1

PROJECT REPORT

ON

BANKING SECTOR

BY

B-4
 2

GROUP MEMBERS
1. RAVI AWADE
2. AVINASH B.N
3. PALLAVI BALEGAR
4. DIPTI MANKAR
5. ASHA BABA
6. GANESH NEVARKAR
7. NITIN BAGUL
8. JYOTI DANGAT
9. KUNAL
10. NIVEDITA SAMBARE
11. RAKSHIT SHAH
12. SAGAR BORUDE
13. VAIBHAV ABADULE
14. AMOL BHAVSAR
 3

Acknowledgement
If words are considered to be signs of gratitude then let these words
convey the very same our sincere gratitude to HDFC BANK for providing
us with an opportunity to work with and giving necessary directions on
doing this project to the best of our abilities.

We are highly indebted to Mr. Rahul Majgaonkar, Deputy Manager

Retail and company project guide, who has provided us with the
necessary information and also for the support extended out to us in
the completion of this report and his valuable suggestion and comments
on bringing out this report in the best way possible.

We also thank Prof. Ajay Varade, Indira Institute of Management, who

has sincerely supported me with the valuable insights into the
completion of this project. We are grateful to all faculty members of
IIMP and our seniors who have helped us in the successful completion
of this project.
 4

INDEX
Sr. No. CONTENTS Page No.

1 INTRODUCTION 5

2 GLOBAL BANKING SCENARIO 6

3 BANKING STRUCTURE IN INDIA 8

4 INDIAN BANKING INDUSTRY 10

5 LEGAL ISSUES 12

6 CURRENT ISSUES AND EVENTS 14

7 HDFC BANK 17

8 COMPANY PROFILE 18

9 PRODUCTS AND SERVICES 23

10 BUSINESS STRATERGIES 28

11 HUMAN RESOURCES 30

12 SIGNIFICANT EVENTS 34

13 ACHIEVEMENTS 40
14 SWOT ANALYSIS 42
15 FINANCIALS OF HDFC BANK 49
16 COMPARISON 53
17 CORPORATE SOCIAL 56
RESPONSIBILITIES
18 FUTURE PLANS 57
 5

Introduction:

The definition of a bank varies from country to country.

Under English common law, a banker is defined as a person who carries on the
business of banking, which is specified as:[1]

• conducting current accounts for his customers

• paying cheques drawn on him, and
• collecting cheques for his customers.

In most English common law jurisdictions there is a Bills of Exchange Act that
codifies the law in relation to negotiable instruments, including cheques, and this Act
contains a statutory definition of the term banker: banker includes a body of persons,
whether incorporated or not, who carry on the business of banking' (Section 2,
Interpretation). Although this definition seems circular, it is actually functional,
because it ensures that the legal basis for bank transactions such as cheques do not
depend on how the bank is organised or regulated.

The business of banking is in many English common law countries not defined by
statute but by common law, the definition above. In other English common law
jurisdictions there are statutory definitions of the business of banking or banking
business. When looking at these definitions it is important to keep in mind that they
are defining the business of banking for the purposes of the legislation, and not
necessarily in general. In particular, most of the definitions are from legislation that
has the purposes of entry regulating and supervising banks rather than regulating
the actual business of banking. However, in many cases the statutory definition
closely mirrors the common law one. Examples of statutory definitions:

• "banking business" means the business of receiving money on current or

deposit account, paying and collecting cheques drawn by or paid in by
customers, the making of advances to customers, and includes such other
business as the Authority may prescribe for the purposes of this Act; (Banking
Act (Singapore), Section 2, Interpretation).

• "banking business" means the business of either or both of the following:

1. receiving from the general public money on current, deposit, savings or other
similar account repayable on demand or within less than [3 months] ... or with
a period of call or notice of less than that period;
2. paying or collecting cheques drawn by or paid in by customers

Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit,
direct debit and internet banking, the cheque has lost its primacy in most banking
 6

systems as a payment instrument. This has lead legal theorists to suggest that the
cheque based definition should be broadened to include financial institutions that
conduct current accounts for customers and enable customers to pay and be paid by
third parties, even if they do not pay and collect cheques.

Global Banking
Size of global banking industry

Worldwide assets of the largest 1,000 banks grew 16.3% in 2006/2007 to reach a
record $74.2 trillion. This follows a 5.4% increase in the previous year. EU banks
held the largest share, 53%, up from 43% a decade earlier. The growth in Europe’s
share was mostly at the expense of Japanese banks whose share more than halved
during this period from 21% to 10%. The share of US banks remained relatively
stable at around 14%. Most of the remainder was from other Asian and European
countries.

