A

PROJECT REPORT ON PROFITABILITY & OPERATIONAL EFFICIENCY OF

HDFC BANK LTD.
IN PARTIAL FULFILLMEN OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF M.B.A IN

FINANCE
SUBMITTED BY RIJVANI BHARATKUMAR RAJKUMAR ROLL NO. 521020889 SUBMITTED TO

JULY 2012

BONAFIDE CERTIFICATE

SMU
Directorate of Distance Education Sikkim Manipal University Manipal – 576104 TO, THE PRINCIPLE, INNOVATIVE SCHOOL OF BUSINESS MANAGEMENT, MEHSANA This is to certify that RIJVANI BHARATKUMAR RAJKUMAR SEM-4 MBA student of SIKKIM MANIPAL UNIVERSITY in this institute for the year 2011-2012. As a part of the, the student has completed the project report titled, “PROFITABILITY AND OPERATIONAL EFFICIENCY OF HDFC BANK LTD” The project report is prepared by the student under the guidance of Prof. ARCHNA RAISINGHANI

SIGNATURE HEAD OF THE DEPARTMENT

SIGNATURE FACULTY IN CHARGE

1.1 HISTORY OF HDFC BANK 1.2 SUBSIDIARY & ASSOCIATES COMPANIES 1.3 BUSINESS FOCUS 1.4 BOARD OF DIRECTORS 1.5 PROFILE 1.6 DISTRIBUTION NETWORK 1.7 BUSINESSES OF HDFC BANK LTD 1.8 PRODUCTS & SERVICES

1.1 HISTORY OF HDFC BANK

HDFC was incorporated in 1977 with the primary objective of meeting a social Need – that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million. The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. In the year 1998 HDFC Bank had tied up with the Ahmadabad Stock Exchange (ASE) to act as its clearing bank.

1.2 Subsidiary and Associate Companies

The subsidiaries of HDFC consists of
1. HDFC Bank 2. HDFC Mutual Fund 3. HDFC Standard Life Insurance Company 4. HDFC Realty 5. HDFC Chubb General Insurance Company Limited. 6. Intel net Global Services Limited 7. Credit Information Bureau (India) Limited 8. Other Companies Co – Promoted by HDFC i. HDFC Trustee Company Ltd. ii. GRUH Finance Ltd. iii. HDFC Developers Ltd. iv. HDFC Venture Capital Ltd. v. HDFC Venture Trustee Company Ltd vi. HDFC Securities Ltd. vii. HDFC Holding Ltd. viii.Home Loan Services India Pvt. Ltd

1.3 Business Focus

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values - Operational Excellence, Customer Focus, Product Leadership and People.

1.4BOARD OF DIRECTORS

Mr. C. M. Vasudev, Chairman Mrs. Renu Karnad Mr. Ashim Samanta Dr. Pandit Palande Mr. Partho Datta Mr. Bobby Parikh Mr. Anami N Roy Mr. Keki Mistry (re-appointed on 19.01.2012) Mr. Aditya Puri, Managing Director Mr. Harish Engineer, Executive Director Mr. Paresh Sukthankar, Executive Director.

1.5 PROFILE OF HDFC BANK LTD.

Type Traded as

: Public : BSE: 500180 NSE: HDFCBANK NYSE: HDB BSE SENSEX Constituent

Industry Founded Headquarters Key People Products

: Banking Financial Services : Augast 1994. : Mumbai, India : Aditya Puri ( M.D ) : Credit cards, consumer banking, corporate banking, finance and insurance, mortgage loans, private banking, private equity, wealth management

Revenue Profit Total Assets Total Equity Website

: US$ 5.585 billion (2011) : US$ 923.8 million (2011) : US$ 65.483 billion (2011) : US$ 7.769 million (2011) : HDFCBank.com

1.6 DISTRIBUTION NETWORK

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of 2,544 branches spread in 1,399 cities across India. All branches are linked on an online realtime basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centres where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE have a strong and active member base.

The Bank also has 9,333 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.

1.7 BUSINESSES OF HDFC BANK LTD

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 corporates and agri-based businesses. For these customers, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. The bank is also a leading provider of structured solutions, which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. Based on its superior product delivery / service levels and strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of leading Indian corporates including multinationals, companies from the domestic business houses and prime public sector companies. It is recognised as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock exchange members and banks.

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 customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, NetBanking 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 Mastercard Maestro debit card as well. The Bank launched

its credit card business in late 2001. By March 2010, the bank had a total card base (debit and credit cards) of over 14 million. The Bank is also one of the leading players in the “merchant acquiring” business with over 90,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc. Treasury Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the liberalisation of the financial markets in India, corporates need more sophisticated risk management information, advice and product structures. These and fine pricing on various treasury products are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio.

1.8 PRODUCTS & SERVICES
Product range: The following is the product range offered at HDFC: While various Deposit products offered by the bank are assigned different names, the deposit products can be categorized broadly into the following types. Definition of major deposit schemes are as under: -

1. Demand deposits:
"Demand Deposits" means a deposit received by the bank which is withdrawn able on demand; Savings Account: "Savings Deposits" means a form of Demand Deposit which is subject to restrictions as to the number of withdrawals as also the amounts of withdrawals permitted by the bank during any specified period; HDFC provides with saving bank account with the usual facilities, and one also gets a free ATM card, intrbranch banking, bill payment facilities, phone banking and mobile banking. some exclusive features and benefits with HDFC Bank Regular Saving Account are as follows:

Wide network of branches and over 7300 ATMs to meet all your banking needs, no matter where you are located. Bank conveniently with facilities like NetBanking and MobileBanking – check your account balance, pay utility bills or stop cheque payments all via SMS. Never overspend – shop using your International Debit Card that reflects the actual balance in your savings account. Personalisedcheques with your name printed on each cheque leaf for enhanced security. Take advantage of BillPay – an instant solution so you can pay all your frequent utility bill payments. Instruct for payments over the phone or through the Internet. Avail of facilities like Safe Deposit Lockers, Sweep-In and Super Saver facilities on your account. Free cash withdrawals at any other Bank's ATMs* Free Payable-at-ParThis means you only have to pay the amount written on the cheque and not the service charges that might otherwise be charged to you, especially when you send a cheque to someone out of your city or country.chequebook, without any usage charges.

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Free InstaAlerts for all account holders for lifetime of the account. Free passbook facility available at home branch for account holders (individuals). Free Email Statement facility.

2. Term Deposits:
"Term Deposit" means a deposit received by the bank for a fixed period withdraw

able only after the expiry of the fixed period and includes deposits such as Recurring / Double Benefit Deposits / Short Deposits / Fixed Deposits / Monthly Income Certificate / Quarterly Income Certificate.

3. Notice Deposit:
''Notice Deposit'' means Term Deposit for a specific period but which can be withdrawn on giving at least one complete banking day's notice.

4. Current Account:
"Current Account" means a form of Demand Deposit wherefrom withdrawals are allowed any number of times depending upon the balance in the account or up to a particular agreed amount and will also include other deposit accounts which are neither Savings Deposit nor Term Deposit; The account holder gets a personalized cheque book, monthly account statements, and Inter-branch banking.

5. Corporate Account:These are more commonly known as Salary Accounts. These are account in HDFC bank with zero balance. These are given to salaried people. These accounts are opened by the employer for the employees to deposit the salary of the employee directly to the account.

6. HDFC Bank Preferred:A preferential Savings Account where in, one is assigned with a dedicated Relationship Manager, who’s you’re the one point contact. One also get privileges like fee waivers, enhanced ATM withdrawal limit, priority locker allotment, free Demat Account and lower interest rates on loans.

7. Sweep-In Account:A Fixed Deposit linked to one’s Savings Account. So, even if one’s Savings Account runs a bit short, one can issue a cheque (or use ATM Card). The money is automatically swept in to one’s Savings Account from one’s Fixed Deposit Account. The excess funds in the account are directly transferred to the fixed deposit account

of the account holder.

8. Super Saver Account:
It gives one an overdraft facility up to 75% of one’s fixed deposit. In an emergency, you can access your funds while your fixed deposit continues to earn high interest.

9. HDFC Bank Plus:
Apart from Regular and Premium Current Accounts HDFC also has HDFC Bank Plus, a Current Account and then something extra for the HDFC bank customers. One can transfer up to Rs. 50 lakh every month at no extra charges, between the four metros. One can also avail cheque clearing between the four metros, get cash delivery/pick-up up to Rs. 25000/-, home delivery of demand drafts, at-par cheque, outstation cheque clearing facility, etc.

10. Demat Account:
One can conduct hassle-free transactions on the stock market for one’s shares. The shares held by the customer are protected from damage, loss and theft, by maintaining shares in electronic form. This account can be accessed through Internet too. these

11. Loans:
There are a variety of loan schemes offered like personal loans, new car loans, used car loans, loan against shares, consumer loans, two wheeler loans, and home loans. These are available with easy payback in monthly instalments. Loans are sanctioned with easy documentation and quick delivery.

Home Loan - Home loans for individuals to purchase (fresh / resale) or construct
houses. Application can be made individually or jointly. HDFC finances up to 85% maximum of the cost of the property (Agreement value + Stamp duty + Registration charges) based on the repayment capacity of the customer.

Home improvement loan
HIL facilitates internal and external repairs and other structural improvements like painting, waterproofing, plumbing and electric works, tiling and flooring, grills and Aluminum windows. HDFC finances up to 85% of the cost of renovation (100% for

Existing customers) subject to market value of the property. Purpose  External repairs  Tiling and flooring  Internal and external painting  Plumbing and electrical work  Waterproofing and roofing  Grills and aluminum windows  Waterproofing on terrace  Construction of underground/overhead water tank  Paving of compound wall (with stone/tile/etc.)

