A comparative study of cash flow statements of

HDFC and ICICI Bank

Diksha
Research scholar, Guru Kashi University, Talwandi Sabo.

ABSTRACT: Cash flow statement is a statement which shows inflow and outflows of cash and cash
equivalents during a particular period of time. It explains the reasons for changes in the balance of cash and
cash equivalents between two balance sheet dates. According to AS-3, cash flow statement should be
prepared in such a way so as to show the flows of cash separately under three headings:- “ operating
activities”, “investing activities”, “financing activities”. Operating activities deals with sales of goods and
services, Investing activities deals with sale or purchase of an asset and financing activities deals with
borrowings or sale of common stock. It helps to assess the soundness of the business’s position and to
highlight the major activities that have provided cash and that used cash during a period, and to show the
resulting effect on the overall cash balance. The cash flow statement complements the income statement and
balance sheet. It is not same as net income, it is the movement of money into and out of the business
enterprises and also effected by various non-cash transactions.

KEYWORDS: cash, cash equivalents, operating activities, investing activities, financing activities.

INTRODUCTION: Banking sector has a very important place in our Indian economy. Indian banks
can be classified into public and private sector Banks. Banks have principal role of converting liquid
deposits into liquid assets like loans, which makes them constitutionally weak to liquidity risk. Lack of cash
is an indicator of crises in the banking sector therefore cash management is an important objective of any
bank. Monitoring the cash flows of a business entity is one of modern methods of financial analysis. Other
financial statements like balance sheet and profit and loss account not provide full information regarding
cash position of any enterprise therefore, cash flow statement is formed. Cash flow statement is a financial
statement which reports the cash generated and used during the time interval it contains. Other financial
statements like balance sheet and income statement shows only net balances at opening of financial year
and a the end of financial year but cash flow statement describes how and why the difference between the
closing balance and opening balance takes places. According to AS-3, cash flow statement should be
prepared in such a way so as to show the flows of cash separately under three headings:-“operating
activities”, “investing activities”, “financing activities”. Operating activities deals with sales of goods and
services, investing activities deals with sale or purchase of an asset and financing activities deals with
borrowings or sale of common stock. It helps to assess the soundness of the business’s position and to
highlight the major activities that have provided cash and that used cash during a period, and to show the
resulting effect on the overall cash balance. Cash is the blood for every business organisation so there is
need of proper management of cash, cash flow statement showing us the company in which area used the
cash and from which area generate it. So that we know that, it properly worked or not. By cash flow
statement we know about the liquidity and profitability of the organisation. For example: companies
operating activities are compared with net income. If cash received from operating profit is more than its net
income, the company’s earnings are of “high quality”. But if it is less than net income our liquidity position
is not so good. The difference between income statement and the cash flow statement because there is timing
difference between the times of cash is actually expanded or received.

LITERATURE REVIEW:

Dodiya & Gelda (2014), have carried out a study regarding comparison of one public sector bank SBI and
one private sector bank HDFC by evaluating their cash flow statement. The study is conducted for five years
from 2009-2010 to 2013-2014. According to this study cash flow from operating activities of SBI better than
HDFC but cash flow from investing and financing activities of HDFC are better than SBI. The statistical
analysis technique is selected to analyze the cash flow statement which are- Mean, Standard Deviation, Co-
efficient of Variance and t-test. It concludes that co-variance of HDFC bank is less than SBI bank in all three
activities that means HDFC is having more consistency in all three activities than the SBI. But limitation of
this study is that they take only one bank from private sector and one bank from public sector.

Varshney & Jain(2016), have carried out a study to make comparison of cash flow statement of Bank of
Baroda and Syndicate Bank and conclude that through cash flow analysis, an organization can identify the
unproductive use of fund as well as to ascertain and plan future cash flows. The study is conducted for five
financial years from 2011-12 to 2015-16. With the help of this study, it has been found that bank of Baroda
is performing well as compared to syndicate bank. This study also concludes that cash flow analysis is
important to identify weaknesses in business operation that can lead the organization towards liquidity
crunch. Through cash flow analysis, an organization can identify the unproductive use of fund as well as to
ascertain and plan future cash flows

Singh (2016), has carried out study to compare cash flow statement of one public sector bank i.e. State Bank
of India and one private sector bank i.e. ICICI Bank. This study is conducted is conducted for a period of ten
financial years i.e. from 2006-2007 to 2015-16 and four statistical techniques are used to analyze the cash
flow statements i.e. Mean, Standard Deviation, co-efficient of variance and Median. According to study,
cash position of both banks SBI and ICICI is good and satisfactory but position of SBI is more satisfactory
than ICICI. According to this study, showing financial statement of cash flows is more challenging than
analysis information from profit and loss account and balance sheet. The primary reason is that it is common
for cash flows for certain categories to be negative, thereby forming interpretation difficult.

