CHAPTER-I

INTRODUCTION

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 INTRODUCTION

In our present day economy, “FINANCE” is defined as the provision of money at the
time when it is required. Every enterprise, whether big, medium of small, needs finance to
carry on its operations and to achieve its targets.

Finance is so indispensable today that it is the lifeblood of an enterprise. Without

adequate finance, no enterprise can possibly accomplish its objectives.

“Finance” is the life blood and nerve system of any business organization. Just as
circulation of blood, is necessary in the human body to maintain life. Finance is necessary in
the business org. for smooth running of the business.
Financial management involves managerial activities concerned with the procurement and
utilization of funds for business purpose the finance function does with procurement of
money taking in to consideration of today’s as well as future need and its effective utilization.
Since finance is required to purchase of machinery and raw materials, to pay salaries and
wages also for day-to-day expenses.

Financial management entails planning for the future of a person or a business

enterprise to ensure a positive cash flow. It includes the administration and maintenance of
financial assets. Besides, financial management covers the process of identifying and
managing risks.

The primary concern of financial management is the assessment rather than the
techniques of financial quantification. A financial manager looks at the available data to
judge the performance of enterprises. Managerial finance is an interdisciplinary approach that
borrows from both managerial accounting and corporate finance.

Some experts refer to financial management as the science of money management.

The primary usage of this term is in the world of financing business activities. However,
financial management is important at all levels of human existence because every entity
needs to look after its finances.

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Financial Management: Levels

Broadly speaking, the process of financial management takes place at two levels. At the
individual level, financial management involves tailoring expenses according to the financial
resources of an individual. Individuals with surplus cash or access to funding invest their
money to make up for the impact of taxation and inflation. Else, they spend it on
discretionary items. They need to be able to take the financial decisions that are intended to
benefit them in the long run and help them achieve their financial goals.

From an organizational point of view, the process of financial management is associated with
financial planning and financial control. Financial planning seeks to quantify various
financial resources available and plan the size and timing of expenditures. Financial control
refers to monitoring cash flow. Inflow is the amount of money coming into a particular
company, while outflow is a record of the expenditure being made by the company.
Managing this movement of funds in relation to the budget is essential for a business.

At the corporate level, the main aim of the process of managing finances

Is to achieve the various goals a company sets at a given point of time. Businesses also seek
to generate substantial amounts of profits, following a particular set of financial processes.

Financial managers aim to boost the levels of resources at their disposal. Besides, they
control the functioning on money put in by external investors. Providing investors with
sufficient amount of returns on their investments is one of the goals that every company tries
to achieve. Efficient financial management ensures that this becomes possible.

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. The purpose of financial analysis is to disclose the information
contained in the financial statements so as to judge the profitability and financial soundness
of the organization.

The first task of the financial analyst is to select the information relevant to the
decision under consideration from the total information contained in the financial statement.

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 Secondly, to arrange the information in a way to highlight the significant
relationships.

Finally to interpret and draw inferences and conclusions. In brief, financial analysis is
the process of selection, relation and evaluation.

NEED OF THE STUDY

 To know about the financial performance of a “The Housing Development Finance

Corporation Limited (HDFC).”
 To know about the status of a company by different financial budgetary policies.
 To know about the present scenario of Thermal companies Investment estimation that
are existed in the market.
 To know about the present impact of the financial position of the company.
 Significance and meaning of the financial statements
 Need of financial management study to diagnose the information contain in
financial statement. So as to judge the profitability and financial position of the
firm
 Financial analyst analyses the financial statements with various tools of
analysis before commanding upon the financial health of the firm.

OBJECTIVES OF THE STUDY

 To study the liquidity position of HDFC bank, Ameerpet, Hyderabad.

 To study the profitability position of the bank.
 To know the solvency position of the bank.
 To find out the relative importance of different components of the financial position
of the bank.
 To identify the reasons for change in the profitability/financial position of the bank.
 To draw the conclusions and give suggestions if any.
 To study the working of the financial department at The Housing Development
Finance Corporation Limited (HDFC).

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SCOPE OF THE STUDY

1. The scope of this project is confined to HDFC bank, Aameerpet, Hyderabad.

2. It reveals the financial performance of the bank.
3. The period of study covers five years data.
4. The scope of the study is limited to the period of 45 days or 6 weeks.
5. The study is restricted only to HDFC bank.

METHODOLOGY AND DATABASES

Data is defined as group of non-random symbols in the form of text, image, or voice
representing quantities, action as objects. Data is processed into a form that is meaningful to
the recipient and is of real and perceived value in the current or prospective actions or
decisions of the recipient.
Data are mainly classified into two groups:
 Primary data
 Secondary data

Primary data
An investigator originally collects the data or agency for the first time for any statistical
investigation and used by them in the statistical analysis are termed as primary data.

Secondary data
The data published or unpublished, which have already been collected and processed by
some agencies for their statistical work, are termed as secondary data as far as second
agency is concerned. The second agency if and when it publishes and files such data, it
becomes secondary data source to anyone who later uses the data.

This is related to collect the required information about the study. My source of
information is the data available with the bank by on going through the annual reports.

The study basically relies on secondary data supplied by the bank. The primary data
used for this study consist of informal discussion, interviews with the deputy manager of the
bank.

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  Annual reports of The Housing Development Finance Corporation Limited
(HDFC).
 Financial management text books.
 Printed Materials.
 Journals and magazines
 Newspapers.

SOURCES OF THE DATA:

The collection of information don by two sources.

They are as follow:
A. Primary data
B. Secondary data
A. primary data:
The primary data is gathered though personal discussions with bank officials and staff.
B. Secondary data:
Published resources such as:
1. Annual reports and internal records of HDFC bank.
2. Brochures of the bank.
3. Bank website www.hdfcbank.com

LIMITATIONS OF THE STUDY

 The study is mainly based on the data presented in the annual report of bank.
 The study has considered the financial information of five years only.
 As the study period is short, the analysis may not give accurate information about the
financial performance.
 As the bank maintains some secrecy the accurate interpretations cannot be drawn.
 There may be some fractional difference in the calculated ratio.
 The study is purely based on the information provided by the company and the data is
collected from the reports, annual reports, and magazines of the company.
 Estimates are used as basis for budget plan and estimates are based mostly on
available facts and best managerial judgment
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 Budgetary control cannot reduce the managerial function to a formula. It is only a
managerial.
 Tool which increase effectiveness of managerial control.
 The use of budget may be to restricted use of resources. Budgets an often taken as
limits.
 Efforts may therefore not be made to exceed the performance beyond the budgeted
targets.
 Frequent changes may be called for in budgets due to first changing industrial climate.

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 CHAPTER-II
COMPANY PROFILE

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 INDUSTRIAL BACKGROUND

Meaning of Bank
According to banking regulation act of 1949 defines the term banking as accepting for
the purpose of lending or investment of deposits of money from the public, repay on demand
or otherwise and withdraw by cheques, draft or otherwise.
Kinds or types of bank: -
 Commercial bank
 Industrial bank
 Foreign exchange bank
 Co-operative bank
 Agricultural bank
 Land and development bank
 Saving bank
 Central bank

GENERAL INTRODUCTION
Finance is the life-blood of business. It is rightly termed as the science of money.
Finance is very essential for the smooth running of the business. Finance controls the
policies, activities and decision of every business.
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.”- Wheeler

Financial management is that managerial activity which is concerned with the

planning and controlling of a firm financial reserve. Financial management as an academic
discipline has undergone fundamental changes as regards its scope and coverage. In the early
years of its evolution it was treated synonymously with the raising of funds. In the current
literature pertaining to this growing academic discipline, a broader scope so as to include in
addition to procurement of funds, efficient use of resources is universally recognized.
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.

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 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. Financial analysis is as
the final step of accounting that result in the presentation of final and the exact data that helps
the business managers, creditors and investors.
Based on this reasoning, this project is an attempt to analyze the financial
performance of HDFC BANK LIMITED.
In the financial analysis a ratio is used as an index for evaluating the financial position
and performance of the firm. The absolute accounting figures reported in the financial
statement do not provide a meaningful understanding of the performance and the financial
position of a firm. But the accounting figures convey the meaning when it is related to some
other relation information for example Rs.5 crores net profit may look impressive, but the
firms performance can be said good or bad only when net profit figures is related to the
firm’s investment.

