity to express my deep gratitude to

Mr. S.K.V.N.Viswanath; Branch Manager HDFC Dilshuknagar for his guidance and

invaluable support that has been instrumental to the groundwork behind this Project.

S.Sandeep Reddy
 Executive Summary

The project undertaken was aimed to study the Banking requirements of various business

units situated in Dilshuknagar and Malakper area of Hyderabad. A survey was conducted

among the traders by a questionnaire that helped in analyzing their banking requirements.

Questions were put regarding the banking operations they undertake as well as the effect

of VAT on their business. Many traders were still confused about the procedures of VAT

but were satisfied with the tax rates as the burden indirectly falls on the consumer. It was

also observed that they undertake regular banking activities like cash

deposits/withdrawals, issue of cheques, Demand drafts etc.

The traders showed keen interest in the products and services offered by HDFC bank.

Few traders have still the jinx about investing in private banks though it is diminishing at

a considerable rate. The study was helpful in analyzing the banking requirements and

understanding their nature of business.

 Table of Contents

Acknowledgement i

Executive Summary ii

S.No TITLE Page. No

1 Company Profile 1

2 Organization Structure 5

3 Business Profile 8

4 Products/Services offered by HDFC Bank 11

5 Types of Current Accounts 18

6 Research Findings 33

7 Value Added Tax 36

8 Conclusion 39

Appendix 40
 Housing Development Finance Corporation Bank Limited

1.Company Profile

1.1 About HDFC:

Housing Development Finance Corporation Limited 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. 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 the RBI's liberalisation 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.

1.2 Promoter:

HDFC is India's premier housing finance company and enjoys an impeccable track record

in India as well as in international markets. Since its inception in 1977, the Corporation

has maintained a consistent and healthy growth in its operations to remain a market

leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling

units. HDFC has developed significant expertise in retail mortgage loans to different

market segments and also has a large corporate client base for its housing related credit

facilities. With its experience in the financial markets, a strong market reputation, large

shareholder base and unique consumer franchise, HDFC was ideally positioned to

promote a bank in the Indian environment.

1.3 Business Focus:

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.

1.4 CapitalStructure:

The authorised capital of HDFC Bank is Rs.450 crore (Rs.45 billion). The paid-up capital

is Rs.282 crore (Rs.28.2 billion). The HDFC Group holds 24.2% of the bank's equity

while about 13.1% of the equity is held by the depository in respect of the bank's issue of

American Depository Shares (ADS/ADR Issue). The Indian Private Equity Fund,

Mauritius (IPEF) and Indocean Financial Holdings Ltd., Mauritius (IFHL) (both funds

advised by J P Morgan Partners, formerly Chase Capital Partners) together hold about

5.5% of the bank's equity. Roughly 27.5% of the equity is held by FIIs, NRIs/OCBs

while the balance is widely held by about 214,000 shareholders. The shares are listed on

The Stock Exchange, Mumbai and the National Stock Exchange. The bank's American

Depository Shares are listed on the New York Stock Exchange (NYSE) under the symbol

"HDB".
1.5 TimesBank Amalgamation:

In a milestone transaction in the Indian banking industry, TimesBank Limited (another

new private sector bank promoted by Bennett, Coleman & Co./Times Group) was merged
with HDFC Bank Ltd., effective February 26, 2000. As per the scheme of amalgamation
approved by the shareholders of both banks and the Reserve Bank of India, shareholders
of TimesBank received 1 share of HDFC Bank for every 5.75 shares of TimesBank. The
amalgamation added significant value to HDFC Bank in terms of increased branch
network, expanded geographic reach, enhanced customer base, skilled manpower and the
opportunity to cross-sell and leverage alternative delivery channels.

1.6 Distribution Network:

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network

of over 481 branches spread over 215 cities across the country. All branches are linked on

an online real-time basis. Customers in 90 locations are also serviced through Phone

Banking. The Bank's expansion plans have taken into account the need to have their

presence felt in all major industrial and commercial centres where its corporate customers

are located. It also built 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 network of over 1054-networked ATMs across these cities. HDFC

Bank's ATM network can be accessed by all domestic and international Visa/MasterCard,

Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.

1.7 Technology:

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 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,

scaleable and web-enabled.

The Bank has prioritised 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.

2. Organization Structure:

The organization structure of the bank is more decentralized. The Branch Managers takes

all the important decisions pertaining to the bank. They follow the procedures of the bank

and implement them. They follow a strict code of conduct. The head office takes

decisions pertaining to loans, verifications or any other crucial matters.

2.1 Code of Corporate Governance

The Bank believes in adopting and adhering to the best corporate governance practices

and continuously benchmarking itself against each such practice in the industry. The

Bank understands and respects its fiduciary role and responsibility to shareholders and

strives hard to meet their expectations. We believe that the best board practices,

transparent disclosures and shareholder empowerment are necessary for creating

shareholder value.

