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A PROJECT REPORT ON SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF Master of Business Administration Under the Guidance of Submitted by Mr. R. K. Mishra BALMUKAND SHARMA Lecturer Reg. No. 204033071284 MIITM, Aligarh 5

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A PROJECT REPORT ON

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF

Master of Business Administration

Under the Guidance of Submitted byMr. R. K. Mishra BALMUKAND SHARMA Lecturer Reg. No. 204033071284 MIITM, Aligarh

MASTER’S INSTITUTE OF I.T. & MANAGEMENT ALIGARH, U.P.

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(VINAYAKA MISSIONS UNIVERSITY)SALEM, TAMILNADU, INDIA

2009

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29 July, 2009

Mr. R. K. MishraLecturerMIITM, Aligarh

This is to certify that the present Dissertation report titled.

“H.D.F.C. Bank” is an original outcome of study undertaken by

Mr. BALMUKAND SHARMA, MBA (2009) and has been

conducted under my guidance and supervision.

The present dissertation is the result of his own research

work and to the best of my knowledge, no part of it has been

submitted in part or full to this University or any other University

for any Degree/Diploma or for any other purpose.

Mr. R.K. Mishra

(Supervisor)

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Dedicated To

My Parents &

Teachers with love

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DECLARATION

I hereby declare that this report is result of my intensive study of

H.D.F.C. Bank. All the facts, figures and findings in this report are

genuine, authentic & purely academic interest only for the case study

of H.D.F.C. Bank.

BALMUKAND SHARMA

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CONTENTS

Sr. No. Subject Covered Page No.

1 Banking Structure in India 06-25

2 Indian Banking Industries 26-45

3 Upcoming Foreign Bank in India 46-51

4 HDFC BANK 52-53

5 Company Profile 54-56

6 Technology used 57-60

7 Product and Customer segments 61-66

8 Business Strategy 67-68

9 Inside Hdfc Bank 69-74

10 Rupee Earned – Rupee Spent 75-76

11 Recent Development 77-84

12 SWOT Analysis 85-91

13 Project on Plastic Money 92-98

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BANKING STRUCTURE IN INDIA

India has a well developed banking system. Most of the banks in

India were founded by Indian entrepreneurs and visionaries in the

pre-independence era to provide financial assistance to traders,

agriculturists and budding Indian industrialists. The origin of banking

in India can be traced back to the last decades of the 18th century.

The General Bank of India and the Bank of Hindustan, which started

in 1786 were the first banks in India. Both the banks are now defunct.

The oldest bank in existence in India at the moment is the State Bank

of India. The State Bank of India came into existence in 1806. At that

time it was known as the Bank of Calcutta. SBI is presently the

largest commercial bank in the country.

The role of central banking in India is looked by the Reserve Bank of

India, which in 1935 formally took over these responsibilities from the

then Imperial Bank of India. Reserve Bank was nationalized in 1947

and was given broader powers. In 1969, 14 largest commercial banks

were nationalized followed by six next largest in 1980. But with

adoption of economic liberalization in 1991, private banking was

again allowed.

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The commercial banking structure in India consists of: Scheduled

Commercial Banks and Unscheduled Banks. Scheduled commercial

Banks constitute those banks, which have been included in the

Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI

includes only those banks in this schedule, which satisfy the criteria

laid down vide section 42 (6) (a) of the Act.

Indian banks can be broadly classified into public sector banks (those

banks in which the Government of India holds a stake), private banks

(government doe not have a stake in these banks; they may be

publicly listed and traded on stock exchanges) and foreign banks.

Bank Fixed Deposits

Bank Fixed Deposits are also known as Term Deposits. In a Fixed

Deposit Account, a certain sum of money is deposited in the bank for

a specified time period with a fixed rate of interest. The rate of

interest for Bank Fixed Deposits depends on the maturity period. It is

higher in case of longer maturity period. There is great flexibility in

maturity period and it ranges from 15days to 5 years.

Current Account

Current Account is primarily meant for businessmen, firms,

companies, public enterprises etc. that have numerous daily banking

transactions. Current Accounts are cheque operated accounts meant

neither for the purpose of earning interest nor for the purpose of

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savings but only for convenience of business hence they are non-

interest bearing accounts.

Demat Account

Demat refers to a dematerialised account. Demat account is just like

a bank account where actual money is replaced by shares. Just as a

bank account is required if we want to save money or make cheque

payments, we need to open a demat account in order to buy or sell

shares.

Recurring Bank Deposits

Under a Recurring Deposit account (RD account), a specific amount

is invested in bank on monthly basis for a fixed rate of return. The

deposit has a fixed tenure, at the end of which the principal sum as

well as the interest earned during that period is returned to the

investor.

Reserve Bank of India

The Reserve Bank of India was established on April 1, 1935 in

accordance with the provisions of the Reserve Bank of India Act,

1934. Though initially RBI was privately owned, it was nationalized in

1949. Its central office is in Mumbai where the Governor of RBI sits.

Savings Bank Account

Savings Bank Accounts are meant to promote the habit of saving

among the citizens while allowing them to use their funds when

required. The main advantage of Savings Bank Account is its high

liquidity and safety.

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Senior Citizen Saving Scheme 2004

The Senior Citizen Saving Scheme 2004 had been introduced by the

Government of India for the benefit of senior citizens who have

crossed the age of 60 years. However, under some circumstances

the people above 55 years of age are also eligible to enjoy the

benefits of this scheme.

Foreign Banks in India

Foreign banks have brought latest technology and latest banking

practices in India. They have helped made Indian Banking system

more competitive and efficient. Government has come up with a road

map for expansion of foreign banks in India.

Nationalised Banks

Nationalised banks dominate the banking system in India. The history

of nationalised banks in India dates back to mid-20th century, when

Imperial Bank of India was nationalised (under the SBI Act of 1955)

and re-christened as State Bank of India (SBI) in July 1955.

Private Banks in India

Initially all the banks in India were private banks, which were founded

in the pre-independence era to cater to the banking needs of the

people. In 1921, three major banks i.e. Banks of Bengal, Bank of

Bombay, and Bank of Madras, merged to form Imperial Bank of India.

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Banking in India originated in the last decades of the 18th century. The

oldest bank in existence in India is the State Bank of India, a government-

owned bank that traces its origins back to June 1806 and that is the largest

commercial bank in the country. Central banking is the responsibility of the

Reserve Bank of India, which in 1935 formally took over these

responsibilities from the then Imperial Bank of India, relegating it to

commercial banking functions. After India's independence in 1947, the

Reserve Bank was nationalized and given broader powers. In 1969 the

government nationalized the 14 largest commercial banks; the government

nationalized the six next largest in 1980.

Currently, India has 88 scheduled commercial banks (SCBs) - 27 public

sector banks (that is with the Government of India holding a stake), 31

private banks (these do not have government stake; they may be publicly

listed and traded on stock exchanges) and 38 foreign banks. They have a

combined network of over 53,000 branches and 17,000 ATMs. According to

a report by ICRA Limited, a rating agency, the public sector banks hold over

75 percent of total assets of the banking industry, with the private and

foreign banks holding 18.2% and 6.5% respectively.

Early history

Banking in India originated in the last decades of the 18th century.

The first banks were The General Bank of India which started in

1786, and the Bank of Hindustan, both of which are now defunct. The

oldest bank in existence in India is the State Bank of India, which

originated in the Bank of Calcutta in June 1806, which almost

immediately became the Bank of Bengal. This was one of the three

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presidency banks, the other two being the Bank of Bombay and the

Bank of Madras, all three of which were established under charters

from the British East India Company. For many years the Presidency

banks acted as quasi-central banks, as did their successors. The

three banks merged in 1925 to form the Imperial Bank of India, which,

upon India's independence, became the State Bank of India.

