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Project Report 2004-

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INTRODUCTION

In India the banking sector is segregated as public or privatesector banks, cooperative

banks and regional rural banks. Private banking in India was practiced since the

beginning of banking system in India.

With years, banks are also adding services to their customers. The Indian banking

industry is passing through a phase of customers market. The customers have more

choices in choosing their banks. A competition has been established within the banks

operating in India.

With stiff competition and advancement of technology, the services provided by banks

has become more easy and convenient. This section of banking deals with the latestdiscovery in the banking instruments along with the polished version of their old

systems.

Commercial Banking

The commercial banks are the usual type of institution, which dominates the entire

banking system in every country. It derives its name from the fact that it confines its

business largely to transactions with businessman and business institutions. According

to the modern concept banking is a business which not only deals with borrowing,

lending and remittance of funds but it is also an important instrument for fostering

economic growth.


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Bank credit is the primary institutional source of working capital finance in India. In

fact, it represents the most important source for financing of current assets. The

competitive climate in the financial market has changed dramatically over the last few

years.

Foams of working Capital

Over Draft

Cash Credit

Term Loan

Bill Discounting

Letter of Credit

Packing Credit


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COMPANY PROFILE

HDFC BANK LIMITED

Background

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 liberalisation of the Indian Banking

Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC

Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced

operations as a Scheduled Commercial Bank in January 1995.

Promoter

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

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

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

the market leader in mortgages. Its outstanding loan portfolio covers well over a

million dwelling units. HDFC has developed significant expertise in retail mortgage

loans to different market segments and also has a large corporate client base for its

housing related credit facilities. With its experience in the financial markets, a strong

market reputation, large shareholder base and unique consumer franchise, HDFC was

ideally positioned to promote a bank in the Indian environment.


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Business Focus

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build

sound customer franchises across distinct businesses so as to be the preferred provider

of banking services for target retail and wholesale customer segments, and to achieve

healthy growth in profitability, consistent with the bank's risk appetite. The bank is

committed to maintain the highest level of ethical standards, professional integrity,

corporate governance and regulatory compliance. HDFC Bank's business philosophy

is based on four core values - Operational Excellence, Customer Focus, Product

Leadership and People.

Capital Structure

The authorised capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The paid-up

capital is Rs.309.9 crore (Rs.3.09 billion). The HDFC Group holds 22.2% of the

bank's equity and about 19.5% of the equity is held by the ADS Depository (in respect

of the bank's American Depository Shares (ADS) Issue). Roughly 31.7% of the equity

is held by Foreign Institutional Investors (FIIs) and the bank has about 190,000

shareholders. The shares are listed on the The Stock Exchange, Mumbai and the

National Stock Exchange. The bank's American Depository Shares are listed on the

New York Stock Exchange (NYSE) under the symbol "HDB".

TimesBank Amalgamation

In a milestone transaction in the Indian banking industry, Times Bank Limited

(another new private sector bank promoted by Bennett, Coleman & Co./Times Group)

was merged with HDFC Bank Ltd., effective February 26, 2000. As per the scheme of

amalgamation approved by the shareholders of both banks and the Reserve Bank ofIndia, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75


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shares of Times Bank. The acquisition added significant value to HDFC Bank in terms

of increased branch network, expanded geographic reach, enhanced customer base,

skilled manpower and the opportunity to cross-sell and leverage alternative delivery

channels.

Distribution Network

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

network of over 500 branches spread over 220 cities across India. All branches arelinked on an online real-time basis. Customers in over 120 locations are also serviced

through Telephone Banking. The Bank's expansion plans take into account the need to

have a presence in all major industrial and commercial centres where its corporate

customers are located as well as the need to build a strong retail customer base for

both deposits and loan products. Being a clearing/settlement bank to various leading

stock exchanges, the Bank has branches in the centres where the NSE/BSE have a

strong and active member base.

The Bank also has a network of about over 1054 networked ATMs across these cities.

Moreover, HDFC Bank's ATM network can be accessed by all domestic and

international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American

Express Credit/Charge cardholders.

Management

Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr.

Capoor was a Deputy Governor of the Reserve Bank of India.

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25

years, and before joining HDFC Bank in 1994 was heading Citibank's operations in

Malaysia.


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The Bank's Board of Directors is composed of eminent individuals with a wealth of

experience in public policy, administration, industry and commercial banking. Senior

executives representing HDFC are also on the Board.

Senior banking professionals with substantial experience in India and abroad head

various businesses and functions and report to the Managing Director. Given the

professional expertise of the management team and the overall focus on recruiting and

retaining the best talent in the industry, the bank believes that its people are a

significant competitive strength.

Technology

HDFC Bank operates in a highly automated environment in terms of information

technology and communication systems. All the bank's branches have online

connectivity, which enables the bank to offer speedy funds transfer facilities to its

customers. Multi-branch access is also provided to retail customers through the branch

network and Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best

technology available internationally, to build the infrastructure for a world class bank.

In terms of software, the Corporate Banking business is supported by Flexcube, while

the Retail Banking business by Finware, both from i-flex Solutions Ltd. The systems

are open, scaleable and web-enabled.

The Bank has prioritised its engagement in technology and the internet as one of its

key goals and has already made significant progress in web-enabling its core

businesses. In each of its businesses, the Bank has succeeded in leveraging its market

position, expertise and technology to create a competitive advantage and build market

share.