The US had by far the most banks (7,540 at end-2005) and branches (75,000) in the
world. The large number of banks in the US is an indicator of its geography and
regulatory structure, resulting in a large number of small to medium sized institutions
in its banking system. Japan had 129 banks and 12,000 branches. In 2004,
Germany, France, and Italy had more than 30,000 branches each—more than
double the 15,000 branches in the UK.

Top ten banking groups in the world ranked by shareholder equity ($m)

The 2008 bank atlas was compiled by Moody's from commercial banks’ annual
reports and financial statements. Shareholder equity is the assessment of a bank's
value in its own markets currency valuation at a given point of time relative to other
currencies. Figures are in U.S. dollars

Rank Company Shareholder equity ($m) -

1 Bank of America 131720 $mln -

2 Citigroup 119783 $mln -

3 JPMorgan Chase 115790 $mln -

 7

4 HSBC 114928 $mln -

5 Mitsubishi UFJ Financial Group 81,940 $mln -

6 Royal Bank of Scotland Group 78,730 $mln -

7 ING Group 78,088 $mln -

8 Crédit Agricole 77,462 $mln -

9 Wachovia Corporation 69,716 $mln -

10 BNP Paribas 67,378 $mln -

 8

BANKING STRUCTURE IN INDIA

Scheduled Banks in India

(A) Scheduled Commercial Banks

Public sector Private sector Foreign Regional Rural

Banks Banks Banks in Bank
India
(28) (27) (29) (102)
• Nationalized • Old Private
Bank Banks
• Other Public • New
Sector Banks Private
(IDBI) Banks
• SBI and its
Associates

(B) Scheduled Cooperative Banks

Scheduled Urban Cooperative Scheduled State Cooperative

Banks (55) Banks (31)
 9

Here we more concerned about private sector banks and competition among them.
Today, there are 27 private sector banks in the banking sector: 19 old private sector
banks and 8 new private sector banks.

These new banks have brought in state-of-the-art technology and aggressively

marketed their products. The Public sector banks are facing a stiff competition from
the new private sector banks.

The banks which have been setup in the 1990s under the guidelines of the
Narasimham Committee are referred to as NEW PRIVATE SECTOR BANKS.

New Private Sector Banks

• Superior Financial Services

• Designed Innovative Products

• Tapped new markets

• Accessed Low cost NRI funds

• Greater efficiency
 10

INDIAN BANKING INDUSTRIES

The Indian banking market is growing at an astonishing rate, with assets expected to
reach US$1 trillion by 2010. An expanding economy, middle class, and
technological innovations are all contributing to this growth.

The country’s middle class accounts for over 320 million people. In correlation with
the growth of the economy, rising income levels, increased standard of living, and
affordability of banking products are promising factors for continued expansion.

The Indian banking Industry is in the middle of an IT revolution, focusing on the

expansion of retail and rural banking. Players are becoming increasingly customer -
centric in their A approach, which has resulted in innovative methods of offering new
banking products and services. Banks are now realizing the importance of being
a big player and are beginning to focus their attention on mergers and acquisitions
to take advantage of economies of scale and/or comply with Basel II
regulation. “Indian banking industry assets are expected to reach US$1 trillion by
2010 and are poised to receive a greater infusion of foreign capital,” says Prathima
 11

Rajan, analyst in Celent's banking group and author of the report. “The banking
industry should focus on having a small number of large players that can compete
globally rather than having a large number of fragmented players."

UPCOMING FOREIGN BANKS IN INDIA

By 2009 few more names is going to be added in the list of foreign banks in India.
This is as an aftermath of the sudden interest shown by Reserve Bank of India
paving roadmap for foreign banks in India greater freedom in India. Among them is
the world's best private bank

by EuroMoney magazine, Switzerland's UBS.

The following are the list of foreign banks going to set up business in India :-

• Royal Bank of Scotland

• Switzerland's UBS
• US-based GE Capital
• Credit Suisse Group
• Industrial and Commercial Bank of China
 12

Legal issues relating to Banks:

Banks work under various legal framework the most important of these is the
Banking Regulation Act 1949, Basel II norms, RBI act and Negotiable Instruments
Act

BANKING REGULATIONS ACT 1949

The Banking Regulation Act was passed as the Banking Companies Act 1949 and
came into force wef 16.3.49. Subsequently it was changed to Banking Regulations
Act 1949 wef 01.03.66.

Basel II Regulations

Basel II is the second of the Basel Accords, which are recommendations on banking
laws and regulations issued by the Basel Committee on Banking Supervision. The
purpose of Basel II, which was initially published in June 2004, is to create an
international standard that banking regulators can use when creating regulations
about how much capital banks need to put aside to guard against the types of
financial and operational risks banks face. Advocates of Basel II believe that such an
international standard can help protect the international financial system from the
types of problems that might arise should a major bank or a series of banks
collapse. In practice, Basel II attempts to accomplish this by setting up rigorous risk
and capital management requirements designed to ensure that a bank holds capital
reserves appropriate to the risk the bank exposes itself to through its lending and
investment practices. Generally speaking, these rules mean that the greater risk to
which the bank is exposed, the greater the amount of capital the bank needs to hold
to safeguard its solvency and overall economic stability.

