A STUDY ON CASH MANAGEMENT AT HDFC Project report submitted to OSMANIA UNIVERSITY HYDERABAD In partial fulfillment of the requirement for

the award of the degree of MASTER OF BUSINESS ADMINISTRATION Submitted by PENSALWAR RESHMA ROLLNO: 130311672044 Under the Guidance of MS. HARIKA

OSMANIA UNIVERSITY UPPAL, HYDERABAD A.P INDIA 2011-2013

A STUDY ON CASH MANAGEMENT AT HDFC Project report submitted to OSMANIA UNIVERSITY HYDERABAD In partial fulfillment of the requirement for the award of the degree of MASTER OF BUSINESS ADMINISTRATION Submitted by PENSALWAR RESHMA ROLL NO: 130311672044 Under the Guidance of MS.HARIKA

AURORAS PG COLLEGE (MBA) Approved by AICTE, New Delhi and affiliated to OSMANIA UNIVERSITY Uppal (vil), Rangareddy (MDL) Hyderabad , A.P

DECLARATION

This project work entitled A Study on CASH MANGEMENT was prepared and submitted by me to the Department of Business Management, AROURAS PG COLLEGE (MBA), is a confide work under taken by me and it is not submitted to any another university or institution for the award of any degree diploma/certificate or published any time before.

DATE:

Signature of the student

Acknowledgement My project would be incomplete without expressing my gratitude to all those who have helped me in completing this project. I would thank college management, HOD Madam DR.SUBHASHINI for giving me this wonderful opportunity to make a study on any well-defined problems during my course, which is MBA.. I would like to express thanks to MS.HARIKA (asst proof dept of Business management) who was my internal guide throughout my study. During my project, from time to time, she was there with me and always gave me the right guidance and it is with her support and guidance that today I have completed this project . Finally, I would like to express my gratitude to all lecturers who have helped me a lot in the project and other people who have directly and indirectly helped me in my project and I also thank my parents and friends for their role in my completion of my project. I am extremely thankful to the Management of HDFC BANK for granting me an opportunity to take on this project. I reserve my extreme gratitude to L.ANIL KUMAR, without his guidance this project would not have taken its actual form.

PENSALWAR RESHMA 130311672044

ABSTRACT Cash management is a marketing term for certain services offered primarily to larger business customers. It may be used to describe all bank accounts (such as checking accounts) provided to businesses of a certain size, but it is more often used to describe specific services such as cash

concentration, zero balance accounting, and automated clearing house facilities. Sometimes, private bank customers are given cash
management services. Balancing a checkbook can be a difficult process for a very large business, since it issues so many checks it can take a lot of human monitoring to understand which checks have not cleared and therefore what the company's true balance is. To address this, banks have developed a system which allows companies to upload a list of all the checks that they issue on a daily basis, so that at the end of the month the bank statement will show not only which checks have cleared, but also which have not. More recently, banks have used this system to prevent checks from being fraudulently cashed if they are not on the list, a process known as positive pay.
subscribe to secure web-based reporting of their account and transaction information at their lead bank. These sophisticated compilations of banking activity may include balances in foreign currencies, as well as those at other banks. They include information

Corporate clients who actively manage their cash balances usually on cash positions as well as 'float' (e.g., checks in the process of collection). Finally, they offer transactionspecific details on all forms of payment activity, including deposits, checks, wire transfers in and out, ACH (automated clearinghouse debits and credits), investments, etc.

CONTENT/INDEX

CHAPTER-I i. Introduction ii. Need of the study iii. Scope of the study iv. Objectives of the study v. Research methodology vi. Limitations of the study

Pg.No 10 14 15 16 17 18

CHAPTER II: 1. Review of literature CHAPTER III:

1. Industry profile 2. company profile

19 25 40

CHAPTER IV:

1. Data analysis and presantation CHAPTER V: 1. Findings & suggestions 2. Conclusion Bibliography 70

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68

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CHAPTER I INTRODUCTION

Cash management Definition: Cash management is a marketing term for certain services offered primarily to larger business customers. It may be used to describe all bank accounts (such as checking accounts) provided to businesses of a certain size, but it is more often used to describe specific services such as cash concentration, zero balance accounting, and automated clearing house facilities. Sometimes, private bank customers are given cash management services. Cash Management Services Generally offered The following is a list of services generally offered by banks and utilised by larger businesses and corporations:

Account Reconcilement Services: Balancing a checkbook can be a difficult process for a very large business, since it issues so many checks it can take a lot of human monitoring to understand which checks have not cleared and therefore what the company's true balance is. To address this, banks have developed a system which

allows companies to upload a list of all the checks that they issue on a daily basis, so that at the end of the month the bank statement will show not only which checks have cleared, but also which have not. More recently, banks have used this system to prevent checks from being fraudulently cashed if they are not on the list, a process known as positive pay.

Advanced Web Services: Most banks have an Internet-based system which is more advanced than the one available to consumers. This enables managers to create and authorize special internal logon credentials, allowing employees to send wires and access other cash management features normally not found on the consumer web site.

Armored Car Services: Large retailers who collect a great deal of cash may have the bank pick this cash up via an armored car company, instead of asking its employees to deposit the cash.

Automated Clearing House: services are usually offered by the cash management division of a bank. The Automated Clearing House is an electronic system used to transfer funds between banks. Companies use this to pay others, especially employees (this is how direct deposit works). Certain companies also use it to collect funds from customers (this is generally how automatic payment plans work). This system is criticized by some consumer advocacy groups, because under this system banks assume that the company initiating the debit is correct until proven otherwise.

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Balance Reporting Services: Corporate clients who actively manage their cash balances usually subscribe to secure web-based reporting of their account and transaction information at their lead bank. These sophisticated compilations of banking activity may include balances in foreign currencies, as well as those at other banks. They include information on cash positions as well as 'float' (e.g., checks in the process of collection). Finally, they offer transaction-specific details on all forms of payment activity, including deposits, checks, wire transfers in and out, ACH (automated clearinghouse debits and credits), investments, etc.