Accounting ratios are relationships expressed in the mathematical terms between figures
that are connected with each other in the some manner the information contained in the
balance sheet, profit and loss account or the income statements are used by the
management, creditors investors and others to form judgment about the operating
performance and the financial strengths and weaknesses of the firm if we properly analysis
the information reported in the statement.

ORIGIN OF THE BANK

The Housing Development Finance Corporation Limited (HDFC) was amongst the first
to receive approval from the Reserve Bank of India (RBI) to set up a bank in the private
sector, as part of RBI’s liberalization of the Indian Banking Industry. HDFC Bank was
incorporated in August, 1994 and commenced operation as a Commercial Bank in January
1995. Currently, HDFC Bank has a nation spread over 110 cities across the country and
operates in three segments.
Wholesale banking, retail banking and treasury services.

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The challenge:
Efficiently Deploy Critical Applications to Branch offices. The sheer size and
complexity of HDFC Bank’s operation made it difficult to deploy new business-critical
banking applications to hundreds of branches swiftly and efficiently. Operating in an industry
where speed, efficiency and customer responsiveness are key performance metrics, delays in
application deployment mean a loss of productivity, and spiraling maintenance and support
costs.
“The deployment of the application across all access terminals was of paramount
importance”, explained Mrs. Surya Prasad, Assistance Vice President, IT, HDFC Bank.

However, our existing IT challenges at HDFC Bank also entailed bringing a

standardized system across the enterprise that would enable us to achieve a broader spectrum
of operational and strategic benefit

HDFC- a house hold name that Indians proudly reckon with:

Housing Development Finance Corporation Limited (HDFC Ltd.) was established in 1977 with th
primary objective of meeting a social need of encouraging home ownership by providing long-term finance to
households. Over the last three decades, HDFC has turned the concept of housing finance for the growin
middle class in India into a world-class enterprise with excellent reputation for professionalism, integrity and
impeccable service.
A pioneer and leader in housing finance in India, since inception, HDFC has assisted more
than 3.5 million families to own a home of their own, through cumulative housing loan
approvals of over Rs. 2.98 trillion and disbursements of over Rs. 2.42 trillion as at March 31,
2014.
HDFC has a wide network of 283 offices (which includes 66 offices of HDFC's wholly
owned distribution company HDFC Sales Private Limited) catering to over 2,400 towns & cities
spread across the country. It also has offices in Dubai, London and Singapore and service
associates in the Middle East region, to provide housing loans and property advisory services to
Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs).
HDFC's unrelenting focus on Corporate Governance, high standards of ethics and clarity
of vision, percolate through the organization. Trust, Integrity, Transparency and Professional
Service are the important pillars of the brand HDFC and most importantly, people - both
employees and customers - are its brand ambassadors.
Customer satisfaction is the hallmark of all HDFC offerings. The first touch of HDFC's

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personalized service begins as soon as a customer approaches HDFC, and over time it progresses
into a long and meaningful relationship. State-of-the-art information systems supported by strong
in-house training programmers conducted at its specialized training centre in Lonavla, have
equipped HDFC to respond swiftly to the ever-changing customer needs and

Thereby empower customers in making the right home buying decision. This is what sets a part
HDFC’s customer service philosophy-‘with you, Right through’.
HDFC's specialist team of over 1,500 trained and experienced professionals follows a smooth
and value added services at all stages. The team guides the customers right through the entire
process of property purchase - be it property search assistance, technical support prior to
finalizing the property, legal advice on property related documentation, personalized home
loan counseling or providing tailor-made repayment options to suit the customer's specific
requirements.
HDFC's wide product range includes loans for purchase and construction of a residential
unit, purchase of land, home improvement loans, home extension loans, non-residential premises
loans for professionals and loan against property, while its flexible repayment options include
Step Up Repayment Facility (SURF) and Flexible Loan Installment Plan (FLIP).
HDFC also has a robust deposits mobilization programme. HDFC has been able to mobilize
deposits from over 10 lac depositors. Outstanding deposits grew from Rs. 1,458 crores in March
1994 to Rs 23,081 crores in March 2014. In addition, HDFC has received 'AAA' rating for its
Deposit products for highest safety from both CRISIL and ICRA for sixteen consecutive years.
Over the years, HDFC has emerged as a financial conglomerate with its presence in the entire
gamut of financial services including banking, insurance (life and non-life), asset management,
real estate venture capital and more recently education loans.
Today, HDFC is recognized as one of the Best Managed Companies in India and is a
model housing finance company for developing countries with nascent housing finance markets.
HDFC has undertaken several consultancy assignments in various countries across Asia,

Africa and East Europe to support and establish their housing finance institutions.

At HDFC, 'Corporate Social Responsibility' has always been an evolving concept, akin to
its 'learning by doing' philosophy. As part of its social objectives, HDFC has always
endeavoured to contribute to economic development and social upliftment of the weaker sections
of society and has professionally nurtured each of its social initiative as an investment. HDFC
has undertaken development oriented work and supported several social initiatives in the areas of

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education, child welfare, medical research, welfare for the elderly and the handicapped among
several others.
HDFC is how millions of Indian families spell the word 'Home' as the brand not only offers
Housing Finance, but also Total Housing Solutions.

The HDFC Advantage

Pioneers of Housing Finance in India with over 33 years of lending experience.
Widest range of home loan & deposit products.
Vast network of over 283 interconnected offices which includes 3 international offices.
Most experienced and empowered personnel to ensure smooth & easy processing.
Online loan application facility at www.hdfc.com and across-the-counter services for new
deposits, renewals & repayments.
Counseling and advisory services for acquiring a property.
Flexible loan repayment options
Free & safe document storage.

Housing Finance Sector

Against the milieu of rapid urbanization and a changing socio-economic scenario, the
demand for housing has grown explosively. The importance of the housing sector in the
economy can be illustrated by a few key statistics. According to the National Building
Organization (NBO), the total housing shortfall is estimated to be 19.4 million units, of which
12.76 million units is from rural areas and 6.64 million units from urban areas. The housing
industry is the second largest employment generator in the country.

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 CHAPTER-III
THEORETICAL FRAMEWORK

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 PROFILE OF THE BANK

HDFC was incorporated in 1977 by Mr. Hasmukhbhai Parekh with the primary

objective of meeting a social need - that of promoting home ownership by providing long-
term finance to households. The launching of HDFC was meant to be one small step in
dealing with the availability of housing accommodation in India which was then virtually
non-existent. HDFC as a pioneer launched India’s first specialized home loan company with
an initial capital of Rs. 100 million.

Business Objective
Our primary objective is to enhance residential housing stock in the country through
the provision of housing finance in a systematic and professional manner, and to promote
home ownership. We aim to increase the flow of resources to the housing sector by
integrating the housing finance sector with the overall domestic financial markets.

Our goals:
Develop close relationships with individual households.
Maintain our position as the premier housing finance institution in the country.
Transform ideas into viable and creative solutions.
To grow through diversification by gaining leverage from our existing client base.
To nurture the values and ethos of Brand HDFC through all its Subsidiaries and Associate
Companies. 

Our growth strategies:

Increase the return on equity each year by 1 percentage point in order to maximize
shareholder value;
Maintain gross Non-Performing Assets (NPAs) below 1%;
Consistently grow the loan book;
Improve operational efficiency by consistently bringing down the cost to income ratio.

BACKGROUND

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

15
private sector, as part of 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.

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, 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

As on 30th September, 2014 the authorized share capital of the Bank is Rs. 550 crore. The
paid-up capital as on the said date is Rs. 4,723,396,480/- (2,361,698,240 equity shares of Rs.
2/- each). The HDFC Group holds 23% of the Bank's equity and about 17.20 % of the equity
is held by the ADS / GDR Depositories (in respect of the bank's American Depository Shares
(ADS) and Global Depository Receipts (GDR) Issues). 32.17% of the equity is held by
Foreign Institutional Investors (FIIs) and the Bank has 429979 shareholders.