The Bank has infused the philosophy of corporate governance in all its activities. The

philosophy on corporate governance is an important tool for shareholder protection and

maximization of their long-term values. The cardinal principles such as independence,

accountability, responsibility, transparency, fair and timely disclosures, credibility etc.

serve as the means for implementing the philosophy of corporate governance in letter and

in spirit.

2.2 Composition of the Board:

The composition of the Board of Directors of the Bank is governed by the Companies

Act, 1956, the Banking Regulation Act, 1949 and the listing requirements of the Indian
stock exchanges where the securities issued by the Bank are listed. The Board had

strength of 11 Directors as on March 31, 2005. The Board had an optimum combination

of Executive and Non-executive Directors and a majority of Directors are independent

Directors. The Board consists of eminent persons with considerable professional

expertise and experience in banking, finance and other related fields. The board consists

of Mr. Vineet Jain, nominated by the Bennett, Coleman Group, Mr. Aditya Puri, Mr.

Jagdish Capoor, Mr. Aditya Puri, Mr. Keki Mistry and Mrs. Renu Karnad.

2.3 Rating of the Bank:

HDFC Bank has its deposit programmes rated by two rating agencies - Credit Analysis &

Research Limited (CARE) and Fitch Ratings India Pvt. Ltd. The Bank's Fixed Deposit

programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents

instruments considered to be "of the best quality, carrying negligible investment risk".

CARE has also rated the Bank's Certificate of Deposit (CD) programme "PR 1+" which

represents "superior capacity for repayment of short term promissory obligations". Fitch

Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "AAA (ind)"

rating to the Bank's deposit programme, with the outlook on the rating as "stable". This

rating indicates "highest credit quality" where "protection factors are very high". HDFC

Bank also has its long-term unsecured, subordinated (Tier-II) Bonds rated by CARE and

Fitch Ratings India Pvt. Ltd. CARE has assigned the rating of "CARE AAA" for the

Tier-II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA (ind)"

with the outlook on the rating as "stable". In each case referred to above, the ratings

awarded were the highest assigned by the rating agency for those instruments.
2.4 Corporate Governance Rating:

The bank was one of the first four companies, which subjected itself to a Corporate

Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating

Information Services of India Limited (CRISIL). The rating provides an independent

assessment of an entity’s current performance and an expectation on its "balanced value

creation and corporate governance practices" in future. The bank has been assigned a

‘CRISIL GVC Level 1' rating which indicates that the bank's capability with respect to

wealth creation for all its stakeholders while adopting sound corporate governance

practices is the highest.

3. Business Profile:
HDFC Bank caters to a wide range of banking services covering both commercial and

investment banking on the wholesale side and transactional / branch banking on the retail

side. The bank has three key business areas:

3.1 Wholesale Banking Services:

The Bank's target market is primarily large blue-chip manufacturing companies in the

Indian corporate sector and to a lesser extent, emerging mid-sized corporates. For these

corporates, the Bank provides a wide range of commercial and transactional banking

services, including working capital finance, trade services, transactional services, cash

management, etc. The bank is also a leading provider of structured solutions, which

combine cash management services with vendor and distributor finance for facilitating

superior supply chain management for its corporate customers. Based on its superior

product delivery service levels and strong customer orientation, the Bank has made

significant inroads into the banking consortia of a number of leading Indian corporates

including multinationals, companies from the domestic business houses and prime Public

Sector companies. It is recognised as a leading provider of cash management and

transactional banking solutions to corporate customers, mutual funds, stock exchange

members and banks.

3.2 Retail Banking Services:

The objective of the Retail Bank is to provide its target market customers a full range of

financial products and banking services, giving the customer an easy access for all his/her

banking requirements. The products are backed by world-class service and delivered to
the customers through the growing branch network, as well as through alternative

delivery channels like ATMs, Phone Banking, Net Banking and Mobile Banking.

The HDFC Bank preferred program for high net worth individuals, the HDFC Bank Plus

and the Investment Advisory Services programs have been designed keeping in mind

needs of customers who seek distinct financial solutions, information and advice on

various investment avenues. The Bank also has a wide array of retail loan products

including Auto Loans, Loans against marketable securities, Personal Loans and Loans for

Two-wheelers. It is also a leading provider of Depository Services to retail customers,

offering customers the facility to hold their investments in electronic form.

HDFC Bank was the first bank in India to launch an International Debit Card in

association with VISA (VISA Electron) and issues the MasterCard Maestro debit card as

well. The debit card allows the user to directly debit his account at the point of purchase

at a merchant establishment, in India and overseas. The Bank launched its credit card in

association with VISA in November 2001. The Bank is also one of the leading players in

the "merchant acquiring" business with over 25,000 Point-of-Sale (POS) terminals for

debit / credit cards acceptance at merchant establishments. The Bank is well positioned as

a leader in various net-based B2C opportunities including a wide range of internet

banking services for Fixed Deposits, Loans, Bill Payments, etc.