Cash Concentration Services: Large or national chain retailers often are in areas where their primary bank does not have branches. Therefore, they open bank accounts at various local banks in the area. To prevent funds in these accounts from being idle and not earning sufficient interest, many of these companies have an agreement set with their primary bank, whereby their primary bank uses the Automated Clearing House to electronically "pull" the money from these banks into a single interest-bearing bank account.

Lockbox services: Often companies (such as utilities) which receive a large number of payments via checks in the mail have the bank set up a post office box for them, open their mail, and deposit any checks found. This is referred to as a "lockbox" service.

Positive Pay: Positive pay is a service whereby the company electronically shares its check register of all written checks with the

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bank. The bank therefore will only pay checks listed in that register, with exactly the same specifications as listed in the register (amount, payee, serial number, etc.). This system dramatically reduces check fraud.

Sweep Accounts: are typically offered by the cash management division of a bank. Under this system, excess funds from a company's bank accounts are automatically moved into a money market mutual fund overnight, and then moved back the next morning. This allows them to earn interest overnight. This is the primary use of money market mutual funds.

Zero Balance Accounting: can be thought of as somewhat of a hack. Companies with large numbers of stores or locations can very often be confused if all those stores are depositing into a single bank account. Traditionally, it would be impossible to know which deposits were from which stores without seeking to view images of those deposits. To help correct this problem, banks developed a system where each store is given their own bank account, but all the money deposited into the individual store accounts are automatically moved or swept into the company's main bank account. This allows the company to look at individual statements for each store. U.S. banks are almost all converting their systems so that companies can tell which store made a particular deposit, even if these deposits are all deposited into a single account. Therefore, zero balance accounting is being used less frequently

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Wire Transfer: A wire transfer is an electronic transfer of funds. Wire transfers can be done by a simple bank account transfer, or by a transfer of cash at a cash office. Bank wire transfers are often the most expedient method for transferring funds between bank accounts. A bank wire transfer is a message to the receiving bank requesting them to effect payment in accordance with the instructions given. The message also includes settlement instructions. The actual wire transfer itself is virtually instantaneous, requiring no longer for transmission than a telephone call.

Controlled Disbursement: This is another product offered by banks under Cash Management Services. The bank provides a daily report, typically early in the day, that provides the amount of disbursements that will be charged to the customer's account. This early knowledge of daily funds requirement allows the customer to invest any surplus in intraday investment opportunities, typically money market investments. This is different from delayed disbursements, where payments are issued through a remote branch of a bank and customer is able to delay the payment due to increased float time.

In the past, other services have been offered the usefulness of which has diminished with the rise of the Internet. For example, companies could have daily faxes of their most recent transactions or be sent CD-ROMs of images of their cashed checks.

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Cash management aims at evolving strategies for dealing with various facets of cash management. These facets includes the following:

SCOPE OF THE STUDY: Implementation of a sound cash management programme is based on rapid generation, efficient utilisation and effective conversation of its cash resources. Cash flow is a circle. The quantum and speed of the flow can be regulated through prudent financial planning facilitating the running of business with the minimum cash balance. This can be achieved by making a proper analysis of operative cash flow cycle alongwith efficient management of working capital. Purpose of Cash Management Cash management is the stewardship or proper use of an entitys cash resources. It serves as the means to keep an organization functioning by making the best use of cash or liquid resources of the organization.

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The function of cash management at the U.S. Treasury is threefold: 1. To eliminate idle cash balances. Every dollar held as cash rather than used to augment revenues or decrease expenditures represents a lost opportunity. Funds that are not needed to cover expected transactions can be used to buy back outstanding debt (and cease a flow of funds out of the Treasury for interest payments) or can be invested to generate a flow of funds into the Treasurys account. Minimizing idle cash balances requires accurate information about expected receipts and likely disbursements. 2. To deposit collections timely. Having funds in-hand is better than having accounts receivable. The cash is easier to convert immediately into value or goods. A receivable, an item to be converted in the future, often is subject to a transaction delay or a depreciation of value. Once funds are due to the Government, they should be converted to cash-in-hand immediately and deposited in the Treasury's account as soon as possible. 3. To properly time disbursements. Some payments must be made on a specified or legal date, such as Social Security payments. For such payments, there is no cash management decision. For other payments, such as vendor payments, discretion in timing is possible. Government vendors face the same cash management needs as the Government. They want to accelerate collections. One way vendors can do this is to offer discount terms for timely payment for goods sold. OBJECTIVES

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Objectives of a project tell us why project has been taken under study. It helps us to know more about the topic that is being undertaken and helps us to explore future prospects of that organisation. Basically it tells what all have been studied while making the project. To learn about various aspects of HDFC cash management. To analyze the history of HDFC bank. To gain insights about functioning of HDFC Bank cash management. To explore the future prospects of HDFC cash management.

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NEED OF THE STUDY:

Cash forecasting is backbone of cash planning. It forewarns a business regarding expected cash problems, which it may encounter, thus assisting it to regulate further cash flow movements. Lack of cash planning results in spasmodic cash flows. Every business is interested in accelerating its cash collections and decelerating cash payments so as to exploit its scarce cash resources to the maximum. There are techniques in the cash management which a business to achieve this objective. The importance of liquidity in a business cannot be over emphasized. If one does the autopsies of the businesses that failed, he would find that the major reason for the failure was their unability to remain liquid. Liquidity has an intimate relationship with efficient utilisation of cash. It helps in the attainment of optimum level of liquidity. Due to non-synchronization of ash inflows and cash outflows the surplus cash may arise at certain points of time. If this cash surplus is deployed judiciously cash management will itself become a profit centre.

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However, much depends on the quantum of cash surplus and acceptability of market for its short-term investments. Another product of non-synchronisation of cash inflows and cash outflows is emergence of deficits at various points of time. A business has to raise funds to the extent and for the period of deficits. Raising of funds at minimum cost is one of the important facets of cash management.