Indian merchants in Calcutta established the Union Bank in 1839, but

it failed in 1848 as a consequence of the economic crisis of 1848-49.

The Allahabad Bank, established in 1865 and still functioning today,

is the oldest Joint Stock bank in India. It was not the first though. That

honor belongs to the Bank of Upper India, which was established in

1863, and which survived until 1913, when it failed, with some of its

assets and liabilities being transferred to the Alliance Bank of Simla.

When the American Civil War stopped the supply of cotton to

Lancashire from the Confederate States, promoters opened banks to

finance trading in Indian cotton. With large exposure to speculative

ventures, most of the banks opened in India during that period failed.

The depositors lost money and lost interest in keeping deposits with

banks. Subsequently, banking in India remained the exclusive

domain of Europeans for next several decades until the beginning of

the 20th century.

Foreign banks too started to arrive, particularly in Calcutta, in the

1860s. The Comptoire d'Escompte de Paris opened a branch in

Calcutta in 1860, and another in Bombay in 1862; branches in

Madras and Pondichery, then a French colony, followed. HSBC

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established itself in Bengal in 1869. Calcutta was the most active

trading port in India, mainly due to the trade of the British Empire, and

so became a banking center.

The Bank of Bengal, which later became the State Bank of India.

The first entirely Indian joint stock bank was the Oudh Commercial

Bank, established in 1881 in Faizabad. It failed in 1958. The next was

the Punjab National Bank, established in Lahore in 1895, which has

survived to the present and is now one of the largest banks in India.

Around the turn of the 20th Century, the Indian economy was passing

through a relative period of stability. Around five decades had

elapsed since the Indian Mutiny, and the social, industrial and other

infrastructure had improved. Indians had established small banks,

most of which served particular ethnic and religious communities.

The presidency banks dominated banking in India but there were also

some exchange banks and a number of Indian joint stock banks. All

these banks operated in different segments of the economy. The

exchange banks, mostly owned by Europeans, concentrated on

financing foreign trade. Indian joint stock banks were generally under

capitalized and lacked the experience and maturity to compete with

the presidency and exchange banks. This segmentation let Lord

Curzon to observe, "In respect of banking it seems we are behind the

times. We are like some old fashioned sailing ship, divided by solid

wooden bulkheads into separate and cumbersome compartments."

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The period between 1906 and 1911, saw the establishment of banks

inspired by the Swadeshi movement. The Swadeshi movement

inspired local businessmen and political figures to found banks of and

for the Indian community. A number of banks established then have

survived to the present such as Bank of India, Corporation Bank,

Indian Bank, Bank of Baroda, Canara Bank and Central Bank of

India.

The fervour of Swadeshi movement lead to establishing of many

private banks in Dakshina Kannada and Udupi district which were

unified earlier and known by the name South Canara ( South Kanara

) district. Four nationalised banks started in this district and also a

leading private sector bank. Hence undivided Dakshina Kannada

district is known as "Cradle of Indian Banking".

From World War I to Independence

The period during the First World War (1914-1918) through the end of

the Second World War (1939-1945), and two years thereafter until

the independence of India were challenging for Indian banking. The

years of the First World War were turbulent, and it took its toll with

banks simply collapsing despite the Indian economy gaining indirect

boost due to war-related economic activities. At least 94 banks in

India failed between 1913 and 1918 as indicated in the following

table:

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YearsNumber of banksthat failed

Authorised capital(Rs. Lakhs)

Paid-up Capital(Rs. Lakhs)

1913 12 274 35

1914 42 710 109

1915 11 56 5

1916 13 231 4

1917 9 76 25

1918 7 209 1

Post-independence

The partition of India in 1947 adversely impacted the economies of

Punjab and West Bengal, paralyzing banking activities for months.

India's independence marked the end of a regime of the Laissez-faire

for the Indian banking. The Government of India initiated measures to

play an active role in the economic life of the nation, and the

Industrial Policy Resolution adopted by the government in 1948

envisaged a mixed economy. This resulted into greater involvement

of the state in different segments of the economy including banking

and finance. The major steps to regulate banking included:

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In 1948, the Reserve Bank of India, India's central banking

authority, was nationalized, and it became an institution owned

by the Government of India.

In 1949, the Banking Regulation Act was enacted which

empowered the Reserve Bank of India (RBI) "to regulate,

control, and inspect the banks in India."

The Banking Regulation Act also provided that no new bank or

branch of an existing bank could be opened without a license

from the RBI, and no two banks could have common directors.

However, despite these provisions, control and regulations, banks in

India except the State Bank of India, continued to be owned and

operated by private persons. This changed with the nationalization of

major banks in India on 19 July, 1969.

Nationalization

By the 1960s, the Indian banking industry has become an important

tool to facilitate the development of the Indian economy. At the same

time, it has emerged as a large employer, and a debate has ensued

about the possibility to nationalize the banking industry. Indira

Gandhi, the-then Prime Minister of India expressed the intention of

the GOI in the annual conference of the All India Congress Meeting in

a paper entitled "Stray thoughts on Bank Nationalization." The paper

was received with positive enthusiasm. Thereafter, her move was

swift and sudden, and the GOI issued an ordinance and nationalized

the 14 largest commercial banks with effect from the midnight of July

19, 1969. Jayaprakash Narayan, a national leader of India, described

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the step as a "masterstroke of political sagacity." Within two weeks of

the issue of the ordinance, the Parliament passed the Banking

Companies (Acquisition and Transfer of Undertaking) Bill, and it

received the presidential approval on 9 August, 1969.

A second dose of nationalization of 6 more commercial banks

followed in 1980. The stated reason for the nationalization was to

give the government more control of credit delivery. With the second

dose of nationalization, the GOI controlled around 91% of the banking

business of India. Later on, in the year 1993, the government merged

New Bank of India with Punjab National Bank. It was the only merger

between nationalized banks and resulted in the reduction of the

number of nationalised banks from 20 to 19. After this, until the

1990s, the nationalised banks grew at a pace of around 4%, closer to

the average growth rate of the Indian economy.

The nationalised banks were credited by some, including Home

minister P. Chidambaram, to have helped the Indian economy

withstand the global financial crisis of 2007-2009.

Liberalisation

In the early 1990s, the then Narsimha Rao government embarked on

a policy of liberalization, licensing a small number of private banks.

These came to be known as New Generation tech-savvy banks, and

included Global Trust Bank (the first of such new generation banks to

be set up), which later amalgamated with Oriental Bank of

Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC

Bank. This move, along with the rapid growth in the economy of India,

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revitalized the banking sector in India, which has seen rapid growth

with strong contribution from all the three sectors of banks, namely,

government banks, private banks and foreign banks.

The next stage for the Indian banking has been setup with the

proposed relaxation in the norms for Foreign Direct Investment,

where all Foreign Investors in banks may be given voting rights which

could exceed the present cap of 10%,at present it has gone up to

49% with some restrictions.

The new policy shook the Banking sector in India completely.

Bankers, till this time, were used to the 4-6-4 method (Borrow at

4%;Lend at 6%;Go home at 4) of functioning. The new wave ushered

in a modern outlook and tech-savvy methods of working for traditional

banks.All this led to the retail boom in India. People not just

demanded more from their banks but also received more.

Currently (2007), banking in India is generally fairly mature in terms of

supply, product range and reach-even though reach in rural India still

remains a challenge for the private sector and foreign banks. In terms

of quality of assets and capital adequacy, Indian banks are

considered to have clean, strong and transparent balance sheets

relative to other banks in comparable economies in its region. The

Reserve Bank of India is an autonomous body, with minimal pressure

from the government. The stated policy of the Bank on the Indian

Rupee is to manage volatility but without any fixed exchange rate-and

this has mostly been true.

