KLE SOCIETY’S

INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH, HUBLI

(Affiliated to Karnatak University, Dharwad&

Recognized by AICTE, New Delhi)

A PROJECT REPORT ON
“A STUDY ON ASSET AND LIABILITY MANAGEMENT OF HDFC BANK”

SUBMITTED TO
KARNATAK UNIVERSITY, DHARWAD
FOR PARTIAL FULFILLMENT FOR REQUIREMENTS OF THE AWARD OF MASTER OF
BUSINESS ADMINISTRATION IN THE ACADEMIC YEAR 2020 – 21

SUBMITTED BY
PRADEEP CHAVAN
MBA II SEMESTER
REG. NO: 20MBA108

PROJECT GUIDE
Prof : Saptarshi Mukherjee
KLE’S IMSR.
Hubli.
 KLE SOCIETY’S
INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH, HUBLI

(Affiliated to Karnatak University, Dharwad&

Recognized by AICTE, New Delhi)

CERTIFICATE
This is to certify that Mr. PRADEEP CHAVAN, REG. NO: 20MBA108 has successfully
completed his Summer In-plant Project on “A STUDY ON ASSET AND LIABILITY

MANAGEMENT OF HDFC BANK” in the partial fulfillment of the requirement of

Master of Business administration, during the academic year 2020-2021 from 1stSeptember
2021 to 30th October 2021.

PROJECT GUIDE DIRECTOR

Prof. Saptarshi Mukherjee Dr. Rajendraprasad K H
KLE’S IMSR. Director
Hubli. KLE’S IMSR,Hubli.
 DECLARATION

I hereby declare that the project report on “A STUDY ON ASSET AND

LIABILITY MANAGEMENT OF HDFC BANK, under the guidance of Prof.
Saptarshi Mukherjee submitted in partial fulfillment of the requirements for the
degree of Master in Business Administrations is my original work and the same has
not been submitted earlier for the award of any other Degree/Diploma/Fellowship.

PLACE: Hubli Name of the Student: Pradeep Chavan

DATE: Registration No. 20MBA108
 ACKNOWLEDGEMENT

It is a matter of great pleasure to acknowledge those personalities who have inspired,

guided and contributed immensely in bringing out this Project Report.

I express my sincere thanks to our Director Dr. Rajendraprasad K

H,KLES’sIMSR,Hubli for giving me an opportunity for learning.

It is my privilege to have accomplished this study under the guidance of my guide,

Prof. Saptarshi Mukherjee of MBA department IMSR, Hubli for his constant
support and encouragement in carrying out this project.
Name of the Student: Pradeep Chavan
Registration No. 20MBA108
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INDEX

SL.NO CONTENT PAGE NO

1 EXECUTIVE SUMMARY 2

2 INTRODUCTION TO STUDY 6

3 INDUSTRY PROFILE 11

4 COMPANY PROFILE 31

5 LITERATURE REVIEW 63

6 RESEARCH METHODOLOGY 68

7 DATA ANALYSIS AND INTERPRETATION 70

8 FINDINGS 83

9 SUGGESTION 85

10 CONCLUSION 87

11 ANNEXURE 89

12 BIBLIOGRAPHY 96

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EXECUTIVE SUMMARY

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INTRODUCTION TO THE STUDY

“A Study on Asset and Liability Management of Hdfc Bank”

ALM is essential to match assets and liabilities, as well as to reduce liquidity and market risk.
To gain a better grip over commercial banks and public sector banks, the RBI has established
some guidelines, such as asset and liability management, profitability and liquidity ratios, credit
deposit ratios, and so on. The RBI has control over the interest rates charged by commercial
banks and public sector banks. For the regulation of Indian banks, the Reserve Bank of India
(RBI) has implemented the Basel II regulations, which provide a framework for banks to create
ALM policies. The current study looks at asset-liability management in the financial sector. The
main source of data for this study is the bank's past records, which were collected and analyzed
using the type of research described above. Various aspects of HDFC bank have been analyzed
based on these norms.

Asset and liability management is a strategic approach to managing balance sheet dynamics in
order to maximize net profits. This strategy focuses on managing net interest margin to ensure
that its level and riskiness are in line with the bank's risk return objectives.
Asset-Liability Management (ALM) is concerned with the strategic management of a bank's
assets (uses of funds) and liabilities (sources of funds), as well as the risk of credit risk and
contingency risk posed by changes in the bank's liquidity position, interest rates, and exchange
rates. An effective ALM strategy aims to control the volume, mix, maturity, rate sensitivity,
quality, and liquidity of all assets and liabilities in order to achieve a predetermined risk/reward
ratio. The goal of ALM is to improve asset quality, quantify risks associated with assets and
liabilities, and manage them further in order to keep short-term profits stable. the bank's long-
term earnings and long-term viability.

TITLE:
“A STUDY ON ASSET AND LIABILITY MANAGEMENT OF HDFC BANK ”

OBJECTIVES OF THE STUDY

 To study RBI norms on Asset and liability management
 To evaluate quality of Asset and liability.
 To know trend of Asset and liability management over last 10 years.
 To understand liquidity position of HDFC bank.

NEED FOR THE STUDY

 The prime importance of the study is to analyze the maintenance of asset and liability.
 To have practical knowledge of asset and liability management in the bank.
 The findings of the study can be used as secondary data for the various future
studypurposes.

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SCOPE OF THE STUDY

 This research will be useful in determining asset liability management and management
profitability.
 This research also makes recommendations for ways to improve bank asset
management.
 It's also beneficial to understand asset and liability management. This research is useful
in determining the bank's financial performance.

 We can learn from the bank's practical experience and knowledge. The bank's risk will
be identified with the help of the management. The findings will aid management in
devising strategies to address the bank's current issues.

RESEARCH METHODOLOGY:

Research Design
The type of research used for data collection and analysis is known as "Historical Research
Method." The research is entirely based on secondary information. The study's main goal is to
figure out how HDFC Bank manages its assets and liabilities. Annual reports prepared by HDFC
Bank, journals, magazines, and other similar studies are the main sources of information.

Data Collection Method

Exploratory research is one of the most common types of research.
Primary data- Nil
A primary data source is an original data source, that is, one in which the data are collected. First
hand by the researcher for a specific research purpose or project.
Secondary data- Secondary data refers to data that is collected by someone other than the user.
Common sources of secondary data for social science include censuses, information collected by
government departments, organizational records and data that was originally collected for other
research purposes. The sources of secondary data used for this study includes annual report of
the bank and bank websites.

IMPORTANT FINDINGS:

 The rate of increase in interest earned is greater than the rate of increase in interest
expended. As a result, Net Interest Income continues to rise, resulting in an operating
profit for the bank.
 The value of liabilities has been decreasing for a few years, then suddenly increasing in
2019-20 due to a surge in deposits.
 The value of assets has been declining for a few years, followed by a sharp increase in
2019-20 due to a surge in loans and advances.
 Profit Margin as far as Interest Income is concerned is stable at around 4%., and that is a
Healthy sign, because the rate at which Net Interest Income has increased at the same
time the Average total assets has also increased at a uniform speed from 2012-20.

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IMPORTANT SUGGESTIONS:
 The value of Economic Equity Ratio is at around 8-11%. Further infusion of Capital is
required to maintain the level at 10%.
 From the report of last 10 years it is observed that, Bank has a surplus short term liability
which has to be deployed only in liquid assets to meet the repayment obligation of the
short term liability. 

CONCLUSION:

Based on the findings, HDFC expects to provide a more favorable service in the near future. The
company's balance sheet has remained consistent, indicating growth and expansion. The
company is expected to increase its profitability by a greater margin by contributing to the
development of the industry and economy in a variety of ways. The increase in Interest Income,
as well as Net Interest Income, over the years is a clear indicator of the above-mentioned
statement as seen in the bank's financials. The bank's strong balance sheet can be seen by the
healthy increase in both assets and liabilities.

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INTRODUCTION TO STUDY

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ASSET AND LIABILITY MANAGEMENT

 Asset and liability management is the practice of managing financial risks that arise due
to mismatches between the assets and liabilities as part of an investment strategy in
financial accounting. Banking business involves the identifying, measuring, accepting
and managing the risk; risk management is the heart of bank financial management. One
of the most important risk-management functions in bank is Asset Liability Management.
 The primary objective of the Asset/Liability Management (ALM) Policy is to maximize
earnings and return on assets within acceptable levels of risk: Interest Rate - impact on
earnings and net worth from potential short- and long-term changes in interest rates.
 An effective Asset Liability management Technique ails to manage the volume, mix,
maturity, rate sensitivity, quality & liquidity of assets and liabilities as a whole so as to
attain a predetermined acceptable risk/reward ration.

It is aimed to stabilize short term profits, long-term earnings and long term substance of the
bank. The parameters for stabilizing ALM system are:

1. Net Interest Income

2. Net Interest Margin
3. Economic Equity Ratio

COMPONENTS OF BANK’S BALANCE SHEET

Bank’s Liabilities:
Capital
Reserve and Surplus
Deposits
Borrowings
Other Liabilities & Pro.
Contingent Liabilities

Bank’s Assets:
Cash and Balance with RBI
Balance with other banks
Investment
Advances
Fixed assets
Other assets

TOOLS OF ALM:
Gap Analysis: Basically Assets and Liabilities both are rate sensitive in different degree. It is
therefore necessary to identify the rate sensitivity among different groups of assets and liabilities
and match identical groups of assets with liabilities. In the ALM process, Gap is generally

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usedFor quantifying the rate sensitive groups only (as compared to rate insensitive groups of
liabilities like current deposits, float funds etc.)

In other words, GAP is the “excess” of interest sensitive assets over interest sensitive liabilities
or vice – versa> If Risk sensitive liabilities and Risk sensitive Assets are equal when difference
of two (GAP RSA-RSL) becomes NIL, Net Interest Margin (NIM) is free from any effect of
interest rates movements.

1. Duration Analysis: Under this method, impact of changes in interest rate on the market value
of assets and liabilities is considered. Duration analysis is carried out with respect to cash flows
and average maturity.

2. Value-at-risk method: This method is variant of the practice of „Market-to Market‟

approved securities based on Yield- to Maturity.

3. Risk management: Under this process, the risk profiles of assets and liabilities are evaluated
to ensure that they are within the acceptable levels of risk. The availability of hedging
mechanisms (e.g. derivative instruments) would facilitate risk management. The Reserve Bank
of India issues specific guidelines to be followed by banks for managing their respective. Asset
and Liability Management. Although the principles of managing assets and liability based on
Basel committee have been given above some important points of the guidelines issued by RBI
(these are reviewed periodically to suit the changing atmosphere of the monetary and economic
policies of the government)

FACTORS INFLUENCING ALM:

1. ALM information system,

 Management Information System
 Information availability, accuracy, adequacy and expediency
2. ALM Organization, and
 Structure and responsibilities
 Level of top management involvement
3. ALM process.
 Risk parameters
 Risk identification
 Risk measurement
 Risk management
 Risk policies and tolerance levels.

Under the Information system banks are required to ensure development of information
procuring system for measuring, monitoring, controlling and reporting the risks.

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The method is used to analyze the behavior of assets and liability products to assess in
which way the assets and liability would behave in the business of banking. The ALM
Organization guidelines insist that each bank at the top management level and Board of
Directors should on the ongoing basis review the situation to ensure appropriate policies
and procedures are adopted and implemented to timely arrest the prospective risks.

 The ALM process is meant to create parameters for managing the risks like,
identification of risk, measurement of risk, management of risk, planning to mitigate the
risk etc..