Research Methodology: Research is a process through which we attempt to achieve systematically and with the support of data the answer to a question, the resolution of a problem, or a greater understanding of a phenomenon. This process, which is frequently called research methodology, has eight distinct characteristics: 1. Research originates with a question or problem. 2. Research requires a clear articulation of a goal. 3. Research follows a specific plan of procedure. 4. Research usually divides the principal problem into more manageable subproblems. 5. Research is guided by the specific research problem, question, or hypothesis. 6. Research accepts certain critical assumptions. 7. Research requires the collection and interpretation of data in attempting to resolve the problem that initiated the research. 8. Research is, by its nature, cyclical; or more exactly, helical.

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Descriptive research is used in this project report in order to know about cash management services to clients and determining their level of satisfaction. This is the most popular type of research technique, generally used in survey research design and most useful in describing the characteristics of consumer behavior. The method used were following:

Questionnaire method
Direct Interaction with the clients.

MODE OF DATA COLLECTION

Secondary data: - the sources of secondary data were internet, books and newspaper articles. Sample size: 8 LIMITATIONS OF THE STUDY: Following are the limitations faced by me during this project: 1. The allotted time period of 6 weeks for the study was relatively insufficient, keeping in mind the long duration it can take at times, to close a particular corporate deal. 2. The study might not produce absolutely accurate results as it was based on a sample taken from the population.

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3. It was difficult getting time and access to senior level Finance/HR managers (who had to be talked to, to get required information) due to their busy schedules and prior commitments. 4. A few of the managers refrained from giving the required information as he considered I to be from their confidential domains.

CHAPTER II Theoretical review

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Web-based Cash Management Finance web-based cash management solution enables banks to offer comprehensive cash management services to businesses, ranging from small enterprises to large corporate houses. Built on new-generation industry standard technologies J2EE and .NET, the modular solution provides corporate customers anytime, anywhere access to real-time consolidated information. It manages cash positions and electronically sends and receives funds in a secure manner, within and across borders. The solution is multi-currency enabled and offers multilingual support. It is also designed to support multiple channels including the Internet and mobile, and can be interfaced with disparate host systems and third-party applications. Key Offerings

Balances and Transaction Information Electronic Invoice Presentment and Payment

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Payables Management Receivables Management Liquidity Management and Reconciliation Reporting Trade Finance

Additional Features

Alerts Infrastructure

Corporate Cash Management to benefit from Electronic Payments The new electronic payment products and services offer the corporate clients an improved bottom line by helping manage cash requirements. It helps corporate to make the best use of their funds and provides an effective means of managing their financial requirements. Several of the trends in cash flow forecasting favor the use of electronic payment products like RTGS, Electronic Funds Transfer (EFT) and card payments. Improved technology and systems integration makes it more attractive to use electronic payment products because these methods of payment can be incorporated into firm-wide computing systems. The new forecasting techniques also suggest use of electronic payments, because they offer disaggregated revenue and spending data that can easily be categorized and studied. Electronic payments and cards provide control over incoming funds, and allow companies to limit access to these funds to authorized parties. In

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addition, limiting corporate purchases to electronic payments makes it easier for firms to monitor cash outflows and prevent unauthorized expenditures, because these payments are easier to document and provide an audit trail. From the perspective of a Corporate, the electronic payment systems ensure speed and security of the transaction processing chain, from verification and authorisation to clearing and settlement. Also it gives a great deal of freedom from more costly labor, materials, and accounting services that are required in paper-based processing, better management of cash flow, inventory, and financial planning due to swift bank payments. Banknet Fourth Annual Conference on Payment Systems in Mumbai, India on 16 January 2008will discuss on topics like: How innovations in the payments world could shape cash management, How can banks and corporate facilitate one another's business, Linking of electronic payment systems like RTGS, EFT, NEFT, SWIFT etc in cash management etc. Banknet will also release results of Bank Customer Survey on Payment Systems at the conference Business Benefits Generation of Fee-based Income Finacles features such as wire initiations, liquidity management, alerts, cross border payments and positive pay offer a consistent stream of feebased revenues. The customer relationship management capabilities

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embedded within these systems also enable targeted marketing, leading to greater opportunities for cross-selling and a higher fee income. Business Agility Built on industry standard platforms J2EE and .NET, the solution provides banks with tremendous flexibility to extend their product portfolio and customize the solution according to requirements. The architecture of the solution enables the bank to write business rules once and deploy anywhere, add new rules, modify existing ones or integrate with other applications seamlessly. The solution also provides an additional layer that can be extended to interface with multiple back office systems. All this enhances agility of operations, helping the bank identify new opportunities and roll out new products. Cost Savings Thin-client architecture over the Internet reduces the cost of maintenance associated with frequent upgrades and support. The deployment of Finacle enables a cost-effective channel through which to serve customers. As the number of transactions completed on-line increases, the number of more expensive branch transactions decreases. This is especially true of small business customers who tend to use the branch as their primary channel. Greater automation and productivity, as well as reduced human error, further lead to increased cost savings. Increased Customer Satisfaction The self-service capabilities empower corporate customers to manage the solution in terms of defining user-permissions, based on hierarchy and

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roles. This leads to greater convenience and offer better monitoring of banking transactions in real time. A more empowering corporate client would be a more satisfied and profitable customer. Cash Management Basics Cash is your business's lifeblood. Managed well, your company remains healthy and strong. Managed poorly, your company goes into cardiac arrest. If you haven't considered cash management an important issue, then you're probably undermining your business's short-term stability and its long-term survival. But how can you manage business cash better? Start with understanding how good cash-management practices can influence your company's growth and survival by reading "The Art of Cash Management," Inc Finance Editor Jill Andresky Fraser's classic article on the topic. Then dive into forecasting your business-cash needs and learning how to handle a cash crisis. Assembled here are practical pieces of advice, tips and tricks from CEOs, and tools that you can use to get a handle on business cash. Handling and Avoiding Crises How Do You Define Cash Flow? If your definition of cash flow is flawed, and you're not tracking the right numbers, you may grow your company right into a cash crisis. The 10 Absolutely Must Follow Cash Flow Rules Everyone wants cash on hand at all times. Here are 10 rules to help you get there.