The final version aims at:

1. Ensuring that capital allocation is more risk sensitive;

2. Separating operational risk from credit risk, and quantifying both;
3. Attempting to align economic and regulatory capital more closely to reduce
the scope for regulatory arbitrage.

Objectives of Bank Regulation

The objectives of bank regulation, and the emphasis, vary between jurisdiction. The
most common objectives are:
 13

1. Prudential -- to reduce the level of risk bank creditors are exposed to (i.e. to
protect depositors)
2. Systemic risk reduction -- to reduce the risk of disruption resulting from
adverse trading conditions for banks causing multiple or major bank failures
3. Avoid Misuse of Banks -- to reduce the risk of banks being used for criminal
purposes, e.g. laundering the proceeds of crime
4. To protect banking confidentiality
5. Credit allocation -- to direct credit to favoured sectors.

General Principles of Bank Regulation

Banking regulations can vary widely across nations and jurisdictions. This section of
the article describes general principles of bank regulation throughout the world.

Minimum Requirements

Requirements are imposed on banks in order to promote the objectives of the

regulator. The most important minimum requirement in banking regulation is
minimum capital ratios.

Supervisory Review

Banks are required to be issued with a bank licence by the regulator in order to carry
on business as a bank, and the regulator supervises licenced banks for compliance
with the requirements and responds to breaches of the requirements through
obtaining undertakings, giving directions, imposing penalties or revoking the bank's
licence.

Market Discipline

The regulator requires banks to publicly disclose financial and other information, and
depositors and other creditors are able to use this information to assess the level of
risk and to make investment decisions. As a result of this, the bank is subject to
market discipline and the regulator can also use market pricing information as an
indicator of the bank's financial health.
 14

CURRENT ISSUES:

RBI tightens rates at Q1 2008-09 review of Monetary Policy

RBI in its first quarter review of monetary policy tightened interest rates.

The policy actions are:

Repo rate increased by 50 bps to 9%.

Cash reserve ratio increased by 25 bps to 9.0% with effect from the fortnight
beginning August 30, 2008

Reverse repo rate unchanged

The overall stance of monetary policy in 2008-09 will broadly continue to :

To ensure a monetary and interest rate environment that accords high priority to
price stability, well-anchored inflation expectations and orderly conditions in financial
markets while being conducive to continuation of the growth momentum.

To respond swiftly on a continuing basis to the evolving constellation of adverse

international developments and to the domestic situation impinging on inflation
expectations, financial stability and growth momentum, with both conventional and
unconventional measures, as appropriate.

To emphasise credit quality as well as credit delivery, in particular, for employment-

intensive sectors, while pursuing financial inclusion.

RBI has also revised its inflation forecasts for the year:
 15

While the policy actions would aim to bring down the current intolerable level of
inflation to a tolerable level of below 5.0 per cent as soon as possible and around 3.0
per cent over the medium-term, at this juncture a realistic policy endeavour would be
to bring down inflation from the current level of about 13 per cent to a level close to
7.0 per cent by March 31, 2009.

This was important as inflation of 5% - 5.5% was simply not achievable. It is

important to have flexibility in inflation targets.

RBI has also lowered its growth projections:

GDP growth projection for 2008-09 revised from the range of 8.0-8.5 per cent to
around 8.0 per cent, barring domestic or external shocks.

First, the drop in the wholesale price-based inflation from 11.91% to 11.89% for the
week ended 12 July, the first such drop in two months.

Second, a decline in industrial production. The year-on-year growth rate in industrial

production in May fell to 3.8%, its lowest in six years. Finally, the drop in crude oil
prices.

Indian banking sector set to open up by 2009

India’s banking sector, currently ranked among the most preferred banking
destinations in the world, is well on track for opening up fully in 2009, said K.
Sitaramam, managing director of State Bank of Travancore (SBT).

Sitaramam, who was in the UAE to meet Sultan bin Nasser Al Suwaidi, Governor of
the UAE Central Bank, said India's financial sector is undergoing a consolidation
phase with the implementation of Basel II norms next month.
 16

According to a survey conducted by the Federation of Indian Chambers of

Commerce and Industries (FICCI), a major strength of the Indian banking industry is
the regulatory system, which has helped the country mark its place on the global
banking scene. The regulatory systems of Indian banks are rated better than China
and Russia; at par with Japan and Singapore but less advanced than the UK and
USA.

