General management Project on

“A STUDY OF HDFC LTD’S GENERAL MANAGEMENT

PRACTICES”

Submitted in partial fulfilment for the award of the degree of

Master of Management Studies (MMS)

(Under University of Mumbai)

Submitted By
SATYAMSINGH DHAGE
(Roll No.11)

Under The Guidance Of

Dr. PANKAJ NANDURKAR

2016 – 2018

THAKUR INSTITUTE OF MANAGEMENT STUDIES AND

RESEARCH (TIMSR)
SHYAMNARAYAN THAKUR MARG, THAKUR VILLAGE,
KANDIVALI (EAST), MUMBAI 400101

1
 CERTIFICATE

This is to certify that project titled, “A STUDY OF HDFC LTD’S GENERAL

MANAGEMENT PRACTICES” is successfully completed by Ms. Satyamsingh Dhage
during the IV semester, in partial fulfilment of the Master’s Degree in Management Studies
recognised by the University of Mumbai for the academic year 2016-2018 through Thakur
Institute of Management Studies And Research, Mumbai.

This project work is original and not submitted earlier for the award of any degree diploma or
associate ship of any other University / Institution.

Signature Signature:

Project Guide: Dr. Pankaj Nandurkar Director: Dr. Ramakumar Ambatipudi

Date: Date:
 DECLARATION

I hereby declare this project submitted by to the Thakur Institute of Management Studies And
Research, Mumbai, is a bonafide work undertaken by me and it is not submitted to any other
University or Institution for the award of nay degree diploma / certificate or published any
time before.

Date: (Signature of the Student)

Place: Name: Satyamsingh

Dhage

Roll no: 11
 ACKNOWLEDGEMENT

The success and final outcome of this project required a lot of guidance and assistance from
many people and I am extremely privileged to have got this all along the completion of my
project. All that I have done is only due to such supervision and assistance and I would not
forget to thank them.

I respect and thank Dr. Ramakumar Ambatipudi for providing me an opportunity to do the
project work in Thakur Institute of Management Studies and Research, Kandivali.

I owe my deep gratitude to my project guide Dr. Pankaj Nandurkar, who took keen interest
on my project work and guided us all along, till the completion of my project work by
providing all the necessary information for developing a good system.

I am thankful to and fortunate enough to get constant encouragement, support and guidance
from all Teaching staffs of TIMSR which helped me in successfully completing my project
work. Also, I would like to extend my sincere esteems to all staff in library for their timely
support.

(SATYAMSINGH DHAGE)

4
 EXECUTIVE SUMMARY

The following project contains detailed information about the company i.e HDFC Ltd.
Starting from the performance of the housing finance industry and its contribution to GDP.
Also reason for selecting HDFC Ltd as research topic based on its performance. There has
been discussion about the decision making process and how they have chopped off their
organizational layers to clear off the channel between divisional layers and Global heads.
Some of the motivational and leadership practices followed by the company makes it unique
from others and they utilize to its optimum level. Talking about the Leadership development
at HDFC is about building leaders through a combination of disciplined routines and
processes: a collective expertise, honed through practice, in recognizing and developing
talent.

5
 INDEX

Sr. No. Particulars Page No.

1 Introduction 1
1.1 About the Industry 1
1.2 Reason for selection of company for research work 2
1.3 Research objective 3
1.4 Method of Contact 3
2 Company Profile 4
2.1 About the Organisation 4
2.2 Registration Details 4
2.3 Form of Ownership 4
2.4 Mission, Vision, Goal and Core Values 5
2.5 Products and Services 5
3 Organising 11
3.1 Organisation Structure 11
3.2 Decision Making Process 11
3.3 Leadership in HDFC Ltd 12
4 Law and Regulatory policies for HFDC Ltd 13
5 Facility layout and Location 24
5.1 Facility location 24
6 HR Policies of the Organisation 25
6.1 Wages and Salary 25
6.2 Recruitment and Selection 25
6.3 Grievance Redressal 26
7 Management Information System 31
8 Conclusion 33
9 References 34

6
 Chapter 1: Introduction

1.1 About the Industry

Housing is a primary necessity in every economy and is a basic indicator of growth and
social well-being. Development of housing is not just important to economic growth but is
also one of the tools for economic development considering the accelerator impact it has on
various industries including construction and infrastructure sector; it generates demand for
supporting industries and leads to creation of job opportunities. Development of housing in a
country is a sign of economic welfare.

For any emerging economy, development of the housing sector has its own challenges. The
biggest of these challenges is access to finance. While investment in real estate is an easy
candidate for borrowing, real estate lending is more opportunity-based. In India, access to
finance for housing needs is largely concentric and focused at higher income groups, as that
is the sector where there are formal evidences of income such as salary slips or income-tax
returns. Since lenders tend to lend to sectors where lending is the easiest, the lower segments
of the population pyramid will remain unserved or underserved if the system was left entirely
to itself. Therefore, there is a need, in every financial system, to enable access to finance by
lower segments of the population pyramid.

While the upper has low or no access to banks for mortgage finance; creating a huge demand
in this segment and lack of access of finance. The fact that the upper segments of the pyramid
are well-served is evident from the highly competitive mortgage lending rates prevailing for
the sector. There is also a much longer way to travel in terms of ensuring the availability of
housing finance to low income to middle income groups.

