CASE STUDY OF HDFC BANK

ASSIGNMENT 2

COURCE COORDINATOR:
MISS PRERNA DHAWAN
CHANDIGARH UNIVERSITY

DATE OF SUBMISSION: 30/09/22

SUBMITTED BY: ANIL KUMAR, SHIVANI THAKUR

UID: 22MBF10101, 22MBF 1010
 HISTORY
HDFC Bank incorporated in – 1994 as subsidiary of HOUSING DEVELOPMENT FINANCE
CORPORATION.
HDFC Ltd.( HOUSING DEVELOPMENT FINANCE CORPORATION) was India’s premier
finance company. Started in 1977
HDFC was promoted by the Industrial Credit and Investment Corporation of India
(ICICI). 
Hasmukhbhai Parekh played a key role in the foundation of this company which
started with the main aim of solving the housing shortage in India and started rising
steadily thereafter.
Only used to sell Housing loans nothing else it was not a bank in the starting, it was
NBFC in the beginning used to bring money from sources and provide to the
customer.

Private Banks were recognized in the 1990s after the LPG policy came into
existence. Amongst the oldest and most famous private banks, Axis Bank and
IndusInd Bank are regarded as the oldest private banks in India started in
1993-94 when the government allowed them to launch such banks
In 1994 government of India was providing license to private banks as there
were already a lot of public sector banks in the industry they wanted to
introduce private banks so that competition can be increased.
HDFC ltd. Also applied for the license and got permission.
Opened 1st branch on 18th feb , 1995
HDFC Bank commenced operations as a Scheduled Commercial Bank in
January 1995. Ramon House Church-gate branch was inaugurated on 16
January 1995 as the first branch of the bank.
Place founded: Mumbai
Area served: India
Chief guest at the inauguration was: Dr Manmohan Singh (advisor)
First director : Aditya Puri
Chairman of HDFC limited: Deepak Parekh

TEAM
Aditya Puri (Citi Bank, Malaysia head)

Paresh Sukhtankar (Citi Bank)

Sameer Bhatia (Citi Bank)

Shailendar Bhandari()

CN Ram, A Rajan, Harish Engineer (Bank of America)

Luis Miranda (HSBC)
At that time Aditya puri recruited people from the top banks on top of that he
picked up people from the top profile to take HDFC bank to new heights.
Team of Ex-Bankers from top bank to do Banking startup.
 Search for Name
HDFC Ltd wasn’t allowing keeping Name as HDFC bank due to the reputation
concern of HDFC Ltd.
Aditya Puri Initiated on “HDFC Bank” on agreement if any time, their holding
falls below 20% it may ask it to change the name (if his stake falls down below
20%) but it never fell down from then.
Currently (21.5%) Bank registers a 21.5% rise in Loans to RS 13, 95,000 cr.

JOURENY
Taking money on low Rates and lend it on higher rates.
Lowest rate money is Current Accounts and Saving Accounts (CASA)
Current account consist money (Without interest) Free money.
Saving Account consist money (only 2-3% interest)
The main policy to earn profit is to get money at low interest or no interest
and lend the same money at higher rate and earn money from there by
making products and the only source of making money is lending money
through loans.
NIM is the (Net interest Margin) Net interest margin (NIM) reveals the
amount of money that a bank is earning in interest on loans compared to
the amount it is paying in interest on deposits. NIM is one indicator of a
bank's profitability and growth.
NIM of HDFC bank (Currently) 4.0% Financial Year 22
4.1 in yr 22
4.3 in yr 20
Previously they used to be in the range of (4.2-4.5)%
CASA of HDFC 46% (JUNE 22)(48.2%) in March 2022
NIM of HDFC is 1.5-2% higher than other Private Banks.