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With the growth in the Indian economy expected to be strong for quite

some time-especially in its services sector-the demand for banking

services, especially retail banking, mortgages and investment

services are expected to be strong. One may also expect M&As,

takeovers, and asset sales.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to

increase its stake in Kotak Mahindra Bank (a private sector bank) to

10%. This is the first time an investor has been allowed to hold more

than 5% in a private sector bank since the RBI announced norms in

2005 that any stake exceeding 5% in the private sector banks would

need to be vetted by them.

In recent years critics have charged that the non-government owned

banks are too aggressive in their loan recovery efforts in connection

with housing, vehicle and personal loans. There are press reports

that the banks' loan recovery efforts have driven defaulting borrowers

to suicide.

RECENT HISTORY OF INDIAN BANKING

Indian banking system, over the years has gone through various

phases after establishment of Reserve Bank of India in 1935 during

the British rule, to function as Central Bank of the country. Earlier to

creation of RBI, the central bank functions were being looked after by

the Imperial Bank of India. With the 5-year plan having acquired an

important place after the independence, the Govt. felt that the private

banks may not extend the kind of cooperation in providing credit

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support, the economy may need. In 1954 the All India Rural Credit

Survey Committee submitted its report recommending creation of a

strong, integrated, State-sponsored, State-partnered commercial

banking institution with an effective machinery of branches spread all

over the country. The recommendations of this committee led to

establishment of first Public Sector Bank in the name of State Bank of

India on July 01, 1955 by acquiring the substantial part of share

capital by RBI, of the then Imperial Bank of India. Similarly during

1956-59, as a result of re-organisation of princely States, the

associate banks came into fold of public sector banking.

Another evaluation of the banking in India was undertaken during

1966 as the private banks were still not extending the required

support in the form of credit disbursal, more particularly to the

unorganised sector. Each leading industrial house in the country at

that time was closely associated with the promotion and control of

one or more banking companies. The bulk of the deposits collected,

were being deployed in organized sectors of industry and trade, while

the farmers, small entrepreneurs, transporters , professionals and

self-employed had to depend on money lenders who used to exploit

them by charging higher interest rates. In February 1966, a Scheme

of Social Control was set-up whose main function was to periodically

assess the demand for bank credit from various sectors of the

economy to determine the priorities for grant of loans and advances

so as to ensure optimum and efficient utilization of resources. The

scheme however, did not provide any remedy. Though a no. of

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branches were opened in rural area but the lending activities of the

private banks were not oriented towards meeting the credit

requirements of the priority/weaker sectors.

On July 19, 1969, the Govt. promulgated Banking Companies

(Acquisition and Transfer of Undertakings) Ordinance 1969 to acquire

14 bigger commercial bank with paid up capital of Rs.28.50 cr,

deposits of Rs.2629 cr, loans of Rs.1813 cr and with 4134 branches

accounting for 80% of advances. Subsequently in 1980, 6 more

banks were nationalized which brought 91% of the deposits and 84%

of the advances in Public Sector Banking. During December 1969,

RBI introduced the Lead Bank Scheme on the recommendations of

FK Nariman Committee.

Meanwhile, during 1962 Deposit Insurance Corporation was

established to provide insurance cover to the depositors.

In the post-nationalization period, there was substantial increase in

the no. of branches opened in rural/semi-urban centres bringing down

the population per bank branch to 12000 appx. During 1976, RRBs

were established (on the recommendations of M. Narasimham

Committee report) under the sponsorship and support of public sector

banks as the 3rd component of multi-agency credit system for

agriculture and rural development. The Service Area Approach was

introduced during 1989.

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While the 1970s and 1980s saw the high growth rate of branch

banking net-work, the consolidation phase started in late 80s and

more particularly during early 90s, with the submission of report by

the Narasimham Committee on Reforms in Financial Services Sector

during 1991.

In these five decades since independence, banking in India has

evolved through four distinct phases:

Foundation phase can be considered to cover 1950s and 1960s till

the nationalization of banks in 1969. The focus during this period was

to lay the foundation for a sound banking system in the country. As a

result the phase witnessed the development of necessary legislative

framework for facilitating re-organization and consolidation of the

banking system, for meeting the requirement of Indian economy. A

major development was transformation of Imperial Bank of India into

State Bank of India in 1955 and nationalization of 14 major private

banks during 1969.

Expansion phase

It had begun in mid-60s but gained momentum after nationalization of

banks and continued till 1984. A determined effort was made to make

banking facilities available to the masses. Branch network of the

banks was widened at a very fast pace covering the rural and semi-

urban population, which had no access to banking hitherto. Most

importantly, credit flows were guided towards the priority sectors.

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However this weakened the lines of supervision and affected the

quality of assets of banks and pressurized their profitability and

brought competitive efficiency of the system at a low ebb.

Consolidation phase:

The phase started in 1985 when a series of policy initiatives were

taken by RBI which saw marked slowdown in the branch expansion.

Attention was paid to improving house-keeping, customer service,

credit management, staff productivity and profitability of banks.

Measures were also taken to reduce the structural constraints that

obstructed the growth of money market.

Reforms phase

The macro-economic crisis faced by the country in 1991 paved the

way for extensive financial sector reforms which brought deregulation

of interest rates, more competition, technological changes, prudential

guidelines on asset classification and income recognition, capital

adequacy, autonomy packages etc.

BANK NATIONALISATION & PUBLIC SECTOR BANKING

Organized banking in India is more than two centuries old. Till 1935

all the banks were in private sector and were set up by individuals

and/or industrial houses which collected deposits from individuals and

used them for their own purposes. In the absence of any regulatory

framework, these private owners of banks were at liberty to use the

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funds in any manner, they deemed appropriate and resultantly, the

bank failures were frequent.

Move towards State ownership of banks started with the

nationalization of RBI and passing of Banking Companies Act 1949.

On the recommendations of All India Rural Credit Survey Committee,

SBI Act was enacted in 1955 and Imperial Bank of India was

transferred to SBI. Similarly, the conversion of 8 State-owned banks

(State Bank of Bikaner and State Bank of Jaipur were two separate

banks earlier and merged) into subsidiaries (now associates) of SBI

during 1959 took place. During 1968 the scheme of ‘social control’

was introduced, which was closely followed by nationalization of 14

major banks in 1969 and another six in 1980.

Keeping in view the objectives of nationalization, PSBs undertook

expansion of reach and services. Resultantly the number of branches

increased 7 fold (from 8321 to more than 60000 out of which 58% in

rural areas) and no. of people served per branch office came down

from 65000 in 1969 to 10000. Much of this expansion has taken place

in rural and semi-urban areas. The expansion is significant in terms of

geographical distribution. States neglected by private banks before

1969 have a vast network of public sector banks. The PSBs including

RRBs, acount for 93% of bank offices and 87% of banking system

deposits.

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Scheduled Banks in India

(A) Scheduled Commercial Banks

Public sector

Banks

Private sector

Banks

Foreign

Banks in

India

Regional Rural

Bank

(28) (27) (29) (102)

Nationalized

Bank

Other Public

Sector Banks

(IDBI)

SBI and its

Associates

Old Private

Banks

New

Private

Banks

(B) Scheduled Cooperative Banks

Scheduled Urban Cooperative

Banks (55)

Scheduled State Cooperative

Banks (31)

Here we more concerned about private sector banks and competition

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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

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INDIAN BANKING INDUSTRIES

The growth in the Indian Banking Industry has been more qualitative

than quantitative and it is expected to remain the same in the coming

years. Based on the projections made in the "India Vision 2020"

prepared by the Planning Commission and the Draft 10th Plan, the

report forecasts that the pace of expansion in the balance-sheets of

banks is likely to decelerate. The total assets of all scheduled

commercial banks by end-March 2010 is estimated at Rs 40,90,000

crores. That will comprise about 65 per cent of GDP at current market

prices as compared to 67 per cent in 2002-03. Bank assets are

expected to grow at an annual composite rate of 13.4 per cent during

the rest of the decade as against the growth rate of 16.7 per cent that

existed between 1994-95 and 2002-03. It is expected that there will

be large additions to the capital base and reserves on the liability

side.