Housing is an important sector for any economy as it has inter-linkages with nearly 269 other
industries. The development of housing sector can have direct impact on employment
generation,
GDP growth and consumption pattern in the economy. To help develop housing in the
country, there is need to have a well-developed housing finance market. In India, housing
finance market is still in its nascent stage compared to other countries. The outstanding
amount of housing finance from all sources accounts for less than 8 per cent of GDP when
compared with 12 per cent in China, 29 per cent in Malaysia, 46 per cent in Spain and 80 per
cent in the US. The demand for housing is increasingly being made by individuals and

7
Households given increasing level of income and prosperity. The supply of houses have to
come from builders, developers and construction companies scattered widely across the
country, both in the private and public sector when examined in the context of demand and
supply of housing units, especially in the face of scarce land in the urban areas.
In India, housing finance market is very complex. The government, both at centre and states,
is a facilitator and is assisted by two regulators, Reserve Bank of India (RBI) and National
Housing Bank (NHB). The housing finance market is dominated by commercial banks, both
domestic and foreign. In addition, there are cooperative banks and housing finance
companies, self-help groups, micro-finance institutions, and NGOs. The RBI regulates
commercial banks and partially cooperative banks (which are mainly governed by the State
Governments under
State Cooperative Acts) while the NHB regulates the housing finance companies. The others
are not regulated by any authority in the country.
The financial sector reforms initiated in 1985 and 1991 unleashed development forces in the
economy. This resulted in higher employment, increased income levels, faster urbanisation
and higher demand for houses, especially in urban areas.
Therefore, concerted efforts were made by the Government and the Reserve Bank to
encourage housing during the 1990s. The long term goal of the National Housing Policy,
announced by the Government in 1998, was to eradicate house lessness, improve the housing
conditions of the poor and provide minimum level of basic services and amenities to all.
Fiscal incentives were also granted, in general, to the housing sector. The government has
been initiating as well as strengthening measures to extend housing to the weaker sections of
the society. A number of measures were announced from 2001 but a concerted effort was
made in 2006 after some fears were expressed that there was a housing bubble developing in
India which could eventually burst. It was then recognized that role of housing could be
critical in India and therefore measures announced thereafter aimed to improve business
environment in the country.

1.2 Reason for selection of company for research work

Since HDFC Ltd is market leader in housing Finance Sector, this organisation is selected for
research work.

8
1.3 Research Objectives

 Study of Company Profile of HDFC Ltd.


 Study of General Management practices of HDFC Ltd.

1.4 Method of Information collection

 Research Approach: Observation


 Data Collection Method: Secondary Data

9
 Chapter 2: Company Profile

2.1 About the Organisation

Housing Development Finance Corporation Limited (‘the Corporation’ or ‘HDFC’) was

promoted in October 1977 as a public limited company specialising in providing housing
finance to primarily households and corporates for purchase and construction of residential
housing. Prior to 1977, retail mortgage finance was unknown in India. There were no
foreclosure norms, no credit bureau and no easy access to finance in India. HDFC is India’s
first retail housing finance company and is currently one of the largest originators of housing
loans in the country. HDFC has financed over 5.8 million homes.

The HDFC group is considered as a financial conglomerate in the Indian capital market with
the presence of housing finance, banking, life and general insurance, Asset management,
Venture Capital and Education loan.

As a part of development initiatives HDFC has promoted institutions in various fields

including credit rating, consumer finance, leasing, infrastructure and IT enabled Service.
HDFC’s distribution network spreads 427 outlets which includes 130 offices of its
distribution company, HDFC sales private limited (HSPL). In addition, HDFC covers several
locations through its outrage programmes. Distribution channel form an integral part of the
distribution network with home loan being sourced through HSPL, HDFC bank limited and
other third party direct selling associates.

2.2 Registration Details

Housing Development Finance Corporation Limited (‘the Corporation’ or ‘HDFC’) is a

public limited company incorporated on October 17, 1977, under the Companies Act, 1956
(Corporate Identity Number L70100MH1977PLC019916). It is registered as a Housing
Finance Company with the National Housing Bank (‘NHB’) under the NHB Act, 1987. The
equity shares of the Corporation are listed on the Bombay Stock Exchange Limited and the
National Stock Exchange of India Limited.

2.3 Form of ownership

HDFC is a public limited company with its stocks listed on BSE ad NSE

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2.4 Mission, Vision, Goal and Core Values

 Mission: To enhance the residential housing stock in the country through the
provision of Housing Finance in a systematic and professional manner, and to
promote home ownership.



 Vision: A socially conscious and responsible organisation with larger and long term
impact projects across the sector.



 Goal: Increase the flow of resources to the housing sector by integrating the housing
finance sector with the overall domestic financial markets.



 Core Values: Trust, Integrity, Transparency and Professional Services.

2.5 Products and Services

Various products of HDFC Ltd include:

1) Housing Loans
a. Home loans

Salient Features:

 HDFC offers Home Loans for purchase of:

O A flat, row house, bungalow from private developers in approved projects.
O Properties from Development Authorities such as DDA, MHADA et.

 Attractive Home Loan interest rates to make your Home Loans affordable and easier
on your pocket.

 Customized repayment options to suit your needs.

 No hidden charges.

 Expert legal and technical counselling to help you make the right home buying
decision.

11
  Integrated branch network for availing and servicing the Home Loans anywhere in
India.

 Special arrangement with AGIF for Home Loans for those employed in the Indian
Army.

b. Home Improvement Loans

Salient Features:

 Loans for enhancing your home in many ways such as tiling and flooring, internal and
external plaster and painting etc.

 Available for both existing and new customers.

 Easy and hassle free documentation.

 Simple repayments through monthly instalments.

 Loans at Home Loan interest rates.

c. Home Extension loans

Salient Features:

 Loans to extend or add space to your home such as additional rooms etc.

 Available for both existing and new customers.

 Easy and hassle free documentation.

 Simple repayments through monthly instalments.

 Loans at Home Loan interest rates.

d. Plot Loans

Salient Features:

 Loans for:
O Purchase of a plot through direct allotment
O Purchase of a resale plot
O Transferring your outstanding loan availed from another Bank / Financial
Institution

12
  Attractive interest rates that make your Plot Loan affordable and easier on your
pocket.

 Customised repayment options to suit your needs.