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Business Profile

HDFC Bank caters to a wide range of banking services covering both commercial and

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

retail side. The bank has three key business segments:

a) Wholesale Banking Services

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

Indian corporate sector and to a lesser extent, small & mid-sized corporates and agri-

based businesses. For these customers, the Bank provides a wide range of commercial

and transactional banking services, including working capital finance, trade services,

transactional services, cash management, etc. The bank is also a leading provider of

structured solutions, which combine cash management services with vendor and

distributor finance for facilitating superior supply chain management for its corporate

customers. Based on its superior product delivery / service levels and strong customer

orientation, the Bank has made significant inroads into the banking consortia of a

number of leading Indian corporates including multinationals, companies from the

domestic business houses and prime public sector companies. It is recognised as a

leading provider of cash management and transactional banking solutions to corporate

customers, mutual funds, stock exchange members and banks.

b) Retail Banking Services

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

of financial products and banking services, giving the customer a one-stop window for

all his/her banking requirements. The products are backed by world-class service and

delivered to the customers through the growing branch network, as well as through

alternative delivery channels like ATMs, Phone Banking, NetBanking and Mobile

Banking.


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The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank

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

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

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

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

for Two-wheelers. It is also a leading provider of Depository Participant (DP) services

for retail customers, providing customers the facility to hold their investments in

electronic form.

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

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

as well. The Bank launched its credit card business in late 2001. By March 2005, the

bank had a total card base (debit and credit cards) of 4.2 million cards. The Bank is

also one of the leading players in the "merchant acquiring" business with over 42,000

Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant

establishments. The Bank is well positioned as a leader in various net based B2C

opportunities including a wide range of internet banking services for Fixed Deposits,

Loans, Bill Payments, etc.

c) Treasury

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

Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the

liberalisation of the financial markets in India, corporates need more sophisticated risk

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

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

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

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

and market risk on this investment portfolio.


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RATINGS/AWARDS

a) Credit Rating

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

Analysis & Research Limited. (CARE) and Fitch Ratings India Private Limited. The

Bank's Fixed Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by

CARE, which represents instruments considered to be "of the best quality, carrying

negligible investment risk". CARE has also rated the Bank's Certificate of Deposit

(CD) programme "PR 1+" which represents "superior capacity for repayment of short

term promissory obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch

Inc.) has assigned the "tAAA (ind)" rating to the Bank's deposit programme, with the

outlook on the rating as "stable". This rating indicates "highest credit quality" where

"protection factors are very high". HDFC Bank also has its long term unsecured,

subordinated (Tier II) Bonds of Rs.4 billion rated by CARE and Fitch Ratings India

Private Limited. CARE has assigned the rating of "CARE AAA" for the Tier II Bonds

while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA(ind)" with the

outlook on the rating as "stable". In each of the cases referred to above, the ratings

awarded were the highest assigned by the rating agency for those instruments.

b) Corporate Governance Rating

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

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

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

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

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

assigned a 'CRISIL GVC Level 1' rating which indicates that the bank's capability

with respect to wealth creation for all its stakeholders while adopting sound corporate

governance practices is the highest.


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c) Awards and Accolades

Over the years, HDFC Bank has received recognition and awards from various

leading organisations and publications, both domestic and international. In June 2005,

HDFC Bank won Asiamoney magazine's "Best Domestic Commercial Bank Award

2005" for India. The Bank was awarded The Asian Banker's, "Excellence in Retail

Banking Risk Management Award for 2004", a pan-Asia recognition of the bank's risk

management abilities. The Asset (Triple A Country Awards) rated HDFC Bank as the

"Best Domestic Bank in India - 2004" and "Best Domestic Bank in India - 2003".Forbes Global again named the Bank in its listing of 'Best Under a Billion, 100 Best

Smaller Size Enterprises in Asia/Pacific and Europe", in its November 2004 issue.

The Bank was rated as the "Best Overall Local/Domestic Bank - India" in the

Corporate Cash Management Poll conducted by the Hong Kong based Asiamoney

magazine. The said magazine also awarded the Bank with the titles of "Overall Most

Improved Company for Best Management Practices in India" in the Best Managed

Companies poll 2004, "Best Local Cash Management Bank", Best Overall Domestic

Trade Finance Services Award", and also awarded the Managing Director, Mr. Aditya

Puri as the "Best Chief Executive Officer in India". In May 2004, the Bank also won

the "Operational Excellence in Retail Financial Services - India" award as part of the

Asian Banker Excellence in Retail Financial Services Program 2003. HDFC Bank was

selected by Finance Asia as the "Best Local Bank - India 2003", "Best Local Bank in

India 2002", "Best Domestic Commercial Bank - India 2001", "Best Domestic

Commercial Bank - India 2000" and "Best Domestic Commercial Bank - India 1999".

Euromoney rated HDFC Bank as "Best Bank in India 2002", "Best Bank - India

2001", "Best Domestic Bank - India 2000" and "Best Bank - India 1999". For its use

of information technology the bank has been recognized as a "Computerworld Honors

Laureate" and awarded the 21st Century Achievement Award in 2002 for Finance,

Insurance & Real Estate category by Computerworld, Inc., USA.


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Closer home, HDFC Bank was selected as the "Best Bank in India" for the second

consecutive year in 2004 by Business Today. The Bank was selected by Business

World as "one of India's Most Respected Companies" as part of The Business World

Most Respected Company Awards 2004. In the FE-E&Y Best Banks Survey for 2002-

03, HDFC Bank was selected as the number one new generation private-sector bank.