GETTING LOW COST FUND

The more current accounts they started opening the more saving account
they started opening the more CASA they started generating.
How to get CASA??
1st Corporate Banking
People who came from CITI banks to join the HDFC team they have
connections outside the countries and big connections in corporate sectors
but not with the common people and small businessmen

INTRODUCTION OF TECHNOLOGY
The team of HDFC bank(they were the leaders of foreign banks) the
technology outside India in banks was excellent so they wanted to improve.
HDFC was focused on the Technology and choose Centralized Real time
Solution(other were offline) all other banks in INDIA were offline at that time.

Problems faced at that time: DURING 1995

 If applied for Cheque it used to take 4-5 days to complete the process
 Salary transfer used to take Approximately 3 days
 Every transaction used to take time to complete
  “Payzapp” works as payment gateway

Solutions provided through the technology

 Provided Cash management service to corporate sector they asked to
provide the list of employees and open account for them on their
behalves and transfer money directly into the accounts.
 Opened salary accounts The amount which was spent by the employee
is gone but the rest which is not spent stays with HDFC bank
 Companies current account was opened to transfer the companies
money into the salaries account of the employee’s(free money)
 This is how they solved the problem of money transfer in corporate
sector
IN REAL TIME through internet and doing fast transactions
1.Salary transfer
2.Bank transfer
3.Payment to vendors
4.Fast clearance
5.Interstate transfer

These were the problems that corporate sector was facing at that time and
was solved by HDFC bank and its technology by proving real time and fast
transactions they made CASA improved and opened current and saving
accounts for corporate sector this improved salary transfer problems.
Payment to vendors used to take a lot of time along with that faster clearance
of cheques was made possible and previously interstate transfer of money
wasn’t easy that was also made instant due to the internet and real time
transactions.
NOW THE BANK WAS ALL SET TO GO WITH GOOD LEADERS AND QUALITY
PEOPLE NOW THEY HAVE TO PICK UP THE MONEY BELOW MENTIONED AND
EXPLAINED HOW MONEY WAS PICKED UP FROM THE MARKET

CHEQUE SETTLEMENT SYSTEM

Corporative Banks have state wise working if their customer has any supplier
or customer outside states takes time to serve.
It used to take 3-4 days to complete the transactions for example: I have to
give order for supply of goods outside the state , the dealer will ask for the
advance cheque if I apply for cheque today it will take 2-3 days and then the
supplier will receive the cheque on 4th day and money will be transferred into
his account on the next day then he will supply the goods. So there was delay
in the work.
  HDFC Bank offered something which can clear the cheque cleared within
one day
 Insured that if someone wants to transfer the cheque money and have
that much money in the account without wasting any time Cheque
money will be transferred on the basis of the customer’s account data
rest of the process can be done later
 Acceptable at any branch of HDFC bank

STOCK EXCHANGE
HDFC pitched idea of Real time processing system to stock exchanges
Earlier this process used to take 4 days, Stock got demat but payment system
was still manual
This was the Major sector from where they picked up money
They talked to Brokers about the problem regarding the delay in the time and
the value of shares increases till the time payment gets successful.
Payment Cheque Stock Broker Exchange it was a lengthy
process
They asked everybody to open the account in HDFC Bank
Provided real-time Cheque transfer and money transaction to brokers and
exchange.
Now they had the accounts of
  Exchange
 Broker and Investors
Became instant customer with high liquidity.
Captured 80% of the market at that time.
This is how HDFC bank picked up the money now they have to make their
products and sell to earn profit.

From 1995-1998 HDFC bank focused on raising funds and

collecting money

DEPLOYMENT OF FUNDS
In 1998 Launched 1st product “LOAN AGAINST SHARE”
On exchange of shares they started giving money for example: if someone
was having Shares of 1 lac he can ask for loan of 70,000 INR. It was a safe
product HDFC started slow but safe.
 In 1999 Launched “CAR LOANS”
 2000 Launched “Personal LOANS / LOANS for IPO” it was a risky move but
still ok
 2003 Launched “Credit Cards, 2 wheeler Loans”
 2004 Become distributor of “HOME LOANS” for HDFC Ltd.
 2007 SME Small businessmen, Lending, Rural, Agri, Micro-finance etc.
 Other Income from POS & 3rd party selling ex. Machine and card swiping
have a cut of 2-3%
AT CURRENT THESE ARE THE PRODUCTS HDFC BANK OFFERS