The shares are listed on the Bombay Stock Exchange Limited and The National Stock

16
Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the
New York Stock Exchange under the symbol 'HDB' and the Bank's Global Depository
Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No US40415F2002.
AMALGAMATION OF TIME BANK&CENTURION BANK OF PUNJAB
WITH HDFC BANK
On May 23, 2009, the amalgamation of Centurion Bank of Punjab with HDFC Bank was
formally approved by Reserve Bank of India to complete the statutory and regulatory
approval process. As per the scheme of amalgamation, shareholders of CBoP received 1 share
of HDFC Bank for every 29 shares of CBoP.

The amalgamation added significant value to HDFC Bank in terms of increased branch
network, geographic reach, and customer base, and a bigger pool of skilled manpower.

In a milestone transaction in the Indian banking industry, Times Bank Limited (another new
private sector bank promoted by Bennett, Coleman & Co. / Times Group) was merged with
HDFC Bank Ltd., effective February 26, 2000. This was the first merger of two private banks
in the New Generation Private Sector Banks. As per the scheme of amalgamation approved by
the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank
received 1 share of HDFC Bank for every 5.75 shares of Times Bank.

DISTRIBUTION NETWORK
HDFC Bank is headquartered in Mumbai. As on September 30, 2014, the Bank has a network
of 2620 branches in 1454 cities across India. All branches are linked on an online real-time
basis. Customers in over 1350 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 centres where
the NSE / BSE have a strong and active member base.

The Bank also has a network of 10316 ATMs across India. 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.
MANAGEMENT
Mr C.M. Vasudev has been appointed as the Chairman of the Bank with effect from 6th July
2011. Mr. Vasudev has been a Director of the Bank since October 2006. A retired IAS officer,

17
Mr. Vasudev has had an illustrious career in the civil services and has held several key
positions in India and overseas, including Finance Secretary, Government of India, Executive
Director, World Bank and Government nominee on the Boards of many companies in the
financial sector.

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years,
and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.
The Bank's Board of Directors is composed of eminent individuals with a wealth of
experience in public policy, administration, industry and commercial banking. Senior
executives representing HDFC are also on the Board.

Senior banking professionals with substantial experience in India and abroad head various
businesses and functions and report to the Managing Director. Given the professional
expertise of the management team and the overall focus on recruiting and retaining the best
talent in the industry, the bank believes that its people are a significant competitive strength.

TECHNOLOGY

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

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

The Bank has made substantial efforts and investments in acquiring the best technology
available internationally, to build the infrastructure for a world class bank. In terms of core
banking software, the Corporate Banking business is supported by Flex cube, while the Retail
Banking business by Finware, both from i-flex Solutions Ltd. The systems are open, scalable
and web-enabled.

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

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BUSINESS PROFILE
HDFC Bank caters to a wide range of banking services covering commercial and investment
banking on the wholesale side and transactional / branch banking on the retail side. The bank
has three key business segments:
a. Wholesale Banking

The Bank’s target market is primarily large, blue-chip manufacturing companies in the Indian
corporate sector and to a lesser extent, small & mid-sized corporates and agri-based
businesses. For these customers, the Bank provides a wide range of commercial and
transactional banking services, including working capital finance, trade services, transactional
services, cash management, etc. The bank is also a leading provider of structured solutions,
which combine cash management services with vendor and distributor finance for facilitating
superior supply chain management for its corporate customers. Based on its superior product
delivery / service levels and customer orientation, the Bank has made significant inroads into
the banking consortia of a number of leading Indian corporates including multinationals,

Companies from the domestic business houses and prime public sector companies. It is
recognised as a leading provider of cash management and transactional banking solutions to
corporate customers, mutual funds, stock exchange members and banks.

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

c. Retail Banking

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

19
customers through the growing branch network, as well as through alternative delivery
channels like ATMs, Phone Banking, Net Banking and Mobile Banking.

The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and
the Investment Advisory Services programs have been designed keeping in mind needs of
customers who seek distinct financial solutions, information and advice on various investment
avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans
against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading
provider of Depository Participant (DP) services for retail customers, providing customers the
facility to hold their investments in electronic form.

HDFC Bank was the first bank in India to launch an International Debit Card in association
with VISA (VISA Electron) and issues the MasterCard Maestro debit card as well. The Bank
launched its credit card business in late 2001. By March 2013, the bank had a total card base
(debit and credit cards) of over 16.6 million. The Bank is also one of the leading players in the
“merchant acquiring” business with over 120,000 Point-of-sale (POS) terminals for debit /
credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in
various net based B2C opportunities including a wide range of internet banking services for
Fixed Deposits, Loans, Bill Payments, etc.

RATINGS/AWARDS

Credit Rating
The Bank has its deposit programs rated by two rating agencies - Credit Analysis & Research
Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed Deposit
programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents
instruments considered to be "of the best quality, carrying negligible investment risk." 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". Fitch Ratings India
Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "AAA (ind)" rating to the Bank's
deposit programme, with the outlook on the rating as "stable". This rating indicates "highest
credit quality" where "protection factors are very high".

The Bank also has its long term unsecured, 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. CARE has assigned the rating of "CARE AAA" for the
20
 subordinated Tier II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA
(ind)" with the outlook on the rating as "stable". CARE has also assigned "CARE AAA
[Triple A]" for the Banks Perpetual bond and Upper Tier II bond issues. CRISIL has assigned
the rating "AAA / Stable" for the Bank's Perpetual Debt programme and Upper Tier II Bond
issue. In each of the cases referred to above, 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, which subjected itself to a Corporate
Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating
Information Services of India Limited (CRISIL). 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 bank was assigned a 'CRISIL
GVC Level 1' rating in January 2007 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.

Awards and Accolades:

HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian
Bank". We realized that only a single-minded focus on product quality and service excellence
would help us get there. Today, we are proud to say that we are well on our way towards that
goal. Over the years, the Bank has received recognition and awards from several leading
organizations and publications, both domestic and international (details are available on
http://www.hdfcbank.com/aboutus/awards/default.htm).
Some important awards that the Bank won:

Forbes Asia Fab 50 Companies - Winning for

the 6th year
IBA Banking Technology Awards 2012 - Best Online Bank
- Best use of Business Intelligence
- Best Customer Relationship
Initiative
- Best Risk Management & Security

21
 Initiative
- Best use of Mobility Technology
in Banking
Dun & Bradstreet Banking Awards 2014 - Overall Best Bank
- Best Private Sector Bank
- Asset Quality - Private Sector
- Retail Banking -Private Sector
IDRBT Banking Technology Excellence Awards Best Bank in 'IT for Operational
2012-12 Effectiveness' category
Asia Money 2014 Best Domestic Bank in India
India's Top 500 Companies -Dun & Bradstreet Best Bank in India
Corporate Awards
Finance Asia - Best Managed Company
- Best CEO - Mr. Aditya Puri

UTI Mutual Fund CNBC TV 18 Financial Advisor Best Performing Bank - Private
Awards 2012
Asian Banker International Excellence in Retail - Best Retail Bank in India
Financial Services Awards 2013 - Best Bancassurance
- Best Risk Management
5th Loyalty Summit award Customer and Brand Loyalty
Skoch foundation 2013 SHG/JLG linkage programme
ICAI Awards 2012 Excellence in Financial Reporting

 Our MD received the ET Corporate Excellence Award - Company of the Year 2013
from our Prime Minister Mr. Manmohan Singh
Awards for our MD, Mr. Aditya Puri:
 Business India Business man of the year 2010
 Business man of the year Business category
GROWTH AND DEVELOPMENT OF THE BANK
It is well-recognized fact that the quality of financial management is a key ingredient in
determining the success of an organization. This is even more relevant in a service industry
like banks. At HDFC Bank, they work for ultimate identity and success of their bank will
22
reside, as it always has, in the exceptional quality of their people and their extraordinary
effort.
The bank is only as strong as its infrastructure and its processes. At HDFC Bank, right
from inception, they have invested in a robust technology platform, that’s is seamlessly
integrated with centralized and audited processes.

