Financial Institutions

WORKING OF FINANCIAL INSTITUTIONS
1
MEANING

Financial institutions provide means and mechanism of transferring resources from those who have an
excess of income over expenditure to those who can make productive use for the same.

DEFINITION
Financial Institutions:-
1. A financial institution is an institution that provides financial services for its clients or members act
as financial intermediaries.

2. Institution which collects funds from the public and places them in financial assets, such as deposits,
loans, and bonds, rather than tangible property.
In financial economics, a financial institution is an institution that provides financial services for its clients or
members. Probably the most important financial service provided by financial institutions is acting as financial
intermediaries. Most financial institutions are highly regulated by government bodies. Broadly speaking, there
are three major types of financial institution:
1. Deposit -taking institutions that accept and manage deposits and make loans (this category includes
banks, credit union, trust companies and mortgage loan companies);
2. Insurance companies and pension funds; and
3. Brokers, underwriters and investment fund.


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WHAT ARE THE MAJOR FUNCTIONS OF
FINANCIAL INSTITUTIONS?

Financial institutions, which are immensely important to the smooth functioning of a society have certain
functions of their own, which accentuates their role in the society, consolidating their significance to an
extensive extent.

The first function of financial institutions is the transformation of assets, which are acquired through
markets, into a wider and more preferable form, which becomes their liability this function is performed
mainly by financial intermediaries, which is undeniably the most important category of financial institutions.

Also financial institutions are involved in exchanging of assets on behalf of their customers. Other than
that, exchanging of assets for their own personal accounts is also part of their job. Furthermore, financial
institutions create financial assets for their customers and sell those assets to other market participants for a
definite emolument. In addition to all these functions, financial institutions are also involved in providing
investment advice to market participants and managing the portfolios of market participants.


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FUNCTIONS OF FINANCIAL
INSTITUTIONS

Financial institutions include banks, credit unions, asset management firms, building societies, and
stock brokerages, among others. These institutions are responsible for distributing financial resources in a
planned way to the potential users.
There are a number of institutions that collect and provide funds for the necessary sector or individual.
On the other hand, there are several institutions that act as the middleman and join the deficit and surplus
units. Investing money on behalf of the client is another of the variety of functions of financial institutions.

Financial institutions can be categorized as follows:-

Deposit Taking Institutions
Finance and Insurance Institutions
Investment Institutions
Pension Providing Institutions
Risk Management Institutions

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At the same time, there are several governmental financial institutions assigned with regulatory and
supervisory functions. These institutions have played a distinct role in fulfilling the financial and management
needs of different industries, and have also shaped the national economic scene.

Deposit taking financial organizations is known as commercial banks, mutual savings banks, savings
associations, and loan associations and so on. The primary functions of financial institutions of this nature are
as follows:
Accepting Deposits
Providing Commercial Loans
Providing Real Estate Loans
Providing Mortgage Loans
Issuing Share Certificates

Finance companies provide loans, business inventory financing and indirect consumer loans. These
companies get their funds by issuing bonds and other obligations. These companies operate in a number of
countries. On the other hand, there are insurance companies that provide coverage for a variety of risk factors
and they also provide several investment options. Insurance companies provide loans for a number of
purposes and create investment products.

The functions of financial institutions, such as stock exchanges, commodity markets, futures, currency,
and options exchanges are very important for the economy. These institutions are involved in creating and
providing ownership for financial claims. These institutions are also responsible for maintaining liquidity in
the market and managing price change risks. As part of their various services, these institutions provide
investment opportunities and help businesses to generate funds for various purposes.


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The functions of financial institutions like investment banks are also vital and related to the
investment sector. These companies are involved in a number of financial activities, such as underwriting
securities, selling securities to investors, providing brokerage services, and fund raising advice.

Financial institutions provide service as intermediaries of the capital and debt markets.

They are responsible for transferring funds from investors to companies, in need of those funds.

The presence of financial institutions facilitates the flow of money through the economy.
To do so, savings are pooled to mitigate the risk brought to provide funds for loans.

Such is the primary means for depositary institutions to develop revenue. Should the yield curve
become inverse, firms in this area will offer additional fee-generating services including securities
underwriting, and prime brokerage.


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OBJECTIVES
Planning for the future it is important to have clear idea about the objective of finance i.e. provision of
financial services at prices that reflect their cost. Being a management student the future prospectus are to get
in to the field of business before that it is important to know about financial institutions as they are the sources
of a finance then may it be for setting up of business or for a development of business. So this was the main
objective to select this topic for my project and to know about the various aspects of the financial institutions.
The objective if doing this project is to know about the following:
The financial markets in India, their happenings, classification of Indian financial system etc.
Various financial institutions, their objectives, their role in the Indian money market and their working
etc.
Money market in India.
Types of financial institutions.
Role of RBI with respect to financial institutions and rules and regulations set by RBI.

To transform financial assets acquired through the market and constitute them into a different, and
more widely preferable, type of asset-which becomes their liability. This is the function performed
by financial intermediaries, the most important type of financial institution.
To exchange financial assets on behalf of customers.
To exchange of financial assets for their own accounts.
To assist in the creation of financial assets for their customers, and then selling those financial assets
to other market participants.
To provide investment advice to other market participants.
To manage the portfolios of other market participants.


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TYPES OF FINANCIAL INSTITUTIONS
Financial institutions are the firms that provide financial services and advices to its clients.
Commercial banks, credit unions, stock brokerage firms and asset management firms are the major types of
financial institutions.
Insurance companies, finance companies, building societies and retailers are the other types of
financial institutions. The financial institutions are generally regulated by the financial laws of government
authority. The various financial institutions generally act as the intermediaries between the capital market and
debt market. But the service provided by financial institution depends on its type. The financial institutions
are also responsible to transfer funds from investors to the companies. Typically, these are the key entities that
control the flow of money in the economy.
The services provided by the various types of financial institutions may vary from one institution to
another. For example, the services offered by the commercial banks are - insurance services, mortgages, loans
and credit cards. The services provided by the brokerage firms, on the other hand, are different and they
are - insurance, securities, mortgages, loans, credit cards, money market and check writing. The insurance
companies offer - insurance services, securities, buying or selling service of the real estates, mortgages, loans,
credit cards and check writing.
The credit union is co-operative financial institution, which is usually controlled by the members of
the union. The major difference between the credit unions and banks is that the credit unions are owned by the
members having accounts in it.
The stock brokerage firms are the other types of financial institutions that help both the corporations
and individuals to invest in the stock market. Another type of financial institution is the asset management
firms. The prime functionality of these firms is to manage various securities and assets to meet the financial
goals of the investors. The firms also offer fund management advice and decisions to the corporations and
individuals.

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Different categories of instruments:-


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Leading Financial Institutions in India
The FIs comprise five all-India development banks, specialized finance institutions, three investment
institutions, 18 state financial corporations (SFCs) and 28 state industrial development corporations (SIDCs).
All India Developmental Financial Institutions
a. Industrial Credit and Investment Corporation of India (ICICI)
b. Industrial Development Bank of India (IDBI)
c. Industrial Finance Corporation of India (IFCI)
d. Industrial Investment Bank of India (IIBI)
Specialized Development Finance Institutions
a. Small Industries Development Bank of India (SIDBI)
b. Tourism Finance Corporation of India (TFCI)
c. Export-Import Bank of India (EXIM Bank)
Investment Institutions
a. Life Insurance Corporation of India (LIC)
b. Unit Trust of India (UTI)
c. General Insurance Corporation (GIC)
d. New India Assurance
e. United India Insurance
f. National Assurance Corporation
g. Oriental Insurance


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EXAMPLES OF FINANCIAL
INSTITUTIONS

Banks

Stock Brokerage Firms

Non Banking Financial Institutions

Building Societies

Asset Management Firms

Credit Unions

Insurance Companies


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IMPORTANCE OF FINANCIAL
INSTITUTIONS

Financial intermediaries convert the money given by savers to investment by borrowers, such as
banks, UTI, NBFIs, etc.

