A report on Organization Structure

and Functioning of HDFC Bank

Submitted by:

Mukul Yadav

PRN: 12020841145

Finance Batch 2012-14

 Contents

Executive Summary ............................................................................................ 3

Company Profile – HDFC Bank ........................................................................ 4
Brief History ...................................................................................................... 4
Promoter ............................................................................................................. 4
Business focus.................................................................................................... 4
Capital Structure ................................................................................................ 4
Distribution Network ......................................................................................... 5
Technology ........................................................................................................ 5
Key Financial Highlights ................................................................................... 5
Functional Departments of the Bank ................................................................ 6
H R Department: ................................................................................................ 6
Finance Department ........................................................................................... 7
Marketing Consultancy Department .................................................................. 7
Research Department ......................................................................................... 7
Technical Consultancy Department ................................................................... 7
Organization Structure....................................................................................... 7
Core Businesses & Operations ........................................................................... 9
Wholesale Banking Services ............................................................................. 9
Retail Banking Services ..................................................................................... 9
Treasury ............................................................................................................. 9
Operations ........................................................................................................ 10
Critical Review – Past & Current Strategies ................................................. 10
Where did they go right? ................................................................................. 10
Where did they go wrong? ............................................................................... 12
Bibliography ...................................................................................................... 13
Executive Summary

Banking is a business that provides financial service, usually for profit. Traditional banking
services include receiving deposit of money, lending money and processing transaction. A
commercial bank accepts deposit. Some banks (called bank of issue) issue banknotes as legal
tender. Many banks offer ancillary financial services to make additional profit: for example –
selling insurance product, investment product.

Banking in India is generally mature in terms of supply, product range and reach – even
though reach in rural India still remains a challenge for private and foreign banks. With the
growth in Indian economy especially service sector is improving – demand for banking
services especially retail banking, mortgages and investment services is expected to be
strong.

There are many banks that are available in the Indian banking system and they give different
types of account services to the customers. Also a bank provides different types of services to
the customers like net banking, phone banking and mobile banking. As per census, about
58.7% households are reported to be availing banking facilities. The size of the Indian
Banking Sector is 64 trillion INR. According to a report by the Boston Consulting Group
(BCG) India, Indian banking sector is anticipated to grow exponentially and become the
world’s third largest in asset size (projected at US$ 28,500 billion from the current US$ 1,350
billion) by 2025. Driven by 3G and Smart phones, mobiles would emerge as the most
preferred mediums for banking wherein they will account for almost 20-30 per cent of the
transactions.

This project discuss about the organization and working of HDFC bank, what are the
different product range provided by the bank and how the bank is contributing to the Indian
banking sector.
Company Profile – HDFC Bank

Brief History

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.HDFC bank began its operations in 1995 with a simple
mission : to be a “world-class Indian Bank”. They realized that only a single-minded focus on
product quality and service excellence would help them get there. It is extremely gratifying
that their efforts towards providing customer convenience have been appreciated both
nationally and internationally.

Promoter

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

Business focus

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

Capital Structure

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

Distribution Network

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of
over 3000 branches spread over cities across India. All branches are linked on an online real-
time basis. Customers in over 120 locations are also serviced through Telephone Banking.
The Bank's expansion plans take into account the need to have a presence in all major
industrial and commercial centres where its corporate customers are located as well as the
need to build a strong retail customer base for both deposits and loan products. Being a
clearing/settlement bank to various leading stock exchanges, the Bank has branches in the
centres where the NSE/BSE has a strong and active member base. The Bank also has a
network of about over 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.

Technology

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

and communication systems. All the bank's branches have online connectivity, which enables
the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also
provided to retail customers through the branch network and Automated Teller Machines
(ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology
available internationally, to build the infrastructure for a world class bank. The Bank's
business is supported by scalable and robust systems which ensure that our clients always get
the finest services we offer. The 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 businesses. In each of its businesses, the Bank has succeeded in leveraging its market
position, expertise and technology to create a competitive advantage and build market share.

Key Financial Highlights

 Net profit up by 27.1% to ` 19.8 Bn

 Gross advances increased by 16.0% to ` 2,705 Bn

 Deposits up by 14.2% to ` 3,130 Bn

 CASA ratio at 45.0%

 Net Interest Margin at 4.3%

 Cost-to-income ratio at 46.4%

 Gross NPA / gross advances at 1.1%

 Net NPA / net advances at 0.3%

 Capital adequacy ratio (CAR)* - total 14.6% of which tier I at 9.9%

Functional Departments of the Bank

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

H R Department:

HDFC Human Resources department plans and direct for the employee population as well as
they are having the following functions as:-

 Hiring

 Promotions

 Reassignments

 Position classification and grading

 Salary determination

 Performance appraisal review and processing

 Personnel data entry and records maintenances

 Policy development

 Work permitting immigration visa program

  Workers’ compensation

Finance Department

Finance is the lifeblood of the organization. Finance management as an integral part of the
overall management is not a totally independent area. It draws heavily on related subjects and
fields of study namely economics, accounting, marketing, production, and quantitative
methods. The Finance Manager is responsible for all aspects of the accounting and financial
administration of the HDFC, the supervision of the implementation of the HDFC financial policies,
directives and procedures and the initiation of the financial plans within the guidelines of HDFC The
department contains several distinct sections, each of which is responsible for a proportion of the
activities taking place within the finance department.