3.3 Treasury Operations:

Within this business, the bank has three main product areas - Foreign Exchange and

Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalisation of the financial markets in India, corporates need more sophisticated risk

management information, advice and product structures. These and fine pricing on

various treasury products are provided through the bank's Treasury team. To comply with

statutory reserve requirements, the bank is required to hold 25% of its deposits in

government securities. The Treasury business is responsible for managing the returns and

market risk on this investment portfolio.

4. Product/Services offered by HDFC:

HDFC Bank offers its customers a variety of wide range of products to meet the

customers banking requirements. They are Savings Account, Fixed Deposits, Current

Account, Demat Account, Phone Banking, Net Banking, Mobile Banking, Personal loans,

Home loans, Two/Four wheeler loans, Inter city/Intra city Banking, Mutual Funds, NRI

Services, Forex facilities and many more attractive products.

4.1 Types of Deposit Accounts:

The deposit products can be categorised broadly into the following types. Definition of

major deposit schemes are as under: -

• Demand Deposits means a deposit received by the Bank, which is withdrawable

on demand.

• Savings Deposits means a form of Demand Deposit, which is subject to

restrictions as to the number of withdrawals as also the amounts of withdrawals

permitted by the Bank during any specified period.

• Term Deposit means a deposit received by the Bank for a fixed period

withdrawable only after the expiry of the fixed period and includes deposits such

as Recurring / Double Benefit Deposits / Short Deposits / Fixed Deposits

/Monthly Income Certificate /Quarterly Income Certificate etc.

• Notice Deposit means Term Deposit for a specific period but withdrawable on

giving at least one complete banking day's notice.

• Current Account means a form of Demand Deposit wherefrom withdrawals are

allowed any number of times depending upon the balance in the account or up to a
 particular agreed amount and will also include other deposit accounts which are

neither Savings Deposit nor Term Deposit.

4.2 Account Opening and Operation of Deposit Accounts:

• The Bank before opening any Deposit Account will carry out due diligence as

required under "Know Your Customer" (KYC) guidelines issued by RBI and or

such other norms or procedures adopted by the Bank. If the decision to open an

account of a prospective depositor requires clearance at a higher level, reasons

for any delay in opening of the account will be informed to him and the final

decision of the Bank will be conveyed at the earliest to him.

• The account opening forms and other material would be provided to the

prospective depositor by the Bank. The same will contain details of information

to be furnished and documents to be produced for verification and / or for record.

It is expected of the Bank official opening the account, to explain the procedural

formalities and provide necessary clarifications sought by the prospective

depositor when he approaches the Bank for opening a Deposit Account.

• For deposit products like Savings Bank Account and Current Deposit Account,

the Bank will normally stipulate certain minimum balances to be maintained as

part of the terms and conditions governing operation of such accounts. Failure to

maintain minimum balance in the account will attract levy of charges as specified

by the Bank from time to time. For Savings Bank Account, the Bank may also
 place restrictions on number of transactions, cash withdrawals, etc., for a given

period. Similarly, the Bank may specify charges for issue of chequebooks,

additional statement of accounts, duplicate passbook, folio charges, etc. All such

details, regarding terms and conditions for operation of the accounts and schedule

of charges for various services provided will be communicated to the prospective

depositor while opening the account.

• Savings Bank Accounts can be opened for eligible person / persons and certain

organizations / agencies (as advised by Reserve Bank of India from time to time).

Current Accounts can be opened by Individuals / Partnership firms / Private and

Public Limited Companies / HUFs / Specified Associates / Societies / Trusts, etc.

Term Deposit Accounts can be opened by Individuals / Partnership firms /

Private and Public Limited Companies / HUFs/ Specified Associates / Societies /

Trusts, etc.

• The due diligence process, while opening a Deposit Account will involve

satisfying about the identity of the person, verification of address, satisfying

about his occupation and source of income. Obtaining introduction of the

prospective depositor from a person acceptable to the Bank and obtaining recent

photographs of the person/s opening / operating the account are part of the due

diligence process.
• In addition to the due diligence requirements, under KYC norms the Bank is

required by law to obtain Permanent Account Number (PAN) or General Index

Register (GIR) Number or alternatively declaration in Form No. 60 or 61 as

specified under the Income Tax Act / Rules.

• Deposit Accounts can be opened by an individual in his own name (status:

known as account in single name) or by more than one individual in their own

names (status: known as Joint Account). Savings Bank Account can also be

opened by a minor jointly with natural guardian or with mother as the guardian

(Status: known as Minor's Account). Minors above the age of 10 will also be

allowed to open and operate Saving Bank Account independently.

• Operation of Joint Account: The Joint Account opened by more than one

individual can be operated by single individual or by more than one individual

jointly. The mandate for operating the account can be modified with the consent

of all account holders. The Savings Bank Account opened by minor jointly with

natural guardian can be operated by natural guardian only.