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The Magic Number Every business has a magic number. By employing his, our columnist didn't overstaff this year. Riding the Economic Roller Coaster Tighten your seatbelt. Surviving the ups and downs of the world economy means keeping an eye on business finances. When a Cash Crisis Strikes Credibility with vendors, bankers, and other creditors is built slowly, but can be destroyed quickly if your company falls behind on payments. Know how to break the bad news to preserve your business's relationships. Hot Tip: Prepare for a Cash Crisis How do you prep for a cash crisis? Wayne Karpoff, president of Myrias Software Corp., knew cash would be a problem late last year. His 15employee, $1.5-million company dropped selling its products and became a full-time service business. So he built a contingency fund into his annual budget -- an amount equal to three months' worth of payroll. He got the idea when his bank suggested he set up a contingency fund to safeguard his mortgage payments in the event he found himself out of work. He dipped into the fund three times last year to float the company during project and payment delays. Source: Ilan Mochari, Inc magazine, March 2000 Forecasting, Projections and Budgets The Secrets to Formatting Cash Flow Projections

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Here are the keys to creating a powerful tool to take control of your cash flow. Cash Flow Projections Made Easy Here is a 4-step process you can use to create cash flow projections you can trust. Breaking Free from Budgets Exasperated by budgets that hamstring creativity, a growing number of companies are tossing off financial constraints--and still holding the line on spending. Budgeting for Blunders Lisa Hickey created a fund to support creative risks her Bostonbased ad agency, Velocity Inc., takes when trying innovative ideas that might not pan out. A Passion for Forecasting Don't put together an annual sales forecast using only gut instinct and wishful thinking! Here are some rules you can follow to create a forecast that you and your employees can count on. Action Plan: Forecasting and Cash-Flow Budgeting Developing a budget is simple, and when created with solid sales and expense forecasts in mind, you can ensure that your budget will stand up to the daily demands of your business. Here are some steps you can take to create a cash flow budget you can rely on. Tools Defining Key Financial Ratios

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Tracking these key financial ratios will highlight financial trends in your business. Financial Ratio Worksheets Use these financial-ratio worksheets to determine 10 key ratios and track financial trends in your business. A Simple Formula Determine your breakeven point with this online calculator. The Employee-Run-Budget Worksheet Help employees get in on the budgeting act with this worksheet. Profit-and-Loss Projection Use this profit-and-loss projection as a guide to projecting your company's profitability.

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How to Improve Cash Management Practice in India?

There are, of course, many ways to improve and re-engineer the processes. However, depending on budgets and also to minimise disturbances to the business, the following are the suggested simple and initial steps. Note that the larger the corporation, the more involved the process will be. (1) Commit to change: Recognize the need for improvement and commit to change (this commitment must come from top management and cannot be just lip service). (2) Establish a credible project team: The project team must have a credible and strong project leader and be sponsored by the decision maker(s). (3) Study the existing internal financial transaction processes: This is straightforward and a simple overview. Ask questions such as: Is electronic banking used? To what degree? How are revenues collected and how are payments made? How many staff are dedicated to these functions? What is the decision-making and authorisation chain? What information is available from internal management information systems? (4) Review services available in the marketplace:

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Review existing service providers and other service providers, making initial presentations and discussions with banks and providers. Quickly shortlist potential providers for further in-depth discussions and presentations. Develop a good idea of what solutions, services and products are on offer. (5) Establish high-level, practical goals and objectives: There must be a true desire and commitment to improve and make changes for the better; however, the process should be evolutionary and practical. Take care to ensure goals are not artificially set for easy attainment nor established for ideal perfection so to be unreachable or unrealistic. The goals should be at a higher level than where the company is now and the initial level of improvement. For example, a goal may be to achieve costs savings and efficiency gains on the process of collecting revenues and reconciling with the accounts receivable system. (6) Establish and commit to specific initiatives, sequence and Action points, initiatives and a realistic time frame must be decided for achieving each initiative. Communicate these to the providers. For example, an initiative may include automating and outsourcing vendor payments. (7) Obtain simple written proposals from the shortlisted potential providers: Have providers present proposals and be prepared to ask questions and probe exactly what is being offered and whether the proposed solution, services and products meet your objectives. Look for comprehensive, well thought-out and realistic solutions. timeframe:

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(8) Decide on the solution and decide on a provider(s): It is not necessary to have only one provider of services. For example, there could be a domestic collection bank and a regional account management bank. Document all goals and services as well as pricing and the period the pricing covers, such as one-year or two-year, and the start dates. (9) Review the internal project team and add actual users to help implement the proposed changes: This process is to help obtain commitment from the bottom up and to gain the buy in of internal users. The bank provider(s) should also have a parallel team to work with your implementation or project team. Also, a mutually designed and agreed schedule and action plan should be established. (10) Review, establish and commit to a process for ongoing Services should be reviewed once implemented to ensure that the high-level goals and objectives are obtained. There should also be an ongoing emphasis on improvement, and a culture for empowering staff to recommend and look for ways and means to improve cash management services and processes. This needs to be encouraged, especially with the new developments in technology afforded by the Internet. Management and users must commit to the discipline of cash management. Protecting Yourself from Fraud improvement:

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Safeguarding your personal and financial information has become increasingly challenging, as the threat of fraud has never been greater. Personal computers, the Internet and e-mail can become dangerous weapons in the hands of someone looking to deceive you. You can help prevent many types of fraud if you know what to look for. Below are some of the most common online threats. What types of scams should I be aware of? Among ways that scam artists obtain access to personal and/or financial information are: Phishing: These authentic-looking e-mail messages instruct the recipient to provide sensitive personal, financial or password information. The e-mail appears to have been sent by a reputable company from a legitimate e-mail address and includes logos and links to reputable businesses and government agencies. Social engineering (a term used in the information security industry): Criminals pretend to be, for example, from the security and fraud department of a major credit card company. They ask questions to verify personal information such as your home address, as well as the numbers on the back of your credit card, to verify you have the card. Bank scams: Perpetrators attempt to get you to log on to a fake Web site to capture your personal financial information. They send an email to bank customers asking them to click on a fake bank Web site and supply their account name and password. These e-mails may contain logos and graphics that appear to be legitimate, but they often contain typos, e-mail addresses or URLs that have nothing to do with