Home extention loan
HEL facilitates the extension of an existing dwelling unit. All the terms are the same as applicable to Home Loan. · Purpose HDFC Home Extension Loan makes it convenient for you to extend or add space to your home. Be it an additional room, a larger bathroom, or even enclosing an open balcony. · Maximum loan · 85% of the cost of extension · Maximum Term 20 years subject to your retirement age

· Applicant and Co- Applicant to the loan
Home Loans can be applied for either individually or jointly. Proposed owners of the Property will have to be co-applicants. However, the co-applicants need not be co owners. · Adjustable Rate Home Loan

Loan under Adjustable Rate is linked to HDFC's Retail Prime Lending Rate (RPLR).The rate on your loan will be revised every three months from the date of first disbursement, if there is a change in RPLR, the interest rate on your loan may Change. However, the EMI on the home loan disbursed will not change. If the interest rate increases, the interest component in an EMI will increase and the Principal component will reduce resulting in an extension of term of the loan, and vice versa.

12. MOBILE BANKING

13. INVESTMENT PRODUCTS

o o o o o

Life Insurance Health Insurance Motor Insurance Travel Insurance Home Insurance

2.1 INTRODUCTION TO PROFITABILITY 2.2 CONCEPT OF PROFITABILITY 2.3 OPERATIONAL EFFICIENCY

.

2.1 INTRODUCTION
Business is conducted primarily to earn profits. The amount of profit earned measures the efficiency of a business. The greater the volume of profit, the higher is the efficiency of the concern. The profit of a business may be measured and analyzed by studying the profitability of investments attained by the business.

MEANING AND DEFINITION OF PROFIBILITY: The word 'profitability' is composed of two words, namely; profit and ability. The term profit has already been discussed at length in detail. The term ability indicates the power of a firm to earn profits. The ability of an enterprise also denotes its earning power or operating performance. Also, that the business ability points towards the financial and operational ability of the business. So, on this basis profitability may be defined as ―the ability of a given instrument to earn a return from its use"' Weston and Brigham defines profitability as "the net surplus of a large number of policies and decisions." Profit being an absolute figure fails to indicate the adequacy of income or changes in efficiency resulting from financial and operational performance of an enterprise. Much difficulty and confusion comes home while interpreting the absolute figures of profit in case of historical or inter-firm comparisons due to variation in the size of investment or volume of sales etc. Such problems are handled by relating figures of profit either with the volume of sales or with the level of investment. A quantitative relationship is thereof established either in the form of ratios or percentages. Such ratios are names as profitability ratios. Thus, profitability may be regarded as a relative term measurable in terms of profit and its relation with other elements that can directly influence the profit. No doubt, profit and profitability are closely related and mutually interdependent, yet they are two different concepts. "The accounting concept of profit measures what have been accumulated, the analytical concept of profitability is concerned with future accumulation of wealth. Profit of an enterprise, reports about the financial and operational efficiency of the business. Whereas, profitability interprets the term profit in relation to other elements likely to affect these profits in order to help in decision-making. Profit is regarded as an absolute connotation as against profitability, which is regarded as a relative concept. Where profit is the residual income left after meeting all manufacturing, administrative expenses; profitability is the profit making ability of an enterprise. The profit figure indicates the amount of earning of a business during a special period. While, profitability denotes whether these profits are constant or improved or deteriorated, how and to what extent they can be improved. profit in two separate business concerns may be identical, yet, at many times, it usually happens that their profitability varies when measured in terms of size of investment* It has been aptly remarked that the role played by profits and profitability in a business enterprises is identical to the function carried out by blood and pulse in the human body. Profitability is the ability to earn profit from all the activities of an enterprise. It indicates how well management of an enterprise generates earnings by using the resources at its disposal. In the other words the ability to earn profit e.g. profitability, it is composed of two words profit and ability. The word profit represents the absolute figure of profit but an absolute figure alone does not give an exact ideas

of the adequacy or otherwise of increase or change in performance as shown in the financial statement of the enterprise. The word ‘ability’ reflects the power of an enterprise to earn profits, it is called earning performance. Earnings are an essential requirement to continue the business. So we can say that a healthy enterprise is that which has good profitability. According to hermenson Edward and salmonson ‘profitability is the relationship of income to some balance sheet measure which indicates the relative ability to earn income on assets employed.

2.2 CONCEPT OF PROFITABILITY

1.Accounting Profitability Profitability is a measure of evaluating the overall efficiency of the business. The best possible course for evaluation of business efficiency may be input-output analysis. Profitability can be measured by relating output as a proportion of input or matching it with the results of other firms of the same industry or results attained in the different periods of operations. Profitability of a firm can be evaluated by comparing the amount of capital employed i.e. the input with income earned i.e. the output. This is popularly known as return on investment or return on capital employed. It is regarded as the overall profitability ratio and has two components; net profit ratio and turnover ratio. That is: Return on Investment = Net Profit Ratio x Turnover Ratio Or, Return on Investment = Operating Profit x Sales Sales Capital Employed Or, Return on Investment = Operating Profit Capital Employed This method is increasingly accepted as an indicator of performance and capability. This is the reason for viewing operational and financial performance in relation to the scale of resources of funds required in production. That is, "a given amount of profit return should be evaluated in terms of the percentage profit return on the investment of funds. Moreover, "the return on capital used depicts the effectiveness of all the operating decisions from the routine to the critical, made by the management at all levels of the organization from shop foreman to President. 2. Social Profitability Along with the economic objective of earning profits, a business is also required to perform a large number of social objectives. Besides providing better quality of goods and services, it provides big employment opportunities to the people, better condition of work, fulfill community needs, conserves resources etc. C. Mean Cardiner rightly observed, "The darkness of avarice has been dispelled by the light of a new kind of social responsibility. Social objectives may prove profitable as well as expensive lo a concern. As some objectives aids in enhancing profitability by attracting customers like in case of providing quality goods. Whilst other may be counteractive such as elimination of pollution may cost the company and reduce its profitability, but it creates social profitability. In other words of Earnest Dale, these social objectives "appear lo urge the executive to assume an infinitely broad-gauge burden of responsibilities to all the various public with whom he clears. That makes it an obligation on the part of the company to disclose its financial, marketing, personnel and social objectives in a simple and concise form to all the members of the concern so that they can judge the influence of these objectives on their jobs.

3. Value Added Profitability Wealth generation is essential for every enterprise. Value added profitability indicates the wealth generated (net value earned) as a result of manufacturing process during a specified period. Wealth generation is the very essence for survival or growth of a business. An enterprise may survive without making profit but would cease to do so without adding value. "The enterprise, not making profit, is bound to become sick but not adding value may cause its death over a period of lime." Profit forms a part of value added. Thus, value added is a broader concept. "Value added at particular level of operating capacity and claims should be determined as value added can expose the efficiency and inefficiency of a business." The concept of value added can be related to the concept of social profitability of an enterprise. The investment of an enterprise comprises of the investment of shareholders, debenture holders, creditors, financial institutions etc.If an enterprise fails to generate growth or add anything as value added, it would simply mean that the enterprise is misusing public funds. This concept represents the wealth distribution in a proper manner besides suggesting how productivity can be increased when reducing the consumption of resources produces same or better outputs.

2.3 OPERATIONAL EFFICIENCY

Operational efficiency is the ability for an organization to execute its tactical plans while maintaining a healthy balance between cost and productivity. In other words, it's your ability to get things done without costing the company an arm and a leg. Typically, this is affected by the productivity of the organization which is measured by examining the amount of output (product or service) for a given amount of input (assets, employee work hours, etc.) In order to increase operational efficiency, you strive to increase the output without a change in input of a similar order of magnitude. Typically, this is done in one of two ways: 1. Change the underlying processes to eliminate unnecessary steps. This is the aim of Six Sigma and other process oriented frameworks. 2. Add capabilities to the underlying processes that increase output without increasing input, esp. using IT assets such as SAP, Salesforce.com, etc. It is nearly impossible to increase output without affecting the input requirements, so one must realize that you are simply trying to get a higher ratio of output:input than simply higher numbers.

3.1 3.2 3.3

OBJECTIVES OF THE REPORT. RESEARCH METHODOLOGY. RESEARCH METHODOLOGY CHART.

3.1 OBJECTIVES OF THE REPORT
Achieving the objective of any study is possible after a systematic analysis of facts and data associated with the study. This is the most important segment of the project. To evaluate the profitibility & operational efficiency of HDFC Bank Ltd for the purpose of commenting on the banks performance over duration of 5 years and a comparative analysis with Axis Bank Ltd. This chapter basically involves application of various tools and techniques on the data collected. Data for analysis are presented in a summarized manner in the master sheet. I made an attempt to analysis both profitibility and operational efficiency of HDFC Bank Ltd. It halps to summarize the large equations of financial and operational data to make efficient judgement about the banks performance.  To check the Profitibility and Operational efficiency of HDFC Bank Limited.  To compare the Profitibility and Operational efficiency of HDFC Bank Limited with its competitive Bank  To analyze that which type of services are most preferred and demanded by the customers.

3.2 RESEARCH METHODOLOGY
Research Type: Exploratory Research EXPLANATION: The study was regarding Profitability and operational efficiency of HDFC Bank Limited and comparative analysis between others Bank. Sample Design: A sample design is a definite plan for obtaining a sample for a given population. It refers to a techniques or procedure adopted in selecting items for the sample. Sampling: Further, the design that has been adopted for the study of the given topic is Profitability and operational efficiency of HDFC Bank Limited. Tools and techniques for Data Collection
I.

Primary Data: - The researchers collected primary data during the course of research period with the help of the questionnaire that was designed for the bank employee to collect the information that was required to carry out the research.

II. Secondary Data: - Secondary data was collected from books, articles, Internet and

previous research papers that had been conducted by the company representatives and officials. Tools and techniques of Analysis Simple statistical tools and techniques like average, ratios, pie charts, tables and graphs analysis method are used to analyze the data.