Marketing Consultancy Department

The Marketing Consultancy Department plays an important role within the Fund as it studies
and analyzes marketing information in order to build solid base for management decisions.
The division also assists projects sponsors in formulating solid marketing strategies to
improve their industries and strengthen their position in the local and international markets.

Research Department

The research department is having the capacity to act through four composing units i.e. the
market research unit, economic studies unit and statistical studies unit. It is the mission of the
division to provide support Bank for information and consultancy to the senior management
and division in the areas of economic, statistical and marketing information and consultancy
through data analysis, processing of economic and statistical data, market research studies
and publishing related periodical reports.

Technical Consultancy Department

The Technical Consultancy Department is responsible for technical appraisal of industrial

projects. The mission of the division is aimed towards the verification of the technical
viability of industrial projects and assisting the Funds management in taking the decisions
that require technical expertise. Moreover, it is responsible for conducting technical studies
and rendering technical consultancy bank to certain industrial sectors for the purposes of
investigating modern technologies and productivity levels for local manufacturing plants.

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

The organization structure is well planned out and it follows a simple structure as follows:

Each team lead has a team comprising only of both senior as well as junior market research
analyst who aid the team lead in the entire market research process as it has been discussed
previously. This is the basic organizational structure followed by HDFC bank.
Core Businesses & Operations
HDFC Bank offers a wide range of commercial and transactional banking services and
treasury products to wholesale and retail customers. The bank has three key business
segments:

Wholesale Banking Services

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

Retail Banking Services

The objective of the Retail Bank is to provide its target market customers a full range of
financial products and banking services, giving the customer a one-stop window for all
his/her banking requirements. The products are backed by world-class service and delivered
to the customers through the growing branch network, as well as through alternative delivery
channels like ATMs, Phone Banking, Net Banking and Mobile Banking. The HDFC Bank
Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment
Advisory Services programs have been designed keeping in mind needs of customers who
seek distinct financial solutions, information and advice on various investment avenues. The
Bank also has a wide array of retail loan products including Auto Loans.

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 September 30, 2005, the bank had a total
card base (debit and credit cards) of 5.2 million cards. The Bank is also one of the leading
players in the "merchant acquiring" business with over 50,000 Point-of-sale (POS) terminals
for debit / credit cards acceptance at merchant establishments.

Treasury

Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalization of the financial markets in India, corporate need more sophisticated risk
management information, advice and product structures. These and fine pricing on various
treasury products are provided through the bank's Treasury team. To comply with statutory
reserve requirements, the bank is required to hold 25% of its deposits in government
securities. The Treasury business is responsible for managing the returns and market risk on
this investment portfolio.
Operations

As of 30 September 2013, HDFC Bank has 3,251 branches and 11,177 ATMs, in 2,022 cities
in India, and all branches of the bank are linked on an online real-time basis. The Bank has
overseas branch operations in Bahrain and Hong Kong.

HDFC Bank has two subsidiaries:

 HDB Financial Services Limited

o NBFC catering to certain customer segments not served by the Bank
o Main Products: Retail secured and unsecured loans, Insurance services and
Collection services
o Network of 230 branches
o FY 2013 - Loan book: ` 82,037 million, Net Profit: ` 1,024 million
 HDFC Securities Limited
o Amongst the leading equity brokerages in the country
o Over 190 branches and 1.6 million customers
o Revenues from brokerage as well as distribution of financial products
o FY 2013 - Net Profit: ` 668 million

Critical Review – Past & Current Strategies

Where did they go right?