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the company. An example of this is the 419, or advance-fee scam, run by Nigerian gangs who set up fake bank Web sites. How can I protect myself from these scams? Use extreme caution in providing personal information on Web sites or on unsolicited phone calls. Be cautious of unexpected e-mails linking to online forms that ask you to submit sensitive personal information. Legitimate Web sites hardly ever ask for this kind of information to confirm account renewal or other information. Scam artists take many precautions to make consumers believe their site is secure and legitimate. If you receive an e-mail that warns you, with little or no notice, that an account of yours will be shut down unless you confirm your billing information, do not reply or click on the link in the e-mail. Instead, contact the company cited in the e-mail by a telephone number or Web site address you know to be genuine. (Note: Merrill Lynch will not ask a client to send sensitive personal information via non-secure e-mail.) If someone calls about a potential attempt at credit card theft, hang up and call back, using the phone number on the back of your credit card. Do not share any personal information over the phone with an unsolicited caller. Why Invest Your Working Capital?

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Keeping your operating funds working for your company is crucial to maintaining healthy cash flow and maximizing your financial return. Investing idle funds wisely may help you to generate income from your working capital, increasing your yields while maintaining liquidity. There are a wide variety of investment instruments available to companies seeking a return on excess cash. How do you know which investments to choose? Many businesses emphasize only convenience and accept whatever return is offered. However, there are ways you may be able to improve yields on your idle working capital. Concentrate on maximizing after-tax returns If your company is in a lower tax bracket, focus on higher yields rather than tax advantages; however, if your federal tax bracket is high, you may be able to obtain a better after-tax return by investing in federally taxexempt securities. It's important to compare the yields on tax-free obligations to their fully taxed equivalents to find those that provide a higher after-tax return. The tax benefits of some investments may depend on your business structure.1 Extend the maturities of investments when practical Investing funds for longer terms typically means higher yields. If your business keeps its cash highly liquid, perhaps in a money market fund,

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when only a portion is needed for daily operating expenses, you may well be sacrificing some yield. Determine how much you can commit for a longer period. By investing that amount for as little as 90 days, you may be able to earn extra return. Also consider intermediate-term investments with maturities from one to three years. If your business is building cash reserves for an expansion, an acquisition or new machinery, you may be able to invest those funds for a year or two.

Diversify credit quality to help increase yield potential The potential for additional yield might warrant assuming some moderate investment risk. Newly issued obligations guaranteed by the U.S. government (such as Treasury bills) yield less than securities lacking that guarantee. You may be able to obtain a higher yield with high-quality investment-grade corporate obligations. A number of rating services, such as Fitch Investors Service, Moody's Investors Service and Standard & Poor's Corporation (S&P), provide comparative analyses of the risk levels of various instruments. If you choose bonds with short maturities, you may want to consider an A-rated bond by S&P. This type of bond is likely to yield a higher return than an

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AAA-rated bond (S&Ps highest investment rating) of equal maturity. You should, however, be comfortable with the incremental risk associated with lesser quality credits. Choose investments based on the amount of cash available to you Many working capital investment vehicles must be purchased in minimum amounts and in multiples of the same or smaller amounts. Treasury bills, for example, can be bought in multiples of $1,000, with a minimum investment of $10,000. As a business grows and builds a stronger cash flow, the variety of investment opportunities increases. If you have a large amount of investable assets (perhaps $100,000 or more), this gives you an advantage in finding higher rates. Many institutional investment vehicles require high minimum investments but, in return, offer higher yields Four Steps to a Healthy Cash Flow Healthy cash flow is essential to the success of a small business. You may have the best service or product around, your employees and customers may love you, your office may be well organized, but if you dont have the money to buy inventory or pay bills, you cant keep your business running. Many business owners make the mistake of believing cash flow is largely out of their control. On the contrary, the following steps can really help. 1. Analyze your financial condition

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Financial analysts, credit providers and knowledgeable investors rely heavily on financial ratios to judge the health of a company. You should use these tools as well. Commonly used ratios can help you analyze your pricing strategy, level of overhead, liquidity, the health of your cash flow, your average collection period, the appropriateness of your collection terms and your inventory turnover rate. 2. Improve your cash management When it comes to the cash flowing through your financial accounts, your goals should be to ensure that incoming funds spend as much time as possible earning interest or dividends for your benefit and that outgoing funds are available when needed. With a traditional business checking account, meeting these seemingly simple goals can be a complex task. You will have to move funds manually into a separate money market account in order to earn interest or dividend income and back into your checking account to cover disbursements when due. An alternative is a central asset account, which combines traditional checking features, investment and borrowing into a single account. A central asset account saves you time and effort by automatically putting your cash where it needs to be, when it needs to be there. And by keeping your cash in interest-bearing accounts right up until the moment disbursements clear your account, a central asset account can also help increase your return and your bottom line.1 3. Even out temporary fluctuations

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No matter how efficiently you manage your cash flow, there may be times when your business needs more money than it has on hand. This is why adequate credit resources are essential. A business line of credit is useful and convenient because it can be used as needed, paid down and reused without reapplying. When a line of credit is integrated with a central asset account, credit is automatically accessed when needed. And incoming funds automatically go to pay down your loan balance, reducing borrowing time and interest expense.

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4. Invest surplus cash Although part of your business capital needs to be liquid, most businesses have some capital that can be invested in short- and intermediate-term securities for potentially higher yields. A broad array of investments can be purchased within a central asset account. And you can sell securities in your account at any time, or, if appropriate, borrow against their value 2, to meet working capital needs. Be sure to discuss the risks of borrowing against your securities with your Business Financial Advisor. Todays business environment changes rapidly, and as a business owner, you need to regularly review your cash flow and cash management policies to ensure that they are helping to keep your business competitive.

