Indian Banking Sector Report

1

PROJECT REPORT ON

BANKING SECTOR BY B-4

2

GROUP MEMBERS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

RAVI AWADE AVINASH B.N PALLAVI BALEGAR DIPTI MANKAR ASHA BABA GANESH NEVARKAR NITIN BAGUL JYOTI DANGAT KUNAL NIVEDITA SAMBARE RAKSHIT SHAH SAGAR BORUDE VAIBHAV ABADULE 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 14 15 16 17

ACHIEVEMENTS SWOT ANALYSIS FINANCIALS OF HDFC BANK COMPARISON CORPORATE SOCIAL RESPONSIBILITIES FUTURE PLANS

40 42 49 53 56

18

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 Banks

Private sector Banks

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

Foreign Banks in India (29)

Regional Rural Bank (102)

(B) Scheduled Cooperative Banks Scheduled Urban Cooperative Banks (55)

Scheduled State Cooperative 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 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

the

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.

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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 employmentintensive 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 1977,

the Corporation has maintained

its

inception in

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

Electronic

Straight

Derived Economies of Scale

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

• Auto Loan • Loan Against Security • Loan Against Property • Personal loan • Credit card • 2-wheeler loan • Commercial vehicles finance • Home loans • Retail business

Deposit Product

• • • • •

Saving a/c Current a/c Fixed deposit Demat a/c Safe Deposit Lockers

Investment & Insurance

Mutual Fund Bonds Knowledge Centre Insurance General and Health Insurance • Equity and Derivatives • Mudra Gold Bar • • • • •

24

• •

•

• • •

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

• Credit Card • Debit Card • Prepaid Card

------------------------------Forex Services ------------------------------• Product & Services • Trade Services • Forex service Branch Locater • RBI Guidelines

Payment Services NetSafe Merchant Prepaid Refill Billpay Visa Billpay InstaPay DirectPay VisaMoney Transfer • e–Monies Electronic Funds Transfer • Online Payment of Direct Tax • • • • • • • •

Access To Bank

• NetBanking • OneView • InstaAlert MobileBanking • ATM • Phone Banking • Email Statements • Branch Network

25

WHOLESALE BANKING Corporate

Small and Medium Enterprises

Financial Institutions and Trusts

• Funded Services • Non Funded Services • Value Added Services • Internet Banking

• Funded Services • Non Funded Services • Specialized Services • Value added services • Internet Banking

BANKS • Clearing SubMembership • RTGS – submembership • Fund Transfer • ATM Tie-ups • Corporate Salary a/c • Tax Collection Financial Institutions Mutual Funds Stock Brokers Insurance Companies Commodities Business

26

Trusts

BUSINESS MIX

Total Deposits Revenue

Retail

Gross Advances

Net

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 • • • • •

Rupee Saving a/c Rupee Current a/c Rupee Fixed Deposits Foreign Currency Deposits Accounts for Returning Indians

Remittances • • • • • • •

North America UK Europe South East Asia Middle East Africa Others Quick remit IndiaLink Cheque LockBox Telegraphic/ Wire Transfer Funds Transfer Cheques/DDs/TCs

Investment & Insurances • Mutual Funds

Loans • Home Loans

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• Insurance • Private Banking • Portfolio Investment Scheme

• Loans Against Securities • Loans Against Deposits • Gold Credit Card

Payment Services • • • • • •

NetSafe BillPay InstaPay DirectPay Visa Money Online Donation

Access To Bank • • • • • • •

Net Banking One View InstaAlert ATM PhoneBanking 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.

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• 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 As of

March 31, 2007.

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 Exchange.

Luxembourg

Stock

40

ACHIEVEMENTS

Business Monitor survey

TodayGroup One

of Companies"

India's

"Most

Innovative

Financial ExpressErnst & Young Best Bank Award in the Private Sector Award category

Global Excellence Awards Pacific Congress:

HR 'Employer Brand of the Year 2007 -2008' Award - First Runner up, & many more Asia HRM

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 Foundation's Practice' Award Business for Social

Social

Responsibility

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

WEAKNESSES

STRENGTH • Right strategy for the

•

right products. • Superior

Some gaps in range for certain sectors.

customer

•

service vs. competitors.