The Indian Banking Industry can be categorized into non-scheduled

banks and scheduled banks. Scheduled banks constitute of

commercial banks and co-operative banks. There are about 67,000

branches of Scheduled banks spread across India. As far as the

present scenario is concerned the Banking Industry in India is going

through a transitional phase.

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The Public Sector Banks(PSBs), which are the base of the Banking

sector in India account for more than 78 per cent of the total banking

industry assets. Unfortunately they are burdened with excessive Non

Performing assets (NPAs), massive manpower and lack of modern

technology. On the other hand the Private Sector Banks are making

tremendous progress. They are leaders in Internet banking, mobile

banking, phone banking, ATMs. As far as foreign banks are

concerned they are likely to succeed in the Indian Banking Industry.

In the Indian Banking Industry some of the Private Sector Banks

operating are IDBI Bank, ING Vyasa Bank, SBI Commercial and

International Bank Ltd, Bank of Rajasthan Ltd. and banks from the

Public Sector include Punjab National bank, Vijaya Bank, UCO Bank,

Oriental Bank, Allahabad Bank among others. ANZ Grindlays Bank,

ABN-AMRO Bank, American Express Bank Ltd, Citibank are some of

the foreign banks operating in the Indian Banking Industry.

Pharmaceutical Industry

Standard Chartered Bank

The Indian Banking industry, which is governed by the Banking

Regulation Act of India, 1949 can be broadly classified into two

major categories, non-scheduled banks and scheduled banks.

Scheduled banks comprise commercial banks and the co-

operative banks. In terms of ownership, commercial banks can be

further grouped into nationalized banks, the State Bank of India

and its group banks, regional rural banks and private sector banks

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(the old/ new domestic and foreign). These banks have over

67,000 branches spread across the country.

The first phase of financial reforms resulted in the nationalization

of 14 major banks in 1969 and resulted in a shift from Class

banking to Mass banking. This in turn resulted in a significant

growth in the geographical coverage of banks. Every bank had to

earmark a minimum percentage of their loan portfolio to sectors

identified as “priority sectors”. The manufacturing sector also grew

during the 1970s in protected environs and the banking sector was

a critical source. The next wave of reforms saw the nationalization

of 6 more commercial banks in 1980. Since then the number of

scheduled commercial banks increased four-fold and the number

of bank branches increased eight-fold.

After the second phase of financial sector reforms and

liberalization of the sector in the early nineties, the Public Sector

Banks (PSB) s found it extremely difficult to compete with the new

private sector banks and the foreign banks. The new private sector

banks first made their appearance after the guidelines permitting

them were issued in January 1993. Eight new private sector banks

are presently in operation. These banks due to their late start have

access to state-of-the-art technology, which in turn helps them to

save on manpower costs and provide better services.

During the year 2000, the State Bank Of India (SBI) and its 7

associates accounted for a 25 percent share in deposits and 28.1

percent share in credit. The 20 nationalized banks accounted for

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53.2 percent of the deposits and 47.5 percent of credit during the

same period. The share of foreign banks (numbering 42), regional

rural banks and other scheduled commercial banks accounted for

5.7 percent, 3.9 percent and 12.2 percent respectively in deposits

and 8.41 percent, 3.14 percent and 12.85 percent respectively in

credit during the year 2000.

Current Scenario

The industry is currently in a transition phase. On the one hand,

the PSBs, which are the mainstay of the Indian Banking system

are in the process of shedding their flab in terms of excessive

manpower, excessive non Performing Assets (Npas) and

excessive governmental equity, while on the other hand the private

sector banks are consolidating themselves through mergers and

acquisitions.

PSBs, which currently account for more than 78 percent of total

banking industry assets are saddled with NPAs (a mind-boggling

Rs 830 billion in 2000), falling revenues from traditional sources,

lack of modern technology and a massive workforce while the new

private sector banks are forging ahead and rewriting the traditional

banking business model by way of their sheer innovation and

service. The PSBs are of course currently working out challenging

strategies even as 20 percent of their massive employee strength

has dwindled in the wake of the successful Voluntary Retirement

Schemes (VRS) schemes.

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The private players however cannot match the PSB’s great reach,

great size and access to low cost deposits. Therefore one of the

means for them to combat the PSBs has been through the merger

and acquisition (M& A) route. Over the last two years, the industry

has witnessed several such instances. For instance, Hdfc Bank’s

merger with Times Bank Icici Bank’s acquisition of ITC Classic,

Anagram Finance and Bank of Madura. Centurion Bank, Indusind

Bank, Bank of Punjab, Vysya Bank are said to be on the lookout.

The UTI bank- Global Trust Bank merger however opened a

pandora’s box and brought about the realization that all was not

well in the functioning of many of the private sector banks.

Private sector Banks have pioneered internet banking, phone

banking, anywhere banking, mobile banking, debit cards,

Automatic Teller Machines (ATMs) and combined various other

services and integrated them into the mainstream banking arena,

while the PSBs are still grappling with disgruntled employees in

the aftermath of successful VRS schemes. Also, following India’s

commitment to the W To agreement in respect of the services

sector, foreign banks, including both new and the existing ones,

have been permitted to open up to 12 branches a year with effect

from 1998-99 as against the earlier stipulation of 8 branches.

Talks of government diluting their equity from 51 percent to 33

percent in November 2000 has also opened up a new opportunity

for the takeover of even the PSBs. The FDI rules being more

rationalized in Q1FY02 may also pave the way for foreign banks

taking the M& A route to acquire willing Indian partners.

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Meanwhile the economic and corporate sector slowdown has led

to an increasing number of banks focusing on the retail segment.

Many of them are also entering the new vistas of Insurance. Banks

with their phenomenal reach and a regular interface with the retail

investor are the best placed to enter into the insurance sector.

Banks in India have been allowed to provide fee-based insurance

services without risk participation, invest in an insurance company

for providing infrastructure and services support and set up of a

separate joint-venture insurance company with risk participation.

Aggregate Performance of the Banking Industry

Aggregate deposits of scheduled commercial banks increased at a

compounded annual average growth rate (Cagr) of 17.8 percent

during 1969-99, while bank credit expanded at a Cagr of 16.3

percent per annum. Banks’ investments in government and other

approved securities recorded a Cagr of 18.8 percent per annum

during the same period.

In FY01 the economic slowdown resulted in a Gross Domestic

Product (GDP) growth of only 6.0 percent as against the previous

year’s 6.4 percent. The WPI Index (a measure of inflation)

increased by 7.1 percent as against 3.3 percent in FY00. Similarly,

money supply (M3) grew by around 16.2 percent as against 14.6

percent a year ago.

The growth in aggregate deposits of the scheduled commercial

banks at 15.4 percent in FY01 percent was lower than that of 19.3

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percent in the previous year, while the growth in credit by SCBs

slowed down to 15.6 percent in FY01 against 23 percent a year

ago.

The industrial slowdown also affected the earnings of listed banks.

