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CHAPTER-1

INTRODUCTION
Bank is an institution that deals in money and its substitutes and provides crucial financial services. The principal type of baking in the modern industrial world is commercial banking & central banking. Banking Means "Accepting Deposits for the purpose of lending or Investment of deposits of money from the public, repayable on demand or otherwise and withdraw by cheque, draft or otherwise." -Banking Companies (Regulation) Act,1949 The concise oxford dictionary has defined a bank as "Establishment for custody of money which it pays out on customers order." Infact this is the function which the bank performed when banking originated. "Banking in the most general sense, is meant the business of receiving, conserving & utilizing the funds of community or of any special section of it." -By H.Wills & J. Bogan "A banker of bank is a person, a firm, or a company having a place of business where credits are opened by deposits or collection of money or currency or where money is advanced and waned. -By Findlay Sheras A Bank : • • • • • Accept deposits of money from public, Pays interest on money deposited with it. Lends or invests money Repays the amount on demand, Allow the money deposited to be with drawn by cheque or draft. 1

ORIGIN OF WORD BANK: The origin of the word bank is shrouded in mystery. According to one view point the Italian business house carrying on crude from of banking were called banchi bancheri" According to another viewpoint banking is derived from German word "Branck" which mean heap or mound. In England, the issue of paper money by the government was referred to as a raising a bank. ORIGIN OF BANKING : Its origin in the simplest form can be traced to the origin of authentic history. After recognizing the benefit of money as a medium of exchange, the importance of banking was developed as it provides the safer place to store the money. This safe place ultimately evolved in to financial institutions that accepts deposits and make loans i.e., modern commercial banks. BANKING SYSTEM IN INDIA A HISTORICAL PERSPECTIVE : We can identify there distinct phases in the history of Indian banking: 1. 2. 3. Early phase from 1786-1969. Nationalization of banks and up to 1991 prior to banking sector reforms. New phase of Indian banking with the advent of financial banking. Banking in India has its origin as early or Vedic period. It is believed that the transitions from many lending to banking must have occurred even before Manu, the great Hindu furriest, who has devoted a section of his work to deposit and advances and laid down rules relating to the rate of interest. During the Mughal period, the indigenious banker played a very important role in lending money and financing foreign trade and commerce. During the days of the East India Company it was the turn of agency house to carry on the banking business. The General Bank of India was the first joint stock bank to be established in the year 1786. The other which followed was the Bank 2

of Hindustan and Bengal Bank. The Bank of Hindustan is reported to have continued till 1906. While other two failed in the meantime. In the first half of the 19th century the East India Company established there banks, The bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Bombay in1843. These three banks also known as the Presidency banks were the independent units and functioned well. These three banks were amalgamated in 1920 and new bank, the Imperial Bank of India was established on 27th January, 1921. With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial Bank of India was taken over by the newly constituted SBI. The Reserve Bank of India (RBI) which is the Central bank was established in April, 1935 by passing Reserve bank of India act 1935. The Central office of RBI is in Mumbai and it controls all the other banks in the country. In the wake of Swadeshi Movement, number of banks with the Indian management were established in the country namely, Punjab National Bank Ltd., Bank of India Ltd., Bank of Baroda Ltd., Canara Bank. Ltd. on 19th July 1969, 14 major banks of the country were nationalized and on 15th April 1980, 6 more commercial private sector banks were taken over by the government.

FUNCTIONS OF BANKS
PRIMARY FUNCTIONS • • • • • • Acceptance of Deposits Making loans & advances Loans Overdraft Cash Credit Discounting of bills of exchange

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SECONDARY FUNCTIONS • • • • • • • Agency functions Collection of cheques & Bills etc. Collection of interest and dividends. Making payment on behalf of customers Purchase & sale of securities Facility of transfer of funds To act as trustee & executor.

UTILITY FUNCTIONS :  Safe custody of customers valuable articles & securities.  Underwriting facility  Issuing of traveller's cheque letter of credit  Facility of foreign exchanges  Providing trade information  Provide information regarding credit worthiness of their customer.

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CHAPTER-2
COMPANY PROFILE
INTRODUCTION The housing development finance corporation limited (HDFC) was amongst the first to receive an"in-principle" approval from the reserve bank of India (RBI) to set up a bank in the private sector, as part of RBI liberalization of Indian banking industry in 1994. The bank was in corporate in Aug. 1994 in the name of HDFC Bank Ltd. With its registered office in Mumbai, India, HDFC Bank commenced operations as scheduled commercial bank in January 1995. Currently, HDFC Bank has a nation spread over 771 cities across the country and operates in three segments. Wholesale banking, retail banking and treasury services. PROMOTOR HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1997, the corporation has maintained a consistent and healthy growth in its operations to remain a market leader in mortgage. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong franchise, HDFC was ideally positioned to promote a bank in the Indian environment. BUSINESS FOCUS HDFC bank's mission is to be a world class Indian bank. The bank has aim to build sound customer franchises across district business so as to be the prefer provider of 5

HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard. The Bank at present has an enviable network of 1.725 branches spread in 771 cities across India. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centre’s where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. All branches are linked on an online real-time basis. the Bank has branches in the centre’s where the NSE/BSE have a strong and active member base. administration. professional integrity and regulatory compliance. Visa Electron/Maestro. 4. TECHNOLOGY HDFC bank operates in a highly automated environment in terms of information technology and communication systems. industry and commercial banking. Distribution Network HDFC Bank is headquartered in Mumbai. The bank’s Board of Directors is composed of eminent individuals with a wealth of experience in public policy. The bank is committed to maintain the highest level of ethical standards. HDFC bank's business philosophy is based on four core values: 1. Customers in over 500 locations are also serviced through Telephone Banking.000 networked ATMs across these cities. Moreover. consistent with the bank's risk appetite. Being a clearing/settlement bank to various leading stock exchanges. 3. The Bank also has 4. Plus/Cirrus and American Express Credit/Charge cardholders. All the bank's branches have connectivity 6 .banking services in the segment that the bank operates in and to achieve healthy growth in profitability. 2. Operational Excellence Customer Focus Product Leadership People. Senior executives representing HDFC are also on the Board.