• The joint account holders can give any of the following mandates for the disposal

of balance in the above accounts:

i. Either or Survivor: If the account is held by two individuals say, A

& B, the final balance along with interest, if applicable, will be

paid to survivor on death of any one of the account holders.

 ii. Anyone or Survivor/s: If the account is held by more than two

individuals say, A, B and C, the final balance along with interest, if

applicable, will be paid to the survivor on death of any two account

holders.

The above mandates will be applicable to or become operational only on or after the date

of maturity of term deposits. This mandate can be modified by the consent of all the

account holders.

• At the request of the depositor, the Bank will register the mandate / power of

attorney given by him authorizing another person to operate the account on his

behalf.

• The term deposit account holders at the time of placing their deposits can give

instructions with regard to closure of deposit account or renewal of deposit for

further period on the date of maturity. In absence of such mandate, the Bank will

seek instructions from the depositor/s as to the disposal of the deposit by sending

an intimation before 15 days of the maturity date of term deposit.

• Nomination facility is available on all deposit accounts opened by the individuals.

Nomination is also available to a sole proprietory concern account. Nomination

can be made in favour of one individual only. Nomination so made can be

cancelled or changed by the account holder/s any time. While making nomination,

cancellation or change thereof, it is required to be witnessed by a third party.

 Nomination can be modified by the consent of account holder/s. Nomination can

be made in favour of a minor also. Bank recommends that all depositors avail

nomination facility. The nominee, in the event of death of the depositor/s, would

receive the balance outstanding in the account as a trustee of legal heirs. The

depositor will be informed of the advantages of the nomination facility while

opening a deposit account.

• A statement of account will be provided by the Bank to Savings Bank as well as

Current Deposit Account Holders periodically as per terms and conditions of

opening of the account. Alternatively, the Bank may issue a Pass Book to these

account holders. The deposit accounts may be transferred to any other branch of

the Bank at the request of the depositor

4.3 Interest Payments:

Interest shall be paid on Saving Account at the rate specified by Reserve Bank of India

directive from time to time. However, Term Deposit interest rates are decided by the

Bank within the general guidelines issued by the Reserve Bank of India from time to

time.

In terms of Reserve Bank of India Directives, interest shall be calculated at quarterly

intervals on Term Deposits and paid at the rate decided by the Bank depending upon the

period of deposits. In case of Monthly Deposit Scheme, the interest shall be calculated for

the quarter and paid monthly at discounted value. The interest on Term Deposits is
calculated by the Bank in accordance with the formulae and conventions advised by

Indian Banks' Association.

The rate of interest on deposits will be prominently displayed in the branch premises.

Changes, if any, with regard to the deposit schemes and other related services shall also

be communicated upfront and shall be prominently displayed.

The Bank has statutory obligation to deduct tax at source if the total interest paid /

payable on all Term Deposits held by a person exceeds the amount specified under the

Income Tax Act. The Bank will issue a tax deduction certificate (TDS Certificate) for the

amount of tax deducted. The depositor, if entitled to exemption from TDS can submit

declaration in the prescribed format at the beginning of every financial year.

5. Types of Current Accounts:

There are various types of current accounts that can be useful for different kinds of

businesses depending on their size and requirements. HDFC offers a wide variety of

products for their customers who are into wholesale and retail trading.

5.1 Regular Current Account:

Money transactions are at the heart of most business relationships. There has to be the

support and services of a Bank so as to make a difference in closing a deal, and

maintaining goodwill with business associates.

The HDFC Bank Current Account gives access to a large network of branches across

India. It also gives 4 direct access channels to the account through phone, mobile,

Internet and through the ATM so that it can be convenient to the customer.

The Advantages:

A customer can access their account anytime and anywhere, to withdraw cash, deposit

cash/cheques, make balance inquiries or ask for mini-statements, or make a chequebook

request. An account holder also receives a free ATM card for easy access of their

accounts whenever needed. Safety deposit lockers are also provided.

Useful inter-city banking:

A customer can deposit their local cheques in one branch in one city, to be

credited to their account at a branch in another city, at nominal rates

Safe & convenient intra-city banking:

One can deposit and withdraw cash in more than one branch/ATM in a city

(only for sole proprietorships). So they don’t have to risk carrying money

wherever they go.

Phone Banking:

A customer can enjoy free 24-hour Phone Banking to check their balance, find

out the status of their cheque or even stop a cheque.

Net Banking:

HDFC offers a free, safe and secure way to do banking over the Internet.

Transfer funds between accounts or to third parties within the bank, all in a

mouse click

Mobile Banking:

Free access to ones account on their mobile phone screen through SMS or

WAP services

Sweep-In Account:

Need cash urgently? Now with the Sweep-In Facility a customer can

automatically transfer funds from their Fixed Deposit to their Current Account

whenever needed

Attractive rates for inter-city/inter-branch transactions:

Funds will be transferred at Rs.1.50/- per Rs.1000/-. The minimum charge is

Rs. 50/-. One can also deposit or withdraw cash for an additional charge of

Rs. 2.50/- per Rs. 1000/- (on full amount, if amount is more than Rs. 50,000)
 at branches other than the branch where they have opened an account.