 Expert legal and technical counselling.

 No hidden charges.

e. Short Term Bridging Loans

Salient Features:

 Loans for the immediate funds required to purchase a new home while waiting for
sale of your existing home.

 Repayments through monthly instalments of simple interest with lump sum principal
repayment at the end of the term.

 Easy and hassle free documentation.

 Zero prepayment charges.

 No hidden charges.

 Integrated branch network for availing and servicing the loan anywhere in India.

f. Rural Housing Finance

Salient Features:

 Specially designed loans to Agriculturists, Planters, Horticulturists, Dairy Farmers

for:

O Purchasing an under construction / new / existing residential property in the

rural and urban areas.
O Constructing your home on a freehold / lease hold residential plot in the rural
and urban areas.
O Enhancing your home in many ways such as tiling and flooring, internal and
external plaster and painting etc.
O Extending / adding space to your home such as additional rooms etc.

13
  Loans also available for the Salaried / Self-Employed for:

O Purchasing a under construction / new / existing residential property in your

village.
O Constructing your home on a freehold / lease hold residential plot in
your village.
O Enhancing and extending / adding space to your home in many ways.

 For Agriculturists, no mortgage of agricultural land is required to avail the Home

Loan.

 No mandatory requirement of Income Tax Returns from Agriculturists applying for
the Home Loan.

 Longer tenure of 20 years for Agriculturists.

 Attractive interest rates.

 No hidden charges.

 Customised repayment options to suit your needs.

2) Non Housing Loans

a. Loan Against property

Salient Features:

 Loan against fully constructed, freehold residential and commercial properties for:
O Business Needs

O Marriage, medical expenses and other personal needs

O Transferring your outstanding loan availed from another Bank / Financial
Institution

 Longer tenure, smaller EMIs.

 Attractive interest rates.

 Easy and hassle free documentation.

 Simple repayments through monthly instalments.

 Integrated branch network for availing and servicing the loan anywhere in India.

14
 b. Top-up Loans

Salient Features:

 Loans for a variety of personal or professional needs (other than for speculative
purposes).

 Avail of a maximum Top Up Loan of Rs. 50 lacs.

 Loans for existing customers as well as new customers availing of our Balance
Transfer Facility.

 Attractive interest rates.

 Easy and hassle free documentation.

 Simple repayments through monthly instalments.

 Integrated branch network for availing and servicing the loan anywhere in India.


c. Non Residential premises loans
1. Built up Property

Salient Features:

 Loans for:

O The purchase of a new or existing clinic or office

O The extension, improvement or construction of an office or clinic
O Transferring your outstanding loan availed from another Bank / Financial
Institution

 Expert legal and technical counselling to help you make the right property buying
decision.

 Attractive interest rate.

 Easy and hassle free documentation.

 Simple repayments through monthly instalments.

 Integrated branch network for availing and servicing the loan anywhere in India.


15
 2. Plot

Salient Feature:

 Loans for:

O Purchasing a new or existing commercial plot

O Transferring your outstanding loan availed from another Bank / Financial
Institution

 Expert legal and technical counselling.


 Attractive interest rates.

 Easy and hassle free documentation.

 Simple repayments through monthly instalments.

Various Services offered by HDFC Ltd are:

1) Pre-payment
2) PMAY subsidy
3) Property identification and sales service
4) Property Valuation

16
 Chapter 3: Organising

3.1 Organisation Structure

Organisation Structure of HDFC Ltd is very simple. Organizational structure is a system used
to define a hierarchy within an organization. It identifies each job, its function and where it
reports to within the organization. This structure is developed to establish how an
organization operates and assists an organization in obtaining its goals to allow for future
growth. The structure is illustrated using an organizational chart.

Figure 1: Organisational Structure of HDFC ltd

3.2 Decision making process

Organizational decision making is an extremely complex exercise. Fast decision making

guided by quality insights is an imperative for business performance. Through agile
decisions, organizations can accelerate innovations, reduce the time-to-market of products
and services, and tackle emerging business complexities. While undertaking key decisions,

17
Enterprises are often guided by questions such as: What are the overall goals? Are there any
dependencies between these goals? What are the means of achieving them? How do these
means differ qualitatively and quantitatively? Typically, experts are guided by past
experience. They validate and rank solution alternatives. The limited details available at this
stage means decision alternatives can at best be qualitatively differentiated.

3.3 Leadership in HDFC Ltd.

 Mr. Deepak S. Parekh (DIN: 00009078) is the chairman of the corporation. He

joined the corporation in a senior management position in 1978. He was inducted as a
whole time director in 1985. He was then appointed as MD in 1993. He is a director
on board of several prominent companies in India. He is also the chairman of CSR
committee of the organisation

 Mr. Keki Mistry (DIN: 00008886) is the Vice Chairman and Chief Executive Officer
of the organisation. He is a fellow of Chartered Accountant of India. He joined the
corporation in 1981. He was then appointed as executive director in 1993, as deputy
Managing Director in 1999 and as Managing Director in 2000. He was then appointed
as Chairman and Chief Executive Officer in 2010. He is also a member of risk
management committee.

 Ms. Renu Karnad (DIN: 00008084) is Managing Director. She holds master’s
degree in economics from Delhi University and is graduated in law from Mumbai
University. She joined the corporation in 1978. He was then appointed as executive
director in 2000, as joint Managing Director in 2007 and as Managing Director in
2010. She is also a member of risk management committee.

 Mr. V. Srinivasa Rangan (DIN: 00008084) is the Executive Director of the
corporation. He is a fellow of Chartered Accountant of India. He joined the
corporation in 1986 and served in Delhi region and was a senior general manager at
head office since 2000. He was then appointed as executive director in 2010. He is

Responsible for the treasury, resources and accounts function of the corporation. He is
also a member of stake holders’ relationship committee and risk management
committee.