Stock Exchange Members and Bank. Mutual Funds. 7 . cash management etc. WHOLESALE BANKING SERVICES The Bank's target is primary large blue-chip manufacturing companies in the Indian corporate sector and to a lesser extent.which enables the bank to offer speedy funds transfer facility to its customers. The Bank is also a leading provider of structure solution which combine cash management services with vendors and distributor finance for facilitating superior supply chain management for its corporate customers. emerging mid sized corporate. It is recognized as a leading provider of cash management and transactional Banking solutions to corporate customers. For these corporate the Bank provides a wide range of commercial and transactional Banking services including working capital finance trade services. the Bank has succeeded in leveraging its market position. The bank three key business areas 1. expertise and technology to create a competitive advantage and build market share. Based on its superior product delivery service levels and strong customer orientation. In each office its business. BUSINESS PROFILE HDFC Bank caters to wide range of banking services covering both commercial and investment banking on the wholesale side and transactional branch banking on the retail side. transactional services. Multi branch access is also provided to retail customers through the branch network and automated teller machines (ATMs) The bank has made substantial efforts and investments in acquiring the besttechnology available internationally to build the infrastructure for a world class bank has prioritized its engagement in technology and the internet as one of its key goals and has already made significant progress in web enabling its core business. the Bank has made significant in roads into the Banking consortia of a number of leading India corporate including Multinationals. Companies from the domestic business house and prime public sector companies.

These and fine pricing on various treasury products are provided through the bank's Treasury team. The also had a wide array of retail ban products including auto loans.400 point of sale (pos) terminals for debit/credit cards acceptance at merchant establishments. the bank is required to hold 25% of its deposits in 8 . advice and product structures. loans. TREASURY OPERATIONS Within this business. giving the customer a one-stop window for all his/her banking requirements. phone banking. personal loans and loans for two wheelers. 3. The products are backed by world-class services and delivered to the customers through the growing branch network as well as though alternative delivery channels like ATMs. RETAIL BANKING SERVICES: The objective of retail bank is to provide its target market customer a full range of financial products and banking service. and Equities. the bank has three main product areas . Local Currency Money Market & Debt Securities. bill payments etc. the HDFC bank plus and the investment advisory services program have been designed keeping in mind heads of customers who seek distinct financial solutions information and advice on various investment avenues. HDFC Bank was the first bank in India to launch an international debit card in association with VISA (Visa election) and issue the master card Maestro debit card as well. corporates need more sophisticated risk management information. The bank is also one of the leading players in the "merchant acquiring" business with 26. The bank is well positioned as a leader in various net based B2C opportunities including a wide range of interest banking services for fixed deposit. net banking and mobile banking. The HDFC bank preferred programs for high net worth individuals. loans against marketable securities.2. To comply with statutory reserve requirements. The bank launches its credit card in association with VISA in November 2002. It is also a leading provider of depository service to retail customers offering customers the facility to hold their investments in electronic form. in India and overseas. With the liberalization of the financial markets in India.Foreign Exchange and Derivatives. The debit card allows the use to directly debit his account at the point of purchase at a merchant establishment.

subordinated (Tier II) Bonds rated by CARE and Fitch Ratings India Private Limited and its Tier I perpetual Bonds and Upper Tier II Bonds rated by CARE and CRISIL Ltd. Rating The Bank has its deposit programs rated by two rating agencies . has assigned the rating "AAA (ind)" with the outlook on the rating as "stable". Ltd. carrying negligible investment risk". The rating provides an independent assessment of an entity's current performance and an expectation on its "balanced value creation and corporate governance practices" in future. the ratings awarded were the highest assigned by the rating agency for those instruments Corporate Governance Rating The bank was one of the first four companies. (100% subsidiary of Fitch Inc. The bank has been assigned a 9 . The Bank's Fixed Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE.Credit Analysis & Research Limited (CARE) and Fitch Ratings India Private Limited. In each of the cases referred to above. with the outlook on the rating as "stable". CARE has also rated the bank's Certificate of Deposit (CD) programme "PR 1+" which represents "superior capacity for repayment of short term promissory obligations". Ltd. CARE has assigned the rating of "CARE AAA" for the subordinated Tier II Bonds while Fitch Ratings India Pvt. The Treasury business is responsible for managing the returns and market risk on this investment portfolio. which subjected itself to a Corporate Governance and Value Creation (GVC) rating by the rating agency. This rating indicates "highest credit quality "where" protection factors are very high” The Bank also has its long term unsecured. CRISIL has assigned the rating "AAA / Stable" for the Bank's Perpetual Debt programme and Upper Tier II Bond issue. Fitch Ratings India Pvt.) has assigned the "AAA ( ind )" rating to the Bank's deposit programme. which represents instruments considered to be "of the best quality. CARE has also assigned "CARE AAA [Triple A]" for the Banks Perpetual bond and Upper Tier II bond issues. The Credit Rating Information Services of India Limited (CRISIL).government securities.

10/. Mehta Mr.23. The paid-up capital as on said date is Rs. Capital Structure As on 31st December.46 % of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has about 4.94 % of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). B.Srinivasa Rangan ( Chairman ) ( Vice Chairman ) ( Independent ) ( Independent ) ( Executive Director ) 10 .87 % of the Bank's equity and about 16. Patel Mr.683 shareholders. 550 crore.52.(45. The HDFC Group holds 23. Keshub Mahindra Mr.'CRISIL GVC Level 1' rating which indicates that the bank's capability with respect to wealth creation for all its stakeholders while adopting sound corporate governance practices is the highest. Parekh Mr. 455.640/.564 equity shares of Rs.each). 2009 the authorized share capital of the Bank is Rs. The shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited. Shirish B.36. The Bank's American Depository Shares (ADS) are listed on the New York Stock Exchange (NYSE) under the symbol 'HDB'. Deepak S. BOARD OF DIRECTORS Mr.V.58. 27. S.65.