Acceptance of cash at the home branch is as per branch's discretion. Free

personalised chequebook of 50 leaves for enhanced security. Rs. 2/- per leaf

is charged for subsequent chequebooks.

Fees:

The customer needs to maintain an average balance of Rs.10, 000/- per quarter. Non-

maintenance of this balance entails a nominal charge of Rs. 750/-.

5.2 Plus Current Account :

In today's fast-paced business, we frequently need to transfer funds in and across cities,

and time is of the essence. HDFC Bank Plus Current Account gives the power of inter-

city banking with a single account.

From special cheques that get treated at par with local ones in any city where HDFC has

a branch, to free inter-branch transfers of up to 100 lakhs. The priority services have

become the benchmark for banking efficiency at HDFC bank.

The Advantages:

Convenient Inter-city banking across 215 cities:

Cheques are treated at par with local cheques and get cleared within 2 days instead of

7 for national cheques. A customer can save nearly 75% of what they would normally

spend on Demand Drafts.

Free Funds Transfer-Huge Savings:

A customer can transfer funds absolutely free across all locations, except Bharuch

and Dahej, in the HDFC Bank network upto a total value of Rs.100 lakhs per month.

any incremental amount above Rs.100 lakhs will be charged @Rs. 0.50/Rs.1000.

Easy cash deposit and withdrawal:

A customer can avail of the service free, at home branch, as per the branch's

discretion. At non-home branches within the same city, we can withdraw cash up to

Rs.50,000/-, but cash deposits are disallowed.

Free Demand Drafts:

A customer can avail free Demand Drafts without any limit payable at Mumbai,

Delhi, Kolkata, Chennai, Ahmedabad, Bangalore, Bhopal, Chandigarh, Jaipur,

Hyderabad, Nagpur and Trivandrum. At all other locations in the HDFC Bank

network, demand drafts of value up to Rs. 10 lakhs per day are available free.

These drafts are available free only from the Home Branch

Free cheques and documents pick-up once a day:

This facility is available for accounts based in Mumbai, Delhi, Kolkata, Chennai,

Ahmedabad, Bangalore, Pune and Hyderabad. This is available only in the city where

the account is based.

Delivery of Demand Drafts/Pay Orders:

A Demand Draft/Pay Order upto Rs. 3 lakh as well as cash pick-up and delivery up to

Rs. 1 lakh is available in 4 metros at a nominal fee.

Free outstation cheque collection:

Collection of cheques drawn on HDFC Bank locations is at no extra cost and

crediting to the account will be done on the 4th working day for Metros and 6th

working days for other HDFC Bank locations, subject to realization. For non-HDFC

Bank locations, it is at a fee of only Rs. 4/- per Rs. 1,000/- plus Rs 25 per cheque as

courier charges.
Free ATM card is issued for sole proprietor or individual Current Account holder. Debit

Card will be issued at a nominal charge for Individual and Sole Proprietor Current

Accounts.

Free Net Banking for inquiry transactions. Authorized signatory has to register using

individual customer I.D. Financial transactions are also allowed on completion of

certain formalities.

Fees:

To avail the above facilities, a customer needs to maintain Average Quarterly Balance

(AQB) of Rs. 1,00,000/- per quarter, non-maintenance of which entails:

AQB less than 1 lakh and upto Rs.50,000/-, there is a service charge of Rs.1,500/- per

quarter. AQB less than Rs.50,000/-, there is a service charge of Rs.6,000/- per quarter.
5.3 Trade Current Account

In today's changing business requirements, we need to transfer funds across cities, and

time is of the essence. HDFC Bank Trade Current Account gives you the power of inter-

city banking with a single account.

From special cheques that get treated at par with local ones in any city where they have a

branch, to free inter-branch transfers of up to 25 lakhs, their priority services have

become the benchmark for their banking efficiency.

The Advantages:

Convenient Inter-city banking across 215 cities:

Cheques are treated at par with local cheques and get cleared within 2 days

instead of 7 for national cheques. One can also save nearly 50% of what they

would normally spend on Demand Drafts.

Free Funds Transfer-Huge Savings:

We can transfer funds absolutely free across all locations, except Bharuch and

Dahej, in the HDFC Bank network upto a total value of Rs.25 lakhs per month.

Any incremental amount above Rs.25 lakhs will be charged @Rs. 1.00/Rs.1000.

This is effective November 2002.