CURRENT CONDITION OF HDFC BANK

HDFC Bank has reported a strong performance in Q4 FY20 with Net
Profit growth of 18% YoY despite of weak economic activities provoked
by COVID-19 pandemic. Bank has delivered a healthy performance
over almost every parameter – Loan growth, CASA deposits growth,
Net Interest Margins and asset quality. Let’s analyze the key Financial
Highlights of HDFC Bank for Q4 FY20

UNDERSTANDING THE CUSTOMER

It is very important for any new business to find the gap in the market for
mew opportunities and ways to earn money wherever there is a gap there is
ton of ways to earn a fat amount of money.
HDFC bank knew this thing and they were able to find the gap and ways to
earn
THERE USED BE TWO TYPES OF BANK
1.Public Sector bank(Pocket friendly , Affordable, Slow)
2.Foreign Bank(Technology based, Ambience, Classy, Fast, Costly)
Public bank used to take low Balance to open account
Foreign bank took high Balance to open account
HDFC played the game here and combined both there positive aspects
Now they wanted to create a bank with
 Quality services
 Fast services
 At cheaper cost
 Friendly for small businessmen’s and common people
HDFC bank opted many strategies to come on the top when there are already
competitors in the market with same work and they are well optimized and
settled in the market there is a way to do smart work and that way is known
as Benchmarking.
Now what is benchmarking??
Benchmarking is more like motivation to do something or setting target or a
blue print on which the company is going to work
They decided to benchmark with the best bank in each sector.
There used to be a bank named as WELLS FARGO famous for Virtual banking
cross selling .
HDFC studied the model of Wells fargo Which was the well established bank
of that time they decided to benchmark with best banks in each category
Wells Fargo
Multinational financial services company with headquarters in San Francisco,
California. The founder of the original company were Henry Wells and
William George Fargo .
They earlier helped establishing the American Express Company.
They and other investors established Wells and Fargo in 1852 to handle the
banking and express business promoted by the California Gold Rush.
The time when HDFC bank opted the model of Wells and Fargo
This banking company was solid in
 Virtual banking
 Cross selling
There were other banks too from which they studied their model and started
doing the things in the same way to be better than anybody in the market.
Banks which were set as the benchmark
 Banking mandiri (Indonesia) ------- Small ticket loan
 Hang seng bank(Hong Kong) ------- Good returns (NIMS)
 State Street Corp (America) ------- Transactional Expertise(Smooth
transactions)
 CUSTOMER FOCUSED
What to we mean by customer oriented and customer focused when any
company is focusing on solving problems of public at a fair price which is
more convenience and have good service.
So HDFC bank divided Customer in different segments and identified their
needs and developed products for example.
 CAR Loan
 Two wheeler loan
 Home loan
 Personal loan
According to the lifecycle of a human being they started understanding the
need of public and created products and played a smart move.
They worked on a motive that if something is valuable to customer they
started providing the services to the customer no matter how hard it is for
them to achieve.
In Banking service is only what makes them different
 Less documents
 Fast processing
 Less heptication
 Easy branch access
 Customer complaints were taken very seriously

OPERATIONAL EXCELLENCE
 IT WAS THE 1ST Bank to launch mobile Banking
 1st bank to launch “INSTANT ALERT”
 Centralized Banking (Customer of bank, Not branch) Customer gets
service from everywhere in INDIA
 Tech platform was provided to the customer now they were able to
access everything by sitting at home without even visiting the branch
  Developed branches as sales & service center
 Front desk had people from non-banking(Hospitality)
 Employee are trained in detailed on Customer Service importance and
have zero Intolerance Policy

Latest stats of HDFC bank On Saturday report A 19% rise in Standalone net
profit to Rs 9,196 cr in quarter last year Rs 7,730 cr .
After the merger with HDFC Ltd
Rs50 thousand cr

