A Study On

“Performance of Home Loan With

Development Credit Bank, Kolhapur”
Project Report Submitted To
Chhatrapati Shahu Institute Of Business Education And
Research
(An Autonomous Institute)
As Partial Fulfillment For The Award Of Degree Of
Master of Business Administration
By
Miss. Pawar Shivani Prakash
Under the guidance of
Dr.Mrs.Bindu Menon
MCA, SET (Comp.Sci.)
 Through
Department of Management
Chhatrapati Shahu Institute Of Business Education And Research
(An Autonomous Institute)
Kolhapur
2023-2024
 INTRODUCTION
DCB Bank is a mid-size private sector bank with 440 branches across India. The
bank mainly focuses on mortgages, MSME, agri, and gold loan segments. It has a
deposit book of ₹45,000 Cr and a balance sheet size of ₹57,000 Cr.
The bank started its operations in May 1995 and was listed on the stock
exchanges in October 2006. For the first 15-odd years, the bank started with
personal loans, commercial vehicles, wholesale lending, mortgages, etc. For
various reasons, whether competition or mis-lending practices, things didn’t go
well for the bank. The deposits and interest income saw degrowth, asset quality
deteriorated, and return ratios were impacted.
In May 2009, the DCB board appointed Mr. Murali Natrajan as MD & CEO (earlier,
he served as Global Head for SME banking at Standard Chartered Bank). With the
benefit of hindsight, things slowly started moving in the right direction. Mr.
Natrajan began to fix the leaks. He discontinued personal loans and commercial
vehicles, slowed down on wholesale lending, and focused mainly on the more
conservative segments of mortgages and gold.
 Literature Review

Customer
"
A customer is the most important visitor on our premises. He is not depending on us. We aredepending on him. He
is not an interruption on our work. He is the purpose of it. He is not anoutsider on our business. He is a part of it.
We are not doing him a favor by serving him. He isdoing us a favor by giving us an opportunity to do so."
- Mahatma Gandhi
Modern marketers are rediscovering the ancient mantras for success in corporate world
and blending them with contemporary marketing practices. Long term survival and competitiveadvantage can
only be attained by establishing an emotional bond with the customers. A shiftis taking place from marketing to
anonymous masses of customers to developing and managingrelationships with more or less well known or at
least some identified customers (Gronroos,1994).
Customer satisfaction
Customer satisfaction has been the subject of considerable research and has been defined
andmeasured in various ways (Oliver, 1997). Customer satisfaction may be defined as the
customer’s fulfilment response to a consumption experience, or some part of it.
Customersatisfaction I a pleasurable fulfilment response while dissatisfaction is an
unpleasurable one
(Buttle,2004 ). Satisfaction and dissatisfaction are two ends of a continuum, where the
locationis defined by a comparison between expectations and outcome. Customers would
be satisfiedif the outcome of the service meets expectations. When the service quality
exceeds theexpectations, the service provider has won a delighted customer.
Dissatisfaction will occurwhen the perceived overall service quality does not meet
expectations
(Looy,Gemmel&Dierdonck,2003). Sometimes customer’s expectations are met, yet the customer
is not
satisfied. This occurs when the expectations are low
(Buttle,2005). For example, the customerexpects the flight to be late and it gets late.
Customer Loyalty
Loyalty, behaviours, including relationship continuance, increased scale or scope of
relationship, and recommendation (word of mouth advertising) result from customers’
beliefs
that the quantity of value received from one supplier is greater than that available from
othersuppliers.Loyalty, in one or more of the forms noted above, creates increased profit
through enhancedrevenues, reduced costs to acquire customers, lower customer-price
sensitivity, and decreased
costs to serve customers 64 familiar with a firm’
s service delivery system
(Reicheldand Sasser, 1990).

Yi’s “Critical review of customer satisfaction” (1990) concludes, “Many studies found that
customer satisfaction influences purchase intentions as well as post-
purchase attitude” (p. 104).
Customer loyalty can be viewed in two distinct ways
(JacobyandKyner,1973)
.