Easy cash deposit and withdrawal:

We can avail of the service free at home branch, as per the branch's discretion. At

non-home branches, we can withdraw cash up to 50,000/-, but cannot deposit

cash.
Free Demand Drafts:

A customer can avail free Demand Drafts without any limit payable at

Mumbai,Delhi, Kolkata, Chennai, Ahmedabad, Bangalore, Bhopal, Chandigarh,

Jaipur, Hyderabad, Nagpur and Trivandrum. At all other locations in the HDFC

Bank network, demand drafts of value up to Rs. 10 lakhs per day are available

free only from home branch. In a quarter 30 such drafts are free.

Free outstation cheque collection:

Collection of cheques drawn on HDFC Bank locations is at no extra cost and

crediting to the account will be done on the 4th working day for Metros and 6th

working days for other HDFC Bank locations, subject to realization. For non-

HDFC Bank locations, it is at a fee of only Rs. 4/- per Rs. 1,000/-, min Rs 25 plus

per cheque as courier charges.

Free ATM card is issued for sole proprietor or individual Current Account holder.

Debit Card will be issued at a nominal charge for Individual and Sole Proprietor

Current Accounts.

Free Net Banking for inquiry transactions. Authorized signatory has to register

using individual customer I.D. Financial transactions are also allowed on

completion of certain formalities.

Fees:

To avail of the above facilities, all we need is an Average Quarterly Balance

(AQB) of Rs. 40,000/- per quarter, on-maintenance of which entails AQB less

than Rs.40,000/-, there is a service charge of Rs.1,200/- per quarter.

5.4 Premium Current Account:

A business needs a partner who can manage finances while one can concentrate on

growing their business. Making funds easily accessible wherever the business expands.

HDFC Bank introduced Premium Current Account; a Current Account with the benefits

of accessing your account from a large network of branches, and through direct access

channels - the phone, mobile, Internet and through the ATM.

The Advantages:

A customer can access their account anytime and anywhere, to withdraw cash, deposit

cash, cheques, make balance inquiries or mini statements, and for cheque book requests.

Convenient Inter-city banking across more than 185 cities:

Cheques are treated at par with local cheques and get cleared within 2 days instead of

7 days for national cheques. One can also save nearly 50% of what they would

normally spend on Demand Drafts.

Safe & convenient Intra-city banking:

A customer can deposit and withdraw cash in more than one branch/ATM in a city

(only for sole proprietorship companies). So they don’t have to risk carrying any

money.

Sweep-In Account:

Need cash urgently? Now with the Sweep-In Facility a customer can automatically

transfer funds from their Fixed Deposit to their Current Account whenever needed.
Free Funds Transfer-Huge Savings:

We can transfer funds absolutely free across all locations, except Dahej, in the HDFC

Bank network up to a total value of Rs.10 lakhs per month. Any incremental amount

above Rs.10 Lakhs will be charged @ Rs.1.50 per Rs.1000/-. This is effective

November 2004. Acceptance of cash at the home branch is as per branch's discretion.

Free ATM card is issued for sole proprietor or individual Current Account holder.

Debit Card will be issued at a nominal charge for Individual and Sole Proprietor

Current Accounts.

Free Net Banking for inquiry transactions. Authorized signatory has to register using

individual customer I.D. Financial transactions are also allowed on completion of

certain formalities.

Fees:

To avail the above facilities, all we need is a minimum average balance of Rs.

25,000/- per quarter, the non-maintenance of which entails a fee of Rs. 900/-.
5.5 Reimbursement Account:

HDFC Bank introduced Reimbursement Account which completely eliminates the

necessity of counting and recounting cash, and the tedious paperwork and receipts

involved. For those employees who already have Salary Accounts with the bank all they

need to do is open a Reimbursement Account and simply ask their company to credit the

cash payments directly into the account. It’s as easy as that.

There are numerous benefits to it. For instance, no more worries about carrying large

amounts of cash around. Since it is separate from the Salary Account, it’s also so much

easier for us to maintain and track all the cash payments in the Reimbursement Account.

And with HDFC Bank’s world-class banking services and facilities, we can access the

account, anytime and from anywhere in the world.

The Advantages

Being a current account, the Reimbursement Account does not pay any interest.

However, it does offer various facilities that enable us to transact, shop and make

payments with ease. These include:

International Debit Card:

The existing free International Debit Card, which is attached to a persons Salary

Account, will now also be linked to the Reimbursement Account, enabling anyone to

choose the transaction account at the ATM. If anyone requires an additional Debit

Card, it will be charged at the usual rates.

Free Phone Banking:

Accessing the account is extremely easy. All you need to do is dial the Phone

Banking number and press a few buttons on the telephone.

Free Net Banking

Any banking transaction can be carried out on the account with just a click of a

mouse, all from the comfort of ones PC at home or office.

Free Mobile Banking:

This innovative feature enables banking on the move, using SMS (Short Messaging

Service) which incurs no airtime costs, or by using WAP.

Interbranch/Intercity Banking

We can access the account from any of HDFC Bank's 481 branches in 215 cities

across India, at no additional charge. You also receive a host of other benefits such

as:

• Half Yearly Statements:

These allow you to track all transactions on the account, and are sent to you at

the end of September and March every year.