3.3 RESEARCH METHODOLOGY CHART

4. 1 4. 2 4. 3 4. 4 4. 5

DIRECTOR’S REPORT FINANCIAL REPORTS OF HDFC BANK LTD FINANCIAL REPORTS OF AXIS BANK LTD PERFORMANCE AT GLANCE WITH TABLE & CHARTS ANALYSIS & INTERPRETATION OF FINANCIAL EFFICIENCY WITH AXIS BANK LTD

4.1 Directors Report
The Directors have great pleasure in presenting the Eighteenth Annual Report on the business and operations of your Bank together with the audited accounts for the year ended March 31, 2012. FINANCIAL PERFORMANCE
(Rs in crore) For the year ended March 31, 2012 March 31, 2011 Deposits and Other Borrowings Advances Total Income Profit before Depreciation and Tax Net Profit Profit brought forward Total Profit available for Appropriation Appropriations: Transfer to Statutory Reserve Transfer to General Reserve Transfer to Capital Reserve Transfer to / (from) Investment Reserve Proposed Dividend Tax Including Surcharge and Education Cess on Dividend Dividend (including tax/cess thereon) pertaining to previous year paid during the year Balance carried over to Balance Sheet 1,291.8 516.7 (41.7) 1,009.1 163.7 981.6 392.6 0.4 15.6 767.6 124.5 270,553.0 195,420.0 32,530.0 8,055.7 5,167.1 6,174.2 11,341.3 222,980.5 159,982.7 24,263.4 6,316.1 3,926.4 4,532.8 8,459.2

2.1 8,399.6

2.6 6,174.2

The Bank posted total income and net profit of Rs 32,530.0 crore and Rs 5,167.1 crore respectively for the financial year ended March 31, 2012 as against Rs 24,263.4 crore and Rs 3,926.4 crore respectively in the previous year. Appropriations from net profit have been effected as per the table given above.

DIVIDEND Bank has had a dividend policy that balances the dual objectives of appropriately rewarding shareholders through dividends and retaining capital in order to maintain a healthy capital adequacy ratio to support future growth. It has had a consistent track record of moderate but steady increase over its history with the dividend payout ratio ranging between 20% and and in recognition of the overall performance during this financial in dividend declaration

25%. Consistent with this policy

year,your directors are pleased to recommend a dividend of Rs4.30 per equity share of Rs 2 for the year ended March 31, 2012 as against Rs 3.30 per equity share of Rs 2 (which was Rs 16.50 per share of Rs 10 before the share split) for the previous year ended March 31,2011. This dividend shall be subject to tax on dividend to be paid by the Bank.

AWARDS As in the past years, awards and recognition were conferred on HDFC Bank by leading domestic and international organizations and publications during the financial year ended March 31, 2012. Some of them are: The Asian Banker International Excellence in Retail Financial Services Awards 2012 - Best Retail Bank in India - Best Bancassurance Business in India - Best Risk Management in India -Business World Best Bank Award 2011 -CNBC TV18 Best Bank and Financial Institution Awards 2011 - AdityaPuri - Outstanding Finance Professional - CNBC TV18 Financial Advisor Award 2011

- Best Performing Bank (Private) -DSCI (Data Security Council of India) Excellence Awards 2011 - Security in Bank - Dun & Bradstreet Banking Awards 2011 - Best Private Sector Bank - SME Financing -Euromoney Awards for Excellence 2011 - Finance Asia Country Awards 2011 - Best Cash Management Bank in India - Best Trade Finance Bank in India - Financial Express Best Bank Survey 2010-11 - Best in Strength and Soundness -Institute of Chartered Accountants of India Awards 2011 - Excellence in Financial Reporting - International Data Corporation Financial Insights Innovation Awards 2011 - Excellence in Customer Experience -Skoch Foundation Financial Inclusion Awards.

RATINGS Instrument Rating Agency Fixed Deposit Program CARE AAA CARE Represents instruments considered to be ''of the best credit quality, offering highest safety for timely servicing of debt obligations, and carry minimal credit risk' Certificate of Deposits CARE A1 CARE Instruments with this rating are considered to have very Program strong degree of safety regarding timely payment of financial obligations. Such instruments carry lowest credit risk. Long term unsecured, CARE AAA CARE Represents instruments considered to be ''of the best credit quality, offering highest safety for timely servicing. Rating Comments

(Lower Tier II)

FITCH

AAA

Instruments with this rating are considered to have the highest degree of safety

Bond’s of Debt Obligations & carrying

Minimal credit risk

regarding timely servicing of financial obligations. Such instruments carry lowest credit risk

Tier I Perpetual Bonds CARE AAA CARE Represents instruments considered to be ''of the best credit quality, offering highest safety for timely servicing of debt obligations, and carry minimal credit risk'' Upper Tier II Bonds CARE AAA CARE Represents instruments considered to be ''of the best credit quality, offering highest safety for timely servicing of debt obligations, and carry minimal credit risk'' CARE - Credit Analysis & Research Limited FITCH - Fitch Ratings India Private Limited (100% subsidiary of Fitch Inc.) CRISIL - CRISIL Ltd. (A Standard &Poor''s company) ISSUANCE OF EQUITY SHARES During the year under review, 205.6 lac shares (post sub- division,each equity share of Rs 2) were allotted to the employees of HDFC Bankpursuant to the exercise of options under the Employee Stock Option Schemes of the Bank. These include the shares allotted under the Employee Stock Option Schemes of the erstwhile Centurion Bank of Punjab.

CAPITAL ADEQUACY RATIO HDFC Bank''s total Capital Adequacy Ratio (CAR) calculated in line with Basel II framework stood at 16.5%, well above the regulatory minimum of 9.0%. Of this, Tier I CAR was 11.6%. SUBSIDIARY COMPANIES HDFC Bank has two subsidiaries, HDFC Securities Limited (''HSL) and HDB Financial Services Limited (''HDBFS''). HSL is primarily in the business of providing brokerage services through the internet and other channels with a focus to emerge as a full-fledged financial services provider through a distribution of a bouquet of financial services products. The company continued to strengthen its distribution franchise and as on March 31, 2012 had a network of 184 branches across the country. During the year under review, the company''s total income amounted to Rs 210.0 crore as against Rs 260.5 crore in the previous year. The operations resulted in a net profit after tax of Rs 54.1 crore. HDBFS is a non-deposit taking non-bank finance company (''NBFC''), the customer segments being addressed by HDBFS are typically underserviced by the larger commercial banks, and thus create a profitable niche for the company to operate. Apart from lending to individuals, the company grants loans to small and medium business enterprises and micro small and medium enterprises, the principle businesses of HDBFS are as follows: - Loans - The company offers a range of loans in the secured and unsecured loans space that fulfill the financial needs of its target segment - Insurance Services - HDBFS is a corporate agent for HDFC Standard Life Insurance Company and sells standalone insurance products as well as products such as Loan Cover and Asset Cover. - Collections - BPO Services - The Company runs 6 call centres with a capacity of over 1700 seats. These centres cover collection requirements at over 200 towns through its calling and field teams.Currently the company has a contract with HDFC Bank for collection services.

As on March 31, 2012, HDBFS had 180 branches in 135 cities in order to distribute its products and

services. During the financial year ended March 31, 2012, the company''s total income increased by over 141% to Rs 431.8 crore as compared to Rs 178.9 crore in the previous year. During the same period the company''s net profit was Rs 51.1 crore as compared to Rs 15.8 crore in the previous year. In terms of the approval granted by the Government of India, the provisions contained under Section 212 (1) of the Companies Act, 1956 shall not apply in respect of the Bank''s subsidiaries. Accordingly , a copy of the balance sheet, profit and loss account, report of the Boardof Directors and the report of the auditors of HSL and HDBFS have not been attached to the accounts of the Bank for the year ended March 31, 2012. Shareholders who wish to have a copy of the annual accounts and detailed information on HSL and HDBFS may write to the Bank for the same. Further, the said documents shall also be available for inspection by shareholders at the registered offices of the Bank, HSL and HDBFS. INTERNAL AUDIT AND COMPLIANCE HDFC Bank has Internal Audit and Compliance functions which are responsible for independently evaluating the adequacy of all internal controls and ensuring operating and business units adhere to internal processes and procedures as well as to regulatory and legal requirements. The audit function also pro- actively recommends improvements in operational processes and service quality. To ensure independence, the audit department has a reporting line to the Chairman of the Board of Directors and the Audit and Compliance Committee of the Board and only a dotted line to the Managing Director. To mitigate operational risks, the Bank has put in place extensive internal controls including restricted access to the Bank''s computer systems, appropriate segregation of front and back office operations and strong audit trails. The Audit and Compliance Committee of the Board also reviews the performance of the audit and compliance functions and reviews the effectiveness of controls and compliance with regulatory guidelines.

CORPORATE SOCIAL RESPONSIBILITY

HDFC Bank has a defined guiding principle for all its social initiatives: ''Changing Lives by empowering individuals through Finance, Education and Training''. An essential element of the Bank''s Corporate Responsibility is its community initiatives which aim at empowering individuals at the bottom of the pyramid through developmental initiatives such as education and livelihood support. In the field of education its interventions are aimed at mainstreaming of school children and ensuring the quality of education they receive. HDFC Bank has undertaken a multitude of initiatives for retaining children in school and arrest the rate of dropouts. As part of these initiatives, pre-primary schools are run in communities with the objective of preparing and enrolling these children into mainstream education. Apart from providing basic nutritional and health needs, regular parent and community meetings are an integral part of this program which is currently running in Kolkata, Hyderabad and Delhi.