Outlook Money Awards selected HDFC Bank as the "Best Bank - Private Sector

2003-04" in February 2004. HDFC Bank was ranked India's Best Bank - 2003 by

Business Today and as Best Bank for the year 2000 by Business India. It was also the

winner of The Economic Times Award - Corporate Excellence for Emerging

Company of the Year 2000-01. HDFC Bank was awarded the Best IT User award

2003 (category: Banking) as part of the IT User Awards 2003 conferred by

Economictimes.com & Nasscom.

Product Range

Savings, Fixed Deposits, Current and Demat Accounts Savings Account: Apart from

the usual facilities, you get a free ATM Card, Interbranch banking, NetBanking,

BillPay, PhoneBanking, Debit Card and MobileBanking, among others.

HDFC Bank Preferred: A preferential Savings Account where you are assigned a

dedicated Relationship Manager, who is your one-point contact. You also get

privileges like fee waivers, enhanced ATM withdrawal limit, priority locker allotment,

free Demat Account and lower interest rates on loans, to name a few.

Sweep-In Account: A fixed deposit linked to your Savings Account. So, even if your

Savings Account runs a bit short, you can issue a cheque (or use your ATM Card).

The money is automatically swept in from your fixed deposit into your Savings

Account.


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Super Saver Account: Gives you an overdraft facility up to 75% of your Fixed

Deposit. In an emergency, you can access your funds while your Fixed Deposit

continues to earn high interest.

HDFC Bank Plus: Apart from Regular and Premium Current accounts we also have

HDFC Bank Plus, a Current Account and then some more. You can transfer up to Rs.

50 lakh per month at no extra charge, between the four metros. You can also avail of

cheque clearing between the four metros, get cash delivery/pickup upto Rs. 25,000/-,

home delivery of Demand Drafts, at-par cheques, outstation cheque clearance facility,

etc.

Demat Account: Conduct hassle-free transactions on your shares. You can also

access your Demat Account on the Internet.

Innovative services for your convenience...

PhoneBanking: 24-hour automated banking services with 39 PhoneBanking numbers

available.

ATM 24-hour banking: Apart from routine transactions, you can also pay your

utility bills and transfer funds, at any of our ATMs across the country all year round.

Inter-city/Inter-branch Banking: Access your account from any of our 500

branches in 220 cities.

NetBanking: Access your bank account from anywhere in the world, at anytime, at

your own convenience. You can also view your Demat Account through NetBanking.

International Debit Card: An ATM card you can shop with all over the country andin over 140 countries with. You can spend in any currency, and pay in Rupees.


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MobileBanking: Access your account on your mobile phone screen at no airtime

cost. Use SMS technology to conduct your banking transactions from your cellphone.

BillPay: Pay your telephone, electricity and mobilephone bills through our ATMs,

Internet, phone or mobile phone. No more standing in long queues or writing cheques.

Loans for every need

Now, our loans come to you in easy-to-pay monthly installments, and are available

with easy documentation and quick delivery.

Personal Loans: Take a loan of up to Rs. 3 lakh for a wedding, education, purchase

of a computer or an exciting holiday.

New Car Loans and Used Car Loans: Finance up to 90% of the cost of a car, new or

used! And the loans come to you with easy documentation and speedy processing at

attractive interest rates.

Loans Against Shares: Get an overdraft up to Rs. 10 lakh at an attractive interest rate

against physical shares, up to 50% of the market value of your shares. In case of

Demat Shares, you can get a Loans Against Shares of up to 65% of the market value

of your shares, till Rs. 20 lakh.

Two Wheeler & Consumer Loans: To help you buy the best durables for your

home.

Demat Account: Protect your shares from damage, loss and theft, by maintaining

your shares in electronic form. You can also access your demat account on the

internet.


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Current Account: Get a personalised cheque book, monthly account statements,

inter-branch banking and much more.

Mutual Funds: Apart from a wide choice of mutual funds to suit your individual

needs, you benefit from expert advice on choosing the right funds based on in-depth

market analysis.

International Credit Card: Get an option of Silver, Gold, or Health Plus Credit card,

accepted worldwide from a world-class bank. If you have outstanding balance on your

other credit card, you can transfer that balance to this card at a lower interest rate.

NRI Services: A comprehensive range, backed by unmatched features and world-

class service, ensures NRIs all the banking support they need.

Forex Facilities: Avail of foreign currency, travellers cheques, foreign exchange

demand drafts, to meet your travel needs.

Insurance*: HDFC Bank now brings you Life Insurance and Pension Solutions like

Risk Cover Scheme, Savings Scheme, Children's Plan and Personal Plan from HDFC

Standard Life Insurance Co. Ltd.


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WORKING CAPITAL

Working capital is the business's lifeblood, to help keep it flowing, and to. If a

business is operating profitably, then it should, in theory, generate cash surpluses. If it

does not generate surpluses, the business will eventually run out of cash and expire.

The faster a business expands the more cash it will need for working capital

and investment. The cheapest and best sources of cash exist as working capital right

within business. Good management of working capital will generate cash will help

improve profits and reduce risks. The cost of providing credit to customers and

holding stocks can represent a substantial proportion of a firm's total profits.