• Full Function Branch Services:

It helps the employee to make the most of the facilities and guidance available

at various branches.
• Join Account:

A family member can also experience world class banking through a joint account

facility.

• Cheque Book:

The cheque Book on a Reimbursement Account is free of Charge. The

customer however has to request for the same.

• Zero Balance:

Importantly, there is no minimum average quarterly balance requirement, so

all these services can be availed of, even with zero balance in the account.
5.6 Real Time Gross Settlement (RTGS) system:

The Reserve Bank of India introduced a new t ype of banking to help the

transfer of funds faster and safe. The RTGS s ystem helps the bank to

transact more quickly, though it has not been implemented in a full-

fledged way plans are on to take it to a higher level.

• RTGS is a payment system in which both processing and final

settlement of funds transfer instructions take place continuousl y in

real time.

• It is a gross settlement s ystem where transfers are settled

individuall y, that is, without netting debits against credits.

As it is a real-time settlement s ystem, the s ystem effects final settlement

continuousl y rather than periodicall y at pre-specified times provided that

a sending bank has sufficient covering balances or credit.

RTGS s ystem can be characterized as a funds transfer s ystem that is able

to provide continuous intra-day finalit y for individual transfers. In this

s ystem payment instructions between banks are processed and settled

individuall y and continuousl y throughout the day. This is in contrast to

net settlements where payment instructions are processed throughout the

day but inter-bank settlement takes place onl y afterwards t ypicall y at the

end of the day.

In RTGS s ystem, payee banks and their customers receive funds with

certaint y, or so-called finalit y, during the day, enabling them to use the

funds immediatel y without exposing themselves to risk

6. Research Findings:
A research was conducted in order to analyze the banking requirements of various

business units. The findings and observations of the research is given below.

6.1 Research Objective:

A survey was undertaken to analyze the banking requirements of traders with the

following objectives:

To study the banking requirements of various Business houses mainly traders.

The services that the banks are providing them and their expectations from Banks.

Their comments and recommendations on Value Added Tax (VAT)

To find out if they are interested or know any products/services provided by

HDFC Bank.

To find out if any trader is satisfied with the services provided by their respective

banks and if they need any other services apart from the ones provided.

To know the customers view as to how the banking can be improved and be able

to provide better facilities to the people.

6.2 Research Methodology:

A survey was conducted among various business mostly wholesale and retail traders in

Malakpet and Dilshuknagar area situated in Hyderabad. A questionnaire1 was prepared

and the traders were asked questions regarding their banking requirements. A sample size

of Sixty/60 traders was taken and asked the questions. The questionnaire contained Nine

questions mostly open-ended

1
Exhibit-I
6.3 Research Analysis:

On the basis of the research conducted and the data collected from the traders many of

them food grain traders (wholesale and retail merchants) with respect to the answers

given by them in the questionnaire it was observed that:

It was observed that the traders preferred the nearest bank for their regular day-to-

day transactions for their Current accounts as there are a lot of transactions being

made and they need money to rotate fast and swift.

Most of the wholesale and retail traders utilize cheques and Demand draft

facilities from the bank apart from the regular deposits that were made.

Many traders use the overdraft facility and many are looking forward to avail that

facility from the banks.

The traders operate in more than one bank.

Some of the traders are inclined towards the nationalized banks as they trust them

the most and feel they give a guarantee to their money.

The traders are looking to diversify their business but with stiff competition in

the market they are not able to do so. Many traders were interested in commercial

ad business loans.

Many traders feel that private banks look for an opportunity to charge their

customers. They feel the rates that private banks charge when compared to that of

nationalized and co-operative banks are high.

Many traders wanted private banks to lessen the cheque bounce charges, which

they feel is very high.

Mahesh co-operative Bank is the favorite among the traders situated in Malakpet,

Gunj area as it is near to them and have been their customers for a long time.

The traders feel that banks should offer them good service and customer care

should be given the highest priority.

Most of the traders who are the customers of Mahesh Co-operative bank avail a

facility where in the traders can deposit the money once the cheque issued by him

comes to the bank for clearance. The bank clears the cheque and intimates their

customers to deposit the money by 4.00 P.M the same day in their account with

the Bank.

Most of the traders are inclined to the Mahesh Bank because of Trust and

customer friendly banking.

Many traders feel that the rate on interest charged is comparatively high with

private Banks when compared to those of nationalized banks.

Traders also feel that small enterprises should be given overdraft facility.

Traders also feel that the private banks have revolutioalised the banking sector.

The quality of service that is being offered is very good. Banking has been made

much easier by the introduction of computerized banking facilities and they don’t

have to stand in a queue anymore for deposits or withdrawls.

7. Value Added Tax (VAT):

7.1 Let us understand what is VAT:

Each commodity passes through different stages of production and distribution before

finally it reaches the Consumer. Some value is added at each stage of the production

and distribution chain. Value Added Tax (VAT) is tax on value addition at each stage.