This has enabled them to expand rapidly and grow manifold while maintaining acceptable
service standards.
The bank’s well-documented procedures, high levels of automation, intensive training of
personnel and ongoing audit review had enabled then to improve the reliability of their
operational processes. ISO 9002 certifications of their cash management, retail centralized
processing and custody and depository operations are indicative of their achievements in this
regard.
Some of the developments are:
 Ceiling of 5% of the total advances imposed on the capital markets exposure (fund
based and non-fund based) for all commercial banks.
 Better systems for trading in government securities and settlement in the foreign
exchange and government securities markets operationalized through the clearing
corporation of India ltd. (CCIL) and the electronic negotiated dealing system (NDS).
In the growing competition faced by all the banks from various money market and its
effects bank deposits and advances, it has become necessary to design, develop new
instruments which would attack the customers by satisfying the identical needs.
In the context of products of banks in recent days bank marketing it is essential to take a
look at the following products, which attract the middle class customers and also are
profitable to the bank.

Conceptual Framework:
Financial Management is the process of managing the financial resources, including
accounting and financial reporting, budgeting, collecting accounts receivable, risk
management, and insurance for a business.

23
 The financial management system for a small business includes both how you are
financing it as well as how you manage the money in the business.

In setting up a financial management system your first decision is whether you will
manage your financial records yourself or whether you will have someone else do it for you.
There are a number of alternative ways you can handle this. You can manage everything
yourself; hire an employee who manages it for you; keep your records in-house, but have an
accountant prepare specialized reporting such as tax returns; or have an external bookkeeping
service that manages financial transactions and an accountant that handles formal reporting
functions. Some accounting firms also handle bookkeeping functions. Software packages are
also available for handling bookkeeping and accounting.

Bookkeeping refers to the daily operation of an accounting system, recording routine

transactions within the appropriate accounts. An accounting system defines the process of
identifying, measuring, recording and communicating financial information about the
business. So, in a sense, the bookkeeping function is a subset of the accounting system. A
bookkeeper compiles the information that goes into the system. An accountant takes the data
and analyzes it in ways that give you useful information about your business. They can advise
you on the systems needed for your particular business and prepare accurate reports certified
by their credentials. While software packages are readily available to meet almost any
accounting need, having an accountant at least review your records can lend credibility to
your business, especially when dealing with lending institutions and government agencies.

Setting up an accounting system, collecting bills, paying employees, suppliers, and

taxes correctly and on time are all part of running a small business. And, unless accounting is
your small business, it is often the bane of the small business owner. Setting up a system that
does what you need with the minimum of maintenance can make running a small business
not only more pleasant, but it can save you from problems down the road.

The basis for every accounting system is a good Bookkeeping system. What is the
difference between that and an accounting system? Think of accounting as the big picture of
how your business runs -- income, expenses, assets, liabilities -- an organized system for
keeping track of how the money flows through your business, keeping track that it goes
where it is supposed to go. A good bookkeeping system keeps track of the nuts and bolts --
the actual transactions that take place. The bookkeeping system provides the numbers for the

24
accounting system. Both accounting and bookkeeping can be contracted out to external firms
if you are not comfortable with managing them yourself.

Even if you outsource the accounting functions, however, you will need some type of
Recordkeeping Systems to manage the day-to-day operations of your business - in addition to
a financial plan and a budget to make certain you have thought through where you are headed
in your business finances. And, your accounting system should be producing Financial
Statements. Learning to read them is an important skill to acquire.

Another area that your financial management system needs to address is risk. Any
good system should minimize the risks in your business. Consider implementing some of
these risk management strategies in your business. Certainly, insurance needs to be
considered not only for your property, office, equipment, and employees, but also for loss of
critical employees. Even in businesses that have a well set up system, cash flow can be a
problem. There are some tried and true methods for Managing Cash Shortages that can help
prevent cash flow problems and deal with them if they come up. In the worst case you may
have difficulties meeting all you debt obligations. Take a look at Financial Difficulties to
learn more about ways to manage situations in which you have more debt than income.

It is possible you may even be at the point where you want to sell the business or
simply close it and liquidate assets. There are financial issues involved for these
circumstances too. So, be certain that you know what steps you need to take in order to
protect yourself financially in the long run.

Clearly, financial management encompasses a number of crucial areas of your

business. Take time to set them up right. It will make a significant difference in your stress
levels and in the bottom line for your business.

25
 Financial Planning

  Financial planning is often thought of as a way to manage debt, but a good financial plan really is

a way to make certain that you have financial security throughout your life. Many small business
owners consider their business as their investment in their future, but that is a huge risk to take.
As any economist will tell you, diversification is the only sure way to create security in the long
run. Your business is one stream of income. Putting together a financial plan that allows for
multiple streams of income is what provides you security in the longer term.

The essential components of a good financial plan are investing, retirement planning, insurance,
borrowing and using credit, tax planning, having a will, and ensuring the right people receive
your assets. Financial planning is the process of meeting your life goals through the proper
management of your finances. Life goals can include buying a home, saving for your child's
education or planning for retirement.

The financial planning process involves gathering relevant financial information, setting life
goals, examining your current financial status and coming up with a plan for how you can meet
your goals given your current situation and future plans.

There are personal finance software packages, magazines and self-help books to help you do your
own financial planning. However, you may decide to seek help from a professional financial
planner if:

26
  You need expertise you don't possess in certain areas of your finances. For example, a
planner can help you evaluate the level of risk in your investment portfolio or adjust your
retirement plan due to changing family circumstances.
 You want to get a professional opinion about the financial plan you developed for
yourself.
 You don't feel you have the time to spare to do your own financial planning.
 You have an immediate need or unexpected life event such as a birth, inheritance or
major illness.
 You feel that a professional adviser could help you improve on how you are currently
managing your finances.
 You know that you need to improve your current financial situation but don't know where
to start.

A financial planner is someone who uses the financial planning process to help you figure out
how to meet your life goals. The planner can take a "big picture" view of your financial situation
and make financial planning recommendations that are right for you. The planner can look at all
of your needs including budgeting and saving, taxes, investments, insurance and retirement
planning. Or, the planner may work with you on a single financial issue but within the context of
your overall situation. This big picture approach to your financial goals may set the planner apart
from other financial advisers, who may have been trained to focus on a particular area of your
financial life.

In addition to providing you with general financial planning services, many financial planners are
also registered as investment advisers or hold insurance or securities licenses that allow them to
buy or sell products. Other planners may have you use more specialized financial advisers to help
you implement their recommendations. With the right education and experience, each of the
following advisers could take you through the financial planning process. Ethical financial
planners will refer you to one of these professionals for services that they cannot provide and
disclose any referral fees they may receive in the process. Similarly, these advisers should refer
you to a planner if they cannot meet your financial planning needs.

Accountant
Accountants provide you with advice on tax matters and help you prepare and submit your tax
returns to the Internal Revenue Service. All accountants who practice as Certified Public
Accountants (CPAs) must be licensed by the state(s) in which they practice.

27
Estate Planner

Estate planners provide you with advice on estate taxes or other estate planning issues and put
together a strategy to manage your assets at the time of your death. While attorneys, accountants,
financial planners, insurance agents or trust bankers may all provide estate planning services, you
should seek an attorney to prepare legal documents such as wills, trusts and powers of attorney.
Many estate planners hold the Accredited Estate Planner (AEP) designation.

Financial Planner

Many financial planners have earned the Certified Financial Planners certification, or the
Chartered Financial Consultant (ChFC) or Personal Financial Specialist (CPA/PFS) designations.
Financial planners can take you through the financial planning process.

Insurance Agent

Insurance agents are licensed by the state(s) in which they practice to sell life, health, property
and casualty or other insurance products. Many insurance agents hold the Chartered Life
Underwriter (CLU) designation. Financial planners may identify and advise you on your
insurance needs, but can only sell you insurance products if they are also licensed as insurance
agents.

Investment Adviser

Anybody who is paid to provide securities advice must register as an investment adviser with the
Securities and Exchange Commission or relevant state securities agencies, depending on the
amount of money he or she manages. Because financial planners often advise people on
securities-based investments, many are registered as investment advisers. Investment advisers
cannot sell securities products without a securities license. For that, you must use a licensed
securities representative such as a stockbroker.

Stockbroker

Also called registered representatives, stockbrokers are licensed by the state(s) in which they
practice to buy and sell securities products such as stocks, bonds and mutual funds. They
generally earn commissions on all of their transactions. Stockbrokers must be registered with a
company that is a member of the National Association of Securities Dealers (NASD) and pass
NASD-administered securities exams.