Two elements in the business cycle absorb cash - Inventory (stocks and work-

in-progress) and Receivables (debtors). The main sources of cash are Payables (your

creditors) and Equity and Loans.

Nature of working Capital

Working capital is the amount required to carry on the day-to-day operations in

a business. It is difference between the current assets and current liabilities. The term

current assets refers to those assets which in ordinary course of business can be, or

will be, converted into cash within one year without undergoing a diminution in value

and without disrupting the operations of the firm. The major current assets are cash,

marketable securities, accounts receivables and inventory. Current liabilities are those

liabilities, which are intended, at their inception, to be paid in the ordinary course of

business, within a year, out of the current assets or earnings of the concern.


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Concepts of working Capital

There are two concepts of working capital, they are:

Gross working capital: - it refers to the firms investment in current assets.

Current assets are the assets which can be converted into cash within an

accounting year and include cash, short-term securities, debtors, bills receivables

and stock.

Net working capital: - it refers to the difference between current assets and

current liabilities or it is that portion of current assets which is financed with long-

term funds. Current liabilities are those claims of outsiders, which are expected to

mature for payment within an accounting year and include creditors, bills payable

and outstanding expenses. Net Working capital can be positive or negative. A

Positive net working capital will arise when current assets exceed current

liabilities. A negative working capital occurs when current liabilities are in excess

of current assets.

Need for Working Capital

The need for working capital to run the day-to-day activities cannot be over

emphasized. We will hardly find a business firm, which does not require any amount

of working capital. Indeed, firms differ in their requirements of the working capital. in

order to maximize the wealth of its shareholders a firm should earn sufficient return

from its operations. Earning a steady amount of profit requires successful activity. The

firm has to invest enough funds in current assets for generating sales. Current assets

are needed because sales do not convert into cash simultaneously. There is always an

operating cycle involved in the conversion of sales into cash.


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Operating Cycle

Operating cycle is the time duration required to convert sales, after the conversion of

resources into inventories, into cash. The continuing flow from cash to suppliers, to

inventory, to accounts receivable and back to cash is what is called the operating

cycle. involves :-

Operating cycle is a continuous process. If it were possible to complete the sequences

instantaneously, there would be no need for working capital. but since it is not

possible, the firm is forced to have current assets. Since cash inflows and outflows do

not match, firms have to necessarily keep cash or invest in short-term securities so that

they will be in a position to meet obligations when they become due.

Similarly, adequate inventory provides a cushion against being out of stock. It the

firms have to be competitive they must sell goods to their customers on credit, when

necessitates the holding of accounts receivables. It is in these ways than an adequate

level of working capital is absolutely necessary for smooth sales activity, which, in

turn, enhances owners wealth.


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WORKING CAPITAL PRODUCTS

Overdraft

Bank provides overdraft facility to the current account holders through which they are

allowed to withdraw more than their deposits. An over draft is a fluctuating account

wherein the balance some times may be in credit and at other times in debit. In this

case a limit is agreed upon by the banker and the customer, beyond which the

customer is not allowed to withdraw. Interest is charged only on the amount actually

overdrawn.

Cash Credits

A cash credit is essentially a drawing account against credit granted by the bank and is

operated in the same way as a current account in which overdraft limit has been

sanctioned. The bank opens a cash credit account in the name of the borrower and

credits the amount sanctioned as cash credit. The Banker allows the borrower to

withdraw money up to a certain limit. Interest is charged on the amount actually

withdrawn from the account.

Packing credit

Packing credit is essentially a short-term advance granted by a bank to an exporter toassisting him to buy, process, pack and ship the goods.

Letter of Credit

Letter of credit is an indirect form of working capital financing and the banks assume

only the risk, the being provided by the supplier himself. The purchaser of the goods

on credit obtains a letter of credit from a bank. The bank undertakes the responsibilityto make payment to the supplier in case the buyer fails to meet his obligations.


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Bill Discounting

Under this method a holder of a bill of exchange can get it discounted by the bank.

After making some marginal deductions as discount, the bank pays the value of the

bill to the holder. When the bill of exchange matures, the bank gets its payment from

the acceptor of the bill.

Term Loan

If the loans are granted for more than one year they are called term loans. Under this

method bank advance loans for 3-7 years repayable in yearly or half-yearly

installments.


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NEED AND SCOPE OF THE STUDY

The project concerns "A study on the identification of potential customers for working

capital funds for HDFC Bank".

The study is done to find out weather the current account holders of the HDFC bank

are eligible for working capital funds. The scope and spectrum of this analysis

revalues in and around banglore city. The primary objective of the study is to identify

the potential customers from existing current account holders of HDFC Bank for the

requirements of working capital funds.

By this study I can understand the customers preferences and their interests about the

working capital funds. Hope this study will be of considerable use to the company.


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OBJECTIVES

Primary objective

To identify the potential customers from existing current account holders of HDFC

Bank for the requirements of working capital funds.

Secondary Objective

1. To understand the interest rate of working capital funds of other banks.

2. To identify customers preference for the different types of working capital

products.

3. To suggest a suitable target segment for working capital funds for small

and medium segment.

4. To know which facility is most widely used by the small and medium

Enterprises.

5. To know the existing clients interest towards HDFC Banks working capital

products.

6. To analyze the selected respondents in terms of their Vintage, Sales

Turnover, Collateral etc.


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RESEARCH METHODOLOGY

The success of analysis mostly depends on the methodology on which it is carried out.