CATEGORIES OF RISKS ARE:

Risk in a way can be defined as the chance or the probability of loss or damage. In the case of
banks, these include credit risk, capital risk, market risk, interest rate risk, and liquidity risk.
These categories of financial risk require focus, since financial institutions like banks do have
complexities and rapid changes in their operating environments.

I. CREDIT RISK: The risk of counter party failure in meeting the payment obligation on
the specific date is known as credit risk. Credit risk management is an important
challenge for financial institutions and failure on this front may lead to failure of banks.
The recent failure of many Japanese banks and failure of savings and loan associations in
the 1980s in the USA are important examples, which provide lessons for others. It may
be noted that the willingness to pay, which is measured by the character of the counter
party, and the ability to pay need not necessarily go together. The other important issue is
contract enforcement in countries like India. Legal reforms are very critical in order to
have timely contract enforcement. Delays and loopholes in the legal system significantly
affect the ability of the lender to enforce the contract.
II. CAPITAL RISK: One of the sound aspects of the banking practice is the maintenance
of adequate capital on a continuous basis. There are attempts to bring in global norms in
this field in order to bring in commonality and standardization in international practices.
Capital adequacy also focuses on the weighted average risk of lending and to that extent,
banks are in a position to realign their portfolios between more risky and less risky
assets.
III. MARKET RISK: Market risk is related to the financial condition, which results from
adverse movement in market prices. This will be more pronounced when financial
information has to be provided on a marked-to-market basis since significant fluctuations
in asset holdings could adversely affect the balance sheet of banks. In the Indian context,
the problem is accentuated because many financial institutions acquire bonds and hold it
till maturity. When there is a significant increase in the term structure of interest rates, or
violent fluctuations in the rate structure, one finds substantial erosion of the value of the
securities held.
IV. INTEREST RATE RISK: Interest risk is the change in prices of bonds that could occur
as a result of change: n interest rates. It also considers change in impact on interest
income due to changes in the rate of interest. In other words, price as well as
reinvestment risks require focus. In so far as the terms for which interest rates were fixed

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on deposits differed from those for which they fixed on assets, banks incurred interest
rate risk i.e., they stood to make gains or losses with every change in the level of interest
rates.
V. LIQUIDITY RISK: Affects many Indian institutions. It is the potential inability to
generate adequate cash to cope with a decline in deposits or increase in assets. To a large
extent, it is an outcome of the mismatch in the maturity patterns of assets and liabilities.

BENEFITS OF ALM

 The assets and liability management systems enhances the productivity of the employees
who are managing the assets and the liabilities in a company. Without proper assets and
liability management systems it is going to be a tedious task to manage them.
 Managing the assets and liabilities manually needs skilled personnel who are into that
domain for a long time. Moreover chances are there that they might miss out the
liabilities and assets. As far as assets are concerned you might even purchase an asset
that already exists in your company without knowing that it exists.
4. Implementing assets and liability management systems is sure to increase the productivity of
the staff who are managing this job. Moreover the management can get timely reminders and
reports regarding the assets and liabilities which will definitely help them in taking some
critical decisions regarding their business

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INDUSTRY PROFILE
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INTRODUCTION:
The banking industry has transformed the global transaction and financial services sector.
Banking services are now available to customers at all times, including outside conventional
banking hours, on a 24x7 basis, thanks to technological advancements. The access to most
banking-related services is what banking industry services are all about (such as verification of
account details, going with the transactions, etc.). In today's world, the advancement of online
services is available to all customers of the concerned bank and may be accessed at any time and
from any location that has Internet connectivity. Almost every bank in the world now uses block
chain technology. especially the multinational ones, provide their customers with online-
banking.

History
Banking in India can be traced back to the Vedic period. The transition from money lending to
banking is thought to have occurred before Manu, the famous Hindu jurist who dedicated a
section of his book to deposits and advances and established interest laws. Local bankers played
a crucial role in lending money and funding overseas trade and commerce during the mogul
period. It was the turn of the agency houses to carry on the banking operations during the days
of the East India Company. In 1786, the General Bank of India became the first joint stock bank
in the world. The Bank of Hindustan and the Bengal Bank were the next to follow. According to
reports, the Bank of Hindustan lasted until 1906, while the other two failed in the meanwhile.
The East India Company created three banks in the first half of the 19th century: The Bank of
Bengal in 1809, The Bank of Bombay in 1840, and The Bank of Madras in 1843. These three
banks, sometimes known as presidency banks, were self-contained units that performed
admirably. These three banks merged in 1920, and The Imperial Bank of India was founded on
January 27, 1921. With the passage of the SBI Act in 1955, The Imperial Bank of India's
enterprise was taken over by the newly formed SBI.. The Reserve Bank which is the Central
Bank was created in 1935 by passing of RBI Act 1934, in the wake of swadeshi movement, a
number of banks with Indian Management were established in the country namely Punjab
National Bank Ltd, Bank of India Ltd, Canara Bank Ltd, Indian Bank Ltd, The Bank of Baroda
Ltd, The Central Bank of India Ltd .On July 19 th 1969, 14 Major Banks of the country were
nationalized and in 15th April 1980 six more commercial private sector banks were also taken
over by the government. The Indian Banking industry, which is governed byThe Banking
Regulation Act of India 1949, can be broadly classified into two major categories, non-
scheduled banksand scheduled banks. Scheduled Banks comprise commercial banks and the co-
operative banks.

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Phase 1
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 the
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 1970’s in protected environments 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 to eight fold.
Phase 2
Government took major steps in the Indian Banking Sector Reform after independence. In
1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale
specially in rural and semi urban areas. It formed State Bank of India to act as the principal
agent of RBI and to handle banking transactions of the Union and State Governments all over
the country.
Seven banks forming subsidiary of State Bank of India were nationalized on 19th July 1959. In
1969, major process of nationalization was carried out. It was the effort of the then Prime
Minister of India, Mrs Indira Gandhi 14 major commercial banks in the country was
nationalized.
Second phase of nationalization in Indian Banking Sector Reform was carried out in 1980 with
six more banks. This step brought 80% of the banking segment in India under Government
ownership.
The following are the steps taken by the Government of India to Regulate Banking Institutions
in the country.
a) 1949: Enactment of Banking Regulation Act.
b) 1955: Nationalization of State Bank of India.
c) 1959: Nationalization of SBI subsidiaries.
d) 1961: Insurance cover extended to deposits.
e) 1969: Nationalization of 14 major banks.
f) 1971: Creation of credit guarantee corporation.
g) 1975: Creation of regional rural banks.
h) 1980: Nationalization of 6 banks with deposits over 200 crore.

After the nationalization the branches of the public sector banks in India rose to approximately
800% and deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public implicit faith and immense
confidence about the sustainability of these institutions

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Phase 3
This phase has introduced many more products and facilities in the banking sector in its
reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was setup by
his name which worked for the liberalisation of banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts are being made to
give a satisfactory service to customers. Phone banking and net banking is introduced. The entire
system became more convenient and swift. Time is given more importance than money.
The financial system of India has shown a great deal of resilience. It is sheltered from any crisis
triggered by any external macro-economics shock as other East Asian Countries suffered. This is
all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is
not yet fully convertible, and banks and their customers have limited foreign exchange exposure.
This is how the Banking Industry grew.

The Indian Banking System:

Banking in our country is already witnessing the sea changes as the banking sector seeks new
technology and its applications. The best port is that the benefits are beginning to reach the
masses. Earlier this domain was the preserve of very few organizations. Foreign banks with
heavy investments in technology started giving some “Out of the world” customer services. But,
such services were available only to selected few- the very large account holders. Then came the
liberalization and with it a multitude of private banks, a large segment of the urban population
now requires minimal time and space for its banking needs. Automated teller Machines or
popularly known as ATM are the three alphabets that have changed the concept of banking like
nothing before. Instead of tellers handling your own cash, today there are efficient machines that
don’t talk but just dispense cash. Under the Reserve Bank of India Act 1934, banks are classified
as scheduled banks and non-scheduled banks. The scheduled banks are those, which are entered
in the Second Schedule of RBI Act, 1934. Such banks are those, which have paid- up capital and
reserves of an Aggregate value of not less then Rs.5 lakhs and which satisfy RBI that their
affairs are carried out in the interest of their depositors. All commercial banks Indian and
Foreign, regional rural banks and state co-operative banks are Scheduled banks. Non Scheduled
banks are those, which have not been included in the Second Schedule of the RBI Act, 1934.
The organized banking system in India can be broadly classified into three categories: (i)
Commercial Banks (ii) Regional Rural Banks and (iii) Co-operative banks. The Reserve Bank of
India is the supreme monetary and banking authority in the country and has the responsibility to
control the banking system in the country. It keeps the reserves of all commercial banks and
hence is known as the “Reserve Bank”.
Purpose of Banks
A bank is a financial institution which is involved in borrowing and lending money. Banks take
customer deposits in return for paying customers an annual interest payment. The bank then uses
the majority of these deposits to lend to other customers for a variety of loans. The difference
between the two interest rates is effectively the profit margin for banks. Banks play an
important role in the economy for offering a service for people wishing to save. Banks also play
an important role in offering finance to businesses who wish to invest and expand. These loans
and business investment are important for enabling economic growth.

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1. Safety of deposits
Banks are seen as a secure place to deposit money. It would be impractical and risky to keep all
your savings as cash under your bed. In medieval times, people would often pay early banks to
keep their money and assets safe. It also saves people worrying about money. In the UK
commercial banks are guaranteed by the Bank of England as a lender of last resort. Therefore,
consumers see them as safe places to deposit money.

2. Interest on deposits
Commercial banks pay interest on deposits. For current accounts, this may be very low, but for
saving accounts, the interest rate can be significant. In a period of inflation, interest rates on
deposits are very important for maintaining the real value of your savings. For example, if
inflation is 4% then keeping cash will see the value of savings decrease in value. However if the
bank is playing an interest rate of 6% then the real value of your saving will increase. For some
customers, such as pensioners, interest payments on their bank savings can be an important
source of income.

3. Loans
A bank can become more profitable by using a percentage of its deposits to lend to other
customers. If a bank pays 2% on bank deposits but lends money to firm and customers at 60%
then it can make a bigger profit on its deposits. A bank just needs to keep sufficient liquidity to
meet the demands of customers to withdraw. Bank lending varies from unsecured personal loans
to secured mortgage lending. Unsecured lending tends to be at a higher interest rate because of
the risk factor. Secured mortgage lending is at a lower rate, but can be over 30 years or more.

Personal loan – In this case, the bank may make a loan to be paid back over a few years. This
loan may be unsecured against any assets like a house. Personal loans could be for a big
purchase like a car or specifically to help fund a career or educational improvement.

Business loan – A loan for a firm to invest and expand their business.

Mortgage – This is a special type of loan, where the bank advances a loan to purchase a house.
Usually the customer will need to pay a deposit on the house until the borrowers have finished
paying back the mortgage payments over a period of 20-40 years. Interest rates on mortgages
tend to be relatively low because the loan is secured against the value of the house. However, on
a 30-year mortgages, home-buyers will typically pay more interest than the total cost of the
house

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4. Other Features
Banks can also give other features to customers such as
 Instant access to cash
 Advice on financial matters
 Methods to make international payments. Increasingly banks offer electronic transfer of
money through system such as BACS.
 Offering special offers to customers, including arranging travel insurance. Increasingly many
current accounts come with a range of extras such as free travel insurance, free membership
AA.Banking in the UK is very profitable enterprise because there is a lack of competition.
 The markets is dominated by the top 10 banks and in particular the big 5 banks
Importance of bank
1. Increase supply of money through credit creation.
2. Banks help in remitting money from one place to another.
3. Growth in banking activity helps in increasing employment opportunities.
4. They provide locker service and they are way safe now.
 They provide loans and they make direct investment in industrial sector .