The net profits of 20 listed banks dropped by 34.43 percent in the

quarter ended March 2001. Net profits grew by 40.75 percent in

the first quarter of 2000-2001, but dropped to 4.56 percent in the

fourth quarter of 2000-2001.

On the Capital Adequacy Ratio (CAR) front while most banks

managed to fulfill the norms, it was a feat achieved with its own

share of difficulties. The CAR, which at present is 9.0 percent, is

likely to be hiked to 12.0 percent by the year 2004 based on the

Basle Committee recommendations. Any bank that wishes to grow

its assets needs to also shore up its capital at the same time so

that its capital as a percentage of the risk-weighted assets is

maintained at the stipulated rate. While the IPO route was a much-

fancied one in the early ‘90s, the current scenario doesn’t look too

attractive for bank majors.

Consequently, banks have been forced to explore other avenues

to shore up their capital base. While some are wooing foreign

partners to add to the capital others are employing the M& A route.

Many are also going in for right issues at prices considerably lower

than the market prices to woo the investors.

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Interest Rate Scene

The two years, post the East Asian crises in 1997-98 saw a climb

in the global interest rates. It was only in the later half of FY01 that

the US Fed cut interest rates. India has however remained more or

less insulated. The past 2 years in our country was characterized

by a mounting intention of the Reserve Bank Of India (RBI) to

steadily reduce interest rates resulting in a narrowing differential

between global and domestic rates.

The RBI has been affecting bank rate and CRR cuts at regular

intervals to improve liquidity and reduce rates. The only exception

was in July 2000 when the RBI increased the Cash Reserve Ratio

(CRR) to stem the fall in the rupee against the dollar. The steady

fall in the interest rates resulted in squeezed margins for the banks

in general.

Governmental Policy

After the first phase and second phase of financial reforms, in the

1980s commercial banks began to function in a highly regulated

environment, with administered interest rate structure, quantitative

restrictions on credit flows, high reserve requirements and

reservation of a significant proportion of lendable resources for the

priority and the government sectors. The restrictive regulatory

norms led to the credit rationing for the private sector and the

interest rate controls led to the unproductive use of credit and low

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levels of investment and growth. The resultant ‘financial

repression’ led to decline in

productivity and efficiency and erosion of profitability of the

banking sector in general.

This was when the need to develop a sound commercial banking

system was felt. This was worked out mainly with the help of the

recommendations of the Committee on the Financial System

(Chairman: Shri M. Narasimham), 1991. The resultant financial

sector reforms called for interest rate flexibility for banks, reduction

in reserve requirements, and a number of structural measures.

Interest rates have thus been steadily deregulated in the past few

years with banks being free to fix their Prime Lending Rates(PLRs)

and deposit rates for most banking products. Credit market

reforms included introduction of new instruments of credit,

changes in the credit delivery system and integration of functional

roles of diverse players, such as, banks, financial institutions and

non-banking financial companies (Nbfcs). Domestic Private Sector

Banks were allowed to be set up, PSBs were allowed to access

the markets to shore up their Cars.

Implications Of Some Recent Policy Measures

The allowing of PSBs to shed manpower and dilution of equity are

moves that will lend greater autonomy to the industry. In order to

lend more depth to the capital markets the RBI had in November

2000 also changed the capital market exposure norms from 5

percent of bank’s incremental deposits of the previous year to 5

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percent of the bank’s total domestic credit in the previous year. But

this move did not have the desired effect, as in, while most banks

kept away almost completely from the capital markets, a few

private sector banks went overboard and exceeded limits and

indulged in dubious stock market deals. The chances of seeing

banks making a comeback to the stock markets are therefore quite

unlikely in the near future.

The move to increase Foreign Direct Investment FDI limits to 49

percent from 20 percent during the first quarter of this fiscal came

as a welcome announcement to foreign players wanting to get a

foot hold in the Indian Markets by investing in willing Indian

partners who are starved of networth to meet CAR norms. Ceiling

for FII investment in companies was also increased from 24.0

percent to 49.0 percent and have been included within the ambit of

FDI investment.

The abolishment of interest tax of 2.0 percent in budget 2001-02

will help banks pass on the benefit to the borrowers on new loans

leading to reduced costs and easier lending rates. Banks will also

benefit on the existing loans wherever the interest tax cost element

has already been built into the terms of the loan. The reduction of

interest rates on various small savings schemes from 11 percent

to 9.5 percent in Budget 2001-02 was a much awaited move for

the banking industry and in keeping with the reducing interest rate

scenario, however the small investor is not very happy with the

move.

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Some of the not so good measures however like reducing the limit

for tax deducted at source (TDS) on interest income from deposits

to Rs 2,500 from the earlier level of Rs 10,000, in Budget 2001-02,

had met with disapproval from the banking fraternity who feared

that the move would prove counterproductive and lead to

increased fragmentation of deposits, increased volumes and

transaction costs. The limit was thankfully partially restored to Rs

5000 at the time of passing the Finance Bill in the Parliament.

April 2001-Credit Policy Implications

The rationalization of export credit norms in will bestow greater

operational flexibility on banks, and also reduce the borrowing

costs for exporters. Thus this move could trigger exports growth in

the future. Banks can also hope to earn increased revenue with

the interest paid by RBI on CRR balances being increased from

4.0 percent to 6.0 percent.

The stock market scam brought out the unholy nexus between the

Cooperative banks and stockbrokers. In order to usher in greater

prudence in their operations, the RBI has barred Urban

Cooperative Banks from financing the stock market operations and

is also in the process of setting up of a new apex supervisory body

for them. Meanwhile the foreign banks have a bone to pick with

the RBI. The RBI had announced that forex loans are not to be

calculated as a part of Tier-1 Capital for drawing up exposure

limits to companies effective 1 April 2002. This will force foreign

banks either to infuse fresh capital to maintain the capital

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adequacy ratio (CAR) or pare their asset base. Further, the RBI

has also sought to keep foreign competition away from the

nascent net banking segment in India by allowing only Indian

banks with a local physical presence, to offer Internet banking.

Crystal Gazing

On the macro economic front, GDP is expected to grow by 6.0 to

6.5 percent while the projected expansion in broad money (M3) for

2001-02 is about 14.5 percent. Credit and deposits are both

expected to grow by 15-16 percent in FY02. India's foreign

exchange reserves should reach US$50.0 billion in FY02 and the

Indian rupee should hold steady.

The interest rates are likely to remain stable this fiscal based on an

expected downward trend in inflation rate, sluggish pace of non-oil

imports and likelihood of declining global interest rates. The

domestic banking industry is forecasted to witness a higher degree

of mergers and acquisitions in the future. Banks are likely to opt for

the universal banking approach with a stronger retail approach.

Technology and superior customer service will continue to be the

imperatives for success in this industry.

Public Sector banks that imbibe new concepts in banking, turn

tech savvy, leaner and meaner post VRS and obtain more

autonomy by keeping governmental stake to the minimum can

succeed in effectively taking on the private sector banks by virtue

of their sheer size. Weaker PSU banks are unlikely to survive in

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the long run. Consequently, they are likely to be either acquired by

stronger players or will be forced to look out for other strategies to

infuse greater capital and optimize their

operations.

Foreign banks are likely to succeed in their niche markets and be

the innovators in terms of technology introduction in the domestic

scenario. The outlook for the private sector banks indeed looks to

be more promising vis-à-vis other banks. While their focused

operations, lower but more productive employee force etc will

stand them good, possible acquisitions of PSU banks will definitely

give them the much needed scale of operations and access to

lower cost of funds. These banks will continue to be the early

technology adopters in the industry, thus increasing their

efficiencies. Also, they have been amongst the first movers in the

lucrative insurance segment. Already, banks such as Icici Bank

and Hdfc Bank have forged alliances with Prudential Life and

Standard Life respectively. This is one segment that is likely to

witness a greater deal of action in the future. In the near term, the

low interest rate scenario is likely to affect the spreads of majors.