18
 Chapter 4: Law and Regulatory policies for HFDC Ltd

The NHB is a wholly owned subsidiary of the RBI and propagates norms that apply to all
registered HFCs. HFCs in India can be sub-classified in to deposit–Taking and non–deposit-
Taking institutions. Deposit-taking HFCs must currently comply with the following rules:-

1. No HFC can accept/renew public deposits unless it has an investment grade rating for
fixed deposits on a yearly basis.
2. The ceiling on public deposits stands at some stated multiple (currently five times) of the
HFCs’ net owned funds (NOF)
3. No HFC can accept / Renew deposits repayable on demand unless the maturity of the
deposit is more than 12 months and less than 84 months.
4. An HFC must comply with interest rate regulation on such deposits as prescribed by the
NHB

Housing finance may be subject to a wide range of legal and regulatory enactments governing
every stage of the lending process, including, for example, the form and content of loan
information disclosed to borrowers, the rules for creating a mortgage, and the procedures for
enforcing a creditor’s security rights. Approaches to legal regulation of housing finance may
differ significantly among countries.

Most housing loans are secured by mortgage of the home constructed, acquired or improved
with the proceeds of the loan. While there are other forms of housing lending–housing
microfinance, for example, which appears to be developing rapidly today–and other forms of
loan security, these appear to comprise a relatively minor part of the total volume of housing
lending. Indeed, most banking regulators insist on high-quality collateral for housing loans,
even more so today as the effects of the 2007 mortgage market crisis in developed economies
continue to be felt. Accordingly, the essential laws of housing finance are concerned with the
creation and enforcement of mortgage liens, and the depth and breadth of housing finance
markets in countries may be related to the nature and quality of their laws for establishing
and enforcing creditors’ rights under mortgages.

19
1) Theory of Mortgage Collateral

Laws and regulations can be either incentives or disincentives to lending and borrowing.
The theory of collateral is that by providing an efficient means of recapturing an
investment, the costs and risks of housing lending are reduced. In particular, shorter time
periods and greater certainty in realization of collateral eliminates risks such as lost
interest and loss of principal from deterioration in collateral value due to, for example,
unpaid taxes or lack of property maintenance. Simplification of enforcement procedures
also may tend to reduce transaction costs. Reduction of transaction costs and financial
risks means greater proceeds from sale of collateral, which benefits not only the creditor,
but in theory the debtor also. Reduced costs and greater certainty in enforcement are
believed to result in lower risk premiums in interest rates, and greater willingness of
creditors to make more credit available for housing construction and acquisition, either
going deeper into the socio-economic strata or offering larger loans.

2) Some Empirical Evidence

Arriving at compelling conclusions regarding the relationship between the efficiency of

enforcing creditors’ rights and the availability and cost of credit has not been easy.
Finding data that permit cross-country comparisons, defining the appropriate indicators,
and controlling for the host of external variables that affect credit markets and interest
rates are only a few of the problems. Nevertheless, there is a body of empirical evidence
that the theory is correct, and that an efficient system of creditors’ rights increases
societal welfare. Modern studies have suggested a strong relationship between the quality
of laws, the efficiency of law enforcement concerning creditors’ and contract rights and
the availability and cost of credit to businesses and households. Moreover, while much of
this research initially focused on the laws themselves, it has become clear that the quality
of the laws and quality of enforcement can be independent variables and that good laws
will have more effect when they are efficiently enforced.

3) Lack of legal guidance

There are several ways in which inadequate legal regimes may affect the breadth and
depth of housing finance markets. One has been lack of clear legal guidance for lenders in
the laws of some emerging country markets. Lenders are reluctant to be pioneers in

20
Situations where the laws are unclear and there is lack of legal precedent, as is the case in
many emerging markets. This concern seems to be decreasing as better mortgage laws are
adopted and experience with housing finance is gained by lenders, borrowers and courts.
Nevertheless, in new markets some ambiguities persist. Typical areas of ambiguity may
include grounds for default and enforcement of claims, judicial discretion to suspend or
refuse execution, permitted defences to lender’s claims, legal priorities among parties,
and obtaining orders of eviction and possession of mortgage property.

4) Delays and non-judicial process

A main problem may be long delays and high costs in realization of creditors’ rights.
Delays are a function of the laws and often of enforcement of the laws by the courts,
which may be reluctant to enforce claims against residential property and inclined to
tolerate long delays on procedural grounds. This is true not only in emerging markets but
in many developed markets as well. It is perhaps noteworthy how many countries of the
EU, for example, specifically allow courts to suspend execution of a mortgage for a
period of time, in their discretion, for the benefit of the borrower on grounds of social
protection.

5) Balancing interests

There have been and are ongoing in many countries today efforts to reach a reasonable
comprise between the rights and interests of both borrowers and lenders, which are what
mortgage law, should be about. Countries have been trying through amendments to laws
and other measures to make enforcement more efficient, while at the same time
protecting the essential rights of borrowers, including by adopting well-regulated non-
judicial procedures, providing for accelerated enforcement procedures, reducing frivolous
appeals, and allowing provisional execution pending completion of appeal. On the other
side, following the mortgage market crisis in developed countries in which mortgage law
has been settled for many years, more attention is being paid to the needs and rights of
borrowers and more constraints are being considered on loan underwriting and disclosure
practices, for example.

21
Non-performing Assets Regulation

In 2002, the Indian legislators enacted the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest (SARFAESI) Act. As stated in the legislation,
this act aimed to “improve recovery by taking possession of securities, selling them and
reducing non-performing assets by adopting measures for recovery or reconstruction”. Prior
to its enactment, there were very few mechanisms that allowed for effective and swift
recovery in the event of default.