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Types of Banks

(Figure.1) https://edurev.in/studytube/Structure-of-Commercial-Banking-System-Indian-Bank/09657608-716e-
4018-988d-add6f5dfdd87_t

1. Schedule banks

 Scheduled banks are covered under the 2nd schedule of Reserve Bank of India act
1934. To qualify as a scheduled bank, the bank should confirm the following conditions
 Scheduled bank that has a paid up capital of Rs.5 lakh and above qualifies for
the schedule bank category
 A bank requires to satisfy the central bank that its affairs are not carried out in a
way that causes harm to the interest of the depositors
 A bank should be a corporation rather than a sole proprietorship or partnership
firm

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Commercial banks
Commercial banks are the most important constituents of banking system. These are the
banks which do banking business to earn profit. The principle function of this bank is that the
credit created by these banks is accepted and functions like money as medium of exchange.
These banks do not issue notes but create credit on the basis of their cash deposit.

Public Bank:
The bank which is established, directed, managed, and controlled by the government
is called public bank. When the bank is governed by the management, control, organizing from
the beginning to the organization, it is called public or government bank. Generally , these banks
are stated for service motive not for earning a profit. Sometimes non government banks are also
converted into government bank by nationalization.
some of nationalised bank in India 1.State bank of India
2. Allahabad Bank 3.Indian bank
4.Punjab National Bank 5.Bank of Baroda

Private Bank:
Private Banks are privately owned, directed and controlled. Banks that are controlled by the
private sector or individuals. Overall, these banks are owned by private individuals or
corporations and not by the government or co-operative societies. Those banks are enlisted by
the central bank. Indirectly these banks are controlled by the government. Main objective of the
private sector is to earn a profit.
Some of private bank in India
1. HDFC Bank
2. Axis Bank
3. Kotak Mahindra Bank
4. ICICI Bank
5. IBFC Bank

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Foreign Bank
A foreign bank is a type of international bank that is obligated to follow the regulation
of both the home and host countries. Because the foreign banks can provide more loan limits are
based on the parent banks capital, foreign banks can provide more loans than subsidiary banks.
Foreign banks are present in India either as representative offices or as branches. Their principle
function is to make credit arrangement for the exports and imports of the country and these
banks deal in foreign exchange.
Some of Foreign Bank 1.Citi Bank
2. Standard chartered bank 3.HSBC Bank
4. DBS Bank

Regional Rural Bank:

RRBs are government banks operating at regional level in different states of India.
Currently there are 43 RRBs inn India along with state government and sponsor bank. They
were set up under the provision of 26 September 1975 ordinance and the RRB act of 1976 to
allocate banking and credit services for agriculture and other rural sectors. They were
established on recommendation of Narshimham working group. That time almost 70% of India’s
population was based on rural region.

2. Non scheduled Bank

Non scheduled banks refer to the local area banks which are not listed in the second schedule of
Reserve Bank of India. Non scheduled banks are also required to maintain the cash reserve
requirement not with the RBI but with them.

Co-operate Bank:
cooperative banks are registered under the cooperative societies act 1912 and they run by an
elected managing committee, These work on no-profit no loss basis and mainly serve
entrepreneurs, small businesses, industries and self-employment in urban areas. In rural areas,
they mainly finance agriculture-based activities like farming, livestock and hatcheries.

Cooperative banks are operated on co-operative lines. Co-operative credit institutions are
organized under a cooperative society’s law and play a significant role in meeting financial
needs in rural areas

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Urban co-operative Banks:

Urban co-operative banks refer to the primary cooperative banks located in urban and
semi urban areas. These banks essentially lent to small borrowers and businesses centered
around communities, localities work place groups.
According to the RBI, on 31st march 2003 there were 2104 urban co-operative Banks
of which 56 were scheduled banks. About 79% of these are located in five states Andhra
Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu.

State Co-operative Banks:

A state co-operative bank is a federation of the central cooperative bank which acts as
custodian of the cooperative banking structure in the state. Banks can also be classified on the
basis of scheduled and non scheduled bank. Scheduled banks are also covered under the
depositor insurance program of deposit insurance and credit guarantee corporation, which id
beneficial for all account holders holding a savings and fixed/recurring deposit account.

Payment Bank:
A payment bank is like any other bank, but operating on a smaller scale without
involving any credit risk. In simple words ,it can carry out most banking operations but can’t
accept demand deposits(up to RS.100000)offer remittance services, mobile
payments/transfers/purchases and other banking services like ATM/ debit cards , net banking
and third party fund transfers.

Small Finance Bank:

It is a specific segment of banking created by RBI under the guidance of government
of India with an objective of furthering financial inclusion by primarily undertaking basic
banking activities to unserved and underserved section including small business units.

Investment banks:
An investment bank is a financial intermediary that performs a variety of services.
Most investment banks specialize in large and complex financial transactions, such as
underwriting, acting as an intermediary between a securities issuer and the investing public,
facilitating mergers and corporate reorganizations and acting as a broker or financial adviser for
institutional clients.

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Functions of banking system

(Figure .2) https://bank.caknowledge.com/functions-bank/

Primary functions of banking system

1. Accepting deposit :

The bank collects deposits from the public. These deposits can be different types,
Such as
a. Savings deposits.
b. Fixed deposits
c. Current deposits
d. Recurring deposits

Saving deposits
Saving deposits encourages saving habit among the public. It has low rate of interest.
At present it is about 4% p.a. This account is suitable for salary and wage earners.

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Fixed deposits
Lump sum amount is deposited at one time for a specific period. Higher rate of interest is paid,
which varies with the period of deposit. Withdrawals are not allowed before the expiry of the
period.

Recurring deposits
This type of account is operated by salaried persons and petty traders. A certain sum of
money is periodically deposited into the bank. Withdrawals are permitted only after the
expiry of certain period.

Current deposits
This type of account is operated by businessmen withdrawals are freely allowed. No
interest is paid. But there are service charges.

2. Granting loans and advances

The bank advances loans to the business community and other members of
the public. The rate charged is higher than what it pays on deposits. The difference in the
interest rates is its profit. The types of bank loans and advances are
a. Overdraft
b. Cash credit
c. Loans
d. Discounting of bill of exchange

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Overdraft
These types of advances are given to current account holders. No separate account is
maintained. All entries are made in the current account. A certain amount is sanctioned as
overdraft which can be withdrawn within a certain period of time of three months or so. It is
sanctioned to businessman and firm.

Cash credits
The client is allowed cash credit upto a specific limit fixed in advance. It can be given
to current account holders as well as to others who do not have an account with bank.
Separate cash credit amount is maintained. Interest is charged on the amount withdrawn in
excess limit.

Loan
It is normally for short term say a period of one year or medium term say a period of
five years. Now days, banks do lend money for long term. Repayment of money can be in the
lumpsum amount. Interest is charged on the actual amount sanctioned, whether withdrawn or
not. The rate of interest may be slightly lower than what is charged on overdrafts and cash
credits.

Discounting of bill of exchange

The bank can advance money discounting or by purchasing bills of exchange both
domestic and foreign bills. The bank pays the bill amount to the drawer or the beneficiary of
the bill by deducting usual discount charge.

Secondary function
1. Agency Functions :

The bank acts as an agent its customers. The bank performs a number of agency
functions which includes
a. Transfer of funds
b. Collection of cheques

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c. Periodic payments
d. Portfolio management
e. Periodic collection

Transfer of fund
The bank transfer fund from one branch to another from one place to another

Collection of cheques
The bank collects the money of the cheques through clearing section of its
customer. The bank also collects money of the bills of exchange.
Periodic payments
On standing instruction of the client, the bank makes periodic payments in respect
of electricity bills, rent, etc.

Portfolio management
The banks also undertake to purchase and sell the shares and debentures on behalf
of the clients and accordingly debits or credits the account. This facility is called portfolio
management.

Periodic collections
The bank collects salary, pension, dividend and such other periodic collections on
behalf of the client.
2. General utility functions

The bank also performs general utility functions, such as

a. Issue of drafts and letter of credits
b. Locker facility
c. Underwriting of shares
d. Dealing in foreign exchange
e. Project reports
f. Social welfare programmes

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Issue of drafts and letter of credits

Banks issue drafts for transferring money from one place to another. It also issues letter
of credit especially in case of, import trade. It also issues travelers cheques.

Locker facility
The bank provides a locker facility for the safe custody of valuable document, gold
ornaments and other valuables.

Underwriting of shares
The bank underwrites shares and debentures through its merchant banking division.

Dealing in foreign exchange

The commercial banks are allowed by RBI to deal in foreign exchange.

Project Reports
The bank may also undertake to prepare reports on behalf of its clients.

Social welfare programmes

It undertakes social welfare programmes , such as adult literacy programmes, public
welfare campaigns, etc

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Porter Five Force Model

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(Figure .3) https://strategicmanagementinsight.com/tools/porters-five-forces.html

Threat of New Entrants

Within the banking industry, the threat of new entrants is relatively low. It is difficult for a bank
to enter the market and compete on an equal footing. In fact, the new entrant would face a
number of challenges, including securing the massive amount of capital required, the time
required to develop a brand identity, and, most importantly, government regulations governing
bank operations. The company must also keep an eye on major developing economies like China
and the United States, which will eventually compete on a global scale. Bandhan Bank and
Ujjivan Bank are two new entrants into the market.

Bargaining Power of Suppliers

The threat of suppliers luring away human capital is more dangerous than the threat of suppliers
luring away capital. RBI acts as a regulator in the Indian banking industry, posing a significant
threat to banks as money suppliers.

Bargaining Power of Buyers

Although the individual does not constitute a significant threat to the banking industry, high
switching costs are a major issue affecting purchasing power. If a person has a mortgage, auto
loan, credit card, checking account, and mutual funds with one bank, switching to another bank
might be exceedingly difficult. Banks try to entice consumers by lowering the cost of switching,
but many people would prefer stay with their present bank. Large corporate clients, on the other
hand, have banks wrapped around their little fingers. Financial institutions — through providing
better currency rates, more services, and access to international capital markets – Make a
concerted effort to get high-margin business clients.
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Threat of Substitutes
Banks provide a variety of services in addition to collecting deposits and lending money, but
whether it's insurance, mutual funds, or fixed-income securities, a non-banking financial
services company can likely provide equivalent services. Banks are facing more competition
from unusual businesses when it comes to lending. Customers who purchase large-ticket items
can take advantage of special financing offered by all of them.

Competitive Rivalry
Banking is an intensely competitive industry. The financial services industry has existed for
hundreds of years, and almost everyone who need banking services has access to it. As a result,
banks must try to entice customers away from competitors. They accomplish this by providing
lower-cost lending, preferential rates, and investment services. The banking industry is
competing to see who can provide the finest and fastest services, yet this results in reduced ROA
for banks. They will be more inclined to take on high-risk enterprises as a result. In the long run,
the banking industry is likely to become increasingly consolidated.

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SWOT ANALYSIS OF THE BANKING INDUSTRY

STRENGTHS:

Banking is as old as the Human race:

The Banking business is the main impetus of any country. It helps in shaping the life of mankind
might be some time simply by Exchange (which was known as the trade framework), or by
exchange or by encouraging advances.

Source of employment & GDP growth:

There is an agreement among market analysts that the improvement of the money related
framework adds to financial development. Monetary advancement makes empowering
conditions for development through either an inventory driving (money related improvement
prods development) or an interest following. It is this industry that consistently attempts to
verify budgetary strength, encourage universal exchange, advance work, and diminish neediness
around the globe.