The country's central bank, Reserve Bank of India (RBI), which has outlined the
roadmap for foreign players to grow by allowing them to set up branches in rural
India and take over weak banks with an investment of up to 74 per cent, promises to
do more in the next two years.

RBI has said that between March 2005 and 2009, foreign banks that were so far
restricted to branch operations could also set up wholly owned subsidiaries. The
guidelines also noted that foreign bank subsidiaries with a minimum capital
requirement of Rs 3 billion would be treated on par with existing branches of foreign
banks for branch expansion. However, foreign banks cannot grow unrestrained
through local acquisitions; they can buy only weak local banks the regulator
identifies. The RBI said the second phase of opening up would commence in April
2009, after a review of the experience gained and after due consultation with all the
stakeholders.
 17

WE UNDERSTAND YOUR WORLD

The Housing Development Finance Corporation Limited (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 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 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 the 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.

HDFC Bank began operations in 1995 with a simple mission: to be a “World Class
Indian Bank.” We realized that only a single minded focus on product quality and
 18

service excellence would help us get there. Today, we are proud to say that we are
well on our way towards that goal.

COMPANY PROFILE

STRONG NATIONAL NETWORK

March 2006 March 2007 March 2008

Citied 228 316 327

Branches 535 684 761

ATMs 1323 1605 1977

As of March 31, 2008, the Bank’s distribution network was at 761 Branches and
1977 ATMs in 327 cities as against 684 branches and 1,605 ATMs in 320 cities
as of March 31, 2007. Against the regulatory approvals for new branches in hand,
the Bank expects to further expand the branch network by around 150 branches by
June 30, 2008. During the year, the Bank stepped up retail customer acquisition with
deposit accounts increasing from
6.2 million to 8.7 million and total cards issued (debit and credit cards) increasing
from 7 million to 9.2 million.
 19

Whilst credit growth in the banking system slowed down to about 22% for the year
ended 2007-08, the Bank’s net advances grew by 35.1% with retail advances
growing by 38.6% and wholesale advances growing by 30%, implying a higher
market share in both segments.

The transactional banking business also registered healthy growth with cash
management volumes increased by around 80% and trade services volumes by
around 40% over the previous year.

Portfolio quality as of March 31, 2008 remained healthy with gross nonperforming
assets at 1.3% and net non-performing assets at 0.4% of total customer assets. The
Bank’s provisioning policies for specific loan loss provisions remained higher than
regulatory requirements.
 20

TECHNOLOGY USED IN HDFC BANK

In the era of globalization each and every sector faced the stiff competition
from their rivals. And world also converted into the flat from the globe. After the
policy of liberalization and RBI initiatives to take the step for the private sector
banks, more and more changes are taking the part into it. And there are create
competition between the private sector banks and public sector bank. Private sector
banks are today used the latest technology for the different transaction of day to day
banking life. As we know that Information Technology plays the vital role in the each
and every industry and gives the optimum return from the limited resources.

Banks are service industries and today IT gives the innovative Technology
application to Banking industries. HDFC BANK is the leader in the industries and
today IT and HDFC BANK together combined they reached the sky. New technology
changed the mind of the customers and changed the queue concept from the history
banking transaction. Today there are different channels are available for the
banking transactions.

We can see that the how technology gives the best results in the below diagram.
There are drastically changes seen in the use of Internet banking, in a year 2001
(2%) and in the year 2008 (25%).
 21

This type of technology gives the freedom to retail customers.

Centralized Processing Units Derived Economies of Scale

Electronic Straight Through Reduced Transaction Cost

Processing

Data Warehousing , CRM Improve cost efficiency, Cross

sell
Innovative Technology Application Provide new or superior
products

HDFC BANK is the very consistent player in the new private sector banks. New
private sector banks to withstand the competition from public sector banks came up
with innovative products and superior service.

2001
 22

Branches 43%

ATM 40%

Phone Banking
14%
Internet 2%

Mobile 1%

2005

Branches 17%

ATM 45%

Phone Banking
12%
Internet 25%

Mobile 1%

(
% customer initiated Transaction by Channel )
 23

HDFC BANK PRODUCTS AND SERVICES

PERSONAL BANKING

Loan Product Deposit Product Investment & Insurance

• Auto Loan • Saving a/c • Mutual Fund

• Loan Against • Current a/c • Bonds
Security • Fixed deposit • Knowledge Centre
• Loan Against • Demat a/c • Insurance
Property • Safe Deposit • General and Health
• Personal loan Lockers Insurance
• Credit card • Equity and
• 2-wheeler loan Derivatives
• Commercial • Mudra Gold Bar
vehicles
finance
• Home loans
• Retail business
 24

banking
• Tractor loan
• Working
Capital
Finance
• Construction
Equipment
Finance
• Health Care
Finance
• Education
Loan
• Gold Loan