The act provides two channels of recourse to financial institutions. A financial institution had
the legal sanction to move NPAs off its books by way of sale to a new class of institutions
called Asset Reconstruction Companies (ARCs) who then attempt recovery of such assets.
The second channel for financial institutions such as Banks or HFCs is asset seizure and
auction. This channel is also the one to be used by ARCs to recover debt. The right of the
secured creditor, in our case the Banks or HFCs, did not allow them to enforce their security
interest without the intervention of a court of law until SARFAESI Act, 2002 was brought
into force. Even under the act, this can be done only after two conditions are fulfilled: The
borrower should not have paid debt instalments, classifying the asset as an NPA and the
borrower fails to pay within sixty days from the first notice to fully discharge the borrower’s
obligations. The SARFAESI Act, hence, allowed for enforcement of security interest without
going to a court of law. While there is no public evidence on the extent to which the first
channel (transfer of assets to ARCs) has been used in the Housing finance sector, Banks and
HFCs have enforced their security interest without going through a judicial process under this
law.

The second important change is that the definition of an NPA was modified in 2004 (by RBI)
and 2005 (by NHB) for banks and HFCs respectively. With effect from March 31, 2005, the
NHB redefined a ‘non-performing’ asset as one, “in respect of which, interest has remained
overdue for a period of ninety days or more”, reducing the number of days from 180 to 90
days for HFCs. However, as noted earlier, the RBI introduced this change a year earlier for
banks.

22
Subsidies for the Housing Sector
Subsidies for the housing sector comprise mandatory lending, cash subsidies, and reduced
interest rates on housing loans.

Priority sector lending (PSL)

Lending to small borrowers is an important political goal in India. Banks are subject to a
quantity target for Priority-Sector Lending (PSL), which includes loans to agriculture,
small businesses, export credit, affirmative action lending, educational loans, and -- of
particular interest to us -- mortgages for low-cost housing. The PSL target is 40% of net
bank credit for domestic banks (32% for foreign banks), and there is a severe financial
penalty for failure to meet the target, namely, compulsory lending to rural agriculture at a
haircut to the repo rate In addition, since 1998, 3% of net new deposits of public sector
banks must be allocated to housing.

PSL requirements have been binding on banks in India. For the public sector banks in
India, priority sector lending has fluctuated between 36% and 45% of credit outstanding
over the past one and a half decades.

These regulations do not directly apply to HFCs, but bank lending to an HFC qualifies for
the PSL target to the extent that the HFC makes mortgage loans that qualify, i.e., are below
the specified nominal PSL threshold. The overall effect of the PSL system is to provide a
strong incentive, directly for banks, and indirectly for HFCs, to originate small mortgages
that finance low-cost housing purchases.

Housing has been a priority sector in India since 1970. Unlike other micro-subsidy
schemes, PSL was a creation of the RBI rather than the Government of India. The intention
of priority sector lending is to focus on sectors that “impact large segments of the
population & the weaker sections, which are employment-intensive”. Housing loans for
individuals and commercial real estate intended towards construction of houses were
covered under this scheme. Over time, the definition of loan size that qualifies for PSL has
changed. While the size differed across urban and rural areas, currently, loans up to 25
lakhs, irrespective of location constitute the priority sector for housing.

23
Beyond quantitative ceilings, PSL regulation also governs other provisions such as penal
interest, services and inspection charges, waiver of insurance against risks on underlying
assets, repayment schedule, and interest rate calculations.

Interest rate on housing credit

A federal government budget announcement in the financial year (FY) 1997-98 stated that
where, “loans up to Rs. 2 lakhs will be given for building houses in freehold land in rural
areas at normal rates of interest, subject to the borrower putting in one-third of the value of
the house. NHB has been requested to prepare a scheme in which other organizations will
also participate.”

The NHB followed this up with an expansive scheme called the “Golden Jubilee Rural
Housing Finance Scheme” (GJRHFS), where the objective was to provide institutional
credit at ‘normal rates of interest’ for housing in India. While what constitutes normal rates
of interest has been left vague in the policy documents, banks followed guidelines issued
by the RBI. Such guidelines, in addition to what has been documented above, involve
categorization of loans under various schemes. The “Differential Rate of Interest” scheme
is one such scheme, in which banks lend up to a ceiling (subject to change) per dwelling
unit at an interest rate of 4 per cent per annum. It is important to note that this rate of
interest has not changed since 1977. Another such scheme, introduced in 1996, was the
Indira Awas Yojana (IAY), which public sector banks were advised to fund under the
“Differential Rate of Interest” scheme.

Until 2009, the government simply decreed the (immutable) rates at which very small
housing loans should be made. Since 2009, subsidy schemes were changed to provide
reductions in the prevailing market interest rates. From October 2009, a 1 per cent interest-
rate subvention on the first 12 months was announced for qualifying loan sizes.48 In this
scheme, it is also important to note that, “in case account turns NPA [non- performing
asset, or default] after 12 months, subsidy would not be returned, as Scheme provides 1%
interest subsidy for 12 months only.”

An urban interest subsidy scheme has also been in place since 2009, in which small urban
loans (of less than Rs. 1 lakh) qualify for a subsidy of 5 per cent per annum on the principal
of the loan, for the entire period of the outstanding loan.

24
 Quantum of housing credit and cash subsidy

These low interest-rate schemes in many cases were augmented by directives on the amount
of credit to be provided for housing. Three major schemes launched by the Government of
India, together with the NHB, namely the IAY, GJRHFS and the Credit-cum-Subsidy
Scheme were prevalent at some point or the entire period under discussion.

The IAY focuses on the amount of credit to be given to each beneficiary of the scheme, with
per unit assistance varying over the years. The GJRHFS is based on the total number of
units financed and these targets are in turn sub-allocated to implementing agencies (banks,
HFCs and other smaller financial institutions in rural areas). In the year of introduction (FY
1997-98), the target was 50,000 units and has steadily risen over the years to 350,000 units
in FY 2007-08.