Ms. HDFC Bank is one of the largest private sector bank working in India. Bank boasts of a strong brand equity. OPPORTUNITY: * Branch expansion 11 . ISO 9001 certification for its depository & custody operations & for its backend processing of retail operation & direct banking operatiosn. The bank has a near competitive edge in area of operations. Mistry ( Managing Director ) ( Vice Chairman & Chief Executive Officer ) SWOT ANALYSIS STRENGHTS : * It has an extensive distribution network comprising of 1725 branches in 771 cities & one international office in Dubai this provides a competitive edge over the competitions. WEAKNESS: * * Account opening and delivery of cheque book take comparatively more time. It has a highly automated environment in terms of information technology & communication system. Lack of availability of different credit products like CC Limit. Keki. The bank has a market leader in cash settlement service for the major stock exchanges in its country. Infrastructure is best. It has many innovative products like kids Advantage scheme. M. Renu Sud Karnad Mr. NRI services. Bill discounting facilities. * * * * * * * * * The Bank has a strong retail depository base & has more than million customers.

12 . Sector Banks. This reduce the profit margins in the future. PNB Bank in the finance market itself.* * * * Door step services Greater liberalization in foreign ownership via FDI in Indian Pvt. Infrastructure improvements & better systems for trading & settlement in the govt. CC/ OF Facilities. Some Pvt. Banks have 7 days banking. securities & foreign exchange markets. THREATS: * * The bank has started facing competition from players like SBI.

ORGANISATIONAL STRUCTURE AND CHART: GROUP HEADS FOR RESPECTIVE DIVISIONS REGIONAL BUSINESS MANAGER STATE MANAGER BRANCH MANAGER SUPERVISOR/AUTHORIZER SUPERVISOR/AUTHORIZER PERSONAL BANKERS TELLERS &RELATIONSHIP MANAGERS CHAPTER-3 13 .

”. activities and decision of every business. Financial statements contain summarized information of the organization’s financial affairs. 14 . Finance is very essential for the smooth running of the business. the difference being the net profit or net loss.GENERAL INTRODUCTION INTRODUCTION Finance is the life-blood of business. FINANCIAL STATEMENTS An organization communicates its financial information to the users through financial statements and reports. is shown as the difference between the two sides of the account. Thus. Definition “Finance is that business activity which is concerned with the organization and conversation of capital funds in meeting financial needs and overall objectives of a business enterprise. organized systematically . It is highly temed as the sciencde of money.Wheeler Financial analysis can be defined as a study of relationship between many factors as disclosed by the statement and the study of the trend of these factors.these statements comprises the income statements or profit and loss a/c and the position statement or the balance sheet. the earning capacity and the potential of and organization are reflected by its profit and loss account. Finance controls the policies. The objective of financial analysis is the pinpointing of strength and weakness of a business undertaking by regrouping and analyzing of figures obtained from financial statement and balance sheet by the tools and techniques of management accounting. Income Statement : the profit and loss account sets out income as well as expenses of the same period and after matching the two.

e. It indicates a statement of affair of a business at a particular moment of time and thus it is static in nature. Statement of Retained Earnings : also known as the profit and loss appropriation account . Finally . relation and evaluation. summarizes the changes in assets.it is a statement of flows. Thus . It shows how profits of the business for the accounting period is appropriated towards reserve and dividend and how much of the same is carried forwarded s retained earnings. is generally a part of the profit and loss account. liabilities and the owner’s equity between two balance sheet dates.Position Statement : otherwise know as the balance sheet displays the total resource of a business and the owners creditors equity in these resources. The first task of the financial analyst is to select the information relevant to decision under consideration from the total information contained in the financial statement. FINANCIAL ANALYSIS Financial analysis is the process of identifying the financial strengths and weakness of the firm by properly establishing relationships between the items of the balance sheet and profit and loss account. 15 . it measures the changes that have been taken place in the financial position of a firm between two balance sheet dates. so as to judge the profitability and financial Secondly. to interpret and draw inferences and conclusions. In brief. i. Statement of changes in Financial Position :also known as the fund flow statement. The purpose of financial analysis is to disclose the information contained in the financial statements soundness of the organization. financial analysis is the process of selection. It summarizes the sources and uses of the funds obtained. to arrange the information in a way to highlight the significant relationships.

” A noticeable point is that a ratio reflecting a quantitative relationship helps to perform a qualitative judgment. its historical performance and current financial condition. figures which have a cause and effect relationship or which are connected with each other in some manner or the other. such is the nature of all financial ratios. It ia defined as systematic use of ratio to interpret the financial statements so that the strengths and weaknesses of the organization. Financial statements may be analyzed by means of any of the following techniques: • • • • • • • Comparative Statements Common –size Statements Trend analysis Ratio analysis Fund flow Statements Cash Flow Statements Cost-Volume –profit analysis RATIO ANALYSIS A ratio is defined as “ the indicated quotient of two mathematical expressions and as the relationship between two quantitative terms.TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS A financial analyzes the financial statements by selecting appropriate technique according to the purpose of analysis. can be determined. Classification of Ratio’s 16 . Ratio analysis is widely used technique in financial analysis.

long creditors like debenture holders. etc. The shareholders. financial leverage or capital structure ratio is used. Much insight could be obtained into the present cash solvency of the firm and its ability to remain solvent in the event of emergent. debenture holders and other long –termed creditors like financial institutions are more interested in the long 17 . To judge the long –term financial position of the firm. become due.The use of ratio analysis is not confined to the financial manager only. Liquidity Ratio = current assets/current liabilities Leverage Ratio : The short-term creditors like the bankers and the suppliers of raw materials are more concerned with the firm’s current debt paying ability. which can be calculated for the given information in the financial statements. Liquidity Ratio 2. In view of the various users of ratios. On the other hand. There are different parties interested in the ratio analysis for knowing the financial position of the firm for different purpose. the firm’s long-term financial position. i. financial institutions. These ratios are calculated to comment upon the short term paying capacity of the concern or the firm’s ability to meet its current obligations. the firm should ensure that it does not suffer from any lack of liquidity and also that it is necessary to strike aproper balance between high liquidity and lack of liquidity. there are many types of ratios. profitability Ratio 4. Activity Ratio Liquidity Ratios: liquidity refers to the ability of the concern to meet its current obligations as and when they.e. Leverage Ratio 3. are more concerned with. Following is the classification of ratios : 1.