28
The government does not regulate financial planners as financial planners; instead, it regulates
planners by the services they provide. For example, a planner who also provides securities
transactions or advice is regulated as a stockbroker or investment adviser. As a result, the term
"financial planner" may be used inaccurately by some financial advisers. To be sure that you are
getting financial planning advice, ask if the adviser follows the six steps.

The Financial Planning Process Consists of the Following Six Steps

1. Establishing and defining the client-planner relationship.

The financial planner should clearly explain or document the services to be provided to
you and define both his and your responsibilities. The planner should explain fully how
he will be paid and by whom. You and the planner should agree on how long the
professional relationship should last and on how decisions will be made.

2. Gathering client data, including goals.

The financial planner should ask for information about your financial situation. You and
the planner should mutually define your personal and financial goals, understand your
time frame for results and discuss, if relevant, how you feel about risk. The financial
planner should gather all the necessary documents before giving you the advice you need.

3. Analyzing and evaluating your financial status.

The financial planner should analyze your information to assess your current situation and
determine what you must do to meet your goals. Depending on what services you have
asked for, this could include analyzing your assets, liabilities and cash flow, current
insurance coverage, investments or tax strategies.

4. Developing and presenting financial planning recommendations and/or alternatives.

The financial planner should offer financial planning recommendations that address your
goals, based on the information you provide. The planner should go over the
recommendations with you to help you understand them so that you can make informed
decisions. The planner should also listen to your concerns and revise the
recommendations as appropriate.

5. Implementing the financial planning recommendations.

You and the planner should agree on how the recommendations will be carried out. The
planner may carry out the recommendations or serve as your "coach," coordinating the
whole process with you and other professionals such as attorneys or stockbrokers.

29
 6. Monitoring the financial planning recommendations.
You and the planner should agree on who will monitor your progress towards your goals.
If the planner is in charge of the process, she should report to you periodically to review
your situation and adjust the recommendations, if needed, as your life changes.

Best Practices When Approaching Financial Planning

 Set measurable goals.

 Understand the effect your financial decisions have on other financial issues.
 Re-evaluate your financial plan periodically.
 Start now - don't assume financial planning is for when you get older.
 Start with what you've got - don't assume financial planning is only for the wealthy.
 Take charge - you are in control of the financial planning engagement.
 Look at the big picture - financial planning is more than just retirement planning or tax
planning.
 Don't confuse financial planning with investing.
 Don't expect unrealistic returns on investments.
 Don't wait until a money crisis to begin financial planning.
You are the focus of the financial planning process. As such, the results you get from working
with a financial planner are as much your responsibility as they are those of the planner.

To achieve the best results from your financial planning engagement, you will need to be
prepared to avoid some of the common mistakes by considering the following advice:

 Set measurable financial goals.

Set specific targets of what you want to achieve and when you want to achieve results.
For example, instead of saying you want to be "comfortable" when you retire or that you
want your children to attend "good" schools, you need to quantify what "comfortable" and
"good" mean so that you will know when you've reached your goals.

 Understand the effect of each financial decision.

Each financial decision you make can affect several other areas of your life. For example,
an investment decision may have tax consequences that are harmful to your estate plans.
Or a decision about your child's education may affect when and how you meet your
retirement goals. Remember that all of your financial decisions are interrelated.

 Re-evaluate your financial situation periodically.

Financial planning is a dynamic process. Your financial goals may change over the years
due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth,
house purchase or change of job status. Revisit and revise your financial plan as time goes
by to reflect these changes so that you stay on track with your long-term goals.
30
 Start planning as soon as you can.
Don't delay your financial planning. People who save or invest small amounts of money
early, and often, tend to do better than those who wait until later in life. Similarly, by
developing good financial planning habits such as saving, budgeting, investing and
regularly reviewing your finances early in life, you will be better prepared to meet life
changes and handle emergencies.

 Be realistic in your expectations.

Financial planning is a common sense approach to managing your finances to reach your
life goals. It cannot change your situation overnight; it is a lifelong process. Remember
that events beyond your control such as inflation or changes in the stock market or
interest rates will affect your financial planning results.

 Realize that you are in charge.

If you're working with a financial planner, be sure you understand the financial planning
process and what the planner should be doing. Provide the planner with all of the relevant
information on your financial situation. Ask questions about the recommendations offered
to you and play an active role in decision-making.

31
TYPES OF ANALYSIS

When we use the term financial analysis, we do distinguish between horizontal analysis
and vertical whether the analysis and vertical analysis whether the analysis is for those
external to the business or the managerial personnel.

 Horizontal Analysis- also known as dynamic analysis portrays figures for a number
of years and change in these figures from the figure of a particular year is chosen as
the standard or the base year. Changes from the figures of the base year, represented
as percentage, gives us a clear idea of the trend, during the year, i.e. whether there is
an increasing trend, decreasing trend or violent fluctuations so that it is possible to
analyse the reasons for the same.

 Vertical Analysis- aims at making a static analysis of financial statements for one
year only. This method of analysis is useful in studying the inter-relationship of
different figures, as for instance, the relationship of gross or net profit to total deposits
and also for inter-firm comparison

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. The purpose of financial analysis is to disclose the information
contained in the financial statements so as to judge the profitability and financial soundness
of the organization.

The first task of the financial analyst is to select the information relevant to the decision
under consideration from the total information contained in the financial statement.

Secondly, to arrange the information in a way to highlight the significant relationships.

Finally to interpret and draw inferences and conclusions. In brief, financial analysis is the
process of selection, relation and evaluation.

ANALYSIS AND INTERPRETATION

32
 Analysis of Financial statements is a process of scanning them with a view to get the
necessary information. Accordingly, there are a large number of persons who are interested
in the analysis of financial statements. However, even with the accompanying schedules, the
layman does not understand the statements. Except an expert analyst, others including the
management cannot follow and digest the information contained in the statements. Hence,
the need for analysis.

Interpretation is drawing conclusions with regard to the nature of the inter-relationship

between figures analysed.

It is necessary to note in the context, that analysis and interpretation are

complementary and one cannot be stressed or favoured as against the other. In fact, the very
object of the analysis is to interpret the significant relationship between figures, and there
cannot be any interpretation without first analysing the data. Thus, analysis and
interpretation go hand in hand.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

A financial analyst analyses the financial statements by selecting the appropriate
technique according to the purpose of analysis. Financial statements may be analysed 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

Comparative Statements:

33
 The comparative financial statement shows the financial position at different period of
time. The elements of financial position of shown in a comparative form so as to give idea of
financial position at 2 or more periods. Two financial statements (balance sheet and income
statement) are prepared in a comparative form for financial analysis purposes. These
statements enable an in –depth study of financial position operating results. Comparative
statement can be prepared for both income statement and balance sheet.

Common size statements:

This statement indicates the relationship of various items with some common items
(expressed as percentage of common item). In the income statement the sales figure is taken
as base and all balance sheets the total is expressed as percentage of sales. Similarly in the
other figures are expressed as a percentage to this total. The percentages so calculated can be
easily compared with the corresponding percentages in other periods and meaningful
conclusions can be drawn.

Trend analysis:
Trend analysis is a technique with the help of which the financial statements can be
analysed by computing trend for a series of information. This method determines the

directions in the data and establishes the percentage relationship that each item in the
statement bears to the same item base year.

Ratio analysis:
A ratio is only comparison of the numerator with the denominator. The term ratio
refers to the numerical or quantitative relationship between two figures. A ratio is the
relationship between two figures, and obtained the former by the latter. Ratios are designed to
show how one number is related to another. It is worked out by dividing one number by
another.

Funds Flow Statements:

This statement is prepared in order to reveal clearly the various sources where form
the funds are procured to finance the activities of a business concern during an accounting
periods.
Cash flow statement:

34
 This statement is prepared to know clearly the various sources of cash inflows and
cash outflows. It is helpful in evaluating the current liquidity of a business concern. Thus it is
helpful in short-term financial analysis.

Cost volume- profit analysis:

Cost volume profit analysis is a technique for studying the relationship between cost,
volume and profit . Profit of and under taking depends upon a large numbers of factors. But
the most important of this factor are the cost of manufacture, volume of scale and the selling
prices of the products. In the words of HERMAN C. HERSER, the most significant single
factors profit planning of the average business is the relationship between the volume of
business, costs and profits. The CVP relationship is an important tool used for the profit
planning of a business.