This is likely to result in a greater focus on better asset-liability

management procedures. Consequently, only banks that strive

hard to increase their share of fee-based revenues are likely to do

better in the future.

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Improved performance of the banking industry in India has helped the

economy to bounce back to a positive growth level. According to the

Reserve Bank of India (RBI), the banking sector in India is sound,

adequately capitalised and well-regulated. Indian financial and

economic conditions are much better than in many other countries of

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the world. Credit, market and liquidity risk studies show that Indian

banks are generally resilient and have withstood the global downturn

well.

According to RBI's 'Quarterly Statistics on Deposits and Credit of

Scheduled Commercial Banks: March 2009', nationalised banks, as a

group, accounted for 49.5 per cent of the aggregate deposits, while

State Bank of India and its Associates accounted for 24.1 per cent.

The shares of other scheduled commercial banks, foreign banks and

regional rural banks in aggregate deposits were 18.2 per cent, 5.2 per

cent and 3.0 per cent, respectively. Nationalized banks held the

highest share of 50.5 per cent in the total bank credit followed by

State Bank of India and its associates at 23.1 per cent and other

scheduled commercial banks at 18.2 per cent. Foreign banks and

regional rural banks had slightly lower share in the total bank credit at

5.9 per cent and 2.3 per cent, respectively.

According to the RBI in March 2009, number of all Scheduled

Commercial Banks (SCBs) was 171 of which, 86 were Regional Rural

Banks and the number of Non-Scheduled Commercial Banks

including Local Area Banks stood at 5. Taking into account all banks

in India, there are overall 56,640 branches or offices, 893,356

employees and 27,088 ATMs. Public sector banks made up a large

chunk of the infrastructure, with 87.7 per cent of all offices, 82 per

cent of staff and 60.3 per cent of all automated teller machines

(ATMs).

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Also, growth of aggregate deposits of all Scheduled Commercial

Banks (SCBs) including Regional Rural Banks (RRBs) up to March

27, 2009 stood at 19.8 per cent while overall nationalized banks was

at 24.7 per cent, foreign banks at 7.8 per cent and private sector

banks about 8.0 per cent.

According to the RBI, gross bank credit offered by all Scheduled

Commercial Banks (SCBs) including Regional Rural Banks (RRBs)

grew by 17.3 per cent up to March 2009. Public sector banks' credit

grew by 20.4 per cent, foreign banks' credit by 4 per cent and private

sector banks about 10.9 per cent.

Deposits with scheduled commercial banks (SCBs) surged by US$

13.41 billion in the fortnight ended July 3, as against an accumulation

of US$ 1.29 billion in the previous fortnight. In the said fortnight, time

and demand deposits jumped by US$ 8.92 billion and US$ 4.49

billion, respectively. Credit offtake from the SCBs was up by US$ 5.8

billion. Corporates, MSMEs, agriculture, and the retail sector have

been borrowing strongly, according to major bankers in the country.

The government's huge borrowing programme, investments by

banks, predominantly in government securities, were higher at US$ 9

billion in the July 3 ended fortnight as against an investment of US$ 4

billion in the preceding fortnight.

Non-resident Indians (NRIs) have cumulatively placed US$ 1.167

billion as deposits with banks in the April-May 2009-10 period as

against US$ 452 million in the corresponding period last year. NRIs

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are finding it remunerative to park their money with Indian banks,

which are offering higher interest rates. In the April-May 2009 period,

NRIs deposited almost US$ 543 million in Foreign Currency Non-

Resident (Banks) deposits. In the corresponding period last year,

they had pulled out US$ 291 million from the FCNR (B) deposits.

The new borrowing level for April-September 2009 has been set at

US$ 62.85 billion—nearly 25 per cent more than the March 2009

projection of US$ 50.66 billion—jointly by the Finance Ministry and

the Reserve Bank of India (RBI).

During 2008-09, non-food bank credit (year-on-year basis) stood at

17.5 per cent by March 2009.

India's foreign exchange reserves were US$ 252.0 billion as at end-

March 2009 which increased to US$ 253.0 billion by April 10, 2009.

The country's largest bank – the State Bank of India's (SBI) branch

network, increased by 470 to over 11,900 branches. Based on

March-end 2009 figures, SBI's deposits increased by US$ 6 billion to

US$ 152.32 billion and advances by US$ 4.57 billion to US$ 120

billion.

Boosted by gains from gilts, corporate debt and equity, Axis Bank and

HDFC Bank have posted healthy net profit growth of 70 per cent and

30 per cent respectively, for the quarter ended June 30, 2009.

Public sector banks too are now being approached by more

customers owing to low interest rates and better-managed and

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transparent operations. An analysis by Crisil Research reveals that

the increasing customer preference for public sector banks is evident

by the rise in their market share by more than 10 per cent over the

last one year. The share of the PSBs has in fact risen to 40 per cent

of the total vehicle finance portfolio as against 25-30 per cent earlier.

Private banks have retained their share at 50 per cent.

ICICI Bank has organised road shows in Asia, Europe and the US,

jointly with the Union Ministry of Road Transport and Highways to

attract investments for highways and roads. To begin with, the bank

organised a meeting between potential investors and the Union

Minister of Road Transport and Highways, Mr Kamal Nath.

HDFC Bank has signed an agreement with Guruvayoor Devaswom

for offering e-collection through HDFC Bank Payment Gateway.

Government Initiatives

In its platinum jubilee year, the RBI, the central bank of the country, in

a notification issued on June 25, 2009, said that banks should link

more branches to the National Electronic Clearing Service (NECS).

Ideally, all core-banking-enabled branches should be part of NECS.

NECS was introduced in September 2008 for centralised processing

of repetitive and bulk payment instructions. Currently, a little over

26,000 branches of 114 banks are enabled to participate in NECS.

The reduction in the Reserve Bank's policy rates and easy liquidity

conditions in the market have helped all public sector banks, most

private sector banks and some foreign banks reduce their deposit

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and lending rates. Term deposit rates between October 2008-April

18, 2009 have been reduced by a range of 125-250 basis points by

public sector banks, 75-200 basis points by private sector banks and

100-200 basis points by five major foreign banks. The reduction in the

range of BPLRs was 125-225 basis points by public sector banks,

followed by 100-125 basis points by private sector banks and 100

basis points by five major foreign banks.

Since mid-September 2008 till date, the Reserve Bank has cut the

repo rate by 400 basis points to 5 per cent and the reverse repo rate

by 250 basis points to 3.5 per cent. The CRR was also reduced by

400 basis points of NDTL of banks and stood at 5 per cent.

Apart from the bank rate cuts announced in the stimulus packages,

cash withdrawals from bank will not attract tax from April 1, 2009

following abolition of the banking cash transaction tax (BCTT) in the

Union Budget 2008-09. Also, inter-ATM usage transaction became

free of charges effective April 1, 2009.

Exchange rate used: 1 USD = 47.57 INR (as on June 2009).

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,

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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

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 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."

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UPCOMING FOREIGN BANKS IN INDIA

Foreign Banks In India

Foreign Banks in India always brought an explanation about the

prompt services to customers. After the set up foreign banks in India,

the banking sector in India also become competitive and accurative.

New rules announced by the Reserve Bank of India for the foreign

banks in India in this budget has put up great hopes among foreign

banks which allows them to grow unfettered. Now foreign banks in

India are permitted to set up local subsidiaries. The policy conveys

that forign banks in India may not acquire Indian ones (except for

weak banks identified by the RBI, on its terms) and their Indian

subsidiaries will not be able to open branches freely. Please see the

list of Foreign banks in India till date.