Hedge from risk:

Whether it is a characteristic cataclysm or man-made disaster banks relieve the eventual
outcome of the devastation by giving money related help to the unfortunate casualties to stand –
up and have a quiet existence once more.

Connecting People:
With the coming of new-age mechanical headway Banks have made the life of the regular man
simpler. Individuals can execute consistently in numerous spots.

WEAKNESSES

Absence of Coordination:
The worldwide financial industry faces momentary vulnerability because of the obligation
emergencies that challenge a few significant economies. Industry resources remain at $143
trillion (2013) &the EU is the biggest local market, with over 57% of the worldwide market.
Unpredictability in various markets/Currencies has made issues for the banks so as to work
appropriately over the fringes.

Vulnerable to risk:
Since this area manages accounts, it is the most hazardous segment that can change the destiny
of any business/Industry.

High NPA’s:
The rise in Retail and corporate NPA‟s (Non-performing resources) the single significant
issue this part is experiencing around the world

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Can’t reach to Under-penetrated market:

Due to a few clashing destinations of government and banks that goes connected at the hip,
provincial regions of creating countries are still not in the shadow of banks. In spite of the fact
that PMJDY (PradhanMantri Jan DhanYojna) actualized by the Indian banks got recognized by
the World Bank for money related consideration, the Idea isn’t completely promoted even in the
nation of origin.

OPPORTUNITIES

Expansion:
Penetrating to the country markets and bringing the rustic masses under the domain of sorted out
financial will be the goal of the Banks in decades to come.

Changing Socio-cultural & demographic factors:

Given the statistic shifts coming about because of changes in age profile and family pay,
customers will progressively request upgraded institutional capacities and administration levels
from banks.

Rise in private sector banking:

Banking Industry over the world is exceptionally controlled &lead by PSU‟s with their separate
national banks. With the approach of private division banks, this part is experiencing basic and
practical changes basically because of the adjustment of the trendsetting innovations and
expanded challenge in this way profiting the end clients.

THREATS:

Recession:
It is one of the significant dangers to the money related arrangement of the country. The horrible
stun of Economic emergencies and the breakdown of a few organizations can influence the
banks and the other way around.

Stability of the system:

Failure of some feeble banks has regularly compromised the steadiness of the framework.

Competition:
Competition from NBFC‟s (Non-banking budgetary organizations) like insurance
agencies andcommon reserve organizations can influence the matter of Banks.
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COMPANY PROFILE
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Introduction

The Housing development Finance Corporation(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 is 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 operation 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 segment and also has
a large corporate client base for its housing related credit facilities with its experience in the
financial markets, a strong market reputation, large shareholder base and unique consumer
franchise ,HDFC was ideally positioned to promote a bank in the Indian environment.
HDFC Bank began operations in 1995 with a simple mission to be “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.
HDFC bank limited is an Indian based banking company engaged in providing a range of
banking and financial services, including commercial banking and treasury operations. The

Bank has a network of 1412 branches and 3295 automated teller machine(ATM) in 528 cities
and total employees in 52687.

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History of HDFC bank

HDFC BANK LTD was incorporated in august 1994 in the name of HDFC Bank ltd, with its
registered office in Mumbai, India. HDFC Bank commenced operations as a scheduled
commercial bank in January 1995.
If ever there was a man with a mission it was Hasmukhbai Parek founder and chairman of
HDFC BANK LTD was among the first to set up a bank in the private sector. The bank was
incorporated on 30thaugust 1994 in the name of ‘HDFC Bank limited’. With its registered office
in Mumbai. It commenced operations as a scheduled commercial bank on 16 th January 1995.The
bank has grown consistently and is now amongst the leading player in the industry. 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 mortgages 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 in a milestone transaction in the Indian banking industry ,Times Bank was merged
with HDFC bank ltd, effective February 26 2000.

As on 30-June-2019, the authorized share capital of the Bank is Rs.650 crore. The paid-up share
capital of the Bank as on the said date is Rs.546,56,24,542 /- which is comprising of
273,28,12,271 equity shares of the face value of Rs 2/- each. The HDFC Group holds 21.31% of
the Bank's equity and about 18.81% of the equity is held by the ADS / GDR Depositories (in
respect of the bank's American Depository Shares (ADS) and Global Depository Receipts
(GDR) Issues). 31.37% of the equity is held by Foreign Institutional Investors (FIIs) and
therefore the Bank has 6,53,843 shareholders. The shares are listed on the BSE Limited and
therefore the National stock market of India Limited. The Bank's American Depository Shares
(ADS) are listed on the by stock exchange (NYSE) under the symbol 'HDB' and thus the
Bank's Global Depository Receipts (GDRs) are listed on Luxembourg stock market under ISIN
No US40415F2002.

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Organizational structure

(Figure .4) https://www.hdfc.com.mv/about/company-structure/#1513850522529-1ff78fb8-8a81

Management
Mr C.M Vasudev has been appointed as the chairman of the ban with effect from 6 th July 2010
subject to the approval of the Reserve Bank of India and the shareholders. MrVasudev has been
a Director of the bank since October 2006 .A retired IAS officer, Mr VASUDEV has had a
illustrious career in the civil services and has held several key positions in India and overseas
including Finance secretary, Government of India, Executive Director, World Bank and
government nominee on the boards of many companies in the financial sector. The managing
Director , Mr.Sashidhar Jagdishan , The Bank’s Board of Directors is composed of eminent
individuals with a wealth of experiencing in public policy. administration, industry and
commercial banking. Senior executive 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 significant competitive strengths.

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Technology
HDFC Bank operates in a highly automated environment in terms of information technology and
communication systems. All the banks branches have online connectivity, which enables the
bank to offer speedy funds transfer facilities to its customers. Multi-Branch access is also
provided to retain customer through the branch network and automated teller(ATMs).
The bank has made substantial efforts and investments in accuring the best technology
available internationally, to build the infrastructure for a word class bank. The banks business is
supported by scale and robust system which ensure that our clients always get the finest services
we offer.
The bank has priorities’ its engagement in technology and 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 in its market position, expertise and technology
to create a competitive advantage and build market share.

Board of Directors
HDFC Bank's Board of Directors is comprised of distinguished individuals with a wealth of
experience publicly policy, administration, industry and commercial banking. Senior executives
representing HDFC Ltd. are also on the Board. Various businesses and functions within the bank
are headed by senior executives with work experience in India and abroad. They report to the
Managing Director. The Bank is focused on recruiting and retaining the simplest talent within
the industry because it believes that its people are a competitive strength.
 Mr.Sashidhar Jagdishan ( CEO )
 Mr.Atanu chakraborty ( Chairman of Board )
 Mr.Srikanth Nadhamuni (Director)
 Mr.Sandeep Parekh ( Director )
 Mrs.Renu Karnad ( Director )
 Mr..Malay Patel ( Director )
 Mr.MD Ranganath ( Director )

 Mr.Sanjiv Sachar ( Director )

 Mr.Umesh Sarangi ( Director )
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HDFC Bank’s director ,AdityaPuri, continues to stay the very best paid banking chief within the
country, despite taking a lower increment than some counterparts during 2012-13. Puri has been
leading the country’s second largest private bank since 1994.
Business Strategy
 Increasing market share in India’s expanding banking
 Delivering high quality customer service.
 Maintaining current high standards for asset quality through disciplined credit risk
management
 Develop innovative products and services that attract targeted customers and address
inefficiencies in the Indian financial sector

Competitive strength analysis

a. HDFC Bank is a leader among Indian banks in the use of technology
Since the bank’s inception ,it has made substantial investment in technology platform and
systems. Bank multiple distribution channels, including an electronically linked branch
network, automated telephone banking, internet banking and banking by mobile phone, to
offer customer convenience access to our products. Technology platform has driven the
development of innovative product and reduce operating cost.
b. HDFC Bank delivers high quality service with superior execution
Bank tries to deliver efficient service with rapid response time. Bank focus on personalize
service tries to draws customers to the products and increases existing customer loyalty.
c. HDFC offers wide range of products
Whether in retail or wholesale banking, the bank tries to be a “ one stop stock” for the
customers banking needs. The wide range of products creates multiple cross- selling
opportunities for bank and improves customer retention rates.
d. HDFC claims to have an experienced management team
According to HDFC, many of the members of senior management team who have
been with the bank; since inception seem to have substantial experience in multinational
banking

Competitors

 Axis Bank
 Bandhan Bank
 City Union Bank

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 CSB Bank
 ICICI Bank
 Karnataka Bank
 Kotak Mahindra Bank
 Lakshmi Vilas Bank

Awards
a) Euro money Survey 2018 - Best Private Banking services for Super Affluent Clients.
b) Best Bank For Financial Inclusion - UTI Mutual fund CNBC TV 18 Financial Advisory
Awards 2017.

c) UTI MF & CNBC- TV18 Financial Advisory Awards - Best Performing Bank – Private
2018-19
d) Our Bank has won this honour 7 times in the past 10 years since the inception of this award
in 2009.
e) Euro money Trade Finance Survey 2019 - Best Service ( Asian Banks only) – India &
Market Leader ( Asian Banks only) - India
f) The Banker - Bank of the year TB 2018 - The Banker - Bank of the year award - Best
Private Bank in India 2018
g) Euro money Private Banking and Wealth Management Survey 2018 - Ranked No. 1 in
Super Affluent Clients (US$ 1 million to US$ 5 million)
h) HDFC Bank has been awarded by Euro money10 times in the last 11 years
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Products and Services

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1. Wholesale banking services
The bank`s target market ranges from large, blue-chip manufacturing companies in the
Indian corporate to small and mid zoned corporate 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 banking 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

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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 corporate including multinationals, companies from the
domestic business houses and prime public sector companies. It is recognized as a leading
provider of cash management and transactional banking solutions to corporate customers,
mutual funds, stocks exchange members and banks.

2. Retail banking service

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 step 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, Net banking and Mobile Banking.
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 district financial solutions, information and advice on various investment
avenues. The Bank also has a wide array of retail loans products including auto loan, loans
against marketable securities, personal loans and loans for two wheelers. It is also leading
providers 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 and issues the Master card Maestro debit card as well. The bank launched its credit
card business it 2001.By September 30 2005, the bank had a total card base of 52 million cards.
The Bank is also one of the leading player in the merchant acquiring business with over 50000
point of sale (POS) terminals for debit/credit cards acceptance of merchant establishment.

3. Treasury
Within this business the bank has three main product areas-Foreign Exchange and
Derivatives, local currency money market and debt securities and equities. With the
liberalization of the financial markets in India, Corporate need more sophisticated risk
management information advice and product structures. These and fine pricing on various
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Treasury products are provided through the banks treasury team. To comply with statutory
reserve requirement, 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.

4. Account and Deposits Service

Banking should be effortless with HDFC bank, the effort are rewarding. No matter what a
customer’s need and occupational status, we have a range of solutions that are second to none.
Whether you are employed in a company and need a simple savings account or run your own
business and require a robust banking partner, HDFC bank not only has the perfect solution for
you, but also can recommend products that can augment your planning for the future.
It include these services:-
a. Saving accounts
b. Current accounts
c. Fix deposits
d. Demat account
e. Safe deposit lockers

Savings accounts
These accounts are primarily meant to inculcate a sense of savings for the future
Accumulating funds over a period of time. Whatever person’s occupation, bank have confident
that person will find the perfect banking solution. There some savings accounts like

Regular saving account

An easy-to-operate savings account that allows you to issue cheques, draw demand drafts and
withdraw cash. Check up on your balance from the comfort of your home or office through Net
Banking, Phone Banking and mobile banking .If you need money urgently then you can take
money from the ATM machine. There are 1977 ATM centers across the country.