Customer service staff need training.

• Great Brand Image

•

Processes and systems, etc

• Products have required

•

Management

accreditations.

insufficient.

• High degree of customer satisfaction. • Good place to work • Lower with

cover

response

time

efficient

and

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

•

Sectoral growth is constrained by low unemployment levels and competition for staff

43

Threats

Opportunities •

Profit margins will be good.

•

Legislation could impact.

•

Could extend to overseas

•

Great risk involved

•

Very

broadly. •

New specialist applications.

•

Could seek better customer

Fast-track development

career

•

Vulnerable to reactive

•

attack by major competitors Lack of infrastructure in

opportunities

rural areas could constrain

on an industry-wide basis. •

An applied research centre to create opportunities for developing techniques to provide added-value services.

competition

prevailing in the industry.

deals. •

high

investment. •

High volume/low cost market is intensely competitive.

44

COMPETITIVE SWOT ANALYSIS WITH ICICI BANK STRENGTHS

WEAKNESSES

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

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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

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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.

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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 outsourcing 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.

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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.

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FINANCIALS PROFIT AND LOSS ACCOUNT

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QUARTERLY RESULTS

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Profit & Loss Figures 13000 12000 11000

Rs.(in crores)

10000 9000 8000

total income

7000

total expense

6000

total net profit

5000 4000 3000 2000 1000 0

2004 march

2005 march

2006 march

2007 march

2008 march

Year

Income Breakup

Rs.(in crores)

13000 12000 11000 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0

other income interest earned

Mar'04 Mar'05 Mar'06 Mar'07 Mar'08

Year

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Rs.(in crores)

Total Net Profit 1800 1600 1400 1200 1000 800 600 400 200 0

1590.18 1382.54 1115.94

Total Net Profit

853.62 602.72

2004

2005

2006

2007

2008

Year

Employee cost

Rs.(in crores)

1400 1200 1000 800 600

Employee cost

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 20072008.

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COMPARISON BETWEEN BANKS hdfc bank icici bank axis bank kotak bank federal bank

net sales 10115 30788.34 7005.32 2535.36 2515.44

net profits 4157.73 1590.18 1071.03 293.93 368.05

net assets 295281.61 99161.29 87684.85 22034.54 27786.79

total deposits 100768.6 244431.05 87626.22 16423.65 25913.36

total advances 63426.9 225616.08 59611.14 15552.22 18904.66

Graphical representation

Rs.(in Crores)

Net sales 35000 30000 25000 20000 15000 10000 5000 0

30788.34

net sales

10115

7005.32 2535.36

2515.44

kotak bank

federal bank

hdfc bank icici bank axis bank Banks

Net profits

Rs.(in crores)

5000

4157.73

4000 3000 1590.18

2000

net profits 1071.03

1000

293.93

368.05

kotak bank

federal bank

0 hdfc bank

icici bank

axis bank Banks

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350000 295281.61 300000 250000 200000 150000 99161.29 87684.85 100000 22034.54 27786.79 50000 0 hdfc bank icici bank axis bank

kotak bank

net assets

federal bank

Banks

Total Deposits

Rs.(in crores)

Rs.(in crores)

Net assets

244431.05

300000 200000

100768.6

total deposits

87626.22

100000

16423.65 25913.36

0 hdfc bank

icici bank

axis bank Banks

kotak bank

federal bank

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Total advances 250000

225616.08

Rs.(in crores)

200000 150000 total advances 100000

63426.9

59611.14

50000

15552.2218904.66

0 hdfc bank

icici bank

axis bank Banks

kotak bank

federal bank

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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.

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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.

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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!

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