Cards Payment Access To Bank

Services

• Credit Card • NetSafe • NetBanking

• Debit Card • Merchant • OneView
• Prepaid Card • Prepaid Refill • InstaAlert
• Billpay MobileBanking
• Visa Billpay • ATM
• InstaPay • Phone Banking
---------------------------- • DirectPay • Email Statements
---- • VisaMoney • Branch Network
Forex Services Transfer
---------------------------- • e–Monies
---- Electronic
• Product & Funds Transfer
Services • Online
• Trade Services Payment of
• Forex service Direct Tax
Branch Locater
• RBI Guidelines
 25

WHOLESALE BANKING

Corporate Small and Medium Financial Institutions

Enterprises and Trusts

• Funded • Funded Services BANKS

Services • Non Funded • Clearing Sub-
• Non Funded Services Membership
Services • Specialized • RTGS –
• Value Added Services submembership
Services • Value added • Fund Transfer
• Internet services • ATM Tie-ups
Banking • Internet Banking • Corporate Salary a/c
• Tax Collection
Financial Institutions

Mutual Funds

Stock Brokers

Insurance Companies

Commodities
Business
 26

Trusts

BUSINESS MIX

Total Deposits Gross Advances Net

Revenue

Retail Wholesale

• HDFC Bank is a consistent player in the private sector

Bank and have a well balanced product and business

mix in the Indian as well as overseas markets.

 27

• Customer segments (retail & wholesale) account for

84% of Net revenues (FY 2008)

• Higher retail revenues partly offset by higher operating

and credit costs.

• Equally well positioned to grow both segments.

NRI SERVICES

Accounts & Deposits Remittances

• Rupee Saving a/c • North America

• Rupee Current a/c • UK
• Rupee Fixed Deposits • Europe
• Foreign Currency Deposits • South East Asia
• Accounts for Returning • Middle East
Indians • Africa
• Others
Quick remit
IndiaLink
Cheque LockBox
Telegraphic/ Wire Transfer
Funds Transfer
Cheques/DDs/TCs

Investment & Insurances Loans

• Mutual Funds • Home Loans

 28

• Insurance • Loans Against Securities

• Private Banking • Loans Against Deposits
• Portfolio Investment • Gold Credit Card
Scheme

Payment Services Access To Bank

• NetSafe • Net Banking

• BillPay • One View
• InstaPay • InstaAlert
• DirectPay • ATM
• Visa Money • PhoneBanking
• Online Donation • Email Statements
• Branch Network

BUSINESS STRATEGY

HDFC BANK mission is to be "a World Class Indian Bank",

benchmarking themselves against international standards and best

practices in terms of product offerings, technology, service levels,

risk management and audit & compliance. The objective is to build

sound customer franchises across distinct businesses so as to be a

preferred provider of banking services for target retail and wholesale

customer segments, and to achieve a healthy growth in profitability,

consistent with the Bank's risk appetite. Bank is committed to do this

while ensuring the highest levels of ethical standards, professional

 29

integrity, corporate governance and regulatory compliance. Continue

to develop new product and technology is the main business strategy

of the bank. Maintain good relation with the customers is the main

and prime objective of the bank.

HDFC BANK business strategy emphasizes the following :

• Increase market share in India’s 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 current high standards for asset quality through

disciplined credit risk management.

• Develop innovative products and services that attract the

targeted customers and address inefficiencies in the Indian

financial sector.
 30

• Continue to develop products and services that reduce bank’s

cost of funds.

• Focus on high earnings growth with low volatility

 31

HUMAN RESOURCES

ORGANISATIONAL STRUCTURE :
Board Of Directors
Chairman
Group Heads
Regional/Zonal Heads
State Heads
Cluster Heads
Unit Heads
Executive Staff

The Bank’s staffing needs continued to increase during the year

particularly in the retail banking businesses in line with the business

growth. Total number of employees increased from 14878 as of

March31,2006 to 21477 as of March 31, 2007. The Bank continues to

focus on training its employees on a continuing basis, both on the job

and through training programs conducted by internal and external

faculty.

The Bank has consistently believed that broader employee ownership

of its shares has a positive impact on its performance and employee

motivation. The Bank’s employee stock option scheme so far covers

around 9000 employees.

 32

HR POLICIES :
Sources for Recruitment :
Campus Selections, Placement Agencies, Advertisement in
Newspapers, CVs posted on Site, Recommendations by staff.

RUPEE EARNED - RUPEE SPENT

It is more important for every organization to know about from where

and where to spent money. And balanced between these two things

rupee earned and rupee spent are required for smooth running of

business and financial soundness. This type of watch can control

and eliminate the unnecessary spending of business. In this diagram

it include both things from where Bank earned Rupee and where to

spent.
 33

HDFC BANK earned from the ‘Interest from Advances’ 51.14 % ,

‘Interest from Investment’ 27.12 %, bank earned commission

exchange and brokerage of 15.25 %. These are the major earning

sources of the bank. Bank also earned from the Forex and

Derivatives and some other Interest Income.