Saving plus Account

Introducing the best banking option for you with HDFC Bank Savings plus account .Now you
can get access to some of the finest banking facilities with HDFC Bank’s savings plus account.
All you have to maintain an Average Quarterly Balance of Rs.10,000.
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Saving Max Account

Welcome to a world of conveniences .Presenting Savings Max account, loaded with maximum
benefits to make your banking experience a pleasure .By maintaining an average quarterly
balance of just Rs.25,000/- you get a host of premium services from HDFC bank absolutely free.

Senior Citizen Account

HDFC bank appreciates your needs and endeavors , which is why , they presents an account
especially dedicated to customers , which like a dutiful child will help you fulfill your needs in
the best manner possible.

No frills Account
In an effort to make banking simpler and more accessible for customers, bank has introduced the
‘No frills account, which offers customers all the basic banking facilities. Customer can even
avail of services like net banking, mobile banking free of cost .In this customer can put Zero
Initial Pay-in and Zero balance account.

Institutional savings account

A specially designed account that offers twin benefits of a savings as well as a current account.
Customer’s funds continue to earn you interest while he enjoys hassle-free banking and a host of
others features .All this and more in zero balance account.

Salary account
In this account customers can get salary from where he/she doing such job and organization or
company at where the customer of the bank in doing job deposit their salary in to the salary
account a person can get salary.

There are various kinds of savings accounts in the HDFC bank like:-

Pay roll account

Classic salary account Regular salary account Premium salary account Defense salary account
No frills salary account

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Kid’s advantage account

Start saving for your child today and secure his/her future a sentence tells by the HDFC bank.
Open a savings account and transfer money every month into customer’s kids advantage account
and watch the savings grow as customer’s child grows. The accumulated savings in the kids
advantage account can over the years help in meeting customers child’s needs. Main features
and benefits of this account are as follows:-

5. Current accounts
HDFC bank current account gives the power of inter-city banking with a single account
and access to the more cities. From special cheques that get treated as per with local ones in any
city where branches , faster collection of outstation cheques (payable at branch location ), free
account to account funds transfer between HDFC bank accounts to free inter- city clearing of up
to 100 lakhs per month, bank’s priority services have become the benchmark for banking
efficiency. Now , with an HDFC bank current account , experience the freedom of multi-city
banking . person can have the power of multi-location access to his account from any of our 761
branches in 327 cities not only that , he can do most of his banking transaction from the comfort
of his office or home without stepping out .There are various kind of current account in this
bank like:-

Plus current account

HDFC bank plus current account gives the power of inter-city banking with a single account and
access to more than cities. Plus current account requires maintaining an average quarterly
balance of Rs 1,00,000.

Trade current account

In today’s changing business requirements, you need to transfer funds across cities , and the time
is of the essence. HDFC bank trade account gives power of inter-city banking with a single
account.
From special cheques that got treated as per with local ones in any city where banks have a
branch, to free account to account funds transfer between HDFC bank account to free inter- city
clearing of up to 50 lakhs per month, bank’s priority services have become the benchmark for
banking efficiency. Trade current account requires maintaining an average balance of Rs.
40,000.

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Premium current account

Business needs a partner who can manage finance while concentrate on growing business. From
this account customers can avail benefits of inter-city banking account that requires an average
quarterly balance of only Rs. 25,000 offers payable-At-Par cheque book facility and free inter-
city clearing transaction across our network up to Rs. 25 lakhs per month.
A current account with the benefit of accessing account from a large network of branches, and
through direct access channels-the phone , mobile ,internet and through the ATM.

Regular current account

A current account is a ideal for carrying out day-to-day business transaction. With the HDFC
bank regular current account, customer can access a account anytime, anywhere , pay using
payable at per cheques or deposit cheque at any HDFC bank branch. It also facilitate FREE
NEFT transaction and FREE RTGS collection for faster collections in account Regular current
account requires to maintain an average quarterly balance of only Rs.10,000.With a vast network
of branches in cities all over the country , and access to a multitude of ATM’S customer can
keep track of all transaction anytime

Reimbursement current account

No more paperwork, no more receipts to keep track of –a hassle-free account that allows
deposits the reimbursement receive from company organization on monthly basis.
To open this account a person has to follow these processes:
Procure an Account Opening Document (AOD) from HDFC bank (if person has just joined, first
request to company to open up a salary account for particular person).
Mention salary account number and debit card number on the AOD so that debit card can be
linked to both, salary account as well as new reimbursement account.
Request company to directly credit cash payments to the Reimbursement account.

RFC – Domestic account

Full name of this account is Resident foreign Currency account.
Have you accumulated foreign currency from travelling abroad frequently? Received from
relatives in foreign currency? Or earned it by any other means as approved by the reserve bank
of India?
If so, open resident foreign currency domestic account and manage foreign currency efficiently.

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Person can choose to set up your account either in US dollar, great Britain pound or euro.
To open this account the person has to follow these processes:
Choose the currency in which person wish to operate. Open account with an initial amount as
per the following –US Dollar =250 Great Britain Pound =200 Euro=250 and maintain an
average quarterly balance of the same account.

Flexi current account

With HDFC bank flexi current account cash deposit and anywhere transaction limits are a
multiple of the balance you maintain in current account. So, during peak seasons, customer get
the benefits of higher transaction limits due to the higher average balance maintained in account.
What’s more, during lean seasons, person need not worry about maintaining huge balances to
enjoy high transaction limits, which person anyway may not need. Flexi current account requires
maintaining a minimum average monthly balance (AMB) of just Rs. 75,000.

Apex current account

The top position is always the desirable position. With the apex current account, take business to
a new high. On maintaining an average quarterly balance of Rs. 10 lakhs , this account makes
sure person make the most of every business opportunities coming his way . Unlimited free ,
anywhere banking experience at the APEX is reserved for person who joints this.

Max current account

Maintaining benefits and minimum hassles for customer with max current account with a Rs. 5
lakhs average quarterly balance requirement, bank present to world of privileges that helps
business expand and grow. Features like maximum limits including other beneficial features on
this current account truly enhance business potential to the maximum.

6. Fix deposits service

Long-term investments form the chunk of everybody’s future plans. An alternative to simply
applying for loans, fixed deposits allows to borrow from own funds for a limited period , thus
fulfilling needs as well as keeping saving secure.
People can invest his//her money into either in security market or gold or mutual fund or into a
fix deposits. People always go to that way where hr//she can get more benefits and minimum
risks. So for this purpose he has a better chance to deposits money in to the fix deposit.

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Regular fix deposit

As per the rules and regulation of the bank a person can deposit their money into a fix deposit in
the bank and can get the benefits of these facilities

Five year tax saving fix deposit

In 2006, it was announced for the first deposits booked by an Individual/ HUF for 5 years and up
to RS. 100000 will be allowed exemption under sec 80C of the Income Tax Act 1961 subject to
necessary declaration taken from the customer.

Super saver facility

Customer can enjoy a high rate of interest along with the liquidity of a saving account by opting
for a super saver facility on is or her saving account. Avail of an overdraft facility of up to 75%
of the value of his or her fixed deposit.

7. Demat account service

Nowadays share market is becoming is the main occupation of the person. So to
avoid faculty processes demat account is really most important for the share market and for the
safety of shares it is most important.
HDFC Bank is one of the leading Depository participant (DP) in the country with over 8 lac
demat accounts.
HDFC bank demat services offers a secure and convenient way to keep track of securities and
investments over a period of time, without the hassle of handling physical document that get
multilated or lost in transit.
HDFC Bank is depository participant both with- National securities depositories limited (NSDL)
and central depository services limited(CSDL)

8. Card service
In today’s competitive and first time card services providing by the banks are really
very important to every person and every business needs or to take meal in to hehtel or to
purchase jewellery from the jewellerys shops cards are playing good role in the banking sectors.
Bank ranges of cards help to meet financial objectives so whether persons are looking to add
to his buying power, conducting cashless shopping, or budgeting his expenditure, he will find a
card that suits him.

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Credit Cards
A person wants many things like a trip, A diamond ring. Some dreams can’t wait. If there’s
something person has always wanted. If a person wanted to fulfill his wants he can get benefit
from the HDFC bank’s credit cards facilities different types of credit

Classic cards

Sliver credit card Value plus credit card Premium cards

Gold credit card and so on.

Debit card
HDFC Bank debit card give person complete and instant access to the money in his accounts
without the risk or hassle of carrying cash. Types of Debit card

Classic card
Easy shop international debit card

Premium card
Easy shop gold Debit card and so on.

Prepaid card
Besides offering convenience, prepaid cards have been tailored to answer travel and gifting
needs.
Prepaid Travel Card Prepaid gift card

9. General insurance
The company offers general insurance products such as:
Motor, health, travel, home and private accident within the retail segment which accounts for
47% of its total business and Property, marine, aviation and insurance within the corporate
segment

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10.Mutual funds
HDFC provides mutual fund services through its subsidiary HDFC Asset Management
Company Limited. The average Assets Under Management (AUM) of HDFC Mutual Fund for
the quarter Jul-13 to Sep-13 was INR 1.03 trillion

11. Loan services

In today’s competitive world everything happens only with the help of money or through
the money every person needs money. But sometime a person has not cash on hand at that time
he needs loan from either friend or from any financial institution. Loan does not mean that only
lower class person needs it but also upper class person it is needed.
As per the requirement of the every person there are much type of loans are there in the
HDFC bank.

Personal Loan
A person has so many dreams but some time due to scarcity of money a dream can’t be satisfied.
So, here one solution for that person is personal loan. From this he/she can fulfill their needs or
requirements. It can be anything either a dream of vacation or son/ daughter’s admission to
college or any wedding, so personal loan can be helpful in this entire requirements.

HDFC Loan
HDFC bank bring HDFC home loan to door step. With over 30 years of experience, a dedicated
team of experts and a complete package to meet all housing finance needs, HDFC home loans,
help people realise dream.

Vehicle Loan
Nowadays the life is being so fast, time value is becoming more important so to reach at the
destination of any business related occation or for a boy to reach college or any where at a fixed
time there are so many requirements of vehicles. But every people have no capacity to purchase
vehicle with cash so for that here in HDFC bank vehicle loan is available. There are many types
of vehicle loan they are

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 Two wheeler loan

 New car loan
 Used car loan
 Tractor loan(for agriculture business)
 Commercial vehicle loan

So as per the requirement of a person there are these types of loan are available this are at the
ship rate from more documentation and other procedure. And commercial b business men can
get the benefits of the commercial vehicle loan. Thus as per the need of different people there
are vehicle loan available and also terms and condition are different as per the requirements

Express Loan plus

Bank offer express loan first at person door step to help fulfil his/her needs. The procedure is
simple, documentation minimal and approval is quick. It is helpful to person in reparing of
house, school admission or also in the family holiday.

Gold loan
With HDFC Bank’s Gods loan, person can get an instant loan against gold jewellery and
ornaments. The procedure is simple, documentation is minimal and approval is quick. A person
can get 70% loan on the value of gold jewellery and ornaments. There is also availability of
overdrafts on the gold jewellery. With this a customer can get free additional services like free
personalized cheque book, free international debit card and free net banking phone banking
services.

Educational loan
Nowadays importance of education is very high. As its importance is becoming high it is
becoming costly. So in the higher education sometime people can not effort a higher price at a
same time.so, there is educational loan is available for students.