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CHAPTER-III INDUSTRY PROFILE

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Banking in India Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a governmentowned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers, In 1969 the government nationalized the 14 largest commercial banks, the government nationalized the six next largest in 1980. Currently India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake, they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively Early history

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Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India which started in 1786, and the Bank of Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as Quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India. Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India. It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in

42

India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoired' Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center.

The Bank of Bengal, which later became the State Bank of India. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad, It was failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities.

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The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally undercapitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. The fervor of Swedishi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking".

44

45

COMPANY PROFILE

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique

46

consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment. 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 31st December, 2010 the authorized share capital of the Bank is Rs. 550 crore. The paid-up capital as on said date is Rs. 455, 23, 65,640/- (45, 52, 36,564 equity shares of Rs. 10/- each). The HDFC Group holds 23.87 % of the Bank's equity and about 16.94 % of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). 27.46 % of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has about 4,58,683 shareholders.

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The shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No US40415F2002. HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of 1,725 branches spread in 771 cities across India. All branches are linked on an online real-time basis. Customers in over 500 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 centre s where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centre s where the NSE/BSE have a strong and active member base. The Bank also has 4,000 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders. Mr. Jagadish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor was a Deputy Governor of the Reserve Bank of India. 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.

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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. HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the bank's branches have online connectivity, which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The Bank has made substantial efforts and investments in acquiring the best technology available internationally, to build the infrastructure for a world class bank. The Bank's business is supported by scalable and robust systems which ensure that our clients always get the finest services we offer. The Bank has prioritized its engagement in technology and the internet as one of its key goals and has already made significant progress in web-

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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. HDFC Bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments:

Wholesale Banking Services The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian corporate to small & mid-sized corporate and 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 strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of leading Indian corporate including multinationals, companies from the domestic business houses and prime public sector companies. It is recognized as a leading provider of cash management and transactional

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banking solutions to corporate customers, mutual funds, stock exchange members and banks. Retail Banking Services The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed by world-class service and delivered to 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 2010, the bank had a total card base (debit and credit cards) of over 13 million. The Bank is also one of

51

the leading players in the merchant acquiring business with over 70,000 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. Treasury Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the liberalization of the financial markets in India, corporate need more sophisticated risk management information, advice and product structures. These and fine pricing on various treasury products are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio. 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,

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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 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 has been assigned a 'CRISIL GVC Level 1' rating 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.

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The merged entity will have a strong deposit base of around Rs. 1,22,000 crore and net advances of around Rs. 89,000 crore. The balance sheet size of the combined entity would be over Rs. 1,63,000 crore. 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. HDFC Bank Ltd. (BSE: 500180, NYSE: HDB) is a commercial bank of India, incorporated in August 1994, after the Reserve Bank of India allowed establishing private sector banks. The Bank was promoted by the Housing Development Finance Corporation, a premier housing finance company (set up in 1977) of India. HDFC Bank has 1,412 branches and over 3,295 ATMs, in 528 cities in India, and all branches of the bank are linked on an online real-time basis. As of September 30, 2008 the bank had total assets of INR 1006.82 billion. For the fiscal year 2008-09, the bank has reported net profit of Rs.2,244.9 crore, up 41% from the previous

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fiscal. Total annual earnings of the bank increased by 58% reaching at Rs.19,622.8 crore in 2008-09. Business Focus HDFC Bank deals with three key business segments Wholesale Banking Services, Retail Banking Services, and Treasury. It has entered the banking consortia of over 50 corporates for providing working capital finance, trade services, corporate finance and merchant banking. It is also providing sophisticated product structures in area of foreign exchange and derivatives, money markets and debt trading and equity research. Retail Banking Services The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed by world-class service and delivered to customers through the growing branch network, as well as through alternative delivery channels like ATM, Phone Banking, Net Banking and Mobile Banking. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Master card Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2010, the bank had a total card base (debit and credit cards) of over 13 million. The Bank is also one of the leading players in the merchant acquiring business with over 70,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments.

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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. Treasury Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. These services 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. Distribution Network HDFC Bank is headquartered in Mumbai. The Bank has a network of 1,725 branches spread in 771 cities across India. All branches are linked on an online real-time basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank has a presence in all major industrial and commercial centres across the country. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centre where the NSE/BSE has a strong and active member base. The Bank also has 3,898 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and

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international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders. Housing Development Finance Corporation Limited or HDFC (BSE: 500010), founded 1977 by Ravi Maurya and Hasmukhbhai Parekh, is an Indian NBFC, focusing on home mortgages. HDFC's distribution network spans 243 outlets that include 49 offices of HDFC's distribution company, HDFC Sales Private Limited. In addition, HDFC covers over 90 locations through its outreach programmes. HDFC's marketing efforts continue to be concentrated on developing a stronger distribution network. Home loans are also Sharcket through HDFC Sales, HDFC Bank Limited and other third party Direct Selling Agents (DSA). To cater to non-resident Indians, HDFC has an office in London and Dubai and service associates in Kuwait, Oman, Qatar, Sharjah, Abu Dhabi, Al Khobar, Jeddah and Riyadh in Saudi Arabia. AWARDS 2011 Euro money Private Banking and Wealth Management Poll 2011 Financial Insights Innovation Innovation in Branch Operations - Server Consolidation Project 1) Best Local Bank in India (second year in a row) 2) Best Private Banking Services overall (moved up from No. 2 last year)

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Awards 2011 Global Finance Award 2 Banking Technology Awards 2011 SPJIMR Marketing Impact Awards (SMIA) 2011 Business Today Best Employer Survey 2010 Business India Businessman of the Year Award for 2010. Business world Best Bank Awards 2010 Outlook Money NDTV Profit Awards 2010 Forbes Asia Feb. 50 Companies in Asia Pacific Best Bank Most Tech-savvy Bank Mr. Adityapuri MD, HDFC Bank Listed in top 10 Best Employers in the country 2nd Prize 1) Best Risk Management Initiative and 2) Best Use of Business Intelligence. Best Trade Finance Provider in India for 2011