Bank spent 39.75 % on Interest Expense, 30.27 % on Operating

Expense and 14.58 % on Provision. Bank also spent Dividend and

Tax on dividend, Loss on Investment , Tax.

As we discuss above that balancing is must between these two for

every organization especially in the era of globalization where there

are stiff competition among various market players.

 34

SIGNIFICANT EVENTS

The Reserve Bank of India has approved the scheme of

amalgamation of Centurion Bank of Punjab Ltd. with HDFC Bank

Ltd. with effect from May 23, 2008.

All the branches of Centurion Bank of Punjab will function as

branches of HDFC Bank with effect from May 23, 2008. With RBI’s

approval, all requisite statutory and regulatory approvals for the

merger have been obtained.

 35

The combined entity would have a nationwide network of 1167

branches; a strong deposit base of around Rs.1,22,000 crores and

net advances of around Rs.89,000 crores. The balance sheet size of

the combined entity would be over Rs.1,63,000 crores.

Merger with Centurion Bank of Punjab Limited

On March 27, 2008, the shareholders of the Bank accorded their

consent to a scheme of amalgamation of Centurion Bank of Punjab

Limited with HDFC Bank Limited. The shareholders of the Bank

approved the issuance of one equity share of Rs.10/- each of HDFC

Bank Limited for every 29 equity shares of Re. 1/- each held in

Centurion Bank of Punjab Limited. This is subject to receipt of

 36

Approvals from the Reserve Bank of India, stock exchanges and

Other requisite statutory and regulatory authorities. The shareholders

Also accorded their consent to issue equity shares and/or warrants

convertible into equity shares at the rate of Rs.1,530.13 each to

HDFC Limited and/or other promoter group companies on preferential

basis, subject to final regulatory approvals in this regard. The

Shareholders of the Bank have also approved an increase in the

authorized capital from Rs.450 crores to Rs.550 crores.

Promoted in 1995 by Housing Development Finance Corporation

(HDFC), India's leading housing finance company, HDFC Bank is one

of India's premier banks providing a wide range of financial products

and services to its over 11 million customers across hundreds of

Indian cities using multiple distribution channels including a pan-India

network of branches, ATMs, phone banking, net banking and mobile

banking. Within a relatively short span of time, the bank has emerged

as a leading player in retail banking, wholesale banking, and treasury

 37

operations, its three principal business segments.

The bank's competitive strength clearly lies in the use of technology

and the ability to deliver world-class service with rapid response time.

Over the last 13 years, the bank has successfully gained market

share in its target customer franchises while maintaining healthy

profitability and asset quality.

As on March 31, 2008, the Bank had a network of 761 branches and

1,977 ATMs in 327 cities. For the year ended March 31, 2008, the

Bank reported a net profit of INR 15.90 billion (Rs.1590.2crore),

up 39.3%, over the corresponding year ended March 31, 2007.

As of March 31, 2008 total deposits were INR 1007.69 billion,

(Rs.100,769 crore) up 47.5% over the corresponding year ended

March 31, 2007. Total balance sheet size too grew by 46.0% to INR

1,331.77 billion (133177 crore). Leading Indian and international

Publications have recognized the bank for its performance and

quality.
 38

Centurion Bank of Punjab is one of the leading new generation

private sector banks in India. The bank serves individual consumers,

small and medium businesses and large corporations with a full

range of financial products and services for investing, lending and

advice on financial planning. The bank offers its customers an array

of wealth management products such as mutual funds, life and

general insurance and has established a leadership 'position'.

The bank is also a strong player in foreign exchange services,

personal loans, mortgages and agricultural loans.

Additionally the bank offers a full suite of NRI banking products to

Overseas Indians. On 29th August 2007, Centurion Bank of Punjab

merged with Lord Krishna Bank (LKB), post obtaining all requisite

statutory and regulatory approvals. This merger has further

strengthened the geographical reach of the Bank in major towns and

cities across the country, especially in the State of Kerala, in addition

 39

to its existing dominance in the northern part of the country.

Centurion Bank of Punjab now operates on a strong nationwide

franchise of 404 branches and 452 ATMs in 190 locations across the

country, supported by employee base of over 7,500 employees.