Non-intermediaries give loans but do not collect deposits or funds from savers.

Regulators watch the markets, players and modes of transactions.

Regulators design the market system, create and enforce regulations and rules for the market.


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FINANCIAL INTERMEDIARIES
Financial intermediaries are a special group of financial institutions that obtain funds by issuing
claims to market participants and use these funds to purchase financial assets. Intermediaries transform funds
they acquire into assets that are more attractive to the public. By doing so, financial intermediaries do one or
more of the following:

Provide maturity intermediation.

Provide risk reduction via diversification at lower cost.

Reduce the cost of contracting and information processing.

Provide payments mechanism.


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FINANCIAL INSTITUTIONS
MANAGEMENT

Financial institutions management refers to the different management techniques and methods
used by the senior management of financial institutions for running their organizations in a smooth manner.
Financial institutions management forms an integral part of the financial sector or industry.

The managers of financial institutions face various forms of risk and financial institutions
management focuses on how these risks can be managed with the help of various tools and techniques.
Relevant information and statistics are provided by the credit unions, non-banking financial institutions, and
insurance companies, and other types of financial services providers and these data offer a comprehensive
idea about the challenges thrown by various factors. The factors include the following:
Interest rate risk
Credit risk
Market risk
Liquidity risk
One of the principal objectives of the management of financial institutions is to maintain a balance
between return and risk. Of late, it has been witnessed that the methods and techniques used by the financial
institutions for managing the different risks faced by their managers are getting more and more similar in
nature. This is irrespective of the financial institution being a savings bank, commercial bank, insurance
company, or an investment bank. This might be a consequence of globalization.


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ADVANTAGES OF FINANCIAL
INSTITUTIONS

Reduction of information and transaction costs

Grant long-term loans

Provide liquid claims and pool risks.

Financial intermediaries economize costs of borrowers and lenders.

Banks are set up to mobilize savings of many small depositors, which are insured.


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OVERVIEW OF FINANCIAL MARKETS
Every financial system helps to increase output by moving the economic system towards the
production. This is possible by making use of the available resources to create a more wealth and bring in
prosperity to the economy. This is tern gives more opportunity to the player for better investment and ultimate
saving. The financial system can be broadly classified into Regulated and Unregulated market. The regulated
financial market has supervision and control and system governed by the central bank of the country, the
treasurer or Government. In, contrast the unregulated financial market lack recognition of transactions and are
subject to risk.
For any economic to develop and reap the benefit of such development, it is essential that the
economic activates saving habit amongst the people. The favorable features of such inducement or saving are
easy access, nearness, better returns etc.
While the financial growth is attributed to the discipline, the lack of it would lead to negative growth.
In order in the economy the market would need to be disciplined or regulated and properly supervised, it is
difficult to precisely say whether financial development occurs due to growth of vice versa.
A financial market has fully competitive elements wherein the scarce resources are put to efficient use,
meaning thereby the money or its worth is used judiciously at optimum. Then again, the benefits are used for
better earnings and investments.
Taking the financial benefits as the ultimate commodity, which is traded in the financial market, the
buyer and the seller should be able to achieve a win-win situation for any transaction to be through
successfully.
The market players in any financial markets are the banks, financial institutions, intermediaries, funds
and treasury. In a healthy economy the market is engineered, intermediate and well supervised. To say finally,
all the transaction embodied in the system as well protected and saved from number of risks.


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FINANCIAL INSTITUTION MARKETING
Financial institution marketing refers to the various marketing policies of the financial institutions.
For the promotion of the various financial products and services offered by financial institutions, it is
necessary to lay out an efficient marketing plan.
Financial institutions focus on the practical implementation of marketing methods for selling their
financial products and services. In order to do that, it is essential that the financial institutions utilize their
marketing resources and functions in a proper way. For launching their products, the financial institutions
take into consideration a number of factors, which include the timing, degree, and blend of customer
demand.

Usually, the financial institution marketing services can be categorized into the following types:

Implementation planning
Process, project, and vendor management
Leadership and organizational management
Reporting
Measurement
Feedback and control systems
For the selling purpose of the financial products and services, financial institutions often take the
assistance of various advertising firms. They provide valuable marketing advices and techniques to
numerous banks, credit unions, and various other financial services providers.


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Various techniques that are implemented for enhancing sales of financial products and
services include the following:
Cross selling of equity and debt capital market products, such as stocks, bonds, and CDOs
(Collateralized Debt Obligations)
Formulation of marketing plans and market research
Assessment of client financing and other facilities and recommendation of suitable action
Supervision of the functions of the relationship managers
Keep informed and cover capital market activities and corporate finance
Advising and training staff
For marketing the financial products and services, the various forms of advertisements that are
utilized include the following:
Consumer media print advertisements
Web banner advertisements
Annual report
Logo
Informational brochures and displays
Consumer radio advertisements
Poster
Newspaper advertisements
Usually, a common trend is seen in the marketing of financial products which is a product launched by a
company is immediately followed by another company. However, this is not beneficial all the time.


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FINANCIAL INSTITUTION
COMPLIANCE

All financial institutions need to abide by certain accepted standards. Financial institution
compliance is all about regulating the activities of these organizations as per the given standards. The
performance of the financial institutions is assessed by certain regulators. These regulators are specially
designed to boost up the productivity level of the financial organizations. Financial institution compliance
aims at improving the efficiency level of these organizations.

Advantages Associated with Financial Institution Compliance
Financial institution compliance leads to higher profitability.
If the compliance regulators place the financial institutions on the positive side, then the cost of
production is bound to come down.
Financial institution compliance helps to expand the customer base of these organizations. If a
particular financial institution performs in conformity with the accepted standard then the customers
will also be satisfied with its products and services.
Compliance enhances the operational transparency of the financial service providers.
Financial institution compliance reduces the risk of unexpected financial loss. With the growing
competition in the global market, the task of financial institution compliance is becoming more
complicated. However, financial institution compliance opens up new opportunities of product
diversification. Besides controlling the activities of financial service providers, the financial
institution compliance also takes into account many other factors like management of IT operations
risk, management of information life cycle and management of enterprise risk.

Financial institution compliance results in business value creation in long run.


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REGULATIONS OF FINANCIAL
INSTITUTIONS
Regulations of financial institutions differ from one country to another. The financial institution
regulations are delineated by the government authorities of different countries. The principal objective of
these government authorities is to regulate the financial activities going on in the country.

The financial regulatory bodies control the stock markets, bond markets, foreign exchange markets,
and various other segments of financial markets.

The financial regulations are laid out for the purpose of creating a fair and customer-friendly
environment in the financial market of a particular country, which is conducive for economic growth. Some of
the examples of financial regulatory bodies are the Federal Reserve Bank (United States), Reserve Bank of
India (RBI), Securities and Exchange Board of India (SEBI), the Financial Services Authority (FSA) in the
United Kingdom, the Securities and Exchange Commission (SEC) in the United States and many others.
The statutory objectives of the regulatory bodies of financial institutions include the following:
Market confidence: Sustaining confidence in the financial markets is one of the most important
objectives of the financial regulatory bodies
Consumer protection: Ensuring the most suitable level of customer protection
Public awareness: Encouraging public awareness about the financial market through imparting
educational programs
Eliminating financial crime: The financial regulations are designed for the purpose of reducing
financial crimes and frauds


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The regulatory principles that are followed by the regulators of financial institutions include the
following:

Role of management: Regulatory measures on the senior management of the financial institutions
so that they do not take decisions that are detrimental to the financial market

Innovation: Innovation should be facilitated with restriction so that the financial products and
services launched are compliant to the rules and regulations

International aspects: Strict monitoring should be there to see whether the international standards
are maintained or not

Efficiency and economy: The financial resources of a country should be used in the most prudent
and effective way

Proportionality: The financial regulations that are imposed should be proportional to the
advantages that are anticipated from the regulations

Competition: There should be strict supervision on the financial market for the purpose of
minimizing harmful effects of competition.