HDFC Bank in partnership with NGOs and the government has adopted state-run schools by providing educational support to the children and to train staff to ensure better levels of learning and lower rate of drop-out in state-run schools in Pune and Mumbai. Also needy and deserving children are identified based on set criteria and provided with educational support to cover the cost of their education in stat -run schools. In a unique initiative supported by the Bank, 30 children from government schools have been integrated to DPS School in Ahmedabad. HDFC Bank launched its Educational Crisis Scholarship Support (ECSS) in 2011 to reach out to students, studying in private /government-aided schools, who due to personal / family constraints, are unable to continue bearing the cost of education and are at risk of dropping out of school. HDFC Bank also undertakes programs that cover around 500 children through ''afterschool class'' and out-of school children through ''bridge class'' in Pune, Delhi and Kolkata, a rehabilitation program in Kashmir, Kolkata and Mumbai, where development, training and placement assistance is provided to differently abled individuals, so that they can lead a life of dignity, and financial literacy programs for children which are run in 458 schools in rural areas of Maharashtra, Tamil Nadu and Orissa to inculcate values of money and concept of savings. HDFC Bank has also created a financial literacy module which is run by its employee volunteers.

''Power of Banking'' is a two- hour-long interactive module designed for school children studying in Vth to VIIIth standards and covers simple concepts about money such as budgeting, saving and banking. Power of banking has also been redesigned to introduce financial concepts and values associated with money to street children. HDFC Bank''s livelihood initiatives are aimed at training and capacitydevelopment of youth and women in the age group of 18-30 years from economically weaker sections of society and to empower them to gain access to opportunities for sustainable livelihoods and growth. HDFC Bank''s livelihood support programs are aimed at empowering competency- based, skill-oriented technical and vocational training. Such training programs have been carried out in Andhra Pradesh, Maharashtra and Gujarat. In Kolkata, HDFC Bank has supported the setting up of a physiotherapy training unit where visually challenged candidates undergo a diploma in physiotherapy. In a pilot project undertaken in the same city, interest-free loans were given to school drop-outs who underwent training as laboratory technicians and were successfully placed in hospitals through industry interface. In addition to projects implemented through NGO partners, HDFC Bank also drives direct community initiatives through its employees. Changing Lives through Employee Engagement Employees are an integral part of all volunteering programs. With an organization of over sixty thousand people, HDFC Bank believes that it is in a unique position to leverage theknowledge base, skills and resources of its employees to ''Change Lives''. While employees are part of all the community-based interventions, the Bank also provides opportunities for employees to contribute through special programs that are centrally driven. Payroll Giving: Under this program, employees are provided with an easy and convenient system to donate small amounts on monthly basis and accumulate it to reach a corpus thatallows them individually to donate to a charity of their choice. Your Bank matches their contribution, There by endorsing the charity they choose to support. Currently, we have employees who have cumulatively supported over 50,000 individuals. Make A Difference Day: HDFC Bank celebrates ''Make A Difference Day'' annually as a community volunteering day where employees identify NGOs in their region and interact with

beneficiaries. Employees conduct activities, competitions and workshops for the underprivileged community. ''Make A Difference Day'' is celebrated as an opportunity for the employees to leave their laptops, conferences calls and emails and direct their passion, determination and skills for the benefit of communities.

HDFC Bank Fellowship: HDFC Bank supports the ''Teach for India'' movement which is a nationwide campaign aiming to bridge the educational gap in India by placing young professionals in low-income schools to teach full-time for two years, advocating educational equity. Each year, two employees are selected for the fellowship and are given a two-year sabbatical, during which they continue to receivetheir basic salary. Blood Donation: Employees of HDFC Bank have been actively organizing blood camps at all India level since 2007. The journey started with a collection of 4,385 units of blood and today has increased to 25,758 units. Identifying a need for preserving the blood especially in rural areas, employees initiated a drive to identify and support the setup of blood banks. This year too, HDFC bank supported this initiative and set up four blood banks.

Environmental Sustainability: HDFC Bank believes in taking responsibility for the effects of its operations on society and on the environment. It regards climate change mitigation and environmental improvements as essential elements of a sustainable business philosophy and this belief embodies the Bank''s approach to reduction of carbon emissions. It has conducted an inventory of energy-related emissions from its office buildings and retail branches and is taking steps to manage Green House Gas (GHG) emissions. HDFC Bank is also a signatory to the Carbon Disclosure Project (CDP). An important aspect of HDFC Bank''s GHG management strategy is behavioral modifications and employees are constantly being made aware of the importance of conservation. Through all these measures, the Bank has embarked on a mission to make tangible and meaningful difference to people''s lives. It will continue to walk the path and not rest tillthis goal is achieved. FINANCIAL INCLUSION

Over the last few years, HDFC Bank has been working on a number of initiatives to promote Financial Inclusion across identified sections of rural and urban, under-banked and un- banked consumers. These initiatives target segments of the population that have limited or no access to the formal banking system for their basic banking and credit requirements, by building a robust and sustainable model that provides relevant services and viable and timely credit that ultimately results in economically uplifting its customers and substituting the borrowings at usurious rates. The Bank''s initiatives in the rural or deeper geography dovetails in to the bank''s financial inclusion plans and also compliments the bank''s Corporate Social Responsibility initiative where the endeavor has been to provide banking services which are viable both for the customer and the bank. The Banks financial inclusion initiatives have been integrated across its various businesses, across product groups. By March 31, 2012 HDFC Bank has brought over 5 million households who were hitherto excluded from basic banking services under the fold of this program. Rural Initiative The Bank offers products and services such as savings, current, fixed & recurring deposits, loans, ATM facilities, investment products such as mutual funds and insurance, electronic funds transfers, drafts and remittances etc in its branches located in rural and under banked locations. The Bank also leverages some of these branches as hubs for other inclusion initiatives such as direct linkages to self-help groups and to promote Joint liability Group Loans, POS terminals and information technology enabled kiosks, as well as other ICT initiatives such as mobile banking in these locations. The Bank covers over 6,000 villages in the country through various distribution set ups, these include branches and business correspondents. Around half of the above villages are those having a population of less than 2,000 that have typically been financially excluded from the formal banking sector.

A number of retail credit products such as two-wheeler loans, car loans, mortgages etc. that are consumption products in urban centers happen to be means of income generation for rural consumers. Apart from loans directly linked to agriculture such as pre and post harvest credit, there are many other credit products that the Bank uses to aid financial betterment in rural locations. HDFC Bank has extended provision of its retail loans to large segments of the rural population where the end use of the products acquired (by availing Bank''s loans) is used for income generating activities. For

example, loans for tractors, commercial vehicles, two wheelers etc. supplement the farmer''s income by improving productivity and reducing expenses.

No Frills Savings Accounts A savings account is the primary requirement for the provision of other banking services, the account promotes the habit of savings, provides security, and inculcates confidence among the target segment in the banking sector. This product was launched by the Bank with a specific objective to provide customers a platform that enables them to inculcate the habit of savings. By not insisting on a requirement of a minimum balance, the entry barrier into the banking system has been removed, thereby giving the hitherto unbanked person to start experiencing benefits of banking. These accounts are offered only to customers who do not have any other bank account (are unbanked) no frills or who are either beneficiaries of a government welfare scheme or have annual incomes savings account HDFC Bank also offers these segments other accounts such as no frills less than a defined threshold (constitute the bottom of the economic pyramid). Apart from the basic salary accounts and limited KYC accounts. Given the specific segment that is being targeted, being a customer who does not have any other Bank account, this product truly addresses the cause of Financial Inclusion. Additionally the Bank also periodically tracks the behavior in these accounts to ensure that the accounts opened maintain a balance and are active. The total number of No Frills Savings Accounts opened as on March 2012 was at 7.60 lac accounts a s against 5.53 lac accounts as on March 2011. Sustainable Livelihood Financing Over the last one year, HDFC Bank has accelerated its direct linkage program to self-help groups, where the Bank itself works at the grass root level with women in villages, conducts financial literacy programs, forms groups and then funds these groups for income generation activities. This enables the delivery of viable credit to the rural poor in a sustainable manner & at the same time also inculcates the saving and banking habits. Till date the Bank has lent to over 73,000 Self Help Groups

and over 1,10,000 Joint Liability groups covering approximately 11.7 Lac households. HDFC Bank also disburses loans to its rural customers under the mutual guarantee micro loan product which is now termed as Joint liability group product. This product works on the principle of group guarantees and provides clean (not backed by any collateral) loans to the borrowers based on a guarantee by other borrowers. Agriculture and Allied Activities A large portion of India''s un-banked population relies on agriculture as the main source of livelihood. We believe provision of credit to farmers through various methods that your Bank has employed generating replaces the traditional money lending channel, while at the same time providing income activities. The Bank provides various loans tofarmers through its suite of specifically

designed products such as the Kisan Gold Card, tractor and cattle loans etc. In addition, the Bank offers post-harvest cash credit, warehouse receipt financing and bill discounting facilities to mandi (markets for grain and other agricultural produce) participants and farmers. These facilities enable the mandi participants to make timely payments to farmers. The Bank carries out this business through over 400 branches that are located in close proximity to mandis. The Bank targets specific sectors to capture supply chain of certain crops from the production stage to the sales stage. On the basis of these cashflows, HDFC Bank is able to finance specific needs of the farmers. This is further supported by using Business Correspondents closer to their respective locations and helping them to create a savings and banking habit. This model has currently been implemented with dairy and sugarcane farmers. The initiative currently underway includes the appointment of dairy societies and sugarcane co-operatives as business correspondents, through whom the Bank opens accounts of individual farmers attached to these societies. The societies route all payments to the farmers through this account. Gold Loans The Gold loan product is an offering which allows customers a reliable source of credit at the time of need. In the absence of this, either,credit would not have been available to these customers or would have been available at higher rates in form of unsecured loans. Gold loans provide a source of monetizing the household gold and at the same time provides an alternate source of funds. It provides financial independence to small traders, small entrepreneurs and house wives. It also substitutes