The appropriate methodology will improve the validity of the findings generally

methodology consists of the two type of data collection.

Title of the study

"A study on the identification of potential customers for working capital funds

for HDFC Bank."

Research Design

The study is descriptive in nature. Descriptive research includes surveys and fact-

findings enquire of different kind. However all the efforts have been made to collect

both primary and secondary data as accurately as possible.

Universe of the study

All the current account holders of HDFC Bank C.M.H road Banglore is taken in to

consideration as the universe of the study.

Sample Design

Convenience Sampling.

Sample Area

The study was under taken in some major places in banglore city.


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Sample Size

The sample size for the study is 75. From whom the data is collected directly from

their office.

Data Collection Method

The study is based on the data collected through primary and secondary

Sources.

Primary Data

A Interview schedule was designed to collect the primary data.

Secondary Data

Secondary data was collected from the company broachers, Magazines, Journals,

websites etc.

Tools used for analysis

1. Simple Percentage method.

2. Graphical aids.

3. Constructed an index for ranking the eligibility of potential customers on the basis

of their Turnover, Capacity to offer Collateral security, Vintage and Profitability.


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METHODOLOGY USED FOR THE CONSTRUCTION

OF INDEX

An attempt is made to rank the potential customers to HDFC Bank wherein a ranking

Index is constructed. There are four parameters, which the bank expects to be a

potential customer. They are: -

1. Annual turnover of the Customer should be more than 75lakhs per annum.

2. The potential customers must be willing to offer collateral security for getting

assistance.

3. The potential customer should profit track record of business during the preceding

three years.

4. The length of experience\Existence in the business which in vintage to be a

potential customer.

Only the customers who fulfill the above four criteria are deemed to be the potential

customers to the HDFC Bank. Thus to be a potential customer an index number is

constructed based on the above four criteria of the four criteria appropriate weight age

is given to identify the potential customer. Among the four criteria the HDFC Bank

assigns grater weight age to volume of turnover generated by the customer. The

Ability to offer collateral security as the second important factor. The third factor is

given to profitability of the business. The fourth factor is given to the track record of

existence with business. Accordingly the following weights are assigned to the four

criteria.


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Criteria Points

1. Turnover = 40 points

2. Capacity to offer Collateral = 30 points

3. Profitability of the Business = 10 points

4. Years of experience I.e. Vintage

of theBusiness = 10 points

Total = 100 points

It is considered that a potential customer must have at least 100 points in theconstructed index. Out of 75 respondents from whom I have received the response in

my primary survey, Only 25 customers are observed to fulfilling the bank created

norms to be potential customers. Now the question is out of 25 customers, who are the

preferable customer?

In order to identify the preferable customers, the 25 customers need to be ranked

based on the bank norms. Index numbers are constructed with appropriate weight age

for each customer.

The turnover of each customer is classified into different classes with class interval of

25lakhs beginning with 75 lakhs to 300 lakhs. We have the following 10 classes.


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Turn Over Points

75-100 1

100-125 2

125-150 3

150-175 4

175-200 5

200-225 6

225-250 7

250-275 8

275-300 9

> 300 10

Depending the reported turnover of a customer. The frequencies are marked for each

class. The weight age is given according to the magnitude of turnover. The highest

turnover customer is given a weight age of 10 points whereas the lowest customer

having a turnover of 75lakh will have weight age of one point. Like that according toreported turnover appropriate weight age points are assigned. The weighted points for

the turnover criteria are multiplied by the weight age of importance (i.e. 40 points) for

the turnover criteria in the constructed index.

The second criterion to be a potential customer given by the bank is for the ability to

offer collateral security. A weight age of 30 points is assigned if a customer is able to

offer collateral security. If the a customer is not able to offer a collateral security, then

the weight age will be zero in the construction of index.

The third criteria considered for a potential customer considered by the bank is

profitability of the business. The data available are in the form of profit margin of the

turnover. The profit margin of the potential customers is ranging from 2 percent to 10

percent of their turnover. The reported profit margin percentage of a customer is

multiplied by the corresponding weight age (i.e. 20 points) in the construction of the

index.


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The forth criteria which the bank give significance for the identification of potential

customer is track record of existence i.e. vintage of the customer for which 10 points

are assigned in the construction of index number.

The vintage of the customers range from 3 years to 25 years. The length of existence

of each customer is directly multiplied by the weight age points say 10 points. If a

customer has three years of experience then his vintage in the index would be

3*10=30 points, and if 7 years 7*10=70 and so on. Thus index numbers are

constructed for each potential customer. Based on the value of index numbers the

potential customers are ranked in the ascending order. A customer whose index is

highest is ranked as first and so on.


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29

LIMITATION

Scope of the study is limited to Bangalore City only.

The result may not be widely applicable.

Since the Data Collection tool is questionnaire, all the limitations of the

questionnaire will reflect in this study.

The Respondents were scattered in the city of Banglore and was difficult to

reach them.

Some of the respondents hesitated to give the required details due to security

reasons.


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30

Table No:1

Constitution

Type Total Number Percentage

Pvt Ltd 6 8 %

Public Ltd 0 0 %

Proprietorship 65 87 %

Partnership 4 5 %Total 75 100 %

Interpretation

From the above table it is understood that 87 % of the respondents were belongs to the

proprietorship constitution.8% of the respondents are belongs to Pvt ltd, and

remaining 5% coming under partnership. None of the respondents belongs toPublic Ltd.