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GQ India's Man of the Year (Business) UTI MF-CNBC TV18 Financial Advisor Awards 2010 Wall Street Asia's Best 200

Mr. Aditya Puri, MD, HDFC Bank

Best Performing Bank

Our Bank among India's 10 Most Admired

Journal survey of Companies Companies 2010 Rated 3rd Best in terms of Financial Reputation Business Standard Best Banker Award Fe Best Bank Awards 2010 - Best Innovator of the year award for our MD Mr. Aditya Puri - Second Best Private Bank in India - Best in Strength and Soundness Euro money Awards 2010 Economic Times Most Trusted Brand - Runner Up Brand Equity & Nielsen Research annual survey Best Bank in India Award Mr. Aditya Puri, MD, HDFC Bank

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2010 Asia Money 2010 Awards IBA Banking Technology Awards 2010 Global Finance Award IDRBT Banking Best IT Governance and Value Delivery Technology Excellence Award 2009 Finance Asia magazine's annual poll of Investors and Analysts 2009 Asian Banker Excellence in Retail Financial Services Asian Banker Best Retail Bank in India Award 2009 Our Bank is 3rd in 'Best managed Company' category Mr. Aditya Puri - India's Best CEO Best Trade Finance Bank in India for 2010 Best IT Governance Award - Runner up Best Domestic Bank in India

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CHAPTER-IV Data Analysis And interpretation

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Analysis of the above diagram Most of the companies re-insure themselves from one another or by a reinsurer it helps them to reduce risk on there part HDFC Bank can look into to the opportunity to become the re-insuring bank as its quite rewarding. CASE STUDY (HDFC BANK) GROUND REALITIES: The ABC Ltd. is a FMCG Company. The company has presence in more than 15 cities and have its head quarter in Mumbai. The company has Depots at these cities. And each depots has some turnover every month. The name of Cities, the monthly turn over of the each depots and no. Of retailers in each cities are as follows:

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Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Cities Mumbai Delhi Calcutta Madras Ahmedabad Banglore Hyderabad Pune Jaipur Indore Cochin Agra Jalandhar Jammu Nagpur Lucknow

Monthly Turnover No. of Retailers (Rs. In Crore) 1.5 1.25 1.00 0.75 0.75 0.70 1.00 0.50 0.60 0.75 0.50 0.50 0.40 0.10 0.10 0.10 200 180 175 180 150 160 155 140 150 120 130 120 110 115 135 140

The requirements of the ABC Ltd. are as follows: 1. All money should be ABC Ltd. a/c at Delhi. 2. All money should on the next day basis. 3. Details of cheques deposited at different location on daily basis: Location No. of cheques deposited

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Cheque number Cheque amount Date of deposit Clearing date Retailer name/code Returned cheques

Date Reason Location Amount 4. Courier pick-up service at each location. 5. Monthly reports of each location about sales, collection, expenditures etc.
6. Other MIS reports

HDF C Bank

Previous Years

Consolidated Yearly ------------------- in Rs. Cr. ------------------Results Mar '12 Mar '11 Mar '10 Mar '09 Mar '08

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Sales Turnover Other Income Total Income Total Expenses Operating Profit Profit On Sale Of Assets Profit On Sale Of Investments Gain/Loss On Foreign Exchange VRS Adjustment Other Extraordinary Income/Expenses Total Extraordinary Income/Expenses Tax On Extraordinary Items Net Extra Ordinary Income/Expenses Gross Profit Interest PBDT Depreciation Depreciation On Revaluation Of Assets PBT Tax

27,605.56 20,043.34 16,232.92 16,314.02 10,122.96 5,452.39 4,585.04 4,034.07 3,436.52 2,372.57 33,057.95 24,628.38 20,266.99 19,750.54 12,495.53 10,284.33 9,246.02 8,050.38 7,529.12 5,313.56 17,321.23 10,797.32 8,182.54 8,784.90 4,809.40 ----------------------------------------7,181.97 4,887.79 2,294.18 --2,294.18 701.97

22,773.62 15,382.36 12,216.61 12,221.42 15,106.12 9,425.15 7,797.60 8,903.37 7,667.50 5,957.21 4,419.01 3,318.05 -----7,667.50 2,394.10 -5,957.21 1,939.52 -4,419.01 1,386.09 -3,318.05 1,065.92

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Prior Years Income/Expenses Net Profit Minority Interest Share Of P/L Of Associates Net P/L After Minority Interest & Share Of Associates Depreciation for Previous Years Written Back/ Provided Dividend Dividend Tax Dividend (%) Earnings Per Share Book Value Equity Reserves Face Value

-5,273.40 -30.02 3.64

-4,017.69 -32.24 7.04

-3,032.92 -32.54 3.27

-2,252.13 -6.35 3.21

-1,592.21 -6.70 9.56

5,247.02

3,992.49

3,003.65

2,248.99

1,595.07

----22.47

----86.36

----66.26

----52.94

----44.92

-----469.34 465.23 457.74 425.38 354.43 29,741.11 25,117.91 21,158.15 14,262.74 11,180.72 2.00 10.00 10.00 10.00 10.00

Source : Dion Global Solutions Limited

10.

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ANALYZING PROCESS:

These are the conditions and facts of the organization. Now, what the bank will do? I have taken the case of HDFC BANK CMS. This is regarding how the bank makes deal with the company. The HDFC BANK will analyses the location of the company. The ABC Ltd. have sixteen locations in the country. This is not always possible to have the branches at each location of the client for the banks. In this case, we are taking the assumptions as follows: In 10 locations of the company, the bank has its own presence. In 2 locations of the company, the bank has tie-up with correspondent bank And in remaining 4 locations, the bank has no presence as well as no tie-up with any other bank. How the bank makes allocation of the different instruments? The bank broadly categorized the instruments into two types: I. Local Cheque Collections (LCC)

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LCC are the cheques, which are drawn and deposited at the same location. Eg. A Cheque drawn at Jaipur and deposited at Jaipur only.