term financial position or long term solvency of the firm. Accordingly. The management of the company should know how efficiently they carry out business operation. There are two types of profitability ratio’s namely margin ratio and ratio on returns rates. They are: 1. regular payment of interest. The term solvency generally refers to the firm ability to pay the interest regularly and repay the principal amount of debt on due date. To the creditors it is the margin of safety. Leverage or solvency ratios are used for such an analysis. Profit margin ratio’s show the relation between sales and profit. That is only these are also called capital – structure ratios. ability to repay the principal amount of loan on the due date. These are computed from the profit and loss account. The second type of leverage ratio is coverage ratios. Profitability ratio Profit reflects the final result of the business operations. The first type of leverage ratio is used on the relationship between owned-capital and borrowed capital. To the management profit is a measurement of efficiency and control. Lord keens remarked. the management of the company is very much interested in the 18 . “ profit is the engine that drives the business enterprise. There are two aspects of long – term solvency of a firm.” a firm should earn profit to survive and grow for a long period of time. there are two types of leverage ratios. 2. In other words. These ratios are also used to analyze the capital structure of a company. The ultimate aim of any business enterprise is to earn maximum profit. These ratios are calculated from the balance items. To the owners it is to measure the worth f their investment.

the profitability ratio in relation to investment are return on assets. Activity ratio Funds of the owners and creditors are invested in various assets to generate sales and profits. Net profit ratio. Besides management. which can be in term used to make a judgment. as they want to get interest and repayment of principal amount regularly. return on equity capital. Ratio Analysis Ratio analysis is a technique of analysis and interpretation of financial statements. operating ratio. expenses ratio etc. Owners want to get a reasonable return on their investment. etc. The important rate of return ratio is return on equity and return on investment.profitability of the company. total assets and invested capital. creditors and owners are also interested in the profitability of the co-creditors. the rate of return ratio reflects the relationship between rate and profit and investment. A ratio indicates a quantitative relationship. Profitability ratio are generally calculated either in relation to investment. The important profit margin ratios are gross profit margin and net profit margin. These ratios are also called turnover ratio because they indicate the speed with the assets are being converted or turn over into sales. 19 . It is the process of establishing various ratios for helping in making certain decisions. The better the ratios are employed to evaluater the efficiency with which the firm’s manager utilize their assets. return on investment. The profitability ration measures the ability of the firm to earn and on sales. The profitability ratio in relation to sales is gross profit ratio.

Current ratio = Current assets ( CA ) 20 .Types of ratio  Short term solvency  Long term solvency ratio  Profitability ratio SHORT TERM SOLVENCY RATIO These are ratios. A ratio of 2:1is considered satisfactory as a rule of thumb. The ration is a measure of general Liquidity of the firm for a short period of time. These ratios are calculated to comment upon the short term paying capacity of a concern or the firm ability to meet its current obligations.  Current ratio  Absolute liquid ratio  Cash position Ratio Current Ratio: It may be defined as the relationship between the current assets and current liabilities. which measures the short –term solvency of financial position of a firm.

75:1 is also good . A ratio of 1:1 is considered to be good .Current liabilities ( CL ) Absolute liquid ratio It may be defined as the relationship between absolute liquid assets and current liabilities. Cash Cash position ratio = Current liabilities Long term solvency ratios 21 . A ratio 1:1 is considered to be a good ratio but a rate of 0. Cash +marketable securities Absolute liquid ratio = Current liabilities Cash position ratio It may be defined as the relationship between the available cash both at bank and in hand current liabilities. such a ratio would imply that the firm has enough cash on hand to meet all the current liabilities. Absolute liquid assets include cash in hand and at bank and marketable securities or temporary investments. such a ratio will imply that the firm has enough liquid assets to meets all current liabilities of the firm.

It also helps the creditors to know the capacity of a business concern to pay debt In future. Shareholders fund Proprietary ratio = Total assets *100 Solvency ratio 22 . It usually is expressed as a pure ratio. These ratios are helpful to management in proper administration of capital. a) Proprietary ratio b) Solvency ratio c) Fixed asset to net worth ratio d) Debt-equity ratio Proprietary ratio This ratio establishes the relationship between the shareholders funds and the total assets of the firm. It establishes the claims of the shareholders on the firm’s assets.Long-term solvency ratio conveys a firm’s ability to meet the interest cost and repayment schedule of its long-term obligations.

Total liabilities Solvency ratio = Total assets *100 Fixed asset to Net worth ratio This ratio establish the relationship between fixed asset and shareholders fund.It can be defined as the relationship between total liabilities and total assets. This ratio indicates the relationship between external equities or the outsider’s funds and the internal equities or share holders fund. Generally. Deposits+ borrowings+ subordinated Debt equity ratio = 23 . This ratio indicates the extent to which shareholders fund are sunk in the fixed asset. surpluses and retained earnings Fixed asset Fixed asset ratio = Net worth *100 Debt Equity Ratio Debt equity ratio is also known as external –internal equity ratio and is used to measure the relative claims of outsiders and the owners (shareholders ) against the firm’s assets. which includes reserve. the purchase of fixed assets should be financed by the shareholders equity .

Market price per equity share P/ E ratio = Earnings per share Generally.  Return on equity  Return on total assets 24 . Higher the profit the more efficient is the business. which reveal the total effect of business transaction and indicate how far the organization has been successful its operation. If the P/ E ratio falls the management should look into the causes that causes that have resulted into the fall of this ratio. Profitability ratio Profits are measures of overall efficiency of a business. The ratio is calculated to make an estimation of appreciation in the value of a share of a company and is widely used by investors to decide whether or not buy shares in particular company. In other words they are the ratios they are the ratios. higher the P/ E ratio the better it is.Share holders fund Price earning ratio Price earning ratio is the ratio between market price per equity share and earnings per share.