 First Mover Advantage

o The Bank started operations as a scheduled commercial bank in January 1995
under the RBI's liberalisation policies.
o Among the first companies to receive an 'in principle' approval from the Reserve
Bank of India (RBI) to set up a bank in the private sector.
 LONG TERM FOCUS
o From Housing Loans to Banking and then to best service.
o Mr. Aditya Puri ,Managing Director of HDFC Bank Ltd. since September 1994 is
now investing in building investment banking capabilities unlike some of the
bank's peers which looked at acquiring teams and capabilities to build this
business
o The CEO likes Wells Fargo for its product penetration and cross-selling
 ADAPTIVE & ANTICIPATIVE
o During the first decade, the focus was on urban centres, but today semi-urban and
rural areas generate a large chunk. "Some 4-5 years back, 80% of their income
came from the top 15 cities, today 40% comes from semi urban and rural areas.
That's an amazing strategic shift," says Nandan Savnal, an ex-banker and a keen
industry watcher.
 Retail focus
o The cornerstone of HDFC business strategy has been its retail focus."Our focus
has always been low-cost retail deposits. Corporate deposits tend to be very
volatile and command a higher cost, hence our reticence toward it," says Paresh
Sukhtankar, head of credit and market risk.
o The bank's strategy-high growth with low risk-has been a great source of value to
shareholders.
 FINANCIAL INCLUSION
o Over the last few years, your Bank has been working on a number of initiatives to
promote Financial Inclusion across identified sections of rural, under-banked and
un-banked consumers.
 Rural Initiative
o The Bank has approximately 33% of its branches in rural and under banked
locations
 No Frills Savings Accounts
o The Bank provides ‘No Frills’ savings accounts through all its branches as a
stepping stone towards financial inclusion.
 Capitalizing on Under banked Demand
o Given that demand was abundant in under banked India, the way HDFC
positioned itself to take advantage of that demand is a case study.
 Service
o HDFC bank ATM services have been considered remarkable by the customers.
Efficient handling of the complaints it receives regarding ATMs and DEBIT card
maximum takers of HDFC bank’s ATM cards. Customers call HDFC bank as
friendly and reliable bank because of its CRM services
 The superior quality of its funding franchisee
o Currents and savings account (CASA) at 48% - provides the bank a sticky and
low-cost source of funding. And just how good that is can be gauged from the fact
that compared to its peer group average of 36%, the bank has maintained an
average CASA ratio of 56% over last seven years. And what a high CASA does is
give the bank, a Net Interest Margin (NIM) of 4.2%, a good profitability number
for any bank
 Small and Micro Enterprises
o One of the means to financial inclusion is by supporting small and micro
enterprises which in turn provide employment opportunities to the financially
excluded.
o The Bank offers complete banking solutions to micro, small and medium scale
enterprises across industry segments including manufacturers, retailers,
wholesalers / traders and services.
 Capture Customer Loyalty & Trust:
o HDFC bank has also targeted kids by opening accounts for them and by
introducing kid’s advantage plan under mutual funds. Due to these efforts of
HDFC bank lots of kids have become loyal customers of HDFC already.
 BUNDLING & PIONEERING OF SERVICES
o Leverage its technology platform and open scalable systems to deliver more
products to more customers and to control operating costs.
o Vast repertoire of financial services
o It is already perceived as “comprehensive financial supermarket”.

Where did they go wrong?

 Delightful Service but at a COST:

o HDFC still stands behind Giant Indian PSUs on Banking parameters.
o Even differentiators need to focus on cost reduction to offer a value proposition.
 Good Adaptor but No Innovation
o ICICI Bank, which was transforming itself from a long-term project lender to
commercial banker, went the whole hog for retail banking—everything from
housing loans to auto loans to credit cards—and was growing exponentially.
o ICICI was also a first mover in technology
 Lagging in Net Banking
o ICICI Net banking also offers online self-compounding accounts like Recurring
Deposits and Money Multiplier Account that HDFC Net banking doesn’t.
o Though both ICICI and HDFC Net banking offers the facility of receiving
message “Alerts” on your mobile to notify transactions, ICICI offers online
customisation of the alerts up to the minutest details. For e.g, you can configure
the threshold amounts above which you need an alert for, and also specify whether
you need the alert by an SMS or email.
o Premature liquidation of your Fixed Deposit
o De-registration of Bill Pay facility
o The ICICI Net banking interface is quite appealing aesthetically
 Scope for Cost Reduction to boost Competitive Advantage
o Even as a trendsetter Bank HDFC needs to shed the tag of Most Expensive bank
& add value for Customer
 HDFC has a long way to go.

Scope exists for:

o To translate ‘Brand Value’ to Market Share

o To reduce expenses %
o To better the Profitabilityy
o To contribute more to Exchequer & National interests as a whole.
Bibliography

 http://en.wikipedia.org/wiki/HDFC_Bank
 http://documents.scribd.com.s3.amazonaws.com/docs/5oe3oj2v5s2klg7n.pdf?t=13728420
71
 http://www.hdfcbank.com/assets/pdf/Investor_Presentation.pdf
 http://www.scribd.com/doc/30849414/HDFC-Bank-Summer-project