The first views loyalty as an attitude. Different feelings create an individual’s overall
attachment to a product, service, or organization
(see Fornier, 1994)
. These feelings define
the individual’s (purely cognitive) degree of loyalty.


The second view of loyalty is behavioural. Examples of loyalty behaviour includecontinuing to purchase services from
the same supplier, increasing the scale and or scopeof a relationship, or the act of recommendation
(Yi, 1990).
Customer attitude being difficult to measure, for financial and practical purposes, customerretention is widely used as
an indicator of customer loyalty. Researchers have combined bothviews into comprehensive models of customer
loyalty.
Dick and Basu (1994)
came up with a two-dimensional model of customer loyalty identifyingfour forms of loyalty according to relative
attitudinal strength and repeat purchase behaviour.The true loyal are those who have high levels of repeat purchase
behaviour and a strong relativeattitude. Spuriously loyal customers tend to be more motivated by impulse,
convenience andhabit i.e. if the conditions are right. Latent loyalty applies to those customers who are loyalsimply
because they have no other choice. Lastly, there will always be some customers whoshall not be loyal to any particular
Customer acquisition
According to Kotler and Armstrong (2009), finding the right customers that provides
a profitable return can be defined as customer acquisition.Customer acquisition is
necessary for every companies that start creating a business, expandingtheir business,
products and services, and it is effective in situation where the switching cost isrelatively
low and repeat purchases are rare. In acquiring customers, it is essential fororganization to
choose the right customers to serve before decide how they can best acquirethem. This is
particularly important as it is a fact that organization will not be able to serve allcustomers
in every way. Hence, organizations nowadays decide to segment their customersand focus
more on customers that they can acquire, satisfy best and bring profitability (Jobber,2010).
Figure 2: 5 Rules of Customer Acquisition
DATA ANALYSIS AND INTERPRETATION
The fundamental side of things
In the past five years:
 The bank’s balance sheet has grown at a CAGR of 11.6%.
 Net advances increased by 12.8% CAGR to ₹37,276 Cr.
 Total deposits grew by 13.6% to ₹45,500 Cr.
 NII increased by 10% and PAT by 9.4% during the same period.
 CASA improved from 25% to ~30%, showing decent improvement.
 The cost of funds was marginally down from 6.5% to 6.1%.
 Return ratios are below par, with ROE at 11.5% and ROA at 0.9%.
The loan book is well diversified, with a greater focus on secured & retail lending, including
Mortgages at 45% of the loan book, Gold Loans at 8.4%, priority sector lending at 23.5%, and SME
lending at 6.6% of the book.
*Source: Q2FY24 Investors Presentation
Given the bank’s conservative nature and emphasis on secured lending, the bank has maintained
decent asset quality with current GNPA of 3.4% & NNPA of 1.3%. The provision coverage ratio is
healthy at 75%.
*Source: Q2FY24 Investors Presentation
Agri-Inclusive Banking & Gold Loans: The Key Growth Drivers