Inference

The survey shows that majority of the respondents were belonging to sole

proprietorship type of constitution.

CHART SHOWING TYPE OF CONSTITUTION


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CONSTITUTION

8% 0%

87%

5%

Pvt Ltd

Public Ltd

Proprietorship

Partnership


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32

Table No:2

Segment


Trader 36 48 %

Manufacturer 8 11 %

Distributor 10 13 %

Retailer 15 20 %

Services 6 8 %

Total 75 100 %

Interpretation

The above table shows that majority of the customers are belongs to traders that is

48% after that the retailers 20% followed by distributors 13%, and manufacturers

11% finally the services 8%

Inference

The majority current account holders in the bank were traders and after that retailers

the other categories are distributors and services.


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CHART SHOWING TYPE OF SEGMENT

SEGMENT

48%

11%

13%

20%

8%

Trader

Manufacturer

Distributor

Retailer

Services


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34

Table No:3

Vintage


Less than one year 3 4 %

1-10 years 41 55 %

10-20years 25 33 %

20-30 years 4 5 %

30 years and above 2 3 %

Total 75 100 %

Interpretation

The above table clearly interprets that majority of the respondents coming under the

experience category 1-10 years. They were above 55%. 33% of the respondents

belong to 10-20 years of vintage followed by the 20-30 category is about 5% and 4%

less than one year experience. Finally 3% is has got about 30 years of experience.

Inference

The survey shows that majority of the respondents participated in the survey had

around 1-10 years experience.


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CHART SHOWING VINTAGE OF BUSINESS

VINTAGE

4%

55%

33%

5%3%

Less than one year

1-10 years

10-20years20-30 years

30 years and above


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36

Table No:4

Current Banker


SBI 16 21 %

SBM 8 11%

HDFC 10 13 %

ICICI 8 11 %

STANDARD

CHARTERED

4 5 %

ING VYSHYA 3 4 %

SYNDICATE BANK 9 12 %

CENTURION BANK 3 4 %

VIJAYA BANK 5 7 %

UCO BANK 5 7 %

CITY BANK 2 3 %

CANARA BANK 1 1 %

LORD KRISHNA

BANK

1 1 %

Total 75 100 %


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37

Interpretation

Out of the 75 respondents 21% of the respondents were dealing with SBI.13% of them

dealing with HDFC.12% of them deals with Syndicate Bank.11% of the respondents

were deals with ICICI bank and SBM. 7% of the respondents deal with Vijaya bank

and UCO bank. And rest of the respondents deals with various banks.

Inference

The respondents participated in the survey deals with different banks such us SBI,

SBM, HDFC, Syndicate Bank, ICICI Bank etc.


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38

CHART SHOWING CURRENT BANKER OF THE RESPONDENTS

CURRENT BANKER

21%

11%

13%11%

5%

4%

12%

4%

7% 7%

3%

1%

1%SBI

SBM

HDFC

ICICI

STANDARD CHARTERED

ING VYSHYA

SYNDICATE BANK

CENTURION BANK

VIJAYA BANK

UCO BANK

CITY BANK

CANARA BANK

LORD KRISHNA BANK


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39

Table No-5

Relationship with current Banker


Less than one year 4 5 %

1-5 years 51 68 %

5-10 years 15 20 %

More than 10 years 5 7 %Total 75 100 %

Interpretation

The above table clearly shows that 68% of the respondents have got 1-5 years

experience with the bank. And 20%of the respondents deals with the banks at around

5-10 years and 7% of the respondents has got more than 10 years experience finally

only 5% of the respondents deals with the bank far less than one year.

Inference

The majority of the respondents who participated in the survey has got more than 5

years or up to 5 years experience with the respective bank.


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40

CHART SHOWING RELATIONSHIP WITH CURRENT BANKER

45%

51

68%

15

20% 5 7%

0

10

20

30

40

50

60

Lessthan

oneyear

1-5years

5-10years

Morethan

10years

RELATIONSHIP WITH CURRENT BANKER

Total Number

Percentage


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41

Table No:6

Facility Enjoyed


Cash Credit 11 15 %

Overdraft 49 65 %

Term Loan 13 17 %

Packing Credit 0 0 %

Bill discounting 0 0 %Letter of credit 0 0 %

Total 75 100 %

Interpretation

From the above table it is clear that 65% of the respondents are enjoying the O.D

facility followed by 17% at the respondents are enjoying term loans and 15% of the

respondents enjoying C.C facility. None of the respondents are enjoying the like

Packing credit, Bill Discounting and Letter of Credit.

Inference

Majority of the respondents opinioned that the most preferred working capital product

was overdraft followed by Term Loan and Cash Credit.

CHAPTER SHOWING FACILITY ENJOYED


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FACILITY ENJOYED

15%

67%

18%

0%

0%

0%

Cash Credit

Overdraft

Term Loan

Packing Credit

Bill discounting

Letter of credit


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43

Table No:7

Facility Value


Less than 1lakh 1 1 %

1-20lakh 58 77 %

20-40lakh 7 9 %

40-60lakh 3 4 %

60-80lakh 1 1 %

80-1crore 1 1 %

1crore & above 2 3 %

Total 75 100 %

Interpretation

The above table clearly shows that majority of the respondents are enjoying 1-20lakhs

facility value that is 77%.Followed by 9% of the customers enjoying 20-40lakhs and

4% of the respondents has got 40-60lakhs of facility value.3% of the customers are

having 1crore and above facility value and finally 1% of the respondents are using less

than one lakh, 60lakhs, 80lakhs respectively.