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List of Foreign Banks in India

ABN-AMRO Bank

Abu Dhabi Commercial Bank

Bank of Ceylon

BNP Paribas Bank

Citi Bank

China Trust Commercial Bank

Deutsche Bank

HSBC

JPMorgan Chase Bank

Standard Chartered Bank

Scotia Bank

Taib Bank

By the year 2009, the list of foreign banks in India is going to become

more quantitative as number of foreign banks are still waiting with

baggage to start business in India.

Foreign banks have brought latest technology and latest banking

practices in India. They have helped made Indian Banking system

more competitive and efficient. Government has come up with a road

map for expansion of foreign banks in India.

The road map has two phases. During the first phase between March

2005 and March 2009, foreign banks may establish a presence by

way of setting up a wholly owned subsidiary (WOS) or conversion of

existing branches into a WOS. The second phase will commence in

April 2009 after a review of the experience gained after due

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consultation with all the stake holders in the banking sector. The

review would examine issues concerning extension of national

treatment to WOS, dilution of stake and permitting

mergers/acquisitions of any private sector banks in India by a foreign

bank.

Major foreign banks in India are:

ABN-AMRO Bank

The history of ABN Amro Bank dates back to the year 1924, when

King Williem – I issued a Royal Decree declaring the establishment of

the Nederlandsche Handel-Maatschappij (Netherlands Trading

Society, NTS). The NTS had been established with an aim to

promote the trade between the Netherlands and the Dutch East

Indies.

Abu Dhabi Commercial Bank Ltd.

Abu Dhabi Commercial Bank (ADCB) is one of the most prominent

nationalized banks of the United Arab Emirates (UAE). Three

different banks viz. the Khalij Commercial Bank, the Emirates

Commercial Bank and the Federal Commercial Bank merged in the

month of July 1985, leading to the incorporation of the Abu Dhabi

Commercial Bank.

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American Express Bank Ltd

With its headquarters located in New York, U.S., American Express

company is a global financial services provider, also known as

“AmEx” in short. American Express had been established in the year

1850, and is well known all around the world for its dedicated Credit

Card, Traveler’s Cheque and Charge Card services.

BNP Paribas

BNP Paribas is one of the oldest banks in the continent of Europe,

and the largest bank in the Eurozone (consortium of countries having

adopted Euro as their primary currency), as reported by The Banker

magazine. The bank is present in 87 countries with a 162,700-strong

workforce offering its services to the bank.

Citibank

Citibank is one of the largest banks in the U.S., and is a part of the

financial services company Citigroup. Citibank had been founded in

the year 1812. Initially its name was City Bank of New York, which

was later changed to First National City Bank of New York.

DBS Bank Ltd

DBS Bank is a Singapore-based bank, and is known to be one of the

largest banks to exist in South East Asian region by asset value. The

government of Singapore established the DBS Bank in the year 1968,

and it was primarily aimed at providing development oriented financial

services.

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Deutsche Bank

Deutsche Bank, headquartered at Frankfurt in Germany, ranks

among the global leaders in corporate banking and securities,

transaction banking, asset management, and private wealth

management. It is one the world's leading international financial

service providers with roughly EURO 2.2 trillion in assets and

approximately 80,000 employees.

HSBC Ltd

HSBC Bank is a subsidiary of HSBC Holdings plc, a London based

banking giant which, according to the Forbes magazine, is the largest

banking group in the world, and the 6th largest company in the world

as of April 2009.

Standard Chartered Bank

Standard Chartered Bank is a London based bank, currently

operational within over 70 nations with more than 1,700 branches and

73,000 strong workforce as of April 2009. Although the bank is

located in Britain, still a huge chunk of its revenues originate from the

continents of Asia, Africa and Middle East.

Barclays Bank

Barclays GRCB India is led by Samir Bhatia as its Managing Director.

In a short period of just two and a half years, Barclays GRCB India

has placed itself amongst the most respected foreign banks in the

country that is serving more than 830,000 clients.

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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

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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

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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 service excellence would help us get

there. Today, we are proud to say that we are well on our way

towards that goal.

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COMPANY PROFILE

STRONG NATIONAL NETWORK

HDFC

BANK

March 2006 March 2007 March 2008

Citied 228 316 327

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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.

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

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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.

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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

industries 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

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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%).

These type of technology gives the freedom to retail customers.

Centralized Processing Units Derived Economies of

Scale

Electronic Straight Through

Processing

Reduced Transaction Cost

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

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service.

2001

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2005

( % customer initiated Transaction by Channel )

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HDFC BANK PRODUCT AND CUSTOMER SEGMENTS

PERSONAL BANKING

Loan Product Deposit Product Investment & Insurance

Auto Loan

Loan Against

Security

Loan Against

Property

Personal loan

Credit card

2-wheeler loan

Commercial

vehicles finance

Home loans

Retail business

banking

Saving a/c

Current a/c

Fixed deposit

Demat a/c

Safe Deposit

Lockers

Mutual Fund

Bonds

Knowledge Centre

Insurance

General and Health

Insurance

Equity and

Derivatives

Mudra Gold Bar

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Tractor loan

Working Capital

Finance

Construction

Equipment

Finance

Health Care

Finance

Education Loan

Gold Loan

Cards Payment Services Access To Bank

Credit Card

Debit Card

Prepaid Card

----------------------------

Forex Services

----------------------------

Product &

Services

Trade Services

Forex service

NetSafe

Merchant

Prepaid Refill

Billpay

Visa Billpay

InstaPay

DirectPay

VisaMoney

Transfer

e–Monies

Electronic Funds

Transfer

NetBanking

OneView

InstaAlert

MobileBanking

ATM

Phone Banking

Email Statements

Branch Network

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Branch Locater

RBI Guidelines

Online Payment

of Direct Tax

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 Sub-

Membership

RTGS –

submembership

Fund Transfer

ATM Tie-ups

Corporate Salary a/c

Tax Collection

Financial Institutions

Mutual Funds

Stock Brokers

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Insurance Companies

Commodities

Business

Trusts

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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.

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.

.

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NRI SERVICES

Accounts & Deposits Remittances

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

Indians

North America UK Europe South East Asia Middle East Africa Others

Quick remitIndiaLinkCheque LockBoxTelegraphic/ Wire TransferFunds Transfer Cheques/DDs/TCs

Investment & Insurances Loans

Mutual Funds Insurance Private Banking Portfolio Investment

Scheme

Home Loans Loans Against Securities Loans Against Deposits Gold Credit Card

Payment Services Access To Bank

NetSafe BillPay InstaPay DirectPay Visa Money Online Donation

NetBanking OneView InstaAlert ATM PhoneBanking Email Statements Branch Network

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BUSINESS STRETEGY

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

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.

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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.

Continue to develop products and services that reduce bank’s

cost of funds.

Focus on high earnings growth with low volatility.

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INSIDE HDFC BANK

FIVE “S” , PART OF KAIZEN

WORK PLACE TRANSFORMATION

Focus on effective work place organization

Believe in

“ Small changes lead to large improvement ”

Every successful organization have their own strategy to win the

race in the competitive market. They use some technique and

methodology for smooth running of business. HDFC BANK also

acquired the Japanese technique for smooth running of work and

effective work place organization.

Five ‘S’ Part of Kaizen is the technique which is used in the bank

For easy and systematic work place and eliminating unnecessary

things from the work place.

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BENEFIT OF FIVE “S”

It can be started immediately. Every one has to participate. Five “ S” is an entirely people driven initiatives. Brings in concept of ownership. All wastage are made visible.