The Credit-cum-Subsidy Scheme for Rural Housing was launched in April 1999, where the
policy targeted families with annual income up to Rs. 32,000 for a subsidy of Rs. 10,000. The
maximum loan that can be availed of is Rs. 40,000 (25 per cent more than the annual income
of the borrower).

Other schemes

The NHB is the nodal agency for refinancing housing loans in India. Over and above
standard refinancing undertaken by the agency, several schemes relating to refinancing
housing loans were available during this period.

Individual financial institutions have limits up to which refinancing is available. Some

schemes redefine the ceiling on loan slabs that are eligible for refinance, while others define
direct pass-through of 100 per cent of principal for refinancing. The first such scheme
underway, within the time period of concern, was in FY 2000-01. This concerned revision
of general loan slabs and also those under the refinancing scheme that went together with
the GJRHFS.

In FY 2000-01, the government directed NHB to refinance banks and HFCs to construct
150,000 houses under the GJRHFS. Refinancing was used, in effect, as a tool of reducing
the interest rate charged by financial institutions for housing loans. Another scheme,

25
introduced in 2006, was designed as a composite loan for income generating activity and
housing, where the NHB provided the housing loan component by way of 100 per cent
refinancing.

More recently, in 2008, loans up to Rs. 15 lakhs for housing construction and up to Rs. 5
lakhs for extension and renovation to ‘weaker section of society’ (direct and indirect) are
eligible for 100% refinance from the NHB at a rate specified from time to time. The sum has
to be repaid in 3 to 7 years by financial institutions making the loan. Currently, the rate of
refinancing is set at 8 per cent.

Refinancing assistance from NHB is constrained by various factors like the net owned fund
restriction on the NHB (from the RBI), and borrowing power of HFCs. In order to assist
HFCs to raise funds directly from the market, the NHB devised a scheme in FY 2001-02 to
guarantee bonds floated by HFCs under certain conditions. The main thrust of this scheme is
that HFCs pay a floating charge on the assets equivalent to 125% of the principal amount.

NHB’s ability to refinance is also assisted by its ability to raise debts at lower cost than
private financial institutions. With an average maturity of 3 years and an explicit
government guarantee, NHB bonds trade at yields that are roughly 50 basis points lower
than bonds issued by private institutions.

RBI Mid-Term Policy

The RBI in its mid-term review policy, released on 2nd November, 2010 made the norms for
housing loans more stringent to curb the excessive borrowing that has pushed property prices
in most metros to levels seen before the global financial meltdown and even beyond. •
Among the steps mandated by the RBI are:

 Increase in the risk weight of high-value loans of Rs 75 lakh and above to 125 per
cent. Increasing the risk weight means banks will have to keep more money aside
against high value loans.

 Bringing down the ceiling limit on housing loans to 80 per cent of the property value.
This is intended to dissuade excessive borrowing for housing purposes. Till now,
banks used to impose their own ceiling on housing loans, but there was no cap from
the RBI side.

26
  An increase in the funds to be kept aside by banks as a cushion in case of defaults on

loans made at teaser rates. It has increased the standard asset provisioning by banks
for all such loans to 2 per cent from the earlier 0.4 per cent. • It has been
observed that many banks at the time of initial loan appraisal do not take into account
the repaying capacity of the borrower at normal lending rates. The overall policy is
designed to check the creation of pricing bubble in the market.

Provisioning of Standard Assets in respect of Individual Housing Loans

NHB has reduced the standard assets provisions on individual housing loans to 0.25% on the
total outstanding amount of such loan and also lowered the risk weights on such lending.
Earlier, there was no specific provision requirement in case of individual housing loans, a
general provision of 0.4% of the total outstanding amount of loans which are standard assets
was made.

Pursuant to the amendment HFCs shall be required to make a provision against the Standard
Assets in respect of Individual Housing Loans of 0.25% on the total outstanding amount of
such loan. Further, it has also been clarified that the revised provisioning norms relating to
standard category of individual hosing loans would be effective prospectively but the
provisions held at present towards such loans, i.e. under the general provision, shall not be
reversed. However, in future, if by applying the revised provisioning norms, any provisions
are required over and above the level of provisions currently held for the standard category of
such loans, these shall be duly provided for.

Prior to the amendment, only the general provision of 0.4% of the total outstanding amount
of loans were not reckoned for arriving at net NPAs. However, the same has now been
replaced with the provisions on standard assets.

For the financial year, the general provision already made shall be sufficient for the HFCs
unless the growth of asset size is such that it exceeds the requirement of more than 0.25% of
the total outstanding amount of such loan. For instance, if the present size of standard assets
in respect of all loans other than those specifically provided for is 100 crore, a general
provision of 0.4% shall be made that will be 40 lakhs. Now, till the growth in the asset size is
such that the revised provision calculated at 0.25% in respect of individual housing loans is

27
Within 40 lakhs, additional provision shall not be required to be made. In such a situation, the
HFCs will have better distributable surplus in hand.

Computation of LTV

HFCs are required to grant loans in accordance with the LTV Ratio. Further, the computation
of LTV indirectly affects the calculation of capital adequacy ratio. Capital adequacy ratio is
calculated as a percentage of its aggregate risk weighted assets and of risk adjusted value of
off-balance sheet items. Since housing loans are linked to LTV Ratio which have to be
multiplied by the prescribed risk weights to determine the risk adjusted value of the asset and
thereafter the aggregate risk weighted assets.

The said inclusion will however, not have any significant impact as the same was already
clarified earlier and required to be complied by the HFCs.