Inference

The majority portion of the respondents has got more than 1lakh or up to 20lakh

facility value with their respective banker


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CHART SHOWING FACILITY VALUE

FACILITY VALUE

1%

80%

10%4%1%1% 3% Less than 1lakh

1-20lakh

20-40lakh40-60lakh

60-80lakh

80-1crore

1crore & above


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Table No:8

Rate of interest


9.5-11 % 17 23 %

11-12 % 19 25 %

12-13 % 29 39 %

13 & above 3 4 %

Total 75 100 %

Interpretation

The above table shows that 39% of the total respondents come under

12-13% rate of interest.25% of the respondents are paying 11-12% of interest rate and

23% of the respondents are paying 9.5-11% interest and 4% of the respondents pays

13% and above interest.

Inference

Major portion of the respondents are paying 12-13% of interest rate to the respective

bank for their loan.


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46

CHART SHOWING RATE OF INTEREST

RATE OF INTEREST

25%

28%

43%

4%

9.5-11 %

11-12 %

12-13 %

13 & above


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Table No:9

Collateral Offered


Residential 55 73 %

Commercial 18 24 %

Industrial 2 3 %

Other 0 0 %

Total 75 100 %

Interpretation

From the above table it is clear that 73% of the total respondents are offering

residential property as collateral.24% of the respondents are offering commercial

property as collateral. And 3% of the respondents are offering industrial property as

collateral. None of the respondents are offering property in others category.

Inference

The survey shows that majority of the respondents are offering collateral in the form

of residential property.


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CHART SHOWING COLLATERAL OFFERING

CAPACITY OF RESPONDENTS

COLLATERAL OFFERED

73%

24%

3%0%

Residential

Commercial

Industrial

Other


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Table No:10

Annual sales turnover


< 75lakh 48 64 %

75-100lakhs 16 21 %

100-200lakhs 10 13 %

200-300lakhs 1 1 %

Total 75 100 %

Interpretation

From the above table it is clear that 64% of the respondents are having less than

75lakh turnover 21% of the respondents has got 75-100lakh turnover followed by

13% has got 100-200lakh turnover and finally 1% has got

200-300lakh turn over.

Inference

The annual sales turnover of the majority of the respondents are less than 75lakhs

followed by 75-100lakh turnover.


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CHART SHOWING ANNUAL SALES TURNOVER OF RESPONDENTS

ANNUAL SALES TURNOVER

65%

21%

13%1%

< 75lakh

75-100lakhs100-200lakhs

200-300lakhs


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Table No:11

Profit Margin


2-4 % 29 39 %

4-6 % 14 19 %

6-8 % 15 20 %

8-11 % 15 20 %

Total 75 100 %

Interpretation

The above table shows that the majority of the respondents are having a profit margin

of 2-4% that is 39%.Followed by 20% of the respondents has got 6-8% and 8-11% of

profit margin. And finally 19% of the respondents has got 4-6% profit margin.

Inference

The survey show that majority of the respondents has got more than 2% or up to 4%

of profit margin. Followed by 6-8% and 8-11% respectively.

CHART SHOWING PROFIT MARGIN OF RESPONDENTS


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PROFIT MARGIN

39%

19%

21%

21%

2-4 %

4-6 %

6-8 %

8-11 %


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Table No:12

Satisfied with current Bankers service


Good 39 52%

Very good 22 29%

Satisfactory 11 15%

Not Satisfactory 1 1%

Total 75 100 %

Interpretation

From the above table it is clear that 52% of the total respondents are having an

opinion as good towards current bankers service. Followed by 29% of the

respondents commented as very good and 15% of the customers commented as

satisfactory .Finally 1% of the customers are not satisfactory with the existing level of

service.

Inference

Majority of the customers say 99% of the respondents were found to be satisfied with

the current banker.


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CHART SHOWING THE RESPONDENTS OPINION ABOUT THEIR

CURRENT BANKER

SATISFIED WITH CURRENT BANKERS SERVICE

54%30%

15% 1%

Good

Very good

Satisfactory

Not Satisfactory

3


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Table No:13

Interested to move to HDFC Bank


Yes 54 72 %

No 21 28 %

Total 75 100 %

Interpretation

The table shows that majority of the respondents are ready to move to HDFC Banks

working capital funds and 20% are not willing to move.

Inference

The survey shows that majority of the respondents are ready to move to HDFC from

the current bank. Due to the speedy transaction, competitive interest rates and service

quality.