Classification of Ratios:
The use of ratio analysis is not confined to the financial manager only. There are
different parties interested in the ratio analysis for knowing the financial position of the firm
for different purposes. In view of the various users of ratios, there are many types of ratios,
which can be calculated for the given information in the financial statements.

Following is the classification of ratios:

1. Liquidity Ratio
2. Leverage Ratio
3. Profitability Ratio
4. Activity Ratio

Liquidity Ratios

Liquidity refers to the ability of the concern to meet its current obligations as and
when they, become due. 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. Much insight
could be obtained into the present cash solvency of the firm and its ability to remain solvent
in the event of emergent: i.e. the firm should ensure that it does not suffer from any lack of
liquidity and also that it is necessary to strike a proper balance between high liquidity and
lack of liquidity.

35
Leverage Ratios
The short-term creditors like the bankers and the suppliers of raw materials are more
concerned with the firm’s current debt paying ability. On the other hand, long terms creditors
like debenture holders, financial institutions, etc., are more concerned with the firm’s long-
term financial position. To judge the long-term financial position of the firm, financial
leverage or capital structure ratio is used. The shareholders, debenture holders and other long-
termed creditors like financial institutions are more interested in the long term financial
position or long term solvency of the firm. Leverage or solvency ratios are used for such an
analysis. These ratios are also used to analyse the capital structure of a company Because of
the above said reason these are also called capital-structure ratios. The term solvency
generally refers to the firm’s ability to pay the interest regularly and repay the principal
amount of debt on due date.

There are two aspects of long-term solvency of a firm. They are:

1. Ability to repay the principal amount of loan on the due date.
2. Regular payment of interest.
Accordingly, there are two types of leverage ratios. The first type of leverage ratio is
based on the relationship between owned-capital and borrowed capital. These ratios are
calculated from the Balance sheet items. The second type of leverage ratio is coverage ratios.
These are computed from the profit and loss account items.

Profitability ratio

Profit reflects the final result of the business operations. There are two types of profitability
ratios namely margin ratio and ratio on returns rates. Profit margin ratios show the relation
between sales and profits.
The ultimate aim of any business enterprise is to earn maximum profit. Lord keens
remarked, “Profit is the engine that drive the business enterprise”, a firm should earn profit to
survive and grow for a long period of time. To the management profit is a measurement of
efficiency and control. To the owners it is to measure the worth of their investment. To the
creditors it is the margin of safety.

The management of the company should know how efficiently they carry out business
operation. In other words, the management of the company is very much interested in the

36
profitability of the company. Beside management, creditors and owners are also interested in
the profitability of the co-creditors, as they want to get interest and repayment of principal
amount regularly. Owners want to get a reasonable return on their investment.
The profitability ratio measures the ability of the firm to earn and on sales, total assets
and invested capital. Profitability ratios are generally calculated either in relation to sales or
in relation to investment. The profitability ratios in relation to sales are gross profit ratio. Net
profit ratio, operating ratio, expenses ratio, and etc. the profitability ratios in relation to
investment are return on assets, return on investment, return on equity capital.

The important profit margin ratios are gross profit margin and net profit margin .the
rate of return ratio reflects the relationship between rate and profit and investment. The
important rate of return ratio is return on equity and return on investment, etc.

Activity ratios

Funds of the owners and creditors are invested in various assets to generate sales and
profits. The better the management of assets, the larger the amount of sales. Activity ratios
are employed to evaluate the efficiency with which the firm’s managers utilize their assets.
These ratios are also called turnover ratio because they indicate the speed with the assets are
being converted or turn over into sales.
 Calculation of the above ratios over the study period and analysing it.
 Forwarding certain recommendation and conclusion to the bank.

IMPORTANCE (OR ADVANTAGES) OF RATIO ANALYSIS:

Ratio analysis stands for the process of determining and presenting relationship of items
and groups of items in the financial statements. It is an important technique of financial
analysis. It is a way by which financial stability and health of a concern can be judge. The
following are the advantages of ratio analysis:

37
ADVANTAGES:
1. USEFUL IN FINANCIAL POSITINO ANALYSIS
Accounting ratio reveal the financial position of the concern. This help banks,
insurance companies and other financial institutions in lending and making
investment decisions.
2. USEFUL IN SIMPLIFYING ACCOUNTING FIGURES
Accounting ratio simplifies summaries and systemize the accounting figures in
order to make them more understandable and in lucid from the highlight the inter-
relationship, which exists between various segments of the business as expressed by
accounting statements. Often the figures standing alone cannot help them convey any
meaning and ratio help them to relate with other figures.
3. USEFULE IN FORECASTING PURPOSES
If accounting ratio recalculated for a number of tears, then a trend is
established. The trend help in setting up further plans and forecasting. For example,
expenses as a percentage of sale can be easily forecasted on the basis of sales and
expenses of the past years.
4. USEFUL IN ASSESSING THE OPERATIONAL EFFICIENCY
Accounting ratio help to have an idea of the working of a concern. The
efficiency of the firm becomes evident when analysis is based on accounting ratio.
They diagnose the financial health by evaluating liquidity, solvency, profitability, etc.
This helps the management to assess the financial requirement and capabilities of
various business units.
5. USEFUL IN LOCATING THE WEAK SPOTS OF THE BUSINESS:
Accounting ratio are provide the assistance in locating the weak spots in the
business even

RESEARCH DESIGN
Research design means a search of facts, answers to question and solution to the
problems. It is a prospective investigation. Research is a systematic logical study of an issue
or problem through scientific method. It is a systematic and objective analysis and recording
of controlled observation that may lead to the development of generalization, principles,
resulting in prediction and possibly ultimate control of events.

38
 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 relevance to
economy. There are various designs, which are descriptive and helpful for analytical
research.
In brief a research design contains the following:

 A clear statement of the research problem.

 A specification of data required.
 Procedure and techniques to be adopted for data collection.
 A method of processing and analysis of data.

39
 CHAPTER-IV

DATA ANALYSIS &

INTERPRITATION

40
 RATIO CALCULATIONS
CURRENT RATIO

Current ratio be defined as the relationship between current assets and current
liabilities. This ratio is known as working capital ratio, is a measure of general liquidities and
is most widely used to make the analysis of the short-term financial position or liquidities of a
firm. It is calculated by dividing the total of current assets by total of the current liabilities.
Current Ratio = Current Assets/ Current Liabilities

CURRENT RATIO TABLE

(Rs. In Crores)

Current
Current assets
Year Liabilities Current Ratio
(Amt. in Rs)
(Amt. in Rs)
2015 5,489 1,078 5.09:1

2016 5,202 1,752 2.96:1

2017 4,891 2,458 1.99:1

2018 4,608 3,278 1.41:1
2019 4,210 4,867 0.86:1

The average ratio=2.462

2015 2016 2017 2018 2019

INTERPRETATION:-

1. The current ratio in the year 2015 was 5.09which is the highest ratio during
the study period.
2. The ratio has and develop trend during the period of study because there is a
significant increases in liabilities.
3. The average ratio is 2.462
4. Overall analysis tells that the ratio is satisfactory
41
 ABSOLUTE LIQUIDITY RATIO

It may be defined as the relationship between absolute Liquid assets and current
Liabilities. Absolute Liquid assets include cash in hand and at bank and marketable
securities or temporary investments.
A ratio of 1: 1 is considered to be good. Such a ratio will imply that the firm has
enough Liquid assets to meet all current Liabilities of the firm.