Further, it has also been specified that with respect to valuation of properties and
empanelment of values the HFCs shall be guided by the circular issued by NHB on the same
from time to time

Restriction on acceptance of deposits

No housing finance company shall accept or renew public deposits unless the housing finance
company has obtained minimum investment grade rating for its fixed deposits from any one
of the approved rating agencies, at least once a year and a copy of the rating is sent to the
National Housing Bank and it is complying with all the prudential norms, provided that:

i. a housing finance company having obtained credit rating for its fixed deposits not
below the minimum investment grade rating as above and complying with all the
prudential norms, may accept public deposits not exceeding five times of its NOF.
ii. a housing finance company which does not have the requisite rating for its fixed
deposits shall obtain the same within a period of six months time from the date of
notification or such extended period as may be permitted by the National Housing
Bank, to obtain the prescribed rating for its fixed deposits.

No housing finance company shall have deposits inclusive of public deposits, the aggregate
amount of which together with the amounts, if any, held by it which are referred in clauses

28
(iii) to (vii) of sub-section (bb) of Section 45 I of the Reserve Bank of India Act, 1934 (2 of
1934) as also loans or other assistance from the National Housing Bank, is in excess of
sixteen times of its NOF.

Where a housing finance company holds as on the date of commencement of these directions
public deposits in excess of the limits specified in above and as applicable to it or deposits
inclusive of the items mentioned in above in excess of the limits specified in above, it shall -

(i) not accept fresh deposit or open new deposit account; or

(ii) not renew the existing deposit or where the deposits are received under any recurring
scheme, receive instalments under such scheme after the expiry of the scheme period;

(iii) Reduce such excess deposit by repayment on maturity.

In the event of down gradation of the credit rating to any level below investment grade, the
housing finance company shall
(i) report the position within fifteen working days to the National Housing Bank;
(ii) with immediate effect stop accepting fresh public deposit and
(iii) Reduce such excess deposit by repayment on maturity.

Period of Deposits

No housing finance company shall accept or renew any public deposit:

i. which is repayable on demand or on notice; or

ii. unless such deposit is repayable after a period of twelve months or more but not later
than eighty four months from the date of acceptance or renewal of such deposits

29
 Chapter 5: Facility layout and Location

Factors Determining Layout and Design:

1) Ease of Future expansion or change: The layout designed should be flexible so that it can
be changed according to the future needs at the time of any expansions if needed.

2) Flow of movement: The facility design should reflect the process of flow smoothly. When
the flow is against or across the overall flow, it becomes confusion and coordination also
becomes complicated.

3) Materials handling: It should make certain that the facility layout makes it possible to
handle materials in an orderly, efficient and in a simple manner.

4) Space Utilization: The space should be utilized in a proper way that it should help in 3
reducing time.

5) Ease of communication and support: Facility should be laid in a proper way so that
communication within various areas of business and interactions with co-employees and
customers can be done easily and effective manner

5.1 Facility location

HDFC has registered office at Mumbai. The corporation’s network now spans 427 outlets
with 35 Hubs. To further augment the network, HDFC has overseas offices in London,
Singapore and Dubai the Dubai office caters to customers across Middle-East through its
service associates based in Kuwait, Oman and Saudi Arabia.

30
 Chapter 6: HR Policies of the Organisation

6.1 Wages and Salary

Figure 2: Wages and Salary of HDFC ltd Employees

6.2 Recruitment and Selection

The hiring manager along with the Human Resource Department would decide the channel /
source to use based on the nature of the recruitment. The following sources of recruitment
may be considered:

Internal Sources:

Whenever any vacancy arises, the possibility of fulfilling the requirement internally via
reassignment and relocation, re-allocation of the responsibilities or internal promotion will be
explored by the hiring function along with the HR Department. - Internal job postings to
explore internal candidates.

Employee Referrals:

HDFC will encourage employees to refer suitable candidates for open positions.

Other external sources:

- Recruitment agencies

31
- External job postings

- College / campus requirement

- Requirement advertisements

Application Processing

HDFC will process all applications promptly and inform the applicant or source regarding the
status of the application. HDFC will respond to all solicited applications within 5 working
days of receiving the application.

Interview Process

All candidates are required to undergo a face to face interview with the interview panel
before selection. Interviews may be conducted at a place at mutually convenient locations
and time in an effort to maintain confidentiality of the hiring effort. One on one meeting shall
be preferred as the interview format, however depending on the constraints panel interviews /
telephone / video conference screening could be used. For recruitment at junior levels, job
fairs, universities etc, where large volume of candidates, HDFC will use recruitment tests for
purpose of short listing. The candidate may be tested on the basic aptitude, analytical skills or
other skills required for the job of the candidates. The interview process will focus on the
evaluating the candidates suitability in terms of the job description and fit within the
organization. Each interviewer will complete the interview feedback form and submit it to
HR. HR will compile the results from a various interviews and provide these to the line
manager for the final decision.

Pre-employment Check

This will include both a professional reference check as well as the background check.
Professional reference check will be completed by the hiring manager. HDFC will request
contact information for 2 references from the candidate, and check the quality of previous
work experience and key personal characteristics/conduct/ previous record etc.

Offer Process

Once the hiring decision is finalized, HR will prepare an offer / fitment as per the
compensation structure and grade and keeping in mind the internal equity. The offer would
be communicated to the selected candidates by the hiring manager along with HR. The
candidate will sign the contract letter to formally accept employment from the organization.

32
Probation Policy

Probation is a trial that is mutual opportunity for the employee and HDFC to confirm
suitability for continued employment. An assessment will be based on factors related to work
performance, work habits, productivity, attitude and compatibility, attendance and
punctuality, and any other matter that is linked to job performance and expectations. All new
hires will be placed on probation for a period of 6 months from the date of joining HR will
initiate the confirmation process by sending an appraisal form to the immediate supervisor
before the completion of probationary period. The appraisal form will need to be approved by
the supervisor’s leadership. All letters of confirmation or extension of probation will be
signed by the HR head and will be stored in employee file for records.