Das (2017), has carried out a study to compare one public sector i.e. State Bank of India and one private
sector bank i.e. ICICI Bank by evaluating their cash flow statement for five financial years from 2009-10 to
2013-14. For this purpose three statistical techniques are used- Mean, Standard Deviation, Co-efficient of
variance. According to this study, level of performance of ICICI is superior to SBI. It also provides that the
meaning of the word “cash” is not clearly expressed. Also cash balance of a firm is too easily influenced by
post pointing cash receipts and cash payments and as the selected two banks maintain books of Accounts
under accrual basis, so cash flow analysis fails to predict the actual result of the organization.

Samaddar(2017), has carried out a study to compare one public sector bank i.e. Bank of Baroda and one
private sector bank i.e. ICICI Bank by evaluating their cash flow statement. the study is conducted for ten
financial years i.e. from 2007-2008 to 2016-2017 and four techniques are used to analyze the cash flow
statements i.e. Mean, Standard Deviation, co-efficient of variance and Median. According to Mean,
Standard Deviation and Median cash flow from operating activities and investing activities of BOB is better
than ICICI but situation change in case of financing activities ICICI bank better than BOB. According to co-
variance cash flow from operating activities and financing activities BOB is better than ICICI. But cash flow
from investing activities ICICI is better than BOB.

Maheshwari & Yadav(2017), have carried out a study for comparative analysis of Punjab National Bank
and ICICI Bank by evaluating cash flow statement of both banks for a period of five years from 2011- 12 to
2015-16. To analyses the cash flow statement of selected banks four statistical tools i.e. Mean, Standard
Deviation, Coefficient of Variation, Paired t-test are used. According to this study, it is observed that mean
of operating activity of ICICI Bank is higher than PNB which is better for the bank. It is also observed that
ICICI bank is investing more in fixed assets which is better sign. But standard deviation of PNB is less than
ICICI Bank in all three activities. Lower the situation better the situation but on other hand coefficient of
variation of ICICI Bank is lower than PNB which means ICICI is having more consistency in all three
activities than the PNB.

Bhasker & krishnavamsi (2018), have carried out a study on cash flow statement analysis, for the purpose
of the study two companies are selected and analyzed for five financial years. The study conclude that cash
flows are huge in operating activities, which is decreasing working capital of the company and diminishing
the net cash flow of the company influences the operational efficiency of the company

OBJECTIVE:

 To compare the liquidity position for the period of study of HDFC bank and ICICI bank.
 To do comparative study on operating activities for the period of study of HDFC Bank and ICICI
bank.
 To do comparative study on investing activities for the period of study of HDFC Bank and ICICI
bank.
 To do comparative study on financing activities for the period of study of HDFC Bank and ICICI
bank.
RESEARCH METHODOLOGY:

SAMPLE SELECTION:

For the purpose of study two banks from private sector i.e. HDFC bank and ICICI bank.

PERIOD OF STUDY:

The study is conducted for the period of 12 financial years i.e. from 2006-07 to 2017-18

DATA COLLECTION:

In this study, mainly secondary data is collected. Secondary data has been obtained from the following
sources:

 Published annual reports of the banks for the financial years 2006-2007 to 2015-16.
 Directory if Mumbai stock exchange.
 Website of HDFC bank and ICICI bank
 Other related websites like money control.com

STATISTICAL TOOLS AND TECHNIQUES:

To analysis cash flow statements of the banks following techniques are being used.

 Mean
 Standard deviation
 Coefficient of variation

COMPARATIVE STUDY:

The performance can be evaluated by the difference techniques. Mean is calculated to see the quantum of
different companies for each company for a given period of time. Subsequently ranks are allotted on basis of
their quantum. But this does not serve complete purpose so, standard deviation is used and ranks are given
on the basis of standard deviation result. If the standard deviation is less the rank is higher and if the
standard deviation is higher than rank is lower. Coefficient of variable is calculated to know the consistency
level of each activity of each company and ranks are given accordingly. If coefficient is higher the
consistency is lower and if coefficient is lower the consistency is higher
 (Rs. In Crore)

YEAR OPERATING INVESTING FINANCING ACTIVITIES

ACTIVITIES ACTIVITIES

HDFC ICICI HDFC ICICI HDFC ICICI

2006-07 666.63 23061.95 -311.40 -18362.67 1637.88 15414.58
2007-08 3583.43 -11631.15 -619.82 -17561.11 3628.34 29964.82
2008-09 -1736.14 -14188.49 -663.78 3857.88 2964.66 1625.36
2009-10 9389.89 1869.21 -551.51 6150.73 3598.91 1382.62
2010-11 -375.83 -6908.92 -1122.74 -2108.82 1227.99 3105.97
2011-12 -11355.61 9683.82 -686.85 -12280.17 3286.19 3829.95
2012-13 -1868.78 11102.01 -858.88 -9431.56 9065.84 2989.72
2013-14 8363.60 4668.60 -1591.26 -12246.48 5562.98 6838.37
2014-15 -15862.27 -4824.49 -1944.27 -9199.56 14543.44 15005.67
2015-16 -3224.67 22428.47 -804.76 -3949.98 6588.57 -585.07
2016-17 23585.40 39222.81 -1956.25 7045.42 -11567.63 -30378.79
2017-18 26074.07 13303.65 -533.10 -38968.80 48411.43 34118.30
MEAN 3103.31 7315.6 -970.385 -8921.26 7412.383 6942.625
RANK 2 1 1 2 1 2
STANDARD 12393.45 15834.41 561.4247 12812.81 14257.72 16387.67
DEVIATION
RANK 1 2 1 2 1 2
COEFFICIEN 399.36 216.447 -57.85 -143.62 192.35 236.044
T OF
VARIATION
RANK 2 1 2 1 1 2