 Net profit ratio  Operating expenses ratio Return on equity It indicates how the firm has used the resources of owners. Net profit Return on total assets = * 100 25 . This ratio measures the productivity of the of the total resources of a concern. Profit after tax Return on equity = Equity share capital *100 Return on total assets Return on total assets or total assets ratio is the ratio of net profit to total resources or total assets. If they are realizable. The ratio of the net profit to owner’s equity reflects the extent to which the objective has been accomplished. Return here means net profit after tax and total resources means all realizable assets including intangible assets. This ratio is one of the most important ratios in financial analysis. The earnings of a satisfactory return are one of the most desirable objectives of a business.

His first interest will be the security of his investment and then a return in the form of dividend or interest.term solvency ratios will help him in accessing financial position of the concern. For this purpose he will try to access the value of fixed assets. Long. The following are the main points of importance of ratio analysis : A)Managerial uses of ratio analysis  Helps in decision making  Helps in financial forecasting and planning  Helps in communication  Helps in co-coordinating  Helps in control B) Utility to share holder or investor An investor in the bank will like to access the financial position of the concern where he is going to invest. 26 .Total assets SIGNIFICANCE OF RATIO ANALYSIS Ratio analysis is an important technique of analyzing the financial statement and it helps the analyst to make quantitative judgment with regard to concern’s financial position and performance.

Profitability ratios. one has to be careful about the changes. These future rtios may be taken as standards for comparisons and the ratios calculated on actual financial statements can be compared with the standard ratios to find out variances. D) Inter. C) Projected ratios Ratios can also be calculated for future standards based upon the projected or performance financial statement. This kind of comparisons helps in evaluating relative financial position and performance of the firm. if any. while interpretation of ratios from comparison over time.firm comparisons Ratios of one firm can also be compared with the ratio of some other selected firm’s in the same industry at the same point of time. if any. But. such variances help in interpreting and taking corrective action for improvement in future. deteriorated or remained constant over a period of time. will be useful to determine the direction of change and reflects whether the banks performance and financial position has improved. on the other hand. LIMITATIONS OF RATIO ANALYSIS 27 . in the firm’s policies and accounting policies.

Window dressing . ratios also suffer from the inherent weakness of accounting records such as their historical nature. it makes comparison of ratios 28 . It renders interpretation of the ratios difficult. usually. 2. etc. Personal bias: Not only industries differ in their nature but also the firm’s of the similar business widely differ in their size and accounting procedures. they suffer from some serious limitations: 1. does not convey much of a sense. calculated from such financial statements. Though ratios are simple to calculate and easy to understand. which can be accepted as norms. Limited use of a single ratio: A single ratio. Lack of adequate standards: There are no well-accepted standards or rules of thumb for all ratios. 3. Inherent limitation of accounting: Like financial statements. Hence.The ratio analysis is one of the most powerful tools of financial management. one has to be very careful in making a decision from ratios. 5. But it may be very difficult for and outsider to know about the window dressing made from a firm. Financial statements can easily be window dressed to present a better picture of its financial and profitability position to outsiders. 4. To make a better interpretation a numbr of ratios have to be calculated which is likely to confuse the analyst than help him in making any meaningful conclusion.

Price level changes: While making ratio analysis.diffcult and misleading. Moreover comparisons are difficult due to differences in definitions of various financial trms used in the ration analysis. CHAPTER-5 29 . no consideration is made to the changes in price levels and this makes the interpretation of ratios invalid. 6.

could have their money refunded through a lucky draw. Mixed global cues with a downward bias after the US Commerce Department yesterday surprised market by 30 . the trade is likely to remain range-bound in the coming sessions in the absence of triggers to drive the market. Mr Biju Pillai. It touched a high of 6. senior executive vice president & business head said.REVIEW OF LITERATURE HDFC Bank to take railway booking online June 10. the HDFC Bank has on Tuesday announced the launch of 'Bharosa Gold Loan'. The 50-share Nifty index ended at 6. led by losses in Tata Power. RIL January 31. the 'Bharosa Gold Loan' will be offered through 1300 branches of the bank in over 950 locations across the country.60. The product will offer a loan amount of up to 140 % of the gold valuation. HDFC Bank and RIL shares. Bharti Airtel and ICICI Bank. down 22. profit-taking in ICICI Bank.025. 2003. HDFC Bank.98 amid cautious trading on monthly expiry of derivative products. the BSE benchmark Sensex today fell by 110 points to close at two-week low of 19. Sensex falls to 2-week low.033. 2013 MUMBAI: The Nifty ended the last day of January series in the negative terrain. HDFC Bank launches 'Bharosa Gold Loan' March 6. HDFC Bank said in a release here on Tuesday. the bank has announced that 10 customers who book their train tickets aviling the scheme before August 17. As a special inaugural offer to its customers. 2012 In an attempt to reach out to the rural market. According to dealers. A product tailor-made for the rural customer.05 and a low of 6.894.37 per cent.15 points or 0.15 in trade today.058. Nifty ends below 6. 2003 MUMBAI: HDFC Bank has tied up with Indian Railway Catering and Tourism Corporation (IRCTC) to offer online railway bookings to its net-banking customers.050 on January series expiry day January 31. 2013 MUMBAI: Hit by profit-booking in ICICI.