RISK AVERSION
 HDFC always focus on its asset Quality.
 Calculated funding across diff segments
 Deals mostly with Blue chip corporate only with companies like Airtel
which do not have any possibilities of falling down in the coming
years(safe move)
 Loan exposure to mid is limited up-to 25%
 Infrastructure Segment loans are limited upto 5%(Risky segment)
 Loan is given to experience & credit worthy Corporate
 No friends, only by the rules and process.
 For other loans follow the “3 initial system”
 Loan Origination approval and disbursement is done by 3 different
departments
In 2008 every bank was struggling due to the financial crisis in the country
But HDFC stand tall and suffered no loss or very less.
 No target for the credit department that part is only for the sales
department
 HDFC bank was already smart enough to know that there is risk in small
loans that’s why they exited the small loan market early in the starting
 gave small loans and realize it’s risky. Money do not come back Slowly
came out of these segments(NPA) only invested in Blue chips corporation
 When every ban was struggling in 2008 HDFC was free
 Lowest (NPA) non productive asset in industry is 2.54% by HDFC
 So always protect Capital and maintain the flow Earn less but do not
waste money
In the process of doing more sales do not make more risk sell less but sell
productive earn less but have no loss

PROFIT AND GROWTH FOCUSED

 HDFC didn’t Just follow growth approach followed growth and profit
approach
 Reducing the cost by using Technology If one customer comes to
branch for service chequebook issue if serving him cost more rupees if
he applies everything online money was saved
 Not sacrificing margin due to great asset quality invested in blue chip
companies like Reliance
 Bank has to maintain 10% equity to their loan book so if you have 100cr
loans lend you must have 10cr equity in that amount that u lent.
According to the RBI guidelines
 And if somehow you grow it some more extent than you have to add
10% of the total amount
 Which is only possible by the profitable banks
 INNOVATION WITH TIME
 Started giving personal loans in just 10 minutes to existing
customer just by applying online
 30 minutes CAR loan
 “Smart buy” for all transaction (Travel,Food,Shop)
 “Payzapp” works as payment gateway
 To stay updated once they called Fin-tech startups for innovation
Solutions and selected 5 Startup to work for them

EMPLOYEE FOCUSED
 Ranked among the top 10 best company to work for
 Employee philosophy
i) Don’t squeeze them
ii) Just give potisitive environment vision to work
iii) Timely career growth
iv) They will work for you with head and heart
Any new opportunity is given to the Current employee first
 While hiring HDFC follow introduction and training process diligently
(Employee are aligned with vision)
 Roles are defined clearly. Everyone has their ID
 Measurement is key. Everyone has their KPI which is tracked daily
 Promotion, transfer, growth salary hike
PROCESS AND SYSTEM
LEAD by the factory of successful CEO’s
I. Shailendar Bhandari - CEO of ICICI prudential
II. Luis Miranda - MD and CEO ,IDFC
III. Sameer Bhatia - MD, Barclays
IV. Neeraj Swaroop - CEO, Standard chartered
So many great personalities came and left the HDFC bank’s lead still it never
fell and its growth never impacted
Due to the detailed SOP’s and that’s why this bank is known as SOP bank
Totally depended on the System not on a single person
LEADERSHIP
last but not the least great leaders who lead the company to new heights
Business is just the reflection of the owners and employees.

THE SINGLE BIGEGST ISSUE WITH CURRENT BANKING SYSTEM

With a series of high-profile breaches over the past few years, security is one
of the leading banking industry challenges, as well as a major concern for
bank and credit union customers. Financial institutions must invest in the
latest technology-driven security measures to keep sensitive customers safe,
such as:
 Address Verification Service (AVS): AVS “checks the billing
address submitted by the card user with the cardholder’s billing address
on record at the issuing bank” in order to identify suspicious transactions
and prevent fraudulent activity.
 End-to-End Encryption (E2EE): E2EE “is a method of secure
communication that prevents third-parties from accessing data while it’s
transferred from one end system or device to another.” E2EE uses
cryptographic keys, which are stored at each endpoint, to encrypt and
decrypt private messages. Banks and credit unions can use E2EE to
secure mobile transactions and other online payments so that funds are
securely transferred from one account to another or from a customer to
a retailer.
 Authentication:
o Biometric authentication “is a security process that relies on