In addition to being listed on the major Indian stock exchanges,

the Bank’s shares are also listed on the Luxembourg Stock

Exchange.
 40

ACHIEVEMENTS

Business Today-
Monitor Group
survey One of India's "Most Innovative
Companies"

Financial Express-
Ernst & Young Best Bank Award in the Private Sector
Award category

Global HR 'Employer Brand of the Year 2007 -2008'

Excellence Award - First Runner up, & many more
Awards - Asia
Pacific HRM
Congress:

Business Today 'Best Bank' Award

Dun & Bradstreet

– American
Express Corporate 'Corporate Best Bank' Award
Best Bank Award
2007
The Bombay
Stock Exchange
and Nasscom 'Best Corporate Social Responsibility
Foundation's
Business for
Practice' Award
Social
 41

Responsibility
Awards 2007
Outlook Money & Best Bank Award in the Private sector category.
NDTV Profit

The Asian Banker Best Retail Bank in India

Excellence in
Retail Financial
Services Awards

Asian Banker HDFC BANK Managing Director Aditya Puri wins

the Leadership Achievement Award for
India
 42

SWOT ANALYSIS

STRENGTH WEAKNESSES

• Right strategy for the • Some gaps in range for

right products. certain sectors.
• Superior customer • Customer service staff need
service vs. competitors. training.
• Great Brand Image • Processes and systems, etc
• Products have required • Management cover
accreditations. insufficient.

• High degree of customer • Sectoral growth is

constrained by low
satisfaction.
unemployment levels and
• Good place to work competition for staff

• Lower response time

with efficient and
effective service.

• Dedicated workforce
aiming at making a
long-term career in
the field.
 43

Opportunities Threats

• Profit margins will be good. • Legislation could impact.

• Could extend to overseas • Great risk involved

broadly. • Very high competition
• New specialist applications. prevailing in the industry.

• Could seek better customer • Vulnerable to reactive

deals.
attack by major competitors
• Fast-track career • Lack of infrastructure in
development opportunities rural areas could constrain
on an industry-wide basis. investment.
• An applied research centre • High volume/low cost
to create opportunities for market is intensely
developing techniques to competitive.
provide added-value
services.
 44

COMPETITIVE SWOT ANALYSIS WITH ICICI BANK

STRENGTHS WEAKNESSES

O
P S – O Strategies W – O Strategies
P
O Strength: Large Capital base. Weakness: Workforce
R
T Opportunity: Market Expansion. Responsiveness.
U
N Opportunity: Outsourcing of Non –
I Strategy: Deep Penetration into Core Business.
T
I Rural Market. Strategy: Outsource Customer
E Care & other E-Helps.
S

S – T Strategies W – T Strategies
T
H Strength: Low operating costs Weakness: Not Equal to
R International Standards.
E
A Threat: Increased Competition Threat: Entry of many Foreign
T from others Pvt. Banks. Banks.
S
Strategy: Steps to Ensure
Loyalty by old Strategy: Consider additional
Customers. benefits
 45

Detailed Analysis:

i. Strength - Opportunity Analysis.

Strength:

It is well know that ICICI Bank has the largest Authorised Capital

Base in the Banking System in India i.e. having a total capacity to

raise Rs. 19,000,000,000 (Non – Premium Value).

Opportunity:

Seeing the present financial & economic development of Indian

Economy and also the tremendous growth of the Indian

Companies including the acquisition spree followed by them,

it clearly states the expanding market for finance requirements

and also the growth in surplus disposal income of Indian citizens

has given a huge rise in savings deposits – from the above point it

is clear that there is a huge market expansion possible in banking

sector in India.

Strategy:

From the analysis of Strength & Opportunity the simple and

 46

straight possible strategy for ICICI Bank could be - to penetrate

into the rural sector of India for expanding its market share as well

as leading all other Pvt. Banks from a great gap.

ii. Strength - Threat Analysis.

Strength:

ICICI Bank is not only known for large capital but also for having a

low operations cost though having huge number of branches and

services provided.

Threat:

After showing a significant growth overall, India is able to attract

many international financial & banking institutes, which are known

for their state of art working and keeping low operation costs.

Strategy:

To ensure that ICICI Bank keeps going on with low operation cost

& have continuous business it should simply promote itself well &

provide quality service so as to ensure customer loyalty, therefore

guaranteeing continuous business.

 47

iii. Weakness - Opportunity Analysis.

Weakness:

It is well known that workforce responsiveness in banking sector is

Very low in Indian banking sector, though ICICI Bank has better

responsible staff but it still lacks behind its counterparts like HSBC,

HDFC BANK, CITI BANK, YES BANK etc.

Opportunity:

In the present world, India is preferred one of the best places for

out – sourcing of business process works and many more.

Strategy:

As international companies are reaping huge benefits after out-

sourcing there customer care & BPO’s, this same strategy should

be implemented by ICICI Bank so as to have proper customer

service without hindering customer expectations.

 48

iv. Weakness - Threat Analysis.

Weakness:

Though having a international presence, ICICI Bank has not been

able to keep up the international standards in providing customer

service as well as banking works.