Under VAT system, a dealer collects tax on his sales, retains the tax paid on his

purchase and pays balance to the Govt. Treasury. It is a consumption tax because it is

borne ultimately by the final Consumer. The tax paid by the dealer is passed on to the

buyer. It is not a charge on the dealer. Hence, VAT is a multipoint tax system with

provision for set off of tax paid on purchases at each point of sale. All business

transactions carried on within a State by individuals, partnerships, Companies, etc.

will be covered by VAT.

7.2 Effect of VAT on Business:

The dealer pays VAT by deducting the tax paid on purchases (input tax) from his tax

collected on sales (output tax). Hence, VAT = Output Tax – Input Tax. For example:

A dealer pays Rs.10.00 @ 10% on his purchase price of goods valued Rs.100.00. He

sells the goods at Rs.150.00 and collects tax amounting to Rs.15.00 (@ 10%. He will

pay Rs.5.00 (Rs.15.00- Rs.10.00) as he has already paid Rs.10.00 to his seller while

purchasing those goods.

There are just four rates under VAT- the zero rate (exempted goods), 1%, 4% and a

general rate of 12.5%. These rates will be uniform in all States across the country.
The same set of goods will be charged at the same rates in all the States. Most

essential commodities are exempt from VAT or fall in the category of 4%.

VAT is different from sales tax in many different ways as it will have only four rates

instead of large number of rats of Sales Tax, with off setting of tax on inputs against

that on output; VAT does away with tax on tax. Claiming input tax credit under VAT

ensures proper invoicing. Overall, these features of VAT encourage disclosure of

complete information on business turnover.

There is considerable euphoria about the impending introduction of value added tax; a

move described by Finance Minister Jaswant Singh in his Budget speech as a historic

reform of our domestic trade tax system that would take place in the highest tradition

of cooperative federalism.

7.3 Traders Point of view:

On the other hand traders feel that VAT very a loosely drafted law and there are many

confusing elements in it. Out of the Sixty traders interviewed in the survey more than

75% of the traders were still not sure about the procedures of VAT and how is it

effects them. Many of then haven’t filed their forms yet as they have no idea of how

to do it. The explanation given was that there are many strict rules and procedures to

be followed which they are not acquainted with.

Few traders feel that the business is declining as the consumer feels the pinch and

they don not know how much tax to charge their customers. Few of the merchants

like onion, garlic, turmeric traders are happy about VAT, as there is no tax. Few

traders feel that the tax rate has not changed even though it did and they are still

continuing with the same old tax rate. Most of the food grain merchants are paying

4% as tax. Lot of traders are still confused about VAT and its procedures and they

need to be given counseling. A few traders even mentioned that the Tax officials who

are supposed to guide them are not sure about the procedures themselves. The

automobile dealers were not happy, as the tax had increased by 2%.
8. Conclusion:

Based on the survey conducted among various traders it was found out that trader needs

to operate a current account for his business transactions. All the transactions pertaining

to his business should be done through the current account. He regularly utilizes various

services offered by the bank such as cheques, demand drafts, overdraft facility and many

more products that are being offered to him.

Value Added Tax has created lot of confusion among the business units. The traders are

not acquainted with the procedures of VAT and the percentage that is chargeable and also

many people are yet to file their papers. A few business units are satisfied with VAT as

the tax rate on the products they deal have decreased.

Exhibit-I

Questionnaire
Dear Sir/Madam, Date:

I am a student of Business Management studying at Indian Business Academy, Bangalore

and am currently doing a project with HDFC bank. I request you to spare a few minutes
of your time to answer few simple questions. Kindly Oblige.

1. The Nature of Business

(a) Wholesaler (b) Retailer (c) Manufacturer (d) Distributor

(e) Others: _________________

2. What products do you deal in?

_______________________________________________.

3. Who are your primary Bankers?

Bank: 1. ___________________

2. ___________________

3. ___________________

4. What are the services offered by the Banks to you?

Bank 1 Bank 2 Bank 3

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

 5. Do you require any other products or services to be provided by the bank for your

business?

________________________________________________________________.

6. Do you know any of the products/services offered by HDFC Bank? (Please Tick)

At Par Payable Cheques Inter-city/Intra-City Fund Transfers*

Free ATM Card Free Phone Banking/Net Banking
Free Pay orders Free Demand Drafts
Overdraft Facility* Mobile Banking
Home Loans Car/Two wheeler Loans
Free Cheques and Document Pick up and delivery of DD’s/Pay orders *
Foreign Exchange Services Loan against Securities/Property
* Conditions Apply

7. As an account holder could you provide few valuable suggestions?

_____________________________________________________

8. What are your comments on VAT?

_____________________________________________________

Personal Details:

Name: ______________________________

Company: ___________________________

Address: ____________________________

____________________________

Phone No: ___________________________

Thank You for Your Co-operation