the unique biological characteristics of an individual to verify that he

is who he says he is. Biometric authentication systems compare a
biometric data capture to stored, confirmed authentic data in a
database.” Common forms of biometric authentication include voice
and facial recognition and iris and fingerprint scans. Banks and credit
unions can use biometric authentication in place of PINs, as it’s more
difficult to replicate and, therefore, more secure.
o Location-based authentication (sometimes referred to as geo-

location identification) “is a special procedure to prove an

individual’s identity and authenticity on appearance simply by
detecting its presence at a distinct location.” Banks can use location-
based authentication in conjunction with mobile banking to prevent
fraud by either sending out a push notification to a customer’s
mobile device authorizing a transaction, or by triangulating the
customer’s location to determine whether they’re in the same
location in which the transaction is taking place.
o Out-of-band authentication (OOBA) refers to “a process where

authentication requires two different signals from two different

networks or channels… [By] using two different channels,
authentication systems can guard against fraudulent users that may
only have access to one of these channels.” Banks can use OOBA to
generate a one-time security code, which the customer receives via
automated voice call, SMS text message, or email; the customer then
enters that security code to access their account, thereby verifying
their identity.
o Risk-based authentication (RBA) — also known as adaptive

authentication or step-up authentication — “is a method of

applying varying levels of stringency to authentication processes
 based on the likelihood that access to a given system could result in
its being compromised.” RBA enables banks and credit unions to
tailor their security measures to the risk level of each customer
transaction.

Money laundering and Frauds

Money laundering is the process of making large amount of
money generated by a criminal activity such as drug trafficking or
terrorist funding, appear to have come from a legitimate source
Money laundering is a crime in itself
3 stages are involved in money laundering
 PLACEMENT
 LAYERING
 INTEGRATION
PLACEMENT The process of Placing through deposits or other
means unlawful cash proceeds into traditional financial
institutions
LAYERING is the process of separating the proceeds of criminal
activity from their origin through the use of many different
techniques to layer the funds these includes using multiple Banks
and accounts layers of complex financial transactions, etc.
INTEGRATION It is the stage at which launched funds are
reintroduced into the legitimate economy.
Money laundering is something which kept happening India every
after certain period the earliest known forms of bank frauds
include forging of instrument ,accounting irregularities and
inflation asset. Over the period of time money laundering in
banking system has become more frequent and sophisticated
with the advent of internet based banking leading to increase in
the quantum of money involved in such cases.
Much recently in India on February 2022, India witnessed its
biggest ever bank fraud of INR 22,842 crores (approx USD 3
Billion) that involved ABG shipyard Ltd. A shipbuilding and repair
company.
The company allegedly created a web of transactions to cheat a
consortium of 28 banks led by state bank of India (SBI) and ICICI
bank. According to CBI.. ABG SL took loans from the bank and
then diverted them for use in other purposes. They make
investments in overseas subsidiaries from the loan amount ,
brought assets in the names of affiliated companies, and also
transferred money to several related parties. A forensic audit
with the help of Ernst and young was found that the fraud took
place over a period of five years from April 2012 to july 2017. The
reports further revealed that fraud was executed through
“Diversion of funds, misappropriation and criminal breach of
trust, with an objective to gain unlawfully at the cost of bank’s
funds.” While the fraud was identified in june 2019 by a “Fraud
Identification Committee” of SBI, the first complaint was made to
the CBI, much later, in November 2019.
There are other frauds too
 ICICI bank- Videocon Case November 2020
 Yes Bank – DHFL Case
 Punjab National Bank Case
This is how fraudulent activities give rise to money laundering.