Cash + Marketable Securities

Absolute Liquid Ratio =
Current Liabilities

(Rs. in Crores)
Years Absolutely Liquid Current
Assets Liabilities RATIO
(Amt. in Rs) (Amt. in Rs)
2015 2264 1078 2.10 : 1
2016 3474 1752 1.98 : 1
2017 3908 2458 1.59 : 1
2018 3707 3278 1.31 : 1
2019 3912 4867 0.80 : 1

The average ratio=1.556 : 1

2015 2016 2017 2018 2019

INTERPRETATION:
1. During the study period the ratio has a trend of decreases
2. During 2018 the ratio recorded very low this is because the current liabilities
are more than absolute assets.
3. The average ratio is recorded as 1.556 : 1.
4. So when we compare with standard norm we can say that the ratio is
satisfactory.
PROPRIETARY RATIO
42
 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. It usually
is expressed as a pure ratio.
Shareholder’s Fund
Proprietary Ratio = * 100

Total Assets

PROPRIETARY RATIO TABLE

Share holder funds Total Assets

Years Ratio
(Amt. in Rs) (Amt. in Rs)
2015 15,155 19,525 77.62 times

2016 17,515 111,731 15.68 times

2017 19,130 115,617 16.55 times

2018 19,422 118,787 16.35 times

2019 19,860 123,783 16.04 times

(Rs in Crores)

The average ratio=28.448 times

2015 2016 2017 2018 2019

INTERPRETATION:

1. During the study period the ratio has a trend of fluctuation.

2. During 2015 the ratio was 77.62 times which is the highest because total assets are
more than shareholders’ funds.
3. The average ratio is 28.448 times.
4. The proprietary ratio position of the bank is satisfactory.

43
 INTEREST PAYOUT RATIO

It establishes the relationship between interest paid and earnings before tax
and interest.
Interest Paid
Formulae = ______________ * 100
EBIT
EBIT= Profit for the year + Interest paid + Tax

INTEREST COVERAGE RATIO TABLE

(Rs in Crores)
Years Interest Paid EBIT
Ratio
(Amt. in Rs) (Amt. in Rs)
2015 3,215 5,032 63.89 times

2016 3,742 5,691 65.75 times

2017 4,537 6,072 74.72 times

2018 1,073 1,486 72.21 times

2019 1,191 1,967 60.55 times

The average ratio is=67.424 times

2015 2016 2017 2018 2019

INTERPRETATION:

1. The interest ratio in the year 2015-2016 was 74.72 times which is the highest ratio
during the study period.
2. The ratio has a fluctuating trend during study period.
3. The average ratio is 67.424 times.
4. As the average ratio is more than 50%, so we can say that the EBIT Level on interest
is good.

44
OPERATING PROFIT RATIO: This ratio indicates the profitability of the company.

Operating Profit
Operating Profit Ratio =
Total Interest Received
(Rs. in Crores)

Years Operating profit Int Rec Ratio

(Amt. in Rs) (Amt. in Rs)
2015 1,158 1,214 0.95%
2016 1,002 2,221 0.45%
2017 2,198 2,288 0.96%
2018 7,657 2,246 3.41%
2019 9,024 2,506 3.60%

The average ratio=1.874

2015 2016 2017 2018 2019

INTREPRETATION

1. During the study period the ratio has improved, this is because the operating profit
ratio was increased every year.
2. The operating profit ratio in the year 2017-2018 was 3.60% which is the highest
ratio during the study period.
3. The average ratio is 1.874%.
4. The operating profit ratio position of the bank is satisfactory.

Networking capital:

45
 The difference between current assets and current liabilities excluding short –term
bank borrowing is called net working capital or current assets.
Net working capital is sometimes used as a measure of firm s liquidity. It consider
that, between two firms one having the larger net working capital has the greater ability to
meet its current obligation Networking capital however measure the firms potential reserves
of funds.
Net working capital
Networking Capital Ratio=
Total assets

(Rs. in Crores)

Years NWS Net assets NWC Ratio

(Amt. in Rs) (Amt. in Rs)
2015 4,471 16,802 0.27 times
2016 3,450 19,186 0.18 times
2017 5,186 21,069 0.25 times
2018 3,292 23,138 0.14 times

2019 6,574 23,620 0.28 times

The average ratio=0.224 times

2015 2016 2017 2018 2019

INTREPRETATION

1. During the study period the ratio has a trend of increses and decreases.
2. The net working capital ratio in the year 2017-2018 was 0.28 times which is the
highest ratio durng the study period.
3. The average ratio is 0.224 times which is less than 1 that means the bank has limited
ability to meet is current obligations.
4. The net working capital ratio position of the bank is not satisfactory.

46
Return on Total Resource

Return on total resource or total assets ratio is the ratio of net profit to total resources
or total assets. Return here means net profit after taxes and total resources mean all realizable
assets including intangible assets, if they are realizable. This ratio measures the productivity
of the total resources of a concern.
Net Profit
Return on Total Resource = ______________ x 100
Total Asset

(Rs. in Crores)
Years Net Profit Total assets Ratio
(Amt. in Rs) (Amt. in Rs)
2015 9,595 19,325 41.65 times
2016 12,004 111,731 10.74 times
2017 19,704 115,617 17.04 times
2018 23,704 118,787 19.96 times

2019 30,670 123,783 24.78 times

The average ratio=22.834 times

2015 2016 2017 2018 2019

INTREPRETATION

1. During the study period the ratio has a trend of only decreasing the year to year.
2. The return on total resource ratio in the year 2010-2015 was 41.65 times which is
the higheast ratio during the study period.
3. The average ratio is 22.834 times.
4. The return on total resource ratio position of the bank is satisfactory.

47
Cash Position Ratio

It may be defined as the relationship between the available cash both at bank and in
hand and current liabilities.
A ratio of 1: 1 is considered to be a good ratio but a rate of 0.75 : 1 is also good. Such
a ratio would imply that the firm has enough cash on hand to meet all the current liabilities.
Cash
Cash Position Ratio =
Current Liabilities
(Rs. in Crores)
Years Cash in the Firm Current Liabilities Ratio
(Amt. in Rs) (Amt. in Rs)
2015 1,232 1,078 1.14 times
2016 1,617 1,752 0.92 times
2017 2,622 2,458 1.67 times
2018 3,458 3,278 1.55 times
2019 3,969 4,867 0.82 times

The average ratio=1.22 times

2015 2016 2017 2018 2019

INTREPRETATION:-

1. The ratio has on fluctuating trend during study period.

2. The cash position in the 2015-2016 was 1.67 times which the highest ratio is during
the study period.
3. The average ratio is 1.22 times.
4. The cash position ratio position of the bank is satisfactory.

48
FIXED ASSETS RATIO:
The ratio is indicates the extent to which the total fixed assets are financed by long term
funds of the bank generally the total of fixed assets should be equal to the total of the long
term funds.

Generally the ratio should not be more than 1. But in case the fixed asset exceeds the total
of the long term funds, it implies that bank has financed part of the fixed assets out of the
working capital which is not a good financial policy. And if the working capital requirements
is met out of the long term funds of the bank. The ideal ratio is 0.67.

Fixed asset
Fixed Assets Ratio =
Capital employed
(Rs. in Crores)
Years Fixed Assets Capital employed Ratio
(Amt. in Rs) (Amt. in Rs)
2015 1175.13 116744.69 0.01 times
2016 17067.290 1601437.47 0.01 times
2017 21228.114 2018397.12 0.01 times
2018 21706.480 2483568.21 8.74 times
2019 23471.940 304773.28 7.81 times

The average ratio=3.31 times

2015 2016 2017 2018 2019

INTREPRETATION
1. During the study period the ratio has trend of increases.
2. During 2017 the ratio was 8.74 times which the highest ratio is the study period.
3. The average ratio is 3.31 times.
4. The fixed asset ratio position of the bank is satisfactory.
NETWORKING CAPITAL:
49
 The difference between current assets and current liabilities excluding short term bank
borrowing is called net working capital or current assets.

Net working capital is sometimes used as a measure of firm s liquidity. It consider

that, between two firms one having the larger net working capital has the greater ability to
meet its current obligation Networking capital however measure the firms potential reserves
of funds.
Net working capital
Networking Capital Ratio=
Total assets
(Rs. in Crores)
Years NWS Net assets NWC Ratio
(Amt. in Rs) (Amt. in Rs)
2015 111166.87 133176.60 0.83 times
2016 1524868.9 1832707.732 0.83 times
1937646.65 2224585.697 0.87 times
2017

2018 2315880.09 2773525.912 0.83 times

2019 2764087.96 3379094.990 0.81 times

The average ratio=0.834 times

2015 2016 2017 2018 2019

INTREPRETATION
1. During the study period the ratio has a trend of increses and decreases.
2. The net working capital ratio in the year 2016 was 0.87 times which is the highest
ratio durng the study period.
3. The average ratio is 0.834 times, which is less than 1 that means the bank has limited
ability to meet is current obligations.
4. The net working capital ratio position of the bank is not satisfactory.