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FINANCIAL INSTITUTION FRAUD
Financial institution fraud prevention projects take care of the criminal violations involved in the
activities of these organizations. Financial institution crime is a serious legal violation, which includes fraud
against credit lender, stock brokers, banks credit unions, savings associations, check cashers and all other
financial organizations.

All commercial and financial undertakings in modern society bear the risk of fraud. The crime
insurance for financial institutions is specially designed to provide safeguard against fraud and theft.

Many a times it happens that few employees of a particular financial organization get involved in
fraudulent practices. The financial institution fraud prevention programs prove to be of great use in
protecting these institutions in the event of such vulnerability.

Burglary, counterfeiting, dishonesty of staffs, robbery, money laundering, forgery and many other
unlawful activities fall under the domain of financial institution fraud.

Criminal investigation agencies are usually employed to reduce the incidence of financial institution
fraud. The investigating officers enquire the staffs and management personnel to identify the fraudulent
employees. The investigation agencies work in association with legal bodies to combat the financial
institution fraud.

The reports of suspicious activity and currency transaction are the two tools, which are commonly
used to get the relevant information about the financial institution crime.

From the statistics of financial institution fraud one can get a clear about the extent of fraudulent
activity taking place in the global financial sector.


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As the incidence of financial institution fraud is increasing over the years, the need for crime
insurance is also growing in the insurance market. The crime insurance deal should be carefully selected.
Most of the crime insurance deals for the financial and commercial organizations offer financial coverage to the
first party whenever they face any asset loss due to fraud.

The incidence of financial institution fraud can be significantly reduced by strictly enforcing the strategies
for risk management.


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FINANCIAL INSTITUTION RISK
MANAGEMENT

Financial institution risk management is essential for the growth of both public and private financial
organizations. With the growing competition in the financial market, the task of risk management is becoming
increasingly important over the passage of time. Financial organizations face different types of operational
risks. Business risks may arise due to several reasons like production loss, theft, fire, natural calamities like
flood and earthquake. Reputational risk is another major threat faced by all popular financial service
providers.
Risk Management Policies of Financial Institutions
All financial institutions make use of risk management strategies to take early precaution against
unanticipated loss. Some of the widely used strategies of risk management are as follows:
Transfer of risk is always a better option than risk absorption for all financial institutions regardless
of size.
It is always advisable to eliminate risk-bearing assets. Financial organizations always try to use less
risky resources and other means of production.
There are some risks that are naturally associated with the activity of the financial organizations.
Elimination of those inherent risks is a real challenge for all financial institutions.
Risks are associated with different stages of business activity. Market creation, intermediation, servicing,
packaging, distribution and origination are the various services, which may involve risks.

Financial institution risks can be broadly categorized into three different types.
Legal
Systematic
Counterparty

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INTERNATIONAL FINANCIAL
INSTITUTIONS
The International Financial Institutions (IFIs) Program works to support local communities concerned
about projects financed mainly by the World Bank Group and Export Credit Agencies. By promoting
principles of transparency and participation, strong policies and procedures and citizen-based
accountability mechanisms, CIEL seeks to improve the social and environmental practices of these
institutions to promote a more sustainable paradigm of development.
Press Releases
Read recent announcements related to the work of the IFI Program.

How Does CIEL Affect the Policies of International Financial Institutions?
CIEL is one of the leading organizations dedicated to obtaining and maintaining independent
citizen-based accountability mechanisms.

What is the World Bank Group?
The World Bank Group is a multilateral development bank that provides loans and credits to
developing countries to stimulate social and economic development, yet it often support projects
that have significant negative social and environmental impacts.


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Private Sector Funding: IFC & MIGA
The International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency
(MIGA) give loans to promote private sector, corporate investment in developing countries, under
the theory that such investment will provide economic growth. The IFC and MIGA are not subject
to the jurisdiction of the World Bank Inspection Panel, but they are subject to review by the
Compliance Advisor/Ombudsman (CAO)...

World Bank Group's Social and Environmental Policies
The World Bank Group developed most of its social and environmental policies under pressure
from civil society in the late 80s when local peoples and international NGOs highlighted problems
with various projects...

The World Bank Inspection Panel
The World Bank Inspection Panel is a quasi-independent mechanism that was created under
pressure from non-governmental organizations and donor governments concerned about the
Banks history of policy violations...
Read about past Claims to the Inspection Panel.

Controversial Projects at the World Bank
Two of the most egregious recent projects at the World Bank include the China Western Poverty
Reduction Project and the Chad/Cameroon Oil Pipeline Project. Both have been the focus of
organized debates and protests by a variety of human and indigenous rights groups, and have even
alarmed some of the World Bank Group's own member states.


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Read "Profiling Problem Projects", a collection of case studies of misguided International
Finance Corporation projects.

Export Credit Agencies
Export Credit Agencies and Investment Insurance Agencies, commonly known as ECAs, are
public agencies that provide government-backed loans, guarantees and insurance to corporations
from their home country that seek to do business overseas in developing countries and emerging
markets...

International Financial Institutions Publications
Proceed to view CIEL's publications regarding IFIs.

International Financial Institutions Links
Proceed to view CIEL's links regarding IFIs.


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ROLES OF INTERNATIONAL FINANCIAL
INSTITUTIONS

The roles of international financial institutions are regulated by the international laws as they are
operational in more than one country. The shareholders or the owners of the international financial institutions
are national governments of the countries.
The international financial institutions (IFI) are getting involved in the conflicting situations very easily
due to various international laws. It is widely believed that structural and political concerns of the countries
cause obstacles to the development of roles of international financial institutions. This is caused mainly due to
the international humanitarian laws. On the other hand, it is also believed that the roles of international
financial institutions in the international community help them to make contribution to the enforcement and
implementation of the international humanitarian laws.
The involvement of IFI in international humanitarian law can also be helpful to the United Nations in
supporting its efforts to prevent violations of the international humanitarian law.
It is also helpful to enforce the law against those who are suspected of committing atrocities. The
International Monetary Fund (IMF) and World Bank are the specialized financial agencies of the United
Nations that function as independent international organizations. Their functionalities are not bound by the
UN decisions but are regulated by the UN Security Council resolutions.
The decisions made by the IFIs may be significantly influenced by the international humanitarian law
violations. The humanitarian law violations are licit economic concern to the IFIs and that should not be
excluded from its consideration as political issues
It is also argued that IFIs need to consider international humanitarian law issues in some circumstances
to fulfill their authorizations. The violations of rights under humanitarian laws can give insight into how the
governments will handle the international obligations like loan agreements with the IMF or the World Bank. It
is also seen that human rights violations during the conflicts can affect the economic growth of a country.

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FINANCIAL INSTITUTIONS IN INDIA
The regulators are assigned with the job of governing all the divisions of the Indian financial system.
These regulatory institutions are responsible for maintaining the transparency and the national interest in the
operations of the institutions under their supervision.
That has been incorporated for a definite purpose. These institutions include the insurance companies, the
housing finance companies, mutual funds, merchant banks, credit reporting and debt collection companies and
many more.
Apart from these, there are several other financial institutions that are existing in the country. These are
the stock brokers and sub-brokers, portfolio managers, investment advisors, underwriters, foreign institutional
investors and many more..