Think of it as a bank within a bank. Agri-Inclusive Banking (AIB) functions as a distinct unit of the bank,
primarily catering to agricultural and MFI customers in rural and semi-urban areas. Its product
offerings include Kissan credit cards, tractors, small ticket housing loans etc. Out of a total of 440
branches, 198 are exclusively dedicated to the AIB segment.
Over the past 5 years, the AIB segment has witnessed impressive growth of 17%, while Mortgages
have grown by 13%, and the overall bank loan book has expanded by 10%. AIB also enjoys relatively
better yields compared to other products.
Turning to the Gold loan segment, the bank ventured into it in 2013, gradually building a strong
portfolio that now constitutes 8.4% of the overall book. Gold loans rank as the bank’s third-largest
product, achieving a remarkable 26% CAGR in the past 5 years. On the other hand, the management is
downsizing its segments like Corporate & CV lending.
Post covid, the bank strategically accelerated branch expansion to reignite growth. In the last three
years, 87 new branches have opened. Due to upfront costs, the cost-to-income ratio has increased
from 49% in FY21 to 63.8% today. However, as branches scale, we can expect the cost-to-income
ratio to return to previous levels of around 50-55%, providing operating leverage over the next
couple of years.
Management has set a target to double the balance sheet every 3-4 years and maintain GNPA
below 2.5% and NNPA below 1%. The bank is looking to stabilize NIMs at around 3.6% to 3.7%
and reduce the cost-to-income ratio to 55%. Additionally, they aim to improve return ratios to
achieve a 14% ROE and 1% ROA.
Capital infusion by promoter and new MD & CEO appointment
Aga Khan Fund for Economic Development (AKFED), the promoter of the bank, currently owns
14.8% of the bank. In December 2023, AKFED expressed interest in investing an additional $10
million as growth capital. Following this equity infusion, the promoter’s holding will increase to up
to 16.3%.
As Mr. Natrajan approaches his retirement this year, the board has announced Mr. Praveen
Achuthan as the new MD & CEO of the bank. He is an insider, having been with the bank for the
past 16 years. The RBI has also approved Mr. Praveen’s appointment as the next MD of the bank,
effective from April 2024, removing any ambiguity and overhang on the bank’s leadership.
Is it a value buy or a value trap?
As of Q2FY24, the book value per share stands at ₹147, currently trading at a price-to-book
ratio of 0.9 times. While this may seem optically cheap, it is in line with the 5-year historical
median valuation of the bank. Relatively, the bank is trading at a discount compared to its
peers, but there is a reason for this.
DCB Bank has shown relatively faster loan book growth compared to other mid-sized banks.
However, it lags in terms of higher cost of funds, high cost-to-income, and low return ratios.
Therefore, the current valuation of DCB Bank appears justified.
However, as Wayne Gretzky famously said, ‘Skate to where the puck is going to be, not where
it has been.’ Things are expected to change for the bank over the next 2-3 years, owing to:
 Operating leverage as new branches start to break even, leading to a contraction in cost-to-income.
 Expansion of the Agri-Inclusive Banking segment, contributing to higher yields.
 Relatively higher growth in Gold Loans on a (lower base).
Considering these potential triggers, the bank is currently trading at a decent valuation, with
the possibility of a re-rating if these triggers unfold as expected.
History of DCB Bank:-
DCB bank as over the past two years doubled the branch network presence to 439

branches (as per 30st September 2023) form 160 branches in 2015. The relatively recent growth as well
visibility. The bank has a come a long way from humble being in the 1930s in Mumbai form a series of
cooperative bank mergers with the Ismailia cooperative bank limited and the Masalawala Cooperative Bank
respectively.

These 2 banks later merged to form development cooperative bank that changed to development
credit bank after it was granted the scheduled bank license by Reserve Bank of India in May 1995.
Development credit bank it went on to successfully offer shares to the public by an initial public offering
(IPO) in 2006. DCB Bank limited is the new name of the Bank, changed with the due regulatory approval in
January 2014
Growth of the organisation:-
DCB Bank is a growing private sector organisation, hence in 2010, DCB received permission to open two
Semi-Urban / Rural branches in Gujarat. Development Credit Bank (DCB) inaugurated its newest branch in
Gujarat at Vadodara in 2011 and also it inaugurates 81st branch at Mandvi, Surat District, Gujarat. - DCB
presents Aga Khan Hockey Tournament May 15-21-2011.

By 2012 DCB Bank and ITZ Cash launch Freedom Pre-Paid Card and also in 2013 Development Credit
Bank (DCB) has associated with Credit Sudhaar, a credit health improvement company, to offer DCB Payless
Card to customers it has also assigned a “CRISIL A1+” (pronounced “CRISIL A one plus”) rating for the Rs.
10.00 billion. Certificates of Deposit programme (enhanced from Rs. 5.00 billion).