FIVE ‘S’ Means :-

S-1 SORT SEIRIS-2 SYSTEMATIZE SEITONS-3 SPIC-N-SPAN SEIROS-4 STANDARDIZE SEIKETSUS-5 SUSTAIN SHITSUKE

(1) SORT :-

It focus on eliminating unnecessary items from the work place.

It is excellent way to free up valuable floor space.

It segregate items as per “require and wanted”.

76

Frequently Required

Less FrequentlyRequiredRemove

everything from workplace

Junk

Wanted but not Required Junk

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(2) SYSTEMATIZE :-

Systematize is focus on efficient and effective Storage method.

That means it identify, organize and arrange retrieval.

It largely focus on good labeling and identification practices.

Objective :- “A place for everything and everything in its place”.

(3) SPIC- n - SPAN :-

Spic-n-Span focuses on regular clearing and self

inspection. It brings in the sense of ownership.

(4) STANDERDIZE :-

It focus on simplification and standardization. It involve standard

rules and policies. It establish checklist to facilitates autonomous

maintenance of workplace. It assign responsibility for doing

various jobs and decide on Five S frequency.

(5) SUSTAIN:-

It focuses on defining a new status and standard of organized work place. Sustain means regular training to maintain

standards developed under S-4. It brings in self- discipline and commitment towards workplace organization.

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LABELLING ON FILE

FILE NUMBER

SUBJECT

FROM DATE

TO DATE

OWNER

BOX LABEL

For Example

1 / 3 / A / 6

1 – Work Station (1)

3 – Drawer (3)

A - Shelf (A)

6 – File Number ( 6)

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COLOUR CODING OF FILES

DEPARTMENT

Welcome Desk

Personal Banker

Teller

Relationship Manager

Branch Manager

Demat

Others

In the HDFC BANK each department has their different color coding

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apply on the different file. Due to this everyone aware about their

particular color file which is coding on it and they save their valuable

time. It is a part of Kaizen and also included in the system of the Five

‘S’. Logic behind it that , the color coding are always differentiate the

things from the similar one.

HUMAN RESOURCES

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.

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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.

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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.

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RECENT DEVELOPMENT

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.

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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

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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

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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.

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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

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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.

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ACHIEVEMENT IN 2007

Business Today-

Monitor Group

survey

One of India's "Most Innovative

Companies"

Financial Express-

Ernst & Young

Award

Best Bank Award in the Private Sector

category

Global HR

Excellence Awards

- Asia Pacific HRM

Congress:

'Employer Brand of the Year 2007 -2008'

Award - First Runner up, & many more

Business Today 'Best Bank' Award

Dun & Bradstreet –

American Express

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Corporate Best

Bank Award 2007 'Corporate Best Bank' Award

The Bombay Stock

Exchange and

Nasscom

Foundation's

Business for Social

Responsibility

Awards 2007

' Best Corporate Social Responsibility

Practice' Award

Outlook Money &

NDTV Profit

Best Bank Award in the Private sector category.

The Asian Banker

Excellence in

Retail Financial

Services Awards

Best Retail Bank in India

Asian Banker HDFC BANK Managing Director Aditya Puri wins

the Leadership Achievement Award for

India

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SWOT ANALYSIS

STRENGTH

Right strategy for the

right products.

Superior customer

service vs. competitors.

Great Brand Image

Products have required

accreditations.

High degree of customer

satisfaction.

Good place to work

Lower response time

with efficient and

effective service.

Dedicated workforce aiming at making a

WEAKNESSES

Some gaps in range for

certain sectors.

Customer service staff need

training.

Processes and systems, etc

Management cover

insufficient.

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

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long-term career in the field.

Opportunities

Profit margins will be good.

Could extend to overseas

broadly.

New specialist applications.

Could seek better customer

deals.

Fast-track career

development opportunities

on an industry-wide basis.

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

Threats

Legislation could impact.

Great risk involved

Very high competition

prevailing in the industry.

Vulnerable to reactive

attack by major competitors

Lack of infrastructure in

rural areas could constrain

investment.

High volume/low cost market is intensely competitive.

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COMPETITIVE SWOT ANALYSIS WITH ICICI BANK

STRENGTHS WEAKNESSES

OPPORTUNITIES

S – O Strategies

Strength: Large Capital base.

Opportunity: Market Expansion.

Strategy: Deep Penetration into Rural Market.

W – O Strategies

Weakness: Workforce

Responsiveness.

Opportunity: Outsourcing of Non – Core Business.

Strategy: Outsource Customer Care & other E-Helps.

THREATS

S – T Strategies

Strength: Low operating costs

Threat: Increased Competition from others Pvt. Banks.

Strategy: Steps to Ensure Loyalty by old Customers.

W – T Strategies

Weakness: Not Equal to International Standards.

Threat: Entry of many Foreign Banks.

Strategy: Consider additional 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.

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Strategy:

From the analysis of Strength & Opportunity the simple and

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 &

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provide quality service so as to ensure customer loyalty, therefore

guaranteeing continuous business.

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.

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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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PROJECT ON PLASTIC MONEY

PLASTIC MONEYPLASTIC MONEY

I give the project on Plastic Money to bank. The objective behind this

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project is to increase the rich customers list in a bank. Plastic Money

title itself says the use of Credit Card and Debit Card in day to day

transaction of the business. I prepared the presentation on it and

submitted to bank and Bank already started work on this project.

Idea behind this project is to sale the bulk product. Target customer

Of this project are two parties one is Wholesaler and second is

Retailer. Due to this idea bank also sell their swipe machine to

wholesaler and create brand image in the market.

The idea behind this, bank give the credit card swipe machine to

wholesalers and retailers use the credit card of the bank. Bank gives

the 50 days credit to their credit card holders. So here retailers can

get benefit of long credit period and on the other side wholesalers can

get the benefit of same day payment. As a result bank got the wide

list of customers of wholesalers and retailers.

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POWERPOINT PRESENTATION ON PLATIC MONEY

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IDEAIDEA

We sale our product to wholesalers and Retailers We sale our product to wholesalers and Retailers and create group transactions.and create group transactions.

Credit CardCredit Cardand and Debit CardDebit Cardas a medium of as a medium of transaction.transaction.

Both the parties get benefit from it .Both the parties get benefit from it .

Bank got the new customers as a result.Bank got the new customers as a result.

Idea behind it, to convenience both the parties and create the group

transaction between them so bank can got the maximum benefit from

it. Each wholesaler has more than 15 to 20 retailers, so by this way

bank sell the bulk products.

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How it worksHow it works

Meet to Meet to wholesalerswholesalersfirstfirst Collect details of their Collect details of their RetailersRetailers Convince both the parties and showing them a Convince both the parties and showing them a

benefitsbenefitsfrom it.from it. Force to open a bank account in Force to open a bank account in HDFC BankHDFC Bank

to both the parties. to both the parties.

This power point slide shows the how idea works behind this project. Meet the wholesaler first and get the details about their retailers and

convince both parties and shows the benefit of using this type of

transaction by plastic money.

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Benefit to BankBenefit to Bank

BulkBulkproduct selling product selling

Because wholesalers and retailers are in a Because wholesalers and retailers are in a groupgroup

Indirect way to Indirect way to marketingmarketing

Bank always find those customers which are more involve in the

banking transaction. These type of group transaction between the

wholesalers and retailers maintain the well account in a bank.

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Marketing Strategy Marketing Strategy

It's show time and it's about one thingIt's show time and it's about one thing----communicating the benefits of your product or communicating the benefits of your product or service in such a way that prospects or service in such a way that prospects or customers customers wantwantyour solution to their your solution to their problem... problem...

104