Financial Institutions in India as under :
Reserve Bank of India (RBI)

Securities and Exchange Board of India (SEBI)

Central Board of Direct Taxes (CBDT)

Central Board of Excise & Customs


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Apart from the Regulatory bodies, there are the Intermediaries that include the banking and non-
banking financial institutions. Some of the specialized
are as follows:
Unit Trust of India (UTI)
Securities Trading Corporation of India Ltd. (STCI)
Industrial Development Bank of India (IDBI)
Industrial Reconstruction Bank of India (IRBI), now (Industrial Investment Bank of India)
Export - Import Bank of India (EXIM Bank)
Small Industries Development Bank of India (SIDBI)
National Bank for Agriculture and Rural Development (NABARD)
Life Insurance Corporation of India (LIC)
General Insurance Corporation of India (GIC)
Shipping Credit and Investment Company of India Ltd. (SCICI)
Housing and Urban Development Corporation Ltd. (HUDCO)
National Housing Bank (NHB)

The banking institutions of India play a major role in the economy of the country. The banking institutions
are the providers of depository and transaction services. These activities are the major sources of creating
money. The banking institutions are the major sources of providing loans and other credit facilities to the
clients.

The Financial Institutions in India mainly comprises of the Central Bank which is better known as the
Reserve Bank of India, the commercial banks, the credit rating agencies, the securities and exchange board of
India, insurance companies and the specialized financial institutions in Ind


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WHAT ROLE DOES FINANCIAL
ACCOUNTING PLAY IN DECISION
MAKING?

In Business Accounting and Bookkeeping
Accounting has been defined as the process of identifying, measuring, recording and communicating
economic information to permit informed judgements and economic decisions. The primary purpose of
accounting is to help persons make economic decisions. In our society resources must be allocated among and
within all kinds of entities. Accounting information provides the basis for making decisions about resource
allocation.
Accounting information is financial information about economic activities. All economic entities (e.g.
businesses, government agencies, families, charitable entities) need such information because it is used for
making economic decisions about those entities.
1


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INDIAN MONEY MARKET

The money markets satisfy the short term needs. The money markets can be subdivided in to
organized and unorganized. The organized market consists of the banks and the RBI. Non-banking financial
institution such as the LIC, GIC and the subsidiaries and the UTI also operate in this market through banks.
Besides the commercial banks, the co-operative banks also participate in this market.
The organized market is largely made of the moneylenders, professionals and non-professional.
They operate throughout the length and breadth of India but without any link between themselves. It is
insulated from any monetary or credit controls. The RBI has no control over this market. This market is
shrinking because of the fast expansion of the organized sector.
There are three main components of the organized sector. They are the interbank call market, bill
market and the bank loan market. The unorganized market also has its own market. The call market is small
and restricted. The other market is quite important. The indigenous bills are called hundis and the market is
quite active. The indigenous bankers are still are measure source for the small borrowers.
The money market provides short term funds to the borrowers whether its the government or others.
The short term surpluses of the financial and non-financial units including the state government, local
government and quasi government bodies. Banks do it by selling deposits of various kinds such as
participation certificates and bills discounted. The banks also deal in treasury bills that are sold on tap by the
RBI. The RBI acts the last resort to the market.


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INSTRUMENTS
Traditionally when a borrower takes a loan from a lender, he enters into a agreement with the lender
specifying when he would repay the loan and what return (interest) he would provide the lender for providing
the loan. This entire structure can be converted into a form wherein a loan can be made tradable by converting
it into smaller units with pro rata allocation of interest and principal. This tradable form of the loan is termed
as debt instruments.
Therefore, debt instruments are basically obligations undertaken by the issuer of the instrument as
regards certain future cash flows representing interest and principal, which the issuer would pay to the legal
owner of the instrument. Debt instruments are of various types. The key terms that distinguish one instrument
from another are as follows:
Issuer of the instrument.
Face value of the instrument.
Interest rate.
Repayment terms (and therefore maturity period/tenure).
Security or collateral provided by the issuer.

Following are the different debt instruments and their key terms and characteristics are discussed
below.
Banks and Development financial institutions:
Instruments issued by Development financial Institutions and Banks carry the highest credit ratings
amongst non-government issuers primarily because of the their linkage with the government and even there is
apperception that the government will not allow important development financial institutions and banks to fail
or default on their obligations. Development financial institutions are the second largest issuers of debt
instruments after the Government and the sovereign bodies. Virtually all development financial institutions
and banks raise Certificate of Deposit in order to raise their capital to meet their capital adequacy
requirements.

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Development financial institutions issue 1-3 year Certificate of Deposits as well as longer maturity
bonds. Banks mainly issue short term Certificate of deposit and they also issue bonds from time to time.
Previously for development financial Institutions bonds used to account for a very small part of their overall
resource raising which is changed last 5 years. For new private sector and foreign banks Certificate of
Deposits constitute an extremely important part of overall resource rising. Development of financial
Institutions.

Private sector companies:-
Private sector companies issues commercial papers and short and long term debentures. Capital
investments in the private sector was booming on the back of a strong capital market and private sector
companies used to raise loans by way of debentures in order to meet their overall fund requirements.
Sometimes, debentures were issued along with equity shares in the form of partly convertible debentures
which laid to :
Overall decline in the invest meant spending by the private corporate sector leading to a decline in
demand for raising money in all forms.
Increased demand for top quality debentures.
Banks were allowed to invest in private sector debentures, which indirectly gave term loans to other
companies.

Most of the debentures issued by the private sector banks are privately placed with institutional
investors. It is not feasible for a company to have a public issue of debentures because the cost of making
public issue is very high.


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Government owned or quasi government non corporate
entities:-
This is a new class of issuers which has emerged in last 5 years. The origin of these issuers lives in the
inability of state-governments to execute large infrastructure projects. These state governments have created
special purpose vehicles for executing these projects. These special purpose vehicles issue bonds/debentures
of typical maturity of the instruments ranging from 3-7 years.
The first prominent issue of this type was made in 1993 for Sardar sarovar Narmada nigam ltd by the
government of Gujarat to execute this project and then, Krishna Bhagya Jala Nigam, Maharashtra Krishna
Valley Development Corporation, Maharashtra State Road Development Corporation etc came with larger
issues for funding such ambitious infrastructure projects.
The actual subscribers of these instruments are largely institutional because there is a brief that the
state government behind the issuance would not be willing to face a large number of retail investors. Many of
the private developers have come forward to sponsor infrastructure projects.


35

DEVELOPMENTAL

FINANCIAL

INSTITUTION


36
INTRODUCTION
Financial institutions play an important role in the financial system. The financial intermediaries
taking place outside the banks attributed to the operation of the financial institution. Financial institutions
provide project finance to the needy Corporate and Government institution and perform an important role in
development of infrastructure of the country.
Broadly these financial institutions can be classified in to two broad categories depending on the basis
of incorporation and operation. The All India institutions like IDBI or Regional /state financial corporations
and thirdly other institution like DICGE and ECGC.
The ALL India financial institution is IDBI, ICICI, SIDBI, IIBI and IFCI;
Specialized financial institutions are EXIM Bank, ICICI Venture;
Investments institutions are UTI, LIC, GIC and subsidiaries and refinance institution are NABARD
and NHB;
State level institutions are SFCs (18) and SIDCs (28);


37
FINANCIAL INSTITUTIONS COVERED IN
THIS PROJECTS

FINANCIAL
INSTITUTIONS
PRiVATE
INSTITUTIONS
ICICI BANK
HSBC
IDBI
HDFC
GOVERNMENT
INSTITUTIONS
SBI
RBI
Non Banking Financial
Institution
LIC
GIC
UTI

38
WHAT IS A BANK ?
A bank as an institution which accepts deposits from the public and in turn advances loans by creating
credit. It is different from other financial institutions in that they cannot create credit though they may be
accepting deposits and making advances.