says. retail liabilities product group. HDFC Bank. said brokers. 2012 With interest rates almost at their peak. As far as the commercial vehicle segment is concerned.1 per cent in early trade on Tuesday. ONGC and HDFC ahead of Reserve Bank of India's policy meet later today.5 per cent. it is the right time to lock your funds in good debt instruments. Sensex starts on a cautious note ahead of RBI policy meet January 29. The interest rate on car loan will be lower by 0. The Reserve Bank of India at its third quarter review of monetary policy cut the repo rate by 25 basis points to 7.75 per cent. Wipro decline January 29. the official said. 2013 NEW DELHI: Taking a cue from RBI's rate cut yesterday. Subdued opening of European peers also dampened sentiment. RIL.25 per cent while two-wheeler loan will be cheaper by 0. the 85 per cent analysts are expecting 25 bps cut in repo and reverse repo rate.COM MUMBAI: The Sensex failed to hold on to intraday gains and slipped in the negative territory on Tuesday as traders. led by losses in Tata Motors. 31 . "Interest rates have peaked and are likely to come down now. So. private sector HDFC Bank has decided to slash auto loan rates by upto 0. senior vice-president. 2013 | ECONOMICTIMES. Start a recurring deposit to gain from high interest rates February 20. Sensex pares gains. who had already factored in a 25 basis points cut in the repo rate by the Reserve Bank of India. HDFC Bank cuts auto loan rates by upto 0.5 percent January 30. 2013 NEW DELHI: The BSE Sensex slipped 0. the reduction in rates will be 0. Anindya Mitra. The new rates would be effective from February 1.5 per cent. booked profits near higher levels.25 per cent. According to ET Now poll. it's a good time to invest in recurring deposits at the current rates. A minority of 5 per cent are expecting a 50 bps cut while 10 per cent of them expect the RBI to maintain status quo. But what if you don't have a lump sum to invest? This is where recurring deposits come in handy. a senior bank official confirmed when contacted.declaring contraction in the US economy for the fourth quarter also weighed on the domestic market sentiment. HDFC Bank.

07 and a low of 19.588.76.616. At 11:30 a.10 per cent. CHAPTER-4 32 .m. The index touched a high of 19. TCS and L&T. It touched a high of 5953. up 36 points or 0.2 per cent..Top 20 trading ideas from ET NOW experts for Friday February 8.05 in trade today.57 in trade today. the 50-share index was at 5943. up 5 points or 0.648. 2013 NEW DELHI: Indian markets are moving in a narrow range with a positive bias on Friday. The Sensex was at 19. led by gains in HDFC Bank.70 and a low of 5929.

which are descriptive and helpful for analytical research. annual reports for the study period and the profile of the company. There are various designs.e. principles. resulting in predicition and possibly ultimate control of events. It is a prospective investigation. It is a systematic and objective analysis and recording of controlled observation that may lead to the development of generalization. Research design used in the specific study includes the following:  Identifying the statement of the problem. Research design is the arrangement of conditions for the collection and analysis of data in manner that aims to combine relevance to the research purpose with to economy. Research is a systematic logical study of an issue or problem through scientific method. answers to question and solution to problems.  Scanning through standard books to understand the theory behind the financial performance evaluation.  Collection of the company’s specific literature I.DESIGN OF THE STUDY Research design INTRODUCTION Research design means a search of facts.  Collection of information from various journals to understand 33 .

Activity ratio  Calculation of the above ratios over the study period and analyzing it.  Identification of financial ratios likely to reflect the capital adequacy. so as to judge the profitability and financial soundness of the firm with various tools of analysis before commenting upon the financial health or weakness of an enterprise. assets quality. The information provided in the financial statements is of immense are in making decisions through analysis and interpretations of financial statements. Profitability ratio 2. earning quality and liquidity of the organization. In this case it was decided to be: 1. activities and solvency position of the company will be reflected in the financial mirror 34 . Need of the study Any company would like to know its position against its competitors. The industrial background of the study. STATEMENT OF THE PROBLEM Financial statement is prepared primarily for decision making. They play a dominant role in setting the frame work of financial decisions. The ultimate performance indicator of any company is the financial parameters because invariably all costs efficiencies.  Forwarding certain recommendation and conclusion to the bank. management quality. But the information provided in the financial statements is not an end in itself. The purpose of financial analysis is to diagnose the information contained in financial statements. resources deployed. Liquidity ratio 3.

government and many more to get and idea of the overall performance of the bank.  The bank to understand its own position over time. SCOPE OF THE STUDY The study was taken to know financial performance and profitability position of the company based on its financial statement of previous years. The analysis and interpretation comprises of Ratio analysis. OBJECTIVES OF THE STUDY 35 .  To understand the movement of profit over a period of time.  To know the reason for the variation in the profit.  The managers to understand the contribution to the performance of the bank. This research seeks to investigate and constructively contribute to help:  The bank in finding out gray area for improvement in performance.  To know the present standing of the company. debtors.  The present and potential investors outside parties such as the creditors.The following are stated as the need for the study:  To understand the volume of the profit and its reasonableness.

 To study the comparison of the different ratios of the firm for the past three years. It provides reliable. LIMITATIONS OF THE STUDY  Value of human resources not being disclosed. I took data comprise annual reports and post records from these sources.  Affected by window dressing. The data has been collected through secondary sources- SECONDARY DATA – It is the data which is already collected by someone else.  To evaluate the overall operating efficiency and performance of the bank. suitable. This data has been collected from the internet – the financial reports.  Ignored price level changes.  To determine the financial condition and financial performance of the firm. To show the firm’s relative strength and weakness by using ratio analysis. DATA COLLECTIONS The process of data collection begins after a research problem has been defined and research design ahs been chalked out. adequate and specific knowledge. 36 .

CHAPTER-6 37 . customers. the employees and managers of the organization and also the external users of the study i.e.e. government and researchers..The valuable cooperation extended by staff members contributed a lot to fulfill the requirements in the collection of data in order to complete the project. Expected contribution of the study Financial analysis is a well-scrutinized area and contributes constructively for the benefit of the interested internal users of the study i. potential investors. the shareholders. Overall. it shows the financial performance of the organization.

ANALYSIS AND INTERPRETATION VARIOUS CALCULATED RATIOS ARE GIVEN BELOW • Current Ratio Current ratio may be defined as the relationship between current assets and current liabilities.6 RATIO IN % Source: Developed from collected data 38 . Current assets Current ratio = Current liabilities YEAR CURRENTS ASSETS(Rs in lacks) 2010 2011 2012 2568386 4411407 5844364 CURRENT LIABILITES(Rs in lacks) 2123838 2505345 3492959 1.7 1.2 1.