borrowing at usurious rates, particularly by small borrowers and weaker sections. Small and Micro Enterprises The Bank offers complete banking solutions to micro, small and medium scale enterprises across industry segments including manufacturers, retailers, wholesalers / traders and services. The entire suite of financial products including cash credit, overdrafts, term loans, bills discounting, export packing credit, letter of credit, bank guarantees,cash management services and other structured products are made available to these customers. One of the means to financial inclusion is by and micro enterprises which in turn provide employment opportunities to the supporting small

financially excluded. Though indirect, we believe this model may in many instances be more effective than providing subsidies that are often unsustainable, or never reach the intended beneficiary. Promoting Financial Awareness In addition to providing various products and services to the financially excluded, the Bank believes that imparting education and training to these target segments is equally essential to ensure transparency and create awareness. To this effect the Bank has put in place various training programs, these are conducted by Bank staff in local languages and cover not only the customers but also various intermediaries such as the Bank''s business correspondents. Through these programs the Bank provides credit counseling and information on parameters like savings habit, better utilization of savings, features of savings products, credit utilization, asset creation, insurance, income generation program etc. During the financial year ended March 31, 2012, over 5,400 financial awareness programs covering over 1,40,000 households were conducted. The bank also facilitates need based capacity building and market place for the customers with the objective of sustaining their livelihood in holistic manner. HUMAN RESOURCES The total number of employees of HDFC Bank was 66,076 as of March 31,2012. The Bank continued to focus on training its employees both – on the job as well as through training programs conducted by internal and external faculty. The Bank has consistently believed that broader employee ownership of its equity shares has a positive impact on its performance and employee motivation. HDFC Bank lists ''people'' as one of its stated core values. The Bank believes in empowering its employees and constantly takes various measures to achieve this objective.

STATUTORY DISCLOSURES The information required under Section 217(2A) of the Companies Act,1956 and the rules made there under as amended, are given in an annexure and forms part of this report. In terms of section 219(1)(iv) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Bank. The Bank had 66076 employees as on March 31, 2012. 120 employees employed throughout the year were in receipt of remuneration of more than Rs 60 lac per annum and 12 employees employed for part of the year were in receipt of remuneration of more than Rs 5 lac per month. The provisions of Section 217(1)(e) of the Act relating to conservation of energy and technology absorption do not apply to HDFC Bank. The Bank has, however, used information technology extensively in its operations.

MANAGEMENT’S DISCUSSIONS AND ANALYSIS
Macro-economic and Industry Developments
It was a challenging year for the Indian economy with lingering concerns over global growth prospects and financial stability weighing on external demand and international funding.Further, local headwinds such as inflation, rising interest rates and policy impediments have only exacerbated the impact of a shaky global environment on domestic growth. Aggressive monetary tightening curtailed leveraged spending pulling private consumption growth lower from 8.1% for the financial year ended March 31, 2011 to 6.5% for the financial year ended March 31, 2012, while policy hurdles such as land acquisition problems and environmental clearances dampened investment momentum dragging investment growth lower to 5.8% from 11.1% a year ago. The I ntensification of the debt crisis in Europe as well as a moderation in emerging markets across the globe pulled down export growth sharply in the second half of the financial year to 6% from close to 25% in first half of the financial year 2012, weakening a vital support to the GDP growth in the financial year 2012 The drag from local and global dampeners was largely concentrated on the industrial sector with growth for the year at 3.9%, sharply lower than the 7.2% recorded a year ago. Agricultural growth too slowed dow over the past year but this was largely because of an unfavorable base. While the monsoon season was more than adequate in the financial year 2012 and food grain

production was strong, an adverse base pulled down

agricultural growth in financial year 2012 to a

lower but robust rate of 3.0% against a remarkably strong reading of 7.0% in financial year 2011. Meanwhile, service sector growth remained strong supported by structural drivers such as firm rural demand and low penetration and registered. a growth of 9.4% against 9.3% in financial year 2011. On balance however, sturdy service sector growth was not enough to offset the drag from industry growth which pulled headline GDP growth in financial year 2012 lower to 6.9% against 8.4% a year ago While growth slowed down over the past year, inflation was slower to respond to this deceleration, remaining elevated through most of the financial year 2012. Exchange rate depreciation pressures driven by periods of extreme risk aversion exacerbated the impact of firm global commodity prices on domestic manufactured goods prices. Further, large fiscal imbalances and a relatively loose fiscal policy kept demand pressures on inflation intact. These led to the generalization of input price increases and have kept core inflation in the 7.5-8.0% range. Additionally, structural demand supply mismatches in specific food items kept food inflation sticky. As a result, headline inflation averaged 8.8% in financial year 2012 only marginally lower than the average inflation rate of 9.5% a year ago. The RBI therefore kept its vigil on inflation, hiking key policy rates by an aggressive 175 basis points between April, 2011- November, 2011. There are signs however that inflation is slowly moderating in response to subdued domestic demand and the lagged impact of past monetary tightening measures. While a favorable base helped, sequential price pressures also stabilized in recent months pulling headline inflation lower to 7.0% in February, 2012 from 9.5% a year ago. Further, core inflation came down from close to 8.0% a year ago to 5.7% in February, 2012. Given the attendant risks to growth and some signs of moderating inflation, the RBI diluted its hawkish stance in recent months, pausing its tightening cycle in December, 2011 and following this up with CRR cuts of 125 basis points since January, 2012 to address tight liquidity conditions.As a result, while lending rates were hiked by a sharp 150 basis points on average, most of this increase has been concentrated in first half of the financial year 2012. Rising interest rates, inflation and weak domestic demand impacted credit growth taking it lower from 23% in April, 2011 to 16% in February, 2012. Interest rate sensitive segments such as retail housing, vehicle and personal loans came under pressure with credit growth in this category slowing to 11.0% in February, 2012 from 16.5% a year ago. Further, tardy infrastructure project execution and subdued capex especially in areas such as power took infrastructure loan growth lower to 18.8% in February, 2012 from 40.0% a year ago.

Some segments such as roads and highways benefited from a turnaround in awarding activity which kept loan growth to the sector strong at 26-30% but this did little to arrest the slowdown in broader loan disbursements. Firm interest rates and deposit rate hikes of nearly 150 basis points over September, 2010-July, 2011 boosted deposit growth in first half of the financial year 2012. However, subdued base money growth reflecting muted forex asset accretion and thin foreign inflows started impacting deposit mobilization which pulled deposit growth lower to 14-15%, thus creating a structural drag on domestic liquidity.While liberalization in non-resident deposit rates helped growth in private remittances and transfers pushing it higher from 14% in financial year 2011 to over 25% in financial year 2012, firm commodity prices meant that import growth was much stronger. Further, growing global risk aversion boosted domestic demand for gold pushing the annual growth rate in gold imports to 75% from 25% a year ago. While subdued global demand drove export growth lower from 25% in first half of financial year 2012 to single digits in second half of financial year 2012, import growth remained strong at 25-30% thus widening the current account deficit close to 4% of GDP in financial year 2012 from 2.7% a year ago. On the other hand, muted global risk sentiment and periods of intense financial instability meant thin net capital inflows totaling USD 66 billion against USD 62 billion a year ago. As a result, the country saw net foreign outflows of USD 8-9 billion over the past year against net inflows of USD 13 billion a year ago. This kept the exchange rate under pressure leading to periods of extreme depreciation amidst a sharp fall in global risk sentiment and forcing the RBI to intervene and stabilize the domestic currency unit. While thin foreign inflows and efforts by the RBI to stem the pace of currency depreciation kept domestic liquidity under pressure, the government’s large market borrowing target only exacerbated the liquidity shortage. A combination of lower than budgeted revenue mobilization and an overshoot in subsidies drove the government to surpass its fiscal deficit target by more than 1% of GDP. This translated to extra borrowings of close to ` 1,00,000 crore through dated securities and a similar amount through treasury bills in second half of financial year 2012 on top of an already hefty dated securities draft of 4,17,000 crore budgeted for the year. As a result, the average banking system borrowing against surplus SLR (Statutory Liquidity Ratio) Securities from the RBI widened from ` 45,000 crore in first half of financial year 2012 to ` 1,20,000 crore in the second half of the year which kept government bond yields elevated taking the benchmark 10-yr yield to 8.55-8.60%, higher by 80 basis points over the previous year. Tight liquidity and aggressive monetary tightening over the

year meant that the short-end of the curve came under pressure with the yield curve inverted and the 3-month T-bill yield largely ruled above the 10-yr benchmark yield. The overnight MIBOR shot up by 200 basis points to close the year at 8.80-9.0% Since the intensification of the global financial crisis 2008, risks to domestic growth largely stemmed from the external environment. Over the last year however, domestic factors played a key role in pushing growth below potential. It follows then that policy initiatives to reverse this drag both in the form of monetary easing and addressing policy impediments and supply shortages will determine the trajectory of growth in financial year 2013. Some efforts have been made in resolving policy hurdles in recent months. For instance, efforts have been made to ease coal supply shortages in the power sector by securing coal supply agreements from state suppliers for power projects that have already been commissioned or would get commissioned on or before March, 2015. A draft bill has been formulated to smooth land acquisition bottlenecks. However most of these policy changes are yet to be fully implemented and were these delays to persist, could continue to impede domestic investment and ultimately impact growth. While adequate capital provisioning and stringent prudential regulations largely shielded the domestic banking system from the global crisis, cyclical deterioration in asset quality remains a concern. Loans to the power sector where financial closure of projects has been delayed by policy hurdles, coal supply shortages and end-product pricing problems have come under stress. Further, there is some concern that a portion of the loans that banks were allowed to restructure may become impaired and will add to the stock of non-performing loans. As a result, the gross NPA ratio of the system is likely to move higher from 2.3% in financial year 2011 to 3.0% in financial year 2012. Recent stress tests have however revealed that the banking system as a whole remains robust enough to withstand a sharp increase in asset quality slippages and capitalization levels of stressed banks are likely to be maintained either through government assistance or further equity infusion.While monetary easing in response to slowing domestic demand is likely to be modest it is likely to be enough to offset at least a part of the tightening over the last year. Leveraged consumer spending could thus gain some impetus. Further,while greenfield capex could remain restricted, brownfield capacity expansion involving minimal interface with regulatory hurdles could benefit from easing domestic funding conditions and firm private consumption. Besides, some sectors such as roads and highways that have seen considerable traction in activity over the last year are likely to remain an important support to investment momentum going ahead. Despite a slowdown in growth over financial year 2012, India has continued to outperform the global economy. With world output growth likely to remain relatively feeble at 3.3% in 2012 against 3.8% in 2011, structural supports from a rapidly expanding rural and semi-urban economy, favorable demographics and low product penetration are likely to continue to keep domestic growth higher than world growth.