Primary
Functions

Agency
Functions

General Utility
Functions

Functions of Banks


39
Primary Functions
Acceptance of deposits
Lending money
Making investments
Borrowing money

Agency Functions
Collection and payment of cheques
Collection and payment of bills
Remittance of funds
Collections of government taxes
Undertaking administration of estates as executors and trustees

General Utility Functions
Issues of guarantees, letters of credit, cheques, credit and debit cards
Dealing with bullion, foreign exchange, merchant banking, safe custody of articles, etc,


40

WE
UNDERSTAND
YOUR
WORLD

41
INTRODUCTION

The Housing Development Finance Corporation Limited
(HDFC) was amongst the first to receive an in principle'
approval from the Reserve Bank of India (RBI) to set up a
bank in the private sector, as part of the RBI's liberalization
of the Indian Banking Industry in 1994. The bank was
incorporated in August 1994 in the name of 'HDFC Bank
Limited', with its registered office in Mumbai, India. HDFC
Bank commenced operations as a Scheduled Commercial
Bank in January 1995.

HDFC is Indias premier housing finance company and
enjoys an impeccable track record in India as well as in
international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy
growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well
over a million
dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market
segments and also has a large corporate client base for its housing related credit facilities. With its experience
in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise,
HDFC was ideally positioned to promote a bank in the Indian environment.

HDFC Bank began operations in 1995 with a simple mission: to be a World Class Indian Bank. We
realized that only a single minded focus on product quality and service excellence would help us get there.
Today, we are proud to say that we are well on our way towards that goal. HDFC Bank Limited (the Bank) is
an India-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 machines (ATMs) in 528 cities and total employees are 52687.


42
COMPANY PROFILE

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in
principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the
RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the
name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced
operations as a Scheduled Commercial Bank
in January 1995.

Promoters

HDFC is India's premier housing finance company and enjoys an impeccable track record in India as
well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and
healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio
covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans
to different market segments and also has a large corporate client base for its housing related credit facilities.
With its experience in the financial markets, a strong market reputation, large shareholder base and unique
consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.


43
CAPITAL STRUCTURE

The authorized capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The paid-up capital is Rs.311.9
crore (Rs.3.1 billion). The HDFC Group holds 22.1% of the bank's equity and about 19.4% of the equity is
held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). Roughly
31.3% of the equity is held by Foreign Institutional Investors (FIIs) and the bank has about 190,000
shareholders.
The shares are listed on the The Stock Exchange, Mumbai and the National Stock Exchange. The
bank's American Depository Shares are listed on the New York Stock Exchange (NYSE) under the symbol
"HDB".


44
HISTORY

HDFC BANK LTD. was incorporated in August 1994 in the name of 'HDFC Bank Limited, with its
registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in
January 1995. HDFC BANK LTD was amongst the first to set up a bank in the private sector. The bank was
incorporated on 30th August 1994 in the name of HDFC Bank Limited, with its registered office in Mumbai.
It commenced operations as a Scheduled Commercial Bank on 16th January 1995.

The bank has grown consistently and is now amongst the leading players 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 mortgage loans to different market segments and also
has a large corporate client base for its housing related credit facilities. With its experience in the financial
markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was
ideally positioned to promote a bank in the Indian environment In a milestone transaction in the Indian
banking industry, Times Bank was merged with HDFC Bank Ltd., effective February 26, 2000.


45
CUSTOMER SATISFACTION TOWARDS
HDFC BANK

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer
franchises across distinct businesses so as to be the preferred provider of banking services for target retail
and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's
risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity,
corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core
values - Operational Excellence, Customer Focus, Product Leadership and People.
The authorized capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The paid-up capital is
Rs.311.9 crore (Rs.3.1 billion). The HDFC Group holds 22.1% of the bank's equity and about 19.4% of the
equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue).
Roughly 31.3% of the equity is held by Foreign Institutional Investors (FIIs) and the bank has about
190,000 shareholders. The shares are listed on the The Stock Exchange, Mumbai and the National Stock
Exchange. The bank's American Depository Shares are listed on the New York Stock Exchange (NYSE)
under the symbol "HDB".


46
RESEARCH METHODOLOGY

A research design is the detailed blueprint used to guide a research study towards its objectives.
It is series of advanced decisions taken together comprising a master plan or a model for the conduct
of research in consonance with the research objectives.
It details the procedures necessary for obtaining the information needed to structure or solve the
marketing research problem .

The research methods will be used by us before the promotion :-

1. Direct Interview:

In this we directly will interview the Customer dealing with HDFC BANK.

Sampling Size - 40

Date Collection - Questionnaire & Personal Interview


47
BOARD OF DIRECTORS

Mr. Jagdish Capoor, Chairman
Mr. Keki Mistry
Mr. Vineet Jain
Mrs. Renu Karnad
Mr. Arvind Pande
Mr. Ashim Samanta
Mr. C. M. Vasudev
Mr. Gautam Divan
Dr. Pandit Palande
Mr. Aditya Puri, Managing Director
Mr. Harish Engineer, Executive Director
(w.e.f. 12.10.2007 subject to approval of RBI)
Mr. Paresh Sukthankar, Executive Director
(w.e.f. 12.10.2007 subject to approval of RBI)

48
TECHNOLOGY

HDFC Bank operates in a highly automated environment in terms of information technology and
communication systems. All the bank's branches have online connectivity, which enables the bank to offer
speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers
through the branch network and Automated Teller Machines (ATMs).
The Bank has made substantial efforts and
investments in acquiring the best technology available
internationally, to build the infrastructure for a world class
bank. In terms of software, the Corporate Banking business
is supported by Flex cube, while the Retail Banking
business by
Fin ware, both from i-flex Solutions Ltd. The systems are
open, scaleable and web-enabled.

The Bank has prioritised its engagement in
technology and the internet as one of its key goals and has
already made significant progress in web-enabling its core
businesses. In each of its
businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a
competitive advantage and build market share.


49
DISTRIBUTION NETWORK

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 761
branches spread over 327 cities across India. All branches are linked on an online real-time basis. Customers
in over 120 locations are also serviced through Telephone Banking.

The Bank's expansion plans take into account the need to have a presence in all major industrial and
commercial centres where its corporate customers are located as well as the need to build a strong retail
customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock
exchanges, the Bank has branches in the centers where the NSE/BSE have a strong and active member base.

The Bank also has a network of about over 1977-networked ATMs across these cities. Moreover, all
domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and
American Express Credit/Charge cardholders can access HDFC BANKs ATM network.


50
MISSION STATEMENT OF HDFC BANK

World Class Indian Bank.

Benchmarking against international standards.

To build sound customer franchises across distinct businesses.

Best practices in terms of product offerings, technology, service levels, risk management and audit &
compliance.


51
VISION STATEMENT OF HDFC BANK

The HDFC Bank is committed to maintain the highest level of ethical standards, professional integrity
and regulatory compliance. HDFC Banks business philosophy is based on four core values such as:-

Operational excellence.

Customer Focus.

Product leadership.

People.

The objective of the HDFC 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 requirements. The
HDFC Bank plus and the investment advisory services programs have been designed keeping in mind needs
of customers who seeks distinct financial solutions, information and advice on various investment avenues.


52
BUSINESS STRATEGY

Increasing market share in Indias 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.


53
AWARDS AND ACHIEVEMENTS
BANKING SERVICES

YEAR 2010
The Asset Triple A Awards
IDRBT Technology Awards 2009
ACI Excellence Awards 2010
Avaya Global Connect 2010
Financial Express- Ernst Youn Survey 2009-10
Asian Banker Excellence Awards 2009
Global Finance Award
Euromoney Private Banking and Wealth Management Poll 2010
Financial Insights Innovation Awards 2010
Business Today Best Employer Survey
2 Banking Technology Awards 2009
SPJIMR Marketing Impact Awards (SMIA)2010


54

YEAR-2009

EUROMONEY AWARDS 2009
'BEST BANK IN INDIA' Economic Times

Brand Equity &Nielsen Research annual survey 2009
Most Trusted Brand - Runner Up

Asia Money 2009 Awards
'Best Domestic Bank in India'

IBA Banking Technology Awards 2009
'Best IT Governance Award - Runner up'

Global Finance Award
'Best Trade Finance Bank in India for 2009

IDRBT Banking Technology Excellence Award 2008
'Best IT Governance and Value Delivery'

Asian Banker Excellence in Retail Financial Services
'Asian Banker Best Retail Bank in India Award 2009


55
BUSINESS SEGMENT

HDFC Bank offers a wide range of commercial and transactional banking services and treasury
products to wholesale and retail customers.