As person can get loan upto 10 lakhs to study in India and 20 lakhs if he wants to study in
abroad. Loan available up to tenure of 7 years including moratorium period. Loan disbursed
directly to the educational institution. It is released as per fee schedules of institute. Exclusive
telegraphic transfer facility available for courses abroad. Loan available for short duration / job
orientation courses loan.

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Loan against securities

With HDFC Bank’s loan against securities, person can get an overdraft against securities like
equity shares, Mutual fund units( quity, debt, FMPs)Gold exchange traded fund(ETF),
NABARD’s BhavishyaNirman Bonds, Policies issued by LIC and select private Insurance
companies, NSC, KVP, UTI Bonds and Gold deposits certificates, While still retaining
ownership .And the best part is that he can continue to enjoy all his shareholder benefits such as
rights, dividends and loan available to NRIs against shares, Mutual funds, Insurance policies,
NSC and KVP.

Loan against property

HDFC Bank brings loan against property(LAP) person can now take a loan against residential
or commercial property, to expand his business, plan a dream wedding and fund his child’s
education and much more. He can depend on bank to meet all his business requirements even to
purchase a new shop or office for business. Loan to purchase commercial property(LCP) is a
specially designed product to help person expand his business without reducing the capital from
his business
These are loan services providing by HDFC bank which are very hassle free and really
benefits for most of customer and most of customer satisfied by the loan services providing by
the bank

12.Payment services
Nowadays life of a person become very stressful and he/she becoming busy with their
own businesses, but they have to pay for something he/she has purchased, so for that reason
bank’s payment service became started. With HDFC Bank’s payment services, person can bid
goodbye to queue and paper work. Bank’s range of payment options make it easy for pay a
variety of utilities and services.

Pay Now
Use your HDFC bank credit card to pay your utility bills online, make subscriptions and
donations; no restrictions required. Enjoy credit free period and reward points as per your credit
card features.

Insta pay
Pay your bills, make donations and subscribe to magzines without going to the hassels of any
registrations.

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Direct pay
Shop or pay bills online without cash or card. Debit your account directly with our direct pay
service

Visa money transfer

Transfer funds to any visa card(debit/credit) within India at your own convenience through
HDFC Banks net banking facilities.

Online payment excise and service tax

Make your excise and service tax payment at your own convenience through HDFC banks net
banking facilities

Net safe
Now shop online without revealing your HDFC bank credit card number. What more, you can
now use your HDFC bank debit card also for online purchases

Merchant services
Accept all visa, master card, credit and debit card at your outlets through state of the art POS
machines or through your website and experience hassle free payment acceptance

Bill Pay
Pay your telephone, electricity and mobile phone bill at your convenience. Through the internet,
ATMs your mobile phone and telephone- with bill pay, our comprehensive bill payments
solution.

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McKinsey 7S Framework
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(Figure .5) https://whittblog.wordpress.com/2011/04/24/mckinsey-7s-model-a-strategic-assessment-and-alignment-model/

1. Strategy
In good times and bad, HDFC Bank sticks to its 30 per cent profit growth. Delivering
such growth, quarter after quarter, is a carefully crafted strategy. It’s a well known fact that
the bank increases its provision cover for its loans, such that it can deliver 30 per cent
growth in more challenging years. This strategy is evidently paying off this year. Though
the net interest income has grown at 22.3 per cent in the first quarter compared to the
corresponding one last year, the bank has managed to deliver a 30 per cent net profit
growth.

2. Structure
The organization structure of the company HDFC is such that it comprises of the
department and employees in the hierarchical order so that they are able to perform their
function and duty smoothly and effectively doing the job in a manner in which it should be
done. The organization is headed by the administrative department which coordinates and
controls the executive departments. The executive departments is a link from the top and the
bottom comprising of lower level employees such that they work together to fulfill the
common objectives of getting business from the persons to get in touch with them and see
to it that they are provided with the best of the bank
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which constitute giving financial advice to providing account to the customers. The lower
level employees and the corporate financial consultance work together to see to it that the
data base for providing financial bank to suffficiant number of people is made. They work
together to see to it that this data base is followed and worked upon such that more and
more number of people get themselves avail the financial bank of the organisation. Team
leaders who formered a part of the administrative department of the organisation make sure
that the clients that turn up for the financial bank are dealt with the most efficiently and
effectively.

CEO

Directors

Managers

Supervisors

Clerks

Peon

3. System
I. Policy framework around customer acceptance
II. Policy framework around customer care/ customer service:
a) Employee recruitment / Training/ Education around customer service
b) Grievance redressal mechanism and its review
c) Customer training / Education around customer service
III.

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4) Staff

HDFC Bank’s leadership team brings together a diversity of talent and a wealth of experience.
Guided by an experienced board and visionary managing director, the team steers the bank to
new heights. As the world becomes increasingly digital, the management team is leading the
bank to leadership in this emerging domain with innovative products and services . As of June 30
2019 , the bank has 104154 employees.

5) Style
HDFC Bank always been market oriented and dynamic with respect to resource mobilization as
well as its lending programme. This renders it more than capable to meet the new challenges that
have emerged. Over the years, HDFC has developed a vast client base of borrowers, depositors,
share holders and agents, and it hopes to capitalize on this loyal and satisfied client base for
future growth

6) Skill
Genpact founder PramodBhasin and DLF director Pia Singh-promoted The Skills Academy will
tie up with HDFC Bank to co-develop the content of a training course for professional
bankers.The Academy plans to launch the training course titled “The Professional Banker
Programme” here Sunday. The course aims at bridging the skills gap in the banking industry and
transforming candidates into job-ready professionals.

7) Subordinates goals

HDFC Bank aims to be a dominant and go-to bank for startups, a key official said on Tuesday.
Close to 9,000 start-ups are currently banking with HDFC Bank, said SmitaBhagat, Country
Head, Government & Institutional Business, e-commerce and start-ups,
HDFC Bank, the country’s largest lender by market value, is hiring top investment banking
talent to boost its presence in a business holding major promise and close the gap with bulge-
bracket Wall Street names that dominate placements at South Asian B-schools.
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SWOT Analysis

Strength
 HDFC Bank Limited's low cost structure helps it produce at a low cost and sell its
products at a low price making it affordable for its customers
 HDFC Bank limited has a strong relationship with its dealers that not only provide them
with supplies but also focus on promoting the company’s products and training
 HDFC Bank limited had been successfully able to generate positive returns on the
capital expenditure it has incurred on various projects in the past

 HDFC Bank limited is a brand that has been in the market for years and people are
aware of it. This makes its brand awareness high.

Weakness
 Lack of legal experience and legal department employees are not highly qualified.
 Poor cash generated from core business – decling cash flow from operations for last 2
years
Opportunities
 The population has been growing and is expected to grow at a positive rate for the
upcoming years. This is beneficial for HDFC Bank limited as there will be an increase
in the number of potential customers
 The government’s reduction in tax rate is beneficial for HDFC Bank limited as a lower
amount would be expensed out as a tax.
 The growth in customer spending in the economy is likely to increase consumption for
HDFC Bank Limited’s product.

Threats
 The Bargaining power of suppliers has increased over the years with the decrease in
the number of suppliers. This means that the costs of inputs could increase for HDFC
Bank Limited.
 Political uncertainties in the country prove to be a barrier in business, hindering
performance at times and making the business incur unnecessary costs.Regulations on
international trade keep changing and this requires compliance by companies if they
are to operate globally

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FUNCTIONAL DEPARTMENT OF THE ORGANISATION

The functional department of the organisation consists of HR department, The administrative
department and the executive department. The HR department of the organisation consist of the
people to employ the persons who they think would be able to justice with the job handled. The
administrative department of the organisation consists of the director and the manager of the
organisation. They preside the organisation and control all the operation of the organisation such
that the organisation could run in a smooth and effective manner. The executive department of
the organisation consists of the various employees who execute the job undertaken by them. The
employees consist of the team leader, the corporate financial consultants, the telecallers, various
staffs and junior staffs who are the main structural framework of the organisation. The
organisation thus runs with the effective coordination of the HR department, the administrative
departments and the executive department such that the supervisors of the organisation preside
over the subordinate employees to give them directions about fulfilling their works most
efficiently and effectively

HR Department
Human resource management functions that help managers recruit, select, train and develop
members for an organisation. Obviously HRM is concerned with the people’s dimension in
organisation. Work force of an organisation is one of the most important assets. Because of the
unique importance of human resource and its complexity due to ever changing psychology,
behavior and attitude of men and women at work, in all business concern, there is one common
element i.e Human personal function i.e manpower management function is becoming
increasingly specialized. The personnel function or system can be broadly defined as the
management of people at work management of managers and management of workers. Personal
function is particularly interested in personnel relationship and interaction of employee’s human
relations. HDFC Human resources department plans and direct for the employee population as
well as they are Having the following function as
 Hiring
 Promotion reassignments
 Position classification and grading
 Salary determination
 Performance appraisal review and processing
 Personnel data entry and records maintenance

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Finance Departments
The finance manager is responsible for all the aspects of the accounting and financial
administration of the HDFC, the supervision of the implementation of the HDFC financial
policies, Directives and procedures and the initiation of the financial plans within the guidelines
of HDFC. The department contains several distinct sections, each of which is responsible for the
proportion of the activities taking place within the finance department. In this modern era it is
very easy to know how much important e finance is in the business. As current position of the
market is totally different from the ancient where it was very easy to get the finance. But
nowadays it is not so, it is very difficult task to raise funds from market. As today people are
facing lot of problem and have less confidence on the market so it is difficult to raise fund
without proper planning.
For the bank as it is a financial institution we can consider finance as lifeblood of this business.
The company should manage to get sufficient finance. The company should use to keep proper
planning for the finance of its own and also of the large number of depositors who are there with
the bank. We can define financial management as a task of acquisition and utilization of funds
needed in the business in the manner so that the organisation goals can be achieved.

Marketing consultancy department

The marketing consultancy departments plays an important role within the fund as it studies and
analyses marketing information in order to build solid base for management decisions. The
division also assists projects sponsors in formulating solid marketing strategies to improve their
industries and strengthen their position in the local and international markets. The activities of
the company associated with buying and selling product or service. It includes advertising ,
selling and delivering the products to people.

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DESCRIPTION OF THE STUDY

ASSET AND LIABILITY MANAGEMENT

 Asset and liability management is the practice of managing financial risks that arise due
to mismatches between the assets and liabilities as part of an investment strategy in
financial accounting. Banking business involves the identifying, measuring, accepting
and managing the risk; risk management is the heart of bank financial management. One
of the most important risk-management functions in bank is Asset Liability Management.
 The primary objective of the Asset/Liability Management (ALM) Policy is to maximize
earnings and return on assets within acceptable levels of risk: Interest Rate - impact on
earnings and net worth from potential short- and long-term changes in interest rates.
 An effective Asset Liability management Technique ails to manage the volume, mix,
maturity, rate sensitivity, quality & liquidity of assets and liabilities as a whole so as to
attain a predetermined acceptable risk/reward ration.

It is aimed to stabilize short term profits, long-term earnings and long term substance of the
bank. The parameters for stabilizing ALM system are:

1. Net Interest Income

2. Net Interest Margin
3. Economic Equity Ratio

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LITERATURE REVIEW

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1) PAPER TITLE: INTEGRATING ASSET-LIABILITY RISK MANAGEMENT

WITH PORTFOLIO OPTIMIZATION FOR INDIVIDUAL INVESTORS II
(IALRM)
AUTHOR: TRAVIS L. JONES, PH.D.
Findings:

A majority of private client practitioners rely on mean-variance optimization (MVO), rules of

thumb, or model portfolios for making asset allocation recommendations. Considerations for
income levels and other constraints figure into the typical approach. However, not enough
attention is given to the nature of an investor's multiple time horizons and implications for cash
flows. These are the future demands placed upon the portfolio. The risks that these demands will
not be met need to be clearly understood in order to validate any asset allocation decision. This
study presents an approach of incorporating MVO within a multi-horizon, asset-liability
Management risk model. This approach allows for cash-flow matching of a portion of an
investor's portfolio within the optimization framework. This allows an individual's portfolio to
provide short-term cash flow, as needed, while also considering the longer-term demands on the
portfolio

2) PART TITLE: - ASSET & LIABILITY MANAGEMENT (ALM) MODELLING

WITH RISK CONTROL BY STOCHASTIC DOMINANCE.