The LCC is again categorised into two types: 1) LCC BRN: A local Cheque which is drawn and deposited at the same location where the bank has its own presence. 2) LCC COR: A local Cheque which is drawn and deposited at the same location where the bank doesnt have its own presence but has tie up with correspondent Bank. II. Upcountry Cheque Collections (UCC) The UCC are the cheques, which are drawn and deposited at different locations. Eg. A Cheque drawn at Jaipur and deposited at Delhi. The UCC is again categorised into two types: 1) UCC BRN: A upcountry Cheque which is drawn at one location and deposited at another location where the bank has its own presence. 2) UCC COR:

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A upcountry Cheque which is drawn at one location and deposited at another location where the bank has tie-up with correspondent Bank.
3) UCC ONW:

A upcountry Cheque which is drawn at one location and deposited at another location where the bank neither have its own presence nor have tie-up with correspondent bank.

PRICING: Pricing is competitive; varies from centre to center. It also varies from instruments to instruments. Special pricing can be worked out taking into account the volume of funds & the centres. The pricing part of the CMS is very complex. Normally, the HDFC bank takes into account the following factors while going for pricing: 1) Bank In Funds/ Out of Funds & Correspondent Bank Charges: When Cheque is deposited in the bank it passes through the clearing house. In India, clearing is done through RBI, SBI and PSU banks. The RBI has presence in 15 cities in India while SBI has 938 locations in

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India including its associates. other cities where clearing house is not there, the clearing is done through Correspondent Bank, mostly these are PSU Banks or Co-operative Banks. Suppose I deposit the Cheque on day 0, then the time taken by the clearing houses to debit the bank account would be different. The SCB has to debit its customers account on the next day basis irrespective of days to clear. Day when Clearing Bank the Cheque will be credited Day1 RBI Day2 SBI Day3 Correspondent Bank Days for which bank is out fund 0 1 1 Bank In Fund/Out of Fund Not out of funds 1 Day out of funds 1 Day out of funds In this case, the bank charges interest on the money which it gives in form of Credit Against Uncleared Cheque, to the company. When it comes to the Correspondent bank, the bank has to pay extra charges to these banks. 2) Overheads:

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The bank takes into account the o/hs charges, which it occurs in the process. The o/hs charges includes salary, administration charges, maintenance etc. 3) Margin: After including the transaction and other o/hs charges, the bank gets the cost of transaction. On this the bank adds its margin for being in the business. In pricing, other elements like courier charges, return cheques etc. also considered. Pricing in CMS in generally negotiable between the company and the Bank.

Features of HDFC Bank CMS: Exclusive CMP desks with infrastructure Debit Transfers Courier pick-up at branches No collection a/cs needed at branches Customized Reports Transmission of data through Internal LAN system

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 Direct credit to accounts

Benefits to Customers: Centralised Control of cash Cost reduction Enhanced Liquidity Interchange of Information between treasury & operating units Reduced excess cash balance Cash forecasting & scheduling Effective control over disbursements Timely & effective investments

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CHAPTER-V FINDINGS &

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SUGGESTIONS

FINDINGS & SUGGESTIONS:

We suggest following measures, which HDFC Bank could take so as to take on heavy competition from HSBC Bank and ABN AMRO Bank:

To identify regions where promotions are required. SCB lacks visibility in western region where as it is a well known name in western region. Even then, its promotional campaign focuses on western region where as northern region is still waiting for promotional campaigns.

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 Try to reduce cost, so that benefits can be passed on to customers. Senior managers at SCB keep on telling that it is difficult to reduce cost, because of services we provide. But the fact is, India being a price sensitive market; people at times go for monetary benefits rather than for long-term non- monetary benefits.

If charges cant be reduced because of costs involved, make the services customized, so that services are provided to only those customers who are willing to pay the price for services they are getting and let the other customers enjoy costs benefits without getting services.

SCB should provide competitive prices as nowadays a lot business is being acquired by AXIS bank and HSBC bank and SCB is facing a lot competition from these banks

SCB should contact with their clients regularly for knowing the problems faced by them. This will help SCB in providing best

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services to customers. This will result in additional customer base by getting further references from satisfied clients.

SCB should provide a separate relationships manager who should be liable to handle all the needs of the client as the clients here are big corporate giants.

SCB should focus on getting the business other business clients other than its existing customers as it would help them to increase their business opportunities.

CONCLUSION

The study allowed us get answers regarding the service awareness among people and the problems it faces. The key findings and analysis of the survey shoed the following

A large number of clients and customers call the branch frequently to handle banking issues , this shows the keenness of the customers to

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call the branch for almost every small issue. The service Straight2bank does provide an answer to the problem of the customers.

The service provided by staright2bank does offer the main requirements of the customers for which they visit or call the branch

All the respondents wanted to carry out the banking needs at their convenience. This means the service caters the banking needs that customers generally require and its main benefit of banking while sitting at office is desired by one and all, thereby proving that the service does have the potential usage.

Few of the respondents were aware about the service which was desired by 100% respondents clearly showing that there has been a falter in its promotion and awareness strategies.

Customers were not aware that the service was a free one, this is clear that almost all the attributes of the services are favorable to the

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customers still customers are not using the service and are not even aware of it.

Almost all customers once educated about the service readily enrolled for it whereas a mere portion did not trust the bank and thought that the bank would have some hidden charges that they are not putting forward

Bibliography Authors: Financial Management Financial Management

by I.M.PANDEY by MY KHAN PK JAIN

www.scb.com www.scb.co.in

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www.hsbc.co.in www.hdfc.com Interaction with concerned personnels on getting the questionnaires filled

Refered to Book CASH MANAGEMENT MADE EASY for better understanding of the concept

www.inc.com www.treasurymanagement.com www.business.ml.com

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