6.3 Grievance Redressal

HDFC believes in smooth and effective communication to ensure better flow of information
and understanding amongst its employees. Any employee irrespective of hierarchy has free
access to the member of the senior management for sharing creative ideas, suggestions or
even personal grievances. Such an “Open Door Policy” has resulted in HDFC embracing a
free and informal culture that has facilitated a sense of belongingness, loyalty and
commitment amongst the employees.

HDFC has established a whistle blower mechanism which is primarily governed by

corporations’ whistle blower policy. The said policy which has been uploaded on HDFC
website and communicated to all employees, aims to promote good governance. The main
aim of the policy is to ensure all the employees work in a conducive environment, so that
they can freely express their concerns and grievances.

Housing Development Finance Corporation Limited ('the Corporation') is committed to

providing effective and prompt service to its shareholders. The Corporation has in place, a
designated e-mail address i.e. investorcare@hdfc.com for assistance and/or grievance
redressal and is closely monitored by the Company Secretary of the Corporation. The
escalation matrix for complaints relating to the securities of the Corporation is as provided
below:

33
  Level 1:

For Shares:

Ms. Lata Nayak

Senior Manager- Investor Services

5 th Floor, Ramon House,

H. T. Parekh Marg,

169, Backbay Reclamation,

Churchgate, Mumbai – 400 020.

Tel Nos.: +91-22- 6141 3900

Fax No.: +91-22- 2414 7301

E-mail – lata@hdfc.com

For Debentures:

Ms. Lakshmi Shetty

Assistant General Manager- Investor Services

5 th Floor, Ramon House,

H. T. Parekh Marg,

169, Backbay Reclamation,

Churchgate, Mumbai - 400 020.

Tel Nos.: +91-22- 6141 3900

Fax No.: +91-22- 2414 7301

E-mail – lakshmis@hdfc.com

34
  Level 2:

In the event, the grievance(s) are not resolved within 3 working days of its submission along
with all requisite documents or the investor is not satisfied with the resolution provided, he/
she can forward his/her complaint to the Company Secretary.

Mr. Ajay Agarwal

Company Secretary

HDFC House, H. T. Parekh Marg,

165-166, Backbay Reclamation, Churchgate,
Mumbai – 400 020.

Tel Nos.: +91-22-6631 6000

Fax No.: +91-22- 2281 1203

Email: ajaya@hdfc.com

 Level 3:

In case of non-redressal of the complaint to the investor’s satisfaction, within a reasonable

time frame, the investor may approach-

Mr. V. Srinivasa Rangan

Executive Director

HDFC House, H. T. Parekh Marg,

165-166, Backbay Reclamation, Churchgate,
Mumbai – 400 020.

Tel Nos.: +91-22-6631 6000

Fax No.: +91-22- 2204 6758

Email: vsrangan@hdfc.com

35
  Level 4:

In case a complaint is still not redressed to the investor's satisfaction, the investor may
approach the Securities and Exchange Board of India and file their grievance through
“SCORES”, the centralized online system for lodging and tracking complaints.

SCORES facility can be accessed through the web link http://scores.gov.in.

36
 Chapter 7: Management Information System

Management Support System

Management Information System (MIS) is an integrated information system used by the

managers to perform their operations and functions. It helps management in their Decision
Making.

G. B. Davis defines management information system as “an integrated man/machine system

for providing information to support the operations, management and decision-making
functions in an organization”.

Advantages of MIS

 Enhance communication among employees


 Deliver complex material throughout the institution.

 Provide an objective system for recording

 Aggregating information.

 Reduce expenses related to intensive manual activities.

 Support the organization's strategic goals and direction.

Information System in HDFC

Information technology can be a strategic tool in making HDFC more efficient and effective.
HDFC can reach more people in more efficient way by implementing right management
information system. IT creates an evolution in whole world in every business and so in
banking system. Due to IS employees can easily connect with other branches, customer,
service get improved, online banking emerged and lot of others benefits.

37
Topology used in HDFC

Topology used in HDFC Hybrid Topology is used in HDFC which consists of ring and bus
Network. The bus trunk serves as a backbone of network.

Figure 3: Topology of HDFC Ltd

38
 Chapter 8: Conclusion

The project helped the researcher to study about the firm and its general management
practices and insights in deep by understanding the policies, standards and decision making
process. HDFC is on a spree of ramping up its decision making process. Currently, company
is chopping off its organizational layers to clear off the channel between customer and Credit
appraisal team. The move is considered as company’s step to enhance its decision making
process as now.

The firm follows stricter rules and regulations relating to employee’s behaviour or
performance appraisal and also concerned about the ethics and morale that everyone should
adhere to. It also takes into consideration the safety and security measures by putting
Management Information Systems into place to avoid hassle. Using the master software
HDFC arranges software which involves various steps from getting an order to payment
made. At, last having seen the performance of HDFC in recent years with incomes and profits
are on increasing spree and focused plans for future it will definitely maintain its leadership
in the industry.

39
 Chapter 9: References

 https://www.hdfc.com/investor-relations/annual-report (4th April 2018, 15:25)


 https://images.hdfc.com/s3fs-public/BusinessResponsibility-Report-2016-
17.pdf?zxsiOaL.EMqmlrE590HxgpP5CYyDe7V1 (3rd April 2018, 21:50)

 https://images.hdfc.com/s3fspublic/Annual_Report_2016_17.pdf?dYGwTAD9g4oXg
QJsrdkEiJMxY2aE820u (4th April 2018, 16:48)

 https://www.hdfc.com/about-us (4th April 2018, 15:32)

 https://test.nhb.org.in/Regulation/Regulation.php (4th April 2018, 13:05)

40