Information Technology Since its inception, HDFC Bank has made and continues to make substantial investments in its technology platform and systems, built multiple distribution channels, including an electronically linked branch network , automated telephone banking, internet banking and banking through mobile phones, to offer its customers convenient access to various products. During this financial year, the bank has made further strides in adding more capability to the internet banking platform, launched mobile banking for 2G customers and launched applications for various mobile platforms. HDFC Bank has templatized credit underwriting through automated customer data de-duplication and real-time scoring in its loan origination process. Having enhanced its cross selling and up-selling capabilities through data mining and analytical customer relationship management solutions, the Bank’s technology enables it to have a 3600 view of its customers. HDFC Bank employs event detection technology based customer messaging and has deployed an enterprise wide data warehousing solution as a back bone to its business intelligence system. Implementation of risk management engine for internet transactions coupled with various multi factor authentication has reduced the phishing attacks significantly. The bank has also implemented a digital certificate based security engine for corporate internet banking customers. Credit and debit cards usage of the Bank’s customers is secured by powerful proactive risk manager technology solutions which does rules based SMS alerts as well as prompts customer service representatives to call the customer on detecting abnormal usage behavior. This prevents frauds and minimizes losses to customers, if the card ha been stolen and yet to be hot listed. Sophisticated automated switch-over and switch-back solutions power the Bank’s Business Continuity and Disaster Recovery management strategy for core banking and other key applications. The bank conducts drills periodically to upgrade this capability and to improve the availability of HDFC Bank’s services to its customers.

With the various initiatives that HDFC Bank has taken using technology, it has been successful in driving the development of innovative product features, reducing operating costs, enhancing customer service delivery and minimizing inherent risks. In April 2011, RBI issued Guidelines on Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds and provided recommendations for implementation.

The Bank remains committed towards complying with the requirements outlined in the guidelines and instituted a senior level internal team to oversee the implementation program for complying with the guidelines. The team supervised the various domains, performed gap analysis, and prepared remediation plan for each area where gaps were observed. Significant progress has been made towards remediation over the year and this has been reported to the board on a quarterly basis

4.2 FINANCIAL REPORTS OF HDFC BANK LTD
(1) BALANCE SHEET OF HDFC BANK LTD. FOR LAST 5 YEARS Particulars Liabilities
Share Capital Reserves & Surplus

Mar'12
12 Months 469.64 29,455.04

Mar'11
12 Months 465.23 24,914.04

Mar'10
12 Months 457.74 21,064.75

Mar'09
12 Months 826.30 14,226.43

Mar'08
12 Months 354.43 11,142.80

Net Worth

29,924.68

25,379.27

21,522.49

15,052.73

11,497.23

Secured Loans Unsecured Loans

23,846.51 246,706.45

14,394.06 208,586.41

12,915.69 167,404.44

2,685.84 142,811.58

4,478.86 100,768.60

TOTAL LIABILITIES Assets
Gross Block (-) Acc. Depreciation Net Block Capital Work in Progress. Investments. Inventories Sundry Debtors Cash And Bank Loans And Advances Total Current Assets Current Liabilities Provisions Total Current Liabilities NET CURRENT ASSETS Misc. Expenses
TOTAL ASSETS (A+B+C+D+E)

300,477.6 3

248,359.7 3

201,842.6 3

160,550.1 5

116,744.69

5,930.24 3,583.05 2,347.19 0.00 97,482.91 0.00 0.00 20,937.73 217,141.67 238,079.40 35,348.31 2,083.56 37,431.87 200,647.53 0.00

5,244.21 3,073.56 2,170.65 0.00 70,929.37 0.00 0.00 29,668.83 174,583.74 204,252.58 27,340.42 1,652.44 28,992.86 175,259.72 0.00

4,707.97 2,585.16 2,122.81 0.00 58,607.62 0.00 0.00 29,942.40 131,785.74 161,728.14 19,975.42 640.52 20,615.94 141,112.20 0.00

3,956.63 2,249.90 1,706.73 0.00 58,817.55 0.00 0.00 17,506.62 105,239.88 122,746.50 22,222.94 497.68 22,720.62 100,025.87 0.00

2,386.99 1,211.86 1,175.13 0.00 49,393.54 0.00 0.00 14,778.34 67,829.59 82,607.93 16,079.44 352.47 16,431.91 66,176.02 0.00

300,477.6 3

248,359.7 3

201,842.6 3

160,550.1 5

116,744.69

Balance Sheet: As of March 31, 2012 The Bank’s total balance sheet size increased by 21.8% from ` 277,353 crores as of March 31, 2011 to 337,909 crores as of March 31, 2012. Total net advances as of March 31,2012 were ` 195,420 crores, an increase of 22.2% over March 31, 2011. Total deposits were at `246,706 crores, an increase of 18.3% over March 31, 2011. Adjusted for one off current account deposits at the ended March 31, 2011, core total deposit growth for the year was 20.6%. Savings account deposits grew 16.6% over the previous year to reach ` 73,998 crores, and with current account deposits at ` 45,408 crores, the CASA ratio was at 48.4% of total deposits as at March 31, 2012.

(2) PROFIT & LOSS ACCOUNT OF HDFC BANK LTD FOR LAST 5YEARS.
Mar'12 Mar'11 Mar'10 Mar'09 Mar'08

12 Months 12 Months 12 Months 12 Months 12 Months

INCOME:
Sales Turnover Excise Duty NET SALES Other Income 32,539.11 0.00 32,539.11 0.00 24,393.60 0.00 24,393.60 0.00 19,958.76 0.00 19,958.76 0.00 19,770.72 0.00 19,770.72 0.00 12,354.41 0.00 12,354.41 0.00

TOTAL INCOME EXPENDITURE: Manufacturing Expenses Material Consumed Personal Expenses Selling Expenses Administrative Expenses Expenses Capitalised Provisions Made TOTAL EXPENDITURE Operating Profit EBITDA Depreciation Other Write-offs EBIT Interest EBT Taxes Profit and Loss for the Year Non Recurring Items Other Non Cash Adjustments Other Adjustments REPORTED PAT KEY ITEMS Preference Dividend Equity Dividend Equity Dividend (%) Shares in Issue (Lakhs) EPS - Annualised (Rs)

32,435.13

24,393.60

19,976.49

19,770.72

12,397.45

0.00 0.00 3,399.91 152.48 5,146.73 0.00 431.54 9,130.66 8,850.41 8,746.43 542.52 0.00 8,203.92 14,989.58 7,772.38 2,606.80 5,165.58 1.51 -2.12 2.12 5,167.09

0.00 0.00 2,836.04 158.95 4,552.96 0.00 1,143.09 8,691.03 7,460.57 7,460.57 497.41 0.00 6,963.16 9,385.08 5,820.08 1,892.86 3,927.22 -0.8 -2.65 2.65 3,926.40

0.00 0.00 2,289.18 83.12 4,936.73 0.00 201.11 7,510.13 4,863.44 4,881.17 394.39 0.00 4,486.77 7,786.30 4,285.67 1,340.99 2,944.68 4.02 -0.9 0.93 2,948.70

0.00 0.00 2,238.20 108.68 4,583.86 0.00 273.30 7,204.03 3,928.87 3,928.87 359.91 0.00 3,568.97 8,911.10 3,295.67 1,054.92 2,240.75 4.19 -0.5 0.59 2,244.94

0.00 0.00 1,301.35 114.73 2,247.48 0.00 1,294.67 4,958.23 3,803.73 3,846.77 271.72 0.00 3,575.05 4,887.12 2,280.38 690.90 1,589.48 0.70 -0.0 0.06 1,590.18

0.00 1,009.08 214.99 23,466.88 22.02

0.00 767.62 164.99 4,652.26 84.40

0.00 549.29 119.99 4,577.43 64.42

0.00 425.38 100.00 4,253.84 52.77

0.00 301.27 85.00 3,544.33 44.87

Profit & Loss Account: Quarter ended March 31, 2012
The Bank’s total income for the quarter ended March 31, 2012, was ` 8,880.0 crores an increase of 32.1% over ` 6,724.3 crores, for the quarter ended March 31, 2011. Net revenues (net interest income plus other income) was at ` 4,880.3 crores for the quarter ended March 31, 2012 as against ` 4,095.2 crores for the corresponding quarter of the previous year. Net interest income (interest earned less interest expended) for the quarter ended March 31, 2012 grew by 19.3% to ` 3,388.3 crores as against ` 2,839.5 crores for the quarter ended March 31, 2011. This was driven by loan growth of 22.2% and a core net interest margin for the quarter of 4.2%.Other income (non-interest revenue) for the quarter ended March 31, 2012 was ` 1,492.0 crores up 18.8% over that in the corresponding quarter ended March 31, 2011. The main contributor to other income for the quarter was fees & commissions of ` 1,237.3 crores, up by 23.7% over ` 1,000.6 crores in the corresponding quarter ended March 31, 2011. The two other components of other income were foreign exchange & derivatives revenue of ` 325.2 crores (`245.4 crores for the corresponding quarter of the previous year) and loss on revaluation / sale of investments of ` 71.5 crores (profit of ` 8.6 crores for the quarter ended March 31, 2011). Operating expenses for the quarter were ` 2,467.1 crores, an increase of 23.5% over `

1,998.4 crores during the corresponding quarter of the previous year. The bank’s branch distribution network expanded by 558 branches in 403 new cities during the year resulting in a core cost-to-income ratio for the quarter at 49.8% as against 48.9% for the corresponding quarter ended March 31, 2011. Provisions and contingencies were ` 298.3 crores (including specific loan loss and floating provisions of ` 291.7 crores) for the quarter ended March 31, 2012 as against `431.3 crores (including specific loan loss and floating provisions of ` 330.1 crores) for the corresponding quarter ended March 31, 2011. After providing ` 661.8 crores for taxation, the Bank earned a Net Profit of ` 1,453.1 crores, an increase of 30.4% over the quarter ended March31, 2011.