AUTHOR NAME:-XI YANG, JACEK GONDZI & ANDREAS GROTHEY

Findings:
An Asset Liability Management model with a novel strategy for controlling the risk of
underfunding is presented in this article. The basic model involves multi-period decisions
(portfolio rebalancing) and deals with the usual uncertainty of investment returns and future
liabilities. Therefore, it is well suited to a stochastic programming approach. A stochastic
dominance concept is applied to control the risk of underfunding through modelling a chance
constraint A small numerical example and an out-of-sample back test are provided to
demonstrate the advantages of this new model, which includes stochastic dominance constraints,
over the basic model and a passive investment strategy. Adding stochastic dominance
constraints comes with a price. This complicates the structure of the underlying stochastic
program. Indeed, the new constraints create a link between variables associated with different
scenarios of the same time stage. This destroys the usual tree structure of the constraint matrix in

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the stochastic program and prevents the application of standard stochastic programming
approaches, such a (nested) Benders decomposition and progressive hedging Instead, we apply a
structure exploiting interior point method to this problem. The specialized interior point solver,
object oriented parallel solver, can deal efficiently with such problems and outperforms the
industrial strength commercial solver CPLEX on our test problem set. Computational results un
medium scale problems with sizes reaching about one million variables demonstrate the
efficiency of the specialized solution technique. The solution time for these non-trivial asset
liability models appears to grow sub linearly with the key parameters of the model, such as the
number of assets and the number of realizations of the benchmark portfolio, which makes the
method applicable to truly large-scale problems,

3) PAPER TITLE: - AN INVESTIGATION OF ASSET LIABILITY

MANAGEMENT PRACTICES IN KENYA COMMERCIAL BANKS (IALM)

AUTHOR: - MACHARIA, & IRUNGU PETER

Findings:
Risk management practices in commercial banks are commonly known as asset liability
management and it remains critical in ensuring safety of depositors funds as well as investors'
stake. Asset liability management is a requirement by the Central Banks of any country in order
to ensure full compliance to the set risk management guidelines. This study was designed to
establish the asset/liability management practices by Commercial Banks in Kenya and to find
out the extent of asset-liability management by these banks. The study will be important to
commercial banks, scholars and it will contribute more knowledge to the existing information on
asset liability management. The population under study comprised of all Heads of Treasury
Operations of the 43 Commercial Banks in Kenya Census study was used because the
population was relatively small for sampling and gave a better representation of the various risk
management practices employed by various commercial banks as well as their asset liability
management practices. Each respondent filled and submitted a self administered questionnaire
that was dropped and picked later. The questionnaire responses were summarized and the results
analyzed using Statistical data analysis programme (SPSS) to describe the relationship between
the dependent and the independent variables. Findings were presented by way of charts, graphs
and tables. Several deductions were drawn from the findings. These included: responding banks
employed both conventional and bank-specific asset liability management practices. Most banks
considered credit/default risk to be the most critical of all financial risk exposures though some
empirical evidence shows that foreign exchange risk is the most critical risk for most firms.

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Majority of the banks did not find the Kenyan currency market to be information efficient:
speculation and forecasting techniques were extensively used by most of them. Regular and
systematic appraisal of asset/liability management policies was a common practice amongst
most banks. Most banks also indicated that their asset liability management systems were
governed by guidelines set by the management board which is a cross functional outfit covering
all the major functions in the bank this showed that ALM is a highly strategic issue in the banks
Most banks, regardless of their size, extensively utilized most of the conventional hedging
instruments. Micro hedge approach, accounting and economic exposure measurement strategies,
natural hedging and diversification were some of the most utilized strategies. Some hedging
practices were considered by most banks to be more important than others. These included me
of forward contracts and foreign currency options as hedging instruments, and use of
matching/natural hedging strategy.
4) PAPER TITLE-A FINANCIAL ASSETS AND LIABILITIES MANAGEMENT
SUPPORT SYSTEM

AUTHOR: YUNG-HSIN WANG, TA-HUA KUO

Findings:
This paper describes the design and implementation of a decision support system (DSS) based on
the fund dispatching decision viewpoint from the financial division of a business group. An
integrated data warehouse is established and the technique of online analytical processing
(OLAP) is applied to analyze daily transaction data of an enterprise resource planning system
with determined management goal. We adopt the Business Dimensional Lifecycle approach to
accomplish the system design and development. The DSS system developed is to provide latest
and timely information of financial asset and liability positions in each company within the case
business group so that decision makers can have a clear decision support in fund dispatching.
While most related researches on fund dispatching focused especially on efficient banking
capital management and few studies were done for general financial department of traditional
enterprise let alone for the business group, this study has made a progress in this issue and the
resultant system is applicable to the similar business group the interest rate changing adversely,
this in turn protects the owner's equity of the bank. We use seven-day's reacquired interest rate
data to estimate the frequency distribution of the fluctuation of the future market rate and solved
the problem to describe the fluctuation of the interest rate with multi-factors.

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5) PAPER TITLE: - OPTIMAL ASSET ALLOCATION IN ASSET LIABILITY

MANAGEMENT

AUTHOR: - JULES H. VAN BINSBERGEN, MICHAEL W. BRANDT

Findings:
We study the impact of regulations on the investment decisions of a defined benefits pension
plan. We assess the influence of ex ante (preventive) and ex post (punitive) risk constraints on
the gains to dynamic, as opposed to myopic, decision making. We find that preventive measures.
such as Value-at-Risk constraints, tend to decrease the gains to dynamic investment. In contrast,
punitive constraints, such as mandatory additional contributions from the sponsor when the plan
becomes underfunded, lead to very large utility gains from solving the dynamic program. We
also show that financial reporting rules have real effects on investment behavior. For example,
the current requirement to discount liabilities at a rolling average of yields, as opposed to at
current yields, induces grossly suboptimal investment decisions.

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RESEARCH
METHODOLOGY

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OBJECTIVES OF THE STUDY

1. To study RBI norms on Asset and liability management
2. To evaluate quality of Asset and liability.
3. To know trend of Asset and liability management over last 10 years.
4. To understand liquidity position of HDFC bank.

NEED FOR THE STUDY

a. The prime importance of the study is to analyze the maintenance of asset and liability.
b. To have practical knowledge of asset and liability management in the bank.
c. The findings of the study can be used as secondary data for the various future study
purposes.

INTRODUCTION
The quality of the project work depends upon the methodology adapted for the study and also on
the nature of the project work. Using proper way of research methodology is very essential. In
order to conduct a study scientifically, suitable methods and measures are to be followed.

Research Design:
The type of research used for collection and analysis of the data is “Historical Research
Method”. The study is completely based on secondary data. The main focus of the study is to
determine the asset and liability management of HDFC bank. The major source of information is
the annual reports prepared by HDFC bank, journals, magazines and other similar studies.

Data Collection Method:

Types of Research: Exploratory ResearchPrimary data- Nil
A primary data source is an original data source, that is, one in which the data are collected. First
hand by the researcher for a specific research purpose or project.
Secondary data- Secondary data refers to data that is collected by someone other than the user.
Common sources of secondary data for social science include censuses, information collected by
government departments, organizational records and data that was originally collected for other
research purposes. The sources of secondary data used for this study includes annual report of
the bank and bank websites.

LIMITATIONS OF THE STUDY

 Due to Covid-19 we could not go to the bank and ask Queries or Interact with the staff
members.
 The duration of the study was limited for 60 days.
 This study is based on the secondary data, which involve bank annual.

DURATION OF THE STUDY

 1stsept 2021 to 30th October 2021

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DATA ANALYSIS
AND
INTERPRETAON

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A. GROSS NPA %

Gross Gross
Year Advance NPAs Gross NPAs % to Gross Advances
2012 195420 2003.17 1.03
2013 239720.6 2373.92 0.99
2014 303000.3 3100.75 1.02
2015 365495 3438.38 0.94
2016 464594 4392.83 0.95
2017 554568.2 5885.66 1.06
2018 658333.1 8606.97 1.31
2019 819401.2 11224.16 1.37
2020 993702.9 12649.97 1.27
2021 1132836.6 15086 1.33

Gross NPAs % to Gross Advances

1.60

1.40

1.20

1.00

0.80 Gross NPAs % to Gross

Advances
0.60

0.40

0.20

0.00
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Interpretation: Gross NPA was stable for the year 2012 – 2014 (1.03% to 1.02%) and continues
to decrease till 2016 (0.95%), there was an increase seen from 2016 – 2019 (0.95% - 0.37%) and in
2020 it decreased (0.27%) due to the high provision during the year 2020 but continue to increase
in 2021 (1.33%).

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B. Ratio of Short term liabilities to Liquid assets

Short term Ratio of Short term liabilities to Liquid

Year liabilities Liquid assets assets
2012 119405.88 14791.09 8.1
2013 140521.53 14427.40 9.7
2014 164621.37 25145.63 6.5
2015 198492.05 27310.45 7.3
2016 236310.85 29858.31 7.9
2017 309152.49 32696.88 9.5
2018 343092.78 43970.47 7.8
2019 391198.15 46563.62 8.4
2020 484625.01 47005.12 10.3
2021 615682.16 70134.74 8.8

Interpretation: In the data analysis represents from the above table and graph shows the ratio of
short term liabilities to liquid assets is ranging from 6-10%. That means bank has surplus short term
liabilities which has to be deployed only in liquid assets to meet the repayment obligation of the
short term liability.

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C. Comparative Analysis on Liabilities

Year Liabilities Increase/Decrease in the value of Liability % Increase/decrease

2012 337909.50 60556.91 22%
2013 400331.90 62422.40 19%
2014 491599.50 91267.60 22%
2015 590503.07 98903.57 20%
2016 708845.57 118342.50 20%
2017 863840.19 154994.62 22%
2018 1063934.32 200094.13 23%
2019 1244540.69 180606.37 17%
2020 1530511.26 285970.57 22%
2021 1746870.52 216359.26 15%

Interpretation: In the data analysis represents from the above table and graph shows the value of
total liabilities is on continuous increasing from the year 2012-13 to 2018-19, and the Percentage
increase/decrease in the value of liabilities which is around 20% ,and that is a Healthy sign.
Maximum percentage of decrease in the value of Liabilities is from the year 2012- 13and in the
year 2017-18 to 2018-19 and sudden increase in the year 2019-20.

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D. Net Interest Margin

NIM (Net Interest

Margin) [NII
Net interest Closing balance Opening balance Average /Average Total
Year income of assets of assets total assets Assets]
2012 12297.00 337909.50 277352.29 307631 4.00%
2013 15811.00 400331.90 337909.50 369121 4.28%
2014 18473.00 491599.50 400331.90 445966 4.14%
2015 22396.00 590503.07 491599.50 541051 4.14%
2016 27592.00 708845.57 590503.07 649674 4.25%
2017 33139.00 863840.19 708845.57 786343 4.21%
2018 40095.00 1063934.32 863840.19 963887 4.16%
2019 48243.00 1244540.69 1063934.32 1154238 4.18%
2020 56186.00 1530511.26 1244540.69 1387526 4.05%
2021 64880.00 1746870.52 1530511.26 1638691 3.96%

Interpretation: In the data analysis represents from the above table and graph shows the value of
Net Interest Margin is on continuous increasing from the year 2012-13 to 2018-19, Profit Margin as
far as Interest Income is concerned is stable at around 4%., and that is a Healthy sign.