The bank has three key business segments :-

WHOLESALE BANKING SERVICES :-

The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian
corporate to small & mid-sized 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 services, cash management,
etc.

The bank is also a leading provider of structured solutions, which combine cash management services
with vendor and distributor finance for facilitating superior supply chain management for its corporate
customers.

Based on its superior product delivery / service levels and strong customer orientation, the Bank has
made significant inroads into the banking consortia of a number of leading Indian 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, stock exchange members and banks.


56
RETAIL BANKING SERVICES :-

The objective of the Retail Bank is to provide its target market customers a full range of financial
products and banking services, giving the customer a one-stop window for all his/her banking requirements.
The products are backed by world-class service
and delivered to the customers through the growing branch network, as well as through alternative delivery
channels like ATMs, Phone Banking, 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
distinct financial solutions, information and
advice on various investment avenues. The Bank also has a wide array of retail loan products including Auto
Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading
provider of Depository Participant
(DP) services for retail customers, providing customers the facility to hold their investments in electronic
form.

HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA
(VISA Electron) and issues the Master card Maestro debit card as well. The Bank launched its credit card
business in late 2001. By September 30,
2005, the bank had a total card base (debit and credit cards) of 5.2 million cards. The Bank is also one of the
leading players in the "merchant acquiring" business with over 50,000 Point-of-sale (POS) terminals for debit
/ credit cards acceptance at merchant establishments.


57
TREASURY :-

Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local
Currency Money Market & Debt Securities, and Equities. With the liberalization of the financial markets in
India, corporate need more sophisticated risk management information, advice and product structures. These
and fine pricing on

various treasury products are provided through the bank's Treasury team. To comply with statutory
reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury
business is responsible for managing the returns and market risk on this investment portfolio.


58

PRODUCT
OF
HDFC BANK


59
PERSONAL BANKING

ACCOUNT & DEPOSITS SERVICE

Banking should be effortless. With HDFC Bank, the efforts 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're
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 includes these services: -

Saving accounts.

Current accounts.

Fix deposits.

Demat account.

Safe deposits lockers.


60
Savings Accounts

These accounts are primarily meant to inculcate a sense of saving for the future, accumulating funds over a
period of time. Whatever persons occupation, bank have confident that person will find the perfect banking
solution. There some saving 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 balances 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 do is
maintain an Average Quarterly Balance of Rs. 10,000/-.

Saving Max Account
Welcome to a world of convenience. 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 present an account especially
dedicated to customer, which like a dutiful child will help you fulfill your needs in the best manner possible.


61
No frills Account
In an effort to make banking simpler and more accessible for customers, bank has introduced the 'No Frills'
Savings Account, which offers customer all the basic banking facilities. Customer can even avail customer
can put Zero Initial Pay-in and a Zero Balance account

Institutional saving accounts
A specially designed account that offers twin benefits of a savings as well as a current account. Customers
funds continue to earn you interest while he enjoys 29 hassle-free banking & a host of other

Salary Accounts
In this account customer 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 saving 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.
Reimbursement salary account.


62
Kids 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 customers Kids Advantage Account and watch the
savings grow as customers child grows. The accumulated savings in the Kids Advantage Account can over
the years help in meeting customer child's needs.

Main features and benefits of this account are as follow:-
For their Growing Needs

Free Education Insurance cover of Rs. 1, 00,000/- in the event of death of the parent / guardian
through vehicular accident by road, rail or air to safeguard the future of your child.
ATM/International Debit Card will be issued for children between 7-18 years of age in the child's
name with your permission. The amount your child is able to withdraw is Rs. 2,500/- at ATMs or
spend Rs. 2,500/- at merchant locations.
Free cash withdrawals on any other Bank's ATM*.
1 free Personalised cheque book for your child.
Monitor the transactions of your child's account with the free quarterly physical statement of account
or free monthly Email Statement of account.
Free Net Banking for you to monitor your child's account.
Free SMS/Email alerts informing you about the account transactions.

For their Secured Future
Standing Instruction to transfer any amount from your account to your Kid's Advantage Account every
month (Minimum value = Rs. 1,000/- & Minimum tenure = 1 year) (Mandatory).
Once the balance in the Kid's Advantage Account reaches/exceeds Rs. 35,000/-, the amount in excess
of Rs. 25,000/- will automatically be transferred into a Fixed Deposit for 1 year 1 day, in your child's
name, by signing in for our sweep-out facility.
You can also opt for systematic investments in mutual funds from the Kid's Advantage Account in
your child's name.

63
Current accounts

HDFC Bank Current Account gives the power of inter-city banking with a single account and access to
more than cities. From special cheques that get treated at par with local ones in any city where branch, faster
collection of outstation cheques (payable at branch locations), free account to account funds transfer between
HDFC Bank accounts to Free inter-city clearing of up to 100 lakhs per month, banks 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 transactions from the comfort of his office or home without stepping out.

There are various kinds 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.
100,000.

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


64
Premium current account
Business needs a partner who can manage finances while concentrate on growing business. Form this
account customer 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 & FREE inter-city clearing transactions across
our network up to
Rs.25 Lacs per month.

A Current Account with the benefits 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 ideal for carrying out day-to-day business transactions. With the HDFC Bank
Regular Current Account, customer can access account anytime, anywhere, pay using payable at par cheques
or deposit cheque at any HDFC bank branch. It also facilitates FREE NEFT transactions & FREE RTGS
collections 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 transactions anytime.

Reimbursement Current Account
No more paperwork, no more receipts to keep track of - a hassle-free account that allows deposit the
reimbursements receive from company/organization on a 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).

65
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 traveling abroad frequently? Received gifts 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.
Person can choose to set up your account either in US Dollar, Great Britain Pound or Euro.
To open this accounts a person as to follow this process: -

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 amount.

Flexi current account
Tired of static transaction limits during peak seasons? HDFC Bank Flexi Current Account is the answer to
changing banking needs during peak seasons. 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 benefit of higher transaction limits due to the higher average
balances maintained in account. Whats 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 to maintain a minimum Average
Monthly Balance (AMB) of just Rs. 75,000.


66
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 lacs, 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
Maximum benefits and minimum hassles for customer with Max Current Account with a Rs. 5 lacs
average quarterly balance requirement, bank present to world of privileges that helps business expand and
grow. Features like maximum free transaction limits including other beneficial features on this current
account truly enhances business potential to the Maximum.

Fix Deposits
Long-term investments form the chunk of everybody's future plans. An alternative to simply applying for
loans, fixed deposits allow to borrow from own funds for a limited period, thus fulfilling needs as well as
keeping savings 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 he/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.

If people believe in long-term investments and wish to earn higher interests on his/her savings, now is
the time to invest money in HDFC bank Fixed Deposit. Get up to 9.75% on HDFC Bank Fixed Deposit with
an additional 0.50% for Senior Citizens. What's more NO PENALTY if withdraw part of the FD in times of
need. Flexibility, Security and High Returns all bundled into one offering.


67

Regular fix deposit
As per the rules and regulation of the bank a person can deposit their money in to 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 time that Bank fixed deposits booked by an Individual/HUF for
5 years & up to Rs. 1,00,000/- will be allowed exemption under Sec 80C of the Income Tax Act,1961 subject
to necessary declarations taken from the Customer.