CHART SHOWING RESPONDENTS INTEREST TO MOVE TO


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HDFC BANK

INTERESTED TO MOVE TO HDFC BANK

72%

28%

Yes

No


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TABLE SHOWING RANK OF THE PREFERRED

CUSTOMERS

Table showing rank 1-5

Number Company

Name

Sales

turnover

Collatera

l security

Profitability Vintage Total

weigh

t age

Rank

1 Padmini

Marketing

400 30 60 140 630 1

2 Rajadhani

Tyres

240 30 120 200 590 2

3 S.P.N

Enterprises

320 30 80 130 560 3

4 Sujeeth

Enterprises

240 30 60 200 530 4

5 Paramesh

wari

Traders

240 30 40 200 510 5

Criteria-1 Criteria-2 Criteria-3 Criteria-4


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Table showing Rank 5-10

Number Company

Name

Sales

turnover

Collateral

security


weight

age

Rank

6 Topaz 320 30 80 70 500 6

7 Electrex

India Pvt Ltd

240 30 60 150 480 7

8 Sree

Nagalakshmi

240 30 40 150 460 8

9 Hittico 40 30 120 250 440 9

10 Sri Andavar 40 30 140 200 410 10



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Number Company

Name

Sales

turnover

Collateral

security


weight

age

Rank

11 Mahaveer 40 30 140 150 360 11

12 Mubalia

Traders

240 30 50 30 350 12

13 Sreegopu

Enterprises

40 30 120 150 340 13

14 Sky

Marketing

40 30 140 120 330 14

15 CeeDee

Enterprises

160 30 80 50 320 15



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Number Company

Name

Sales

turnover

Collateral

security


weight

age

Rank

16 Apotex 80 30 40 150 300 16

17 A one silks 40 30 120 100 290 1718 Meridian 40 30 180 40 290 17

19 Lakshmi

Enterprises

40 30 80 130 280 18

20 Cotton Fab 80 30 60 100 270 19

21 Rvg &

Sons

80 30 80 70 260 20



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Number Company

Name

Sales

turnover

Collateral

security


weight

age

Rank

22 JK garments 40 30 120 60 250 21

23 Kanchipuram

Silks

40 30 60 90 220 22

24 Ambika 40 30 80 70 220 22

25 Nexus 40 30 60 10 140 23



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62

FINDINGS

Majority of therespondents aretraders.

Manufacturing firms are having high sales turnover and need more funds than

other segment.

Retailers are having high profit margin than other segment.

Manufacturers, traders and distributors are showing more interest than other

category because this segments needs more working capital funds for their

operation.

Majority of the respondents are using overdraft and cash credit facility because

of convenience.

Most of the respondents are really interested in HDFC banks working capital

funds because of its innovative products and services.

Other reason for opting Working capital funds from HDFC is comparatively

low interest rates and easy terms and conditions.

Majority of respondents has got more than one year or less than 10 years

experience in business i.e. vintage.

Majority of the respondents are banking with SBI because of easy terms and

conditions.

Other banks are also offering less interest rate.


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Majority of the respondents has got 1-5 years relation with the current banker

for their cash transactions.

Majority of the respondents has got working capital loans in between

1-20lakhs.

All most all of the respondents are offering collateral security.

Majority of the respondents are having less than 75lakhs turnover. But the

eligibility as per HDFC Bank is more than 75lakh turn over.

Majority of the respondents are satisfied with their current banker in terms of

loans.

Customers mainly taking working capital funds for improving their day today

business activities.

An index is constructed to find out the most preferred customer and the least

preferred customer. Base on the index a list of eligible customers for HDFC

Bank is created they are grouped in to five clusters based on their rank

obtained. So the company can accordingly target based on the most eligible and

least eligible customer.


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SUGGESTION AND RECOMMENDATIONS

1. Base on the index a list of eligible customers for HDFC Bank is created they

are grouped in to five clusters based on their rank obtained. So the company

can accordingly target based on the most eligible customers say 1 to 5 and least

eligibility say 21 to 23.And the companies ranked in their order of importance

with respect to the eligibility fulfilling criteria like turnover, capacity to offer

collateral security, Profitability and Vintage.

2. With respect to demand for working capital products there is huge potential

even among the existing current account holders say out of 5000 current

account holders at least one third of them might be eligible and can be easily

tapped going by the current study.

3. The company can attract the customers by using the strong sales force to tap

the potential customers and try to influence the prospective customers because

most of them are willing to shift.

4. As among its prospective clients it is enjoying a very good brand image the

company can use this aspect to its advantage and win more customers.

5. Over and above the prospect of their own current account holders company can

also generate leads through referrals.


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CONCLUSION

The project work entitled made an attempt to find out the potential customers and their

interest towards HDFC Bank. Through the study researcher came to know about

various factors that make their influence in working capital funds.

The survey shows that majority of the respondents are ready to move to HDFC from

their current banker. Because of its innovative products and the speedy dispersal of

loans, competitive interest rates and service quality. Other reason for opting working

capital funds from HDFC is easy terms and conditions. An index is constructed to find

out the most preferred customer and the least preferred customer. Base on the index a

list of eligible customers for HDFC Bank is created they are grouped in to five

clusters based on their rank obtained. So the company can accordingly target based on

the most eligible and least eligible customer.

As among its prospective clients it is enjoying a very good brand image the company

can use this aspect to its advantage and win more customers. With respect to demand

for working capital products there is huge potential even from its existing current

account holders at least one third of them might be eligible and can be easily tapped

going by the current study.


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BIBLIOGRAPHY

Books: -

AuthorsAuthors

Kothari C.R, Research Methodology

New Age International (P) Limited, New Delhi, 1985.

Dr. D.D Sharma Marketing Research

Sulthan Chand & sons 4792\23

Daryagni, New Delhi-110002

MY Khan, P.K Jain, Financial Management

Third Edition,

Tata McGraw-Hill Publishing Company Limited.

New Delhi. 2000

S.P Guptha, Operation Research ,S.Chand & Co New Delhi-110055

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