In 2014 the Company has changed its name from Development Credit Bank Ltd. to DCB Bank Ltd
effective from October 24, 2014. And by 2015 DCB Bank, M2P launches mobile wallet service YAP and also
Bank Updates itself by 150+ additional branches roll out plan and by 2016 DCB Bank launches Aadhaar enabled
ATM in Bangalore and yet to be refund. Hence it is still growing.
Vision And Values:

Vision:
To be the most innovative and responsive neighbourhood bank in India serving entrepreneurs, individuals and
businesses.

Our Values :
 Treat Everyone with Dignity Respect

Do What Is Right? Ethical

Be Open and transparent Fair

Sense of Urgency, Passion and Dynamic

Energy

Go The Extra Mile, Find Solutions Stretch

Improve Continuously Excellence

Play As a Team, To Win Team Work

Support The Society Contribute

Awards and recognition:-

1. Great place to work institute, India 2019

2. Enterprise application BFSI Digital innovation awards Jan 2019

3. Fastest growing small bank runner up Business world Magna Awards 2018

4. Private bank of the year India banking summit and Awards 2018

5. Outstanding contribution in the field of BFSI The economic times Iconic Brands OF

India- 2018

6. Best SME lending (private sector) winner 6th SMEs excellence award - 2018

ASSOCHAM
7. Good corporate citizen winner Bombay chamber of commerce and industry

8. Best small bank winner

Business world Magna Awards 2017

9.Good Corporate Citizen award 2017-18 by Bombay Chamber of Commerce and

Industry.

10. “Excellent Services of the Year” Award by ASSOCHAM in 8 th MSME’s Excellence

Awards March 2022.

11. Best CSR Impact Awards in UBS FORUMES 2022

12. Great workplace Culture award in 2022-23.

 Organization chart:-
Name Designation

Farokh N. Subedar Chairman

Murali M Natrajan MD and CEO

Bharat Sampat CFO and President

Shridhar Seshadri Executive Vice President

Amin Manekia Director

Ashoka Bharat Director

Iqbal Khan Director

Jamal Pradhan Director

Shafiq Dharamshi Director

Rupa Devi Singh Director

ORGANISATIONAL STRUCTURE:-

Branch Manager

Branch
Assistant
Sales Manager Operation Manager
Manager

Commercial
Business Tellers
Executive/SeCBW

Customer Service
Sales Executive Executive
Products And Services:-

Retail Banking

 Cards

1. Co Branded Prepaid Card

2. Credit Card

3. Debit Card

4. Secured Card
 Deposits Products

1.Kasa

2. Corporate Salary

3. Current And Savings

4. Lockers

5. NRI deposits

6. POS terminals

7. Fixed Deposits
 Loans

1. Auto Loan

2. Commercials Vehicles

3. Construction Equipment

4. Construction Finance

5. Home Loan

6. Loan against Gold

7. Loan against Property

8. Tractor Loan
 Payments And Services

1. Bill / Utility Payments

2. IMPS / RTGS / NEFT

3. Online Share Trading / Demat

4. Remittances

5. Tax Payments

6. Visa Money Transfer

 Third Party Products

1. Life Insurance And General Insurance

2. Mutual Fund
 Services

1. 24/7 Phone Banking

2. Any Branch Banking

3. Foreign Banking

4. Internet banking

5. Mobile banking

 Treasury

1. CDS

2. Corporate bonds

3. Equity investment

4. Foreign exchange

5. Liquidity management
 CONCLUSION

As of my last update in January 2022, DCB Bank was a private sector bank in India, known for its focus
on technology-driven banking solutions and customer service. However, without more specific
information, I can't provide the current conclusion or status of DCB Bank. For the latest information on
DCB Bank, I recommend checking financial news websites or the bank's official announcements.
THANK YOU