Threat:

In recent times, India has witnessed entry of many international

banks like CITI Bank, YES Bank etc which posses an external

entrant threat to ICICI Bank – as this Banks are known for their art

of working and maintain high standards of customer service.

Strategy:

After having new entrants threat, ICICI Bank should come up with

More additional benefits to its customer or may be even reduce

some fees for any additional works of customers.

 49

FINANCIALS
PROFIT AND LOSS ACCOUNT
 50

QUARTERLY RESULTS
 51

Profit & Loss Figures

13000
12000
11000
10000
9000
Rs.(in crores)

8000
total income
7000
total expense
6000
5000 total net profit
4000
3000
2000
1000
0
2004 2005 2006 2007 2008
march march march march march
Year

Income Breakup

13000
12000
11000
10000
9000
8000
7000
Rs.(in crores) 6000 other income
5000
4000 interest earned
3000
2000
1000
0
Mar'04 Mar'05 Mar'06 Mar'07 Mar'08

Year
 52

Total Net Profit

1800
1600 1590.18
1400 1382.54
Rs.(in crores)

1200
1115.94
1000 Total Net Profit
800 853.62
600 602.72
400
200
0
2004 2005 2006 2007 2008
Year

Employee cost
1400
1200
Rs.(in crores)

1000
800
Employee cost
600
400
200
0
'04 '05 '06 '07 '08
Year

Employee cost:
The employee cost seems to rise exponentially. This is an indication of the
aggressive expansion that HDFC went through during the period of 2007-
2008.
 53

COMPARISON BETWEEN BANKS

net total
net sales net profits assets total deposits advances
hdfc bank 10115 4157.73 295281.61 100768.6 63426.9
icici bank 30788.34 1590.18 99161.29 244431.05 225616.08
axis bank 7005.32 1071.03 87684.85 87626.22 59611.14
kotak bank 2535.36 293.93 22034.54 16423.65 15552.22
federal bank 2515.44 368.05 27786.79 25913.36 18904.66

Graphical representation

Net sales

35000 30788.34
30000
Rs.(in Crores)

25000
20000
15000 net sales
10115
10000 7005.32
5000 2535.36 2515.44
0
hdfc bank icici bank axis bank kotak federal
bank bank
Banks

Net profits

5000 4157.73
Rs.(in crores)

4000
3000
1590.18 net profits
2000 1071.03
1000 293.93 368.05
0
hdfc icici axis kotak federal
bank bank bank bank bank
Banks
 54

Net assets

350000 295281.61
300000
Rs.(in crores)

250000
200000
net assets
150000 99161.29 87684.85
100000
50000 22034.54 27786.79
0
hdfc bank icici bank axis bank kotak federal
bank bank
Banks

Total Deposits

300000 244431.05
Rs.(in crores)

200000
100768.6 87626.22 total deposits
100000 16423.65 25913.36
0
hdfc icici axis kotak federal
bank bank bank bank bank
Banks
 55

Total advances

250000 225616.08

200000
Rs.(in crores)

150000
total advances
100000
63426.9 59611.14
50000
15552.2218904.66
0
hdfc icici axis kotak federal
bank bank bank bank bank
Banks
 56

CORPORATE SOCIAL RESPONSIBILITIES

Blood Donation Camps conducted for HDFC Staff

Contribution to work of PMC – Putting up of “NO PARKING” boards.
Contribution to an NGOs like “GIVE INDIA”, “CRY” by HDFC staff as
well as bank.
 57

FUTURE PLANS OF HDFC

• HDFC is one of the nine Indian banks, who have made it to the
list of top 50 Asian banks.

• HDFC Bank has been able to protect their net interest margin and
loan quality amid aggressive growth, further improving their
earnings growth momentum.

• HDFC has an enviable network of over 1229 branches spread

over 444 cities across India. All branches are linked on an online
real-time basis.

• HDFC has plan of establishing 200 branches per year 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.

• The Bank also has a network of about over 2526 networked ATMs
across these cities, and the number is increasing day by day.

• 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.

• HDFC Bank Merchant Services is the national leader in electronic

payment solutions.

• HDFC Bank would install the state of the art latest generation EDC
terminals on which all signature-based cards can be accepted.

• OneView is a revolutionary service from HDFC Bank that allows

you to manage multiple accounts in different banks through one
single online interface.

If you are an HDFC Bank customer and have one or more

accounts with Citibank, ICICI Bank, HSBC India, Standard
Chartered Bank then OneView is just right for you.
 58

Features Of One View:

• No need to individually log on to internet banking of every account.
Just log on to One View and manage upto FIVE accounts in
different banks.

• Remember only ONE password Enjoy this convenience,

absolutely FREE!
 59

WE UNDERSTAND YOUR WORLD

THANK YOU