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E. Net Interest Income

Interest Net interest income (interest earned - Interset
Year Interest earned Expended expended)
2012 27286.35 14989.58 12,297
2013 35064.87 19253.75 15,811
2014 41125.53 22652.90 18,473
2015 48469.9 26074.24 22,396
2016 60221.45 32629.93 27,592
2017 69305.96 36166.73 33,139
2018 80241.36 40146.49 40,095
2019 98972.05 50728.83 48,243
2020 114812.65 58626.40 56,186
2021 120858.23 55978.66 64,880

70000

60000

50000

40000

Net interest income (interset

earned - Interset expended)
30000

20000

10000

0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Interpretation: In the data analysis represents from the above table and graph shows the Interest
earned is on continuous increasing from the year 2012-13 to 2010-21, at the same time Interest
expenditure is also increasing continuously during the corresponding period. Here rate of increase
in Interest earned is more than rate of increase in Interest expended. Hence Net Interest Income is
on continuous increase.
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F. Economic Equity Ratio

Owners Economic Equity Ratio(Owner's Fund)/Total

Year Fund Total assets assets)
2012 29924.68 337909.50 0.0886
2013 36214.15 400331.90 0.0905
2014 43478.63 491599.50 0.0884
2015 62009.42 590503.07 0.1050
2016 72677.76 708845.57 0.1025
2017 89462.35 863840.19 0.1036
2018 106295.00 1063934.32 0.0999
2019 149206.35 1244540.69 0.1199
2020 170986.03 1530511.26 0.1117
2021 203720.83 1746870.52 0.1166

Economic Equity Ratio(Owner's Fund)/Total

assets)
0.1400

0.1200

0.1000

0.0800
Economic Equity Ratio(Owner's
0.0600 Fund)/Total assets)

0.0400

0.0200

0.0000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Interpretation: In the data analysis represents from the above table and graph shows the value of
Economic Equity Ratio is at around 9-11%. Further infusion of Capital is required to maintain the
level at 10%.

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G. Ratio of short term liabilities to Total assets

Ratio of Short term liabilities to Total
Year Short term liabilities Total Assets assets
2012 119405.88 337909.50 0.3534
2013 140521.53 400331.90 0.3510
2014 164621.37 491599.50 0.3349
2015 198492.05 590503.07 0.3361
2016 236310.85 708845.57 0.3334
2017 309152.49 863840.19 0.3579
2018 343092.78 1063934.32 0.3225
2019 391198.15 1244540.69 0.3143
2020 484625.01 1530511.26 0.3166
2021 615682.16 1746870.52 0.3524

Ratio of Short term liabilities to Total assets

0.3700

0.3600

0.3500

0.3400

0.3300 Ratio of Short term liabilities to

Total assets

0.3200

0.3100

0.3000

0.2900
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Interpretation: In the data analysis represents from the above table and graph shows the ratio of
short term liabilities to Total assets is stable around 3%.

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H. Comparative Analysis on Assets

Year Assets Increase/Decrease in the value of Liability % Increase/decrease
2012 337909.50 60556.91 21.5%
2013 400331.90 62422.40 18.7%
2014 491599.50 91267.60 22.3%
2015 590503.07 98903.57 20.1%
2016 708845.57 118342.50 20.0%
2017 863840.19 154994.62 21.5%
2018 1063934.32 200094.13 22.6%
2019 1244540.69 180606.37 17.4%
2020 1530511.26 285970.57 22.4%
2021 1746870.52 216359.26 14.9%

2000000

1800000

1600000

1400000

1200000 Year

1000000 Assets

800000 Increase/Decrease in the value of

Liability
600000

400000

200000

0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Interpretation: In the data analysis represents from the above table and graph shows the value of
total assets is on continuous increasing from the year 2012-13 to 2018-19, and the Percentage
increase/decrease in the value of assets which is around 20% ,and that is a Healthy sign. Maximum
percentage of decrease in the value of assets is from the year 2018-19 and sudden increase in the
year 2019-20

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I. Ratio of Market liabilities to total assets

Year Market Liabilities Total Assets Ratio of Market Liabilities to Total assets
2012 23806.51 337909.50 0.0705
2013 32731.60 400331.90 0.0818
2014 39438.99 491599.50 0.0802
2015 45213.56 590503.07 0.0766
2016 53018.47 708845.57 0.0748
2017 74028.87 863840.19 0.0857
2018 109304.97 1063934.32 0.1027
2019 99685.12 1244540.69 0.0801
2020 142902.54 1530511.26 0.0934
2021 126467.32 1746870.52 0.0724

Ratio of Market Liabilities to Total assets

0.1200

0.1000

0.0800

0.0600 Ratio of Market Liabilities to

Total assets

0.0400

0.0200

0.0000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Interpretation: In the data analysis represents from the above table and graph shows that there is
decrease in Market Liabilities during the year 2017-18 to 2019-20. Except for the year 2018-20, the
ratio of Market Liabilities to total assets is on an increasing during other years ranging from 7-10%.

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J. Ratio of Prime assets to total assets

Year Prime assets Total Assets Ratio of prime assets to Total assets
2012 20937.72 337909.50 0.0620
2013 27280.17 400331.90 0.0681
2014 39583.64 491599.50 0.0805
2015 36331.45 590503.07 0.0615
2016 38918.84 708845.57 0.0549
2017 48952.09 863840.19 0.0567
2018 122915.08 1063934.32 0.1155
2019 81347.64 1244540.69 0.0654
2020 86618.72 1530511.26 0.0566
2021 119470.40 1746870.52 0.0684

Ratio of prime assets to Total assets

0.1400

0.1200

0.1000

0.0800
Ratio of prime assets to Total
0.0600 assets

0.0400

0.0200

0.0000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Interpretation: In the data analysis represents from the above table and graph shows that there is
decrease in Prime assets during the years 2014-17, and 2019-20. Except for the year 2012-13, and
2017-18, the ratio of Prime assets to total assets is on stable during other years ranging from 5-6%.

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K. Ratio of Liquid assets to Total assets

Year Liquid assets Total Assets Ratio of Liquid assets to Total assets
2012 14791.09 337909.50 0.0438
2013 14427.40 400331.90 0.0360
2014 25145.63 491599.50 0.0512
2015 27310.45 590503.07 0.0462
2016 29858.31 708845.57 0.0421
2017 32696.88 863840.19 0.0379
2018 43970.47 1063934.32 0.0413
2019 46563.62 1244540.69 0.0374
2020 47005.12 1530511.26 0.0307
2021 70134.74 1746870.52 0.0401

Ratio of Liquid assets to Total assets

0.0600

0.0500

0.0400

0.0300 Ratio of Liquid assets to Total

assets

0.0200

0.0100

0.0000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Interpretation: In the data analysis represents from the above table and graph shows that there is
decrease in Liquid assets during the years 2011-12 to 2012-13and 2019-20, otherwise it is on an
increase during other years. the ratio of liquid assets to total assets is ranging from 3-5%.

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L. NET NPA %

Year Net Advance Net NPAs Net NPAs % to Net Advances

2012 193772.94 356.11 0.18
2013 237854.91 508.23 0.21
2014 300831.05 931.5 0.31
2015 362952.9 896.28 0.25
2016 461521.54 1320.37 0.29
2017 550526.53 1843.99 0.33
2018 652327.15 2601.02 0.40
2019 811391.56 3214.52 0.40
2020 984595.29 3542.36 0.36
2021 1122305.42 4554.82 0.41

Net NPAs % to Net Advances

0.45

0.4

0.35

0.3

0.25

Net NPAs % to Net Advances

0.2

0.15

0.1

0.05

0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Interpretation : Net NPA has increased for the year 2012 – 2014 (0.18% to 0.31%) and slight
decrease for the year 2015 (0.25%) steady increase from 2015 to 2019 (0.25% - 0.40%), there was
slight unstable from the year 2019 to 2021 as there was slight decrease for the year 2020 (0.36%)
and increased for the year 2021(0.41%).

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FINDINGS

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FINDINGS:

 Gross NPA was stable for the initial years and later it increased.

 .Rate of increase in Interest earned is more than rate of increase in Interest expended.
Hence Net Interest Income is on continuous increase, due to which there is an operating
Profit for the bank.

 There is a decrease in the value of Liabilities for few years followed by sudden increase
in the year 2019-20 because of spurt in deposits.

 There is a decrease in the value of assets for few years followed by sudden increase in
the year 2019-20 because of spurt in Loans and advances.

 Profit Margin as far as Interest Income is concerned is stable at around 4%., and that is a
Healthy sign, because the rate at which Net Interest Income has increased at the same
time the Average total assets has also increased at a uniform speed from 2012-21.

 Bank has a surplus short term liability. The reason may be the bank is giving more
attractive interest rates on short term deposits rather than long term deposits.

 The value of economic equity ratio is around 8-11% because of steady increase in
owner’s fund and total assets have increased in uniform rate. The highest Economic
Equity Ratio is in the year 2019 that is 0.1199.

 Prime assets have decreased in some years because there is decrease in cash in balances
and balances with bank.

 Net NPA as increased considerably from 2012 and ended at 0.41 for the 2021

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SUGGESTIONS

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SUGGESTIONS:
 Gross NPA and net NPA should be reduced by the bank as the numbers are
high for HDFC bank
 The value of Economic Equity Ratio is at around 8-11%. Further infusion of Capital is
required to maintain the level at 10%.
 From the report of last 10 years it is observed that, Bank has a surplus short term liability
which has to be deployed only in liquid assets to meet the repayment obligation of the
short term liability. 
 Liquid assets of bank are decreasing, unless they lend more short term loans and increase
liquid assets, bank will not be able to increase the profits. Liquid assets may be in the
kind of working capital limits at attractive rates.

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CONCLUSION

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CONCLUSION:

The project “a study on asset and liability management of HDFC bank” was helpful to know
how they manage and monitor the risk and the mismatches between assets and liability.
From the study it is clear that HDFC looks forward to generate a more favorable service in the
near future. The balance sheet of the company has been consistent and gives a hint of growth
and expansion. The company is expected to increase its Profitability by a higher margin through
various ways to contribute to the development of the industry and economy. The increase in
Interest Income for the consecutive years, so also the Net interest income is a clear indicator of
the above said statement as observed in the financials of the bank. The healthy increase in the
assets as well as liabilities of the bank shows the bank has a strong balance sheet. The initiative
taken by the bank to serve the various segments of the society is very helpful in developing a
better environment for the business.

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ANNEXURE

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BALANCE SHEET for the year end 31st march 2018

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PROFIT AND LOSS ACCOUNT for the year end 31st march 2018

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BALANCE SHEET for the year end 31st march 2019

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PROFIT AND LOSS ACCOUNT for the year end 31st march 2019

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BALANCE SHEET for the year end 31st march 2020

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PROFIT AND LOSS ACCOUNT for the year end 31st march 2020

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BIBLIOGRAPHY

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BIBLIOGRAPHY:

Websites:
WWW.HDFCBANK.COM
HTTPS://WWW.IBEF.ORG/
WWW.BSEINDIA.COM
WWW.RBI.ORG.IN
WWW.MONEYCONTROL.COM

Reference:
Annual reports of HDFC BANK

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