Supper saver facility
Customer can enjoy a high rate of interest along with the liquidity of a Savings Account by opting for a
Super Saver Facility on his or her savings account. Avail of an overdraft facility of up to 75% of the value of
his or her Fixed Deposit.

Sweep-in facility
Do you wish to avoid taking overdrafts, and still take advantage of your Fixed Deposits? Then what you
need is a Sweep-In Facility on savings account. Link Fixed Deposit to Savings or Current Account and use it
to fall back on in case of emergencies. A deficit in Savings or Current Account is taken care of by using up an
exact value from Fixed Deposit. Since deposits are broken down in units of Re 1/-, customer will lose interest
only for the actual amount that has been withdrawn.


68
Demat Account
Nowadays share market is becoming is the main occupation of the person. So to avoid faulty
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 documents that get mutilated or lost in transit.

HDFC BANK is Depository participant both with -National Securities Depositories Limited (NSDL)
and Central Depository Services Limited (CDSL).

Safe Deposit Lockers
A Safe Deposit Locker with HDFC Bank is the solution to persons fear. Located at select branches in
cities all over the country, banks lockers ensure the safe keeping of valuables.

Eligibility
An individual (not minor), firms, limited company, associations, clubs, trusts, societies, etc may hire a locker.

Advantages of safe deposit locker in HDFC bank

Lockers available in various sizes. i.e. Small, Medium, Large and Extra Large with varying rents.
Lockers are rented out for a minimum period of one year. Rent is payable in advance.
No deposits are required to avail a locker. Just open an account and get the locker facility.
There is a nominal annual charge, which depends on the size of the locker and the centre in which the
branch is located.


69
Nomination for Safe Deposit Locker

The Lockers and their contents can be nominated to people near and dear to you.
Nomination facility is available to individual hirer of Safe Deposit Locker.
In the case of a sole hirer of a safe deposit locker, nomination can be made in favor of only one
individual.
Where the safe deposit locker is hired in the name of a minor, the nomination shall be made by a
person lawfully entitled to act on behalf of the minor.

Terms & Conditions

For obtaining a Locker at HDFC Bank you must be an account holder with Bank.
Lockers can be allotted individually as well as jointly.
The Locker holder is permitted to add or delete names from the list of persons who can operate the
Locker and can have access to it.
Loss of Key is to be immediately informed to the concerned Branch.


70
LOAN

In todays competitive world every thing happens only with the help of money or through the money
every person need money. But some time a person has not cash on hand at that time he needs lone either from
any friend or from any financial
institute. 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 cant be satisfy. So, here
one solution for that person this is personal loan. From this he/she can fulfill their needs or requirement. It can
be any thing either a dream of vacation or son/daughters admission to college or any wedding, so personal
loan can be helpful in this entire requirement.

As person ordered in the hotel for tea or coffee and it is immediately came fast, same over here any
person want to get a personal loan with the nominal documents he can get the loan.


71
Home loan

HDFC Bank brings HDFC home loans to doorstep. 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 realize
dream.

Vehicles loan

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

Types of vehicles loan:

Two wheeler loans.
New car loan.
Used car loan.
Tractor loan (for agriculture business).
Commercial vehicle loan.
So, as per the requirement of the person there are these types of loans are available in this are at the
chip rate and hassel free from more documentation and other procedure. And commercial businessman can
get the benefits of the commercial vehicles loans. Thus as per the need of different people there are vehicle
loans available. And also terms and condition are different as per the requirement.

72
Express loan plus

Bank offer Express Loans Plus at person Doorstep to help fulfill all his/her needs. The procedure is
simple, documentation is minimal and approval is quick. It is helpful to person in repairing of house, School
admission or also in the family holiday.

Gold loan

With HDFC Bank's Gold 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 the gold jewellery and ornaments. There is also availability of the overdraft 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 important of education becoming very high. As it important becoming high it is becoming
costly. So in the higher education some time people can not effort a high price at a same time. So, there is
education loan is also available for the student.

A person can get loan up to 10 lacs to study in India and 20 lacs if he wants to study in abroad. Loan
available up to tenure of 7 years including moratorium period. Loans disbursed directly to the educational
institution. It is released as per fee schedules of institutes. Exclusive Telegraphic Transfer facility available for
courses abroad. Loans available for short duration/ job oriented courses also.


73
Loan against security

With HDFC Bank's Loan against Securities, person can get an overdraft against securities like Equity
Shares, Mutual Fund Units(Equity, Debt, FMPs), Gold Exchange Traded Fund(ETF), NABARD's Bhavishya
Nirman Bonds, Policies issued by LIC & Select Private Insurance Companies, NSC, KVP, UTI Bonds (ARS
& US64 Bonds) and Gold Deposit 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 bonuses Loan available to NRIs
against Shares, Mutual Funds
(equity, Debt, FMPs), US64 Bonds, 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 loans services providing by HDFC bank which are very hassle free and really benefits for
most of customer and most of customer are satisfied by the loan services providing by the bank.


74
CARD SERVICES

In todays competitive and fast time card services providing by the banks are really very important to
every person and every business needs or to take meal in to the hotel or to purchase jewellery from the
jewellery 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.

Credit cards
A person wants many things like, a trip to Bali, a diamond ring for wife's dreams. Some dreams can't wait.
If there's something person has always wanted. If a person wanted fulfills his wants he can get benefits from
the HDFC banks credit cards facilities.

Different types of credit

Classic cards
Silver Credit Card.
Value plus Credit Card.
Health Plus Credit Card.
Premium Cards:
Gold Credit Card
Titanium Credit Card
Woman's Gold Card
Platinum Plus Credit Card
Visa Signature Credit Card
World MasterCard
Commercial Cards
Corporate Credit Card


75
Debit cards
HDFC Bank Debit Cards 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.
Specialized card
Easy Shop International Business Debit Card .
Easy Shop Woman's Advantage Debit Card .
Easy Shop NRO Debit Card .
Kisan Card .

Prepaid card
Besides offering convenience, Prepaid Cards have been tailored to answer travel and gifting needs.

Forex Plus Cards
Prepaid Travel Card.
Gift Plus Cards
Prepaid Gift Card.
Food Plus Cards
Prepaid Food Plus card.
Money Plus Card
The Corporate Payment card


76

SHARE PRICE
OF
HDFC


77
SHARE PRICE OF HDFC {BSE}


78
SHARE PRICE OF HDFC {NSE}


79
SHARE PRICE OF HDFC {NYSE}


80
MEANS OF COMMUNICATION

The quarterly and half-yearly unaudited financial results are published in 'Business Standard' in
English and 'Mumbai Sakal' in Marathi (regional language). The results are also displayed on the Banks web-
site at www.hdfcbank.com. The shareholders can visit the Banks web-site for financial information,
shareholding information, dividend policy, key shareholders agreements, Memorandum and Articles of
Association of the Bank, etc. The web-site also gives a link to www.sec.gov where the investors can view
statutory filings of the Bank with the Securities and Exchange Commission, USA.

CODE FOR PREVENTION OF INSIDER TRADING

The Bank has adopted a share dealing code for the prevention of insider trading in the shares of the
Bank. The share dealing code, inter alia, prohibits purchase / sale of shares of the Bank by employees while in
possession of unpublished price sensitive information in relation to the Bank.


81
BALANCE SHEET SIZE
(Rs. Crores)

222459

183271

2009 2010


82
ADVANCES
(Rs. Crores)

127262

98883

2009 2010


83
RETAIL ASSETS
(Rs.Crores)

72271

61154

2009 2010


84
DEPOSITS
(Rs. Crores)

167404

142812

2009 2010


85
SAVINGS DEPOSITS
(Rs. Crores)

49877
34915

2009 2010


86
RETURN ON CAPITAL
(%)

16.80%

16.20%

2009 2010


87
PROFIT AFTER TAX
(Rs. Crores)


88
DIVIDEND PER SHARE
(Rs.)


89
EARNING PER SHARE
(Rs.)


90
RUPEE EARNED


91
RUPEE SPENT


92
SWOT ANALYSIS


93
WHAT IS SWOT ANALYSIS?

SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective
of the business venture or project and identifying the internal and external factors that are favorable and
unfavorable to achieving that objective. The technique is credited to Albert Humphrey, who led a convention
at Stanford University in the 1960s and 1970s using data from Fortune 500 companies.