Profit & Loss Account: Year ended March 31, 2012
For the year ended March 31, 2012, the Bank earned total income of ` 32,530.0 crores Net revenues for the year ended March 31, 2012 were ` 17,540.5 crores, up by 17.9% over 14,878.3 crores for the year ended March 31, 2011. The Bank’s net profit for year ended March 31, 2012 was ` 5,167.1 crores, up 31.6%, over the year ended March 31, 2011. Consolidated net profit for the Bank increased by 31.4% to ` 5,247.0 crores for the year ended March 31, 2012.

(3)

CASH FLOW STATEMENT OF HDFC BANK LTD FOR LAST 5 YEARS. Mar'12
7,513.17 11,355.61 -686.85 3,286.19 -8,731.11 29,668.83 20,937.73

Particulars
Profit Before Tax Net Cash Flows from Operating Activity Net Cash Used in Investing Activity Net Cash Used in Financing Activity Net Inc/Dec in Cash and Cash Equivalent Cash and Cash Equivalent Beginning of the Year Cash and Equivalent - End of the Year

Mar'11
5,818.66 -375.83 -1,122.74 1,227.99 -273.56 29,942.40 29,668.83

Mar'10
4,289.14 9,389.89 -551.51 3,598.91 12,435.78 17,506.62 29,942.40

Mar'09
3,299.25 -1,736.14 -663.78 2,964.66 564.74 14,778.34 15,343.08

Mar'08
2,280.63 3,583.43 -619.82 3,628.34 6,591.95 8,074.54 14,666.49

(4) FINANCIAL RATIOS
Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08

Per share ratios
Adjusted EPS (Rs) Adjusted cash EPS (Rs) Reported EPS (Rs) Reported cash EPS (Rs) Dividend per share Operating profit per share (Rs) Book value (excl rev res) per share (Rs) Book value (incl rev res) per share (Rs.) Net operating income per share (Rs) Free reserves per share (Rs) 22.01 24.32 22.02 24.33 4.30 37.71 127.52 127.52 138.66 97.01 84.42 95.11 84.40 95.09 16.50 160.36 545.53 545.53 524.34 419.10 64.33 72.95 64.42 73.03 12.00 106.25 470.19 470.19 436.03 363.55 52.68 61.14 52.77 61.24 10.00 92.36 344.44 344.44 464.77 252.37 44.85 52.51 44.87 52.53 8.50 107.32 324.38 324.38 348.57 269.89

Profitability ratios
Operating margin (%) Gross profit margin (%) 27.19 25.53 30.58 28.54 24.36 22.39 19.87 18.05 30.78 28.58

Net profit margin (%) Adjusted cash margin (%) Adjusted return on net worth (%) Reported return on net worth (%) Return on long term funds (%)

15.93 17.59 17.26 17.26 76.06

16.09 18.13 15.47 15.47 59.91

14.76 16.71 13.68 13.70 56.08

11.35 13.15 15.29 15.32 83.31

12.82 15.01 13.82 13.83 62.34

Leverage ratios
Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio 8.24 10.81 5.49 8.22 10.84 4.65 7.78 11.39 4.24 9.75 9.30 5.00 8.76 10.24 5.18

Liquidity ratios
Current ratio Current ratio (inc.st loans) Quick ratio Inventory turnover ratio 0.58 0.07 6.20 0.50 0.06 6.89 0.28 0.03 7.14 0.27 0.03 5.23 0.26 0.03 4.89 -

Payout ratios
Dividend payout ratio (net profit) Dividend payout ratio (cash profit) Earning retention ratio Cash earnings retention ratio 22.69 20.54 77.30 79.46 22.72 20.16 77.29 79.84 21.72 19.15 78.25 80.82 22.16 19.10 77.79 80.87 22.16 18.93 77.83 81.07

Coverage ratios
Adjusted cash flow time total debt Financial charges coverage ratio Fin. charges cov.ratio (post tax) 43.22 0.58 1.38 47.14 0.79 1.47 50.13 1.63 1.43 54.91 0.44 1.29 54.14 0.78 1.38

Component ratios
Material cost component (% earnings) Selling cost Component Exports as percent of total sales 0.46 0.65 0.41 0.54 0.92 -

Import comp. in raw mat. consumed Long term assets / total Assets Bonus component in equity capital (%)

0.82 -

0.83 -

0.91 -

0.90 -

0.91 -

4.3 FINANCIAL REPORTS OF AXIS BANK LTD

(1)Balance sheet Of AXIS Bank Ltd for last 5 years.
Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08

Sources of funds
Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus 413.20 22,395.34 410.55 18,588.28 405.17 0.17 15,639.27 359.01 1.21 9,854.58 357.71 2.19 8,410.79 -

Loan funds
Secured loans Unsecured loans Total 2,20,104.30 1,89,237.80 1,41,300.22 1,17,374.11 87,626.22 2,42,912.85 2,08,236.63 1,57,344.84 1,27,588.90 96,396.91

Uses of funds
Fixed assets Gross block 3,583.67 3,426.49 1,176.03 2,250.46 22.69 2,107.98 942.79 1,165.18 57.24 1,741.86 726.45 1,015.40 57.48 1,384.70 590.33 794.37 128.48

Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress 1,395.12 2,188.56 70.77

Investments

93,192.09 6,482.93 8,643.28 -2,160.35 93,291.06 -

71,991.62 4,632.12 8,208.86 -3,576.74 70,688.02 -

55,974.82 3,901.06 6,133.46 -2,232.40 54,964.83 -

46,330.35 3,745.15 9,947.67 -6,202.52 41,200.72 -

33,705.10 2,784.51 7,556.90 -4,772.38 29,855.57 -

Net current assets
Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total

Notes:
Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity sharesoutstanding (Lacs)

5,14,871.98 4,86,470.44 3,31,881.90 1,34,334.43 94,598.40 4132.04 4105.46 4051.74 3590.05 3577.10

(2) Profit & Loss Account of AXIS Bank Ltd for last 5 years
Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08

Income
Operating income 27,026.17 19,343.6 3 15,407.7 4 13,550.95 8,750.68

Expenses
Material consumed Manufacturing expenses Personnel expenses Selling expenses Adminstrative expenses Expenses capitalised Cost of sales Operating profit Other recurring income Adjusted PBDIT Financial expenses Depreciation Other write offs Adjusted PBT Tax charges Adjusted PAT Non recurring items Other non cash adjustments 2,080.17 88.15 4,356.98 6,525.29 6,523.98 310.29 6,834.27 1,613.90 79.02 3,752.05 5,444.96 5,306.84 351.02 5,657.86 1,255.82 47.27 3,529.35 4,832.44 3,941.77 202.17 4,143.94 6,633.53 234.32 3,909.62 1,492.37 2,518.40 -3.87 997.66 46.32 2,357.78 3,401.76 2,999.92 81.81 3,081.73 7,149.27 188.67 2,893.07 970.12 1,823.56 -8.20 670.25 74.41 1,551.27 2,295.92 2,034.80 13.86 2,048.66 4,419.96 158.11 1,890.54 734.86 1,086.21 -15.18 -

13,976.90 8,591.82 342.24 -7,484.87 2,045.99 4,221.90 20.30 289.59 -3,223.55 1,747.92 3,395.47 -6.98 -

Reported net profit Earnigs before appropriation Equity dividend Preference dividend Retained earnings

4,242.21 9,211.98 770.07 8,441.90

3,388.49 6,815.92 670.36 6,145.57

2,514.53 4,862.62 567.45 4,295.17

1,815.36 3,369.23 420.52 2,948.71

1,071.03 2,100.10 251.64 1,848.47

(3) Cash flow Statement of AXIS Bank Ltd For Last 5 Years
Mar ' 12 Profit before tax Net cashflow-operating activity Net cash used in investing activity Netcash used in fin. activity Net inc/dec in cash and equivlnt Cash and equivalnt begin of year Cash and equivalnt end of year 6,287.84 -9,826.93 -5,118.58 7,270.37 -7,474.74 Mar ' 11 5,135.66 11,425.07 Mar ' 10 3,851.36 28.87 Mar ' 09 2,785.19 Mar ' 08 1,646.27

10,551.63 5,960.45 -9,741.96 1,692.32 2,512.66 -4,702.52 4,325.79 5,585.94

-13,985.33 -5,122.98 8,769.69 6,204.75 5,304.07 189.54

21,408.66 15,203.91 13,933.92 21,408.66

15,016.90 12,504.24 6,918.31 15,206.44 15,016.90 12,504.24

4.4 PERFORMANCE AT GLANCE WITH TABLE & CHARTS

- FINANCIAL HIGHLIGHTS FROM 2002-03 TO 2011-12 - CHARTS - COMPARISON - TABLES - ANALYSIS OF VARIOUS INSTRUMENTS.