.
 Cash flow from operating activities

50000

40000

30000

20000
HDFC
ICICI
10000

-10000

-20000

Cash flow from investing activities

10000

-10000

HDFC
-20000
ICICI

-30000

-40000

-50000
 Cash flow from financing activities

60000

50000

40000

30000

20000

HDFC
10000
ICICI

-10000

-20000

-30000

-40000

INTERPRETATION:

 OPERATING ACTIVITIES-
Mean of operating activities of ICICI bank (7315.6) is higher than the HDFC bank (3103.31). so,
ICICI bank stands at 1st rank and HDFC bank stands 2nd rank.

In case of Standard Deviation of operating activities of HDFC bank (12393.45) is lower than the
ICICI bank (15834.41). So, HDFC bank stands at 1st rank and ICICI Bank stands 2nd rank.

In case of co-efficient of variation of ICICI bank (216.447) is higher than the HDFC bank (399.36).
So, ICICI bank stands at 1st rank and HDFC bank stands 2nd rank. Therefore consistency level of
cash flow from operating activities of ICICI bank is superior as compared to HDFC bank.
  INVESTING ACTIVITIES-
Mean of investing activity of ICICI bank (-8921.26) is less than of HDFC bank (-970.385). So,
HDFC bank stands at 1st rank and ICICI bank stands 2nd rank.

Standard deviation of cash from investing activities of HDFC bank (561.4247) is less than of ICICI
bank (12812.81). So, HDFC bank stands at 1st rank and ICICI bank stands at 2nd rank.

Co-efficient of variation of cash flow from investing activities of ICICI bank (-143.62) is less than of
HDFC bank (-57.85). So, ICICI bank stands at 1st rank and HDFC bank stands at 2nd rank. Therefore
consistency level of cash flow from operating activities of ICICI bank is superior as compared to
HDFC bank.

 FINANCING ACTIVITIES-
Mean of cash flow from financing activity of ICICI bank (6942.625) is less than of HDFC bank
(7412.383). So, HDFC bank stands at 1st rank and ICICI bank stands 2nd rank.

Standard deviation of cash from financing activities of HDFC bank (1425.72) is less than of ICICI
bank (16387.67). So, HDFC bank stands at 1st rank and ICICI bank stands at 2nd rank.

Co-efficient of variation of cash flow from financing activities of HDFC bank(192.35) is less than of
ICICI bank (236.044). So, HDFC bank stands at 1st rank and ICICI bank stands at 2nd rank. Therefore
consistency level of cash flow from operating activities of HDFC bank is superior as compared to
ICICI bank.
OVERALL CONCLUSION
Level Operating Activities Investing Activities Financing Activities
Best ICICI HDFC HDFC
Poor HDFC ICICI ICICI

CONCLUSION:-

The survey has revealed that all banks made cash flow statement according to AS-3 but there are
differences of interpretation or accounting treatments. According to study, cash flow from operating
activities of ICICI bank is better than OF HDFC bank on other hand cash flow from investing and
financing activities HDFC bank is better than ICICI bank. But this is not show adequate information
about the bank. To make the cash flow statement more useful, the bank should disclose other
information also like cash flow per share and also disclose notes related to the operating, financing
 and investing activities, So that user can easily and deeply understand about the cash flow of the
banks. Cash flow statement is used by the users for taking many decisions; incorrect cash flow may
lead the user to take wrong decisions on base of it. So, it is responsibility of all banks to show cash
flow in correct manner.

REFERENCES-

 Dodiya, D.B. & Gelda, k., (2014) cash flow statement of State Bank of India and HDFC Bank : A
comparative study. Paripex Indian Journal of Research, 3(12), 28-30.

 Varshney, N. & Jain, M., (2016) cash flow statement of Bank of Baroda and Syndicate bank: a
comparative analysis of operating, investing and financing activities. Voice of Research, 5(2), 43-
45.
 Singh, K., (2016). A comparative study on cash flow statements of State Bank of India and ICICI
Bank. International Journal of Commerce and Management Research, 2(9), 3-6.
 Das, S., (2017) A comparative systematic study of cash flow statements between State Bank of India
and ICICI bank. North Asian International Research journal of Social Science & Humanities, 3(9),
1-8.
 Samaddar, k. (2017). A Comparative Cash Flow Statement Analysis between selected Public sectors
and Private Sector Banks in India. North Asian International research Journal consortiums, 3(11),
364-373.
 Maheshwari A. & Yadav V., (2017) Cash flow Statements of PNB and ICICI Bank: A comparative
Analysis. EduSys Intermational Journal of Management Research, 1(1), 1-9.
 Bhasker D. & Krishnavamsi B., (2018) A study on Cash Flow Statement Analysis. International
Journal of Engineering Technology Science and Research, 5(3), 1499-1503.

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