SWOT ANALAYSIS OF HDFC BANK

STRENGTHS

HDFC is the strongest and most venerable play on Indian mortgages over the long term. The
management of the bank is termed to be one of the best in the country.
HDFC has differentiated itself from its peers with its diversified network and revamped distribution
strategy.
HDFC has been highly proactive in passing on the cost and benefit to customers.
Besides the core business, HDFCs insurance, AMC, banking, BPO, and real estate private equity
businesses are also growing at a rapid pace and the estimated value of its investments/subsidiaries
explains ~30% of HDFCs market capitalization.
High degree of customer satisfaction.
Lower response time with efficient and effective service.
Dedicated workforce aiming at making a long-term career in the field.
Superior customer service vs. competitors.
Large share of low-cost deposits, higher net interest margin.
Better quality of assets, NPA of 0.4 per cent.
Free float available, FIIs can buy its stock.
Higher profitability.

94
WEAKNESSES

High dependence on individual loans.
Major stake held by American financial groups which are under stress due to economic slowdown.
Customer service staff needs training.
Processes and systems, etc need to be better managed.
Management covers insufficient.
Sectoral growth is constrained by low unemployment levels and competition
for staff.
Marginal international presence.
No next line of leadership.
Not very aggressive in M&A space, growing only organically.
Possible takeover target.

OPPORTUNITIES
Fast growing insurance business in the country.
Untapped rural markets.
Could extend to overseas broadly.
Fast-track career development opportunities on an industry-wide basis.
An applied research centre to create opportunities for developing techniquesto provides added-value
services.
Unique partnership to create job opportunities for IFBIs PGDBO students.
HDFC bank automates business processes with Staff ware; HDFC Bank anticipates major cost savings
whilst maintaining high levels of customer service thanks to new enterprise software agreement.
HDFC Bank plans to set up a non-banking finance company (NBFC) to undertake fund-based
activities.


95
In recent times, India has witnessed entry of many international banks like CITI Bank, YES Bank etc
which posses an external entrant threat to HDFC Bank as this Banks are known for their art of
working and maintain high standards of customer service.
After showing a significant growth overall, India is able to attract many international financial &
banking institutes, which are known for their state of art working and keeping low operation costs.

THREATS
Loss of market share to commercial banks and HFCs
Higher than expected increase in funding cost
Risk of fraud and NPA accretion due to increase in interest rates and fall in property prices is inherent
to the mortgage business
Lack of infrastructure in rural areas could constrain investment.
High volume/low cost market is intensely competitive.
Very high competition prevailing in the industry
Extension overseas holds a lot of risk!
Threat from credit card collections dept.
Varying and In-Convenient ECS dates.
Unlike Government Banks, an account needs a minimum balance ofRs.10,000


96

EUROMONEY DECLARES HDFC BANK
BEST PRIVATE BANKING
SERVICES OVERALL IN INDIA

-Also adjudged Best Local Bank in India for the 2nd year in a row-
Mumbai, February 17, 2010: HDFC Bank, one of Indias premier banks, has been declared the Best
Private Banking Services overall in the Euromoneys annual global Private Banking and Wealth
Management Poll - 2010. The survey also recognized HDFC Bank as the Best Local Bank in India for the
second consecutive year.

According to Euromoney, HDFC Bank's nomination as Best Private Banking Services indicates the
Banks excellence in both advisory and portfolio management across a range of asset classes and investment
styles. The rankings are based on qualitative and quantitative survey supported by quantitative data provided
by the participating banks. The survey also includes competitors' perceptions of the best performing providers
in defined client and product categories.

Commenting on this recognition, Abhay Aima, Group Head Equities, Private Banking, Third
Party Products, NRI & International Consumer Business said It is an honor for us to be conferred with
these awards. At HDFC Bank, we understand the challenges in the market and strongly believe that we have
the right business strategy to address the growing market needs and capitalize on opportunities to build
partnerships for mutual development with our clients. The growth in private banking in India is inclusive and
we are witnessing growth from Tier 2 and Tier 3 cities also. He further added In the process we have also
outperformed all global private banks operating in India. Interestingly even in Asia, in the private bank
category, we have moved up in rankings, to 10th position in the current year from 23rd in the previous year.


97
The survey results reflect a global trend where new regional/ national players along with a few leading
international banks are now making good inroads in the global Private Banking space. Euromoney Private
Banking and Wealth Management Services is the global industry benchmark for the wealth management
industry and cover over 60 countries every year, as well as global and regional awards. The results are based
on combinations of performance figures and nominations. The year Euromoney received a total of 1800 votes,
up almost 10% on last years poll. Votes cast represented $6.8 trillion of assets under management.


98
HDFC Bank opens its 4000th ATM in the
country

Mumbai, February 21, 2010: HDFC Bank, one of Indias premier banks, has opened its 4000
th
ATM
in the country at Mangalore. This is the Bank's 8th ATM in the city and 1165th in the South overall. The new
ATM located at Vijaya Mahal, NH 17, Surathkal was inaugurated by Mr. K. Padmanabha, President,
CAMPCO Ltd., Mangalore.

With the introduction of "Faster ATMs" an HDFC Bank customer can, at any time of the day, now do
cash withdrawal at any HDFC Bank ATM in 40% less time. The time thus saved is utilized for logical cross
sell and targeted marketing to the customers. The customers can also do other transactions on the ATM like
credit card payment, cheque status enquiry, transfer funds between accounts, viewing account balances and
mini statements.

Speaking on the occasion Mr. Rahul Bhagat, Country Head - Retail Liabilities, Marketing &
Direct Banking Channels said, We have always believed in using technology to enhance customer
experience and the fact that over 80% of our regular customers transact at the ATM is proof that adoption of
such innovations is very high. It is a matter of great satisfaction for us that we have 4,000 such ATMs in
service today and will continue to expand in future.


99
BEST RETAIL BANK

The Asian Banker declares HDFC Bank the Best Retail Bank in India

HDFC Bank wins for the 4th year in a row

More than 130 retail financial institutions participated from 22 countries across the Asia Pacific, Gulf
and Central Asian regions

Mumbai, March 29, 2010: HDFC Bank, one of Indias premier banks, has won The Asian Banker's
Best Retail Bank in India award this year. Beating a host of other competitors in Asia Pacific, Gulf
Cooperation Council (GCC) and Central Asia on a range of parameters, the Bank has won the Best Retail
Bank in India award for the fourth year in a row. The Bank also emerged best in the Automobile Lending
sector.

Some of the parameters that winners were measured on:

Outstanding annual performance of the retail banking unit
Sustainability as a franchise over a long period of time and across economic cycles
A well-defined franchise in the chosen marketplace
Transparency and accountability of business model
Ethical banking
Clear sales and execution skills at the product level
Rigorous risk management capabilities
Superior business and operational processes and technology
Strong penetration and efficiency of distribution channels
Focus on developing human resources to support the banks strategy


100
Announcing the Asian Banker Excellence awards 2009, the publication has observed in its
communication to the company, HDFC Bank has passed all stringent screening and requirements throughout
the Excellence in Retail Financial Services evaluation process and been granted the awards.
The Asian Banker Excellence in Retail Financial Services Programme was instituted in 2001 on the premise
that an outstanding player in the retail financial services industry should build business franchises that are
sustainable, competitive and profitable over a period of time.


101

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