4.5 Analysis and Interpretation Financial Efficiency with AXIS Bank Ltd.
Net Profit
Year 2007-08 2008-09 2009-10 (Rs In Lacs) 2010-11 2011-12

HDFC Bank Ltd Axis Bank Ltd

1590.1 8 1071.0 3

2244.9 3 1815.3 6

2948.7 1 2514.5 3

3926.4 1 3388.4 9

5167.0 9 4221.9

Interpretation The trand of HDFC Bank Ltd. over the years says that the profit of the company are continuously increase and on the other side Axis Bank Ltd also says the volume of the profits are increase but not much increase as HDFC Bank Ltd. When in the 2011-12 HDFC bank made business profit volume of 5167.09 crore and that time Axis Bank Ltd. done the business profit volume of only 4221.90 crore. Therefore, from the interpretation it is says that Axis Bank Ltd generated profit but not much as HDFC Bank Ltd done.

INVESTMENTS

(Rs In Lacs)

Year HDFC Bank Ltd Axis Bank Ltd

2007-08 49393.5 33705.1

2008-09 58817.6 46330.4

2009-10 58607.6 55974.8

2010-11 70929.4 71991.6

2011-12 97482.9 93192.1

Interpretation The Investment trend of HDFC Bank Ltd over the year says that the trand is increaseing. HDFC Bank Ltd. invested there funds to various sectors of industry and they have done continuous investment with increasing rate to various sectors means HDFC Bank Ltd have sufficient fund to investment and they have a strong financial position. On the other hand AXIS Bank Ltd investment trand is upword but not much as HDFC bank. In the year 2011-12, HDFC Bank Ltd. invested 97482.90 crore where as AXIS Bank Ltd only invested 93192.01 crore.

ANALYSIS & INTERPRETATION OF OPERATING EFFICIENCY (Rs in Lacs)
Year Operating Profit
2007-08 2008-09 2009-10 2010-11 2011-12

3803.73 3928.87 4863.44 7460.57 8850.41

Interpretation Operating Revenue means Cash inflows or other enhancements of assets of an entity during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major operations. It is usually presented as sales minus sales discounts, returns, and allowances. Every time a business sells a product or performs a service, it obtains revenue. This often is referred to as gross revenue or sales revenue.

Operating Expenses means Cash outflows or other using-up of assets or incurrence of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major operations.

Operating Profit means the total pre-tax profit a business generated from its operations. It is what is available to the owners before a few other items need to be paid such as preferred stock dividends and income taxes. Operating income can be used to gauge the general health of a company's core business or businesses. All else being equal, it is one of the most important figures you will ever need to know. The reason is straightforward and intuitive: Unless a firm has a lot of assets that it can sell, any money that will flow to shareholders is going to have to be generated from selling something such as a product or service. If a company is experiencing declining operating income, there will be less money for owners, expansion, debt reduction, or anything else management hopes to achieve. This is one of the reasons that it is so closely watched by lenders and shareholders. In fact, operating income is used to calculate the interest coverage ratio and operating margin.

Calculating Operating Income/Profit Operating Income = Gross Profit – Operating Expenses The Operating efficiency of HDFC Bank Ltd over the year says that the trand is increaseing. There Operating Profit will increase with a very high margin means there financial position is very good. In the year 2011-12 they achieve operating profit Rs 8850.41 crores. Where as in the year 2007-08, 2008-09, 2009-10 & 2010-11 HDFC Bank Ltd. get operating profit Rs 3803.73 crores, Rs 3928.87 crores, Rs 4863.44. crores & Rs 7460.57 crores respectively. Therefore, from the above interpretation it is says that HDFC Bank Lid. have a good financial and economic position in the market relating to others banks.

5.1 FINDINGS.
• Net profit: 5,167 crore. An increase of 31.6% compared to the previous year • Balance sheet size: 337,909 crore as at 31st March 2012 • Total deposits: 246,706 crore. An increase of 18.3% compared to the previous year • Total advances: 195,420 crore. An increase of 22.2% compared to the previous year • Capital Adequacy Ratio: 16.5%. Regulatory minimum requirement is 9% • Tier I capital ratio: 11.6% • Non Performing Assets: 1,999 crore (gross); 1.0% of Gross Advances

• Network: Branches: 2544 • ATMs: 8913 • Cities: 1399

5.2 SUGGESTIONS
1. HDFC Bank Limited should open many branch and ATMs in the urban and rural areas of our country to give your service to all level of customers or account holders. 2. Reduces the bank charges . 3. If possible omit the drafting charges and monthly statement charges like some other banks. 4. HDFC Bank Limited should adopt innovative techniques and facilities, as consumers are highly attracted towards new services of the banks. 5. HDFC Bank Limited should start a program for the loyal customers to reduce their complaints by providing timely solving their problem or any confusion. This will help to enhance the profitibility and efficiency.

6. Provide customer relation officer to solve all the complecative or any matter regarding customers as well as any person who want to know about the facilities provided by the bank. 7. Provide sufficient employee for a smooth transaction and enhance the customer relation.

5.3 Limitation of analysis
1. It is very difficult to give a accurate picture of the profitibility and operation efficiency of HDFC Bank Ltd within a short span of time. 2. The analysis is done on the basis of past performance of the bank. But the past performance may not be an indicator of future performance. 3. The profitibility and operational efficiency is flactuated due to market because market always carried high risk like business risk, inflation risk, interest rate risk, etc. 4. It is very difficute to says that the imformation about the bank is accurate because we get this information from the banks website. To assess their accuracy we need to know how the data were collected. 5. As the nature of research was exploratory so it was difficult to cover each and every prospect of business of HDFC Bank Ltd. 6. It is very difficult to analysis and interpretation with the others bank like AXIS bank Ltd. because every bank should follow theire own policy and their own methodology.

5.4 CONCLUSION
After conducting the project on profitibility and operational efficiency of HDFC Bank Ltd., it is found that there is a huge possibility for the bank to enhance there business. The Bank has reported another successful performance, underpinned by healthy growth of both business and revenues. The Bank continue to have a fairly well-diversified customer base that spans both the retail and corporate banking space. In addition to creating infrastructural capabilities for the future. The bank have launched several other initiatives to fulfill product and service needs of our customers including the launch of an online-broking portal through our wholly-owned subsidiary. The infrastructure business size has grown well, in line with our expectations and this augurs well for the future, infrastructure being critical to the country‟s growth. The economic outlook for the country continues to be promising despite concerns around rising inflation. I believe the Bank is truly well-positioned to capitalize on emerging opportunities across the economy including infrastructure, SME, retail banking and capital markets and will, therefore, continue to deliver value to its shareholders. Bank’s network of over 2,500 branches and more than 8,900 ATMs has spread across the length and breadth of the country. Over 70% of HDFC Bank branches are now outside metro areas. Banking services through mobile phones was delivered to both smartphone as well as basic handset users. The Bank launched Mobile Banking, enabling customers to use their internet banking facility on their handset without compromising security. Understanding customers across multiple segments and meeting their varied financial needs efficiently is at the heart of what HDFC Bank do. The focus, however, will always be on helping them meet their goals and realise their aspirations. Because, Bank believe that success in banking is not just about providing great financial products and services; it’s about making a difference ... and empowering lives.

In addition to providing various products and services to the financially excluded, the Bank believes that imparting education and training to these target segments is equally essential to ensure transparency and create awareness. To this effect the Bank has put in place various training programs,

these are conducted by Bank staff in local languages and cover not only the customers but also various intermediaries such as the Bank’s business correspondents. Through these programs the Bank provides credit counseling and information on parameters like savings habit, better utilization of savings, features of savings products, credit utilization, asset creation, insurance, income generation program etc. During the financial year ended March 31, 2012, over 5,400 financial awareness programs covering over 1,40,000 households were conducted. The bank also facilitates need based capacity building and market place for the customers with the objective of sustaining their livelihood in holistic manner. The financial performance of HDFC Bank during the financial year ended March 31, 2012 remained healthy with total net revenues (net interest income plus other income) increasing by 17.9% to 17,540.5 crore from ` 14,878.3 crore in the previous financial year. Revenue growth was driven by an increase in both, net interest income and other income. Net interest income grew by 16.6% due to acceleration in loan growth to 22.2% coupled with a net interest margin (NIM) of 4.2% for the year ending March 31, 2012.

HDFC Bank’s profit after tax increased by 31.6% from 3,926.4 crore in the previous financial year to 5,167.1 crore in the year ended March 31, 2012. Return on average net worth was 18.4% while the basic earnings per share increased from 17.00 to 22.11 per equity share. During this year HDFC Bank expanded its distribution network from 1,986 branches in 996 cities as on March 31, 2011 to 2,544 branches in 1,399 Indian cities on March 31, 2012. The Bank’s ATMs increased from 5,471 to 8,913 during the same period. HDFC Bank’s branch network is deeply entrenched across the country with significant density in areas conducive to the growth of its businesses. The Bank’s focus on semi-urban and under-banked markets continued, with over 75% of the Bank’s branches now outside the top nine Indian cities. The Bank’s customer base grew in line with the growth in its network and increased product penetration initiatives. This currently stands at 26 million customers. The Bank continues to provide unique products and services with customer centricity as a key objective. In order to provide its customers increased choices, flexibility and convenience the Bank continued to make significant headway in its multi channel servicing strategy. HDFC Bank offered its customers the use of ATMs, internet, phone and mobile banking in addition to its expanded branch network to serve their banking needs.

BIBLIOGRAPHY
Web Links: http://www.hdfcbank.com http://www.axisbank.com  http://www.moneycontrol.com  http://www.businesslink.gov.uk/ http://www.marketresearchdata.org/index
Report :HDFC Bank Ltd Annual Report 2011-12.

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