6 C. 39 .it increases in 2011 to 1.Analysis: The current ratio from the above calculation is 1. it indicates lack of liquidity and shortage of working capital. is not necessarily good for the company. But a much higher ratio.2% in 2010.2 1.4 1.2 1.7% and in the year 2012 it has deceased to 1.1 1. A much higher ratio than 2 : 1 may indicate the poor investment policies of the management.R.7 1.6% GRAPH SHOWING CURRENT RATIO 1. even though it is beneficial to the short-term creditors. is less than 2 : 1.R 2010 2011 Years 2012 Interpretation If the C.7 1.95 1.05 1 0. So liquidity of Bank is satisfactory.

06% in the year 2011.17 RATIO IN %age Source: Developed from collected data.ABSOLUTE LIQUIDITY RATIO YEAR ABSOLUTE LIQUID 2010 2011 2012 ASSETs(Rs in lacs) 212163 156099 617944 CURRENT LIABILITIES(Rsin lacs) 2123838 2505345 3492959 0.In the year 2012. the ratio is good which indicates that the firm has the ability to meet current liabilities in time. GRAPH SHOWING ABSOLUTE LIQUID RATIO 40 .09 0.09% then it decreased to 0. Analysis: The liquid ratio in the year 2010 was 0.06 .

05 0 0.06. it has decreased to 0. The various ratios are: 1.06 0.06 ALR 0.18 0.14 0. while on the other hand in the year 2010 and 2011.ALR 0. Proprietary ratio 41 . the ratio was high which indicate that the firm has the ability to meet its current liabilities in time.09 A L R 2010 Interpretation: 2011 Years 2012 In the year 2012.17 0.09 to 0. These ratio’s are helpful to management in proper administration of capital. It also helps the creditors to know the capacity of a business concern to pay debt in future.07 0.09 0. LONG TERM SOLVECY RATIO’S Long term solvency ratio conveys a firm’s ability to meet the interest cost and repayment schedule of its long –term obligations.

Fixed asset to net worth ratio 4.19 0.14 RATIO IN %age Source: Developed from collected data Analysis: 42 . Debt – equity ratio PROPRIETORY RATIO YEAR SHARE HOLDERS FUND(Rs in Lacs) 2010 2011 2012 480820 840000 941576 TOTAL ASSETS(Rs in Lacs) 2602658 5088582 6715635 0.17 0. Solvency ratio 3.2.

14 GRAPH SHOWING PROPRIETARY RATIO 0.19. 43 . the proprietary ratio was 0. In the year 2010. In the year 2011.15 0.25 0.The proprietary ratio reflects the financial strength of the bank.45 0.30 PR 0.it is decreased to 0.20 019 0. it further decreased to 0.14 0.40 0.And in the year 2012.17.10 0 2010 2011 Years 2012 INTERPRETATION: In the year 2010 the proprietary ratio was high as Compared to other two years.17 0.

14 RATIO IN %age Source: Developed from collected data Analysis: The fixed assets to current asset ratio in the year was 0.14 44 .13.FIXED ASSETS TO CURRENT ASSETS RATIO YEAR 2010 2011 2012 FIXED ASSETS(Rs in lacs) 342720 667175 371271 CURRENT ASSETS(Rs in lacs) 2568386 4411407 5844364 0.15. in the year 2012 it decreases to 0.15 0.In the year 2011 it increases to 0.however.13 0.

14 F A R 0.6 0. DEBT.13 0.18 0. as current assets are more than fixed assets.GRAPH SHOWING FIXED ASSETS RATIO I 0.3 0 2010 2011 Years 2010-11 INTERPRETATION: The fixed assets ratio to current asset ratio is in good position .14 0.EQUITY RATIO 45 .10 0.15 0.

The debt equity ratio is calculated to find out the long –term financial position of the firm Long –term Loans Debt-equity ratio = Shareholder’s funds YEAR 2010 2011 2012 DEBT(Rs in lacs) 1061200 1743237 2280999 SHAREHOLDER’S FUNDS(Rs in lacs) 480820 840000 941576 RATIO I%age 2. and also in the shareholder’s funds and the ratio is also good.2 2.5 2.42 Source: Developed from collected data Analysis: The above table shows that there is considerable increase in the debt every year .1 2.4 2.9 1.3 DER 2.8 2010 2011 Years 2012 2.1 GRAPH SHOWING DEBT -EQUITY RATIO 46 .42 2. 2.20 2.20 2.1 2 1.

1 which is equal to normal ratio 2:1. in the year 2011 is 2. Higher the profit the more efficient is the business. PROFITABILITY RATIO The main objective of a business is to earn profit. In other words.20. profits measures overall efficiency of a business.INTEPRETATION: Here the debt –equity ratio in the year 2010 is 2. It is good financial position from the point of long –term lenders. they are the ratios. which reveal the total effect of business transaction and indicate how far the organization has been successful in its operation. These ratio’s are:  Gross profit Ratio 47 .

 Net profit Ratio  Return on Equity  Operating Ratio  Return on shareholders funds GROSS PROFIT RATIO Gross profit Gross profit Ratio = Net sales X 100 YEAR 2010 2011 2012 GROSS PROFIT(Rs in lacs) 651473 2822218 3151830 NET SALES(Rs in lacs) 11807611 17350281 18735665 RATIO IN %age 5.52 16.82 Source: Developed from collected data 48 .26 16.

and then it increases to 16. 49 .8 Grs.52.52 G P R 16.26 in the year 2011 and remains same in the year of 2012.Analysis: Here the gross profit ratio in the year 2010 is 5.21 in the year 2011. the company is doing well .52 and then it moves to 16. Graph showing Gross profit Ratio 25 20 15 10 5 0 2010 2011 Years 2012 5.2 16. profit ratio Interpretation: Here the gross profit ratio in the year 2010 was only 5. and remains same to this ratio in 2012.as having more sales.