RETURN ON TOTAT RESOURCE

50
 Return on total resource or total assets ratio is the ratio of net profit to total resources
or total assets. Return here means net profit after taxes and total resources mean all realizable
assets including intangible assets, if they are realizable. This ratio measures the productivity
of the total resources of a concern.

Net Profit
Return on Total Resource = ______________ x 100
Total Asset

(Rs. in Crores)
Years Net Profit Total assets Ratio
(Amt. in Rs) (Amt. in Rs)
2015 1590.18 133176.60 0.01
2016 22449.392 1832707.732 0.01
2017 29487.009 2224585.697 0.01
2018 39264.009 2773525.912 0.01

2019 51670.907 3379094.990 0.01

The average ratio=0.01

2015 2016 2017 2018 2019

INTREPRETATION
1. During the study period the ratio has a trend of maintain the same position.
2. The average ratio is 0.01.
3. The return on total resource ratio position of the bank is not satisfactory.

FIXED ASSETS TO CURRENT ASSETS RATIO

The ratio is indicates the extent to which the total taxed asset are financed by long term
funds of the bank. Generally total of fixed assets should be equal to the current assets ratio.
51
 It is land and building, machinery, patent, good will, etc.
It is cash in hand cash at bank, sundry debtors, stock, bills receivable, etc.

Fixed assets
Fixed assets to current assets Ratio =
Current assets

(Rs. in Crores)
Years Fixed Assets Current Assets Ratio
(Amt. in Rs) (Amt. in Rs)
2015 1175.13 127598.78 9.20
2016 17067.290 1752072.13 9.74
2017 21228.114 2143806.09 9.90
2018 21706.480 2605808.651 8.33
2019 23471.940 3138406.65 7.47
The average ratio=8.928

2015 2016 2017 2018 2019

INTREPRETATION:-
1. The ratio has on fluctuating trend during study period.
2. During 2016 was 9.90 which is the highest ratio during the study period.
3. The average ratio is 8.928.
4. The fixed asset to current asset ratio position of the bank is satisfactory.

FIXED ASSETS TO NET WORTH RATIO

52
 This ratio established the relationship between the fixed assets to net worth ratio the bank.
It is established the claims of fixed asset to net worth ratio. It usually is expressed as a pure
ratio 1:3.
Fixed asset to net worth ratio=Fixed Assets / Net worth
(Rs. in Crores)
Years Fixed Assets Net worth Ratio
(Amt. in Rs) (Amt. in Rs)
2015 1175.13 11497.23 0.10
2016 17067.290 146463.301 0.11
2017 21228.114 215195.802 0.09
2018 21706.480 253763.548 0.08
2019 23471.940 299243.735 0.07

The average ratio=0.09

2015 2016 2017 2018 2019

INTERPREATION:
1. During the study period the ratio has trend of decreasing.

2. The fixed asset to net worth ratio 2015 was 0.11 which is the highest ratio during the study
Period.

3. The average ratio is 0.09.

4. The fixed asset to net worth ratio position of the bank is not satisfactory.

DEBT-EQUITY RATIO
This ratio establishes the relationship between external equities and internal equities.
While external equities belong to outsiders, include all debts, liabilities to outsides whether
Short-term or long term. Internal equities belong to shareholders; include equity capital,
preference share capital, capital reserves, revenue reserves etc. (2:1)

53
 Debt equity=Long term liabilities / Shareholders funds
(Rs. in crores)

Years Long term liabilities Shareholders funds Ratio

(Amt. in Rs) (Amt. in Rs)
2015 105247.46 1147.23 9.15
2016 1454974.17 14643.301 9.93
2017 1803201.32 215195.802 8.37
2018 2229804.66 253763.548 8.78
2019 2705529.55 299243.735 9.04
The average ratio=9.05

2015 2016 2017 2018 2019

INTERPRETATION

1. The debt and equity ratio during the study period the ratio has a trend of increases and
Decreased.
2. During 2015 the ratio was 9.93 which is the highest ratio the study period.
3. The average ratio is 9.05.
4. The debt and equity ratio position of the bank is satisfactory.

RATIO OF TOTAL INVESTMENT TO LONG TERM LIABILITIES

This ratio calculated by dividing the total of long term fund by the long term liabilities, the
ratio of total investment to long term liabilities.

Total investment to long term liabilities = shareholder fund + long term liabilities / Long term
Liabilities

(Rs. in crores)
Years Shareholder fund + Long term liabilities Ratio
54
 Long term liabilities
2015 116744.69 105247.46 1.11

2016 1601437.47 1454974.17 1.10

2017 2018397.12 1803201.32 1.12
2018 2483568.21 2229804.66 1.11
2019 3004773.28 2705529.55 1.11

The average ratio=1.11

2015 2016 2017 2018 2019

INTERPRETRTION

1. The total investment to long term liabilities ratio was increased for the year 2016 was 1.12
Which is the highest ratio during the study period.
2. The average ratio is 1.11.
3. The low total investment to long term liabilities are indicates the position of long term
Liabilities are very low it implies better position of the bank.
4. The overall long term financial position of bank was satisfactory.
RATIO OF CURRENT ASSETS TO PROPRIETORS FUND
The ratio indicates to extent to which proprietor funds are in current assets.
There is no rule of thumb for this ratio and depending upon the nature of the business there
may be different ratios for different firm.

Ratio of current assets to proprietary fund = Current asset / share holders fund

Years Current Assets Share holders fund Ratio

(Amt. in Rs) (Amt. in Rs)
2015 127598.78 11497.23 11.09
2016 1752072.13 146463.301 11.96
55
 2017 2143806.09 215195.802 9.96
2018 2605808.65 253763.548 10.26
2019 3138406.65 299243.735 10.48

The average ratio=10.75

2015 2016 2017 2018 2019

INTERPRETRTION:
1. During the study period ratio trend of increasing and decreasing.
2. The average ratio 10.75.
3. During 2015 was 11.96 which is the highest ratio the study period.
4. The ratio indicates the extent to which proprietors funds are invested in current assets.

56
 CHAPTER-V

 SUGGESTIONS
 FINDINGS
CONCLUSTIONS

CONCLUSIONS

1. The Current assets of the bank are increases every year. This indicates that there is
significant large investment in current assets by bank. .

2. It the above mentioned trend following the future then bank may not be able to meet
its current obligations.

3. The absolute liquidity of the bank are decreasing every year. This indicates that there
is significant less investment in absolute assets by bank.

57
4. The quick assets have been improving every year. This indicates that the bank has
high liquidity.

5. The debit and equity ratio of the bank is increasing and decreasing. This position is
not satisfactory.

6. The proprietary ratio of the bank is increasing every year. This position is satisfactory.

7. The Bank’s totally assets and their consumption with reference to shareholders funds
in satisfactory.

8. The net working capital of the bank is increasing. The bank has to check when there
are any idle funds in working capital.

9. The proper utilization of assets and effective operational efficiency has lead the bank
to earn a good amount of net profit every year.

10. The bank’s cash position out of its current assets is significance improved this
indicates that the bank is ready to meet its current obligations

58
 SUGGESTIONS

1. The bank shod not follow the same policy for the investment in current assets.

2. The bank, to meet its current obligations, has to concentrate more to invest in their
current assets.

3. As the liquidity position is good, the bank has to maintain same levels in its liquid
assets.

4. The consumption of total assets should be done to the must optimum level by the
bank.

5. The bank has to concentrate to improve its EBIT, by improving their operation
efficiency which yields high EPS and NAV.

6. The bank should take necessary measures to improve its credit worthiness.

7. The bank should maintain the same trend with regards to its working capital position.

8. If there are any idle fund in the bank, those should be utilized for the better
performance and growth of the bank.

9. Cash position of the bank should be maintained at the same level, makes the bank
ready to face it current obligations at any give point of time.

59
BIBLIOGRAPHY

60
 BIBLIOGRAPHY

FINANCIAL MANAGEMENT - I.M.PANDEY.

FINANCIAL MANAGEMENT - R.K.SHARMA & SHASHI K.GUPTHA.

FINANCIAL MANAGEMENT - PRASANNA CHANDRA.

REFERENCES

1. OTHER PUBLISHED DATA OF BANK

2. HDFC AND OTHER THIRD PARTY WEBSITES

61