Higher the ratio .6 50 .6 X 100 Source: Developed from collected data.8 to 4. then it slightly increases in 2011 -2012 from 2.NET PROFIT RATIO Net profit Net profit Ratio = Net sales YEAR 2010 2011 2012 NET PROFIT(Rs in lacs) 135450 45771 85676 NET SALES(Rs in lacs) 11807612 1735028 1873566 RATIO IN %age 1.15. Analysis: Net profit Ratio measures the overall efficiency of the business.8 4. From above we see that the ratio in 2010 was only 1. the better it is.15 2.

GROUP SHOWING NET PROFIT RATIO 7 6 5 NPR 4 3 2 1 0 2010 2011 Years 1.15 2.8 4.6 Net profit ratio 2012 Interpretation : This Ratio measures the rate of net profit earned on sales. An Increase in the ratio over the previous year shows improvement in the overall efficiency and profitability of the business. RETURN ON SHAREHOLDERS FUNDS 51 . It helps in determining the overall efficiency of the business operations.

17 and then in 2011 it decreases to 5. and slight increase in 2012 to 9. it quite fluctuating and the company has to maintain a reserve from the profit.45 9.17 5. Return on shareholders(%) GRAPH SHOWING RETURN ON SHAREHOLDERS 30 16. Analysis: The above table shows that.1. during 2010 it was 28.45 9.45 .Net profit Return on Shareholders funds = Shareholders funds X 100 YEAR 2010 2011 2012 NET PROFIT(Rs in lacs) 135450 45771 85676 SHAREHOLDERS FUNDS(Rs in lacs) 480820 840000 941576 RATIO IN %age 28.1 Return on shareholders(%) 52 .43 15 10 5 0 2010 2011 Years 2012 5.1 Source: Developed from collected data.

27 x 100 Source: Developed from collected data.89 1.Interpretation : This Ratio indicates what amount of return has been given to the Share holders of the firm which help in building the good will of firm. 53 .20 0. RETURN ON TOTAL RESOURCE RATI0 Net profit Return on total Assets ratio = Total assets YEAR 2010 2011 2012 NET PROFIT(Rs in lacs) 135450 45771 85676 TOTAL ASSETS(Rs in lacs) 2602658 5088582 6715635 RATIO IN %age 5.

8 8 0.89%.9 0 0.20% and in the year 2011 it decreases to 0.27%. 54 . there is slight decrease in the returns.89 TAR 2011 Years 2012 Interpretation: As the bank purchased more assets during the year 2011.27 0. FINDINGS.6 0 2010 TAR 5.Analysis: The ratio indicates the return on fixed assets and current assets. And in the year 2012 it increases to 1. GRAPH SHOWIN RETURN ON TOTAL ASSETS TAR 7 13 5 . The return on assets in the year 2010 was 5.20 1.

 Gross profit ratio of the company is good and remains same in the last years. so. this shows.  Increase in external debt and also shareholders funds and increases in last year. the growth rate is some what low. 55 .  The proprietary ratio of the company is fluctuating to lower rate.CONCLUSIONS AND RECOMMENDATIONS FINDINGS  The bank has a good progress of maintaining current assets in order to meet its short – obligations.  The fixed assets ratio is in good position. as current assets are more in all three years.  There has been continuous in net profit for three years.  The maintenance of liquidity ratio is fluctuating every year because low investment in marketable securities.  that the profitability of the company is in good position.

” has been undertaken with the objective to interpret the company’s financial performance. which has highlighted the performance of the company in key areas and also has helped in the avocations of certain strategies to be followed by HDFC BANK LIMITED. 56 . CONCLUSION The study entitle “ A STUDY OF FINANCIAL RATIO ANALYSIS IN HDFC BANK LTD. Thus . which are important tools of financial analysis. and then fluctuating in last two years.ratio analysis has been a very useful technique. which is indispensable to its future growth. Ratio of shareholders funds is high during first year. The analysis of the bank was undertaken with the help of ratio’s.  The company is in good position maintaining the total assets.

which is for current ratio. Though the liquidity of the bank is satisfactory. including customers’ acquisitions. and the bank has to maintain more current assets in order to meet its short-term obligations. we can say that the liquidity of the bank is favorable. It has been that the current assets are more than the current liabilities and we can conclude that the bank will be able to meet all its immediate. but is not up to the standard when compared to the standard ratio. • The bank can increase its market share in India’s expanding banking and financial services industry by following a disciplined growth strategy and delivering high quality customer service. Thus.In general. it is 2:1`and for liquid ratio. business volumes and revenues. it is 1:1. It indicates that the bank will face some difficulties in raising its long-term financial requirement . geographical spread. all its financial commitments. The bank has been able to achieve heavy growth across multiple parameters. ratio analysis has been a very useful technique. and mobile banking. RECOMMENDATION: • The liquidity of the bank is found to be unfavorable. internet banking. The proprietary ratio reveals that the net worth of the company is not sufficient to finance the assets of the bank. • The bank can service its customer’s through multiple channels that are phoned banking. without succumbing to pressure. 57 . which has highlighted the performance of the company in key areas and also has helped in the avocations of certain strategies to be followed by HDFC BANK LIMITED. the bank has achieved tremendous progress over the recent years. which is indispensable to its future growth. The bank has a healthy financial performance.

• If the bank has to attract more customers increase turnover. • • Increase the availability of car loans. the bank can provide advances and loans to the general public for the following purposes: • • • Loan to small scale industries and cottage industries. Loan to self –employed person or young entrepreneurs. WHICH ARE USED TO GATHER INFORMATION • www. The bank can also provide two wheelers and education loan which can boost income of the bank. BIBLIOGRAPHY WEBSITE.google. Increase short-term deposits and long –term deposits by providing higher rate of interest.com 58 .

the following books have been refered: STANDARD TEXT BOOKS SUCH AS: Title of books Financial management Financial management Management Accounting Authors I.com For the purpose of the study.Khan &P.• • www.M Pandey M.K Sharma & Shashi K.Gupta Publishers Vikas Publishing Tata McGraw Hill publishing Kalyani publishers Edition 2002 2002 2000 59 .K Jain P.hdfcbank.com www.economictimes.